[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2045 Introduced in Senate (IS)]








109th CONGRESS
  1st Session
                                S. 2045

  To provide incentives to the auto industry to accelerate efforts to 
  develop more energy-efficient vehicles to lessen dependence on oil.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 17, 2005

   Mr. Obama introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To provide incentives to the auto industry to accelerate efforts to 
  develop more energy-efficient vehicles to lessen dependence on oil.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Health Care for Hybrids Act''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) The United States imports over half the oil it 
        consumes.
            (2) According to present trends, the United States reliance 
        on foreign oil will increase to 68 percent of its total 
        consumption by 2025.
            (3) With only 3 percent of the world's known oil reserves, 
        the health of the United States economy is dependent on world 
        oil prices.
            (4) World oil prices are overwhelmingly dictated by 
        countries other than the United States, thus endangering our 
        economic and national security.
            (5) Legacy health care costs associated with retiree 
        workers are an increasing burden on the global competitiveness 
        of American industries.
            (6) American automakers have lagged behind their foreign 
        competitors in producing hybrid and other energy efficient 
        automobiles.
            (7) Innovative uses of new technology in automobiles in the 
        United States will help retain American jobs, support health 
        care obligations for retiring workers in the automotive sector, 
        decrease America's dependence on foreign oil, and address 
        pressing environmental concerns.

                            TITLE I--PROGRAM

SEC. 101. COORDINATING TASK FORCE.

    Not later than 6 months after the date of enactment of this Act, 
the Secretary of Energy, the Secretary of Health and Human Services, 
the Secretary of Transportation, and the Secretary of the Treasury 
shall establish, and appoint an equal number of representatives to, a 
task force (referred to in this Act as the ``task force'') to 
administer the program established under this Act.

SEC. 102. ESTABLISHMENT OF PROGRAM.

    (a) In General.--Not later than 1 year after the date of enactment 
of this Act, the task force established under section 101 shall 
establish a program to provide financial assistance to eligible 
domestic automobile manufacturers for the costs incurred in providing 
health benefits to their retired employees.
    (b) Consultation.--In establishing the program under subsection 
(a), the task force shall consult with representatives from the 
domestic automobile manufacturers, unions representing employees of 
such manufacturers, and consumer and environmental groups.
    (c) Eligible Domestic Automobile Manufacturer.--To be eligible to 
receive financial assistance under the program established under 
subsection (a), a domestic automobile manufacturer shall--
            (1) submit an application to the task force at such time, 
        in such manner, and containing such information as the task 
        force shall require;
            (2) certify that such manufacturer is providing full health 
        care coverage to all of its domestic employees;
            (3) provide an assurance that the manufacturer will invest 
        an amount equal to not less than 50 percent of the amount of 
        health savings derived by the manufacturer as a result of its 
        retiree health care costs being covered under the program under 
        this section, in--
                    (A) the domestic manufacture and commercialization 
                of petroleum fuel reduction technologies, including 
                alternative or flexible fuel vehicles, hybrids, and 
                other state-of-the-art fuel saving technologies;
                    (B) the retraining of workers and retooling of 
                assembly lines for such domestic manufacture and 
                commercialization;
                    (C) research and development, design, 
                commercialization, and other costs related to the 
                diversifying of domestic production of automobiles 
                through the offering of high performance fuel efficient 
                vehicles; and
                    (D) assisting domestic automobile component 
                suppliers to retool their domestic manufacturing plants 
                to produce components for petroleum fuel reduction 
                technologies, including alternative or flexible fuel 
                vehicles, hybrid, advanced diesel, or other state-of-
                the-art fuel saving technologies; and
            (4) provide additional assurances and information as the 
        task force may require, including information needed by the 
        task force to audit the manufacturer's compliance with the 
        requirements of the program.
    (d) Limitation.--The total amount of financial assistance that may 
be provided each year under the program under this section with respect 
to any single domestic automobile manufacturer shall not exceed an 
amount equal to 10 percent of the retiree health care costs of that 
manufacturer for that year.

