[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2303 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 2303

  To amend the Internal Revenue Code of 1986 to provide incentives to 
   increase the sale and use of certain ethanol and biodiesel fuels.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 25, 2001

Mr. Lewis of Kentucky 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 provide incentives to 
   increase the sale and use of certain ethanol and biodiesel fuels.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Ethanol and Biodiesel Promotion Act 
of 2001''.

SEC. 2. CREDIT FOR PROPERTY USED IN THE RETAIL SALE, OR BUSINESS USE, 
              OF E85 ETHANOL AND NEAT BIODIESEL.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45G. PROPERTY USED IN THE RETAIL SALE, OR BUSINESS USE, OF E85 
              ETHANOL AND NEAT BIODIESEL.

    ``(a) General Rule.--For purposes of section 38, the E85 ethanol 
and biodiesel credit is an amount equal to 50 percent of the basis of 
qualified fuel property placed in service by the taxpayer during the 
taxable year.
    ``(b) Limitation.--The credit allowed by subsection (a) for any 
taxable year shall not exceed $50,000.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified fuel property.--The term `qualified fuel 
        property' means--
                    ``(A) qualified vehicle refueling property, and
                    ``(B) qualified business use property.
            ``(2) Qualified vehicle refueling property.--The term 
        `qualified vehicle refueling property' means any property which 
        would be qualified clean-fuel vehicle refueling property, as 
        defined in section 179A(d), if the only clean-burning fuel 
        referred to in such section were E85 ethanol and neat 
        biodiesel.
            ``(3) Qualified business use property.--The term `qualified 
        business use property' means any property (not including a 
        building and its structural components) if--
                    ``(A) such property is of a character subject to 
                the allowance for depreciation,
                    ``(B) the original use of such property begins with 
                the taxpayer, and
                    ``(C) such property is used by the taxpayer in the 
                consumption of E85 ethanol or neat biodiesel in a trade 
                of business of the taxpayer.
            ``(4) E85 ethanol.--The term `E85 ethanol' means any fuel 
        at least 85 percent of which is ethanol.
            ``(5) Neat biodiesel.--The term `neat biodiesel' means 
        diesel fuel at least 85 percent of which is produced from a 
        substance other than petroleum.
    ``(d) Termination.--This section shall not apply to any property 
placed in service after December 31, 2007.''.
    (b) Conforming Amendments.--
            (1) Section 38(b) of such Code is amended by striking 
        ``plus'' at the end of paragraph (14), by striking the period 
        at the end of paragraph (15) and inserting ``, plus'', and by 
        adding at the end the following:
            ``(16) the E85 ethanol and biodiesel credit determined 
        under section 45G.''.
            (2) Section 39(d) of such Code (relating to transitional 
        rules) is amended by adding at the end the following:
            ``(11) No carryback of section 45g credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the credit determined under 
        section 45G(a) may be carried back to a taxable year ending 
        before January 1, 2001.''.
            (3) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following:

                              ``Sec. 45G. Property used in the retail 
                                        sale, or business use, of E85 
                                        ethanol and neat biodiesel.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

SEC. 3. CREDIT FOR RETAIL SALE OF E85 ETHANOL AND NEAT BIODIESEL AS 
              MOTOR VEHICLE FUEL.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45H. RETAIL SALE OF E85 ETHANOL AND NEAT BIODIESEL AS MOTOR 
              VEHICLE FUEL.

