I
104TH CONGRESS
2D SESSION
H. R. 3345
To amend the Internal Revenue Code of 1986 to reduce the tax incentives
for the production of alcohol for fuel use.
IN THE HOUSE OF REPRESENTATIVES
APRIL 25, 1996
Mr. TATE (for himself, Mr. GIBBONS, Mr. BREWSTER, Mrs. SMITH of Wash-
ington, Mr. STARK, Mr. PETE GEREN of Texas, Mr. MEEHAN, Mr. ENG-
LISH of Pennsylvania, Mr. CASTLE, Mr. BAKER of Louisiana, Mr.
FIELDS of Texas, Mr. COLEMAN, Mr. BARTON of Texas, Mr. GREEN-
WOOD, Mr. BENTSEN, Mr. BAKER of California, Mr. FRANKS of New Jer-
sey, Mr. FRANK of Massachusetts, Mr. WAMP, Mr. CHAPMAN, Mr. ZIM-
MER, Mr. THOMPSON, Mr. HOEKSTRA, Mr. LIVINGSTON, Ms. GREENE of
Utah, Mr. DAVIS, Mr. MORAN, Mrs. VUCANOVICH, Mr. BLUTE, Mr. SAM
JOHNSON of Texas, Mr. FRELINGHUYSEN, Mr. FOGLIETTA, Mrs. LOWEY,
Mr. LOBIONDO, Mr. STENHOLM, Mr. GENE GREEN of Texas, Mr. HORN,
Mr. LEWIS of California, Mr. SHUSTER, Mr. CHABOT, Mr. MONTGOM-
ERY, Mr. CLINGER, Mr. ACKERMAN, Mr. BONILLA, Mr. ENSIGN, Mr.
MOORHEAD, Mr. MCCRERY, Mr. MICA, Mr. ZELIFF, Mr. SHAYS, Mr.
MILLER of Florida, Mr. SMITH of New Jersey, and Mr. HILLEARY) intro-
duced the following bill; which was referred to the Committee on Ways
and Means
A BILL
To amend the Internal Revenue Code of 1986 to reduce
the tax incentives for the production of alcohol for fuel use.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
‘‘(3) PRODUCTION
FOR
LESS
THAN
ENTIRE
BASE PERIOD.—
‘‘(A) IN GENERAL.—If alcohol is produced
by a producer for less than the entire 3-year pe-
riod referred to in paragraph (2)(A), the aver-
age referred to in paragraph (2) shall be treat-
ed as being equal to 50 percent of the annual
productive capacity of such producer as of De-
cember 31, 1996.
‘‘(B) PRODUCER MAY ESTABLISH HIGHER
AVERAGE PRODUCTION.—In the case of a pro-
ducer who produced alcohol during at least the
last 3 months of such 3-year period, subpara-
graph (A) shall be applied by substituting for
‘50 percent’ the percentage established by such
producer to the satisfaction of the Secretary as
the percentage which such producer’s normal
alcohol production is of its productive capacity.
‘‘(4) ACQUISITIONS AND DISPOSITIONS.—Rules
similar to the rules of subparagraphs (A) and (B) of
section 41(f)(3) shall apply for purposes of this sub-
section.’’
(3) CONFORMING AMENDMENT.—Paragraph (1)
of section 40(g) of such Code is amended by striking
‘‘clauses (i) and (ii)’’ and inserting ‘‘clauses (i), (ii),
and (iii)’’.
(c) REDUCTION OF CREDIT FOR ETHANOL BY REA-
SON OF CARBON DIOXIDE BYPRODUCT BENEFIT.—Sub-
section (h) of section 40 of such Code is amended—
(1) by striking ‘‘54 cents’’ each place it appears
and inserting ‘‘51 cents’’, and
(2) by striking ‘‘40 cents’’ each place it appears
and inserting ‘‘38.25 cents’’.
