To amend sections 125.831, 3317.022, 5733.98, and 5747.98 and to enact sections 125.834, 125.835, 125.836, 901.14, 3327.17, 3704.121, 3704.20, 3704.30 to 3704.34, 5501.18, 5733.47, 5733.48, 5735.40, 5747.76, and 5747.77 of the Revised Code to require that half of all motor vehicles purchased for state agency fleets be capable of using alternative fuels; to require that state agencies procuring vehicles give preference to qualified bidders who supply vehicles that use Ohio corn-based ethanol or Ohio soybean-based biodiesel fuel; to allow the Department of Administrative Services to sell or trade credits generated by the acquisition of alternative fueled vehicles under the federal "Energy Policy Act of 1992"; to establish an alternative fuel transportation grant program for the purchase and installation of alternative fuel refueling facilities and the purchase of certain grades of ethanol or biodiesel; to authorize city, local, or exempted village school districts to purchase biodiesel for the operation of school buses and receive a subsidy from the Department of Education for such purchase; to require that diesel fuel contain at least two per cent biodiesel under certain circumstances; to authorize the Director of Environmental Protection to require the use of clean alternative fuel in covered fleet vehicles in counties identified as severe non-attainment for ozone under the federal Clean Air Act Amendments; to establish a local government vehicular fleet alternative fuel revolving loan program administered by the Director; to require that part of the Department of Transportation's vehicle fleet and heavy equipment that operates on diesel fuel use biodiesel; to prohibit political subdivisions from levying taxes on alternative fuel; and to authorize tax credits against corporation franchise and income tax liability for selling ethanol blended gasoline and for installing E85 fuel pumps.

Section 1. That sections 125.831, 3317.022, 5733.98, and 5747.98 be amended and sections 125.834, 125.835, 125.836, 901.14, 3327.17, 3704.121, 3704.20, 3704.30, 3704.31, 3704.32, 3704.33, 3704.34, 5501.18, 5733.47, 5733.48, 5735.40, 5747.76, and 5747.77 of the Revised Code be enacted to read as follows:

Sec. 125.831. As used in sections 125.831 to 125.833 125.834 of the Revised Code:

(A) "Alternative fuel" means any of the following fuels used in a motor vehicle:

(1) Any alcohol fuel containing eighty-five per cent or more of alcohol or containing any other percentage of not less than seventy per cent of alcohol if the United States department of energy determines, by rule, that the lower percentage is necessary to provide for the requirements of cold start, safety, or vehicle functions;

(2) Any fuel other than alcohol fuel that is derived from biological materials, when designated by the United States department of energy as an alternative fuel;

(3) Natural gas;

(4) Liquefied petroleum gas;

(5) Hydrogen;

(6) Any power source, including electricity;

(7) Any fuel not described in divisions (A)(1) to (6) of this section that the United States department of energy determines, by final rule, to be substantially not petroleum, and that would yield substantial energy security and environmental benefits.

(B) "Law enforcement officer" means an officer, agent, or employee of a state agency upon whom, by statute, a duty to conserve the peace or to enforce all or certain laws is imposed and the authority to arrest violators is conferred, within the limits of that statutory duty and authority.

(B)(C)(1) "Motor vehicle" means any automobile, car minivan, passenger van, sport utility vehicle, or pickup truck with a gross vehicle weight of under twelve thousand pounds.

(2) "Motor vehicle" does not include any vehicle described in division (B)(C)(1) of this section that is used by a law enforcement officer and law enforcement agency or any vehicle that is so described and that is equipped with specialized equipment that is not normally found in such a vehicle and that is used to carry out a state agency's specific and specialized duties and responsibilities.

(C)(D) "Specialized equipment" does not include standard mobile radios with no capabilities other than voice communication, exterior and interior lights, or roof-mounted caution lights.

(D)(E) "State agency" means every organized body, office, or agency established by the laws of the state for the exercise of any function of state government, other than any state-supported institution of higher education, the office of the governor, lieutenant governor, auditor of state, treasurer of state, secretary of state, or attorney general, the general assembly or any legislative agency, or the courts or any judicial agency.

Sec. 125.834.  (A) The following entities shall ensure that at least seventy-five per cent of the new motor vehicles they acquire during the two-year period beginning July 1, 2006, and ending June 30, 2008, and during each two-year period beginning on the first day of July thereafter, are capable of using alternative fuels:

(1) The department of administrative services;

(2) Each state agency that has been delegated fleet management duties under division (G)(1) of section 125.832 of the Revised Code and that manages a fleet of more than fifteen motor vehicles.

(B)(1) If the department of administrative services or a state agency described in division (A)(2) of this section exceeds the percentage specified in division (A) of this section in its purchase or lease of motor vehicles during any two-year period described in that division, the excess purchases or leases shall be credited to any future two-year period the department or state agency designates.

(2) If the department or such a state agency fails to satisfy the percentage specified in division (A) of this section in its purchase or lease of motor vehicles during any two-year period described in that division, the department or state agency shall not purchase or lease any motor vehicles that are incapable of using alternative fuels during any subsequent two-year period until the department or state agency satisfies that percentage deficiency, unless one or more of the following applies:

(a) The department or state agency will be operating its motor vehicles primarily in an area in which it or its fuel supplier does not have and cannot reasonably be expected to have a central refueling station for alternative fuels.

(b) The department or state agency is unable to acquire or operate motor vehicles within the cost limitations described in division (D) of this section.

(c) The use of alternative fuels would not meet the energy conservation and exhaust emissions criteria described in division (D) of this section.

(C) Between July 1, 2006, and June 30, 2007, at least thirty per cent of the fuel purchased for use in fleets of state-owned motor vehicles shall be alternative fuels. Between July 1, 2007, and June 30, 2008, at least fifty per cent of such fuel purchased shall be alternative fuels. Beginning July 1, 2008, and each fiscal year thereafter, at least seventy-five per cent of such fuel purchased between the first day of July and the thirtieth day of June of the following year shall be alternative fuels.

(D) The director of administrative services shall adopt and may amend, in accordance with Chapter 119. of the Revised Code, rules that establish cost limitations for the acquisition and operation of, and energy conservation and exhaust emissions criteria for, motor vehicles capable of using alternative fuels.

