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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 2304 Introduced in Senate (IS)]

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.

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

SECTION 1. PHASE-OUT OF TAX SUBSIDIES FOR ALCOHOL FUELS PRODUCED FROM 
              FEEDSTOCKS ELIGIBLE TO RECEIVE FEDERAL AGRICULTURAL 
              SUBSIDIES.

    (a) Alcohol Fuels Credit.--Section 40 of the Internal Revenue Code 
of 1986 (relating to credit for alcohol used as a fuel) is amended by 
adding at the end the following new subsection:
    ``(g) Phase-Out of Credit for Alcohol Produced From Feedstocks 
Eligible To Receive Federal Agricultural Subsidies.--
            ``(1) In general.--No credit shall be allowed under this 
        section with respect to any alcohol, or fuel containing 
        alcohol, which is produced from any feedstock which is a 
        subsidized agricultural commodity.
            ``(2) Phase-in of disallowance.--In the case of taxable 
        years beginning in 1995 and 1996, paragraph (1) shall not apply 
        and the credit determined under this section with respect to 
        alcohol or fuels described in paragraph (1) shall be equal to 
        67 percent (33 percent in the case of taxable years beginning 
        in 1996) of the credit determined without regard to this 
        subsection.
            ``(3) Subsidized agricultural commodity.--For purposes of 
        this subsection, the term `subsidized agricultural commodity' 
        means any agricultural commodity which is supported, or is 
        eligible to be supported, by a price support or production 
        adjustment program carried out by the Secretary of 
        Agriculture.''.
    (b) Excise Tax Reduction.--
            (1) Petroleum products.--Section 4081(c) of the Internal 
        Revenue Code of 1986 (relating to taxable fuels mixed with 
        alcohol) is amended by redesignating paragraph (8) as paragraph 
        (9) and by adding after paragraph (7) the following new 
        paragraph:
            ``(8) Phase-out of subsidy for alcohol produced from 
        feedstocks eligible to receive federal agricultural 
        subsidies.--
                    ``(A) In general.--This subsection shall not apply 
                to any qualified alcohol mixture containing alcohol 
                which is produced from any feedstock which is a 
                subsidized agricultural commodity.
                    ``(B) Phase-in of disallowance.--In the case of 
                calendar years 1995 and 1996, the rate of tax under 
                subsection (a) with respect to any qualified alcohol 
                mixture described in subparagraph (A) shall be equal to 
                the sum of--
                            ``(i) the rate of tax determined under this 
                        subsection (without regard to this paragraph), 
                        plus
                            ``(ii) 33 percent (67 percent in the case 
                        of 1996) of the difference between the rate of 
                        tax under subsection (a) determined with and 
                        without regard to this subsection.
                    ``(C) Subsidized agricultural commodity.--For 
                purposes of this paragraph, the term `subsidized 
                agricultural commodity' means any agricultural 
                commodity which is supported, or is eligible to be 
                supported, by a price support or production adjustment 
                program carried out by the Secretary of Agriculture.''.
            (2) Special fuels.--Section 4041 (relating to tax on 
        special fuels) is amended by adding at the end the following 
        new subsection:
    ``(n) Phase-Out of Subsidy for Alcohol Produced From Feedstocks 
Eligible To Receive Federal Agricultural Subsidies.--
            ``(1) In general.--Subsections (b)(2), (k), and (m) shall 
        not apply to any alcohol fuel containing alcohol which is 
        produced from any feedstock which is a subsidized agricultural 
        commodity.
            ``(2) Phase-in of disallowance.--In the case of calendar 
        years 1995 and 1996, the rate of tax determined under 
        subsection (b)(2), (k), or (m) with respect to any alcohol fuel 
        described in paragraph (1) shall be equal to the sum of--
                    ``(A) the rate of tax determined under such 
                subsection (without regard to this subsection), plus
                    ``(B) 33 percent (67 percent in the case of 1996) 
                of the difference between the rate of tax under this 
                section determined with and without regard to 
                subsection (b)(2), (k), or (m), whichever is 
                applicable.
            ``(3) Subsidized agricultural commodity.--For purposes of 
        this subsection, the term `subsidized agricultural commodity' 
        means any agricultural commodity which is supported, or is 
        eligible to be supported, by a price support or production 
        adjustment program carried out by the Secretary of 
        Agriculture.''.
            (3) Aviation fuel.--Section 4084(c) (relating to reduced 
        rate of tax for aviation fuel in alcohol mixture) is amended by 
        redesignating paragraph (5) as paragraph (6) and by inserting 
        after paragraph (4) the following new paragraph:
            ``(5) Phase-out of subsidy for alcohol produced from 
        feedstocks eligible to receive federal agricultural 
        subsidies.--
                    ``(A) In general.--This subsection shall not apply 
                to any mixture of aviation fuel containing alcohol 
                which is produced from any feedstock which is a 
                subsidized agricultural commodity.
                    ``(B) Phase-in of disallowance.--In the case of 
                calendar years 1995 and 1996, the rate of tax under 
                subsection (a) with respect to any mixture of aviation 
                fuel described in subparagraph (A) shall be equal to 
                the sum of--
                            ``(i) the rate of tax determined under this 
                        subsection (without regard to this paragraph), 
                        plus
                            ``(ii) 33 percent (67 percent in the case 
                        of 1996) of the difference between the rate of 
                        tax under subsection (a) determined with and 
                        without regard to this subsection.
                    ``(C) Subsidized agricultural commodity.--For 
                purposes of this paragraph, the term `subsidized 
                agricultural commodity' means any agricultural 
                commodity which is supported, or is eligible to be 
                supported, by a price support or production adjustment 
                program carried out by the Secretary of Agriculture.''.
    (c) Effective Dates.--
            (1) Credit.--The amendment made by subsection (a) shall 
        apply to taxable years beginning after December 31, 1994.
            (2) Excise taxes.--
                    (A) In general.--The amendments made by subsection 
                (b) shall take effect on January 1, 1995.
                    (B) Floor stock tax.--
                            (i) In general.--In the case of any alcohol 
                        fuel in which tax was imposed under section 
                        4041, 4081, or 4091 of the Internal Revenue 
                        Code of 1986 before any tax-increase date, and 
                        which is held on such date by any person, then 
                        there is hereby imposed a floor stock tax on 
                        such fuel equal to the difference between the 
                        tax imposed under such section on such date and 
                        the tax so imposed.
                            (ii) Liability for tax and method of 
                        payment.--A person holding an alcohol fuel on 
                        any tax-increase date shall be liable for such 
                        tax, shall pay such tax no later than 90 days 
                        after such date, and shall pay such tax in such 
                        manner as the Secretary may prescribe.
                            (iii) Exceptions.--The tax imposed by 
                        clause (i) shall not apply--
                                    (I) to any fuel held in the tank of 
                                a motor vehicle or motorboat, or
                                    (II) to any fuel held by a person 
                                if, on the tax-increase date, the 
                                aggregate amount of fuel held by such 
                                person and any related persons does not 
                                exceed 2,000 gallons.
                            (iv) Tax-increase date.--For purposes of 
                        this subparagraph, the term ``tax-increase 
                        date'' means January 1, 1995, and January 1, 
                        1996.
                            (v) Other laws applicable.--All provisions 
                        of law, including penalties applicable with 
                        respect to the taxes imposed by sections 4041, 
                        4081, and 4091 of such Code shall, insofar as 
                        applicable and not inconsistent with the 
                        provisions of this subparagraph, apply with 
                        respect to the floor stock taxes imposed by 
                        clause (i).
                                 <all>
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