‘‘(C) is removed from the refinery by a 
person producing such mixture. 
‘‘(4) OTHER
DEFINITIONS.—For purposes of 
this subsection—
‘‘(A) ALCOHOL.—The term ‘alcohol’ in-
cludes methanol and ethanol but does not in-
clude—
‘‘(i) alcohol produced from petroleum, 
natural gas, or coal (including peat), or 
‘‘(ii) alcohol with a proof of less than 
190 (determined without regard to any 
added denaturants). 
Such term also includes an alcohol gallon equiv-
alent of ethyl tertiary butyl ether or other 
ethers produced from such alcohol. 
‘‘(B) TAXABLE FUEL.—The term ‘taxable 
fuel’ has the meaning given such term by sec-
tion 4083(a)(1). 
‘‘(c) BIODIESEL MIXTURE CREDIT.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the biodiesel mixture credit is the product of 
the applicable amount and the number of gallons of 
biodiesel used by the taxpayer in producing any bio-
diesel mixture for sale or use in a trade or business 
of the taxpayer.
‘‘(2) APPLICABLE AMOUNT.—For purposes of 
this subsection—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the applicable amount is 50 
cents. 
‘‘(B) AMOUNT
FOR
AGRI-BIODIESEL.—In 
the case of any biodiesel which is agri-biodiesel, 
the applicable amount is $1.00. 
‘‘(3) BIODIESEL
MIXTURE.—For purposes of 
this section, the term ‘biodiesel mixture’ means a 
mixture of biodiesel and diesel fuel (as defined in 
section 4083(a)(3)), determined without regard to 
any use of kerosene, which—
‘‘(A) is sold by the taxpayer producing 
such mixture to any person for use as a fuel, 
‘‘(B) is used as a fuel by the taxpayer pro-
ducing such mixture, or 
‘‘(C) is removed from the refinery by a 
person producing such mixture. 
‘‘(4) 
CERTIFICATION
FOR
BIODIESEL.—No 
credit shall be allowed under this section unless the 
taxpayer obtains a certification (in such form and 
manner as prescribed by the Secretary) from the 
producer of the biodiesel which identifies the product
produced and the percentage of biodiesel and agri-
biodiesel in the product. 
‘‘(d) MIXTURE NOT USED AS A FUEL, ETC.—
‘‘(1) IMPOSITION OF TAX.—If—
‘‘(A) any credit was determined under this 
section with respect to alcohol or biodiesel used 
in the production of any alcohol fuel mixture or 
biodiesel mixture, respectively, and 
‘‘(B) any person—
‘‘(i) separates the alcohol or biodiesel 
from the mixture, or 
‘‘(ii) without separation, uses the mix-
ture other than as a fuel, 
then there is hereby imposed on such person a 
tax equal to the product of the applicable 
amount and the number of gallons of such alco-
hol or biodiesel. 
‘‘(2) APPLICABLE LAWS.—All provisions of law, 
including penalties, shall, insofar as applicable and 
not inconsistent with this section, apply in respect of 
any tax imposed under paragraph (1) as if such tax 
were imposed by section 4081 and not by this sec-
tion.
‘‘(e) COORDINATION WITH EXEMPTION FROM EX-
CISE TAX.—Rules similar to the rules under section 40(c) 
shall apply for purposes of this section.’’. 
(b) 
REGISTRATION
REQUIREMENT.—Section 
4101(a)(1) (relating to registration), as amended by sec-
tions 871 and 880 of this Act, is amended by inserting 
‘‘and every person producing or importing biodiesel (as de-
fined in section 40A(d)(1)) or alcohol (as defined in sec-
tion 6426(b)(4)(A))’’ after ‘‘4081’’. 
(c) ADDITIONAL AMENDMENTS.—
(1) Section 40(c) of such Code is amended by 
striking ‘‘subsection (b)(2), (k), or (m) of section 
4041, section 4081(c), or section 4091(c)’’ and in-
serting ‘‘section 4041(b)(2), section 6426, or section 
6427(e)’’. 
(2) Paragraph (4) of section 40(d) of such Code 
is amended to read as follows: 
‘‘(4) VOLUME OF ALCOHOL.—For purposes of 
determining under subsection (a) the number of gal-
lons of alcohol with respect to which a credit is al-
lowable under subsection (a), the volume of alcohol 
shall include the volume of any denaturant (includ-
ing gasoline) which is added under any formulas ap-
proved by the Secretary to the extent that such de-
naturants do not exceed 5 percent of the volume of 
such alcohol (including denaturants).’’. 
(3) Section 40(e) of such Code is hereby re-
pealed. 
(4) Section 40(h) of such Code is amended—
(A) by striking ‘‘through 2007’’ in para-
graph (1) and inserting ‘‘and thereafter’’, and 
(B) by striking paragraph (2) and insert-
ing the following: 
‘‘(2) AMOUNTS.—For purposes of paragraph 
(1), the blender amount is 51 cents and the low-
proof blender amount is 37.78 cents.’’. 
