[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2108 Introduced in House (IH)]
107th CONGRESS
1st Session
H. R. 2108
To amend the Internal Revenue Code of 1986 to provide tax incentives to
encourage the production and use of efficient energy sources, and for
other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 7, 2001
Mr. Matsui (for himself, Mr. Becerra, Mr. Pomeroy, Mr. Condit, Mr.
Sawyer, Mr. Thompson of California, Mrs. Capps, Ms. Lofgren, Mr.
Bentsen, Mr. Crowley, Mr. Kanjorski, and Ms. Jackson-Lee of Texas)
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 tax incentives to
encourage the production and use of efficient energy sources, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Energy Security
and Tax Incentive Policy Act of 2001''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I--ENERGY-EFFICIENT PROPERTY USED IN BUSINESS
Sec. 101. Credit for energy-efficient property used in business.
Sec. 102. Energy Efficient Commercial Building Property Deduction.
Sec. 103. Credit for energy-efficient appliances.
TITLE II--RESIDENTIAL ENERGY SYSTEMS
Sec. 201. Business credit for construction of new energy-efficient
home.
Sec. 202. Credit for energy efficiency improvements to existing homes.
Sec. 203. Credit for residential solar, wind, and fuel cell energy
property.
TITLE III--ELECTRICITY FACILITIES AND PRODUCTION
Sec. 301. Incentive for Distributed Generation.
Sec. 302. Modifications to credit for electricity produced from
renewable and waste resources.
Sec. 303. Treatment of facilities using bagasse to produce energy as
solid waste disposal facilities eligible
for tax-exempt financing.
Sec. 304. Depreciation of property used in the transmission of
electricity.
TITLE IV--INCENTIVES FOR EARLY COMMERCIAL APPLICATIONS OF ADVANCED
CLEAN COAL TECHNOLOGIES
Sec. 401. Credit for investment in qualifying advanced clean coal
technology.
Sec. 402. Credit for production from qualifying advanced clean coal
technology.
Sec. 403. Risk pool for qualifying advanced clean coal technology.
TITLE V--HEATING FUELS AND STORAGE
Sec. 501. Full expensing of propane storage facilities.
Sec. 502. Arbitrage rules not to apply to prepayments for natural gas
and other commodities.
Sec. 503. Private loan financing test not to apply to prepayments for
natural gas and other commodities.
TITLE VI--OIL AND GAS PRODUCTION AND PETROLEUM PRODUCTS
Sec. 601. Credit for production of re-refined lubricating oil.
Sec. 602. Oil and gas from marginal wells.
Sec. 603. Deduction for delay rental payments.
Sec. 604. Election to expense geological and geophysical expenditures.
Sec. 605. Gas pipelines treated as 7-year property.
Sec. 606. Crude oil and natural gas development credit.
Sec. 607. Credit for capture of coalmine methane gas.
Sec. 608. Allocation of alcohol fuels credit to patrons of a
cooperative.
Sec. 609. Extension of credit for producing fuel from a nonconventional
source.
TITLE I--ENERGY-EFFICIENT PROPERTY USED IN BUSINESS
SEC. 101. CREDIT FOR CERTAIN ENERGY-EFFICIENT PROPERTY USED IN
BUSINESS.
(a) In General.--Subpart E of part IV of subchapter A of chapter 1
(relating to rules for computing investment credit) is amended by
inserting after section 48 the following:
``SEC. 48A. ENERGY CREDIT.
``(a) In General.--For purposes of section 46, the energy credit
for any taxable year is the energy percentage of the basis of each
energy property placed in service during such taxable year.
``(b) Energy Percentage.--
``(1) In general.--The energy percentage is--
``(A) except as otherwise provided in this
subparagraph, 10 percent,
``(B) in the case of energy property described in
clauses (i), (iii), and (vi) of subsection (c)(1)(A),
20 percent,
``(C) in the case of energy property described in
subsection (c)(1)(A)(v), 15 percent,
``(D) in the case of energy property described in
subsection (c)(1)(A)(ii) relating to a high risk
geothermal well, 20 percent, and
``(E) in the case of energy property described in
subsection (c)(1)(A)(vii), 30 percent.
``(2) Coordination with rehabilitation.--The energy
percentage shall not apply to that portion of the basis of any
property which is attributable to qualified rehabilitation
expenditures.
``(c) Energy Property Defined.--
``(1) In general.--For purposes of this subpart, the term
`energy property' means any property--
``(A) which is--
``(i) solar energy property,
``(ii) geothermal energy property,
``(iii) energy-efficient building property
other than property described in clauses
(iii)(I) and (v)(I) of subsection (d)(3)(A),
``(iv) combined heat and power system
property,
``(v) low core loss distribution
transformer property,
``(vi) qualified anaerobic digester
property, or
``(vii) qualified wind energy systems
equipment property,
``(B)(i) the construction, reconstruction, or
erection of which is completed by the taxpayer, or
``(ii) which is acquired by the taxpayer if the
original use of such property commences with the
taxpayer.
``(C) which can reasonably be expected to remain in
operation for at least 5 years,
``(D) with respect to which depreciation (or
amortization in lieu of depreciation) is allowable, and
``(E) which meets the performance and quality
standards (if any) which--
``(i) have been prescribed by the Secretary
by regulations (after consultation with the
Secretary of Energy), and
``(ii) are in effect at the time of the
acquisition of the property.
``(2) Exceptions.--
``(A) Public utility property.--Such term shall not
include any property which is public utility property
(as defined in section 46(f)(5) as in effect on the day
before the date of the enactment of the Revenue
Reconciliation Act of 1990), except for property
described in paragraph (1)(A)(iv).
``(B) Certain wind equipment.--Such term shall not
include equipment described in paragraph (1)(A)(vii)
which is taken into account for purposes of section 45
for the taxable year.
``(d) Definitions Relating to Types of Energy Property.--For
purposes of this section--
``(1) Solar energy property.--
``(A) In general.--The term `solar energy property'
means equipment which uses solar energy to generate
electricity, to heat or cool (or provide hot water for
use in) a structure, or to provide solar process heat.
``(B) Swimming pools, etc. used as storage
medium.--The term `solar energy property' shall not
include property with respect to which expenditures are
properly allocable to a swimming pool, hot tub, or any
other energy storage medium which has a function other
than the function of such storage.
``(C) Solar panels.--No solar panel or other
property installed as a roof (or portion thereof) shall
fail to be treated as solar energy property solely
because it constitutes a structural component of the
structure on which it is installed.
``(2) Geothermal energy property.--
``(A) In general.--The term `geothermal energy
property' means equipment used to produce, distribute,
or use energy derived from a geothermal deposit (within
the meaning of section 613(e)(2)), but only, in the
case of electricity generated by geothermal power, up
to (but not including) the electrical transmission
stage.
``(B) High risk geothermal well.--The term `high
risk geothermal well' means a geothermal deposit
(within the meaning of section 613(e)(2)) which
requires high risk drilling techniques. Such deposit
may not be located in a State or national park or in an
area in which the relevant State park authority or the
National Park Service determines the development of
such a deposit will negatively impact on a State or
national park.
``(3) Energy-efficient building property.--
``(A) In general.--The term `energy-efficient
building property' means--
``(i) a fuel cell which--
``(I) generates electricity using
an electrochemical process,
``(II) has an electricity-only
generation efficiency greater than 30
percent, and
``(III) has a minimum generating
capacity of 2 kilowatts,
``(ii) an electric heat pump hot water
heater which yields an energy factor of 1.7 or
greater under test procedures prescribed by the
Secretary of Energy,
``(iii)(I) an electric heat pump which has
a heating system performance factor (HSPF) of
at least 8.5 but less than 9 and a cooling
seasonal energy efficiency ratio (SEER) of at
least 13.5 but less than 15,
``(II) an electric heat pump which has a
heating system performance factor (HSPF) of 9
or greater and a cooling seasonal energy
efficiency ratio (SEER) of 15 or greater,
``(iv) a natural gas heat pump which has a
coefficient of performance of not less than
1.25 for heating and not less than 0.70 for
cooling,
``(v)(I) a central air conditioner which
has a cooling seasonal energy efficiency ratio
(SEER) of at least 13.5 but less than 15,
``(II) a central air conditioner which has
a cooling seasonal energy efficiency ratio
(SEER) of 15 or greater,
``(vi) an advanced natural gas water heater
which--
``(I) increases steady state
efficiency and reduces standby and vent
losses, and
``(II) has an energy factor of at
least 0.65,
``(vii) an advanced natural gas furnace
which achieves a 90 percent AFUE and rated for
seasonal electricity use of less than 300 kWh
per year, and
``(viii) natural gas cooling equipment
which meets all applicable standards of the
American Society of Heating, Refrigerating, and
Air Conditioning Engineers and which--
``(I) has a coefficient of
performance of not less than .60, or
``(II) uses desiccant technology
and has an efficiency rating of not
less than 50 percent.
``(B) Limitations.--The credit under subsection (a)
for the taxable year may not exceed--
``(i) $500 in the case of property
described in subparagraph (A) other than
clauses (i), (iv), and (viii) thereof,
``(ii) $500 for each kilowatt of capacity
in the case of any fuel cell described in
subparagraph (A)(i),
``(iii) $1,000 in the case of any natural
gas heat pump described in subparagraph
(A)(iv), and
``(iv) $150 for each ton of capacity in the
case of any natural gas cooling equipment
described in subparagraph (A)(viii).
``(4) Combined heat and power system property.--
``(A) In general.--The term `combined heat and
power system property' means property--
``(i) comprising a system for the same
energy source for the simultaneous or
sequential generation of electrical power,
mechanical shaft power, or both, in combination
with steam, heat, or other forms of useful
energy,
``(ii) which has an electrical capacity of
more than 50 kilowatts or a mechanical energy
capacity of more than 67 horsepower or an
equivalent combination of electrical and
mechanical energy capacities,
``(iii) which produces--
``(I) at least 20 percent of its
total useful energy in the form of
thermal energy, and
``(II) at least 20 percent of its
total useful energy in the form of
electrical or mechanical power (or a
combination thereof), and
``(iv) the energy efficiency percentage of
which exceeds--
``(I) 60 percent in the case of a
system with an electrical capacity of
less than 1 megawatt,
``(II) 65 percent in the case of a
system with an electrical capacity of
not less than 1 megawatt and not in
excess of 50 megawatts, and
``(III) 70 percent in the case of a
system with an electrical capacity in
excess of 50 megawatts.
``(B) Special rules.--
``(i) Energy efficiency percentage.--For
purposes of subparagraph (A)(iv), the energy
efficiency percentage of a system is the
fraction--
``(I) the numerator of which is the
total useful electrical, thermal, and
mechanical power produced by the system
at normal operating rates, and
``(II) the denominator of which is
the lower heating value of the primary
fuel source for the system.
``(ii) Determinations made on btu basis.--
The energy efficiency percentage and the
percentages under subparagraph (A)(iii) shall
be determined on a Btu basis.
``(iii) Input and output property not
included.--The term `combined heat and power
system property' does not include property used
to transport the energy source to the facility
or to distribute energy produced by the
facility.
``(iv) Accounting rule for public utility
property.--If the combined heat and power
system property is public utility property (as
defined in section 46(f)(5) as in effect on the
day before the date of the enactment of the
Revenue Reconciliation Act of 1990), the
taxpayer may only claim the credit under
subsection (a)(1) if, with respect to such
property, the taxpayer uses a normalization
method of accounting.
``(5) Low core loss distribution transformer property.--The
term `low core loss distribution transformer property' means a
distribution transformer which has energy savings from a highly
efficient core of at least 20 percent more than the average for
power ratings reported by studies required under section 124 of
the Energy Policy Act of 1992.
``(6) Qualified anaerobic digester property.--The term
`qualified anaerobic digester property' means an anaerobic
digester for manure or crop waste which achieves at least 65
percent efficiency measured in terms of the fraction of energy
input converted to electricity and useful thermal energy.
``(7) Qualified wind energy systems equipment property.--
The term `qualified wind energy systems equipment property'
means wind energy systems equipment with a turbine size of not
more than 75 kilowatts rated capacity.
``(e) Special Rules.--For purposes of this section--
``(1) Special rule for property financed by subsidized
energy financing or industrial development bonds.--
``(A) Reduction of basis.--For purposes of applying
the energy percentage to any property, if such property
is financed in whole or in part by--
``(i) subsidized energy financing, or
``(ii) the proceeds of a private activity
bond (within the meaning of section 141) the
interest on which is exempt from tax under
section 103, the amount taken into account as
the basis of such property shall not exceed the
amount which (but for this subparagraph) would
be so taken into account multiplied by the
fraction determined under subparagraph (B).
``(B) Determination of fraction.--For purposes of
subparagraph (A), the fraction determined under this
subparagraph is 1 reduced by a fraction--
``(i) the numerator of which is that
portion of the basis of the property which is
allocable to such financing or proceeds, and
``(ii) the denominator of which is the
basis of the property.
``(C) Subsidized energy financing.--For purposes of
subparagraph (A), the term `subsidized energy
financing' means financing provided under a Federal,
State, or local program a principal purpose of which is
to provide subsidized financing for projects designed
to conserve or produce energy.
``(2) Certain progress expenditure rules made applicable.--
Rules similar to the rules of subsections (c)(4) and (d) of
section 46 (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990) shall
apply for purposes of this section.
``(f) Application of Section.--
``(1) In general.--Except as provided by paragraph (2),
this section shall apply to property placed in service after
December 31, 2001, and before January 1, 2009.
``(2) Exceptions.--
``(A) Solar energy and geothermal energy
property.--Paragraph (1) shall not apply to solar
energy property or geothermal energy property.
``(B) Certain electric heat pumps and central air
conditioners.--In the case of property which is
described in subsection (d)(3)(A)(iii)(I) or
(d)(3)(A)(v)(I), this section shall apply to property
placed in service after December 31, 2001, and before
January 1, 2006.''.
(b) Conforming Amendments.--
(1) Section 48 is amended to read as follows:
``SEC. 48. REFORESTATION CREDIT.
``(a) In General.--For purposes of section 46, the reforestation
credit for any taxable year is 20 percent of the portion of the
amortizable basis of any qualified timber property which was acquired
during such taxable year and which is taken into account under section
194 (after the application of section 194(b)(1)).
``(b) Definitions.--For purposes of this subpart, the terms
`amortizable basis' and `qualified timber property' have the respective
meanings given to such terms by section 194.''.
(2) Section 39(d) is amended by adding at the end the
following:
``(10) No carryback of energy credit before effective
date.--No portion of the unused business credit for any taxable
year which is attributable to the energy credit determined
under section 48A may be carried back to a taxable year ending
before January 1, 2002.''.
