‘‘(ii) a certificate that such vehicle 
meets or exceeds the Bin 5 Tier II emis-
sion standard established in regulations 
prescribed by the Administrator of the En-
vironmental Protection Agency under sec-
tion 202(i) of the Clean Air Act for that 
make and model year vehicle, 
‘‘(C) the original use of which commences 
with the taxpayer, 
‘‘(D) which is acquired for use or lease by 
the taxpayer and not for resale, and 
‘‘(E) which is made by a manufacturer. 
‘‘(c) NEW ADVANCED LEAN BURN TECHNOLOGY 
MOTOR VEHICLE CREDIT.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), the new advanced lean burn technology motor 
vehicle credit determined under this subsection with 
respect to a new advanced lean burn technology 
motor vehicle placed in service by the taxpayer dur-
ing the taxable year is the credit amount determined 
under paragraph (2). 
‘‘(2) CREDIT AMOUNT.— 
‘‘(A) FUEL ECONOMY.—The credit amount 
determined under this paragraph shall be deter-
mined in accordance with the following table:
‘‘In the case of a vehicle which 
achieves a fuel economy (ex-
pressed as a percentage of the 
2002 model year city fuel econ-
omy) of— 
The credit amount is— 
At least 125 percent but less than 150 percent ......................
$400
At least 150 percent but less than 175 percent ......................
$800
At least 175 percent but less than 200 percent ......................
$1,200
At least 200 percent but less than 225 percent ......................
$1,600
At least 225 percent but less than 250 percent ......................
$2,000
At least 250 percent ................................................................
$2,400. 
‘‘(B) 
CONSERVATION
CREDIT.—The 
amount determined under subparagraph (A) 
with respect to a new advanced lean burn tech-
nology motor vehicle shall be increased by the 
conservation credit amount determined in ac-
cordance with the following table: 
‘‘In the case of a vehicle which 
achieves a lifetime fuel savings 
(expressed in gallons of gaso-
line) of— 
The conservation credit 
amount is— 
At least 1,200 but less than 1,800 ..........................................
$250
At least 1,800 but less than 2,400 ..........................................
$500
At least 2,400 but less than 3,000 ..........................................
$750
At least 3,000 ..........................................................................
$1,000. 
‘‘(3) NEW ADVANCED LEAN BURN TECHNOLOGY 
MOTOR VEHICLE.—For purposes of this subsection, 
the term ‘new advanced lean burn technology motor 
vehicle’ means a passenger automobile or a light 
truck— 
‘‘(A) with an internal combustion engine 
which—
‘‘(i) is designed to operate primarily 
using more air than is necessary for com-
plete combustion of the fuel, 
‘‘(ii) incorporates direct injection, 
‘‘(iii) achieves at least 125 percent of 
the 2002 model year city fuel economy, 
‘‘(iv) for 2004 and later model vehi-
cles, has received a certificate that such ve-
hicle meets or exceeds— 
‘‘(I) in the case of a vehicle hav-
ing a gross vehicle weight rating of 
6,000 pounds or less, the Bin 5 Tier 
II emission standard established in 
regulations prescribed by the Adminis-
trator of the Environmental Protec-
tion Agency under section 202(i) of 
the Clean Air Act for that make and 
model year vehicle, and 
‘‘(II) in the case of a vehicle hav-
ing a gross vehicle weight rating of 
more than 6,000 pounds but not more 
than 8,500 pounds, the Bin 8 Tier II 
emission standard which is so estab-
lished,
‘‘(B) the original use of which commences 
with the taxpayer, 
‘‘(C) which is acquired for use or lease by 
the taxpayer and not for resale, and 
‘‘(D) which is made by a manufacturer. 
‘‘(4) LIFETIME FUEL SAVINGS.—For purposes 
of this subsection, the term ‘lifetime fuel savings’ 
means, in the case of any new advanced lean burn 
technology motor vehicle, an amount equal to the ex-
cess (if any) of— 
‘‘(A) 120,000 divided by the 2002 model 
year city fuel economy for the vehicle inertia 
weight class, over 
‘‘(B) 120,000 divided by the city fuel econ-
omy for such vehicle. 
