S 60 IS

To authorize Department of Energy programs to develop and implement an accelerated research and development program for advanced clean coal technologies for use in coal-based electricity generating facilities and to amend the Internal Revenue Code of 1986 to provide financial incentives to encourage the retrofitting, repowering, or replacement of coal-based electricity generating facilities to protect the environment and improve efficiency and encourage the early commercial application of advanced clean coal technologies, so as to allow coal to help meet the growing need of the United States for the generation of reliable and affordable electricity.

January 22, 2001

Mr. BYRD introduced the following bill; which was read twice and referred to the Committee on Finance

To authorize Department of Energy programs to develop and implement an accelerated research and development program for advanced clean coal technologies for use in coal-based electricity generating facilities and to amend the Internal Revenue Code of 1986 to provide financial incentives to encourage the retrofitting, repowering, or replacement of coal-based electricity generating facilities to protect the environment and improve efficiency and encourage the early commercial application of advanced clean coal technologies, so as to allow coal to help meet the growing need of the United States for the generation of reliable and affordable electricity.

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 `National Electricity and Environmental Technology Act'.

(b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings and purposes.

TITLE I--ACCELERATED TECHNOLOGY RESEARCH AND DEVELOPMENT PROGRAM FOR ADVANCED CLEAN COAL TECHNOLOGY FOR COAL-BASED ELECTRICITY GENERATING FACILITIES

Sec. 101. Purpose.

Sec. 102. Definitions.

Subtitle A--National Coal-Based Technology Development and Applications Program

Sec. 111. Cost and performance goals.

Sec. 112. Study.

Sec. 113. Technology research and development program.

Sec. 114. Authorization of appropriations.

Subtitle B--Power Plant Improvement Initiative

Sec. 121. Power plant improvement initiative program.

Sec. 122. Financial assistance.

Sec. 123. Funding.

TITLE II--CREDIT FOR EMISSION REDUCTIONS AND EFFICIENCY IMPROVEMENTS IN EXISTING COAL-BASED ELECTRICITY GENERATION FACILITIES

Sec. 201. Credit for investment in qualifying clean coal technology.

Sec. 202. Credit for production from a qualifying clean coal technology unit.

TITLE III--INCENTIVES FOR EARLY COMMERCIAL APPLICATIONS OF ADVANCED CLEAN COAL TECHNOLOGIES

Sec. 301. Credit for investment in qualifying advanced clean coal technology.

Sec. 302. Credit for production from qualifying advanced clean coal technology.

Sec. 303. Risk pool for qualifying advanced clean coal technology.

TITLE IV--TREATMENT OF CERTAIN TAX-EXEMPT ENTITIES

Sec. 401. Offset credits for electric cooperatives or publicly owned electric utilities.

Sec. 402. Offset of certain annual payment obligations in lieu of qualifying clean coal technology credits.

SEC. 2. FINDINGS AND PURPOSES.

(a) FINDINGS- Congress finds that--

(1) reliable, affordable, increasingly clean electricity will continue to power the growing United States economy;

(2) an increasing use of electrotechnologies, the desire for continuous environmental improvement, a more competitive electricity market, and concerns about rising energy prices add importance to the need for reliable, affordable, increasingly clean electricity;

(3) coal, which, as of the date of enactment of this Act, accounts for more than 1/2 of all electricity generated in the United States, is the most abundant fossil energy resource of the United States;

(4) coal comprises more than 85 percent of all fossil resources in the United States and exists in quantities sufficient to supply the United States for 250 years at current usage rates;

(5) investments in electricity generating facility emissions control technology over the past 30 years have reduced the aggregate emissions of pollutants from coal-based generating facilities by 21 percent, even as coal use for electricity generation has nearly tripled;

(6) continuous improvement in efficiency and environmental performance from electricity generating facilities would allow continued use of coal and preserve less-abundant energy resources for other energy uses;

(7) new technologies for converting coal into electricity can effectively eliminate health-threatening emissions and improve efficiency by as much as 50 percent, but initial commercial deployment of new coal generation technologies entails significant risk that generators may be unable to accept in a newly competitive electricity market; and

(8) continued environmental improvement in coal-based generation through continued research, development, and demonstration toward an ultimate goal of near-zero emissions is important and desirable.

(b) PURPOSES- The purposes of this Act are--

(1) to authorize Department of Energy programs to develop and implement an accelerated research and development program for advanced clean coal technologies for use in coal-based electricity generating facilities; and

(2) to amend the Internal Revenue Code of 1986--

(A) to provide financial incentives to encourage the retrofitting, repowering, or replacement of coal-based electricity generating facilities to protect the environment and improve efficiency;

(B) to encourage the early commercial application of advanced clean coal technologies; and

(C) to develop technologies that provide flexibility in obtaining environmental objectives at the lowest possible cost in order to provide electricity to the consumer at the lowest possible cost;

so as to allow coal to help meet the growing need of the United States for the generation of clean, reliable, and affordable electricity.

TITLE I--ACCELERATED TECHNOLOGY RESEARCH AND DEVELOPMENT PROGRAM FOR ADVANCED CLEAN COAL TECHNOLOGY FOR COAL-BASED ELECTRICITY GENERATING FACILITIES

SEC. 101. PURPOSE.

The purpose of this title is to direct the Secretary--

(1) to establish a coal-based technology development program designed to achieve cost and performance goals;

(2) to carry out a study to identify technologies that may be capable of achieving the cost and performance goals and for other purposes; and

(3) to implement a research, development, and demonstration program to develop and demonstrate in commercial-scale applications advanced clean coal technologies for coal-fired generating units constructed before the date of enactment of this Act.

SEC. 102. DEFINITIONS.

In this title:

(1) COST AND PERFORMANCE GOALS- The term `cost and performance goals' means the cost and performance goals established under section 111.

(2) SECRETARY- The term `Secretary' means the Secretary of Energy.

Subtitle A--National Coal-Based Technology Development and Applications Program

SEC. 111. COST AND PERFORMANCE GOALS.

(a) IN GENERAL- The Secretary shall perform an assessment that identifies costs and associated performance of technologies that would permit the continued cost-competitive use of coal for electricity generation, as chemical feedstocks, and as transportation fuel in 2007, 2015, and the years after 2020.

(b) CONSULTATION- In establishing the cost and performance goals, the Secretary shall consult with representatives of--

(1) the United States coal industry;

(2) State coal development agencies;

(3) the electric utility industry;

(4) railroads and other transportation industries;

(5) manufacturers of equipment using advanced coal technologies;

(6) organizations representing workers; and

(7) organizations formed to--

(A) further the goals of environmental protection;

(B) promote the use of coal; or

(C) promote the development and use of advanced coal technologies.

