I
107TH CONGRESS
1ST SESSION
H. R. 1636
To amend the Internal Revenue Code of 1986 to allow allocation of small
ethanol producer credit to patrons of cooperative, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 26, 2001
Mr. THUNE (for himself, Mr. POMEROY, Mrs. EMERSON, Mr. JOHNSON of Illi-
nois, Mr. KENNEDY of Minnesota, Mr. GRAVES, Mr. SHIMKUS, Mrs.
CLAYTON, and Mr. MORAN of Kansas) 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 alloca-
tion of small ethanol producer credit to patrons of coop-
erative, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SMALL ETHANOL PRODUCER CREDIT.
(a) ALLOCATION OF ALCOHOL FUELS CREDIT TO
PATRONS OF A COOPERATIVE.—Section 40(g) Internal
Revenue Code of 1986 (relating to definitions and special
rules for eligible small ethanol producer credit) is amended
by adding at the end the following:
‘‘(6) ALLOCATION
OF
SMALL
ETHANOL
PRO-
DUCER CREDIT TO PATRONS OF COOPERATIVE.—
‘‘(A) ELECTION TO ALLOCATE.—
‘‘(i) IN
GENERAL.—Notwithstanding
paragraph (4), in the case of a cooperative
organization described in section 1381(a),
any portion of the credit determined under
subsection (a)(3) for the taxable year may,
at the election of the organization, be ap-
portioned 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.
‘‘(iii) SPECIAL
RULE
FOR
TAXABLE
YEARS
PRIOR
TO
ENACTMENT
OF
PARA-
GRAPH.—Notwithstanding clause (ii), an
election for any taxable year ending prior
to the date of the enactment of this para-
graph may be made at any time before the
expiration of the 3-year period beginning
on the last date prescribed by law for filing
the return of the taxpayer for such taxable
year (determined without regard to exten-
sions) by filing an amended return for
such year.
‘‘(B) TREATMENT OF ORGANIZATIONS AND
PATRONS.—The amount of the credit appor-
tioned to patrons under subparagraph (A)—
‘‘(i) shall not be included in the
amount determined under subsection (a)
with respect to the organization for the
taxable year,
‘‘(ii) shall be included in the amount
determined under subsection (a) for the
taxable year of each patron for which the
patronage dividends for the taxable year
described in subparagraph (A) are included
in gross income, and
‘‘(iii) shall be included in gross income
of such patrons for the taxable year in the
manner and to the extent provided in sec-
tion 87.
‘‘(C) SPECIAL RULES FOR DECREASE IN
CREDITS FOR TAXABLE YEAR.—If the amount
of the credit of a cooperative organization (as
so defined) determined under subsection (a)(3)
for a taxable year is less than the amount of
such credit shown on the return of the coopera-
tive organization 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. Such in-
crease shall not be treated as tax imposed by
this chapter for purposes of determining the
amount of any credit under this subpart or sub-
part A, B, E, or G.’’.
(b) DEFINITION OF SMALL ETHANOL PRODUCER;
IMPROVEMENTS
TO
SMALL
ETHANOL
PRODUCER
CREDIT.—
(1) DEFINITION
OF
SMALL
ETHANOL
PRO-
DUCER.—Section 40(g)(1) of the Internal Revenue
Code of 1986 (relating to eligible small ethanol pro-
ducer) is amended by striking ‘‘30,000,000’’ and in-
serting ‘‘60,000,000’’.
(2) SMALL ETHANOL PRODUCER CREDIT NOT A
PASSIVE
ACTIVITY
CREDIT.—Clause (i) of section
469(d)(2)(A) of such Code (relating to passive activ-
ity credit) is amended by striking ‘‘subpart D’’ and
inserting ‘‘subpart D, other than section 40(a)(3),’’.
(3) ALLOWING
CREDIT
AGAINST
MINIMUM
TAX.—
(A) IN GENERAL.—Subsection (c) of sec-
tion 38 of such Code (relating to limitation
based on amount of tax) is amended by redesig-
nating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following:
‘‘(3) SPECIAL
RULES
FOR
SMALL
ETHANOL
PRODUCER CREDIT.—
‘‘(A) IN
GENERAL.—In the case of the
small ethanol producer credit—
‘‘(i) this section and section 39 shall
be applied separately with respect to the
credit, and
‘‘(ii) in applying paragraph (1) to the
credit—
‘‘(I) subparagraphs (A) and (B)
thereof shall not apply, and
‘‘(II) the limitation under para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the
taxable year (other than the small
ethanol producer credit).
‘‘(B) SMALL ETHANOL PRODUCER CRED-
IT.—For purposes of this subsection, the term
‘small ethanol producer credit’ means the credit
allowable under subsection (a) by reason of sec-
tion 40(a)(3).’’.
(B) 
CONFORMING
AMENDMENT.—Sub-
clause (II) of section 38(c)(2)(A)(ii) of such
Code is amended by inserting ‘‘or the small eth-
anol 
producer 
credit’’ 
after 
‘‘employment
credit’’.
(4) SMALL ETHANOL PRODUCER CREDIT NOT
ADDED BACK TO INCOME UNDER SECTION 87.—Sec-
tion 87 of such Code (relating to income inclusion
of alcohol fuel credit is amended to read as follows:
‘‘SEC. 87. ALCOHOL FUEL CREDIT.
‘‘Gross income includes an amount equal to the sum
of—
‘‘(1) the amount of the alcohol mixture credit
determined with respect to the taxpayer for the tax-
able year under section 40(a)(1), and
‘‘(2) the alcohol credit determined with respect
to the taxpayer for the taxable year under section
40(a)(2).’’.
(c) CONFORMING AMENDMENT.—Section 1388 of the
Internal Revenue Code of 1986 (relating to definitions and
special rules for cooperative organizations) is amended by
adding at the end the following:
‘‘(k) CROSS REFERENCE.—For provisions relating to
the apportionment of the alcohol fuels credit between coop-
erative organizations and their patrons, see section 40(d)
(6).’’
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years beginning after Decem-
ber 31, 1997.
(2) CERTAIN
PROVISIONS.—The amendments
made by paragraphs (1) and (4) of subsection (b)
shall apply to taxable years ending after the date of
the enactment of this Act.
Æ