H. R. 4520—190
(A) was submitted for approval to the Federal Transit
Administration (an agency of the Department of Transpor-
tation) after June 30, 2003, and before March 13, 2004,
(B) is approved by the Federal Transit Administration
before January 1, 2006, and
(C) includes a description of such property and the
value of such property.
(3) EXCHANGES AND CONVERSION OF TAX-EXEMPT USE PROP-
ERTY.—Section 470(e)(4) of the Internal Revenue Code of 1986,
as added by section 848, shall apply to property exchanged
or converted after the date of the enactment of this Act.
(4) INTANGIBLES AND INDIAN TRIBAL GOVERNMENTS.—The
amendments made subsections (b)(2), (b)(3), and (e) of section
847, and the treatment of property described in clauses (ii)
and (iii) of section 470(c)(2)(B) of the Internal Revenue Code
of 1986 (as added by section 848) as tangible property, shall
apply to leases entered into after October 3, 2004.
Subtitle C—Reduction of Fuel Tax Evasion
SEC. 851. 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 exemptions) is
amended by adding at the end the following 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, farming, mining, drilling, timbering, or similar
operation 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 particular machinery or equipment
involved, whether or not such machinery or equipment
is in operation, and
‘‘(C) which, by reason of such special design, could
not, without substantial structural modification, be used
as a component of a vehicle designed to perform a function
of transporting any load other than that particular
machinery or equipment or similar machinery or equipment
requiring such a specially designed chassis.’’.
(2) EFFECTIVE DATE.—The amendment made by this sub-
section shall take effect on the day after the date of the enact-
ment of this Act.
(b) EXEMPTION FROM TAX ON USE OF CERTAIN VEHICLES.—
(1) IN GENERAL.—Section 4483 (relating to exemptions) is
amended by redesignating subsection (g) as subsection (h) and
by inserting after subsection (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).’’.
H. R. 4520—191
(2) EFFECTIVE DATE.—The amendments made by this sub-
section shall take effect on the day after the date of the enact-
ment of this Act.
(c) EXEMPTION FROM TAX ON TIRES.—
(1) IN GENERAL.—Section 4072(b)(2) is amended by adding
at the end the following flush sentence: ‘‘Such term shall not
include tires of a type used exclusively on vehicles described
in section 4053(8).’’.
(2) EFFECTIVE DATE.—The amendment made by this sub-
section shall take effect on the day after the date of the enact-
ment of this Act.
(d) 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 purposes of clause
(ii)(I), the design-based test is met if the vehicle con-
sists of a chassis—
‘‘(I) to which there has been permanently
mounted (by welding, bolting, riveting, or other
means) machinery or equipment to perform a
construction, manufacturing, processing, farming,
mining, drilling, timbering, or similar operation
if the operation of the machinery or equipment
is unrelated to transportation on or off the public
highways,
‘‘(II) which has been specially designed to serve
only as a mobile carriage 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 substantial structural modifica-
tion, be used as a component of a vehicle designed
to perform a function of transporting any load
other than that particular machinery or equipment
or similar machinery or equipment requiring such
a specially designed chassis.
‘‘(iv) USE-BASED
TEST.—For purposes 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. This clause shall
be applied without regard to use of the vehicle by
any organization which is described in section 501(c)
and exempt from tax under section 501(a).’’.
(2) NO TAX-FREE SALES.—Subsection (b) of section 4082
is amended by inserting before the period at the end the fol-
lowing: ‘‘and such term shall not include any use described
in section 6421(e)(2)(C)’’.
H. R. 4520—192
(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 sub-
section shall apply to taxable years beginning after the date
of the enactment of this Act.
SEC. 852. MODIFICATION OF DEFINITION OF OFF-HIGHWAY VEHICLE.
(a) IN GENERAL.—Section 7701(a) (relating to definitions) is
amended by adding at the end the following new paragraph:
‘‘(48) OFF-HIGHWAY VEHICLES.—
‘‘(A) OFF-HIGHWAY TRANSPORTATION VEHICLES.—
‘‘(i) IN GENERAL.—A vehicle shall not be treated
as a highway vehicle if such vehicle is specially
designed for the primary function of transporting a
particular type of load other than over the public high-
way and because of this special design such vehicle’s
capability to transport a load over the public highway
is substantially limited or impaired.
‘‘(ii) DETERMINATION
OF
VEHICLE’S
DESIGN.—For
purposes of clause (i), a vehicle’s design is determined
solely on the basis of its physical characteristics.
‘‘(iii) DETERMINATION OF SUBSTANTIAL LIMITATION
OR IMPAIRMENT.—For purposes of clause (i), in deter-
mining whether substantial limitation or impairment
exists, account may be taken of factors such as the
size of the vehicle, whether such vehicle is subject
to the licensing, safety, and other requirements
applicable to highway vehicles, and whether such
vehicle can transport a load at a sustained speed of
at least 25 miles per hour. It is immaterial that a
vehicle can transport a greater load off the public
highway than such vehicle is permitted to transport
over the public highway.
‘‘(B) 
NONTRANSPORTATION
TRAILERS
AND
SEMITRAILERS.—A trailer or semitrailer shall not be treated
as a highway vehicle if it is specially designed to function
only as an enclosed stationary shelter for the carrying
on of an off-highway function at an off-highway site.’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendment made by this section shall take effect on the date
of the enactment of this Act.
(2) FUEL
TAXES.—With respect to taxes imposed under
subchapter B of chapter 31 and part III of subchapter A of
chapter 32, the amendment made by this section shall apply
to taxable periods beginning after the date of the enactment
of this Act.
SEC. 853. 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:
H. R. 4520—193
‘‘(iv) in the case of aviation-grade kerosene, 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 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.—
(A) IN
GENERAL.—Subsection (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.—For purposes of paragraph (2)(C),
a refueler truck, tanker, or tank wagon shall be treated
as part of a terminal if—
‘‘(i) such terminal is located within a secured area
of an airport,
‘‘(ii) any aviation-grade kerosene which is loaded
in such truck, tanker, or wagon at such terminal is
for delivery only into aircraft at the airport in which
such terminal is located,
‘‘(iii) such truck, tanker, or wagon meets the
requirements of subparagraph (B) with respect to such
terminal, and
‘‘(iv) except in the case of exigent circumstances
identified by the Secretary in regulations, 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 a terminal if such truck, tanker, or wagon—
‘‘(i) has storage tanks, hose, and coupling equip-
ment designed and used for the purposes of fueling
aircraft,
‘‘(ii) is not registered for highway use, and
‘‘(iii) 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 require under
section 4101(d) reporting by such terminal operator of—
‘‘(i) any information obtained under subparagraph
(B)(iii)(II), and
‘‘(ii) any similar information maintained by such
terminal operator with respect to deliveries of fuel
made by trucks, tankers, or wagons operated by such
terminal operator.’’.
(B) LIST OF AIRPORTS WITH SECURED TERMINALS.—Not
later than December 15, 2004, the Secretary of the
Treasury shall publish and maintain a list of airports which
H. R. 4520—194
include a secured area in which a terminal is located
(within the meaning of section 4081(a)(3)(A)(i) of the
Internal Revenue Code of 1986, as added by this para-
graph).
(4) LIABILITY FOR TAX ON AVIATION-GRADE KEROSENE USED
IN COMMERCIAL AVIATION.—Subsection (a) of section 4081 is
amended by adding at the end the following new paragraph:
‘‘(4) LIABILITY FOR TAX ON AVIATION-GRADE KEROSENE USED
IN COMMERCIAL AVIATION.—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 sentence, fuel shall be treated as used when
such fuel is removed into the fuel tank.’’.
(5) NONTAXABLE USES.—
(A) IN GENERAL.—Section 4082 is amended by redesig-
nating subsections (e) and (f) as subsections (f) and (g),
respectively, and by inserting after subsection (d) the fol-
lowing new subsection:
‘‘(e) AVIATION-GRADE KEROSENE.—In the case of aviation-grade
kerosene which is exempt from the tax imposed 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 redesignating 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 subparagraph shall not apply to avia-
tion-grade kerosene.’’.
