[House Report 114-147]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 114-147
======================================================================
PROTECT MEDICAL INNOVATION ACT OF 2015
_______
June 11, 2015.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Ryan of Wisconsin, from the Committee on Ways and Means, submitted
the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 160]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 160) to amend the Internal Revenue Code of 1986 to
repeal the excise tax on medical devices, having considered the
same, report favorably thereon with an amendment and recommend
that the bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...........................................2
A. Purpose and Summary................................. 2
B. Background and Need for Legislation................. 2
C. Legislative History................................. 2
II. EXPLANATION OF THE BILL..........................................3
A. Repeal of Medical Device Excise Tax (sec. 2 of the
bill, sec. 4191 of the Code)....................... 3
III. VOTES OF THE COMMITTEE...........................................5
IV. BUDGET EFFECTS OF THE BILL.......................................5
A. Committee Estimate of Budgetary Effects............. 5
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 6
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 6
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......7
A. Committee Oversight Findings and Recommendations.... 7
B. Statement of General Performance Goals and
Objectives......................................... 7
C. Information Relating to Unfunded Mandates........... 7
D. Applicability of House Rule XXI 5(b)................ 7
E. Tax Complexity Analysis............................. 8
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 8
G. Duplication of Federal Programs..................... 8
H. Disclosure of Directed Rule Makings................. 8
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............8
A. Text of Existing Law Amended or Repealed by the
Bill, as Reported.................................. 8
B. Changes in Existing Law Proposed by the Bill, as
Reported........................................... 17
VII. MINORITY VIEWS..................................................27
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Protect Medical Innovation Act of
2015''.
SEC. 2. REPEAL OF MEDICAL DEVICE EXCISE TAX.
(a) In General.--Chapter 32 of the Internal Revenue Code of 1986 is
amended by striking subchapter E.
(b) Conforming Amendments.--
(1) Subsection (a) of section 4221 of such Code is amended by
striking the last sentence.
(2) Paragraph (2) of section 6416(b) of such Code is amended
by striking the last sentence.
(c) Clerical Amendment.--The table of subchapters for chapter 32 of
such Code is amended by striking the item relating to subchapter E.
(d) Effective Date.--The amendments made by this section shall apply
to sales in calendar quarters beginning after the date of the enactment
of this Act.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 160, as reported by the Committee on Ways
and Means, repeals the 2.3-percent excise tax on medical device
sales for calendar quarters beginning after the date of
enactment.
B. Background and Need for Legislation
While the Committee continues actively to pursue
comprehensive tax reform as a critical means of promoting
economic growth and job creation, the Committee also believes
it is important to provide immediate relief from taxes that
stifle innovation in order to encourage economic growth and job
creation. The Committee believes that repealing the medical
device excise tax will decrease health care costs, encourage
medical innovation, and eliminate an unfair tax burden.
C. Legislative History
Background
H.R. 160 was introduced on January 6, 2015, and was
referred to the Committee on Ways and Means.
Committee action
The Committee on Ways and Means marked up H.R. 160, the
``Protect Medical Innovation Act of 2015'' on June 2, 2015, and
ordered the bill, as amended, favorably reported (with a quorum
being present).
Committee hearings
The harmful effects and need for repeal of the medical
device excise tax was discussed at three hearings during the
112th, 113th, and 114th Congresses:
Full Committee Hearing on the Tax
Ramifications of the Supreme Court's Ruling on the
Democrats' Health Care Law (July 10, 2012);
Oversight Subcommittee Hearing on the Tax-
Related Provisions in the President's Health Care Law
(March 5, 2013); and
Full Committee Hearing on Moving America
Forward: With a Focus on Economic Growth (January 15,
2015).
II. EXPLANATION OF THE BILL
A. Repeal of Medical Device Excise Tax (sec. 2 of the bill, sec. 4191
of the Code)
PRESENT LAW
Effective for sales after December 31, 2012, a tax equal to
2.3 percent of the sale price is imposed on the sale of any
taxable medical device by the manufacturer, producer, or
importer of such device.\1\ A taxable medical device is any
device, as defined in section 201(h) of the Federal Food, Drug,
and Cosmetic Act,\2\ intended for humans. Regulations further
define a medical device as one that is listed by the Food and
Drug Administration (``FDA'') under section 510(j) of the
Federal Food, Drug, and Cosmetic Act and 21 CFR Part 807,
pursuant to FDA requirements.\3\
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\1\Sec. 4191.
\2\21 U.S.C. sec. 321. Section 201(h) defines device as ``an
instrument, apparatus, implement, machine, contrivance, implant, in
vitro reagent, or other similar or related article, including any
component, part, or accessory, which is (1) recognized in the official
National Formulary, or the United States Pharmacopeia, or any
supplement to them, (2) intended for use in the diagnosis of disease or
other conditions, or in the cure, mitigation, treatment, or prevention
of disease, in man or other animals, or (3) intended to affect the
structure or any function of the body of man or other animals, and
which does not achieve its primary intended purposes through chemical
action within or on the body of man or other animals and which is not
dependent upon being metabolized for the achievement of its primary
intended purposes.''
\3\Treas. Reg. sec. 48.4191-2(a). The regulations also include as
devices items that should have been listed as a device with the FDA as
of the date the FDA notifies the manufacturer or importer that
corrective action with respect to listing is required.
---------------------------------------------------------------------------
The excise tax does not apply to eyeglasses, contact
lenses, hearing aids, or any other medical device determined by
the Secretary to be of a type that is generally purchased by
the general public at retail for individual use (``retail
exemption''). Regulations provide guidance on the types of
devices that are exempt under the retail exemption. A device is
exempt under these provisions if: (1) it is regularly available
for purchase and use by individual consumers who are not
medical professionals; and (2) the design of the device
demonstrates that it is not primarily intended for use in a
medical institution or office or by a medical professional.\4\
Additionally, the regulations provide certain safe harbors for
devices eligible for the retail exemption.\5\
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\4\Treas. Reg. sec. 48.4191-2(b)(2).
\5\Treas. Reg. sec. 48.4191-2(b)(2)(iii). The safe harbors include
devices that are described as over-the-counter devices in relevant FDA
classification headings, as well as certain FDA device classifications
listed in the regulations.
---------------------------------------------------------------------------
The medical device excise tax is generally subject to the
rules applicable to other manufacturers excise taxes. These
rules include certain general manufacturers excise tax
exemptions including the exemption for sales for use by the
purchaser for further manufacture (or for resale to a second
purchaser in further manufacture) or for export (or for resale
to a second purchaser for export).\6\ If a medical device is
sold free of tax for resale to a second purchaser for further
manufacture or for export, the exemption does not apply unless,
within the six-month period beginning on the date of sale by
the manufacturer, the manufacturer receives proof that the
medical device has been exported or resold for use in further
manufacturing.\7\ In general, the exemption does not apply
unless the manufacturer, the first purchaser, and the second
purchaser are registered with the Secretary of the Treasury.
Foreign purchasers of articles sold or resold for export are
exempt from the registration requirement.
---------------------------------------------------------------------------
\6\Sec. 4221(a). Other general manufacturers excise tax exemptions
(i.e., the exemption for sales to purchasers for use as supplies for
vessels or aircraft, to a State or local government, to a nonprofit
educational organization, or to a qualified blood collector
organization) do not apply to the medical device excise tax.
