[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 446 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 446

 To amend the Internal Revenue Code of 1986 to eliminate tax subsidies 
                           for ethanol fuel.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            February 2, 1999

 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 Representatives of the 
United States of America in Congress assembled,

SECTION 1. ELIMINATION OF TAX SUBSIDIES FOR ETHANOL 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 (relating to alcohol used as fuel).
            (2) Clerical and conforming amendments.--
                    (A) Subsection (b) of section 38 of such Code 
                (relating to general business credit) is amended by 
                striking paragraph (3) and by redesignating paragraphs 
                (4) through (12) as paragraphs (3) through (11), 
                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 subparagraph (A), by 
                striking the period at the end of subparagraph (B) and 
                inserting ``, and'', and by adding at the end the 
                following new subparagraph:
                    ``(C) the credit allowable by section 40, as in 
                effect on the day before the date of the enactment of 
                this subparagraph (relating to alcohol 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 reason 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.
                    (D)(i) Part II of subchapter B of chapter 1 of such 
                Code is amended by striking section 87 (relating to 
                alcohol fuel credit).
                    (ii) The table of sections for part II of 
                subchapter B of chapter 1 of such Code is amended by 
                striking the item relating to section 87.
                    (iii) Subsection (a) of section 56 of such Code 
                (relating to adjustments in computing alternative 
                minimum taxable income) is amended by striking 
                paragraph (7) (relating to section 87 not applicable).
                    (E) Subsection (c) of section 196 of such Code 
                (relating to qualified business credits) is amended by 
                striking paragraph (3) and redesignating paragraphs (4) 
                through (8) as paragraphs (3) through (7), 
                respectively.
                    (F) Section 6501(m) of such Code (relating to 
                deficiencies attributable to election of certain 
                credits) is amended by striking ``40(f),''.
    (b) Reductions of Other Incentives for Ethanol Fuel.--
            (1) Repeal of reduced rate on ethanol fuel not produced 
        from petroleum or natural gas.--Subsection (b) of section 4041 
        of such Code is amended to read as follows:
    ``(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 business 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-highway 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 ``shall be--'' and all that 
                follows and inserting ``shall be 9.15 cents per gallon, 
                and''.
                    (C) Clause (ii) of section 4041(m)(1)(A) of such 
                Code is amended by striking ``shall be--'' and all that 
                follows and inserting ``shall be 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 ethanol)'' 
                        after ``alcohol''.
    (c) Tax of Fuel Alcohol To Same Extent as Other Motor Fuels.--
            (1) Treatment as taxable fuel.--Paragraph (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.--Subsection (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 methanol)--
                    ``(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 alcohol.--In the case 
                of fuel alcohol--
                            ``(i) the distillery where produced shall 
                        be treated as a refinery, and
                            ``(ii) subparagraph (B) shall be applied 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 
                        alcohol'' 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 imposed 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).
                    (D) Paragraph (2) of section 6427(k) of such Code 
                is amended by striking ``(3),''.
                    (E)(i) Paragraph (1) of section 6427(l) of such 
                Code is amended by striking ``or'' at the end of 
                subparagraph (A), by redesignating subparagraph (B) as 
                subparagraph (C), and by inserting after subparagraph 
                (A) the following new subparagraph:
                    ``(B) any fuel alcohol (as defined in section 4083) 
                on which tax has been imposed by section 4041 or 4081, 
                or''.
                    (ii) Paragraph (2) of section 6427(l) of such Code 
                is amended by striking ``and'' at the end of 
                subparagraph (A), by redesignating subparagraph (B) as 
                subparagraph (C), and by inserting after subparagraph 
                (A) the following new subparagraph:
                    ``(B) in the case of fuel alcohol (as so defined), 
                any use which is exempt from the tax imposed by section 
4041(a)(2) other than by reason of a prior imposition of tax, and''.
                    (iii) The heading of subsection (l) of section 6427 
                of such Code is amended by inserting ``, Fuel 
                Alcohol,'' after ``Kerosene''.
                    (F) Sections 9503(b)(1)(D) and 9508(b)(2) of such 
                Code are each amended by striking ``and kerosene'' and 
                inserting ``kerosene, and fuel alcohol''.
