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H.R. 6049 (110th): Energy Improvement and Extension Act of 2008


The text of the bill below is as of May 21, 2008 (Passed the House).


IB

110th CONGRESS

2d Session

H. R. 6049

IN THE HOUSE OF REPRESENTATIVES

AN ACT

To amend the Internal Revenue Code of 1986 to provide incentives for energy production and conservation, to extend certain expiring provisions, to provide individual income tax relief, and for other purposes.

1.

Short title, etc

(a)

Short title

This Act may be cited as the Renewable Energy and Job Creation Act of 2008.

(b)

Reference

Except as otherwise expressly provided, whenever in this Act 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.

(c)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title, etc.

Title I—Energy tax incentives

Subtitle A—Energy production incentives

Part I—Renewable energy incentives

Sec. 101. Renewable energy credit.

Sec. 102. Production credit for electricity produced from marine renewables.

Sec. 103. Energy credit.

Sec. 104. Credit for residential energy efficient property.

Sec. 105. Special rule to implement FERC and State electric restructuring policy.

Sec. 106. New clean renewable energy bonds.

Part II—Carbon mitigation provisions

Sec. 111. Expansion and modification of advanced coal project investment credit.

Sec. 112. Expansion and modification of coal gasification investment credit.

Sec. 113. Temporary increase in coal excise tax.

Sec. 114. Special rules for refund of the coal excise tax to certain coal producers and exporters.

Sec. 115. Carbon audit of the tax code.

Subtitle B—Transportation and domestic fuel security provisions

Sec. 121. Inclusion of cellulosic biofuel in bonus depreciation for biomass ethanol plant property.

Sec. 122. Credits for biodiesel and renewable diesel.

Sec. 123. Clarification that credits for fuel are designed to provide an incentive for United States production.

Sec. 124. Credit for new qualified plug-in electric drive motor vehicles.

Sec. 125. Exclusion from heavy truck tax for idling reduction units and advanced insulation.

Sec. 126. Restructuring of New York Liberty Zone tax credits.

Sec. 127. Transportation fringe benefit to bicycle commuters.

Sec. 128. Alternative fuel vehicle refueling property credit.

Subtitle C—Energy conservation and efficiency provisions

Sec. 141. Qualified energy conservation bonds.

Sec. 142. Credit for nonbusiness energy property.

Sec. 143. Energy efficient commercial buildings deduction.

Sec. 144. Modifications of energy efficient appliance credit for appliances produced after 2007.

Sec. 145. Accelerated recovery period for depreciation of smart meters and smart grid systems.

Sec. 146. Qualified green building and sustainable design projects.

Title II—One-year extension of temporary provisions

Subtitle A—Extensions Primarily Affecting Individuals

Sec. 201. Deduction for State and local sales taxes.

Sec. 202. Deduction of qualified tuition and related expenses.

Sec. 203. Treatment of certain dividends of regulated investment companies.

Sec. 204. Tax-free distributions from individual retirement plans for charitable purposes.

Sec. 205. Deduction for certain expenses of elementary and secondary school teachers.

Sec. 206. Election to include combat pay as earned income for purposes of earned income tax credit.

Sec. 207. Modification of mortgage revenue bonds for veterans.

Sec. 208. Distributions from retirement plans to individuals called to active duty.

Sec. 209. Stock in RIC for purposes of determining estates of nonresidents not citizens.

Sec. 210. Qualified investment entities.

Sec. 211. Exclusion of amounts received under qualified group legal services plans.

Subtitle B—Extensions Primarily Affecting Businesses

Sec. 221. Research credit.

Sec. 222. Indian employment credit.

Sec. 223. New markets tax credit.

Sec. 224. Railroad track maintenance.

Sec. 225. Fifteen-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant property.

Sec. 226. Seven-year cost recovery period for motorsports racing track facility.

Sec. 227. Accelerated depreciation for business property on Indian reservation.

Sec. 228. Expensing of environmental remediation costs.

Sec. 229. Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.

Sec. 230. Modification of tax treatment of certain payments to controlling exempt organizations.

Sec. 231. Qualified zone academy bonds.

Sec. 232. Tax incentives for investment in the District of Columbia.

Sec. 233. Economic development credit for American Samoa.

Sec. 234. Enhanced charitable deduction for contributions of food inventory.

Sec. 235. Enhanced charitable deduction for contributions of book inventory to public schools.

Sec. 236. Enhanced deduction for qualified computer contributions.

Sec. 237. Basis adjustment to stock of S corporations making charitable contributions of property.

Sec. 238. Work opportunity tax credit for Hurricane Katrina employees.

Sec. 239. Subpart F exception for active financing income.

Sec. 240. Look-thru rule for related controlled foreign corporations.

Sec. 241. Expensing for certain qualified film and television productions.

Subtitle C—Other Extensions

Sec. 251. Authority to disclose information related to terrorist activities made permanent.

Sec. 252. Authority for undercover operations made permanent.

Sec. 253. Authority to disclose return information for certain veterans programs made permanent.

Sec. 254. Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands.

Sec. 255. Parity in the application of certain limits to mental health benefits.

Title III—Additional Tax Relief

Subtitle A—Individual tax relief

Sec. 301. Additional standard deduction for real property taxes for nonitemizers.

Sec. 302. Refundable child credit.

Sec. 303. Increase of AMT refundable credit amount for individuals with long-term unused credits for prior year minimum tax liability, etc.

Subtitle B—Business related provisions

Sec. 311. Uniform treatment of attorney-advanced expenses and court costs in contingency fee cases.

Sec. 312. Provisions related to film and television productions.

Subtitle C—Modification of penalty on understatement of taxpayer’s liability by tax return preparer

Sec. 321. Modification of penalty on understatement of taxpayer’s liability by tax return preparer.

Subtitle D—Extension and expansion of certain GO Zone incentives

Sec. 331. Certain GO Zone incentives.

Title IV—Revenue Provisions

Sec. 401. Nonqualified deferred compensation from certain tax indifferent parties.

Sec. 402. Delay in application of worldwide allocation of interest.

Sec. 403. Time for payment of corporate estimated taxes.

I

Energy tax incentives

A

Energy production incentives

I

Renewable energy incentives

101.

Renewable energy credit

(a)

Extension of credit

(1)

1-year extension for wind facilities

Paragraph (1) of section 45(d) is amended by striking January 1, 2009 and inserting January 1, 2010.

(2)

3-year extension for certain other facilities

Each of the following provisions of section 45(d) is amended by striking January 1, 2009 and inserting January 1, 2012:

(A)

Clauses (i) and (ii) of paragraph (2)(A).

(B)

Clauses (i)(I) and (ii) of paragraph (3)(A).

(C)

Paragraph (4).

(D)

Paragraph (5).

(E)

Paragraph (6).

(F)

Paragraph (7).

(G)

Subparagraphs (A) and (B) of paragraph (9).

(b)

Modification of Credit Phaseout

(1)

Repeal of phaseout

Subsection (b) of section 45 is amended—

(A)

by striking paragraph (1), and

(B)

by striking the 8 cent amount in paragraph (1), in paragraph (2) thereof.

(2)

Limitation based on investment in facility

Subsection (b) of section 45 is amended by inserting before paragraph (2) the following new paragraph:

(1)

Limitation based on investment in facility

(A)

In general

In the case of any qualified facility originally placed in service after December 31, 2009, the amount of the credit determined under subsection (a) for any taxable year with respect to electricity produced at such facility shall not exceed the product of—

(i)

the applicable percentage with respect to such facility, multiplied by

(ii)

the eligible basis of such facility.

(B)

Carryforward of unused limitation and excess credit

(i)

Unused limitation

If the limitation imposed under subparagraph (A) with respect to any facility for any taxable year exceeds the prelimitation credit for such facility for such taxable year, the limitation imposed under subparagraph (A) with respect to such facility for the succeeding taxable year shall be increased by the amount of such excess.

(ii)

Excess credit

If the prelimitation credit with respect to any facility for any taxable year exceeds the limitation imposed under subparagraph (A) with respect to such facility for such taxable year, the credit determined under subsection (a) with respect to such facility for the succeeding taxable year (determined before the application of subparagraph (A) for such succeeding taxable year) shall be increased by the amount of such excess. With respect to any facility, no amount may be carried forward under this clause to any taxable year beginning after the 10-year period described in subsection (a)(2)(A)(ii) with respect to such facility.

(iii)

Prelimitation credit

The term prelimitation credit with respect to any facility for a taxable year means the credit determined under subsection (a) with respect to such facility for such taxable year, determined without regard to subparagraph (A) and after taking into account any increase for such taxable year under clause (ii).

(C)

Applicable percentage

For purposes of this paragraph—

(i)

In general

The term applicable percentage means, with respect to any facility, the appropriate percentage prescribed by the Secretary for the month in which such facility is originally placed in service.

