To amend the Internal Revenue Code of 1986 to provide incentives for alternative fuels and alternative fuel vehicles.

October 7, 2004

Ms. MIKULSKI introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to provide incentives for alternative fuels and alternative fuel vehicles.

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

SECTION 1. SHORT TITLE.

(a) SHORT TITLE- This Act may be cited as the `Common Sense Automobile Efficiency Act of 2004'.

(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 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. REPEAL OF PHASEOUTS FOR QUALIFIED ELECTRIC VEHICLE CREDIT AND DEDUCTION FOR CLEAN-FUEL VEHICLES.

(a) CREDIT FOR QUALIFIED ELECTRIC VEHICLES- Subsection (b) of section 30 (relating to limitations) is amended by striking paragraph (2) and redesignating paragraph (3) as paragraph (2).

(b) DEDUCTION FOR CLEAN-FUEL VEHICLES AND CERTAIN REFUELING PROPERTY- Paragraph (1) of section 179A(b) (relating to qualified clean-fuel vehicle property) is amended to read as follows:

`(1) QUALIFIED CLEAN-FUEL VEHICLE PROPERTY- The cost which may be taken into account under subsection (a)(1)(A) with respect to any motor vehicle shall not exceed--

`(A) in the case of a motor vehicle not described in subparagraph (B) or (C), $2,000,

`(B) in the case of any truck or van with a gross vehicle weight rating greater than 10,000 pounds but not greater than 26,000 pounds, $5,000, or

`(C) $50,000 in the case of--

`(i) a truck or van with a gross vehicle weight rating greater than 26,000 pounds, or

`(ii) any bus which has a seating capacity of at least 20 adults (not including the driver).'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.

SEC. 3. ALTERNATIVE MOTOR VEHICLE CREDIT.

(a) IN GENERAL- Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credit, etc.) is amended by adding at the end the following:

`SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.

`(a) ALLOWANCE OF CREDIT- There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of--

`(1) the new qualified fuel cell motor vehicle credit determined under subsection (b),

`(2) the new advanced lean burn technology motor vehicle credit determined under subsection (c),

`(3) the new qualified hybrid motor vehicle credit determined under subsection (d), and

`(4) the new qualified alternative fuel motor vehicle credit determined under subsection (e).

`(b) NEW QUALIFIED FUEL CELL MOTOR VEHICLE CREDIT-

`(1) IN GENERAL- For purposes of subsection (a), the new qualified fuel cell motor vehicle credit determined under this subsection with respect to a new qualified fuel cell motor vehicle placed in service by the taxpayer during the taxable year shall be determined in accordance with the following table:

$4,000

$10,000

$20,000

$40,000.

`(2) INCREASE FOR FUEL EFFICIENCY-

`(A) IN GENERAL- The amount determined under paragraph (1) with respect to a new qualified fuel cell motor vehicle which is a passenger automobile or light truck shall be increased by the additional credit amount.

`(B) ADDITIONAL CREDIT AMOUNT- For purposes of subparagraph (A), the additional credit amount shall be determined in accordance with the following table:

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000.

`(3) NEW QUALIFIED FUEL CELL MOTOR VEHICLE- For purposes of this subsection, the term `new qualified fuel cell motor vehicle' means a motor vehicle--

`(A) which is propelled by power derived from one or more cells which convert chemical energy directly into electricity by combining oxygen with hydrogen fuel which is stored on board the vehicle in any form and may or may not require reformation prior to use,

`(B) which, in the case of a passenger automobile or light truck, has received--

`(i) a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and

`(ii) a certificate that such vehicle meets or exceeds the Bin 5 Tier II emission standard established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle,

`(C) the original use of which commences with the taxpayer,

`(D) which is acquired for use or lease by the taxpayer and not for resale, and

`(E) which is made by a manufacturer.

`(c) NEW ADVANCED LEAN BURN TECHNOLOGY MOTOR VEHICLE CREDIT-

`(1) IN GENERAL- For purposes of subsection (a), the new advanced lean burn technology motor vehicle credit determined under this subsection with respect to a new advanced lean burn technology motor vehicle placed in service by the taxpayer during the taxable year is the credit amount determined under paragraph (2).