Sec. 125.835.  (A) As used in this section:

(1) "Biodiesel" has the same meaning as in section 3704.121 of the Revised Code.

(2) "Ethanol" has the same meaning as in section 5733.46 of the Revised Code.

(3) "Law enforcement officer" has the same meaning as in section 125.831 of the Revised Code.

(4) "State agency" has the same meaning as in section 125.831 of the Revised Code, but includes any state-supported institution of higher education.

(5) "Vehicle" means any automobile, automobile truck, tractor, or self-propelled vehicle not operated or driven on fixed rails or track, but does not include a vehicle operated by a law enforcement officer.

(B) In awarding any contract that requires the procurement of vehicles, a state agency shall give preference to an otherwise qualified bidder who will fulfill the contract through the use of vehicles that use as a fuel component ethanol produced from Ohio corn or biodiesel produced from Ohio soybeans or Ohio corn.

Sec. 125.836.  (A) As used in this section:

(1) "Biodiesel" and "diesel fuel" have the same meanings as in section 3704.121 of the Revised Code.

(2) "Credit" means a credit generated by the acquisition of alternative fueled vehicles in accordance with the "Energy Policy Act of 1992," 106 Stat. 2897, 42 U.S.C. 13257.

(3) "Incremental cost" has the same meaning as in section 5501.18 of the Revised Code.

(B) The department of administrative services shall establish and administer a credit banking and selling program. The department may sell or trade credits in accordance with procedures established pursuant to the "Energy Policy Act of 1992," 106 Stat. 2897, 42 U.S.C. 13258.

(C) There is hereby created in the state treasury the "biodiesel revolving fund," into which shall be deposited moneys received from the sale of credits under this section, any moneys appropriated to the fund by the general assembly, and any other moneys obtained or accepted by the department for deposit into the fund. Moneys deposited into the fund shall be used to pay for the incremental cost of biodiesel for use in vehicles owned or leased by the state that use diesel fuel.

Sec. 901.14. (A) As used in this section:

(1) "Alternative fuel" means blended biodiesel or blended gasoline.

(2) "Biodiesel" has the same meaning as in section 3704.121 of the Revised Code.

(3) "Diesel fuel" and "gasoline" have the same meanings as in section 5735.01 of the Revised Code.

(4) "Ethanol" has the same meaning as in section 5733.46 of the Revised Code.

(5) "Blended biodiesel" means diesel fuel containing at least twenty per cent biodiesel by volume.

(6) "Blended gasoline" means gasoline containing at least eighty-five per cent ethanol by volume.

(7) "Incremental cost" means either of the following:

(a) The difference in cost between blended gasoline and gasoline containing ten per cent or less ethanol at the time that the blended gasoline is purchased;

(b) The difference in cost between blended biodiesel and diesel fuel containing two per cent or less biodiesel at the time that the blended biodiesel is purchased.

(B) For the purpose of improving the air quality in this state, the director of agriculture shall establish an alternative fuel transportation grant program under which the director may make grants to businesses, nonprofit organizations, public school systems, or local governments for the purchase and installation of alternative fuel refueling facilities and for the purchase and use of alternative fuel.

(C) The director shall adopt rules in accordance with Chapter 119. of the Revised Code that are necessary for the administration of the alternative fuel transportation grant program. The rules shall establish at least all of the following:

(1) An application form and procedures governing the application process for a grant under the program;

(2) A procedure for prioritizing the award of grants under the program;

(3) A requirement that the maximum grant for the purchase and installation of an alternative fuel refueling facility be fifty per cent of the cost of the facility;

(4) A requirement that the maximum grant for the purchase of alternative fuel be fifty per cent of the incremental cost of the fuel;

(5) Any other criteria, procedures, or guidelines that the director determines are necessary to administer the program.

(D) There is hereby created in the state treasury the alternative fuel transportation grant fund. The fund shall consist of money that is received from direct payments in lieu of excise credits for alcohol fuels under the "American Jobs Creation Act of 2004," Pub. L. No. 108-357. Money in the fund shall be used to make grants under the alternative fuel transportation grant program and by the director in the administration of that program.

Sec. 3317.022.  (A)(1) The department of education shall compute and distribute state base cost funding to each school district for the fiscal year in accordance with the following formula, making any adjustment required by division (A)(2) of this section and using the information obtained under section 3317.021 of the Revised Code in the calendar year in which the fiscal year begins.

Compute the following for each eligible district:

If the difference obtained is a negative number, the district's computation shall be zero.

(2)(a) For each school district for which the tax exempt value of the district equals or exceeds twenty-five per cent of the potential value of the district, the department of education shall calculate the difference between the district's tax exempt value and twenty-five per cent of the district's potential value.

(b) For each school district to which division (A)(2)(a) of this section applies, the department shall adjust the recognized valuation used in the calculation under division (A)(1) of this section by subtracting from it the amount calculated under division (A)(2)(a) of this section.

(B) As used in this section:

(1) The "total special education weight" for a district means the sum of the following amounts:

(a) The district's category one special education ADM multiplied by the multiple specified in division (A) of section 3317.013 of the Revised Code;

(b) The district's category two special education ADM multiplied by the multiple specified in division (B) of section 3317.013 of the Revised Code;

(c) The district's category three special education ADM multiplied by the multiple specified in division (C) of section 3317.013 of the Revised Code;

(d) The district's category four special education ADM multiplied by the multiple specified in division (D) of section 3317.013 of the Revised Code;

(e) The district's category five special education ADM multiplied by the multiple specified in division (E) of section 3317.013 of the Revised Code;

(f) The district's category six special education ADM multiplied by the multiple specified in division (F) of section 3317.013 of the Revised Code.

(2) "State share percentage" means the percentage calculated for a district as follows:

(a) Calculate the state base cost funding amount for the district for the fiscal year under division (A) of this section. If the district would not receive any state base cost funding for that year under that division, the district's state share percentage is zero.

(b) If the district would receive state base cost funding under that division, divide that amount by an amount equal to the following:

The resultant number is the district's state share percentage.

