[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3967 Introduced in House (IH)]







108th CONGRESS
  2d Session
                                H. R. 3967

To amend the Internal Revenue Code of 1986 to credit the Highway Trust 
 Fund with the full amount of fuel taxes, to combat fuel tax evasion, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 12, 2004

  Mr. Thomas introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to credit the Highway Trust 
 Fund with the full amount of fuel taxes, to combat fuel tax evasion, 
                        and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. REFERENCE, ETC.

    (a) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (b) Table of Contents.--

      TITLE I--RESTRUCTURING OF INCENTIVES FOR ALCOHOL FUELS, ETC.

Sec. 101. Reduced rates of tax on gasohol replaced with excise tax 
                            credit; repeal of other alcohol-based fuel 
                            incentives; etc.
Sec. 102. Alcohol fuel subsidies borne by general fund.
                TITLE II--REDUCTION OF FUEL TAX EVASION

Sec. 201. Exemption from certain excise taxes for mobile machinery.
Sec. 202. Taxation of aviation-grade kerosene.
Sec. 203. Dye injection equipment.
Sec. 204. Authority to inspect on-site records.
Sec. 205. Registration of pipeline or vessel operators required for 
                            exemption of bulk transfers to registered 
                            terminals or refineries.
Sec. 206. Display of registration.
Sec. 207. Penalties for failure to register and failure to report.
Sec. 208. Collection from Customs bond where importer not registered.
Sec. 209. Modifications of tax on use of certain vehicles.
Sec. 210. Modification of ultimate vendor refund claims with respect to 
                            farming.
Sec. 211. Dedication of revenues from certain penalties to the Highway 
                            Trust Fund.
                 TITLE III--OTHER EXCISE TAX PROVISIONS

Sec. 301. Taxable fuel refunds for certain ultimate vendors.
Sec. 302. Two-party exchanges.
Sec. 303. Simplification of tax on tires.
       TITLE IV--PRIVATE ACTIVITY BONDS FOR MODERN TRANSPORTATION

Sec. 401. Treatment of bonds for certain transportation facilities as 
                            exempt facility bonds.
                      TITLE V--REVENUE PROVISIONS

                          Subtitle A--Leasing

Sec. 501. Reform of tax treatment of certain leasing arrangements.
Sec. 502. Limitation on deductions allocable to property used by 
                            governments or other tax-exempt entities.
Sec. 503. Effective date.
                     Subtitle B--Charitable Giving

Sec. 511. Donations of motor vehicles, boats, and aircraft.
Sec. 512. Increased reporting for noncash charitable contributions.
Sec. 513. Treatment of charitable contributions of patents and similar 
                            property.
                  Subtitle C--Tax Collection Contracts

Sec. 521. Qualified tax collection contracts.
                      Subtitle D--Other Provisions

Sec. 531. Extension of amortization of intangibles to sports 
                            franchises.
Sec. 532. Class lives for utility grading costs.
Sec. 533. Modification of continuing levy on payments to Federal 
                            venders.

      TITLE I--RESTRUCTURING OF INCENTIVES FOR ALCOHOL FUELS, ETC.

SEC. 101. REDUCED RATES OF TAX ON GASOHOL REPLACED WITH EXCISE TAX 
              CREDIT; REPEAL OF OTHER ALCOHOL-BASED FUEL INCENTIVES; 
              ETC.

    (a) Excise Tax Credit for Alcohol Fuel Mixtures.--
            (1) In general.--Subsection (f) of section 6427 is amended 
        to read as follows:
    ``(f) Alcohol Fuel Mixtures.--
            ``(1) In general.--The amount of credit which would (but 
        for section 40(c)) be determined under section 40(a)(1) for any 
        period--
                    ``(A) shall, with respect to taxable events 
                occurring during such period, be treated--
                            ``(i) as a payment of the taxpayer's 
                        liability for tax imposed by section 4081, and
                            ``(ii) as received at the time of the 
                        taxable event, and
                    ``(B) to the extent such amount of credit exceeds 
                such liability for such period, shall (except as 
                provided in subsection (k)) be paid subject to 
                subsection (i)(3) by the Secretary without interest.
            ``(2) Special rules.--
                    ``(A) Only certain alcohol taken into account.--For 
                purposes of paragraph (1), section 40 shall be 
                applied--
                            ``(i) by not taking into account alcohol 
                        with a proof of less than 190, and
                            ``(ii) by treating as alcohol the alcohol 
                        gallon equivalent of ethyl tertiary butyl ether 
                        or other ethers produced from such alcohol.
                    ``(B) Treatment of refiners.--For purposes of 
                paragraph (1), in the case of a mixture--
                            ``(i) the alcohol in which is described in 
                        subparagraph (A)(ii), and
                            ``(ii) which is produced by any person at a 
                        refinery prior to any taxable event,
                section 40 shall be applied by treating such person as 
                having sold such mixture at the time of its removal 
                from the refinery (and only at such time) to another 
                person for use as a fuel.
            ``(3) Mixtures not used as fuel.--Rules similar to the 
        rules of subparagraphs (A) and (D) of section 40(d)(3) shall 
        apply for purposes of this subsection.
            ``(4) Termination.--This section shall apply only to 
        periods to which section 40 applies, determined by substituting 
        in section 40(e)--
                    ``(A) `September 30, 2007' for `December 31, 2007', 
                and
                    ``(B) `October 1, 2007' for `January 1, 2008'.''.
            (2) Revision of rules for payment of credit.--Paragraph (3) 
        of section 6427(i) is amended to read as follows:
            ``(3) Special rule for alcohol mixture credit.--
                    ``(A) In general.--A claim may be filed under 
                subsection (f)(1)(B) by any person for any period--
                            ``(i) for which $200 or more is payable 
                        under such subsection (f)(1)(B), and
                            ``(ii) which is not less than 1 week.
                    ``(B) Payment of claim.--Notwithstanding subsection 
                (f)(1)(B), if the Secretary has not paid pursuant to a 
                claim filed under this section within 45 days of the 
                date of the filing of such claim (20 days in the case 
                of an electronic claim), the claim shall be paid with 
                interest from such date determined by using the 
                overpayment rate and method under section 6621.
                    ``(C) Time for filing claim.--No claim filed under 
                this paragraph shall be allowed unless filed on or 
                before the last day of the first quarter following the 
                earliest quarter included in the claim.''.
    (b) Repeal of Other Incentives for Fuel Mixtures.--
            (1) Subsection (b) of section 4041 is amended to read as 
        follows:
    ``(b) Exemption for Off-Highway Business Use.--
            ``(1) In general.--No tax shall be imposed by subsection 
        (a) or (d)(1) on liquids sold for use or used in an off-highway 
        business use.
            ``(2) Tax where other use.--If a liquid on which no tax was 
        imposed by reason of paragraph (1) is used otherwise than in an 
        off-highway business use, a tax shall be imposed by paragraph 
        (1)(B), (2)(B), or (3)(A)(ii) of subsection (a) (whichever is 
        appropriate) and by the corresponding provision of subsection 
        (d)(1) (if any).
            ``(3) Off-highway business use defined.--For purposes of 
        this subsection, the term `off-highway business use' has the 
        meaning given to such term by section 6421(e)(2); except that 
        such term shall not, for purposes of subsection (a)(1), include 
        use in a diesel-powered train.''.
            (2) Section 4041(k) is hereby repealed.
            (3) Section 4081(c) is hereby repealed.
            (4) Section 4091(c) is hereby repealed.
    (c) Transfers to Highway Trust Fund.--Paragraph (4) of section 
9503(b) is amended by adding ``or'' at the end of subparagraph (B), by 
striking the comma at the end of subparagraph (C) and inserting a 
period, and by striking subparagraphs (D), (E), and (F).
    (d) Conforming Amendments.--
            (1) Subsection (c) of section 40 is amended to read as 
        follows:
    ``(c) Coordination With Excise Tax Benefits.--The amount of the 
credit determined under this section with respect to any alcohol shall, 
under regulations prescribed by the Secretary, be properly reduced to 
take into account the benefit provided with respect to such alcohol 
under section 6427(f).''.
            (2) Subparagraph (B) of section 40(d)(4) is amended by 
        striking ``under section 4041(k) or 4081(c)'' and inserting 
        ``under section 6427(f)''.
    (e) Effective Dates.--
            (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall apply to fuel sold or 
        used after September 30, 2004.
            (2) Subsection (c).--The amendments made by subsection (c) 
        shall apply to taxes imposed after September 30, 2003.

