Sec. 1343. REDUCED MOTOR FUEL EXCISE TAX ON CERTAIN MIXTURES OF DIESEL FUEL

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## SEC. 1343 REDUCED MOTOR FUEL EXCISE TAX ON CERTAIN MIXTURES OF DIESEL FUEL ###

(a)In General Paragraph

(2)of section 4081(a) is amended by adding at the end the following: > > ##### “(D) Diesel-water fuel emulsion > > In the case of diesel-water fuel emulsion at least 14 percent of which is water and with respect to which the emulsion additive is registered by a United States manufacturer with the Environmental Protection Agency pursuant to section 211 of the Clean Air Act (as in effect on March 31, 2003), subparagraph (A)(iii) shall be applied by substituting ‘19.7 cents’ for ‘24.3 cents’. The preceding sentence shall not apply to the removal, sale, or use of diesel-water fuel emulsion unless the person so removing, selling, or using such fuel is registered under section 4101.” > . ###

(b)Special Rules for Diesel-Water Fuel Emulsions ####

(1)Refunds for tax-paid purchases Section 6427 is amended by redesignating subsections

(m)through

(p)as subsections

(n)through (q), respectively, and by inserting after subsection

(l)the following new subsection: > > ### “(m) Diesel Fuel Used to Produce Emulsion > > > #### “(1) In general > > Except as provided in subsection (k), if any diesel fuel on which tax was imposed by section 4081 at the regular tax rate is used by any person in producing an emulsion described in section 4081(a)(2)(D) which is sold or used in such person's trade or business, the Secretary shall pay (without interest) to such person an amount equal to the excess of the regular tax rate over the incentive tax rate with respect to such fuel. > > > #### “(2) Definitions > > For purposes of paragraph (1)— > > > ##### “(A) Regular tax rate > > The term ‘**regular tax rate**’ means the aggregate rate of tax imposed by section 4081 determined without regard to section 4081(a)(2)(D). > > > ##### “(B) Incentive tax rate > > The term ‘**incentive tax rate**’ means the aggregate rate of tax imposed by section 4081 determined with regard to section 4081(a)(2)(D).” > . ####

(2)Later separation of fuel Section 4081 (relating to imposition of tax) is amended by inserting after subsection

(b)the following new subsection: > > ### “(c) Later Separation of Fuel From Diesel-Water Fuel Emulsion > > If any person separates the taxable fuel from a diesel-water fuel emulsion on which tax was imposed under subsection

(a)at a rate determined under subsection (a)(2)(D) (or with respect to which a credit or payment was allowed or made by reason of section 6427), such person shall be treated as the refiner of such taxable fuel. The amount of tax imposed on any removal of such fuel by such person shall be reduced by the amount of tax imposed (and not credited or refunded) on any prior removal or entry of such fuel.” > . ####

(3)Credit claims Paragraphs

(1)and

(2)of section 6427(i) are both amended by inserting “(m),” after “(l),”. ###

(c)Effective Date The amendments made by this section shall take effect on January 1, 2006.