\7\Sec. 4221(b).
---------------------------------------------------------------------------
The lease of a medical device is generally considered to be
a sale of such device.\8\ Special rules apply for the
imposition of tax to each lease payment. The use of a medical
device subject to tax by manufacturers, producers, or importers
of such device is treated as a sale for the purpose of
imposition of excise taxes.\9\
---------------------------------------------------------------------------
\8\Sec. 4217(a).
\9\Sec. 4218.
---------------------------------------------------------------------------
There are also rules for determining the price of a medical
device on which the excise tax is imposed.\10\ These rules
provide for (1) the inclusion of containers, packaging, and
certain transportation charges in the price, (2) determining a
constructive sales price if a medical device is sold for less
than the fair market price, and (3) determining the tax due in
the case of partial payments or installment sales.
---------------------------------------------------------------------------
\10\Sec. 4216.
---------------------------------------------------------------------------
REASONS FOR CHANGE
The U.S. medical device industry is a leader in medical
technology innovation. The industry is an important contributor
to the nation's economy, employing hundreds of thousands of
people and manufacturing devices both for the U.S. and foreign
markets. The United States is a net exporter of medical
devices. The Committee believes that the excise tax on medical
devices adversely affects the industry. The Committee believes
that repealing the tax will decrease the cost of healthcare,
encourage medical innovation, and lead to more jobs in the
industry.
EXPLANATION OF PROVISION
The provision repeals the medical device excise tax.
EFFECTIVE DATE
The provision applies to sales in calendar quarters
beginning after the date of enactment of this Act.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H.R. 160, the ``Protect Medical Innovation Act
of 2015,'' on June 2, 2015.
The Chairman's amendment in the nature of a substitute was
adopted by a voice vote (with a quorum being present).
The bill, H.R. 160, as amended, was ordered favorably
reported to the House of Representatives by a roll call vote of
25 yeas to 14 nays (with a quorum being present). The vote was
as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Ryan....................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Rangel....... ........ X .........
Mr. Brady...................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. Nunes...................... X ........ ......... Mr. Lewis........ ........ X .........
Mr. Tiberi..................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Reichert................... X ........ ......... Mr. Becerra...... ........ X .........
Mr. Boustany................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Roskam..................... X ........ ......... Mr. Thompson..... ........ X .........
Mr. Price...................... X ........ ......... Mr. Larson....... ........ X .........
Mr. Buchanan................... X ........ ......... Mr. Blumenauer... ........ X .........
Mr. Smith (NE)................. X ........ ......... Mr. Kind......... X ........ .........
Ms. Jenkins.................... X ........ ......... Mr. Pascrell..... ........ X .........
Mr. Paulsen.................... X ........ ......... Mr. Crowley...... ........ X .........
Mr. Marchant................... X ........ ......... Mr. Davis........ ........ X .........
Ms. Black...................... X ........ ......... Ms. Sanchez...... ........ X .........
Mr. Reed....................... X ........ .........
Mr. Young...................... X ........ .........
Mr. Kelly...................... X ........ .........
Mr. Renacci.................... X ........ .........
Mr. Meehan..................... X ........ .........
Ms. Noem....................... X ........ .........
Mr. Holding.................... X ........ .........
Mr. Smith (MO)................. X ........ .........
Mr. Dold....................... X ........ .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 160, as
reported.
The bill, as reported, is estimated to have the following
effect on Federal budget receipts for fiscal years 2016-2025:
FISCAL YEARS
[Billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016-20 2016-25
--------------------------------------------------------------------------------------------------------------------------------------------------------
-1.8 -2.0 -2.1 -2.2 -2.3 -2.5 -2.6 -2.8 -2.9 -3.1 -10.4 -24.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.
Pursuant to clause 8 of rule XIII of the Rules of the House
of Representatives, the following statement is made by the
Joint Committee on Taxation with respect to the provisions of
the bill amending the Internal Revenue Code of 1986: The gross
budgetary effect (before incorporating macroeconomic effects)
in any fiscal year is less than 0.25 percent of the current
projected gross domestic product of the United States for that
fiscal year; therefore, the bill is not ``major legislation''
for purposes of requiring that the estimate include the
budgetary effects of changes in economic output, employment,
capital stock and other macroeconomic variables.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee further states that there are no new or increased tax
expenditures.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 4, 2015.
Hon. Paul Ryan,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 160, the Protect
Medical Innovation Act of 2015.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Logan
Timmerhoff.
Sincerely,
Keith Hall, Director.
Enclosure.
H.R. 160--Protect Medical Innovation Act of 2015
H.R. 160 would amend the Internal Revenue Code to repeal
the medical device excise tax. Under current law, a tax of 2.3
percent is imposed on the sale of medical devices by the
manufacturer or importer. Medical devices that are regularly
available at retail for individual use and not primarily
intended for use by a medical professional are exempt from the
tax. The tax went into effect on January 1, 2013, and its
repeal by H.R. 160 would be effective starting in the first
calendar quarter after the date of enactment.
The staff of the Joint Committee on Taxation (JCT)
estimates that enacting H.R. 160 would reduce revenues, thus
increasing federal deficits, by about $24.4 billion over the
2015-2025 period. The estimate assumes enactment in the last
quarter of fiscal year 2015.
The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting
direct spending and revenues. Enacting H.R. 160 would result in
revenue losses in each year beginning in 2016. The estimated
increases in the deficit are shown in the following table.
JCT has determined that the bill contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Logan
Timmerhoff. The estimate was approved by David Weiner,
Assistant Director for Tax Analysis.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 160, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON JUNE 2, 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
------------------------------------------------------------------------------------------------------------
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2015-2020 2015-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN THE DEFICIT
Statutory Pay-As-You-Go Impact............. 0 1,834 1,958 2,085 2,216 2,349 2,488 2,630 2,778 2,934 3,097 10,441 24,368
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Note: Components do not sum to totals because of rounding.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee advises that it was as a result of the
Committee's review of the provisions of H.R. 160 that the
Committee concluded that it is appropriate to report the bill,
as amended, favorably to the House of Representatives with the
recommendation that the bill do pass.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Applicability of House Rule XXI 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill, and states that the bill does not
involve any Federal income tax rate increases within the
meaning of the rule.
E. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service
Restructuring and Reform Act of 1998 requires the staff of the
Joint Committee on Taxation (in consultation with the Internal
Revenue Service and the Treasury Department) to provide a tax
complexity analysis. The complexity analysis is required for
all legislation reported by the Senate Committee on Finance,
the House Committee on Ways and Means, or any committee of
conference if the legislation includes a provision that
directly or indirectly amends the Internal Revenue Code and has
widespread applicability to individuals or small businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Internal Revenue
Code and that have ``widespread applicability'' to individuals
or small businesses, within the meaning of the rule.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
G. Duplication of Federal Programs
In compliance with Sec. 3(g)(2) of H. Res. 5 (114th
Congress), the Committee states that no provision of the bill
establishes or reauthorizes: (1) a program of the Federal
Government known to be duplicative of another Federal program,
(2) a program included in any report from the Government
Accountability Office to Congress pursuant to section 21 of
Public Law 111-139, or (3) a program related to a program
identified in the most recent Catalog of Federal Domestic
Assistance, published pursuant to the Federal Program
Information Act (Public Law 95-220, as amended by Public Law
98-169).
