[House Report 114-147]
[From the U.S. Government Publishing Office]


114th Congress    }                                      {      Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                      {     114-147

======================================================================



 
                 PROTECT MEDICAL INNOVATION ACT OF 2015

                                _______
                                

 June 11, 2015.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Ryan of Wisconsin, from the Committee on Ways and Means, submitted 
                             the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 160]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 160) to amend the Internal Revenue Code of 1986 to 
repeal the excise tax on medical devices, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. SUMMARY AND BACKGROUND...........................................2
          A. Purpose and Summary.................................     2
          B. Background and Need for Legislation.................     2
          C. Legislative History.................................     2
 II. EXPLANATION OF THE BILL..........................................3
          A. Repeal of Medical Device Excise Tax (sec. 2 of the 
              bill, sec. 4191 of the Code).......................     3
III. VOTES OF THE COMMITTEE...........................................5
 IV. BUDGET EFFECTS OF THE BILL.......................................5
          A. Committee Estimate of Budgetary Effects.............     5
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................     6
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................     6
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......7
          A. Committee Oversight Findings and Recommendations....     7
          B. Statement of General Performance Goals and 
              Objectives.........................................     7
          C. Information Relating to Unfunded Mandates...........     7
          D. Applicability of House Rule XXI 5(b)................     7
          E. Tax Complexity Analysis.............................     8
          F. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................     8
          G. Duplication of Federal Programs.....................     8
          H. Disclosure of Directed Rule Makings.................     8
 VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............8
          A. Text of Existing Law Amended or Repealed by the 
              Bill, as Reported..................................     8
          B. Changes in Existing Law Proposed by the Bill, as 
              Reported...........................................    17
VII. MINORITY VIEWS..................................................27

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Protect Medical Innovation Act of 
2015''.

SEC. 2. REPEAL OF MEDICAL DEVICE EXCISE TAX.

  (a) In General.--Chapter 32 of the Internal Revenue Code of 1986 is 
amended by striking subchapter E.
  (b) Conforming Amendments.--
          (1) Subsection (a) of section 4221 of such Code is amended by 
        striking the last sentence.
          (2) Paragraph (2) of section 6416(b) of such Code is amended 
        by striking the last sentence.
  (c) Clerical Amendment.--The table of subchapters for chapter 32 of 
such Code is amended by striking the item relating to subchapter E.
  (d) Effective Date.--The amendments made by this section shall apply 
to sales in calendar quarters beginning after the date of the enactment 
of this Act.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 160, as reported by the Committee on Ways 
and Means, repeals the 2.3-percent excise tax on medical device 
sales for calendar quarters beginning after the date of 
enactment.

                 B. Background and Need for Legislation

    While the Committee continues actively to pursue 
comprehensive tax reform as a critical means of promoting 
economic growth and job creation, the Committee also believes 
it is important to provide immediate relief from taxes that 
stifle innovation in order to encourage economic growth and job 
creation. The Committee believes that repealing the medical 
device excise tax will decrease health care costs, encourage 
medical innovation, and eliminate an unfair tax burden.

                         C. Legislative History


Background

    H.R. 160 was introduced on January 6, 2015, and was 
referred to the Committee on Ways and Means.

Committee action

    The Committee on Ways and Means marked up H.R. 160, the 
``Protect Medical Innovation Act of 2015'' on June 2, 2015, and 
ordered the bill, as amended, favorably reported (with a quorum 
being present).

Committee hearings

    The harmful effects and need for repeal of the medical 
device excise tax was discussed at three hearings during the 
112th, 113th, and 114th Congresses:
           Full Committee Hearing on the Tax 
        Ramifications of the Supreme Court's Ruling on the 
        Democrats' Health Care Law (July 10, 2012);
           Oversight Subcommittee Hearing on the Tax-
        Related Provisions in the President's Health Care Law 
        (March 5, 2013); and
           Full Committee Hearing on Moving America 
        Forward: With a Focus on Economic Growth (January 15, 
        2015).

                      II. EXPLANATION OF THE BILL


 A. Repeal of Medical Device Excise Tax (sec. 2 of the bill, sec. 4191 
                              of the Code)


                              PRESENT LAW

    Effective for sales after December 31, 2012, a tax equal to 
2.3 percent of the sale price is imposed on the sale of any 
taxable medical device by the manufacturer, producer, or 
importer of such device.\1\ A taxable medical device is any 
device, as defined in section 201(h) of the Federal Food, Drug, 
and Cosmetic Act,\2\ intended for humans. Regulations further 
define a medical device as one that is listed by the Food and 
Drug Administration (``FDA'') under section 510(j) of the 
Federal Food, Drug, and Cosmetic Act and 21 CFR Part 807, 
pursuant to FDA requirements.\3\
---------------------------------------------------------------------------
    \1\Sec. 4191.
    \2\21 U.S.C. sec. 321. Section 201(h) defines device as ``an 
instrument, apparatus, implement, machine, contrivance, implant, in 
vitro reagent, or other similar or related article, including any 
component, part, or accessory, which is (1) recognized in the official 
National Formulary, or the United States Pharmacopeia, or any 
supplement to them, (2) intended for use in the diagnosis of disease or 
other conditions, or in the cure, mitigation, treatment, or prevention 
of disease, in man or other animals, or (3) intended to affect the 
structure or any function of the body of man or other animals, and 
which does not achieve its primary intended purposes through chemical 
action within or on the body of man or other animals and which is not 
dependent upon being metabolized for the achievement of its primary 
intended purposes.''
    \3\Treas. Reg. sec. 48.4191-2(a). The regulations also include as 
devices items that should have been listed as a device with the FDA as 
of the date the FDA notifies the manufacturer or importer that 
corrective action with respect to listing is required.
---------------------------------------------------------------------------
    The excise tax does not apply to eyeglasses, contact 
lenses, hearing aids, or any other medical device determined by 
the Secretary to be of a type that is generally purchased by 
the general public at retail for individual use (``retail 
exemption''). Regulations provide guidance on the types of 
devices that are exempt under the retail exemption. A device is 
exempt under these provisions if: (1) it is regularly available 
for purchase and use by individual consumers who are not 
medical professionals; and (2) the design of the device 
demonstrates that it is not primarily intended for use in a 
medical institution or office or by a medical professional.\4\ 
Additionally, the regulations provide certain safe harbors for 
devices eligible for the retail exemption.\5\
---------------------------------------------------------------------------
    \4\Treas. Reg. sec. 48.4191-2(b)(2).
    \5\Treas. Reg. sec. 48.4191-2(b)(2)(iii). The safe harbors include 
devices that are described as over-the-counter devices in relevant FDA 
classification headings, as well as certain FDA device classifications 
listed in the regulations.
---------------------------------------------------------------------------
    The medical device excise tax is generally subject to the 
rules applicable to other manufacturers excise taxes. These 
rules include certain general manufacturers excise tax 
exemptions including the exemption for sales for use by the 
purchaser for further manufacture (or for resale to a second 
purchaser in further manufacture) or for export (or for resale 
to a second purchaser for export).\6\ If a medical device is 
sold free of tax for resale to a second purchaser for further 
manufacture or for export, the exemption does not apply unless, 
within the six-month period beginning on the date of sale by 
the manufacturer, the manufacturer receives proof that the 
medical device has been exported or resold for use in further 
manufacturing.\7\ In general, the exemption does not apply 
unless the manufacturer, the first purchaser, and the second 
purchaser are registered with the Secretary of the Treasury. 
Foreign purchasers of articles sold or resold for export are 
exempt from the registration requirement.
---------------------------------------------------------------------------
    \6\Sec. 4221(a). Other general manufacturers excise tax exemptions 
(i.e., the exemption for sales to purchasers for use as supplies for 
vessels or aircraft, to a State or local government, to a nonprofit 
educational organization, or to a qualified blood collector 
organization) do not apply to the medical device excise tax.
    \7\Sec. 4221(b).
---------------------------------------------------------------------------
    The lease of a medical device is generally considered to be 
a sale of such device.\8\ Special rules apply for the 
imposition of tax to each lease payment. The use of a medical 
device subject to tax by manufacturers, producers, or importers 
of such device is treated as a sale for the purpose of 
imposition of excise taxes.\9\
---------------------------------------------------------------------------
    \8\Sec. 4217(a).
    \9\Sec. 4218.
---------------------------------------------------------------------------
    There are also rules for determining the price of a medical 
device on which the excise tax is imposed.\10\ These rules 
provide for (1) the inclusion of containers, packaging, and 
certain transportation charges in the price, (2) determining a 
constructive sales price if a medical device is sold for less 
than the fair market price, and (3) determining the tax due in 
the case of partial payments or installment sales.
---------------------------------------------------------------------------
    \10\Sec. 4216.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The U.S. medical device industry is a leader in medical 
technology innovation. The industry is an important contributor 
to the nation's economy, employing hundreds of thousands of 
people and manufacturing devices both for the U.S. and foreign 
markets. The United States is a net exporter of medical 
devices. The Committee believes that the excise tax on medical 
devices adversely affects the industry. The Committee believes 
that repealing the tax will decrease the cost of healthcare, 
encourage medical innovation, and lead to more jobs in the 
industry.

