I 
112TH CONGRESS 
1ST SESSION 
H. R. 684 
To amend the Internal Revenue Code of 1986 to modify the incentives 
for the production of biodiesel. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 14, 2011 
Ms. HIRONO (for herself 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 modify 
the incentives for the production of biodiesel. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. REFORM OF BIODIESEL INCOME TAX INCEN-
TIVES. 
(a) IN GENERAL.—Section 40A of the Internal Rev-
enue Code of 1986 is amended to read as follows: 
‘‘SEC. 40A. BIODIESEL PRODUCTION. 
‘‘(a) IN GENERAL.—For purposes of section 38, the 
biodiesel fuels credit determined under this section for the 
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taxable year is $1.00 for each gallon of biodiesel produced 
by the taxpayer and which during the taxable year— 
‘‘(1) is sold by such producer to another per-
son— 
‘‘(A) for use by such other person’s trade 
or business (other than casual off-farm produc-
tion), 
‘‘(B) for use by such other person as a fuel 
in a trade or business, or 
‘‘(C) who sells such biodiesel at retail to 
another person and places such biodiesel in the 
fuel tank of such other person, or 
‘‘(2) is used or sold by such producer for any 
purpose described in paragraph (1). 
‘‘(b) INCREASED CREDIT FOR SMALL PRODUCERS.— 
‘‘(1) IN GENERAL.—In the case of any eligible 
small biodiesel producer, subsection (a) shall be ap-
plied by increasing the dollar amount contained 
therein by 10 cents. 
‘‘(2) LIMITATION.—Paragraph (1) shall only 
apply with respect to the first 15,000,000 gallons of 
biodiesel produced by any eligible small biodiesel 
producer during any taxable year. 
‘‘(c) COORDINATION WITH CREDIT AGAINST EXCISE 
TAX.—The amount of the credit determined under this 
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section with respect to any biodiesel shall be properly re-
duced to take into account any benefit provided with re-
spect to such biodiesel solely by reason of the application 
of section 6426 or 6427(e). 
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) BIODIESEL.—The term ‘biodiesel’ means 
liquid fuel derived from biomass which meets— 
‘‘(A) the registration requirements for 
fuels and fuel additives established by the Envi-
ronmental Protection Agency under section 211 
of the Clean Air Act (42 U.S.C. 7545), and 
‘‘(B) the requirements of the American So-
ciety of Testing and Materials D6751. 
Such term shall not include any liquid with respect 
to which a credit may be determined under section 
40. 
‘‘(2) BIODIESEL NOT USED AS FUEL.—If— 
‘‘(A) any credit was determined with re-
spect to any biodiesel under this section, and 
‘‘(B) any person does not use such fuel for 
the purpose described in subsection (a), 
then there is hereby imposed on such person a tax 
equal to the product of the rate applicable under 
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4081(a)(1)(B)(i) 
in 
instances 
where 
section 
4081(a)(1)(B)(iii) is applicable. Credit allowed under 
subsection (a) cannot be claimed by a terminal or re-
finery on fuel upon which the credit was previously 
claimed by a biodiesel producer. 
‘‘(e) DEFINITIONS AND SPECIAL RULES FOR SMALL 
BIODIESEL PRODUCERS.— 
‘‘(1) ELIGIBLE SMALL BIODIESEL PRODUCER.— 
The term ‘eligible small biodiesel producer’ means a 
person who, at all times during the taxable year, has 
a productive capacity for biodiesel not in excess of 
60,000,000 gallons. 
‘‘(2) AGGREGATION
RULE.—For purposes of 
the 15,000,000 gallon limitation under subsection 
(b)(2) and the 60,000,000 gallon limitation under 
paragraph (1), all members of the same controlled 
group of corporations (within the meaning of section 
267(f)) and all persons under common control (with-
in the meaning of section 52(b) but determined by 
treating an interest of more than 50 percent as a 
controlling interest) shall be treated as 1 person. 
‘‘(3) PARTNERSHIP, 
S
CORPORATION, 
AND 
OTHER
PASS-THRU
ENTITIES.—In the case of a 
partnership, trust, S corporation, or other pass-thru 
entity, the limitations contained in subsection (b)(2) 
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and paragraph (1) shall be applied at the entity level 
and at the partner or similar level. 
‘‘(4) ALLOCATION.—For purposes of this sub-
section, in the case of a facility in which more than 
1 person has an interest, productive capacity shall 
be allocated among such persons in such manner as 
the Secretary may prescribe. 