(3) Section 280C is amended by adding at the end the
following:
``(d) Credit for Energy Property Expenses.--
``(1) In general.--No deduction shall be allowed for that
portion of the expenses for energy property (as defined in
section 48A(c)) otherwise allowable as a deduction for the
taxable year which is equal to the amount of the credit
determined for such taxable year under section 48A(a).
``(2) Similar rule where taxpayer capitalizes rather than
deducts expenses.--If--
``(A) the amount of the credit allowable for the
taxable year under section 48A (determined without
regard to section 38(c)), exceeds
``(B) the amount allowable as a deduction for the
taxable year for expenses for energy property
(determined without regard to paragraph (1)), the
amount chargeable to capital account for the taxable
year for such expenses shall be reduced by the amount
of such excess.
``(3) Controlled groups.--Paragraph (3) of subsection (b)
shall apply for purposes of this subsection.''.
(4) Section 29(b)(3)(A)(i)(III) is amended by striking
`section 48(a)(4)(C)' and inserting `section 48A(e)(1)(C)'.
(5) Section 50(a)(2)(E) is amended by striking `section
48(a)(5)' and inserting `section 48A(e)(2)'.
(6) Section 168(e)(3)(B) is amended--
(A) by striking clause (vi)(I) and inserting the
following:
``(I) is described in paragraph (1) or (2)
of section 48A(d) (or would be so described if
`solar and wind' were substituted for `solar'
in paragraph (1)(B)),'', and
(B) in the last sentence by striking ``section
48(a)(3)'' and inserting ``section 48A(c)(2)(A)''.
(c) Clerical Amendment.--The table of sections for subpart E of
part IV of subchapter A of chapter 1 is amended by striking the item
relating to section 48 and inserting the following:
``Sec. 48. Reforestation credit.
``Sec. 48A. Energy credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2001, 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. 102. ENERGY-EFFICIENT COMMERCIAL BUILDING PROPERTY DEDUCTION.
(a) In General.--Part VI of subchapter B of chapter 1 (relating to
itemized deductions for individuals and corporations) is amended by
adding at the end the following:
``SEC. 199. ENERGY-EFFICIENT COMMERCIAL BUILDING PROPERTY.
``(a) In General.--There shall be allowed as a deduction for the
taxable year an amount equal to the energy-efficient commercial
building property expenditures made by a taxpayer for the taxable year.
``(b) Maximum Amount of Deduction.--The amount of energy-efficient
commercial building property expenditures taken into account under
subsection (a) shall not exceed an amount equal to the product of--
``(1) $2.25, and
``(2) the square footage of the building with respect to
which the expenditures are made.
``(c) Year Deduction Allowed.--The deduction under subsection (a)
shall be allowed in the taxable year in which the construction of the
building is completed.
``(d) Energy-Efficient Commercial Building Property Expenditures.--
For purposes of this section--
``(1) In general.--The term `energy-efficient commercial
building property expenditures' means an amount paid or
incurred for energy-efficient commercial building property
installed on or in connection with new construction or
reconstruction of property--
``(A) for which depreciation is allowable under
section 167,
``(B) which is located in the United States, and
``(C) the construction or erection of which is
completed by the taxpayer.
Such property includes all residential rental property,
including low-rise multifamily structures and single family
housing property which is not within the scope of Standard
90.1-1999 (described in paragraph (3)).
``(2) Labor costs included.--Such term includes
expenditures for labor costs properly allocable to the onsite
preparation, assembly, or original installation of the
property.
``(3) Energy expenditures excluded.--Such term does not
include any expenditures taken into account in determining any
credit allowed under section 48A.
``(e) Energy-Efficient Commercial Building Property.--For purposes
of subsection (d)--
``(1) In general.--The term `energy-efficient commercial
building property' means any property which reduces total
annual energy and power costs with respect to the lighting,
heating, cooling, ventilation, and hot water supply systems of
the building by 50 percent or more in comparison to a reference
building which meets the requirements of Standard 90.1-1999 of
the American Society of Heating, Refrigerating, and Air
Conditioning Engineers and the Illuminating Engineering Society
of North America using methods of calculation under
subparagraph (B) and certified by qualified professionals as
provided under paragraph (6).
``(2) Methods of calculation.--The Secretary, in
consultation with the Secretary of Energy, shall promulgate
regulations which describe in detail methods for calculating
and verifying energy and power consumption and cost, taking
into consideration the provisions of the 1998 California
Nonresidential ACM Manual. These procedures shall meet the
following requirements:
``(A) In calculating tradeoffs and energy
performance, the regulations shall prescribe the costs
per unit of energy and power, such as kilowatt hour,
kilowatt, gallon of fuel oil, and cubic foot or Btu of
natural gas, which may be dependent on time of usage.
``(B) The calculational methodology shall require
that compliance be demonstrated for a whole building.
If some systems of the building, such as lighting, are
designed later than other systems of the building, the
method shall provide that either--
``(i) the expenses taken into account under
paragraph (1) shall not occur until the date
designs for all energy-using systems of the
building are completed, or
``(ii) the expenses taken into account
under paragraph (1) shall be a fraction of such
expenses based on the performance of less than
all energy-using systems in accordance with
subparagraph (C), and the energy performance of
all systems and components not yet designed
shall be assumed to comply minimally with the
requirements of such Standard 90.1-1999.
``(C) The expenditures in connection with the
design of subsystems in the building, such as the
envelope, the heating, ventilation, air conditioning
and water heating system, and the lighting system shall
be allocated to the appropriate building subsystem
based on system-specific energy cost savings targets in
regulations promulgated by the Secretary of Energy
which are equivalent, using the calculation
methodology, to the whole building requirement of 50
percent savings.
``(D) The calculational methods under this
paragraph need not comply fully with section 11 of such
Standard 90.1-1999.
``(E) The calculational methods shall be fuel
neutral, such that the same energy efficiency features
shall qualify a building for the deduction under this
section regardless of whether the heating source is a
gas or oil furnace or an electric heat pump.
``(F) The calculational methods shall provide
appropriate calculated energy savings for design
methods and technologies not otherwise credited in
either such Standard 90.1-1999 or in the 1998
California Nonresidential ACM Manual, including the
following:
``(i) Natural ventilation.
``(ii) Evaporative cooling.
``(iii) Automatic lighting controls such as
occupancy sensors, photocells, and timeclocks.
``(iv) Daylighting.
``(v) Designs utilizing semi-conditioned
spaces which maintain adequate comfort
conditions without air conditioning or without
heating.
``(vi) Improved fan system efficiency,
including reductions in static pressure.
``(vii) Advanced unloading mechanisms for
mechanical cooling, such as multiple or
variable speed compressors.
``(viii) The calculational methods may take
into account the extent of commissioning in the
building, and allow the taxpayer to take into
account measured performance which exceeds
typical performance.
``(3) Computer software.--
``(A) In general.--Any calculation under this
subsection shall be prepared by qualified computer
software.
``(B) Qualified computer software.--For purposes of
this paragraph, the term `qualified computer software'
means software--
``(i) for which the software designer has
certified that the software meets all
procedures and detailed methods for calculating
energy and power consumption and costs as
required by the Secretary,
``(ii) which provides such forms as
required to be filed by the Secretary in
connection with energy efficiency of property
and the deduction allowed under this section,
and
``(iii) which provides a notice form which
summarizes the energy efficiency features of
the building and its projected annual energy
costs.
``(4) Allocation of deduction for public property.--In the
case of energy-efficient commercial building property installed
on or in public property, the Secretary shall promulgate a
regulation to allow the allocation of the deduction to the
person primarily responsible for designing the property in lieu
of the public entity which is the owner of such property. Such
person shall be treated as the taxpayer for purposes of this
section.
``(5) Notice to owner.--The qualified individual shall
provide an explanation to the owner of the building regarding
the energy efficiency features of the building and its
projected annual energy costs as provided in the notice under
paragraph (3)(B)(iii).
``(6) Certification.--
``(A) In general.--Except as provided in this
paragraph, the Secretary, in consultation with the
Secretary of Energy, shall establish requirements for
certification and compliance procedures similar to the
procedures under section 45F(d).
``(B) Qualified individuals.--Individuals qualified
to determine compliance shall be only those individuals
who are recognized by an organization certified by the
Secretary for such purposes.
``(C) Proficiency of qualified individuals.--The
Secretary shall consult with nonprofit organizations
and State agencies with expertise in energy efficiency
calculations and inspections to develop proficiency
tests and training programs to qualify individuals to
determine compliance.
``(f) Termination.--This section shall not apply with respect to
any energy-efficient commercial building property expenditures in
connection with property--
``(1) the plans for which are not certified under
subsection (e)(6) on or before December 31, 2006, and
``(2) the construction of which is not completed on or
before December 31, 2008.''.
(b) Conforming Amendments.--Section 1016(a) is amended by striking
``and'' at the end of paragraph (26), by striking the period at the end
of paragraph (27) and inserting ``, and'', and by inserting the
following:
``(28) for amounts allowed as a deduction under section
199(a).''.
(c) Clerical Amendment.--The table of sections for part VI of
subchapter B of chapter 1 is amended by adding at the end the
following:
``Sec. 199. Energy-efficient commercial building property.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
SEC. 103. CREDIT FOR ENERGY-EFFICIENT APPLIANCES.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business-related credits) is amended by adding at the end
the following:
``SEC. 45E. ENERGY-EFFICIENT APPLIANCE CREDIT.
``(a) General Rule.--For purposes of section 38, the energy-
efficient appliance credit determined under this section for the
taxable year is an amount equal to the applicable amount determined
under subsection (b) with respect to qualified energy-efficient
appliances produced by the taxpayer during the calendar year ending
with or within the taxable year.
``(b) Applicable Amount.--For purposes of subsection (a), the
applicable amount determined under this subsection with respect to a
taxpayer is the sum of--
``(1) in the case of an energy-efficient clothes washer
described in subsection (d)(2)(A) or an energy-efficient
refrigerator described in subsection (d)(3)(B)(i), an amount
equal to--
``(A) $50, multiplied by
``(B) the number of such washers and refrigerators
produced by the taxpayer during such calendar year, and
``(2) in the case of an energy-efficient clothes washer
described in subsection (d)(2)(B) or an energy-efficient
refrigerator described in subsection (d)(3)(B)(ii), an amount
equal to--
``(A) $100, multiplied by
``(B) the number of such washers and refrigerators
produced by the taxpayer during such calendar year.
``(c) Limitation on Maximum Credit.--
``(1) In general.--The maximum amount of credit allowed
under subsection (a) with respect to a taxpayer for all taxable
years shall be--
``(A) $30,000,000 with respect to the credit
determined under subsection (b)(1), and
``(B) $30,000,000 with respect to the credit
determined under subsection (b)(2).
``(2) Limitation based on gross receipts.--The credit
allowed under subsection (a) with respect to a taxpayer for the
taxable year shall not exceed an amount equal to 2 percent of
the average annual gross receipts of the taxpayer for the 3
taxable years preceding the taxable year in which the credit is
determined.
``(3) Gross receipts.--For purposes of this subsection, the
rules of paragraphs (2) and (3) of section 448(c) shall apply.
``(d) Qualified Energy-Efficient Appliance.--For purposes of this
section--
``(1) In general.--The term `qualified energy-efficient
appliance' means--
``(A) an energy-efficient clothes washer, or
``(B) an energy-efficient refrigerator.
``(2) Energy-efficient clothes washer.--The term `energy-
efficient clothes washer' means a residential clothes washer,
including a residential style coin operated washer, which is
manufactured with--
``(A) a 1.26 Modified Energy Factor (referred to in
this paragraph as `MEF') (as determined by the
Secretary of Energy), or
``(B) a 1.42 MEF (as determined by the Secretary of
Energy) (1.5 MEF for calendar years beginning after
2004).
``(3) Energy-efficient refrigerator.--The term `energy-
efficient refrigerator' means an automatic defrost
refrigerator-freezer which--
``(A) has an internal volume of at least 16.5 cubic
feet, and
``(B) consumes--
``(i) 10 percent less kWh per year than the
energy conservation standards promulgated by
the Department of Energy for such refrigerator
for 2001, or
``(ii) 15 percent less kWh per year than
such energy conservation standards.
``(e) Special Rules.--
``(1) In general.--Rules similar to the rules of
subsections (c), (d), and (e) of section 52 shall apply for
purposes of this section.
``(2) Aggregation rules.--All persons treated as a single
employer under subsection (a) or (b) of section 52 or
subsection (m) or (o) of section 414 shall be treated as one
person for purposes of subsection (a).
``(f) Verification.--The taxpayer shall submit such information or
certification as the Secretary, in consultation with the Secretary of
Energy, determines necessary to claim the credit amount under
subsection (a).
``(g) Termination.--This section shall not apply--
``(1) with respect to energy-efficient refrigerators
described in subsection (d)(3)(B)(i) produced in calendar years
beginning after 2005, and
``(2) with respect to all other qualified energy-efficient
appliances produced in calendar years beginning after 2007.''.
(b) Limitation on Carryback.--Section 39(d) (relating to transition
rules), as amended by section 101(b)(2), is amended by adding at the
end the following:
``(11) No carryback of energy-efficient appliance credit
before 2002.--No portion of the unused business credit for any
taxable year which is attributable to the energy-efficient
appliance credit determined under section 45E may be carried to
a taxable year beginning before January 1, 2002.''.
(c) Denial of Double Benefit.--Section 280C (relating to certain
expenses for which credits are allowable), as amended by section
102(b)(3), is amended by adding at the end the following:
``(e) Credit for Energy-Efficient Appliance Expenses.--No deduction
shall be allowed for that portion of the expenses for qualified energy-
efficient appliances (as defined in section 45E(d)) otherwise allowable
as a deduction for the taxable year which is equal to the amount of the
credit determined for such taxable year under section 45E(a).''.
(d) Conforming Amendment.--Section 38(b) (relating to general
business credit) is amended by striking ``plus'' at the end of
paragraph (12), by striking the period at the end of paragraph (13) and
inserting ``, plus'', and by adding at the end the following:
``(14) the energy-efficient appliance credit determined
under section 45E(a).''.
(e) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by inserting after the
item relating to section 45D the following:
``Sec. 45E. Energy-efficient appliance
credit.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
TITLE II--RESIDENTIAL ENERGY SYSTEMS
SEC. 201. CREDIT FOR CONSTRUCTION OF NEW ENERGY-EFFICIENT HOME.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits), as amended by section 103(a),
is amended by inserting after section 45E the following:
``SEC. 45F. NEW ENERGY-EFFICIENT HOME CREDIT.
``(a) In General.--For purposes of section 38, in the case of an
eligible contractor, the credit determined under this section for the
taxable year is an amount equal to the aggregate adjusted bases of all
energy-efficient property installed in a qualified new energy-efficient
home during construction of such home.
