S 2642
110th CONGRESS
2d Session
S. 2642
To establish a national renewable energy standard, to extend
and create renewable energy tax incentives, and for other purposes.
IN THE SENATE OF THE UNITED STATES
February 14, 2008
Ms. KLOBUCHAR (for herself, Ms. SNOWE, and Ms. CANTWELL) introduced
the following bill; which was read twice and referred to the Committee
on Finance
A BILL
To establish a national renewable energy standard, to extend
and create renewable energy tax incentives, 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; TABLE OF CONTENTS.
(a) Short Title- This Act may be cited as the `American Renewable Energy
Act of 2008'.
(b) Table of Contents- The table of contents of this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I--RENEWABLE ENERGY STANDARD
Sec. 101. Renewable portfolio standard.
TITLE II--ENERGY TAX PROVISIONS
Sec. 200. Short title; etc.
Subtitle A--Energy Advancement and Investment
Part I--Advanced Electricity Infrastructure
Sec. 201. Extension and modification of renewable electricity, refined
coal, and Indian coal production credit.
Sec. 202. Extension and modification of credit for clean renewable
energy bonds.
Sec. 203. Extension and modification of energy credit.
Sec. 204. Energy credit for combined heat and power system property.
Sec. 205. Special depreciation allowance for certain electric transmission
property.
Sec. 206. Extension of special rule to implement FERC restructuring
policy.
Sec. 207. Extension and modification of credit for residential energy
efficient property.
Sec. 208. Credit for residential wind property.
Sec. 209. Seven-year applicable recovery period for depreciation of
qualified energy management devices.
Sec. 210. Landowner incentive to encourage electric transmission build-out.
Sec. 211. Partial exemption from passive activity limitations for
qualified wind facilities.
Sec. 212. Credit for electricity produced from qualified wind facilities
allowed against alternative minimum tax.
Part II--Domestic Fuel Security
Sec. 221. Credit for production of cellulosic biomass alcohol.
Sec. 222. Expansion of special allowance to cellulosic biomass alcohol
fuel plant property.
Sec. 223. Extension of small ethanol producer credit.
Sec. 224. Credit for producers of fossil free alcohol.
Sec. 225. Modification of alcohol credit.
Sec. 226. Extension and modification of credit for biodiesel used
as fuel.
Sec. 227. Extension and modification of alternative fuel credit.
Sec. 228. Extension of alternative fuel vehicle refueling property
credit.
Sec. 229. Extension of suspension of taxable income limit on percentage
depletion for oil and natural gas produced from marginal properties.
Sec. 230. Extension and modification of election to expense certain
refineries.
Sec. 231. Ethanol tariff extension.
Sec. 232. Elimination and reductions of duty drawback on certain imported
ethanol.
Sec. 233. Certain income and gains relating to alcohol fuel mixtures,
biodiesel fuel mixtures, and alternative fuel treated as qualifying
income for publicly traded partnerships.
Sec. 234. Technical amendments.
Part III--Advanced Technology Vehicles
Sec. 241. Expansion and modification of credit for alternative fuel
motor vehicles.
Sec. 242. Credit for plug-in electric drive motor vehicles.
Sec. 243. Exclusion from heavy truck tax for idling reduction units
and advanced insulation added after purchase.
Part IV--Conservation and Energy Efficiency
Sec. 251. Extension and modification of nonbusiness energy property
credit.
Sec. 252. Extension and modification of new energy efficient home
credit.
Sec. 253. Extension and modification of energy efficient commercial
buildings deduction.
Sec. 254. Modifications of energy efficient appliance credit for appliances
produced after 2007.
Sec. 255. Special depreciation allowance for certain reuse and recycling
property.
Subtitle B--Revenue Raising Provisions
Sec. 261. Denial of deduction for major integrated oil companies for
income attributable to domestic production of oil, natural gas, or
primary products thereof.
Sec. 262. Elimination of the different treatment of foreign oil and
gas extraction income and foreign oil related income for purposes
of the foreign tax credit.
Sec. 263. Increase and extension of Oil Spill Liability Trust Fund
tax.
Sec. 264. Limitation on drawback claimed for amounts deposited into
the Oil Spill Liability Trust Fund.
Sec. 265. Tax on crude oil and natural gas produced from the outer
Continental Shelf in the Gulf of Mexico.
Sec. 266. Taxation of taxable fuels in foreign trade zones.
Sec. 267. Clarification of penalty for sale of fuel failing to meet
EPA regulations.
Sec. 268. Clarification of eligibility for certain fuels credits for
fuel with insufficient nexus to the United States.
Sec. 269. Treatment of qualified alcohol fuel mixtures and qualified
biodiesel fuel mixtures as taxable fuels.
Sec. 270. Calculation of volume of alcohol for fuel credits.
Sec. 271. Bulk transfer exception not to apply to finished gasoline.
Sec. 272. Application of rules treating inverted corporations as domestic
corporations to certain transactions occurring after March 20, 2002.
Sec. 273. Modification of effective date of leasing provisions of
the American Jobs Creation Act of 2004.
Sec. 274. Revision of tax rules on expatriation of individuals.
TITLE I--RENEWABLE ENERGY STANDARD
SEC. 101. RENEWABLE PORTFOLIO STANDARD.
(a) In General- Title VI of the Public Utility Regulatory Policies Act
of 1978 (16 U.S.C. 2601 et seq.) is amended by adding at the end the
following:
`SEC. 610. FEDERAL RENEWABLE PORTFOLIO STANDARD.
`(a) Definitions- In this section:
`(1) BASE AMOUNT OF ELECTRICITY- The term `base amount of electricity'
means the total amount of electricity sold by an electric utility
to electric consumers in a calendar year, excluding municipal waste
and electricity generated by a hydroelectric facility (including a
pumped storage facility, but excluding incremental hydropower).
`(2) DISTRIBUTED GENERATION FACILITY- The term `distributed generation
facility' means a facility at a customer site.
`(3) EXISTING RENEWABLE ENERGY- The term `existing renewable energy'
means, except as provided in paragraph (7)(B), electric energy generated
at a facility (including a distributed generation facility) placed
in service prior to January 1, 2001, from solar, wind, or geothermal
energy, ocean energy, biomass (as defined in section 203(b) of the
Energy Policy Act of 2005 (42 U.S.C. 15852(b)), or landfill gas.
`(4) GEOTHERMAL ENERGY- The term `geothermal energy' means energy
derived from a geothermal deposit (within the meaning of section 613(e)(2)
of the Internal Revenue Code of 1986).
`(5) INCREMENTAL GEOTHERMAL PRODUCTION-
`(A) IN GENERAL- The term `incremental geothermal production' means
for any year the excess of--
`(i) the total kilowatt hours of electricity produced from a facility
(including a distributed generation facility) using geothermal
energy; over
`(ii) the average annual kilowatt hours produced at such facility
for 5 of the previous 7 calendar years before the date of enactment
of this section after eliminating the highest and the lowest kilowatt
hour production years in such 7-year period.
`(B) SPECIAL RULE- A facility described in subparagraph (A) that
was placed in service at least 7 years before the date of enactment
of this section shall, commencing with the year in which such date
of enactment occurs, reduce the amount calculated under subparagraph
(A)(ii) each year, on a cumulative basis, by the average percentage
decrease in the annual kilowatt hour production for the 7-year period
described in subparagraph (A)(ii) with such cumulative sum not to
exceed 30 percent.
`(6) INCREMENTAL HYDROPOWER-
`(A) IN GENERAL- The term `incremental hydropower' means additional
energy generated as a result of efficiency improvements or capacity
additions made on or after January 1, 2001, or the effective date
of an existing applicable State renewable portfolio standard program
at a hydroelectric facility that was placed in service before that
date.
