[Senate Report 114-27]
[From the U.S. Government Publishing Office]
Calendar No. 50
114th Congress } { Report
SENATE
1st Session } { 114-27
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LNG AND LPG EXCISE TAX EQUALIZATION ACT OF 2015
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April 14, 2015.--Ordered to be printed
_______
Mr. Hatch, from the Committee on Finance,
submitted the following
R E P O R T
[To accompany S. 917]
The Committee on Finance, having considered an original
bill, S. 917, to amend the Internal Revenue Code of 1986 to
equalize the excise tax on liquefied petroleum gas and
liquefied natural gas, having considered the same, reports
favorably thereon without amendment and recommends that the
bill do pass.
CONTENTS
Page
I. LEGISLATIVE BACKGROUND...........................................1
II. EXPLANATION OF THE BILL..........................................2
A. Equalization of Excise Tax on Liquefied Natural Gas
and Liquefied Petroleum Gas (sec. 1 of the bill and
sec. 4041(a)(2) of the Code)......................... 2
B. Increase Continuous Levy Authority on Payments to
Medicare Providers and Suppliers (sec. 6331 of the
Code)................................................ 4
III. BUDGET EFFECTS OF THE BILL.......................................6
IV. VOTES OF THE COMMITTEE...........................................8
V. REGULATORY IMPACT AND OTHER MATTERS..............................8
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............9
I. LEGISLATIVE BACKGROUND
The Committee on Finance, having considered S. 917, the
``LNG and LPG Excise Tax Equalization Act of 2015'' to amend
the Internal Revenue Code of 1986 to equalize the excise tax on
liquefied petroleum gas and liquefied natural gas, reports
favorably thereon without amendment and recommends that the
bill do pass.
Background and need for legislative action
Based on S. 344 (a bill to equalize the excise tax on
liquefied petroleum gas and liquefied natural gas) as
introduced by Senators Bennet and Burr, and also on a proposal
recommended by Senators Bennet, Burr, Thune, Cardin, and
Roberts, the Committee on Finance marked up original
legislation (the LNG and LPG Excise Tax Equalization Act of
2015'') on February 11, 2015, and, with a majority present,
ordered the bill favorably reported.
The provisions approved by the Committee reflect the need
to establish excise tax rates for both liquefied natural gas
(``LNG'') and liquefied petroleum gas that reflect the energy
content of the fuel. The tax on LNG and on diesel fuel is set
at 24.3 cents per gallon. However, LNG produces less energy per
gallon than diesel fuel. It takes approximately 1.7 gallons of
LNG to equal the energy in one gallon of diesel fuel, resulting
in LNG being taxed at approximately 170 percent of the rate of
diesel fuel on an energy equivalent basis. Liquefied petroleum
gas and gasoline are both taxed at 18.3 cents per gallon.
However, a gallon of liquefied petroleum gas has only 72
percent of the energy content of a gallon of gasoline but is
taxed at 138 percent of the rate of gasoline on an energy
equivalent basis.
In addition, it has been reported that many thousands of
Medicare providers and suppliers have outstanding Federal
employment and income tax liability, which contribute to the
tax gap. The permissible percentage of payments to a Medicare
provider subject to levy should be increased.
Hearings
The committee favorably ordered reported similar provisions
as part of the ``Preserving America's Transit and Highways Act
of 2014'' or PATH Act. The provisions of the PATH Act, as they
related to LNG and liquefied petroleum gas, subsequently passed
the U.S. Senate as part of the Senate Amendment to H.R. 5021 of
the 113th Congress, the Highway Transportation and Funding Act
of 2014.
II. EXPLANATION OF THE BILL
A. Equalization of Excise Tax on Liquefied Natural Gas and Liquefied
Petroleum Gas (sec. 1 of the bill and sec. 4041(a)(2) of the Code)
Present Law
The Code imposes an excise tax on gasoline, diesel fuel,
kerosene, and certain alternative fuels at the following
rates:\1\
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\1\These fuels are subject to an additional 0.1-cent-per-gallon
excise tax to fund the Leaking Underground Storage Tank (``LUST'')
Trust Fund (secs. 4041(d) and 4081(a)(2)(B)). That tax is imposed as an
``add-on'' to other existing taxes. Unless otherwise stated, all
section references are to the Internal Revenue Code of 1986, as amended
(the ``Code'').