‘‘(d) NEW QUALIFIED HYBRID MOTOR VEHICLE 
CREDIT.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), the new qualified hybrid motor vehicle credit de-
termined under this subsection with respect to a new 
qualified hybrid motor vehicle placed in service by 
the taxpayer during the taxable year is the credit 
amount determined under paragraph (2). 
‘‘(2) CREDIT AMOUNT.—
‘‘(A) CREDIT
AMOUNT
FOR
PASSENGER 
AUTOMOBILES
AND
LIGHT
TRUCKS.—In the 
case of a new qualified hybrid motor vehicle 
which is a passenger automobile or light truck 
and which has a gross vehicle weight rating of 
not more than 8,500 pounds, the amount deter-
mined under this paragraph is the sum of the 
amounts determined under clauses (i) and (ii). 
‘‘(i) FUEL
ECONOMY.—The amount 
determined under this clause is the amount 
which would be determined under sub-
section (c)(2)(A) if such vehicle were a ve-
hicle referred to in such subsection. 
‘‘(ii) CONSERVATION
CREDIT.—The 
amount determined under this clause is the 
amount which would be determined under 
subsection (c)(2)(B) if such vehicle were a 
vehicle referred to in such subsection. 
‘‘(B) CREDIT AMOUNT FOR OTHER MOTOR 
VEHICLES.— 
‘‘(i) IN GENERAL.—In the case of any 
new qualified hybrid motor vehicle to which 
subparagraph (A) does not apply, the 
amount determined under this paragraph 
is the amount equal to the applicable per-
centage of the qualified incremental hybrid 
cost of the vehicle as certified under clause 
(v). 
‘‘(ii) APPLICABLE PERCENTAGE.—For 
purposes of clause (i), the applicable per-
centage is— 
‘‘(I) 20 percent if the vehicle 
achieves an increase in city fuel econ-
omy relative to a comparable vehicle 
of at least 30 percent but less than 40 
percent, 
‘‘(II) 30 percent if the vehicle 
achieves such an increase of at least 
40 percent but less than 50 percent, 
and 
‘‘(III) 40 percent if the vehicle 
achieves such an increase of at least 
50 percent. 
‘‘(iii) QUALIFIED
INCREMENTAL
HY-
BRID COST.—For purposes of this subpara-
graph, the qualified incremental hybrid 
cost of any vehicle is equal to the amount 
of the excess of the manufacturer’s sug-
gested retail price for such vehicle over
such price for a comparable vehicle, to the 
extent such amount does not exceed— 
‘‘(I) $7,500, if such vehicle has a 
gross vehicle weight rating of not 
more than 14,000 pounds, 
‘‘(II) $15,000, if such vehicle has 
a gross vehicle weight rating of more 
than 14,000 pounds but not more 
than 26,000 pounds, and 
‘‘(III) $30,000, if such vehicle 
has a gross vehicle weight rating of 
more than 26,000 pounds. 
‘‘(iv) COMPARABLE
VEHICLE.—For 
purposes of this subparagraph, the term 
‘comparable vehicle’ means, with respect to 
any new qualified hybrid motor vehicle, 
any vehicle which is powered solely by a 
gasoline or diesel internal combustion en-
gine and which is comparable in weight, 
size, and use to such vehicle. 
‘‘(v) CERTIFICATION.—A certification 
described in clause (i) shall be made by the 
manufacturer and shall be determined in 
accordance with guidance prescribed by the 
Secretary. Such guidance shall specify pro-
cedures and methods for calculating fuel 
economy savings and incremental hybrid 
costs. 