`(B) EXCLUSION- The term `incremental hydropower' does not include
additional energy generated as a result of operational changes not
directly associated with efficiency improvements or capacity additions.
`(C) MEASUREMENT- Efficiency improvements and capacity additions
shall be measured on the basis of the same water flow information
used to determine a historic average annual generation baseline
for the hydroelectric facility and certified by the Secretary or
the Federal Energy Regulatory Commission.
`(7) NEW RENEWABLE ENERGY- The term `new renewable energy' means--
`(A) electric energy generated at a facility (including a distributed
generation facility) placed in service on or after January 1, 2001,
from--
`(i) solar, wind, or geothermal energy or ocean energy;
`(ii) biomass (as defined in section 203(b) of the Energy Policy
Act of 2005 (42 U.S.C. 15852(b));
`(iv) incremental hydropower; and
`(B) for electric energy generated at a facility (including a distributed
generation facility) placed in service prior to the date of enactment
of this section--
`(i) the additional energy above the average generation during
the 3-year period ending on the date of enactment of this section
at the facility from--
`(I) solar or wind energy or ocean energy;
`(II) biomass (as defined in section 203(b) of the Energy Policy
Act of 2005 (42 U.S.C. 15852(b));
`(IV) incremental hydropower; and
`(ii) incremental geothermal production.
`(8) OCEAN ENERGY- The term `ocean energy' includes current, wave,
tidal, and thermal energy.
`(b) Renewable Energy Requirement-
`(1) IN GENERAL- Each electric utility that sells electricity to electric
consumers shall obtain a percentage of the base amount of electricity
the electric utility sells to electric consumers in any calendar year
from new renewable energy or existing renewable energy.
`(2) MINIMUM ANNUAL PERCENTAGE- The percentage obtained in a calendar
year shall not be less than the amount specified in the following
table:
Minimum annual
`Calendar year:
percentage:
2010
--2
2011
--4
2012
--6
2013
--8
2014
--10
2015
--11
2016
--12
2017
--13
2018
--14
2019
--15
2020
--16
2021
--17
2022
--18
2023
--19
2024
--20.
`(3) MEANS OF COMPLIANCE- An electric utility shall meet the requirements
of this subsection by--
`(A) submitting to the Secretary renewable energy credits issued
under subsection (c);
`(B) making alternative compliance payments to the Secretary at
the rate of 2 cents per kilowatt hour (as adjusted for inflation
under subsection (h)); or
`(C) conducting a combination of activities described in subparagraphs
(A) and (B).
`(c) Renewable Energy Credit Trading Program-
`(1) IN GENERAL- Not later than July 1, 2009, the Secretary shall
establish a renewable energy credit trading program under which each
electric utility shall submit to the Secretary renewable energy credits
to certify the compliance of the electric utility with respect to
obligations under subsection (b).
`(2) ADMINISTRATION- As part of the program, the Secretary shall--
`(A) issue tradeable renewable energy credits to generators of electric
energy from new renewable energy;
`(B) issue nontradeable renewable energy credits to generators of
electric energy from existing renewable energy;
`(C) issue renewable energy credits to electric utilities associated
with State renewable portfolio standard compliance mechanisms pursuant
to subsection (i);
`(D) ensure that a kilowatt hour, including the associated renewable
energy credit, shall be used only once for purposes of compliance
with this section;
`(E) allow double credits for generation from facilities on Indian
land, and triple credits for generation from small renewable distributed
generators (meaning those no larger than 1 megawatt); and
`(F) ensure that, with respect to a purchaser that as of the date
of enactment of this section has a purchase agreement from a renewable
energy facility placed in service before that date, the credit associated
with the generation of renewable energy under the contract is issued
to the purchaser of the electric energy.
`(3) DURATION- A credit described in subparagraph (A) or (B) of paragraph
(2) may only be used for compliance with this section during the 3-year
period beginning on the date of issuance of the credit.
`(4) TRANSFERS- An electric utility that holds credits in excess of
the quantity of credits needed to comply with subsection (b) may transfer
the credits to another electric utility in the same utility holding
company system.
`(5) DELEGATION OF MARKET FUNCTION- The Secretary may delegate to
an appropriate entity that establishes markets the administration
of a national tradeable renewable energy credit market for purposes
of creating a transparent national market for the sale or trade of
renewable energy credits.
`(1) CIVIL PENALTIES- Any electric utility that fails to meet the
compliance requirements of subsection (b) shall be subject to a civil
penalty.
`(2) AMOUNT OF PENALTY- Subject to paragraph (3), the amount of the
civil penalty shall be equal to the product obtained by multiplying--
`(A) the number of kilowatt-hours of electric energy sold to electric
consumers in violation of subsection (b); by
`(i) 2 cents (adjusted for inflation under subsection (h)); or
`(ii) 200 percent of the average market value of renewable energy
credits during the year in which the violation occurred.
`(3) MITIGATION OR WAIVER-
`(A) IN GENERAL- The Secretary may mitigate or waive a civil penalty
under this subsection if the electric utility is unable to comply
with subsection (b) for reasons outside of the reasonable control
of the utility.
`(B) REDUCTION- The Secretary shall reduce the amount of any penalty
determined under paragraph (2) by an amount paid by the electric
utility to a State for failure to comply with the requirement of
a State renewable energy program if the State requirement is greater
than the applicable requirement of subsection (b).
`(4) PROCEDURE FOR ASSESSING PENALTY- The Secretary shall assess a
civil penalty under this subsection in accordance with the procedures
prescribed by section 333(d) of the Energy Policy and Conservation
Act of 1954 (42 U.S.C. 6303).
`(e) State Renewable Energy Account Program-
`(1) IN GENERAL- Not later than December 31, 2008, the Secretary of
the Treasury shall establish a State renewable energy account in the
Treasury.
`(A) IN GENERAL- All money collected by the Secretary from alternative
compliance payments and the assessment of civil penalties under
this section shall be deposited into the renewable energy account
established under paragraph (1).
`(B) SEPARATE ACCOUNT- The State renewable energy account shall
be maintained as a separate account in the Treasury and shall not
be transferred to the general fund of the Treasury.
`(3) USE- Proceeds deposited in the State renewable energy account
shall be used by the Secretary, subject to appropriations, for a program
to provide grants to the State agency responsible for developing State
energy conservation plans under section 362 of the Energy Policy and
Conservation Act (42 U.S.C. 6322) for the purposes of promoting renewable
energy production, including programs that promote technologies that
reduce the use of electricity at customer sites such as solar water
heating.
`(4) ADMINISTRATION- The Secretary may issue guidelines and criteria
for grants awarded under this subsection. State energy offices receiving
grants under this section shall maintain such records and evidence
of compliance as the Secretary may require.
`(5) PREFERENCE- In allocating funds under this program, the Secretary
shall give preference--
`(A) to States in regions which have a disproportionately small
share of economically sustainable renewable energy generation capacity;
and
`(B) to State programs to stimulate or enhance innovative renewable
energy technologies.
`(f) Rules- The Secretary shall issue rules implementing this section
not later than 1 year after the date of enactment of this section.
`(g) Exemptions- This section shall not apply in any calendar year to
an electric utility--
`(1) that sold less than 4,000,000 megawatt-hours of electric energy
to electric consumers during the preceding calendar year; or
`(h) Inflation Adjustment- Not later than December 31, 2008, and December
31 of each year thereafter, the Secretary shall adjust for United States
dollar inflation (as measured by the Consumer Price Index)--
`(1) the price of a renewable energy credit under subsection (c)(2);
and
`(2) the amount of the civil penalty per kilowatt-hour under subsection
(d)(2).
