[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 727 Introduced in Senate (IS)]
108th CONGRESS
1st Session
S. 727
To reauthorize a Department of Energy program to develop and implement
accelerated research, development, and demonstration projects for
advanced clean coal technologies for use in coal-based electricity
generating facilities, to amend the Internal Revenue Code of 1986 to
provide incentives for the use of those technologies, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 27, 2003
Mr. Byrd (for himself, Mr. Rockefeller, Mr. Thomas, Mr. Burns, Mr.
Dorgan, Mr. Allard, Mr. Durbin, Mr. Voinovich, Mr. Bayh, Mr. Enzi, Mr.
Campbell, and Mr. Conrad) introduced the following bill; which was read
twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To reauthorize a Department of Energy program to develop and implement
accelerated research, development, and demonstration projects for
advanced clean coal technologies for use in coal-based electricity
generating facilities, to amend the Internal Revenue Code of 1986 to
provide incentives for the use of those technologies, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``National Coal
Research, Development, and Demonstration Act of 2003''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--COAL RESEARCH AND DEVELOPMENT
Sec. 101. Definitions.
Sec. 102. Cost and performance goals.
Sec. 103. Production and generation of coal-based power.
Sec. 104. Coal and related technologies research and development
programs.
TITLE II--CLEAN COAL POWER INITIATIVE
Sec. 201. Definition of Secretary.
Sec. 202. Project criteria.
Sec. 203. Reports.
Sec. 204. Authorization of appropriations.
TITLE III--CLEAN COAL INCENTIVES
Subtitle A--Credit for Emission Reductions and Efficiency Improvements
in Existing Coal-Based Electricity Generation Facilities
Sec. 301. Credit for production from a qualifying clean coal technology
unit.
Subtitle B--Incentives for Early Commercial Applications of Advanced
Clean Coal Technologies
Sec. 311. Credit for investment in qualifying advanced clean coal
technology.
Sec. 312. Credit for production from a qualifying advanced clean coal
technology unit.
Subtitle C--Treatment of Persons Not Able To Use Entire Credit
Sec. 321. Treatment of persons not able to use entire credit.
TITLE I--COAL RESEARCH AND DEVELOPMENT
SEC. 101. DEFINITIONS.
In this title:
(1) Cost and performance goals.--The term ``cost and
performance goals'' means the cost and performance goals
identified under section 102.
(2) Secretary.--The term ``Secretary'' means the Secretary
of Energy.
SEC. 102. COST AND PERFORMANCE GOALS.
(a) Establishment of Cost and Performance Goals.--
(1) In general.--The Secretary shall conduct an assessment
that identifies cost and performance goals of technologies that
would permit the continued cost-competitive use of coal for
electricity generation, as chemical feedstocks, and as
transportation fuel in--
(A) 2007;
(B) 2015; and
(C) 2020 and thereafter.
(2) Consultation.--In identifying the cost and performance
goals, the Secretary shall--
(A) consider activities and studies undertaken by
industry in cooperation with the Department of Energy
in support of the assessment; and
(B) consult with interested entities, including--
(i) coal producers;
(ii) industries using coal;
(iii) organizations that promote coal and
advanced coal technologies;
(iv) environmental organizations; and
(v) organizations representing workers.
(3) Timing.--The Secretary shall--
(A) not later than 120 days after the date of
enactment of this Act, issue draft cost and performance
goals for public comment; and
(B) not later than 180 days after the date of
enactment of this Act, after taking into consideration
public comment, submit to Congress the final cost and
performance goals.
(b) Study.--
(1) In general.--Not later than 1 year after the date of
enactment of this Act, and once every 2 years thereafter
through 2016, the Secretary, in cooperation with other
appropriate Federal agencies, shall conduct a study to--
(A) identify technologies that, by themselves or in
combination with other technologies, may be capable of
achieving the cost and performance goals;
(B) assess the costs that would be incurred by, and
the period of time that would be required for, the
development and demonstration of technologies that, by
themselves or in combination with other technologies,
contribute to the achievement of the cost and
performance goals;
(C) develop recommendations for technology
development programs that the Department of Energy
could carry out, in cooperation with industry, to
develop and demonstrate technologies that, by
themselves or in combination with other technologies,
achieve the cost and performance goals; and
(D)(i) develop recommendations for additional
authorities required to achieve the cost and
performance goals; and
(ii) review and recommend changes, if any, to the
cost and performance goals if the Secretary determines
that changes are necessary as a result of ongoing
research, development, and demonstration of
technologies.
(2) Expert advice.--In carrying out this section, the
Secretary shall give due weight to the expert advice of
representatives of the entities described in subsection
(a)(2)(B).
SEC. 103. PRODUCTION AND GENERATION OF COAL-BASED POWER.
(a) In General.--The Secretary shall carry out a technology
research, development, and demonstration program to facilitate
production and generation of coal-based power through methods and
equipment under--
(1) this title;
(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) Cost and Performance Goals.--The program under subsection (a)
shall be designed to achieve the cost and performance goals.
SEC. 104. COAL AND RELATED TECHNOLOGIES RESEARCH AND DEVELOPMENT
PROGRAMS.
