26 USC 40 - Biodiesel and renewable diesel used as fuel

View all text of Subpart D [§ 38 - § 45AA]

§ 40A. Biodiesel and renewable diesel used as fuel

(a) General ruleFor 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 creditFor purposes of this section—

(1) Biodiesel mixture credit

(A) In general

(B) Qualified biodiesel mixtureThe 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

(2) Biodiesel credit

(A) In generalThe biodiesel credit of any taxpayer for any taxable year is $1.00 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

(3) Certification for biodiesel

(4) Small agri-biodiesel producer credit

(A) In general

(B) Qualified agri-biodiesel productionFor 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).

(d) Definitions and special rulesFor purposes of this section—

(1) BiodieselThe 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.

Such term shall not include any liquid with respect to which a credit may be determined under section 40 or 40B.

(2) Agri-biodiesel

(3) Mixture or biodiesel not used as a fuel, etc.

(A) MixturesIf—

(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) BiodieselIf—

(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.

(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 agri-biodiesel.

(D) Applicable laws

(4) Pass-thru in the case of estates and trusts

(5) Limitation to biodiesel with connection to the United States

(e) Definitions and special rules for small agri-biodiesel producer creditFor purposes of this section—

(1) Eligible small agri-biodiesel producer

(2) Aggregation rule

(3) Partnership, S corporation, and other pass-thru entities

(4) Allocation

(5) RegulationsThe 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

(ii) Form and effect of election

(B) Treatment of organizations and patrons

(i) Organizations

(ii) Patrons

(iii) Special rules for decrease in credits for taxable yearIf 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 dieselFor purposes of this title—

(1) Treatment in the same manner as biodiesel

(2) Exception

(3) Renewable diesel definedThe term “renewable diesel” means liquid fuel derived from biomass 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, or other equivalent standard approved by the Secretary.

Such term shall not include any liquid with respect to which a credit may be determined under section 40. Such term does not include any fuel derived from coprocessing biomass with a feedstock which is not biomass. For purposes of this paragraph, the term “biomass” has the meaning given such term by section 45K(c)(3).

(g) Termination

(Added Pub. L. 108–357, title III, § 302(a), Oct. 22, 2004, 118 Stat. 1463; amended Pub. L. 109–58, title XIII, §§ 1344(a), 1345(a)–(d), 1346(a), (b)(1), Aug. 8, 2005, 119 Stat. 1052–1055; Pub. L. 109–135, title IV, § 412(h), Dec. 21, 2005, 119 Stat. 2637; Pub. L. 110–234, title XV, § 15321(f), May 22, 2008, 122 Stat. 1514; Pub. L. 110–246, § 4(a), title XV, § 15321(f), June 18, 2008, 122 Stat. 1664, 2276; Pub. L. 110–343, div. B, title II, §§ 202(a), (b)(1), (b)(3)–(f), 203(b), Oct. 3, 2008, 122 Stat. 3832, 3833; Pub. L. 111–312, title VII, § 701(a), Dec. 17, 2010, 124 Stat. 3310; Pub. L. 112–240, title IV, § 405(a), Jan. 2, 2013, 126 Stat. 2340; Pub. L. 113–295, div. A, title I, § 153(a), Dec. 19, 2014, 128 Stat. 4021; Pub. L. 114–113, div. Q, title I, § 185(a)(1), Dec. 18, 2015, 129 Stat. 3073; Pub. L. 115–123, div. D, title I, § 40407(a)(1), Feb. 9, 2018, 132 Stat. 149; Pub. L. 116–94, div. Q, title I, § 121(a)(1), Dec. 20, 2019, 133 Stat. 3230; Pub. L. 117–169, title I, §§ 13201(a), 13203(c), Aug. 16, 2022, 136 Stat. 1931, 1934.)