I 

114TH CONGRESS 

2D SESSION H. R. 5240 

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

for biodiesel. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 13, 2016 

Mrs. NOEM (for herself, Mr. PASCRELL, Mr. PETERSON, Mr. LOEBSACK, Mr. 

SMITH of Nebraska, Mr. BLUM, and Mr. SMITH of Missouri) 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 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 2016’’. 

6 SEC. 2. REFORM OF BIODIESEL TAX INCENTIVES. 

7 (a) INCOME TAX CREDIT.— 

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1 (1) IN GENERAL.—So much of section 40A of 

2 the Internal Revenue Code as precedes subsection 

3 (c) is amended to read as follows: 

4 ‘‘SEC. 40A. BIODIESEL FUELS CREDIT. 

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

6 biodiesel fuels credit determined under this section for the 

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

8 by the taxpayer which during the taxable year— 

9 ‘‘(1) is sold by the taxpayer to another per10 son— 

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

12 or business as a fuel or in the production of a 

13 qualified biodiesel mixture (other than casual 

14 off-farm production), or 

15 ‘‘(B) who sells such biodiesel at retail to 

16 another person and places such biodiesel in the 

17 fuel tank of such other person, or 

18 ‘‘(2) is used by such taxpayer for any purpose 

19 described in paragraph (1). 

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

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

22 small biodiesel producer, subsection (a) shall be ap23 plied by increasing the dollar amount contained 

24 therein by 10 cents. 

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

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

3 biodiesel produced by any eligible small biodiesel 

4 producer during any taxable year.’’. 

5 (2) DEFINITIONS AND SPECIAL RULES.—Sec6 tion 40A(d) of such Code is amended by striking all 

7 that follows paragraph (1) and inserting the fol8 lowing: 

9 ‘‘(2) QUALIFIED BIODIESEL MIXTURE; BIO10 DIESEL MIXTURE.— 

11 ‘‘(A) QUALIFIED BIODIESEL MIXTURE.— 

12 ‘‘(i) IN GENERAL.—The term ‘quali13 fied biodiesel mixture’ means a biodiesel 

14 mixture which is— 

15 ‘‘(I) sold by the producer of such 

16 mixture to any person for use as a 

17 fuel, or 

18 ‘‘(II) used by the producer of 

19 such mixture as a fuel. 

20 ‘‘(ii) SALE OR USE MUST BE IN

21 TRADE OR BUSINESS, ETC.—A biodiesel 

22 mixture shall not be treated as a qualified 

23 biodiesel mixture unless the sale or use de24 scribed in clause (i) is in a trade or busimstockstill on DSK3G9T082PROD with BILLS

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1 ness of the person producing the biodiesel 

2 mixture. 

3 ‘‘(B) BIODIESEL MIXTURE.—The term 

4 ‘biodiesel mixture’ means a mixture which con5 sists of biodiesel and diesel fuel (as defined in 

6 section 4083(a)(3)), determined without regard 

7 to any use of kerosene. 

8 ‘‘(3) BIODIESEL NOT USED FOR A QUALIFIED

9 PURPOSE.—If— 

10 ‘‘(A) any credit was determined with re11 spect to any biodiesel under this section, and 

12 ‘‘(B) any person uses such biodiesel for a 

13 purpose not described in subsection (a), 

14 then there is hereby imposed on such person a tax 

15 equal to the product of the rate applicable under 

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

17 biodiesel. 

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

19 TRUSTS.—Under regulations prescribed by the Sec20 retary, rules similar to the rules of subsection (d) of 

21 section 52 shall apply. 

22 ‘‘(5) LIMITATION TO BIODIESEL WITH CONNEC23 TION TO THE UNITED STATES.— 

24 ‘‘(A) IN GENERAL.—No credit shall be de25 termined under subsection (a) with respect to 

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1 biodiesel unless such biodiesel is produced in 

2 the United States from qualified feedstocks. 

3 For purposes of this paragraph, the term 

4 ‘United States’ includes any possession of the 

5 United States. 

6 ‘‘(B) QUALIFIED FEEDSTOCKS.—For pur7 poses of subparagraph (A), the term ‘qualified 

8 feedstock’ means any feedstock which is allow9 able for a fuel that is assigned a D–Code of 4 

10 under section 80.1426(f) of title 40, Code of 

11 Federal Regulations.’’. 

12 (3) RULES FOR SMALL BIODIESEL PRO13 DUCERS.— 

14 (A) IN GENERAL.—Section 40A(e) of such 

15 Code is amended— 

16 (i) by striking ‘‘agri-biodiesel’’ each 

17 place it appears in paragraphs (1) and 

18 (5)(A) and inserting ‘‘biodiesel’’, 

19 (ii) by striking ‘‘subsection (b)(4)(C)’’ 

20 each place it appears in paragraphs (2) 

21 and (3) and inserting ‘‘subsection (b)(2)’’, 

22 and 

23 (iii) by striking ‘‘subsection (a)(3)’’ 

24 each place it appears in paragraphs (5)(A), 

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1 (6)(A)(i), and (6)(B)(i) and inserting 

2 ‘‘subsection (b)’’. 

