Foreign Oil Displacement Act - Amends the Internal Revenue Code to allow an investment credit for carbonaceous fuels conversion facilities, defined as facilities for producing: (1) oil from shale and tar sands; (2) gas from geopressured brine, Devonian shale, coal seams, or a tight formation, or from biomass; and (3) liquid, gaseous, or solid synthetic fuels from coal (including lignite, standard anthracite, peat, and any byproduct from a coal, culm, or silt preparation facility containing fixed carbon and including such fuels when used as feedstocks). Provides for recapture.
[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 162 Introduced in House (IH)]
106th CONGRESS
1st Session
H. R. 162
To amend the Internal Revenue Code of 1986 to provide an investment
credit to promote the conversion of United States coal and domestic
carbonaceous feedstocks into liquid fuels.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 6, 1999
Mr. Holden introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide an investment
credit to promote the conversion of United States coal and domestic
carbonaceous feedstocks into liquid fuels.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Foreign Oil Displacement Act''.
SEC. 2. FINDINGS.
Congress finds that--
(1) the strategic interests of the United States would be
served by a reduction in the Nation's dependence upon imported
oil to produce transportation fuels and other products vital to
both the domestic economy and national security;
(2) this goal would be served by the development of a
viable, commercially competitive synthetic fuels industry
reliant upon domestic coals and other plentiful, nontraditional
carbonaceous feedstocks; and
(3) temporary financial incentives are required to foster
private investment in the technology, design, construction, and
operation of strategic facilities capable of producing
synthetic fuels on a commercial scale.
SEC. 3. CARBONACEOUS FUELS FACILITY CREDIT.
(a) Allowance of Carbonaceous Fuels Facility Credit.--Section 46 of
the Internal Revenue Code of 1986 is amended by striking ``and'' at the
end of paragraph (2), by striking the period at the end of paragraph
(3) and inserting ``, and'', and by inserting after paragraph (3) the
following new paragraph:
``(4) the carbonaceous fuels facility credit.''
(b) Amount of Carbonaceous Fuels Facility Credit.--Section 48 of
such Code (relating to the energy credit and the reforestation credit)
is amended by adding after subsection (b) the following new subsection:
``(c) Carbonaceous Fuels Facility Credit.--
``(1) In general.--For purposes of section 46, the
carbonaceous fuels facility credit for any taxable year is an
amount equal to 28 percent of the qualified investment in a
carbonaceous fuels conversion facility for such taxable year.
``(2) Carbonaceous fuels conversion facility.--
``(A) In general.--For purposes of paragraph (1),
the term `carbonaceous fuels conversion facility' means
a facility of the taxpayer--
``(i)(I) the original use of which
commences with the taxpayer or the
reconstruction of which is completed by the
taxpayer (but only with respect to that portion
of the basis which is properly attributable to
such reconstruction), or
``(II) that is acquired through purchase
(as defined by section 179(d)(2)),
``(ii) that is depreciable under section
167,
``(iii) that has a useful life of not less
than 4 years, and
``(iv) that is used to produce a qualified
fuel.
``(B) Special rule for sale-leasebacks.--For
purposes of clause (i) of subparagraph (A), in the case
of a facility that--
``(i) is originally placed in service by a
person, and
``(ii) is sold and leased back by such
person, or is leased to such person, within 3
months after the date such facility was
originally placed in service, for a period of
not less than 12 years,
such facility shall be treated as originally placed in
service not earlier than the date on which such
property is used under the leaseback (or lease)
referred to in clause (ii). The preceding sentence
shall not apply to any property if the lessee and
lessor of such property make an election under this
sentence. Such an election, once made, may be revoked
only with the consent of the Secretary.
``(C) Qualified fuel.--For purposes of clause (iv)
of subparagraph (A), the term `qualified fuel'--
``(i) has the meaning given such term by
section 29(c), except that
``(ii) in respect of subparagraph (C) of
paragraph (1) of section 29(c), the term `coal'
shall, in addition to lignite, be deemed to
include standard anthracite, peat, and any
byproduct from a coal, culm, or silt
preparation facility that contains fixed
carbon.
``(3) Qualified investment.--For purposes of paragraph (1),
the term `qualified investment' means, with respect to any
taxable year, the basis of a carbonaceous fuels conversion
facility placed in service by the taxpayer during such taxable
year.
