S.Amdt. 2893

SA 2893. Mr. REID (for himself and Mr. Dayton) submitted an amendment intended to be proposed by him to the bill S. 1637, to amend the Internal Revenue Code of 1986 to comply with the World Trade Organization rulings on the FSC/ETI benefit in a manner that preserves jobs and production activities in the United States, to reform and simplify the international taxation rules of the United States, and for other purposes; which was ordered to lie on the table; as follows:

Beginning on page 179, after line 25, add the following:

SEC. __. EXTENSION AND EXPANSION OF CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE RESOURCES.

(a) Expansion of Qualified Energy Resources.--Subsection (c) of section 45 (relating to electricity produced from certain renewable resources), as amended by section 514 of this Act (as added by amendment no. 2687, as agreed to) is amended to read as follows:

“(c) Qualified Energy Resources.--For purposes of this section--

“(1) In general.--The term ‘qualified energy resources' means--

“(A) wind,

“(B) closed-loop biomass,

“(C) biomass (other than closed-loop biomass),

“(D) geothermal energy,

“(E) solar energy,

“(F) small irrigation power,

“(G) biosolids and sludge, and

“(H) municipal solid waste.”.

“(2) Closed-loop biomass.--The term ‘closed-loop biomass' means any organic material from a plant which is planted exclusively for purposes of being used at a qualified facility to produce electricity.

“(3) Biomass.--

“(A) In general.--The term ‘biomass' means--

“(i) any agricultural livestock waste nutrients, or

“(ii) any solid, nonhazardous, cellulosic waste material which is segregated from other waste materials and which is derived from--

“(I) any of the following forest-related resources: mill and harvesting residues, precommercial thinnings, slash, and brush,

“(II) solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes (other than pressure-treated, chemically-treated, or painted wood wastes), and landscape or right-of-way tree trimmings, but not including municipal solid waste, gas derived from the biodegradation of solid waste, or paper which is commonly recycled, or

“(III) agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.

“(B) Agricultural livestock waste nutrients.--

“(i) In general.--The term ‘agricultural livestock waste nutrients' means agricultural livestock manure and litter, including wood shavings, straw, rice hulls, and other bedding material for the disposition of manure.

“(ii) Agricultural livestock.--The term ‘agricultural livestock' includes bovine, swine, poultry, and sheep.

“(4) Geothermal energy.--The term ‘geothermal energy' means energy derived from a geothermal deposit (within the meaning of section 613(e)(2)).

“(5) Small irrigation power.--The term ‘small irrigation power' means power--

“(A) generated without any dam or impoundment of water through an irrigation system canal or ditch, and

“(B) the installed capacity of which is less than 5 megawatts.

“(6) Biosolids and sludge.--The term ‘biosolids and sludge' means the residue or solids removed in the treatment of commercial, industrial, or municipal wastewater.

“(7) Municipal solid waste.--The term ‘municipal solid waste' has the meaning given the term ‘solid waste' under section 2(27) of the Solid Waste Disposal Act (42 U.S.C. 6903).”.

(b) Extension and Expansion of Qualified Facilities.--

(1) In general.--Section 45 is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection:

“(d) Qualified Facilities.--For purposes of this section--

“(1) Wind facility.--In the case of a facility using wind to produce electricity, the term ‘qualified facility' means any facility owned by the taxpayer which is originally placed in service after December 31, 1993, and before January 1, 2007.

“(2) Closed-loop biomass facility.--

“(A) In general.--In the case of a facility using closed-loop biomass to produce electricity, the term ‘qualified facility' means any facility--

“(i) owned by the taxpayer which is originally placed in service after December 31, 1992, and before January 1, 2007, or

“(ii) owned by the taxpayer which before January 1, 2007, is originally placed in service and modified to use closed-loop biomass to co-fire with coal, with other biomass, or with both, but only if the modification is approved under the Biomass Power for Rural Development Programs or is part of a pilot project of the Commodity Credit Corporation as described in 65 Fed. Reg. 63052.

“(B) Special rules.--In the case of a qualified facility described in subparagraph (A)(ii)--

“(i) the 10-year period referred to in subsection (a) shall be treated as beginning no earlier than October 1, 2004,

“(ii) the amount of the credit determined under subsection (a) with respect to the facility shall be an amount equal to the amount determined without regard to this clause multiplied by the ratio of the thermal content of the closed-loop biomass used in such facility to the thermal content of all fuels used in such facility, and

“(iii) if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) shall be the lessee or the operator of such facility.

