[Congressional Record (Bound Edition), Volume 150 (2004), Part 5]
[House]
[Pages 6349-6396]
[From the U.S. Government Publishing Office, www.gpo.gov]




             TRANSPORTATION EQUITY ACT: A LEGACY FOR USERS

  The SPEAKER pro tempore (Mr. Shaw). Pursuant to House Resolution 593 
and rule XVIII, the Chair declares the House in the Committee of the 
Whole House on the State of the Union for the further consideration of 
the bill, H.R. 3550.

                              {time}  1033


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the 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, 
with Mr. Nethercutt (Chairman pro tempore) in the chair.
  The Clerk read the title of the bill.
  The CHAIRMAN pro tempore. When the Committee of the Whole rose 
earlier today, a request for a recorded vote on amendment No. 23 by the 
gentleman from Georgia. (Mr. Isakson) had been postponed.
  Pursuant to the order of the House of today, it is now in order for a 
period of final debate on the bill. The gentleman from Alaska (Mr. 
Young) and the gentleman from Minnesota (Mr. Oberstar) each will 
control 5 minutes.
  The Chair recognizes the gentleman from Alaska (Mr. Young).
  Mr. YOUNG of Alaska. Mr. Chairman, I yield myself such time as I may 
consume.
  I hope everybody that is standing around will listen for a few 
moments as a matter of courtesy, because I have to refer back to one of 
the former speakers from New Jersey who said we had plenty of time on 
this bill, and we should have done better. I can tell my colleagues, we 
have done everything we could possibly do, because we had to really 
write three different bills, which is very difficult to do, because the 
numbers kept changing and kept floating. But every time we had to 
change, the staffs on both sides, on this side and that side, majority 
and minority, had to go back and rewrite most of the legislation each 
time.
  So at this time I would like to acknowledge not just the work of the 
gentleman from Minnesota (Mr. Oberstar) and the gentleman from Illinois 
(Mr. Lipinski) and the gentleman from Wisconsin (Mr. Petri), but those 
who really did the work: Levon Boyagian, Graham Hill, Jim Tyman, Joyce 
Rose, Mike Lamm, Sharon Barkeloo, Melissa Theriault, and Ryan Young. He 
is not my son, either; he is no relation.
  Also, Debbie Gephardt, not the daughter of the gentleman from 
Missouri (Mr. Gephardt), either; Patrick Mullane on the gentleman from 
Wisconsin's (Mr. Petri) staff. They were the real behind-the-
organization workers.
  Also my chief of staff, Lloyd Jones; Liz Megginson; Charlie Ziegler; 
Mark Zachares; and Fraser Verrusio, Debbie Callis and John Bressler.
  I would also like to thank the minority staff. I can tell my 
colleagues with sincerity that the minority staff, because the majority 
staff would come to me and say, the minority staff is not working with 
us; and the minority would say the majority staff is not working with 
us but, in the long run, we all got together and solved, I think, a lot 
of very serious, contentious problems and philosophies and where this 
bill was headed.
  I also want to thank David Heymsfeld, Ward McCarrager, Clyde Woodall, 
Ken House, Katherine Donnelly, and Art Chan. On the staff of the 
gentleman from Illinois (Mr. Lipinski), Jason Tai.
  There are many others, and would I like to thank all of the members 
of this committee that worked with me and have stood by me; and those 
that object to provisions in this bill, they have my assurance that I 
am going to try to make sure that we solve those problems in 
conference. I have been one that does not weaken very easily when it 
comes to working with the other body. And if we stand shoulder to 
shoulder, I think we can solve those problems that have been brought to 
the floor. We hope to do so. I am confident we can.
  Again, I am extremely grateful for those who put all the time in, 4 
o'clock in the morning, 5 o'clock in the morning, and back here, like 
today, at 9 o'clock in the morning. This is a large legislative 
package, and we could not have done it without the hard work and 
dedication of professional people, I want to stress that, professional 
people; and for that, I extend my sincerest thanks.
  Mr. Chairman, I reserve the balance of my time.
  Mr. OBERSTAR. Mr. Chairman, I yield myself 1 minute to join with the 
chairman in complimenting the staff on both sides and expressing deep 
gratitude. As a former staff member myself, I am well sensitive to the 
long hours that staff put in.
  On our side, Davis Heymsfeld, Ward McCarrager, Kathie Donnelly, Clyde 
Woodle, Ken House, Art Chan, John Upchurch, Eric Van Scandle, and Jason 
Tai, all have worked those long hours the chairman talked about. While 
we were recharging our batteries, they were running theirs sometimes on 
practically empty. But we also must express our appreciation to the 
legislative counsels from the House Legislative Counsel's Office who 
have provided such skilled draftsmanship for both sides, to David 
Mendelsohn, Curt Haensel, and Rosemary Gallagher.
  Mr. Chairman, I reserve the balance of my time.
  Mr. YOUNG of Alaska. Mr. Chairman, I yield 1 minute to the gentleman 
from Wisconsin (Mr. Petri), the chairman of the subcommittee, who has 
done an outstanding job traveling across this country explaining our 
bill.
  Mr. PETRI. Mr. Chairman, I would just like to concur in the 
commendation that our chairman extended to the working staff on both 
sides of the aisle, and to say to my colleagues that this is a work in 
progress.
  This is an important milestone, but this is not the end of the 
process by any means. We will be working on this and voting on it over 
the coming months, and then we will be back under the terms of this 
bill in about 18 months to readdress the needs of our Nation in the 
transportation area.
  So this is not a one-time snapshot that is set. This is a work in 
progress; and I hope that, as we continue with this work in progress, 
we will work together to meet the transportation needs of our country, 
which are enormous.
  Mr. OBERSTAR. Mr. Chairman, I yield 1 minute to the distinguished 
gentleman from Oregon (Mr. Blumenauer).
  Mr. BLUMENAUER. Mr. Chairman, while we are decompressing for a moment 
and in a congratulatory mode, I would add my congratulations as well, 
but I would have just one little footnote.
  Before we are through today, there will be an opportunity for Members 
of this Chamber to make a vote towards the level that was crafted by 
our distinguished chairman and ranking member. We are not going to get 
the $375 billion yet; some day we will, but we will have a motion by 
the gentleman from Tennessee (Mr. Davis) that will permit us to at 
least vote on the $318 billion that was approved by the other body. It 
has no new user fees or taxes on gas; it is fully paid for, and it 
includes money that Americans are already paying for transportation.
  I sincerely hope that we will be able to have an ``aye'' vote for 
this motion to recommit to keep faith with the broadest coalition that 
we have seen supporting American transportation, allow not just an 
empty gesture, but a House standing up for the future of America's 
communities.

[[Page 6350]]


  Mr. YOUNG of Alaska. Mr. Chairman, I reserve the balance of my time.
  Mr. OBERSTAR. Mr. Chairman, I yield 1 minute to the gentleman from 
Illinois (Mr. Lipinski), the ranking member of the Subcommittee on 
Surface Transportation.
  Mr. LIPINSKI. Mr. Chairman, I want to take this opportunity to thank 
the gentleman from Wisconsin (Mr. Petri), the gentleman from Minnesota 
(Mr. Oberstar), and the gentleman from Alaska (Mr. Young) for involving 
me in this process very thoroughly, very completely. This truly has 
been a bipartisan effort. I have been astonished by the willingness of 
the gentleman from Alaska (Chairman Young) to involve this side of the 
aisle in the deliberations, the planning, the execution of what we have 
in this bill.
  This is a bill that was approved unanimously by the very large 
Committee on Transportation and Infrastructure. Not one single negative 
vote was cast against this bill in committee. And that is a testament 
to the leadership of the gentleman from Alaska (Mr. Young) of involving 
everyone. But it was not only the big four that was involved in this 
bill; every single member of this committee, every single Member of 
this House had the opportunity to participate in this bill. That is a 
tribute to the gentleman from Alaska (Chairman Young), and I thank him 
for it.
  Mr. YOUNG of Alaska. Mr. Chairman, I yield myself such time as I may 
consume.
  Again, we are about to close this very long 2 days. We will have a 
series of three votes: the Bradley amendment vote, the Kennedy 
amendment vote, the Isakson amendment vote, and motion to recommit, and 
then final passage. Again, I can suggest to most of the Members of this 
House that this has been a long, trying time, but one which I take 
great pride in.
  Regardless of what my colleagues read in the two rag sheets in this 
body, and they are constantly reporting and trying to divide this 
House, to try to pit one against the other in different fashions, we 
have overcome that and I think have come out with a very good piece of 
bipartisan legislation.
  Yes, there are some that do not agree with it, and I understand that. 
But overall, if we believe in the national transportation system, and I 
want to stress, the national transportation system, H.R. 3550, the $275 
billion does not completely do the job, but it is the nearest thing we 
can do at this time.
  I will say right up front, a motion to recommit is very attractive, 
but it should not be done because it does break the budget against the 
budget resolution that passed the House; and it does, in fact, send a 
message to the Senate, but it does not accomplish the goals that I am 
trying to achieve, and that is to pass legislation so we can make a 
step forward, a step forward to the progress that is necessary to get 
our country moving, to keep this country moving, to make sure our 
people and our products move.
  Mr. Chairman, I yield back the balance of my time.
  Mr. OBERSTAR. Mr. Chairman, I yield myself the balance of the time.
  Mr. Chairman, we will soon be voting on one amendment held over from 
last night. I want to remind Members that that is a heavy-trucks 
amendment. The position of our committee is no on heavy trucks. Vote 
``no'' on the Bradley amendment. Vote ``no'' on this misguided Kennedy 
amendment dealing with tolls on existing highways, expanding that 
authority, and vote ``no'' on the Isakson amendment.
  Let me restate, under TEA LU, every State gains. Look at your 
revenues, not at some arcane formula, a percentage of this and a 
percentage of that, and some percentage that is missing, like missing 
matter from the universe. There is no missing money; it is all there. 
It all goes to the States, and all States grow in their revenues under 
this bill.
  Let me just point out, however, that under the introduced bill of 
last year, which the gentleman from Alaska and I and all, virtually all 
of the other, all but one other member of the committee supported, we 
have vastly increased funding. That is the direction we need to go. 
That is where we ought to be making the investment. That bill will put 
475,000 jobs on the work sites of America by Labor Day. We would have 
$80 billion of additional economic activity in the workplace by Labor 
Day. We would have an economy rising instead of one that is stagnating. 
But we are not there.

