[JPRT 112-1-11]
[From the U.S. Government Publishing Office]


                                                               JCS-1-11

                                     

                        [JOINT COMMITTEE PRINT]

 
                              PRESENT LAW
                       AND BACKGROUND INFORMATION
                        ON FEDERAL EXCISE TAXES

                               __________

                         Prepared by the Staff

                                 of the

                      JOINT COMMITTEE ON TAXATION


[GRAPHIC] [TIFF OMITTED] TONGRESS.#13



                              JANUARY 2011


                            C O N T E N T S

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                                                                   Page
Introduction.....................................................     1

 I. Excise Taxes Dedicated to Trust Funds.............................2

        A. Excise Taxes Dedicated to Transportation Trust Funds..     2

            1. Highway Trust Fund Excise Taxes...................     2
            2. Airport and Airway Trust Fund Excise Taxes........    11
            3. Inland Waterways Trust Fund Excise Tax............    16
            4. Harbor Maintenance Trust Fund Excise Tax..........    17

        B. Excise Taxes Dedicated to Environmental Trust Funds or 
            Designated Funds.....................................    18

            1. Leaking Underground Storage Tank Trust Fund Excise 
                Taxes............................................    18
            2. Oil Spill Liability Trust Fund Excise Tax.........    19
            3. Sport Fish Restoration and Boating Trust Fund 
                Excise Taxes.....................................     2
            4. Land and Water Conservation Fund (Federal Aid to 
                Wildlife Restoration Program) and Dedicated 
                Excise Taxes.....................................    22

        C. Excise Taxes Dedicated to Health-Related Trust Funds..    24

            1. Black Lung Disability Trust Fund Excise Taxes.....    24
            2. Vaccine Injury Compensation Trust Fund Excise 
                Taxes............................................    26
            3. Patient-Centered Outcomes Research Trust Fund 
                Excise Taxes.....................................    27
            4. Annual Fee on Branded Prescription Pharmaceutical 
                Manufacturers and Importers......................    29

II. General Fund Excise Taxes........................................31

        A. Principal General Fund Excise Taxes...................    31

            1. Distilled Spirits, Wine and Beer Excise Taxes.....    31
            2. Tobacco Excise Taxes..............................    33
            3. Communications Excise Tax.........................    35
            4. Gas Guzzler Excise Tax............................    36
            5. Water Transportation Passenger Excise Tax.........    37
            6. Ozone-Depleting Chemicals Excise Tax..............    37

        B. Foreign Procurement Excise Tax........................    38

        C. General Fund Excise Taxes Related to Health Care......    38

            1. Excise Tax on Indoor Tanning Services.............    38
            2. Excise Tax on Certain Medical Devices.............    39
            3. Annual Fee on Health Insurance Providers..........    39
            4. Excise Tax on Individuals Without Essential 
                Coverage.........................................    41
            5. Excise Tax on Large Employers Not Offering Health 
                Care Coverage....................................    43
            6. Failure To Satisfy Continuation Coverage 
                Requirements of Group Health Plans...............    44
            7. Failure to Meet Certain Group Health Plan 
                Requirements.....................................    45
            8. Failure of Employer to Make Comparable Archer MSA 
                Contributions....................................    46
            9. Failure By Employer to Make Comparable Health 
                Savings Account Contributions....................    47
            10. Excise Tax on Issuers of Qualified Long Term Care 
                Contracts........................................    48
            11. Nonconforming Group Health Plans.................    49
            12. Excise Tax on Insurers For High-Cost Employer-
                Sponsored Health Coverage........................    50

        D. Miscellaneous Regulatory Excise Taxes.................    51

III.Information on Selected Trust Fund Balances and Related Federal 
    Excise Tax Receipts..............................................60

        A. Background............................................    60

        B. Estimated Revenues and Outlays for Selected Federal 
            Trust Funds (FY 2011-2020)...........................    62

Appendices.......................................................    69

        A. Schedule of Present Federal Excise Tax Rates..........    69

        B. Expired Hazardous Substance Superfund Excise Taxes....    85


                              INTRODUCTION

    The Internal Revenue Code (the ``Code'') imposes numerous 
excise taxes on goods and services.\1\ In addition to excise 
taxes the primary purpose of which is revenue production, 
excise taxes also are imposed to promote adherence to other 
policies (e.g., penalty excise taxes). Many trust funds 
established by the Federal Government are financed with 
dedicated excise tax receipts. This document \2\ provides a 
description of present-law Federal excise taxes, and when 
applicable, background information on trust funds financed with 
excise tax revenues.
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    \1\ Unless otherwise stated, all section references are to the 
Internal Revenue Code of 1986, as amended.
    \2\ This document may be cited as follows: Joint Committee on 
Taxation, Present Law and Background Information on Federal Excise 
Taxes (JCS-1-11), January 2011. This document is available at 
www.jct.gov.
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    Revenues from certain Federal excise taxes are dedicated to 
trust funds (e.g., the Highway Trust Fund) for designated 
expenditure programs, and revenues from other excise taxes 
(e.g., alcoholic beverages) go to the General Fund for general 
purpose expenditures. The largest excise taxes in terms of 
revenue (for fiscal year 2009) are those for gasoline motor 
fuels ($25.1 billion), domestic cigarettes ($11.0 billion), 
diesel motor fuel ($8.5 billion), and domestic air ticket ($7.3 
billion).\3\
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    \3\ Internal Revenue Service, Statistics of Income Bulletin, 
Historical Table 20, Federal Excise Taxes Reported to or Collected By 
the Internal Revenue Service, Alcohol and Tobacco Tax and Trade Bureau, 
and Customs Service, By Type of Excise Tax, Fiscal Years 1997-2009,  
http://www.irs.gov/taxstats/bustaxstats/article/0,,id=97148,00.html 
(2010).
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    Part I of the document discusses excise taxes dedicated to 
trust funds. Part II discusses General Fund excise taxes. Part 
III provides background information, projected excise tax 
receipts, and information on the projected fiscal status of 
various trust funds. Appendix A includes a summary rate 
schedule for the principal excise taxes that are presently 
imposed, and Appendix B provides background information on the 
expired Hazardous Substance Superfund taxes and related trust 
fund.

                I. EXCISE TAXES DEDICATED TO TRUST FUNDS

        A. Excise Taxes Dedicated to Transportation Trust Funds

1. Highway Trust Fund excise taxes
            In general
    Excise taxes are imposed on fuels, and heavy vehicles and 
tires used in highway transportation to fund the Highway Trust 
Fund. The Highway Trust Fund was established in 1956, with what 
were General Fund excise taxes being expanded and revenues 
transferred to the Highway Trust Fund. Since 1983, the Highway 
Trust Fund has financed certain mass transit programs as well 
as traditional highway construction and maintenance programs. 
Historically, the excise taxes have included statutory 
expiration dates that coordinate with the Highway Trust Fund 
expenditure authorization periods. Currently, the excise taxes 
(except for 4.3 cents per gallon of the motor fuels taxes which 
is permanent) are scheduled to expire after September 30, 
2011.\4\
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    \4\ The 4.3-cents-per-gallon component of the taxes was enacted in 
1993 as a General Fund deficit reduction measure. Provisions for 
transfer of these revenues to the Highway Trust Fund were enacted in 
1997. Despite the statutory expiration dates, the full amount of the 
excise taxes is assumed to be permanent for Federal budget scorekeeping 
purposes. See, Part III.A., for a description of these Federal budget 
rules.
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    A majority of the revenue received from the highway 
transportation excise taxes is derived from taxes on highway 
motor fuels. Although the Code provides several refundable fuel 
excise tax credits, such as the alcohol, biodiesel, and 
alternative fuel mixture credits, the Highway Trust Fund is 
credited with the full amount of tax imposed, without reduction 
for the fuel excise tax credits.\5\ The present highway 
transportation excise taxes consist of:
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    \5\ Sec. 9503(b)(1).

------------------------------------------------------------------------
                                                  Tax rates \6\ and
                                              nonrefundable income tax/
       Tax/credit (and Code section)            refundable excise tax
                                                       credits
------------------------------------------------------------------------
Major highway motor fuels excise taxes and credits
 
    Taxable fuels:
        a. Gasoline and gasoline            18.3 cents per gallon
         blendstocks (sec. 4081).\7\......
        b. Diesel fuel and kerosene (secs.  24.3 cents per gallon
         4081 and 4041)...................
        c. Diesel-water fuel emulsion       19.7 cents per gallon
         (sec. 4081).\8\..................
        d. Alcohol fuels (sec. 4041)......  18.3 cents per gallon
 
    Alcohol credits:
        a. Ethanol and ethanol fuel         45 cents per gallon of
         mixtures (secs. 40, 6426 and        ethanol (E-100 eligible for
         6427(e)).                           nonrefundable section 40
                                             income tax credit only)
        b. Alcohol or alcohol fuel          60 cents per gallon of
         mixtures (other than ethanol)       alcohol (100 percent
         (secs. 40, 6426 and 6427(e)).       alcohol fuel not in a
                                             mixture eligible for
                                             nonrefundable income tax
                                             credit only)
        c. Small ethanol producer credit    10 cents per gallon
         (sec. 40).                          (nonrefundable income tax
                                             credit only)
        d. Cellulosic biofuel producer      41 cents per gallon; 46
         credit (for alcohol fuel) (sec.     cents per gallon for
         40).                                ethanol (nonrefundable
                                             income tax credit only)
------------------------------------------------------------------------
\6\ With the exception of liquefied petroleum gas (propane), compressed
  natural gas (``CNG''), and liquefied natural gas (``LNG''), highway
  motor fuels are subject to an additional 0.1 cent-per-gallon tax to
  fund the Leaking Underground Storage Tank (``LUST'') Trust Fund
  (through September 30, 2011). See, Part I.B.1., for a description of
  this excise tax and Trust Fund.
\7\ Gasoline blendstocks are defined in Treasury Department regulations
  as: alkylate, butane, catalytically cracked gasoline, coker gasoline,
  ethyl tertiary butyl ether (``ETBE''), hexane, hydrocrackate,
  isomerate, methyl tertiary butyl ether (``MTBE''), mixed xylene
  (including any separated isomer of xylene), natural gasoline, pentane,
  pentane mixture, polymer gasoline, raffinate, reformate, straight-run
  gasoline, straight-run naphtha, tertiary amyl methyl ether (``TAME''),
  tertiary butyl alcohol (gasoline grade), thermally cracked gasoline,
  and toluene. See, Treas. Reg. sec. 48.4081-1(c)(3).
\8\ Diesel-water fuel emulsion consists of a mixture of diesel fuel and
  at least 14 percent water combined with an emulsion additive that is
  registered by a U.S. manufacturer with the EPA pursuant to section 211
  of the Clean Air Act (as in effect on March 31, 2003) (sec.
  4081(a)(2)(D)).


------------------------------------------------------------------------
                                                  Tax rates \6\ and
                                              nonrefundable income tax/
       Tax/credit (and Code section)            refundable excise tax
                                                       credits
------------------------------------------------------------------------
Special motor fuel, alternative fuels, and biodiesel taxes and credits
 
    Tax on taxable fuels:
        a. Liquid fuel produced from coal   24.3 cents per gallon
         (sec. 4041)......................
        b. Partially exempt ethanol         11.3 cents per gallon
         produced from natural gas (sec.
         4041(m)).\9\.....................
        c. Partially exempt methanol fuel   9.15 cents per gallon
         produced from natural gas (sec.
         4041(m)..........................
        d. B-100 (100% biodiesel) and       24.3 cents per gallon
         renewable diesel (sec. 4081).\10\
        e. Biodiesel and renewable diesel   24.3 cents per gallon
         fuel mixtures (sec. 4081)........
        f. Compressed natural gas           18.3 cents per gasoline
         (``CNG'') (sec. 4041)............   gallon equivalent
                                            (GGE = 126.67 c.f.)
        g. Liquefied petroleum gas          18.3 cents per gallon
         (``LPG'') (sec. 4041)............
        h. Liquefied natural gas (``LNG'')  24.3 cents per gallon
         (sec. 4041)......................
        i. Liquid fuel derived from         24.3 cents per gallon
         biomass (sec. 4041)..............
        j. ``P Series'' fuels (sec. 4041).  18.3 cents per gallon
        k. Liquefied hydrogen fuel (sec.    18.3 cents per gallon
         4041)............................
        l. Qualified ethanol and methanol   18.3 cents per gallon
         fuels produced from coal (sec.
         4041)............................
------------------------------------------------------------------------
\9\ Partially exempt ethanol and methanol fuel means a liquid at least
  85 percent of which consists of ethanol, methanol, or other alcohol
  produced from natural gas. After September 30, 2011, the tax rates on
  these fuels are scheduled to decline to 4.3 cents per gallon (ethanol)
  and 2.15 cents per gallon (methanol and other non-ethanol alcohol).
\10\ Biodiesel contains monoalkyl esters of long chain fatty acids
  derived from plant or animal matter which meet EPA requirements and
  ASTM D6751. Renewable diesel is defined as a liquid fuel meeting EPA
  requirements and ASTM D975 and D396 (or other equivalent standards
  approved by the Treasury Department). Renewable diesel fuel does not
  include any fuel derived by co-processing biomass with a feedstock
  that is not biomass.


------------------------------------------------------------------------
                                                  Tax rates \6\ and
                                              nonrefundable income tax/
       Tax/credit (and Code section)            refundable excise tax
                                                       credits
------------------------------------------------------------------------
    Tax credits:
        a. Biodiesel and biodiesel fuel     $1.00 per gallon of
         mixtures (secs. 40A, 6426, and      biodiesel (B-100 eligible
         6427(e)).........................   for nonrefundable income
                                             tax credit only)
        b. Renewable diesel and renewable   $1.00 per gallon of
         fuel mixtures renewable diesel      renewable diesel (100%
         fuel eligible for (secs. 40A,       nonrefundable income tax
         6426 and 6427(e))................   credit only)
        c. Small agri-biodiesel producer    10 cents per gallon
         credit (sec. 40A)................   (nonrefundable income tax
                                             credit only)
        d. Cellulosic biofuel producer      $1.01 per gallon
         credit (sec. 40).................   (nonrefundable income tax
                                             credit only)
        e. Alternative fuels and            50 cents per gallon
         alternative fuel mixtures (LPG,     (refundable excise tax
         ``P Series'' fuels, CNG, LNG,       credit)
         liquefied hydrogen, liquid fuel
         derived from coal,\11\ and liquid
         fuel derived from biomass) (sec.
         6426 and 6427(e))................
------------------------------------------------------------------------
\11\ To be an alternative fuel, liquid fuel from coal (including peat)
  must be derived through the ``Fischer-Tropsch'' process, and certain
  carbon capture requirements applicable to the gasification facility
  also must be met. Sec. 6426(d)(2)(E) and 6426(d)(4).


------------------------------------------------------------------------
                                                  Tax rates \6\ and
                                              nonrefundable income tax/
       Tax/credit (and Code section)            refundable excise tax
                                                       credits
------------------------------------------------------------------------
Non-fuels taxes imposed on heavy highway vehicles:
 
        a. Retail sales tax on highway      12 percent of retail price
         tractors (over 19,500 lbs), heavy
         trucks (over 33,000 lbs.), and
         trailers (over 26,000 lbs.) (sec.
         4051).\12\.......................
        b. Manufacturers' excise tax on     9.45 cents for each 10 lbs.
         tires for heavy vehicles (sec.      in excess of 3,500 lbs. of
         4071)............................   maximum rated load capacity
                                             (4.725 cents for biasply
                                             tires and super single
                                             tires) \13\
        c. Annual heavy vehicle use tax     Under 55,000 lbs.--No tax
         (sec. 4481).\14\.................  55,000-75,000 lbs.--$100
                                             plus $22 per 1,000 lbs.
                                             over 55,000 lbs.
                                            Over 75,000 lbs.--$550
------------------------------------------------------------------------

