Revenue Reconciliation Act
page5
 
4.
Establish IRS continuous levy and improve debt
collection (secs. 834, 835, and 836 of the bill and
secs. 6331 and 6334 of the Code)
a.
Continuous levy
Present
Law
If any person is liable for any internal revenue tax
and does not pay it within 10 days after notice and
demand89
by the IRS, the IRS may then collect the tax by levy
upon all property and rights to property belonging
to the person,90
unless there is an explicit statutory restriction on
doing so. A levy is the seizure of the person's
property or rights to property. Property that is not
cash is sold pursuant to statutory requirements.91
In general, a levy does not apply to property
acquired after the date of the levy,92
regardless of whether the property is held by the
taxpayer or by a third party (such as a bank) on
behalf of a taxpayer. Successive seizures may be
necessary if the initial seizure is insufficient to
satisfy the liability.93
The only exception to this rule is for salary and
wages.94
A levy on salary and wages is continuous from the
date it is first made until the date it is fully
paid or becomes unenforceable.
A minimum exemption is provided for salary and
wages.95
It is computed on a weekly basis by adding the value
of the standard deduction plus the aggregate value
of personal exemptions to which the taxpayer is
entitled, divided by 52.96
For a family of four for taxable year 1996, the
weekly minimum exemption is $325.97
Reasons
for Change
The extension of the continuous levy provisions will
substantially ease the administrative burdens of
collecting taxes by levy. The Committee anticipates
that taxpayers who already comply with the tax laws
will have a positive view of increased collections
of taxes owed by taxpayers who have not complied
with the tax laws.
Explanation
of Provision
The provision amends the Code to provide that a
continuous levy is also applicable to non-means
tested recurring Federal payments. This is defined
as a Federal payment for which eligibility is not
based on the income and/or assets of a payee. For
example, Social Security payments, which are subject
to levy under present law, would become subject to
continuous levy.
In addition, the provision provides that this levy
would attach up to 15 percent of any specified
payment due the taxpayer. This rule explicitly
replaces the other specifically enumerated
exemptions from levy in the Code. A continuous levy
of up to 15 percent would also apply to unemployment
benefits and means-tested public assistance.
The bill also permits the disclosure of otherwise
confidential tax return information to the Treasury
Department's Financial Management Service only for
the purpose of, and to the extent necessary in,
implementing these levy provisions.
Effective
Date
The provision is effective for levies issued after
the date of enactment.
b.
Modifications of levy exemptions
Present
Law
The Code exempts from levy workmen's compensation
payments,98
unemployment benefits99
and means-tested public assistance.100
Reasons
for Change
The Committee believes that if wages are subject to
levy, wage replacement payments should also be
subject to levy.
Explanation
of Provision
The provision provides that the following property
is not exempt from continuous levy if the Secretary
of the Treasury (or his delegate) approves the levy
of such property:
(1) workmen's compensation payments,
(2) unemployment benefits, and
(3) means-tested public assistance.
Effective
Date
The provision applies to levies issued after the
date of enactment.
E.
Excise Tax Provisions
1.
Extension and modification of Airport and Airway
Trust Fund excise taxes (sec. 841 of the bill and
secs. 4081, 4091, and 4261 of the Code)
Present
Law
Present law imposes a variety of excise taxes on air
transportation to finance the Airport and Airway
Trust Fund programs administered by the Federal
Aviation Administration (the "FAA"). In
general, the full cost of FAA capital programs is
financed from the Airport and Airway Trust Fund,
while only a portion of FAA operational expenses is
Trust Fund-financed. Overall, the portion of total
FAA expenditures that has been financed from the
Trust Fund has declined from 75 percent through the
early 1990s to 62 percent for the 1997 fiscal year.
The balance is financed by general taxpayers, rather
than directly by program users. Each of the Airport
and Airway Trust Fund excise taxes is scheduled to
expire after September 30, 1997.
