EXTENSION AND MODIFICATION OF TAXES FUNDING AIRPORT AND AIRWAY TRUST FUND; INCREASED DEPOSITS INTO SUCH FUND.

SEC. 1031. EXTENSION AND MODIFICATION OF TAXES FUNDING AIRPORT AND AIRWAY TRUST FUND; INCREASED DEPOSITS INTO SUCH FUND. (a) Fuel Taxes.— (1) Aviation fuel.—Clause (ii) of section 4091(b)(3)(A) is amended by striking “September 30, 1997” and inserting “September 30, 2007”. (2) Aviation gasoline.—Subparagraph (B) of section 4081(d)(2) is amended by striking “September 30, 1997” and inserting “September 30, 2007”. (3) Noncommercial aviation.—Subparagraph (B) of section 4041(c)(3) is amended by striking “September 30, 1997” and inserting “September 30, 2007”. (b) Ticket Taxes.— (1) Persons.—Clause (ii) of section 4261(g)(1)(A) is amended by striking “September 30, 1997” and inserting “September 30, 2007”. (2) Property.—Clause (ii) of section 4271(d)(1)(A) is amended by striking “September 30, 1997” and inserting “September 30, 2007”. (c) Modifications to Tax on Transportation of Persons by Air.— (1) In general.—Section 4261 (relating to imposition of tax) is amended by striking subsections (a), (b), and (c) and inserting the following new subsections: “(a) In General.—There is hereby imposed on the amount paid for taxable transportation of any person a tax equal to 7.5 percent of the amount so paid. “(b) Domestic Segments of Taxable Transportation.— “(1) In general.—There is hereby imposed on the amount paid for each domestic segment of taxable transportation by air a tax in the amount determined in accordance with the following table for the period in which the segment begins: In the case of segments beginning: The tax is: After September 30, 1997, and before October 1, 1998 $1.00 After September 30, 1998, and before October 1, 1999 $12.00 After September 30, 1999, and before January 1, 2000 $12.25 During 2000 $12.50 During 2001 $12.75 During 2002 or thereafter $3.00. “(2) Domestic segment.—For purposes of this section, the term ‘domestic segment’ means any segment consisting of 1 takeoff and 1 landing and which is taxable transportation described in section 4262(a)(1). “(3) Changes in segments by reason of rerouting.—If— “(A) transportation is purchased between 2 locations on specified flights, and “(B) there is a change in the route taken between such 2 locations which changes the number of domestic segments, but there is no change in the amount charged for such transportation, 111 STAT. 930the tax imposed by paragraph (1) shall be determined without regard to such change in route. “(c) Use of International Travel Facilities.— “(1) In general.—There is hereby imposed a tax of $12.00 on any amount paid (whether within or without the United States) for any transportation of any person by air, if such transportation begins or ends in the United States. “(2) Exception for transportation entirely taxable under subsection (a).—This subsection shall not apply to any transportation all of which is taxable under subsection (a) (determined without regard to sections 4281 and 4282). “(3) Special rule for alaska and Hawaii.—In any case in which the tax imposed by paragraph (1) applies to a domestic segment beginning or ending in Alaska or Hawaii, such tax shall apply only to departures and shall be at the rate of $6.”. (2) Special rules.—Section 4261 is amended by redesignating subsections (e), (f), and (g) as subsections (f), (g), and (h), respectively, and by inserting after subsection (d) the following new subsection: “(e) Special Rules.— “(1) Segments to and from rural airports.— “(A) Exception from segment tax.—The tax imposed by subsection (b)(1) shall not apply to any domestic segment beginning or ending at an airport which is a rural airport for the calendar year in which such segment begins or ends (as the case may be). “(B) Rural airport.—For purposes of this paragraph, the term ‘rural airport’ means, with respect to any calendar year, any airport if— “(i) there were fewer than 100,000 commercial passengers departing by air during the second preceding calendar year from such airport, and “(ii) such airport— “(I) is not located within 75 miles of another airport which is not described in clause (i), or “(II) is receiving essential air service subsidies as of the date of the enactment of this paragraph. “(C) No phasein of reduced ticket tax.—In the case of transportation beginning before October 1, 1999— “(i) In general.—Paragraph (5) shall not apply to any domestic segment beginning or ending at an airport which is a rural airport for the calendar year in which such segment begins or ends (as the case may be). “(ii) Transportation involving multiple segments.—In the case of transportation involving more than 1 domestic segment at least 1 of which does not begin or end at a rural airport, the 7.5 percent rate applicable by reason of clause (i) shall be applied by taking into account only an amount which bears the same ratio to the amount paid for such transportation as the number of specified miles in domestic segments which begin or end at a rural airport bears to the total number of specified miles in such transportation.111 STAT. 931 “(2) Amounts paid outside the united states.—In the case of amounts paid outside the United States for taxable transportation, the taxes imposed by subsections (a) and (b) shall apply only if such transportation begins and ends in the United States. “(3) Amounts paid for right to award free or reduced rate air transportation.— “(A) In general.—Any amount paid (and the value of any other benefit provided) to an air carrier (or any related person) for the right to provide mileage awards for (or other reductions in the cost of) any transportation of persons by air shall be treated for purposes of subsection (a) as an amount paid for taxable transportation, and such amount shall be taxable under subsection (a) without regard to any other provision of this subchapter. “(B) Controlled group.