(ii)

Method of prescribing applicable percentages

The applicable percentages prescribed by the Secretary for any month under clause (i) shall be percentages which yield over a 10-year period amounts of limitation under subparagraph (A) which have a present value equal to 35 percent of the eligible basis of the facility.

(iii)

Method of discounting

The present value under clause (ii) shall be determined—

(I)

as of the last day of the 1st year of the 10-year period referred to in clause (ii),

(II)

by using a discount rate equal to the greater of 110 percent of the Federal long-term rate as in effect under section 1274(d) for the month preceding the month for which the applicable percentage is being prescribed, or 4.5 percent, and

(III)

by taking into account the limitation under subparagraph (A) for any year on the last day of such year.

(D)

Eligible basis

For purposes of this paragraph—

(i)

In general

The term eligible basis means, with respect to any facility, the sum of—

(I)

the basis of such facility determined as of the time that such facility is originally placed in service, and

(II)

the portion of the basis of any shared qualified property which is properly allocable to such facility under clause (ii).

(ii)

Rules for allocation

For purposes of subclause (II) of clause (i), the basis of shared qualified property shall be allocated among all qualified facilities which are projected to be placed in service and which require utilization of such property in proportion to projected generation from such facilities.

(iii)

Shared qualified property

For purposes of this paragraph, the term shared qualified property means, with respect to any facility, any property described in section 168(e)(3)(B)(vi)—

(I)

which a qualified facility will require for utilization of such facility, and

(II)

which is not a qualified facility.

(iv)

Special rule relating to geothermal facilities

In the case of any qualified facility using geothermal energy to produce electricity, the basis of such facility for purposes of this paragraph shall be determined as though intangible drilling and development costs described in section 263(c) were capitalized rather than expensed.

(E)

Special rule for first and last year of credit period

In the case of any taxable year any portion of which is not within the 10-year period described in subsection (a)(2)(A)(ii) with respect to any facility, the amount of the limitation under subparagraph (A) with respect to such facility shall be reduced by an amount which bears the same ratio to the amount of such limitation (determined without regard to this subparagraph) as such portion of the taxable year which is not within such period bears to the entire taxable year.

(F)

Election to treat all facilities placed in service in a year as 1 facility

At the election of the taxpayer, all qualified facilities which are part of the same project and which are placed in service during the same calendar year shall be treated for purposes of this section as 1 facility which is placed in service at the mid-point of such year or the first day of the following calendar year.

.

(c)

Trash facility clarification

Paragraph (7) of section 45(d) is amended—

(1)

by striking facility which burns and inserting facility (other than a facility described in paragraph (6)) which uses, and

(2)

by striking combustion.

(d)

Expansion of biomass facilities

(1)

Open-loop biomass facilities

Paragraph (3) of section 45(d) is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph:

(B)

Expansion of facility

Such term shall include a new unit placed in service after the date of the enactment of this subparagraph in connection with a facility described in subparagraph (A), but only to the extent of the increased amount of electricity produced at the facility by reason of such new unit.

.

(2)

Closed-loop biomass facilities

Paragraph (2) of section 45(d) is amended by redesignating subparagraph (B) as subparagraph (C) and inserting after subparagraph (A) the following new subparagraph:

(B)

Expansion of facility

Such term shall include a new unit placed in service after the date of the enactment of this subparagraph in connection with a facility described in subparagraph (A)(i), but only to the extent of the increased amount of electricity produced at the facility by reason of such new unit.

.

(e)

Sales of net electricity to regulated public utilities treated as sales to unrelated persons

Paragraph (4) of section 45(e) is amended by adding at the end the following new sentence: The net amount of electricity sold by any taxpayer to a regulated public utility (as defined in section 7701(a)(33)) shall be treated as sold to an unrelated person..

(f)

Modification of rules for hydropower production

Subparagraph (C) of section 45(c)(8) is amended to read as follows:

(C)

Nonhydroelectric dam

For purposes of subparagraph (A), a facility is described in this subparagraph if—

(i)

the hydroelectric project installed on the nonhydroelectric dam is licensed by the Federal Energy Regulatory Commission and meets all other applicable environmental, licensing, and regulatory requirements,

(ii)

the nonhydroelectric dam was placed in service before the date of the enactment of this paragraph and operated for flood control, navigation, or water supply purposes and did not produce hydroelectric power on the date of the enactment of this paragraph, and

(iii)

the hydroelectric project is operated so that the water surface elevation at any given location and time that would have occurred in the absence of the hydroelectric project is maintained, subject to any license requirements imposed under applicable law that change the water surface elevation for the purpose of improving environmental quality of the affected waterway.

The Secretary, in consultation with the Federal Energy Regulatory Commission, shall certify if a hydroelectric project licensed at a nonhydroelectric dam meets the criteria in clause (iii). Nothing in this section shall affect the standards under which the Federal Energy Regulatory Commission issues licenses for and regulates hydropower projects under part I of the Federal Power Act.

.

(g)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to property originally placed in service after December 31, 2008.

(2)

Repeal of credit phaseout

The amendments made by subsection (b)(1) shall apply to taxable years ending after December 31, 2008.

(3)

Limitation based on investment in facility

The amendment made by subsection (b)(2) shall apply to property originally placed in service after December 31, 2009.

(4)

Trash facility clarification; sales to related regulated public utilities

The amendments made by subsections (c) and (e) shall apply to electricity produced and sold after the date of the enactment of this Act.

(5)

Expansion of biomass facilities

The amendments made by subsection (d) shall apply to property placed in service after the date of the enactment of this Act.

102.

Production credit for electricity produced from marine renewables

(a)

In general

Paragraph (1) of section 45(c) is amended by striking and at the end of subparagraph (G), by striking the period at the end of subparagraph (H) and inserting , and, and by adding at the end the following new subparagraph:

(I)

marine and hydrokinetic renewable energy.

.

(b)

Marine renewables

Subsection (c) of section 45 is amended by adding at the end the following new paragraph:

(10)

Marine and hydrokinetic renewable energy

(A)

In general

The term marine and hydrokinetic renewable energy means energy derived from—

(i)

waves, tides, and currents in oceans, estuaries, and tidal areas,

(ii)

free flowing water in rivers, lakes, and streams,

(iii)

free flowing water in an irrigation system, canal, or other man-made channel, including projects that utilize nonmechanical structures to accelerate the flow of water for electric power production purposes, or

(iv)

differentials in ocean temperature (ocean thermal energy conversion).

(B)

Exceptions

Such term shall not include any energy which is derived from any source which utilizes a dam, diversionary structure (except as provided in subparagraph (A)(iii)), or impoundment for electric power production purposes.

.

(c)

Definition of facility

Subsection (d) of section 45 is amended by adding at the end the following new paragraph:

(11)

Marine and hydrokinetic renewable energy facilities

In the case of a facility producing electricity from marine and hydrokinetic renewable energy, the term qualified facility means any facility owned by the taxpayer—

(A)

which has a nameplate capacity rating of at least 150 kilowatts, and

(B)

which is originally placed in service on or after the date of the enactment of this paragraph and before January 1, 2012.

.

(d)

Credit rate

Subparagraph (A) of section 45(b)(4) is amended by striking or (9) and inserting (9), or (11).

(e)

Coordination with small irrigation power

Paragraph (5) of section 45(d), as amended by section 101, is amended by striking January 1, 2012 and inserting the date of the enactment of paragraph (11).

(f)

Effective date

The amendments made by this section shall apply to electricity produced and sold after the date of the enactment of this Act, in taxable years ending after such date.

103.

Energy credit

(a)

Extension of credit

(1)

Solar energy property

Paragraphs (2)(A)(i)(II) and (3)(A)(ii) of section 48(a) are each amended by striking January 1, 2009 and inserting January 1, 2015.

(2)

Fuel cell property

Subparagraph (E) of section 48(c)(1) is amended by striking December 31, 2008 and inserting December 31, 2014.

(3)

Microturbine property

Subparagraph (E) of section 48(c)(2) is amended by striking December 31, 2008 and inserting December 31, 2014.

(b)

Allowance of energy credit against alternative minimum tax

Subparagraph (B) of section 38(c)(4) is amended by striking and at the end of clause (iii), by redesignating clause (iv) as clause (v), and by inserting after clause (iii) the following new clause:

(iv)

the credit determined under section 46 to the extent that such credit is attributable to the energy credit determined under section 48, and

.

(c)

Energy credit for combined heat and power system property

(1)

In general

Section 48(a)(3)(A) (defining energy property) is amended by striking or at the end of clause (iii), by inserting or at the end of clause (iv), and by adding at the end the following new clause:

(v)

combined heat and power system property,

.