``(b) Limitations.--
``(1) Maximum credit.--
``(A) In general.--The credit allowed by this
section with respect to a dwelling shall not exceed--
``(i) in the case of a dwelling described
in subsection (c)(3)(D)(i), $1,500, and
``(ii) in the case of a dwelling described
in subsection (c)(3)(D)(ii), $2,500.
``(B) Prior credit amounts on same dwelling taken
into account.--If a credit was allowed under subsection
(a) with respect to a dwelling in 1 or more prior
taxable years, the amount of the credit otherwise
allowable for the taxable year with respect to that
dwelling shall not exceed the amount under clause (i)
or (ii) (as the case may be), reduced by the sum of the
credits allowed under subsection (a) with respect to
the dwelling for all prior taxable years.
``(2) Coordination with rehabilitation and energy
credits.--For purposes of this section--
``(A) the basis of any property referred to in
subsection (a) shall be reduced by that portion of the
basis of any property which is attributable to
qualified rehabilitation expenditures (as defined in
section 47(c)(2)) or to the energy percentage of energy
property (as determined under section 48A(a)), and
``(B) expenditures taken into account under either
section 47 or 48A(a) shall not be taken into account
under this section.
``(c) Definitions.--For purposes of this section--
``(1) Eligible contractor.--The term `eligible contractor'
means the person who constructed the new energy-efficient home,
or in the case of a manufactured home which conforms to Federal
Manufactured Home Construction and Safety Standards (24 C.F.R.
3280), the manufactured home producer of such home.
``(2) Energy-efficient property.--The term `energy-
efficient property' means any energy-efficient building
envelope component, and any energy-efficient heating or cooling
equipment which can, individually or in combination with other
components, meet the requirements of this section.
``(3) Qualified new energy-efficient home.--The term
`qualified new energy-efficient home' means a dwelling--
``(A) located in the United States,
``(B) the construction of which is substantially
completed after December 31, 2000,
``(C) the original use of which is as a principal
residence (within the meaning of section 121) which
commences with the person who acquires such dwelling
from the eligible contractor, and
``(D) which is certified to have a projected level
of annual heating and cooling energy consumption,
measured in terms of average annual energy cost to the
homeowner which is at least--
``(i) 30 percent less than the annual level
of heating and cooling energy consumption of a
reference dwelling constructed in accordance
with the standards of chapter 4 of the 2000
International Energy Conservation Code, or
``(ii) 50 percent less than such annual
level of heating and cooling energy
consumption.
``(4) Construction.--The term `construction' includes
reconstruction and rehabilitation.
``(5) Acquire.--The term `acquire' includes purchase and,
in the case of reconstruction and rehabilitation, such term
includes a binding written contract for such reconstruction or
rehabilitation.
``(6) Building envelope component.--The term `building
envelope component' means--
``(A) insulation material or system which is
specifically and primarily designed to reduce the heat
loss or gain of a dwelling when installed in or on such
dwelling, and
``(B) exterior windows (including skylights) and
doors.
``(7) Manufactured home included.--The term `dwelling'
includes a manufactured home conforming to Federal Manufactured
Home Construction and Safety Standards (24 C.F.R. 3280).
``(d) Certification.--
``(1) Method.--A certification described in subsection
(c)(3)(D) shall be determined on the basis of 1 of the
following methods:
``(A) A component-based method, using the
applicable technical energy efficiency specifications
or ratings (including product labeling requirements)
for the energy-efficient building envelope component or
energy-efficient heating or cooling equipment. The
Secretary shall, in consultation with the Administrator
of the Environmental Protection Agency, develop
prescriptive component-based packages that are
equivalent in energy performance to properties that
qualify under subparagraph (B).
``(B) An energy performance-based method that
calculates projected energy usage and cost reductions
in the dwelling in relation to a reference dwelling--
``(i) heated by the same energy source and
heating system type, and
``(ii) constructed in accordance with the
standards of chapter 4 of the 2000
International Energy Conservation Code.
Computer software shall be used in support of an energy
performance-based method certification under subparagraph (B).
Such software shall meet procedures and methods for calculating
energy and cost savings in regulations promulgated by the
Secretary of Energy. Such regulations on the specifications for
software and verification protocols shall be based on the 1998
California Residential Alternative Calculation Method Approval
Manual.
``(2) Provider.--Such certification shall be provided by--
``(A) in the case of a method described in
paragraph (1)(A), a local building regulatory
authority, a utility, a manufactured home production
inspection primary inspection agency (IPIA), or a home
energy rating organization, or
``(B) in the case of a method described in
paragraph (1)(B), an individual recognized by an
organization designated by the Secretary for such
purposes.
``(3) Form.--
``(A) In general.--Such certification shall be made
in writing in a manner that specifies in readily
verifiable fashion the energy-efficient building
envelope components and energy-efficient heating or
cooling equipment installed and their respective rated
energy efficiency performance, and in the case of a
method described in paragraph (1)(B), accompanied by
written analysis documenting the proper application of
a permissible energy performance calculation method to
the specific circumstances of such dwelling.
``(B) Form provided to buyer.--A form documenting
the energy-efficient building envelope components and
energy-efficient heating or cooling equipment installed
and their rated energy efficiency performance shall be
provided to the buyer of the dwelling. The form shall
include labeled R-value for insulation products, NFRC-
labeled U-factor and Solar Heat Gain Coefficient for
windows, skylights, and doors, labeled AFUE ratings for
furnaces and boilers, labeled HSPF ratings for electric
heat pumps, and labeled SEER ratings for air
conditioners.
``(C) Ratings label affixed in dwelling.--A
permanent label documenting the ratings in subparagraph
(B) shall be affixed to the front of the electrical
distribution panel of the dwelling, or shall be
otherwise permanently displayed in a readily
inspectable location in the dwelling.
``(4) Regulations.--
``(A) In general.--In prescribing regulations under
this subsection for energy performance-based
certification methods, the Secretary, after examining
the requirements for energy consultants and home energy
ratings providers specified by the Mortgage Industry
National Accreditation Procedures for Home Energy
Rating Systems, shall prescribe procedures for
calculating annual energy usage and cost reductions for
heating and cooling and for the reporting of the
results. Such regulations shall--
``(i) provide that any calculation
procedures be fuel neutral such that the same
energy efficiency measures allow a home to
qualify for the credit under this section
regardless of whether the dwelling uses a gas
or oil furnace or boiler or an electric heat
pump, and
``(ii) require that any computer software
allow for the printing of the Federal tax forms
necessary for the credit under this section and
for the printing of forms for disclosure to the
homebuyer.
``(B) Providers.--For purposes of paragraph (2)(B),
the Secretary shall establish requirements for the
designation of individuals based on the requirements
for energy consultants and home energy raters specified
by the Mortgage Industry National Accreditation
Procedures for Home Energy Rating Systems.
``(e) Basis Adjustment.--For purposes of this subtitle, if a credit
is allowed under this section for any expenditure with respect to any
property, the increase in the basis of such property which would (but
for this subsection) result from such expenditure shall be reduced by
the amount of the credit so allowed.
``(f) Termination.--Subsection (a) shall apply to dwellings
purchased during the period beginning on January 1, 2001, and ending on
December 31, 2005.''.
(b) Credit Made Part of General Business Credit.--Subsection (b) of
section 38 (relating to current year business credit), as amended by
section 103(d), is amended by striking ``plus'' at the end of paragraph
(13), by striking the period at the end of paragraph (14) and inserting
``, plus'', and by adding at the end the following:
``(15) the new energy-efficient home credit determined
under section 45F.''.
(c) Denial of Double Benefit.--Section 280C (relating to certain
expenses for which credits are allowable), as amended by section
103(c), is amended by adding at the end the following:
``(f) New Energy-Efficient Home Expenses.--No deduction shall be
allowed for that portion of expenses for a new energy-efficient home
otherwise allowable as a deduction for the taxable year which is equal
to the amount of the credit determined for such taxable year under
section 45F.''.
(d) Credit Allowed Against Regular and Minimum Tax.--
(1) In general.--Subsection (c) of section 38 (relating to
limitation based on amount of tax) is amended by redesignating
paragraph (3) as paragraph (4) and by inserting after paragraph
(2) the following new paragraph:
``(3) Special rules for new energy efficient home credit.--
``(A) In general.--In the case of the new energy
efficient home credit--
``(i) this section and section 39 shall be
applied separately with respect to the credit,
and
``(ii) in applying paragraph (1) to the
credit--
``(I) subparagraphs (A) and (B)
thereof shall not apply, and
``(II) the limitation under
paragraph (1) (as modified by subclause
(I)) shall be reduced by the credit
allowed under subsection (a) for the
taxable year (other than the new energy
efficient home credit).
``(B) New energy efficient home credit.--For
purposes of this subsection, the term `new energy
efficient home credit' means the credit allowable under
subsection (a) by reason of section 45F.''.
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) is amended by inserting ``or the new energy
efficient home credit'' after ``employment credit''.
(e) Limitation on Carryback.--Subsection (d) of section 39, as
amended by section 103(b), is amended by adding at the end the
following:
``(12) No carryback of new energy-efficient home credit
before effective date.--No portion of the unused business
credit for any taxable year which is attributable to the credit
determined under section 45F may be carried back to any taxable
year ending before January 1, 2001.''.
(f) Deduction for Certain Unused Business Credits.--Subsection (c)
of section 196 is amended by striking ``and'' at the end of paragraph
(7), by striking the period at the end of paragraph (8) and inserting
``, and'', and by adding after paragraph (8) the following:
``(9) the new energy-efficient home credit determined under
section 45F.''.
(g) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1, as amended by section 103(d), is
amended by inserting after the item relating to section 45E the
following:
``Sec. 45F. New energy-efficient home
credit.''.
(h) Effective Date.--The amendments made by this section shall
apply to taxable years ending after December 31, 2000.
SEC. 202. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
(relating to nonrefundable personal credits) is amended by inserting
after section 25A the following new section:
``SEC. 25B. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.
``(a) Allowance of Credit.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to 20 percent of the amount paid
or incurred by the taxpayer for qualified energy efficiency
improvements installed during such taxable year.
``(b) Limitations.--
``(1) Maximum credit.--The credit allowed by this section
with respect to a dwelling shall not exceed $2,000.
``(2) Prior credit amounts for taxpayer on same dwelling
taken into account.--If a credit was allowed to the taxpayer
under subsection (a) with respect to a dwelling in 1 or more
prior taxable years, the amount of the credit otherwise
allowable for the taxable year with respect to that dwelling
shall not exceed the amount of $2,000 reduced by the sum of the
credits allowed under subsection (a) to the taxpayer with
respect to the dwelling for all prior taxable years.
``(c) Carryforward of Unused Credit.--If the credit allowable under
subsection (a) exceeds the limitation imposed by section 26(a) for such
taxable year reduced by the sum of the credits allowable under subpart
A of part IV of subchapter A (other than this section), such excess
shall be carried to the succeeding taxable year and added to the credit
allowable under subsection (a) for such taxable year.
``(d) Qualified Energy Efficiency Improvements.--For purposes of
this section, the term `qualified energy efficiency improvements' means
any energy efficient building envelope component which is certified to
meet or exceed the prescriptive criteria for such component in the 2000
International Energy Conservation Code, or any combination of energy
efficiency measures which achieves at least a 30 percent reduction in
heating and cooling energy usage for the dwelling (as measured in terms
of energy cost to the taxpayer), if--
``(1) such component or combinations of measures is
installed in or on a dwelling--
``(A) located in the United States, and
``(B) owned and used by the taxpayer as the
taxpayer's principal residence (within the meaning of
section 121),
``(2) the original use of such component or combination of
measures commences with the taxpayer, and
``(3) such component or combination of measures reasonably
can be expected to remain in use for at least 5 years.
``(e) Certification.--The certification described in subsection (d)
shall be--
``(1) in the case of any component described in subsection
(d), determined on the basis of applicable energy efficiency
ratings (including product labeling requirements) for affected
building envelope components,
``(2) in the case of combinations of measures described in
subsection (d), determined by the performance-based methods
described in section 45F(d),
``(3) provided by a third party, such as a local building
regulatory authority, a utility, a manufactured home production
inspection primary inspection agency (IPIA), or a home energy
rating organization, consistent with the requirements of
section 45F(d)(2), and
``(4) made in writing on forms which specify in readily
inspectable fashion the energy-efficient components and other
measures and their respective efficiency ratings, and which
shall include a permanent label affixed to the electrical
distribution panel as described in section 45F(d)(3)(C).
``(f) Definitions and Special Rules.--
``(1) Dollar amounts in case of joint occupancy.--In the
case of any dwelling unit which is jointly occupied and used
during any calendar year as a residence by 2 or more
individuals the following shall apply:
``(A) The amount of the credit allowable under
subsection (a) by reason of expenditures for the
qualified energy efficiency improvements made during
such calendar year by any of such individuals with
respect to such dwelling unit shall be determined by
treating all of such individuals as 1 taxpayer whose
taxable year is such calendar year.
``(B) There shall be allowable with respect to such
expenditures to each of such individuals, a credit
under subsection (a) for the taxable year in which such
calendar year ends in an amount which bears the same
ratio to the amount determined under subparagraph (A)
as the amount of such expenditures made by such
individual during such calendar year bears to the
aggregate of such expenditures made by all of such
individuals during such calendar year.
``(2) Tenant-stockholder in cooperative housing
corporation.--In the case of an individual who is a tenant-
stockholder (as defined in section 216) in a cooperative
housing corporation (as defined in such section), such
individual shall be treated as having paid his tenant-
stockholder's proportionate share (as defined in section
216(b)(3)) of the cost of qualified energy efficiency
improvements made by such corporation.
``(3) Condominiums.--
``(A) In general.--In the case of an individual who
is a member of a condominium management association
with respect to a condominium which he owns, such
individual shall be treated as having paid his
proportionate share of the cost of qualified energy
efficiency improvements made by such association.
``(B) Condominium management association.--For
purposes of this paragraph, the term `condominium
management association' means an organization which
meets the requirements of paragraph (1) of section
528(c) (other than subparagraph (E) thereof) with
respect to a condominium project substantially all of
the units of which are used as residences.
``(4) Building envelope component.--The term `building
envelope component' means--
``(A) insulation material or system which is
specifically and primarily designed to reduce the heat
loss or gain or a dwelling when installed in or on such
dwelling, and
``(B) exterior windows (including skylights) and
doors.
``(5) Manufactured homes included.--For purposes of this
section, the term `dwelling' includes a manufactured home which
conforms to Federal Manufactured Home Construction and Safety
Standards (24 C.F.R. 3280).
