January 15, 1982. Such recommendations shall include any alternative tax structures which the Secretary believes would more nearly achieve an equitable distribution of the tax burden among classes of persons and vehicles using Federal-aid highways, and the projected impact of such structures on affected industries and other users.

SEC. 507. STUDY OF EXISTING HIGHWAY EXCISE TAX STRUCTURE AND OF POSSIBLE ALTERNATIVES ΤΟ SUCH EXISTING STRUCTURE.

(a) IN GENERAL.-The Secretary of the Treasury, in consultation with. the Secretary of Transportation and the staff of the Joint Committee on Taxation, shall

(1) review and analyze each excise tax now dedicated to the Highway Trust Fund with respect to such factors as ease or difficulty of administration of such tax and the compliance burdens imposed on taxpayers by such tax, and

(2) on or before April 15, 1982, report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate as to the matters set forth in paragraph (1) and other findings, as well as recommendations on—

(A) improvements in excise taxation which would enhance tax administration, equity, and compliance, or

(B) a new system of raising revenues to fund the Highway Trust Fund which would meet the objectives set forth in subparagraph (A).

The recommendations described in paragraph (2) shall be formulated in conjunction with the recommendations of the cost allocation study under section 506 of the equitable distribution of the highway excise taxes.

(b) INTERIM REPORTS.-The Secretary of the Treasury, in consultation with the Secretary of Transportation and the staff of the Joint Committee on Taxation, shall file an interim report with the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on or before April 15,

5-year extension of trust fund taxes

Title V contains the extension of the highway trust fund financing provisions. It provides for a 5-year extension of the Highway Trust Fund, from September 30, 1979, through Septem

ber 30, 1984. Also, the scheduled rate reductions of the taxes allocated to the trust fund are postponed for 5 years, from October 1, 1979, to October 1, 1984. These rate reductions had been scheduled to take effect at the expiration of the trust fund. Receipts from the taxes allocated to the trust fund are estimated to total $41.2 billion during the 5-year extension period, of which about $17 billion represents revenue which otherwise would be general fund revenue during the period.

taxicabs for qualified taxicab services. This exemption applies only to fuel used for business purposes and where the taxicabs are not prevented from implementing a shared-ride program by either government regulation or company policy. The exemption does not apply for fuel-inefficient taxicabs of 1978 or later model years.

New highway cost allocation study

The bill also contains a requirement for a cost allocation study. Under this study, the Secretary of Transportation is directed, with assistance from the Congressional Budget Office in the design of the study, to undertake an investigation of the costs of Federal-aid highways occasioned by the use of different types of vehicles and the proportionate share of such costs attributable to each category of users and vehicles using these highways. A final report is due to the Congress on or before January 15, 1982.

Study of highway tax structure

In addition, the bill directs the Secretary of the Treasury, in consultation with the Secretary of Transportation and the staff of the Joint Committee on Taxation, to review and analyze each excise tax now dedicated to the

Highway Trust Fund with respect to such factors as the ease or difficulty of administration and compliance burdens. This study is to be conducted in conjunction with the cost allocation study. A final report is due on or before April 15, 1982. The report is to include recommendations for any improvements in the highway excise tax

structure.

[92] II. GENERAL STATEMENT

A. Five-Year Extension of Highway Trust Fund and Current Rates of Trust Fund Excise Taxes (secs. 502 and 503 of the bill and secs. 4041, 4081, etc. of the Code). Present law

Under present law, revenues (after applicable refunds and credits) from a series of highway-related user excise

taxes are deposited in the Highway Trust Fund (see Table 1): the retailers taxes on diesel and special motor fuels; the manufacturers taxes on gasoline, lubricating oil, trucks and buses, truck and bus parts, and tires, tubes and tread rubber; and the tax on use of heavy highway motor vehicles.1 These taxes are projected to raise ap

The Airport and Airway Revenue Act of 1970 created the Airport and Airway Trust Fund and covered into it the manufacturers and retailers taxes on aviation gasoline, the manufacturers taxes on tires and tubes of the types used on aircraft, and the retailers taxes on special fuel, as well as the taxes on transportation by air and on use of civil aircraft. The Land and Water Conservation Act of 1965 [Pub. L. 88-578, 1964-2 C.B. 654] created the Land

proximately $7 billion in revenue for the trust fund in fiscal year 1978, and $7.4 billion in fiscal year 1979.

The trust fund is scheduled to expire after September 30, 1979; that is, tax liabilities arising after that date for the taxes mentioned above are to be paid into the general fund rather than the trust fund. However, taxes collected after September 30, 1979, on account of these pre-October 1979 liabilities will continue to be paid into the fund for 9 months after the basic

and Water Conservation Fund and required that revenues attributable to the taxes on special fuels and gasoline used as motorboat fuel be transferred to that fund from the Highway Trust Fund.

expiration date; that is, until June 30, 1980. The balance in the fund can be spent for highway trust fund purposes until September 30, 1979.

