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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3119 Introduced in House (IH)]

108th CONGRESS
  1st Session
                                H. R. 3119

 To amend the Internal Revenue Code of 1986 to allow a credit against 
                income tax for biodiesel used as a fuel.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           September 17, 2003

Mr. Hulshof (for himself, Mr. Pomeroy, Mr. Nussle, Mr. Young of Alaska, 
Mr. Oberstar, Mr. Stenholm, Mrs. Emerson, Mr. Graves, Mr. Skelton, Mr. 
    Akin, and Mr. Boehner) 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 allow a credit against 
                income tax for biodiesel used as a fuel.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Renewable Fuels and Transportation 
Infrastructure Enhancement Act of 2003''.

SEC. 2. ALCOHOL FUEL AND BIODIESEL MIXTURES EXCISE TAX CREDIT.

    (a) In General.--Subchapter B of chapter 65 of the Internal Revenue 
Code of 1986 (relating to rules of special application) is amended by 
inserting after section 6425 the following new section:

``SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL MIXTURES.

    ``(a) Allowance of Credits.--There shall be allowed as a credit 
against the tax imposed by section 4081 an amount equal to the sum of--
            ``(1) the alcohol fuel mixture credit, plus
            ``(2) the biodiesel mixture credit.
    ``(b) Alcohol Fuel Mixture Credit.--
            ``(1) In general.--For purposes of this section, the 
        alcohol fuel mixture credit is the product of the applicable 
        amount and the number of gallons of alcohol used by the 
        taxpayer in producing any alcohol fuel mixture.
            ``(2) Applicable amount.--For purposes of this subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the applicable amount is 52 cents (51 
                cents in the case of any sale or use after 2004).
                    ``(B) Mixtures not containing ethanol.--In the case 
                of an alcohol fuel mixture in which none of the alcohol 
                consists of ethanol, the applicable amount is 60 cents.
            ``(3) Alcohol fuel mixture.--For purposes of this 
        subsection, the term `alcohol fuel mixture' means a mixture of 
        alcohol and a taxable fuel which--
                    ``(A) is sold by the taxpayer producing such 
                mixture to any person for use as a fuel,
                    ``(B) is used as a fuel by the taxpayer producing 
                such mixture, or
                    ``(C) is removed from the refinery by a person 
                producing such mixture.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Alcohol.--The term `alcohol' includes 
                methanol and ethanol but does not include--
                            ``(i) alcohol produced from petroleum, 
                        natural gas, or coal (including peat), or
                            ``(ii) alcohol with a proof of less than 
                        190 (determined without regard to any added 
                        denaturants).
                Such term also includes an alcohol gallon equivalent of 
                ethyl tertiary butyl ether or other ethers produced 
                from such alcohol.
                    ``(B) Taxable fuel.--The term `taxable fuel' has 
                the meaning given such term by section 4083(a)(1).
            ``(5) Termination.--This subsection shall not apply to any 
        sale or use for any period after December 31, 2010.
    ``(c) Biodiesel Mixture Credit.--
            ``(1) In general.--For purposes of this section, the 
        biodiesel mixture credit is the product of the applicable 
        amount and the number of gallons of biodiesel used by the 
        taxpayer in producing any qualified biodiesel mixture.
            ``(2) Applicable amount.--For purposes of this subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the applicable amount is 50 cents.
                    ``(B) Amount for agri-biodiesel.--
                            ``(i) In general.--Subject to clause (ii), 
                        in the case of any biodiesel which is agri-
                        biodiesel, the applicable amount is $1.00.
                            ``(ii) Certification for agri-biodiesel.--
                        Clause (i) shall apply only if the taxpayer 
                        described in paragraph (1) obtains a 
                        certification (in such form and manner as 
                        prescribed by the Secretary) from the producer 
                        of the agri-biodiesel which identifies the 
                        product produced.
            ``(3) Definitions.--Any term used in this subsection which 
        is also used in section 40A shall have the meaning given such 
        term by section 40A.
            ``(4) Termination.--This subsection shall not apply to any 
        sale or use for any period after December 31, 2005.
    ``(d) Mixture Not Used as a Fuel, etc.--
            ``(1) Imposition of tax.--If--
                    ``(A) any credit was determined under this section 
                with respect to alcohol or biodiesel used in the 
