Internal Revenue Code:Sec. 40A. Biodiesel and renewable diesel used as fuel
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart D - Business Related Credits
Statute
SEC. 40A. BIODIESEL AND RENEWABLE DIESEL 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, plus
(3) in the case of an eligible small agri-biodiesel
producer, the small agri-biodiesel producer credit.
(b) Definition of Biodiesel Mixture Credit, Biodiesel
Credit, and Small Agri-biodiesel Producer 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 <<NOTE: Applicability.>> 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 paragraph (1) or (2) of subsection (a)
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.
(5) SMALL AGRI-BIODIESEL PRODUCER CREDIT-
(A) IN GENERAL- The small agri-biodiesel producer credit
of any eligible small agri-biodiesel producer for any
taxable year is 10 cents for each gallon of qualified
agri-biodiesel production of such producer.
(B) QUALIFIED AGRI-BIODIESEL PRODUCTION- For purposes of
this paragraph, the term `qualified agri-biodiesel
production' means any agri-biodiesel which is produced
by an eligible small agri-biodiesel producer, and which
during the taxable year--
(i) is sold by such producer to another person--
(I) for use by such other person in the production
of a qualified biodiesel mixture in 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 agri-biodiesel at retail to
another person and places such agri-biodiesel in
the fuel tank of such other person, or
(ii) is used or sold by such producer for any purpose
described in clause (i).
(C) LIMITATION- The qualified agri-biodiesel production
of any producer for any taxable year shall not exceed
15,000,000 gallons.
(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) PRODUCER CREDIT- If--
(i) any credit was determined under subsection (a)
(3), and
(ii) any person does not use such fuel for a purpose
described in subsection (b)(5)(B), then there is
hereby imposed on such person a tax equal to 10
cents a gallon for each gallon of such agri-
biodiesel.
(D) 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 <<NOTE: Regulations. Applicability.>> 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) Definitions and Special Rules for Small Agri-Biodiesel
Producer Credit- For purposes of this section--
(1) ELIGIBLE SMALL AGRI-BIODIESEL PRODUCER- The term
`eligible small agri-biodiesel producer' means a person
who, at all times during the taxable year, has a
productive capacity for agri-biodiesel not in excess of
60,000,000 gallons.
(2) AGGREGATION RULE- For purposes of the 15,000,000 gallon
limitation under subsection (b)(5)(C) 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)(5)(C) 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 (a)
(3) from directly or indirectly benefiting any person
with a direct or indirect productive capacity of more
than 60,000,000 gallons of agri-biodiesel during the
taxable year, or
(B) to prevent any person from directly or indirectly
benefiting with respect to more than 15,000,000
gallons during the taxable year.
(6) ALLOCATION OF SMALL AGRI-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 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. 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 (a)(3) 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. Such increase 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.
(f) Renewable Diesel- For purposes of this title--
(1) TREATMENT IN THE SAME MANNER AS BIODIESEL- Except as
provided in paragraph (2), renewable diesel shall be
treated in the same manner as biodiesel.
(2) EXCEPTIONS-
(A) RATE OF CREDIT- Subsections (b)(1)(A) and (b)(2)(A)
shall be applied with respect to renewable diesel by
substituting `$1.00' for `50 cents'.
(B) NONAPPLICATION OF CERTAIN CREDITS- Subsections
(b)(3) and (b)(5) shall not apply with respect to
renewable diesel.
(3) RENEWABLE DIESEL DEFINED- The term `renewable diesel'
means diesel fuel derived from biomass (as defined in
section 45K(c)(3)) using a thermal depolymerization
process 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 of Testing
and Materials D975 or D396.'.
(g) Termination.--This section shall not apply to any sale or use
after December 31, 2008.
Sources
Miscellaneous
AMENDMENTS
2005 - Energy Policy Act of 2005, Sec.1346(a), amended
Sec.40A by redesignating section (f) as (g) and adding
a new section (f)"Renewable Diesel". The amendment made
by subsection (a) shall apply with respect to fuel sold
or used after December 31, 2005.
2005 - Energy Policy Act of 2005, Sec.1345(d)(3),
amended Sec.40A(d)(3)by designating subparagraph (C)
to (D) and adding a new subparagraph (C). The amendments
made by this section shall apply to taxable years ending
after the date of the enactment of this Act.
2005 - Energy Policy Act of 2005, Sec.1345(c), amended Sec.40A
by redesignating paragraph (e) as (f) and adding a new
paragraph (e). The amendments made by this section shall apply
to taxable years ending after the date of the enactment of
this Act.
2005 - Energy Policy Act of 2005, Sec.1345(a), amended Sec.40A
(a) by restating the General Rule. Sec.1345(b), amended Sec.
40A(b) by adding new paragraph (5).The amendments made by these
sections shall apply to taxable years ending after the date of
the enactment of this Act.
2005 - Energy Policy Act of 2005, Sec.1344, amended Sec.40A
(e) by striking `2006' and inserting `2008'. The amendments
made by this section shall take effect on the date of the
enactment of this Act.
2004 - Pub. L. 108-357, Sec. 302(a). 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."
Effective Date.--The amendments made by this section shall apply
to fuel produced, and sold or used, after December 31, 2004, in
taxable years ending after such date.
References
SECTION REFERRED TO IN OTHER SECTIONS
