[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2021 Introduced in Senate (IS)]

113th CONGRESS
  2d Session
                                S. 2021

To amend the Internal Revenue Code of 1986 to modify the incentives for 
                      the production of biodiesel.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 12, 2014

 Ms. Cantwell (for herself and Mr. Grassley) 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 modify the incentives for 
                      the production of biodiesel.

    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 Tax Incentive Reform and 
Extension Act of 2014''.

SEC. 2. REFORM OF BIODIESEL INCOME TAX INCENTIVES.

    (a) In General.--Section 40A of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 40A. BIODIESEL PRODUCTION.

    ``(a) In General.--For purposes of section 38, the biodiesel fuels 
credit determined under this section for the taxable year is $1.00 for 
each gallon of biodiesel produced by the taxpayer which during the 
taxable year--
            ``(1) is sold by such producer to another person--
                    ``(A) for use by such other person's trade or 
                business (other than casual off-farm production),
                    ``(B) for use by such other person as a fuel in a 
                trade or business, or
                    ``(C) who sells such biodiesel at retail to another 
                person and places such biodiesel in the fuel tank of 
                such other person, or
            ``(2) is used or sold by such producer for any purpose 
        described in paragraph (1).
    ``(b) Increased Credit for Small Producers.--
            ``(1) In general.--In the case of any eligible small 
        biodiesel producer, subsection (a) shall be applied by 
        increasing the dollar amount contained therein by 10 cents.
            ``(2) Limitation.--Paragraph (1) shall only apply with 
        respect to the first 15,000,000 gallons of biodiesel produced 
        by any eligible small biodiesel producer during any taxable 
        year.
    ``(c) Coordination With Credit Against Excise Tax.--The amount of 
the credit determined under this section with respect to any biodiesel 
shall be 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 liquid fuel 
        derived from biomass which meets--
                    ``(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 for 
                Testing and Materials D6751.
        Such term shall not include any liquid with respect to which a 
        credit may be determined under section 40.
            ``(2) Biodiesel not used for a qualified purpose.--If--
                    ``(A) any credit was determined with respect to any 
                biodiesel under this section, and
                    ``(B) any person does not use such biodiesel for 
                the purpose described in subsection (a),
        then there is hereby imposed on such person a tax equal to the 
        product of the rate applicable under subsection (a) and the 
        number of gallons of such biodiesel.
            ``(3) 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.
            ``(4) Limitation to biodiesel produced in the united 
        states.--No credit shall be determined under this section with 
        respect to any biodiesel unless such biodiesel is produced in 
        the United States from raw feedstock. For purposes of this 
        paragraph, the term `United States' includes any possession of 
        the United States.
            ``(5) Biodiesel transfers from an irs registered biodiesel 
        production facility to an irs registered terminal or 
        refinery.--The credit allowed under subsection (a) shall be 
        allowed to the terminal or refinery referred to in section 
        4081(a)(1)(B)(i) in instances where section 4081(a)(1)(B)(iii) 
        is applicable. The credit allowed under subsection (a) cannot 
        be claimed by a terminal or refinery on fuel upon which the 
        credit was previously claimed by a biodiesel producer.
    ``(e) Definitions and Special Rules for Small Biodiesel 
Producers.--
            ``(1) Eligible small biodiesel producer.--The term 
        `eligible small biodiesel producer' means a person who at all 
        times during the taxable year has a productive capacity for 
        biodiesel not in excess of 60,000,000 gallons.
            ``(2) Aggregation rule.--For purposes of the 15,000,000 
        gallon limitation under subsection (b)(2) 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)(2) 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 (b) from directly or indirectly benefitting 
                any person with a direct or indirect productive 
                capacity of more than 60,000,000 gallons of biodiesel 
                during the taxable year, or
                    ``(B) to prevent any person from directly or 
                indirectly benefitting with respect to more than 
                15,000,000 gallons during the taxable year.
            ``(6) Allocation of small 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 increase determined 
                        under subsection (b) 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. Such 
                        election shall not take effect unless the 
                        organization designates the apportionment as 
                        such in a written notice mailed to its patrons 
                        during the payment period described in section 
                        1382(d).
                    ``(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 (b) 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.
    ``(f) Renewable Diesel.--For purposes of this title--
            ``(1) Treatment in the same manner as biodiesel.--Renewable 
        diesel shall be treated in the same manner as biodiesel.
            ``(2) Renewable diesel defined.--The term `renewable 
        diesel' means liquid fuel derived from biomass which meets--
                    ``(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 for 
                Testing and Materials D975 or D396, or other equivalent 
                standard approved by the Secretary.
        Such term shall not include any liquid with respect to which a 
        credit may be determined under section 40. Such term does not 
        include any fuel derived from coprocessing biomass with a 
        feedstock which is not biomass. For purposes of this paragraph, 
        the term `biomass' has the meaning given such term by section 
        45K(c)(3).
            ``(3) Certain aviation fuel.--Except as provided in the 
        last 3 sentences of paragraph (2), the term `renewable diesel' 
        shall include fuel derived from biomass which meets the 
        requirements of a Department of Defense specification for 
        military jet fuel or an American Society for Testing and 
        Materials specification for aviation turbine fuel.
    ``(g) Termination.--This section shall not apply to any sale or use 
after December 31, 2017.''.
    (b) 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 striking the item relating to section 40A and 
inserting the following new item:

``Sec. 40A. Biodiesel production.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to biodiesel sold or used after December 31, 2013.

SEC. 3. REFORM OF BIODIESEL EXCISE TAX INCENTIVES.