‘‘(3) NEW
QUALIFIED
HYBRID
MOTOR
VEHI-
CLE.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘new quali-
fied hybrid motor vehicle’ means a motor vehi-
cle— 
‘‘(i) which draws propulsion energy 
from onboard sources of stored energy 
which are both— 
‘‘(I) an internal combustion or 
heat engine using consumable fuel, 
and 
‘‘(II) a rechargeable energy stor-
age system; 
‘‘(ii) which, in the case of a vehicle to 
which paragraph (2)(A) applies, has re-
ceived a certificate of conformity under the 
Clean Air Act and meets or exceeds the 
equivalent qualifying California low emis-
sion 
vehicle 
standard 
under 
section 
243(e)(2) of the Clean Air Act for that 
make and model year, and—
‘‘(I) in the case of a vehicle hav-
ing a gross vehicle weight rating of 
6,000 pounds or less, the Bin 5 Tier 
II emission standard established in 
regulations prescribed by the Adminis-
trator of the Environmental Protec-
tion Agency under section 202(i) of 
the Clean Air Act for that make and 
model year vehicle, and 
‘‘(II) in the case of a vehicle hav-
ing a gross vehicle weight rating of 
more than 6,000 pounds but not more 
than 8,500 pounds, the Bin 8 Tier II 
emission standard which is so estab-
lished; 
‘‘(iii) which has a maximum available 
power of at least— 
‘‘(I) 4 percent in the case of a ve-
hicle to which paragraph (2)(A) ap-
plies, 
‘‘(II) 10 percent in the case of a 
vehicle which has a gross vehicle 
weight rating or more than 8,500 
pounds and not than 14,000 pounds, 
and
‘‘(III) 15 percent in the case of a 
vehicle in excess of 14,000 pounds; 
‘‘(iv) which, in the case of a vehicle to 
which paragraph (2)(B) applies, has an in-
ternal combustion or heat engine which 
has received a certificate of conformity 
under the Clean Air Act as meeting the 
emission standards set in the regulations 
prescribed by the Administrator of the En-
vironmental Protection Agency for 2004 
through 2007 model year diesel heavy duty 
engines or ottocycle heavy duty engines, as 
applicable; 
‘‘(v) the original use of which com-
mences with the taxpayer; 
‘‘(vi) which is acquired for use or 
lease by the taxpayer and not for resale; 
and 
‘‘(vii) which is made by a manufac-
turer. 
Such term shall not include any vehicle which 
is not a passenger automobile or light truck if 
such vehicle has a gross vehicle weight rating of 
less than 8,500 pounds.
‘‘(B) CONSUMABLE FUEL.—For purposes 
of subparagraph (A)(i)(I), the term ‘consumable 
fuel’ means any solid, liquid, or gaseous matter 
which releases energy when consumed by an 
auxiliary power unit. 
‘‘(C) MAXIMUM AVAILABLE POWER.— 
‘‘(i) 
CERTAIN
PASSENGER
AUTO-
MOBILES AND LIGHT TRUCKS.—In the case 
of a vehicle to which paragraph (2)(A) ap-
plies, the term ‘maximum available power’ 
means the maximum power available from 
the rechargeable energy storage system, 
during a standard 10 second pulse power 
or equivalent test, divided by such max-
imum power and the SAE net power of the 
heat engine. 
‘‘(ii) OTHER
MOTOR
VEHICLES.—In 
the case of a vehicle to which paragraph 
(2)(B) applies, the term ‘maximum avail-
able power’ means the maximum power 
available from the rechargeable energy 
storage system, during a standard 10 sec-
ond pulse power or equivalent test, divided 
by the vehicle’s total traction power. For 
purposes of the preceding sentence, the
term ‘total traction power’ means the sum 
of the peak power from the rechargeable 
energy storage system and the heat engine 
peak power of the vehicle, except that if 
such storage system is the sole means by 
which the vehicle can be driven, the total 
traction power is the peak power of such 
storage system. 
‘‘(e) NEW QUALIFIED ALTERNATIVE FUEL MOTOR 
VEHICLE CREDIT.— 
‘‘(1) ALLOWANCE OF CREDIT.—Except as pro-
vided in paragraph (5), the new qualified alternative 
fuel motor vehicle credit determined under this sub-
section is an amount equal to the applicable percent-
age of the incremental cost of any new qualified al-
ternative fuel motor vehicle placed in service by the 
taxpayer during the taxable year. 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes 
of paragraph (1), the applicable percentage with re-
spect to any new qualified alternative fuel motor ve-
hicle is— 
‘‘(A) 40 percent, plus 
‘‘(B) 30 percent, if such vehicle— 
‘‘(i) has received a certificate of con-
formity under the Clean Air Act and meets
or exceeds the most stringent standard 
available for certification under the Clean 
Air Act for that make and model year vehi-
cle (other than a zero emission standard), 
or 
‘‘(ii) has received an order certifying 
the vehicle as meeting the same require-
ments as vehicles which may be sold or 
leased in California and meets or exceeds 
the most stringent standard available for 
certification under the State laws of Cali-
fornia (enacted in accordance with a waiv-
er granted under section 209(b) of the 
Clean Air Act) for that make and model 
year vehicle (other than a zero emission 
standard). 
