[Congressional Record Volume 145, Number 48 (Thursday, March 25, 1999)]
[Senate]
[Page S3441]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MURKOWSKI (for himself and Mr. Stevens):
  S. 714. A bill to amend the Internal Revenue Code of 1986 to maintain 
exemption of Alaska from dyeing requirements for exempt diesel fuel and 
kerosene; to the Committee on Finance.


                   DIESEL DYEING EXEMPTION FOR ALASKA

  Mr. MURKOWSKI. Mr. President, today I am joined by Senator Ted 
Stevens in introducing legislation that would clarify a provision in 
the tax code that exempts the State of Alaska from the IRS diesel 
dyeing rules.
  The Small Business Job Protection Act of 1996 included a provision 
that exempted Alaska from the diesel dyeing requirements during the 
period the state was exempted from the Clean Air Act low sulfur diesel 
dyeing rules. For various reasons, it was believed at the time that 
Alaska would ultimately be permanently exempted from the Clean Air Act 
rules. However, technological changes suggest that Alaska may in the 
next few years lose its exemption from the low sulfur rules.
  However, in our view, whether Alaska is exempted from the low sulfur 
rules, it is imperative that Alaska be permanently exempted from the 
IRS diesel dyeing rules. That is what our bill does.
  Today, more than 95 percent of all diesel fuel used in Alaska is 
exempt from tax because it is used for heating, power generation, or in 
commercial fishing boats. Under the diesel dyeing rules in place in 49 
states, exempt diesel must be dyed. If these diesel dyeing rules were 
applied to Alaska, refiners would have to buy huge quantities of dye, 
along with expensive injection systems, to dye all of this non-taxable 
diesel fuel.
  Although the Joint Tax Committee originally estimated in 1996 that 
repealing the dyeing rules for Alaska could cost the Treasury $500,000 
a year, some refiners were spending as much as $750,000 on dye alone. 
Add on another $100,000 for injection systems and you begin to wonder 
what happened to common sense regulation. Congress saw it that way and 
decided to exempt Alaska. Now that exemption should be made permanent.
  Approximately 65 percent of the state's communities are served solely 
by barges. For many of these communities, the fuel oil barge comes in 
only once a year when the waterways are not frozen. It is absurd to 
require these communities to build a second storage facility for undyed 
taxable fuel simply for the few vehicles in town that are subject to 
tax.
  It is currently projected that the state will have to spend from $200 
million to $400 million just to repair fuel storage tanks in hundreds 
of rural communities because of leaking fuel problems. If IRS dyeing 
rules were in place, millions more would have to be spent simply to 
maintain a small supply of taxable diesel in each of these communities.
  Mr. President, in 1996, Congress acted sensibly in exempting Alaska 
from the IRS diesel dyeing rules. It is my hope that we will again see 
the wisdom of exempting Alaska, this time making it a permanent 
exemption.
  I ask unanimous consent that the text of the bill be included in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 714

       Be it enacted by the Senate and the House of 
     Representatives of the United States of America in Congress 
     assembled,
       (a) Exception to Dyeing Requirements for Exempt Diesel Fuel 
     and Kerosene.--Paragraph (1) of section 4082(c) of the 
     Internal Revenue Code of 1986 (relating to exception to 
     dyeing requirements is amended to read as follows:
       ``(1) removed, entered, or sold in the State of Alaska for 
     ultimate sale or use in such State, and''.
       (b) Effective Date.--The amendment made by this section 
     applies with respect to fuel removed, entered, or sold on or 
     after the date of the enactment of this Act.
                                 ______