    (a) In General.--Subsection (c) of section 6426 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(c) Biodiesel Credit.--
            ``(1) In general.--For purposes of this section, the 
        biodiesel credit is $1.00 for each gallon of biodiesel produced 
        by the taxpayer and which--
                    ``(A) is sold by such producer to another person--
                            ``(i) for use by 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 biodiesel at retail 
                        to another person and places such biodiesel in 
                        the fuel tank of such other person, or
                    ``(B) is used or sold by such producer for any 
                purpose described in subparagraph (A).
            ``(2) Definitions.--Any term used in this subsection which 
        is also used in section 40A shall have the meaning given such 
        term by section 40A.
            ``(3) Biodiesel transfers from an irs registered biodiesel 
        production facility to an irs registered terminal.--The credit 
        allowed under this subsection can be claimed by a registered 
        terminal or refinery in instances where section 
        4081(a)(1)(B)(iii) is applicable. The credit allowed under this 
        subsection cannot be claimed by a terminal or refinery on fuel 
        upon which the credit was previously claimed by a biodiesel 
        producer.
            ``(4) Termination.--This subsection shall not apply to any 
        sale, use, or removal for any period after December 31, 
        2017.''.
    (b) Payment of Credit.--Subsection (e) of section 6427 of the 
Internal Revenue Code of 1986 is amended--
            (1) by striking ``or the biodiesel mixture credit'' in 
        paragraph (1),
            (2) by redesignating paragraphs (3) through (6) as 
        paragraphs (4) through (7), respectively, and by inserting 
        after paragraph (2) the following new paragraph:
            ``(3) Biodiesel credit.--If any person produces biodiesel 
        and sells or uses such biodiesel as provided in section 
        6426(c), the Secretary shall pay (without interest) to such 
        person an amount equal to the biodiesel credit with respect to 
        such biodiesel.'',
            (3) by striking ``paragraph (1) or (2)'' each place it 
        appears in paragraphs (4) and (6), as redesignated by paragraph 
        (2), and inserting ``paragraph (1), (2), or (3)'',
            (4) by striking ``alternative fuel'' each place it appears 
        in paragraphs (4) and (6), as redesignated by paragraph (2), 
        and inserting ``fuel'',
            (5) by striking ``biodiesel mixture (as defined in section 
        6426(c)(3))'' in paragraph (7)(B), as so redesignated, and 
        inserting ``biodiesel (within the meaning of section 40A)'', 
        and
            (6) by striking ``2013'' in paragraph (7)(B), as so 
        redesignated, and inserting ``2017''.
    (c) Exemption for Biodiesel Transferred From a Registered Producer 
to a Registered Terminal.--Subparagraph (B) of section 4081(a)(1) of 
the Internal Revenue Code of 1986 is amended--
            (1) by striking ``clause (ii)'' in clause (i) and inserting 
        ``clauses (ii) and (iii)'', and
            (2) by adding at the end the following new clause:
                            ``(iii) Exemptions for biodiesel 
                        transferred from a registered producer to a 
                        registered terminal.--The tax imposed by this 
                        paragraph shall not apply to any removal or 
                        entry of biodiesel (as defined in section 
                        40A(d)(1)) transferred in bulk (without regard 
                        to the manner of such transfer) to a terminal 
                        or refinery if--
                                    ``(I) such biodiesel was produced 
                                by a person who is registered under 
                                section 4101 as a producer of biodiesel 
                                and who provides reporting under the 
                                ExStars fuel reporting system of the 
                                Internal Revenue Service, and
                                    ``(II) the operator of such 
                                terminal or refinery is registered 
                                under section 4101.''.
    (d) Producer Registration Requirement.--Subsection (a) of section 
6426 of the Internal Revenue Code of 1986 is amended by striking 
``subsections (d) and (e)'' in the flush sentence at the end and 
inserting ``subsections (c), (d), and (e)''.
    (e) Recapture.--Subsection (f) of section 6426 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(f) Recapture.--
            ``(1) Alcohol fuel mixtures.--If--
                    ``(A) any credit was determined under this section 
                with respect to alcohol used in the production of any 
                alcohol fuel mixture, and
                    ``(B) any person--
                            ``(i) separates the alcohol 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.
            ``(2) Biodiesel.--If any credit was determined under this 
        section with respect to the production of any biodiesel and any 
        person does not use such biodiesel for a purpose described in 
        subsection (c)(1), then there is hereby imposed on such person 
        a tax equal to $1 for each gallon of such biodiesel.
            ``(3) 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) or (2) as if such tax were imposed by section 
        4081 and not by this section.''.
    (f) Clerical Amendments.--
            (1) The heading of section 6426 of the Internal Revenue 
        Code of 1986 is amended by striking ``alcohol fuel, biodiesel, 
        and alternative fuel mixtures'' and inserting ``alcohol fuel 
        mixtures, biodiesel production, and alternative fuel 
        mixtures''.
            (2) The item relating to section 6426 in the table of 
        sections for subchapter B of chapter 65 of such Code is amended 
        by striking ``alcohol fuel, biodiesel, and alternative fuel 
        mixtures'' and inserting ``alcohol fuel mixtures, biodiesel 
        production, and alternative fuel mixtures''.
    (g) Effective Date.--The amendments made by this section shall 
apply to biodiesel sold or used after December 31, 2013.

SEC. 4. BIODIESEL TREATED AS TAXABLE FUEL.

    (a) Biodiesel Treated as Taxable Fuel.--Clause (i) of section 
4083(a)(3)(A) of the Internal Revenue Code of 1986 is amended by 
inserting ``, including biodiesel (as defined in section 6426(c)(3)),'' 
after ``(other than gasoline)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to biodiesel removed, entered, or sold after the date which is 6 months 
after the date of the enactment of this Act.
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