[Congressional Record Volume 150, Number 44 (Thursday, April 1, 2004)]
[House]
[Pages H1820-H1845]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PROVIDING FOR FURTHER CONSIDERATION OF H.R. 3550, TRANSPORTATION EQUITY
ACT: A LEGACY FOR USERS
Mr. DREIER. Mr. Speaker, by direction of the Committee on Rules, I
call up House Resolution 593 and ask for its immediate consideration.
The Clerk read the resolution, as follows:
H. Res. 593
Resolved, That at any time after the adoption of this
resolution the Speaker may, pursuant to clause 2(b) of rule
XVIII, declare the House resolved in the Committee of the
Whole House on the state of the Union for further
consideration of the bill (H.R. 3550) to authorize funds for
Federal-aid highways, highway safety programs, and transit
programs, and for other purposes. No further general debate
(except for the final period contemplated in the order of the
House of March 30, 2004) shall be in order. The amendment in
the nature of a substitute recommended by the Committee on
Transportation and Infrastructure now printed in the bill,
modified by the amendments printed in
[[Page H1821]]
part A of the report of the Committee on Rules accompanying
this resolution, shall be considered as adopted in the House
and in the Committee of the Whole. The bill, as amended,
shall be considered as the original bill for the purpose of
further amendment under the five-minute rule and shall be
considered as read. All points of order against provisions in
the bill, as amended, are waived. No further amendment shall
be in order except those printed in part B of the report of
the Committee on Rules. Each further amendment may be offered
only in the order printed in the report, may be offered only
by a Member designated in the report, shall be considered as
read, shall be debatable for the time specified in the report
equally divided and controlled by the proponent and an
opponent, and shall not be subject to amendment or demand for
division of the question. All points of order against such
further amendments are waived. At the conclusion of
consideration of the bill, as amended, the Committee shall
rise and report the bill, as amended, to the House with such
further amendments as may have been adopted. The previous
question shall be considered as ordered on the bill and
amendments thereto to final passage without intervening
motion except one motion to recommit with or without
instructions.
Sec. 2. The amendment considered as adopted under the first
section of this resolution shall be considered an amendment
offered under section 411 of House Concurrent Resolution 95.
The SPEAKER pro tempore (Mr. LaHood). The gentleman from California
(Mr. Dreier) is recognized for 1 hour.
Mr. DREIER. Mr. Speaker, for the purpose of debate only, I yield the
customary 30 minutes to the gentleman from Texas (Mr. Frost), pending
which I yield myself such time as I may consume. During consideration
of this resolution, all time yielded is for the purpose of debate only.
Mr. Speaker, I rise today in strong support of both the rule we are
considering now as well as the underlying legislation. Before I get
into the legislation itself, I would like to briefly speak about the
rule. Mr. Speaker, this is a very fair and balanced rule. The Committee
on Rules received a total of 59 amendments for our consideration, and
this rule makes in order 23 of those 59 amendments that were submitted
to us. It includes 14 amendments offered by Republicans, eight
amendments offered by Democrats, and one bipartisan amendment. The rule
also makes in order a very bipartisan manager's amendment, which
addresses a significant number of concerns that have been raised by
many Members.
The rule also includes an important provision from the Committee on
Ways and Means to ensure fiscal solvency of the Highway Trust Fund, as
well as a provision relating to the mass transit guarantee.
Mr. Speaker, this provision is necessary to ensure that current
flexibilities and authorities of Congress to set appropriate annual
spending levels for basic salaries and administrative expenses for the
Federal Transit Administration are maintained.
Under current law, the Committee on Appropriations can adjust
spending in this account so long as those savings are rolled into other
mass transit programs and the full transit guarantees are preserved.
The underlying bill, as reported by the Committee on Transportation and
Infrastructure, restricted the ability of the Committee on
Appropriations to adjust spending on an account-by-account basis. The
amendment to the bill included in this rule simply provides guidance in
interpreting existing rules of the House to ensure that the status quo
is maintained. This is not intended to provide any new authority
whatsoever.
Mr. Speaker, I want to note that I will continue to work with the
committees to perfect language to ensure that the provisions achieve
the intended purpose. Legislating House rules in this manner is not my
preferred way to proceed.
Regrettably, however, when TEA 21 was enacted, changes to the House
rules were legislated within the authorizing statute and were not
implemented through the regular order of the House.
{time} 1315
Instead, they were and are continuing to be legislated by a committee
that does not have any jurisdiction over this matter.
I want to make it very clear, Mr. Speaker, that the Committee on
Rules has and will retain its jurisdiction over the rules of the House.
As part of our review of budget enforcement procedures, this and other
budgetary enforcement mechanisms will be further scrutinized. It is my
hope that the affected committees will continue to work with the
Committee on Rules to ensure that all changes to the rules of the House
are thoughtful and reasoned. But, Mr. Speaker, despite my reservations
over some portions of the legislation, I want to reiterate my strong
support for the underlying legislation.
Mr. Speaker, the Transportation Equity Act: A Legacy For Users,
reauthorizes our Nation's surface transportation programs for the next
6 years. The very core of this bill is safety and congestion relief.
Investing in transportation infrastructure has fundamental impacts on
our quality of life, our Nation's economic growth and, as was just said
by the distinguished chairman of the Committee on Transportation and
Infrastructure, our competitiveness in the world. Our highways, transit
systems, pipelines, airports, harbors and waterways serve as the
backbone of our economy by moving people and goods, employing millions
of workers, and generating a significant share of total economic
output.
Transportation-related goods and services generate 10 percent of our
total gross domestic product. In making our infrastructure backbone
stronger, TEA LU provides safety improvements that will save lives.
Many of the more than 42,000 highway fatalities each year can be
prevented by building better roads and improving the safety features of
existing roads. Commercial motor vehicles are involved in 12 percent of
all crashes resulting in a fatality. Carriers transporting extremely
hazardous materials must ensure that sufficient safety and security
measures are in place to accomplish that transportation without loss of
life, injury or property damage.
Improvements in safety include the movement of freight from ship to
shore, which must be conducted in a safe, efficient, secure manner in
order to improve air quality and decrease congestion.
Congestion relief is imperative. American families do not need books
of statistics to know that traffic congestion has increased. We all
know that rush hour starts earlier in the day and ends later at night,
creating more travel time than ever before. Congestion also negatively
impacts our environment by increasing emissions and wasting fuel.
Vehicles in stop-and-go traffic not only emit more pollutants than they
do when operating without frequent breaking and acceleration, but
obviously they decrease fuel efficiency as well.
In my home State of California, improving safety while reducing
congestion has never been more critical. As California is considered
the Gateway to the Pacific Rim, 40 percent of the Nation's goods are
imported through the ports of Los Angeles and Long Beach. The
infrastructure supporting the movement of goods from ship to shore
through Los Angeles and Long Beach will distribute an estimated $314
billion worth of trade by the year 2020.
Facilitating growth in trade is directly connected to the overall
economic vitality of the entire Nation. Ninety-five percent of U.S.
international cargo by volume is transported by ocean. According to the
United States Trade Representative's Office, nearly 20 percent of all
U.S. jobs are directly associated with international trade.
In the Southern California region alone, improvements to our
infrastructure will reduce a projected 300 percent increase by 2020 in
auto-truck traffic delays in points where freight moving on railroads
impedes vehicle and pedestrian traffic. This is just one example of how
TEA LU strengthens our transportation infrastructure into the next
decade.
During this debate, you will hear the challenges we must still
address in improving our surface transportation programs. Nobody can
deny that the need is great and our resources are limited.
In addition, I look forward toward working that States receive their
fair share. However, our critical task here is to ensure the safety of
American families and to move people and goods throughout this country
faster and more efficiently. This bill accomplishes that goal.
I would like to congratulate the gentleman from Alaska (Chairman
[[Page H1822]]
Young), the gentleman from Wisconsin (Chairman Petri), the gentleman
from Minnesota (Mr. Oberstar) and the gentleman from Pennsylvania (Mr.
Lipinski) on their leadership in crafting this important legislation.
To that end, Mr. Speaker, I urge my colleagues to support this rule
and the underlying bill.
Mr. Speaker, I reserve the balance of my time.
Mr. FROST. Mr. Speaker, I yield myself such time as I may consume.
(Mr. FROST asked and was given permission to revise and extend his
remarks.)
Mr. FROST. Mr. Speaker, throughout my 25 years of service in this
House, I have always worked hard to ensure a bright economic future and
a good quality of life for the people I represent. That is why I have
consistently made transportation priorities of North Texas my own
priorities here in Congress. I have always supported the Federal
highway and transit bills that have come before the House, because I
knew they would directly benefit the people of my area.
In 1998, for example, I voted in favor of TEA 21, the last
transportation reauthorization bill passed by Congress. That bill
widened a major thoroughfare in North Texas, Interstate 30, from six to
eight and ten lanes, easing congestion in Dallas-Fort Worth and the
surrounding areas.
TEA 21 also included important funding to expand DART, the Dallas
Area Rapid Transit System. As one of DART's original supporters, I knew
that by reducing motor vehicle traffic on our already-overcrowded
roads, the system would significantly reduce air pollution and ease the
commute of thousands of Dallas residents. An important byproduct of
both these projects were the many, many good jobs created for our
community.
So for me it has always been an easy decision to vote for the
transportation bills in this House, and that is why today I am proud to
rise in strong support of this year's transportation authorization
bill, TEA LU.
TEA LU will be one of the most important bills we pass in Congress
this year, and the reason is simple: Transportation projects stimulate
economic activity in our home communities. Quite simply, this bill is
good for our Nation's economy. In fact, the Federal Highway
Administration reports that for every $1 billion in Federal funds
invested in highway infrastructure, it creates 47,500 new jobs and $6.2
billion in economic activity.
So whenever Congress passes its transportation reauthorization bill,
we do not simply reduce congestion and air pollution, we create jobs,
good jobs that cannot be shipped overseas, and we create huge
opportunities for our constituents by bringing the government, the
private sector and the general public together to help grow the economy
so that those good jobs stay here at home in our own communities.
There is no doubt that for far too many Americans, the U.S. economy
is in bad shape. Over 8 million people are currently unemployed, the
average length of unemployment has risen to 20.3 weeks, the longest
duration since 1984, and no new private sector jobs were created last
month. So, as you can see, Mr. Speaker, it is especially critical that
we pass the transportation bill today.
The bill before us today continues to provide benefits for North
Texas. It is my understanding that the bill contains $35 million in
funding that I requested from the committee to replace Interstate 30
and Interstate 35 Trinity River bridges in Dallas and for the
improvements to I-635 in Dallas. The bill also authorizes four new rail
lines to expand DART in Dallas, including construction of a Northwest/
Southeast extension that will add 60,000 daily riders to the rail
system.
So, by passing TEA LU, we will not only be reducing air pollution and
easing congestion throughout the metropolitan area, we will be creating
new jobs and a brighter economic future for North Texas.
Mr. Speaker, highway and transportation funding must never be subject
to partisan politics. There is too much at stake for the American
people, and there is too much at stake for the economy. I know that my
colleagues all want the same thing for their constituents as I want for
mine: clean air, better roads and good jobs. The bill before us today
can set us on that path. I hope that today Members will set aside
politics as usual and vote to pass TEA LU for the good of our
communities and our entire Nation.
Mr. Speaker, I urge a yea vote on the rule and on the bill.
Mr. Speaker, I reserve the balance of my time.
Mr. DREIER. Mr. Speaker, I am very happy to yield 3 minutes to the
gentleman from Atlanta, Georgia (Mr. Linder), the distinguished
chairman of the Committee on Rules' Subcommittee on Technology.
Mr. LINDER. Mr. Speaker, I thank my friend from California, the
chairman of the Committee on Rules, for yielding me time.
Mr. Speaker, I rise in support of House Resolution 593 and urge the
House to approve this rule so we can move on to consideration of the
underlying legislation, H.R. 3550, the highway funding bill.
As the gentleman from California (Chairman Dreier) described, this is
a fair, structured rule that makes in order a total of 23 amendments,
14 Republican and 8 Democrat, and one very important bipartisan
amendment. Thus, the Committee on Rules has crafted a rule that will
allow the House to have a lively debate and work its will on a number
of key issues that these amendments raise. H. Res. 593 should receive
bipartisan support for doing so.
With respect to H.R. 3550, this legislation reauthorizes our Nation's
highway and transit programs for the next 6 years and covers a variety
of important transportation needs. While I am pleased that the House is
moving forward with its consideration of the highway bill, there is one
outstanding issue that concerns me, the issue of minimum guaranteed
funding.
Georgia has, unfortunately, been a highway funding donor State for
far too long. The two previous highway bills in 1991 and 1998 made good
progress toward improving donor States' rates of return, but more still
needs to be done in order to treat Georgia and other donor States more
fairly.
In the 1998 Transportation Equity Act For the 21st Century, TEA 21, I
worked hard, along with other key members of the Georgia delegation, to
achieve the present rate of return of 90.5 percent. With these efforts,
Georgia was able to raise its average rate of return from 76 percent to
approximately 86 percent of their share of contributions over the 6-
year life of the bill.
Unfortunately, H.R. 3550 in its current form is not a step forward
toward the current goal of 95 percent. It does not even maintain the
current level of minimum guaranteed funding provided under TEA 21.
Although H.R. 3550 maintains the TEA 21 rate of return of 90.5 percent,
the bill would mandate that only 84 percent is available for minimum
guaranteed funding, unlike TEA 21, which sets aside approximately 93
percent of the Highway Trust Fund for minimum guaranteed needs.
As such, the issue of minimum guaranteed funding under H.R. 3550 must
be addressed more satisfactorily. In this respect, I am very pleased
that the rule we crafted in the Committee on Rules will provide Members
the opportunity to consider amendments offered by the gentleman from
Georgia (Mr. Isakson) and the gentleman from Georgia (Mr. Burns) and
others which is designed to address this very concern.
Mr. Speaker, this is a good rule. It provides all Members the
opportunity to debate a wide variety of transportation related issues
facing our Nation. I urge my colleagues to support the rule, so we may
proceed to debate the underlying legislation.
Mr. FROST. Mr. Speaker, I yield 4 minutes to the gentleman from
Massachusetts (Mr. McGovern).
Mr. McGOVERN. Mr. Speaker, I thank the gentleman for yielding me
time.
Mr. Speaker, while the Committee on Rules this morning reported out
of committee an unnecessarily restrictive rule, and, as a result I will
not support the rule, I do want to commend the chairman of the
Committee on Transportation and Infrastructure, the gentleman from
Alaska (Mr. Young), and the ranking member, the gentleman from
Minnesota (Mr. Oberstar), as well as the subcommittee chair, the
gentleman from Wisconsin (Mr. Petri), and the ranking member, the
gentleman from Pennsylvania (Mr. Lipinski), for all their hard,
bipartisan work
[[Page H1823]]
on this highway reauthorization bill. They recognized the importance of
adequately meeting our Nation's transportation needs and of creating
good-paying jobs for the American people at a time when we desperately
need new jobs.
I only wish that the leadership of this House and the White House
would follow their lead and the lead of the entire membership of the
Committee on Transportation and Infrastructure. There are lots of good
things in this bill, but I continue to believe that the overall funding
level is not enough to meet our needs.
In States all across this country, including Massachusetts, roads and
bridges are crumbling under the burden of age and heavy use. Adequate
infrastructure is essential for economic development. We can do better,
and I am hopeful that in the very near future we will have the
opportunity to return to transportation policy to finish the work that
this bill begins. I was glad to hear the distinguished Committee on
Transportation and Infrastructure Chair say that he would be back
fighting for more money, and I will certainly stand with him in that
effort.
Mr. Speaker, I am also concerned about efforts by some Members to
decrease highway safety and quality by increasing truck size and truck
weight. This rule makes in order two amendments that are particularly
troublesome.
The first, offered by my colleague, the gentleman from New Hampshire
(Mr. Bradley), would create an exemption from existing Federal truck
size and weight limits for certain roads in his home State. The
exemption for New Hampshire would damage the highway infrastructure,
especially bridges, and cost taxpayers a great deal of money.
The U.S. Department of Transportation calculated that if the
exemptions the Bradley amendment would create were applied nationwide,
it would result in additional bridge costs to taxpayers of $329
billion.
Further, heavier trucks are more dangerous. As truck weights
increase, fatal accident rates will go up, according to the University
of Michigan Transportation Research Institute. In fact, the Institute
says, ``Gross combination weight is the only vehicle characteristic
showing a clear association with the overall fatal accident rate.''
I also urge my colleagues to oppose the amendment offered by the
gentleman from Indiana (Mr. Chocola). This amendment would allow truck
operators who use ``idle reduction technology'' to operate at 400
pounds above the Federal legal weight limits.
{time} 1330
Although this seems to be only a minor increase in weight, it would
actually cost Americans hundreds of millions of tax dollars each year
because of the increased pavement damage this additional weight would
cause.
According to the EPA, there is an inexpensive alternative to the idle
reduction technology proposed in this amendment that would still reduce
emissions and save fuel without adding additional weight. The
alternative is stand-alone truck stop electrification systems, which
are permanent structures located at various truck stops that have HVAC
systems attached. The driver purchases a one-time $10 adapter and pays
an hourly rate to use the system.
The Chocola amendment also runs counter to the recent agreement
between the American Trucking Association, and the Association of
American Railroads that calls for no national truck weight increases in
the transportation reauthorization bill. While a 400-pound weight
increase may seem innocuous, it is not as simple as it seems, and it is
best left out of this highway reauthorization bill.
Proposals to increase truck sizes and weights have been opposed by a
broad range of national organizations because of their negative impact
on the highway infrastructure and their danger to other motorists.
Organizations opposing bigger trucks include the American Automobile
Association, the International Brotherhood of Police Officers, the
National Association of Emergency Medical Technicians, the National
Association of Police Organizations, and the National Troopers
Coalition.
The SPEAKER pro tempore (Mr. LaHood). The gentleman's time has
expired.
Mr. DREIER. Mr. Speaker, I yield 1 minute to my friend, the gentleman
from Massachusetts (Mr. McGovern); and when he has completed his
statement, if he would yield to me for 1 comment, I would appreciate it
Mr. McGOVERN. Mr. Speaker, I appreciate the gentleman's courtesy.
The National Troopers Coalition, the Society of Trauma Nurses, these
groups know firsthand the danger caused by bigger and heavier trucks on
our roadways.
So I urge my colleagues to oppose both the Bradley and the Chocola
amendments.
Again, Mr. Speaker, I commend the gentleman from Alaska (Chairman
Young) and the gentleman from Minnesota (Ranking Member Oberstar) and
all of the members of the Committee on Transportation and
Infrastructure for their hard work.
Mr. DREIER. Mr. Speaker, will the gentleman yield?
Mr. McGOVERN. I yield to the gentleman from California.
Mr. DREIER. Mr. Speaker, I did not want to interrupt my colleague
when he was going through his prepared statement, but I did want to
clarify one issue that the gentleman raised.
He said in his opening that this was an unusually restrictive rule,
and I would just like to state for the Record that when the ISTEA
legislation was considered, there were a total of 12 amendments made in
order. That was in the 102nd Congress when the Democrats were in
charge. When TEA 21 was considered, there were a total of six
amendments made in order, Mr. Speaker; and then in this legislation we
have provided for consideration of a total of 23 amendments.
So that is why I asked the gentleman to yield.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. FROST. Mr. Speaker, I yield 1 minute to the gentleman from
Massachusetts (Mr. McGovern).
Mr. McGOVERN. Mr. Speaker, I think what I said was this was an
unnecessarily restrictive rule, and what I meant to say is that, as
usual, this is a restrictive rule that we have come to expect of the
Committee on Rules.
There were a number of good amendments that were not made in order,
and I think that, as a result, I will oppose the rule.
Mr. DREIER. Mr. Speaker, will the gentleman yield?
Mr. McGOVERN. I yield to the gentleman from California.
Mr. DREIER. Mr. Speaker, all I was saying is that if you go and look
at the pattern of consideration of transportation measures, when the
gentleman's party was in control, half the number of amendments were
made in order.
Mr. McGOVERN. Mr. Speaker, reclaiming my time, I would simply say
that there were a lot of good amendments dealing with truck sizes and
truck weights but also dealing with issues like outsourcing that the
Committee on Rules chose not to make in order, which I think is
unfortunate.
Mr. DREIER. Mr. Speaker, I reserve the balance of my time.
Mr. FROST. Mr. Speaker, I yield 3 minutes to the gentleman from
Tennessee (Mr. Davis).
Mr. DAVIS of Tennessee. Mr. Speaker, I appreciate the opportunity to
make a few presentations about TEA LU. Living in a rural area, it is
obvious to me that as we see infrastructure and dollars that are being
spent on roads, it is the fertilizer that drives economic development
for many of the areas, especially rural areas throughout this country.
I applaud this House in their effort to pass legislation that will
provide funding for infrastructure that will eventually provide
economic development for this Nation.
There are many who look at this bill and say, look at the jobs that
will be created as we start building infrastructure. Well, it is more
than just the jobs that will be provided as we build the
infrastructure. It will be the jobs 50 years from now that my
grandchildren or my unborn great grandchildren will have an opportunity
for a job as well. Because, as I have observed, the interstate systems
in Tennessee and throughout this Nation, as we build a system that
provides transportation from coast to coast and border to border, we
have seen economic development unsurpassed by any other country as a
result of those dollars spent.
[[Page H1824]]
Now, as we look at this particular bill, certainly $275 billion
sounds like a lot of money for 6 years. Unfortunately, I believe, and I
think most of the folks that I represent believe, that that is too
short, that it does not go fair enough. As a result of that, I, along
with three other Members of the House, introduced an amendment that
would enhance the dollars to at least the amount that the Senate
approved, being $318 billion.
Some folks say, well, we can spend the money some other place. But
there are no sections of our economy that produces the jobs at the same
rate for the same dollars spent as infrastructure and development on
our road systems and infrastructure of this country. As a result of
that, I think that enhancing the dollars, increasing the amount, is a
wise thing for those of us in Congress to do.
Because, Mr. Speaker, as we build infrastructure we provide the tools
that will drive the economic engines of the future generations for now
or decades from now. What we are doing, unfortunately, what we are
doing today is not passing on an engine or the fertilizer for economic
development; and, unfortunately, what my grandchildren will be
receiving is huge debts, a $500 billion deficit in trade and a $500
billion deficit in our budget. At least this way, this Congress can do
something for generations down the road, instead of taking away from
them.
Mr. DREIER. Mr. Speaker, I reserve the balance of my time.
Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from
Oregon (Mr. Blumenauer).
Mr. BLUMENAUER. Mr. Speaker, I appreciate the gentleman's courtesy in
yielding me this time and permitting me to speak on this bill.
There are two things I wanted to say, that we have seen our committee
leadership that has been appropriately exhalted for the hard work that
they have done, and we have some terrific men and women who have been
laboring in the field. The majority party has recognized some of
theirs, and I would like to acknowledge Ward McCarragher, David
Heymsfield, Ken House, Clyde Woodle, Jonathan Upchurch, Art Chan,
Sheila Lockwood, who stayed with the committee for another 4 months
before retiring, and Jason Tai. On the Majority side we have had
extraordinary cooperation from Joyce Rose. These people have worked
with the committee leadership, the staff to put together a really
artfully crafted piece of legislation.
The problem is that we are today not able to deal with what I think
is the most important issue and that is how to rightsize it. The
gentleman from California (Mr. Dreier), my good friend, talked about
the number of amendments that have been offered up and balanced with
what happened with the original TEA 21 or ISTEA. I do not know about
the number, but the significance of the amendment is what should be
debated, not the number.
We have had a meltdown with some of our friends on the Republican
side of the equation because they are not being able to correlate their
needs. They are concerned about adequate money dealing with a donor or
donee.
Well, our amendment which was not made in order would have just
simply rightsized it to the Senate number and would have provided $3
billion more for California, $2.5 billion for Texas, $1.6 billion for
New York, $1.5 billion for Florida. It would have given the committee
leadership an opportunity to deal with the balance that is so
important.
I hope that we will, in a moment, support an effort by the gentleman
from Texas (Mr. Frost) to be able to make in order an amendment to deal
with at least voting on whether we are going to have the same level of
funding as the Senate. I think it is important for the House to
establish that marker. It would make it a lot easier for everybody. It
is fully funded. It does not require a tax increase, and I sincerely
hope that we will, in our wisdom, be able to consider it.
Mr. FROST. Mr. Speaker, I yield 3 minutes to the gentleman from New
Jersey (Mr. Menendez).
(Mr. MENENDEZ asked and was given permission to revise and extend his
remarks.)
Mr. MENENDEZ. Mr. Speaker, I want to also commend the leadership of
the committee in producing a bill within the constraints that they had
and in keeping so many items that are of great, important policy
intact.
But I oppose the rule because the committee does not allow the House
to work its will on a higher funding level that the committee, on a
bipartisan basis, recognize is needed for the Nation's infrastructure.
Also, because of a critical issue on this bill that is also about jobs,
the committee did also not accept my amendment which was a sense of the
Congress that none of these jobs in transportation should be
outsourced.
Now, it is very difficult to see billions of dollars going to Iraq
for infrastructure funding and to leave America short of where we need
to be. I believe, as does I think a majority, if they were given the
opportunity, that the Senate bill of $318 billion is a fiscally
responsible bill. I also believe that it is responsible national
economic development policy, and I also believe it is responsible
national security policy.
That is why I was pleased to have joined my colleagues in offering an
amendment in the Committee on Rules that would have increased the
funding of this bill to that Senate level of $318 billion and let the
House work its will. We did not get that chance in this rule.
Now, transportation is about a lot more than simply moving goods and
people from one place to another. It is about economic development in
both the short and the long term. It is about good-paying jobs at a
time that we desperately need those jobs. Having lost several million
jobs during this administration, it would be great if we could have the
resources to meet the infrastructure needs and create more good-paying
jobs here in America.
