II 

108TH CONGRESS 

2D SESSION S. 2110

To amend the Internal Revenue Code of 1986 to extend the Highway Trust 

Fund provisions through March 31, 2004, and to add the volumetric 

ethanol excise tax credit (VEETC), and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 24, 2004

Mr. GRASSLEY (for himself and Mr. BAUCUS) 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 extend 

the Highway Trust Fund provisions through March 31, 

2004, and to add the volumetric ethanol excise tax credit 

(VEETC), 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. SHORT TITLE. 

4 This Act may be cited as the ‘‘Surface Transpor5 tation Extension Act of 2004’’. 

6 SEC. 2. EXTENSION OF AUTHORIZATION FOR USE OF TRUST 

7 FUNDS FOR OBLIGATIONS UNDER TEA–21. 

8 (a) HIGHWAY TRUST FUND.—
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1 (1) IN GENERAL.—Paragraph (1) of section 

2 9503(c) of the Internal Revenue Code of 1986 is 

3 amended—

4 (A) in the matter before subparagraph (A), 

5 by striking ‘‘March 1, 2004’’ and inserting 

6 ‘‘April 1, 2004’’, 

7 (B) by striking ‘‘or’’ at the end of subpara8 graph (E), 

9 (C) by striking the period at the end of 

10 subparagraph (F) and inserting ‘‘, or’’, 

11 (D) by inserting after subparagraph (F), 

12 the following new subparagraph: 

13 ‘‘(G) authorized to be paid out of the 

14 Highway Trust Fund under the Surface Trans15 portation Extension Act of 2004.’’, and 

16 (E) in the matter after subparagraph (G), 

17 as added by this paragraph, by striking ‘‘Sur18 face Transportation Extension Act of 2003’’ 

19 and inserting ‘‘Surface Transportation Exten20 sion Act of 2004’’. 

21 (2) MASS TRANSIT ACCOUNT.—Paragraph (3) 

22 of section 9503(e) of such Code is amended—

23 (A) in the matter before subparagraph (A), 

24 by striking ‘‘March 1, 2004’’ and inserting 

25 ‘‘April 1, 2004’’, 
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1 (B) in subparagraph (C), by striking ‘‘or’’ 

2 at the end of such subparagraph, 

3 (C) in subparagraph (D), by inserting ‘‘or’’ 

4 at the end of such subparagraph, 

5 (D) by inserting after subparagraph (D) 

6 the following new subparagraph: 

7 ‘‘(E) the Surface Transportation Extension 

8 Act of 2004,’’, and 

9 (E) in the matter after subparagraph (E), 

10 as added by this paragraph, by striking ‘‘Sur11 face Transportation Extension Act of 2003’’ 

12 and inserting ‘‘Surface Transportation Exten13 sion Act of 2004’’. 

14 (3) EXCEPTION TO LIMITATION ON TRANS15 FERS.—Subparagraph (B) of section 9503(b)(5) of 

16 such Code is amended by striking ‘‘March 1, 2004’’ 

17 and inserting ‘‘April 1, 2004’’. 

18 (b) AQUATIC RESOURCES TRUST FUND.—

19 (1) SPORT FISH RESTORATION ACCOUNT.—

20 Paragraph (2) of section 9504(b) of the Internal 

21 Revenue Code of 1986 is amended by striking ‘‘Sur22 face Transportation Extension Act of 2003’’ each 

23 place it appears and inserting ‘‘Surface Transpor24 tation Extension Act of 2004’’. 
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1 (2) BOAT SAFETY ACCOUNT.—Subsection (c) of 

2 section 9504 of such Code is amended—

3 (A) by striking ‘‘March 1, 2004’’ and in4 serting ‘‘April 1, 2004’’, and 

5 (B) by striking ‘‘Surface Transportation 

6 Extension Act of 2003’’ and inserting ‘‘Surface 

7 Transportation Extension Act of 2004’’. 

8 (3) EXCEPTION TO LIMITATION ON TRANS9 FERS.—Paragraph (2) of section 9504(d) of such 

10 Code is amended by striking ‘‘March 1, 2004’’ and 

11 inserting ‘‘April 1, 2004’’. 