                production of any alcohol fuel mixture or qualified 
                biodiesel mixture, respectively, and
                    ``(B) any person--
                            ``(i) separates such alcohol or biodiesel 
                        from the mixture, or
                            ``(ii) without separation, uses the mixture 
                        other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to the product of the applicable amount and the number 
                of gallons of such alcohol or biodiesel.
            ``(2) Applicable laws.--All provisions of law, including 
        penalties, shall, insofar as applicable and not inconsistent 
        with this section, apply in respect of any tax imposed under 
        paragraph (1) as if such tax were imposed by section 4081 and 
        not by this section.''.
    (b) Registration Requirement.--Section 4101(a) of such Code 
(relating to registration) is amended by inserting ``and every person 
producing biodiesel (as defined in section 40A(d)(1)) or alcohol (as 
defined in section 6426(b)(4)(A))'' after ``4091''.
    (c) Conforming Amendments.--
            (1) Section 40(c) of such Code is amended by striking 
        ``section 4081(c), or section 4091(c)'' and inserting ``section 
        4091(c), section 6426, section 6427(e), or section 6427(f)''.
            (2) Section 40(d)(4)(B) of such Code is amended by striking 
        ``or 4081(c)''.
            (3) Section 40(e)(1) of such Code is amended--
                    (A) by striking ``2007'' in subparagraph (A) and 
                inserting ``2010'', and
                    (B) by striking ``2008'' in subparagraph (B) and 
                inserting ``2011''.
            (4) Section 40(h) of such Code is amended--
                    (A) by striking ``2007'' in paragraph (1) and 
                inserting ``2010'', and
                    (B) by striking ``, 2006, or 2007'' in the table 
                contained in paragraph (2) and inserting ``through 
                2010''.
            (5) Section 4041(b)(2)(B) of such Code is amended by 
        striking ``a substance other than petroleum or natural gas'' 
        and inserting ``coal (including peat)''.
            (6) Paragraph (1) of section 4041(k) of such Code is 
        amended to read as follows:
            ``(1) In general.--Under regulations prescribed by the 
        Secretary, in the case of the sale or use of any liquid at 
        least 10 percent of which consists of alcohol (as defined in 
        section 6426(b)(4)(A)), the rate of the tax imposed by 
        subsection (c)(1) shall be the comparable rate under section 
        4091(c).''.
            (7) Section 4081 of such Code is amended by striking 
        subsection (c).
            (8) Paragraph (2) of section 4083(a) of such Code is 
        amended to read as follows:
            ``(2) Gasoline.--The term `gasoline'--
                    ``(A) includes any gasoline blend, other than 
                qualified methanol or ethanol fuel (as defined in 
                section 4041(b)(2)(B)) or a denaturant of alcohol (as 
                defined in section 6426(b)(4)(A)), and
                    ``(B) includes, to the extent prescribed in 
                regulations--
                            ``(i) any gasoline blend stock, and
                            ``(ii) any product commonly used as an 
                        additive in gasoline.
        For purposes of subparagraph (B)(i), the term `gasoline blend 
        stock' means any petroleum product component of gasoline.''.
            (9) Section 6427 of such Code is amended by inserting after 
        subsection (d) the following new subsection:
    ``(e) Alcohol or Biodiesel Used To Produce Alcohol Fuel and 
Biodiesel Mixtures or Used as Fuels.--Except as provided in subsection 
(k)--
            ``(1) Used to produce a mixture.--If any person produces a 
        mixture described in section 6426 in such person's trade or 
        business, the Secretary shall pay (without interest) to such 
        person an amount equal to the alcohol fuel mixture credit or 
        the biodiesel mixture credit with respect to such mixture.
            ``(2) Used as fuel.--If alcohol (as defined in section 
        40(d)(1)) or biodiesel (as defined in section 40A(d)(1)) or 
        agri-biodiesel (as defined in section 40A(d)(2)) which is not 
        in a mixture with a taxable fuel (as defined in section 
        4083(a)(1))--
                    ``(A) is used by any person as a fuel in a trade or 
                business, or
                    ``(B) is sold by any person at retail to another 
                person and placed in the fuel tank of such person's 
                vehicle,
        the Secretary shall pay (without interest) to such person an 
        amount equal to the alcohol credit (as determined under section 
        40(b)(2)) or the biodiesel credit (as determined under section 
        40A(b)(2)) with respect to such fuel.
            ``(3) Coordination with other repayment provisions.--No 
        amount shall be payable for any period under paragraph (1) with 
        respect to any mixture with respect to which an amount may be 
        claimed by such person as a credit under section 6426 for such 
