[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 355 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 355

   To amend the Internal Revenue Code of 1986 to allow a credit for 
                            biodiesel fuel.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 11, 2003

  Mrs. Lincoln (for herself, Mr. Grassley, Mr. Hagel, Mr. Dayton, Mr. 
   Durbin, Mr. Harkin, Mr. Coleman, and Mr. Johnson) 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 a credit for 
                            biodiesel fuel.

    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 ``Biodiesel Promotion Act of 2003''.

SEC. 2. INCENTIVES FOR BIODIESEL.

    (a) Credit for Biodiesel Used as a Fuel.--
            (1) 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 biodiesel mixture credit.
    ``(b) Definition of Biodiesel Mixture 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 the sum of the 
                products of the biodiesel mixture rate for each 
                qualified biodiesel mixture and the number of gallons 
                of such mixture of the taxpayer for the taxable year.
                    ``(B) Biodiesel mixture rate.--For purposes of 
                subparagraph (A), the biodiesel mixture rate for each 
                qualified biodiesel mixture shall be--
                            ``(i) in the case of a mixture with only 
                        biodiesel V, 1 cent for each whole percentage 
                        point (not exceeding 20 percentage points) of 
                        biodiesel V in such mixture, and
                            ``(ii) in the case of a mixture with 
                        biodiesel NV, or a combination of biodiesel V 
                        and biodiesel NV, 0.5 cent for each whole 
                        percentage point (not exceeding 20 percentage 
                        points) of such biodiesel in such mixture.
            ``(2) Qualified biodiesel mixture.--
                    ``(A) In general.--The term `qualified biodiesel 
                mixture' means a mixture of diesel and biodiesel V or 
                biodiesel NV 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.
                    ``(B) Sale or use must be in trade or business, 
                etc.--
                            ``(i) In general.--Biodiesel V or biodiesel 
                        NV used in the production of a qualified 
                        biodiesel mixture shall be taken into account--
                                    ``(I) only if the sale or use 
                                described in subparagraph (A) is in a 
                                trade or business of the taxpayer, and
                                    ``(II) for the taxable year in 
                                which such sale or use occurs.
                            ``(ii) Certification for biodiesel v.--
                        Biodiesel V used in the production of a 
                        qualified biodiesel mixture shall be taken into 
                        account only if the taxpayer described in 
                        subparagraph (A) obtains a certification from 
                        the producer of the biodiesel V which 
                        identifies the product produced.
                    ``(C) 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.
    ``(c) Coordination With Exemption From Excise Tax.--The amount of 
the credit determined under this section with respect to any biodiesel 
V shall, under regulations prescribed by the Secretary, be properly 
reduced to take into account any benefit provided with respect to such 
biodiesel V solely by reason of the application of section 4041(n) or 
section 4081(f).
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Biodiesel v defined.--The term `biodiesel V' means 
        the monoalkyl esters of long chain fatty acids derived solely 
        from virgin vegetable oils for use in compressional-ignition 
        (diesel) engines. Such term shall include esters derived from 
        vegetable oils from corn, soybeans, sunflower seeds, 
        cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, 
        rice bran, and mustard seeds.
            ``(2) Biodiesel nv defined.--The term `biodiesel NV' means 
        the monoalkyl esters of long chain fatty acids derived from 
        nonvirgin vegetable oils or animal fats for use in 
        compressional-ignition (diesel) engines.
            ``(3) Registration requirements.--The terms `biodiesel V' 
        and `biodiesel NV' shall only include a biodiesel which meets--
                            ``(i) 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
                            ``(ii) the requirements of the American 
                        Society of Testing and Materials D6751.
            ``(4) Biodiesel mixture not used as a fuel, etc.--
                    ``(A) Imposition of tax.--If--
                            ``(i) any credit was determined under this 
                        section with respect to biodiesel V or 
                        biodiesel NV used in the production of any 
                        qualified biodiesel mixture, and
                            ``(ii) any person--
                                    ``(I) separates such 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 biodiesel 
                        mixture rate applicable under subsection 
                        (b)(1)(B) and the number of gallons of the 
                        mixture.