(c) TIMING- The Secretary shall--

(1) not later than 120 days after the date of enactment of this Act, issue a set of draft cost and performance goals for public comment; and

(2) not later than 180 days after the date of enactment of this Act, after taking into consideration any public comments received, submit to Congress the final cost and performance goals.

SEC. 112. STUDY.

(a) IN GENERAL- Not later than 1 year after the date of enactment of this Act, the Secretary, in cooperation with the Secretary of the Interior and the Administrator of the Environmental Protection Agency, shall conduct a study to--

(1) identify technologies capable of achieving the cost and performance goals;

(2) assess the costs that would be incurred by, and the period of time that would be required for, the development and demonstration of the cost and performance goals; and

(3) develop recommendations for technology development programs, which the Department of Energy could carry out in cooperation with industry, to develop and demonstrate the cost and performance goals.

(b) COOPERATION- In carrying out this section, the Secretary shall give due weight to the expert advice of representatives of the entities described in section 111(b).

SEC. 113. TECHNOLOGY RESEARCH AND DEVELOPMENT PROGRAM.

(a) IN GENERAL- The Secretary shall carry out a program of research on and development, demonstration, and commercial application of coal-based technologies under--

(1) this Act;

(2) the Federal Nonnuclear Energy Research and Development Act of 1974 (42 U.S.C. 5901 et seq.);

(3) the Energy Reorganization Act of 1974 (42 U.S.C. 5801 et seq.); and

(4) title XVI of the Energy Policy Act of 1992 (42 U.S.C. 13381 et seq.).

(b) CONDITIONS- The research, development, demonstration, and commercial application programs identified in section 112(a) shall be designed to achieve the cost and performance goals.

(c) REPORT- Not later than 18 months after the date of enactment of this Act, the Secretary shall submit to the President and Congress a report containing--

(1) a description of the programs that, as of the date of the report, are in effect or are to be carried out by the Department of Energy to support technologies that are designed to achieve the cost and performance goals; and

(2) recommendations for additional authorities required to achieve the cost and performance goals.

SEC. 114. AUTHORIZATION OF APPROPRIATIONS.

(a) IN GENERAL- There is authorized to be appropriated to carry out this subtitle $100,000,000 for each of fiscal years 2002 through 2012, to remain available until expended.

(b) CONDITIONS OF AUTHORIZATION- The authorization of appropriations under subsection (a)--

(1) shall be in addition to authorizations of appropriations in effect on the date of enactment of this Act; and

(2) shall not be a cap on Department of Energy fossil energy research and development and clean coal technology appropriations.

Subtitle B--Power Plant Improvement Initiative

SEC. 121. POWER PLANT IMPROVEMENT INITIATIVE PROGRAM.

(a) IN GENERAL- The Secretary shall carry out a power plant improvement initiative program that will demonstrate commercial applications of advanced coal-based technologies applicable to new or existing power plants, including co-production plants, which must advance the efficiency, environmental performance, and cost competitiveness well beyond that which is in operation or has been demonstrated on the date of enactment of this Act.

(b) PLAN- Not later than 120 days after the date of enactment of this Act, the Secretary shall submit to Congress a plan to carry out subsection (a) that includes a description of--

(1) the program elements and management structure to be used;

(2) the technical milestones to be achieved with respect to each of the advanced coal-based technologies included in the plan; and

(3) the demonstration activities proposed to be conducted at new or existing coal-based electric generation units having at least 50 megawatts nameplate rating, including improvements to allow the units to achieve 1 or more of the following:

(A) An overall design efficiency improvement of not less than 3 percent as compared with the efficiency of the unit as operated on the date of enactment of this Act and before any retrofit, repowering, replacement, or installation.

(B) A significant improvement in the environmental performance related to the control of sulfur dioxide, nitrogen oxide, and mercury in a manner that is different and well below the cost of technologies that are in operation or have been demonstrated on the date of enactment of this Act.

(C) A means of recycling or reusing a significant portion of coal combustion wastes produced by coal-based generating units excluding practices that are commercially available at the date of enactment of this Act.

SEC. 122. FINANCIAL ASSISTANCE.

(a) IN GENERAL- Not later than 180 days after the date on which the Secretary submits to Congress the plan under section 121(b), the Secretary shall solicit proposals for projects at new or existing facilities designed to achieve the levels of performance set forth in section 121(b)(3).

(b) PROJECT CRITERIA- A solicitation under subsection (a) may include solicitation of a proposal for a project to demonstrate--

(1) the control of emissions of 1 or more pollutants; or

(2) the production of coal combustion byproducts that are capable of obtaining economic values significantly greater than byproducts produced on the date of enactment of this Act.

(c) FINANCIAL ASSISTANCE- The Secretary shall provide financial assistance to projects that--

(1) demonstrate overall cost reductions in the utilization of coal to generate useful forms of energy;

(2) improve the competitiveness of coal among various forms of energy in order to maintain a diversity of fuel choices in the United States to meet electricity generation requirements;

(3) achieve, in a cost-effective manner, 1 or more of the criteria described in the solicitation; and

(4) demonstrate technologies that are applicable to 25 percent of the electricity generating facilities that use coal as the primary feedstock on the date of enactment of this Act.

(d) FEDERAL SHARE- The Federal share cost of a project funded under this subtitle shall not exceed 50 percent.

(e) EXEMPTION FROM NEW SOURCE REVIEW PROVISIONS- A project funded under this subtitle shall be exempt from the new source review provisions of the Clean Air Act (42 U.S.C. 7401 et seq.).

SEC. 123. FUNDING.

To carry out this subtitle, the Secretary may use any unobligated funds available to the Secretary and any funds obligated to any project selected under the clean coal technology program that become unobligated.

TITLE II--CREDIT FOR EMISSION REDUCTIONS AND EFFICIENCY IMPROVEMENTS IN EXISTING COAL-BASED ELECTRICITY GENERATION FACILITIES

SEC. 201. CREDIT FOR INVESTMENT IN QUALIFYING CLEAN COAL TECHNOLOGY.

(a) ALLOWANCE OF QUALIFYING CLEAN COAL TECHNOLOGY UNIT CREDIT- Section 46 of the Internal Revenue Code of 1986 (relating to amount of credit) is amended by striking `and' at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting `, and', and by adding at the end the following:

`(4) the qualifying clean coal technology unit credit.'.

(b) AMOUNT OF QUALIFYING CLEAN COAL TECHNOLOGY UNIT CREDIT- 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 48 the following:

`SEC. 48A. QUALIFYING CLEAN COAL TECHNOLOGY UNIT CREDIT.

