DIESEL FUEL AND AVIATION FUEL TAXES IMPOSED AT WHOLESALE LEVEL.

SEC. 10502. DIESEL FUEL AND AVIATION FUEL TAXES IMPOSED AT WHOLESALE LEVEL. (a) In General.— Part III of subchapter A of chapter 32 is amended by inserting after subpart A the following new subpart: “Subpart B— Diesel Fuel and Aviation Fuel “Sec. 4091. Imposition of tax. “Sec. 4092. Definitions. “Sec. 4093. Exemptions; special rule. “SEC. 4091. IMPOSITION OF TAX. “(a) In General.— There is hereby imposed a tax on the sale of any taxable fuel by the producer or the importer thereof or by any producer of a taxable fuel. “(b) Rate of Tax.— “(1) In general.— The rate of the tax imposed by subsection (a) shall be the sum of— 101 STAT. 1330–439 “(A) (i) the Highway Trust Fund financing rate in the case of diesel fuel, and “(ii) the Airport and Airway Trust Fund financing rate in the case of aviation fuel, and “(B) the Leaking Underground Storage Tank Trust Fund financing rate in the case of any taxable fuel. “(2) Highway trust fund financing rate.— For purposes of paragraph (1), except as provided in subsection (c), the Highway Trust Fund financing rate is 15 cents per gallon. “(3) Airport and airway trust fund financing rate.— For purposes of paragraph (1), the Airport and Airway Trust Fund financing rate is 14 cents per gallon. “(4) Leaking underground storage tank trust fund financing rate.— For purposes of paragraph (1), the Leaking Underground Storage Tank Trust Fund financing rate is 0.1 cent per gallon. “(5) Termination of rates.— “(A) The Highway Trust Fund financing rate shall not apply on and after October 1, 1993. “(B) The Airport and Airway Trust Fund financing rate shall not apply on and after January 1, 1988. “(C) The Leaking Underground Storage Tank Trust Fund financing rate shall not apply during any period during which the Leaking Underground Storage Tank Trust Fund financing rate under section 4081 does not apply. “(c) Reduced Rate of Tax for Diesel Fuel in Alcohol Mixture, Etc.— Under regulations prescribed by the Secretary— “(1) In general.— The Highway Trust Fund financing rate shall be— “(A) 9 cents per gallon in the case of the sale of any mixture of diesel fuel if— “(i) at least 10 percent of such mixture consists of alcohol (as defined in section 4081(c)(3)), and “(ii) the diesel fuel in such mixture was not taxed under subparagraph (B), and “(B) 10 cents per gallon in the case of the sale of diesel fuel for use (at the time of such sale) in producing a mixture described in subparagraph (A). “(2) Later separation.— If any person separates the diesel fuel from a mixture of the diesel fuel and alcohol on which tax was imposed under subsection (a) at a Highway Trust Fund financing rate equivalent to 9 cents a gallon by reason of this subsection (or with respect to which a credit or payment was allowed or made by reason of section 6427(f)(1)), such person shall be treated as the producer of such diesel fuel. The amount of tax imposed on any sale of such diesel fuel by such person shall be 5 cents per gallon. “(3) Termination.— Paragraph (1) shall not apply to any sale after September 30, 1993. “(d) Exemption From Tax for Aviation Fuel in Alcohol Mixture, Etc.— “(1) In general.— The Airport and Airway Trust Fund financing rate shall not apply to the sale of— “(A) any mixture of aviation fuel at least 10 percent of which consists of alcohol (as defined in section 4081(c)(3)), or “(B) any aviation fuel for use (at the time of such sale) in producing a mixture described in subparagraph (A). 101 STAT. 1330–440 “(2) Later separation.— If any person separates the aviation fuel from a mixture of the aviation fuel and alcohol on which the Airport and Airway Trust Fund financing rate did not apply by reason of this subsection (or with respect to which a credit or payment was allowed or made by reason of section 6427(f)(2)), such person shall be treated as the producer of such aviation fuel. “(3) Termination.— Paragraph (1) shall not apply to any sale after September 30, 1993. “SEC. 4092. DEFINITIONS. “(a) Taxable Fuel.— For purposes of this subpart— “(1) In general.— The term ‘taxable fuel’ means— “(A) diesel fuel, and “(B) aviation fuel. “(2) Diesel fuel.— The term ‘diesel fuel’ means any liquid (other than any product taxable under section 4081) which is suitable for use as a fuel in a diesel-powered highway vehicle or a diesel-powered train. “(3) Aviation fuel.