[Senate Report 114-27]
[From the U.S. Government Publishing Office]


                                                        Calendar No. 50
114th Congress     }                                   {         Report
                                 SENATE
 1st Session       }                                   {         114-27

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



 
            LNG AND LPG EXCISE TAX EQUALIZATION ACT OF 2015

                                _______
                                

                 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'').

------------------------------------------------------------------------
 
------------------------------------------------------------------------
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\
------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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]