SEC. 103. REPORTING.

    Not later than 6 months after the date of enactment of this Act, 
and every 6 months thereafter, the task force shall submit to Congress 
a report on any financial assistance provided under this program under 
this Act and the resulting changes in the manufacture and 
commercialization of fuel saving technologies implemented by auto 
manufacturers as a result of such financial assistance. Not later than 
1 year after the date of enactment of this Act, the task force shall 
submit a report to Congress on the effectiveness of current consumer 
incentives available for the purchase of hybrid vehicles in encouraging 
the purchase of such vehicles and whether these incentives should be 
expanded.

SEC. 104. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated, such sums as may be 
necessary in each fiscal year to carry out this Act.

SEC. 105. LIMITATION ON BACKSLIDING.

    To be eligible to receive financial assistance under this title, a 
manufacturer shall provide assurances to the task force that fuel 
savings achieved with respect its average adjusted fuel economy will 
not result in decreases with respect to fuel economy elsewhere in the 
domestic fleet. The task force shall determine compliance with such 
assurances using accepted measurements of fuel savings.

SEC. 106. TERMINATION OF PROGRAM.

    The program established under this title shall terminate on 
December 31, 2015.

                           TITLE II--OFFSETS

SEC. 201. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

    (a) In General.--Section 7701 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (o) as subsection (p) and by 
inserting after subsection (n) the following new subsection:
    ``(o) Clarification of Economic Substance Doctrine; Etc.--
            ``(1) General rules.--
                    ``(A) In general.--In any case in which a court 
                determines that the economic substance doctrine is 
                relevant for purposes of this title to a transaction 
                (or series of transactions), such transaction (or 
                series of transactions) shall have economic substance 
                only if the requirements of this paragraph are met.
                    ``(B) Definition of economic substance.--For 
                purposes of subparagraph (A)--
                            ``(i) In general.--A transaction has 
                        economic substance only if--
                                    ``(I) the transaction changes in a 
                                meaningful way (apart from Federal tax 
                                effects) the taxpayer's economic 
                                position, and
                                    ``(II) the taxpayer has a 
                                substantial nontax purpose for entering 
                                into such transaction and the 
                                transaction is a reasonable means of 
                                accomplishing such purpose.
                        In applying subclause (II), a purpose of 
                        achieving a financial accounting benefit shall 
                        not be taken into account in determining 
                        whether a transaction has a substantial nontax 
                        purpose if the origin of such financial 
                        accounting benefit is a reduction of income tax
                            ``(ii) Special rule where taxpayer relies 
                        on profit potential.--A transaction shall not 
                        be treated as having economic substance by 
                        reason of having a potential for profit 
                        unless--
                                    ``(I) the present value of the 
                                reasonably expected pre-tax profit from 
                                the transaction is substantial in 
                                relation to the present value of the 
                                expected net tax benefits that would be 
                                allowed if the transaction were 
                                respected, and
                                    ``(II) the reasonably expected pre-
                                tax profit from the transaction exceeds 
                                a risk-free rate of return.
                    ``(C) Treatment of fees and foreign taxes.--Fees 
