[Congressional Record Volume 141, Number 130 (Saturday, August 5, 1995)]
[Extensions of Remarks]
[Page E1676]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


               SMALL ETHANOL PRODUCERS CREDIT LEGISLATION

                                 ______


                            HON. DAVID MINGE

                              of minnesota

                    in the house of representatives

                         Friday, August 4, 1995
  Mr. MINGE. Mr. Speaker, Representatives Tom Latham, Pat Danner, Gil 
Gutknecht, Earl Pomeroy, Jim Oberstar, Collin Peterson, Tim Johnson, 
and I are introducing a bipartisan bill that will make a relatively 
minor correction to the Federal Tax Code relating to the application of 
the Small Ethanol Producers Credit. This legislation will allow small 
ethanol cooperatives the same opportunity to utilize the Small Ethanol 
Producers Credit that other business entities such as trusts, S-
Corporations, and partnerships currently utilize.
  The Small Ethanol Producers Credit (Internal Revenue Code Section 
40(b)(4)) was passed into law in 1990. The credit was created because 
Congress determined that tax incentives were an appropriate way to help 
small producers build ethanol plants. This credit is only available to 
those entities that produce less than 30 million gallons of ethanol 
annually. They are eligible for a 10-cent per gallon tax credit for the 
first 15 million gallons produced. Cooperatives are not eligible 
because the Internal Revenue Service has ruled that the Code does not 
permit the credit pass-through to patrons of a cooperative. Without 
specific inclusion in the Internal Revenue Code, thousands of farmers 
will be unable to benefit from this credit. This inadvertent exclusion 
of cooperatives is tragic and should be corrected.
  Increasingly, cooperatives are the primary business organization 
involved in ethanol production in the Midwest. This form of operation 
usually passes cooperative tax attributes on to its participating 
patrons. The ineligibility of farmers who are patrons of small ethanol 
plants denies the tax benefit to those being taxed for cooperative 
income.
  In the Second District of Minnesota alone, four small cooperatives 
are either currently in production or under construction. At least 18 
other small ethanol cooperatives are in the planning stages in 
Minnesota, Iowa, Missouri, North Dakota, South Dakota, and Illinois. On 
average, each of these cooperatives is comprised of approximately 300 
farmers. For some, the availability of the Small Ethanol Producers 
Credit determines their start-up viability and whether or not they can 
compete in the marketplace. This legislation is supported by the 
National Council for Farm Cooperatives, the American Farm Bureau 
Federation, the National Corn Growers Association, and the National 
Farmers Union.
  For years, farmers have been encouraged to diversify their business 
operations. Value-added production, such as ethanol plants, holds great 
promise to boost rural economies. Ethanol cooperatives provide an 
excellent opportunity to create local jobs and local profits. I hope 
that Congress can make this correction to the Tax Code so that small 
farmers will be able to benefit from the same ethanol credits that 
other types of businesses presently utilize.


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