II

106TH CONGRESS

2D SESSION S. 2884

To amend the Internal Revenue Code of 1986 to allow allocation of small

ethanol producer credit to patrons of cooperative, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 18, 2000

Mr. GRAMS 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 allow allocation of small ethanol producer credit to patrons of cooperative, and for other purposes.

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

3 SECTION 1. SMALL ETHANOL PRODUCER CREDIT.

4 (a) ALLOCATION OF ALCOHOL FUELS CREDIT TO

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

6 Revenue Code of 1986 (relating to definitions and special

7 rules for eligible small ethanol producer credit) is amended

8 by adding at the end the following:

9 ‘‘(6) ALLOCATION OF SMALL ETHANOL PRO10 DUCER CREDIT TO PATRONS OF COOPERATIVE.—
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1 ‘‘(A) ELECTION TO ALLOCATE.—

2 ‘‘(i) IN GENERAL.—Notwithstanding

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

4 organization described in section 1381(a),

5 any portion of the credit determined under

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

7 at the election of the organization, be ap8 portioned pro rata among patrons of the

9 organization on the basis of the quantity

10 or value of business done with or for such

11 patrons for the taxable year.

12 ‘‘(ii) FORM AND EFFECT OF ELEC13 TION.—An election under clause (i) for any

14 taxable year shall be made on a timely

15 filed return for such year. Such election,

16 once made, shall be irrevocable for such

17 taxable year.

18 ‘‘(iii) SPECIAL RULE FOR 1998 AND

19 1999.—Notwithstanding clause (ii), an elec20 tion for any taxable year ending prior to

21 the date of the enactment of this para22 graph may be made at any time before the

23 expiration of the 3-year period beginning

24 on the last date prescribed by law for filing

25 the return of the taxpayer for such taxable
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1 year (determined without regard to exten2 sions) by filing an amended return for

3 such year.

4 ‘‘(B) TREATMENT OF ORGANIZATIONS AND

5 PATRONS.—The amount of the credit appor6 tioned to patrons under subparagraph (A)—

7 ‘‘(i) shall not be included in the

8 amount determined under subsection (a)

9 with respect to the organization for the

10 taxable year,

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

12 determined under subsection (a) for the

13 taxable year of each patron for which the

14 patronage dividends for the taxable year

15 described in subparagraph (A) are included

16 in gross income, and

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

18 of such patrons for the taxable year in the

19 manner and to the extent provided in sec20 tion 87.

21 ‘‘(C) SPECIAL RULES FOR DECREASE IN

22 CREDITS FOR TAXABLE YEAR.—If the amount

23 of the credit of a cooperative organization (as

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

25 for a taxable year is less than the amount of
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1 such credit shown on the return of the coopera2 tive organization for such year, an amount

3 equal to the excess of—

4 ‘‘(i) such reduction, over

5 ‘‘(ii) the amount not apportioned to

6 such patrons under subparagraph (A) for

7 the taxable year,

8 shall be treated as an increase in tax imposed

9 by this chapter on the organization. Such in10 crease shall not be treated as tax imposed by

11 this chapter for purposes of determining the

12 amount of any credit under this subpart or sub13 part A, B, E, or G.’’.

14 (b) DEFINITION OF SMALL ETHANOL PRODUCER;

15 IMPROVEMENTS TO SMALL ETHANOL PRODUCER CRED16 IT.—

17 (1) DEFINITION OF SMALL ETHANOL PRO18 DUCER.—Section 40(g)(1) of the Internal Revenue

19 Code of 1986 (relating to eligible small ethanol pro20 ducer) is amended by striking ‘‘30,000,000’’ and in21 serting ‘‘60,000,000’’.

22 (2) SMALL ETHANOL PRODUCER CREDIT NOT A

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

24 469(d)(2)(A) of such Code (relating to passive activ-
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1 ity credit) is amended by striking ‘‘subpart D’’ and

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

3 (3) ALLOWING CREDIT AGAINST MINIMUM

4 TAX.—

5 (A) IN GENERAL.—Subsection (c) of sec6 tion 38 of such Code (relating to limitation

7 based on amount of tax) is amended by redesig8 nating paragraph (3) as paragraph (4) and by

9 inserting after paragraph (2) the following:

10 ‘‘(3) SPECIAL RULES FOR SMALL ETHANOL

11 PRODUCER CREDIT.—

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

13 small ethanol producer credit—

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

15 be applied separately with respect to the

16 credit, and

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

18 credit—

19 ‘‘(I) subparagraphs (A) and (B)

20 thereof shall not apply, and

21 ‘‘(II) the limitation under para22 graph (1) (as modified by subclause

23 (I)) shall be reduced by the credit al24 lowed under subsection (a) for the
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1 taxable year (other than the small

2 ethanol producer credit).

3 ‘‘(B) SMALL ETHANOL PRODUCER CRED4 IT.—For purposes of this subsection, the term

5 ‘small ethanol producer credit’ means the credit

6 allowable under subsection (a) by reason of sec7 tion 40(a)(3).’’.

8 (B) CONFORMING AMENDMENT.—Sub9 clause (II) of section 38(c)(2)(A)(ii) of such

10 Code is amended by inserting ‘‘or the small eth11 anol producer credit’’ after ‘‘employment

12 credit’’.

13 (4) SMALL ETHANOL PRODUCER CREDIT NOT

14 ADDED BACK TO INCOME UNDER SECTION 87.—Sec15 tion 87 of such Code (relating to income inclusion

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

17 ‘‘SEC. 87. ALCOHOL FUEL CREDIT.

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

19 of—

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

21 determined with respect to the taxpayer for the tax22 able year under section 40(a)(1), and

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

24 to the taxpayer for the taxable year under section

25 40(a)(2).’’.
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1 (c) CONFORMING AMENDMENT.—Section 1388 of the

2 Internal Revenue Code of 1986 (relating to definitions and

3 special rules for cooperative organizations) is amended by

4 adding at the end the following:

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

6 the apportionment of the alcohol fuels credit between coop7 erative organizations and their patrons, see section 40(d)

8 (6).’’

9 (d) EFFECTIVE DATES.—

10 (1) IN GENERAL.—Except as provided in para11 graph (2), the amendments made by this section

12 shall apply to taxable years beginning after Decem13 ber 31, 1997.

14 (2) CERTAIN PROVISIONS.—The amendments

15 made by paragraphs (1) and (4) of subsection (b)

16 shall apply to taxable years ending after the date of

17 the enactment of this Act.

Æ