[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2673 Introduced in Senate (IS)]








109th CONGRESS
  2d Session
                                S. 2673

 To temporarily reduce the Federal fuel tax through the suspension of 
  royalty relief for oil production and certain energy production tax 
                              incentives.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 27, 2006

 Mr. Thune (for himself and Mr. Graham) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To temporarily reduce the Federal fuel tax through the suspension of 
  royalty relief for oil production and certain energy production tax 
                              incentives.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Gas Price 
Reduction Act of 2006''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
         TITLE I--TEMPORARY REDUCTION IN HIGHWAY FUEL TAX RATE

Sec. 101. Reduction in highway fuel tax and maintenance of Highway 
                            Trust Fund.
Sec. 102. Floor stock refunds.
Sec. 103. Floor stocks tax.
Sec. 104. Benefits of tax reduction should be passed on to consumers.
                 TITLE II--SUSPENSION OF ROYALTY RELIEF

Sec. 201. Suspension of royalty relief.
   TITLE III--SUSPENSION OF CERTAIN ENERGY PRODUCTION TAX INCENTIVES

Sec. 301. Suspension of deduction for development expenditures.
Sec. 302. Suspension of deduction for certain mining exploration 
                            expenditures.
Sec. 303. Suspension of deduction for intangible drilling and 
                            development costs.
Sec. 304. Suspension of credit for producing fuel from a 
                            nonconventional source.

         TITLE I--TEMPORARY REDUCTION IN HIGHWAY FUEL TAX RATE

SEC. 101. REDUCTION IN HIGHWAY FUEL TAX AND MAINTENANCE OF HIGHWAY 
              TRUST FUND.

    (a) In General.--Section 4081 of the Internal Revenue Code of 1986 
(relating to imposition of tax on gasoline, diesel fuel, and kerosene) 
is amended by adding at the end the following new subsection:
    ``(f) Temporary Reduction in Taxes on Gasoline, Diesel Fuel, and 
Kerosene.--
            ``(1) In general.--During the applicable period, each rate 
        of tax referred to in paragraph (2) shall be reduced to zero 
        cents per gallon.
            ``(2) Rates of tax.--The rates of tax referred to in this 
        paragraph are the rates of tax otherwise applicable under--
                    ``(A) clause (i) and (iii) of subsection (a)(2)(A) 
                (relating to gasoline, diesel fuel, and kerosene), 
                determined without regard to subparagraph (B) or (C) of 
                subsection (a)(2), and
                    ``(B) paragraph (1) of section 4041(a) (relating to 
                diesel fuel) with respect to fuel sold for use or used 
                in a diesel-powered highway vehicle.
            ``(3) Applicable period.--For purposes of this subsection, 
        the term `applicable period' means the period beginning after 
        the date of the enactment of the Gas Price Reduction Act of 
        2006, and ending before October 1, 2006.
            ``(4) Maintenance of trust fund deposits.--In determining 
        the amounts to be appropriated to the Highway Trust Fund under 
        section 9503, an amount equal to the reduction in revenues to 
        the Treasury by reason of this subsection shall be treated as 
        taxes received in the Treasury under this section.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 102. FLOOR STOCK REFUNDS.

    (a) In General.--If--
            (1) before a tax reduction date, a tax referred to in 
        section 4081(f)(2) of the Internal Revenue Code of 1986 has 
        been imposed on any liquid, and
            (2) on such date such liquid is held by a dealer and has 
        not been used and is intended for sale, there shall be credited 
        (without interest) to the person who paid such tax (hereafter 
        in this section referred to as the ``taxpayer''), against the 
        taxpayer's subsequent semi-monthly deposit of such tax, an 
        amount equal to the excess of the tax paid by the taxpayer over 
        the amount of such tax which would be imposed on such liquid 
        had the taxable event occurred on the tax reduction date.
    (b) Certification Necessary to File Claim for Credit.--
            (1) In general.--In any case where liquid is held by a 
        dealer (other than the taxpayer) on the tax reduction date, no 
        credit amount with respect to such liquid shall be allowed to 
        the taxpayer under subsection (a) unless the taxpayer files 
        with the Secretary--
                    (A) a certification that the taxpayer has given a 
                credit to such dealer with respect to such liquid 
                against the dealer's first purchase of liquid from the 
                taxpayer subsequent to the tax reduction date, and
                    (B) a certification by such dealer that such dealer 
                has given a credit to a succeeding dealer (if any) with 
                respect to such liquid against the succeeding dealer's 
                first purchase of liquid from such dealer subsequent to 
                the tax reduction date.
            (2) Reasonableness of claims certified.--Any certification 
        made under paragraph (1) shall include an additional 
        certification that the claim for credit was reasonable based on 
        the taxpayer's or dealer's past business relationship with the 
        succeeding dealer.
    (c) Exception for Fuel Held in Retail Stocks.--No credit or refund 
shall be allowed under this section with respect to any liquid in 
retail stocks held at the place where intended to be sold at retail.
    (d) Definitions.--For purposes of this section--
            (1) the terms ``dealer'' and ``held by a dealer'' have the 
        respective meanings given to such terms by section 6412 of such 
        Code; except that the term ``dealer'' includes a producer, and
            (2) the term ``tax reduction date'' means the day after the 
        date of the enactment of this Act.
    (e) Certain Rules to Apply.--Rules similar to the rules of 
subsections (b) and (c) of section 6412 of such Code shall apply for 
purposes of this section.