            Administration of taxes
    Fuels excise taxes.--The highway motor fuels excise taxes 
on fuels other than ``alternative fuels'' are imposed on 
removal of the fuel from a refinery or on importation, unless 
the fuel is transferred in bulk by pipeline or barge to a 
registered terminal facility. In such a case, tax is imposed 
upon removal from the terminal facility. The bulk removal 
exception to refinery or importation taxation applies only if 
the person removing or entering the fuel and the operator of 
the pipeline or barge also are registered with the Treasury 
Department.\15\
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    \12\ Weight is determined on ``gross vehicle weight,'' which is the 
fully-loaded, certificated weight for the vehicle.
    \13\ Biasply tire means a pneumatic tire on which the ply cords 
that extend to the beads are laid at alternate angles substantially 
less than 90 degrees to the centerline of the tread (sec. 4072(d)). 
Super single tires are single tires greater than 13 inches in cross 
section width designed to replace two tires in a dual fitment (other 
than for steering) (sec. 4072(c)).
    \14\ Weight is defined as ``taxable gross weight,'' which is the 
customary fully loaded weight.
    \15\ Deep-draft vessels are not required to be registered for the 
bulk transfer exception to apply.
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    Present law imposes tax on all gasoline (including gasoline 
blendstocks), diesel fuel, and kerosene that is removed, except 
diesel fuel and kerosene that is destined for a nontaxable use 
(including a partially taxable use in an intercity bus) and 
that is indelibly dyed in accordance with Treasury Department 
regulations.\16\ The refiner, importer, or person holding an 
inventory position in a terminal (the ``position holder'') 
generally is liable for payment of the tax.
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    \16\ The dyeing requirement does not apply in rural areas of 
Alaska. A further exception applies to kerosene received by pipeline or 
vessel for use in the manufacture or production of non-fuel feedstocks.
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    The taxes on alternative fuels are imposed at the retail or 
user level.
    Other taxes.--The sales tax on heavy highway vehicles is 
imposed at the retail level. To prevent sales of ``stripped 
down'' vehicles which subsequently are completed, special rules 
apply to sales of parts and accessories (in excess of $1,000) 
installed on a taxable vehicle within six months after the date 
the vehicle is first placed in service. This tax is primarily 
imposed on the truck owner, with installers secondarily liable 
for its payment.\17\ Similarly, special rules apply for 
determining whether repairs or other modifications to heavy 
highway vehicles constitute a taxable re-manufacture of a new 
vehicle.\18\
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    \17\ Sec. 4051(b).
    \18\ Sec. 4052(f).
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    The excise tax on heavy vehicle tires is a manufacturers' 
excise tax.
    The annual heavy vehicle use tax is imposed with respect to 
a taxable period of July 1-June 30. Tax liability is incurred 
as of the first month the vehicle is used during the taxable 
period (subject to proration rules). Tax also is prorated for 
vehicles sold, destroyed, or stolen (and not subsequently used) 
during the taxable period.
            Exemptions and reduced rates
    Fuels excise taxes.--Present law includes numerous 
exemptions (including partial exemptions) for specified uses 
(or users) of taxable fuels. Because most highway motor fuels 
excise taxes are imposed before the end use (or user) of the 
fuel is known, most of these exemptions are administered 
through refunds to end users of tax paid by a party that 
processed the fuel earlier in the distribution chain. The 
present exempt uses (and users) include:
          1. Use by State and local government;
          2. Use by nonprofit educational organizations;
          3. Use in private local mass transit buses having a 
        seating capacity of at least 20 adults (not including 
        the driver) when the buses operate under contract with 
        (or are subsidized by) a State or local governmental 
        unit to furnish transportation;
          4. Use in private intercity buses serving the general 
        public along scheduled routes; \19\ and,
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    \19\ This use is exempt from the full 18.3-cents-per-gallon 
gasoline excise tax (sec. 6421(b)) and is subject to 7.3 cents per 
gallon of the 24.3-cents-per-gallon diesel fuel and kerosene excise 
taxes (sec. 6427(b)).
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          5. Use in an off-highway business use (gasoline), or 
        an off-highway use (diesel fuel and kerosene). Examples 
        of such uses include use for non-fuel feedstock 
        purposes and the use of diesel fuel or kerosene as 
        heating fuel.
    Other taxes.--The non-fuels excise taxes imposed on heavy 
highway vehicles include numerous partial and full exemptions 
and special rules for coordinating the taxes on vehicles that 
otherwise could be subject (in part) to more than one of these 
taxes.
    1. Tractors for use with a trailer or semi-trailer are not 
subject to the retail sales tax if the combination has a gross 
weight of 33,000 pounds or less.
    2. The cost of idling reduction devices is not subject to 
the retail sales tax on tractors and trucks.
    3. A credit is allowed against the retail sales tax for tax 
previously imposed on tires sold in connection with a taxable 
tractor, trailer, or truck.
    4. Various vehicles and components are exempt from the 
retail sales tax: camper coaches for self-propelled mobile 
homes, certain agricultural vehicles, house trailers, 
ambulances and hearses, concrete mixers, rail/highway 
combination trailers and vans, trash containers that are not 
designed to be permanently mounted on a taxable vehicle, 
insulation having an ``R value'' of not less than R35 per inch, 
and certain mobile machinery.
    5. State and local government vehicles, certain local 
transit buses, certain blood collector vehicles, and certain 
mobile machinery are exempt from the annual heavy vehicle use 
tax as are vehicles used fewer than 5,000 miles on public 
highways during a taxable period (7,500 miles in the case of 
farm vehicles).
    6. The annual heavy vehicle use tax is reduced by 25 
percent for vehicles used exclusively in transporting harvested 
forest products to and from the forested site if the vehicles 
are under for such purpose in the State where the vehicle is 
required to be registered.
            Special rules for alcohol fuels, biodiesel, and alternative 
                    fuels
    Before 2005, alcohol fuels mixtures generally were subject 
to reduced rates of tax.\20\ Beginning on January 1, 2005, 
however, the full 18.3-cents-per-gallon and 24.3-cents-per-
gallon highway fuels tax rates were nominally extended to these 
fuels. At that time, a new refundable excise tax credit also 
was enacted for alcohol fuel mixtures and new refundable excise 
tax credits were enacted for biodiesel mixtures as well.\21\ 
Later, refundable excise tax credits were enacted for 
alternative fuels and alternative fuel mixtures. The amount of 
the excise tax credits exceeds the amount of the excise tax 
imposed, resulting in a net Federal outlay for each gallon of 
these fuels.
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    \20\ Alcohol is defined as methanol and ethanol that is not 
produced from petroleum, natural gas, or coal (including peat) and 
having a proof of at least 150. Alcohol having a proof or at least 150, 
but less than 190, receives a reduced credit.
    The credit is allowed for qualifying alcohol consumed in the 
production of ETBE and MTBE.
    \21\ Secs. 6426 and 6427(e).
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    Through December 31, 2011, the refundable excise tax credit 
rates for these fuels are: 45 cents per gallon for ethanol 
mixtures; 60 cents per gallon for methanol (or other non-
ethanol alcohol) mixtures, $1.00 per gallon for biodiesel and 
renewable diesel mixtures; and 50 cents per gallon for 
alternative fuels (including compressed gas derived from 
biomass).\22\ The alternative fuels credit is allowed without 
regard to whether the fuels are mixed with other taxable motor 
fuels but only if the fuel is used or sold for use in a motor 
vehicle, motorboat or for use as a fuel in aviation.
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    \22\ The scheduled expiration date for the alternative fuel credit 
for liquefied hydrogen is September 30, 2014.
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    The following illustrates the interaction of the taxes and 
credits. If one gallon of ethanol is blended with nine gallons 
of gasoline to make 10 gallons of gasoline, the tax is $1.83 
(10  .183) on the 10 gallons of gasohol. However, the 
alcohol fuel mixture credit for the gallon of ethanol is 45 
cents, so after the credit is taken into account, the tax on 
each gallon of gasohol is 13.8 cents per gallon (($1.83 - .45)/
10 = .138), rather than 18.3 cents per gallon. Nonetheless, the 
Highway Trust Fund is credited for the full amount of the tax, 
18.3 cents per gallon, without regard to the credit. As another 
example, a gallon of liquified natural gas is taxed at 24.3 
cents per gallon. The alternative fuel credit, when it was in 
effect, was 50 cents per gallon, thus after taking into account 
the credit, the taxpayer received a refundable credit of 24.7 
cents per gallon or the full 50 cents if the fuel was to be 
used for a nontaxable purpose, such as for use by a State or 
local government.
    Through December 31, 2011, nonrefundable income tax credits 
are allowed in the same amounts as described above for 
qualifying fuels mixtures, and for alcohol fuel, biodiesel, and 
renewable diesel.\23\
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    \23\ Secs. 40 and 40A. Adding a denaturants not exceeding two 
percent of the volume of alcohol is not treated as the creation of an 
alcohol fuels mixture (sec. 40(b)(5)). Denaturants in such amounts are 
disregarded in determining the volume of qualifying alcohol in an 
alcohol mixture (sec. 40(d)(4)).
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    The income tax credits generally are available to the 
person selling the qualifying product for use as a fuel or 
using it as a fuel. In addition to the general excise tax and 
income tax credits, add-on income tax credits of 10 cents per 
gallon are allowed to qualifying small producers of ethanol and 
agri-biodiesel producers (through December 31, 2011).\24\ A 
$1.01 per gallon income tax credit is allowed to producers of 
``cellulosic biofuel'' through December 31, 2012. Cellulosic 
biofuel is defined as a liquid fuel produced from any 
lignocellulosic or hemicellulosic matter that is available on a 
renewable or recurring basis and meets the registration 
requirements for fuels and fuel additives established under the 
Clean Air Act.\25\ Cellulosic biofuel does not include certain 
unprocessed fuels if more than four percent of such fuel 
(determined by weight) is any combination of water or sediment, 
or the ash content of such fuel is more than one percent 
(determined by weight).
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    \24\ Agri-biodiesel is defined as biodiesel derived solely from 
virgin oils, including esters derived from virgin vegetable oils from 
corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, 
rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and 
camelina, or from animal fats (sec. 40A(d)(2)).
    \25\ 42 U.S.C. 7545.
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            Overview of Highway Trust Fund expenditure provisions
    In general.--Dedication of highway excise tax revenues to 
the Highway Trust Fund and expenditures from the Highway Trust 
Fund are governed by provisions of the Code.\26\ The Code 
authorizes expenditures (subject to appropriations) from the 
Highway Trust Fund through March 4, 2011, for the purposes 
provided in authorizing legislation in effect on the date of 
enactment of the Surface Transportation Extension Act of 2010, 
Part II.\27\
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    \26\ Sec. 9503.
    \27\ Pub. L. No. 111-322.
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    Revenues from the highway excise taxes, as imposed through 
September 30, 2011, generally are dedicated to the Highway 
Trust Fund. However, certain transfers are made from the 
Highway Trust Fund into the General Fund of the Treasury, 
relating to tax revenues on gasoline used on farms, gasoline 
used for certain non-highway purposes or by local transit 
systems, fuels not used for taxable purposes, and income tax 
credits for certain uses of fuels.\28\
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    \28\ Sec. 9503(c)(2).
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    In addition, revenues attributable to the excise taxes 
imposed on motorboat gasoline and special motor fuels and on 
gasoline used as a fuel in the non-business use of small-engine 
outdoor power equipment are transferred to the Sport Fish 
Restoration and Boating Trust Fund through September 30, 2011, 
with the first $1,000,000 per fiscal year of such monies going 
to the Land and Water Conservation Fund instead.\29\
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    \29\ Sec. 9503(c)(4) and (5). See, Part I.B.3 relating to the Sport 
Fish Restoration and Boating Trust Fund.
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    Highway Trust Fund expenditures.--The Highway Trust Fund 
has two accounts: Mass Transit Account and Highway Account.\30\ 
Both accounts are funding sources for specific transit and 
highway-related programs. Neither account receives interest on 
unexpended balances. The Mass Transit Account receives revenues 
equivalent to 2.86 cents per gallon of highway motor fuels 
excise taxes generally, except 1.43 cents per gallon for any 
partially exempt methanol or ethanol, 1.86 cents per gallon for 
liquefied natural gas, 2.13 cents per gallon for liquefied 
petroleum gas, and 9.71 cents per MCF for compressed natural 
gas.
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    \30\ Highway Trust Fund expenditures are subject to appropriations 
Acts. However, certain of the programs are classified as ``contract 
spending'', a category of Federal spending in which executive agencies 
are permitted to enter into contracts for spending with appropriations 
being enacted subsequently to liquidate the contracted expenditures. 
Highway Trust Fund spending further benefits from special Federal 
budget ``firewalls'' designed to ensure that the monies are spent as 
authorized rather than being subjected to obligations ceilings enacted 
as part of deficit reduction measures.
---------------------------------------------------------------------------
    Highway Trust Fund expenditure purposes have been updated 
with each surface transportation Act enacted since 
establishment of the Highway Trust Fund in 1956. In general, 
expenditures authorized under those Acts (as the Acts were in 
effect on the date of enactment of the most recent such 
authorizing Act) are specifically approved by the Code as 
Highway Trust Fund expenditure purposes. No Highway Trust Fund 
monies may be spent for a purpose not approved by the Code. The 
Code provides that authority to make expenditures from the 
Highway Trust Fund expires after March 4, 2011.
    Anti-deficit provisions of the Highway Trust Fund.--Because 
some highway/mass transit projects can take multiple years to 
complete, the Highway Trust Fund generally has carried a 
positive unexpended balance--a large portion of which is 
reserved to cover existing Highway Trust Fund obligations. 
Highway Trust Fund spending is limited by the fund's internal 
anti-deficit provisions--the so-called ``Harry Byrd rule.'' 
Generally, this rule is intended to prevent the further 
obligation of Federal highway/transit funds from the Highway 
Trust Fund if the current and expected balances of the fund are 
projected to fall below a certain level. The rule requires the 
Treasury Department to determine, on a quarterly basis, the 
amount (if any) by which unfunded highway authorizations exceed 
projected net fund tax receipts for the 48-month period 
beginning at the close of each fiscal year.\31\ If unfunded 
highway authorizations exceed projected 48-month trust fund 
receipts, apportionments to the States for programs are to be 
reduced proportionately. The Mass Transit Account has a 12-
month receipts rule.\32\ For purposes of this rule, Highway 
Trust Fund excise taxes are assumed extended beyond their 
statutory expiration date.
---------------------------------------------------------------------------
    \31\ Sec. 9503(d).
    \32\ Sec. 9503(e)(4).
---------------------------------------------------------------------------
    Limitations on transfers to the Highway Trust Fund.--The 
Code also contains a specific enforcement provision to prevent 
expenditure of Highway Trust Fund monies for purposes not 
authorized in the Code.\33\ Should such unapproved expenditures 
occur, no further excise tax receipts will be transferred to 
the Highway Trust Fund. Instead, the taxes will continue to be 
imposed with receipts being retained in the General Fund. This 
enforcement provision provides that it applies not only to 
unauthorized expenditures under the current Code provisions, 
but also to expenditures pursuant to future legislation that 
does not amend section 9503's expenditure authorization 
provisions or otherwise authorize the expenditure as part of a 
revenue Act.
---------------------------------------------------------------------------
    \33\ Sec. 9503(b)(5).
---------------------------------------------------------------------------

2. Airport and Airway Trust Fund excise taxes \34\
---------------------------------------------------------------------------

    \34\ All Airport and Airway Trust Fund excise taxes except for 4.3 
cents per gallon of the taxes on aviation fuels are scheduled to expire 
after March 31, 2011. The 4.3-cents-per-gallon fuels tax rate is 
permanent. However, for Federal budget scorekeeping purposes, the 
statutory expiration date is disregarded and the full amount of the 
taxes is assumed to be permanent. See, Part III.A.
---------------------------------------------------------------------------
    Excise taxes are imposed on amounts paid for commercial air 
passenger and freight transportation and on fuels used in 
commercial and noncommercial (i.e., transportation that is not 
``for hire'') aviation to fund the Airport and Airway Trust 
Fund.\35\ The present aviation excise taxes are as follows:
---------------------------------------------------------------------------
    \35\ Air transportation through U.S. airspace that neither lands in 
nor takes off from a point in the United States (or the 225-mile zone, 
described below) is exempt from the aviation excise taxes, but the 
transportation provider is subject to certain ``overflight fees'' 
imposed by the Federal Aviation Administration pursuant to 
Congressional authorization.

------------------------------------------------------------------------
          Tax (and Code section)                      Tax rates
------------------------------------------------------------------------
a. Domestic air passengers (sec. 4261)....  7.5 percent of fare, plus
                                             $3.70 (2011) per domestic
                                             flight segment generally
                                             \36\
a. International air passengers (sec.       $16.30 (2011) per arrival or
 4261)....................................   departure \37\
b. Amounts paid for right to award free or  7.5 percent of amount paid
 reduced rate passenger air transportation
 (sec. 4261)..............................
c. Air cargo (freight) transportation       6.25 percent of amount
 (sec. 4271)..............................   charged for domestic
                                             transportation; no tax on
                                             international cargo
                                             transportation
d. Aviation fuels (sec. 4081): \38\
    i. Commercial aviation................  4.3 cents per gallon
    ii. Non-commercial (general) aviation:
        Aviation gasoline.................  19.3 cents per gallon
        Jet fuel..........................  21.8 cents per gallon
------------------------------------------------------------------------

            Administration of taxes
    Air passenger and cargo taxes.--Persons purchasing air 
transportation are liable for the commercial air passenger 
excise taxes. Transportation providers are secondarily liable 
if they fail to collect tax from their passengers. The amount 
of tax must be separately disclosed on airline tickets. Like 
the air passenger excise taxes, the air cargo tax is imposed on 
the person paying for the service.
---------------------------------------------------------------------------
    \36\ The domestic flight segment portion of the tax is adjusted 
annually (effective each January 1) for inflation (adjustments based on 
the changes in the consumer price index (the ``CPI'')).
    \37\ The international arrival and departure tax rate is adjusted 
annually for inflation (measured by changes in the CPI).
    \38\ Like most other taxable motor fuels, aviation fuels are 
subject to an additional 0.1-cent-per-gallon excise tax to fund the 
LUST Trust Fund. See, Part I.B.1.
---------------------------------------------------------------------------
    Aviation fuels taxes.--The aviation fuels excise taxes are 
administered under rules similar to those that apply to the 
Highway Trust Fund fuels taxes. That is, the taxes generally 
are collected on removal of taxable fuels from a refinery 
(subject to the bulk transfer exception also applicable to the 
highway fuels excise taxes). Most aviation fuels excise tax is 
collected upon removal of the fuel from a registered terminal 
facility. Many airports include registered terminals within the 
secured area of the airport. Under a special rule, certain 
refueler trucks, tankers, or tank wagons are treated as part of 
such terminals, thereby allowing imposition of tax on jet fuel 
to be deferred until the kerosene is loaded into the fuel tank 
of an aircraft.\39\ Qualifying trucks and tankers may not be 
registered for highway use and must be operated by the owner of 
the registered terminal facility. Jet fuel that is not 
delivered directly into the fuel tank of an aircraft from a 
registered terminal is taxed at the higher general aviation 
rates. Commercial airlines and other commercial aircraft using 
jet fuel taxed at the general aviation tax rate may recover tax 
imposed at the higher rate through refund claims or credits 
against excise tax liability (including air passenger and cargo 
tax liability).
---------------------------------------------------------------------------
    \39\ When fuel is delivered directly into the fuel tanks of a 
commercial aircraft, commercial airlines may ``self-certify'' and 
become the direct payors of the jet fuel excise tax.
---------------------------------------------------------------------------
            Exemptions, reduced rates, and special rules
    Air passenger taxes.--The domestic air passenger taxes 
apply to transportation beginning and ending within the United 
States or to or from a point within the continental United 
States and a point within the ``225-mile zone'' of Canada or 
Mexico. The 225-mile zone includes the portions of those 
countries that are not more than 225 miles from the nearest 
point in the continental United States. If passenger 
transportation is purchased outside the United States, it is 
subject to the domestic taxes only if the transportation both 
begins and ends in this country.
    Special rules apply to air transportation between the 
continental United States and Alaska or Hawaii and between 
Alaska and Hawaii.\40\ The portion of such transportation that 
is not within the United States (e.g., the portion over the 
Pacific Ocean) is not subject to the 7.5-percent domestic air 
passenger excise tax. In addition to this pro-rated ad valorem 
tax, an $8.20 (2011) international tax rate for the excluded 
portion of the travel is imposed.\41\ The domestic flight 
segment component of tax applies under the same rules as for 
flights within the continental United States. Further, 
transportation within Alaska or Hawaii is taxed in the same 
manner as domestic transportation within the continental United 
States.
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    \40\ The term ``continental United States'' includes the 48 
contiguous States and the District of Columbia.
    \41\ The $8.20 amount is adjusted annually for inflation (measured 
by the CPI).
---------------------------------------------------------------------------
    An additional special rule exempts domestic flight segments 
to or from qualified rural airports from the flight segment 
portion of the domestic air passenger excise tax. A qualified 
rural airport is an airport (1) from which there were fewer 
than 100,000 commercial passengers departing by air on flight 
segments of at least 100 miles during the second preceding 
calendar year, and (2) (a) which is not located within 75 miles 
of another airport that is not a qualified rural airport or (b) 
which is not connected by paved roads to another airport.
    The domestic air passenger excise tax does not apply to 
domestic segments (i.e., wholly within the United States) that 
are part of uninterrupted international air transportation. 
Uninterrupted international air transportation means travel 
(entirely by air) that does not both begin and end in the 
United States (or the 225-mile zone) and during which there is 
no more than a 12-hour scheduled period between arrival at and 
departure from any point in the United States.\42\
---------------------------------------------------------------------------
    \42\ A more liberal rule is provided for military personnel 
traveling in uniform while on leave in transportation that involves 
both international and domestic U.S. segments.
---------------------------------------------------------------------------
    Both the domestic and international passenger taxes are 
imposed on ``amounts paid'' for air transportation. Therefore, 
no tax is imposed on transportation under airline frequent 
flyer programs for which no charge is made. Similarly, no 
excise tax is imposed on no-charge transportation provided to 
airline employees as a fringe benefit. Excise tax is imposed 
(determined by reference to actual amounts paid) for reduced-
cost travel available under both frequent-flyer and airline 
employee and fringe-benefit programs. Further, the IRS has 
ruled in at least one instance that separately-stated charges 
for ``checked'' passenger baggage are not subject to the excise 
tax.\43\
---------------------------------------------------------------------------
    \43\ PLR 20102004, 2010 WL 147820 (January 15, 2010).
---------------------------------------------------------------------------
    Air cargo tax.--Based on legislative history accompanying 
the original enacting legislation, the air cargo excise tax has 
been interpreted to exclude amounts paid for ``accessorial 
ground services.'' This interpretation has allowed air cargo 
providers to reduce the effective rate of tax below the 
statutory 6.25 percent of price by allocating a portion of 
waybill charges to ground operations. Accessorial services 
charges are exempt from tax only if the service could be 
performed by a party other than the transportation provider and 
if the provider maintains in its records a separate accounting 
for the charge.
    Additional exemptions to air passenger and air cargo 
taxes.--Special rules classify certain for-hire (i.e., 
commercial) transportation as general aviation (thereby making 
the transportation subject to the higher-rate fuels excise tax 
rather than the air passenger and cargo excise taxes). Under 
these rules, flights for skydiving and flights on seaplanes 
generally are subject to the general aviation fuels excise 
taxes rather than the air passenger and air cargo excise taxes.
    An additional rule classifies all air transportation on 
aircraft having a maximum certificated takeoff weight of 6,000 
pounds or less as general aviation when the aircraft are not 
operating on established lines. Aircraft operated for the sole 
purpose of sightseeing are not treated as operated on 
established lines, notwithstanding that such aircraft may 
operate on established schedules or routes.
    Certain transportation on air ambulances providing 
emergency services and on helicopters and fixed-wing aircraft 
operating engaged in hard mineral, oil, or gas exploration 
activities or as part of logging activities are exempt from 
tax. The exemption is limited to aircraft not using Federal 
aviation services or taking off or landing at an airport 
eligible for Airport and Airway Trust Fund assistance in the 
case of the latter uses.
    Aviation fuels tax exemptions.--Fuels used in aircraft 
owned and operated by certain aircraft museums are exempt from 
the aviation fuels excise taxes. Qualifying museums are section 
501(c)(3) organizations that are operated exclusively for the 
procurement, care, and exhibition of World War II combat and 
transport aircraft.
    Kerosene, gasoline, or diesel fuel blended with blended 
with alcohol and sold for use as aviation fuel by the person 
producing the mixture qualify for the refundable excise tax 
credit and the non-refundable income tax credit described in 
Part I.A.1.
            Overview of Airport and Airway Trust Fund expenditure 
                    provisions
    In general.--Operation of the Airport and Airway Trust Fund 
is governed by parallel provisions of the Code and authorizing 
statutes.\44\ The Code provisions govern deposit of revenues 
into the trust fund and approve expenditure purposes in 
authorizing statutes as in effect on the date of enactment of 
the latest authorizing Act. The authorizing Acts provide for 
specific trust fund expenditure programs. The Airport and 
Airway Trust Fund was created in 1970 to finance a major 
portion of Federal expenditures on national aviation programs. 
Prior to that time, these expenditures had been financed with 
General Fund monies.
---------------------------------------------------------------------------
    \44\ Sec. 9502 and 49 U.S.C. sec. 48101, et. seq.
---------------------------------------------------------------------------
    Authorized expenditures from the Airport and Airway Trust 
Fund include the following principal programs:
          1. Airport Improvement Program (``AIP'') (airport 
        planning, construction, noise compatibility programs, 
        and safety projects);
          2. Facilities and Equipment (``F&E'') program (costs 
        of acquiring, establishing, and improving the air 
        traffic control facilities);
          3. Research, Engineering, and Development (``RED'') 
        program (FAA research and development activities);
          4. Federal Aviation Administration (``FAA'') 
        Operations and Maintenance (``O&M'') programs; and
          5. Certain other aviation-related programs specified 
        in authorizing Acts.
    Part of the O&M programs also is financed from General Fund 
monies. Of the total FAA appropriations each year, the General 
Fund has contributed about 24 to 25 percent.
    Limits on Airport and Airway Trust Fund expenditures.--No 
expenditures are currently permitted to be made from the 
Airport and Airway Trust Fund after March 31, 2011. Because the 
purposes for which Airport and Airway Trust Fund monies are 
permitted to be expended are fixed as of the date of enactment 
of the Airport and Airway Extension Act of 2010, Part IV, the 
Code must be amended in order to authorize new Airport and 
Airway Trust Fund expenditure purposes.\45\ In addition, the 
Code contains a specific enforcement provision to prevent 
expenditure of Airport and Airway Trust Fund monies for 
purposes not authorized under section 9502.\46\ This provision 
provides that, should such unapproved expenditures occur, no 
further aviation excise tax receipts will be transferred to the 
Airport and Airway Trust Fund. Rather, the aviation taxes would 
continue to be imposed, but the receipts would be retained in 
the General Fund.
---------------------------------------------------------------------------
    \45\ Sec. 9502(d).
    \46\ Sec. 9502(e)(1).
---------------------------------------------------------------------------