It is about improving the environment by creating a transportation
system that pollutes less and helps us achieve Clean Air Act
requirements. It is about spending less time in traffic and more time
with our family or on our work, being productive, and it is about
security.
On September 11, my district, right across from mid-town, if it was
not for the multiplicity of transportation modes, the people who were
trapped in downtown Manhattan would have not gotten out but for a ferry
system. When all the tunnels, all the bridges, all the trains were
closed, security on that day came in the vehicle of a ferry system.
That is why this bill in this modern age is so important. That is why
we should be having a higher funding, and that is why we should have
the ability for the House to work its will on economic development, on
jobs, on making sure those jobs are not outsourced and on the Nation's
security in the context of transportation. That is why I oppose the
rule; and, hopefully, we will be given the opportunity to have a vote
on these issues and, in doing so, strengthen America financially,
economically, jobs and security.
FEDERAL HIGHWAY FORMULA PROGRAMS
[6-year comparison of funding levels, H.R. 3550 vs. Davis amendment, March 30, 2004]
----------------------------------------------------------------------------------------------------------------
State H.R. 3550 Davis amendment Increase
----------------------------------------------------------------------------------------------------------------
Alabama................................................ 3,677,518,555 4,319,449,206 641,930,651
Alaska................................................. 2,161,805,396 2,539,160,160 377,354,764
Arizona................................................ 3,132,889,645 3,679,752,390 546,862,745
Arkansas............................................... 2,397,490,265 2,815,985,091 418,494,826
California............................................. 17,090,057,720 20,073,219,252 2,983,161,532
Colorado............................................... 2,599,044,285 3,052,721,449 453,677,165
Connecticut............................................ 2,755,281,305 3,236,230,482 480,949,177
Delaware............................................... 802,671,177 942,781,750 140,110,573
Dist. of Col........................................... 717,759,307 843,048,057 125,288,749
Florida................................................ 8,572,806,425 10,069,235,914 1,496,429,489
Georgia................................................ 6,369,115,958 7,480,879,419 1,111,763,461
Hawaii................................................. 939,292,198 1,103,250,705 163,958,507
Idaho.................................................. 1,400,320,105 1,644,753,514 244,433,409
Illinois............................................... 7,126,178,352 8,370,091,127 1,243,912,775
Indiana................................................ 4,648,807,879 5,460,282,309 811,474,429
Iowa................................................... 2,239,473,448 2,630,385,588 390,912,140
Kansas................................................. 2,125,881,144 2,496,965,136 371,083,992
Kentucky............................................... 3,150,629,518 3,700,588,853 549,959,335
Louisiana.............................................. 2,884,826,337 3,388,388,296 503,561,959
Maine.................................................. 954,895,661 1,121,577,837 166,682,176
Maryland............................................... 2,915,353,992 3,424,244,718 508,890,726
Massachusetts.......................................... 3,381,597,061 3,971,873,023 590,275,962
Michigan............................................... 5,923,386,287 6,957,345,236 1,033,958,948
Minnesota.............................................. 3,594,936,603 4,222,452,130 627,515,527
Mississippi............................................ 2,210,974,449 2,596,911,936 385,937,487
Missouri............................................... 4,284,602,135 5,032,502,492 747,900,357
Montana................................................ 1,801,474,258 2,115,931,283 314,457,025
Nebraska............................................... 1,409,391,886 1,655,408,823 246,016,937
Nevada................................................. 1,315,045,364 1,544,593,608 229,548,244
New Hampshire.......................................... 936,752,099 1,100,267,219 163,515,119
New Jersey............................................. 4,778,585,240 5,612,713,006 834,127,766
New Mexico............................................. 1,793,309,655 2,106,341,504 313,031,850
New York............................................... 9,367,158,121 11,002,245,973 1,635,087,852
North Carolina......................................... 5,211,624,631 6,121,341,752 909,717,121
North Dakota........................................... 1,188,947,609 1,396,484,812 207,537,203
Ohio................................................... 7,168,776,245 8,420,124,712 1,251,348,467
Oklahoma............................................... 2,797,555,804 3,285,884,223 488,328,418
Oregon................................................. 2,210,430,142 2,596,272,617 385,842,475
Pennsylvania........................................... 9,051,278,709 10,631,228,110 1,579,949,401
Rhode Island........................................... 1,080,993,416 1,269,686,633 188,693,217
South Carolina......................................... 2,951,639,076 3,466,863,559 515,224,483
South Dakota........................................... 1,297,083,238 1,523,496,096 226,412,858
Tennessee.............................................. 4,108,791,020 4,826,002,601 717,211,581
Texas.................................................. 14,365,474,761 16,873,045,677 2,507,570,916
Utah................................................... 1,420,822,330 1,668,834,513 248,012,183
Vermont................................................ 829,705,084 974,534,571 144,829,487
Virginia............................................... 4,684,441,786 5,502,136,305 817,694,519
Washington............................................. 3,261,461,121 3,830,766,708 569,305,588
West Virginia.......................................... 2,053,669,768 2,412,148,876 358,479,108
Wisconsin.............................................. 3,613,471,781 4,244,222,724 630,750,942
Wyoming................................................ 1,261,158,985 1,481,301,072 220,142,087
--------------------------------------------------------
[[Page H1825]]
All states........................................... 188,016,637,337 220,835,953,046 32,819,315,709
----------------------------------------------------------------------------------------------------------------
Total funding levels calculated by Federal Highway Administration, U.S. Department of Transportation.
FEDERAL TRANSIT FORMULA PROGRAMS
[6-year comparison of funding levels H.R. 3550 vs. Davis Amendment, March 30, 2004]
----------------------------------------------------------------------------------------------------------------
State H.R. 3550 Davis Amendment Increase
----------------------------------------------------------------------------------------------------------------
Alabama................................................ 198,869,641 231,156,144 32,266,503
Alaska................................................. 133,060,259 140,513,693 7,453,434
Arizona................................................ 403,911,758 470,227,686 66,315,929
Arkansas............................................... 116,150,368 135,270,375 19,120,008
California............................................. 5,552,597,250 6,343,415,048 790,817,798
Colorado............................................... 403,479,756 471,766,156 68,286,399
Connecticut............................................ 647,204,763 709,330,655 62,125,892
Delaware............................................... 54,248,356 63,622,106 9,373,749
District of Columbia................................... 877,852,428 967,767,310 89,914,881
Florida................................................ 1,483,096,526 1,717,128,836 234,032,310
Georgia................................................ 815,018,982 918,781,238 103,762,256
Hawaii................................................. 202,434,156 238,805,983 36,371,827
Idaho.................................................. 73,260,393 86,047,086 12,426,693
Illinois............................................... 2,556,048,373 2,856,722,554 300,674,181
Indiana................................................ 417,530,452 476,695,916 59,165,463
Iowa................................................... 149,594,568 174,954,344 25,359,777
Kansas................................................. 118,069,423 138,190,463 20,121,040
Kentucky............................................... 217,385,766 253,776,373 36,390,607
Louisiana.............................................. 308,212,487 356,370,390 48,157,903
Maine.................................................. 56,815,827 65,391,665 8,575,838
Maryland............................................... 730,485,598 826,480,076 95,994,478
Massachusetts.......................................... 1,423,677,171 1,591,967,255 168,290,084
Michigan............................................... 627,110,529 732,156,410 105,045,881
Minnesota.............................................. 420,631,347 487,032,862 66,401,515
Mississippi............................................ 105,336,903 122,276,702 16,939,799
Missouri............................................... 386,141,847 447,919,643 61,777,797
Montana................................................ 55,239,907 63,899,172 8,659,265
Nebraska............................................... 93,382,341 109,844,579 16,462,238
Nevada................................................. 193,001,724 227,399,351 34,397,627
New Hampshire.......................................... 56,243,067 65,593,404 9,350,337
New Jersey............................................. 2,098,273,741 2,383,583,819 285,310,078
New Mexico............................................. 112,681,925 131,579,394 18,897,469
New York............................................... 6,444,879,743 7,175,638,872 730,759,129
North Carolina......................................... 420,756,227 490,377,297 69,621,070
North Dakota........................................... 46,410,005 53,750,291 7,340,286
Ohio................................................... 900,583,684 1,034,764,387 134,180,702
Oklahoma............................................... 166,621,542 195,099,134 28,477,592
Oregon................................................. 338,235,316 392,830,946 54,595,630
Pennsylvania........................................... 1,987,703,003 2,205,014,254 217,311,252
Rhode Island........................................... 76,644,720 89,477,672 12,832,952
South Carolina......................................... 181,253,492 210,208,976 28,955,485
South Dakota........................................... 46,483,209 53,967,891 7,484,682
Tennessee.............................................. 313,483,924 364,150,802 50,666,878
Texas.................................................. 1,765,377,276 2,052,505,365 287,128,089
Utah................................................... 233,854,931 275,023,227 41,168,296
Vermont................................................ 27,540,665 31,245,242 3,704,577
Virginia............................................... 603,913,755 685,812,664 81,898,909
Washington............................................. 918,384,406 1,049,682,654 131,298,248
West Virginia.......................................... 85,312,226 98,084,121 12,771,895
Wisconsin.............................................. 384,588,461 447,857,272 63,268,811
Wyoming................................................ 29,710,803 34,376,684 4,665,881
--------------------------------------------------------
Total apportioned.................................... 36,059,145,018 40,945,534,437 4,886,389,419
--------------------------------------------------------
Oversight............................................ 265,991,427 301,490,789 35,499,362
========================================================
Grand total.......................................... 36,325,136,445 41,247,025,226 4,921,888,781
----------------------------------------------------------------------------------------------------------------
Total funding levels calculated by Federal Highway Administration, U.S. Department of Transportation
State allocation includes 5307, 5307 TI, 5309 FGM, 5310, 5311 (but not RTAP), JARC, NFI, 5303, 5313, and Clean
Fuel under both funding levels
TOTAL HIGHWAY/TRANSIT INVESTMENT INCREASES AND NEW JOBS CREATED UNDER DAVIS AMENDMENT
[6-year comparison of funding levels, H.R. 3550 vs. Davis Amendment, March 30, 2004]
----------------------------------------------------------------------------------------------------------------
State Highway Transit Total increase New jobs created
----------------------------------------------------------------------------------------------------------------
Alabama..................... 641,930,651 32,286,503 674,217,154 32,025
Alaska...................... 377,354,764 7,453,434 384,808,198 18,278
Arizona..................... 546,862,745 66,315,929 613,178,674 29,126
Arkansas.................... 418,494,826 19,120,008 437,614,834 20,787
California.................. 2,983,161,532 791,817,798 3,774,979,330 179,312
Colorado.................... 453,677,165 68,286,399 521,963,564 24,793
Connecticut................. 480,949,177 62,125,892 543,075,069 25,796
Delaware.................... 140,110,573 9,373,749 149,484,322 7,101
Dist. of Col................ 125,288,749 89,914,881 215,203,630 10,222
Florida..................... 1,496,429,489 234,032,310 1,730,461,799 82,197
Georgia..................... 1,111,763,461 103,762,256 1,215,525,717 57,737
Hawaii...................... 163,958,507 36,371,827 200,330,334 9,516
Idaho....................... 244,433,409 12,426,693 256,860,102 12,201
Illinois.................... 1,243,912,775 300,674,181 1,544,586,956 73,368
Indiana..................... 811,474,429 59,165,463 870,639,892 41,355
Iowa........................ 390,912,140 25,359,777 416,271,917 19,773
Kansas...................... 371,083,992 20,121,040 391,205,032 18,582
Kentucky.................... 549,959,335 36,390,607 586,349,942 27,852
Louisiana................... 503,561,959 48,157,903 551,719,862 26,207
Maine....................... 166,682,176 8,575,838 175,258,014 8,325
Maryland.................... 508,890,726 95,994,478 604,885,204 28,732
Massachusetts............... 590,275,962 168,290,084 758,566,046 36,032
Michigan.................... 1,033,958,948 105,045,881 1,139,004,829 54,103
Minnesota................... 627,515,527 66,401,515 693,917,042 32,961
Mississippi................. 385,937,487 16,939,799 402,877,286 19,137
Missouri.................... 747,900,357 61,777,797 809,678,154 38,460
Montana..................... 314,457,025 8,659,265 323,116,290 15,348
Nebraska.................... 246,016,937 16,462,238 262,479,175 12,468
Nevada...................... 229,548,244 34,397,627 263,945,871 12,537
New Hampshire............... 163,515,119 9,350,337 172,865,456 8,211
New Jersey.................. 834,127,766 285,310,078 1,119,437,844 53,173
New Mexico.................. 313,031,850 18,897,469 331,929,319 15,767
New York.................... 1,635,087,852 730,759,129 2,365,846,981 112,378
North Carolina.............. 909,717,121 69,621,070 979,338,191 46,519
North Dakota................ 207,537,203 7,340,286 214,877,489 10,207
Ohio........................ 1,251,348,467 134,180,702 1,385,529,169 65,813
Oklahoma.................... 488,328,418 28,477,592 516,806,010 24,548
Oregon...................... 385,842,475 54,595,630 440,438,105 20,921
Pennsylvania................ 1,579,949,401 217,311,252 1,797,260,653 85,370
Rhode Island................ 188,693,217 12,832,952 201,526,169 9,572
South Carolina.............. 515,224,483 28,955,485 544,179,968 25,849
South Dakota................ 226,412,858 7,484,682 277,079,736 13,161
Tennessee................... 717,211,581 50,666,878 1,004,339,670 47,706
Texas....................... 2,507,570,916 287,128,089 2,548,739,212 121,065
Utah........................ 248,012,183 41,168,296 251,716,760 11,957
Vermont..................... 144,829,487 3,704,577 226,728,396 10,770
Virginia.................... 817,694,519 81,898,909 948,992,767 45,077
Washington.................. 569,305,588 131,298,248 582,077,483 27,649
West Virginia............... 358,479,108 12,771,895 421,747,919 20,033
Wisconsin................... 630,750,942 63,268,811 635,416,823 30,182
Wyoming..................... 220,142,087 4,665,881 224,807,968 10,678
-----------------------------------------------------------------------------------
All states................ 32,177,385,058 4,855,102,917 37,032,487,975 1,759,043
----------------------------------------------------------------------------------------------------------------
Total funding levels calculated by the Federal Highway Administration and the Federal Transit Administration,
U.S. Department of Transportation.
Mr. DREIER. Mr. Speaker, I continue to reserve the balance of my
time.
Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from Texas
(Mr. Turner).
Mr. TURNER of Texas. Mr. Speaker, I am greatly disturbed that we are
debating a $275 billion transportation measure without taking strong
action in this bill to increase security in our rail and transit
systems.
Three weeks ago, a terrorist group related to al Qaeda conducted
several coordinated bombings on commuter trains in Madrid. Two hundred
civilians were killed and more than 1,500 injured. The tragedy was
enough to shock the nations of Europe into immediate action to get
serious about transit security, but we have not responded here at home
with sufficient urgency to protect the lives of the many Americans who
travel every day by rail and transit.
Earlier this week, British police arrested eight and seized half a
ton of ammonia nitrate. Philippine authorities arrested four members of
a terrorist group linked to al Qaeda and seized 30 pounds of TNT. Each
of these cases may have prevented another Madrid-style attack.
Closer to home, Amtrak's trains were stopped this last Tuesday and
searched
[[Page H1826]]
in Florida, North Carolina, and Pennsylvania after bomb threats were
reported. We are enormously vulnerable to rail and transit attack and
have an estimated need for $2 billion in investments in security for
mass transit.
{time} 1345
Yet since the attacks of September 11 of 2001, the Department of
Homeland Security has made available only $115 million for this
purpose.
Today, we have a $275 billion bill that barely addresses security. It
does not specifically dedicate one dollar to rail or transit security.
I offered three amendments in the Committee on Rules, two of them
designed to make a down payment of $250 million in grants to local
transit agencies to improve security through surveillance and
communications systems, detectors for weapons of mass destruction,
training, education and other uses.
In light of terrorist threats that we face, Mr. Speaker, it is
difficult to understand why we are not allowed to take up these
amendments on the floor of the House today.
Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from West
Virginia (Mr. Rahall).
Mr. RAHALL. Mr. Speaker, tomorrow, on Friday, the President of the
United States will be in my congressional district talking about jobs
and the economy. Unfortunately, although I was invited, and I
appreciate that, I will not be with the President because I will be
here in the Halls of Congress working on a bill that very vitally
affects jobs and the economy, this transportation and infrastructure
legislation.
I commend the gentleman from Minnesota (Ranking Member Oberstar) and
the gentleman from Alaska (Chairman Young) and the gentleman from
Wisconsin (Mr. Petri) and the gentleman from Illinois (Mr. Lipinski),
the ranking subcommittee member, for the hard work that they have put
in on this legislation.
Jobs and the economy. That is what this is about. This legislation is
the quickest way to put American working men and women back to work.
For every $1 billion invested in our Nation's infrastructure, we are
talking about 46,500 good paying jobs, not hamburger-flipping jobs; we
are talking about good-paying jobs for our economy.
The $318 billion passed in the Senate bill, the $275 billion pending
in this legislation is not sufficient to do the job. The President's
own Department of Transportation has said that $375 billion is what is
necessary just to, quote, ``maintain current economic growth.''
So if I were in my congressional district tomorrow with the President
of the United States, I would say, Mr. President, would you please just
allow us in the House of Representatives to maintain current economic
growth and allow us to go to the $375 billion spending level for this
bill. That makes economic sense. It makes just and fair legislation.
And I think that is what the American people want. If this were money
that we are talking about, a difference here of several billion,
unfortunately if it were money going to rebuild Iraq, perhaps it would
sail through this body without any Presidential veto threats. But this
is money that we are talking about to go here in America, putting
Americans back to work, spending money on infrastructure in America,
which is not any pork spending, it is not an entitlement; but it is an
investment in America's future.
Mr. FROST. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I think it is clear that the bill before us today will
ease congestion, reduce pollution, and create good jobs across America.
Most Members of this House, myself included, will vote to pass TEA LU.
But I think we are missing out on a unique opportunity to further
strengthen our economy.
Last night the Committee on Rules and this morning considered the
Davis-Menendez-Blumenauer-Baird amendment to strengthen investment in
our Nation's highway and transit infrastructure by increasing funding
in the bill to the Senate-passed level of $318 billion. However, in a
move that denies the House the opportunity to fully debate the
transportation needs of this country, as is usually the case when
Democrats offer thoughtful alternatives in the Committee on Rules, the
Republican majority defeated the amendment on a straight party-line
vote.
So today I hope to offer Members another chance to vote on this
important proposal. If the previous question is defeated, I will offer
an amendment to the rule that will give the House the opportunity to
debate and vote on the Davis substitute.
Mr. Speaker, although I hope to see more legislation to help the
economy come before this House, the transportation bill before us today
will be our best chance to spur job creation this year. And the Davis
substitute will create nearly 1.8 million additional jobs over the bill
we have on the floor today, with 120,000 new jobs in my home State of
Texas alone, and create $235 billion worth of economic activity.
Mr. Speaker, when you consider the 8.2 million people in this country
that are currently unemployed, I do not see how you can vote against a
measure that will create 1.8 million new jobs.
So I urge my colleagues today to vote in favor of a job creation and
economic development package by voting ``no'' on the previous question.
We only reauthorize the transportation bill once every 6 years. Let us
not squander this unique opportunity to create jobs and strengthen the
economy by giving in to politics as usual.
Mr. Speaker, I ask unanimous consent to insert the text of the
amendment and extraneous materials at this point in the Record.
The SPEAKER pro tempore (Mr. LaHood). Is there objection to the
request of the gentleman from Texas?
There was no objection.
Previous Question for Rule for H. Res. 593--H.R. 3500--Transportation
Equity Act for the 21st Century (TEA-LU)
At the end of the resolution, add the following:
``Sec. 2. Notwithstanding any other provision of this
resolution the amendment specified in section 3 shall be in
order without intervention of any point of order as though
printed as the first amendment in part B of the report of the
Committee on Rules if offered by Representative Davis of
Tennessee or a designee. That amendment shall be debatable
for 60 minutes equally divided and controlled by the
proponent and an opponent.
Sec. 3. the amendment referred to in section 2 is as
follows:
Amendment to H.R. 3550, as Reported Offered by Mr. Davis of Tennessee
In section 1101(a)(1) of the bill, strike
``$4,323,076,000'' and all that follows through
``$4,891,164,000'' and insert ``$5,076,187,293 for fiscal
year 2004, $4,953,445,477 for fiscal year 2005,
$5,171,212,959 for fiscal year 2006, $5,263,571,478 for
fiscal year 2007, $5,556,536,840 for fiscal year 2008, and
$6,654,739,293''.
In section 1101(a)(2) of the bill, strike
``$5,187,691,000'' and all that follows through
``$5,869,396,000'' and insert ``$6,091,424,517 for fiscal
year 2004, $5,944,133,902 for fiscal year 2005,
$6,205,455,095 for fiscal year 2006, $6,316,285,773 for
fiscal year 2007, $6,667,843,743 for fiscal year 2008, and
$7,985,686,064''.
In section 1101(a)(3) of the bill, strike
``$3,709,440,000'' and all that follows through
``$4,196,891,000'' and insert ``$4,355,651,438 for fiscal
year 2004, $4,250,332,027 for fiscal year 2005,
$4,437,189,163 for fiscal year 2006, $4,516,437,339 for
fiscal year 2007, $4,767,818,482 for fiscal year 2008, and
$5,710,136,779''.
In section 1101(a)(5) of the bill, strike
``$6,052,306,000'' and all that follows through
``$6,847,629,000'' and insert ``$7,106,661,741 for fiscal
year 2004, $6,934,823,445 for fiscal year 2005,
$7,239,697,231 for fiscal year 2006, $7,369,000,069 for
fiscal year 2007, $7,779,151,809 for fiscal year 2008, and
$9,316,634,194''.
In section 1101(a)(6) of the bill, strike
``$1,469,846,000'' and all that follows through
``$1,662,996,000'' and insert ``$1,725,903,868 for fiscal
year 2004, $1,684,171,440 for fiscal year 2005,
$1,758,212,543 for fiscal year 2006, $1,789,614,076 for
fiscal year 2007, $1,889,222,762 for fiscal year 2008, and
$2,262,611,686''.
In section 1102(a) of the bill, strike paragraphs (2)
through (6) and insert the following:
(2) $37,900,000,000 for fiscal year 2005;
(3) $39,100,000,000 for fiscal year 2006;
(4) $39,100,000,000 for fiscal year 2007;
(5) $39,400,000,000 for fiscal year 2008; and
(6) $44,400,000,000 for fiscal year 2009.
In the matter proposed to be inserted as section
5338(a)(2)(A) of title 49, United States Code, by section
3034 of the bill, strike clauses (i) through (vi) and insert
the following:
``(i) $5,081,125,000 for fiscal year 2005;
``(ii) $5,283,418,000 for fiscal year 2006;
``(iii) $5,550,420,000 for fiscal year 2007;
``(iv) $6,176,172,500 for fiscal year 2008; and
``(v) $6,834,667,500 for fiscal year 2009.
In section 3043 of the bill, strike paragraphs (2) through
(6) and insert the following:
(2) $8,650,000,000 for fiscal year 2005;
(3) $9,085,123,000 for fiscal year 2006;
(4) $9,600,000,000 for fiscal year 2007;
(5) $10,490,000,000 for fiscal year 2008; and
[[Page H1827]]
(6) $11,430,000,000 for fiscal year 2009.
Add at the end the following new title:
TITLE IX--HIGHWAY REAUTHORIZATION AND EXCISE TAX SIMPLIFICATION
SEC. 9000. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) Short Title.--This title may be cited as the ``Highway
reauthorization and excise tax simplification Act of 2004''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this title an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
Subtitle A--Trust Fund Reauthorization
SEC. 9001. EXTENSION OF HIGHWAY TRUST FUND AND AQUATIC
RESOURCES TRUST FUND EXPENDITURE AUTHORITY AND
RELATED TAXES.
(a) Highway Trust Fund Expenditure Authority.--
(1) Highway account.--Paragraph (1) of section 9503(c)
(relating to transfers from Highway Trust Fund for certain
repayments and credits) is amended--
(A) in the matter before subparagraph (A), by striking
``May 1, 2004'' and inserting ``October 1, 2009'',
(B) by striking ``or'' at the end of subparagraph (F),
(C) by striking the period at the end of subparagraph (G)
and inserting ``, or'',
(D) by inserting after subparagraph (G), the following new
subparagraph:
``(H) authorized to be paid out of the Highway Trust Fund
under the Highway reauthorization and excise tax
simplification Act of 2004.'', and
(E) in the matter after subparagraph (G), as added by
subparagraph (D), by striking ``Surface Transportation
Extension Act of 2004'' and inserting ``Highway
reauthorization and excise tax simplification Act of 2004''.
(2) Mass transit account.--Paragraph (3) of section 9503(e)
(relating to establishment of Mass Transit Account) is
amended--
(A) in the matter before subparagraph (A), by striking
``May 1, 2004'' and inserting ``October 1, 2009'',
(B) by striking ``or'' at the end of subparagraph (D),
(C) by striking the period at the end of subparagraph (E)
and inserting ``, or'',
(D) by inserting after subparagraph (E), the following new
subparagraph:
``(F) the Highway reauthorization and excise tax
simplification Act of 2004,'', and
(E) in the matter after subparagraph (E), as added by
subparagraph (D), by striking ``Surface Transportation
Extension Act of 2004'' and inserting ``Highway
reauthorization and excise tax simplification Act of 2004''.
(3) Exception to limitation on transfers.--Subparagraph (B)
of section 9503(b)(5) (relating to limitation on transfers to
Highway Trust Fund) is amended by striking ``May 1, 2004''
and inserting ``October 1, 2009''.