—For purposes of subparagraph (A), a corporation and all wholly owned subsidiaries of such corporation shall be treated as 1 corporation. “(C) Regulations.—The Secretary shall prescribe rules which reallocate items of income, deduction, credit, exclusion, or other allowance to the extent necessary to prevent the avoidance of tax imposed by reason of this paragraph. The Secretary may prescribe rules which exclude from the tax imposed by subsection (a) amounts attributable to mileage awards which are used other than for transportation of persons by air. “(4) Inflation adjustment of dollar rates of tax.— “(A) In general.—In the case of taxable events in a calendar year after the last nonindexed year, the $3.00 amount contained in subsection (b) and each dollar amount contained in subsection (c) shall be increased by an amount equal to— “(i) such dollar amount, multiplied by “(ii) the cost-of-living adjustment determined under section 1(0(3) for such calendar year by substituting the year before the last nonindexed year for ‘calendar year 1992’ in subparagraph (B) thereof. If any increase determined under the preceding sentence is not a multiple of 10 cents, such increase shall be rounded to the nearest multiple of 10 cents. “(B) Last nonindexed year.—For purposes of subparagraph (A), the last nonindexed year is— “(i) 2002 in the case of the $3.00 amount contained in subsection (b), and “(ii) 1998 in the case of the dollar amounts contained in subsection (c). “(C) Taxable event.—For purposes of subparagraph (A), in the case of the tax imposed subsection (b), the beginning of the domestic segment shall be treated as the taxable event. “(5) Rates of ticket tax for transportation beginning before october 1, 1999.—Subsection (a) shall be applied by substituting for ‘7.5 percent’— “(A) ‘9 percent’ in the case of transportation beginning after September 30, 1997, and before October 1, 1998, and111 STAT. 932 “(B) ‘8 percent’ in the case of transportation beginning after September 30, 1998, and before October 1, 1999.”. (3) Secondary liability of carrier for unpaid tax.—Subsection (c) of section 4263 is amended by striking “subchapter—” and all that follows and inserting “subchapter, such tax shall be paid by the carrier providing the initial segment of such transportation which begins or ends in the United States.”. (d) Increased Airport and Airway Trust Fund Deposits.—(1) Paragraph (1) of section 9502(b) is amended— (A) by striking “(to the extent that the rate of the tax on such gasoline exceeds 4.3 cents per gallon)” in subparagraph (C), (B) by striking “to the extent attributable to the Airport and Airway Trust Fund financing rate” in subparagraph (D), and (C) by adding at the end the following flush sentence: “There shall not be taken into account under paragraph (1) so much of the taxes imposed by sections 4081 and 4091 as are determined at the rates specified in section 4081(a)(2)(B) or 4091(b)(2)”. (2) Section 9502 is amended by striking subsection (f). (e) Effective Dates.— (1) Fuel taxes.—The amendments made by subsection (a) shall apply take effect on October 1, 1997. (2) Ticket taxes.— (A) In general.—Except as otherwise provided in this paragraph, the amendments made by subsections (b) and (c) shall apply to transportation beginning on or after October 1, 1997. (B) Treatment of amounts paid for tickets purchased before october 1, 1997.—The amendments made by subsection (c) shall not apply to amounts paid before October 1, 1997; except that— (i) the amendment made to section 4261(c) of the Internal Revenue Code of 1986 shall apply to amounts paid more than 7 days after the date of the enactment of this Act for transportation beginning on or after October 1, 1997, and (ii) the amendment made to section 4263(c) of such Code shall apply to the extent related to taxes imposed under the amendment made to such section 4261(c) on the amounts described in clause (i). (C) Amounts paid for right to award mileage awards.— (i) In general.—Paragraph (3) of section 4261(e) of the Internal Revenue Code of 1986 (as added by the amendment made by subsection (c)) shall apply to amounts paid (and other benefits provided) after September 30, 1997. (ii) Payments within controlled group.—For purposes of clause (i), any amount paid after June 11, 1997, and before October 1, 1997, by 1 member of a controlled group for a right which is described in such section 4261(e)(3) and is furnished by another member of such group after September 30, 1997, shall 111 STAT. 933be treated as paid after September 30, 1997. For purposes of the preceding sentence, all persons treated as a single employer under subsection (a) or (b) of section 52 of such Code shall be treated as members of a controlled group. (3) Increased deposits into airport and airway trust fund.—The amendments made by subsection (d) shall apply with respect to taxes received in the Treasury on and after October 1, 1997. (g) Delayed Deposits of Airport Trust Fund Tax Revenues.—Notwithstanding section 6302 of the Internal Revenue Code of 1986— (1) in the case of deposits of taxes imposed by section 4261 of such Code, the due date for any such deposit which would (but for this subsection) be required to be made after August 14, 1997, and before October 1, 1997, shall be October 10, 1997, (2) in the case of deposits of taxes imposed by section 4261 of such Code, the due date for any such deposit which would (but for this subsection) be required to be made after August 14, 1998, and before October 1, 1998, shall be October 5, 1998, and (3) in the case of deposits of taxes imposed by sections 4081(a)(2)(A)(ii), 4091, and 4271 of such Code, the due date for any such deposit which would (but for this subsection) be required to be made after July 31, 1998, and before October 1, 1998, shall be October 5, 1998.