I
109th CONGRESS
1st Session
H. R. 2828
IN THE HOUSE OF REPRESENTATIVES
June 9, 2005
Mr. Inslee (for himself, Mr. Van Hollen, Mr. Holt, Mr. Israel, Mr. Honda, Mr. McDermott, Mr. Larsen of Washington, Mr. Jackson of Illinois, Ms. Schakowsky, Mr. Langevin, Mr. Grijalva, Mr. Emanuel, Ms. Baldwin, Mr. George Miller of California, and Mr. Smith of Washington) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committees on Science, Ways and Means, Financial Services, Transportation and Infrastructure, Education and the Workforce, Government Reform, and Agriculture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned
A BILL
To ensure that the United States leads the world in developing and manufacturing next generation energy technologies, to grow the economy of the United States, to create new highly trained, highly skilled American jobs, to eliminate American overdependence on foreign oil, and to address the threat of global warming.
Short title; table of contents
Short title
This Act may be cited as the New Apollo Energy Act of 2005
.
Table of contents
The table of contents of this Act is as follows:
Sec. 1. Short title; table of contents
Title I—Findings and performance goals
Sec. 101. Findings
Sec. 102. Performance goals
Title II—Federal research and development partnerships with industry for new technology
Subtitle A—General provisions
Sec. 201. Authorization of appropriations
Sec. 202. Participation
Sec. 203. Cost sharing
Sec. 204. Education and outreach
Sec. 205. Definition
Subtitle B—Clean energy technology research program
Sec. 211. Definitions
Sec. 212. Enhanced clean energy research, development, and demonstration
Subtitle C—Energy efficiency research, development, and demonstration program
Sec. 221. Enhanced energy efficiency research, development, and demonstration
Sec. 222. Enhanced aeronautical system energy efficiency research, development, and public-private partnership
Sec. 223. Next Generation Lighting Initiative
Sec. 224. National Building Performance Initiative
Subtitle D—Additional research programs
Part 1—Fusion
Sec. 231. Plan for fusion experiment
Sec. 232. Definitions
Part 2—Ultra-deepwater and extended reach drilling and carbon sequestration technologies
Sec. 241. Program authority
Sec. 242. Ultra-deepwater and extended reach drilling and carbon sequestration and unconventional technologies program
Sec. 243. Sunset
Sec. 244. Definitions
Title III—Tax incentives for new technologies
Sec. 301. References
Sec. 302. Administration of title
Subtitle A—Near term tax incentives
Sec. 311. Extension through 2015 for placing qualified facilities in service for producing renewable electric energy
Sec. 312. Expansion and modification of renewable resource credit
Sec. 313. Tradable renewable resource credit for public utilities and other tax exempt organizations
Sec. 314. Alternative motor vehicle credit
Sec. 315. Modification of credit for qualified electric vehicles
Sec. 316. Extension of biodiesel tax credits
Sec. 317. Credit for retail sale of alternative fuels as motor vehicle fuel
Sec. 318. Study of effectiveness of certain provisions by GAO
Sec. 319. Extension of deduction for certain refueling property
Sec. 320. Credit for installation of alternative fueling stations
Sec. 321. Incentive for certain energy efficient property used in business
Sec. 322. Energy efficient commercial buildings deduction
Sec. 323. Credit for construction of new highly energy-efficient homes
Sec. 324. Credit for energy efficient appliances
Sec. 325. Credit for distributed energy generation and demand management property
Sec. 326. Credit for energy efficient recycling or remanufacturing equipment
Sec. 327. Credit for distributed energy generation and demand management property used in residences
Sec. 328. Credit for energy management systems using residential real time metering systems
Sec. 329. Credit for flywheel property
Sec. 330. Credits for clean coal
Subtitle B—Long Term Incentives
Sec. 331. Tax incentives for retooling and investment in new facilities and assets to produce energy efficiency technologies and domestic clean energy production technologies
Sec. 332. Special rules for automotive industry
Sec. 333. Special rules for high-capacity airplanes
Sec. 334. New electricity transmission lines designed primarily to carry electricity from renewable energy resources
Sec. 335. New energy technologies commission
Sec. 336. Expenditure limitation
Title IV—Federal Government leverage to move new technologies to market
Sec. 401. Improved coordination of technology transfer activities
Sec. 402. Federal support for commercialization of new technologies
Sec. 403. Clean energy technology exports program
Sec. 404. International energy technology deployment program
Sec. 405. Risk pool for qualifying advanced clean energy technology
Sec. 406. Federal renewable and clean energy use
Sec. 407. Require the Export-Import Bank of the United States to meet renewable energy targets in its lending practices
Sec. 408. Grants for transit programs
Sec. 409. Grants for water and sewer improvement programs
Sec. 410. Loans for high-efficiency vehicles
Sec. 411. Requirement regarding purchase of motor vehicles by Executive agencies
Sec. 412. Federal energy efficiency
Sec. 413. Federal agency ethanol-blended gasoline and biodiesel purchasing requirement
Sec. 414. Permitting of wind energy development projects on public lands
Sec. 415. Energy savings performance contracts
Sec. 416. Municipality grants for distributed energy plans
Sec. 417. Green building standards for Federal buildings
Title V—Consumer protection and assistance
Sec. 501. Strategic Petroleum Reserve
Sec. 502. Regulatory oversight over energy trading markets and metals trading markets
Sec. 503. Increased funding for liheap, weatherization assistance
Sec. 504. National energy efficient housing
Sec. 505. National net metering requirement for utilities and interconnection standards for distributive energy generation
Sec. 506. Appliance standards
Sec. 507. Energy Star certification for solar water heaters
Sec. 508. Electric reliability standards
Title VI—Market-based Initiatives to reduce greenhouse gases
Sec. 600. Definitions
Subtitle A—Federal climate change research and related activities
Sec. 601. National Science Foundation fellowships
Sec. 602. Research grants
Sec. 603. Abrupt climate change research
Sec. 604. NIST greenhouse gas functions
Sec. 605. Development of new measurement technologies
Sec. 606. Enhanced environmental measurements and standards
Sec. 607. Technology development and diffusion
Sec. 608. Agricultural outreach program
Sec. 609. NOAA report on climate change effects; preparation assistance
Subtitle B—National Greenhouse Gas Database
Sec. 611. National Greenhouse Gas Database and registry established
Sec. 612. Inventory of greenhouse gas emissions for covered entities
Sec. 613. Greenhouse gas reduction reporting
Sec. 614. Measurement and verification
Subtitle C—Market-driven greenhouse gas reductions
Chapter 1—Emission reduction requirements; use of tradeable allowances
Sec. 621. Covered entities must submit allowances for emissions
Sec. 622. Compliance
Sec. 623. Borrowing against future reductions
Sec. 624. Other uses of tradeable allowances
Sec. 625. Exemption of source categories
Chapter 2—Establishment and allocation of tradeable allowances
Sec. 631. Establishment of tradeable allowances
Sec. 632. Determination of tradeable allowance allocations
Sec. 633. Allocation of tradeable allowances
Sec. 634. Ensuring target adequacy
Sec. 635. Initial allocations for early participation and accelerated participation
Sec. 636. Bonus for accelerated participation
Chapter 3—Climate Change Credit Corporation
Sec. 641. Establishment
Sec. 642. Purposes and functions
Chapter 4—Sequestration accounting; penalties
Sec. 651. Penalties
Sec. 652. Sequestration accounting
Title VII—Energy Independence
Subtitle A—Renewable fuels standard
Sec. 701. Renewable fuels standard
Sec. 702. Elimination of oxygen content requirement for reformulated gasoline
Sec. 703. Public health and environmental impacts of fuels and fuel additives
Sec. 704. Analyses of motor vehicle fuel changes
Sec. 705. Additional Opt-in areas under reformulated gasoline program
Sec. 706. Federal enforcement of State fuels requirements
Sec. 707. Fuel system requirements harmonization study
Sec. 708. Report on renewable motor fuel
Subtitle B—Renewable portfolio standard
Sec. 711. Renewable portfolio standard
Subtitle C—Oil Savings
Sec. 721. Oil savings
Sec. 722. Determination of Equivalency between CAFE credits and greenhouse gas credits
Sec. 723. Elimination of 2–FLEET rule
Subtitle D—Loan guarantees for biorefineries and renewable electricity generation facilities
Sec. 731. Loan guarantees for biorefineries and renewable energy production facilities
Title VIII—Tax offsets
Sec. 801. References
Subtitle A—Budget neutrality
Sec. 811. Tax reductions limited to revenue raised by tax offsets
Subtitle B—Denial of treaty benefits
Sec. 821. Denial of treaty benefits for certain deductible payments
Subtitle C—Abusive tax shelter shutdown and taxpayer accountability
Sec. 831. Findings and purpose
Sec. 832. Clarification of economic substance doctrine
Sec. 833. Penalty for understatements attributable to transactions lacking economic substance, etc
Sec. 834. Understatement of taxpayer’s liability by income tax return preparer
Sec. 835. Frivolous tax submissions
Sec. 836. Expanded authority to disallow tax benefits under section 269
Findings and performance goals
Findings
Findings
The Congress finds the following:
The United States imports over half the oil it consumes and consumes about one fourth of the world’s daily oil production.
According to present trends, the United States reliance on foreign oil will increase to 68 percent of total consumption by 2025.
Having only 3 percent of the world’s known oil reserves, the health of the United States economy is dependent on world oil prices.
World oil prices are overwhelmingly dictated by countries other than the United States, particularly by the member countries of the Organization of Petroleum Exporting Countries.
A major portion of the world’s oil supply is controlled by unstable governments and countries that are known to finance, harbor, or otherwise support terrorists and terrorist activities.
Since World War II, the United States has made significant expenditures of American taxpayer dollars in attempts to stabilize governments and protect American interests in the Middle East.
Countries such as Japan, Germany, Denmark, and Great Britain lead the United States in manufacturing alternative energy technologies that both decrease reliance on fossil fuels and do not contribute to global warming.
The United States has led the world in the development of a wide array of technological advances and is now poised to lead the world, using its unique national genius for innovation, in the development of a host of new energy technologies.
Development of renewable energy resources in the United States offers a substantial opportunity for economic development in rural, agriculture-dependent areas.
A bold new national energy plan can lead to a surge of investment in, development of, and deployment of clean energy and energy efficient technologies that would result in the creation of millions of highly trained manufacturing and technical jobs throughout the American economy.
Innovative uses of tax incentives to encourage the manufacturing of new clean energy technologies in the United States will help create American jobs, decrease America’s dependence on foreign oil, and address pressing environmental concerns, and are preferable to large tax breaks for the wealthiest in society.
Human activities have caused rapid increases in atmospheric concentrations of carbon dioxide and other greenhouse gases in the last century.
According to the Intergovernmental Panel on Climate Change and the National Research Council—
the Earth has warmed in the last century; and
the majority of the observed warming is attributable to human activities, including fossil fuel-generated carbon dioxide emissions.
Despite the fact that many uncertainties in climate science remain, the potential impacts from human-induced climate change pose a substantial risk that should be managed in a responsible manner.
The United States has ratified the UNFCCC (United Nations Framework Convention on Climate Change), which states, in part, the Parties to the Convention are to implement policies with the aim of returning to their 1990 levels anthropogenic emissions of carbon dioxide and other greenhouse gases
.
Global warming poses a significant threat to national security, the American economy, public health and welfare, and the global environment. According to a report commissioned by the Department of Defense in 2003 entitled An Abrupt Climate Change Scenario and its Implications for United States National Security
, the risk of abrupt climate change due to global warming should be elevated beyond a scientific debate to a US national security concern.
Performance goals
New Apollo Energy Act Performance Goals
In order to ensure that the national energy policy of the United States is the most effective policy for protecting national and homeland security, expanding our economy and creating jobs, addressing global warming and environmental health concerns, and protecting the interests of American consumers, Congress establishes the New Apollo Energy Act Performance Goals, which the President shall consider when formulating and enforcing national energy policy. These goals are to—
reduce demand for oil in the United States by at least 600,000 barrels per day from the demand for oil projected by the Energy Information Administration for 2010, 1,700,000 barrels per day from projected demand for oil in 2015, and 3,000,000 barrels per day from projected demand for oil in 2020;
create and retain 3,000,000 new highly skilled, high-waged jobs in the United States by 2015;
meet 15 percent of the country’s electricity needs from electricity generated from renewable resources by 2015, and 5 percent of the country’s electricity needs from electricity generated from carbon-based zero emission carbon dioxide sources by 2015;
produce 8,100,000,000 gallons per year of renewable fuels, including traditional ethanol, cellulose ethanol, and biodiesel by 2013 without creating regional cost disparities for fuel;
lower energy costs for consumers by meeting 25 percent of energy supply needs, as projected for the year 2013 by the Energy Information Administration, through increased conservation and improved energy efficiency;
maximize long-term production of existing domestic marginal and stripper oil reserves;
encourage stable energy prices and markets by promoting energy production and energy infrastructure modernization, while maintaining existing environmental protections;
reduce total carbon dioxide emissions in the United States to 5,806,100,000 metric tons per year by 2015;
encourage domestic manufacturing and production of new energy and energy efficient technologies;
redevelop and enhance existing industrial facilities in areas of the country adversely impacted by manufacturing job losses; and
promote rural economic development.
Federal research and development partnerships with industry for new technology
General provisions
Authorization of appropriations
There are authorized to be appropriated for carrying out this title $36,000,000,000.
Participation
The Secretary of Energy, in collaboration with the Secretary of Commerce, shall coordinate the participation of National Laboratories, universities, commercial industry, and other organizations in carrying out this title.
Cost sharing
In general
Unless otherwise specified, the Secretary shall require a commitment from non-Federal sources of at least 20 percent of the cost of proposed research and development projects under this title.
Reduction or elimination
The Secretary may reduce or eliminate the cost sharing requirement under subsection (a)—
if the Secretary determines that the research and development is of a basic or fundamental nature; or
for technical analyses, outreach activities, and educational programs that the Secretary does not expect to result in a marketable product.
Education and outreach
Program
The Secretary of Energy shall establish a program of education and outreach, including innovative education and outreach techniques, on renewable energy and energy efficiency technologies to manufacturers, consumers, engineers, architects, builders, energy service companies, universities, facility planners and managers, State and local governments, and other appropriate entities.
Authorization of appropriations
There are authorized to be appropriated to the Secretary of Energy for carrying out this section $100,000,000 for each of the fiscal years 2006 through 2009, and such sums as may be necessary for each of the fiscal years 2010 through 2022.
Definition
For purposes of this title, the term National Laboratory means any of the following laboratories owned by the Department of Energy:
Ames National Laboratory.
Argonne National Laboratory.
Brookhaven National Laboratory.
Fermi National Laboratory.
Idaho National Engineering and Environmental Laboratory.
Lawrence Berkeley National Laboratory.
Lawrence Livermore National Laboratory.
Los Alamos National Laboratory.
National Energy Technology Laboratory.
National Renewable Energy Laboratory.
Oak Ridge National Laboratory.
Pacific Northwest National Laboratory.
Princeton Plasma Physics Laboratory.
Sandia National Laboratories.
Savannah River National Laboratory.
Stanford Linear Accelerator Center.
Thomas Jefferson National Accelerator Facility.
Clean energy technology research program
Definitions
For purposes of this subtitle—
the term biomass means any organic matter that is available on a renewable or recurring basis, including agricultural crops and trees, wood and wood wastes and residues, plants (including aquatic plants), grasses, residues, fibers, animal wastes, and municipal wastes;
the term clean energy source means—
wind;
biomass;
a geothermal source;
ocean waves;
a solar source;
a photovoltaic source;
additional hydroelectric generation capacity achieved from increased efficiency at an existing hydroelectric dam; or
minimal emission coal; and
the term minimal emission coal means coal resources that result in zero or near zero emissions of sulfur dioxide, nitrogen oxides, and mercury, and 90 percent or more sequestration of carbon dioxide emissions.
Enhanced clean energy research, development, and demonstration
Goals
In order to achieve the goals stated in section 102 of this Act, the United States shall have an energy research, development, and demonstration program to enhance clean energy with the following goals:
For wind power, the program should reduce the cost of wind-generated electricity by 40 percent by 2015, compared to the cost as of the date of the enactment of this Act, with concentration within the program on a variety of advanced wind turbine concepts, manufacturing technologies, and optimal demonstration locations.
For photovoltaics, the programs should pursue research, development, and demonstration that would lead to photovoltaic systems with generation costs of 10 cents kWh by 2015, and 7 cents kWh by 2020. Program activities should include assisting industry in developing manufacturing technologies, giving greater attention to balance of system issues, and expanding fundamental research on relevant advanced materials.
For solar thermal electric systems the program should strengthen ongoing research, development, and demonstration combining high-efficiency and high-temperature receivers with advanced thermal storage and power cycles, with the goal of making solar-only power (including baseload solar power) widely competitive with fossil fuel power by 2017.
For geothermal energy, the program should continue work on hydrothermal systems, and reactivate research, development, and demonstration of advanced concepts, giving top priority to hot dryrock geothermal energy.
For ocean wave energy, the program should reactivate and strengthen ongoing research, development, and demonstration programs that would lead to generating technologies for deriving electrical power from the ocean, including tidal power, wave power, and ocean thermal energy conversion.
For stationary power generation, the Secretary shall work with domestic manufacturers and the utilities to encourage commercial production of cost-competitive, fuel cell power generating facilities. The program should provide new technologies that achieve an efficiency of 70–80 percent Lower Heating Value with an average cost of $400 per kilowatt by 2015.
For biomass energy—
the program should enable the United States to triple biomass energy use by 2010;
for biomass-based power systems, the program should enable commercialization, within five years after the date of the enactment of this Act, of integrated power-generating technologies that employ gas turbines and fuel cells integrated with biomass gasifiers; and
for biofuels, the program should accelerate research, development, and demonstration on advanced cellulosic conversion, including recalcitrance of biomass, feedstock development, and co-products development.
For hydropower, the program should provide for a new generation of turbine technologies that will increase generating capacity and will be less damaging to fish and aquatic ecosystems.
For electric energy systems and storage, the program should develop—
technologies for generators and transmission, distribution, and storage systems that combine high capacity with high efficiency (particularly for electric transmission facilities in rural and remote areas);
new transmission and distribution technologies, including flexible alternating current transmission systems, composite conductor materials, advanced protection devices, and controllers;
technologies for interconnection of distributed energy resources with electric power systems;
technologies to sequester 90 percent or more of carbon dioxide emissions;
high-temperature superconducting materials for power delivery equipment such as transmission and distribution cables, transformers, and generators; and
real-time transmission and distribution system control technologies that provide for continual exchange of information between generation, transmission, distribution, and end-user facilities.
For minimum emission coal, the program shall pursue research that develops and demonstrates facilities generating electricity from coal, in a cost-competitive manner, that by 2020—
remove 99 percent of total sulfur dioxide emissions;
emit no more than .05 lbs of NOx per million BTU;
achieve a 90 percent reduction in mercury emissions;
sequester 90 percent or more of carbon dioxide emissions; and
achieve a thermal efficiency of—
60 percent for coal of more than 9,000 Btu;
59 percent for coal of 7,000 to 9,000 Btu; and
57 percent for coal of less than 7,000 Btu.
The Secretary shall work to maximize the production of hydrogen from clean energy sources.
The Secretary shall support under this section any other technology that may help achieve the goals stated in section 102.
Technical criteria for gasification
In allocating the funds made available for minimum emission coal, the Secretary shall ensure that at least 80 percent of the funds are used for coal-based gasification technologies or coal-based projects that include gasification combined cycle, gasification fuel cells, gasification co-production, or hybrid gasification/combustion. The Secretary shall set technical milestones specifying emissions levels that coal gasification projects must be designed to, and can reasonably be expected to, achieve. The milestones shall get more restrictive through the life of the program.
Coordination with other benefits
The Secretary shall not provide assistance under this section to any person if such person has received assistance under section 642 or 731.
Energy efficiency research, development, and demonstration program
Enhanced energy efficiency research, development, and demonstration
Goals
In order to achieve the goal stated in section 102 of this Act, the United States shall have an energy research, development, and demonstration program to enhance energy efficiency with the following goals:
For energy efficiency in housing, the program should develop technologies, housing components, designs, and production methods that will, by 2010—
reduce the time needed to move energy-efficient technologies to market by 50 percent, compared to the time needed as of the date of the enactment of this Act;
reduce the monthly cost of new housing by 20 percent, compared to the cost as of the date of the enactment of this Act;
cut the environmental impact and energy use of new housing by 50 percent, compared to the impact and use as of the date of the enactment of this Act;
ensure that at least 15,000,000 homes existing as of the date of the enactment of this Act reduce their total energy consumption by 30 percent, compared to the use as of the date of the enactment of this Act; and
improve the durability and reduce maintenance costs of housing technology components by 50 percent compared to the durability and costs as of the date of the enactment of this Act.
For industrial energy efficiency, the program should, in cooperation with the affected industries—
develop a microturbine (40 to 300 kilowatt) that is greater than 40 percent more efficient by 2008, compared to the efficiency as of the date of the enactment of this Act;
develop a microturbine that is greater than 50 percent more efficient by 2012, compared to the efficiency as of the date of the enactment of this Act;
develop advanced materials for combustion systems that reduce emissions of nitrogen oxides by 30 to 50 percent while increasing efficiency 5 to 10 percent by 2010, compared to such emissions as of the date of the enactment of this Act; and
improve the energy intensity of the major energy-consuming industries by at least 25 percent by 2012, compared to the energy intensity as of the date of the enactment of this Act.
For transportation energy efficiency, the Secretary shall work with domestic automobile manufacturers to encourage commercial production of cost-competitive, highly fuel-efficient vehicles. In developing these public-private partnerships, the Secretary shall take into consideration the following:
Hybrid gas/electric vehicles.
Fuel cells.
Alternative fuel driven engines.
Maximizing the production of hydrogen from clean energy sources.
The Secretary shall support under this section any other technology that may help achieve the goals stated in section 102.
Definitions
For purposes of this section—
the term alternative fuel has the meaning given that term in section 301(2) of the Energy Policy Act of 1992; and
the term major energy-consuming industries means—
the forest product industry;
the steel industry;
the aluminum industry;
the metal casting industry;
the chemical industry;
the petroleum refining industry; and
the glass-making industry.
Limits on use of funds
None of the funds authorized to be appropriated under this section may be used for—
the promulgation and implementation of energy efficiency regulations;
the Weatherization Assistance Program under part A of title IV of the Energy Conservation and Production Act;
the State Energy Program under part D of title III of the Energy Policy and Conservation Act; or
the Federal Energy Management Program under part 3 of title V of the National Energy Conservation Policy Act.
Enhanced aeronautical system energy efficiency research, development, and public-private partnership
Goals
For aeronautical system energy efficiency, the Secretary of Energy, the Secretary of the Treasury, and the Secretary of Transportation shall develop for commercial production by 2008 a superefficient, high-capacity commercial airplane. To carry out this section, the Secretaries shall form a public-private partnership research and development loan program such that—
the Federal Government enters into an agreement with a domestic commercial airplane manufacturer in which the Federal Government provides loans for up to 49 percent of the research and development cost; and
the Federal Government receives repayment for loans under paragraph (1) from the commercial airplane manufacturer through a royalty system agreed upon by the Secretary of the Treasury.
Definition
For purposes of this section, the term superefficient, high-capacity commercial airplane means a commercial airplane with a passenger seating capacity of no less than 200 people with a range of at least 7,200 nautical miles which consumes at least 15 percent less fuel than comparable airplanes.
Next Generation Lighting Initiative
In general
The Secretary shall carry out a Next Generation Lighting Initiative in accordance with this section to support research, development, demonstration, and commercial application activities related to advanced solid-state lighting technologies based on white light emitting diodes.
Objectives
The objectives of the initiative shall be—
to develop, by 2012, advanced solid-state lighting technologies based on white light emitting diodes that, compared to incandescent and fluorescent lighting technologies, are—
longer lasting;
more energy-efficient; and
cost-competitive;
to develop an inorganic white light emitting diode that has an efficiency of 160 lumens per watt and a 10-year lifetime; and
to develop an organic white light emitting diode with an efficiency of 100 lumens per watt with a 5-year lifetime that—
illuminates over a full color spectrum;
covers large areas over flexible surfaces; and
does not contain harmful pollutants, such as mercury, typical of fluorescent lamps.
Fundamental research
Consortium
The Secretary shall carry out the fundamental research activities of the Next Generation Lighting Initiative through a private consortium (which may include private firms, trade associations and institutions of higher education), which the Secretary shall select through a competitive process. Each proposed consortium shall submit to the Secretary such information as the Secretary may require, including a program plan agreed to by all participants of the consortium.
Joint venture
The consortium shall be structured as a joint venture among the participants of the consortium. The Secretary shall serve on the governing council of the consortium.
Eligibility
To be eligible to be selected as the consortium under paragraph (1), an applicant must be broadly representative of United States solid-state lighting research, development, and manufacturing expertise as a whole.
Grants
The Secretary shall award grants for fundamental research to the consortium, which the consortium may disburse to researchers, including those who are not participants of the consortium.
To receive a grant, the consortium must provide a description to the Secretary of the proposed research and list the parties that will receive funding.
At least 20 percent of the cost of a research and development project for which a grant is made under this section shall be matched by the consortium, and at least 50 percent of the cost of a demonstration or commercial application project for which a grant is made under this section shall be matched by the consortium.
National Laboratories
National Laboratories may participate in the research described in this section, and may receive funds from the consortium.
Intellectual property
Participants in the consortium and the Federal Government shall have royalty-free nonexclusive rights to use intellectual property derived from research funded pursuant to this subsection.
Development, demonstration, and commercial application
The Secretary shall carry out the development, demonstration, and commercial application activities of the Next Generation Lighting Initiative through awards to private firms, trade associations, and institutions of higher education. In selecting awardees, the Secretary may give preference to members of the consortium selected pursuant to subsection (c).
Plans and assessments
The consortium shall formulate an annual operating plan which shall include research priorities, technical milestones, and plans for technology transfer, and which shall be subject to approval by the Secretary.
The Secretary shall enter into an arrangement with the National Academy of Sciences to conduct periodic reviews of the Next Generation Lighting Initiative. The Academy shall review the research priorities, technical milestones, and plans for technology transfer established under paragraph (1) and evaluate the progress toward achieving them. The Secretary shall consider the results of such reviews in evaluating the plans submitted under paragraph (1).
Audit
The Secretary shall retain an independent, commercial auditor to perform an audit of the consortium to determine the extent to which the funds authorized by this section have been expended in a manner consistent with the purposes of this section. The auditor shall transmit a report annually to the Secretary, who shall transmit the report to the Congress, along with a plan to remedy any deficiencies cited in the report.
Sunset
The Next Generation Lighting Initiative shall terminate no later than September 30, 2013.
Definitions
As used in this section:
Advanced solid-state lighting
The term advanced solid-state lighting means a semiconducting device package and delivery system that produces white light using externally applied voltage.
Fundamental research
The term fundamental research includes basic research on both solid-state materials and manufacturing processes.
Inorganic white light emitting diode
The term inorganic white light emitting diode means an inorganic semiconducting package that produces white light using externally applied voltage.
Organic white light emitting diode
The term organic white light emitting diode means an organic semiconducting compound that produces white light using externally applied voltage.
National Building Performance Initiative
Interagency group
Not later than 3 months after the date of enactment of this Act, the Director of the Office of Science and Technology Policy shall establish an interagency group to develop, in coordination with the advisory committee established under subsection (e), a National Building Performance Initiative (in this section referred to as the Initiative
). The interagency group shall be cochaired by appropriate officials of the Department and the Department of Commerce, who shall jointly arrange for the provision of necessary administrative support to the group.
Integration of efforts
The Initiative shall integrate Federal, State, and voluntary private sector efforts to reduce the costs of construction, operation, maintenance, and renovation of commercial, industrial, institutional, and residential buildings.
Plan
Not later than 1 year after the date of enactment of this Act, the interagency group shall submit to Congress a plan for carrying out the appropriate Federal role in the Initiative. The plan shall include—
research, development, demonstration, and commercial application of systems and materials for new construction and retrofit relating to the building envelope and building system components; and
the collection, analysis, and dissemination of research results and other pertinent information on enhancing building performance to industry, government entities, and the public.
Department of Energy role
Within the Federal portion of the Initiative, the Department shall be the lead agency for all aspects of building performance related to use and conservation of energy.
Advisory Committee
Establishment
The Director of the Office of Science and Technology Policy shall establish an advisory committee to—
analyze and provide recommendations on potential private sector roles and participation in the Initiative; and
review and provide recommendations on the plan described in subsection (c).
Membership
Membership of the advisory committee shall include representatives with a broad range of appropriate expertise, including expertise in—
building research and technology;
architecture, engineering, and building materials and systems; and
the residential, commercial, and industrial sectors of the construction industry.
Construction
Nothing in this section provides any Federal agency with new authority to regulate building performance.
Additional research programs
Fusion
Plan for fusion experiment
In general
Priority for international burning plasma project
The Secretary of Energy (in this part referred to as the Secretary
) is authorized to undertake full scientific and technological cooperation in the international burning plasma project known as ITER.
Alternative project
If at any time during the negotiations on the ITER project, the Secretary determines that construction and operation of the ITER project is unlikely or infeasible, the Secretary shall send to Congress, as part of the budget request for the following year, a plan for implementing an alternative plan, such as the domestic burning plasma experiment known as FIRE, including costs and schedules for such a plan. The Secretary shall refine such plan in full consultation with the Fusion Energy Sciences Advisory Committee and shall also transmit such plan to the National Research Council for review.
United States policy with respect to fusion energy science
Declaration of policy
It shall be the policy of the United States to develop the scientific, engineering, and commercial infrastructure necessary to ensure that the United States is competitive with other nations in providing fusion energy for its own needs and the needs of other nations, including demonstrating electric hydrogen power production for national power grid utilizing fusion energy by the earliest date possible.
Fusion energy plan
Requirement
Within 6 months of the date of enactment of this Act, the Secretary shall transmit to Congress a plan for carrying out the policy set forth in paragraph (1), including cost estimates, proposed budgets, potential international partners, and specific programs for implementing such policy.
Requirements of plan
Such plan shall also ensure that—
existing fusion research facilities are more fully utilized;
fusion science, technology, theory, advanced computation, modeling, and simulation are strengthened;
new magnetic and inertial fusion research facilities are selected based on scientific innovation, cost effectiveness, and their potential to advance the goal of practical fusion energy at the earliest date possible;
such facilities that are selected are funded at a cost-effective rate;
communication of scientific results and methods between the fusion energy science community and the broader scientific and technology communities is improved;
inertial confinement fusion facilities are utilized to the extent practicable for the purpose of inertial fusion energy research and development; and
attractive alternative inertial and magnetic fusion energy approaches are more fully explored.
Report on fusion materials and technology project
In addition, the plan required by this section shall also address the status of, and to the degree possible, the costs and schedules for—
the design and implementation of international or national facilities for the testing of fusion materials; and
the design and implementation of international or national facilities for the testing and development of key fusion technologies.
Definitions
As used in this part, the following definitions apply:
The term ITER refers to the international fusion research project whose design is complete and whose location and financing is currently being negotiated between Japan, Europe, the Russian Federation, Canada, China, and the United States.
The term FIRE refers to the Fusion Ignition Research Experiment, the fusion research experiment for which design work has been supported by the Department of Energy as a possible alternative burning plasma experiment in the event that the ITER project fails to move forward.
Ultra-deepwater and extended reach drilling and carbon sequestration technologies
Program authority
In general
The Secretary shall carry out a program under this part of research, development, demonstration, and commercial application of technologies for ultra-deepwater and extended reach drilling and carbon sequestration.
Program
The program under this part shall address the following areas, including improving safety and minimizing environmental impacts of activities within each area:
Ultra-deepwater technology.
Ultra-deepwater architecture.
Extended reach drilling.
Sequestration of carbon.
Limitation on location of field activities
Field activities under the program under this part shall be carried out only—
in—
areas in the territorial waters of the United States not under any Outer Continental Shelf moratorium as of September 30, 2002;
areas onshore in the United States on public land administered by the Secretary of the Interior available for oil and gas leasing, where consistent with applicable law and land use plans; and
areas onshore in the United States on State or private land, subject to applicable law; and
with the approval of the appropriate Federal or State land management agency or private land owner.
Research at National Energy Technology Laboratory
The Secretary, through the National Energy Technology Laboratory, shall carry out research complementary to research under subsection (b).
Consultation with Secretary of the Interior
In carrying out this part, the Secretary shall consult regularly with the Secretary of the Interior.
Ultra-deepwater and extended reach drilling and carbon sequestration and unconventional technologies program
In general
The Secretary shall carry out the activities under section 241(b), to—
maximize the value of the ultra-deepwater natural gas and other petroleum resources of the United States by increasing the supply of such resources and by reducing the cost and increasing the efficiency of exploration for and production of such resources, while improving safety and minimizing environmental impacts;
maximize the value of existing natural gas and petroleum production on existing lease sites by utilizing long range extended reach drilling technology;
maximize the value of the onshore unconventional natural gas resources of the United States by increasing supply of such resources and improving efficiencies; and
develop commercial carbon sequestration and carbon recapture methods with the goal of—
sequestering 20 percent of the total quantity of direct greenhouse gas emissions from stationary sources in the United States per year, expressed in units of carbon dioxide equivalence, by 2010;
sequestering 40 percent of the total quantity of direct greenhouse gas emissions from stationary sources in the United States per year, expressed in units of carbon dioxide equivalence, by 2015; and
sequestering 60 percent of the total quantity of direct greenhouse gas emissions from stationary sources in the United States per year, expressed in units of carbon dioxide equivalence, by 2020.
Role of the Secretary
The Secretary shall have ultimate responsibility for, and oversight of, all aspects of the program under this section.
Role of the program consortium
In general
The Secretary shall contract with a consortium to—
manage awards pursuant to subsection (f)(4);
make recommendations to the Secretary for project solicitations;
disburse funds awarded under subsection (f) as directed by the Secretary in accordance with the annual plan under subsection (e); and
carry out other activities assigned to the program consortium by this section.
Limitation
The Secretary may not assign any activities to the program consortium except as specifically authorized under this section.
Conflict of interest
The Secretary shall establish procedures—
to ensure that each board member, officer, or employee of the program consortium who is in a decisionmaking capacity under subsection (f)(3) or (4) shall disclose to the Secretary any financial interests in, or financial relationships with, applicants for or recipients of awards under this section, including those of his or her spouse or minor child, unless such relationships or interests would be considered to be remote or inconsequential; and
to require any board member, officer, or employee with a financial relationship or interest disclosed under clause (i) to recuse himself or herself from any review under subsection (f)(3) or oversight under subsection (f)(4) with respect to such applicant or recipient.
The Secretary may disqualify an application or revoke an award under this section if a board member, officer, or employee has failed to comply with procedures required under subparagraph (A)(ii).
Selection of the program consortium
In general
The Secretary shall select the program consortium through an open, competitive process.
Members
The program consortium may include corporations, institutions of higher education, National Laboratories, or other research institutions. After submitting a proposal under paragraph (4), the program consortium may not add members without the consent of the Secretary.
Tax status
The program consortium shall be an entity that is exempt from tax under section 501(c)(3) of the Internal Revenue Code of 1986.
Schedule
Not later than 90 days after the date of enactment of this Act, the Secretary shall solicit proposals for the creation of the program consortium, which must be submitted not less than 180 days after the date of enactment of this Act. The Secretary shall select the program consortium not later than 240 days after such date of enactment.
Application
Applicants shall submit a proposal including such information as the Secretary may require. At a minimum, each proposal shall—
list all members of the consortium;
fully describe the structure of the consortium, including any provisions relating to intellectual property; and
describe how the applicant would carry out the activities of the program consortium under this section.
Eligibility
To be eligible to be selected as the program consortium, an applicant must be an entity whose members collectively have demonstrated capabilities in planning and managing research, development, demonstration, and commercial application programs in natural gas or other petroleum exploration or production.
Criterion
The Secretary may consider the amount of the fee an applicant proposes to receive under subsection (g) in selecting a consortium under this section.
Annual plan
In general
The program under this section shall be carried out pursuant to an annual plan prepared by the Secretary in accordance with paragraph (2).
Development
Before drafting an annual plan under this subsection, the Secretary shall solicit specific written recommendations from the program consortium for each element to be addressed in the plan, including those described in paragraph (4). The Secretary may request that the program consortium submit its recommendations in the form of a draft annual plan.
The Secretary shall consult regularly with the program consortium throughout the preparation of the annual plan. The Secretary may also solicit comments from any other experts.
Publication
The Secretary shall transmit to the Congress and publish in the Federal Register the annual plan, along with any written comments received under paragraph (2). The annual plan shall be transmitted and published not later than 60 days after the date of enactment of an Act making appropriations for a fiscal year for the program under this section.
Contents
The annual plan shall describe the ongoing and prospective activities of the program under this section and shall include—
a list of any solicitations for awards that the Secretary plans to issue to carry out research, development, demonstration, or commercial application activities, including the topics for such work, who would be eligible to apply, selection criteria, and the duration of awards; and
a description of the activities expected of the program consortium to carry out subsection (f)(4).
Awards
In general
The Secretary shall make awards to carry out research, development, demonstration, and commercial application activities under the program under this section. The program consortium shall not be eligible to receive such awards, but members of the program consortium may receive such awards.
Proposals
The Secretary shall solicit proposals for awards under this subsection in such manner and at such time as the Secretary may prescribe, in consultation with the program consortium.
Review
The Secretary shall make awards under this subsection through a competitive process, which shall include a review by individuals selected by the Secretary. Such individuals shall include, for each application, Federal officials, the program consortium, and non-Federal experts who are not board members, officers, or employees of the program consortium or of a member of the program consortium.
Oversight
The program consortium shall oversee the implementation of awards under this subsection, consistent with the annual plan under subsection (e), including disbursing funds and monitoring activities carried out under such awards for compliance with the terms and conditions of the awards.
Nothing in subparagraph (A) shall limit the authority or responsibility of the Secretary to oversee awards, or limit the authority of the Secretary to review or revoke awards.
The Secretary shall provide to the program consortium the information necessary for the program consortium to carry out its responsibilities under this paragraph.
Fee
In general
To compensate the program consortium for carrying out its activities under this section, the Secretary shall provide to the program consortium a fee in an amount not to exceed 7.5 percent of the amounts awarded under subsection (f) for each fiscal year.
Advance
The Secretary shall advance funds to the program consortium upon selection of the consortium, which shall be deducted from amounts to be provided under paragraph (1).
Audit
The Secretary shall retain an independent, commercial auditor to determine the extent to which funds provided to the program consortium, and funds provided under awards made under subsection (f), have been expended in a manner consistent with the purposes and requirements of this part. The auditor shall transmit a report annually to the Secretary, who shall transmit the report to Congress, along with a plan to remedy any deficiencies cited in the report.
Sunset
The authority provided by this part shall terminate on September 30, 2010.
Definitions
In this part:
Carbon sequestration
The term carbon sequestration means the capture and secure storage of carbon dioxide emitted from the combustion of fossil fuels or other organic matter.
Extended reach drilling
The term extended reach drilling means technology designed to achieve a range up to 50,000 feet, so that more energy resources can be realized with fewer drilling facilities.
Program consortium
The term program consortium means the consortium selected under section 242(d).
Remote or inconsequential
The term remote or inconsequential has the meaning given that term in regulations issued by the Office of Government Ethics under section 208(b)(2) of title 18, United States Code.
Ultra-deepwater
The term ultra-deepwater means a water depth that is equal to or greater than 1,500 meters.
Ultra-deepwater architecture
The term ultra-deepwater architecture means the integration of technologies for the exploration for, or production of, natural gas or other petroleum resources located at ultra-deepwater depths.
Ultra-deepwater technology
The term ultra-deepwater technology means a discrete technology that is specially suited to address one or more challenges associated with the exploration for, or production of, natural gas or other petroleum resources located at ultra-deepwater depths.
Unconventional natural gas and other petroleum resource
The term unconventional natural gas and other petroleum resource means natural gas and other petroleum resource located onshore in an economically inaccessible geological formation.
Tax incentives for new technologies
References
Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
Administration of title
In general
Notwithstanding any other provision of law, the Secretary of the Treasury shall allocate the tax incentives provided in subtitles A and B among taxpayers in accordance with regulations promulgated by the Secretary.
Limitation on total allocated
The total amount of incentives allocated under subsection (a) shall not exceed—
$14,000,000,000 in the case of the tax incentives provided in subtitle A for the 10-year period beginning with taxable years beginning after the date of the enactment of this Act, and
$22,000,000,000 in the case of the tax incentives provided in subtitle B for the 10-year period beginning with taxable years beginning after the date of the enactment of this Act.
Near term tax incentives
Extension through 2015 for placing qualified facilities in service for producing renewable electric energy
In general
Subsection (d) of section 45 is amended by striking January 1, 2006
each place it appears and inserting January 1, 2015
.
