[Congressional Record Volume 150, Number 20 (Tuesday, February 24, 2004)]
[Senate]
[Pages S1525-S1528]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Baucus):
  S. 2110. A bill to amend the Internal Revenue Code of 1986 to extend 
the Highway Trust Fund provisions through March 31, 2004, and to add 
the volumetric ethanol excise tax credit (VEETC), and for other 
purposes; to the Committee on Finance
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

       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 ``Surface Transportation 
     Extension Act of 2004''.

     SEC. 2. EXTENSION OF AUTHORIZATION FOR USE OF TRUST FUNDS FOR 
                   OBLIGATIONS UNDER TEA-21.

       (a) Highway Trust Fund.--
       (1) In general.--Paragraph (1) of section 9503(c) of the 
     Internal Revenue Code of 1986 is amended--
       (A) in the matter before subparagraph (A), by striking 
     ``March 1, 2004'' and inserting ``April 1, 2004'',
       (B) by striking ``or'' at the end of subparagraph (E),
       (C) by striking the period at the end of subparagraph (F) 
     and inserting ``, or'',
       (D) by inserting after subparagraph (F), the following new 
     subparagraph:
       ``(G) authorized to be paid out of the Highway Trust Fund 
     under the Surface Transportation Extension Act of 2004.'', 
     and
       (E) in the matter after subparagraph (G), as added by this 
     paragraph, by striking ``Surface Transportation Extension Act 
     of 2003'' and inserting ``Surface Transportation Extension 
     Act of 2004''.
       (2) Mass transit account.--Paragraph (3) of section 9503(e) 
     of such Code is amended--
       (A) in the matter before subparagraph (A), by striking 
     ``March 1, 2004'' and inserting ``April 1, 2004'',
       (B) in subparagraph (C), by striking ``or'' at the end of 
     such subparagraph,
       (C) in subparagraph (D), by inserting ``or'' at the end of 
     such subparagraph,
       (D) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) the Surface Transportation Extension Act of 2004,'', 
     and
       (E) in the matter after subparagraph (E), as added by this 
     paragraph, by striking ``Surface Transportation Extension Act 
     of 2003'' and inserting ``Surface Transportation Extension 
     Act of 2004''.
       (3) Exception to limitation on transfers.--Subparagraph (B) 
     of section 9503(b)(5) of such Code is amended by striking 
     ``March 1, 2004'' and inserting ``April 1, 2004''.
       (b) Aquatic Resources Trust Fund.--
       (1) Sport fish restoration account.--Paragraph (2) of 
     section 9504(b) of the Internal Revenue Code of 1986 is 
     amended by striking ``Surface Transportation Extension Act of 
     2003'' each place it appears and inserting ``Surface 
     Transportation Extension Act of 2004''.
       (2) Boat safety account.--Subsection (c) of section 9504 of 
     such Code is amended--
       (A) by striking ``March 1, 2004'' and inserting ``April 1, 
     2004'', and
       (B) by striking ``Surface Transportation Extension Act of 
     2003'' and inserting ``Surface Transportation Extension Act 
     of 2004''.
       (3) Exception to limitation on transfers.--Paragraph (2) of 
     section 9504(d) of such Code is amended by striking ``March 
     1, 2004'' and inserting ``April 1, 2004''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.
       (d) Temporary Rule Regarding Adjustments.--During the 
     period beginning on the date of the enactment of the Surface 
     Transportation Extension Act of 2003 and ending on March 31, 
     2004, for purposes of making any estimate under section 
     9503(d) of the Internal

[[Page S1526]]

     Revenue Code of 1986 of receipts of the Highway Trust Fund, 
     the Secretary of the Treasury shall treat--
       (1) each expiring provision of paragraphs (1) through (4) 
     of section 9503(b) of such Code which is related to 
     appropriations or transfers to such Fund to have been 
     extended through the end of the 24-month period referred to 
     in section 9503(d)(1)(B) of such Code, and
       (2) with respect to each tax imposed under the sections 
     referred to in section 9503(b)(1) of such Code, the rate of 
     such tax during the 24-month period referred to in section 
     9503(d)(1)(B) of such Code to be the same as the rate of such 
     tax as in effect on the date of the enactment of the Surface 
     Transportation Extension Act of 2003.