                        EXPLANATION OF PROVISION

    The provision repeals the medical device excise tax.

                             EFFECTIVE DATE

    The provision applies to sales in calendar quarters 
beginning after the date of enactment of this Act.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 160, the ``Protect Medical Innovation Act 
of 2015,'' on June 2, 2015.
    The Chairman's amendment in the nature of a substitute was 
adopted by a voice vote (with a quorum being present).
    The bill, H.R. 160, as amended, was ordered favorably 
reported to the House of Representatives by a roll call vote of 
25 yeas to 14 nays (with a quorum being present). The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Ryan.......................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Brady......................        X   ........  .........  Mr. McDermott....  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Becerra......  ........        X   .........
Mr. Boustany...................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Price......................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........        X   ........  .........
Ms. Jenkins....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........
Mr. Young......................        X   ........  .........
Mr. Kelly......................        X   ........  .........
Mr. Renacci....................        X   ........  .........
Mr. Meehan.....................        X   ........  .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Dold.......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 160, as 
reported.
    The bill, as reported, is estimated to have the following 
effect on Federal budget receipts for fiscal years 2016-2025:

                                                                      FISCAL YEARS
                                                                  [Billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
    2016         2017         2018         2019         2020         2021         2022         2023         2024         2025       2016-20     2016-25
--------------------------------------------------------------------------------------------------------------------------------------------------------
     -1.8         -2.0         -2.1         -2.2         -2.3         -2.5         -2.6         -2.8         -2.9         -3.1        -10.4       -24.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.

    Pursuant to clause 8 of rule XIII of the Rules of the House 
of Representatives, the following statement is made by the 
Joint Committee on Taxation with respect to the provisions of 
the bill amending the Internal Revenue Code of 1986: The gross 
budgetary effect (before incorporating macroeconomic effects) 
in any fiscal year is less than 0.25 percent of the current 
projected gross domestic product of the United States for that 
fiscal year; therefore, the bill is not ``major legislation'' 
for purposes of requiring that the estimate include the 
budgetary effects of changes in economic output, employment, 
capital stock and other macroeconomic variables.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee further states that there are no new or increased tax 
expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, June 4, 2015.
Hon. Paul Ryan,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 160, the Protect 
Medical Innovation Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Logan 
Timmerhoff.
            Sincerely,
                                              Keith Hall, Director.
    Enclosure.

H.R. 160--Protect Medical Innovation Act of 2015

    H.R. 160 would amend the Internal Revenue Code to repeal 
the medical device excise tax. Under current law, a tax of 2.3 
percent is imposed on the sale of medical devices by the 
manufacturer or importer. Medical devices that are regularly 
available at retail for individual use and not primarily 
intended for use by a medical professional are exempt from the 
tax. The tax went into effect on January 1, 2013, and its 
repeal by H.R. 160 would be effective starting in the first 
calendar quarter after the date of enactment.
    The staff of the Joint Committee on Taxation (JCT) 
estimates that enacting H.R. 160 would reduce revenues, thus 
increasing federal deficits, by about $24.4 billion over the 
2015-2025 period. The estimate assumes enactment in the last 
quarter of fiscal year 2015.
    The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting 
direct spending and revenues. Enacting H.R. 160 would result in 
revenue losses in each year beginning in 2016. The estimated 
increases in the deficit are shown in the following table.
    JCT has determined that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Logan 
Timmerhoff. The estimate was approved by David Weiner, 
Assistant Director for Tax Analysis.

            CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 160, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON JUNE 2, 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               By fiscal year, in millions of dollars--
                                            ------------------------------------------------------------------------------------------------------------
                                              2015   2016    2017    2018    2019    2020    2021    2022    2023    2024    2025   2015-2020  2015-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact.............      0   1,834   1,958   2,085   2,216   2,349   2,488   2,630   2,778   2,934   3,097    10,441     24,368
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Note: Components do not sum to totals because of rounding.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the provisions of H.R. 160 that the 
Committee concluded that it is appropriate to report the bill, 
as amended, favorably to the House of Representatives with the 
recommendation that the bill do pass.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                D. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill, and states that the bill does not 
involve any Federal income tax rate increases within the 
meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 requires the staff of the 
Joint Committee on Taxation (in consultation with the Internal 
Revenue Service and the Treasury Department) to provide a tax 
complexity analysis. The complexity analysis is required for 
all legislation reported by the Senate Committee on Finance, 
the House Committee on Ways and Means, or any committee of 
conference if the legislation includes a provision that 
directly or indirectly amends the Internal Revenue Code and has 
widespread applicability to individuals or small businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Internal Revenue 
Code and that have ``widespread applicability'' to individuals 
or small businesses, within the meaning of the rule.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with Sec. 3(g)(2) of H. Res. 5 (114th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169).

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED


  A. Text of Existing Law Amended or Repealed by the Bill, as Reported

    In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *


CHAPTER 32--MANUFACTURERS EXCISE TAXES

           *       *       *       *       *       *       *


subchapter e. medical devices

           *       *       *       *       *       *       *


                     Subchapter E--Medical Devices

Sec. 4191. Medical devices.

SEC. 4191. MEDICAL DEVICES.

  (a) In General.--There is hereby imposed on the sale of any 
taxable medical device by the manufacturer, producer, or 
importer a tax equal to 2.3 percent of the price for which so 
sold.
  (b) Taxable Medical Device.--For purposes of this section--
          (1) In general.--The term ``taxable medical device'' 
        means any device (as defined in section 201(h) of the 
        Federal Food, Drug, and Cosmetic Act) intended for 
        humans.
          (2) Exemptions.--Such term shall not include--
                  (A) eyeglasses,
                  (B) contact lenses,
                  (C) hearing aids, and
                  (D) any other medical device determined by 
                the Secretary to be of a type which is 
                generally purchased by the general public at 
                retail for individual use.

           *       *       *       *       *       *       *


              Subchapter G--Exemptions, Registration, Etc

SEC. 4221. CERTAIN TAX-FREE SALES.