Effective date
The amendments made by this section shall apply to property originally placed in service on or after January 1, 2006.
Expansion and modification of renewable resource credit
Additional qualified energy resources
In general
Section 45(c)(1) is amended by striking and
at the end of subparagraph (F), by striking the period at the end of subparagraph (G), and by adding at the end the following new subparagraphs:
incremental hydropower,
incremental geothermal, and
ocean (tidal, wave, current, or thermal).
.
Definition of resources
Section 45(c) is amended by adding at the end the following new paragraphs:
Incremental hydropower
The term ‘incremental hydropower’ means additional generating capacity achieved at a qualified facility before January 1, 2015, from increased efficiency .
Incremental geothermal
The term ‘incremental geothermal’ means additional generating capacity achieved at a qualified facility before January 1, 2015, from—
increased efficiency, or
additions of new capacity.
.
Definition of facilities
Section 45(d) is amended by adding at the end the following new paragraphs:
Incremental hydopower facilities
In the case of a facility producing electricity from incremental hydropower, the term qualified facility means any facility which is—
owned by the taxpayer,
originally placed in service before the date of the enactment of this paragraph, and
licensed by the Federal Energy Regulatory Commission.
Incremental geothermal facilities
In the case of a facility producing electricity from incremental geothermal, the term qualified facility means any facility owned by the taxpayer which is originally placed in service before the date of the enactment of this paragraph.
Ocean facilities
In the case of a facility producing electricity from the ocean, the term qualified facility means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2015.
.
Modifications regarding open-loop biomass
Subclause (I) of section 45(c)(3)(A)(ii) is amended by adding at the end but not including old-growth timber or black liquor,
.
Subclause (II) of section 45(c)(3)(A)(ii) is amended by striking municipal solid waste, gas derived from the biodegradation of solid waste, or paper which is commonly recycled
and inserting unsegregated municipal solid waste (garbage) or postconsumer wastepaper which can be recycled affordably
.
Qualified facilities with co-production
Section 45(b) is amended by striking paragraph (4) and inserting the following new paragraph:
Increased credit for co-production facilities
In general
In the case of a qualified facility described in paragraph (2) or (3) of subsection (c) which adds a co-production facility after the date of the enactment of this paragraph, the amount in effect under subsection (a)(1) for an eligible taxable year of the taxpayer shall (after adjustment under paragraphs (1), (2), and (3)) be increased by .25 cents.
Co-production facility
For purposes of subparagraph (A), the term co-production facility means a facility which—
enables a qualified facility to produce heat, mechanical power, or minerals from qualified energy resources in addition to electricity, and
produces such energy on a continuous basis.
Eligible taxable year
For purposes of subparagraph (A), the term eligible taxable year means any taxable year in which the amount of gross receipts attributable to the co-production facility of a qualified facility are at least 10 percent of the amount of gross receipts attributable to electricity produced by such facility.
.
Qualified facilities located within qualified indian lands
Section 45(b) is amended by adding at the end the following new paragraph:
Increased credit for qualified facility located within qualified indian land
In the case of a qualified facility described in subsection (d)(2)(A) which—
is located within—
qualified Indian lands (as defined in section 7871(c)(3)), or
lands which are held in trust by a Native Corporation (as defined in section 3(m) of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m))) for Alaska Natives, and
is operated with the explicit written approval of the Indian tribal government or Native Corporation (as so defined) having jurisdiction over such lands, the amount in effect under subsection (a)(1) for a taxable year shall (after adjustment under paragraphs (1), (2), (3), and (4)) be increased by .25 cents.
.
Treatment of qualified facilities not in compliance with pollution laws
Section 45(c) is further amended by adding at the end the following new paragraph:
Noncompliance with pollution laws
A facility 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 treated as a qualified facility during such period.
.
Coordination with other credits
Section 45(e) is amended by adding at the end the following new paragraph:
Coordination with other credits
This section shall not apply to any qualified facility with respect to which a credit under any other section is allowed for the taxable year unless the taxpayer elects to waive application of such credit to such facility.
.
Effective date
The amendments made by this section shall apply to electricity and other energy produced in taxable years beginning after the date of the enactment of this Act.
Tradable renewable resource credit for public utilities and other tax exempt organizations
Credits for certain tax-exempt organizations and governmental units
In general
Section 45(d) (relating to definitions and special rules), as amended by section 312, is amended by adding at the end the following:
Credits for certain tax-exempt organizations and governmental units
Allowance of credit
Any credit which would be allowable under subsection (a) with respect to a qualified facility of an entity if such entity were not exempt from tax under this chapter shall be treated as a credit allowable under subpart D to such entity if such entity is—
an organization described in section 501(c)(12)(C) and exempt from tax under section 501(a),
an organization described in section 1381(a)(2)(C),
an entity the income of which is excludable from gross income under section 115, or
a State, the District of Columbia, any territory or possession of the United States, or any political subdivision thereof.
Use of credit
Transfer of credit
An entity described in subparagraph (A) may assign, trade, sell, or otherwise transfer any credit allowable to such entity under subparagraph (A) to any taxpayer.
Use of credit as an offset
Notwithstanding any other provision of law, in the case of an entity described in clause (i) or (ii) of subparagraph (A), any credit allowable to such entity under subparagraph (A) may be applied by such entity, without penalty, 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.).
Credit not income
Neither a transfer under clause (i) nor a use under clause (ii) of subparagraph (B) of any credit allowable under subparagraph (A) shall result in income for purposes of section 501(c)(12).
Transfer proceeds treated as arising from essential Government function
Any proceeds derived by an entity described in subparagraph (A)(iii) from the transfer of any credit under subparagraph (B)(i) shall be treated as arising from an essential government function.
Credits not reduced by tax-exempt Bonds or certain other subsidies
Subsection (b)(3) shall not apply to reduce any credit allowable under subparagraph (A) with respect to—
proceeds described in subparagraph (A)(ii) of such subsection, 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.), used to provide financing for any qualified facility.
Treatment of unrelated persons
For purposes of this paragraph, sales among and between entities described in subparagraph (A) shall be treated as sales between unrelated parties.
.
Inclusion of Indian tribal governments
Section 7871(a)(7) is amended by striking and
at the end of subparagraph (A), by striking the period at the end of subparagraph (B), and by adding at the end the following:
section 45 (relating to credit for electricity produced from certain renewable resources).
.
Effective date
The amendments made by this section shall apply to electricity and other energy produced in taxable years beginning after the date of the enactment of this Act.
Alternative motor vehicle credit
In general
Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credit, etc.) is amended by adding at the end the following new section:
Alternative motor vehicle credit
Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—
the new qualified fuel cell motor vehicle credit determined under subsection (b),
the new qualified hybrid motor vehicle credit determined under subsection (c),
the new qualified alternative fuel motor vehicle credit determined under subsection (d), and
the new qualified advanced diesel motor vehicle credit determined under subsection (e).
New Qualified fuel cell motor vehicle credit
In general
For purposes of subsection (a), the new qualified fuel cell motor vehicle credit determined under this subsection with respect to a new qualified fuel cell motor vehicle placed in service by the taxpayer during the taxable year is—
$8,000 ($4,000 in the case of vehicles placed in service after December 31, 2008), if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds,
$10,000, if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds,
$20,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and
$40,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.
Increase for fuel efficiency
In general
The amount determined under paragraph (1)(A) with respect to a new qualified fuel cell motor vehicle which is a passenger automobile or light truck shall be increased by—
$1,000, if such vehicle achieves at least 150 percent but less than 175 percent of the 2002 model year city fuel economy,
$1,500, if such vehicle achieves at least 175 percent but less than 200 percent of the 2002 model year city fuel economy,
$2,000, if such vehicle achieves at least 200 percent but less than 225 percent of the 2002 model year city fuel economy,
$2,500, if such vehicle achieves at least 225 percent but less than 250 percent of the 2002 model year city fuel economy,
$3,000, if such vehicle achieves at least 250 percent but less than 275 percent of the 2002 model year city fuel economy,
$3,500, if such vehicle achieves at least 275 percent but less than 300 percent of the 2002 model year city fuel economy, and
$4,000, if such vehicle achieves at least 300 percent of the 2002 model year city fuel economy.
2002 model year city fuel economy
For purposes of subparagraph (A), the 2002 model year city fuel economy with respect to a vehicle shall be determined in accordance with the following tables:
In the case of a passenger automobile:
| The 2002 model year city | |
| “If vehicle inertia weight class is: | fuel economy is: |
| 1,500 or 1,750 lbs | 45.2 mpg |
| 2,000 lbs | 39.6 mpg |
| 2,250 lbs | 35.2 mpg |
| 2,500 lbs | 31.7 mpg |
| 2,750 lbs | 28.8 mpg |
| 3,000 lbs | 26.4 mpg |
| 3,500 lbs | 22.6 mpg |
| 4,000 lbs | 19.8 mpg |
| 4,500 lbs | 17.6 mpg |
| 5,000 lbs | 15.9 mpg |
| 5,500 lbs | 14.4 mpg |
| 6,000 lbs | 13.2 mpg |
| 6,500 lbs | 12.2 mpg |
| 7,000 to 8,500 lbs | 11.3 mpg. |
In the case of a light truck:
| The 2002 model year city | |
| “If vehicle inertia weight class is: | fuel economy is: |
| 1,500 or 1,750 lbs | 39.4 mpg |
| 2,000 lbs | 35.2 mpg |
| 2,250 lbs | 31.8 mpg |
| 2,500 lbs | 29.0 mpg |
| 2,750 lbs | 26.8 mpg |
| 3,000 lbs | 24.9 mpg |
| 3,500 lbs | 21.8 mpg |
| 4,000 lbs | 19.4 mpg |
| 4,500 lbs | 17.6 mpg |
| 5,000 lbs | 16.1 mpg |
| 5,500 lbs | 14.8 mpg |
| 6,000 lbs | 13.7 mpg |
| 6,500 lbs | 12.8 mpg |
| 7,000 to 8,500 lbs | 12.1 mpg. |
Vehicle inertia weight class
For purposes of subparagraph (B), the term vehicle inertia weight class has the same meaning as when defined in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).
New Qualified fuel cell motor vehicle
For purposes of this subsection, the term new qualified fuel cell motor vehicle means a motor vehicle—
which is propelled by power derived from one or more cells which convert chemical energy directly into electricity by combining oxygen with hydrogen fuel which is stored on board the vehicle in any form and may or may not require reformation prior to use,
which, in the case of a passenger automobile or light truck—
for 2002 and later model vehicles, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and
for 2004 and later model vehicles, has received a certificate that such vehicle meets or exceeds the Bin 5 Tier II emission level established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle,
the original use of which commences with the taxpayer,
which is acquired for use or lease by the taxpayer and not for resale, and
which is made by a manufacturer.
New Qualified hybrid motor vehicle credit
In general
For purposes of subsection (a), the new qualified hybrid motor vehicle credit determined under this subsection with respect to a new qualified hybrid motor vehicle placed in service by the taxpayer during the taxable year is the credit amount determined under paragraph (2).
Credit amount
In general
The credit amount determined under this paragraph shall be determined in accordance with the following tables:
In the case of a new qualified hybrid motor vehicle which is a passenger automobile, medium duty passenger vehicle, or light truck and which provides the following percentage of the maximum available power:
| “If percentage of the maximum | |
| available power is: | The credit amount is: |
| At least 5 percent but less than 10 percent | $250 |
| At least 10 percent but less than 20 percent | $500 |
| At least 20 percent but less than 30 percent | $750 |
| At least 30 percent | $1,000. |
In the case of a new qualified hybrid motor vehicle which is a heavy duty hybrid motor vehicle and which provides the following percentage of the maximum available power:
If such vehicle has a gross vehicle weight rating of not more than 14,000 pounds:
| “If percentage of the maximum | |
| available power is: | The credit amount is: |
| At least 20 percent but less than 30 percent | $1,000 |
| At least 30 percent but less than 40 percent | $1,750 |
| At least 40 percent but less than 50 percent | $2,000 |
| At least 50 percent but less than 60 percent | $2,250 |
| At least 60 percent | $2,500. |
If such vehicle has a gross vehicle weight rating of more than 14,000 but not more than 26,000 pounds:
| “If percentage of the maximum | |
| available power is: | The credit amount is: |
| At least 20 percent but less than 30 percent | $4,000 |
| At least 30 percent but less than 40 percent | $4,500 |
| At least 40 percent but less than 50 percent | $5,000 |
| At least 50 percent but less than 60 percent | $5,500 |
| At least 60 percent | $6,000. |
If such vehicle has a gross vehicle weight rating of more than 26,000 pounds:
| “If percentage of the maximum | |
| available power is: | The credit amount is: |
| At least 20 percent but less than 30 percent | $6,000 |
| At least 30 percent but less than 40 percent | $7,000 |
| At least 40 percent but less than 50 percent | $8,000 |
| At least 50 percent but less than 60 percent | $9,000 |
| At least 60 percent | $10,000. |
Increase for fuel efficiency
Amount
The amount determined under subparagraph (A)(i) with respect to a new qualified hybrid motor vehicle which is a passenger automobile or light truck shall be increased by—
$500, if such vehicle achieves at least 125 percent but less than 150 percent of the 2002 model year city fuel economy,
$1,000, if such vehicle achieves at least 150 percent but less than 175 percent of the 2002 model year city fuel economy,
$1,500, if such vehicle achieves at least 175 percent but less than 200 percent of the 2002 model year city fuel economy,
$2,000, if such vehicle achieves at least 200 percent but less than 225 percent of the 2002 model year city fuel economy,
$2,500, if such vehicle achieves at least 225 percent but less than 250 percent of the 2002 model year city fuel economy, and
$3,000, if such vehicle achieves at least 250 percent of the 2002 model year city fuel economy.
2002 model year city fuel economy
For purposes of clause (i), the 2002 model year city fuel economy with respect to a vehicle shall be determined on a gasoline gallon equivalent basis as determined by the Administrator of the Environmental Protection Agency using the tables provided in subsection (b)(2)(B) with respect to such vehicle.
Increase for accelerated emissions performance
The amount determined under subparagraph (A)(ii) with respect to an applicable heavy duty hybrid motor vehicle shall be increased by the increased credit amount determined in accordance with the following tables:
In the case of a vehicle which has a gross vehicle weight rating of not more than 14,000 pounds:
| “If the model year is: | The increased credit amount is: |
| 2005 | $3,000 |
| 2006 | $2,500 |
| 2007 | $2,000 |
| 2008 | $1,500. |
In the case of a vehicle which has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds:
| “If the model year is: | The increased credit amount is: |
| 2005 | $7,750 |
| 2006 | $6,500 |
| 2007 | $5,250 |
| 2008 | $4,000. |
In the case of a vehicle which has a gross vehicle weight rating of more than 26,000 pounds:
| “If the model year is: | The increased credit amount is: |
| 2005 | $12,000 |
| 2006 | $10,000 |
| 2007 | $8,000 |
| 2008 | $6,000. |
Definitions relating to credit amount
Applicable heavy duty hybrid motor vehicle
For purposes of subparagraph (C), the term applicable heavy duty hybrid motor vehicle means a heavy duty hybrid motor vehicle which is powered by an internal combustion or heat engine which is certified as meeting the emission standards set in the regulations prescribed by the Administrator of the Environmental Protection Agency for 2007 and later model year diesel heavy duty engines, or for 2008 and later model year ottocycle heavy duty engines, as applicable.
Maximum available power
Passenger automobile, medium duty passenger vehicle, or light truck
For purposes of subparagraph (A)(i), the term maximum available power means the maximum power available from the rechargeable energy storage system, during a standard 10 second pulse power or equivalent test, divided by such maximum power and the SAE net power of the heat engine.
Heavy duty hybrid motor vehicle
For purposes of subparagraph (A)(ii), the term maximum available power means the maximum power available from the rechargeable energy storage system, during a standard 10 second pulse power or equivalent test, divided by the vehicle’s total traction power. The term total traction power means the sum of the peak power from the rechargeable energy storage system and the heat engine peak power of the vehicle, except that if such storage system is the sole means by which the vehicle can be driven, the total traction power is the peak power of such storage system.
New Qualified hybrid motor vehicle
For purposes of this subsection, the term new qualified hybrid motor vehicle means a motor vehicle—
which draws propulsion energy from onboard sources of stored energy which are both—
an internal combustion or heat engine using combustible fuel, and
a rechargeable energy storage system,
which, in the case of a passenger automobile, medium duty passenger vehicle, or light truck—
for 2002 and later model vehicles, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and
for 2004 and later model vehicles, has received a certificate that such vehicle meets or exceeds the Bin 5 Tier II emission level established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle,
which, in the case of a heavy duty hybrid motor vehicle, the internal combustion or heat engine of which has received a certificate of conformity under the Clean Air Act as meeting the emission standards set in the regulations prescribed by the Administrator of the Environmental Protection Agency for 2004 through 2007 model year diesel heavy duty engines or ottocycle heavy duty engines, as applicable,
the original use of which commences with the taxpayer,
which is acquired for use or lease by the taxpayer and not for resale, and
which is made by a manufacturer.
Heavy duty hybrid motor vehicle
For purposes of this subsection, the term heavy duty hybrid motor vehicle means a new qualified hybrid motor vehicle which has a gross vehicle weight rating of more than 8,500 pounds. Such term does not include a medium duty passenger vehicle.
New Qualified alternative fuel motor vehicle credit
Allowance of credit
Except as provided in paragraph (5), the new qualified alternative fuel motor vehicle credit determined under this subsection is an amount equal to the applicable percentage of the incremental cost of any new qualified alternative fuel motor vehicle placed in service by the taxpayer during the taxable year.
Applicable percentage
For purposes of paragraph (1), the applicable percentage with respect to any new qualified alternative fuel motor vehicle is—
50 percent, plus
30 percent, if such vehicle—
has received a certificate of conformity under the Clean Air Act and meets or exceeds the most stringent standard available for certification under the Clean Air Act for that make and model year vehicle (other than a zero emission standard), or
has received an order certifying the vehicle as meeting the same requirements as vehicles which may be sold or leased in California and meets or exceeds the most stringent standard available for certification under the State laws of California (enacted in accordance with a waiver granted under section 209(b) of the Clean Air Act) for that make and model year vehicle (other than a zero emission standard).
Incremental cost
For purposes of this subsection, the incremental cost of any new qualified alternative fuel motor vehicle is equal to the amount of the excess of the manufacturer’s suggested retail price for such vehicle over such price for a gasoline or diesel fuel motor vehicle of the same model, to the extent such amount does not exceed—
$5,000, if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds,
$10,000, if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds,
$25,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and
$40,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.
New Qualified alternative fuel motor vehicle
For purposes of this subsection—
In general
The term new qualified alternative fuel motor vehicle means any motor vehicle—
which is only capable of operating on an alternative fuel,
the original use of which commences with the taxpayer,
which is acquired by the taxpayer for use or lease, but not for resale, and
which is made by a manufacturer.
Alternative fuel
The term alternative fuel means compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and any liquid at least 85 percent of the volume of which consists of methanol or ethanol.
Credit for mixed-fuel vehicles
In general
In the case of a mixed-fuel vehicle placed in service by the taxpayer during the taxable year, the credit determined under this subsection is an amount equal to—
in the case of a 75/25 mixed-fuel vehicle, 70 percent of the credit which would have been allowed under this subsection if such vehicle was a qualified alternative fuel motor vehicle, and
in the case of a 90/10 mixed-fuel vehicle, 90 percent of the credit which would have been allowed under this subsection if such vehicle was a qualified alternative fuel motor vehicle.
Mixed-fuel vehicle
For purposes of this subsection, the term mixed-fuel vehicle means any motor vehicle described in subparagraph (C) or (D) of paragraph (3), which—
is certified by the manufacturer as being able to perform efficiently in normal operation on a combination of an alternative fuel and a petroleum-based fuel,
either—
has received a certificate of conformity under the Clean Air Act, or
has received an order certifying the vehicle as meeting the same requirements as vehicles which may be sold or leased in California and meets or exceeds the low emission vehicle standard under section 88.105-94 of title 40, Code of Federal Regulations, for that make and model year vehicle,
the original use of which commences with the taxpayer,
which is acquired by the taxpayer for use or lease, but not for resale, and
which is made by a manufacturer.
75/25 mixed-fuel vehicle
For purposes of this subsection, the term 75/25 mixed-fuel vehicle means a mixed-fuel vehicle which operates using at least 75 percent alternative fuel and not more than 25 percent petroleum-based fuel.
90/10 mixed-fuel vehicle
For purposes of this subsection, the term 90/10 mixed-fuel vehicle means a mixed-fuel vehicle which operates using at least 90 percent alternative fuel and not more than 10 percent petroleum-based fuel.
New qualified advanced diesel motor vehicle credit
In general
For purposes of subsection (a), the new qualified advanced diesel motor vehicle credit determined under this subsection with respect to a new qualified advanced diesel motor vehicle placed in service by the taxpayer during the taxable year is—
$3,000 for vehicles with a gross vehicle weight rating of not more than 14,000 pounds, placed in service before December 31, 2009, if such vehicle has received a certificate that such vehicle meets or exceeds the Bin 5 Tier II emission level established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year,
$5,000 for vehicles with a gross vehicle weight rating of not more than 14,000 pounds, placed in service before December 31, 2013, if such vehicle has received a certificate that such vehicle meets or exceeds the Ultra Low Emission Vehicle II (ULEV II) emission level established in regulations prescribed by the California Air Resources Board under chapter 1 of division 3 of title 13, California Code of Regulations, for that make and model year, and
zero in any other case.
Definitions
Vehicle inertia weight class
For purposes of this subsection, the term ‘vehicle inertia weight class’ has the same meaning as when defined in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).
New qualified advanced diesel motor vehicle
For purposes of this subsection, the term ‘new qualified advanced diesel motor vehicle’ means any motor vehicle—
with a direct-injection diesel engine which achieves at least 20% increased fuel efficiency over the comparably sized gasoline engine, as determined by the Secretary,
the original use of which commences with the taxpayer,
which is acquired for use or lease by the taxpayer and not for resale, and
which is made by a manufacturer.
Application with other credits
The credit allowed under subsection (a) for any taxable year shall not exceed the excess (if any) of—
the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27, 29, and 30, over
the tentative minimum tax for the taxable year.
Other definitions and special rules
For purposes of this section—
Consumable fuel
The term consumable fuel means any solid, liquid, or gaseous matter which releases energy when consumed by an auxiliary power unit.
Motor vehicle
The term motor vehicle has the meaning given such term by section 30(c)(2).
City fuel economy
The city fuel economy with respect to any vehicle shall be measured in a manner which is substantially similar to the manner city fuel economy is measured in accordance with procedures under part 600 of subchapter Q of chapter I of title 40, Code of Federal Regulations, as in effect on the date of the enactment of this section.
Other terms
The terms automobile, passenger automobile, medium duty passenger vehicle, light truck, and manufacturer have the meanings given such terms in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).
Reduction in basis
For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed (determined without regard to subsection (e)).
No double benefit
The amount of any deduction or other credit allowable under this chapter—
for any incremental cost taken into account in computing the amount of the credit determined under subsection (d) shall be reduced by the amount of such credit attributable to such cost, and
with respect to a vehicle described under subsection (b) or (c), shall be reduced by the amount of credit allowed under subsection (a) for such vehicle for the taxable year.
Property used by tax-exempt entities
In the case of a credit amount which is allowable with respect to a motor vehicle which is acquired by an entity exempt from tax under this chapter, the person which sells or leases such vehicle to the entity shall be treated as the taxpayer with respect to the vehicle for purposes of this section and the credit shall be allowed to such person, but only if the person clearly discloses to the entity at the time of any sale or lease the specific amount of any credit otherwise allowable to the entity under this section.
Recapture
The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit (including recapture in the case of a lease period of less than the economic life of a vehicle).
Property used outside United States, etc., not Qualified
No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b) or with respect to the portion of the cost of any property taken into account under section 179.
Election to not take credit
No credit shall be allowed under subsection (a) for any vehicle if the taxpayer elects to not have this section apply to such vehicle.
Carryback and carryforward allowed
In general
If the credit amount allowable under subsection (a) for a taxable year exceeds the amount of the limitation under subsection (e) for such taxable year (in this paragraph referred to as the unused credit year
), such excess shall be allowed as a credit carryback for each of the 3 taxable years beginning after the date of the enactment of this section, which precede the unused credit year and a credit carryforward for each of the 20 taxable years which succeed the unused credit year.
Rules
Rules similar to the rules of section 39 shall apply with respect to the credit carryback and credit carryforward under subparagraph (A).
Interaction with air quality and Motor Vehicle Safety Standards
Unless otherwise provided in this section, a motor vehicle shall not be considered eligible for a credit under this section unless such vehicle is in compliance with—
the applicable provisions of the Clean Air Act for the applicable make and model year of the vehicle (or applicable air quality provisions of State law in the case of a State which has adopted such provision under a waiver under section 209(b) of the Clean Air Act), and
the motor vehicle safety provisions of sections 30101 through 30169 of title 49, United States Code.
Regulations
In general
Except as provided in paragraph (2), the Secretary shall promulgate such regulations as necessary to carry out the provisions of this section.
Coordination in prescription of certain regulations
The Secretary of the Treasury, in coordination with the Secretary of Transportation and the Administrator of the Environmental Protection Agency, shall prescribe such regulations as necessary to determine whether a motor vehicle meets the requirements to be eligible for a credit under this section.
Termination
This section shall not apply to any property purchased after—
in the case of a new qualified fuel cell motor vehicle (as described in subsection (b)), December 31, 2013,
in the case of a new qualified advanced diesel motor vehicle to which subsection (e)(1)(B) applies, December 31, 2013, and
in the case of any other property, December 31, 2009.
.
Conforming amendments
Section 1016(a) is amended by striking and
at the end of paragraph (30), by striking the period at the end of paragraph (31) and inserting , and
, and by adding at the end the following new paragraph:
to the extent provided in section 30B(g)(5).
.
Section 55(c)(3) is amended by inserting 30B(f),
after 30(b)(3)
.
Section 6501(m) is amended by inserting 30B(g)(10),
after 30(d)(4),
.
The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 30A the following new item:
Sec. 30B. Alternative motor vehicle credit
.
Effective date
The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act, in taxable years ending after such date.
Modification of credit for qualified electric vehicles
Amount of credit
In general
Section 30(a) (relating to allowance of credit) is amended by striking 10 percent of
.
Limitation of credit according to type of vehicle
Section 30(b) (relating to limitations) is amended—
by striking paragraphs (1) and (2) and inserting the following new paragraph:
Limitation according to type of vehicle
The amount of the credit allowed under subsection (a) for any vehicle shall not exceed the greatest of the following amounts applicable to such vehicle:
In the case of a vehicle which conforms to the Motor Vehicle Safety Standard 500 prescribed by the Secretary of Transportation, as in effect on the date of the enactment of the New Apollo Energy Act of 2005, the lesser of—
10 percent of the manufacturer’s suggested retail price of the vehicle, or
$1,500.
In the case of a vehicle not described in subparagraph (A) with a gross vehicle weight rating not exceeding 8,500 pounds—
$4,000, or
$6,000, if such vehicle is—
capable of a driving range of at least 100 miles on a single charge of the vehicle’s rechargeable batteries as measured pursuant to the urban dynamometer schedules under appendix I to part 86 of title 40, Code of Federal Regulations, or
capable of a payload capacity of at least 1,000 pounds.
In the case of a vehicle with a gross vehicle weight rating exceeding 8,500 but not exceeding 14,000 pounds, $10,000.
In the case of a vehicle with a gross vehicle weight rating exceeding 14,000 but not exceeding 26,000 pounds, $20,000.
In the case of a vehicle with a gross vehicle weight rating exceeding 26,000 pounds, $40,000.
, and
by redesignating paragraph (3) as paragraph (2).
Conforming amendments
Section 53(d)(1)(B)(iii) is amended by striking section 30(b)(3)(B)
and inserting section 30(b)(2)(B)
.
Section 55(c)(3) is amended by striking 30(b)(3)
and inserting 30(b)(2)
.
Qualified battery electric vehicle
In general
Section 30(c)(1)(A) (defining qualified electric vehicle) is amended to read as follows:
which is—
operated solely by use of a battery or battery pack, or
powered primarily through the use of an electric battery or battery pack using a flywheel or capacitor which stores energy produced by an electric motor through regenerative braking to assist in vehicle operation,
.
Leased vehicles
Section 30(c)(1)(C) is amended by inserting or lease
after use
.
Conforming amendments
Subsections (a), (b)(2), and (c) of section 30 are each amended by inserting battery
after qualified
each place it appears.
The heading of subsection (c) of section 30 is amended by inserting Battery
after Qualified
.
The heading of section 30 is amended by inserting battery
after qualified
.
The item relating to section 30 in the table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by inserting battery
after qualified
.
Section 179A(c)(3) is amended by inserting battery
before electric
.
The heading of paragraph (3) of section 179A(c) is amended by inserting battery
before electric
.
Additional special rules
In general
Section 30(d) (relating to special rules) is amended by adding at the end the following new paragraphs:
No double benefit
The amount of any deduction or other credit allowable under this chapter for any cost taken into account in computing the amount of the credit determined under subsection (a) shall be reduced by the amount of such credit attributable to such cost.
Property used by tax-exempt entities
In the case of a credit amount which is allowable with respect to a vehicle which is acquired by an entity exempt from tax under this chapter, the person which sells or leases such vehicle to the entity shall be treated as the taxpayer with respect to the vehicle for purposes of this section and the credit shall be allowed to such person, but only if the person clearly discloses to the entity at the time of any sale or lease the specific amount of any credit otherwise allowable to the entity under this section.
Carryback and carryforward allowed
In general
If the credit amount allowable under subsection (a) for a taxable year exceeds the amount of the limitation under subsection (b)(2) for such taxable year (in this paragraph referred to as the unused credit year
), such excess shall be allowed as a credit carryback for each of the 3 taxable years beginning after the date of the enactment of this paragraph, which precede the unused credit year and a credit carryforward for each of the 20 taxable years which succeed the unused credit year.
Rules
Rules similar to the rules of section 39 shall apply with respect to the credit carryback and credit carryforward under subparagraph (A).
.
Conforming amendment
Section 179A(c) is amended by striking paragraph (3).
Extension of credit
Section 30(e) (relating to termination) is amended by striking 2006
and inserting 2009
.
Effective date
The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act, in taxable years ending after such date.
Extension of biodiesel tax credits
In general
Sections 40A(e), 6426(c)(6), and 6427(e)(3)(B) are each amended by stirking 2006
and inserting 2014
.
Effective date
The amendments made by this section shall take effect on the date of the enactment of this Act.
Credit for retail sale of alternative fuels as motor vehicle fuel
In general
Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by inserting after section 40A the following new section:
Credit for retail sale of alternative fuels as motor vehicle fuel
General rule
For purposes of section 38, the alternative fuel retail sales credit for any taxable year is the applicable amount for each gasoline gallon equivalent of alternative fuel sold at retail by the taxpayer during such year as a fuel to propel any qualified motor vehicle.
Definitions
For purposes of this section—
Applicable amount
The term applicable amount means as follows:
In general
Except as provided in subparagraph (B), the amount determined in accordance with the following table:
| “In the case of any taxable year | |
| ending in— | The applicable amount is— |
| 2006 | 30 cents |
| 2007 | 40 cents |
| 2008 and 2009 | 50 cents |
| 2010 | 40 cents |
| 2011 | 30 cents. |
Hydrogen fuel
In the case of an alternative fuel which is hydrogen fuel, the amount determined in accordance with the following table:
| “In the case of any taxable year | |
| ending in— | The applicable amount is— |
| 2006 | 30 cents |
| 2007 | 40 cents |
| 2008 through 2013 | 50 cents |
| 2014 | 40 cents |
| 2015 | 30 cents. |
Alternative fuel
The term alternative fuel means compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and any liquid at least 85 percent of the volume of which consists of methanol or ethanol.
Gasoline gallon equivalent
The term gasoline gallon equivalent means, with respect to any alternative fuel, the amount (determined by the Secretary) of such fuel having a Btu content of 114,000.
Qualified motor vehicle
The term qualified motor vehicle means any motor vehicle (as defined in section 30(c)(2)) which meets any applicable Federal or State emissions standards with respect to each fuel by which such vehicle is designed to be propelled.
Sold at retail
In general
The term sold at retail means the sale, for a purpose other than resale, after manufacture, production, or importation.
Use treated as sale
If any person uses alternative fuel (including any use after importation) as a fuel to propel any qualified alternative fuel motor vehicle (as defined in section 30B(d)(4)) before such fuel is sold at retail, then such use shall be treated in the same manner as if such fuel were sold at retail as a fuel to propel such a vehicle by such person.
Election to pass credit
A person which sells alternative fuel at retail may elect to pass the credit allowable under this section to the purchaser of such fuel or, in the event the purchaser is a tax-exempt entity or otherwise declines to accept such credit, to the person which supplied such fuel, under rules established by the Secretary.
No double benefit
The amount of any deduction or other credit allowable under this chapter for any fuel taken into account in computing the amount of the credit determined under subsection (a) shall be reduced by the amount of such credit attributable to such fuel.
Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
Termination
In general
Except as provided in paragraph (2), this section shall not apply to any fuel sold at retail after December 31, 2011.
Hydrogen fuel
In the case of an alternative fuel which is hydrogen fuel, this section shall not apply to any fuel sold at retail after December 31, 2015.
.
Credit treated as business credit
Section 38(b) (relating to current year business credit) is amended by striking plus
at the end of paragraph (18), by striking the period at the end of paragraph (19) and inserting , plus
, and by adding at the end the following new paragraph:
the alternative fuel retail sales credit determined under section 40B(a).
.
Clerical amendment
The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 40A the following new item:
Sec. 40B. Credit for retail sale of alternative fuels as motor vehicle fuel
.
Effective date
The amendments made by this section shall apply to fuel sold at retail after December 31, 2005, in taxable years ending after such date.
Study of effectiveness of certain provisions by GAO
Study
The Comptroller General of the United States shall undertake an ongoing analysis of—
the effectiveness of the alternative motor vehicles and fuel incentives provisions under this Act, and
the recipients of the tax benefits contained in such provisions, including an identification of such recipients by income and other appropriate measurements.
Reports
The Comptroller General of the United States shall report the analysis required under subsection (a) to Congress not later than December 31, 2006, and annually thereafter.
Extension of deduction for certain refueling property
In general
Section 179A(f) (relating to termination) is amended by striking 2006
and inserting 2009
.
Effective date
The amendments made by this section shall apply to property placed in service after December 31, 2005, in taxable years ending after such date.
Credit for installation of alternative fueling stations
In general
Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credit, etc.), as amended by this Act, is amended by adding at the end the following new section:
Clean-fuel vehicle refueling property credit
Credit allowed
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 50 percent of the amount paid or incurred by the taxpayer during the taxable year for the installation of qualified clean-fuel vehicle refueling property.
Limitation
In general
The credit allowed under subsection (a)—
with respect to any retail clean-fuel vehicle refueling property, shall not exceed $30,000, and
with respect to any residential clean-fuel vehicle refueling property, shall not exceed $1,000.
Phaseout
In general
Except as provided in subparagraph (B), in the case of any qualified clean-fuel vehicle refueling property placed in service after December 31, 2007, the limit otherwise applicable under paragraph (1) shall be reduced by—
25 percent in the case of any vehicle placed in service in calendar year 2008, and
50 percent in the case of any vehicle placed in service in calendar year 2009.
Hydrogen property
In the case of any qualified clean-fuel vehicle refueling property relating to hydrogen placed in service after December 31, 2011, the limit otherwise applicable under paragraph (1) shall be reduced by—
25 percent in the case of any vehicle placed in service in calendar year 2012, and
50 percent in the case of any vehicle placed in service in calendar year 2013.
Year credit allowed
The credit allowed under subsection (a) shall be allowed in the taxable year in which the qualified clean-fuel vehicle refueling property is placed in service by the taxpayer.
Definitions
For purposes of this section—
Qualified clean-fuel vehicle refueling property
The term qualified clean-fuel vehicle refueling property has the same meaning given such term by section 179A(d).
Residential clean-fuel vehicle refueling property
The term residential clean-fuel vehicle refueling property means qualified clean-fuel vehicle refueling property which is installed on property which is used as the principal residence (within the meaning of section 121) of the taxpayer.
Retail clean-fuel vehicle refueling property
The term retail clean-fuel vehicle refueling property means qualified clean-fuel vehicle refueling property which is installed on property (other than property described in paragraph (2)) used in a trade or business of the taxpayer.
Application with other credits
The credit allowed under subsection (a) for any taxable year shall not exceed the excess (if any) of—
the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27, 29, 30, and 30B, over
the tentative minimum tax for the taxable year.
Basis reduction
For purposes of this title, the basis of any property shall be reduced by the portion of the cost of such property taken into account under subsection (a).
No double benefit
No deduction shall be allowed under section 179A with respect to any property with respect to which a credit is allowed under subsection (a).
Refueling property installed for tax-exempt entities
In the case of qualified clean-fuel vehicle refueling property installed on property owned or used by an entity exempt from tax under this chapter, the person which installs such refueling property for the entity shall be treated as the taxpayer with respect to the refueling property for purposes of this section (and such refueling property shall be treated as retail clean-fuel vehicle refueling property) and the credit shall be allowed to such person, but only if the person clearly discloses to the entity in any installation contract the specific amount of the credit allowable under this section.
Carryforward allowed
In general
If the credit amount allowable under subsection (a) for a taxable year exceeds the amount of the limitation under subsection (e) for such taxable year (referred to as the unused credit year
in this subsection), such excess shall be allowed as a credit carryforward for each of the 20 taxable years following the unused credit year.
Rules
Rules similar to the rules of section 39 shall apply with respect to the credit carryforward under paragraph (1).
Special rules
Rules similar to the rules of paragraphs (4) and (5) of section 179A(e) shall apply.
Regulations
The Secretary shall prescribe such regulations as necessary to carry out the provisions of this section.
Termination
This section shall not apply to any property placed in service—
in the case of property relating to hydrogen, after December 31, 2013, and
in the case of any other property, after December 31, 2009.
.
Incentive for production of hydrogen at qualified clean-fuel vehicle refueling property
Section 179A(d) (defining qualified clean-fuel vehicle refueling property) is amended by adding at the end the following new flush sentence:
In the case of clean-burning fuel which is hydrogen produced from another clean-burning fuel, paragraph (3)(A) shall be applied by substituting production, storage, or dispensing
for storage or dispensing
both places it appears.
.
Conforming amendments
Section 1016(a), as amended by this Act, is amended by striking and
at the end of paragraph (31), by striking the period at the end of paragraph (32) and inserting , and
, and by adding at the end the following new paragraph:
to the extent provided in section 30C(f).
.
Section 55(c)(3) is amended by inserting 30C(e),
after 30B(e)
.
The table of sections for subpart B of part IV of subchapter A of chapter 1, as amended by this Act, is amended by inserting after the item relating to section 30B the following new item:
Sec. 30C. Clean-fuel vehicle refueling property credit
.
Effective date
The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act, in taxable years ending after such date.
Incentive for certain energy efficient property used in business
In general
Part VI of subchapter B of chapter 1 is amended by adding at the end the following new section:
Energy property deduction
In general
There shall be allowed as a deduction for the taxable year an amount equal to the sum of—
the amount determined under subsection (b) for each energy property of the taxpayer placed in service during such taxable year, and
the energy efficient residential rental building property deduction determined under subsection (e).
Amount for energy property
In general
The amount determined under this subsection for the taxable year for each item of energy property shall equal the amount specified for such property in the following table:
| Description of property: | Allowable amount is: |
| Elected solar hot water property | $1.00 per each kwh/year of savings. |
| Photovoltaic property | $4.50 per peak watt. |
| Advanced main air circulating fan or a Tier 1 natural gas, propane, or oil water heater | $150. |
| Tier 2 energy-efficient building property | $900. |
| Tier 1 energy-efficient building property (other than an advanced main air circulating fan or a natural gas, propane, or oil water heater) | $450. |
Elected solar hot water property
In the case of elected solar hot water property, the taxpayer may elect to substitute $21 per annual Therm of natural gas savings
for $1.00 per each kwh/year of savings
in the table contained in paragraph (1).
Energy property defined
In general
For purposes of this part, the term energy property means any property—
which is—
solar energy property,
Tier 2 energy-efficient building property, or
Tier 1 energy-efficient building property,
the construction, reconstruction, or erection of which is completed by the taxpayer, or
which is acquired by the taxpayer if the original use of such property commences with the taxpayer,
with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and
which meets the performance and quality standards, and the certification requirements (if any), which—
have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy or the Administrator of the Environmental Protection Agency, as appropriate),
in the case of the energy efficiency ratio (EER) for central air conditioners and electric heat pumps—
require measurements to be based on published data which is tested by manufacturers at 95 degrees Fahrenheit, and
may be based on certified data of the Air Conditioning and Refrigeration Institute,
in the case of geothermal heat pumps—
shall be based on testing under the conditions of ARI/ISO Standard 13256–1 for Water Source Heat Pumps or ARI 870 for Direct Expansion GeoExchange Heat Pumps (DX), as appropriate, and
shall include evidence that water heating services have been provided through a desuperheater or integrated water heating system connected to the storage water heater tank, and
are in effect at the time of the acquisition of the property.
