II 

113TH CONGRESS 

2D SESSION S. 2021 

To amend the Internal Revenue Code of 1986 to modify the incentives 

for the production of biodiesel. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 12, 2014 

Ms. CANTWELL (for herself and Mr. GRASSLEY) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to modify 

the incentives for the production of biodiesel. 

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 ‘‘Biodiesel Tax Incentive 

5 Reform and Extension Act of 2014’’. 

6 SEC. 2. REFORM OF BIODIESEL INCOME TAX INCENTIVES. 

7 (a) IN GENERAL.—Section 40A of the Internal Rev8 enue Code of 1986 is amended to read as follows: 


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1 ‘‘SEC. 40A. BIODIESEL PRODUCTION. 

2 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

3 biodiesel fuels credit determined under this section for the 

4 taxable year is $1.00 for each gallon of biodiesel produced 

5 by the taxpayer which during the taxable year— 

6 ‘‘(1) is sold by such producer to another per7 son— 

8 ‘‘(A) for use by such other person’s trade 

9 or business (other than casual off-farm produc10 tion), 

11 ‘‘(B) for use by such other person as a fuel 

12 in a trade or business, or 

13 ‘‘(C) who sells such biodiesel at retail to 

14 another person and places such biodiesel in the 

15 fuel tank of such other person, or 

16 ‘‘(2) is used or sold by such producer for any 

17 purpose described in paragraph (1). 

18 ‘‘(b) INCREASED CREDIT FOR SMALL PRODUCERS.— 

19 ‘‘(1) IN GENERAL.—In the case of any eligible 

20 small biodiesel producer, subsection (a) shall be ap21 plied by increasing the dollar amount contained 

22 therein by 10 cents. 

23 ‘‘(2) LIMITATION.—Paragraph (1) shall only 

24 apply with respect to the first 15,000,000 gallons of 

25 biodiesel produced by any eligible small biodiesel 

26 producer during any taxable year. 


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1 ‘‘(c) COORDINATION WITH CREDIT AGAINST EXCISE

2 TAX.—The amount of the credit determined under this 

3 section with respect to any biodiesel shall be reduced to 

4 take into account any benefit provided with respect to such 

5 biodiesel solely by reason of the application of section 

6 6426 or 6427(e). 

7 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur8 poses of this section— 

9 ‘‘(1) BIODIESEL.—The term ‘biodiesel’ means 

10 liquid fuel derived from biomass which meets— 

11 ‘‘(A) the registration requirements for 

12 fuels and fuel additives established by the Envi13 ronmental Protection Agency under section 211 

14 of the Clean Air Act (42 U.S.C. 7545), and 

15 ‘‘(B) the requirements of the American So16 ciety for Testing and Materials D6751. 

17 Such term shall not include any liquid with respect 

18 to which a credit may be determined under section 

19 40. 

20 ‘‘(2) BIODIESEL NOT USED FOR A QUALIFIED

21 PURPOSE.—If— 

22 ‘‘(A) any credit was determined with re23 spect to any biodiesel under this section, and 


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1 ‘‘(B) any person does not use such bio2 diesel for the purpose described in subsection 

3 (a), 

4 then there is hereby imposed on such person a tax 

5 equal to the product of the rate applicable under 

6 subsection (a) and the number of gallons of such 

7 biodiesel. 

8 ‘‘(3) PASS-THRU IN THE CASE OF ESTATES AND

9 TRUSTS.—Under regulations prescribed by the Sec10 retary, rules similar to the rules of subsection (d) of 

11 section 52 shall apply. 

12 ‘‘(4) LIMITATION TO BIODIESEL PRODUCED IN

13 THE UNITED STATES.—No credit shall be deter14 mined under this section with respect to any bio15 diesel unless such biodiesel is produced in the United 

16 States from raw feedstock. For purposes of this 

17 paragraph, the term ‘United States’ includes any 

18 possession of the United States. 