(2)

Combined Heat and Power System Property

Section 48 is amended by adding at the end the following new subsection:

(d)

Combined Heat and Power System Property

For purposes of subsection (a)(3)(A)(v)—

(1)

Combined heat and power system property

The term combined heat and power system property means property comprising a system—

(A)

which uses the same energy source for the simultaneous or sequential generation of electrical power, mechanical shaft power, or both, in combination with the generation of steam or other forms of useful thermal energy (including heating and cooling applications),

(B)

which produces—

(i)

at least 20 percent of its total useful energy in the form of thermal energy which is not used to produce electrical or mechanical power (or combination thereof), and

(ii)

at least 20 percent of its total useful energy in the form of electrical or mechanical power (or combination thereof),

(C)

the energy efficiency percentage of which exceeds 60 percent, and

(D)

which is placed in service before January 1, 2015.

(2)

Limitation

(A)

In general

In the case of combined heat and power system property with an electrical capacity in excess of the applicable capacity placed in service during the taxable year, the credit under subsection (a)(1) (determined without regard to this paragraph) for such year shall be equal to the amount which bears the same ratio to such credit as the applicable capacity bears to the capacity of such property.

(B)

Applicable capacity

For purposes of subparagraph (A), the term applicable capacity means 15 megawatts or a mechanical energy capacity of more than 20,000 horsepower or an equivalent combination of electrical and mechanical energy capacities.

(C)

Maximum capacity

The term combined heat and power system property shall not include any property comprising a system if such system has a capacity in excess of 50 megawatts or a mechanical energy capacity in excess of 67,000 horsepower or an equivalent combination of electrical and mechanical energy capacities.

(3)

Special rules

(A)

Energy efficiency percentage

For purposes of this subsection, the energy efficiency percentage of a system is the fraction—

(i)

the numerator of which is the total useful electrical, thermal, and mechanical power produced by the system at normal operating rates, and expected to be consumed in its normal application, and

(ii)

the denominator of which is the lower heating value of the fuel sources for the system.

(B)

Determinations made on btu basis

The energy efficiency percentage and the percentages under paragraph (1)(B) shall be determined on a Btu basis.

(C)

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.

(4)

Systems using biomass

If a system is designed to use biomass (within the meaning of paragraphs (2) and (3) of section 45(c) without regard to the last sentence of paragraph (3)(A)) for at least 90 percent of the energy source—

(A)

paragraph (1)(C) shall not apply, but

(B)

the amount of credit determined under subsection (a) with respect to such system shall not exceed the amount which bears the same ratio to such amount of credit (determined without regard to this paragraph) as the energy efficiency percentage of such system bears to 60 percent.

.

(d)

Increase of credit limitation for fuel cell property

Subparagraph (B) of section 48(c)(1) is amended by striking $500 and inserting $1,500.

(e)

Public utility property taken into account

(1)

In general

Paragraph (3) of section 48(a) is amended by striking the second sentence thereof.

(2)

Conforming amendments

(A)

Paragraph (1) of section 48(c) is amended by striking subparagraph (D) and redesignating subparagraph (E) as subparagraph (D).

(B)

Paragraph (2) of section 48(c) is amended by striking subparagraph (D) and redesignating subparagraph (E) as subparagraph (D).

(f)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall take effect on the date of the enactment of this Act.

(2)

Allowance against alternative minimum tax

The amendments made by subsection (b) shall apply to credits determined under section 46 of the Internal Revenue Code of 1986 in taxable years beginning after the date of the enactment of this Act and to carrybacks of such credits.

(3)

Combined heat and power and fuel cell property

The amendments made by subsections (c) and (d) shall apply to periods after the date of the enactment of this Act, in taxable years ending after such date, 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).

(4)

Public utility property

The amendments made by subsection (e) shall apply to periods after February 13, 2008, in taxable years ending after such date, 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).

104.

Credit for residential energy efficient property

(a)

Extension

Section 25D(g) is amended by striking December 31, 2008 and inserting December 31, 2014.

(b)

Maximum credit for solar electric property

(1)

In general

Section 25D(b)(1)(A) is amended by striking $2,000 and inserting $4,000.

(2)

Conforming amendment

Section 25D(e)(4)(A)(i) is amended by striking $6,667 and inserting $13,333.

(c)

Credit for residential wind property

(1)

In general

Section 25D(a) is amended by striking and at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting , and, and by adding at the end the following new paragraph:

(4)

30 percent of the qualified small wind energy property expenditures made by the taxpayer during such year.

.

(2)

Limitation

Section 25D(b)(1) is amended by striking and at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting , and, and by adding at the end the following new subparagraph:

(D)

$500 with respect to each half kilowatt of capacity (not to exceed $4,000) of wind turbines for which qualified small wind energy property expenditures are made.

.

(3)

Qualified small wind energy property expenditures

(A)

In general

Section 25D(d) is amended by adding at the end the following new paragraph:

(4)

Qualified small wind energy property expenditure

The term qualified small wind energy property expenditure means an expenditure for property which uses a wind turbine to generate electricity for use in connection with a dwelling unit located in the United States and used as a residence by the taxpayer.

.

(B)

No double benefit

Section 45(d)(1) is amended by adding at the end the following new sentence: Such term shall not include any facility with respect to which any qualified small wind energy property expenditure (as defined in subsection (d)(4) of section 25D) is taken into account in determining the credit under such section..

(4)

Maximum expenditures in case of joint occupancy

Section 25D(e)(4)(A) is amended by striking and at the end of clause (ii), by striking the period at the end of clause (iii) and inserting , and, and by adding at the end the following new clause:

(iv)

$1,667 in the case of each half kilowatt of capacity (not to exceed $13,333) of wind turbines for which qualified small wind energy property expenditures are made.

.

(d)

Credit for geothermal heat pump systems

(1)

In general

Section 25D(a), as amended by subsection (c), 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 new paragraph:

(5)

30 percent of the qualified geothermal heat pump property expenditures made by the taxpayer during such year.

.

(2)

Limitation

Section 25D(b)(1), as amended by subsection (c), is amended by striking and at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting , and, and by adding at the end the following new subparagraph:

(E)

$2,000 with respect to any qualified geothermal heat pump property expenditures.

.

(3)

Qualified geothermal heat pump property expenditure

Section 25D(d), as amended by subsection (c), is amended by adding at the end the following new paragraph:

(5)

Qualified geothermal heat pump property expenditure

(A)

In general

The term qualified geothermal heat pump property expenditure means an expenditure for qualified geothermal heat pump property installed on or in connection with a dwelling unit located in the United States and used as a residence by the taxpayer.

(B)

Qualified geothermal heat pump property

The term qualified geothermal heat pump property means any equipment which—

(i)

uses the ground or ground water as a thermal energy source to heat the dwelling unit referred to in subparagraph (A) or as a thermal energy sink to cool such dwelling unit, and

(ii)

meets the requirements of the Energy Star program which are in effect at the time that the expenditure for such equipment is made.

.

(4)

Maximum expenditures in case of joint occupancy

Section 25D(e)(4)(A), as amended by subsection (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 new clause:

(v)

$6,667 in the case of any qualified geothermal heat pump property expenditures.

.

(e)

Credit allowed against alternative minimum tax

(1)

In general

Subsection (c) of section 25D is amended to read as follows:

(c)

Limitation based on amount of tax; carryforward of unused credit

(1)

Limitation based on amount of tax

In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for the taxable year shall not exceed the excess of—

(A)

the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

(B)

the sum of the credits allowable under this subpart (other than this section) and section 27 for the taxable year.

(2)

Carryforward of unused credit

(A)

Rule for years in which all personal credits allowed against regular and alternative minimum tax

In the case of a taxable year to which section 26(a)(2) applies, if the credit allowable under subsection (a) exceeds the limitation imposed by section 26(a)(2) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year.

(B)

Rule for other years

In the case of a taxable year to which section 26(a)(2) does not apply, if the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year.

.

(2)

Conforming amendments

(A)

Section 23(b)(4)(B) is amended by inserting and section 25D after this section.

(B)

Section 24(b)(3)(B) is amended by striking and 25B and inserting , 25B, and 25D.

(C)

Section 25B(g)(2) is amended by striking section 23 and inserting sections 23 and 25D.

(D)

Section 26(a)(1) is amended by striking and 25B and inserting 25B, and 25D.

(f)

Effective date

(1)

In general

The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

(2)

Application of EGTRRA sunset

The amendments made by subparagraphs (A) and (B) of subsection (e)(2) shall be subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 in the same manner as the provisions of such Act to which such amendments relate.

105.

Special rule to implement FERC and State electric restructuring policy

(a)

Extension for qualified electric utilities

(1)

In general

Paragraph (3) of section 451(i) is amended by inserting (before January 1, 2010, in the case of a qualified electric utility) after January 1, 2008.

(2)

Qualified electric utility

Subsection (i) of section 451 is amended by redesignating paragraphs (6) through (10) as paragraphs (7) through (11), respectively, and by inserting after paragraph (5) the following new paragraph:

(6)

Qualified electric utility

For purposes of this subsection, the term qualified electric utility means a person that, as of the date of the qualifying electric transmission transaction, is vertically integrated, in that it is both—

(A)

a transmitting utility (as defined in section 3(23) of the Federal Power Act (16 U.S.C. 796(23))) with respect to the transmission facilities to which the election under this subsection applies, and

(B)

an electric utility (as defined in section 3(22) of the Federal Power Act (16 U.S.C. 796(22))).

