I 

111TH CONGRESS 

1ST SESSION H. R. 4070 

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

for the production of biodiesel. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 16, 2009 

Mr. POMEROY (for himself and Mr. SHIMKUS) 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 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. REFORM OF BIODIESEL INCOME TAX INCEN4 TIVES. 

5 (a) IN GENERAL.—Section 40A of the Internal Rev6 enue Code of 1986 is amended to read as follows: 

7 ‘‘SEC. 40A. BIODIESEL PRODUCTION. 

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

9 biodiesel fuels credit determined under this section for the 


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

2 by the taxpayer and which during the taxable year— 

3 ‘‘(1) is sold by such producer to another per4 son— 

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

6 or business (other than casual off-farm produc7 tion), 

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

9 in a trade or business, or 

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

11 another person and places such biodiesel in the 

12 fuel tank of such other person, or 

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

14 purpose described in paragraph (1). 

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

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

17 small biodiesel producer, subsection (a) shall be ap18 plied by increasing the dollar amount contained 

19 therein by 10 cents. 

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

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

22 biodiesel produced by any eligible small biodiesel 

23 producer during any taxable year. 

24 ‘‘(c) COORDINATION WITH CREDIT AGAINST EXCISE

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


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1 section with respect to any biodiesel shall be properly re2 duced to take into account any benefit provided with re3 spect to such biodiesel solely by reason of the application 

4 of section 6426 or 6427(e). 

5 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur6 poses of this section— 

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

8 liquid fuel derived from biomass which meets— 

9 ‘‘(A) the registration requirements for 

10 fuels and fuel additives established by the Envi11 ronmental Protection Agency under section 211 

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

13 ‘‘(B) the requirements of the American So14 ciety of Testing and Materials D6751. 

15 Such term shall not include any liquid with respect 

16 to which a credit may be determined under section 

17 40. 

18 ‘‘(2) BIODIESEL NOT USED AS FUEL.—If— 

19 ‘‘(A) any credit was determined with re20 spect to any biodiesel under this section, and 

21 ‘‘(B) any person does not use such fuel for 

22 the purpose described in subsection (a), 

23 then there is hereby imposed on such person a tax 

24 equal to the product of the rate applicable under 


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

2 biodiesel. 

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

4 TRUSTS.—Under regulations prescribed by the Sec5 retary, rules similar to the rules of subsection (d) of 

6 section 52 shall apply. 

7 ‘‘(4) LIMITATION TO BIODIESEL PRODUCED IN

8 THE UNITED STATES.—No credit shall be deter9 mined under this section with respect to any bio10 diesel unless such biodiesel is produced in the United 

11 States from raw feedstock. For purposes of this 

12 paragraph, the term ‘United States’ includes any 

13 possession of the United States. 

14 ‘‘(5) LIMITATION TO BIODIESEL WITH CONNEC15 TION TO THE UNITED STATES.—No credit shall be 

16 determined under this section with respect to any 

17 biodiesel which is produced outside the United 

18 States for use as a fuel outside the United States. 

19 For purposes of this paragraph, the term ‘United 

20 States’ includes any possession of the United States. 

21 ‘‘(6) BIODIESEL TRANSFERS FROM AN IRS REG22 ISTERED BIODIESEL PRODUCTION FACILITY TO AN

23 IRS REGISTERED TERMINAL OR REFINERY.—Credit 

24 allowed under subsection (a) shall be allowed to the 

25 terminal or refinery referred to in section 


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

2 4081(a)(1)(B)(iii) is applicable. Credit allowed under 

3 subsection (a) cannot be claimed by a terminal or re4 finery on fuel upon which the credit was previously 

5 claimed by a biodiesel producer. 

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

7 BIODIESEL PRODUCERS.— 

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

9 The term ‘eligible small biodiesel producer’ means a 

10 person who, at all times during the taxable year, has 

11 a productive capacity for biodiesel not in excess of 

12 60,000,000 gallons. 

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

14 the 15,000,000 gallon limitation under subsection 

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

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

17 group of corporations (within the meaning of section 

18 267(f)) and all persons under common control (with19 in the meaning of section 52(b) but determined by 

20 treating an interest of more than 50 percent as a 

21 controlling interest) shall be treated as 1 person. 

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

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

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

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


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

2 and at the partner or similar level. 

3 ‘‘(4) ALLOCATION.—For purposes of this sub4 section, in the case of a facility in which more than 

5 1 person has an interest, productive capacity shall 

6 be allocated among such persons in such manner as 

7 the Secretary may prescribe. 

