[Congressional Record Volume 143, Number 106 (Thursday, July 24, 1997)]
[Senate]
[Page S8096]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WELLSTONE (for himself, Mr. Grassley, Mr. Kerrey, Mr. 
        Johnson, Mr. Daschle, and Mr. Conrad):
  S. 1066. A bill to amend the Internal Revenue Code of 1986 to allow 
the alcohol fuels credit to be allocated to patrons of a cooperative in 
certain cases; to the Committee on Finance.


                         tax relief legislation

  Mr. WELLSTONE. This situation is extremely unfair--owners of other 
ethanol production facilities are able to take advantage of this 
incentive, yet we are denying family farmers their fair share of the 
benefit. While I strongly support the preservation and extension of the 
ethanol tax incentives--vital for this maturing industry--passthrough 
of the small producer credit is a separate issue of fundamental 
fairness for family farmers.
  I believe all Members can agree that family farmers, who have made a 
substantial investment in ethanol production, should be able to take 
advantage of the same tax benefits that other small business owners who 
produce ethanol now enjoy. Passthrough of this tax credit is not a 
corporate subsidy and does not benefit large corporations, but is an 
incentive for America's family farmers to help produce a fuel that 
decreases our foreign oil dependence, spurs rural development, and 
improves our Nation's air quality.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill as ordered to be printed in the 
Record, as follows:

                                S. 1066

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

     SECTION 1. ALLOCATION OF ALCOHOL FUELS CREDIT TO PATRONS OF A 
                   COOPERATIVE.

       (a) In General.--Subsection (d) 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) 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 made on a 
     timely filed return (including extensions) for such year, be 
     apportioned pro rata among patrons on the basis of the 
     quantity or value of business done with or for such patrons 
     for the taxable year. Such an election, once made, shall be 
     irrevocable for such taxable year.
       ``(B) Treatment of organizations and patrons.--The amount 
     of the credit apportioned to patrons pursuant to subparagraph 
     (A)--
       ``(i) shall not be included in the amount determined under 
     subsection (a) for the taxable year of the organization, and
       ``(ii) shall be included in the amount determined under 
     subsection (a) for the taxable year of each patron in which 
     the patronage dividend for the taxable year referred to in 
     subparagraph (A) is includible in gross income.
       ``(C) Special rule for decreasing credit 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 
     cooperative organization's return for such year, an amount 
     equal to the excess of such reduction over the amount not 
     apportioned to the patrons under subparagraph (A) for the 
     taxable year shall be treated as an increase in tax imposed 
     by this chapter on the organization. Any such increase shall 
     not be treated as tax imposed by this chapter for purposes of 
     determining the amount of any credit under this subpart or 
     subpart A, B, E, or G of this part.''
       (b) Technical Amendment.--Section 1388 of the Internal 
     Revenue Code of 1986 (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(d)(6).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.
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