.

(b)

Extension of period for transfer of operational control authorized by FERC

Clause (ii) of section 451(i)(4)(B) is amended by striking December 31, 2007 and inserting the date which is 4 years after the close of the taxable year in which the transaction occurs.

(c)

Property located outside the united states not treated as exempt utility property

Paragraph (5) of section 451(i) is amended by adding at the end the following new subparagraph:

(C)

Exception for property located outside the united states

The term exempt utility property shall not include any property which is located outside the United States.

.

(d)

Effective Dates

(1)

Extension

The amendments made by subsection (a) shall apply to transactions after December 31, 2007.

(2)

Transfers of operational control

The amendment made by subsection (b) shall take effect as if included in section 909 of the American Jobs Creation Act of 2004.

(3)

Exception for property located outside the united states

The amendment made by subsection (c) shall apply to transactions after the date of the enactment of this Act.

106.

New clean renewable energy bonds

(a)

In general

Part IV of subchapter A of chapter 1 is amended by adding at the end the following new subpart:

I

Qualified tax credit bonds

Sec. 54A. Credit to holders of qualified tax credit bonds.

Sec. 54B. New clean renewable energy bonds.

54A.

Credit to holders of qualified tax credit bonds

(a)

Allowance of credit

If a taxpayer holds a qualified tax credit bond on one or more credit allowance dates of the bond during any taxable year, 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 credits determined under subsection (b) with respect to such dates.

(b)

Amount of credit

(1)

In general

The amount of the credit determined under this subsection with respect to any credit allowance date for a qualified tax credit bond is 25 percent of the annual credit determined with respect to such bond.

(2)

Annual credit

The annual credit determined with respect to any qualified tax credit bond is the product of—

(A)

the applicable credit rate, multiplied by

(B)

the outstanding face amount of the bond.

(3)

Applicable credit rate

For purposes of paragraph (2), the applicable credit rate is the rate which the Secretary estimates will permit the issuance of qualified tax credit bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer. The applicable credit rate with respect to any qualified tax credit bond shall be determined as of the first day on which there is a binding, written contract for the sale or exchange of the bond.

(4)

Special rule for issuance and redemption

In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this subsection with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed or matures.

(c)

Limitation based on amount of tax

(1)

In general

The credit allowed under subsection (a) for any taxable year shall not exceed the excess of—

(A)

the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

(B)

the sum of the credits allowable under this part (other than subpart C and this subpart).

(2)

Carryover of unused credit

If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year (determined before the application of paragraph (1) for such succeeding taxable year).

(d)

Qualified tax credit bond

For purposes of this section—

(1)

Qualified tax credit bond

The term qualified tax credit bond means a new clean renewable energy bond which is part of an issue that meets the requirements of paragraphs (2), (3), (4), (5), and (6).

(2)

Special rules relating to expenditures

(A)

In general

An issue shall be treated as meeting the requirements of this paragraph if, as of the date of issuance, the issuer reasonably expects—

(i)

100 percent or more of the available project proceeds to be spent for 1 or more qualified purposes within the 3-year period beginning on such date of issuance, and

(ii)

a binding commitment with a third party to spend at least 10 percent of such available project proceeds will be incurred within the 6-month period beginning on such date of issuance.

(B)

Failure to spend required amount of bond proceeds within 3 years

(i)

In general

To the extent that less than 100 percent of the available project proceeds of the issue are expended by the close of the expenditure period for 1 or more qualified purposes, the issuer shall redeem all of the nonqualified bonds within 90 days after the end of such period. For purposes of this paragraph, the amount of the nonqualified bonds required to be redeemed shall be determined in the same manner as under section 142.

(ii)

Expenditure period

For purposes of this subpart, the term expenditure period means, with respect to any issue, the 3-year period beginning on the date of issuance. Such term shall include any extension of such period under clause (iii).

(iii)

Extension of period

Upon submission of a request prior to the expiration of the expenditure period (determined without regard to any extension under this clause), the Secretary may extend such period if the issuer establishes that the failure to expend the proceeds within the original expenditure period is due to reasonable cause and the expenditures for qualified purposes will continue to proceed with due diligence.

(C)

Qualified purpose

For purposes of this paragraph, the term qualified purpose means a purpose specified in section 54B(a)(1).

(D)

Reimbursement

For purposes of this subtitle, available project proceeds of an issue shall be treated as spent for a qualified purpose if such proceeds are used to reimburse the issuer for amounts paid for a qualified purpose after the date that the Secretary makes an allocation of bond limitation with respect to such issue, but only if—

(i)

prior to the payment of the original expenditure, the issuer declared its intent to reimburse such expenditure with the proceeds of a qualified tax credit bond,

(ii)

not later than 60 days after payment of the original expenditure, the issuer adopts an official intent to reimburse the original expenditure with such proceeds, and

(iii)

the reimbursement is made not later than 18 months after the date the original expenditure is paid.

(3)

Reporting

An issue shall be treated as meeting the requirements of this paragraph if the issuer of qualified tax credit bonds submits reports similar to the reports required under section 149(e).

(4)

Special rules relating to arbitrage

(A)

In general

An issue shall be treated as meeting the requirements of this paragraph if the issuer satisfies the requirements of section 148 with respect to the proceeds of the issue.

(B)

Special rule for investments during expenditure period

An issue shall not be treated as failing to meet the requirements of subparagraph (A) by reason of any investment of available project proceeds during the expenditure period.

(C)

Special rule for reserve funds

An issue shall not be treated as failing to meet the requirements of subparagraph (A) by reason of any fund which is expected to be used to repay such issue if—

(i)

such fund is funded at a rate not more rapid than equal annual installments,

(ii)

such fund is funded in a manner reasonably expected to result in an amount not greater than an amount necessary to repay the issue, and

(iii)

the yield on such fund is not greater than the discount rate determined under paragraph (5)(B) with respect to the issue.

(5)

Maturity limitation

(A)

In general

An issue shall not be treated as meeting the requirements of this paragraph if the maturity of any bond which is part of such issue exceeds the maximum term determined by the Secretary under subparagraph (B).

(B)

Maximum term

During each calendar month, the Secretary shall determine the maximum term permitted under this paragraph for bonds issued during the following calendar month. Such maximum term shall be the term which the Secretary estimates will result in the present value of the obligation to repay the principal on the bond being equal to 50 percent of the face amount of such bond. Such present value shall be determined using as a discount rate the average annual interest rate of tax-exempt obligations having a term of 10 years or more which are issued during the month. If the term as so determined is not a multiple of a whole year, such term shall be rounded to the next highest whole year.

(6)

Prohibition on financial conflicts of interest

An issue shall be treated as meeting the requirements of this paragraph if the issuer certifies that—

(A)

applicable State and local law requirements governing conflicts of interest are satisfied with respect to such issue, and

(B)

if the Secretary prescribes additional conflicts of interest rules governing the appropriate Members of Congress, Federal, State, and local officials, and their spouses, such additional rules are satisfied with respect to such issue.

(e)

Other definitions

For purposes of this subchapter—

(1)

Credit allowance date

The term credit allowance date means—

(A)

March 15,

(B)

June 15,

(C)

September 15, and

(D)

December 15.

Such term includes the last day on which the bond is outstanding.
(2)

Bond

The term bond includes any obligation.

(3)

State

The term State includes the District of Columbia and any possession of the United States.

(4)

Available project proceeds

The term available project proceeds means—

(A)

the excess of—

(i)

the proceeds from the sale of an issue, over

(ii)

the issuance costs financed by the issue (to the extent that such costs do not exceed 2 percent of such proceeds), and

(B)

the proceeds from any investment of the excess described in subparagraph (A).

(f)

Credit treated as interest

For purposes of this subtitle, the credit determined under subsection (a) shall be treated as interest which is includible in gross income.

(g)

S Corporations and partnerships

In the case of a tax credit bond held by an S corporation or partnership, the allocation of the credit allowed by this section to the shareholders of such corporation or partners of such partnership shall be treated as a distribution.

(h)

Bonds held by regulated investment companies and real estate investment trusts

If any qualified tax credit bond is held by a regulated investment company or a real estate investment trust, the credit determined under subsection (a) shall be allowed to shareholders of such company or beneficiaries of such trust (and any gross income included under subsection (f) with respect to such credit shall be treated as distributed to such shareholders or beneficiaries) under procedures prescribed by the Secretary.

(i)

Credits may be stripped

Under regulations prescribed by the Secretary—

(1)

In general

There may be a separation (including at issuance) of the ownership of a qualified tax credit bond and the entitlement to the credit under this section with respect to such bond. In case of any such separation, the credit under this section shall be allowed to the person who on the credit allowance date holds the instrument evidencing the entitlement to the credit and not to the holder of the bond.

