To amend the Internal Revenue Code of 1986 to provide that the special motor fuels excise tax on water-phased hydrocarbon fuel emulsions shall be based on their Btu content relative to gasoline.

Amends the Internal Revenue Code to provide that the special motor fuels excise tax shall be 12.66 cents per gallon in the case of any water-phased hydrocarbon fuel. Defines the term "water-phased hydrocarbon fuel" to mean any liquid consisting of a hydrocarbon base and water if not less than 20 percent (by volume) of the liquid consists of water.