IN THE SENATE OF THE UNITED STATES
July 13, 2006
Mr. Jeffords (for himself and Mr. Carper) introduced the following bill; which was read twice and referred to the Committee on Finance
To amend the Internal Revenue Code to allow a credit against income tax, or, in the alternative, a special depreciation allowance, for reuse and recycling property, to provide for tax-exempt financing of recycling equipment, and for other purposes.
This Act may be cited as the
Recycling Investment Saves
Energy or the
The Senate finds the following:
Recycling means business in the United States, with more than 56,000 reuse and recycling establishments that employ over 1.1 million people, generating an annual payroll of nearly $37 billion, and grossing over $236 billion in annual revenues. On a per-ton basis, sorting and processing recyclables alone sustain 10 times more jobs than landfilling or incineration.
By reducing the need to extract and process virgin raw materials into manufacturing feedstock, reuse and recycling helps achieve significant energy savings. For example:
Taken together, the amount of energy wasted from not recycling aluminum and steel cans, paper, printed materials, glass, and plastic equals the annual output of 15 medium sized power plants.
The reuse of 500 steel drums per week yields 6 trillion Btu’s per year, which is enough energy savings to power a city the size of Colorado Springs, Colorado, for 1 year.
Unfortunately, the United States recycling rate of many consumer commodities, including aluminum, glass, and plastic, are stagnant or declining, and businesses that rely on recycled feedstock are finding it difficult to obtain the quantity and quality of recycled materials needed. Increasingly, United States manufacturing facilities that rely on recycled feedstock are closing or forced to re-tool to use virgin materials.
The environmental impacts from reuse and recycling are significant. Increased reuse and recycling would produce significant environmental benefits, such as cleaner air, safer water, and reduced production costs. For example:
Between 2 and 5 percent of the waste stream is reusable. Reuse prevents waste creation and adverse impacts from disposal.
On a per-ton basis, recycling of: office paper prevents 60 pounds of air pollutants from being released, saves 7,000 gallons of water, and 3.3 cubic yards of landfill space; aluminum saves 10 cubic yards of landfill space; plastic saves 30 cubic yards of landfill space; glass prevents 7.5 pounds of air pollutants from being released and saves 2 cubic yards of landfill space; and steel saves 4 cubic yards of landfill space.
A national investment in the reuse and recycling industries is needed to preserve and expand America’s reuse and recycling infrastructure.
Credit for reuse and recycling property
Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business-related credits) is amended by adding at the end the following new section:
Credit for qualified reuse and recycling property
Allowance of Credit
For purposes of section 38, the qualified reuse and recycling property credit determined under this section for the taxable year is an amount equal to 15 percent of the amount paid or incurred during the taxable year for the cost of qualified reuse and recycling property placed in service or leased by the taxpayer.
For purposes of this section—
Qualified reuse and recycling property
The term qualified reuse and recycling property means any machinery and equipment (not including buildings or real estate), along with all appurtenances thereto, including software necessary to operate such equipment, which is used exclusively to collect, distribute, or recycle qualified reuse and recyclable materials.
Such term does not include rolling stock or other equipment used to transport reuse and recyclable materials.
Qualified reuse and recyclable materials
The term qualified reuse and recyclable materials means scrap plastic, scrap textiles, scrap rubber, scrap packaging, recovered fiber, scrap ferrous and nonferrous metals, or electronic waste generated by an individual or business.
For purposes of subparagraph (A), the term electronic waste means—
any cathode ray tube, flat panel screen, or similar video display device with a screen size greater than 4 inches measured diagonally, or
any central processing unit.
Recycling or recycle
The term recycling or recycle means that process (including sorting) by which worn or superfluous materials are manufactured or processed into specification grade commodities that are suitable for use as a replacement or substitute for virgin materials in manufacturing tangible consumer and commercial products, including packaging.
Amount Paid or Incurred
For purposes of this section—
The term amount paid or incurred includes installation costs.
In the case of the leasing of qualified reuse and recycling property by the taxpayer, the term amount paid or incurred means the amount of the lease payments due to be paid during the term of the lease occurring during the taxable year other than such portion of such lease payments attributable to interest, insurance, and taxes.
Grants, etc. excluded
The term amount paid or incurred shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity).
Election to have section not apply
A taxpayer may elect for any taxable year to have this section not apply with respect to any qualified recycling property specified by the taxpayer.
Other tax deductions and credits available for portion of cost not taken into account for credit under this Section
No deduction or other credit under this chapter shall be allowed with respect to the amount of the credit determined under this section.
For purposes of this subtitle, if a credit is allowed under this section for any amount paid or incurred 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.