(a) In General.--The Secretary shall carry out coal and related
technologies research and development programs that include--
(1) innovations for existing plants;
(2) integrated gasification combined cycle systems;
(3) advanced combustion systems;
(4) turbines for synthesis gas derived from coal;
(5) carbon capture and sequestration research and
development;
(6) coal-derived transportation fuels and chemicals;
(7) solid fuels and feedstocks; and
(8) advanced coal-related research.
(b) Report.--At least 30 days before using funds made available
under subsection (c), the Secretary shall submit to Congress a report
that--
(1) describes the proposed use of the funds; and
(2) contains a plan that includes--
(A) a detailed description of the manner in which
any proposals will be solicited and evaluated,
including a list of all activities expected to be
undertaken;
(B) a detailed list of technical milestones for
each coal technology and related technology that will
be pursued; and
(C) a description of the manner in which the
programs authorized by this section will be carried out
so as to complement and not duplicate activities
authorized under title II.
(c) Authorization of Appropriations.--
(1) In general.--There are authorized to be appropriated to
carry out this section--
(A) $200,000,000 for fiscal year 2004;
(B) $210,000,000 for fiscal year 2005; and
(C) $220,500,000 for fiscal year 2006.
(2) Availability.--Funds made available under paragraph (1)
shall remain available until expended.
TITLE II--CLEAN COAL POWER INITIATIVE
SEC. 201. DEFINITION OF SECRETARY.
In this title, the term ``Secretary'' means the Secretary of
Energy.
SEC. 202. PROJECT CRITERIA.
(a) In General.--The Secretary shall carry out a program under
which the Secretary shall provide funding for projects that advance
efficiency, environmental performance, and cost competitiveness well
beyond the level of technologies that are in operation or have been
demonstrated as of the date of enactment of this Act.
(b) Technical Criteria for Clean Coal Power Initiative.--
(1) Gasification.--
(A) In general.--In allocating the funds made
available under section 204, the Secretary shall ensure
that not less than 60 nor more than 80 percent of the
funds are used for--
(i) coal-based gasification technologies;
(ii) coal-based projects that include the
separation and capture of carbon dioxide; or
(iii) coal-based projects that include
gasification combined cycle systems,
gasification fuel cells, gasification
coproduction, or hybrid gasification or
combustion.
(B) Technical milestones.--
(i) In general.--The Secretary shall
establish technical milestones specifying
emissions levels that coal gasification
projects shall be designed, and reasonably
expected, to achieve.
(ii) Increasing restrictiveness.--The
milestones shall become more restrictive
through the life of the program.
(iii) Requirements.--The milestones shall
be designed to develop, not later than 2020,
coal gasification projects that are capable
of--
(I) removing 99 percent of sulfur
dioxide;
(II) emitting not more than .05 lbs
of NOx per million Btu;
(III) achieving substantial
reductions in mercury emissions; and
(IV) achieving a thermal efficiency
of--
(aa) 60 percent for coal of
more than 9,000 Btu;
(bb) 59 percent for coal of
7,000 to 9,000 Btu; and
(cc) 57 percent for coal of
less than 7,000 Btu.
(2) Other projects.--
(A) In general.--For projects not described in
paragraph (1), the Secretary shall establish technical
milestones specifying emissions levels that the
projects shall be designed, and reasonably expected, to
achieve.
(B) Increasing restrictiveness.--The milestones
shall become more restrictive through the life of the
program.
(C) Requirements.--The milestones shall be designed
to develop, by 2010, projects that are capable of--
(i) removing 97 percent of sulfur dioxide;
(ii) emitting not more than .08 lbs of NOx
per million Btu;
(iii) achieving substantial reductions in
mercury emissions; and
(iv) achieving a thermal efficiency of--
(I) 45 percent for coal of more
than 9,000 Btu;
(II) 44 percent for coal of 7,000
to 9,000 Btu; and
(III) 42 percent for coal of less
than 7,000 Btu.
(3) Consultation.--Before establishing the technical
milestones under paragraphs (1) and (2), the Secretary shall
consult with--
(A) the Administrator of the Environmental
Protection Agency; and
(B) interested entities, including--
(i) coal producers;
(ii) industries using coal;
(iii) organizations promoting coal or
advanced coal technologies;
(iv) environmental organizations; and
(v) organizations representing workers.
(4) Existing units.--In the case of a project at a unit in
existence on the date of enactment of this Act, in lieu of the
thermal efficiency requirements specified in paragraphs
(1)(B)(iii)(IV) and (2)(C)(iv), the project shall be designed
to achieve an overall thermal design efficiency improvement,
compared to the efficiency of the unit as operated on the date
of enactment of this Act, of not less than--
(A) 7 percent for coal of more than 9,000 Btu;
(B) 6 percent for coal of 7,000 to 9,000 Btu; or
(C) 4 percent for coal of less than 7,000 Btu.
(c) Financial Criteria.--The Secretary shall not provide funding
under this title unless the recipient documents to the satisfaction of
the Secretary that--
(1) the recipient is financially viable without the receipt
of additional Federal funding;
(2) the recipient will provide sufficient information to
the Secretary for the Secretary to ensure that the funds are
spent efficiently and effectively; and
(3) a market exists for the technology to be demonstrated
or applied, as evidenced by statements of interest in writing
from potential purchasers of the technology.