SEC. 102. ALCOHOL FUEL SUBSIDIES BORNE BY GENERAL FUND.

    (a) Transfers to Fund.--Section 9503(b)(1) is amended by adding at 
the end the following new flush sentence:
        ``For purposes of this paragraph, the amount of taxes received 
        under section 4081 shall include any amount treated as a 
        payment under section 6427(f)(1)(A) and shall not be reduced by 
        the amount paid under section 6427(f)(1)(B).''.
    (b) Transfers From Fund.--Subparagraph (A) of section 9503(c)(2) is 
amended by adding at the end the following new sentence: ``Clauses 
(i)(III) and (ii) shall not apply to claims under section 
6427(f)(1)(B).''
    (c) Effective Date.--
            (1) Subsection (a).--The amendment made by subsection (a) 
        shall apply to taxes received after September 30, 2004.
            (2) Subsection (b).--The amendment made by subsection (b) 
        shall apply to amounts paid after September 30, 2004, and (to 
        the extent related to section 34 of the Internal Revenue Code 
        of 1986) to fuel used after such date.

                TITLE II--REDUCTION OF FUEL TAX EVASION

SEC. 201. EXEMPTION FROM CERTAIN EXCISE TAXES FOR MOBILE MACHINERY.

    (a) Exemption From Tax on Heavy Trucks and Trailers Sold at 
Retail.--
            (1) In general.--Section 4053 (relating to 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 subsection 
        shall take effect on the day after the date of the enactment 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).''.
            (2) Effective date.--The amendments made by this subsection 
        shall take effect on the day after the date of the enactment of 
        this Act.
    (c) Refund of Fuel Taxes.--
            (1) In general.--Section 6421(e)(2) (defining off-highway 
        business use) is amended by adding at the end the following new 
        subparagraph:
                    ``(C) Uses in mobile machinery.--
                            ``(i) In general.--The term `off-highway 
                        business use' shall include any use in a 
                        vehicle which meets the requirements described 
                        in clause (ii).
                            ``(ii) Requirements for mobile machinery.--
                        The requirements described in this clause are--
                                    ``(I) the design-based test, and
                                    ``(II) the use-based test.
                            ``(iii) Design-based test.--For purposes of 
                        clause (ii)(I), the design-based test is met if 
                        the vehicle consists 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 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.
                            ``(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.''.
            (2) No tax-free sales.--Subsection (b) of section 4082, as 
        amended by section 202, is amended by inserting before the 
        period at the end ``and such term shall not include any use 
        described in section 6421(e)(2)(C).''.
            (3) Annual refund of tax paid.--Section 6427(i)(2) 
        (relating to exceptions) is amended by adding at the end the 
        following new subparagraph:
                    ``(C) Nonapplication of paragraph.--This paragraph 
                shall not apply to any fuel used solely in any off-
                highway business use described in section 
                6421(e)(2)(C).''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.

SEC. 202. TAXATION OF AVIATION-GRADE KEROSENE.

    (a) Rate of Tax.--
            (1) In general.--Subparagraph (A) of section 4081(a)(2) is 
        amended by striking ``and'' at the end of clause (ii), by 
        striking the period at the end of clause (iii) and inserting 
        ``, and'', and by adding at the end the following new clause:
                            ``(iv) in the case of aviation-grade 
                        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.--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.--A refueler truck, tanker, or 
                tank wagon shall be treated as part of the terminal 
                referred to in paragraph (2)(C) if--
                            ``(i) such truck, tanker, or wagon meets 
                        the requirements of subparagraph (B) with 
                        respect to an airport, and
                            ``(ii) no vehicle registered for highway 
                        use is loaded with aviation-grade kerosene at 
                        such terminal.
                    ``(B) Requirements.--A refueler truck, tanker, or 
                tank wagon meets the requirements of this subparagraph 
                with respect to an airport if such truck, tanker, or 
                wagon--
                            ``(i) is loaded with aviation-grade 
                        kerosene at such terminal located within such 
                        airport and delivers such kerosene only into 
                        aircraft at such airport for use in commercial 
                        aviation,
                            ``(ii) has storage tanks, hose, and 
                        coupling equipment designed and used for the 
                        purposes of fueling aircraft,
                            ``(iii) is not registered for highway use, 
                        and
                            ``(iv) is operated by--
                                    ``(I) the terminal operator of such 
                                terminal, or
                                    ``(II) a person that makes a daily 
                                accounting to such terminal operator of 
                                each delivery of fuel from such truck, 
                                tanker, or wagon.
                    ``(C) Reporting.--The Secretary shall require under 
                section 4101(d) reporting by such terminal operator 
                of--
                            ``(i) any information obtained under 
                        subparagraph (B)(iv)(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.''.
            (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.--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 
                redesignating subsections (e) and (f) as subsections 
                (f) and (g), respectively, and by inserting after 
                subsection (d) the following 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. For 
purposes of the preceding sentence, rules similar to the rules of 
section 4081(a)(3) shall apply.''.
                    (B) Conforming amendments.--
                            (i) Subsection (b) of section 4082 is 
                        amended by adding at the end the 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 paragraphs (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 aviation-grade kerosene.''.
                    (B) Conforming amendment.--The heading for 
                paragraph (1) of section 4041(a) is amended by 
                inserting ``and kerosene'' after ``diesel fuel''.
    (b) Commercial Aviation.--Section 4083 is amended by redesignating 
subsections (b) and (c) as subsections (c) and (d), respectively, and 
by inserting after subsection (a) the following new subsection:
    ``(b) Commercial Aviation.--For purposes of this subpart, the term 
`commercial aviation' means any use of an aircraft in a business of 
transporting persons or 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 
                kerosene used in commercial aviation (as defined in 
                section 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.--Paragraph (4) of section 
        6427(i) is amended by striking ``subsection (l)(5)'' and 
        inserting ``paragraph (4)(B) or (5) of subsection (l)''.
            (3) Conforming amendment.--Subparagraph (B) of section 
        6427(l)(2) is amended to read as 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 
        subsection shall be the rate of tax specified in section 
        4081(a)(2)(A)(iv) which is in effect at the time of such sale 
        or use.''.
                    (B) Section 4041(d)(2) is amended by striking 
                ``section 4091'' and inserting ``section 4081''.
                    (C) Section 4041 is amended by striking subsection 
                (e).
                    (D) Section 4041 is amended by striking subsection 
                (i).
                    (E) Sections 4101(a), 4103, 4221(a), and 6206 are 
                each amended by striking ``, 4081, or 4091'' and 
                inserting ``or 4081''.
                    (F) Section 6416(b)(2) is amended by striking 
                ``4091 or''.
                    (G) Section 6416(b)(3) is amended by striking ``or 
                4091'' each place it appears.
                    (H) Section 6416(d) is amended by striking ``or to 
                the tax imposed by section 4091 in the case of refunds 
                described in section 4091(d)''.
                    (I) Section 6427(j)(1) is amended by striking ``, 
                4081, and 4091'' and inserting ``and 4081''.
                    (J)(i) Section 6427(l)(1) is amended to read as 
                follows:
            ``(1) In general.--Except as otherwise 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)''.
                    (K) Subparagraph (B) of section 6724(d)(1) is 
                amended by striking clause (xv) and by redesignating 
                the succeeding clauses accordingly.
                    (L) Paragraph (2) of section 6724(d) is amended by 
                striking subparagraph (W) and by redesignating the 
                succeeding subparagraphs accordingly.
                    (M) 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:
                    ``(C) section 4081 with respect to aviation 
                gasoline and aviation-grade kerosene, and''.
                    (N) The last sentence of section 9502(b) is amended 
                to read as follows:
``There shall not be taken into account under paragraph (1) so much of 
the taxes imposed by section 4081 as are determined at the rate 
specified in section 4081(a)(2)(B).''.
                    (O) Subsection (b) of section 9508 is amended by 
                striking paragraph (3) and by redesignating paragraphs 
                (4) and (5) as paragraphs (3) and (4), respectively.
                    (P) Section 9508(c)(2)(A) is amended by striking 
                ``sections 4081 and 4091'' and inserting ``section 
                4081''.
                    (Q) The table of subparts for part III of 
                subchapter A of chapter 32 is amended to read as 
                follows:

                              ``Subpart A. Motor and aviation fuels.
                              ``Subpart B. Special provisions 
                                        applicable to fuels tax.''.
                    (R) The heading for subpart A of part III of 
                subchapter A of chapter 32 is amended to read as 
                follows:

                ``Subpart A--Motor and Aviation Fuels''.

                    (S) The heading for subpart B of part III of 
                subchapter A of chapter 32 is amended to read as 
                follows:

       ``Subpart B--Special Provisions Applicable to Fuels Tax''.

    (e) Effective Date.--The amendments made by this section shall 
apply to aviation-grade kerosene removed, entered, or sold after 
September 30, 2004.
    (f) Floor Stocks Tax.--
            (1) In general.--There is hereby imposed on aviation-grade 
        kerosene held on October 1, 2004, by any person a tax equal 
        to--
                    (A) the tax which would have been imposed before 
                such date on such kerosene had the amendments made by 
                this section been in effect at all times before such 
                date, reduced by
                    (B) the tax imposed before such date under section 
                4091 of the Internal Revenue Code of 1986, as in effect 
                on the day before the date of the enactment of this 
                Act.
            (2) Liability for tax and method of payment.--
                    (A) Liability for tax.--The person holding the 
                kerosene on October 1, 2004, to which the tax imposed 
                by paragraph (1) applies shall be liable for such tax.
                    (B) Method and time for payment.--The tax imposed 
                by paragraph (1) shall be paid at such time and in such 
                manner as the Secretary of the Treasury (or the 
                Secretary's delegate) shall prescribe, including the 
                nonapplication of such tax on de minimus amounts of 
                kerosene.
            (3) Transfer of floor stock tax revenues to trust funds.--
        For purposes of determining the amount transferred to any trust 
        fund, the tax imposed by this subsection shall be treated as 
imposed by section 4081 of the Internal Revenue Code of 1986--
                    (A) at the Leaking Underground Storage Tank Trust 
                Fund financing rate under such section to the extent of 
                0.1 cents per gallon, and
                    (B) at the rate under section 4081(a)(2)(A)(iv) to 
                the extent of the remainder.
            (4) Held by a person.--For purposes of this section, 
        kerosene shall be considered as held by a person if title 
        thereto has passed to such person (whether or not delivery to 
        the person has been made).
            (5) Other laws applicable.--All provisions of law, 
        including penalties, applicable with respect to the tax imposed 
        by section 4081 of such Code shall, insofar as applicable and 
        not inconsistent with the provisions of this subsection, apply 
        with respect to the floor stock tax imposed by paragraph (1) to 
        the same extent as if such tax were imposed by such section.

SEC. 203. DYE INJECTION EQUIPMENT.

    (a) In General.--Section 4082(a)(2) (relating to exemptions for 
diesel fuel and kerosene) is amended by inserting ``by mechanical 
injection'' after ``indelibly dyed''.
    (b) Dye Injector Security.--Not later than 180 days after the date 
of the enactment of this Act, the 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 Systems.--
            (1) In general.--Part I of subchapter B of chapter 68 
        (relating to assessable penalties) is amended by adding after 
        section 6715 the following new section:

``SEC. 6715A. TAMPERING WITH OR FAILING TO MAINTAIN SECURITY 
              REQUIREMENTS FOR MECHANICAL DYE INJECTION SYSTEMS.

    ``(a) Imposition of Penalty--
            ``(1) Tampering.--If any person tampers with a mechanical 
        dye injection system used to indelibly dye fuel for purposes of 
        section 4082, 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 
        Secretary, 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--
            ``(1) for each violation described in paragraph (1), the 
        greater of--
                    ``(A) $25,000, or
                    ``(B) $10 for each gallon of fuel involved, and
            ``(2) for each--
                    ``(A) failure to maintain security standards 
                described in paragraph (2), $1,000, and
                    ``(B) failure to correct a violation described in 
                paragraph (2), $1,000 per day for each day after which 
                such violation was discovered or such person should 
                have reasonably known of such violation.
    ``(c) Joint and Several Liability.--
            ``(1) In general.--If a penalty is imposed under this 
        section on any business entity, each 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. 204. AUTHORITY TO INSPECT ON-SITE RECORDS.

    (a) In General.--Section 4083(d)(1)(A) (relating to administrative 
authority), as previously amended by this Act, is amended by striking 
``and'' at the end of clause (i) and by inserting after clause (ii) the 
following new clause:
                            ``(iii) inspecting any books and records 
                        and any shipping papers pertaining to such 
                        fuel, and''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 205. REGISTRATION OF PIPELINE OR VESSEL 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 October 1, 2004.
    (c) Publication of Registered Persons.--Beginning on July 1, 2004, 
the Secretary of the Treasury (or the Secretary's delegate) shall 
periodically publish a current list of persons registered under section 
4101 of the Internal Revenue Code of 1986 who are required to register 
under such section.

SEC. 206. DISPLAY OF REGISTRATION.

    (a) In General.--Subsection (a) of section 4101 (relating to 
registration) is amended--
            (1) by striking ``Every'' and inserting the 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 electronic 
        identification device prescribed by the Secretary on each 
        vessel used by such operator to transport any taxable fuel.''.
    (b) Civil Penalty for Failure To Display Registration.--
            (1) In general.--Part I of subchapter B of chapter 68 
        (relating to assessable penalties) is amended by inserting 
        after section 6716 the following new section:

``SEC. 6717. FAILURE TO DISPLAY TAX REGISTRATION ON VESSELS.