Commercial
air passenger transportation taxes
Domestic air passenger transportation is subject to
an ad valorem excise tax equal to 10 percent
of the amount paid for the transportation. Taxable
domestic air transportation includes both travel
within the
United States
and certain travel between the
United States
and points in
Canada
or
Mexico
that are within 225 miles of the
U.S.
border (the "225-mile zone").
Special rules apply to air transportation between
the continental
United States
and
Alaska
or
Hawaii
and between
Alaska
and
Hawaii
. The portion of such transportation which is not
within the United States (e.g., the portion over the
Pacific Ocean between the continental West Coast and
Hawaii) is not subject to the 10-percent air
passenger excise tax.101
The 10-percent excise tax applies in full, however,
to air transportation within the States of Alaska
and
Hawaii
.
The 10-percent air passenger transportation excise
tax also does not apply to domestic
U.S.
segments of uninterrupted international air
transportation. Uninterrupted international air
transportation includes only travel (entirely by
air) that does not both begin and end in the
United States
(or in the 225-mile zone) and during which there is
no more than a 12-hour scheduled period between
arrival and departure at any intermediate point in
the
United States
. For example, assume that a passenger travels from
New York
to
Tokyo
, with a four-hour stop and aircraft change in
Seattle
. The domestic segment of the flight (i.e.,
New York
to
Seattle
) is not subject to the domestic air passenger
transportation excise tax because that segment is a
part of uninterrupted international air
transportation.
International air passenger transportation is
subject to a $6 departure excise tax imposed on
passengers departing the
United States
for other countries. No tax is imposed on passengers
arriving in the
United States
from other countries. As with passengers departing
the
United States
, separate domestic flights of arriving passengers
that connect from international flights are exempt
from tax, provided that stopover time at any point
within the
United States
does not exceed 12 hours.
Because both the domestic and international air
passenger excise taxes are imposed only on
transportation for which an amount is paid, no tax
is imposed on "free" travel (e.g.,
frequent flyer travel and airline industry employee
travel for which the passenger is not directly
charged).
The air passenger transportation excise taxes are
imposed on passengers; transportation providers
(generally airlines) are responsible for collecting
and remitting the taxes to the Federal Government.
In general, both the domestic and international air
passenger transportation excise taxes are imposed
without regard to whether the transportation is
purchased within the
United States
. An exception provides that travel between the
United States
and the 225-mile zone is subject to the ad
valorem domestic tax only if it is purchased
within the
United States
.
The amount of air passenger transportation excise
tax collected from a passenger must be stated
separately on the ticket.
Commercial
air cargo transportation
Domestic air cargo transportation is subject to a
6.25-percent ad valorem excise tax. This tax,
like the air passenger excise taxes, is imposed on
the consumer, with the transportation provider being
required to collect and remit the tax to the Federal
Government. However, there is no requirement that
the tax be stated separately on shipping invoices.
Noncommercial
aviation
Noncommercial aviation, or transportation on private
aircraft which is not "for hire," is
subject to excise taxes imposed on fuel in lieu of
the commercial air passenger ticket and air cargo
excise taxes. The current Airport and Airway Trust
Fund tax rates on these fuels are 15 cents per
gallon on aviation gasoline and 17.5 cents per
gallon on jet fuel.
The aviation gasoline excise tax is imposed on
removal of the fuel from a registered terminal
facility (the same point as the highway gasoline
excise tax). The jet fuel excise tax is imposed on
sale of the fuel by a wholesale distributor. Many
larger airports have dedicated pipeline facilities
that directly service aircraft; in such a case, the
tax effectively is imposed at the retail level. The
person removing the gasoline from a terminal
facility or the wholesale distributor of the jet
fuel is liable for these taxes.
Deposit
of air transportation excise taxes
Under present law, the air passenger ticket and
freight excise taxes are collected from passengers
and freight shippers by the commercial air carriers.
The air carriers then remit the funds to the
Treasury Department; however, the air carriers are
not required to remit monies immediately. Excise tax
returns are filed quarterly (similar to annual
income tax returns), with taxes being deposited on a
semi-monthly basis (similar to estimated income
taxes). For air transportation sold during a
semi-monthly period, air carriers may elect to treat
the taxes as collected on the last day of the first
week of the second following semi-monthly period.