(b) Aquatic Resources Trust Fund Expenditure Authority.--
(1) Sport fish restoration account.--Paragraph (2) of
section 9504(b) (relating to Sport Fish Restoration Account)
is amended by striking ``Surface Transportation Extension Act
of 2004'' each place it appears and inserting ``Highway
reauthorization and excise tax simplification Act of 2004''.
(2) Boat safety account.--Section 9504(c) (relating to
expenditures from Boat Safety Account) is amended--
(A) by striking ``May 1, 2004'' and inserting ``October 1,
2009'', and
(B) by striking ``Surface Transportation Extension Act of
2004'' and inserting ``Highway reauthorization and excise tax
simplification Act of 2004''.
(3) Exception to limitation on transfers.--Paragraph (2) of
section 9504(d) (relating to limitation on transfers to
Aquatic Resources Trust Fund) is amended by striking ``May 1,
2004'' and inserting ``October 1, 2009''.
(4) Technical correction.--The last sentence of paragraph
(2) of section 9504(b) is amended by striking ``subparagraph
(B)'', and inserting ``subparagraph (C)''.
(c) Extension of Taxes.--
(1) In general.--The following provisions are each amended
by striking ``2005'' each place it appears and inserting
``2009'':
(A) Section 4041(a)(1)(C)(iii)(I) (relating to rate of tax
on certain buses).
(B) Section 4041(a)(2)(B) (relating to rate of tax on
special motor fuels).
(C) Section 4041(m)(1)(A) (relating to certain alcohol
fuels produced from natural gas).
(D) Section 4051(c) (relating to termination of tax on
heavy trucks and trailers).
(E) Section 4071(d) (relating to termination of tax on
tires).
(F) Section 4081(d)(1) (relating to termination of tax on
gasoline, diesel fuel, and kerosene).
(G) Section 4481(e) (relating to period tax in effect).
(H) Section 4482(c)(4) (relating to taxable period).
(I) Section 4482(d) (relating to special rule for taxable
period in which termination date occurs).
(2) Floor stocks refunds.--Section 6412(a)(1) (relating to
floor stocks refunds) is amended--
(A) by striking ``2005'' each place it appears and
inserting ``2009'', and
(B) by striking ``2006'' each place it appears and
inserting ``2010''.
(d) Extension of Certain Exemptions.--The following
provisions are each amended by striking ``2005'' and
inserting ``2009'':
(1) Section 4221(a) (relating to certain tax-free sales).
(2) Section 4483(g) (relating to termination of exemptions
for highway use tax).
(e) Extension of Deposits Into, and Certain Transfers From,
Trust Fund.--
(1) In general.--Subsections (b), (c)(2), (c)(3),
(c)(4)(A)(i), and (c)(5)(A) of section 9503 (relating to the
Highway Trust Fund) are amended--
(A) by striking ``2005'' each place it appears and
inserting ``2009'', and
(B) by striking ``2006'' each place it appears and
inserting ``2010''.
(2) Conforming amendments to land and water conservation
fund.--Section 201(b) of the Land and Water Conservation Fund
Act of 1965 (16 U.S.C. 460l-11(b)) is amended--
(A) by striking ``2003'' and inserting ``2007'', and
(B) by striking ``2004'' each place it appears and
inserting ``2008''.
(f) Extension of Tax Benefits for Qualified Methanol and
Ethanol Fuel Produced From Coal.--Section 4041(b)(2)
(relating to qualified methanol and ethanol fuel) is
amended--
(1) by striking ``2007'' in subparagraph (C)(ii) and
inserting ``2010'', and
(2) by striking ``October 1, 2007'' in subparagraph (D) and
inserting ``January 1, 2011''.
(g) Prohibition on Use of Highway Account for Rail
Projects.--Section 9503(c) (relating to transfers from
Highway Trust Fund for certain repayments and credits) is
amended by adding at the end the following new paragraph:
``(6) Prohibition on use of highway account for certain
rail projects.--With respect to rail projects beginning after
the date of the enactment of this paragraph, no amount shall
be available from the Highway Account (as defined in
subsection (e)(5)(B)) for any rail project, except for any
rail project involving publicly owned rail facilities or any
rail project yielding a public benefit.''.
(h) Highway Trust Fund Expenditures for Highway Use Tax
Evasion Projects.--Section 9503(c), as amended by subsection
(g), is amended to add at the end the following new
paragraph:
``(7) Highway use tax evasion projects.--From amounts
available in the Highway Trust Fund, there is authorized to
be expended--
``(A) for each fiscal year after 2003 to the Internal
Revenue Service--
``(i) $30,000,000 for enforcement of fuel tax compliance,
including the per-certification of tax-exempt users,
``(ii) $10,000,000 for Xstars, and
``(iii) $10,000,000 for xfirs, and
``(B) for each fiscal year after 2003 to the Federal
Highway Administration, $50,000,000 to be allocated
$1,000,000 to each State to combat fuel tax evasion on the
State level.''.
(i) Effective Date.--The amendments made by and provisions
of this section shall take effect on the date of the
enactment of this Act.
SEC. 9002. FULL ACCOUNTING OF FUNDS RECEIVED BY THE HIGHWAY
TRUST FUND.
(a) In General.--Section 9503(c) (relating to transfers
from Highway Trust Fund for certain repayments and credits),
as amended by section 9001 of this Act, is amended by
striking paragraph (2) and redesignating paragraphs (3), (4),
(5), (6), and (7) as paragraphs (2), (3), (4), (5), and (6),
respectively.
(b) Interest on Unexpended Balances Credited to Trust
Fund.--Section 9503 (relating to the Highway Trust Fund) is
amended by striking subsection (f).
(c) Conforming Amendments.--
(1) Section 9503(b)(4)(D) is amended by striking
``paragraph (4)(D) or (5)(B)'' and inserting ``paragraph
(3)(D) or (4)(B)''.
(2) Paragraph (2) of section 9503(c) (as redesignated by
subsection (a)) is amended by adding at the end the following
new sentence: ``The amounts payable from the Highway Trust
Fund under this paragraph shall be determined by taking into
account only the portion of the taxes which are deposited
into the Highway Trust Fund.''.
(3) Section 9504(a)(2) is amended by striking ``section
9503(c)(4), section 9503(c)(5)'' and inserting ``section
9503(c)(3), section 9503(c)(4)''.
(4) Paragraph (2) of section 9504(b), as amended by section
9001 of this Act, is amended by striking ``section
9503(c)(5)'' and inserting ``section 9503(c)(4)''.
(5) Section 9504(e) is amended by striking ``section
9503(c)(4)'' and inserting ``section 9503(c)(3)''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts paid
for which no transfer from the Highway Trust Fund has been
made before April 1, 2004.
(2) Interest credited.--The amendment made by subsection
(b) shall take effect on the date of the enactment of this
Act.
SEC. 9003. MODIFICATION OF ADJUSTMENTS OF APPORTIONMENTS.
(a) In General.--Section 9503(d) (relating to adjustments
for apportionments) is amended--
(1) by striking ``24-month'' in paragraph (1)(B) and
inserting ``48-month'', and
(2) by striking ``2 years' '' in the heading for paragraph
(3) and inserting ``4 years' ''.
[[Page H1828]]
(b) Measurement of Net Highway Receipts.--Section 9503(d)
is amended by redesignating paragraph (6) as paragraph (7)
and by inserting after paragraph (5) the following new
paragraph:
``(6) Measurement of net highway receipts.--For purposes of
making any estimate under paragraph (1) of net highway
receipts for periods ending after the date specified in
subsection (b)(1), the Secretary shall treat--
``(A) each expiring provision of subsection (b) which is
related to appropriations or transfers to the Highway Trust
Fund to have been extended through the end of the 48-month
period referred to in paragraph (1)(B), and
``(B) with respect to each tax imposed under the sections
referred to in subsection (b)(1), the rate of such tax during
the 48-month period referred to in paragraph (1)(B) to be the
same as the rate of such tax as in effect on the date of such
estimate.''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
Subtitle B--Volumetric Ethanol Excise Tax Credit
SEC. 9101. SHORT TITLE.
This subtitle may be cited as the ``Volumetric Ethanol
Excise Tax Credit (VEETC) Act of 2004''.
SEC. 9102. ALCOHOL AND BIODIESEL EXCISE TAX CREDIT AND
EXTENSION OF ALCOHOL FUELS INCOME TAX CREDIT.
(a) In General.--Subchapter B of chapter 65 (relating to
rules of special application) is amended by inserting after
section 6425 the following new section:
``SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL MIXTURES.
``(a) Allowance of Credits.--There shall be allowed as a
credit against the tax imposed by section 4081 an amount
equal to the sum of--
``(1) the alcohol fuel mixture credit, plus
``(2) the biodiesel mixture credit.
``(b) Alcohol Fuel Mixture Credit.--
``(1) In general.--For purposes of this section, the
alcohol fuel mixture credit is the product of the applicable
amount and the number of gallons of alcohol used by the
taxpayer in producing any alcohol fuel mixture for sale or
use in a trade or business of the taxpayer.
``(2) Applicable amount.--For purposes of this subsection--
``(A) In general.--Except as provided in subparagraph (B),
the applicable amount is 52 cents (51 cents in the case of
any sale or use after 2004).
``(B) Mixtures not containing ethanol.--In the case of an
alcohol fuel mixture in which none of the alcohol consists of
ethanol, the applicable amount is 60 cents.
``(3) Alcohol fuel mixture.--For purposes of this
subsection, the term `alcohol fuel mixture' means a mixture
of alcohol and a taxable fuel which--
``(A) is sold by the taxpayer producing such mixture to any
person for use as a fuel,
``(B) is used as a fuel by the taxpayer producing such
mixture, or
``(C) is removed from the refinery by a person producing
such mixture.
``(4) Other definitions.--For purposes of this subsection--
``(A) Alcohol.--The term `alcohol' includes methanol and
ethanol but does not include--
``(i) alcohol produced from petroleum, natural gas, or coal
(including peat), or
``(ii) alcohol with a proof of less than 190 (determined
without regard to any added denaturants).
Such term also includes an alcohol gallon equivalent of ethyl
tertiary butyl ether or other ethers produced from such
alcohol.
``(B) Taxable fuel.--The term `taxable fuel' has the
meaning given such term by section 4083(a)(1).
``(5) Termination.--This subsection shall not apply to any
sale, use, or removal for any period after December 31, 2010.
``(c) Biodiesel Mixture Credit.--
``(1) In general.--For purposes of this section, the
biodiesel mixture credit is the product of the applicable
amount and the number of gallons of biodiesel used by the
taxpayer in producing any biodiesel mixture for sale or use
in a trade or business of the taxpayer.
``(2) Applicable amount.--For purposes of this subsection--
``(A) In general.--Except as provided in subparagraph (B),
the applicable amount is 50 cents.
``(B) Amount for agri-biodiesel.--In the case of any
biodiesel which is agri-biodiesel, the applicable amount is
$1.00.
``(3) Biodiesel mixture.--For purposes of this section, the
term `biodiesel mixture' means a mixture of biodiesel and
diesel fuel (as defined in section 4083(a)(3)), determined
without regard to any use of kerosene, which--
``(A) is sold by the taxpayer producing such mixture to any
person for use as a fuel,
``(B) is used as a fuel by the taxpayer producing such
mixture, or
``(C) is removed from the refinery by a person producing
such mixture.
``(4) Certification for biodiesel.--No credit shall be
allowed under this section unless the taxpayer obtains a
certification (in such form and manner as prescribed by the
Secretary) from the producer of the biodiesel which
identifies the product produced and the percentage of
biodiesel and agri-biodiesel in the product.
``(5) Other definitions.--Any term used in this subsection
which is also used in section 40A shall have the meaning
given such term by section 40A.
``(6) Termination.--This subsection shall not apply to any
sale, use, or removal for any period after December 31, 2006.
``(d) Mixture not Used as a Fuel, Etc.--
``(1) Imposition of tax.--If--
``(A) any credit was determined under this section with
respect to alcohol or biodiesel used in the production of any
alcohol fuel mixture or biodiesel mixture, respectively, and
``(B) any person--
``(i) separates the alcohol or biodiesel from the mixture,
or
``(ii) without separation, uses the mixture other than as a
fuel,
then there is hereby imposed on such person a tax equal to
the product of the applicable amount and the number of
gallons of such alcohol or biodiesel.
``(2) Applicable laws.--All provisions of law, including
penalties, shall, insofar as applicable and not inconsistent
with this section, apply in respect of any tax imposed under
paragraph (1) as if such tax were imposed by section 4081 and
not by this section.
``(e) Coordination With Exemption From Excise Tax.--Rules
similar to the rules under section 40(c) shall apply for
purposes of this section.''.
(b) Registration Requirement.--Section 4101(a)(1) (relating
to registration), as amended by sections 9211 and 9242 of
this Act, is amended by inserting ``and every person
producing or importing biodiesel (as defined in section
40A(d)(1)) or alcohol (as defined in section 6426(b)(4)(A))''
after ``4081''.
(c) Additional Amendments.--
(1) Section 40(c) is amended by striking ``subsection
(b)(2), (k), or (m) of section 4041, section 4081(c), or
section 4091(c)'' and inserting ``section 4041(b)(2), section
6426, or section 6427(e)''.
(2) Paragraph (4) of section 40(d) is amended to read as
follows:
``(4) Volume of alcohol.--For purposes of determining under
subsection (a) the number of gallons of alcohol with respect
to which a credit is allowable under subsection (a), the
volume of alcohol shall include the volume of any denaturant
(including gasoline) which is added under any formulas
approved by the Secretary to the extent that such denaturants
do not exceed 5 percent of the volume of such alcohol
(including denaturants).''.
(3) Section 40(e)(1) is amended--
(A) by striking ``2007'' in subparagraph (A) and inserting
``2010'', and
(B) by striking ``2008'' in subparagraph (B) and inserting
``2011''.
(4) Section 40(h) is amended--
(A) by striking ``2007'' in paragraph (1) and inserting
``2010'', and
(B) by striking ``, 2006, or 2007'' in the table contained
in paragraph (2) and inserting ``through 2010''.
(5) Section 4041(b)(2)(B) is amended by striking ``a
substance other than petroleum or natural gas'' and inserting
``coal (including peat)''.
(6) Section 4041 is amended by striking subsection (k).
(7) Section 4081 is amended by striking subsection (c).
(8) Paragraph (2) of section 4083(a) is amended to read as
follows:
``(2) Gasoline.--The term `gasoline'--
``(A) includes any gasoline blend, other than qualified
methanol or ethanol fuel (as defined in section
4041(b)(2)(B)), partially exempt methanol or ethanol fuel (as
defined in section 4041(m)(2)), or a denatured alcohol, and
``(B) includes, to the extent prescribed in regulations--
``(i) any gasoline blend stock, and
``(ii) any product commonly used as an additive in gasoline
(other than alcohol).
For purposes of subparagraph (B)(i), the term `gasoline blend
stock' means any petroleum product component of gasoline.''.
(9) Section 6427 is amended by inserting after subsection
(d) the following new subsection:
``(e) Alcohol or Biodiesel Used to Produce Alcohol Fuel and
Biodiesel Mixtures or Used as Fuels.--Except as provided in
subsection (k)--
``(1) Used to produce a mixture.--If any person produces a
mixture described in section 6426 in such person's trade or
business, the Secretary shall pay (without interest) to such
person an amount equal to the alcohol fuel mixture credit or
the biodiesel mixture credit with respect to such mixture.
``(2) Used as fuel.--If alcohol (as defined in section
40(d)(1)) or biodiesel (as defined in section 40A(d)(1)) or
agri-biodiesel (as defined in section 40A(d)(2)) which is not
in a mixture described in section 6426--
``(A) is used by any person as a fuel in a trade or
business, or
``(B) is sold by any person at retail to another person and
placed in the fuel tank of such person's vehicle,
the Secretary shall pay (without interest) to such person an
amount equal to the alcohol credit (as determined under
section 40(b)(2)) or the biodiesel credit (as determined
under section 40A(b)(2)) with respect to such fuel.
``(3) Coordination with other repayment provisions.--No
amount shall be payable under paragraph (1) with respect to
any mixture with respect to which an amount is allowed as a
credit under section 6426.
``(4) Termination.--This subsection shall not apply with
respect to--
[[Page H1829]]
``(A) any alcohol fuel mixture (as defined in section
6426(b)(3)) or alcohol (as so defined) sold or used after
December 31, 2010, and
``(B) any biodiesel mixture (as defined in section
6426(c)(3)) or biodiesel (as so defined) or agri-biodiesel
(as so defined) sold or used after December 31, 2006.''.
(10) Section 6427(i)(3) is amended--
(A) by striking ``subsection (f)'' both places it appears
in subparagraph (A) and inserting ``subsection (e)(1)'',
(B) by striking ``gasoline, diesel fuel, or kerosene used
to produce a qualified alcohol mixture (as defined in section
4081(c)(3))'' in subparagraph (A) and inserting ``a mixture
described in section 6426'',
(C) by adding at the end of subparagraph (A) the following
new flush sentence: ``In the case of an electronic claim,
this subparagraph shall be applied without regard to clause
(i).'',
(D) by striking ``subsection (f)(1)'' in subparagraph (B)
and inserting ``subsection (e)(1)'',
(E) by striking ``20 days of the date of the filing of such
claim'' in subparagraph (B) and inserting ``45 days of the
date of the filing of such claim (20 days in the case of an
electronic claim)'', and
(F) by striking ``alcohol mixture'' in the heading and
inserting ``alcohol fuel and biodiesel mixture''.
(11) Section 9503(b)(1) is amended by adding at the end the
following new flush sentence: ``For purposes of this
paragraph, taxes received under sections 4041 and 4081 shall
be determined without reduction for credits under section
6426.''.
(12) Section 9503(b)(4), as amended by section 9101 of this
Act, is amended--
(A) by adding ``or'' at the end of subparagraph (C),
(B) by striking the comma at the end of subparagraph
(D)(iii) and inserting a period, and
(C) by striking subparagraphs (E) and (F).
(13) The table of sections for subchapter B of chapter 65
is amended by inserting after the item relating to section
6425 the following new item:
``Sec. 6426. Credit for alcohol fuel and biodiesel mixtures.''.
(14) Tariff schedule.--Headings 9901.00.50 and 9901.00.52
of the Harmonized Tariff Schedule of the United States (19
U.S.C. 3007) are each amended in the effective period column
by striking ``10/1/2007'' each place it appears and inserting
``1/1/2011''.
(d) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to fuel sold or used after September 30, 2004.
(2) Registration requirement.--The amendment made by
subsection (b) shall take effect on April 1, 2005.
(3) Extension of alcohol fuels credit.--The amendments made
by paragraphs (3), (4), and (14) of subsection (c) shall take
effect on the date of the enactment of this Act.
(4) Repeal of general fund retention of certain alcohol
fuels taxes.--The amendments made by subsection (c)(12) shall
apply to fuel sold or used after September 30, 2003.
(e) Format for Filing.--The Secretary of the Treasury shall
describe the electronic format for filing claims described in
section 6427(i)(3)(B) of the Internal Revenue Code of 1986
(as amended by subsection (c)(10)(C)) not later than
September 30, 2004.
SEC. 9103. BIODIESEL INCOME TAX CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended
by inserting after section 40 the following new section:
``SEC. 40A. BIODIESEL USED AS FUEL.
``(a) General Rule.--For purposes of section 38, the
biodiesel fuels credit determined under this section for the
taxable year is an amount equal to the sum of--
``(1) the biodiesel mixture credit, plus
``(2) the biodiesel credit.
``(b) Definition of Biodiesel Mixture Credit and Biodiesel
Credit.--For purposes of this section--
``(1) Biodiesel mixture credit.--
``(A) In general.--The biodiesel mixture credit of any
taxpayer for any taxable year is 50 cents for each gallon of
biodiesel used by the taxpayer in the production of a
qualified biodiesel mixture.
``(B) Qualified biodiesel mixture.--The term `qualified
biodiesel mixture' means a mixture of biodiesel and diesel
fuel (as defined in section 4083(a)(3)), determined without
regard to any use of kerosene, which--
``(i) is sold by the taxpayer producing such mixture to any
person for use as a fuel, or
``(ii) is used as a fuel by the taxpayer producing such
mixture.
``(C) Sale or use must be in trade or business, etc.--
Biodiesel used in the production of a qualified biodiesel
mixture shall be taken into account--
``(i) only if the sale or use described in subparagraph (B)
is in a trade or business of the taxpayer, and
``(ii) for the taxable year in which such sale or use
occurs.
``(D) Casual off-farm production not eligible.--No credit
shall be allowed under this section with respect to any
casual off-farm production of a qualified biodiesel mixture.
``(2) Biodiesel credit.--
``(A) In general.--The biodiesel credit of any taxpayer for
any taxable year is 50 cents for each gallon of biodiesel
which is not in a mixture with diesel fuel and which during
the taxable year--
``(i) is used by the taxpayer as a fuel in a trade or
business, or
``(ii) is sold by the taxpayer at retail to a person and
placed in the fuel tank of such person's vehicle.
``(B) User credit not to apply to biodiesel sold at
retail.--No credit shall be allowed under subparagraph (A)(i)
with respect to any biodiesel which was sold in a retail sale
described in subparagraph (A)(ii).
``(3) Credit for agri-biodiesel.--In the case of any
biodiesel which is agri-biodiesel, paragraphs (1)(A) and
(2)(A) shall be applied by substituting `$1.00' for `50
cents'.
``(4) Certification for biodiesel.--No credit shall be
allowed under this section unless the taxpayer obtains a
certification (in such form and manner as prescribed by the
Secretary) from the producer or importer of the biodiesel
which identifies the product produced and the percentage of
biodiesel and agri-biodiesel in the product.
``(c) Coordination With Credit Against Excise Tax.--The
amount of the credit determined under this section with
respect to any biodiesel shall be properly reduced to take
into account any benefit provided with respect to such
biodiesel solely by reason of the application of section 6426
or 6427(e).
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Biodiesel.--The term `biodiesel' means the monoalkyl
esters of long chain fatty acids derived from plant or animal
matter which meet--
``(A) the registration requirements for fuels and fuel
additives established by the Environmental Protection Agency
under section 211 of the Clean Air Act (42 U.S.C. 7545), and
``(B) the requirements of the American Society of Testing
and Materials D6751.
``(2) Agri-biodiesel.--The term `agri-biodiesel' means
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, and mustard seeds, and from
animal fats.
``(3) Mixture or biodiesel not used as a fuel, etc.--
``(A) Mixtures.--If--
``(i) any credit was determined under this section with
respect to biodiesel used in the production of any qualified
biodiesel mixture, and
``(ii) any person--
``(I) separates the biodiesel from the mixture, or
``(II) without separation, uses the mixture other than as a
fuel,
then there is hereby imposed on such person a tax equal to
the product of the rate applicable under subsection (b)(1)(A)
and the number of gallons of such biodiesel in such mixture.
``(B) Biodiesel.--If--
``(i) any credit was determined under this section with
respect to the retail sale of any biodiesel, and
``(ii) any person mixes such biodiesel or uses such
biodiesel other than as a fuel,
then there is hereby imposed on such person a tax equal to
the product of the rate applicable under subsection (b)(2)(A)
and the number of gallons of such biodiesel.
``(C) Applicable laws.--All provisions of law, including
penalties, shall, insofar as applicable and not inconsistent
with this section, apply in respect of any tax imposed under
subparagraph (A) or (B) as if such tax were imposed by
section 4081 and not by this chapter.
``(4) Pass-thru in the case of estates and trusts.--Under
regulations prescribed by the Secretary, rules similar to the
rules of subsection (d) of section 52 shall apply.
``(e) Termination.--This section shall not apply to any
sale or use after December 31, 2006.''.
(b) Credit Treated as Part of General Business Credit.--
Section 38(b) (relating to current year business credit) is
amended by striking ``plus'' at the end of paragraph (14), by
striking the period at the end of paragraph (15) and
inserting ``, plus'', and by adding at the end the following
new paragraph:
``(16) the biodiesel fuels credit determined under section
40A(a).''.
(c) Conforming Amendments.--
(1) Section 39(d) is amended by adding at the end the
following new paragraph:
``(11) No carryback of biodiesel fuels credit before
effective date.--No portion of the unused business credit for
any taxable year which is attributable to the biodiesel fuels
credit determined under section 40A may be carried back to a
taxable year ending on or before September 30, 2004.''.
(2)(A) Section 87 is amended to read as follows:
``SEC. 87. ALCOHOL AND BIODIESEL FUELS CREDITS.
``Gross income includes--
``(1) the amount of the alcohol fuels credit determined
with respect to the taxpayer for the taxable year under
section 40(a), and
``(2) the biodiesel fuels credit determined with respect to
the taxpayer for the taxable year under section 40A(a).''.
(B) The item relating to section 87 in the table of
sections for part II of subchapter B of chapter 1 is amended
by striking ``fuel credit'' and inserting ``and biodiesel
fuels credits''.
(3) Section 196(c) is amended by striking ``and'' at the
end of paragraph (9), by striking the period at the end of
paragraph (10) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(11) the biodiesel fuels credit determined under section
40A(a).''.
[[Page H1830]]
(4) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding after the item
relating to section 40 the following new item:
``Sec. 40A. Biodiesel used as fuel.''.
(d) Effective Date.--The amendments made by this section
shall apply to fuel produced, and sold or used, after
September 30, 2004, in taxable years ending after such date.
Subtitle C--Fuel Fraud Prevention
SEC. 9200. SHORT TITLE.
This subtitle may be cited as the ``Fuel Fraud Prevention
Act of 2004''.
PART I--AVIATION JET FUEL
SEC. 9211. TAXATION OF AVIATION-GRADE KEROSENE.
(a) Rate of Tax.--
(1) In general.--Subparagraph (A) of section 4081(a)(2) is
amended by striking ``and'' at the end of clause (ii), by
striking the period at the end of clause (iii) and inserting
``, and'', and by adding at the end the following new clause:
``(iv) in the case of aviation-grade kerosene, 21.8 cents
per gallon.''.
