Report to the Congress on Taxation of Diesel Fuel Used in NoncommercialMotorboats

摘要

The Internal Revenue Code has imposed a tax on diesel fuel used in noncommericalmotorboats since 1994. Section 1208 of the Small Business Job Protection Act of 1996 (Pub. L. No. 104-188) provides, however, that this tax is not imposed during the period beginning on August 20, 1996, and ending on December 31, 1997. In accompanying committee reports, Congress requested that the Department of the Treasury study possible alternatives to the current collection regime for motorboat diesel fuel that will provide comparable compliance with the law, and report its findings to the House Committee on Ways and Means and the Senate Committee on Finance. The report describes the current regime for collecting the tax on motorboat diesel fuel (i.e., the rules that applied before the enactment of the moratorium and that will apply after its expiration). The report also describes the concern that led to the imposition of the moratorium. This is the failure of some marinas to offer clear fuel, leading to shortages of diesel fuel for recreational motorboat use in some areas. The report concludes that the current collection regime is ineffective. In part, this is because tax is not imposed on diesel fuel sold for use in commercial vessels, and the decision to supply clear taxed fuel or dyed untaxed fuel is made by the retailer, generally based on the boatowner's representation. In addition, the potential revenue from the tax is very small. The report also concludes that no other collection regime would be any more effective. The report offers two suggestions. Finally, the report suggests a possible revenue offset for a repeal of the tax on motorboat diesel fuel: the restoration, at reduced levels and only for larger boats, of the Coast Guard user fee repealed in 1994.