TAXATION OF AVIATION-GRADE KEROSENE.

SEC. 853. TAXATION OF AVIATION-GRADE KEROSENE.(a) Rate of Tax.—(1) In general.—Subparagraph (A) of section 4081(a)(2) is amended by striking “and” at the end of clause (ii), by striking the period at the end of clause (iii) and inserting “, and”, and by adding at the end the following new clause:118 STAT. 1610 “(iv) in the case of aviation-grade kerosene, 21.8 cents per gallon.”.(2) Commercial aviation.—Paragraph (2) of section 4081(a) is amended by adding at the end the following new subparagraph:“(C) Taxes imposed on fuel used in commercial aviation.—In the case of aviation-grade kerosene which is removed from any refinery or terminal directly into the fuel tank of an aircraft for use in commercial aviation, the rate of tax under subparagraph (A)(iv) shall be 4.3 cents per gallon.”.(3) Certain refueler trucks, tankers, and tank wagons treated as terminal.—(A) In general.—Subsection (a) of section 4081 is amended by adding at the end the following new paragraph:“(3) Certain refueler trucks, tankers, and tank wagons treated as terminal.—“(A) In general.—For purposes of paragraph (2)(C), a refueler truck, tanker, or tank wagon shall be treated as part of a terminal if—“(i) such terminal is located within a secured area of an airport,“(ii) any aviation-grade kerosene which is loaded in such truck, tanker, or wagon at such terminal is for delivery only into aircraft at the airport in which such terminal is located,“(iii) such truck, tanker, or wagon meets the requirements of subparagraph (B) with respect to such terminal, and“(iv) except in the case of exigent circumstances identified by the Secretary in regulations, no vehicle registered for highway use is loaded with aviation-grade kerosene at such terminal. “(B) Requirements.—A refueler truck, tanker, or tank wagon meets the requirements of this subparagraph with respect to a terminal if such truck, tanker, or wagon—“(i) has storage tanks, hose, and coupling equipment designed and used for the purposes of fueling aircraft,“(ii) is not registered for highway use, and“(iii) is operated by—“(I) the terminal operator of such terminal, or“(II) a person that makes a daily accounting to such terminal operator of each delivery of fuel from such truck, tanker, or wagon.“(C) Reporting.—The Secretary shall require under section 4101(d) reporting by such terminal operator of—“(i) any information obtained under subparagraph (B)(iii)(II), and“(ii) any similar information maintained by such terminal operator with respect to deliveries of fuel made by trucks, tankers, or wagons operated by such terminal operator.”.(B) List of airports with secured terminals.—Not later than December 15, 2004, the Secretary of the Treasury shall publish and maintain a list of airports which 118 STAT. 1611 include a secured area in which a terminal is located (within the meaning of section 4081(a)(3)(A)(i) of the Internal Revenue Code of 1986, as added by this paragraph).(4) Liability for tax on aviation-grade kerosene used in commercial aviation.—Subsection (a) of section 4081 is amended by adding at the end the following new paragraph:“(4) Liability for tax on aviation-grade kerosene used in commercial aviation.—For purposes of paragraph (2)(C), the person who uses the fuel for commercial aviation shall pay the tax imposed under such paragraph. For purposes of the preceding sentence, fuel shall be treated as used when such fuel is removed into the fuel tank.”.(5) Nontaxable uses.—(A) In general.—Section 4082 is amended by redesignating subsections (e) and (f) as subsections (f) and (g), respectively, and by inserting after subsection (d) the following new subsection:“(e) Aviation-Grade Kerosene.—In the case of aviation-grade kerosene which is exempt from the tax imposed by section 4041(c) (other than by reason of a prior imposition of tax) and which is removed from any refinery or terminal directly into the fuel tank of an aircraft, the rate of tax under section 4081(a)(2)(A)(iv) shall be zero.”.(B) Conforming amendments.—(i) Subsection (b) of section 4082 is amended by adding at the end the following new flush sentence:“The term ‘nontaxable use’ does not include the use of aviation-grade kerosene in an aircraft.”.(ii) Section 4082(d) is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.(6) Nonaircraft use of aviation-grade kerosene.—(A) In general.—Subparagraph (B) of section 4041(a)(1) is amended by adding at the end the following new sentence: “This subparagraph shall not apply to aviation-grade kerosene.”. (B) Conforming amendment.—The heading for paragraph (1) of section 4041(a) is amended by inserting “and kerosene” after “diesel fuel”.(b) Commercial Aviation.