                and other transaction expenses and foreign taxes shall 
                be taken into account as expenses in determining pre-
                tax profit under subparagraph (B)(ii).
            ``(2) Special rules for transaction with tax-indifferent 
        parties.--
                    ``(A) Special rules for financing transactions.--
                The form of a transaction which is in substance the 
                borrowing of money or the acquisition of financial 
                capital directly or indirectly from a tax-indifferent 
                party shall not be respected if the present value of 
                the deductions to be claimed with respect to the 
                transaction is substantially in excess of the present 
                value of the anticipated economic returns of the person 
                lending the money or providing the financial capital. A 
                public offering shall be treated as a borrowing, or an 
                acquisition of financial capital, from a tax-
                indifferent party if it is reasonably expected that at 
                least 50 percent of the offering will be placed with 
                tax-indifferent parties.
                    ``(B) Artificial income shifting and basis 
                adjustments.--The form of a transaction with a tax-
                indifferent party shall not be respected if--
                            ``(i) it results in an allocation of income 
                        or gain to the tax-indifferent party in excess 
                        of such party's economic income or gain, or
                            ``(ii) it results in a basis adjustment or 
                        shifting of basis on account of overstating the 
                        income or gain of the tax-indifferent party.
            ``(3) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Economic substance doctrine.--The term 
                `economic substance doctrine' means the common law 
                doctrine under which tax benefits under subtitle A with 
                respect to a transaction are not allowable if the 
                transaction does not have economic substance or lacks a 
                business purpose.
                    ``(B) Tax-indifferent party.--The term `tax-
                indifferent party' means any person or entity not 
                subject to tax imposed by subtitle A. A person shall be 
                treated as a tax-indifferent party with respect to a 
                transaction if the items taken into account with 
                respect to the transaction have no substantial impact 
                on such person's liability under subtitle A.
                    ``(C) Exception for personal transactions of 
                individuals.--In the case of an individual, this 
                subsection shall apply only to transactions entered 
                into in connection with a trade or business or an 
                activity engaged in for the production of income.
                    ``(D) Treatment of lessors.--In applying paragraph 
                (1)(B)(ii) to the lessor of tangible property subject 
                to a lease--
                            ``(i) the expected net tax benefits with 
                        respect to the leased property shall not 
                        include the benefits of--
                                    ``(I) depreciation,
                                    ``(II) any tax credit, or
                                    ``(III) any other deduction as 
                                provided in guidance by the Secretary, 
                                and
                            ``(ii) subclause (II) of paragraph 
                        (1)(B)(ii) shall be disregarded in determining 
                        whether any of such benefits are allowable.
            ``(4) Other common law doctrines not affected.--Except as 
        specifically provided in this subsection, the provisions of 
        this subsection shall not be construed as altering or 
        supplanting any other rule of law, and the requirements of this 
        subsection shall be construed as being in addition to any such 
        other rule of law.
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this subsection. Such regulations may include 
        exemptions from the application of this subsection.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after the date of the enactment of 
this Act.

