I 
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 Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. INCENTIVES FOR BIODIESEL. 
(a) CREDIT FOR BIODIESEL USED AS A FUEL.—Sub-
part D of part IV of subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 (relating to business re-
lated 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 mix-
ture credit. 
‘‘(b) DEFINITION OF BIODIESEL MIXTURE CRED-
IT.—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 tax-
payer 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 percent-
age point (not exceeding 10 percentage 
points) of biodiesel V in such mixture, and 
‘‘(ii) in the case of a mixture with bio-
diesel NV, or a combination of biodiesel V 
and biodiesel NV, 0.5 cent for each whole 
percentage point (not exceeding 10 per-
centage 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 bio-
diesel NV used in the production of a 
qualified biodiesel mixture shall be taken 
into account— 
‘‘(I) only if the sale or use de-
scribed 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 de-
scribed in subparagraph (A) is ulti-
mately 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 pur-
poses of this section— 
‘‘(1) BIODIESEL V DEFINED.—The term ‘bio-
diesel 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 vege-
table oils from corn, soybeans, sunflower seeds, cot-
tonseeds, canola, crambe, rapeseeds, safflowers, 
flaxseeds, rice bran, and mustard seeds.
‘‘(2) BIODIESEL NV DEFINED.—The term ‘bio-
diesel 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 in-
clude 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 Amer-
ican 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 per-
son a tax equal to the product of the bio-
diesel mixture rate applicable under sub-
section (b)(1)(B) and the number of gal-
lons of the mixture. 
‘‘(B) APPLICABLE LAWS.—All provisions of 
law, including penalties, shall, insofar as appli-
cable and not inconsistent with this section, 
apply in respect of any tax imposed under sub-
paragraph (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 Sec-
retary, 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 elec-
tion under paragraph (1) for any taxable year may