  (a) General Rule.--Under regulations prescribed by the 
Secretary, no tax shall be imposed under this chapter (other 
than under section 4121 or 4081) on the sale by the 
manufacturer (or under subchapter C of chapter 31 on the first 
retail sale) of an article--
          (1) for use by the purchaser for further manufacture, 
        or for resale by the purchaser to a second purchaser 
        for use by such second purchaser in further 
        manufacture,
          (2) for export, or for resale by the purchaser to a 
        second purchaser for export,
          (3) for use by the purchaser as supplies for vessels 
        or aircraft,
          (4) to a State or local government for the exclusive 
        use of a State or local government,
          (5) to a nonprofit educational organization for its 
        exclusive use, or
          (6) to a qualified blood collector organization (as 
        defined in section 7701(a)(49)) for such organization's 
        exclusive use in the collection, storage, or 
        transportation of blood,
but only if such exportation or use is to occur before any 
other use. Paragraphs (4), (5), and (6) shall not apply to the 
tax imposed by section 4064. In the case of taxes imposed by 
section 4051, or 4071, paragraphs (4) and (5) shall not apply 
on and after October 1, 2016. In the case of the tax imposed by 
section 4131, paragraphs (3), (4), and (5) shall not apply and 
paragraph (2) shall apply only if the use of the exported 
vaccine meets such requirements as the Secretary may by 
regulations prescribe. In the case of taxes imposed by 
subchapter C or D, paragraph (6) shall not apply. In the case 
of the tax imposed by section 4191, paragraphs (3), (4), (5), 
and (6) shall not apply.
  (b) Proof of Resale for Further Manufacture; Proof of 
Export.--Where an article has been sold free of tax under 
subsection (a)--
          (1) for resale by the purchaser to a second purchaser 
        for use by such second purchaser in further 
        manufacture, or
          (2) for export, or for resale by the purchaser to a 
        second purchaser for export,
subsection (a) shall cease to apply in respect of such sale of 
such article unless, within the 6-month period which begins on 
the date of the sale by the manufacturer (or, if earlier, on 
the date of shipment by the manufacturer), the manufacturer 
receives proof that the article has been exported or resold for 
use in further manufacture.
  (c) Manufacturer Relieved from Liability in Certain Cases.--
In the case of any article sold free of tax under this section 
(other than a sale to which subsection (b) applies), and in the 
case of any article sold free of tax under section 4053(6), if 
the manufacturer in good faith accepts a certification by the 
purchaser that the article will be used in accordance with the 
applicable provisions of law, no tax shall thereafter be 
imposed under this chapter in respect of such sale by such 
manufacturer.
  (d) Definitions.--For purposes of this section--
          (1) Manufacturer.--The term ``manufacturer'' includes 
        a producer or importer of an article, and, in the case 
        of taxes imposed by subchapter C of chapter 31, 
        includes the retailer with respect to the first retail 
        sale.
          (2) Export.--The term ``export'' includes shipment to 
        a possession of the United States; and the term 
        ``exported'' includes shipped to a possession of the 
        United States.
          (3) Supplies for vessels or aircraft.--The term 
        ``supplies for vessels or aircraft'' means fuel 
        supplies, ships' stores, sea stores, or legitimate 
        equipment on vessels of war of the United States or of 
        any foreign nation, vessels employed in the fisheries 
        or in the whaling business, or vessels actually engaged 
        in foreign trade or trade between the Atlantic and 
        Pacific ports of the United States or between the 
        United States and any of its possessions. For purposes 
        of the preceding sentence, the term ``vessels'' 
        includes civil aircraft employed in foreign trade or 
        trade between the United States and any of its 
        possessions, and the term ``vessels of war of the 
        United States or of any foreign nation'' includes 
        aircraft owned by the United States or by any foreign 
        nation and constituting a part of the armed forces 
        thereof.
          (4) State or local government.--The term ``State or 
        local government'' means any State, any political 
        subdivision thereof, or the District of Columbia.
          (5) Nonprofit educational organization.--The term 
        ``nonprofit educational organization'' means an 
        educational organization described in section 
        170(b)(1)(A)(ii) which is exempt from income tax under 
        section 501(a). The term also includes a school 
        operated as an activity of an organization described in 
        section 501(c)(3) which is exempt from income tax under 
        section 501(a), if such school normally maintains a 
        regular faculty and curriculum and normally has a 
        regularly enrolled body of pupils or students in 
        attendance at the place where its educational 
        activities are regularly carried on.
          (6) Use in further manufacture.--An article shall be 
        treated as sold for use in further manufacture if--
                  (A) such article is sold for use by the 
                purchaser as material in the manufacture or 
                production of, or as a component part of, 
                another article taxable under this chapter to 
                be manufactured or produced by him; or
                  (B) in the case of gasoline taxable under 
                section 4081, such gasoline is sold for use by 
                the purchaser, for nonfuel purposes, as a 
                material in the manufacture or production of 
                another article to be manufactured or produced 
                by him.
          (7) Qualified bus.--
                  (A) In general.--The term ``qualified bus'' 
                means--
                          (i) an intercity or local bus, and
                          (ii) a school bus.
                  (B) Intercity or local bus.--The term 
                ``intercity or local bus'' means any automobile 
                bus which is used predominantly in furnishing 
                (for compensation) passenger land 
                transportation available to the general public 
                if--
                          (i) such transportation is scheduled 
                        and along regular routes, or
                          (ii) the seating capacity of such bus 
                        is at least 20 adults (not including 
                        the driver).
                  (C) School bus.--The term ``school bus'' 
                means any automobile bus substantially all the 
                use of which is in transporting students and 
                employees of schools. For purposes of the 
                preceding sentence, the term ``school'' means 
                an educational organization which normally 
                maintains a regular faculty and curriculum and 
                normally has a regularly enrolled body of 
                pupils or students in attendance at the place 
                where its educational activities are carried 
                on.
  (e) Special Rules.--
          (1) Reciprocity required in case of civil aircraft.--
        In the case of articles sold for use as supplies for 
        aircraft, the privileges granted under subsection 
        (a)(3) in respect of civil aircraft employed in foreign 
        trade or trade between the United States and any of its 
        possessions, in respect of aircraft registered in a 
        foreign country, shall be allowed only if the Secretary 
        of the Treasury has been advised by the Secretary of 
        Commerce that he has found that such foreign country 
        allows, or will allow, substantially reciprocal 
        privileges in respect of aircraft registered in the 
        United States. If the Secretary of the Treasury is 
        advised by the Secretary of Commerce that he has found 
        that a foreign country has discontinued or will 
        discontinue the allowance of such privileges, the 
        privileges granted under subsection (a)(3) shall not 
        apply thereafter in respect of civil aircraft 
        registered in that foreign country and employed in 
        foreign trade or trade between the United States and 
        any of its possessions.
          (2) Tires.--
                  (A) Tax-free sales.--Under regulations 
                prescribed by the Secretary, no tax shall be 
                imposed under section 4071 on the sale by the 
                manufacturer of a tire if--
                          (i) such tire is sold for use by the 
                        purchaser for sale on or in connection 
                        with the sale of another article 
                        manufactured or produced by such 
                        purchaser; and
                          (ii) such other article is to be sold 
                        by such purchaser in a sale which 
                        either will satisfy the requirements of 
                        paragraph (2), (3), (4), or (5) of 
                        subsection (a) for a tax-free sale, or 
                        would satisfy such requirements but for 
                        the fact that such other article is not 
                        subject to tax under this chapter.
                  (B) Proof.--Where a tire has been sold free 
                of tax under this paragraph, this paragraph 
                shall cease to apply unless, within the 6-moth 
                period which begins on the date of the sale by 
                him (or, if earlier on the date of the shipment 
                by him), the manufacturer of such tire receives 
                proof that the other article referred to in 
                clause (ii) of subparagraph (A) has been sold 
                in a manner which satisfies the requirements of 
                such clause (ii) (including in the case of a 
                sale for export, proof of export of such other 
                article).
                  (C) Subsection (a)(1) does not apply.--
                Paragraph (1) of subsection (a) shall not apply 
                with respect to the tax imposed under section 
                4071 on the sale of a tire.
          (3) Tires used on intercity, local, and school 
        buses.--Under regulations prescribed by the Secretary, 
        the tax imposed by section 4071 shall not apply in the 
        case of tires sold for use by the purchaser on or in 
        connection with a qualified bus.

