[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 907 Introduced in Senate (IS)]
107th CONGRESS
1st Session
S. 907
To amend the Internal Revenue Code of 1986 to encourage the use of
ethanol and the adoption of other forms of value-added agriculture, and
for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 17, 2001
Mrs. Carnahan introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to encourage the use of
ethanol and the adoption of other forms of value-added agriculture, and
for other purposes.
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 ``Investment in Value-Added
Agriculture Act''.
SEC. 2. EXTENSION OF ETHANOL MOTOR FUEL EXCISE TAX EXEMPTION.
(a) In General.--Section 40(e)(1) of the Internal Revenue Code of
1986 (relating to termination) is amended--
(1) in subparagraph (A) by striking ``2007'' and inserting
``2015'', and
(2) in subparagraph (B) by striking ``2008'' and inserting
``2016''.
SEC. 3. SMALL ETHANOL PRODUCER CREDIT.
(a) Allocation of Alcohol Fuels Credit to Patrons of a
Cooperative.--Section 40(g) of the Internal Revenue Code of 1986
(relating to alcohol used as fuel) is amended by adding at the end the
following new paragraph:
``(6) Allocation of small ethanol producer credit to
patrons of cooperative.--
``(A) Election to allocate.--
``(i) In general.--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.
``(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 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) Improvements to Small Ethanol Producer Credit.--
(1) Definition of small ethanol producer.--Section 40(g) of
the Internal Revenue Code of 1986 (relating to definitions and
special rules for eligible small ethanol producer credit) is
amended by striking ``30,000,000'' each place it appears 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 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 new paragraph:
``(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
striking ``(other'' and all that follows through
``credit)'' and inserting ``(other than the empowerment
zone employment credit or the small ethanol producer
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 new
subsection:
``(k) Cross Reference.--For provisions relating to the
apportionment of the alcohol fuels credit between cooperative
organizations and their patrons, see section 40(g)(6).''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 4. CREDIT FOR FARMER INVESTMENT IN VALUE-ADDED AGRICULTURAL
PROPERTY.
(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. 45E. VALUE-ADDED AGRICULTURAL PROPERTY INVESTMENT CREDIT.
``(a) General Rule.--For purposes of section 38, in the case of a
taxpayer who is--
``(1) an eligible person, or
``(2) a farmer-owned entity,
the value-added agricultural property investment credit determined
under this section for any taxable year is 50 percent of the basis of
any qualified value-added agricultural property placed in service
during the taxable year. In the case of a farmer-owned entity, such
credit shall be allocated on a pro rata basis among eligible persons
holding qualified interests in such entity as of the last day of such
taxable year.
``(b) Maximum Credit.--For purposes of subsection (a)--
``(1) Property placed in service by eligible person.--In
the case of property placed in service during a taxable year by
an eligible person, the credit determined under this section
for such year shall not exceed $30,000, reduced by the amount
of the creditable investments allowed for the taxable year
under paragraph (2).
``(2) Property placed in service by farmer-owned entity.--
``(A) In general.--In the case of property placed
in service by a farmer-owned entity, the credit
determined under this section shall not exceed the sum
of the eligible person's creditable investments in such
entity as of the date such property is placed in
service.
``(B) Creditable investments.--For purposes of
subparagraph (A), the term `creditable investments'
means, with respect to any property placed in service
by a farmer-owned entity, the aggregate qualified
investments made by the eligible person in such entity,
reduced (but not below zero) by the sum of--
``(i) the amount of the aggregate qualified
investments made by such person in such entity
which were taken into account under this
section with respect to property previously
placed in service by such entity, and
``(ii) the amount of the aggregate
qualified investments made by such person in
all other farmer-owned entities which were
taken into account under this section with
respect to property previously placed in
service by such other entities.
``(C) Limitation.--For purposes of this paragraph,
the aggregate qualified investments made by the
eligible person which may be taken into account for any
taxable year shall not exceed $30,000.