(5) Section 4041(b)(2)(B) of such Code is 
amended by striking ‘‘a substance other than petro-
leum or natural gas’’ and inserting ‘‘coal (including 
peat)’’. 
(6) Section 4041 of such Code is amended by 
striking subsection (k). 
(7) Section 4081 of such Code is amended by 
striking subsection (c). 
(8) Paragraph (2) of section 4083(a) of such 
Code is amended to read as follows: 
‘‘(2) GASOLINE.—The term ‘gasoline’—
‘‘(A) includes any gasoline blend, other 
than qualified methanol or ethanol fuel (as de-
fined in section 4041(b)(2)(B)), partially ex-
empt methanol or ethanol fuel (as defined in 
section 4041(m)(2)), or a denatured alcohol, 
and 
‘‘(B) includes, to the extent prescribed in 
regulations—
‘‘(i) any gasoline blend stock, and 
‘‘(ii) any product commonly used as 
an additive in gasoline (other than alco-
hol). 
For purposes of subparagraph (B)(i), the term ‘gas-
oline blend stock’ means any petroleum product 
component of gasoline.’’. 
(9) Section 6427 of such Code is amended by 
inserting after subsection (d) the following new sub-
section: 
‘‘(e) ALCOHOL OR BIODIESEL USED TO PRODUCE 
ALCOHOL FUEL AND BIODIESEL MIXTURES OR USED AS 
FUELS.—Except as provided in subsection (k)—
‘‘(1) USED TO PRODUCE A MIXTURE.—If any 
person produces a mixture described in section 6426 
in such person’s trade or business, the Secretary 
shall pay (without interest) to such person an 
amount equal to the alcohol fuel mixture credit or
the biodiesel mixture credit with respect to such mix-
ture. 
‘‘(2) USED AS FUEL.—If alcohol (as defined in 
section 40(d)(1)) or biodiesel (as defined in section 
40A(d)(1)) or agri-biodiesel (as defined in section 
40A(d)(2)) which is not in a mixture described in 
section 6426—
‘‘(A) is used by any person as a fuel in a 
trade or business, or 
‘‘(B) is sold by any person at retail to an-
other person and placed in the fuel tank of such 
person’s vehicle, 
the Secretary shall pay (without interest) to such 
person an amount equal to the alcohol credit (as de-
termined under section 40(b)(2)) or the biodiesel 
credit (as determined under section 40A(b)(2)) with 
respect to such fuel. 
‘‘(3) COORDINATION WITH OTHER REPAYMENT 
PROVISIONS.—No amount shall be payable under 
paragraph (1) with respect to any mixture with re-
spect to which an amount is allowed as a credit 
under section 6426.’’. 
(10) Section 6427(i)(3) of such Code is amend-
ed—
(A) by striking ‘‘subsection (f)’’ both 
places it appears in subparagraph (A) and in-
serting ‘‘subsection (e)(1)’’, 
(B) by striking ‘‘gasoline, diesel fuel, or 
kerosene used to produce a qualified alcohol 
mixture (as defined in section 4081(c)(3))’’ in 
subparagraph (A) and inserting ‘‘a mixture de-
scribed in section 6426’’, 
(C) by adding at the end of subparagraph 
(A) the following new flush sentence: ‘‘In the 
case of an electronic claim, this subparagraph 
shall be applied without regard to clause (i).’’, 
(D) by striking ‘‘subsection (f)(1)’’ in sub-
paragraph 
(B) 
and 
inserting 
‘‘subsection 
(e)(1)’’, 
(E) by striking ‘‘20 days of the date of the 
filing of such claim’’ in subparagraph (B) and 
inserting ‘‘45 days of the date of the filing of 
such claim (20 days in the case of an electronic 
claim)’’, and 
(F) by striking ‘‘alcohol mixture’’ in the 
heading and inserting ‘‘alcohol fuel and bio-
diesel mixture’’. 
(11) Section 9503(b)(4) of such Code is amend-
ed—
(A) by adding ‘‘or’’ at the end of subpara-
graph (C), 
(B) by striking the comma at the end of 
subparagraph (D)(iii) and inserting a period, 
and 
(C) by striking subparagraphs (E) and 
(F). 
(12) The table of sections for subchapter B of 
chapter 65 of such Code is amended by inserting 
after the item relating to section 6425 the following 
new item:
‘‘6426. Credit for alcohol fuel and biodiesel mixtures.’’.
(13) 
TARIFF
SCHEDULE.—Headings 
9901.00.50 and 9901.00.52 of the Harmonized Tar-
iff Schedule of the United States (19 U.S.C. 3007) 
are each amended in the effective period column by 
striking ‘‘Before 10/1/2007,’’ each place it appears. 
(d) EFFECTIVE DATES.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to fuel sold or used after 
September 30, 2004. 
(2) 
REGISTRATION
REQUIREMENT.—The 
amendment made by subsection (b) shall take effect 
on April 1, 2005.
