A bill to amend the Internal Revenue Code of 1986 to provide for a variable VEETC rate based on the price of crude oil, and for other purposes.

Summary: Ethanol Reform and Deficit Reduction Act - Amends the Internal Revenue Code to: (1) link the amount of  the volumetric ethanol excise tax credit (VEETC) for calendar quarters beginning after June 30, 2011, to the average price of crude oil in a calendar quarter, (2) modify the rates of the income tax credit for alcohol used as fuel and extend such credit through 2014, (3) extend the alternative fuel refueling property tax credit and the special depreciation allowance for cellulosic biofuel plant property, and (4) make permanent the cellulosic biofuel producer tax credit.

Modifies the definition of "cellulosic biofuel" for purposes of the cellulosic biofuel producer tax credit and the special depreciation allowance to mean any liquid fuel that is derived solely by or from qualified feedstocks. Defines "qualified feedstocks" as any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis and any cultivated algae, cyanobacteria, or lemna.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Ethanol Reform and Deficit Reduction 
Act''.

SEC. 2. VARIABLE VEETC RATE BASED ON PRICE OF CRUDE OIL.

    (a) Excise Tax Credit.--
            (1) In general.--Subparagraph (A) of section 6426(b)(2) of 
        the Internal Revenue Code of 1986 is amended--
                    (A) by striking ``and'' at the end of clause (i),
                    (B) by striking ``calendar years beginning after 
                2008, 45 cents.'' in clause (ii) and inserting 
                ``calendar quarters beginning after 2008 and before 
                July 1, 2011, 45 cents, and'', and
                    (C) by adding at the end the following new clause:
                            ``(iii) in the case of calendar quarters 
                        beginning after June 30, 2011, the applicable 
                        rate determined in accordance with the 
                        following table:

``If the average price of crude oil            The applicable rate for 

 during the preceding calendar                 the calendar quarter is:
        quarter is:
        Not more than $50/barrel...........................   30 cents 
        More than $50 but not more than $60/barrel.........   24 cents 
        More than $60 but not more than $70/barrel.........   18 cents 
        More than $70 but not more than $80/barrel.........   12 cents 
        More than $80 but not more than $90/barrel.........    6 cents 
        More than $90/barrel...............................    0 cents.
                        For purposes of the preceding table, the 
                        average price of crude oil for any calendar 
                        quarter shall be the average 3-month futures 
                        price on the New York Mercantile Exchange for 
                        light sweet crude oil for such calendar 
                        quarter. Each applicable rate under the 
                        preceding table shall be reduced by 2 cents for 
                        each calendar year beginning after 2011.''.
            (2) Extension of tax credit or payment.--Sections 
        6426(b)(6) and 6427(e)(6)(A) of such Code are each amended by 
        striking ``2011'' and inserting ``2014''.
    (b) Income Tax Credit.--
            (1) In general.--The table contained in section 40(h)(2) of 
        the Internal Revenue Code of 1986 is amended--
                    (A) by striking ``calendar year'' in the heading 
                for the first column,
                    (B) by inserting ``Calendar year'' before ``2001'',
                    (C) by inserting ``Calendar year'' before ``2003'',
                    (D) by inserting ``Calendar year'' before ``2005'',
                    (E) by inserting ``Calendar years'' before 
                ``2009'',
                    (F) by striking ``2011'' and inserting ``the last 
                calendar quarter beginning before July 1, 2011'',
                    (G) by striking the period at the end of the table, 
                and
                    (H) by adding at the end the following:

 
``Any calendar quarter beginning after              1st   2d applicable rate.''.
 June 30, 2011, and before 2015.             applicable
                                                   rate
 

            (2) Applicable rates.--Paragraph (3) of section 40(h) of 
        such Code is amended to read as follows:
            ``(3) Applicable rates.--For purposes of this subsection, 
        the 1st applicable rate and the 2d applicable rate shall be 
        determined in accordance with the following table:


----------------------------------------------------------------------------------------------------------------
                                                  The 1st
 ``If the average price of crude oil during   applicable rate    The 2d applicable rate for the calendar quarter
     the preceding calendar quarter is:       for the calendar                         is:
                                                quarter is:
----------------------------------------------------------------------------------------------------------------
Not more than $50/barrel...................           30 cents  22.20 cents
More than $50 but not more than $60/barrel.           24 cents  17.76 cents
More than $60 but not more than $70/barrel.           18 cents  13.33 cents
More than $70 but not more than $80/barrel.           12 cents  8.88 cents
More than $80 but not more than $90/barrel.            6 cents  4.44 cents
More than $90/barrel.......................            0 cents  0 cents.
----------------------------------------------------------------------------------------------------------------

