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defined in section 48(a)(3)) placed in service after the
date of the enactment of this section.
‘‘(c) NO INCREASE IN BASIS.—Notwithstanding any
other provision of this subtitle, no increase in the basis or
adjusted basis of any property shall result from any amount
excluded under this subsection with respect to such prop-
erty.
‘‘(d) DENIAL OF DOUBLE BENEFIT.—Notwithstanding
any other provision of this subtitle, no deduction or credit
shall be allowed (to the person for whose benefit a qualified
electric transmission easement payment is made) for, or by
reason of, any expenditure to the extent of the amount ex-
cluded under this section with respect to such expenditure.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
such part III is amended by inserting after the item relat-
ing to section 139A the following new item:
‘‘Sec. 139B. Electric transmission easement payments.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to payments received after the date of
the enactment of this Act.
SEC. 12303. EXCEPTION TO REDUCTION OF RENEWABLE
ELECTRICITY CREDIT.
(a) IN GENERAL.—Section 45(b)(3) (relating to credit
reduced for grants, tax-exempt bonds, subsidized energy fi-
nancing, and other credits) is amended by adding after the
last sentence the following: ‘‘This paragraph shall not apply
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with respect to any loans, loan guarantees, or grants issued
by the Secretary of Agriculture under authority granted by
section 9007 of the Farm Security and Rural Investment
Act of 2002.’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to facilities placed in service after the
date of the enactment of this Act.
PART II—ALCOHOL FUEL
SEC. 12311. EXPANSION OF SPECIAL ALLOWANCE TO CEL-
LULOSIC BIOFUEL PLANT PROPERTY.
(a) IN GENERAL.—Paragraph (3) of section 168(l) (re-
lating to special allowance for cellulosic biomass ethanol
plant property) is amended to read as follows:
‘‘(3) CELLULOSIC
BIOFUEL.—For purposes of
this subsection, the term ‘cellulosic biofuel’ means any
alcohol, ether, ester, or hydrocarbon produced from
any lignocellulosic or hemicellulosic matter that is
available on a renewable or recurring basis.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (l) of section 168 is amended by
striking ‘‘cellulosic biomass ethanol’’ each place it ap-
pears and inserting ‘‘cellulosic biofuel’’.
(2) The heading of section 168(l) is amended by
striking ‘‘CELLULOSIC BIOMASS ETHANOL’’ and in-
serting ‘‘CELLULOSIC BIOFUEL’’.
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(3) The heading of paragraph (2) of section
168(l) is amended by striking ‘‘CELLULOSIC BIOMASS
ETHANOL’’ and inserting ‘‘CELLULOSIC BIOFUEL’’.
(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.
SEC. 12312. CREDIT FOR PRODUCTION OF CELLULOSIC
BIOFUEL.
(a) IN GENERAL.—Subsection (a) of section 40 (relat-
ing to alcohol used as fuel) is amended by striking ‘‘plus’’
at the end of paragraph (2), by striking the period at the
end of paragraph (3) and inserting ‘‘, plus’’, and by adding
at the end the following new paragraph:
‘‘(4) the cellulosic biofuel producer credit.’’.
(b) CELLULOSIC BIOFUEL PRODUCER CREDIT.—
(1) IN GENERAL.—Subsection (b) of section 40 is
amended by adding at the end the following new
paragraph:
‘‘(6) CELLULOSIC
BIOFUEL
PRODUCER
CRED-
IT.—
‘‘(A) IN
GENERAL.—The cellulosic biofuel
producer credit of any taxpayer is an amount
equal to the applicable amount for each gallon of
qualified cellulosic biofuel production.
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‘‘(B) APPLICABLE AMOUNT.—For purposes
of subparagraph (A), the applicable amount
means the excess of—
‘‘(i) $1.25, over
‘‘(ii) the sum of—
‘‘(I) the amount of the credit in
effect for alcohol which is ethanol
under subsection (b)(1) (without regard
to subsection (b)(3)) at the time of the
qualified cellulosic biofuel production,
plus
‘‘(II) the amount of the credit in
effect under subsection (b)(4) at the
time of such production.
‘‘(C) QUALIFIED CELLULOSIC BIOFUEL PRO-
DUCTION.—For purposes of this section, the term
‘qualified cellulosic biofuel production’ means
any cellulosic biofuel which during the taxable
year—
‘‘(i) is sold by the taxpayer to another
person—
‘‘(I) for use by such other person
in the production of a qualified cel-
lulosic biofuel mixture in such other
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person’s trade or business (other than
casual off-farm production),
‘‘(II) for use by such other person
as a fuel in a trade or business, or
‘‘(III) who sells such cellulosic
biofuel at retail to another person and
places such cellulosic biofuel in the fuel
tank of such other person, or
‘‘(ii) is used or sold by the taxpayer for
any purpose described in clause (i).
The qualified cellulosic biofuel production of any
taxpayer for any taxable year shall not include
any alcohol which is purchased by the taxpayer
and with respect to which such producer in-
creases the proof of the alcohol by additional dis-
tillation.