(3) EXTENSION OF ALCOHOL FUELS CREDIT.—
The amendments made by paragraphs (3), (4), and 
(13) of subsection (c) shall take effect on the date 
of the enactment of this Act. 
(4) REPEAL OF GENERAL FUND RETENTION OF 
CERTAIN
ALCOHOL
FUELS
TAXES.—The amend-
ments made by subsection (c)(12) shall apply to fuel 
sold or used after September 30, 2003. 
(e) FORMAT
FOR FILING.—The Secretary of the 
Treasury shall describe the electronic format for filing 
claims described in section 6427(i)(3)(B) of the Internal 
Revenue Code of 1986 (as amended by subsection 
(c)(10)(C)) not later than September 30, 2004. 
SEC. 209. BIODIESEL INCOME TAX CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter 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 sum of—
‘‘(1) the biodiesel mixture credit, plus 
‘‘(2) the biodiesel credit.
‘‘(b) DEFINITION OF BIODIESEL MIXTURE CREDIT 
AND BIODIESEL CREDIT.—For purposes of this section—
‘‘(1) BIODIESEL MIXTURE CREDIT.—
‘‘(A) IN GENERAL.—The biodiesel mixture 
credit of any taxpayer for any taxable year is 
50 cents for each gallon of biodiesel used by the 
taxpayer in the production of a qualified bio-
diesel mixture. 
‘‘(B) QUALIFIED
BIODIESEL
MIXTURE.—
The term ‘qualified biodiesel mixture’ means a 
mixture of biodiesel and diesel fuel (as defined 
in section 4083(a)(3)), determined without re-
gard to any use of kerosene, 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. 
‘‘(C) SALE OR USE MUST BE IN TRADE OR 
BUSINESS, ETC.—Biodiesel used in the produc-
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.—In the 
case of any biodiesel which is agri-biodiesel, para-
graphs (1)(A) and (2)(A) shall be applied by sub-
stituting ‘$1.00’ for ‘50 cents’. 
‘‘(4) 
CERTIFICATION
FOR
BIODIESEL.—No 
credit shall be allowed under this section unless the 
taxpayer obtains a certification (in such form and 
manner as prescribed by the Secretary) from the 
producer or importer of the biodiesel which identifies 
the product produced and the percentage of biodiesel 
and agri-biodiesel in the product. 
‘‘(c) COORDINATION WITH CREDIT AGAINST EXCISE 
TAX.—The amount of the credit determined under this 
section with respect to any biodiesel shall be properly re-
duced to take into account any benefit provided with re-
spect to such 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, 
including esters derived from virgin vegetable oils 
from corn, soybeans, sunflower seeds, cottonseeds, 
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 the 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 such biodiesel in such 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)(2)(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) or (B) as if such tax were im-
posed 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.’’. 
(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 inserting after 
paragraph (3) the end the following new paragraph (and 
redesignating the succeeding paragraphs accordingly):
‘‘(4) the biodiesel fuels credit determined under 
section 40A(a),’’. 
(c) CONFORMING AMENDMENTS.—
(1)(A) Section 87 of such Code, as amended by 
this Act, is amended—
(i) by striking ‘‘and’’ at the end of para-
graph (1), 
(ii) by striking the period at the end of 
paragraph (2) and inserting ‘‘, and’’, 
(iii) by adding at the end the following new 
paragraph: 
‘‘(3) the biodiesel fuels credit determined with 
respect to the taxpayer for the taxable year under 
section 40A(a).’’, and 
(iv) by striking ‘‘FUEL CREDIT’’ in the head-
ing and inserting ‘‘AND BIODIESEL FUELS CRED-
ITS’’. 
(B) The item relating to section 87 in the table 
of sections for part II of subchapter B of chapter 1 
of such Code is amended by striking ‘‘fuel credit’’ 
and inserting ‘‘and biodiesel fuels credits’’. 
(2) Section 196(c) of such Code is amended by 
striking ‘‘and’’ at the end of paragraph (10), by 
striking the period at the end of paragraph (11) and
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(12) the biodiesel fuels credit determined 
under section 40A(a).’’. 
(3) The table of sections for subpart D of part 
IV of subchapter A of chapter 1 of such Code is 
amended by adding after the item relating to section 
40 the following new item:
‘‘40A. Biodiesel used as fuel.’’.
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to fuel produced, and sold or used, 
after September 30, 2004, in taxable years ending after 
such date. 
SEC. 210. EXPANSION OF QUALIFIED SMALL-ISSUE BOND 
PROGRAM; 
TREATMENT 
OF 
RENEWABLE 
FUEL PRODUCTION FACILITIES. 
(a) EXPANSION.—
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section 
144(a)(4)(A) of the Internal Revenue Code of 1986 
(relating to $10,000,000 limit in certain cases) is 
amended by striking ‘‘$10,000,000’’ and inserting 
‘‘$20,000,000’’. 