SEC. 103. FLOOR STOCKS TAX.

    (a) Imposition of Tax.--In the case of any liquid on which tax 
would have been imposed under section 4081 of the Internal Revenue Code 
of 1986 during the applicable period but for the amendments made by 
this title, and which is held on the floor stocks tax date by any 
person, there is hereby imposed a floor stocks tax in an amount equal 
to the tax which would be imposed on such liquid had the taxable event 
occurred on the floor stocks tax date.
    (b) Liability for Tax and Method of Payment.--
            (1) Liability for tax.--A person holding a liquid on the 
        floor stocks tax date to which the tax imposed by subsection 
        (a) applies shall be liable for such tax.
            (2) Method of payment.--The tax imposed by subsection (a) 
        shall be paid in such manner as the Secretary shall prescribe.
            (3) Time for payment.--The tax imposed by subsection (a) 
        shall be paid on or before the date which is 6 months after the 
        floor stocks tax date.
    (c) Definitions.--For purposes of this section--
            (1) Held by a person.--A liquid 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).
            (2) Gasoline, diesel fuel, and aviation fuel.--The terms 
        ``gasoline'' and ``diesel fuel'' have the respective meanings 
        given such terms by sections 4083 of such Code.
            (3) Floor stocks tax date.--The term ``floor stocks tax 
        date'' means October 1, 2006.
            (4) Applicable period.--The term ``applicable period'' has 
        the meaning given such term by section 4081(f)(3) of such Code.
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury or the Secretary's delegate.
    (d) Exception for Exempt Uses.--The tax imposed by subsection (a) 
shall not apply to gasoline, diesel fuel, kerosene, or aviation fuel 
held by any person exclusively for any use to the extent a credit or 
refund of the tax imposed by section 4081 of such Code is allowable for 
such use.
    (e) Exception for Fuel Held in Vehicle Tank.--No tax shall be 
imposed by subsection (a) on gasoline, diesel fuel, or kerosene held in 
the tank of a motor vehicle.
    (f) Exception for Certain Amounts of Fuel.--
            (1) In general.--No tax shall be imposed by subsection 
        (a)--
                    (A) on gasoline held on the floor stocks tax date 
                by any person if the aggregate amount of gasoline held 
                by such person on such date does not exceed 4,000 
                gallons, and
                    (B) on diesel fuel or kerosene held on such date by 
                any person if the aggregate amount of diesel fuel or 
                kerosene held by such person on such date does not 
                exceed 2,000 gallons.
        The preceding sentence shall apply only if such person submits 
        to the Secretary (at the time and in the manner required by the 
        Secretary) such information as the Secretary shall require for 
        purposes of this subsection.
            (2) Exempt fuel.--For purposes of paragraph (1), there 
        shall not be taken into account fuel held by any person which 
        is exempt from the tax imposed by subsection (a) by reason of 
        subsection (d) or (e).
            (3) Controlled groups.--For purposes of this subsection--
                    (A) Corporations.--
                            (i) In general.--All persons treated as a 
                        controlled group shall be treated as 1 person.
                            (ii) Controlled group.--The term 
                        ``controlled group'' has the meaning given to 
                        such term by subsection (a) of section 1563 of 
                        such Code; except that for such purposes the 
                        phrase ``more than 50 percent'' shall be 
                        substituted for the phrase ``at least 80 
                        percent'' each place it appears in such 
                        subsection.
                    (B) Nonincorporated persons under common control.--
                Under regulations prescribed by the Secretary, 
                principles similar to the principles of this 
                subparagraph shall apply to a group of persons under 
                common control where 1 or more of such persons is not a 
                corporation.
    (g) Other Law Applicable.--All provisions of law, including 
penalties, applicable with respect to the taxes imposed by section 4081 
of such Code shall, insofar as applicable and not inconsistent with the 
provisions of this section, apply with respect to the floor stock taxes 
imposed by subsection (a) to the same extent as if such taxes were 
imposed by such section 4081.

SEC. 104. BENEFITS OF TAX REDUCTION SHOULD BE PASSED ON TO CONSUMERS.

    (a) Passthrough to Consumers.--
            (1) Sense of congress.--It is the sense of Congress that--
                    (A) consumers immediately receive the benefit of 
                the reduction in taxes under this title, and
                    (B) transportation motor fuels producers and other 
                dealers take such actions as necessary to reduce 
                transportation motor fuels prices to reflect such 
                reduction, including immediate credits to customer 
                accounts representing tax refunds allowed as credits 
                against excise tax deposit payments under the floor 
                stocks refund provisions of this title.
            (2) Study.--
                    (A) In general.--The Comptroller General of the 
                United States and the Attorney General of the United 
                States shall conduct a study of the reduction of taxes 
                under this title to determine whether there has been a 
                passthrough of such reduction.
                    (B) Report.--Not later than June 30, 2006, the 
                Comptroller General of the United States and the 
                Attorney General of the United States shall report to 
                the Committee on Finance of the Senate and the 
                Committee on Ways and Means of the House of 
                Representatives the results of the study conducted 
                under subparagraph (A).

