§ 40. Alcohol, etc., used as fuel
(a)
General rule
For purposes of section
38, the alcohol fuels credit determined under this section for the taxable year is an amount equal to the sum of—
(b)
Definition of alcohol mixture credit, alcohol credit, and small ethanol producer credit
For purposes of this section, and except as provided in subsection (h)—
(1)
Alcohol mixture credit
(A)
In general
The alcohol mixture credit of any taxpayer for any taxable year is 60 cents for each gallon of alcohol used by the taxpayer in the production of a qualified mixture.
(B)
Qualified mixture
The term “qualified mixture” means a mixture of alcohol and gasoline or of alcohol and a special fuel which—
(2)
Alcohol credit
(3)
Smaller credit for lower proof alcohol
In the case of any alcohol with a proof which is at least 150 but less than 190, paragraphs (1)(A) and (2)(A) shall be applied by substituting “45 cents” for “60 cents”.
(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—
(5)
Adding of denaturants not treated as mixture
The adding of any denaturant to alcohol shall not be treated as the production of a mixture.
(6)
Cellulosic biofuel producer credit
(A)
In general
The cellulosic biofuel producer credit of any taxpayer is an amount equal to the applicable amount for each gallon of qualified cellulosic biofuel production.
(B)
Applicable amount
For purposes of subparagraph (A), the applicable amount means $1.01, except that such amount shall, in the case of cellulosic biofuel which is alcohol, be reduced by the sum of—
(C)
Qualified cellulosic biofuel production
For purposes of this section, the term “qualified cellulosic biofuel production” means any cellulosic biofuel which is produced by the taxpayer, and which during the taxable year—
(i)
is sold by the taxpayer to another person—
The qualified cellulosic biofuel production of any taxpayer for any taxable year shall not include any alcohol which is purchased by the taxpayer and with respect to which such producer increases the proof of the alcohol by additional distillation.
(D)
Qualified cellulosic biofuel mixture
For purposes of this paragraph, the term “qualified cellulosic biofuel mixture” means a mixture of cellulosic biofuel and gasoline or of cellulosic biofuel and a special fuel which—
(E)
Cellulosic biofuel
For purposes of this paragraph—
(i)
In general
The term “cellulosic biofuel” means any liquid fuel which—
(ii)
Exclusion of low-proof alcohol
Such term shall not include any alcohol with a proof of less than 150. The determination of the proof of any alcohol shall be made without regard to any added denaturants.
(F)
Allocation of cellulosic biofuel producer credit to patrons of cooperative
Rules similar to the rules under subsection (g)(6) shall apply for purposes of this paragraph.
(G)
Registration requirement
No credit shall be determined under this paragraph with respect to any taxpayer unless such taxpayer is registered with the Secretary as a producer of cellulosic biofuel under section
4101.
(c)
Coordination with exemption from excise tax
The amount of the credit determined under this section with respect to any alcohol shall, under regulations prescribed by the Secretary, be properly reduced to take into account any benefit provided with respect to such alcohol solely by reason of the application of section
4041
(b)(2), section
6426, or section
6427
(e).
(d)
Definitions and special rules
For purposes of this section—
(1)
Alcohol defined
(2)
Special fuel defined
The term “special fuel” includes any liquid fuel (other than gasoline) which is suitable for use in an internal combustion engine.
(3)
Mixture or alcohol not used as a fuel, etc.
(A)
Mixtures
If—
(i)
any credit was determined under this section with respect to alcohol used in the production of any qualified mixture, and
(B)
Alcohol
If—
(i)
any credit was determined under this section with respect to the retail sale of any alcohol, and
then there is hereby imposed on such person a tax equal to 60 cents a gallon (45 cents in the case of alcohol with a proof less than 190) for each gallon of such alcohol.
(C)
Small ethanol producer credit
If—
then there is hereby imposed on such person a tax equal to 10 cents a gallon for each gallon of such alcohol.
(D)
Cellulosic biofuel producer credit
If—
then there is hereby imposed on such person a tax equal to the applicable amount (as defined in subsection (b)(6)(B)) for each gallon of such cellulosic biofuel.
(E)
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), (B), (C), or (D) as if such tax were imposed by section
4081 and not by this chapter.
(4)
Volume of alcohol
For purposes of determining under subsection (a) the number of gallons of alcohol with respect to which a credit is allowable under subsection (a), the volume of alcohol shall include the volume of any denaturant (including gasoline) which is added under any formulas approved by the Secretary to the extent that such denaturants do not exceed 2 percent of the volume of such alcohol (including denaturants).
(5)
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.
(6)
Special rule for cellulosic biofuel producer credit
No cellulosic biofuel producer credit shall be determined under subsection (a) with respect to any cellulosic biofuel unless such cellulosic biofuel is produced in the United States and used as a fuel in the United States. For purposes of this subsection, the term “United States” includes any possession of the United States.
(7)
Limitation to alcohol with connection to the United States
No credit shall be determined under this section with respect to any alcohol which is produced outside the United States for use as a fuel outside the United States. For purposes of this paragraph, the term “United States” includes any possession of the United States.
(e)
Termination
(2)
No carryovers to certain years after expiration
If this section ceases to apply for any period by reason of paragraph (1) or subsection (b)(6)(H), 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.
(f)
Election to have alcohol fuels credit not apply
(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)(1)(A) without regard to clauses (i) and (ii)) not in excess of 60,000,000 gallons.
(2)
Aggregration 1 rule
For purposes of the 15,000,000 gallon limitation under subsection (b)(4)(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 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)(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—
(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. 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—
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.
(h)
Reduced credit for ethanol blenders
(1)
In general
In the case of any alcohol mixture credit or alcohol credit with respect to any sale or use of alcohol which is ethanol during calendar years 2001 through 2011—
(A)
subsections (b)(1)(A) and (b)(2)(A) shall be applied by substituting “the blender amount” for “60 cents”,
(2)
Amounts
For purposes of paragraph (1), the blender amount and the low-proof blender amount shall be determined in accordance with the following table:
| In the case of any sale or use during calendar year: | The blender amount is: | The low-proof blender amount is: |
|---|---|---|
| 2001 or 2002 | 53 cents | 39.26 cents |
| 2003 or 2004 | 52 cents | 38.52 cents |
| 2005, 2006, 2007, or 2008 | 51 cents | 37.78 cents |
| 2009 through 2011 | 45 cents | 33.33 cents. |
(3)
Reduction delayed until annual production or importation of 7,500,000,000 gallons
(A)
In general
In the case of any calendar year beginning after 2008, if the Secretary makes a determination described in subparagraph (B) with respect to all preceding calendar years beginning after 2007, the last row in the table in paragraph (2) shall be applied by substituting “51 cents” for “45 cents”.
(B)
Determination
A determination described in this subparagraph with respect to any calendar year is a determination, in consultation with the Administrator of the Environmental Protection Agency, that an amount less than 7,500,000,000 gallons of ethanol (including cellulosic ethanol) has been produced in or imported into the United States in such year.
[1] So in original. Probably should be “Aggregation”.