Under these "deemed collected" rules, for
example, the taxes on air transportation sold
between August 1 and August 15, are treated as
collected by the air carriers on or before September
7, with the amounts generally being deposited with
the Treasury Department by September 10. A special
rule requires certain amounts deemed collected
during the second half of September to be deposited
by September 29.
Semi-monthly deposits and quarterly excise tax
returns also are required with respect to the fuels
excise taxes imposed on air transportation.
Overflight
user fees
Non-tax user fees are imposed on air transportation
(both commercial and noncommercial aviation) that
travels through airspace for which the
United States
provides air traffic control services, but that
neither lands in nor takes off from a point in the
United States
. These fees are imposed and collected by the FAA
with respect to mileage actually flown, and apply
both to travel within U.S. territorial airspace and
to travel within international oceanic airspace for
which the United States is responsible for providing
air traffic control services.
Reasons
for Change
The Committee determined that provisions to ensure a
long-term, stable funding source for the Airport and
Airway Trust Fund should be enacted at this time. As
illustrated by the recent events when a shortfall in
fiscal year 1997 FAA funding was narrowly averted by
an emergency extension of the present-law excise
taxes through September 30, 1997, longer-term
assurance of these funding needs is imperative.
Therefore, the bill extends (with certain
modifications) the current Airport and Airway Trust
Fund excise taxes for a 10-year period, a move that
it is believed will resolve, for this 10-year
period, concerns about the availability of adequate
user tax revenues to fund the portion of FAA
programs to be appropriated from the Airport and
Airway Trust Fund.
The Committee determined that limited modifications
to the current passenger excise tax structure are
warranted to improve the perceived fairness of these
taxes. First, the Committee was very concerned that,
under present law, passengers traveling in
international transportation pay significantly less
tax for transportation involving comparable FAA
services than do entirely domestic passengers. The
Committee believes it unfair for American families
traveling domestically on, e.g., family vacations,
to be required to subsidize persons engaged in this
international travel. In particular, the Committee
is extremely concerned that domestic passengers
flying on entirely domestic flights currently are
exempt from tax if they connect to or from another,
international flight while passengers on the same
flight who do not go on to or arrive from an
international destination are fully taxed.
Similarly, the Committee believes it is
inappropriate that passengers arriving in the
United States
should not pay any tax for the FAA services they
receive. To achieve greater equity in the air
transportation user taxes, the bill extends the tax
to internationally arriving passengers, reclassifies
domestic segments of international travel as
domestic transportation, and clarifies that the tax
applies to payments to airlines (and related
parties) from credit card and other companies in
exchange for the right to award frequent flyer miles
or other reduced air travel rights.
The Committee further believes that continued
availability of air transportation services to rural
areas is an important national objective.
Accordingly, the bill provides a special, reduced
tax rate for flight segments to and from smaller
rural airports.
Explanation
of Provisions
Extension
of Airport and Airway Trust Fund taxes
The Airport and Airway Trust Fund excise taxes, as
modified below, are extended for 10 years, for the
period October 1, 1997, through September 30, 2007.
The taxes that are extended include the domestic and
international air passenger excise taxes, the air
cargo excise tax, and the noncommercial aviation
fuels taxes. Gross receipts from these taxes will
continue to be deposited in the Airport and Airway
Trust Fund.
Modification
of commercial air passenger transportation taxes
Tax on international arrivals and departures;
treatment of domestic flight segments associated
with international travel. --The current $6
international departure tax is increased to $8 per
departure, and an identical $8 per passenger tax is
imposed on arrivals in the
United States
from international locations. The definition of
international transportation is modified to
eliminate domestic flight segments associated with
that travel (which are taxed the same as other
domestic transportation under the bill). Thus, the
$8 per passenger tax applies to all uninterrupted
flight segments between a point in the
United States
and a point in a foreign country.