(d) Financial Assistance.--The Secretary shall provide financial
assistance to projects that--
(1) meet the requirements of subsections (a), (b), and (c);
and
(2) are likely to--
(A) achieve overall cost reductions in the use of
coal to generate useful forms of energy;
(B) 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; and
(C) demonstrate methods and equipment that are
applicable to 25 percent of the electricity generating
facilities that use coal as the primary feedstock as of
the date of enactment of this Act.
(e) Clean Coal Centers of Excellence.--
(1) In general.--As part of the program authorized under
this section, the Secretary shall provide competitive, merit-
based grants to universities for the establishment of Centers
of Excellence for Energy Systems of the Future.
(2) Eligible universities.--The Secretary shall provide
grants under paragraph (1) to universities that show the
greatest potential for advancing new clean coal technologies.
(f) Federal Share.--The Federal share of the cost of a coal or
related technology project funded under this section shall not exceed
50 percent.
(g) Applicability.--No technology, or level of emission reduction,
shall be treated as adequately demonstrated for purposes of section 111
of the Clean Air Act (42 U.S.C. 7411), achievable for purposes of
section 169 of that Act (42 U.S.C. 7479), or achievable in practice for
purposes of section 171(3)(B) of that Act (42 U.S.C. 7501(3)(B)) solely
by reason of the use of that technology, or the achievement of that
emission reduction, by 1 or more facilities receiving assistance under
this title.
SEC. 203. REPORTS.
(a) Report on Technical Milestones.--Not later than 1 year after
the date of enactment of this Act, and once every 2 years thereafter
through 2011, the Secretary, in consultation with other Federal
agencies as appropriate, shall submit to the Committee on Energy and
Commerce and the Committee on Science of the House of Representatives,
and to the Senate, a report that describes--
(1) the technical milestones established under section 202,
including a description of how the milestones ensure that
progress will be made toward meeting the requirements of
paragraphs (1)(B) and (2) of section 202(b); and
(2) the status of projects funded under this title.
(b) Report Before Using Funding.--At least 30 days before using
funds made available under subsection (c), the Secretary shall submit
to the Committee on Energy and Commerce and the Committee on Science of
the House of Representatives, and to the Senate, a report that--
(1) describes the proposed use of funds; and
(2) includes--
(A) a detailed assessment of whether the aggregate
funding levels provided under section 204 are the
appropriate funding levels for the program under this
title;
(B) a detailed description of the manner in which
proposals will be solicited and evaluated, including a
list of all activities expected to be undertaken;
(C) a detailed list of technical milestones for
each coal technology and related technology that will
be pursued; and
(D) a detailed description of how the program will
avoid problems enumerated in General Accounting Office
reports on the Clean Coal Technology Program, including
problems that resulted in the failure to expend funds
and in projects that failed financially or
scientifically.
(c) Applicability.--Paragraph (1) shall not apply to a project
selected before September 30, 2003.
SEC. 204. AUTHORIZATION OF APPROPRIATIONS.
(a) In General.--There are authorized to be appropriated to carry
out this title $200,000,000 for each of fiscal years 2003 through 2011.
(b) Availability.--Funds made available under subsection (a) shall
remain available until expended.
TITLE III--CLEAN COAL INCENTIVES
Subtitle A--Credit for Emission Reductions and Efficiency Improvements
in Existing Coal-Based Electricity Generation Facilities
SEC. 301. 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 new section:
``SEC. 45G. 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 applicable percentage of the kilowatt hours of
electricity produced by the taxpayer during such taxable year
at a qualifying clean coal technology unit, but only if such
production occurs during the 10-year period beginning on the
date the unit was returned to service after becoming a
qualifying clean coal technology unit.
``(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 per kilowatt-hour of electricity produced and
the equivalent heat value of other fuels or chemicals produced
from not more than 300,000 kilowatts of nameplate capacity at
the same qualifying clean coal technology unit.
``(2) Inflation adjustment.--For calendar years after 2003,
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) Applicable Percentage.--For purposes of this section, with
respect to any qualifying clean coal technology unit, the applicable
percentage is the percentage equal to the ratio which the portion of
the national megawatt capacity limitation allocated to the taxpayer
with respect to such unit under subsection (e) bears to the total
megawatt capacity of such unit.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualifying clean coal technology unit.--The term
`qualifying clean coal technology unit' means a clean coal
technology unit of the taxpayer which--
``(A) on the date of the enactment of this section
was a coal-based electricity generating steam
generator-turbine unit which was not a clean coal
technology unit,
``(B) on such date of enactment had a nameplate
capacity rating of not more than 300,000 kilowatts,
``(C) becomes a clean coal technology unit as the
result of the retrofitting, repowering, or replacement
of the unit with clean coal technology, which nameplate
capacity may then be greater than 300,000 kilowatts,
during the 10-year period beginning on such date of
enactment,
``(D) is not receiving nor is scheduled to receive
funding under the Clean Coal Technology Program, the
Power Plant Improvement Initiative, or the Clean Coal
Power Initiative administered by the Secretary of
Energy, and
``(E) receives an allocation of a portion of the
national megawatt capacity limitation under subsection
(e).
