(A) IN
GENERAL.—Clause (i) of section 
1301(b)(1)(A) is amended by inserting ‘‘or fish-
ing business’’ before the semicolon. 
(B) CONFORMING AMENDMENT.—Subpara-
graph (B) of section 1301(b)(1) is amended by 
inserting ‘‘or fishing business’’ after ‘‘farming 
business’’ both places it occurs. 
(3) DEFINITION OF FISHING BUSINESS.—Sec-
tion 1301(b) is amended by adding at the end the 
following new paragraph: 
‘‘(4) FISHING
BUSINESS.—The term ‘fishing 
business’ means the conduct of commercial fishing 
as defined in section 3 of the Magnuson-Stevens 
Fishery Conservation and Management Act (16 
U.S.C. 1802).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 9. MODIFICATION TO COOPERATIVE MARKETING 
RULES TO INCLUDE VALUE ADDED PROC-
ESSING INVOLVING ANIMALS. 
(a) IN GENERAL.—Section 1388 (relating to defini-
tions and special rules) is amended by adding at the end 
the following new subsection:
‘‘(k) COOPERATIVE MARKETING INCLUDES VALUE- 
ADDED PROCESSING INVOLVING ANIMALS.—For pur-
poses of section 521 and this subchapter, the term ‘mar-
keting the products of members or other producers’ in-
cludes feeding the products of members or other producers 
to cattle, hogs, fish, chickens, or other animals and selling 
the resulting animals or animal products.’’. 
(b) CONFORMING AMENDMENT.—Section 521(b) is 
amended by adding at the end the following new para-
graph: 
‘‘(7) CROSS REFERENCE.— 
‘‘For treatment of value-added processing involv-
ing animals, see section 1388(k).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 10. EXTENSION OF DECLARATORY JUDGMENT PROCE-
DURES TO FARMERS’ COOPERATIVE ORGANI-
ZATIONS. 
(a) IN GENERAL.—Section 7428(a)(1) (relating to 
declaratory judgments of tax exempt organizations) is 
amended by striking ‘‘or’’ at the end of subparagraph (B) 
and by adding at the end the following new subparagraph: 
‘‘(D) with respect to the initial classifica-
tion or continuing classification of a cooperative
as described in section 521(b) which is exempt 
from tax under section 521(a), or’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to pleadings filed after 
the date of the enactment of this Act. 
SEC. 11. SMALL ETHANOL PRODUCER CREDIT. 
(a) ALLOCATION OF ALCOHOL FUELS CREDIT TO 
PATRONS OF A COOPERATIVE.—Section 40(g) (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) (relating to definitions and 
special rules for eligible small ethanol producer cred-
it) 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) 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 (relating to limitation based on amount 
of tax) is amended by redesignating 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).
nizations) 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. 
SEC. 12. PAYMENT OF DIVIDENDS ON STOCK OF COOPERA-
TIVES 
WITHOUT 
REDUCING 
PATRONAGE 
DIVIDENDS. 
(a) IN GENERAL.—Subsection (a) of section 1388 
(relating to patronage dividend defined) is amended by 
adding at the end the following new sentence: ‘‘For pur-
poses of paragraph (3), net earnings shall not be reduced 
by amounts paid during the year as dividends on capital 
stock or other proprietary capital interests of the organiza-
tion to the extent that the articles of incorporation or by-
laws of such organization or other contract with patrons 
provide that such dividends are in addition to amounts 
otherwise payable to patrons which are derived from busi-
ness done with or for patrons during the taxable year.’’.
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to distributions in taxable years 
beginning after the date of the enactment of this Act. 
SEC. 13. SPECIAL RULES FOR LIVESTOCK SOLD ON AC-
COUNT OF WEATHER-RELATED CONDITIONS. 
(a) RULES FOR REPLACEMENT OF INVOLUNTARILY 
CONVERTED LIVESTOCK.—Subsection (e) of section 1033 
(relating to involuntary conversions) is amended— 
(1) by striking ‘‘CONDITIONS.—For purposes’’ 
and inserting ‘‘CONDITIONS.— 
‘‘(1) IN GENERAL.—For purposes’’, and 
(2) by adding at the end the following new 
paragraph: 
‘‘(2) EXTENSION OF REPLACEMENT PERIOD.— 
‘‘(A) 
IN
GENERAL.—In 
the 
case 
of 
drought, flood, or other weather-related condi-
tions described in paragraph (1) which result in 
the area being designated as eligible for assist-
ance by the Federal Government, subsection 
(a)(2)(B) shall be applied with respect to any 
converted property by substituting ‘4 years’ for 
‘2 years’. 
‘‘(B) 
FURTHER
EXTENSION
BY
SEC-
RETARY.—The Secretary may extend on a re-
gional basis the period for replacement under
this section (after the application of subpara-
graph (A)) for such additional time as the Sec-
retary determines appropriate if the weather-re-
lated conditions which resulted in such applica-
tion continue for more than 3 years.’’. 
(b) INCOME INCLUSION RULES.—Section 451(e) (re-
lating to special rule for proceeds from livestock sold on 
account of drought, flood, or other weather-related condi-
tions) is amended by adding at the end the following new 
paragraph: 
‘‘(3) SPECIAL
ELECTION
RULES.—If section 
1033(e)(2) applies to a sale or exchange of livestock 
described in paragraph (1), the election under para-
graph (1) shall be deemed valid if made during the 
replacement period described in such section.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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