Under the bill, domestic flight segments associated
with international transportation are taxed the same
as other domestic flights. Domestic flight segments
are flight segments between two
U.S.
points (or between a
U.S.
point and a point within the 225-mile zone) from
which the passenger continues to or from an
international flight. The 10-percent domestic tax
rate applies to all such flight segments. The
portion of a passenger's fare that is subject to
this tax is equal to the percentage of total travel
miles covered by the fare (determined based on the
aggregate number of miles in all of the flight
segments) that the domestic flight segment miles
comprise. For this purpose, flight miles are
"Great Circle" miles unless the Treasury
Department develops another measure (such as
predominate routed mileage). Great Circle miles are
based on the shortest distance (i.e., "as the
crow flies") between two points. In general,
this mileage calculation is identical to that which
is used by frequent flyer programs offered by all
major
U.S.
airlines today. Computer programs are readily
available for calculating "Great Circle"
miles between origin and destination points for
flights.
These provisions are illustrated by the following
example. Assume that a passenger travels from
Paris
to
Los Angeles
with a intermediate stop and aircraft change in
New York
. The passenger is subject to an $8 tax on the
flight segment from
Paris
to
New York
. Assume further that 50 percent of the aggregate
miles on the
London
to
Los Angeles
trip are attributable to travel between
New York
and
Los Angeles
. In this case, 50 percent of the fare is subject to
the 10-percent ad valorem tax for the flight
segment between
New York
and
Los Angeles
. The combined tax amount (international and
domestic rate portions) are calculated by the
airline and stated on the passenger's ticket.
Special rules applicable to certain
transportation. --Transportation between the 48
contiguous States and
Alaska
or
Hawaii
(or between those States) remains subject to the
special rules provided in present law. Thus, this
transportation is taxed on apportioned mileage in
U.S. territorial airspace plus $6 per passenger per
one-way flight.102
Clarification is provided that only one $6 per
passenger tax is imposed on a single flight segment
(despite the fact that such a flight segment
technically constitutes both an international
departure and an international arrival).
Additionally, the current special provisions
governing transportation between the United States
and points within the 225-mile zone of Canada or
Mexico are retained, with that transportation being
taxed on the same basis as other domestic
transportation in the circumstances provided under
present law (as modified by the provisions of the
bill recharacterizing certain domestic flight
segments associated with international
transportation).
A further special rule is provided for certain
flight segments to or from qualified rural airports.
A qualified rural airport is an airport that (1) in
the second preceding calendar year had fewer than
100,000 commercial passenger enplanements (i.e.,
departures), and (2) either (a) is not located
within 75 miles of another airport that had more
than 100,000 such passenger enplanements in that
year, or (b) is eligible for payments under the
Federal "essential air services" program
(as in effect on the date of enactment). Flight
segments to or from a qualified rural airport are
subject to a reduced, 7.5-percent ad valorem
rate (in lieu of the general 10-percent rate).103
The term flight segment is defined as transportation
involving a single take-off and a single landing. In
the case of transportation involving multiple flight
segments, the portion of the fare allocable to the
rural segment is determined based on the number of
Great Circle miles in the rural flight segment as
compared to the aggregate number of miles in all of
the flight segments. This is the same calculation
that is used in apportioning international
transportation between taxable international travel
and associated domestic flight segments.
Extension of tax to certain currently exempt
passengers. --As described above, passengers
arriving in the
United States
from other countries, who currently are the only
group of travelers whose transportation is subject
neither to an excise tax nor a user fee for
U.S.-provided aviation services, are subject to tax
on their arriving international flights. Similarly,
passengers traveling on domestic flight segments
that either connect to or from international flight
segments are subject to tax in the same manner as
other, entirely domestic passengers.
Clarification further is provided that any amounts
paid to air carriers (in cash or in kind) for the
right to award or otherwise distribute free or
reduced-rate air transportation are treated as
amounts paid for taxable air transportation, subject
to the 10-percent ad valorem tax rate.
