TREATMENT OF KEROSENE FOR USE IN AVIATION.

SEC. 11161. TREATMENT OF KEROSENE FOR USE IN AVIATION.(a) All Kerosene Taxed at Highest Rate.—(1) In general.—Section 4081(a)(2)(A) (relating to rates of tax) is amended by adding “and” at the end of clause (ii), by striking “, and” at the end of clause (iii) and inserting a period, and by striking clause (iv).(2) Exception for use in aviation.—Subparagraph (C) of section 4081(a)(2) is amended to read as follows:“(C) Taxes imposed on fuel used in aviation.—In the case of kerosene which is removed from any refinery or terminal directly into the fuel tank of an aircraft for use in aviation, the rate of tax under subparagraph (A)(iii) shall be—“(i) in the case of use for commercial aviation by a person registered for such use under section 4101, 4.3 cents per gallon, and“(ii) in the case of use for aviation not described in clause (i), 21.8 cents per gallon.”.(3) Applicable rate in case of certain refueler trucks, tankers, and tank wagons.—Section 4081(a)(3) (relating to certain refueler trucks, tankers, and tank wagons treated as terminals) is amended—(A) by striking “a secured area of” in subparagraph (A)(i), and(B) by adding at the end the following new subparagraph:119 STAT. 1970 “(D) Applicable rate.—For purposes of paragraph (2)(C), in the case of any kerosene treated as removed from a terminal by reason of this paragraph—“(i) the rate of tax specified in paragraph (2)(C)(i) in the case of use described in such paragraph shall apply if such terminal is located within a secured area of an airport, and“(ii) the rate of tax specified in paragraph (2)(C)(ii) shall apply in all other cases.”.(4) Conforming amendments.—(A) Sections 4081(a)(3)(A) and 4082(b) are amended by striking “aviation-grade” each place it appears.(B) Section 4081(a)(4) is amended by striking “paragraph (2)(C)” and inserting “paragraph (2)(C)(i)”.(C) The heading for paragraph (4) of section 4081(a) is amended by striking “aviation-grade”.(D) Section 4081(d)(2) is amended by striking so much as precedes subparagraph (A) and inserting the following:“(2) Aviation fuels.—The rates of tax specified in subsection (a)(2)(A)(ii) and (a)(2)(C)(ii) shall be 4.3 cents per gallon—”.(E) Subsection (e) of section 4082 is amended—(i) by striking “aviation-grade”,(ii) by striking “section 4081(a)(2)(A)(iv)” and inserting “section 4081(a)(2)(A)(iii)”,(iii) by adding at the end the following new sentence: “For purposes of this subsection, any removal described in section 4081(a)(3)(A) shall be treated as a removal from a terminal but only if such terminal is located within a secure area of an airport.”, and(iv) by striking “Aviation-grade Kerosene” in the heading thereof and inserting “Kerosene Removed Into an Aircraft”.(b) Reduced Rate for Use of Certain Liquids in Aviation.—(1) In general.—Subsection (c) of section 4041 (relating to imposition of tax) is amended—(A) by striking “aviation-grade kerosene” in paragraph (1) and inserting “any liquid for use as a fuel other than aviation gasoline”,(B) by striking “aviation-grade kerosene” in paragraph (2) and inserting “liquid for use as a fuel other than aviation gasoline”,(C) by striking paragraph (3) and inserting the following new paragraph:“(3) Rate of tax.—The rate of tax imposed by this subsection shall be 21.8 cents per gallon (4.3 cents per gallon with respect to any sale or use for commercial aviation).”, and(D) by striking “Aviation-grade Kerosene” in the heading thereof and inserting “Certain Liquids Used as a Fuel in Aviation”.(2) Partial refund of full rate.—(A) In general.—Paragraph (2) of section 6427(l) (relating to nontaxable uses of diesel fuel, kerosene and aviation fuel) is amended to read as follows:“(2) Nontaxable use.—For purposes of this subsection, the term ‘nontaxable use’ means any use which is exempt 119 STAT. 1971 from the tax imposed by section 4041(a)(1) other than by reason of a prior imposition of tax.”.(B) Refunds for noncommercial aviation.—Section 6427(l) (relating to nontaxable uses of diesel fuel, kerosene and aviation fuel) is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph:“(5) Refunds for kerosene used in noncommercial aviation.—“(A) In general.—In the case of kerosene used in aviation not described in paragraph (4)(A) (other than any use which is exempt from the tax imposed by section 4041(c) other than by reason of a prior imposition of tax), 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)(iii) as does not exceed the rate specified in section 4081(a)(2)(C)(ii).