(2)

Certain rules to apply

In the case of a separation described in paragraph (1), the rules of section 1286 shall apply to the qualified tax credit bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon.

54B.

New clean renewable energy bonds

(a)

New clean renewable energy bond

For purposes of this subpart, the term new clean renewable energy bond means any bond issued as part of an issue if—

(1)

100 percent of the available project proceeds of such issue are to be used for capital expenditures incurred by public power providers or cooperative electric companies for one or more qualified renewable energy facilities,

(2)

the bond is issued by a qualified issuer, and

(3)

the issuer designates such bond for purposes of this section.

(b)

Reduced credit amount

The annual credit determined under section 54A(b) with respect to any new clean renewable energy bond shall be 70 percent of the amount so determined without regard to this subsection.

(c)

Limitation on amount of bonds designated

(1)

In general

The maximum aggregate face amount of bonds which may be designated under subsection (a) by any issuer shall not exceed the limitation amount allocated under this subsection to such issuer.

(2)

National limitation on amount of bonds designated

There is a national new clean renewable energy bond limitation of $2,000,000,000 which shall be allocated by the Secretary as provided in paragraph (3), except that—

(A)

not more than 331/3 percent thereof may be allocated to qualified projects of public power providers,

(B)

not more than 331/3 percent thereof may be allocated to qualified projects of governmental bodies, and

(C)

not more than 331/3 percent thereof may be allocated to qualified projects of cooperative electric companies.

(3)

Method of allocation

(A)

Allocation among public power providers

After the Secretary determines the qualified projects of public power providers which are appropriate for receiving an allocation of the national new clean renewable energy bond limitation, the Secretary shall, to the maximum extent practicable, make allocations among such projects in such manner that the amount allocated to each such project bears the same ratio to the cost of such project as the limitation under paragraph (2)(A) bears to the cost of all such projects.

(B)

Allocation among governmental bodies and cooperative electric companies

The Secretary shall make allocations of the amount of the national new clean renewable energy bond limitation described in paragraphs (2)(B) and (2)(C) among qualified projects of governmental bodies and cooperative electric companies, respectively, in such manner as the Secretary determines appropriate.

(d)

Definitions

For purposes of this section—

(1)

Qualified renewable energy facility

The term qualified renewable energy facility means a qualified facility (as determined under section 45(d) without regard to paragraphs (8) and (10) thereof and to any placed in service date) owned by a public power provider, a governmental body, or a cooperative electric company.

(2)

Public power provider

The term public power provider means a State utility with a service obligation, as such terms are defined in section 217 of the Federal Power Act (as in effect on the date of the enactment of this paragraph).

(3)

Governmental body

The term governmental body means any State or Indian tribal government, or any political subdivision thereof.

(4)

Cooperative electric company

The term cooperative electric company means a mutual or cooperative electric company described in section 501(c)(12) or section 1381(a)(2)(C).

(5)

Clean renewable energy bond lender

The term clean renewable energy bond lender means a lender which is a cooperative which is owned by, or has outstanding loans to, 100 or more cooperative electric companies and is in existence on February 1, 2002, and shall include any affiliated entity which is controlled by such lender.

(6)

Qualified issuer

The term qualified issuer means a public power provider, a cooperative electric company, a governmental body, a clean renewable energy bond lender, or a not-for-profit electric utility which has received a loan or loan guarantee under the Rural Electrification Act.

.

(b)

Reporting

Subsection (d) of section 6049 is amended by adding at the end the following new paragraph:

(9)

Reporting of credit on qualified tax credit bonds

(A)

In general

For purposes of subsection (a), the term interest includes amounts includible in gross income under section 54A and such amounts shall be treated as paid on the credit allowance date (as defined in section 54A(e)(1)).

(B)

Reporting to corporations, etc

Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A) of this paragraph, subsection (b)(4) of this section shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i).

(C)

Regulatory authority

The Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.

.

(c)

Conforming amendments

(1)

Sections 54(c)(2) and 1400N(l)(3)(B) are each amended by striking subpart C and inserting subparts C and I.

(2)

Section 1397E(c)(2) is amended by striking subpart H and inserting subparts H and I.

(3)

Section 6401(b)(1) is amended by striking and H and inserting H, and I.

(4)

The heading of subpart H of part IV of subchapter A of chapter 1 is amended by striking certain bonds and inserting clean renewable energy bonds.

(5)

The table of subparts for part IV of subchapter A of chapter 1 is amended by striking the item relating to subpart H and inserting the following new items:

Subpart H. Nonrefundable credit to holders of clean renewable energy bonds.

Subpart I. Qualified tax credit bonds.

.

(d)

Application of certain labor standards on projects financed under tax credit bonds

Subchapter IV of chapter 31 of title 40, United States Code, shall apply to projects financed with the proceeds of any tax credit bond (as defined in section 54A of the Internal Revenue Code of 1986).

(e)

Effective dates

The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.

II

Carbon mitigation provisions

111.

Expansion and modification of advanced coal project investment credit

(a)

Modification of credit amount

Section 48A(a) 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:

(3)

30 percent of the qualified investment for such taxable year in the case of projects described in clause (iii) of subsection (d)(3)(B).

.

(b)

Expansion of aggregate credits

Section 48A(d)(3)(A) is amended by striking $1,300,000,000 and inserting $2,550,000,000.

(c)

Authorization of Additional Projects

(1)

In general

Subparagraph (B) of section 48A(d)(3) is amended to read as follows:

(B)

Particular projects

Of the dollar amount in subparagraph (A), the Secretary is authorized to certify—

(i)

$800,000,000 for integrated gasification combined cycle projects the application for which is submitted during the period described in paragraph (2)(A)(i),

(ii)

$500,000,000 for projects which use other advanced coal-based generation technologies the application for which is submitted during the period described in paragraph (2)(A)(i), and

(iii)

$1,250,000,000 for advanced coal-based generation technology projects the application for which is submitted during the period described in paragraph (2)(A)(ii).

.

(2)

Application period for additional projects

Subparagraph (A) of section 48A(d)(2) is amended to read as follows:

(A)

Application period

Each applicant for certification under this paragraph shall submit an application meeting the requirements of subparagraph (B). An applicant may only submit an application—

(i)

for an allocation from the dollar amount specified in clause (i) or (ii) of paragraph (3)(B) during the 3-year period beginning on the date the Secretary establishes the program under paragraph (1), and

(ii)

for an allocation from the dollar amount specified in paragraph (3)(B)(iii) during the 3-year period beginning at the earlier of the termination of the period described in clause (i) or the date prescribed by the Secretary.

.

(3)

Capture and sequestration of carbon dioxide emissions requirement

(A)

In general

Section 48A(e)(1) is amended by striking and at the end of subparagraph (E), by striking the period at the end of subparagraph (F) and inserting ; and, and by adding at the end the following new subparagraph:

(G)

in the case of any project the application for which is submitted during the period described in subsection (d)(2)(A)(ii), the project includes equipment which separates and sequesters at least 65 percent (70 percent in the case of an application for reallocated credits under subsection (d)(4)) of such project's total carbon dioxide emissions.

.

(B)

Highest priority for projects which sequester carbon dioxide emissions

Section 48A(e)(3) is amended by striking and at the end of subparagraph (A)(iii), by striking the period at the end of subparagraph (B)(iii) and inserting , and, and by adding at the end the following new subparagraph:

(C)

give highest priority to projects with the greatest separation and sequestration percentage of total carbon dioxide emissions.

.

(C)

Recapture of credit for failure to sequester

Section 48A is amended by adding at the end the following new subsection:

(h)

Recapture of credit for failure To sequester

The Secretary shall provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any project which fails to attain or maintain the separation and sequestration requirements of subsection (e)(1)(G).

.

(4)

Additional priority for research partnerships

Section 48A(e)(3)(B), as amended by paragraph (3)(B), is amended—

(A)

by striking and at the end of clause (ii),

(B)

by redesignating clause (iii) as clause (iv), and

(C)

by inserting after clause (ii) the following new clause:

(iii)

applicant participants who have a research partnership with an eligible educational institution (as defined in section 529(e)(5)), and

.

(5)

Clerical amendment

Section 48A(e)(3) is amended by striking integrated gasification combined cycle in the heading and inserting certain.

(d)

Competitive certification awards modification authority

Section 48A, as amended by subsection (c)(3), is amended by adding at the end the following new subsection:

(i)

Competitive certification awards modification authority

In implementing this section or section 48B, the Secretary is directed to modify the terms of any competitive certification award and any associated closing agreement where such modification—

(1)

is consistent with the objectives of such section,

(2)

is requested by the recipient of the competitive certification award, and

(3)

involves moving the project site to improve the potential to capture and sequester carbon dioxide emissions, reduce costs of transporting feedstock, and serve a broader customer base,

unless the Secretary determines that the dollar amount of tax credits available to the taxpayer under such section would increase as a result of the modification or such modification would result in such project not being originally certified. In considering any such modification, the Secretary shall consult with other relevant Federal agencies, including the Department of Energy.

