II 111th CONGRESS 1st Session S. 333 IN THE SENATE OF THE UNITED STATES January 27, 2009 Ms. Mikulski (for herself, Ms. Stabenow, Mr. Cardin, and Mr. Webb) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to allow an above-the-line deduction against individual income tax for interest on indebtedness and for State sales and excise taxes with respect to the purchase of certain motor vehicles.

1.

Above-the-line deduction for interest on indebtedness with respect to the purchase of certain motor vehicles

(a)

In general

Paragraph (2) of section 163(h) of the Internal Revenue Code of 1986 is amended— (1)by striking and at the end of subparagraph (E), (2)by striking the period at the end of subparagraph (F) and inserting , and, and (3)by adding at the end the following new subparagraph: (G)any qualified motor vehicle interest (within the meaning of paragraph (5)). . (b)

Qualified motor vehicle interest

Section 163(h) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (5)

Qualified motor vehicle interest

For purposes of this subsection— (A)

In general

The term qualified motor vehicle interest means any interest which is paid or accrued during the taxable year on any indebtedness which— (i)is incurred after November 12, 2008, and before January 1, 2010, in acquiring any qualified motor vehicle of the taxpayer, and (ii)is secured by such qualified motor vehicle. Such term also includes any indebtedness secured by such qualified motor vehicle resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence (or this sentence); but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.(B)

Dollar limitation

The aggregate amount of indebtedness treated as described in subparagraph (A) for any period shall not exceed $49,500 ($24,750 in the case of a separate return by a married individual). (C)

Income limitation

The amount otherwise treated as interest under subparagraph (A) for any taxable year (after the application of subparagraph (B)) shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so treated as— (i)the excess (if any) of— (I)the taxpayer's modified adjusted gross income for such taxable year, over (II)$125,000 ($250,000 in the case of a joint return), bears to (ii)$10,000. For purposes of the preceding sentence, 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.(D)

Qualified motor vehicle

The term qualified motor vehicle means a passenger automobile (within the meaning of section 30B(h)(3)) or a light truck (within the meaning of such section)— (i)which is acquired for use by the taxpayer and not for resale after November 12, 2008, and before January 1, 2010, (ii)the original use of which commences with the taxpayer, and (iii)which has a gross vehicle weight rating of not more than 8,500 pounds. . (c)

Deduction allowed above-the-line

Section 62(a) of the Internal Revenue Code of 1986 is amended by inserting after paragraph (21) the following new paragraph: (22)

Qualified motor vehicle interest

The deduction allowed under section 163 by reason of subsection (h)(2)(G) thereof. . (d)

Reporting of qualified motor vehicle interest

(1)

In general

Subpart B of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

6050X.

Returns relating to qualified motor vehicle interest received in trade or business from individuals

(a)

Qualified motor vehicle interest

Any person— (1)who is engaged in a trade or business, and (2)who, in the course of such trade or business, receives from any individual interest aggregating $600 or more for any calendar year on any indebtedness secured by a qualified motor vehicle (as defined in section 163(h)(5)(D)), shall make the return described in subsection (b) with respect to each individual from whom such interest was received at such time as the Secretary may by regulations prescribe.(b)

Form and manner of returns

A return is described in this subsection if such return— (1)is in such form as the Secretary may prescribe, (2)contains— (A)the name and address of the individual from whom the interest described in subsection (a)(2) was received, (B)the amount of such interest received for the calendar year, and (C)such other information as the Secretary may prescribe. (c)

Application to governmental units

For purposes of subsection (a)— (1)

Treated as persons

The term person includes any governmental unit (and any agency or instrumentality thereof). (2)

Special rules

In the case of a governmental unit or any agency or instrumentality thereof— (A)subsection (a) shall be applied without regard to the trade or business requirement contained therein, and (B)any return required under subsection (a) shall be made by the officer or employee appropriately designated for the purpose of making such return. (d)

Statements To Be furnished to individuals with respect to whom information is required

Every person required to make a return under subsection (a) shall furnish to each individual whose name is required to be set forth in such return a written statement showing— (1)the name, address, and phone number of the information contact of the person required to make such return, and (2)the aggregate amount of interest described in subsection (a)(2) received by the person required to make such return from the individual to whom the statement is required to be furnished. The written statement required under the preceding sentence shall be furnished on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made.(e)

Returns which would be required To be made by 2 or more persons

Except to the extent provided in regulations prescribed by the Secretary, in the case of interest received by any person on behalf of another person, only the person first receiving such interest shall be required to make the return under subsection (a).

