S. 3208 - Carbon Reduction Technology Bridge Act of 2008

S 3208

110th CONGRESS
2d Session

S. 3208

To amend the Internal Revenue Code of 1986 to provide tax incentives for clean coal technology, and for other purposes.

IN THE SENATE OF THE UNITED STATES

June 26, 2008

Mr. CONRAD (for himself and Mr. HATCH) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide tax incentives for clean coal technology, 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; FINDINGS.

(a) Short Title- This Act may be cited as the `Carbon Reduction Technology Bridge Act of 2008'.

(b) Findings- The Congress finds the following:

(1) Significantly reducing greenhouse gas emissions from U.S. coal plants must be part of a strategy to address climate change.

(2) Carbon capture and sequestration is the key to continued enjoyment of the energy security and economic benefits associated with the use of the Nation's abundant domestic coal resources for power generation.

(3) Multiple technology demonstrations that increase the efficiency of power plants and thereby reduce carbon dioxide emissions and that demonstrate carbon dioxide capture and sequestration are needed in the near-term as a bridge to a reliable and affordable power system that can achieve future greenhouse gas reduction goals.

SEC. 2. SEVEN-YEAR AMORTIZATION FOR CERTAIN SYSTEMS INSTALLED ON COAL-FIRED ELECTRIC GENERATION UNITS AFTER 2007.

(a) In General- Subsection (d) of section 169 of the Internal Revenue Code of 1986 (relating to amortization of pollution control facilities) is amended by adding at the end the following new paragraph:

`(6) SPECIAL RULE FOR SYSTEMS INSTALLED ON COAL-FIRED ELECTRIC GENERATION UNITS AFTER 2007-

`(A) IN GENERAL- Any mechanical or electronic system--

`(i) which is installed on a coal-fired electric generation unit after December 31, 2007, and

`(ii) which reduces carbon dioxide emissions per net megawatt hour of electricity generation by 1 or more of the means described in subparagraph (B) or any other means,

shall be treated for purposes of this section as an identifiable treatment facility which abates or controls atmospheric pollution or contamination by removing, altering, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. Paragraph (1)(C) of this subsection, and subsection (e), shall not apply to any system which is so treated.

`(B) MEANS FOR REDUCING EMISSIONS- The means described in this subparagraph are--

`(i) optimizing combustion,

`(ii) optimizing sootblowing and heat transfer,

`(iii) upgrading steam temperature control capabilities,

`(iv) reducing exit gas temperatures (air heater modifications),

`(v) predrying low rank coals using power plant waste heat,

`(vi) modifying steam turbines or change the steam path/blading,

`(vii) replacing single speed motors with variable speed drives for fans and pumps, and

`(viii) improving operational controls, including neural networks.

`(C) SPECIAL RULE FOR MINIMUM TAX- Section 56(a)(5) shall not apply to property to which this paragraph applies.'.

(b) Effective Date- The amendment made by this section shall apply to property placed in service after December 31, 2007.

SEC. 3. CREDIT FOR CLOSED-LOOP BIOMASS CO-FIRED WITH COAL.

(a) In General- Subparagraph (A) of section 45(d)(2) of the Internal Revenue Code of 1986 (relating to closed-loop biomass facility) is amended by striking the period at the end of clause (ii) and inserting `, or' and by adding after clause (ii) the following new clause:

`(iii) owned by the taxpayer which before January 1, 2014, is originally placed in service as--

`(I) a facility to use closed-loop biomass to co-fire (or, in the case of an integrated gasification combined cycle facility, co-process) with coal, or

`(II) a coal-fired facility which is modified to use closed-loop biomass to co-fire (or, in the case of an integrated gasification combined cycle facility, co-process) with coal.'.

(b) Conforming Amendment- Subparagraph (B) of section 45(d)(2) of such Code is amended by striking `subparagraph (A)(ii)' and inserting `clause (ii) or (iii) of subparagraph (A)'.

SEC. 4. CREDIT FOR INVESTMENT IN QUALIFIED NEW CLEAN COAL ELECTRIC GENERATION UNITS.