H. Disclosure of Directed Rule Makings
In compliance with Sec. 3(i) of H. Res. 5 (114th Congress),
the following statement is made concerning directed rule
makings: The Committee estimates that the bill requires no
directed rule makings within the meaning of such section.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
A. Text of Existing Law Amended or Repealed by the Bill, as Reported
In compliance with clause 3(e)(1)(A) of rule XIII of the
Rules of the House of Representatives, the text of each section
proposed to be amended or repealed by the bill, as reported, is
shown below:
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle D--Miscellaneous Excise Taxes
* * * * * * *
CHAPTER 32--MANUFACTURERS EXCISE TAXES
* * * * * * *
subchapter e. medical devices
* * * * * * *
Subchapter E--Medical Devices
Sec. 4191. Medical devices.
SEC. 4191. MEDICAL DEVICES.
(a) In General.--There is hereby imposed on the sale of any
taxable medical device by the manufacturer, producer, or
importer a tax equal to 2.3 percent of the price for which so
sold.
(b) Taxable Medical Device.--For purposes of this section--
(1) In general.--The term ``taxable medical device''
means any device (as defined in section 201(h) of the
Federal Food, Drug, and Cosmetic Act) intended for
humans.
(2) Exemptions.--Such term shall not include--
(A) eyeglasses,
(B) contact lenses,
(C) hearing aids, and
(D) any other medical device determined by
the Secretary to be of a type which is
generally purchased by the general public at
retail for individual use.
* * * * * * *
Subchapter G--Exemptions, Registration, Etc
SEC. 4221. CERTAIN TAX-FREE SALES.
(a) General Rule.--Under regulations prescribed by the
Secretary, no tax shall be imposed under this chapter (other
than under section 4121 or 4081) on the sale by the
manufacturer (or under subchapter C of chapter 31 on the first
retail sale) of an article--
(1) for use by the purchaser for further manufacture,
or for resale by the purchaser to a second purchaser
for use by such second purchaser in further
manufacture,
(2) for export, or for resale by the purchaser to a
second purchaser for export,
(3) for use by the purchaser as supplies for vessels
or aircraft,
(4) to a State or local government for the exclusive
use of a State or local government,
(5) to a nonprofit educational organization for its
exclusive use, or
(6) to a qualified blood collector organization (as
defined in section 7701(a)(49)) for such organization's
exclusive use in the collection, storage, or
transportation of blood,
but only if such exportation or use is to occur before any
other use. Paragraphs (4), (5), and (6) shall not apply to the
tax imposed by section 4064. In the case of taxes imposed by
section 4051, or 4071, paragraphs (4) and (5) shall not apply
on and after October 1, 2016. In the case of the tax imposed by
section 4131, paragraphs (3), (4), and (5) shall not apply and
paragraph (2) shall apply only if the use of the exported
vaccine meets such requirements as the Secretary may by
regulations prescribe. In the case of taxes imposed by
subchapter C or D, paragraph (6) shall not apply. In the case
of the tax imposed by section 4191, paragraphs (3), (4), (5),
and (6) shall not apply.
(b) Proof of Resale for Further Manufacture; Proof of
Export.--Where an article has been sold free of tax under
subsection (a)--
(1) for resale by the purchaser to a second purchaser
for use by such second purchaser in further
manufacture, or
(2) for export, or for resale by the purchaser to a
second purchaser for export,
subsection (a) shall cease to apply in respect of such sale of
such article unless, within the 6-month period which begins on
the date of the sale by the manufacturer (or, if earlier, on
the date of shipment by the manufacturer), the manufacturer
receives proof that the article has been exported or resold for
use in further manufacture.
(c) Manufacturer Relieved from Liability in Certain Cases.--
In the case of any article sold free of tax under this section
(other than a sale to which subsection (b) applies), and in the
case of any article sold free of tax under section 4053(6), if
the manufacturer in good faith accepts a certification by the
purchaser that the article will be used in accordance with the
applicable provisions of law, no tax shall thereafter be
imposed under this chapter in respect of such sale by such
manufacturer.
(d) Definitions.--For purposes of this section--
(1) Manufacturer.--The term ``manufacturer'' includes
a producer or importer of an article, and, in the case
of taxes imposed by subchapter C of chapter 31,
includes the retailer with respect to the first retail
sale.
(2) Export.--The term ``export'' includes shipment to
a possession of the United States; and the term
``exported'' includes shipped to a possession of the
United States.
(3) Supplies for vessels or aircraft.--The term
``supplies for vessels or aircraft'' means fuel
supplies, ships' stores, sea stores, or legitimate
equipment on vessels of war of the United States or of
any foreign nation, vessels employed in the fisheries
or in the whaling business, or vessels actually engaged
in foreign trade or trade between the Atlantic and
Pacific ports of the United States or between the
United States and any of its possessions. For purposes
of the preceding sentence, the term ``vessels''
includes civil aircraft employed in foreign trade or
trade between the United States and any of its
possessions, and the term ``vessels of war of the
United States or of any foreign nation'' includes
aircraft owned by the United States or by any foreign
nation and constituting a part of the armed forces
thereof.
(4) State or local government.--The term ``State or
local government'' means any State, any political
subdivision thereof, or the District of Columbia.
(5) Nonprofit educational organization.--The term
``nonprofit educational organization'' means an
educational organization described in section
170(b)(1)(A)(ii) which is exempt from income tax under
section 501(a). The term also includes a school
operated as an activity of an organization described in
section 501(c)(3) which is exempt from income tax under
section 501(a), if such school normally maintains a
regular faculty and curriculum and normally has a
regularly enrolled body of pupils or students in
attendance at the place where its educational
activities are regularly carried on.
(6) Use in further manufacture.--An article shall be
treated as sold for use in further manufacture if--
(A) such article is sold for use by the
purchaser as material in the manufacture or
production of, or as a component part of,
another article taxable under this chapter to
be manufactured or produced by him; or
(B) in the case of gasoline taxable under
section 4081, such gasoline is sold for use by
the purchaser, for nonfuel purposes, as a
material in the manufacture or production of
another article to be manufactured or produced
by him.
(7) Qualified bus.--
(A) In general.--The term ``qualified bus''
means--
(i) an intercity or local bus, and
(ii) a school bus.
(B) Intercity or local bus.--The term
``intercity or local bus'' means any automobile
bus which is used predominantly in furnishing
(for compensation) passenger land
transportation available to the general public
if--
(i) such transportation is scheduled
and along regular routes, or
(ii) the seating capacity of such bus
is at least 20 adults (not including
the driver).
(C) School bus.--The term ``school bus''
means any automobile bus substantially all the
use of which is in transporting students and
employees of schools. For purposes of the
preceding sentence, the term ``school'' means
an educational organization which normally
maintains a regular faculty and curriculum and
normally has a regularly enrolled body of
pupils or students in attendance at the place
where its educational activities are carried
on.