—Section 4083 is amended by redesignating subsections (b) and (c) as subsections (c) and (d), respectively, and by inserting after subsection (a) the following new subsection:“(b) Commercial Aviation.—For purposes of this subpart, the term ‘commercial aviation’ means any use of an aircraft in a business of transporting persons or property for compensation or hire by air, unless properly allocable to any transportation exempt from the taxes imposed by sections 4261 and 4271 by reason of section 4281 or 4282 or by reason of section 4261(h).”.(c) Refunds.—(1) In general.—Paragraph (4) of section 6427(l) is amended to read as follows:“(4) Refunds for aviation-grade kerosene.—“(A) No refund of certain taxes on fuel used in commercial aviation.—In the case of aviation-grade kerosene used in commercial aviation (as defined in section 118 STAT. 1612 4083(b)) (other than supplies for vessels or aircraft within the meaning of section 4221(d)(3)), paragraph (1) shall not apply to so much of the tax imposed by section 4081 as is attributable to—“(i) the Leaking Underground Storage Tank Trust Fund financing rate imposed by such section, and“(ii) so much of the rate of tax specified in section 4081(a)(2)(A)(iv) as does not exceed 4.3 cents per gallon.“(B) Payment to ultimate, registered vendor.—With respect to aviation-grade kerosene, if the ultimate purchaser of such kerosene waives (at such time and in such form and manner as the Secretary shall prescribe) the right to payment under paragraph (1) and assigns such right to the ultimate vendor, then the Secretary shall pay the amount which would be paid under paragraph (1) to such ultimate vendor, but only if such ultimate vendor—“(i) is registered under section 4101, and“(ii) meets the requirements of subparagraph (A), (B), or (D) of section 6416(a)(1).”.(2) Time for filing claims.—Subparagraph (A) of section 6427(i)(4) is amended—(A) by striking “subsection (l)(5)” both places it appears and inserting “paragraph (4)(B) or (5) of subsection (l)”, and(B) by striking “the preceding sentence” and inserting “subsection (l)(5)”.(3) Conforming amendment.—Subparagraph (B) of section 6427(l)(2) is amended to read as follows:“(B) in the case of aviation-grade kerosene—“(i) any use which is exempt from the tax imposed by section 4041(c) other than by reason of a prior imposition of tax, or“(ii) any use in commercial aviation (within the meaning of section 4083(b)).”.(d) Repeal of Prior Taxation of Aviation Fuel.—(1) In general.—Part III of subchapter A of chapter 32 is amended by striking subpart B and by redesignating subpart C as subpart B.(2) Conforming amendments.—(A) Section 4041(c) is amended to read as follows:“(c) Aviation-Grade Kerosene.—“(1) In general.—There is hereby imposed a tax upon aviation-grade kerosene—“(A) sold by any person to an owner, lessee, or other operator of an aircraft for use in such aircraft, or“(B) used by any person in an aircraft unless there was a taxable sale of such fuel under subparagraph (A).“(2) Exemption for previously taxed fuel.—No tax shall be imposed by this subsection on the sale or use of any aviation-grade kerosene if tax was imposed on such liquid under section 4081 and the tax thereon was not credited or refunded.“(3) Rate of tax.—The rate of tax imposed by this subsection shall be the rate of tax applicable under section 4081(a)(2)(A)(iv) which is in effect at the time of such sale or use.”.118 STAT. 1613(B) Section 4041(d)(2) is amended by striking “section 4091” and inserting “section 4081”.(C) Section 4041 is amended by striking subsection (e).(D) Section 4041 is amended by striking subsection (i).(E) Section 4041(m)(1) is amended to read as follows:“(1) In general.—In the case of the sale or use of any partially exempt methanol or ethanol fuel the rate of the tax imposed by subsection (a)(2) shall be—“(A) after September 30, 1997, and before October 1, 2005—“(i) in the case of fuel none of the alcohol in which consists of ethanol, 9.15 cents per gallon, and “(ii) in any other case, 11.3 cents per gallon, and “(B) after September 30, 2005—“(i) in the case of fuel none of the alcohol in which consists of ethanol, 2.15 cents per gallon, and “(ii) in any other case, 4.3 cents per gallon.”.(F) Sections 4101(a), 4103, 4221(a), and 6206 are each amended by striking “, 4081, or 4091” and inserting “or 4081”.(G) Section 6416(b)(2) is amended by striking “4091 or”.(H) Section 6416(b)(3) is amended by striking “or 4091” each place it appears.(I) Section 6416(d) is amended by striking “or to the tax imposed by section 4091 in the case of refunds described in section 4091(d)”.(J) Section 6427(j)(1) is amended by striking “, 4081, and 4091” and inserting “and 4081”.