Solar energy property
In the case of—
elected solar hot water property, the regulations under paragraph (1)(D) shall be based on the OG–300 Standard for the Annual Performance of OG–300 Certified Systems of the Solar Rating and Certification Corporation, and
photovoltaics, such regulations shall be based on the ASTM Standard E 1036 and E 1036M–96 Standard Test Method for Electric Performance of Nonconcentrator Terrestrial Photovoltaic Modules and Arrays Using Reference Cells,
Exception
Such term shall not include any property which is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).
Definitions relating to types of energy property
For purposes of this section—
Solar energy property
In general
The term solar energy property means equipment which uses solar energy—
to generate electricity, or
to provide hot water for use in a structure.
Elected solar hot water property
In general
The term elected solar hot water property means property which is solar energy property by reason of subparagraph (A)(ii) and for which an election under this subparagraph is in effect.
Election
For purposes of clause (i), a taxpayer may elect to treat property described in clause (i) as elected solar hot water property.
Photovoltaic property
The term photovoltaic property means solar energy property which uses a solar photovoltaic process to generate electricity.
Swimming pools, etc., used as storage medium
The term solar energy property shall not include a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage.
Solar panels
No solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as solar energy property solely because it constitutes a structural component of the structure on which it is installed.
Tier 2 energy-efficient building property
The term Tier 2 energy-efficient building property means—
an electric heat pump water heater which yields an energy factor of at least 2.0 in the standard Department of Energy test procedure,
an electric heat pump which has a heating seasonal performance factor (HSPF) of at least 9, a seasonal energy efficiency ratio (SEER) of at least 15, and an energy efficiency ratio (EER) of at least 13,
a geothermal heat pump which—
in the case of a closed loop product, has an energy efficiency ratio (EER) of at least 14.1 and a heating coefficient of performance (COP) of at least 3.3,
in the case of an open loop product, has an energy efficiency ratio (EER) of at least 16.2 and a heating coefficient of performance (COP) of at least 3.6, and
in the case of a direct expansion (DX) product, has an energy efficiency ratio (EER) of at least 15 and a heating coefficient of performance (COP) of at least 3.5,
a central air conditioner which has a seasonal energy efficiency ratio (SEER) of at least 15 and an energy efficiency ratio (EER) of at least 13, and
a natural gas, propane, or oil water heater which has an energy factor of at least 0.80.
Tier 1 energy-efficient building property
The term Tier 1 energy-efficient building property means—
an electric heat pump which has a heating system performance factor (HSPF) of at least 8.5, a cooling seasonal energy efficiency ratio (SEER) of at least 14, and an energy efficiency ratio (EER) of at least 12,
a central air conditioner which has a cooling seasonal energy efficiency ratio (SEER) of at least 14 and an energy efficiency ratio (EER) of at least 12,
a natural gas, propane, or oil water heater which has an energy factor of at least 0.65, and
an oil, natural gas, or propane furnace or hot water boiler which achieves at least 95 percent annual fuel utilization efficiency (AFUE).
Advanced main air circulating fan
The term advanced main air circulating fan means a fan used in a natural gas, propane, or oil furnace originally placed in service by the taxpayer during the taxable year, including a fan which uses a brushless permanent magnet motor or another type of motor which achieves similar or higher efficiency at full and half speed, as determined by the Secretary.
Energy efficient residential rental building property deduction
Deduction allowed
For purposes of subsection (a)—
In general
The energy efficient residential rental building property deduction determined under this subsection is an amount equal to energy efficient residential rental building property expenditures made by a taxpayer for the taxable year.
Maximum amount of deduction
The amount of energy efficient residential rental building property expenditures taken into account under subparagraph (A) with respect to each dwelling unit shall not exceed—
$6,000 in the case of a percentage reduction of 50 percent as determined under paragraph (2)(B), and
$12,000 times the percentage reduction in the case of a percentage reduction of less than 50 percent as determined under paragraph (2)(B).
Year deduction allowed
The deduction under subparagraph (A) shall be allowed in the taxable year in which the construction, reconstruction, erection, or rehabilitation of the property is completed.
Energy efficient residential rental building property expenditures
For purposes of this subsection—
In general
The term energy efficient residential rental building property expenditures means an amount paid or incurred in connection with construction, reconstruction, erection, or rehabilitation of energy efficient residential rental building property—
for which depreciation is allowable under section 167,
which is located in the United States, and
the construction, reconstruction, erection, or rehabilitation of which is completed by the taxpayer.
Energy efficient residential rental building property
In general
The term energy efficient residential rental building property means any property which reduces total annual energy and power costs with respect to heating and cooling of the building by a percentage certified according to clause (ii).
Procedures
In general
For purposes of clause (i), energy usage and costs shall be demonstrated by performance-based compliance.
Performance-based compliance
Performance-based compliance shall be demonstrated by calculating the percent energy cost savings for heating and cooling, as applicable, with respect to a dwelling unit when compared to the original condition of the dwelling unit.
Computer software
Computer software shall be used in support of performance-based compliance under subclause (II) and such software shall meet all of the procedures and methods for calculating energy savings reductions which are promulgated by the Secretary of Energy. Such regulations on the specifications for software and verification protocols shall be based on the 2005 California Residential Alternative Calculation Method Approval Manual.
Calculation requirements
In calculating tradeoffs and energy performance, the regulations prescribed under this clause shall prescribe for the taxable year the costs per unit of energy and power, such as kilowatt hour, kilowatt, gallon of fuel oil, and cubic foot or Btu of natural gas, which may be dependent on time of usage. Where a State has developed annual energy usage and cost reduction procedures based on time of usage costs for use in the performance standards of the State’s building energy code prior to the effective date of this section, the State may use those annual energy usage and cost reduction procedures in lieu of those adopted by the Secretary.
Approval of software submissions
The Secretary shall approve software submissions which comply with the requirements of subclause (III).
Procedures for inspection and testing of homes
The Secretary shall ensure that procedures for the inspection and testing for compliance comply with the calculation requirements under subclause (IV) of this clause and clause (iv).
Determinations of compliance
A determination of compliance with respect to energy efficient residential rental building property made for the purposes of this subparagraph shall be filed with the Secretary not later than 1 year after the date of such determination and shall include the TIN of the certifier, the address of the building in compliance, and the identity of the person for whom such determination was performed. Determinations of compliance filed with the Secretary shall be available for inspection by the Secretary of Energy.
Compliance
In general
The Secretary, after consultation with the Secretary of Energy, shall establish requirements for certification and compliance procedures after examining the requirements for energy consultants and home energy ratings providers specified by the Mortgage Industry National Home Energy Rating Standards.
Individuals qualified to determine compliance
The determination of compliance may be provided by a local building regulatory authority, a utility, a manufactured home production inspection primary inspection agency (IPIA), or an accredited home energy rating system provider. All providers shall be accredited, or otherwise authorized to use approved energy performance measurement methods, by the Residential Energy Services Network (RESNET).
Allocation of deduction for public property
In the case of energy efficient residential rental building property which is public property, the Secretary shall promulgate a regulation to allow the allocation of the deduction to the person primarily responsible for designing the improvements to the property in lieu of the public entity which is the owner of such property. Such person shall be treated as the taxpayer for purposes of this subsection.
Special rules
For purposes of this section—
Basis reduction
For purposes of this subtitle, if a deduction is allowed under this section with respect to any property, the basis of such property shall be reduced by the amount of the deduction so allowed.
Double benefit
Property which would, but for this paragraph, be eligible for deduction under more than one provision of this section shall be eligible only under one such provision, the provision specified by the taxpayer.
Regulations
The Secretary shall promulgate such regulations as necessary to take into account new technologies regarding energy efficiency and renewable energy for purposes of determining energy efficiency and savings under this section.
Termination
This section shall not apply with respect to—
any energy property placed in service after December 31, 2010 (December 31, 2006, in the case of Tier 1 energy-efficient building property), and
any energy efficient residential rental building property expenditures in connection with property—
placed in service after December 31, 2008, or
the construction, reconstruction, erection, or rehabilitation of which is not completed on or before December 31, 2008.
.
Conforming amendments
Section 48(a)(3)(A) is amended to read as follows:
which is equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage,
.
Subparagraph (B) of section 168(e)(3) is amended—
in clause (vi)(I)—
by striking section 48(a)(3)
and inserting section 200(d)(1)
, and
by striking clause (i)
and inserting such subparagraph (A)
, and
in the last sentence, by striking section 48(a)(3)
and inserting section 200(c)(3)
.
Section 1016(a) is amended by striking and
at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting , and
, and by inserting the following new paragraph:
for amounts allowed as a deduction under section 200(a).
.
Clerical amendment
The table of sections for part VI of subchapter B of chapter 1 is amended by adding at the end the following new item:
.
Authorization of appropriations
There are authorized to be appropriated to the Department of Energy out of amounts not already appropriated such sums as necessary to carry out this section.
Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2005.
Energy efficient commercial buildings deduction
In general
Part VI of subchapter B of chapter 1 (relating to itemized deductions for individuals and corporations) is amended by inserting after section 179B the following new section:
Energy efficient commercial buildings deduction
In general
There shall be allowed as a deduction an amount equal to the cost of energy efficient commercial building property placed in service during the taxable year.
Maximum amount of deduction
The deduction under subsection (a) with respect to any building for the taxable year and all prior taxable years shall not exceed an amount equal to the product of—
$2.25, and
the square footage of the building.
Definitions
For purposes of this section—
Energy efficient commercial building property
The term energy efficient commercial building property means property—
which is installed on or in any building located in the United States,
which is installed as part of—
the interior lighting systems,
the heating, cooling, ventilation, and hot water systems, or
the building envelope, and
which is certified in accordance with subsection (d)(6) as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 50 percent or more in comparison to a reference building which meets the minimum requirements of Standard 90.1–2001 using methods of calculation under subsection (d)(2).
Standard 90.1–2001
The term Standard 90.1–2001 means Standard 90.1–2001 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America (as in effect on April 2, 2003).
Special rules
Partial allowance
In general
Except as provided in subsection (f), if—
the requirement of subsection (c)(1)(C) is not met, but
there is a certification in accordance with paragraph (6) that any system referred to in subsection (c)(1)(B) satisfies the energy-savings targets established by the Secretary under subparagraph (B) with respect to such system,
$.75for
$2.25.
Regulations
The Secretary, after consultation with the Secretary of Energy, shall establish a target for each system described in subsection (c)(1)(B) which, if such targets were met for all such systems, the building would meet the requirements of subsection (c)(1)(C).
Methods of calculation
The Secretary, after consultation with the Secretary of Energy, shall promulgate regulations which describe in detail methods for calculating and verifying energy and power consumption and cost, based on the provisions of the 2005 California Nonresidential Alternative Calculation Method Approval Manual or, in the case of residential property, the 2005 California Residential Alternative Calculation Method Approval Manual. These regulations shall meet the following requirements:
In calculating tradeoffs and energy performance, the regulations shall prescribe the costs per unit of energy and power, such as kilowatt hour, kilowatt, gallon of fuel oil, and cubic foot or Btu of natural gas, which may be dependent on time of usage. If a State has developed annual energy usage and cost calculation procedures based on time of usage costs for use in the performance standards of the State’s building energy code before the effective date of this section, the State may use those annual energy usage and cost calculation procedures in lieu of those adopted by the Secretary.
The calculation methods under this paragraph need not comply fully with section 11 of Standard 90.1–2001.
The calculation methods shall be fuel neutral, such that the same energy efficiency features shall qualify a building for the deduction under this section regardless of whether the heating source is a gas or oil furnace or an electric heat pump. The reference building for a proposed design which employs electric resistance heating shall be modeled as using a heat pump.
The calculation methods shall provide appropriate calculated energy savings for design methods and technologies not otherwise credited in either Standard 90.1–2001 or in the 2005 California Nonresidential Alternative Calculation Method Approval Manual, including the following:
Natural ventilation.
Evaporative cooling.
Automatic lighting controls such as occupancy sensors, photocells, and timeclocks.
Daylighting.
Designs utilizing semi-conditioned spaces which maintain adequate comfort conditions without air conditioning or without heating.
Improved fan system efficiency, including reductions in static pressure.
Advanced unloading mechanisms for mechanical cooling, such as multiple or variable speed compressors.
The calculation methods may take into account the extent of commissioning in the building, and allow the taxpayer to take into account measured performance which exceeds typical performance.
On-site generation of electricity, including combined heat and power systems, fuel cells, and renewable energy generation such as solar energy.
Wiring with lower energy losses than wiring satisfying Standard 90.1–2001 requirements for building power distribution systems.
Computer software
In general
Any calculation under paragraph (2) shall be prepared by qualified computer software.
Qualified computer software
For purposes of this paragraph, the term qualified computer software means software—
for which the software designer has certified that the software meets all procedures and detailed methods for calculating energy and power consumption and costs as required by the Secretary,
which provides such forms as required to be filed by the Secretary in connection with energy efficiency of property and the deduction allowed under this section, and
which provides a notice form which documents the energy efficiency features of the building and its projected annual energy costs.
Allocation of deduction for public property
In the case of energy efficient commercial building property installed on or in public property, the Secretary shall promulgate a regulation to allow the allocation of the deduction to the person primarily responsible for designing the property in lieu of the public entity which is the owner of such property. Such person shall be treated as the taxpayer for purposes of this section.
Notice to owner
Each certification required under this section shall include an explanation to the building owner regarding the energy efficiency features of the building and its projected annual energy costs as provided in the notice under paragraph (3)(B)(iii).
Certification
In general
The Secretary shall prescribe the manner and method for the making of certifications under this section.
Procedures
The Secretary shall include as part of the certification process procedures for inspection and testing by qualified individuals described in subparagraph (C) to ensure compliance of buildings with energy-savings plans and targets. Such procedures shall be comparable, given the difference between commercial and residential buildings, to the requirements in the Mortgage Industry National Accreditation Procedures for Home Energy Rating Systems.
Qualified individuals
Individuals qualified to determine compliance shall be only those individuals who are recognized by an organization certified by the Secretary for such purposes.
Basis reduction
For purposes of this subtitle, if a deduction is allowed under this section with respect to any energy efficient commercial building property, the basis of such property shall be reduced by the amount of the deduction so allowed.
Interim rules for lighting systems
Until such time as the Secretary issues final regulations under subsection (d)(1)(B) with respect to property which is part of a lighting system—
In general
The lighting system target under subsection (d)(1)(A)(ii) shall be a reduction in lighting power density of 25 percent (50 percent in the case of a warehouse) of the minimum requirements in Table 9.3.1.1 or Table 9.3.1.2 (not including additional interior lighting power allowances) of Standard 90.1–2001.
Reduction in deduction if reduction less than 40 percent
In general
If, with respect to the lighting system of any building other than a warehouse, the reduction in lighting power density of the lighting system is not at least 40 percent, only the applicable percentage of the amount of deduction otherwise allowable under this section with respect to such property shall be allowed.
Applicable percentage
For purposes of subparagraph (A), the applicable percentage is the number of percentage points (not greater than 100) equal to the sum of—
50, and
the amount which bears the same ratio to 50 as the excess of the reduction of lighting power density of the lighting system over 25 percentage points bears to 15.
Exceptions
This subsection shall not apply to any system—
the controls and circuiting of which do not comply fully with the mandatory and prescriptive requirements of Standard 90.1–2001 and which do not include provision for bilevel switching in all occupancies except hotel and motel guest rooms, store rooms, restrooms, and public lobbies, or
which does not meet the minimum requirements for calculated lighting levels as set forth in the Illuminating Engineering Society of North America Lighting Handbook, Performance and Application, Ninth Edition, 2000.
Coordination with other tax benefits
No double benefit
No deduction shall be allowed under subsection (a) with respect to any building for which a credit under section 45J has been allowed.
Special rule with respect to buildings with energy efficient property
In any case in which a deduction under section 200 or a credit under section 25C has been allowed with respect to property in connection with a building, the annual energy and power costs of the reference building referred to in subsection (c)(1)(C) shall be determined assuming such reference building contains the property for which such deduction or credit has been allowed.
Regulations
The Secretary shall promulgate such regulations as necessary—
to take into account new technologies regarding energy efficiency and renewable energy for purposes of determining energy efficiency and savings under this section, and
to provide for a recapture of the deduction allowed under this section if the plan described in subsection (c)(1)(C) or (d)(1)(A) is not fully implemented.
Termination
This section shall not apply with respect to property placed in service after December 31, 2010.
.
Conforming amendments
Section 1016(a) is amended by striking and
at the end of paragraph (33), by striking the period at the end of paragraph (34) and inserting , and
, and by adding at the end the following new paragraph:
to the extent provided in section 179C(e).
.
Section 1245(a) is amended by inserting 179C,
after 179B,
both places it appears in paragraphs (2)(C) and (3)(C).
Section 1250(b)(3) is amended by inserting before the period at the end of the first sentence or by section 179C
.
Section 263(a)(1) is amended by striking or
at the end of subparagraph (H), by striking the period at the end of subparagraph (I) and inserting , or
, and by inserting after subparagraph (I) the following new subparagraph:
expenditures for which a deduction is allowed under section 179C.
.
Section 312(k)(3)(B) is amended by striking section 179, 179A, or 179B
each place it appears in the heading and text and inserting section 179, 179A, 179B, or 179C
.
Clerical amendment
The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 179B the following new item:
.
Effective date
The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act in taxable years ending after such date.
Credit for construction of new highly energy-efficient homes
In general
Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by inserting after section 45I the following:
New highly energy-efficient home credit
In general
For purposes of section 38, in the case of an eligible contractor, the credit determined under this section for the taxable year is an amount equal to the credit amount specified in the following table for a new, highly energy-efficient principal residence:
| New, highly energy-efficient principal residence: | Credit amount: |
| 30 percent property | $1,000 |
| 50 percent property | $2,000 |
Highly energy-efficient principal residence
For purposes of this section—
In general
The term highly energy-efficient principal residence means a dwelling—
located in the United States,
the construction of which is substantially completed after December 31, 2005,
the original use of which is as a principal residence (within the meaning of section 121) which commences with the person who acquires such dwelling from the eligible contractor, and
which is certified before such use commences as being 50 percent property or 30 percent property.
50 or 30 percent property
In general
For purposes of paragraph (1), property is 50 percent property or 30 percent property if the projected heating and cooling energy usage of such property, measured in terms of average annual energy cost to taxpayer, is reduced by 50 percent, or 30 percent, respectively, in comparison to the energy usage of the standard design reference house as determined using the procedures under subparagraph (D).
Standard design reference house
For purposes of this subsection, the term standard design reference house means a dwelling which conforms with the standards of chapter 4 of the 2000 International Energy Conservation Code of the International Code Council and the minimum equipment efficiency standards promulgated by the Department of Energy under the National Appliance Energy Conservation Act.
Energy efficient reference house
For purposes of this paragraph, the term energy efficient reference house means a design of a dwelling which uses the same heating fuel type as the proposed design and which uses minimum standards equipment, as required by the Department of Energy under the National Appliance Energy Conservation Act and which achieves, on average over fuel type and house geometry, the required 30 percent or 50 percent reductions in annual energy cost as calculated using the procedures under subparagraph (D).
Procedures
In general
For purposes of subparagraph (A), energy usage shall be demonstrated either by a component-based approach or a performance-based approach.
Component approach
Compliance by the component approach is achieved when all of the components of the house comply with the requirements of prescriptive packages established by the Secretary of Energy, in consultation with the Administrator of the Environmental Protection Agency, such that they are equivalent, for the strong majority of houses which can use this method, to the results of using the performance-based approach of clause (iii) to achieve the required reduction in energy usage.
Performance-based approach
Performance-based compliance shall be demonstrated in terms of equivalent or less energy usage when compared to the energy efficient reference house of the same heating fuel type as the dwelling concerned or through an alternate method prescribed by the Secretary which yields equivalent results.
Computer software
Computer software shall be used in support of performance-based compliance under clause (iii) and such software shall meet all of the procedures and methods for calculating energy savings reductions that are promulgated by the Secretary of Energy. Such regulations on the specifications for software and verification protocols shall be based on the 2005 California Residential Alternative Calculation Method Approval Manual.
Fuel parity
In the case of both the component and the performance-based approaches, and any software used in support of either such approach, the Secretary shall assure fuel parity by requiring both the energy efficient reference house and the prescriptive package under clause (ii) to employ the same envelope energy efficiency measures for a house heated by a gas furnace as for a house heated by an electric air source heat pump or by an oil furnace or boiler; and, for equipment efficiency, to employ electric, oil, or gas equipment efficiency of corresponding efficiency improvement. Such determination of corresponding efficiency improvement shall be made on a linear scale between the minimum standard equipment efficiency and the best available marketplace technology efficiency as determined by the Secretary after considering the information provided by the Air Conditioning and Refrigeration Institute (ARI) and the Gas Appliance Manufacturers Association (GAMA) guides for the respective electric, oil, and natural gas equipment of such type (such as heating and cooling).
Approval of software submissions
The Secretary shall approve software submissions that comply with the calculation requirements of clause (iv).
Procedures for inspection and testing of homes
The Secretary shall ensure that procedures for the inspection and testing for compliance comply with the calculation requirements under clause (iv).
Determinations of compliance
A determination of compliance made for the purposes of this subsection shall be filed with the Secretary within 1 year after the date of such determination and shall include the TIN of the certifier, the address of the building in compliance, and the identity of the person for whom such determination was performed. Determinations of compliance filed with the Secretary shall be available for inspection by the Secretary of Energy.
Compliance
In general
The Secretary, in consultation with the Secretary of Energy shall establish requirements for certification and compliance procedures after examining the requirements for energy consultants and home energy ratings providers specified by the Mortgage Industry National Accreditation Procedures for Home Energy Rating Systems.
Individuals Qualified to determine compliance
Individuals qualified to determine compliance shall be only those individuals who are recognized by an organization certified by the Secretary for such purposes. The Secretary may qualify a Home Energy Rating Systems Organization, a local building code agency, a State or local energy office, a utility, or other organizations which meet the requirements prescribed under this section.
Form provided to buyer
In general
A form documenting the energy-efficiency of the dwelling, including the rated energy efficiency performance of equipment installed in the dwelling, shall be provided to the buyer of the dwelling. The form shall include labeled R-value for insulation products, NFRC-labeled U-factor and Solar Heat Gain Coefficient for windows, skylights, and doors, labeled AFUE ratings for furnaces and boilers, labeled HSPF ratings for electric heat pumps, and labeled SEER ratings for air conditioners.
Ratings label affixed in dwelling
A permanent label documenting the ratings in subparagraph (A) shall be affixed to the front of the electrical distribution panel of the dwelling, or shall be otherwise permanently displayed in a readily inspectable location in the dwelling.
Additional definitions
For purposes of this section—
Eligible contractor
The term eligible contractor means the person who constructed the new energy-efficient home, or in the case of a manufactured home which conforms to Federal Manufactured Home Construction and Safety Standards (24 C.F.R. 3280), the manufactured home producer of such home.
Construction
The term construction includes reconstruction and rehabilitation.
Acquire
The term acquire includes purchase and, in the case of reconstruction and rehabilitation, such term includes a binding written contract for such reconstruction or rehabilitation.
Manufactured home included
The term dwelling includes a manufactured home conforming to Federal Manufactured Home Construction and Safety Standards (24 C.F.R. 3280).
Coordination with other credits
Property which would, but for this paragraph, be eligible for credit under more than one provision of this section shall be eligible only under one such provision, the provision specified by the taxpayer.
Basis adjustment
For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.
Termination
Subsection (a) shall apply to dwellings purchased during the period beginning on January 1, 2006, and ending on December 31, 2010.
.
Credit made part of general business credit
Section 38(b) (relating to current year business credit) is amended by striking plus
at the end of paragraph (19), by striking the period at the end of paragraph (20) and inserting , plus
, and by adding at the end the following:
the new highly energy-efficient home credit determined under section 45J.
.
Denial of double benefit
Section 280C (relating to certain expenses for which credits are allowable) is amended by adding at the end the following:
New energy-efficient home expenses
No deduction shall be allowed for that portion of expenses for a new highly energy-efficient home otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45J.
.
Credit allowed against regular and minimum tax
In general
Section 38(c) (relating to limitation based on amount of tax) is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph:
Special Rules for new energy efficient home credit
In general
In the case of the new energy efficient home credit—
this section and section 39 shall be applied separately with respect to the credit, and
in applying paragraph (1) to the credit—
subparagraphs (A) and (B) thereof shall not apply, and
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 new energy efficient home credit).
New highly energy efficient home credit
For purposes of this subsection, the term new highly energy efficient home credit means the credit allowable under subsection (a) by reason of section 45J.
.
Conforming amendment
Subclause (II) of section 38(c)(2)(A)(ii) is amended by inserting or the new highly energy efficient home credit
after employment credit
.
Deduction for certain unused business credits
Subsection (c) of section 196 is amended by striking and
at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting , and
, and by adding after paragraph (12) the following:
the new highly energy-efficient home credit determined under section 45J.
.
Clerical amendment
The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 45I the following:
Sec. 45J. New highly energy-efficient home credit
.
Effective date
The amendments made by this section shall apply to taxable years ending after December 31, 2005.
Credit for energy efficient appliances
In general
Subpart D of part IV of subchapter A of chapter 1 (relating to business-related credits) is amended by adding after section 45J the following:
Energy efficient appliance credit
General rule
For purposes of section 38, the energy efficient appliance credit determined under this section for the taxable year is an amount equal to the applicable amount determined under subsection (b) with respect to qualified energy efficient appliances produced by the taxpayer during the calendar year ending with or within the taxable year.
Applicable Amount
For purposes of subsection (a), the applicable amount determined under this subsection with respect to a taxpayer is the sum of—
in the case of an energy efficient clothes washer described in subsection (d)(2)(A) or an energy efficient refrigerator described in subsection (d)(3)(B)(i), an amount equal to—
$50, multiplied by
the number of such washers and refrigerators produced by the taxpayer during such calendar year, and
in the case of an energy efficient clothes washer described in subsection (d)(2)(B) or an energy efficient refrigerator described in subsection (d)(3)(B)(ii), an amount equal to—
$100, multiplied by
the number of such washers and refrigerators produced by the taxpayer during such calendar year.
Limitation on maximum credit
In general
The maximum amount of credit allowed under subsection (a) with respect to a taxpayer for all taxable years shall be—
$30,000,000 with respect to the credit determined under subsection (b)(1), and
$30,000,000 with respect to the credit determined under subsection (b)(2).
Limitation based on gross receipts
The credit allowed under subsection (a) with respect to a taxpayer for the taxable year shall not exceed an amount equal to 2 percent of the average annual gross receipts of the taxpayer for the 3 taxable years preceding the taxable year in which the credit is determined.
Gross receipts
For purposes of this subsection, the rules of paragraphs (2) and (3) of section 448(c) shall apply.
Qualified energy efficient appliance
For purposes of this section—
In general
The term qualified energy efficient appliance means—
an energy efficient clothes washer, or
an energy efficient refrigerator.
Energy efficient clothes washer
The term energy efficient clothes washer means a residential clothes washer, including a residential style coin operated washer, which is manufactured with—
a 8.5 Water Factor (referred to in this paragraph as WF
) (as determined by the Secretary) and a 1.60 Modified Energy Factor (referred to in this paragraph as MEF
) (as determined by the Secretary of Energy) for calendar years 2006 through 2008, or
a 7.5 WF (as determined by the Secretary) and a 1.80 MEF (as determined by the Secretary of Energy) for calendar years after 2008.
Energy efficient refrigerator
The term energy efficient refrigerator means an automatic defrost refrigerator-freezer which—
has an internal volume of at least 16.5 cubic feet, and
consumes—
15 percent less kw/hr/yr than the energy conservation standards promulgated by the Department of Energy for such refrigerator for 2005, or
20 to 25 percent less kw/hr/yr than such energy conservation standards.
Special Rules
In general
Rules similar to the rules of subsections (c), (d), and (e) of section 52 shall apply for purposes of this section.
Aggregation rules
All persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as one person for purposes of subsection (a).
Verification
The taxpayer shall submit such information or certification as the Secretary, in consultation with the Secretary of Energy, determines necessary to claim the credit amount under subsection (a).
Termination
This section shall not apply to qualified energy efficient appliances produced in calendar years beginning after 2010.
.
Conforming amendment
Section 38(b) (relating to general business credit) is amended by striking plus
at the end of paragraph (20), by striking the period at the end of paragraph (21) and inserting , plus
, and by adding at the end the following new paragraph:
the energy efficient appliance credit determined under section 45K(a).
.
Clerical amendment
The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 45J the following new item:
Sec. 45K. Energy efficient appliance credit
.
Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2005.
Credit for distributed energy generation and demand management property
In general
Subpart E of part IV of subchapter A of chapter 1 (relating to rules for computing investment credit) is amended by inserting after section 48 the following:
Energy credit
In general
For purposes of section 46, the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
Energy percentage
In general
The energy percentage is—
except as otherwise provided in this subparagraph, 10 percent,
in the case of energy property described in clauses (ii), (iv), and (v) of subsection (c)(1)(A), 20 percent,
in the case of energy property described in subsection (c)(1)(A)(vii), 15 percent,
in the case of energy property described in subsection (c)(1)(A)(iii) relating to a high risk geothermal well, 20 percent, and
in the case of energy property described in subsection (c)(1)(A)(i), 50 percent.
Coordination with rehabilitation
The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures as determined under section 47.
Energy property defined
In general
For purposes of this subpart, the term energy property means any property—
which is—
photovoltaic property,
other solar energy property,
geothermal energy property,
energy-efficient building property other than property described in clauses (iii)(I) and (v)(I) of subsection (d)(3)(A),
combined heat and power system property,
qualified anaerobic digester property,
waste conversion property, or
adjustable speed drive property,
the construction, reconstruction, or erection of which is completed by the taxpayer, or
which is acquired by the taxpayer if the original use of such property commences with the taxpayer,
which can reasonably be expected to remain in operation for at least 5 years,
with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and
which meets the performance and quality standards (if any) which—
have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy), and
are in effect at the time of the acquisition of the property.
Exception for public utility property
Such term shall not include any property which is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990), except for property described in paragraph (1)(A)(iv).
Limitation on credit for photovoltaic property
In general
The credit allowed under this section which is attributable to photovoltaic property shall not exceed the sum of—
the applicable low-wattage rate multiplied by the number of watts of generating capacity of the property which does not exceed 10 kilowatts, plus
the applicable high-wattage rate multiplied by the number of watts of generating capacity of the property in excess of 10 kilowatts (if any).
Applicable low- and high-wattage rates
For purposes of this subsection, the applicable low- and high-wattage rates shall be determined under the following table:
| In the case of taxable years beginning in calendar year: | The applicable low-wattage rate is: | The applicable high-wattage rate is: |
| 2006 | $3.00 | $2.00 |
| 2007 | $2.85 | $1.90 |
| 2008 | $2.70 | $1.80 |
| 2009 | $2.55 | $1.70 |
| 2010 and thereafter | $2.40 | $1.60 |
Generating capacity
For purposes of this subsection, generating capacity shall be measured as the rated peak power output of a system’s component modules as established by the American Society for Testing and Materials. Any photovoltaic property which is electrically contiguous or serves the same customer load shall be treated as one system for purposes of this section.
Definitions relating to types of energy property
For purposes of this section—
Solar energy property
Photovoltaic property
The term photovoltaic property means equipment—
which uses solar energy to generate electricity, and
which the taxpayer has elected (at such time and in such form and manner as the Secretary may specify) to treat as photovoltaic property for purposes of this section.
Other solar energy property
The term other solar energy property means equipment—
which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, and
which is not photovoltaic property.
Swimming pools, etc. used as storage medium
Photovoltaic and other solar energy property shall not include property with respect to which expenditures are properly allocable to a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage.
Solar panels
No solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as photovoltaic or other solar energy property solely because it constitutes a structural component of the structure on which it is installed.
Geothermal energy property
In general
The term geothermal energy property means equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage.
High risk geothermal well
The term high risk geothermal well means a geothermal deposit (within the meaning of section 613(e)(2)) which requires high risk drilling techniques. Such deposit may not be located in a State or national park or in an area in which the relevant State park authority or the National Park Service determines the development of such a deposit will negatively impact on a State or national park.
Energy-efficient building property
In general
The term energy-efficient building property means—
a fuel cell which—
generates electricity using an electrochemical process,
has an electricity-only generation efficiency greater than 30 percent, and
has a minimum generating capacity of 1 kilowatt,
an electric heat pump hot water heater which yields an energy factor of 2.0 or greater under test procedures prescribed by the Secretary of Energy,
an electric heat pump which has a heating system performance factor (HSPF) of at least 8.5 but less than 9 and a cooling seasonal energy efficiency ratio (SEER) of at least 14 but less than 15 and an energy efficiency ratio (EER) of at least 12,
an electric heat pump which has a heating system performance factor (HSPF) of 9 or greater and a cooling seasonal energy efficiency ratio (SEER) of 15 or greater and an energy efficiency ratio (EER) of at least 13,
a natural gas heat pump which has a coefficient of performance of not less than 1.25 for heating and not less than 0.80 for cooling,
a central air conditioner which has a cooling seasonal energy efficiency ratio (SEER) of at least 14 but less than 15 and an energy efficiency ratio (EER) of at least 12,
a central air conditioner which has a cooling seasonal energy efficiency ratio (SEER) of 15 or greater and an energy efficiency ratio (EER) of at least 13,
an advanced natural gas water heater which—
increases steady state efficiency and reduces standby and vent losses, and
has an energy factor of at least 0.80, and
an advanced natural gas furnace which achieves a 95 percent AFUE and rated for seasonal electricity use of less than 300 kWh per year.
Limitations
The credit under subsection (a) for the taxable year may not exceed—
$500 in the case of property described in subparagraph (A) other than clauses (i) and (iv) thereof,
$500 for each kilowatt of capacity in the case of any fuel cell described in subparagraph (A)(i), and
$3,000 in the case of any natural gas heat pump described in subparagraph (A)(iv).
Combined heat and power system property
In general
The term combined heat and power system property means property—
comprising a system for the same energy source for the simultaneous or sequential generation of electrical power, mechanical shaft power, or both, in combination with steam, heat, or other forms of useful energy,
which has an electrical capacity of more than 20 kilowatts or a mechanical energy capacity of more than 67 horsepower or an equivalent combination of electrical and mechanical energy capacities,
which produces—
at least 20 percent of its total useful energy in the form of thermal energy, and
at least 20 percent of its total useful energy in the form of electrical or mechanical power (or a combination thereof), and
the energy efficiency percentage of which exceeds—
60 percent in the case of a system with an electrical capacity of less than 1 megawatt,
65 percent in the case of a system with an electrical capacity of not less than 1 megawatt and not in excess of 50 megawatts, and
70 percent in the case of a system with an electrical capacity in excess of 50 megawatts.
Special Rules
Energy efficiency percentage
For purposes of subparagraph (A)(iv), the energy efficiency percentage of a system is the fraction—
the numerator of which is the total useful electrical, thermal, and mechanical power produced by the system at normal operating rates, and
the denominator of which is the lower heating value of the primary fuel source for the system.
Determinations made on BTU basis
The energy efficiency percentage shall be determined on a Btu basis.
Input and output property not included
The term combined heat and power system property does not include property used to transport the energy source to the facility or to distribute energy produced by the facility.
Accounting rule for public utility property
If the combined heat and power system property is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990), the taxpayer may only claim the credit under subsection (a)(1) if, with respect to such property, the taxpayer uses a normalization method of accounting.
Qualified anaerobic digester property
The term qualified anaerobic digester property means an anaerobic digester for manure or crop waste which achieves at least 65 percent efficiency measured in terms of the fraction of energy input converted to electricity and useful thermal energy.
Waste conversion property
The term waste conversion property means equipment used to produce a usable liquid or gaseous synthetic fuel derived from a waste feedstock (including plastic waste and biomass (as defined in section 29(c)).
Adjustable speed drive property
In general
The term adjustable speed drive property means equipment installed as part of an electric motor driven system of 10 horsepower or greater—
that is used to adjust the speed of the electric motor drive output to the requirements of a fluctuating load, and
that achieves an energy savings of at least 20 percent during a complete cycle of operation.
Limitation
In the case of adjustable speed drive property placed in service during the taxable year, the credit under subsection (a) for such year may not exceed $10,000 for each item of such property.
Coordination with deduction for energy-efficient commercial building property
The energy percentage shall apply to the basis of adjustable speed drive property after adjustment under section 1016(a)(34).
Special Rules
For purposes of this section—
Special rule for property financed by subsidized energy financing or industrial development Bonds
Reduction of basis
For purposes of applying the energy percentage to any property, if such property is financed in whole or in part by—
subsidized energy financing, or
the proceeds of a private activity bond (within the meaning of section 141) the interest on which is exempt from tax under section 103, the amount taken into account as the basis of such property shall not exceed the amount which (but for this subparagraph) would be so taken into account multiplied by the fraction determined under subparagraph (B).
Determination of fraction
For purposes of subparagraph (A), the fraction determined under this subparagraph is 1 reduced by a fraction—
the numerator of which is that portion of the basis of the property which is allocable to such financing or proceeds, and
the denominator of which is the basis of the property.
Subsidized energy financing
For purposes of subparagraph (A), the term subsidized energy financing means financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy.
Certain progress expenditure rules made applicable
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.
Application of Section
This section shall apply to property placed in service after December 31, 2005, and before January 1, 2011.
.
Conforming amendments
Section 48 is repealed.
Section 280C is amended by adding after subsection (e) the following:
Credit for energy property expenses
In general
No deduction shall be allowed for that portion of the expenses for energy property (as defined in section 48A(c)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 48A(a).
Similar rule where taxpayer capitalizes rather than deducts expenses
If—
the amount of the credit allowable for the taxable year under section 48A (determined without regard to section 38(c)), exceeds
the amount allowable as a deduction for the taxable year for expenses for energy property (determined without regard to paragraph (1)), the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess.
Controlled groups
Paragraph (3) of subsection (b) shall apply for purposes of this subsection.
.
Section 29(b)(3)(A)(i)(III) is amended by striking section 48(a)(4)(C)
and inserting section 48A(e)(1)(C)
.
Section 50(a)(2)(E) is amended by striking section 48(a)(5)
and inserting section 48A(e)(2)
.
Section 168(e)(3)(B) is amended—
by striking clause (vi)(I) and inserting the following:
is described in paragraph (1) or (2) of section 48A(d) (or would be so described if solar and wind
were substituted for solar
in paragraph (1)(B)),
, and
in the last sentence by striking section 48(a)(3)
and inserting section 48A(c)(2)(A)
.
The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 48 and inserting the following:
Sec. 48A. Energy credit
.
Effective date
The amendments made by this section shall apply to property placed in service after December 31, 2005, 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).
Credit for energy efficient recycling or remanufacturing equipment
In general
Section 46 (relating to amount of investment credit) is amended by striking and
at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting , and
, and by adding at the end the following new paragraph:
the reclamation credit.
.
Reclamation credit
Subpart E of part IV of subchapter A of chapter 1 is amended by inserting before section 48A, as added by this Act, the following new section:
Reclamation credit
In general
For purposes of section 46, the reclamation credit for any taxable year is 20 percent of the basis of each qualified reclamation property placed in service during the taxable year.
Qualified reclamation property
In general
For purposes of this section, the term qualified reclamation property means property—
which is qualified recycling property or qualified remanufacturing property,
which is tangible property (not including a building and its structural components),
with respect to which depreciation (or amortization in lieu of depreciation) is allowable,
which has a useful life of at least 5 years, and
which is—
acquired by purchase (as defined in section 179(d)(2)) by the taxpayer if the original use of such property commences with the taxpayer, or
constructed by or for the taxpayer.
Dollar limitation
In general
The basis of qualified reclamation property taken into account under paragraph (1) for any taxable year shall not exceed $10,000,000 for a taxpayer.
Treatment of controlled group
For purposes of clause (i)—
all component members of a controlled group shall be treated as one taxpayer, and
the Secretary shall apportion the dollar limitation in such clause among the component members of such controlled group in such manner as he shall by regulation prescribe.
Treatment of partnerships and s corporations
In the case of a partnership, the dollar limitation in clause (i) shall apply with respect to the partnership and with respect to each partner. A similar rule shall apply in the case of an S corporation and its shareholders.
Controlled group defined
For purposes of clause (ii), the term controlled group has the meaning given such term by section 1563(a), except that more than 50 percent
shall be substituted for at least 80 percent
each place it appears in section 1563(a)(1).
Certain progress expenditure rules made applicable
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this subsection.
