I

108TH CONGRESS

1ST SESSION H. R. 465

To amend the Internal Revenue Code of 1986 to allow allocation of small

ethanol producer credit to patrons of a cooperative, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 29, 2003

Mr. KING of Iowa (for himself, Mr. POMEROY, Mr. SHIMKUS, Mr. SIMPSON,

Mr. REHBERG, Mr. WELLER, Mr. LAHOOD, Mr. KENNEDY of Minnesota,

Mr. LATHAM, Mr. MORAN of Kansas, Mr. BEREUTER, Mr. GRAVES, Mrs.

EMERSON, Mr. BLUNT, and Mr. JOHNSON of Illinois) 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 allow allocation of small ethanol producer credit to patrons of a

cooperative, 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. SMALL ETHANOL PRODUCER CREDIT.

4 (a) ALLOCATION OF ALCOHOL FUELS CREDIT TO

5 PATRONS OF A COOPERATIVE.—Section 40(g) of the In6 ternal Revenue Code of 1986 (relating to alcohol used as

7 fuel) is amended by adding at the end the following new

8 paragraph:
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1 ‘‘(6) ALLOCATION OF SMALL ETHANOL PRO2 DUCER CREDIT TO PATRONS OF COOPERATIVE.—

3 ‘‘(A) ELECTION TO ALLOCATE.—

4 ‘‘(i) IN GENERAL.—In the case of a

5 cooperative organization described in sec6 tion 1381(a), any portion of the credit de7 termined under subsection (a)(3) for the

8 taxable year may, at the election of the or9 ganization, be apportioned pro rata among

10 patrons of the organization on the basis of

11 the quantity or value of business done with

12 or for such patrons for the taxable year.

13 ‘‘(ii) FORM AND EFFECT OF ELEC14 TION.—An election under clause (i) for any

15 taxable year shall be made on a timely

16 filed return for such year. Such election,

17 once made, shall be irrevocable for such

18 taxable year.

19 ‘‘(B) TREATMENT OF ORGANIZATIONS AND

20 PATRONS.—The amount of the credit appor21 tioned to patrons under subparagraph (A)—

22 ‘‘(i) shall not be included in the

23 amount determined under subsection (a)

24 with respect to the organization for the

25 taxable year,
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1 ‘‘(ii) shall be included in the amount

2 determined under subsection (a) for the

3 taxable year of each patron for which the

4 patronage dividends for the taxable year

5 described in subparagraph (A) are included

6 in gross income, and

7 ‘‘(iii) shall be included in gross income

8 of such patrons for the taxable year in the

9 manner and to the extent provided in sec10 tion 87.

11 ‘‘(C) SPECIAL RULES FOR DECREASE IN

12 CREDITS FOR TAXABLE YEAR.—If the amount

13 of the credit of a cooperative organization de14 termined under subsection (a)(3) for a taxable

15 year is less than the amount of such credit

16 shown on the return of the cooperative organi17 zation for such year, an amount equal to the

18 excess of—

19 ‘‘(i) such reduction, over

20 ‘‘(ii) the amount not apportioned to

21 such patrons under subparagraph (A) for

22 the taxable year,

23 shall be treated as an increase in tax imposed

24 by this chapter on the organization. Such in25 crease shall not be treated as tax imposed by
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1 this chapter for purposes of determining the

2 amount of any credit under this chapter or for

3 purposes of section 55.’’.

4 (b) IMPROVEMENTS TO SMALL ETHANOL PRODUCER

5 CREDIT.—

6 (1) DEFINITION OF SMALL ETHANOL PRO7 DUCER.—Section 40(g) of such Code (relating to

8 definitions and special rules for eligible small ethanol

9 producer credit) is amended by striking

10 ‘‘30,000,000’’ each place it appears and inserting

11 ‘‘60,000,000’’.

12 (2) SMALL ETHANOL PRODUCER CREDIT NOT A

13 PASSIVE ACTIVITY CREDIT.—Clause (i) of section

14 469(d)(2)(A) of such Code is amended by striking

15 ‘‘subpart D’’ and inserting ‘‘subpart D, other than

16 section 40(a)(3),’’.

17 (3) ALLOWING CREDIT AGAINST ENTIRE REG18 ULAR TAX AND MINIMUM TAX.—

19 (A) IN GENERAL.—Subsection (c) of sec20 tion 38 of such Code (relating to limitation

21 based on amount of tax) is amended by redesig22 nating paragraph (4) as paragraph (5) and by

23 inserting after paragraph (3) the following new

24 paragraph:
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1 ‘‘(4) SPECIAL RULES FOR SMALL ETHANOL

2 PRODUCER CREDIT.—

3 ‘‘(A) IN GENERAL.—In the case of the

4 small ethanol producer credit—

5 ‘‘(i) this section and section 39 shall

6 be applied separately with respect to the

7 credit, and

8 ‘‘(ii) in applying paragraph (1) to the

9 credit—

10 ‘‘(I) the amounts in subpara11 graphs (A) and (B) thereof shall be

12 treated as being zero, and

13 ‘‘(II) the limitation under para14 graph (1) (as modified by subclause

15 (I)) shall be reduced by the credit al16 lowed under subsection (a) for the

17 taxable year (other than the small

18 ethanol producer credit).

19 ‘‘(B) SMALL ETHANOL PRODUCER CRED20 IT.—For purposes of this subsection, the term

21 ‘small ethanol producer credit’ means the credit

22 allowable under subsection (a) by reason of sec23 tion 40(a)(3).’’.

24 (B) CONFORMING AMENDMENTS.—Sub25 clause (II) of section 38(c)(2)(A)(ii), and sub-
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1 clause (II) of section 38(c)(3)(A)(ii), as added

2 by section 301(b)(1) of such Act, are each

3 amended by inserting ‘‘or the small ethanol pro4 ducer credit’’ after ‘‘employee credit’’.

5 (4) SMALL ETHANOL PRODUCER CREDIT NOT

6 ADDED BACK TO INCOME UNDER SECTION 87.—Sec7 tion 87 of such Code (relating to income inclusion

8 of alcohol fuel credit) is amended to read as follows:

9 ‘‘SEC. 87. ALCOHOL FUEL CREDIT.

10 ‘‘Gross income includes an amount equal to the sum

11 of—

12 ‘‘(1) the amount of the alcohol mixture credit

13 determined with respect to the taxpayer for the tax14 able year under section 40(a)(1), and

15 ‘‘(2) the alcohol credit determined with respect

16 to the taxpayer for the taxable year under section

17 40(a)(2).’’.

18 (c) CONFORMING AMENDMENT.—Section 1388 of

19 such Code (relating to definitions and special rules for co20 operative organizations) is amended by adding at the end

21 the following new subsection:

22 ‘‘(k) CROSS REFERENCE.—For provisions relating to

23 the apportionment of the alcohol fuels credit between coop24 erative organizations and their patrons, see section

25 40(g)(6).’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 the date of the enactment of this Act.

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