``(g) Basis Adjustment.--For purposes of this subtitle, if a credit
is allowed under this section for any expenditure with respect to any
property, the increase in the basis of such property which would (but
for this subsection) result from such expenditure shall be reduced by
the amount of the credit so allowed.
``(h) Termination.--Subsection (a) shall apply to qualified energy
efficiency improvements installed during the period beginning on the
date of the enactment of this section and ending on December 31,
2005.''.
(b) Conforming Amendments.--
(1) Subsection (c) of section 23 is amended by inserting
``, section 25B, and section 1400C'' after ``other than this
section''.
(2) Subparagraph (C) of section 25(e)(1) is amended by
striking ``section 23'' and inserting ``sections 23, 25B, and
1400C''.
(3) Subsection (d) of section 1400C is amended by inserting
``and section 25B'' after ``other than this section''.
(4) Subsection (a) of section 1016, as amended by section
102(b), is amended by striking ``and'' at the end of paragraph
(27), by striking the period at the end of paragraph (28) and
inserting ``; and'', and by adding at the end the following:
``(29) to the extent provided in section 25B(f), in the
case of amounts with respect to which a credit has been allowed
under section 25B.''.
(5) The table of sections for subpart A of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 25A the following new item:
``Sec. 25B. Energy efficiency
improvements to existing
homes.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending on or after the date of the enactment of
this Act.
SEC. 203. CREDIT FOR RESIDENTIAL SOLAR, WIND, AND FUEL CELL ENERGY
PROPERTY.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
(relating to nonrefundable personal credits), as amended by section
201(a), is amended by inserting after section 25B the following:
``SEC. 25C. RESIDENTIAL SOLAR, WIND, AND FUEL CELL ENERGY PROPERTY.
``(a) Allowance of Credit.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to the sum of--
``(1) 15 percent of the qualified photovoltaic property
expenditures,
``(2) 15 percent of the qualified solar water heating
property expenditures,
``(3) 30 percent of the qualified wind energy property
expenditures, and
``(4) 20 percent for the qualified fuel cell property
expenditures,
made by the taxpayer during the taxable year.
``(b) Limitations.--
``(1) Maximum credit.--The credit allowed under subsection
(a)(2) shall not exceed $2,000 for each system of solar energy
property.
``(2) Type of property.--No expenditure may be taken into
account under this section unless such expenditure is made by
the taxpayer for property installed on or in connection with a
dwelling unit which is located in the United States and which
is used as a residence.
``(3) Safety certifications.--No credit shall be allowed
under this section for an item of property unless--
``(A) in the case of solar water heating property,
such property is certified for performance and safety
by the non-profit Solar Rating Certification
Corporation or a comparable entity endorsed by the
government of the State in which such property is
installed, and
``(B) in the case of a photovoltaic, wind energy,
or fuel cell property, such property meets appropriate
fire and electric code requirements.
``(c) Definitions.--For purposes of this section--
``(1) Qualified solar water heating property expenditure.--
The term `qualified solar water heating property expenditure'
means an expenditure for property which uses solar energy to
heat water for use in a dwelling unit with respect to which a
majority of the energy is derived from the sun.
``(2) Qualified photovoltaic property expenditure.--The
term `qualified photovoltaic property expenditure' means an
expenditure for property which uses solar energy to generate
electricity for use in a dwelling unit.
``(3) Solar panels.--No expenditure relating to a solar
panel or other property installed as a roof (or portion
thereof) shall fail to be treated as property described in
paragraph (1) or (2) solely because it constitutes a structural
component of the structure on which it is installed.
``(4) Qualified wind energy property expenditure.--The term
`qualified wind energy property expenditure' means an
expenditure for property which uses wind energy to generate
electricity for use in a dwelling unit.
``(5) Qualified fuel cell property expenditure.--The term
`qualified fuel cell property expenditure' means an expenditure
for property which uses an electrochemical fuel cell system to
generate electricity for use in a dwelling unit.
``(6) Labor costs.--Expenditures for labor costs properly
allocable to the onsite preparation, assembly, or original
installation of the property described in paragraph (1), (2),
(4), or (5) and for piping or wiring to interconnect such
property to the dwelling unit shall be taken into account for
purposes of this section.
``(7) Energy storage medium.--Expenditures which are
properly allocable to a swimming pool, hot tub, or any other
energy storage medium which has a function other than the
function of such storage shall not be taken into account for
purposes of this section.
``(d) Special Rules.--For purposes of this section--
``(1) Dollar amounts in case of joint occupancy.--In the
case of any dwelling unit which is jointly occupied and used
during any calendar year as a residence by 2 or more
individuals the following shall apply:
``(A) The amount of the credit allowable under
subsection (a) by reason of expenditures (as the case
may be) made during such calendar year by any of such
individuals with respect to such dwelling unit shall be
determined by treating all of such individuals as 1
taxpayer whose taxable year is such calendar year.
``(B) There shall be allowable with respect to such
expenditures to each of such individuals, a credit
under subsection (a) for the taxable year in which such
calendar year ends in an amount which bears the same
ratio to the amount determined under subparagraph (A)
as the amount of such expenditures made by such
individual during such calendar year bears to the
aggregate of such expenditures made by all of such
individuals during such calendar year.
``(2) Tenant-stockholder in cooperative housing
corporation.--In the case of an individual who is a tenant-
stockholder (as defined in section 216) in a cooperative
housing corporation (as defined in such section), such
individual shall be treated as having made his tenant-
stockholder's proportionate share (as defined in section
216(b)(3)) of any expenditures of such corporation.
``(3) Condominiums.--
``(A) In general.--In the case of an individual who
is a member of a condominium management association
with respect to a condominium which such individual
owns, such individual shall be treated as having made
his proportionate share of any expenditures of such
association.
``(B) Condominium management association.--For
purposes of this paragraph, the term `condominium
management association' means an organization which
meets the requirements of paragraph (1) of section
528(c) (other than subparagraph (E) thereof) with
respect to a condominium project substantially all of
the units of which are used as residences.
``(4) Joint ownership of items of solar or wind energy
property.--
``(A) In general.--Any expenditure otherwise
qualifying as an expenditure described in paragraph
(1), (2), or (4) of subsection (c) shall not be treated as failing to
so qualify merely because such expenditure was made with respect to 2
or more dwelling units.
``(B) Limits applied separately.--In the case of
any expenditure described in subparagraph (A), the
amount of the credit allowable under subsection (a)
shall (subject to paragraph (1)) be computed separately
with respect to the amount of the expenditure made for
each dwelling unit.
``(5) Allocation in certain cases.--If less than 80 percent
of the use of an item is for nonbusiness residential purposes,
only that portion of the expenditures for such item which is
properly allocable to use for nonbusiness residential purposes
shall be taken into account. For purposes of this paragraph,
use for a swimming pool shall be treated as use which is not
for residential purposes.
``(6) When expenditure made; amount of expenditure.--
``(A) In general.--Except as provided in
subparagraph (B), an expenditure with respect to an
item shall be treated as made when the original
installation of the item is completed.
``(B) Expenditures part of building construction.--
In the case of an expenditure in connection with the
construction or reconstruction of a structure, such
expenditure shall be treated as made when the original
use of the constructed or reconstructed structure by
the taxpayer begins.
``(C) Amount.--The amount of any expenditure shall
be the cost thereof.
``(7) Reduction of credit for grants, tax-exempt bonds, and
subsidized energy financing.--The rules of section 29(b)(3)
shall apply for purposes of this section.
``(e) Basis Adjustments.--For purposes of this subtitle, if a
credit is allowed under this section for any expenditure with respect
to any property, the increase in the basis of such property which would
(but for this subsection) result from such expenditure shall be reduced
by the amount of the credit so allowed.
``(f) Termination.--The credit allowed under this section shall not
apply to taxable years beginning after December 31, 2011.''.
(b) Conforming Amendments.--
(1) Subsection (a) of section 1016, as amended by section
201(b)(4), is amended by striking ``and'' at the end of
paragraph (28), by striking the period at the end of paragraph
(29) and inserting ``; and'', and by adding at the end the
following:
``(30) to the extent provided in section 25C(e), in the
case of amounts with respect to which a credit has been allowed
under section 25C.''.
(2) The table of sections for subpart A of part IV of
subchapter A of chapter 1, as amended by section 201(b)(2), is
amended by inserting after the item relating to section 25B the
following:
``Sec. 25C. Residential solar, wind, and
fuel cell energy property.''.
(c) Effective Date.--The amendments made by this section shall
apply to expenditures made after the date of the enactment of this Act,
in taxable years ending after such date.
TITLE III--ELECTRICITY FACILITIES AND PRODUCTION
SEC. 301. INCENTIVE FOR DISTRIBUTED GENERATION.
(a) Depreciation of Distributed Power Property.--
(1) In general.--Subparagraph (C) of section 168(e)(3)
(relating to 7-year property) is amended by redesignating
clause (ii) as clause (iii) and by inserting after clause (i)
the following:
``(ii) any distributed power property,
and''.
(2) 10-year class life.--The table contained in section
168(g)(3)(B) is amended by inserting after the item relating to
subparagraph (C)(i) the following:
``(C)(ii)...................................................... 10''.
(b) Distributed Power Property.--Section 168(i) is amended by
adding at the end the following:
``(15) Distributed power property.--The term `distributed
power property' means property--
``(A) which is used in the generation of
electricity for primary use--
``(i) in nonresidential real or residential
rental property used in the taxpayer's trade or
business, or
``(ii) in the taxpayer's industrial
manufacturing process or plant activity, with a
rated total capacity in excess of 500
kilowatts,
``(B) which also may produce usable thermal energy
or mechanical power for use in a heating or cooling
application, as long as at least 40 percent of the
total useful energy produced consists of--
``(i) with respect to assets described in
subparagraph (A)(i), electrical power (whether
sold or used by the taxpayer), or
``(ii) with respect to assets described in
subparagraph (A)(ii), electrical power (whether
sold or used by the taxpayer) and thermal or
mechanical energy used in the taxpayer's
industrial manufacturing process or plant
activity,
``(C) which is not used to transport primary fuel
to the generating facility or to distribute energy
within or outside of the facility, and
``(D) where it is reasonably expected that not more
than 50 percent of the produced electricity will be
sold to, or used by, unrelated persons.
For purposes of subparagraph (B), energy output is determined
on the basis of expected annual output levels, measured in
British thermal units (Btu), using standard conversion factors
established by the Secretary.''.
(c) Effective Date.--The amendments made by this section shall
apply to property placed in service after the date of the enactment of
this Act.
SEC. 302. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED FROM
RENEWABLE AND WASTE PRODUCTS.
(a) Increase in Credit Rate.--
(1) In general.--Section 45(a)(1) is amended by striking
``1.5 cents'' and inserting ``1.8 cents''.
(2) Conforming amendments.--
(A) Section 45(b)(2) is amended by striking ``1.5
cent'' and inserting ``1.8 cent''.
(B) Section 45(d)(2)(B) is amended by inserting
``(calendar year 2001 in the case of the 1.8 cent
amount in subsection (a))'' after ``1992''.
(b) Expansion of Qualified Resources.--
(1) In general.--Section 45(c)(1) (relating to qualified
energy resources) is amended by striking ``and'' at the end of
subparagraph (B), by striking the period at the end of
subparagraph (C) and inserting ``, and'', and by adding at the
end the following:
``(D) alternative resources.''.
(2) Definition of alternative resources.--Section 45(c)
(relating to definitions) is amended--
(A) by redesignating paragraph (3) as paragraph
(5),
(B) by redesignating paragraph (4) as paragraph
(3), and
(C) by inserting after paragraph (3), as
redesignated by subparagraph (B), the following:
``(4) Alternative resources.--
``(A) In general.--The term `alternative resources'
means--
``(i) solar,
``(ii) biomass (other than closed loop
biomass),
``(iii) municipal solid waste,
``(iv) incremental hydropower,
``(v) geothermal,
``(vi) landfill gas, and
``(vii) steel cogeneration.
``(B) Biomass.--The term `biomass' means any solid,
nonhazardous, cellulosic waste material or any organic
carbohydrate matter, which is segregated from other
waste materials, and which is derived from--
``(i) any of the following forest-related
resources: mill residues, precommercial
thinnings, slash, and brush, but not including
old-growth timber,
``(ii) waste pallets, crates, dunnage,
untreated wood waste from construction or
manufacturing activities, and landscape or
right-of-way tree trimmings, but not including
unsegregated municipal solid waste or post-
consumer wastepaper, or
``(iii) any of the following agriculture
sources: orchard tree crops, vineyard, grain,
legumes, sugar, and other crop by-products or
residues, including any packaging and other
materials which are nontoxic and biodegradable
and are associated with the processing,
feeding, selling, transporting, and disposal of
such agricultural materials.
``(C) Municipal solid waste.--The term `municipal
solid waste' has the same meaning given the term `solid
waste' under section 2(27) of the Solid Waste
Utilization Act (42 U.S.C. 6903).
``(D) Incremental hydropower.--The term
`incremental hydropower' means additional generating
capacity achieved from--
``(i) increased efficiency, or
``(ii) additions of new capacity,
at a licensed non-Federal hydroelectric project
originally placed in service before the date of the
enactment of this paragraph.
``(E) Geothermal.--The term `geothermal' means
energy derived from a geothermal deposit (within the
meaning of section 613(e)(2)), but only, in the case of
electricity generated by geothermal power, up to (but
not including) the electrical transmission stage.
``(F) Landfill gas.--The term `landfill gas' means
gas generated from the decomposition of any household
solid waste, commercial solid waste, and industrial
solid waste disposed of in a municipal solid waste
landfill unit (as such terms are defined in regulations
promulgated under subtitle D of the Solid Waste
Disposal Act (42 U.S.C. 6941 et seq.).
``(G) Steel cogeneration.--The term `steel
cogeneration' means the production of electricity and
steam (or other form of thermal energy) from any or all
waste sources defined in paragraphs (2) and (3) and
subparagraphs (B) and (C) of this paragraph within an
operating facility which produces or integrates the
production of coke, direct reduced iron ore, iron, or
steel provided that the cogeneration meets any regulatory energy-
efficiency standards established by the Secretary, and only to the
extent that such energy is produced from--
``(i) gases or heat generated from the
production of metallurgical coke,
``(ii) gases or heat generated from the
production of direct reduced iron ore or iron,
from blast furnace or direct ironmaking
processes, or
``(iii) gases or heat generated from the
manufacture of steel.''.
(3) Qualified facility.--Section 45(c)(5) (defining
qualified facility), as redesignated by paragraph 2(A), is
amended by adding at the end the following:
``(D) Alternative resources facility.--
``(i) In general.--Except as provided in
clauses (ii), (iii), and (iv), in the case of a
facility using alternative resources to produce
electricity, the term `qualified facility'
means any facility of the taxpayer which is
originally placed in service after the date of
the enactment of this subparagraph.