Definitions
For purposes of this subsection—
Qualified recycling property
The term qualified recycling property means equipment used exclusively to collect, distribute, or sort used ferrous or nonferrous metals. The term does not include equipment used to collect, distribute, or sort precious metals such as gold, silver, or platinum unless such use is coincidental to the collection, distribution, or sorting of other used ferrous or nonferrous metals.
Qualified remanufacturing property
The term qualified remanufacturing property means equipment used primarily by the taxpayer in the business of rebuilding or remanufacturing a used product or part, but only if—
the rebuilt or remanufactured product or part includes 50 percent or less virgin material, and
the equipment is not used primarily in a process occurring after the product or part is rebuilt or remanufactured.
Coordination with rehabilitation and energy credits
For purposes of this section—
the basis of any qualified reclamation property shall be reduced by that portion of the basis of any property which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)) or to the energy percentage of energy property (as determined under section 48A), and
expenditures taken into account under either section 47 or 48A shall not be taken into account under this section.
.
Special basis adjustment rule
Paragraph (3) of section 50(c) (relating to basis adjustment to investment credit property) is amended by inserting or reclamation credit
after energy credit
.
Clerical amendment
The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting before the item relating to section 48A the following:
Sec. 48. Reclamation credit
.
Effective date
The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.
Credit for distributed energy generation and demand management property used in residences
In general
Subpart A of part IV of subchapter A of chapter 1 (relating to nonrefundable personal credits) is amended by inserting after section 25B the following:
Residential distributed energy generation and demand management property
Allowance of credit
In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—
50 percent of the qualified photovoltaic property expenditures,
15 percent of the qualified solar water heating property expenditures,
25 percent of the qualified wind energy property expenditures, and
20 percent for the qualified fuel cell property expenditures,
20 percent for qualified energy-efficient building property expenditures (10 percent for expenditures described in subsection (c)(5)(B)), made by the taxpayer during the taxable year.
Limitations
Maximum credit
Photovoltaic property
In general
The credit allowed under subsection (a)(1) shall not exceed the applicable rate multiplied by the number of watts of generating capacity of the property which does not exceed 10 kilowatts.
Applicable rate
For purposes of this subparagraph, the applicable rate is the rate determined under the following table:
| In the case of taxable years beginning in calendar year: | The applicable rate is: |
| 2006 | $3.00 |
| 2007 | $2.75 |
| 2008 | $2.50 |
| 2009 and thereafter | $2.25 |
Generating capacity
For purposes of this subparagraph, generating capacity shall be measured as the rated peak power output of a system’s component modules as established by the American Society for Testing and Materials. Any photovoltaic property which is electrically contiguous or serves the same customer load shall be treated as one system for purposes of this section.
Solar water heating
The credit allowed under subsection (a)(2) shall not exceed $2,000 for each system of solar energy property.
Wind
The credit allowed under subsection (a)(3) shall not exceed $5,000 for each system of wind energy property.
Energy-efficient building property
The credit allowed under subsection (a)(5) shall not exceed $500 for each item of energy-efficient building property.
Type of property
No expenditure may be taken into account under this section unless such expenditure is made by the taxpayer for property installed on or in connection with a dwelling unit which is located in the United States and which is used as a residence.
Safety certifications
No credit shall be allowed under this section for an item of property unless—
in the case of solar water heating property, such property is certified for performance and safety by the nonprofit Solar Rating Certification Corporation or a comparable entity endorsed by the government of the State in which such property is installed, and
in the case of a photovoltaic, wind energy, or fuel cell property, such property meets appropriate fire and electric code requirements.
Definitions and Special Rules relating to expenditures
For purposes of this section—
Qualified photovoltaic property expenditure
The term qualified photovoltaic property expenditure means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit.
Qualified solar water heating property expenditure
The term qualified solar water heating property expenditure means an expenditure for property which uses solar energy to heat water for use in a dwelling unit with respect to which a majority of the energy is derived from the sun.
Qualified wind energy property expenditure
The term qualified wind energy property expenditure means an expenditure for property which uses wind energy to generate electricity for use in a dwelling unit.
Qualified fuel cell property expenditure
The term qualified fuel cell property expenditure means an expenditure for property which uses an electrochemical fuel cell system to generate electricity for use in a dwelling unit.
Qualified energy-efficient building property expenditure
In general
The term qualified energy-efficient building property expenditure means an expenditure for energy efficient building property defined in clauses (ii), (iii), (iv), (v), (vi), and (vii) of section 48A(d)(3)(A).
10 percent credit for certain property
For purposes of subsection (a)(5), the expenditures described in this subparagraph are expenditures for energy efficient building property defined in clauses (iii)(II) and (iv)(II) of section 48A(d)(3)(A).
Solar panels
No expenditure relating to a solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as property described in paragraph (1) or (2) solely because it constitutes a structural component of the structure on which it is installed.
Labor costs
Expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property described in paragraph (1), (2), (3), (4), or (5) and for piping or wiring to interconnect such property to the dwelling unit shall be taken into account for purposes of this section.
Energy storage medium
Expenditures which are properly allocable to a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage shall not be taken into account for purposes of this section.
Special Rules
For purposes of this section—
Dollar amounts in case of joint occupancy
In the case of any dwelling unit which is jointly occupied and used during any calendar year as a residence by 2 or more individuals the following shall apply:
The amount of the credit allowable under subsection (a) by reason of expenditures (as the case may be) made during such calendar year by any of such individuals with respect to such dwelling unit shall be determined by treating all of such individuals as 1 taxpayer whose taxable year is such calendar year.
There shall be allowable with respect to such expenditures to each of such individuals, a credit under subsection (a) for the taxable year in which such calendar year ends in an amount which bears the same ratio to the amount determined under subparagraph (A) as the amount of such expenditures made by such individual during such calendar year bears to the aggregate of such expenditures made by all of such individuals during such calendar year.
Tenant-stockholder in cooperative housing Corporation
In the case of an individual who is a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as defined in such section), such individual shall be treated as having made his tenant-stockholder’s proportionate share (as defined in section 216(b)(3)) of any expenditures of such corporation.
Condominiums
In general
In the case of an individual who is a member of a condominium management association with respect to a condominium which such individual owns, such individual shall be treated as having made his proportionate share of any expenditures of such association.
Condominium management association
For purposes of this paragraph, the term condominium management association means an organization which meets the requirements of paragraph (1) of section 528(c) (other than subparagraph (E) thereof) with respect to a condominium project substantially all of the units of which are used as residences.
Joint ownership of items of solar or wind energy property
In general
Any expenditure otherwise qualifying as an expenditure described in paragraph (1), (2), or (3) of subsection (c) shall not be treated as failing to so qualify merely because such expenditure was made with respect to 2 or more dwelling units.
Limits applied separately
In the case of any expenditure described in subparagraph (A), the amount of the credit allowable under subsection (a) shall (subject to paragraph (1)) be computed separately with respect to the amount of the expenditure made for each dwelling unit.
Allocation in certain cases
If less than 80 percent of the use of an item is for nonbusiness residential purposes, only that portion of the expenditures for such item which is properly allocable to use for nonbusiness residential purposes shall be taken into account. For purposes of this paragraph, use for a swimming pool shall be treated as use which is not for residential purposes.
When expenditure made; amount of expenditure
In general
Except as provided in subparagraph (B), an expenditure with respect to an item shall be treated as made when the original installation of the item is completed.
Expenditures part of building construction
In the case of an expenditure in connection with the construction or reconstruction of a structure, such expenditure shall be treated as made when the original use of the constructed or reconstructed structure by the taxpayer begins.
Amount
The amount of any expenditure shall be the cost thereof.
Reduction of credit for grants, tax-exempt Bonds, and subsidized energy financing
The rules of section 29(b)(3) shall apply for purposes of this section.
Basis adjustments
For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.
Termination
The credit allowed under this section shall not apply to taxable years beginning after December 31, 2009.
.
Conforming amendments
Section 1016(a) is amended by striking and
at the end of paragraph (34), by striking the period at the end of paragraph (35) and inserting ; and
, and by adding at the end the following:
to the extent provided in section 25C(e), in the case of amounts with respect to which a credit has been allowed under section 25C.
.
The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 25B the following:
Sec. 25C. Residential solar, wind, and fuel cell energy property
.
Effective date
The amendments made by this section shall apply to expenditures made after the date of the enactment of this Act, in taxable years ending after such date.
Credit for energy management systems using residential real time metering systems
Credit for energy management systems
In general
Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credits, etc.) is amended by inserting after section 30C the following new section:
Credit for energy management systems
Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year—
an amount equal to $20 for each qualified energy management device originally placed in service during the taxable year, and
for each qualified retrofitted meter originally placed in service during the taxable year, an amount equal to the lesser of—
$20, or
the adjusted basis of such meter.
Definitions
Qualified energy management device
For purposes of this section, the term qualified energy management device means any meter or metering device acquired and used by an electric energy or natural gas supplier or service provider to enable consumers or others to manage their purchase, sale, or use of electricity or natural gas in response to energy price and usage signals.
Qualified retrofitted meter
For purposes of this section, the term qualified retrofitted meter means an electric energy or natural gas meter or metering device that has been modified by the addition of equipment designed to enable users to manage the purchase, sale, or use of electricity and natural gas in response to energy price and usage signals.
Placed in service
For purposes of this section, the term placed in service means interconnected with other devices in a manner that permits reading of energy price and usage signals on at least a daily basis.
Cost of meters includes cost of installation
The cost of any qualified energy management device or qualified retrofitted meter referred to in paragraph (1) or (2) shall include the cost of the original installation of such property.
Special Rules
Basis reduction
The basis of any property for which a credit is allowed under subsection (a) shall be reduced by the amount of such credit.
Recapture
The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property that ceases to be property eligible for such credit.
Property used outside the United States, etc., not Qualified
No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b)(1) or with respect to the portion of the cost of any property taken into account under section 179.
Election to not take credit
No credit shall be allowed under subsection (a) for any energy management device if the taxpayer elects to not have this section apply to such device.
Credits for certain tax exempt organizations and governmental units
Allowance of credit
Any credit which would be allowable under subsection (a) with respect to a qualified energy management device or a qualified retrofitted meter placed in service by an entity if such entity were not exempt from tax under this chapter shall be treated as a credit allowable under subpart B to such entity if such entity is—
an organization described in section 501(c)(12)(C) and exempt from tax under section 501(a),
an organization described in section 1381(a)(2)(C),
an entity the income of which is excludable from gross income under section 115, or
a State, the District of Columbia, any territory or possession of the United States, or any political subdivision thereof.
Use of credit
Transfer of credit
An entity described in subparagraph (A) may assign, trade, sell, or otherwise transfer any credit allowable to such entity under subparagraph (A) to any taxpayer.
Use of credit as an offset
Notwithstanding any other provision of law, in the case of an entity described in clause (i) or (ii) of subparagraph (A), any credit allowable to such entity under subparagraph (A) may be applied by such entity, without penalty, 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.).
Credit not income
Neither a transfer under clause (i) nor a use under clause (ii) of subparagraph (B) of any credit allowable under subparagraph (A) shall result in income for purposes of section 501(c)(12).
Transfer proceeds treated as arising from essential Government function
Any proceeds derived by an entity described in subparagraph (A)(iii) from the transfer of any credit under subparagraph (B)(i) shall be treated as arising from an essential government function.
Termination
This section shall not apply to any property placed in service after December 31, 2012.
.
Inclusion of Indian tribal governments
Section 7871(a)(7) is amended by striking and
at the end of subparagraph (B), by striking the period at the end of subparagraph (C), and by adding at the end the following:
section 30D (relating to credit for energy management systems).
.
Conforming amendments
The table of contents for subpart B of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 30C the following new item:
Sec. 30D. Credit for energy management systems
.
Section 1016(a) is amended by striking and
at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting , and
, and by adding at the end the following new paragraph:
to the extent provided in section 30D(c)(1).
.
Effective date
The amendments made by this subsection shall apply to qualified energy management devices placed in service after the date of the enactment of this Act and to qualified retrofitted meters that are placed in service on or after, or that are in use as of, January 1, 2006.
5–Year applicable recovery period for depreciation of Qualified energy management devices
In general
Subparagraph (B) of section 168(e)(3) (relating to classification of property) is amended by striking and
at the end of clause (v), by striking the period at the end of clause (vi) and inserting , and
, and by adding at the end the following new clause:
any qualified energy management device.
.
Definition of Qualified energy management device
Section 168(i) (relating to definitions and special rules) is amended by inserting at the end the following new paragraph:
Qualified energy management device
The term qualified energy management device means a meter or metering device that is acquired and used by an electric energy or natural gas supplier or service provider to enable consumers and others to manage their purchase, sale, and use of electricity or natural gas in response to energy price and usage signals that are readable on at least a daily basis. For purposes of the preceding sentence, the cost of any qualified energy management device shall (at the election of the taxpayer) include the cost of the original installation of such property.
.
Effective date
The amendments made by this subsection shall apply to property placed in service after December 31, 2005, and before January 1, 2012.
Credit for flywheel property
In general
Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credits, etc.) is amended by inserting after section 30D the following new section:
Credit for flywheel property
Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 10 percent of the cost of any qualified flywheel property placed in service by the taxpayer during the taxable year.
Limitation
The credit allowed under subsection (a) shall not exceed $2,000 for a taxable year.
Qualified flywheel property
For purposes of this section, the term qualified flywheel property means a flywheel designed exclusively to store energy that is used to generate electricity.
Special Rules
Basis reduction
The basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit.
Recapture
The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property that ceases to be property eligible for such credit.
Property used outside the United States, etc., not Qualified
No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b)(1) or with respect to the portion of the cost of any property taken into account under section 179.
Election to not take credit
No credit shall be allowed under subsection (a) for any qualified flywheel property if the taxpayer elects to not have this section apply to such property.
Termination
This section shall not apply to any property placed in service after December 31, 2009.
.
Conforming amendments
The table of contents for subpart B of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 30D the following new item:
Sec. 30E. Credit for qualified flywheel property
.
Section 1016(a) is amended by striking and
at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and
, and by adding at the end the following new paragraph:
to the extent provided in section 30E(c)(1).
.
Effective date
The amendments made by this section shall apply to property placed in service in taxable years ending after the date of the enactment of this Act.
Credits for clean coal
Allowance of qualifying clean coal technology unit credit
In general
Section 46 (relating to amount of credit), as amended by this Act, 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:
the qualifying clean coal technology unit credit.
.
Amount of qualifying clean coal technology unit credit
Subpart E of part IV of subchapter A of chapter 1 (relating to rules for computing investment credit) is amended by inserting after section 48A the following:
Qualifying clean coal technology unit credit
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.
Qualifying system of continuous emission control
In general
For purposes of subsection (a), the term qualifying system of continuous emission control means a system of the taxpayer which—
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),
removes or reduces—
90 percent or more of carbon dioxide emissions, or
any pollutant subject to the requirements of section 109 of the Clean Air Act or any hazardous pollutant listed under section 112(b) of such Act, to a greater extent than is required under such Act,
is depreciable under section 167,
has a useful life of not less than 4 years, and
is located in the United States.
Special rule for sale-leasebacks
For purposes of subparagraph (A) of paragraph (1), in the case of a unit which—
is originally placed in service by a person, and
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.
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.
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.
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.
Qualified progress expenditures
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.
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.
Qualified progress expenditures defined
For purposes of this subsection—
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.
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.
Other definitions
For purposes of this subsection—
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.
Nonself-constructed property
The term nonself-constructed property means property which is not self-constructed property.
Construction, etc
The term construction includes reconstruction and erection, and the term constructed includes reconstructed and erected.
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 therefore are properly chargeable to capital account with respect to the property.
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.
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 48A is allowed unless the taxpayer elects to waive the application of such credit to such property.
Termination
This section shall not apply with respect to any qualified investment made more than 10 years after the effective date of this section.
.
Recapture
Section 50(a) (relating to other special rules) is amended by adding at the end the following:
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 48B, the following shall apply:
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 48B(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.
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 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).
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.
.
Technical amendments
Section 49(a)(1)(C) 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:
the portion of the basis of any qualifying system of continuous emission control attributable to any qualified investment (as defined by section 48B(e)).
.
Section 50(a)(4) is amended by striking and (2)
and inserting , (2), and (6)
.
Section 50(c) is amended by adding at the end the following:
Nonapplication
Paragraphs (1) and (2) shall not apply to any qualifying clean coal technology unit credit under section 48B.
.
The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 48A the following:
Sec. 48B. Qualifying clean coal technology unit credit
.
Effective date
The amendments made by this subsection shall apply to periods after December 31, 2005, 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).
Credit for production from a qualifying clean coal technology unit
In general
Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by adding at the end the following:
Credit for production from a qualifying clean coal technology unit
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—
the applicable amount of clean coal technology production credit, multiplied by
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.
Applicable Amount.
In general
For purposes of this section, the applicable amount of clean coal technology production credit is equal to $0.0034.
Inflation adjustment factor
For calendar years after 2005, 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.
Definitions and Special Rules
For purposes of this section—
Qualifying clean coal technology unit
The term qualifying clean coal technology unit means a unit of the taxpayer which—
is an existing coal-based electricity generating steam generator-turbine unit,
has a nameplate capacity rating of not more than 300,000 kilowatts, and
has been retrofitted, repowered, or replaced with a clean coal technology within 10 years of the effective date of this section.
Clean coal technology
The term clean coal technology means technology which—
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,
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,
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
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.
Application of certain rules
The rules of paragraphs (3), (4), and (5) of section 45(e) shall apply.
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 2005.
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.
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.
.
Credit treated as business credit
Section 38(b) is amended by striking plus
at the end of paragraph (21), by striking the period at the end of paragraph (22) and inserting , plus
, and by adding at the end the following:
the qualifying clean coal technology production credit determined under section 45L(a).
.
Clerical amendment
The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended after the item relating to section 45K the following:
Sec. 45L. Credit for production from a qualifying clean coal technology unit
.
Effective date
The amendments made by this subsection shall apply to production after the date of enactment of this Act.
Credit for investment in qualifying advanced clean coal technology
Allowance of qualifying advanced clean coal technology facility credit
Section 46 (relating to amount of credit) is amended by striking and
at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting , and
, and by adding at the end the following:
the qualifying advanced clean coal technology facility credit.
.
Amount of qualifying advanced clean coal technology facility credit
Subpart E of part IV of subchapter A of chapter 1 (relating to rules for computing investment credit) is amended by inserting after section 48B the following:
Qualifying advanced clean coal technology facility credit
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.
Qualifying advanced clean coal technology facility
In general
For purposes of subsection (a), the term qualifying advanced clean coal technology facility means a facility of the taxpayer which—
replaces a conventional technology facility of the taxpayer and the original use of which commences with the taxpayer, or
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
is acquired through purchase (as defined by section 179(d)(2)),
is depreciable under section 167,
has a useful life of not less than 4 years,
is located in the United States, and
uses qualifying advanced clean coal technology.
Special rule for sale-leasebacks
For purposes of subparagraph (A) of paragraph (1), in the case of a facility which—
is originally placed in service by a person, and
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.
Qualifying advanced clean coal technology
For purposes of paragraph (1)—
In general
The term qualifying advanced clean coal technology means, with respect to clean coal technology—
multiple applications, with a combined capacity of not more than 5,000 megawatts, of advanced pulverized coal or atmospheric fluidized bed combustion technology—
installed as a new, retrofit, or repowering application,
operated between 2006 and 2015, and
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,
multiple applications, with a combined capacity of not more than 1,000 megawatts, of pressurized fluidized bed combustion technology—
installed as a new, retrofit, or repowering application,
operated between 2006 and 2015, and
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,
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—
installed as a new, retrofit, or repowering application,
operated between 2006 and 2015,
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
with a net thermal efficiency on any fuel or chemical co-production of not less than 39 percent (higher heating value), and
multiple applications, with a combined capacity of not more than 2,000 megawatts of technology for the production of electricity—
installed as a new, retrofit, or repowering application,
operated between 2006 and 2015, and
with a carbon emission rate which is not more than 85 percent of conventional technology.
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.
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.
Conventional technology
The term conventional technology means—
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,
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
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.
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).
Selection criteria
Selection criteria for clean coal technology facilities—
shall be established by the Secretary of Energy as part of a competitive solicitation,
shall include primary criteria of minimum design net heat rate, maximum design thermal efficiency, and lowest cost to the government, and
shall include supplemental criteria as determined appropriate by the Secretary of Energy.
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.
Qualified progress expenditures
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.
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.
Qualified progress expenditures defined
For purposes of this subsection—
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.
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.
Other definitions
For purposes of this subsection—
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.
Nonself-constructed property
The term nonself-constructed property means property which is not self-constructed property.
Construction, etc
The term construction includes reconstruction and erection, and the term constructed includes reconstructed and erected.
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 therefore are properly chargeable to capital account with respect to the property.
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.
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 48A is allowed unless the taxpayer elects to waive the application of such credit to such property.
Termination
This section shall not apply with respect to any qualified investment made more than 10 years after the effective date of this section.
.
Recapture
Section 50(a) (relating to other special rules) is amended by inserting after paragraph (6) the following:
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 48C, the following shall apply:
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 48C(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.
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 48C, 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).
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.
.
Technical amendments
Section 49(a)(1)(C) 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:
the portion of the basis of any qualifying advanced clean coal technology facility attributable to any qualified investment (as defined by section 48C(c)).
.
Section 50(a)(4) of such Code is amended by striking and (6)
and inserting (6), and (7)
.
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 48C
after section 48B
.
The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 48B the following:
Sec. 48C. Qualifying advanced clean coal technology facility credit
.
Effective date
The amendments made by this subsection shall apply to periods after December 31, 2005, 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).
Credit for production from qualifying advanced clean coal technology
In general
Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by inserting after section 45L the following:
Credit for production from qualifying advanced clean coal technology
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—
the applicable amount of advanced clean coal technology production credit, multiplied by
the sum of—
the kilowatt hours of electricity, plus
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.
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:
Where the design coal has a heat content of more than 8,000 Btu per pound:
In the case of a facility originally placed in service before 2008, if—
| “The facility design net heat rate, Btu/kWh (HHV) is: | 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 less than 8,750 | $.0005 | $.0005. | |
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: | 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. | |
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: | 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. | |
Where the design coal has a heat content of not more than 8,000 Btu per pound:
In the case of a facility originally placed in service before 2008, if—
| “The facility design net thermal efficiency (HHV) is: | 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. | |
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: | 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. | |
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: | 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. | |
Where the clean coal technology facility is producing fuel or chemicals:
In the case of a facility originally placed in service before 2008, if—
| “The facility design net thermal efficiency (HHV) is: | 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. | |
In the case of a facility originally placed in service after 2007 and before 2012, if—
| “The facility design net thermal efficiency (HHV) is: | 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. | |
In the case of a facility originally placed in service after 2011 and before 2015, if—
| “The facility design net thermal efficiency (HHV) is: | 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 | |
Inflation adjustment factor
For calendar years after 2005, 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.
Definitions and Special Rules
For purposes of this section—
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.
Applicable rules
The rules of paragraphs (3), (4), and (5) of section 45(e) shall apply.
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 2005.
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.
.
Credit treated as business credit
Section 38(b) is amended by striking plus
at the end of paragraph (22), by striking the period at the end of paragraph (23) and inserting , plus
, and by adding at the end the following:
the qualifying advanced clean coal technology production credit determined under section 45M(a).
.
Clerical amendment
The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 45I the following:
Sec. 45M. Credit for production from qualifying advanced clean coal technology
.
Effective date
The amendments made by this subsection shall apply to production after the date of enactment of this Act.
Long Term Incentives
Tax incentives for retooling and investment in new facilities and assets to produce energy efficiency technologies and domestic clean energy production technologies
Research credit
Section 41 (relating to credit for increasing research activities) is amended by adding at the end the following new subsection:
Certain technologies
Increased credit amount
In the case of expenses relating to a technology described in paragraph (2), subsection (a)(1) shall be applied by substituting 40 percent
for 20 percent
.
Technology described
A technology described in this paragraph is—
a facility modified to use closed-loop biomass to co-fire with coal (within the meaning of section 45(d)(2)(A)(ii)),
a facility which uses qualified clean energy resources (as defined in section 45(c)(1)),
a technology which enables a vehicle to qualify for the alternative motor vehicle credit under section 30B, as determined by the secretary, and which is—
a fuel cell described in section 30B(b)(3),
a hybrid motor vehicle technology described in paragraphs (2) or (3) of section 30B(c),
an alternative fuel motor vehicle described in section 30B(d)(4), or
an advanced diesel motor vehicle described in section 30B(e),
a qualified energy efficient appliance (as defined by section 45K(d)),
energy property described in section 48A(c),
property, expenditures for which a credit is allowed under section 25C,
qualified energy management device or qualified retrofitted meter (as defined by section 30D(b)),
qualified flywheel property (as defined by section 30E(c)), and
new electricity transmission lines designed and built primarily to transmit electricity from rural renewable energy resources which do not currently have access to such transmission lines.
Domestic production requirement
An expense shall be treated as not described in paragraph (1) unless any research qualified under this section is conducted substantially within the United States.
Technology portion of credit refundable for small businesses
In general
In the case of an eligible small business, the portion of the credit which is attributable to expenses relating to technologies described in paragraph (2) and which would (but for subparagraph (B)) be allowable under this section shall be treated for purposes of this title as a credit allowed under subpart C.
No double benefit
The amount of the credit allowed under this section shall be reduced by the amount of any credit treated as allowed under subpart C by reason of subparagraph (A).
Eligible small business
For purposes of this paragraph, a taxpayer is an eligible small business for any taxable year if the average annual gross receipts of the taxpayer for the 3 preceding taxable years do not exceed $5,000,000. For purposes of the preceding sentence, rules similar to the rules of paragraphs (2) and (3) of section 448(c) shall apply.
.
Investment tax credit for equipment, structures, and all assets involved in production of qualified technologies
In general
Section 46 (relating to amount of investment credit) is amended by striking and
at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting ; and
, and by adding at the end the following new paragraph:
the qualified technology credit.
.
Qualified technology credit
Subpart E of part IV of subchapter A of chapter 1 (relating to rules for computing investment credit) is amended by inserting after section 48C the following:
Qualified technology credit
In general
For purposes of section 46, the qualified technology credit for any taxable year is 35 percent of the basis of each facility placed in service in the United States during such taxable year which is primarily used in the production or manufacture of technology property described in section 41(i)(2).
Certain progress expenditure rules made applicable
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.
.
Special basis adjustment rule
Paragraph (3) of section 50(c) (relating to basis adjustment to investment credit property) is amended by striking or reclamation credit
and inserting , reclamation credit, or qualified technology credit
.
Clerical amendment
The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 48C the following new item:
Sec. 48D. Qualified technology credit
.
Effective date
The amendments made by this subsection shall apply to property placed in service after the date of enactment of this Act.
Accelerated depreciation
Section 168 (relating to accelerated cost recovery system) is amended by adding at the end the following new subsection:
Certain technologies
Increased additional allowance
In the case of any property located in the United States which is primarily used in the production or manufacture of technology property described in section 41(i)(2)—
the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to the applicable percentage of the adjusted basis of such property; and
the adjusted basis of such property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year.
Applicable percentage
For purposes of paragraph (1), the term applicable percentage means—
70 percent for taxable years beginning in 2005, 2006, or 2007;
50 percent for taxable years beginning in 2008 or 2009;
30 percent for taxable years beginning in 2010, 2011, 2012, 2013, or 2014; and
zero thereafter.
.
Expensing
Section 179 is amended by adding at the end the following new subsection:
Property purchased for production of qualified technology
In the case of section 179 property placed in service in the United States for the primary purpose of producing or manufacturing technology property described in section 41(i)(2), subsection (b)(1) shall be applied by substituting $500,000 for any dollar amount specified therein.
.
Exclusion for interest on loans for production of qualified technology
In general
Part III of subchapter B of chapter 1 is amended by inserting after section 139B the following new section:
Interest on loans for production of qualified technology
Gross income shall not include 50 percent of the interest received on any obligation the proceeds of which are used exclusively in the production in the United States of a qualified technology property described in section 41(i)(2).
.
Clerical amendment
The table of sections for part III of subchapter B of chapter 1 is amended by inserting after the item relating to section 139B the following new item:
Sec. 139C. Interest on loans for production of qualified technology
.
Increased carryovers
Subsection (a) of section 39 is amended by adding at the end the following new paragraph:
Increased carryovers for credits relating to certain technologies
In the case of the credits allowable under section 38 by reason of section 41(i) or section 46(6)—
the carryback under paragraphs (1) and (2) shall be 5 years in lieu of 1 year;
the carryforward paragraphs (1) and (2) shall be 25 years in lieu of 20 years;
this paragraph shall be applied separately with respect to any other carryover under this section; and
the determination of the amounts carried over under this paragraph shall be made after this section is applied after the application of subparagraph (C).
.
Alternative minimum tax
Subsection (a) of section 56 is amended by adding at the end the following new paragraph:
Qualified technologies
Notwithstanding any other provision of this part, no provision of this part shall apply with respect to sections 41(i), 48D, 139C, 168(l), and 179(e).
.
Effective date
The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Special rules for automotive industry
In general
Chapter 77 is amended by adding at the end the following new section:
Special rules for automotive industry
In general
For purposes of sections 41(i), 48D, and 39(a)(3) any vehicle for which a credit is allowed by section 30B shall be treated as a technology described in section 41(i)(2), except that—
section 41(i)(1) shall be applied by substituting 60 percent
for 40 percent
,
section 48D shall be applied by substituting 50 percent
for 35 percent
, and
section 39(a)(3) shall be applied by substituting 30 years
for 25 years
and 10 years
for 5 years
.
Special rule relating to accelerated depreciation
For purposes of section 168(l), the applicable percentage shall be the percentage specified in subparagraphs (A), (B), and (C) of paragraph (2) thereof, increased by 10 percentage points.
.
Clerical amendment
The table of sections for chapter 77 is amended by adding at the end the following new item:
Sec. 7529. Special rules for automotive industry
.
Effective date
The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Special rules for high-capacity airplanes
In general
Chapter 77 is amended by adding at the end the following new section:
Special rules for high-capacity airplanes
In general
For purposes of sections 41(i), 48D, and 39(a)(3) any high-capacity airplane shall be treated as a technology described in section 41(i)(2), except that—
section 41(i)(1) shall be applied by substituting 60 percent
for 40 percent
;
section 48D shall be applied by substituting 50 percent
for 35 percent
;
section 39(a)(3) shall be applied by substituting 30 years
for 25 years
and 8 years
for 5 years
.
Special rule relating to accelerated depreciation
For purposes of section 168(l), the applicable percentage shall be the percentage specified in subparagraphs (A), (B), and (C) of paragraph (2) thereof, increased by 10 percentage points.
High-capacity airplane
For purposes of this section, the term ‘high-capacity airplane’ means a commercial airplane which—
has a passenger seating capacity of no less than 200 people;
has a range of at least 7,200 nautical miles; and
consumes at least 15 percent less fuel than comparable airplanes.
.
Clerical amendment
The table of sections for chapter 77 is amended by adding at the end the following new item:
Sec. 7530. Special rules for high-capacity airplanes
.
Effective date
The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
New electricity transmission lines designed primarily to carry electricity from renewable energy resources
The Secretary of the Treasury, in consultation with the Secretary of Energy, the Secretary of Commerce, and the Administrator of the Environmental Protection Agency, shall establish an appropriate investment tax credit for the construction of new electricity transmission lines designed primarily to carry electricity from renewable energy resources. Such credit shall be sufficient to encourage the development of promising rural renewable energy domestic resources that otherwise would likely not be developed.
New energy technologies commission
Establishment
There is established a commission to be known as the New Energy Technologies Commission
(hereafter in this section referred to as the Commission
).
Duties
Identify new energy technologies eligible for tax incentives
In general
The Commission shall oversee—
the identification of—
Apollo Approved energy efficiency technologies; and
Apollo Approved domestic clean energy production technologies; that the Commission finds substantially contributes to the goals of this Act and merits consideration for favorable tax incentives by Congress; and
the identification of criteria and standards for determining technologies eligible under clause (i) as qualifying energy efficiency standards used to determine eligibility for the investment, production, and consumption tax incentives outlined in this title.
Matters to be considered by the commission
In developing energy efficiency standards, the Commission shall—
consult with the Environmental Protection Agency program known as Energy Star
; and
focus on technologies manufactured domestically.
Report
Not later than one year after the date of enactment of this Act, and every six months thereafter the Commission shall submit to Congress a report that contains—
a detailed statement of any technology that qualifies for or merits the tax incentives in this title;
recommendations for tax incentives specifically tailored to be beneficial to such technologies and any standards that should be defined in statute to determine eligibility for such benefits; and
recommendations for other legislation, administrative actions, and voluntary actions necessary to implement such incentives.
Apollo approved energy technologies
For purposes of this section, the term Apollo Approved energy technologies means any final unit product that the Commission finds substantially contributes to the goals of this Act and merits consideration for favorable tax incentives by Congress not already included in this Act.
Apollo approved domestic clean energy production technologies
For purposes of this section, the term Apollo Approved domestic clean energy production technologies means any domestic energy production technology that the Commission finds substantially contributes to the goals of this Act and merits consideration for favorable tax incentives by Congress not already included in this Act.
Membership
In general
The Commission shall be comprised of 11 members.
Appointments by this act
The following are hereby designated as members of the Commission:
The Secretary of the Department of Energy, the Director of the Office of Energy Efficiency and Renewable Energy of the Department of Energy, or the Administrator of the Energy Information Administration of the Department of Energy.
The Secretary of the Department of Commerce or designee.
The Secretary of the Department of Treasury or designee.
The Director of the Environmental Protection Agency or designee.
Appointments by the senate and House of Representatives
7 members appointed jointly by the majority leader and minority leader of the Senate and the Speaker and minority leader of the House of Representatives, of whom—
1 shall represent consumer advocacy organizations focusing on energy issues;
1 shall represent auto manufacturers;
1 shall represent the lending community;
1 shall represent environmental advocacy organizations focusing on energy issues;
1 shall represent organized labor;
1 shall represent small business manufacturers; and
1 shall represent the energy industry.
Date of appointments
The appointment of a member of the Commission shall be made not later than 30 days after the date of enactment of this Act.
Term
A member shall be appointed for 5 year terms.
Powers of commission
Hearings and sessions
The Commission may, for the purpose of carrying out this section, hold hearings, sit and act at times and places, take testimony, and receive evidence to carry out its duties under subsection (b). The Commission may administer oaths or affirmations to witnesses appearing before it.
Powers of members and agents
Any member or agent of the Commission may, if authorized by the Commission, take any action which the Commission is authorized to take by this section.
Obtaining official information
Requirement to furnish
Except as provided in subparagraph (B), if the Commission submits a request to a Federal department or agency for information necessary to enable the Commission to carry out this section, the head of that department or agency shall furnish that information to the Commission.
Exception for national security
If the head of a Federal department or agency determines that it is necessary to withhold requested information from disclosure to protect the national security interests of the United States, the department or agency head shall not furnish that information to the Commission.
Mails
The Commission may use the United States mails in the same manner and under the same conditions as other departments and agencies of the United States.
Administrative support services
Upon the request of the Director, the Administrator of General Services shall provide to the Commission, on a reimbursable basis, the administrative support services necessary for the Commission to carry out this section.
Gifts and donations
The Commission may accept, use, and dispose of gifts or donations of services or property to carry out this Act, but only to the extent or in the amounts provided in advance in appropriation Acts.
Contracts
The Commission may contract with and compensate persons and government agencies for supplies and services, without regard to section 3709 of the Revised Statutes (41 U.S.C. 5).
Initial meeting
The Commission shall hold the initial meeting of the Commission not later than the earlier of—
the date that is 30 days after the date on which all members of the Commission have been appointed; or
the date that is 90 days after the date of enactment of this Act, regardless of whether all members have been appointed.
Chairperson and vice chairperson
The Commission shall select a Chairperson and Vice Chairperson from among the members of the Commission determined under subsection (c)(2).
Executive committee
The Commission shall have an executive committee comprised of any five members of the Commission.
Conflicts of interest
Each member appointed to the Commission shall submit a financial disclosure report pursuant to the Ethics in Government Act of 1978, notwithstanding the minimum required rate of compensation or time period employed.
Staff appointment and compensation
The Chairperson, in consultation with the Vice Chairperson, in accordance with rules agreed upon by the Commission, may appoint and fix the compensation of a staff director and such other personnel as may be necessary to enable the Commission to carry out its functions, without regard to the provisions of title 5, United States Code, governing appointments in the competitive service, and without regard to the provisions of chapter 51 and subchapter III of chapter 53 of such title relating to classification and General Schedule pay rates; except that no rate of pay fixed under this subsection may exceed the equivalent of that payable for a position at level V of the Executive Schedule under section 5316 of title 5, United States Code.
Personnel as federal employees
In general
The staff director and any personnel of the Commission who are employees shall be employees under section 2105 of title 5, United States Code, for purposes of chapters 63, 81, 83, 84, 85, 87, 89, and 90 of that title.
Members of commission
Subparagraph (A) shall not be construed to apply to members of the Commission.
Detailees
Any Federal Government employee may be detailed to the Commission without reimbursement from the Commission, and such detailee shall retain the rights, status, and privileges of his or her regular employment without interruption.
Consultant services
The Commission is authorized to procure the services of experts and consultants in accordance with section 3109 of title 5, United States Code, but at rates not to exceed the daily rate paid a person occupying a position at level IV of the Executive Schedule under section 5315 of title 5, United States Code.
Member compensation
Each member of the Commission specified in subsection (c)(3) may be compensated at a rate not to exceed the daily equivalent of the annual rate of basic pay in effect for a position at level IV of the Executive Schedule under section 5315 of title 5, United States Code, for each day during which that member is engaged in the actual performance of the duties of the Commission.
Information and administrative expenses
The Federal agencies and members specified in subsection (c)(3) shall provide the Commission such information and pay such administrative and members expenses as the Commission requires to carry out this section, consistent with the requirements and guidelines of the Federal Advisory Commission Act (5 U.S.C. App.).
Travel expenses
While away from their homes or regular places of business in the performance of services for the Commission, members of the Commission shall be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses under section 5703 of title 5, United States Code.
Authorization of appropriations
In general
There is authorized to be appropriated to the Commission such sums as may be necessary to carry out this section.
Availability
Amounts appropriated under paragraph (1) are authorized to remain available until expended.
Expenditure limitation
Not later than 6 months after the date of the enactment of this Act, the Secretary of the Treasury shall submit a report to the Congress on the tax expenditures incurred by reason of this subtitle, determined on both an annual basis and for the 10-year period beginning on January 1, 2006, together with such recommendations as the Secretary determines necessary or appropriate to achieve a national 10-year tax expenditure under this subtitle of—
$10,000,000,000 with respect to automobiles, of which $7,000,000,000 shall be expended in the first 5 years of such 10-year period;
$1,500,000,000 with respect to airplanes, of which $1,000,000,000 shall be expended in the first 5 years of such 10-year period, and
$10,500,000,000 with respect to all other tax expenditures under this subtitle, of which—
$6,500,000,000 shall be expended in the first 3 years of such 10-year period;
$2,000,000,000 shall be expended in the fourth and fifth years of such 10-year period; and
$2,000,000,000 shall be expended over the last 5 years of such 10-year period.
Federal Government leverage to move new technologies to market
Improved coordination of technology transfer activities
Technology Transfer Coordinator
The Secretary shall designate a Technology Transfer Coordinator to perform oversight of and policy development for technology transfer activities at the Department. The Technology Transfer Coordinator shall coordinate the activities of the Technology Transfer Working Group, and shall oversee the expenditure of funds allocated to the Technology Transfer Working Group, and shall coordinate with each technology partnership ombudsman appointed under section 11 of the Technology Transfer Commercialization Act of 2000 (42 U.S.C. 7261c).
Technology Transfer Working Group
The Secretary shall establish a Technology Transfer Working Group, which shall consist of representatives of the National Laboratories and single-purpose research facilities, to—
coordinate technology transfer activities occurring at National Laboratories and single-purpose research facilities;
exchange information about technology transfer practices, including alternative approaches to resolution of disputes involving intellectual property rights and other technology transfer matters; and
develop and disseminate to the public and prospective technology partners information about opportunities and procedures for technology transfer with the Department, including those related to alternative approaches to resolution of disputes involving intellectual property rights and other technology transfer matters.
Technology transfer responsibility
Nothing in this section shall affect the technology transfer responsibilities of Federal employees under the Stevenson-Wydler Technology Innovation Act of 1980.
Definition
For purposes of this section, the term National Laboratory means any of the following laboratories owned by the Department:
Ames National Laboratory.
Argonne National Laboratory.
Brookhaven National Laboratory.
Fermi National Laboratory.
Idaho National Engineering and Environmental Laboratory.
Lawrence Berkeley National Laboratory.
Lawrence Livermore National Laboratory.
Los Alamos National Laboratory.
National Energy Technology Laboratory.
National Renewable Energy Laboratory.
Oak Ridge National Laboratory.
Pacific Northwest National Laboratory.