``(c) Definitions.--For purposes of this section--
``(1) Qualified value-added agricultural property.--The
term `qualified value-added agricultural property' means
property--
``(A) which is used to add value to a good or
product, suitable for food or nonfood use, derived in
whole or in part from organic matter which is available
on a renewable basis, including agricultural crops and
agricultural wastes and residues, wood wastes and
residues, and domesticated animal wastes,
``(B)(i) to which section 168 applies without
regard to any useful life, or
``(ii) with respect to which depreciation (or
amortization in lieu of depreciation) is allowable and
having a useful life (determined as of the time such
property is placed in service) of 3 years or more, and
``(C) which is owned and operated by an eligible
person or a farmer-owned entity.
``(2) Eligible person.--
``(A) In general.--The term `eligible person' means
a person who materially participates during the taxable
year in an eligible farming business.
``(B) Material participation.--For purposes of
subparagraph (A), the determination of whether a person
materially participates in the trade or business of
farming shall be made in a manner similar to the manner
in which such determination is made under section
2032A(e)(6). In the case that the person is a
corporation, cooperative, partnership, estate, or
trust, such determination shall be made at the
shareholder, partner, or beneficial interests level (as
the case may be).
``(C) Eligible farming business.--For purposes of
subparagraph (A), the term `eligible farming business'
means a farming business (as defined in section
263A(e)(4)) which is not a passive activity (within the
meaning of section 469(c)).
``(3) Farmer-owned entity.--
``(A) In general.--The term `farmer-owned entity'
means--
``(i) a corporation (including an S
corporation) in which eligible persons own 50
percent or more of the total voting power of
the stock and 50 percent or more (in value) of the stock,
``(ii) a partnership in which eligible
persons own 50 percent or more of the total
voting power of the profits interest and 50
percent or more (in value) of the profits
interest, and
``(iii) a cooperative in which eligible
persons own 50 percent or more of the total
voting power of the member patronage interests
and 50 percent or more (in value) of the member
patronage interests.
``(B) Constructive ownership rules.--For purposes
of subparagraph (A), rules similar to the rules of
section 263A(e)(2)(B) shall apply; except that, in
applying such rules, the members of an individual's
family shall be the individuals described in
subparagraph (C).
``(C) Members of family.--The family of any
individual shall include only his spouse and children,
grandchildren, and great grandchildren (whether by the
whole or half blood), and the spouses of his children,
grandchildren, and great grandchildren, who reside in
the same household or jointly operate farming
businesses (as defined in section 263A(e)(4)). For
purposes of the preceding sentence, a child who is
legally adopted, or who is placed with the taxpayer by
an authorized placement agency for adoption by the
taxpayer, shall be treated as a child by blood.
``(4) Qualified investments.--
``(A) In general.--The term `qualified investments'
means a payment of cash for the purchase of a qualified
equity interest in a farmer-owned entity.
``(B) Qualified equity interest.--The term
`qualified equity interest' means--
``(i) any stock in a domestic corporation
if such stock is acquired by the taxpayer after
December 31, 2001, and before January 1, 2008,
at its original issue (directly or through an
underwriter) from the corporation solely in
exchange for cash,
``(ii) any capital or profits interest in a
domestic partnership if such interest is
acquired by the taxpayer after December 31,
2001, and before January 1, 2008, and
``(iii) any patronage interest in a
cooperative if such interest is acquired by the
taxpayer after December 31, 2001, and before
January 1, 2008.
Rules similar to the rules of section 1202(c)(3) shall
apply for purposes of this paragraph.
``(d) Special Rules.--For purposes of this section--
``(1) Treatment of married individuals.--In the case of a
separate return by a married individual (as defined in section
7703), subsection (b)(3)(A) shall be applied by substituting
`$15,000' for `$30,000'.
``(2) Applicable rules.--Under regulations prescribed by
the Secretary--
``(A) Allocation of credit in the case of estates
and trusts.--Rules similar to the rules of subsection
(d) of section 52 shall apply.
``(B) Certain property not eligible.--Rules similar
to the rules of section 50(b) shall apply.
``(3) Basis adjustment.--For purposes of this subtitle, if
a credit is allowed under this section to any eligible person
with respect to qualified value-added agricultural property,
the basis of such property shall be reduced by the amount of
the credit so allowed and increased by the amount of recapture
under subsection (e).
