tion of a qualified biodiesel mixture shall be 
taken into account—
‘‘(i) only if the sale or use described 
in subparagraph (B) is in a trade or busi-
ness of the taxpayer, and 
‘‘(ii) for the taxable year in which 
such sale or use occurs. 
‘‘(D) 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. 
‘‘(2) BIODIESEL CREDIT.—
‘‘(A) IN GENERAL.—The biodiesel credit of 
any taxpayer for any taxable year is 50 cents 
for each gallon of biodiesel which is not in a 
mixture with diesel fuel and which during the 
taxable year—
‘‘(i) is used by the taxpayer as a fuel 
in a trade or business, or 
‘‘(ii) is sold by the taxpayer at retail 
to a person and placed in the fuel tank of 
such person’s vehicle. 
‘‘(B) USER CREDIT NOT TO APPLY TO BIO-
DIESEL SOLD AT RETAIL.—No credit shall be 
allowed under subparagraph (A)(i) with respect
to any biodiesel which was sold in a retail sale 
described in subparagraph (A)(ii). 
‘‘(3) CREDIT FOR AGRI-BIODIESEL.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), in the case of any biodiesel which is 
agri-biodiesel, paragraphs (1)(A) and (2)(A) 
shall be applied by substituting ‘$1.00’ for ‘50 
cents’. 
‘‘(B) 
CERTIFICATION
FOR
AGRI-BIO-
DIESEL.—Subparagraph (A) shall apply only if 
the taxpayer described in paragraph (1)(A) or 
(2)(A) obtains a certification (in such form and 
manner as prescribed by the Secretary) from 
the producer of the agri-biodiesel which identi-
fies the product produced. 
‘‘(c) COORDINATION WITH CREDIT AGAINST EXCISE 
TAX.—The amount of the credit determined under this 
section with respect to any agri-biodiesel shall, under regu-
lations prescribed by the Secretary, be properly reduced 
to take into account any benefit provided with respect to 
such agri-biodiesel solely by reason of the application of 
section 6426 or 6427(e). 
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) BIODIESEL.—The term ‘biodiesel’ means 
the monoalkyl esters of long chain fatty acids de-
rived from plant or animal matter which meet—
‘‘(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. 
‘‘(2) AGRI-BIODIESEL.—The term ‘agri-bio-
diesel’ means biodiesel derived solely from virgin oils. 
Such term shall include esters derived from vege-
table oils from soybeans, corn, sunflower seeds, cot-
tonseeds, canola, crambe, rapeseeds, safflowers, 
flaxseeds, rice bran, and mustard seeds, and from 
animal fats.
‘‘(3) MIXTURE OR BIODIESEL NOT USED AS A 
FUEL, ETC.—
‘‘(A) MIXTURES.—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 person a 
tax equal to the product of the rate applicable 
under subsection (b)(1)(A) and the number of 
gallons of the mixture. 
‘‘(B) BIODIESEL.—If—
‘‘(i) any credit was determined under 
this section with respect to the retail sale 
of any biodiesel, and 
‘‘(ii) any person mixes such biodiesel 
or uses such biodiesel other than as a fuel, 
then there is hereby imposed on such person a 
tax equal to the product of the rate applicable 
under subsection (b)(1)(A) and the number of 
gallons of such biodiesel. 
‘‘(C) 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) TERMINATION.—This section shall not apply to 
any fuel sold after December 31, 2005.’’. 
(b) CREDIT TREATED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) of such Code (relating to 
current year business credit) is amended by striking 
‘‘plus’’ at the end of paragraph (14), by striking the period 
at the end of paragraph (15) and inserting ‘‘, plus’’, and 
by adding at the end the following new paragraph: 
‘‘(16) the biodiesel fuels credit determined 
under section 40A(a).’’. 
(c) CONFORMING AMENDMENTS.—
(1) Section 39(d) of such Code is amended by 
adding at the end the following new paragraph: 
‘‘(11) NO
CARRYBACK
OF
BIODIESEL
FUELS 
CREDIT BEFORE EFFECTIVE DATE.—No portion of 
the unused business credit for any taxable year 
which is attributable to the biodiesel fuels credit de-
termined under section 40A may be carried back to 
a taxable year ending on or before December 31, 
2003.’’.