`(a) IN GENERAL- For purposes of section 46, the qualifying clean coal technology unit credit for any taxable year is an amount equal to 10 percent of the qualified investment in a qualifying system of continuous emission control for such taxable year.

`(b) QUALIFYING SYSTEM OF CONTINUOUS EMISSION CONTROL-

`(1) IN GENERAL- For purposes of subsection (a), the term `qualifying system of continuous emission control' means a system of the taxpayer which--

`(A) serves, is added to, or retrofits an existing coal-based electricity generation unit, the construction, installation, or retrofitting of which is completed by the taxpayer (but only with respect to that portion of the basis which is properly attributable to such construction, installation, or retrofitting),

`(B) removes or reduces 1 or more of the pollutants regulated under title I of the Clean Air Act (42 U.S.C. 7401 et seq.),

`(C) is depreciable under section 167,

`(D) has a useful life of not less than 4 years, and

`(E) is located in the United States.

`(2) SPECIAL RULE FOR SALE-LEASEBACKS- For purposes of subparagraph (A) of paragraph (1), in the case of a unit which--

`(A) is originally placed in service by a person, and

`(B) is sold and leased back by such person, or is leased to such person, within 3 months after the date such unit was originally placed in service, for a period of not less than 12 years,

such unit shall be treated as originally placed in service not earlier than the date on which such property is used under the leaseback (or lease) referred to in subparagraph (B). The preceding sentence shall not apply to any property if the lessee and lessor of such property make an election under this sentence. Such an election, once made, may be revoked only with the consent of the Secretary.

`(c) EXISTING COAL-BASED ELECTRICITY GENERATION UNIT- For purposes of subsection (a), the term `existing coal-based electricity generating unit' means, with respect to any taxable year, a steam generator-turbine unit which uses coal to produce 75 percent or more of its output as electricity and was in operation before the effective date of this section.

`(d) LIMIT ON QUALIFYING CLEAN COAL TECHNOLOGY UNIT CREDIT- For purposes of subsection (a), the credit shall be applicable to not more than the first $100,000,000 of qualifying investment in a qualifying system of continuous emission control at any 1 existing coal-based electricity generating unit.

`(e) QUALIFIED INVESTMENT- For purposes of subsection (a), the term `qualified investment' means, with respect to any taxable year, the basis of a qualifying system of continuous emission control placed in service by the taxpayer during such taxable year.

`(f) QUALIFIED PROGRESS EXPENDITURES-

`(1) INCREASE IN QUALIFIED INVESTMENT- In the case of a taxpayer who has made an election under paragraph (5), the amount of the qualified investment of such taxpayer for the taxable year (determined under subsection (e) without regard to this subsection) shall be increased by an amount equal to the aggregate of each qualified progress expenditure for the taxable year with respect to progress expenditure property.

`(2) PROGRESS EXPENDITURE PROPERTY DEFINED- For purposes of this subsection, the term `progress expenditure property' means any property being constructed by or for the taxpayer and which it is reasonable to believe will qualify as a qualifying system of continuous emission control which is being constructed by or for the taxpayer when it is placed in service.

`(3) QUALIFIED PROGRESS EXPENDITURES DEFINED- For purposes of this subsection--

`(A) SELF-CONSTRUCTED PROPERTY- In the case of any self-constructed property, the term `qualified progress expenditures' means the amount which, for purposes of this subpart, is properly chargeable (during such taxable year) to capital account with respect to such property.

`(B) NONSELF-CONSTRUCTED PROPERTY- In the case of nonself-constructed property, the term `qualified progress expenditures' means the amount paid during the taxable year to another person for the construction of such property.

`(4) OTHER DEFINITIONS- For purposes of this subsection--

`(A) SELF-CONSTRUCTED PROPERTY- The term `self-constructed property' means property for which it is reasonable to believe that more than half of the construction expenditures will be made directly by the taxpayer.

`(B) NONSELF-CONSTRUCTED PROPERTY- The term `nonself-constructed property' means property which is not self-constructed property.

`(C) CONSTRUCTION, ETC- The term `construction' includes reconstruction and erection, and the term `constructed' includes reconstructed and erected.

`(D) ONLY CONSTRUCTION OF QUALIFYING SYSTEM OF CONTINUOUS EMISSION CONTROL TO BE TAKEN INTO ACCOUNT- Construction shall be taken into account only if, for purposes of this subpart, expenditures therefor are properly chargeable to capital account with respect to the property.

`(5) ELECTION- An election under this subsection may be made at such time and in such manner as the Secretary may by regulations prescribe. Such an election shall apply to the taxable year for which made and to all subsequent taxable years. Such an election, once made, may not be revoked except with the consent of the Secretary.

`(g) COORDINATION WITH OTHER CREDITS- This section shall not apply to any property with respect to which the rehabilitation credit under section 47 or the energy credit under section 48 is allowed unless the taxpayer elects to waive the application of such credit to such property.

`(h) TERMINATION- This section shall not apply with respect to any qualified investment made more than 10 years after the effective date of this section.'.

(c) RECAPTURE- Section 50(a) of the Internal Revenue Code of 1986 (relating to other special rules) is amended by adding at the end the following:

`(6) SPECIAL RULES RELATING TO QUALIFYING SYSTEM OF CONTINUOUS EMISSION CONTROL- For purposes of applying this subsection in the case of any credit allowable by reason of section 48A, the following shall apply:

`(A) GENERAL RULE- In lieu of the amount of the increase in tax under paragraph (1), the increase in tax shall be an amount equal to the investment tax credit allowed under section 38 for all prior taxable years with respect to a qualifying system of continuous emission control (as defined by section 48A(b)(1)) multiplied by a fraction whose numerator is the number of years remaining to fully depreciate under this title the qualifying system of continuous emission control disposed of, and whose denominator is the total number of years over which such unit would otherwise have been subject to depreciation. For purposes of the preceding sentence, the year of disposition of the qualifying system of continuous emission control property shall be treated as a year of remaining depreciation.

`(B) PROPERTY CEASES TO QUALIFY FOR PROGRESS EXPENDITURES- Rules similar to the rules of paragraph (2) shall apply in the case of qualified progress expenditures for a qualifying system of continuous emission control under section 48A, except that the amount of the increase in tax under subparagraph (A) of this paragraph shall be substituted in lieu of the amount described in such paragraph (2).

`(C) APPLICATION OF PARAGRAPH- This paragraph shall be applied separately with respect to the credit allowed under section 38 regarding a qualifying system of continuous emission control.'.

