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‘‘(III) The term ‘FERC’ means
the Federal Energy Regulatory Com-
mission.
‘‘(F) The term ‘nuclear decommissioning
transaction’ means—
‘‘(i) any transfer into a trust, fund, or
instrument established to pay any nuclear
decommissioning costs if the transfer is in
connection with the transfer of the mutual
or cooperative electric company’s interest in
a nuclear power plant or nuclear power
plant unit,
‘‘(ii) any distribution from any trust,
fund, or instrument established to pay any
nuclear decommissioning costs, or
‘‘(iii) any earnings from any trust,
fund, or instrument established to pay any
nuclear decommissioning costs.
‘‘(G) The term ‘asset exchange or conversion
transaction’ means any voluntary exchange or
involuntary conversion of any property related
to generating, transmitting, distributing, or sell-
ing electric energy by a mutual or cooperative
electric company, the gain from which qualifies
for deferred recognition under section 1031 or
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1033, but only if the replacement property ac-
quired by such company pursuant to such sec-
tion constitutes property which is used, or to be
used, for—
‘‘(i) generating, transmitting, distrib-
uting, or selling electric energy, or
‘‘(ii) producing, transmitting, distrib-
uting, or selling natural gas.’’.
(b) TREATMENT OF INCOME FROM LOAD LOSS TRANS-
ACTIONS.—Section 501(c)(12), as amended by subsection
(a)(2), is amended by adding after subparagraph (G) the
following new subparagraph:
‘‘(H)(i) In the case of a mutual or coopera-
tive electric company described in this para-
graph or an organization described in section
1381(a)(2)(C), income received or accrued from a
load loss transaction shall be treated as an
amount collected from members for the sole pur-
pose of meeting losses and expenses.
‘‘(ii) For purposes of clause (i), the term
‘load loss transaction’ means any wholesale or
retail sale of electric energy (other than to mem-
bers) to the extent that the aggregate sales during
the recovery period do not exceed the load loss
mitigation sales limit for such period.
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‘‘(iii) For purposes of clause (ii), the load
loss mitigation sales limit for the recovery period
is the sum of the annual load losses for each year
of such period.
‘‘(iv) For purposes of clause (iii), a mutual
or cooperative electric company’s annual load
loss for each year of the recovery period is the
amount (if any) by which—
‘‘(I) the megawatt hours of electric en-
ergy sold during such year to members of
such electric company are less than
‘‘(II) the megawatt hours of electric en-
ergy sold during the base year to such mem-
bers.
‘‘(v) For purposes of clause (iv)(II), the
term ‘base year’ means—
‘‘(I) the calendar year preceding the
start-up year, or
‘‘(II) at the election of the electric com-
pany, the second or third calendar years
preceding the start-up year.
‘‘(vi) For purposes of this subparagraph, the
recovery period is the 7-year period beginning
with the start-up year.
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‘‘(vii) For purposes of this subparagraph,
the start-up year is the calendar year which in-
cludes January 1, 2005, or, if later, at the elec-
tion of the mutual or cooperative electric
company—
‘‘(I) the first year that such electric
company offers nondiscriminatory open ac-
cess, or
‘‘(II) the first year in which at least 10
percent of such electric company’s sales are
not to members of such electric company.
‘‘(viii) A company shall not fail to be treat-
ed as a mutual or cooperative company for pur-
poses of this paragraph or as a corporation oper-
ating on a cooperative basis for purposes of sec-
tion 1381(a)(2)(C) by reason of the treatment
under clause (i).
‘‘(ix) In the case of a mutual or cooperative
electric company, income from any open access
transaction received, or accrued, indirectly from
a member shall be treated as an amount collected
from members for the sole purpose of meeting
losses and expenses.’’.
