I
106TH CONGRESS
1ST SESSION
H. R. 446
To amend the Internal Revenue Code of 1986 to eliminate tax subsidies
for ethanol fuel.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 2, 1999
Mr. BENTSEN 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 eliminate
tax subsidies for ethanol fuel.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. ELIMINATION OF TAX SUBSIDIES FOR ETHA-
NOL FUEL.
(a) ELIMINATION OF CREDIT FOR ALCOHOL USED
AS FUEL.—
(1) IN GENERAL.—Subpart D of part IV of
subchapter A of chapter 1 of the Internal Revenue
Code of 1986 is amended by striking section 40 (re-
lating to alcohol used as fuel).
(2) CLERICAL
AND
CONFORMING
AMEND-
MENTS.—
(A) Subsection (b) of section 38 of such
Code (relating to general business credit) is
amended by striking paragraph (3) and by re-
designating paragraphs (4) through (12) as
paragraphs (3) through (11), respectively.
(B) Paragraph (3) of section 38(d) of such
Code (relating to credits no longer listed) is
amended by striking ‘‘and’’ at the end of sub-
paragraph (A), by striking the period at the
end of subparagraph (B) and inserting ‘‘, and’’,
and by adding at the end the following new sub-
paragraph:
‘‘(C) the credit allowable by section 40, as
in effect on the day before the date of the en-
actment of this subparagraph (relating to alco-
hol used as fuel) shall be treated as referred to
after the last paragraph of subsection (b) and
after any credits treated as referred to by rea-
son of subparagraph (A).’’
(C) The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such
Code is amended by striking the item relating
to section 40.
(D)(i) Part II of subchapter B of chapter
1 of such Code is amended by striking section
87 (relating to alcohol fuel credit).
(ii) The table of sections for part II of sub-
chapter B of chapter 1 of such Code is amend-
ed by striking the item relating to section 87.
(iii) Subsection (a) of section 56 of such
Code (relating to adjustments in computing al-
ternative minimum taxable income) is amended
by striking paragraph (7) (relating to section
87 not applicable).
(E) Subsection (c) of section 196 of such
Code (relating to qualified business credits) is
amended by striking paragraph (3) and redesig-
nating paragraphs (4) through (8) as para-
graphs (3) through (7), respectively.
(F) Section 6501(m) of such Code (relat-
ing to deficiencies attributable to election of
certain credits) is amended by striking ‘‘40(f),’’.
(b) REDUCTIONS OF OTHER INCENTIVES FOR ETHA-
NOL FUEL.—
(1) REPEAL OF REDUCED RATE ON ETHANOL
FUEL NOT PRODUCED FROM PETROLEUM OR NATU-
RAL 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.—
(A) Paragraph (1) of section 4041(m) of
such Code is amended by striking ‘‘or ethanol’’
in the material preceding subparagraph (A).
(B) Clause (i) of section 4041(m)(1)(A) of
such Code is amended by striking ‘‘shall be—
’’ and all that follows and inserting ‘‘shall be
9.15 cents per gallon, and’’.
(C) Clause (ii) of section 4041(m)(1)(A) of
such Code is amended by striking ‘‘shall be—
’’ and all that follows and inserting ‘‘shall be
2.15 cents per gallon, and’’.
(D) Paragraph (2) of section 4041(m) of
such Code is amended—
(i) by striking ‘‘or ethanol’’ each place
it appears in the heading and text,
(ii) by striking ‘‘, ethanol,’’ and
(iii) by inserting ‘‘(other than etha-
nol)’’ after ‘‘alcohol’’.
(c) TAX OF FUEL ALCOHOL TO SAME EXTENT AS
OTHER MOTOR FUELS.—
(1) TREATMENT
AS
TAXABLE
FUEL.—Para-
graph (1) of section 4083(a) of such Code (defining
taxable fuel) is amended by striking ‘‘and’’ at the
end of subparagraph (B), by striking the period at
the end of subparagraph (C) and inserting ‘‘, and’’,
and by adding at the end the following:
‘‘(D) fuel alcohol.’’
(2) DEFINITION
OF
FUEL
ALCOHOL.—Sub-
section (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.’’
(3) RATE
OF
TAX.—Clause (i) of section
4081(a)(2)(A) of such Code is amended by striking
‘‘other than aviation gasoline’’ and inserting ‘‘(other
than aviation gasoline) and fuel alcohol’’.
(4) SPECIAL RULES FOR IMPOSITION OF TAX.—
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.’’
(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) 
Subparagraph 
(A) 
of 
section
4041(a)(2) of such Code is amended—
(i) by inserting ‘‘other than fuel alco-
hol’’ after ‘‘any product’’, and
(ii) by adding at the end the following
flush sentence:
‘‘No tax shall be imposed by this paragraph on
the sale or use of any fuel alcohol if tax was im-
posed on such alcohol under section 4081 and
the tax thereon was not credited or refunded.’’
(B) Section 6427 of such Code is amended
by striking subsection (f).
(C) Subsection (i) of section 6427 of such
Code is amended by striking paragraph (3).
(D) Paragraph (2) of section 6427(k) of
such Code is amended by striking ‘‘(3),’’.
(E)(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 4041 or 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 ‘‘KEROSENE’’.
(F) 
Sections 
9503(b)(1)(D) 
and
9508(b)(2) of such Code are each amended by
striking ‘‘and kerosene’’ and inserting ‘‘ker-
osene, and fuel alcohol’’.
(G) Subsection (e) of section 9502 of such
Code is amended by striking paragraph (2).
(H) Paragraph (4) of section 9503(b) of
such Code is amended by adding ‘‘and’’ at the
end of subparagraph (C), by striking the
comma at the end of subparagraph (D) and in-
serting a period, and by striking subparagraphs
(E) and (F).
(I) Subsection (b) of section 9503 of such
Code is amended by striking paragraph (5) and
by redesignating paragraph (6) as paragraph
(5).
(d) EFFECTIVE DATES.—
(1) GENERAL
RULE.—Except as provided in
paragraph (2), the amendments made by this section
shall take effect on the date of the enactment of this
Act.
(2) ELIMINATION OF SECTION 40 CREDIT.—The
amendments made by subsection (a) shall apply to
alcohol produced after the date of the enactment of
this Act.
(e) FLOOR STOCK TAXES.—
(1) IMPOSITION OF TAX.—In the case of fuel al-
cohol which is held on the date of the enactment of
this Act by any person, 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 the date of the enactment of
this Act 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 the date which is 6 months after the date
of the enactment of this Act.
(3) 
DEFINITIONS.—For 
purposes 
of 
this
subsection—
(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
the date of the enactment of this Act by any
person if the aggregate amount of fuel alcohol
held by such person on such date does not ex-
ceed 2,000 gallons. The preceding sentence