(a) In General- Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to rules for computing investment credit) is amended by inserting after section 48B the following new section:

`SEC. 48C. QUALIFYING NEW CLEAN COAL ELECTRIC GENERATION UNIT CREDIT.

`(a) General Rule- For purposes of section 46, the qualifying new clean coal electric generation credit for any taxable year is an amount equal to the applicable percentage of the qualified investment for such taxable year.

`(b) Applicable Percentage- For purposes of subsection (a)--

`(1) IN GENERAL- Except as provided in paragraph (2), the applicable percentage is the percentage determined under the following table using the design net heat rate of the qualified clean coal electric generation unit.

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`Design Net Heat Rate in Btus/kilowatt hour   Percentage

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More than 8,322 but not more than 8,530 (40%)         10

More than 8,120 but not more than 8,322 (41%)         10

More than 7,940 but not more than 8,120 (42%)         20

More than 7,760 but not more than 7,940 (43%)         26

More than 7,580 but not more than 7,760 (44%)         28

Not more than 7,580 (45%)                             30

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`(2) ELECTION TO USE ALTERNATIVE METHOD FOR DETERMINING PERCENTAGE- In the case of a qualified clean coal electric generation unit which is designed to emit carbon dioxide at an average annual rate of not more than 800 pounds per net megawatt hour of electricity generation, in lieu of applying paragraph (1), the taxpayer may elect an applicable percentage of 30 percent.

`(c) Qualified Investment-

`(1) IN GENERAL- For purposes of subsection (a), the qualified investment for any taxable year is the basis of property placed in service by the taxpayer during such taxable year as part of, or in connection with, a qualified clean coal electric generation unit--

`(A)(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, and

`(B) with respect to which depreciation (or amortization in lieu of depreciation) is allowable.

`(2) SPECIAL RULE FOR CERTAIN SUBSIDIZED PROPERTY- Rules similar to section 48(a)(4) shall apply for purposes of this section.

`(3) CERTAIN QUALIFIED PROGRESS EXPENDITURES 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 enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.

`(d) Aggregate Credits-

`(1) IN GENERAL- No credit shall be allowed under this section with respect to any qualified clean coal electric generation unit unless such unit is certified by the Secretary under subsection (f).

`(2) LIMITATION ON UNITS CERTIFIED- The Secretary may certify under subsection (f) in the aggregate no more than 6,000 megawatts of electric generation units.

`(e) Definitions- For purposes of this section--

`(1) QUALIFIED CLEAN COAL ELECTRIC GENERATION UNIT- The term `qualified clean coal electric generation unit' means a coal-based electric generation unit if--

`(A) the unit achieves a design net heat rate of not more than 8,530 Btu/Kw-hr,

`(B) the unit is designed to meet the performance requirements specified in the table contained in section 48A(f)(1)(B),

`(C) the unit includes--

`(i) carbon dioxide capture, transport, and storage property (as defined in section 48D(c)) for carbon dioxide produced by such unit, and

`(ii) 1 or more sites for the storage of such carbon dioxide,

`(D) the unit is designed to capture, and store, at least--

`(i) 500,000 metric tons per year of carbon dioxide if such unit is among the first 1,000 megawatts of electric generation units certified by the Secretary under subsection (f), and

`(ii) 1,000,000 metric tons per year of carbon dioxide if such unit is among the next 3,000 megawatts of electric generation units certified by the Secretary under subsection (f), and

`(iii) 2,000,000 metric tons per year of carbon dioxide for any other unit,

`(E) the fuel input for the unit, when completed, is at least 75 percent coal, and

`(F) the unit is located in the United States.

`(2) DESIGN NET HEAT RATE- Design net heat rate shall be determined as provided in section 48A(f)(2) and before any energy loss resulting from the operation of the carbon dioxide capture process.

`(3) COAL- The term `coal' means bituminous coal, subbituminous coal, and lignite.

`(4) ELECTRIC GENERATION UNIT- The term `electric generation unit' means any unit at least 50 percent of the total annual net output of which is electrical power, including an otherwise eligible unit which is used in an industrial application.