Examples of such taxable amounts include (1)
payments for frequent flyer miles purchased by
credit card companies, telephone companies, rental
car companies, television networks, restaurants and
hotels, and other businesses for distribution to
their customers and others (e.g., employees) and (2)
amounts received by airlines pursuant to joint
venture credit card or other marketing arrangements.
The Treasury Department is authorized specifically
to disregard accounting allocations or other
arrangements which have the effect of reducing
artificially the base to which the 10-percent tax is
applied. (No inference is intended from this
provision as to the proper treatment of these
payments under present law.)
Liability for tax. --The present-law
provision imposing liability for the tax on
passengers (with transportation providers being
liable for collecting and remitting revenues to the
Federal Government) are modified to impose secondary
liability on air carriers. As with the current tax,
the aggregate tax will continue to be required to be
stated separately on passenger tickets.
Modification of air passenger excise tax deposit
rules. --The deposit rules with respect to the
commercial air passenger excise taxes are modified
to permit payment of these taxes that otherwise
would have been required to be deposited during the
period August 15, 1997 through September 30, 1997,
to be deposited on October 10, 1997. Similarly, tax
deposits that would be due during the period July 1,
2001, through September 30, 2001, are required to be
made no later than October 10, 2001.
Effective
Date
These provisions generally are effective on the date
of enactment, for air transportation beginning after
September 30, 1997.
Present law requires transportation providers to
continue collecting the commercial aviation excise
taxes (at the current rates) on transportation to be
provided after September 30, 1997, if the
transportation is purchased before October 1, 1997.
The bill requires transportation providers to
collect the taxes at the modified rates for
transportation purchased after the date of enactment
for travel beginning after September 30, 1997.
The extension of the general aviation fuels excise
taxes is effective for fuels removed or sold after
September 30, 1997.
The provision clarifying application of the
commercial air passenger excise tax to certain
amounts paid for the right to award air
transportation is effective for amounts paid (or
benefits transferred) after September 30, 1997. A
special rule provides that payments (or transfers)
between related parties occurring after June 16,
1997 and before October 1, 1997, are subject to tax
if the payments relate to rights to transportation
to be awarded or otherwise distributed after
September 30, 1997.
The modifications to the commercial air passenger
excise tax deposit rules are effective on the date
of enactment.
2.
Reinstate Leaking Underground Storage Tank Trust
Fund excise tax (sec. 842 of the bill and secs.
4041(d), 4081(a)(2), and 4081(d)(2) of the Code)
Present
Law
Before January 1, 1996, an excise tax of 0.1 cent
per gallon was imposed on gasoline, diesel fuel
(including train diesel fuel), special motor fuels
(other than liquefied petroleum gas), aviation
fuels, and inland waterways fuels. Revenues from the
tax were dedicated to the Leaking Underground
Storage Tank Trust Fund to finance cleanups of
leaking underground storage tanks.
Reasons
for Change
The Committee determined that the Leaking
Underground Storage Tank Trust Fund excise tax
should be reinstated to ensure the availability of
funds to pay cleanup costs of leaking underground
storage tanks.
Explanation
of Provision
The bill reinstates the prior-law Leaking
Underground Storage Tank Trust Fund excise tax
through September 30, 2007.
Effective
Date
The provision is effective on October 1, 1997.
3.
Application of communications tax to long-distance
prepaid telephone cards (sec. 843 of the bill and
sec. 4251 of the Code)
Present
Law
A 3-percent excise tax is imposed on amounts paid
for local and toll (long-distance) telephone service
and teletypewriter exchange service. The tax is
collected by the provider of the service from the
consumer (business and residential custormers).
Reasons
for Change
The Committee understands that communication service
providers sometimes sell units of long-distance
service to third parties who, in turn, resell or
distribute these units of long-distance telephone
service to the ultimate customer in the form of
prepaid telephone cards or similar arrangements. The
Committee believes that such payments clearly
represent payments for long-distance telephone
service and clarifies that such payments are subject
to the communications excise tax.
