S. 1981 – Reading Mode

109th CONGRESS

1st Session

S. 1981

IN THE SENATE OF THE UNITED STATES

November 9, 2005

Mr. Durbin introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to impose a temporary windfall profit tax on crude oil, to rebate a portion of the tax collected back to American consumers, to fund programs under the Low-Income Home Energy Assistance Act of 1981 and tax incentives for the manufacture of energy efficient motor vehicles by using a portion of the proceeds of such tax, and to deposit the balance of the tax collected into the Highway Trust Fund to support the funding of highway projects and to aid highway users, and for other purposes.

Short title

This Act may be cited as the Windfall Profits Tax Act of 2005.

Windfall profits tax

(a)

In general

Subtitle E of the Internal Revenue Code of 1986 (relating to alcohol, tobacco, and certain other excise taxes) is amended by adding at the end thereof the following new chapter:

Windfall profits on crude oil

Sec. 5896. Imposition of tax.

Sec. 5897. Windfall profit; removal price; adjusted base price; qualified investment.

Sec. 5898. Special rules and definitions.

5896.

Imposition of tax

(a)

In general

In addition to any other tax imposed under this title, there is hereby imposed on any integrated oil company (as defined in section 291(b)(4)) an excise tax equal to the amount equal to 50 percent of the windfall profit from all barrels of taxable crude oil removed from the property during each taxable year.

(b)

Fractional part of barrel

In the case of a fraction of a barrel, the tax imposed by subsection (a) shall be the same fraction of the amount of such tax imposed on the whole barrel.

(c)

Tax paid by producer

The tax imposed by this section shall be paid by the producer of the taxable crude oil.

5897.

Windfall profit; removal price; adjusted base price

(a)

General rule

For purposes of this chapter, the term windfall profit means the excess of the removal price of the barrel of taxable crude oil over the adjusted base price of such barrel.

(b)

Removal price

For purposes of this chapter—

(1)

In general

Except as otherwise provided in this subsection, the term removal price means the amount for which the barrel of taxable crude oil is sold.

(2)

Sales between related persons

In the case of a sale between related persons, the removal price shall not be less than the constructive sales price for purposes of determining gross income from the property under section 613.

(3)

Oil removed from property before sale

If crude oil is removed from the property before it is sold, the removal price shall be the constructive sales price for purposes of determining gross income from the property under section 613.

(4)

Refining begun on property

If the manufacture or conversion of crude oil into refined products begins before such oil is removed from the property—

(A)

such oil shall be treated as removed on the day such manufacture or conversion begins, and

(B)

the removal price shall be the constructive sales price for purposes of determining gross income from the property under section 613.

(5)

Property

The term property has the meaning given such term by section 614.

(c)

Adjusted base price defined

(1)

In general

For purposes of this chapter, the term adjusted base price means $40 for each barrel of taxable crude oil plus an amount equal to—

(A)

such base price, multiplied by

(B)

the inflation adjustment for the calendar year in which the taxable crude oil is removed from the property.

The amount determined under the preceding sentence shall be rounded to the nearest cent.

(2)

Inflation adjustment

(A)

In general

For purposes of paragraph (1), the inflation adjustment for any calendar year after 2006 is the percentage by which—

(i)

the implicit price deflator for the gross national product for the preceding calendar year, exceeds

(ii)

such deflator for the calendar year ending December 31, 2005.

(B)

First revision of price deflator used

For purposes of subparagraph (A), the first revision of the price deflator shall be used.

5898.

Special rules and definitions

(a)

Withholding and deposit of tax

The Secretary shall provide such rules as are necessary for the withholding and deposit of the tax imposed under section 5896 on any taxable crude oil.

(b)

Records and information

Each taxpayer liable for tax under section 5896 shall keep such records, make such returns, and furnish such information (to the Secretary and to other persons having an interest in the taxable crude oil) with respect to such oil as the Secretary may by regulations prescribe.

(c)

Return of windfall profit tax

The Secretary shall provide for the filing and the time of such filing of the return of the tax imposed under section 5896.

(d)

Definitions

For purposes of this chapter—

(1)

Producer

The term producer means the holder of the economic interest with respect to the crude oil.

(2)

Crude oil

(A)

In general

The term crude oil includes crude oil condensates and natural gasoline.

(B)

Exclusion of newly discovered oil

Such term shall not include any oil produced from a well drilled after the date of the enactment of the Windfall Profits Tax Act of 2005, except with respect to any oil produced from a well drilled after such date on any proven oil or gas property (within the meaning of section 613A(c)(9)(A)).

(3)

Barrel

The term barrel means 42 United States gallons.

(e)

Adjustment of removal price

In determining the removal price of oil from a property in the case of any transaction, the Secretary may adjust the removal price to reflect clearly the fair market value of oil removed.

