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‘‘(7) SMALL FOSSIL FREE ALCOHOL PRODUCER
CREDIT.—
‘‘(A) IN
GENERAL.—In addition to any
other credit allowed under this section, there
shall be allowed as a credit against the tax im-
posed by this chapter for the taxable year an
amount equal to 10 cents for each gallon of not
more than 60,000,000 gallons of qualified fossil
free alcohol production.
‘‘(B) QUALIFIED
FOSSIL
FREE
ALCOHOL
PRODUCTION.—For purposes of this section, the
term ‘qualified fossil free alcohol production’
means alcohol which is produced by an eligible
small fossil free alcohol producer at a fossil free
alcohol production facility and which during the
taxable year—
‘‘(i) is sold by the taxpayer to another
person—
‘‘(I) for use by such other person
in the production of a qualified alcohol
mixture in such other person’s trade or
business (other than casual off-farm
production),
‘‘(II) for use by such other person
as a fuel in a trade or business, or
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‘‘(III) who sells such alcohol at re-
tail to another person and places such
alcohol in the fuel tank of such other
person, or
‘‘(ii) is used or sold by the taxpayer for
any purpose described in clause (i).
‘‘(C) 
ADDITIONAL
DISTILLATION
EX-
CLUDED.—The qualified fossil free alcohol pro-
duction of any taxpayer for any taxable year
shall not include any alcohol which is purchased
by the taxpayer and with respect to which such
producer increases the proof of the alcohol by ad-
ditional distillation.’’.
(c) ELIGIBLE SMALL FOSSIL FREE ALCOHOL PRO-
DUCER.—Section 40 is amended by adding at the end the
following new subsection:
‘‘(i) DEFINITIONS AND SPECIAL RULES FOR SMALL
FOSSIL FREE ALCOHOL PRODUCER.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘eligible small fos-
sil free alcohol producer’ means a person, who at all
times during the taxable year, has a productive ca-
pacity for alcohol from all fossil free alcohol produc-
tion facilities of the taxpayer which is not in excess
of 60,000,000 gallons.
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‘‘(2) FOSSIL FREE ALCOHOL PRODUCTION FACIL-
ITY.—The term ‘fossil free alcohol production facility’
means any facility at which 90 percent of the energy
used in the production of alcohol is produced from
biomass (as defined in section 45K(c)(3)).
‘‘(3) AGGREGATION RULE.—For purposes of the
60,000,000 gallon limitation under paragraph (1)
and subsection (b)(7)(A), all members of the same
controlled group of corporations (within the meaning
of section 267(f)) and all persons under common con-
trol (within the meaning of section 52(b) but deter-
mined by treating an interest of more than 50 percent
as a controlling interest) shall be treated as 1 person.
‘‘(4) PARTNERSHIP, 
S
CORPORATIONS, 
AND
OTHER PASS-THRU ENTITIES.—In the case of a part-
nership, trust, S corporation, or other pass-thru enti-
ty, the limitation contained in paragraph (1) shall be
applied at the entity level and at the partner or simi-
lar level.
‘‘(5) ALLOCATION.—For purposes of this sub-
section, in the case of a facility in which more than
1 person has an interest, productive capacity shall be
allocated among such persons in such manner as the
Secretary may prescribe.
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‘‘(6) REGULATIONS.—The Secretary may pre-
scribe such regulations as may be necessary to prevent
the credit provided for in subsection (a)(5) from di-
rectly or indirectly benefitting any person with a di-
rect or indirect productive capacity of more than
60,000,000 gallons of alcohol from fossil free alcohol
production facilities during the taxable year.
‘‘(7) ALLOCATION OF SMALL FOSSIL FREE ALCO-
HOL PRODUCER CREDIT TO PATRONS OF COOPERA-
TIVE.—Rules similar to the rules under subsection
(g)(6) shall apply for purposes of this subsection.’’.
(d) ALCOHOL NOT USED AS A FUEL, ETC.—
(1) IN
GENERAL.—Paragraph (3) of section
40(d), as amended by this Act, is amended by redesig-
nating subparagraph (E) as subparagraph (F) and
by inserting after subparagraph (D) the following
new subparagraph:
‘‘(E) SMALL FOSSIL FREE ALCOHOL PRO-
DUCER CREDIT.—If—
‘‘(i) any credit is allowed under sub-
section (a)(5), and
‘‘(ii) any person does not use such fuel
for a purpose described in subsection
(b)(7)(B),
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then there is hereby imposed on such person a
tax equal to 10 cents for each gallon of such alco-
hol.’’.
(2) CONFORMING
AMENDMENT.—Subparagraph
(F) of section 40(d)(3), as redesignated by paragraph
(1) and amended by this Act, is amended by striking
‘‘or (D)’’ and inserting ‘‘(D), or (E)’’.
(e) ALCOHOL PRODUCED IN THE UNITED STATES.—
Section 40(d)(6), as added by this Act, is amended—
(1) by inserting ‘‘or small fossil free alcohol pro-
ducer credit’’ after ‘‘cellulosic alcohol producer cred-
it’’, and
(2) by inserting ‘‘AND
FOSSIL
FREE’’ after
‘‘CELLULOSIC’’ in the heading.
(f) TERMINATION.—Paragraph (1) of section 40(e), as
amended by this Act, is amended—
(1) in subparagraph (A), by inserting ‘‘, and De-
cember 31, 2011, in the case of the credit allowed by
reason of subsection (a)(5)’’ after ‘‘subsection (a)(3)’’,
and
(2) in subparagraph (B), by inserting ‘‘, and
January 1, 2012, in the case of the credit allowed by
reason of subsection (a)(5)’’ after ‘‘subsection (a)(3)’’.