(c) EXCEPTION FROM UNRELATED BUSINESS TAX-
ABLE INCOME.—Section 512(b) (relating to modifications),
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as amended by this Act, is amended by adding at the end
the following new paragraph:
‘‘(20) TREATMENT OF MUTUAL OR COOPERATIVE
ELECTRIC COMPANIES.—In the case of a mutual or
cooperative electric company described in section
501(c)(12), there shall be excluded income which is
treated as member income under subparagraph (H)
thereof.’’.
(d) CROSS REFERENCE.—Section 1381 is amended by
adding at the end the following new subsection:
‘‘(c) CROSS REFERENCE.—
‘‘For treatment of income from load loss trans-
actions of organizations described in subsection
(a)(2)(C), see section 501(c)(12)(H).’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
SEC. 857. SALES OR DISPOSITIONS TO IMPLEMENT FED-
ERAL ENERGY REGULATORY COMMISSION OR
STATE ELECTRIC RESTRUCTURING POLICY.
(a) IN GENERAL.—Section 451 (relating to general
rule for taxable year of inclusion) is amended by adding
at the end the following new subsection:
‘‘(i) SPECIAL RULE FOR SALES OR DISPOSITIONS TO
IMPLEMENT FEDERAL ENERGY REGULATORY COMMISSION
OR STATE ELECTRIC RESTRUCTURING POLICY.—
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‘‘(1) IN GENERAL.—For purposes of this subtitle,
if a taxpayer elects the application of this subsection
to a qualifying electric transmission transaction in
any taxable year—
‘‘(A) any ordinary income derived from
such transaction which would be required to be
recognized under section 1245 or 1250 for such
taxable year (determined without regard to this
subsection), and
‘‘(B) any income derived from such trans-
action in excess of such ordinary income which
is required to be included in gross income for
such taxable year (determined without regard to
this subsection),
shall be so recognized and included ratably over the
8-taxable year period beginning with such taxable
year.
‘‘(2) 
QUALIFYING
ELECTRIC
TRANSMISSION
TRANSACTION.—For purposes of this subsection, the
term ‘qualifying electric transmission transaction’
means any sale or other disposition before January 1,
2008, of—
‘‘(A) property used by the taxpayer in the
trade or business of providing electric trans-
mission services, or
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‘‘(B) any stock or partnership interest in a
corporation or partnership, as the case may be,
whose principal trade or business consists of pro-
viding electric transmission services,
but only if such sale or disposition is to an inde-
pendent transmission company.
‘‘(3) INDEPENDENT TRANSMISSION COMPANY.—
For purposes of this subsection, the term ‘independent
transmission company’ means—
‘‘(A) a regional transmission organization
approved by the Federal Energy Regulatory
Commission,
‘‘(B) a person—
‘‘(i) who the Federal Energy Regu-
latory Commission determines in its au-
thorization of the transaction under section
203 of the Federal Power Act (16 U.S.C.
824b) is not a market participant within
the meaning of such Commission’s rules ap-
plicable to regional transmission organiza-
tions, and
‘‘(ii) whose transmission facilities to
which the election under this subsection ap-
plies are under the operational control of a
Federal Energy Regulatory Commission-ap-
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proved regional transmission organization
before the close of the period specified in
such authorization, but not later than Jan-
uary 1, 2008, or
‘‘(C) in the case of facilities subject to the
exclusive jurisdiction of the Public Utility Com-
mission of Texas, a person which is approved by
that Commission as consistent with Texas State
law regarding an independent transmission or-
ganization.
‘‘(4) ELECTION.—An election under paragraph
(1), once made, shall be irrevocable.
‘‘(5) NONAPPLICATION OF INSTALLMENT SALES
TREATMENT.—Section 453 shall not apply to any
qualifying electric transmission transaction with re-
spect to which an election to apply this subsection is
made.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to transactions occurring after December
31, 2004.
Subtitle G—Volumetric Ethanol
Excise Tax Credit
SEC. 860. SHORT TITLE.
This subtitle may be cited as the ‘‘Volumetric Ethanol
Excise Tax Credit (VEETC) Act of 2004’’.