(2) INFLATION ADJUSTMENT.—Paragraph (4) 
of section 144(a) of such Code is amended by adding 
at the end the following new subparagraph:
‘‘(G) 
INFLATION
ADJUSTMENT
OF 
$20,000,000 LIMIT.—In the case of obligations 
issued during any calendar year after 2004, the 
$20,000,000 amount in subparagraph (A) shall 
be increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, by substituting ‘calendar year 2003’ 
for ‘calendar year 1992’ in subparagraph 
(B) thereof. 
If any amount as increased under clause (i) is 
not a multiple of $10,000, such amount shall be 
rounded to the nearest multiple of $10,000.’’
(3) CLERICAL
AMENDMENT.—The heading of 
paragraph (4) of section 144(a) of such Code is 
amended by striking ‘‘$10,000,000’’ and inserting 
‘‘$20,000,000’’. 
(4) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to—
(A) obligations issued after the date of the 
enactment of this Act, and
(B) capital expenditures made after such 
date with respect to obligations issued on or be-
fore such date. 
(b) TREATMENT OF RENEWABLE FUEL PRODUCTION 
FACILITIES.—
(1) IN GENERAL.—Paragraph (12) of section 
144(a) of such Code is amended by adding at the 
end the following new subparagraph: 
‘‘(D) RENEWABLE FUEL PRODUCTION FA-
CILITY.—For purposes of this paragraph, the 
term ‘manufacturing property’ includes any fa-
cility described in paragraph (4)(F).’’
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to bonds issued after 
the date of the enactment of this Act. 
SEC. 211. ALTERNATIVE MOTOR VEHICLE CREDIT. 
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to foreign tax credit, etc.) is amended by 
adding at the end the following new section: 
‘‘SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT. 
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the sum of—
‘‘(1) the new qualified fuel cell motor vehicle 
credit determined under subsection (b), 
‘‘(2) the new qualified hybrid motor vehicle 
credit determined under subsection (c), and 
‘‘(3) the new qualified alternative fuel motor ve-
hicle credit determined under subsection (d). 
‘‘(b) NEW QUALIFIED FUEL CELL MOTOR VEHICLE 
CREDIT.—
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), the new qualified fuel cell motor vehicle credit 
determined under this subsection with respect to a 
new qualified fuel cell motor vehicle placed in service 
by the taxpayer during the taxable year is—
‘‘(A) $4,000, if such vehicle has a gross ve-
hicle weight rating of not more than 8,500 
pounds, 
‘‘(B) $10,000, if such vehicle has a gross 
vehicle weight rating of more than 8,500 
pounds but not more than 14,000 pounds, 
‘‘(C) $20,000, if such vehicle has a gross 
vehicle weight rating of more than 14,000 
pounds but not more than 26,000 pounds, and 
‘‘(D) $40,000, if such vehicle has a gross 
vehicle weight rating of more than 26,000 
pounds.
‘‘(2) INCREASE FOR FUEL EFFICIENCY.—
‘‘(A) IN
GENERAL.—The amount deter-
mined under paragraph (1)(A) with respect to 
a new qualified fuel cell motor vehicle which is 
a passenger automobile or light truck shall be 
increased by—
‘‘(i) $1,000, if such vehicle achieves at 
least 150 percent but less than 175 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(ii) $1,500, if such vehicle achieves 
at least 175 percent but less than 200 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(iii) $2,000, if such vehicle achieves 
at least 200 percent but less than 225 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(iv) $2,500, if such vehicle achieves 
at least 225 percent but less than 250 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(v) $3,000, if such vehicle achieves 
at least 250 percent but less than 275 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(vi) $3,500, if such vehicle achieves 
at least 275 percent but less than 300 per-
cent of the 2002 model year city fuel econ-
omy, and 
‘‘(vii) $4,000, if such vehicle achieves 
at least 300 percent of the 2002 model 
year city fuel economy. 
‘‘(B) 2002 MODEL YEAR CITY FUEL ECON-
OMY.—For purposes of subparagraph (A), the 
2002 model year city fuel economy with respect 
to a vehicle shall be determined in accordance 
with the following tables: 
‘‘(i) In the case of a passenger auto-
mobile: 
‘‘If vehicle inertia weight class is: 
The 2002 model 
year city fuel 
economy is:
1,500 or 1,750 lbs ..................................................
45.2 mpg
2,000 lbs .................................................................
39.6 mpg
2,250 lbs .................................................................
35.2 mpg
2,500 lbs .................................................................
31.7 mpg
2,750 lbs .................................................................
28.8 mpg
3,000 lbs .................................................................
26.4 mpg
3,500 lbs .................................................................
22.6 mpg
4,000 lbs .................................................................
19.8 mpg
4,500 lbs .................................................................
17.6 mpg
5,000 lbs .................................................................
15.9 mpg
5,500 lbs .................................................................
14.4 mpg
6,000 lbs .................................................................
13.2 mpg
6,500 lbs .................................................................
12.2 mpg
7,000 to 8,500 lbs ..................................................
11.3 mpg.
‘‘(ii) In the case of a light truck: 
‘‘If vehicle inertia weight class is: 
The 2002 model 
year city fuel 
economy is:
1,500 or 1,750 lbs ..................................................