`(f) Certification-

`(1) CERTIFICATION PROCESS- The Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, shall establish a certification process to determine if a coal-based electric generation unit meets all criteria and other requirements to be recognized as a qualified clean coal electric generation unit. The certification process shall also be designed to determine the efficiency (and, in the case of an election under subsection (b)(2), the carbon dioxide emission rate) of such unit to establish the amount of the credit under subsection (a).

`(2) PRIORITY FOR UNITS EXCEEDING CAPTURE AND STORAGE REQUIREMENTS- In determining which qualified clean coal generation units to certify under subsection (f), the Secretary shall give high priority to those units which exceed the carbon dioxide and storage requirements provided in subsection (e)(1)(D).

`(3) FEEDSTOCK REQUIREMENTS- After the date of publication by the Secretary of the final certification process referred to in subsection (d), the Secretary shall allocate the limitation in subsection (d)(2) in equal amounts among--

`(A) units using bituminous coal as a primary feedstock,

`(B) units using subbituminous coal as a primary feedstock, and

`(C) units using lignite as a primary feedstock.

`(4) REDISTRIBUTION- The Secretary may reallocate credits if the Secretary determines that there is an insufficient quantity of qualifying applications for certification, pending at the time of review, to comply with the feedstock requirements of paragraph (3). The Secretary may conduct an additional program for applications for certification and reallocate available credits without regard to the feedstock requirement which was not satisfied as a result of insufficient applications for certification.

`(5) REQUIREMENTS FOR APPLICATIONS FOR CERTIFICATION- An application for certification shall contain such information as the Secretary may require in order to make a determination to accept or reject the application and establish applicable credit entitlement. Any information contained in the application shall be protected as provided in section 552(b)(4) of title 5, United States Code.

`(g) Denial of Double Benefit- No credit shall be allowed under this section for any property for which credit is allowed under sections 48A, 48B, or 48D.'.

(b) Conforming Amendments-

(1) Section 46 of such Code (relating to amount of credit) is amended by striking `and' at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting `, and', and by adding at the end the following new paragraph:

`(5) the qualifying new clean coal electric generation credit.'.

(2) Subparagraph (C) of section 49(a)(1) of such Code 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 after clause (iv) the following new clause:

`(v) the basis of any property which is part of a qualifying clean coal electric generation unit under section 48C.'.

(3) The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 48B the following new item:

`Sec. 48C. Qualifying new clean coal electric generation unit credit.'.

(c) Effective Date- The amendments made by this section shall apply to periods after the date of the enactment of this Act under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

SEC. 5. TAX CREDIT FOR INSTALLATION OF CARBON DIOXIDE CAPTURE, TRANSPORT, AND STORAGE EQUIPMENT.

`SEC. 48D. QUALIFYING CARBON DIOXIDE CAPTURE, TRANSPORT, AND STORAGE EQUIPMENT CREDIT.

`(a) General Rule- For purposes of section 46, the qualifying carbon dioxide equipment credit for any taxable year is an amount equal to 30 percent of the qualified investment for such taxable year.

`(b) Qualified Investment-

`(1) IN GENERAL- For purposes of subsection (a), the qualified investment for any taxable year is the basis eligible property which is placed in service by the taxpayer during such taxable year.

`(2) SPECIAL RULE FOR CERTAIN SUBSIDIZED PROPERTY- Rules similar to section 48(a)(4) shall apply for purposes of this section.

`(c) Definitions- For purposes of this section--

`(1) ELIGIBLE PROPERTY- The term `eligible property' means carbon dioxide capture, transport, and storage property--

`(A) which is part of (or used in connection with) a qualified coal-fired electric generation unit of the taxpayer,

`(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, and

`(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable.

`(2) CARBON DIOXIDE CAPTURE, TRANSPORT, AND STORAGE PROPERTY- The term `carbon dioxide capture, transport, and storage property' means equipment to capture, transport, or store carbon dioxide produced at such unit, including--

`(A) equipment to separate and pressurize carbon dioxide for transport (including equipment to operate such equipment), and

`(B) equipment to transport, inject, and monitor such carbon dioxide.

