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 (4) as paragraph (5) and by 
inserting after paragraph (3) the following: 
‘‘(4) 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) and of sec-
tion 38(c)(3)(A)(ii) of such Code are both 
amended by inserting ‘‘or the small ethanol pro-
ducer credit’’ after ‘‘the New York Liberty 
Zone business employee 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 DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 5. EXTENSION OF EXPENSING OF VEHICLE REFUEL-
ING PROPERTY FOR E85 ETHANOL. 
Subsection (f) of section 179A of the Internal Rev-
enue Code of 1986 (relating to termination) is amended 
by inserting before the period ‘‘(December 31, 2009, for 
property which is qualified clean-fuel vehicle refueling 
property with respect to fuel at least 85 percent of which 
is ethanol)’’. 
SEC. 6. REPEAL OF LIMITATION ON DEPOSITS INTO HIGH-
WAY TRUST FUND WITH RESPECT TO ALCO-
HOL FUELS. 
(a) IN GENERAL.—Paragraph (4) of section 9503(b) 
of the Internal Revenue Code of 1986 (relating to certain 
taxes not transferred to Highway Trust Fund) is amended 
by adding ‘‘and’’ at the end of subparagraph (C), by strik-
ing the comma at the end of subparagraph (D) and insert-
ing a period, and by striking subparagraphs (E) and (F).