        For purposes of the preceding table, the average price of crude 
        oil for any calendar quarter shall be the average 3-month 
        futures price on the New York Mercantile Exchange for light 
        sweet crude oil for such calendar quarter. Each 1st applicable 
        rate under the preceding table shall be reduced by 2 cents for 
        each calendar year beginning after 2011 and each 2d applicable 
        rate under such table shall be reduced by 1.48 cents for each 
        such year.''.
            (3) Extension of tax credit.--Section 40 of such Code is 
        amended--
                    (A) by striking ``2011'' in subsection (e)(1)(A) 
                and inserting ``2014'',
                    (B) by striking ``2012'' in subsection (e)(1)(B) 
                and inserting ``2015'', and
                    (C) by striking ``2011'' in subsection (h)(1) and 
                inserting ``2014''.
    (c) Repeal of Deadwood.--Section 6426(b)(2) of the Internal Revenue 
Code of 1986 is amended by striking subparagraph (C).
    (d) Effective Date.--The amendments made by this section shall 
apply to any sale, use, or removal for any period after June 30, 2011.

SEC. 3. EXTENSION AND MODIFICATION OF ALTERNATIVE FUEL VEHICLE 
              REFUELING PROPERTY CREDIT.

    (a) Extension.--Subsection (g) of section 30C of the Internal 
Revenue Code of 1986 is amended by striking ``placed in service--'' and 
all that follows and inserting ``placed in service after the earlier of 
December 31, 2016, or the date on which the Secretary certifies that at 
least 53,000 qualified alternative fuel refueling properties (other 
than properties described in subsection (c)(2)(C)) have been placed in 
service.''.
    (b) Only Certain Ethanol Blends Eligible for Credit.--Subparagraph 
(A) of section 30C(c)(2) of the Internal Revenue Code of 1986 is 
amended to read as follows:
                    ``(A) Any fuel--
                            ``(i) at least 85 percent of the volume of 
                        which consists of one or more of the following: 
                        natural gas, compressed natural gas, liquified 
                        natural gas, liquefied petroleum gas, or 
                        hydrogen, or
                            ``(ii) at least 85 percent of the volume of 
                        which consists of--
                                    ``(I) ethanol, or
                                    ``(II) ethanol and gasoline or one 
                                or more of the fuels described in 
                                clause (i), but only if at least 15 
                                percent and not more than 85 percent of 
                                the volume of such fuel consists of 
                                ethanol.''.
    (c) Credit for Dual-Use Refueling Property.--Subsection (e) of 
section 30C of the Internal Revenue Code of 1986 is amended by adding 
at the end the following new paragraph:
            ``(6) Dual-use refueling property.--
                    ``(A) In general.--In the case of any dual-use 
                refueling property, 100 percent of the cost of such 
                property shall be treated as qualified alternative fuel 
                refueling property if the taxpayer certifies, in such 
                time and manner as the Secretary shall prescribe, that 
                such property will be used in more than a de minimis 
                capacity for the purposes described in section 
                179A(d)(3)(A) (applied as specified in subsection 
                (c)(2)).
                    ``(B) Recapture.--If at any time within 5 years 
                after the date of the certification under subparagraph 
                (A) the dual-use refueling property ceases to be used 
                as required under such subparagraph, 100 percent of the 
                cost of such property shall be subject to recapture 
                under paragraph (5).
                    ``(C) Dual-use refueling property.--For purposes of 
                this paragraph, the term `dual-use refueling property' 
                means property that is both qualified alternative fuel 
                vehicle refueling property and property used--
                            ``(i) to store or dispense fuels not 
                        described in subsection (c)(2), or
                            ``(ii) to store fuels described in 
                        subsection (c)(2) for any purpose other than 
                        delivery of such fuel into the fuel tank of a 
                        motor vehicle.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after June 30, 2011.

SEC. 4. EXTENSION OF CELLULOSIC BIOFUEL PRODUCER CREDIT THROUGH 2014.

    (a) In General.--Section 40(b)(6) of the Internal Revenue Code of 
1986 is amended by striking subparagraph (H).
    (b) Conforming Amendment.--Section 40(e) of the Internal Revenue 
Code of 1986 is amended by striking paragraph (3).

SEC. 5. EXTENSION OF SPECIAL DEPRECIATION ALLOWANCE FOR CELLULOSIC 
              BIOFUEL PLANT PROPERTY.

    Subparagraph (D) of section 168(l)(2) of the Internal Revenue Code 
of 1986 is amended by striking ``January 1, 2013'' and inserting 
``January 1, 2015''.