3. Inland Waterways Trust Fund excise tax

            Tax and exemptions
    A 20-cents-per-gallon excise tax is imposed on fuel used in 
powering commercial cargo vessels on a designated system of 
inland or intra-coastal waterways.\47\ This tax is permanent. 
The tax applies to fuel used on any specified inland or 
intracoastal waterway of the United States in the business of 
transporting property for compensation or hire, or in 
transporting property in the business of the owner, lessee, or 
operator of the vessel (other than fish or other aquatic animal 
life caught on the voyage).\48\ The inland waterways excise tax 
is a use tax, imposed on the boat operator.
---------------------------------------------------------------------------
    \47\ Sec. 4042. Like other taxable motor fuels, inland waterway 
fuels are subject to an additional excise tax of 0.1 cents per gallon 
to fund the LUST Trust Fund. See Part 1.B.1.
    \48\ The term inland or intracoastal waterway of the United States 
means any inland or intracoastal waterway of the United States which is 
described in section 206 of the Inland Waterways Revenue Act of 1978 
and includes the Mississippi River upstream from Baton Rouge, the 
Mississippi River's tributaries, and specified waterways, including the 
Gulf of Mexico and Atlantic Intra-coastal Waterways, and the Tennessee-
Tombigbee Waterway.
---------------------------------------------------------------------------
    Exemptions are provided for vessels designed primarily for 
use on the high seas which have a draft of more than 12 feet 
(``deep-draft ocean-going vessels''), for vessels used 
primarily for transportation of persons, for State or local 
government vessels engaged in governmental business, and for 
use in tugboat movement of LASH (``lighter-aboard-ship'') and 
SEABEE ocean-going barges used exclusively to ferry 
international cargoes to or from their carriers.
            Overview of Inland Waterways Trust Fund expenditure 
                    provisions
    Operation of the Inland Waterways Trust Fund is governed by 
parallel provisions of the Code and authorizing statutes.\49\ 
The Code provisions govern deposit of revenues from the fuel 
tax into the Inland Waterways Trust Fund and approve general 
expenditure programs. The authorizing statutes specify 
expenditure programs.
---------------------------------------------------------------------------
    \49\ Sec. 9506 and 33 U.S.C. sec. 2212.
---------------------------------------------------------------------------
    Amounts in the Inland Waterways Trust Fund are available, 
as provided by appropriation Acts, for making construction and 
rehabilitation expenditures for navigation on the inland and 
coastal waterways of the United States described in section 206 
of the Inland Waterways Revenue Act of 1978, as in effect on 
the date of the enactment of section 9506. There is a limit of 
50 percent that can be paid from the Inland Waterways Trust 
Fund for the cost of any construction under section 102(a) of 
the Water Resources Development Act of 1986 (as in effect on 
the date of enactment of section 9506). The remaining 50 
percent is to be paid from the General Fund.

4. Harbor Maintenance Trust Fund excise tax

            Tax and exemptions
    A 0.125-percent excise tax is imposed on the value of 
commercial cargo loaded or unloaded at taxable United States 
ports and on charges for transportation of passengers to or 
from such ports.\50\ No tax is imposed on cargo movements 
within a U.S. port. The tax is permanent. Unlike most Federal 
excise taxes, the harbor maintenance excise tax is administered 
by the U.S. Customs Service (rather than the Internal Revenue 
Service or the Treasury Department's Tax and Trade Bureau). 
Administrative rules applicable to the tax are those applicable 
to customs duties. Shippers and importers are liable for the 
tax.
---------------------------------------------------------------------------
    \50\ Sec. 4461.
---------------------------------------------------------------------------
    The tax generally is imposed on all cargo (other than 
exports) and passengers that are loaded or unloaded at U.S. 
ports, defined as any channel or harbor in the United States 
that is open to public navigation. The tax does not apply to 
waterways where the inland waterways fuels excise tax is 
imposed or to ports with respect to which no Federal funds have 
been used since 1977 for construction, maintenance, or 
operation, or which were de-authorized by Federal law before 
1985. Transportation at ports on the Columbia River is taxable 
only if the ports are downstream of the Bonneville lock and 
dam.
    In addition to exported cargo, the tax does not apply to 
cargo shipped between the continental United States and Alaska 
(except for crude oil), Hawaii, and/or U.S. possessions, or to 
cargo shipped between Alaska, Hawaii, and/or such possessions. 
This exemption includes passenger cruises within Alaska or 
Hawaii that also include travel in international waters, if the 
cruises do not include any stops at ports of call located 
outside the State from which the cruise begins. Transportation 
on regularly scheduled ferries transporting passengers (and 
their vehicles) that operate within the United States or 
between the U.S. and contiguous countries (e.g., Canada) are 
not subject to tax. There is an exemption for cargo owned by 
nonprofit organizations intended for use in humanitarian or 
development assistance overseas. Ships' stores and fish (not 
previously loaded on shore) also are exempt.
            Overview of Harbor Maintenance Trust Fund expenditure 
                    provisions
    Operation of the Harbor Maintenance Trust Fund is governed 
by parallel provisions of the Code and authorizing 
statutes.\51\ The Code provisions govern deposit of revenues 
into the Harbor Maintenance Trust Fund and approve general 
expenditure programs. The authorizing statutes specify 
expenditure programs.
---------------------------------------------------------------------------
    \51\ Sec. 9505 and Pub. L. No. 104-303.
---------------------------------------------------------------------------
    The Harbor Maintenance Trust Fund generally is limited to 
financing the operations and maintenance costs for federally-
authorized public harbors and channels for commercial 
navigation incurred by the U. S. Corps of Engineers under 
section 210 of the Water Resources Development Act of 1986 (as 
in effect on the date of the enactment of the Water Resources 
Development Act of 1996). Harbor Maintenance Trust Fund 
expenditures have principally been for operations and 
maintenance costs of access channels to deep-draft harbors, 
i.e., dredging expenses and not channel deepening projects.
    Also, St. Lawrence Seaway Development Corporation 
operations and maintenance expenditures related to the seaway 
are financed from the Harbor Maintenance Trust Fund, as well as 
rebates of tolls or charges pursuant to section 13(b) of the 
Act of May 13, 1954 (as in effect on April 1, 1987).
    Certain ancillary activities directly related to 
maintenance dredging or related to keeping a waterway 
unobstructed also are financed from the Harbor Maintenance 
Trust Fund.\52\ Further, the administrative costs of collecting 
the harbor maintenance tax (not to exceed $5 million for any 
fiscal year) are authorized to be paid from the Harbor 
Maintenance Trust Fund.
---------------------------------------------------------------------------
    \52\ See, 33 U.S.C. 2241(2).
---------------------------------------------------------------------------

 B. Excise Taxes Dedicated to Environmental Trust Funds or Designated 
                                 Funds


1. Leaking Underground Storage Tank Trust Fund excise taxes

            Tax and exemptions
    Fuels of a type subject to other trust fund excise taxes 
generally are subject to an add-on excise tax of 0.1 cent per 
gallon to fund the Leaking Underground Storage Tank (``LUST'') 
Trust Fund.\53\ For example, the LUST excise tax applies, to 
gasoline, diesel fuel, kerosene, and most alternative fuels 
subject to highway and aviation fuels excise taxes, and to 
fuels subject to the inland waterways fuel excise tax. This 
excise tax is imposed on both uses and parties subject to the 
other taxes, and to situations (other than export) in which the 
fuel otherwise is tax-exempt. For example, off-highway business 
use of gasoline and off-highway use of diesel fuel and kerosene 
generally are exempt from highway motor fuels excise tax. 
Similarly, States and local governments and certain other 
parties are exempt from such tax. Nonetheless, all such uses 
and parties are subject to the 0.1-cent-per-gallon LUST excise 
tax.
---------------------------------------------------------------------------
    \53\ Secs. 4041, 4042, and 4081.
---------------------------------------------------------------------------
    Liquefied natural gas, compressed natural gas, and 
liquefied petroleum gas are exempt from the LUST tax. 
Additionally, methanol and ethanol fuels produced from coal 
(including peat) are taxed at a reduce rate of 0.05 cents per 
gallon.
    The LUST tax is scheduled to expire after September 30, 
2011.\54\
---------------------------------------------------------------------------
    \54\ For Federal budget scorekeeping purposes, the LUST Trust Fund 
tax, like other excise taxes dedicated to trust funds, is assumed to be 
permanent. See, Part III.A. for a description of these Federal budget 
rules.
---------------------------------------------------------------------------
            Overview of Leaking Underground Storage Tank Trust Fund 
                    expenditure provisions
    Amounts in the LUST Trust Fund are available, as provided 
in appropriations Acts, for purposes of making expenditures to 
carry out sections 9003(h)-(j), 9004(f), 9005(c), and 9010-9013 
of the Solid Waste Disposal Act, as in effect on the date of 
enactment of Public Law 109-168. Any claim filed against the 
LUST Trust Fund may be paid only out of such fund, and the 
liability of the United States for claims is limited to the 
amount in the fund.
    The monies in the LUST Trust Fund are used to pay expenses 
incurred by the Environmental Protection Agency (the ``EPA'') 
and the States for preventing, detecting, and cleaning up leaks 
from petroleum underground storage tanks, as well as programs 
to evaluate the compatibility of fuel storage tanks with 
alternative fuels, MTBE additives, and ethanol and biodiesel 
blends.
    The EPA makes grants to States to implement the program, 
and States use cleanup funds primarily to oversee and enforce 
corrective actions by responsible parties. States and EPA also 
use cleanup funds to conduct corrective actions where no 
responsible party has been identified, where a responsible 
party fails to comply with a cleanup order, in the event of an 
emergency, and to take cost recovery actions against parties. 
In 2005, Congress authorized EPA and States to use trust fund 
monies for non-cleanup purposes as well, specifically for 
administration and enforcement of the leak prevention 
requirements of the UST program.\55\ Although States report 
that trust fund allotments are insufficient to cover the costs 
of federal program mandates, annual appropriations have 
remained less than the annual amounts earned in interest on the 
LUST Trust Fund.
---------------------------------------------------------------------------
    \55\ Pub. L. No. 109-58.
---------------------------------------------------------------------------

2. Oil Spill Liability Trust Fund excise tax

            Tax and exemptions
    The Oil Spill Liability Trust Fund is financed with 
revenues from an eight-cents-per-barrel \56\ excise tax on 
crude oil received at a United States refinery and on imported 
petroleum products.\57\ The tax rate is scheduled to increase 
to nine cents per barrel in calendar year 2017, after which it 
currently is scheduled to expire.\58\ A back-up ``use tax'' is 
imposed on crude oil that is used in or exported from the 
United States before being received at a refinery (sec. 
4611(b)). Crude oil is defined to include oil condensates and 
natural gas. Under a special rule, natural gasoline produced 
from natural gas at a refinery is treated as received at the 
refinery at the time of its production and is subject to tax at 
that time.
---------------------------------------------------------------------------
    \56\ A barrel equals 42 gallons.
    \57\ Sec. 4611(a). Petroleum products include crude oil (sec. 
4612(a)(3)). Statutorily, the tax also applies to domestic crude oil 
exported from the United States before being received at a U.S. 
refinery (sec. 4611(b)(1)).
    \58\ For Federal budget scorekeeping purposes, the oil spill excise 
tax is assumed to be permanent. See, Part III.A., for a description of 
these Federal budget rules. Under prior law, the tax was required to 
terminate if the trust fund balance were to reach $2.7 billion in a 
calendar quarter. That requirement was repealed in the Emergency 
Economic Stabilization Act of 2008 (Pub. L. No. 110-343, sec. 405(b)(1) 
Div. B).
---------------------------------------------------------------------------
    Unlike the excise taxes dedicated to transportation trust 
funds, the oil spill liability excise tax applies in Puerto 
Rico, all U.S. possessions, the Commonwealth of the Northern 
Mariana Islands, and the Trust Territory of the Pacific Islands 
as well as in the 50 States and the District of Columbia.\59\ 
The term ``United States'' is defined for purposes of this tax 
to include foreign trade zones and the U.S. continental shelf.
---------------------------------------------------------------------------
    \59\ Revenues from the tax imposed in Puerto Rico and the U.S. 
Virgin Islands are retained in the Federal Treasury, unlike revenues 
from the excise tax on rum imported or brought in to the United States 
(and certain tobacco products produced in those possessions), which are 
``covered over'' to the two possessions.
---------------------------------------------------------------------------
            Overview of the Oil Spill Liability Trust Fund provisions
    Operation of the Oil Spill Liability Trust Fund is governed 
by parallel provisions of the Code and authorizing 
statutes.\60\ The Code provisions govern deposit of revenues 
into the Oil Spill Liability Trust Fund and approve general Oil 
Spill Liability Trust Fund expenditure programs. The 
authorizing statutes specify expenditure programs.
---------------------------------------------------------------------------
    \60\ Sec. 9509 and 33 U.S.C. secs. 2701-2761, et. seq.
---------------------------------------------------------------------------
    Amounts in the Oil Spill Liability Trust Fund are 
available, as provided in appropriation Acts or section 6002(b) 
of the Oil Pollution Act of 1990, for the following oil spill-
related expenditures:
          1. Payment of removal costs and other costs, 
        expenses, claims, and damages under section 1012 of the 
        1990 Act;
          2. Costs relating to oil pollution or the substantial 
        threat of oil pollution (under sections 5 and 7 of the 
        Intervention on the High Seas Act);
          3. Payment of liabilities incurred by the revolving 
        fund under section 311(k) of the Federal Water 
        Pollution Control Act;
          4. Payments for prevention, removal, and enforcement 
        related to oil discharges (under section 311(b)-(d), 
        (j), and (l) of the Federal Water Pollution Control 
        Act);
          5. Payment of liabilities incurred by the Deepwater 
        Port Liability Fund; and
          6. Payment of liabilities incurred by the Offshore 
        Pollution Compensation Fund.
    There is a general limit of $1 billion per incident that 
may be paid out of the Oil Spill Liability Trust Fund, with 
costs of natural resource damage assessments and claims for any 
single incident limited to $500 million. Except in the case of 
payments of oil removal costs, payments may be made from the 
Trust Fund only if the Fund maintains a minimum balance of $30 
million after such payment. Any claim filed against the Oil 
Spill Liability Trust Fund may be paid only out of the Fund.
    Under prior law, the Oil Spill Liability Trust Fund had the 
authority to borrow monies from the General Fund, as repayable 
advances, with a limit of $1 billion of repayable advances at 
any one time. Such advances were to be repaid to the General 
Fund with interest. The authority to make advances to the Oil 
Spill Liability Trust Fund expired after December 31, 1994.