In addition, as is indicated in Table 1, as of the same date, all of the taxes mentioned above (except the tax on lubricating oil) are scheduled to be reduced or eliminated. The taxes on tread rubber and on the use of heavy highway motor vehicles are to expire on that date; the remaining taxes are to be retained at lower levels which, in the aggregate, are expected to produce about 40 percent as much revenue as the taxes would produce at their pres

ent rates.

programs is concerned, the termination of the trust fund in 1979 already is a matter of concern for Congress because of the timing involved in the authorization and apportionment processes. At the present time, consideration is being given to the overall trust fund [94] authorizations for fiscal year 1979. The Federal Highway Administration is awaiting these authorizations in order to make the non-Interstate apportionment among the States for fiscal year 1979. According to the Committee on Public Works and Transportation, the Highway Trust Fund needs to be extended for 5 years in order to provide the necessary funding level for the 4-year highway authorization (fiscal years 1979-82) provided in titles I and II of this bill. This is because of the contract authority for the obligations for highway construction, and the need for the trust fund receipts to be available to finance these obligations.

Thus, although the Trust Fund does not expire until the end of fiscal year 1979, action to extend the Fund (and the highway excise taxes) is needed at this time because (1) non-Interstate authorizations have not yet been approved by the Congress for fiscal year 1979, and (2) unless the Trust Fund is extended, insufficient funds would be available (under the Byrd amendment requirements) for highway authorizations to be funded for fiscal year 1979.

The Committee on Public Works and Transportation originally requested a six-year extension for the Trust Fund and the highway excise taxes in order to finance the provisions of Titles I and II at proposed levels for fiscal years 1979-1982. During the Ways and Means Committee consideration of the Trust Fund extension period, the Chairman and ranking minority member of the Subcommittee on Surface Transportation of the Committee on Public Works and Transportation announced their intention to offer amendments on the House floor to reduce the reported authorizations by about $1 billion each year, and

therefore requested a five-year extension period for the Trust Fund (and taxes) to cover the revised authorization levels, from fiscal year 1980 through fiscal year 1984.

The Ways and Means Committee accepted the recommendation of the Public Work Committee and approved a five-year extension period for the Trust Fund and the current highway excise taxes in order to provide sufficient revenues for the authorization levels, as modified by the proposed floor amendments, and to avoid program restrictions resulting from application of the Byrd amendment during the 4-year authorization period-fiscal years 1979-1982.

It is clear that if the current construction and safety programs of the States are not to be interrupted, a decision needs to be made expeditiously as to whether the Highway Trust Fund is to be extended beyond the 1979 date. However, since there has not yet been an opportunity to study and reach conclusions whether modifications should be made in the trust fund or in the trust fund taxes, the Committee on Ways and Means believes that the fund should be extended for a period which is financially adequate for the 4-year highway authorization extension and related to the 4year cost allocation and highway excise tax studies provided elsewhere in this title. Because of these considerations, the committee has extended the

cluding payments to the Land and Water Conservation Fund).

More specifically, the following provisions are extended by this title:

Highway Trust Fund

(1) Present law's appropriation to the trust fund of amounts equivalent to the listed excise taxes received by the Internal Revenue Service before October 1, 1979, is changed to an appropriation of amounts so received before October 1, 1984. The excise taxes to which this applies are the retailers taxes on diesel fuel and special motor fuels, the manufacturers taxes on gasoline, lubricating oil, tires and tubes, tread rubber, trucks and buses, and truck and bus parts, and the use tax on highway motor vehicles weighing over 26,000 pounds.

(2) Under present law, the trust fund also is to receive amounts equal to the amount of those taxes which are received by the Internal Revenue Service after September 30, 1979, and before July 1, 1980, and which are attributable to tax liabilities incurred before October 1, 1979. The bill extends the 1979 dates to 1984 and the 1980 date to 1985. The effect of this is to allow 9 months for collection of pre-October 1984 liabilities for the listed taxes, the same procedure followed under present law with respect to pre-October 1979 liabilities.

Explanation of provisions

For the reasons indicated above, title V of the bill extends the Highway Trust Fund for 5 years, from September 30, 1979, through September 30, 1984. It also postpones for 5 years those tax rate reduc-[95]tions scheduled under present law to take effect at the expiration of the trust fund in 1979 and postpones for 5 years the transfer of other tax revenues back to the general fund. Further, it extends for 5 years the provisions dealing with payments out of the trust fund (in

gress by March 1 of each year on the condition and operation of the fund through the fiscal year 1980, is extended to require reports for the fiscal years 1981 through 1985.

(4) The provision making trust fund moneys available for Federal-aid highway expenditures before October 1, 1979, is extended to expenditures before October 1, 1984.