(e) Special Rules.--
(1) Reciprocity required in case of civil aircraft.--
In the case of articles sold for use as supplies for
aircraft, the privileges granted under subsection
(a)(3) in respect of civil aircraft employed in foreign
trade or trade between the United States and any of its
possessions, in respect of aircraft registered in a
foreign country, shall be allowed only if the Secretary
of the Treasury has been advised by the Secretary of
Commerce that he has found that such foreign country
allows, or will allow, substantially reciprocal
privileges in respect of aircraft registered in the
United States. If the Secretary of the Treasury is
advised by the Secretary of Commerce that he has found
that a foreign country has discontinued or will
discontinue the allowance of such privileges, the
privileges granted under subsection (a)(3) shall not
apply thereafter in respect of civil aircraft
registered in that foreign country and employed in
foreign trade or trade between the United States and
any of its possessions.
(2) Tires.--
(A) Tax-free sales.--Under regulations
prescribed by the Secretary, no tax shall be
imposed under section 4071 on the sale by the
manufacturer of a tire if--
(i) such tire is sold for use by the
purchaser for sale on or in connection
with the sale of another article
manufactured or produced by such
purchaser; and
(ii) such other article is to be sold
by such purchaser in a sale which
either will satisfy the requirements of
paragraph (2), (3), (4), or (5) of
subsection (a) for a tax-free sale, or
would satisfy such requirements but for
the fact that such other article is not
subject to tax under this chapter.
(B) Proof.--Where a tire has been sold free
of tax under this paragraph, this paragraph
shall cease to apply unless, within the 6-moth
period which begins on the date of the sale by
him (or, if earlier on the date of the shipment
by him), the manufacturer of such tire receives
proof that the other article referred to in
clause (ii) of subparagraph (A) has been sold
in a manner which satisfies the requirements of
such clause (ii) (including in the case of a
sale for export, proof of export of such other
article).
(C) Subsection (a)(1) does not apply.--
Paragraph (1) of subsection (a) shall not apply
with respect to the tax imposed under section
4071 on the sale of a tire.
(3) Tires used on intercity, local, and school
buses.--Under regulations prescribed by the Secretary,
the tax imposed by section 4071 shall not apply in the
case of tires sold for use by the purchaser on or in
connection with a qualified bus.
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 65--ABATEMENTS, CREDITS, AND REFUNDS
* * * * * * *
Subchapter B--Rules of Special Application
* * * * * * *
SEC. 6416. CERTAIN TAXES ON SALES AND SERVICES.
(a) Condition to Allowance.--
(1) General rule.--No credit or refund of any
overpayment of tax imposed by chapter 31 (relating to
retail excise taxes), or chapter 32 (manufacturers
taxes), shall be allowed or made unless the person who
paid the tax establishes, under regulations prescribed
by the Secretary, that he--
(A) has not included the tax in the price of
the article with respect to which it was
imposed and has not collected the amount of the
tax from the person who purchased such article;
(B) has repaid the amount of the tax to the
ultimate purchaser of the article;
(C) in the case of an overpayment under
subsection (b)(2) of this section--
(i) has repaid or agreed to repay the
amount of the tax to the ultimate
vendor of the article, or
(ii) has obtained the written consent
of such ultimate vendor to the
allowance of the credit or the making
of the refund; or
(D) has filed with the Secretary the written
consent of the person referred to in
subparagraph (B) to the allowance of the credit
or the making of the refund.
(2) Exceptions.--This subsection shall not apply to--
(A) the tax imposed by section 4041 (relating
to tax on special fuels) on the use of any
liquid, and
(B) an overpayment of tax under paragraph
(1), (3)(A), (4), (5), or (6) of subsection (b)
of this section.
(3) Special rule.--For purposes of this subsection,
in any case in which the Secretary determines that an
article is not taxable, the term ``ultimate purchaser''
(when used in paragraph (1)(B) of this subsection)
includes a wholesaler, jobber, distributor, or retailer
who, on the 15th day after the date of such
determination, holds such article for sale; but only if
claim for credit or refund by reason of this paragraph
is filed on or before the date for filing the return
with respect to the taxes imposed under chapter 32 for
the first period which begins more than 60 days after
the date on such determination.
(4) Registered ultimate vendor or credit card issuer
to administer credits and refunds of gasoline tax.--
(A) In general.--For purposes of this
subsection, except as provided in subparagraph
(B), if an ultimate vendor purchases any
gasoline on which tax imposed by section 4081
has been paid and sells such gasoline to an
ultimate purchaser described in subparagraph
(C) or (D) of subsection (b)(2) (and such
gasoline is for a use described in such
subparagraph), such ultimate vendor shall be
treated as the person (and the only person) who
paid such tax, but only if such ultimate vendor
is registered under section 4101.
(B) Credit card issuer.--For purposes of this
subsection, if the purchase of gasoline
described in subparagraph (A) (determined
without regard to the registration status of
the ultimate vendor) is made by means of a
credit card issued to the ultimate purchaser,
paragraph (1) shall not apply and the person
extending the credit to the ultimate purchaser
shall be treated as the person (and the only
person) who paid the tax, but only if such
person--
(i) is registered under section 4101,
(ii) has established, under
regulations prescribed by the
Secretary, that such person--
(I) has not collected the
amount of the tax from the
person who purchased such
article, or
(II) has obtained the written
consent from the ultimate
purchaser to the allowance of
the credit or refund, and
(iii) has so established that such
person--
(I) has repaid or agreed to
repay the amount of the tax to
the ultimate vendor,
(II) has obtained the written
consent of the ultimate vendor
to the allowance of the credit
or refund, or
(III) has otherwise made
arrangements which directly or
indirectly provides the
ultimate vendor with
reimbursement of such tax.
If clause (i), (ii), or (iii) is not met by
such person extending the credit to the
ultimate purchaser, then such person shall
collect an amount equal to the tax from the
ultimate purchaser and only such ultimate
purchaser may claim such credit or payment.
(C) Timing of claims.--The procedure and
timing of any claim under subparagraph (A) or
(B) shall be the same as for claims under
section 6427(i)(4), except that the rules of
section 6427(i)(3)(B) regarding electronic
claims shall not apply unless the ultimate
vendor or credit card issuer has certified to
the Secretary for the most recent quarter of
the taxable year that all ultimate purchasers
of the vendor or credit card issuer are
certified and entitled to a refund under
subparagraph (C) or (D) of subsection (b)(2).
(b) Special Cases in Which Tax Payments Considered
Overpayments.--Under regulations prescribed by the Secretary,
credit or refund (without interest) shall be allowed or made in
respect of the overpayments determined under the following
paragraphs:
(1) Price readjustments.--
(A) In general.--Except as provided in
subparagraph (B) or (C), if the price of any
article in respect of which a tax, based on
such price, is imposed by chapter 31 or 32, is
readjusted by reason of the return or
repossession of the article or a covering or
container, or by a bona fide discount, rebate,
or allowance, including a readjustment for
local advertising (but only to the extent
provided in section 4216(e)(2) and (3)), the
part of the tax proportionate to the part of
the price repaid or credited to the purchaser
shall be deemed to be an overpayment.
(B) Further manufacture.--Subparagraph (A)
shall not apply in the case of an article in
respect of which tax was computed under section
4223(b)(2); but if the price for which such
article was sold is readjusted by reason of the
return or repossession of the article, the part
of the tax proportionate to the part of such
price repaid or credited to the purchaser shall
be deemed to be an overpayment.
(C) Adjustment of tire price.--No credit or
refund of any tax imposed by subsection (a) or
(b) of section 4071 shall be allowed or made by
reason of an adjustment of a tire pursuant to a
warranty or guarantee.
