The committee met, pursuant to notice, at 10 a.m., in room 2221, New Senate Office Building, Senator Harry F. Byrd (chairman) presiding.

Present: Senators Byrd (presiding), Long, Smathers, Anderson, Douglas, Talmadge, McCarthy, Hartke, Ribicoff, Williams, Bennett, Morton, and Dirksen.

Also present: Elizabeth B. Springer, chief clerk.

The CHAIRMAN. The committee will come to order.

The bill under consideration by the committee today is the Excise Tax Reduction Act of 1965, H.R. 8371.

(A copy of the bill follows:)

[H.R. 8371, 89th Cong., 1st sess.]

AN ACT To reduce excise taxes, and for other purposes.

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

SECTION 1. SHORT TITLE, ETC.

(a) SHORT TITLE.-This Act may be cited as the "Excise Tax Reduction Act of 1965".

(b) AMENDMENT OF 1954 CODE.-Except as otherwise expressly provided, whenever in this Act an amendment is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference is to a section or other provision of the Internal Revenue Code of 1954.

TITLE I-RETAILERS EXCISE TAXES

SEC. 101. REPEAL OF RETAILERS EXCISE TAXES.

(a) IN GENERAL.-Subchapters A (relating to jewelry and related items), B (relating to furs), C (relating to toilet preparations), and D (relating to luggage, handbags, etc.) of chapter 31 are repealed.

(b) TECHNICAL AND CONFORMING AMENDMENT.—

(1) The table of subchapters for chapter 31 is amended by striking out the items relating to subchapters A, B, C, and D.

(2) Sections 4051 through 4053 are repealed and the table of sections for subchapter F of chapter 31 is amended by striking out the items relating to sections 4051, 4052, and 4053.

(3) Section 4055 is amended by striking out", in the case of the tax imposed by section 4041,".

(4) Section 4057 (a) is amended by striking out ", in the case of a tax imposed by section 4041,".

(5) Section 4224 (relating to exemption for articles taxable as jewelry) is repealed and the table of sections for subchapter G of chapter 32 is amended by striking out the item relating to section 4224.

(6) Section 6011 (c) (relating to return of retailers excise taxes by suppliers) is repealed.

TITLE II-MANUFACTURERS EXCISE TAX

SEC. 201. AUTOMOBILES AND AUTOMOBILE PARTS.

(a) PASSENGER AUTOMOBILES, ETC.-Paragraph (2) of section 4061(a) (relating to imposition of tax) is amended to read as follows:

"(2) (A) Articles enumerated in subparagraph (B) are taxable at whichever of the following rates is applicable:

"10 percent for the period ending June 30, 1965.

"7 percent for the period July 1, 1965, through December 31, 1965.

"6 percent for the period January 1, 1966, through December 31, 1966. "4 percent for the period January 1, 1967, through December 31, 1967. "2 percent for the period January 1, 1968, through December 31, 1968. Effective for the period beginning January 1, 1969, the tax imposed under this paragraph shall cease to apply.

"(B) The articles to which subparagraph (A) applies are:

"Automobile chassis and bodies other than those taxable under paragraph (1).

"Chassis and bodies for trailers and semitrailers (other than house trailers) suitable for use in connection with passenger automobiles. A sale of an automobile, or of a trailer or semitrailer suitable for use in connection with a passenger automobile, shall, for the purposes of this paragraph, be considered to be a sale of a chassis and of a body enumerated in this subparagraph."

(b) PARTS AND ACCESSORIES.—

(1) Effective as provided by section 701 (a) (1), subsection (b) of section 4061 (relating to imposition of tax on parts and accessories) is amended by striking out "and other than automobile radio and television receiving sets" and by striking out ", except that on and after July 1, 1965, the rate shall be 5 percent".

(2) Effective as provided by section 701 (a) (2), subsection (b) of section 4061 is amended to read as follows:

"(b) PARTS AND ACCESSORIES.—

"(1) Except as provided in paragraph (2), there is hereby imposed upon parts or accessories (other than tires and inner tubes) for any of the articles enumerated in subsection (a) (1) sold by the manufacturer, producer, or importer a tax equivalent to 8 percent of the price for which so sold, except that on and after October 1, 1972, the rate shall be 5 percent.

"(2) No tax shall be imposed under this subsection upon any part or accessory which is suitable for use (and ordinarily is used) on or in connection with, or as a component part of, any article enumerated in subsection (a) (2) or a house trailer."