(3) "Related services" includes:

(a) Child study, special education supervisors and coordinators, speech and hearing services, adaptive physical development services, occupational or physical therapy, teacher assistants for handicapped children whose handicaps are described in division (B) of section 3317.013 or division (F)(3) of section 3317.02 of the Revised Code, behavioral intervention, interpreter services, work study, nursing services, and specialized integrative services as those terms are defined by the department;

(b) Speech and language services provided to any student with a handicap, including any student whose primary or only handicap is a speech and language handicap;

(c) Any related service not specifically covered by other state funds but specified in federal law, including but not limited to, audiology and school psychological services;

(d) Any service included in units funded under former division (O)(1) of section 3317.023 of the Revised Code;

(e) Any other related service needed by handicapped children in accordance with their individualized education plans.

(4) The "total vocational education weight" for a district means the sum of the following amounts:

(a) The district's category one vocational education ADM multiplied by the multiple specified in division (A) of section 3317.014 of the Revised Code;

(b) The district's category two vocational education ADM multiplied by the multiple specified in division (B) of section 3317.014 of the Revised Code.

(C)(1) The department shall compute and distribute state special education and related services additional weighted costs funds to each school district in accordance with the following formula:

(2) The attributed local share of special education and related services additional weighted costs equals:

(3)(a) The department shall compute and pay in accordance with this division additional state aid to school districts for students in categories two through six special education ADM. If a district's costs for the fiscal year for a student in its categories two through six special education ADM exceed the threshold catastrophic cost for serving the student, the district may submit to the superintendent of public instruction documentation, as prescribed by the superintendent, of all its costs for that student. Upon submission of documentation for a student of the type and in the manner prescribed, the department shall pay to the district an amount equal to the sum of the following:

(i) One-half of the district's costs for the student in excess of the threshold catastrophic cost;

(ii) The product of one-half of the district's costs for the student in excess of the threshold catastrophic cost multiplied by the district's state share percentage.

(b) For purposes of division (C)(3)(a) of this section, the threshold catastrophic cost for serving a student equals:

(i) For a student in the school district's category two, three, four, or five special education ADM, twenty-five thousand dollars in fiscal year 2002 and twenty-five thousand seven hundred dollars in fiscal years 2003, 2004, and 2005;

(ii) For a student in the district's category six special education ADM, thirty thousand dollars in fiscal year 2002 and thirty thousand eight hundred forty dollars in fiscal years 2003, 2004, and 2005.

(c) The district shall only report under division (C)(3)(a) of this section, and the department shall only pay for, the costs of educational expenses and the related services provided to the student in accordance with the student's individualized education program. Any legal fees, court costs, or other costs associated with any cause of action relating to the student may not be included in the amount.

(4)(a) As used in this division, the "personnel allowance" means thirty thousand dollars in fiscal years 2002, 2003, 2004, and 2005.

(b) For the provision of speech language pathology services to students, including students who do not have individualized education programs prepared for them under Chapter 3323. of the Revised Code, and for no other purpose, the department of education shall pay each school district an amount calculated under the following formula:

(5) In any fiscal year, a school district shall spend for purposes that the department designates as approved for special education and related services expenses at least the amount calculated as follows:

The purposes approved by the department for special education expenses shall include, but shall not be limited to, identification of handicapped children, compliance with state rules governing the education of handicapped children and prescribing the continuum of program options for handicapped children, provision of speech language pathology services, and the portion of the school district's overall administrative and overhead costs that are attributable to the district's special education student population.

The department shall require school districts to report data annually to allow for monitoring compliance with division (C)(5) of this section. The department shall annually report to the governor and the general assembly the amount of money spent by each school district for special education and related services.

(6) In any fiscal year, a school district shall spend for the provision of speech language pathology services not less than the sum of the amount calculated under division (C)(1) of this section for the students in the district's category one special education ADM and the amount calculated under division (C)(4) of this section.

(D)(1) As used in this division:

(a) "Daily bus miles per student" equals the number of bus miles traveled per day, divided by transportation base.

(b) "Transportation base" equals total student count as defined in section 3301.011 of the Revised Code, minus the number of students enrolled in preschool handicapped units, plus the number of nonpublic school students included in transportation ADM.

(c) "Transported student percentage" equals transportation ADM divided by transportation base.

(d) "Transportation cost per student" equals total operating costs for board-owned or contractor-operated school buses divided by transportation base.

(2) Analysis of student transportation cost data has resulted in a finding that an average efficient transportation use cost per student can be calculated by means of a regression formula that has as its two independent variables the number of daily bus miles per student and the transported student percentage. For fiscal year 1998 transportation cost data, the average efficient transportation use cost per student is expressed as follows:

The department of education shall annually determine the average efficient transportation use cost per student in accordance with the principles stated in division (D)(2) of this section, updating the intercept and regression coefficients of the regression formula modeled in this division, based on an annual statewide analysis of each school district's daily bus miles per student, transported student percentage, and transportation cost per student data. The department shall conduct the annual update using data, including daily bus miles per student, transported student percentage, and transportation cost per student data, from the prior fiscal year. The department shall notify the office of budget and management of such update by the fifteenth day of February of each year.

(3) In addition to funds paid under divisions (A), (C), and (E) of this section, each district with a transported student percentage greater than zero shall receive a payment equal to a percentage of the product of the district's transportation base from the prior fiscal year times the annually updated average efficient transportation use cost per student, times an inflation factor of two and eight tenths per cent to account for the one-year difference between the data used in updating the formula and calculating the payment and the year in which the payment is made. The percentage shall be the following percentage of that product specified for the corresponding fiscal year:

The payments made under division (D)(3) of this section each year shall be calculated based on all of the same prior year's data used to update the formula.

(4) In addition to funds paid under divisions (D)(2) and (3) of this section, a school district shall receive a rough road subsidy if both of the following apply:

(a) Its county rough road percentage is higher than the statewide rough road percentage, as those terms are defined in division (D)(5) of this section;

(b) Its district student density is lower than the statewide student density, as those terms are defined in that division.

(5) The rough road subsidy paid to each district meeting the qualifications of division (D)(4) of this section shall be calculated in accordance with the following formula:

where:

(a) "Per rough mile subsidy" equals the amount calculated in accordance with the following formula:

(i) "Maximum rough road percentage" means the highest county rough road percentage in the state.