(B) CONFORMING AMENDMENT.—The heading for para-
graph (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 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 busi-
ness of transporting persons or property for compensation or hire
by air, unless properly allocable 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 KEROSENE.—
‘‘(A) NO REFUND OF CERTAIN TAXES ON FUEL USED IN
COMMERCIAL AVIATION.—In the case of aviation-grade ker-
osene used in commercial aviation (as defined in section
H. R. 4520—195
4083(b)) (other than supplies for vessels or aircraft within
the meaning of section 4221(d)(3)), paragraph (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 specified 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 kerosene, if the ultimate
purchaser of such kerosene waives (at such time and in
such form and manner 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 subparagraph (A),
(B), or (D) of section 6416(a)(1).’’.
(2) TIME FOR FILING CLAIMS.—Subparagraph (A) of section
6427(i)(4) is amended—
(A) by striking ‘‘subsection (l)(5)’’ both places it appears
and inserting ‘‘paragraph (4)(B) or (5) of subsection (l)’’,
and
(B) by striking ‘‘the preceding sentence’’ and inserting
‘‘subsection (l)(5)’’.
(3) CONFORMING AMENDMENT.—Subparagraph (B) of section
6427(l)(2) is amended to read as follows:
‘‘(B) in the case of aviation-grade kerosene—
‘‘(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, lessee, or other
operator of an aircraft for use in such aircraft, or
‘‘(B) used by any person in an aircraft unless 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 sub-
section shall be the rate of tax applicable under section
4081(a)(2)(A)(iv) which is in effect at the time of such sale
or use.’’.
H. R. 4520—196
(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) Section 4041(m)(1) is amended to read as follows:
‘‘(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 October 1,
2005—
‘‘(i) in the case of fuel none of the alcohol 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, 2005—
‘‘(i) in the case of fuel none of the alcohol 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 striking ‘‘4091
or’’.
(H) Section 6416(b)(3) is amended by striking ‘‘or 4091’’
each place it appears.
(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(j)(1) is amended by striking ‘‘, 4081,
and 4091’’ and inserting ‘‘and 4081’’.
(K)(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 nontaxable 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 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 ‘‘Paragraph (1) shall not apply to kerosene
(other than aviation-grade kerosene)’’.
(L) Subparagraph (B) of section 6724(d)(1), as amended
by section 805, is amended by striking clause (xvi) and
by redesignating the succeeding clauses accordingly.
(M) Paragraph (2) of section 6724(d), as amended by
section 805, is amended by striking subparagraph (X) and
by redesignating the succeeding subparagraphs accord-
ingly.
(N) Paragraph (1) of section 9502(b) is amended by
adding ‘‘and’’ at the end of subparagraph (B) and by striking
subparagraphs (C) and (D) and inserting the following new
subparagraph:
H. R. 4520—197
‘‘(C) section 4081 with respect to aviation gasoline and
aviation-grade kerosene, and’’.
(O) 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).’’.
(P) Subsection (b) of section 9508 is amended by
striking paragraph (3) and by redesignating paragraphs
(4) and (5) as paragraphs (3) and (4), respectively.
(Q) Section 9508(c)(2)(A) is amended by striking ‘‘sec-
tions 4081 and 4091’’ and inserting ‘‘section 4081’’.
(R) 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.’’.
(S) 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’’.
(T) The heading for subpart B of part III of subchapter
A of chapter 32, as redesignated by paragraph (1), 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, entered, or sold
after December 31, 2004.
(f) FLOOR STOCKS TAX.—
(1) IN
GENERAL.—There is hereby imposed on aviation-
grade kerosene held on January 1, 2005, 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 sum of—
(i) the tax imposed before such date on such ker-
osene under section 4091 of the Internal Revenue Code
of 1986, as in effect on such date, and
(ii) in the case of kerosene held exclusively for
such person’s own use, the amount which such person
would (but for this clause) reasonably expect (as of
such date) to be paid as a refund under section 6427(l)
of such Code with respect to such kerosene.
(2) EXCEPTION FOR FUEL HELD IN AIRCRAFT FUEL TANK.—
Paragraph (1) shall not apply to kerosene held in the fuel
tank of an aircraft on January 1, 2005.
(3) LIABILITY FOR TAX AND METHOD OF PAYMENT.—
(A) LIABILITY FOR TAX.—The person holding the ker-
osene on January 1, 2005, 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
H. R. 4520—198
manner as the Secretary of the Treasury (or the Secretary’s
delegate) shall prescribe, including the nonapplication of
such tax on de minimis amounts of kerosene.
(4) TRANSFER OF FLOOR STOCK TAX REVENUES TO TRUST
FUNDS.—For purposes of determining 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) in any case in which tax was not imposed by
section 4091 of such Code, 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) of such
Code to the extent of the remainder.
(5) HELD BY A PERSON.—For purposes of this subsection,
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).
(6) 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. 854. 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 Secretary of the Treasury
shall issue regulations regarding mechanical dye injection systems
described in the amendment made by subsection (a), and such
regulations shall include standards for making such systems tamper
resistant.
(c) PENALTY FOR TAMPERING WITH OR FAILING TO MAINTAIN
SECURITY REQUIREMENTS
FOR MECHANICAL DYE INJECTION SYS-
TEMS.—
(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 MECHANICAL DYE INJECTION SYS-
TEMS.
‘‘(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 REQUIREMENTS.—If any
operator of a mechanical dye injection system used to indelibly
dye fuel for purposes 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 addition
to the tax (if any).
‘‘(b) AMOUNT OF PENALTY.—The amount of the penalty under
subsection (a) shall be—
H. R. 4520—199
‘‘(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 para-
graph (2), $1,000 per day for each day after which such
violation was discovered or such person should have reason-
ably 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 officer, employee, or agent of
such entity or other contracting party who willfully participated
in any act giving rise to such penalty shall be jointly and
severally 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 severally liable with such entity for the penalty
imposed under this section.’’.
(2) CLERICAL AMENDMENT.—The table of sections 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 requirements
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 regulations described in subsection
(b).
SEC. 855. ELIMINATION OF ADMINISTRATIVE REVIEW FOR TAXABLE
USE OF DYED FUEL.
(a) IN GENERAL.—Section 6715 is amended by inserting at
the end the following new subsection:
‘‘(e) NO ADMINISTRATIVE APPEAL FOR THIRD AND SUBSEQUENT
VIOLATIONS.—In the case of any person who is found to be subject
to the penalty under this section after a chemical analysis of such
fuel and who has been penalized under this section at least twice
after the date of the enactment of this subsection, no administrative
appeal or review shall be allowed with respect to such finding
except in the case of a claim regarding—
‘‘(1) fraud or mistake in the chemical analysis, or
‘‘(2) mathematical calculation of the amount of the pen-
alty.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to penalties assessed after the date of the enactment
of this Act.
SEC. 856. PENALTY ON UNTAXED CHEMICALLY ALTERED DYED FUEL
MIXTURES.
(a) IN GENERAL.—Section 6715(a) (relating to dyed fuel sold
for use or used in taxable use, etc.) is amended by striking ‘‘or’’
in paragraph (2), by inserting ‘‘or’’ at the end of paragraph (3),
and by inserting after paragraph (3) the following new paragraph:
H. R. 4520—200
‘‘(4) any person who has knowledge that a dyed fuel which
has been altered as described in paragraph (3) sells or holds
for sale such fuel for any use which the person knows or
has reason to know is not a nontaxable use of such fuel,’’.
(b) CONFORMING AMENDMENT.—Section 6715(a)(3) is amended
by striking ‘‘alters, or attempts to alter,’’ and inserting ‘‘alters,
chemically or otherwise, or attempts to so alter,’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 857. TERMINATION OF DYED DIESEL USE BY INTERCITY BUSES.
(a) IN GENERAL.—Paragraph (3) of section 4082(b) (relating
to nontaxable use) is amended to read as follows:
‘‘(3) any use described in section 4041(a)(1)(C)(iii)(II).’’.
(b) ULTIMATE VENDOR REFUND.—Subsection (b) of section 6427
is amended by adding at the end the following new paragraph:
‘‘(4) REFUNDS FOR USE OF DIESEL FUEL IN CERTAIN INTER-
CITY
BUSES.—With respect to any fuel to which paragraph
(2)(A) applies, if the ultimate purchaser of such fuel waives
(at such time and in such form and manner 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—
‘‘(A) is registered under section 4101, and
‘‘(B) meets the requirements of subparagraph (A), (B),
or (D) of section 6416(a)(1).’’.