(f)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this chapter.

(g)

Termination

This section shall not apply to taxable crude oil removed after the date which is 10 years after the date of the enactment of this section.

(b)

Clerical amendment

The table of chapters for subtitle E of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Chapter 56. Windfall profit on crude oil.

(c)

Deductibility of windfall profit tax

The first sentence of section 164(a) of the Internal Revenue Code of 1986 (relating to deduction for taxes) is amended by inserting after paragraph (5) the following new paragraph:

(6)

The windfall profit tax imposed by section 5896.

(d)

American consumer rebate

(1)

In general

Subchapter B of chapter 65 of the Internal Revenue Code of 1986 (relating to rules of special application in the case of abatements, credits, and refunds) is amended by adding at the end the following new section:

6430.

American consumer rebate

(a)

General rule

Except as otherwise provided in this section, each individual shall be treated as having made a payment against the tax imposed by chapter 1 in an amount equal to_

(1)

in the case of any taxable year beginning in 2006, $150, and

(2)

in the case of any taxable year beginning after 2006, the applicable amount.

(b)

Applicable amount

For purposes of this section, the applicable amount for any taxpayer for any taxable year shall be determined by the Secretary not later than December 31 (beginning in 2007) taking into account the number of such taxpayers and 75 percent of the amount of revenues in the Treasury resulting from the tax imposed by section 5896 for such taxable year.

(c)

Credits and refunds

Under regulations prescribed by the Secretary, any amount treated as a payment under subsection (a) for the taxable year shall be credited against the tax liability of the taxpayer under section 1 for such taxable year or, in the absence of such tax liability of the taxpayer for such taxable year, refunded to the taxpayer.

(d)

Certain persons not eligible

This section shall not apply to—

(1)

any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins,

(2)

any estate or trust, or

(3)

any nonresident alien individual.

(2)

Conforming amendment

Section 1324(b)(2) of title 31, United States Code, is amended by inserting before the period , or enacted by the Windfall Profits Tax Act of 2005.

(3)

Clerical amendment

The table of sections for subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Sec. 6430. American consumer rebate.

(4)

Effective date

The amendments made by this subsection shall take effect on the date of the enactment of this Act.

(e)

Low Income Home Energy Assistance Trust Fund

(1)

In general

Subchapter A of chapter 98 of the Internal Revenue Code of 1986 (relating to trust fund code) is amended by adding at the end the following new section:

9511.

Low-Income Home Energy Assistance Trust Fund

(a)

Creation of Trust Fund

There is established in the Treasury of the United States a trust fund to be known as the Low-Income Home Energy Assistance Trust Fund, consisting of any amount appropriated or credited to the Trust Fund as provided in this section or section 9602(b).

(b)

Transfers to Trust Fund

There are hereby appropriated to the Low-Income Home Energy Assistance Trust Fund for each fiscal year beginning after September 30, 2005, amounts equivalent to 7.5 percent of the taxes received in the Treasury under section 5896 (relating to windfall profit tax on crude oil) for such fiscal year.

(c)

Expenditures from Trust Fund

Amounts in the Low Income Home Energy Assistance Trust Fund shall be available, without further appropriation, for each fiscal year to carry out the program under the Low-Income Home Energy Assistance Act of 1981 for which funds are authorized under section 2602(b) of such Act for such fiscal year, but only if not less than $1,800,000,000 has been appropriated for such program for such fiscal year (determined without regard to any amount appropriated to the Low Income Home Energy Assistance Trust Fund).

(2)

Clerical amendment

The table of sections for such subchapter is amended by adding at the end the following new item:

Sec. 9511. Low-Income Home Energy Assistance Trust Fund.

(f)

Energy efficient motor vehicles manufacturing credit

(1)

In General

Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to foreign tax credit, etc.) is amended by adding at the end the following new section:

30D.

Energy efficient motor vehicles manufacturing credit

(a)

Credit allowed

In the case of an eligible taxpayer, subject to a credit allocation under subsection (e) to such eligible taxpayer, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year to an amount equal to the sum of—

(1)

the initial investment credit determined under subsection (b) for the taxable year,

(2)

the fuel economy achievement credit determined under subsection (c) for such taxable year, and

(3)

the eligible components R&D credit determined under subsection (d) for such taxable year.

(b)

Initial investment credit

For purposes of this section, the initial investment credit is equal to 20 percent of the qualified investment of an eligible taxpayer with respect to energy efficient motor vehicles during the taxable year beginning in 2006.