    ``(a) General Rule.--For purposes of section 38, the E85 ethanol 
and biodiesel retail sales credit of any taxpayer for any taxable year 
is the credit amount for each gasoline gallon equivalent of E85 ethanol 
and neat biodiesel sold at retail by the taxpayer during such year as a 
fuel to propel any qualified motor vehicle.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Credit amount.--The term `credit amount' means--
                    ``(A) in the case of E85 ethanol, the excess of 60 
                cents over the blender amount applicable under section 
                40(h) for the calendar year in which the sale occurs, 
                and
                    ``(B) in the case of neat biodiesel, 25 cents.
            ``(2) E85 ethanol and neat biodiesel.--The terms `E85 
        ethanol' and `neat biodiesel' have the respective meanings 
        given such terms by section 45G.
            ``(3) Gasoline gallon equivalent.--The term `gasoline 
        gallon equivalent' means, with respect to any alternative fuel, 
the amount (determined by the Secretary) of such fuel having a Btu 
content of 114,000.
            ``(4) Qualified motor vehicle.--The term `qualified motor 
        vehicle' means any motor vehicle (as defined in section 
        179A(e)(2)) which meets any applicable Federal or State 
        emissions standards with respect to each fuel by which such 
        vehicle is designed to be propelled.
            ``(5) Sold at retail.--
                    ``(A) In general.--The term `sold at retail' means 
                the sale, for a purpose other than resale, after 
                manufacture, production, or importation.
                    ``(B) Use treated as sale.--If any person uses E85 
                ethanol or neat biodiesel as a fuel to propel any 
                qualified motor vehicle (including any use after 
                importation) before such fuel is sold at retail, then 
                such use shall be treated in the same manner as if such 
                fuel were sold at retail as a fuel to propel such a 
                vehicle by such person.
    ``(c) No Double Benefit.--The amount of any deduction or credit 
allowable under this chapter for any fuel taken into account in 
computing the amount of the credit determined under subsection (a) 
shall be reduced by the amount of such credit attributable to such 
fuel.
    ``(d) 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.
    ``(e) Termination.--This section shall not apply to any fuel sold 
at retail after December 31, 2007.''.
    (b) Conforming Amendments.--
            (1) Section 38(b) of such Code is amended by striking 
        ``plus'' at the end of paragraph (15), by striking the period 
        at the end of paragraph (16) and inserting ``, plus'', and by 
        adding at the end the following:
            ``(17) the E85 ethanol and biodiesel retail sales credit 
        determined under section 45H.''.
            (2) Section 39(d) of such Code (relating to transitional 
        rules) is amended by adding at the end the following:
            ``(12) No carryback of section 45h credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the credit determined under 
        section 45H(a) may be carried back to a taxable year ending 
        before January 1, 2001.''.
            (3) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following:

                              ``Sec. 45G. Retail sale of E85 ethanol 
                                        and neat biodiesel as motor 
                                        vehicle fuel.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to fuel sold at retail after December 31, 2001, in taxable years 
ending after such date.

SEC. 4. SMALL ETHANOL PRODUCER CREDIT.