(2) Specified uses and resales.--The tax paid under
chapter 32 (or under subsection (a) or (d) of section
4041 in respect of sales or under section 4051) in
respect of any article shall be deemed to be an
overpayment if such article was, by any person--
(A) exported;
(B) used or sold for use as supplies for
vessels or aircraft;
(C) sold to a State or local government for
the exclusive use of a State or local
government;
(D) sold to a nonprofit educational
organization for its exclusive use;
(E) sold to a qualified blood collector
organization (as defined in section
7701(a)(49)) for such organization's exclusive
use in the collection, storage, or
transportation of blood;
(F) in the case of any tire taxable under
section 4071(a), sold to any person for use as
described in section 4221(e)(3); or
(G) in the case of gasoline, used or sold for
use in the production of special fuels referred
to in section 4041.
Subparagraphs (C), (D), and (E) shall not apply in the
case of any tax paid under section 4064. In the case of
the tax imposed by section 4131, subparagraphs (B),
(C), (D), and (E) shall not apply and subparagraph (A)
shall apply only if the use of the exported vaccine
meets such requirements as the Secretary may by
regulations prescribe. This paragraph shall not apply
in the case of any tax imposed under section 4041(a)(1)
or 4081 on diesel fuel or kerosene and any tax paid
under section 4121. Subparagraphs (C) and (D) shall not
apply in the case of any tax imposed on gasoline under
section 4081 if the requirements of subsection (a)(4)
are not met. In the case of taxes imposed by subchapter
C or D of chapter 32, subparagraph (E) shall not apply.
In the case of the tax imposed by section 4191,
subparagraphs (B), (C), (D), and (E) shall not apply.
(3) Tax-paid articles used for further manufacture,
etc..--If the tax imposed by chapter 32 has been paid
with respect to the sale of any article (other than
coal taxable under section 4121) by the manufacturer,
producer, or importer thereof and such article is sold
to a subsequent manufacturer or producer before being
used, such tax shall be deemed to be an overpayment by
such subsequent manufacturer or producer if--
(A) in the case of any article other than any
fuel taxable under section 4081, such article
is used by the subsequent manufacturer or
producer as material in the manufacture or
production of, or as a component part of--
(i) another article taxable under
chapter 32, or
(ii) an automobile bus chassis or an
automobile bus body, manufactured or
produced by him; or
(B) in the case of any fuel taxable under
section 4081, such fuel is used by the
subsequent manufacturer or producer, for
nonfuel purposes, as a material in the
manufacture or production of any other article
manufactured or produced by him.
(4) Tires.--If--
(A) the tax imposed by section 4071 has been
paid with respect to the sale of any tire by
the manufacturer, producer, or importer
thereof, and
(B) such tire is sold by any person on or in
connection with, or with the sale of, any other
article, such tax shall be deemed to be an
overpayment by such person if such other
article is--
(i) an automobile bus chassis or an
automobile bus body,
(ii) by such person exported, sold to
a State or local government for the
exclusive use of a State or local
government, sold to a nonprofit
educational organization for its
exclusive use, or used or sold for use
as supplies for vessels or aircraft, or
(iii) sold to a qualified blood
collector organization for its
exclusive use in connection with a
vehicle the organization certifies will
be primarily used in the collection,
storage, or transportation of blood.
(5) Return of certain installment accounts.--If--
(A) tax was paid under section 4216(d)(1) in
respect of any installment account,
(B) such account is, under the agreement
under which the account was sold, returned to
the person who sold such account, and
(C) the consideration is readjusted as
provided in such agreement,
the part of the tax paid under section 4216(d)(1)
allocable to the part of the consideration repaid or
credited to the purchaser of such account shall be
deemed to be an overpayment.
(6) Truck chassis, bodies, and semitrailers used for
further manufacture.--If--
(A) the tax imposed by section 4051 has been
paid with respect to the sale of any article,
and
(B) before any other use, such article is by
any person used as a component part of another
article taxable under section 4051 manufactured
or produced by him,
such tax shall be deemed to be an overpayment by such
person. For purposes of the preceding sentence, an
article shall be treated as having been used as a
component part of another article if, had it not been
broken or rendered useless in the manufacture or
production of such other article, it would have been so
used.
This subsection shall apply in respect of an article
only if the exportation or use referred to in the
applicable provision of this subsection occurs before
any other use, or, in the case of a sale or resale, the
use referred to in the applicable provision of this
subsection is to occur before any other use.
(c) Refund to Exporter or Shipper.--Under regulations
prescribed by the Secretary the amount of any tax imposed by
chapter 31, or chapter 32 erroneously or illegally collected in
respect of any article exported to a foreign country or shipped
to a possession of the United States may be refunded to the
exporter or shipper thereof, if the person who paid such tax
waives his claim to such amount.
(d) Credit on Returns.--Any person entitled to a refund of
tax imposed by chapter 31 or 32, paid to the Secretary may,
instead of filing a claim for refund, take credit therefor
against taxes imposed by such chapter due on any subsequent
return. The preceding sentence shall not apply to the tax
imposed by section 4081 in the case of refunds described in
section 4081(e).
(e) Accounting Procedures for Like Articles.--Under
regulations prescribed by the Secretary, if any person uses or
resells like articles, then for purposes of this section the
manufacturer, producer, or importer of any such article may be
identified, and the amount of tax paid under chapter 32 in
respect of such article may be determined--
(1) on a first-in-first-out basis,
(2) on a last-in-first-out basis, or
(3) in accordance with any other consistent method
approved by the Secretary.
(f) Meaning of Terms.--For purposes of this section, any term
used in this section has the same meaning as when used in
chapter 31, 32, or 33, as the case may be.
* * * * * * *
B. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e)(1)(B) of rule XIII of the
Rules of the House of Representatives, changes in existing law
made by the bill, as reported, are shown as follows (existing
law proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle D--Miscellaneous Excise Taxes
* * * * * * *
CHAPTER 32--MANUFACTURERS EXCISE TAXES
* * * * * * *
[subchapter e. medical devices]
* * * * * * *
[Subchapter E--Medical Devices
[SEC. 4191. MEDICAL DEVICES.
[(a) In General.--There is hereby imposed on the sale of any
taxable medical device by the manufacturer, producer, or
importer a tax equal to 2.3 percent of the price for which so
sold.
[(b) Taxable Medical Device.--For purposes of this section--
[(1) In general.--The term ``taxable medical device''
means any device (as defined in section 201(h) of the
Federal Food, Drug, and Cosmetic Act) intended for
humans.
[(2) Exemptions.--Such term shall not include--
[(A) eyeglasses,
[(B) contact lenses,
[(C) hearing aids, and
[(D) any other medical device determined by
the Secretary to be of a type which is
generally purchased by the general public at
retail for individual use.]
* * * * * * *
Subchapter G--Exemptions, Registration, Etc
SEC. 4221. CERTAIN TAX-FREE SALES.