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 65--ABATEMENTS, CREDITS, AND REFUNDS

           *       *       *       *       *       *       *


Subchapter B--Rules of Special Application

           *       *       *       *       *       *       *


SEC. 6416. CERTAIN TAXES ON SALES AND SERVICES.

  (a) Condition to Allowance.--
          (1) General rule.--No credit or refund of any 
        overpayment of tax imposed by chapter 31 (relating to 
        retail excise taxes), or chapter 32 (manufacturers 
        taxes), shall be allowed or made unless the person who 
        paid the tax establishes, under regulations prescribed 
        by the Secretary, that he--
                  (A) has not included the tax in the price of 
                the article with respect to which it was 
                imposed and has not collected the amount of the 
                tax from the person who purchased such article;
                  (B) has repaid the amount of the tax to the 
                ultimate purchaser of the article;
                  (C) in the case of an overpayment under 
                subsection (b)(2) of this section--
                          (i) has repaid or agreed to repay the 
                        amount of the tax to the ultimate 
                        vendor of the article, or
                          (ii) has obtained the written consent 
                        of such ultimate vendor to the 
                        allowance of the credit or the making 
                        of the refund; or
                  (D) has filed with the Secretary the written 
                consent of the person referred to in 
                subparagraph (B) to the allowance of the credit 
                or the making of the refund.
          (2) Exceptions.--This subsection shall not apply to--
                  (A) the tax imposed by section 4041 (relating 
                to tax on special fuels) on the use of any 
                liquid, and
                  (B) an overpayment of tax under paragraph 
                (1), (3)(A), (4), (5), or (6) of subsection (b) 
                of this section.
          (3) Special rule.--For purposes of this subsection, 
        in any case in which the Secretary determines that an 
        article is not taxable, the term ``ultimate purchaser'' 
        (when used in paragraph (1)(B) of this subsection) 
        includes a wholesaler, jobber, distributor, or retailer 
        who, on the 15th day after the date of such 
        determination, holds such article for sale; but only if 
        claim for credit or refund by reason of this paragraph 
        is filed on or before the date for filing the return 
        with respect to the taxes imposed under chapter 32 for 
        the first period which begins more than 60 days after 
        the date on such determination.
          (4) Registered ultimate vendor or credit card issuer 
        to administer credits and refunds of gasoline tax.--
                  (A) In general.--For purposes of this 
                subsection, except as provided in subparagraph 
                (B), 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.
                  (B) Credit card issuer.--For purposes of this 
                subsection, if the purchase of gasoline 
                described in subparagraph (A) (determined 
                without regard to the registration status of 
                the ultimate vendor) is made by means of a 
                credit card issued to the ultimate purchaser, 
                paragraph (1) shall not apply and the person 
                extending the credit to the ultimate purchaser 
                shall be treated as the person (and the only 
                person) who paid the tax, but only if such 
                person--
                          (i) is registered under section 4101,
                          (ii) has established, under 
                        regulations prescribed by the 
                        Secretary, that such person--
                                  (I) has not collected the 
                                amount of the tax from the 
                                person who purchased such 
                                article, or
                                  (II) has obtained the written 
                                consent from the ultimate 
                                purchaser to the allowance of 
                                the credit or refund, and
                          (iii) has so established that such 
                        person--
                                  (I) has repaid or agreed to 
                                repay the amount of the tax to 
                                the ultimate vendor,
                                  (II) has obtained the written 
                                consent of the ultimate vendor 
                                to the allowance of the credit 
                                or refund, or
                                  (III) has otherwise made 
                                arrangements which directly or 
                                indirectly provides the 
                                ultimate vendor with 
                                reimbursement of such tax.
                If clause (i), (ii), or (iii) is not met by 
                such person extending the credit to the 
                ultimate purchaser, then such person shall 
                collect an amount equal to the tax from the 
                ultimate purchaser and only such ultimate 
                purchaser may claim such credit or payment.
                  (C) Timing of claims.--The procedure and 
                timing of any claim under subparagraph (A) or 
                (B) 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 or credit card issuer has certified to 
                the Secretary for the most recent quarter of 
                the taxable year that all ultimate purchasers 
                of the vendor or credit card issuer are 
                certified and entitled to a refund under 
                subparagraph (C) or (D) of subsection (b)(2).
  (b) Special Cases in Which Tax Payments Considered 
Overpayments.--Under regulations prescribed by the Secretary, 
credit or refund (without interest) shall be allowed or made in 
respect of the overpayments determined under the following 
paragraphs:
          (1) Price readjustments.--
                  (A) In general.--Except as provided in 
                subparagraph (B) or (C), if the price of any 
                article in respect of which a tax, based on 
                such price, is imposed by chapter 31 or 32, is 
                readjusted by reason of the return or 
                repossession of the article or a covering or 
                container, or by a bona fide discount, rebate, 
                or allowance, including a readjustment for 
                local advertising (but only to the extent 
                provided in section 4216(e)(2) and (3)), the 
                part of the tax proportionate to the part of 
                the price repaid or credited to the purchaser 
                shall be deemed to be an overpayment.
                  (B) Further manufacture.--Subparagraph (A) 
                shall not apply in the case of an article in 
                respect of which tax was computed under section 
                4223(b)(2); but if the price for which such 
                article was sold is readjusted by reason of the 
                return or repossession of the article, the part 
                of the tax proportionate to the part of such 
                price repaid or credited to the purchaser shall 
                be deemed to be an overpayment.
                  (C) Adjustment of tire price.--No credit or 
                refund of any tax imposed by subsection (a) or 
                (b) of section 4071 shall be allowed or made by 
                reason of an adjustment of a tire pursuant to a 
                warranty or guarantee.
          (2) Specified uses and resales.--The tax paid under 
        chapter 32 (or under subsection (a) or (d) of section 
        4041 in respect of sales or under section 4051) in 