    (a) Allocation of Alcohol Fuels Credit to Patrons of a 
Cooperative.--Section 40(g) Internal Revenue Code of 1986 (relating to 
definitions and special rules for eligible small ethanol producer 
credit) is amended by adding at the end the following:
            ``(6) Allocation of small ethanol producer credit to 
        patrons of cooperative.--
                    ``(A) Election to allocate.--
                            ``(i) In general.--Notwithstanding 
                        paragraph (4), in the case of a cooperative 
                        organization described in section 1381(a), any 
                        portion of the credit determined under 
                        subsection (a)(3) for the taxable year may, at 
                        the election of the organization, 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 election.--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.
                            ``(iii) Special rule for taxable years 
                        prior to enactment of paragraph.--
                        Notwithstanding clause (ii), an election for 
                        any taxable year ending prior to the date of 
                        the enactment of this paragraph may be made at 
                        any time before the expiration of the 3-year 
                        period beginning on the last date prescribed by 
                        law for filing the return of the taxpayer for 
                        such taxable year (determined without regard to 
                        extensions) by filing an amended return for 
                        such year.
                    ``(B) Treatment of organizations and patrons.--The 
                amount of the credit apportioned 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,
                            ``(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, 
                        and
                            ``(iii) shall be included in gross income 
                        of such patrons for the taxable year in the 
                        manner and to the extent provided in section 
                        87.
                    ``(C) Special rules for decrease in credits for 
                taxable year.--If the amount of the credit of a 
                cooperative organization (as so defined) determined 
                under subsection (a)(3) for a taxable year is less than 
                the amount of such credit shown on the return of the 
                cooperative organization for such year, an amount equal 
                to the excess of--
                            ``(i) such reduction, over
                            ``(ii) the amount not apportioned to such 
                        patrons under subparagraph (A) for the taxable 
                        year,
                shall be treated as an increase in tax imposed by this 
                chapter on the organization. Such increase shall not be 
                treated as tax imposed by this chapter for purposes of 
                determining the amount of any credit under this subpart 
                or subpart A, B, E, or G.''.
    (b) Definition of Small Ethanol Producer; Improvements to Small 
Ethanol Producer 
Credit.--
            (1) Definition of small ethanol producer.--Section 40(g)(1) 
        of the Internal Revenue Code of 1986 (relating to eligible 
        small ethanol producer) is amended by striking ``30,000,000'' 
        and inserting ``60,000,000''.
            (2) Small ethanol producer credit not a passive activity 
        credit.--Clause (i) of section 469(d)(2)(A) of such Code 
        (relating to passive activity credit) is amended by striking 
        ``subpart D'' and inserting ``subpart D, other than section 
        40(a)(3),''.
            (3) Allowing credit against minimum tax.--
                    (A) In general.--Subsection (c) of section 38 of 
                such Code (relating to limitation based on amount of 
                tax) is amended by redesignating paragraph (3) as 
                paragraph (4) and by inserting after paragraph (2) the 
                following:
            ``(3) Special rules for small ethanol producer credit.--
                    ``(A) In general.--In the case of the small ethanol 
                producer credit--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to the credit, 
                        and
                            ``(ii) in applying paragraph (1) to the 
                        credit--
                                    ``(I) subparagraphs (A) and (B) 
                                thereof shall not apply, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the small 
                                ethanol producer credit).
                    ``(B) Small ethanol producer credit.--For purposes 
                of this subsection, the term `small ethanol producer 
                credit' means the credit allowable under subsection (a) 
                by reason of section 40(a)(3).''.
                    (B) Conforming amendment.--Subclause (II) of 
                section 38(c)(2)(A)(ii) of such Code is amended by 
                inserting ``or the small ethanol producer credit'' 
                after ``employment credit''.
            (4) Small ethanol producer credit not added back to income 
        under section 87.--Section 87 of such Code (relating to income 
        inclusion of alcohol fuel credit is amended to read as follows:

``SEC. 87. ALCOHOL FUEL CREDIT.

    ``Gross income includes an amount equal to the sum of--
            ``(1) the amount of the alcohol mixture credit determined 
        with respect to the taxpayer for the taxable year under section 
        40(a)(1), and
            ``(2) the alcohol credit determined with respect to the 
        taxpayer for the taxable year under section 40(a)(2).''.
    (c) Conforming Amendment.--Section 1388 of the Internal Revenue 
Code of 1986 (relating to definitions and special rules for cooperative 
organizations) is amended by adding at the end the following:
    ``(k) Cross Reference.--For provisions relating to the 
apportionment of the alcohol fuels credit between cooperative 
organizations and their patrons, see section 40(d)(6).''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

SEC. 5. EXTENSION OF EXPENSING OF VEHICLE REFUELING PROPERTY FOR E85 
              ETHANOL.

    Subsection (f) of section 179A of the Internal Revenue Code of 1986 
(relating to termination) is amended by inserting before the period 
``(December 31, 2007, for property which is qualified clean-fuel 
vehicle refueling property with respect to fuel at least 85 percent of 
which is ethanol)''.

SEC. 6. REPEAL OF LIMITATION ON DEPOSITS INTO HIGHWAY TRUST FUND WITH 
              RESPECT TO ALCOHOL FUELS.

    (a) In General.--Paragraph (4) of section 9503(b) of the Internal 
Revenue Code of 1986 (relating to certain taxes not transferred to 
Highway Trust Fund) 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).
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxes received in the Treasury after December 31, 2001.
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