Princeton Plasma Physics Laboratory.
Sandia National Laboratories.
Thomas Jefferson National Accelerator Facility.
Federal support for commercialization of new technologies
Program
The Secretary of Energy shall establish a program of support, through grants, low-interest loans, and loan guarantees, for the commercialization, including support for pilot projects, of new—
renewable energy technologies;
technologies for energy generation from fossil fuels that incorporate carbon sequestration; and
energy efficiency technologies.
Authorization of appropriations
There are authorized to be appropriated to the Secretary of Energy for carrying out this section $5,000,000,000.
Clean energy technology exports program
Definitions
In this section:
Interagency Working Group
The term interagency working group means the Interagency Working Group on Clean Energy Technology Exports established under subsection (b).
United States clean energy technology
The term United States clean energy technology means an energy supply or end-use technology, including a technology using renewable energy sources, that—
over its lifecycle and compared to a similar technology already in commercial use in developing countries, countries in transition, and other partner countries—
emits substantially lower levels of pollutants and/or greenhouse gases; and
may generate substantially smaller and/or less toxic volumes of solid or liquid waste; and
consists of manufactured articles, materials, and supplies produced in the United States substantially all from articles, materials, or supplies mined, produced, or manufactured in the United States, within the meaning of the Buy American Act (41 U.S.C. 10a).
Interagency Working Group
Establishment
Not later than 90 days after the date of enactment of this section, the Secretary of Energy, the Secretary of Commerce, and the Administrator of the United States Agency for International Development shall jointly establish a Interagency Working Group on Clean Energy Technology Exports. The interagency working group will focus on opening and expanding energy markets and transferring clean energy technology generated in the United States to developing countries, countries in transition, and other partner countries that are expected to experience, over the next 20 years, the most significant growth in energy production and associated greenhouse gas emissions, including through technology transfer programs under the Framework Convention on Climate Change, other international agreements, and relevant Federal efforts.
Membership
The interagency working group shall be jointly chaired by representatives appointed by the agency heads under paragraph (1) and shall also include representatives from the Department of State, the Department of the Treasury, the Environmental Protection Agency, the Export-Import Bank, the Overseas Private Investment Corporation, the Trade and Development Agency, and other Federal agencies as deemed appropriate by all three agency heads under paragraph (1).
Duties
The interagency working group shall—
analyze technology, policy, and market opportunities for international development, demonstration, and deployment of clean energy technology developed in the United States;
investigate issues associated with building capacity to deploy clean energy technology generated in the United States in developing countries, countries in transition, and other partner countries, including—
energy-sector reform;
creation of open, transparent, and competitive markets for clean energy technologies;
availability of trained personnel to deploy and maintain the technology; and
demonstration and cost-buydown mechanisms to promote first adoption of the technology;
examine relevant trade, tax, international, and other policy issues to assess what policies would help open markets and improve United States clean energy technology exports in support of the following areas—
enhancing energy innovation and cooperation, including energy sector and market reform, capacity building, and financing measures;
improving energy end-use efficiency technologies, including buildings and facilities, vehicle, industrial, and co-generation technology initiatives; and
promoting energy supply technologies, including fossil, nuclear, and renewable technology initiatives;
establish an advisory committee involving the private sector and other interested groups on the export and deployment of United States clean energy technology;
monitor each agency’s progress towards meeting goals in the 5-year strategic plan submitted to Congress pursuant to the Energy and Water Development Appropriations Act, 2001, and the Energy and Water Development Appropriations Act, 2002;
make recommendations to heads of appropriate Federal agencies on ways to streamline Federal programs and policies to improve each agency’s role in the international development, demonstration, and deployment of United States clean energy technology;
make assessments and recommendations regarding the distinct technological, market, regional, and stakeholder challenges necessary to carry out the program; and
recommend conditions and criteria that will help ensure that United States funds promote sound energy policies in participating countries while simultaneously opening their markets and exporting United States energy technology.
Federal support for clean energy technology transfer
Notwithstanding any other provision of law, each Federal agency or Government corporation carrying out an assistance program in support of the activities of United States persons in the environment or energy sector of a developing country, country in transition, or other partner country shall support, to the maximum extent practicable, the transfer of United States clean energy technology as part of that program.
Annual report
Not later than 90 days after the date of the enactment of this Act, and on March 31 of each year thereafter, the Interagency Working Group shall submit a report to Congress on its activities during the preceding calendar year. The report shall include a description of the technology, policy, and market opportunities for international development, demonstration, and deployment of United States clean energy technology investigated by the Interagency Working Group in that year, as well as any policy recommendations to improve the expansion of clean energy markets and United States clean energy technology exports.
Authorization of appropriations
There are authorized to be appropriated to the appropriate departments, agencies, and entities of the United States such sums as may be necessary for each of the fiscal years 2006 through 2016 to support the transfer of United States clean energy technology, consistent with the subsidy codes of the World Trade Organization, as part of assistance programs carried out by those departments, agencies, and entities in support of activities of United States persons in the energy sector of a developing country, country in transition, or other partner country.
International energy technology deployment program
Section 1608 of the Energy Policy Act of 1992 (42 U.S.C. 13387) is amended by striking subsection (l) and inserting the following:
International energy technology deployment program
Definitions
In this subsection:
International energy deployment project
The term international energy deployment project means a project to construct an energy production facility outside the United States—
the output of which will be consumed outside the United States; and
the deployment of which will result in a greenhouse gas reduction per unit of energy produced when compared to the technology that would otherwise be implemented—
20 percentage points or more, in the case of a unit placed in service before January 1, 2010;
40 percentage points or more, in the case of a unit placed in service after December 31, 2009, and before January 1, 2020; or
60 percentage points or more, in the case of a unit placed in service after December 31, 2019, and before January 1, 2030.
Qualifying international energy deployment project
The term qualifying international energy deployment project means an international energy deployment project that—
is submitted by a United States firm to the Secretary in accordance with procedures established by the Secretary by regulation;
uses technology that has been successfully developed or deployed in the United States;
uses technology that consists of manufactured articles, materials, and supplies produced in the United States substantially from articles, materials, or supplies mined, produced, or manufactured in the United States, within the meaning of the Buy American Act (41 U.S.C. 10a);
meets the criteria of subsection (k);
is approved by the Secretary, with notice of the approval being published in the Federal Register; and
complies with such terms and conditions as the Secretary establishes by regulation.
United States
For purposes of this paragraph, the term United States, when used in a geographical sense, means the 50 States, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, American Samoa, and the Commonwealth of the Northern Mariana Islands.
Pilot program for financial assistance
In general
Not later than 180 days after the date of enactment of this subsection, the Secretary shall, by regulation, provide for a pilot program for financial assistance for qualifying international energy deployment projects.
Selection criteria
After consultation with the Secretary of State, the Secretary of Commerce, and the United States Trade Representative, the Secretary shall select projects for participation in the program based solely on the criteria under this title and without regard to the country in which the project is located.
Financial assistance
In general
A United States firm that undertakes a qualifying international energy deployment project that is selected to participate in the pilot program shall be eligible to receive a loan or a loan guarantee from the Secretary.
Rate of interest
The rate of interest of any loan made under clause (i) shall be equal to the rate for Treasury obligations then issued for periods of comparable maturities.
Amount
The amount of a loan or loan guarantee under clause (i) shall not exceed 50 percent of the total cost of the qualified international energy deployment project.
Developed countries
Loans or loan guarantees made for projects to be located in a developed country, as listed in Annex I of the United Nations Framework Convention on Climate Change, shall require at least a 50 percent contribution towards the total cost of the loan or loan guarantee by the host country.
Developing countries
Loans or loan guarantees made for projects to be located in a developing country (those countries not listed in Annex I of the United Nations Framework Convention on Climate Change) shall require at least a 10 percent contribution towards the total cost of the loan or loan guarantee by the host country.
Capacity building research
Proposals made for projects to be located in a developing country may include a research component intended to build technological capacity within the host country. Such research must be related to the technologies being deployed and must involve both an institution in the host country and an industry, university or national laboratory participant from the United States. The host institution shall contribute at least 50 percent of funds provided for the capacity building research.
Coordination with other programs
A qualifying international energy deployment project funded under this section shall not be eligible as a qualifying clean coal technology under section 415 of the Clean Air Act (42 U.S.C. 7651n).
Report
Not later than 5 years after the date of enactment of this subsection, the Secretary shall submit to the President a report on the results of the pilot projects.
Recommendation
Not later than 60 days after receiving the report under subparagraph (E), the President shall submit to Congress a recommendation, based on the results of the pilot projects as reported by the Secretary of Energy, concerning whether the financial assistance program under this section should be continued, expanded, reduced, or eliminated.
Authorization of appropriations
There are authorized to be appropriated to the Secretary to carry out this section $500,000,000 for each of fiscal years 2006 through 2016, to remain available until expended.
.
Risk pool for qualifying advanced clean energy technology
Establishment
The Secretary of the Treasury shall establish a financial risk pool which shall be available to any United States owner or developer of a technology that the Secretary determines will help achieve the goals stated in section 102 of this Act (whether or not such owner or developer receives any loan guaranteed under section 731), 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.
Authorization of appropriations
There are authorized to be appropriated $4,500,000,000 to carry out the purposes of this section.
Federal renewable and clean energy use
In general
The President shall take measures necessary to ensure that, within 10 years after the date of the enactment of this Act, at least 20 percent of the electricity consumed by nondefense related activities of the Federal Government shall be generated from renewable sources or zero-emission fossil fuel energy sources.
Solar panels and photovoltaics
The requirement in subsection (a) may be achieved through the purchase and installation of solar panels or photovoltaics on executive agency properties.
Require the Export-Import Bank of the United States to meet renewable energy targets in its lending practices
Allocation of assistance among energy projects
Of the total amount available to the Export-Import Bank of the United States for the extension of credit for transactions related to energy projects, the Bank shall, not later than the beginning of fiscal year 2008, use—
not more than 85 percent for transactions related to fossil fuel projects; and
not less than 15 percent for transactions related to renewable energy and energy efficiency projects.
Renewable Energy and Technology Commission
Establishment
Within 1 year after the date of the enactment of this Act, the Export-Import Bank of the United States (in this subsection referred to as the Bank
) shall establish a commission which shall be known as the Renewable Energy and Technology Commission
(in this subsection referred to as the Commission
).
Function
The Commission shall help the Bank achieve the percentage goal set forth in subsection (a)(2) by the beginning of fiscal year 2008, by proactively assisting the Bank in identifying new opportunities for renewable energy and energy efficiency financing.
Composition
The Commission shall be composed of—
6 representatives selected by companies involved in renewable energy and energy efficiency technology;
2 representatives selected by environmental organizations;
2 members of the academic community who are knowledgeable about renewable energy; and
representatives of the Bank.
Reports
The Commission shall submit annually to the Committee on Resources and the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a report that contains the following information for the fiscal year covered by the report:
A detailed description of the activities of the Commission.
Any recommendations made by the Commission that were adopted by the Bank.
An analysis comparing the level of credit extended by the Bank for renewable energy and energy efficiency projects with the level of credit so extended for the preceding fiscal year.
Definition of renewable energy and energy efficiency projects
In this section, the term renewable energy and energy efficiency projects means projects related to solar, wind, biomass, or geothermal energy sources.
Grants for transit programs
In general
The Secretary of Transportation shall award grants to a State or local governmental authority to improve mass transportation programs, including capital projects.
Authorization of appropriations
There are authorized to be appropriated to carry out this section $1,500,000,000 for each of 10 fiscal years beginning with the first fiscal year after the date of enactment of this Act.
Labor standards
The Secretary of Transportation shall not provide a grant under this section unless the Secretary receives reasonable assurances from a State that laborers and mechanics employed by contractors or subcontractors in the performance of construction or modernization on the a transit project will be paid wages not less than those prevailing on similar construction or modernization in the locality as determined by the Secretary of Labor under the Act of March 3, 1931 (known as the Davis-Bacon Act) (40 U.S.C. 276a et seq.).
Definitions
General definitions
For purposes of this section, the terms capital project, local governmental authority, and mass transportation have the same meanings such terms have in section 5302 of title 49, United States Code.
State defined
For purposes of this section, the term State means a State of the United States, the District of Columbia, Puerto Rico, the Northern Mariana Islands, Guam, American Samoa, and the United States Virgin Islands.
Grants for water and sewer improvement programs
In general
The Secretary of Transportation shall award grants to a State or local governmental authority to improve water and sewer systems by increasing energy efficiency in such systems by not less than 25 percent.
Authorization of appropriations
There are authorized to be appropriated to carry out this section $1,000,000,000 for each of 10 fiscal years beginning with the first fiscal year after the date of enactment of this Act.
Labor standards
The Secretary of Transportation shall not provide a grant under this section unless the Secretary receives reasonable assurances from a State that laborers and mechanics employed by contractors or subcontractors in the performance of construction or modernization on a water or sewer system improvement project will be paid wages not less than those prevailing on similar construction or modernization in the locality as determined by the Secretary of Labor under the Act of March 3, 1931 (known as the Davis-Bacon Act) (40 U.S.C. 276a et seq.).
Definitions
General definitions
For purposes of this section, the terms capital project, local governmental authority, and mass transportation have the same meanings such terms have in section 5302 of title 49, United States Code.
State defined
For purposes of this section, the term State means a State of the United States, the District of Columbia, Puerto Rico, the Northern Mariana Islands, Guam, American Samoa, and the United States Virgin Islands.
Loans for high-efficiency vehicles
Loan program authorized
Subject to the availability of appropriations, the Secretary of Transportation shall establish a program to offer federally financed, interest-free loans to local educational agencies, public institutions of higher education, municipalities, and local governments for the purchase of hybrid electric vehicles or high-efficiency vehicles.
Repayment term
The time for repayment of a loan under this section may not exceed 5 years.
Security interest
The Secretary shall require, as a condition of a loan under this section, that the borrower grant to the United States a security interest in any vehicle purchased with the proceeds of such loan.
Definitions
In this section:
The term high-efficiency vehicle means a motor vehicle the fuel economy of which is rated at not less than 40 miles per gallon.
The term hybrid electric vehicle means a motor vehicle with a fuel-efficient gasoline engine assisted by an electric motor.
The term motor vehicle has the meaning given that term in section 30102(a)(6) of title 49, United States Code.
The term local educational agency has the meaning given that term in the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.).
The term public institution of higher education has the meaning given the term institution of higher education in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)), but does not include private institutions described in that section.
Authorization of appropriations
There are authorized to be appropriated to carry out this section $50,000,000 for each of fiscal years 2006 through 2011 and such sums as may be necessary for each fiscal year thereafter.
Requirement regarding purchase of motor vehicles by Executive agencies
In general
At least ten percent of the motor vehicles purchased by an Executive agency in any fiscal year shall be comprised of high-efficiency vehicles or hybrid electric vehicles.
Definitions
In this Act:
The term Executive agency has the meaning given that term in section 105 of title 5, United States Code, but also includes Amtrak, the Smithsonian Institution, and the United States Postal Service.
The term high-efficiency vehicle means a motor vehicle the fuel economy of which is rated at not less than 40 miles per gallon.
The term hybrid electric vehicle means a motor vehicle with a fuel-efficient gasoline engine assisted by an electric motor.
The term motor vehicle has the meaning given that term in section 102(7) of title 40, United States Code.
Pro-rated applicability in year of enactment
In the fiscal year in which this Act is enacted, the requirement in subsection (a) shall only apply with respect to motor vehicles purchased after the date of the enactment of this Act in such fiscal year.
Federal energy efficiency
The President shall take measures necessary to ensure that electricity consumption for nondefense related activities of the Federal Government shall be decreased by 35 percent by 2015.
Federal agency ethanol-blended gasoline and biodiesel purchasing requirement
Title III of the Energy Policy Act of 1992 is amended by striking section 306 (42 U.S.C. 13215) and inserting the following:
Federal agency ethanol-blended gasoline and biodiesel purchasing requirement
Ethanol-blended gasoline
The head of each Federal agency shall ensure that, in areas in which ethanol-blended gasoline is reasonably available at a generally competitive price, the Federal agency purchases ethanol-blended gasoline containing at least 85 percent ethanol rather than nonethanol-blended gasoline, for use in vehicles used by the agency that use gasoline. If 85 percent ethanol-blended gasoline is not reasonably available, then each agency shall purchase ethanol-blended gasoline containing at least 10 percent ethanol in areas in which ethanol-blended gasoline is reasonably available at a generally competitive price.
Biodiesel
Definition of biodiesel
In this subsection, the term biodiesel has the meaning given the term in section 312(f).
Requirement
The head of each Federal agency shall ensure that the Federal agency purchases, for use in fueling fleet vehicles that use diesel fuel used by the Federal agency at the location at which fleet vehicles of the Federal agency are centrally fueled, in areas in which the biodiesel-blended diesel fuel described in subparagraphs (A) and (B) is available at a generally competitive price—
as of the date that is 5 years after the date of enactment of this paragraph, biodiesel-blended diesel fuel that contains at least 2 percent biodiesel, rather than nonbiodiesel-blended diesel fuel; and
as of the date that is 10 years after the date of enactment of this paragraph, biodiesel-blended diesel fuel that contains at least 20 percent biodiesel, rather than nonbiodiesel-blended diesel fuel.
Requirement of Federal law
The provisions of this subsection shall not be considered a requirement of Federal law for the purposes of section 312.
Exemption
This section does not apply to fuel used in vehicles excluded from the definition of fleet
by subparagraphs (A) through (H) of section 301(9).
.
Permitting of wind energy development projects on public lands
Required policies and procedures
The Secretary of the Interior shall process right-of-way applications for wind energy site testing and monitoring facilities on public lands administered by the Bureau of Land Management in accordance with policies and procedures that are substantially the same as those set forth in Bureau of Land Management Instruction Memorandum No. 9 2003–020, dated October 16, 2002.
Limitation on rent and other charges
In general
The Secretary of the Interior may not impose rent and other charges with respect to any wind energy development project on public lands that, in the aggregate, exceed 50 percent of the maximum amount of rent that could be charged with respect to that project under the terms of the Bureau of Land Management Instruction Memorandum referred to in subsection (a).
Termination
Paragraph (1) shall not apply after the earlier of—
the date on which the Secretary of the Interior determines there exists at least 10,000 megawatts of electricity generating capacity from nonhydropower renewable energy resources on public lands; or
the end of the 10-year period beginning on the date of the enactment of this Act.
State share not affected
This subsection shall not affect any State share of rent and other charges with respect to any wind energy development project on public lands.
Energy savings performance contracts
Permanent extension
Section 801(c) of the National Energy Conservation Policy Act (42 U.S.C. 8287(c)) is repealed.
Payment of costs
Section 802 of the National Energy Conservation Policy Act (42 U.S.C. 8287a) is amended by inserting , water, or wastewater treatment
after payment of energy
.
Energy savings
Section 804(2) of the National Energy Conservation Policy Act (42 U.S.C. 8287c(2)) is amended to read as follows:
The term energy savings means a reduction in the cost of energy, water, or wastewater treatment, from a base cost established through a methodology set forth in the contract, used in an existing federally owned building or buildings or other federally owned facilities as a result of—
the lease or purchase of operating equipment, improvements, altered operation and maintenance, or technical services;
the increased efficient use of existing energy sources by cogeneration or heat recovery, excluding any cogeneration process for other than a federally owned building or buildings or other federally owned facilities; or
the increased efficient use of existing water sources in either interior or exterior applications.
.
Energy savings contract
Section 804(3) of the National Energy Conservation Policy Act (42 U.S.C. 8287c(3)) is amended to read as follows:
The terms energy savings contract and energy savings performance contract mean a contract that provides for the performance of services for the design, acquisition, installation, testing, and, where appropriate, operation, maintenance, and repair, of an identified energy or water conservation measure or series of measures at 1 or more locations. Such contracts shall, with respect to an agency facility that is a public building (as such term is defined in section 3301 of title 40, United States Code), be in compliance with the prospectus requirements and procedures of section 3307 of title 40, United States Code.
.
Energy or water conservation measure
Section 804(4) of the National Energy Conservation Policy Act (42 U.S.C. 8287c(4)) is amended to read as follows:
The term energy or water conservation measure means—
an energy conservation measure, as defined in section 551; or
a water conservation measure that improves the efficiency of water use, is life-cycle cost-effective, and involves water conservation, water recycling or reuse, more efficient treatment of wastewater or stormwater, improvements in operation or maintenance efficiencies, retrofit activities, or other related activities, not at a Federal hydroelectric facility.
.
Review
Not later than 180 days after the date of the enactment of this Act, the Secretary of Energy shall complete a review of the Energy Savings Performance Contract program to identify statutory, regulatory, and administrative obstacles that prevent Federal agencies from fully utilizing the program. In addition, this review shall identify all areas for increasing program flexibility and effectiveness, including audit and measurement verification requirements, accounting for energy use in determining savings, contracting requirements, including the identification of additional qualified contractors, and energy efficiency services covered. The Secretary shall report these findings to Congress and shall implement identified administrative and regulatory changes to increase program flexibility and effectiveness to the extent that such changes are consistent with statutory authority.
Municipality grants for distributed energy plans
Program
The Secretary of Energy shall award grants to municipalities or tribes to facilitate the promulgation of distributed energy implementation plans.
Authorization of appropriations
There are authorized to be appropriated to the Secretary of Energy for carrying out this section $100,000,000.
Green building standards for Federal buildings
Requirement
A Federal building for which the design phase for construction or major renovation is begun after the date of enactment of this Act shall be designed, constructed, and certified to meet, at a minimum, the LEED silver standard.
Exceptions
Subsection (a) shall not apply to Federal laboratories or defense facilities, or to a building of a type for which no LEED silver standard exists.
Study
Not later than 1 year after the date of enactment of this Act, the Secretary of Energy shall transmit to Congress the results of a study comparing the expected energy savings resulting from the implementation of this section with energy savings under all other Federal energy savings requirements. The Secretary shall include any recommendations for changes to Federal law necessary to reduce or eliminate duplicative or inconsistent Federal energy savings requirements.
Definition
For purposes of this section, the term LEED silver standard means the Leadership in Energy and Environmental Design green building rating standard identified as silver by the United States Green Building Council.
Consumer protection and assistance
Strategic Petroleum Reserve
Full capacity
The President shall—
fill the Strategic Petroleum Reserve established pursuant to part B of title I of the Energy Policy and Conservation Act (42 U.S.C. 6231 et seq.) to full capacity as soon as practicable; and
ensure that the fill rate minimizes impacts on petroleum markets.
Recommendations
Not later than 180 days after the date of enactment of this Act, the Secretary of Energy shall submit to Congress a plan to—
eliminate any infrastructure impediments that may limit maximum drawdown capability; and
determine whether the capacity of the Strategic Petroleum Reserve on the date of enactment of this section is adequate in light of the increasing consumption of petroleum and the reliance on imported petroleum.
Regulatory oversight over energy trading markets and metals trading markets
Jurisdiction of the Commodity Futures Trading Commission over energy trading markets and metals trading markets
FERC liaison
Section 2(a)(8) of the Commodity Exchange Act (7 U.S.C. 2(a)(8)) is amended by adding at the end the following:
FERC liaison
The Commission shall, in cooperation with the Federal Energy Regulatory Commission, maintain a liaison between the Commission and the Federal Energy Regulatory Commission.
.
Exempt transactions
Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is amended—
in subsection (h), by adding at the end the following:
Applicability
This subsection does not apply to an agreement, contract, or transaction in an exempt energy commodity or an exempt metal commodity described in subsection (j)(1).
; and
by adding at the end the following:
Exempt transactions
Transactions in exempt energy commodities and exempt metals commodities
An agreement, contract, or transaction (including a transaction described in section 2(g)) in an exempt energy commodity or exempt metal commodity shall be subject to—
sections 4b, 4c(a), 4c(b), 4o, and 5b;
subsections (c) and (d) of section 6 and sections 6c, 6d, and 8a, to the extent that those provisions—
provide for the enforcement of the requirements specified in this subsection; and
prohibit the manipulation of the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market;
sections 6c, 6d, 8a, and 9(a)(2), to the extent that those provisions prohibit the manipulation of the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market;
section 12(e)(2); and
section 22(a)(4).
Bilateral dealer markets
In general
Except as provided in paragraph (6), a person or group of persons that constitutes, maintains, administers, or provides a physical or electronic facility or system in which a person has the ability to offer, execute, trade, or confirm the execution of an agreement, contract, or transaction (including a transaction described in section 2(g)) (other than an agreement, contract, or transaction in an excluded commodity) by making or accepting the bids and offers of 1 or more participants on the facility or system (including facilities or systems described in clauses (i) and (iii) of section 1a(33)(B)), the person or group of persons, and the facility or system (referred to in this subsection as a bilateral dealer market
) may offer to enter into, enter into, or confirm the execution of any agreement, contract, or transaction under paragraph (1) (other than an agreement, contract, or transaction in an excluded commodity) if the bilateral dealer market meets the requirement of subparagraph (B).
Requirement
The requirement of this subparagraph is that a bilateral dealer market shall—
provide notice to the Commission in such form as the Commission may specify by rule or regulation;
file with the Commission any reports (including large trader position reports) that the Commission requires by rule or regulation;
consistent with section 4i, maintain books and records relating to each transaction in such form as the Commission may specify for a period of 5 years after the date of the transaction; and
make those books and records available to representatives of the Commission and the Department of Justice for inspection for a period of 5 years after the date of each transaction; and
make available to the public on a daily basis such information as total volume by commodity, settlement price, open interest, opening and closing ranges, and any other information that the Commission determines to be appropriate for public disclosure, except that the Commission may not—
require the real-time publication of proprietary information; or
prohibit the commercial sale of real-time proprietary information.
Reporting requirements
On request of the Commission, an eligible contract participant that trades on a bilateral dealer market shall provide to the Commission, within the time period specified in the request and in such form and manner as the Commission may specify, any information relating to the transactions of the eligible contract participant on the bilateral dealer market within 5 years after the date of any transaction that the Commission determines to be appropriate.
Capital requirements
In general
Except as provided in subparagraph (B), a bilateral dealer market shall adopt a value-at-risk model approved by the Commission.
Capital commensurate with risk
If there is an interaction of multiple bids and multiple offers on the bilateral dealer market in a predetermined, nondiscretionary automated trade matching and trade execution algorithm or bids and offers and acceptances of bids and offers made on the bilateral dealer market are binding, a bilateral dealer market shall maintain sufficient capital commensurate with the risk associated with transactions on the bilateral dealer market, as determined by the Commission.
Transactions exempted by Commission action
Any agreement, contract, or transaction on a bilateral dealer market (other than an agreement, contract, or transaction in an excluded commodity) that would otherwise be exempted by the Commission under section 4(c) shall be subject to—
sections 4b, 4c(a), 4c(b), 4o, and 5b; and
subsections (c) and (d) of section 6 and sections 6c, 6d, 8a, and 9(a)(2), to the extent that those provisions prohibit the manipulation of the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market.
No effect on other FERC authority
This subsection does not affect the authority of the Federal Energy Regulatory Commission to regulate transactions under the Federal Power Act (16 U.S.C. 791a et seq.) or the Natural Gas Act (15 U.S.C 717 et seq.).
Applicability
This subsection does not apply to—
a designated contract market regulated under section 5; or
a registered derivatives transaction execution facility regulated under section 5a.
.
Contracts designed to defraud or mislead
Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is amended by striking subsection (a) and inserting the following:
Prohibition
It shall be unlawful for any member of a registered entity, or for any correspondent, agent, or employee of any member, in or in connection with any order to make, or the making of, any contract of sale of any commodity in interstate commerce, made, or to be made on or subject to the rules of any registered entity, or for any person, in or in connection with any order to make, or the making of, any agreement, transaction, or contract in a commodity subject to this Act—
to cheat or defraud or attempt to cheat or defraud any person;
willfully to make or cause to be made to any person any false report or statement, or willfully to enter or cause to be entered any false record;
willfully to deceive or attempt to deceive any person by any means; or
to bucket the order, or to fill the order by offset against the order of any person, or willfully, knowingly, and without the prior consent of any person to become the buyer in respect to any selling order of any person, or to become the seller in respect to any buying order of any person.
.
Conforming amendments
The Commodity Exchange Act is amended—
in section 2 (7 U.S.C. 2)—
in subsection (h)—
in paragraph (1), by striking paragraph (2)
and inserting paragraphs (2) and (7)
; and
in paragraph (3), by striking paragraph (4)
and inserting paragraphs (4) and (7)
; and
in subsection (i)(1)(A), by striking section 2(h) or 4(c)
and inserting section 2(h), 2(j), or 4(c)
;
in section 4i (7 U.S.C. 6i)—
by striking any contract market or
and inserting any contract market,
; and
by inserting , or pursuant to an exemption under section 4(c)
after transaction execution facility
;
in section 5a(g)(1) (7 U.S.C. 7a(g)(1)), by striking 2(h)
and inserting 2(h) or 2(j)
;
in section 5b (7 U.S.C. 7a–1)—
in subsection (a)(1), by striking 2(h) or
and inserting 2(h), 2(j), or
; and
in subsection (b), by striking 2(h) or
and inserting 2(h), 2(j), or
; and
in section 12(e)(2)(B) (7 U.S.C. 16(e)(2)(B)), by striking 2(h)
and inserting 2(h), 2(j),
.
Jurisdiction of the Federal Energy Regulatory Commission over energy trading markets
Section 402 of the Department of Energy Organization Act (42 U.S.C. 7172) is amended by adding at the end the following:
Jurisdiction over derivatives transactions
In general
To the extent that the Commission determines that any contract that comes before the Commission is not under the jurisdiction of the Commission, the Commission shall refer the contract to the appropriate Federal agency.
Meetings
A designee of the Commission shall meet quarterly with a designee of the Commodity Futures Trading Commission, the Securities Exchange Commission, the Federal Trade Commission, and the Federal Reserve Board to discuss—
conditions and events in energy trading markets; and
any changes in Federal law (including regulations) that may be appropriate to regulate energy trading markets.
Liaison
The Commission shall, in cooperation with the Commodity Futures Trading Commission, maintain a liaison between the Commission and the Commodity Futures Trading Commission.
.
Increased funding for liheap, weatherization assistance
Liheap
Section 2602(b) of the Low-Income Home Energy Assistance Act of 1981 (42 U.S.C. 8621(b)) is amended by striking the first sentence and inserting There are authorized to be appropriated to carry out the provisions of this title (other than section 2607A), $3,400,000,000 for each of fiscal years 2006 through 2008.
.
Section 2602(e) of the Low-Income Home Energy Assistance Act of 1981 (42 U.S.C. 8621(e)) is amended by striking $600,000,000
and inserting $1,000,000,000
.
Section 2609A(a) of the Low-Income Energy Assistance Act of 1981 (42 U.S.C. 8628a(a)) is amended by striking not more than $300,000
and inserting not more than $750,000
.
Weatherization assistance
Section 422 of the Energy Conservation and Production Act (42 U.S.C. 6872) is amended by striking for fiscal years 1999 through 2003 such sums as may be necessary.
and inserting $325,000,000 for fiscal year 2006, $400,000,000 for fiscal year 2007, and $500,000,000 for fiscal year 2008.
.
National energy efficient housing
Establishment
There is created a body corporate to be known as the Federal Energy Efficient Home Mortgage Association
(in this section referred to as the Corporation
), which shall be regulated by the Office of Federal Housing Enterprise Oversight. The Corporation shall have succession until dissolved by Act of Congress. The Corporation shall maintain its principal office in the District of Columbia and shall be deemed, for purposes of venue in civil actions, to be a resident thereof. The Corporation may establish agencies or offices in such other place or places as it may deem necessary or appropriate in the conduct of its business.
Authority
The Corporation may—
pursuant to commitments or otherwise, purchase, service, sell, or otherwise deal in any mortgages that meet or exceed the eligibility requirements for the Environmental Protection Agency program known as Energy Star
including mortgages that were previously purchased, serviced, or held by the Secretary of Housing and Urban Development pursuant to the National Housing Act, any Federal Home Loan Bank, the Government National Mortgage Association, the Department of Veterans Affairs, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation;
purchase, service, sell, lend on the security of, and otherwise deal in loans or advances of credit for the purchase and installation of home energy conserving improvements; and
upon such terms and conditions as it may deem appropriate, issue, and guarantee the timely payment of principal of and interest on, such trust certificates or other securities that are based on and backed by a trust or pool composed of mortgages described in paragraph (1), (2), or (3).
Limitation
The price of a mortgage purchased by the Corporation pursuant to the authority under subsection (b) may not exceed 100 percent of the unpaid principal amount of the mortgage at the time of purchase, with adjustments for interest and any comparable items.
Borrowing from Treasury
Authority
The Corporation may issue to the Secretary of the Treasury, and the Secretary may purchase, obligations as may be necessary to fund the operations of the Corporation.
Terms
Obligations issued under this subsection shall be in such forms and denomination, bear such maturities and rates of interest, and be subject to such other terms and conditions, as the Secretary of the Treasury shall determine.
Public debt transactions
For the purpose of purchasing any such obligations, the Secretary may use a public debt transaction the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under such chapter are extended to include such purpose.
Limitation on amount
The Secretary of the Treasury shall not at any time purchase any obligations under this subsection if the purchase would increase the aggregate principal amount of the outstanding holdings of obligations under this subsection by the Secretary to an amount greater than $1,000,000,000.
Sale
The Secretary of the Treasury may at any time sell, upon terms and conditions and at prices determined by the Secretary, any of the obligations acquired by the Secretary under this subsection.
Treatment
All redemptions, purchases and sales by the Secretary of the Treasury of obligations under this subsection shall be treated as public debt transactions of the United States.
National net metering requirement for utilities and interconnection standards for distributive energy generation
The Federal Power Act is amended by adding the following new part at the end thereof:
National requirements affecting retail electric energy
Net metering
Definitions
As used in this section:
The term customer-generator means the owner or operator of an electric generation unit qualified for net metering under this section.
The term net metering means measuring the difference between the electricity supplied to a customer-generator and the electricity generated by a customer-generator that is delivered to a local distribution section system at the same point of interconnection during an applicable billing period.
The terms electric generation unit qualified for net metering and qualified generation unit mean an electric energy generation unit that meets each of the following requirements:
The unit is a fuel cell or uses as its energy source either solar, wind, or biomass.
The unit has a generating capacity of not more than 100 kilowatts.
The unit is located on premises that are owned, operated, leased, or otherwise controlled by the customer-generator.
The unit operates in parallel with the retail electric supplier.
The unit is intended primarily to offset part or all of the customer-generator’s requirements for electric energy.
The term retail electric supplier means any person that sells electric energy to the ultimate consumer thereof.
The term local distribution system means any system for the distribution section of electric energy to the ultimate consumer thereof, whether or not the owner or operator of such system is also a retail electric supplier.
Adoption
Not later than one year after the enactment of this section, each retail electric supplier shall comply with each of the following requirements and notify all of its retail customers of such requirements not less frequently than quarterly:
The supplier shall offer to arrange (either directly or through a local distribution company or other third party) to make available, on a first-come-first-served basis, to each of its retail customers that has installed an energy generation unit that is intended for net metering and that notifies the supplier of its generating capacity an electric energy meter that is capable of net metering if the customer-generator’s existing electrical meter cannot perform that function.
Rates and charges and contract terms and conditions applicable to the sale by the supplier of electric energy to customer-generators shall be the same as the rates and charges and contract terms and conditions that would be applicable if the customer-generator did not own or operate a qualified generation unit and use a net metering system.
Net energy measurement and billing
Each retail electric supplier subject to subsection (b) shall calculate the net energy measurement for a customer using a net metering system in the following manner:
The retail electric supplier shall measure the net electricity produced or consumed during the billing period using the metering referred to in paragraph (1) of subsection (b) or in subsection (f).
If the electricity supplied by the retail electric supplier exceeds the electricity generated by the customer-generator during the billing period, the customer-generator shall be billed for the net electricity supplied by the retail electric supplier in accordance with normal metering practices.
If electricity generated by the customer-generator exceeds the electricity supplied by the retail electric supplier, the customer-generator—
shall be billed for the appropriate customer charges for that billing period;
shall be credited for the excess electric energy generated during the billing period, with this credit appearing on the bill to be applied against charges for the following billing period (except for a billing period that ends in the next calendar year); and
shall not be charged for transmission losses.
real time meter), the credit shall be based on the retail rates for sale by the retail electric supplier at the time of such generation. At the beginning of each calendar year, any remaining unused kilowatt-hour credit accumulated by a customer-generator during the previous year may be sold by the customer-generator to any electric supplier that agrees to purchase such credit. In the absence of any such purchase, the credit shall be assigned (at no cost) to the retail electric supplier that supplied electric energy to such customer-generator at the end of the previous year.
Percent limitations
Two percent limitation
A retail electric supplier shall not be required to comply with subsection (b) with respect to additional customer-generators after the date during any calendar year on which the total generating capacity of all customer-generators with qualified generation facilities and net metering systems served by that supplier is equal to or in excess of 2 percent of the capacity necessary to meet the supplier’s average forecasted aggregate customer peak demand for that calendar year.
One percent limitation
A retail electric supplier shall not be required to comply with subsection (b) with respect to additional customer-generators using a single type of qualified energy generation system after the date during any calendar year on which the total generating capacity of all customer-generators with qualified generation facilities of that type and net metering systems served by that supplier is equal to or in excess of 1 percent of the capacity necessary to meet the supplier’s average forecasted aggregate customer peak demand for that calendar year.
Records and notice
Each retail electric supplier shall maintain, and make available to the public, records of the total generating capacity of customer-generators of such supplier that are using net metering, the type of generating systems and energy source used by the electric generating systems used by such customer-generators. Each such supplier shall notify the Commission when the total generating capacity of such customer-generators is equal to or in excess of 2 percent of the capacity necessary to meet the supplier’s aggregate customer peak demand during the previous calendar year and when the total generating capacity of such customer-generators using a single type of qualified generation is equal to or in excess of 1 percent of such capacity.
Safety and performance standards
A qualified generation unit and net metering system used by a customer-generator shall meet all applicable safety and performance and reliability standards established by the national electrical code, the Institute of Electrical and Electronics Engineers, Underwriters Laboratories, or the American National Standards Institute.
The Commission, after consultation with State regulatory authorities and nonregulated local distribution systems and after notice and opportunity for comment, may adopt by regulation additional control and testing requirements for customer-generators that the Commission determines are necessary to protect public safety and system reliability.
The Commission shall, after consultation with State regulatory authorities and nonregulated local distribution systems and after notice and opportunity for comment, prohibit by regulation the imposition of additional charges by electric suppliers and local distribution systems for equipment or services for safety or performance that are additional to those necessary to meet the standards and requirements referred to in paragraphs (2) and (3).
Additional meters
Any retail electric supplier or local distribution company may, at its own expense, install one or more additional electric energy meters to monitor the flow of electricity in either direction to and from customer-generators, to identify the time of generation by customer- generators, or both.
Federal credits
Whenever a customer-generator with a net metering system uses any energy generation system entitled to credits under a Federal minimum renewable energy generation requirement, the total amount of energy generated by that system shall be treated as generated by the retail electric supplier for purposes of such requirement.
State authority
Nothing in this section shall preclude a State from establishing or imposing additional incentives or requirements to encourage qualified generation and net metering additional to that required under this section.
Interconnection standards
Within one year after the enactment of this section the Commission shall publish model standards for the physical connection between local distribution systems and qualified generation units and electric generation units that would be qualified generation units but for the fact that the unit has a generating capacity of more than 100 kilowatts (but not more than 250 kilowatts). Such model standards shall be designed to encourage the use of qualified generation units and to insure the safety and reliability of such units and the local distribution systems interconnected with such units. Within 2 years after the enactment of this section, each State shall adopt such model standards, with or without modification, and submit such standards to the Commission for approval. The Commission shall approve a modification of the model standards only if the Commission determines that such modification is consistent with the purpose of such standards and is required by reason of local conditions. If standards have not been approved under this paragraph by the Commission for any State within 2 years after the enactment of this section, the Commission shall, by rule or order, enforce the Commission’s model standards in such State until such time as State standards are approved by the Commission.
The standards under this section shall establish such measures for the safety and reliability of the affected equipment and local distribution systems as may be appropriate. Such standards shall be consistent with all applicable safety and performance standards established by the national electrical code, the Institute of Electrical and Electronics Engineers, Underwriters Laboratories, or the American National Standards Institute and with such additional safety and reliability standards as the Commission shall, by rule, prescribe. Such standards shall ensure that generation units will automatically isolate themselves from the electrical system in the event of an electrical power outage. Such standards shall permit the owner or operator of the local distribution system to interrupt or reduce deliveries of available energy from the generation unit to the system when necessary in order to construct, install, maintain, repair, replace, remove, investigate, or inspect any of its equipment or part of its system; or if it determines that curtailment, interruption, or reduction is necessary because of emergencies, forced outages, force majeure, or compliance with prudent electrical practices.