(c) PAYMENT
OF
REFUNDS.—Subparagraph (A) of section
6427(i)(4), as amended by this Act, is amended by inserting ‘‘sub-
sections (b)(4) and’’ after ‘‘filed under’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to fuel sold after December 31, 2004.
SEC. 858. AUTHORITY TO INSPECT ON-SITE RECORDS.
(a) IN GENERAL.—Section 4083(d)(1)(A) (relating to administra-
tive authority), as 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. 859. ASSESSABLE PENALTY FOR REFUSAL OF ENTRY.
(a) IN GENERAL.—Part I of subchapter B of chapter 68 (relating
to assessable penalties), as amended by this Act, is amended by
inserting after section 6716 the following new section:
‘‘SEC. 6717. REFUSAL OF ENTRY.
‘‘(a) IN GENERAL.—In addition to any other penalty provided
by law, any person who refuses to admit entry or refuses to permit
any other action by the Secretary authorized by section 4083(d)(1)
shall pay a penalty of $1,000 for such refusal.
‘‘(b) JOINT AND SEVERAL LIABILITY.—
‘‘(1) IN GENERAL.—If a penalty is imposed under this section
on any business entity, each officer, employee, or agent of
such entity or other contracting party who willfully participated
H. R. 4520—201
in any act giving rise to such penalty shall be jointly and
severally 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 severally liable with such entity for the penalty
imposed under this section.
‘‘(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.’’.
(b) CONFORMING
AMENDMENTS.—(1) Section 4083(d)(3), as
amended by this Act, is amended—
(A) by striking ‘‘ENTRY.—The penalty’’ and inserting:
‘‘ENTRY.—
‘‘(A) FORFEITURE.—The penalty’’, and
(B) by adding at the end the following new subparagraph:
‘‘(B) ASSESSABLE PENALTY.—For additional assessable
penalty for the refusal to admit entry or other refusal
to permit an action by the Secretary authorized by para-
graph (1), see section 6717.’’.
(2) The table of sections for part I of subchapter B of chapter
68, as amended by this Act, is amended by inserting after the
item relating to section 6716 the following new item:
‘‘Sec. 6717. Refusal of entry.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on January 1, 2005.
SEC. 860. REGISTRATION OF PIPELINE OR VESSEL OPERATORS
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 March 1, 2005.
(c) PUBLICATION
OF
REGISTERED
PERSONS.—Beginning on
January 1, 2005, the Secretary of the Treasury (or the Secretary’s
delegate) shall periodically publish under section 6103(k)(7) of the
Internal Revenue Code of 1986 a current list of persons registered
under section 4101 of such Code who are required to register
under such section.
SEC. 861. DISPLAY OF REGISTRATION.
(a) IN GENERAL.—Subsection (a) of section 4101 (relating to
registration) is amended—
(1) by striking ‘‘Every’’ and inserting the following:
‘‘(1) IN GENERAL.—Every’’, and
(2) by adding at the end the following new paragraph:
‘‘(2) DISPLAY OF REGISTRATION.—Every operator of a vessel
required by the Secretary to register under this section shall
display proof of registration through an 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 REGISTRATION.—
H. R. 4520—202
(1) IN GENERAL.—Part I of subchapter B of chapter 68
(relating to assessable penalties), as amended by this Act, is
amended by inserting after section 6717 the following new
section:
‘‘SEC. 6718. FAILURE TO DISPLAY TAX REGISTRATION ON VESSELS.
‘‘(a) FAILURE TO DISPLAY REGISTRATION.—Every operator of
a vessel who fails to display proof of registration 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 number 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 sections for part
I of subchapter B of chapter 68, as amended by this Act,
is amended by inserting after the item relating to section 6717
the following new item:
‘‘Sec. 6718. Failure to display tax registration on vessels.’’.
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendments made by subsection
(a) shall take effect on January 1, 2005.
(2) SUBSECTION (b).—The amendments made by subsection
(b) shall apply to penalties imposed after December 31, 2004.
SEC. 862. REGISTRATION OF PERSONS WITHIN FOREIGN TRADE ZONES,
ETC.
(a) IN GENERAL.—Section 4101(a), as amended by this Act,
is amended by redesignating paragraph (2) as paragraph (3), and
by inserting after paragraph (1) the following new paragraph:
‘‘(2) REGISTRATION
OF
PERSONS
WITHIN
FOREIGN
TRADE
ZONES, ETC.—The Secretary shall require registration by any
person which—
‘‘(A) operates a terminal or refinery within a foreign
trade zone or within a customs bonded storage facility,
or
‘‘(B) holds an inventory position with respect to a tax-
able fuel in such a terminal.’’.
(b) TECHNICAL AMENDMENT.—Section 6718(a), as added by this
Act, is amended by striking ‘‘section 4101(a)(2)’’ and inserting ‘‘sec-
tion 4101(a)(3)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on January 1, 2005.
SEC. 863. 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 amended by inserting
‘‘($10,000 in the case of a failure to register under section 4101)’’
after ‘‘$50’’.
H. R. 4520—203
(b) INCREASED CRIMINAL PENALTY.—Section 7232 (relating to
failure to register under section 4101, false representations of reg-
istration status, etc.) is amended by striking ‘‘$5,000’’ and inserting
‘‘$10,000’’.
(c) ASSESSABLE PENALTY FOR FAILURE TO REGISTER.—
(1) IN GENERAL.—Part I of subchapter B of chapter 68
(relating to assessable penalties), as amended by this Act, is
amended by inserting after section 6718 at the end the following
new section:
‘‘SEC. 6719. 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 sections for part
I of subchapter B of chapter 68, as amended by this Act,
is amended by inserting after the item relating to section 6718
the following new item:
‘‘Sec. 6719. Failure to register.’’.
(d) ASSESSABLE PENALTY FOR FAILURE TO REPORT.—
(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 section:
‘‘SEC. 6725. FAILURE TO REPORT INFORMATION UNDER SECTION 4101.
‘‘(a) IN GENERAL.—In the case of each failure described 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 purposes of sub-
section (a), the failures described in this subsection 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 information required
to be shown on such report or the inclusion of incorrect informa-
tion.
‘‘(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 sections 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 December 31, 2004.
H. R. 4520—204
SEC. 864. ELECTRONIC FILING OF REQUIRED INFORMATION REPORTS.
(a) IN GENERAL.—Section 4101(d) is amended by adding at
the end the following new flush sentence:
‘‘Any person who is required to report under this subsection and
who has 25 or more reportable transactions in a month shall file
such report in electronic format.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply on January 1, 2006.
SEC. 865. TAXABLE FUEL REFUNDS FOR CERTAIN ULTIMATE 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 ADMINISTER 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 ultimate purchaser described in subpara-
graph (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.
‘‘(B) TIMING
OF
CLAIMS.—The procedure and timing
of any claim under subparagraph (A) shall be the same
as for claims under section 6427(i)(4), except that the rules
of section 6427(i)(3)(B) regarding electronic claims shall
not apply unless the ultimate vendor has certified to the
Secretary for the most recent quarter of the taxable year
that all ultimate purchasers of the vendor are certified
and entitled to a refund under subparagraph (C) or (D)
of subsection (b)(2).’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall take effect on January 1, 2005.
SEC. 866. TWO-PARTY EXCHANGES.
(a) IN GENERAL.—Subpart C of part III of subchapter A of
chapter 32, as amended by this Act, is amended by inserting after
section 4104 the following new section:
‘‘SEC. 4105. TWO-PARTY EXCHANGES.
‘‘(a) IN GENERAL.—In a two-party exchange, the delivering per-
son 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 registered under section
4101 as a taxable fuel registrant 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 position for taxable fuel in
the terminal as reflected in the records of the terminal operator.
‘‘(2) The exchange transaction occurs before or contempora-
neous 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 product
H. R. 4520—205
across the terminal rack for purposes of reporting the trans-
action to the Secretary.
‘‘(4) The transaction is the subject of a written contract.’’.