(a) General Rule.--Under regulations prescribed by the
Secretary, no tax shall be imposed under this chapter (other
than under section 4121 or 4081) on the sale by the
manufacturer (or under subchapter C of chapter 31 on the first
retail sale) of an article--
(1) for use by the purchaser for further manufacture,
or for resale by the purchaser to a second purchaser
for use by such second purchaser in further
manufacture,
(2) for export, or for resale by the purchaser to a
second purchaser for export,
(3) for use by the purchaser as supplies for vessels
or aircraft,
(4) to a State or local government for the exclusive
use of a State or local government,
(5) to a nonprofit educational organization for its
exclusive use, or
(6) to a qualified blood collector organization (as
defined in section 7701(a)(49)) for such organization's
exclusive use in the collection, storage, or
transportation of blood,
but only if such exportation or use is to occur before any
other use. Paragraphs (4), (5), and (6) shall not apply to the
tax imposed by section 4064. In the case of taxes imposed by
section 4051, or 4071, paragraphs (4) and (5) shall not apply
on and after October 1, 2016. In the case of the tax imposed by
section 4131, paragraphs (3), (4), and (5) shall not apply and
paragraph (2) shall apply only if the use of the exported
vaccine meets such requirements as the Secretary may by
regulations prescribe. In the case of taxes imposed by
subchapter C or D, paragraph (6) shall not apply. [In the case
of the tax imposed by section 4191, paragraphs (3), (4), (5),
and (6) shall not apply.]
(b) Proof of Resale for Further Manufacture; Proof of
Export.--Where an article has been sold free of tax under
subsection (a)--
(1) for resale by the purchaser to a second purchaser
for use by such second purchaser in further
manufacture, or
(2) for export, or for resale by the purchaser to a
second purchaser for export,
subsection (a) shall cease to apply in respect of such sale of
such article unless, within the 6-month period which begins on
the date of the sale by the manufacturer (or, if earlier, on
the date of shipment by the manufacturer), the manufacturer
receives proof that the article has been exported or resold for
use in further manufacture.
(c) Manufacturer Relieved from Liability in Certain Cases.--
In the case of any article sold free of tax under this section
(other than a sale to which subsection (b) applies), and in the
case of any article sold free of tax under section 4053(6), if
the manufacturer in good faith accepts a certification by the
purchaser that the article will be used in accordance with the
applicable provisions of law, no tax shall thereafter be
imposed under this chapter in respect of such sale by such
manufacturer.
(d) Definitions.--For purposes of this section--
(1) Manufacturer.--The term ``manufacturer'' includes
a producer or importer of an article, and, in the case
of taxes imposed by subchapter C of chapter 31,
includes the retailer with respect to the first retail
sale.
(2) Export.--The term ``export'' includes shipment to
a possession of the United States; and the term
``exported'' includes shipped to a possession of the
United States.
(3) Supplies for vessels or aircraft.--The term
``supplies for vessels or aircraft'' means fuel
supplies, ships' stores, sea stores, or legitimate
equipment on vessels of war of the United States or of
any foreign nation, vessels employed in the fisheries
or in the whaling business, or vessels actually engaged
in foreign trade or trade between the Atlantic and
Pacific ports of the United States or between the
United States and any of its possessions. For purposes
of the preceding sentence, the term ``vessels''
includes civil aircraft employed in foreign trade or
trade between the United States and any of its
possessions, and the term ``vessels of war of the
United States or of any foreign nation'' includes
aircraft owned by the United States or by any foreign
nation and constituting a part of the armed forces
thereof.
(4) State or local government.--The term ``State or
local government'' means any State, any political
subdivision thereof, or the District of Columbia.
(5) Nonprofit educational organization.--The term
``nonprofit educational organization'' means an
educational organization described in section
170(b)(1)(A)(ii) which is exempt from income tax under
section 501(a). The term also includes a school
operated as an activity of an organization described in
section 501(c)(3) which is exempt from income tax under
section 501(a), if such school normally maintains a
regular faculty and curriculum and normally has a
regularly enrolled body of pupils or students in
attendance at the place where its educational
activities are regularly carried on.
(6) Use in further manufacture.--An article shall be
treated as sold for use in further manufacture if--
(A) such article is sold for use by the
purchaser as material in the manufacture or
production of, or as a component part of,
another article taxable under this chapter to
be manufactured or produced by him; or
(B) in the case of gasoline taxable under
section 4081, such gasoline is sold for use by
the purchaser, for nonfuel purposes, as a
material in the manufacture or production of
another article to be manufactured or produced
by him.
(7) Qualified bus.--
(A) In general.--The term ``qualified bus''
means--
(i) an intercity or local bus, and
(ii) a school bus.
(B) Intercity or local bus.--The term
``intercity or local bus'' means any automobile
bus which is used predominantly in furnishing
(for compensation) passenger land
transportation available to the general public
if--
(i) such transportation is scheduled
and along regular routes, or
(ii) the seating capacity of such bus
is at least 20 adults (not including
the driver).
(C) School bus.--The term ``school bus''
means any automobile bus substantially all the
use of which is in transporting students and
employees of schools. For purposes of the
preceding sentence, the term ``school'' means
an educational organization which normally
maintains a regular faculty and curriculum and
normally has a regularly enrolled body of
pupils or students in attendance at the place
where its educational activities are carried
on.
(e) Special Rules.--
(1) Reciprocity required in case of civil aircraft.--
In the case of articles sold for use as supplies for
aircraft, the privileges granted under subsection
(a)(3) in respect of civil aircraft employed in foreign
trade or trade between the United States and any of its
possessions, in respect of aircraft registered in a
foreign country, shall be allowed only if the Secretary
of the Treasury has been advised by the Secretary of
Commerce that he has found that such foreign country
allows, or will allow, substantially reciprocal
privileges in respect of aircraft registered in the
United States. If the Secretary of the Treasury is
advised by the Secretary of Commerce that he has found
that a foreign country has discontinued or will
discontinue the allowance of such privileges, the
privileges granted under subsection (a)(3) shall not
apply thereafter in respect of civil aircraft
registered in that foreign country and employed in
foreign trade or trade between the United States and
any of its possessions.
(2) Tires.--
(A) Tax-free sales.--Under regulations
prescribed by the Secretary, no tax shall be
imposed under section 4071 on the sale by the
manufacturer of a tire if--
(i) such tire is sold for use by the
purchaser for sale on or in connection
with the sale of another article
manufactured or produced by such
purchaser; and
(ii) such other article is to be sold
by such purchaser in a sale which
either will satisfy the requirements of
paragraph (2), (3), (4), or (5) of
subsection (a) for a tax-free sale, or
would satisfy such requirements but for
the fact that such other article is not
subject to tax under this chapter.
(B) Proof.--Where a tire has been sold free
of tax under this paragraph, this paragraph
shall cease to apply unless, within the 6-moth
period which begins on the date of the sale by
him (or, if earlier on the date of the shipment
by him), the manufacturer of such tire receives
proof that the other article referred to in
clause (ii) of subparagraph (A) has been sold
in a manner which satisfies the requirements of
such clause (ii) (including in the case of a
sale for export, proof of export of such other
article).
(C) Subsection (a)(1) does not apply.--
Paragraph (1) of subsection (a) shall not apply
with respect to the tax imposed under section
4071 on the sale of a tire.
(3) Tires used on intercity, local, and school
buses.--Under regulations prescribed by the Secretary,
the tax imposed by section 4071 shall not apply in the
case of tires sold for use by the purchaser on or in
connection with a qualified bus.
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 65--ABATEMENTS, CREDITS, AND REFUNDS
* * * * * * *
Subchapter B--Rules of Special Application
* * * * * * *
SEC. 6416. CERTAIN TAXES ON SALES AND SERVICES.