The model standards under this subsection prohibit the imposition of additional charges by local distribution systems for equipment or services for interconnection that are additional to those necessary to meet such standards.
Interconnection
At the election of the owner or operator of the generation unit concerned, connections meeting the standards applicable under subsection (g) may be made—
by such owner or operator at such owner’s or operator’s expense, or
by the owner or operator of the local distribution system upon the request of the owner or operator of the generating unit and pursuant to an offer by the owner or operator of the generating unit to reimburse the local distribution system in an amount equal to the minimum cost of such connection, consistent with the procurement procedures of the State in which the unit is located, except that the work on all such connections shall be performed by qualified electrical personnel certified by a responsible body or licensed by a State or local government authority.
Consumer friendly contracts
The Commission shall promulgate regulations insuring that simplified contracts will be used for the interconnection of electric energy by electric energy transmission or distribution systems and generating facilities that have a power production capacity not greater than 250 kilowatts.
.
Conforming amendments
Section 316A of the Federal Power Act is amended by striking out or 214
in both places it appears and inserting 214, or title IV
.
Appliance standards
Standards for household appliances in standby mode
Section 325 of the Energy Policy and Conservation Act (42 U.S.C. 6295) is amended by adding at the end the following:
Standby mode electric energy consumption by household appliances
Definitions
In this subsection:
Household appliance
The term household appliance means any device that uses household electric current and operates in a standby mode except digital televisions, digital set top boxes, and digital video recorders.
Standby mode
The term standby mode means a mode in which a household appliance uses household electric current but is not in the active or primary operating mode. For products with more than one operating mode, the term standby mode means the mode in which the appliance consumes the least amount of electric energy that the household appliance is capable of consuming without being completely switched off.
Standard
In general
Except as provided in subparagraph (B), a household appliance that is manufactured in, or imported for sale in, the United States on or after the date that is 3 years after the date of enactment of this subsection shall not consume in standby mode more than 1 watt.
Household appliances participating in the energy star program
A household appliance model that, as of the date of enactment of this subsection, is recognized under the Energy Star program administered by the Administrator of the Environmental Protection Agency and the Secretary shall have until January 1, 2010, to meet the standard under subparagraph (A).
Analog televisions
In the case of analog televisions, the Secretary shall prescribe, on or after the date that is 2 years after the date of enactment of this subsection, in accordance with subsections (o) and (p) of section 325, an energy conservation standard that is technologically feasible and economically justified under section 325(o)(2)(A) (in lieu of the 1 watt standard under subparagraph (A)).
Exemptions
Application
A manufacturer or importer of a household appliance or their designated agent may submit to the Secretary an application for an exemption of a household appliance of class of appliances from the standard under paragraph (2).
Criteria for exemption
The Secretary shall grant an exemption for a household appliance of class of appliances for which an application is made under subparagraph (A) if the applicant provides evidence showing that, and the Secretary determines that—
it is not technically feasible to modify the household appliance or appliances concerned to enable them to meet the standard;
the standard is incompatible with an energy efficiency standard applicable to the household appliance of class of appliances under another subsection; or
The cost of electricity that a typical consumer would save in operating the household appliance of class of appliances meeting the standard would not equal the increase in the price of the household appliance or class of household appliances that would be attributable to the modifications that would be necessary to enable the household appliance or class of household appliances to meet the standard by the earlier of—
the date that is 7 years after the date of purchase of the household appliance concerned; or
the end of the useful life of the household appliance.
Determination of technical infeasibility
If the Secretary determines that it is not technically feasible to modify a household appliance or class of household appliances to meet the standard under paragraph (2), the Secretary shall establish a different standard for the household appliance or class of household appliances in accordance with the criteria under subsection (l).
Test procedure
In general
Not later than 1 year after the date of enactment of this subsection, the Secretary shall establish a test procedure for determining the amount of consumption of power by a household appliance operating in standby mode.
Considerations
In establishing the test procedure, the Secretary shall consider—
international test procedures under development;
test procedures used in connection with the Energy Star program; and
test procedures used for measuring power consumption in standby mode in other countries.
Further reduction of standby power consumption
The Secretary shall provide technical assistance to manufacturers in achieving further reductions in standby mode electric energy consumption by household appliances.
Standby mode electric energy consumption by digital televisions, digital set top boxes, and digital video recorders
The Secretary shall initiate within 5 years of the date of enactment of this subsection a rulemaking to prescribe, in accordance with subsections (o) and (p), an energy conservation standard of standby mode electric energy consumption by digital television sets, digital set top boxes, and digital video recorders. The Secretary shall issue a final rule prescribing such standards not later than 18 months thereafter. In determining whether a standard under this section is technologically feasible and economically justified under section 325(o)(2)(A), the Secretary shall consider the potential negative effects on market penetration by digital products covered under this section, and shall consider any recommendations by the FCC regarding such effects.
.
Standards for noncovered products
Section 325(m) of the Energy Policy and Conservation Act (42 U.S.C. 6295(m)) is amended as follows:
Inserting (1)
before After
.
Inserting the following at the end:
Not later than one year after the date of enactment of this paragraph, and every 5 years thereafter, the Secretary shall conduct a rulemaking to determine whether consumer or commercial products not classified as a covered product under section 322(a)(1) through (19) meet the criteria of section 322(b)(1). If the Secretary finds that a consumer or commercial product not classified as a covered product meets the criteria of section 322(b)(1), the Secretary shall prescribe, in accordance with subsections (o) and (p), an energy conservation standard for such consumer or commercial product.
.
Part B of title III of such Act is amended as follows:
In the heading for such part by inserting AND COMMERCIAL
after CONSUMER
.
In section 321 by striking consumer product of a type specified in section 322
and inserting: consumer or commercial product of a type specified in section 322(a)
.
In paragraphs (4), (5), (7), (12), (13), (14), and (15) of section 321 by striking consumer
in each place it appears and inserting covered
.
In section 322(a) by inserting or commercial
after consumer
in the first place it appears in the material preceding paragraph (1).
In section 322(b), by inserting or commercial
after consumer
in each place it appears.
In section 322(b)(1)(B) and (b)(2)(A), by inserting (or per-business in the case of a commercial product)
after per-household
in each place it appears.
In section 322(b)(2)(A) by inserting (or businesses in the case of commercial products)
after households
in each place it appears.
In section 322(b)(2)(C) by striking term
and inserting terms
and by inserting and
after business
household
.
In sections 323 though 339, by inserting or commercial
after consumer
in each place it appears.
Consumer education on energy efficiency benefits of air conditioning, heating and ventilation maintenance
Section 337 of the Energy Policy and Conservation Act (42 U.S.C. 6307) is amended by adding the following new subsection after subsection (b):
HVAC maintenance
For the purpose of ensuring that installed air conditioning and heating systems operate at their maximum rated efficiency levels, the Secretary shall, within 180 days of the date of enactment of this subsection, develop and implement a public education campaign to educate homeowners and small business owners concerning the energy savings resulting from regularly scheduled maintenance of air conditioning, heating, and ventilating systems. The public service information shall provide sufficient information to allow consumers to make informed choices from among professional, licensed (where State or local licensing is required) contractors. There are authorized to be appropriated to carry out this subsection $5,000,000 for the fiscal years 2006 and 2007 in addition to amounts otherwise appropriated in this part.
.
Efficiency standards for other consumer and commercial products
Definitions
Section 321 of the Energy Policy and Conservation Act (42 U.S.C. 6291) is amended by adding the following at the end thereof:
The term residential furnace fan means an electric fan installed as part of a furnace for purposes of circulating air through the system air filters, the heat exchangers or heating elements of the furnace, and the duct work.
The terms residential central air conditioner fan and heat pump circulation fan mean an electric fan installed as part of a central air conditioner or heat pump for purposes of circulating air through the system air filters, the heat exchangers of the air conditioner or heat pump, and the duct work.
The term suspended ceiling fan means a fan intended to be mounted to a ceiling outlet box, ceiling building structure, or to a vertical rod suspended from the ceiling, and which as blades which rotate below the ceiling and consists of an electric motor, fan blades (which rotate in a direction parallel to the floor), an optional lighting kit, and one or more electrical controls (integral or remote) governing fan speed and lighting operation.
The term refrigerated bottled or canned beverage vending machine means a machine that cools bottled or canned beverages and dispenses them upon payment.
Automatic commercial icemaker
The term automatic commercial icemaker means a factory-made assembly that
consists of a condensing unit and icemaking section operating as an integrated unit, with means for making and harvesting ice;
may include means for storing or dispensing ice; and
may or may not be shipped in 1 package.
Commercial freezer
The term commercial freezer means a freezer that is not a consumer product regulated under this Act.
Commercial refrigerator
The term commercial refrigerator means a refrigerator that is not a consumer product regulated under this Act.
Commercial refrigerator-freezer
The term commercial refrigerator-freezer means a refrigerator-freezer that is not a consumer product regulated under this Act.
Icemaking head
The term icemaking head means an automatic commercial icemaker that does not include a storage compartment in an integral cabinet.
Illuminated exit sign
The term illuminated exit sign means a sign that
is designed to be permanently fixed in place to identify an exit; and
Consists of
a light source that illuminates the sign or letters from within; and
a background that is not transparent.
Remote condensing icemaker
The term remote condensing icemaker means an automatic commercial icemaker in which the icemaking mechanism and condensing unit are in separate sections.
Traffic signal module
The term traffic signal module means a standard 8-inch (200mm) or 12-inch (300mm) traffic signal indication, consisting of a light source, a lens, and all other parts necessary for operation, that communicates movement messages to drivers through red, amber, and green colors.
Torchiere fixture
The term torchiere fixture means a portable electric lighting fixture with a reflector bowl that directs light upward so as to give indirect illumination.
Unit heater
The term unit heater means a self-contained fan-type heater designed to be installed within the heated space. Unit heaters include an apparatus or appliance to supply heat, and a fan for circulating air over a heat exchange surface, all enclosed in a common casing. Unit heaters do not include furnaces as defined in this Act.
.
Testing requirements
Section 323 of the Energy Policy and Conservation Act (42 U.S.C. 6293) is amended by adding the following at the end thereof:
Additional consumer products
The Secretary shall within 18 months after the date of enactment of this subsection prescribe testing requirements for the consumer and commercial products referred to in paragraphs (36) though (45) of section 321. Such testing requirements shall be based on existing test procedures used in industry to the extent practical and reasonable. In the case of residential furnace fans, residential central air conditioner fans or heat pump circulation fans, and suspended ceiling fans unit heaters, such test procedures shall include efficiency at both maximum output and at an output no more than 50 percent of the maximum output.
.
Standards for additional consumer products
Section 325 of the Energy Policy and Conservation Act (42 U.S.C. 6295), as amended by subsection (a) of this section, is amended by adding the following at the end thereof:
Residential, other consumer, and commercial products
The Secretary shall, within 18 months after the date of enactment of this subsection, assess the current and projected future market for the consumer, and commercial products referred to in paragraphs (36) through (45) of section 321, furnace fans, residential central air conditioner fans and heat pump circulation fans, suspended ceiling fans, and refrigerated bottled or canned beverage vending machines. This assessment shall include an examination of the types of these products sold, the number of these products in use, annual sales of these products, energy used by these products sold, estimates of the potential energy savings from specific technical improvements to these products, and an examination of the cost-effectiveness of these improvements. Prior to the end of this time period, the Secretary shall hold an initial scoping workshop to discuss and receive input to plans for developing minimum efficiency standards for these products.
The Secretary shall within 24 months after the date on which testing requirements are prescribed by the Secretary pursuant to section 323(f), prescribe, by rule, energy conservation standards for residential furnace fans, residential central air conditioner fans and heat pump circulation fans, suspended ceiling fans, and refrigerated bottled or canned beverage vending machines. In establishing these standards, the Secretary shall use the criteria and procedures contained in this section. Any standard prescribed under this section shall apply to products manufactured 36 months after the date such rule is published.
.
Labeling
Section 324(a) of the Energy Policy and Conservation Act (42 U.S.C. 6294(a)) is amended by adding the following at the end thereof:
The Secretary shall within 6 months after the date on which energy conservation standards are prescribed by the Secretary, prescribe, by rule, labeling requirements for the consumer and commercial products referred to in paragraphs (33) though (45) of section 321. These requirements shall take effect on the same date as the standards prescribed pursuant to section 325(w).
.
Covered products
Section 322(a) of the Energy Policy and Conservation Act (42 U.S.C. 6292(a)) is amended by redesignating paragraph (19) as (20) and by inserting the following after paragraph (18):
Beginning on the effective date for standards established pursuant to subsection (w) of section 325, each product referred to in such subsection (w).
.
Air conditioner energy efficiency rules
Section 325(o)(1) of the Energy Policy and Conservation Act is amended by adding the following at the end thereof: Any rule relating to the energy efficiency of air conditioners that violates the preceding sentence shall have no force and effect after the date of the enactment of this sentence.
.
Energy Star certification for solar water heaters
Not later than January 1, 2007, the Secretary, in consultation with the Administrator of the Environmental Protection Agency, shall adopt regulations establishing Energy Star Program requirements and an Energy Star rating program for commercial and residential solar water heating devices.
Electric reliability standards
Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is amended by adding at the end the following:
Electric reliability
Definitions
In this section—
bulk power system
means the network of interconnected transmission facilities and generating facilities;
electric reliability organization
means a self-regulating organization certified by the Commission under subsection (c) whose purpose is to promote the reliability of the bulk power system; and
reliability standard
means a requirement to provide for reliable operation of the bulk power system approved by the Commission under this section.
Jurisdiction and applicability
The Commission shall have jurisdiction, within the United States, over an electric reliability organization, any regional entities, and all users, owners and operators of the bulk power system, including but not limited to the entities described in section 201(f), for purposes of approving reliability standards and enforcing compliance with this section. All users, owners and operators of the bulk power system shall comply with reliability standards that take effect under this section.
Certification
The Commission shall issue a final rule to implement the requirements of this section not later than 180 days after the date of enactment of this section.
Following the issuance of a Commission rule under paragraph (1), any person may submit an application to the Commission for certification as an electric reliability organization. The Commission may certify an applicant if the Commission determines that the applicant—
has the ability to develop, and enforce reliability standards that provide for an adequate level of reliability of the bulk power system; and
has established rules that—
assure the independence of the applicant from the users and owners and operators of the bulk power system while assuring fair stakeholder representation in the selection of its directors and balanced decision making in any committee or subordinate organizational structure;
allocate equitably dues, fees, and other charges among users for all activities under this section;
provide fair and impartial procedures for enforcement of reliability standards through imposition of penalties (including limitations on activities, functions, or operations, or other appropriate sanctions) and
provide for reasonable notice and opportunity for public comment, due process, openness, and balance of interests in developing reliability standards and otherwise exercising its duties.
If the Commission receives 2 or more timely applications that satisfy the requirements of this subsection, the Commission shall approve only the application the Commission concludes will best implement the provisions of this section.
Reliability standards
An electric reliability organization shall file a proposed reliability standard or modification to a reliability standard with the Commission.
The Commission may approve a proposed reliability standard or modification to a reliability standard if it determines that the standard is just, reasonable, not unduly discriminatory or preferential, and in the public interest. The Commission shall give due weight to the technical expertise of the electric reliability organization with respect to the content of a proposed standard or modification to a reliability standard, but shall not defer with respect to its effect on competition.
The electric reliability organization and the Commission shall rebuttably presume that a proposal from a regional entity organized on an interconnection-wide basis for a reliability standard or modification to a reliability standard to be applicable on an interconnection-wide basis is just, reasonable, and not unduly discriminatory or preferential, and in the public interests.
The Commission shall remand to the electric reliability organization for further consideration a proposed reliability standard or a modification to a reliability standard that the Commission disapproves in whole or in part.
The Commission, upon its own motion or upon complaint, may order an electric reliability organization to submit to the Commission a proposed reliability standard or a modification to a reliability standard that addresses a specific matter if the Commission considers such a new or modified reliability standard appropriate to carry out this section.
Enforcement
An electric reliability organization may impose a penalty on a user or owner or operator of the bulk power system if the electric reliability organization, after notice and an opportunity for a hearing—
finds that the user or owner or operator of the bulk power system has violated a reliability standard approved by the Commission under subsection (d); and
files notice with the Commission, which shall affirm, set aside, or modify the action.
On its own motion or upon complaint, the Commission may order compliance with a reliability standard and may impose a penalty against a user or owner or operator of the bulk power system if the Commission finds, after notice and opportunity for a hearing, that the user or owner or operator of the bulk power system has violated or threatens to violate a reliability standard.
The Commission shall establish regulations authorizing the electric reliability organization to enter into an agreement to delegate authority to a regional entity for the purpose of proposing and enforcing reliability standards (including related activities) if the regional entity satisfies the provisions of subparagraphs (A) and (B) of subsection (c)(2) and the agreement promotes effective and efficient administration of bulk power system reliability. The Commission may modify such delegation. The electric reliability organization and the Commission shall rebuttably presume that a proposal for delegation to a regional entity organized on a interconnection-wide basis promotes effective and efficient administration of bulk power system reliability and should be approved. Such regulation may provide that the Commission may assign the electric reliability organization’s authority to enforce reliability standards directly to a regional entity consistent with the requirements of this paragraph.
The Commission may take such action as is necessary or appropriate against the electric reliability organization or a regional entity to ensure compliance with a reliability standard or any Commission order affecting the electric reliability organization or a regional entity.
Changes in electricity reliability organization rules
An electric reliability organization shall file with the Commission for approval any proposed rule or proposed rule change, accompanied by an explanation of its basis and purpose. The Commission, upon its own motion or complaint, may propose a change to the rules of the electric reliability organization. A proposed rule or proposed rule change shall take effect upon a finding by the Commission, after notice and opportunity for comment, that the change is just, reasonable, not unduly discriminatory or preferential, is in the public interest, and satisfies the requirements of subsection (c)(2).
Coordination With Canada and Mexico
The electric reliability organization shall take all appropriate steps to gain recognition in Canada and Mexico.
The President shall use his best efforts to enter into international agreements with the governments of Canada and Mexico to provide for effective compliance with reliability standards and the effectiveness of the electric reliability organization in the United States and Canada or Mexico.
Reliability reports
The electric reliability organization shall conduct periodic assessments of the reliability and adequacy of the interconnected bulk power system in North America.
Savings Provisions
The electric reliability organization shall have authority to develop and enforce compliance with standards for the reliable operation of only the bulk power system.
This section does not provide the electric reliability organization or the Commission with authority to order the construction of additional generation or transmission capacity or to set and enforce compliance with standards for adequacy or safety of electric facilities or services.
Nothing in this section shall be construed to preempt any authority of any State to take action to ensure the safety, adequacy, and reliability of electric service within that State, as long as such action is not inconsistent with any reliability standard established under this section.
Not later than 90 days after the date of the application of the electric reliability organization or other affected party, and after notice and opportunity for comment, the Commission shall issue a final order determining whether a State action is inconsistent with a reliability standard, taking into consideration any recommendation of the electric reliability organization.
The Commission, after consultation with the electric reliability organization, may stay the effectiveness of any State action, pending the Commission’s issuance of a final order.
Application of Antitrust Laws
To the extent undertaken to develop, implement, or enforce a reliability standard, each of the following activities shall not, in any action under the antitrust laws, be deemed illegal per se:
Activities undertaken by an electric reliability organization under this section.
Activities of a user or owner or operator of the bulk power system undertaken in good faith under the rules of an electric reliability organization.
In any action under the antitrust laws, an activity described in paragraph (1) shall be judged on the basis of its reasonableness, taking into account all relevant factors affecting competition and reliability.
For purposes of this subsection, the term antitrust laws has the meaning given the term in subsection (a) of the first section of the Clayton Act (15 U.S.C. 12(a)), except that it includes section 5 of the Federal Trade Commission Act (15 U.S.C. 45) to the extent that section 5 applies to unfair methods of competition.
Regional advisory bodies
The Commission shall establish a regional advisory body on the petition of at least 2/3 of the States within a region that have more than 1/2 of their electric load served within the region. A regional advisory body shall be composed of one member from each participating State in the region, appointed by the Governor of each State, and may include representatives of agencies, States, and provinces outside the United States. A regional advisory body may provide advice to the electric reliability organization, a regional reliability entity, or the Commission regarding the governance of an existing or proposed regional reliability entity within the same region, whether a standard proposed to apply within the region is just, reasonable, not unduly discriminatory or preferential, and in the public interest, whether fees proposed to be assessed within the region are just, reasonable, not unduly discriminatory or preferential, and in the public interest and any other responsibilities requested by the Commission. The Commission may give deference to the advice of any such regional advisory body if that body is organized on an interconnection-wide basis.
Application to alaska and hawaii
The provisions of this section apply only to the contiguous 48 States.
.
Market-based Initiatives to reduce greenhouse gases
Definitions
In this Act:
Administrator
The term Administrator means the Administrator of the Environmental Protection Agency.
Baseline
The term baseline means the historic greenhouse gas emission levels of an entity, as adjusted upward by the Administrator to reflect actual reductions that are verified in accordance with—
regulations promulgated under section 611(c)(1); and
relevant standards and methods developed under this title.
Carbon dioxide equivalents
The term carbon dioxide equivalents means, for each greenhouse gas, the amount of each such greenhouse gas that makes the same contribution to global warming as one metric ton of carbon dioxide, as determined by the Administrator.
Covered sectors
The term covered sectors means the electricity, transportation, industry, and commercial sectors, as such terms are used in the Inventory.
Covered entity
The term covered entity means an entity (including a branch, department, agency, or instrumentality of Federal, State, or local government) that—
owns or controls a source of greenhouse gas emissions in the electric power, industrial, or commercial sector of the United States economy (as defined in the Inventory), refines or imports petroleum products for use in transportation, or produces or imports hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride; and
emits, from any single facility owned by the entity, over 10,000 metric tons of greenhouse gas per year, measured in units of carbon dioxide equivalents, or produces or imports—
petroleum products that, when combusted, will emit,
hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride that, when used, will emit, or
other greenhouse gases that, when used, will emit,
Database
The term database means the national greenhouse gas database established under section 611.
Direct emissions
The term direct emissions means greenhouse gas emissions by an entity from a facility that is owned or controlled by that entity.
Facility
The term facility means a building, structure, or installation located on any 1 or more contiguous or adjacent properties of an entity in the United States.
Greenhouse gas
The term greenhouse gas means—
carbon dioxide;
methane;
nitrous oxide;
hydrofluorocarbons;
perfluorocarbons; or
sulfur hexafluoride.
Indirect emissions
The term indirect emissions means greenhouse gas emissions that are—
a result of the activities of an entity; but
emitted from a facility owned or controlled by another entity.
Inventory
The term Inventory means the Inventory of U.S. Greenhouse Gas Emissions and Sinks, prepared in compliance with the United Nations Framework Convention on Climate Change Decision 3/CP.5.
Leakage
The term leakage means—
an increase in greenhouse gas emissions by one facility or entity caused by a reduction in greenhouse gas emissions by another facility or entity; or
a decrease in sequestration that is caused by an increase in sequestration at another location.
Permanence
The term permanence means the extent to which greenhouse gases that are sequestered will not later be returned to the atmosphere.
Registry
The term registry means the registry of greenhouse gas emission reductions established under section 611(b)(2).
Secretary
The term Secretary means the Secretary of Commerce.
Sequestration
In general
The term sequestration means the capture, long-term separation, isolation, or removal of greenhouse gases from the atmosphere.
Inclusions
The term sequestration includes—
agricultural and conservation practices;
reforestation;
forest preservation; and
any other appropriate method of capture, long-term separation, isolation, or removal of greenhouse gases from the atmosphere, as determined by the Administrator.
Exclusions
The term sequestration does not include—
any conversion of, or negative impact on, a native ecosystem; or
any introduction of non-native species.
Source category
The term source category means a process or activity that leads to direct emissions of greenhouse gases, as listed in the Inventory.
Stationary source
The term stationary source means generally any source of greenhouse gases except those emissions resulting directly from an engine for transportation purposes.
Federal climate change research and related activities
National Science Foundation fellowships
The Director of the National Science Foundation shall establish a fellowship program for students pursuing graduate studies in global climate change, including capability in observation, analysis, modeling, paleoclimatology, consequences, and adaptation.
Research grants
Section 105 of the Global Change Research Act of 1990 (15 U.S.C. 2935) is amended—
by redesignating subsection (c) as subsection (d); and
by inserting after subsection (b) the following:
Research grants
Committee to develop list of priority research areas
The Committee shall develop a list of priority areas for research and development on climate change that are not being addressed by Federal agencies.
Director of ostp to transmit list to nsf
The Director of the Office of Science and Technology Policy shall transmit the list to the National Science Foundation.
Funding through nsf
Budget request
The National Science Foundation shall include, as part of the annual request for appropriations for the Science and Technology Policy Institute, a request for appropriations to fund research in the priority areas on the list developed under paragraph (1).
Authorization
For fiscal year 2006 and each fiscal year thereafter, there are authorized to be appropriated to the National Science Foundation not less than $25,000,000, to be made available through the Science and Technology Policy Institute, for research in those priority areas.
.
Abrupt climate change research
In general
The Secretary, through the National Oceanic and Atmospheric Administration, shall carry out a program of scientific research on potential abrupt climate change designed—
to develop a global array of terrestrial and oceanographic indicators of paleoclimate in order to sufficiently to identify and describe past instances of abrupt climate change;
to improve understanding of thresholds and nonlinearities in geophysical systems related to the mechanisms of abrupt climate change;
to incorporate these mechanisms into advanced geophysical models of climate change; and
to test the output of these models against an improved global array of records of past abrupt climate changes.
Abrupt climate change defined
In this section, the term abrupt climate change means a change in climate that occurs so rapidly or unexpectedly that human or natural systems may have difficulty adapting to it.
Authorization of appropriations
There are authorized to be appropriated to the Secretary for fiscal year 2006 $60,000,000 to carry out this section, such sum to remain available until expended.
NIST greenhouse gas functions
Section 2(c) of the National Institute of Standards and Technology Act (15 U.S.C. 272(c)) is amended—
by striking and
after the semicolon in paragraph (21);
by redesignating paragraph (22) as paragraph (23); and
by inserting after paragraph (21) the following:
perform research to develop enhanced measurements, calibrations, standards, and technologies which will facilitate activities that reduce emissions of greenhouse gases or increase sequestration of greenhouse gases, including carbon dioxide, methane, nitrous oxide, ozone, perfluorocarbons, hydrofluorocarbons, and sulfur hexafluoride; and
.
Development of new measurement technologies
To facilitate implementation of section 614, the Secretary shall initiate a program to develop, with technical assistance from appropriate Federal agencies, innovative standards and measurement technologies to calculate greenhouse gas emissions or reductions for which no accurate or reliable measurement technology exists. The program shall include—
technologies (including remote sensing technologies) to measure carbon changes and other greenhouse gas emissions and reductions from agriculture, forestry, and other land use practices; and
technologies to calculate non-carbon dioxide greenhouse gas emissions from transportation.
Enhanced environmental measurements and standards
The National Institute of Standards and Technology Act (15 U.S.C. 271 et seq.) is amended—
by redesignating sections 17 through 32 as sections 18 through 33, respectively; and
by inserting after section 16 the following:
Climate change standards and processes
In general
The Director shall establish within the Institute a program to perform and support research on global climate change standards and processes, with the goal of providing scientific and technical knowledge applicable to the reduction of greenhouse gases (as defined in section 600 of the New Apollo Energy Act of 2005) and of facilitating implementation of section 614 of that Act.
Research program
In general
The Director is authorized to conduct, directly or through contracts or grants, a global climate change standards and processes research program.
Research projects
The specific contents and priorities of the research program shall be determined in consultation with appropriate Federal agencies, including the Environmental Protection Agency, the National Oceanic and Atmospheric Administration, and the National Aeronautics and Space Administration. The program generally shall include basic and applied research—
to develop and provide the enhanced measurements, calibrations, data, models, and reference material standards which will enable the monitoring of greenhouse gases;
to assist in establishing a baseline reference point for future trading in greenhouse gases and the measurement of progress in emissions reduction;
that will be exchanged internationally as scientific or technical information which has the stated purpose of developing mutually recognized measurements, standards, and procedures for reducing greenhouse gases; and
to assist in developing improved industrial processes designed to reduce or eliminate greenhouse gases.
National Measurement Laboratories
In general
In carrying out this section, the Director shall utilize the collective skills of the National Measurement Laboratories of the National Institute of Standards and Technology to improve the accuracy of measurements that will permit better understanding and control of industrial chemical processes and result in the reduction or elimination of greenhouse gases.
Material, process, and building research
The National Measurement Laboratories shall conduct research under this subsection that includes—
developing material and manufacturing processes which are designed for energy efficiency and reduced greenhouse gas emissions into the environment;
developing chemical processes to be used by industry that, compared to similar processes in commercial use, result in reduced emissions of greenhouse gases or increased sequestration of greenhouse gases; and
enhancing building performance with a focus in developing standards or tools which will help incorporate low- or no-emission technologies into building designs.
Standards and tools
The National Measurement Laboratories shall develop standards and tools under this subsection that include software to assist designers in selecting alternate building materials, performance data on materials, artificial intelligence-aided design procedures for building subsystems and smart buildings
, and improved test methods and rating procedures for evaluating the energy performance of residential and commercial appliances and products.
National Voluntary Laboratory Accreditation Program
The Director shall utilize the National Voluntary Laboratory Accreditation Program under this section to establish a program to include specific calibration or test standards and related methods and protocols assembled to satisfy the unique needs for accreditation in measuring the production of greenhouse gases. In carrying out this subsection the Director may cooperate with other departments and agencies of the Federal Government, State and local governments, and private organizations.
.
Technology development and diffusion
The Director of the National Institute of Standards and Technology, through the Manufacturing Extension Partnership Program, may develop a program to promote the use, by the more than 380,000 small manufacturers, of technologies and techniques that result in reduced emissions of greenhouse gases or increased sequestration of greenhouse gases.
Agricultural outreach program
In general
The Secretary of Agriculture, acting through the Global Change Program Office and in consultation with the heads of other appropriate departments and agencies, shall establish the Climate Change Education and Outreach Initiative Program to educate, and reach out to, agricultural organizations and individual farmers on global climate change.
Program components
The program—
shall be designed to ensure that agricultural organizations and individual farmers receive detailed information about—
the potential impact of climate change on their operations and well-being;
market-driven economic opportunities that may come from storing carbon in soils and vegetation, including emerging private sector markets for carbon storage; and
techniques for measuring, monitoring, verifying, and inventorying such carbon capture efforts;
may incorporate existing efforts in any area of activity referenced in paragraph (1) or in related areas of activity;
shall provide—
outreach materials to interested parties;
workshops; and
technical assistance; and
may include the creation and development of regional centers on climate change or coordination with existing centers (including such centers within NRCS and the Cooperative State Research Education and Extension Service).
NOAA report on climate change effects; preparation assistance
The Coastal Zone Management Act of 1972 (16 U.S.C. 1451 et seq.) is amended by adding at the end the following:
Report on effects of climate change
In general
The Secretary shall report to the Congress not later than 2 years after the date of enactment of this section, and every 5 years thereafter, on the possible and projected impacts of climate change on—
oceanic and coastal ecosystems, including marine fish and wildlife and their habitat, and the commercial and recreational fisheries and tourism industries associated with them; and
coastal communities, including private residential and commercial development and public infrastructure in the coastal zone.
Contents
Each report under this section shall include information regarding—
the impacts that may be due to climate change that have occurred as of the date of the submission of the report; and
the projected future impacts of climate change.
Impacts
The impacts reported on under subsection (b) shall include any—
increases in sea level;
increases in storm activity and intensity;
increases in floods, droughts, and other extremes of weather;
increases in the temperature of the air and the water on oceanic and coastal ecosystems, with a particular focus on vulnerable fisheries and ecosystems; and
changes in the acidity of the ocean surface associated with an increase in concentration of carbon dioxide in the atmosphere.
Climate change preparation assistance
In general
The Secretary shall provide technical assistance to each coastal state that has an approved coastal zone management plan under this title, to assist such States in preparing persons living within their coastal zones to adapt to climate change.
Identification of affected areas and adaptations
In carrying out this section, the Secretary shall—
identify the projected impacts of climate change to which persons located in coastal zones may need to adapt, including—
increases in sea level;
increases in storm activity and intensity; and
increases in floods, droughts, and other extremes of weather;
identify the specific coastal areas of the United States, and the public and private development in coastal communities and the natural resources of the coastal zone, that are vulnerable to the impacts identified under paragraph (1);
identify the various adaptation measures that may be used to protect the areas and resources identified under paragraph (2) from the impacts identified under paragraph (1); and
estimate the costs of the adaptation measures identified under paragraph (3).
.
National Greenhouse Gas Database
National Greenhouse Gas Database and registry established
Establishment
As soon as practicable after the date of enactment of this Act, the Administrator, in coordination with the Secretary, the Secretary of Energy, the Secretary of Agriculture, and private sector and nongovernmental organizations, shall establish, operate, and maintain a database, to be known as the National Greenhouse Gas Database
, to collect, verify, and analyze information on greenhouse gas emissions by entities.
National Greenhouse Gas Database components
The database shall consist of—
an inventory of greenhouse gas emissions; and
a registry of greenhouse gas emission reductions and increases in greenhouse gas sequestrations.
Comprehensive system
In general
Not later than 2 years after the date of enactment of this Act, the Administrator shall promulgate regulations to implement a comprehensive system for greenhouse gas emissions reporting, inventorying, and reductions registration.
Requirements
The Administrator shall ensure, to the maximum extent practicable, that—
the comprehensive system described in paragraph (1) is designed to—
maximize completeness, transparency, and accuracy of information reported; and
minimize costs incurred by entities in measuring and reporting greenhouse gas emissions; and
the regulations promulgated under paragraph (1) establish procedures and protocols necessary—
to prevent the double-counting of greenhouse gas emissions or emission reductions reported by more than 1 reporting entity;
to provide for corrections to errors in data submitted to the database;
to provide for adjustment to data by reporting entities that have had a significant organizational change (including mergers, acquisitions, and divestiture), in order to maintain comparability among data in the database over time;
to provide for adjustments to reflect new technologies or methods for measuring or calculating greenhouse gas emissions;
to account for changes in registration of ownership of emission reductions resulting from a voluntary private transaction between reporting entities; and
to clarify the responsibility for reporting in the case of any facility owned or controlled by more than 1 entity.
Serial numbers
Through regulations promulgated under paragraph (1), the Administrator shall develop and implement a system that provides—
for the verification of submitted emissions reductions registered under section 613;
for the provision of unique serial numbers to identify the registered emission reductions made by an entity relative to the baseline of the entity;
for the tracking of the registered reductions associated with the serial numbers; and
for such action as may be necessary to prevent counterfeiting of the registered reductions.
Inventory of greenhouse gas emissions for covered entities
In general
Not later than July 1st of each calendar year after 2008, each covered entity shall submit to the Administrator a report that states, for the preceding calendar year, the entity-wide greenhouse gas emissions (as reported at the facility level), including—
the total quantity of direct greenhouse gas emissions from stationary sources, expressed in units of carbon dioxide equivalents, except those reported under paragraph (3);
the amount of petroleum products sold or imported by the entity and the amount of greenhouse gases, expressed in units of carbon dioxide equivalents, that would be emitted when these products are used for transportation in the United States, as determined by the Administrator under section 621(b);
the amount of hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride, expressed in units of carbon dioxide equivalents, that are sold or imported by the entity and will ultimately be emitted in the United States, as determined by the Administrator under section 621(d); and
such other categories of emissions as the Administrator determines in the regulations promulgated under section 611(c)(1) may be practicable and useful for the purposes of this Act, such as—
indirect emissions from imported electricity, heat, and steam;
process and fugitive emissions; and
production or importation of greenhouse gases.
Collection and analysis of data
The Administrator shall collect and analyze information reported under subsection (a) for use under subtitle C.
Greenhouse gas reduction reporting
In general
Subject to the requirements described in subsection (b)—
a covered entity may register greenhouse gas emission reductions achieved after 1990 and before 2010 under this section; and
an entity that is not a covered entity may register greenhouse gas emission reductions achieved at any time since 1990 under this section.
Requirements
In general
The requirements referred to in subsection (a) are that an entity (other than an entity described in paragraph (2)) shall—
establish a baseline; and
submit the report described in subsection (c)(1).
Requirements applicable to entities entering into certain agreements
An entity that enters into an agreement with a participant in the registry for the purpose of a carbon sequestration project shall not be required to comply with the requirements specified in paragraph (1) unless that entity is required to comply with the requirements by reason of an activity other than the agreement.
Reports
Required report
Not later than July 1st of each calendar year beginning more than 2 years after the date of enactment of this Act, but subject to paragraph (3), an entity described in subsection (a) shall submit to the Administrator a report that states, for the preceding calendar year, the entity-wide greenhouse gas emissions (as reported at the facility level), including—
the total quantity of direct greenhouse gas emissions from stationary sources, expressed in units of carbon dioxide equivalents;
the amount of petroleum products sold or imported by the entity and the amount of greenhouse gases, expressed in units of carbon dioxide equivalents, that would be emitted when these products are used for transportation in the United States, as determined by the Administrator under section 621(b);
the amount of hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride, expressed in units of carbon dioxide equivalents, that are sold or imported by the entity and will ultimately be emitted in the United States, as determined by the Administrator under section 621(d); and
such other categories of emissions as the Administrator determines in the regulations promulgated under section 611(c)(1) may be practicable and useful for the purposes of this Act, such as—
indirect emissions from imported electricity, heat, and steam;
process and fugitive emissions; and
production or importation of greenhouse gases.
Voluntary reporting
An entity described in subsection (a) may (along with establishing a baseline and reporting emissions under this section)—
submit a report described in paragraph (1) before the date specified in that paragraph for the purposes of achieving and commoditizing greenhouse gas reductions through use of the registry and for other purposes; and
submit to the Administrator, for inclusion in the registry, information that has been verified in accordance with regulations promulgated under section 611(c)(1) and that relates to—
any activity that resulted in the net reduction of the greenhouse gas emissions of the entity or a net increase in sequestration by the entity that were carried out during or after 1990 and before the establishment of the database, verified in accordance with regulations promulgated under section 611(c)(1), and submitted to the Administrator before the date that is 4 years after the date of enactment of this Act; and
with respect to the calendar year preceding the calendar year in which the information is submitted, any project or activity that resulted in the net reduction of the greenhouse gas emissions of the entity or a net increase in net sequestration by the entity.
Provision of verification information by reporting entities
Each entity that submits a report under this subsection shall provide information sufficient for the Administrator to verify, in accordance with measurement and verification methods and standards developed under section 614, that the greenhouse gas report of the reporting entity—
has been accurately reported; and
in the case of each voluntary report under paragraph (2), represents—
actual reductions in direct greenhouse gas emissions—
relative to historic emission levels of the entity; and
after accounting for any increases in indirect emissions described in paragraph (1)(D)(i); or
actual increases in net sequestration.
Failure to submit report
An entity that participates or has participated in the registry and that fails to submit a report required under this subsection shall be prohibited from using, or allowing another entity to use, its registered emissions reductions or increases in sequestration to satisfy the requirements of section 621.
Independent third-party verification
To meet the requirements of this section and section 614, an entity that is required to submit a report under this section may—
obtain independent third-party verification; and
present the results of the third-party verification to the Administrator.
Availability of data
In general
The Administrator shall ensure that information in the database is—
published; and
accessible to the public, including in electronic format on the Internet.
Exception
Subparagraph (A) shall not apply in any case in which the Administrator determines that publishing or otherwise making available information described in that subparagraph poses a risk to national security or discloses confidential business information that cannot be derived from information that is otherwise publicly available and that would cause competitive harm if published.
Data infrastructure
The Administrator shall ensure, to the maximum extent practicable, that the database uses, and is integrated with, Federal, State, and regional greenhouse gas data collection and reporting systems in effect as of the date of enactment of this Act.
Additional issues to be considered
In promulgating the regulations under section 611(c)(1) and implementing the database, the Administrator shall take into consideration a broad range of issues involved in establishing an effective database, including—
the data and information systems and measures necessary to identify, track, and verify greenhouse gas emissions in a manner that will encourage private sector trading and exchanges;
the greenhouse gas reduction and sequestration measurement and estimation methods and standards applied in other countries, as applicable or relevant;
the extent to which available fossil fuels, greenhouse gas emissions, and greenhouse gas production and importation data are adequate to implement the database; and
the differences in, and potential uniqueness of, the facilities, operations, and business and other relevant practices of persons and entities in the private and public sectors that may be expected to participate in the database.
Annual report
The Administrator shall publish an annual report that—
describes the total greenhouse gas emissions and emission reductions reported to the database during the year covered by the report;
provides entity-by-entity and sector-by-sector analyses of the emissions and emission reductions reported;
describes the atmospheric concentrations of greenhouse gases;
provides a comparison of current and past atmospheric concentrations of greenhouse gases; and
describes the activity during the year covered by the period in the trading of greenhouse gas emission allowances.