39.4 mpg
2,000 lbs .................................................................
35.2 mpg
2,250 lbs .................................................................
31.8 mpg
2,500 lbs .................................................................
29.0 mpg
2,750 lbs .................................................................
26.8 mpg
3,000 lbs .................................................................
24.9 mpg
3,500 lbs .................................................................
21.8 mpg
4,000 lbs .................................................................
19.4 mpg
4,500 lbs .................................................................
17.6 mpg
5,000 lbs .................................................................
16.1 mpg
5,500 lbs .................................................................
14.8 mpg
6,000 lbs .................................................................
13.7 mpg
6,500 lbs .................................................................
12.8 mpg
7,000 to 8,500 lbs ..................................................
12.1 mpg. 
‘‘(C) VEHICLE INERTIA WEIGHT CLASS.— 
For purposes of subparagraph (B), the term 
‘vehicle inertia weight class’ has the same 
meaning as when defined in regulations pre-
scribed by the Administrator of the Environ-
mental Protection Agency for purposes of the 
administration of title II of the Clean Air Act 
(42 U.S.C. 7521 et seq.). 
‘‘(3) NEW QUALIFIED FUEL CELL MOTOR VEHI-
CLE.—For purposes of this subsection, the term 
‘new qualified fuel cell motor vehicle’ means a motor 
vehicle— 
‘‘(A) which is propelled by power derived 
from 1 or more cells which convert chemical en-
ergy directly into electricity by combining oxy-
gen with hydrogen fuel which is stored on board 
the vehicle in any form and may or may not re-
quire reformation prior to use, 
‘‘(B) which, in the case of a passenger 
automobile or light truck— 
‘‘(i) for 2002 and later model vehicles, 
has received a certificate of conformity 
under the Clean Air Act and meets or ex-
ceeds the equivalent qualifying California 
low emission vehicle standard under sec-
tion 243(e)(2) of the Clean Air Act for 
that make and model year, and 
‘‘(ii) for 2004 and later model vehi-
cles, has received a certificate that such ve-
hicle meets or exceeds the Bin 5 Tier II 
emission level established in regulations 
prescribed by the Administrator of the En-
vironmental Protection Agency under sec-
tion 202(i) of the Clean Air Act for that 
make and model year vehicle, 
‘‘(C) the original use of which commences 
with the taxpayer, 
‘‘(D) which is acquired for use or lease by 
the taxpayer and not for resale, and 
‘‘(E) which is made by a manufacturer.
‘‘(c) NEW QUALIFIED HYBRID MOTOR VEHICLE 
CREDIT.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), the new qualified hybrid motor vehicle credit de-
termined under this subsection with respect to a new 
qualified hybrid motor vehicle placed in service by 
the taxpayer during the taxable year is the credit 
amount determined under paragraph (2). 
‘‘(2) CREDIT AMOUNT.— 
‘‘(A) IN GENERAL.—The credit amount de-
termined under this paragraph shall be deter-
mined in accordance with the following tables: 
‘‘(i) In the case of a new qualified hy-
brid motor vehicle which is a passenger 
automobile, medium duty passenger vehi-
cle, or light truck and which provides the 
following percentage of the maximum 
available power: 
‘‘If percentage of the maximum available 
power is: 
The credit 
amount is: 
At least 4 percent but less than 10 percent ...........
$250 
At least 10 percent but less than 20 percent .........
$500 
At least 20 percent but less than 30 percent .........
$750 
At least 30 percent .................................................
$1,000. 
‘‘(ii) In the case of a new qualified hy-
brid motor vehicle which is a heavy duty 
hybrid motor vehicle and which provides
the following percentage of the maximum 
available power: 
‘‘(I) If such vehicle has a gross 
vehicle weight rating of not more than 
14,000 pounds: 
‘‘If percentage of the maximum available 
power is: 
The credit 
amount is: 
At least 20 percent but less than 30 percent .........
$1,000 
At least 30 percent but less than 40 percent .........
$1,750 
At least 40 percent but less than 50 percent .........
$2,000 
At least 50 percent but less than 60 percent .........
$2,250 
At least 60 percent .................................................
$2,500. 
‘‘(II) If such vehicle has a gross 
vehicle weight rating of more than 
14,000 but not more than 26,000 
pounds: 
‘‘If percentage of the maximum available 
power is: 
The credit 
amount is: 
At least 20 percent but less than 30 percent .........
$4,000 
At least 30 percent but less than 40 percent .........
$4,500 
At least 40 percent but less than 50 percent .........
$5,000 
At least 50 percent but less than 60 percent .........
$5,500 
At least 60 percent .................................................
$6,000. 
‘‘(III) If such vehicle has a gross 
vehicle weight rating of more than 
26,000 pounds: 
‘‘If percentage of the maximum available 
power is: 
The credit 
amount is: 
At least 20 percent but less than 30 percent .........
$6,000 
At least 30 percent but less than 40 percent .........