(c) TECHNICAL AMENDMENT.-The last sentence of paragraph (1) of section 4061 (a) is amended by striking out "the chassis and of the body" and inserting in lieu thereof "a chassis and of a body enumerated in this paragraph”. SEC. 202. LUBRICATING OIL.

(a) IMPOSITION OF TAX.-Section 4091 (relating to imposition of tax) is amended to read as follows:

"SEC. 4091. IMPOSITION OF TAX.

"There is hereby imposed on lubricating oil (other than cutting oils) which is sold in the United States by the manufacturer or producer a tax of 6 cents a gallon, to be paid by the manufacturer or producer."

(b) PAYMENTS TO ULTIMATE PURCHASERS.-Subchapter B of chapter 65 (relating to rules of special application) is amended by adding at the end thereof the following new section:

"SEC. 6424. LUBRICATING OIL NOT USED IN HIGHWAY MOTOR VEHICLES.

"(a) PAYMENTS.-If lubricating oil (other than cutting oils, as defined in section 4092 (b), and other than oil which has previously been used) is used otherwise than in a highway motor vehicle, the Secretary or his delegate shall

pay (without interest) to the ultimate purchaser of such lubricating oil an amount equal to 6 cents for each gallon of lubricating oil so used. "(b) TIME FOR FILING CLAIMS; PERIOD COVERED.—

"(1) GENERAL RULE.-Except as provided in paragraph (2), not more than one claim may be filed under subsection (a) by any person with respect to lubricating oil used during the one-year period ending on June 30 of any year. No claim shall be allowed under this paragraph with respect to any one-year period unless filed on or before September 30 of the year in which such one-year period ends. For purposes of this paragraph, in the case of lubricating oil used during the six-month period beginning January 1, 1966, the term 'one-year' shall be read as 'six-months'.

"(2) EXCEPTION.-If $1,000 or more is payable under this section to any person with respect to lubricating oil used during a calendar quarter, a claim may be filed under this section by such person with respect to lubricating oil used during such quarter. No claim filed under this paragraph shall be allowed unless filed on or before the last day of the first calendar quarter following the calendar quarter for which the claim is filed.

"(c) EXEMPT SALES.-No amount shall be paid under this section with respect to any lubricating oil which the Secretary or his delegate determines was exempt from the tax imposed by section 4091. The amount which (but for this sentence) would be payable under this section with respect to any lubricating oil shall be reduced by any other amount which the Secretary or his delegate determines is payable under this section, or is refundable under any provision of this title, to any person with respect to such lubricating oil. "(d) APPLICABLE LAWS.

"(1) IN GENERAL.—All provisions of law, including penalties, applicable in respect of the tax imposed by section 4091 shall, insofar as applicable and not inconsistent with this section, apply in respect of the payments provided for in this section to the same extent as if such payments constituted refunds of overpayments of the tax so imposed.

"(2) EXAMINATION OF BOOKS AND WITNESSES.-For the purpose of ascertaining the correctness of any claim made under this section, or the correctness of any payment made in respect of any such claim, the Secretary or his delegate shall have the authority granted by paragraphs (1), (2), and (3) of section 7602 (relating to examination of books and witnesses) as if the claimant were the person liable for tax.

"(e) REGULATIONS.-The Secretary or his delegate may by regulations prescribe the conditions, not inconsistent with the provisions of this section, under which payments may be made under this section.

“(f) EFFECTIVE DATE.-This section shall apply only with respect to lubricating oil placed in use after December 31, 1965.

"(g) CROSS REFERENCES.

"(1) For civil penalty for excessive claims under this section, see section 6675.

"(2) For fraud penalties, etc., see chapter 75 (section 7201 and following, relating to crimes, other offenses, and forfeitures).”

(c) TECHNICAL AND CONFORMING AMENDMENTS.

(1) (A) Subpart B of part III of subchapter A of chapter 32 is amended by adding at the end thereof the following new section:

"SEC. 4094. CROSS REFERENCE.

"For provisions to relieve purchasers of lubricating oil from excise tax in the case of lubricating oil used otherwise than in a highway motor vehicle, see section 6424."

(B) The table of sections for such subpart B is amended by adding at the end thereof the following:

"Sec. 4094. Cross reference."

(2) (A) Section 6206 is amended

(i) by striking out "6420 AND 6421" in the heading and inserting in lieu thereof "6420, 6421, AND 6424",

(ii) by striking out "6420 or 6421" each place it appears in the text and inserting in lieu thereof “6420, 6421, or 6424", and

(iii) by inserting "(or, in the case of lubricating oil, by section 4091)" after "4081".