8 ‘‘(5) REGULATIONS.—The Secretary may pre9 scribe such regulations as may be necessary— 

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

11 subsection (b) from directly or indirectly bene12 fitting any person with a direct or indirect pro13 ductive capacity of more than 60,000,000 gal14 lons of biodiesel during the taxable year, or 

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

16 or indirectly benefitting with respect to more 

17 than 15,000,000 gallons during the taxable 

18 year. 

19 ‘‘(6) ALLOCATION OF SMALL BIODIESEL CREDIT

20 TO PATRONS OF COOPERATIVE.— 

21 ‘‘(A) ELECTION TO ALLOCATE.— 

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

23 cooperative organization described in sec24 tion 1381(a), any portion of the increase 

25 determined under subsection (b) for the 


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1 taxable year may, at the election of the or2 ganization, be apportioned pro rata among 

3 patrons of the organization on the basis of 

4 the quantity or value of business done with 

5 or for such patrons for the taxable year. 

6 ‘‘(ii) FORM AND EFFECT OF ELEC7 TION.—An election under clause (i) for any 

8 taxable year shall be made on a timely 

9 filed return for such year. Such election, 

10 once made, shall be irrevocable for such 

11 taxable year. Such election shall not take 

12 effect unless the organization designates 

13 the apportionment as such in a written no14 tice mailed to its patrons during the pay15 ment period described in section 1382(d). 

16 ‘‘(B) TREATMENT OF ORGANIZATIONS AND

17 PATRONS.— 

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

19 the credit not apportioned to patrons pur20 suant to subparagraph (A) shall be in21 cluded in the amount determined under 

22 subsection (b) for the taxable year of the 

23 organization. 

24 ‘‘(ii) PATRONS.—The amount of the 

25 credit apportioned to patrons pursuant to 


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1 subparagraph (A) shall be included in the 

2 amount determined under such subsection 

3 for the first taxable year of each patron 

4 ending on or after the last day of the pay5 ment period (as defined in section 

6 1382(d)) for the taxable year of the orga7 nization or, if earlier, for the taxable year 

8 of each patron ending on or after the date 

9 on which the patron receives notice from 

10 the cooperative of the apportionment. 

11 ‘‘(iii) SPECIAL RULES FOR DECREASE

12 IN CREDITS FOR TAXABLE YEAR.—If the 

13 amount of the credit of the organization 

14 determined under such subsection for a 

15 taxable year is less than the amount of 

16 such credit shown on the return of the or17 ganization for such year, an amount equal 

18 to the excess of— 

19 ‘‘(I) such reduction, over 

20 ‘‘(II) the amount not apportioned 

21 to such patrons under subparagraph 

22 (A) for the taxable year, shall be 

23 treated as an increase in tax imposed 

24 by this chapter on the organization. 


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1 Such increase shall not be treated as tax 

2 imposed by this chapter for purposes of de3 termining the amount of any credit under 

4 this chapter or for purposes of section 55. 

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

6 title— 

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

8 BIODIESEL.—Except as provided in paragraph (2), 

9 renewable diesel shall be treated in the same manner 

10 as biodiesel. 

11 ‘‘(2) EXCEPTION.—Subsection (b) shall not 

12 apply with respect to renewable diesel. 

13 ‘‘(3) RENEWABLE DIESEL DEFINED.—The term 

14 ‘renewable diesel’ means liquid fuel derived from bio15 mass which meets— 

16 ‘‘(A) the registration requirements for 

17 fuels and fuel additives established by the Envi18 ronmental Protection Agency under section 211 

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

20 ‘‘(B) the requirements of the American So21 ciety of Testing and Materials D975 or D396, 

22 or other equivalent standard approved by the 

23 Secretary. 

24 Such term shall not include any liquid with respect 

25 to which a credit may be determined under section 


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1 40. Such term does not include any fuel derived 

2 from coprocessing biomass with a feedstock which is 

3 not biomass. For purposes of this paragraph, the 

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

5 section 45K(c)(3). 

6 ‘‘(4) CERTAIN AVIATION FUEL.—Except as pro7 vided in the last 3 sentences of paragraph (3), the 

8 term ‘renewable diesel’ shall include fuel derived 

9 from biomass which meets the requirements of a De10 partment of Defense specification for military jet 

11 fuel or an American Society of Testing and Mate12 rials specification for aviation turbine fuel. 

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

14 any sale or use after December 31, 2014.’’. 

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

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

17 of such Code is amended by striking the item relating to 

18 section 40A and inserting the following new item: 

‘‘Sec. 40A. Biodiesel production.’’. 

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

20 this section shall apply to biodiesel sold or used after De21 cember 31, 2009. 

