(a) In general
For purposes of section 38, the amount of the low sulfur diesel fuel production credit determined under this section with respect to any facility of a small business refiner is an amount equal to 5 cents for each gallon of low sulfur diesel fuel produced during the taxable year by such small business refiner at such facility.
(b) Maximum credit (1) In general
The aggregate credit determined under subsection (a) for any taxable year with respect to any facility shall not exceed—
(A) 25 percent of the qualified costs incurred by the small business refiner with respect to such facility, reduced by
(B) the aggregate credits determined under this section for all prior taxable years with respect to such facility.
(2) Reduced percentage
In the case of a small business refiner with average daily domestic refinery runs for the 1-year period ending on December 31, 2002, in excess of 155,000 barrels, the number of percentage points described in paragraph (1) shall be reduced (not below zero) by the product of such number (before the application of this paragraph) and the ratio of such excess to 50,000 barrels.
(c) Definitions and special rule
For purposes of this section—
(1) Small business refiner
The term "small business refiner" means, with respect to any taxable year, a refiner of crude oil—
(A) with respect to which not more than 1,500 individuals are engaged in the refinery operations of the business on any day during such taxable year, and
(B) the average daily domestic refinery run or average retained production of which for all facilities of the taxpayer for the 1-year period ending on December 31, 2002, did not exceed 205,000 barrels.
(2) Qualified costs
The term "qualified costs" means, with respect to any facility, those costs paid or incurred during the applicable period for compliance with the applicable EPA regulations with respect to such facility, including expenditures for the construction of new process operation units or the dismantling and reconstruction of existing process units to be used in the production of low sulfur diesel fuel, associated adjacent or offsite equipment (including tankage, catalyst, and power supply), engineering, construction period interest, and sitework.
(3) Applicable EPA regulations
The term "applicable EPA regulations" means the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency.
(4) Applicable period
The term "applicable period" means, with respect to any facility, the period beginning on January 1, 2003, and ending on the earlier of the date which is 1 year after the date on which the taxpayer must comply with the applicable EPA regulations with respect to such facility or December 31, 2009.
(5) Low sulfur diesel fuel
The term "low sulfur diesel fuel" means diesel fuel with a sulfur content of 15 parts per million or less.
(d) Special rule for determination of refinery runs
For purposes of this section and section 179B(b), in the calculation of average daily domestic refinery run or retained production, only refineries which on April 1, 2003, were refineries of the refiner or a related person (within the meaning of section 613A(d)(3)), shall be taken into account.
(e) Certification (1) Required
No credit shall be allowed unless, not later than the date which is 30 months after the first day of the first taxable year in which the low sulfur diesel fuel production credit is determined with respect to a facility, the small business refiner obtains certification from the Secretary, after consultation with the Administrator of the Environmental Protection Agency, that the taxpayer’s qualified costs with respect to such facility will result in compliance with the applicable EPA regulations.
(2) Contents of application
An application for certification shall include relevant information regarding unit capacities and operating characteristics sufficient for the Secretary, after consultation with the Administrator of the Environmental Protection Agency, to determine that such qualified costs are necessary for compliance with the applicable EPA regulations.
(3) Review period
Any application shall be reviewed and notice of certification, if applicable, shall be made within 60 days of receipt of such application. In the event the Secretary does not notify the taxpayer of the results of such certification within such period, the taxpayer may presume the certification to be issued until so notified.
(4) Statute of limitations
With respect to the credit allowed under this section—
(A) the statutory period for the assessment of any deficiency attributable to such credit shall not expire before the end of the 3-year period ending on the date that the review period described in paragraph (3) ends with respect to the taxpayer, and
(B) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
(f) Cooperative organizations (1) Apportionment of credit (A) In general
In the case of a cooperative organization described in section 1381(a), any portion of the credit determined under subsection (a) for the taxable year may, at the election of the organization, be apportioned among patrons eligible to share in patronage dividends on the basis of the quantity or value of business done with or for such patrons for the taxable year.
(B) Form and effect of election
An election under subparagraph (A) 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.
(2) Treatment of organizations and patrons (A) Organizations
The amount of the credit not apportioned to patrons pursuant to paragraph (1) shall be included in the amount determined under subsection (a) for the taxable year of the organization.
The amount of the credit apportioned to patrons pursuant to paragraph (1) shall be included in the amount determined under subsection (a) 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.
(3) Special rule
If the amount of a credit which has been apportioned to any patron under this subsection is decreased for any reason—
(A) such amount shall not increase the tax imposed on such patron, and
(B) the tax imposed by this chapter on such organization shall be increased by such amount.
The increase under subparagraph (B) 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.
(g) Election to not take credit
No credit shall be determined under subsection (a) for the taxable year if the taxpayer elects not to have subsection (a) apply to such taxable year.
AMENDMENTS 2018—Subsec. (d). Pub. L. 115–141 substituted "purposes of this" for "purposes this". 2007—Subsec. (b)(1)(A). Pub. L. 110–172, §7(a)(3)(A), substituted "qualified costs" for "qualified capital costs". Subsec. (c)(2). Pub. L. 110–172, §7(a)(3)(B), struck out "capital" before "costs" in heading. Pub. L. 110–172, §7(a)(3)(A), substituted "qualified costs" for "qualified capital costs". Subsec. (d). Pub. L. 110–172, §7(a)(1)(A), redesignated subsec. (e) as (d) and struck out heading and text of former subsec. (d). Text read as follows: "For purposes of this subtitle, if a credit is determined under this section for any expenditure with respect to any property, the increase in basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so determined." Subsec. (e). Pub. L. 110–172, §7(a)(1)(A), redesignated subsec. (f) as (e). Former subsec. (e) redesignated (d). Subsec. (e)(1), (2). Pub. L. 110–172, §7(a)(3)(A), substituted "qualified costs" for "qualified capital costs". Subsec. (f). Pub. L. 110–172, §7(a)(1)(A), redesignated subsec. (g) as (f). Former subsec. (f) redesignated (e). Subsec. (g). Pub. L. 110–172, §7(a)(2)(A), added subsec. (g). Former subsec. (g) redesignated (f).EFFECTIVE DATE OF 2007 AMENDMENT Amendment by Pub. L. 110–172 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 7(e) of Pub. L. 110–172, set out as a note under section 1092 of this title.EFFECTIVE DATE Section applicable to expenses paid or incurred after Dec. 31, 2002, in taxable years ending after such date, see section 339(f) of Pub. L. 108–357, set out as an Effective Date of 2004 Amendment note under section 38 of this title.
26 U.S.C. § 45H (2018)
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