    ``(a) Failure To Display Registration.--Every operator of a vessel 
who fails to display proof of 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 is amended by inserting after the 
        item relating to section 6716 the following new item:

                              ``Sec. 6717. Failure to display tax 
                                        registration on vessels.''.
    (c) Effective Dates.--
            (1) Subsection (a).--The amendments made by subsection (a) 
        shall take effect on October 1, 2004.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to penalties imposed after September 30, 2004.

SEC. 207. PENALTIES FOR FAILURE TO REGISTER AND FAILURE TO REPORT.

    (a) Increased Penalty.--Subsection (a) of section 7272 (relating to 
penalty for failure to register) is amended by inserting ``($10,000 in 
the case of a failure to register under section 4101)'' after ``$50''.
    (b) Increased Criminal Penalty.--Section 7232 (relating to failure 
to register under section 4101, false representations of registration 
status, etc.) is amended by striking ``$5,000'' and inserting 
``$10,000''.
    (c) Assessable Penalty for Failure To Register.--
            (1) In general.--Part I of subchapter B of chapter 68 
        (relating to assessable penalties) is amended by inserting 
        after section 6717 the following new section:

``SEC. 6718. FAILURE TO REGISTER.

    ``(a) Failure To Register.--Every person who is required to 
register under section 4101 and fails to do so shall pay a penalty in 
addition to the tax (if any).
    ``(b) Amount of Penalty.--The amount of the penalty under 
subsection (a) shall be--
            ``(1) $10,000 for each initial failure to register, and
            ``(2) $1,000 for each day thereafter such person fails to 
        register.
    ``(c) Reasonable Cause Exception.--No penalty shall be imposed 
under this section with respect to any failure if it is shown that such 
failure is due to reasonable cause.''.
            (2) Clerical amendment.--The table of sections for part I 
        of subchapter B of chapter 68 is amended by inserting after the 
        item relating to section 6717 the following new item:

                              ``Sec. 6718. 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 subsection (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 information.
    ``(c) Reasonable Cause Exception.--No penalty shall be imposed 
under this section with respect to any failure if it is shown that such 
failure is due to reasonable cause.''.
            (2) Clerical amendment.--The table of 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 September 30, 2004.

SEC. 208. COLLECTION FROM CUSTOMS BOND WHERE IMPORTER NOT REGISTERED.

    (a) Tax at Point of Entry Where Importer Not Registered.--Subpart C 
of part III of subchapter A of chapter 31 is amended by adding after 
section 4103 the following new section:

``SEC. 4104. COLLECTION FROM CUSTOMS BOND WHERE IMPORTER NOT 
              REGISTERED.

    ``(a) In General.--The importer of record shall be jointly and 
severally liable for the tax imposed by section 4081(a)(1)(A)(iii) if, 
under regulations prescribed by the Secretary, any other person that is 
not a person who is registered under section 4101 is liable for such 
tax.
    ``(b) Collection From Customs Bond.--If any tax for which any 
importer of record is liable under subsection (a), or for which any 
importer of record that is not a person registered under section 4101 
is otherwise liable, is not paid on or before the last date prescribed 
for payment, the Secretary may collect such tax from the Customs bond 
posted with respect to the importation of the taxable fuel to which the 
tax relates. For purposes of determining the jurisdiction of any court 
of the United States or any agency of the United States, any action by 
the Secretary described in the preceding sentence shall be treated as 
an action to collect the tax from a bond described in section 
4101(b)(1) and not as an action to collect from a bond relating to the 
importation of merchandise.''.
    (b) Conforming Amendment.--The table of sections for subpart C of 
part III of subchapter A of chapter 31 is amended by adding after the 
item related to section 4103 the following new item:

                              ``Sec. 4104. Collection from Customs bond 
                                        where importer not 
                                        registered.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to fuel entered after September 30, 2004.

SEC. 209. MODIFICATIONS OF TAX ON USE OF CERTAIN VEHICLES.

    (a) Proration of Tax Where Vehicle Sold.--
            (1) In general.--Paragraph (2) of section 4481(c) (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 redesignating 
subsection (e) as subsection (f) and by inserting after subsection (d) 
the following new subsection:
    ``(e) Electronic Filing.--Any taxpayer who files a return under 
this section with respect to 25 or more vehicles for any taxable period 
shall file such return 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 enactment of 
this Act.

SEC. 210. MODIFICATION OF ULTIMATE VENDOR REFUND CLAIMS WITH RESPECT TO 
              FARMING.

    (a) In General.--
            (1) Refunds.--Section 6427(l) is amended by adding at the 
        end the following new paragraph:
            ``(6) Registered vendors permitted to administer certain 
        claims for refund of diesel fuel and kerosene sold to 
        farmers.--
                    ``(A) In general.--In the case of diesel fuel or 
                kerosene used on a farm for farming purposes (within 
                the meaning of section 6420(c)), paragraph (1) shall 
                not apply to the aggregate amount of such diesel fuel 
                or kerosene if such amount does not exceed 250 gallons 
                (as determined under subsection (i)(5)(A)(iii)).
                    ``(B) Payment to ultimate vendor.--The amount which 
                would (but for subparagraph (A)) have been paid under 
                paragraph (1) with respect to any fuel shall be paid to 
                the ultimate vendor of such fuel, if such vendor--
                            ``(i) is registered under section 4101, and
                            ``(ii) meets the requirements of 
                        subparagraph (A), (B), or (D) of section 
                        6416(a)(1).''.
            (2) Filing of claims.--Section 6427(i) is amended by 
        inserting at the end the following new paragraph:
            ``(5) Special rule for vendor refunds with respect to 
        farmers.--
                    ``(A) In general.--A claim may be filed under 
                subsection (l)(6) by any person with respect to fuel 
                sold by such person for any period--
                            ``(i) for which $200 or more ($100 or more 
                        in the case of kerosene) is payable under 
                        subsection (l)(6),
                            ``(ii) which is not less than 1 week, and
                            ``(iii) which is for not more than 250 
                        gallons for each farmer for which there is a 
                        claim.
                Notwithstanding subsection (l)(1), paragraph (3)(B) 
                shall apply to claims filed under the preceding 
                sentence.
                    ``(B) Time for filing claim.--No claim filed under 
                this paragraph shall be allowed unless filed on or 
                before the last day of the first quarter following the 
                earliest quarter included in the claim.''.
            (3) Conforming amendments.--
                    (A) Section 6427(l)(5)(A) is amended to read as 
                follows:
                    ``(A) In general.--Paragraph (1) shall not apply to 
                diesel fuel or kerosene used by a State or local 
                government.''.
                    (B) The heading for section 6427(l)(5) is amended 
                by striking ``farmers and''.
    (b) Effective Date.--The amendment made by this section shall apply 
to fuels sold for nontaxable use after the date of the enactment of 
this Act.

SEC. 211. DEDICATION OF REVENUES FROM CERTAIN 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, 6725, 7232, and 7272 
        (but only with regard to penalties under such section related 
        to failure to register under section 4101).''.
    (b) Conforming Amendments.--
            (1) The heading of subsection (b) of section 9503 is 
        amended by inserting ``and Penalties'' after ``Taxes''.
            (2) The heading of paragraph (1) of section 9503(b) is 
        amended by striking ``In general'' and inserting ``Certain 
        taxes''.
    (c) Effective Date.--The amendments made by this section shall 
apply to penalties assessed after October 1, 2004.