For purposes of the preceding sentence, in the case 
of any new qualified alternative fuel motor vehicle 
which has a gross vehicle weight rating of more than 
14,000 pounds, the most stringent standard avail-
able shall be such standard available for certification 
on the date of the enactment of the Energy Tax Pol-
icy Act of 2003. 
‘‘(3) INCREMENTAL
COST.—For purposes of 
this subsection, the incremental cost of any new
qualified alternative fuel motor vehicle is equal to 
the amount of the excess of the manufacturer’s sug-
gested retail price for such vehicle over such price 
for a gasoline or diesel fuel motor vehicle of the 
same model, to the extent such amount does not ex-
ceed— 
‘‘(A) $5,000, if such vehicle has a gross ve-
hicle weight rating of not more than 8,500 
pounds, 
‘‘(B) $10,000, if such vehicle has a gross 
vehicle weight rating of more than 8,500 
pounds but not more than 14,000 pounds, 
‘‘(C) $25,000, if such vehicle has a gross 
vehicle weight rating of more than 14,000 
pounds but not more than 26,000 pounds, and 
‘‘(D) $40,000, if such vehicle has a gross 
vehicle weight rating of more than 26,000 
pounds. 
‘‘(4) NEW
QUALIFIED
ALTERNATIVE
FUEL 
MOTOR
VEHICLE.—For purposes of this sub-
section— 
‘‘(A) IN GENERAL.—The term ‘new quali-
fied alternative fuel motor vehicle’ means any 
motor vehicle—
‘‘(i) which is only capable of operating 
on an alternative fuel, 
‘‘(ii) the original use of which com-
mences with the taxpayer, 
‘‘(iii) which is acquired by the tax-
payer for use or lease, but not for resale, 
and 
‘‘(iv) which is made by a manufac-
turer. 
‘‘(B) ALTERNATIVE FUEL.—The term ‘al-
ternative fuel’ means compressed natural gas, 
liquefied natural gas, liquefied petroleum gas, 
hydrogen, and any liquid at least 85 percent of 
the volume of which consists of methanol. 
‘‘(5) CREDIT FOR MIXED-FUEL VEHICLES.— 
‘‘(A) IN
GENERAL.—In the case of a 
mixed-fuel vehicle placed in service by the tax-
payer during the taxable year, the credit deter-
mined under this subsection is an amount equal 
to— 
‘‘(i) in the case of a 75/25 mixed-fuel 
vehicle, 70 percent of the credit which 
would have been allowed under this sub-
section if such vehicle was a qualified alter-
native fuel motor vehicle, and
‘‘(ii) in the case of a 90/10 mixed-fuel 
vehicle, 90 percent of the credit which 
would have been allowed under this sub-
section if such vehicle was a qualified alter-
native fuel motor vehicle. 
‘‘(B) MIXED-FUEL
VEHICLE.—For pur-
poses of this subsection, the term ‘mixed-fuel 
vehicle’ means any motor vehicle described in 
subparagraph (C) or (D) of paragraph (3), 
which— 
‘‘(i) is certified by the manufacturer 
as being able to perform efficiently in nor-
mal operation on a combination of an al-
ternative fuel and a petroleum-based fuel, 
‘‘(ii) either— 
‘‘(I) has received a certificate of 
conformity under the Clean Air Act, 
or 
‘‘(II) has received an order certi-
fying the vehicle as meeting the same 
requirements as vehicles which may be 
sold or leased in California and meets 
or exceeds the low emission vehicle 
standard under section 88.105–94 of
title 40, Code of Federal Regulations, 
for that make and model year vehicle, 
‘‘(iii) the original use of which com-
mences with the taxpayer, 
‘‘(iv) which is acquired by the tax-
payer for use or lease, but not for resale, 
and 
‘‘(v) which is made by a manufac-
turer. 
‘‘(C) 75/25 MIXED-FUEL
VEHICLE.—For 
purposes of this subsection, the term ‘75/25 
mixed-fuel vehicle’ means a mixed-fuel vehicle 
which operates using at least 75 percent alter-
native fuel and not more than 25 percent petro-
leum-based fuel. 