$7,000 
At least 40 percent but less than 50 percent .........
$8,000 
At least 50 percent but less than 60 percent .........
$9,000 
At least 60 percent .................................................
$10,000.
‘‘(B) INCREASE FOR FUEL EFFICIENCY.— 
‘‘(i) AMOUNT.—The amount deter-
mined under subparagraph (A)(i) with re-
spect to a new qualified hybrid motor vehi-
cle which is a passenger automobile or 
light truck shall be increased by— 
‘‘(I) 
$500, 
if 
such 
vehicle 
achieves at least 125 percent but less 
than 150 percent of the 2002 model 
year city fuel economy, 
‘‘(II) $1,000, if such vehicle 
achieves at least 150 percent but less 
than 175 percent of the 2002 model 
year city fuel economy, 
‘‘(III) $1,500, if such vehicle 
achieves at least 175 percent but less 
than 200 percent of the 2002 model 
year city fuel economy, 
‘‘(IV) $2,000, if such vehicle 
achieves at least 200 percent but less 
than 225 percent of the 2002 model 
year city fuel economy, 
‘‘(V) $2,500, if such vehicle 
achieves at least 225 percent but less
than 250 percent of the 2002 model 
year city fuel economy, and 
‘‘(VI) $3,000, if such vehicle 
achieves at least 250 percent of the 
2002 model year city fuel economy. 
‘‘(ii) 2002 MODEL YEAR CITY FUEL 
ECONOMY.—For purposes of clause (i), the 
2002 model year city fuel economy with re-
spect to a vehicle shall be determined on a 
gasoline gallon equivalent basis as deter-
mined by the Administrator of the Envi-
ronmental Protection Agency using the ta-
bles provided in subsection (b)(2)(B) with 
respect to such vehicle. 
‘‘(C) INCREASE FOR ACCELERATED EMIS-
SIONS
PERFORMANCE.—The amount deter-
mined under subparagraph (A)(ii) with respect 
to an applicable heavy duty hybrid motor vehi-
cle shall be increased by the increased credit 
amount determined in accordance with the fol-
lowing tables: 
‘‘(i) In the case of a vehicle which has 
a gross vehicle weight rating of not more 
than 14,000 pounds:
‘‘If the model year is: 
The increased 
credit amount 
is: 
2004 .......................................................................
$2,500 
2005 .......................................................................
$2,000 
2006 .......................................................................
$1,500. 
‘‘(ii) In the case of a vehicle which 
has a gross vehicle weight rating of more 
than 14,000 pounds but not more than 
26,000 pounds: 
‘‘If the model year is: 
The increased 
credit amount 
is: 
2004 .......................................................................
$6,500 
2005 .......................................................................
$5,250 
2006 .......................................................................
$4,000. 
‘‘(iii) In the case of a vehicle which 
has a gross vehicle weight rating of more 
than 26,000 pounds: 
‘‘If the model year is: 
The increased 
credit amount 
is: 
2004 .......................................................................
$10,000 
2005 .......................................................................
$8,000 
2006 .......................................................................
$6,000. 
‘‘(D) DEFINITIONS RELATING TO CREDIT 
AMOUNT.— 
‘‘(i) APPLICABLE
HEAVY
DUTY
HY-
BRID MOTOR VEHICLE.—For purposes of 
subparagraph (C), the term ‘applicable 
heavy duty hybrid motor vehicle’ means a
100 
heavy duty hybrid motor vehicle which is 
powered by an internal combustion or heat 
engine which is certified as meeting the 
emission standards set in the regulations 
prescribed by the Administrator of the En-
vironmental Protection Agency for 2007 
and later model year diesel heavy duty en-
gines, or for 2008 and later model year 
ottocycle heavy duty engines, as applicable. 
‘‘(ii) MAXIMUM AVAILABLE POWER.— 
‘‘(I) PASSENGER
AUTOMOBILE, 
MEDIUM DUTY PASSENGER VEHICLE, 
OR LIGHT TRUCK.—For purposes of 
subparagraph (A)(i), the term ‘max-
imum available power’ means the 
maximum power available from the re-
chargeable energy storage system, 
during a standard 10 second pulse 
power or equivalent test, divided by 
such maximum power and the SAE 
net power of the heat engine. 
‘‘(II) 
HEAVY
DUTY
HYBRID 
MOTOR
VEHICLE.—For purposes of 
subparagraph (A)(ii), the term ‘max-
imum available power’ means the
101 
maximum power available from the re-
chargeable energy storage system, 
during a standard 10 second pulse 
power or equivalent test, divided by 
the vehicle’s total traction power. The 
term ‘total traction power’ means the 
sum of the peak power from the re-
chargeable energy storage system and 
the heat engine peak power of the ve-
hicle, except that if such storage sys-
tem is the sole means by which the ve-
hicle can be driven, the total traction 
power is the peak power of such stor-
age system. 