(a) Condition to Allowance.--
(1) General rule.--No credit or refund of any
overpayment of tax imposed by chapter 31 (relating to
retail excise taxes), or chapter 32 (manufacturers
taxes), shall be allowed or made unless the person who
paid the tax establishes, under regulations prescribed
by the Secretary, that he--
(A) has not included the tax in the price of
the article with respect to which it was
imposed and has not collected the amount of the
tax from the person who purchased such article;
(B) has repaid the amount of the tax to the
ultimate purchaser of the article;
(C) in the case of an overpayment under
subsection (b)(2) of this section--
(i) has repaid or agreed to repay the
amount of the tax to the ultimate
vendor of the article, or
(ii) has obtained the written consent
of such ultimate vendor to the
allowance of the credit or the making
of the refund; or
(D) has filed with the Secretary the written
consent of the person referred to in
subparagraph (B) to the allowance of the credit
or the making of the refund.
(2) Exceptions.--This subsection shall not apply to--
(A) the tax imposed by section 4041 (relating
to tax on special fuels) on the use of any
liquid, and
(B) an overpayment of tax under paragraph
(1), (3)(A), (4), (5), or (6) of subsection (b)
of this section.
(3) Special rule.--For purposes of this subsection,
in any case in which the Secretary determines that an
article is not taxable, the term ``ultimate purchaser''
(when used in paragraph (1)(B) of this subsection)
includes a wholesaler, jobber, distributor, or retailer
who, on the 15th day after the date of such
determination, holds such article for sale; but only if
claim for credit or refund by reason of this paragraph
is filed on or before the date for filing the return
with respect to the taxes imposed under chapter 32 for
the first period which begins more than 60 days after
the date on such determination.
(4) Registered ultimate vendor or credit card issuer
to administer credits and refunds of gasoline tax.--
(A) In general.--For purposes of this
subsection, except as provided in subparagraph
(B), if an ultimate vendor purchases any
gasoline on which tax imposed by section 4081
has been paid and sells such gasoline to an
ultimate purchaser described in subparagraph
(C) or (D) of subsection (b)(2) (and such
gasoline is for a use described in such
subparagraph), such ultimate vendor shall be
treated as the person (and the only person) who
paid such tax, but only if such ultimate vendor
is registered under section 4101.
(B) Credit card issuer.--For purposes of this
subsection, if the purchase of gasoline
described in subparagraph (A) (determined
without regard to the registration status of
the ultimate vendor) is made by means of a
credit card issued to the ultimate purchaser,
paragraph (1) shall not apply and the person
extending the credit to the ultimate purchaser
shall be treated as the person (and the only
person) who paid the tax, but only if such
person--
(i) is registered under section 4101,
(ii) has established, under
regulations prescribed by the
Secretary, that such person--
(I) has not collected the
amount of the tax from the
person who purchased such
article, or
(II) has obtained the written
consent from the ultimate
purchaser to the allowance of
the credit or refund, and
(iii) has so established that such
person--
(I) has repaid or agreed to
repay the amount of the tax to
the ultimate vendor,
(II) has obtained the written
consent of the ultimate vendor
to the allowance of the credit
or refund, or
(III) has otherwise made
arrangements which directly or
indirectly provides the
ultimate vendor with
reimbursement of such tax.
If clause (i), (ii), or (iii) is not met by
such person extending the credit to the
ultimate purchaser, then such person shall
collect an amount equal to the tax from the
ultimate purchaser and only such ultimate
purchaser may claim such credit or payment.
(C) Timing of claims.--The procedure and
timing of any claim under subparagraph (A) or
(B) shall be the same as for claims under
section 6427(i)(4), except that the rules of
section 6427(i)(3)(B) regarding electronic
claims shall not apply unless the ultimate
vendor or credit card issuer has certified to
the Secretary for the most recent quarter of
the taxable year that all ultimate purchasers
of the vendor or credit card issuer are
certified and entitled to a refund under
subparagraph (C) or (D) of subsection (b)(2).
(b) Special Cases in Which Tax Payments Considered
Overpayments.--Under regulations prescribed by the Secretary,
credit or refund (without interest) shall be allowed or made in
respect of the overpayments determined under the following
paragraphs:
(1) Price readjustments.--
(A) In general.--Except as provided in
subparagraph (B) or (C), if the price of any
article in respect of which a tax, based on
such price, is imposed by chapter 31 or 32, is
readjusted by reason of the return or
repossession of the article or a covering or
container, or by a bona fide discount, rebate,
or allowance, including a readjustment for
local advertising (but only to the extent
provided in section 4216(e)(2) and (3)), the
part of the tax proportionate to the part of
the price repaid or credited to the purchaser
shall be deemed to be an overpayment.
(B) Further manufacture.--Subparagraph (A)
shall not apply in the case of an article in
respect of which tax was computed under section
4223(b)(2); but if the price for which such
article was sold is readjusted by reason of the
return or repossession of the article, the part
of the tax proportionate to the part of such
price repaid or credited to the purchaser shall
be deemed to be an overpayment.
(C) Adjustment of tire price.--No credit or
refund of any tax imposed by subsection (a) or
(b) of section 4071 shall be allowed or made by
reason of an adjustment of a tire pursuant to a
warranty or guarantee.
(2) Specified uses and resales.--The tax paid under
chapter 32 (or under subsection (a) or (d) of section
4041 in respect of sales or under section 4051) in
respect of any article shall be deemed to be an
overpayment if such article was, by any person--
(A) exported;
(B) used or sold for use as supplies for
vessels or aircraft;
(C) sold to a State or local government for
the exclusive use of a State or local
government;
(D) sold to a nonprofit educational
organization for its exclusive use;
(E) sold to a qualified blood collector
organization (as defined in section
7701(a)(49)) for such organization's exclusive
use in the collection, storage, or
transportation of blood;
(F) in the case of any tire taxable under
section 4071(a), sold to any person for use as
described in section 4221(e)(3); or
(G) in the case of gasoline, used or sold for
use in the production of special fuels referred
to in section 4041.
Subparagraphs (C), (D), and (E) shall not apply in the
case of any tax paid under section 4064. In the case of
the tax imposed by section 4131, subparagraphs (B),
(C), (D), and (E) shall not apply and subparagraph (A)
shall apply only if the use of the exported vaccine
meets such requirements as the Secretary may by
regulations prescribe. This paragraph shall not apply
in the case of any tax imposed under section 4041(a)(1)
or 4081 on diesel fuel or kerosene and any tax paid
under section 4121. Subparagraphs (C) and (D) shall not
apply in the case of any tax imposed on gasoline under
section 4081 if the requirements of subsection (a)(4)
are not met. In the case of taxes imposed by subchapter
C or D of chapter 32, subparagraph (E) shall not apply.
[In the case of the tax imposed by section 4191,
subparagraphs (B), (C), (D), and (E) shall not apply.]
(3) Tax-paid articles used for further manufacture,
etc..--If the tax imposed by chapter 32 has been paid
with respect to the sale of any article (other than
coal taxable under section 4121) by the manufacturer,
producer, or importer thereof and such article is sold
to a subsequent manufacturer or producer before being
used, such tax shall be deemed to be an overpayment by
such subsequent manufacturer or producer if--
(A) in the case of any article other than any
fuel taxable under section 4081, such article
is used by the subsequent manufacturer or
producer as material in the manufacture or
production of, or as a component part of--
(i) another article taxable under
chapter 32, or
(ii) an automobile bus chassis or an
automobile bus body, manufactured or
produced by him; or
(B) in the case of any fuel taxable under
section 4081, such fuel is used by the
subsequent manufacturer or producer, for
nonfuel purposes, as a material in the
manufacture or production of any other article
manufactured or produced by him.
