ducer credit) is amended by adding at the end the fol-
lowing 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, and 
‘‘(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. 
‘‘(C) SPECIAL RULE.—If the amount of a 
credit which has been apportioned to any pa-
tron under this paragraph is decreased for any 
reason— 
‘‘(i) such amount shall not increase 
the tax imposed on such patron, and 
‘‘(ii) the tax imposed by this chapter 
on such organization shall be increased by 
such amount. 
The increase under clause (ii) shall not be 
treated as tax imposed by this chapter for pur-
poses of determining the amount of any credit 
under this chapter or for purposes of section 
55.’’. 
(b) DEFINITION OF SMALL ETHANOL PRODUCER.— 
Section 40(g) (relating to definitions and special rules for 
eligible small ethanol producer credit) is amended by strik-
ing ‘‘30,000,000’’ each place it appears and inserting 
‘‘60,000,000’’. 
(c) CONFORMING AMENDMENT.—Section 1388 (re-
lating to definitions and special rules for cooperative orga-
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 cooperative organi-
zations and their patrons, see section 40(g)(6).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 5. INCENTIVES FOR BIODIESEL. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its) is amended by inserting after section 40 the following 
new section: 
‘‘SEC. 40A. BIODIESEL USED AS FUEL. 
‘‘(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. 
‘‘(b) DEFINITION OF BIODIESEL MIXTURE CREDIT 
AND BIODIESEL CREDIT.—For purposes of this section— 
‘‘(1) BIODIESEL MIXTURE CREDIT.—
‘‘(A) IN GENERAL.—The biodiesel mixture 
credit of any taxpayer for any taxable year is 
50 cents for each gallon of biodiesel used by the 
taxpayer in the production of a qualified bio-
diesel mixture. 
‘‘(B) QUALIFIED
BIODIESEL
MIXTURE.— 
The term ‘qualified biodiesel mixture’ means a 
mixture of biodiesel and a taxable fuel (within 
the meaning of section 4083(a)(1)) which— 
‘‘(i) is sold by the taxpayer producing 
such mixture to any person for use as a 
fuel, or 
‘‘(ii) is used as a fuel by the taxpayer 
producing such mixture. 
‘‘(C) SALE OR USE MUST BE IN TRADE OR 
BUSINESS, ETC.—Biodiesel used in the produc-
tion of a qualified biodiesel mixture shall be 
taken into account— 
‘‘(i) only if the sale or use described 
in subparagraph (B) is in a trade or busi-
ness of the taxpayer, and 
‘‘(ii) for the taxable year in which 
such sale or use occurs. 
‘‘(D) CASUAL OFF-FARM PRODUCTION NOT 
ELIGIBLE.—No credit shall be allowed under
this section with respect to any casual off-farm 
production of a qualified biodiesel mixture. 
‘‘(2) BIODIESEL CREDIT.— 
‘‘(A) IN GENERAL.—The biodiesel credit of 
any taxpayer for any taxable year is 50 cents 
for each gallon of biodiesel which is not in a 
mixture and which during the taxable year— 
‘‘(i) is used by the taxpayer as a fuel 
in a trade or business, or 
‘‘(ii) is sold by the taxpayer at retail 
to a person and placed in the fuel tank of 
such person’s vehicle. 
‘‘(B) USER CREDIT NOT TO APPLY TO BIO-
DIESEL SOLD AT RETAIL.—No credit shall be 
allowed under subparagraph (A)(i) with respect 
to any biodiesel which was sold in a retail sale 
described in subparagraph (A)(ii). 
‘‘(3) CREDIT
FOR
AGRI-BIODIESEL.—In the 
case of any biodiesel which is agri-biodiesel, para-
graphs (1)(A) and (2)(A) shall be applied by sub-
stituting ‘$1.00’ for ‘50 cents’. 
‘‘(4) 
CERTIFICATION
FOR
BIODIESEL.—No 
credit shall be allowed under this section unless the 
taxpayer obtains a certification (in such form and 
manner as prescribed by the Secretary) from the