To amend the Internal Revenue Code of 1986 to extend financing for the Airport and Airway Trust Fund, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Airport and Airway Trust Fund 
Financing Act of 2007''.

SEC. 2. EXTENSION AND MODIFICATION OF TAXES FUNDING AIRPORT AND AIRWAY 
              TRUST FUND.

    (a) Rate of Tax on Aviation-Grade Kerosene and Aviation Gasoline.--
            (1) Aviation-grade kerosene.--Subparagraph (A) of section 
        4081(a)(2) of the Internal Revenue Code of 1986 (relating to 
        rates of tax) is amended by striking ``and'' at the end of 
        clause (ii), by striking the period at the end of clause (iii) 
        and inserting ``, and'', and by adding at the end the following 
        new clause:
                            ``(iv) in the case of aviation-grade 
                        kerosene, 35.9 cents per gallon.''.
            (2) Aviation gasoline.--Clause (ii) of section 
        4081(a)(2)(A) of such Code is amended by striking ``19.3 
        cents'' and inserting ``24.1 cents''.
            (3) Fuel removed directly into fuel tank of airplane used 
        in noncommercial aviation.--Subparagraph (C) of section 
        4081(a)(2) of such Code is amended to read as follows:
                    ``(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 by a person registered for such use under 
                section 4101, the rate of tax under subparagraph 
                (A)(iv) shall be 4.3 cents per gallon.''.
            (4) Conforming amendments.--
                    (A) Clause (iii) of section 4081(a)(2)(A) of such 
                Code is amended by inserting ``other than aviation-
                grade kerosene'' after ``kerosene''.
                    (B) The following provisions of such Code are each 
                amended by striking ``kerosene'' and inserting 
                ``aviation-grade kerosene'':
                            (i) Section 4081(a)(3)(A)(ii).
                            (ii) Section 4081(a)(3)(A)(iv).
                            (iii) Section 4081(a)(3)(D).
                    (C) Section 4081(a)(3)(D) of such Code is amended--
                            (i) by striking ``paragraph (2)(C)(i)'' in 
                        clause (i) and inserting ``paragraph (2)(C)'', 
                        and
                            (ii) by striking ``paragraph (2)(C)(ii)'' 
                        in clause (ii) and inserting ``paragraph 
                        (2)(A)(iv)''.
                    (D) Section 4081(a)(4) of such Code is amended in 
                the heading by striking ``kerosene'' and inserting 
                ``aviation-grade kerosene''.
                    (E) Section 4081(d)(2) of such Code is amended by 
                inserting ``, (a)(2)(A)(iv),'' after ``subsections 
                (a)(2)(A)(ii)''.
    (b) Extension.--
            (1) Fuels taxes.--Paragraph (2) of section 4081(d) of such 
        Code is amended by striking ``gallon--'' and all that follows 
        and inserting ``gallon after September 30, 2011''.
            (2) Taxes on transportation of persons and property.--
                    (A) Persons.--Clause (ii) of section 4261(j)(1)(A) 
                of such Code is amended by striking ``September 30, 
                2007'' and inserting ``September 30, 2011''.
                    (B) Property.--Clause (ii) of section 4271(d)(1)(A) 
                of such Code is amended by striking ``September 30, 
                2007'' and inserting ``September 30, 2011''.
    (c) Exemption for Aviation-Grade Kerosene Removed Into an 
Aircraft.--Subsection (e) of section 4082 of such Code is amended--
            (1) by striking ``kerosene'' and inserting ``aviation-grade 
        kerosene'',
            (2) by striking ``section 4081(a)(2)(A)(iii)'' and 
        inserting ``section 4081(a)(2)(A)(iv)'', and
            (3) by striking ``Kerosene'' in the heading and inserting 
        ``Aviation-Grade Kerosene''.
    (d) Retail Tax on Aviation Fuel.--
            (1) Exemption for previously taxed fuel.--Paragraph (2) of 
        section 4041(c) of such Code is amended by inserting ``at the 
        rate specified in subsection (a)(2)(A)(iv) thereof'' after 
        ``section 4081''.
            (2) Rate of tax.--Paragraph (3) of section 4041(c) of such 
        Code is amended to read as follows:
            ``(3) Rate of tax.--The rate of tax imposed by this 
        subsection shall be the rate of tax in effect under section 
        4081(a)(2)(A)(iv) (4.3 cents per gallon with respect to any 
        sale or use for commercial aviation).''.
    (e) Refunds Relating to Aviation-Grade Kerosene.--
            (1) Kerosene used in commercial aviation.--Clause (ii) of 
        section 6427(l)(4)(A) of such Code is amended by striking 
        ``specified in section 4041(c) or 4081(a)(2)(A)(iii), as the 
        case may be,'' and inserting ``so imposed''.
            (2) Kerosene used in aviation.--Paragraph (4) of section 
        6427(l) of such Code is amended--
                    (A) by striking subparagraph (B) and redesignating 
                subparagraph (C) as subparagraph (B), and
                    (B) by amending subparagraph (B), as redesignated 
                by subparagraph (A), to read as follows:
                    ``(B) Payments to ultimate, registered vendor.--
                With respect to any kerosene used in aviation (other 
                than kerosene to which paragraph (6) applies), 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 (without interest) 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).''.
            (3) Aviation-grade kerosene not used in aviation.--
        Subsection (l) of section 6427 of such Code is amended by 
        redesignating paragraph (5) as paragraph (6) and by inserting 
        after paragraph (4) the following new paragraph:
            ``(5) Refunds for aviation-grade kerosene not used in 
        aviation.--If tax has been imposed under section 4081 at the 
        rate specified in section 4081(a)(2)(A)(iv) and the fuel is 
        used other than in an aircraft, the Secretary shall pay 
        (without interest) to the ultimate purchaser of such fuel an 
        amount equal to the amount of tax imposed on such fuel reduced 
        by the amount of tax that would be imposed under section 4041 
        if no tax under section 4081 had been imposed.''.
            (4) Conforming amendments.--
                    (A) Section 6427(i)(4) of such Code is amended--
                            (i) by striking ``(4)(C)'' the first two 
                        places it occurs and inserting ``(4)(B)'', and
                            (ii) by striking ``, (l)(4)(C)(ii), and'' 
                        and inserting ``and''.
                    (B) Section 4082(d)(2)(B) of such Code is amended 
                by striking ``6427(l)(5)(B)'' and inserting 
                ``6427(l)(6)(B)''.
    (f) Airport and Airway Trust Fund.--
            (1) Extension of trust fund authorities.--
                    (A) Expenditures from trust fund.--Paragraph (1) of 
                section 9502(d) of such Code is amended--
                            (i) in the matter preceding subparagraph 
                        (A) by striking ``October 1, 2007'' and 
                        inserting ``October 1, 2011'', and
                            (ii) in subparagraph (A) by inserting ``or 
                        the FAA Reauthorization Act of 2007'' before 
                        the semicolon at the end.
                    (B) Limitation on transfers to trust fund.--
                Paragraph (2) of section 9502(f) of such Code is 
                amended by striking ``October 1, 2007'' and inserting 
                ``October 1, 2011''.
            (2) Transfers to trust fund.--Subparagraph (C) of section 
        9502(b)(1) of such Code is amended to read as follows:
                    ``(C) section 4081 with respect to aviation 
                gasoline and aviation-grade kerosene, and''.
            (3) Transfers on account of certain refunds.--
                    (A) In general.--Subsection (d) of section 9502 of 
                such Code is amended--
                            (i) in paragraph (2) by striking ``(other 
                        than subsection (l)(4) thereof)'', and
                            (ii) in paragraph (3) by striking ``(other 
                        than payments made by reason of paragraph (4) 
                        of section 6427(l))''.
                    (B) Conforming amendments.--
                            (i) Section 9503(b)(4) of such Code is 
                        amended by striking ``or'' at the end of 
                        subparagraph (C), by striking the period at the 
                        end of subparagraph (D) and inserting a comma, 
                        and by inserting after subparagraph (D) the 
                        following:
                    ``(E) section 4081 to the extent attributable to 
                the rate specified in clause (ii) or (iv) of section 
                4081(a)(2)(A), or
                    ``(F) section 4041(c).''.
                            (ii) Section 9503(c) of such Code is 
                        amended by striking the last paragraph 
                        (relating to transfers from the Trust Fund for 
                        certain aviation fuel taxes).
                            (iii) Section 9502(a) of such Code is 
                        amended by striking ``, section 9503(c)(7),''.
            (4) Transfers on account of aviation-grade kerosene not 
        used in aviation.--Section 9502(d) of such Code is amended by 
        adding at the end the following new paragraph:
            ``(7) Transfers from airport and airway trust fund on 
        account of aviation-grade kerosene not used in aviation.--The 
        Secretary of the Treasury shall pay from time to time from the 
        Airport and Airway Trust Fund into the Highway Trust Fund 
        amounts as determined by the Secretary of the Treasury 
        equivalent to amounts transferred to the Airport and Airway 
        Trust Fund with respect to aviation-grade kerosene not used in 
        aviation.''.
            (5) Expenditures for air traffic control modernization.--
        Section 9502(d) of such Code, as amended by this Act, is 
        amended by adding at the end the following new paragraph:
            ``(8) Expenditures for air traffic control modernization.--
        The following amounts may be used only for making expenditures 
        to carry out air traffic control modernization:
                    ``(A) So much of the amounts appropriated under 
                subsection (b)(1)(C) as the Secretary estimates are 
                attributable to--
                            ``(i) 14.1 cents per gallon of the tax 
                        imposed at the rate specified in section 
                        4081(a)(2)(A)(iv) in the case of aviation-grade 
                        kerosene used other than in commercial aviation 
                        (as defined in section 4083(b)), and
                            ``(ii) 4.8 cents per gallon of the tax 
                        imposed at the rate specified in section 
                        4081(a)(2)(A)(ii) in the case of aviation 
                        gasoline used other than in commercial aviation 
                        (as so defined).
                    ``(B) Any amounts credited to the Airport and 
                Airway Trust Fund under section 9602(b) with respect to 
                amounts described in this paragraph.''.
    (g) Effective Date.--