Explanation
of Provision
The bill provides that any amounts paid to telephone
carriers (in cash or in kind) for the right to award
or otherwise distribute long-distance telephone
service, including free or reduced-rate service, are
treated as amounts paid for taxable communication
services, subject to the 3-percent ad valorem
tax rate. Examples of such taxable amounts include
(1) prepaid telephone cards offered through service
stations, convenience stores and other businesses to
their customers and others (e.g., employees) and (2)
amounts received by telephone carriers pursuant to
joint venture credit card or other marketing
arrangements.
For example, company A, which is a telephone carrier
that owns telephone transmission and switching
equipment and generally offers telephone service to
the public, may sell a block of long-distance
message units to company B for X dollars. Company B
owns no transmission or switching equipment, but
rather acts a reseller of long distance telephone
services and also is a telephone carrier. Company B,
in turn, resells all or part of the long-distance
message units purchased from Company A to Company C
for Y dollars. Company C operates a chain of
convenience stores. Company C resells some of the
long-distance message units in the form of prepaid
telephone cards to its convenience store customers
and also makes some of the message units available
to its employees as a benefit by the free
distribution of such prepaid telephone cards to the
employees. The amount Y will be considered an amount
paid for telecommunications services subject to the
3-percent telephone excise tax. Alternatively, if
company C had purchased the block of message units
directly from company A for X dollars, the amount X
will be considered an amount paid for
telecommunications services subject to the 3-percent
telephone excise tax.
In the case of amounts received by
telecommunications carriers pursuant to joint
venture credit card or other marketing arrangements,
the Treasury Department is authorized specifically
to disregard accounting allocations or other
arrangements which have the effect of reducing
artificially the base to which the 3-percent tax is
applied.
No inference is intended from this provision as to
the proper treatment of these payments under present
law.
Effective
Date
The provision is effective for amounts paid on or
after the date of enactment.
4.
Uniform rate of excise tax on vaccines (sec. 844 of
the bill and secs. 4131 and 4132 of the Code)
Present
Law
Under section 4131, a manufacturer's excise tax is
imposed on the following vaccines routinely
recommended for administration to children: DPT
(diphtheria, pertussis, tetanus,), $4.56 per dose;
DT (diphtheria, tetanus), $0.06 per dose; MMR
(measles, mumps, or rubella), $4.44 per dose; and
polio, $0.29 per dose. In general, if any vaccine is
administered by combining more than one of the
listed taxable vaccines, the amount of tax imposed
is the sum of the amounts of tax imposed for each
taxable vaccine. However, in the case of MMR and its
components, any component vaccine of MMR is taxed at
the same rate as the MMR-combined vaccine.
Amounts equal to net revenues from this excise tax
are deposited in the Vaccine Injury Compensation
Trust Fund to finance compensation awards under the
Federal Vaccine Injury Compensation Program for
individuals who suffer certain injuries following
administration of the taxable vaccines. This program
provides a substitute Federal, "no fault"
insurance system for the State-law tort and private
liability insurance systems otherwise applicable to
vaccine manufacturers. All persons immunized after
September 30, 1998, with covered vaccines must
pursue compensation under this Federal program
before bringing civil tort actions under State law.
Reasons
for Change
The Committee understands that the present-law tax
rates applicable to taxable vaccines were chosen to
reflect estimated probabilities of adverse reactions
and the severity of the injury that might result
from such reactions. The Committee understands that
medical researchers believe that there is
insufficient data to support fine gradations of
estimates of potential harm from the various
different childhood vaccines. In the light of this
scientific assessment, the Committee believes some
simplicity can be achieved by taxing such vaccines
at the same rate per dose.
The Committee further believes it is appropriate to
review the list of taxable vaccines from time to
time as medical science advances. The Center for
Disease Control has recommended that the vaccines
for HIB (haemophilus influenza type B), Hepatitis B,
and varicella (chicken pox) be widely administered
among the nation's children. In light of the growing
number of immunizations using these vaccines, the
Committee adds these vaccines to the list of taxable
vaccines.