`(3) QUALIFIED COAL-FIRED ELECTRIC GENERATION UNIT- The term `qualified coal-fired electric generation unit' means any coal-fired electric generation unit--

`(A) which, after installation of eligible property, is designed--

`(i) to emit carbon dioxide at an average annual rate of less than 1,100 pounds of carbon dioxide per net megawatt hour of electricity generation, or

`(ii) to capture and store in a secure geologic formation at least 500,000 metric tons of carbon dioxide per year,

`(B) the fuel input for which is at least 75 percent coal, and

`(C) which is located in the United States.

`(4) COAL- The term `coal' means bituminous coal, subbituminous coal, and lignite.

`(d) Aggregate Credits-

`(1) IN GENERAL- No credit shall be allowed under this section for property which is part of (or used in connection with) a qualified coal-fired electric generation unit unless such unit is certified by the Secretary under subsection (e).

`(2) LIMITATION ON UNITS CERTIFIED- The Secretary may certify under subsection (e) in the aggregate no more than 9,000 megawatts of electric generation units.

`(e) Certification-

`(1) CERTIFICATION PROCESS- The Secretary shall establish a certification process for purposes of this section.

`(2) FEEDSTOCK REQUIREMENTS- During the first 24 months after the date of publication by the Secretary of the final certification process referred to in paragraph (1), the Secretary shall allocate the limitation in subsection (d)(2) in equal amounts among--

`(A) units using bituminous coal as a primary feedstock,

`(B) units using subbituminous coal as a primary feedstock, and

`(C) units using lignite as a primary feedstock.

`(3) REDISTRIBUTION- The Secretary may reallocate credits if the Secretary determines that there is an insufficient quantity of qualifying applications for certification, pending at the time of review, to comply with the feedstock requirements of paragraph (2). The Secretary may conduct an additional program for applications for certification and reallocate available credits without regard to the feedstock requirement which was not satisfied as a result of insufficient applications for certification.

`(4) REQUIREMENTS FOR APPLICATIONS FOR CERTIFICATION- An application for certification shall contain such information as the Secretary may require in order to establish credit entitlement. Any information contained in an application shall be protected as provided in section 552(b)(4) of title 5, United States Code.'.

(b) Conforming Amendments-

(1) Section 46 of such Code (relating to amount of credit), as amended by this Act, is amended by striking `and' at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting `, and', and by adding at the end the following new paragraph:

`(6) the qualifying carbon dioxide equipment credit.'.

(2) Subparagraph (C) of section 49(a)(1) of such Code, as amended by this Act, is amended by striking `and' at the end of clause (iv), by striking the period at the end of clause (v) and inserting `, and', and by adding after clause (v) the following new clause:

`(vi) the basis of any eligible property (as defined in section 48D(c)(1)).'.

(3) The table of sections for such subpart E is amended by inserting after the item relating to section 48C the following new item:

`Sec. 48D. Qualifying carbon dioxide capture, transport, and storage equipment credit.'.

SEC. 6. TAX CREDIT FOR CARBON DIOXIDE SEQUESTRATION.

(a) In General- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

`SEC. 45Q. CREDIT FOR CARBON DIOXIDE SEQUESTRATION.

`(a) General Rule- For purposes of section 38, the carbon dioxide sequestration credit for any taxable year is an amount equal to the sum of--

`(1) $30 per metric ton of qualified carbon dioxide which is stored by the taxpayer in secure geological storage,

`(2) $20 per metric ton of qualified carbon dioxide which is compressed, and transferred, by the taxpayer to the United States at a facility under such rules and conditions as the Federal Government shall prescribe not later than 18 months prior to any transfer, and

`(3) $15 per metric ton of qualified carbon dioxide which is used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project.

`(b) Qualified Carbon Dioxide- For purposes of this section, the term `qualified carbon dioxide' means carbon dioxide--

`(1) which is captured from a qualified electric generation unit during the 10-year period beginning on the date that carbon dioxide capture equipment was originally placed in service at such unit,

`(2) which would otherwise be released into the atmosphere, and

`(3) which is measured at the source of capture and verified at the point of disposal or injection.