.

(e)

Disclosure of allocations

Section 48A(d) is amended by adding at the end the following new paragraph:

(5)

Disclosure of allocations

The Secretary shall, upon making a certification under this subsection or section 48B(d), publicly disclose the identity of the applicant and the amount of the credit certified with respect to such applicant.

.

(f)

Effective dates

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to credits the application for which is submitted during the period described in section 48A(d)(2)(A)(ii) of the Internal Revenue Code of 1986 and which are allocated or reallocated after the date of the enactment of this Act.

(2)

Competitive certification awards modification authority

The amendment made by subsection (d) shall take effect on the date of the enactment of this Act and is applicable to all competitive certification awards entered into under section 48A or 48B of the Internal Revenue Code of 1986, whether such awards were issued before, on, or after such date of enactment.

(3)

Disclosure of allocations

The amendment made by subsection (e) shall apply to certifications made after the date of the enactment of this Act.

(4)

Clerical amendment

The amendment made by subsection (c)(5) shall take effect as if included in the amendment made by section 1307(b) of the Energy Tax Incentives Act of 2005.

112.

Expansion and modification of coal gasification investment credit

(a)

Modification of credit amount

Section 48B(a) is amended by inserting (30 percent in the case of credits allocated under subsection (d)(1)(B)) after 20 percent.

(b)

Expansion of aggregate credits

Section 48B(d)(1) is amended by striking shall not exceed $350,000,000 and all that follows and inserting

shall not exceed—

(A)

$350,000,000, plus

(B)

$250,000,000 for qualifying gasification projects that include equipment which separates and sequesters at least 75 percent of such project’s total carbon dioxide emissions.

.

(c)

Recapture of credit for failure To sequester

Section 48B is amended by adding at the end the following new subsection:

(f)

Recapture of credit for failure To sequester

The Secretary shall provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any project which fails to attain or maintain the separation and sequestration requirements for such project under subsection (d)(1).

.

(d)

Selection priorities

Section 48B(d) is amended by adding at the end the following new paragraph:

(4)

Selection priorities

In determining which qualifying gasification projects to certify under this section, the Secretary shall—

(A)

give highest priority to projects with the greatest separation and sequestration percentage of total carbon dioxide emissions, and

(B)

give high priority to applicant participants who have a research partnership with an eligible educational institution (as defined in section 529(e)(5)).

.

(e)

Effective date

The amendments made by this section shall apply to credits described in section 48B(d)(1)(B) of the Internal Revenue Code of 1986 which are allocated or reallocated after the date of the enactment of this Act.

113.

Temporary increase in coal excise tax

Paragraph (2) of section 4121(e) is amended—

(1)

by striking January 1, 2014 in subparagraph (A) and inserting December 31, 2018, and

(2)

by striking January 1 after 1981 in subparagraph (B) and inserting December 31 after 2007.

114.

Special rules for refund of the coal excise tax to certain coal producers and exporters

(a)

Refund

(1)

Coal producers

(A)

In general

Notwithstanding subsections (a)(1) and (c) of section 6416 and section 6511 of the Internal Revenue Code of 1986, if—

(i)

a coal producer establishes that such coal producer, or a party related to such coal producer, exported coal produced by such coal producer to a foreign country or shipped coal produced by such coal producer to a possession of the United States, or caused such coal to be exported or shipped, the export or shipment of which was other than through an exporter who meets the requirements of paragraph (2),

(ii)

such coal producer filed an excise tax return on or after October 1, 1990, and on or before the date of the enactment of this Act, and

(iii)

such coal producer files a claim for refund with the Secretary not later than the close of the 30-day period beginning on the date of the enactment of this Act,

then the Secretary shall pay to such coal producer an amount equal to the tax paid under section 4121 of such Code on such coal exported or shipped by the coal producer or a party related to such coal producer, or caused by the coal producer or a party related to such coal producer to be exported or shipped.
(B)

Special rules for certain taxpayers

For purposes of this section—

(i)

In general

If a coal producer or a party related to a coal producer has received a judgment described in clause (iii), such coal producer shall be deemed to have established the export of coal to a foreign country or shipment of coal to a possession of the United States under subparagraph (A)(i).

(ii)

Amount of payment

If a taxpayer described in clause (i) is entitled to a payment under subparagraph (A), the amount of such payment shall be reduced by any amount paid pursuant to the judgment described in clause (iii).

(iii)

Judgment described

A judgment is described in this subparagraph if such judgment—

(I)

is made by a court of competent jurisdiction within the United States,

(II)

relates to the constitutionality of any tax paid on exported coal under section 4121 of the Internal Revenue Code of 1986, and

(III)

is in favor of the coal producer or the party related to the coal producer.

(2)

Exporters

Notwithstanding subsections (a)(1) and (c) of section 6416 and section 6511 of the Internal Revenue Code of 1986, and a judgment described in paragraph (1)(B)(iii) of this subsection, if—

(A)

an exporter establishes that such exporter exported coal to a foreign country or shipped coal to a possession of the United States, or caused such coal to be so exported or shipped,

(B)

such exporter filed a tax return on or after October 1, 1990, and on or before the date of the enactment of this Act, and

(C)

such exporter files a claim for refund with the Secretary not later than the close of the 30-day period beginning on the date of the enactment of this Act,

then the Secretary shall pay to such exporter an amount equal to $0.825 per ton of such coal exported by the exporter or caused to be exported or shipped, or caused to be exported or shipped, by the exporter.
(b)

Limitations

Subsection (a) shall not apply with respect to exported coal if a settlement with the Federal Government has been made with and accepted by, the coal producer, a party related to such coal producer, or the exporter, of such coal, as of the date that the claim is filed under this section with respect to such exported coal. For purposes of this subsection, the term settlement with the Federal Government shall not include any settlement or stipulation entered into as of the date of the enactment of this Act, the terms of which contemplate a judgment concerning which any party has reserved the right to file an appeal, or has filed an appeal.

(c)

Subsequent refund prohibited

No refund shall be made under this section to the extent that a credit or refund of such tax on such exported or shipped coal has been paid to any person.

(d)

Definitions

For purposes of this section—

(1)

Coal producer

The term coal producer means the person in whom is vested ownership of the coal immediately after the coal is severed from the ground, without regard to the existence of any contractual arrangement for the sale or other disposition of the coal or the payment of any royalties between the producer and third parties. The term includes any person who extracts coal from coal waste refuse piles or from the silt waste product which results from the wet washing (or similar processing) of coal.

(2)

Exporter

The term exporter means a person, other than a coal producer, who does not have a contract, fee arrangement, or any other agreement with a producer or seller of such coal to export or ship such coal to a third party on behalf of the producer or seller of such coal and—

(A)

is indicated in the shipper’s export declaration or other documentation as the exporter of record, or

(B)

actually exported such coal to a foreign country or shipped such coal to a possession of the United States, or caused such coal to be so exported or shipped.

(3)

Related party

The term a party related to such coal producer means a person who—

(A)

is related to such coal producer through any degree of common management, stock ownership, or voting control,

(B)

is related (within the meaning of section 144(a)(3) of the Internal Revenue Code of 1986) to such coal producer, or

(C)

has a contract, fee arrangement, or any other agreement with such coal producer to sell such coal to a third party on behalf of such coal producer.

(4)

Secretary

The term Secretary means the Secretary of Treasury or the Secretary's designee.

(e)

Timing of refund

With respect to any claim for refund filed pursuant to this section, the Secretary shall determine whether the requirements of this section are met not later than 180 days after such claim is filed. If the Secretary determines that the requirements of this section are met, the claim for refund shall be paid not later than 180 days after the Secretary makes such determination.

(f)

Interest

Any refund paid pursuant to this section shall be paid by the Secretary with interest from the date of overpayment determined by using the overpayment rate and method under section 6621 of the Internal Revenue Code of 1986.

(g)

Denial of double benefit

The payment under subsection (a) with respect to any coal shall not exceed—

(1)

in the case of a payment to a coal producer, the amount of tax paid under section 4121 of the Internal Revenue Code of 1986 with respect to such coal by such coal producer or a party related to such coal producer, and

(2)

in the case of a payment to an exporter, an amount equal to $0.825 per ton with respect to such coal exported by the exporter or caused to be exported by the exporter.

(h)

Application of section

This section applies only to claims on coal exported or shipped on or after October 1, 1990, through the date of the enactment of this Act.

(i)

Standing not conferred

(1)

Exporters

With respect to exporters, this section shall not confer standing upon an exporter to commence, or intervene in, any judicial or administrative proceeding concerning a claim for refund by a coal producer of any Federal or State tax, fee, or royalty paid by the coal producer.

