I
107TH CONGRESS
2D SESSION
H. R. 4843
To amend the Internal Revenue Code of 1986 to provide tax incentives
for the use of biodiesel as a fuel.
IN THE HOUSE OF REPRESENTATIVES
MAY 23, 2002
Mr. HULSHOF (for himself, Mr. POMEROY, Mr. KENNEDY of Minnesota, Mr.
NUSSLE, Mr. TANNER, Mr. WELLER, Mr. PETERSON of Minnesota, Mr.
LEWIS of Kentucky, Mr. GRAVES, Mrs. EMERSON, Mr. GANSKE, and Mr.
BOSWELL) introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on Agri-
culture, for a period to be subsequently determined by the Speaker, in
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned
A BILL
To amend the Internal Revenue Code of 1986 to provide
tax incentives for the use of biodiesel as a fuel.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. INCENTIVES FOR BIODIESEL.
(a) CREDIT FOR BIODIESEL USED AS A FUEL.—
(1) IN GENERAL.—Subpart D of part IV of
subchapter A of chapter 1 of the Internal Revenue
Code of 1986 (relating to business related credits) 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 biodiesel mix-
ture credit.
‘‘(b) DEFINITION OF BIODIESEL MIXTURE CRED-
IT.—For purposes of this section—
‘‘(1) BIODIESEL MIXTURE CREDIT.—
‘‘(A) IN GENERAL.—The biodiesel mixture
credit of any taxpayer for any taxable year is
an amount equal to the biodiesel mixture rate
for each gallon of biodiesel used by the taxpayer
in the production of a qualified biodiesel mix-
ture.
‘‘(B) BIODIESEL
MIXTURE
RATE.—For
purposes of subparagraph (A), the biodiesel
mixture rate is 1 cent for each whole percent-
age point (not exceeding 20 percentage points)
of biodiesel in the mixture.
‘‘(2) QUALIFIED BIODIESEL MIXTURE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
biodiesel mixture’ means a mixture of diesel
and biodiesel which—
‘‘(i) is sold by the taxpayer producing
such mixture to any person for use as a
fuel, or
‘‘(ii) is used as a fuel by the taxpayer
producing such mixture.
‘‘(B) SALE OR USE MUST BE IN TRADE OR
BUSINESS, ETC.—
‘‘(i) IN GENERAL.—Biodiesel used in
the production of a qualified biodiesel mix-
ture shall be taken into account—
‘‘(I) only if the sale or use de-
scribed in subparagraph (A) is in a
trade or business of the taxpayer, and
‘‘(II) for the taxable year in
which such sale or use occurs.
‘‘(ii) 
CERTIFICATION
FOR
BIO-
DIESEL.—Biodiesel used in the production
of a qualified biodiesel mixture shall be
taken into account only if the taxpayer de-
scribed in subparagraph (A) obtains a cer-
tification from the producer of the bio-
diesel which identifies the product pro-
duced.
‘‘(C) CASUAL OFF-FARM PRODUCTION NOT
ELIGIBLE.—No credit shall be allowed under
this section with respect to any casual off-farm
production of a qualified biodiesel mixture.
‘‘(c) COORDINATION WITH EXEMPTION FROM EX-
CISE TAX.—The amount of the credit determined under
this section with respect to any biodiesel shall, under regu-
lations prescribed by the Secretary, be properly reduced
to take into account any benefit provided with respect to
such biodiesel solely by reason of the application of section
4041(n) or section 4081(f).
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) BIODIESEL
DEFINED.—The term ‘bio-
diesel’ means the monoalkyl esters of long chain
fatty acids derived solely from virgin vegetable oils
for use in compressional-ignition (diesel) engines.
Such term shall include esters derived from vege-
table oils from corn, soybeans, sunflower seeds, cot-
tonseeds, canola, crambe, rapeseeds, safflowers,
flaxseeds, rice bran, and mustard seeds.
‘‘(2) 
REGISTRATION
REQUIREMENTS.—The
term ‘biodiesel’ shall only include a biodiesel which
meets—
‘‘(A) the registration requirements for
fuels and fuel additives established by the Envi-
ronmental Protection Agency under section 211
of the Clean Air Act (42 U.S.C. 7545), and
‘‘(B) the requirements of the American So-
ciety of Testing and Materials D6751.
‘‘(3) BIODIESEL
MIXTURE
NOT
USED
AS
A
FUEL, ETC.—
‘‘(A) IMPOSITION OF TAX.—If—
‘‘(i) any credit was determined under
this section with respect to biodiesel used
in the production of any qualified biodiesel
mixture, and
‘‘(ii) any person—
‘‘(I) 
separates 
such 
biodiesel
from the mixture, or
‘‘(II) without separation, uses the
mixture other than as a fuel,
then there is hereby imposed on such per-
son a tax equal to the product of the bio-
diesel mixture rate applicable under sub-
section (b)(1)(B) and the number of gal-
lons of the mixture.
‘‘(B) APPLICABLE LAWS.—All provisions of
law, including penalties, shall, insofar as appli-
cable and not inconsistent with this section,
apply in respect of any tax imposed under sub-
paragraph (A) as if such tax were imposed by
section 4081 and not by this chapter.
‘‘(4) PASS-THRU IN THE CASE OF ESTATES AND
TRUSTS.—Under regulations prescribed by the Sec-
retary, rules similar to the rules of subsection (d) of
section 52 shall apply.
‘‘(e) ELECTION TO HAVE BIODIESEL FUELS CREDIT
NOT APPLY.—
‘‘(1) IN GENERAL.—A taxpayer may elect to
have this section not apply for any taxable year.
‘‘(2) TIME FOR MAKING ELECTION.—An elec-
tion under paragraph (1) for any taxable year may
be made (or revoked) at any time before the expira-
tion of the 3-year period beginning on the last date
prescribed by law for filing the return for such tax-
able year (determined without regard to exten-
sions).’’
(2) CREDIT TREATED AS PART OF GENERAL
BUSINESS CREDIT.—Section 38(b) of such Code is
amended by redesignating paragraphs (4) through
(15) as paragraphs (5) through (16), respectively,
and by inserting after paragraph (3) the following
new paragraph:
‘‘(4) the biodiesel fuels credit determined under
section 40A(a),’’.