‘‘(3) NEW
QUALIFIED
HYBRID
MOTOR
VEHI-
CLE.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘new quali-
fied hybrid motor vehicle’ means a motor vehi-
cle— 
‘‘(i) which draws propulsion energy 
from onboard sources of stored energy 
which are both— 
‘‘(I) an internal combustion or 
heat engine using consumable fuel, 
and
102 
‘‘(II) a rechargeable energy stor-
age system, 
‘‘(ii) which, in the case of a passenger 
automobile, medium duty passenger vehi-
cle, or light truck— 
‘‘(I) for 2002 and later model ve-
hicles, has received a certificate of 
conformity under the Clean Air Act 
and meets or exceeds the equivalent 
qualifying California low emission ve-
hicle standard under section 243(e)(2) 
of the Clean Air Act for that make 
and model year, and 
‘‘(II) for 2004 and later model 
vehicles, has received a certificate that 
such vehicle meets or exceeds the Bin 
5 Tier II emission level established in 
regulations prescribed by the Adminis-
trator of the Environmental Protec-
tion Agency under section 202(i) of 
the Clean Air Act for that make and 
model year vehicle, 
‘‘(iii) which, in the case of a heavy 
duty hybrid motor vehicle, has an internal 
combustion or heat engine which has re-
103 
ceived a certificate of conformity under the 
Clean Air Act as meeting the emission 
standards set in the regulations prescribed 
by the Administrator of the Environmental 
Protection Agency for 2004 through 2007 
model year diesel heavy duty engines or 
ottocycle heavy duty engines, as applicable, 
‘‘(iv) the original use of which com-
mences with the taxpayer, 
‘‘(v) which is acquired for use or lease 
by the taxpayer and not for resale, and 
‘‘(vi) which is made by a manufac-
turer. 
‘‘(B) CONSUMABLE FUEL.—For purposes 
of subparagraph (A)(i)(I), the term ‘consumable 
fuel’ means any solid, liquid, or gaseous matter 
which releases energy when consumed by an 
auxiliary power unit. 
‘‘(4) HEAVY DUTY HYBRID MOTOR VEHICLE.— 
For purposes of this subsection, the term ‘heavy 
duty hybrid motor vehicle’ means a new qualified hy-
brid motor vehicle which has a gross vehicle weight 
rating of more than 8,500 pounds. Such term does 
not include a medium duty passenger vehicle.
104 
‘‘(d) NEW QUALIFIED ALTERNATIVE FUEL MOTOR 
VEHICLE CREDIT.— 
‘‘(1) ALLOWANCE OF CREDIT.—Except as pro-
vided in paragraph (5), the new qualified alternative 
fuel motor vehicle credit determined under this sub-
section is an amount equal to the applicable percent-
age of the incremental cost of any new qualified al-
ternative fuel motor vehicle placed in service by the 
taxpayer during the taxable year. 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes 
of paragraph (1), the applicable percentage with re-
spect to any new qualified alternative fuel motor ve-
hicle is— 
‘‘(A) 40 percent, plus 
‘‘(B) 30 percent, if such vehicle— 
‘‘(i) has received a certificate of con-
formity under the Clean Air Act and meets 
or exceeds the most stringent standard 
available for certification under the Clean 
Air Act for that make and model year vehi-
cle (other than a zero emission standard), 
or 
‘‘(ii) has received an order certifying 
the vehicle as meeting the same require-
ments as vehicles which may be sold or
105 
leased in California and meets or exceeds 
the most stringent standard available for 
certification under the State laws of Cali-
fornia (enacted in accordance with a waiv-
er granted under section 209(b) of the 
Clean Air Act) for that make and model 
year vehicle (other than a zero emission 
standard). 
For purposes of the preceding sentence, in the case 
of any new qualified alternative fuel motor vehicle 
which weighs more than 14,000 pounds gross vehicle 
weight rating, the most stringent standard available 
shall be such standard available for certification on 
the date of the enactment of the Energy Tax Incen-
tives Act. 
‘‘(3) INCREMENTAL
COST.—For purposes of 
this subsection, the incremental cost of any new 
qualified alternative fuel motor vehicle is equal to 
the amount of the excess of the manufacturer’s sug-
gested retail price for such vehicle over such price 
for a gasoline or diesel fuel motor vehicle of the 
same model, to the extent such amount does not ex-
ceed—
106 
‘‘(A) $5,000, if such vehicle has a gross ve-
hicle weight rating of not more than 8,500 
pounds, 
‘‘(B) $10,000, if such vehicle has a gross 
vehicle weight rating of more than 8,500 
pounds but not more than 14,000 pounds, 
‘‘(C) $25,000, if such vehicle has a gross 
vehicle weight rating of more than 14,000 
pounds but not more than 26,000 pounds, and 
‘‘(D) $40,000, if such vehicle has a gross 
vehicle weight rating of more than 26,000 
pounds. 