(b) CONFORMING AMENDMENT.—The table of sections for sub-
part C of part III of subchapter A of chapter 32, as amended
by this Act, is amended by adding after the last item 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. 867. MODIFICATIONS OF TAX ON USE OF CERTAIN VEHICLES.
(a) PRORATION OF TAX WHERE VEHICLE SOLD.—
(1) IN GENERAL.—Subparagraph (A) of section 4481(c)(2)
(relating to where vehicle destroyed or stolen) is amended by
striking ‘‘destroyed or stolen’’ both places it appears and
inserting ‘‘sold, destroyed, or stolen’’.
(2) CONFORMING
AMENDMENT.—The heading for section
4481(c)(2) is amended by striking ‘‘DESTROYED OR STOLEN’’ and
inserting ‘‘SOLD, DESTROYED, OR STOLEN’’.
(b) REPEAL
OF
INSTALLMENT
PAYMENT.—(1) Section 6156
(relating to installment payment of tax on use of highway motor
vehicles) is repealed.
(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 redesig-
nating subsection (e) as subsection (f) and by inserting after sub-
section (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 electronically.’’.
(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 enact-
ment of this Act.
SEC. 868. DEDICATION OF REVENUES FROM CERTAIN PENALTIES 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 paragraph (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, 6719, 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 on or after the date of the enact-
ment of this Act.
H. R. 4520—206
SEC. 869. 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 hereby imposed
on taxable tires sold by the manufacturer, producer, or importer
thereof a tax at the rate of 9.45 cents (4.725 cents in the case
of a biasply tire or super single tire) for each 10 pounds so much
of the maximum rated load capacity thereof as exceeds 3,500
pounds.’’.
(b) BIASPLY
AND
SUPER
SINGLE
TIRES.—Section 4072 is
amended by adding at the end the following new subsections:
‘‘(c) BIASPLY.—For purposes of this part, the term ‘biasply tire’
means a pneumatic tire on which the ply cords that extend to
the beads are laid at alternate angles substantially less than 90
degrees to the centerline of the tread.
‘‘(d) SUPER SINGLE TIRE.—For purposes of this part, the term
‘super single tire’ means a single tire greater than 13 inches in
cross section width designed to replace 2 tires in a dual fitment.’’.
(b) TAXABLE TIRE.—Section 4072, as amended by subsection
(a), is amended by redesignating subsections (a), (b), (c), and (d)
as subsections (b), (c), (d), and (e) respectively, and by inserting
before subsection (b) (as so redesignated) the following new sub-
section:
‘‘(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 highway use.’’.
(c) EXEMPTION FOR TIRES SOLD TO DEPARTMENT OF DEFENSE.—
Section 4073 is amended to read as follows:
‘‘SEC. 4073. EXEMPTIONS.
‘‘The tax imposed by section 4071 shall not apply to tires
sold for the exclusive use of the Department of Defense or the
Coast Guard.’’.
(d) CONFORMING AMENDMENTS.—(1) Section 4071 is amended
by striking subsection (c) and by moving subsection (e) after sub-
section (b) and redesignating subsection (e) as subsection (c).
(2) The item relating to section 4073 in the table of sections
for part II of subchapter A of chapter 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 beginning more than 30
days after the date of the enactment of this Act.
SEC. 870. TRANSMIX AND DIESEL FUEL BLEND STOCKS TREATED AS
TAXABLE FUEL.
(a) IN GENERAL.—Paragraph (3) of section 4083(a) is amended
to read as follows:
‘‘(3) DIESEL FUEL.—
‘‘(A) IN GENERAL.—The term ‘diesel fuel’ means—
‘‘(i) any liquid (other than gasoline) which is suit-
able for use as a fuel in a diesel-powered highway
vehicle, or a diesel-powered train,
‘‘(ii) transmix, and
‘‘(iii) diesel fuel blend stocks identified by the Sec-
retary.
H. R. 4520—207
‘‘(B) TRANSMIX.—For purposes of subparagraph (A), the
term ‘transmix’ means a byproduct of refined products pipe-
line operations created by the mixing of different specifica-
tion products during pipeline transportation.’’.
(b) CONFORMING AMENDMENT.—Subsection (h) of section 6427
is amended to read as follows:
‘‘(h) BLEND STOCKS NOT USED FOR PRODUCING TAXABLE FUEL.—
‘‘(1) GASOLINE BLEND STOCKS OR ADDITIVES NOT USED FOR
PRODUCING GASOLINE.—Except as provided in subsection (k),
if any gasoline blend stock or additive (within the meaning
of section 4083(a)(2)) is not used by any person to produce
gasoline and such person establishes that the ultimate use
of such gasoline blend stock or additive is not to produce
gasoline, the Secretary shall pay (without interest) to such
person an amount equal to the aggregate amount of the tax
imposed on such person with respect to such gasoline blend
stock or additive.
‘‘(2) DIESEL FUEL BLEND STOCKS OR ADDITIVES NOT USED
FOR PRODUCING DIESEL.—Except as provided in subsection (k),
if any diesel fuel blend stock is not used by any person to
produce diesel fuel and such person establishes that the ulti-
mate use of such diesel fuel blend stock is not to produce
diesel fuel, the Secretary shall pay (without interest) to such
person an amount equal to the aggregate amount of the tax
imposed on such person with respect to such diesel fuel blend
stock.’’.
(c) EFFECTIVE DATE.—The amendment made by this section
shall apply to fuel removed, sold, or used after December 31, 2004.
SEC. 871. STUDY REGARDING FUEL TAX COMPLIANCE.
(a) IN GENERAL.—Not later than January 31, 2005, the Sec-
retary of the Treasury shall submit to the Committee on Finance
of the Senate and the Committee on Ways and Means of the
House of Representatives a report regarding compliance with the
tax imposed under subchapter B of chapter 31 and part III of
subchapter A of chapter 32 of the Internal Revenue Code of 1986.
Such report shall include the information, analysis, and rec-
ommendations specified in subsections (b), (c), and (d).
(b) TAXABLE FUEL BLENDSTOCKS.—The Secretary shall identify
chemical products to be added to the list of blendstocks from lab
analysis of fuel samples collected by the Internal Revenue Service
which have been blended with taxable fuel but are not treated
as blendstocks. The Secretary shall include statistics regarding
the frequency in which a chemical product has been collected,
and whether the sample contained an above normal concentration
of the chemical product.
(c) WASTE PRODUCTS ADDED TO TAXABLE FUELS.—The report
shall include a discussion of Internal Revenue Service findings
regarding the addition of waste products to taxable fuel and any
recommendations to address the taxation of such products.
(d) ERRONEOUS CLAIMS OF FUEL TAX EXEMPTIONS.—The report
shall include a discussion of Internal Revenue Service findings
regarding sales of taxable fuel to entities claiming exempt status
as a State or local government and the frequency of erroneous
certifications of tax exempt status. The Secretary, in consultation
with representatives of State and local governments, shall provide
H. R. 4520—208
recommendations to address such erroneous claims, including rec-
ommendations on the feasibility of a State maintained list of exempt
governmental entities within the State.
Subtitle D—Other Revenue Provisions
SEC. 881. 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 Department)—
‘‘(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
payment of such amount during a period not to exceed
5 years, and
‘‘(C) to obtain financial information specified by the
Secretary with respect to such taxpayer,
‘‘(2) prohibits each person providing such services under
such contract from committing any act or omission which
employees of the Internal Revenue Service are prohibited from
committing in the performance 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—
‘‘(1) 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, and
‘‘(2) an amount not in excess of 25 percent of such amount
collected for collection enforcement activities of the Internal
Revenue Service.
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 contract.
‘‘(e) APPLICATION OF FAIR DEBT COLLECTION PRACTICES ACT.—
The provisions of the Fair Debt Collection Practices Act (15 U.S.C.
H. R. 4520—209
1692 et seq.) shall apply to any qualified tax collection contract,
except to the extent superseded by section 6304, section 7602(c),
or by any other provision of this title.
‘‘(f) CROSS REFERENCES.—
‘‘(1) For damages for certain unauthorized collection actions by
persons performing services under a qualified tax collection con-
tract, see section 7433A.
‘‘(2) For application of Taxpayer Assistance Orders to persons
performing services under a qualified tax collection contract, see
section 7811(g).’’.