        respect of any article shall be deemed to be an 
        overpayment if such article was, by any person--
                  (A) exported;
                  (B) used or sold for use as supplies for 
                vessels or aircraft;
                  (C) sold to a State or local government for 
                the exclusive use of a State or local 
                government;
                  (D) sold to a nonprofit educational 
                organization for its exclusive use;
                  (E) sold to a qualified blood collector 
                organization (as defined in section 
                7701(a)(49)) for such organization's exclusive 
                use in the collection, storage, or 
                transportation of blood;
                  (F) in the case of any tire taxable under 
                section 4071(a), sold to any person for use as 
                described in section 4221(e)(3); or
                  (G) in the case of gasoline, used or sold for 
                use in the production of special fuels referred 
                to in section 4041.
        Subparagraphs (C), (D), and (E) shall not apply in the 
        case of any tax paid under section 4064. In the case of 
        the tax imposed by section 4131, subparagraphs (B), 
        (C), (D), and (E) shall not apply and subparagraph (A) 
        shall apply only if the use of the exported vaccine 
        meets such requirements as the Secretary may by 
        regulations prescribe. This paragraph shall not apply 
        in the case of any tax imposed under section 4041(a)(1) 
        or 4081 on diesel fuel or kerosene and any tax paid 
        under section 4121. Subparagraphs (C) and (D) shall not 
        apply in the case of any tax imposed on gasoline under 
        section 4081 if the requirements of subsection (a)(4) 
        are not met. In the case of taxes imposed by subchapter 
        C or D of chapter 32, subparagraph (E) shall not apply. 
        In the case of the tax imposed by section 4191, 
        subparagraphs (B), (C), (D), and (E) shall not apply.
          (3) Tax-paid articles used for further manufacture, 
        etc..--If the tax imposed by chapter 32 has been paid 
        with respect to the sale of any article (other than 
        coal taxable under section 4121) by the manufacturer, 
        producer, or importer thereof and such article is sold 
        to a subsequent manufacturer or producer before being 
        used, such tax shall be deemed to be an overpayment by 
        such subsequent manufacturer or producer if--
                  (A) in the case of any article other than any 
                fuel taxable under section 4081, such article 
                is used by the subsequent manufacturer or 
                producer as material in the manufacture or 
                production of, or as a component part of--
                          (i) another article taxable under 
                        chapter 32, or
                          (ii) an automobile bus chassis or an 
                        automobile bus body, manufactured or 
                        produced by him; or
                  (B) in the case of any fuel taxable under 
                section 4081, such fuel is used by the 
                subsequent manufacturer or producer, for 
                nonfuel purposes, as a material in the 
                manufacture or production of any other article 
                manufactured or produced by him.
          (4) Tires.--If--
                  (A) the tax imposed by section 4071 has been 
                paid with respect to the sale of any tire by 
                the manufacturer, producer, or importer 
                thereof, and
                  (B) such tire is sold by any person on or in 
                connection with, or with the sale of, any other 
                article, such tax shall be deemed to be an 
                overpayment by such person if such other 
                article is--
                          (i) an automobile bus chassis or an 
                        automobile bus body,
                          (ii) by such person exported, sold to 
                        a State or local government for the 
                        exclusive use of a State or local 
                        government, sold to a nonprofit 
                        educational organization for its 
                        exclusive use, or used or sold for use 
                        as supplies for vessels or aircraft, or
                          (iii) sold to a qualified blood 
                        collector organization for its 
                        exclusive use in connection with a 
                        vehicle the organization certifies will 
                        be primarily used in the collection, 
                        storage, or transportation of blood.
          (5) Return of certain installment accounts.--If--
                  (A) tax was paid under section 4216(d)(1) in 
                respect of any installment account,
                  (B) such account is, under the agreement 
                under which the account was sold, returned to 
                the person who sold such account, and
                  (C) the consideration is readjusted as 
                provided in such agreement,
        the part of the tax paid under section 4216(d)(1) 
        allocable to the part of the consideration repaid or 
        credited to the purchaser of such account shall be 
        deemed to be an overpayment.
          (6) Truck chassis, bodies, and semitrailers used for 
        further manufacture.--If--
                  (A) the tax imposed by section 4051 has been 
                paid with respect to the sale of any article, 
                and
                  (B) before any other use, such article is by 
                any person used as a component part of another 
                article taxable under section 4051 manufactured 
                or produced by him,
        such tax shall be deemed to be an overpayment by such 
        person. For purposes of the preceding sentence, an 
        article shall be treated as having been used as a 
        component part of another article if, had it not been 
        broken or rendered useless in the manufacture or 
        production of such other article, it would have been so 
        used.
        This subsection shall apply in respect of an article 
        only if the exportation or use referred to in the 
        applicable provision of this subsection occurs before 
        any other use, or, in the case of a sale or resale, the 
        use referred to in the applicable provision of this 
        subsection is to occur before any other use.
  (c) Refund to Exporter or Shipper.--Under regulations 
prescribed by the Secretary the amount of any tax imposed by 
chapter 31, or chapter 32 erroneously or illegally collected in 
respect of any article exported to a foreign country or shipped 
to a possession of the United States may be refunded to the 
exporter or shipper thereof, if the person who paid such tax 
waives his claim to such amount.
  (d) Credit on Returns.--Any person entitled to a refund of 
tax imposed by chapter 31 or 32, paid to the Secretary may, 
instead of filing a claim for refund, take credit therefor 
against taxes imposed by such chapter due on any subsequent 
return. The preceding sentence shall not apply to the tax 
imposed by section 4081 in the case of refunds described in 
section 4081(e).
  (e) Accounting Procedures for Like Articles.--Under 
regulations prescribed by the Secretary, if any person uses or 
resells like articles, then for purposes of this section the 
manufacturer, producer, or importer of any such article may be 
identified, and the amount of tax paid under chapter 32 in 
respect of such article may be determined--
          (1) on a first-in-first-out basis,
          (2) on a last-in-first-out basis, or
          (3) in accordance with any other consistent method 
        approved by the Secretary.
  (f) Meaning of Terms.--For purposes of this section, any term 
used in this section has the same meaning as when used in 
chapter 31, 32, or 33, as the case may be.