‘‘(D) 90/10 MIXED-FUEL
VEHICLE.—For 
purposes of this subsection, the term ‘90/10 
mixed-fuel vehicle’ means a mixed-fuel vehicle 
which operates using at least 90 percent alter-
native fuel and not more than 10 percent petro-
leum-based fuel. 
‘‘(f) LIMITATION ON NUMBER OF NEW QUALIFIED 
HYBRID AND ADVANCED LEAN-BURN TECHNOLOGY VE-
HICLES ELIGIBLE FOR CREDIT.—
‘‘(j) TERMINATION.—This section shall not apply to 
any property placed in service after— 
‘‘(1) in the case of a new qualified alternative 
fuel motor vehicle, December 31, 2006, 
‘‘(2) in the case of a new advanced lean burn 
technology motor vehicle or a new qualified hybrid 
motor vehicle, December 31, 2008, and 
‘‘(3) in the case of a new qualified fuel cell 
motor vehicle, December 31, 2012.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 30(d) (relating to special rules) is 
amended by adding at the end the following new 
paragraphs: 
‘‘(5) NO DOUBLE BENEFIT.—No credit shall be 
allowed under this section for any motor vehicle for 
which a credit is also allowed under section 30B.’’. 
(2) Section 1016(a) is amended by striking 
‘‘and’’ at the end of paragraph (27), by striking the 
period at the end of paragraph (28) and inserting ‘‘, 
and’’, and by adding at the end the following: 
‘‘(29) to the extent provided in section 
30B(h)(5).’’. 
(3) Section 6501(m) is amended by inserting 
‘‘30B(h)(9),’’ after ‘‘30(d)(4),’’.
(4) The table of sections for subpart B of part 
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 30A the fol-
lowing: 
‘‘Sec. 30B. Alternative motor vehicle credit.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
the date of the enactment of this Act, in taxable years 
ending after such date. 
(d) STICKER INFORMATION REQUIRED AT RETAIL 
SALE.— 
(1) IN GENERAL.—The Secretary of the Treas-
ury shall issue regulations under which each quali-
fied vehicle sold at retail shall display a notice— 
(A) that such vehicle is a qualified vehicle, 
and 
(B) that the buyer may not benefit from 
the credit allowed under section 30B of the In-
ternal Revenue Code of 1986 if such buyer has 
insufficient tax liability. 
(2) QUALIFIED
VEHICLE.—For purposes of 
paragraph (1), the term ‘‘qualified vehicle’’ means a 
vehicle with respect to which a credit is allowed 
under section 30B of the Internal Revenue Code of 
1986.
SEC. 4. SMALL ETHANOL PRODUCER CREDIT. 
(a) ALLOCATION OF ALCOHOL FUELS CREDIT TO 
PATRONS OF A COOPERATIVE.—Section 40(g) (relating to 
definitions and special rules for eligible small ethanol pro-
ducer credit) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(6) ALLOCATION
OF
SMALL
ETHANOL
PRO-
DUCER 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 credit de-
termined under subsection (a)(3) for the 
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.
‘‘(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, and 
‘‘(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. 
‘‘(C) SPECIAL RULE.—If the amount of a 
credit which has been apportioned to any pa-
tron under this paragraph is decreased for any 
reason— 
‘‘(i) such amount shall not increase 
the tax imposed on such patron, and 
‘‘(ii) the tax imposed by this chapter 
on such organization shall be increased by 
such amount. 
The increase under clause (ii) shall not be 
treated as tax imposed by this chapter for pur-
poses of determining the amount of any credit
under this chapter or for purposes of section 
55.’’. 
(b) DEFINITION OF SMALL ETHANOL PRODUCER.— 
Section 40(g) (relating to definitions and special rules for 
eligible small ethanol producer credit) is amended by strik-
ing ‘‘30,000,000’’ each place it appears and inserting 
‘‘60,000,000’’. 
(c) CONFORMING AMENDMENT.—Section 1388 (re-
lating to definitions and special rules for cooperative orga-
nizations) is amended by adding at the end the following 
new subsection: 
‘‘(k) CROSS REFERENCE.— 
‘‘For provisions relating to the apportionment of 
the alcohol fuels credit between cooperative organi-
zations and their patrons, see section 40(g)(6).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 5. INCENTIVES FOR BIODIESEL. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its) 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 sum of—