SEC. 5. ALLOWANCE OF SMALL BIODIESEL PRODUCER 
CREDIT FOR QUALIFIED FARMERS. 
(a) IN GENERAL.—Section 40A of the Internal Rev-
enue Code of 1986 (relating to biodiesel and renewable 
diesel used as fuel) is amended— 
(1) in subsection (a), by striking the period at 
the end of paragraph (3) and inserting ‘‘, plus’’ and 
by adding at the end the following new paragraph: 
‘‘(4) in the case of an eligible small biodiesel 
producer, the small biodiesel producer credit.’’, 
(2) in subsection (b), by adding at the end the 
following new paragraph: 
‘‘(6) SMALL BIODIESEL PRODUCER CREDIT.— 
‘‘(A) IN
GENERAL.—The small biodiesel 
producer credit of any eligible small biodiesel 
producer for any taxable year is 10 cents for 
each gallon of qualified biodiesel production of 
such producer. 
‘‘(B) 
QUALIFIED
BIODIESEL
PRODUC-
TION.—For purposes of this paragraph, the 
term ‘‘qualified biodiesel production’’ means 
any biodiesel which is produced by an eligible 
small biodiesel producer, and which during the 
taxable year— 
‘‘(i) is sold by such producer to an-
other person— 
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‘‘(I) for use by such other person 
in the production of a qualified bio-
diesel mixture in such other person’s 
trade or business (other than casual 
off-farm production), 
‘‘(II) for use by such other per-
son as a fuel in a trade or business, 
or 
‘‘(III) who sells such biodiesel at 
retail to another person and places 
such biodiesel in the fuel tank of such 
other person, or 
‘‘(ii) is used or sold by such producer 
for any purpose described in clause (i). 
‘‘(C) LIMITATION.—The qualified biodiesel 
production of any producer for any taxable year 
shall not exceed 15,000,000 gallons.’’, and 
(3) by redesignating subsections (f) and (g) as 
subsections (g) and (h), respectively, and by insert-
ing after subsection (e) the following new subsection: 
‘‘(f) DEFINITIONS AND SPECIAL RULES FOR SMALL 
BIODIESEL PRODUCER CREDIT.—For purposes of this 
section— 
‘‘(1) ELIGIBLE SMALL BIODIESEL PRODUCER.— 
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‘‘(A) IN
GENERAL.—The term ‘‘eligible 
small biodiesel producer’’ means a qualified 
farmer who, at all times during the taxable 
year, has a productive capacity for biodiesel not 
in excess of 60,000,000 gallons. 
‘‘(B) QUALIFIED FARMER.—With respect 
to a taxable year, the term ‘qualified farmer’ 
means an individual— 
‘‘(i) who is actively engaged in farm-
ing, 
‘‘(ii) whose contributions to a farming 
operation during the taxable year are at 
least commensurate with the individual’s 
claimed share of the profits or losses of the 
farming operation, and 
‘‘(iii) whose gross income from farm-
ing for the taxable year is at least 75 per-
cent of the individual’s total gross income 
from all sources for the taxable year. 
‘‘(2) SPECIAL
RULES.—Rules similar to the 
rules of paragraphs (2), (3), (4), (5), and (6) of sub-
section (e) shall apply to the small biodiesel producer 
credit.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply qualified biodiesel production be-
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ginning after December 31, 2006, in taxable years begin-
ning after such date. 
Æ 
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