S 1151 ISCommentsClose CommentsPermalink

To provide incentives to the auto industry to accelerate efforts to develop more energy-efficient vehicles to lessen dependence on oil.CommentsClose CommentsPermalink

April 18, 2007

Mr. OBAMA introduced the following bill; which was read twice and referred to the Committee on FinanceCommentsClose CommentsPermalink

To provide incentives to the auto industry to accelerate efforts to develop more energy-efficient vehicles to lessen dependence on oil.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the `Health Care for Hybrids Act'.CommentsClose CommentsPermalink





(b) Table of Contents- The table of contents for this Act is as follows:CommentsClose CommentsPermalink





Sec. 1. Short title; table of contents.CommentsClose CommentsPermalink





Sec. 2. Findings.CommentsClose CommentsPermalink

TITLE I--RETIRED EMPLOYEE HEALTH BENEFITS REIMBURSEMENT PROGRAM

Sec. 101. Coordinating task force.CommentsClose CommentsPermalink





Sec. 102. Establishment of program.CommentsClose CommentsPermalink





Sec. 103. Reporting.CommentsClose CommentsPermalink





Sec. 104. Authorization of appropriations.CommentsClose CommentsPermalink

TITLE II--TAX PROVISIONS

Sec. 201. Clarification of economic substance doctrine.CommentsClose CommentsPermalink





Sec. 202. Penalty for understatements attributable to transactions lacking economic substance.CommentsClose CommentsPermalink





Sec. 203. Denial of deduction for interest on underpayments attributable to noneconomic substance transactions.CommentsClose CommentsPermalink

SEC. 2. FINDINGS.

Congress makes the following findings:CommentsClose CommentsPermalink





(1) More than 50 percent of the oil consumed in the United States is imported.CommentsClose CommentsPermalink





(2) If present trends continue, foreign oil will represent 68 percent of the oil consumed in the United States by 2025.CommentsClose CommentsPermalink





(3) The United States has only 3 percent of the world's known oil reserves and the Nation's economic health is dependent on world oil prices.CommentsClose CommentsPermalink





(4) World oil prices are overwhelmingly dictated by other countries, which endangers the economic and national security of the United States.CommentsClose CommentsPermalink





(5) A major portion of the world's oil supply is controlled by unstable governments and countries that are known to finance, harbor, or otherwise support terrorists and terrorist activities.CommentsClose CommentsPermalink





(6) American automakers have lagged behind their foreign competitors in producing hybrid and other energy-efficient automobiles.CommentsClose CommentsPermalink





(7) Legacy health care costs associated with retiree workers are an increasing burden on the global competitiveness of American industries.CommentsClose CommentsPermalink





(8) Innovative uses of new technology in automobiles manufactured in the United States will--CommentsClose CommentsPermalink





(A) help retain American jobs;CommentsClose CommentsPermalink





(B) support health care obligations for retiring workers in the automotive sector;CommentsClose CommentsPermalink





(C) decrease our Nation's dependence on foreign oil; andCommentsClose CommentsPermalink





(D) address pressing environmental concerns.CommentsClose CommentsPermalink

TITLE I--RETIRED EMPLOYEE HEALTH BENEFITS REIMBURSEMENT PROGRAM

SEC. 101. COORDINATING TASK FORCE.

(a) Establishment- Not later than 6 months after the date of the enactment of this Act, the Secretary of Energy, the Secretary of Health and Human Services, the Secretary of Transportation, and the Secretary of the Treasury shall establish a task force (referred to in this Act as the `task force') to administer the program established under section 102 (referred to in this Act as the `program').CommentsClose CommentsPermalink





(b) Membership- The task force shall be composed representatives of the departments headed by the officials referred to in subsection (a), who shall be appointed by such officials in equal numbers.CommentsClose CommentsPermalink

SEC. 102. ESTABLISHMENT OF PROGRAM.

(a) In General- Not later than 1 year after the date of the enactment of this Act, the task force shall establish a program to reimburse eligible domestic automobile manufacturers for the costs incurred in providing health benefits to their retired employees. The task force shall determine compliance with the assurances under subsection (c)(4) through accepted measurements of fuel savings.CommentsClose CommentsPermalink





(b) Consultation- In establishing the program, the task force shall consult with representatives from--CommentsClose CommentsPermalink





(1) eligible domestic automobile manufacturers;CommentsClose CommentsPermalink





(2) unions representing employees of such manufacturers; andCommentsClose CommentsPermalink





(3) consumer and environmental groups.CommentsClose CommentsPermalink





(c) Eligibility Requirements- A domestic automobile manufacturer seeking reimbursement under the program shall--CommentsClose CommentsPermalink





(1) submit an application to the task force at such time, in such manner, and containing such information as the task force shall require;CommentsClose CommentsPermalink