(2)

Coal producers

With respect to coal producers, this section shall not confer standing upon a coal producer to commence, or intervene in, any judicial or administrative proceeding concerning a claim for refund by an exporter of any Federal or State tax, fee, or royalty paid by the producer and alleged to have been passed on to an exporter.

115.

Carbon audit of the tax code

(a)

Study

The Secretary of the Treasury shall enter into an agreement with the National Academy of Sciences to undertake a comprehensive review of the Internal Revenue Code of 1986 to identify the types of and specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects.

(b)

Report

Not later than 2 years after the date of enactment of this Act, the National Academy of Sciences shall submit to Congress a report containing the results of study authorized under this section.

(c)

Authorization of appropriations

There is authorized to be appropriated to carry out this section $1,500,000 for the period of fiscal years 2008 and 2009.

B

Transportation and domestic fuel security provisions

121.

Inclusion of cellulosic biofuel in bonus depreciation for biomass ethanol plant property

(a)

In general

Paragraph (3) of section 168(l) is amended to read as follows:

(3)

Cellulosic biofuel

The term cellulosic biofuel means any liquid fuel which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis.

.

(b)

Conforming amendments

Subsection (l) of section 168 is amended—

(1)

by striking cellulosic biomass ethanol each place it appears and inserting cellulosic biofuel,

(2)

by striking cellulosic biomass ethanol in the heading of such subsection and inserting cellulosic biofuel, and

(3)

by striking cellulosic biomass ethanol in the heading of paragraph (2) thereof and inserting cellulosic biofuel.

(c)

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.

122.

Credits for biodiesel and renewable diesel

(a)

In general

Sections 40A(g), 6426(c)(6), and 6427(e)(5)(B) are each amended by striking December 31, 2008 and inserting December 31, 2009.

(b)

Increase in rate of credit

(1)

Income tax credit

Paragraphs (1)(A) and (2)(A) of section 40A(b) are each amended by striking 50 cents and inserting $1.00.

(2)

Excise tax credit

Paragraph (2) of section 6426(c) is amended to read as follows:

(2)

Applicable amount

For purposes of this subsection, the applicable amount is $1.00.

.

(3)

Conforming amendments

(A)

Subsection (b) of section 40A is amended by striking paragraph (3) and by redesignating paragraphs (4) and (5) as paragraphs (3) and (4), respectively.

(B)

Paragraph (2) of section 40A(f) is amended to read as follows:

(2)

Exception

Subsection (b)(4) shall not apply with respect to renewable diesel.

.

(C)

Paragraphs (2) and (3) of section 40A(e) are each amended by striking subsection (b)(5)(C) and inserting subsection (b)(4)(C).

(D)

Clause (ii) of section 40A(d)(3)(C) is amended by striking subsection (b)(5)(B) and inserting subsection (b)(4)(B).

(c)

Uniform treatment of diesel produced from biomass

Paragraph (3) of section 40A(f) is amended—

(1)

by striking diesel fuel and inserting liquid fuel,

(2)

by striking using a thermal depolymerization process, and

(3)

by striking or D396 in subparagraph (B) and inserting , D396, or other equivalent standard approved by the Secretary.

(d)

Coproduction of renewable diesel with petroleum feedstock

(1)

In general

Paragraph (3) of section 40A(f) (defining renewable diesel) is amended by adding at the end the following flush sentence:

Such term does not include any fuel derived from coprocessing biomass with a feedstock which is not biomass. For purposes of this paragraph, the term biomass has the meaning given such term by section 45K(c)(3).

.

(2)

Conforming amendment

Paragraph (3) of section 40A(f) is amended by striking (as defined in section 45K(c)(3)).

(e)

Eligibility of certain aviation fuel

Paragraph (3) of section 40A(f) (defining renewable diesel) is amended by adding at the end the following: The term renewable diesel also means fuel derived from biomass which meets the requirements of a Department of Defense specification for military jet fuel or an American Society of Testing and Materials specification for aviation turbine fuel.

(f)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to fuel produced, and sold or used, after December 31, 2008.

(2)

Coproduction of renewable diesel with petroleum feedstock

The amendments made by subsection (c) shall apply to fuel produced, and sold or used, after February 13, 2008.

123.

Clarification that credits for fuel are designed to provide an incentive for United States production

(a)

Alcohol fuels credit

Subsection (d) of section 40 is amended by adding at the end the following new paragraph:

(6)

Limitation to alcohol with connection to the United States

No credit shall be determined under this section with respect to any alcohol which is produced outside the United States for use as a fuel outside the United States. For purposes of this paragraph, the term United States includes any possession of the United States.

.

(b)

Biodiesel fuels credit

Subsection (d) of section 40A is amended by adding at the end the following new paragraph:

(5)

Limitation to biodiesel with connection to the United States

No credit shall be determined under this section with respect to any biodiesel which is produced outside the United States for use as a fuel outside the United States. For purposes of this paragraph, the term United States includes any possession of the United States.

.

(c)

Excise tax credit

(1)

In general

Section 6426 is amended by adding at the end the following new subsection:

(i)

Limitation to fuels with connection to the United States

(1)

Alcohol

No credit shall be determined under this section with respect to any alcohol which is produced outside the United States for use as a fuel outside the United States.

(2)

Biodiesel and alternative fuels

No credit shall be determined under this section with respect to any biodiesel or alternative fuel which is produced outside the United States for use as a fuel outside the United States.

For purposes of this subsection, the term United States includes any possession of the United States.

.

(2)

Conforming amendment

Subsection (e) of section 6427 is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph:

(5)

Limitation to fuels with connection to the United States

No amount shall be payable under paragraph (1) or (2) with respect to any mixture or alternative fuel if credit is not allowed with respect to such mixture or alternative fuel by reason of section 6426(i).

.

(d)

Effective date

The amendments made by this section shall apply to claims for credit or payment made on or after May 15, 2008.

124.

Credit for new qualified plug-in electric drive motor vehicles

(a)

In general

Subpart B of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section:

30D.

New qualified plug-in electric drive motor vehicles

(a)

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 credit amounts determined under subsection (b) with respect to each new qualified plug-in electric drive motor vehicle placed in service by the taxpayer during the taxable year.

(b)

Per vehicle dollar limitation

(1)

In general

The amount determined under this subsection with respect to any new qualified plug-in electric drive motor vehicle is the sum of the amounts determined under paragraphs (2) and (3) with respect to such vehicle.

(2)

Base amount

The amount determined under this paragraph is $3,000.

(3)

Battery capacity

In the case of a vehicle which draws propulsion energy from a battery with not less than 5 kilowatt hours of capacity, the amount determined under this paragraph is $200, plus $200 for each kilowatt hour of capacity in excess of 5 kilowatt hours. The amount determined under this paragraph shall not exceed $2,000.

(c)

Application with other credits

(1)

Business credit treated as part of general business credit

So much of the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) that is attributable to property of a character subject to an allowance for depreciation shall be treated as a credit listed in section 38(b) for such taxable year (and not allowed under subsection (a)).

(2)

Personal credit

(A)

In general

For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.

(B)

Limitation based on amount of tax

In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall not exceed the excess of—

(i)

the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

(ii)

the sum of the credits allowable under subpart A (other than this section and sections 23 and 25D) and section 27 for the taxable year.

(d)

New qualified plug-In electric drive motor vehicle

For purposes of this section—

(1)

In general

The term new qualified plug-in electric drive motor vehicle means a motor vehicle (as defined in section 30(c)(2))—

(A)

the original use of which commences with the taxpayer,

(B)

which is acquired for use or lease by the taxpayer and not for resale,

(C)

which is made by a manufacturer,

(D)

which has a gross vehicle weight rating of less than 14,000 pounds,

(E)

which has received a certificate of conformity under the Clean Air Act and meets or exceeds the Bin 5 Tier II emission standard 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, and

(F)

which is propelled to a significant extent by an electric motor which draws electricity from a battery which—

(i)

has a capacity of not less than 4 kilowatt hours, and

(ii)

is capable of being recharged from an external source of electricity.

(2)

Exception

The term new qualified plug-in electric drive motor vehicle shall not include any vehicle which is not a passenger automobile or light truck if such vehicle has a gross vehicle weight rating of less than 8,500 pounds.

(3)

Other terms

The terms passenger automobile, 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.).

(4)

Battery capacity

The term capacity means, with respect to any battery, the quantity of electricity which the battery is capable of storing, expressed in kilowatt hours, as measured from a 100 percent state of charge to a 0 percent state of charge.

(e)

Limitation on number of new qualified plug-In electric drive motor vehicles eligible for credit

(1)

In general

In the case of a new qualified plug-in electric drive motor vehicle sold during the phaseout period, only the applicable percentage of the credit otherwise allowable under subsection (a) shall be allowed.