(5) The provision that the trust fund is to reimburse the general fund for refunds and credits for certain uses of gasoline, lubricating oil, and special fuels for periods ending before October 1, 1979, is extended to apply to

periods ending before October 1, 1984. Reimbursements are to be made in the case of payments (under secs. 6420, 6421, 6424, and 6427 of the Internal Revenue Code) only for amounts paid by the Treasury before July 1, 1985. Present law limits such payments to those made before July 1, 1980.

(6) The provision that the trust fund reimburse the general fund for floor stocks refunds paid before July 1, 1980, on account of the present law's scheduled 1979 reductions in manufacturers taxes, is changed to apply to floor stocks refunds paid before July 1, 1985, on account of the 1984 tax reductions provided by this title.

Land and Water Conservation Fund

(1) The provision that the Land and Water Conservation Fund reimburse the general fund for refunds and credits for certain uses of gasoline for periods ending before October 1, 1979, is extended to apply to periods ending before October 1, 1984. Reimbursements are to be made in the case of payments under section 6421 of the Code only for amounts paid by the Treasury before July 1, 1985. Present law limits such payments to those before July 1, 1980.

[96] (2) The provision that the Land and Water Conservation Fund reimburse the general fund for floor stocks refunds paid before July 1, 1980, on account of the gasoline tax reduction in 1979, is changed to apply to floor stocks refunds paid before July 1, 1985, on account of the 1984 tax reduction.

Postponement of Excise Tax Reduc

tion

(1) The Airport and Airway Revenue Act of 1970 imposed a retailers tax on gasoline sold for use or used in aircraft in noncommercial aviation. Under present law, that tax is to be 3 cents per gallon until September 30, 1979, and 51⁄2 cents per gallon until June 30, 1980, so that the total tax on aviation gasoline would be 7 cents per gallon both before and after September 30, 1979. The bill makes per

manent the 3-cents-per-gallon rate of the retailers tax.

(2) Under present law, the taxes on special fuels and diesel fuels are to be reduced from 4 cents per gallon to 12 cents per gallon on and after October 1, 1979. The bill postpones that reduction to October 1, 1984.

(3) Present law provides that the truck and bus tax is to be reduced from 10 percent of the manufacturer's sales price to 5 percent on and after October 1, 1979. The bill postpones that reduction until October 1, 1984.

(4) Present law provides that the truck and bus parts and accessories tax is to be reduced from 8 percent of the manufacturer's sales price to 5 percent on and after October 1, 1979. The bill postpones that reduction until October 1, 1984.

use tax in installments is not to apply to tax liabilities incurred in July, August, or September of 1979. The bill changes this to July, August, or September of 1984.

(10) Present law provides that the special refund provisions of section 6421 (relating to gasoline used for certain nonhighway purposes or by local transit systems) does not apply with respect to gasoline purchased after September 30, 1979. The bill extends the application of section 6421 to gasoline purchased before October 1, 1984.

(11) Present law provides for floor stocks refunds in the case of the manufacturers taxes on trucks and buses, tires, tubes, tread rubber, and gasoline that are scheduled to be reduced on October 1, 1979. [97] Under the floor stocks refund provision, the dealer

way vehicle tire tax is to be reduced from 10 cents per pound to 5 cents per pound; the inner tube tax is to be reduced from 10 cents per pound to 9 cents per pound; and the tread rubber tax of 5 cents per pound is to expire. The bill postpones the date to October 1, 1984.

(6) Present law provides that the gasoline tax is to be reduced from 4 cents per gallon to 12 cents per gallon on and after October 1, 1979. The bill postpones this reduction to October 1, 1984.

(7) Present law provides that the tax on use of heavy motor vehicles (over 26,000 pounds taxable gross weight) is to apply only to use before October 1, 1979. The bill extends the tax to use before October 1, 1984.

(8) Present law provides special rules and definitions for the heavy vehicle use tax for the period beginning on July 1, 1979, and ending on September 30, 1979. The bill makes those rules and definitions applicable, instead, to the period July 1 through September 30, 1984.

(9) Present law provides that the privilege of paying the heavy vehicle

must submit a claim to the manufacturer before January 1, 1980, and the manufacturer must file a claim for credit or refund with the Internal Revenue Service by March 31, 1980, and also by that latter date the manufacturer must have either reimbursed the dealer for the tax or obtained the dealer's written consent to the refund.

The bill changes the tax reduction date to October 1, 1984, the date for dealer submission of claims to the manufacturer to January 1, 1985, and the date for the manufacturer to file his claim for credit or refund and to have reimbursed the dealer and obtained the dealer's consent to March 31, 1985.

Revenue effect

For the estimated revenue effect of the 5-year extension of the Highway Trust Fund taxes at current rates, see Part III of the report on this title.