`(2) CREDIT AMOUNT-

`(A) FUEL ECONOMY- The credit amount determined under this paragraph shall be determined in accordance with the following table:

$400

$800

$1,200

$1,600

$2,000

$2,400.

`(B) CONSERVATION CREDIT- The amount determined under subparagraph (A) with respect to a new advanced lean burn technology motor vehicle shall be increased by the conservation credit amount determined in accordance with the following table:

$250

$500

$750

$1,000.

`(3) NEW ADVANCED LEAN BURN TECHNOLOGY MOTOR VEHICLE- For purposes of this subsection, the term `new advanced lean burn technology motor vehicle' means a passenger automobile or a light truck--

`(A) with an internal combustion engine which--

`(i) is designed to operate primarily using more air than is necessary for complete combustion of the fuel,

`(ii) incorporates direct injection,

`(iii) achieves at least 125 percent of the 2002 model year city fuel economy, and

`(iv) for 2004 and later model vehicles, has received a certificate that such vehicle meets or exceeds--

`(I) in the case of a vehicle having a gross vehicle weight rating of 6,000 pounds or less, the Bin 5 Tier II emission standard established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle, and

`(II) in the case of a vehicle having a gross vehicle weight rating of more than 6,000 pounds but not more than 8,500 pounds, the Bin 8 Tier II emission standard which is so established,

`(B) the original use of which commences with the taxpayer,

`(C) which is acquired for use or lease by the taxpayer and not for resale, and

`(D) which is made by a manufacturer.

`(4) LIFETIME FUEL SAVINGS- For purposes of this subsection, the term `lifetime fuel savings' means, in the case of any new advanced lean burn technology motor vehicle, an amount equal to the excess (if any) of--

`(A) 120,000 divided by the 2002 model year city fuel economy for the vehicle inertia weight class, over

`(B) 120,000 divided by the city fuel economy for such vehicle.

`(d) NEW QUALIFIED HYBRID MOTOR VEHICLE CREDIT-

`(1) IN GENERAL- For purposes of subsection (a), the new qualified hybrid motor vehicle credit determined under this subsection with respect to a new qualified hybrid motor vehicle placed in service by the taxpayer during the taxable year is the credit amount determined under paragraph (2).

`(2) CREDIT AMOUNT-

`(A) CREDIT AMOUNT FOR PASSENGER AUTOMOBILES AND LIGHT TRUCKS- In the case of a new qualified hybrid motor vehicle which is a passenger automobile or light truck and which has a gross vehicle weight rating of

not more than 8,500 pounds, the amount determined under this paragraph is the sum of the amounts determined under clauses (i) and (ii).

`(i) FUEL ECONOMY- The amount determined under this clause is the amount which would be determined under subsection (c)(2)(A) if such vehicle were a vehicle referred to in such subsection.

`(ii) CONSERVATION CREDIT- The amount determined under this clause is the amount which would be determined under subsection (c)(2)(B) if such vehicle were a vehicle referred to in such subsection.

`(B) CREDIT AMOUNT FOR OTHER MOTOR VEHICLES-

`(i) IN GENERAL- In the case of any new qualified hybrid motor vehicle to which subparagraph (A) does not apply, the amount determined under this paragraph is the amount equal to the applicable percentage of the qualified incremental hybrid cost of the vehicle as certified under clause (v).

`(ii) APPLICABLE PERCENTAGE- For purposes of clause (i), the applicable percentage is--

`(I) 20 percent if the vehicle achieves an increase in city fuel economy relative to a comparable vehicle of at least 30 percent but less than 40 percent,

`(II) 30 percent if the vehicle achieves such an increase of at least 40 percent but less than 50 percent, and

`(III) 40 percent if the vehicle achieves such an increase of at least 50 percent.

`(iii) QUALIFIED INCREMENTAL HYBRID COST- For purposes of this subparagraph, the qualified incremental hybrid cost of any vehicle is equal to the amount of the excess of the manufacturer's suggested retail price for such vehicle over such price for a comparable vehicle, to the extent such amount does not exceed--

`(I) $10,000, if such vehicle has a gross vehicle weight rating of not more than 14,000 pounds,

`(II) $25,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and

`(III) $40,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.