. (2)

Amendments relating to penalties

(A)Section 6721(e)(2)(A) of such Code is amended by striking or 6050L and inserting 6050L, or 6050X. (B)Section 6722(c)(1)(A) of such Code is amended by striking or 6050L(c) and inserting 6050L(c), or 6050X(d). (C)Subparagraph (B) of section 6724(d)(1) of such Code is amended by redesignating clauses (xvi) through (xxii) as clauses (xvii) through (xxiii), respectively, and by inserting after clause (xii) the following new clause: (xvi)section 6050X (relating to returns relating to qualified motor vehicle interest received in trade or business from individuals), . (D)Paragraph (2) of section 6724(d) of such Code is amended by striking the period at the end of subparagraph (DD) and inserting , or and by inserting after subparagraph (DD) the following new subparagraph: (EE)section 6050X(d) (relating to returns relating to qualified motor vehicle interest received in trade or business from individuals). . (3)

Clerical amendment

The table of sections for subpart B of part III of subchapter A of chapter 61 of such Code is amended by inserting after the item relating to section 6050W the following new item: Sec. 6050X. Returns relating to qualified motor vehicle interest received in trade or business from individuals. . (e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

2.

Above-the-line deduction for State sales tax and excise tax on the purchase of certain motor vehicles

(a)

In general

Subsection (a) of section 164 of the Internal Revenue Code of 1986 is amended by inserting after paragraph (5) the following new paragraph: (6)Qualified motor vehicle taxes. . (b)

Qualified motor vehicle taxes

Subsection (b) of section 164 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (6)

Qualified motor vehicle taxes

(A)

In general

For purposes of this section, the term qualified motor vehicle taxes means any State or local sales or excise tax imposed on the purchase of a qualified motor vehicle (as defined in section 163(h)(5)(D)). (B)

Income limitation

The amount otherwise taken into account under subparagraph (A) for any taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so treated as— (i)the excess (if any) of— (I)the taxpayer's modified adjusted gross income for such taxable year, over (II)$125,000 ($250,000 in the case of a joint return), bears to (ii)$10,000. For purposes of the preceding sentence, 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.(C)

Qualified motor vehicle taxes not included in cost of acquired property

The last sentence of subsection (a) shall not apply to any qualified motor vehicle taxes. (D)

Coordination with general sales tax

This paragraph shall not apply in the case of a taxpayer who makes an election under paragraph (5) for the taxable year. . (c)

Conforming amendments

Paragraph (5) of section 163(h) of the Internal Revenue Code of 1986, as added by section 1, is amended— (1)by adding at the end the following new subparagraph: (E)

Exclusion

If the indebtedness described in subparagraph (A) includes the amounts of any State or local sales or excise taxes paid or accrued by the taxpayer in connection with the acquisition of a qualified motor vehicle, the aggregate amount of such indebtedness taken into account under such subparagraph shall be reduced, but not below zero, by the amount of any such taxes for which a deduction is allowed under section 164(a) by reason of paragraph (6) thereof. , and (2)by inserting , after the application of subparagraph (E), after for any period in subparagraph (B). (d)

Deduction allowed above-the-line

Section 62(a) of the Internal Revenue Code of 1986, as amended by section 1, is amended by inserting after paragraph (22) the following new paragraph: (23)

Qualified motor vehicle taxes

The deduction allowed under section 164 by reason of subsection (a)(6) thereof. . (e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.