I
107TH CONGRESS
1ST SESSION
H. R. 3116
To amend the Internal Revenue Code of 1986 to eliminate tax subsidies
for ethanol fuel.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 12, 2001
Mr. BENTSEN introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to eliminate
tax subsidies for ethanol fuel.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. ELIMINATION OF TAX SUBSIDIES FOR ETH-
ANOL FUEL.
(a) ELIMINATION OF CREDIT FOR ALCOHOL USED
AS FUEL.—
(1) IN GENERAL.—Subpart D of part IV of
subchapter A of chapter 1 of the Internal Revenue
Code of 1986 is amended by striking section 40 (re-
lating to alcohol used as fuel).
(2) CLERICAL
AND
CONFORMING
AMEND-
MENTS.—
(A) Subsection (b) of section 38 of such
Code (relating to general business credit) is
amended by striking paragraph (3) and by re-
designating paragraphs (4) through (15) as
paragraphs (3) through (14), respectively.
(B) Paragraph (3) of section 38(d) of such
Code (relating to credits no longer listed) is
amended by striking ‘‘and’’ at the end of sub-
paragraph (A), by striking the period at the
end of subparagraph (B) and inserting ‘‘, and’’,
and by adding at the end the following new sub-
paragraph:
‘‘(C) the credit allowable by section 40, as
in effect on the day before the date of the en-
actment of this subparagraph (relating to alco-
hol used as fuel) shall be treated as referred to
after the last paragraph of subsection (b) and
after any credits treated as referred to by rea-
son of subparagraph (A).’’
(C) The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such
Code is amended by striking the item relating
to section 40.
‘‘(b) EXEMPTION
FOR
OFF-HIGHWAY
BUSINESS
USE.—
‘‘(1) IN GENERAL.—No tax shall be imposed by
subsection (a) or (d)(1) on liquids sold for use or
used in an off-highway business use.
‘‘(2) TAX WHERE OTHER USE.—If a liquid on
which no tax was imposed by reason of paragraph
(1) is used otherwise than in an off-highway busi-
ness use, a tax shall be imposed by paragraph
(1)(B), (2)(B), or (3)(A)(ii) of subsection (a)
(whichever is appropriate) and by the corresponding
provision of subsection (d)(1) (if any).
‘‘(3) OFF-HIGHWAY BUSINESS USE DEFINED.—
For purposes of this subsection, the term ‘off-high-
way business use’ has the meaning given to such
term by section 6421(e)(2); except that such term
shall not, for purposes of subsection (a)(1), include
use in a diesel-powered train.’’
(2) REPEAL OF REDUCED RATE ON ETHANOL
FUEL PRODUCED FROM NATURAL GAS.—
(A) Paragraph (1) of section 4041(m) of
such Code is amended by striking ‘‘or ethanol’’
in the material preceding subparagraph (A).
(B) Clause (i) of section 4041(m)(1)(A) of
such Code is amended by striking ‘‘2005—’’
and all that follows and inserting ‘‘2005, 9.15
cents per gallon, and’’.
(C) Clause (ii) of section 4041(m)(1)(A) of
such Code is amended by striking ‘‘2005—’’
and all that follows and inserting ‘‘2005, 2.15
cents per gallon, and’’.
(D) Paragraph (2) of section 4041(m) of
such Code is amended—
(i) by striking ‘‘or ethanol’’ each place
it appears in the heading and text,
(ii) by striking ‘‘, ethanol,’’ and
(iii) by inserting ‘‘(other than eth-
anol)’’ after ‘‘alcohol’’.
(c) TAX OF FUEL ALCOHOL TO SAME EXTENT AS
OTHER MOTOR FUELS.—
(1) TREATMENT
AS
TAXABLE
FUEL.—Para-
graph (1) of section 4083(a) of such Code (defining
taxable fuel) is amended by striking ‘‘and’’ at the
end of subparagraph (B), by striking the period at
the end of subparagraph (C) and inserting ‘‘, and’’,
and by adding at the end the following:
‘‘(D) fuel alcohol.’’
(2) DEFINITION
OF
FUEL
ALCOHOL.—Sub-
section (a) of section 4083 of such Code is amended
by adding at the end the following new paragraph:
‘‘(4) FUEL ALCOHOL.—The term ‘fuel alcohol’
means any alcohol (including ethanol and meth-
anol)—
‘‘(A) which is produced other than from
petroleum, natural gas, or coal (including peat),
and
‘‘(B) which is withdrawn from the distillery
where produced free of tax under chapter 51 by
reason of section 5181 or so much of section
5214(a)(1) as relates to fuel use.’’
(3) RATE
OF
TAX.—Clause (i) of section
4081(a)(2)(A) of such Code is amended by striking
‘‘(other than aviation gasoline)’’ and inserting
‘‘(other than aviation gasoline) and fuel alcohol’’.
(4) SPECIAL RULES FOR IMPOSITION OF TAX.—
Paragraph (1) of section 4081(a) of such Code is
amended by adding at the end the following new
subparagraph:
‘‘(C) SPECIAL
RULES
FOR
FUEL
ALCO-
HOL.—In the case of fuel alcohol—
‘‘(i) the distillery where produced shall
be treated as a refinery, and
‘‘(ii) subparagraph (B) shall be ap-
plied by including transfers by truck or rail
in excess of such minimum quantities as
the Secretary shall prescribe.’’
(5) REPEAL OF REDUCED RATES ON ALCOHOL
FUELS.—
(A) Section 4041 of such Code is amended
by striking subsection (k).
(B) Section 4081 of such Code is amended
by striking subsection (c).
(C) Section 4091 of such Code is amended
by striking subsection (c).
(6) CONFORMING AMENDMENTS.—
(A) 
Subparagraph 
(A) 
of 
section
4041(a)(2) of such Code is amended—
(i) by inserting ‘‘other than fuel alco-
hol’’ after ‘‘any product’’, and
(ii) by adding at the end the following
flush sentence:
‘‘No tax shall be imposed by this paragraph on
the sale or use of any fuel alcohol if tax was im-
posed on such alcohol under section 4081 and
the tax thereon was not credited or refunded.’’
(B) Section 6427 of such Code is amended
by striking subsection (f).
(C) Subsection (i) of section 6427 of such
Code is amended by striking paragraph (3).