[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2110 Introduced in Senate (IS)]







108th CONGRESS
  2d Session
                                S. 2110

To amend the Internal Revenue Code of 1986 to extend the Highway Trust 
   Fund provisions through March 31, 2004, and to add the volumetric 
       ethanol excise tax credit (VEETC), and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 24, 2004

  Mr. Grassley (for himself and Mr. Baucus) 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 extend the Highway Trust 
   Fund provisions through March 31, 2004, and to add the volumetric 
       ethanol excise tax credit (VEETC), 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 ``Surface Transportation Extension Act 
of 2004''.

SEC. 2. EXTENSION OF AUTHORIZATION FOR USE OF TRUST FUNDS FOR 
              OBLIGATIONS UNDER TEA-21.

    (a) Highway Trust Fund.--
            (1) In general.--Paragraph (1) of section 9503(c) of the 
        Internal Revenue Code of 1986 is amended--
                    (A) in the matter before subparagraph (A), by 
                striking ``March 1, 2004'' and inserting ``April 1, 
                2004'',
                    (B) by striking ``or'' at the end of subparagraph 
                (E),
                    (C) by striking the period at the end of 
                subparagraph (F) and inserting ``, or'',
                    (D) by inserting after subparagraph (F), the 
                following new subparagraph:
                    ``(G) authorized to be paid out of the Highway 
                Trust Fund under the Surface Transportation Extension 
                Act of 2004.'', and
                    (E) in the matter after subparagraph (G), as added 
                by this paragraph, by striking ``Surface Transportation 
                Extension Act of 2003'' and inserting ``Surface 
                Transportation Extension Act of 2004''.
            (2) Mass transit account.--Paragraph (3) of section 9503(e) 
        of such Code is amended--
                    (A) in the matter before subparagraph (A), by 
                striking ``March 1, 2004'' and inserting ``April 1, 
                2004'',
                    (B) in subparagraph (C), by striking ``or'' at the 
                end of such subparagraph,
                    (C) in subparagraph (D), by inserting ``or'' at the 
                end of such subparagraph,
                    (D) by inserting after subparagraph (D) the 
                following new subparagraph:
                    ``(E) the Surface Transportation Extension Act of 
                2004,'', and
                    (E) in the matter after subparagraph (E), as added 
                by this paragraph, by striking ``Surface Transportation 
                Extension Act of 2003'' and inserting ``Surface 
                Transportation Extension Act of 2004''.
            (3) Exception to limitation on transfers.--Subparagraph (B) 
        of section 9503(b)(5) of such Code is amended by striking 
        ``March 1, 2004'' and inserting ``April 1, 2004''.
    (b) Aquatic Resources Trust Fund.--
            (1) Sport fish restoration account.--Paragraph (2) of 
        section 9504(b) of the Internal Revenue Code of 1986 is amended 
        by striking ``Surface Transportation Extension Act of 2003'' 
        each place it appears and inserting ``Surface Transportation 
        Extension Act of 2004''.
            (2) Boat safety account.--Subsection (c) of section 9504 of 
        such Code is amended--
                    (A) by striking ``March 1, 2004'' and inserting 
                ``April 1, 2004'', and
                    (B) by striking ``Surface Transportation Extension 
                Act of 2003'' and inserting ``Surface Transportation 
                Extension Act of 2004''.
            (3) Exception to limitation on transfers.--Paragraph (2) of 
        section 9504(d) of such Code is amended by striking ``March 1, 
        2004'' and inserting ``April 1, 2004''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.
    (d) Temporary Rule Regarding Adjustments.--During the period 
beginning on the date of the enactment of the Surface Transportation 
Extension Act of 2003 and ending on March 31, 2004, for purposes of 
making any estimate under section 9503(d) of the Internal Revenue Code 
of 1986 of receipts of the Highway Trust Fund, the Secretary of the 
Treasury shall treat--
            (1) each expiring provision of paragraphs (1) through (4) 
        of section 9503(b) of such Code which is related to 
        appropriations or transfers to such Fund to have been extended 
        through the end of the 24-month period referred to in section 
        9503(d)(1)(B) of such Code, and
            (2) with respect to each tax imposed under the sections 
        referred to in section 9503(b)(1) of such Code, the rate of 
        such tax during the 24-month period referred to in section 
        9503(d)(1)(B) of such Code to be the same as the rate of such 
        tax as in effect on the date of the enactment of the Surface 
        Transportation Extension Act of 2003.