                              {time}  1045

  We have done a fair job with this legislation, taking every State 
from the level of 90.5 percent return of their contribution of the 
trust fund to 95 percent over the 6 years of this bill. That was the 
goal. That is where we started. Everybody wanted to do that. We checked 
with Members on both sides of the aisle. That is what we do with this 
bill.
  Let us not get bogged down into ``I get a little more percentage of 
this and my State gets a little more percentage of that.'' Remember, we 
are one Nation, one highway system, one sense of mobility. Let us move 
America together ahead with TEA LU, not backwards with these 
destructive amendments.
   Mr. MICHAUD. Mr. Chairman, it is vitally important that we continue 
our efforts to fund the Nation's highway and transit systems, and that 
we find new ways to invest in these systems. I think we are seeing a 
consensus within the transportation committee, and an impressive unity 
in our committee's fine leaders, on the need to increase the level of 
highway and transit investments.
   These are extremely worthwhile investments. According to the Federal 
Highway Administration, each $1 billion of Federal funds invested in 
infrastructure creates approximately 47,500 jobs and $6.1 billion in 
economic activity.
   Today, America finds itself in a struggling economy. Maine is 
suffering as badly as anyone, with unemployment in my hometown soaring. 
People are looking for answers. Well--here is an answer, loud and 
clear. We need new investment, we need new jobs, and we need the 
highway and transit program to reach new levels of funding.
   Many transportation committee members, including myself, had 
supported a bill with even more robust funding, and we will be voting 
during today for a version of the bill with an additional $100 billion 
in funding over 6 years. The fact that this is not the version that 
will be on the floor is disappointing.
   Despite wide-ranging support from construction, engineering, trade, 
and labor groups for its job-creating impact, this $375 billion version 
of the bill has been blocked by a veto threat from the administration. 
This leads me to ask--what is it about jobs and economic growth that 
they object to?
   Still, while today's bill is less than we would want, it does 
represent the best we could do given the constraints, and it is a 
testament to bipartisan cooperation and commitment to moving our 
economy forward. Many would have preferred a bill with greater 
investment in transportation, because this country needs jobs, and 
transportation investment is the best way to do it. But given the 
choice of stalling the process or supporting a bill with lower 
investment levels, I suspect the most members will vote in favor of the 
bill today, because of all the good things it does achieve. It 
increases overall funding, creates vital new programs to improve 
walking and biking routes, fund projects of regional and national 
security, and increase border safety. It is good for the country, and 
it is great for Maine.
   I am particularly pleased with some of the project funding that will 
be included in this bill for Maine. Among the most important is the 
``Wood Composite Materials Demonstration Project'' that is aimed at the 
University of Maine and its Advanced Wood Composites Laboratory. This 
vital funding to demonstrate the durability and effectiveness of wood 
composite materials in multimodal transportation facilities promises to 
increase the efficiency and value of our transportation infrastructure 
and find valuable new uses for our natural resources.
   I believe that we will all work together in the coming months to 
make the good start we are getting today into an even better final 
bill.
  Mr. SMITH of Michigan. Mr. Chairman, this bill has several problems. 
The people of Michigan get even less money for their dollar than they 
did before. Currently, Michigan taxpayers get 88 cents back for every 
gas tax dollar that we pay to Washington for highway funding. Under 
this new bill, that falls to 79 cents. That's unacceptable. Today, 
people in Michigan pay 18.4 cents in federal gas taxes and 20 cents in 
state gas taxes. All of the state gas taxes stay in Michigan, but only 
79 percent of the federal gas taxes will be returned to Michigan.

[[Page 6351]]

  President Bush's budget requested $256 billion over 6 years for a 
transportation bill. H.R. 3550 has been estimated to cost $284 billion. 
That's a 30 percent increase above the previous transportation bill of 
$218 billion. And the reopener provision is going to force us to 
increase spending in the future.
  Much of this money is not even spent on transportation projects. 
There is $3 million for a park in Alabama and $1.5 million for 
``streetscape improvements'' in Long Beach, California. There are $1.2 
billion for bike paths and more set asides for hiking trails, nature 
centers, obesity programs for children and battlefield preservation. 
There are 2,800 earmarks in this bill, 1,000 more than in the last 
transportation bill. And the Manager's amendment added $1 billion in 
projects to encourage people to support the bill.
  Mr. ISTOOK. Mr. Chairman, I oppose the TEA-LU highway authorization 
bill today, which will significantly reduce Oklahoma and many other 
states' share of highway funds over the next 6 years.
  For years, I've been fighting to reverse Oklahoma's donor state 
status. Instead of helping, this bill will cause Oklahoma to slide 
backwards, becoming more of a donor state than we already are.
  Under the formula adopted by TEA-LU, Oklahoma will receive $2.8 
billion over the next 6 years--which is about $250 million less than it 
would have under the formula provided in the TEA-21 6-year 
authorization that it replaces. People should not be confused by talk 
that this bill ``preserves'' any state at a 90.5 percent funding 
guarantee. It applies that guarantee against a significantly-lowered 
base number, which has now been set at 90.5 percent of 84 percent, 
rather than 90.5 percent of 93 percent of highway funding provided in 
TEA-21.
  The House of Representatives had a chance today to ensure fairness 
for all states in this bill when my good friend Johnny Isakson of 
Georgia introduced his amendment that would restore the base number to 
the 93 percent level. I strongly supported that amendment and 
encouraged others, especially in the Oklahoma delegation, to do so as 
well. Unfortunately, it was not the will of the House to support Mr. 
Isakson's amendment and provide the funding fairness that mine, and 
other states, deserve.
  Consequently, I cannot support a bill that takes one step forward and 
two steps back. I worked to make sure the bill funds important projects 
for my district, like $34 million for the Oklahoma City Crosstown 
Expressway. But I also worked toward fair treatment for all of 
Oklahoma. In the long run this bill hurts Oklahoma more than it helps 
us by changing the formula and costing Oklahoma hundreds of millions 
over the next 6 years.
  Mr. YOUNG of Alaska. Mr. Chairman, I want to assure my colleagues 
from Hawaii that pertaining to section 1812, I continue to be willing 
to work with them to find an alternative resolution of the issues 
addressed in that section.
  We worked on legislative language last fall that would have 
transferred the dry-dock back to the Federal Government and compensated 
TDX for its costs and that would have ended all lawsuits. I am still 
interested in this framework for a legislative solution to these 
debilitating lawsuits.
  Once again, I remain committed to working out a mutually acceptable 
solution to this problem with my friends from Hawaii and others, in 
conference or elsewhere.
   Mr. LEVIN. Mr. Chairman, it is unfortunate that the House does not 
have a better transportation bill before it today. As it is currently 
written, the bill has a number of genuine shortcomings which are 
inequitable to my home state of Michigan and a large number of other 
donor states. Let me make it clear that these shortcomings will have to 
be addressed.
   I also want to underscore that this transportation reauthorization 
is seriously behind schedule. Renewal of the highway bill was supposed 
to be completed last year. The states need Congress to complete our 
work and pass a long-term transportation bill in order to plan and 
implement their road and transit projects. The inability of the House 
to effectively deal with this legislation is negatively affecting the 
economy and jobs.
   The House is in this unenviable position because the Republican 
Leadership and the White House cannot agree on the size and shape of 
the highway bill. The White House has indicated the President may well 
veto the bill that the Majority has brought to the Floor today. The 
President's ``my way or the highway'' approach to this bill is the 
single largest obstacle to providing equity to donor states in this 
legislation.
   But we simply cannot keep putting this off and passing short-term 
extensions. We have got to break the impasse. Our country's roads and 
transit are too important to maintain the status quo. It is time to 
approve a multi-year reauthorization, move it to conference with the 
Senate, and have all parties sit down and work through the difficult 
issues that need to be addressed.
   Primary among those issues is the need to address donor state 
equity. By maintaining the current 90.5 percent minimum guaranteed 
return on Federal highway dollars, this bill does nothing to improve 
the status of donor states like Michigan. I worked with other concerned 
Members in each of the past few highway funding reauthorization bills 
to increase Michigan's rate of return. Along with so many of my 
colleagues, I have cosponsored legislation in this session of Congress 
to increase this return once more by requiring a minimum return of 95 
percent. The House Leadership has agreed to address this concern when 
this bill goes to conference.
   The bill before the House today simply does not provide an adequate 
level of funding to meet the needs of our states' transportation 
infrastructure. The Senate has approved legislation providing $318 
billion over 6 years, while we are considering a $275 billion measure. 
I very much support the Senate-passed funding level, which would 
provide $1.65 billion more for Michigan. I hope that we can move closer 
to the Senate-passed funding level in conference.
   I will vote for this legislation today to get the bill to conference 
so that these shortcomings can be negotiated and addressed. Let me be 
clear: My vote on the final version of this legislation will depend on 
how these matters are addressed by the conferees.
  Mr. STUPAK. Mr. Chairman, I have decided to vote in support for H.R. 
3550 or the TEA-LU highway/transit reauthorization bill, but with 
reservations and with the hope that it will be addressed during the 
House-Senate conference.
  I am pleased that this highway and transit reauthorization contains 
my requests on the may critically needed transportation projects for 
the First District.
  However, this $275 billion bill still shortchanges Michigan in 
overall funding. It fails to include enough funding to ensure my state 
receives its fair share of highway funding.
  Under the current highway authorization law, TEA-21, Michigan is a 
``donor'' state. That means for every dollar Michigan taxpayers pay 
into the federal highway/transit fund--the state gets back only 90.5 
cents in federal highway funding. The new reauthorization bill, TEA-LU, 
does not narrow this gap. Instead, it actually makes it worse by making 
the pot of money where this formula applies even smaller.
  The $318 billion Senate bill, however, would gradually increase 
Michigan's rate of return on the dollar up to 95 cents by the end of FY 
2009. That would be a vast improvement from the House version and I 
urge the joint House-Senate conference committee to accept the Senate 
version.
  Congress needs to address this inequity to ensure Michigan receives a 
more equitable share of funding so it can better address and upgrade 
its highway and transit system as well as create much needed jobs in 
Michigan. For every $1 billion in highway and transit funding, that 
creates 47,500 new jobs and $6.2 billion in economic activity, 
according to the House Budget Committee Minority Office.
  Mr. CARSON of Oklahoma. Mr. Chairman, as a member of the 
Transportation and Infrastructure Committee, I would like to thank the 
Chairman and the Ranking Member for their leadership and tireless 
efforts to bring this important bill to the House floor today.
  This bill makes significant improvements over the previous 
legislation and I strongly support it. Though there is much work behind 
us, there is still more that can be done to continue to improve our 
nation's transportation systems. As a representative of the state that 
leads the nation in the highest percentage of bridges considered 
structurally deficient, we must recognize the importance of investing 
in our nation's infrastructure both for our economic well being, as 
well as public safety.
  This bill makes valuable improvements in programs of importance to 
many Oklahomans. The Indian Reservation Roads program has a significant 
impact in Oklahoma and allows tribal governments to partner with local 
communities to improve roads for all Oklahomans. Bridge improvement 
money will hopefully take Oklahoma out of the top position in this 
perilous category by providing funds for the state to improve our many 
deficient bridges. These improvements and repairs will then allow 
commerce, such as our state's wheat harvest, to again use the most 
direct routes to get their products to market. There are transit 
programs, which take rural Oklahomans to jobs and healthcare, that they 
would otherwise have no access to without this legislation. This bill 
is truly good government at work.
  This legislation will put Americans to work like no other legislation 
brought to the floor