(K)(i) Section 6427(l)(1) is amended to read as follows:“(1) In general.—Except as otherwise provided in this subsection and in subsection (k), if any diesel fuel or kerosene on which tax has been imposed by section 4041 or 4081 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 4041 or 4081, as the case may be, reduced by any payment made to the ultimate vendor under paragraph (4)(B).”.(ii) Paragraph (5)(B) of section 6427(l) is amended by striking “Paragraph (1)(A) shall not apply to kerosene” and inserting “Paragraph (1) shall not apply to kerosene (other than aviation-grade kerosene)”.(L) Subparagraph (B) of section 6724(d)(1), as amended by section 805, is amended by striking clause (xvi) and by redesignating the succeeding clauses accordingly.(M) Paragraph (2) of section 6724(d), as amended by section 805, is amended by striking subparagraph (X) and by redesignating the succeeding subparagraphs accordingly.(N) Paragraph (1) of section 9502(b) is amended by adding “and” at the end of subparagraph (B) and by striking subparagraphs (C) and (D) and inserting the following new subparagraph:118 STAT. 1614 “(C) section 4081 with respect to aviation gasoline and aviation-grade kerosene, and”.(O) The last sentence of section 9502(b) is amended to read as follows:“There shall not be taken into account under paragraph (1) so much of the taxes imposed by section 4081 as are determined at the rate specified in section 4081(a)(2)(B).”.(P) Subsection (b) of section 9508 is amended by striking paragraph (3) and by redesignating paragraphs (4) and (5) as paragraphs (3) and (4), respectively.(Q) Section 9508(c)(2)(A) is amended by striking “sections 4081 and 4091” and inserting “section 4081”.(R) The table of subparts for part III of subchapter A of chapter 32 is amended to read as follows: “Subpart A. Motor and aviation fuels. “Subpart B. Special provisions applicable to fuels tax.”. (S) The heading for subpart A of part III of subchapter A of chapter 32 is amended to read as follows:“Subpart A—Motor and Aviation Fuels”.(T) The heading for subpart B of part III of subchapter A of chapter 32, as redesignated by paragraph (1), is amended to read as follows:“Subpart B—Special Provisions Applicable to Fuels Tax”.(e) Effective Date.—The amendments made by this section shall apply to aviation-grade kerosene removed, entered, or sold after December 31, 2004.(f) Floor Stocks Tax.—(1) In general.—There is hereby imposed on aviation-grade kerosene held on January 1, 2005, by any person a tax equal to—(A) the tax which would have been imposed before such date on such kerosene had the amendments made by this section been in effect at all times before such date, reduced by(B) the sum of—(i) the tax imposed before such date on such kerosene under section 4091 of the Internal Revenue Code of 1986, as in effect on such date, and(ii) in the case of kerosene held exclusively for such person’s own use, the amount which such person would (but for this clause) reasonably expect (as of such date) to be paid as a refund under section 6427(l) of such Code with respect to such kerosene.(2) Exception for fuel held in aircraft fuel tank.—Paragraph (1) shall not apply to kerosene held in the fuel tank of an aircraft on January 1, 2005.(3) Liability for tax and method of payment.—(A) Liability for tax.—The person holding the kerosene on January 1, 2005, to which the tax imposed by paragraph (1) applies shall be liable for such tax.(B) Method and time for payment.—The tax imposed by paragraph (1) shall be paid at such time and in such 118 STAT. 1615 manner as the Secretary of the Treasury (or the Secretary’s delegate) shall prescribe, including the nonapplication of such tax on de minimis amounts of kerosene.(4) Transfer of floor stock tax 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 4081 of the Internal Revenue Code of 1986—(A) in any case in which tax was not imposed by section 4091 of such Code, at the Leaking Underground Storage Tank Trust Fund financing rate under such section to the extent of 0.1 cents per gallon, and(B) at the rate under section 4081(a)(2)(A)(iv) of such Code to the extent of the remainder.(5) Held by a person.—For purposes of this subsection, kerosene shall be considered as held by a person if title thereto has passed to such person (whether or not delivery to the person has been made).(6) Other laws applicable.—All provisions of law, including penalties, applicable with respect to the tax imposed by section 4081 of such Code shall, insofar as applicable and not inconsistent with the provisions of this subsection, apply with respect to the floor stock tax imposed by paragraph (1) to the same extent as if such tax were imposed by such section.