3 (B) The heading for subsection (e) of sec4 tion 40A of such Code is amended by striking 

5 ‘‘AGRI-BIODIESEL’’ and inserting ‘‘BIODIESEL’’. 

6 (C) The headings for paragraphs (1) and 

7 (6) of section 40A(e) of such Code are each 

8 amended by striking ‘‘AGRI-BIODIESEL’’ and in9 serting ‘‘BIODIESEL’’. 

10 (4) RENEWABLE DIESEL.— 

11 (A) IN GENERAL.—Paragraph (3) of sec12 tion 40A(f) of such Code is amended to read as 

13 follows: 

14 ‘‘(3) RENEWABLE DIESEL DEFINED.— 

15 ‘‘(A) IN GENERAL.—The term ‘renewable 

16 diesel’ means liquid fuel derived from biomass 

17 which— 

18 ‘‘(i) is not a mono-alkyl ester, 

19 ‘‘(ii) can be used in engines designed 

20 to operate on conventional diesel fuel, and 

21 ‘‘(iii) meets the requirements for any 

22 Grade No. 1–D fuel or Grade No. 2–D fuel 

23 covered under the American Society for 

24 Testing and Materials specification D– 

25 975–13a. 

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1 ‘‘(B) EXCEPTIONS.—Such term shall not 

2 include— 

3 ‘‘(i) any liquid with respect to which 

4 a credit may be determined under section 

5 40, 

6 ‘‘(ii) any fuel derived from coproc7 essing biomass with a feedstock which is 

8 not biomass, or 

9 ‘‘(iii) any fuel that is not chemically 

10 equivalent to petroleum diesel fuels that 

11 can meet fuel quality specifications appli12 cable to diesel fuel, gasoline, or aviation 

13 fuel. 

14 ‘‘(C) BIOMASS.—For purposes of this 

15 paragraph, the term ‘biomass’ has the meaning 

16 given such term by section 45K(c)(3).’’. 

17 (B) CONFORMING AMENDMENTS.—Section 

18 40A(f) of such Code is amended— 

19 (i) by striking ‘‘Subsection (b)(4)’’ in 

20 paragraph (2) and inserting ‘‘Subsection 

21 (b)’’, and 

22 (ii) by striking paragraph (4) and in23 serting the following: 

24 ‘‘(4) CERTAIN AVIATION FUEL.—Except as pro25 vided paragraph (3)(B), the term ‘renewable diesel’ 

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1 shall include fuel derived from biomass which meets 

2 the requirements of a Department of Defense speci3 fication for military jet fuel or an American Society 

4 for Testing and Materials specification for aviation 

5 turbine fuel.’’. 

6 (5) EXTENSION.—Subsection (g) of section 40A 

7 of such Code is amended by striking ‘‘December 31, 

8 2016’’ and inserting ‘‘December 31, 2019’’. 

9 (6) CLERICAL AMENDMENT.—The table of sec10 tions for subpart D of part IV of subchapter A of 

11 chapter 1 of such Code is amended by striking the 

12 item relating to section 40A and inserting the fol13 lowing new item: 

‘‘Sec. 40A. Biodiesel fuels credit.’’. 

14 (b) REFORM OF EXCISE TAX CREDIT.— 

15 (1) IN GENERAL.—Subsection (c) of section 

16 6426 of the Internal Revenue Code of 1986 is 

17 amended to read as follows: 

18 ‘‘(c) BIODIESEL PRODUCTION CREDIT.— 

19 ‘‘(1) IN GENERAL.—For purposes of this sec20 tion, the biodiesel production credit is $1.00 for each 

21 gallon of biodiesel produced by the taxpayer and 

22 which— 

23 ‘‘(A) is sold by such taxpayer to another 

24 person— 

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

2 trade or business as a fuel or in the pro3 duction of a qualified biodiesel mixture 

4 (other than casual off-farm production), or 

5 ‘‘(ii) who sells such biodiesel at retail 

6 to another person and places such biodiesel 

7 in the fuel tank of such other person, or 

8 ‘‘(B) is used by such taxpayer for any pur9 pose described in subparagraph (A). 

10 ‘‘(2) DEFINITIONS.—Any term used in this sub11 section which is also used in section 40A shall have 

12 the meaning given such term by section 40A. 

