Extension and modification of taxes funding airport and airway trust fund

(a)

Rate of tax on aviation-grade kerosene and aviation gasoline

(1)

Aviation-grade kerosene

Subparagraph (A) of section 4081(a)(2) of the Internal Revenue Code of 1986 (relating to rates of tax) is amended by striking and at the end of clause (ii), by striking the period at the end of clause (iii) and inserting , and, and by adding at the end the following new clause:

(iv)in the case of aviation-grade kerosene, 35.9 cents per gallon.

(2)

Aviation gasoline

Clause (ii) of section 4081(a)(2)(A) of such Code is amended by striking 19.3 cents and inserting 24.1 cents. (3)

Fuel removed directly into fuel tank of airplane used in noncommercial aviation

Subparagraph (C) of section 4081(a)(2) of such Code is amended to read as follows:

(C)

Taxes imposed on fuel used in commercial aviation

In the case of aviation-grade kerosene which is removed from any refinery or terminal directly into the fuel tank of an aircraft for use in commercial aviation by a person registered for such use under section 4101, the rate of tax under subparagraph (A)(iv) shall be 4.3 cents per gallon.

(4)

Conforming amendments

(A)Clause (iii) of section 4081(a)(2)(A) of such Code is amended by inserting other than aviation-grade kerosene after kerosene. (B)The following provisions of such Code are each amended by striking kerosene and inserting aviation-grade kerosene: (i)Section 4081(a)(3)(A)(ii). (ii)Section 4081(a)(3)(A)(iv). (iii)Section 4081(a)(3)(D). (C)Section 4081(a)(3)(D) of such Code is amended— (i)by striking paragraph (2)(C)(i) in clause (i) and inserting paragraph (2)(C), and (ii)by striking paragraph (2)(C)(ii) in clause (ii) and inserting paragraph (2)(A)(iv). (D)Section 4081(a)(4) of such Code is amended in the heading by striking

kerosene

and inserting

aviation-grade kerosene

. (E)Section 4081(d)(2) of such Code is amended by inserting , (a)(2)(A)(iv), after subsections (a)(2)(A)(ii). (b)

Extension

(1)

Fuels taxes

Paragraph (2) of section 4081(d) of such Code is amended by striking gallon— and all that follows and inserting gallon after September 30, 2011. (2)

Taxes on transportation of persons and property

(A)

Persons

Clause (ii) of section 4261(j)(1)(A) of such Code is amended by striking September 30, 2007 and inserting September 30, 2011. (B)

Property

Clause (ii) of section 4271(d)(1)(A) of such Code is amended by striking September 30, 2007 and inserting September 30, 2011. (c)

Exemption for aviation-grade kerosene removed into an aircraft

Subsection (e) of section 4082 of such Code is amended— (1)by striking kerosene and inserting aviation-grade kerosene, (2)by striking section 4081(a)(2)(A)(iii) and inserting section 4081(a)(2)(A)(iv) , and (3)by striking

Kerosene

in the heading and inserting

Aviation-Grade Kerosene

. (d)

Retail tax on aviation fuel

(1)

Exemption for previously taxed fuel

Paragraph (2) of section 4041(c) of such Code is amended by inserting at the rate specified in subsection (a)(2)(A)(iv) thereof after section 4081. (2)

Rate of tax

Paragraph (3) of section 4041(c) of such Code is amended to read as follows:

(3)

Rate of tax

The rate of tax imposed by this subsection shall be the rate of tax in effect under section 4081(a)(2)(A)(iv) (4.3 cents per gallon with respect to any sale or use for commercial aviation).