        period.
            ``(4) Termination.--This subsection shall not apply with 
        respect to--
                    ``(A) any alcohol fuel mixture (as defined in 
                section 6426(b)(3)) or alcohol (as so defined) sold or 
                used after December 31, 2010, and
                    ``(B) any qualified biodiesel mixture (within the 
                meaning of section 6426(c)(1)) or biodiesel (as so 
                defined) or agri-biodiesel (as so defined) sold or used 
                after December 31, 2005.''.
            (10) Subsection (f) of section 6427 of such Code is amended 
        to read as follows:
    ``(f) Aviation Fuel Used To Produce Certain Alcohol Fuels.--
            ``(1) In general.--Except as provided in subsection (k), if 
        any aviation fuel on which tax was imposed by section 4091 at 
        the regular tax rate is used by any person in producing a 
        mixture described in section 4091(c)(1)(A) which is sold or 
        used in such person's trade or business, the Secretary shall 
        pay (without interest) to such person an amount equal to the 
        excess of the regular tax rate over the incentive tax rate with 
        respect to such fuel.
            ``(2) Definitions.--For purposes of paragraph (1)--
                    ``(A) Regular tax rate.--The term `regular tax 
                rate' means the aggregate rate of tax imposed by 
section 4091 determined without regard to subsection (c) thereof.
                    ``(B) Incentive tax rate.--The term `incentive tax 
                rate' means the aggregate rate of tax imposed by 
                section 4091 with respect to fuel described in 
                subsection (c)(2) thereof.
            ``(3) Coordination with other repayment provisions.--No 
        amount shall be payable under paragraph (1) with respect to any 
        aviation fuel with respect to which an amount is payable under 
        subsection (d) or (l).
            ``(4) Termination.--This subsection shall not apply with 
        respect to any mixture sold or used after September 30, 
        2007.''.
            (11) Paragraphs (1) and (2) of section 6427(i) of such Code 
        are amended by inserting ``(f),'' after ``(d),''.
            (12) Section 6427(i)(3) of such Code is amended--
                    (A) by striking ``subsection (f)'' both places it 
                appears in subparagraph (A) and inserting ``subsection 
                (e)(1)'',
                    (B) by striking ``gasoline, diesel fuel, or 
                kerosene used to produce a qualified alcohol mixture 
                (as defined in section 4081(c)(3))'' in subparagraph 
                (A) and inserting ``a mixture described in section 
                6426'',
                    (C) by striking ``subsection (f)(1)'' in 
                subparagraph (B) and inserting ``subsection (e)(1)'',
                    (D) by striking ``20 days of the date of the filing 
                of such claim'' in subparagraph (B) and inserting ``45 
                days of the date of the filing of such claim (20 days 
                in the case of an electronic claim)'', and
                    (E) by striking ``alcohol mixture'' in the heading 
                and inserting ``alcohol fuel and biodiesel mixture''.
            (13) Section 6427(o) of such Code is amended--
                    (A) by striking paragraph (1) and inserting the 
                following new paragraph:
            ``(1) any tax is imposed by section 4081, and'',
                    (B) by striking ``such gasohol'' in paragraph (2) 
                and inserting ``the alcohol fuel mixture (as defined in 
                section 6426(b)(3))'',
                    (C) by striking ``gasohol'' both places it appears 
                in the matter following paragraph (2) and inserting 
                ``alcohol fuel mixture'', and
                    (D) by striking ``Gasohol'' in the heading and 
                inserting ``Alcohol Fuel Mixture''.
            (14) Section 9503(b)(1) of such Code is amended by adding 
        at the end the following new flush sentence:
        ``For purposes of this paragraph, taxes received under sections 
        4041 and 4081 shall be determined without reduction for credits 
        under section 6426.''.
            (15) Section 9503(b)(4) of such Code is amended--
                    (A) by adding ``or'' at the end of subparagraph 
                (C),
                    (B) by striking the comma at the end of 
                subparagraph (D)(iii) and inserting a period, and
                    (C) by striking subparagraphs (E) and (F).
            (16) Section 9503(c)(2)(A)(i)(III) of such Code is amended 
        by inserting ``(other than subsection (e) thereof)'' after 
        ``section 6427''.
            (17) Section 9503(e)(2) of such Code is amended by striking 
        subparagraph (B) and by redesignating subparagraphs (C), (D), 
        and (E) as subparagraphs (B), (C), and (D), respectively.
            (18) The table of sections for subchapter B of chapter 65 
        of such Code is amended by inserting after the item relating to 
        section 6425 the following new item:

        ``Sec. 6426. Credit for alcohol fuel and biodiesel mixtures.''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to fuel sold or 
        used after December 31, 2003.
            (2) Repeal of general fund retention of certain alcohol 
        fuels taxes.--The amendments made by subsection (c)(15) shall 
        apply to fuel sold or used after September 30, 2003.
    (e) Format for Filing.--The Secretary of the Treasury shall 
describe the electronic format for filing claims described in section 
6427(i)(3)(B) of the Internal Revenue Code of 1986 (as amended by 
subsection (b)(12)(C)) not later than October 31, 2003.

SEC. 3. INCENTIVES FOR BIODIESEL.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by inserting after section 40 the following new 
section:

``SEC. 40A. BIODIESEL USED AS FUEL.

    ``(a) General Rule.--For purposes of section 38, the biodiesel 
fuels credit determined under this section for the taxable year is an 
amount equal to the sum of--
            ``(1) the biodiesel mixture credit, plus
            ``(2) the biodiesel credit.
    ``(b) Definition of Biodiesel Mixture Credit and Biodiesel 
Credit.--For purposes of this section--
            ``(1) Biodiesel mixture credit.--
                    ``(A) In general.--The biodiesel mixture credit of 
                any taxpayer for any taxable year is 50 cents for each 
                gallon of biodiesel used by the taxpayer in the 
                production of a qualified biodiesel mixture.
                    ``(B) Qualified biodiesel mixture.--The term 
                `qualified biodiesel mixture' means a mixture of 
                biodiesel and diesel fuel which--
                            ``(i) is sold by the taxpayer producing 
                        such mixture to any person for use as a fuel,
                            ``(ii) is used as a fuel by the taxpayer 
                        producing such mixture, or
                            ``(iii) is removed from the refinery by a 
                        person producing such mixture.
                    ``(C) Sale or use must be in trade or business, 
                etc.--Biodiesel used in the production of a qualified 
                biodiesel mixture shall be taken into account--
                            ``(i) only if the sale or use described in 
                        subparagraph (B) is in a trade or business of 
                        the taxpayer, and
                            ``(ii) for the taxable year in which such 
                        sale or use occurs.
                    ``(D) Casual off-farm production not eligible.--No 
                credit shall be allowed under this section with respect 
                to any casual off-farm production of a qualified 
                biodiesel mixture.
            ``(2) Biodiesel credit.--
                    ``(A) In general.--The biodiesel credit of any 
                taxpayer for any taxable year is 50 cents for each 
                gallon of biodiesel which is not in a mixture with 
                diesel fuel and which during the taxable year--
                            ``(i) is used by the taxpayer as a fuel in 
                        a trade or business, or
                            ``(ii) is sold by the taxpayer at retail to 
                        a person and placed in the fuel tank of such 
                        person's vehicle.
                    ``(B) User credit not to apply to biodiesel sold at 
                retail.--No credit shall be allowed under subparagraph 
                (A)(i) with respect to any biodiesel which was sold in 
                a retail sale described in subparagraph (A)(ii).
            ``(3) Credit for agri-biodiesel.--
                    ``(A) In general.--Subject to subparagraph (B), in 
                the case of any biodiesel which is agri-biodiesel, 
                paragraphs (1)(A) and (2)(A) shall be applied by 
                substituting `$1.00' for `50 cents'.
                    ``(B) Certification for agri-biodiesel.--
                Subparagraph (A) shall apply only if the taxpayer 
                described in paragraph (1)(A) or (2)(A) obtains a 
                certification (in such form and manner as prescribed by 
                the Secretary) from the producer of the agri-biodiesel 
                which identifies the product produced.
    ``(c) Coordination With Credit Against Excise Tax.--The amount of 
the credit determined under this section with respect to any agri-
biodiesel shall, under regulations prescribed by the Secretary, be 
properly reduced to take into account any benefit provided with respect 
to such agri-biodiesel solely by reason of the application of section 
6426 or 6427(e).
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Biodiesel.--The term `biodiesel' means the monoalkyl 
        esters of long chain fatty acids derived from plant or animal 
        matter which meet--