`(iv) COMPARABLE VEHICLE- For purposes of this subparagraph, the term `comparable vehicle' means, with respect to any new qualified hybrid motor vehicle, any vehicle which is powered solely by a gasoline or diesel internal combustion engine and which is comparable in weight, size, and use to such vehicle.

`(v) CERTIFICATION- A certification described in clause (i) shall be made by the manufacturer and shall be determined in accordance with guidance prescribed by the Secretary. Such guidance shall specify procedures and methods for calculating fuel economy savings and incremental hybrid costs.

`(3) NEW QUALIFIED HYBRID MOTOR VEHICLE- For purposes of this subsection--

`(A) IN GENERAL- The term `new qualified hybrid motor vehicle' means a motor vehicle--

`(i) which draws propulsion energy from onboard sources of stored energy which are both--

`(I) an internal combustion or heat engine using consumable fuel, and

`(II) a rechargeable energy storage system,

`(ii) which, in the case of a vehicle to which paragraph (2)(A) applies, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and

`(I) in the case of a vehicle having a gross vehicle weight rating of 6,000 pounds or less, the Bin 5 Tier II emission standard established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle, and

`(II) in the case of a vehicle having a gross vehicle weight rating of more than 6,000 pounds but not more than 8,500 pounds, the Bin 8 Tier II emission standard which is so established,

`(iii) which has a maximum available power of at least--

`(I) 4 percent in the case of a vehicle to which paragraph (2)(A) applies,

`(II) 10 percent in the case of a vehicle which has a gross vehicle weight rating or more than 8,500 pounds and not than 14,000 pounds, and

`(III) 15 percent in the case of a vehicle in excess of 14,000 pounds,

`(iv) which, in the case of a vehicle to which paragraph (2)(B) applies, has an internal combustion or heat engine which has received a certificate of conformity under the Clean Air Act as meeting the emission standards set in the regulations prescribed by the Administrator of the Environmental Protection Agency for 2004 through 2007 model year diesel heavy duty engines or ottocycle heavy duty engines, as applicable,

`(v) the original use of which commences with the taxpayer,

`(vi) which is acquired for use or lease by the taxpayer and not for resale, and

`(vii) which is made by a manufacturer.

Such term shall not include any vehicle which is not a passenger automobile or light truck if such vehicle has a gross vehicle weight rating of less than 8,500 pounds.

`(B) CONSUMABLE FUEL- For purposes of subparagraph (A)(i)(I), the term `consumable fuel' means any solid, liquid, or gaseous matter which releases energy when consumed by an auxiliary power unit.

`(C) MAXIMUM AVAILABLE POWER-

`(i) CERTAIN PASSENGER AUTOMOBILES AND LIGHT TRUCKS- In the case of a vehicle to which paragraph (2)(A) applies, the term `maximum available power' means the maximum power available from the rechargeable energy storage system, during a standard 10 second pulse power or equivalent test, divided by such maximum power and the SAE net power of the heat engine.

`(ii) OTHER MOTOR VEHICLES- In the case of a vehicle to which paragraph (2)(B) applies, the term `maximum available power' means the maximum power available from the rechargeable energy storage system, during a standard 10 second pulse power or equivalent test, divided by the vehicle's total traction power. For purposes of the preceding sentence, the term `total traction power' means the sum of the peak power from the rechargeable energy storage system and the heat engine peak power of the vehicle, except that if such storage system is the sole means by which the vehicle can be driven, the total traction power is the peak power of such storage system.

`(e) NEW QUALIFIED ALTERNATIVE FUEL MOTOR VEHICLE CREDIT-

`(1) ALLOWANCE OF CREDIT- Except as provided in paragraph (5), the new qualified alternative

fuel motor vehicle credit determined under this subsection is an amount equal to the applicable percentage of the incremental cost of any new qualified alternative fuel motor vehicle placed in service by the taxpayer during the taxable year.