(e)

Refunds relating to aviation-grade kerosene

(1)

Kerosene used in commercial aviation

Clause (ii) of section 6427(l)(4)(A) of such Code is amended by striking specified in section 4041(c) or 4081(a)(2)(A)(iii), as the case may be, and inserting so imposed. (2)

Kerosene used in aviation

Paragraph (4) of section 6427(l) of such Code is amended— (A)by striking subparagraph (B) and redesignating subparagraph (C) as subparagraph (B), and (B)by amending subparagraph (B), as redesignated by subparagraph (A), to read as follows:

(B)

Payments to ultimate, registered vendor

With respect to any kerosene used in aviation (other than kerosene to which paragraph (6) applies), if the ultimate purchaser of such kerosene waives (at such time and in such form and manner as the Secretary shall prescribe) the right to payment under paragraph (1) and assigns such right to the ultimate vendor, then the Secretary shall pay (without interest) the amount which would be paid under paragraph (1) to such ultimate vendor, but only if such ultimate vendor— (i)is registered under section 4101, and (ii)meets the requirements of subparagraph (A), (B), or (D) of section 6416(a)(1).

(3)

Aviation-grade kerosene not used in aviation

Subsection (l) of section 6427 of such Code is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph:

(5)

Refunds for aviation-grade kerosene not used in aviation

If tax has been imposed under section 4081 at the rate specified in section 4081(a)(2)(A)(iv) and the fuel is used other than in an aircraft, the Secretary shall pay (without interest) to the ultimate purchaser of such fuel an amount equal to the amount of tax imposed on such fuel reduced by the amount of tax that would be imposed under section 4041 if no tax under section 4081 had been imposed.

(4)

Conforming amendments

(A)Section 6427(i)(4) of such Code is amended— (i)by striking (4)(C) the first two places it occurs and inserting (4)(B), and (ii)by striking , (l)(4)(C)(ii), and and inserting and. (B)Section 4082(d)(2)(B) of such Code is amended by striking 6427(l)(5)(B) and inserting 6427(l)(6)(B). (f)

Airport and Airway Trust Fund

(1)

Extension of trust fund authorities

(A)

Expenditures from trust fund

Paragraph (1) of section 9502(d) of such Code is amended— (i)in the matter preceding subparagraph (A) by striking October 1, 2007 and inserting October 1, 2011, and (ii)in subparagraph (A) by inserting or the FAA Reauthorization Act of 2007 before the semicolon at the end. (B)

Limitation on transfers to Trust Fund

Paragraph (2) of section 9502(f) of such Code is amended by striking October 1, 2007 and inserting October 1, 2011. (2)

Transfers to trust fund

Subparagraph (C) of section 9502(b)(1) of such Code is amended to read as follows:

(C)section 4081 with respect to aviation gasoline and aviation-grade kerosene, and

(3)

Transfers on account of certain refunds

(A)

In general

Subsection (d) of section 9502 of such Code is amended— (i)in paragraph (2) by striking (other than subsection (l)(4) thereof), and (ii)in paragraph (3) by striking (other than payments made by reason of paragraph (4) of section 6427(l)). (B)

Conforming amendments

(i)Section 9503(b)(4) of such Code is amended by striking or at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting a comma, and by inserting after subparagraph (D) the following:

(E)section 4081 to the extent attributable to the rate specified in clause (ii) or (iv) of section 4081(a)(2)(A), or (F)section 4041(c).

(ii)Section 9503(c) of such Code is amended by striking the last paragraph (relating to transfers from the Trust Fund for certain aviation fuel taxes). (iii)Section 9502(a) of such Code is amended by striking , section 9503(c)(7),. (4)

Transfers on account of aviation-grade kerosene not used in aviation

Section 9502(d) of such Code is amended by adding at the end the following new paragraph:

(7)

Transfers from Airport and Airway Trust Fund on account of aviation-grade kerosene not used in aviation

The Secretary of the Treasury shall pay from time to time from the Airport and Airway Trust Fund into the Highway Trust Fund amounts as determined by the Secretary of the Treasury equivalent to amounts transferred to the Airport and Airway Trust Fund with respect to aviation-grade kerosene not used in aviation.

(5)

Expenditures for air traffic control modernization

Section 9502(d) of such Code, as amended by this Act, is amended by adding at the end the following new paragraph:

(8)

Expenditures for air traffic control modernization

The following amounts may be used only for making expenditures to carry out air traffic control modernization: (A)So much of the amounts appropriated under subsection (b)(1)(C) as the Secretary estimates are attributable to— (i)14.1 cents per gallon of the tax imposed at the rate specified in section 4081(a)(2)(A)(iv) in the case of aviation-grade kerosene used other than in commercial aviation (as defined in section 4083(b)), and (ii)4.8 cents per gallon of the tax imposed at the rate specified in section 4081(a)(2)(A)(ii) in the case of aviation gasoline used other than in commercial aviation (as so defined). (B)Any amounts credited to the Airport and Airway Trust Fund under section 9602(b) with respect to amounts described in this paragraph.