``(2) Clean coal technology unit.--The term `clean coal
technology unit' means a unit which--
``(A) uses clean coal technology, 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) uses at least 75 percent coal to produce 50
percent or more of its thermal output as electricity,
``(C) has a design net heat rate of at least 500
less than that of such unit as described in paragraph
(1)(A),
``(D) has a maximum design net heat rate of not
more than 9,500, and
``(E) meets the pollution control requirements of
paragraph (3).
``(3) Pollution control requirements.--
``(A) In general.--A unit meets the requirements of
this paragraph if--
``(i) its emissions of sulfur dioxide,
nitrogen oxide, or particulates meet the lower
of the emission levels for each such emission
specified in--
``(I) subparagraph (B), or
``(II) the new source performance
standards of the Clean Air Act (42
U.S.C. 7411) which are in effect for
the category of source at the time of
the retrofitting, repowering, or
replacement of the unit, and
``(ii) its emissions do not exceed any
relevant emission level specified by regulation
pursuant to the hazardous air pollutant
requirements of the Clean Air Act (42 U.S.C.
7412) in effect at the time of the
retrofitting, repowering, or replacement.
``(B) Specific levels.--The levels specified in
this subparagraph are--
``(i) in the case of sulfur dioxide
emissions, 50 percent of the sulfur dioxide
emission levels specified in the new source
performance standards of the Clean Air Act (42
U.S.C. 7411) in effect on the date of the
enactment of this section for the category of
source,
``(ii) in the case of nitrogen oxide
emissions--
``(I) 0.1 pound per million Btu of
heat input if the unit is not a
cyclone-fired boiler, and
``(II) if the unit is a cyclone-
fired boiler, 15 percent of the
uncontrolled nitrogen oxide emissions
from such boilers, and
``(iii) in the case of particulate
emissions, 0.02 pound per million Btu of heat
input.
``(4) Design net heat rate.--The design net heat rate with
respect to any unit, measured in Btu per kilowatt hour (HHV)--
``(A) shall be based on the design annual heat
input to and the design annual net electrical power,
fuels, and chemicals output from such unit (determined
without regard to such unit's co-generation of steam),
``(B) shall be adjusted for the heat content of the
design coal to be used by the unit if it is less than
12,000 Btu per pound according to the following
formula:
Design net heat rate = Unit net heat rate X [l- {((12,000-design coal
heat content, Btu per pound)/1,000) X 0.013}],
``(C) shall be corrected for the site reference
conditions of--
``(i) elevation above sea level of 500
feet,
``(ii) air pressure of 14.4 pounds per
square inch absolute (psia),
``(iii) temperature, dry bulb of 63 deg.F,
``(iv) temperature, wet bulb of 54 deg.F,
and
``(v) relative humidity of 55 percent, and
``(D) shall be adjusted (or credit given) for any
unit which installs carbon capture controls which
remove not less than 50 percent of the unit's carbon
dioxide emissions up to the design net heat rate level
which would have resulted without installation of
carbon capture controls.
``(5) HHV.--The term `HHV' means higher heating value.
``(6) Application of certain rules.--The rules of
paragraphs (3), (4), and (5) of section 45(d) shall apply.
``(7) Inflation adjustment factor.--
``(A) In general.--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 2002.
``(B) 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.
``(8) Noncompliance with pollution laws.--For purposes of
this section, a unit which is not in compliance with the
applicable State and Federal pollution prevention, control, and
permit requirements for any period of time shall not be
considered to be a qualifying clean coal technology unit during
such period.
``(e) National Limitation on the Aggregate Capacity of Qualifying
Clean Coal Technology Units.--
``(1) In general.--For purposes of subsection (d)(1)(E),
the national megawatt capacity limitation for qualifying clean
coal technology units is 4,000 megawatts.
``(2) Allocation of limitation.--The Secretary shall
allocate the national megawatt capacity limitation for
qualifying clean coal technology units in such manner as the
Secretary may prescribe under the regulations under paragraph
(3), except that the allocation with respect to each such unit
shall not exceed 300,000 kilowatts.
``(3) Regulations.--Not later than 6 months after the date
of the enactment of this section, the Secretary shall prescribe
such regulations as may be necessary or appropriate--
``(A) to carry out the purposes of this subsection,
``(B) to limit the capacity of any qualifying clean
coal technology unit to which this section applies so
that the combined megawatt capacity allocated to all
such units under this subsection when all such units are placed in
service during the 10-year period described in subsection (d)(1)(C),
does not exceed 4,000 megawatts,
``(C) to provide a certification process under
which the Secretary, in consultation with the Secretary
of Energy, shall approve and allocate the national
megawatt capacity limitation--
``(i) to encourage that units with the
highest thermal efficiencies, when adjusted for
the heat content of the design coal and site
reference conditions described in subsection
(d)(4)(C), and superior environmental
performance compared to other proposals, be
placed in service as soon as possible, and
``(ii) to allocate capacity to taxpayers
which have a definite and credible plan for
placing into commercial operation a qualifying
clean coal technology unit, including--
``(I) a site,
``(II) contractual commitments for
procurement and construction or, in the
case of regulated utilities, the
agreement of the State utility
commission,
``(III) filings for all necessary
preconstruction approvals,
``(IV) a demonstrated record of
having successfully completed
comparable projects on a timely basis,
and
``(V) such other factors that the
Secretary determines are appropriate,
``(D) to allocate the national megawatt capacity
limitation to a portion of the capacity of a qualifying
clean coal technology unit if the Secretary determines
that such an allocation would maximize the amount of
efficient production encouraged with the available tax
credits,
``(E) to set progress requirements and conditional
approvals so that capacity allocations for clean coal
technology units which become unlikely to meet the
necessary conditions for qualifying can be reallocated
by the Secretary to other clean coal technology units,
and
``(F) to provide taxpayers with opportunities to
correct administrative errors and omissions with
respect to allocations and record keeping within a
reasonable period after discovery, taking into account
the availability of regulations and other
administrative guidance from the Secretary.''.