(2) certify that such manufacturer is providing full health care coverage to all of its employees;CommentsClose CommentsPermalink





(3) provide assurances to the task force that the manufacturer will invest, in an amount equal to not less than 50 percent of the amount saved by the manufacturer through the reimbursement of its retiree health care costs under the program, in--CommentsClose CommentsPermalink





(A) the domestic manufacture and commercialization of petroleum fuel reduction technologies, including alternative or flexible fuel vehicles, hybrids, and other state-of-the-art fuel saving technologies;CommentsClose CommentsPermalink





(B) retraining workers and retooling assembly lines for the activities described in subparagraph (A);CommentsClose CommentsPermalink





(C) researching, developing, designing, and commercializing high-performance, fuel-efficient vehicles, and other activities related to diversifying the domestic production of automobiles; andCommentsClose CommentsPermalink





(D) assisting domestic automobile component suppliers to retool their domestic manufacturing plants to produce components for petroleum fuel reduction technologies, including alternative or flexible fuel vehicles and hybrid, advanced diesel, and other state-of-the-art fuel saving technologies; andCommentsClose CommentsPermalink





(4) provide assurances to the task force that average adjusted fuel economy savings achieved under paragraph (3) will not result in fuel economy decreases in other automobiles manufactured in the United States; andCommentsClose CommentsPermalink





(5) provide additional assurances and information as the task force may require, including information needed by the task force to audit the manufacturer's compliance with the requirements of the program.CommentsClose CommentsPermalink





(d) Limitation- Not more than 10 percent of the annual retiree health care costs of any domestic automobile manufacturer may be reimbursed under the program in any year.CommentsClose CommentsPermalink





(e) Termination of Program- The program shall terminate on December 31, 2017.CommentsClose CommentsPermalink

SEC. 103. REPORTING.

(a) Reimbursement Reports- Not later than 6 months after the date of the enactment of this Act, and every 6 months thereafter, the task force shall submit a report to Congress that--CommentsClose CommentsPermalink





(1) identifies the reimbursements paid under the program; andCommentsClose CommentsPermalink





(2) describes the changes in the manufacture and commercialization of fuel saving technologies implemented by automobile manufacturers as a result of such reimbursements.CommentsClose CommentsPermalink





(b) Consumer Incentives- Not later than 1 year after the date of the enactment of this Act, the task force shall submit a report to Congress that--CommentsClose CommentsPermalink





(1) indicates the effectiveness of financial incentives available to consumers for the purchase of hybrid vehicles in encouraging such purchases; andCommentsClose CommentsPermalink





(2) recommends whether such incentives should be expanded.CommentsClose CommentsPermalink

SEC. 104. AUTHORIZATION OF APPROPRIATIONS.

There are authorized to be appropriated such sums as may be necessary in each of fiscal years 2008 through 2018 to carry out this title.CommentsClose CommentsPermalink

TITLE II--TAX PROVISIONS

SEC. 201. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

(a) In General- Section 7701 of the Internal Revenue Code of 1986 is amended--CommentsClose CommentsPermalink





(1) by redesignating subsection (p) as subsection (q); andCommentsClose CommentsPermalink





(2) by inserting after subsection (o) the following:CommentsClose CommentsPermalink





`(p) Clarification of Economic Substance Doctrine-CommentsClose CommentsPermalink





`(1) GENERAL RULES-CommentsClose CommentsPermalink





`(A) IN GENERAL- In any case in which a court determines that the economic substance doctrine is relevant for purposes of this title to a transaction (or series of transactions), such transaction (or series of transactions) shall have economic substance only if the requirements of this paragraph are met.CommentsClose CommentsPermalink





`(B) DEFINITION OF ECONOMIC SUBSTANCE- For purposes of subparagraph (A):CommentsClose CommentsPermalink





`(i) IN GENERAL- A transaction has economic substance only if--CommentsClose CommentsPermalink





`(I) the transaction changes in a meaningful way (apart from Federal tax effects) the taxpayer's economic position, andCommentsClose CommentsPermalink





`(II) the taxpayer has a substantial nontax purpose for entering into such transaction and the transaction is a reasonable means of accomplishing such purpose.CommentsClose CommentsPermalink





In applying subclause (II), a purpose of achieving a financial accounting benefit shall not be taken into account in determining whether a transaction has a substantial nontax purpose if the origin of such financial accounting benefit is a reduction of income tax.CommentsClose CommentsPermalink





`(ii) SPECIAL RULE WHERE TAXPAYER RELIES ON PROFIT POTENTIAL- A transaction shall not be treated as having economic substance by reason of having a potential for profit unless--CommentsClose CommentsPermalink





`(I) the present value of the reasonably expected pre-tax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected, andCommentsClose CommentsPermalink





`(II) the reasonably expected pre-tax profit from the transaction exceeds a risk-free rate of return.CommentsClose CommentsPermalink