Credit made part of general business credit
Subsection (b) of section 38 of
the Internal Revenue Code of 1986 is amended by striking
the end of paragraph (29), by striking the period at the end of paragraph (30)
, plus, and by adding at the end the following new
the qualified reuse and recycling property credit determined under section 45N(a).
Subsection (a) of
section 1016 of such Code is amended by striking
and at the end
of paragraph (36), by striking the period at the end of paragraph (37) and
; and, and by adding at the end the following new
to the extent provided in section 45N(f), in the case of amounts with respect to which a credit has been allowed under section 45N.
Section 6501(m) of
such Code is amended by inserting
The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 45M the following new item:
Sec. 45N. Credit for qualified reuse and recycling property.
The amendments made by this section shall apply to taxable years beginning after December 31, 2005.
Special depreciation allowance for certain reuse and recycling property
Section 168 of the Internal Revenue Code of 1986 (relating to accelerated cost recovery system) is amended by adding at the end the following new subsection:
Special allowance for certain reuse and recycling property
In the case of any qualified reuse and recycling property—
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 50 percent of the adjusted basis of the qualified reuse and recycling property, and
the adjusted basis of the qualified reuse and recycling 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.
Qualified reuse and recycling property
For purposes of this subsection—
The term qualified reuse and recycling property means any qualified reuse and recycling property (as defined in section 45N(b)(1))—
to which this section applies,
which has a useful life of at least 5 years,
the original use of which commences with the taxpayer after December 31, 2005,
acquired by purchase (as defined in section 179(d)(2)) by an eligible taxpayer after December 31, 2005, but only if no written binding contract for the acquisition was in effect before December 31, 2005, or
acquired by the eligible taxpayer pursuant to a written binding contract which was entered into after December 31, 2005.
Alternative depreciation property
The term qualified property shall not include any property to which the alternative depreciation system under subsection (g) applies, determined without regard to paragraph (7) of subsection (g) (relating to election to have system apply).
If a taxpayer makes an election under this clause with respect to any class of property for any taxable year, this subsection shall not apply to all property in such class placed in service during such taxable year.
In the case of an eligible taxpayer manufacturing, constructing, or producing property for the eligible taxpayer's own use, the requirements of clause (iv) of subparagraph (A) shall be treated as met if the eligible taxpayer begins manufacturing, constructing, or producing the property after December 31, 2005.
For purposes of subparagraph (A)(iii), if property—
is originally placed in service after December 31, 2005, by a person, and
sold and leased back by such person within 3 months after the date such property was originally placed in service,
Deduction allowed in computing minimum tax
For purposes of determining alternative minimum taxable income under section 55, the deduction under subsection (a) for qualified reuse and recycling property shall be determined under this section without regard to any adjustment under section 56.
For purposes of this subsection, the term eligible taxpayer means, with respect to any qualified reuse and recycling property, any taxpayer which elects not to have section 45N apply with respect to such property.
The amendment made by this section shall apply to property placed in service after December 31, 2005.
Tax-exempt bond financing of recycling facilities
Section 142 of the Internal Revenue Code of 1986 (defining exempt facility bond) is amended by adding at the end the following new subsection:
Solid waste disposal facilities
For purposes of subsection (a)(6) only, the term solid waste disposal facilities means any facility used to perform a solid waste disposal function.
Solid waste disposal function
For purposes of this subsection only, the term solid waste disposal function means the collection, separation, sorting, storage, treatment, disassembly, handling, or processing of solid waste in any manner designed to dispose of the solid waste, including processing the solid waste into a useful energy source or product.
Extent of function
For purposes of this subsection only, the solid waste disposal function ends at the later of—
the point of final disposal of the solid waste,
immediately after the solid waste is incinerated to produce energy, or
the point at which the solid waste has been converted into a material or product that can be sold in the same manner as comparable material or product produced from virgin material.
Functionally related and subordinate facilities
For purposes of this subsection only, in the case of a facility used to perform both a solid waste disposal function and another function—
the costs of the facility allocable to the solid waste disposal function are determined using any reasonable method based upon facts and circumstances, and
if during the period that bonds issued as part of an issue described in subsection (a)(6) are outstanding with respect to any facility at least 65 percent of the materials processed in such facility are solid waste materials as measured by weight or volume, then all of the costs of the property used to perform such process are allocable to a solid waste disposal function.
For purposes of this subsection only—
The term solid waste means garbage, refuse, or discarded solid materials, including waste materials resulting from industrial, commercial, agricultural, or community activities.
Garbage, refuse or discarded solid materials
For purposes of subparagraph (A), the term garbage, refuse, or discarded solid materials means materials that are useless, unused, unwanted, or discarded.
The term solid waste does not include materials in domestic sewage, pollutants in industrial or other water resources, or other liquid or gaseous waste materials.
The amendment made by this section shall apply to bonds issued before, on, or after the date of the enactment of this Act.