SA 3750. Mr. BAUCUS submitted an amendment intended to be proposed to amendment SA 3500 proposed by Mr. Harkin (for himself, Mr. Chambliss, Mr. Baucus, and Mr. Grassley) to the bill H.R. 2419, to provide for the continuation of agricultural programs through fiscal year 2012, and for other purposes; which was ordered to lie on the table; as follows:

Beginning on page 1473, strike line 3 and all that follows through page 1480, line 3, and insert the following:
SEC. 12312. CREDIT FOR PRODUCTION OF CELLULOSIC BIOMASS ALCOHOL.
(a) In General.--Subsection (a) of section 40 (relating to alcohol used as fuel) is amended by striking ``plus'' at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting ``, plus'', and by adding at the end the following new paragraph:
``(4) the small cellulosic alcohol producer credit.''.
(b) Small Cellulosic Alcohol Producer Credit.--
(1) IN GENERAL.--Subsection (b) of section 40 is amended by adding at the end the following new paragraph:
``(6) SMALL CELLULOSIC ALCOHOL PRODUCER CREDIT.--
``(A) IN GENERAL.--In addition to any other credit allowed under this section, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable amount for each gallon of qualified cellulosic alcohol production.
``(B) APPLICABLE AMOUNT.--For purposes of subparagraph (A), the applicable amount means the excess of--
``(i) $1.28, over
``(ii) the sum of--
``(I) the amount of the credit in effect for alcohol which is ethanol under subsection (b)(1) (without regard to subsection (b)(3)) at the time of the qualified cellulosic alcohol production, plus
``(II) the amount of the credit in effect under subsection (b)(4) at the time of such production.
``(C) LIMITATION.--
``(i) IN GENERAL.--No credit shall be allowed to any taxpayer under subparagraph (A) with respect to any qualified cellulosic alcohol production during the taxable year in excess of 60,000,000 gallons.
``(ii) AGGREGATION RULE.--For purposes of clause (i), 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.
``(iii) PARTNERSHIP, S CORPORATIONS, AND OTHER PASS-THRU ENTITIES.--In the case of a partnership, trust, S corporation, or other pass-thru entity, the limitation contained in clause (i) shall be applied at the entity level and at the partner or similar level.
``(D) QUALIFIED CELLULOSIC ALCOHOL PRODUCTION.--For purposes of this section, the term `qualified cellulosic alcohol production' means any cellulosic biomass alcohol which during the taxable year--
``(i) is sold by the taxpayer to another person--
``(I) for use by such other person in the production of a qualified alcohol 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 cellulosic biomass alcohol at retail to another person and places such cellulosic biomass alcohol in the fuel tank of such other person, or
``(ii) is used or sold by the taxpayer for any purpose described in clause (i).

The qualified cellulosic alcohol 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.
``(E) CELLULOSIC BIOMASS ALCOHOL.--
``(i) IN GENERAL.--The term `cellulosic biomass alcohol' has the meaning given such term under section 168(l)(3), but does not include any alcohol with a proof of less than 150.
``(ii) DETERMINATION OF PROOF.--The determination of the proof of any alcohol shall be made without regard to any added denaturants.
``(F) ALLOCATION OF SMALL CELLULOSIC PRODUCER CREDIT TO PATRONS OF COOPERATIVE.--Rules similar to the rules under subsection (g)(6) shall apply for purposes of this paragraph.
``(G) APPLICATION OF PARAGRAPH.--This paragraph shall apply with respect to qualified cellulosic alcohol production after December 31, 2007, and before April 1, 2015.''.
(2) TERMINATION DATE NOT TO APPLY.--Subsection (e) of section 40 (relating to termination) is amended--
(A) by inserting ``or subsection (b)(6)(G)'' after ``by reason of paragraph (1)'' in paragraph (2), and
(B) by adding at the end the following new paragraph:
``(3) EXCEPTION FOR SMALL CELLULOSIC ALCOHOL PRODUCER CREDIT.--Paragraph (1) shall not apply to the portion of the credit allowed under this section by reason of subsection (a)(4).''.
(c) Alcohol Not Used as a Fuel, etc.--
(1) IN GENERAL.--Paragraph (3) of section 40(d) is amended by redesignating subparagraph (D) as subparagraph (E) and by inserting after subparagraph (C) the following new subparagraph:
``(D) SMALL CELLULOSIC ALCOHOL PRODUCER CREDIT.--If--
``(i) any credit is allowed under subsection (a)(4), and
``(ii) any person does not use such fuel for a purpose described in subsection (b)(6)(D),