‘‘(D) QUALIFIED CELLULOSIC BIOFUEL MIX-
TURE.—For purposes of this paragraph, the term
‘qualified cellulosic biofuel mixture’ means a
mixture of cellulosic biofuel and any petroleum
fuel product which—
‘‘(i) is sold by the person producing
such mixture to any person for use as a
fuel, or
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‘‘(ii) is used as a fuel by the person
producing such mixture.
‘‘(E) CELLULOSIC BIOFUEL.—
‘‘(i) IN GENERAL.—The term ‘cellulosic
biofuel’ has the meaning given such term
under section 168(l)(3), but does not include
any alcohol with a proof of less than 150.
‘‘(ii) DETERMINATION OF PROOF.—The
determination of the proof of any alcohol
shall be made without regard to any added
denaturants.
‘‘(F) ALLOCATION OF CELLULOSIC BIOFUEL
PRODUCER CREDIT TO PATRONS OF COOPERA-
TIVE.—Rules similar to the rules under sub-
section (g)(6) shall apply for purposes of this
paragraph.
‘‘(G) APPLICATION
OF
PARAGRAPH.—This
paragraph shall apply with respect to qualified
cellulosic biofuel production after December 31,
2007, and before April 1, 2015.’’.
(2) TERMINATION DATE NOT TO APPLY.—Sub-
section (e) of section 40 (relating to termination) is
amended—
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(A) by inserting ‘‘or subsection (b)(6)(G)’’
after ‘‘by reason of paragraph (1)’’ in paragraph
(2), and
(B) by adding at the end the following new
paragraph:
‘‘(3) EXCEPTION FOR CELLULOSIC BIOFUEL PRO-
DUCER CREDIT.—Paragraph (1) shall not apply to
the portion of the credit allowed under this section by
reason of subsection (a)(4).’’.
(c) BIOFUEL NOT USED AS A FUEL, ETC.—
(1) IN
GENERAL.—Paragraph (3) of section
40(d) is amended by redesignating subparagraph (D)
as subparagraph (E) and by inserting after subpara-
graph (C) the following new subparagraph:
‘‘(D) 
CELLULOSIC
BIOFUEL
PRODUCER
CREDIT.—If—
‘‘(i) any credit is allowed under sub-
section (a)(4), and
‘‘(ii) any person does not use such fuel
for a purpose described in subsection
(b)(6)(C),
then there is hereby imposed on such person a
tax equal to the applicable amount for each gal-
lon of such cellulosic biomass biofuel.’’.
(2) CONFORMING AMENDMENTS.—
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(A) Subparagraph (C) of section 40(d)(3) is
amended by striking ‘‘PRODUCER’’ in the head-
ing and inserting ‘‘SMALL ETHANOL PRODUCER’’.
(B) Subparagraph (E) of section 40(d)(3),
as redesignated by paragraph (1), is amended by
striking ‘‘or (C)’’ and inserting ‘‘(C), or (D)’’.
(d) BIOFUEL PRODUCED IN THE UNITED STATES.—
Section 40(d) is amended by adding at the end the following
new paragraph:
‘‘(6) SPECIAL RULE FOR CELLULOSIC BIOFUEL
PRODUCER
CREDIT.—No cellulosic biofuel producer
credit shall be determined under subsection (a) with
respect to any cellulosic biofuel unless such cellulosic
biofuel is produced in the United States.’’.
(e) WAIVER
OF CREDIT LIMIT
FOR CELLULOSIC
BIOFUEL PRODUCTION BY SMALL ETHANOL PRODUCERS.—
Section 40(b)(4)(C) is amended by inserting ‘‘(determined
without regard to any qualified cellulosic biofuel produc-
tion’’ after ‘‘15,000,000 gallons’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to fuel produced after December 31,
2007.
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SEC. 12313. EXTENSION OF SMALL ETHANOL PRODUCER
CREDIT.
Paragraph (1) of section 40(e) (relating to termi-
nation) is amended—
(1) in subparagraph (A), by inserting ‘‘(Decem-
ber 31, 2012, in the case of the credit allowed by rea-
son of subsection (a)(3))’’ after ‘‘December 31, 2010’’,
and
(2) in subparagraph (B), by inserting ‘‘(Janu-
ary 1, 2013, in the case of the credit allowed by rea-
son of subsection (a)(3))’’ after ‘‘January 1, 2011’’.
SEC. 12314. CREDIT FOR PRODUCERS OF FOSSIL FREE AL-
COHOL.
(a) IN GENERAL.—Subsection (a) of section 40 (relat-
ing to alcohol used as fuel), as amended by this Act, is
amended by striking ‘‘plus’’ at the end of paragraph (3),
by striking the period at the end of paragraph (4) and in-
serting ‘‘, plus’’, and by adding at the end the following
new paragraph:
‘‘(5) the small fossil free alcohol producer cred-
it.’’.
(b) SMALL FOSSIL FREE ALCOHOL PRODUCER CRED-
IT.—Subsection (b) of section 40, as amended by this Act,
is amended by adding at the end the following new para-
graph: