I 

108TH CONGRESS 

1ST SESSION H. R. 1447

To amend the Internal Revenue Code of 1986 to provide incentives to increase 

the sale and use of certain ethanol and biodiesel fuels. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 26, 2003

Mr. LEWIS of Kentucky introduced the following bill; which was referred to 

the Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to provide 

incentives to increase the sale and use of certain ethanol 

and biodiesel fuels.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Ethanol and Biodiesel 

5 Promotion Act of 2003’’. 

6 SEC. 2. CREDIT FOR PROPERTY USED IN THE RETAIL SALE, 

7 OR BUSINESS USE, OF E85 ETHANOL AND 

8 NEAT BIODIESEL. 

9 (a) IN GENERAL.—Subpart D of part IV of sub10 chapter A of chapter 1 of the Internal Revenue Code of 
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1 1986 (relating to business related credits) is amended by 

2 adding at the end the following new section: 

3 ‘‘SEC. 45G. PROPERTY USED IN THE RETAIL SALE, OR BUSI4 NESS USE, OF E85 ETHANOL AND NEAT BIO5 DIESEL. 

6 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

7 the E85 ethanol and biodiesel credit is an amount equal 

8 to 50 percent of the basis of qualified fuel property placed 

9 in service by the taxpayer during the taxable year. 

10 ‘‘(b) LIMITATION.—The credit allowed by subsection 

11 (a) for any taxable year shall not exceed $50,000. 

12 ‘‘(c) DEFINITIONS.—For purposes of this section—

13 ‘‘(1) QUALIFIED FUEL PROPERTY.—The term 

14 ‘qualified fuel property’ means—

15 ‘‘(A) qualified vehicle refueling property, 

16 and 

17 ‘‘(B) qualified business use property. 

18 ‘‘(2) QUALIFIED VEHICLE REFUELING PROP19 ERTY.—The term ‘qualified vehicle refueling prop20 erty’ means any property which would be qualified 

21 clean-fuel vehicle refueling property, as defined in 

22 section 179A(d), if the only clean-burning fuel re23 ferred to in such section were E85 ethanol and neat 

24 biodiesel. 
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1 ‘‘(3) QUALIFIED BUSINESS USE PROPERTY.—

2 The term ‘qualified business use property’ means 

3 any property (not including a building and its struc4 tural components) if—

5 ‘‘(A) such property is of a character sub6 ject to the allowance for depreciation, 

7 ‘‘(B) the original use of such property be8 gins with the taxpayer, and 

9 ‘‘(C) such property is used by the taxpayer 

10 in the consumption of E85 ethanol or neat bio11 diesel in a trade of business of the taxpayer. 

12 ‘‘(4) E85 ETHANOL.—The term ‘E85 ethanol’ 

13 means any fuel at least 85 percent of which is eth14 anol. 

15 ‘‘(5) NEAT BIODIESEL.—The term ‘neat bio16 diesel’ means diesel fuel at least 85 percent of which 

17 is produced from a substance other than petroleum. 

18 ‘‘(d) TERMINATION.—This section shall not apply to 

19 any property placed in service after December 31, 2009.’’. 

20 (b) CONFORMING AMENDMENTS.—

21 (1) Section 38(b) of such Code is amended by 

22 striking ‘‘plus’’ at the end of paragraph (14), by 

23 striking the period at the end of paragraph (15) and 

24 inserting ‘‘, plus’’, and by adding at the end the fol25 lowing: 
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1 ‘‘(16) the E85 ethanol and biodiesel credit de2 termined under section 45G.’’. 

3 (2) Section 39(d) of such Code (relating to 

4 transitional rules) is amended by adding at the end 

5 the following: 

6 ‘‘(11) NO CARRYBACK OF SECTION 45G CREDIT

7 BEFORE EFFECTIVE DATE.—No portion of the un8 used business credit for any taxable year which is 

9 attributable to the credit determined under section 

10 45G(a) may be carried back to a taxable year ending 

11 before January 1, 2003.’’. 

12 (3) The table of sections for subpart D of part 

13 IV of subchapter A of chapter 1 of such Code is 

14 amended by adding at the end the following:

‘‘Sec. 45G. Property used in the retail sale, or business use, of 

E85 ethanol and neat biodiesel.’’.