(d) TRANSITIONAL RULE- Section 39(d) of the Internal Revenue Code of 1986 (relating to transitional rules) is amended by adding at the end the following:

`(9) NO CARRYBACK OF SECTION 48A CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the qualifying clean coal technology unit credit determined under section 48A may be carried back to a taxable year ending before the date of enactment of section 48A.'.

(e) TECHNICAL AMENDMENTS-

(1) Section 49(a)(1)(C) of the Internal Revenue Code of 1986 is amended by striking `and' at the end of clause (ii), by striking the period at the end of clause (iii) and inserting `, and', and by adding at the end the following:

`(iv) the portion of the basis of any qualifying system of continuous emission control attributable to any qualified investment (as defined by section 48A(e)).'.

(2) Section 50(a)(4) of such Code is amended by striking `and (2)' and inserting `, (2), and (6)'.

(3) Section 50(c) of such Code is amended by adding at the end the following:

`(6) NONAPPLICATION- Paragraphs (1) and (2) shall not apply to any qualifying clean coal technology unit credit under section 48A.'.

(4) 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 48 the following:

`Sec. 48A. Qualifying clean coal technology unit credit.'.

(f) INSTALLATIONS NOT SUBJECT TO NEW SOURCE REVIEW, ETC-

(1) EXEMPTION FROM NEW SOURCE REVIEW- The installation of a qualifying system of continuous emission control (as defined in section 48A(b)(1) of the Internal Revenue Code of 1986, as added by subsection (b)), shall be exempt from the new source review provisions of the Clean Air Act (42 U.S.C. 7401 et seq.).

(2) EXEMPTION FROM EMISSION CONTROL REQUIREMENTS- The installation of a qualifying system of continuous emission control (as so defined) on an existing coal-based electricity generating unit, which meets or exceeds, for the applicable source category and pollutant being controlled by such qualified system, the standard of performance for new stationary sources, shall exempt the existing unit from any new or increased emission control requirements for the pollutant being controlled by such qualified system under title I of the Clean Air Act (42 U.S.C. 7401 et seq.) for a period of 10 years after the date such qualified system is originally placed in service.

(g) EFFECTIVE DATE- The amendments made by this section shall apply to periods after December 31, 2000, 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 enactment of the Revenue Reconciliation Act of 1990).

SEC. 202. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL TECHNOLOGY UNIT.

(a) CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL TECHNOLOGY UNIT- 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:

`SEC. 45E. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL TECHNOLOGY UNIT.

`(a) GENERAL RULE- For purposes of section 38, the qualifying clean coal technology production credit of any taxpayer for any taxable year is equal to the product of--

`(1) the applicable amount of clean coal technology production credit, multiplied by

`(2) the kilowatt hours of electricity produced by the taxpayer during such taxable year at a qualifying clean coal technology unit during the 10-year period beginning on the date the unit was returned to service after retrofit, repowering, or replacement.

`(b) APPLICABLE AMOUNT-

`(1) IN GENERAL- For purposes of this section, the applicable amount of clean coal technology production credit is equal to $0.0034.

`(2) INFLATION ADJUSTMENT FACTOR- For calendar years after 2001, the applicable amount of clean coal technology production credit shall be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the amount is applied. If any amount as increased under the preceding sentence is not a multiple of 0.01 cent, such amount shall be rounded to the nearest multiple of 0.01 cent.

`(c) DEFINITIONS AND SPECIAL RULES- For purposes of this section--

`(1) QUALIFYING CLEAN COAL TECHNOLOGY UNIT- The term `qualifying clean coal technology unit' means a unit of the taxpayer which--

`(A) is an existing coal-based electricity generating steam generator-turbine unit,

`(B) has a nameplate capacity rating of not more than 300,000 kilowatts, and

`(C) has been retrofitted, repowered, or replaced with a clean coal technology within 10 years of the effective date of this section.

`(2) CLEAN COAL TECHNOLOGY- The term `clean coal technology' means technology which--

`(A) uses coal to produce 50 percent or more of its thermal output as electricity, including advanced pulverized coal or atmospheric fluidized bed combustion, pressurized fluidized bed combustion, integrated gasification combined cycle, or any other technology for the production of electricity,

`(B) has a design heat rate not less than 500 Btu/kWh below that of the existing unit before it is retrofit, repowered, or replaced with the qualifying clean coal technology,

`(C) has a maximum design heat rate of not more than 9,000 Btu/kWh when the design coal has a heat content of more than 8,000 Btu per pound, and

`(D) has a maximum design heat rate of not more than 10,500 Btu/kWh when the design coal has a heat content of 8,000 Btu per pound or less.

`(3) APPLICATION OF CERTAIN RULES- The rules of paragraphs (3), (4), and (5) of section 45 shall apply.

`(4) INFLATION ADJUSTMENT FACTOR- The term `inflation adjustment factor' means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 2000.

`(5) GDP IMPLICIT PRICE DEFLATOR- The term `GDP implicit price deflator' means the most recent revision of the implicit price deflator for the gross domestic product as computed by the Department of Commerce before March 15 of the calendar year.

`(d) COORDINATION WITH OTHER CREDITS- This section shall not apply to any property with respect to which the qualifying clean coal technology unit credit under section 48A is allowed unless the taxpayer elects to waive the application of such credit to such property.'.

(b) CREDIT TREATED AS BUSINESS CREDIT- Section 38(b) of the Internal Revenue Code of 1986 is amended by striking `plus' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting `, plus', and by adding at the end the following:

`(13) the qualifying clean coal technology production credit determined under section 45E(a).'.

(c) TRANSITIONAL RULE- Section 39(d) of the Internal Revenue Code of 1986 (relating to transitional rules), as amended by section 201(d), is amended by adding at the end the following:

`(10) NO CARRYBACK OF SECTION 45E CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the qualifying clean coal technology production credit determined under section 45E may be carried back to a taxable year ending before the date of enactment of section 45E.'.

(d) CLERICAL AMENDMENT- The table of sections for subpart D 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:

`Sec. 45E. Credit for production from a qualifying clean coal technology unit.'.

(e) MODIFICATIONS AND INSTALLATIONS NOT SUBJECT TO NEW SOURCE REVIEW, ETC-

(1) EXEMPTION FROM NEW SOURCE REVIEW- Modifications made to an existing coal-based generation unit because of, or as part of a qualifying clean coal technology unit (as defined in section 45E(c)(1) of the Internal Revenue Code of 1986, as added by subsection (a)), shall be exempt from the new source review provisions of the Clean Air Act (42 U.S.C. 7401 et seq.).