`(2) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the applicable percentage with respect to any new qualified alternative fuel motor vehicle is--

`(A) 40 percent, plus

`(B) 30 percent, if such vehicle--

`(i) has received a certificate of conformity under the Clean Air Act and meets or exceeds the most stringent standard available for certification under the Clean Air Act for that make and model year vehicle (other than a zero emission standard), or

`(ii) has received an order certifying the vehicle as meeting the same requirements as vehicles which may be sold or leased in California and meets or exceeds the most stringent standard available for certification under the State laws of California (enacted in accordance with a waiver granted under section 209(b) of the Clean Air Act) for that make and model year vehicle (other than a zero emission standard).

For purposes of the preceding sentence, in the case of any new qualified alternative fuel motor vehicle which has a gross vehicle weight rating of more than 14,000 pounds, the most stringent standard available shall be such standard available for certification on the date of the enactment of this act.

`(3) INCREMENTAL COST- For purposes of this subsection, the incremental cost of any new qualified alternative fuel motor vehicle is equal to the amount of the excess of the manufacturer's suggested retail price for such vehicle over such price for a gasoline or diesel fuel motor vehicle of the same model, to the extent such amount does not exceed--

`(A) $5,000, if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds,

`(B) $10,000, if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds,

`(C) $25,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and

`(D) $40,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.

`(4) NEW QUALIFIED ALTERNATIVE FUEL MOTOR VEHICLE- For purposes of this subsection--

`(A) IN GENERAL- The term `new qualified alternative fuel motor vehicle' means any motor vehicle--

`(i) which is only capable of operating on an alternative fuel,

`(ii) the original use of which commences with the taxpayer,

`(iii) which is acquired by the taxpayer for use or lease, but not for resale, and

`(iv) which is made by a manufacturer.

`(B) ALTERNATIVE FUEL- The term `alternative fuel' means compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and any liquid at least 85 percent of the volume of which consists of methanol.

`(5) CREDIT FOR MIXED-FUEL VEHICLES-

`(A) IN GENERAL- In the case of a mixed-fuel vehicle placed in service by the taxpayer during the taxable year, the credit determined under this subsection is an amount equal to--

`(i) in the case of a 75/25 mixed-fuel vehicle, 70 percent of the credit which would have been allowed under this subsection if such vehicle was a qualified alternative fuel motor vehicle, and

`(ii) in the case of a 90/10 mixed-fuel vehicle, 90 percent of the credit which would have been allowed under this subsection if such vehicle was a qualified alternative fuel motor vehicle.

`(B) MIXED-FUEL VEHICLE- For purposes of this subsection, the term `mixed-fuel vehicle' means any motor vehicle described in subparagraph (C) or (D) of paragraph (3), which--

`(i) is certified by the manufacturer as being able to perform efficiently in

normal operation on a combination of an alternative fuel and a petroleum-based fuel,

`(ii) either--

`(I) has received a certificate of conformity under the Clean Air Act, or

`(II) has received an order certifying the vehicle as meeting the same requirements as vehicles which may be sold or leased in California and meets or exceeds the low emission vehicle standard under section 88.105-94 of title 40, Code of Federal Regulations, for that make and model year vehicle,

`(iii) the original use of which commences with the taxpayer,

`(iv) which is acquired by the taxpayer for use or lease, but not for resale, and

`(v) which is made by a manufacturer.

`(C) 75/25 MIXED-FUEL VEHICLE- For purposes of this subsection, the term `75/25 mixed-fuel vehicle' means a mixed-fuel vehicle which operates using at least 75 percent alternative fuel and not more than 25 percent petroleum-based fuel.

`(D) 90/10 MIXED-FUEL VEHICLE- For purposes of this subsection, the term `90/10 mixed-fuel vehicle' means a mixed-fuel vehicle which operates using at least 90 percent alternative fuel and not more than 10 percent petroleum-based fuel.

`(f) LIMITATION ON NUMBER OF NEW QUALIFIED HYBRID AND ADVANCED LEAN-BURN TECHNOLOGY VEHICLES ELIGIBLE FOR CREDIT-

`(1) IN GENERAL- In the case of a qualified vehicle sold during the phaseout period, only the applicable percentage of the credit otherwise allowable under subsection (c) or (d) shall be allowed.