SEC. 6. ALGAE TREATED AS A QUALIFIED FEEDSTOCK FOR PURPOSES OF THE 
              CELLULOSIC BIOFUEL PRODUCER CREDIT, ETC.

    (a) In General.--Subclause (I) of section 40(b)(6)(E)(i) of the 
Internal Revenue Code of 1986 is amended to read as follows:
                                    ``(I) is derived solely by, or 
                                from, qualified feedstocks, and''.
    (b) Qualified Feedstock; Special Rules for Algae.--Paragraph (6) of 
section 40(b) of the Internal Revenue Code of 1986, as amended by this 
Act, is amended by redesignating subparagraphs (F) and (G) as 
subparagraphs (H) and (I), respectively, and by inserting after 
subparagraph (E) the following new subparagraphs:
                    ``(F) Qualified feedstock.--For purposes of this 
                paragraph, the term `qualified feedstock' means--
                            ``(i) any lignocellulosic or hemicellulosic 
                        matter that is available on a renewable or 
                        recurring basis, and
                            ``(ii) any cultivated algae, cyanobacteria, 
                        or lemna.
                    ``(G) Special rules for algae.--In the case of fuel 
                which is derived by, or from, feedstock described in 
                subparagraph (F)(ii) and which is sold by the taxpayer 
                to another person for refining by such other person 
                into a fuel which meets the requirements of 
                subparagraph (E)(i)(II)--
                            ``(i) such sale shall be treated as 
                        described in subparagraph (C)(i),
                            ``(ii) such fuel shall be treated as 
                        meeting the requirements of subparagraph 
                        (E)(i)(II) in the hands of such taxpayer, and
                            ``(iii) except as provided in this 
                        subparagraph, such fuel (and any fuel derived 
                        from such fuel) shall not be taken into account 
                        under subparagraph (C) with respect to the 
                        taxpayer or any other person.''.
    (c) Algae Treated as a Qualified Feedstock for Purposes of Bonus 
Depreciation for Biofuel Plant Property.--
            (1) In general.--Subparagraph (A) of section 168(l)(2) of 
        the Internal Revenue Code of 1986 is amended by striking 
        ``solely to produce cellulosic biofuel'' and inserting ``solely 
        to produce second generation biofuel (as defined in section 
        40(b)(6)(E))''.
            (2) Conforming amendments.--Subsection (l) of section 168 
        of such Code, as amended by this Act, is amended--
                    (A) by striking ``cellulosic biofuel'' each place 
                it appears in the text thereof and inserting ``second 
                generation biofuel'',
                    (B) by striking paragraph (3) and redesignating 
                paragraphs (4) through (8) as paragraphs (3) through 
                (7), respectively,
                    (C) by striking ``Cellulosic'' in the heading of 
                such subsection and inserting ``Second Generation'', 
                and
                    (D) by striking ``cellulosic'' in the heading of 
                paragraph (2) and inserting ``second generation''.
    (d) Conforming Amendments.--
            (1) Section 40 of the Internal Revenue Code of 1986, as 
        amended by this Act, is amended--
                    (A) by striking ``cellulosic biofuel'' each place 
                it appears in the text thereof and inserting ``second 
                generation biofuel'',
                    (B) by striking ``Cellulosic'' in the headings of 
                subsections (b)(6), (b)(6)(E), and (d)(3)(D) and 
                inserting ``Second generation'', and
                    (C) by striking ``cellulosic'' in the headings of 
                subsections (b)(6)(C), (b)(6)(D), (b)(6)(H), (d)(6), 
                and (e)(3) and inserting ``second generation''.
            (2) Clause (ii) of section 40(b)(6)(E) of such Code is 
        amended by striking ``Such term shall not'' and inserting ``The 
        term `second generation biofuel' shall not''.
            (3) Paragraph (1) of section 4101(a) of such Code is 
        amended by striking ``cellulosic biofuel'' and inserting 
        ``second generation biofuel''.
    (e) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to fuels sold or 
        used after the date of the enactment of this Act.
            (2) Application to bonus depreciation.--The amendments made 
        by subsection (c) shall apply to property placed in service 
        after the date of the enactment of this Act.

SEC. 7. BUDGETARY EFFECTS.

    (a) PAYGO Scorecard.--The budgetary effects of this Act shall not 
be entered on either PAYGO scorecard maintained pursuant to section 
4(d) of the Statutory Pay-As-You-Go Act of 2010.
    (b) Senate PAYGO Scorecard.--The budgetary effects of this Act 
shall not be recorded on any PAYGO scorecard maintained for purposes of 
section 201 of S. Con. Res. 21 (110th Congress).