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

13 this section shall take effect on the date of the enactment 

14 of this Act. 

15 (d) TEMPORARY RULE REGARDING ADJUST16 MENTS.—During the period beginning on the date of the 

17 enactment of the Surface Transportation Extension Act 

18 of 2003 and ending on March 31, 2004, for purposes of 

19 making any estimate under section 9503(d) of the Internal 

20 Revenue Code of 1986 of receipts of the Highway Trust 

21 Fund, the Secretary of the Treasury shall treat—

22 (1) each expiring provision of paragraphs (1) 

23 through (4) of section 9503(b) of such Code which 

24 is related to appropriations or transfers to such 

25 Fund to have been extended through the end of the 
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1 24-month period referred to in section 

2 9503(d)(1)(B) of such Code, and 

3 (2) with respect to each tax imposed under the 

4 sections referred to in section 9503(b)(1) of such 

5 Code, the rate of such tax during the 24-month pe6 riod referred to in section 9503(d)(1)(B) of such 

7 Code to be the same as the rate of such tax as in 

8 effect on the date of the enactment of the Surface 

9 Transportation Extension Act of 2003. 

10 SEC. 3. ALCOHOL AND BIODIESEL EXCISE TAX CREDIT AND 

11 EXTENSION OF ALCOHOL FUELS INCOME TAX 

12 CREDIT. 

13 (a) IN GENERAL.—Subchapter B of chapter 65 of the 

14 Internal Revenue Code of 1986 (relating to rules of special 

15 application) is amended by inserting after section 6425 

16 the following new section: 

17 ‘‘SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL 

18 MIXTURES. 

19 ‘‘(a) ALLOWANCE OF CREDITS.—There shall be al20 lowed as a credit against the tax imposed by section 4081 

21 an amount equal to the sum of—

22 ‘‘(1) the alcohol fuel mixture credit, plus 

23 ‘‘(2) the biodiesel mixture credit. 

24 ‘‘(b) ALCOHOL FUEL MIXTURE CREDIT.—
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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the alcohol fuel mixture credit is the product 

3 of the applicable amount and the number of gallons 

4 of alcohol used by the taxpayer in producing any al5 cohol fuel mixture for sale or use in a trade or busi6 ness of the taxpayer. 

7 ‘‘(2) APPLICABLE AMOUNT.—For purposes of 

8 this subsection—

9 ‘‘(A) IN GENERAL.—Except as provided in 

10 subparagraph (B), the applicable amount is 52 

11 cents (51 cents in the case of any sale or use 

12 after 2004). 

13 ‘‘(B) MIXTURES NOT CONTAINING ETH14 ANOL.—In the case of an alcohol fuel mixture 

15 in which none of the alcohol consists of ethanol, 

16 the applicable amount is 60 cents. 

17 ‘‘(3) ALCOHOL FUEL MIXTURE.—For purposes 

18 of this subsection, the term ‘alcohol fuel mixture’ 

19 means a mixture of alcohol and a taxable fuel 

20 which—

21 ‘‘(A) is sold by the taxpayer producing 

22 such mixture to any person for use as a fuel, 

23 ‘‘(B) is used as a fuel by the taxpayer pro24 ducing such mixture, or 
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1 ‘‘(C) is removed from the refinery by a 

2 person producing such mixture. 

3 ‘‘(4) OTHER DEFINITIONS.—For purposes of 

4 this subsection—

5 ‘‘(A) ALCOHOL.—The term ‘alcohol’ in6 cludes methanol and ethanol but does not in7 clude—

8 ‘‘(i) alcohol produced from petroleum, 

9 natural gas, or coal (including peat), or

10 ‘‘(ii) alcohol with a proof of less than 

11 190 (determined without regard to any 

12 added denaturants). 

13 Such term also includes an alcohol gallon equiv14 alent of ethyl tertiary butyl ether or other 

15 ethers produced from such alcohol. 

16 ‘‘(B) TAXABLE FUEL.—The term ‘taxable 

17 fuel’ has the meaning given such term by sec18 tion 4083(a)(1). 