SEC. 202. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS 
              LACKING ECONOMIC SUBSTANCE, ETC.

    (a) In General.--Subchapter A of chapter 68 of the Internal Revenue 
Code of 1986 is amended by inserting after section 6662A the following 
new section:

``SEC. 6662A. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS 
              LACKING ECONOMIC SUBSTANCE, ETC.

    ``(a) Imposition of Penalty.--If a taxpayer has an noneconomic 
substance transaction understatement for any taxable year, there shall 
be added to the tax an amount equal to 40 percent of the amount of such 
understatement.
    ``(b) Reduction of Penalty for Disclosed Transactions.--Subsection 
(a) shall be applied by substituting `20 percent' for `40 percent' with 
respect to the portion of any noneconomic substance transaction 
understatement with respect to which the relevant facts affecting the 
tax treatment of the item are adequately disclosed in the return or a 
statement attached to the return.
    ``(c) Noneconomic Substance Transaction Understatement.--For 
purposes of this section--
            ``(1) In general.--The term `noneconomic substance 
        transaction understatement' means any amount which would be an 
        understatement under section 6662A(b)(1) if section 6662A were 
        applied by taking into account items attributable to 
        noneconomic substance transactions rather than items to which 
        section 6662A would apply without regard to this paragraph.
            ``(2) Noneconomic substance transaction.--The term 
        `noneconomic substance transaction' means any transaction if--
                    ``(A) there is a lack of economic substance (within 
                the meaning of section 7701(o)(1)) for the transaction 
                giving rise to the claimed benefit or the transaction 
                was not respected under section 7701(o)(2), or
                    ``(B) the transaction fails to meet the 
                requirements of any similar rule of law.
    ``(d) Rules Applicable to Compromise of Penalty.--
            ``(1) In general.--If the 1st letter of proposed deficiency 
        which allows the taxpayer an opportunity for administrative 
        review in the Internal Revenue Service Office of Appeals has 
        been sent with respect to a penalty to which this section 
        applies, only the Commissioner of Internal Revenue may 
        compromise all or any portion of such penalty.
            ``(2) Applicable rules.--The rules of paragraphs (2) and 
        (3) of section 6707A(d) shall apply for purposes of paragraph 
        (1).
    ``(e) Coordination With Other Penalties.--Except as otherwise 
provided in this part, the penalty imposed by this section shall be in 
addition to any other penalty imposed by this title.
    ``(f) Cross References.--
            ``(1) For coordination of penalty with understatements 
        under section 6662 and other special rules, see section 
        6662A(e).
            ``(2) For reporting of penalty imposed under this section 
        to the Securities and Exchange Commission, see section 
        6707A(e).''.
    (b) Coordination With Other Understatements and Penalties.--
            (1) The second sentence of section 6662(d)(2)(A) of the 
        Internal Revenue Code of 1986 is amended by inserting ``and 
        without regard to items with respect to which a penalty is 
        imposed by section 6662B'' before the period at the end.
            (2) Subsection (e) of section 6662A of the Internal Revenue 
        Code of 1986 is amended--
                    (A) in paragraph (1), by inserting ``and 
                noneconomic substance transaction understatements'' 
                after ``reportable transaction understatements'' both 
                places it appears,
                    (B) in paragraph (2)(A), by inserting ``and a 
                noneconomic substance transaction understatement'' 
                after ``reportable transaction understatement'',
                    (C) in paragraph (2)(B), by inserting ``6662B or'' 
                before ``6663'',
                    (D) in paragraph (2)(C)(i), by inserting ``or 
                section 6662B'' before the period at the end,
                    (E) in paragraph (2)(C)(ii), by inserting ``and 
                section 6662B'' after ``This section'',
                    (F) in paragraph (3), by inserting ``or noneconomic 
                substance transaction understatement'' after 
                ``reportable transaction understatement'', and
                    (G) by adding at the end the following new 
                paragraph:
            ``(3) Noneconomic substance transaction understatement.--
        For purposes of this subsection, the term `noneconomic 
        substance transaction understatement' has the meaning given 
        such term by section 6662B(c).''.
            (3) Subsection (e) of section 6707A of the Internal Revenue 
        Code of 1986 is amended--
                    (A) by striking ``or'' at the end of subparagraph 
                (B), and
                    (B) by striking subparagraph (C) and inserting the 
                following new subparagraphs:
                    ``(C) is required to pay a penalty under section 
                6662B with respect to any noneconomic substance 
                transaction, or
                    ``(D) is required to pay a penalty under section 
                6662(h) with respect to any transaction and would (but 
                for section 6662A(e)(2)(C)) have been subject to 
                penalty under section 6662A at a rate prescribed under 
                section 6662A(c) or under section 6662B,''.
    (c) Clerical Amendment.--The table of sections for part II of 
subchapter A of chapter 68 of the Internal Revenue Code of 1986 is 
amended by inserting after the item relating to section 6662A the 
following new item:

        ``Sec. 6662B. Penalty for understatements attributable to 
                            transactions lacking economic substance, 
                            etc.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after the date of the enactment of 
this Act.

SEC. 203. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
              ATTRIBUTABLE TO NONECONOMIC SUBSTANCE TRANSACTIONS.

    (a) In General.--Section 163(m) of the Internal Revenue Code of 
1986 (relating to interest on unpaid taxes attributable to nondisclosed 
reportable transactions) is amended--
            (1) by striking ``attributable'' and all that follows and 
        inserting the following: ``attributable to--
            ``(1) the portion of any reportable transaction 
        understatement (as defined in section 6662A(b)) with respect to 
        which the requirement of section 6664(d)(2)(A) is not met, or
            ``(2) any noneconomic substance transaction understatement 
        (as defined in section 6662B(c)).''; and
            (2) by inserting ``and noneconomic substance transactions'' 
        after ``transactions''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transactions after the date of the enactment of this Act in 
taxable years ending after such date.
                                 <all>