`(c) Qualified Electric Generation Unit- For purposes of this section, the term `qualified electric generation unit' means any electric generation unit (as defined in section 48A(c)(6))--

`(1) which is owned by the taxpayer,

`(2) at which the fuel input is at least 75 percent coal,

`(3) at which carbon dioxide capture equipment is placed in service,

`(4) which--

`(A) captures not less than 500,000 metric tons of carbon dioxide during the taxable year, or

`(B) is designed to emit carbon dioxide at an average annual rate of less than 1,100 pounds of carbon dioxide per net megawatt hour of electricity generated during the taxable year, and

`(5) which is located in--

`(A) the United States (within the meaning of section 638(1)), or

`(B) a possession of the United States (within the meaning of section 638(2)).

`(d) Aggregate Credits-

`(1) IN GENERAL- No credit shall be allowed under this section for carbon dioxide captured from a qualified facility unless such facility is certified by the Secretary for purposes of this section. The owner of a qualified facility may request to be certified for purposes of this section by submitted a request to the Secretary containing such information as the Secretary may require.

`(2) LIMITATION ON UNITS CERTIFIED- The Secretary may certify in the aggregate no more than 9,000 megawatts of electric generation units.

`(e) Certification-

`(1) CERTIFICATION PROCESS- The Secretary shall establish a certification process for purposes of this section.

`(A) units using bituminous coal as a primary feedstock,

`(B) units using subbituminous coal as a primary feedstock, and

`(C) units using lignite as a primary feedstock.

`(4) REQUIREMENTS FOR APPLICATIONS FOR CERTIFICATION- An application for certification shall contain such information as the Secretary may require in order to make a determination to accept or reject the application and establish applicable credit entitlement. Any information contained in the application shall be protected as provided in section 552(b)(4) of title 5, United States Code.

`(f) Special Rules and Other Definitions- For purposes of this section--

`(1) SECURE GEOLOGICAL STORAGE- The Secretary, in consultation with the Administrator of the Environmental Protection Agency, shall establish regulations for determining adequate security measures for the geological storage of carbon dioxide under subsection (a)(1)(B). Such regulation shall include storage within deep saline formations and umninable coal seams under such conditions as the Secretary may determine under such regulations.

`(2) RULES RELATING TO USE AS TERTIARY INJECTANT-

`(A) TERTIARY INJECTANT- The term `tertiary injectant' has the same meaning as when used within section 193(b)(1).

`(B) QUALIFIED ENHANCED OIL OR NATURAL GAS RECOVERY PROJECT- The term `qualified enhanced oil or natural gas recovery project' has the meaning given the term `qualified enhanced oil recovery project' by section 43(c)(2), determined by substituting `crude oil or natural gas' for `crude oil' in subparagraph (A)(i) thereof.

`(C) RECYCLED CARBON DIOXIDE- No credit shall be allowed under this section for carbon dioxide that is recaptured, recycled, and reinjected as part of the enhanced oil and natural gas recovery process.

`(3) CREDIT ATTRIBUTABLE TO TAXPAYER- Any credit under this section shall be attributable to the person that captures and physically or contractually ensures the disposal of or the use as a tertiary injectant of the qualified carbon dioxide, except to the extent provided in regulations prescribed by the Secretary.

`(4) RECAPTURE- The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any qualified carbon dioxide which ceases to be captured, disposed of, or used as a tertiary injectant in a manner consistent with the requirements of this section.

`(5) INFLATION ADJUSTMENT- In the case of any taxable year beginning in a calendar year after 2008, there shall be substituted for each dollar amount contained in subsection (a) an amount equal to the product of--

`(A) such dollar amount, multiplied by

`(B) the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting `2008' for `1990'.

`(6) COAL- The term `coal' means bituminous coal, subbituminous coal, and lignite.'.

(b) Conforming Amendment- Section 38(b) of such Code is amended by striking `plus' at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting `, plus', and by adding at the end of following new paragraph:

`(34) the carbon dioxide sequestration credit determined under section 45Q(a).'.

(c) Clerical Amendment- The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 45Q. Credit for carbon dioxide sequestration.'.

(d) Effective Date- The amendments made by this section shall apply carbon dioxide captured after the date of the enactment of this Act.

SEC. 7. CLEAN ENERGY COAL BONDS.

(a) In General- Subpart I of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to qualified tax credit bonds) is amended by adding at the end the following new section:

`SEC. 54C. CLEAN ENERGY COAL BONDS.