(2) EXEMPTION FROM EMISSION CONTROL REQUIREMENTS- The installation of a qualifying clean coal technology unit (as so defined) on an existing coal-based electricity generating unit, which meets or exceeds, for the applicable source category, the standard of performance for new stationary sources under section 111 of the Clean Air Act (42 U.S.C. 7411), shall exempt the existing unit from any new or increased emission control requirements under title I of such Act (42 U.S.C. 7401 et seq.) for a period of 10 years after the date the qualifying clean coal technology is originally placed in service.

(f) EFFECTIVE DATE- The amendments made by this section shall apply to production after the date of enactment of this Act.

TITLE III--INCENTIVES FOR EARLY COMMERCIAL APPLICATIONS OF ADVANCED CLEAN COAL TECHNOLOGIES

SEC. 301. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY.

(a) ALLOWANCE OF QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY FACILITY CREDIT- Section 46 of the Internal Revenue Code of 1986 (relating to amount of credit), as amended by section 201(a), 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:

`(5) the qualifying advanced clean coal technology facility credit.'.

(b) AMOUNT OF QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY FACILITY CREDIT- Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to rules for computing investment credit), as amended by section 201(b), is amended by inserting after section 48A the following:

`SEC. 48B. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY FACILITY CREDIT.

`(a) IN GENERAL- For purposes of section 46, the qualifying advanced clean coal technology facility credit for any taxable year is an amount equal to 10 percent of the qualified investment in a qualifying advanced clean coal technology facility for such taxable year.

`(b) QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY FACILITY-

`(1) IN GENERAL- For purposes of subsection (a), the term `qualifying advanced clean coal technology facility' means a facility of the taxpayer which--

`(A)(i)(I) replaces a conventional technology facility of the taxpayer and the original use of which commences with the taxpayer, or

`(II) is a retrofitted or repowered conventional technology facility, the retrofitting or repowering of which is completed by the taxpayer (but only with respect to that portion of the basis which is properly attributable to such retrofitting or repowering), or

`(ii) is acquired through purchase (as defined by section 179(d)(2)),

`(B) is depreciable under section 167,

`(C) has a useful life of not less than 4 years,

`(D) is located in the United States, and

`(E) uses qualifying advanced clean coal technology.

`(2) SPECIAL RULE FOR SALE-LEASEBACKS- For purposes of subparagraph (A) of paragraph (1), in the case of a facility which--

`(A) is originally placed in service by a person, and

`(B) is sold and leased back by such person, or is leased to such person, within 3 months after the date such facility was originally placed in service, for a period of not less than 12 years,

such facility shall be treated as originally placed in service not earlier than the date on which such property is used under the leaseback (or lease) referred to in subparagraph (B). The preceding sentence shall not apply to any property if the lessee and lessor of such property make an election under this sentence. Such an election, once made, may be revoked only with the consent of the Secretary.

`(3) QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY- For purposes of paragraph (1)--

`(A) IN GENERAL- The term `qualifying advanced clean coal technology' means, with respect to clean coal technology--

`(i) multiple applications, with a combined capacity of not more than 5,000 megawatts, of advanced pulverized coal or atmospheric fluidized bed combustion technology--

`(I) installed as a new, retrofit, or repowering application,

`(II) operated between 2000 and 2011, and

`(III) with a design net heat rate of not more than 9,500 Btu per kilowatt hour when the design coal has a heat content of more than 8,000 Btu per pound, or a design net heat rate of not more than 9,900 Btu per kilowatt hour when the design coal has a heat content of 8,000 Btu per pound or less,

`(ii) multiple applications, with a combined capacity of not more than 1,000 megawatts, of pressurized fluidized bed combustion technology--

`(I) installed as a new, retrofit, or repowering application,

`(II) operated between 2000 and 2015, and

`(III) with a design net heat rate of not more than 8,400 Btu per kilowatt hour when the design coal has a heat content of more than 8,000 Btu per pound, or a design net heat rate of not more than 9,900 Btu's per kilowatt hour when the design coal has a heat content of 8,000 Btu per pound or less,

`(iii) multiple applications, with a combined capacity of not more than 2,000 megawatts, of integrated gasification combined cycle technology, with or without fuel or chemical co-production--

`(I) installed as a new, retrofit, or repowering application,

`(II) operated between 2000 and 2015,

`(III) with a design net heat rate of not more than 8,550 Btu per kilowatt hour when the design coal has a heat content of more than 8,000 Btu per pound, or a design net heat rate of not more than 9,900 Btu per kilowatt hour when the design coal has a heat content of 8,000 Btu per pound or less, and

`(IV) with a net thermal efficiency on any fuel or chemical co-production of not less than 39 percent (higher heating value), and

`(iv) multiple applications, with a combined capacity of not more than 2,000 megawatts of technology for the production of electricity--

`(I) installed as a new, retrofit, or repowering application,

`(II) operated between 2000 and 2015, and

`(III) with a carbon emission rate which is not more than 85 percent of conventional technology.

`(B) EXCEPTIONS- Such term shall not include clean coal technology projects receiving or scheduled to receive funding under the Clean Coal Technology Program of the Department of Energy.

`(C) CLEAN COAL TECHNOLOGY- The term `clean coal technology' means advanced technology which uses coal to produce 75 percent or more of its thermal output as electricity including advanced pulverized coal or atmospheric fluidized bed combustion, pressurized fluidized bed combustion, integrated gasification combined cycle with or without fuel or chemical co-production, and any other technology for the production of electricity which exceeds the performance of conventional technology.

`(D) CONVENTIONAL TECHNOLOGY- The term `conventional technology' means--

`(i) coal-fired combustion technology with a design net heat rate of not less than 9,500 Btu per kilowatt hour (HHV) and a carbon equivalents emission rate of not more than 0.54 pounds of carbon per kilowatt hour when the design coal has a heat content of more than 8,000 Btu per pound,

`(ii) coal-fired combustion technology with a design net heat rate of not less than 10,500 Btu per kilowatt hour (HHV) and a carbon equivalents emission rate of not more than 0.60 pounds of carbon per kilowatt hour when the design coal has a heat content of 8,000 Btu per pound or less, or

`(iii) natural gas-fired combustion technology with a design net heat rate of not less than 7,500 Btu per kilowatt hour (HHV) and a carbon equivalents emission rate of not more than 0.24 pounds of carbon per kilowatt hour.

`(E) DESIGN NET HEAT RATE- The design net heat rate shall be based on the design annual heat input to and the design annual net electrical output from the qualifying advanced clean coal technology (determined without regard to such technology's co-generation of steam).