then there is hereby imposed on such person a tax equal to the applicable amount for each gallon of such cellulosic biomass alcohol.''.
(2) CONFORMING AMENDMENTS.--
(A) Subparagraph (C) of section 40(d)(3) is amended by striking ``PRODUCER'' in the heading and inserting ``SMALL ETHANOL PRODUCER''.
(B) Subparagraph (E) of section 40(d)(3), as redesignated by paragraph (1), is amended by striking ``or (C)'' and inserting ``(C), or (D)''.
(d) Alcohol Produced in the United States.--Section 40(d) is amended by adding at the end the following new paragraph:
``(6) SPECIAL RULE FOR SMALL CELLULOSIC ALCOHOL PRODUCERS.--No small cellulosic alcohol producer credit shall be determined under subsection (a) with respect to any alcohol unless such alcohol is produced in the United States.''.
(e) Effective Date.--The amendments made by this section shall apply to fuel produced after December 31, 2007.
On page 1482, line 20, strike ``, as amended by this Act,''.
On page 1482, line 22, strike ``(j)'' and insert ``(i)''.
On page 1485, line 16, strike ``section 312 of''.
On page 1488, strike lines 1 through 21, and insert following:
SEC. 12316. CALCULATION OF VOLUME OF ALCOHOL FOR FUEL CREDITS.
(a) In General.--Paragraph (4) of section 40(d) (relating to volume of alcohol) is amended by striking ``5 percent'' and inserting ``2 percent''.
(b) Conforming Amendment for Excise Tax Credit.--Section 6426(b) (relating to alcohol fuel mixture credit) is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph:
``(5) 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).''.
(c) Effective Date.--The amendments made by this section shall apply to fuel sold or used after December 31, 2007.
Beginning on page 1563, line 6, strike through page 1564, line 15, and insert following:
SEC. 12504. MODIFICATION OF SECTION 1031 TREATMENT FOR CERTAIN REAL ESTATE.
(a) In General.--Section 1031 (relating to exchange of property held for productive use or investment), as amended by this Act, is amended by adding at the end the following new subsection:
``(j) Special Rule for Subsidized Agricultural Real Property.--
``(1) IN GENERAL.--Subsidized agricultural real property and nonagricultural real property are not property of a like kind.
``(2) SUBSIDIZED AGRICULTURAL REAL PROPERTY.--For purposes of this subsection, the term `subsidized agricultural real property' means real property--
``(A) which is used as a farm for farming purposes (within the meaning of section 2032A(e)(5)); and
``(B) with respect to which a taxpayer receives, in the taxable year in which an exchange of such property is made, any payment or benefit under--
``(i) part I of subtitle A,
``(ii) part III (other than sections 1307 and 1308) of subtitle A, or
``(iii) subtitle B,

of title I of the Food and Energy Security Act of 2007.
``(3) NONAGRICULTURAL REAL PROPERTY.--For purposes of this subsection, the term `nonagricultural real property' means real property which is not used as a farm for farming purposes (within the meaning of section 2032A(e)(5)).
``(4) EXCEPTION.--Paragraph (1) shall not apply with respect to any subsidized agricultural real property which, not later than the date of the exchange, is permanently retired from any program under which any payment or benefit described in paragraph (2)(B) is made.''.
(b) Effective Date.--The amendments made by this section shall apply to exchanges completed after the date of the enactment of this Act.


(As printed in the Congressional Record for the Senate on Nov 15, 2007.)