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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4165 Introduced in House (IH)]

108th CONGRESS
  2d Session
                                H. R. 4165

To amend the Internal Revenue Code of 1986 to provide tax incentives to 
                encourage the use of biodiesel as fuel.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             April 2, 2004

Mr. Smith of Michigan 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 provide tax incentives to 
                encourage the use of biodiesel as fuel.

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

SECTION 1. INCENTIVES FOR BIODIESEL.

    (a) Credit for Biodiesel Used as a Fuel.--Subpart D of part IV of 
subchapter A of chapter 1 of the Internal Revenue Code of 1986 
(relating to business related credits) is amended by inserting after 
section 40 the following new section:

``SEC. 40A. BIODIESEL USED AS FUEL.

    ``(a) General Rule.--For purposes of section 38, the biodiesel 
fuels credit determined under this section for the taxable year is an 
amount equal to the biodiesel mixture credit.
    ``(b) Definition of Biodiesel Mixture Credit.--For purposes of this 
section--
            ``(1) Biodiesel mixture credit.--
                    ``(A) In general.--The biodiesel mixture credit of 
                any taxpayer for any taxable year is the sum of the 
                products of the biodiesel mixture rate for each 
                qualified biodiesel mixture and the number of gallons 
                of such mixture of the taxpayer for the taxable year.
                    ``(B) Biodiesel mixture rate.--For purposes of 
                subparagraph (A), the biodiesel mixture rate for each 
                qualified biodiesel mixture shall be--
                            ``(i) in the case of a mixture with only 
                        biodiesel V, 1 cent for each whole percentage 
                        point (not exceeding 10 percentage points) of 
                        biodiesel V in such mixture, and
                            ``(ii) in the case of a mixture with 
                        biodiesel NV, or a combination of biodiesel V 
                        and biodiesel NV, 0.5 cent for each whole 
                        percentage point (not exceeding 10 percentage 
                        points) of such biodiesel in such mixture.
            ``(2) Qualified biodiesel mixture.--
                    ``(A) In general.--The term `qualified biodiesel 
                mixture' means a mixture of diesel and biodiesel V or 
                biodiesel NV which--
                            ``(i) is sold by the taxpayer producing 
                        such mixture to any person for use as a fuel, 
                        or
                            ``(ii) is used as a fuel by the taxpayer 
                        producing such mixture.
                    ``(B) Sale or use must be in trade or business, in 
                off-highway use, etc.--
                            ``(i) In general.--Biodiesel V or biodiesel 
                        NV used in the production of a qualified 
                        biodiesel mixture shall be taken into account--
                                    ``(I) only if the sale or use 
                                described in subparagraph (A) is in a 
                                trade or business of the taxpayer,
                                    ``(II) for the taxable year in 
                                which such sale or use occurs, and
                                    ``(III) only if the sale or use 
                                described in subparagraph (A) is 
                                ultimately for use in a vehicle which 
                                at the time of use will not be 
                                registered and is not required to be 
                                registered for highway use under the 
                                laws of any State or foreign country.
                            ``(ii) Certification for biodiesel v.--
                        Biodiesel V used in the production of a 
                        qualified biodiesel mixture shall be taken into 
                        account only if the taxpayer described in 
                        subparagraph (A) obtains a certification from 
                        the producer of the biodiesel V which 
                        identifies the product produced.
                    ``(C) Casual off-farm production not eligible.--No 
                credit shall be allowed under this section with respect 
                to any casual off-farm production of a qualified 
                biodiesel mixture.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Biodiesel v defined.--The term `biodiesel V' means 
        the monoalkyl esters of long chain fatty acids derived solely 
        from virgin vegetable oils for use in compressional-ignition 
        (diesel) engines. Such term shall include esters derived from 
        vegetable oils from corn, soybeans, sunflower seeds, 
        cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, 
        rice bran, and mustard seeds.
            ``(2) Biodiesel nv defined.--The term `biodiesel nv' means 
        the monoalkyl esters of long chain fatty acids derived from 
        nonvirgin vegetable oils or animal fats for use in 
        compressional-ignition (diesel) engines.
            ``(3) Registration requirements.--The terms `biodiesel V' 
        and `biodiesel NV' shall only include a biodiesel which meets--
                            ``(A) the registration requirements for 
                        fuels and fuel additives established by the 
                        Environmental Protection Agency under section 
                        211 of the Clean Air Act (42 U.S.C. 7545), and
                            ``(B) the requirements of the American 
                        Society of Testing and Materials D6751.
            ``(4) Biodiesel mixture not used as a fuel, etc.--
                    ``(A) Imposition of tax.--If--
                            ``(i) any credit was determined under this 
                        section with respect to biodiesel V or 
                        biodiesel NV used in the production of any 
                        qualified biodiesel mixture, and
                            ``(ii) any person--
                                    ``(I) separates such biodiesel from 
                                the mixture, or
                                    ``(II) without separation, uses the 
                                mixture other than as a fuel,
                        then there is hereby imposed on such person a 
                        tax equal to the product of the biodiesel 
                        mixture rate applicable under subsection 
                        (b)(1)(B) and the number of gallons of the 
                        mixture.
                    ``(B) Applicable laws.--All provisions of law, 
                including penalties, shall, insofar as applicable and 
                not inconsistent with this section, apply in respect of 
                any tax imposed under subparagraph (A) as if such tax 
                were imposed by section 4081 and not by this chapter.
            ``(5) Pass-thru in the case of estates and trusts.--Under 
        regulations prescribed by the Secretary, rules similar to the 
        rules of subsection (d) of section 52 shall apply.
    ``(d) Election To Have Biodiesel Fuels Credit Not Apply.--
            ``(1) In general.--A taxpayer may elect to have this 
        section not apply for any taxable year.
            ``(2) Time for making election.--An election under 
        paragraph (1) for any taxable year may be made (or revoked) at 
        any time before the expiration of the 3-year period beginning 
        on the last date prescribed by law for filing the return for 
        such taxable year (determined without regard to extensions).
            ``(3) Manner of making election.--An election under 
        paragraph (1) (or revocation thereof) shall be made in such 
        manner as the Secretary may by regulations prescribe.''.
    (b) Credit Treated as Part of General Business Credit.--Section 
38(b) of such Code is amended by striking ``plus'' at the end of 
paragraph (14), by striking the period at the end of paragraph (15) and 
inserting ``, plus'', and by adding at the end the following new 
paragraph:
            ``(16) the biodiesel fuels credit determined under section 
        40A(a).''.
    (c) Conforming Amendments.--
            (1) Section 39(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(11) No carryback of biodiesel fuels credit before 
        january 1, 2004.--No portion of the unused business credit for 
        any taxable year which is attributable to the biodiesel fuels 
        credit determined under section 40A may be carried back to a 
        taxable year beginning before January 1, 2004.''.
            (2) Section 196(c) of such Code is amended by striking 
        ``and'' at the end of paragraph (9), by striking the period at 
        the end of paragraph (10), and by adding at the end the 
        following new paragraph:
            ``(11) the biodiesel fuels credit determined under section 
        40A(a).''.
            (3) Section 6501(m) of such Code is amended by inserting 
        ``40A(e),'' after ``40(f),''.
            (4) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding 
        after the item relating to section 40 the following new item:

                              ``Sec. 40A. Biodiesel used as fuel.''.
    (d) Effective Date.--The amendments made by this subsection shall 
apply to taxable years beginning after December 31, 2003.
                                 <all>
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