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Gasoline.................................. 18.3 cents per gallon
Diesel fuel and kerosene.................. 24.3 cents per gallon\2\
Alternative fuels......................... 24.3 and 18.3 cents per
gallon\3\
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The Code imposes tax on gasoline, diesel fuel, and kerosene
upon removal from a refinery or on importation, unless the fuel
is transferred in bulk by registered pipeline or barge to a
registered terminal facility.\4\ The imposition of tax on
alternative fuels generally occurs at retail when the fuel is
sold to an owner, lessee or other operator of a motor vehicle
or motorboat for use as a fuel in such motor vehicle or
motorboat.
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\2\Diesel-water emulsions are taxed at 19.7 cents per gallon (sec.
4081(a)(2)(D)).
\3\The rate of tax is 24.3 cents per gallon in the case of
liquefied natural gas, any liquid fuel (other than ethanol or methanol)
derived from coal, and liquid hydrocarbons derived from biomass. Other
alternative fuels sold or used as motor fuel are generally taxed at
18.3 cents per gallon. ``Alternative fuel'' also includes compressed
natural gas. The rate for compressed natural gas is 18.3 cents per
energy equivalent of a gallon of gasoline. See sec. 4041(a)(2) and (3).
\4\Sec. 4081(a)(1).
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Liquefied natural gas (``LNG'') and liquefied petroleum gas
(also known as propane) are classified as alternative fuels.
LNG is taxed at the same per gallon rate as diesel, 24.3 cents
per gallon. According to the Oak Ridge National Laboratory,
diesel fuel has an energy content of 128,700 Btu per gallon
(lower heating value) and LNG has an energy content of 74,700
Btu per gallon (lower heating value). Therefore, a gallon of
LNG produces approximately 58 percent of the energy produced by
a gallon of diesel fuel.
Liquefied petroleum gas is taxed at the same per gallon
rate as gasoline, 18.3 cents per gallon. According to the Oak
Ridge National Laboratory, gasoline has an energy content of
115,400 Btu per gallon (lower heating value), and liquefied
petroleum gas has an energy content of 83,500 Btu per gallon
(lower heating value).\5\ Therefore, a gallon of liquefied
petroleum gas produces approximately 72 percent of the energy
produced by a gallon of gasoline.
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\5\All Btu lower (or ``net'') heating values are taken from
Appendix B of the Oak Ridge National Laboratories Data Transportation
Energy Data Book (Edition 32), Table B.4, Heat Content for Various
Fuels (2013) http://cta.ornl.gov/data/tedb32/Edition32_Appendix_B.pdf.
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REASONS FOR CHANGE
LNG is a transportation fuel source used for large trucks
and some marine and rail vessels. Currently, the excise tax
rate for both LNG and diesel fuel is set at 24.3 cents per
gallon. However, LNG produces less energy per gallon than
diesel fuel. It takes approximately 1.7 gallons of LNG to equal
the energy in one gallon of diesel fuel, resulting in LNG being
taxed at approximately 170 percent of the rate of diesel fuel
on an energy equivalent basis. The current tax system can
result in thousands of dollars of additional cost for companies
choosing to utilize LNG. Similarly, liquefied petroleum gas and
gasoline are both taxed at 18.3 cents per gallon. However, a
gallon of liquefied petroleum gas has only 72 percent of the
energy content of a gallon of gasoline but is taxed at 138
percent of the rate of gasoline on an energy equivalent basis.
Therefore, the Committee believes it is appropriate to lower
the tax rate of both liquefied petroleum gas and LNG, basing
the tax rate on the energy content of those fuels as compared
with gasoline and diesel, respectively.