``(ii) Biomass facility.--In the case of a
facility using biomass described in paragraph
(4)(A)(ii) to produce electricity, the term
`qualified facility' means any facility of the
taxpayer.
``(iii) Geothermal facility.--In the case
of a facility using geothermal to produce
electricity, the term `qualified facility'
means any facility of the taxpayer which is
originally placed in service after December 31,
1992.
``(iv) Steel cogeneration facilities.--In
the case of a facility using steel cogeneration
to produce electricity, the term `qualified
facility' means any facility permitted to
operate under the environmental requirements of
the Clean Air Act Amendments of 1990 which is
owned by the taxpayer and originally placed in
service after the date of the enactment of this
subparagraph. Such a facility may be treated as
originally placed in service when such facility
was last upgraded to increase efficiency or
generation capability after such date.
``(v) Special rules.--In the case of a
qualified facility described in this
subparagraph, the 10-year period referred to in
subsection (a) shall be treated as beginning no
earlier than the date of the enactment of this
subparagraph.''.
(4) Government-owned facility.--Section 45(d)(6) (relating
to credit eligibility in the case of government-owned
facilities using poultry waste) is amended--
(A) by inserting ``or alternative resources'' after
``poultry waste'', and
(B) by inserting ``or alternative resources'' after
``poultry waste'' in the heading thereof.
(5) Qualified facilities with co-production.--Section 45(b)
(relating to limitations and adjustments) is amended by adding
at the end the following:
``(4) Increased credit for co-production facilities.--
``(A) In general.--In the case of a qualified
facility described in subsection (c)(3)(D)(i) which
has a co-production facility or a qualified facility described in
subparagraph (A), (B), or (C) of subsection (c)(3) which adds a co-
production facility after the date of the enactment of this paragraph,
the amount in effect under subsection (a)(1) for an eligible taxable
year of a taxpayer shall (after adjustment under paragraph (2) and
before adjustment under paragraphs (1) and (3)) be increased by .25
cents.
``(B) Co-production facility.--For purposes of
subparagraph (A), the term `co-production facility'
means a facility which--
``(i) enables a qualified facility to
produce heat, mechanical power, chemicals,
liquid fuels, or minerals from qualified energy
resources in addition to electricity, and
``(ii) produces such energy on a continuous
basis.
``(C) Eligible taxable year.--For purposes of
subparagraph (A), the term `eligible taxable year'
means any taxable year in which the amount of gross
receipts attributable to the co-production facility of
a qualified facility are at least 10 percent of the
amount of gross receipts attributable to electricity
produced by such facility.''.
(6) Qualified facilities located within qualified indian
lands.--Section 45(b) (relating to limitations and
adjustments), as amended by paragraph (5), is amended by adding
at the end the following:
``(5) Increased credit for qualified facility located
within qualified indian land.--In the case of a qualified
facility described in subsection (c)(3)(D) which--
``(A) is located within--
``(i) qualified Indian lands (as defined in
section 7871(c)(3)), or
``(ii) lands which are held in trust by a
Native Corporation (as defined in section 3(m)
of the Alaska Native Claims Settlement Act (43
U.S.C. 1602(m)) for Alaska Natives, and
``(B) is operated with the explicit written
approval of the Indian tribal government or Native
Corporation (as so defined) having jurisdiction over
such lands,
the amount in effect under subsection (a)(1) for a taxable year
shall (after adjustment under paragraphs (2) and (4) and before
adjustment under paragraphs (1) and (3)) be increased by .25
cents.''.
(7) Electricity produced from certain resources co-fired in
coal plants.--Section 45(d) (relating to definitions and
special rules) is amended by adding at the end the following:
``(8) Special rule for electricity produced from certain
resources co-fired in coal plants.--In the case of electricity
produced from biomass (including closed loop biomass),
municipal solid waste, or animal waste, co-fired in a facility
which produces electricity from coal--
``(A) subsection (a)(1) shall be applied by
substituting `1 cent' for `1.8 cents',
``(B) such facility shall be considered a qualified
facility for purposes of this section, and
``(C) the 10-year period referred to in subsection
(a) shall be treated as beginning no earlier than the
date of the enactment of this paragraph.''.
(8) Conforming amendments.--
(A) The heading for section 45 is amended by
inserting ``and waste energy'' after ``renewable''.
(B) The item relating to section 45 in the table of
sections subpart D of part IV of subchapter A of
chapter 1 is amended by inserting ``and waste energy''
after ``renewable''.
(c) Additional Modifications of Renewable and Waste Energy Resource
Credit.--
(1) Credits for certain tax exempt organizations and
governmental units.--Section 45(d) (relating to definitions and
special rules), as amended by subsection (b)(7), is amended by
adding at the end the following:
``(9) Credits for certain tax exempt organizations and
governmental units.--
``(A) Allowance of credit.--Any credit which would
be allowable under subsection (a) with respect to a
qualified facility of an entity if such entity were not
exempt from tax under this chapter shall be treated as
a credit allowable under subpart C to such entity if
such entity is--
``(i) an organization described in section
501(c)(12)(C) and exempt from tax under section
501(a),
``(ii) an organization described in section
1381(a)(2)(C), or
``(iii) an entity the income of which is
excludable from gross income under section 115.
``(B) Use of credit.--
``(i) Transfer of credit.--An entity
described in subparagraph (A) may assign,
trade, sell, or otherwise transfer any credit
allowable to such entity under subparagraph (A)
to any taxpayer.
``(ii) Use of credit as an offset.--
Notwithstanding any other provision of law, in
the case of an entity described in clause (i)
or (ii) of subparagraph (A), any credit
allowable to such entity under subparagraph (A)
may be applied by such entity, without penalty,
as a prepayment of any loan, debt, or other
obligation the entity has incurred under
subchapter I of chapter 31 of title 7 of the
Rural Electrification Act of 1936 (7 U.S.C. 901
et seq.).
``(C) Credit not income.--Neither a transfer under
clause (i) or a use under clause (ii) of subparagraph
(B) of any credit allowable under subparagraph (A)
shall result in income for purposes of section 501(c)(12).
``(D) Transfer proceeds treated as arising from
essential government function.--Any proceeds derived by
an entity described in subparagraph (A)(iii) from the
transfer of any credit under subparagraph (B)(i) shall
be treated as arising from an essential government
function.
``(E) Credits not reduced by tax-exempt bonds or
certain other subsidies.--Subsection (b)(3) shall not
apply to reduce any credit allowable under subparagraph
(A) with respect to--
``(i) proceeds described in subparagraph
(A)(ii) of such subsection, or
``(ii) any loan, debt, or other obligation
incurred under subchapter I of chapter 31 of
title 7 of the Rural Electrification Act of
1936 (7 U.S.C. 901 et seq.),
used to provide financing for any qualified facility.
``(F) Treatment of unrelated persons.--For purposes
of this paragraph, sales among and between entities
described in subparagraph (A) shall be treated as sales
between unrelated parties.''.
(2) Coordination with other credits.--Section 45(d), as
amended by paragraph (1), is amended by adding at the end the
following:
``(10) Coordination with other credits.--This section shall
not apply to any qualified facility with respect to which a
credit under any other section is allowed for the taxable year
unless the taxpayer elects to waive the application of such
credit to such facility.''.
(3) Expansion to include animal waste.--Section 45
(relating to electricity produced from certain renewable
resources), as amended by paragraphs (2) and (4) of subsection
(b), is amended--
(A) by striking ``poultry'' each place it appears
in subsection (c)(1)(C) and subsection (d)(6) and
inserting ``animal'',
(B) by striking ``poultry'' in the heading of
paragraph (6) of subsection (d) and inserting
``animal'',
(C) by striking paragraph (3) of subsection (c) and
inserting the following:
``(3) Animal waste.--The term `animal waste' means poultry
manure and litter and other animal wastes, including--
``(A) wood shavings, straw, rice hulls, and other
bedding material for the disposition of manure, and
``(B) byproducts, packaging, and other materials
which are nontoxic and biodegradable and are associated
with the processing, feeding, selling, transporting,
and disposal of such animal wastes.'', and
(D) by striking subparagraph (C) of subsection
(c)(5) and inserting the following:
``(C) Animal waste facility.--
``(i) In general.--Except as provided in
clause (ii), in the case of a facility using
animal waste (other than poultry) to produce
electricity, the term `qualified facility'
means any facility of the taxpayer which is
originally placed in service after the date of
the enactment of this clause.
``(ii) Poultry waste.--In the case of a
facility using animal waste relating to poultry
to produce electricity, the term `qualified
facility' means any facility of the taxpayer
which is originally placed in service after
December 31, 1999.''.
(4) Treatment of qualified facilities not in compliance
with pollution laws.--Section 45(c)(5) (relating to qualified
facilities), as amended by paragraphs (2) and (3) of subsection
(b), is amended by adding at the end the following:
``(E) Noncompliance with pollution laws.--For
purposes of this paragraph, a facility which is not in
compliance with the applicable State and Federal
pollution prevention, control, and permit requirements
for any period of time shall not be considered to be a
qualified facility during such period.''.
(5) Permanent extension of qualified facility dates.--
Section 45(c)(5) (relating to qualified facility), as
redesignated by subsection (b)(2), is amended by striking ``,
and before January 1, 2002'' in subparagraphs (A) and (B).
(d) Effective Date.--The amendments made by this section shall
apply to electricity and other energy produced after the date of the
enactment of this Act.
SEC. 303. TREATMENT OF FACILITIES USING BAGASSE TO PRODUCE ENERGY AS
SOLID WASTE DISPOSAL FACILITIES ELIGIBLE FOR TAX-EXEMPT
FINANCING.
(a) In General.--Section 142 (relating to exempt facility bond) is
amended by adding at the end the following:
``(k) Solid Waste Disposal Facilities.--For purposes of subsection
(a)(6), the term `solid waste disposal facilities' includes property
located in Hawaii and used for the collection, storage, treatment,
utilization, processing, or final disposal of bagasse in the
manufacture of ethanol.''.
(b) Effective Date.--The amendment made by this section shall apply
to bonds issued after the date of the enactment of this Act.
SEC. 304. DEPRECIATION OF PROPERTY USED IN THE TRANSMISSION OF
ELECTRICITY.
(a) Depreciation of Property Used in the Transmission of
Electricity.--
(1) In general.--Subparagraph (C) of section 168(e)(3)
(relating to 7-year property), as amended by section 301(a)(1),
is amended by striking ``and'' at the end of clause (ii), by
redesignating clause (iii) as clause (iv), and by inserting
after clause (ii) the following:
``(iii) any property used in the
transmission of electricity, and''.
(2) 10-year class life.--The table contained in section
168(g)(3)(B), as amended by section 301(a)(2), is amended by
inserting after the item relating to subparagraph (C)(ii) the
following:
``(C)(iii)..................................................... 10''.
(b) Definition of Property Used in the Transmission of
Electricity.--Section 168(i), as amended by section 301(b), is amended
by adding at the end the following:
``(16) Property used in the transmission of electricity.--
The term `property used in the transmission of electricity'
means property used in the transmission of electricity for
sale.''.
(c) Effective Date.--The amendments made by this section shall
apply to property placed in service after the date of the enactment of
this Act.
TITLE IV--INCENTIVES FOR EARLY COMMERCIAL APPLICATIONS OF ADVANCED
CLEAN COAL TECHNOLOGIES
SEC. 401. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN COAL
TECHNOLOGY.
(a) Allowance of Qualifying Advanced Clean Coal Technology Facility
Credit.--Section 46 (relating to amount of credit) 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 adding at the
end the following:
``(4) the qualifying advanced clean coal technology
facility credit.''.
(b) Amount of Qualifying Advanced Clean Coal Technology Facility
Credit.--Subpart E of part IV of subchapter A of chapter 1 (relating to
rules for computing investment credit), as amended by section 101(a),
is amended by inserting after section 48A the following:
``SEC. 48B. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY FACILITY CREDIT.
``(a) In General.--For purposes of section 46, the qualifying
advanced clean coal technology facility credit for any taxable year is
an amount equal to 10 percent of the qualified investment in a
qualifying advanced clean coal technology facility for such taxable
year.
``(b) Qualifying Advanced Clean Coal Technology Facility.--
``(1) In general.--For purposes of subsection (a), the term
`qualifying advanced clean coal technology facility' means a
facility of the taxpayer which--
``(A)(i)(I) replaces a conventional technology
facility of the taxpayer and the original use of which
commences with the taxpayer, or
``(II) is a retrofitted or repowered conventional
technology facility, the retrofitting or repowering of
which is completed by the taxpayer (but only with
respect to that portion of the basis which is properly
attributable to such retrofitting or repowering), or
``(ii) is acquired through purchase (as defined by
section 179(d)(2)),
``(B) is depreciable under section 167,
``(C) has a useful life of not less than 4 years,
``(D) is located in the United States, and
``(E) uses qualifying advanced clean coal
technology.
``(2) Special rule for sale-leasebacks.--For purposes of
subparagraph (A) of paragraph (1), in the case of a facility
which--
``(A) is originally placed in service by a person,
and
``(B) 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 subparagraph (B). 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.
``(3) Qualifying advanced clean coal technology.--For
purposes of paragraph (1)--
``(A) In general.--The term `qualifying advanced
clean coal technology' means, with respect to clean
coal technology--
``(i) multiple applications, with a
combined capacity of not more than 2,000
megawatts, of advanced pulverized coal or
atmospheric fluidized bed combustion
technology--
``(I) installed as a new, retrofit,
or repowering application,
``(II) operated between 2001 and
2011, and
``(III) with a design net heat rate
of not more than 9,500 Btu per kilowatt
hour when the design coal has a heat
content of more than 8,000 Btu per
pound, or a design net heat rate of not
more than 9,900 Btu per kilowatt hour
when the design coal has a heat content
of 8,000 Btu per pound or less,
``(ii) multiple applications, with a
combined capacity of not more than 1,000
megawatts, of pressurized fluidized bed
combustion technology--
``(I) installed as a new, retrofit,
or repowering application,
``(II) operated between 2001 and
2015, and
``(III) with a design net heat rate
of not more than 8,400 Btu per kilowatt
hour when the design coal has a heat
content of more than 8,000 Btu per
pound, or a design net heat rate of not
more than 9,900 Btu per kilowatt hour
when the design coal has a heat
content of 8,000 Btu per pound or less,
``(iii) multiple applications, with a
combined capacity of not more than 5,000
megawatts, of integrated gasification combined
cycle technology, with or without fuel or
chemical co-production--
``(I) installed as a new, retrofit,
or repowering application,
``(II) operated between 2001 and
2015,
``(III) with a design net heat rate
of not more than 8,550 Btu per kilowatt
hour when the design coal has a heat
content of more than 8,000 Btu per
pound, or a design net heat rate of not
more than 9,900 Btu per kilowatt hour
when the design coal has a heat content
of 8,000 Btu per pound or less, and
``(IV) with a net thermal
efficiency on any fuel or chemical co-
production of not less than 39 percent
(higher heating value), and
``(iv) multiple applications, with a
combined capacity of not more than 2,000
megawatts of technology for the production of
electricity--
``(I) installed as a new, retrofit,
or repowering application,
``(II) operated between 2001 and
2015, and
``(III) with a carbon emission rate
which is not more than 85 percent of
conventional technology.