(ii) "County rough road percentage" equals the percentage of the mileage of state, municipal, county, and township roads that is rated by the department of transportation as type A, B, C, E2, or F in the county in which the school district is located or, if the district is located in more than one county, the county to which it is assigned for purposes of determining its cost-of-doing-business factor.

(iii) "Statewide rough road percentage" means the percentage of the statewide total mileage of state, municipal, county, and township roads that is rated as type A, B, C, E2, or F by the department of transportation.

(b) "Total rough road miles" means a school district's total bus miles traveled in one year times its county rough road percentage.

(c) "Density multiplier" means a figure calculated in accordance with the following formula:

(i) "Minimum student density" means the lowest district student density in the state.

(ii) "District student density" means a school district's transportation base divided by the number of square miles in the district.

(iii) "Statewide student density" means the sum of the transportation bases for all school districts divided by the sum of the square miles in all school districts.

(6) In addition to funds paid under divisions (D)(2) to (5) of this section, each district shall receive in accordance with rules adopted by the state board of education a payment for students transported by means other than board-owned or contractor-operated buses and whose transportation is not funded under division (J) of section 3317.024 of the Revised Code. The rules shall include provisions for school district reporting of such students.

(7) In addition to funds paid under divisions (D)(2) to (6) of this section, the department annually shall pay each district to which division (C) of section 3327.17 of the Revised Code applies a subsidy equal to the difference between (a) the actual total cost of the diesel fuel purchased by the district from the eligible agricultural cooperative or a retailer or distributor for that cooperative during the fiscal year and (b) the number of gallons of diesel fuel purchased by the district from the eligible agricultural cooperative or a retailer or distributor for that cooperative during the fiscal year times the average statewide cost for the fiscal year of a gallon of diesel fuel that contains no biodiesel. If the difference obtained is a negative number, the district's subsidy shall be zero. No payments shall be made under division (D)(7) of this section for fiscal years beginning on or after July 1, 2012.

(E)(1) The department shall compute and distribute state vocational education additional weighted costs funds to each school district in accordance with the following formula:

In any fiscal year, a school district receiving funds under division (E)(1) of this section shall spend those funds only for the purposes that the department designates as approved for vocational education expenses. Vocational educational expenses approved by the department shall include only expenses connected to the delivery of career-technical programming to career-technical students. The department shall require the school district to report data annually so that the department may monitor the district's compliance with the requirements regarding the manner in which funding received under division (E)(1) of this section may be spent.

(2) The department shall compute for each school district state funds for vocational education associated services in accordance with the following formula:

In any fiscal year, a school district receiving funds under division (E)(2) of this section, or through a transfer of funds pursuant to division (L) of section 3317.023 of the Revised Code, shall spend those funds only for the purposes that the department designates as approved for vocational education associated services expenses, which may include such purposes as apprenticeship coordinators, coordinators for other vocational education services, vocational evaluation, and other purposes designated by the department. The department may deny payment under division (E)(2) of this section to any district that the department determines is not operating those services or is using funds paid under division (E)(2) of this section, or through a transfer of funds pursuant to division (L) of section 3317.023 of the Revised Code, for other purposes.

(F) The actual local share in any fiscal year for the combination of special education and related services additional weighted costs funding calculated under division (C)(1) of this section, transportation funding calculated under divisions (D)(2) and (3) of this section, and vocational education and associated services additional weighted costs funding calculated under divisions (E)(1) and (2) of this section shall not exceed for any school district the product of three and three-tenths mills times the district's recognized valuation. The department annually shall pay each school district as an excess cost supplement any amount by which the sum of the district's attributed local shares for that funding exceeds that product. For purposes of calculating the excess cost supplement:

(1) The attributed local share for special education and related services additional weighted costs funding is the amount specified in division (C)(2) of this section.

(2) The attributed local share of transportation funding equals the difference of the total amount calculated for the district using the formula developed under division (D)(2) of this section minus the actual amount paid to the district after applying the percentage specified in division (D)(3) of this section.

(3) The attributed local share of vocational education and associated services additional weighted costs funding is the amount determined as follows:

Sec. 3327.17. Notwithstanding division (D) of section 3311.19 and division (D) of section 3311.52 of the Revised Code, this section does not apply to any joint vocational or cooperative education school district.

(A) As used in this section and in division (D)(7) of section 3317.022 of the Revised Code:

(1) "Agricultural cooperative" has the same meaning as in section 1729.01 of the Revised Code.

(2) "Biodiesel" and "diesel fuel" have the same meanings as in section 3704.121 of the Revised Code.

(3) "Development facility" means a facility that produces a good derived from an agricultural commodity.

(4) "Renewable fuel production facility" means a facility that produces an energy source derived from a renewable, domestically grown organic compound and capable of powering machinery, including an engine.

(5) "Eligible agricultural cooperative" means an agricultural cooperative formed for the purpose of operating a development facility or a renewable fuel production facility.

(B) Any city, local, or exempted village school district may enter into a contract with an eligible agricultural cooperative or a retailer or distributor for that cooperative to purchase diesel fuel that contains twenty per cent or greater of biodiesel by volume for the operation of the district's school buses.

(C) Any district that enters into a contract pursuant to division (B) of this section shall submit a copy of the contract to the department of education. The department annually shall pay the subsidy calculated under division (D)(7) of section 3317.022 of the Revised Code to the district for the duration of the contract, but not after the time designated in that division.

Sec. 3704.121. (A) As used in this section:

(1) "Biodiesel" means a mono-alkyl ester combustible liquid fuel that is derived from vegetable oils or animal fats, or any combination of those reagents, and that meets American society for testing and materials specification D6751-03a for biodiesel fuel (B100) blend stock distillate fuels.

(2) "Diesel fuel" means any liquid fuel that is capable of use in discrete form or as a blend component in the operation of engines of the diesel type.

(B) On and after June 30, 2007, no person shall sell any diesel fuel in this state unless the fuel contains two per cent or greater of biodiesel by volume, provided that one of the following occurs:

(1) The director of environmental protection determines that the state has an annual production capacity of biodiesel greater than eight million gallons and publishes that determination on the environmental protection agency's web site.

