[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 240 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 240

To amend the Internal Revenue Code of 1986 to allow allocation of small 
   ethanol producer credit to patrons of cooperative, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 29, 2003

 Mr. Fitzgerald (for himself, Mr. Johnson, Mr. Hagel, and Mr. Harkin) 
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 allow allocation of small 
   ethanol producer credit to patrons of cooperative, 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. SMALL ETHANOL PRODUCER CREDIT.

    (a) Allocation of Alcohol Fuels Credit to Patrons of a 
Cooperative.--Subsection (g) of section 40 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 chapter 
                or for purposes of section 55.''.
    (b) Improvements to Small Ethanol Producer Credit.--
            (1) Definition of small ethanol producer.--Section 40(g) of 
        such Code (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 entire regular tax and 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 (4) as 
                paragraph (5) and by inserting after paragraph (3) the 
                following new paragraph:
            ``(4) 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) the amounts in subparagraphs 
                                (A) and (B) thereof shall be treated as 
                                being zero, 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 amendments.--Subclause (II) of 
                section 38(c)(2)(A)(ii) and subclause (II) of section 
                38(c)(3)(A)(ii) are each amended by inserting ``or the 
                small ethanol producer credit'' after ``employee 
                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 such Code (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.
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