            (1) Modifications.--Except as provided in paragraph (2), 
        the amendments made by this section shall apply to fuels 
        removed, entered, or sold after December 31, 2007.
            (2) Extensions.--The amendments made by subsections (b) and 
        (f)(1) shall take effect on the date of the enactment of this 
        Act.
    (h) Floor Stocks Tax.--
            (1) Imposition of tax.--In the case of aviation fuel which 
        is held on January 1, 2008, by any person, there is hereby 
        imposed a floor stocks tax on aviation fuel equal to--
                    (A) the tax which would have been imposed before 
                such date on such fuel 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 fuel under section 4081 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) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding aviation 
                fuel on January 1, 2008, shall be liable for such tax.
                    (B) Time and method of payment.--The tax imposed by 
                paragraph (1) shall be paid on April 30, 2008, and in 
                such manner as the Secretary of the Treasury shall 
                prescribe.
            (3) Transfer of floor stock tax revenues to trust funds.--
        For purposes of determining the amount transferred to the 
        Airport and Airway Trust Fund, the tax imposed by this 
        subsection shall be treated as imposed by the provision of 
        section 4081 of the Internal Revenue Code of 1986 which applies 
        with respect to the aviation fuel involved.
            (4) Definitions.--For purposes of this subsection--
                    (A) Aviation fuel.--The term ``aviation fuel'' 
                means aviation-grade kerosene and aviation gasoline, as 
                such terms are used within the meaning of section 4081 
                of the Internal Revenue Code of 1986.
                    (B) Held by a person.--Aviation fuel 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).
                    (C) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or the Secretary's delegate.
            (5) Exception for exempt uses.--The tax imposed by 
        paragraph (1) shall not apply to any aviation fuel held by any 
        person exclusively for any use to the extent a credit or refund 
        of the tax is allowable under the Internal Revenue Code of 1986 
        for such use.
            (6) Exception for certain amounts of fuel.--
                    (A) In general.--No tax shall be imposed by 
                paragraph (1) on any aviation fuel held on January 1, 
                2008, by any person if the aggregate amount of such 
                aviation fuel held by such person on such date does not 
                exceed 2,000 gallons. The preceding sentence shall 
                apply only if such person submits to the Secretary (at 
                the time and in the manner required by the Secretary) 
                such information as the Secretary shall require for 
                purposes of this subparagraph.
                    (B) Exempt fuel.--For purposes of subparagraph (A), 
                there shall not be taken into account any aviation fuel 
                held by any person which is exempt from the tax imposed 
                by paragraph (1) by reason of paragraph (6).
                    (C) Controlled groups.--For purposes of this 
                subsection--
                            (i) Corporations.--
                                    (I) In general.--All persons 
                                treated as a controlled group shall be 
                                treated as 1 person.
                                    (II) Controlled group.--The term 
                                ``controlled group'' has the meaning 
                                given to such term by subsection (a) of 
                                section 1563 of such Code; except that 
                                for such purposes the phrase ``more 
                                than 50 percent'' shall be substituted 
                                for the phrase ``at least 80 percent'' 
                                each place it appears in such 
                                subsection.
                            (ii) Nonincorporated persons under common 
                        control.--Under regulations prescribed by the 
                        Secretary, principles similar to the principles 
                        of subparagraph (A) shall apply to a group of 
                        persons under common control if 1 or more of 
                        such persons is not a corporation.
            (7) Other laws applicable.--All provisions of law, 
        including penalties, applicable with respect to the taxes 
        imposed by section 4081 of such Code on the aviation fuel 
        involved shall, insofar as applicable and not inconsistent with 
        the provisions of this subsection, apply with respect to the 
        floor stock taxes imposed by paragraph (1) to the same extent 
        as if such taxes were imposed by such section.

Summary: Airport and Airway Trust Fund Financing Act of 2007 - Amends the Internal Revenue Code to (1) impose an excise tax on aviation-grade kerosene of 35.9 cents per gallon (4.3 cents per gallon for commercial aviation uses); (2) increase to 24.1 cents per gallon the tax rate for aviation gasoline; and (3) extend through FY2011 the excise tax on the transportation by air of persons and property and the excise tax on aviation gasoline and aviation-grade kerosene.

Extends through FY2011 the expenditure authority for the Airport and Airway Trust Fund.

Dedicates revenues from the taxes imposed on aviation gasoline and aviation-grade kerosene to carry out air traffic control modernization.