‘‘(5) REGULATIONS.—The Secretary may pre-
scribe such regulations as may be necessary— 
‘‘(A) to prevent the credit provided for in 
subsection (b) from directly or indirectly bene-
fitting any person with a direct or indirect pro-
ductive capacity of more than 60,000,000 gal-
lons of biodiesel during the taxable year, or 
‘‘(B) to prevent any person from directly 
or indirectly benefitting with respect to more 
than 15,000,000 gallons during the taxable 
year. 
‘‘(6) ALLOCATION OF SMALL BIODIESEL CREDIT 
TO PATRONS OF COOPERATIVE.— 
‘‘(A) ELECTION TO ALLOCATE.— 
‘‘(i) IN GENERAL.—In the case of a 
cooperative organization described in sec-
tion 1381(a), any portion of the increase 
determined under subsection (b) for the 
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taxable year may, at the election of the or-
ganization, be apportioned pro rata among 
patrons of the organization on the basis of 
the quantity or value of business done with 
or for such patrons for the taxable year. 
‘‘(ii) FORM
AND
EFFECT
OF
ELEC-
TION.—An election under clause (i) for any 
taxable year shall be made on a timely 
filed return for such year. Such election, 
once made, shall be irrevocable for such 
taxable year. Such election shall not take 
effect unless the organization designates 
the apportionment as such in a written no-
tice mailed to its patrons during the pay-
ment period described in section 1382(d). 
‘‘(B) TREATMENT OF ORGANIZATIONS AND 
PATRONS.— 
‘‘(i) ORGANIZATIONS.—The amount of 
the credit not apportioned to patrons pur-
suant to subparagraph (A) shall be in-
cluded in the amount determined under 
subsection (b) for the taxable year of the 
organization. 
‘‘(ii) PATRONS.—The amount of the 
credit apportioned to patrons pursuant to 
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subparagraph (A) shall be included in the 
amount determined under such subsection 
for the first taxable year of each patron 
ending on or after the last day of the pay-
ment 
period 
(as 
defined 
in 
section 
1382(d)) for the taxable year of the orga-
nization or, if earlier, for the taxable year 
of each patron ending on or after the date 
on which the patron receives notice from 
the cooperative of the apportionment. 
‘‘(iii) SPECIAL RULES FOR DECREASE 
IN CREDITS FOR TAXABLE YEAR.—If the 
amount of the credit of the organization 
determined under such subsection for a 
taxable year is less than the amount of 
such credit shown on the return of the or-
ganization for such year, an amount equal 
to the excess of— 
‘‘(I) such reduction, over 
‘‘(II) the amount not apportioned 
to such patrons under subparagraph 
(A) for the taxable year, shall be 
treated as an increase in tax imposed 
by this chapter on the organization. 
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Such increase shall not be treated as tax 
imposed by this chapter for purposes of de-
termining the amount of any credit under 
this chapter or for purposes of section 55. 
‘‘(f) RENEWABLE DIESEL.—For purposes of this 
title— 
‘‘(1) TREATMENT
IN
THE
SAME
MANNER
AS 
BIODIESEL.—Except as provided in paragraph (2), 
renewable diesel shall be treated in the same manner 
as biodiesel. 
‘‘(2) EXCEPTION.—Subsection (b) shall not 
apply with respect to renewable diesel. 
‘‘(3) RENEWABLE DIESEL DEFINED.—The term 
‘renewable diesel’ means liquid fuel derived from bio-
mass which meets— 
‘‘(A) the registration requirements for 
fuels and fuel additives established by the Envi-
ronmental Protection Agency under section 211 
of the Clean Air Act (42 U.S.C. 7545), and 
‘‘(B) the requirements of the American So-
ciety of Testing and Materials D975 or D396, 
or other equivalent standard approved by the 
Secretary. 
Such term shall not include any liquid with respect 
to which a credit may be determined under section 
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40. Such term does not include any fuel derived 
from coprocessing biomass with a feedstock which is 
not biomass. For purposes of this paragraph, the 
term ‘biomass’ has the meaning given such term by 
section 45K(c)(3). 
‘‘(4) CERTAIN AVIATION FUEL.—Except as pro-
vided in the last 3 sentences of paragraph (3), the 
term ‘renewable diesel’ shall include fuel derived 
from biomass which meets the requirements of a De-
partment of Defense specification for military jet 
fuel or an American Society of Testing and Mate-
rials specification for aviation turbine fuel. 
‘‘(g) TERMINATION.—This section shall not apply to 
any sale or use after December 31, 2016.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of such Code is amended by striking the item relating to 
section 40A and inserting the following new item: 
‘‘Sec. 40A. Biodiesel production.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to biodiesel sold or used after De-
cember 31, 2011. 