(g)

Effective date

(1)

Modifications

Except as provided in paragraph (2), the amendments made by this section shall apply to fuels removed, entered, or sold after December 31, 2007. (2)

Extensions

The amendments made by subsections (b) and (f)(1) shall take effect on the date of the enactment of this Act. (h)

Floor stocks tax

(1)

Imposition of tax

In the case of aviation fuel which is held on January 1, 2008, by any person, there is hereby imposed a floor stocks tax on aviation fuel equal to— (A)the tax which would have been imposed before such date on such fuel had the amendments made by this section been in effect at all times before such date, reduced by (B)the sum of— (i)the tax imposed before such date on such fuel under section 4081 of the Internal Revenue Code of 1986, as in effect on such date, and (ii)in the case of kerosene held exclusively for such person’s own use, the amount which such person would (but for this clause) reasonably expect (as of such date) to be paid as a refund under section 6427(l) of such Code with respect to such kerosene. (2)

Liability for tax and method of payment

(A)

Liability for tax

A person holding aviation fuel on January 1, 2008, shall be liable for such tax. (B)

Time and method of payment

The tax imposed by paragraph (1) shall be paid on April 30, 2008, and in such manner as the Secretary of the Treasury shall prescribe. (3)

Transfer of floor stock tax revenues to trust funds

For purposes of determining the amount transferred to the Airport and Airway Trust Fund, the tax imposed by this subsection shall be treated as imposed by the provision of section 4081 of the Internal Revenue Code of 1986 which applies with respect to the aviation fuel involved. (4)

Definitions

For purposes of this subsection— (A)

Aviation fuel

The term aviation fuel means aviation-grade kerosene and aviation gasoline, as such terms are used within the meaning of section 4081 of the Internal Revenue Code of 1986. (B)

Held by a person

Aviation fuel shall be considered as held by a person if title thereto has passed to such person (whether or not delivery to the person has been made). (C)

Secretary

The term Secretary means the Secretary of the Treasury or the Secretary’s delegate. (5)

Exception for exempt uses

The tax imposed by paragraph (1) shall not apply to any aviation fuel held by any person exclusively for any use to the extent a credit or refund of the tax is allowable under the Internal Revenue Code of 1986 for such use. (6)

Exception for certain amounts of fuel

(A)

In general

No tax shall be imposed by paragraph (1) on any aviation fuel held on January 1, 2008, by any person if the aggregate amount of such aviation fuel held by such person on such date does not exceed 2,000 gallons. The preceding sentence shall apply only if such person submits to the Secretary (at the time and in the manner required by the Secretary) such information as the Secretary shall require for purposes of this subparagraph. (B)

Exempt fuel

For purposes of subparagraph (A), there shall not be taken into account any aviation fuel held by any person which is exempt from the tax imposed by paragraph (1) by reason of paragraph (6). (C)

Controlled groups

For purposes of this subsection— (i)

Corporations

(I)

In general

All persons treated as a controlled group shall be treated as 1 person. (II)

Controlled group

The term controlled group has the meaning given to such term by subsection (a) of section 1563 of such Code; except that for such purposes the phrase more than 50 percent shall be substituted for the phrase at least 80 percent each place it appears in such subsection. (ii)

Nonincorporated persons under common control

Under regulations prescribed by the Secretary, principles similar to the principles of subparagraph (A) shall apply to a group of persons under common control if 1 or more of such persons is not a corporation. (7)

Other laws applicable

All provisions of law, including penalties, applicable with respect to the taxes imposed by section 4081 of such Code on the aviation fuel involved shall, insofar as applicable and not inconsistent with the provisions of this subsection, apply with respect to the floor stock taxes imposed by paragraph (1) to the same extent as if such taxes were imposed by such section.