(B) Paragraph (4) of section 40(d) of such
Code is amended to read as follows:
‘‘(4) VOLUME OF ALCOHOL.—For purposes of
determining under subsection (a) the number of gal-
lons of alcohol with respect to which a credit is al-
lowable under subsection (a), the volume of alcohol
shall include the volume of any denaturant (includ-
ing gasoline) which is added under any formulas ap-
proved by the Secretary to the extent that such de-
naturants do not exceed 5 percent of the volume of
such alcohol (including denaturants).’’
(C) Paragraph (2) of section 4041(a) of
such Code is amended by adding at the end the
following: ‘‘No tax shall be imposed by this
paragraph on the sale or use of any liquid if tax
was imposed on such liquid under section 4081
and the tax thereon was not credited or re-
funded.’’
(D) Section 6427 of such Code is amended
by striking subsection (f).
(E) Subsection (i) of section 6427 of such
Code is amended by striking paragraph (3).
(F) Paragraph (2) of section 6427(k) of
such Code is amended by striking ‘‘(3)’’.
(G)(i) Paragraph (1) of section 6427(l) of
such Code is amended by striking ‘‘or’’ at the
end of subparagraph (A), by redesignating sub-
paragraph (B) as subparagraph (C), and by in-
serting after subparagraph (A) the following
new subparagraph:
‘‘(B) any fuel alcohol (as defined in section
4083) on which tax has been imposed by sec-
tion 4081, or’’.
(ii) Paragraph (2) of section 6427(l) of
such Code is amended by striking ‘‘and’’ at the
end of subparagraph (A), by redesignating sub-
paragraph (B) as subparagraph (C), and by in-
serting after subparagraph (A) the following
new subparagraph:
‘‘(B) in the case of fuel alcohol (as so de-
fined), any use which is exempt from the tax
imposed by section 4041(a)(2) other than by
reason of a prior imposition of tax, and’’.
(iii) The heading of subsection (l) of sec-
tion 6427 of such Code is amended by inserting
‘‘, FUEL ALCOHOL,’’ after ‘‘DIESEL FUEL’’.
(H) 
Sections 
9503(b)(1)(E) 
and
9508(b)(2) of such Code are each amended by
striking ‘‘and kerosene’’ and inserting ‘‘ker-
osene, and fuel alcohol’’.
(I) Section 9502 of such Code is amended
by striking subsection (e) and by redesignating
subsection (f) as subsection (e).
(J) Subsection (e) of section 9502 of such
Code (as redesignated by subparagraph (I)) is
amended by striking paragraph (2) and by re-
designating paragraph (3) as paragraph (2).
(K) Subsection (b) of section 9503 of such
Code is amended by striking paragraph (5).
(L) Paragraph (3) of section 9503(f) of
such Code is amended to read as follows:
‘‘(3) PARTIALLY EXEMPT METHANOL OR ETHA-
NOL FUEL.—In the case of a rate of tax determined
under section 4041(m), the Highway Trust Fund fi-
nancing rate is the excess (if any) of the rate so de-
termined over 4.3 cents per gallon.’’
(f) INCREASE IN SMALL ETHANOL PRODUCER CRED-
IT.—Subparagraph (A) of section 40(b)(4) of such Code
is amended by striking ‘‘10 cents’’ and inserting ‘‘13
cents’’.
(g) EFFECTIVE DATE.—
(1) AMENDMENTS RELATING TO CREDIT.—The
amendments made by subsections (a), (b), (c), and
(f) shall apply to alcohol produced after December
31, 1996, in taxable years ending after such date.
(2) 
AMENDMENTS
RELATING
TO
EXCISE
TAXES.—The amendments made by subsections (d)
and (e) shall take effect on January 1, 1997.