(2) Commercial aviation.--Paragraph (2) of section 4081(a)
is amended by adding at the end the following new
subparagraph:
``(C) Taxes imposed on fuel used in commercial aviation.--
In the case of aviation-grade kerosene which is removed from
any refinery or terminal directly into the fuel tank of an
aircraft for use in commercial aviation, the rate of tax
under subparagraph (A)(iv) shall be 4.3 cents per gallon.''.
(3) Nontaxable uses.--
(A) In general.--Section 4082 is amended by redesignating
subsections (e) and (f) as subsections (f) and (g),
respectively, and by inserting after subsection (d) the
following new subsection:
``(e) Aviation-Grade Kerosene.--In the case of aviation-
grade kerosene which is exempt from the tax imposed by
section 4041(c) (other than by reason of a prior imposition
of tax) and which is removed from any refinery or terminal
directly into the fuel tank of an aircraft, the rate of tax
under section 4081(a)(2)(A)(iv) shall be zero.''.
(B) Conforming amendments.--
(i) Subsection (b) of section 4082 is amended by adding at
the end the following new flush sentence: ``The term
`nontaxable use' does not include the use of aviation-grade
kerosene in an aircraft.''.
(ii) Section 4082(d) is amended by striking paragraph (1)
and by redesignating paragraphs (2) and (3) as paragraphs (1)
and (2), respectively.
(4) Nonaircraft use of aviation-grade kerosene.--
(A) In general.--Subparagraph (B) of section 4041(a)(1) is
amended by adding at the end the following new sentence:
``This subparagraph shall not apply to aviation-grade
kerosene.''.
(B) Conforming amendment.--The heading for paragraph (1) of
section 4041(a) is amended by inserting ``and kerosene''
after ``diesel fuel''.
(b) Commercial Aviation.--Section 4083 is amended
redesignating subsections (b) and (c) as subsections (c) and
(d), respectively, and by inserting after subsection (a) the
following new subsection:
``(b) Commercial Aviation.--For purposes of this subpart,
the term `commercial aviation' means any use of an aircraft
in a business of transporting persons or property for
compensation or hire by air, unless properly allocable to any
transportation exempt from the taxes imposed by section 4261
and 4271 by reason of section 4281 or 4282 or by reason of
section 4261(h).''.
(c) Refunds.--
(1) In general.--Paragraph (4) of section 6427(l) is
amended to read as follows:
``(4) Refunds for aviation-grade kerosene.--
``(A) No refund of certain taxes on fuel used in commercial
aviation.--In the case of aviation-grade kerosene used in
commercial aviation (as defined in section 4083(b)) (other
than supplies for vessels or aircraft within the meaning of
section 4221(d)(3)), paragraph (1) shall not apply to so much
of the tax imposed by section 4081 as is attributable to--
``(i) the Leaking Underground Storage Tank Trust Fund
financing rate imposed by such section, and
``(ii) so much of the rate of tax specified in section
4081(a)(2)(A)(iv) as does not exceed 4.3 cents per gallon.
``(B) Payment to ultimate, registered vendor.--With respect
to aviation-grade kerosene, if the ultimate purchaser of such
kerosene waives (at such time and in such form and manner as
the Secretary shall prescribe) the right to payment under
paragraph (1) and assigns such right to the ultimate vendor,
then the Secretary shall pay the amount which would be paid
under paragraph (1) to such ultimate vendor, but only if such
ultimate vendor--
``(i) is registered under section 4101, and
``(ii) meets the requirements of subparagraph (A), (B), or
(D) of section 6416(a)(1).''.
(2) Time for filing claims.--Paragraph (4) of section
6427(i) is amended by striking ``subsection (l)(5)'' and
inserting ``paragraph (4)(B) or (5) of subsection (l)''.
(3) Conforming amendment.--Subparagraph (B) of section
6427(l)(2) is amended to read as follows:
``(B) in the case of aviation-grade kerosene--
``(i) any use which is exempt from the tax imposed by
section 4041(c) other than by reason of a prior imposition of
tax, or
``(ii) any use in commercial aviation (within the meaning
of section 4083(b)).''.
(d) Repeal of Prior Taxation of Aviation Fuel.--
(1) In general.--Part III of subchapter A of chapter 32 is
amended by striking subpart B and by redesignating subpart C
as subpart B.
(2) Conforming amendments.--
(A) Section 4041(c) is amended to read as follows:
``(c) Aviation-Grade Kerosene.--
``(1) In general.--There is hereby imposed a tax upon
aviation-grade kerosene--
``(A) sold by any person to an owner, lessee, or other
operator of an aircraft for use in such aircraft, or
``(B) used by any person in an aircraft unless there was a
taxable sale of such fuel under subparagraph (A).
``(2) Exemption for previously taxed fuel.--No tax shall be
imposed by this subsection on the sale or use of any
aviation-grade kerosene if tax was imposed on such liquid
under section 4081 and the tax thereon was not credited or
refunded.
``(3) Rate of tax.--The rate of tax imposed by this
subsection shall be the rate of tax specified in section
4081(a)(2)(A)(iv) which is in effect at the time of such sale
or use.''.
(B) Section 4041(d)(2) is amended by striking ``section
4091'' and inserting ``section 4081''.
(C) Section 4041 is amended by striking subsection (e).
(D) Section 4041 is amended by striking subsection (i).
(E) Section 4041(m)(1) is amended to read as follows:
``(1) In general.--In the case of the sale or use of any
partially exempt methanol or ethanol fuel, the rate of the
tax imposed by subsection (a)(2) shall be--
``(A) after September 30, 1997, and before September 30,
2009--
``(i) in the case of fuel none of the alcohol in which
consists of ethanol, 9.15 cents per gallon, and
``(ii) in any other case, 11.3 cents per gallon, and
``(B) after September 30, 2009--
``(i) in the case of fuel none of the alcohol in which
consists of ethanol, 2.15 cents per gallon, and
``(ii) in any other case, 4.3 cents per gallon.''.
(F) Sections 4101(a), 4103, 4221(a), and 6206 are each
amended by striking ``, 4081, or 4091'' and inserting ``or
4081''.
(G) Section 6416(b)(2) is amended by striking ``4091 or''.
(H) Section 6416(b)(3) is amended by striking ``or 4091''
each place it appears.
(I) Section 6416(d) is amended by striking ``or to the tax
imposed by section 4091 in the case of refunds described in
section 4091(d)''.
(J) Section 6427 is amended by striking subsection (f).
(K) Section 6427(j)(1) is amended by striking ``, 4081, and
4091'' and inserting ``and 4081''.
(L)(i) Section 6427(l)(1) is amended to read as follows:
``(1) In general.--Except as otherwise provided in this
subsection and in subsection (k), if any diesel fuel or
kerosene on which tax has been imposed by section 4041 or
4081 is used by any person in a nontaxable use, the Secretary
shall pay (without interest) to the ultimate purchaser of
such fuel an amount equal to the aggregate amount of tax
imposed on such fuel under section 4041 or 4081, as the case
may be, reduced by any refund paid to the ultimate vendor
under paragraph (4)(B).''.
(ii) Paragraph (5)(B) of section 6427(l) is amended by
striking ``Paragraph (1)(A) shall not apply to kerosene'' and
inserting ``Paragraph (1) shall not apply to kerosene (other
than aviation-grade kerosene)''.
(M) Subparagraph (B) of section 6724(d)(1) is amended by
striking clause (xv) and by redesignating the succeeding
clauses accordingly.
(N) Paragraph (2) of section 6724(d) is amended by striking
subparagraph (W) and by redesignating the succeeding
subparagraphs accordingly.
(O) Paragraph (1) of section 9502(b) is amended by adding
``and'' at the end of subparagraph (B) and by striking
subparagraphs (C) and (D) and inserting the following new
subparagraph:
``(C) section 4081 with respect to aviation gasoline and
aviation-grade kerosene, and''.
(P) The last sentence of section 9502(b) is amended to read
as follows: ``There shall not be taken into account under
paragraph (1) so much of the taxes imposed by section 4081 as
are determined at the rate specified in section
4081(a)(2)(B).''.
(Q) Subsection (b) of section 9508 is amended by striking
paragraph (3) and by redesignating paragraphs (4) and (5) as
paragraphs (3) and (4), respectively.
(R) Section 9508(c)(2)(A) is amended by striking ``sections
4081 and 4091'' and inserting ``section 4081''.
(S) The table of subparts for part III of subchapter A of
chapter 32 is amended to read as follows:
``Subpart A. motor and aviation fuels
``Subpart B. special provisions applicable to fuels tax''.
(T) The heading for subpart A of part III of subchapter A
of chapter 32 is amended to read as follows:
``Subpart A--Motor and Aviation Fuels''.
(U) The heading for subpart B of part III of subchapter A
of chapter 32 is amended to read as follows:
[[Page H1831]]
``Subpart B--Special Provisions Applicable to Fuels Tax''.
(e) Effective Date.--The amendments made by this section
shall apply to aviation-grade kerosene removed, entered, or
sold after September 30, 2004.
(f) Floor Stocks Tax.--
(1) In general.--There is hereby imposed on aviation-grade
kerosene held on October 1, 2004, by any person a tax equal
to--
(A) the tax which would have been imposed before such date
on such kerosene had the amendments made by this section been
in effect at all times before such date, reduced by
(B) the tax imposed before such date under section 4091 of
the Internal Revenue Code of 1986, as in effect on the day
before the date of the enactment of this Act.
(2) Liability for tax and method of payment.--
(A) Liability for tax.--The person holding the kerosene on
October 1, 2004, to which the tax imposed by paragraph (1)
applies shall be liable for such tax.
(B) Method and time for payment.--The tax imposed by
paragraph (1) shall be paid at such time and in such manner
as the Secretary of the Treasury shall prescribe, including
the nonapplication of such tax on de minimis amounts of
kerosene.
(3) Transfer of floor stock tax revenues to trust funds.--
For purposes of determining the amount transferred to any
trust fund, the tax imposed by this subsection shall be
treated as imposed by section 4081 of the Internal Revenue
Code of 1986--
(A) at the Leaking Underground Storage Tank Trust Fund
financing rate under such section to the extent of 0.1 cents
per gallon, and
(B) at the rate under section 4081(a)(2)(A)(iv) to the
extent of the remainder.
(4) Held by a person.--For purposes of this section,
kerosene shall be considered as held by a person if title
thereto has passed to such person (whether or not delivery to
the person has been made).
(5) Other laws applicable.--All provisions of law,
including penalties, applicable with respect to the tax
imposed by section 4081 of such Code shall, insofar as
applicable and not inconsistent with the provisions of this
subsection, apply with respect to the floor stock tax imposed
by paragraph (1) to the same extent as if such tax were
imposed by such section.
SEC. 9212. TRANSFER OF CERTAIN AMOUNTS FROM THE AIRPORT AND
AIRWAY TRUST FUND TO THE HIGHWAY TRUST FUND TO
REFLECT HIGHWAY USE OF JET FUEL.
(a) In General.--Section 9502(d) is amended by adding at
the end the following new paragraph:
``(7) Transfers from the trust fund to the highway trust
fund.--
``(A) In general.--The Secretary shall pay annually from
the Airport and Airway Trust Fund into the Highway Trust Fund
an amount (as determined by him) equivalent to amounts
received in the Airport and Airway Trust Fund which are
attributable to fuel that is used primarily for highway
transportation purposes.
``(B) Amounts transferred to mass transit account.--The
Secretary shall transfer 11 percent of the amounts paid into
the Highway Trust Fund under subparagraph (A) to the Mass
Transit Account established under section 9503(e).''.
(b) Conforming Amendments.--
(1) Subsection (a) of section 9503 is amended--
(A) by striking ``appropriated or credited'' and inserting
``paid, appropriated, or credited'', and
(B) by striking ``or section 9602(b)'' and inserting ``,
section 9502(d)(7), or section 9602(b)''.
(2) Subsection (e)(1) of section 9503 is amended by
striking ``or section 9602(b)'' and inserting ``, section
9502(d)(7), or section 9602(b)''.
(c) Effective Date.--The amendments made by this section
shall take effect on October 1, 2004.
PART II--DYED FUEL
SEC. 9221. DYE INJECTION EQUIPMENT.
(a) In General.--Section 4082(a)(2) (relating to exemptions
for diesel fuel and kerosene) is amended by inserting ``by
mechanical injection'' after ``indelibly dyed''.
(b) Dye Injector Security.--Not later than June 30, 2004,
the Secretary of the Treasury shall issue regulations
regarding mechanical dye injection systems described in the
amendment made by subsection (a), and such regulations shall
include standards for making such systems tamper resistant.
(c) Penalty for Tampering With or Failing to Maintain
Security Requirements for Mechanical Dye Injection Systems.--
(1) In general.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by adding after
section 6715 the following new section:
``SEC. 6715A. TAMPERING WITH OR FAILING TO MAINTAIN SECURITY
REQUIREMENTS FOR MECHANICAL DYE INJECTION
SYSTEMS.
``(a) Imposition of Penalty.--
``(1) Tampering.--If any person tampers with a mechanical
dye injection system used to indelibly dye fuel for purposes
of section 4082, then such person shall pay a penalty in
addition to the tax (if any).
``(2) Failure to maintain security requirements.--If any
operator of a mechanical dye injection system used to
indelibly dye fuel for purposes of section 4082 fails to
maintain the security standards for such system as
established by the Secretary, then such operator shall pay a
penalty.
``(b) Amount of Penalty.--The amount of the penalty under
subsection (a) shall be--
``(1) for each violation described in paragraph (1), the
greater of--
``(A) $25,000, or
``(B) $10 for each gallon of fuel involved, and
``(2) for each--
``(A) failure to maintain security standards described in
paragraph (2), $1,000, and
``(B) failure to correct a violation described in paragraph
(2), $1,000 per day for each day after which such violation
was discovered or such person should have reasonably known of
such violation.
``(c) Joint and Several Liability.--
``(1) In general.--If a penalty is imposed under this
section on any business entity, each officer, employee, or
agent of such entity or other contracting party who willfully
participated in any act giving rise to such penalty shall be
jointly and severally liable with such entity for such
penalty.
``(2) Affiliated groups.--If a business entity described in
paragraph (1) is part of an affiliated group (as defined in
section 1504(a)), the parent corporation of such entity shall
be jointly and severally liable with such entity for the
penalty imposed under this section.''.
(2) Clerical amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by adding after the
item related to section 6715 the following new item:
``Sec. 6715A. Tampering with or failing to maintain security
requirements for mechanical dye injection systems.''.
(d) Effective Date.--The amendments made by subsections (a)
and (c) shall take effect 180 days after the date on which
the Secretary issues the regulations described in subsection
(b).
SEC. 9222. ELIMINATION OF ADMINISTRATIVE REVIEW FOR TAXABLE
USE OF DYED FUEL.
(a) In General.--Section 6715 is amended by inserting at
the end the following new subsection:
``(e) No Administrative Appeal for Third and Subsequent
Violations.--In the case of any person who is found to be
subject to the penalty under this section after a chemical
analysis of such fuel and who has been penalized under this
section at least twice after the date of the enactment of
this subsection, no administrative appeal or review shall be
allowed with respect to such finding except in the case of a
claim regarding--
``(1) fraud or mistake in the chemical analysis, or
``(2) mathematical calculation of the amount of the
penalty.''.
(b) Effective Date.--The amendment made by this section
shall apply to penalties assessed after the date of the
enactment of this Act.
SEC. 9223. PENALTY ON UNTAXED CHEMICALLY ALTERED DYED FUEL
MIXTURES.
(a) In General.--Section 6715(a) (relating to dyed fuel
sold for use or used in taxable use, etc.) is amended by
striking ``or'' in paragraph (2), by inserting ``or'' at the
end of paragraph (3), and by inserting after paragraph (3)
the following new paragraph:
``(4) any person who has knowledge that a dyed fuel which
has been altered as described in paragraph (3) sells or holds
for sale such fuel for any use which the person knows or has
reason to know is not a nontaxable use of such fuel,''.
(b) Conforming Amendment.--Section 6715(a)(3) is amended by
striking ``alters, or attempts to alter,'' and inserting
``alters, chemically or otherwise, or attempts to so
alter,''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 9224. TERMINATION OF DYED DIESEL USE BY INTERCITY BUSES.
(a) In General.--Paragraph (3) of section 4082(b) (relating
to nontaxable use) is amended to read as follows:
``(3) any use described in section
4041(a)(1)(C)(iii)(II).''.
(b) Ultimate Vendor Refund.--Subsection (b) of section 6427
is amended by adding at the end the following new paragraph:
``(4) Refunds for use of diesel fuel in certain intercity
buses.--
``(A) In general.--With respect to any fuel to which
paragraph (2)(A) applies, if the ultimate purchaser of such
fuel waives (at such time and in such form and manner as the
Secretary shall prescribe) the right to payment under
paragraph (1) and assigns such right to the ultimate vendor,
then the Secretary shall pay the amount which would be paid
under paragraph (1) to such ultimate vendor, but only if such
ultimate vendor--
``(i) is registered under section 4101, and
``(ii) meets the requirements of subparagraph (A), (B), or
(D) of section 6416(a)(1).
``(B) Credit cards.--For purposes of this paragraph, if the
sale of such fuel is made by means of a credit card, the
person extending credit to the ultimate purchaser shall be
deemed to be the ultimate vendor.''.
(c) Payment of Refunds.--Subparagraph (A) of section
6427(i)(4), as amended by section 9211 of this Act, is
amended by inserting ``subsections (b)(4) and'' after ``filed
under''.
(b) Effective Date.--The amendments made by this section
shall apply to fuel sold after September 30, 2004.
[[Page H1832]]
PART III--MODIFICATION OF INSPECTION OF RECORDS PROVISIONS
SEC. 9231. AUTHORITY TO INSPECT ON-SITE RECORDS.
(a) In General.--Section 4083(d)(1)(A) (relating to
administrative authority), as amended by section 9211 of this
Act, is amended by striking ``and'' at the end of clause (i)
and by inserting after clause (ii) the following new clause:
``(iii) inspecting any books and records and any shipping
papers pertaining to such fuel, and''.
(b) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 9232. ASSESSABLE PENALTY FOR REFUSAL OF ENTRY.
(a) In General.--Part I of subchapter B of chapter 68
(relating to assessable penalties), as amended by section
9221 of this Act, is amended by adding at the end the
following new section:
``SEC. 6717. REFUSAL OF ENTRY.
``(a) In General.--In addition to any other penalty
provided by law, any person who refuses to admit entry or
refuses to permit any other action by the Secretary
authorized by section 4083(d)(1) shall pay a penalty of
$1,000 for such refusal.
``(b) Joint and Several Liability.--
``(1) In general.--If a penalty is imposed under this
section on any business entity, each officer, employee, or
agent of such entity or other contracting party who willfully
participated in any act giving rise to such penalty shall be
jointly and severally liable with such entity for such
penalty.
``(2) Affiliated groups.--If a business entity described in
paragraph (1) is part of an affiliated group (as defined in
section 1504(a)), the parent corporation of such entity shall
be jointly and severally liable with such entity for the
penalty imposed under this section.
``(c) Reasonable Cause Exception.--No penalty shall be
imposed under this section with respect to any failure if it
is shown that such failure is due to reasonable cause.''.
(b) Conforming Amendments.--
(1) Section 4083(d)(3), as amended by section 9211 of this
Act, is amended--
(A) by striking ``entry.--The penalty'' and inserting:
``entry.--
``(A) Forfeiture.--The penalty'', and
(B) by adding at the end the following new subparagraph:
``(B) Assessable penalty.--For additional assessable
penalty for the refusal to admit entry or other refusal to
permit an action by the Secretary authorized by paragraph
(1), see section 6717.''.
(2) The table of sections for part I of subchapter B of
chapter 68, as amended by section 9221 of this Act, is
amended by adding at the end the following new item:
``Sec. 6717. Refusal of entry.''.
(c) Effective Date.--The amendments made by this section
shall take effect on October 1, 2004.
PART IV--REGISTRATION AND REPORTING REQUIREMENTS
SEC. 9241. REGISTRATION OF PIPELINE OR VESSEL OPERATORS
REQUIRED FOR EXEMPTION OF BULK TRANSFERS TO
REGISTERED TERMINALS OR REFINERIES.
(a) In General.--Section 4081(a)(1)(B) (relating to
exemption for bulk transfers to registered terminals or
refineries) is amended--
(1) by inserting ``by pipeline or vessel'' after
``transferred in bulk'', and
(2) by inserting ``, the operator of such pipeline or
vessel,'' after ``the taxable fuel''.
(b) Civil Penalty for Carrying Taxable Fuels by
Nonregistered Pipelines or Vessels.--
(1) In general.--Part I of subchapter B of chapter 68
(relating to assessable penalties), as amended by section
9232 of this Act, is amended by adding at the end the
following new section:
``SEC. 6718. CARRYING TAXABLE FUELS BY NONREGISTERED
PIPELINES OR VESSELS.
``(a) Imposition of Penalty.--If any person knowingly
transfers any taxable fuel (as defined in section 4083(a)(1))
in bulk pursuant to section 4081(a)(1)(B) to an unregistered,
such person shall pay a penalty in addition to the tax (if
any).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
amount of the penalty under subsection (a) on each act shall
be an amount equal to the greater of--
``(A) $10,000, or
``(B) $1 per gallon.
``(2) Multiple violations.--In determining the penalty
under subsection (a) on any person, paragraph (1) shall be
applied by increasing the amount in paragraph (1) by the
product of such amount and the number of prior penalties (if
any) imposed by this section on such person (or a related
person or any predecessor of such person or related person).
``(c) Joint and Several Liability.--
``(1) In general.--If a penalty is imposed under this
section on any business entity, each officer, employee, or
agent of such entity or other contracting party who willfully
participated in any act giving rise to such penalty shall be
jointly and severally liable with such entity for such
penalty.
``(2) Affiliated groups.--If a business entity described in
paragraph (1) is part of an affiliated group (as defined in
section 1504(a)), the parent corporation of such entity shall
be jointly and severally liable with such entity for the
penalty imposed under this section.
``(d) Reasonable Cause Exception.--No penalty shall be
imposed under this section with respect to any failure if it
is shown that such failure is due to reasonable cause.''.
(2) Clerical amendment.--The table of sections for part I
of subchapter B of chapter 68, as amended by section 9232 of
this Act, is amended by adding at the end the following new
item:
``Sec. 6718. Carrying taxable fuels by nonregistered pipelines or
vessels.''.
(c) Publication of Registered Persons.--Not later than June
30, 2004, the Secretary of the Treasury shall publish a list
of persons required to be registered under section 4101 of
the Internal Revenue Code of 1986.
(d) Effective Date.--The amendments made by subsections (a)
and (b) shall take effect on October 1, 2004.
SEC. 9242. DISPLAY OF REGISTRATION.
(a) In General.--Subsection (a) of section 4101 (relating
to registration) is amended--
(1) by striking ``Every'' and inserting the following:
``(1) In general.--Every'', and
(2) by adding at the end the following new paragraph:
``(2) Display of registration.--Every operator of a vessel
required by the Secretary to register under this section
shall display proof of registration through an electronic
identification device prescribed by the Secretary on each
vessel used by such operator to transport any taxable
fuel.''.
(b) Civil Penalty for Failure to Display Registration.--
(1) In general.--Part I of subchapter B of chapter 68
(relating to assessable penalties), as amended by section
9241 of this Act, is amended by adding at the end the
following new section:
``SEC. 6719. FAILURE TO DISPLAY REGISTRATION OF VESSEL.
``(a) Failure to Display Registration.--Every operator of a
vessel who fails to display proof of registration pursuant to
section 4101(a)(2) shall pay a penalty of $500 for each such
failure. With respect to any vessel, only one penalty shall
be imposed by this section during any calendar month.
``(b) Multiple Violations.--In determining the penalty
under subsection (a) on any person, subsection (a) shall be
applied by increasing the amount in subsection (a) by the
product of such amount and the number of prior penalties (if
any) imposed by this section on such person (or a related
person or any predecessor of such person or related person).
``(c) Reasonable Cause Exception.--No penalty shall be
imposed under this section with respect to any failure if it
is shown that such failure is due to reasonable cause.''.
(2) Clerical amendment.--The table of sections for part I
of subchapter B of chapter 68, as amended by section 9241 of
this Act, is amended by adding at the end the following new
item:
``Sec. 6719. Failure to display registration of vessel.''.
(c) Effective Date.--The amendments made by this section
shall take effect on October 1, 2004.
SEC. 9243. REGISTRATION OF PERSONS WITHIN FOREIGN TRADE
ZONES, ETC.
(a) In General.--Section 4101(a), as amended by section
9242 of this Act, is amended by redesignating paragraph (2)
as paragraph (3), and by inserting after paragraph (1) the
following new paragraph:
``(2) Registration of persons within foreign trade zones,
etc.--The Secretary shall require registration by any person
which--
``(A) operates a terminal or refinery within a foreign
trade zone or within a customs bonded storage facility, or
``(B) holds an inventory position with respect to a taxable
fuel in such a terminal.''.
(b) Effective Date.--The amendments made by this section
shall take effect on October 1, 2004.
SEC. 9244. PENALTIES FOR FAILURE TO REGISTER AND FAILURE TO
REPORT.
(a) Increased Penalty.--Subsection (a) of section 7272
(relating to penalty for failure to register) is amended by
inserting ``($10,000 in the case of a failure to register
under section 4101)'' after ``$50''.
(b) Increased Criminal Penalty.--Section 7232 (relating to
failure to register under section 4101, false representations
of registration status, etc.) is amended by striking
``$5,000'' and inserting ``$10,000''.
