[Congressional Record Volume 147, Number 85 (Tuesday, June 19, 2001)]
[Senate]
[Pages S6450-S6452]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. HUTCHINSON (for himself and Mr. Dayton):
S. 1058. A bill to amend the Internal Revenue Code of 1986 to provide
tax relief for farmers and the producers of biodiesel, and for other
purposes; to the Committee on Finance.
Mr. HUTCHINSON. Mr. President, the debate over energy use in America
has gripped our national attention for well over a year. A week doesn't
go by that you don't pick up a newspaper or magazine and read at least
one story about our Nation's domestic or foreign energy crisis. One
issue in the energy debate that has caught my attention and that of
farmers in my State is renewable fuels.
The technology to convert agricultural crops into combustible fuel,
suitable for use in modern diesel and gasoline engines, has existed for
more than 100 years. I believe this process continues to hold great
potential for America. The production and use of biofuels offers our
Nation a safe, renewable source of energy for travel and transport, not
to mention the long-term economic benefits for farmers and consumers.
That is why I rise today to introduce the Biodiesel Renewable Fuels
Act. I am pleased that Senator Dayton has joined with me as my lead
cosponsor. This bill encourages the use of biodiesel by establishing a
tax credit for manufacturers who produce a blend of conventional diesel
and soybean or oilseed additives. By reducing the diesel fuel excise
tax, suppliers will receive a 3-cent-per-gallon credit for using a
diesel blend that contains at least 2 percent biodiesel. This tax
credit is very similar to the existing tax incentive for ethanol, a
biofuel made from corn-based products. I believe a tax incentive for
soy-based biodiesel will increase domestic production and capture the
agricultural, environmental and economical benefits associated with
using this renewable source of energy.
Most Americans don't realize that farm communities sit atop a vast
and virtually untapped source of renewable fuels in the form of
agriculture crops. Farmers in Arkansas are interested in developing new
markets for soybean and oilseed products. In Arkansas for example,
farmers grew 94 million bushels, or 2.5 million metric tons, of
soybeans last year. Nationally, farmers produced 2.6 billion bushels of
soybeans in 1999-2000, equal to 72 million metric tons. The oil derived
from soybeans and other oilseed crops can be refined into a diesel
additive or diesel alternative. According to a USDA study released in
1996, an annual market for biodiesel of 100 million gallons in the
United States would raise the price of soybeans by up to seven cents
per bushel. Given the recent U.S. soybean crop, that kind of annual
market would result in more than $168 million directly related to the
use of soy-based biodiesel.
Producing biodiesel domestically also means that more money stays in
the U.S. Instead of purchasing more foreign petroleum, manufacturers
can reduce their dependence on overseas oil by adding biodiesel blends
for use in existing diesel engines. If domestic companies are
encouraged to develop the infrastructure necessary to produce more
biodiesel, the economic effect will be more U.S. jobs, lower prices for
the consumer and larger markets for farmers.
Developing markets for agricultural commodities and reducing our
dependence on foreign oil is good, but there are environmental benefits
as well. It is well documented that the burning of biofuels in
combustion engines reduces the emissions of harmful greenhouse gases
and particulate matter. In fact, biodiesel passes some of the
Environmental Protection Agency's most stringent emissions and health
standards for fuel additives and fuel alternatives. This becomes
important when you consider the EPA's recent announcement that
California should continue to use ethanol as a fuel oxygenate to
improve air quality. As more cities and States are faced with having to
improve the quality of their air, I believe biofuels are a sensible
alternative to existing oxygenates which are not as friendly to the
environment or human health.
If using biodiesel improves air quality, reduces our dependence on
foreign oil and provides a value-added market for soybean and oilseed
crops, then we should support legislation to further development of
this renewable source of fuel. My bill is good for farmers, it's good
for consumers and it's good for
[[Page S6451]]
the environment. I ask unanimous consent that the text of the Biodiesel
Renewable Fuels Act be printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 1058
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Biodiesel
Renewable Fuels Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to or a repeal of a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
SEC. 2. CREDIT FOR BIODIESEL USED AS FUEL.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (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 blend of qualified
biodiesel mixture and the number of gallons of the blend of
the taxpayer for the taxable year.
``(B) Biodiesel mixture rate.--For purposes of subparagraph
(A), the biodiesel mixture rate shall be--
``(i) the applicable amount for a B-1 blend,
``(ii) 3.0 cents for a B-2 blend, and
``(iii) 20.0 cents for a B-20 blend.
``(C) Blends.--For purposes of this paragraph--
``(i) B-1 blend.--The term `B-1 blend' means a qualified
biodiesel mixture if at least 0.5 percent but less than 2.0
percent of the mixture is biodiesel.
``(ii) B-2 blend.--The term `B-2 blend' means a qualified
biodiesel mixture if at least 2.0 percent but less than 20
percent of the mixture is biodiesel.
``(iii) B-20 blend.--The term `B-20 blend' means a
qualified biodiesel mixture if at least 20 percent of the
mixture is biodiesel.