           *       *       *       *       *       *       *


        B. Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
made by the bill, as reported, are shown as follows (existing 
law proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *


CHAPTER 32--MANUFACTURERS EXCISE TAXES

           *       *       *       *       *       *       *


[subchapter e. medical devices]

           *       *       *       *       *       *       *


                     [Subchapter E--Medical Devices

[SEC. 4191. MEDICAL DEVICES.

  [(a) In General.--There is hereby imposed on the sale of any 
taxable medical device by the manufacturer, producer, or 
importer a tax equal to 2.3 percent of the price for which so 
sold.
  [(b) Taxable Medical Device.--For purposes of this section--
          [(1) In general.--The term ``taxable medical device'' 
        means any device (as defined in section 201(h) of the 
        Federal Food, Drug, and Cosmetic Act) intended for 
        humans.
          [(2) Exemptions.--Such term shall not include--
                  [(A) eyeglasses,
                  [(B) contact lenses,
                  [(C) hearing aids, and
                  [(D) any other medical device determined by 
                the Secretary to be of a type which is 
                generally purchased by the general public at 
                retail for individual use.]

           *       *       *       *       *       *       *


              Subchapter G--Exemptions, Registration, Etc

SEC. 4221. CERTAIN TAX-FREE SALES.

  (a) General Rule.--Under regulations prescribed by the 
Secretary, no tax shall be imposed under this chapter (other 
than under section 4121 or 4081) on the sale by the 
manufacturer (or under subchapter C of chapter 31 on the first 
retail sale) of an article--
          (1) for use by the purchaser for further manufacture, 
        or for resale by the purchaser to a second purchaser 
        for use by such second purchaser in further 
        manufacture,
          (2) for export, or for resale by the purchaser to a 
        second purchaser for export,
          (3) for use by the purchaser as supplies for vessels 
        or aircraft,
          (4) to a State or local government for the exclusive 
        use of a State or local government,
          (5) to a nonprofit educational organization for its 
        exclusive use, or
          (6) to a qualified blood collector organization (as 
        defined in section 7701(a)(49)) for such organization's 
        exclusive use in the collection, storage, or 
        transportation of blood,
but only if such exportation or use is to occur before any 
other use. Paragraphs (4), (5), and (6) shall not apply to the 
tax imposed by section 4064. In the case of taxes imposed by 
section 4051, or 4071, paragraphs (4) and (5) shall not apply 
on and after October 1, 2016. In the case of the tax imposed by 
section 4131, paragraphs (3), (4), and (5) shall not apply and 
paragraph (2) shall apply only if the use of the exported 
vaccine meets such requirements as the Secretary may by 
regulations prescribe. In the case of taxes imposed by 
subchapter C or D, paragraph (6) shall not apply. [In the case 
of the tax imposed by section 4191, paragraphs (3), (4), (5), 
and (6) shall not apply.]
  (b) Proof of Resale for Further Manufacture; Proof of 
Export.--Where an article has been sold free of tax under 
subsection (a)--
          (1) for resale by the purchaser to a second purchaser 
        for use by such second purchaser in further 
        manufacture, or
          (2) for export, or for resale by the purchaser to a 
        second purchaser for export,
subsection (a) shall cease to apply in respect of such sale of 
such article unless, within the 6-month period which begins on 
the date of the sale by the manufacturer (or, if earlier, on 
the date of shipment by the manufacturer), the manufacturer 
receives proof that the article has been exported or resold for 
use in further manufacture.
  (c) Manufacturer Relieved from Liability in Certain Cases.--
In the case of any article sold free of tax under this section 
(other than a sale to which subsection (b) applies), and in the 
case of any article sold free of tax under section 4053(6), if 
the manufacturer in good faith accepts a certification by the 
purchaser that the article will be used in accordance with the 
applicable provisions of law, no tax shall thereafter be 
imposed under this chapter in respect of such sale by such 
manufacturer.
  (d) Definitions.--For purposes of this section--
          (1) Manufacturer.--The term ``manufacturer'' includes 
        a producer or importer of an article, and, in the case 
        of taxes imposed by subchapter C of chapter 31, 
        includes the retailer with respect to the first retail 
        sale.
          (2) Export.--The term ``export'' includes shipment to 
        a possession of the United States; and the term 
        ``exported'' includes shipped to a possession of the 
        United States.
          (3) Supplies for vessels or aircraft.--The term 
        ``supplies for vessels or aircraft'' means fuel 
        supplies, ships' stores, sea stores, or legitimate 
        equipment on vessels of war of the United States or of 
        any foreign nation, vessels employed in the fisheries 
        or in the whaling business, or vessels actually engaged 
        in foreign trade or trade between the Atlantic and 
        Pacific ports of the United States or between the 
        United States and any of its possessions. For purposes 
        of the preceding sentence, the term ``vessels'' 
        includes civil aircraft employed in foreign trade or 
        trade between the United States and any of its 
        possessions, and the term ``vessels of war of the 
        United States or of any foreign nation'' includes 
        aircraft owned by the United States or by any foreign 
        nation and constituting a part of the armed forces 
        thereof.
          (4) State or local government.--The term ``State or 
        local government'' means any State, any political 
        subdivision thereof, or the District of Columbia.
          (5) Nonprofit educational organization.--The term 
        ``nonprofit educational organization'' means an 
        educational organization described in section 
        170(b)(1)(A)(ii) which is exempt from income tax under 
        section 501(a). The term also includes a school 
        operated as an activity of an organization described in 
        section 501(c)(3) which is exempt from income tax under 
        section 501(a), if such school normally maintains a 
        regular faculty and curriculum and normally has a 
        regularly enrolled body of pupils or students in 
        attendance at the place where its educational 
        activities are regularly carried on.
          (6) Use in further manufacture.--An article shall be 
        treated as sold for use in further manufacture if--
                  (A) such article is sold for use by the 
                purchaser as material in the manufacture or 
                production of, or as a component part of, 
                another article taxable under this chapter to 
                be manufactured or produced by him; or
                  (B) in the case of gasoline taxable under 
                section 4081, such gasoline is sold for use by 
                the purchaser, for nonfuel purposes, as a 
                material in the manufacture or production of 
                another article to be manufactured or produced 
                by him.
          (7) Qualified bus.--
                  (A) In general.--The term ``qualified bus'' 
                means--
                          (i) an intercity or local bus, and
                          (ii) a school bus.
                  (B) Intercity or local bus.--The term 
                ``intercity or local bus'' means any automobile 
                bus which is used predominantly in furnishing 
                (for compensation) passenger land 
                transportation available to the general public 
                if--
                          (i) such transportation is scheduled 
                        and along regular routes, or
                          (ii) the seating capacity of such bus 
                        is at least 20 adults (not including 
                        the driver).
                  (C) School bus.--The term ``school bus'' 
                means any automobile bus substantially all the 
                use of which is in transporting students and 
                employees of schools. For purposes of the 
                preceding sentence, the term ``school'' means 
                an educational organization which normally 
                maintains a regular faculty and curriculum and 
                normally has a regularly enrolled body of 
                pupils or students in attendance at the place 
                where its educational activities are carried 
                on.
  (e) Special Rules.--
          (1) Reciprocity required in case of civil aircraft.--
        In the case of articles sold for use as supplies for 
        aircraft, the privileges granted under subsection 
        (a)(3) in respect of civil aircraft employed in foreign 
        trade or trade between the United States and any of its 
        possessions, in respect of aircraft registered in a 
        foreign country, shall be allowed only if the Secretary 
        of the Treasury has been advised by the Secretary of 
        Commerce that he has found that such foreign country 
        allows, or will allow, substantially reciprocal 
        privileges in respect of aircraft registered in the 
        United States. If the Secretary of the Treasury is 
        advised by the Secretary of Commerce that he has found 
        that a foreign country has discontinued or will 
        discontinue the allowance of such privileges, the 
        privileges granted under subsection (a)(3) shall not 
        apply thereafter in respect of civil aircraft 
        registered in that foreign country and employed in 
        foreign trade or trade between the United States and 
        any of its possessions.
          (2) Tires.--
                  (A) Tax-free sales.--Under regulations 
                prescribed by the Secretary, no tax shall be 
                imposed under section 4071 on the sale by the 
                manufacturer of a tire if--
                          (i) such tire is sold for use by the 
                        purchaser for sale on or in connection 
                        with the sale of another article 
                        manufactured or produced by such 
                        purchaser; and
                          (ii) such other article is to be sold 
                        by such purchaser in a sale which 
                        either will satisfy the requirements of 
                        paragraph (2), (3), (4), or (5) of 
                        subsection (a) for a tax-free sale, or 
                        would satisfy such requirements but for 
                        the fact that such other article is not 
                        subject to tax under this chapter.
                  (B) Proof.--Where a tire has been sold free 
                of tax under this paragraph, this paragraph 
                shall cease to apply unless, within the 6-moth 
                period which begins on the date of the sale by 
                him (or, if earlier on the date of the shipment 
                by him), the manufacturer of such tire receives 
                proof that the other article referred to in 
                clause (ii) of subparagraph (A) has been sold 
                in a manner which satisfies the requirements of 
                such clause (ii) (including in the case of a 
                sale for export, proof of export of such other 
                article).
                  (C) Subsection (a)(1) does not apply.--
                Paragraph (1) of subsection (a) shall not apply 
                with respect to the tax imposed under section 
                4071 on the sale of a tire.
          (3) Tires used on intercity, local, and school 
        buses.--Under regulations prescribed by the Secretary, 
        the tax imposed by section 4071 shall not apply in the 
        case of tires sold for use by the purchaser on or in 
        connection with a qualified bus.

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 65--ABATEMENTS, CREDITS, AND REFUNDS

           *       *       *       *       *       *       *


Subchapter B--Rules of Special Application

           *       *       *       *       *       *       *


SEC. 6416. CERTAIN TAXES ON SALES AND SERVICES.