3. Sport Fish Restoration and Boating Trust Fund excise taxes

            In general
    The Sport Fish Restoration and Boating Trust Fund \61\ is 
financed by revenues from three principal excise taxes.\62\ 
First, revenue equivalent to the highway excise taxes collected 
on gasoline and other motor fuels used in motorboats is 
transferred from the Highway Trust Fund to this trust fund in 
lieu of allowing refunds to consumers for this off-highway 
use.\63\ Second, the trust fund receives revenues (also 
transferred from the Highway Trust Fund) equivalent to excise 
taxes collected on ``small engine fuel.'' Small-engine fuel 
means gasoline used as a fuel in the nonbusiness use of small-
engine outdoor power equipment (i.e., non-commercial off-
highway vehicles such as snowmobiles and small-engine outdoor 
power equipment such as snow blowers and lawn mowers).\64\
---------------------------------------------------------------------------
    \61\ Formerly the ``Aquatic Resources Trust Fund.''
    \62\ In addition to the excise tax revenue sources, the Trust Fund 
receives revenue from import duties on fishing tackle and on yachts and 
pleasure craft.
    \63\ The first $1 million of such revenues is transferred to the 
Land and Water Conservation Fund, discussed in Part I.A.4. Off-highway 
business use generally is exempt from the highway gasoline excise tax, 
and off-highway use generally is exempt from those taxes on diesel fuel 
and kerosene (sec. 4082, 4041, and 6421).
    \64\ The fuels subject from which tax revenues are transferred to 
the Trust Fund are subject to an additional 0.1-cent-per-gallon excise 
tax for the LUST Trust fund in the same manner as other highway motor 
fuels.
---------------------------------------------------------------------------
    The third excise tax revenue source for the trust fund is 
imposed on manufacturers and importers of ``sport fishing 
equipment.'' \65\ The articles subject to tax, and the 
applicable tax rates, are shown in the following table.
---------------------------------------------------------------------------
    \65\ Sec. 4161.
    \66\ The tax on fishing rods and poles is limited to a maximum of 
$10 per taxable article.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Articles subject to tax at 10 percent rate:
    Fishing rods and poles (and component parts therefor) \66\
    Fishing reels
    Fly fishing lines, and other fishing lines not over 130 pounds test
    Fishing spears, spear guns, and spear tips
    Items of terminal tackle, including leaders, artificial lures,
     artificial baits, and artificial flies, fishing hooks, bobbers,
     sinkers, snaps, drayles, and swivels \67\
    Fish stringers
    Creels
    Bags, baskets, or other containers designed to hold fish
    Portable bait containers
    Fishing vests
    Gaff hooks
    Fishing hook disgorgers
    Dressing for fishing lines and artificial flies
    Fishing rod belts, fishing rodholders, fishing harnesses, fish
     fighting chairs, fishing outriggers, and fishing downriggers
Articles subject to tax at 3 percent rate:
    Tackle boxes
    Electric outboard motors
------------------------------------------------------------------------

    Parts and accessories sold by manufacturers or importers in 
connection with the sale of any taxable article are included in 
the tax base for the article.
---------------------------------------------------------------------------
    \67\ Terminal tackle does not include natural bait or any item of 
terminal tackle designed for use and ordinarily used on fishing lines 
over 130 pounds test.
---------------------------------------------------------------------------
            Overview of Sport Fish Restoration and Boating Trust Fund 
                    expenditure provisions
    Operation of the Sport Fish Restoration and Boating Trust 
Fund is governed by parallel provisions of the Internal Revenue 
Code and authorizing statutes.\68\ The Code provisions govern 
deposit of revenues into the trust fund and approve general 
expenditure programs. The authorizing statutes specify 
expenditure programs.
---------------------------------------------------------------------------
    \68\ Sec. 9504. 16 U.S.C. sec. 777, 16 USC sec. 3951, et. seq., and 
Pub. L. No. 105-178, sec. 7204.
---------------------------------------------------------------------------
    Income received in this trust fund in any fiscal year is to 
be allocated to eligible programs in the following fiscal year. 
The following eight programs are funded from the trust fund: 
\69\
---------------------------------------------------------------------------
    \69\ See, Ranger, The Sport Fish Restoration and Boating Trust Fund 
(CRS Report RS22060, January 25, 2010).
---------------------------------------------------------------------------
          1. Coastal wetlands conservation and restoration 
        programs, the majority of which is for Corps of 
        Engineers Louisiana Coastal Wetlands Restoration;
          2. Recreational boating safety grant program to the 
        States, administered by the U.S. Coast Guard's Office 
        of Boating Safety;
          3. Grant program for states to construct sewage pump-
        out and dump stations for recreational boating sewage 
        disposal;
          4. State grant programs for construction or upgrade 
        of docking facilities for transient large recreational 
        boats (26 feet or more in length);
          5. Grants for national aquatic resource outreach and 
        communications programs to encourage participation in 
        recreational boating and fishing and greater public 
        involvement in aquatic stewardship and to improve 
        communication with anglers, boaters, and the general 
        public;
          6. State conservation grants for wildlife and sport 
        fish restoration;
          7. Interstate fishery commissions and the Sport 
        Fishing and Boating Partnership Council; and
          8. After the previously listed programs are funded, 
        the remaining amounts are to be used for State grants 
        for sport fish restoration programs, with 60% of the 
        grants based on the number of anglers and 40 percent on 
        its land and water area.

4. Land and Water Conservation Fund (Federal Aid to Wildlife 
        Restoration Program) and dedicated excise taxes

            In general
    The Federal Aid to Wildlife Program (the ``Fund''), 
although not a formal trust fund, receives revenues from three 
dedicated excise tax sources. First, the Fund receives $1 
million per year of the excise taxes imposed on motorboat 
fuels. Second, revenues from an 11-percent manufacturers' or 
importers' excise tax on certain bows and arrows and taxes on 
certain ``regular'' firearms are dedicated to the Fund. The 
latter two excise taxes are outlined in the following table.

------------------------------------------------------------------------
          Tax (and Code section)                      Tax rates
------------------------------------------------------------------------
Bows and arrows (sec. 4161)
    Bows having a peak draw weight of 30    11 percent of price
     pounds or more.......................
    Archery equipment \70\................  11 percent of price
    Arrow shafts for use as part of an      45 cents per shaft (2011)
     arrow (a) that measures at least 18     \72\
     inches in length, or (b) if shorter,
     that is suitable for use with a
     taxable bow \71\.....................
Regular firearms and ammunition (sec.
 4181) \73\
    Pistols and revolvers.................  10 percent of price
    Other firearms \74\...................  11 percent of price
    Shells and cartridges.................  11 percent of price
------------------------------------------------------------------------

            Overview of Federal Aid to Wildlife Restoration Fund 
                    provisions
    In general.--The Federal Aid to Wildlife Restoration Act of 
September 2, 1937, commonly referred to as the ``Pittman-
Robertson Act'' \75\ became effective on July 1, 1938. As 
amended by the Dingell-Johnson Act and other amendments, the 
program provides dedicated funds in the Treasury for Federal 
aid to States for management and restoration of fish and game 
wildlife (including acquisition and improvement of wildlife 
habitat), hunter education programs (including operation of 
target ranges), hunter safety programs, and development of fish 
and wildlife management plans.
---------------------------------------------------------------------------
    \ 70\ Taxable archery equipment is any part or accessory suitable 
for inclusion in or attachment to a taxable bow, and any quiver, 
broadhead, or point suitable for use with a taxable bow.
    \71\ The tax applies to shafts sold separately or as part of a 
finished arrow.
    Otherwise taxable shafts consisting of all natural wood with no 
laminations or artificial means of enhancing the spine, which are 
designed to be (or are) incorporated into a finished arrow measuring 5/
16 of an inch or less in diameter and which are not suitable for use 
with a taxable bow are exempt from tax.
    \72\ The tax rate is adjusted annually for inflation (measured by 
the CPI).
    \73\ Otherwise taxable firearms manufactured by persons that 
manufacture or import fewer than 50 such articles during a calendar 
year are exempt from tax. Sales to the U.S. Department of Defense also 
are exempt.
    \74\ ``Other firearms'' are firearms (other than pistols and 
revolvers) such as regular rifles and shotguns that are exempt from the 
``non-regular firearms'' excise tax of sec. 5811 of the National 
Firearms Act. See, Part II.C.
    \75\ 16 U.S.C. 669-669i; 50 Stat. 917.
---------------------------------------------------------------------------
    Specific Federal Wildlife Restoration Fund expenditure 
purposes.--The Federal Aid to Wildlife Restoration Act 
authorizes appropriations from the Fund attributable to 
revenues from Federal excises on regular firearms (rifles, 
shotguns, pistols and revolvers), ammunition, and bows and 
arrows received during the prior fiscal year to be made 
available until expended. Any State-apportioned amounts that 
are unspent or unobligated at the end of the following fiscal 
year may be used by the Secretary of the Interior to carry out 
the provisions of the Migratory Bird Conservation Act.
    Monies attributable to the excise tax on sporting firearms 
(rifles and shotguns) and ammunition are appropriated to the 
Secretary of the Interior and apportioned to States for paying 
up to 75 percent of the approved wildlife restoration projects 
(including acquisition and development of access facilities for 
public use) and hunter education programs.
    One-half of the monies accruing to the Fund from the excise 
taxes on pistols, revolvers, and bows and arrows are to be 
apportioned among the states based on population. One half of 
the other 50 percent of the monies is apportioned among the 
States based on geographic size, and the balance is apportioned 
based on the number of paid hunting license holders in each 
State. The States may use such apportioned amounts to finance 
up to 75 percent of the costs of the approved plan or project 
(not to include law enforcement or public relation costs), 
i.e., 25 percent must come from State and local government 
sources. States may use funds apportioned on the basis of 
population for up to 75 percent of the costs of hunter safety 
programs and the construction and operation of public target 
ranges.
    Federal administrative expenses are allowed from the Fund 
monies. Limited monies are also available for such aid to U. S. 
territories and possessions. For fiscal year 2003, $8,212,000 
of the monies in the Fund may be used for administering the 
Federal Aid in Wildlife Restoration Act and the Migratory Bird 
Conservation Act. This amount is indexed for inflation for 
fiscal years 2004 and thereafter.\76\ For fiscal year 2010, the 
administration cap amount was $9.798 million.
---------------------------------------------------------------------------
    \76\ 16 U.S.C. sec. 669c(a)(1)(B).
---------------------------------------------------------------------------

        C. Excise Taxes Dedicated to Health-Related Trust Funds


1. Black Lung Disability Trust Fund excise taxes

            Coal excise tax
    To finance the Black Lung Disability Trust Fund, a producer 
(manufacturer) excise tax is imposed on coal (other than 
lignite) mined in the United States.\77\ The present tax rate 
is $1.10 per ton for coal from underground mines and 55 cents 
per ton for coal from surface mines. Both rates are limited to 
a maximum of 4.4 percent of the coal's selling price. The coal 
excise tax rates are scheduled to decline to 50 cents per ton 
for underground mines and 25 cents per ton for surface mines 
(both limited to two percent of the coal's selling price) on 
the earlier of January 1, 2019 or the first January 1 after 
which there is no balance of repayable advances that have been 
made to the Trust Fund and no unpaid interest on previous such 
advances.\78\
---------------------------------------------------------------------------
    \77\ Sec. 4121.
    \78\ Sec. 4121(e).
---------------------------------------------------------------------------
    The tax does not apply to lignite \79\ or to coal mined in 
the United States that is to be exported.\80\
---------------------------------------------------------------------------
    \79\ Sec. 4121(c).
    \80\ See, Ranger Fuel Corp. v. U.S., 33 F.Supp.2d 466 (E.D. Va., 
1998).
---------------------------------------------------------------------------
            Black lung benefit trusts and penalty excise taxes
    Present law allows coal mine operators that are liable for 
paying black lung benefits to miners or their survivors to fund 
that liability through deductible contributions to a qualified 
tax-exempt trust.\81\ To qualify, the trust must be established 
for the sole purpose of satisfying the operator's liability 
under Black Lung Acts, paying premiums for insurance 
exclusively covering such liability, and paying administrative 
expenses of the trust.
---------------------------------------------------------------------------
    \81\ Sec. 501(c)(21).
---------------------------------------------------------------------------
    The Code imposes three ``penalty excise taxes'' to regulate 
potential misuse of monies in these trusts. Revenues from the 
penalty excise taxes are dedicated to the Black Lung Disability 
Trust Fund. Because raising revenue is not the primary purpose 
of these taxes, revenues raised by the penalty excise taxes 
historically have been relatively small. The following table 
summarizes these penalty excise taxes.

------------------------------------------------------------------------
          Tax (and Code section)                      Tax rates
------------------------------------------------------------------------
Self-dealing (sec. 4951) \82\.............  Initial tax.--10 percent of
                                             the amount of self-dealing
                                             on the self dealer; 2.5
                                             percent of such amount on
                                             the trustee
                                            Additional tax.--If not
                                             corrected, additional tax
                                             of 100 percent of amount
                                             involved on the self
                                             dealer; 50 percent of such
                                             amount on the trustee
Taxable expenditures (sec. 4952) \83\       Initial tax.--10 percent of
                                             taxable expenditure on the
                                             fund; 2.5 percent of such
                                             amount on the trustee
                                            Additional tax.--If not
                                             corrected, additional tax
                                             of 100 percent of amount of
                                             expenditure on the fund; 50
                                             percent of such amount on
                                             the trustee
Excess contributions to benefit trust       Five percent of excess
 (sec. 4953)                                 contribution on the
                                             contributor
------------------------------------------------------------------------

            Overview of Black Lung Disability Trust Fund expenditure 
                    provisions
    In general.--Operation of the Black Lung Disability Trust 
Fund is governed by parallel provisions of the Code and 
authorizing statutes.\84\ The Code provisions govern deposit of 
revenues into the trust fund and approve general expenditure 
programs. The authorizing statutes specify expenditure 
programs.
---------------------------------------------------------------------------
    \82\ Self-dealing is defined as sale, leasing, etc. of real or 
personal property, lending of money or other extension of credit, 
furnishing of goods, services or facilities, and payment of 
compensation between a benefit trust and a disqualified person. A 
disqualified person is a contributor to the benefit trust, a trustee, 
or an owner of more than 10 percent of the combined voting power of a 
corporation, the profits interest of a partnership, or the beneficial 
interest of a trust or unincorporated entity that is a contributor to 
the benefit trust. Officers, directors, and employees of contributors 
to the benefit trust and spouses, family members, and certain related 
corporations and trusts also are disqualified persons.
    \83\ A taxable expenditure is any expenditure other than for a 
purpose described in sec. 501(c)(21).
    \84\ Sec. 9501 and 30 U.S.C. sec. 901 et seq.
---------------------------------------------------------------------------
    Black Lung Disability Trust Fund expenditure purposes.--
Amounts in the trust fund are available, as provided in 
appropriation Acts, for the following purposes:
          1. Payment of benefits under section 422 of the Black 
        Lung Benefits Act in cases where the Secretary of Labor 
        determines that (a) the coal mine operator liable for 
        the payment of such benefits has not commenced payment 
        of benefits within 30 days after the date of an initial 
        determination of eligibility or has not made a payment 
        within 30 days after the payment is due, or (b) there 
        is no operator who is liable for payment of such 
        benefits;
          2. Payment of obligations incurred by the Secretary 
        of Labor for claims of miners or their survivors where 
        the miner's last coal mine employment was before 
        January 1, 1970;
          3. Repayment to the General Fund of amounts paid by 
        the Secretary of Labor for claims under part C of the 
        Black Lung Benefits Act that were attributable to 
        eligibility between January 1, 1974-March 31, 1978;
          4. Repayment of advances (and interest on advances) 
        to the General Fund;
          5. Payment of administrative expenses incurred on or 
        after March 1, 1978, by the Department of Labor or 
        Department of Health and Human Services under Part C of 
        the Black Lung Benefits Act (other than sections 427(a) 
        or 433), or by the Department of the Treasury in 
        administering the excise tax and the Trust Fund;
          6. Reimbursement of operators for amounts paid (other 
        than for penalties or interest) before April 1, 1978, 
        in satisfaction of claims of miners employed before 
        Payment January 1, 1970; and
          7. Reimbursement of operators and insurers for 
        amounts paid (other than for penalties, interest, or 
        attorney's fees) for any claim denied before March 1, 
        1978, and which is or has been approved under section 
        435 of the Black Lung Benefits Act.

2. Vaccine Injury Compensation Trust Fund excise taxes

            In general
    A 75-cents-per-dose \85\ excise tax is imposed on the sale 
or use by a manufacturer or importer of listed vaccines to 
finance the Vaccine Injury Compensation Trust Fund program.\86\ 
The tax is imposed on sale or use by private parties and 
governmental entities, including the Federal, State, and local 
governments. The tax further is imposed within the 50 States 
and the District of Columbia and in Puerto Rico, the 
Commonwealth of the Northern Marianas, the Trust Territory of 
the Pacific, and all other U.S. possessions.
---------------------------------------------------------------------------
    \85\ Vaccines comprised of more than one taxable component vaccine 
are taxed as if the components were separate doses.
    \86\ Sec. 4131.
---------------------------------------------------------------------------
    The following table lists the currently taxable vaccines.

------------------------------------------------------------------------
                            Taxable vaccines:
-------------------------------------------------------------------------
Any vaccine containing diphtheria toxoid
------------------------------------------------------------------------
Any vaccine containing tetanus toxoid
------------------------------------------------------------------------
Any vaccine containing pertussis bacteria, extracted or partial cell
 bacteria, or specific pertussis antigens
------------------------------------------------------------------------
Any vaccine against measles, mumps, or rubella
------------------------------------------------------------------------
Any vaccine containing polio virus
------------------------------------------------------------------------
Any vaccine against hepatitis A, hepatitis B, chicken pox, or rotavirus
 gastroenteritis
------------------------------------------------------------------------
Any conjugate vaccine against streptococcus pneumoniae
------------------------------------------------------------------------
Any trivalent vaccine against influenza
------------------------------------------------------------------------
Any meningococcal vaccine
------------------------------------------------------------------------
Any vaccine against the human papillomavirus
------------------------------------------------------------------------

            Overview of Vaccine Injury Compensation Trust Fund 
                    provisions
    Operation of the Vaccine Injury Compensation Trust Fund is 
governed by parallel provisions of the Code and authorizing 
statutes.\87\ The Code provisions govern deposit of revenues 
into the trust fund and approve general expenditure programs. 
The authorizing statutes specify expenditure programs.
---------------------------------------------------------------------------
    \87\ Sec. 9510 and 42 U.S.C. sec. 300aa.
---------------------------------------------------------------------------
    Amounts in the Vaccine Injury Compensation Trust Fund are 
available, as provided in appropriations Acts, only for the 
following:
          1. Payment of compensation under subtitle 2 of Title 
        XXI of the Public Health Service Act (as in effect on 
        October 18, 2000) for vaccine-related injury or death 
        with respect to any vaccine which is (a) administered 
        after September 30, 1988, and (b) a taxable vaccine 
        (defined in sec. 4132(a)(1)) at the time compensation 
        is paid; or
          2. Payment of expenses of administration (not to 
        exceed $9.5 million for any fiscal year) incurred by 
        the Federal Government in administering subtitle 2.
    Liability of the United States relating to vaccine injury 
compensation is limited to the amount in the Vaccine Injury 
Compensation Trust Fund, and any claim filed against the fund 
may be paid only out of the fund.