                 TITLE II--SUSPENSION OF ROYALTY RELIEF

SEC. 201. SUSPENSION OF ROYALTY RELIEF.

    (a) New Leases.--
            (1) Requirement.--The Secretary of the Interior (referred 
        to in this title as the ``Secretary'') shall suspend the 
        application of any provision of Federal law under which a 
        person would otherwise be provided relief from a requirement to 
        pay a royalty for the production of oil or natural gas from 
        Federal land (including submerged land) occurring on or after 
        the date of enactment of this Act during a period in which--
                    (A) for the production of oil, the average price of 
                crude oil in the United States during the 4-week period 
                immediately preceding the suspension is greater than 
                $50.00 per barrel; and
                    (B) for the production of natural gas, the average 
                wellhead price of natural gas in the United States 
                during the 4-week period immediately preceding the 
                suspension is greater than $6.25 per 1,000 cubic feet.
            (2) Determination of average prices.--For purposes of 
        paragraph (1), the Secretary shall determine average prices, 
        taking into consideration the most recent data reported by the 
        Energy Information Administration.
    (b) Renegotiation of Existing Leases.--
            (1) Requirement.--The Secretary shall, to the maximum 
        extent practicable, renegotiate each lease authorizing 
        production of oil or natural gas on Federal land (including 
        submerged land) issued by the Secretary before the date of the 
        enactment of this Act as the Secretary determines to be 
        necessary to modify the terms of the lease to ensure that a 
        suspension of a requirement to pay royalties under the lease 
        does not apply to production described in subsection (a)(1).
            (2) Failure to renegotiate and modify.--
                    (A) In general.--Beginning on the date that is 1 
                year after the date of enactment of this Act, a lessee 
                that does not renegotiate a lease described in 
                paragraph (1) in accordance with that paragraph shall 
                not be eligible to enter into a new lease authorizing 
                production of oil or natural gas on Federal land 
                (including submerged land).
                    (B) Transfers.--A lessee shall not be eligible to 
                obtain by sale or other transfer any lease described in 
                paragraph (1) issued before the date of enactment of 
                this Act, unless the lessee--
                            (i) renegotiates the lease; and
                            (ii) enters into an agreement with the 
                        Secretary to modify the terms of the lease in 
                        accordance with paragraph (1).

   TITLE III--SUSPENSION OF CERTAIN ENERGY PRODUCTION TAX INCENTIVES

SEC. 301. SUSPENSION OF DEDUCTION FOR DEVELOPMENT EXPENDITURES.

    Section 616 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection:
    ``(f) Nonapplication of Section.--This section shall not apply with 
respect to any expenditure paid or incurred during the period beginning 
on the date of the enactment of this subsection and ending on the date 
on which aggregate revenues resulting from the provisions of, and 
amendments made by, sections 201 through 304 of the Gas Price Reduction 
Act of 2006 are estimated by the Secretary to equal the aggregate 
appropriations made to the Highway Trust Fund by reason of section 
9503(f)(4).''.

SEC. 302. SUSPENSION OF DEDUCTION FOR CERTAIN MINING EXPLORATION 
              EXPENDITURES.

    Section 617 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection:
    ``(j) Nonapplication of Section.--This section shall not apply with 
respect to any expenditure paid or incurred during the period beginning 
on the date of the enactment of this subsection and ending on the date 
on which aggregate revenues resulting from the provisions of, and 
amendments made by, sections 201 through 304 of the Gas Price Reduction 
Act of 2006 are estimated by the Secretary to equal the aggregate 
appropriations made to the Highway Trust Fund by reason of section 
9503(f)(4).''.

SEC. 303. SUSPENSION OF DEDUCTION FOR INTANGIBLE DRILLING AND 
              DEVELOPMENT COSTS.

    Section 263(c) of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new sentence: ``This section shall not 
apply with respect to any costs paid or incurred during the period 
beginning on the date of the enactment of this sentence and ending on 
the date on which aggregate revenues resulting from the provisions of, 
and amendments made by, sections 201 through 304 of the Gas Price 
Reduction Act of 2006 are estimated by the Secretary to equal the 
aggregate appropriations made to the Highway Trust Fund by reason of 
section 9503(f)(4).''.

SEC. 304. SUSPENSION OF CREDIT FOR PRODUCING FUEL FROM A 
              NONCONVENTIONAL SOURCE.

    Section 45K of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection:
    ``(h) Nonapplication of Section.--This section shall not apply with 
respect to any fuel sold during the period beginning on the date of the 
enactment of this subsection and ending on the date on which aggregate 
revenues resulting from the provisions of, and amendments made by, 
sections 201 through 304 of the Gas Price Reduction Act of 2006 are 
estimated by the Secretary to equal the aggregate appropriations made 
to the Highway Trust Fund by reason of section 9503(f)(4).''.
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