“(B) Payment to ultimate, registered vendor.—The amount which would be paid under paragraph (1) with respect to any kerosene shall be paid only to the ultimate vendor of such kerosene. A payment shall be made to such vendor if such vendor—“(i) is registered under section 4101, and“(ii) meets the requirements of subparagraph (A), (B), or (D) of section 6416(a)(1).”.(3) Conforming amendments.—(A) Section 4041(a)(1)(B) is amended by striking the last sentence.(B) The heading for subsection (l) of section 6427 is amended by striking “, Kerosene and Aviation Fuel” and inserting “and Kerosene”.(C) Section 4082(d)(2)(B) is amended by striking “section 6427(l)(5)(B)” and inserting “section 6427(l)(6)(B)”.(D) Section 6427(i)(4)(A) is amended—(i) by striking “paragraph (4)(B) or (5)” both places it appears and inserting “paragraph (4)(B), (5), or (6)”, and(ii) by striking “subsection (b)(4) and subsection (l)(5)” in the last sentence and inserting “subsections (b)(4), (l)(5), and (l)(6)”.(E) Paragraph (4) of section 6427(l) is amended—(i) by striking “aviation-grade” in subparagraph (A),(ii) by striking “section 4081(a)(2)(A)(iv)” and inserting “section 4081(a)(2)(iii)”,(iii) by striking “aviation-grade kerosene” in subparagraph (B) and inserting “kerosene used in commercial aviation as described in subparagraph (A)”, and(iv) by striking “aviation-grade kerosene” in the heading thereof and inserting “kerosene used in commercial aviation”.119 STAT. 1972(F) Section 6427(l)(6)(B), as redesignated by paragraph (2)(B), is amended by striking “aviation-grade kerosene” and inserting “kerosene used in aviation”.(c) Transfers From Highway Trust Fund of Taxes on Fuels Used in Aviation to Airport and Airway Trust Fund.—(1) In general.—Section 9503(c) (relating to expenditures from Highway Trust Fund) is amended by adding at the end the following new paragraph:“(7) Transfers from the trust fund for certain aviation fuel taxes.—The Secretary shall pay at least monthly from the Highway Trust Fund into the Airport and Airway Trust Fund amounts (as determined by the Secretary) equivalent to the taxes received on or after October 1, 2005, and before October 1, 2011, under section 4081 with respect to so much of the rate of tax as does not exceed—“(A) 4.3 cents per gallon of kerosene with respect to which a payment has been made by the Secretary under section 6427(l)(4), and“(B) 21.8 cents per gallon of kerosene with respect to which a payment has been made by the Secretary under section 6427(l)(5).Transfers under the preceding sentence shall be made on the basis of estimates by the Secretary, and proper adjustments shall be made in the amounts subsequently transferred to the extent prior estimates were in excess of or less than the amounts required to be transferred. Any amount allowed as a credit under section 34 by reason of paragraph (4) or (5) of section 6427(l) shall be treated for purposes of subparagraphs (A) and (B) as a payment made by the Secretary under such paragraph.”.(2) Conforming amendments.—(A) Section 9502(a) is amended by striking “appropriated or credited to the Airport and Airway Trust Fund as provided in this section or section 9602(b)” and inserting “appropriated, credited, or paid into the Airport and Airway Trust Fund as provided in this section, section 9503(c)(7), or section 9602(b)”.(B) Section 9502(b)(1) is amended—(i) by striking “subsections (c) and (e) of section 4041” in subparagraph (A) and inserting “section 4041(c)”, and(ii) by striking “and aviation-grade kerosene” in subparagraph (C) and inserting “and kerosene to the extent attributable to the rate specified in section 4081(a)(2)(C)”.(C) Section 9503(b) is amended by striking paragraph (3).(d) Certain Refunds not Transferred From Airport and Airway Trust Fund.—(1) Section 9502(d)(2) (relating to transfers from Airport and Airway Trust Fund on account of certain refunds) is amended by inserting “(other than subsection (l)(4) and (l)(5) thereof)” after “or 6427 (relating to fuels not used for taxable purposes)”.(2) The text of section 9502(d)(3) (relating to transfers from Airport and Airway Trust Fund on account of certain 119 STAT. 1973 section 34 credits) is amended by inserting “(other than payments made by reason of paragraph (4) or (5) of section 6427(l))” after “section 34”.(e) Effective Date.—The amendments made by this section shall apply to fuels or liquids removed, entered, or sold after September 30, 2005.