``(B) Exceptions.--Such term shall not include
clean coal technology projects receiving or scheduled
to receive funding under the Clean Coal Technology
Program of the Department of Energy.
``(C) Clean coal technology.--The term `clean coal
technology' means advanced technology which uses coal
to produce 75 percent or more of its thermal output as
electricity including advanced pulverized coal or
atmospheric fluidized bed combustion, pressurized
fluidized bed combustion, integrated gasification
combined cycle with or without fuel or chemical co-
production, and any other technology for the production
of electricity which exceeds the performance of
conventional technology.
``(D) Conventional technology.--The term
`conventional technology' means--
``(i) coal-fired combustion technology with
a design net heat rate of not less than 9,500
Btu per kilowatt hour (HHV) and a carbon
equivalents emission rate of not more than 0.54
pounds of carbon per kilowatt hour when the
design coal has a heat content of more than
8,000 Btu per pound,
``(ii) coal-fired combustion technology
with a design net heat rate of not less than
10,500 Btu per kilowatt hour (HHV) and a carbon
equivalents emission rate of not more than 0.60
pounds of carbon per kilowatt hour when the
design coal has a heat content of 8,000 Btu per
pound or less, or
``(iii) natural gas-fired combustion
technology with a design net heat rate of not
less than 7,500 Btu per kilowatt hour (HHV) and
a carbon equivalents emission rate of not more
than 0.24 pounds of carbon per kilowatt hour.
``(E) Design net heat rate.--The design net heat
rate shall be based on the design annual heat input to
and the design annual net electrical output from the
qualifying advanced clean coal technology (determined
without regard to such technology's co-generation of
steam).
``(F) Selection criteria.--Selection criteria for
clean coal technology facilities--
``(i) shall be established by the Secretary
of Energy as part of a competitive
solicitation,
``(ii) shall include primary criteria of
minimum design net heat rate, maximum design
thermal efficiency, and lowest cost to the
government, and
``(iii) shall include supplemental criteria
as determined appropriate by the Secretary of
Energy.
``(4) Noncompliance with pollution laws.--For purposes of
this subsection, a facility which is not in compliance with the
applicable State and Federal pollution prevention, control, and
permit requirements for any period of time shall not be
considered to be a qualifying advanced clean coal technology
facility during such period.
``(c) Qualified Investment.--For purposes of subsection (a), the
term `qualified investment' means, with respect to any taxable year,
the basis of a qualifying advanced clean coal technology facility
placed in service by the taxpayer during such taxable year.
``(d) Qualified Progress Expenditures.--
``(1) Increase in qualified investment.--In the case of a
taxpayer who has made an election under paragraph (5), the
amount of the qualified investment of such taxpayer for the
taxable year (determined under subsection (c) without regard to
this section) 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.
``(2) Progress expenditure property defined.--For purposes
of this subsection, the term `progress expenditure property'
means any property being constructed by or for the taxpayer and
which it is reasonable to believe will qualify as a qualifying
advanced clean coal technology facility which is being
constructed by or for the taxpayer when it is placed in
service.
``(3) Qualified progress expenditures defined.--For
purposes of this subsection--
``(A) 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.
``(B) Nonself-constructed property.--In the case of
nonself-constructed property, the term `qualified
progress expenditures' means the amount paid during the
taxable year to another person for the construction of
such property.
``(4) Other definitions.--For purposes of this subsection--
``(A) 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.
``(B) Nonself-constructed property.--The term
`nonself-constructed property' means property which is
not self-constructed property.
``(C) Construction, etc.--The term `construction'
includes reconstruction and erection, and the term
`constructed' includes reconstructed and erected.
``(D) Only construction of qualifying advanced
clean coal technology 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.
``(5) Election.--An election under this subsection 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.
``(e) Credits for Certain Tax Exempt Organizations and Governmental
Units.--
``(1) Allowance of credit.--Any credit which would be
allowable under subsection (a) with respect to a qualifying
advanced clean coal technology facility of an entity if such
entity were not exempt from tax under this chapter shall be
treated as a credit allowable under subpart C to such entity if
such entity is--
``(A) an organization described in section
501(c)(12)(C) and exempt from tax under section 501(a),
``(B) an organization described in section
1381(a)(2)(C),
``(C) an entity the income of which is excludable
from gross income under section 115, or
``(D) the Tennessee Valley Authority.
``(2) Use of credit.--
``(A) Transfer of credit.--An entity described in
subparagraph (A), (B), or (C) of paragraph (1) may
assign, trade, sell, or otherwise transfer any credit
allowable to such entity under paragraph (1) to any
taxpayer.
``(B) Use of credit as an offset.--Notwithstanding
any other provision of law, in the case of an entity
described in subparagraph (A) or (B) of paragraph (1),
any credit allowable to such entity under paragraph (1)
may be applied by such entity, without penalty, as a
prepayment of any loan, debt, or other obligation the
entity has incurred under subchapter I of chapter 31 of
title 7 of the Rural Electrification Act of 1936 (7
U.S.C. 901 et seq.).
``(C) Use by tva.--
``(i) In general.--Notwithstanding any
other provision of law, in the case of an
entity described in paragraph (1)(D), any
credit allowable under paragraph (1) to such
entity may be applied as a credit against the
payments required to be made in any fiscal year
under section 15d(e) of the Tennessee Valley
Authority Act of 1933 (16 U.S.C. 831n-4(e)) as
an annual return on the appropriations
investment and an annual repayment sum.
``(ii) Treatment of credits.--The aggregate
amount of credits described in paragraph (1)
shall be treated in the same manner and to the
same extent as if such credits were a payment
in cash and shall be applied first against the
annual return on the appropriations investment.
``(iii) Credit carryover.--With respect to
any fiscal year, if the aggregate amount of
credits described in paragraph (1) exceeds the
aggregate amount of payment obligations
described in clause (i), the excess amount
shall remain available for application as
credits against the amounts of such payment
obligations in succeeding fiscal years in the
same manner as described in this subparagraph.
``(3) Credit not income.--Neither a transfer under
subparagraph (A) or a use under subparagraph (B) of paragraph
(2) of any credit allowable under paragraph (1) shall result in
income for purposes of section 501(c)(12).
``(4) Transfer proceeds treated as arising from essential
government function.--Any proceeds derived by an entity
described in paragraph (1)(C) from the transfer of any credit
under paragraph (2)(A) shall be treated as arising from an
essential government function.
``(f) Coordination With Other Credits.--This section shall not
apply to any property with respect to which the rehabilitation credit
under section 47 or the energy credit under section 48A is allowed
unless the taxpayer elects to waive the application of such credit to
such property.
``(g) Termination.--This section shall not apply with respect to
any qualified investment made more than 10 years after the effective
date of this section.''.
(c) Recapture.--Section 50(a) (relating to other special rules) is
amended by adding at the end the following:
``(6) Special rules relating to qualifying advanced clean
coal technology facility.--For purposes of applying this
subsection in the case of any credit allowable by reason of
section 48B, 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 qualifying advanced clean coal
technology facility (as defined by section 48B(b)(1))
multiplied by a fraction whose numerator is the number
of years remaining to fully depreciate under this title
the qualifying advanced clean coal technology 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
qualifying advanced clean coal technology 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 qualifying advanced clean coal
technology facility under section 48B, 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) Application of paragraph.--This paragraph
shall be applied separately with respect to the credit
allowed under section 38 regarding a qualifying
advanced clean coal technology facility.''.
(d) Transitional Rule.--Section 39(d) of the Internal Revenue Code
of 1986 (relating to transitional rules), as amended by section 201(e),
is amended by adding at the end the following:
``(13) No carryback of section 48b credit before effective
date.--No portion of the unused business credit for any taxable
year which is attributable to the qualifying advanced clean
coal technology facility credit determined under section 48B may be
carried back to a taxable year ending before January 1, 2002.''.
(e) Technical Amendments.--
(1) Section 49(a)(1)(C) 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
the following:
``(iv) the portion of the basis of any
qualifying advanced clean coal technology
facility attributable to any qualified
investment (as defined by section 48B(c)).''.
(2) Section 50(a)(4) is amended by striking ``and (2)'' and
inserting ``(2), and (6)''.
(3) Section 50(c) is amended by adding at the end the
following:
``(6) Nonapplication.--Paragraphs (1) and (2) shall not
apply to any advanced clean coal technology facility credit
under section 48B.''.
(4) The table of sections for subpart E of part IV of
subchapter A of chapter 1, as amended by section 101(c), is
amended by inserting after the item relating to section 48A the
following:
``Sec. 48B. Qualifying advanced clean coal technology facility
credit.''.
(f) Effective Date.--The amendments made by this section shall
apply to periods after December 31, 2001, 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. 402. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED CLEAN COAL
TECHNOLOGY.
(a) Credit for Production From Qualifying Advanced Clean Coal
Technology.--Subpart D of part IV of subchapter A of chapter 1 of the
Internal Revenue Code of 1986 (relating to business related credits),
as amended by section 201(a), is amended by adding at the end the
following:
``SEC. 45G. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED CLEAN COAL
TECHNOLOGY.
``(a) General Rule.--For purposes of section 38, the qualifying
advanced clean coal technology production credit of any taxpayer for
any taxable year is equal to--
``(1) the applicable amount of advanced clean coal
technology production credit, multiplied by
``(2) the sum of--
``(A) the kilowatt hours of electricity, plus
``(B) each 3,413 Btu of fuels or chemicals,
produced by the taxpayer during such taxable year at a
qualifying advanced clean coal technology facility during the
10-year period beginning on the date the facility was
originally placed in service.
``(b) Applicable Amount.--For purposes of this section, the
applicable amount of advanced clean coal technology production credit
with respect to production from a qualifying advanced clean coal
technology facility shall be determined as follows:
``(1) Where the design coal has a heat content of more than
8,000 Btu per pound:
``(A) In the case of a facility originally placed
in service before 2008, if--
------------------------------------------------------------------------
The applicable amount is:
``The facility design net -------------------------------------------
heat rate, Btu/kWh (HHV) is For 1st 5 years of For 2d 5 years of
equal to: such service such service
------------------------------------------------------------------------
Not more than 8,400......... $.0050 $.0030
More than 8,400 but not more $.0010 $.0010
than 8,550.
More than 8,550 but not more $.0005 $.0005.
than 8,750.
------------------------------------------------------------------------
``(B) In the case of a facility originally placed
in service after 2007 and before 2012, if--
------------------------------------------------------------------------
The applicable amount is:
``The facility design net -------------------------------------------
heat rate, Btu/kWh (HHV) is For 1st 5 years of For 2d 5 years of
equal to: such service such service
------------------------------------------------------------------------
Not more than 7,770......... $.0090 $.0075
More than 7,770 but not more $.0070 $.0050
than 8,125.
More than 8,125 but not more $.0060 $.0040.
than 8,350.
------------------------------------------------------------------------
``(C) In the case of a facility originally placed
in service after 2011 and before 2015, if--
------------------------------------------------------------------------
The applicable amount is:
``The facility design net -------------------------------------------
heat rate, Btu/kWh (HHV) is For 1st 5 years of For 2d 5 years of
equal to: such service such service
------------------------------------------------------------------------
Not more than 7,380......... $.0120 $.0090
More than 7,380 but not more $.0095 $.0070.
than 7,720.
------------------------------------------------------------------------
``(2) Where the design coal has a heat content of not more
than 8,000 Btu per pound:
``(A) In the case of a facility originally placed
in service before 2008, if--
------------------------------------------------------------------------
The applicable amount is:
``The facility design net -------------------------------------------
heat rate, Btu/kWh (HHV) is For 1st 5 years of For 2d 5 years of
equal to: such service such service
------------------------------------------------------------------------
Not more than 8,500......... $.0050 $.0030
More than 8,500 but not more $.0010 $.0010
than 8,650.
More than 8,650 but not more $.0005 $.0005.
than 8,750.
------------------------------------------------------------------------
``(B) In the case of a facility originally placed
in service after 2007 and before 2012, if--
------------------------------------------------------------------------
The applicable amount is:
``The facility design net -------------------------------------------
heat rate, Btu/kWh (HHV) is For 1st 5 years of For 2d 5 years of
equal to: such service such service
------------------------------------------------------------------------
Not more than 8,000......... $.0090 $.0075
More than 8,000 but not more $.0070 $.0050
than 8,250.
More than 8,250 but not more $.0060 $.0040.
than 8,400.
------------------------------------------------------------------------
``(C) In the case of a facility originally placed
in service after 2011 and before 2015, if--
------------------------------------------------------------------------
The applicable amount is:
``The facility design net -------------------------------------------
heat rate, Btu/kWh (HHV) is For 1st 5 years of For 2d 5 years of
equal to: such service such service
------------------------------------------------------------------------
Not more than 7,800......... $.0120 $.0090
More than 7,800 but not more $.0095 $.0070.
than 7,950.
------------------------------------------------------------------------
``(3) Where the clean coal technology facility is producing
fuel or chemicals:
``(A) In the case of a facility originally placed
in service before 2008, if--
------------------------------------------------------------------------
The applicable amount is:
``The facility design net -------------------------------------------
thermal efficiency (HHV) is For 1st 5 years of For 2d 5 years of
equal to: such service such service
------------------------------------------------------------------------
Not less than 40.6 percent.. $.0050 $.0030
Less than 40.6 but not less $.0010 $.0010
than 40 percent.
Less than 40 but not less $.0005 $.0005.
than 39 percent.
------------------------------------------------------------------------
``(B) In the case of a facility originally placed
in service after 2007 and before 2012, if--
------------------------------------------------------------------------
The applicable amount is:
``The facility design net -------------------------------------------
thermal efficiency (HHV) is For 1st 5 years of For 2d 5 years of
equal to: such service such service
------------------------------------------------------------------------
Not less than 43.9 percent.. $.0090 $.0075
Less than 43.9 but not less $.0070 $.0050
than 42 percent.
Less than 42 but not less $.0060 $.0040.
than 40.9 percent.