15 (c) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to taxable years beginning after 

17 December 31, 2003. 

18 SEC. 3. CREDIT FOR RETAIL SALE OF E85 ETHANOL AND 

19 NEAT BIODIESEL AS MOTOR VEHICLE FUEL. 

20 (a) IN GENERAL.—Subpart D of part IV of sub21 chapter A of chapter 1 of the Internal Revenue Code of 

22 1986 (relating to business related credits) is amended by 

23 adding at the end the following new section: 
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1 ‘‘SEC. 45H. RETAIL SALE OF E85 ETHANOL AND NEAT BIO2 DIESEL AS MOTOR VEHICLE FUEL. 

3 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

4 the E85 ethanol and biodiesel retail sales credit of any 

5 taxpayer for any taxable year is the credit amount for each 

6 gasoline gallon equivalent of E85 ethanol and neat bio7 diesel sold at retail by the taxpayer during such year as 

8 a fuel to propel any qualified motor vehicle. 

9 ‘‘(b) DEFINITIONS.—For purposes of this section—

10 ‘‘(1) CREDIT AMOUNT.—The term ‘credit 

11 amount’ means—

12 ‘‘(A) in the case of E85 ethanol, the excess 

13 of 60 cents over the blender amount applicable 

14 under section 40(h) for the calendar year in 

15 which the sale occurs, and 

16 ‘‘(B) in the case of neat biodiesel, 25 

17 cents. 

18 ‘‘(2) E85 ETHANOL AND NEAT BIODIESEL.—

19 The terms ‘E85 ethanol’ and ‘neat biodiesel’ have 

20 the respective meanings given such terms by section 

21 45G. 

22 ‘‘(3) GASOLINE GALLON EQUIVALENT.—The 

23 term ‘gasoline gallon equivalent’ means, with respect

24 to any alternative fuel, the amount (determined by 

25 the Secretary) of such fuel having a Btu content of 

26 114,000. 
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1 ‘‘(4) QUALIFIED MOTOR VEHICLE.—The term 

2 ‘qualified motor vehicle’ means any motor vehicle (as 

3 defined in section 179A(e)(2)) which meets any ap4 plicable Federal or State emissions standards with 

5 respect to each fuel by which such vehicle is de6 signed to be propelled. 

7 ‘‘(5) SOLD AT RETAIL.—

8 ‘‘(A) IN GENERAL.—The term ‘sold at re9 tail’ means the sale, for a purpose other than 

10 resale, after manufacture, production, or impor11 tation. 

12 ‘‘(B) USE TREATED AS SALE.—If any per13 son uses E85 ethanol or neat biodiesel as a fuel 

14 to propel any qualified motor vehicle (including 

15 any use after importation) before such fuel is 

16 sold at retail, then such use shall be treated in 

17 the same manner as if such fuel were sold at 

18 retail as a fuel to propel such a vehicle by such 

19 person. 

20 ‘‘(c) NO DOUBLE BENEFIT.—The amount of any de21 duction or credit allowable under this chapter for any fuel 

22 taken into account in computing the amount of the credit 

23 determined under subsection (a) shall be reduced by the 

24 amount of such credit attributable to such fuel. 
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1 ‘‘(d) PASS-THRU IN THE CASE OF ESTATES AND

2 TRUSTS.—Under regulations prescribed by the Secretary, 

3 rules similar to the rules of subsection (d) of section 52 

4 shall apply. 

5 ‘‘(e) TERMINATION.—This section shall not apply to 

6 any fuel sold at retail after December 31, 2009.’’. 

7 (b) CONFORMING AMENDMENTS.—

8 (1) Section 38(b) of such Code is amended by 

9 striking ‘‘plus’’ at the end of paragraph (15), by 

10 striking the period at the end of paragraph (16) and 

11 inserting ‘‘, plus’’, and by adding at the end the fol12 lowing: 

13 ‘‘(17) the E85 ethanol and biodiesel retail sales 

14 credit determined under section 45H.’’. 

15 (2) Section 39(d) of such Code (relating to 

16 transitional rules) is amended by adding at the end 

17 the following: 

18 ‘‘(12) NO CARRYBACK OF SECTION 45H CREDIT

19 BEFORE EFFECTIVE DATE.—No portion of the un20 used business credit for any taxable year which is 

21 attributable to the credit determined under section 

22 45H(a) may be carried back to a taxable year end23 ing before January 1, 2004.’’. 
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1 (3) The table of sections for subpart D of part 

2 IV of subchapter A of chapter 1 of such Code is 

3 amended by adding at the end the following:

‘‘Sec. 45G. Retail sale of E85 ethanol and neat biodiesel as motor 

vehicle fuel.’’.