`(1) IN GENERAL- Nothing in this section diminishes any authority
of a State or political subdivision of a State to adopt or enforce
any law or regulation respecting renewable energy, but, except as
provided in subsection (d)(3), no such law or regulation shall relieve
any person of any requirement otherwise applicable under this section.
`(2) COORDINATION- The Secretary, in consultation with States having
such renewable energy programs, shall, to the maximum extent practicable,
facilitate coordination between the Federal program and State programs.
`(A) IN GENERAL- The Secretary, in consultation with States, shall
promulgate regulations to ensure that an electric utility subject
to the requirements of this section that is also subject to a State
renewable energy standard receives renewable energy credits in relation
to equivalent quantities of renewable energy associated with compliance
mechanisms, other than the generation or purchase of renewable energy
by the electric utility, including the acquisition of certificates
or credits and the payment of taxes, fees, surcharges, or other
financial compliance mechanisms by the electric utility or a customer
of the electric utility, directly associated with the generation
or purchase of renewable energy.
`(B) PROHIBITION ON DOUBLE COUNTING- The regulations promulgated
under this paragraph shall ensure that a kilowatt hour associated
with a renewable energy credit issued pursuant to this subsection
shall not be used for compliance with this section more than once.
`(1) IN GENERAL- The Commission shall issue and enforce such regulations
as are necessary to ensure that an electric utility recovers all prudently
incurred costs associated with compliance with this section.
`(2) APPLICABLE LAW- A regulation under paragraph (1) shall be enforceable
in accordance with the provisions of law applicable to enforcement
of regulations under the Federal Power Act (16 U.S.C. 791a et seq.).
`(k) Wind Energy Development Study- The Secretary, in consultation with
appropriate Federal and State agencies, shall conduct, and submit to
Congress a report describing the results of, a study on methods to increase
transmission line capacity for wind energy development.
`(l) Sunset- This section expires on December 31, 2040.'.
(b) Table of Contents Amendment- The table of contents of the Public
Utility Regulatory Policies Act of 1978 (16 U.S.C. prec. 2601) is amended
by adding at the end of the items relating to title VI the following:
`Sec. 609. Rural and remote communities electrification grants.
`Sec. 610. Federal renewable portfolio standard.'.
TITLE II--ENERGY TAX PROVISIONS
SEC. 200. SHORT TITLE; ETC.
(a) Short Title- This title may be cited as the `Renewable Energy Tax
Incentives Act'.
(b) Amendment of 1986 Code- Except as otherwise expressly provided,
whenever in this title 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.
Subtitle A--Energy Advancement and Investment
PART I--ADVANCED ELECTRICITY INFRASTRUCTURE
SEC. 201. EXTENSION AND MODIFICATION OF RENEWABLE ELECTRICITY, REFINED
COAL, AND INDIAN COAL PRODUCTION CREDIT.
(1) IN GENERAL- Section 45(d) (relating to qualified facilities) is
amended--
(A) by striking `January 1, 2009' each place it appears in paragraphs
(1), (2), (3), (4), (5), (6), (7), (8), and (9) and inserting `January
1, 2014', and
(B) by striking `7-year period' both places it appears in paragraph
(10)(A) and inserting `8-year period'.
(2) EFFECTIVE DATE- The amendments made by this subsection shall take
effect on the date of the enactment of this Act.
(b) Credit Rate for Electricity Maintained at 2007 Level-
(1) IN GENERAL- Section 45(a)(1) (relating to general rule) is amended
by striking `1.5 cents' and inserting `2 cents'.
(2) NO INFLATION ADJUSTMENT- Section 45(b)(2) (relating to credit
and phaseout adjustment based on inflation) is amended by striking
`1.5 cent amount in subsection (a), the'.
(3) CONFORMING AMENDMENTS- Section 45(b)(4)(A) is amended--
(A) by striking `2003' and inserting `2006', and
(B) by striking `the amount in effect' and all that follows and
inserting `subsection (a)(1) shall be applied by substituting `0.9
cent' for `2 cents'.'.
(4) EFFECTIVE DATE- The amendments made by this subsection shall apply
to electricity produced and sold after December 31, 2006.
(c) Modification of Refined Coal as a Qualified Energy Resource-
(1) ELIMINATION OF INCREASED MARKET VALUE TEST- Section 45(c)(7)(A)
(defining refined coal) is amended--
(A) by striking clause (iv),
(B) by adding `and' at the end of clause (ii), and
(C) by striking `, and' at the end of clause (iii) and inserting
a period.
(2) INCREASE IN REQUIRED EMISSION REDUCTION- Section 45(c)(7)(B) (defining
qualified emission reduction) is amended by inserting `at least 40
percent of the emissions of' after `nitrogen oxide and'.
(3) EFFECTIVE DATE- The amendments made by this subsection shall apply
to coal produced and sold after December 31, 2007.
(d) Credit Allowed for On-Site Use of Electricity Produced From Biomass-
(1) ON-SITE USE- Section 45(e) (relating to definitions and special
rules) is amended by adding at the end the following new paragraph:
`(12) CREDIT ALLOWED FOR ON-SITE USE OF ELECTRICITY PRODUCED FROM
BIOMASS- In the case of electricity produced after December 31, 2007,
at any facility described in paragraph (2) or (3) which is equipped
with net metering to determine electricity consumption or sale (such
consumption or sale to be verified by a third party as determined
by the Secretary), subsection (a)(2) shall be applied without regard
to subparagraph (B) thereof.'.
(2) EFFECTIVE DATE- The amendment made by this subsection shall take
effect on the date of the enactment of this Act.
(e) Expansion of Resources to Wave, Current, Tidal, and Ocean Thermal
Energy-
(1) IN GENERAL- Section 45(c)(1) (defining qualified energy resources)
is amended by striking `and' at the end of subparagraph (G), by striking
the period at the end of subparagraph (H) and inserting `, and', and
by adding at the end the following new subparagraph:
`(I) wave, current, tidal, and ocean thermal energy.'.
(2) DEFINITION OF RESOURCES- Section 45(c) is amended by adding at
the end the following new paragraph:
`(10) WAVE, CURRENT, TIDAL, AND OCEAN THERMAL ENERGY- The term `wave,
current, tidal, and ocean thermal energy' means electricity produced
from any of the following:
`(A) Free flowing ocean water derived from tidal currents, ocean
currents, waves, or estuary currents.
`(B) Ocean thermal energy.'.
(3) FACILITIES- Section 45(d) is amended by adding at the end the
following new paragraph:
`(11) WAVE, CURRENT, TIDAL, AND OCEAN THERMAL FACILITY- In the case
of a facility using resources described in subparagraph (A), (B),
or (C) of subsection (c)(10) to produce electricity, the term `qualified
facility' means any facility owned by the taxpayer which is originally
placed in service after the date of the enactment of this paragraph
and before January 1, 2014, but such term shall not include a facility
which includes impoundment structures or a small irrigation power
facility.'.
(4) CREDIT RATE- Section 45(b)(4)(A) (relating to credit rate), as
amended by this section, is amended by striking `or (9)' and inserting
`(9), or (11)'.
(5) EFFECTIVE DATE- The amendments made by this subsection shall take
effect on the date of the enactment of this Act.
(f) Trash Facility Clarification-
(1) IN GENERAL- Paragraph (7) of section 45(d) is amended--
(A) by striking `facility which burns' and inserting `facility (other
than a facility described in paragraph (6)) which uses', and
(B) by striking `COMBUSTION'.
(2) EFFECTIVE DATE- The amendments made by this subsection shall apply
to electricity produced and sold before, on, or after December 31,
2007.
SEC. 202. EXTENSION AND MODIFICATION OF CREDIT FOR CLEAN RENEWABLE
ENERGY BONDS.