SEC. 2. REFORM OF BIODIESEL EXCISE TAX INCENTIVES. 
(a) IN GENERAL.—Subsection (c) of section 6426 of 
the Internal Revenue Code of 1986 is amended to read 
as follows: 
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this subsection cannot be claimed by a terminal or 
refinery on fuel upon which the credit was previously 
claimed by a biodiesel producer. 
‘‘(4) TERMINATION.—This subsection shall not 
apply to any sale, use, or removal for any period 
after December 31, 2016.’’. 
(b) PAYMENT OF CREDIT.—Subsection (e) of section 
6427 of such Code is amended— 
(1) by striking ‘‘or the biodiesel mixture credit’’ 
in paragraph (1), 
(2) by redesignating paragraphs (3) through 
(6) as paragraphs (4) through (7), respectively, and 
by inserting after paragraph (2) the following new 
paragraph: 
‘‘(3) BIODIESEL CREDIT.—If any person pro-
duces biodiesel and sells or uses such biodiesel as 
provided in section 6426(c), the Secretary shall pay 
(without interest) to such person an amount equal to 
the biodiesel credit with respect to such biodiesel.’’, 
(3) by striking ‘‘paragraph (1) or (2)’’ each 
place it appears in paragraphs (4) and (6), as redes-
ignated by paragraph (2), and inserting ‘‘paragraph 
(1), (2), or (3)’’, 
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(4) by striking ‘‘alternative fuel’’ each place it 
appears in paragraphs (4) and (6), as redesignated 
by paragraph (2), and inserting ‘‘fuel’’, and 
(5) by striking ‘‘biodiesel mixture (as defined in 
section 6426(c)(3))’’ in paragraph (7)(B), as so re-
designated, and inserting ‘‘biodiesel (within the 
meaning of section 40A)’’. 
(c) EXEMPTION FOR TRANSFERS BETWEEN REG-
ISTERED
FACILITIES.—Subparagraph (B) of section 
4081(a)(1) of such Code is amended by adding at the end 
the following new clause: 
‘‘(iii) The tax imposed by this para-
graph shall not apply to biodiesel that is 
removed from a registered IRS biodiesel 
plant and is transferred to a IRS reg-
istered terminal or refinery.’’. 
(d) PRODUCER
REGISTRATION
REQUIREMENT.— 
Subsection (a) of section 6426 of such Code is amended 
by striking ‘‘subsections (d) and (e)’’ in the flush sentence 
at the end and inserting ‘‘subsections (c), (d), and (e)’’. 
(e) RECAPTURE.—Subsection (f) of section 6426 of 
such Code is amended to read as follows: 
‘‘(f) RECAPTURE.— 
‘‘(1) ALCOHOL FUEL MIXTURES.—If— 
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‘‘(A) any credit was determined under this 
section with respect to alcohol used in the pro-
duction of any alcohol fuel mixture, and 
‘‘(B) any person— 
‘‘(i) separates the alcohol from the 
mixture, or 
‘‘(ii) without separation, uses the mix-
ture other than as a fuel, 
then there is hereby imposed on such person a tax 
equal to the product of the applicable amount and 
the number of gallons of such alcohol. 
‘‘(2) BIODIESEL.—If any credit was determined 
under this section with respect to the production of 
any biodiesel and any person does not use such bio-
diesel for a purpose described in subsection (c)(1), 
then there is hereby imposed on such person a tax 
equal to $1 for each gallon of such biodiesel. 
‘‘(3) 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 paragraph (1) or (2) as if 
such tax were imposed by section 4081 and not by 
this section.’’. 
(f) CLERICAL AMENDMENT.—The heading of section 
6426 of such Code (and the item relating to such section 
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in the table of sections for subchapter B of chapter 65 
of such Code) is amended by striking ‘‘alcohol fuel, bio-
diesel, and alternative fuel mixtures’’ and inserting ‘‘alco-
hol fuel mixtures, biodiesel production, and alternative fuel 
mixtures’’. 
(g) EFFECTIVE DATE.—The amendments made by 
this section shall apply to biodiesel sold or used after De-
cember 31, 2011. 
SEC. 3. BIODIESEL TREATED AS TAXABLE FUEL. 
(a) BIODIESEL TREATED
AS TAXABLE FUEL.— 
Clause (i) of section 4083(a)(3)(A) of such Code is amend-
ed by inserting ‘‘, including biodiesel (as defined in section 
6426(c)(3)),’’ after ‘‘(other than gasoline)’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to biodiesel removed, entered, or 
sold after the date which is 6 months after the date of 
the enactment of this Act. 
Æ 
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