`(C) TREATMENT OF FEES AND FOREIGN TAXES- Fees and other transaction expenses and foreign taxes shall be taken into account as expenses in determining pre-tax profit under subparagraph (B)(ii).CommentsClose CommentsPermalink





`(2) SPECIAL RULES FOR TRANSACTION WITH TAX-INDIFFERENT PARTIES-CommentsClose CommentsPermalink





`(A) SPECIAL RULES FOR FINANCING TRANSACTIONS- The form of a transaction which is in substance the borrowing of money or the acquisition of financial capital directly or indirectly from a tax-indifferent party shall not be respected if the present value of the deductions to be claimed with respect to the transaction is substantially in excess of the present value of the anticipated economic returns of the person lending the money or providing the financial capital. A public offering shall be treated as a borrowing, or an acquisition of financial capital, from a tax-indifferent party if it is reasonably expected that at least 50 percent of the offering will be placed with tax-indifferent parties.CommentsClose CommentsPermalink





`(B) ARTIFICIAL INCOME SHIFTING AND BASIS ADJUSTMENTS- The form of a transaction with a tax-indifferent party shall not be respected if--CommentsClose CommentsPermalink





`(i) it results in an allocation of income or gain to the tax-indifferent party in excess of such party's economic income or gain, orCommentsClose CommentsPermalink





`(ii) it results in a basis adjustment or shifting of basis on account of overstating the income or gain of the tax-indifferent party.CommentsClose CommentsPermalink





`(3) DEFINITIONS AND SPECIAL RULES- For purposes of this subsection:CommentsClose CommentsPermalink





`(A) ECONOMIC SUBSTANCE DOCTRINE- The term `economic substance doctrine' means the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose.CommentsClose CommentsPermalink





`(B) TAX-INDIFFERENT PARTY- The term `tax-indifferent party' means any person or entity not subject to tax imposed by subtitle A. A person shall be treated as a tax-indifferent party with respect to a transaction if the items taken into account with respect to the transaction have no substantial impact on such person's liability under subtitle A.CommentsClose CommentsPermalink





`(C) EXCEPTION FOR PERSONAL TRANSACTIONS OF INDIVIDUALS- In the case of an individual, this subsection shall apply only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.CommentsClose CommentsPermalink





`(D) TREATMENT OF LESSORS- In applying paragraph (1)(B)(ii) to the lessor of tangible property subject to a lease--CommentsClose CommentsPermalink





`(i) the expected net tax benefits with respect to the leased property shall not include the benefits of--CommentsClose CommentsPermalink





`(I) depreciation,CommentsClose CommentsPermalink





`(II) any tax credit, orCommentsClose CommentsPermalink





`(III) any other deduction as provided in guidance by the Secretary, andCommentsClose CommentsPermalink





`(ii) subclause (II) of paragraph (1)(B)(ii) shall be disregarded in determining whether any of such benefits are allowable.CommentsClose CommentsPermalink





`(4) OTHER COMMON LAW DOCTRINES NOT AFFECTED- Except as specifically provided in this subsection, the provisions of this subsection shall not be construed as altering or supplanting any other rule of law, and the requirements of this subsection shall be construed as being in addition to any such other rule of law.CommentsClose CommentsPermalink





`(5) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection. Such regulations may include exemptions from the application of this subsection.'.CommentsClose CommentsPermalink





(b) Effective Date- The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 202. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE.

(a) In General- Subchapter A of chapter 68 of the Internal Revenue Code of 1986 is amended by inserting after section 6662A the following:CommentsClose CommentsPermalink

`SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE.

`(a) Imposition of Penalty- If a taxpayer has an noneconomic substance transaction understatement for any taxable year, there shall be added to the tax an amount equal to 40 percent of the amount of such understatement.CommentsClose CommentsPermalink





`(b) Reduction of Penalty for Disclosed Transactions- Subsection (a) shall be applied by substituting `20 percent' for `40 percent' with respect to the portion of any noneconomic substance transaction understatement with respect to which the relevant facts affecting the tax treatment of the item are adequately disclosed in the return or a statement attached to the return.CommentsClose CommentsPermalink





`(c) Noneconomic Substance Transaction Understatement- For purposes of this section--CommentsClose CommentsPermalink





`(1) IN GENERAL- The term `noneconomic substance transaction understatement' means any amount which would be an understatement under section 6662A(b)(1) if section 6662A were applied by taking into account items attributable to noneconomic substance transactions rather than items to which section 6662A would apply without regard to this paragraph.CommentsClose CommentsPermalink





`(2) NONECONOMIC SUBSTANCE TRANSACTION- The term `noneconomic substance transaction' means any transaction if--CommentsClose CommentsPermalink