SEC. 3. ALCOHOL AND BIODIESEL EXCISE TAX CREDIT AND EXTENSION OF 
              ALCOHOL FUELS INCOME TAX CREDIT.

    (a) In General.--Subchapter B of chapter 65 of the Internal Revenue 
Code of 1986 (relating to rules of special application) is amended by 
inserting after section 6425 the following new section:

``SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL MIXTURES.

    ``(a) Allowance of Credits.--There shall be allowed as a credit 
against the tax imposed by section 4081 an amount equal to the sum of--
            ``(1) the alcohol fuel mixture credit, plus
            ``(2) the biodiesel mixture credit.
    ``(b) Alcohol Fuel Mixture Credit.--
            ``(1) In general.--For purposes of this section, the 
        alcohol fuel mixture credit is the product of the applicable 
        amount and the number of gallons of alcohol used by the 
        taxpayer in producing any alcohol fuel mixture for sale or use 
        in a trade or business of the taxpayer.
            ``(2) Applicable amount.--For purposes of this subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the applicable amount is 52 cents (51 
                cents in the case of any sale or use after 2004).
                    ``(B) Mixtures not containing ethanol.--In the case 
                of an alcohol fuel mixture in which none of the alcohol 
                consists of ethanol, the applicable amount is 60 cents.
            ``(3) Alcohol fuel mixture.--For purposes of this 
        subsection, the term `alcohol fuel mixture' means a mixture of 
        alcohol and a taxable fuel which--
                    ``(A) is sold by the taxpayer producing such 
                mixture to any person for use as a fuel,
                    ``(B) is used as a fuel by the taxpayer producing 
                such mixture, or
                    ``(C) is removed from the refinery by a person 
                producing such mixture.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Alcohol.--The term `alcohol' includes 
                methanol and ethanol but does not include--
                            ``(i) alcohol produced from petroleum, 
                        natural gas, or coal (including peat), or
                            ``(ii) alcohol with a proof of less than 
                        190 (determined without regard to any added 
                        denaturants).
                Such term also includes an alcohol gallon equivalent of 
                ethyl tertiary butyl ether or other ethers produced 
                from such alcohol.
                    ``(B) Taxable fuel.--The term `taxable fuel' has 
                the meaning given such term by section 4083(a)(1).
            ``(5) Termination.--This subsection shall not apply to any 
        sale, use, or removal for any period after December 31, 2010.
    ``(c) Biodiesel Mixture Credit.--
            ``(1) In general.--For purposes of this section, the 
        biodiesel mixture credit is the product of the applicable 
        amount and the number of gallons of biodiesel used by the 
        taxpayer in producing any biodiesel mixture for sale or use in 
        a trade or business of the taxpayer.
            ``(2) Applicable amount.--For purposes of this subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the applicable amount is 50 cents.
                    ``(B) Amount for agri-biodiesel.--In the case of 
                any biodiesel which is agri-biodiesel, the applicable 
                amount is $1.00.
            ``(3) Biodiesel mixture.--For purposes of this section, the 
        term `biodiesel mixture' means a mixture of biodiesel and 
        diesel fuel (as defined in section 4083(a)(3)), determined 
        without regard to any use of kerosene, which--
                    ``(A) is sold by the taxpayer producing such 
                mixture to any person for use as a fuel,
                    ``(B) is used as a fuel by the taxpayer producing 
                such mixture, or
                    ``(C) is removed from the refinery by a person 
                producing such mixture.
            ``(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 producer of the biodiesel which identifies 
        the product produced and the percentage of biodiesel and agri-
        biodiesel in the product.
            ``(5) Other definitions.--Any term used in this subsection 
        which is also used in section 40A shall have the meaning given 
        such term by section 40A.
            ``(6) Termination.--This subsection shall not apply to any 
        sale, use, or removal for any period after December 31, 2006.
    ``(d) Mixture Not Used as a Fuel, etc.--
            ``(1) Imposition of tax.--If--
                    ``(A) any credit was determined under this section 
                with respect to alcohol or biodiesel used in the 
                production of any alcohol fuel mixture or biodiesel 
                mixture, respectively, and
                    ``(B) any person--
                            ``(i) separates the alcohol or biodiesel 
                        from the mixture, or
                            ``(ii) without separation, uses the mixture 
                        other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to the product of the applicable amount and the number 