19 ‘‘(5) BIODIESEL TRANSFERS FROM AN IRS REG20 ISTERED BIODIESEL PRODUCTION FACILITY TO AN

21 IRS REGISTERED TERMINAL OR REFINERY.—The 

22 credit allowed under subsection (a) shall be allowed 

23 to the terminal or refinery referred to in section 

24 4081(a)(1)(B)(i) in instances where section 

25 4081(a)(1)(B)(iii) is applicable. The credit allowed 


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1 under subsection (a) cannot be claimed by a ter2 minal or refinery on fuel upon which the credit was 

3 previously claimed by a biodiesel producer. 

4 ‘‘(e) DEFINITIONS AND SPECIAL RULES FOR SMALL

5 BIODIESEL PRODUCERS.— 

6 ‘‘(1) ELIGIBLE SMALL BIODIESEL PRODUCER.— 

7 The term ‘eligible small biodiesel producer’ means a 

8 person who at all times during the taxable year has 

9 a productive capacity for biodiesel not in excess of 

10 60,000,000 gallons. 

11 ‘‘(2) AGGREGATION RULE.—For purposes of 

12 the 15,000,000 gallon limitation under subsection 

13 (b)(2) and the 60,000,000 gallon limitation under 

14 paragraph (1), all members of the same controlled 

15 group of corporations (within the meaning of section 

16 267(f)) and all persons under common control (with17 in the meaning of section 52(b) but determined by 

18 treating an interest of more than 50 percent as a 

19 controlling interest) shall be treated as 1 person. 

20 ‘‘(3) PARTNERSHIP, S CORPORATION, AND

21 OTHER PASS-THRU ENTITIES.—In the case of a 

22 partnership, trust, S corporation, or other pass-thru 

23 entity, the limitations contained in subsection (b)(2) 

24 and paragraph (1) shall be applied at the entity level 

25 and at the partner or similar level. 


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1 ‘‘(4) ALLOCATION.—For purposes of this sub2 section, in the case of a facility in which more than 

3 1 person has an interest, productive capacity shall 

4 be allocated among such persons in such manner as 

5 the Secretary may prescribe. 

6 ‘‘(5) REGULATIONS.—The Secretary may pre7 scribe such regulations as may be necessary— 

8 ‘‘(A) to prevent the credit provided for in 

9 subsection (b) from directly or indirectly bene10 fitting any person with a direct or indirect pro11 ductive capacity of more than 60,000,000 gal12 lons of biodiesel during the taxable year, or 

13 ‘‘(B) to prevent any person from directly 

14 or indirectly benefitting with respect to more 

15 than 15,000,000 gallons during the taxable 

16 year. 

17 ‘‘(6) ALLOCATION OF SMALL BIODIESEL CREDIT

18 TO PATRONS OF COOPERATIVE.— 

19 ‘‘(A) ELECTION TO ALLOCATE.— 

20 ‘‘(i) IN GENERAL.—In the case of a 

21 cooperative organization described in sec22 tion 1381(a), any portion of the increase 

23 determined under subsection (b) for the 

24 taxable year may, at the election of the or25 ganization, be apportioned pro rata among 


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1 patrons of the organization on the basis of 

2 the quantity or value of business done with 

3 or for such patrons for the taxable year. 

4 ‘‘(ii) FORM AND EFFECT OF ELEC5 TION.—An election under clause (i) for any 

6 taxable year shall be made on a timely 

7 filed return for such year. Such election, 

8 once made, shall be irrevocable for such 

9 taxable year. Such election shall not take 

10 effect unless the organization designates 

11 the apportionment as such in a written no12 tice mailed to its patrons during the pay13 ment period described in section 1382(d). 