``(4) Qualified progress expenditures.--
``(A) Increase in qualified investment.--In the
case of a taxpayer who has made an election under
subparagraph (E), the amount of the qualified
investment of such taxpayer for the taxable year
(determined under paragraph (3) without regard to this
subsection) shall be increased by an amount equal to
the aggregate of each qualified progress expenditure for the taxable
year with respect to progress expenditure property.
``(B) Progress expenditure property defined.--For
purposes of this paragraph, the term `progress
expenditure property' means any property being
constructed by or for the taxpayer and which--
``(i) cannot reasonably be expected to be
completed in less than 18 months, and
``(ii) it is reasonable to believe will
qualify as a carbonaceous fuels conversion
facility which is being constructed by or for
the taxpayer when it is placed in service.
``(C) Qualified progress expenditures defined.--For
purposes of this paragraph--
``(i) Self-constructed property.--In the
case of any self-constructed property, the term
`qualified progress expenditures' means the
amount which, for purposes of this subpart, is
properly chargeable (during such taxable year)
to capital account with respect to such
property.
``(ii) Non-self-constructed property.--In
the case of non-self-constructed property, the
term `qualified progress expenditures' means
the amount paid during the taxable year to
another person for the construction of such
property.
``(D) Other definitions.--For purposes of this
subsection--
``(i) Self-constructed property.--The term
`self-constructed property' means property for
which it is reasonable to believe that more
than half of the construction expenditures will
be made directly by the taxpayer.
``(ii) Non-self-constructed property.--The
term `non-self-constructed property' means
property which is not self-constructed
property.
``(iii) Construction, etc.--The term
`construction' includes reconstruction and
erection, and the term `constructed' includes
reconstructed and erected.
``(iv) Only construction of carbonaceous
fuels conversion facility to be taken into
account.--Construction shall be taken into
account only if, for purposes of this subpart,
expenditures therefor are properly chargeable
to capital account with respect to the property.
``(E) Election.--An election under this paragraph
may be made at such time and in such manner as the
Secretary may by regulations prescribe. Such an
election shall apply to the taxable year for which made
and to all subsequent taxable years. Such an election,
once made, may not be revoked except with the consent
of the Secretary.
``(5) Coordination with other credits.--This subsection
shall not apply to any property with respect to which the
energy credit or the rehabilitation credit is allowed unless
the taxpayer elects to waive the application of such credits to
such property.''
(c) Recapture.--Subsection (a) of section 50 of such Code is
amended by adding at the end the following new paragraph:
``(6) Special rules relating to carbonaceous fuels
conversion facility.--For purposes of applying this subsection
in the case of any credit allowable by reason of section 48(c),
the following shall apply:
``(A) General rule.--In lieu of the amount of the
increase in tax under paragraph (1), the increase in
tax shall be an amount equal to the investment tax
credit allowed under section 38 for all prior taxable
years with respect to a carbonaceous fuels conversion
facility (as defined by section 48(c)) multiplied by a
fraction whose numerator is the number of years
remaining to fully depreciate under this title the
carbonaceous fuels conversion facility disposed of, and
whose denominator is the total number of years over
which such facility would otherwise have been subject
to depreciation. For purposes of the preceding
sentence, the year of disposition of the carbonaceous
fuels conversion facility property shall be treated as
a year of remaining depreciation.
``(B) Property ceases to qualify for progress
expenditures.--Rules similar to the rules of paragraph
(2) shall apply in the case of qualified progress
expenditures for a carbonaceous fuels conversion
facility under section 48(c), except that the amount of
the increase in tax under subparagraph (A) of this
paragraph shall be substituted in lieu of the amount
described in such paragraph (2).
``(C) This paragraph shall be applied separately
with respect to the credit allowed under section 38
regarding a carbonaceous fuels conversion facility.''
(d) Technical Amendments.--
(1) Subparagraph (C) of section 49(a)(1) of such Code is
amended by striking ``and'' at the end of clause (ii), by
striking the period at the end of clause (iii) and inserting
``, and'', and by adding at the end thereof the following new
clause:
``(iv) the portion of the basis of any
carbonaceous fuels conversion facility
attributable to any qualified investment (as
defined by section 48(c)(3)).''
