[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 610 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                 S. 610

To amend the Internal Revenue Code of 1986 to provide for a small agri-
  biodiesel producer credit and to improve the small ethanol producer 
                                credit.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 11, 2005

  Mr. Talent (for himself, Mrs. Lincoln, Mr. Thune, Mr. Johnson, Mr. 
 Coleman, Mr. Salazar, Mr. Harkin, Mr. Hagel, and Mr. Bond) 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 provide for a small agri-
  biodiesel producer credit and to improve the small ethanol producer 
                                credit.

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

SECTION 1. SMALL AGRI-BIODIESEL PRODUCER CREDIT.

    (a) In General.--Subsection (a) of section 40A of the Internal 
Revenue Code of 1986 (relating to biodiesel used as a fuel) is amended 
to read as follows:
    ``(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, plus
            ``(3) in the case of an eligible small agri-biodiesel 
        producer, the small agri-biodiesel producer credit.''.
    (b) Small Agri-Biodiesel Producer Credit Defined.--Section 40A(b) 
of the Internal Revenue Code of 1986 (relating to definition of 
biodiesel mixture credit and biodiesel credit) is amended by adding at 
the end the following new paragraph:
            ``(5) Small agri-biodiesel producer credit.--
                    ``(A) In general.--The small agri-biodiesel 
                producer credit of any eligible small agri-biodiesel 
                producer for any taxable year is 10 cents for each 
                gallon of qualified agri-biodiesel production of such 
                producer.
                    ``(B) Qualified agri-biodiesel production.--For 
                purposes of this paragraph, the term `qualified agri-
                biodiesel production' means any agri-biodiesel which is 
                produced by an eligible small agri-biodiesel producer, 
                and which during the taxable year--
                            ``(i) is sold by such producer to another 
                        person--
                                    ``(I) for use by such other person 
                                in the production of a qualified 
                                biodiesel mixture in such other 
                                person's trade or business (other than 
                                casual off-farm production),
                                    ``(II) for use by such other person 
                                as a fuel in a trade or business, or
                                    ``(III) who sells such agri-
                                biodiesel at retail to another person 
                                and places such agri-biodiesel in the 
                                fuel tank of such other person, or
                            ``(ii) is used or sold by such producer for 
                        any purpose described in clause (i).
                    ``(C) Limitation.--The qualified agri-biodiesel 
                production of any producer for any taxable year shall 
                not exceed 15,000,000 gallons.''.
    (c) Definitions and Special Rules.--Section 40A of the Internal 
Revenue Code of 1986 is amended by redesignating subsection (e) as 
subsection (f) and by inserting after subsection (d) the following new 
subsection:
    ``(e) Definitions and Special Rules for Small Agri-Biodiesel 
Producer Credit.--For purposes of this section--
            ``(1) Eligible small agri-biodiesel producer.--The term 
        `eligible small agri-biodiesel producer' means a person who, at 
        all times during the taxable year, has a productive capacity 
        for agri-biodiesel not in excess of 60,000,000 gallons.
            ``(2) Aggregation rule.--For purposes of the 15,000,000 
        gallon limitation under subsection (b)(5)(C) and the 60,000,000 
        gallon limitation under paragraph (1), all members of the same 
        controlled group of corporations (within the meaning of section 
        267(f)) and all persons under common control (within the 
        meaning of section 52(b) but determined by treating an interest 
        of more than 50 percent as a controlling interest) shall be 
        treated as 1 person.
            ``(3) Partnership, s corporation, and other pass-thru 
        entities.--In the case of a partnership, trust, S corporation, 
        or other pass-thru entity, the limitations contained in 
        subsection (b)(5)(C) and paragraph (1) shall be applied at the 
        entity level and at the partner or similar level.
            ``(4) Allocation.--For purposes of this subsection, in the 
        case of a facility in which more than 1 person has an interest, 
        productive capacity shall be allocated among such persons in 
        such manner as the Secretary may prescribe.
            ``(5) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary--
                    ``(A) to prevent the credit provided for in 
                subsection (a)(3) from directly or indirectly 