`(a) Clean Energy Coal Bond- For purposes of this subchapter--

`(1) IN GENERAL- The term `clean energy coal bond' means any bond issued as part of an issue if--

`(A) the bond is issued by a qualified issuer pursuant to an allocation by the Secretary to such issuer of a portion of the national clean energy coal bond limitation under subsection (b)(2);

`(B) 100 percent of the available project proceeds from the sale of such issue are to be used for capital expenditures incurred by qualified borrowers for 1 or more qualified projects;

`(C) the qualified issuer designates such bond for purposes of this section and the bond is in registered form; and

`(D) in lieu of the requirements of section 54A(d)(2), the issue meets the requirements of subsection (c).

`(2) QUALIFIED PROJECT; SPECIAL USE RULES-

`(A) IN GENERAL- The term `qualified project' means a qualified clean coal project (as defined in subsection (f)(1)) placed in service by a qualified borrower.

`(B) REFINANCING RULES- For purposes of paragraph (1)(B), a qualified project may be refinanced with proceeds of a clean energy coal bond only if the indebtedness being refinanced (including any obligation directly or indirectly refinanced by such indebtedness) was originally incurred by a qualified borrower after the date of the enactment of this section.

`(C) REIMBURSEMENT- For purposes of paragraph (1)(B), a clean energy coal bond may be issued to reimburse a qualified borrower for amounts paid after the date of the enactment of this section with respect to a qualified project, but only if--

`(i) prior to the payment of the original expenditure, the qualified borrower declared its intent to reimburse such expenditure with the proceeds of a clean energy coal bond;

`(ii) not later than 60 days after payment of the original expenditure, the qualified issuer adopts an official intent to reimburse the original expenditure with such proceeds; and

`(iii) reimbursement is not made later than 18 months after the date the original expenditure is paid or the date the project is placed in service or abandoned, but in no event more than 3 years after the original expenditure is paid.

`(D) TREATMENT OF CHANGES IN USE- For purposes of paragraph (1)(B), the proceeds of an issue shall not be treated as used for a qualified project to the extent that a qualified borrower takes any action within its control which causes such proceeds not to be used for a qualified project. The Secretary shall prescribe regulations specifying remedial actions that may be taken (including conditions to taking such remedial actions) to prevent an action described in the preceding sentence from causing a bond to fail to be a clean energy coal bond.

`(b) Limitation on Amount of Bonds Designated-

`(1) NATIONAL LIMITATION- There is a national clean energy coal bond limitation of $5,000,000,000.

`(2) ALLOCATION BY SECRETARY- The Secretary shall allocate the amount described in paragraph (1) among qualified projects in such manner as the Secretary determines appropriate.

`(c) Special Rules Relating to Expenditures-

`(1) IN GENERAL- An issue shall be treated as meeting the requirements of this subsection if, as of the date of issuance, the qualified issuer reasonably expects--

`(A) 100 percent or more of the available project proceeds from the sale of the issue are to be spent for 1 or more qualified projects within the 5-year period beginning on the date of issuance of the clean energy bond;

`(B) a binding commitment with a third party to spend at least 10 percent of such available project proceeds from the sale of the issue will be incurred within the 6-month period beginning on the date of issuance of the clean energy bond or, in the case of a clean energy bond the available project proceeds of which are to be loaned to 2 or more qualified borrowers, such binding commitment will be incurred within the 6-month period beginning on the date of the loan of such proceeds to a qualified borrower; and

`(C) such projects will be completed with due diligence and the available project proceeds from the sale of the issue will be spent with due diligence.

`(2) EXTENSION OF PERIOD- Upon submission of a request prior to the expiration of the period described in paragraph (1)(A), the Secretary may extend such period if the qualified issuer establishes that the failure to satisfy the 5-year requirement is due to reasonable cause and the related projects will continue to proceed with due diligence.

`(3) FAILURE TO SPEND REQUIRED AMOUNT OF BOND PROCEEDS WITHIN 5 YEARS- To the extent that less than 100 percent of the available project proceeds of such issue are expended by the close of the 5-year period beginning on the date of issuance (or if an extension has been obtained under paragraph (2), by the close of the extended period), the qualified issuer shall redeem all of the nonqualified bonds within 90 days after the end of such period. For purposes of this paragraph, the amount of the nonqualified bonds required to be redeemed shall be determined in the same manner as under section 142.