``(D) Applicable amount.--For purposes of this paragraph,
the term `applicable amount' means, in the case of a B-1
blend, the amount equal to 1.5 cents multiplied by a fraction
the numerator of which is the percentage of biodiesel in the
B-1 blend and the denominator of which is 1 percent.
``(2) Qualified biodiesel mixture.--
``(A) In general.--The term `qualified biodiesel mixture'
means a mixture of diesel and biodiesel 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.--
Biodiesel 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.
``(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 shall, under regulations prescribed
by the Secretary, be properly reduced to take into account
any benefit provided with respect to such biodiesel 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 defined.--
``(A) In general.--The term `biodiesel' means the monoalkyl
esters of long chain fatty acids derived from 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, and mustard seeds.
``(B) Registration requirements.--Such term shall only
include a biodiesel which meets 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).
``(2) 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 used in the production of any qualified
biodiesel mixture, and
``(ii) any person--
``(I) separates the 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.
``(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.
``(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.''
(b) Credit Treated as Part of General Business Credit.--
Section 38(b) 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:
``(16) the biodiesel fuels credit determined under section
40A.''
(c) Conforming Amendments.--
(1) Section 39(d) is amended by adding at the end the
following:
``(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.''
(2) Section 196(c) 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:
``(11) the biodiesel fuels credit determined under section
40A.''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding after the item
relating to section 40 the following new item:
``Sec. 40A. Biodiesel used as fuel.''
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
SEC. 3. REDUCTION OF MOTOR FUEL EXCISE TAXES ON BIODIESEL
MIXTURES.
(a) In General.--Section 4081 (relating to manufacturers
tax on petroleum products) is amended by adding at the end
the following new subsection:
``(f) Biodiesel Mixtures.--Under regulations prescribed by
the Secretary--
``(1) In general.--In the case of the removal or entry of a
qualified biodiesel mixture, 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, the rate of tax under
subsection (a) shall be the otherwise applicable rate,
reduced by the amount determined under subparagraph (B).
``(B) Applicable reduction.--For purposes of subparagraph
(A), the amount determined under this subparagraph is an
amount equal to the biodiesel mixture rate for the qualified
biodiesel mixture to be produced from the diesel fuel,
divided by a percentage equal to 100 percent minus the
percentage of biodiesel 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.''.
(b) Conforming Amendments.--
(1) Section 4041 is amended by adding at the end the
following new subsection:
``(n) Biodiesel 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)), 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)).''.
(2) Section 6427 is amended by redesignating subsection (p)
as subsection (q) and by inserting after subsection (o) the
following new subsection:
``(p) Biodiesel 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)) 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.''.
(c) Effective Date.--The amendments made by this section
shall take effect on January 1, 2002.
[[Page S6452]]
SEC. 4. HIGHWAY TRUST FUND HELD HARMLESS.
There are hereby transferred (from time to time) from the
funds of the Commodity Credit Corporation amounts equivalent
to the reductions that would occur (but for this section) in
the receipts of the Highway Trust Fund by reason of the
amendments made by this Act. Such transfers shall be made on
the basis of estimates made by the Secretary of the Treasury
and adjustments shall be made to subsequent transfers to
reflect any errors in the estimates.
Mr. DAYTON. Mr. President, I rise today to introduce, along with my
distinguished colleague Senator Hutchinson from Arkansas, legislation
that will increase the use of biodiesel fuel throughout our country.
Biodiesel is a natural additive to diesel fuel, much as ethanol is to
regular gasoline. It is also a fuel in its own right. Biodiesel is made
from soybeans and other vegetable oils. Its use as a 2-percent blend
with diesel fuel, and in some instances as high as a 20-percent blend,
will increase the demand for these commodities, boost their market
price, and reduce the toxic carbon emissions from trucks and other
vehicles across this Nation, all at no additional cost to American
taxpayers.
Our legislation would provide a 3-cent-per-gallon credit to diesel
fuel suppliers using 2-percent biodiesel and up to a 20-cent-per-gallon
credit for blends containing 20-percent biodiesel.
As soybean prices rise then due to the increased usage, Federal
spending on the U.S. Department of Agriculture Marketing Assistance
Loan Program will be reduced accordingly, resulting in substantial
savings for the American taxpayers.
A credit such as this would otherwise reduce the revenues that would
be going into the highway trust fund. Given the deterioration of many
of our Nation's highways, that would be unwise. Thus, this legislation
provides for the Commodity Credit Corporation to reimburse the highway
trust fund for its forgone revenues.
Our current energy crisis is also an opportunity for our country. I
currently have a van driving around the State of Minnesota that uses
85-percent ethanol fuel with no difficulties whatsoever. These
agricultural fuels are not just possible tomorrow, they are practical
today. We just need to help them become financially competitive, until
these industries can reach the volume of production necessary to
compete with the giant oil industry.
In conclusion, this legislation is an important step in several right
directions--toward less foreign oil dependency, toward higher
agricultural commodity prices for American farmers, toward lower
taxpayer costs for our struggling farm economy, and toward a cleaner
air quality for us all. I respectfully urge my colleagues to support
this important legislation.
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