                benefiting any person with a direct or indirect 
                productive capacity of more than 60,000,000 gallons of 
                agri-biodiesel during the taxable year, or
                    ``(B) to prevent any person from directly or 
                indirectly benefiting with respect to more than 
                15,000,000 gallons during the taxable year.
            ``(6) Allocation of small agri-biodiesel 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.--
                            ``(i) Organizations.--The amount of the 
                        credit not apportioned to patrons pursuant to 
                        subparagraph (A) shall be included in the 
                        amount determined under subsection (a)(3) for 
                        the taxable year of the organization.
                            ``(ii) Patrons.--The amount of the credit 
                        apportioned to patrons pursuant to subparagraph 
                        (A) shall be included in the amount determined 
                        under such subsection for the first taxable 
                        year of each patron ending on or after the last 
                        day of the payment period (as defined in 
                        section 1382(d)) for the taxable year of the 
                        organization or, if earlier, for the taxable 
                        year of each patron ending on or after the date 
                        on which the patron receives notice from the 
                        cooperative of the apportionment.
                            ``(iii) Special rules for decrease in 
                        credits for taxable year.--If the amount of the 
                        credit of the organization determined under 
                        such subsection for a taxable year is less than 
                        the amount of such credit shown on the return 
                        of the 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.''.
    (d) Small Agri-Biodiesel Credit Not a Passive Activity Credit.--
Clause (i) of section 469(d)(2)(A) of the Internal Revenue Code of 
1986, as amended by section 2, is amended by striking ``section 
40(a)(3)'' and inserting ``sections 40(a)(3) and 40A(a)(3)''.
    (e) Small Agri-Biodiesel Producer Credit Not Added Back to Income 
Under Section 87.--Section 87 of the Internal Revenue Code of 1986, as 
amended by section 2, is amended by striking ``and'' at the end of 
paragraph (2) and by striking paragraph (3) and inserting the following 
new paragraphs:
            ``(3) the biodiesel mixture credit determined with respect 
        to the taxpayer for the taxable year under section 40A(a)(1), 
        and
            ``(4) the biodiesel credit determined with respect to the 
        taxpayer for the taxable year under section 40A(a)(2).''.
    (f) Conforming Amendments.--
            (1) Paragraph (4) of section 40A(b) of the Internal Revenue 
        Code of 1986 is amended by striking ``this section'' and 
        inserting ``paragraph (1) or (2) of subsection (a)''.
            (2) The heading of subsection (b) of section 40A of such 
        Code is amended by striking ``and Biodiesel Credit'' and 
        inserting ``, Biodiesel Credit, and Small Agri-Biodiesel 
        Producer Credit''.
            (3) Paragraph (3) of section 40A(d) of such Code is amended 
        by redesignating subparagraph (C) as subparagraph (D) and by 
        inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) Producer credit.--If--
                            ``(i) any credit was determined under 
                        subsection (a)(3), and
                            ``(ii) any person does not use such fuel 
                        for a purpose described in subsection 
                        (b)(5)(B),
                then there is hereby imposed on such person a tax equal 
                to 10 cents a gallon for each gallon of such agri-
                biodiesel.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 2. IMPROVEMENTS TO SMALL ETHANOL PRODUCER CREDIT.

    (a) 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''.
    (b) Small Ethanol Producer Credit Not a Passive Activity Credit.--
Clause (i) of section 469(d)(2)(A) of the Internal Revenue Code of 1986 
is amended by striking ``subpart D'' and inserting ``subpart D, other 
than section 40(a)(3),''.
    (c) Small Ethanol Producer Credit Not Added Back to Income Under 
Section 87.--Section 87 of the Internal Revenue Code of 1986 (relating 
to income inclusion of alcohol and biodiesel fuels credits) is amended 
by redesignating paragraph (2) as paragraph (3) and by striking 
paragraph (1) and inserting the following:
            ``(1) the amount of the alcohol mixture credit determined 
        with respect to the taxpayer for the taxable year under section 
        40(a)(1),
            ``(2) the alcohol credit determined with respect to the 
        taxpayer for the taxable year under section 40(a)(2), and''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
                                 <all>