(2) The director publishes on the agency's web site a statement that a federal action on taxes imposed or tax credits or any other federal action creates a reduction of two cents or more in the price per gallon on taxable diesel fuel that contains two per cent or greater of biodiesel by volume and that is sold in this state.

(C) The director periodically shall survey production facilities in the state to determine whether the state has an annual production capacity of biodiesel greater than eight million gallons. If the director finds that the state has a production capacity greater than eight million gallons, the director shall publish that determination on the agency's web site.

In addition, the director shall maintain knowledge of any federal action on taxes imposed or tax credits or any other federal action that creates a reduction of two cents or more in the price per gallon on taxable diesel fuel that contains two per cent or greater of biodiesel by volume and that is sold in this state. If a federal action creates such a reduction, the director shall publish a statement concerning that federal action on the agency's web site.

Sec. 3704.20.  (A) As used in this section:

(1) "Clean alternative fuel" and "covered fleet" have the same meanings as in 42 U.S.C. 7581.

(2) "Clean Air Act Amendments" has the same meaning as in section 3704.14 of the Revised Code.

(B) The director of environmental protection may adopt rules under Chapter 119. of the Revised Code establishing requirements for the use of clean alternative fuel in vehicles that are owned or used by operators of covered fleets in any county identified as severe nonattainment for ozone in accordance with the Clean Air Act Amendments.

The rules adopted under this section shall include all of the following:

(1) Requirements and procedures governing the registration of covered fleet operators;

(2) Procedures for the submission of annual compliance plans to the director by covered fleet operators and for the review and approval or disapproval of those plans;

(3) Requirements and procedures establishing a system of marketable credit trading applicable to covered fleet operators;

(4) Enforcement procedures and penalties for failure to comply with the requirements of the rules adopted under this section;

(5) Any other requirements or procedures that are determined to be necessary by the director.

Sec. 3704.30.  (A) As used in sections 3704.30 to 3704.34 of the Revised Code, "political subdivision" means a municipal corporation, township, county, school district, or other entity corporate and politic that is responsible for governmental activities in geographical areas smaller than that of the state.

(B) For the purpose of improving the air quality in this state, the director of environmental protection shall administer a local government vehicular fleet alternative fuel revolving loan program under which the director shall make loans to political subdivisions for the purpose of establishing or improving their capability of using alternative fuels in their vehicle fleets. Loans shall be made to political subdivisions for any or all of the following:

(1) The purchase of new motor vehicles that are capable of using alternative fuels;

(2) The conversion of motor vehicles that operate on gasoline to enable those vehicles to operate on alternative fuels;

(3) The construction of fueling stations that are capable of dispensing alternative fuels.

(C) An applicant for a loan under the program shall submit a plan to the director outlining the applicant's strategy for utilizing alternative fuels in its vehicle fleet. The director shall give preference to applicants who are or will be contributing significantly to the cost of the implementation of their plans and who will work cooperatively with the state, other political subdivisions, and private entities in developing a fueling infrastructure that is capable of dispensing alternative fuels in this state.

(D) The director shall adopt rules under Chapter 119. of the Revised Code that are necessary for the administration of the local government vehicular fleet alternative fuel revolving loan program, including, but limited to, rules establishing the types of alternative fuels concerning which recipients may receive loans under the program.

Sec. 3704.31.  All of the following apply to loans that are made under the local government vehicular fleet alternative fuel revolving loan program:

(A) A political subdivision may receive a maximum of two thousand dollars for the cost of purchasing a new vehicle that is capable of operating on an alternative fuel.

(B) A political subdivision may receive a maximum of two thousand dollars for the conversion of a new or existing vehicle that is designed to operate on gasoline to enable the vehicle to operate on an alternative fuel.

(C) A political subdivision may receive a maximum of one hundred thousand dollars for the construction of a fueling station that is capable of dispensing alternative fuels.

(D) No political subdivision shall receive a total of more than one hundred thousand dollars in loans for the purchase of or conversion to alternative fuel vehicles in any one year.

(E) No political subdivision shall receive a total of more than one hundred thousand dollars in loans for the construction of fueling stations in any one year.

Sec. 3704.32.  The director of environmental protection shall enter into a loan agreement with each recipient of a loan under the local government vehicular fleet alternative fuel revolving loan program. The director shall establish the interest rate and terms of repayment for each loan. In establishing the repayment schedule, the director shall do all of the following:

(A) Consider the projected savings to the political subdivision resulting from the use of an alternative fuel;

(B) Establish the repayment schedule for a maximum repayment period of four years;

(C) Include provisions for payments to be made on a monthly basis.

Sec. 3704.33.  A political subdivision that receives a loan under the local government vehicular fleet alternative fuel revolving loan program shall do all of the following:

(A) Remit payments in accordance with the repayment schedule established by the director of environmental protection under section 3704.32 of the Revised Code;

(B) Agree to use the alternative fuel for which the vehicle that was purchased or converted with the aid of the loan was designed, if applicable;

(C) Provide reasonable data requested by the director on the use and performance of the vehicle that was purchased or converted with the aid of the loan, if applicable;

(D) Allow for reasonable inspections by the director of the vehicle that was purchased or converted or the fueling station that was constructed with the aid of the loan;

(E) If applicable make the fueling station that was constructed with the aid of the loan available for use at reasonable cost by the vehicle fleets of other political subdivisions and, with consideration of the capacity of the fueling station, by the general public.

Sec. 3704.34. There is hereby created in the state treasury the local government vehicular fleet alternative fuel revolving loan fund. The fund shall consist of money from appropriations made by the general assembly, proceeds from the repayment of loans made under sections 3704.30 to 3704.33 of the Revised Code, and any gifts, bequests, donations, or other payments made to the fund. Money in the fund shall be used to make loans under the local government vehicular fleet alternative fuel revolving loan program and by the director of environmental protection in the administration of that program.

Sec. 5501.18.  (A) As used in this section:

(1) "Biodiesel" and "diesel fuel" have the same meanings as in section 3704.121 of the Revised Code.

(2) "Biodiesel rating" means the percentage of biodiesel in relation to petroleum diesel in a diesel fuel mixture, which is represented by the letter B and a number that corresponds to the percentage of biodiesel in the mixture by volume.