`(F) SELECTION CRITERIA- Selection criteria for clean coal technology facilities--

`(i) shall be established by the Secretary of Energy as part of a competitive solicitation,

`(ii) shall include primary criteria of minimum design net heat rate, maximum design thermal efficiency, and lowest cost to the government, and

`(iii) shall include supplemental criteria as determined appropriate by the Secretary of Energy.

`(c) QUALIFIED INVESTMENT- For purposes of subsection (a), the term `qualified investment' means, with respect to any taxable year, the basis of a qualifying advanced clean coal technology facility placed in service by the taxpayer during such taxable year.

`(d) QUALIFIED PROGRESS EXPENDITURES-

`(1) INCREASE IN QUALIFIED INVESTMENT- In the case of a taxpayer who has made an election under paragraph (5), the amount of the qualified investment of such taxpayer for the taxable year (determined under subsection (c) without regard to this section) shall be increased by an amount equal to the aggregate of each qualified progress expenditure for the taxable year with respect to progress expenditure property.

`(2) PROGRESS EXPENDITURE PROPERTY DEFINED- For purposes of this subsection, the term `progress expenditure property' means any property being constructed by or for the taxpayer and which it is reasonable to believe will qualify as a qualifying advanced clean coal technology facility which is being constructed by or for the taxpayer when it is placed in service.

`(3) QUALIFIED PROGRESS EXPENDITURES DEFINED- For purposes of this subsection--

`(A) SELF-CONSTRUCTED PROPERTY- In the case of any self-constructed property, the term `qualified progress expenditures' means the amount which, for purposes of this subpart, is properly chargeable (during such taxable year) to capital account with respect to such property.

`(B) NONSELF-CONSTRUCTED PROPERTY- In the case of nonself-constructed property, the term `qualified progress expenditures' means the amount paid during the taxable year to another person for the construction of such property.

`(4) OTHER DEFINITIONS- For purposes of this subsection--

`(A) SELF-CONSTRUCTED PROPERTY- The term `self-constructed property' means property for which it is reasonable to believe that more than half of the construction expenditures will be made directly by the taxpayer.

`(B) NONSELF-CONSTRUCTED PROPERTY- The term `nonself-constructed property' means property which is not self-constructed property.

`(C) CONSTRUCTION, ETC- The term `construction' includes reconstruction and erection, and the term `constructed' includes reconstructed and erected.

`(D) ONLY CONSTRUCTION OF QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY FACILITY TO BE TAKEN INTO ACCOUNT- Construction shall be taken into account only if, for purposes of this subpart, expenditures therefor are properly chargeable to capital account with respect to the property.

`(5) ELECTION- An election under this subsection may be made at such time and in such manner as the Secretary may by regulations prescribe. Such an election shall apply to the taxable year for which made and to all subsequent taxable years. Such an election, once made, may not be revoked except with the consent of the Secretary.

`(e) COORDINATION WITH OTHER CREDITS- This section shall not apply to any property with respect to which the rehabilitation credit under section 47 or the energy credit under section 48 is allowed unless the taxpayer elects to waive the application of such credit to such property.

`(f) TERMINATION- This section shall not apply with respect to any qualified investment made more than 10 years after the effective date of this section.'.

(c) RECAPTURE- Section 50(a) of the Internal Revenue Code of 1986 (relating to other special rules), as amended by section 201(c), is amended by adding at the end the following:

`(7) SPECIAL RULES RELATING TO QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY FACILITY- For purposes of applying this subsection in the case of any credit allowable by reason of section 48B, the following shall apply:

`(A) GENERAL RULE- In lieu of the amount of the increase in tax under paragraph (1), the increase in tax shall be an amount equal to the investment tax credit allowed under section 38 for all prior taxable years with respect to a qualifying advanced clean coal technology facility (as defined by section 48B(b)(1)) multiplied by a fraction whose numerator is the number of years remaining to fully depreciate under this title the qualifying advanced clean coal technology facility disposed of, and whose denominator is the total number of years over which such facility would otherwise have been subject to depreciation. For purposes of the preceding sentence, the year of disposition of the qualifying advanced clean coal technology facility property shall be treated as a year of remaining depreciation.

`(B) PROPERTY CEASES TO QUALIFY FOR PROGRESS EXPENDITURES- Rules similar to the rules of paragraph (2) shall apply in the case of qualified progress expenditures for a qualifying advanced clean coal technology facility under section 48B, except that the amount of the increase in tax under subparagraph (A) of this paragraph shall be substituted in lieu of the amount described in such paragraph (2).

`(C) APPLICATION OF PARAGRAPH- This paragraph shall be applied separately with respect to the credit allowed under section 38 regarding a qualifying advanced clean coal technology facility.'.

(d) TRANSITIONAL RULE- Section 39(d) of the Internal Revenue Code of 1986 (relating to transitional

rules), as amended by section 202(c), is amended by adding at the end the following:

`(11) NO CARRYBACK OF SECTION 48B CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the qualifying advanced clean coal technology facility credit determined under section 48B may be carried back to a taxable year ending before the date of enactment of section 48B.'.

(e) TECHNICAL AMENDMENTS-

(1) Section 49(a)(1)(C) of the Internal Revenue Code of 1986, as amended by section 201(e)(1), 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:

`(v) the portion of the basis of any qualifying advanced clean coal technology facility attributable to any qualified investment (as defined by section 48B(c)).'.

(2) Section 50(a)(4) of such Code, as amended by section 201(e)(2), is amended by striking `and (6)' and inserting `(6), and (7)'.

(3) Section 50(c)(6) of such Code, as added by section 201(e)(3), is amended by inserting `or any advanced clean coal technology facility credit under section 48B' after `section 48A'.

(4) The table of sections for subpart E of part IV of subchapter A of chapter 1, as amended by section 201(e)(4), is amended by inserting after the item relating to section 48A the following:

`Sec. 48B. Qualifying advanced clean coal technology facility credit.'.

(f) EFFECTIVE DATE- The amendments made by this section shall apply to periods after December 31, 2000, 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 enactment of the Revenue Reconciliation Act of 1990).

SEC. 302. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY.

(a) CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits), as amended by section 202(a), is amended by adding at the end the following:

`SEC. 45F. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY.

`(a) GENERAL RULE- For purposes of section 38, the qualifying advanced clean coal technology production credit of any taxpayer for any taxable year is equal to--

`(1) the applicable amount of advanced clean coal technology production credit, multiplied by

`(2) the sum of--

`(A) the kilowatt hours of electricity, plus

`(B) each 3,413 Btu of fuels or chemicals,

produced by the taxpayer during such taxable year at a qualifying advanced clean coal technology facility during the 10-year period beginning on the date the facility was originally placed in service.