(c) Assessable Penalty for Failure to Register.--
(1) In general.--Part I of subchapter B of chapter 68
(relating to assessable penalties), as amended by section
9242 of this Act, is amended by adding at the end the
following new section:
``SEC. 6720. FAILURE TO REGISTER.
``(a) Failure to Register.--Every person who is required to
register under section 4101 and fails to do so shall pay a
penalty in addition to the tax (if any).
``(b) Amount of Penalty.--The amount of the penalty under
subsection (a) shall be--
``(1) $10,000 for each initial failure to register, and
``(2) $1,000 for each day thereafter such person fails to
register.
``(c) Reasonable Cause Exception.--No penalty shall be
imposed under this section with respect to any failure if it
is shown that such failure is due to reasonable cause.''.
(2) Clerical amendment.--The table of sections for part I
of subchapter B of chapter 68, as amended by section 9242 of
this Act, is
[[Page H1833]]
amended by adding at the end the following new item:
``Sec. 6720. Failure to register.''.
(d) Assessable Penalty for Failure to Report.--
(1) In general.--Part II of subchapter B of chapter 68
(relating to assessable penalties) is amended by adding at
the end the following new section:
``SEC. 6725. FAILURE TO REPORT INFORMATION UNDER SECTION
4101.
``(a) In General.--In the case of each failure described in
subsection (b) by any person with respect to a vessel or
facility, such person shall pay a penalty of $10,000 in
addition to the tax (if any).
``(b) Failures Subject to Penalty.--For purposes of
subsection (a), the failures described in this subsection
are--
``(1) any failure to make a report under section 4101(d) on
or before the date prescribed therefor, and
``(2) any failure to include all of the information
required to be shown on such report or the inclusion of
incorrect information.
``(c) Reasonable Cause Exception.--No penalty shall be
imposed under this section with respect to any failure if it
is shown that such failure is due to reasonable cause.''.
(2) Clerical amendment.--The table of sections for part II
of subchapter B of chapter 68 is amended by adding at the end
the following new item:
``Sec. 6725. Failure to report information under section 4101.''.
(e) Effective Date.--The amendments made by this section
shall apply to failures pending or occurring after September
30, 2004.
SEC. 9245. INFORMATION REPORTING FOR PERSONS CLAIMING CERTAIN
TAX BENEFITS.
(a) In General.--Subpart C of part III of subchapter A of
chapter 32 is amended by adding at the end the following new
section:
``SEC. 4104. INFORMATION REPORTING FOR PERSONS CLAIMING
CERTAIN TAX BENEFITS.
``(a) In General.--The Secretary shall require any person
claiming tax benefits--
``(1) under the provisions of section 34, 40, and 40A to
file a return at the time such person claims such benefits
(in such manner as the Secretary may prescribe), and
``(2) under the provisions of section 4041(b)(2), 6426, or
6427(e) to file a monthly return (in such manner as the
Secretary may prescribe).
``(b) Contents of Return.--Any return filed under this
section shall provide such information relating to such
benefits and the coordination of such benefits as the
Secretary may require to ensure the proper administration and
use of such benefits.
``(c) Enforcement.--With respect to any person described in
subsection (a) and subject to registration requirements under
this title, rules similar to rules of section 4222(c) shall
apply with respect to any requirement under this section.''.
(b) Conforming Amendment.--The table of sections for
subpart C of part III of subchapter A of chapter 32 is
amended by adding at the end the following new item:
``Sec. 4104. Information reporting for persons claiming certain tax
benefits.''.
(c) Effective Date.--The amendments made by this section
shall take effect on October 1, 2004.
SEC. 9246. ELECTRONIC REPORTING.
(a) In General.--Section 4101(d), as amended by section
9273 of this Act, is amended by adding at the end the
following new sentence: ``Any person who is required to
report under this subsection and who has 25 or more
reportable transactions in a month shall file such report in
electronic format.''.
(b) Effective Date.--The amendments made by this section
shall apply on October 1, 2004.
PART V--IMPORTS
SEC. 9251. TAX AT POINT OF ENTRY WHERE IMPORTER NOT
REGISTERED.
(a) Tax at Point of Entry Where Importer not Registered.--
(1) In general.--Subpart C of part III of subchapter A of
chapter 31, as amended by section 9245 of this Act, is
amended by adding at the end the following new section:
``SEC. 4105. TAX AT ENTRY WHERE IMPORTER NOT REGISTERED.
``(a) In General.--Any tax imposed under this part on any
person not registered under section 4101 for the entry of a
fuel into the United States shall be imposed at the time and
point of entry.
``(b) Enforcement of Assessment.--If any person liable for
any tax described under subsection (a) has not paid the tax
or posted a bond, the Secretary may--
``(1) seize the fuel on which the tax is due, or
``(2) detain any vehicle transporting such fuel,
until such tax is paid or such bond is filed.
``(c) Levy of Fuel.--If no tax has been paid or no bond has
been filed within 5 days from the date the Secretary seized
fuel pursuant to subsection (b), the Secretary may sell such
fuel as provided under section 6336.''.
(2) Conforming amendment.--The table of sections for
subpart C of part III of subchapter A of chapter 31 of the
Internal Revenue Code of 1986, as amended by section 9245 of
this Act, is amended by adding after the last item the
following new item:
``Sec. 4105. Tax at entry where importer not registered.''.
(b) Denial of Entry Where Tax not Paid.--The Secretary of
Homeland Security is authorized to deny entry into the United
States of any shipment of a fuel which is taxable under
section 4081 of the Internal Revenue Code of 1986 if the
person entering such shipment fails to pay the tax imposed
under such section or post a bond in accordance with the
provisions of section 4105 of such Code.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 9252. RECONCILIATION OF ON-LOADED CARGO TO ENTERED
CARGO.
(a) In General.--Subsection (a) of section 343 of the Trade
Act of 2002 is amended by inserting at the end the following
new paragraph:
``(4) In general.--Subject to paragraphs (2) and (3), not
later than 1 year after the enactment of this paragraph, the
Secretary of Homeland Security, together with the Secretary
of the Treasury, shall promulgate regulations providing for
the transmission to the Internal Revenue Service, through an
electronic data interchange system, of information pertaining
to cargo of taxable fuels (as defined in section 4083 of the
Internal Revenue Code of 1986) destined for importation into
the United States prior to such importation.''.
(b) Effective Date.--The amendment made by this section
shall take effect on the date of the enactment of this Act.
PART VI--MISCELLANEOUS PROVISIONS
SEC. 9261. TAX ON SALE OF DIESEL FUEL WHETHER SUITABLE FOR
USE OR NOT IN A DIESEL-POWERED VEHICLE OR
TRAIN.
(a) In General.--Section 4083(a)(3) is amended--
(1) by striking ``The term'' and inserting the following:
``(A) In general.--The term'', and
(2) by inserting at the end the following new subparagraph:
``(B) Liquid sold as diesel fuel.--The term `diesel fuel'
includes any liquid which is sold as or offered for sale as a
fuel in a diesel-powered highway vehicle or a diesel-powered
train.''.
(b) Conforming Amendments.--
(1) Section 40A(b)(1)(B), as amended by section 9103 of
this Act, is amended by striking ``4083(a)(3)'' and inserting
``4083(a)(3)(A)''.
(2) Section 6426(c)(3), as added by section 5102 of this
Act, is amended by striking ``4083(a)(3)'' and inserting
``4083(a)(3)(A)''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 9262. MODIFICATION OF ULTIMATE VENDOR REFUND CLAIMS WITH
RESPECT TO FARMING.
(a) In General.--
(1) Refunds.--Section 6427(l) is amended by adding at the
end the following new paragraph:
``(6) Registered vendors permitted to administer certain
claims for refund of diesel fuel and kerosene sold to
farmers.--
``(A) In general.--In the case of diesel fuel or kerosene
used on a farm for farming purposes (within the meaning of
section 6420(c)), paragraph (1) shall not apply to the
aggregate amount of such diesel fuel or kerosene if such
amount does not exceed 500 gallons (as determined under
subsection (i)(5)(A)(iii)).
``(B) Payment to ultimate vendor.--The amount which would
(but for subparagraph (A)) have been paid under paragraph (1)
with respect to any fuel shall be paid to the ultimate vendor
of such fuel, if such vendor--
``(i) is registered under section 4101, and
``(ii) meets the requirements of subparagraph (A), (B), or
(D) of section 6416(a)(1).''.
(2) Filing of claims.--Section 6427(i) is amended by
inserting at the end the following new paragraph:
``(5) Special rule for vendor refunds with respect to
farmers.--
``(A) In general.--A claim may be filed under subsection
(l)(6) by any person with respect to fuel sold by such person
for any period--
``(i) for which $200 or more ($100 or more in the case of
kerosene) is payable under subsection (l)(6),
``(ii) which is not less than 1 week, and
``(iii) which is for not more than 500 gallons for each
farmer for which there is a claim.
Notwithstanding subsection (l)(1), paragraph (3)(B) shall
apply to claims filed under the preceding sentence.
``(B) Time for filing claim.--No claim filed under this
paragraph shall be allowed unless filed on or before the last
day of the first quarter following the earliest quarter
included in the claim.''.
(3) Conforming amendments.--
(A) Section 6427(l)(5)(A) is amended to read as follows:
``(A) In general.--Paragraph (1) shall not apply to diesel
fuel or kerosene used by a State or local government.''.
(B) The heading for section 6427(l)(5) is amended by
striking ``farmers and''.
(b) Effective Date.--The amendment made by this section
shall apply to fuels sold for nontaxable use after the date
of the enactment of this Act.
SEC. 9263. TAXABLE FUEL REFUNDS FOR CERTAIN ULTIMATE VENDORS.
(a) In General.--Paragraph (4) of section 6416(a) (relating
to abatements, credits, and refunds) is amended to read as
follows:
``(4) Registered ultimate vendor to administer credits and
refunds of gasoline tax.--
[[Page H1834]]
``(A) In general.--For purposes of this subsection, if an
ultimate vendor purchases any gasoline on which tax imposed
by section 4081 has been paid and sells such gasoline to an
ultimate purchaser described in subparagraph (C) or (D) of
subsection (b)(2) (and such gasoline is for a use described
in such subparagraph), such ultimate vendor shall be treated
as the person (and the only person) who paid such tax, but
only if such ultimate vendor is registered under section
4101. For purposes of this subparagraph, if the sale of
gasoline is made by means of a credit card, the person
extending the credit to the ultimate purchaser shall be
deemed to be the ultimate vendor.
``(B) Timing of claims.--The procedure and timing of any
claim under subparagraph (A) shall be the same as for claims
under section 6427(i)(4), except that the rules of section
6427(i)(3)(B) regarding electronic claims shall not apply
unless the ultimate vendor has certified to the Secretary for
the most recent quarter of the taxable year that all ultimate
purchasers of the vendor are certified and entitled to a
refund under subparagraph (C) or (D) of subsection (b)(2).''.
(b) Credit Card Purchases of Diesel Fuel or Kerosene by
State and Local Governments.--Section 6427(l)(5)(C) (relating
to nontaxable uses of diesel fuel, kerosene, and aviation
fuel), as amended by section 9252 of this Act, is amended by
adding at the end the following new sentence: ``For purposes
of this subparagraph, if the sale of diesel fuel or kerosene
is made by means of a credit card, the person extending the
credit to the ultimate purchaser shall be deemed to be the
ultimate vendor.''.
(c) Effective Date.--The amendments made by this section
shall take effect on October 1, 2004.
SEC. 9264. TWO-PARTY EXCHANGES.
(a) In General.--Subpart C of part III of subchapter A of
chapter 32, as amended by section 9251 of this Act, is
amended by adding at the end the following new section:
``SEC. 4106. TWO-PARTY EXCHANGES.
``(a) In General.--In a two-party exchange, the delivering
person shall not be liable for the tax imposed under of
section 4081(a)(1)(A)(ii).
``(b) Two-Party Exchange.--The term `two-party exchange'
means a transaction, other than a sale, in which taxable fuel
is transferred from a delivering person registered under
section 4101 as a taxable fuel registrant to a receiving
person who is so registered where all of the following occur:
``(1) The transaction includes a transfer from the
delivering person, who holds the inventory position for
taxable fuel in the terminal as reflected in the records of
the terminal operator.
``(2) The exchange transaction occurs before or
contemporaneous with completion of removal across the rack
from the terminal by the receiving person.
``(3) The terminal operator in its books and records treats
the receiving person as the person that removes the product
across the terminal rack for purposes of reporting the
transaction to the Secretary.
``(4) The transaction is the subject of a written
contract.''.
(b) Conforming Amendment.--The table of sections for
subpart C of part III of subchapter A of chapter 32, as
amended by section 9251 of this Act, is amended by adding
after the last item the following new item:
``Sec. 4106. Two-party exchanges.''.
(c) Effective Date.--The amendment made by this section
shall take effect on the date of the enactment of this Act.
SEC. 9265. MODIFICATIONS OF TAX ON USE OF CERTAIN VEHICLES.
(a) No Proration of Tax Unless Vehicle Is Destroyed or
Stolen.--
(1) In general.--Section 4481(c) (relating to proration of
tax) is amended to read as follows:
``(c) Proration of Tax Where Vehicle Sold, Destroyed, or
Stolen.--
``(1) In general.--If in any taxable period a highway motor
vehicle is sold, destroyed, or stolen before the first day of
the last month in such period and not subsequently used
during such taxable period, the tax shall be reckoned
proportionately from the first day of the month in such
period in which the first use of such highway motor vehicle
occurs to and including the last day of the month in which
such highway motor vehicle was sold, destroyed, or stolen.
``(2) Destroyed.--For purposes of paragraph (1), a highway
motor vehicle is destroyed if such vehicle is damaged by
reason of an accident or other casualty to such an extent
that it is not economic to rebuild.''.
(2) Conforming amendments.--
(A) Section 6156 (relating to installment payment of tax on
use of highway motor vehicles) is repealed.
(B) The table of sections for subchapter A of chapter 62 is
amended by striking the item relating to section 6156.
(b) Display of Tax Certificate.--Paragraph (2) of section
4481(d) (relating to one tax liability for period) is amended
to read as follows:
``(2) Display of tax certificate.--Every taxpayer which
pays the tax imposed under this section with respect to a
highway motor vehicle shall, not later than 1 month after the
due date of the return of tax with respect to each taxable
period, receive and display on such vehicle an electronic
identification device prescribed by the Secretary.''.
(c) Electronic Filing.--Section 4481, as amended by section
9001 of this Act, is amended by redesignating subsection (e)
as subsection (f) and by inserting after subsection (d) the
following new subsection:
``(e) Electronic Filing.--Any taxpayer who files a return
under this section with respect to 25 or more vehicles for
any taxable period shall file such return electronically.''.
(d) Repeal of Reduction in Tax for Certain Trucks.--Section
4483 of the Internal Revenue Code of 1986 is amended by
striking subsection (f).
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable
periods beginning after the date of the enactment of this
Act.
(2) Subsection (b).--The amendment made by subsection (b)
shall take effect on October 1, 2005.
SEC. 9266. DEDICATION OF REVENUES FROM CERTAIN PENALTIES TO
THE HIGHWAY TRUST FUND.
(a) In General.--Subsection (b) of section 9503 (relating
to transfer to Highway Trust Fund of amounts equivalent to
certain taxes), as amended by section 9001 of this Act, is
amended by redesignating paragraph (5) as paragraph (6) and
inserting after paragraph (4) the following new paragraph:
``(5) Certain penalties.--There are hereby appropriated to
the Highway Trust Fund amounts equivalent to the penalties
assessed under sections 6715, 6715A, 6717, 6718, 6719, 6720,
6725, 7232, and 7272 (but only with regard to penalties under
such section related to failure to register under section
4101).''.
(b) Conforming Amendments.--
(1) The heading of subsection (b) of section 9503 is
amended by inserting ``and Penalties'' after ``Taxes''.
(2) The heading of paragraph (1) of section 9503(b) is
amended by striking ``In general'' and inserting ``Certain
taxes''.
(c) Effective Date.--The amendments made by this section
shall apply to penalties assessed after October 1, 2004.
SEC. 9267. NONAPPLICATION OF EXPORT EXEMPTION TO DELIVERY OF
FUEL TO MOTOR VEHICLES REMOVED FROM UNITED
STATES.
(a) In General.--Section 4221(d)(2) (defining export) is
amended by adding at the end the following new sentence:
``Such term does not include the delivery of a taxable fuel
(as defined in section 4083(a)(1)) into a fuel tank of a
motor vehicle which is shipped or driven out of the United
States.''.
(b) Conforming Amendments.--
(1) Section 4041(g) (relating to other exemptions) is
amended by adding at the end the following new sentence:
``Paragraph (3) shall not apply to the sale for delivery of a
liquid into a fuel tank of a motor vehicle which is shipped
or driven out of the United States.''.
(2) Clause (iv) of section 4081(a)(1)(A) (relating to tax
on removal, entry, or sale) is amended by inserting ``or at a
duty-free sales enterprise (as defined in section 555(b)(8)
of the Tariff Act of 1930)'' after ``section 4101''.
(c) Effective Date.--The amendments made by this section
shall apply to sales or deliveries made after the date of the
enactment of this Act.
PART VII--TOTAL ACCOUNTABILITY
SEC. 9271. TOTAL ACCOUNTABILITY.
(a) Taxation of Reportable Liquids.--
(1) In general.--Section 4081(a), as amended by this Act,
is amended--
(A) by inserting ``or reportable liquid'' after ``taxable
fuel'' each place it appears, and
(B) by inserting ``such liquid'' after ``such fuel'' in
paragraph (1)(A)(iv).
(2) Rate of tax.--Subparagraph (A) of section 4081(a)(2),
as amended by section 9211 of this Act, is amended by
striking ``and'' at the end of clause (iii), by striking the
period at the end of clause (iv) and inserting ``, and'', and
by adding at the end the following new clause:
``(v) in the case of reportable liquids, the rate
determined under section 4083(c)(2).''.
(3) Exemption.--Section 4081(a)(1) is amended by adding at
the end the following new subparagraph:
``(C) Exemption for registered transfers of reportable
liquids.--The tax imposed by this paragraph shall not apply
to any removal, entry, or sale of a reportable liquid if--
``(i) such removal, entry, or sale is to a registered
person who certifies that such liquid will not be used as a
fuel or in the production of a fuel, or
``(ii) the sale is to the ultimate purchaser of such
liquid.''.
(4) Reportable liquids.--Section 4083, as amended by this
Act, is amended by redesignating subsections (c) and (d) (as
redesignated by section 5211 of this Act) as subsections (d)
and (e), respectively, and by inserting after subsection (b)
the following new section:
``(c) Reportable Liquid.--For purposes of this subpart--
``(1) In general.--The term `reportable liquid' means any
petroleum-based liquid other than a taxable fuel.
``(2) Taxation.--
``(A) Gasoline blend stocks and additives.--Gasoline blend
stocks and additives which are reportable liquids (as defined
in paragraph (1)) shall be subject to the rate of tax under
clause (i) of section 4081(a)(2)(A).
``(B) Other reportable liquids.--Any reportable liquid (as
defined in paragraph (1)) not described in subparagraph (A)
shall be subject to the rate of tax under clause (iii) of
section 4081(a)(2)(A).''.
(5) Conforming amendments.--
(A) Section 4081(e) is amended by inserting ``or reportable
liquid'' after ``taxable fuel''.
[[Page H1835]]
(B) Section 4083(d) (relating to certain use defined as
removal), as redesignated by paragraph (4), is amended by
inserting ``or reportable liquid'' after ``taxable fuel''.
(C) Section 4083(e)(1) (relating to administrative
authority), as redesignated by paragraph (4), is amended--
(i) in subparagraph (A)--
(I) by inserting ``or reportable liquid'' after ``taxable
fuel'', and
(II) by inserting ``or such liquid'' after ``such fuel''
each place it appears, and
(ii) in subparagraph (B), by inserting ``or any reportable
liquid'' after ``any taxable fuel''.
(D) Section 4101(a)(2), as added by section 5243 of this
Act, is amended by inserting ``or a reportable liquid'' after
``taxable fuel''.
(E) Section 4101(a)(3), as added by section 5242 of this
Act and redesignated by section 5243 of this Act, is amended
by inserting ``or any reportable liquid'' before the period
at the end.
(F) Section 4102 is amended by inserting ``or any
reportable liquid'' before the period at the end.
(G)(i) Section 6718, as added by section 5241 of this Act,
is amended--
(I) in subsection (a), by inserting ``or any reportable
liquid (as defined in section 4083(c)(1))'' after `` section
4083(a)(1))'', and
(II) in the heading, by inserting ``or reportable liquids''
after ``taxable fuel''.
(ii) The item relating to section 6718 in table of sections
for part I of subchapter B of chapter 68, as added by section
5241 of this Act, is amended by inserting ``or reportable
liquids'' after ``taxable fuels''.
(H) Section 6427(h) is amended to read as follows:
``(h) Gasoline Blend Stocks or Additives and Reportable
Liquids.--Except as provided in subsection (k)--
``(1) if any gasoline blend stock or additive (within the
meaning of section 4083(a)(2)) is not used by any person to
produce gasoline and such person establishes that the
ultimate use of such gasoline blend stock or additive is not
to produce gasoline, or
``(2) if any reportable liquid (within the meaning of
section 4083(c)(1)) is not used by any person to produce a
taxable fuel and such person establishes that the ultimate
use of such reportable liquid is not to produce a taxable
fuel,
then the Secretary shall pay (without interest) to such
person an amount equal to the aggregate amount of the tax
imposed on such person with respect to such gasoline blend
stock or additive or such reportable fuel.''.
(I) Section 7232, as amended by this Act, is amended by
inserting ``or reportable liquid (within the meaning of
section 4083(c)(1))'' after ``section 4083)''.
(J) Section 343 of the Trade Act of 2002, as amended by
section 9252 of this Act, is amended by inserting ``and
reportable liquids (as defined in section 4083(c)(1) of such
Code)'' after ``Internal Revenue Code of 1986)''.
(b) Dyed Diesel.--Section 4082(a) is amended by striking
``and'' at the end of paragraph (2), by striking the period
at the end of paragraph (3) and inserting ``and'', and by
inserting after paragraph (3) the following new paragraph:
``(4) which is removed, entered, or sold by a person
registered under section 4101.''.
(c) Effective Date.--The amendments made by this section
shall apply to reportable liquids (as defined in section
4083(c) of the Internal Revenue Code) and fuel sold or used
after September 30, 2004.
SEC. 9272. EXCISE TAX REPORTING.
(a) In General.--Part II of subchapter A of chapter 61 is
amended by adding at the end the following new subpart:
``Subpart E--Excise Tax Reporting
``SEC. 6025. RETURNS RELATING TO FUEL TAXES.
``(a) In General.--The Secretary shall require any person
liable for the tax imposed under Part III of subchapter A of
chapter 32 to file a return of such tax on a monthly basis.
``(b) Information Included With Return.--The Secretary
shall require any person filing a return under subsection (a)
to provide information regarding any refined product (whether
or not such product is taxable under this title) removed from
a terminal during the period for which such return
applies.''.
(b) Conforming Amendment.--The table of parts for
subchapter A of chapter 61 is amended by adding at the end
the following new item:
``Subpart E--Excise tax reporting''.
(c) Effective Date.--The amendments made by this section
shall apply to fuel sold or used after September 30, 2004.
SEC. 9273. INFORMATION REPORTING.
(a) In General.--Section 4101(d) is amended by adding at
the end the following new flush sentence: ``The Secretary
shall require reporting under the previous sentence with
respect to taxable fuels removed, entered, or transferred
from any refinery, pipeline, or vessel which is registered
under this section.''.
(b) Effective Date.--The amendment made by this section
shall apply on October 1, 2004.
Subtitle D--Definition of Highway Vehicle
SEC. 9301. EXEMPTION FROM CERTAIN EXCISE TAXES FOR MOBILE
MACHINERY.
(a) Exemption From Tax on Heavy Trucks and Trailers Sold at
Retail.--
(1) In general.--Section 4053 (relating to exemptions) is
amended by adding at the end the following new paragraph:
``(8) Mobile machinery.--Any vehicle which consists of a
chassis--
``(A) to which there has been permanently mounted (by
welding, bolting, riveting, or other means) machinery or
equipment to perform a construction, manufacturing,
processing, farming, mining, drilling, timbering, or similar
operation if the operation of the machinery or equipment is
unrelated to transportation on or off the public highways,
``(B) which has been specially designed to serve only as a
mobile carriage and mount (and a power source, where
applicable) for the particular machinery or equipment
involved, whether or not such machinery or equipment is in
operation, and
``(C) which, by reason of such special design, could not,
without substantial structural modification, be used as a
component of a vehicle designed to perform a function of
transporting any load other than that particular machinery or
equipment or similar machinery or equipment requiring such a
specially designed chassis.''.
(2) Effective date.--The amendment made by this subsection
shall take effect on the day after the date of the enactment
of this Act.
(b) Exemption From Tax on Use of Certain Vehicles.--
(1) In general.--Section 4483 (relating to exemptions) is
amended by redesignating subsection (g) as subsection (h) and
by inserting after subsection (f) the following new
subsection:
``(g) Exemption for Mobile Machinery.--No tax shall be
imposed by section 4481 on the use of any vehicle described
in section 4053(8).''.
(2) Effective date.--The amendments made by this subsection
shall take effect on the day after the date of the enactment
of this Act.
(d) Exemption From Fuel Taxes.--
(1) In general.--Section 6421(e)(2) (defining off-highway
business use) is amended by adding at the end the following
new subparagraph:
``(C) Uses in mobile machinery.--
``(i) In general.--The term `off-highway business use'
shall include any use in a vehicle which meets the
requirements described in clause (ii).
``(ii) Requirements for mobile machinery.--The requirements
described in this clause are--
``(I) the design-based test, and
``(II) the use-based test.
