1. Short title
This Act may be cited as the “Biodiesel Tax Incentive Reform and Extension Act of 2014”.
Biodiesel Tax Incentive Reform and Extension Act of 2014
A BILL
To amend the Internal Revenue Code of 1986 to modify the incentives for the production of biodiesel.
2. Reform of biodiesel income tax incentives
In general— Section 40A of the Internal Revenue Code of 1986 is amended to read as follows:
“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.
“(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),
“(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.
“(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.
“(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.”
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:
Effective date— The amendments made by this section shall apply to biodiesel sold or used after December 31, 2013.
3. Reform of biodiesel excise tax incentives
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.”
Payment of credit— Subsection (e) of section 6427 of the Internal Revenue Code of 1986 is amended—
by striking “or the biodiesel mixture credit” in paragraph (1),
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.”
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)”,
by striking “alternative fuel” each place it appears in paragraphs (4) and (6), as redesignated by paragraph (2), and inserting “fuel”,
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
by striking “2013” in paragraph (7)(B), as so redesignated, and inserting “2017”.
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—
by striking “clause (ii)” in clause (i) and inserting “clauses (ii) and (iii)”, and
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.”
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)”.
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,
“(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.”
Clerical amendments—
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”.
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”.
Effective date— The amendments made by this section shall apply to biodiesel sold or used after December 31, 2013.
4. Biodiesel treated as taxable fuel
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)”.
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.