3. Patient-Centered Outcomes Research Trust Fund excise taxes

            In general
    The ``Patient Protection and Affordable Care Act,'' as 
amended by the ``Health and Education Reconciliation Act of 
2010'' (the ``Health-Care Reform Act'') \88\ imposed two new 
excise taxes, or ``fees'' on insured and self-insured health 
plans.\89\ Revenues from the taxes are dedicated to the 
Patient-Centered Outcomes Research Trust Fund. These excise 
taxes become effective for policy years ending after September 
30, 2012.
---------------------------------------------------------------------------
    \88\ Pub. L. No. 111-148 and Pub. L. No. 111-152 (2010).
    \89\ Secs. 4375 and 4376.
---------------------------------------------------------------------------
    The tax rates are phased in, beginning at $1.00 for 
``specified health insurance policies'' for insured plans in FY 
2013 and $2.00 for such policies in FY 2014. For self-insured 
plans, the tax rates are $1.00 for self-insured plans in FY 
2013 and $2.00 in FY 2014. In both cases, the tax is determined 
by applying the applicable rate to the average number of lives 
covered under the policy or plan. After FY 2014, the tax rate 
is indexed to reflect projected annual increases in the per 
capita amount of national health expenditures.
    The taxes are imposed on all persons issuing taxable 
insurance policies or providing self-insured plans, including 
governmental entities (other than Medicare, Medicaid, the State 
Children's Health Insurance Program (``SCHIP''), and Federal 
programs for providing medical care (other than through 
insurance policies) to members of the Armed Forces, veterans, 
or members of Indian tribes). The taxes further are imposed 
both within the 50 States and the District of Columbia, and in 
all U.S. possessions (including Puerto Rico, the Commonwealth 
of the Northern Marianas, and the Trust Territory of the 
Pacific).
    A ``specified health insurance policy'' is an accident or 
health insurance policy that is issued with respect to 
individuals residing in the United States.\90\
---------------------------------------------------------------------------
    \90\ A specified health insurance policy does not include a policy 
substantially all of the benefits of which are excepted benefits under 
section 9832(c). Examples of excepted benefits are coverage for only 
accident or disability insurance, or any combination thereof, liability 
insurance, workers' compensation or similar insurance, automobile 
medical payment insurance, coverage for on-site medical clinics, 
limited scope dental or vision benefits, benefits for long-term care, 
nursing home care, community-based care, coverage for only a specified 
disease or illness, hospital indemnity or other fixed indemnity 
insurance, and Medicare supplemental coverage.
---------------------------------------------------------------------------
    A taxable self-insured plan is any plan providing accident 
or health coverage if any portion of the coverage is provided 
other than through an insurance policy and such plan is 
established or maintained by (1) an employer for benefit of its 
employees, (2) an employee organization for the benefit of its 
members (or former members), (3) a Voluntary Employee 
Beneficiary Association (``VEBA'') under section 501(c)(9), (4) 
any section 501(c)(6) organization, or (5) a multiple employer 
welfare arrangement or rural electric or telephone cooperative.
            Overview of Patient-Centered Outcomes Research Trust Fund 
                    provisions
    The Health-Care Reform Act establishes the Patient-Centered 
Outcomes Research Institute, a non-government, non-profit 
corporation to support research, evidence synthesis, and 
dissemination of research findings on ``the manner in which 
diseases, disorders, and other health conditions can 
effectively and appropriately be prevented, diagnosed, treated, 
monitored and managed.'' The Patient-Centered Outcomes Research 
Institute is funded through a newly established Patient-
Centered Outcomes Research Trust Fund.\91\
---------------------------------------------------------------------------
    \91\ Sec. 9512.
---------------------------------------------------------------------------

4. Annual fee on branded prescription pharmaceutical manufacturers and 
        importers

    An annual fee is imposed on certain manufacturers and 
importers of branded prescription drugs for sale to any 
specified government program or pursuant to coverage under any 
such program. Fees collected are credited to the Medicare Part 
B trust fund.
    The aggregate annual fee imposed on all covered 
manufacturers and importers is $2.5 billion for calendar year 
2011, $2.8 billion for calendar years 2012 and 2013, $3 billion 
for calendar years 2014 through 2016, $4 billion for calendar 
year 2017, $4.1 billion for calendar year 2018, and $2.8 
billion for calendar year 2019 and thereafter. The aggregate 
fee is apportioned among the covered manufacturers and 
importers each year based on their relative share of branded 
prescription drug sales taken into account during the previous 
calendar year.
    A covered manufacturer's or importer's relative market 
share for a calendar year is the manufacturer's or importer's 
branded prescription drug sales taken into account during the 
preceding calendar year as a percentage of the aggregate 
branded prescription drug sales of all manufacturers and 
importers taken into account during the preceding calendar 
year. Sales taken into account during any calendar year with 
respect to a manufacturer or importer is: (1) zero percent of 
sales not more than $5 million; (2) 10 percent of sales over $5 
million but not more than $125 million; (3) 40 percent of sales 
over $125 million but not more than $225 million; (4) 75 
percent of sales over $225 million but not more than $400 
million; and (5) 100 percent of sales over $400 million.
    Branded prescription drug sales are sales of branded 
prescription drugs made to any specified government program, or 
pursuant to coverage under any such program. The term ``branded 
prescription drug'' includes any drug which is subject to 
section 503(b) of the Federal Food, Drug, and Cosmetic Act and 
for which an application was submitted under section 505(b) of 
such Act. Branded prescription drugs also include any 
biological product the license for which was submitted under 
section 351(a) of the Public Health Service Act. Branded 
prescription drug sales does not include sales of any drug or 
biological product with respect to which an orphan drug tax 
credit was allowed for any taxable year under section 45C. The 
exception for orphan drug sales does not apply to any drug or 
biological product after such drug or biological product is 
approved by the Food and Drug Administration for marketing for 
any indication other than the rare disease or condition with 
respect to which the section 45C credit was allowed.
    Specified government programs include: (1) the Medicare 
Part D program under part D of title XVIII of the Social 
Security Act; (2) the Medicare Part B program under part B of 
title XVIII of the Social Security Act; (3) the Medicaid 
program under title XIX of the Social Security Act; (4) any 
program under which branded prescription drugs are procured by 
the Department of Veterans Affairs; (5) any program under which 
branded prescription drugs are procured by the Department of 
Defense; or (6) the TRICARE retail pharmacy program under 
section 1074g of title 10, United States Code.
    For purposes of procedure and administration under the 
rules of Subtitle F of the Code, the fee under this provision 
is treated as an excise tax with respect to which only civil 
actions for refund under Subtitle F apply. The Secretary of the 
Treasury may redetermine the amount of a covered entity's fee 
for any calendar year for which the statute of limitations 
remains open.
    For purposes of section 275, relating to the 
nondeductibility of specified taxes, the fee is considered to 
be a nondeductible tax described in section 275(a)(6).
    The fees apply to covered manufacturers and importers for 
calendar years beginning after December 31, 2010.

                     II. GENERAL FUND EXCISE TAXES

                 A. Principal General Fund Excise Taxes

1. Distilled spirits, wine and beer excise taxes
            In general
    Federal excise taxes on alcohol were first imposed by the 
Distilled Spirits Tax Act of 1791, but the origins of most of 
the excise taxes on distilled spirits, wine, and beer dates 
from the 1860s when they were enacted to fund the Federal 
Government's costs of the Civil War. Under present law, taxes 
are imposed at different rates for distilled spirits, wine, and 
beer and are imposed on these products when produced or 
imported. Generally, these excise taxes are administered and 
enforced by the Alcohol and Tobacco Tax and Trade Bureau (TTB), 
Department of the Treasury, except these taxes on imported 
bottled distilled spirits, wine, and beer are collected by the 
Customs and Border Protection Bureau (CBP), Department of 
Homeland Security, under delegation by the Secretary of the 
Treasury.
    The following table outlines the present rates of tax on 
distilled spirits, wine, and beer:

------------------------------------------------------------------------
          Tax (and Code section)                      Tax rates
------------------------------------------------------------------------
Distilled spirits (sec. 5001).............  $13.50 per proof gallon \92\
 
Wines (sec. 5041)
    ``Still wines'' \93\ not more than 14   $1.07 per wine gallon \94\
     percent alcohol......................
    ``Still wines'' more than 14 percent,   $1.57 per wine gallon
     but not more than 21 percent, alcohol
    ``Still wines'' more than 21 percent,   $3.15 per wine gallon
     but not more than 24 percent, alcohol
    ``Still wines'' more than 24 percent    $13.50 per proof gallon
     alcohol..............................   (taxed as distilled
                                             spirits)
 
    Champagne and other sparkling wines...  $3.40 per wine gallon
    Artificially carbonated wines.........  $3.30 per wine gallon
    Hard apple cider \95\.................  $0.226 per wine gallon
 
Beer (sec. 5051)..........................  $18 per barrel (31 gallons)
                                             generally
------------------------------------------------------------------------

    The liability for the excise tax on distilled spirits comes 
into existence at the moment the alcohol is produced but is not 
determined and payable until the bottled distilled spirits are 
removed from the bonded premises of the distilled spirits 
plant. The liability for the excise taxes on wine and beer also 
come into existence when the alcohol is produced but is not 
payable until the wine or beer is removed from the bonded wine 
cellar or winery or brewery for consumption or sale. Generally, 
bulk distilled spirits and bulk and bottled wine may be 
transferred in bond between bonded premises and beer may be 
transferred between commonly owned breweries without payment of 
the tax; however, the tax liability follows these products. 
Imported bulk distilled spirits, bulk natural wine, and bulk 
beer may be released from customs custody without payment of 
the tax and transferred in bond to a distillery, winery, or 
brewery. Distilled spirits, wine, and beer may be exported 
without payment of the tax and these products may be withdrawn 
without payment of tax or free of tax from the production 
facility for certain authorized uses, including industrial uses 
and non-beverage uses.
---------------------------------------------------------------------------
    \92\ A proof gallon is a U.S. liquid gallon consisting of 50 
percent alcohol.
    \93\ A ``still wine'' is a non-carbonated wine. Most common table 
wines are still wines.
    \94\ A wine gallon is a U.S. liquid gallon.
    \95\ Hard apple cider is defined as apple cider otherwise 
classified as a still wine, the alcohol content of which is at least 
one-half of one percent but less than seven percent by volume.
---------------------------------------------------------------------------
    A portion of the revenues from the distilled spirits excise 
tax imposed on rum imported or brought into \96\ the United 
States (less certain administrative costs) is transferred 
(``covered over'') to Puerto Rico and the U.S. Virgin 
Islands.\97\ The amount covered over is $10.50 per proof gallon 
($13.25 per proof gallon during the period from July 1, 1999, 
through December 31, 2011).
---------------------------------------------------------------------------
    \96\ Because Puerto Rico is inside U.S. customs territory, articles 
entering the United States from that commonwealth are ``brought into'' 
rather than ``imported into'' the U.S.
    \97\ Sec. 7652.
---------------------------------------------------------------------------
    Eligible distilled spirits wholesale distributors and 
distillers receive an income tax credit for the average cost of 
carrying previously imposed excise tax on beverages stored in 
their warehouses.\98\
---------------------------------------------------------------------------
    \98\ Sec. 5011. Section 5011 is administered and enforced by the 
Internal Revenue Service.
---------------------------------------------------------------------------
            Reduced rates and exemptions for certain wine and beer 
                    producers
    Domestic wineries having aggregate annual production not 
exceeding 250,000 gallons receive a credit against the wine 
excise tax equal to 90 cents per gallon (the amount of a wine 
tax increase enacted in 1990) on the first 100,000 gallons of 
wine removed during a calendar year.\99\ The credit is reduced 
by one percent for each 1,000 gallons produced in excess of 
150,000 gallons. The credit does not apply to champagne and 
other sparkling wines. The credit rate is 5.6 cents per gallon 
for hard apple cider. Production of hard cider and other wines 
produced by a qualifying winery are aggregated in applying the 
per-winery volume limits of the credit.
---------------------------------------------------------------------------
    \99\ Sec. 5041(c).
---------------------------------------------------------------------------
    Small domestic brewers are subject to a reduced tax rate of 
$7 per barrel on the first 60,000 barrels of beer removed each 
year.\100\ Small brewers are defined as brewers producing fewer 
than two million barrels of beer during a calendar year. The 
credit reduces the effective per-gallon tax rate from 
approximately 58 cents per gallon to approximately 22.6 cents 
per gallon for this beer.
---------------------------------------------------------------------------
    \100\ Sec. 5051(a)(2).
---------------------------------------------------------------------------
    Individuals may produce limited quantities of wine and beer 
for personal or family use without payment of tax during each 
calendar year. The limits for each beverage are 200 gallons per 
calendar year for households of two or more adults and 100 
gallons per calendar year for single-adult households.

2. Tobacco excise taxes

            In general
    Excise taxes are imposed on tobacco products and cigarette 
papers and tubes that are manufactured or imported into the 
United States. ``Tobacco products'' means cigars, cigarettes, 
smokeless tobacco (snuff and chewing tobacco), pipe tobacco, 
and roll your own tobacco. Processed tobacco is regulated under 
the internal revenue laws but no excise tax is imposed on it. 
The tax liability comes into existence when the domestic 
tobacco products are manufactured and is determined and payable 
when the tobacco products or cigarette papers and tubes are 
removed in packages from the bonded premises of the 
manufacturer. Manufacturers and export warehouse proprietors 
are subject to an annual special (occupational) tax. These 
excise taxes are administered and enforced by TTB, except that 
the taxes on imported tobacco products and cigarette papers and 
tubes are collected by CBP, under a delegation from the 
Secretary of the Treasury, except where such imported products 
are transferred in bond to the bonded premises of a 
manufacturer of tobacco products or cigarette papers and tubes 
or export warehouse proprietor. Tobacco products and cigarette 
papers and tubes may be exported from the United States without 
payment of tax.

------------------------------------------------------------------------
          Tax (and Code section)                      Tax rates
------------------------------------------------------------------------
Tobacco products (sec. 5701)
    ``Small cigarettes'' (weighing three    $50.33 per thousand \101\
     pounds or less per thousand).........
    ``Large cigarettes'' (weighing more     $105.69 per thousand \102\
     than three pounds per thousand)......
    ``Small cigars'' (weighing three        $50.33 per thousand
     pounds or less per thousand).........
    ``Large cigars'' (weighing more than    52.75 percent of
     three pounds per thousand).             manufacturer's sales price,
                                             but not more than 40.26
                                             cents per cigar \103\
    Snuff.................................  $1.51 per pound
                                             (proportionate rate on
                                             fractional parts of a
                                             pound)
    Chewing tobacco.......................  50.33 cents per pound
                                             (proportionate rate on
                                             fractional parts of a
                                             pound)
    Pipe tobacco..........................  $2.8311 per pound
                                             (proportionate rate on
                                             fractional parts of a
                                             pound)
    ``Roll-your-own'' tobacco.............  $24.78 per pound
                                             (proportionate rate on
                                             fractional parts of a
                                             pound)
    Cigarette papers \104\................  3.15 cents for each 50
                                             papers (or fractional part
                                             thereof)
    Cigarette tubes.......................  6.30 cents for each 50 tubes
                                             (or fractional part
                                             thereof)
Manufacturers and export warehouse          $1,000 per taxable year, per
 proprietors occupational tax (sec. 5731).   premise ($500 per year, per
                                             premise for businesses
                                             having gross receipts of
                                             less than $500,000 in the
                                             preceding taxable year)
                                             \105\
------------------------------------------------------------------------


3. Communications excise tax

    Local telephone service, teletypewriter service, and 
prepaid telephone cards (that are expressly for local-only 
service) are subject to a three-percent excise tax.\106\ The 
taxes on local telephone service and teletypewriter service are 
imposed on the amount billed to consumers. The consumer is 
liable for the tax, with service providers being responsible 
for collecting and remitting tax to the Government. The tax on 
prepaid telephone cards is based on the face amount of the card 
and is imposed when the cards are transferred from a 
telecommunications carrier to any person who is not such a 
carrier.
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    \101\ The tax rate equals $1.0066 per pack of 20 cigarettes.
    \102\ Large cigarettes more than 6.5 inches long are taxed as small 
cigarettes, counting each 2.75 inches in length (or fraction) as one 
cigarette.
    \103\ The price of large cigars on which tax is based is inclusive 
of any charge for putting the cigar into a condition ready for sale, 
and is exclusive of (1) Federal excise tax and (2) separately stated 
retail sales taxes imposed by any State or local government (regardless 
of whether the vendor or purchaser is liable for the tax).
    \104\ Cigarette papers measuring more than 6.5 inches in length are 
taxed at the rate prescribed, counting each 2.75 inches (or fraction 
thereof) as one cigarette paper. An identical rule applies to cigarette 
tubes more than 6.5 inches in length.
    \105\ The taxable year is July 1 through June 30.
    \106\ Sec. 4251.
---------------------------------------------------------------------------
    Statutorily, the tax applies to ``toll,'' or long distance, 
telephone service as well. However, toll service is defined in 
the Code as service for which charges vary based on both 
distance and elapsed time. Present long distance service 
typically does not vary based on both of these elements; 
therefore, tax is not imposed on such service. After July 31, 
2006, collectors stopped collecting and paying over the tax on 
long distance service. The Internal Revenue Service allowed 
taxpayers to claim income tax credits for past excise tax 
collected on non-taxable service that was billed after February 
28, 2003, and before August 1, 2006, on their 2006 Federal 
income tax returns.\107\
---------------------------------------------------------------------------
    \107\ Notice 2006-50, 2006 I.R.B. 25, and Notice 2007-11, 2007 
I.R.B. 261.
---------------------------------------------------------------------------

4. Gas Guzzler excise tax

    Automobiles with a fuel efficiency rating less than 22.5 
miles per gallon (``mpg'') are subject to an excise tax ranging 
from $1,000 to $7,700.\108\ The tax is imposed on manufacturers 
and importers. Taxable automobiles include four-wheeled highway 
vehicles rated at 6,000 pounds unloaded gross vehicle weight or 
less. The following table outlines the rates imposed on 
vehicles at different fuel efficiency levels.
---------------------------------------------------------------------------
    \108\ Sec. 4064.

------------------------------------------------------------------------
    Fuel economy rating (in mpg)               Tax per vehicle
------------------------------------------------------------------------
At least 22.5......................  No tax
At least 21.5, but less than 22.5..  $1,000
At least 20.5 but less than 21.5...  $1,300
At least 19.5 but less than 20.5...  $1,700
At least 18.5 but less than 19.5...  $2,100
At least 17.5 but less than 18.5...  $2,600
At least 16.5 but less than 17.5...  $3,000
At least 15.5 but less than 16.5...  $3,700
At least 14.5 but less than 15.5...  $4,500
At least 13.5 but less than 14.5...  $5,400
At least 12.5 but less than 13.5...  $6,400
Less than 12.5.....................  $7,700
------------------------------------------------------------------------

    Fuel economy ratings are determined by the Environmental 
Protection Agency based upon the average number of miles 
traveled by the automobile per gallon of gasoline.
    Exemptions are provided for automobiles classified as non-
passenger vehicles under rules prescribed by the Department of 
Transportation for purposes of section 501 of the Motor 
Vehicles Information and Cost Savings Act (as in effect on 
November 9, 1978), emergency vehicles used as ambulances or 
ambulance/hearses, police and law-enforcement vehicles, and 
other emergency-use vehicles specified in Treasury Department 
regulations. The Treasury Department further has excluded 
certain sport utility vehicles (and trucks) from the term 
``automobile'' as defined for purposes of the tax.