13 ‘‘(3) TERMINATION.—This subsection shall not 

14 apply to any sale, use, or removal after December 

15 31, 2019.’’. 

16 (2) PRODUCER REGISTRATION REQUIRE17 MENT.—Subsection (a) of section 6426 of such Code 

18 is amended by striking ‘‘subsections (d) and (e)’’ in 

19 the flush sentence at the end and inserting ‘‘sub20 sections (c), (d), and (e)’’. 

21 (3) RECAPTURE.— 

22 (A) IN GENERAL.—Subsection (f) of sec23 tion 6426 of such Code is amended— 

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1 (i) by striking ‘‘or biodiesel’’ each 

2 place it appears in subparagraphs (A) and 

3 (B)(i) of paragraph (1), 

4 (ii) by striking ‘‘or biodiesel mixture’’ 

5 in paragraph (1)(A), and 

6 (iii) by redesignating paragraph (2) as 

7 paragraph (3) and by inserting after para8 graph (1) the following new paragraph: 

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

10 under this section or paid pursuant to section 

11 6427(e) with respect to the production of any bio12 diesel and any person uses such biodiesel for a pur13 pose not described in subsection (c)(1), then there is 

14 hereby imposed on such person a tax equal to $1 for 

15 each gallon of such biodiesel.’’. 

16 (B) CONFORMING AMENDMENTS.— 

17 (i) Paragraph (3) of section 6426(f) 

18 of such Code, as redesignated by subpara19 graph (A)(iii), is amended by inserting ‘‘or 

20 (2)’’ after ‘‘paragraph (1)’’. 

21 (ii) The heading for paragraph (1) of 

22 section 6426(f) of such Code is amended 

23 by striking ‘‘IMPOSITION OF TAX’’ and in24 serting ‘‘IN GENERAL’’. 

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1 (4) LIMITATION.—Section 6426(i) of such Code 

2 is amended— 

3 (A) in paragraph (2)— 

4 (i) by striking ‘‘biodiesel or’’, and 

5 (ii) by striking ‘‘BIODIESEL AND’’ in 

6 the heading, and 

7 (B) by inserting after paragraph (2) the 

8 following new paragraph: 

9 ‘‘(3) BIODIESEL.—No credit shall be deter10 mined under subsection (a) with respect to biodiesel 

11 unless such biodiesel is produced in the United 

12 States from qualified feedstocks (as defined in sec13 tion 40A(d)(5)(B)).’’. 

14 (5) CLERICAL AMENDMENTS.— 

15 (A) The heading of section 6426 of such 

16 Code is amended by striking ‘‘ALCOHOL

17 FUEL, BIODIESEL, AND ALTERNATIVE

18 FUEL MIXTURES’’ and inserting ‘‘ALCOHOL

19 FUEL MIXTURES, BIODIESEL PRODUCTION, 

20 AND ALTERNATIVE FUEL MIXTURES’’. 

21 (B) The item relating to section 6426 in 

22 the table of sections for subchapter B of chap23 ter 65 of such Code is amended by striking ‘‘al24 cohol fuel, biodiesel, and alternative fuel mix25 tures’’ and inserting ‘‘alcohol fuel mixtures, biomstockstill on DSK3G9T082PROD with BILLS

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1 diesel production, and alternative fuel mix2 tures’’. 

3 (c) REFORM OF EXCISE PAYMENTS.—Subsection (e) 

4 of section 6427 of such Code is amended— 

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

6 in paragraph (1), 

7 (2) by redesignating paragraphs (3) through 

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

9 by inserting after paragraph (2) the following new 

10 paragraph: 

11 ‘‘(3) BIODIESEL PRODUCTION CREDIT.—If any 

12 person produces biodiesel and sells or uses such bio13 diesel as provided in section 6426(c)(1), the Sec14 retary shall pay (without interest) to such person an 

15 amount equal to the biodiesel production credit with 

16 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’’, and 

24 (5) in paragraph (7)(B), as redesignated by 

25 paragraph (2)— 

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1 (A) by striking ‘‘biodiesel mixture (as de2 fined in section 6426(c)(3))’’ and inserting 

3 ‘‘biodiesel (within the meaning of section 

4 40A)’’, and 

5 (B) by striking ‘‘December 31, 2016’’ and 

6 inserting ‘‘December 31, 2019’’. 

7 (d) GUIDANCE.—Not later than 30 days after the 

8 date of the enactment of this Act, the Secretary of the 

9 Treasury, or the Secretary’s delegate, shall issue prelimi10 nary guidance with respect to the amendments made by 

11 this subsection. 

12 (e) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to fuel sold or used after December 

14 31, 2016. 

Æ 

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