                of gallons of such alcohol or biodiesel.
            ``(2) Applicable laws.--All provisions of law, including 
        penalties, shall, insofar as applicable and not inconsistent 
        with this section, apply in respect of any tax imposed under 
        paragraph (1) as if such tax were imposed by section 4081 and 
        not by this section.
    ``(e) Coordination With Exemption From Excise Tax.--Rules similar 
to the rules under section 40(c) shall apply for purposes of this 
section.''.
    (b) Registration Requirement.--Section 4101(a) of the Internal 
Revenue Code of 1986 (relating to registration) is amended by inserting 
``and every person producing or importing biodiesel (as defined in 
section 40A(d)(1)) or alcohol (as defined in section 6426(b)(4)(A))'' 
after ``4081''.
    (c) Additional Amendments.--
            (1) Section 40(c) of the Internal Revenue Code of 1986 is 
        amended by striking ``section 4081(c), or section 4091(c)'' and 
        inserting ``section 4091(c), section 6426, section 6427(e), or 
        section 6427(f)''.
            (2) Section 40(d)(4)(B) of such Code is amended by striking 
        ``or 4081(c)''.
            (3) Section 40(e)(1) of such Code is amended--
                    (A) by striking ``2007'' in subparagraph (A) and 
                inserting ``2010'', and
                    (B) by striking ``2008'' in subparagraph (B) and 
                inserting ``2011''.
            (4) Section 40(h) of such Code is amended--
                    (A) by striking ``2007'' in paragraph (1) and 
                inserting ``2010'', and
                    (B) by striking ``, 2006, or 2007'' in the table 
                contained in paragraph (2) and inserting ``through 
                2010''.
            (5) Section 4041(b)(2)(B) of such Code is amended by 
        striking ``a substance other than petroleum or natural gas'' 
        and inserting ``coal (including peat)''.
            (6) Paragraph (1) of section 4041(k) of such Code is 
        amended to read as follows:
            ``(1) In general.--Under regulations prescribed by the 
        Secretary, in the case of the sale or use of any liquid at 
        least 10 percent of which consists of alcohol (as defined in 
        section 6426(b)(4)(A)), the rate of the tax imposed by 
        subsection (c)(1) shall be the comparable rate under section 
        4091(c).''.
            (7) Section 4081 of such Code is amended by striking 
        subsection (c).
            (8) Paragraph (2) of section 4083(a) of such Code is 
        amended to read as follows:
            ``(2) Gasoline.--The term `gasoline'--
                    ``(A) includes any gasoline blend, other than 
                qualified methanol or ethanol fuel (as defined in 
                section 4041(b)(2)(B)), partially exempt methanol or 
                ethanol fuel (as defined in section 4041(m)(2)), or a 
                denatured alcohol, and
                    ``(B) includes, to the extent prescribed in 
                regulations--
                            ``(i) any gasoline blend stock, and
                            ``(ii) any product commonly used as an 
                        additive in gasoline (other than alcohol).
        For purposes of subparagraph (B)(i), the term `gasoline blend 
        stock' means any petroleum product component of gasoline.''.
            (9) Section 6427 of such Code is amended by inserting after 
        subsection (d) the following new subsection:
    ``(e) Alcohol or Biodiesel Used To Produce Alcohol Fuel and 
Biodiesel Mixtures or Used as Fuels.--Except as provided in subsection 
(k)--
            ``(1) Used to produce a mixture.--If any person produces a 
        mixture described in section 6426 in such person's trade or 
        business, the Secretary shall pay (without interest) to such 
        person an amount equal to the alcohol fuel mixture credit or 
        the biodiesel mixture credit with respect to such mixture.
            ``(2) Used as fuel.--If alcohol (as defined in section 
        40(d)(1)) or biodiesel (as defined in section 40A(d)(1)) or 
        agri-biodiesel (as defined in section 40A(d)(2)) which is not 
        in a mixture described in section 6426--
                    ``(A) is used by any person as a fuel in a trade or 
                business, or
                    ``(B) is sold by any person at retail to another 
                person and placed in the fuel tank of such person's 
                vehicle,
        the Secretary shall pay (without interest) to such person an 
        amount equal to the alcohol credit (as determined under section 
        40(b)(2)) or the biodiesel credit (as determined under section 
        40A(b)(2)) with respect to such fuel.
            ``(3) Coordination with other repayment provisions.--No 
        amount shall be payable under paragraph (1) with respect to any 
        mixture with respect to which an amount is allowed as a credit 
        under section 6426.
            ``(4) Termination.--This subsection shall not apply with 
        respect to--
                    ``(A) any alcohol fuel mixture (as defined in 
                section 6426(b)(3)) or alcohol (as so defined) sold or 