(3) "Incremental cost" means the difference in cost between blended biodiesel and conventional petroleum-based diesel fuel at the time the blended biodiesel is purchased.

(B) On or before October 1, 2006, the director of transportation shall develop a program that provides for the opportunity to use fuel with at least a biodiesel rating of two or greater in its vehicle fleet and heavy equipment that use diesel fuel. The program shall establish the following as its goals for biodiesel fuel usage:

(1) On or before July 1, 2007, at least fifty per cent of the department's vehicle fleet and heavy equipment that use diesel fuel use fuel that has a biodiesel rating of two or greater, if such fuel is commercially available;

(2) On or before July 1, 2008, at least seventy-five per cent of the department's vehicle fleet and heavy equipment that use diesel fuel use fuel that has a biodiesel rating of two or greater, if such fuel is commercially available.

(C) Biodiesel shall be presumed to be commercially available if the incremental cost of such fuel is not more than twenty-five cents.

(D) The director may adopt any rules that are necessary to carry out this section.

Sec. 5733.47.  (A) As used in this section:

(1) "Ethanol" has the same meaning as in section 5733.46 of the Revised Code.

(2) "Ethanol blended gasoline" means gasoline containing at least ten per cent ethanol.

(3) "Gasoline" has the same meaning as in section 5735.01 of the Revised Code.

(4) "Retail dealer" means a taxpayer that sells or distributes gasoline at a retail service station located in this state.

(5) "Retail service station" means each location from which gasoline is sold or offered for sale at retail to the general public and is dispensed from a metered pump.

(B) There is hereby allowed a refundable credit against the tax imposed by section 5733.06 of the Revised Code for a retail dealer that owns or operates a retail service station at which more than sixty per cent of the total gallons of gasoline sold and dispensed through one or more metered pumps by the taxpayer in the tax year is ethanol blended gasoline. The amount of the credit for each eligible retail service station is two and one-half cents multiplied by the total number of gallons of ethanol blended gasoline sold and dispensed through all metered pumps located at that retail service station during the tax year in excess of sixty per cent of all gasoline sold and dispensed through metered pumps at that retail service station during the tax year. The credit shall be calculated separately for each retail service station site owned or operated by that retail dealer.

(C) The retail dealer shall claim the credit in the order required by section 5733.98 of the Revised Code. If the amount of the credit under this section exceeds the amount of tax otherwise due under section 5733.06 of the Revised Code after the deduction of all other credits in that order, the retail dealer is entitled to a refund of the excess.

(D) The tax commissioner may require that the retail dealer furnish information as is necessary to support a claim for a tax credit under this section, and no credit shall be allowed unless the information is provided.

(E) The credit allowed under this section may be claimed beginning with tax year 2006.

Sec. 5733.48. (A) As used in this section:

(1) "E85 blend fuel" means a motor fuel that consists of at least eighty-five per cent ethanol as defined in section 5733.46 of the Revised Code and no more than fifteen per cent gasoline or other liquid motor fuel by volume.

(2) "Gasoline" and "motor fuel" have the same meanings as in section 5735.01 of the Revised Code.

(3) "Motor fuel retail dealer" means a taxpayer that sells or distributes motor fuel at a retail service station located in this state and that possesses an unrevoked retail dealer's license issued by the tax commissioner under section 5735.022 of the Revised Code.

(4) "Retail service station" means a location from which motor fuel is sold to the general public and is dispensed or pumped directly into motor vehicle fuel tanks for consumption.

(B) For tax years 2006, 2007, 2008, and 2009, there is hereby allowed a nonrefundable credit against the tax imposed by section 5733.06 of the Revised Code for a motor fuel retail dealer that installs at a retail service station located in this state one or more pumps that dispense E85 blend fuel for sale to the general public. The amount of the credit equals ten thousand dollars. The credit shall be claimed in the tax year immediately following the calendar year in which a pump is installed. The amount of the credit claimed in a tax year shall not exceed ten thousand dollars regardless of the number of pumps installed by the motor fuel retail dealer at a retail service station during the preceding calendar year and regardless of the number of retail service stations at which the dealer installs a pump during the preceding calendar year. The credit shall be claimed in the order required under section 5733.98 of the Revised Code.

(C) The tax commissioner may require that a motor fuel retail dealer furnish information as is necessary to support the claim for the credit under this section, and no credit shall be allowed unless the information is provided.

Sec. 5733.98.  (A) To provide a uniform procedure for calculating the amount of tax imposed by section 5733.06 of the Revised Code that is due under this chapter, a taxpayer shall claim any credits to which it is entitled in the following order, except as otherwise provided in section 5733.058 of the Revised Code:

(1) The credit for taxes paid by a qualifying pass-through entity allowed under section 5733.0611 of the Revised Code;

(2) The credit allowed for financial institutions under section 5733.45 of the Revised Code;

(3) The credit for qualifying affiliated groups under section 5733.068 of the Revised Code;

(4) The subsidiary corporation credit under section 5733.067 of the Revised Code;

(5) The savings and loan assessment credit under section 5733.063 of the Revised Code;

(6) The credit for recycling and litter prevention donations under section 5733.064 of the Revised Code;

(7) The credit for employers that enter into agreements with child day-care centers under section 5733.36 of the Revised Code;

(8) The credit for employers that reimburse employee child day-care expenses under section 5733.38 of the Revised Code;

(9) The credit for maintaining railroad active grade crossing warning devices under section 5733.43 of the Revised Code;

(10) The credit for purchases of lights and reflectors under section 5733.44 of the Revised Code;

(11) The job retention credit under division (B) of section 5733.0610 of the Revised Code;

(12) The credit for losses on loans made under the Ohio venture capital program under sections 150.01 to 150.10 of the Revised Code if the taxpayer elected a nonrefundable credit under section 150.07 of the Revised Code;

(13) The credit for purchases of new manufacturing machinery and equipment under section 5733.31 or section 5733.311 of the Revised Code;

(14) The second credit for purchases of new manufacturing machinery and equipment under section 5733.33 of the Revised Code;

(15) The job training credit under section 5733.42 of the Revised Code;

(16) The credit for qualified research expenses under section 5733.351 of the Revised Code;

(17) The enterprise zone credit under section 5709.66 of the Revised Code;