Measurement and verification
Standards
In general
Not later than 1 year after the date of enactment of this Act, the Secretary shall establish by rule, in coordination with the Administrator, the Secretary of Energy, and the Secretary of Agriculture, comprehensive measurement and verification methods and standards to ensure a consistent and technically accurate record of greenhouse gas emissions, emission reductions, sequestration, and atmospheric concentrations for use in the registry.
Requirements
The methods and standards established under paragraph (1) shall include—
a requirement that a covered entity use a continuous emissions monitoring system, or another system of measuring or estimating emissions that is determined by the Secretary to provide information with precision, reliability, accessibility, and timeliness similar to that provided by a continuous emissions monitoring system where technologically feasible;
establishment of standardized measurement and verification practices for reports made by all entities participating in the registry, taking into account—
protocols and standards in use by entities requiring or desiring to participate in the registry as of the date of development of the methods and standards under paragraph (1);
boundary issues, such as leakage;
avoidance of double counting of greenhouse gas emissions and emission reductions;
protocols to prevent a covered entity from avoiding the requirements of this Act by reorganization into multiple entities that are under common control; and
such other factors as the Secretary, in consultation with the Administrator, determines to be appropriate;
establishment of methods of—
estimating greenhouse gas emissions, for those cases in which the Secretary determines that methods of monitoring, measuring or estimating such emissions with precision, reliability, accessibility, and timeliness similar to that provided by a continuous emissions monitoring system are not technologically feasible at present; and
reporting the accuracy of such estimations;
establishment of measurement and verification standards applicable to actions taken to reduce, avoid, or sequester greenhouse gas emissions;
in coordination with the Secretary of Agriculture, standards to measure the results of the use of carbon sequestration and carbon recapture technologies, including—
soil carbon sequestration practices; and
forest preservation and reforestation activities that adequately address the issues of permanence, leakage, and verification;
establishment of such other measurement and verification standards as the Secretary, in consultation with the Secretary of Agriculture, the Administrator, and the Secretary of Energy, determines to be appropriate;
establishment of standards for obtaining the Secretary’s approval of the suitability of geological storage sites that include evaluation of both the geology of the site and the entity’s capacity to manage the site; and
establishment of other features that, as determined by the Secretary, will allow entities to adequately establish a fair and reliable measurement and reporting system.
Review and revision
The Secretary shall periodically review, and revise as necessary, the methods and standards developed under subsection (a).
Public participation
The Secretary shall—
make available to the public for comment, in draft form and for a period of at least 90 days, the methods and standards developed under subsection (a); and
after the 90-day period referred to in paragraph (1), in coordination with the Secretary of Energy, the Secretary of Agriculture, and the Administrator, adopt the methods and standards developed under subsection (a) for use in implementing the database.
Experts and consultants
In general
The Secretary may obtain the services of experts and consultants in the private and nonprofit sectors in accordance with section 3109 of title 5, United States Code, in the areas of greenhouse gas measurement, certification, and emission trading.
Available arrangements
In obtaining any service described in paragraph (1), the Secretary may use any available grant, contract, cooperative agreement, or other arrangement authorized by law.
Market-driven greenhouse gas reductions
Emission reduction requirements; use of tradeable allowances
Covered entities must submit allowances for emissions
In general
Beginning with calendar year 2010—
each covered entity in the electric generation, industrial, and commercial sectors shall submit to the Administrator one tradeable allowance for every metric ton of greenhouse gases, measured in units of carbon dioxide equivalents, that it emits from stationary sources, except those described in paragraph (2);
each producer or importer of hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride that is a covered entity shall submit to the Administrator one tradeable allowance for every metric ton of hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride, measured in units of carbon dioxide equivalents, that it produces or imports and that will ultimately be emitted in the United States, as determined by the Administrator under subsection (d) and
each petroleum refiner or importer that is a covered entity shall submit one tradeable allowance for every unit of petroleum product it sells that will produce one metric ton of greenhouse gases, measured in units of carbon dioxide equivalents, as determined by the Administrator under subsection (b), when used for transportation.
Determination of Transportation sector amount
For the transportation sector, the Administrator shall determine the amount of greenhouse gases, measured in units of carbon dioxide equivalents, that will be emitted when petroleum products are used for transportation.
Exception for certain deposited emissions
Notwithstanding subsection (a), a covered entity is not required to submit a tradeable allowance for any amount of greenhouse gas that would otherwise have been emitted from a facility under the ownership or control of that entity if—
the emission is deposited in a geological storage facility approved by the Administrator described in section 614(a)(2)(G); and
the entity agrees to submit tradeable allowances for any portion of the deposited emission that is subsequently emitted from that facility.
Determination of hydroflurocarbon, perfluorocarbon, and sulfur hexafluoride amount
The Administrator shall determine the amounts of hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride, measured in units of carbon dioxide equivalents, that will be deemed to be emitted for purposes of this Act.
Compliance
In general
Source of tradeable allowances used
A covered entity may use a tradeable allowance to meet the requirements of this section without regard to whether the tradeable allowance was allocated to it under chapter 2 or acquired from another entity or the Climate Change Credit Corporation established under section 641.
Verification by Administrator
At various times during each year, the Administrator shall determine whether each covered entity has met the requirements of this section. In making that determination, the Administrator shall—
take into account the tradeable allowances submitted by the covered entity to the Administrator; and
retire the serial number assigned to each such tradeable allowance.
Alternative means of compliance
For the years after 2010, a covered entity may satisfy up to 15 percent of its total allowance submission requirement under this section by—
submitting tradeable allowances from another nation’s market in greenhouse gas emissions if—
the Secretary determines that the other nation’s system for trading in greenhouse gas emissions is complete, accurate, and transparent and reviews that determination at least once every 5 years;
the other nation has adopted enforceable limits on its greenhouse gas emissions which the tradeable allowances were issued to implement; and
the covered entity certifies that the tradeable allowance has been retired unused in the other nation’s market;
submitting a registered net increase in sequestration, as registered in the database, adjusted, if necessary, to comply with the accounting standards and methods established under section 651;
submitting a greenhouse gas emissions reduction (other than a registered net increase in sequestration) that was registered in the database by a person that is not a covered entity; or
submitting credits obtained from the Administrator under section 623.
Dedicated program for sequestration in agricultural soils
If a covered entity chooses to satisfy 15 percent of its total allowance submission requirements under the provisions of subsection (b), it shall satisfy up to 1.5 percent of its total allowance submission requirement by submitting registered net increases in sequestration in agricultural soils, as registered in the database, adjusted, if necessary, to comply with the accounting standards and methods established under section 651.
Borrowing against future reductions
In general
The Administrator shall establish a program under which a covered entity may—
receive a credit in the current calendar year for anticipated reductions in emissions in a future calendar year; and
use the credit in lieu of a tradeable allowance to meet the requirements of this Act for the current calendar year, subject to the limitation imposed by section 622(b).
Determination of tradeable allowance credits
The Administrator may make credits available under subsection (a) only for anticipated reductions in emissions that—
are attributable to the realization of capital investments in equipment, the construction, reconstruction, or acquisition of facilities, or the deployment of new technologies—
for which the covered entity has executed a binding contract and secured, or applied for, all necessary permits and operating or implementation authority;
that will not become operational within the current calendar year; and
that will become operational and begin to reduce emissions from the covered entity within 5 years after the year in which the credit is used; and
will be realized within 5 years after the year in which the credit is used.
Carrying cost
If a covered entity uses a credit under this section to meet the requirements of this Act for a calendar year (referred to as the use year), the tradeable allowance requirement for the year from which the credit was taken (referred to as the source year) shall be increased by an amount equal to—
10 percent for each credit borrowed from the source year; multiplied by
the number of years beginning after the use year and before the source year.
Maximum borrowing period
A credit from a year beginning more than 5 years after the current year may not be used to meet the requirements of this Act for the current year.
Failure to achieve reductions generating credit
If a covered entity that uses a credit under this section fails to achieve the anticipated reduction for which the credit was granted for the year from which the credit was taken, then—
the covered entity’s requirements under this Act for that year shall be increased by the amount of the credit, plus the amount determined under subsection (c);
any tradeable allowances submitted by the covered entity for that year shall be counted first against the increase in those requirements; and
the covered entity may not use credits under this section to meet the increased requirements.
Other uses of tradeable allowances
In general
Subject to subsection (b)(2), tradeable allowances may be sold, exchanged, purchased, retired, or used as provided in this section.
Limitations on intersector trading
Intersector Trading
Subject to paragraph (2), a covered entity in a covered sector may purchase or otherwise acquire tradeable allowances from a covered entity in another covered sector to satisfy the requirements of section 621.
Exception
A covered entity in the electricity sector may not purchase or otherwise acquire a tradeable allowance from, or sell a tradeable allowance to, an entity in a sector other than the electricity sector.
Climate change credit organization
The Climate Change Credit Corporation established under section 641 may sell tradeable allowances allocated to it under section 632(a)(2) to any covered entity or to any investor, broker, or dealer in such tradeable allowances. The Climate Change Credit Corporation shall use all proceeds from such sales in accordance with the provisions of section 642.
Banking of tradeable allowances
Notwithstanding the requirements of section 621, a covered entity that has more than a sufficient amount of tradeable allowances to satisfy the requirements of section 621, may refrain from submitting a tradeable allowance to satisfy the requirements in order to sell, exchange, or use the tradeable allowance in the future.
Exemption of source categories
In general
The Administrator may grant an exemption from the requirements of this Act to a source category if the Administrator determines, after public notice and comment, that it is not feasible to measure or estimate emissions from that source category, until such time as measurement or estimation becomes feasible.
Reduction of limitations
If the Administrator exempts a source category under subsection (a), the Administrator shall also reduce the total tradeable allowances under section 631(a)(1) by the amount of greenhouse gas emissions that the exempted source category emitted in calendar year 2000, as identified in the 2000 Inventory.
Limitation on exemption
The Administrator may not grant an exemption under subsection (a) to carbon dioxide produced from fossil fuel.
Establishment and allocation of tradeable allowances
Establishment of tradeable allowances
In general
The Administrator shall promulgate regulations to establish tradeable allowances, denominated in units of carbon dioxide equivalents, for calendar years beginning after 2009, equal to—
5896 million metric tons, measured in units of carbon dioxide equivalents, reduced by
the amount of emissions of greenhouse gases in calendar year 2000 from non-covered entities.
Serial numbers
The Administrator shall assign a unique serial number to each tradeable allowance established under subsection (a), and shall take such action as may be necessary to prevent counterfeiting of tradeable allowances.
Nature of tradeable allowances
A tradeable allowance is not a property right, and nothing in this title or any other provision of law limits the authority of the United States to terminate or limit a tradeable allowance.
Non-covered entity
In this section:
In general
The term non-covered entity means an entity that—
owns or controls a source of greenhouse gas emissions in the electric power, industrial, or commercial sector of the United States economy (as defined in the Inventory), refines or imports petroleum products for use in transportation, or produces or imports hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride; and
is not a covered entity.
Exception
Notwithstanding paragraph (1), an entity that is a covered entity for any calendar year beginning after 2009 shall not be considered to be a non-covered entity for purposes of subsection (a) only because it emitted, or its products would have emitted, 10,000 metric tons or less of greenhouse gas, measured in units of carbon dioxide equivalents, in the year 2000.
Determination of tradeable allowance allocations
In general
The Secretary shall determine—
the amount of tradeable allowances to be allocated to each covered sector of that sector’s allotments; and
the amount of tradeable allowances to be allocated to the Climate Change Credit Corporation established under section 641.
Allocation factors
In making the determination required by subsection (a), the Secretary shall consider—
the distributive effect of the allocations on household income and net worth of individuals;
the impact of the allocations on corporate income, taxes, and asset value;
the impact of the allocations on income levels of consumers and on their energy consumption;
the effects of the allocations in terms of economic efficiency;
the ability of covered entities to pass through compliance costs to their customers;
the degree to which the amount of allocations to the covered sectors should decrease over time; and
the need to maintain the international competitiveness of United States manufacturing and avoid the additional loss of United States manufacturing jobs.
Allocation recommendations and implementation
Before allocating or providing tradeable allowances under subsection (a) and within 24 months after the date of enactment of this Act, the Secretary shall submit the determinations under subsection (a) to the Senate Committee on Commerce, Science, and Transportation, the Senate Committee on Environment and Public Works, the House of Representatives Committee on Science, and the House of Representatives Committee on Energy and Commerce. The Secretary’s determinations under subsection (a)(1), including the allocations and provision of tradeable allowances pursuant to that determination, are deemed to be a major rule (as defined in section 804(2) of title 5, United States Code), and subject to the provisions of chapter 8 of that title.
Allocation of tradeable allowances
In general
Beginning with calendar year 2010 and after taking into account any initial allocations under section 635, the Administrator shall—
allocate to each covered sector that sector’s allotments determined by the Administrator under section 632 (adjusted for any such initial allocations and the allocation to the Climate Change Credit Corporation established under section 641); and
allocate to the Climate Change Credit Corporation established under section 641 the tradeable allowances allocable to that Corporation.
Intrasectorial allotments
The Administrator shall, by regulation, establish a process for the allocation of tradeable allowances under this section, without cost to covered entities (except with respect to new entrants as provided in subsection (g)), that will—
encourage investments that increase the efficiency of the processes that produce greenhouse gas emissions;
minimize the costs to the Government of allocating the tradeable allowances;
not penalize a covered entity for emissions reductions made before 2010 and registered with the database; and
provide for the allocation and sale of tradeable allowances to new entrants in accordance with subsection (g).
Point source allocation
The Administrator shall allocate the tradeable allowances for the electricity generation, industrial, and commercial sectors to the entities owning or controlling the point sources of greenhouse gas emissions within that sector.
Hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride
The Administrator shall allocate the tradeable allowances for producers or importers of hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride to such producers or importers.
Special rule for allocation within the Transportation sector
The Administrator shall allocate the tradeable allowances for the transportation sector to petroleum refiners or importers that produce or import petroleum products that will be used as fuel for transportation.
Allocations to rural electric cooperatives
In general
The Administrator shall make the allocations described in paragraph (2) each year at no cost. The allocations shall be offset from the allowances allocated to the Climate Change Credit Corporation.
Rural electric cooperatives
For each electric generating unit that is owned or operated by a rural electric cooperative, the Administrator shall allocate allowances in an amount equal to the greenhouse gas emissions of each such unit in 2000, plus an amount equal to the average emissions growth expected for all such units.
New entrants
Allocation
Of the tradeable allowances allocated under this section to a covered sector for a calendar year, the percentage of such allowances allocated to new entrants into the sector—
shall be 5 percent for calendar year 2010; and
shall be increased by 0.5 percent for 2013 and each succeeding calendar year, except that such total percentage shall not exceed 10 percent.
Auctions
For calendar year 2010 and each subsequent calendar year, the Administrator shall conduct an auction for the purpose of selling to new entrants in each covered sector the tradeable allowances allocated for such purpose under paragraph (1).
Ensuring target adequacy
In general
Beginning 2 years after the date of enactment of this Act, the Under Secretary of Commerce for Oceans and Atmosphere shall review the allowances established by section 631 no less frequently than biennially—
to re-evaluate the levels established by that section, after taking into account the best available science and the most currently available data, and
to re-evaluate the environmental and public health impacts of specific concentration levels of greenhouse gases,
Review of 2010 levels
The Under Secretary shall specifically review in 2008 the level established under section 631(a)(1), and transmit a report on his reviews, together with any recommendations, including legislative recommendations, for modification of the levels, to the Senate Committee on Commerce, Science, and Transportation, the Senate Committee on Environment and Public Works, the House of Representatives Committee on Science, and the House of Representatives Committee on Energy and Commerce.
Initial allocations for early participation and accelerated participation
Before making any allocations under section 633, the Administrator shall allocate—
to any covered entity an amount of tradeable allowances equivalent to the amount of greenhouse gas emissions reductions registered by that covered entity in the national greenhouse gas database if—
the covered entity has requested to use the registered reduction in the year of allocation;
the reduction was registered prior to 2010; and
the Administrator retires the unique serial number assigned to the reduction under section 611(c)(3); and
to any covered entity that has entered into an accelerated participation agreement under section 636, such tradeable allowances as the Administrator has determined to be appropriate under that section.
Bonus for accelerated participation
In general
If a covered entity executes an agreement with the Administrator under which it agrees to reduce its level of greenhouse gas emissions to a level no greater than the level of its greenhouse gas emissions for calendar year 1990 by the year 2010, then, for the 6-year period beginning with calendar year 2010, the Administrator shall—
provide additional tradeable allowances to that entity when allocating allowances under section 634 in order to recognize the additional emissions reductions that will be required of the covered entity;
allow that entity to satisfy 20 percent of its requirements under section 621 by—
submitting tradeable allowances from another nation’s market in greenhouse gas emissions under the conditions described in section 622(b)(1);
submitting a registered net increase in sequestration, as registered in the National Greenhouse Gas Database established under section 611, and as adjusted by the appropriate sequestration discount rate established under section 651; or
submitting a greenhouse gas emission reduction (other than a registered net increase in sequestration) that was registered in the National Greenhouse Gas Database by a person that is not a covered entity.
Termination
An entity that executes an agreement described in subsection (a) may terminate the agreement at any time.
Failure to meet commitment
If an entity that executes an agreement described in subsection (a) fails to achieve the level of emissions to which it committed by calendar year 2010—
its requirements under section 621 shall be increased by the amount of any tradeable allowances provided to it under subsection (a)(1); and
any tradeable allowances submitted thereafter shall be counted first against the increase in those requirements.
Climate Change Credit Corporation
Establishment
In general
The Climate Change Credit Corporation is established as a nonprofit corporation without stock. The Corporation shall not be considered to be an agency or establishment of the United States Government.
Applicable laws
The Corporation shall be subject to the provisions of this title and, to the extent consistent with this title, to the District of Columbia Business Corporation Act.
Board of directors
The Corporation shall have a board of directors of 5 individuals who are citizens of the United States, of whom 1 shall be elected annually by the board to serve as chairman. No more than 3 members of the board serving at any time may be affiliated with the same political party. The members of the board shall be appointed by the President of the United States, by and with the advice and consent of the Senate and shall serve for terms of 5 years.
Purposes and functions
Trading
The Corporation—
shall receive and manage tradeable allowances allocated to it under section 633(a)(2); and
shall buy and sell tradeable allowances, whether allocated to it under that section or obtained by purchase, trade, or donation from other entities; but
may not retire tradeable allowances unused.
Use of tradeable allowances and proceeds
In general
The Corporation shall use the tradeable allowances, and proceeds derived from its trading activities in tradeable allowances, to reduce costs borne by consumers as a result of the greenhouse gas reduction requirements of this Act. The reductions—
may be obtained by buy-down, subsidy, negotiation of discounts, consumer rebates, or otherwise;
shall be, as nearly as possible, equitably distributed across all regions of the United States; and
may include arrangements for preferential treatment to consumers who can least afford any such increased costs.
Transition assistance to dislocated workers and communities
The Corporation shall allocate a percentage of the proceeds derived from its trading activities in tradeable allowances to provide transition assistance to dislocated workers and communities. Transition assistance may take the form of—
grants to employers, employer associations, and representatives of employees—
to provide training, adjustment assistance, and employment services to dislocated workers; and
to make income-maintenance and needs-related payments to dislocated workers; and
grants to State and local governments to assist communities in attracting new employers or providing essential local government services.
Phase-out of transition assistance
The percentage allocated by the Corporation under paragraph (2)—
shall be 20 percent for 2010;
shall be reduced by 2 percentage points each year thereafter; and
may not be reduced below zero.
Technology deployment programs
The Corporation shall establish and carry out a program, through direct grants, revolving loan programs, or other financial measures, to provide support for the deployment of technology to assist in compliance with this Act by distributing the proceeds from no less than 10 percent of the total allowances allocated to it. The support shall include the following:
Coal gasification combined-cycle and geological carbon storage program
The Corporation shall establish and carry out a program, through direct grants, to provide incentives for the repowering of existing facilities or construction of new facilities producing electricity or other products from coal gasification combined-cycle plants that capture and geologically store at least 90 percent of the carbon dioxide produced at the facility in accordance with requirements established by the Administrator to ensure the permanence of the storage and that such storage will not cause or contribute to significant adverse effects on public health or the environment. The Corporation shall ensure that no less than 20 percent of the funding under this program is distributed to rural electric cooperatives.
Agricultural programs
The Corporation shall establish and carry out a program, through direct grants, revolving loan programs, or other financial measures, to provide incentives for greenhouse gas emissions reductions or net increases in greenhouse gas sequestration on agricultural lands. The program shall include incentives for—
production of wind energy on agricultural lands;
agricultural management practices that achieve verified, incremental increases in net carbon sequestration, in accordance with the requirements established by the Administrator under section 651; and
production of renewable fuels that, after consideration of the energy needed to produce such fuels, result in a net reduction in greenhouse gas emissions.
Coordination with other benefits
The Corporation shall not provide assistance under this section to any person if such person has received assistance under section 212 or 731.
Sequestration accounting; penalties
Penalties
Any covered entity that fails to meet the requirements of section 621 for a year shall be liable for a civil penalty, payable to the Administrator, equal to thrice the market value (determined as of the last day of the year at issue) of the tradeable allowances that would be necessary for that covered entity to meet those requirements on the date of the emission that resulted in the violation.
Sequestration accounting
Sequestration accounting
If a covered entity uses a registered net increase in sequestration to satisfy the requirements of section 621 for any year, that covered entity shall submit information to the Administrator every 5 years thereafter sufficient to allow the Administrator to determine, using the methods and standards created under section 614, whether that net increase in sequestration still exists. Unless the Administrator determines that the net increase in sequestration continues to exist, the covered entity shall offset any loss of sequestration by submitting additional tradeable allowances of equivalent amount in the calender year following that determination.
Regulations required
The Secretary, acting through the Under Secretary of Commerce for Science and Technology, in coordination with the Secretary of Agriculture, the Secretary of Energy, and the Administrator, shall issue regulations establishing the sequestration accounting rules for all classes of sequestration projects.
Criteria for regulations
In issuing regulations under this section, the Secretary shall use the following criteria:
If the range of possible amounts of net increase in sequestration for a particular class of sequestration project is not more than 10 percent of the median of that range, the amount of sequestration awarded shall be equal to the median value of that range.
If the range of possible amounts of net increase in sequestration for a particular class of sequestration project is more than 10 percent of the median of that range, the amount of sequestration awarded shall be equal to the fifth percentile of that range.
The regulations shall include procedures for accounting for potential leakage from sequestration projects and for ensuring that any registered increase in sequestration is in addition to that which would have occurred if this Act had not been enacted.
Updates
The Secretary shall update the sequestration accounting rules for every class of sequestration project at least once every 5 years.
Energy Independence
Renewable fuels standard
Renewable fuels standard
In general
Section 211 of the Clean Air Act (42 U.S.C. 7545) is amended—
by redesignating subsection (o) as subsection (q); and
by inserting after subsection (n) the following:
Renewable fuel program
Definitions
In this subsection:
Cellulosic biomass ethanol
The term cellulosic biomass ethanol means ethanol derived from any nonhazardous lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, including—
dedicated energy crops and trees;
the following forest-related resources—
harvesting residue
pre-commercial thinnings;
slash; and
bush;
plants;
grasses;
agricultural residues;
fibers;
animal wastes and other waste materials; and
municipal solid waste.
Renewable fuel
In general
The term renewable fuel means motor vehicle fuel that—
is produced from grain, starch, oilseeds, or other biomass; or
is natural gas produced from a biogas source, including a landfill, sewage waste treatment plant, feedlot, or other place where decaying organic material is found; and
is used to replace or reduce the quantity of fossil fuel present in a fuel mixture used to operate a motor vehicle.
Inclusion
The term renewable fuel includes cellulosic biomass ethanol and biodiesel (as defined in section 312(f) of the Energy Policy Act of 1992).
Small refinery
The term small refinery means a refinery for which average aggregate daily crude oil throughput for the calendar year (as determined by dividing the aggregate throughput for the calendar year by the number of days in the calendar year) does not exceed 75,000 barrels.
Renewable fuel program
In general
Not later than the beginning of calendar year 2007, the Administrator shall promulgate regulations ensuring that gasoline sold or dispensed to consumers in the United States, on an annual average basis, contains the applicable volume of renewable fuel as specified in subparagraph (B). Regardless of the date of promulgation, such regulations shall contain compliance provisions for refiners, blenders, and importers, as appropriate, to ensure that the requirements of this subsection are met, but shall not restrict where renewables can be used, or impose any per-gallon obligation for the use of renewables. If the Administrator does not promulgate such regulations, the applicable percentage, on a volume percentage of gasoline basis, shall be 1.62 in 2007.
Applicable volume
Calendar years 2007 through 2013
For the purpose of subparagraph (A), the applicable volume for any of calendar years 2007 through 2013 shall be determined in accordance with the following table:
| Calendar year: | (In billions of gallons) |
| 2007 | 4.0 |
| 2008 | 4.5 |
| 2009 | 5.1 |
| 2010 | 5.7 |
| 2011 | 6.4 |
| 2012 | 7.2 |
| 2013 | 8.1 |
Calendar year 2014 and thereafter
For the purpose of subparagraph (A), the applicable volume for calendar year 2014 and each calendar year thereafter shall be equal to the product obtained by multiplying—
the number of gallons of gasoline that the Administrator estimates will be sold or introduced into commerce in the calendar year; and
the ratio that—
8.1 billion gallons of renewable fuels; bears to
the number of gallons of gasoline sold or introduced into commerce in calendar year 2013.
Cellulosic biomass ethanol
For the purpose of subparagraph (A), the applicable volume shall include, as a percentage of the total applicable volume, cellulosic biomass ethanol as follows:
For calendar year 2007, 1.0 percent.
For calendar year 2008, 1.5 percent.
For calendar year 2009, 2.0 percent.
For calendar year 2010, 2.5 percent.
For calendar year 2011, 3.0 percent.
For calendar year 2012, 3.5 percent.
For calendar year 2013 and each subsequent calendar year, 4.0 percent.
Applicable percentages
Not later than October 31 of each calendar year, through 2012, the Administrator of the Energy Information Administration shall provide the Administrator an estimate of the volumes of gasoline sales in the United States for the coming calendar year. Based on such estimates, the Administrator shall by November 30 of each calendar year, through 2012, determine and publish in the Federal Register, the renewable fuel obligation, on a volume percentage of gasoline basis, applicable to refiners, blenders, distributors and importers, as appropriate, for the coming calendar year, to ensure that the requirements of paragraph (2) are met. For each calendar year, the Administrator shall establish a single applicable percentage that applies to all parties, and make provision to avoid redundant obligations. In determining the applicable percentages, the Administrator shall make adjustments to account for the use of renewable fuels by exempt small refineries during the previous year.
Cellulosic biomass ethanol
For the purpose of paragraph (2), 1 gallon of cellulosic biomass ethanol shall be considered to be the equivalent of 3.0 gallons of renewable fuel.
Credit program
In general
The regulations promulgated to carry out this subsection shall provide for the generation of an appropriate amount of credits by any person that refines, blends, or imports gasoline that contains a quantity of renewable fuel that is greater than the quantity required under paragraph (2). Such regulations shall provide for the generation of an appropriate amount of credits for biodiesel fuel. If a small refinery notifies the Administrator that it waives the exemption provided by this Act, the regulations shall provide for the generation of credits by the small refinery beginning in the year following such notification.
Use of credits
A person that generates credits under subparagraph (A) may use the credits, or transfer all or a portion of the credits to another person, for the purpose of complying with paragraph (2).
Life of credits
A credit generated under this paragraph shall be valid to show compliance—
in the calendar year in which the credit was generated or the next calendar year, or
in the calendar year in which the credit was generated or the next two consecutive calendar years if the Administrator promulgates regulations under paragraph (6).
Inability to purchase sufficient credits
The regulations promulgated to carry out this subsection shall include provisions allowing any person that is unable to generate or purchase sufficient credits to meet the requirements under paragraph (2) to carry forward a renewables deficit provided that, in the calendar year following the year in which the renewables deficit is created, such person shall achieve compliance with the renewables requirement under paragraph (2), and shall generate or purchase additional renewables credits to offset the renewables deficit of the previous year.
Seasonal variations in renewable fuel use
Study
For each of calendar years 2007 through 2013, the Administrator of the Energy Information Administration shall conduct a study of renewable fuels blending to determine whether there are excessive seasonal variations in the use of renewable fuels.
Regulation of excessive seasonal variations
If, for any calendar year, the Administrator of the Energy Information Administration, based on the study under subparagraph (A), makes the determinations specified in subparagraph (C), the Administrator shall promulgate regulations to ensure that 35 percent or more of the quantity of renewable fuels necessary to meet the requirement of paragraph (2) is used during each of the periods specified in subparagraph (D) of each subsequent calendar year.
Determinations
The determinations referred to in subparagraph (B) are that—
less than 35 percent of the quantity of renewable fuels necessary to meet the requirement of paragraph (2) has been used during one of the periods specified in subparagraph (D) of the calendar year; and
a pattern of excessive seasonal variation described in clause (i) will continue in subsequent calendar years.
Periods
The two periods referred to in this paragraph are—
April through September; and
January through March and October through December.
Exclusions
Renewable fuels blended or consumed in 2007 in a State which has received a waiver under section 209(b) shall not be included in the study in subparagraph (A).
Waivers
In general
The Administrator, in consultation with the Secretary of Agriculture and the Secretary of Energy, may waive the requirement of paragraph (2) in whole or in part on petition by one or more States by reducing the national quantity of renewable fuel required under this subsection—
based on a determination by the Administrator, after public notice and opportunity for comment, that implementation of the requirement would severely harm the economy or environment of a State, a region, or the United States; or
based on a determination by the Administrator, after public notice and opportunity for comment, that there is an inadequate domestic supply or distribution capacity to meet the requirement.
Petitions for waivers
The Administrator, in consultation with the Secretary of Agriculture and the Secretary of Energy, shall approve or disapprove a State petition for a waiver of the requirement of paragraph (2) within 90 days after the date on which the petition is received by the Administrator.
Termination of waivers
A waiver granted under subparagraph (A) shall terminate after 1 year, but may be renewed by the Administrator after consultation with the Secretary of Agriculture and the Secretary of Energy.
Study and waiver for initial year of program
Not later than 180 days after the date of the enactment of this subsection, the Secretary of Energy (in this paragraph referred to as the Secretary
) shall complete for the Administrator a study assessing whether the renewable fuels requirement under paragraph (2) will likely result in significant adverse consumer impacts in 2007, on a national, regional, or State basis. Such study shall evaluate renewable fuel supplies and prices, blendstock supplies, and supply and distribution system capabilities. Based on such study, the Secretary shall make specific recommendations to the Administrator regarding waiver of the requirements of paragraph (2), in whole or in part, to avoid any such adverse impacts. Within 270 days after the date of the enactment of this subsection, the Administrator shall, consistent with the recommendations of the Secretary waive, in whole or in part, the renewable fuels requirement under paragraph (2) by reducing the national quantity of renewable fuel required under this subsection in 2007. This provision shall not be interpreted as limiting the Administrator’s authority to waive the requirements of paragraph (2) in whole, or in part, under paragraph (7), pertaining to waivers.
Small refineries
In general
The requirement of paragraph (2) shall not apply to small refineries until January 1, 2011. Not later than December 31, 2009, the Secretary of Energy shall complete for the Administrator a study to determine whether the requirement of paragraph (2) would impose a disproportionate economic hardship on small refineries. For any small refinery that the Secretary of Energy determines would experience a disproportionate economic hardship, the Administrator shall extend the small refinery exemption for such small refinery for no less than two additional years.
Economic hardship
Extension of exemption
A small refinery may at any time petition the Administrator for an extension of the exemption from the requirement of paragraph (2) for the reason of disproportionate economic hardship. In evaluating a hardship petition, the Administrator, in consultation with the Secretary of Energy, shall consider the findings of the study under subparagraph (A) in addition to other economic factors.
Deadline for action on petitions
The Administrator shall act on any petition submitted by a small refinery for a hardship exemption not later than 90 days after the receipt of the petition.
Credit program
If a small refinery notifies the Administrator that it waives the exemption provided by this paragraph, the regulations shall provide for the generation of credits by the small refinery beginning in the year following such notification.
Opt-in for small refiners
A small refinery shall be subject to the requirements of this subsection if it notifies the Administrator that it waives the exemption under subparagraph (A).
.
Penalties and enforcement
Section 211(d) of the Clean Air Act (42 U.S.C. 7545(d)) is amended—
in paragraph (1)—
in the first sentence, by striking or (n)
each place it appears and inserting (n), or (o)
; and
in the second sentence, by striking or (m)
and inserting (m), or (o)
; and
in the first sentence of paragraph (2), by striking and (n)
each place it appears and inserting (n), and (o)
.
Exclusion from ethanol waiver
Section 211(h) of the Clean Air Act (42 U.S.C. 7545(h)) is amended—
by redesignating paragraph (5) as paragraph (6); and
by inserting after paragraph (4) the following:
Exclusion from ethanol waiver
Promulgation of regulations
Upon notification, accompanied by supporting documentation, from the Governor of a State that the Reid vapor pressure limitation established by paragraph (4) will increase emissions that contribute to air pollution in any area in the State, the Administrator shall, by regulation, apply, in lieu of the Reid vapor pressure limitation established by paragraph (4), the Reid vapor pressure limitation established by paragraph (1) to all fuel blends containing gasoline and 10 percent denatured anhydrous ethanol that are sold, offered for sale, dispensed, supplied, offered for supply, transported or introduced into commerce in the area during the high ozone season.
Deadline for promulgation
The Administrator shall promulgate regulations under subparagraph (A) not later than 90 days after the date of receipt of a notification from a Governor under that subparagraph.
Effective date
In general
With respect to an area in a State for which the Governor submits a notification under subparagraph (A), the regulations under that subparagraph shall take effect on the later of—
the first day of the first high ozone season for the area that begins after the date of receipt of the notification; or
1 year after the date of receipt of the notification.
Extension of effective date based on determination of insufficient supply
In general
If, after receipt of a notification with respect to an area from a Governor of a State under subparagraph (A), the Administrator determines, on the Administrator’s own motion or on petition of any person and after consultation with the Secretary of Energy, that the promulgation of regulations described in subparagraph (A) would result in an insufficient supply of gasoline in the State, the Administrator, by regulation—
shall extend the effective date of the regulations under clause (i) with respect to the area for not more than 1 year; and
may renew the extension under item (aa) for two additional periods, each of which shall not exceed 1 year.
Deadline for action on petitions
The Administrator shall act on any petition submitted under subclause (I) not later than 180 days after the date of receipt of the petition.
.
Survey of renewable fuel market
Survey and report
Not later than December 1, 2008, and annually thereafter, the Administrator shall—
conduct, with respect to each conventional gasoline use area and each reformulated gasoline use area in each State, a survey to determine the market shares of—
conventional gasoline containing ethanol;
reformulated gasoline containing ethanol;
conventional gasoline containing renewable fuel; and
reformulated gasoline containing renewable fuel; and
submit to the Congress, and make publicly available, a report on the results of the survey under subparagraph (A).
Recordkeeping and reporting requirements
The Administrator may require any refiner, blender, or importer to keep such records and make such reports as are necessary to ensure that the survey conducted under paragraph (1) is accurate. The Administrator shall rely, to the extent practicable, on existing reporting and recordkeeping requirements to avoid duplicative requirements.
Applicable law
Activities carried out under this subsection shall be conducted in a manner designed to protect confidentiality of individual responses.
Elimination of oxygen content requirement for reformulated gasoline
Elimination
In general
Section 211(k) of the clean air act (42 U.S.C. 7545(k)) is amended—
In paragraph (2)—
in the second sentence of subparagraph (A), by striking (including the oxygen content requirement contained in subparagraph (B))
;
by striking subparagraph (B); and
by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively;
in paragraph (3)(A), by striking clause (v); and
In paragraph (7)—
In subparagraph (A)
by striking clause (i); and
by redesignating clauses (ii) and (iii) as clauses (i) and (ii), respectively; and
in subparagraph (C)—
by striking clause (ii); and
by redesignating clause (iii) as clause (ii).
Effective date
The amendments made by paragraph (1) take effect on the date that is 1 year after the date of enactment of this Act, except that the amendments shall take effect upon that date of enactment in any State that has received a waiver under section 209(b) of the Clean Air Act (42 U.S.C. 7543(b)).
Maintenance of toxic air pollutant emission reductions
Section 211(k)(1) of the Clean Air Act (42 U.S.C. 7545(k)(1)) is amended—
by striking Within 1 year after the enactment of the Clean Air Act Amendments of 1990,
and inserting the following:
In general
Not later than November 15, 1991,
; and
by adding at the end the following:
Maintenance of toxic air pollutant emissions reductions from reformulated gasoline
Definition of PADD
In this subparagraph, the term PADD means a Petroleum Administration for Defense District
Regulations regarding emissions of toxic air pollutants
Not later than 270 days after the date of enactment of this subparagraph, the Administrator shall establish, for each refinery or importer, standards for toxic air pollutants from use of the reformulated gasoline produced or distributed by the refinery or importer that maintain the reduction of the average annual aggregate emissions of toxic air pollutants for reformulated gasoline produced or distributed by the refinery or importer during calendar years 2002 and 2003, determined on the basis of data collected by the Administrator with respect to the refinery or importer.
Standards applicable to specific refineries or importers
Applicability of standards
For any calendar year, the standards applicable to a refinery or importer under clause (ii) shall apply to the quantity of gasoline produced or distributed by the refinery or importer in the calendar year only to the extent that the quantity is less than or equal to the average annual quantity of reformulated gasoline produced or distributed by the refinery or importer during calendar years 2002 and 2003.
Applicability of other standards
For any calendar year, the quantity of gasoline produced or distributed by a refinery or importer that is in excess of the quantity subject to subclause (I) shall be subject to standards for toxic air pollutants promulgated under subparagraph (A) and paragraph (3)(B).
Credit program
The Administrator shall provide for the granting and use of credits for emissions of toxic air pollutants in the same manner as provided in paragraph (7).
Regional protection of toxics reduction baselines
In general
Not later than 60 days after the date of enactment of this subparagraph, and not later than April 1 of each calendar year that begins after that date of enactment, the Administrator shall publish in the Federal Register a report that specifies, with respect to the previous calendar year—
the quantity of reformulated gasoline produced that is in excess of the average annual quantity of reformulated gasoline produced in 2002 and 2003; and
the reduction of the average annual aggregate emissions of toxic air pollutants in each PADD, based on retail survey data or data from other appropriate sources.
Effect of failure to maintain aggregate toxics reductions
If, in any calendar year, the reduction of the average annual aggregate emissions of toxic air pollutants in a PADD fails to meet or exceed the reduction of the average annual aggregate emissions of toxic air pollutants in the PADD in calendar years 2002 and 2003, the Administrator, not later than 90 days after the date of publication of the report for the calendar year under subclause (I), shall—
identify, to the maximum extent practicable, the reasons for the failure, including the sources, volumes, and characteristics of reformulated gasoline that contributed to the failure; and
promulgate revisions to the regulations promulgated under clause (ii), to take effect not earlier than 180 days but not later than 270 days after the date of promulgation, to provide that, notwithstanding clause (iii)(II), all reformulated gasoline produced or distributed at each refinery or importer shall meet the standards applicable under clause (ii) not later than April 1 of the year following the report under this subclause and for subsequent years.
Regulations to control hazardous air pollutants from motor vehicles and motor vehicle fuels
Not later than July 1, 2006, the Administrator shall promulgate final regulations to control hazardous air pollutants from motor vehicles and motor vehicle fuels, as provided for in section 80.1045 of title 40, Code of Federal Regulations (as in effect on the date of enactment of this subparagraph).
.
Consolidation in reformulated gasoline regulations
Not later than 180 days after the date of enactment of this Act, the Administrator of the Environmental Protection Agency shall revise the reformulated gasoline regulations under subpart D of part 80 of title 40, Code of Federal Regulations (or any successor regulations), to consolidate the regulations applicable to VOC–Control Regions 1 and 2 under section 80.41 of that title by eliminating the less stringent requirements applicable to gasoline designated for VOC–Control Region 2 and instead applying the more stringent requirements applicable to gasoline designated for VOC–Control Region 1.
Authority of Administrator
Nothing in this section affects or prejudices any legal claim or action with respect to regulations promulgated by the Administrator of the Environmental Protection Agency before the date of enactment of this act regarding—
emissions of toxic air pollutants from motor vehicles; or
the adjustment of standards applicable to a specific refinery or importer made under the prior regulations.
Determination regarding a State petition
Section 211(k) of the Clean Air Act (42 U.S.C. 7545(k)) is amended by inserting after paragraph (10) the following:
Determination regarding a State petition
In general
Notwithstanding any other provision of this section, not later than 30 days after the date of enactment of this paragraph, the Administrator shall determine the adequacy of any petition received from a Governor of a State to exempt gasoline sold in that State from the requirements under paragraph (2)(B).