(2) CONFORMING
AMENDMENTS.—(A) Section 7809(a) is
amended by inserting ‘‘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 SERVICES UNDER QUALIFIED TAX
COLLECTION CONTRACTS.—
(1) IN GENERAL.—Subchapter B of chapter 76 (relating to
proceedings by taxpayers and third parties) is amended by
inserting after section 7433 the following new section:
‘‘SEC. 7433A. CIVIL DAMAGES FOR CERTAIN UNAUTHORIZED COLLEC-
TION ACTIONS BY PERSONS PERFORMING SERVICES
UNDER QUALIFIED TAX COLLECTION CONTRACTS.
‘‘(a) IN GENERAL.—Subject to the modifications provided 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 section 6306(b)) to the same extent and
in the same manner as if such person were an employee of the
Internal Revenue 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 sections for sub-
chapter 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 actions by
persons performing services under qualified tax collection con-
tracts.’’.
(c) APPLICATION OF TAXPAYER ASSISTANCE ORDERS TO PERSONS
PERFORMING SERVICES UNDER A QUALIFIED TAX COLLECTION CON-
TRACT.—Section 7811 (relating to taxpayer assistance orders) is
amended by adding at the end the following new subsection:
‘‘(g) APPLICATION TO PERSONS PERFORMING SERVICES UNDER
A QUALIFIED TAX COLLECTION CONTRACT.—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 collection contract (as defined in section 6306(b)) to the same
H. R. 4520—210
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 Rev-
enue Service Restructuring Act of 1998 (relating to termination
of employment for misconduct) 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 per-
mitted 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 connection
with the performance of such services.’’.
(e) BIENNIAL REPORT.—The Secretary of the Treasury shall
biennially submit (beginning in 2005) to the Committee on Finance
of the Senate and the Committee on Ways and Means of the
House of Representatives a report with respect to qualified tax
collection contracts under section 6306 of the Internal Revenue
Code of 1986 (as added by this section) which includes—
(1) a complete cost benefit analysis,
(2) the impact of such contracts on collection enforcement
staff levels in the Internal Revenue Service,
(3) the impact of such contracts on the total number and
amount of unpaid assessments, and on the number and amount
of assessments collected by Internal Revenue Service personnel
after initial contact by a contractor,
(4) the amounts collected and the collection costs incurred
(directly and indirectly) by the Internal Revenue Service,
(5) an evaluation of contractor performance,
(6) a disclosure safeguard report in a form similar to that
required under section 6103(p)(5) of such Code, and
(7) a measurement plan which includes a comparison of
the best practices used by the private collectors with the
Internal Revenue Service’s own collection techniques and
mechanisms to identify and capture information on successful
collection techniques used by the contractors which could be
adopted by the Internal Revenue Service.
(f) EFFECTIVE DATE.—The amendments made to this section
shall take effect on the date of the enactment of this Act.
SEC. 882. 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 inserting after clause (ii) the
following new clause:
‘‘(iii) of any patent, copyright (other than a copy-
right 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 section
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
H. R. 4520—211
170 is amended by redesignating subsection (m) as subsection (n)
and by inserting after subsection (l) the following new subsection:
‘‘(m) CERTAIN DONEE INCOME FROM INTELLECTUAL PROPERTY
TREATED AS AN ADDITIONAL CHARITABLE CONTRIBUTION.—
‘‘(1) TREATMENT AS ADDITIONAL CONTRIBUTION.—In the case
of a taxpayer who makes a qualified intellectual property con-
tribution, the deduction allowed under subsection (a) for each
taxable year of the taxpayer ending on or after the date of
such contribution shall be increased (subject to the limitations
under subsection (b)) by the applicable percentage of qualified
donee income with respect to such contribution which is prop-
erly allocable to such year under this subsection.
‘‘(2) REDUCTION IN ADDITIONAL DEDUCTIONS TO EXTENT OF
INITIAL DEDUCTION.—With respect to any qualified intellectual
property contribution, the deduction allowed under subsection
(a) shall be increased under paragraph (1) only to the extent
that the aggregate amount of such increases with respect to
such contribution exceed the amount allowed as a deduction
under subsection (a) with respect to such contribution deter-
mined without regard to this subsection.
‘‘(3) QUALIFIED DONEE INCOME.—For purposes of this sub-
section, the term ‘qualified donee income’ means any net income
received by or accrued to the donee which is properly allocable
to the qualified intellectual property.
‘‘(4) ALLOCATION OF QUALIFIED DONEE INCOME TO TAXABLE
YEARS OF DONOR.—For purposes 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.
‘‘(5) 10-YEAR LIMITATION.—Income shall not be treated as
properly allocable to qualified intellectual 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 contribution of such property.
‘‘(6) BENEFIT
LIMITED
TO
LIFE
OF
INTELLECTUAL
PROP-
ERTY.—Income shall not be treated as properly allocable to
qualified intellectual property for purposes of this subsection
if such income is received by or accrued to the donee after
the expiration of the legal life of such property.
‘‘(7) APPLICABLE PERCENTAGE.—For purposes of this sub-
section, the term ‘applicable percentage’ means the percentage
determined under the following table which corresponds to
a taxable year of the donor ending on or after the date of
the qualified intellectual property contribution:
‘‘Taxable Year of Donor
Ending on or After
Applicable
Date of Contribution:
Percentage:
1st ....................................................................................................................
100
2nd ...................................................................................................................
100
3rd ....................................................................................................................
4th ....................................................................................................................
5th ....................................................................................................................
6th ....................................................................................................................
7th ....................................................................................................................
8th ....................................................................................................................
9th ....................................................................................................................
10th ..................................................................................................................
11th ..................................................................................................................
12th ..................................................................................................................
10.
H. R. 4520—212
‘‘(8) QUALIFIED INTELLECTUAL PROPERTY CONTRIBUTION.—
For purposes of this subsection, the term ‘qualified intellectual
property contribution’ means any charitable contribution of
qualified intellectual property—
‘‘(A) the amount of which taken into account under
this section is reduced by reason of subsection (e)(1), and
‘‘(B) with respect to which the donor informs the donee
at the time of such contribution that the donor intends
to treat such contribution as a qualified intellectual prop-
erty contribution for purposes of this subsection and section
6050L.
‘‘(9) QUALIFIED INTELLECTUAL PROPERTY.—For purposes of
this subsection, the term ‘qualified intellectual property’ means
property described in subsection (e)(1)(B)(iii) (other than prop-
erty contributed to or for the use of an organization described
in subsection (e)(1)(B)(ii)).
‘‘(10) OTHER SPECIAL RULES.—
‘‘(A) APPLICATION OF LIMITATIONS ON CHARITABLE CON-
TRIBUTIONS.—Any increase under this subsection of the
deduction provided under subsection (a) shall be treated
for purposes 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 (3) 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 subparagraph (D)(i), this sub-
section shall not apply with respect to any qualified intellec-
tual 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 regula-
tions or other guidance to carry out the purposes of this
subsection, including regulations 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 further
a purpose or function constituting the basis of the
donee’s exemption under section 501 (or, in the case
of a governmental unit, any purpose described in sec-
tion 170(c)) and does not possess a right to receive
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.—
H. R. 4520—213
‘‘(1) IN GENERAL.—If the donee of any charitable deduction
property sells, exchanges, or otherwise disposes of such property
within 2 years after its receipt, the donee shall make a return
(in accordance 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 disposition, and
‘‘(E) the date of such disposition.
‘‘(2) DEFINITIONS.—For purposes of this subsection:
‘‘(A) CHARITABLE
DEDUCTION
PROPERTY.—The term
‘charitable deduction property’ means any property (other
than publicly traded securities) contributed in a contribu-
tion for which a deduction was claimed under section 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 securities for which (as of the
date of the contribution) market quotations are readily
available on an established securities market.
‘‘(b) QUALIFIED INTELLECTUAL PROPERTY CONTRIBUTIONS.—
‘‘(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 prescribe) 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 intellectual 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 allocable to the qualified
intellectual property (determined without regard to para-
graph (10)(B) of section 170(m) and with the modifications
described in paragraphs (5) and (6) of such section).
‘‘(2) DEFINITIONS.—For purposes of this subsection:
‘‘(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 tax-
able year’ means, with respect to any qualified intellectual
property contribution, 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 regulations prescribe.’’.