14 ‘‘(B) TREATMENT OF ORGANIZATIONS AND

15 PATRONS.— 

16 ‘‘(i) ORGANIZATIONS.—The amount of 

17 the credit not apportioned to patrons pur18 suant to subparagraph (A) shall be in19 cluded in the amount determined under 

20 subsection (b) for the taxable year of the 

21 organization. 

22 ‘‘(ii) PATRONS.—The amount of the 

23 credit apportioned to patrons pursuant to 

24 subparagraph (A) shall be included in the 

25 amount determined under such subsection 


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1 for the first taxable year of each patron 

2 ending on or after the last day of the pay3 ment period (as defined in section 

4 1382(d)) for the taxable year of the orga5 nization or, if earlier, for the taxable year 

6 of each patron ending on or after the date 

7 on which the patron receives notice from 

8 the cooperative of the apportionment. 

9 ‘‘(iii) SPECIAL RULES FOR DECREASE

10 IN CREDITS FOR TAXABLE YEAR.—If the 

11 amount of the credit of the organization 

12 determined under such subsection for a 

13 taxable year is less than the amount of 

14 such credit shown on the return of the or15 ganization for such year, an amount equal 

16 to the excess of— 

17 ‘‘(I) such reduction, over 

18 ‘‘(II) the amount not apportioned 

19 to such patrons under subparagraph 

20 (A) for the taxable year, shall be 

21 treated as an increase in tax imposed 

22 by this chapter on the organization. 

23 Such increase shall not be treated as tax 

24 imposed by this chapter for purposes of deVerDate Mar 15 2010 06:01 Feb 15, 2014 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2021.IS S2021

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1 termining the amount of any credit under 

2 this chapter or for purposes of section 55. 

3 ‘‘(f) RENEWABLE DIESEL.—For purposes of this 

4 title— 

5 ‘‘(1) TREATMENT IN THE SAME MANNER AS

6 BIODIESEL.—Renewable diesel shall be treated in 

7 the same manner as biodiesel. 

8 ‘‘(2) RENEWABLE DIESEL DEFINED.—The term 

9 ‘renewable diesel’ means liquid fuel derived from bio10 mass which meets— 

11 ‘‘(A) the registration requirements for 

12 fuels and fuel additives established by the Envi13 ronmental Protection Agency under section 211 

14 of the Clean Air Act (42 U.S.C. 7545), and 

15 ‘‘(B) the requirements of the American So16 ciety for Testing and Materials D975 or D396, 

17 or other equivalent standard approved by the 

18 Secretary. 

19 Such term shall not include any liquid with respect 

20 to which a credit may be determined under section 

21 40. Such term does not include any fuel derived 

22 from coprocessing biomass with a feedstock which is 

23 not biomass. For purposes of this paragraph, the 

24 term ‘biomass’ has the meaning given such term by 

25 section 45K(c)(3). 


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1 ‘‘(3) CERTAIN AVIATION FUEL.—Except as pro2 vided in the last 3 sentences of paragraph (2), the 

3 term ‘renewable diesel’ shall include fuel derived 

4 from biomass which meets the requirements of a De5 partment of Defense specification for military jet 

6 fuel or an American Society for Testing and Mate7 rials specification for aviation turbine fuel. 

8 ‘‘(g) TERMINATION.—This section shall not apply to 

9 any sale or use after December 31, 2017.’’. 

10 (b) CLERICAL AMENDMENT.—The table of sections 

11 for subpart D of part IV of subchapter A of chapter 1 

12 of the Internal Revenue Code of 1986 is amended by strik13 ing the item relating to section 40A and inserting the fol14 lowing new item: 

‘‘Sec. 40A. Biodiesel production.’’. 

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

16 this section shall apply to biodiesel sold or used after De17 cember 31, 2013. 