                used after December 31, 2010, and
                    ``(B) any biodiesel mixture (as defined in section 
                6426(c)(3)) or biodiesel (as so defined) or agri-
                biodiesel (as so defined) sold or used after December 
                31, 2006.''.
            (10) Subsection (f) of section 6427 of such Code is amended 
        to read as follows:
    ``(f) Aviation Fuel Used To Produce Certain Alcohol Fuels.--
            ``(1) In general.--Except as provided in subsection (k), if 
        any aviation fuel on which tax was imposed by section 4091 at 
        the regular tax rate is used by any person in producing a 
        mixture described in section 4091(c)(1)(A) which is sold or 
        used in such person's trade or business, the Secretary shall 
        pay (without interest) to such person an amount equal to the 
        excess of the regular tax rate over the incentive tax rate with 
        respect to such fuel.
            ``(2) Definitions.--For purposes of paragraph (1)--
                    ``(A) Regular tax rate.--The term `regular tax 
                rate' means the aggregate rate of tax imposed by 
                section 4091 determined without regard to subsection 
                (c) thereof.
                    ``(B) Incentive tax rate.--The term `incentive tax 
                rate' means the aggregate rate of tax imposed by 
                section 4091 with respect to fuel described in 
                subsection (c)(2) thereof.
            ``(3) Coordination with other repayment provisions.--No 
        amount shall be payable under paragraph (1) with respect to any 
        aviation fuel with respect to which an amount is payable under 
        subsection (d) or (l).
            ``(4) Termination.--This subsection shall not apply with 
        respect to any mixture sold or used after September 30, 
        2007.''.
            (11) Paragraphs (1) and (2) of section 6427(i) of such Code 
        are amended by inserting ``(f),'' after ``(d),''.
            (12) Section 6427(i)(3) of such Code is amended--
                    (A) by striking ``subsection (f)'' both places it 
                appears in subparagraph (A) and inserting ``subsection 
                (e)(1)'',
                    (B) by striking ``gasoline, diesel fuel, or 
                kerosene used to produce a qualified alcohol mixture 
                (as defined in section 4081(c)(3))'' in subparagraph 
                (A) and inserting ``a mixture described in section 
                6426'',
                    (C) by adding at the end of subparagraph (A) the 
                following new flush sentence:
                ``In the case of an electronic claim, this subparagraph 
                shall be applied without regard to clause (i).'',
                    (D) by striking ``subsection (f)(1)'' in 
                subparagraph (B) and inserting ``subsection (e)(1)'',
                    (E) by striking ``20 days of the date of the filing 
                of such claim'' in subparagraph (B) and inserting ``45 
                days of the date of the filing of such claim (20 days 
                in the case of an electronic claim)'', and
                    (F) by striking ``alcohol mixture'' in the heading 
                and inserting ``alcohol fuel and biodiesel mixture''.
            (13) Section 6427(o) of such Code is amended--
                    (A) by striking paragraph (1) and inserting the 
                following new paragraph:
            ``(1) any tax is imposed by section 4081, and'',
                    (B) by striking ``such gasohol'' in paragraph (2) 
                and inserting ``the alcohol fuel mixture (as defined in 
                section 6426(b)(3))'',
                    (C) by striking ``gasohol'' both places it appears 
                in the matter following paragraph (2) and inserting 
                ``alcohol fuel mixture'', and
                    (D) by striking ``Gasohol'' in the heading and 
                inserting ``Alcohol Fuel Mixture''.
            (14) Section 9503(b)(1) of such Code is amended by adding 
        at the end the following new flush sentence:
        ``For purposes of this paragraph, taxes received under sections 
        4041 and 4081 shall be determined without reduction for credits 
        under section 6426.''.
            (15) Section 9503(b)(4) of such Code is amended--
                    (A) by adding ``or'' at the end of subparagraph 
                (C),
                    (B) by striking the comma at the end of 
                subparagraph (D)(iii) and inserting a period, and
                    (C) by striking subparagraphs (E) and (F).
            (16) Section 9503(c)(2)(A)(i)(III) of such Code is amended 
        by inserting ``(other than subsection (e) thereof)'' after 
        ``section 6427''.
            (17) Section 9503(e)(2) of such Code is amended by striking 
        subparagraph (B) and by redesignating subparagraphs (C), (D), 
        and (E) as subparagraphs (B), (C), and (D), respectively.
            (18) The table of sections for subchapter B of chapter 65 
        of such Code is amended by inserting after the item relating to 
        section 6425 the following new item:

        ``Sec. 6426. Credit for alcohol fuel and biodiesel mixtures.''.
            (19) Tariff schedule.--Headings 9901.00.50 and 9901.00.52 
        of the Harmonized Tariff Schedule of the United States (19 
        U.S.C. 3007) are each amended in the effective period column by 
        striking ``10/1/2007'' each place it appears and inserting ``1/
        1/2011''.
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        fuel sold or used after September 30, 2004.
            (2) Registration requirement.--The amendment made by 
        subsection (b) shall take effect on April 1, 2005.
            (3) Extension of alcohol fuels credit.--The amendments made 
        by paragraphs (3), (4), and (19) of subsection (c) shall take 
        effect on the date of the enactment of this Act.
            (4) Repeal of general fund retention of certain alcohol 
        fuels taxes.--The amendments made by subsection (c)(15) shall 
        apply to fuel sold or used after September 30, 2003.
    (e) Format for Filing.--The Secretary of the Treasury shall 
describe the electronic format for filing claims described in section 
6427(i)(3)(B) of the Internal Revenue Code of 1986 (as amended by 
subsection (c)(12)(C)) not later than September 30, 2004.

SEC. 4. BIODIESEL INCOME TAX CREDIT.

    (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 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 biodiesel mixture.
                    ``(B) Qualified biodiesel mixture.--The term 
                `qualified biodiesel mixture' means a mixture of 
                biodiesel and diesel fuel (as defined in section 
                4083(a)(3)), determined without regard to any use of 
                kerosene, 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 production 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 business 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 with 
                diesel fuel 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 biodiesel 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, paragraphs (1)(A) and (2)(A) 
        shall be applied by substituting `$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 producer or importer of the biodiesel which 
        identifies the product produced and the percentage of biodiesel 
        and agri-biodiesel in the product.
    ``(c) Coordination With Credit Against Excise Tax.--The amount of 
the credit determined under this section with respect to any biodiesel 
shall be properly reduced to take into account any benefit provided 
with respect to such biodiesel solely by reason of the application of 
section 6426 or 6427(e).
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Biodiesel.--The term `biodiesel' means the monoalkyl 
        esters of long chain fatty acids derived from plant or animal 
        matter which meet--
                    ``(A) the registration requirements for fuels and 
                fuel additives established by the Environmental 
                Protection Agency under section 211 of the Clean Air 
                Act (42 U.S.C. 7545), and
                    ``(B) the requirements of the American Society of 
                Testing and Materials D6751.
            ``(2) Agri-biodiesel.--The term `agri-biodiesel' means 
        biodiesel derived solely from virgin oils, including esters 
        derived from virgin vegetable oils from corn, soybeans, 
        sunflower seeds, cottonseeds, canola, crambe, rapeseeds, 
        safflowers, flaxseeds, rice bran, and mustard seeds, and from 
        animal fats.
            ``(3) Mixture or biodiesel not used as a fuel, etc.--
                    ``(A) Mixtures.--If--
                            ``(i) any credit was determined under this 
                        section with respect to biodiesel used in the 
                        production of any qualified biodiesel mixture, 