(b) Credit Treated as Business Credit.--Section 38(b) of the
Internal Revenue Code of 1986 (relating to current year business
credit) is amended by striking ``plus'' at the end of paragraph (14),
by striking the period at the end of paragraph (15) and inserting ``,
plus'', and by adding at the end the following new paragraph:
``(16) the qualifying clean coal technology production
credit determined under section 45G(a).''.
(c) 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 new paragraph:
``(11) No carryback of section 45g credit before effective
date.--No portion of the unused business credit for any taxable
year which is attributable to the qualifying clean coal
technology production credit determined under section 45G may
be carried back to a taxable year ending on or before the date
of the enactment of section 45G.''.
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by adding at the end the following new item:
``Sec. 45G. Credit for production from a qualifying clean coal
technology unit.''.
(e) Effective Date.--The amendments made by this section shall
apply to production after the date of the enactment of this Act, in
taxable years ending after such date.
Subtitle B--Incentives for Early Commercial Applications of Advanced
Clean Coal Technologies
SEC. 311. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN COAL
TECHNOLOGY.
(a) Allowance of Qualifying Advanced 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 new
paragraph:
``(4) the qualifying advanced clean coal technology unit
credit.''.
(b) Amount of Qualifying Advanced 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 new section:
``SEC. 48A. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY UNIT CREDIT.
``(a) In General.--For purposes of section 46, the qualifying
advanced clean coal technology unit credit for any taxable year is an
amount equal to 10 percent of the applicable percentage of the
qualified investment in a qualifying advanced clean coal technology
unit for such taxable year.
``(b) Qualifying Advanced Clean Coal Technology Unit.--
``(1) In general.--For purposes of subsection (a), the term
`qualifying advanced clean coal technology unit' means an
advanced clean coal technology unit of the taxpayer--
``(A)(i)(I) in the case of a unit first placed in
service after the date of the enactment of this
section, the original use of which commences with the
taxpayer, or
``(II) in the case of the retrofitting or
repowering of a unit first placed in service before
such date of enactment, the retrofitting or repowering
of which is completed by the taxpayer after such date,
or
``(ii) which is acquired through purchase (as
defined by section 179(d)(2)),
``(B) which is depreciable under section 167,
``(C) which has a useful life of not less than 4
years,
``(D) which is located in the United States,
``(E) which is not receiving nor is scheduled to
receive funding under the Clean Coal Technology
Program, the Power Plant Improvement Initiative, or the
Clean Coal Power Initiative administered by the
Secretary of Energy,
``(F) which is not a qualifying clean coal
technology unit, and
``(G) which receives an allocation of a portion of
the national megawatt capacity limitation under
subsection (f).
``(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 unit 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) Noncompliance with pollution laws.--For purposes of
this subsection, a unit which is not in compliance with the
applicable State and Federal pollution prevention, control, and
permit requirements for any period of time shall not be
considered to be a qualifying advanced clean coal technology
unit during such period.
``(c) Applicable Percentage.--For purposes of this section, with
respect to any qualifying advanced clean coal technology unit, the
applicable percentage is the percentage equal to the ratio which the
portion of the national megawatt capacity limitation allocated to the
taxpayer with respect to such unit under subsection (f) bears to the
total megawatt capacity of such unit.
``(d) Advanced Clean Coal Technology Unit.--For purposes of this
section--
``(1) In general.--The term `advanced clean coal technology
unit' means a new, retrofit, or repowering unit of the taxpayer
which--
``(A) is--
``(i) an eligible advanced pulverized coal
or atmospheric fluidized bed combustion
technology unit,
``(ii) an eligible pressurized fluidized
bed combustion technology unit,
``(iii) an eligible integrated gasification
combined cycle technology unit, or
``(iv) an eligible other technology unit,
and
``(B) meets the carbon emission rate requirements
of paragraph (6).
``(2) Eligible advanced pulverized coal or atmospheric
fluidized bed combustion technology unit.--The term `eligible
advanced pulverized coal or atmospheric fluidized bed
combustion technology unit' means a clean coal technology unit
using advanced pulverized coal or atmospheric fluidized bed
combustion technology which--
``(A) is placed in service after the date of the
enactment of this section and before January 1, 2015,
and
``(B) has a design net heat rate of not more than
8,500 (8,900 in the case of units placed in service
before 2011).