(c)

Fuel economy achievement credit

For purposes of this section—

(1)

In general

In the case of an eligible taxpayer who meets the requirements of paragraph (2) for a model year ending in a taxable year specified in the table contained in paragraph (3), the fuel economy achievement credit for such taxable year is equal to 30 percent of the sum of—

(A)

at the election of the eligible taxpayer, such qualified investment for any preceding taxable year beginning after 2005 if such taxable year has not previously been taken into account under this subsection by such taxpayer, plus

(B)

at the election of the eligible taxpayer, the qualified investment with respect to energy efficient motor vehicles of the eligible taxpayer for the taxable year beginning in 2015.

(2)

Demonstrated combined fleet economy improvements

The requirements of this paragraph are met for any model year ending in a taxable year if the eligible taxpayer can demonstrate to the satisfaction of the Secretary that the percentage by which the taxpayer's overall combined fuel economy standard for the taxpayer's vehicle fleet for such model year exceeds such standard for such taxpayer's 2005 model year as reported to the National Highway Traffic Safety Administration under section 32907 of title 49, United States Code, is not less than the percentage determined for such model year under paragraph (3).

(3)

Percentage increase

The percentage determined under this paragraph for any taxable year is equal to—

Model year ending in	Percentage
taxable year	increase
2008	5
2009	10
2010	15
2011	20
2012	27.5
2013	35
2014	42.5
2015	50

(d)

Eligible components R&D credit

For purposes of this section, the eligible R&D credit for any taxable year is equal to 30 percent of the research and development costs paid or incurred by an eligible taxpayer for such taxable year with respect to eligible components used or to be used in the manufacture of energy efficient motor vehicles.

(e)

Limitation

(1)

Initial investment credit and fuel economy achievement credit

Subject to paragraph (2), the aggregate amount of initial investment credits and fuel economy achievement credits allowed under subsection (a) for any taxable year beginning in a calendar year after 2005 shall be allocated by the Secretary among all eligible taxpayers—

(A)

based on each eligible taxpayer's percentage of the total qualified investment of all such taxpayers, and

(B)

such that such aggregate amount does not exceed—

(i)

$1,000,000,000, plus

(ii)

any amount of credit unallocated during any preceding calendar year.

(2)

Eligible components R&D credit

Of the dollar amount available for allocation under paragraph (1) for any taxable year, 10 percent of such amount shall be allocated in the same manner by the Secretary among all eligible taxpayers with respect to the eligible components R&D credit.

(f)

Qualified investment

For purposes of this section—

(1)

In general

The qualified investment for any taxable year is equal to the incremental costs incurred during such taxable year—

(A)

to re-equip or expand any manufacturing facility of the eligible taxpayer to produce energy efficient motor vehicles or to produce eligible components, and

(B)

for engineering integration of such vehicles and components as described in subsection (h).

(2)

Attribution rules

In the event a facility of the eligible taxpayer produces both energy efficient motor vehicles and conventional motor vehicles, or eligible and non-eligible components, only the qualified investment attributable to production of energy efficient motor vehicles and the research and development costs attributable to eligible components shall be taken into account.

(g)

Energy efficient motor vehicles and eligible components

For purposes of this section—

(1)

Energy efficient motor vehicle

The term energy efficient motor vehicle means—

(A)

any new advanced lean burn technology motor vehicle (as defined in section 30B(c)(3) determined without regard to subparagraph (A)(iv)(II) thereof or the weight limitation under subparagraph (A)(iv)(I) thereof),

(B)

any new qualified hybrid motor vehicle (as defined in section 30B(d)(3)(A) determined without regard to subparagraph (A)(ii)(II) thereof, the weight limitation under subparagraph (A)(ii)(I) thereof, and subparagraph (A)(iv) thereof), or

(C)

any other new technology motor vehicle identified by the Secretary as offering a substantial increase in fuel economy.

(2)

Eligible components

The term eligible component means any component inherent to any energy efficient motor vehicle, including—

(A)

with respect to any gasoline-electric new qualified hybrid motor vehicle—

(i)

electric motor or generator,

(ii)

power split device,

(iii)

power control unit,

(iv)

power controls,

(v)

integrated starter generator, or

(vi)

battery,

(B)

with respect to any new advanced lean burn technology motor vehicle—

(i)

diesel engine,

(ii)

turbocharger,

(iii)

fuel injection system, or

(iv)

after-treatment system, such as a particle filter or NOx absorber, and

(C)

with respect to any energy efficient motor vehicle, any other component approved by the Secretary.

(h)

Engineering integration costs

For purposes of subsection (f)(1)(B), costs for engineering integration are costs incurred prior to the market introduction of energy efficient vehicles for engineering tasks related to—

(1)

incorporating eligible components into the design of energy efficient motor vehicles, and

(2)

designing new tooling and equipment for production facilities which produce eligible components or energy efficient motor vehicles.