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to fuel sold at retail after Decem6 ber 31, 2003, in taxable years ending after such date. 

7 SEC. 4. SMALL ETHANOL PRODUCER CREDIT. 

8 (a) ALLOCATION OF ALCOHOL FUELS CREDIT TO

9 PATRONS OF A COOPERATIVE.—Section 40(g) Internal 

10 Revenue Code of 1986 (relating to definitions and special 

11 rules for eligible small ethanol producer credit) is amended 

12 by adding at the end the following: 

13 ‘‘(6) ALLOCATION OF SMALL ETHANOL PRO14 DUCER CREDIT TO PATRONS OF COOPERATIVE.—

15 ‘‘(A) ELECTION TO ALLOCATE.—

16 ‘‘(i) IN GENERAL.—Notwithstanding 

17 paragraph (4), in the case of a cooperative 

18 organization described in section 1381(a), 

19 any portion of the credit determined under 

20 subsection (a)(3) for the taxable year may, 

21 at the election of the organization, be ap22 portioned pro rata among patrons of the 

23 organization on the basis of the quantity 
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1 or value of business done with or for such 

2 patrons for the taxable year. 

3 ‘‘(ii) FORM AND EFFECT OF ELEC4 TION.—An election under clause (i) for any 

5 taxable year shall be made on a timely 

6 filed return for such year. Such election, 

7 once made, shall be irrevocable for such 

8 taxable year. 

9 ‘‘(iii) SPECIAL RULE FOR TAXABLE

10 YEARS PRIOR TO ENACTMENT OF PARA11 GRAPH.—Notwithstanding clause (ii), an 

12 election for any taxable year ending prior 

13 to the date of the enactment of this para14 graph may be made at any time before the 

15 expiration of the 3-year period beginning 

16 on the last date prescribed by law for filing 

17 the return of the taxpayer for such taxable 

18 year (determined without regard to exten19 sions) by filing an amended return for 

20 such year. 

21 ‘‘(B) TREATMENT OF ORGANIZATIONS AND

22 PATRONS.—The amount of the credit appor23 tioned to patrons under subparagraph (A)—

24 ‘‘(i) shall not be included in the 

25 amount determined under subsection (a) 
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1 with respect to the organization for the 

2 taxable year, 

3 ‘‘(ii) shall be included in the amount 

4 determined under subsection (a) for the 

5 taxable year of each patron for which the 

6 patronage dividends for the taxable year 

7 described in subparagraph (A) are included 

8 in gross income, and 

9 ‘‘(iii) shall be included in gross income 

10 of such patrons for the taxable year in the 

11 manner and to the extent provided in sec12 tion 87.

13 ‘‘(C) SPECIAL RULES FOR DECREASE IN

14 CREDITS FOR TAXABLE YEAR.—If the amount 

15 of the credit of a cooperative organization (as 

16 so defined) determined under subsection (a)(3) 

17 for a taxable year is less than the amount of 

18 such credit shown on the return of the coopera19 tive organization for such year, an amount 

20 equal to the excess of—

21 ‘‘(i) such reduction, over 

22 ‘‘(ii) the amount not apportioned to 

23 such patrons under subparagraph (A) for 

24 the taxable year,
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1 shall be treated as an increase in tax imposed 

2 by this chapter on the organization. Such in3 crease shall not be treated as tax imposed by 

4 this chapter for purposes of determining the 

5 amount of any credit under this subpart or sub6 part A, B, E, or G.’’. 

7 (b) DEFINITION OF SMALL ETHANOL PRODUCER; 

8 IMPROVEMENTS TO SMALL ETHANOL PRODUCER

9 CREDIT.—

10 (1) DEFINITION OF SMALL ETHANOL PRO11 DUCER.—Section 40(g)(1) of the Internal Revenue 

12 Code of 1986 (relating to eligible small ethanol pro13 ducer) is amended by striking ‘‘30,000,000’’ and in14 serting ‘‘60,000,000’’. 