------------------------------------------------------------------------
``(C) In the case of a facility originally placed
in service after 2011 and before 2015, if--
------------------------------------------------------------------------
The applicable amount is:
``The facility design net -------------------------------------------
thermal efficiency (HHV) is For 1st 5 years of For 2d 5 years of
equal to: such service such service
------------------------------------------------------------------------
Not less than 44.2 percent.. $.0120 $.0090
Less than 44.2 but not less $.0095 $.0070.
than 43.6 percent.
------------------------------------------------------------------------
``(c) Inflation Adjustment Factor.--For calendar years after 2001,
each amount in paragraphs (1), (2), and (3) shall be adjusted by
multiplying such amount by the inflation adjustment factor for the
calendar year in which the amount is applied. If any amount as
increased under the preceding sentence is not a multiple of 0.01 cent,
such amount shall be rounded to the nearest multiple of 0.01 cent.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) In general.--Any term used in this section which is
also used in section 48B shall have the meaning given such term
in section 48B.
``(2) Applicable rules.--The rules of paragraphs (3), (4),
and (5) of section 45(d) and section 48B(e) shall apply.
``(3) Inflation adjustment factor.--The term `inflation
adjustment factor' means, with respect to a calendar year, a
fraction the numerator of which is the GDP implicit price
deflator for the preceding calendar year and the denominator of
which is the GDP implicit price deflator for the calendar year
2000.
``(4) GDP implicit price deflator.--The term `GDP implicit
price deflator' means the most recent revision of the implicit
price deflator for the gross domestic product as computed by
the Department of Commerce before March 15 of the calendar
year.''.
(b) Credit Treated as Business Credit.--Section 38(b), as amended
by section 201(b), is amended by striking ``plus'' at the end of
paragraph (14), by striking the period at the end of paragraph (15) and
inserting ``, plus'', and by adding at the end the following:
``(16) the qualifying advanced clean coal technology
production credit determined under section 45G(a).''.
(c) Transitional Rule.--Section 39(d) (relating to transitional
rules), as amended by section 401(d), is amended by adding at the end
the following:
``(14) No carryback of section 45g credit before effective
date.--No portion of the unused business credit for any taxable
year which is attributable to the qualifying advanced clean
coal technology production credit determined under section 45G
may be carried back to a taxable year ending before the date of
the enactment of section 45G.''.
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1, as amended by section 201(g), is
amended by adding at the end the following:
``Sec. 45G. Credit for production from qualifying advanced clean coal
technology.''.
(e) Effective Date.--The amendments made by this section shall
apply to production after the date of the enactment of this Act.
SEC. 403. RISK POOL FOR QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY.
(a) Establishment.--The Secretary of the Treasury shall establish a
financial risk pool which shall be available to any United States owner
of a qualifying advanced clean coal technology which has qualified for
an advanced clean coal technology production credit (as defined in
section 45G of the Internal Revenue Code of 1986, as added by section
402) to offset for the first 3 years of the operation of such
technology the costs (not to exceed 5 percent of the total cost of
installation) for modifications resulting from the technology's failure
to achieve its design performance.
(b) Authorization of Appropriations.--There is authorized to be
appropriated such sums as are necessary to carry out the purposes of
this section.
TITLE V--HEATING FUELS AND STORAGE.
SEC. 501. FULL EXPENSING OF HOME HEATING OIL AND PROPANE STORAGE
FACILITIES.
(a) In General.--Section 179(b) (relating to limitations) is
amended by adding at the end the following:
``(5) Full expensing of home heating oil and propane
storage facilities.--Paragraphs (1) and (2) shall not apply to
section 179 property which is any storage facility (not
including a building or its structural components) used in
connection with the distribution of home heating oil or
liquefied petroleum gas.''.
(b) Effective Date.--The amendment made by this section shall apply
to property placed in service on or after the date of the enactment of
this Act.
SEC. 502. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR NATURAL GAS
AND OTHER COMMODITIES.
(a) In General.--Subsection (b) of section 148 (defining higher
yielding investments) is amended by adding at the end the following:
``(4) Investment property not to include certain
prepayments to ensure commodity supply.--The term `investment
property' shall not include a prepayment entered into for the
purpose of obtaining a supply of a commodity reasonably
expected to be used in a business of one or more utilities each
of which is owned and operated by a State or local government,
any political subdivision or instrumentality thereof, or any
governmental unit acting for or on behalf of such a utility.''.
(b) Effective Date.--The amendment made by this section shall apply
to obligations issued after the date of the enactment of this Act.
SEC. 503. PRIVATE LOAN FINANCING TEST NOT TO APPLY TO PREPAYMENTS FOR
NATURAL GAS AND OTHER COMMODITIES.
(a) In General.--Section 141(c)(2) (providing exceptions to the
private loan financing test) is amended by striking ``or'' at the end
of subparagraph (A), by striking the period at the end of subparagraph
(B) and inserting ``, or'', and by adding at the end the following:
``(C) arises from a transaction described in
section 148(b)(4).''.
(b) Effective Date.--The amendments made by this section shall
apply to obligations issued after the date of the enactment of this
Act.
TITLE VI--OIL AND GAS PRODUCTION
SEC. 601. CREDIT FOR PRODUCTION OF RE-REFINED LUBRICATING OIL.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits), as amended by section 402(a),
is amended by adding at the end the following:
``SEC. 45H. CREDIT FOR PRODUCING RE-REFINED LUBRICATING OIL.
``(a) General Rule.--For purposes of section 38, the re-refined
lubricating oil production credit of any taxpayer for any taxable year
is equal to $4.05 per barrel of qualified re-refined lubricating oil
production which is attributable to the taxpayer (within the meaning of
section 29(d)(3)).
``(b) Qualified Re-Refined Lubricating Oil Production.--For
purposes of this section--
``(1) In general.--The term `qualified re-refined
lubricating oil production' means a base oil manufactured from
at least 95 percent used oil and not more than 2 percent of
previously unused oil by a re-refining process at a qualified
facility which effectively removes physical and chemical
impurities and spent and unspent additives to the extent that
such base oil meets industry standards for engine oil as
defined by the American Petroleum Institute document API 1509
as in effect on the date of the enactment of this section.
``(2) Limitation on amount of production which may
qualify.--Re-refined lubricating oil produced during any
taxable year shall not be treated as qualified re-refined
lubricating oil production but only to the extent average daily
production during the taxable year exceeds 7,000 barrels.
``(3) Barrel.--The term `barrel' has the meaning given such
term by section 613A(e)(4).
``(4) Noncompliance with pollution laws.--For purposes of
paragraph (1), a facility which is not in compliance with the
applicable State and Federal pollution prevention, control, and
permit requirements for any period of time shall not be
considered to be a qualified facility during such period.
``(c) Inflation Adjustment.--In the case of any taxable year
beginning in a calendar year after 2001, the dollar amount contained in
subsection (a) shall be increased to an amount equal to such dollar
amount multiplied by the inflation adjustment factor for such calendar
year (determined under section 29(d)(2)(B) by substituting `2000' for
`1979').''.
(b) Credit Treated as Business Credit.--Section 38(b) (relating to
current year business credit), as amended by section 402(b), is amended
by striking `plus' at the end of paragraph (15), by striking the period
at the end of paragraph (16), and inserting `, plus', and by adding at
the end the following:
``(17) the re-refined lubricating oil production credit
determined under section 45H(a).''.
(c) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1, as amended by section 402(d), is
amended by adding at the end the following:
``Sec. 45H. Credit for producing re-refined lubricating oil.''.
(d) Effective Date.--The amendments made by this section shall
apply to production after the date of the enactment of this Act.
SEC. 602. OIL AND GAS FROM MARGINAL WELLS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business credits), as amended by section 601(a), is
amended by adding at the end the following:
``SEC. 45I. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS.
``(a) General Rule.--For purposes of section 38, the marginal well
production credit for any taxable year is an amount equal to the
product of--
``(1) the credit amount, and
``(2) the qualified credit oil production and the qualified
natural gas production which is attributable to the taxpayer.
``(b) Credit Amount.--For purposes of this section--
``(1) In general.--The credit amount is--
``(A) $3 per barrel of qualified crude oil
production, and
``(B) 50 cents per 1,000 cubic feet of qualified
natural gas production.
``(2) Reduction as oil and gas prices increase.--
``(A) In general.--The $3 and 50 cents amounts
under paragraph (1) shall each be reduced (but not
below zero) by an amount which bears the same ratio to
such amount (determined without regard to this
paragraph) as--
``(i) the excess (if any) of the applicable
reference price over $14 ($1.56 for qualified
natural gas production), bears to
``(ii) $3 ($0.33 for qualified natural gas
production).
The applicable reference price for a taxable year is
the reference price of the calendar year preceding the
calendar year in which the taxable year begins.
``(B) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2001,
each of the dollar amounts contained in subparagraph
(A) shall be increased to an amount equal to such
dollar amount multiplied by the inflation adjustment
factor for such calendar year (determined under section
43(b)(3)(B) by substituting `2000' for `1990').
``(C) Reference price.--For purposes of this
paragraph, the term `reference price' means, with
respect to any calendar year--
``(i) in the case of qualified crude oil
production, the reference price determined
under section 29(d)(2)(C), and
``(ii) in the case of qualified natural gas
production, the Secretary's estimate of the
annual average wellhead price per 1,000 cubic
feet for all domestic natural gas.
``(c) Qualified Crude Oil and Natural Gas Production.--For purposes
of this section--
``(1) In general.--The terms `qualified crude oil
production' and `qualified natural gas production' mean
domestic crude oil or natural gas which is produced from a
qualified marginal well.
``(2) Limitation on amount of production which may
qualify.--
``(A) In general.--Crude oil or natural gas
produced during any taxable year from any well shall
not be treated or qualified crude oil production or
qualified natural gas production to the extent
production from the well during the taxable year
exceeds 1,095 barrels or barrel equivalents.
``(B) Proportionate reductions.--
``(i) Short taxable years.--In the case of
a short taxable year, the limitations under
this paragraph shall be proportionately reduced
to reflect the ratio which the number of days
in such taxable year bears to 365.
``(ii) Wells not in production entire
year.--In the case of a well which is not
capable of production during each day of a
taxable year, the limitations under this
paragraph applicable to the well shall be
proportionately reduced to reflect the ratio
which the number of days of production bears to
the total number of days in the taxable year.
``(3) Definitions.--
``(A) Qualified marginal well.--The term `qualified
marginal well' means a domestic well--
``(i) the production from which during the
taxable year is treated as marginal production
under section 613A(c)(6), or
``(ii) which, during the taxable year--
``(I) has average daily production
of not more than 25 barrel equivalents,
and
``(II) produces water at a rate not
less than 95 percent of total well
effluent.
``(B) Crude oil, etc.--The terms `crude oil',
`natural gas', `domestic', and `barrel' have the
meanings given such terms by section 613A(e).
``(C) Barrel equivalent.--The term `barrel
equivalent' means, with respect to natural gas, a
conversation ratio of 6,000 cubic feet of natural gas
to 1 barrel of crude oil.
``(d) Other Rules.--
``(1) Production attributable to the taxpayer.--In the case
of a qualified marginal well in which there is more than one
owner of operating interests in the well and the crude oil or
natural gas production exceeds the limitation under subsection
(c)(2), qualifying crude oil production or qualifying natural
gas production attributable to the taxpayer shall be determined
on the basis of the ratio which taxpayer's revenue interest in
the production bears to the aggregate of the revenue interests
of all operating interest owners in the production.
``(2) Operating interest required.--Any credit under this
section may be claimed only on production which is attributable
to the holder of an operating interest.
``(3) Production from nonconventional sources excluded.--In
the case of production from a qualified marginal well which is
eligible for the credit allowed under section 29 for the
taxable year, no credit shall be allowable under this section
unless the taxpayer elects not to claim the credit under
section 29 with respect to the well.
``(4) Noncompliance with pollution laws.--For purposes of
subsection (c)(3)(A), a marginal well which is not in
compliance with the applicable State and Federal pollution
prevention, control, and permit requirements for any period of
time shall not be considered to be a qualified marginal well
during such period.''.
(b) Credit Treated as Business Credit.--Section 38(b), as amended
by section 601(b), is amended by striking `plus' at the end of
paragraph (16), by striking the period at the end of paragraph (17) and
inserting ``, plus'', and by adding at the end the following:
``(18) the marginal oil and gas well production credit
determined under section 45I(a).''.
(c) Credit Allowed Against Regular and Minimum Tax.--
(1) In general.--Subsection (c) of section 38 (relating to
limitation based on amount of tax), as amended by section
201(d)(1), is amended by redesignating paragraph (4) as
paragraph (5) and by inserting after paragraph (3) the
following:
``(4) Special rules for marginal oil and gas well
production credit.--
``(A) In general.--In the case of the marginal oil
and gas well production credit--
``(i) this section and section 39 shall be
applied separately with respect to the credit,
and
``(ii) in applying paragraph (1) to the
credit--
``(I) subparagraphs (A) and (B)
thereof shall not apply, and
``(II) the limitation under
paragraph (1) (as modified by subclause
(I)) shall be reduced by the credit
allowed under subsection (a) for the
taxable year (other than the marginal
oil and gas well production credit).
``(B) Marginal oil and gas well production
credit.--For purposes of this subsection, the term
`marginal oil and gas well production credit' means the
credit allowable under subsection (a) by reason of
section 45I(a).''.
(2) Conforming amendments.--Subclause (II) of section
38(c)(2)(A)(ii), as amended by section 201(d)(2), and subclause
(II) of section 38(c)(3)(A)(ii), as added by section 201(d)(1),
are each amended by inserting ``or the marginal oil and gas
well production credit'' after ``home credit''.
(d) Carryback.--Subsection (a) of section 39 (relating to carryback
and carryforward of unused credits generally) is amended by adding at
the end the following:
``(3) 10-year carryback for marginal oil and gas well
production credit.--In the case of the marginal oil and gas
well production credit--
``(A) this section shall be applied separately from
the business credit (other than the marginal oil and
gas well production credit),
``(B) paragraph (1) shall be applied by
substituting `10 taxable years' for `1 taxable years'
in subparagraph (A) thereof, and
``(C) paragraph (2) shall be applied--
``(i) by substituting `31 taxable years'
for `21 taxable years' in subparagraph (A)
thereof, and
``(ii) by substituting `30 taxable years'
for `20 taxable years' in subparagraph (A)
thereof.''.
(e) Coordination With Section 29.--Section 29(a) is amended by
striking ``There'' and inserting ``At the election of the taxpayer,
there''.
(f) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter I, as amended by section 601(c), is
amended by adding at the end the following:
``Sec. 45I. Credit for producing oil and gas from marginal wells.''.
(g) Effective Date.--The amendments made by this section shall
apply to production in taxable years beginning after December 31, 2001.