— The term ‘aviation fuel’ means any liquid (other than any product taxable under section 4081) which is suitable for use as a fuel in an aircraft. “(b) Producer.— For purposes of this subpart— “(1) Certain persons treated as producers.— “(A) In general.— The term ‘producer’ includes any person described in subparagraph (B) who elects to register under section 4101 with respect to the tax imposed by section 4091. “(B) Persons described.— A person is described in this subparagraph if such person is— “(i) a refiner, compounder, blender, or wholesale distributor of a taxable fuel, or “(ii) a dealer selling any taxable fuel exclusively to producers of such taxable fuel. “(C) Tax-free purchasers treated as producers.— Any person to whom any taxable fuel is sold tax-free under this subpart shall be treated as the producer of such fuel. “(2) Wholesale distributor.— For purposes of paragraph (1), the term ‘wholesale distributor’ includes any person who sells a taxable fuel to producers, retailers, or to users who purchase in bulk quantities and deliver into bulk storage tanks. Such term does not include any person who (excluding the term ‘wholesale distributor’ from paragraph (1)) is a producer or importer. “SEC. 4093. EXEMPTIONS; SPECIAL RULE. “(a) Heating Oil.— The tax imposed by section 4091 shall not apply in the case of sales of any taxable fuel which the Secretary determines is destined for use as heating oil. “(b) Sales to Producer.— Under regulations prescribed by the Secretary, the tax imposed by section 4091 shall not apply in the case of sales of a taxable fuel to a producer of such fuel. “(c) Authority to Exempt Certain Other Uses.— Subject to such terms and conditions as the Secretary may provide (including the application of section 4101), the Secretary may by regulation provide that— 101 STAT. 1330–441 “(1) the Highway Trust Fund financing rate under section 4091 shall not apply to diesel fuel sold for use by any purchaser as a fuel in a diesel-powered train, “(2) the Airport and Airway Trust Fund financing rate under section 4091 snail not apply to aviation fuel sold for use by any purchaser as a fuel in an aircraft not in noncommercial aviation (as defined in section 4041(c)(4)), “(3) the tax imposed by section 4091 shall not apply to taxable fuel sold for use by any purchaser other than as a motor fuel, and “(4) the tax imposed by section 4091 shall not apply to taxable fuel sold for the exclusive use of any State, any political subdivision of a State, or the District of Columbia. “(d) Special Administrative Rules.— The Secretary may require— “(1) information reporting by each remitter of the tax imposed by section 4091, and “(2) information reporting by, and registration of, such other persons as the Secretary deems necessary to carry out this subpart. “(e) Cross References.— “(1) For imposition of tax where certain uses of diesel fuel or aviation fuel occur before imposition of tax by section 4091, see subsections (a)(1) and (c)(1) of section 4041. “(2) For provisions allowing a credit or refund for fuel not used for certain taxable purposes, see section 6427.” (b) Retail Diesel Fuel and Aviation Fuel Taxes To Be Residual Taxes.— (1) Paragraph (1) of section 4041(a) is amended— (A) by striking out “Diesel fuel” in the heading and inserting in lieu thereof “Tax on diesel fuel where no tax imposed on fuel under section 4091”, and (B) by adding at the end thereof the following new sentence: “No tax shall be imposed by this paragraph on the sale or use of any liquid if there was a taxable sale of such liquid under section 4091.” (2) Paragraph (1) of section 4041(c) is amended— (A) by striking out “In general” in the heading and inserting in lieu thereof “Tax on nongasoline fuels where no tax imposed on fuel under section 4091”, and (B) by adding at the end thereof the following new sentence: “No tax shall be imposed by this paragraph on the sale or use of any liquid if there was a taxable sale of such liquid under section 4091.” (3) Subsection (d) of section 4041 is amended by redesignating paragraph (3) as paragraph (4) and by striking out paragraphs (1) and (2) and inserting in lieu thereof the following: “(1) Tax on sales and uses subject to tax under subsection (a).— In addition to the taxes imposed by subsection (a), there is hereby imposed a tax of 0.1 cent a gallon on the sale or use of any liquid (other than liquefied petroleum gas) if tax is imposed by subsection (a) on such sale or use. “(2) Tax on diesel fuel used in trains.