                    (G) Subsection (e) of section 9502 of such Code is 
                amended by striking paragraph (2).
                    (H) Paragraph (4) of section 9503(b) of such Code 
                is amended by adding ``and'' at the end of subparagraph 
                (C), by striking the comma at the end of subparagraph 
                (D) and inserting a period, and by striking 
                subparagraphs (E) and (F).
                    (I) Subsection (b) of section 9503 of such Code is 
                amended by striking paragraph (5) and by redesignating 
                paragraph (6) as paragraph (5).
    (d) Effective Dates.--
            (1) General rule.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on the date 
        of the enactment of this Act.
            (2) Elimination of section 40 credit.--The amendments made 
        by subsection (a) shall apply to alcohol produced after the 
        date of the enactment of this Act.
    (e) Floor Stock Taxes.--
            (1) Imposition of tax.--In the case of fuel alcohol which 
        is held on the date of the enactment of this Act by any person, 
        there is hereby imposed a floor stocks tax of 18.4 cents per 
        gallon.
            (2) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding fuel 
                alcohol on the date of the enactment of this Act to 
                which the tax imposed by paragraph (1) applies shall be 
                liable for such tax.
                    (B) Method of payment.--The tax imposed by 
                paragraph (1) shall be paid in such manner as the 
                Secretary shall prescribe.
                    (C) Time for payment.--The tax imposed by paragraph 
                (1) shall be paid on or before the date which is 6 
                months after the date of the enactment of this Act.
            (3) Definitions.--For purposes of this subsection--
                    (A) Fuel alcohol.--The term ``fuel alcohol'' has 
                the meaning given such term by section 4083 of the 
                Internal Revenue Code of 1986, as amended by this 
                section.
                    (B) Held by a person.--Fuel alcohol shall be 
                considered as ``held by a person'' if title thereto has 
                passed to such person (whether or not delivery to the 
                person has been made).
                    (C) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or his delegate.
            (4) Exception for exempt uses.--The tax imposed by 
        paragraph (1) shall not apply to fuel alcohol held by any 
        person exclusively for any use to the extent a credit or refund 
        of the tax imposed by section 4081 of the Internal Revenue Code 
        of 1986 is allowable for such use.
            (5) Exception for fuel held in vehicle tank.--No tax shall 
        be imposed by paragraph (1) on fuel alcohol held in the tank of 
        a motor vehicle or motorboat.
            (6) Exception for certain amounts of fuel.--
                    (A) In general.--No tax shall be imposed by 
                paragraph (1) on fuel alcohol held on the date of the 
                enactment of this Act by any person if the aggregate 
                amount of fuel alcohol held by such person on such date 
                does not exceed 2,000 gallons. The preceding sentence 
                shall apply only if such person submits to the 
                Secretary (at the time and in the manner required by 
                the Secretary) such information as the Secretary shall 
                require for purposes of this paragraph.
                    (B) Exempt fuel.--For purposes of subparagraph (A), 
                there shall not be taken into account fuel held by any 
                person which is exempt from the tax imposed by 
                paragraph (1) by reason of paragraph (4) or (5).
                    (C) Controlled groups.--For purposes of this 
                paragraph--
                            (i) Corporations.--
                                    (I) In general.--All persons 
                                treated as a controlled group of 
                                corporations shall be treated as 1 
                                person.
                                    (II) Controlled group of 
                                corporations.--The term ``controlled 
                                group of corporations'' has the meaning 
                                given to such term by subsection (a) of 
                                section 1563 of such Code; except that 
                                for such purposes the phrase ``more 
                                than 50 percent'' shall be substituted 
                                for the phrase ``at least 80 percent'' 
                                each place it appears in such 
                                subsection.
                            (ii) Nonincorporated persons under common 
                        control.--Under regulations prescribed by the 
                        Secretary, principles similar to the principles 
                        of clause (i) shall apply to a group of persons 
                        under common control where 1 or more of such 
                        persons is not a corporation.
            (7) Other laws applicable.--All provisions of law, 
        including penalties, applicable with respect to the taxes 
        imposed by section 4081 of such Code shall, insofar as 
        applicable and not inconsistent with the provisions of this 
        subsection, apply with respect to the floor stock taxes imposed 
        by paragraph (1) to the same extent as if such taxes were 
        imposed by such section 4081.
                                 <all>