EXPLANATION OF PROVISION
The provision changes the tax rate of LNG to a rate based
on its energy equivalent of a gallon of diesel (approximately
14.1 cents per gallon) and changes the tax rate of liquefied
petroleum gas to a rate based on its energy equivalent of a
gallon of gasoline (approximately 13.2 cents per gallon).
Specifically, the provision provides that liquefied
petroleum gas is taxed at 18.3 cents per energy equivalent of a
gallon of gasoline. For this purpose, ``energy equivalent of a
gallon of gasoline'' means, with respect to liquefied petroleum
gas, the amount of such fuel having a Btu (British Thermal
Unit) content of 115,400 (lower heating value). LNG is taxed at
24.3 cents per energy equivalent of a gallon of diesel fuel.
For this purpose, ``energy equivalent of a gallon of diesel''
means, with respect to a liquefied natural gas fuel, the amount
of such fuel having a Btu content of 128,700 (lower heating
value).
EFFECTIVE DATE
The provision is effective for fuel sold or used in
calendar quarters beginning more than 60 days after the date of
enactment.
B. Increase Continuous Levy Authority on Payments to Medicare Providers
and Suppliers (sec. 6331 of the Code)
PRESENT LAW
In general
Levy is the administrative authority of the IRS to seize a
taxpayer's property, or rights to property, to pay the
taxpayer's tax liability.\6\ Generally, the IRS is entitled to
seize a taxpayer's property by levy if a Federal tax lien has
attached to such property,\7\ the property is not exempt from
levy,\8\ and the IRS has provided both notice of intention to
levy\9\ and notice of the right to an administrative hearing
(the notice is referred to as a ``collections due process
notice'' or ``CDP notice'' and the hearing is referred to as
the ``CDP hearing'')\10\ at least 30 days before the levy is
made. A levy on salary or wages generally is continuously in
effect until released.\11\ A Federal tax lien arises
automatically when: (1) a tax assessment has been made; (2) the
taxpayer has been given notice of the assessment stating the
amount and demanding payment; and (3) the taxpayer has failed
to pay the amount assessed within 10 days after the notice and
demand.\12\
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\6\ Sec. 6331(a). Levy specifically refers to the legal process by
which the IRS orders a third party to turn over property in its
possession that belongs to the delinquent taxpayer named in a notice of
levy.
\7\Ibid.
\8\Sec. 6334.
\9\Sec. 6331(d).
\10\Sec. 6330. The notice and the hearing are referred to
collectively as the CDP requirements.
\11\Secs. 6331(e) and 6343.
\12\Sec. 6321.
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The notice of intent to levy is not required if the
Secretary finds that collection would be jeopardized by delay.
The standard for determining whether jeopardy exists is similar
to the standard applicable when determining whether assessment
of tax without following the normal deficiency procedures is
permitted.\13\
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\13\Secs. 6331(d)(3), 6861.
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The CDP notice (and pre-levy CDP hearing) is not required
if: (1) the Secretary finds that collection would be
jeopardized by delay; (2) the Secretary has served a levy on a
State to collect a Federal tax liability from a State tax
refund; (3) the taxpayer subject to the levy requested a CDP
hearing with respect to unpaid employment taxes arising in the
two-year period before the beginning of the taxable period with
respect to which the employment tax levy is served; or (4) the
Secretary has served a Federal contractor levy. In each of
these four cases, however, the taxpayer is provided an
opportunity for a hearing within a reasonable period of time
after the levy.\14\
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\14\Sec. 6330(f).
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Federal payment levy program
To help the IRS collect taxes more effectively, the
Taxpayer Relief Act of 1997\15\ authorized the establishment of
the Federal Payment Levy Program (``FPLP''), which allows the
IRS to continuously levy up to 15 percent of certain
``specified payments'' by the Federal government if the payees
are delinquent on their tax obligations. With respect to
payments to vendors of goods, services, or property sold or
leased to the Federal government, the continuous levy may be up
to 100 percent of each payment.\16\ For payments to Medicare
providers and suppliers, the levy is up to 15 percent for
payments made within 180 days after December 19, 2014. For
payments made after that date, the levy is up to 30
percent.\17\
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\15\Pub. L. No. 105-34.