(3) STILLS PLACED IN SERVICE PURSUANT TO
BINDING CONTRACTS.—For purposes of subsections
(d)(1)(A)(iii) and (i)(3)(A) of section 40 of the In-
ternal Revenue Code of 1986, as amended by this
section, a still (or other distilling apparatus) shall be
treated as placed in service before January 1, 1997,
if such still (or other apparatus)—
(A) is constructed or acquired by the tax-
payer pursuant to a written contract which was
binding on April 30, 1996, and at all times
thereafter before such construction or acquisi-
tion, and
(B) is placed in service before January 1,
1998.
(h) FLOOR STOCK TAXES.—
(1) IMPOSITION OF TAX.—In the case of fuel al-
cohol which is held on January 1, 1997, by any per-
son, there is hereby imposed a floor stocks tax of
18.4 cents per gallon.
(2) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.—
(A) LIABILITY FOR TAX.—A person hold-
ing fuel alcohol on January 1, 1997, to which
the tax imposed by paragraph (1) applies shall
be liable for such tax.
(B) METHOD OF PAYMENT.—The tax im-
posed by paragraph (1) shall be paid in such
manner as the Secretary shall prescribe.
(C) TIME
FOR
PAYMENT.—The tax im-
posed by paragraph (1) shall be paid on or be-
fore June 30, 1997.
(3) DEFINITIONS.—For purposes of this sub-
section—
(A) FUEL ALCOHOL.—The term ‘‘fuel alco-
hol’’ has the meaning given such term by sec-
tion 4083 of the Internal Revenue Code of
1986, as amended by this section.
(B) HELD
BY
A
PERSON.—Fuel alcohol
shall be considered as ‘‘held by a person’’ if
title thereto has passed to such person (whether
or not delivery to the person has been made).
(C) SECRETARY.—The term ‘‘Secretary’’
means the Secretary of the Treasury or his del-
egate.
(4) EXCEPTION FOR EXEMPT USES.—The tax
imposed by paragraph (1) shall not apply to fuel al-
cohol held by any person exclusively for any use to
the extent a credit or refund of the tax imposed by
section 4081 of the Internal Revenue Code of 1986
is allowable for such use.
(5) EXCEPTION FOR FUEL HELD IN VEHICLE
TANK.—No tax shall be imposed by paragraph (1)
on fuel alcohol held in the tank of a motor vehicle
or motorboat.
(6) EXCEPTION
FOR
CERTAIN
AMOUNTS
OF
FUEL.—
(A) IN
GENERAL.—No tax shall be im-
posed by paragraph (1) on fuel alcohol held on
January 1, 1997, by any person if the aggre-
gate amount of fuel alcohol held by such person
on such date does not exceed 2,000 gallons.
The preceding sentence shall apply only if such
person submits to the Secretary (at the time
and in the manner required by the Secretary)
such information as the Secretary shall require
for purposes of this paragraph.
(B) EXEMPT FUEL.—For purposes of sub-
paragraph (A), there shall not be taken into ac-
count fuel held by any person which is exempt
from the tax imposed by paragraph (1) by rea-
son of paragraph (4) or (5).
(C) CONTROLLED GROUPS.—For purposes
of this paragraph—
(i) CORPORATIONS.—
(I) IN
GENERAL.—All persons
treated as a controlled group shall be
treated as 1 person.
(II) CONTROLLED
GROUP.—The
term ‘‘controlled group’’ has the
meaning given to such term by sub-
section (a) of section 1563 of such
Code; except that for such purposes
the phrase ‘‘more than 50 percent’’
shall be substituted for the phrase ‘‘at
least 80 percent’’ each place it ap-
pears in such subsection.
(ii) 
NONINCORPORATED
PERSONS
UNDER COMMON CONTROL.—Under regula-
tions prescribed by the Secretary, prin-
ciples similar to the principles of clause (i)
shall apply to a group of persons under
common control where 1 or more of such
persons is not a corporation.
(7) OTHER LAWS APPLICABLE.—All provisions
of law, including penalties, applicable with respect to
the taxes imposed by section 4081 of such Code
shall, insofar as applicable and not inconsistent with
the provisions of this subsection, apply with respect
to the floor stock taxes imposed by paragraph (1) to
the same extent as if such taxes were imposed by
such section 4081.
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