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SEC. 861. ALCOHOL AND BIODIESEL EXCISE TAX CREDIT
AND EXTENSION OF ALCOHOL FUELS INCOME
TAX CREDIT.
(a) IN GENERAL.—Subchapter B of chapter 65 (relat-
ing 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 allowed
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 section,
the alcohol fuel mixture credit is the product of the
applicable amount and the number of gallons of alco-
hol used by the taxpayer in producing any alcohol
fuel 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 52
cents (51 cents in the case of any sale or use
after 2004).
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‘‘(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
‘‘(C) is removed from the refinery by a per-
son producing such mixture.
‘‘(4) OTHER DEFINITIONS.—For purposes of this
subsection—
‘‘(A) ALCOHOL.—The term ‘alcohol’ includes
methanol and ethanol but does not include—
‘‘(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.
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‘‘(B) TAXABLE
FUEL.—The term ‘taxable
fuel’ has the meaning given such term by section
4083(a)(1).
‘‘(5) TERMINATION.—This subsection shall not
apply to any sale, use, or removal for any period
after December 31, 2010.
‘‘(c) BIODIESEL MIXTURE CREDIT.—
‘‘(1) IN GENERAL.—For purposes of this section,
the biodiesel mixture credit is the product of the ap-
plicable amount and the number of gallons of bio-
diesel 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
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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 per-
son 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.
‘‘(5) OTHER DEFINITIONS.—Any term used in
this subsection which is also used in section 40A shall
have the meaning given such term by section 40A.
‘‘(6) TERMINATION.—This subsection shall not
apply to any sale, use, or removal for any period
after December 31, 2006.
‘‘(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
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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 section.
‘‘(e) COORDINATION WITH EXEMPTION FROM EXCISE
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 defined
in section 40A(d)(1)) or alcohol (as defined in section
6426(b)(4)(A))’’ after ‘‘4081’’.
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(c) ADDITIONAL AMENDMENTS.—
(1) Section 40(c) is amended by striking ‘‘sub-
section (b)(2), (k), or (m) of section 4041, section
4081(c), or section 4091(c)’’ and inserting ‘‘section
4041(b)(2), section 6426, or section 6427(e)’’.
(2) Paragraph (4) of section 40(d) is amended to
read as follows:
‘‘(4) VOLUME OF ALCOHOL.—For purposes of de-
termining under subsection (a) the number of gallons
of alcohol with respect to which a credit is allowable
under subsection (a), the volume of alcohol shall in-
clude the volume of any denaturant (including gaso-
line) which is added under any formulas approved by
the Secretary to the extent that such denaturants do
not exceed 5 percent of the volume of such alcohol (in-
cluding denaturants).’’.
(3) Section 40(e)(1) is amended—
(A) by striking ‘‘2007’’ in subparagraph
(A) and inserting ‘‘2010’’, and
(B) by striking ‘‘2008’’ in subparagraph
(B) and inserting ‘‘2011’’.
(4) Section 40(h) is amended—
(A) by striking ‘‘2007’’ in paragraph (1)
and inserting ‘‘2010’’, and
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(B) by striking ‘‘, 2006, or 2007’’ in the
table contained in paragraph (2) and inserting
‘‘through 2010’’.
(5) Section 4041(b)(2)(B) is amended by striking
‘‘a substance other than petroleum or natural gas’’
and inserting ‘‘coal (including peat)’’.
(6) Section 4041 is amended by striking sub-
section (k).
(7) Section 4081 is amended by striking sub-
section (c).
(8) Paragraph (2) of section 4083(a) is amended
to read as follows:
‘‘(2) GASOLINE.—The term ‘gasoline’—
‘‘(A) includes any gasoline blend, other than
qualified methanol or ethanol fuel (as defined in
section 4041(b)(2)(B)), partially exempt meth-
anol 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 alcohol).