``(3) Eligible pressurized fluidized bed combustion
technology unit.--The term `eligible pressurized fluidized bed
combustion technology unit' means a clean coal technology unit
using pressurized fluidized bed combustion technology which--
``(A) is placed in service after the date of the
enactment of this section and before January 1, 2019,
and
``(B) has a design net heat rate of not more than
7,720 (8,900 in the case of units placed in service
before 2011, and 8,500 in the case of units placed in
service after 2010 and before 2015).
``(4) Eligible integrated gasification combined cycle
technology unit.--The term `eligible integrated gasification
combined cycle technology unit' means a clean coal technology
unit using integrated gasification combined cycle technology,
with or without fuel or chemical co-production, which--
``(A) is placed in service after the date of the
enactment of this section and before January 1, 2019,
``(B) has a design net heat rate of not more than
7,720 (8,900 in the case of units placed in service
before 2011, and 8,500 in the case of units placed in
service after 2010 and before 2015), and
``(C) has a net thermal efficiency (HHV) using coal
with fuel or chemical co-production of not less than
44.2 percent (38.4 percent in the case of units placed
in service before 2011, and 40.2 percent in the case of
units placed in service after 2010 and before 2015).
``(5) Eligible other technology unit.--The term `eligible
other technology unit' means a clean coal technology unit using
any other technology for the production of electricity which is
placed in service after the date of the enactment of this
section and before January 1, 2019.
``(6) Carbon emission rate requirements.--
``(A) In general.--Except as provided in
subparagraph (B), a unit meets the requirements of this
paragraph if--
``(i) in the case of a unit using design
coal with a heat content of not more than 9,000
Btu per pound, the carbon emission rate is less
than 0.60 pound of carbon per kilowatt hour,
and
``(ii) in the case of a unit using design
coal with a heat content of more than 9,000 Btu
per pound, the carbon emission rate is less
than 0.54 pound of carbon per kilowatt hour.
``(B) Eligible other technology unit.--In the case
of an eligible other technology unit, subparagraph (A)
shall be applied by substituting `0.51' and `0.459' for
`0.60' and `0.54', respectively.
``(e) General Definitions.--Any term used in this section which is
also used in section 45G shall have the meaning given such term in
section 45G.
``(f) National Limitation on the Aggregate Capacity of Advanced
Clean Coal Technology Units.--
``(1) In general.--For purposes of subsection (b)(1)(G),
the national megawatt capacity limitation is--
``(A) for qualifying advanced clean coal technology
units using advanced pulverized coal or atmospheric
fluidized bed combustion technology, not more than
1,000 megawatts (not more than 500 megawatts in the
case of units placed in service before 2011),
``(B) for such units using pressurized fluidized
bed combustion technology, not more than 500 megawatts
(not more than 250 megawatts in the case of units
placed in service before 2011),
``(C) for such units using integrated gasification
combined cycle technology, with or without fuel or
chemical co-production, not more than 2,000 megawatts
(not more than 750 megawatts, or not more than 1
project with a design net heat rate greater than 8,900
Btu per kilowatt hour, whichever is less, in the case
of units placed in service before 2011), and
``(D) for such units using other technology for the
production of electricity, not more than 500 megawatts
(not more than 250 megawatts in the case of units
placed in service before 2011).
``(2) Allocation of limitation.--The Secretary shall
allocate the national megawatt capacity limitation for
qualifying advanced clean coal technology units in such manner
as the Secretary may prescribe under the regulations under
paragraph (3).
``(3) Regulations.--Not later than 6 months after the date
of the enactment of this section, the Secretary shall prescribe
such regulations as may be necessary or appropriate--
``(A) to carry out the purposes of this subsection
and section 45H,
``(B) to limit the capacity of any qualifying
advanced clean coal technology unit to which this
section applies so that the combined megawatt capacity
of all such units to which this section applies does
not exceed 4,000 megawatts,
``(C) to provide a certification process described
in section 45G(e)(3)(C),
``(D) to carry out the purposes described in
subparagraphs (D), (E), and (F) of section 45G(e)(3),
and
``(E) to reallocate capacity which is not allocated
to any technology described in subparagraphs (A)
through (D) of paragraph (1) because an insufficient
number of qualifying units request an allocation for
such technology, to another technology described in
such subparagraphs in order to maximize the amount of
energy efficient production encouraged with the
available tax credits.
``(4) Selection criteria.--For purposes of paragraph
(3)(C), the selection criteria for allocating the national
megawatt capacity limitation to qualifying advanced clean coal
technology units--
``(A) shall be established by the Secretary of
Energy as part of a competitive solicitation,
``(B) shall include primary criteria of minimum
design net heat rate, maximum design thermal
efficiency, environmental performance, and lowest cost
to the Government,
``(C) shall include criteria for the selection of 1
or more units which achieve a thermal efficiency of
lower than 8,900 Btu per kilowatt hour in that instance
where 2 or more projects are otherwise eligible for the
credit under this section, and have applied to the
Secretary for selection during approximately the same
time period, and
``(D) shall include supplemental criteria as
determined appropriate by the Secretary of Energy.