“(3) Biomass facility.--

“(A) In general.--In the case of a facility using biomass (other than closed-loop biomass) to produce electricity, the term ‘qualified facility' means any facility owned by the taxpayer which--

“(i) in the case of a facility using agricultural livestock waste nutrients, is originally placed in service after September 30, 2004 and before January 1, 2007, and

“(ii) in the case of any other facility, is originally placed in service before January 1, 2005.

“(B) Special rules for preeffective date facilities.--In the case of any facility described in subparagraph (A)(ii) which is placed in service before October 1, 2004--

“(i) subsection (a)(1) shall be applied by substituting ‘1.2 cents' for ‘1.5 cents', and

“(ii) the 5-year period beginning on October 1, 2004, shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).

“(C) Credit eligibility.--In the case of any facility described in subparagraph (A), if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) shall be the lessee or the operator of such facility.

“(4) Geothermal or solar energy facility.--

“(A) In general.--In the case of a facility using geothermal or solar energy to produce electricity, the term ‘qualified facility' means any facility owned by the taxpayer which is originally placed in service after September 30, 2004, and before January 1, 2007.

“(B) Special rule.--In the case of any facility described in subparagraph (A), the 5-year period beginning on the date the facility was originally placed in service shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).

“(5) Small irrigation power facility.--In the case of a facility using small irrigation power to produce electricity, the term ‘qualified facility' means any facility owned by the taxpayer which is originally placed in service after September 30, 2004, and before January 1, 2007.

“(6) Biosolids and sludge facility.--In the case of a facility using waste heat from the incineration of biosolids and sludge to produce electricity, the term ‘qualified facility' means any facility owned by the taxpayer which is originally placed in service after September 30, 2004, and before January 1, 2007. Such term shall not include any property described in section 48(a)(6) the basis of which is taken into account for purposes of the energy credit under section 46.

“(7) Municipal solid waste facility.--

“(A) In general.--In the case of a facility or unit incinerating municipal solid waste to produce electricity, the term ‘qualified facility' means any facility or unit owned by the taxpayer which is originally placed in service after September 30, 2004, and before January 1, 2007.

“(B) Special rule.--In the case of any facility or unit described in subparagraph (A), the 5-year period beginning on the date the facility or unit was originally placed in service shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).

“(C) Credit eligibility.--In the case of any qualified facility described in subparagraph (A), if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) shall be the lessee or the operator of such facility.”.

(2) No credit for certain production.--Section 45(e) (relating to definitions and special rules), as redesignated by paragraph (1), is amended by striking paragraph (6) and inserting the following new paragraph:

“(6) Operations inconsistent with solid waste disposal act.--In the case of a qualified facility described in subsection (d)(6)(A), subsection (a) shall not apply to electricity produced at such facility during any taxable year if, during a portion of such year, there is a certification in effect by the Administrator of the Environmental Protection Agency that such facility was permitted to operate in a manner inconsistent with section 4003(d) of the Solid Waste Disposal Act (42 U.S.C. 6943(d)).”.

(3) Conforming amendment.--Section 45(e), as so redesignated, is amended by striking “subsection (c)(3)(A)” in paragraph (7)(A)(i) and inserting “subsection (d)(1)”.

(c) Credit Rate for Electricity Produced From New Facilities.--Section 45(a) is amended by adding at the end the following new flush sentence: “In the case of electricity produced after September 30, 2004, at any qualified facility originally placed in service after such date, paragraph (1) shall be applied by substituting ‘1.8 cents' for ‘1.5 cents'.”.

(d) Elimination of Certain Credit Reductions.--Section 45(b)(3)(A) (relating to credit reduced for grants, tax-exempt bonds, subsidized energy financing, and other credits) is amended--

(1) by striking clause (ii),

(2) by redesignating clauses (iii) and (iv) as clauses (ii) and (iii),

(3) by inserting “(other than proceeds of an issue of State or local government obligations the interest on which is exempt from tax under section 103, or any loan, debt, or other obligation incurred under subchapter I of chapter 31 of title 7 of the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.), as in effect on the date of the enactment of the Energy Tax Incentives Act)” after “project” in clause (ii) (as so redesignated),

(4) by adding at the end the following new sentence: “This paragraph shall not apply with respect to any facility described in subsection (d)(2)(A)(ii).”, and

(5) by striking “tax-exempt bonds,” in the heading and inserting “certain”.

(e) Treatment of Persons Not Able To Use Entire Credit.--Section 45(e) (relating to definitions and special rules), as redesignated by subsection (b)(1), is amended by adding at the end the following new paragraph:

“(8) Treatment of persons not able to use entire credit.--

“(A) Allowance of credit.--

“(i) In general.--Except as otherwise provided in this subsection--

“(I) any credit allowable under subsection (a) with respect to a qualified facility owned by a person described in clause (ii) may be transferred or used as provided in this paragraph, and

“(II) the determination as to whether the credit is allowable shall be made without regard to the tax-exempt status of the person.