15 (2) SMALL ETHANOL PRODUCER CREDIT NOT A

16 PASSIVE ACTIVITY CREDIT.—Clause (i) of section 

17 469(d)(2)(A) of such Code (relating to passive activ18 ity credit) is amended by striking ‘‘subpart D’’ and 

19 inserting ‘‘subpart D, other than section 40(a)(3),’’. 

20 (3) ALLOWING CREDIT AGAINST MINIMUM

21 TAX.—

22 (A) IN GENERAL.—Subsection (c) of sec23 tion 38 of such Code (relating to limitation 

24 based on amount of tax) is amended by redesig-
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1 nating paragraph (4) as paragraph (5) and by 

2 inserting after paragraph (3) the following: 

3 ‘‘(4) SPECIAL RULES FOR SMALL ETHANOL

4 PRODUCER CREDIT.—

5 ‘‘(A) IN GENERAL.—In the case of the 

6 small ethanol producer credit—

7 ‘‘(i) this section and section 39 shall 

8 be applied separately with respect to the 

9 credit, and 

10 ‘‘(ii) in applying paragraph (1) to the 

11 credit—

12 ‘‘(I) subparagraphs (A) and (B) 

13 thereof shall not apply, and

14 ‘‘(II) the limitation under para15 graph (1) (as modified by subclause 

16 (I)) shall be reduced by the credit al17 lowed under subsection (a) for the 

18 taxable year (other than the small 

19 ethanol producer credit). 

20 ‘‘(B) SMALL ETHANOL PRODUCER CRED21 IT.—For purposes of this subsection, the term 

22 ‘small ethanol producer credit’ means the credit 

23 allowable under subsection (a) by reason of sec24 tion 40(a)(3).’’. 
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1 (B) CONFORMING AMENDMENT.—Sub2 clause (II) of section 38(c)(2)(A)(ii) and of sec3 tion 38(c)(3)(A)(ii) of such Code are both 

4 amended by inserting ‘‘or the small ethanol pro5 ducer credit’’ after ‘‘the New York Liberty 

6 Zone business employee credit’’. 

7 (4) SMALL ETHANOL PRODUCER CREDIT NOT

8 ADDED BACK TO INCOME UNDER SECTION 87.—Sec9 tion 87 of such Code (relating to income inclusion 

10 of alcohol fuel credit is amended to read as follows: 

11 ‘‘SEC. 87. ALCOHOL FUEL CREDIT. 

12 ‘‘Gross income includes an amount equal to the sum 

13 of—

14 ‘‘(1) the amount of the alcohol mixture credit 

15 determined with respect to the taxpayer for the tax16 able year under section 40(a)(1), and 

17 ‘‘(2) the alcohol credit determined with respect 

18 to the taxpayer for the taxable year under section 

19 40(a)(2).’’. 

20 (c) CONFORMING AMENDMENT.—Section 1388 of the 

21 Internal Revenue Code of 1986 (relating to definitions and 

22 special rules for cooperative organizations) is amended by 

23 adding at the end the following: 

24 ‘‘(k) CROSS REFERENCE.—For provisions relating to 

25 the apportionment of the alcohol fuels credit between coop-
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1 erative organizations and their patrons, see section 

2 40(d)(6).’’

3 (d) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to taxable years beginning after 

5 December 31, 2003. 

6 SEC. 5. EXTENSION OF EXPENSING OF VEHICLE REFUEL7 ING PROPERTY FOR E85 ETHANOL. 

8 Subsection (f) of section 179A of the Internal Rev9 enue Code of 1986 (relating to termination) is amended 

10 by inserting before the period ‘‘(December 31, 2009, for 

11 property which is qualified clean-fuel vehicle refueling 

12 property with respect to fuel at least 85 percent of which 

13 is ethanol)’’. 

14 SEC. 6. REPEAL OF LIMITATION ON DEPOSITS INTO HIGH15 WAY TRUST FUND WITH RESPECT TO ALCO16 HOL FUELS. 

17 (a) IN GENERAL.—Paragraph (4) of section 9503(b) 

18 of the Internal Revenue Code of 1986 (relating to certain 

19 taxes not transferred to Highway Trust Fund) is amended 

20 by adding ‘‘and’’ at the end of subparagraph (C), by strik21 ing the comma at the end of subparagraph (D) and insert22 ing a period, and by striking subparagraphs (E) and (F). 
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1 (b) EFFECTIVE DATE.—The amendment made by 

2 subsection (a) shall apply to taxes received in the Treasury 

3 after December 31, 2003.

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