     SEC. 3. ALCOHOL AND BIODIESEL EXCISE TAX CREDIT AND EXTENSION 
                   OF ALCOHOL FUELS INCOME TAX CREDIT.

       (a) In General.--Subchapter B of chapter 65 of the Internal 
     Revenue Code of 1986 (relating to rules of special 
     application) is amended by inserting after section 6425 the 
     following new section:

     ``SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL MIXTURES.

       ``(a) Allowance of Credits.--There shall be allowed as a 
     credit against the tax imposed by section 4081 an amount 
     equal to the sum of--
       ``(1) the alcohol fuel mixture credit, plus
       ``(2) the biodiesel mixture credit.
       ``(b) Alcohol Fuel Mixture Credit.--
       ``(1) In general.--For purposes of this section, the 
     alcohol fuel mixture credit is the product of the applicable 
     amount and the number of gallons of alcohol used by the 
     taxpayer in producing any alcohol fuel mixture for sale or 
     use in a trade or business of the taxpayer.
       ``(2) Applicable amount.--For purposes of this subsection--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the applicable amount is 52 cents (51 cents in the case of 
     any sale or use after 2004).
       ``(B) Mixtures not containing ethanol.--In the case of an 
     alcohol fuel mixture in which none of the alcohol consists of 
     ethanol, the applicable amount is 60 cents.
       ``(3) Alcohol fuel mixture.--For purposes of this 
     subsection, the term `alcohol fuel mixture' means a mixture 
     of alcohol and a taxable fuel which--
       ``(A) is sold by the taxpayer producing such mixture to any 
     person for use as a fuel,
       ``(B) is used as a fuel by the taxpayer producing such 
     mixture, or
       ``(C) is removed from the refinery by a person producing 
     such mixture.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Alcohol.--The term `alcohol' includes methanol and 
     ethanol but does not include--
       ``(i) alcohol produced from petroleum, natural gas, or coal 
     (including peat), or
       ``(ii) alcohol with a proof of less than 190 (determined 
     without regard to any added denaturants).