``(e) Recapture in the Case of Certain Dispositions.--
``(1) In general.--Under regulations prescribed by the
Secretary, rules similar to the rules of section 50(a) shall
apply with respect to an eligible person if, within the 5-year
period beginning on the date qualified value-added agricultural
property with respect to which such person was allowed a credit
under subsection (a) is originally placed in service--
``(A) such property ceases to be qualified for
purposes of this section,
``(B) the eligible person or the farmer-owned
entity (as the case may be) disposes of all or part of
such property, or
``(C) the eligible person or the farmer-owned
entity (as the case may be) ceases to be an eligible
person or farmer-owned entity for purposes of this
section.
``(2) Special rules in event of death.--
``(A) In general.--The period in paragraph (1)
shall be suspended with respect to an eligible person
for the 2-year period beginning on the date of death of
such person.
``(B) Heirs who are eligible persons.--In the case
that an heir of an eligible person is also an eligible
person, neither paragraph (1) nor subparagraph (A) of
this paragraph (unless elected by such heir) shall
apply with respect to the transfer of property to such
heir.
``(f) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to carry out the purposes of this section.
``(g) Termination.--This section shall not apply to property placed
in service after December 31, 2007.''.
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) of the Internal Revenue Code of 1986 (defining current year
business credit) is amended by striking ``plus'' at the end of
paragraph (12), by striking the period at the end of paragraph (13) and
inserting ``, plus'', and by adding at the end the following new
paragraph:
``(14) in the case of an eligible person (as defined in
section 45E(c)), the value-added agricultural property
investment credit determined under section 45E(a).''.
(c) Credit Allowable Against Minimum Tax.--
(1) In general.--Subsection (c) of section 38 of the
Internal Revenue Code of 1986 is amended by redesignating
paragraph (3) as paragraph (4) and by inserting after paragraph
(2) the following new paragraph:
``(3) Value-added agricultural property investment credit
allowed against minimum tax.--
``(A) In general.--The amount determined under
paragraph (1)(A) shall be reduced by the portion of the
value-added agricultural property investment credit not
used against the normal limitation.
``(B) Portion of value-added agricultural property
investment credit not used against normal limitation.--
For purposes of subparagraph (A), the portion of the
value-added agricultural property investment credit not
used against the normal limitation is the excess (if
any) of--
``(i) the portion of the credit allowable
under subsection (a) which is attributable to
the value-added agricultural property
investment credit, over
``(ii) the limitation of paragraph (1)
(determined without regard to this paragraph)
reduced by the portion of the credit under
subsection (a) which is not so attributable.''.
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) of such Code is amended by inserting ``or the
value-added agricultural property investment credit'' after
``employment credit''.
(d) Limitation on Carryback.--Subsection (d) of section 39 of the
Internal Revenue Code of 1986 is amended by adding at the end thereof
the following new paragraph:
``(10) No carryback of value-added agricultural property
investment credit before effective date.--No portion of the
unused business credit for any taxable year which is
attributable to the credit determined under section 45E may be
carried back to any taxable year ending before the date of the
enactment of section 45E.''.
(e) Deduction for Certain Unused Business Credits.--Subsection (c)
of section 196 of the Internal Revenue Code of 1986 is amended by
striking ``and'' at the end of paragraph (8), by striking the period at
the end of paragraph (9) and inserting ``, and'', and by adding after
paragraph (9) the following new paragraph:
``(10) the value-added agricultural property investment
credit determined under section 45E.''.
(f) Basis Adjustment.--Subsection (a) of section 1016 of the
Internal Revenue Code of 1986 is amended by striking ``and'' at the end
of paragraph (26), by striking the period at the end of paragraph (27)
and inserting ``; and'', and by adding at the end the following new
paragraph:
``(28) to the extent provided in section 45E(d)(3), in the
case of payments with respect to which a credit has been
allowed under section 38.''.
(g) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by adding at the end thereof the following new section:
``Sec. 45E. Value-added agricultural
property investment credit.''.
(h) Effective Date.--The amendments made by this section shall
apply to qualified investments (as defined in section 45E(c)(5) of the
Internal Revenue Code of 1986 (as added by this section) made, and
property placed in service, after December 31, 2001.
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