Reform and extension of biodiesel tax incentives

(a)

Income tax credit

(1)

In general

So much of section 40A of the Internal Revenue Code as precedes subsection (c) is amended to read as follows:

40A.

Biodiesel fuels credit

(a)

In general

For purposes of section 38, the biodiesel fuels credit determined under this section for the taxable year is $1.00 for each gallon of biodiesel produced by the taxpayer which during the taxable year— (1)is sold by the taxpayer to another person— (A)for use by such other person’s trade or business as a fuel or in the production of a qualified biodiesel mixture (other than casual off-farm production), or (B)who sells such biodiesel at retail to another person and places such biodiesel in the fuel tank of such other person, or (2)is used by such taxpayer for any purpose described in paragraph (1). (b)

Increased credit for small producers

(1)

In general

In the case of any eligible small biodiesel producer, subsection (a) shall be applied by increasing the dollar amount contained therein by 10 cents. (2)

Limitation

Paragraph (1) shall only apply with respect to the first 15,000,000 gallons of biodiesel produced by any eligible small biodiesel producer during any taxable year.

(2)

Definitions and special rules

Section 40A(d) of such Code is amended by striking all that follows paragraph (1) and inserting the following:

(2)

Qualified biodiesel mixture; biodiesel mixture

(A)

Qualified biodiesel mixture

(i)

In general

The term qualified biodiesel mixture means a biodiesel mixture which is— (I)sold by the producer of such mixture to any person for use as a fuel, or (II)used by the producer of such mixture as a fuel. (ii)

Sale or use must be in trade or business, etc

A biodiesel mixture shall not be treated as a qualified biodiesel mixture unless the sale or use described in clause (i) is in a trade or business of the person producing the biodiesel mixture. (B)

Biodiesel mixture

The term biodiesel mixture means a mixture which consists of biodiesel and diesel fuel (as defined in section 4083(a)(3)), determined without regard to any use of kerosene. (3)

Biodiesel not used for a qualified purpose

If— (A)any credit was determined with respect to any biodiesel under this section, and (B)any person uses such biodiesel for a purpose not described in subsection (a),

then there is hereby imposed on such person a tax equal to the product of the rate applicable under subsection (a) and the number of gallons of such biodiesel.

(4)

Pass-thru in the case of estates and trusts

Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply. (5)

Limitation to biodiesel with connection to the united states

(A)

In general

No credit shall be determined under subsection (a) with respect to biodiesel unless such biodiesel is produced in the United States from qualified feedstocks. For purposes of this paragraph, the term United States includes any possession of the United States. (B)

Qualified feedstocks

For purposes of subparagraph (A), the term qualified feedstock means any feedstock which is allowable for a fuel that is assigned a D code of 4 under section 80.1426(f) of title 40, Code of Federal Regulations.

(3)

Rules for small biodiesel producers

(A)

In general

Section 40A(e) of such Code is amended— (i)by striking agri-biodiesel each place it appears in paragraphs (1) and (5)(A) and inserting biodiesel, (ii)by striking subsection (b)(4)(C) each place it appears in paragraphs (2) and (3) and inserting subsection (b)(2), and (iii)by striking subsection (a)(3) each place it appears in paragraphs (5)(A), (6)(A)(i), and (6)(B)(i) and inserting subsection (b). (B)The heading for subsection (e) of section 40A of such Code is amended by striking

agri-biodiesel

and inserting

biodiesel

. (C)The headings for paragraphs (1) and (6) of section 40A(e) of such Code are each amended by striking

agri-biodiesel

and inserting

biodiesel

. (4)

Renewable diesel

(A)

In general

Paragraph (3) of section 40A(f) of such Code is amended to read as follows:

(3)

Renewable diesel defined

(A)

In general

The term renewable diesel means liquid fuel derived from biomass which— (i)is not a mono-alkyl ester, (ii)can be used in engines designed to operate on conventional diesel fuel, and (iii)meets the requirements for any Grade No. 1–D fuel or Grade No. 2–D fuel covered under the American Society for Testing and Materials specification D–975–13a. (B)

Exceptions

Such term shall not include— (i)any liquid with respect to which a credit may be determined under section 40, (ii)any fuel derived from coprocessing biomass with a feedstock which is not biomass, or (iii)any fuel that is not chemically equivalent to petroleum diesel fuels that can meet fuel quality specifications applicable to diesel fuel, gasoline, or aviation fuel. (C)

Biomass

For purposes of this paragraph, the term biomass has the meaning given such term by section 45K(c)(3).

(B)

Conforming amendments

Section 40A(f) of such Code is amended— (i)by striking Subsection (b)(4) in paragraph (2) and inserting Subsection (b), and (ii)by striking paragraph (4) and inserting the following:

(4)

Certain aviation fuel

Except as provided paragraph (3)(B), the term renewable diesel shall include fuel derived from biomass which meets the requirements of a Department of Defense specification for military jet fuel or an American Society for Testing and Materials specification for aviation turbine fuel.

(5)

Extension

Subsection (g) of section 40A of such Code is amended by striking December 31, 2016 and inserting December 31, 2020. (6)

Clerical amendment

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 40A and inserting the following new item:

Sec. 40A. Biodiesel fuels credit.