(a) Increase in Amount of Bonds Designated; 4-Year Extension-
(1) IN GENERAL- Section 54(f) (relating to limitation on amount of
bonds designated) is amended by adding at the end the following new
paragraph:
`(3) NATIONAL ANNUAL LIMITATION-
`(A) IN GENERAL- There is a national clean renewable energy bond
annual limitation for each calendar year. Such limitation is $900,000,000
for 2008, 2009, 2010, and 2011, and, except as provided in subparagraph
(C), zero thereafter.
`(B) ALLOCATION BY SECRETARY- The national clean renewable energy
bond limitation for a calendar year shall be allocated by the Secretary
among qualified projects in such manner as the Secretary determines
appropriate, except that the Secretary may not allocate more than
$563,000,000 of such limitation for each calendar year to finance
qualified projects of qualified borrowers which are governmental
bodies, of which not less than one-half of such amount shall be
allocated with respect to qualified projects equaling or exceeding
$10,000,000 in capital expenditures per project.
`(C) CARRYOVER OF UNUSED LIMITATION- If for any calendar year, the
national clean renewable energy bond annual limitation for such
year exceeds the amount of bonds allocated during such year, such
limitation for the following calendar year shall be increased by
the amount of such excess. Any carryforward of a limitation may
be carried only to the first year following the unused limitation
year. For purposes of the preceding sentence, a limitation shall
be treated as used on a first-in first-out basis.'.
(2) CONFORMING AMENDMENT- Section 54 is amended by striking subsection
(m).
(b) Limitation on Time for Issuance- Section 54(d)(1)(A) (defining clean
renewable energy bond) is amended by inserting `, or is issued by the
qualified issuer pursuant to an allocation by the Secretary to such
issuer of a portion of the national clean renewable energy bond annual
limitation under subsection (f)(3) by not later than the end of the
calendar year following the year of such allocation' after `subsection
(f)(2)'.
(c) Modification of Ratable Principal Amortization Requirement-
(1) IN GENERAL- Paragraph (5) of section 54(l) is amended to read
as follows:
`(5) RATABLE PRINCIPAL AMORTIZATION REQUIRED- A bond shall not be
treated as a clean renewable energy bond unless it is part of an issue
which provides for an equal amount of principal to be paid by the
qualified issuer during each 12-month period that the issue is outstanding
(other than the first 12-month period in the case of bonds issued
pursuant to an allocation under subsection (f)(3)).'.
(2) CONFORMING AMENDMENT- The third sentence of section 54(e)(2) is
amended by striking `subsection (l)(6)' and inserting `subsection
(l)(5)'.
(d) Qualified Project Includes Certain Transmission Lines- Section 54(d)(2)(A)
(defining qualified project) is amended by inserting `and any electric
transmission property capital expenditures (as defined in section 172(b)(1)(I)(v)(I))
related to such facility' after `qualified borrower'.
(e) Effective Date- The amendments made by this section shall take effect
on the date of the enactment of this Act.
SEC. 203. EXTENSION AND MODIFICATION OF ENERGY CREDIT.
(1) QUALIFIED FUEL CELL PROPERTY- Subparagraph (E) of section 48(c)(1)
is amended by striking `December 31, 2008' and inserting `December
31, 2016'.
(2) QUALIFIED MICROTURBINE PROPERTY- Subparagraph (E) of section 48(c)(2)
is amended by striking `December 31, 2008' and inserting `December
31, 2016'.
(3) SOLAR PROPERTY- Paragraphs (2)(i)(II) and (3)(A)(ii) of section
48(a) are each amended by striking `January 1, 2009' and inserting
`January 1, 2017'.
(b) Repeal of Public Utility Property Exclusion-
(1) IN GENERAL- Paragraph (3) of section 48(a), as amended by subsection
(a)(3), is amended by striking the first sentence which follows subparagraph
(D).
(2) CONFORMING AMENDMENTS-
(A) Section 48(c)(1), as amended by subsection (a)(1), is amended
by striking subparagraph (D) and by redesignating subparagraph (E)
as subparagraph (D).
(B) Section 48(c)(2), as amended by subsection (a)(2), is amended
by striking subparagraph (D) and by redesignating subparagraph (E)
as subparagraph (D).
(c) Repeal of Dollar Per Kilowatt Limitation for Fuel Cell Property-
(1) IN GENERAL- Section 48(c)(1), as amended by subsection (b)(2)(A),
is amended by striking subparagraph (B) and by redesignating subparagraphs
(C) and (D) as subparagraphs (B) and (C), respectively.
(2) CONFORMING AMENDMENT- Section 48(a)(1) is amended by striking
`paragraphs (1)(B) and (2)(B) of subsection (c)' and inserting `subsection
(c)(2)(B)'.
(1) IN GENERAL- Except as provided in paragraph (2), the amendments
made by section shall apply to periods after the date of the enactment
of this Act, in taxable years ending after such date, 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).
(2) EXTENSIONS- The amendments made by subsection (a) shall take effect
on the date of the enactment of this Act.
SEC. 204. ENERGY CREDIT FOR COMBINED HEAT AND POWER SYSTEM PROPERTY.
(a) In General- Section 48(a)(3)(A) (defining energy property) is amended
by striking `or' at the end of clause (iii), by inserting `or' at the
end of clause (iv), and by adding at the end the following new clause:
`(v) combined heat and power system property,'.
(b) Combined Heat and Power System Property- Section 48 (relating to
energy credit; reforestation credit) is amended by adding at the end
the following new subsection:
`(d) Combined Heat and Power System Property- For purposes of subsection
(a)(3)(A)(v)--
`(1) COMBINED HEAT AND POWER SYSTEM PROPERTY- The term `combined heat
and power system property' means property comprising a system--
`(A) which uses the same energy source for the simultaneous or sequential
generation of electrical power, mechanical shaft power, or both,
in combination with the generation of steam or other forms of useful
thermal energy (including heating and cooling applications),
`(B) which has an electrical capacity of not more than 15 megawatts
or a mechanical energy capacity of not more than 2,000 horsepower
or an equivalent combination of electrical and mechanical energy
capacities,
`(i) at least 20 percent of its total useful energy in the form
of thermal energy which is not used to produce electrical or mechanical
power (or combination thereof), and
`(ii) at least 20 percent of its total useful energy in the form
of electrical or mechanical power (or combination thereof),
`(D) the energy efficiency percentage of which exceeds 60 percent,
and
`(E) which is placed in service before January 1, 2017.
`(A) ENERGY EFFICIENCY PERCENTAGE- For purposes of this subsection,
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 expected to be consumed in its normal application,
and
`(ii) the denominator of which is the lower heating value of the
fuel sources for the system.
`(B) DETERMINATIONS MADE ON BTU BASIS- The energy efficiency percentage
and the percentages under paragraph (1)(C) shall be determined on
a Btu basis.
`(C) 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.
`(3) SYSTEMS USING BIOMASS- If a system is designed to use biomass
(within the meaning of paragraphs (2) and (3) of section 45(c) without
regard to the last sentence of paragraph (3)(A)) for at least 90 percent
of the energy source--
`(A) paragraph (1)(D) shall not apply, but
`(B) the amount of credit determined under subsection (a) with respect
to such system shall not exceed the amount which bears the same
ratio to such amount of credit (determined without regard to this
paragraph) as the energy efficiency percentage of such system bears
to 60 percent.'.
(c) Effective Date- The amendments made by this section shall apply
to periods after the date of the enactment of this Act, in taxable years
ending after such date, 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. 205. SPECIAL DEPRECIATION ALLOWANCE FOR CERTAIN ELECTRIC TRANSMISSION
PROPERTY.