— There is hereby imposed a tax of 0.1 cent a gallon on any liquid (other than a product taxable under section 4081)— 101 STAT. 1330–442 “(A) sold by any person to an owner, lessee, or other operator of a diesel-powered train for use as a fuel in such train, or “(B) used by any person as a fuel in a diesel-powered train unless there was a taxable sale of such liquid under subparagraph (A). No tax shall be imposed by this paragraph on the sale or use of any liquid if there was a taxable sale of such liquid under section 4091. “(3) Liquids used in aviation.— In addition to the taxes imposed by subsection (c), there is hereby imposed a tax of 0.1 cent a gallon on any liquid (other than any product taxable under section 4081)— “(A) sold by any person to an owner, lessee, or other operator of an aircraft for use as a fuel in such aircraft, or “(B) used by any person as a fuel in an aircraft unless there was a taxable sale of such liquid under subparagraph (A). No tax shall be imposed by this paragraph on the sale or use of any liquid if there was a taxable sale of such liquid under section 4091.” (4) Subsection (n) of section 4041 is hereby repealed. (c) Amendments Relating to Credits and Refunds.— (1) Section 6427 is amended by redesignating subsections (1) through (p) as subsections (m) through (q), respectively, and by inserting after subsection (k) the following new subsection: “(l) Nontaxable Uses of Diesel Fuel and Aviation Fuel Taxed Under Section 4091.— “(1) In general.— Except as provided in subsection (k) and in paragraph (3) of this subsection, if any fuel on which tax has been imposed by section 4091 is used by any person in a nontaxable use, the Secretary shall pay (without interest) to the ultimate purchaser of such fuel an amount equal to the aggregate amount of tax imposed on such fuel under section 4091. “(2) Nontaxable use.— For purposes of this subsection, the term ‘nontaxable use’ means, with respect to any fuel, any use of such fuel if such use is exempt from the taxes imposed by subsections (a)(1) and (c)(1) of section 4041 (other than by reason of the imposition of tax on any sale thereof). “(3) No refund of leaking underground storage tank trust fund financing tax.— Paragraph (1) shall not apply to so much of the tax imposed by section 4091 as is attributable to the Leaking Underground Storage Tank Trust Fund financing rate imposed by such section in the case of— “(A) fuel used in a diesel-powered train, and “(B) fuel used in any aircraft.” (2) Paragraph (1) of section 6427(b) is amended— (A) by striking out “subsection (a) of section 4041” the first place it appears and inserting in lieu thereof “section 4041(a) or 4091”, and (B) by striking out “subsection (a) of section 4041” the second place it appears and inserting in lieu thereof “section 4041(a) or 4091, as the case may be”. (3) Subparagraph (B) of section 6427(e)(1) is amended by inserting “or 4091” after “section 4041”. (4) Subsection (f) of section 6427 is amended to read as follows: 101 STAT. 1330–443 “(f) Gasoline, Diesel Fuel, and Aviation Fuel Used To 123123 Copy read “to”. Produce Certain Alcohol Fuels.— Except as provided in subsection (k)— “(1) Gasoline and diesel fuels.— “(A) In general.— If any gasoline or diesel fuel on which tax was imposed by section 4081 or 4091 at the regular Highway Trust Fund financing rate is used by any person in producing a mixture described in section 4081(c) or in section 4091(c)(1)(A) (as the case may be) which is sold or used in such person’s trade or business, the Secretary shall pay (without interest) to such person an amount equal to the excess of the regular Highway Trust Fund financing rate over the incentive Highway Trust Fund Financing rate with respect to such fuel. “(B) Definitions.— For purposes of subparagraph (A)— “(i) Regular highway trust fund financing rate.— The term ‘regular Highway Trust Fund financing rate’ means— “(I) 9 cents per gallon in the case of gasoline, and “(II) 15 cents per gallon in the case of diesel fuel, “(ii) Incentive highway trust fund financing rate.— The term ‘incentive Highway Trust Fund Financing rate’ means— “(I) 3⅓ cents per gallon in the case of gasoline, and “(II) 10 cents per gallon in the case of diesel fuel. “(C) Coordination with other repayment provisions.— No amount shall be payable under subparagraph (A) with respect to any gasoline or diesel fuel with respect to which an amount is payable under subsection (d), (e), or (1) of this section or under section 6420 or 6421. “(2) Aviation fuel.