[[Page 6352]]

during my time in Congress. For every $1 billion invested in federal 
highway and transit programs, 47,500 jobs are created here in the 
United States. These are jobs in small businesses, in rural communities 
and cities alike. Investing in our Nation's infrastructure is one of 
the best investments we can make, both for the economic benefits as 
well as our transportation safety on roads and transit systems all 
Americans use everyday.
  Again I thank the Chairman and Ranking Member, as well as Mr. Petri 
and Mr. Lipinski for their dedication to this legislation. I urge my 
colleagues to support this important bill.
  Mr. BACA. Mr. Chairman. I rise in opposition to the Graves amendment 
to H.R. 3550. Don't be fooled by this amendment. This amendment is bad 
for my district and bad for California.
  My State is a destination State. Tourists come to visit and see the 
sights and cities of Southern California. Sometimes these tourists rent 
cars. And sometimes they get into accidents. California passed a 
vicarious liability law that protects innocent bystanders from rental 
car companies that rent to uninsured drivers. When people get hurt by 
these uninsured drivers, there is no place to turn for compensation. 
This law allows those that get hurt to ask for compensation from the 
rental car companies. The State saw a need for such a law, so they 
passed one.
  The Graves amendment attempts to tell California what type of law it 
needs. It will cancel California's law and hurt their citizens. What 
makes Washington Congressmen think they know what's best for my 
district and for California? California, 14 other States and the 
District of Columbia know that vicarious liability laws are good for 
their citizens. They know that when push comes to shove this will help 
keep their citizens safe. That is why I oppose the Graves amendment and 
support California's right to determine what best serves the interests 
of its citizens.
  Mr. RUSH. Mr. Chairman, I am pleased that we are voting on H.R. 3550, 
``The Transportation Equity Act: A Legacy For Users'' (TEA-LU), a much 
needed legislation that will fund our Nation's critical transportation 
infrastructure. H.R. 3550 would not only repair our roads and alleviate 
traffic congestion but it would also create and sustain 1.7 million new 
jobs throughout all 50 states over the next 6 years. This bill 
addresses many problems that plague our Nation's transportation 
infrastructure. For example, TEA-LU creates a congestion relief program 
which requires states to focus on the congestion resources that affect 
their roadways. TEA-LU provides 28 percent increase in funding for 
NHTSA highway safety formula grants that supports state safety 
programs. This is extremely important because it is well known that 
42,000 Americans are killed and 3.3 million die from our Nation's 
highways due to substandard road conditions and roadside hazards. More 
importantly, H.R. 3550 recognizes that transportation in the 21st 
century cannot exist without adequate resources for public 
transportation. I am also pleased that TEA-LU provides $51 billion for 
public transportation infrastructure programs. However, I am 
disappointed that the funding level for this bill is well below the 
Senate highway bill. Originally, this bill was to be funded at $318 
billion but because of pressures from the White House it was scaled 
back to $275 billion. This is quite unfortunate. H.R. 3550 may be the 
only job creating measure considered by Congress this year, as every $1 
billion invested in federal highway and transit creates 47,500 jobs. 
These well paying jobs would go a long way in my district.
  Mr. RODRIGUEZ. Mr. Chairman, I rise in support of H.R. 3550, the 
Transportation Equity Act: A Legacy for Users. Today, we have a 
historic opportunity to reinvest in our Nation's infrastructure and 
promote sound economic development policy.
  Highways make traveling the distances of our great State of Texas 
feasible and affordable. These roads traverse our lands, connect people 
together, and allow them to travel quickly and efficiently. They 
facilitate the transfer of commerce and enable the delivery of goods 
across state lines, and the construction and maintenance of these roads 
are an important source of employment for Texas residents.
  While highways perform valuable services, they are merely an 
afterthought for the average person. However without timely maintenance 
and construction, highways may become unsafe and overly congested. 
Current economic problems have delayed critical maintenance and 
expansion projects causing increased congestion, air pollution, and 
accidents. The U.S. Department of Transportation reports that $375 
billion is needed for highway and transit improvements.
  NAFTA has brought numerous new economic and trade benefits to South 
Texas and the Nation; however, this increased trade is straining our 
current transportation infrastructure and causing an increase in air 
pollution and chemical runoff. Funds for transportation projects are 
urgently needed to offset and improve the many longstanding 
transportation and infrastructure needs of San Antonio and South Texas. 
I firmly believe that South Texas should not have to bear the burden of 
increased international trade traffic alone. If we do not invest in the 
region now, the flow of international trade will be negatively impacted 
in the future.
  Last April, I had the opportunity to speak before the House 
Transportation and Infrastructure Committee and testified on the 
pressing transportation needs in South Texas. I would like to take a 
moment to thank the Chairman and Ranking Member and their staff for 
their leadership and understanding of the complexity of our Nation's 
transportation problems. As I mentioned a moment ago, South Texas has 
many outstanding needs that will impact the Nation if not addressed in 
the very near future.
  I am pleased that the Committee included six projects for which I had 
submitted requests. The legislation authorizes $4 million for Mission 
Trails Packages 4 and 5, which would complete a project that is vital 
to the revitalization of the South Side of San Antonio. The Mission 
Trails project is a transportation enhancement project that upon 
completion will be approximately 12 miles of picturesque, tree lined 
hike and bike trails, improved well-lit roadways, and rest areas for 
people to enjoy.
  An additional $4 million authorization level was included for the 
Anzalduas Bridge Connector Road in Hidalgo County and $3 million for 
the Hidalgo County Loop. These projects are integral towards improving 
our Nation's gateway to trade and alleviating congestion in the Lower 
Rio Grande Valley. I would like to thank Congressman Lloyd Doggett for 
his steadfast support and work on these projects.
  A $6 million authorization level was also included for construction 
of KellyUSA's 36th Street Extension Road. I would like to thank 
Congressman Charlie Gonzalez for his role in supporting this project. 
The 36th Street Extension Road is a critical component of the KellyUSA 
base conversion plan which includes new gateways and an expanded road 
access system. As a former military base, Kelly was originally built as 
a closed access facility. The 36th Street Extension Road will provide a 
new southern access point and expand community and commercial truck 
access to the facility.
  I am pleased that the bill contained a $4 million authorization level 
for planning, design and engineering along the I-35 corridor in central 
Texas. These funds will support an ongoing multi-modal transportation 
project to improve the Austin-San Antonio corridor.
  Lastly, I would like to thank the Committee for including language to 
authorize $4.5 million for the Arkansas Avenue railroad grade 
separation project in Laredo to improve public safety and overall 
mobility by connecting north and south Laredo. The project will also 
alleviate congestion along major trade corridors and allow traffic to 
flow in the event of an emergency or evacuation.
  I also strongly support critical funding for the VIA Metropolitan 
Transit Authority that was championed by Congressman Gonzalez. A $7 
million authorization level was included for VIA to purchase new buses 
to replace the aging bus fleet and paratransit vans as well as upgrade 
their bus maintenance facility. VIA provides critical services to the 
greater San Antonio area and I thank them for all that they do.
  As you know, funding for the Transportation Equity Act for the 21st 
Century (TEA-21) expired in 2003. I fully supported the House 
Transportation Committee's original reauthorization bill, which 
authorized a $375 billion level, and I'm disappointed that the 
President's veto threat of this jobs bill ultimately reduced the amount 
to $275 billion. I hope that Americans understand that this means fewer 
jobs in an already stagnant job market. For every $1 billion invested 
in federal highway and transit spending, 47,500 jobs--over half of 
which are in the construction industry--are created or sustained. This 
is a jobs bill--it is about investment in our communities and our 
economy.
  Mr. Chairman, while I believe we should continue to push for 
additional funds, we must also face the harsh economic reality that 
recent tax cuts and a skyrocketing deficit have left us with less money 
to invest in our infrastructure. This bill that we have before us today 
is a start, and I urge my colleagues to vote in favor of H.R. 3550. 
Let's start reinvesting in our Nation.
  Mr. KIND. Mr. Chairman, I rise in support of H.R. 3550, the 
Transportation Equity Act. I want to acknowledge the work of the 
Transportation Committee on this complex bill and especially thank my 
friend and colleague from Wisconsin, Mr. Petri, for his leadership on 
the

[[Page 6353]]

legislation; the Wisconsin delegation is lucky to have such a strong 
advocate for our citizens.
  We all know that transportation bills are job bills, and now is 
certainly the time that we need more jobs throughout the country. Over 
8 million Americans are looking for jobs, and last month only 21,000 
new jobs were created, none of which was a private-sector job. I 
consistently hear from constituents who are searching for work; who 
have sent out dozens of resumes and updated their skills but remain 
unemployed. Each billion dollars spent on highway funding creates not 
only safer and better roads: It also creates an estimated 47,500 new 
jobs. An investment in highway funding is an investment for steady work 
for those in Wisconsin and around the Nation.
  Furthermore, I am pleased that the bill recognizes the importance of 
funding crucial highways, transit centers, and bridges in Wisconsin's 
Third Congressional District. Specifically, the inclusion of funding 
for the Stillwater Bridge, which connects Houlton, Wisconsin and 
Stillwater, Minnesota is great news for those of us who have been 
working on this project for years. The bridge is only one example of an 
important project that will provide the Nation with safer roads, 
shorter commutes, and better jobs. I urge my colleagues to support the 
bill.


