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received by such organization during such 
calendar year for energy research. 
‘‘(B) TREATMENT
OF
PERSONS.—All per-
sons treated as a single employer under sub-
section (a) or (b) of section 52 shall be treated 
as related persons for purposes of subparagraph 
(A)(iii) and as a single person for purposes of 
subparagraph (A)(iv).’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
41(b)(3)(C) is amended by inserting ‘‘(other than an 
energy research consortium)’’ after ‘‘organization’’. 
(b) REPEAL OF LIMITATION ON CONTRACT RESEARCH 
EXPENSES PAID TO SMALL BUSINESSES, UNIVERSITIES, 
AND FEDERAL LABORATORIES.—Section 41(b)(3) (relating 
to contract research expenses) is amended by adding at the 
end the following new subparagraph: 
‘‘(D) AMOUNTS PAID TO ELIGIBLE SMALL 
BUSINESSES, UNIVERSITIES, AND FEDERAL LAB-
ORATORIES.— 
‘‘(i) IN
GENERAL.—In the case of 
amounts paid by the taxpayer to— 
‘‘(I) an eligible small business, 
‘‘(II) an institution of higher edu-
cation (as defined in section 3304(f)), 
or
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‘‘(III) an organization which is a 
Federal laboratory, 
for qualified research which is energy re-
search, subparagraph (A) shall be applied 
by substituting ‘100 percent’ for ‘65 per-
cent’. 
‘‘(ii) ELIGIBLE SMALL BUSINESS.—For 
purposes of this subparagraph, the term ‘eli-
gible small business’ means a small business 
with respect to which the taxpayer does not 
own (within the meaning of section 318) 50 
percent or more of— 
‘‘(I) in the case of a corporation, 
the outstanding stock of the corpora-
tion (either by vote or value), and 
‘‘(II) in the case of a small busi-
ness which is not a corporation, the 
capital and profits interests of the 
small business. 
‘‘(iii) SMALL BUSINESS.—For purposes 
of this subparagraph— 
‘‘(I) 
IN
GENERAL.—The 
term 
‘small business’ means, with respect to 
any calendar year, any person if the 
annual average number of employees
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employed by such person during either 
of the 2 preceding calendar years was 
500 or fewer. For purposes of the pre-
ceding sentence, a preceding calendar 
year may be taken into account only if 
the person was in existence throughout 
the year. 
‘‘(II) 
STARTUPS, 
CONTROLLED 
GROUPS, AND
PREDECESSORS.—Rules 
similar to the rules of subparagraphs 
(B) and (D) of section 220(c)(4) shall 
apply for purposes of this clause. 
‘‘(iv) 
FEDERAL
LABORATORY.—For 
purposes of this subparagraph, the term 
‘Federal laboratory’ has the meaning given 
such term by section 4(6) of the Stevenson- 
Wydler Technology Innovation Act of 1980 
(15 U.S.C. 3703(6)), as in effect on the date 
of the enactment of the Energy Tax Incen-
tives Act.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to amounts paid or incurred after the 
date of the enactment of this Act, in taxable years ending 
after such date.
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SEC. 1543. SMALL AGRI-BIODIESEL PRODUCER CREDIT. 
(a) IN GENERAL.—Subsection (a) of section 40A (re-
lating to biodiesel used as a fuel) is amended to read as 
follows: 
‘‘(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, plus 
‘‘(3) in the case of an eligible small agri-biodiesel 
producer, the small agri-biodiesel producer credit.’’. 
(b) SMALL AGRI-BIODIESEL PRODUCER CREDIT DE-
FINED.—Section 40A(b) (relating to definition of biodiesel 
mixture credit and biodiesel credit) is amended by adding 
at the end the following new paragraph: 
‘‘(5) SMALL AGRI-BIODIESEL PRODUCER CRED-
IT.— 
‘‘(A) IN GENERAL.—The small agri-biodiesel 
producer credit of any eligible small agri-bio-
diesel producer for any taxable year is 10 cents 
for each gallon of qualified agri-biodiesel produc-
tion of such producer. 
‘‘(B) QUALIFIED AGRI-BIODIESEL PRODUC-
TION.—For purposes of this paragraph, the term 
‘qualified agri-biodiesel production’ means any 
agri-biodiesel which is produced by an eligible
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small agri-biodiesel producer, and which during 
the taxable year— 
‘‘(i) is sold by such producer to another 
person— 
‘‘(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 person 
as a fuel in a trade or business, or 
‘‘(III) who sells such agri-biodiesel 
at retail to another person and places 
such agri-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 agri-bio-
diesel production of any producer for any tax-
able year shall not exceed 15,000,000 gallons.’’. 
(c) DEFINITIONS AND SPECIAL RULES.—Section 40A 
is amended by redesignating subsection (e) as subsection (f) 
and by inserting after subsection (d) the following new sub-
section:
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‘‘(e) DEFINITIONS AND SPECIAL RULES FOR SMALL 
AGRI-BIODIESEL PRODUCER CREDIT.—For purposes of this 
section— 
‘‘(1) ELIGIBLE
SMALL
AGRI-BIODIESEL
PRO-
DUCER.—The term ‘eligible small agri-biodiesel pro-
ducer’ means a person who, at all times during the 
taxable year, has a productive capacity for agri-bio-
diesel not in excess of 60,000,000 gallons. 
‘‘(2) AGGREGATION RULE.—For purposes of the 
15,000,000 
gallon 
limitation 
under 
subsection 
(b)(5)(C) and the 60,000,000 gallon limitation under 
paragraph (1), all members of the same controlled 
group of corporations (within the meaning of section 
267(f)) and all persons under common control (within 
the meaning of section 52(b) but determined by treat-
ing an interest of more than 50 percent as a control-
ling interest) shall be treated as 1 person. 
‘‘(3) PARTNERSHIP, S CORPORATION, AND OTHER 
PASS-THRU ENTITIES.—In the case of a partnership, 
trust, S corporation, or other pass-thru entity, the 
limitations contained in subsection (b)(5)(C) and 
paragraph (1) shall be applied at the entity level and 
at the partner or similar level. 
‘‘(4) ALLOCATION.—For purposes of this sub-
section, in the case of a facility in which more than
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1 person has an interest, productive capacity shall be 
allocated among such persons in such manner as the 
Secretary may prescribe. 
‘‘(5) REGULATIONS.—The Secretary may pre-
scribe such regulations as may be necessary— 
‘‘(A) to prevent the credit provided for in 
subsection (a)(3) from directly or indirectly ben-
efiting any person with a direct or indirect pro-
ductive capacity of more than 60,000,000 gallons 
of agri-biodiesel during the taxable year, or 
‘‘(B) to prevent any person from directly or 
indirectly benefiting with respect to more than 
15,000,000 gallons during the taxable year. 
‘‘(6) ALLOCATION
OF
SMALL
AGRI-BIODIESEL 
CREDIT TO PATRONS OF COOPERATIVE.— 
‘‘(A) ELECTION TO ALLOCATE.— 
‘‘(i) IN GENERAL.—In the case of a co-
operative organization described in section 
1381(a), any portion of the credit deter-
mined under subsection (a)(3) for the tax-
able year may, at the election of the organi-
zation, be apportioned pro rata among pa-
trons of the organization on the basis of the 
quantity or value of business done with or 
for such patrons for the taxable year.