INCREASE IN TAXES ON DIESEL FUEL AND ON SPECIAL MOTOR FUELS.

SEC. 202. INCREASE IN TAXES ON DIESEL FUEL AND ON SPECIAL MOTOR FUELS. (a) Diesel Fuel.—Subsection (a) of section 4041 (relating to tax on diesel fuel) is amended by striking out “2 cents a gallon” and in-70 Stat. 388serting in lieu thereof “3 cents a gallon”, and by adding after paragraph (2) the following: “In the case of a liquid taxable under this subsection sold for use or used as a fuel in a diesel-powered highway vehicle (A) which (at the time of such sale or use) is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country, or (B) which, in the case of a diesel-powered highway vehicle owned by the United States, is not used on the highway, the tax imposed by paragraph (1) or by paragraph (2) shall be 2 cents a gallon in lieu of 3 cents a gallon. If a liquid on which tax was imposed by paragraph (1) at the rate of 2 cents a gallon by reason of the preceding sentence is used as a fuel in a diesel-powered highway vehicle (A) which (at the time of such use) is registered, or is required to be registered, for highway use under the laws of any State or foreign country, or (B) which, in the case of a diesel-powered highway vehicle owned by the United States, is used on the highway, a tax of 1 cent a gallon shall be imposed under paragraph (2).” (b) Special Motor Fuels.—Subsection (b) of section 4041 (relating to special motor fuels) is amended by striking out “2 cents a gallon” and inserting in lieu thereof “3 cents a gallon”, and by adding after paragraph (2) the following: “In the case of a liquid taxable under this subsection sold for use or used otherwise than as a fuel for the propulsion of a highway vehicle (A) which (at the time of such sale or use) is registered, or is required to be registered, for highway use under the laws of any State or foreign country, or (B) which, in the case of a highway vehicle owned by the United States, is used on the highway, the tax imposed by paragraph (1) or by paragraph (2) shall be 2 cents a gallon in lieu of 3 cents a gallon. If a liquid on which tax was imposed by paragraph (1) at the rate of 2 cents a gallon by reason of the preceding sentence is used as a fuel for the propulsion of a highway vehicle (A) which (at the time of such use) is registered, or is required to be registered, for highway use under the laws of any State or foreign country, or (B) which, in the case of a highway vehicle owned by the United States, is used on the highway, a tax of 1 cent a gallon shall be imposed under paragraph (2).” (c) Rate Reduction.—Subsection (c) of section 4041 (relating to rate reduction) is amended to read as follows: “(c) Rate Reduction.—On and after July 1, 1972— “(1) the taxes imposed by this section shall be 1½ cents a gallon; and “(2) the second and third sentences of subsections (a) and (b) shall not apply.”