[100] C. Exemption From Fuels Taxes for Taxicabs (sec. 505 of the bill and secs. 4041, 4221, and 6427 of the Code)

Present law

Under present law, gasoline and

other motor fuels used in taxicabs are subject to the current Federal excise taxes of 4 cents per gallon.

If gasoline or other motor fuel is used in privately owned local transit. buses, the operators can generally obtain a reduction in this tax of 2 cents

per gallon, and fuels used in public

transit vehicles or school buses operated by State or local governments and by nonprofit schools are not subject to these taxes.

Reasons for change

In many suburban areas and smaller towns, taxicabs are the only available means of public transportation. Also, in many situations where taxicabs compete with buses and other forms of public transportation, the taxicabs. are disadvantaged by being required to pay the full amount of the Federal fuels taxes while competitors are afforded a full or partial exemption from these taxes.

The committee is concerned with the cost squeeze faced by many taxicab companies as well as the competitive disadvantage referred to above. The committee is concerned about this financial pressure because it may force the reduction or elimination of a transportation service which is difficult to replace.

In light of the desire to encourage public transportation, both the House and the Senate, in their versions of the energy tax bills (H.R. 5263, presently in conference), have provided that a full 4 cents per gallon fuels excise taxes would be refunded or credited to the extent that these fuels are used in buses engaged in passenger land transportation available to the general public or in school bus transportation operations. In view of these factors,

the committee considered it appropriate to extend the fuels tax exemption to taxicabs.

The committee also believes that it is important to provide an incentive for the implementation of shared-ride systems and to encourage taxicab companies to purchase fuel efficient vehi

cles. Accordingly, the committee believes it is appropriate to exempt taxicabs from the Federal fuels taxes only where the taxicab is used in taxicab services, in situations where sharedride programs are not prohibited and where 1978 or later model vehicles

purchased after 1978 by the taxicab

operator are fuel efficient.

Explanation of provisions

The bill provides an exemption from (or refund or credit of) the 4-centsper-gallon excise taxes on gasoline and other motor fuels for fuels used in taxicabs for qualified taxicab services if (1) the taxicabs are not prohibited from ride sharing (under company policy or the rules of a Federal, State or local authority having jurisdiction over a sub-[101]stantial portion of the transportation furnished by the taxicabs) and (2) in the case of 1978 or later model taxicabs acquired after 1978, the fuel economy of the model type of vehicle exceeds the fleet average fuel economy standard appli

cable under the Motor Vehicle Information and Cost Savings Act (as amended).

This exemption applies only to fuel used in furnishing qualified taxicab services, which means generally the furnishing of nonscheduled passenger land transportation for a fixed fare by a taxicab which is operated by a person who is licensed to engage in the trade or business of furnishing this transportation by Federal, State, or local authority having jurisdiction over a substantial portion of this type of transportation furnished by this person. Also, the operator must not be prohibited by laws, regulations, or procedures of a governmental regulating authority, or by company policy, from furnishing shared ride services. However, shared rides are not to be required without the consent of pas

sengers.

The nonscheduled passenger land transportation which will qualify under this provision includes land transportation which is exclusively radiodispatched and which may be subject

to certain rules and regulations—such as different licensing rules for the driver-not applicable to taxicabs and taxicab drivers generally. This is intended to cover such taxicabs referred to as "livery" and "gypsy" cabs.

For purposes of this provision, qualified taxicabs generally include any land vehicle, the passenger capacity of which is less than 10 adults including the driver. However, the term "qualified taxicab❞ does not include any vehicle if (1) the model year of the vehicle is 1978 or later, (2) the vehicle was acquired by the person operating the vehicle after 1978, and (3) the vehicle fails to meet the fleet average fuel economy standard applicable under section 502(a) of the Motor Vehicle Information and Cost Savings Act as to the model year of the vehicle. The fuel economy standard referred to in the preceding sentence is the standard for passenger vehicles.

The bill provides that motor fuels used in qualified taxicabs while engaged exclusively in furnishing qualified taxicab services will not ultimately bear the burden of Federal motor fuels taxes. This freedom from tax is intended to apply only to motor fuel which is used for business purposes. However, the "exclusively" standard is not violated by insubstantial personal use of the vehicle. Use of the vehicle in ways which are considered necessary to provide taxicab services, such as driving the cab from home to work and back, would not violate the exclusively standard. A practice of drivers using the taxicabs for their personal use when not working would, however, violate the exclusively standard.

Under the bill, in general, tax-free treatment of motor fuels may be obtained either by tax-free sales or by refund or credit of the taxes paid. However, to minimize the possibility of using exempt gasoline for nonbusiness purposes, the bill provides that a tax-free sale of gasoline occurs only when a producer sells fuel directly to the tax operator or taxicab company. The provision for tax-free sales is in