`(A) there is a lack of economic substance (within the meaning of section 7701(p)(1)) for the transaction giving rise to the claimed benefit or the transaction was not respected under section 7701(p)(2), orCommentsClose CommentsPermalink





`(B) the transaction fails to meet the requirements of any similar rule of law.CommentsClose CommentsPermalink





`(d) Rules Applicable to Compromise of Penalty-CommentsClose CommentsPermalink





`(1) IN GENERAL- If the 1st letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals has been sent with respect to a penalty to which this section applies, only the Commissioner of Internal Revenue may compromise all or any portion of such penalty.CommentsClose CommentsPermalink





`(2) APPLICABLE RULES- The rules of paragraphs (2) and (3) of section 6707A(d) shall apply for purposes of paragraph (1).CommentsClose CommentsPermalink





`(e) Coordination With Other Penalties- Except as otherwise provided in this part, the penalty imposed by this section shall be in addition to any other penalty imposed by this title.CommentsClose CommentsPermalink





`(f) Cross References-CommentsClose CommentsPermalink





`(1) For coordination of penalty with understatements under section 6662 and other special rules, see section 6662A(e).CommentsClose CommentsPermalink





`(2) For reporting of penalty imposed under this section to the Securities and Exchange Commission, see section 6707A(e).'.CommentsClose CommentsPermalink





(b) Coordination With Other Understatements and Penalties-CommentsClose CommentsPermalink





(1) The second sentence of section 6662(d)(2)(A) of the Internal Revenue Code of 1986 is amended by inserting `and without regard to items with respect to which a penalty is imposed by section 6662B' before the period at the end.CommentsClose CommentsPermalink





(2) Subsection (e) of section 6662A of the Internal Revenue Code of 1986 is amended--CommentsClose CommentsPermalink





(A) in paragraph (1), by inserting `and noneconomic substance transaction understatements' after `reportable transaction understatements' both places it appears,CommentsClose CommentsPermalink





(B) in paragraph (2)(A), by inserting `and a noneconomic substance transaction understatement' after `reportable transaction understatement',CommentsClose CommentsPermalink





(C) in paragraph (2)(B), by inserting `6662B or' before `6663',CommentsClose CommentsPermalink





(D) in paragraph (2)(C)(i), by inserting `or section 6662B' before the period at the end,CommentsClose CommentsPermalink





(E) in paragraph (2)(C)(ii), by inserting `and section 6662B' after `This section',CommentsClose CommentsPermalink





(F) in paragraph (3), by inserting `or noneconomic substance transaction understatement' after `reportable transaction understatement', andCommentsClose CommentsPermalink





(G) by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(3) NONECONOMIC SUBSTANCE TRANSACTION UNDERSTATEMENT- For purposes of this subsection, the term `noneconomic substance transaction understatement' has the meaning given such term by section 6662B(c).'.CommentsClose CommentsPermalink





(3) Paragraph (2) of section 6707A(e) of the Internal Revenue Code of 1986 is amended--CommentsClose CommentsPermalink





(A) by striking `or' at the end of subparagraph (B), andCommentsClose CommentsPermalink





(B) by striking subparagraph (C) and inserting the following new subparagraphs:CommentsClose CommentsPermalink





`(C) is required to pay a penalty under section 6662B with respect to any noneconomic substance transaction, orCommentsClose CommentsPermalink





`(D) is required to pay a penalty under section 6662(h) with respect to any transaction and would (but for section 6662A(e)(2)(C)) have been subject to penalty under section 6662A at a rate prescribed under section 6662A(c) or under section 6662B,'.CommentsClose CommentsPermalink





(c) Clerical Amendment- The table of sections for part II of subchapter A of chapter 68 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 6662A the following:CommentsClose CommentsPermalink





`Sec. 6662B. Penalty for understatements attributable to transactions lacking economic substance, etc.'.CommentsClose CommentsPermalink





(d) Effective Date- The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 203. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS ATTRIBUTABLE TO NONECONOMIC SUBSTANCE TRANSACTIONS.

(a) In General- Section 163(m) of the Internal Revenue Code of 1986 (relating to interest on unpaid taxes attributable to nondisclosed reportable transactions) is amended--CommentsClose CommentsPermalink





(1) by striking `attributable' and all that follows and inserting the following: `attributable to--CommentsClose CommentsPermalink





`(1) the portion of any reportable transaction understatement (as defined in section 6662A(b)) with respect to which the requirement of section 6664(d)(2)(A) is not met, orCommentsClose CommentsPermalink





`(2) any noneconomic substance transaction understatement (as defined in section 6662B(c)).'; andCommentsClose CommentsPermalink





(2) by inserting `and noneconomic substance transactions' after `transactions'.CommentsClose CommentsPermalink





(b) Effective Date- The amendments made by this section shall apply to transactions after the date of the enactment of this Act in taxable years ending after such date.CommentsClose CommentsPermalink