22 SEC. 2. REFORM OF BIODIESEL EXCISE TAX INCENTIVES. 

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

24 the Internal Revenue Code of 1986 is amended to read 

25 as follows: 


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1 ‘‘(c) BIODIESEL CREDIT.— 

2 ‘‘(1) IN GENERAL.—For purposes of this sec3 tion, the biodiesel credit is $1.00 for each gallon of 

4 biodiesel produced by the taxpayer and which— 

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

6 person— 

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

8 trade or business (other than casual off9 farm production), 

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

11 a fuel in a trade or business, or 

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

13 to another person and places such biodiesel 

14 in the fuel tank of such other person, or 

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

16 any purpose described in subparagraph (A). 

17 ‘‘(2) DEFINITIONS.—Any term used in this sub18 section which is also used in section 40A shall have 

19 the meaning given such term by section 40A. 

20 ‘‘(3) BIODIESEL TRANSFERS FROM AN IRS REG21 ISTERED BIODIESEL PRODUCTION FACILITY TO AN

22 IRS REGISTERED TERMINAL.—Credit allowed under 

23 this subsection can be claimed by a registered ter24 minal or refinery in instances where section 

25 4081(a)(1)(B) is applicable. Credit allowed under 


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1 this subsection cannot be claimed by a terminal or 

2 refinery on fuel upon which the credit was previously 

3 claimed by a biodiesel producer. 

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

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

6 after December 31, 2014.’’. 

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

8 6427 of such Code is amended— 

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

10 in paragraph (1), 

11 (2) by redesignating paragraphs (3) through 

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

13 by inserting after paragraph (2) the following new 

14 paragraph: 

15 ‘‘(3) BIODIESEL CREDIT.—If any person pro16 duces biodiesel and sells or uses such biodiesel as 

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

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

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

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

21 place it appears in paragraphs (4) and (6), as redes22 ignated by paragraph (2), and inserting ‘‘paragraph 

23 (1), (2), or (3)’’, 


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

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

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

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

5 section 6426(c)(3))’’ in paragraph (7)(B), as so re6 designated, and inserting ‘‘biodiesel (within the 

7 meaning of section 40A)’’. 

8 (c) EXEMPTION FOR TRANSFERS BETWEEN REG9 ISTERED FACILITIES.—Subparagraph (B) of section 

10 4081(a)(1) of such Code is amended by adding at the end 

11 the following new clause: 

12 ‘‘(iii) The tax imposed by this para13 graph shall not apply to biodiesel that is 

14 removed from a registered IRS biodiesel 

15 plant and is transferred to a IRS reg16 istered terminal or refinery.’’. 

17 (d) PRODUCER REGISTRATION REQUIREMENT.— 

18 Subsection (a) of section 6426 of such Code is amended 

19 by striking ‘‘subsections (d) and (e)’’ in the flush sentence 

20 at the end and inserting ‘‘subsections (c), (d), and (e)’’. 

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

22 such Code is amended to read as follows: 

23 ‘‘(f) RECAPTURE.— 

24 ‘‘(1) ALCOHOL FUEL MIXTURES.—If— 


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

2 section with respect to alcohol used in the pro3 duction of any alcohol fuel mixture, and 

4 ‘‘(B) any person— 

5 ‘‘(i) separates the alcohol from the 

6 mixture, or 

7 ‘‘(ii) without separation, uses the mix8 ture other than as a fuel, 

9 then there is hereby imposed on such person a tax 

10 equal to the product of the applicable amount and 

11 the number of gallons of such alcohol. 

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

13 under this section with respect to the production of 

14 any biodiesel and any person does not use such bio15 diesel for a purpose described in subsection (c)(1), 

16 then there is hereby imposed on such person a tax 

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

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

19 including penalties, shall, insofar as applicable and 

20 not inconsistent with this section, apply in respect of 

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

22 such tax were imposed by section 4081 and not by 

23 this section.’’. 

24 (f) CLERICAL AMENDMENT.—The heading of section 

25 6426 of such Code (and the item relating to such section 


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1 in the table of sections for subchapter B of chapter 65 

2 of such Code) is amended by striking ‘‘alcohol fuel, bio3 diesel, and alternative fuel mixtures’’ and inserting ‘‘alco4 hol fuel mixtures, biodiesel production, and alternative fuel 

5 mixtures’’. 

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

7 this section shall apply to biodiesel sold or used after De8 cember 31, 2009. 

9 SEC. 3. BIODIESEL TREATED AS TAXABLE FUEL. 

10 (a) BIODIESEL TREATED AS TAXABLE FUEL.— 

11 Clause (i) of section 4083(a)(3)(A) of such Code is amend12 ed by inserting ‘‘, including biodiesel (as defined in section 

13 6426(c)(3)),’’ after ‘‘(other than gasoline)’’. 

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

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

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

17 the enactment of this Act. 

Æ 


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