     Such term also includes an alcohol gallon equivalent of ethyl 
     tertiary butyl ether or other ethers produced from such 
     alcohol.
       ``(B) Taxable fuel.--The term `taxable fuel' has the 
     meaning given such term by section 4083(a)(1).
       ``(5) Termination.--This subsection shall not apply to any 
     sale, use, or removal for any period after December 31, 2010.
       ``(c) Biodiesel Mixture Credit.--
       ``(1) In general.--For purposes of this section, the 
     biodiesel mixture credit is the product of the applicable 
     amount and the number of gallons of biodiesel used by the 
     taxpayer in producing any biodiesel mixture for sale or use 
     in a trade or business of the taxpayer.
       ``(2) Applicable amount.--For purposes of this subsection--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the applicable amount is 50 cents.
       ``(B) Amount for agri-biodiesel.--In the case of any 
     biodiesel which is agri-biodiesel, the applicable amount is 
     $1.00.
       ``(3) Biodiesel mixture.--For purposes of this section, the 
     term `biodiesel mixture' means a mixture of biodiesel and 
     diesel fuel (as defined in section 4083(a)(3)), determined 
     without regard to any use of kerosene, which--
       ``(A) is sold by the taxpayer producing such mixture to any 
     person for use as a fuel,
       ``(B) is used as a fuel by the taxpayer producing such 
     mixture, or
       ``(C) is removed from the refinery by a person producing 
     such mixture.
       ``(4) Certification for biodiesel.--No credit shall be 
     allowed under this section unless the taxpayer obtains a 
     certification (in such form and manner as prescribed by the 
     Secretary) from the producer of the biodiesel which 
     identifies the product produced and the percentage of 
     biodiesel and agri-biodiesel in the product.
       ``(5) Other definitions.--Any term used in this subsection 
     which is also used in section 40A shall have the meaning 
     given such term by section 40A.
       ``(6) Termination.--This subsection shall not apply to any 
     sale, use, or removal for any period after December 31, 2006.
       ``(d) Mixture Not Used as a Fuel, etc.--
       ``(1) Imposition of tax.--If--
       ``(A) any credit was determined under this section with 
     respect to alcohol or biodiesel used in the production of any 
     alcohol fuel mixture or biodiesel mixture, respectively, and
       ``(B) any person--
       ``(i) separates the alcohol or 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 applicable amount and the number of 
     gallons of such alcohol or biodiesel.
       ``(2) 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) as if such tax were imposed by section 4081 and 
     not by this section.
       ``(e) Coordination With Exemption From Excise Tax.--Rules 
     similar to the rules under section 40(c) shall apply for 
     purposes of this section.''.
       (b) Registration Requirement.--Section 4101(a) of the 
     Internal Revenue Code of 1986 (relating to registration) is 
     amended by inserting ``and every person producing or 
     importing biodiesel (as defined in section 40A(d)(1)) or 
     alcohol (as defined in section 6426(b)(4)(A))'' after 
     ``4081''.
       (c) Additional Amendments.--
       (1) Section 40(c) of the Internal Revenue Code of 1986 is 
     amended by striking ``section 4081(c), or section 4091(c)'' 
     and inserting ``section 4091(c), section 6426, section 
     6427(e), or section 6427(f)''.
       (2) Section 40(d)(4)(B) of such Code is amended by striking 
     ``or 4081(c)''.
       (3) Section 40(e)(1) of such Code is amended--
       (A) by striking ``2007'' in subparagraph (A) and inserting 
     ``2010'', and
       (B) by striking ``2008'' in subparagraph (B) and inserting 
     ``2011''.
       (4) Section 40(h) of such Code is amended--
       (A) by striking ``2007'' in paragraph (1) and inserting 
     ``2010'', and
       (B) by striking ``, 2006, or 2007'' in the table contained 
     in paragraph (2) and inserting ``through 2010''.
       (5) Section 4041(b)(2)(B) of such Code is amended by 
     striking ``a substance other than petroleum or natural gas'' 
     and inserting ``coal (including peat)''.
       (6) Paragraph (1) of section 4041(k) of such Code is 
     amended to read as follows:
       ``(1) In general.--Under regulations prescribed by the 
     Secretary, in the case of the sale or use of any liquid at 
     least 10 percent of which consists of alcohol (as defined in 
     section 6426(b)(4)(A)), the rate of the tax imposed by 
     subsection (c)(1) shall be the comparable rate under section 
     4091(c).''.
       (7) Section 4081 of such Code is amended by striking 
     subsection (c).
       (8) Paragraph (2) of section 4083(a) of such Code is 
     amended to read as follows:
       ``(2) Gasoline.--The term `gasoline'--
       ``(A) includes any gasoline blend, other than qualified 
     methanol or ethanol fuel (as defined in section 
     4041(b)(2)(B)), partially exempt methanol or ethanol fuel (as 
     defined in section 4041(m)(2)), or a denatured alcohol, and
       ``(B) includes, to the extent prescribed in regulations--
       ``(i) any gasoline blend stock, and
       ``(ii) any product commonly used as an additive in gasoline 
     (other than alcohol).

