S. 1185

Ethanol Reform and Deficit Reduction Act

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II

112th CONGRESS

1st Session

S. 1185

IN THE SENATE OF THE UNITED STATES

June 13, 2011

Mr. Thune (for himself, Ms. Klobuchar, Mr. Grassley, Mr. Johanns, Mr. Hoeven, Mr. Franken, Mr. Moran, Mr. Lugar, Mr. Nelson of Nebraska, Mr. Harkin, Mr. Johnson of South Dakota, Mr. Kirk, Mr. Coats, Mr. Durbin, and Mrs. McCaskill) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide for a variable VEETC rate based on the price of crude oil, and for other purposes.

1.

Short title

This Act may be cited as the Ethanol Reform and Deficit Reduction Act.

2.

Variable VEETC rate based on price of crude oil

(a)

Excise tax credit

(1)

In general

Subparagraph (A) of section 6426(b)(2) of the Internal Revenue Code of 1986 is amended—

(A)

by striking and at the end of clause (i),

(B)

by striking calendar years beginning after 2008, 45 cents. in clause (ii) and inserting calendar quarters beginning after 2008 and before July 1, 2011, 45 cents, and, and

(C)

by adding at the end the following new clause:

(iii)

in the case of calendar quarters beginning after June 30, 2011, the applicable rate determined in accordance with the following table:

If the average price of crude oil The applicable rate for
during the preceding calendar quarter is: the calendar quarter is:
Not more than $50/barrel30 cents
More than $50 but not more than $60/barrel24 cents
More than $60 but not more than $70/barrel18 cents
More than $70 but not more than $80/barrel12 cents
More than $80 but not more than $90/barrel6 cents
More than $90/barrel0 cents.
For purposes of the preceding table, the average price of crude oil for any calendar quarter shall be the average 3-month futures price on the New York Mercantile Exchange for light sweet crude oil for such calendar quarter. Each applicable rate under the preceding table shall be reduced by 2 cents for each calendar year beginning after 2011.

.

(2)

Extension of tax credit or payment

Sections 6426(b)(6) and 6427(e)(6)(A) of such Code are each amended by striking 2011 and inserting 2014.

(b)

Income tax credit

(1)

In general

The table contained in section 40(h)(2) of the Internal Revenue Code of 1986 is amended—

(A)

by striking calendar year in the heading for the first column,

(B)

by inserting Calendar year before 2001,

(C)

by inserting Calendar year before 2003,

(D)

by inserting Calendar year before 2005,

(E)

by inserting Calendar years before 2009,

(F)

by striking 2011 and inserting the last calendar quarter beginning before July 1, 2011,

(G)

by striking the period at the end of the table, and

(H)

by adding at the end the following:

Any calendar quarter beginning after June 30, 2011, and before 2015 1st applicable rate 2d applicable rate.

.

(2)

Applicable rates

Paragraph (3) of section 40(h) of such Code is amended to read as follows:

(3)

Applicable rates

For purposes of this subsection, the 1st applicable rate and the 2d applicable rate shall be determined in accordance with the following table:

If the average price of crude oil during the preceding calendar quarter is:The 1st applicable rate for the calendar quarter is:The 2d applicable rate for the calendar quarter is:
Not more than $50/barrel30 cents22.20 cents
More than $50 but not more than $60/barrel24 cents17.76 cents
More than $60 but not more than $70/barrel18 cents13.33 cents
More than $70 but not more than $80/barrel12 cents8.88 cents
More than $80 but not more than $90/barrel6 cents4.44 cents
More than $90/barrel0 cents0 cents.
For purposes of the preceding table, the average price of crude oil for any calendar quarter shall be the average 3-month futures price on the New York Mercantile Exchange for light sweet crude oil for such calendar quarter. Each 1st applicable rate under the preceding table shall be reduced by 2 cents for each calendar year beginning after 2011 and each 2d applicable rate under such table shall be reduced by 1.48 cents for each such year.

.

(3)

Extension of tax credit

Section 40 of such Code is amended—

(A)

by striking 2011 in subsection (e)(1)(A) and inserting 2014,

(B)

by striking 2012 in subsection (e)(1)(B) and inserting 2015, and

(C)

by striking 2011 in subsection (h)(1) and inserting 2014.

(c)

Repeal of deadwood

Section 6426(b)(2) of the Internal Revenue Code of 1986 is amended by striking subparagraph (C).

(d)

Effective Date

The amendments made by this section shall apply to any sale, use, or removal for any period after June 30, 2011.

3.

Extension and modification of alternative fuel vehicle refueling property credit

(a)

Extension

Subsection (g) of section 30C of the Internal Revenue Code of 1986 is amended by striking placed in service— and all that follows and inserting placed in service after the earlier of December 31, 2016, or the date on which the Secretary certifies that at least 53,000 qualified alternative fuel refueling properties (other than properties described in subsection (c)(2)(C)) have been placed in service..

(b)

Only certain ethanol blends eligible for credit

Subparagraph (A) of section 30C(c)(2) of the Internal Revenue Code of 1986 is amended to read as follows:

(A)

Any fuel—

(i)

at least 85 percent of the volume of which consists of one or more of the following: natural gas, compressed natural gas, liquified natural gas, liquefied petroleum gas, or hydrogen, or

(ii)

at least 85 percent of the volume of which consists of—

(I)

ethanol, or

(II)

ethanol and gasoline or one or more of the fuels described in clause (i), but only if at least 15 percent and not more than 85 percent of the volume of such fuel consists of ethanol.