                 TITLE III--OTHER EXCISE TAX PROVISIONS

SEC. 301. TAXABLE FUEL REFUNDS FOR CERTAIN 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 
                subparagraph (C) or (D) of subsection (b)(2) (and such 
                gasoline is for a use described in such subparagraph), 
                such ultimate vendor shall be treated as the person 
                (and the only person) who paid such tax, but only if 
                such ultimate vendor is registered under section 4101. 
                For purposes of this subparagraph, if the sale of 
                gasoline is made by means of a credit card, the person 
                extending the credit to the ultimate purchaser shall be 
                deemed to be the ultimate vendor.
                    ``(B) Timing of claims.--The procedure and timing 
                of any claim under subparagraph (A) shall be the same 
                as for claims under 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 covered by such claim are certified and entitled 
                to a refund under subparagraph (C) or (D) of subsection 
                (b)(2).''.
    (b) Credit Card Purchases of Diesel Fuel or Kerosene by State and 
Local Governments.--Section 6427(l)(5)(C) (relating to nontaxable uses 
of diesel fuel, kerosene, and aviation fuel) is amended by adding at 
the end the following new sentence: ``For purposes of this 
subparagraph, if the sale of diesel fuel or kerosene is made by means 
of a credit card, the person extending the credit to the ultimate 
purchaser shall be deemed to be the ultimate vendor.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2004.

SEC. 302. TWO-PARTY EXCHANGES.

    (a) In General.--Subpart C of part III of subchapter A of chapter 
32 is amended by adding after section 4104 the following new section:

``SEC. 4105. TWO-PARTY EXCHANGES.

    ``(a) In General.--In a two-party exchange, the delivering person 
shall not be liable for the tax imposed under section 
4081(a)(1)(A)(ii).
    ``(b) Two-Party Exchange.--The term `two-party exchange' means a 
transaction, other than a sale, in which taxable fuel is transferred 
from a delivering person registered under section 4101 as a taxable 
fuel registrant fuel to a receiving person who is so registered where 
all of the following occur:
            ``(1) The transaction includes a transfer from the 
        delivering person, who holds the inventory position for taxable 
        fuel in the terminal as reflected in the records of the 
        terminal operator.
            ``(2) The exchange transaction occurs before or 
        contemporaneous with completion of removal across the rack from 
        the terminal by the receiving person.
            ``(3) The terminal operator in its books and records treats 
        the receiving person as the person that removes the taxable 
        fuel across the terminal rack for purposes of reporting the 
        transaction to the Secretary.
            ``(4) The transaction is the subject of a written 
        contract.''.
    (b) Conforming Amendment.--The table of sections for subpart C of 
part III of subchapter A of chapter 32 is amended by adding after the 
item relating to section 4104 the following new item:

                              ``Sec. 4105. Two-party exchanges.''.
    (c) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 303. SIMPLIFICATION OF TAX ON TIRES.

    (a) In General.--Subsection (a) of section 4071 is amended to read 
as follows:
    ``(a) Imposition and Rate of Tax.--There is hereby imposed on 
taxable tires sold by the manufacturer, producer, or importer thereof a 
tax at the rate of 9.4 cents (4.7 cents in the case of a biasply tire) 
for each 10 pounds so much of the maximum rated load capacity thereof 
as exceeds 3,500 pounds.''
    (b) Taxable Tire.--Section 4072 is amended by redesignating 
subsections (a) and (b) as subsections (b) and (c), respectively, and 
by inserting before subsection (b) (as so redesignated) the following 
new subsection:
    ``(a) Taxable Tire.--For purposes of this chapter, the term 
`taxable tire' means any tire of the type used on highway vehicles if 
wholly or in part made of rubber and if marked pursuant to Federal 
regulations for 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 subsection (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.

       TITLE IV--PRIVATE ACTIVITY BONDS FOR MODERN TRANSPORTATION

SEC. 401. TREATMENT OF BONDS FOR CERTAIN TRANSPORTATION FACILITIES AS 
              EXEMPT FACILITY BONDS.

    (a) Treatment as Exempt Facility Bonds.--Subsection (a) of section 
142 (relating to exempt facility bond) is amended by striking ``or'' at 
the end of paragraph (12), by striking the period at the end of 
paragraph (13) and inserting ``, or'', and by adding at the end the 
following new paragraph:
            ``(14) qualified transportation facilities.''.
    (b) Qualified Transportation Facilities.--Section 142 is amended by 
adding at the end the following new subsection:
    ``(l) Qualified Transportation Facilities.--
            ``(1) In general.--For purposes of subsection (a)(14), the 
        term `qualified transportation facilities' means--
                    ``(A) any surface transportation project which is 
                eligible to receive Federal assistance under title 23, 
                United States Code (as in effect on the date of the 
                enactment of this subsection),
                    ``(B) any project for an international bridge or 
                tunnel--
                            ``(i) for which an international entity 
                        authorized under Federal or State law is 
                        responsible, and
                            ``(ii) which is eligible to receive Federal 
                        assistance under title 23, United States Code 
                        (as in effect on the date of the enactment of 
                        this subsection),
                    ``(C) any facility for the transfer of freight from 
                truck to rail or rail to truck (including any temporary 
                storage facility directly related to such transfer) 
                which is eligible to receive Federal assistance under--
                            ``(i) title 23, United States Code (as in 
                        effect on the date of the enactment of this 
                        subsection), or
                            ``(ii) title 49, United States Code (as in 
                        effect on the date of the enactment of this 
                        subsection), and
                    ``(D) any facility described in subsection (a)(3) 
                (as modified and limited by subsections (b) and (c)).
            ``(2) Limitation on aggregate face amount of tax-exempt 
        financing.--
                    ``(A) In general.--An issue shall not be treated as 
                an issue described in subsection (a)(14) unless--
                            ``(i) the Secretary has allocated an amount 
                        to such issue under this paragraph, and
                            ``(ii) the aggregate face amount of bonds 
                        issued pursuant to such issue does not exceed 
                        such amount.
                    ``(B) Allocation.--The Secretary of Transportation, 
                after consultation with the Secretary, may allocate 
                amounts to issues under this paragraph in such manner 
                as the Secretary of Transportation (after so 
                consulting) determines appropriate, except that the 
                aggregate amount so allocated shall not exceed 
                $15,000,000,000.
                    ``(C) Refunding bonds.--Subparagraph (A) shall not 
                apply with respect to any bond the proceeds of which 
                are used exclusively to refund a bond issued pursuant 
                to subsection (a)(14) (or a bond which is a part of a 
                series of refundings of a bond so issued) if the amount 
                of the refunding bond does not exceed the outstanding 
                amount of the refunded bond.''.
    (c) Exemption From General State Volume Caps.--Paragraph (3) of 
section 146(g) (relating to exception for certain bonds) is amended--
            (1) by striking ``or (13)'' and inserting ``(13), or 
        (14)'', and
            (2) by striking ``and qualified public educational 
        facilities'' and inserting ``qualified public educational 
        facilities, and qualified transportation facilities''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.

                      TITLE V--REVENUE PROVISIONS

                          Subtitle A--Leasing

SEC. 501. REFORM OF TAX TREATMENT OF CERTAIN LEASING ARRANGEMENTS.