                        and
                            ``(ii) any person--
                                    ``(I) separates the biodiesel from 
                                the mixture, or
                                    ``(II) without separation, uses the 
                                mixture other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to the product of the rate applicable under subsection 
                (b)(1)(A) and the number of gallons of such biodiesel 
                in such mixture.
                    ``(B) Biodiesel.--If--
                            ``(i) any credit was determined under this 
                        section with respect to the retail sale of any 
                        biodiesel, and
                            ``(ii) any person mixes such biodiesel or 
                        uses such biodiesel other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to the product of the rate applicable under subsection 
                (b)(2)(A) and the number of gallons of such biodiesel.
                    ``(C) Applicable laws.--All provisions of law, 
                including penalties, shall, insofar as applicable and 
                not inconsistent with this section, apply in respect of 
                any tax imposed under subparagraph (A) or (B) as if 
                such tax were imposed by section 4081 and not by this 
                chapter.
            ``(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.
    ``(e) Termination.--This section shall not apply to any sale or use 
after December 31, 2006.''.
    (b) Credit Treated as Part of General Business Credit.--Section 
38(b) of the Internal Revenue Code of 1986 (relating to current year 
business credit) 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 new 
paragraph:
            ``(16) the biodiesel fuels credit determined under section 
        40A(a).''.
    (c) Conforming Amendments.--
            (1) Section 39(d) of the Internal Revenue Code of 1986 is 
        amended by adding at the end the following new paragraph:
            ``(11) No carryback of biodiesel fuels credit before 
        effective date.--No portion of the unused business credit for 
        any taxable year which is attributable to the biodiesel fuels 
        credit determined under section 40A may be carried back to a 
        taxable year ending on or before September 30, 2004.''.
            (2)(A) Section 87 of such Code is amended to read as 
        follows:

``SEC. 87. ALCOHOL AND BIODIESEL FUELS CREDITS.

    ``Gross income includes--
            ``(1) the amount of the alcohol fuels credit determined 
        with respect to the taxpayer for the taxable year under section 
        40(a), and
            ``(2) the biodiesel fuels credit determined with respect to 
        the taxpayer for the taxable year under section 40A(a).''.
            (B) The item relating to section 87 in the table of 
        sections for part II of subchapter B of chapter 1 of such Code 
        is amended by striking ``fuel credit'' and inserting ``and 
        biodiesel fuels credits''.
            (3) Section 196(c) of such Code is amended by striking 
        ``and'' at the end of paragraph (9), by striking the period at 
        the end of paragraph (10) and inserting ``, and'', and by 
        adding at the end the following new paragraph:
            ``(11) the biodiesel fuels credit determined under section 
        40A(a).''.
            (4) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding 
        after the item relating to section 40 the following new item:

                              ``Sec. 40A. Biodiesel used as fuel.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fuel produced, and sold or used, after September 30, 2004, in 
taxable years ending after such date.
                                 <all>