     For purposes of subparagraph (B)(i), the term `gasoline blend 
     stock' means any petroleum product component of gasoline.''.
       (9) Section 6427 of such Code is amended by inserting after 
     subsection (d) the following new subsection:
       ``(e) Alcohol or Biodiesel Used To Produce Alcohol Fuel and 
     Biodiesel Mixtures or Used as Fuels.--Except as provided in 
     subsection (k)--
       ``(1) Used to produce a mixture.--If any person produces a 
     mixture described in section 6426 in such person's trade or 
     business, the Secretary shall pay (without interest) to such 
     person an amount equal to the alcohol fuel mixture credit or 
     the biodiesel mixture credit with respect to such mixture.
       ``(2) Used as fuel.--If alcohol (as defined in section 
     40(d)(1)) or biodiesel (as defined in section 40A(d)(1)) or 
     agri-biodiesel (as defined in section 40A(d)(2)) which is not 
     in a mixture described in section 6426--
       ``(A) is used by any person as a fuel in a trade or 
     business, or
       ``(B) is sold by any person at retail to another person and 
     placed in the fuel tank of such person's vehicle,

     the Secretary shall pay (without interest) to such person an 
     amount equal to the alcohol credit (as determined under 
     section 40(b)(2)) or the biodiesel credit (as determined 
     under section 40A(b)(2)) with respect to such fuel.
       ``(3) Coordination with other repayment provisions.--No 
     amount shall be payable under paragraph (1) with respect to 
     any mixture with respect to which an amount is allowed as a 
     credit under section 6426.
       ``(4) Termination.--This subsection shall not apply with 
     respect to--
       ``(A) any alcohol fuel mixture (as defined in section 
     6426(b)(3)) or alcohol (as so defined) sold or used after 
     December 31, 2010, and
       ``(B) any biodiesel mixture (as defined in section 
     6426(c)(3)) or biodiesel (as so defined) or agri-biodiesel 
     (as so defined) sold or used after December 31, 2006.''.
       (10) Subsection (f) of section 6427 of such Code is amended 
     to read as follows:
       ``(f) Aviation Fuel Used to Produce Certain Alcohol 
     Fuels.--
       ``(1) In general.--Except as provided in subsection (k), if 
     any aviation fuel on which tax was imposed by section 4091 at 
     the regular tax rate is used by any person in producing a 
     mixture described in section 4091(c)(1)(A) which is sold or 
     used in such person's trade or business, the Secretary

[[Page S1527]]

     shall pay (without interest) to such person an amount equal 
     to the excess of the regular tax rate over the incentive tax 
     rate with respect to such fuel.
       ``(2) Definitions.--For purposes of paragraph (1)--
       ``(A) Regular tax rate.--The term `regular tax rate' means 
     the aggregate rate of tax imposed by section 4091 determined 
     without regard to subsection (c) thereof.
       ``(B) Incentive tax rate.--The term `incentive tax rate' 
     means the aggregate rate of tax imposed by section 4091 with 
     respect to fuel described in subsection (c)(2) thereof.
       ``(3) Coordination with other repayment provisions.--No 
     amount shall be payable under paragraph (1) with respect to 
     any aviation fuel with respect to which an amount is payable 
     under subsection (d) or (l).
       ``(4) Termination.--This subsection shall not apply with 
     respect to any mixture sold or used after September 30, 
     2007.''.
       (11) Paragraphs (1) and (2) of section 6427(i) of such Code 
     are amended by inserting ``(f),'' after ``(d),''.
       (12) Section 6427(i)(3) of such Code is amended--
       (A) by striking ``subsection (f)'' both places it appears 
     in subparagraph (A) and inserting ``subsection (e)(1)'',
       (B) by striking ``gasoline, diesel fuel, or kerosene used 
     to produce a qualified alcohol mixture (as defined in section 
     4081(c)(3))'' in subparagraph (A) and inserting ``a mixture 
     described in section 6426'',
       (C) by adding at the end of subparagraph (A) the following 
     new flush sentence:

     ``In the case of an electronic claim, this subparagraph shall 
     be applied without regard to clause (i).'',
       (D) by striking ``subsection (f)(1)'' in subparagraph (B) 
     and inserting ``subsection (e)(1)'',
       (E) by striking ``20 days of the date of the filing of such 
     claim'' in subparagraph (B) and inserting ``45 days of the 
     date of the filing of such claim (20 days in the case of an 
     electronic claim)'', and
       (F) by striking ``alcohol mixture'' in the heading and 
     inserting ``alcohol fuel and biodiesel mixture''.
       (13) Section 6427(o) of such Code is amended--
       (A) by striking paragraph (1) and inserting the following 
     new paragraph:
       ``(1) any tax is imposed by section 4081, and'',
       (B) by striking ``such gasohol'' in paragraph (2) and 
     inserting ``the alcohol fuel mixture (as defined in section 
     6426(b)(3))'',
       (C) by striking ``gasohol'' both places it appears in the 
     matter following paragraph (2) and inserting ``alcohol fuel 
     mixture'', and
       (D) by striking ``Gasohol'' in the heading and inserting 
     ``Alcohol Fuel Mixture''.
       (14) Section 9503(b)(1) of such Code is amended by adding 
     at the end the following new flush sentence:

     ``For purposes of this paragraph, taxes received under 
     sections 4041 and 4081 shall be determined without reduction 
     for credits under section 6426.''.
       (15) Section 9503(b)(4) of such Code is amended--
       (A) by adding ``or'' at the end of subparagraph (C),
       (B) by striking the comma at the end of subparagraph 
     (D)(iii) and inserting a period, and
       (C) by striking subparagraphs (E) and (F).
       (16) Section 9503(c)(2)(A)(i)(III) of such Code is amended 
     by inserting ``(other than subsection (e) thereof)'' after 
     ``section 6427''.
       (17) Section 9503(e)(2) of such Code is amended by striking 
     subparagraph (B) and by redesignating subparagraphs (C), (D), 
     and (E) as subparagraphs (B), (C), and (D), respectively.
       (18) The table of sections for subchapter B of chapter 65 
     of such Code is amended by inserting after the item relating 
     to section 6425 the following new item:

``Sec. 6426. Credit for alcohol fuel and biodiesel mixtures.''.

       (19) Tariff schedule.--Headings 9901.00.50 and 9901.00.52 
     of the Harmonized Tariff Schedule of the United States (19 
     U.S.C. 3007) are each amended in the effective period column 
     by striking ``10/1/2007'' each place it appears and inserting 
     ``1/1/2011''.
       (d) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to fuel sold or used after September 30, 2004.
       (2) Registration requirement.--The amendment made by 
     subsection (b) shall take effect on April 1, 2005.
       (3) Extension of alcohol fuels credit.--The amendments made 
     by paragraphs (3), (4), and (19) of subsection (c) shall take 
     effect on the date of the enactment of this Act.
       (4) Repeal of general fund retention of certain alcohol 
     fuels taxes.--The amendments made by subsection (c)(15) shall 
     apply to fuel sold or used after September 30, 2003.
       (e) Format for Filing.--The Secretary of the Treasury shall 
     describe the electronic format for filing claims described in 
     section 6427(i)(3)(B) of the Internal Revenue Code of 1986 
     (as amended by subsection (c)(12)(C)) not later than 
     September 30, 2004.