‘‘(4) NEW
QUALIFIED
ALTERNATIVE
FUEL 
MOTOR
VEHICLE.—For purposes of this sub-
section— 
‘‘(A) IN GENERAL.—The term ‘new quali-
fied alternative fuel motor vehicle’ means any 
motor vehicle— 
‘‘(i) which is only capable of operating 
on an alternative fuel, 
‘‘(ii) the original use of which com-
mences with the taxpayer, 
‘‘(iii) which is acquired by the tax-
payer for use or lease, but not for resale, 
and
107 
‘‘(iv) which is made by a manufac-
turer. 
‘‘(B) ALTERNATIVE FUEL.—The term ‘al-
ternative fuel’ means compressed natural gas, 
liquefied natural gas, liquefied petroleum gas, 
hydrogen, and any liquid at least 85 percent of 
the volume of which consists of methanol. 
‘‘(5) CREDIT FOR MIXED-FUEL VEHICLES.— 
‘‘(A) IN
GENERAL.—In the case of a 
mixed-fuel vehicle placed in service by the tax-
payer during the taxable year, the credit deter-
mined under this subsection is an amount equal 
to— 
‘‘(i) in the case of a 75/25 mixed-fuel 
vehicle, 70 percent of the credit which 
would have been allowed under this sub-
section if such vehicle was a qualified alter-
native fuel motor vehicle, and 
‘‘(ii) in the case of a 90/10 mixed-fuel 
vehicle, 90 percent of the credit which 
would have been allowed under this sub-
section if such vehicle was a qualified alter-
native fuel motor vehicle. 
‘‘(B) MIXED-FUEL
VEHICLE.—For pur-
poses of this subsection, the term ‘mixed-fuel
108 
vehicle’ means any motor vehicle described in 
subparagraph (C) or (D) of paragraph (3), 
which— 
‘‘(i) is certified by the manufacturer 
as being able to perform efficiently in nor-
mal operation on a combination of an al-
ternative fuel and a petroleum-based fuel, 
‘‘(ii) either— 
‘‘(I) has received a certificate of 
conformity under the Clean Air Act, 
or 
‘‘(II) has received an order certi-
fying the vehicle as meeting the same 
requirements as vehicles which may be 
sold or leased in California and meets 
or exceeds the low emission vehicle 
standard under section 88.105–94 of 
title 40, Code of Federal Regulations, 
for that make and model year vehicle, 
‘‘(iii) the original use of which com-
mences with the taxpayer, 
‘‘(iv) which is acquired by the tax-
payer for use or lease, but not for resale, 
and
109 
‘‘(v) which is made by a manufac-
turer. 
‘‘(C) 75/25 MIXED-FUEL
VEHICLE.—For 
purposes of this subsection, the term ‘75/25 
mixed-fuel vehicle’ means a mixed-fuel vehicle 
which operates using at least 75 percent alter-
native fuel and not more than 25 percent petro-
leum-based fuel. 
‘‘(D) 90/10 MIXED-FUEL
VEHICLE.—For 
purposes of this subsection, the term ‘90/10 
mixed-fuel vehicle’ means a mixed-fuel vehicle 
which operates using at least 90 percent alter-
native fuel and not more than 10 percent petro-
leum-based fuel. 
‘‘(e) APPLICATION WITH OTHER CREDITS.—The 
credit allowed under subsection (a) for any taxable year 
shall not exceed the excess (if any) of— 
‘‘(1) the regular tax for the taxable year re-
duced by the sum of the credits allowable under sub-
part A and sections 27, 29, and 30, over 
‘‘(2) the tentative minimum tax for the taxable 
year. 
‘‘(f) OTHER DEFINITIONS AND SPECIAL RULES.— 
For purposes of this section—
110 
‘‘(1) MOTOR VEHICLE.—The term ‘motor vehi-
cle’ has the meaning given such term by section 
30(c)(2). 
‘‘(2) CITY FUEL ECONOMY.—The city fuel econ-
omy with respect to any vehicle shall be measured in 
a manner which is substantially similar to the man-
ner city fuel economy is measured in accordance 
with procedures under part 600 of subchapter Q of 
chapter I of title 40, Code of Federal Regulations, 
as in effect on the date of the enactment of this sec-
tion. 
‘‘(3) OTHER TERMS.—The terms ‘automobile’, 
‘passenger automobile’, ‘medium duty passenger ve-
hicle’, ‘light truck’, and ‘manufacturer’ have the 
meanings given such terms in regulations prescribed 
by the Administrator of the Environmental Protec-
tion Agency for purposes of the administration of 
title II of the Clean Air Act (42 U.S.C. 7521 et 
seq.). 
‘‘(4) REDUCTION IN BASIS.—For purposes of 
this subtitle, the basis of any property for which a 
credit is allowable under subsection (a) shall be re-
duced by the amount of such credit so allowed (de-
termined without regard to subsection (e)).
117 
‘‘(19) the emissions compliant engine credit de-
termined under section 45I(a).’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of such code is amended by adding after the item relating 
to section 45H the following new item: 
‘‘Sec. 45I. Credit for engines complying with Tier 2, 3, or 4 emissions levels.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to engines incorporated into prod-
ucts produced after December 31, 2004, in taxable years 
ending after such date. 
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