(18) The credit for the eligible costs associated with a voluntary action under section 5733.34 of the Revised Code;

(19) The credit for employers that establish on-site child day-care under section 5733.37 of the Revised Code;

(20) The ethanol plant investment credit under section 5733.46 of the Revised Code;

(21) The credit for purchases of qualifying grape production property under section 5733.32 of the Revised Code;

(22) The export sales credit under section 5733.069 of the Revised Code;

(23) The credit for research and development and technology transfer investors under section 5733.35 of the Revised Code;

(24) The enterprise zone credits under section 5709.65 of the Revised Code;

(25) The credit for using Ohio coal under section 5733.39 of the Revised Code;

(26) The research and development credit under section 5733.352 of the Revised Code;

(27) The credit for small telephone companies under section 5733.57 of the Revised Code;

(27)(28) The credit for eligible nonrecurring 9-1-1 charges under section 5733.55 of the Revised Code;

(28)(29) The credit for providing programs to aid the communicatively impaired under section 5733.56 of the Revised Code;

(29)(30) The credit for installing ethanol fuel pumps under section 5733.48 of the Revised Code;

(31) The refundable jobs creation credit under division (A) of section 5733.0610 of the Revised Code;

(28)(30)(32) The refundable credit for tax withheld under division (B)(2) of section 5747.062 of the Revised Code;

(29)(31)(33) The refundable ethanol blended gasoline credit under section 5733.47 of the Revised Code;

(34) The credit for losses on loans made to the Ohio venture capital program under sections 150.01 to 150.10 of the Revised Code if the taxpayer elected a refundable credit under section 150.07 of the Revised Code.

(B) For any credit except the credits enumerated in divisions (A)(29), (30),, and (29) (31) to (34) of this section, the amount of the credit for a tax year shall not exceed the tax due after allowing for any other credit that precedes it in the order required under this section. Any excess amount of a particular credit may be carried forward if authorized under the section creating that credit.

Sec. 5735.40.  (A) As used in this section:

(1) "Alternative fuel" means all combustible gases and liquids suitable for generation of power for propulsion of motor vehicles, except for motor fuel or general aviation fuel.

(2) "General aviation fuel" means products placed in the fuel supply tank of aircraft, commonly or commercially known as aviation gasoline and jet turbine fuel and other combustible gases and liquids suitable for the generation of power for propulsion of aircraft.

(3) "Motor fuel" has the same meaning as in section 5735.01 of the Revised Code.

(4) "Political subdivision" means a county, township, municipal corporation, school district, or other body corporate and politic responsible for governmental activities in a geographic area smaller than that of the state.

(B) Except as provided in division (B)(6) of section 5739.02 of the Revised Code when levying the tax imposed by that section in conjunction with sections 5739.021, 5739.023, and 5739.026 of the Revised Code, no political subdivision shall levy or collect any excise, license, privilege, or occupational tax upon motor fuel or alternative fuel, or upon the buying, selling, handling, or consuming of motor fuel or alternative fuel.

Sec. 5747.76.  (A) As used in this section:

(1) "Ethanol" has the same meaning as in section 5747.75 of the Revised Code.

(2) "Ethanol blended gasoline" means gasoline containing at least ten per cent ethanol.

(3) "Gasoline" has the same meaning as in section 5735.01 of the Revised Code.

(4) "Retail dealer" means a taxpayer that sells or distributes gasoline at a retail service station located in this state.

(5) "Retail service station" means each location from which gasoline is sold or offered for sale at retail to the general public and is dispensed from a metered pump.

(B) There is hereby allowed a refundable credit against the tax imposed by section 5747.02 of the Revised Code for a retail dealer that owns or operates a retail service station at which more than sixty per cent of the total gallons of gasoline sold and dispensed through one or more metered pumps by the taxpayer in the taxable year is ethanol blended gasoline. The amount of the credit for each eligible retail service station is two and one-half cents multiplied by the total number of gallons of ethanol blended gasoline sold and dispensed through all metered pumps located at that retail service station during the taxable year in excess of sixty per cent of all gasoline sold and dispensed through metered pumps at that retail service station during the taxable year. The credit shall be calculated separately for each retail service station site owned or operated by that retail dealer.

(C) The retail dealer shall claim the credit in the order required by section 5747.98 of the Revised Code. If the amount of the credit under this section exceeds the amount of tax otherwise due under section 5747.02 of the Revised Code after the deduction of all other credits in that order, the retail dealer is entitled to a refund of the excess.

(D) The tax commissioner may require that the retail dealer furnish information as is necessary to support a claim for a tax credit under this section, and no credit shall be allowed unless the information is provided.

(E) The credit allowed under this section may be claimed for taxable years beginning on or after January 1, 2006.

Sec. 5747.77. (A) As used in this section:

(1) "E85 blend fuel" means a motor fuel that consists of at least eighty-five per cent ethanol as defined in section 5747.75 of the Revised Code and no more than fifteen per cent gasoline or other liquid motor fuel by volume.

(2) "Gasoline" and "motor fuel" have the same meanings as in section 5735.01 of the Revised Code.

(3) "Motor fuel retail dealer" means a pass-through entity that sells or distributes motor fuel at a retail service station located in this state and that possesses an unrevoked retail dealer's license issued by the tax commissioner under section 5735.022 of the Revised Code.

(3) "Pass-through entity" has the same meaning as in section 5747.01 of the Revised Code and includes a sole proprietorship.

(4) "Retail service station" means a location from which motor fuel is sold to the general public and is dispensed or pumped directly into motor vehicle fuel tanks for consumption.

(B) For taxable years beginning in 2005, 2006, 2007, and 2008, there is hereby allowed a nonrefundable credit against the tax imposed by section 5747.02 of the Revised Code for a motor fuel retail dealer that installs at a retail service station located in this state one or more pumps that dispense E85 blend fuel for sale to the general public. The amount of the credit equals ten thousand dollars. The credit shall be claimed for the taxable year in which a pump is installed. The amount of the credit claimed for a taxable year shall not exceed ten thousand dollars regardless of the number of pumps installed by the motor fuel retail dealer at a retail service station during the taxable year and regardless of the number of retail service stations at which the dealer installs a pump during the taxable year. The credit shall be claimed in the order required under section 5747.98 of the Revised Code.

