Health Care for Hybrids Act - Requires the Secretaries of Energy, Health and Human Services, Transportation, and the Treasury to establish a task force to create a program to provide financial assistance to certain domestic automobile manufacturers for the annual health care coverage costs of their retired employees. Limits the amount of such assistance to 10% of the manufacturer's annual retiree health care costs. Requires such manufacturers to invest at least 50% of their health care cost savings in petroleum fuel reduction technologies, including alternative or flexible fuel vehicles and hybrids, and in the retraining of workers and retooling of manufacturing plants. Terminates such program on December 31, 2015.
Amends the Internal Revenue Code to: (1) define economic substance for purposes of evaluating tax shelter transactions; (2) impose penalties for understatements of tax liability resulting from transactions lacking in economic substance; and (3) deny a tax deduction for interest assessed on underpayments of tax resulting from transactions lacking in economic substance.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2045 Introduced in Senate (IS)]
109th CONGRESS
1st Session
S. 2045
To provide incentives to the auto industry to accelerate efforts to
develop more energy-efficient vehicles to lessen dependence on oil.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
November 17, 2005
Mr. Obama introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To provide incentives to the auto industry to accelerate efforts to
develop more energy-efficient vehicles to lessen dependence on oil.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Health Care for Hybrids Act''.
SEC. 2. FINDINGS.
Congress makes the following findings:
(1) The United States imports over half the oil it
consumes.
(2) According to present trends, the United States reliance
on foreign oil will increase to 68 percent of its total
consumption by 2025.
(3) With only 3 percent of the world's known oil reserves,
the health of the United States economy is dependent on world
oil prices.
(4) World oil prices are overwhelmingly dictated by
countries other than the United States, thus endangering our
economic and national security.
(5) Legacy health care costs associated with retiree
workers are an increasing burden on the global competitiveness
of American industries.
(6) American automakers have lagged behind their foreign
competitors in producing hybrid and other energy efficient
automobiles.
(7) Innovative uses of new technology in automobiles in the
United States will help retain American jobs, support health
care obligations for retiring workers in the automotive sector,
decrease America's dependence on foreign oil, and address
pressing environmental concerns.
TITLE I--PROGRAM
SEC. 101. COORDINATING TASK FORCE.
Not later than 6 months after the date of 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, and appoint an equal number of representatives to, a
task force (referred to in this Act as the ``task force'') to
administer the program established under this Act.
SEC. 102. ESTABLISHMENT OF PROGRAM.
(a) In General.--Not later than 1 year after the date of enactment
of this Act, the task force established under section 101 shall
establish a program to provide financial assistance to eligible
domestic automobile manufacturers for the costs incurred in providing
health benefits to their retired employees.
(b) Consultation.--In establishing the program under subsection
(a), the task force shall consult with representatives from the
domestic automobile manufacturers, unions representing employees of
such manufacturers, and consumer and environmental groups.
(c) Eligible Domestic Automobile Manufacturer.--To be eligible to
receive financial assistance under the program established under
subsection (a), a domestic automobile manufacturer shall--
(1) submit an application to the task force at such time,
in such manner, and containing such information as the task
force shall require;
(2) certify that such manufacturer is providing full health
care coverage to all of its domestic employees;
(3) provide an assurance that the manufacturer will invest
an amount equal to not less than 50 percent of the amount of
health savings derived by the manufacturer as a result of its
retiree health care costs being covered under the program under
this section, in--
(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;
(B) the retraining of workers and retooling of
assembly lines for such domestic manufacture and
commercialization;
(C) research and development, design,
commercialization, and other costs related to the
diversifying of domestic production of automobiles
through the offering of high performance fuel efficient
vehicles; and
(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, hybrid, advanced diesel, or other state-of-
the-art fuel saving technologies; and
(4) 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.
(d) Limitation.--The total amount of financial assistance that may
be provided each year under the program under this section with respect
to any single domestic automobile manufacturer shall not exceed an
amount equal to 10 percent of the retiree health care costs of that
manufacturer for that year.
SEC. 103. REPORTING.
Not later than 6 months after the date of enactment of this Act,
and every 6 months thereafter, the task force shall submit to Congress
a report on any financial assistance provided under this program under
this Act and the resulting changes in the manufacture and
commercialization of fuel saving technologies implemented by auto
manufacturers as a result of such financial assistance. Not later than
1 year after the date of enactment of this Act, the task force shall
submit a report to Congress on the effectiveness of current consumer
incentives available for the purchase of hybrid vehicles in encouraging
the purchase of such vehicles and whether these incentives should be
expanded.
SEC. 104. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated, such sums as may be
necessary in each fiscal year to carry out this Act.
SEC. 105. LIMITATION ON BACKSLIDING.
To be eligible to receive financial assistance under this title, a
manufacturer shall provide assurances to the task force that fuel
savings achieved with respect its average adjusted fuel economy will
not result in decreases with respect to fuel economy elsewhere in the
domestic fleet. The task force shall determine compliance with such
assurances using accepted measurements of fuel savings.