.

(c)

Credit for dual-Use refueling property

Subsection (e) of section 30C of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(6)

Dual-use refueling property

(A)

In general

In the case of any dual-use refueling property, 100 percent of the cost of such property shall be treated as qualified alternative fuel refueling property if the taxpayer certifies, in such time and manner as the Secretary shall prescribe, that such property will be used in more than a de minimis capacity for the purposes described in section 179A(d)(3)(A) (applied as specified in subsection (c)(2)).

(B)

Recapture

If at any time within 5 years after the date of the certification under subparagraph (A) the dual-use refueling property ceases to be used as required under such subparagraph, 100 percent of the cost of such property shall be subject to recapture under paragraph (5).

(C)

Dual-use refueling property

For purposes of this paragraph, the term dual-use refueling property means property that is both qualified alternative fuel vehicle refueling property and property used—

(i)

to store or dispense fuels not described in subsection (c)(2), or

(ii)

to store fuels described in subsection (c)(2) for any purpose other than delivery of such fuel into the fuel tank of a motor vehicle.

.

(d)

Effective date

The amendments made by this section shall apply to property placed in service after June 30, 2011.

4.

Extension of cellulosic biofuel producer credit through 2014

(a)

In general

Section 40(b)(6) of the Internal Revenue Code of 1986 is amended by striking subparagraph (H).

(b)

Conforming amendment

Section 40(e) of the Internal Revenue Code of 1986 is amended by striking paragraph (3).

5.

Extension of special depreciation allowance for cellulosic biofuel plant property

Subparagraph (D) of section 168(l)(2) of the Internal Revenue Code of 1986 is amended by striking January 1, 2013 and inserting January 1, 2015.

6.

Algae treated as a qualified feedstock for purposes of the cellulosic biofuel producer credit, etc

(a)

In general

Subclause (I) of section 40(b)(6)(E)(i) of the Internal Revenue Code of 1986 is amended to read as follows:

(I)

is derived solely by, or from, qualified feedstocks, and

.

(b)

Qualified feedstock; special rules for algae

Paragraph (6) of section 40(b) of the Internal Revenue Code of 1986, as amended by this Act, is amended by redesignating subparagraphs (F) and (G) as subparagraphs (H) and (I), respectively, and by inserting after subparagraph (E) the following new subparagraphs:

(F)

Qualified feedstock

For purposes of this paragraph, the term qualified feedstock means—

(i)

any lignocellulosic or hemi­cel­lu­los­ic matter that is available on a renewable or recurring basis, and

(ii)

any cultivated algae, cy­a­no­bac­te­ri­a, or lemna.

(G)

Special rules for algae

In the case of fuel which is derived by, or from, feedstock described in subparagraph (F)(ii) and which is sold by the taxpayer to another person for refining by such other person into a fuel which meets the requirements of subparagraph (E)(i)(II)—

(i)

such sale shall be treated as described in subparagraph (C)(i),

(ii)

such fuel shall be treated as meeting the requirements of subparagraph (E)(i)(II) in the hands of such taxpayer, and

(iii)

except as provided in this subparagraph, such fuel (and any fuel derived from such fuel) shall not be taken into account under subparagraph (C) with respect to the taxpayer or any other person.

.

(c)

Algae treated as a qualified feedstock for purposes of bonus depreciation for biofuel plant property

(1)

In general

Subparagraph (A) of section 168(l)(2) of the Internal Revenue Code of 1986 is amended by striking solely to produce cellulosic biofuel and inserting solely to produce second generation biofuel (as defined in section 40(b)(6)(E)).

(2)

Conforming amendments

Subsection (l) of section 168 of such Code, as amended by this Act, is amended—

(A)

by striking cellulosic biofuel each place it appears in the text thereof and inserting second generation biofuel,

(B)

by striking paragraph (3) and redesignating paragraphs (4) through (8) as paragraphs (3) through (7), respectively,

(C)

by striking Cellulosic in the heading of such subsection and inserting Second Generation, and

(D)

by striking cellulosic in the heading of paragraph (2) and inserting second generation.

(d)

Conforming amendments

(1)

Section 40 of the Internal Revenue Code of 1986, as amended by this Act, is amended—

(A)

by striking cellulosic biofuel each place it appears in the text thereof and inserting second generation biofuel,

(B)

by striking Cellulosic in the headings of subsections (b)(6), (b)(6)(E), and (d)(3)(D) and inserting Second generation, and

(C)

by striking cellulosic in the headings of subsections (b)(6)(C), (b)(6)(D), (b)(6)(H), (d)(6), and (e)(3) and inserting second generation.

(2)

Clause (ii) of section 40(b)(6)(E) of such Code is amended by striking Such term shall not and inserting The term second generation biofuel shall not.

(3)

Paragraph (1) of section 4101(a) of such Code is amended by striking cellulosic biofuel and inserting second generation biofuel.

(e)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to fuels sold or used after the date of the enactment of this Act.

(2)

Application to bonus depreciation

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

7.

Budgetary effects

(a)

PAYGO scorecard

The budgetary effects of this Act shall not be entered on either PAYGO scorecard maintained pursuant to section 4(d) of the Statutory Pay-As-You-Go Act of 2010.

(b)

Senate PAYGO scorecard

The budgetary effects of this Act shall not be recorded on any PAYGO scorecard maintained for purposes of section 201 of S. Con. Res. 21 (110th Congress).