(2) CLERICAL AMENDMENT.—The table of sections for sub-
part A of part II of subchapter A of chapter 61 is amended
by striking the item relating to section 6050L and inserting
the following new item:
‘‘Sec. 6050L. Returns relating to certain donated property.’’.
H. R. 4520—214
(d) COORDINATION WITH APPRAISAL REQUIREMENTS.—Subclause
(I) of section 170(f)(11)(A)(ii), as added by this Act, 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 guidance 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 subsection (a)), including preventing—
(1) the circumvention of the reduction of the charitable
deduction by embedding or bundling the patent or similar prop-
erty as part of a charitable contribution of property that
includes the patent or similar property,
(2) the manipulation of the basis of the property to increase
the amount of the charitable deduction 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 patent 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 June 3, 2004.
SEC. 883. INCREASED REPORTING FOR NONCASH CHARITABLE CON-
TRIBUTIONS.
(a) IN GENERAL.—Subsection (f) of section 170 (relating to dis-
allowance of deduction in certain cases and special rules) is
amended by adding after paragraph (10) the following new para-
graph:
‘‘(11) QUALIFIED APPRAISAL AND OTHER DOCUMENTATION FOR
CERTAIN CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—
‘‘(i) DENIAL OF DEDUCTION.—In the case of an indi-
vidual, partnership, or corporation, 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
PROPERTY.—Subpara-
graphs (C) and (D) shall not apply to cash, property
described in section 1221(a)(1), publicly traded
securities (as defined in section 6050L(a)(2)(B)),
and any qualified vehicle described in paragraph
(12)(A)(ii) for which an acknowledgement under
paragraph (12)(B)(iii) is provided.
‘‘(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
CONTRIBUTIONS
OF
MORE THAN $500.—In the case of contributions of property
for which a deduction of more than $500 is claimed, the
requirements 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
H. R. 4520—215
a description of such property and such other information
as the Secretary 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 CONTRIBUTIONS 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 indi-
vidual, partnership, or corporation obtains a qualified
appraisal of such property and attaches to the return for
the taxable year in which such contribution is made such
information regarding such property and such appraisal
as the Secretary may require.
‘‘(D) SUBSTANTIATION
FOR
CONTRIBUTIONS
OF
MORE
THAN
$500,000.—In the case of contributions of property
for which a deduction of more than $500,000 is claimed,
the requirements of this subparagraph are met if the indi-
vidual, partnership, or corporation attaches to the return
for the taxable year a qualified appraisal of such property.
‘‘(E) QUALIFIED APPRAISAL.—For purposes of this para-
graph, the term ‘qualified appraisal’ means, with respect
to any property, an appraisal of such property which is
treated for purposes of this paragraph as a qualified
appraisal under regulations or other guidance prescribed
by the Secretary.
‘‘(F) AGGREGATION OF SIMILAR ITEMS OF PROPERTY.—
For purposes of determining thresholds under this para-
graph, 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 ENTITIES.—In the
case of a partnership or S corporation, this paragraph
shall be applied at the entity level, except that the deduc-
tion 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 provide 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 June 3, 2004.
SEC. 884. DONATIONS OF MOTOR VEHICLES, BOATS, AND AIRPLANES.
(a) IN GENERAL.—Subsection (f) of section 170 (relating to dis-
allowance of deduction in certain cases and special rules), as
amended by this Act, is amended by inserting after paragraph
(11) the following new paragraph:
‘‘(12) CONTRIBUTIONS OF USED MOTOR VEHICLES, BOATS, AND
AIRPLANES.—
‘‘(A) IN
GENERAL.—In the case of a contribution of
a qualified vehicle the claimed value of which exceeds
$500—
‘‘(i) paragraph (8) shall not apply and no deduction
shall be allowed under subsection (a) for such contribu-
tion unless the taxpayer substantiates the contribution
by a contemporaneous written acknowledgement of the
contribution by the donee organization that meets the
H. R. 4520—216
requirements of subparagraph (B) and includes the
acknowledgement with the taxpayer’s return of tax
which includes the deduction, and
‘‘(ii) if the organization sells the vehicle without
any significant intervening use or material improve-
ment of such vehicle by the organization, the amount
of the deduction allowed under subsection (a) shall
not exceed the gross proceeds received from such sale.
‘‘(B) CONTENT
OF
ACKNOWLEDGEMENT.—An acknowl-
edgement meets the requirements of this subparagraph
if it includes the following information:
‘‘(i) The name and taxpayer identification number
of the donor.
‘‘(ii) The vehicle identification number or similar
number.
‘‘(iii) In the case of a qualified vehicle to which
subparagraph (A)(ii) applies—
‘‘(I) a certification that the vehicle was sold
in an arm’s length transaction between unrelated
parties,
‘‘(II) the gross proceeds from the sale, and
‘‘(III) a statement that the deductible amount
may not exceed the amount of such gross proceeds.
‘‘(iv) In the case of a qualified vehicle to which
subparagraph (A)(ii) does not apply—
‘‘(I) a certification of the intended use or mate-
rial improvement of the vehicle and the intended
duration of such use, and
‘‘(II) a certification that the vehicle would not
be transferred in exchange for money, other prop-
erty, or services before completion of such use or
improvement.
‘‘(C) CONTEMPORANEOUS.—For purposes of subpara-
graph (A), an acknowledgement shall be considered to be
contemporaneous if the donee organization provides it
within 30 days of—
‘‘(i) the sale of the qualified vehicle, or
‘‘(ii) in the case of an acknowledgement including
a certification described in subparagraph (B)(iv), the
contribution of the qualified vehicle.
‘‘(D) INFORMATION TO SECRETARY.—A donee organiza-
tion required to provide an acknowledgement under this
paragraph shall provide to the Secretary the information
contained in the acknowledgement. Such information shall
be provided at such time and in such manner as the Sec-
retary may prescribe.
‘‘(E) QUALIFIED VEHICLE.—For purposes of this para-
graph, the term ‘qualified vehicle’ means any—
‘‘(i) motor vehicle manufactured primarily for use
on public streets, roads, and highways,
‘‘(ii) boat, or
‘‘(iii) airplane.
Such term shall not include any property which is described
in section 1221(a)(1).
‘‘(F) REGULATIONS OR OTHER GUIDANCE.—The Secretary
shall prescribe such regulations or other guidance as may
be necessary to carry out the purposes of this paragraph.
H. R. 4520—217
The Secretary may prescribe regulations or other guidance
which exempts sales by the donee organization which are
in direct furtherance of such organization’s charitable pur-
pose from the requirements of subparagraphs (A)(ii) and
(B)(iv)(II).’’.
(b) PENALTY FOR FRAUDULENT ACKNOWLEDGMENTS.—
(1) IN GENERAL.—Part I of subchapter B of chapter 68
(relating to assessable penalties), as amended by this Act, is
amended by inserting after section 6719 the following new
section:
‘‘SEC. 6720. FRAUDULENT ACKNOWLEDGMENTS WITH RESPECT TO
DONATIONS OF MOTOR VEHICLES, BOATS, AND AIR-
PLANES.
‘‘Any donee organization required under section 170(f)(12)(A)
to furnish a contemporaneous written acknowledgment to a donor
which knowingly furnishes a false or fraudulent acknowledgment,
or which knowingly fails to furnish such acknowledgment in the
manner, at the time, and showing the information required under
section 170(f)(12), or regulations prescribed thereunder, shall for
each such act, or for each such failure, be subject to a penalty
equal to—
‘‘(1) in the case of an acknowledgment with respect to
a qualified vehicle to which section 170(f)(12)(A)(ii) applies,
the greater of—
‘‘(A) the product of the highest rate of tax specified
in section 1 and the sales price stated on the acknowledg-
ment, or
‘‘(B) the gross proceeds from the sale of such vehicle,
and
‘‘(2) in the case of an acknowledgment with respect to
any other qualified vehicle to which section 170(f)(12) applies,
the greater of—
‘‘(A) the product of the highest rate of tax specified
in section 1 and the claimed value of the vehicle, or
‘‘(B) $5,000.’’.