SEC. 106. TERMINATION OF PROGRAM.
The program established under this title shall terminate on
December 31, 2015.
TITLE II--OFFSETS
SEC. 201. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701 of the Internal Revenue Code of 1986
is amended by redesignating subsection (o) as subsection (p) and by
inserting after subsection (n) the following new subsection:
``(o) Clarification of Economic Substance Doctrine; Etc.--
``(1) General rules.--
``(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.
``(B) Definition of economic substance.--For
purposes of subparagraph (A)--
``(i) In general.--A transaction has
economic substance only if--
``(I) the transaction changes in a
meaningful way (apart from Federal tax
effects) the taxpayer's economic
position, and
``(II) the taxpayer has a
substantial nontax purpose for entering
into such transaction and the
transaction is a reasonable means of
accomplishing such purpose.
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
``(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--
``(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, and
``(II) the reasonably expected pre-
tax profit from the transaction exceeds
a risk-free rate of return.
``(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).
``(2) Special rules for transaction with tax-indifferent
parties.--
``(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.
``(B) Artificial income shifting and basis
adjustments.--The form of a transaction with a tax-
indifferent party shall not be respected if--
``(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, or
``(ii) it results in a basis adjustment or
shifting of basis on account of overstating the
income or gain of the tax-indifferent party.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(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.
``(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.
``(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.
``(D) Treatment of lessors.--In applying paragraph
(1)(B)(ii) to the lessor of tangible property subject
to a lease--
``(i) the expected net tax benefits with
respect to the leased property shall not
include the benefits of--
``(I) depreciation,
``(II) any tax credit, or
``(III) any other deduction as
provided in guidance by the Secretary,
and
``(ii) subclause (II) of paragraph
(1)(B)(ii) shall be disregarded in determining
whether any of such benefits are allowable.
``(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.
``(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.''.
(b) Effective Date.--The amendments made by this section shall
apply to transactions entered into after the date of the enactment of
this Act.
SEC. 202. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS
LACKING ECONOMIC SUBSTANCE, ETC.
(a) In General.--Subchapter A of chapter 68 of the Internal Revenue
Code of 1986 is amended by inserting after section 6662A the following
new section:
``SEC. 6662A. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS
LACKING ECONOMIC SUBSTANCE, ETC.
``(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.
``(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.
``(c) Noneconomic Substance Transaction Understatement.--For
purposes of this section--
``(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.
``(2) Noneconomic substance transaction.--The term
`noneconomic substance transaction' means any transaction if--
``(A) there is a lack of economic substance (within
the meaning of section 7701(o)(1)) for the transaction
giving rise to the claimed benefit or the transaction
was not respected under section 7701(o)(2), or
``(B) the transaction fails to meet the
requirements of any similar rule of law.
``(d) Rules Applicable to Compromise of Penalty.--
``(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.
``(2) Applicable rules.--The rules of paragraphs (2) and
(3) of section 6707A(d) shall apply for purposes of paragraph
(1).
``(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.
``(f) Cross References.--
``(1) For coordination of penalty with understatements
under section 6662 and other special rules, see section
6662A(e).
``(2) For reporting of penalty imposed under this section
to the Securities and Exchange Commission, see section
6707A(e).''.
(b) Coordination With Other Understatements and Penalties.--
(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.
(2) Subsection (e) of section 6662A of the Internal Revenue
Code of 1986 is amended--
(A) in paragraph (1), by inserting ``and
noneconomic substance transaction understatements''
after ``reportable transaction understatements'' both
places it appears,
(B) in paragraph (2)(A), by inserting ``and a
noneconomic substance transaction understatement''
after ``reportable transaction understatement'',
(C) in paragraph (2)(B), by inserting ``6662B or''
before ``6663'',
(D) in paragraph (2)(C)(i), by inserting ``or
section 6662B'' before the period at the end,
(E) in paragraph (2)(C)(ii), by inserting ``and
section 6662B'' after ``This section'',
(F) in paragraph (3), by inserting ``or noneconomic
substance transaction understatement'' after
``reportable transaction understatement'', and
(G) by adding at the end the following new
paragraph:
``(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).''.
(3) Subsection (e) of section 6707A of the Internal Revenue
Code of 1986 is amended--
(A) by striking ``or'' at the end of subparagraph
(B), and
(B) by striking subparagraph (C) and inserting the
following new subparagraphs:
``(C) is required to pay a penalty under section
6662B with respect to any noneconomic substance
transaction, or
``(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,''.
(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 new item:
``Sec. 6662B. Penalty for understatements attributable to
transactions lacking economic substance,
etc.''.
(d) Effective Date.--The amendments made by this section shall
apply to transactions entered into after the date of the enactment of
this Act.
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--
(1) by striking ``attributable'' and all that follows and
inserting the following: ``attributable to--
``(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, or
``(2) any noneconomic substance transaction understatement
(as defined in section 6662B(c)).''; and
(2) by inserting ``and noneconomic substance transactions''
after ``transactions''.
(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.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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