Explanation
of Provision
The bill replaces the present-law excise tax rates,
that differ by vaccine, with a single rate tax of
$0.84 per dose on any listed vaccine component.
Thus, the bill provides that the tax applied to any
vaccine that is a combination of vaccine components
is 84 cents times the number of components in the
combined vaccine. For example, the MMR vaccine is to
be taxed at a rate of $2.52 per dose and the DT
vaccine is to be taxed at rate of $1.68 per dose.
In addition, the provision adds three new taxable
vaccines to the present-law taxable vaccines: (1)
HIB (haemophilus influenza type B); (2) Hepatitis B;
and (3) varicella (chicken pox). The three newly
listed vaccines also are subject to the 84-cents per
dose excise tax.
Lastly, the Committee directs the Secretary of the
Treasury to undertake a study of the efficacy of the
new flat-rate vaccine tax system as a means to
finance the Vaccine Injury Compensation Trust Fund.
Among other issues that the Secretary might find
pertinent, the Committee directs the Secretary to
explore the following questions. For each taxable
vaccine, how does the magnitude of the tax compare
to the total price of the vaccine that is charged to
the patient (or the patient's insurance company)?
Have any changes in the prices of taxable vaccines
that might have resulted from the changes in tax
enacted by this bill altered the use of taxable
vaccines (i.e., what is the price elasticity of
demand for the various taxable vaccines)? Does
scientific evidence exist to permit a vaccine tax
structure that reflects possibly different medical
risks from the different vaccines? Does the
flat-rate structure generate savings in compliance
costs for taxpayers and administrative cost savings
for the Internal Revenue Service? The Committee
welcomes recommendations regarding possible changes
in this tax structure. However, the Committee
reminds the Secretary that determination of the tax
base and the tax rate are the constitutional
prerogative of the Congress and that recommendations
for delegation of such authority to the executive
branch are inappropriate. The results of the study
are to be reported to the Senate Committee on
Finance and the House Committee on Ways and Means by
September 30, 1999.
Effective
Date
The provision is effective for vaccine purchases
after September 30, 1997. No floor stocks tax is to
be collected or refunds permitted for amounts held
for sale on October 1, 1997. Returns to the
manufacturer occurring on or after October 1, 1997,
are assumed to be returns of vaccines to which the
new rates of tax apply.
5.
Modify treatment of tires under the heavy highway
vehicle retail excise tax (sec. 845 of the bill and
sec. 4071 of the Code)
Present
Law
A 12-percent retail excise tax is imposed on certain
heavy highway trucks and trailers, and on highway
tractors. A separate manufacturers' excise tax is
imposed on tires weighing more than 40 pounds. This
tire tax is imposed as a fixed dollar amount which
varies based on the weight of the tire. Because
tires are taxed separately, the value of tires
installed on a highway vehicle is excluded from the
12-percent excise tax on heavy highway vehicles. The
determination of value is factual and has given rise
to numerous tax audit challenges.
Reasons
for Change
Allowing a credit for the tire tax actually paid on
truck tires will simplify the application of the
retail truck tax.
Explanation
of Provision
The current exclusion of the value of tires
installed on a taxable highway vehicle is repealed.
Instead, a credit for the amount of manufacturers'
excise tax actually paid on the tires is allowed.
Effective
Date
The provision is effective after December 31, 1997.
6.
Increase tobacco excise taxes (sec. 846 of the bill
and sec. 5701 of the Code)
Present
Law
The following is a listing of the Federal excise
taxes imposed on tobacco products under present law:
Article Tax imposed
Cigars:
Small cigars $1.125 per thousand.
12.75% of manufacturer's price, up to $30
Large cigars per
thousand.
Cigarettes:
$12.00 per thousand (24 cents per pack of
Small cigarettes 20
cigarettes).
Large cigarettes $25.20 per thousand.
Cigarette papers $0.0075 per 50 papers.
Cigarette tubes $0.15 per 50 tubes.
Chewing tobacco $0.12 per
pound.
Snuff $0.36 per pound.
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