(a) In General- Section 168 (relating to accelerated cost recovery system)
is amended by adding at the end the following:
`(m) Special Allowance for Certain Electric Transmission Property-
`(1) ADDITIONAL ALLOWANCE- In the case of any specified electric transmission
property--
`(A) the depreciation deduction provided by section 167(a) for the
taxable year in which such property is placed in service shall include
an allowance equal to 50 percent of the adjusted basis of such property,
and
`(B) the adjusted basis of such property shall be reduced by the
amount of such deduction before computing the amount otherwise allowable
as a depreciation deduction under this chapter for such taxable
year and any subsequent taxable year.
`(2) SPECIFIED ELECTRIC TRANSMISSION PROPERTY- The term `specified
electric transmission property' means property of a character subject
to the allowance for depreciation--
`(A) which is used in the United States as a generator tie to solely
transmit electricity from any qualified facility described in section
45(d) (without regard to any placed in service date or the last
sentence of paragraph (4) thereof) to the grid,
`(B) the original use of which commences with the taxpayer after
the date of the enactment of this subsection,
`(C) which is acquired by the taxpayer by purchase (as defined in
section 179(d)) after the date of the enactment of this subsection,
but only if no written binding contract for the acquisition was
in effect on or before the date of the enactment of this subsection,
and
`(D) which is placed in service by the taxpayer before January 1,
2014.
`(A) ALTERNATIVE DEPRECIATION PROPERTY- Such term shall not include
any property described in section 168(k)(2)(D)(i).
`(B) ELECTION OUT- If a taxpayer makes an election under this subparagraph
with respect to any class of property for any taxable year, this
subsection shall not apply to all property in such class placed
in service during such taxable year.
`(4) SPECIAL RULES- For purposes of this subsection, rules similar
to the rules of subparagraph (E) of section 168(k)(2) shall apply,
except that such subparagraph shall be applied--
`(A) by substituting `the date of the enactment of subsection (l)'
for `September 10, 2001' each place it appears therein,
`(B) by substituting `January 1, 2014' for `January 1, 2005' in
clause (i) thereof, and
`(C) by substituting `specified electric transmission property'
for `qualified property' in clause (iv) thereof.
`(5) RECAPTURE- For purposes of this subsection, rules similar to
the rules under section 179(d)(10) shall apply with respect to any
specified electric transmission property which ceases to be specified
electric transmission property.'.
(b) Effective Date- The amendment made by this section shall apply to
property placed in service after the date of the enactment of this Act
in taxable years ending after such date.
SEC. 206. EXTENSION OF SPECIAL RULE TO IMPLEMENT FERC RESTRUCTURING
POLICY.
(a) Qualifying Electric Transmission Transaction-
(1) IN GENERAL- Section 451(i)(3) (defining qualifying electric transmission
transaction) is amended by striking `January 1, 2008' and inserting
`January 1, 2010'.
(2) EFFECTIVE DATE- The amendment made by this subsection shall apply
to transactions after December 31, 2007.
(b) Independent Transmission Company-
(1) IN GENERAL- Section 451(i)(4)(B)(ii) (defining independent transmission
company) is amended by striking `December 31, 2007' and inserting
`the date which is 2 years after the date of such transaction'.
(2) EFFECTIVE DATE- The amendment made by this subsection shall take
effect as if included in the amendments made by section 909 of the
American Jobs Creation Act of 2004.
SEC. 207. EXTENSION AND MODIFICATION OF CREDIT FOR RESIDENTIAL ENERGY
EFFICIENT PROPERTY.
(a) Extension- Section 25D(g) (relating to termination) is amended by
striking `December 31, 2008' and inserting `December 31, 2014'.
(b) Maximum Credit for Solar Electric Property-
(1) IN GENERAL- Section 25D(b)(1)(A) (relating to maximum credit)
is amended by striking `$2,000' and inserting `$4,000'.
(2) CONFORMING AMENDMENT- Section 25D(e)(4)(A)(i) is amended by striking
`$6,667' and inserting `$13,334'.
(c) Effective Date- The amendments made by this section shall apply
to expenditures made after December 31, 2007.
SEC. 208. CREDIT FOR RESIDENTIAL WIND PROPERTY.
(a) In General- Section 25D(a) (relating to allowance 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 new paragraph:
`(4) 30 percent of the qualified small wind energy property expenditures
made by the taxpayer during such year.'.
(b) Limitation- Section 25D(b)(1) (relating to maximum credit) is amended
by striking `and' at the end of subparagraph (B), by striking the period
at the end of subparagraph (A) and inserting `, and', and by adding
at the end the following new subparagraph:
`(D) $500 with respect to each half kilowatt of capacity (not to
exceed $4,000) of wind turbines for which qualified small wind energy
property expenditures are made.'.
(c) Qualified Small Wind Energy Property Expenditures-
(1) IN GENERAL- Section 25D(d) (relating to definitions) is amended
by adding at the end the following new paragraph:
`(4) QUALIFIED SMALL WIND ENERGY PROPERTY EXPENDITURE- The term `qualified
small wind energy property expenditure' means an expenditure for property
which uses a wind turbine to generate electricity for use in connection
with a dwelling unit located in the United States and used as a residence
by the taxpayer.'.
(2) NO DOUBLE BENEFIT- Section 45(d)(1) (relating to wind facility)
is amended by adding at the end the following new sentence: `Such
term shall not include any facility with respect to which any qualified
small wind energy property expenditure (as defined in subsection (d)(4)
of section 25D) is taken into account in determining the credit under
such section.'.
(d) Maximum Expenditures in Case of Joint Occupancy- Section 25D(e)(4)(A)
(relating to maximum expenditures) is amended by striking `and' at the
end of clause (iii), by striking the period at the end of clause (iv)
and inserting `, and', and by adding at the end the following new clause:
`(v) $1,667 in the case of each half kilowatt of capacity of wind
turbines for which qualified small wind energy property expenditures
are made.'.
(e) Effective Date- The amendments made by this section shall apply
to expenditures after December 31, 2007.
SEC. 209. SEVEN-YEAR APPLICABLE RECOVERY PERIOD FOR DEPRECIATION OF
QUALIFIED ENERGY MANAGEMENT DEVICES.
(a) In General- Section 168(e)(3)(C) (defining 7-year property) is amended
by striking `and' at the end of clause (iv), by redesignating clause
(v) as clause (vi), and by inserting after clause (iv) the following
new clause:
`(v) any qualified energy management device, and'.
(b) Definition of Qualified Energy Management Device- Section 168(i)
(relating to definitions and special rules) is amended by inserting
at the end the following new paragraph:
`(18) QUALIFIED ENERGY MANAGEMENT DEVICE-
`(A) IN GENERAL- The term `qualified energy management device' means
any energy management device which is placed in service before January
1, 2011, by a taxpayer who is a supplier of electric energy or a
provider of electric energy services.
`(B) ENERGY MANAGEMENT DEVICE- For purposes of subparagraph (A),
the term `energy management device' means any two-way communications
network and associated equipment, including equipment installed
on the premises of a consumer, which is used by the taxpayer--
`(i) to measure and record electricity usage data on a time-differentiated
basis of at least 60 minutes, and
`(ii) to provide such data on demand to both consumers and the
taxpayer.'.
(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. 210. LANDOWNER INCENTIVE TO ENCOURAGE ELECTRIC TRANSMISSION BUILD-OUT.
(a) In General- Part III of subchapter B of chapter 1 (relating to items
specifically excluded from gross income) is amended by inserting after
section 139A the following new section:
`SEC. 139B. ELECTRIC TRANSMISSION EASEMENT PAYMENTS.
`(a) In General- Gross income shall not include any qualified electric
transmission easement payment.