5. Water Transportation Passenger excise tax

    A $3 per passenger retail excise tax is imposed on 
``covered voyages'' on commercial vessels.\109\ The ship 
operator is liable for payment of the tax. A covered voyage is 
defined generally as any voyage during which passengers embark 
or disembark the vessel in the United States, and (1) which 
extends for one or more nights on a passenger vessel having 
berth or stateroom accommodations for more than 16 passengers, 
or (2) on which passengers may engage in gambling aboard the 
vessel while beyond the territorial waters of the United States 
(i.e., more than three nautical miles from shore). The tax does 
not apply to voyages on any vessel owned or operated by the 
United States or a State or any agency or political 
subdivision, nor does it apply to a voyage of fewer than 12 
hours between two U.S. ports.
---------------------------------------------------------------------------
    \109\ Sec. 4471.
---------------------------------------------------------------------------

6. Ozone-Depleting Chemicals excise tax

            Chemicals
    A manufacturers and importers excise tax is imposed on 
listed ozone-depleting chemicals sold or used in the United 
States.\110\ The tax rate per pound of listed chemicals is 
determined as the product of a base tax amount and each 
chemical's statutorily prescribed ``ozone depleting factor.'' 
The base tax amount is $12.55 for calendar year 2011; this 
amount increases by $0.45 each year. The following table 
outlines the chemicals subject to tax, their statutorily 
prescribed ozone-depleting factors, and the 2011 tax applicable 
to those chemicals.
---------------------------------------------------------------------------
    \110\ Sec. 4681.

------------------------------------------------------------------------
                                                  Ozone-
                  Chemicals                      depleting     2011 Tax
                                                  factor      per pound
------------------------------------------------------------------------
CFC-11, CFC-12, CFC-13, CFC-111, CFC-112, CFC-         1.0        $12.55
 114, and CFC-211 through CFC-217............
CFC-113......................................          0.8        $10.04
CFC-115......................................          0.6         $7.53
Halon-1211...................................          3.0        $37.65
Halon-1301...................................        10.0        $125.50
Halon-2402...................................          6.0        $75.30
Carbon tetrachloride.........................          1.1        $13.80
Methyl chloroform............................          0.1         $1.25
------------------------------------------------------------------------


    Ozone-depleting chemicals that are diverted or recovered in 
the United States as part of a recycling process (and not as 
part of an original manufacturing or production process) and 
certain exported chemicals are exempt from tax. Chemicals used 
as propellants in metered-dose inhalers are exempt from tax.
            Imported taxable products
    Imported products manufactured or produced using taxable 
ozone-depleting chemicals as materials are subject to tax at a 
rate that would have been imposed on the ozone-depleting 
chemicals had those chemicals used been sold in the United 
States. If an importer does not furnish adequate information to 
the Treasury Department to determine a tax rate for a product, 
the assumed rate is one percent of the value of the imported 
product.

                   B. Foreign Procurement Excise Tax

    Foreign persons are subject to an excise tax of two percent 
on any specified procurement payment.\111\ A specified 
procurement payment is a payment made by the United States 
government or its agents, pursuant to a contract under which 
the United States purchases goods or services from a source in 
a country that is not party to an international government 
procurement agreement (``GPA'') with the United States. Goods 
are from such a source if produced or manufactured in such 
country. Payments for services are subject to the tax if the 
services are provided in a country that is not a party to such 
an agreement with the United States. If the origin of the goods 
or services is in a country that is not a member of the GPA, 
payments made to a foreign parent located in a country that is 
a member of the GPA are subject to the excise tax.
---------------------------------------------------------------------------
    \111\ Sec. 5000C.
---------------------------------------------------------------------------
    The excise tax is imposed on the gross amount of the 
payment under contracts entered into on or after January 2, 
2011.\112\ It is treated as an income tax solely for purposes 
of subtitle F of the Internal Revenue Code, permitting 
assessment and collection of the amounts in a manner similar to 
the withholding taxes under chapter 3.
---------------------------------------------------------------------------
    \112\ The provision was enacted as section 301 of the James Zadroga 
9/11 Health and Compensation Act of 2010, Pub. L. No. 111-347. The 
President signed the bill on January 2, 2011.
---------------------------------------------------------------------------

       C. General Fund Excise Taxes Related to Health Care \113\

---------------------------------------------------------------------------
    \113\ For purposes of this pamphlet, Pub. L. No. 111-148 (2010), 
the ``Patient Protection and Affordable Care Act'' and Pub. L. No. 111-
152 (2010), the ``Healthcare and Education Reconciliation Act of 2010'' 
are collectively referred to as the ``Health-Care Reform Act.'' The 
annual fee on branded prescription pharmaceutical manufacturers and 
importers, added by the Health-Care Reform Act, is discussed, supra, in 
I.C.4, relating to excise taxes dedicated to health-related trust 
funds.
---------------------------------------------------------------------------

1. Excise Tax on Indoor Tanning Services

    A retail sales tax is imposed on indoor tanning 
services.\114\ The tax rate is 10 percent of the amount paid 
for such services. Consumers are liable for the tax, with 
service providers being responsible for collecting and 
remitting the tax to the Federal Government.\115\ The tax 
applies to tanning services provided after June 30, 2010.
---------------------------------------------------------------------------
    \114\ Sec. 5000B.
    \115\ This structure is like that of the communications excise tax 
on local telephone service and the domestic air passenger excise tax.
---------------------------------------------------------------------------
    Indoor tanning services are services employing any 
electronic product designed to induce skin tanning and which 
incorporate one or more ultraviolet lamps with wavelengths in 
air between 200 and 400 nanometers. Taxable services do not 
include phototherapy service performed by a licensed medical 
professional.

2. Excise Tax on Certain Medical Devices

    A 2.3-percent excise tax is imposed on the sale of medical 
devices by the manufacturer of importer. ``Medical device'' is 
defined in section 201(h) of the Federal Food, Drug, and 
Cosmetic Act.\116\ Section 201(h) defines ``device'' as an 
instrument, apparatus, implement, machine, contrivance, 
implant, in vitro reagent, or other similar or related article, 
including any component part or accessory which is (1) 
recognized in the official National Formulary, or the United 
States Pharmacopeia, or any supplement to them, (2) intended 
for use in the diagnosis of disease or other conditions, or in 
the cure, mitigation, treatment, or prevention of disease, in 
man or other animals, or (3) intended to affect the structure 
or any function of the body of man or other animals, and which 
does not achieve its primary intended purposes through chemical 
action within or on the body of man or other animals and which 
is not dependent upon being metabolized for the achievement of 
its primary intended purposes.
---------------------------------------------------------------------------
    \116\ Sec. 4191; 21 U.S.C. sec. 321.
---------------------------------------------------------------------------
    The tax does not apply to eyeglasses, contact lenses, 
hearing aids, or to other medical devices specified by the 
Treasury Department to be generally sold in retail 
establishments or over the Internet to individuals for their 
personal use. Examples of such items could be pregnancy test 
kits, diabetes testing supplies, denture adhesives, and certain 
bandages and tipped applicators.
    The tax, which takes effect after December 31, 2012, 
applies to sales to State or local governments, nonprofit 
organizations, and qualified blood collectors as well to sales 
to private parties.

3. Annual Fee on Health Insurance Providers

    An annual fee is imposed on any covered entity engaged in 
the business of providing health insurance with respect to 
United States health risks. The aggregate annual fee for all 
covered entities is $8 billion for calendar year 2014, $11.3 
billion for calendar years 2015 and 2016, $13.9 billion for 
calendar year 2017, and $14.3 billion for calendar year 2018. 
For calendar years after 2018, the fee is the amount for the 
preceding calendar year indexed to the rate of premium growth.
    The aggregate annual fee is apportioned among the providers 
based on a ratio designed to reflect relative market share of 
U.S. health insurance business. For each covered entity, the 
fee for a calendar year is an amount that bears the same ration 
to the aggregate annual fee as (1) the covered entity's net 
premiums written during the preceding calendar year with 
respect to health insurance for any United States health risk, 
bears to (2) the aggregate net written premiums of all covered 
entities during such preceding calendar year with respect to 
such health insurance.
    Net written premiums means premiums written, including 
reinsurance premiums written, reduced by reinsurance ceded, and 
reduced by ceding commissions. Net written premiums do not 
include amounts arising under arrangements that are not treated 
as insurance (i.e., in the absence of sufficient risk shifting 
and risk distribution for the arrangement to constitute 
insurance).\117\
---------------------------------------------------------------------------
    \117\ See Helvering v. Le Gierse, 312 U.S. 531 (1941).
---------------------------------------------------------------------------
    The amount of net premiums written that are taken into 
account for purposes of determining a covered entity's market 
share is subject to dollar thresholds. A covered entity's net 
premiums written during the calendar year that are not more 
than $25 million are not taken into account for this purpose. 
With respect to a covered entity's net premiums written during 
the calendar year that are more than $25 million but not more 
than $50 million, 50 percent are taken into account, and 100 
percent of net premiums written in excess of $50 million are 
taken into account.
    After application of the above dollar thresholds, a special 
rule provides an exclusion, for purposes of determining an 
otherwise covered entity's market share, of 50 percent of net 
premiums written that are attributable to the exempt activities 
\118\ of a health insurance organization that is exempt from 
Federal income tax \119\ by reason of being described in 
section 501(c)(3) (generally, a public charity), section 
501(c)(4) (generally, a social welfare organization), section 
501(c)(26) (generally, a high-risk health insurance pool), or 
section 501(c)(29) (a consumer operated and oriented plan 
(``CO-OP'') health insurance issuer).
---------------------------------------------------------------------------
    \118\ The exempt activities for this purpose are activities other 
than activities of an unrelated trade or business defined in section 
513 of the Code.
    \119\ Section 501(m) of the Code provides that an organization 
described in section 501(c)(3) or (4) is exempt from Federal income tax 
only if no substantial part of its activities consists of providing 
commercial-type insurance. Thus, an organization otherwise described in 
section 501(c)(3) or (4) that is taxable (under the Federal income tax 
rules) by reason of section 501(m) is not eligible for the 50-percent 
exclusion under the insurance fee.
---------------------------------------------------------------------------
    A covered entity generally is an entity that provides 
health insurance with respect to United States health risks 
during the calendar year in which the fee under this section is 
due. Thus for example, an insurance company subject to tax 
under part I or II of subchapter L, an organization exempt from 
tax under section 501(a), a foreign insurer that provides 
health insurance with respect to United States health risks, or 
an insurer that provides health insurance with respect to 
United States health risks under Medicare Advantage, Medicare 
Part D, or Medicaid, is a covered entity except as provided in 
specific exceptions.
    Specific exceptions are provided to the definition of a 
covered entity. A covered entity does not include an employer 
to the extent that the employer self-insures the health risks 
of its employees. A covered entity does not include any 
governmental entity, or an entity that (1) qualifies as 
nonprofit under applicable State law, (2) meets the private 
inurement and limitation on lobbying provisions described in 
section 501(c)(3), and (3) receives more than 80 percent of its 
gross revenue from government programs that target low-income, 
elderly, or disabled populations (including Medicare, Medicaid, 
the State Children's Health Insurance Plan (``SCHIP''), and 
dual-eligible plans).
    A covered entity does not include an organization that 
qualifies as a VEBA under section 501(c)(9) that is established 
by an entity other than the employer (i.e., a union) for the 
purpose of providing health care benefits. This exclusion does 
not apply to multi-employer welfare arrangements (``MEWAs'').
    A United States heath risk means the health risk of an 
individual who is a U.S. citizen, is a U.S. resident within the 
meaning of section 7701(b)(1)(A) (whether or not located in the 
United States), or is located in the United States, with 
respect to the period that the individual is located there.
    Health insurance does not include coverage only for 
accident, or disability income insurance, or a combination 
thereof. Health insurance does not include coverage only for a 
specified disease or illness, nor does health insurance include 
hospital indemnity or other fixed indemnity insurance. Health 
insurance does not include any insurance for long-term care or 
any Medicare supplemental health insurance (as defined in 
section 1882(g)(1) of the Social Security Act).
    For purposes of procedure and administration under the 
rules of Subtitle F of the Code, the fee is treated as an 
excise tax with respect to which only civil actions for refund 
under Subtitle F apply. The Secretary of the Treasury may 
redetermine the amount of a covered entity's fee for any 
calendar year for which the statute of limitations remains 
open.
    For purposes of section 275, relating to the 
nondeductibility of specified taxes, the fee is considered to 
be a nondeductible tax described in section 275(a)(6).
    The annual fee is required to be paid in each calendar year 
beginning after December 31, 2013. The fee is determined with 
respect to net premiums written after December 31, 2012, with 
respect to health insurance for any United States health risk.

4. Excise Tax on Individuals Without Essential Coverage

    Effective after December 31, 2013, most United States 
citizens and legal residents will be required to maintain a 
minimum level of health insurance coverage (``minimum essential 
coverage'' or ``MEC''). Minimum essential coverage includes 
government-sponsored programs, eligible employer-sponsored 
plans, certain plans in the individual market, grandfathered 
group health plans, or other coverage recognized by the 
Departments of Treasury and Health and Human Services. 
Individuals who fail to maintain minimum essential coverage may 
be subject to an excise tax.\120\
---------------------------------------------------------------------------
    \120\ Sec. 5000A.
---------------------------------------------------------------------------
    The amount of the excise tax is the lesser of (1) the sum 
of the monthly penalty amounts for months during a taxable year 
when an applicable individual is not covered under MEC, or (2) 
the national average premium for ``bronze level'' coverage 
applicable to the taxpayer's family size under qualified health 
plans offered through the applicable local insurance exchange 
established under the Health-Care Reform Act for the taxable 
year in issue. The monthly penalty amount for any taxpayer for 
any month is \1/12\ of the greater of (1) the flat dollar 
amount or (2) a percentage (set at one percent for 2014, two 
percent for 2015, and 2.5 percent for 2016 and all subsequent 
taxable years) of the excess of the taxpayer's household income 
for the taxable year over the income tax return filing 
threshold (under section 6012) for that taxpayer for that 
taxable year. The flat dollar amount is the lesser of (1) the 
sum of the applicable dollar amounts for all applicable 
individuals who do not have MEC in that month, or (2) 300 
percent of the applicable dollar amount. The applicable dollar 
amount is phased in for 2014 and for 2015 at $95 and $325 
respectively, and reaches $695 for 2016. For subsequent taxable 
years, the applicable dollar amount is indexed. For an 
applicable individual under the age of 18, the applicable 
dollar amount is 50 percent of that for an adult.
    Exemptions are provided for the following classes of 
taxpayers: (1) those who cannot afford coverage because of the 
required contribution for MEC would exceed eight percent of 
their household incomes,\121\ (2) those whose household incomes 
fall below the income tax return filing threshold, (3) members 
of Indian tribes, (4) those whose coverage gaps last for a 
continuous period of less than three months, and (5) those for 
whom obtaining coverage under a qualified health plan would 
cause hardships as certified by the Secretary of Health and 
Human Services.\122\
---------------------------------------------------------------------------
    \121\ The eight percent affordability measure is subject to 
indexing for tax years after 2014.
    \122\ The eight percent amount is increased annually after 2014 by 
the amount by which health insurance premium growth exceeds income 
growth.
---------------------------------------------------------------------------
    For employees, and individuals who are eligible for minimum 
essential coverage through an employer by reason of a 
relationship to an employee, the determination of whether 
coverage is affordable to the employee and any such individual 
is made by reference to the required contribution of the 
employee for self-only coverage. For individuals not eligible 
for employer sponsored minimum essential coverage the 
determination will be made by reference to the cost of a bronze 
plan in the applicable exchange. Individuals are liable for 
penalties imposed with respect to their dependents (as defined 
in section 152). An individual filing a joint return with a 
spouse is jointly liable for any penalty imposed with respect 
to the spouse.
    No tax is imposed on individuals if the failure to maintain 
minimum coverage lasts for a continuous period of less than 
three months (determined without regard to the calendar year in 
which the months in the period occur). If a continuous period 
is greater than three months the penalty will be applied to the 
entire time of the failure.
    Subject to the exception for brief coverage gaps, the 
excise tax applies to any period the individual does not 
maintain minimum essential coverage and is determined on a 
monthly basis. The excise tax is assessed in the same manner as 
an assessable penalty under the enforcement provisions of 
subtitle F of the Code.\123\ As a result, it is assessable 
without regard to the restrictions of section 6213(b). Although 
assessable and collectible under the Code, the IRS authority to 
use certain collection methods is limited. Specifically, the 
filing of notices of liens and levies otherwise authorized for 
collection of taxes does not apply to the collection of this 
penalty. In addition, the statute waives criminal penalties for 
non-compliance with the requirement to maintain minimum 
essential coverage. However, the authority to offset refunds or 
credits is not limited by this provision.
---------------------------------------------------------------------------
    \123\ IRS authority to assess and collect taxes is generally 
provided in subtitle F, ``Procedure and Administration'' in the Code. 
That subtitle establishes the rules governing both how taxpayers are 
required to report information to the IRS and pay their taxes as well 
as their rights. It also establishes the duties and authority of the 
IRS to enforce the Code, including civil and criminal penalties.
---------------------------------------------------------------------------

5. Excise Tax on Large Employers Not Offering Health Care Coverage

    Effective after December 31, 2013, large employers who fail 
to offer minimum affordable health care coverage to all full-
time employees under the Health-Care Reform Act may be subject 
to a penalty excise tax.\124\ A large employer is defined as an 
employer having an average of at least 50 full-time employees 
during the preceding calendar year.\125\ A large employer that 
does not offer coverage for all of its full-time employees, 
offers minimum coverage that is unaffordable, or offers minimum 
coverage that consists of a plan under which the plan's share 
of the total allowed cost of benefits is less than 60 percent, 
is subject to a penalty excise tax if any full-time employee is 
certified to the employer as having purchased health insurance 
through an exchange established pursuant to the Health-Care 
Reform Act and a tax credit or cost-sharing reduction provided 
under that Act is allowed or paid to the employee.\126\
---------------------------------------------------------------------------
    \124\ Health insurance coverage is considered to be unaffordable if 
the coverage has an employee-paid premium that is more than 9.5 percent 
of the employee's household income. This percentage is indexed to the 
per capita growth in premiums for the insurance market after 2014.
    \125\ An employer is not treated as being below this threshold if 
(1) its workforce exceeds 50 for 120 days or fewer during the calendar 
year or (2) the employees who cause the workforce to exceed 50 are 
seasonal workers.
    \126\ An employee who is offered minimum essential coverage by his 
or her employer is only eligible for a premium tax credit and cost 
sharing reduction if the coverage is either unaffordable or consists of 
a plan under which the plan's share of the total allowed cost of 
benefits is less than 60 percent, and the employee declines to enroll 
in the coverage and purchases coverage through the exchange instead. 
Unaffordable is defined as coverage with a premium required to be paid 
by the employee that is more than 9.5 percent of the employee's 
household income. The percentage of the employee's income is indexed to 
the per capita growth in premiums for the insured market as determined 
by the Secretary of Health and Human Services. Also, an employee is not 
eligible for a premium tax credit for any month in which the employee 
has a ``free choice voucher'' (an employer-provided voucher for certain 
lower-income employees allowed to secure insurance coverage through a 
local exchange).
---------------------------------------------------------------------------
    Tax for not offering coverage.--The tax for not offering 
coverage is imposed monthly. The tax is equal to the total 
number of full-time employees of the employer in excess of 30 
during the applicable month (regardless of how many employees 
receive tax credits or cost-sharing reductions) multiplied by 
one-twelfth of $2,000.\127\ For calendar years after 2014, the 
$2,000 amount is increased by the percentage by which the 
average per capita premium for health insurance coverage in the 
United States for the preceding calendar year exceeds the 
average per capita premium for calendar year 2013.
---------------------------------------------------------------------------
    \127\ Only one 30-employee threshold is allowed when a group of 
employers are aggregated and treated as a single employer, such as for 
a controlled group of employers.
---------------------------------------------------------------------------
    Penalty tax if employer offers coverage.--The tax on 
employers offering coverage any of whose full-time employees 
are certified as having enrolled in health insurance plans 
under an exchange and who are allowed either tax credits or 
cost-sharing reductions on such plans is imposed monthly at a 
rate of one-twelfth of $3,000 for each such employee. The tax 
on employers offering coverage is limited to the amount of the 
tax that would apply if the employer was not offering coverage. 
For calendar years after 2014, the $3,000 amount is increased 
by the percentage by which the average per capita premium for 
health insurance coverage in the United States for the 
preceding calendar year exceeds the average per capita premium 
for calendar year 2013.