(2) Paragraph (4) of section 50(a) of such Code is amended
by striking ``and (2)'' and inserting ``, (2), and (6)''.
(3)(A) The section heading for section 48 of such Code is
amended to read as follows:
``SEC. 48. OTHER CREDITS.''
(B) The table of sections for subpart E of part IV of
subchapter A of chapter 1 of such Code is amended by striking
the item relating to section 48 and inserting the following:
``Sec. 48. Other credits.''
(e) Sale or Assignment of Unused Credit Amount.--Section 50 of such
Code is amended by adding at the end the following new subsection:
``(e) Sale or Assignment of Unused Carbonaceous Fuels Facility
Credit Amount.--
``(1) General rule.--Any unused portion of a carbonaceous
fuels facility credit may be sold or assigned in accordance
with regulations prescribed by the Secretary.
``(2) Treatment of seller.--
``(A) Liability.--The sale or assignment of any
portion of a credit under paragraph (1) shall not
relieve the seller or assignor of any penalty or
interest charged under this title with respect to such
portion.
``(B) Basis.--The basis of a carbonaceous fuels
facility shall not be adjusted by reason of the sale or
assignment of a credit under paragraph (1).
``(3) Treatment of acquirer.--
``(A) Credit claimed.--The credit (or portion
thereof) acquired under paragraph (1) may be claimed
only by the person acquiring such credit in the taxable
year of such person in which such sale or assignment occurred and only
if such person notifies the Secretary of the derivative source of such
credit.
``(B) Liability.--Such person shall not be subject
to any penalty or interest in respect of such credit
for which the seller or assignor remains subject under
paragraph (2)(A).
``(C) Ordering rule.--
``(i) In general.--Such credit shall be
treated as a credit under this part allowable
to such person and shall be used after the
order of all other credits specified by section
38(d).
``(ii) Limitation on carryforwards.--No
amount of a credit acquired under paragraph (1)
may be treated as a business carryforward in
any taxable year beginning after December 31,
2012.
``(4) Regulations.--Not later than 1 year after the date of
the enactment of the Foreign Oil Displacement Act, the
Secretary shall prescribe regulations to carry out this
subsection.''
(f) Effective Date.--The amendments made by this section shall
apply to periods after the date of the enactment of this Act under
rules similar to the rules of section 48(m) of the Internal Revenue
Code of 1986 (as in effect on the day before the date of the enactment
of the Revenue Reconciliation Act of 1990).
SEC. 4. EXEMPTION FROM MANUFACTURERS EXCISE TAX ON FUELS.
(a) Gasoline.--Subsection (a) of section 4083 of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
paragraph:
``(4) Qualified carbonaceous fuel.--
``(A) Exemption.--For taxable years beginning after
90 days after the date of the enactment of this
paragraph and ending before December 31, 2012, the
terms `taxable fuel', `gasoline', and `diesel fuel' do
not include qualified carbonaceous fuel or that portion
of a blend that is qualified carbonaceous fuel.
``(B) Qualified carbonaceous fuel defined.--For
purposes of subparagraph (A), the term `qualified
carbonaceous fuel' means qualified fuel produced by a
carbonaceous fuels conversion facility.
``(C) Other definitions.--For purposes of
subparagraph (B), the terms `qualified fuel' and
`carbonaceous fuels conversion facility' have the
meaning given such terms by section 48(c)(2).''
(b) Aviation Fuel.--Subsection (a) of section 4093 of such Code is
amended by adding at the end the following new sentence: ``Such term
does not include qualified carbonaceous fuel (as defined by section
4083(a)(4)).''
(c) Retail Uses.--Section 4041 of such Code is amended by adding at
the end the following new subsection:
``(n) Certain Carbonaceous Fuel.--
``(1) Exemption.--For taxable years beginning after 90 days
after the date of the enactment of this subsection and ending
before December 31, 2012, no tax shall be imposed under this
section on qualified carbonaceous fuel or that portion of a
blend that is qualified carbonaceous fuel.
``(2) Qualified carbonaceous fuel defined.--For purposes of
paragraph (1), the term `qualified carbonaceous fuel' has the
meaning given such term by section 4083(a)(4).''
(d) Effective Date.--The amendments made by this section shall
apply to fuels produced after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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