`(2) PHASEOUT PERIOD- For purposes of this subsection, the phaseout period is the period beginning with the second calendar quarter following the calendar quarter which includes the first date on which the number of qualified vehicles manufactured by the manufacturer of the vehicle referred to in paragraph (1) sold for use in the United States after the date of the enactment of this section is at least 80,000.

`(3) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the applicable percentage is--

`(A) 50 percent for the first 2 calendar quarters of the phaseout period,

`(B) 25 percent for the 3d and 4th calendar quarters of the phaseout period, and

`(C) 0 percent for each calendar quarter thereafter.

`(4) CONTROLLED GROUPS-

`(A) IN GENERAL- For purposes of this subsection, all persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as a single manufacturer.

`(B) INCLUSION OF FOREIGN CORPORATIONS- For purposes of subparagraph (A), in

applying subsections (a) and (b) of section 52 to this section, section 1563 shall be applied without regard to subsection (b)(2)(C) thereof.

`(5) QUALIFIED VEHICLE- For purposes of this subsection, the term `qualified vehicle' means any new qualified hybrid motor vehicle and any new advanced lean burn technology motor vehicle.

`(g) LIMITATION BASED ON AMOUNT OF TAX- The credit allowed under subsection (a) for the taxable year shall not exceed the excess of--

`(1) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

`(2) the sum of the credits allowable under subpart A and sections 27 and 30 for the taxable year.

`(h) OTHER DEFINITIONS AND SPECIAL RULES- For purposes of this section--

`(1) MOTOR VEHICLE- The term `motor vehicle' has the meaning given such term by section 30(c)(2).

`(2) OTHER TERMS- The terms `automobile', `passenger automobile', `light truck', and `manufacturer' have the meanings given such terms in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).

`(3) 2002 MODEL YEAR CITY FUEL ECONOMY-

`(A) IN GENERAL- The 2002 model year city fuel economy with respect to a vehicle shall

be determined in accordance with the following tables:

`(i) In the case of a passenger automobile:

45.2 mpg

39.6 mpg

35.2 mpg

31.7 mpg

28.8 mpg

26.4 mpg

22.6 mpg

19.8 mpg

17.6 mpg

15.9 mpg

14.4 mpg

13.2 mpg

12.2 mpg

11.3 mpg.

`(ii) In the case of a light truck:

39.4 mpg

35.2 mpg

31.8 mpg

29.0 mpg

26.8 mpg

24.9 mpg

21.8 mpg

19.4 mpg

17.6 mpg

16.1 mpg

14.8 mpg

13.7 mpg

12.8 mpg

12.1 mpg.

`(B) VEHICLE INERTIA WEIGHT CLASS- For purposes of subparagraph (A), the term `vehicle inertia weight class' has the same meaning as when defined in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).

`(4) FUEL ECONOMY- Fuel economy with respect to any vehicle shall be measured under rules similar to the rules under section 4064(c).

`(5) REDUCTION IN BASIS- For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this paragraph) result from such expenditure shall be reduced by the amount of the credit so allowed.

`(6) NO DOUBLE BENEFIT- The amount of any deduction or credit allowable under this chapter (other than the credits allowable under this section and section 30) shall be reduced by the amount of credit allowed under subsection (a) for such vehicle for the taxable year.

`(7) RECAPTURE- The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit (including recapture in the case of a lease period of less than the economic life of a vehicle).

`(8) PROPERTY USED OUTSIDE UNITED STATES, ETC., NOT QUALIFIED- No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b) or with respect to the portion of the cost of any property taken into account under section 179.

`(9) ELECTION NOT TO TAKE CREDIT- No credit shall be allowed under subsection (a) for any vehicle if the taxpayer elects to not have this section apply to such vehicle.

`(10) BUSINESS CARRYOVERS ALLOWED- If the credit allowable under subsection (a) for a taxable year exceeds the limitation under subsection (g) for such taxable year, such excess (to the extent of the credit allowable with respect to property subject to the allowance for depreciation) shall be allowed as a credit carryback and carryforward under rules similar to the rules of section 39.

`(11) INTERACTION WITH MOTOR VEHICLE SAFETY STANDARDS- Unless otherwise provided in this section, a motor vehicle shall not be considered eligible for a credit under this section unless such vehicle is in compliance with the motor vehicle safety provisions of sections 30101 through 30169 of title 49, United States Code.