`(b) APPLICABLE AMOUNT- For purposes of this section, the applicable amount of advanced clean coal technology production credit with respect to production from a qualifying advanced clean coal technology facility shall be determined as follows:

`(1) Where the design coal has a heat content of more than 8,000 Btu per pound:

`(A) In the case of a facility originally placed in service before 2008, if--

------------------------------------------------------------------------------------------------------------------------------

`The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      

                                                               For 1st 5 years of such service For 2d 5 years of such service 

------------------------------------------------------------------------------------------------------------------------------

Not more than 8,400                                            $.0050                          $.0030                         

More than 8,400 but not more than 8,550                        $.0010                          $.0010                         

More than 8,550 but not more than 8,750                        $.0005                          $.0005.                        

------------------------------------------------------------------------------------------------------------------------------

`(B) In the case of a facility originally placed in service after 2007 and before 2012, if--

------------------------------------------------------------------------------------------------------------------------------

`The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      

                                                               For 1st 5 years of such service For 2d 5 years of such service 

------------------------------------------------------------------------------------------------------------------------------

Not more than 7,770                                            $.0090                          $.0075                         

More than 7,770 but not more than 8,125                        $.0070                          $.0050                         

More than 8,125 but not more than 8,350                        $.0060                          $.0040.                        

------------------------------------------------------------------------------------------------------------------------------

`(C) In the case of a facility originally placed in service after 2011 and before 2015, if--

------------------------------------------------------------------------------------------------------------------------------

`The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      

                                                               For 1st 5 years of such service For 2d 5 years of such service 

------------------------------------------------------------------------------------------------------------------------------

Not more than 7,380                                            $.0120                          $.0090                         

More than 7,380 but not more than 7,720                        $.0095                          $.0070.                        

------------------------------------------------------------------------------------------------------------------------------

`(2) Where the design coal has a heat content of not more than 8,000 Btu per pound:

`(A) In the case of a facility originally placed in service before 2008, if--

------------------------------------------------------------------------------------------------------------------------------

`The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      

                                                               For 1st 5 years of such service For 2d 5 years of such service 

------------------------------------------------------------------------------------------------------------------------------

Not more than 8,500                                            $.0050                          $.0030                         

More than 8,500 but not more than 8,650                        $.0010                          $.0010                         

More than 8,650 but not more than 8,750                        $.0005                          $.0005.                        

------------------------------------------------------------------------------------------------------------------------------

`(B) In the case of a facility originally placed in service after 2007 and before 2012, if--

------------------------------------------------------------------------------------------------------------------------------

`The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      

                                                               For 1st 5 years of such service For 2d 5 years of such service 

------------------------------------------------------------------------------------------------------------------------------

Not more than 8,000                                            $.0090                          $.0075                         

More than 8,000 but not more than 8,250                        $.0070                          $.0050                         

More than 8,250 but not more than 8,400                        $.0060                          $.0040.                        

------------------------------------------------------------------------------------------------------------------------------

`(C) In the case of a facility originally placed in service after 2011 and before 2015, if--

------------------------------------------------------------------------------------------------------------------------------

`The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      

                                                               For 1st 5 years of such service For 2d 5 years of such service 

------------------------------------------------------------------------------------------------------------------------------

Not more than 7,800                                            $.0120                          $.0090                         

More than 7,800 but not more than 7,950                        $.0095                          $.0070.                        

------------------------------------------------------------------------------------------------------------------------------

`(3) Where the clean coal technology facility is producing fuel or chemicals:

`(A) In the case of a facility originally placed in service before 2008, if--

------------------------------------------------------------------------------------------------------------------------------

`The facility design net thermal efficiency (HHV) is equal to: The applicable amount is:                                      

                                                               For 1st 5 years of such service For 2d 5 years of such service 

------------------------------------------------------------------------------------------------------------------------------

Not less than 40.6 percent                                     $.0050                          $.0030                         

Less than 40.6 but not less than 40 percent                    $.0010                          $.0010                         

Less than 40 but not less than 39 percent                      $.0005                          $.0005.                        

------------------------------------------------------------------------------------------------------------------------------

`(B) In the case of a facility originally placed in service after 2007 and before 2012, if--

------------------------------------------------------------------------------------------------------------------------------

`The facility design net thermal efficiency (HHV) is equal to: The applicable amount is:                                      

                                                               For 1st 5 years of such service For 2d 5 years of such service 

------------------------------------------------------------------------------------------------------------------------------

Not less than 43.9 percent                                     $.0090                          $.0075                         

Less than 43.9 but not less than 42 percent                    $.0070                          $.0050                         

Less than 42 but not less than 40.9 percent                    $.0060                          $.0040.                        

------------------------------------------------------------------------------------------------------------------------------

`(C) In the case of a facility originally placed in service after 2011 and before 2015, if--

------------------------------------------------------------------------------------------------------------------------------

`The facility design net thermal efficiency (HHV) is equal to: The applicable amount is:                                      

                                                               For 1st 5 years of such service For 2d 5 years of such service 

------------------------------------------------------------------------------------------------------------------------------

Not less than 44.2 percent                                     $.0120                          $.0090                         

Less than 44.2 but not less than 43.6 percent                  $.0095                          $.0070.                        

------------------------------------------------------------------------------------------------------------------------------

`(c) INFLATION ADJUSTMENT FACTOR- For calendar years after 2001, each amount in paragraphs (1), (2), and (3) shall be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the amount is applied. If any amount as increased under the preceding sentence is not a multiple of 0.01 cent, such amount shall be rounded to the nearest multiple of 0.01 cent.

`(d) DEFINITIONS AND SPECIAL RULES- For purposes of this section--

`(1) IN GENERAL- Any term used in this section which is also used in section 48B shall have the meaning given such term in section 48B.

`(2) APPLICABLE RULES- The rules of paragraphs (3), (4), and (5) of section 45 shall apply.

`(3) INFLATION ADJUSTMENT FACTOR- The term `inflation adjustment factor' means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 2000.

`(4) GDP IMPLICIT PRICE DEFLATOR- The term `GDP implicit price deflator' means the most recent revision of the implicit price deflator for the gross domestic product as computed by the Department of Commerce before March 15 of the calendar year.'.

(b) CREDIT TREATED AS BUSINESS CREDIT- Section 38(b) of the Internal Revenue Code of 1986, as amended by section 202(b), is amended by striking `plus' at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting `, plus', and by adding at the end the following:

`(14) the qualifying advanced clean coal technology production credit determined under section 45F(a).'.

(c) TRANSITIONAL RULE- Section 39(d) of the Internal Revenue Code of 1986 (relating to transitional rules), as amended by section 301(d), is amended by adding at the end the following:

`(12) NO CARRYBACK OF SECTION 45F CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the qualifying advanced clean coal technology production credit determined under section 45F may be carried back to a taxable year ending before the date of enactment of section 45F.'.