6. Failure To Satisfy Continuation Coverage Requirements of Group 
        Health Plans

    The Code contains rules that require certain group health 
plans to offer certain individuals (``qualified 
beneficiaries'') the opportunity to continue to participate for 
a specified period of time in the group health plan 
(``continuation coverage'') after the occurrence of certain 
events that otherwise would have terminated such participation 
(``qualifying events'').\128\ These continuation coverage rules 
are often referred to as ``COBRA continuation coverage'' or 
``COBRA,'' which is a reference to the acronym for the law that 
added the continuation coverage rules to the Code.\129\
---------------------------------------------------------------------------
    \128\ Sec. 4980B.
    \129\ The COBRA rules were added to the Code by the Consolidated 
Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99-272. The 
rules were originally added as Code sections 162(i) and (k). The rules 
were later restated as Code section 4980B, pursuant to the Technical 
and Miscellaneous Revenue Act of 1988, Pub. L. No. 100-647.
---------------------------------------------------------------------------
    The Code imposes excise tax penalties on group health plans 
that violate COBRA continuation coverage rules.\130\ Generally, 
the excise tax is $100 per qualified beneficiary per day in the 
``noncompliance period'' ($200 per day when the failure relates 
to two or more qualified beneficiaries). The ``noncompliance 
period'' begins on the date the failure to comply with COBRA 
occurs, and ends when the failure is corrected, or if earlier, 
six months after the last date on which the employer could have 
been required to provide COBRA coverage, without regard to the 
payment of premiums.\131\ A failure to satisfy COBRA 
continuation coverage requirements is corrected if the failure 
is retroactively undone to the extent possible, and the 
qualified beneficiary is placed in a financial position which 
is as good as if the failure had not occurred.
---------------------------------------------------------------------------
    \130\ Sec. 4980B.
    \131\ A person that provides coverage under a group health plan may 
be liable for the penalty if requested in writing to provide COBRA 
continuation coverage to a qualified beneficiary. Sec. 4908B(e)(2)(B). 
In such a case, the noncompliance period does not begin until 45 days 
after the written request is provided to the person. Sec. 4980B(b)(2).
---------------------------------------------------------------------------
    The Code provides for various limitations on the amount of 
excise tax imposed on noncompliant plans. First, if none of the 
persons who could be liable for the tax knew, or exercising 
reasonable diligence would have known, of the plan's failure to 
comply, the noncompliance period does not begin until the first 
date on which the individual knew or should have known of the 
failure.\132\ This is widely known as the ``inadvertent failure 
rule.'' Second, the excise tax does not apply to failures due 
to reasonable cause (and not to willful neglect) that are 
corrected within 30 days after any person liable for the tax 
knew, or exercising reasonable diligence would have known, of 
the plan's failure to comply.\133\ This is widely known as the 
``self correction rule.'' Both the inadvertent failure rule and 
the self correction rule are overridden if the relevant failure 
is not corrected before the IRS sends the employer maintaining 
the plan an audit letter and the failure occurred or continued 
during the period under examination. In such a case, the excise 
tax may not be less than the lesser of (1) $2,500 ($15,000 if 
the failures for any year are more than de minimis), or (2) the 
excise tax determined without regard to the inadvertent failure 
rule and the self correction rule.\134\
---------------------------------------------------------------------------
    \132\ Sec. 4980B(c)(1).
    \133\ Sec. 4980B(c)(2).
    \134\ Sec. 4980B(c)(3).
---------------------------------------------------------------------------
    There is an overall limitation on the penalty tax liability 
for failures during the taxable year, which are due to 
reasonable cause (and not willful neglect).\135\ For single 
employer plans the overall limit is $500,000, or if less, 10% 
of the amount the employer paid or incurred during the 
preceding taxable year for group health plans. For 
multiemployer plans the limit is $500,000, or if less, 10% of 
the amount paid or incurred by the trust to provide medical 
care during the taxable year in which the failure occurred. 
Coverage providers who may become liable for the penalty tax on 
receipt of a written request to provide COBRA continuation 
coverage have an overall limitation of $2,000,000 for a taxable 
year with respect to all plans for which they provide coverage. 
There are no overall limitations in cases of willful neglect.
---------------------------------------------------------------------------
    \135\ Sec. 4980B(c)(4).
---------------------------------------------------------------------------
    The Secretary of the Treasury may waive part or all of the 
penalty tax if it is excessive relative to the failure 
involved. There is no waiver allowed in cases of willful 
neglect.
    In general, the penalty tax is imposed on the employer 
maintaining the plan for single employer plans, and on the plan 
itself for multiemployer plans. The employer includes any 
entity that is a member of a controlled group of corporations, 
a group of trade or businesses under common control, and an 
affiliated service group under Code section 414(b), (c), (m) or 
(o), and any successor employer.\136\ Under certain conditions, 
however, other persons (e.g., insurer, third party 
administrators) may be liable for the penalty tax.\137\
---------------------------------------------------------------------------
    \136\ Treas. Reg. sec. 54.4980B-2.
    \137\ Sec. 4980B(e).
---------------------------------------------------------------------------

7. Failure to Meet Certain Group Health Plan Requirements

    The Health Insurance Portability and Accountability Act of 
1996 (``HIPAA'') \138\ created a new chapter 100 to the Code, 
which, among other things, provides for increased portability 
of coverage through limitations on preexisting condition 
exclusions and prohibits discrimination against individual 
participants and beneficiaries based on health status. Chapter 
100 has been expanded in the wake of HIPAA, notably, the 
Genetic Information Nondiscrimination Act of 2008 (``GINA'') 
\139\ amended HIPAA portability rules in the Code and added new 
provisions regarding genetic information.
---------------------------------------------------------------------------
    \138\ Pub. L. No. 104-191.
    \139\ Sec. 4980D.
---------------------------------------------------------------------------
    An excise tax is imposed on group health plans for failure 
to comply Chapter 100 of the Code. Generally, the amount of the 
excise tax is $100 per day of noncompliance for each individual 
to whom the failure relates.\140\ The excise tax is imposed on 
the plan sponsor for noncompliance by single employer plans, 
and on plan for noncompliance by multiple employer plans. There 
are, however, certain exceptions to the imposition of the tax. 
First, the tax may not apply if the noncompliant group health 
plan can demonstrate that it did not know--and in exercising 
reasonable diligence would not have known--that it was 
noncompliant.\141\ The tax may also not apply if the failure 
was due to reasonable cause (and not willful neglect) and was 
corrected within 30 days after the plan first knew (or in 
exercising reasonable diligence should have known) of the 
failure.\142\
---------------------------------------------------------------------------
    \140\ The excise tax does not apply to group health insurance 
issuers because the requirements imposed on such issuers are not 
contained in the Code.
    \141\ Sec. 4980D(c)(1).
    \142\ Sec. 4980D(c)(2).
---------------------------------------------------------------------------
    The minimum tax imposed on a plan which has uncorrected 
compliance issues and to which an audit letter has been sent is 
$2,500, increased to $15,000 if violations are more than de 
minimis.\143\ The maximum tax imposed for unintentional 
failures is the lesser of 10% of the amount paid during the 
preceding tax year by the employer for group health plans, or 
$500,000. The excise tax does not apply to certain small 
employers \144\ providing health coverage only through a fully 
insured plan through a contract with a health insurance issuer 
if the failure is only due to the health insurance coverage 
offered by the issuer.\145\ The Secretary of the Treasury may 
waive part or all of the tax if it is excessive relative to the 
failure involved. There is, however, no waiver allowed in cases 
of willful neglect.
---------------------------------------------------------------------------
    \143\ Sec. 4980D(b).
    \144\ For this purpose a small employer is one that employed an 
average of at least two, but no more than 50, employees in the 
preceding calendar year and that employs at least two employees on the 
first day of the plan year. Entities treated as a single employer for 
purposes of the controlled group rules of section 414 are treated as 
one employer. Sec. 4980D(d)(2).
    \145\ Sec. 4980D(d).
---------------------------------------------------------------------------

8. Failure of Employer to Make Comparable Archer MSA Contributions

    An Archer medical savings account (``Archer MSA'') \146\ is 
a tax-exempt trust or custodial account established for the 
purpose of paying medical expenses. Within limits, 
contributions to an Archer MSA are deductible if made by an 
eligible individual (or excludable if made by an employer on 
behalf of an eligible individual). Earnings on amounts in an 
Archer MSA, and distributions from an Archer MSA for medical 
expenses, are generally not taxable. Generally, an individual 
is eligible to make tax-free contributions to an Archer MSA if 
he or she is covered under a high deductible health plan 
(``HDHP'') sponsored by a small employer (or is self employed 
and covered by a HDHP), and is not covered under any other 
plan.
---------------------------------------------------------------------------
    \146\ Sec. 220. After 2007, no new contributions can be made to 
Archer MSA, except by or for individuals who previously had Archer MSA 
contributions and employees who are employed by a participating 
employer.
---------------------------------------------------------------------------
    A tax is imposed on the failure of an employer to meet the 
``comparability rule'' for the calendar year in which the 
employer makes a contribution to the Archer MSA of any employee 
with respect to coverage under a high HDHP of the 
employer.\147\ Generally, the amount of the tax imposed on any 
failure for any calendar year is equal to 35 percent of the 
aggregate amount contributed by the employer to Archer MSAs of 
employees for tax years of the employees ending with or within 
the calendar year.\148\ If, however, the failure is due to 
reasonable cause and not to willful neglect, part or all of the 
tax may be waived, to the extent that the payment of the tax 
would be excessive relative to the failure involved.\149\
---------------------------------------------------------------------------
    \147\ Sec. 4980E(a).
    \148\ Sec. 4980E(b).
    \149\ Sec. 4980E(c).
---------------------------------------------------------------------------
    A comparability rule provides that if an employer provides 
HDHP coverage coupled with an Archer MSA to employees, and 
makes employer contributions to the Archer MSAs, the employer 
must make available a comparable contribution on behalf of all 
employees with comparable coverage during the same period.\150\ 
An employer meets the requirements of the comparability rule 
for any calendar year if the employer makes available 
``comparable contributions'' to the Archer MSAs of all 
``comparable participating employees'' for each coverage period 
during the calendar year.\151\ For purposes of the 
comparability rule, all persons treated as a single employer 
for employee benefit plan purposes are treated as one 
employer.\152\
---------------------------------------------------------------------------
    \150\ Conf. Rept. No. 104-736 (Pub. L. No. 104-191).
    \151\ Sec. 4980E(d)(1).
    \152\ Sec. 4980E(e).
---------------------------------------------------------------------------
    ``Comparable contributions'' means contributions that are 
the same amount or the same percentage of the annual deductible 
limit under the HDHP covering the employees.\153\ ``Comparable 
participating employees'' means all employees who (1) are 
eligible individuals covered under any HDHP of the employer, 
and (2) have the same category of coverage (that is, self-only 
or family coverage).\154\ The provision with respect to 
``comparable participating employees'' is applied separately to 
part-time employees and other employees. For this purpose, 
``part-time employee'' means any employee who is customarily 
employed for fewer than 30 hours per week.\155\
---------------------------------------------------------------------------
    \153\ Sec. 4980E(d)(2)(A).
    \154\ Sec. 4980E(d)(3).
    \155\ Ibid.
---------------------------------------------------------------------------

9. Failure By Employer To Make Comparable Health Savings Account 
        Contributions

    A health savings account (``HSA'') is a tax-exempt trust or 
custodial account established for the purpose of paying 
qualified medical expenses. An individual who is covered under 
a qualifying HDHP \156\ (purchased either through the 
individual market or through an employer) is permitted to 
establish and make contributions (or have contribution made on 
his or her behalf) to an HSA. Subject to certain 
limitations,\157\ contributions made to an HSA by an employer, 
including contributions made through a cafeteria plan through 
salary reduction, are excluded from income (and from wages for 
payroll tax purposes). Contributions made by individuals are 
deductible for income tax purposes, regardless of whether the 
individuals itemize their tax deductions. Distributions from 
HSAs that are used for qualified medical expenses are 
excludible from gross income.
---------------------------------------------------------------------------
    \156\ For 2011, a qualifying HDFP must have a deduction of at least 
$1,200 for self only coverage or $2,400 for family coverage and must 
limit annual out-of-pocket expenses beneficiary to $5,950 for self only 
coverage and $11,900 for family coverage.
    \157\ For 2011, the maximum aggregate annual contribution that can 
be made to an HSA is $3,050 in the case of self-only coverage and 
$6,150 in the case of family coverage. The annual contribution limits 
are increased by $1,000 for individuals who have attained age 55 by the 
end of the taxable year (referred to as ``catch-up contributions''). 
Contributions, including catch-up contributions, cannot be made once an 
individual is enrolled in Medicare.
---------------------------------------------------------------------------
    An employer is not required to contribute to the HSAs of 
its employees. In general, however, if an employer makes 
contributions to any employee's HSA, the employer must make 
comparable contributions to the HSAs of all comparable 
participating employees.\158\ If employer contributions do not 
satisfy the comparability rules for a calendar year, the 
employer is subject to an excise tax equal to 35 percent of the 
aggregate amount contributed by the employer to HSAs for that 
period.\159\
---------------------------------------------------------------------------
    \158\ Treas. Reg. sec. 54.4980G-1, A-1.
    \159\ Treas. Reg. sec. 54.4980G-1, A-4. In the case of a failure 
which is due to reasonable cause and not to willful neglect, all or a 
portion of the excise tax imposed under section 4980G may be waived to 
the extent that the payment of the tax would be excessive relative to 
the failure involved. See sections 4980G(b) and 4980E(c). See Treas. 
Reg. sec. 54.4980G-5, A-4.
---------------------------------------------------------------------------
    Contributions are comparable if, for each month in a 
calendar year, the contributions are either the same amount or 
the same percentage of the deductible under the HDHP for 
employees who are eligible individuals with the same category 
of coverage on the first day of that month.\160\
---------------------------------------------------------------------------
    \160\ Treas. Reg. sec. 54.4980G-4, A-1. Employers may make larger 
HSA contributions for employees who are not highly compensated 
employees (as defined in section 414(q)) and who are comparable 
participating employees than for highly compensated employees who are 
comparable participating employees. See Treas. Reg. 54.4980G-6, A-1. 
The comparability rules do not apply to HSA contributions that an 
employer makes through a section 125 cafeteria plan. However, 
contributions to an HSA made through a cafeteria plan are subject to 
the section 125 nondiscrimination rules (eligibility rules, 
contributions and benefits tests and key employee concentration tests). 
See Treas. Reg. sec. 54.4980G-5, A-1.
---------------------------------------------------------------------------
    Comparable participating employees are eligible individuals 
who are in the same category of employees and who have the same 
category of HDHP coverage.\161\ Generally, the categories of 
coverage are self-only coverage and family coverage.\162\ The 
categories of employees for comparability testing are generally 
(1) current full-time employees; (2) current part-time 
employees; and (3) former employees.\163\ For purposes of 
section 4980G, part-time employees are employees who are 
customarily employed for fewer than 30 hours per week. 
Collectively bargained employees are not comparable 
participating employees.
---------------------------------------------------------------------------
    \161\ Treas. Reg. sec. 54.4980G-1, A-1.
    \162\ Treas. Reg. sec. 54.4980G-1, A-2.
    \163\ The is an exception for former employees with coverage under 
the employer's HDHP because of an election under a COBRA continuation 
provision (as defined in section 9832(d)(1)).
---------------------------------------------------------------------------

10. Excise Tax on Issuers of Qualified Long Term Care Contracts

    Long term care contract terms, and issuers of such 
contracts, are required to satisfy certain consumer protection 
provisions of the long-term care insurance model Act and model 
regulations promulgated by the National Association of 
Insurance Commissioners (``NAIC'') (as adopted as of January 
1993).\164\ The consumer protection provisions that apply with 
respect to the terms of the contract apply only for purposes of 
determining whether a contract is a qualified long-term care 
insurance contract.
---------------------------------------------------------------------------
    \164\ Sec. 7702B(g)(2)(B)(i).
---------------------------------------------------------------------------
    An excise tax is imposed on the issuers of a long term care 
insurance contract equal to $100 per insured per day for 
failure to satisfy the consumer protection requirements.\165\ 
The consumer protection requirements for issuers apply with 
respect to contracts that are qualified long-term care 
insurance contracts within the meaning of section 7702B.
---------------------------------------------------------------------------
    \165\ Sec. 4980C(b). In the case of a failure that is due to 
reasonable cause and not to willful neglect, the Secretary may waive 
part or all of the tax to the extent that payment of the tax would be 
excessive relative to the failure involved.
---------------------------------------------------------------------------
    The issuers of long term care insurance contracts must meet 
the consumer protection requirements under the model regulation 
relating to application forms and replacement coverage, 
reporting requirements, marketing, appropriateness of purchase, 
format, delivering a shopper's guide, right to return, outline 
of coverage, group plans, policy summary, monthly reports on 
accelerated death benefits, and incontestability period. 
Further, under the consumer protection requirements for 
issuers, if an application for a qualified long term contract 
(or certificate under such contract) is approved, the issuer 
must deliver the applicant (or policyholder or certificate 
holder) the contract (or certificate) of the insurance not 
later than 30 days after the date of approval. If a claim under 
a qualified long-term care contract is denied, the issuer must, 
within 60 days of a written request by the policy holder or 
certificate holder, provide a written explanation of the 
reasons for the denial and make available all information 
relating to the denial. Also, the issuer must disclose in the 
policy and outline of coverage that the policy is intended to 
be a qualified long term care insurance contract within the 
meaning of section 7702B.
    For purposes of both the requirements as to contract terms 
and the requirements relating to issuers of contracts, the 
determination of whether any requirement of a model regulation 
or model Act has been met is made by the Secretary.\166\
---------------------------------------------------------------------------
    \166\ Sec. 7702B(g)(2)(B)(iii).
---------------------------------------------------------------------------