(d) CONFORMING REDUCTIONS OF OTHER INCEN-
TIVES FOR ETHANOL FUEL.—
(1) REPEAL OF REDUCED RATE ON ETHANOL
FUEL PRODUCED OTHER THAN FROM PETROLEUM
OR NATURAL GAS.—Subsection (b) of section 4041
of such Code is amended to read as follows:
‘‘(b) EXEMPTION
FOR
OFF-HIGHWAY
BUSINESS
USE.—
‘‘(1) IN GENERAL.—No tax shall be imposed by
subsection (a) or (d)(1) on liquids sold for use or
used in an off-highway business use.
‘‘(2) TAX WHERE OTHER USE.—If a liquid on
which no tax was imposed by reason of paragraph
(1) is used otherwise than in an off-highway busi-
ness use, a tax shall be imposed by paragraph
(1)(B), (2)(B), or (3)(A)(ii) of subsection (a)
(whichever is appropriate) and by the corresponding
provision of subsection (d)(1) (if any).
‘‘(3) OFF-HIGHWAY BUSINESS USE DEFINED.—
For purposes of this subsection, the term ‘off-high-
way business use’ has the meaning given to such
term by section 6421(e)(2); except that such term
shall not, for purposes of subsection (a)(1), include
use in a diesel-powered train.’’
(2) REPEAL OF REDUCED RATE ON ETHANOL
FUEL PRODUCED FROM NATURAL GAS.—Subsection
(m) of section 4041 of such Code is amended—
(A) by striking ‘‘or ethanol’’ each place it
appears (including the heading of paragraph
(2)), and
(B) by striking ‘‘, ethanol, or other alco-
hol’’ in paragraph (2) and inserting ‘‘or other
alcohol (other than ethanol)’’.
(e) CONFORMING AMENDMENTS TO EXCISE TAXES;
FUEL ALCOHOL TAXED IN SAME MANNER AS OTHER
MOTOR FUELS.—
(1) IN
GENERAL.—Paragraph (1) of section
4083(a) of such Code (defining taxable fuel) is
amended by striking ‘‘and’’ at the end of subpara-
graph (A), by striking the period at the end of sub-
paragraph (B) and inserting ‘‘, and’’, and by adding
at the end the following:
‘‘(C) fuel alcohol.’’
(2) FUEL ALCOHOL.—Subsection (a) of section
4083 of such Code is amended by adding at the end
the following new paragraph:
‘‘(4) FUEL ALCOHOL.—The term ‘fuel alcohol’
means any alcohol (including ethanol and meth-
anol)—
‘‘(A) which is produced other than from
petroleum, natural gas, or coal (including peat),
and
‘‘(B) which is withdrawn from the distillery
where produced free of tax under chapter 51 by
reason of section 5181 or so much of section
5214(a)(1) as relates to fuel use.
Such term shall not include alcohol designated under
section 40(i).’’
(3) RATE
OF
TAX.—Clause (i) of section
4081(a)(2)(A) of such Code is amended by inserting
‘‘or fuel alcohol’’ after ‘‘gasoline’’.
(4) SPECIAL RULES FOR IMPOSITION OF TAX.—
(A) Paragraph (1) of section 4081(a) of
such Code is amended by adding at the end the
following new subparagraph:
‘‘(C) SPECIAL
RULES
FOR
FUEL
ALCO-
HOL.—In the case of fuel alcohol—
‘‘(i) the distillery where produced shall
be treated as a refinery, and
‘‘(ii) subparagraph (B) shall be ap-
plied by including transfers by truck or rail
in excess of such minimum quantities as
the Secretary shall prescribe.’’
(B) Paragraph (1) of section 4081(b) of
such Code is amended by inserting ‘‘(other than
fuel alcohol designated under section 40(i))’’
after ‘‘taxable fuel’’.
(5) REPEAL OF REDUCED RATES ON ALCOHOL
FUELS.—
(A) Section 4041 of such Code is amended
by striking subsection (k).
(B) Section 4081 of such Code is amended
by striking subsection (c).
(C) Section 4091 of such Code is amended
by striking subsection (c).
(6) CONFORMING AMENDMENTS.—
(A) Subsection (c) of section 40 of such
Code is amended by striking all that follows
‘‘application of’’ and inserting ‘‘the last sen-
tence of section 4083(a)(4)’’.