(4) Tires.--If--
(A) the tax imposed by section 4071 has been
paid with respect to the sale of any tire by
the manufacturer, producer, or importer
thereof, and
(B) such tire is sold by any person on or in
connection with, or with the sale of, any other
article, such tax shall be deemed to be an
overpayment by such person if such other
article is--
(i) an automobile bus chassis or an
automobile bus body,
(ii) by such person exported, sold to
a State or local government for the
exclusive use of a State or local
government, sold to a nonprofit
educational organization for its
exclusive use, or used or sold for use
as supplies for vessels or aircraft, or
(iii) sold to a qualified blood
collector organization for its
exclusive use in connection with a
vehicle the organization certifies will
be primarily used in the collection,
storage, or transportation of blood.
(5) Return of certain installment accounts.--If--
(A) tax was paid under section 4216(d)(1) in
respect of any installment account,
(B) such account is, under the agreement
under which the account was sold, returned to
the person who sold such account, and
(C) the consideration is readjusted as
provided in such agreement,
the part of the tax paid under section 4216(d)(1)
allocable to the part of the consideration repaid or
credited to the purchaser of such account shall be
deemed to be an overpayment.
(6) Truck chassis, bodies, and semitrailers used for
further manufacture.--If--
(A) the tax imposed by section 4051 has been
paid with respect to the sale of any article,
and
(B) before any other use, such article is by
any person used as a component part of another
article taxable under section 4051 manufactured
or produced by him,
such tax shall be deemed to be an overpayment by such
person. For purposes of the preceding sentence, an
article shall be treated as having been used as a
component part of another article if, had it not been
broken or rendered useless in the manufacture or
production of such other article, it would have been so
used.
This subsection shall apply in respect of an article
only if the exportation or use referred to in the
applicable provision of this subsection occurs before
any other use, or, in the case of a sale or resale, the
use referred to in the applicable provision of this
subsection is to occur before any other use.
(c) Refund to Exporter or Shipper.--Under regulations
prescribed by the Secretary the amount of any tax imposed by
chapter 31, or chapter 32 erroneously or illegally collected in
respect of any article exported to a foreign country or shipped
to a possession of the United States may be refunded to the
exporter or shipper thereof, if the person who paid such tax
waives his claim to such amount.
(d) Credit on Returns.--Any person entitled to a refund of
tax imposed by chapter 31 or 32, paid to the Secretary may,
instead of filing a claim for refund, take credit therefor
against taxes imposed by such chapter due on any subsequent
return. The preceding sentence shall not apply to the tax
imposed by section 4081 in the case of refunds described in
section 4081(e).
(e) Accounting Procedures for Like Articles.--Under
regulations prescribed by the Secretary, if any person uses or
resells like articles, then for purposes of this section the
manufacturer, producer, or importer of any such article may be
identified, and the amount of tax paid under chapter 32 in
respect of such article may be determined--
(1) on a first-in-first-out basis,
(2) on a last-in-first-out basis, or
(3) in accordance with any other consistent method
approved by the Secretary.
(f) Meaning of Terms.--For purposes of this section, any term
used in this section has the same meaning as when used in
chapter 31, 32, or 33, as the case may be.
* * * * * * *
VII. MINORITY VIEWS
With this legislation, the Majority furthers their fiscal
irresponsibility and misguided priorities. The bill results in
a revenue loss of $24.4 billion and it is not offset, bringing
the total of deficit-financed tax cuts to $610 billion so far
this year. One need not look far to see the imprudent vision
the Republican Majority has for our country: Republicans
continue to struggle to ensure our nation's infrastructure
investments do not collapse, yet do not blink at deficit
financing over half a trillion in tax cuts. Furthermore, in
these difficult fiscal times, the Majority is insisting on
spending and program cuts that will have a devastating impact
on a vast array of Americans. For example, House Republicans
proposed in their recent budget to slash spending for seniors
who need long-term care, families needing food assistance, and
students struggling to pay for college.
The bill is the latest in a continued series of attacks by
the Majority on the Affordable Care Act (ACA). The medical
device sector stood with the President in the late spring of
2009 and, with other industries that would benefit from
expanding health coverage, pledged $2 trillion in savings for
health care reform. The medical device excise tax that is the
subject of H.R. 160 represents the medical device sector's
contribution to health care reform. All sectors of the health
and medical industry made significant contributions to pay for
health care reform. For example, hospitals, pharmaceutical
companies, and insurance companies all knew that these
contributions were appropriate because the coverage expansions
of health care reform will result in tens of millions of
additional health care customers for the health care industry.
H.R. 160 eliminates the contribution of a key health industry
sector, thereby encouraging the other sectors to follow suit
and press for repeal of their contributions.
A number of distortions surrounding the debate on the
medical device excise tax were dispelled during the markup of
H.R. 160.
First, the device tax has not caused a contraction of the
medical device industry. Tom Barthold, Chief of Staff for the
Joint Committee on Taxation (JCT), testified previously before
the Committee that the medical device industry will continue to
grow even after the effective date of the medical device excise
tax. Among the reasons for this growth is the aging of
America's population--a demographic shift that favors the
device industry as older patients tend to constitute a larger
portion of the sector's total sales. However, as Mr. Barthold
testified, another key reason for the industry's continued
growth is the coverage expansion of the ACA. It should be
carefully noted that JCT is an impartial and nonpartisan expert
on tax law and implications of tax law.
Second, the medical device tax is not hindering the medical
device industry. About half of medical devices produced in the
U.S. are exempt from the tax, either because of exemptions in
the domestic market or because they are being exported. An
analysis by CRS since the tax went into effect suggests that
most costs are included in the prices for devices rather than
reduced medical device company profits. And a recent analysis
by Ernst and Young indicates that the industry's revenue
increased by $8 billion in the year the tax took effect, while
at the same time R&D spending by the industry also increased by
6 percent in the same year and employment in the medical device
industry increased by 23,500. According to CRS, while most
device manufacturers are relatively small, output is
concentrated in the largest manufacturer with the top one
percent of firms accounting for approximately 75 percent of
sales in the industry.
Third, the device tax does not incentivize companies to
ship jobs overseas. The tax applies to products used in the
United States. Thus, the tax applies to goods made abroad and
imported into America. Further, the tax does not apply to
products made in the U.S. and shipped abroad. Domestic and
foreign manufacturers are on a level playing field with regard
to the medical device tax. Furthermore, even when the medical
device tax is taken into account, U.S. medical device companies
are still paying lower effective tax rates than their foreign
competitors. Therefore, the tax is not making them less
internationally competitive.
Finally, we object to the Majority's continued attacks on
the ACA without putting forward any comprehensive legislation
to address the health insurance needs of the nation. Since
January of 2009, the Majority voted to repeal or undermine the
ACA over 58 times, including earlier votes on repealing the
medical device tax in 2012.
Sincerely,
Sander M. Levin,
Ranking Member.
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