19 ‘‘(5) TERMINATION.—This subsection shall not 

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

21 after December 31, 2010. 

22 ‘‘(c) BIODIESEL MIXTURE CREDIT.—

23 ‘‘(1) IN GENERAL.—For purposes of this sec24 tion, the biodiesel mixture credit is the product of 

25 the applicable amount and the number of gallons of 
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1 biodiesel used by the taxpayer in producing any bio2 diesel mixture for sale or use in a trade or business 

3 of the taxpayer. 

4 ‘‘(2) APPLICABLE AMOUNT.—For purposes of 

5 this subsection—

6 ‘‘(A) IN GENERAL.—Except as provided in 

7 subparagraph (B), the applicable amount is 50 

8 cents. 

9 ‘‘(B) AMOUNT FOR AGRI-BIODIESEL.—In 

10 the case of any biodiesel which is agri-biodiesel, 

11 the applicable amount is $1.00. 

12 ‘‘(3) BIODIESEL MIXTURE.—For purposes of 

13 this section, the term ‘biodiesel mixture’ means a 

14 mixture of biodiesel and diesel fuel (as defined in 

15 section 4083(a)(3)), determined without regard to 

16 any use of kerosene, which—

17 ‘‘(A) is sold by the taxpayer producing 

18 such mixture to any person for use as a fuel, 

19 ‘‘(B) is used as a fuel by the taxpayer pro20 ducing such mixture, or 

21 ‘‘(C) is removed from the refinery by a 

22 person producing such mixture. 

23 ‘‘(4) CERTIFICATION FOR BIODIESEL.—No 

24 credit shall be allowed under this section unless the 

25 taxpayer obtains a certification (in such form and 
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1 manner as prescribed by the Secretary) from the 

2 producer of the biodiesel which identifies the product 

3 produced and the percentage of biodiesel and agri4 biodiesel in the product. 

5 ‘‘(5) OTHER DEFINITIONS.—Any term used in 

6 this subsection which is also used in section 40A 

7 shall have the meaning given such term by section 

8 40A. 

9 ‘‘(6) TERMINATION.—This subsection shall not 

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

11 after December 31, 2006. 

12 ‘‘(d) MIXTURE NOT USED AS A FUEL, ETC.—

13 ‘‘(1) IMPOSITION OF TAX.—If—

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

15 section with respect to alcohol or biodiesel used 

16 in the production of any alcohol fuel mixture or 

17 biodiesel mixture, respectively, and 

18 ‘‘(B) any person— 

19 ‘‘(i) separates the alcohol or biodiesel 

20 from the mixture, or

21 ‘‘(ii) without separation, uses the mix22 ture other than as a fuel, 

23 then there is hereby imposed on such person a 

24 tax equal to the product of the applicable 
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1 amount and the number of gallons of such alco2 hol or biodiesel. 

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

4 including penalties, shall, insofar as applicable and 

5 not inconsistent with this section, apply in respect of 

6 any tax imposed under paragraph (1) as if such tax 

7 were imposed by section 4081 and not by this sec8 tion. 

9 ‘‘(e) COORDINATION WITH EXEMPTION FROM EX10 CISE TAX.—Rules similar to the rules under section 40(c) 

11 shall apply for purposes of this section.’’. 

12 (b) REGISTRATION REQUIREMENT.—Section 4101(a) 

13 of the Internal Revenue Code of 1986 (relating to registra14 tion) is amended by inserting ‘‘and every person producing 

15 or importing biodiesel (as defined in section 40A(d)(1)) 

16 or alcohol (as defined in section 6426(b)(4)(A))’’ after 

17 ‘‘4081’’. 

18 (c) ADDITIONAL AMENDMENTS.—

19 (1) Section 40(c) of the Internal Revenue Code 

20 of 1986 is amended by striking ‘‘section 4081(c), or 

21 section 4091(c)’’ and inserting ‘‘section 4091(c), sec22 tion 6426, section 6427(e), or section 6427(f)’’. 

23 (2) Section 40(d)(4)(B) of such Code is amend24 ed by striking ‘‘or 4081(c)’’. 