(i)

Eligible taxpayer

For purposes of this section, the term eligible taxpayer means, with respect to any taxable year, any taxpayer if more than 25 percent of the taxpayer's gross receipts for the taxable year is derived from the manufacture of motor vehicles or any component parts of such vehicles.

(j)

Limitation based on amount of tax

The credit allowed under subsection (a) for the taxable year shall not exceed the excess of—

(1)

the sum of—

(A)

the regular tax liability (as defined in section 26(b)) for such taxable year, plus

(B)

the tax imposed by section 55 for such taxable year, over

(2)

the sum of the credits allowable under subpart A and sections 27, 30, 30B, and 30C for the taxable year.

(k)

Reduction in basis

For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this paragraph) result from such expenditure shall be reduced by the amount of the credit so allowed.

(l)

No double benefit

(1)

Coordination with other deductions and credits

The amount of any deduction or other credit allowable under this chapter for any cost taken into account in determining the amount of the credit under subsection (a) shall be reduced by the amount of such credit attributable to such cost.

(2)

Research and development costs

(A)

In general

Except as provided in subparagraph (B), any amount described in subsection (d) taken into account in determining the amount of the credit under subsection (a) for any taxable year shall not be taken into account for purposes of determining the credit under section 41 for such taxable year.

(B)

Costs taken into account in determining base period research expenses

Any amounts described in subsection (d) taken into account in determining the amount of the credit under subsection (a) for any taxable year which are qualified research expenses (within the meaning of section 41(b)) shall be taken into account in determining base period research expenses for purposes of applying section 41 to subsequent taxable years.

(m)

Business carryovers allowed

If the credit allowable under subsection (a) for a taxable year exceeds the limitation under subsection (j) for such taxable year, such excess (to the extent of the credit allowable with respect to property subject to the allowance for depreciation) shall be allowed as a credit carryback and carryforward under rules similar to the rules of section 39.

(n)

Definitions and special rules

For purposes of this section—

(1)

Definitions

Any term which is used in this section and in chapter 329 of title 49, United States Code, shall have the meaning given such term by such chapter.

(2)

Special rules

Rules similar to the rules of paragraphs (4) and (5) of section 179A(e) and paragraphs (1) and (2) of section 41(f) shall apply.

(o)

Election not to take credit

No credit shall be allowed under subsection (a) for any property if the taxpayer elects not to have this section apply to such property.

(p)

Regulations

The Secretary shall prescribe such regulations as necessary to carry out the provisions of this section.

(q)

Termination

This section shall not apply to any qualified investment made after December 31, 2015.

(2)

Conforming amendments

(A)

Section 1016(a) of such Code is amended by striking and at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and, and by adding at the end the following new paragraph:

(38)

to the extent provided in section 30D(k).

(B)

Section 6501(m) of such Code is amended by inserting 30D(o), after 30C(e)(5),.

(C)

The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 30C the following new item:

Sec. 30D. Energy efficient motor vehicles manufacturing credit.

(3)

Effective date

The amendments made by this subsection shall apply to amounts incurred in taxable years beginning after December 31, 2005.

(g)

Transfer to Highway Trust Fund to fund highway projects and aid highway users

(1)

In general

Section 9503(b)(1) of the Internal Revenue Code of 1986 (relating to certain taxes) is amended—

(A)

by inserting (before January 1, 2016, in the case of taxes under section 5896) after 2011,

(B)

by striking and at the end of subparagraph (D),

(C)

by striking the period at the end of subparagraph (E) and inserting , and,

(D)

by inserting after subparagraph (E) the following new subparagraph:

(F)

section 5896 (relating to windfall profit tax).

, and

(E)

by adding at the end the following new sentence: For purposes of this paragraph, the aggregate amount which is appropriated to the Highway Trust Fund as determined by reference to taxes received under section 5896 shall be reduced by the aggregate amount of the American consumer rebate determined under section 6430, the amount appropriated for each fiscal year to the Low-Income Home Energy Assistance Trust Fund under section 9511(b), and an amount of $1,000,000,000 for each of fiscal years 2006 through 2015.

(2)

Portion to Mass Transit Account

Section 9503(e)(2) of such Code (relating to transfers to Mass Transit Account) is amended by inserting and 18.5 percent of the amounts appropriated to the Highway Trust Fund under subsection (b) which are attributable to the tax under section 5896 after 1983.

(3)

Special rule regarding highway projects funded by windfall profit tax revenues

Notwithstanding section 120 of title 23, United States Code, the Federal share of the cost of any project or activity carried out using funds deposited in the Highway Trust Fund under section 9503(b)(1)(F) of the Internal Revenue Code of 1986 shall be 100 percent to the extent such funds are available under such section.

(h)

Effective date

Except as otherwise provided, the amendments made by this section shall apply to crude oil removed after the date of the enactment of this Act, in taxable years ending after such date.