11. Nonconforming group health plans

    An excise tax is imposed on any employer (including a self-
employed person) or employee organization that contributes to a 
nonconforming group health plan.\167\ The tax is equal to 25 
percent of the employer's, or employee organization's, expenses 
incurred during the calendar year for each group health plan to 
which the employer (including a self-employed person), or 
employee organization, contributes. This tax does not apply to 
an employer that is a Federal or other governmental entity.
---------------------------------------------------------------------------
    \167\ A group health plan for this purpose is a plan (including a 
self-insured plan) of, or contributed to by, an employer (including a 
self-employed person) or employee organization to provide health care 
(directly or otherwise) to the employees, former employees, the 
employer, others associated or formerly associated with the employer in 
a business relationship, or their families.
---------------------------------------------------------------------------
    A nonconforming group health plan is a group health plan 
that does not comply with the secondary payor requirements with 
respect to Medicare under the Social Security Act which, with 
certain exceptions, require a group health plan not to take 
into account entitlement to benefits under Medicare and provide 
that an individual subject to the secondary payor requirements 
be entitled to the same benefits under the plan under the same 
conditions as an individual not entitled to Medicare.\168\ 
Thus, the Social Security Act requires that Medicare be the 
secondary payor for items and services covered by a group 
health plan with respect to employees. The scope of this 
requirement generally depends on the size of the employer,\169\ 
and the basis upon which the individual qualifies for Medicare. 
Specifically, the secondary payor rules generally apply for any 
group health plan that covers an employee or dependent who 
qualifies for Medicare on the basis of end-stage renal disease 
for the first 30 months of Medicare coverage.\170\ The 
secondary payor rules also apply to a group health plan (other 
than a group plan of a small employer) \171\ that covers 
Medicare beneficiaries age 65 and older by virtue of an 
individual's current employment status, or the current 
employment status of a spouse of any age. Finally, for a large 
group health plan,\172\ the secondary payor rules also apply in 
the case of individuals under age 65 who are eligible for 
Medicare on the basis of disability, where the group health 
plan coverage is by virtue of the individual's or a family 
member's current employment status with the employer.\173\
---------------------------------------------------------------------------
    \168\ Sec. 1862(b) of the Social Security Act.
    \169\ The employer aggregation rules under section 414(b), (c), 
(m), and (o) apply for purposes of this provision. Under that rule, 
generally all employees of entities under common control (e.g., members 
of the same control group) are required to be aggregated and are 
treated as a single employer.
    \170\ Sec. 1862(b)(1)(A)(iii) of the Social Security Act.
    \171\ A small employer is an employer that has 20 or more employees 
for each working day in each of 20 or more calendar weeks in the 
current calendar year or the preceding calendar year. See section 
1862(b)(1)(A)(iv) of the Social Security Act.
    \172\ Generally a large group health plan is a group health plan of 
an employer with at least 100 employees on a typical day in the 
previous calendar year.
    \173\ Sec. 1862(b)(1)(A).
---------------------------------------------------------------------------

12. Excise Tax on Insurers For High-Cost Employer-Sponsored Health 
        Coverage

    Effective after December 31, 2017, an excise tax will be 
imposed on the aggregate value of employer-sponsored health 
insurance for an employee that exceeds a threshold amount.\174\ 
The tax equals 40 percent of the aggregate value of the 
coverage in excess of $10,200 for individual coverage and 
$27,500 for family coverage (both multiplied by a ``health care 
cost adjustment percentage,'' discussed below).\175\ This tax 
further is increased by an age and gender adjusted ``excess 
premium amount.'' \176\
---------------------------------------------------------------------------
    \174\ The tax also is imposed if the threshold amount is exceeded 
for any former employee, surviving spouse, or any other primary insured 
individual.
    \175\ In general, the family threshold applies to employees 
enrolled in multi-employer plans regardless of whether the employees 
maintain family or individual coverage.
    \176\ Unlike most Federal excise taxes, the amount of this tax is 
not deductible for Federal income tax purposes.
---------------------------------------------------------------------------
    The value of health insurance coverage equals the sum of 
(1) the aggregate premiums for the coverage, (2) the amount of 
any salary reduction contributions to a Health FSA for the 
taxable year, and (3) the dollar amount of employer 
contributions to an HSA or an Archer MSA.
    The ``health care adjustment percentage'' is designed to 
account for possible increases in the cost of U.S. health care 
in excess of projected growth for the period 2010 through 2017. 
The adjustment percentage equals 100 percent of the excess, if 
any, of (1) the percentage by which the per employee costs of 
coverage under the Blue Cross/Blue Shield standard benefit 
option of the Federal Employees Health Benefits plan 
(``standard FEHBP coverage'') for plan year 2018 exceeds the 
per employee costs of that plan for 2010 over (2) 55 
percent.\177\ Beginning in 2019, the threshold amounts will be 
indexed to the CPI-U plus one percentage point in 2019 and CPI-
U thereafter.
---------------------------------------------------------------------------
    \177\ For purposes of this calculation, the 2010 benefit package is 
to be priced in 2018 dollars.
---------------------------------------------------------------------------
    In general, the age and gender adjustment equals the 
excess, if any, of (1) the premium costs of standard Federal 
Employee's health coverage for the coverage provided to the 
individual (assuming age and gender characteristics of the 
employer's workforce) over (2) premium costs for that coverage 
priced for age and gender characteristics of the national 
workforce. Special rules apply for certain retirees and 
employees in high-risk professions.
    The excise tax is imposed on issuers of the insurance. In 
the case of self-insured group health insurance, a Health FSA 
or an HRA, the tax is paid by the entity that administers the 
benefits (or the employer, if the employer is the plan 
administrator).

                D. Miscellaneous Regulatory Excise Taxes

    In addition to the excise taxes imposed to raise revenues 
for trust fund programs and for the General Fund, the Code 
historically has included numerous excise taxes imposed 
primarily to regulate activities or products (e.g., wagering 
and ``non-regular'' firearms) or to promote adherence to other 
tax policies (e.g., penalty taxes on specified activities with 
respect to private foundations and retirement plans).
    Most of these regulatory excise taxes raise less than $50 
million per year, with certain exceptions. For fiscal years 
2011-2020, the excise tax on domestic private foundation net 
investment income (sec. 4940) is projected to raise $13.3 
billion. The excise tax on insurance policies issued by foreign 
insurers (casualty insurance and indemnity bonds life 
insurance, sickness and accident policies, and annuity 
contracts; reinsurance) (sec. 4371) is projected to raise 
approximately $6.3 billion during fiscal years 2011-2020. The 
following table provides an overview of these excise taxes.

------------------------------------------------------------------------
          Tax (and Code section)                      Tax rates
------------------------------------------------------------------------
1. ``Non-Regular'' Firearms \178\
 
    a. Occupational taxes (sec. 5801)
     \179\
        Manufacturers and importers.......  $1,000 per year, per premise
                                             ($500 for businesses with
                                             gross receipts of less than
                                             $500,000 in the preceding
                                             taxable year).
        Dealers...........................  $500 per year, per premise.
 
    b. Transfer taxes for certain           $5.00 per transfer.
     concealable weapons (sec. 5811)......
 
    c. Making tax (sec. 5821).............  $200 per firearm.
 
2. Wagering Excise Taxes
 
    a. Certain wagers (sec. 4401) \180\...  Two percent of amount of
                                             wager, except tax is 0.25
                                             percent in States where
                                             wagering is authorized by
                                             State law.
    b. Occupational taxes (sec. 4411).....  $500 per year on person
                                             engaged or employed in
                                             business of accepting
                                             wagers, except that the tax
                                             is $50 per year in States
                                             where wagering is
                                             authorized by State
                                             law.\181\
 
------------------------------------------------------------------------
 \178\ The taxes on non-regular firearms are administered by the Bureau
  of Alcohol, Tobacco, Firearms, and Explosives in the Department of
  Justice. The chapter of the Code imposing these excise taxes is named
  the ``National Firearms Act''.
The term ``non-regular'' firearm includes machine guns, destructive
  devices (e.g., explosive devices such as bombs, grenades, small
  rockets, and mines), sawed-off shotguns or rifles, silencers, and
  certain concealable weapons.
\179\ July 1-June 30 is the taxable year for the occupational taxes.
  There also are Federal licensing fees for manufacturers, importers,
  and dealers in destructive devices or ammunition for such devices.
  See, 18 U.S.C. sec. 923.
\180\ The tax is imposed on any wager with respect to a sports event or
  a contest placed with a person engaged in the business of accepting
  such wagers, any wager placed in a wagering pool with respect to a
  sports event or contest (if such pool is conducted for profit), and
  certain lottery-type wagers (including numbers games and similar types
  of wagering). No tax is imposed on pari-mutuel wagering licensed under
  State law, coin-operated wagers, State-conducted lotteries, games
  where wagers are placed and winners are determined and prizes are
  distributed with all persons placing wagers present, or drawings by
  tax-exempt organizations where no part of the proceeds inures to the
  benefit of any private shareholder or individual. The person accepting
  the wager is liable for the tax.
\181\ The taxable year is July 1-June 30.


------------------------------------------------------------------------
          Tax (and Code section)                      Tax rates
------------------------------------------------------------------------
3. Excise Tax on Domestic Private Foundation Net Investment Income (sec.
 4940)
 
                                            Tax-exempt foundations.--Two
                                             percent of net investment
                                             income in general (one
                                             percent where foundation
                                             meets certain distribution
                                             requirements).
                                            Taxable foundations.--Excess
                                             of section 4940 excuse tax
                                             that would be imposed if
                                             foundation were tax-exempt
                                             plus unrelated business tax
                                             that would have been
                                             imposed over regular income
                                             tax imposed on the
                                             foundation.
 
4. Excise Tax on Foreign Private Foundation Net Investment Income (sec.
 4948)
 
                                            Four percent of gross
                                             investment income from
                                             sources within the United
                                             States.
 
5. Excise Tax on Insurance Policies Issued by Foreign Insurers (sec.
 4371) \182\
 
    a. Casualty insurance and indemnity     Four cents per dollar, or
     bonds................................   fractional part, of premium
                                             paid.
    b. Life insurance, sickness and         One cent per dollar, or
     accident policies, and annuity          fractional part, of premium
     contracts............................   paid.
    c. Reinsurance........................  One cent per dollar, or
                                             fractional part, of premium
                                             paid on reinsurance of
                                             policies subject to tax
                                             under a. or b.
 
 6. Excise Tax on Lobbying Expenditures
 
    a. Public charities making an election  25 percent of excess
     under sec. 501(h) (sec. 4911)........   lobbying expenditures.
    b. Charitable organizations             Five percent of lobbying
     disqualified from tax-exempt status     expenditures on the
     because of lobbying expenditures        organization; five percent
     (sec. 4912)..........................   of lobbying expenditures on
                                             the organization manager in
                                             certain cases.
 
------------------------------------------------------------------------
\182\ The tax does not apply to insurance on exports. See, U.S. v.
  International Business Machines, 517 U.S. 843 (1996).


------------------------------------------------------------------------
          Tax (and Code section)                      Tax rates
------------------------------------------------------------------------
7. Excise Taxes on Certain Private Foundation Activities
 
    a. Self-dealing (sec. 4941)...........  Initial tax.--Ten percent of
                                             the amount of self-dealing
                                             on the self-dealer; five
                                             percent on the foundation
                                             manager in certain cases
                                             (up to $20,000 including
                                             any additional tax).
                                            Additional tax.--If not
                                             corrected within specified
                                             period, 200-percent tax on
                                             self-dealer, 50-percent tax
                                             on foundation manager in
                                             certain cases (up to
                                             $20,000 including any
                                             additional tax).
    b. Failure to distribute income (sec.   Initial tax.--30-percent tax
     4942)................................   on foundation on amount of
                                             undistributed income
                                             remaining undistributed at
                                             beginning of succeeding
                                             taxable year.
                                            Additional tax.--If not
                                             corrected within specified
                                             period, tax of 100 percent
                                             of amount not distributed.
    c. Excess business holdings (sec.       Initial tax.--Ten percent
     4943)................................   tax on foundation on value
                                             of excess holdings.
                                            Additional tax.--If not
                                             corrected within specified
                                             period, tax of 200 percent
                                             of excess holdings.
    d. Investments jeopardizing charitable  Initial tax.--Ten-percent
     purpose (sec. 4944)..................   tax on foundation on amount
                                             of investment; ten-percent
                                             tax on foundation manager
                                             in certain cases (up to
                                             $10,000).
                                            Additional tax.--25-percent
                                             tax on foundation if not
                                             corrected within specified
                                             period; five-percent tax on
                                             foundation manager in
                                             certain cases (up to
                                             $20,000).
    e. Taxable expenditures (sec. 4945)...  Initial tax.--20 percent of
                                             amount of expenditure on
                                             foundation; five-percent
                                             tax on foundation manager
                                             in certain cases (up to
                                             $10,000).
                                            Additional tax.--If not
                                             corrected within specified
                                             period, tax of 100 percent
                                             of taxable expenditure on
                                             foundation; 50-percent tax
                                             on foundation manager in
                                             certain cases (up to
                                             $10,000).
 
8. Excise Tax on Political Expenditures of Section 501(c)(3)
 Organizations (sec. 4955)
 
                                            Initial tax.--20 percent of
                                             political expenditure on
                                             organization; 2.5-percent
                                             tax on organization manager
                                             in certain cases (up to
                                             $10,000).
                                            Additional tax.--If not
                                             corrected within specified
                                             period, tax of 100 percent
                                             of expenditure on
                                             organization, 50-percent
                                             tax on organization manager
                                             in certain cases (up to
                                             $20,000).
 
9. Excise Tax on Excess Benefit Transactions of Certain Section
 501(c)(3) and 501(c)(4) Organizations (sec. 4958) \183\
 
                                            Initial tax.--25 percent of
                                             amount of excess benefit on
                                             disqualified person who is
                                             the beneficiary of the
                                             transaction; 10-percent tax
                                             on the organization manager
                                             in certain cases (up to
                                             $20,000).
                                            Additional tax.--If not
                                             corrected within specified
                                             period, tax of 200 percent
                                             of excess benefit on the
                                             disqualified person.
 
------------------------------------------------------------------------
\183\ Private foundations are not subject to the excise tax.


------------------------------------------------------------------------
          Tax (and Code section)                      Tax rates
------------------------------------------------------------------------
10. Excise Taxes Relating to Employee Pension and Benefit Plans
 
    a. Failure to meet minimum funding      Initial tax.--For simple-
     standards (sec. 4971)................   employer plan, 10 percent
                                             of unpaid required
                                             contributions on employer;
                                             for multiemployer plan of
                                             five percent accumulated
                                             funding deficiency on
                                             employer.
                                            Additional tax.--If not
                                             corrected within specified
                                             period, 100 percent of
                                             unpaid required
                                             contributions on
                                             accumulated funding
                                             deficiency on employer.
    b. Nondeductible contributions to       10 percent of nondeductible
     qualified employer plan (sec. 4972)..   contributions under plan on
                                             employer.
    c. Excess contributions to IRA's,       Six percent of excess
     Archer MSA's, etc. (sec. 4973).......   contributions on account
                                             owner.
    d. Certain accumulations in IRA's,      50 percent of amount by
     etc. (sec. 4974).....................   which minimum required to
                                             be distributed during year
                                             exceeds amount actually
                                             distributed on the payee.
    e. Prohibited transactions (sec. 4975)  Initial tax.--15 percent of
                                             amount involved in
                                             prohibited transaction on
                                             disqualified person
                                             engaging in transaction.
                                            Additional tax.--If not
                                             corrected within specified
                                             period, 100 percent of
                                             amount involved on
                                             disqualified person.
    f. Disqualified welfare benefits (sec.  100 percent of disqualified
     4976)................................   benefit amount on the
                                             employer.
    g. Excess fringe benefits provided by   30 percent of excess
     an employer (sec. 4977)..............   benefits on employer
                                             electing aggregation of
                                             lines of business.
    h. Dispositions of sec. 1042            10 percent of amount
     securities by ESOP's and worker-owned   realized on disposition on
     cooperatives (sec. 4978).............   employer or cooperative.
    i. Dispositions of sec. 133 securities  10 percent of amount
     by ESOP's (sec. 4978B)...............   realized on disposition on
                                             employer.
    j. Excess contributions under a cash    10 percent of sum of excess
     or deferred arrangement (sec. 4979)..   contributions and any
                                             excess aggregate
                                             contributions under the
                                             plan for plan year on
                                             employer.
    k. Prohibited allocations of qualified  50 percent of amount
     securities by ESOP's and worker-        involved in prohibited
     owned cooperatives (sec. 4979A)......   allocation or ownership on
                                             employer, cooperative or S
                                             corporation.
    l. Reversion of qualified plan assets   20 percent of amount of
     to employer (sec. 4980)..............   employer reversion on
                                             employer (generally); 50
                                             percent if employer does
                                             not maintain a qualified
                                             replacement plan or provide
                                             certain pro-rata benefit
                                             increases.
    m. Failure to provide of benefit        $100 per day per failure, up
     accrual reduction (sec. 3980F).......   to specified maximum.
 
 11. Excise Taxes on Real Estate Investment Trusts and Regulated
 Investment Companies
 
    a. Real estate investment trusts (sec.  Four percent of excess
     4981)................................   required distribution for
                                             calendar year over
                                             distributed amount.
    b. Regulated investment companies       Four percent of excess
     (sec. 4982)..........................   required distribution for
                                             calendar year over
                                             distributed amount.
 
12. Excise Tax on Issuers of ``Registration-Required Obligations'' Not
 in Registered Form (sec. 4701)
 
                                            One percent of principal
                                             amount of obligation
                                             multiplied by number of
                                             years in obligation term.
 
13. Excise Tax on ``Golden Parachute'' Payments (sec. 4999)
 
                                            20 percent of excess payment
                                             as defined in sec. 280G(b).
 
14. Excise Tax on ``Greenmail'' (sec. 5881)
 
                                            50 percent of ``greenmail''
                                             \184\
 
15. Excise Tax on Certain Tax-Exempt Entities Entering into Prohibited
 Tax Shelter Transactions (sec. 4965)
 
                                            Entity.--In general, highest
                                             corporate rate multiplied
                                             by greater of entity's net
                                             income for taxable year of
                                             prohibited transaction
                                             attributable to transaction
                                             or 75 percent of proceeds
                                             received for taxable year
                                             (for subsequently listed
                                             transactions, amount
                                             allocable to period
                                             beginning on date
                                             transaction identified or
                                             first day of taxable year).
                                            For certain ``knowing
                                             transactions,'' tax equals
                                             greater of 100 percent of
                                             income 