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For purposes of subparagraph (B)(i), the term ‘gaso-
line blend stock’ means any petroleum product compo-
nent of gasoline.’’.
(9) Section 6427 is amended by inserting after
subsection (d) the following new subsection:
‘‘(e) ALCOHOL OR BIODIESEL USED TO PRODUCE AL-
COHOL 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 mixture.
‘‘(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 sec-
tion 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,
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the Secretary shall pay (without interest) to such per-
son an amount equal to the alcohol credit (as deter-
mined 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.
‘‘(4) TERMINATION.—This subsection shall not
apply with respect to—
‘‘(A) any alcohol fuel mixture (as defined in
section 6426(b)(3)) or alcohol (as so defined) sold
or used after December 31, 2010, and
‘‘(B) any biodiesel mixture (as defined in
section 6426(c)(3)) or biodiesel (as so defined) or
agri-biodiesel (as so defined) sold or used after
December 31, 2006.’’.
(10) Section 6427(i)(3) is amended—
(A) by striking ‘‘subsection (f)’’ both places
it appears in subparagraph (A) and inserting
‘‘subsection (e)(1)’’,
(B) by striking ‘‘gasoline, diesel fuel, or ker-
osene used to produce a qualified alcohol mixture
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(as defined in section 4081(c)(3))’’ in subpara-
graph (A) and inserting ‘‘a mixture described 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 subpara-
graph 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)(1) is amended by adding at
the end the following new flush sentence:
‘‘For purposes of this paragraph, taxes received under
sections 4041 and 4081 shall be determined without
reduction for credits under section 6426.’’.
(12) Section 9503(b)(4) is amended—
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(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).
(13) The table of sections for subchapter B of
chapter 65 is amended by inserting after the item re-
lating to section 6425 the following new item:
‘‘Sec. 6426. Credit for alcohol fuel and biodiesel mixtures.’’.
(14) TARIFF SCHEDULE.—Headings 9901.00.50
and 9901.00.52 of the Harmonized Tariff Schedule of
the United States (19 U.S.C. 3007) are each amended
in the effective period column by striking ‘‘10/1/2007’’
each place it appears and inserting ‘‘1/1/2011’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as otherwise provided
in this subsection, the amendments made by this sec-
tion shall apply to fuel sold or used after September
30, 2004.
(2) REGISTRATION REQUIREMENT.—The amend-
ment 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
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(14) 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 amendments
made by subsection (c)(12) shall apply to fuel sold or
used after September 30, 2003.
(e) FORMAT FOR FILING.—The Secretary of the Treas-
ury shall describe the electronic format for filing claims de-
scribed 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. 862. BIODIESEL INCOME TAX CREDIT.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits), as
amended by this Act, is amended by inserting after section
40A the following new section:
‘‘SEC. 40B. 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.—
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‘‘(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 tax-
payer in the production of a qualified biodiesel
mixture.
‘‘(B) QUALIFIED BIODIESEL MIXTURE.—The
term ‘qualified biodiesel mixture’ means a mix-
ture of biodiesel and diesel fuel (as defined in
section 4083(a)(3)), determined without regard
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 business
of the taxpayer, and
‘‘(ii) for the taxable year in which such
sale or use occurs.
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‘‘(D) CASUAL OFF-FARM PRODUCTION NOT
ELIGIBLE.—No credit shall be allowed under this
section with respect to any casual off-farm pro-
duction 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 al-
lowed under subparagraph (A)(i) with respect to
any biodiesel which was sold in a retail sale de-
scribed in subparagraph (A)(ii).
‘‘(3) CREDIT FOR AGRI-BIODIESEL.—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’.
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‘‘(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 im-
porter of the biodiesel which identifies the product
produced and the percentage of biodiesel and agri-bio-
diesel in the product.