SEC. 603. DEDUCTION FOR DELAY RENTAL PAYMENTS.
(a) In General.--Section 263 (relating to capital expenditures) is
amended by adding at the end the following:
``(j) Delay Rental Payments for Domestic Oil and Gas Wells.--
``(1) In general.--Notwithstanding subsection (a), a
taxpayer may elect to treat delay rental payments incurred in
connection with the development of oil or gas within the United
States (as defined in section 638) as payments which are not
chargeable to capital account. Any payments so treated shall be
allowed as a deduction in the taxable year in which paid or
incurred.
``(2) Delay rental payments.--For purposes of paragraph
(1), the term `delay rental payment' means an amount paid for
the privilege of deferring development of an oil or gas well
under an oil or gas lease.''.
(b) Conforming Amendment.--Section 263A(c)(3) is amended by
inserting ``263(j),'' after `263(i),'.
(c) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred in taxable years beginning after
December 31, 2001.
SEC. 604. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL EXPENDITURES.
(a) In General.--Section 263 (relating to capital expenditures), as
amended by section 603(a), is amended by adding at the end the
following:
``(k) Geological and Geophysical Expenditures for Domestic Oil and
Gas Wells.--Notwithstanding subsection (a), a taxpayer may elect to
treat geological and geophysical expenses incurred in connection with
the exploration for, or development of, oil or gas within the United
States (as defined in section 638) as expenses which are not chargeable
to capital account. Any expenses so treated shall be allowed as a
deduction in the taxable year in which paid or incurred.''.
(b) Conforming Amendment.--Section 263A(c)(3), as amended by
section 603(b), is amended by inserting ``263(k),'' after ``263(j),''.
(c) Effective Date.--The amendments made by this section shall
apply to costs paid or incurred in taxable years beginning after
December 31, 2001.
SEC. 605. GAS PIPELINES TREATED AS 7-YEAR PROPERTY.
(a) In General.--Subparagraph (C) of section 168(e)(3) (relating to
classification of certain property), as amended by section 304(a)(1),
is amended by striking ``and'' at the end of clause (iii), by
redesignating clause (iv) as clause (v), and by inserting after clause
(iii) the following:
``(iv) any gas pipeline, and''.
(b) Gas Pipeline.--Subsection (i) of section 168, as amended by
section 304(b), is amended by adding at the end the following:
``(17) Gas pipeline.--The term `gas pipeline' means the
pipe, storage facilities, equipment, distribution
infrastructure, and appurtenances used to deliver natural
gas.''
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to property placed in service on or after the date of the
enactment of this Act.
(2) Accounting rule for public utility property.--If any
gas pipeline is public utility property (as defined in section
46(f)(5) 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), the amendments made by this
section shall only apply to such property if, with respect to
such property, the taxpayer uses a normalization method of
accounting.
SEC. 606. CRUDE OIL AND NATURAL GAS DEVELOPMENT CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits), as amended by section 602(a),
is amended by adding at the end the following:
``SEC. 45J. CRUDE OIL AND NATURAL GAS DEVELOPMENT CREDIT.
``(a) In General.--For purposes of section 38, the crude oil and
natural gas development credit determined under this section for any
taxable year shall be an amount equal to the taxpayer's qualified
investment for the taxable year.
``(b) Reduction as Oil and Gas Prices Increase.--
``(1) In general.--The amount which would (but for this
subsection) be taken into account under subsection (a) for the
taxable year shall be reduced (but not below zero) by an amount
which bears the same ratio to such amount (determined without
regard to this subsection) as--
``(A) the excess (if any) of the applicable
reference price over $11, bears to
``(B) $3.
The applicable reference price for a taxable year is
the reference price of the calendar year preceding the
calendar year in which the taxable year begins.
``(2) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2001, each of the
dollar amounts contained in paragraph (1) shall be increased to
an amount equal to such dollar amount multiplied by the
inflation adjustment factor for such calendar year (determined
under section 43(b)(3)(B) by substituting `2000' for `1990').
``(3) Reference price.--For purposes of this subsection,
the term `reference price' means, with respect to any calendar
year, the reference price determined under section 29(d)(2)(C).
``(c) Qualified Investment.--For purposes of this section, the term
`qualified investment' means amounts paid or incurred--
``(1) for the purpose of drilling and equipping crude oil
and natural gas wells (including pollution control equipment
used in connection with such wells), or
``(2) for the purpose of performing secondary or tertiary
recovery techniques,
on properties located within the United States (as defined in section
638), but only to the extent that the expenditure is not taken into
account for purposes of a credit under any other section.
``(d) Special Rules.--For purposes of this section--
``(1) Aggregation of qualified investment expenses.--
``(A) Controlled groups; common control.--In
determining the amount of the credit under this
section, all members of the same controlled group of
corporations (within the meaning of section 52(a)) and
all persons under common control (within the meaning of
section 52(b)) shall be treated as a single taxpayer
for purposes of this section.
``(B) Apportionment of credit.--The credit (if any)
allowable by this section to members of any group (or
to any person) described in subparagraph (A) shall be
such member's or person's proportionate share of the
qualified investment expenses giving rise to the credit
determined under regulations prescribed by the
Secretary.
``(2) Partnerships, s corporations, estates and trusts.--
``(A) Partnerships and s corporations.--In the case
of a partnership, the credit shall be allocated among
partners under regulations prescribed by the Secretary.
A similar rule shall apply in the case of an S
corporation and its shareholders.
``(B) Pass-thru in the case of estates and
trusts.--Under regulations prescribed by the Secretary,
rules similar to the rules of subsection (d) of section
52 shall apply.
``(3) Adjustments for certain acquisitions and
dispositions.--Under regulations prescribed by the Secretary,
rules similar to the rules contained in section 41(f)(3) shall
apply with respect to the acquisition or disposition of a
taxpayer.
``(4) Short taxable years.--In the case of any short
taxable year, qualified investment expenses shall be annualized
in such circumstances and under such methods as the Secretary
may prescribe by regulation.
``(5) Denial of double benefit.--
``(A) Disallowance of deduction.--Any deduction
allowable under this chapter for any costs taken into
account in computing the amount of the credit
determined under subsection (a) shall be reduced by the
amount of such credit attributable to such costs.
``(B) Basis adjustments.--For purposes of this
subtitle, if a credit is determined under this section
for any expenditure with respect to any property, the
increase in the basis of such property which would (but
for this subsection) result from such expenditures
shall be reduced by the amount of the credit so
allowed.''.
(b) Credit Treated as Business Credit.--Section 38(b), as amended
by section 602(b), is amended by striking ``plus'' at the end of
paragraph (17), by striking the period at the end of paragraph (18) and
inserting ``, plus'', and by adding at the end the following:
``(19) the crude oil and natural gas development credit
determined under section 45J(a).''.
(c) Transitional Rule.--Section 39(d) (relating to transitional
rules), as amended by section 402(c), is amended by adding at the end
the following:
``(15) No carryback of section 45j credit before effective
date.--No portion of the unused business credit for any taxable
year which is attributable to the crude oil and natural gas
development credit determined under section 48J may be carried
back to a taxable year ending before January 1, 2002.''.
(d) Credit Allowed Against Regular and Minimum Tax.--
(1) In general.--Subsection (c) of section 38 (relating to
limitation based on amount of tax), as amended by section
602(c)(1), is amended by redesignating paragraph (5) as
paragraph (6) and by inserting after paragraph (4) the
following:
``(5) Special rules for crude oil and natural gas
development credit.--
``(A) In general.--In the case of the crude oil and
natural gas development credit--
``(i) this section and section 39 shall be
applied separately with respect to the credit,
and
``(ii) in applying paragraph (1) to the
credit--
``(I) subparagraphs (A) and (B)
thereof shall not apply, and
``(II) the limitation under
paragraph (1) (as modified by subclause
(I)) shall be reduced by the credit
allowed under subsection (a) for the
taxable year (other than the crude oil
and natural gas development credit).
``(B) Crude oil and natural gas development
credit.--For purposes of this subsection, the term
`crude oil and natural gas development credit' means
the credit allowable under subsection (a) by reason of
section 45J(a).''.
(2) Conforming amendments.--Subclause (II) of section
38(c)(2)(A)(ii) and subclause (II) of section 38(c)(3)(A)(ii),
as amended by section 602(c)(2), and subclause (II) of section
38(c)(4)(A)(ii), as added by section 602(c)(1), are each
amended by inserting ``or the crude oil and natural gas
development credit'' after ``well production credit''.
(e) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1, as amended by section 602(f), is
amended by adding at the end the following:
``Sec. 45J. Crude oil and natural gas
development credit.''.
(f) Effective Date.--The amendments made by this section shall
apply to expenditures paid or incurred in taxable years beginning after
December 31, 2001.
SEC. 607. CREDIT FOR CAPTURE OF COALMINE METHANE GAS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits), as amended by section 606(a),
is amended by adding at the end the following:
``SEC. 45K. CAPTURE OF COALMINE METHANE GAS.
``(a) In General.--For purposes of section 38, the coalmine methane
gas capture credit of any taxpayer for any taxable year is $1.21 for
1,000,000 Btu of coalmine methane gas captured by the taxpayer and
utilized as a fuel source or sold by or on behalf of the taxpayer to an
unrelated person during such taxable year (within the meaning of
section 45).
``(b) Coalmine Methane Gas.--For purposes of this section, the term
`coalmine methane gas' means any methane gas which is being liberated,
or would be liberated, during qualified coal mining operations or as a
result of past qualified coal mining operations, or which is extracted
up to 10 years in advance of qualified coal mining operations as part
of specific plan to mine a coal deposit.
``(c) Special Rule for Advanced Extraction.--In the case of
coalmine methane gas which is captured in advance of qualified coal
mining operations, the credit under subsection (a) shall be allowed
only after the date the coal extraction occurs in the immediate area
where the coalmine methane gas was removed.
``(d) Noncompliance with pollution laws.--For purposes of
subsections (b) and (c), coal mining operations which are not in
compliance with the applicable State and Federal pollution prevention,
control, and permit requirements for any period of time shall not be
considered to be qualified coal mining operations during such period.
``(e) Application of Rules.--For purposes of this section, rules
similar to the rules of paragraphs (3), (4), and (5) of section 45(d)
shall apply.''.
(b) Credit Treated as Business Credit.--Section 38(b), as amended
by section 606(b), is amended by striking ``plus'' at the end of
paragraph (18), by striking the period at the end of paragraph (19) and
inserting ``, plus'', and by adding at the end the following:
``(20) the coalmine methane gas capture credit determined
under section 45K(a).''.
(c) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1, as amended by section 606(c), is
amended by adding at the end the following:
``Sec. 45K. Capture of coalmine methane gas.''.
(d) Effective Date.--The amendments made by this section shall
apply to the capture of coalmine methane gas after the date of the
enactment of this Act.
SEC. 608. ALLOCATION OF ALCOHOL FUELS CREDIT TO PATRONS OF A
COOPERATIVE.
(a) In General.--Section 40(d) (relating to alcohol used as fuel)
is amended by adding at the end the following:
``(6) Allocation of small ethanol producer credit to
patrons of cooperative.--
``(A) In general.--In the case of a cooperative
organization described in section 1381(a), any portion
of the credit determined under subsection (a)(3) for
the taxable year may, at the election of the
organization made on a timely filed return (including
extensions) for such year, be apportioned pro rata
among patrons of the organization on the basis of the
quantity or value of business done with or for such
patrons for the taxable year. Such an election, once
made, shall be irrevocable for such taxable year.
``(B) Treatment of organizations and patrons.--The
amount of the credit apportioned to patrons pursuant to
subparagraph (A)--
``(i) shall not be included in the amount
determined under subsection (a) for the taxable
year of the organization, and
``(ii) shall be included in the amount
determined under subsection (a) for the taxable
year of each patron in which the patronage
dividend for the taxable year referred to in
subparagraph (A) is includible in gross income.
``(C) Special rule for decreasing credit for
taxable year.--If the amount of the credit of a
cooperative organization determined under subsection
(a)(3) for a taxable year is less than the amount of
such credit shown on the cooperative organization's
return for such year, an amount equal to the excess of
such reduction over the amount not apportioned to the
patrons under subparagraph (A) for the taxable year
shall be treated as an increase in tax imposed by this chapter on the
organization. Any such increase shall not be treated as tax imposed by
this chapter for purposes of determining the amount of any credit under
this subpart or subpart A, B, E, or G of this part.''.
(b) Technical Amendment.--Section 1388 (relating to definitions and
special rules for cooperative organizations) is amended by adding at
the end the following:
``(k) Cross Reference.--For provisions relating to the
apportionment of the alcohol fuels credit between cooperative
organizations and their patrons, see section 40(d)(6).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
SEC. 609. EXTENSION OF CREDIT FOR PRODUCING FUEL FROM A NONCONVENTIONAL
SOURCE.
(a) Inclusion of Alaska Natural Gas.--Section 29(c)(1) (defining
qualified fuels) is amended by striking ``and'' at the end of
subparagraph (B)(ii), by striking the period at the end of subparagraph
(C) and inserting ``, and'', and by adding at the end the following:
``(D) Alaska natural gas.''.
(b) Definition.--Section 29(c) is amended by adding at the end the
following:
``(4) Alaska natural gas.--The term `Alaska natural gas'
means gas produced in compliance with the applicable State and
Federal pollution prevention, control, and permit requirements
from the area generally known as the North Slope of Alaska
(including the continental shelf thereof within the meaning of
section 638(1)), determined without regard to the area of the
Alaska National Wildlife Refuge (including the continental
shelf thereof within the meaning of section 638(1)).''.
(c) Amount of Credit.--
(1) In general.--Section 29(a)(1) (relating to allowance of
credit) is amended by inserting ``($1.45 in the case of a
qualified fuel described in subsection (c)(1)(D))'' after
``$3''.
(2) Conforming amendments.--
(A) Section 29(b)(2) is amended by striking ``The
$3 amount'' and inserting ``The $3 and $1.45 amounts''.
(B) Section 29(d)(2)(B) is amended by inserting
``(calendar year 2001 in the case of the $1.45 amount
in subsection (a)(1))'' after ``1979''.
(d) Extension of Credit.--Section 29(g) (relating to extension for
certain facilities) is amended by adding at the end the following:
``(3) Special rule for alaska natural gas wells.--In the
case of a well for producing qualified fuel described in
subsection (c)(1)(D)--
``(A) for purposes of subsection (f)(1)(A), such
well shall be treated as being placed in service before
January 1, 1993, if such well is placed in service
before January 1, 2009, and
``(B) subsection (f)(2) shall be applied with
respect to such well by substituting `after December
31, 2001, and before January 1, 2009' for `before
January 1, 2003'.''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years ending after December 31, 2001.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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