`(i) REGULATIONS-

`(1) IN GENERAL- The Secretary shall promulgate such regulations as necessary to carry out the provisions of this section.

`(2) DETERMINATION OF MOTOR VEHICLE ELIGIBILITY- The Secretary, after coordination with the Secretary of Transportation and the Administrator of the Environmental Protection Agency, shall prescribe such regulations as necessary to determine whether a motor vehicle meets the requirements to be eligible for a credit under this section.

`(j) TERMINATION- This section shall not apply to any property placed in service after--

`(1) in the case of a new qualified alternative fuel motor vehicle, December 31, 2006,

`(2) in the case of a new advanced lean burn technology motor vehicle or a new qualified hybrid motor vehicle, December 31, 2008, and

`(3) in the case of a new qualified fuel cell motor vehicle, December 31, 2012.'.

(b) CONFORMING AMENDMENTS-

(1) Section 30(d) (relating to special rules) is amended by adding at the end the following new paragraphs:

`(5) NO DOUBLE BENEFIT- No credit shall be allowed under this section for any motor vehicle for which a credit is also allowed under section 30B.'.

(2) Section 1016(a) is amended by striking `and' at the end of paragraph (27), by striking the period at the end of paragraph (28) and inserting `, and', and by adding at the end the following:

`(29) to the extent provided in section 30B(h)(5).'.

(3) Section 6501(m) is amended by inserting `30B(h)(9),' after `30(d)(4),'.

(4) The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 30A the following:

`Sec. 30B. Alternative motor vehicle credit.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act, in taxable years ending after such date.

(d) STICKER INFORMATION REQUIRED AT RETAIL SALE-

(1) IN GENERAL- The Secretary of the Treasury shall issue regulations under which each qualified vehicle sold at retail shall display a notice--

(A) that such vehicle is a qualified vehicle, and

(B) that the buyer may not benefit from the credit allowed under section 30B of the Internal Revenue Code of 1986 if such buyer has insufficient tax liability.

(2) QUALIFIED VEHICLE- For purposes of paragraph (1), the term `qualified vehicle' means a vehicle with respect to which a credit is allowed under section 30B of the Internal Revenue Code of 1986.

SEC. 4. SMALL ETHANOL PRODUCER CREDIT.

(a) ALLOCATION OF ALCOHOL FUELS CREDIT TO PATRONS OF A COOPERATIVE- Section 40(g) (relating to definitions and special rules for eligible small ethanol producer credit) is amended by adding at the end the following new paragraph:

`(6) ALLOCATION OF SMALL ETHANOL PRODUCER 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 credit determined under subsection (a)(3) 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.

`(B) TREATMENT OF ORGANIZATIONS AND PATRONS- The amount of the credit apportioned to patrons under subparagraph (A)--

`(i) shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year, and

`(ii) shall be included in the amount determined under subsection (a) for the taxable year of each patron for which the patronage dividends for the taxable year described in subparagraph (A) are included in gross income.

`(C) SPECIAL RULE- If the amount of a credit which has been apportioned to any patron under this paragraph is decreased for any reason--

`(i) such amount shall not increase the tax imposed on such patron, and

`(ii) the tax imposed by this chapter on such organization shall be increased by such amount.

The increase under clause (ii) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.'.

(b) DEFINITION OF SMALL ETHANOL PRODUCER- Section 40(g) (relating to definitions and special rules for eligible small ethanol producer credit) is amended by striking `30,000,000' each place it appears and inserting `60,000,000'.

(c) CONFORMING AMENDMENT- Section 1388 (relating to definitions and special rules for cooperative organizations) is amended by adding at the end the following new subsection:

`(k) Cross Reference-

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.

SEC. 5. INCENTIVES FOR BIODIESEL.

(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 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 a taxable fuel (within the meaning of section 4083(a)(1)) 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 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 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.

`(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, 2005.'.

(b) CREDIT TREATED AS PART OF GENERAL BUSINESS CREDIT- Section 38(b) (relating to current year business credit) is amended by striking `plus' at the end of paragraph (16), by striking the period at the end of paragraph (17) and inserting `, plus', and by adding at the end the following new paragraph:

`(18) the biodiesel fuels credit determined under section 40A(a).'.

