7871) or any agency or instrumen-
tality thereof, or 
‘‘(VI) the Tennessee Valley Au-
thority. 
‘‘(B) TRANSFER OF CREDIT.—
‘‘(i) IN
GENERAL.—A person de-
scribed in subclause (I), (II), (III), (IV), or 
(V) of subparagraph (A)(ii) may transfer 
any credit to which subparagraph (A)(i) 
applies through an assignment to any 
other person not described in subpara-
graph (A)(ii). Such transfer may be re-
voked only with the consent of the Sec-
retary. 
‘‘(ii) REGULATIONS.—The Secretary 
shall prescribe such regulations as nec-
essary to ensure that any credit described 
in clause (i) is assigned once and not reas-
signed by such other person. 
‘‘(iii) TRANSFER PROCEEDS TREATED 
AS
ARISING
FROM
ESSENTIAL
GOVERN-
MENT
FUNCTION.—Any proceeds derived 
by a person described in subclause (III), 
(IV), or (V) of subparagraph (A)(ii) from 
the transfer of any credit under clause (i)
shall be treated as arising from the exer-
cise of an essential government function. 
‘‘(C) USE OF CREDIT AS AN OFFSET.—
Notwithstanding any other provision of law, in 
the case of a person described in subclause (I), 
(II), or (V) of subparagraph (A)(ii), any credit 
to which subparagraph (A)(i) applies may be 
applied by such person, to the extent provided 
by the Secretary of Agriculture, as a prepay-
ment of any loan, debt, or other obligation the 
entity has incurred under subchapter I of chap-
ter 31 of title 7 of the Rural Electrification Act 
of 1936 (7 U.S.C. 901 et seq.), as in effect on 
the date of the enactment of the Energy Tax 
Incentives Act. 
‘‘(D) USE BY TVA.—
‘‘(i) IN
GENERAL.—Notwithstanding 
any other provision of law, in the case of 
a 
person 
described 
in 
subparagraph 
(A)(ii)(VI), any credit to which subpara-
graph (A)(i) applies may be applied as a 
credit against the payments required to be 
made in any fiscal year under section 
15d(e) of the Tennessee Valley Authority 
Act of 1933 (16 U.S.C. 831n–4(e)) as an
annual return on the appropriations invest-
ment and an annual repayment sum. 
‘‘(ii) TREATMENT OF CREDITS.—The 
aggregate amount of credits described in 
subparagraph (A)(i) with respect to such 
person shall be treated in the same manner 
and to the same extent as if such credits 
were a payment in cash and shall be ap-
plied first against the annual return on the 
appropriations investment. 
‘‘(iii) CREDIT CARRYOVER.—With re-
spect to any fiscal year, if the aggregate 
amount of credits described subparagraph 
(A)(i) with respect to such person exceeds 
the aggregate amount of payment obliga-
tions described in clause (i), the excess 
amount shall remain available for applica-
tion as credits against the amounts of such 
payment obligations in succeeding fiscal 
years in the same manner as described in 
this subparagraph. 
‘‘(E) CREDIT NOT INCOME.—Any transfer 
under subparagraph (B) or use under subpara-
graph (C) of any credit to which subparagraph
(A)(i) applies shall not be treated as income for 
purposes of section 501(c)(12). 
‘‘(F) TREATMENT
OF
UNRELATED
PER-
SONS.—For purposes of subsection (a)(2)(B), 
sales of electricity among and between persons 
described in subparagraph (A)(ii) shall be treat-
ed as sales between unrelated parties.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to electricity produced and sold 
after December 31, 2004, in taxable years ending after 
such date. 
SEC. 208. ALCOHOL AND BIODIESEL EXCISE TAX CREDIT 
AND EXTENSION OF ALCOHOL FUELS IN-
COME TAX CREDIT. 
(a) IN GENERAL.—Subchapter B of chapter 65 of the 
Internal Revenue Code of 1986 (relating to rules of special 
application) is amended by inserting after section 6425 
the following new section: 
‘‘SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL 
MIXTURES. 
‘‘(a) ALLOWANCE OF CREDITS.—There shall be al-
lowed as a credit against the tax imposed by section 4081 
an amount equal to the sum of—
‘‘(1) the alcohol fuel mixture credit, plus 
‘‘(2) the biodiesel mixture credit.
‘‘(b) ALCOHOL FUEL MIXTURE CREDIT.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the alcohol fuel mixture credit is the product 
of the applicable amount and the number of gallons 
of alcohol used by the taxpayer in producing any al-
cohol fuel mixture for sale or use in a trade or busi-
ness of the taxpayer. 
‘‘(2) APPLICABLE AMOUNT.—For purposes of 
this subsection—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the applicable amount is 52 
cents (51 cents in the case of any sale or use 
after 2004). 
‘‘(B) MIXTURES
NOT
CONTAINING
ETH-
ANOL.—In the case of an alcohol fuel mixture 
in which none of the alcohol consists of ethanol, 
the applicable amount is 60 cents. 
‘‘(3) ALCOHOL FUEL MIXTURE.—For purposes 
of this subsection, the term ‘alcohol fuel mixture’ 
means a mixture of alcohol and a taxable fuel 
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