(C) Nothing in this section limits or disallows pass-through treatment of the credit.

(D) The tax commissioner may require that a motor fuel retail dealer furnish information as is necessary to support the claim for the credit under this section, and no credit shall be allowed unless the information is provided.

Sec. 5747.98.  (A) To provide a uniform procedure for calculating the amount of tax due under section 5747.02 of the Revised Code, a taxpayer shall claim any credits to which the taxpayer is entitled in the following order:

(1) The retirement income credit under division (B) of section 5747.055 of the Revised Code;

(2) The senior citizen credit under division (C) of section 5747.05 of the Revised Code;

(3) The lump sum distribution credit under division (D) of section 5747.05 of the Revised Code;

(4) The dependent care credit under section 5747.054 of the Revised Code;

(5) The lump sum retirement income credit under division (C) of section 5747.055 of the Revised Code;

(6) The lump sum retirement income credit under division (D) of section 5747.055 of the Revised Code;

(7) The lump sum retirement income credit under division (E) of section 5747.055 of the Revised Code;

(8) The credit for displaced workers who pay for job training under section 5747.27 of the Revised Code;

(9) The campaign contribution credit under section 5747.29 of the Revised Code;

(10) The twenty-dollar personal exemption credit under section 5747.022 of the Revised Code;

(11) The joint filing credit under division (G) of section 5747.05 of the Revised Code;

(12) The nonresident credit under division (A) of section 5747.05 of the Revised Code;

(13) The credit for a resident's out-of-state income under division (B) of section 5747.05 of the Revised Code;

(14) The credit for employers that enter into agreements with child day-care centers under section 5747.34 of the Revised Code;

(15) The credit for employers that reimburse employee child day-care expenses under section 5747.36 of the Revised Code;

(16) The credit for adoption of a minor child under section 5747.37 of the Revised Code;

(17) The credit for purchases of lights and reflectors under section 5747.38 of the Revised Code;

(18) The job retention credit under division (B) of section 5747.058 of the Revised Code;

(19) The credit for losses on loans made under the Ohio venture capital program under sections 150.01 to 150.10 of the Revised Code if the taxpayer elected a nonrefundable credit under section 150.07 of the Revised Code;

(20) The credit for purchases of new manufacturing machinery and equipment under section 5747.26 or section 5747.261 of the Revised Code;

(21) The second credit for purchases of new manufacturing machinery and equipment and the credit for using Ohio coal under section 5747.31 of the Revised Code;

(22) The job training credit under section 5747.39 of the Revised Code;

(23) The enterprise zone credit under section 5709.66 of the Revised Code;

(24) The credit for the eligible costs associated with a voluntary action under section 5747.32 of the Revised Code;

(25) The credit for employers that establish on-site child day-care centers under section 5747.35 of the Revised Code;

(26) The ethanol plant investment credit under section 5747.75 of the Revised Code;

(27) The credit for purchases of qualifying grape production property under section 5747.28 of the Revised Code;

(28) The export sales credit under section 5747.057 of the Revised Code;

(29) The credit for research and development and technology transfer investors under section 5747.33 of the Revised Code;

(30) The enterprise zone credits under section 5709.65 of the Revised Code;

(31) The research and development credit under section 5747.331 of the Revised Code;

(32) The credit for installing ethanol fuel pumps under section 5747.77 of the Revised Code;

(33) The refundable jobs creation credit under division (A) of section 5747.058 of the Revised Code;

(33)(34) The refundable credit for taxes paid by a qualifying entity granted under section 5747.059 of the Revised Code;

(34)(35) The refundable credits for taxes paid by a qualifying pass-through entity granted under division (J) of section 5747.08 of the Revised Code;

(35)(36) The refundable credit for tax withheld under division (B)(1) of section 5747.062 of the Revised Code;

(36)(37) The refundable ethanol blended gasoline credit under section 5747.76 of the Revised Code;

(38) The credit for losses on loans made to the Ohio venture capital program under sections 150.01 to 150.10 of the Revised Code if the taxpayer elected a refundable credit under section 150.07 of the Revised Code.

(B) For any credit, except the credits enumerated in divisions (A)(32)(33) to (36)(38) of this section and the credit granted under division (I) of section 5747.08 of the Revised Code, the amount of the credit for a taxable year shall not exceed the tax due after allowing for any other credit that precedes it in the order required under this section. Any excess amount of a particular credit may be carried forward if authorized under the section creating that credit. Nothing in this chapter shall be construed to allow a taxpayer to claim, directly or indirectly, a credit more than once for a taxable year.

Section 2. That existing sections 125.831, 3317.022, 5733.98, and 5747.98 of the Revised Code are hereby repealed.

Section 3. (A) As used in this section, "alternative fuel" has the same meaning as in section 125.831 of the Revised Code, as amended by this act.

(B) The Department of Taxation shall study the feasibility of encouraging the use of alternative fuels by reducing the motor fuel tax rate on those fuels, to the extent they are taxed under Chapter 5735. of the Revised Code, to reflect their lower energy content and the need to use more gallons of an alternative fuel to travel the same distance. The study shall examine the British thermal unit ("Btu") of each alternative fuel that may be used in motor vehicles, and determine at what rate each alternative fuel may be taxed to result in an effective tax rate that is equalized to conventional fuels, such as gasoline and diesel, according to their relative Btu content by volume. Among any other matters the Department of Taxation determines to be pertinent to the study, the Department also shall consider the experience of other states that have encouraged the use of alternative fuels by reducing their fuel tax rates on those fuels. Not later than January 1, 2006, the Department shall prepare a report regarding its findings and submit a copy of the report to the Governor, the Speaker and Minority Leader of the House of Representatives, and the President and Minority Leader of the Senate.

Section 4.  Section 5733.98 of the Revised Code is presented in this act as a composite of the section as amended by both Am. Sub. H.B. 1 and Am. Sub. H.B. 95 of the 125th General Assembly. The General Assembly, applying the principle stated in division (B) of section 1.52 of the Revised Code that amendments are to be harmonized if reasonably capable of simultaneous operation, finds that the composite is the resulting version of the section in effect prior to the effective date of the section as presented in this act.