          Sequential Votes Postponed In Committee of The Whole

  The CHAIRMAN pro tempore (Mr. Nethercutt). Pursuant to clause 6 of 
rule XVIII, proceedings will now resume on those amendments on which 
further proceedings were postponed in the following order:
  Amendment number 20 by Mr. Bradley of New Hampshire, amendment number 
22 by Mr. Kennedy of Minnesota, amendment number 23 by Mr. Isakson of 
Georgia.
  The first electronic vote will be conducted as a 15-minute vote. 
Remaining electronic votes will be conducted as 5-minute votes.


        Amendment No. 20 Offered by Mr. Bradley of New Hampshire

  The CHAIRMAN pro tempore. The unfinished business is the demand for a 
recorded vote on the amendment offered by the gentleman from New 
Hampshire (Mr. Bradley) on which further proceedings were postponed and 
on which the noes prevailed by voice vote.
  The Clerk will redesignate the amendment.
  The text of the amendment is as follows:

       Amendment No. 20 offered by Mr. Bradley of New Hampshire:
       Add at the end the following new section:

     SECTION  . VEHICLE WEIGHT LIMITATIONS.

       (a) The next to the last sentence of section 127(a) of 
     title 23, United States Code, is amended by striking 
     ``Interstate Route 95'' and inserting ``Interstate Routes 89, 
     93, and 95''.
       (b)(1) In General.--In consultation with the Secretary of 
     Transportation, the State of New Hampshire shall conduct a 
     study analyzing the economic, safety, and infrastructure 
     impacts of the exemption provided by the amendment made by 
     subsection (a), including the impact of not having such an 
     exemption. In preparing the study, the State shall provide 
     adequate opportunity for public comment.
       (2) Funding.--There is authorized to be appropriated from 
     the Highway Trust Fund (other than the Mass Transit Account) 
     $250,000 for fiscal year 2004 to carry out the study.
       (3) Applicability of Title 23, United States Code.--Funds 
     authorized by this section shall be available for obligation 
     in the same manner as if such funds were apportioned under 
     chapter 1 of title 23, United States Code; except that such 
     funds shall remain available until expended.


                             Recorded Vote

  The CHAIRMAN pro tempore. A recorded vote has been demanded.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 90, 
noes 334, not voting 10, as follows:

                             [Roll No. 110]

                                AYES--90

     Aderholt
     Akin
     Allen
     Barrett (SC)
     Bartlett (MD)
     Bass
     Beauprez
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehner
     Bonner
     Bradley (NH)
     Burns
     Burr
     Buyer
     Calvert
     Cannon
     Cantor
     Castle
     Chocola
     Cox
     Deal (GA)
     DeLay
     Diaz-Balart, M.
     Dreier
     Everett
     Feeney
     Flake
     Fossella
     Franks (AZ)
     Frelinghuysen
     Garrett (NJ)
     Gingrey
     Goode
     Granger
     Greenwood
     Hall
     Harris
     Hastert
     Hayes
     Hayworth
     Hensarling
     Herger
     Hostettler
     Houghton
     Hunter
     Johnson (CT)
     Keller
     Kennedy (MN)
     King (IA)
     Kline
     Latham
     Lewis (KY)
     Manzullo
     McIntyre
     Michaud
     Miller (FL)
     Musgrave
     Myrick
     Nethercutt
     Neugebauer
     Norwood
     Nunes
     Paul
     Pearce
     Pence
     Pitts
     Pryce (OH)
     Rehberg
     Rogers (AL)
     Ryun (KS)
     Sessions
     Shadegg
     Sherwood
     Shimkus
     Simmons
     Simpson
     Smith (MI)
     Souder
     Stenholm
     Sweeney
     Tancredo
     Taylor (NC)
     Terry
     Thornberry
     Walsh
     Whitfield
     Wilson (SC)

                               NOES--334

     Abercrombie
     Ackerman
     Alexander
     Andrews
     Baca
     Bachus
     Baird
     Baker
     Baldwin
     Ballance
     Ballenger
     Barton (TX)
     Becerra
     Bell
     Bereuter
     Berkley
     Berman
     Berry
     Biggert
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boehlert
     Bonilla
     Bono
     Boozman
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brady (TX)
     Brown (OH)
     Brown (SC)
     Brown, Corrine
     Brown-Waite, Ginny
     Burgess
     Burton (IN)
     Camp
     Capito
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Carter
     Case
     Chabot
     Chandler
     Clay
     Clyburn
     Coble
     Cole
     Collins
     Conyers
     Cooper
     Costello
     Cramer
     Crane
     Crenshaw
     Crowley
     Cubin
     Cummings
     Cunningham
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     Davis, Jo Ann
     Davis, Tom
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Diaz-Balart, L.
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doolittle
     Doyle
     Duncan
     Dunn
     Edwards
     Ehlers
     Emanuel
     Emerson
     Engel
     English
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Ferguson
     Filner
     Foley
     Forbes
     Ford
     Frank (MA)
     Frost
     Gallegly
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gonzalez
     Goodlatte
     Gordon
     Goss
     Graves
     Green (TX)
     Green (WI)
     Grijalva
     Gutierrez
     Gutknecht
     Harman
     Hart
     Hastings (FL)
     Hastings (WA)
     Hefley
     Hill
     Hinchey
     Hinojosa
     Hobson
     Hoeffel
     Hoekstra
     Holden
     Holt
     Honda
     Hooley (OR)
     Hoyer
     Hyde
     Inslee
     Isakson
     Israel
     Issa
     Istook
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     Jenkins
     John
     Johnson (IL)
     Johnson, E. B.
     Johnson, Sam
     Jones (NC)
     Jones (OH)
     Kanjorski
     Kaptur
     Kelly
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     King (NY)
     Kingston
     Kirk
     Kleczka
     Knollenberg
     Kolbe
     Kucinich
     LaHood
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     LaTourette
     Leach
     Lee
     Levin
     Lewis (CA)
     Lewis (GA)
     Linder
     Lipinski
     LoBiondo
     Lofgren
     Lowey
     Lucas (KY)
     Lucas (OK)
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McCotter
     McCrery
     McDermott
     McGovern
     McHugh
     McInnis
     McKeon
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Mica
     Millender-McDonald
     Miller (MI)
     Miller (NC)
     Miller, Gary
     Mollohan
     Moore
     Moran (KS)
     Moran (VA)
     Murphy
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Ney
     Northup
     Nussle
     Oberstar
     Obey
     Olver
     Ortiz
     Osborne
     Ose
     Otter
     Owens
     Oxley
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Platts
     Pombo
     Pomeroy
     Porter
     Portman
     Price (NC)
     Putnam
     Quinn
     Radanovich
     Rahall
     Ramstad
     Rangel
     Regula
     Renzi
     Reynolds
     Rodriguez
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Ross
     Rothman
     Roybal-Allard
     Royce
     Ruppersberger
     Rush
     Ryan (OH)
     Ryan (WI)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Saxton
     Schakowsky
     Schiff
     Schrock
     Scott (GA)
     Scott (VA)
     Sensenbrenner
     Serrano
     Shaw
     Shays
     Sherman
     Shuster
     Skelton
     Slaughter
     Smith (NJ)
     Smith (TX)
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stearns
     Strickland
     Stupak
     Sullivan
     Tauscher
     Taylor (MS)
     Thomas
     Thompson (CA)
     Thompson (MS)
     Tiahrt
     Tiberi
     Tierney
     Toomey
     Towns
     Turner (OH)
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Upton
     Van Hollen
     Velazquez
     Visclosky
     Vitter
     Walden (OR)
     Wamp
     Waters
     Watson
     Watt
     Weiner
     Weldon (PA)
     Weller
     Wexler
     Wicker
     Wilson (NM)
     Wolf
     Woolsey
     Wu
     Wynn
     Young (AK)
     Young (FL)

                             NOT VOTING--10

     Culberson
     DeMint
     Gephardt
     Hulshof
     Miller, George
     Reyes
     Tanner
     Tauzin
     Waxman
     Weldon (FL)

                              {time}  1109

  Ms. CARSON of Indiana, and Messrs. GERLACH, LUCAS of Kentucky, 
McHUGH, DICKS, HILL, VITTER,

[[Page 6354]]

LEVIN and MATSUI changed their vote from ``aye'' to ``no.''
  Mr. PENCE and Mrs. MYRICK changed their vote from ``no'' to ``aye.''
  So the amendment was rejected.
  The result of the vote was announced as above recorded.


                Announcement By The Chairman Pro Tempore

  The CHAIRMAN pro tempore (Mr. Nethercutt). Pursuant to clause 6 of 
rule XVIII, the remaining votes in this series will be conducted as 5-
minute votes.


          Amendment No. 22 Offered by Mr. Kennedy of Minnesota

  The CHAIRMAN pro tempore. The pending business is the demand for a 
recorded vote on the amendment offered by the gentleman from Minnesota 
(Mr. Kennedy) on which further proceedings were postponed and on which 
the noes prevailed by voice vote.
  The Clerk will redesignate the amendment.
  The Clerk redesignated the amendment.