(2) CONFORMING AMENDMENT.—The table of sections for
part I of subchapter B of chapter 68, as amended by this
Act, is amended by inserting after the item relating to section
6719 the following new item:
‘‘Sec. 6720. Fraudulent acknowledgments with respect to donations of
motor vehicles, boats, and airplanes.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to contributions made after December 31, 2004.
SEC. 885. TREATMENT OF NONQUALIFIED DEFERRED COMPENSATION
PLANS.
(a) IN GENERAL.—Subpart A of part I of subchapter D of chapter
1 is amended by adding at the end the following new section:
‘‘SEC. 409A. INCLUSION IN GROSS INCOME OF DEFERRED COMPENSA-
TION UNDER NONQUALIFIED DEFERRED COMPENSATION
PLANS.
‘‘(a) RULES RELATING TO CONSTRUCTIVE RECEIPT.—
‘‘(1) PLAN FAILURES.—
‘‘(A) GROSS INCOME INCLUSION.—
H. R. 4520—218
‘‘(i) IN GENERAL.—If at any time during a taxable
year a nonqualified deferred compensation plan—
‘‘(I) fails to meet the requirements of para-
graphs (2), (3), and (4), or
‘‘(II) is not operated in accordance with such
requirements,
all compensation deferred under the plan for the tax-
able year and all preceding taxable years shall be
includible in gross income for the taxable year to the
extent not subject to a substantial risk of forfeiture
and not previously included in gross income.
‘‘(ii) APPLICATION
ONLY
TO
AFFECTED
PARTICI-
PANTS.—Clause (i) shall only apply with respect to
all compensation deferred under the plan for partici-
pants with respect to whom the failure relates.
‘‘(B) INTEREST
AND
ADDITIONAL
TAX
PAYABLE
WITH
RESPECT TO PREVIOUSLY DEFERRED COMPENSATION.—
‘‘(i) IN GENERAL.—If compensation is required to
be included in gross income under subparagraph (A)
for a taxable year, the tax imposed by this chapter
for the taxable year shall be increased by the sum
of—
‘‘(I) the amount of interest determined under
clause (ii), and
‘‘(II) an amount equal to 20 percent of the
compensation which is required to be included in
gross income.
‘‘(ii) INTEREST.—For purposes of clause (i), the
interest determined under this clause for any taxable
year is the amount of interest at the underpayment
rate plus 1 percentage point on the underpayments
that would have occurred had the deferred compensa-
tion been includible in gross income for the taxable
year in which first deferred or, if later, the first taxable
year in which such deferred compensation is not subject
to a substantial risk of forfeiture.
‘‘(2) DISTRIBUTIONS.—
‘‘(A) IN GENERAL.—The requirements of this paragraph
are met if the plan provides that compensation deferred
under the plan may not be distributed earlier than—
‘‘(i) separation from service as determined by the
Secretary (except as provided in subparagraph (B)(i)),
‘‘(ii) the date the participant becomes disabled
(within the meaning of subparagraph (C)),
‘‘(iii) death,
‘‘(iv) a specified time (or pursuant to a fixed
schedule) specified under the plan at the date of the
deferral of such compensation,
‘‘(v) to the extent provided by the Secretary, a
change in the ownership or effective control of the
corporation, or in the ownership of a substantial por-
tion of the assets of the corporation, or
‘‘(vi) the occurrence of an unforeseeable emergency.
‘‘(B) SPECIAL RULES.—
‘‘(i) SPECIFIED
EMPLOYEES.—In the case of any
specified employee, the requirement of subparagraph
(A)(i) is met only if distributions may not be made
H. R. 4520—219
before the date which is 6 months after the date of
separation from service (or, if earlier, the date of death
of the employee). For purposes of the preceding sen-
tence, a specified employee is a key employee (as
defined in section 416(i) without regard to paragraph
(5) thereof) of a corporation any stock in which is
publicly traded on an established securities market
or otherwise.
‘‘(ii) UNFORESEEABLE
EMERGENCY.—For purposes
of subparagraph (A)(vi)—
‘‘(I) IN
GENERAL.—The term ‘unforeseeable
emergency’ means a severe financial hardship to
the participant resulting from an illness or
accident of the participant, the participant’s
spouse, or a dependent (as defined in section
152(a)) of the participant, loss of the participant’s
property due to casualty, or other similar extraor-
dinary and unforeseeable circumstances arising as
a result of events beyond the control of the partici-
pant.
‘‘(II) 
LIMITATION
ON
DISTRIBUTIONS.—The
requirement of subparagraph (A)(vi) is met only
if, as determined under regulations of the Sec-
retary, the amounts distributed with respect to
an emergency do not exceed the amounts necessary
to satisfy such emergency plus amounts necessary
to pay taxes reasonably anticipated as a result
of the distribution, after taking into account the
extent to which such hardship is or may be relieved
through reimbursement or compensation by insur-
ance or otherwise or by liquidation of the partici-
pant’s assets (to the extent the liquidation of such
assets would not itself cause severe financial hard-
ship).
‘‘(C) DISABLED.—For purposes of subparagraph (A)(ii),
a 
participant 
shall 
be 
considered 
disabled 
if 
the
participant—
‘‘(i) is unable to engage in any substantial gainful
activity by reason of any medically determinable phys-
ical or mental impairment which can be expected to
result in death or can be expected to last for a contin-
uous period of not less than 12 months, or
‘‘(ii) is, by reason of any medically determinable
physical or mental impairment which can be expected
to result in death or can be expected to last for a
continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less
than 3 months under an accident and health plan
covering employees of the participant’s employer.
‘‘(3) ACCELERATION OF BENEFITS.—The requirements of this
paragraph are met if the plan does not permit the acceleration
of the time or schedule of any payment under the plan, except
as provided in regulations by the Secretary.
‘‘(4) ELECTIONS.—
‘‘(A) IN GENERAL.—The requirements of this paragraph
are met if the requirements of subparagraphs (B) and
(C) are met.
H. R. 4520—220
‘‘(B) INITIAL DEFERRAL DECISION.—
‘‘(i) IN
GENERAL.—The requirements of this
subparagraph are met if the plan provides that com-
pensation for services performed during a taxable year
may be deferred at the participant’s election only if
the election to defer such compensation is made not
later than the close of the preceding taxable year or
at such other time as provided in regulations.
‘‘(ii) FIRST YEAR OF ELIGIBILITY.—In the case of
the first year in which a participant becomes eligible
to participate in the plan, such election may be made
with respect to services to be performed subsequent
to the election within 30 days after the date the partici-
pant becomes eligible to participate in such plan.
‘‘(iii) PERFORMANCE-BASED COMPENSATION.—In the
case of any performance-based compensation based on
services performed over a period of at least 12 months,
such election may be made no later than 6 months
before the end of the period.
‘‘(C) CHANGES IN TIME AND FORM OF DISTRIBUTION.—
The requirements of this subparagraph are met if, in the
case of a plan which permits under a subsequent election
a delay in a payment or a change in the form of payment—
‘‘(i) the plan requires that such election may not
take effect until at least 12 months after the date
on which the election is made,
‘‘(ii) in the case of an election related to a payment
not described in clause (ii), (iii), or (vi) of paragraph
(2)(A), the plan requires that the first payment with
respect to which such election is made be deferred
for a period of not less than 5 years from the date
such payment would otherwise have been made, and
‘‘(iii) the plan requires that any election related
to a payment described in paragraph (2)(A)(iv) may
not be made less than 12 months prior to the date
of the first scheduled payment under such paragraph.
‘‘(b) RULES RELATING TO FUNDING.—
‘‘(1) OFFSHORE PROPERTY IN A TRUST.—In the case of assets
set aside (directly or indirectly) in a trust (or other arrangement
determined by the Secretary) for purposes of paying deferred
compensation under a nonqualified deferred compensation plan,
for purposes of section 83 such assets shall be treated as
property transferred in connection with the performance of
services whether or not such assets are available to satisfy
claims of general creditors—
‘‘(A) at the time set aside if such assets (or such trust
or other arrangement) are located outside of the United
States, or
‘‘(B) at the time transferred if such assets (or such
trust or other arrangement) are subsequently transferred
outside of the United States.
This paragraph shall not apply to assets located in a foreign
jurisdiction if substantially all of the services to which the
nonqualified deferred compensation relates are performed in
such jurisdiction.