     SEC. 4. BIODIESEL INCOME TAX CREDIT.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (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 sum of--
       ``(1) the biodiesel mixture credit, plus
       ``(2) the biodiesel credit.
       ``(b) Definition of Biodiesel Mixture Credit and Biodiesel 
     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 50 cents for each gallon of 
     biodiesel used by the taxpayer in the production of a 
     qualified biodiesel mixture.
       ``(B) Qualified biodiesel mixture.--The term `qualified 
     biodiesel mixture' means a mixture of biodiesel and diesel 
     fuel (as defined in section 4083(a)(3)), determined without 
     regard to any use of kerosene, 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.
       ``(C) 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 (B) 
     is in a trade or business of the taxpayer, and
       ``(ii) for the taxable year in which such sale or use 
     occurs.
       ``(D) 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.
       ``(2) Biodiesel credit.--
       ``(A) In general.--The biodiesel credit of any taxpayer for 
     any taxable year is 50 cents for each gallon of biodiesel 
     which is not in a mixture with diesel fuel and which during 
     the taxable year--
       ``(i) is used by the taxpayer as a fuel in a trade or 
     business, or
       ``(ii) is sold by the taxpayer at retail to a person and 
     placed in the fuel tank of such person's vehicle.
       ``(B) User credit not to apply to biodiesel sold at 
     retail.--No credit shall be allowed under subparagraph (A)(i) 
     with respect to any biodiesel which was sold in a retail sale 
     described in subparagraph (A)(ii).
       ``(3) Credit for agri-biodiesel.--In the case of any 
     biodiesel which is agri-biodiesel, paragraphs (1)(A) and 
     (2)(A) shall be applied by substituting `$1.00' for `50 
     cents'.
       ``(4) Certification for biodiesel.--No credit shall be 
     allowed under this section unless the taxpayer obtains a 
     certification (in such form and manner as prescribed by the 
     Secretary) from the producer or importer of the biodiesel 
     which identifies the product produced and the percentage of 
     biodiesel and agri-biodiesel in the product.
       ``(c) Coordination With Credit Against Excise Tax.--The 
     amount of the credit determined under this section with 
     respect to any biodiesel shall be properly 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 the monoalkyl 
     esters of long chain fatty acids derived from plant or animal 
     matter which meet--
       ``(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 of Testing 
     and Materials D6751.
       ``(2) Agri-biodiesel.--The term `agri-biodiesel' means 
     biodiesel derived solely from virgin oils, including esters 
     derived from virgin vegetable oils from corn, soybeans, 
     sunflower seeds, cottonseeds, canola, crambe, rapeseeds, 
     safflowers, flaxseeds, rice bran, and mustard seeds, and from 
     animal fats.
       ``(3) Mixture or biodiesel not used as a fuel, etc.--
       ``(A) Mixtures.--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 rate applicable under subsection (b)(1)(A) 
     and the number of gallons of such biodiesel in such mixture.
       ``(B) Biodiesel.--If--
       ``(i) any credit was determined under this section with 
     respect to the retail sale of any biodiesel, and
       ``(ii) any person mixes such biodiesel or uses such 
     biodiesel other than as a fuel,

     then there is hereby imposed on such person a tax equal to 
     the product of the rate applicable under subsection (b)(2)(A) 
     and the number of gallons of such biodiesel.
       ``(C) 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) or (B) as if such tax were imposed by 
     section 4081 and not by this chapter.
       ``(4) 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) Termination.--This section shall not apply to any 
     sale or use after December 31, 2006.''.

[[Page S1528]]

       (b) Credit Treated as Part of General Business Credit.--
     Section 38(b) of the Internal Revenue Code of 1986 (relating 
     to current year business credit) 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 new paragraph:
       ``(16) the biodiesel fuels credit determined under section 
     40A(a).''.
       (c) Conforming Amendments.--
       (1) Section 39(d) of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new paragraph:
       ``(11) No carryback of biodiesel fuels credit before 
     effective date.--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 ending on or before September 30, 2004.''.
       (2)(A) Section 87 of such Code is amended to read as 
     follows:

     ``SEC. 87. ALCOHOL AND BIODIESEL FUELS CREDITS.

       ``Gross income includes--
       ``(1) the amount of the alcohol fuels credit determined 
     with respect to the taxpayer for the taxable year under 
     section 40(a), and
       ``(2) the biodiesel fuels credit determined with respect to 
     the taxpayer for the taxable year under section 40A(a).''.
       (B) The item relating to section 87 in the table of 
     sections for part II of subchapter B of chapter 1 of such 
     Code is amended by striking ``fuel credit'' and inserting 
     ``and biodiesel fuels credits''.
       (3) Section 196(c) of such Code is amended by striking 
     ``and'' at the end of paragraph (9), by striking the period 
     at the end of paragraph (10) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(11) the biodiesel fuels credit determined under section 
     40A(a).''.
       (4) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1 of such Code 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 fuel produced, and sold or used, after 
     September 30, 2004, in taxable years ending after such date.

                          ____________________