                             Recorded Vote

  The CHAIRMAN pro tempore. A recorded vote has been demanded.
  A recorded vote was ordered.
  The CHAIRMAN pro tempore. This will be a 5-minute vote.
  The vote was taken by electronic device, and there were--ayes 231, 
noes 193, not voting 10, as follows:

                             [Roll No. 111]

                               AYES--231

     Aderholt
     Akin
     Alexander
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Bass
     Beauprez
     Bereuter
     Berkley
     Bilirakis
     Bishop (GA)
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonner
     Bono
     Boozman
     Boyd
     Bradley (NH)
     Brady (TX)
     Brown (OH)
     Brown (SC)
     Brown-Waite, Ginny
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Cardin
     Cardoza
     Carter
     Chabot
     Chocola
     Coble
     Cole
     Collins
     Cox
     Crane
     Crenshaw
     Cubin
     Cunningham
     Davis (TN)
     Davis, Tom
     Deal (GA)
     DeLay
     Deutsch
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doggett
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     Engel
     English
     Everett
     Feeney
     Ferguson
     Flake
     Foley
     Forbes
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Gonzalez
     Goode
     Graves
     Green (TX)
     Green (WI)
     Gutknecht
     Hall
     Harris
     Hart
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hill
     Hinchey
     Hinojosa
     Hobson
     Hoekstra
     Hostettler
     Houghton
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Jenkins
     John
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Jones (OH)
     Keller
     Kelly
     Kennedy (MN)
     Kind
     King (IA)
     King (NY)
     Kingston
     Kline
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (GA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (KY)
     Manzullo
     McCotter
     McHugh
     McIntyre
     Mica
     Miller (FL)
     Miller (MI)
     Miller, Gary
     Moore
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Neugebauer
     Ney
     Northup
     Norwood
     Nunes
     Nussle
     Obey
     Ortiz
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (PA)
     Pickering
     Pitts
     Platts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Ros-Lehtinen
     Ross
     Royce
     Ryan (WI)
     Ryun (KS)
     Sandlin
     Saxton
     Schrock
     Scott (GA)
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Sherwood
     Shimkus
     Shuster
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Smith (WA)
     Souder
     Stearns
     Stenholm
     Strickland
     Stupak
     Sullivan
     Sweeney
     Tancredo
     Taylor (NC)
     Terry
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Turner (TX)
     Upton
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)

                               NOES--193

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Barton (TX)
     Becerra
     Bell
     Berman
     Berry
     Biggert
     Bishop (NY)
     Blumenauer
     Bonilla
     Boswell
     Boucher
     Brady (PA)
     Brown, Corrine
     Burgess
     Capps
     Capuano
     Carson (IN)
     Carson (OK)
     Case
     Castle
     Chandler
     Clay
     Clyburn
     Conyers
     Cooper
     Costello
     Cramer
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis, Jo Ann
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Dicks
     Dingell
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Goodlatte
     Gordon
     Goss
     Granger
     Greenwood
     Grijalva
     Gutierrez
     Harman
     Hastings (FL)
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     Johnson (CT)
     Johnson, E. B.
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kirk
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (CA)
     Lipinski
     Lofgren
     Lowey
     Lucas (OK)
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McCrery
     McDermott
     McGovern
     McInnis
     McKeon
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Mollohan
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Olver
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Petri
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Rodriguez
     Rohrabacher
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Schakowsky
     Schiff
     Scott (VA)
     Serrano
     Shays
     Sherman
     Simmons
     Skelton
     Slaughter
     Snyder
     Solis
     Spratt
     Stark
     Tauscher
     Taylor (MS)
     Thomas
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Weiner
     Wexler
     Wolf
     Woolsey
     Wu
     Wynn
     Young (AK)
     Young (FL)

                             NOT VOTING--10

     Culberson
     DeMint
     Gephardt
     Hulshof
     Miller, George
     Reyes
     Tanner
     Tauzin
     Waxman
     Weldon (FL)


                Announcement by the Chairman Pro Tempore

  The CHAIRMAN pro tempore (during the vote). Members are advised there 
are 2 minutes remaining in this vote.

                              {time}  1118

  Ms. BERKLEY changed her vote from ``no'' to ``aye.''
  Mr. MEEKS of New York and Mr. FORD changed their vote from ``aye'' to 
``no.''
  So the amendment was agreed to.
  The result of the vote was announced as above recorded.


                Amendment No. 23 Offered by Mr. Isakson

  The CHAIRMAN pro tempore (Mr. Nethercutt). The pending business is 
the demand for a recorded vote on amendment No. 23 offered by the 
gentleman from Georgia (Mr. Isakson) on which further proceedings were 
postponed and on which the noes prevailed by voice vote.
  The Clerk will redesignate the amendment.
  The Clerk redesignated the amendment.


                             Recorded Vote

  A recorded vote has been demanded.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 170, 
noes 254, not voting 9, as follows:

                             [Roll No. 112]

                               AYES--170

     Akin
     Bachus
     Ballance
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Beauprez
     Bell
     Bilirakis
     Bishop (GA)
     Blackburn
     Blunt
     Boehner
     Bonilla
     Boyd
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Camp
     Cantor
     Carson (IN)
     Carson (OK)
     Carter
     Chabot
     Chandler
     Chocola
     Coble
     Cole
     Collins
     Conyers
     Crenshaw
     Cunningham
     Davis (AL)
     Davis (FL)
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeGette
     DeLay
     Deutsch
     Diaz-Balart, L.
     Diaz-Balart, M.
     Dingell
     Doggett
     Duncan
     Edwards
     Ehlers
     Emerson
     Etheridge
     Feeney
     Ferguson
     Flake
     Foley
     Forbes
     Franks (AZ)
     Frelinghuysen
     Frost
     Garrett (NJ)
     Gingrey
     Gonzalez
     Goode
     Goodlatte
     Goss
     Granger
     Green (TX)
     Gutknecht
     Hall
     Harris
     Hastings (FL)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Hill
     Hoekstra
     Hunter
     Isakson
     Istook
     Jackson-Lee (TX)
     Jefferson
     Jenkins
     Johnson, E. B.
     Johnson, Sam
     Jones (NC)
     Keller
     Kennedy (MN)
     Kildee
     Kilpatrick
     King (IA)
     Kingston
     Kline
     Knollenberg
     Kolbe
     Lampson
     Leach
     Levin
     Lewis (GA)
     Lewis (KY)
     Linder
     Lucas (KY)

[[Page 6355]]


     Lucas (OK)
     Majette
     Marshall
     McCotter
     McInnis
     McIntyre
     Meek (FL)
     Mica
     Miller (FL)
     Miller (MI)
     Miller (NC)
     Musgrave
     Myrick
     Neugebauer
     Northup
     Norwood
     Nussle
     Otter
     Paul
     Pence
     Portman
     Price (NC)
     Putnam
     Ramstad
     Renzi
     Rodriguez
     Rogers (KY)
     Rogers (MI)
     Ros-Lehtinen
     Sandlin
     Schrock
     Scott (GA)
     Scott (VA)
     Sessions
     Shadegg
     Shaw
     Simpson
     Smith (MI)
     Smith (TX)
     Souder
     Spratt
     Stearns
     Stenholm
     Strickland
     Stupak
     Sullivan
     Tancredo
     Taylor (NC)
     Terry
     Thornberry
     Tiahrt
     Tiberi
     Turner (TX)
     Udall (CO)
     Upton
     Visclosky
     Wamp
     Watt
     Weldon (FL)
     Wexler
     Whitfield
     Wilson (SC)
     Wolf
     Young (FL)

                               NOES--254

     Abercrombie
     Ackerman
     Aderholt
     Alexander
     Allen
     Andrews
     Baca
     Baird
     Baker
     Baldwin
     Bass
     Becerra
     Bereuter
     Berkley
     Berman
     Berry
     Biggert
     Bishop (NY)
     Bishop (UT)
     Blumenauer
     Boehlert
     Bonner
     Bono
     Boozman
     Boswell
     Boucher
     Bradley (NH)
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Calvert
     Cannon
     Capito
     Capps
     Capuano
     Cardin
     Cardoza
     Case
     Castle
     Clay
     Clyburn
     Cooper
     Costello
     Cox
     Cramer
     Crane
     Crowley
     Cubin
     Cummings
     Davis (CA)
     Davis (IL)
     Davis (TN)
     DeFazio
     Delahunt
     DeLauro
     Dicks
     Dooley (CA)
     Doolittle
     Doyle
     Dreier
     Dunn
     Emanuel
     Engel
     English
     Eshoo
     Evans
     Everett
     Farr
     Fattah
     Filner
     Ford
     Fossella
     Frank (MA)
     Gallegly
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gordon
     Graves
     Green (WI)
     Greenwood
     Grijalva
     Gutierrez
     Harman
     Hart
     Hastings (WA)
     Herger
     Hinchey
     Hinojosa
     Hobson
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Hostettler
     Houghton
     Hoyer
     Hyde
     Inslee
     Israel
     Issa
     Jackson (IL)
     John
     Johnson (CT)
     Johnson (IL)
     Jones (OH)
     Kanjorski
     Kaptur
     Kelly
     Kennedy (RI)
     Kind
     King (NY)
     Kirk
     Kleczka
     Kucinich
     LaHood
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Latham
     LaTourette
     Lee
     Lewis (CA)
     Lipinski
     LoBiondo
     Lofgren
     Lowey
     Lynch
     Maloney
     Manzullo
     Markey
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McCrery
     McDermott
     McGovern
     McHugh
     McKeon
     McNulty
     Meehan
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller, Gary
     Mollohan
     Moore
     Moran (KS)
     Moran (VA)
     Murphy
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Nethercutt
     Ney
     Nunes
     Oberstar
     Obey
     Olver
     Ortiz
     Osborne
     Ose
     Owens
     Oxley
     Pallone
     Pascrell
     Pastor
     Payne
     Pearce
     Pelosi
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Pomeroy
     Porter
     Pryce (OH)
     Quinn
     Radanovich
     Rahall
     Rangel
     Regula
     Rehberg
     Reynolds
     Rogers (AL)
     Rohrabacher
     Ross
     Rothman
     Roybal-Allard
     Royce
     Ruppersberger
     Rush
     Ryan (OH)
     Ryan (WI)
     Ryun (KS)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Saxton
     Schakowsky
     Schiff
     Sensenbrenner
     Serrano
     Shays
     Sherman
     Sherwood
     Shimkus
     Shuster
     Simmons
     Skelton
     Slaughter
     Smith (NJ)
     Smith (WA)
     Snyder
     Solis
     Stark
     Sweeney
     Tauscher
     Taylor (MS)
     Thomas
     Thompson (CA)
     Thompson (MS)
     Tierney
     Toomey
     Towns
     Turner (OH)
     Udall (NM)
     Van Hollen
     Velazquez
     Vitter
     Walden (OR)
     Walsh
     Waters
     Watson
     Weiner
     Weldon (PA)
     Weller
     Wicker
     Wilson (NM)
     Woolsey
     Wu
     Wynn
     Young (AK)

                             NOT VOTING--9

     Culberson
     DeMint
     Gephardt
     Hulshof
     Miller, George
     Reyes
     Tanner
     Tauzin
     Waxman


                Announcement by the Chairman Pro Tempore

  The CHAIRMAN pro tempore (during the vote). Members are advised there 
are 2 minutes remaining in this vote.