25 (3) Section 40(e)(1) of such Code is amended—
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1 (A) by striking ‘‘2007’’ in subparagraph 

2 (A) and inserting ‘‘2010’’, and 

3 (B) by striking ‘‘2008’’ in subparagraph 

4 (B) and inserting ‘‘2011’’. 

5 (4) Section 40(h) of such Code is amended—

6 (A) by striking ‘‘2007’’ in paragraph (1) 

7 and inserting ‘‘2010’’, and 

8 (B) by striking ‘‘, 2006, or 2007’’ in the 

9 table contained in paragraph (2) and inserting 

10 ‘‘through 2010’’. 

11 (5) Section 4041(b)(2)(B) of such Code is 

12 amended by striking ‘‘a substance other than petro13 leum or natural gas’’ and inserting ‘‘coal (including 

14 peat)’’. 

15 (6) Paragraph (1) of section 4041(k) of such 

16 Code is amended to read as follows: 

17 ‘‘(1) IN GENERAL.—Under regulations pre18 scribed by the Secretary, in the case of the sale or 

19 use of any liquid at least 10 percent of which con20 sists of alcohol (as defined in section 

21 6426(b)(4)(A)), the rate of the tax imposed by sub22 section (c)(1) shall be the comparable rate under 

23 section 4091(c).’’. 

24 (7) Section 4081 of such Code is amended by 

25 striking subsection (c). 
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1 (8) Paragraph (2) of section 4083(a) of such 

2 Code is amended to read as follows: 

3 ‘‘(2) GASOLINE.—The term ‘gasoline’—

4 ‘‘(A) includes any gasoline blend, other 

5 than qualified methanol or ethanol fuel (as de6 fined in section 4041(b)(2)(B)), partially ex7 empt methanol or ethanol fuel (as defined in 

8 section 4041(m)(2)), or a denatured alcohol, 

9 and 

10 ‘‘(B) includes, to the extent prescribed in 

11 regulations—

12 ‘‘(i) any gasoline blend stock, and 

13 ‘‘(ii) any product commonly used as 

14 an additive in gasoline (other than alco15 hol). 

16 For purposes of subparagraph (B)(i), the term ‘gas17 oline blend stock’ means any petroleum product 

18 component of gasoline.’’. 

19 (9) Section 6427 of such Code is amended by 

20 inserting after subsection (d) the following new sub21 section: 

22 ‘‘(e) ALCOHOL OR BIODIESEL USED TO PRODUCE

23 ALCOHOL FUEL AND BIODIESEL MIXTURES OR USED AS

24 FUELS.—Except as provided in subsection (k)—
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1 ‘‘(1) USED TO PRODUCE A MIXTURE.—If any 

2 person produces a mixture described in section 6426 

3 in such person’s trade or business, the Secretary 

4 shall pay (without interest) to such person an 

5 amount equal to the alcohol fuel mixture credit or 

6 the biodiesel mixture credit with respect to such mix7 ture. 

8 ‘‘(2) USED AS FUEL.—If alcohol (as defined in 

9 section 40(d)(1)) or biodiesel (as defined in section 

10 40A(d)(1)) or agri-biodiesel (as defined in section 

11 40A(d)(2)) which is not in a mixture described in 

12 section 6426—

13 ‘‘(A) is used by any person as a fuel in a 

14 trade or business, or 

15 ‘‘(B) is sold by any person at retail to an16 other person and placed in the fuel tank of such 

17 person’s vehicle, 

18 the Secretary shall pay (without interest) to such 

19 person an amount equal to the alcohol credit (as de20 termined under section 40(b)(2)) or the biodiesel 

21 credit (as determined under section 40A(b)(2)) with 

22 respect to such fuel. 

23 ‘‘(3) COORDINATION WITH OTHER REPAYMENT

24 PROVISIONS.—No amount shall be payable under 

25 paragraph (1) with respect to any mixture with re-
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1 spect to which an amount is allowed as a credit 

2 under section 6426. 