``(g) 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 unit placed in
service by the taxpayer during such taxable year (in the case of a unit
described in subsection (b)(1)(A)(i)(II), only that portion of the
basis of such unit which is properly attributable to the retrofitting
or repowering of such unit).
``(h) 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 (g) 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
advanced clean coal technology unit 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 unit 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.
``(i) 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.''.
(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 new paragraph:
``(6) Special rules relating to qualifying advanced clean
coal technology unit.--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 advanced clean coal
technology unit (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 advanced clean coal technology unit
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
advanced clean coal technology unit 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 unit under section 48A, except that the
amount of the increase in tax under subparagraph (A) of
this paragraph shall be substituted for 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 unit.''.
(d) Transitional Rule.--Section 39(d) of the Internal Revenue Code
of 1986 (relating to transitional rules), as amended by this Act, is
amended by adding at the end the following new paragraph:
``(12) 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 advanced clean
coal technology unit credit determined under section 48A may be
carried back to a taxable year ending on or before the date of
the 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 new clause:
``(iv) the portion of the basis of any
qualifying advanced clean coal technology unit
attributable to any qualified investment (as
defined by section 48A(g)).''.
(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 new paragraph:
``(6) Nonapplication.--Paragraphs (1) and (2) shall not
apply to any qualifying advanced 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 new item:
``Sec. 48A. Qualifying advanced clean coal technology unit credit.''.
(f) 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. 312. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED CLEAN COAL
TECHNOLOGY UNIT.
(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), as amended by this Act, is amended by adding at the end the
following new section:
``SEC. 45H. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED CLEAN COAL
TECHNOLOGY UNIT.
``(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 applicable percentage (as determined under
section 48A(c)) of 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 unit during the 10-
year period beginning on the date the unit was originally
placed in service (or returned to service after becoming a
qualifying advanced clean coal technology unit).
``(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 unit shall be determined as follows:
``(1) Where the qualifying advanced clean coal technology
unit is producing electricity only:
``(A) In the case of a unit originally placed in
service before 2011, if--
------------------------------------------------------------------------
The applicable amount is:
``The design net ----------------------------------------------
heat rate is: For 1st 5 years of For 2d 5 years of
such service such service
------------------------------------------------------------------------
Not more than $.0060 $.0038
More than 8,500 $.0025 $.0010
but not more
than 8,750.
More than 8,750 $.0010 $.0010.
but less than
8,900.
------------------------------------------------------------------------
``(B) In the case of a unit originally placed in
service after 2010 and before 2015, if--
------------------------------------------------------------------------
The applicable amount is:
``The design net ----------------------------------------------
heat rate is: For 1st 5 years of For 2d 5 years of
such service such service
------------------------------------------------------------------------
Not more than $.0105 $.0090
More than 7,770 $.0085 $.0068
but not more
than 8,125.
More than 8,125 $.0075 $.0055.
but less than
8,350.
------------------------------------------------------------------------
``(C) In the case of a unit originally placed in
service after 2014 and before 2019, if--
------------------------------------------------------------------------
The applicable amount is:
``The design net ----------------------------------------------
heat rate is: For 1st 5 years of For 2d 5 years of
such service such service
------------------------------------------------------------------------
Not more than $.0140 $.0115
More than 7,380 $.0120 $.0090.
but not more
than 7,720.
------------------------------------------------------------------------
``(2) Where the qualifying advanced clean coal technology
unit is producing fuel or chemicals:
``(A) In the case of a unit originally placed in
service before 2011, if--
------------------------------------------------------------------------
``The unit design The applicable amount is:
net thermal ----------------------------------------------
efficiency (HHV) For 1st 5 years of For 2d 5 years of
is: such service such service
------------------------------------------------------------------------
Not less than $.0060 $.0038
Less than 40.6 $.0025 $.0010
but not less
than 40 percent.
Less than 40 but $.0010 $.0010.
not less than
38.4 percent.
------------------------------------------------------------------------
``(B) In the case of a unit originally placed in
service after 2010 and before 2015, if--
------------------------------------------------------------------------
``The unit design The applicable amount is:
net thermal ----------------------------------------------
efficiency (HHV) For 1st 5 years of For 2d 5 years of
is: such service such service
------------------------------------------------------------------------
Not less than $.0105 $.0090
Less than 43.6 $.0085 $.0068
but not less
than 42 percent.
Less than 42 but $.0075 $.0055.
not less than
40.2 percent.
------------------------------------------------------------------------
``(C) In the case of a unit originally placed in
service after 2014 and before 2019, if--
------------------------------------------------------------------------
``The unit design The applicable amount is:
net thermal ----------------------------------------------
efficiency (HHV) For 1st 5 years of For 2d 5 years of
is: such service such service
------------------------------------------------------------------------
Not less than $.0140 $.0115
Less than 44.2 $.0120 $.0090.
but not less
than 43.9
percent.