`(d) Cooperative Electric Company; Qualified Energy Tax Credit Bond Lender; Governmental Body; Qualified Borrower- For purposes of this section--

`(1) COOPERATIVE ELECTRIC COMPANY- The term `cooperative electric company' means a mutual or cooperative electric company described in section 501(c)(12) or section 1381(a)(2)(C), or a not-for-profit electric utility which has received a loan or loan guarantee under the Rural Electrification Act.

`(2) CLEAN ENERGY BOND LENDER- The term `clean energy bond lender' means a lender which is a cooperative which is owned by, or has outstanding loans to, 100 or more cooperative electric companies and is in existence on February 1, 2002, and shall include any affiliated entity which is controlled by such lender.

`(3) PUBLIC POWER ENTITY- The term `public power entity' means a State utility with a service obligation, as such terms are defined in section 217 of the Federal Power Act (as in effect on the date of enactment of this paragraph).

`(4) QUALIFIED ISSUER- The term `qualified issuer' means--

`(A) a clean energy bond lender;

`(B) a cooperative electric company; or

`(C) a public power entity.

`(5) QUALIFIED BORROWER- The term `qualified borrower' means--

`(A) a mutual or cooperative electric company described in section 501(c)(12) or 1381(a)(2)(C); or

`(B) a public power entity.

`(e) Special Rules Relating to Pool Bonds- No portion of a pooled financing bond may be allocable to any loan unless the borrower has entered into a written loan commitment for such portion prior to the issue date of such issue.

`(f) Other Definitions and Special Rules- For purposes of this section--

`(1) QUALIFIED CLEAN COAL PROJECT- For purposes of this section, the term `qualified clean coal project' means--

`(A) an atmospheric pollution control facility (within the meaning of section 169(d)(6));

`(B) a closed-loop biomass facility (within the meaning of section 45(d)(2));

`(C) a qualified new clean coal electric generation unit (within the meaning of section 48C(d)(1));

`(D) qualifying carbon dioxide equipment described in section 48D(c)(1); or

`(E) a qualified facility (within the meaning of section 45Q(c)).

`(2) POOLED FINANCING BOND- The term `pooled financing bond' shall have the meaning given such term by section 149(f)(4)(A).

`(g) Termination- This section shall not apply with respect to any bond issued after December 31, 2018.'.

(b) Conforming Amendments-

(1) Paragraph (1) of section 54A(d) of the Internal Revenue Code of 1986 is amended to read as follows:

`(1) QUALIFIED TAX CREDIT BOND- The term `qualified tax credit bond' means--

`(A) a qualified forestry conservation bond, or

`(B) a clean energy coal bond,

which is part of an issue that meets requirements of paragraphs (2), (3), (4), (5), and (6).'.

(2) Subparagraph (C) of section 54A(d)(2) of such Code is amended to read as follows:

`(C) QUALIFIED PURPOSE- For purposes of this paragraph, the term `qualified purpose' means--

`(i) in the case of a qualified forestry conservation bond, a purpose specified in section 54B(e), and

`(ii) in the case of a clean energy coal bond, a purpose specified in section 54C(f)(1).'.

(c) Clerical Amendment- The table of sections for subpart I of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

`Sec. 54C. Clean energy coal bonds.'.

(d) Effective Date- The amendments made by this section shall apply to bonds issued after December 31, 2008.

SEC. 8. CERTAIN INCOME AND GAINS RELATING TO INDUSTRIAL SOURCE CARBON DIOXIDE TREATED AS QUALIFYING INCOME FOR PUBLICLY TRADED PARTNERSHIPS.

(a) In General- Subparagraph (E) of section 7704(d)(1) of the Internal Revenue Code of 1986 (defining qualifying income) is amended--

(1) by striking `or the marketing' and inserting `the marketing', and

(2) by inserting `or industrial source carbon dioxide' after `timber)'.

(b) Effective Date- The amendments made by this section shall take effect on the date of the enactment of this Act, in taxable years ending after such date.

END