``(iii) Design-based test.--For purposes of clause (ii)(I),
the design-based test is met if the vehicle consists of a
chassis--
``(I) to which there has been permanently mounted (by
welding, bolting, riveting, or other means) machinery or
equipment to perform a construction, manufacturing,
processing, farming, mining, drilling, timbering, or similar
operation if the operation of the machinery or equipment is
unrelated to transportation on or off the public highways,
``(II) which has been specially designed to serve only as a
mobile carriage and mount (and a power source, where
applicable) for the particular machinery or equipment
involved, whether or not such machinery or equipment is in
operation, and
``(III) which, by reason of such special design, could not,
without substantial structural modification, be used as a
component of a vehicle designed to perform a function of
transporting any load other than that particular machinery or
equipment or similar machinery or equipment requiring such a
specially designed chassis.
``(iv) Use-based test.--For purposes of clause (ii)(II),
the use-based test is met if the use of the vehicle on public
highways was less than 5,000 miles during the taxpayer's
taxable year.
``(v) Special rule for use by certain tax-exempt
organizations.--In the case of any use in a vehicle by an
organization which is described in section 501(c) and exempt
from tax under section 501(a), clause (ii) shall be applied
without regard to subclause (II) thereof.''.
(2) Annual refund of tax paid.--Section 6427(i)(2)
(relating to exceptions) is amended by adding at the end the
following new subparagraph:
``(C) Nonapplication of paragraph.--This paragraph shall
not apply to any fuel used in any off-highway business use
described in section 6421(e)(2)(C).''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 9302. MODIFICATION OF DEFINITION OF OFF-HIGHWAY VEHICLE.
(a) In General.--Section 7701(a) (relating to definitions)
is amended by adding at the end the following new paragraph:
``(48) Off-highway vehicles.--
``(A) Off-highway transportation vehicles.--
``(i) In general.--A vehicle shall not be treated as a
highway vehicle if such vehicle is specially designed for the
primary function of transporting a particular type of load
other than over the public highway and because of this
special design such vehicle's capability to transport a load
over the public highway is substantially limited or impaired.
``(ii) Determination of vehicle's design.--For purposes of
clause (i), a vehicle's design is determined solely on the
basis of its physical characteristics.
``(iii) Determination of substantial limitation or
impairment.--For purposes of
[[Page H1836]]
clause (i), in determining whether substantial limitation or
impairment exists, account may be taken of factors such as
the size of the vehicle, whether such vehicle is subject to
the licensing, safety, and other requirements applicable to
highway vehicles, and whether such vehicle can transport a
load at a sustained speed of at least 25 miles per hour. It
is immaterial that a vehicle can transport a greater load off
the public highway than such vehicle is permitted to
transport over the public highway.
``(B) Nontransportation trailers and semitrailers.--A
trailer or semitrailer shall not be treated as a highway
vehicle if it is specially designed to function only as an
enclosed stationary shelter for the carrying on of an off-
highway function at an off-highway site.''.
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendment made by this section shall take effect on the date
of the enactment of this Act.
(2) Fuel taxes.--With respect to taxes imposed under
subchapter B of chapter 31 and part III of subchapter A of
chapter 32, the amendment made by this section shall apply to
taxable periods beginning after the date of the enactment of
this Act.
Subtitle E--Miscellaneous Provisions
SEC. 9401. DEDICATION OF GAS GUZZLER TAX TO HIGHWAY TRUST
FUND.
(a) In General.--Section 9503(b)(1) (relating to transfer
to Highway Trust Fund of amounts equivalent to certain
taxes), as amended by section 9101 of this Act, is amended by
redesignating subparagraphs (C), (D), and (E) as
subparagraphs (D), (E), and (F), respectively, and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) section 4064 (relating to gas guzzler tax),''.
(b) Uniform Application of Tax.--Subparagraph (A) of
section 4064(b)(1) (defining automobile) is amended by
striking the second sentence.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 9402. MOTOR FUEL TAX ENFORCEMENT ADVISORY COMMISSION.
(a) Establishment.--There is established a Motor Fuel Tax
Enforcement Advisory Commission (in this section referred to
as the ``Commission'').
(b) Function.--The Commission shall--
(1) review motor fuel revenue collections, historical and
current;
(2) review the progress of investigations;
(3) develop and review legislative proposals with respect
to motor fuel taxes;
(4) monitor the progress of administrative regulation
projects relating to motor fuel taxes;
(5) review the results of Federal and State agency
cooperative efforts regarding motor fuel taxes;
(6) review the results of Federal interagency cooperative
efforts regarding motor fuel taxes; and
(7) evaluate and make recommendations regarding--
(A) the effectiveness of existing Federal enforcement
programs regarding motor fuel taxes,
(B) enforcement personnel allocation, and
(C) proposals for regulatory projects, legislation, and
funding.
(c) Membership.--
(1) Appointment.--The Commission shall be composed of the
following representatives appointed by the Chairmen and the
Ranking Members of the Committee on Finance of the Senate and
the Committee on Ways and Means of the House of
Representatives:
(A) At least 1 representative from each of the following
Federal entities: the Department of Homeland Security, the
Department of Transportation--Office of Inspector General,
the Federal Highway Administration, the Department of
Defense, and the Department of Justice.
(B) At least 1 representative from the Federation of State
Tax Administrators.
(C) At least 1 representative from any State department of
transportation.
(D) 2 representatives from the highway construction
industry.
(E) 5 representatives from industries relating to fuel
distribution -- refiners (2 representatives), distributors (1
representative), pipelines (1 representative), and terminal
operators (2 representatives).
(F) 1 representative from the retail fuel industry.
(G) 2 representatives from the staff of the Committee on
Finance of the Senate and 2 representatives from the staff of
the Committee on Ways and Means of the House of
Representatives.
(2) Terms.--Members shall be appointed for the life of the
Commission.
(3) Vacancies.--A vacancy in the Commission shall be filled
in the manner in which the original appointment was made.
(4) Travel expenses.--Members shall serve without pay but
shall receive travel expenses, including per diem in lieu of
subsistence, in accordance with sections 5702 and 5703 of
title 5, United States Code.
(5) Chairman.--The Chairman of the Commission shall be
elected by the members.
(d) Funding.--Such sums as are necessary shall be available
from the Highway Trust fund for the expenses of the
Commission.
(e) Consultation.--Upon request of the Commission,
representatives of the Department of the Treasury and the
Internal Revenue Service shall be available for consultation
to assist the Commission in carrying out its duties under
this section.
(f) Obtaining Data.--The Commission may secure directly
from any department or agency of the United States,
information (other than information required by any law to be
kept confidential by such department or agency) necessary for
the Commission to carry out its duties under this section.
Upon request of the Commission, the head of that department
or agency shall furnish such nonconfidential information to
the Commission. The Commission shall also gather evidence
through such means as it may deem appropriate, including
through holding hearings and soliciting comments by means of
Federal Register notices.
(g) Termination.--The Commission shall terminate after
September 30, 2009.
SEC. 9403. TREASURY STUDY OF FUEL TAX COMPLIANCE AND
INTERAGENCY COOPERATION.
(a) In General.--Not later than January 31, 2006, the
Secretary of the Treasury shall submit to the Committee on
Finance of the Senate and the Committee on Ways and Means of
the House of Representatives a report regarding fuel tax
enforcement which shall include the information and analysis
specified in subsections (b) and (c) and any other
information and recommendations the Secretary of the Treasury
may deem appropriate.
(b) Audits.--With respect to audits conducted by the
Internal Revenue Service, the report required under
subsection (a) shall include--
(1) the number and geographic distribution of audits
conducted annually, by fiscal year, between October 1, 2001,
and September 30, 2005;
(2) the total volume involved for each of the taxable fuels
covered by such audits and a comparison to the annual
production of such fuels;
(3) the staff hours and number of personnel devoted to the
audits per year; and
(4) the results of such audits by year, including total tax
collected, total penalties collected, and number of referrals
for criminal prosecution.
(c) Enforcement Activities.--With respect to enforcement
activities, the report required under subsection (a) shall
include--
(1) the number and geographic distribution of criminal
investigations and prosecutions annually, by fiscal year,
between October 1, 2001, and September 30, 2005, and the
results of such investigations and prosecutions;
(2) to the extent such investigations and prosecutions
involved other agencies, State or Federal, a breakdown by
agency of the number of joint investigations involved;
(3) an assessment of the effectiveness of joint action and
cooperation between the Department of the Treasury and other
Federal and State agencies, including a discussion of the
ability and need to share information across agencies for
both civil and criminal Federal tax enforcement and
enforcement of State or Federal laws relating to fuels;
(4) the staff hours and number of personnel devoted to
criminal investigations and prosecutions per year;
(5) the staff hours and number of personnel devoted to
administrative collection of fuel taxes; and
(6) the results of administrative collection efforts
annually, by fiscal year, between October 1, 2001, and
September 30, 2005.
SEC. 9404. TREASURY STUDY OF HIGHWAY FUELS USED BY TRUCKS FOR
NON-TRANSPORTATION PURPOSES.
(a) Study.--The Secretary of the Treasury shall conduct a
study regarding the use of highway motor fuel by trucks that
is not used for the propulsion of the vehicle. As part of
such study--
(1) in the case of vehicles carrying equipment that is
unrelated to the transportation function of the vehicle--
(A) the Secretary of the Treasury, in consultation with the
Secretary of Transportation, and with public notice and
comment, shall determine the average annual amount of tax
paid fuel consumed per vehicle, by type of vehicle, used by
the propulsion engine to provide the power to operate the
equipment attached to the highway vehicle, and
(B) the Secretary of the Treasury shall review the
technical and administrative feasibility of exempting such
nonpropulsive use of highway fuels for the highway motor
fuels excise taxes,
(2) in the case where non-transportation equipment is run
by a separate motor--
(A) the Secretary of the Treasury shall determine the
annual average amount of fuel exempted from tax in the use of
such equipment by equipment type, and
(B) the Secretary of the Treasury shall review issues of
administration and compliance related to the present-law
exemption provided for such fuel use, and
(3) the Secretary of the Treasury shall--
(A) estimate the amount of taxable fuel consumed by trucks
and the emissions of various pollutants due to the long-term
idling of diesel engines, and
(B) determine the cost of reducing such long-term idling
through the use of plug-ins at truck stops, auxiliary power
units, or other technologies.
(b) Report.--Not later than January 1, 2006, the Secretary
of the Treasury shall report the findings of the study
required under subsection (a) to the Committee on Finance of
the Senate and the Committee on Ways and Means of the House
of Representatives.
[[Page H1837]]
SEC. 9405. TREATMENT OF EMPLOYER-PROVIDED TRANSIT AND VAN
POOLING BENEFITS.
(a) In General.--Subparagraph (A) of section 132(f)(2)
(relating to limitation on exclusion) is amended by striking
``$100'' and inserting ``$120''.
(b) Inflation Adjustment Conforming Amendments.--The last
sentence of section 132(f)(6)(A) (relating to inflation
adjustment) is amended--
(1) by striking ``2002'' and inserting ``2005'', and
(2) by striking ``2001'' and inserting ``2004''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2004.
SEC. 9406. STUDY OF INCENTIVES FOR PRODUCTION OF BIODIESEL.
(a) Study.--The General Comptroller of the United States
shall conduct a study related to biodiesel fuels and the tax
credit for biodiesel fuels established under this Act. Such
study shall include--
(1) an assessment on whether such credit provides
sufficient assistance to the producers of biodiesel fuel to
establish the fuel as a viable energy alternative in the
current market place,
(2) an assessment on how long such credit or similar
subsidy would have to remain in effect before biodiesel fuel
can compete in the market place without such assistance,
(3) a cost-benefit analysis of such credit, comparing the
cost of the credit in forgone revenue to the benefits of
lower fuel costs for consumers, increased profitability for
the biodiesel industry, increased farm income, reduced
program outlays from the Department of Agriculture, and the
improved environmental conditions through the use of
biodiesel fuel, and
(4) an assessment on whether such credit results in any
unintended consequences for unrelated industries, including
the impact, if any, on the glycerin market.
(b) Report.--Not later than 2 years after the date of the
enactment of this Act, the Comptroller General of the United
States shall report the findings of the study required under
subsection (a) to the Committee on Finance of the Senate and
the Committee on Ways and Means of the House of
Representatives.
Subtitle F--Provisions Designed to Curtail Tax Shelters
SEC. 9501. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701 is amended by redesignating
subsection (m) as subsection (n) and by inserting after
subsection (l) the following new subsection:
``(m) Clarification of Economic Substance Doctrine; Etc.--
``(1) General rules.--
``(A) In general.--In applying the economic substance
doctrine, the determination of whether a transaction has
economic substance shall be made as provided in this
paragraph.
``(B) Definition of economic substance.--For purposes of
subparagraph (A)--
``(i) In general.--A transaction has economic substance
only if--
``(I) the transaction changes in a meaningful way (apart
from Federal tax effects and, if there are any Federal tax
effects, also apart from any foreign, State, or local tax
effects) the taxpayer's economic position, and
``(II) the taxpayer has a substantial nontax purpose for
entering into such transaction and the transaction is a
reasonable means of accomplishing such purpose.
``(ii) Special rule where taxpayer relies on profit
potential.--A transaction shall not be treated as having
economic substance by reason of having a potential for profit
unless--
``(I) the present value of the reasonably expected pre-tax
profit from the transaction is substantial in relation to the
present value of the expected net tax benefits that would be
allowed if the transaction were respected, and
``(II) the reasonably expected pre-tax profit from the
transaction exceeds a risk-free rate of return.
``(C) Treatment of fees and foreign taxes.--Fees and other
transaction expenses and foreign taxes shall be taken into
account as expenses in determining pre-tax profit under
subparagraph (B)(ii).
``(2) Special rules for transactions with tax-indifferent
parties.--
``(A) Special rules for financing transactions.--The form
of a transaction which is in substance the borrowing of money
or the acquisition of financial capital directly or
indirectly from a tax-indifferent party shall not be
respected if the present value of the deductions to be
claimed with respect to the transaction is substantially in
excess of the present value of the anticipated economic
returns of the person lending the money or providing the
financial capital. A public offering shall be treated as a
borrowing, or an acquisition of financial capital, from a
tax-indifferent party if it is reasonably expected that at
least 50 percent of the offering will be placed with tax-
indifferent parties.
``(B) Artificial income shifting and basis adjustments.--
The form of a transaction with a tax-indifferent party shall
not be respected if--
``(i) it results in an allocation of income or gain to the
tax-indifferent party in excess of such party's economic
income or gain, or
``(ii) it results in a basis adjustment or shifting of
basis on account of overstating the income or gain of the
tax-indifferent party.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Economic substance doctrine.--The term `economic
substance doctrine' means the common law doctrine under which
tax benefits under subtitle A with respect to a transaction
are not allowable if the transaction does not have economic
substance or lacks a business purpose.
``(B) Tax-indifferent party.--The term `tax-indifferent
party' means any person or entity not subject to tax imposed
by subtitle A. A person shall be treated as a tax-indifferent
party with respect to a transaction if the items taken into
account with respect to the transaction have no substantial
impact on such person's liability under subtitle A.
``(C) Substantial nontax purpose.--In applying subclause
(II) of paragraph (1)(B)(i), a purpose of achieving a
financial accounting benefit shall not be taken into account
in determining whether a transaction has a substantial nontax
purpose if the origin of such financial accounting benefit is
a reduction of income tax.
``(D) Exception for personal transactions of individuals.--
In the case of an individual, this subsection shall apply
only to transactions entered into in connection with a trade
or business or an activity engaged in for the production of
income.
``(E) Treatment of lessors.--In applying subclause (I) of
paragraph (1)(B)(ii) to the lessor of tangible property
subject to a lease, the expected net tax benefits shall not
include the benefits of depreciation, or any tax credit, with
respect to the leased property and subclause (II) of
paragraph (1)(B)(ii) shall be disregarded in determining
whether any of such benefits are allowable.
``(4) Other common law doctrines not affected.--Except as
specifically provided in this subsection, the provisions of
this subsection shall not be construed as altering or
supplanting any other rule of law, and the requirements of
this subsection shall be construed as being in addition to
any such other rule of law.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this subsection. Such regulations may include
exemptions from the application of this subsection.''
(b) Effective Date.--The amendments made by this section
shall apply to transactions entered into after February 13,
2003.
SEC. 9502. PENALTY FOR FAILING TO DISCLOSE REPORTABLE
TRANSACTION.
(a) In General.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6707 the following new section:
``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE
TRANSACTION INFORMATION WITH RETURN OR
STATEMENT.
``(a) Imposition of Penalty.--Any person who fails to
include on any return or statement any information with
respect to a reportable transaction which is required under
section 6011 to be included with such return or statement
shall pay a penalty in the amount determined under subsection
(b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the amount of the penalty under subsection (a) shall be
$50,000.
``(2) Listed transaction.--The amount of the penalty under
subsection (a) with respect to a listed transaction shall be
$100,000.
``(3) Increase in penalty for large entities and high net
worth individuals.--
``(A) In general.--In the case of a failure under
subsection (a) by--
``(i) a large entity, or
``(ii) a high net worth individual,
the penalty under paragraph (1) or (2) shall be twice the
amount determined without regard to this paragraph.
``(B) Large entity.--For purposes of subparagraph (A), the
term `large entity' means, with respect to any taxable year,
a person (other than a natural person) with gross receipts in
excess of $10,000,000 for the taxable year in which the
reportable transaction occurs or the preceding taxable year.
Rules similar to the rules of paragraph (2) and subparagraphs
(B), (C), and (D) of paragraph (3) of section 448(c) shall
apply for purposes of this subparagraph.
``(C) High net worth individual.--For purposes of
subparagraph (A), the term `high net worth individual' means,
with respect to a reportable transaction, a natural person
whose net worth exceeds $2,000,000 immediately before the
transaction.
``(c) Definitions.--For purposes of this section--
``(1) Reportable transaction.--The term `reportable
transaction' means any transaction with respect to which
information is required to be included with a return or
statement because, as determined under regulations prescribed
under section 6011, such transaction is of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.
``(2) Listed transaction.--Except as provided in
regulations, the term `listed transaction' means a reportable
transaction which is the same as, or substantially similar
to, a transaction specifically identified by the Secretary as
a tax avoidance transaction for purposes of section 6011.
``(d) Authority to Rescind Penalty.--
``(1) In general.--The Commissioner of Internal Revenue may
rescind all or any portion of any penalty imposed by this
section with respect to any violation if--
[[Page H1838]]
``(A) the violation is with respect to a reportable
transaction other than a listed transaction,
``(B) the person on whom the penalty is imposed has a
history of complying with the requirements of this title,
``(C) it is shown that the violation is due to an
unintentional mistake of fact;
``(D) imposing the penalty would be against equity and good
conscience, and
``(E) rescinding the penalty would promote compliance with
the requirements of this title and effective tax
administration.
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may be delegated only to the head of the
Office of Tax Shelter Analysis. The Commissioner, in the
Commissioner's sole discretion, may establish a procedure to
determine if a penalty should be referred to the Commissioner
or the head of such Office for a determination under
paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination under this subsection may not be
reviewed in any administrative or judicial proceeding.
``(4) Records.--If a penalty is rescinded under paragraph
(1), the Commissioner shall place in the file in the Office
of the Commissioner the opinion of the Commissioner or the
head of the Office of Tax Shelter Analysis with respect to
the determination, including--
``(A) the facts and circumstances of the transaction,
``(B) the reasons for the rescission, and
``(C) the amount of the penalty rescinded.
``(5) Report.--The Commissioner shall each year report to
the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate--
``(A) a summary of the total number and aggregate amount of
penalties imposed, and rescinded, under this section, and
``(B) a description of each penalty rescinded under this
subsection and the reasons therefor.
``(e) Penalty Reported to SEC.--In the case of a person--
``(1) which is required to file periodic reports under
section 13 or 15(d) of the Securities Exchange Act of 1934 or
is required to be consolidated with another person for
purposes of such reports, and
``(2) which--
``(A) is required to pay a penalty under this section with
respect to a listed transaction,
``(B) is required to pay a penalty under section 6662A with
respect to any reportable transaction at a rate prescribed
under section 6662A(c), or
``(C) is required to pay a penalty under section 6662B with
respect to any noneconomic substance transaction,
the requirement to pay such penalty shall be disclosed in
such reports filed by such person for such periods as the
Secretary shall specify. Failure to make a disclosure in
accordance with the preceding sentence shall be treated as a
failure to which the penalty under subsection (b)(2) applies.
``(f) Coordination With Other Penalties.--The penalty
imposed by this section is in addition to any penalty imposed
under this title.''.
(b) Conforming Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6707 the following:
``Sec. 6707A. Penalty for failure to include reportable transaction
information with return or statement.''.
(c) Effective Date.--The amendments made by this section
shall apply to returns and statements the due date for which
is after the date of the enactment of this Act.
SEC. 9503. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS
AND OTHER REPORTABLE TRANSACTIONS HAVING A
SIGNIFICANT TAX AVOIDANCE PURPOSE.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662 the following new section:
``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERSTATEMENTS WITH RESPECT TO REPORTABLE
TRANSACTIONS.
``(a) Imposition of Penalty.--If a taxpayer has a
reportable transaction understatement for any taxable year,
there shall be added to the tax an amount equal to 20 percent
of the amount of such understatement.
``(b) Reportable Transaction Understatement.--For purposes
of this section--
``(1) In general.--The term `reportable transaction
understatement' means the sum of--
``(A) the product of--
``(i) the amount of the increase (if any) in taxable income
which results from a difference between the proper tax
treatment of an item to which this section applies and the
taxpayer's treatment of such item (as shown on the taxpayer's
return of tax), and
``(ii) the highest rate of tax imposed by section 1
(section 11 in the case of a taxpayer which is a
corporation), and
``(B) the amount of the decrease (if any) in the aggregate
amount of credits determined under subtitle A which results
from a difference between the taxpayer's treatment of an item
to which this section applies (as shown on the taxpayer's
return of tax) and the proper tax treatment of such item.
For purposes of subparagraph (A), any reduction of the excess
of deductions allowed for the taxable year over gross income
for such year, and any reduction in the amount of capital
losses which would (without regard to section 1211) be
allowed for such year, shall be treated as an increase in
taxable income.
``(2) Items to which section applies.--This section shall
apply to any item which is attributable to--
``(A) any listed transaction, and
``(B) any reportable transaction (other than a listed
transaction) if a significant purpose of such transaction is
the avoidance or evasion of Federal income tax.
``(c) Higher Penalty for Nondisclosed Listed and Other
Avoidance Transactions.--
``(1) In general.--Subsection (a) shall be applied by
substituting `30 percent' for `20 percent' with respect to
the portion of any reportable transaction understatement with
respect to which the requirement of section 6664(d)(2)(A) is
not met.
``(2) Rules applicable to compromise of penalty.--
``(A) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which paragraph (1)
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(B) Applicable rules.--The rules of paragraphs (3), (4),
and (5) of section 6707A(d) shall apply for purposes of
subparagraph (A).
``(d) Definitions of Reportable and Listed Transactions.--
For purposes of this section, the terms `reportable
transaction' and `listed transaction' have the respective
meanings given to such terms by section 6707A(c).
``(e) Special Rules.--
``(1) Coordination with penalties, etc., on other
understatements.--In the case of an understatement (as
defined in section 6662(d)(2))--
``(A) the amount of such understatement (determined without
regard to this paragraph) shall be increased by the aggregate
amount of reportable transaction understatements and
noneconomic substance transaction understatements for
purposes of determining whether such understatement is a
substantial understatement under section 6662(d)(1), and
``(B) the addition to tax under section 6662(a) shall apply
only to the excess of the amount of the substantial
understatement (if any) after the application of subparagraph
(A) over the aggregate amount of reportable transaction
understatements and noneconomic substance transaction
understatements.
``(2) Coordination with other penalties.--
``(A) Application of fraud penalty.--References to an
underpayment in section 6663 shall be treated as including
references to a reportable transaction understatement and a
noneconomic substance transaction understatement.
``(B) No double penalty.--This section shall not apply to
any portion of an understatement on which a penalty is
imposed under section 6662B or 6663.
``(3) Special rule for amended returns.--Except as provided
in regulations, in no event shall any tax treatment included
with an amendment or supplement to a return of tax be taken
into account in determining the amount of any reportable
transaction understatement or noneconomic substance
transaction understatement if the amendment or supplement is
filed after the earlier of the date the taxpayer is first
contacted by the Secretary regarding the examination of the
return or such other date as is specified by the Secretary.
``(4) Noneconomic substance transaction understatement.--
For purposes of this subsection, the term `noneconomic
substance transaction understatement' has the meaning given
such term by section 6662B(c).
``(5) Cross reference.--For reporting of section 6662A(c)
penalty to the Securities and Exchange Commission, see
section 6707A(e).''
(b) Determination of Other Understatements.--Subparagraph
(A) of section 6662(d)(2) is amended by adding at the end the
following flush sentence: ``The excess under the preceding
sentence shall be determined without regard to items to which
section 6662A applies and without regard to items with
respect to which a penalty is imposed by section 6662B.''
(c) Reasonable Cause Exception.--
(1) In general.--Section 6664 is amended by adding at the
end the following new subsection:
``(d) Reasonable Cause Exception for Reportable Transaction
Understatements.--
``(1) In general.--No penalty shall be imposed under
section 6662A with respect to any portion of a reportable
transaction understatement if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted
in good faith with respect to such portion.
``(2) Special rules.--Paragraph (1) shall not apply to any
reportable transaction understatement unless--
``(A) the relevant facts affecting the tax treatment of the
item are adequately disclosed in accordance with the
regulations prescribed under section 6011,
``(B) there is or was substantial authority for such
treatment, and
``(C) the taxpayer reasonably believed that such treatment
was more likely than not the proper treatment.
A taxpayer failing to adequately disclose in accordance with
section 6011 shall be treated
[[Page H1839]]
as meeting the requirements of subparagraph (A) if the
penalty for such failure was rescinded under section
6707A(d).