(c) CONFORMING AMENDMENTS-

(1)(A) Section 87 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 is amended by striking `fuel credit' and inserting `and biodiesel fuels credits'.

(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 inserting `, and', and by adding at the end the following new paragraph:

`(11) the biodiesel fuels credit determined under section 40A(a).'.

(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 fuel produced, and sold or used, after December 31, 2003, in taxable years ending after such date.

SEC. 6. ALCOHOL FUEL AND BIODIESEL MIXTURES EXCISE TAX CREDIT.

(a) IN GENERAL- Subchapter B of chapter 65 (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 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) 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, 2005.

`(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) (relating to registration) is amended by inserting `and every person producing biodiesel (as defined in section

40A(d)(1)) or alcohol (as defined in section 6426(b)(4)(A))' after `4091'.

(c) ADDITIONAL AMENDMENTS-

(1) Section 40(c) is amended by striking `or section 4091(c)' and inserting `section 4091(c), or section 6426'.

(2) Section 40(e)(1) is amended--

(A) by striking `2007' in subparagraph (A) and inserting `2010', and

(B) by striking `2008' in subparagraph (B) and inserting `2011'.

(3) Section 40(h) 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'.

(4)(A) Subpart C of part III of subchapter A of chapter 32 is amended by adding at the end the following new section:

`SEC. 4104. INFORMATION REPORTING FOR PERSONS CLAIMING CERTAIN TAX BENEFITS.

`(a) IN GENERAL- The Secretary shall require any person claiming tax benefits under the provisions of section 34, 40, 40A, 4041(b)(2), 4041(k), 4081(c), 6426, or 6427(f) to file a quarterly return (in such manner as the Secretary may prescribe) providing such information relating to such benefits and the coordination of such benefits as the Secretary may require to ensure the proper administration and use of such benefits.

`(b) ENFORCEMENT- With respect to any person described in subsection (a) and subject to registration requirements under this title, rules similar to rules of section 4222(c) shall apply with respect to any requirement under this section.'.

(B) The table of sections for subpart C of part III of subchapter A of chapter 32 is amended by adding at the end the following new item:

(5) Section 6427(i)(3) is amended--

(A) 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).', and

(B) 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)'.

(6) Section 9503(b)(1) 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.'.

(d) CLERICAL AMENDMENT- The table of sections for subchapter B of chapter 65 is amended by inserting after the item relating to section 6425 the following new item:

(e) EFFECTIVE DATES-

(1) IN GENERAL- Except as provided in paragraphs (2) and (3), the amendments made by this section shall apply to fuel sold, used, or removed after December 31, 2003.

(2) SUBSECTION (c)(4)- The amendments made by subsection (c)(4) shall take effect on January 1, 2004.

(3) SUBSECTION (c)(5)- The amendments made by subsection (c)(5) shall apply to claims filed after December 31, 2004.

(f) FORMAT FOR FILING- The Secretary of the Treasury shall prescribe 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)(5)(A)) not later than December 31, 2004.

SEC. 7. NONAPPLICATION OF EXPORT EXEMPTION TO DELIVERY OF FUEL TO MOTOR VEHICLES REMOVED FROM UNITED STATES.

(a) IN GENERAL- Section 4221(d)(2) (defining export) is amended by adding at the end the following new sentence: `Such term does not include the delivery of a taxable fuel (as defined in section 4083(a)(1)) into a fuel tank of a motor vehicle which is shipped or driven out of the United States.'.

(b) CONFORMING AMENDMENTS-

(1) Section 4041(g) (relating to other exemptions) is amended by adding at the end the following new sentence: `Paragraph (3) shall not apply to the sale for delivery of a liquid into a fuel tank of a motor vehicle which is shipped or driven out of the United States.'.

(2) Clause (iv) of section 4081(a)(1)(A) (relating to tax on removal, entry, or sale) is amended by inserting `or at a duty-free sales enterprise (as defined in section 555(b)(8) of the Tariff Act of 1930)' after `section 4101'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to sales or deliveries made after the date of the enactment of this Act.

END