Credit for gasoline and diesel fuel used in highway vehicles for nonbusiness purposes

(a)

In general

Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by adding after section 25B the following new section:

25C.

Credit for gasoline and diesel fuel used in highway vehicles for nonbusiness purposes

(a)

Allowance of credit

In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the aggregate qualified taxable fuel expenditures made by the taxpayer during such year. (b)

Limitation

The credit allowed under subsection (a) for a taxable year shall not exceed $250 ($500 in the case of a joint return). (c)

Qualified taxable fuel expenditures

For purposes of this section— (1)

In general

The term qualified taxable fuel expenditures means amounts paid for a taxable fuel (as defined by section 4083(a) (without regard to paragraph (1)(C) thereof) for a nonbusiness use in a highway vehicle. (2)

Exception

Such term does not include amounts paid for any fuel with respect to which a credit is allowed under section 34 or a refund allowed under section 6420, 6421, or 6427. (d)

Limitation based on modified adjusted gross income

(1)

In general

The amount which would (but for this subsection) be taken into account under subsection (a) for the taxable year shall be reduced (but not below zero) by the amount determined under paragraph (2). (2)

Amount of reduction

The amount determined under this paragraph is the amount which bears the same ratio to the amount which would be so taken into account as— (A)the excess of— (i)the taxpayer's modified adjusted gross income for such taxable year, over (ii)$25,000 ($50,000 in the case of a joint return), bears to (B)$2,500 ($5,000 in the case of a joint return). (3)

Modified adjusted gross income

The term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933. (e)

Rate of increase in price of a gallon of gasoline must exceed rate of inflation by not less than 200 percent

(1)

General rule

Subsection (a) shall not apply for any taxable year unless the Secretary determines that the percentage change in the price of a gallon of gasoline for the taxable year is not less than 200 percent of the change in the inflation rate for such taxable year. (2)

Percentage change in the price of a gallon of gasoline

For purposes of paragraph (1), the percentage change in the price of a gallon of gasoline for a taxable year is the percentage (if any) by which— (A)the average price of a gallon of gasoline as of the close of the taxable year, exceeds (B)the average price of a gallon gasoline as of the beginning of the taxable year. (3)

Inflation rate

For purposes of paragraph (1), the inflation rate for the determination period is the percentage (if any) by which— (A)the average of the Consumer Price Index as of the close of the taxable year, exceeds (B)the average of the Consumer Price Index as of the beginning of the taxable year. (4)

Price of a gallon of gasoline

For purposes of this subsection, the price of a gallon of gasoline shall be as determined under the U.S. Regular All Formulations Retail Gasoline Prices by the Energy Information Administration of the Department of Energy. (5)

Consumer Price Index

For the purposes of this subsection, the term Consumer Price Index means the last Consumer Price Index for all-urban consumers published by the Department of Labor. For purposes of the preceding sentence, the revision of the Consumer Price Index which is most consistent with the Consumer Price Index for calendar year 1986 shall be used. (f)

Adjustments for inflation

In the case of a taxable year beginning after December 31, 2005, each of the dollar amounts in subsection (b) and subsection (d)(2)(A)(ii) shall be increased by an amount equal to— (1)such dollar amount, multiplied by (2)the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2004 for calendar year 1992 in subparagraph (B) thereof. If any amount as increased under the preceding sentence is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50.

If, in the case of any amount in subsection (b) as increased under the preceding sentence, is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10, and if, in the case of any amount in subsection (d) as increased under the preceding sentence, is not a multiple of $100, such amount shall be rounded to the nearest multiple of $100.

(g)

Guidance

Not later than January 31 of each year, the Secretary shall promulgate such guidance as may be necessary or appropriate to carry out the provisions of this section with respect to the preceding taxable year.

(b)

Clerical amendment

The table of sections for subpart A of such part IV is amended by inserting after the item relating to section 25B the following new item:

Sec. 25C. Credit for gasoline and diesel fuel used in highway vehicles for nonbusiness purposes

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2004.