                              {time}  1126

  So the amendment was rejected.
  The result of the vote was announced as above recorded.
  The CHAIRMAN pro tempore. Under the rule, the Committee rises.
  Accordingly, the Committee rose; and the Speaker pro tempore (Mr. 
Thornberry) having assumed the chair, Mr. Nethercutt, Chairman pro 
tempore of the Committee of the Whole House on the State of the Union, 
reported that that Committee, having had under consideration the bill 
(H.R. 3550) to authorize funds for Federal-aid highways, highway safety 
programs, and transit programs, and for other purposes, pursuant to 
House Resolution 593, he reported the bill, as amended pursuant to that 
rule, back to the House with further sundry amendments adopted by the 
Committee of the Whole.
  The SPEAKER pro tempore. Under the rule, the previous question is 
ordered.
  The committee amendment in the nature of a substitute, modified by 
the amendments printed in part A of House Report 108-456, is adopted.
  Is a separate vote demanded on any further amendment reported from 
the Committee of the Whole? If not, the Chair will put them en gros.
  The amendments were agreed to.
  The SPEAKER pro tempore. The question is on the engrossment and third 
reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.


          Motion to Recommit Offered by Mr. Davis of Tennessee

  Mr. DAVIS of Tennessee. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore. Is the gentleman opposed to the bill?
  Mr. DAVIS of Tennessee. Yes, in its present form, Mr. Speaker.
  The SPEAKER pro tempore. The Clerk will report the motion to 
recommit.
  The Clerk read as follows:

       Mr. Davis of Tennessee moves to recommit the bill H.R. 3550 
     to the Committee on Transportation and Infrastructure with 
     instructions to report the same back to the House forthwith 
     with the following amendments:
       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
       (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.

[[Page 6356]]



                 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'''.
       (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:

[[Page 6357]]

       ``(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

[[Page 6358]]

     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--
       ``(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

[[Page 6359]]

       ``(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).''.
       (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

[[Page 6360]]

     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:

       ``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.

[[Page 6361]]



     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.

       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--

[[Page 6362]]

       ``(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 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

[[Page 6363]]

     (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.--
       ``(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

[[Page 6364]]

     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''.
       (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).

[[Page 6365]]

       ``(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 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

[[Page 6366]]

     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.

     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,

[[Page 6367]]

     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--
       ``(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

[[Page 6368]]

     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 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

[[Page 6369]]

     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 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,


[[Page 6370]]


     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--
       (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

[[Page 6371]]

       ``(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, 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

[[Page 6372]]

     (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:

``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

[[Page 6373]]

     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 section 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).
       (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'

[[Page 6374]]

     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. DAVIS of Tennessee (during the reading). Mr. Speaker, I ask 
unanimous consent that the motion to recommit be considered as read and 
printed in the Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Tennessee?
  There was no objection.
  Mr. NUSSLE. Mr. Speaker, I reserve a point of order against the 
gentleman's motion to recommit.
  The SPEAKER pro tempore. The gentleman reserves a point of order. The 
gentleman from Tennessee (Mr. Davis) will be recognized for 5 minutes 
on his motion to recommit.
  Mr. DAVIS of Tennessee. Mr. Speaker, do we have opposition on the 
point of order? On the point of order, may I continue with my motion to 
recommit?
  The SPEAKER pro tempore. The Chair will entertain a point of order 
after the gentleman's debate on his motion to recommit. At this point, 
the point of order is reserved.
  Mr. DAVIS of Tennessee. Mr. Speaker, I would ask the gentleman to 
reconsider his point of order on my offering of this amendment. My 
amendment increases the funds in the bill to the Senate-passed level of 
$318 billion, and I believe that the House should be allowed to vote on 
this amendment.
  The SPEAKER pro tempore. If the gentleman will suspend. The gentleman 
is recognized for 5 minutes to debate his motion to recommit.
  Mr. DAVIS of Tennessee. Mr. Speaker, today I rise with the gentleman 
from New Jersey (Mr. Menendez), the gentleman from Oregon (Mr. 
Blumenauer), and the gentleman from Washington (Mr. Baird) to offer 
this motion to recommit.
  The amendment increases highway and transit investment by $37.8 
billion, a level of funding equal to the Senate/House-passed TEA 21 
reauthorization bill, includes the Senate-passed Highway Trust Fund 
financing mechanisms, which includes no tax increases, and fully 
offsets these investments by cracking down on abusive corporate tax 
shelters, such as those enjoyed by Enron, and prevents American 
corporations from avoiding paying U.S. taxes by moving to a foreign 
country, and by extending customs user fees.

                              {time}  1130

  The amendment is paid for by drawing down from the highway trust fund 
and eliminating subsidies such as ethanol. We should continue to 
promote the use of ethanol, but we should keep the highway trust fund 
for truly highway-related activities.
  A recent national survey found that transportation construction 
contractors hire employees within 3 weeks of obtaining a contract. 
Employees begin receiving paychecks within 2 weeks of hiring. In 
addition, this infrastructure investment will increase business 
productivity by reducing the costs of producing goods in virtually 
every industrial sector of our economy, which results in increased 
demand for labor, capital and raw materials and generally leads to 
lower product prices and increased sales.
  Mr. Speaker, this investment will help create jobs for almost 3 
million Americans who have lost their jobs in the last 3 years and will 
specifically help the more than 1 million unemployed construction 
workers. The number of unemployed private sector construction workers 
in 2003 averaged 810,000. The unemployment rate for these workers 
averaged 9.3 percent. We can invest in a future that our children and 
grandchildren will benefit from rather than continue to create debt for 
the future for our children.
  Mr. Speaker, I yield back the balance of my time.


                             Point of Order

  The SPEAKER pro tempore (Mr. Thornberry). Does the gentleman from 
Iowa wish to make his point of order?
  Mr. NUSSLE. I do, Mr. Speaker.
  I make a point of order against the motion to recommit because it is 
in violation of section 302(f) of the Congressional Budget Act of 1974. 
A motion that would cause any increase in new budget authority will 
breach the allocation made under section 302(a) to the applicable 
committee and is not permitted under 302(f) of the act. This motion 
causes such an increase in new budget authority and, therefore, is not 
in order.
  I insist on my point of order.
  The SPEAKER pro tempore. Does the gentleman from Tennessee wish to be 
heard on the point of order?
  Mr. DAVIS of Tennessee. No.
  The SPEAKER pro tempore. Does the gentleman concede the point of 
order?
  Mr. DAVIS of Tennessee. Mr. Speaker, I concede the point of order.
  The SPEAKER pro tempore. The point of order is therefore sustained.


          Motion to Recommit Offered by Mr. Davis of Tennessee

  Mr. DAVIS of Tennessee. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore. The Clerk will report the motion to 
recommit.
  The Clerk read as follows:

       Mr. DAVIS of Tennessee moves to recommit the bill H.R. 3550 
     to the Committee on Transportation and Infrastructure with 
     instructions to report the same back to the House promptly 
     with the following amendments:
       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
       (6) $11,430,000,000 for fiscal year 2009.
       Strike the revenue title (other than the small business 
     benefits) and insert the following:
    TITLE IX--HIGHWAY REAUTHORIZATION AND EXCISE TAX SIMPLIFICATION

     SECTION 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

[[Page 6375]]

     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 6376]]

       (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.

[[Page 6377]]

       ``(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--
       ``(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.''.

       (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

[[Page 6378]]

       ``(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).''.
       (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

[[Page 6379]]

     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:
       ``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.

[[Page 6380]]



     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.
       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--

[[Page 6381]]

       ``(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 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.

                   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),

[[Page 6382]]

       ``(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.--
       ``(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:

[[Page 6383]]

       ``(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''.
       (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)''.
       (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.

[[Page 6384]]

       ``(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 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

[[Page 6385]]

       (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.

     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:

[[Page 6386]]



     ``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--
       ``(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

[[Page 6387]]

     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 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

[[Page 6388]]

     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 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.

[[Page 6389]]

       ``(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--
       (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.--

[[Page 6390]]

       (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, 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

[[Page 6391]]

     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:

``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.

[[Page 6392]]



     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 section 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).
       (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. FEES FOR CERTAIN CUSTOMS SERVICES.

       (a) In General.--Subtitle A of the Internal Revenue Code of 
     1986 is amended by inserting after chapter 55 the following 
     new chapter:

            ``CHAPTER 56--FEES FOR CERTAIN CUSTOMS SERVICES

``Sec. 5896. Imposition of fees.

     ``SEC. 5896. IMPOSITION OF FEES.

       ``(a) In General.--The Secretary shall charge and collect 
     fees under this title which are equivalent to the fees which 
     would be imposed by section 13031 of the Consolidated Omnibus 
     Budget Reconciliation Act of 1985 (19 U.S.C. 58c) were such 
     section in effect after March 1, 2005.
       ``(b) Collection and Disposition of Fees, Etc.--References 
     in such section 13031 to fees thereunder shall be treated as 
     including references to the fees charged under this 
     section.''
       (b) Clerical Amendment.--The table of chapters for subtitle 
     A of such Code is amended by adding at the end the following 
     new item:

``Chapter 56. Fees for certain customs services.''