``(3) Rules relating to reasonable belief.--For purposes of
paragraph (2)(C)--
``(A) In general.--A taxpayer shall be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief--
``(i) is based on the facts and law that exist at the time
the return of tax which includes such tax treatment is filed,
and
``(ii) relates solely to the taxpayer's chances of success
on the merits of such treatment and does not take into
account the possibility that a return will not be audited,
such treatment will not be raised on audit, or such treatment
will be resolved through settlement if it is raised.
``(B) Certain opinions may not be relied upon.--
``(i) In general.--An opinion of a tax advisor may not be
relied upon to establish the reasonable belief of a taxpayer
if--
``(I) the tax advisor is described in clause (ii), or
``(II) the opinion is described in clause (iii).
``(ii) Disqualified tax advisors.--A tax advisor is
described in this clause if the tax advisor--
``(I) is a material advisor (within the meaning of section
6111(b)(1)) who participates in the organization, management,
promotion, or sale of the transaction or who is related
(within the meaning of section 267(b) or 707(b)(1)) to any
person who so participates,
``(II) is compensated directly or indirectly by a material
advisor with respect to the transaction,
``(III) has a fee arrangement with respect to the
transaction which is contingent on all or part of the
intended tax benefits from the transaction being sustained,
or
``(IV) as determined under regulations prescribed by the
Secretary, has a continuing financial interest with respect
to the transaction.
``(iii) Disqualified opinions.--For purposes of clause (i),
an opinion is disqualified if the opinion--
``(I) is based on unreasonable factual or legal assumptions
(including assumptions as to future events),
``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
or
``(IV) fails to meet any other requirement as the Secretary
may prescribe.''
(2) Conforming amendment.--The heading for subsection (c)
of section 6664 is amended by inserting ``for Underpayments''
after ``Exception''.
(d) Conforming Amendments.--
(1) Subparagraph (C) of section 461(i)(3) is amended by
striking ``section 6662(d)(2)(C)(iii)'' and inserting
``section 1274(b)(3)(C)''.
(2) Paragraph (3) of section 1274(b) is amended--
(A) by striking ``(as defined in section
6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
(B) by adding at the end the following new subparagraph:
``(C) Tax shelter.--For purposes of subparagraph (B), the
term `tax shelter' means--
``(i) a partnership or other entity,
``(ii) any investment plan or arrangement, or
``(iii) any other plan or arrangement,
if a significant purpose of such partnership, entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax.''
(3) Section 6662(d)(2) is amended by striking subparagraphs
(C) and (D).
(4) Section 6664(c)(1) is amended by striking ``this part''
and inserting ``section 6662 or 6663''.
(5) Subsection (b) of section 7525 is amended by striking
``section 6662(d)(2)(C)(iii)'' and inserting ``section
1274(b)(3)(C)''.
(6)(A) The heading for section 6662 is amended to read as
follows:
``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERPAYMENTS. ''
(B) The table of sections for part II of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662 and inserting the following new items:
``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements
with respect to reportable transactions.''
(e) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 9504. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662A the following new section:
``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
``(a) Imposition of Penalty.--If a taxpayer has an
noneconomic substance transaction understatement for any
taxable year, there shall be added to the tax an amount equal
to 40 percent of the amount of such understatement.
``(b) Reduction of Penalty for Disclosed Transactions.--
Subsection (a) shall be applied by substituting `20 percent'
for `40 percent' with respect to the portion of any
noneconomic substance transaction understatement with respect
to which the relevant facts affecting the tax treatment of
the item are adequately disclosed in the return or a
statement attached to the return.
``(c) Noneconomic Substance Transaction Understatement.--
For purposes of this section--
``(1) In general.--The term `noneconomic substance
transaction understatement' means any amount which would be
an understatement under section 6662A(b)(1) if section 6662A
were applied by taking into account items attributable to
noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.
``(2) Noneconomic substance transaction.--The term
`noneconomic substance transaction' means any transaction
if--
``(A) there is a lack of economic substance (within the
meaning of section 7701(m)(1)) for the transaction giving
rise to the claimed tax benefit or the transaction was not
respected under section 7701(m)(2), or
``(B) the transaction fails to meet the requirements of any
similar rule of law.
``(d) Rules Applicable to Compromise of Penalty.--
``(1) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which this section
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(2) Applicable rules.--The rules of paragraphs (3), (4),
and (5) of section 6707A(d) shall apply for purposes of
paragraph (1).
``(e) Coordination With Other Penalties.--Except as
otherwise provided in this part, the penalty imposed by this
section shall be in addition to any other penalty imposed by
this title.
``(f) Cross References.--
``(1) For coordination of penalty with understatements
under section 6662 and other special rules, see section
6662A(e).
``(2) For reporting of penalty imposed under this section
to the Securities and Exchange Commission, see section
6707A(e).''
(b) Clerical Amendment.--The table of sections for part II
of subchapter A of chapter 68 is amended by inserting after
the item relating to section 6662A the following new item:
``Sec. 6662B. Penalty for understatements attributable to transactions
lacking economic substance, etc.''
(c) Effective Date.--The amendments made by this section
shall apply to transactions entered into after February 13,
2003.
SEC. 9505. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT
PENALTY FOR NONREPORTABLE TRANSACTIONS.
(a) Substantial Understatement of Corporations.--Section
6662(d)(1)(B) (relating to special rule for corporations) is
amended to read as follows:
``(B) Special rule for corporations.--In the case of a
corporation other than an S corporation or a personal holding
company (as defined in section 542), there is a substantial
understatement of income tax for any taxable year if the
amount of the understatement for the taxable year exceeds the
lesser of--
``(i) 10 percent of the tax required to be shown on the
return for the taxable year (or, if greater, $10,000), or
``(ii) $10,000,000.''
(b) Reduction for Understatement of Taxpayer Due to
Position of Taxpayer or Disclosed Item.--
(1) In general.--Section 6662(d)(2)(B)(i) (relating to
substantial authority) is amended to read as follows:
``(i) the tax treatment of any item by the taxpayer if the
taxpayer had reasonable belief that the tax treatment was
more likely than not the proper treatment, or''.
(2) Conforming amendment.--Section 6662(d) is amended by
adding at the end the following new paragraph:
``(3) Secretarial list.--For purposes of this subsection,
section 6664(d)(2), and section 6694(a)(1), the Secretary may
prescribe a list of positions for which the Secretary
believes there is not substantial authority or there is no
reasonable belief that the tax treatment is more likely than
not the proper tax treatment. Such list (and any revisions
thereof) shall be published in the Federal Register or the
Internal Revenue Bulletin.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 9506. TAX SHELTER EXCEPTION TO CONFIDENTIALITY
PRIVILEGES RELATING TO TAXPAYER COMMUNICATIONS.
(a) In General.--Section 7525(b) (relating to section not
to apply to communications regarding corporate tax shelters)
is amended to read as follows:
``(b) Section not to Apply to Communications Regarding Tax
Shelters.--The privilege under subsection (a) shall not apply
to any written communication which is--
``(1) between a federally authorized tax practitioner and--
``(A) any person,
``(B) any director, officer, employee, agent, or
representative of the person, or
``(C) any other person holding a capital or profits
interest in the person, and
``(2) in connection with the promotion of the direct or
indirect participation of the
[[Page H1840]]
person in any tax shelter (as defined in section
1274(b)(3)(C)).''
(b) Effective Date.--The amendment made by this section
shall apply to communications made on or after the date of
the enactment of this Act.
SEC. 9507. DISCLOSURE OF REPORTABLE TRANSACTIONS.
(a) In General.--Section 6111 (relating to registration of
tax shelters) is amended to read as follows:
``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.
``(a) In General.--Each material advisor with respect to
any reportable transaction shall make a return (in such form
as the Secretary may prescribe) setting forth--
``(1) information identifying and describing the
transaction,
``(2) information describing any potential tax benefits
expected to result from the transaction, and
``(3) such other information as the Secretary may
prescribe.
Such return shall be filed not later than the date specified
by the Secretary.
``(b) Definitions.--For purposes of this section--
``(1) Material advisor.--
``(A) In general.--The term `material advisor' means any
person--
``(i) who provides any material aid, assistance, or advice
with respect to organizing, promoting, selling, implementing,
or carrying out any reportable transaction, and
``(ii) who directly or indirectly derives gross income in
excess of the threshold amount for such aid, assistance, or
advice.
``(B) Threshold amount.--For purposes of subparagraph (A),
the threshold amount is--
``(i) $50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons, and
``(ii) $250,000 in any other case.
``(2) Reportable transaction.--The term `reportable
transaction' has the meaning given to such term by section
6707A(c).
``(c) Regulations.--The Secretary may prescribe regulations
which provide--
``(1) that only 1 person shall be required to meet the
requirements of subsection (a) in cases in which 2 or more
persons would otherwise be required to meet such
requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6111. Disclosure of reportable transactions.''
(2)(A) So much of section 6112 as precedes subsection (c)
thereof is amended to read as follows:
``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS
MUST KEEP LISTS OF ADVISEES.
``(a) In General.--Each material advisor (as defined in
section 6111) with respect to any reportable transaction (as
defined in section 6707A(c)) shall maintain, in such manner
as the Secretary may by regulations prescribe, a list--
``(1) identifying each person with respect to whom such
advisor acted as such a material advisor with respect to such
transaction, and
``(2) containing such other information as the Secretary
may by regulations require.
This section shall apply without regard to whether a material
advisor is required to file a return under section 6111 with
respect to such transaction.''
(B) Section 6112 is amended by redesignating subsection (c)
as subsection (b).
(C) Section 6112(b), as redesignated by subparagraph (B),
is amended--
(i) by inserting ``written'' before ``request'' in
paragraph (1)(A), and
(ii) by striking ``shall prescribe'' in paragraph (2) and
inserting ``may prescribe''.
(D) The item relating to section 6112 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6112. Material advisors of reportable transactions must keep
lists of advisees.''
(3)(A) The heading for section 6708 is amended to read as
follows:
``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH
RESPECT TO REPORTABLE TRANSACTIONS. ''
(B) The item relating to section 6708 in the table of
sections for part I of subchapter B of chapter 68 is amended
to read as follows:
``Sec. 6708. Failure to maintain lists of advisees with respect to
reportable transactions.''
(c) Effective Date.--The amendments made by this section
shall apply to transactions with respect to which material
aid, assistance, or advice referred to in section
6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as
added by this section) is provided after the date of the
enactment of this Act.
SEC. 9508. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.
(a) In General.--Section 6707 (relating to failure to
furnish information regarding tax shelters) is amended to
read as follows:
``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING
REPORTABLE TRANSACTIONS.
``(a) In General.--If a person who is required to file a
return under section 6111(a) with respect to any reportable
transaction--
``(1) fails to file such return on or before the date
prescribed therefor, or
``(2) files false or incomplete information with the
Secretary with respect to such transaction,
such person shall pay a penalty with respect to such return
in the amount determined under subsection (b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
penalty imposed under subsection (a) with respect to any
failure shall be $50,000.
``(2) Listed transactions.--The penalty imposed under
subsection (a) with respect to any listed transaction shall
be an amount equal to the greater of--
``(A) $200,000, or
``(B) 50 percent of the gross income derived by such person
with respect to aid, assistance, or advice which is provided
with respect to the reportable transaction before the date
the return including the transaction is filed under section
6111.
Subparagraph (B) shall be applied by substituting `75
percent' for `50 percent' in the case of an intentional
failure or act described in subsection (a).
``(c) Rescission Authority.--The provisions of section
6707A(d) (relating to authority of Commissioner to rescind
penalty) shall apply to any penalty imposed under this
section.
``(d) Reportable and Listed Transactions.--The terms
`reportable transaction' and `listed transaction' have the
respective meanings given to such terms by section
6707A(c).''.
(b) Clerical Amendment.--The item relating to section 6707
in the table of sections for part I of subchapter B of
chapter 68 is amended by striking ``tax shelters'' and
inserting ``reportable transactions''.
(c) Effective Date.--The amendments made by this section
shall apply to returns the due date for which is after the
date of the enactment of this Act.
SEC. 9509. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN
LISTS OF INVESTORS.
(a) In General.--Subsection (a) of section 6708 is amended
to read as follows:
``(a) Imposition of Penalty.--
``(1) In general.--If any person who is required to
maintain a list under section 6112(a) fails to make such list
available upon written request to the Secretary in accordance
with section 6112(b)(1)(A) within 20 business days after the
date of the Secretary's request, such person shall pay a
penalty of $10,000 for each day of such failure after such
20th day.
``(2) Reasonable cause exception.--No penalty shall be
imposed by paragraph (1) with respect to the failure on any
day if such failure is due to reasonable cause.''
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.
SEC. 9510. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT
RELATED TO TAX SHELTERS AND REPORTABLE
TRANSACTIONS.
(a) In General.--Section 7408 (relating to action to enjoin
promoters of abusive tax shelters, etc.) is amended by
redesignating subsection (c) as subsection (d) and by
striking subsections (a) and (b) and inserting the following
new subsections:
``(a) Authority to Seek Injunction.--A civil action in the
name of the United States to enjoin any person from further
engaging in specified conduct may be commenced at the request
of the Secretary. Any action under this section shall be
brought in the district court of the United States for the
district in which such person resides, has his principal
place of business, or has engaged in specified conduct. The
court may exercise its jurisdiction over such action (as
provided in section 7402(a)) separate and apart from any
other action brought by the United States against such
person.
``(b) Adjudication and Decree.--In any action under
subsection (a), if the court finds--
``(1) that the person has engaged in any specified conduct,
and
``(2) that injunctive relief is appropriate to prevent
recurrence of such conduct,
the court may enjoin such person from engaging in such
conduct or in any other activity subject to penalty under
this title.
``(c) Specified Conduct.--For purposes of this section, the
term `specified conduct' means any action, or failure to take
action, subject to penalty under section 6700, 6701, 6707, or
6708.''
(b) Conforming Amendments.--
(1) The heading for section 7408 is amended to read as
follows:
``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO
TAX SHELTERS AND REPORTABLE TRANSACTIONS. ''
(2) The table of sections for subchapter A of chapter 67 is
amended by striking the item relating to section 7408 and
inserting the following new item:
``Sec. 7408. Actions to enjoin specified conduct related to tax
shelters and reportable transactions.''
(c) Effective Date.--The amendment made by this section
shall take effect on the day after the date of the enactment
of this Act.
SEC. 9511. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME
TAX RETURN PREPARER.
(a) Standards Conformed to Taxpayer Standards.--Section
6694(a) (relating to understatements due to unrealistic
positions) is amended--
[[Page H1841]]
(1) by striking ``realistic possibility of being sustained
on its merits'' in paragraph (1) and inserting ``reasonable
belief that the tax treatment in such position was more
likely than not the proper treatment'',
(2) by striking ``or was frivolous'' in paragraph (3) and
inserting ``or there was no reasonable basis for the tax
treatment of such position'', and
(3) by striking ``Unrealistic'' in the heading and
inserting ``Improper''.
(b) Amount of Penalty.--Section 6694 is amended--
(1) by striking ``$250'' in subsection (a) and inserting
``$1,000'', and
(2) by striking ``$1,000'' in subsection (b) and inserting
``$5,000''.
(c) Effective Date.--The amendments made by this section
shall apply to documents prepared after the date of the
enactment of this Act.
SEC. 9512. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN
FINANCIAL ACCOUNTS.
(a) In General.--Section 5321(a)(5) of title 31, United
States Code, is amended to read as follows:
``(5) Foreign financial agency transaction violation.--
``(A) Penalty authorized.--The Secretary of the Treasury
may impose a civil money penalty on any person who violates,
or causes any violation of, any provision of section 5314.
``(B) Amount of penalty.--
``(i) In general.--Except as provided in subparagraph (C),
the amount of any civil penalty imposed under subparagraph
(A) shall not exceed $5,000.
``(ii) Reasonable cause exception.--No penalty shall be
imposed under subparagraph (A) with respect to any violation
if--
``(I) such violation was due to reasonable cause, and
``(II) the amount of the transaction or the balance in the
account at the time of the transaction was properly reported.
``(C) Willful violations.--In the case of any person
willfully violating, or willfully causing any violation of,
any provision of section 5314--
``(i) the maximum penalty under subparagraph (B)(i) shall
be increased to the greater of--
``(I) $25,000, or
``(II) the amount (not exceeding $100,000) determined under
subparagraph (D), and
``(ii) subparagraph (B)(ii) shall not apply.
``(D) Amount.--The amount determined under this
subparagraph is--
``(i) in the case of a violation involving a transaction,
the amount of the transaction, or
``(ii) in the case of a violation involving a failure to
report the existence of an account or any identifying
information required to be provided with respect to an
account, the balance in the account at the time of the
violation.''
(b) Effective Date.--The amendment made by this section
shall apply to violations occurring after the date of the
enactment of this Act.
SEC. 9513. FRIVOLOUS TAX SUBMISSIONS.
(a) Civil Penalties.--Section 6702 is amended to read as
follows:
``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
``(a) Civil Penalty for Frivolous Tax Returns.--A person
shall pay a penalty of $5,000 if--
``(1) such person files what purports to be a return of a
tax imposed by this title but which--
``(A) does not contain information on which the substantial
correctness of the self-assessment may be judged, or
``(B) contains information that on its face indicates that
the self-assessment is substantially incorrect; and
``(2) the conduct referred to in paragraph (1)--
``(A) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(B) reflects a desire to delay or impede the
administration of Federal tax laws.
``(b) Civil Penalty for Specified Frivolous Submissions.--
``(1) Imposition of penalty.--Except as provided in
paragraph (3), any person who submits a specified frivolous
submission shall pay a penalty of $5,000.
``(2) Specified frivolous submission.--For purposes of this
section--
``(A) Specified frivolous submission.--The term `specified
frivolous submission' means a specified submission if any
portion of such submission--
``(i) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(ii) reflects a desire to delay or impede the
administration of Federal tax laws.
``(B) Specified submission.--The term `specified
submission' means--
``(i) a request for a hearing under--
``(I) section 6320 (relating to notice and opportunity for
hearing upon filing of notice of lien), or
``(II) section 6330 (relating to notice and opportunity for
hearing before levy), and
``(ii) an application under--
``(I) section 6159 (relating to agreements for payment of
tax liability in installments),
``(II) section 7122 (relating to compromises), or
``(III) section 7811 (relating to taxpayer assistance
orders).
``(3) Opportunity to withdraw submission.--If the Secretary
provides a person with notice that a submission is a
specified frivolous submission and such person withdraws such
submission within 30 days after such notice, the penalty
imposed under paragraph (1) shall not apply with respect to
such submission.
``(c) Listing of Frivolous Positions.--The Secretary shall
prescribe (and periodically revise) a list of positions which
the Secretary has identified as being frivolous for purposes
of this subsection. The Secretary shall not include in such
list any position that the Secretary determines meets the
requirement of section 6662(d)(2)(B)(ii)(II).
``(d) Reduction of Penalty.--The Secretary may reduce the
amount of any penalty imposed under this section if the
Secretary determines that such reduction would promote
compliance with and administration of the Federal tax laws.
``(e) Penalties in Addition to Other Penalties.--The
penalties imposed by this section shall be in addition to any
other penalty provided by law.''
(b) Treatment of Frivolous Requests for Hearings Before
Levy.--
(1) Frivolous requests disregarded.--Section 6330 (relating
to notice and opportunity for hearing before levy) is amended
by adding at the end the following new subsection:
``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding
any other provision of this section, if the Secretary
determines that any portion of a request for a hearing under
this section or section 6320 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative or
judicial review.''
(2) Preclusion from raising frivolous issues at hearing.--
Section 6330(c)(4) is amended--
(A) by striking ``(A)'' and inserting ``(A)(i)'';
(B) by striking ``(B)'' and inserting ``(ii)'';
(C) by striking the period at the end of the first sentence
and inserting ``; or''; and
(D) by inserting after subparagraph (A)(ii) (as so
redesignated) the following:
``(B) the issue meets the requirement of clause (i) or (ii)
of section 6702(b)(2)(A).''
(3) Statement of grounds.--Section 6330(b)(1) is amended by
striking ``under subsection (a)(3)(B)'' and inserting ``in
writing under subsection (a)(3)(B) and states the grounds for
the requested hearing''.
(c) Treatment of Frivolous Requests for Hearings Upon
Filing of Notice of Lien.--Section 6320 is amended--
(1) in subsection (b)(1), by striking ``under subsection
(a)(3)(B)'' and inserting ``in writing under subsection
(a)(3)(B) and states the grounds for the requested hearing'',
and
(2) in subsection (c), by striking ``and (e)'' and
inserting ``(e), and (g)''.
(d) Treatment of Frivolous Applications for Offers-In-
Compromise and Installment Agreements.--Section 7122 is
amended by adding at the end the following new subsection:
``(e) Frivolous Submissions, Etc.--Notwithstanding any
other provision of this section, if the Secretary determines
that any portion of an application for an offer-in-compromise
or installment agreement submitted under this section or
section 6159 meets the requirement of clause (i) or (ii) of
section 6702(b)(2)(A), then the Secretary may treat such
portion as if it were never submitted and such portion shall
not be subject to any further administrative or judicial
review.''
(e) Clerical Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by striking the item
relating to section 6702 and inserting the following new
item:
``Sec. 6702. Frivolous tax submissions.''
(f) Effective Date.--The amendments made by this section
shall apply to submissions made and issues raised after the
date on which the Secretary first prescribes a list under
section 6702(c) of the Internal Revenue Code of 1986, as
amended by subsection (a).
SEC. 9514. REGULATION OF INDIVIDUALS PRACTICING BEFORE THE
DEPARTMENT OF TREASURY.
(a) Censure; Imposition of Penalty.--
(1) In general.--Section 330(b) of title 31, United States
Code, is amended--
(A) by inserting ``, or censure,'' after ``Department'',
and
(B) by adding at the end the following new flush sentence:
``The Secretary may impose a monetary penalty on any
representative described in the preceding sentence. If the
representative was acting on behalf of an employer or any
firm or other entity in connection with the conduct giving
rise to such penalty, the Secretary may impose a monetary
penalty on such employer, firm, or entity if it knew, or
reasonably should have known, of such conduct. Such penalty
shall not exceed the gross income derived (or to be derived)
from the conduct giving rise to the penalty and may be in
addition to, or in lieu of, any suspension, disbarment, or
censure.''
(2) Effective date.--The amendments made by this subsection
shall apply to actions taken after the date of the enactment
of this Act.
(b) Tax Shelter Opinions, Etc.--Section 330 of such title
31 is amended by adding at the end the following new
subsection:
``(d) Nothing in this section or in any other provision of
law shall be construed to limit the authority of the
Secretary of the Treasury to impose standards applicable to
the rendering of written advice with respect to any entity,
transaction plan or arrangement,
[[Page H1842]]
or other plan or arrangement, which is of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.''
SEC. 9515. PENALTY ON PROMOTERS OF TAX SHELTERS.
(a) Penalty on Promoting Abusive Tax Shelters.--Section
6700(a) is amended by adding at the end the following new
sentence: ``Notwithstanding the first sentence, if an
activity with respect to which a penalty imposed under this
subsection involves a statement described in paragraph
(2)(A), the amount of the penalty shall be equal to 50
percent of the gross income derived (or to be derived) from
such activity by the person on which the penalty is
imposed.''
(b) Effective Date.--The amendment made by this section
shall apply to activities after the date of the enactment of
this Act.
SEC. 9516. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH
LISTED TRANSACTIONS NOT REPORTED.
(a) In General.--Section 6501(e)(1) (relating to
substantial omission of items for income taxes) is amended by
adding at the end the following new subparagraph:
``(C) Listed transactions.--If a taxpayer fails to include
on any return or statement for any taxable year any
information with respect to a listed transaction (as defined
in section 6707A(c)(2)) which is required under section 6011
to be included with such return or statement, the tax for
such taxable year may be assessed, or a proceeding in court
for collection of such tax may be begun without assessment,
at any time within 6 years after the time the return is
filed. This subparagraph shall not apply to any taxable year
if the time for assessment or beginning the proceeding in
court has expired before the time a transaction is treated as
a listed transaction under section 6011.''
(b) Effective Date.--The amendment made by this section
shall apply to transactions after the date of the enactment
of this Act in taxable years ending after such date.
SEC. 9517. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS
ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND
NONECONOMIC SUBSTANCE TRANSACTIONS.
(a) In General.--Section 163 (relating to deduction for
interest) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the
following new subsection:
``(m) Interest on Unpaid Taxes Attributable to Nondisclosed
Reportable Transactions and Noneconomic Substance
Transactions.--No deduction shall be allowed under this
chapter for any interest paid or accrued under section 6601
on any underpayment of tax which is attributable to--
``(1) the portion of any reportable transaction
understatement (as defined in section 6662A(b)) with respect
to which the requirement of section 6664(d)(2)(A) is not met,
or
``(2) any noneconomic substance transaction understatement
(as defined in section 6662B(c)).''
(b) Effective Date.--The amendments made by this section
shall apply to transactions after the date of the enactment
of this Act in taxable years ending after such date.
Subtitle G--Other Provisions
SEC. 9601. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN
LOSSES.
(a) In General.--Section 362 (relating to basis to
corporations) is amended by adding at the end the following
new subsection:
``(e) Limitations on Built-In Losses.--
``(1) Limitation on importation of built-in losses.--
``(A) In general.--If in any transaction described in
subsection (a) or (b) there would (but for this subsection)
be an importation of a net built-in loss, the basis of each
property described in subparagraph (B) which is acquired in
such transaction shall (notwithstanding subsections (a) and
(b)) be its fair market value immediately after such
transaction.
``(B) Property described.--For purposes of subparagraph
(A), property is described in this paragraph if--
``(i) gain or loss with respect to such property is not
subject to tax under this subtitle in the hands of the
transferor immediately before the transfer, and
``(ii) gain or loss with respect to such property is
subject to such tax in the hands of the transferee
immediately after such transfer.