Approval
If a determination under subparagraph (A) is not made by the date that is 30 days after the date of enactment of this paragraph, the petition shall be considered to be approved.
.
Public health and environmental impacts of fuels and fuel additives
Section 211(b) of the Clean Air Act (42 U.S.C. 7545(b)) is amended—
in paragraph (2)—
by striking may also
and inserting shall, on a regular basis,
; and
by striking subparagraph (A) and inserting the following:
to conduct tests to determine potential public health and environmental effects of the fuel or additive (including carcinogenic, teratogenic, or mutagenic effects); and
; and
by adding at the end the following:
Study on certain fuel additives and blendstocks
In general
Not later than 2 years after the date of enactment of this paragraph, the Administrator shall—
conduct a study on the effects on public health, air quality, and water resources of increased use of, and the feasibility of using as substitutes for methyl tertiary butyl ether in gasoline
ethyl tertiary butyl ether;
tertiary amyl methyl ether;
di-isopropyl ether;
tertiary butyl alcohol;
other ethers and heavy alcohols, as determined by the Administrator;
ethanol;
iso-octane; and
alkylates;
conduct a study on the effects on public health, air quality, and water resources of the adjustment for ethanol-blended reformulated gasoline to the VOC performance requirements otherwise applicable under sections 211(k)(1) and 211(k)(3); and
submit to the Committee on Environment and Public Works of the Senate and the Committee on Energy and Commerce of the House of Representatives a report describing the results of these studies.
Contracts for study
In carrying out this paragraph, the Administrator may enter into one or more contracts with nongovernmental entities including but not limited to National Energy Laboratories and institutions of higher education (as defined in section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001)).
.
Analyses of motor vehicle fuel changes
Section 211 of the Clean Air Act (42 U.S.C. 7545) is amended by inserting after subsection (o) (as added by section 101(a)(2)) the following:
Analyses of motor vehicle fuel changes and emissions model
Anti-backsliding analysis
Draft analysis
Not later than 4 years after the date of enactment of this subsection, the Administrator shall publish for public comment a draft analysis of the changes in emissions of air pollutants and air quality due to the use of motor vehicle fuel and fuel additives resulting from implementation of the amendments made by the New Apollo Energy Act of 2005.
Final analysis
After providing a reasonable opportunity for comment, but not later than 5 years after the date of enactment of this paragraph, the Administrator shall publish the analysis in final form.
Emissions model
For the purposes of this subsection, as soon as the necessary data are available, the Administrator shall develop and finalize an emissions model that reasonably reflects the effects of gasoline characteristics or components on emissions from vehicles in the motor vehicle fleet during calendar year 2005.
.
Additional Opt-in areas under reformulated gasoline program
Section 211(k)(6) of the Clean Air Act (42 U.S.C. 7545(k)(6)) is amended—
by striking (6) Opt-in areas.—(A) Upon
and inserting the following:
Opt-in areas
Classified areas
In general
Upon
;
in subparagraph (B), by striking (B) If
and inserting the following:
Effect of insufficient domestic capacity to produce reformulated gasoline
If
;
in subparagraph (A)(ii) (as redesignated by paragraph (2))—
in the first sentence, by striking subparagraph (A)
and inserting clause (i)
; and
in the second sentence, by striking this paragraph
and inserting this subparagraph
; and
by adding at the end the following:
Ozone transport Region
Application of prohibition
In general
In addition to the provisions of subparagraph (A), upon the application of the Governor of a State in the ozone transport region established by section 184(a), the Administrator, not later than 180 days after the date of receipt of the application, shall apply the prohibition specified in paragraph (5) to any area in the State (other than an area classified as a marginal, moderate, serious, or severe ozone nonattainment area under subpart 2 of part D of title I) unless the Administrator determines under clause (iii) that there is insufficient capacity to supply reformulated gasoline.
Publication of application
As soon as practicable after the date of receipt of an application under subclause (I), the Administrator shall publish the application in the Federal Register.
Period of applicability
Under clause (i), the prohibition specified in paragraph (5) shall apply in a State—
commencing as soon as practicable but not later than 2 years after the date of approval by the Administrator of the application of the Governor of the State; and
ending not earlier than 4 years after the commencement date determined under subclause (I).
Extension of commencement date based on insufficient capacity
In general
If, after receipt of an application from a Governor of a State under clause (i), the Administrator determines, on the Administrator’s own motion or on petition of any person, after consultation with the Secretary of Energy, that there is insufficient capacity to supply reformulated gasoline, the Administrator, by regulation—
shall extend the commencement date with respect to the State under clause (ii)(I) for not more than 1 year; and
may renew the extension under item (aa) for 2 additional periods, each of which shall not exceed 1 year.
Deadline for action on petitions
The Administrator shall act on any petition submitted under subclause (I) not later than 180 days after the date of receipt of the petition.
.
Federal enforcement of State fuels requirements
Section 211(c)(4)(C) of the Clean Air Act (42 U.S.C. 7545(c)(4)(C)) is amended—
by striking (C) A State
and inserting the following:
Authority of State to control fuels and fuel additives for reasons of necessity
In general
A State
; and
by adding at the end the following:
Enforcement by the Administrator
In any case in which a State prescribes and enforces a control or prohibition under clause (i), the Administrator, at the request of the State, shall enforce the control or prohibition as if the control or prohibition had been adopted under the other provisions of this section.
.
Fuel system requirements harmonization study
Study
In general
The Administrator of the Environmental Protection Agency and the Secretary of Energy shall jointly conduct a study of Federal, State, and local requirements concerning motor vehicle fuels, including—
requirements relating to reformulated gasoline, volatility (measured in Reid vapor pressure), oxygenated fuel, and diesel fuel; and
other requirements that vary from State to State, region to region, or locality to locality.
Required elements
The study shall assess—
the effect of the variety of requirements described in paragraph (1) on the supply, quality, and price of motor vehicle fuels available to the consumer;
the effect of the requirements described in paragraph (1) on achievement of—
national, regional, and local air quality standards and goals; and
related environmental and public health protection standards and goals;
the effect of Federal, State, and local motor vehicle fuel regulations, including multiple motor vehicle fuel requirements, on—
domestic refineries;
the fuel distribution system; and
industry investment in new capacity;
the effect of the requirements described in paragraph (1) on emissions from vehicles, refineries, and fuel handling facilities;
the feasibility of developing national or regional motor vehicle fuel slates for the 48 contiguous States that, while protecting and improving air quality at the national, regional, and local levels, could—
enhance flexibility in the fuel distribution infrastructure and improve fuel fungibility;
reduce price volatility and costs to consumers and producers;
provide increased liquidity to the gasoline market; and
enhance fuel quality, consistency, and supply; and
the feasibility of providing incentives, and the need for the development of national standards necessary, to promote cleaner burning motor vehicle fuel.
Report
In general
Not later than June 1, 2006, the Administrator of the Environmental Protection Agency and the Secretary of Energy shall submit to Congress a report on the results of the study conducted under subsection (a).
Recommendations
In general
The report shall contain recommendations for legislative and administrative actions that may be taken—
to improve air quality;
to reduce costs to consumers and producers; and
to increase supply liquidity.
Required considerations
The recommendations under subparagraph (A) shall take into account the need to provide advance notice of required modifications to refinery and fuel distribution systems in order to ensure an adequate supply of motor vehicle fuel in all States.
Consultation
In developing the report, the Administrator of the Environmental Protection Agency and the Secretary of Energy shall consult with—
the Governors of the States;
automobile manufacturers;
motor vehicle fuel producers and distributors; and
the public.
Report on renewable motor fuel
Not later than January 1, 2007, the Secretary of Energy and the Secretary of Agriculture shall jointly prepare and submit to Congress a report containing recommendations for achieving, by January 1, 2025, at least 25 percent renewable fuel content (calculated on an average annual basis) for all gasoline sold or introduced into commerce in the United States.
Renewable portfolio standard
Renewable portfolio standard
In General
Title VI of the Public Utility Regulatory Policies Act of 1978 is amended by adding at the end the following:
Federal renewable portfolio standard
Minimum renewable generation requirement
For each calendar year beginning in calendar year 2007, each retail electric supplier shall submit to the Secretary, not later than April 1 of the following calendar year, renewable energy credits in an amount equal to the required annual percentage specified in subsection (b).
Required annual percentage
For calendar years 2007 through 2022, the required annual percentage of the retail electric supplier’s base amount that shall be generated from renewable energy resources shall be the percentage specified in the following table:
| Calendar years | Required annual percentage |
| 2007 through 2008 | 1.0 |
| 2009 through 2010 | 2.2 |
| 2011 through 2012 | 3.4 |
| 2013 through 2014 | 4.6 |
| 2015 through 2016 | 5.8 |
| 2017 through 2018 | 7.0 |
| 2019 through 2020 | 8.5 |
| 2021 through 2022 | 10.0 |
Not later than January 1, 2017, the Secretary may, by rule, establish required annual percentages in amounts not less than 10.0 for calendar years 2022 through 2030.
Submission of credits
A retail electric supplier may satisfy the requirements of subsection (a) through the submission of renewable energy credits—
issued to the retail electric supplier under subsection (d);
obtained by purchase or exchange under subsection (e); or
borrowed under subsection (f).
A credit may be counted toward compliance with subsection (a) only once.
Issuance of credits
The Secretary shall establish, not later than 1 year after the date of enactment of this section, a program to issue, monitor the sale or exchange of, and track renewable energy credits.
Under the program, an entity that generates electric energy through the use of a renewable energy resource may apply to the Secretary for the issuance of renewable energy credits. The application shall indicate—
the type of renewable energy resource used to produce the electricity,
the location where the electric energy was produced, and
any other information the Secretary determines appropriate.
Except as provided in paragraphs (B), (C), and (D), the Secretary shall issue to an entity one renewable energy credit for each kilowatt-hour of electric energy the entity generates after the date of enactment of this section and in each subsequent calendar year through the use of a renewable energy resource at an eligible facility.
For incremental hydropower, the credits shall be calculated based on the expected increase in average annual generation resulting from the efficiency improvements or capacity additions. The number of credits shall be calculated using the same water flow information used to determine a historic average annual generation baseline for the hydroelectric facility and certified by the Secretary or the Federal Energy Regulatory Commission. The calculation of the credits for incremental hydropower shall not be based on any operational changes at the hydroelectric facility not directly associated with the efficiency improvements or capacity additions.
The Secretary shall issue two renewable energy credits for each kilowatt-hour of electric energy generated and supplied to the grid in that calendar year through the use of a renewable energy resource at an eligible facility located on Indian land. For purposes of this paragraph, renewable energy generated by biomass cofired with other fuels is eligible for two credits only if the biomass was grown on the land eligible under this paragraph.
For renewable energy resources produced from a generation offset, the Secretary shall issue two renewable energy credits for each kilowatt-hour generated.
To be eligible for a renewable energy credit, the unit of electric energy generated through the use of a renewable energy resource may be sold or may be used by the generator. If both a renewable energy resource and a nonrenewable energy resource are used to generate the electric energy, the Secretary shall issue credits based on the proportion of the renewable energy resource used. The Secretary shall identify renewable energy credits by type and date of generation.
When a generator sells electric energy generated through the use of a renewable energy resource to a retail electric supplier under a contract subject to section 210 of this Act, the retail electric supplier is treated as the generator of the electric energy for the purposes of this section for the duration of the contract.
The Secretary may issue credits for existing facility offsets to be applied against a retail electric supplier’s own required annual percentage. The credits are not tradeable and may only be used in the calendar year generation actually occurs.
Credit trading
A renewable energy credit may be sold or exchanged by the entity to whom issued or by any other entity who acquires the credit. A renewable energy credit for any year that is not used to satisfy the minimum renewable generation requirement of subsection (a) for that year may be carried forward for use within the next 4 years.
Credit borrowing
At any time before the end of calendar year 2007, a retail electric supplier that has reason to believe it will not have sufficient renewable energy credits to comply with subsection (a) may—
submit a plan to the Secretary demonstrating that the retail electric supplier will earn sufficient credits within the next 3 calendar years which, when taken into account, will enable the retail electric supplier’s to meet the requirements of subsection (a) for calendar year 2007 and the subsequent calendar years involved; and
upon the approval of the plan by the Secretary, apply credits that the plan demonstrates will be earned within the next 3 calendar years to meet the requirements of subsection (a) for each calendar year involved.
Credit cost cap
The Secretary shall offer renewable energy credits for sale at the lesser of 3 cents per kilowatt-hour or 200 percent of the average market value of credits for the applicable compliance period. On January 1 of each year following calendar year 2007, the Secretary shall adjust for inflation the price charged per credit for such calendar year, based on the Gross Domestic Product Implicit Price Deflator. Amounts received by the Secretary under this subsection are authorized to be appropriated for purposes of section 610.
Enforcement
The Secretary may bring an action in the appropriate United States district court to impose a civil penalty on a retail electric supplier that does not comply with subsection (a), unless the retail electric supplier was unable to comply with subsection (a) for reasons outside of the supplier’s reasonable control (including weather-related damage, mechanical failure, lack of transmission capacity or availability, strikes, lockouts, actions of a governmental authority). A retail electric supplier who does not submit the required number of renewable energy credits under subsection (a) shall be subject to a civil penalty of not more than the greater of 3 cents or 200 percent of the average market value of credits for the compliance period for each renewable energy credit not submitted.
Information collection
The Secretary may collect the information necessary to verify and audit—
the annual electric energy generation and renewable energy generation of any entity applying for renewable energy credits under this section,
the validity of renewable energy credits submitted by a retail electric supplier to the Secretary, and
the quantity of electricity sales of all retail electric suppliers.
Environmental savings clause
Incremental hydropower shall be subject to all applicable environmental laws and licensing and regulatory requirements.
State savings clause
This section does not preclude a State from requiring additional renewable energy generation in that State, or from specifying technology mix.
Definitions
For purposes of this section:
Biomass
The term biomass means any organic material that is available on a renewable or recurring basis, including dedicated energy crops, trees grown for energy production, wood waste and wood residues, plants (including aquatic plants, grasses, and agricultural crops), residues, fibers, animal wastes and other organic waste materials, and fats and oils, except that with respect to material removed from National Forest System lands the term includes only organic material from—
thinnings from trees that are less than 12 inches in diameter;
slash;
brush; and
mill residues.
Eligible facility
The term eligible facility means—
a facility for the generation of electric energy from a renewable energy resource that is placed in service on or after the date of enactment of this section; or
a repowering or cofiring increment that is placed in service on or after the date of enactment of this section at a facility for the generation of electric energy from a renewable energy resource that was placed in service before that date.
Eligible renewable energy resource
The term renewable energy resource means solar, wind, ocean, or geothermal energy, biomass (excluding solid waste and paper that is commonly recycled), landfill gas, a generation offset, or incremental hydropower.
Generation offset
The term generation offset means reduced electricity usage metered at a site where a customer consumes energy from a renewable energy technology.
Existing facility offset
The term existing facility offset means renewable energy generated from an existing facility, not classified as an eligible facility, that is owned or under contract to a retail electric supplier on the date of enactment of this section.
Incremental hydropower
The term incremental hydropower means additional generation that is achieved from increased efficiency or additions of capacity after the date of enactment of this section at a hydroelectric dam that was placed in service before that date.
Indian land
The term Indian land means—
any land within the limits of any Indian reservation, pueblo, or rancheria,
any land not within the limits of any Indian reservation, pueblo, or rancheria title to which was on the date of enactment of this paragraph either held by the United States for the benefit of any Indian tribe or individual or held by any Indian tribe or individual subject to restriction by the United States against alienation,
any dependent Indian community, and
any land conveyed to any Alaska Native corporation under the Alaska Native Claims Settlement Act.
Indian tribe
The term Indian tribe means any Indian tribe, band, nation, or other organized group or community, including any Alaskan Native village or regional or village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.), which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians.
Renewable energy
The term renewable energy means electric energy generated by a renewable energy resource.
Renewable energy resource
The term renewable energy resource means solar, wind, ocean, or geothermal energy, biomass (including municipal solid waste), landfill gas, a generation offset, or incremental hydropower.
Repowering or cofiring increment
The term repowering or cofiring increment means the additional generation from a modification that is placed in service on or after the date of enactment of this section to expand electricity production at a facility used to generate electric energy from a renewable energy resource or to cofire biomass that was placed in service before the date of enactment of this section, or the additional generation above the average generation in the 3 years preceding the date of enactment of this section, to expand electricity production at a facility used to generate electric energy from a renewable energy resource or to cofire biomass that was placed in service before the date of enactment of this section.
Retail electric supplier
The term retail electric supplier means a person that sells electric energy to electric consumers and sold not less than 1,000,000 megawatt-hours of electric energy to electric consumers for purposes other than resale during the preceding calendar year; except that such term does not include the United States, a State or any political subdivision of a State, or any agency, authority, or instrumentality of any one or more of the foregoing, or a rural electric cooperative.
Retail electric supplier’s base amount
The term retail electric supplier’s base amount means the total amount of electric energy sold by the retail electric supplier to electric customers during the most recent calendar year for which information is available, excluding electric energy generated by—
an eligible renewable energy resource;
municipal solid waste; or
a hydroelectric facility.
Sunset
This section expires December 31, 2030.
State grant program
In general
The Secretary is authorized to distribute, subject to available appropriations, amounts received from sales under subsection (g) of section 609 to States to be used for the purposes of the program established under subsection (b) of this section.
Grant program
In general
Not later than 1 year after the date of enactment of this Act, the Secretary shall establish a program to promote State renewable energy production and use.
Use of fund
The Secretary shall make funds available under this section to State energy agencies for grant programs for the construction of renewable energy facilities.
Preference
In allocating funds under the program, the Secretary shall give preference to the following:
States that have a disproportionately small share of economically sustainable renewable energy generation capacity.
State grant programs that are most likely to stimulate or enhance innovative renewable energy technologies.
.
Table of contents
The table of contents for such title VI is amended by adding the following new items at the end thereof:
.
Oil Savings
Oil savings
In general
Appropriate Federal departments and agencies, as identified by the President, shall propose voluntary, regulatory, and other actions sufficient to achieve—
by 2010 a reduction in the demand for oil in the United States by at least 600,000 barrels per day from the demand projected, as of January 1, 2005, by the Energy Information Administration for the year 2010;
by 2015 a reduction in the demand for oil in the United States by at least 1,700,000 barrels per day from the demand projected, as of January 1, 2005, by the Energy Information Administration for the year 2015; and
by 2020 a reduction in the demand for oil in the United States by at least 3,000,000 barrels per day from the demand projected, as of January 1, 2005, by the Energy Information Administration for the year 2020.
Monitoring and reports to congress
Not later than 12 months after the date of the enactment of this Act, and each year thereafter, the departments and agencies referred to in subsection (a) shall report to the Congress on—
proposed and finalized regulatory and other actions taken to achieve the requirements under subsection (a);
progress made in achieving the actions required under subsection (a); and
lack of funding or authority preventing the implementation of the actions required under subsection (a).
Request to Congress
If the President determines that the departments and agencies referred to in subsection (a) lack authority or funding to implement the actions proposed under subsection (a), the President shall request the necessary authority or funding from the Congress not later than 9 months after the date of enactment of this Act.
Final actions
Not later than 12 months after the date of the enactment of this Act, the departments and agencies referred to in subsection (a) shall finalize the actions proposed pursuant to subsection (a) for which they have authority and funding.
Determination of Equivalency between CAFE credits and greenhouse gas credits
The Secretary of Transportation, the Administrator of the Environmental Protection Agency, and the Secretary of Commerce shall jointly conduct and submit to the Congress within 2 years of the date of the enactment of this section a study—
showing a methodology for determining the equivalency of credits earned under Section 32903 of title 49, United States Code, and tradeable allowances under title VI of the New Apollo Energy Act of 2005; and
recommending an appeals process for resolving any dispute that may arise out of such a determination, which may incorporate an arbitration option.
Elimination of 2–FLEET rule
In general
Section 32904 of title 49, United States Code, is amended—
by striking subsection (b); and
by redesignating subsections (c) through (e) as subsections (b) through (d), respectively.
Effective date
The amendments made by subsection (a) shall apply to model years 2010 and later.
Loan guarantees for biorefineries and renewable electricity generation facilities
Loan guarantees for biorefineries and renewable energy production facilities
Authority
The Secretary of Energy may guarantee not more than 80 percent of the principal of any loan made to any person or other entity for any of the following:
The construction of any new facility that primarily makes cellulosic biomass ethanol or biomethanol or generates electricity, or any combination thereof, from wind energy, biomass, solar energy, ocean energy or geothermal sources.
The modification of any facility that primarily generates electricity from wind energy, biomass, solar energy, ocean energy, or geothermal sources if such modification adds additional electric generation capacity from any of such sources.
The modification of any facility that primarily makes cellulosic biomass ethanol, biomethanol, or electricity from wind energy, biomass, solar energy, ocean energy or geothermal sources if such modification adds additional capacity to make cellulosic biomass ethanol or biomethanol from any such source or combination of sources.
The conversion of any facility that primarily makes ethanol to a facility that primarily makes cellulosic biomass ethanol.
The construction of any new ninety percent sequestration coal power facility.
Conditions
Loan maker
A loan guaranteed under this section shall be made by a financial institution subject to the examination of the Secretary.
Environmental laws
Any project for which a loan guarantee is issued under this section shall be required by the Secretary as a condition of the loan guarantee to comply with all applicable Federal, State, and local environmental laws.
Other requirements
Loan requirements, including term, fees, maximum size, collateral requirements, and other features, shall be determined by the Secretary.
Limitation on amount
The Secretary of Energy may make commitments to guarantee loans under this section only to the extent that the total amount of loan principal guaranteed by the Secretary does not exceed $49,000,000,000. Of such total amount, the Secretary may make commitments to guarantee—
not more than $7,000,000,000 of loan principal for each of the following project types—
biomass facilities;
geothemal energy facilities;
ninety percent sequestration coal power facilities;
ocean energy facilities; and
solar energy facilities;
not more than $7,000,000,000 of loan principal for cellulosic biomass ethanol;
not more than $2,000,000,000 of loan principal for biomethanol facilities; and
not more than $5,000,000,000 of loan principal for wind energy facilities.
Coordination with other benefits
The Secretary shall not guarantee under this section any loan made to any person if such person has received assistance under section 212 or 642.
Regulations
The Secretary of Energy may issue regulations to carry out the provisions of this section.
Definitions
As used in this section:
The term agricultural livestock includes bovine, swine, poultry, and sheep.
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.
The term biomass facility means a facility that generates electricity from closed-loop biomass, open-loop biomass, or both.
The term “biomethanol facility” means a facility that generates methanol from biomass, animal waste, or municipal solid waste.
The term cellulosic biomass ethanol means ethanol derived from any nonhazardous lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, including—
dedicated energy crops and trees;
the following forest-related resources—
harvesting residue;
pre-commercial thinnings;
slash; and
bush;
plants;
grasses
agricultural residues
fibers;
animal wastes and other waste materials; and
municipal solid waste.
The term cellulosic biomass ethanol facility means a facility that produces cellulosic biomass ethanol.
The term closed-loop biomass means any organic material from a plant which is planted exclusively for purposes of being used at a biomass facility to produce electricity.”
The term geothermal energy facility means a facility that generates electricity from geothermal energy.
The term ninety percent sequestration coal power facility means a facility that generates electricity using coal as a fuel source and sequesters, rather than releases to the atmosphere, at least 90 percent of the carbon dioxide emissions resulting from such coal combustion.
The term ocean energy facility means a facility that generates electricity from ocean tidal, wave, current or thermal processes.
The term open-loop biomass means any agricultural livestock waste nutrients, or any solid, nonhazardous, cellulosic waste material which is segregated from other waste materials and which is derived from:
any of the following forest-related resources: mill and harvesting residues, precommercial thinnings, slash, and brush, but not including old-growth timber or black liquor,
old 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 unsegregated municipal solid waste (garbage) or postconsumer wastepaper which can be recycled affordably, or
agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.
The term sequestration means the capture, long-term separation, isolation, or removal of greenhouse gases from the atmosphere.
The term solar energy facility means a facility that generates electricity from solar energy with a capacity of 25 kilowatts or more.
The term wind energy facility means a facility that generates electricity from from wind energy.
Authorization of appropriations
There are authorized to be appropriated to the Secretary of Energy such sums as may be necessary to cover the cost of loan guarantees, as defined by section 502(5) of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a(5)).
Tax offsets
References
Short title
This title may be cited as the Balanced Energy Supply Tax Policy Act of 2005
.
Amendment of 1986 Code
Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
Budget neutrality
Tax reductions limited to revenue raised by tax offsets
In general
The aggregate tax benefits provided by this Act, and any amendment made by this Act, shall not exceed the revenue raised by this Act, and any amendment made by this Act.
Adjustment of tax benefits
If the Secretary of the Treasury determines for any year that the tax benefits provided by this Act, and any amendment made by this Act, exceed the revenue raised by this Act, and any amendment made by this Act, the Secretary shall reduce such excess to zero by adjusting such benefits in the manner determined by the Secretary in his sole discretion.
Report to Congress
Not later than 1 year after the date of the enactment of this Act, and annually thereafter, the Secretary of the Treasury shall submit a report to Congress on the total budget authority granted by this Act, and the amendments made by this Act, together with such recommendations as the Secretary determines necessary or appropriate to either—
reduce such authority, or
to increase receipts to the Treasury of the United States to pay for such authority.
Denial of treaty benefits
Denial of treaty benefits for certain deductible payments
In general
Section 894 (relating to income affected by treaty) is amended by adding at the end the following new subsection:
Denial of treaty benefits for certain deductible payments
In general
A foreign entity shall not be entitled under any income tax treaty of the United States with a foreign country to any reduced rate of any withholding tax imposed by this title on any deductible foreign payment unless such entity is predominantly owned by individuals who are residents of such foreign country.
Deductible foreign payment
For purposes of paragraph (1), the term deductible foreign payment means any payment—
which is made by a domestic entity directly or indirectly to a related person which is a foreign entity, and
which is allowable as a deduction under this chapter.
Domestic and foreign entities; related person
For purposes of this subsection—
Domestic entity
The term domestic entity means any domestic corporation or domestic partnership.
Foreign entity
The term foreign entity means any foreign corporation or foreign partnership.
Related person
The term related person has the meaning given such term by section 954(d)(3) (determined by substituting domestic entity
for controlled foreign corporation
each place it appears).
Predominant ownership
For purposes of this subsection—
In general
An entity is predominantly owned by individuals who are residents of a foreign country if—
in the case of a corporation, more than 50 percent (by value) of the stock of such corporation is owned (within the meaning of section 883(c)(4)) by individuals who are residents of such foreign country, or
in the case of a partnership, more than 50 percent (by value) of the beneficial interests in such partnership are so owned.
Publicly traded corporations
A foreign corporation also shall be treated as predominantly owned by individuals who are residents of a foreign country if—
the stock of such corporation is primarily and regularly traded on an established securities market in such foreign country, and
such corporation has activities within such foreign country which are substantial in relation to the total activities of such corporation and its related persons, or
such corporation is wholly owned (directly or indirectly) by another foreign corporation which is described in clause (i).
Special rule
In general
A foreign corporation shall be treated as meeting the requirements of subparagraph (A) if—
such requirements would be met if 30 percent
were substituted for 50 percent
in subparagraph (A)(i),
the treaty country is a member of a multinational economic association such as the European Union, and
at least 50 percent of the value of the stock of the corporation is owned (within the meaning of section 883(c)(4)) by individuals who are residents of the treaty country or other qualified foreign countries.
Qualified foreign country
For purposes of this subparagraph, the term qualified foreign country means any foreign country if—
such foreign country is a member of the multinational economic association of which the treaty country is a member, and
such foreign country has a tax treaty with the United States providing a withholding tax rate reduction which is not less than the withholding tax rate reduction applicable (without regard to this subsection) to the payment received by such foreign corporation.
Exception for corporations with substantial business activities in treaty country
Paragraph (1) shall not apply to a payment received by a foreign corporation if such corporation has substantial business activities in the treaty country and if such corporation establishes to the satisfaction of the Secretary that the payment is subject to an effective rate of income tax imposed by such country greater than 90 percent of the maximum rate of tax specified in section 11.
Exception for payments received by controlled foreign Corporation
Paragraph (1) shall not apply to any deductible foreign payment made by a corporation if the recipient of the payment is a controlled foreign corporation and the payor is a United States shareholder (as defined in section 951(b)) of such corporation.
Conduit payments
Under regulations prescribed by the Secretary, paragraph (1) shall not apply to a payment received by a foreign entity referred to in paragraph (1) if—
within a reasonable period after such entity receives such payment, such entity makes a comparable payment directly or indirectly to another related person,
such related person is a resident of a foreign country with which the United States has an income tax treaty,
such related person is predominantly owned by individuals who are residents of such country, and
the withholding tax rate applicable under such treaty is equal to or greater than the withholding tax rate applicable (without regard to this paragraph) to the payment received by such foreign entity.
.
Effective date
The amendment made by this section shall take effect on the date of the enactment of this Act.
Abusive tax shelter shutdown and taxpayer accountability
Findings and purpose
Findings
The Congress hereby finds that:
Many corporate tax shelter transactions are complicated ways of accomplishing nothing aside from claimed tax benefits, and the legal opinions justifying those transactions take an inappropriately narrow and restrictive view of well-developed court doctrines under which—
the taxation of a transaction is determined in accordance with its substance and not merely its form,
transactions which have no significant effect on the taxpayer’s economic or beneficial interests except for tax benefits are treated as sham transactions and disregarded,
transactions involving multiple steps are collapsed when those steps have no substantial economic meaning and are merely designed to create tax benefits,
transactions with no business purpose are not given effect, and
in the absence of a specific congressional authorization, it is presumed that Congress did not intend a transaction to result in a negative tax where the taxpayer’s economic position or rate of return is better after tax than before tax.
Permitting aggressive and abusive tax shelters not only results in large revenue losses but also undermines voluntary compliance with the Internal Revenue Code of 1986.
Purpose
The purpose of this subtitle is to eliminate abusive tax shelters by denying tax attributes claimed to arise from transactions that do not meet a heightened economic substance requirement and by repealing the provision that permits legal opinions to be used to avoid penalties on tax underpayments resulting from transactions without significant economic substance or business purpose.
Clarification of economic substance doctrine
In general
Section 7701 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:
Clarification of economic substance doctrine; etc
General rules
In general
In applying the economic substance doctrine, the determination of whether a transaction has economic substance shall be made as provided in this paragraph.
Definition of economic substance
For purposes of subparagraph (A)—
In general
A transaction has economic substance only if—
the transaction changes in a meaningful way (apart from Federal tax effects and, if there are any Federal tax effects, also apart from any foreign, State, or local tax effects) the taxpayer’s economic position, and
the taxpayer has a substantial nontax purpose for entering into such transaction and the transaction is a reasonable means of accomplishing such purpose.
Special rule where taxpayer relies on profit potential
A transaction shall not be treated as having economic substance by reason of having a potential for profit unless—
the present value of the reasonably expected pre-tax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected, and
the reasonably expected pre-tax profit from the transaction exceeds a risk-free rate of return.
Treatment of fees and foreign taxes
Fees and other transaction expenses and foreign taxes shall be taken into account as expenses in determining pre-tax profit under subparagraph (B)(ii).
Special Rules for transactions with tax-indifferent parties
Special Rules for financing transactions
The form of a transaction which is in substance the borrowing of money or the acquisition of financial capital directly or indirectly from a tax-indifferent party shall not be respected if the present value of the deductions to be claimed with respect to the transaction is substantially in excess of the present value of the anticipated economic returns of the person lending the money or providing the financial capital. A public offering shall be treated as a borrowing, or an acquisition of financial capital, from a tax-indifferent party if it is reasonably expected that at least 50 percent of the offering will be placed with tax-indifferent parties.
Artificial income shifting and basis adjustments
The form of a transaction with a tax-indifferent party shall not be respected if—
it results in an allocation of income or gain to the tax-indifferent party in excess of such party’s economic income or gain, or
it results in a basis adjustment or shifting of basis on account of overstating the income or gain of the tax-indifferent party.
Definitions and Special Rules
For purposes of this subsection—
Economic substance doctrine
The term economic substance doctrine means the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose.
Tax-indifferent party
The term tax-indifferent party means any person or entity not subject to tax imposed by subtitle A. A person shall be treated as a tax-indifferent party with respect to a transaction if the items taken into account with respect to the transaction have no substantial impact on such person’s liability under subtitle A.
Substantial nontax purpose
In applying subclause (II) of paragraph (1)(B)(i), a purpose of achieving a financial accounting benefit shall not be taken into account in determining whether a transaction has a substantial nontax purpose if the origin of such financial accounting benefit is a reduction of income tax.
Exception for personal transactions of individuals
In the case of an individual, this subsection shall apply only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.
Treatment of lessors
In applying subclause (I) of paragraph (1)(B)(ii) to the lessor of tangible property subject to a lease, the expected net tax benefits shall not include the benefits of depreciation, or any tax credit, with respect to the leased property and subclause (II) of paragraph (1)(B)(ii) shall be disregarded in determining whether any of such benefits are allowable.
Other common law doctrines not affected
Except as specifically provided in this subsection, the provisions of this subsection shall not be construed as altering or supplanting any other rule of law, and the requirements of this subsection shall be construed as being in addition to any such other rule of law.
Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection. Such regulations may include exemptions from the application of this subsection.
Effective date
The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.
Penalty for understatements attributable to transactions lacking economic substance, etc
In general
Subchapter A of chapter 68 is amended by inserting after section 6662A the following new section:
Penalty for understatements attributable to transactions lacking economic substance, etc
Imposition of penalty
If a taxpayer has an noneconomic substance transaction understatement for any taxable year, there shall be added to the tax an amount equal to 40 percent of the amount of such understatement.
Reduction of penalty for disclosed transactions
Subsection (a) shall be applied by substituting 20 percent
for 40 percent
with respect to the portion of any noneconomic substance transaction understatement with respect to which the relevant facts affecting the tax treatment of the item are adequately disclosed in the return or a statement attached to the return.
Noneconomic substance transaction understatement
For purposes of this section—
In general
The term noneconomic substance transaction understatement means any amount which would be an understatement under section 6662A(b)(1) if section 6662A were applied by taking into account items attributable to noneconomic substance transactions rather than items to which section 6662A would apply without regard to this paragraph.
Noneconomic substance transaction
The term noneconomic substance transaction means any transaction if—
there is a lack of economic substance (within the meaning of section 7701(m)(1)) for the transaction giving rise to the claimed tax benefit or the transaction was not respected under section 7701(m)(2), or
the transaction fails to meet the requirements of any similar rule of law.
Rules applicable to compromise of penalty
In general
If the 1st letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals has been sent with respect to a penalty to which this section applies, only the Commissioner of Internal Revenue may compromise all or any portion of such penalty.
Applicable rules
The rules of paragraphs (3), (4), and (5) of section 6707A(d) shall apply for purposes of paragraph (1).
Coordination with other penalties
Except as otherwise provided in this part, the penalty imposed by this section shall be in addition to any other penalty imposed by this title.
Cross references
For coordination of penalty with understatements under section 6662 and other special rules, see section 6662A(e).
For reporting of penalty imposed under this section to the Securities and Exchange Commission, see section 6707A(e).
Clerical amendment
The table of sections for part II of subchapter A of chapter 68 is amended by inserting after the item relating to section 6662A the following new item:
Sec. 6662B. Penalty for understatements attributable to transactions lacking economic substance, etc
Effective date
The amendments made by this section shall apply to transactions entered into after January 1, 2006.
Understatement of taxpayer’s liability by income tax return preparer
Standards conformed to taxpayer standards
Section 6694(a) (relating to understatements due to unrealistic positions) is amended—
by striking realistic possibility of being sustained on its merits
in paragraph (1) and inserting reasonable belief that the tax treatment in such position was more likely than not the proper treatment
,
by striking or was frivolous
in paragraph (3) and inserting or there was no reasonable basis for the tax treatment of such position
, and
by striking Unrealistic
in the heading and inserting Improper
.
Amount of penalty
Section 6694 is amended—
by striking $250
in subsection (a) and inserting $1,000
, and
by striking $1,000
in subsection (b) and inserting $5,000
.
Effective date
The amendments made by this section shall apply to documents prepared after the date of the enactment of this Act.
Frivolous tax submissions
Civil penalties
Section 6702 is amended to read as follows:
Frivolous tax submissions
Civil penalty for frivolous tax returns
A person shall pay a penalty of $5,000 if—
such person files what purports to be a return of a tax imposed by this title but which—
does not contain information on which the substantial correctness of the self-assessment may be judged, or
contains information that on its face indicates that the self-assessment is substantially incorrect; and
the conduct referred to in paragraph (1)—
is based on a position which the Secretary has identified as frivolous under subsection (c), or
reflects a desire to delay or impede the administration of Federal tax laws.
Civil penalty for specified frivolous submissions
Imposition of penalty
Except as provided in paragraph (3), any person who submits a specified frivolous submission shall pay a penalty of $5,000.
Specified frivolous submission
For purposes of this section—
Specified frivolous submission
The term specified frivolous submission means a specified submission if any portion of such submission—
is based on a position which the Secretary has identified as frivolous under subsection (c), or
reflects a desire to delay or impede the administration of Federal tax laws.
Specified submission
The term specified submission means—
a request for a hearing under—
section 6320 (relating to notice and opportunity for hearing upon filing of notice of lien), or
section 6330 (relating to notice and opportunity for hearing before levy), and
an application under—
section 6159 (relating to agreements for payment of tax liability in installments),
section 7122 (relating to compromises), or
section 7811 (relating to taxpayer assistance orders).
Opportunity to withdraw submission
If the Secretary provides a person with notice that a submission is a specified frivolous submission and such person withdraws such submission within 30 days after such notice, the penalty imposed under paragraph (1) shall not apply with respect to such submission.
Listing of frivolous positions
The Secretary shall prescribe (and periodically revise) a list of positions which the Secretary has identified as being frivolous for purposes of this subsection. The Secretary shall not include in such list any position that the Secretary determines meets the requirement of section 6662(d)(2)(B)(ii)(II).
Reduction of penalty
The Secretary may reduce the amount of any penalty imposed under this section if the Secretary determines that such reduction would promote compliance with and administration of the Federal tax laws.
Penalties in addition to other penalties
The penalties imposed by this section shall be in addition to any other penalty provided by law.
Treatment of frivolous requests for hearings before levy
Frivolous requests disregarded
Section 6330 (relating to notice and opportunity for hearing before levy) is amended by adding at the end the following new subsection:
Frivolous requests for hearing, etc
Notwithstanding any other provision of this section, if the Secretary determines that any portion of a request for a hearing under this section or section 6320 meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A), then the Secretary may treat such portion as if it were never submitted and such portion shall not be subject to any further administrative or judicial review.
Preclusion from raising frivolous issues at hearing
Section 6330(c)(4) is amended—
by striking (A)
and inserting (A)(i)
;
by striking (B)
and inserting (ii)
;
by striking the period at the end of the first sentence and inserting ; or
; and
by inserting after subparagraph (A)(ii) (as so redesignated) the following:
the issue meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A).
Statement of grounds
Section 6330(b)(1) is amended by striking under subsection (a)(3)(B)
and inserting in writing under subsection (a)(3)(B) and states the grounds for the requested hearing
.
Treatment of frivolous requests for hearings upon filing of notice of lien
Section 6320 is amended—
in subsection (b)(1), by striking under subsection (a)(3)(B)
and inserting in writing under subsection (a)(3)(B) and states the grounds for the requested hearing
, and
in subsection (c), by striking and (e)
and inserting (e), and (g)
.
Treatment of frivolous applications for offers-in-compromise and installment agreements
Section 7122 is amended by adding at the end the following new subsection:
Frivolous submissions, etc
Notwithstanding any other provision of this section, if the Secretary determines that any portion of an application for an offer-in-compromise or installment agreement submitted under this section or section 6159 meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A), then the Secretary may treat such portion as if it were never submitted and such portion shall not be subject to any further administrative or judicial review.
Clerical amendment
The table of sections for part I of subchapter B of chapter 68 is amended by striking the item relating to section 6702 and inserting the following new item:
Sec. 6702. Frivolous tax submissions
Effective date
The amendments made by this section shall apply to submissions made and issues raised after the date on which the Secretary first prescribes a list under section 6702(c) of the Internal Revenue Code of 1986, as amended by subsection (a).
Expanded authority to disallow tax benefits under Section 269
In general
Subsection (a) of section 269 (relating to acquisitions made to evade or avoid income tax) is amended to read as follows:
In general
If—
any person acquires stock in a corporation, or
any corporation acquires, directly or indirectly, property of another corporation and the basis of such property, in the hands of the acquiring corporation, is determined by reference to the basis in the hands of the transferor corporation, and
the principal purpose for which such acquisition was made is evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance,
Effective date
The amendment made by this section shall apply to stock and property acquired after January 1, 2006.