`(b) Qualified Electric Transmission Easement Payment- For purposes
of this section, the term `qualified electric transmission payment'
means any payment by an electric utility or electric transmission entity
pursuant to an easement or other agreement granted by the payee (or
any predecessor of such payee) for the right of such entity (or any
successors of such entity) to locate on such payee's property transmission
lines and equipment used to transmit electricity at 230 or more kilovolts
primarily from qualified facilities described in section 45(d) (without
regard to any placed in service date or the last sentence of paragraph
(4) thereof) or energy property (as defined in section 48(a)(3)) placed
in service after the date of the enactment of this section.
`(c) No Increase in Basis- Notwithstanding any other provision of this
subtitle, no increase in the basis or adjusted basis of any property
shall result from any amount excluded under this subsection with respect
to such property.
`(d) Denial of Double Benefit- Notwithstanding any other provision of
this subtitle, no deduction or credit shall be allowed (to the person
for whose benefit a qualified electric transmission easement payment
is made) for, or by reason of, any expenditure to the extent of the
amount excluded under this section with respect to such expenditure.'.
(b) Clerical Amendment- The table of sections for such part III is amended
by inserting after the item relating to section 139A the following new
item:
`Sec. 139B. Electric transmission easement payments.'.
(c) Effective Date- The amendments made by this section shall apply
to payments received after the date of the enactment of this Act.
SEC. 211. PARTIAL EXEMPTION FROM PASSIVE ACTIVITY LIMITATIONS FOR
QUALIFIED WIND FACILITIES.
(a) In General- Section 469 (relating to passive activity losses and
credits limited) is amended by redesignating subsections (l) and (m)
as subsections (m) and (n), respectively, and by inserting after subsection
(k) the following new subsection:
`(l) $40,000 Offset for Qualified Wind Facilities-
`(1) IN GENERAL- In the case of any natural person, subsection (a)
shall not apply to that portion of the passive activity loss or the
deduction equivalent (within the meaning of subsection (j)(5)) of
the passive activity credit for any taxable year which is attributable
to any interest of such person in a facility described in section
45(d)(1) (relating to wind facility).
`(2) DOLLAR LIMITATION- The aggregate amount to which paragraph (1)
applies for any taxable year shall not exceed $40,000.
`(3) SPECIAL RULE FOR ESTATES-
`(A) IN GENERAL- In the case of taxable years of an estate ending
less than 2 years after the date of the death of the decedent, this
subsection shall apply to any interest in a facility described in
section 45(d)(1) (relating to wind facility) held by the decedent
on the date of his death.
`(B) REDUCTION FOR SURVIVING SPOUSE'S EXEMPTION- For purposes of
subparagraph (A), the $40,000 amount under paragraph (2) shall be
reduced by the amount of the exemption under paragraph (1) allowable
to the surviving spouse of the decedent for the taxable year ending
with or within the taxable year of the estate.
`(4) MARRIED INDIVIDUALS FILING SEPARATELY-
`(A) IN GENERAL- Except as provided in subparagraph (B), in the
case of any married individual filing a separate return, this subsection
shall be applied by substituting `$20,000' for `$40,000' each place
it appears.
`(B) TAXPAYERS NOT LIVING APART- This subsection shall not apply
to a taxpayer who--
`(i) is a married individual filing a separate return for any
taxable year, and
`(ii) does not live apart from his spouse at all times during
such taxable year.'.
(b) Effective Date- The amendments made by this section shall apply
to losses and credits taken into account in taxable years beginning
after the date of the enactment of this Act.
SEC. 212. CREDIT FOR ELECTRICITY PRODUCED FROM QUALIFIED WIND FACILITIES
ALLOWED AGAINST ALTERNATIVE MINIMUM TAX.
(a) In General- Subparagraph (B) of section 38(c)(4) (relating to specified
credits) is amended--
(1) by striking `and' at the end of clause (i),
(2) by inserting `(other than a facility described in clause (iii))'
after `facility' in clause (ii)(I),
(3) by striking the period at the end of clause (ii) and inserting
`, and', and
(4) by adding at the end the following new clause:
`(iii) the credit determined under section 45 to the extent that
such credit is attributable to electricity produced at a facility
described in section 45(d)(1) (relating to wind facility).'.
(b) Effective Date- The amendments made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.
PART II--DOMESTIC FUEL SECURITY
SEC. 221. CREDIT FOR PRODUCTION OF CELLULOSIC BIOMASS ALCOHOL.
(a) In General- Subsection (a) of section 40 (relating to alcohol used
as fuel) is amended by striking `plus' at the end of paragraph (2),
by striking the period at the end of paragraph (3) and inserting `,
plus', and by adding at the end the following new paragraph:
`(4) the small cellulosic alcohol producer credit.'.
(b) Small Cellulosic Alcohol Producer Credit-
(1) IN GENERAL- Subsection (b) of section 40 is amended by adding
at the end the following new paragraph:
`(6) SMALL CELLULOSIC ALCOHOL PRODUCER CREDIT-
`(A) IN GENERAL- In addition to any other credit allowed under this
section, there shall be allowed as a credit against the tax imposed
by this chapter for the taxable year an amount equal to the applicable
amount for each gallon of qualified cellulosic alcohol production.
`(B) APPLICABLE AMOUNT- For purposes of subparagraph (A), the applicable
amount means the excess of--
`(I) the amount of the credit allowable for alcohol which is
ethanol under subsection (b)(1) (without regard to subsection
(b)(3)) at the time of the qualified cellulosic alcohol production,
plus
`(II) the amount of the credit allowable under subsection (b)(4)
at the time of such production.
`(C) QUALIFIED CELLULOSIC ALCOHOL PRODUCTION- For purposes of this
section, the term `qualified cellulosic alcohol production' means
any cellulosic biomass alcohol which is produced by an eligible
small cellulosic alcohol producer and which during the taxable year--
`(i) is sold by the taxpayer to another person--
`(I) for use by such other person in the production of a qualified
alcohol mixture in such other person's trade or business (other
than casual off-farm production),
`(II) for use by such other person as a fuel in a trade or business,
or
`(III) who sells such cellulosic biomass alcohol at retail to
another person and places such cellulosic biomass alcohol in
the fuel tank of such other person, or
`(ii) is used or sold by the taxpayer for any purpose described
in clause (i).
`(D) ADDITIONAL DISTILLATION EXCLUDED- The qualified cellulosic
alcohol production of any taxpayer for any taxable year shall not
include any alcohol which is purchased by the taxpayer and with
respect to which such producer increases the proof of the alcohol
by additional distillation.
`(E) APPLICATION OF PARAGRAPH- This paragraph shall apply with respect
to qualified cellulosic alcohol production--
`(i) after December 31, 2007, and
`(ii) before the end of the later of--
`(I) December 31, 2012, or
`(II) the calendar year in which the Secretary, in consultation
with the Administrator of the Environmental Protection Agency,
certifies that 1,000,000,000 gallons of cellulosic biomass alcohol
(as so defined) have been produced in or imported into the United
States after such date.'.
(2) TERMINATION DATE NOT TO APPLY- Subsection (e) of section 40 (relating
to termination) is amended by adding at the end the following new
paragraph:
`(3) EXCEPTION FOR SMALL CELLULOSIC ALCOHOL PRODUCER CREDIT- Paragraph
(1) shall not apply to the portion of the credit allowed under this
section by reason of subsection (a)(4).'.
(c) Eligible Small Cellulosic Alcohol Producer- Section 40 is amended
by adding at the end the following new subsection:
`(i) Definitions and Special Rules for Small Cellulosic Alcohol Producer-
For purposes of this section--
`(1) IN GENERAL- The term `eligible small cellulosic alcohol producer'
means a person, who at all times during the taxable year, has a productive
capacity for cellulosic biomass alcohol not in excess of 60,000,000
gallons.