       (c) Effective date.--The amendments made by this section 
     shall take effect on March 1, 2005.
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)).

[[Page 6393]]

       ``(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. DAVIS of Tennessee (during the reading). Mr. Speaker, I ask 
unanimous consent that the motion to recommit be considered as read and 
printed in the Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Tennessee?
  Mr. NUSSLE. Mr. Speaker, reserving the right to object, my 
understanding is that the only difference between the motion to 
recommit that the gentleman just offered and we struck with a point of 
order and the one that he is now offering is the difference between the 
words ``forthwith'' and ``promptly.''
  Is that the gentleman's understanding?
  Mr. DAVIS of Tennessee. Mr. Speaker, will the gentleman yield?
  Mr. NUSSLE. I yield to the gentleman from Tennessee.
  Mr. DAVIS of Tennessee. No, there are other changes and they have 
been cleared by the Parliamentarian.
  Mr. NUSSLE. Mr. Speaker, then, continuing to reserve the right to 
object, I would ask what the gentleman's changes are. Because my 
understanding is that the only difference is between ``forthwith'' and 
``promptly.'' The first four pages are increases in spending to the 
level purported to be the level of the Senate, and then from page 4, 5, 
6, 7, 8, 9, 10, 11 and on and on and on and on are increases in taxes, 
on and on from page 4 all the way, increasing taxes, not gas taxes, but 
all the way to page 174 are increases in taxes.
  I would ask the gentleman, did he strike the tax increases from page 
4 all the way to 174 in the motion to recommit?
  Mr. DAVIS of Tennessee. One of the differences in this bill is that 
it changes the part where we would report back promptly changes in this 
bill.
  Mr. NUSSLE. Mr. Speaker, I will not object to the dispensing of the 
reading, but at this point I would like certainly to hear from the 
gentleman why it is that there are four pages of spending and then 170 
pages of tax increases in this motion to recommit.
  Mr. Speaker, I withdraw my reservation of objection.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Tennessee?
  There was no objection.
  The SPEAKER pro tempore. The gentleman from Tennessee is recognized 
for 5 minutes in support of his motion to recommit.
  Mr. DAVIS of Tennessee. Mr. Speaker, I include for the Record a State 
by State chart of the total highway/transit investment increases and 
new jobs that would be created under this new motion to recommit.

         TOTAL HIGHWAY/TRANSIT INVESTMENT INCREASES AND NEW JOBS CREATED UNDER DAVIS MOTION TO RECOMMIT
                 [6-Year Comparison of Funding Levels H.R. 3550 vs. Davis Motion--April 2, 2004]
----------------------------------------------------------------------------------------------------------------
                                                                                                       New Jobs
                     State                           Highway          Transit       Total Increase     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      790,817,798     3,773,979,330      179,264
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.........................................       224,433,409       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       440,438,195       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       233,897,540       11,110
Tennessee.....................................       717,211,581       50,666,878       767,878,459       36,474
Texas.........................................     2,507,570,916      287,128,089     2,794,699,005      132,748
Utah..........................................       248,012,183       41,168,296       289,180,479       13,736
Vermont.......................................       144,829,487        3,704,577       148,534,064        7,055
Virginia......................................       817,694,519       81,898,909       899,593,428       42,731
Washington....................................       569,305,588      131,298,248       700,603,836       33,279
West Virginia.................................       358,479,108       12,771,895       371,251,003       17,634
Wisconsin.....................................       630,750,942       63,268,811       694,019,753       32,966
Wyoming.......................................       220,142,087        4,665,881       224,807,968       10,678
                                               -----------------------------------------------------------------
    All States................................    32,177,385,058    4,854,102,917    37,031,487,975    1,758,996
----------------------------------------------------------------------------------------------------------------
Total funding levels calculated by the Federal Highway Administration and the Federal Transit Administration,
  U.S. Department of Transportation.


[[Page 6394]]

  Mr. Speaker, I yield 2 minutes to the gentleman from New Jersey (Mr. 
Menendez).
  Mr. MENENDEZ. Mr. Speaker, the Davis motion to recommit increases the 
funding in this bill to the Senate level of $318 billion, and it does 
something about donor-donee issues which we have heard a lot about 
here. Unlike the previous objection that was originally heard, the 
Senate bill, which is in essence the way in which the gentleman from 
Tennessee has constructed this, is a fiscally responsible bill. There 
is no new gas tax in it, so let us not be deceived.
  That increase to rise to the 318 is fully offset by what? By cracking 
down on abusive tax shelters and by preventing American companies from 
avoiding paying U.S. taxes by moving to a foreign country. It is not 
only fiscally responsible; it is responsible national economic 
development policy. It is going to create 1.8 million more additional 
jobs, and God knows we need those jobs in this country. And it is about 
national security policy.
  The bill is supposed to be about a legacy. Do we want it to be a 
legacy of congestion and deteriorating infrastructure? Or do we want it 
to be about increased productivity and more good-paying jobs? About a 
Nation that has the redundancy and multiplicity of transportation 
infrastructure to respond to national emergencies on the scale of what 
happened on September 11 where after so many different modes of 
transportation were shut down, there is still one available to get 
people out of downtown Manhattan over to New Jersey into hospitals?
  If you want more money to go to your State, if you do not want just 
to stop the decay of the Nation's infrastructure, but dramatically 
improve it; if you want to help create good-paying jobs, 1.8 million 
more jobs for the people of this country; if you want to have multiple 
avenues to evacuate people and for first responders to reach the site, 
God forbid, of the next national emergency, then you will vote for the 
Davis motion to recommit. It is fiscally responsible. It is about 
creating jobs. It is about the national security of the United States.
  Mr. DAVIS of Tennessee. Mr. Speaker, as a graduate from my hometown 
school, I traveled on an interstate called Interstate 40. It was about 
one-third finished. My grandchildren travel that today. With this bill, 
with this increase with this motion to recommit and the suggestion of 
increasing it to $318 billion, all of our children and grandchildren to 
come will have an infrastructure that will be the seed that is needed 
for economic growth and investment for the future.
  Mr. Speaker, I yield the balance of my time to the gentleman from 
Oregon (Mr. Blumenauer).
  The SPEAKER pro tempore. The gentleman from Oregon is recognized for 
1\1/2\ minutes.
  Mr. BLUMENAUER. Mr. Speaker, we have extolled the leadership of our 
committee chair and ranking member and the subcommittee chair and 
ranking member. I think that is appropriate because they have taken a 
difficult task and have given us a good bill. But it falls far short of 
the needs that have been identified by our own Department of 
Transportation.
  One of the reasons we have had the trauma about the donor-donee over 
the course of the last 2 weeks is simply because we are not right-
sizing this bill. Every day we are losing the battle to congestion, 
pollution, and bridges that are crumbling faster than we can fix them. 
This motion will get us one-third of the way that was envisioned by our 
committee leadership. It is, in fact, paid for and it will provide 
extra money for States large like California, Texas and New York, small 
States; and more important than the money in this time of economic 
concern are the jobs.
  We have seen the good work by the committee leadership and we have 
not really acknowledged the leadership of Speaker Hastert and Leader 
Pelosi who understand that the President is wrong to draw the line here 
for the first time in his administration to exercise fiscal 
responsibility, so to speak, at the needs of our infrastructure.
  Now it is time for the leadership here. We on this floor have the 
opportunity to do our part as Members of Congress. We can vote for this 
motion to recommit. We can vote to make sure that the Federal 
Government is a better partner with our communities to make them more 
livable, to make our families safe, healthy and more economically 
secure.
  I strongly urge support for the Davis motion.
  The SPEAKER pro tempore. The time of the gentleman from Tennessee has 
expired.
  Mr. YOUNG of Alaska. Mr. Speaker, I claim the time in opposition to 
the motion to recommit.
  The SPEAKER pro tempore. The gentleman from Alaska is recognized for 
5 minutes.
  Mr. YOUNG of Alaska. Mr. Speaker, we have spent 2 good days of very 
legitimate debate. I was hoping we could avoid some of the things being 
said now. Although it may sound clear and true, I can say we face 
reality. This bill came out of our committee unanimously with the 
gentleman from Minnesota (Mr. Oberstar) supporting it. We want to go 
forth. The 318 figure coming from the Senate side, very frankly, I do 
not think is true. What we have to do is try to find the real dollars, 
and we are going to attempt to do that in conference.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from California (Mr. Thomas).
  Mr. THOMAS. I thank the gentleman for yielding me this time.
  Mr. Speaker, we really do have to decide whether we want to try to 
make law or score political points. The first motion that was offered 
was obviously a ruse because it would have killed the bill. You then 
say changing ``forthwith'' to ``promptly'' makes this a serious offer. 
You need to know that the reason they dropped ``forthwith'' to 
``promptly'' and dropped various portions of the bill was to make it 
germane under the rules. In dropping those portions to make it germane, 
we have no idea what the revenue consequences of this bill are. There 
is no score available.
  I will tell you this, that the old provision was $38 billion in 
revenue. If anyone knows how the Senate works, it is very simple. The 
way you get the votes to pass anything is to ask whoever would possibly 
vote for something, what do they want. It is an additive process. What 
we have here is the sum and substance of a bill that passed the Senate, 
which means there is no rationale to anything in the revenue portion.
  Let me give you one brief example. Turn to page 108 and to raise the 
revenue that is in this bill, which is not directly applicable to the 
highway bill in about two-thirds of it, the effective date of the 
provisions ending on page 108 shall apply to transactions entered into 
after February 13, 2003.

                              {time}  1145

  What was good law on February 13 last year, retroactively, will not 
be good law if you vote for this measure. And if you think there is 
nothing worse than the government's saying one can do something and 
then, after they did it when it was legal, saying, no, now it is not, 
then understand that is the way the Senate legislates. If you want to 
make law, let us stick with the dollar amounts we have.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Thornberry). The Chair would first 
remind all Members that it is inappropriate to characterize actions in 
the other body, and all Members should remember that admonishment in 
making their comments on the floor.
  Mr. THOMAS. Mr. Speaker, I accept that admonition. The other body has 
no problem changing the law after the fact. We should not.


