I
108TH CONGRESS
1ST SESSION
H. R. 465
To amend the Internal Revenue Code of 1986 to allow allocation of small
ethanol producer credit to patrons of a cooperative, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 29, 2003
Mr. KING of Iowa (for himself, Mr. POMEROY, Mr. SHIMKUS, Mr. SIMPSON,
Mr. REHBERG, Mr. WELLER, Mr. LAHOOD, Mr. KENNEDY of Minnesota,
Mr. LATHAM, Mr. MORAN of Kansas, Mr. BEREUTER, Mr. GRAVES, Mrs.
EMERSON, Mr. BLUNT, and Mr. JOHNSON of Illinois) introduced the fol-
lowing bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to allow alloca-
tion of small ethanol producer credit to patrons of a
cooperative, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SMALL ETHANOL PRODUCER CREDIT.
(a) ALLOCATION OF ALCOHOL FUELS CREDIT TO
PATRONS OF A COOPERATIVE.—Section 40(g) of the In-
ternal Revenue Code of 1986 (relating to alcohol used as
fuel) is amended by adding at the end the following new
paragraph:
‘‘(6) ALLOCATION
OF
SMALL
ETHANOL
PRO-
DUCER CREDIT TO PATRONS OF COOPERATIVE.—
‘‘(A) ELECTION TO ALLOCATE.—
‘‘(i) IN GENERAL.—In the case of a
cooperative organization described in sec-
tion 1381(a), any portion of the credit de-
termined under subsection (a)(3) for the
taxable year may, at the election of the or-
ganization, be apportioned pro rata among
patrons of the organization on the basis of
the quantity or value of business done with
or for such patrons for the taxable year.
‘‘(ii) FORM
AND
EFFECT
OF
ELEC-
TION.—An election under clause (i) for any
taxable year shall be made on a timely
filed return for such year. Such election,
once made, shall be irrevocable for such
taxable year.
‘‘(B) TREATMENT OF ORGANIZATIONS AND
PATRONS.—The amount of the credit appor-
tioned to patrons under subparagraph (A)—
‘‘(i) shall not be included in the
amount determined under subsection (a)
with respect to the organization for the
taxable year,
‘‘(ii) shall be included in the amount
determined under subsection (a) for the
taxable year of each patron for which the
patronage dividends for the taxable year
described in subparagraph (A) are included
in gross income, and
‘‘(iii) shall be included in gross income
of such patrons for the taxable year in the
manner and to the extent provided in sec-
tion 87.
‘‘(C) SPECIAL RULES FOR DECREASE IN
CREDITS FOR TAXABLE YEAR.—If the amount
of the credit of a cooperative organization de-
termined under subsection (a)(3) for a taxable
year is less than the amount of such credit
shown on the return of the cooperative organi-
zation for such year, an amount equal to the
excess of—
‘‘(i) such reduction, over
‘‘(ii) the amount not apportioned to
such patrons under subparagraph (A) for
the taxable year,
shall be treated as an increase in tax imposed
by this chapter on the organization. Such in-
crease shall not be treated as tax imposed by
this chapter for purposes of determining the
amount of any credit under this chapter or for
purposes of section 55.’’.
(b) IMPROVEMENTS TO SMALL ETHANOL PRODUCER
CREDIT.—
(1) DEFINITION
OF
SMALL
ETHANOL
PRO-
DUCER.—Section 40(g) of such Code (relating to
definitions and special rules for eligible small ethanol
producer 
credit) 
is 
amended 
by 
striking
‘‘30,000,000’’ each place it appears and inserting
‘‘60,000,000’’.
(2) SMALL ETHANOL PRODUCER CREDIT NOT A
PASSIVE
ACTIVITY
CREDIT.—Clause (i) of section
469(d)(2)(A) of such Code is amended by striking
‘‘subpart D’’ and inserting ‘‘subpart D, other than
section 40(a)(3),’’.
(3) ALLOWING CREDIT AGAINST ENTIRE REG-
ULAR TAX AND MINIMUM TAX.—
(A) IN GENERAL.—Subsection (c) of sec-
tion 38 of such Code (relating to limitation
based on amount of tax) is amended by redesig-
nating paragraph (4) as paragraph (5) and by
inserting after paragraph (3) the following new
paragraph:
‘‘(4) SPECIAL
RULES
FOR
SMALL
ETHANOL
PRODUCER CREDIT.—
‘‘(A) IN
GENERAL.—In the case of the
small ethanol producer credit—
‘‘(i) this section and section 39 shall
be applied separately with respect to the
credit, and
‘‘(ii) in applying paragraph (1) to the
credit—
‘‘(I) the amounts in subpara-
graphs (A) and (B) thereof shall be
treated as being zero, and
‘‘(II) the limitation under para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the
taxable year (other than the small
ethanol producer credit).
‘‘(B) SMALL ETHANOL PRODUCER CRED-
IT.—For purposes of this subsection, the term
‘small ethanol producer credit’ means the credit
allowable under subsection (a) by reason of sec-
tion 40(a)(3).’’.
(B) CONFORMING
AMENDMENTS.—Sub-
clause (II) of section 38(c)(2)(A)(ii), and sub-
clause (II) of section 38(c)(3)(A)(ii), as added
by section 301(b)(1) of such Act, are each
amended by inserting ‘‘or the small ethanol pro-
ducer credit’’ after ‘‘employee credit’’.
(4) SMALL ETHANOL PRODUCER CREDIT NOT
ADDED BACK TO INCOME UNDER SECTION 87.—Sec-
tion 87 of such Code (relating to income inclusion
of alcohol fuel credit) is amended to read as follows:
‘‘SEC. 87. ALCOHOL FUEL CREDIT.
‘‘Gross income includes an amount equal to the sum
of—
‘‘(1) the amount of the alcohol mixture credit
determined with respect to the taxpayer for the tax-
able year under section 40(a)(1), and
‘‘(2) the alcohol credit determined with respect
to the taxpayer for the taxable year under section
40(a)(2).’’.
(c) CONFORMING AMENDMENT.—Section 1388 of
such Code (relating to definitions and special rules for co-
operative organizations) is amended by adding at the end
the following new subsection:
‘‘(k) CROSS REFERENCE.—For provisions relating to
the apportionment of the alcohol fuels credit between coop-
erative organizations and their patrons, see section
40(g)(6).’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
Æ