`(2) CELLULOSIC BIOMASS ALCOHOL-
`(A) IN GENERAL- The term `cellulosic biomass alcohol' has the meaning
given such term under section 168(l)(3), but does not include any
alcohol with a proof of less than 150.
`(B) DETERMINATION OF PROOF- The determination of the proof of any
alcohol shall be made without regard to any added denaturants.
`(3) AGGREGATION RULE- For purposes of the 60,000,000 gallon limitation
under paragraph (1), all members of the same controlled group of corporations
(within the meaning of section 267(f)) and all persons under common
control (within the meaning of section 52(b) but determined by treating
an interest of more than 50 percent as a controlling interest) shall
be treated as 1 person.
`(4) PARTNERSHIP, S CORPORATIONS, AND OTHER PASS-THRU ENTITIES- In
the case of a partnership, trust, S corporation, or other pass-thru
entity, the limitation contained in paragraph (1) shall be applied
at the entity level and at the partner or similar level.
`(5) ALLOCATION- For purposes of this subsection, in the case of a
facility in which more than 1 person has an interest, productive capacity
shall be allocated among such persons in such manner as the Secretary
may prescribe.
`(6) REGULATIONS- The Secretary may prescribe such regulations as
may be necessary to prevent the credit provided for in subsection
(a)(4) from directly or indirectly benefitting any person with a direct
or indirect productive capacity of more than 60,000,000 gallons of
cellulosic biomass alcohol during the taxable year.
`(7) ALLOCATION OF SMALL CELLULOSIC PRODUCER CREDIT TO PATRONS OF
COOPERATIVE- Rules similar to the rules under subsection (g)(6) shall
apply for purposes of this subsection.'.
(d) Alcohol Not Used as a Fuel, etc-
(1) IN GENERAL- Paragraph (3) of section 40(d) is amended by redesignating
subparagraph (D) as subparagraph (E) and by inserting after subparagraph
(C) the following new subparagraph:
`(D) SMALL CELLULOSIC ALCOHOL PRODUCER CREDIT- If--
`(i) any credit is allowed under subsection (a)(4), and
`(ii) any person does not use such fuel for a purpose described
in subsection (b)(6)(C),
then there is hereby imposed on such person a tax equal to the applicable
amount for each gallon of such cellulosic biomass alcohol.'.
(2) CONFORMING AMENDMENTS-
(A) Subparagraph (C) of section 40(d)(3) is amended by striking
`PRODUCER' in the heading and inserting `SMALL ETHANOL PRODUCER'.
(B) Subparagraph (E) of section 40(d)(3), as redesignated by paragraph
(1), is amended by striking `or (C)' and inserting `(C), or (D)'.
(e) Effective Date- The amendments made by this section shall apply
to fuel produced after December 31, 2007.
SEC. 222. EXPANSION OF SPECIAL ALLOWANCE TO CELLULOSIC BIOMASS ALCOHOL
FUEL PLANT PROPERTY.
(a) In General- Paragraph (3) of section 168(l) (relating to special
allowance for cellulosic biomass ethanol plant property) is amended
to read as follows:
`(3) CELLULOSIC BIOMASS ALCOHOL- For purposes of this subsection,
the term `cellulosic biomass alcohol' means any alcohol produced from
any lignocellulosic or hemicellulosic matter that is available on
a renewable or recurring basis.'.
(b) Conforming Amendments-
(1) Subsection (l) of section 168 is amended by striking `cellulosic
biomass ethanol' each place it appears and inserting `cellulosic biomass
alcohol'.
(2) The heading of section 168(l) is amended by striking `Cellulosic
Biomass Ethanol' and inserting `Cellulosic Biomass Alcohol'.
(3) The heading of paragraph (2) of section 168(l) is amended by striking
`CELLULOSIC BIOMASS ETHANOL' and inserting `CELLULOSIC BIOMASS ALCOHOL'.
(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, in taxable years ending after such date.
SEC. 223. EXTENSION OF SMALL ETHANOL PRODUCER CREDIT.
Paragraph (1) of section 40(e) (relating to termination) is amended--
(1) in subparagraph (A), by inserting `(December 31, 2012, in the
case of the credit allowed by reason of subsection (a)(3))' after
`December 31, 2010', and
(2) in subparagraph (B), by inserting `(January 1, 2013, in the case
of the credit allowed by reason of subsection (a)(3))' after `January
1, 2011'.
SEC. 224. CREDIT FOR PRODUCERS OF FOSSIL FREE ALCOHOL.
(a) In General- Subsection (a) of section 40 (relating to alcohol used
as fuel), as amended by this Act, is amended by striking `plus' at the
end of paragraph (3), by striking the period at the end of paragraph
(4) and inserting `, plus', and by adding at the end the following new
paragraph:
`(5) the small fossil free alcohol producer credit.'.
(b) Small Fossil Free Alcohol Producer Credit- Subsection (b) of section
40, as amended by this Act, is amended by adding at the end the following
new paragraph:
`(7) SMALL FOSSIL FREE ALCOHOL PRODUCER CREDIT-
`(A) IN GENERAL- In addition to any other credit allowed under this
section, there shall be allowed as a credit against the tax imposed
by this chapter for the taxable year an amount equal to 25 cents
for each gallon of qualified fossil free alcohol production.
`(B) QUALIFIED FOSSIL FREE ALCOHOL PRODUCTION- For purposes of this
section, the term `qualified fossil free alcohol production' means
alcohol which is produced by an eligible small fossil free alcohol
producer at a fossil free alcohol production facility and which
during the taxable year--
`(i) is sold by the taxpayer to another person--
`(I) for use by such other person in the production of a qualified
alcohol mixture in such other person's trade or business (other
than casual off-farm production),
`(II) for use by such other person as a fuel in a trade or business,
or
`(III) who sells such alcohol at retail to another person and
places such alcohol in the fuel tank of such other person, or
`(ii) is used or sold by the taxpayer for any purpose described
in clause (i).
`(C) ADDITIONAL DISTILLATION EXCLUDED- The qualified fossil free
alcohol production of any taxpayer for any taxable year shall not
include any alcohol which is purchased by the taxpayer and with
respect to which such producer increases the proof of the alcohol
by additional distillation.'.
(c) Eligible Small Fossil Free Alcohol Producer- Section 40, as amended
by this Act, is amended by adding at the end the following new subsection:
`(j) Definitions and Special Rules for Small Fossil Free Alcohol Producer-
For purposes of this section--
`(1) IN GENERAL- The term `eligible small fossil free alcohol producer'
means a person, who at all times during the taxable year, has a productive
capacity for alcohol from all fossil free alcohol production facilities
of the taxpayer which is not in excess of 60,000,000 gallons.
`(2) FOSSIL FREE ALCOHOL PRODUCTION FACILITY- The term `fossil free
alcohol production facility' means any facility at which 90 percent
of the fuel used in the production of alcohol is from biomass (as
defined in section 45K(c)(3)).
`(3) AGGREGATION RULE- For purposes of the 60,000,000 gallon limitation
under paragraph (1), all members of the same controlled group of corporations
(within the meaning of section 267(f)) and all persons under common
control (within the meaning of section 52(b) but determined by treating
an interest of more than 50 percent as a controlling interest) shall
be treated as 1 person.
`(4) PARTNERSHIP, S CORPORATIONS, AND OTHER PASS-THRU ENTITIES- In
the case of a partnership, trust, S corporation, or other pass-thru
entity, the limitation contained in paragraph (1) shall be applied
at the entity level and at the partner or similar level.