(d) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as amended by section 202(d), is amended by adding at the end the following:

`Sec. 45F. Credit for production from qualifying advanced clean coal technology.'.

(e) INSTALLATIONS NOT SUBJECT TO NEW SOURCE REVIEW, ETC-

(1) EXEMPTION FROM NEW SOURCE REVIEW- The installation of a qualifying advanced clean coal technology facility which has qualified for a qualifying advanced clean coal technology production credit determined under section 45F of the Internal Revenue Code of 1986, as added by subsection (a), shall be exempt from the new source review provisions of the Clean Air Act (42 U.S.C. 7401 et seq.).

(2) EXEMPTION FROM EMISSION CONTROL REQUIREMENTS- The installation of a qualifying advanced clean coal technology facility which has qualified for a qualifying advanced clean coal technology production credit determined under such section 45F and which meets or exceeds, for the applicable source category, the standard of performance for new stationary sources established under section 111 of the Clean Air Act (42 U.S.C. 7411), shall exempt that facility from any new or increased emission control requirements under title I of such Act (42 U.S.C. 7401 et seq.) for a period of 10 years after the date the qualifying clean coal technology facility is originally placed in service.

(f) EFFECTIVE DATE- The amendments made by this section shall apply to production after the date of enactment of this Act.

SEC. 303. RISK POOL FOR QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY.

(a) ESTABLISHMENT- The Secretary of the Treasury shall establish a financial risk pool which shall be available to any United States owner of a qualifying advanced clean coal technology which has qualified for an advanced clean coal technology production credit (as defined in section 45F of the Internal Revenue Code of 1986, as added by section 302) to offset for the first 3 years of the operation of such technology the costs (not to exceed 5 percent of the total cost of installation) for modifications resulting from the technology's failure to achieve its design performance.

(b) AUTHORIZATION OF APPROPRIATIONS- There is authorized to be appropriated such sums as are necessary to carry out the purposes of this section.

TITLE IV--TREATMENT OF CERTAIN TAX-EXEMPT ENTITIES

SEC. 401. OFFSET CREDITS FOR ELECTRIC COOPERATIVES OR PUBLICLY OWNED ELECTRIC UTILITIES.

(a) OFFSET CREDITS- Section 6401(b) of the Internal Revenue Code of 1986 (relating to excessive credits) is amended by adding at the end the following:

`(3) SPECIAL RULE FOR CREDITS UNDER SECTIONS 45E, 45F, 48A, AND 48B-

`(A) IN GENERAL- For purposes of paragraph (1), the credits allowed under sections 45E, 45F, 48A, and 48B (relating to credits for emission reductions and efficiency improvements in existing coal-based generating facilities) shall be treated for the taxable year as credits allowable under subpart C of part IV of subchapter A of chapter 1 (relating to refundable credits) only if with respect to such taxable year--

`(i) the taxpayer is an electric cooperative which is--

`(I) an organization engaged in marketing, generating, purchasing, transmitting, or distributing electric energy,

`(II) recognized for purposes of this title as operating on a cooperative basis, and

`(III) the owner of a qualifying system of continuous emission control or a qualifying clean coal technology unit or both or a qualifying advanced clean coal technology facility from which such credits are derived, or

`(ii) the taxpayer is a public utility which is--

`(I) organized by an Act of Congress or whose income would qualify under section 115 as income derived from a State or any subdivision thereof, and

`(II) the owner of the existing coal-based generating facility which is retrofitted, repowered, or replaced with a qualifying clean coal technology for purposes of the credit under section 45E or served by, added to by, or retrofitted with a qualifying system of continuous emission control for purposes of the credit under section 48A, or the owner of qualifying advanced clean coal technology for purposes of the credits under sections 45F and 48B.

`(B) TREATMENT OF COOPERATIVE TAXPAYER- For purposes of this paragraph--

`(i) IN GENERAL- An electric cooperative shall be deemed a taxpayer thereby qualifying for the credits described in sections 45E, 45F, 48A, and 48B notwithstanding any other provision to the contrary.

`(ii) USE OF OFFSET CREDITS- Notwithstanding any other provision of law, in the case of a cooperative taxpayer, the credits described in sections 45E, 45F, 48A, and 48B shall be applied, without penalty, as a prepayment of any debt or obligation the cooperative has incurred under subchapter I of chapter 31 of title 7 of the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.). Such credits shall be applied to loans as selected by the cooperative.

`(C) PUBLIC UTILITY DEFINED- For purposes of this paragraph only, the term `public utility' means a utility providing electricity which is owned by the Federal Government, a State or local government, or any political subdivision thereof.

`(D) TREATMENT OF CREDIT- Neither the amount of credit produced nor the amount of credit refunded pursuant to this paragraph shall result in income for purposes of section 501(c)(12).

`(E) TREATMENT OF UNRELATED PERSONS- For purpose of this paragraph, the rules of section 45(d)(4) shall apply.

`(F) TREATMENT OF TVA- This paragraph shall not apply with respect to the Tennessee Valley Authority.'.

SEC. 402. OFFSET OF CERTAIN ANNUAL PAYMENT OBLIGATIONS IN LIEU OF QUALIFYING CLEAN COAL TECHNOLOGY CREDITS.

(a) IN GENERAL- Notwithstanding any other provision of law, the Tennessee Valley Authority shall be entitled, with respect to its being an owner of a qualifying system of continuous emission control for purposes of the credit under section 45E of the Internal Revenue Code of 1986, a qualifying clean coal technology unit for purposes of the credit under section 48A of such Code, or a qualifying advanced clean coal technology facility for purposes of the credit under section 45F or 48B of such Code, to have an amount, equal to the aggregate amount of such credits for any fiscal year, applied as a credit against the payments required to be made in such fiscal year under section 15d(e) of the Tennessee Valley Authority Act of 1933 (16 U.S.C. 831n-4(e)) as an annual return on the appropriations investment and an annual repayment sum.

(b) TREATMENT OF CREDITS- The aggregate amount of credits described in subsection (a) shall be treated in the same manner and to the same extent as if such credits were a payment in cash and shall be applied first against the annual return on the appropriations investment.

(c) CREDIT CARRYOVER- With respect to any fiscal year, if the aggregate amount of credits described in subsection (a) exceeds the aggregate amount of payment obligations described in subsection (a), the excess amount shall remain available to the Tennessee Valley Authority for application as credits against the amounts of such payment obligations in succeeding fiscal years in the same manner as described in this section.

END