[Congressional Record Volume 144, Number 146 (Wednesday, October 14, 1998)]
[Senate]
[Page S12563]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FIRST:
  S. 2633. A bill to amend the Internal Revenue Code of 1986 to allow 
registered venders to administer claims for refund of kerosene sold for 
home heating use; to the Committee on Finance.


      tax claims for refund of kerosene sold for home heating use

 Mr. FRIST. Mr. President, today I introduce a bill that will 
correct a grave injustice to users of kerosene for home heating. My 
bill would amend last year's change to the tax code concerning kerosene 
to allow registered vendors to administer claims for the refund of 
kerosene sold for home heating use.
  As many of you know, on July 1, 1998, new regulations regarding the 
taxation of kerosene went into effect, and I have heard from many 
Tennesseans who are concerned about the new tax policies. These 
provisions were included in the House version of the ``Taxpayer Relief 
Act of 1997.'' While these provisions were not included in the Senate 
version of the bill, the House language prevailed when the Senate and 
House worked out the conference agreement on this bill. Prior to the 
1997 change in law, kerosene was not taxable unless it was blended with 
taxable diesel fuel or used as an aviation fuel, nor was it subject to 
dyeing requirements.
  There have been continued problems with the use of untaxed kerosene 
being blended with taxable highway fuel, like diesel. As a result, some 
members of the House of Representatives determined and diesel fuel 
compliance measures, like dyeing, should be extended to kerosene. 
According to the new law, kerosene is taxed at 24.4 cents per gallon 
unless it is indelibly dyed and used only for a nontaxable use like 
home heating.
  I am concerned about these changes, especially since kerosene is 
often used as a heating oil or in space heaters. This is a nontaxable 
use; however, it is unclear whether dyed kerosene may be used in space 
heaters due to health concerns. In addition, many small oil companies 
and kerosene venders do not have sufficient facilities to sell both 
dyed and undyed kerosene, and many states have regulations mandating 
that only undyed kerosene may be used in home heaters. As a result, 
many consumers of kerosene for non-taxable home heating purposes will 
either be forced, or will choose for safety reasons, to purchase the 
taxable undyed kerosene. Under current law and IRS regulation, only the 
taxpayer is allowed to file a claim for a fuel credit if he or she 
purchases taxable kerosene for a non-taxable purpose other than from a 
blocked pump.
  The Internal Revenue Service (IRS) has provided refund and credit 
procedures for vendors and/or purchasers of the clear, taxed kerosene 
when the kerosene is intended for nontaxable purposes like home 
heating. This process, however, is complex and potentially unwieldy. 
Individual purchasers may claim a credit on line 59 of the 1040 tax 
form for whatever amount of tax they paid on clear kerosene bought for 
a nontaxable use. It is true that an individual must file a return, 
even if he or she otherwise would not, in order to receive the credit 
from the IRS. Vendors may claim a credit on their tax returns or may 
claim a quarterly refund if at least $750 is owed.

  Because many of these kerosene consumers do not file tax return form 
1040, this provision is an undue burden on hundreds, perhaps thousands, 
of Tennesseans, and many thousands of Americans. The complex nature of 
the kerosene tax refund policies on individual consumers who use 
kerosene for home heating is unduly burdensome. Additionally, for the 
consumers to pay a 24.4 cent tax per gallon at all strikes me as unjust 
taxation. Many of those who use kerosene for home heating are poor and 
can ill-afford to pay approximately 25% more per gallon of kerosene--
even if it is to be refunded at a later time.
  I sent a letter to the Internal Revenue Service (IRS) on August 13, 
1998 asking Commissioner Rossotti to issue a regulation that would 
allow kerosene vendors to file refund claims on behalf of their 
consumers. The Commissioner responded that such a regulation would 
require Congressional action to actually change the statute.
  This bill would do just that. I urge my colleagues to support this 
measure and I strongly urge passage of this bill.
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