\16\Sec. 6331(h)(3).
\17\Pub. L. No. 113-295, Division B.
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Under FPLP, the IRS matches its accounts receivable records
with Federal payment records maintained by Treasury's Bureau of
Fiscal Service (``BFS''), such as certain Social Security
benefit and Federal wage records. When these records match, the
delinquent taxpayer is provided both the notice of intention to
levy and the CDP notice. If the taxpayer does not respond after
30 days, the IRS can instruct BFS to levy the taxpayer's
Federal payments. Subsequent payments are continuously levied
until such time that the tax debt is paid or the IRS releases
the levy.
REASONS FOR CHANGE
It has been reported that many thousands of Medicare
providers and suppliers have outstanding Federal employment and
income tax liability, which contribute to the tax gap.
Consequently, the Committee believes that it is appropriate to
increase the permissible percentage of payments to a Medicare
provider subject to levy.
EXPLANATION OF PROVISION
The provision provides that the present limitation of 30
percent of certain specified payments be increased by an amount
sufficient to offset the estimated revenue loss of the
provision described in Part A, above.
EFFECTIVE DATE
The provision is effective for payments made after 180 days
after the date of enactment.
III. BUDGET EFFECTS OF THE BILL
A. Committee Estimates
In compliance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate, and section 308(a)(1) of the
Congressional Budget and Impoundment Control Act of 1974, as
amended (the ``Budget Act''),\18\ the following statement is
made concerning the estimated budget effects of the revenue
provisions of the ``LNG and LPG Excise Tax Equalization Act of
2015'' as reported.
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\18\Pub. L. No. 93-344.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
B. Budget Authority and Tax Expenditures
Budget authority
In compliance with section 308(a)(1) of the ``Budget Act,''
the Committee states that no provisions of the bill as reported
involve new or increased budget authority.
Tax expenditures
In compliance with section 308(a)(1) of the Budget Act, the
Committee states that there are no provisions that affect the
levels of tax expenditures.
C. Consultation With Congressional Budget Office
In accordance with section 403 of the Budget Act, the
Committee advises that the Congressional Budget Office has not
submitted a statement on the bill. The letter from the
Congressional Budget Office will be provided separately.
IV. VOTES OF THE COMMITTEE
In compliance with paragraph 7(b) of rule XXVI of the
Standing Rules of the Senate, the Committee states that, with a
majority and quorum present, the ``LNG and LPG Excise Tax
Equalization Act of 2015'' was ordered favorably reported by
voice vote on February 11, 2015.
V. REGULATORY IMPACT AND OTHER MATTERS
A. Regulatory Impact
Pursuant to paragraph 11(b) of rule XXVI of the Standing
Rules of the Senate, the Committee makes the following
statement concerning the regulatory impact that might be
incurred in carrying out the provisions of the bill as amended.
Impact on individuals and businesses, personal privacy and paperwork
The bill provides for the conversion of the excise tax on
LNG and liquefied petroleum gas to be converted into their
energy equivalent amounts of diesel fuel and gasoline,
respectively. It also increases the IRS's continuous levy
authority on payments to Medicare providers and suppliers. The
provisions of the bill are not expected to impose additional
administrative requirements or regulatory burdens on
individuals or businesses.
The provisions of the bill do not impact personal privacy.
B. Unfunded Mandates Statement
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 tax provisions of the
reported bill do not contain Federal private sector mandates or
Federal intergovernmental mandates on State, local, or tribal
governments within the meaning of Public Law 104-4, the
Unfunded Mandates Reform Act of 1995.
C. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring 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.
The staff of the Joint Committee on Taxation has determined
that there are no provisions that are of widespread
applicability to individuals or small business.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In the opinion of the Committee, it is necessary in order
to expedite the business of the Senate, to dispense with the
requirements of paragraph 12 of rule XXVI of the Standing Rules
of the Senate (relating to the showing of changes in existing
law made by the bill as reported by the Committee).
[all]