In any case in which the transferor is a partnership, the
preceding sentence shall be applied by treating each partner
in such partnership as holding such partner's proportionate
share of the property of such partnership.
``(C) Importation of net built-in loss.--For purposes of
subparagraph (A), there is an importation of a net built-in
loss in a transaction if the transferee's aggregate adjusted
bases of property described in subparagraph (B) which is
transferred in such transaction would (but for this
paragraph) exceed the fair market value of such property
immediately after such transaction.''
``(2) Limitation on transfer of built-in losses in section
351 transactions.--
``(A) In general.--If--
``(i) property is transferred in any transaction which is
described in subsection (a) and which is not described in
paragraph (1) of this subsection, and
``(ii) the transferee's aggregate adjusted bases of the
property so transferred would (but for this paragraph) exceed
the fair market value of such property immediately after such
transaction,
then, notwithstanding subsection (a), the transferee's
aggregate adjusted bases of the property so transferred shall
not exceed the fair market value of such property immediately
after such transaction.
``(B) Allocation of basis reduction.--The aggregate
reduction in basis by reason of subparagraph (A) shall be
allocated among the property so transferred in proportion to
their respective built-in losses immediately before the
transaction.
``(C) Exception for transfers within affiliated group.--
Subparagraph (A) shall not apply to any transaction if the
transferor owns stock in the transferee meeting the
requirements of section 1504(a)(2). In the case of property
to which subparagraph (A) does not apply by reason of the
preceding sentence, the transferor's basis in the stock
received for such property shall not exceed its fair market
value immediately after the transfer.''
(b) Comparable Treatment Where Liquidation.--Paragraph (1)
of section 334(b) (relating to liquidation of subsidiary) is
amended to read as follows:
``(1) In general.--If property is received by a corporate
distributee in a distribution in a complete liquidation to
which section 332 applies (or in a transfer described in
section 337(b)(1)), the basis of such property in the hands
of such distributee shall be the same as it would be in the
hands of the transferor; except that the basis of such
property in the hands of such distributee shall be the fair
market value of the property at the time of the
distribution--
``(A) in any case in which gain or loss is recognized by
the liquidating corporation with respect to such property, or
``(B) in any case in which the liquidating corporation is a
foreign corporation, the corporate distributee is a domestic
corporation, and the corporate distributee's aggregate
adjusted bases of property described in section 362(e)(1)(B)
which is distributed in such liquidation would (but for this
subparagraph) exceed the fair market value of such property
immediately after such liquidation.''
(c) Effective Date.--The amendments made by this section
shall apply to transactions after the date of the enactment
of this Act.
SEC. 9602. DISALLOWANCE OF CERTAIN PARTNERSHIP LOSS
TRANSFERS.
(a) Treatment of Contributed Property With Built-In Loss.--
Paragraph (1) of section 704(c) is amended by striking
``and'' at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting ``,
and'', and by adding at the end the following:
``(C) if any property so contributed has a built-in loss--
``(i) such built-in loss shall be taken into account only
in determining the amount of items allocated to the
contributing partner, and
``(ii) except as provided in regulations, in determining
the amount of items allocated to other partners, the basis of
the contributed property in the hands of the partnership
shall be treated as being equal to its fair market value
immediately after the contribution.
For purposes of subparagraph (C), the term `built-in loss'
means the excess of the adjusted basis of the property
(determined without regard to subparagraph (C)(ii)) over its
fair market value immediately after the contribution.''
(b) Adjustment to Basis of Partnership Property on Transfer
of Partnership Interest If There Is Substantial Built-In
Loss.--
(1) Adjustment required.--Subsection (a) of section 743
(relating to optional adjustment to basis of partnership
property) is amended by inserting before the period ``or
unless the partnership has a substantial built-in loss
immediately after such transfer''.
(2) Adjustment.--Subsection (b) of section 743 is amended
by inserting ``or with respect to which there is a
substantial built-in loss immediately after such transfer''
after ``section 754 is in effect''.
(3) Substantial built-in loss.--Section 743 is amended by
adding at the end the following new subsection:
``(d) Substantial Built-In Loss.--
``(1) In general.--For purposes of this section, a
partnership has a substantial built-in loss with respect to a
transfer of an interest in a partnership if the transferee
partner's proportionate share of the adjusted basis of the
partnership property exceeds by more than $250,000 the basis
of such partner's interest in the partnership.
``(2) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out the purposes
of paragraph (1) and section 734(d), including regulations
aggregating related partnerships and disregarding property
acquired by the partnership in an attempt to avoid such
purposes.''
(4) Clerical amendments.--
(A) The section heading for section 743 is amended to read
as follows:
``SEC. 743. ADJUSTMENT TO BASIS OF PARTNERSHIP PROPERTY WHERE
SECTION 754 ELECTION OR SUBSTANTIAL BUILT-IN
LOSS. ''
(B) The table of sections for subpart C of part II of
subchapter K of chapter 1 is amended by striking the item
relating to section 743 and inserting the following new item:
[[Page H1843]]
``Sec. 743. Adjustment to basis of partnership property where section
754 election or substantial built-in loss.''
(c) Adjustment to Basis of Undistributed Partnership
Property If There Is Substantial Basis Reduction.--
(1) Adjustment required.--Subsection (a) of section 734
(relating to optional adjustment to basis of undistributed
partnership property) is amended by inserting before the
period ``or unless there is a substantial basis reduction''.
(2) Adjustment.--Subsection (b) of section 734 is amended
by inserting ``or unless there is a substantial basis
reduction'' after ``section 754 is in effect''.
(3) Substantial basis reduction.--Section 734 is amended by
adding at the end the following new subsection:
``(d) Substantial Basis Reduction.--
``(1) In general.--For purposes of this section, there is a
substantial basis reduction with respect to a distribution if
the sum of the amounts described in subparagraphs (A) and (B)
of subsection (b)(2) exceeds $250,000.
``(2) Regulations.--For regulations to carry out this
subsection, see section 743(d)(2).''
(4) Clerical amendments.--
(A) The section heading for section 734 is amended to read
as follows:
``SEC. 734. ADJUSTMENT TO BASIS OF UNDISTRIBUTED PARTNERSHIP
PROPERTY WHERE SECTION 754 ELECTION OR
SUBSTANTIAL BASIS REDUCTION. ''
(B) The table of sections for subpart B of part II of
subchapter K of chapter 1 is amended by striking the item
relating to section 734 and inserting the following new item:
``Sec. 734. Adjustment to basis of undistributed partnership property
where section 754 election or substantial basis
reduction.''
(d) Effective Dates.--
(1) Subsection (a).--The amendment made by subsection (a)
shall apply to contributions made after the date of the
enactment of this Act.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to transfers after the date of the enactment of
this Act.
(3) Subsection (c).--The amendments made by subsection (c)
shall apply to distributions after the date of the enactment
of this Act.
SEC. 9603. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK
HELD BY PARTNERSHIP IN CORPORATE PARTNER.
(a) In General.--Section 755 is amended by adding at the
end the following new subsection:
``(c) No Allocation of Basis Decrease to Stock of Corporate
Partner.--In making an allocation under subsection (a) of any
decrease in the adjusted basis of partnership property under
section 734(b)--
``(1) no allocation may be made to stock in a corporation
which is a partner in the partnership, and
``(2) any amount not allocable to stock by reason of
paragraph (1) shall be allocated under subsection (a) to
other partnership property.
Gain shall be recognized to the partnership to the extent
that the amount required to be allocated under paragraph (2)
to other partnership property exceeds the aggregate adjusted
basis of such other property immediately before the
allocation required by paragraph (2).''
(b) Effective Date.--The amendment made by this section
shall apply to distributions after the date of the enactment
of this Act.
SEC. 9604. REPEAL OF SPECIAL RULES FOR FASITS.
(a) In General.--Part V of subchapter M of chapter 1
(relating to financial asset securitization investment
trusts) is hereby repealed.
(b) Conforming Amendments.--
(1) Paragraph (6) of section 56(g) is amended by striking
``REMIC, or FASIT'' and inserting ``or REMIC''.
(2) Clause (ii) of section 382(l)(4)(B) is amended by
striking ``a REMIC to which part IV of subchapter M applies,
or a FASIT to which part V of subchapter M applies,'' and
inserting ``or a REMIC to which part IV of subchapter M
applies,''.
(3) Paragraph (1) of section 582(c) is amended by striking
``, and any regular interest in a FASIT,''.
(4) Subparagraph (E) of section 856(c)(5) is amended by
striking the last sentence.
(5) Paragraph (5) of section 860G(a) is amended by adding
``and'' at the end of subparagraph (B), by striking ``, and''
at the end of subparagraph (C) and inserting a period, and by
striking subparagraph (D).
(6) Subparagraph (C) of section 1202(e)(4) is amended by
striking ``REMIC, or FASIT'' and inserting ``or REMIC''.
(7) Subparagraph (C) of section 7701(a)(19) is amended by
adding ``and'' at the end of clause (ix), by striking ``,
and'' at the end of clause (x) and inserting a period, and by
striking clause (xi).
(8) The table of parts for subchapter M of chapter 1 is
amended by striking the item relating to part V.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2003.
(2) Exception for existing FASITs.--
(A) In general.--Paragraph (1) shall not apply to any FASIT
in existence on the date of the enactment of this Act.
(B) Transfer of additional assets not permitted.--Except as
provided in regulations prescribed by the Secretary of the
Treasury or the Secretary's delegate, subparagraph (A) shall
cease to apply as of the earliest date after the date of the
enactment of this Act that any property is transferred to the
FASIT.
SEC. 9605. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON
CONVERTIBLE DEBT.
(a) In General.--Paragraph (2) of section 163(l) is amended
by striking ``or a related party'' and inserting ``or equity
held by the issuer (or any related party) in any other
person''.
(b) Conforming Amendment.--Paragraph (3) of section 163(l)
is amended by striking ``or a related party'' in the material
preceding subparagraph (A) and inserting ``or any other
person''.
(c) Effective Date.--The amendments made by this section
shall apply to debt instruments issued after the date of the
enactment of this Act.
SEC. 9606. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER
SECTION 269.
(a) In General.--Subsection (a) of section 269 (relating to
acquisitions made to evade or avoid income tax) is amended to
read as follows:
``(a) In General.--If--
``(1)(A) any person acquires stock in a corporation, or
``(B) any corporation acquires, directly or indirectly,
property of another corporation and the basis of such
property, in the hands of the acquiring corporation, is
determined by reference to the basis in the hands of the
transferor corporation, and
``(2) the principal purpose for which such acquisition was
made is evasion or avoidance of Federal income tax by
securing the benefit of a deduction, credit, or other
allowance,
then the Secretary may disallow such deduction, credit, or
other allowance.''
(b) Effective Date.--The amendment made by this section
shall apply to stock and property acquired after February 13,
2003.
SEC. 9607. MODIFICATIONS OF CERTAIN RULES RELATING TO
CONTROLLED FOREIGN CORPORATIONS.
(a) Limitation on Exception From PFIC Rules for United
States Shareholders of Controlled Foreign Corporations.--
Paragraph (2) of section 1297(e) (relating to passive
investment company) is amended by adding at the end the
following flush sentence: ``Such term shall not include any
period if there is only a remote likelihood of an inclusion
in gross income under section 951(a)(1)(A)(i) of subpart F
income of such corporation for such period.''
(b) Determination of Pro Rata Share of Subpart F Income.--
Subsection (a) of section 951 (relating to amounts included
in gross income of United States shareholders) is amended by
adding at the end the following new paragraph:
``(4) Special rules for determining pro rata share of
subpart f income.--The pro rata share under paragraph (2)
shall be determined by disregarding--
``(A) any rights lacking substantial economic effect, and
``(B) stock owned by a shareholder who is a tax-indifferent
party (as defined in section 7701(m)(3)) if the amount which
would (but for this paragraph) be allocated to such
shareholder does not reflect such shareholder's economic
share of the earnings and profits of the corporation.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years on controlled foreign
corporation beginning after February 13, 2003, and to taxable
years of United States shareholder in which or with which
such taxable years of controlled foreign corporations end.
SEC. 9608. BASIS FOR DETERMINING LOSS ALWAYS REDUCED BY
NONTAXED PORTION OF DIVIDENDS.
(a) In General.--Section 1059 (relating to corporate
shareholder's basis in stock reduced by nontaxed portion of
extraordinary dividends) is amended by redesignating
subsection (g) as subsection (h) and by inserting after
subsection (f) the following new subsection:
``(g) Basis for Determining Loss Always Reduced by Nontaxed
Portion of Dividends.--The basis of stock in a corporation
(for purposes of determining loss) shall be reduced by the
nontaxed portion of any dividend received with respect to
such stock if this section does not otherwise apply to such
dividend.''
(b) Effective Date.--The amendment made by this section
shall apply to dividends received after the date of the
enactment of this Act.
SEC. 9609. AFFIRMATION OF CONSOLIDATED RETURN REGULATION
AUTHORITY.
(a) In General.--Section 1502 (relating to consolidated
return regulations) is amended by adding at the end the
following new sentence: ``In prescribing such regulations,
the Secretary may prescribe rules applicable to corporations
filing consolidated returns under section 1501 that are
different from other provisions of this title that would
apply if such corporations filed separate returns.''
(b) Result not Overturned.--Notwithstanding subsection (a),
the Internal Revenue Code of 1986 shall be construed by
treating Treasury regulation Sec. 1.1502-20(c)(1)(iii) (as
in effect on January 1, 2001) as being inapplicable to the
type of factual situation in 255 F.3d 1357 (Fed. Cir. 2001).
[[Page H1844]]
(c) Effective Date.--The provisions of this section shall
apply to taxable years beginning before, on, or after the
date of the enactment of this Act.
SEC. 9610. EXTENSION OF CUSTOMS USER FEES.
Section 13031(j)(3) of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended
by striking ``March 1, 2005'' and inserting ``March 31,
2010''.
Subtitle H--Prevention of Corporate Expatriation to Avoid United States
Income Tax
SEC. 9701. PREVENTION OF CORPORATE EXPATRIATION TO AVOID
UNITED STATES INCOME TAX.
(a) In General.--Paragraph (4) of section 7701(a) (defining
domestic) is amended to read as follows:
``(4) Domestic.--
``(A) In general.--Except as provided in subparagraph (B),
the term `domestic' when applied to a corporation or
partnership means created or organized in the United States
or under the law of the United States or of any State unless,
in the case of a partnership, the Secretary provides
otherwise by regulations.
``(B) Certain corporations treated as domestic.--
``(i) In general.--The acquiring corporation in a corporate
expatriation transaction shall be treated as a domestic
corporation.
``(ii) Corporate expatriation transaction.--For purposes of
this subparagraph, the term `corporate expatriation
transaction' means any transaction if--
``(I) a nominally foreign corporation (referred to in this
subparagraph as the `acquiring corporation') acquires, as a
result of such transaction, directly or indirectly
substantially all of the properties held directly or
indirectly by a domestic corporation, and
``(II) immediately after the transaction, more than 80
percent of the stock (by vote or value) of the acquiring
corporation is held by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation.
``(iii) Lower stock ownership requirement in certain
cases.--Subclause (II) of clause (ii) shall be applied by
substituting `50 percent' for `80 percent' with respect to
any nominally foreign corporation if--
``(I) such corporation does not have substantial business
activities (when compared to the total business activities of
the expanded affiliated group) in the foreign country in
which or under the law of which the corporation is created or
organized, and
``(II) the stock of the corporation is publicly traded and
the principal market for the public trading of such stock is
in the United States.
``(iv) Partnership transactions.--The term `corporate
expatriation transaction' includes any transaction if--
``(I) a nominally foreign corporation (referred to in this
subparagraph as the `acquiring corporation') acquires, as a
result of such transaction, directly or indirectly properties
constituting a trade or business of a domestic partnership,
``(II) immediately after the transaction, more than 80
percent of the stock (by vote or value) of the acquiring
corporation is held by former partners of the domestic
partnership or related foreign partnerships (determined
without regard to stock of the acquiring corporation which is
sold in a public offering related to the transaction), and
``(III) the acquiring corporation meets the requirements of
subclauses (I) and (II) of clause (iii).
``(v) Special rules.--For purposes of this subparagraph--
``(I) a series of related transactions shall be treated as
1 transaction, and
``(II) stock held by members of the expanded affiliated
group which includes the acquiring corporation shall not be
taken into account in determining ownership.
``(vi) Other definitions.--For purposes of this
subparagraph--
``(I) Nominally foreign corporation.--The term `nominally
foreign corporation' means any corporation which would (but
for this subparagraph) be treated as a foreign corporation.
``(II) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group (as defined in
section 1504(a) without regard to section 1504(b)).
``(III) Related foreign partnership.--A foreign partnership
is related to a domestic partnership if they are under common
control (within the meaning of section 482), or they shared
the same trademark or tradename.''
(b) Effective Dates.--
(1) In general.--The amendment made by this section shall
apply to corporate expatriation transactions completed after
September 11, 2001.
(2) Special rule.--The amendment made by this section shall
also apply to corporate expatriation transactions completed
on or before September 11, 2001, but only with respect to
taxable years of the acquiring corporation beginning after
December 31, 2003.
Mr. FROST. Mr. Speaker, I urge my Members to vote ``no'' on the
previous question, and I yield back the balance of my time.
Mr. DREIER. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, I rise in strong support of this rule. We have looked
into the history of rules that allow for consideration of
transportation legislation. And going back to the 102nd Congress we
found that 12 amendments were made in order. That was consideration of
the ISTEA legislation. The TEA 21 legislation had six amendments made
in order. And this measure will allow for 23 amendments. And I believe
it will give an opportunity for full consideration. Actually, it is
probably 23 more amendments than the distinguished chairman of the
committee, the gentleman from Alaska (Mr. Young), would have preferred
because he is so proud of his work product; but we are going to allow
Members the opportunity to have the chance to work their will on this
very important measure.
If I had my way, the Federal Government would not be involved in
these kinds of transportation decisions. In fact, I think that the
notion of being able to completely turn back to the States the revenues
that come into the trust fund and allowing States to make these
decisions would be in many ways the wisest thing. But I have to face
reality. And reality is that the Federal Government is involved in the
issue of transportation. I believe for that reason we need to do it in
the most responsible way.
This measure authorizes in excess of a quarter of a trillion dollars.
A quarter of a trillion dollars. And I believe that as we look at the
very important pressing needs out there, this is a level of funding
that can allow us to make sure that we do improve our infrastructure.
We know that our infrastructure includes more than highways; it
includes a wide range of other areas which have to do with
transportation. And when we think about the ability of the United
States of America to compete in this global economy, it is important
for goods and services to be able to move around this country. It is
important for U.S. manufacturers, for workers in this country to be
able to get their goods to our Nation's ports so that they can, in
fact, move into these new markets which this administration, and many
of the rest of us, is working to pry open through new bilateral as well
as multilateral trade agreements so that we can get into those markets.
And that is why I believe this is a very, very important measure for
all of us. For our security, which is an important aspect of this
measure, it is important that we improve our infrastructure here.
Let me say that when I think about that issue, I do have, as a
Californian, a particular concern. My State is, in fact, the gateway to
the Pacific Rim, Asia, Latin America. And a tremendous percentage of
the goods that come to and from this country come through the ports of
Long Beach and Los Angeles, as I said in my opening remarks.
And we have a very important issue that needs to be addressed in
Southern California, the extension of the Alameda Corridor East, which
is an issue that the gentleman from Minnesota (Mr. Oberstar) chose to
address when he was testifying before the Committee on Rules as an
important one.
With these two ports, Los Angeles and Long Beach, it is important now
that we have the Alameda Corridor project that takes goods to downtown
Los Angeles and brings goods into that Los Angeles area to get to the
ports for export. We have to realize that there are areas to the east
of Los Angeles that are impacted tremendously because of this new
trade.
We have to realize that this also deals very closely with the issue
of safety and making sure that in the area that I represent in the
Inland Empire, east of downtown Los Angeles, that our emergency
vehicles, ambulances, fire, police, that they are able to move as
easily as possible throughout the area.
The Alameda Corridor East project is something that will be very,
very greatly benefited by this legislation. And I think it is important
that we proceed with that.
There are a wide range of other very important projects which will,
as has been pointed out by many Members, create jobs to see this
already strong and growing economy grow even stronger.
So I hope that my colleagues will join in a bipartisan way to
agreeing to the previous question, making sure that we move ahead with
this legislation and pass this measure with a strong bipartisan vote.
[[Page H1845]]
Mr. Speaker, I yield back the balance of my time, and move the
previous question on the resolution.
The SPEAKER pro tempore. The question is on ordering the previous
question.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. FROST. Mr. Speaker, I object to the vote on the ground that the
quorum is not present and make a point of order that a quorum is not
present.
The SPEAKER pro tempore. Evidently a quorum is not present.
The Sergeant at Arms will notify absent Members.
Pursuant to clause 9 of rule XX, the Chair will reduce to 5 minutes
the minimum time for electronic voting, if ordered, on the question of
adopting the resolution.
The vote was taken by electronic device, and there were--yeas 229,
nays 194, not voting 10, as follows:
[Roll No. 105]
YEAS--229
Aderholt
Akin
Andrews
Bachus
Baker
Ballenger
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bereuter
Biggert
Bilirakis
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Brady (TX)
Brown (SC)
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Capuano
Carter
Chabot
Chocola
Coble
Cole
Collins
Costello
Cox
Crane
Crenshaw
Crowley
Cubin
Culberson
Cunningham
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeFazio
Delahunt
DeLay
DeMint
Diaz-Balart, L.
Diaz-Balart, M.
Doolittle
Dreier
Duncan
Dunn
Ehlers
Emerson
English
Everett
Feeney
Ferguson
Flake
Foley
Forbes
Fossella
Franks (AZ)
Frelinghuysen
Garrett (NJ)
Gerlach
Gilchrest
Gillmor
Gingrey
Goodlatte
Goss
Granger
Graves
Green (WI)
Greenwood
Gutierrez
Gutknecht
Hall
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hobson
Hoeffel
Hoekstra
Holden
Hostettler
Houghton
Hunter
Hyde
Isakson
Issa
Istook
Jenkins
Johnson (CT)
Johnson (IL)
Johnson, Sam
Keller
Kelly
Kennedy (MN)
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lucas (OK)
Manzullo
McCotter
McCrery
McHugh
McInnis
McKeon
Mica
Miller (FL)
Miller (MI)
Miller, Gary
Moran (KS)
Murphy
Musgrave
Myrick
Nadler
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Pascrell
Paul
Pearce
Pence
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Platts
Pombo
Porter
Portman
Pryce (OH)
Putnam
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Royce
Ryan (WI)
Ryun (KS)
Saxton
Schrock
Sensenbrenner
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (MI)
Smith (NJ)
Smith (TX)
Souder
Stearns
Stenholm
Sullivan
Sweeney
Taylor (NC)
Terry
Thomas
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Upton
Vitter
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (AK)
Young (FL)
NAYS--194
Abercrombie
Ackerman
Alexander
Allen
Baca
Baird
Baldwin
Ballance
Becerra
Bell
Berkley
Berman
Berry
Bishop (GA)
Bishop (NY)
Blumenauer
Boswell
Boucher
Boyd
Brady (PA)
Brown (OH)
Brown, Corrine
Capps
Cardin
Cardoza
Carson (IN)
Carson (OK)
Case
Castle
Chandler
Clay
Clyburn
Conyers
Cooper
Cramer
Cummings
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (TN)
DeGette
DeLauro
Deutsch
Dicks
Dingell
Doggett
Dooley (CA)
Doyle
Edwards
Emanuel
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Ford
Frank (MA)
Frost
Gallegly
Gonzalez
Goode
Gordon
Green (TX)
Grijalva
Harman
Hastings (FL)
Hill
Hinchey
Hinojosa
Holt
Hooley (OR)
Hoyer
Inslee
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson, E. B.
Jones (NC)
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kind
Kleczka
Kucinich
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lofgren
Lowey
Lucas (KY)
Lynch
Majette
Maloney
Markey
Marshall
Matheson
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McIntyre
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Michaud
Millender-McDonald
Miller (NC)
Miller, George
Mollohan
Moore
Murtha
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pastor
Payne
Pelosi
Pomeroy
Price (NC)
Rahall
Rangel
Reyes
Rodriguez
Ross
Rothman
Roybal-Allard
Ruppersberger
Rush
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Sandlin
Schakowsky
Schiff
Scott (GA)
Scott (VA)
Serrano
Sherman
Skelton
Slaughter
Smith (WA)
Snyder
Solis
Spratt
Stark
Strickland
Stupak
Tancredo
Tanner
Tauscher
Taylor (MS)
Thompson (CA)
Thompson (MS)
Tierney
Towns
Turner (TX)
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Waters
Watson
Watt
Waxman
Weiner
Wexler
Woolsey
Wu
Wynn
NOT VOTING--10
Bradley (NH)
Brown-Waite, Ginny
Gephardt
Gibbons
Honda
Hulshof
Moran (VA)
Quinn
Sessions
Tauzin
{time} 1417
Messrs. HILL, KILDEE, HASTINGS of Florida, CASTLE, Mrs. NAPOLITANO,
Ms. KILPATRICK, Mr. JONES of North Carolina and Mr. WEINER changed
their vote from ``yea'' to ``nay.''
Messrs. CROWLEY, CAPUANO, HOEFFEL, WALSH and PASCRELL changed their
vote from ``nay'' to ``yea.''
So the previous question was ordered.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
Stated against:
Mr. HONDA. Mr. Speaker, on rollcall No. 105, had I been present, I
would have voted ``nay.''
The SPEAKER pro tempore (Mr. LaHood). The question is on the
resolution.
The resolution was agreed to.
A motion to reconsider was laid on the table.
____________________