(b)

Excise tax credit

(1)

Reform

Subsection (c) of section 6426 of the Internal Revenue Code of 1986 is amended to read as follows:

(c)

Biodiesel production credit

(1)

In general

For purposes of this section, the biodiesel production credit is $1.00 for each gallon of biodiesel produced by the taxpayer and which— (A)is sold by such taxpayer to another person— (i)for use by such other person’s trade or business as a fuel or in the production of a qualified biodiesel mixture (other than casual off-farm production), or (ii)who sells such biodiesel at retail to another person and places such biodiesel in the fuel tank of such other person, or (B)is used by such taxpayer for any purpose described in subparagraph (A). (2)

Definitions

Any term used in this subsection which is also used in section 40A shall have the meaning given such term by section 40A. (3)

Termination

This subsection shall not apply to any sale, use, or removal after December 31, 2020.

(2)

Producer registration requirement

Subsection (a) of section 6426 of such Code is amended by striking subsections (d) and (e) in the flush sentence at the end and inserting subsections (c), (d), and (e). (3)

Recapture

(A)

In general

Subsection (f) of section 6426 of such Code is amended— (i)by striking or biodiesel each place it appears in subparagraphs (A) and (B)(i) of paragraph (1), (ii)by striking or biodiesel mixture in paragraph (1)(A), and (iii)by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following new paragraph:

(2)

Biodiesel

If any credit was determined under this section or paid pursuant to section 6427(e) with respect to the production of any biodiesel and any person uses such biodiesel for a purpose not described in subsection (c)(1), then there is hereby imposed on such person a tax equal to $1 for each gallon of such biodiesel.

(B)

Conforming amendments

(i)Paragraph (3) of section 6426(f) of such Code, as redesignated by subparagraph (A)(iii), is amended by inserting or (2) after paragraph (1). (ii)The heading for paragraph (1) of section 6426(f) of such Code is amended by striking

Imposition of tax

and inserting

In general

. (4)

Limitation

Section 6426(i) of such Code is amended— (A)in paragraph (2)— (i)by striking biodiesel or, and (ii)by striking

Biodiesel and

in the heading, and (B)by inserting after paragraph (2) the following new paragraph:

(3)

Biodiesel

No credit shall be determined under subsection (a) with respect to biodiesel unless such biodiesel is produced in the United States from qualified feedstocks (as defined in section 40A(d)(5)(B)).

(5)

Clerical amendments

(A)The heading of section 6426 of such Code is amended by striking

alcohol fuel, biodiesel, and alternative fuel mixtures

and inserting

alcohol fuel mixtures, biodiesel production, and alternative fuel mixtures

. (B)The item relating to section 6426 in the table of sections for subchapter B of chapter 65 of such Code is amended by striking alcohol fuel, biodiesel, and alternative fuel mixtures and inserting alcohol fuel mixtures, biodiesel production, and alternative fuel mixtures. (c)

Excise payments

Subsection (e) of section 6427 of the Internal Revenue Code of 1986 is amended— (1)by striking or the biodiesel mixture credit in paragraph (1); (2)by redesignating paragraphs (3) through (6) as paragraphs (4) through (7), respectively, and by inserting after paragraph (2) the following new paragraph:

(3)

Biodiesel production credit

If any person produces biodiesel and sells or uses such biodiesel as provided in section 6426(c)(1), the Secretary shall pay (without interest) to such person an amount equal to the biodiesel production credit with respect to such biodiesel.

;

(3)by striking paragraph (1) or (2) each place it appears in paragraphs (4) and (6), as redesignated by paragraph (2), and inserting paragraph (1), (2), or (3); (4)by striking alternative fuel each place it appears in paragraphs (4) and (6), as redesignated by paragraph (2), and inserting fuel; and (5)in paragraph (7)(B), as redesignated by paragraph (2)— (A)by striking biodiesel mixture (as defined in section 6426(c)(3)) and inserting biodiesel (within the meaning of section 40A); and (B)by striking December 31, 2016 and inserting December 31, 2020. (d)

Guidance

Not later than 30 days after the date of the enactment of this Act, the Secretary of the Treasury, or the Secretary's delegate, shall issue preliminary guidance with respect to the amendments made by this section. (e)

Effective date

The amendments made by this section shall apply to fuel sold or used after December 31, 2016. (f)

Special rule for 2017

Notwithstanding any other provision of law, in the case of any biodiesel mixture credit properly determined under section 6426(c) of the Internal Revenue Code of 1986 for period beginning after December 31, 2016, and ending before the date of the enactment of this Act, such credit shall be allowed, and any refund or payment attributable to such credit (including any payment under section 6427(e) of such Code) shall be made, only in such manner as the Secretary of the Treasury (or the Secretary's delegate) shall provide. Such Secretary shall issue guidance within 30 days after the date of the enactment of this Act providing for a one- time submission of claims covering periods described in the preceding sentence. Such guidance shall provide for a 180-day period for the submission of such claims (in such manner as prescribed by such Secretary) to begin not later than 30 days after such guidance is issued. Such claims shall be paid by such Secretary not later than 60 days after receipt. If such Secretary has not paid pursuant to a claim filed under this subsection within 60 days after the date of the filing of such claim, the claim shall be paid with interest from such date determined by using the overpayment rate and method under section 6621 of such Code.