`(5) ALLOCATION- For purposes of this subsection, in the case of a
facility in which more than 1 person has an interest, productive capacity
shall be allocated among such persons in such manner as the Secretary
may prescribe.
`(6) REGULATIONS- The Secretary may prescribe such regulations as
may be necessary to prevent the credit provided for in subsection
(a)(5) from directly or indirectly benefitting any person with a direct
or indirect productive capacity of more than 60,000,000 gallons of
alcohol from fossil free alcohol production facilities during the
taxable year.
`(7) ALLOCATION OF SMALL FOSSIL FREE ALCOHOL PRODUCER CREDIT TO PATRONS
OF COOPERATIVE- Rules similar to the rules under subsection (g)(6)
shall apply for purposes of this subsection.'.
(d) Alcohol Not Used as a Fuel, etc-
(1) IN GENERAL- Paragraph (3) of section 40(d), as amended by this
Act, is amended by redesignating subparagraph (E) as subparagraph
(F) and by inserting after subparagraph (D) the following new subparagraph:
`(E) SMALL FOSSIL FREE ALCOHOL PRODUCER CREDIT- If--
`(i) any credit is allowed under subsection (a)(5), and
`(ii) any person does not use such fuel for a purpose described
in subsection (b)(7)(B),
then there is hereby imposed on such person a tax equal to 25 cents
for each gallon of such alcohol.'.
(2) CONFORMING AMENDMENT- Subparagraph (E) of section 40(d)(3), as
redesignated by paragraph (1) and amended by this Act, is amended
by striking `or (D)' and inserting `(C), or (E)'.
(e) Termination- Paragraph (1) of section 40(e), as amended by this
Act, is amended--
(1) in subparagraph (A), by striking `(December 31, 2012, in the case
of the credit allowed by reason of subsection (a)(3))' and inserting
`(December 31, 2012, in the case of the credits allowed by reason
of paragraphs (3) and (5) of subsection (a))', and
(2) in subparagraph (B), by striking `(January 1, 2013, in the case
of the credit allowed by reason of subsection (a)(3))' and inserting
`(January 1, 2013, in the case of the credits allowed by reason of
paragraphs (3) and (5) of subsection (a))'.
(f) Effective Date- The amendments made by this section shall apply
to fuel produced after December 31, 2007.
SEC. 225. MODIFICATION OF ALCOHOL CREDIT.
(a) Income Tax Credit- Subsection (h) of section 40 (relating to reduced
credit for ethanol blenders) is amended by adding at the end the following
new paragraph:
`(3) REDUCED AMOUNT AFTER SALE OF 7,500,000,000 GALLONS-
`(A) IN GENERAL- In the case of any calendar year beginning after
the date described in subparagraph (B), the last row in the table
in paragraph (2) shall be applied by substituting `46 cents' for
`51 cents'.
`(B) DATE DESCRIBED- The date described in this subparagraph is
the first date on which 7,500,000,000 gallons of ethanol (including
cellulosic ethanol) have been produced in or imported into the United
States after the date of the enactment of this paragraph, as certified
by the Secretary, in consultation with the Administrator of the
Environmental Protection Agency.'.
(1) IN GENERAL- Paragraph (2) of section 6426(b) (relating to alcohol
fuel mixture credit) is amended by adding at the end the following
new subparagraph:
`(C) REDUCED AMOUNT AFTER SALE OF 7,500,000,000 GALLONS- In the
case of any alcohol fuel mixture produced in a calendar year beginning
after the date described in section 40(h)(3)(B), subparagraph (A)
shall be applied by substituting `46 cents' for `51 cents'.'.
(2) CONFORMING AMENDMENT- Subparagraph (A) of section 6426(b)(2) is
amended by striking `subparagraph (B)' and inserting `subparagraphs
(B) and (C)'.
(c) Effective Date- The amendments made by this section shall take effect
on the date of the enactment of this Act.
SEC. 226. EXTENSION AND MODIFICATION OF CREDIT FOR BIODIESEL USED
AS FUEL.
(1) INCOME TAX CREDITS FOR BIODIESEL AND RENEWABLE DIESEL AND SMALL
AGRI-BIODIESEL PRODUCER CREDIT- Section 40A(g) (relating to termination)
is amended by striking `December 31, 2008' and inserting `December
31, 2010 (December 31, 2012, in the case of the credit allowed by
reason of subsection (a)(3))'.
(2) EXCISE TAX CREDIT- Section 6426(c)(6) (relating to termination)
is amended by striking `2008' and inserting `2010'.
(3) FUELS NOT USED FOR TAXABLE PURPOSES- Section 6427(e)(5)(B) (relating
to termination) is amended by striking `2008' and inserting `2010'.
(b) Modification of Credit for Renewable Diesel-
(1) IN GENERAL- Section 40A(f) (relating to renewable diesel) is amended
by adding at the end the following new paragraph:
`(4) SPECIAL RULE FOR CO-PROCESSED RENEWABLE DIESEL- In the case of
a taxpayer which produces renewable diesel through the co-processing
of biomass and petroleum at any facility, this subsection shall not
apply to so much of the renewable diesel produced at such facility
and sold or used during the taxable year in a qualified biodiesel
mixture as exceeds 60,000,000 gallons.'.
(c) Modification Relating to Definition of Agri-Biodiesel- Paragraph
(2) of section 40A(d) (relating to agri-biodiesel) is amended by striking
`and mustard seeds' and inserting `mustard seeds, and camelina'.
(d) Effective Dates- The amendments made by this section shall apply
to fuel sold or used after the date of the enactment of this Act.
SEC. 227. EXTENSION AND MODIFICATION OF ALTERNATIVE FUEL CREDIT.
(1) ALTERNATIVE FUEL CREDIT- Paragraph (4) of section 6426(d) (relating
to alternative fuel credit) is amended by striking `September 30,
2009' and inserting `December 31, 2012'.
(2) ALTERNATIVE FUEL MIXTURE CREDIT- Paragraph (3) of section 6426(e)
(relating to alternative fuel mixture credit) is amended by striking
`September 30, 2009' and inserting `December 31, 2012'.
(3) PAYMENTS- Subparagraph (C) of section 6427(e)(5) (relating to
termination) is amended by striking `September 30, 2009' and inserting
`December 31, 2012'.
(1) ALTERNATIVE FUEL TO INCLUDE COMPRESSED OR LIQUIFIED BIOMASS GAS-
Paragraph (2) of section 6426(d) (relating to alternative fuel credit)
is amended by striking `and' at the end of subparagraph (E), by redesignating
subparagraph (F) as subparagraph (G), and by inserting after subparagraph
(E) the following new subparagraph:
`(F) compressed or liquified biomass gas, and'.
(2) CREDIT ALLOWED FOR AVIATION USE OF FUEL- Paragraph (1) of section
6426(d) is amended by inserting `sold by the taxpayer for use as a
fuel in aviation,' after `motorboat,'.
(c) Carbon Capture Requirement for Certain Fuels-
(1) IN GENERAL- Subsection (d) of section 6426, as amended by subsection
(a), is amended by redesignating paragraph (4) as paragraph (5) and
by inserting after paragraph (3) the following new paragraph:
`(4) CARBON CAPTURE REQUIREMENT- The requirements of this paragraph
are met if the fuel is certified, under such procedures as required
by the Secretary, as having been produced at a facility which separates
and sequesters not less than 75 percent of such facility's total carbon
dioxide emissions.'.
(2) CONFORMING AMENDMENT- Subparagraph (E) of section 6426(d)(2) is
amended by inserting `which meets the requirements of paragraph (4)
and which is' after `any liquid fuel'.
(1) IN GENERAL- Except as provided in paragraph (2), the amendments
made by this section shall apply to fuel sold or used after the date
of the enactment o