  (a) Condition to Allowance.--
          (1) General rule.--No credit or refund of any 
        overpayment of tax imposed by chapter 31 (relating to 
        retail excise taxes), or chapter 32 (manufacturers 
        taxes), shall be allowed or made unless the person who 
        paid the tax establishes, under regulations prescribed 
        by the Secretary, that he--
                  (A) has not included the tax in the price of 
                the article with respect to which it was 
                imposed and has not collected the amount of the 
                tax from the person who purchased such article;
                  (B) has repaid the amount of the tax to the 
                ultimate purchaser of the article;
                  (C) in the case of an overpayment under 
                subsection (b)(2) of this section--
                          (i) has repaid or agreed to repay the 
                        amount of the tax to the ultimate 
                        vendor of the article, or
                          (ii) has obtained the written consent 
                        of such ultimate vendor to the 
                        allowance of the credit or the making 
                        of the refund; or
                  (D) has filed with the Secretary the written 
                consent of the person referred to in 
                subparagraph (B) to the allowance of the credit 
                or the making of the refund.
          (2) Exceptions.--This subsection shall not apply to--
                  (A) the tax imposed by section 4041 (relating 
                to tax on special fuels) on the use of any 
                liquid, and
                  (B) an overpayment of tax under paragraph 
                (1), (3)(A), (4), (5), or (6) of subsection (b) 
                of this section.
          (3) Special rule.--For purposes of this subsection, 
        in any case in which the Secretary determines that an 
        article is not taxable, the term ``ultimate purchaser'' 
        (when used in paragraph (1)(B) of this subsection) 
        includes a wholesaler, jobber, distributor, or retailer 
        who, on the 15th day after the date of such 
        determination, holds such article for sale; but only if 
        claim for credit or refund by reason of this paragraph 
        is filed on or before the date for filing the return 
        with respect to the taxes imposed under chapter 32 for 
        the first period which begins more than 60 days after 
        the date on such determination.
          (4) Registered ultimate vendor or credit card issuer 
        to administer credits and refunds of gasoline tax.--
                  (A) In general.--For purposes of this 
                subsection, except as provided in subparagraph 
                (B), 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.
                  (B) Credit card issuer.--For purposes of this 
                subsection, if the purchase of gasoline 
                described in subparagraph (A) (determined 
                without regard to the registration status of 
                the ultimate vendor) is made by means of a 
                credit card issued to the ultimate purchaser, 
                paragraph (1) shall not apply and the person 
                extending the credit to the ultimate purchaser 
                shall be treated as the person (and the only 
                person) who paid the tax, but only if such 
                person--
                          (i) is registered under section 4101,
                          (ii) has established, under 
                        regulations prescribed by the 
                        Secretary, that such person--
                                  (I) has not collected the 
                                amount of the tax from the 
                                person who purchased such 
                                article, or
                                  (II) has obtained the written 
                                consent from the ultimate 
                                purchaser to the allowance of 
                                the credit or refund, and
                          (iii) has so established that such 
                        person--
                                  (I) has repaid or agreed to 
                                repay the amount of the tax to 
                                the ultimate vendor,
                                  (II) has obtained the written 
                                consent of the ultimate vendor 
                                to the allowance of the credit 
                                or refund, or
                                  (III) has otherwise made 
                                arrangements which directly or 
                                indirectly provides the 
                                ultimate vendor with 
                                reimbursement of such tax.
                If clause (i), (ii), or (iii) is not met by 
                such person extending the credit to the 
                ultimate purchaser, then such person shall 
                collect an amount equal to the tax from the 
                ultimate purchaser and only such ultimate 
                purchaser may claim such credit or payment.
                  (C) Timing of claims.--The procedure and 
                timing of any claim under subparagraph (A) or 
                (B) 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 or credit card issuer has certified to 
                the Secretary for the most recent quarter of 
                the taxable year that all ultimate purchasers 
                of the vendor or credit card issuer are 
                certified and entitled to a refund under 
                subparagraph (C) or (D) of subsection (b)(2).
  (b) Special Cases in Which Tax Payments Considered 
Overpayments.--Under regulations prescribed by the Secretary, 
credit or refund (without interest) shall be allowed or made in 
respect of the overpayments determined under the following 
paragraphs:
          (1) Price readjustments.--
                  (A) In general.--Except as provided in 
                subparagraph (B) or (C), if the price of any 
                article in respect of which a tax, based on 
                such price, is imposed by chapter 31 or 32, is 
                readjusted by reason of the return or 
                repossession of the article or a covering or 
                container, or by a bona fide discount, rebate, 
                or allowance, including a readjustment for 
                local advertising (but only to the extent 
                provided in section 4216(e)(2) and (3)), the 
                part of the tax proportionate to the part of 
                the price repaid or credited to the purchaser 
                shall be deemed to be an overpayment.
                  (B) Further manufacture.--Subparagraph (A) 
                shall not apply in the case of an article in 
                respect of which tax was computed under section 
                4223(b)(2); but if the price for which such 
                article was sold is readjusted by reason of the 
                return or repossession of the article, the part 
                of the tax proportionate to the part of such 
                price repaid or credited to the purchaser shall 
                be deemed to be an overpayment.
                  (C) Adjustment of tire price.--No credit or 
                refund of any tax imposed by subsection (a) or 
                (b) of section 4071 shall be allowed or made by 
                reason of an adjustment of a tire pursuant to a 
                warranty or guarantee.
          (2) Specified uses and resales.--The tax paid under 
        chapter 32 (or under subsection (a) or (d) of section 
        4041 in respect of sales or under section 4051) in 
        respect of any article shall be deemed to be an 
        overpayment if such article was, by any person--
                  (A) exported;
                  (B) used or sold for use as supplies for 
                vessels or aircraft;
                  (C) sold to a State or local government for 
                the exclusive use of a State or local 
                government;
                  (D) sold to a nonprofit educational 
                organization for its exclusive use;
                  (E) sold to a qualified blood collector 
                organization (as defined in section 
                7701(a)(49)) for such organization's exclusive 
                use in the collection, storage, or 
                transportation of blood;
                  (F) in the case of any tire taxable under 
                section 4071(a), sold to any person for use as 
                described in section 4221(e)(3); or
                  (G) in the case of gasoline, used or sold for 
                use in the production of special fuels referred 
                to in section 4041.
        Subparagraphs (C), (D), and (E) shall not apply in the 
        case of any tax paid under section 4064. In the case of 
        the tax imposed by section 4131, subparagraphs (B), 
        (C), (D), and (E) shall not apply and subparagraph (A) 
        shall apply only if the use of the exported vaccine 
        meets such requirements as the Secretary may by 
        regulations prescribe. This paragraph shall not apply 
        in the case of any tax imposed under section 4041(a)(1) 
        or 4081 on diesel fuel or kerosene and any tax paid 
        under section 4121. Subparagraphs (C) and (D) shall not 
        apply in the case of any tax imposed on gasoline under 
        section 4081 if the requirements of subsection (a)(4) 
        are not met. In the case of taxes imposed by subchapter 
        C or D of chapter 32, subparagraph (E) shall not apply. 
        [In the case of the tax imposed by section 4191, 
        subparagraphs (B), (C), (D), and (E) shall not apply.]
          (3) Tax-paid articles used for further manufacture, 
        etc..--If the tax imposed by chapter 32 has been paid 
        with respect to the sale of any article (other than 
        coal taxable under section 4121) by the manufacturer, 
        producer, or importer thereof and such article is sold 
        to a subsequent manufacturer or producer before being 
        used, such tax shall be deemed to be an overpayment by 
        such subsequent manufacturer or producer if--
                  (A) in the case of any article other than any 
                fuel taxable under section 4081, such article 
                is used by the subsequent manufacturer or 
                producer as material in the manufacture or 
                production of, or as a component part of--
                          (i) another article taxable under 
                        chapter 32, or
                          (ii) an automobile bus chassis or an 
                        automobile bus body, manufactured or 
                        produced by him; or
                  (B) in the case of any fuel taxable under 
                section 4081, such fuel is used by the 
                subsequent manufacturer or producer, for 
                nonfuel purposes, as a material in the 
                manufacture or production of any other article 
                manufactured or produced by him.
          (4) Tires.--If--
                  (A) the tax imposed by section 4071 has been 
                paid with respect to the sale of any tire by 
                the manufacturer, producer, or importer 
                thereof, and
                  (B) such tire is sold by any person on or in 
                connection with, or with the sale of, any other 
                article, such tax shall be deemed to be an 
                overpayment by such person if such other 
                article is--
                          (i) an automobile bus chassis or an 
                        automobile bus body,
                          (ii) by such person exported, sold to 
                        a State or local government for the 
                        exclusive use of a State or local 
                        government, sold to a nonprofit 
                        educational organization for its 
                        exclusive use, or used or sold for use 
                        as supplies for vessels or aircraft, or
                          (iii) sold to a qualified blood 
                        collector organization for its 
                        exclusive use in connection with a 
                        vehicle the organization certifies will 
                        be primarily used in the collection, 
                        storage, or transportation of blood.
          (5) Return of certain installment accounts.--If--
                  (A) tax was paid under section 4216(d)(1) in 
                respect of any installment account,
                  (B) such account is, under the agreement 
                under which the account was sold, returned to 
                the person who sold such account, and
                  (C) the consideration is readjusted as 
                provided in such agreement,
        the part of the tax paid under section 4216(d)(1) 
        allocable to the part of the consideration repaid or 
        credited to the purchaser of such account shall be 
        deemed to be an overpayment.
          (6) Truck chassis, bodies, and semitrailers used for 
        further manufacture.--If--
                  (A) the tax imposed by section 4051 has been 
                paid with respect to the sale of any article, 
                and
                  (B) before any other use, such article is by 
                any person used as a component part of another 
                article taxable under section 4051 manufactured 
                or produced by him,
        such tax shall be deemed to be an overpayment by such 
        person. For purposes of the preceding sentence, an 
        article shall be treated as having been used as a 
        component part of another article if, had it not been 
        broken or rendered useless in the manufacture or 
        production of such other article, it would have been so 
        used.
        This subsection shall apply in respect of an article 
        only if the exportation or use referred to in the 
        applicable provision of this subsection occurs before 
        any other use, or, in the case of a sale or resale, the 
        use referred to in the applicable provision of this 
        subsection is to occur before any other use.
  (c) Refund to Exporter or Shipper.--Under regulations 
prescribed by the Secretary the amount of any tax imposed by 
chapter 31, or chapter 32 erroneously or illegally collected in 
respect of any article exported to a foreign country or shipped 
to a possession of the United States may be refunded to the 
exporter or shipper thereof, if the person who paid such tax 
waives his claim to such amount.
  (d) Credit on Returns.--Any person entitled to a refund of 
tax imposed by chapter 31 or 32, paid to the Secretary may, 
instead of filing a claim for refund, take credit therefor 
against taxes imposed by such chapter due on any subsequent 
return. The preceding sentence shall not apply to the tax 
imposed by section 4081 in the case of refunds described in 
section 4081(e).
  (e) Accounting Procedures for Like Articles.--Under 
regulations prescribed by the Secretary, if any person uses or 
resells like articles, then for purposes of this section the 
manufacturer, producer, or importer of any such article may be 
identified, and the amount of tax paid under chapter 32 in 
respect of such article may be determined--
          (1) on a first-in-first-out basis,
          (2) on a last-in-first-out basis, or
          (3) in accordance with any other consistent method 
        approved by the Secretary.
  (f) Meaning of Terms.--For purposes of this section, any term 
used in this section has the same meaning as when used in 
chapter 31, 32, or 33, as the case may be.