    (a) Clarification of Recovery Period for Tax-Exempt Use Property 
Subject to Lease.--Subparagraph (A) of section 168(g)(3) (relating to 
special rules for determining class life) is amended by inserting 
``(notwithstanding any other subparagraph of this paragraph)'' after 
``shall''.
    (b) Limitation on Depreciation Period for Software Leased to Tax-
Exempt Entity.--Paragraph (1) of section 167(f) is amended by adding at 
the end the following new subparagraph:
                    ``(C) Tax-exempt use property subject to lease.--In 
                the case of computer software which would be tax-exempt 
                use property as defined in subsection (h) of section 
                168 if such section applied to computer software, the 
                useful life under subparagraph (A) shall not be less 
                than 125 percent of the lease term (within the meaning 
                of section 168(i)(3)).''.
    (c) Lease Term To Include Related Service Contracts.--Subparagraph 
(A) of section 168(i)(3) (relating to lease term) is amended by 
striking ``and'' at the end of clause (i), by redesignating clause (ii) 
as clause (iii), and by inserting after clause (i) the following new 
clause:
                            ``(ii) the term of a lease shall include 
                        the term of any service contract or similar 
                        arrangement (whether or not treated as a lease 
                        under section 7701(e))--
                                    ``(I) which is part of the same 
                                transaction (or series of related 
                                transactions) which includes the lease, 
                                and
                                    ``(II) which is with respect to the 
                                property subject to the lease or 
                                substantially similar property, and''.

SEC. 502. LIMITATION ON DEDUCTIONS ALLOCABLE TO PROPERTY USED BY 
              GOVERNMENTS OR OTHER TAX-EXEMPT ENTITIES.

    (a) In General.--Subpart C of part II of subchapter E of chapter 1 
(relating to taxable year for which deductions taken) is amended by 
adding at the end the following new section:

``SEC. 470. LIMITATION ON DEDUCTIONS ALLOCABLE TO PROPERTY USED BY 
              GOVERNMENTS OR OTHER TAX-EXEMPT ENTITIES.

    ``(a) Limitation on Losses.--Except as otherwise provided in this 
section, a tax-exempt use loss for any taxable year shall not be 
allowed.
    ``(b) Disallowed Loss Carried to Next Year.--Any tax-exempt use 
loss with respect to any tax-exempt use property which is disallowed 
under subsection (a) for any taxable year shall be treated as a 
deduction with respect to such property in the next taxable year.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Tax-exempt use loss.--The term `tax-exempt use loss' 
        means, with respect to any taxable year, the amount (if any) by 
        which--
                    ``(A) the sum of--
                            ``(i) the aggregate deductions (other than 
                        interest) directly allocable to a tax-exempt 
                        use property, plus
                            ``(ii) the aggregate deductions for 
                        interest properly allocable to such property, 
                        exceed
                    ``(B) the aggregate income from such property.
            ``(2) Tax-exempt use property.--The term `tax-exempt use 
        property' has the meaning given to such term by section 168(h) 
        (without regard to paragraphs (1)(C) and (3) thereof and 
        determined as if property described in section 167(f)(1)(B) 
        were tangible property).
    ``(d) Exception for Certain Leases.--This section shall not apply 
to any lease of property which meets the requirements of all of the 
following paragraphs:
            ``(1) Property not financed with tax-exempt bonds.--A lease 
        of property meets the requirements of this paragraph if no part 
        of the property was (at any time) financed (directly or 
        indirectly) from the proceeds of an obligation the interest on 
        which is exempt from tax under section 103(a) and which (or any 
        refunding bond of which) is outstanding when the lease is 
        entered into. The Secretary shall by regulations provide a de 
        minimis exception from the preceding sentence.
            ``(2) Availability of funds.--
                    ``(A) In general.--A lease of property meets the 
                requirements of this paragraph if (at all times during 
                the lease term) not more than an allowable amount of 
                funds are--
                            ``(i) subject to any arrangement referred 
                        to in subparagraph (B), or
                            ``(ii) set aside or expected to be set 
                        aside,
                to or for the benefit of the lessor or any lender, or 
                to or for the benefit of the lessee to satisfy the 
                lessee's obligations or options under the lease. For 
                purposes of clause (ii), funds shall be treated as set 
                aside or expected to be set aside if a reasonable 
                person would conclude, based on the facts and 
                circumstances, that such funds are set aside or 
                expected to be set aside.
                    ``(B) Arrangements.--The arrangements referred to 
                in this subparagraph include a defeasance arrangement, 
                a loan by the lessee to the lessor or any lender, a 
                deposit arrangement, a letter of credit collateralized 
                with cash or cash equivalents, a payment undertaking 
                agreement, a lease prepayment, a sinking fund 
                arrangement, and any similar arrangement (whether or 
                not such arrangement provides credit support).
                    ``(C) Allowable amount.--
                            ``(i) In general.--Except as otherwise 
                        provided in this subparagraph, the term 
                        `allowable amount' means an amount equal to 20 
                        percent of the lessor's adjusted basis in the 
                        property at the time the lease is entered into.
                            ``(ii) Higher amount permitted in certain 
                        cases.--To the extent provided in regulations, 
                        a higher percentage shall be permitted under 
                        clause (i) where necessary because of the 
                        credit-worthiness of the lessee. In no event 
                        may such regulations permit a percentage of 
                        more than 50 percent.
                            ``(iii) Option to purchase.--If under the 
                        lease the lessee has the option to purchase the 
                        property for a fixed price or for other than 
                        the fair market value of the property 
                        (determined at the time of exercise), the 
                        allowable amount at the time such option may be 
                        exercised may not exceed 50 percent of the 
                        price at which such option may be exercised.
                            ``(iv) No allowable amount for certain 
                        arrangements.--The allowable amount shall be 
zero with respect to any arrangement which involves--
                                    ``(I) a loan from the lessee to the 
                                lessor or a lender,
                                    ``(II) any deposit, letter of 
                                credit, or payment undertaking 
                                agreement involving a lender, or
                                    ``(III) in the case of an 
                                arrangement which involves a lender, 
                                any credit support made available to 
                                the lessor in which any such lender 
                                does not have a claim that is senior to 
                                the lessor.
                        For purposes of subclause (I), the term `loan' 
                        shall not include any amount treated as a loan 
                        under section 467 with respect to a section 467 
                        rental agreement.
            ``(3) Lessor must make substantial equity investment.--A 
        lease of property meets the requirements of this paragraph if--
                    ``(A) the lessor--
                            ``(i) has at the time the lease is entered 
                        into an unconditional at-risk equity investment 
                        (as determined by the Secretary) in the 
                        property of at least 20 percent of the lessor's 
                        adjusted basis in the property as of that time, 
                        and
                            ``(ii) maintains such investment throughout 
                        the term of the lease, and
                    ``(B) the fair market value of the property at the 
                end of the lease term is reasonably expected to be 
                equal to at least 20 percent of such basis.
        Subparagraphs (A)(ii) and (B) shall not apply to a short-term 
        lease (as defined in paragraphs (1)(C) and (3) of section 
        168(h)). For purposes of subparagraph (B), the lessor's at-risk 
        position reflected in the fair market value of the property at 
        the end of the lease term shall be considered to be reduced to 
        the extent of any potential payment from an arrangement 
        described in paragraph (4).
            ``(4) Lessee may not bear more than minimal risk of loss.--
                    ``(A) In general.--A lease of property meets the 
                requirements of this paragraph if there is no 
                arrangement under which more than a minimal risk of 
                loss (as determined under regulations) in the value of 
                the property is borne by the lessee.
                    ``(B) Certain arrangements fail requirement.--
                Except as provided in regulations, the property does 
                not meet the requirements of this paragraph if there is 
                any arrangement under which the lessee bears--
                            ``(i) any portion of the loss that would 
                        occur if the fair market value of the leased 
                        property at the time the lease is terminated 
                        were 25 percent less than its reasonably 
                        expected fair market value at the end of the 
                        lease term, or
                            ``(ii) more than 50 percent of the loss 
                        that would occur if the fair market value of 
                        the leased property at the time the lease is 
                        terminated were zero.
    ``(e) Special Rules.--
            ``(1) Treatment of former tax-exempt use property.--
                    ``(A) In general.--In the case of any former tax-
                exempt use property--
                            ``(i) any deduction allowable under 
                        subsection (b) with respect to such property 
                        for any taxable year shall be allowed only to 
                        the extent of any net income (without regard to 
                        such deduction) from such property for such 
                        taxable year, and
                            ``(ii) any portion of such unused deduction 
                        remaining after application of clause (i) shall 
                        be treated as a deduction allowable under 
                        subsection (b) with respect to such property in 
                        the next taxable year.
                    ``(B) Former tax-exempt use property.--For purposes 
                of this subsection, the term `former tax-exempt use 
                property' means any property which--
                            ``(i) is not tax-exempt use property for 
                        the taxable year, but
                            ``(ii) was tax-exempt use property for any 
                        prior taxable year.
            ``(2) Disposition of entire interest in property.--If 
        during the taxable year a taxpayer disposes of the taxpayer's 
        entire interest in tax-exempt use property (or former tax-
        exempt use property), rules similar to the rules of section 
        469(g) shall apply for purposes of this section.
            ``(3) Coordination with section 469.--This section shall be 
        applied before the application of section 469.
    ``(f) Other Definitions.--For purposes of this section--
            ``(1) Related parties.--The terms `lessor', `lessee', and 
        `lender' each include any related party (within the meaning of 
        section 197(f)(9)(C)(i)).
            ``(2) Lease term.--The term `lease term' has the meaning 
        given to such term by section 168(i)(3).
            ``(3) Lender.--The term `lender' means, with respect to any 
        lease, a person that makes a loan to the lessor which is 
        secured (or economically similar to being secured) by the lease 
        or the leased property.
            ``(4) Loan.--The term `loan' includes any similar 
        arrangement.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the provisions of this 
section, including regulation which--
            ``(1) allow in appropriate cases the aggregation of 
        property subject to the same lease, and
            ``(2) provide for the determination of the allocation of 
        interest expense for purposes of this section.''.
    (b) Conforming Amendment.--The table of sections for subpart C of 
part II of subchapter E of chapter 1 is amended by adding at the end 
the following new item:

                              ``Sec. 470. Limitation on deductions 
                                        allocable to property used by 
                                        governments or other tax-exempt 
                                        entities.''.

SEC. 503. EFFECTIVE DATE.

    (a) In General.--Except as provided by subsection (b), the 
amendments made by this subtitle shall apply to leases entered into 
after February 11, 2004.
    (b) Exception.--
            (1) In general.--The amendments made by this subtitle shall 
        not apply to qualified transportation property.
            (2) Qualified transportation property.--For purposes of 
        paragraph (1), the term ``qualified transportation property'' 
        means domestic property subject to a lease with respect to 
        which a formal application--
                    (A) was submitted for approval to the Federal 
                Transit Administration (an agency of the Department of 
                Transportation) after June 30, 2003, and before 
                February 12, 2004,
                    (B) is approved by the Federal Transit 
                Administration before January 1, 2005, and
                    (C) includes a description of such property and the 
                value of such property.

                     Subtitle B--Charitable Giving

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

    (a) In General.--Subsection (f) of section 170 (relating to 
disallowance of deduction in certain cases and special rules) is 
amended by adding at the end the following new paragraph:
            ``(11) Contributions of motor vehicles, boats, and 
        aircraft.--
                    ``(A) In general.--Except as provided in 
                regulations or other guidance, in the case of a 
                contribution of a specified vehicle to which paragraph 
                (8) applies, no deduction shall be allowed under 
                subsection (a) for such contribution unless the 
                taxpayer obtains a qualified appraisal of the specified 
                vehicle on or before the date of such contribution.
                    ``(B) Exception for inventory property.--
                Subparagraph (A) shall not apply to property which is 
                described in section 1221(a)(1).
                    ``(C) Specified vehicle.--For purposes of this 
                paragraph, the term `specified vehicle' means any--
                            ``(i) motor vehicle manufactured primarily 
                        for use on public streets, roads, and highways,
                            ``(ii) boat, or
                            ``(iii) aircraft.
                    ``(D) Qualified appraisal.--For purposes of this 
                paragraph, the term `qualified appraisal' means any 
                appraisal which is treated for purposes of this 
                paragraph as a qualified appraisal under regulations or 
                other guidance prescribed by the Secretary.
                    ``(E) Regulations or other guidance.--The Secretary 
                shall prescribe such regulations or other guidance as 
                may be necessary to carry out the purposes of this 
                paragraph.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to contributions made after March 12, 2004.

SEC. 512. INCREASED REPORTING FOR NONCASH CHARITABLE CONTRIBUTIONS.

    (a) In General.--Subsection (f) of section 170 (relating to 
disallowance of deduction in certain cases and special rules), as 
amended by section 511, is further amended by adding at the end the 
following new paragraph:
            ``(12) Qualified appraisal and other documentation for 
        certain contributions.--
                    ``(A) In general.--
                            ``(i) Denial of deduction.--In the case of 
                        an individual, 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.--
                                Subparagraphs (C) and (D) shall not 
                                apply to cash, property described in 
                                section 1221(a)(1), and publicly traded 
                                securities (as defined in section 
                                6050L(a)(2)(B)).
                                    ``(II) Reasonable cause.--Clause 
                                (i) shall not apply if it is shown that 
                                the failure to meet such requirements 
                                is due to reasonable cause and not to 
                                willful neglect.
                    ``(B) Property description for 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 individual, partnership or corporation includes 
                with the return for the taxable year in which the 
                contribution is made 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 
                individual, 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 
                individual, partnership, or corporation attaches to the 
return for the taxable year a qualified appraisal of such property.
                    ``(E) Qualified appraisal.--For purposes of this 
                paragraph, 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 
                paragraph, property and all similar items of property 
                donated to 1 or more donees shall be treated as 1 
                property.
                    ``(G) Special rule for pass-thru entities.--In the 
                case of a partnership or S corporation, this paragraph 
                shall be applied at the entity level, except that the 
                deduction shall be denied at the partner or shareholder 
                level.
                    ``(H) Regulations.--The Secretary may prescribe 
                such regulations as may be necessary or appropriate to 
                carry out the purposes of this paragraph, including 
                regulations that may 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 March 12, 2004.

SEC. 513. TREATMENT OF CHARITABLE CONTRIBUTIONS OF PATENTS AND SIMILAR 
              PROPERTY.