                             Point of Order

  Mr. FRANK of Massachusetts. Point of order, Mr. Speaker.
  The SPEAKER pro tempore. The gentleman from Massachusetts will state 
his point of order.
  Mr. FRANK of Massachusetts. Mr. Speaker, simply not using the word 
``Senate'' does not alter the impact of the rule. The gentleman is in 
violation of the rule.

[[Page 6395]]

  The SPEAKER pro tempore. The Chair will repeat that it is 
inappropriate to characterize actions in the other body, regardless of 
what one calls them.
  The gentleman from Alaska (Mr. Young) has 2 minutes remaining.
  Mr. YOUNG of Alaska. Mr. Speaker, I yield the other body 1 minute.
  Mr. THOMAS. Mr. Speaker, in referring to those that I cannot refer 
to, in examining the legislation offered as a motion to recommit, 
simply look at page 108. What was legal will not be legal. Someone who 
took actions by virtue of something that if it were criminal would be 
unconstitutional is in this legislation.
  Let us make law. Let us not make political points. Vote down this 
motion to recommit, and together let us move solid legislation that we 
can turn into law, much-needed law, as soon as possible.
  I thank the gentleman for yielding me this time.
  Mr. YOUNG of Alaska. Mr. Speaker, I thank the gentleman for his 
remarks.
  Let us move forward. Let us try to legislate. Let us do our job.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. Without objection, the previous question is 
ordered on the motion to recommit.
  There was no objection.
  The SPEAKER pro tempore. The question is on the motion to recommit.
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.


                             Recorded Vote

  Mr. DAVIS of Tennessee. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The SPEAKER pro tempore. Pursuant to clause 9 of rule XX, this 15-
minute vote on the motion to recommit will be followed by a 5-minute 
vote, if ordered, on passage and, without objection, by a 5-minute 
vote, if ordered, on a nondebatable concurrent resolution to adjourn.
  There was no objection.
  The vote was taken by electronic device, and there were--ayes 198, 
noes 225, not voting 10, as follows:

                             [Roll No. 113]

                               AYES--198

     Abercrombie
     Ackerman
     Alexander
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Case
     Chandler
     Clay
     Clyburn
     Conyers
     Cooper
     Costello
     Cramer
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gephardt
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lucas (KY)
     Lynch
     Majette
     Maloney
     Markey
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (GA)
     Scott (VA)
     Sherman
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Strickland
     Stupak
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                               NOES--225

     Aderholt
     Akin
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Carter
     Castle
     Chabot
     Chocola
     Coble
     Cole
     Collins
     Cox
     Crane
     Crenshaw
     Cubin
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     English
     Everett
     Feeney
     Ferguson
     Flake
     Foley
     Forbes
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Hall
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Houghton
     Hunter
     Hyde
     Isakson
     Istook
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     Marshall
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller (FL)
     Miller (MI)
     Miller, Gary
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Neugebauer
     Ney
     Northup
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schrock
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Stenholm
     Sullivan
     Sweeney
     Tancredo
     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)

                             NOT VOTING--10

     Culberson
     DeMint
     Hulshof
     Issa
     Miller, George
     Reyes
     Serrano
     Tanner
     Tauzin
     Waxman

                              {time}  1207

  Mr. GUTIERREZ changed his vote from ``no'' to ``aye.''
  So the motion to recommit was rejected.
  The result of the vote was announced as above recorded.
  The SPEAKER pro tempore (Mr. Thornberry). The question is on the 
passage of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Mr. YOUNG of Alaska. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. This will be a 5-minute vote, to be followed 
by a 5-minute vote on H. Con. Res. 404, if ordered.
  The vote was taken by electronic device, and there were--yeas 357, 
nays 65, not voting 11, as follows:

                             [Roll No. 114]

                               YEAS--357

     Abercrombie
     Ackerman
     Aderholt
     Alexander
     Allen
     Andrews
     Baca
     Bachus
     Baird
     Baker
     Baldwin
     Ballance
     Ballenger
     Bartlett (MD)
     Bass
     Beauprez
     Becerra
     Bell
     Bereuter
     Berkley
     Berman
     Berry
     Biggert
     Bishop (GA)
     Bishop (NY)
     Bishop (UT)
     Blackburn
     Blumenauer
     Boehlert
     Bonilla
     Bonner
     Bono
     Boozman
     Boswell
     Boucher
     Bradley (NH)
     Brady (PA)
     Brown (OH)
     Brown (SC)
     Brown, Corrine
     Burgess
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Capito
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Carter
     Case
     Chabot
     Chandler
     Chocola
     Clay
     Clyburn
     Coble
     Collins
     Conyers
     Cooper
     Costello
     Cox
     Cramer
     Crane
     Crowley
     Cubin
     Cummings

[[Page 6396]]


     Cunningham
     Davis (AL)
     Davis (CA)
     Davis (IL)
     Davis (TN)
     Davis, Jo Ann
     Davis, Tom
     DeFazio
     DeGette
     Delahunt
     DeLauro
     DeLay
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doolittle
     Doyle
     Dreier
     Duncan
     Dunn
     Edwards
     Ehlers
     Emanuel
     Emerson
     Engel
     English
     Eshoo
     Etheridge
     Evans
     Everett
     Farr
     Fattah
     Ferguson
     Filner
     Forbes
     Ford
     Fossella
     Frank (MA)
     Frelinghuysen
     Frost
     Gallegly
     Garrett (NJ)
     Gephardt
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gonzalez
     Goode
     Goodlatte
     Gordon
     Granger
     Graves
     Green (TX)
     Greenwood
     Grijalva
     Gutierrez
     Hall
     Harman
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Herger
     Hinchey
     Hinojosa
     Hobson
     Hoeffel
     Hoekstra
     Holden
     Holt
     Honda
     Hooley (OR)
     Hostettler
     Houghton
     Hoyer
     Hyde
     Inslee
     Israel
     Issa
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     Jenkins
     John
     Johnson (CT)
     Johnson (IL)
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kelly
     Kennedy (MN)
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     King (IA)
     King (NY)
     Kirk
     Kleczka
     Knollenberg
     Kucinich
     LaHood
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Latham
     LaTourette
     Leach
     Lee
     Levin
     Lewis (CA)
     Lewis (GA)
     Lewis (KY)
     Lipinski
     LoBiondo
     Lofgren
     Lowey
     Lucas (KY)
     Lynch
     Majette
     Maloney
     Manzullo
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McCotter
     McCrery
     McDermott
     McGovern
     McHugh
     McInnis
     McIntyre
     McKeon
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Mica
     Michaud
     Millender-McDonald
     Miller (MI)
     Miller (NC)
     Miller, Gary
     Mollohan
     Moore
     Moran (KS)
     Moran (VA)
     Murphy
     Murtha
     Musgrave
     Nadler
     Napolitano
     Neal (MA)
     Nethercutt
     Neugebauer
     Ney
     Northup
     Nunes
     Nussle
     Oberstar
     Obey
     Olver
     Ortiz
     Osborne
     Ose
     Owens
     Oxley
     Pallone
     Pascrell
     Pastor
     Payne
     Pearce
     Pelosi
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Pomeroy
     Porter
     Portman
     Price (NC)
     Pryce (OH)
     Quinn
     Radanovich
     Rahall
     Ramstad
     Rangel
     Regula
     Rehberg
     Renzi
     Reynolds
     Rodriguez
     Rogers (AL)
     Rogers (KY)
     Rohrabacher
     Ross
     Rothman
     Roybal-Allard
     Royce
     Ruppersberger
     Rush
     Ryan (OH)
     Ryun (KS)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Schrock
     Scott (GA)
     Scott (VA)
     Serrano
     Sessions
     Shays
     Sherman
     Sherwood
     Shimkus
     Shuster
     Simmons
     Skelton
     Slaughter
     Smith (NJ)
     Smith (TX)
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stenholm
     Strickland
     Stupak
     Sweeney
     Tauscher
     Taylor (MS)
     Taylor (NC)
     Terry
     Thomas
     Thompson (CA)
     Thompson (MS)
     Tiahrt
     Tiberi
     Tierney
     Towns
     Turner (OH)
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Upton
     Van Hollen
     Velazquez
     Visclosky
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Waters
     Watson
     Watt
     Weiner
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Woolsey
     Wu
     Wynn
     Young (AK)

                                NAYS--65

     Akin
     Barrett (SC)
     Barton (TX)
     Bilirakis
     Blunt
     Boehner
     Boyd
     Brady (TX)
     Brown-Waite, Ginny
     Burns
     Cantor
     Castle
     Cole
     Crenshaw
     Davis (FL)
     Deal (GA)
     Deutsch
     Diaz-Balart, L.
     Diaz-Balart, M.
     Feeney
     Flake
     Foley
     Franks (AZ)
     Gingrey
     Goss
     Green (WI)
     Gutknecht
     Harris
     Hastings (FL)
     Hensarling
     Hill
     Isakson
     Istook
     Johnson, Sam
     Jones (NC)
     Keller
     Kingston
     Kline
     Kolbe
     Linder
     Lucas (OK)
     Miller (FL)
     Myrick
     Norwood
     Otter
     Paul
     Pence
     Putnam
     Rogers (MI)
     Ros-Lehtinen
     Ryan (WI)
     Sensenbrenner
     Shadegg
     Shaw
     Simpson
     Smith (MI)
     Souder
     Stearns
     Sullivan
     Tancredo
     Thornberry
     Toomey
     Weldon (FL)
     Wexler
     Young (FL)

                             NOT VOTING--11

     Culberson
     DeMint
     Hulshof
     Hunter
     Miller, George
     Reyes
     Saxton
     Stark
     Tanner
     Tauzin
     Waxman

                              {time}  1215

  Mr. DAVIS of Florida changed his vote from ``yea'' to ``nay.''
  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.
  Stated for:
  Mr. STARK. Mr. Speaker, earlier today during the vote on final 
passage of H.R. 3550, I was called off the floor to receive a phone 
call from my office. In my distraction, I thought I had voted in favor 
of H.R. 3550 when in actual fact I had not cast my vote. Had I not been 
distracted, I would have voted ``Aye'' on final passage of H.R. 3550.

                          ____________________