CREDIT FOR SMALL PRODUCERS OF ETHANOL; MODIFICATION OF ALCOHOL FUELS CREDIT.

SEC. 11502. CREDIT FOR SMALL PRODUCERS OF ETHANOL; MODIFICATION OF ALCOHOL FUELS CREDIT. (a) Allowance of Credit.— Section 40(a) (relating to alcohol used as fuel) is amended— (1) by striking the period at the end of paragraph (2) and inserting “, plus”, and (2) by adding at the end thereof the following new paragraph: “(3) in the case of an eligible small ethanol producer, the small ethanol producer credit.” (b) Small Ethanol Producer Credit.— Subsection (b) of section 40 is amended— (1) by redesignating paragraph (4) as paragraph (5), (2) by inserting after paragraph (3) the following new paragraph: “(4) Small ethanol producer credit.— “(A) In general.— The small ethanol producer credit of any eligible small ethanol producer for any taxable year is 10 cents for each gallon of qualified ethanol fuel production of such producer, “(B) Qualified ethanol fuel production.— For purposes of this paragraph, the term ‘qualified ethanol fuel production’ means any alcohol which is ethanol which is produced by an eligible small ethanol 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 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 ethanol at retail to another person and places such ethanol 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 ethanol fuel production of any producer for any taxable year shall not exceed 15,000,000 gallons. “(D) Additional distillation excluded.— The qualified ethanol fuel production of any producer for any taxable year shall not include any alcohol which is purchased by the producer and with respect to which such producer increases the proof of the alcohol by additional distillation.”; and (3) by striking “and Alcohol Credit” in the heading for such subsection and inserting “, Alcohol Credit, and Small Ethanol Producer Credit”. 104 STAT. 1388–481 (c) Definitions and Special Rules for Eligible Small Ethanol Producer Credit.— Section 40 is amended by adding at the end thereof the following new subsection: “(g) Definitions and Special Rules for Eligible Small Ethanol Producer Credit.— For purposes of this section— “(1) Eligible small ethanol producer.— The term ‘eligible small ethanol producer’ means a person who, at all times during the taxable year, has a productive capacity for alcohol (as defined in subsection (d)(I)(A) without regard to clauses (i) and (ii)) not in excess of 30,000,000 gallons. “(2) Aggregration rule.— For purposes of the 15,000,000 gallon limitation under subsection (b)(4)(O and the 30,000,000 gallon limitation under paragraph (1), all members of the same controlled group of corporations (within the meaning of section 267(D) 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 corporations, 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)(4)(O 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 30,000,000 gallons of alcohol 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.” (d) Alcohol Not Used as Fuel.— (1) In general.— Section 40(d)(3) is amended by redesignating subparagraph (C) as subparagraph (D) and by inserting after subparagraph (B) the following new subparagraph: “(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)(4)(B), then there is hereby imposed on such person a tax equal to 10 cents a gallon for each gallon of such alcohol.”. (2) Conforming amendment.— Section 40(d)(3)(D), as redesignated by paragraph (1), is amended by striking “subparagraph (A) or (B)” and inserting “subparagraph (A), (B), or (C)”. (e) Reduced Credit for Ethanol Blenders.— (1) In general.— Section 40, as amended by subsection (c), is amended by adding at the end thereof the following new subsection: “(h) Reduced Credit for Ethanol Blenders.— In the case of any alcohol mixture credit or alcohol credit with respect to any alcohol which is ethanol— 104 STAT. 1388–482 “(1) subsections (b)(I)(A) and (b)(2)(A) shall be applied by substituting ‘54 cents’ for ‘60 cents’; “(2) subsection (b)(3) shall be applied by substituting ‘40 cents’ for ‘45 cents’ and ‘54 cents’ for ‘60 cents’; and “(3) subparagraphs (A) and (B) of subsection (d)(3) shall be applied by substituting ‘54 cents’ for ‘60 cents’ and ‘40 cents’ for ‘45 cents’.” (2) Conforming amendment.— Section 40(b) is amended by inserting “, and except as provided in subsection (h)” in the matter preceding paragraph (1) thereof. (f) Termination.— Subsection (e) of section 40 is amended to read as follows: “(e) Termination.— “(1) In general.— This section shall not apply to any sale or use— “(A) for any period after December 31, 2000, or “(B) for any period before January 1, 2001, during which the Highway Trust Fund financing rate under section 4081(a)(2) is not in effect. “(2) No carryovers to certain years after expiration.— If this section ceases to apply for any period by reason of paragraph (1), no amount attributable to any sale or use before the first day of such period may be carried under section 39 by reason of this section (treating the amount allowed by reason of this section as the first amount allowed by this subpart) to any taxable year beginning after the 3-taxable-year period beginning with the taxable year in which such first day occurs.” (g) Conforming Amendments to Tariff Schedule.— (1) Heading 9901.00.50 of the Harmonized Tariff Schedule of the United States (19 U.S.C. 3007) is amended— (A) by striking “15.850” each place it appears and inserting “14.27¢”, (B) by striking “12.60” and inserting “11.340”, and (C) by striking the date in the effective period column and inserting “Before 10/1/2000, except that the rate for articles described in this heading shall not apply during any period before 10/1/2000 during which the Highway Trust Fund financing rate under section 4081(a)(2) of the Internal Revenue Code of 1986 is not in effect.” (2) Heading 9901.00.52 of the Harmonized Tariff Schedule of the United States is amended— (A) by striking “6.660” each place it appears and inserting “5.990”, (B) by striking “5.290” and inserting “4.760”, and (C) by striking “The earlier of 12/31/92, or the date on which Treasury regulation § 1.40–1 is withdrawn or declared invalid.” in the effective period column and inserting: “Before the earlier of 10/1/2000, or the date on which Treas. Reg. § 1.40–1 is withdrawn or declared invalid, except that the rate for articles described in this heading shall not apply during any period before 10/1/2000 during which the Highway Trust Fund financing rate under section 4081(a)(2) of the Internal Revenue Code of 1986 is not in effect.” (h) Effective Dates.— 104 STAT. 1388–483 (1) Except as provided in paragraph (2), the amendments made by this section shall apply to alcohol produced, and sold or used, in taxable years beginning after December 31, 1990. (2) The amendments made by subsection (g) shall apply to articles entered or withdrawn from warehouse on or after January 1, 1991.