                    ``(B) 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) as if such tax 
                were imposed by section 4081 and not by this chapter.
            ``(5) 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) Election To Have Biodiesel Fuels Credit Not Apply.--
            ``(1) In general.--A taxpayer may elect to have this 
        section not apply for any taxable year.
            ``(2) Time for making election.--An election under 
        paragraph (1) for any taxable year may be made (or revoked) at 
        any time before the expiration of the 3-year period beginning 
        on the last date prescribed by law for filing the return for 
        such taxable year (determined without regard to extensions).
            ``(3) Manner of making election.--An election under 
        paragraph (1) (or revocation thereof) shall be made in such 
        manner as the Secretary may by regulations prescribe.
    ``(f) Termination.--This section shall not apply to any fuel sold 
after December 31, 2005.''.
            (2) Credit treated as part of general business credit.--
        Section 38(b) of the Internal Revenue Code of 1986 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).''.
            (3) Conforming amendments.--
                    (A) 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 
        january 1, 2003.--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 beginning before January 1, 2003.''.
                    (B) 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 
                by adding at the end the following new paragraph:
            ``(11) the biodiesel fuels credit determined under section 
        40A(a).''.
                    (C) Section 6501(m) of such Code is amended by 
                inserting ``40A(e),'' after ``40(f),''.
                    (D) 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.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2002.
    (b) Reduction of Motor Fuel Excise Taxes on Biodiesel V Mixtures.--
            (1) In general.--Section 4081 of the Internal Revenue Code 
        of 1986 (relating to manufacturers tax on petroleum products) 
        is amended by adding at the end the following new subsection:
    ``(f) Biodiesel V Mixtures.--Under regulations prescribed by the 
Secretary--
            ``(1) In general.--In the case of the removal or entry of a 
        qualified biodiesel mixture with biodiesel V, the rate of tax 
        under subsection (a) shall be the otherwise applicable rate 
        reduced by the biodiesel mixture rate (if any) applicable to 
        the mixture.
            ``(2) Tax prior to mixing.--
                    ``(A) In general.--In the case of the removal or 
                entry of diesel fuel for use in producing at the time 
                of such removal or entry a qualified biodiesel mixture 
                with biodiesel V, the rate of tax under subsection (a) 
                shall be the rate determined under subparagraph (B).
                    ``(B) Determination of rate.--For purposes of 
                subparagraph (A), the rate determined under this 
                subparagraph is the rate determined under paragraph 
                (1), divided by a percentage equal to 100 percent minus 
                the percentage of biodiesel V which will be in the 
                mixture.
            ``(3) Definitions.--For purposes of this subsection, any 
        term used in this subsection which is also used in section 40A 
        shall have the meaning given such term by section 40A.
            ``(4) Certain rules to apply.--Rules similar to the rules 
        of paragraphs (6) and (7) of subsection (c) shall apply for 
        purposes of this subsection.''.
            (2) Conforming amendments.--
                    (A) Section 4041 of the Internal Revenue Code of 
                1986 is amended by adding at the end the following new 
                subsection:
    ``(n) Biodiesel V Mixtures.--Under regulations prescribed by the 
Secretary, in the case of the sale or use of a qualified biodiesel 
mixture (as defined in section 40A(b)(2)) with biodiesel V, the rates 
under paragraphs (1) and (2) of subsection (a) shall be the otherwise 
applicable rates, reduced by any applicable biodiesel mixture rate (as 
defined in section 40A(b)(1)(B)).''.
                    (B) Section 6427 of such Code is amended by 
                redesignating subsection (p) as subsection (q) and by 
                inserting after subsection (o) the following new 
                subsection:
    ``(p) Biodiesel V Mixtures.--Except as provided in subsection (k), 
if any diesel fuel on which tax was imposed by section 4081 at a rate 
not determined under section 4081(f) is used by any person in producing 
a qualified biodiesel mixture (as defined in section 40A(b)(2)) with 
biodiesel V 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 per gallon applicable biodiesel mixture rate (as defined 
in section 40A(b)(1)(B)) with respect to such fuel.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to any fuel sold after December 31, 2002, and 
        before January 1, 2006.
    (c) Highway Trust Fund Held Harmless.--There are hereby transferred 
(from time to time) from the funds of the Commodity Credit Corporation 
amounts determined by the Secretary of the Treasury to be equivalent to 
the reductions that would occur (but for this subsection) in the 
receipts of the Highway Trust Fund by reason of the amendments made by 
this section.
                                 <all>