— If any aviation fuel on which tax was imposed by section 4091 is used by any person in producing a mixture at least 10 percent of which is alcohol (as defined in section 4081(c)(3)) which is sold or used in such person’s trade or business, the Secretary shall pay (without interest) to such person an amount equal to the aggregate amount of tax (attributable to the Airport and Airway Trust Fund financing rate) imposed on such fuel under section 4091. “(3) Termination.— Paragraphs (1) and (2) shall not apply with respect to any mixture sold or used after September 30, 1993.” (5) (A) Paragraph (1) of section 6427(i) is amended by striking out “or (h)” and inserting in lieu thereof “(h), or (1)”. (B) Clause (i) of section 6427(i)(2)(A) is amended by striking out “and (h)” and inserting in lieu thereof “(h), and (I) . (6) Subsection (o) of section 6427 (as redesignated by paragraph (1)) is amended to read as follows: “(o) Termination of Certain Provisions.— Except with respect to taxes imposed by section 4041(d) and sections 4081 and 4091 at the Leaking Underground Storage Tank Trust Fund financing rate, subsections (a), (b), (c), (d), (g), (h), and (1) shall only apply with respect to fuels purchased before October 1, 1993.” (d) Other Conforming Amendments.— 101 STAT. 1330–444 (1) Subsection (c) of section 40 is amended by striking out “or section 4081(c)” and inserting in lieu thereof “, section 4081(c), or section 4091(c)”. (2) Subparagraph (B) of section 4081(e)(2), as amended by section 1703 of the Tax Reform Act of 1986, is amended by striking out “net revenues” and all that follows and inserting in lieu thereof the following: “net revenues are at least $500,000,000 from taxes imposed by section 4041(d) and taxes attributable to Leaking Underground Storage Tank Trust Fund financing rate imposed under this section and sections 4042 and 4091.” (3) Subsection (a) of section 4101, as amended by section 1703 of the Tax Reform Act of 1986, is amended by inserting “or 4091” after “section 4081”. (4) Subsection (a) of section 4221 is amended by striking out “(other than” and all that follows through “sale by the manufacturer” and inserting in lieu thereof “(other than under section 4121, 4081, or 4091) on the sale by the manufacturer”. (5) Section 6206 is amended by striking out “or 4041” and inserting in lieu thereof “or 4041 or 4091”. (6) Paragraph (2) of section 6416(b) is amended— (A) by striking out “(other than coal taxable under section 4121)”, and (B) by adding at the end thereof the following new sentence: “This paragraph shall not apply in the case of any tax paid under section 4091 or 4121.” (7) Subparagraph (A) of section 6416(b)(3) is amended by inserting “and other than any fuel taxable under section 4091” after “section 4081”. (8) Subparagraph (B) of section 6416(b)(3) is amended by striking out “, such gasoline” and inserting in lieu thereof “or any fuel taxable under section 4091, such gasoline or fuel”. (9) Subparagraph (C) of section 6421(e)(2) is hereby repealed. (10) The subsection (j) of section 6421 relating to cross references is amended by striking out paragraph (1) and by redesignating paragraphs (2), (3), and (4), as paragraphs (1), (2), and (3), respectively. (11) Section 6652 is amended by striking out the subsection (j) added by section 1702(b) of the Tax Reform Act of 1986 and by redesignating subsections (1) and (m) as subsections (k) and (l), respectively. (12) Subsection (b) of section 9502 is amended by striking out “and” at the end of paragraph (2), by redesignating paragraph (3) as paragraph (4), and by inserting after paragraph (2) the following new paragraph: “(3) amounts determined by the Secretary to be equivalent to the taxes received in the Treasury before January 1, 1988, under section 4091 (to the extent attributable to the Airport and Airway Trust Fund financing rate), and”. (13) Paragraph (1) of section 9503(b) is amended by striking out subparagraph (F) and inserting in lieu thereof the following: “(F) section 4091 (relating to tax on diesel fuel), and”. (14) Paragraph (4) of section 9503(b) is amended to read as follows: “(4) Certain additional taxes not transferred to highway trust fund.