“(ii) Persons described.--A person is described in this clause if the person is--

“(I) an organization described in section 501(c)(12)(C) and exempt from tax under section 501(a),

“(II) an organization described in section 1381(a)(2)(C),

“(III) a public utility (as defined in section 136(c)(2)(B)), which is exempt from income tax under this subtitle,

“(IV) any State or political subdivision thereof, the District of Columbia, any possession of the United States, or any agency or instrumentality of any of the foregoing, or

“(V) any Indian tribal government (within the meaning of section 7871) or any agency or instrumentality thereof.

“(B) Transfer of credit.--

“(i) In general.--A person described in subparagraph (A)(ii) may transfer any credit to which subparagraph (A)(i) applies through an assignment to any other person not described in subparagraph (A)(ii). Such transfer may be revoked only with the consent of the Secretary.

“(ii) Regulations.--The Secretary shall prescribe such regulations as necessary to ensure that any credit described in clause (i) is assigned once and not reassigned by such other person.

“(iii) Transfer proceeds treated as arising from essential government function.--Any proceeds derived by a person described in subclause (III), (IV), or (V) of subparagraph (A)(ii) from the transfer of any credit under clause (i) shall be treated as arising from the exercise of an essential government function.

“(C) Use of credit as an offset.--Notwithstanding any other provision of law, in the case of a person described in subclause (I), (II), or (V) of subparagraph (A)(ii), any credit to which subparagraph (A)(i) applies may be applied by such person, to the extent provided by the Secretary of Agriculture, as a prepayment of any loan, debt, or other obligation the entity has incurred under subchapter I of chapter 31 of title 7 of the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.), as in effect on the date of the enactment of the Energy Tax Incentives Act.

“(D) Credit not income.--Any transfer under subparagraph (B) or use under subparagraph (C) of any credit to which subparagraph (A)(i) applies shall not be treated as income for purposes of section 501(c)(12).

“(E) Treatment of unrelated persons.--For purposes of subsection (a)(2)(B), sales of electricity among and between persons described in subparagraph (A)(ii) shall be treated as sales between unrelated parties.”.

(f) Credit Allowed Against Regular and Minimum Tax.--

(1) In general.--Subsection (c) of section 38 (relating to limitation based on amount of tax) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph:

“(4) Special rules for section 45 credit.--

“(A) In general.--In the case of any section 45 credit--

“(i) this section and section 39 shall be applied separately with respect to such credit, and

“(ii) in applying paragraph (1) to such credit--

“(I) the tentative minimum tax shall be treated as being zero, and

“(II) the limitation under paragraph (1) (as modified by subclause (I)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the section 45 credit).

“(B) Section 45 credit.--For purposes of this subsection, the term ‘section 45 credit' means the credit determined under section 45 to the extent that such credit is attributable to electricity produced--

“(i) at a facility which is originally placed in service after the date of the enactment of this paragraph, and

“(ii) during the 4-year period beginning on the date that such facility was originally placed in service.”.

(2) Conforming amendments.--

(A) Paragraph (2)(A)(ii)(II) of section 38(c) of such Code is amended by striking “or” and inserting a comma and by inserting “, and the section 45 credit” after “employee credit”.

(B) Paragraph (3)(A)(ii)(II) of section 38(c) of such Code is amended by inserting “and the section 45 credit” after “employee credit”.

(g) Effective Dates.--

(1) In general.--Except as otherwise provided in this subsection, the amendments made by this section shall apply to electricity produced and sold--

(A) with respect to facilities described in paragraphs (1) and (2)(A)(i) of section 45(d), as amended by this section, after December 31, 2003, in taxable years ending after such date, and

(B) with respect to all other facilities described in section 45(d), as amended by this section, after September 30, 2004, in taxable years ending after such date.

(2) Certain biomass facilities.--With respect to any facility described in section 45(d)(3)(A)(ii) of the Internal Revenue Code of 1986, as added by subsection (b)(1), which is placed in service before the date of the enactment of this Act, the amendments made by this section shall apply to electricity produced and sold after September 30, 2004, in taxable years ending after such date.

(3) Credit rate for new facilities.--The amendments made by subsection (c) shall apply to electricity produced and sold after September 30, 2004, in taxable years ending after such date.

(4) Nonapplication of amendments to preeffective date poultry waste facilities.--The amendments made by this section shall not apply with respect to any poultry waste facility (within the meaning of section 45(c)(3)(C), as in effect on September 30, 2004) placed in service on or before such date.