------------------------------------------------------------------------
``(c) Special Rule.--A qualifying clean coal technology facility
originally placed in service before 2009 which has a design net heat
rate which meets a lower heat rate test in subparagraphs (A), (B), and
(C) of subsection (b)(1) and subparagraphs (A), (B), and (C) of
subsection (b)(2) or a qualifying clean coal technology facility
originally placed in service before 2013 which has a design net heat
rate which meets a lower heat rate test in paragraph (1)(C) or (2)(C)
of subsection (b) shall receive the highest applicable amount with
respect to a production credit for which such facility qualifies.
``(d) Inflation Adjustment.--For calendar years after 2003, each
amount in paragraphs (1) and (2) of subsection (b) 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.
``(e) Definitions and Special Rules.--For purposes of this
section--
``(1) In general.--Any term used in this section which is
also used in section 45G or 48A shall have the meaning given
such term in such section.
``(2) Applicable rules.--The rules of paragraphs (3), (4),
and (5) of section 45(d) shall apply.''.
(b) Credit Treated as Business Credit.--Section 38(b) of the
Internal Revenue Code of 1986 (relating to current year business
credit), as amended by this Act, is amended by striking ``plus'' at the
end of paragraph (15), by striking the period at the end of paragraph
(16) and inserting ``, plus'', and by adding at the end the following
new paragraph:
``(17) the qualifying advanced clean coal technology
production credit determined under section 45H(a).''.
(c) Transitional Rule.--Section 39(d) of the Internal Revenue Code
of 1986 (relating to transitional rules), as amended by this Act, is
amended by adding at the end the following new paragraph:
``(13) No carryback of section 45h 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 45H
may be carried back to a taxable year ending on or before the
date of the enactment of section 45H.''.
(d) Denial of Double Benefit.--Section 29(d) of the Internal
Revenue Code of 1986 (relating to other definitions and special rules)
is amended by adding at the end the following new paragraph:
``(9) Denial of double benefit.--This section shall not
apply with respect to any qualified fuel the production of
which may be taken into account for purposes of determining the
credit under section 45H.''.
(e) 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 this Act, is amended by adding at the end the
following new item:
``Sec. 45H. Credit for production from a qualifying advanced clean coal
technology unit.''.
(f) Effective Date.--The amendments made by this section shall
apply to production after the date of the enactment of this Act, in
taxable years ending after such date.
Subtitle C--Treatment of Persons Not Able To Use Entire Credit
SEC. 321. TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT.
(a) In General.--Section 45G of the Internal Revenue Code of 1986,
as added by this Act, is amended by adding at the end the following new
subsection:
``(f) Treatment of Person Not Able To Use Entire Credit.--
``(1) Allowance of credits.--
``(A) In general.--Any credit allowable under this
section, section 45H, or section 48A with respect to a
facility owned by a person described in subparagraph
(B) may be transferred or used as provided in this
subsection, and the determination as to whether the
credit is allowable shall be made without regard to the
tax-exempt status of the person.
``(B) Persons described.--A person is described in
this subparagraph 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)),
``(iv) any State or political subdivision
thereof, the District of Columbia, or any
agency or instrumentality of any of the
foregoing,
``(v) any Indian tribal government (within
the meaning of section 7871) or any agency or
instrumentality thereof, or
``(vi) the Tennessee Valley Authority.
``(2) Transfer of credit.--
``(A) In general.--A person described in clause
(i), (ii), (iii), (iv), or (v) of paragraph (1)(B) may
transfer any credit to which paragraph (1)(A) applies
through an assignment to any other person not described
in paragraph (1)(B). Such transfer may be revoked only
with the consent of the Secretary.
``(B) Regulations.--The Secretary shall prescribe
such regulations as necessary to insure that any credit
described in subparagraph (A) is claimed once and not
reassigned by such other person.
``(C) Transfer proceeds treated as arising from
essential government function.--Any proceeds derived by
a person described in clause (iii), (iv), or (v) of
paragraph (1)(B) from the transfer of any credit under
subparagraph (A) shall be treated as arising from the
exercise of an essential government function.
``(3) Use by tva.--
``(A) In general.--Notwithstanding any other
provision of law, in the case of a person described in
paragraph (1)(B)(vi), any credit to which paragraph
(1)(A) applies may be applied as a credit against the
payments required to be made in any fiscal year under
section 15d(e) of the Tennessee Valley Authority Act of
1933 (16 U.S.C. 831n-4(e)) as an annual return on the
appropriations investment and an annual repayment sum.
``(B) Treatment of credits.--The aggregate amount
of credits described in paragraph (1)(A) with respect
to such person 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
paragraph (1)(A) with respect to such person exceeds
the aggregate amount of payment obligations described
in subparagraph (A), the excess amount shall remain
available for application as credits against the
amounts of such payment obligations in succeeding
fiscal years in the same manner as described in this
paragraph.
``(4) Credit not income.--Any transfer under paragraph (2)
or use under paragraph (3) of any credit to which paragraph
(1)(A) applies shall not be treated as income for purposes of
section 501(c)(12).
``(5) Treatment of unrelated persons.--For purposes of this
subsection, sales among and between persons described in
clauses (i), (ii), (iii), (iv), and (v) of paragraph (1)(A)
shall be treated as sales between unrelated parties.''.
(b) Effective Date.--The amendment made by this section shall apply
to production after the date of the enactment of this Act, in taxable
years ending after such date.
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