— For purposes of paragraphs (1) and (2)— 101 STAT. 1330–445 “(A) there shall not be taken into account the taxes imposed by sections 4041(d), and “(B) there shall be taken into account the taxes imposed by sections 4081 and 4091 only to the extent attributable to the Highway Trust Fund financing rates under such sections.” (15) Paragraph (2) of section 9503(e) is amended— (A) by striking out “sections 4041 and 4081” and inserting in lieu thereof “sections 4041, 4081, and 4091”, and (B) by striking out “section 4041 or 4081” and inserting in lieu thereof “section 4041, 4081, or 4091”. (16) Subsection (b) of section 9508 is amended by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), respectively, and by inserting after paragraph (2) the following new paragraph: “(3) taxes received in the Treasury under section 4091 (relating to tax on diesel fuel and aviation fuel) to the extent attributable to the Leaking Underground Storage Trust Fund financing rate under such section,”. (17) Subparagraph (A) of section 9508(c)(2) is amended by striking out clause (ii) and all that follows and inserting in lieu thereof the following: “(ii) credits allowed under section 34, with respect to the taxes imposed by section 4041(d) or by sections 4081 and 4091 (to the extent attributable to the Leaking Underground Storage Trust Fund financing rate under such sections).” (18) The table of subparts for part III of subchapter A of chapter 32 is amended by inserting after the item relating to subpart A the following new item: “Subpart B. Diesel fuel and aviation fuel.” (e) Effective Date.— The amendments made by this section shall apply to sales after March 31, 1988. (f) Floor Stocks Tax.— (1) Imposition of tax.— On any taxable fuel which on April 1, 1988, is held by a taxable person, there is hereby imposed a floor stocks tax at the rate of tax which would be imposed if such fuel were sold on such date in a sale subject to tax under section 4091 of the Internal Revenue Code of 1986 (as added by this section). (2) Overpayment of floor stocks taxes, etc.— Sections 6416 and 6427 of such Code shall apply in respect of the floor stocks taxes imposed by this subsection so as to entitle, subject to all provisions of such sections, any person paying such floor stocks taxes to a credit or refund thereof for any reason specified in such sections. All provisions of law, including penalties, applicable with respect to the taxes imposed by section 4091 of such Code (as so added) shall apply to the floor stocks taxes imposed by this subsection. (3) Due date of tax.— The taxes imposed by this subsection shall be paid before June 16, 1988. (4) Definitions.— For purposes of this subsection— (A) Taxable fuel.— (i) In general.— The term “taxable fuel” means any taxable fuel (as defined in section 4092 of such Code, as 101 STAT. 1330–446added by this section) on which no tax has been imposed under section 4041 of such Code. (ii) Exception for fuel held for nontaxable uses.— The term “taxable fuel”124124 Copy read “ ‘taxable fuel’ ”. shall not include fuel held exclusively for any use which is a nontaxable use (as defined in section 6427(1) of such Code, as added by this section). (B) Taxable person.— The term “taxable person” means any person other than a producer (as defined in section 4092 of such Code, as so added) or importer of taxable fuel. (C) Held by a taxable person.— An article shall be treated as held by a person if title thereto has passed to such person (whether or not delivery to such person has been made). (5) Special rule for fuel held for use in trains and commercial aircraft.— Only the Leaking Underground Storage Tank Trust Fund financing rate under section 4091 of such Code shall apply for purposes of this subsection with respect (A) diesel fuel held exclusively for use as a fuel in a diesel-powered train, and (B) aviation fuel held exclusively for use as a fuel in an aircraft not in noncommercial aviation (as defined in section 4041(c)(4) of such Code). (6) Transfer of floor stock revenues to trust funds.— For purposes of determining the amount transferred to any trust fund, the tax imposed by this subsection shall be treated as imposed by section 4091 of such Code (as so added). (g) Coordination With Airport and Airway Safety and Capacity Expansion Act of 1987.— If the Airport and Airway Safety and Capacity Expansion Act of 1987 is enacted, effective on December 31, 1987, sections 4091(b)(5)(B) and 9502(b)(3) of such Code (as added by this section) are each amended by striking out “January 1, 1988” and inserting in lieu thereof “January 1, 1991”. 125125 Copy read “1991”, and.”.