II

103D CONGRESS

2D SESSION S. 2304

To amend the Internal Revenue Code of 1986 to phase out the tax subsidies

for alcohol fuels involving alcohol produced from feedstocks eligible to

receive Federal agricultural subsidies.

IN THE SENATE OF THE UNITED STATES

JULY 21 (legislative day, JULY 20), 1994

Mr. BRADLEY (for himself and Mr. WALLOP) 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 phase

out the tax subsidies for alcohol fuels involving alcohol

produced from feedstocks eligible to receive Federal agricultural subsidies.

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

3 SECTION 1. PHASE-OUT OF TAX SUBSIDIES FOR ALCOHOL

4 FUELS PRODUCED FROM FEEDSTOCKS ELIGI5 BLE TO RECEIVE FEDERAL AGRICULTURAL

6 SUBSIDIES.

7 (a) ALCOHOL FUELS CREDIT.—Section 40 of the In8 ternal Revenue Code of 1986 (relating to credit for alcohol
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1 used as a fuel) is amended by adding at the end the follow2 ing new subsection:

3 ‘‘(g) PHASE-OUT OF CREDIT FOR ALCOHOL PRO4 DUCED FROM FEEDSTOCKS ELIGIBLE TO RECEIVE FED5 ERAL AGRICULTURAL SUBSIDIES.—

6 ‘‘(1) IN GENERAL.—No credit shall be allowed

7 under this section with respect to any alcohol, or

8 fuel containing alcohol, which is produced from any

9 feedstock which is a subsidized agricultural commod10 ity.

11 ‘‘(2) PHASE-IN OF DISALLOWANCE.—In the

12 case of taxable years beginning in 1995 and 1996,

13 paragraph (1) shall not apply and the credit deter14 mined under this section with respect to alcohol or

15 fuels described in paragraph (1) shall be equal to 67

16 percent (33 percent in the case of taxable years be17 ginning in 1996) of the credit determined without

18 regard to this subsection.

19 ‘‘(3) SUBSIDIZED AGRICULTURAL COMMOD20 ITY.—For purposes of this subsection, the term

21 ‘subsidized agricultural commodity’ means any agri22 cultural commodity which is supported, or is eligible

23 to be supported, by a price support or production

24 adjustment program carried out by the Secretary of

25 Agriculture.’’.
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1 (b) EXCISE TAX REDUCTION.—

2 (1) PETROLEUM PRODUCTS.—Section 4081(c)

3 of the Internal Revenue Code of 1986 (relating to

4 taxable fuels mixed with alcohol) is amended by re5 designating paragraph (8) as paragraph (9) and by

6 adding after paragraph (7) the following new para7 graph:

8 ‘‘(8) PHASE-OUT OF SUBSIDY FOR ALCOHOL

9 PRODUCED FROM FEEDSTOCKS ELIGIBLE TO RE10 CEIVE FEDERAL AGRICULTURAL SUBSIDIES.—

11 ‘‘(A) IN GENERAL.—This subsection shall

12 not apply to any qualified alcohol mixture con13 taining alcohol which is produced from any

14 feedstock which is a subsidized agricultural

15 commodity.

16 ‘‘(B) PHASE-IN OF DISALLOWANCE.—In

17 the case of calendar years 1995 and 1996, the

18 rate of tax under subsection (a) with respect to

19 any qualified alcohol mixture described in sub20 paragraph (A) shall be equal to the sum of—

21 ‘‘(i) the rate of tax determined under

22 this subsection (without regard to this

23 paragraph), plus

24 ‘‘(ii) 33 percent (67 percent in the

25 case of 1996) of the difference between the
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1 rate of tax under subsection (a) deter2 mined with and without regard to this sub3 section.

4 ‘‘(C) SUBSIDIZED AGRICULTURAL COM5 MODITY.—For purposes of this paragraph, the

6 term ‘subsidized agricultural commodity’ means

7 any agricultural commodity which is supported,

8 or is eligible to be supported, by a price support

9 or production adjustment program carried out

10 by the Secretary of Agriculture.’’.

11 (2) SPECIAL FUELS.—Section 4041 (relating to

12 tax on special fuels) is amended by adding at the

13 end the following new subsection:

14 ‘‘(n) PHASE-OUT OF SUBSIDY FOR ALCOHOL PRO15 DUCED FROM FEEDSTOCKS ELIGIBLE TO RECEIVE FED16 ERAL AGRICULTURAL SUBSIDIES.—

17 ‘‘(1) IN GENERAL.—Subsections (b)(2), (k),

18 and (m) shall not apply to any alcohol fuel contain19 ing alcohol which is produced from any feedstock

20 which is a subsidized agricultural commodity.