‘‘(2) EMPLOYER’S FINANCIAL HEALTH.—In the case of com-
pensation deferred under a nonqualified deferred compensation
H. R. 4520—221
plan, there is a transfer of property within the meaning of
section 83 with respect to such compensation as of the earlier
of—
‘‘(A) the date on which the plan first provides that
assets will become restricted to the provision of benefits
under the plan in connection with a change in the
employer’s financial health, or
‘‘(B) the date on which assets are so restricted,
whether or not such assets are available to satisfy claims
of general creditors.
‘‘(3) INCOME
INCLUSION
FOR
OFFSHORE
TRUSTS
AND
EMPLOYER’S FINANCIAL HEALTH.—For each taxable year that
assets treated as transferred under this subsection remain set
aside in a trust or other arrangement subject to paragraph
(1) or (2), any increase in value in, or earnings with respect
to, such assets shall be treated as an additional transfer of
property under this subsection (to the extent not previously
included in income).
‘‘(4) INTEREST
ON
TAX
LIABILITY
PAYABLE
WITH
RESPECT
TO TRANSFERRED PROPERTY.—
‘‘(A) IN
GENERAL.—If amounts are required to be
included in gross income by reason of paragraph (1) or
(2) for a taxable year, the tax imposed by this chapter
for such taxable year shall be increased by the sum of—
‘‘(i) the amount of interest determined under
subparagraph (B), and
‘‘(ii) an amount equal to 20 percent of the amounts
required to be included in gross income.
‘‘(B) INTEREST.—For purposes of subparagraph (A), the
interest determined under this subparagraph for any tax-
able year is the amount of interest at the underpayment
rate plus 1 percentage point on the underpayments that
would have occurred had the amounts so required to be
included in gross income by paragraph (1) or (2) been
includible in gross income for the taxable year in which
first deferred or, if later, the first taxable year in which
such amounts are not subject to a substantial risk of for-
feiture.
‘‘(c) NO INFERENCE ON EARLIER INCOME INCLUSION OR REQUIRE-
MENT OF LATER INCLUSION.—Nothing in this section shall be con-
strued to prevent the inclusion of amounts in gross income under
any other provision of this chapter or any other rule of law earlier
than the time provided in this section. Any amount included in
gross income under this section shall not be required to be included
in gross income under any other provision of this chapter or any
other rule of law later than the time provided in this section.
‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes
of this section:
‘‘(1) NONQUALIFIED DEFERRED COMPENSATION PLAN.—The
term ‘nonqualified deferred compensation plan’ means any plan
that provides for the deferral of compensation, other than—
‘‘(A) a qualified employer plan, and
‘‘(B) any bona fide vacation leave, sick leave, compen-
satory time, disability pay, or death benefit plan.
‘‘(2) QUALIFIED
EMPLOYER
PLAN.—The term ‘qualified
employer plan’ means—
H. R. 4520—222
‘‘(A) any plan, contract, pension, account, or trust
described in subparagraph (A) or (B) of section 219(g)(5)
(without regard to subparagraph (A)(iii)),
‘‘(B) any eligible deferred compensation plan (within
the meaning of section 457(b)), and
‘‘(C) any plan described in section 415(m).
‘‘(3) PLAN INCLUDES ARRANGEMENTS, ETC.—The term ‘plan’
includes any agreement or arrangement, including an agree-
ment or arrangement that includes one person.
‘‘(4) SUBSTANTIAL RISK OF FORFEITURE.—The rights of a
person to compensation are subject to a substantial risk of
forfeiture if such person’s rights to such compensation are
conditioned upon the future performance of substantial services
by any individual.
‘‘(5) TREATMENT OF EARNINGS.—References to deferred com-
pensation shall be treated as including references to income
(whether actual or notional) attributable to such compensation
or such income.
‘‘(6) AGGREGATION RULES.—Except as provided by the Sec-
retary, rules similar to the rules of subsections (b) and (c)
of section 414 shall apply.
‘‘(e) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be necessary or appropriate to carry out the purposes
of this section, including regulations—
‘‘(1) providing for the determination of amounts of deferral
in the case of a nonqualified deferred compensation plan which
is a defined benefit plan,
‘‘(2) relating to changes in the ownership and control of
a corporation or assets of a corporation for purposes of sub-
section (a)(2)(A)(v),
‘‘(3) exempting arrangements from the application of sub-
section (b) if such arrangements will not result in an improper
deferral of United States tax and will not result in assets
being effectively beyond the reach of creditors,
‘‘(4) defining financial health for purposes of subsection
(b)(2), and
‘‘(5) disregarding a substantial risk of forfeiture in cases
where necessary to carry out the purposes of this section.’’.
(b) TREATMENT OF DEFERRED AMOUNTS.—
(1) W–2 FORMS.—
(A) IN
GENERAL.—Subsection (a) of section 6051
(relating to receipts for employees) is amended by striking
‘‘and’’ at the end of paragraph (11), by striking the period
at the end of paragraph (12) and inserting ‘‘, and’’, and
by inserting after paragraph (12) the following new para-
graph:
‘‘(13) the total amount of deferrals for the year under
a nonqualified deferred compensation plan (within the meaning
of section 409A(d)).’’.
(B) THRESHOLD.—Subsection (a) of section 6051 is
amended by adding at the end the following: ‘‘In the case
of the amounts required to be shown by paragraph (13),
the Secretary may (by regulation) establish a minimum
amount of deferrals below which paragraph (13) does not
apply.’’.
(2) WAGE WITHHOLDING.—Section 3401(a) (defining wages)
is amended by adding at the end the following flush sentence:
H. R. 4520—223
‘‘The term ‘wages’ includes any amount includible in gross
income of an employee under section 409A and payment of
such amount shall be treated as having been made in the
taxable year in which the amount is so includible.’’.
(3) OTHER REPORTING.—Section 6041 (relating to informa-
tion at source) is amended by adding at the end the following
new subsection:
‘‘(g) NONQUALIFIED DEFERRED COMPENSATION.—Subsection (a)
shall apply to—
‘‘(1) any deferrals for the year under a nonqualified deferred
compensation plan (within the meaning of section 409A(d)),
whether or not paid, except that this paragraph shall not apply
to deferrals which are required to be reported under section
6051(a)(13) (without regard to any de minimis exception), and
‘‘(2) any amount includible under section 409A and which
is not treated as wages under section 3401(a).’’.
(c) CLERICAL AMENDMENT.—The table of sections for such sub-
part A of part I of subchapter D of chapter 1 is amended by
adding at the end the following new item:
‘‘Sec. 409A. Inclusion in gross income of deferred compensation under non-
qualified deferred compensation plans.’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to amounts deferred after December 31, 2004.
(2) SPECIAL RULES.—
(A) EARNINGS.—The amendments made by this section
shall apply to earnings on deferred compensation only to
the extent that such amendments apply to such compensa-
tion.
(B) MATERIAL
MODIFICATIONS.—For purposes of this
subsection, amounts deferred in taxable years beginning
before January 1, 2005, shall be treated as amounts
deferred in a taxable year beginning on or after such date
if the plan under which the deferral is made is materially
modified after October 3, 2004, unless such modification
is pursuant to the guidance issued under subsection (f).
(3) EXCEPTION
FOR
NONELECTIVE
DEFERRED
COMPENSA-
TION.—The amendments made by this section shall not apply
to any nonelective deferred compensation to which section 457
of the Internal Revenue Code of 1986 does not apply by reason
of section 457(e)(12) of such Code, but only if such compensation
is provided under a nonqualified deferred compensation plan—
(A) which was in existence on May 1, 2004,
(B) which was providing nonelective deferred com-
pensation described in such section 457(e)(12) on such date,
and
(C) which is established or maintained by an organiza-
tion incorporated on July 2, 1974.
If, after May 1, 2004, a plan described in the preceding sentence
adopts a plan amendment which provides a material change
in the classes of individuals eligible to participate in the plan,
this paragraph shall not apply to any nonelective deferred
compensation provided under the plan on or after the date
of the adoption of the amendment.
(e) GUIDANCE RELATING TO CHANGE OF OWNERSHIP OR CON-
TROL.—Not later than 90 days after the date of the enactment
of this Act, the Secretary of the Treasury shall issue guidance