    (a) In General.--Subparagraph (B) of section 170(e)(1) is amended 
by striking ``or'' at the end of clause (i), by adding ``or'' at the 
end of clause (ii), and by inserting after clause (ii) the following 
new clause:
                            ``(iii) of any patent, copyright (other 
                        than a copyright described in section 
                        1221(a)(3) or 1231(b)(1)(C)), trademark, trade 
                        name, trade secret, know-how, software (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 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 
        contribution, 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 properly allocable to such year under this subsection.
            ``(2) Qualified donee income.--For purposes of this 
        subsection, 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.
            ``(3) 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.
            ``(4) 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.
            ``(5) Benefit limited to life of intellectual property.--
        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.
            ``(6) Applicable percentage.--For purposes of this 
        subsection, 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....................................................     90 
        4th....................................................     80 
        5th....................................................     70 
        6th....................................................     60 
        7th....................................................     50 
        8th....................................................     40 
        9th....................................................     30 
        10th...................................................     20 
        11th...................................................     10 
        12th...................................................     10.
            ``(7) 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 property contribution for purposes of this 
                subsection and section 6050L.
            ``(8) Qualified intellectual property.--For purposes of 
        this subsection, the term `qualified intellectual property' 
        means property described in subsection (e)(1)(B)(iii) (other 
        than property contributed to or for the use of an organization 
        described in subsection (e)(1)(B)(ii)).
            ``(9) Other special rules.--
                    ``(A) Application of limitations on charitable 
                contributions.--Any increase under this subsection of 
                the deduction provided under subsection (a) shall be 
                treated for 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 (2) shall not 
                exceed the amount of such income reported under section 
                6050L(b)(1).
                    ``(C) Deduction limited to 12 taxable years.--
                Except as may be provided under subparagraph (D)(i), 
                this subsection shall not apply with respect to any 
                qualified intellectual property contribution for any 
                taxable year of the donor after the 12th taxable year 
                of the donor which ends on or after the date of such 
                contribution.
                    ``(D) Regulations.--The Secretary may issue 
                regulations or other guidance to carry out the purposes 
                of this subsection, including 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 
                        section 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.--
            ``(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 contribution 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 paragraph (9)(B) of section 170(m) and with 
                the modifications described in paragraphs (4) and (5) 
                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 
                taxable 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.''.
    (d) Coordination With Appraisal Requirements.--Subclause (I) of 
section 170(f)(12)(A)(ii), as added by 512, is amended by inserting 
``subsection (e)(1)(B)(iii) or'' before ``section 1221(a)(1)''.
    (e) Anti-Abuse Rules.--The Secretary of the Treasury may prescribe 
such regulations or other 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 
        property 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 March 12, 2004.

                  Subtitle C--Tax Collection Contracts

SEC. 521. QUALIFIED TAX COLLECTION CONTRACTS.

    (a) Contract Requirements.--
            (1) In general.--Subchapter A of chapter 64 (relating to 
        collection) is amended by adding at the end the following new 
        section:

``SEC. 6306. QUALIFIED TAX COLLECTION CONTRACTS.

    ``(a) In General.--Nothing in any provision of law shall be 
construed to prevent the Secretary from entering into a qualified tax 
collection contract.
    ``(b) Qualified Tax Collection Contract.--For purposes of this 
section, the term `qualified tax collection contract' means any 
contract which--
            ``(1) is for the services of any person (other than an 
        officer or employee of the Treasury 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 an amount not in 
excess of 25 percent of the amount collected under any qualified tax 
collection contract for the costs of services performed under such 
contract. The Secretary shall keep adequate records regarding amounts 
so retained and used. The amount credited as paid by any taxpayer shall 
be determined without regard to this subsection.
    ``(d) No Federal Liability.--The United States shall not be liable 
for any act or omission of any person performing services under a 
qualified tax collection contract.
    ``(e) Application of Fair Debt Collection Practices Act.--The 
provisions of the Fair Debt Collection Practices Act (15 U.S.C. 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 contract, see section 7433A.
            ``(2) For application of Taxpayer Assistance Orders to 
        persons performing services under a qualified tax collection 
        contract, see section 7811(a)(4).''.
            (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 COLLECTION 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 
        subchapter B of chapter 76 is amended by inserting after the 
        item relating to section 7433 the following new item:

                              ``Sec. 7433A. Civil damages for certain 
                                        unauthorized collection actions 
                                        by persons performing services 
                                        under a qualified tax 
                                        collection contract.''.
    (c) Application of Taxpayer Assistance Orders to Persons Performing 
Services Under a Qualified Tax Collection Contract.--Section 
7811 (relating to taxpayer assistance orders) is amended by adding at 
the end the following new subsection:
    ``(g) Application to Persons Performing 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 extent and in the same 
manner as such order or action applies to the Secretary.''.
    (d) Ineligibility of Individuals Who Commit Misconduct to Perform 
Under Contract.--Section 1203 of the Internal Revenue Service 
Restructuring Act of 1998 (relating to termination of employment for 
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 permitted to 
perform any services under any qualified tax collection contract (as 
defined in section 6306(b) of the Internal Revenue Code of 1986) if 
there is a final determination by the Secretary of the Treasury under 
such contract that such individual committed any act or omission 
described under subsection (b) in connection with the performance of 
such services.''.
    (e) Effective Date.--The amendments made to this section shall take 
effect on the date of the enactment of this Act.

                      Subtitle D--Other Provisions

SEC. 531. EXTENSION OF AMORTIZATION OF INTANGIBLES TO SPORTS 
              FRANCHISES.

    (a) In General.--Section 197(e) (relating to exceptions to 
definition of section 197 intangible) is amended by striking paragraph 
(6) and by redesignating paragraphs (7) and (8) as paragraphs (6) and 
(7), respectively.
    (b) Conforming Amendments.--
            (1)(A) Section 1056 (relating to basis limitation for 
        player contracts transferred in connection with the sale of a 
        franchise) is repealed.
            (B) The table of sections for part IV of subchapter O of 
        chapter 1 is amended by striking the item relating to section 
        1056.
            (2) Section 1245(a) (relating to gain from disposition of 
        certain depreciable property) is amended by striking paragraph 
        (4).
            (3) Section 1253 (relating to transfers of franchises, 
        trademarks, and trade names) is amended by striking subsection 
        (e).
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to property 
        acquired after the date of the enactment of this Act.
            (2) Section 1245.--The amendment made by subsection (b)(2) 
        shall apply to franchises acquired after the date of the 
        enactment of this Act.

SEC. 532. CLASS LIVES FOR UTILITY GRADING COSTS.

    (a) Gas Utility Property.--Section 168(e)(3)(E) (defining 15-year 
property) is amended by striking ``and'' at the end of clause (ii), by 
striking the period at the end of clause (iii) and inserting ``, and'', 
and by adding at the end the following new clause:
                            ``(iv) initial clearing and grading land 
                        improvements with respect to gas utility 
                        property.''.
    (b) Electric Utility Property.--Section 168(e)(3) is amended by 
adding at the end the following new subparagraph:
                    ``(F) 20-year property.--The term `20-year 
                property' means initial clearing and grading land 
                improvements with respect to any electric utility 
                transmission and distribution plant.''.
    (c) Conforming Amendments.--The table contained in section 
168(g)(3)(B) is amended by adding at the end the following new items:

``(E)(iv)...................................................        20 
``(F).......................................................      25''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 533. MODIFICATION OF CONTINUING LEVY ON PAYMENTS TO FEDERAL 
              VENDERS.

    (a) In General.--Section 6331(h) (relating to continuing levy on 
certain payments) is amended by adding at the end the following new 
paragraph:
            ``(3) Increase in levy for certain payments.--Paragraph (1) 
        shall be applied by substituting `100 percent' for `15 percent' 
        in the case of any specified payment due to a vendor of goods 
        or services sold or leased to the Federal Government.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.
                                 <all>