21 ‘‘(2) PHASE-IN OF DISALLOWANCE.—In the

22 case of calendar years 1995 and 1996, the rate of

23 tax determined under subsection (b)(2), (k), or (m)

24 with respect to any alcohol fuel described in para25 graph (1) shall be equal to the sum of—
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1 ‘‘(A) the rate of tax determined under such

2 subsection (without regard to this subsection),

3 plus

4 ‘‘(B) 33 percent (67 percent in the case of

5 1996) of the difference between the rate of tax

6 under this section determined with and without

7 regard to subsection (b)(2), (k), or (m), which8 ever is applicable.

9 ‘‘(3) SUBSIDIZED AGRICULTURAL COMMOD10 ITY.—For purposes of this subsection, the term

11 ‘subsidized agricultural commodity’ means any agri12 cultural commodity which is supported, or is eligible

13 to be supported, by a price support or production

14 adjustment program carried out by the Secretary of

15 Agriculture.’’.

16 (3) AVIATION FUEL.—Section 4084(c) (relating

17 to reduced rate of tax for aviation fuel in alcohol

18 mixture) is amended by redesignating paragraph (5)

19 as paragraph (6) and by inserting after paragraph

20 (4) the following new paragraph:

21 ‘‘(5) PHASE-OUT OF SUBSIDY FOR ALCOHOL

22 PRODUCED FROM FEEDSTOCKS ELIGIBLE TO RE23 CEIVE FEDERAL AGRICULTURAL SUBSIDIES.—

24 ‘‘(A) IN GENERAL.—This subsection shall

25 not apply to any mixture of aviation fuel con-
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1 taining alcohol which is produced from any

2 feedstock which is a subsidized agricultural

3 commodity.

4 ‘‘(B) PHASE-IN OF DISALLOWANCE.—In

5 the case of calendar years 1995 and 1996, the

6 rate of tax under subsection (a) with respect to

7 any mixture of aviation fuel described in sub8 paragraph (A) shall be equal to the sum of—

9 ‘‘(i) the rate of tax determined under

10 this subsection (without regard to this

11 paragraph), plus

12 ‘‘(ii) 33 percent (67 percent in the

13 case of 1996) of the difference between the

14 rate of tax under subsection (a) deter15 mined with and without regard to this sub16 section.

17 ‘‘(C) SUBSIDIZED AGRICULTURAL COM18 MODITY.—For purposes of this paragraph, the

19 term ‘subsidized agricultural commodity’ means

20 any agricultural commodity which is supported,

21 or is eligible to be supported, by a price support

22 or production adjustment program carried out

23 by the Secretary of Agriculture.’’.

24 (c) EFFECTIVE DATES.—
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1 (1) CREDIT.—The amendment made by sub2 section (a) shall apply to taxable years beginning

3 after December 31, 1994.

4 (2) EXCISE TAXES.—

5 (A) IN GENERAL.—The amendments made

6 by subsection (b) shall take effect on January

7 1, 1995.

8 (B) FLOOR STOCK TAX.—

9 (i) IN GENERAL.—In the case of any

10 alcohol fuel in which tax was imposed

11 under section 4041, 4081, or 4091 of the

12 Internal Revenue Code of 1986 before any

13 tax-increase date, and which is held on

14 such date by any person, then there is

15 hereby imposed a floor stock tax on such

16 fuel equal to the difference between the tax

17 imposed under such section on such date

18 and the tax so imposed.

19 (ii) LIABILITY FOR TAX AND METHOD

20 OF PAYMENT.—A person holding an alco21 hol fuel on any tax-increase date shall be

22 liable for such tax, shall pay such tax no

23 later than 90 days after such date, and

24 shall pay such tax in such manner as the

25 Secretary may prescribe.
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1 (iii) EXCEPTIONS.—The tax imposed

2 by clause (i) shall not apply—

3 (I) to any fuel held in the tank of

4 a motor vehicle or motorboat, or

5 (II) to any fuel held by a person

6 if, on the tax-increase date, the aggre7 gate amount of fuel held by such per8 son and any related persons does not

9 exceed 2,000 gallons.

10 (iv) TAX-INCREASE DATE.—For pur11 poses of this subparagraph, the term ‘‘tax12 increase date’’ means January 1, 1995,

13 and January 1, 1996.

14 (v) OTHER LAWS APPLICABLE.—All

15 provisions of law, including penalties appli16 cable with respect to the taxes imposed by

17 sections 4041, 4081, and 4091 of such

18 Code shall, insofar as applicable and not

19 inconsistent with the provisions of this

20 subparagraph, apply with respect to the

21 floor stock taxes imposed by clause (i).

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