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

4 apply with respect to—

5 ‘‘(A) any alcohol fuel mixture (as defined 

6 in section 6426(b)(3)) or alcohol (as so defined) 

7 sold or used after December 31, 2010, and 

8 ‘‘(B) any biodiesel mixture (as defined in 

9 section 6426(c)(3)) or biodiesel (as so defined) 

10 or agri-biodiesel (as so defined) sold or used 

11 after December 31, 2006.’’. 

12 (10) Subsection (f) of section 6427 of such 

13 Code is amended to read as follows: 

14 ‘‘(f) AVIATION FUEL USED TO PRODUCE CERTAIN

15 ALCOHOL FUELS.—

16 ‘‘(1) IN GENERAL.—Except as provided in sub17 section (k), if any aviation fuel on which tax was im18 posed by section 4091 at the regular tax rate is used 

19 by any person in producing a mixture described in 

20 section 4091(c)(1)(A) which is sold or used in such 

21 person’s trade or business, the Secretary shall pay 

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

23 the excess of the regular tax rate over the incentive 

24 tax rate with respect to such fuel. 
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1 ‘‘(2) DEFINITIONS.—For purposes of paragraph 

2 (1)—

3 ‘‘(A) REGULAR TAX RATE.—The term ‘reg4 ular tax rate’ means the aggregate rate of tax 

5 imposed by section 4091 determined without re6 gard to subsection (c) thereof. 

7 ‘‘(B) INCENTIVE TAX RATE.—The term 

8 ‘incentive tax rate’ means the aggregate rate of 

9 tax imposed by section 4091 with respect to 

10 fuel described in subsection (c)(2) thereof. 

11 ‘‘(3) COORDINATION WITH OTHER REPAYMENT

12 PROVISIONS.—No amount shall be payable under 

13 paragraph (1) with respect to any aviation fuel with 

14 respect to which an amount is payable under sub15 section (d) or (l). 

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

17 apply with respect to any mixture sold or used after 

18 September 30, 2007.’’. 

19 (11) Paragraphs (1) and (2) of section 6427(i) 

20 of such Code are amended by inserting ‘‘(f),’’ after 

21 ‘‘(d),’’. 

22 (12) Section 6427(i)(3) of such Code is amend23 ed—
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1 (A) by striking ‘‘subsection (f)’’ both 

2 places it appears in subparagraph (A) and in3 serting ‘‘subsection (e)(1)’’, 

4 (B) by striking ‘‘gasoline, diesel fuel, or 

5 kerosene used to produce a qualified alcohol 

6 mixture (as defined in section 4081(c)(3))’’ in 

7 subparagraph (A) and inserting ‘‘a mixture de8 scribed in section 6426’’, 

9 (C) by adding at the end of subparagraph 

10 (A) the following new flush sentence: 

11 ‘‘In the case of an electronic claim, this sub12 paragraph shall be applied without regard to 

13 clause (i).’’, 

14 (D) by striking ‘‘subsection (f)(1)’’ in sub15 paragraph (B) and inserting ‘‘subsection 

16 (e)(1)’’, 

17 (E) by striking ‘‘20 days of the date of the 

18 filing of such claim’’ in subparagraph (B) and 

19 inserting ‘‘45 days of the date of the filing of 

20 such claim (20 days in the case of an electronic 

21 claim)’’, and 

22 (F) by striking ‘‘ALCOHOL MIXTURE’’ in 

23 the heading and inserting ‘‘ALCOHOL FUEL AND

24 BIODIESEL MIXTURE’’. 
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1 (13) Section 6427(o) of such Code is amend2 ed—

3 (A) by striking paragraph (1) and insert4 ing the following new paragraph: 

5 ‘‘(1) any tax is imposed by section 4081, and’’, 

6 (B) by striking ‘‘such gasohol’’ in para7 graph (2) and inserting ‘‘the alcohol fuel mix8 ture (as defined in section 6426(b)(3))’’, 

9 (C) by striking ‘‘gasohol’’ both places it 

10 appears in the matter following paragraph (2) 

11 and inserting ‘‘alcohol fuel mixture’’, and 

12 (D) by striking ‘‘GASOHOL’’ in the heading 

13 and inserting ‘‘ALCOHOL FUEL MIXTURE’’. 