           *       *       *       *       *       *       *


                          VII. MINORITY VIEWS

    With this legislation, the Majority furthers their fiscal 
irresponsibility and misguided priorities. The bill results in 
a revenue loss of $24.4 billion and it is not offset, bringing 
the total of deficit-financed tax cuts to $610 billion so far 
this year. One need not look far to see the imprudent vision 
the Republican Majority has for our country: Republicans 
continue to struggle to ensure our nation's infrastructure 
investments do not collapse, yet do not blink at deficit 
financing over half a trillion in tax cuts. Furthermore, in 
these difficult fiscal times, the Majority is insisting on 
spending and program cuts that will have a devastating impact 
on a vast array of Americans. For example, House Republicans 
proposed in their recent budget to slash spending for seniors 
who need long-term care, families needing food assistance, and 
students struggling to pay for college.
    The bill is the latest in a continued series of attacks by 
the Majority on the Affordable Care Act (ACA). The medical 
device sector stood with the President in the late spring of 
2009 and, with other industries that would benefit from 
expanding health coverage, pledged $2 trillion in savings for 
health care reform. The medical device excise tax that is the 
subject of H.R. 160 represents the medical device sector's 
contribution to health care reform. All sectors of the health 
and medical industry made significant contributions to pay for 
health care reform. For example, hospitals, pharmaceutical 
companies, and insurance companies all knew that these 
contributions were appropriate because the coverage expansions 
of health care reform will result in tens of millions of 
additional health care customers for the health care industry. 
H.R. 160 eliminates the contribution of a key health industry 
sector, thereby encouraging the other sectors to follow suit 
and press for repeal of their contributions.
    A number of distortions surrounding the debate on the 
medical device excise tax were dispelled during the markup of 
H.R. 160.
    First, the device tax has not caused a contraction of the 
medical device industry. Tom Barthold, Chief of Staff for the 
Joint Committee on Taxation (JCT), testified previously before 
the Committee that the medical device industry will continue to 
grow even after the effective date of the medical device excise 
tax. Among the reasons for this growth is the aging of 
America's population--a demographic shift that favors the 
device industry as older patients tend to constitute a larger 
portion of the sector's total sales. However, as Mr. Barthold 
testified, another key reason for the industry's continued 
growth is the coverage expansion of the ACA. It should be 
carefully noted that JCT is an impartial and nonpartisan expert 
on tax law and implications of tax law.
    Second, the medical device tax is not hindering the medical 
device industry. About half of medical devices produced in the 
U.S. are exempt from the tax, either because of exemptions in 
the domestic market or because they are being exported. An 
analysis by CRS since the tax went into effect suggests that 
most costs are included in the prices for devices rather than 
reduced medical device company profits. And a recent analysis 
by Ernst and Young indicates that the industry's revenue 
increased by $8 billion in the year the tax took effect, while 
at the same time R&D spending by the industry also increased by 
6 percent in the same year and employment in the medical device 
industry increased by 23,500. According to CRS, while most 
device manufacturers are relatively small, output is 
concentrated in the largest manufacturer with the top one 
percent of firms accounting for approximately 75 percent of 
sales in the industry.
    Third, the device tax does not incentivize companies to 
ship jobs overseas. The tax applies to products used in the 
United States. Thus, the tax applies to goods made abroad and 
imported into America. Further, the tax does not apply to 
products made in the U.S. and shipped abroad. Domestic and 
foreign manufacturers are on a level playing field with regard 
to the medical device tax. Furthermore, even when the medical 
device tax is taken into account, U.S. medical device companies 
are still paying lower effective tax rates than their foreign 
competitors. Therefore, the tax is not making them less 
internationally competitive.
    Finally, we object to the Majority's continued attacks on 
the ACA without putting forward any comprehensive legislation 
to address the health insurance needs of the nation. Since 
January of 2009, the Majority voted to repeal or undermine the 
ACA over 58 times, including earlier votes on repealing the 
medical device tax in 2012.
            Sincerely,
                                           Sander M. Levin,
                                                    Ranking Member.

                                  [all]