18 SEC. 3. REFORM OF BIODIESEL EXCISE TAX INCENTIVES. 

19 (a) IN GENERAL.—Subsection (c) of section 6426 of 

20 the Internal Revenue Code of 1986 is amended to read 

21 as follows: 

22 ‘‘(c) BIODIESEL CREDIT.— 

23 ‘‘(1) IN GENERAL.—For purposes of this sec24 tion, the biodiesel credit is $1.00 for each gallon of 

25 biodiesel produced by the taxpayer and which— 


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1 ‘‘(A) is sold by such producer to another 

2 person— 

3 ‘‘(i) for use by such other person’s 

4 trade or business (other than casual off5 farm production), 

6 ‘‘(ii) for use by such other person as 

7 a fuel in a trade or business, or 

8 ‘‘(iii) who sells such biodiesel at retail 

9 to another person and places such biodiesel 

10 in the fuel tank of such other person, or 

11 ‘‘(B) is used or sold by such producer for 

12 any purpose described in subparagraph (A). 

13 ‘‘(2) DEFINITIONS.—Any term used in this sub14 section which is also used in section 40A shall have 

15 the meaning given such term by section 40A. 

16 ‘‘(3) BIODIESEL TRANSFERS FROM AN IRS REG17 ISTERED BIODIESEL PRODUCTION FACILITY TO AN

18 IRS REGISTERED TERMINAL.—The credit allowed 

19 under this subsection can be claimed by a registered 

20 terminal or refinery in instances where section 

21 4081(a)(1)(B)(iii) is applicable. The credit allowed 

22 under this subsection cannot be claimed by a ter23 minal or refinery on fuel upon which the credit was 

24 previously claimed by a biodiesel producer. 


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1 ‘‘(4) TERMINATION.—This subsection shall not 

2 apply to any sale, use, or removal for any period 

3 after December 31, 2017.’’. 

4 (b) PAYMENT OF CREDIT.—Subsection (e) of section 

5 6427 of the Internal Revenue Code of 1986 is amended— 

6 (1) by striking ‘‘or the biodiesel mixture credit’’ 

7 in paragraph (1), 

8 (2) by redesignating paragraphs (3) through 

9 (6) as paragraphs (4) through (7), respectively, and 

10 by inserting after paragraph (2) the following new 

11 paragraph: 

12 ‘‘(3) BIODIESEL CREDIT.—If any person pro13 duces biodiesel and sells or uses such biodiesel as 

14 provided in section 6426(c), the Secretary shall pay 

15 (without interest) to such person an amount equal to 

16 the biodiesel credit with respect to such biodiesel.’’, 

17 (3) by striking ‘‘paragraph (1) or (2)’’ each 

18 place it appears in paragraphs (4) and (6), as redes19 ignated by paragraph (2), and inserting ‘‘paragraph 

20 (1), (2), or (3)’’, 

21 (4) by striking ‘‘alternative fuel’’ each place it 

22 appears in paragraphs (4) and (6), as redesignated 

23 by paragraph (2), and inserting ‘‘fuel’’, 

24 (5) by striking ‘‘biodiesel mixture (as defined in 

25 section 6426(c)(3))’’ in paragraph (7)(B), as so reVerDate Mar 15 2010 06:01 Feb 15, 2014 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S2021.IS S2021

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1 designated, and inserting ‘‘biodiesel (within the 

2 meaning of section 40A)’’, and 

3 (6) by striking ‘‘2013’’ in paragraph (7)(B), as 

4 so redesignated, and inserting ‘‘2017’’. 

5 (c) EXEMPTION FOR BIODIESEL TRANSFERRED

6 FROM A REGISTERED PRODUCER TO A REGISTERED TER7 MINAL.—Subparagraph (B) of section 4081(a)(1) of the 

8 Internal Revenue Code of 1986 is amended— 

9 (1) by striking ‘‘clause (ii)’’ in clause (i) and in10 serting ‘‘clauses (ii) and (iii)’’, and 

11 (2) by adding at the end the following new 

12 clause: 