14 (14) Section 9503(b)(1) of such Code is amend15 ed by adding at the end the following new flush sen16 tence: 

17 ‘‘For purposes of this paragraph, taxes received 

18 under sections 4041 and 4081 shall be determined 

19 without reduction for credits under section 6426.’’. 

20 (15) Section 9503(b)(4) of such Code is amend21 ed—

22 (A) by adding ‘‘or’’ at the end of subpara23 graph (C), 
18

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1 (B) by striking the comma at the end of 

2 subparagraph (D)(iii) and inserting a period, 

3 and 

4 (C) by striking subparagraphs (E) and 

5 (F). 

6 (16) Section 9503(c)(2)(A)(i)(III) of such Code 

7 is amended by inserting ‘‘(other than subsection (e) 

8 thereof)’’ after ‘‘section 6427’’. 

9 (17) Section 9503(e)(2) of such Code is amend10 ed by striking subparagraph (B) and by redesig11 nating subparagraphs (C), (D), and (E) as subpara12 graphs (B), (C), and (D), respectively. 

13 (18) The table of sections for subchapter B of 

14 chapter 65 of such Code is amended by inserting 

15 after the item relating to section 6425 the following 

16 new item:

‘‘Sec. 6426. Credit for alcohol fuel and biodiesel mixtures.’’.

17 (19) TARIFF SCHEDULE.—Headings 

18 9901.00.50 and 9901.00.52 of the Harmonized Tar19 iff Schedule of the United States (19 U.S.C. 3007) 

20 are each amended in the effective period column by 

21 striking ‘‘10/1/2007’’ each place it appears and in22 serting ‘‘1/1/2011’’. 

23 (d) EFFECTIVE DATES.—

24 (1) IN GENERAL.—Except as otherwise pro25 vided in this subsection, the amendments made by 
19

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1 this section shall apply to fuel sold or used after 

2 September 30, 2004. 

3 (2) REGISTRATION REQUIREMENT.—The 

4 amendment made by subsection (b) shall take effect 

5 on April 1, 2005. 

6 (3) EXTENSION OF ALCOHOL FUELS CREDIT.—

7 The amendments made by paragraphs (3), (4), and 

8 (19) of subsection (c) shall take effect on the date 

9 of the enactment of this Act. 

10 (4) REPEAL OF GENERAL FUND RETENTION OF

11 CERTAIN ALCOHOL FUELS TAXES.—The amend12 ments made by subsection (c)(15) shall apply to fuel 

13 sold or used after September 30, 2003. 

14 (e) FORMAT FOR FILING.—The Secretary of the 

15 Treasury shall describe the electronic format for filing 

16 claims described in section 6427(i)(3)(B) of the Internal 

17 Revenue Code of 1986 (as amended by subsection 

18 (c)(12)(C)) not later than September 30, 2004. 

19 SEC. 4. BIODIESEL INCOME TAX CREDIT. 

20 (a) IN GENERAL.—Subpart D of part IV of sub21 chapter A of chapter 1 of the Internal Revenue Code of 

22 1986 (relating to business related credits) is amended by 

23 inserting after section 40 the following new section:
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1 ‘‘SEC. 40A. BIODIESEL USED AS FUEL. 

2 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

3 the biodiesel fuels credit determined under this section for 

4 the taxable year is an amount equal to the sum of—

5 ‘‘(1) the biodiesel mixture credit, plus 

6 ‘‘(2) the biodiesel credit. 

7 ‘‘(b) DEFINITION OF BIODIESEL MIXTURE CREDIT

8 AND BIODIESEL CREDIT.—For purposes of this section—

9 ‘‘(1) BIODIESEL MIXTURE CREDIT.—

10 ‘‘(A) IN GENERAL.—The biodiesel mixture 

11 credit of any taxpayer for any taxable year is 

12 50 cents for each gallon of biodiesel used by the 

13 taxpayer in the production of a qualified bio14 diesel mixture. 