                    ``(A) the registration requirements for fuels and 
                fuel additives established by the Environmental 
                Protection Agency under section 211 of the Clean Air 
                Act (42 U.S.C. 7545), and
                    ``(B) the requirements of the American Society of 
                Testing and Materials D6751.
            ``(2) Agri-biodiesel.--The term `agri-biodiesel' means 
        biodiesel derived solely from virgin oils. Such term shall 
        include esters derived from vegetable oils from soybeans, corn, 
        sunflower seeds, cottonseeds, canola, crambe, rapeseeds, 
        safflowers, flaxseeds, rice bran, and mustard seeds, and from 
        animal fats.
            ``(3) Mixture or biodiesel not used as a fuel, etc.--
                    ``(A) Mixtures.--If--
                            ``(i) any credit was determined under this 
                        section with respect to biodiesel used in the 
                        production of any qualified biodiesel mixture, 
                        and
                            ``(ii) any person--
                                    ``(I) separates such biodiesel from 
                                the mixture, or
                                    ``(II) without separation, uses the 
                                mixture other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to the product of the rate applicable under subsection 
                (b)(1)(A) and the number of gallons of the mixture.
                    ``(B) Biodiesel.--If--
                            ``(i) any credit was determined under this 
                        section with respect to the retail sale of any 
                        biodiesel, and
                            ``(ii) any person mixes such biodiesel or 
                        uses such biodiesel other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to the product of the rate applicable under subsection 
                (b)(1)(A) and the number of gallons of such biodiesel.
                    ``(C) Applicable laws.--All provisions of law, 
                including penalties, shall, insofar as applicable and 
                not inconsistent with this section, apply in respect of 
                any tax imposed under subparagraph (A) as if such tax 
                were imposed by section 4081 and not by this chapter.
            ``(4) Pass-thru in the case of estates and trusts.--Under 
        regulations prescribed by the Secretary, rules similar to the 
        rules of subsection (d) of section 52 shall apply.
    ``(e) Termination.--This section shall not apply to any fuel sold 
after December 31, 2005.''.
    (b) Credit Treated as Part of General Business Credit.--Section 
38(b) of such Code (relating to current year business credit) is 
amended by striking ``plus'' at the end of paragraph (14), by striking 
the period at the end of paragraph (15) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(16) the biodiesel fuels credit determined under section 
        40A(a).''.
    (c) Conforming Amendments.--
            (1) Section 39(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(11) No carryback of biodiesel fuels credit before 
        effective date.--No portion of the unused business credit for 
        any taxable year which is attributable to the biodiesel fuels 
        credit determined under section 40A may be carried back to a 
        taxable year ending on or before December 31, 2003.''.
            (2)(A) Section 87 is of such Code amended to read as 
        follows:

``SEC. 87. ALCOHOL AND BIODIESEL FUELS CREDITS.

    ``Gross income includes--
            ``(1) the amount of the alcohol fuel credit determined with 
        respect to the taxpayer for the taxable year under section 
        40(a), and
            ``(2) the biodiesel fuels credit determined with respect to 
        the taxpayer for the taxable year under section 40A(a).''.
            (B) The item relating to section 87 in the table of 
        sections for part II of subchapter B of chapter 1 of such Code 
        is amended by striking ``fuel credit'' and inserting ``and 
        biodiesel fuels credits''.
            (3) Section 196(c) of such Code is amended by striking 
        ``and'' at the end of paragraph (9), by striking the period at 
        the end of paragraph (10) and inserting ``, and'', and by 
        adding at the end the following new paragraph:
            ``(11) the biodiesel fuels credit determined under section 
        40A(a).''.
            (4) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding 
        after the item relating to section 40 the following new item:

                              ``Sec. 40A. Biodiesel used as fuel.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fuel sold after December 31, 2003, in taxable years ending 
after such date.
                                 <all>
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