13 ‘‘(iii) EXEMPTIONS FOR BIODIESEL

14 TRANSFERRED FROM A REGISTERED PRO15 DUCER TO A REGISTERED TERMINAL.— 

16 The tax imposed by this paragraph shall 

17 not apply to any removal or entry of bio18 diesel (as defined in section 40A(d)(1)) 

19 transferred in bulk (without regard to the 

20 manner of such transfer) to a terminal or 

21 refinery if— 

22 ‘‘(I) such biodiesel was produced 

23 by a person who is registered under 

24 section 4101 as a producer of bio25 diesel and who provides reporting 


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1 under the ExStars fuel reporting sys2 tem of the Internal Revenue Service, 

3 and 

4 ‘‘(II) the operator of such ter5 minal or refinery is registered under 

6 section 4101.’’. 

7 (d) PRODUCER REGISTRATION REQUIREMENT.— 

8 Subsection (a) of section 6426 of the Internal Revenue 

9 Code of 1986 is amended by striking ‘‘subsections (d) and 

10 (e)’’ in the flush sentence at the end and inserting ‘‘sub11 sections (c), (d), and (e)’’. 

12 (e) RECAPTURE.—Subsection (f) of section 6426 of 

13 the Internal Revenue Code of 1986 is amended to read 

14 as follows: 

15 ‘‘(f) RECAPTURE.— 

16 ‘‘(1) ALCOHOL FUEL MIXTURES.—If— 

17 ‘‘(A) any credit was determined under this 

18 section with respect to alcohol used in the pro19 duction of any alcohol fuel mixture, and 

20 ‘‘(B) any person— 

21 ‘‘(i) separates the alcohol from the 

22 mixture, or 

23 ‘‘(ii) without separation, uses the mix24 ture other than as a fuel, 


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1 then there is hereby imposed on such person a tax 

2 equal to the product of the applicable amount and 

3 the number of gallons of such alcohol. 

4 ‘‘(2) BIODIESEL.—If any credit was determined 

5 under this section with respect to the production of 

6 any biodiesel and any person does not use such bio7 diesel for a purpose described in subsection (c)(1), 

8 then there is hereby imposed on such person a tax 

9 equal to $1 for each gallon of such biodiesel. 

10 ‘‘(3) APPLICABLE LAWS.—All provisions of law, 

11 including penalties, shall, insofar as applicable and 

12 not inconsistent with this section, apply in respect of 

13 any tax imposed under paragraph (1) or (2) as if 

14 such tax were imposed by section 4081 and not by 

15 this section.’’. 

16 (f) CLERICAL AMENDMENTS.— 

17 (1) The heading of section 6426 of the Internal 

18 Revenue Code of 1986 is amended by striking ‘‘AL19 COHOL FUEL, BIODIESEL, AND ALTERNATIVE

20 FUEL MIXTURES’’ and inserting ‘‘ALCOHOL FUEL

21 MIXTURES, BIODIESEL PRODUCTION, AND AL22 TERNATIVE FUEL MIXTURES’’. 

23 (2) The item relating to section 6426 in the 

24 table of sections for subchapter B of chapter 65 of 

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1 diesel, and alternative fuel mixtures’’ and inserting 

2 ‘‘alcohol fuel mixtures, biodiesel production, and al3 ternative fuel mixtures’’. 

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

5 this section shall apply to biodiesel sold or used after De6 cember 31, 2013. 

7 SEC. 4. BIODIESEL TREATED AS TAXABLE FUEL. 

8 (a) BIODIESEL TREATED AS TAXABLE FUEL.— 

9 Clause (i) of section 4083(a)(3)(A) of the Internal Rev10 enue Code of 1986 is amended by inserting ‘‘, including 

11 biodiesel (as defined in section 6426(c)(3)),’’ after ‘‘(other 

12 than gasoline)’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 this section shall apply to biodiesel removed, entered, or 

15 sold after the date which is 6 months after the date of 

16 the enactment of this Act. 

Æ 


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