15 ‘‘(B) QUALIFIED BIODIESEL MIXTURE.—

16 The term ‘qualified biodiesel mixture’ means a 

17 mixture of biodiesel and diesel fuel (as defined 

18 in section 4083(a)(3)), determined without re19 gard to any use of kerosene, which—

20 ‘‘(i) is sold by the taxpayer producing 

21 such mixture to any person for use as a 

22 fuel, or 

23 ‘‘(ii) is used as a fuel by the taxpayer 

24 producing such mixture. 

25 ‘‘(C) SALE OR USE MUST BE IN TRADE OR

26 BUSINESS, ETC.—Biodiesel used in the produc-
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1 tion of a qualified biodiesel mixture shall be 

2 taken into account—

3 ‘‘(i) only if the sale or use described 

4 in subparagraph (B) is in a trade or busi5 ness of the taxpayer, and 

6 ‘‘(ii) for the taxable year in which 

7 such sale or use occurs. 

8 ‘‘(D) CASUAL OFF-FARM PRODUCTION NOT

9 ELIGIBLE.—No credit shall be allowed under 

10 this section with respect to any casual off-farm 

11 production of a qualified biodiesel mixture. 

12 ‘‘(2) BIODIESEL CREDIT.—

13 ‘‘(A) IN GENERAL.—The biodiesel credit of 

14 any taxpayer for any taxable year is 50 cents 

15 for each gallon of biodiesel which is not in a 

16 mixture with diesel fuel and which during the 

17 taxable year—

18 ‘‘(i) is used by the taxpayer as a fuel 

19 in a trade or business, or 

20 ‘‘(ii) is sold by the taxpayer at retail 

21 to a person and placed in the fuel tank of 

22 such person’s vehicle. 

23 ‘‘(B) USER CREDIT NOT TO APPLY TO BIO24 DIESEL SOLD AT RETAIL.—No credit shall be 

25 allowed under subparagraph (A)(i) with respect 
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1 to any biodiesel which was sold in a retail sale 

2 described in subparagraph (A)(ii). 

3 ‘‘(3) CREDIT FOR AGRI-BIODIESEL.—In the 

4 case of any biodiesel which is agri-biodiesel, para5 graphs (1)(A) and (2)(A) shall be applied by sub6 stituting ‘$1.00’ for ‘50 cents’. 

7 ‘‘(4) CERTIFICATION FOR BIODIESEL.—No 

8 credit shall be allowed under this section unless the 

9 taxpayer obtains a certification (in such form and 

10 manner as prescribed by the Secretary) from the 

11 producer or importer of the biodiesel which identifies 

12 the product produced and the percentage of biodiesel 

13 and agri-biodiesel in the product. 

14 ‘‘(c) COORDINATION WITH CREDIT AGAINST EXCISE

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

16 section with respect to any biodiesel shall be properly re17 duced to take into account any benefit provided with re18 spect to such biodiesel solely by reason of the application 

19 of section 6426 or 6427(e). 

20 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur21 poses of this section—

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

23 the monoalkyl esters of long chain fatty acids de24 rived from plant or animal matter which meet—
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1 ‘‘(A) the registration requirements for 

2 fuels and fuel additives established by the Envi3 ronmental Protection Agency under section 211 

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

5 ‘‘(B) the requirements of the American So6 ciety of Testing and Materials D6751. 

7 ‘‘(2) AGRI-BIODIESEL.—The term ‘agri-bio8 diesel’ means biodiesel derived solely from virgin oils, 

9 including esters derived from virgin vegetable oils 

10 from corn, soybeans, sunflower seeds, cottonseeds, 

11 canola, crambe, rapeseeds, safflowers, flaxseeds, rice 

12 bran, and mustard seeds, and from animal fats.

13 ‘‘(3) MIXTURE OR BIODIESEL NOT USED AS A

14 FUEL, ETC.—

15 ‘‘(A) MIXTURES.—If—

16 ‘‘(i) any credit was determined under 

17 this section with respect to biodiesel used 

18 in the production of any qualified biodiesel 

19 mixture, and 

20 ‘‘(ii) any person— 

21 ‘‘(I) separates the biodiesel from 

22 the mixture, or

23 ‘‘(II) without separation, uses the 

24 mixture other than as a fuel,
24

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1 then there is hereby imposed on such person a 

2 tax equal to the product of the rate applicable 

3 under subsection (b)(1)(A) and the number of 

4 gallons of such biodiesel in such mixture. 