‘‘(c) COORDINATION WITH CREDIT AGAINST EXCISE
TAX.—The amount of the credit determined under this sec-
tion with respect to any biodiesel shall be properly reduced
to take into account any benefit provided with respect 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 derived
from plant or animal matter which meet—
‘‘(A) the registration requirements for fuels
and fuel additives established by the Environ-
mental Protection Agency under section 211 of
the Clean Air Act (42 U.S.C. 7545), and
‘‘(B) the requirements of the American Soci-
ety of Testing and Materials D6751.
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‘‘(2) AGRI-BIODIESEL.—The term ‘agri-biodiesel’
means biodiesel derived solely from virgin oils, in-
cluding 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—
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‘‘(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.
‘‘(e) TERMINATION.—This section shall not apply to
any sale or use after December 31, 2006.’’.
(b) CREDIT TREATED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) (relating to current year
business credit), as amended by this Act, is amended by
striking ‘‘plus’’ at the end of paragraph (28), by striking
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the period at the end of paragraph (29) and inserting ‘‘,
plus’’, and by adding at the end the following new para-
graph:
‘‘(30) the biodiesel fuels credit determined under
section 40B(a).’’.
(c) CONFORMING AMENDMENTS.—
(1)(A) Section 87, 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 re-
spect to the taxpayer for the taxable year under sec-
tion 40B(a).’’, and
(iv) by striking ‘‘FUEL CREDIT’’ in the heading
and inserting ‘‘AND BIODIESEL FUELS CREDITS’’.
(B) The item relating to section 87 in the table
of sections for part II of subchapter B of chapter 1
is amended by striking ‘‘fuel credit’’ and inserting
‘‘and biodiesel fuels credits’’.
(2) Section 196(c), as amended by this Act, is
amended by striking ‘‘and’’ at the end of paragraph
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(11), by striking the period at the end of paragraph
(12) and inserting ‘‘, and’’, and by adding at the end
the following new paragraph:
‘‘(13) the biodiesel fuels credit determined under
section 40B(a).’’.
(3) The table of sections for subpart D of part
IV of subchapter A of chapter 1 is amended by adding
after the item relating to section 40 the following new
item:
‘‘Sec. 40B. 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.
Subtitle H—Fuel Fraud Prevention
SEC. 870. SHORT TITLE.
This subtitle may be cited as the ‘‘Fuel Fraud Preven-
tion Act of 2004’’.
PART I—AVIATION JET FUEL
SEC. 871. TAXATION OF AVIATION-GRADE KEROSENE.
(a) RATE OF TAX.—
(1) IN GENERAL.—Subparagraph (A) of section
4081(a)(2) is amended by striking ‘‘and’’ at the end
of clause (ii), by striking the period at the end of
clause (iii) and inserting ‘‘, and’’, and by adding at
the end the following new clause:
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‘‘(iv) in the case of aviation-grade ker-
osene, 21.8 cents per gallon.’’.
(2) COMMERCIAL AVIATION.—Paragraph (2) of
section 4081(a) is amended by adding at the end the
following new subparagraph:
‘‘(C) TAXES
IMPOSED
ON
FUEL
USED
IN
COMMERCIAL AVIATION.—In the case of aviation-
grade kerosene which is removed from any refin-
ery or terminal directly into the fuel tank of an
aircraft for use in commercial aviation, the rate
of tax under subparagraph (A)(iv) shall be 4.3
cents per gallon.’’.
(3) NONTAXABLE USES.—
(A) IN GENERAL.—Section 4082 is amended
by redesignating subsections (e) and (f) as sub-
sections (f) and (g), respectively, and by insert-
ing after subsection (d) the following new sub-
section:
‘‘(e) AVIATION-GRADE KEROSENE.—In the case of
aviation-grade kerosene which is exempt from the tax im-
posed by section 4041(c) (other than by reason of a prior
imposition of tax) and which is removed from any refinery
or terminal directly into the fuel tank of an aircraft, the
rate of tax under section 4081(a)(2)(A)(iv) shall be zero.’’.
(B) CONFORMING AMENDMENTS.—