5 ‘‘(B) BIODIESEL.—If—

6 ‘‘(i) any credit was determined under 

7 this section with respect to the retail sale 

8 of any biodiesel, and 

9 ‘‘(ii) any person mixes such biodiesel 

10 or uses such biodiesel other than as a fuel, 

11 then there is hereby imposed on such person a 

12 tax equal to the product of the rate applicable 

13 under subsection (b)(2)(A) and the number of 

14 gallons of such biodiesel. 

15 ‘‘(C) APPLICABLE LAWS.—All provisions of 

16 law, including penalties, shall, insofar as appli17 cable and not inconsistent with this section, 

18 apply in respect of any tax imposed under sub19 paragraph (A) or (B) as if such tax were im20 posed by section 4081 and not by this chapter. 

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

22 TRUSTS.—Under regulations prescribed by the Sec23 retary, rules similar to the rules of subsection (d) of 

24 section 52 shall apply. 
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•S 2110 IS 

1 ‘‘(e) TERMINATION.—This section shall not apply to 

2 any sale or use after December 31, 2006.’’. 

3 (b) CREDIT TREATED AS PART OF GENERAL BUSI4 NESS CREDIT.—Section 38(b) of the Internal Revenue 

5 Code of 1986 (relating to current year business credit) 

6 is amended by striking ‘‘plus’’ at the end of paragraph 

7 (14), by striking the period at the end of paragraph (15) 

8 and inserting ‘‘, plus’’, and by adding at the end the fol9 lowing new paragraph: 

10 ‘‘(16) the biodiesel fuels credit determined 

11 under section 40A(a).’’. 

12 (c) CONFORMING AMENDMENTS.—

13 (1) Section 39(d) of the Internal Revenue Code 

14 of 1986 is amended by adding at the end the fol15 lowing new paragraph: 

16 ‘‘(11) NO CARRYBACK OF BIODIESEL FUELS

17 CREDIT BEFORE EFFECTIVE DATE.—No portion of 

18 the unused business credit for any taxable year 

19 which is attributable to the biodiesel fuels credit de20 termined under section 40A may be carried back to 

21 a taxable year ending on or before September 30, 

22 2004.’’. 

23 (2)(A) Section 87 of such Code is amended to 

24 read as follows: 
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•S 2110 IS 

1 ‘‘SEC. 87. ALCOHOL AND BIODIESEL FUELS CREDITS. 

2 ‘‘Gross income includes—

3 ‘‘(1) the amount of the alcohol fuels credit de4 termined with respect to the taxpayer for the taxable 

5 year under section 40(a), and 

6 ‘‘(2) the biodiesel fuels credit determined with 

7 respect to the taxpayer for the taxable year under 

8 section 40A(a).’’. 

9 (B) The item relating to section 87 in the table 

10 of sections for part II of subchapter B of chapter 1 

11 of such Code is amended by striking ‘‘fuel credit’’ 

12 and inserting ‘‘and biodiesel fuels credits’’. 

13 (3) Section 196(c) of such Code is amended by 

14 striking ‘‘and’’ at the end of paragraph (9), by strik15 ing the period at the end of paragraph (10) and in16 serting ‘‘, and’’, and by adding at the end the fol17 lowing new paragraph: 

18 ‘‘(11) the biodiesel fuels credit determined 

19 under section 40A(a).’’. 

20 (4) The table of sections for subpart D of part 

21 IV of subchapter A of chapter 1 of such Code is 

22 amended by adding after the item relating to section 

23 40 the following new item:

‘‘Sec. 40A. Biodiesel used as fuel.’’.

24 (d) EFFECTIVE DATE.—The amendments made by 

25 this section shall apply to fuel produced, and sold or used, 
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•S 2110 IS 

1 after September 30, 2004, in taxable years ending after 

2 such date.

Æ