(2)

Phaseout period

For purposes of this subsection, the phaseout period is the period beginning with the second calendar quarter following the calendar quarter which includes the first date on which the number of new qualified plug-in electric drive motor vehicles manufactured by the manufacturer of the vehicle referred to in paragraph (1) sold for use in the United States after the date of the enactment of this section, is at least 60,000.

(3)

Applicable percentage

For purposes of paragraph (1), the applicable percentage is—

(A)

50 percent for the first 2 calendar quarters of the phaseout period,

(B)

25 percent for the 3d and 4th calendar quarters of the phaseout period, and

(C)

0 percent for each calendar quarter thereafter.

(4)

Controlled groups

Rules similar to the rules of section 30B(f)(4) shall apply for purposes of this subsection.

(f)

Special rules

(1)

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 (determined without regard to subsection (c)).

(2)

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.

(3)

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)(1) or with respect to the portion of the cost of any property taken into account under section 179.

(4)

Election not to 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.

(5)

Property used by tax-exempt entity; interaction with air quality and motor vehicle safety standards

Rules similar to the rules of paragraphs (6) and (10) of section 30B(h) shall apply for purposes of this section.

.

(b)

Coordination with alternative motor vehicle credit

Section 30B(d)(3) is amended by adding at the end the following new subparagraph:

(D)

Exclusion of plug-in vehicles

Any vehicle with respect to which a credit is allowable under section 30D (determined without regard to subsection (c) thereof) shall not be taken into account under this section.

.

(c)

Credit made part of general business credit

Section 38(b) is amended—

(1)

by striking and each place it appears at the end of any paragraph,

(2)

by striking plus each place it appears at the end of any paragraph,

(3)

by striking the period at the end of paragraph (31) and inserting ‘‘, plus’’, and

(4)

by adding at the end the following new paragraph:

(32)

the portion of the new qualified plug-in electric drive motor vehicle credit to which section 30D(c)(1) applies.

.

(d)

Conforming amendments

(1)
(A)

Section 24(b)(3)(B), as amended by section 104, is amended by striking and 25D and inserting 25D, and 30D.

(B)

Section 25(e)(1)(C)(ii) is amended by inserting 30D, after 25D,.

(C)

Section 25B(g)(2), as amended by section 104, is amended by striking and 25D and inserting , 25D, and 30D.

(D)

Section 26(a)(1), as amended by section 104, is amended by striking and 25D and inserting 25D, and 30D.

(E)

Section 1400C(d)(2) is amended by striking and 25D and inserting 25D, and 30D.

(2)

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:

(37)

to the extent provided in section 30D(f)(1).

.

(3)

Section 6501(m) is amended by inserting 30D(f)(4), after 30C(e)(5),.

(4)

The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

Sec. 30D. New qualified plug-in electric drive motor vehicles.

.

(e)

Treatment of alternative motor vehicle credit as a personal credit

(1)

In general

Paragraph (2) of section 30B(g) is amended to read as follows:

(2)

Personal credit

The credit allowed under subsection (a) for any taxable year (after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.

.

(2)

Conforming amendments

(A)

Subparagraph (A) of section 30C(d)(2) is amended by striking sections 27, 30, and 30B and inserting sections 27 and 30.

(B)

Paragraph (3) of section 55(c) is amended by striking 30B(g)(2),.

(f)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2008.

(2)

Treatment of alternative motor vehicle credit as personal credit

The amendments made by subsection (e) shall apply to taxable years beginning after December 31, 2007.

(g)

Application of EGTRRA sunset

The amendment made by subsection (d)(1)(A) shall be subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 in the same manner as the provision of such Act to which such amendment relates.

125.

Exclusion from heavy truck tax for idling reduction units and advanced insulation

(a)

In general

Section 4053 is amended by adding at the end the following new paragraphs:

(9)

Idling reduction device

Any device or system of devices which—

(A)

is designed to provide to a vehicle those services (such as heat, air conditioning, or electricity) that would otherwise require the operation of the main drive engine while the vehicle is temporarily parked or remains stationary using one or more devices affixed to a tractor, and

(B)

is certified by the Secretary of Energy, in consultation with the Administrator of the Environmental Protection Agency and the Secretary of Transportation, to reduce idling of such vehicle at a motor vehicle rest stop or other location where such vehicles are temporarily parked or remain stationary.

(10)

Advanced insulation

Any insulation that has an R value of not less than R35 per inch.

.

(b)

Effective date

The amendment made by this section shall apply to sales or installations after the date of the enactment of this Act.

126.

Restructuring of New York Liberty Zone tax credits

(a)

In general

Part I of subchapter Y of chapter 1 is amended by redesignating section 1400L as section 1400K and by adding at the end the following new section:

1400L.

New York Liberty Zone tax credits

(a)

In general

In the case of a New York Liberty Zone governmental unit, there shall be allowed as a credit against any taxes imposed for any payroll period by section 3402 for which such governmental unit is liable under section 3403 an amount equal to so much of the portion of the qualifying project expenditure amount allocated under subsection (b)(3) to such governmental unit for the calendar year as is allocated by such governmental unit to such period under subsection (b)(4).

(b)

Qualifying project expenditure amount

For purposes of this section—

(1)

In general

The term qualifying project expenditure amount means, with respect to any calendar year, the sum of—

(A)

the total expenditures paid or incurred during such calendar year by all New York Liberty Zone governmental units and the Port Authority of New York and New Jersey for any portion of qualifying projects located wholly within the City of New York, New York, and

(B)

any such expenditures—

(i)

paid or incurred in any preceding calendar year which begins after the date of enactment of this section, and

(ii)

not previously allocated under paragraph (3).

(2)

Qualifying project

The term qualifying project means any transportation infrastructure project, including highways, mass transit systems, railroads, airports, ports, and waterways, in or connecting with the New York Liberty Zone (as defined in section 1400K(h)), which is designated as a qualifying project under this section jointly by the Governor of the State of New York and the Mayor of the City of New York, New York.

(3)

General allocation

(A)

In general

The Governor of the State of New York and the Mayor of the City of New York, New York, shall jointly allocate to each New York Liberty Zone governmental unit the portion of the qualifying project expenditure amount which may be taken into account by such governmental unit under subsection (a) for any calendar year in the credit period.

(B)

Aggregate limit

The aggregate amount which may be allocated under subparagraph (A) for all calendar years in the credit period shall not exceed $2,000,000,000.

(C)

Annual limit

The aggregate amount which may be allocated under subparagraph (A) for any calendar year in the credit period shall not exceed the sum of—

(i)

$115,000,000 ($425,000,000 in the case of the last 2 years in the credit period), plus

(ii)

the aggregate amount authorized to be allocated under this paragraph for all preceding calendar years in the credit period which was not so allocated.

(D)

Unallocated amounts at end of credit period

If, as of the close of the credit period, the amount under subparagraph (B) exceeds the aggregate amount allocated under subparagraph (A) for all calendar years in the credit period, the Governor of the State of New York and the Mayor of the City of New York, New York, may jointly allocate to New York Liberty Zone governmental units for any calendar year in the 5-year period following the credit period an amount equal to—

(i)

the lesser of—

(I)

such excess, or

(II)

the qualifying project expenditure amount for such calendar year, reduced by

(ii)

the aggregate amount allocated under this subparagraph for all preceding calendar years.

(4)

Allocation to payroll periods

Each New York Liberty Zone governmental unit which has been allocated a portion of the qualifying project expenditure amount under paragraph (3) for a calendar year may allocate such portion to payroll periods beginning in such calendar year as such governmental unit determines appropriate.

(c)

Carryover of unused allocations

(1)

In general

Except as provided in paragraph (2), if the amount allocated under subsection (b)(3) to a New York Liberty Zone governmental unit for any calendar year exceeds the aggregate taxes imposed by section 3402 for which such governmental unit is liable under section 3403 for periods beginning in such year, such excess shall be carried to the succeeding calendar year and added to the allocation of such governmental unit for such succeeding calendar year.

(2)

Reallocation

If a New York Liberty Zone governmental unit does not use an amount allocated to it under subsection (b)(3) within the time prescribed by the Governor of the State of New York and the Mayor of the City of New York, New York, then such amount shall after such time be treated for purposes of subsection (b)(3) in the same manner as if it had never been allocated.

(d)

Definitions and special rules

For purposes of this section—

(1)

Credit period

The term credit period means the 12-year period beginning on January 1, 2009.

(2)

New York liberty zone governmental unit

The term New York Liberty Zone governmental unit means—

(A)

the State of New York,

(B)

the City of New York, New York, and

(C)

any agency or instrumentality of such State or City.

(3)

Treatment of funds

Any expenditure for a qualifying project taken into account for purposes of the credit under this section shall be considered State and local funds for the purpose of any Federal program.

(4)

Treatment of credit amounts for purposes of withholding taxes

For purposes of this title, a New York Liberty Zone governmental unit shall be treated as having paid to the Secretary, on the day on which wages are paid to employees, an amount equal to the amount of the credit allowed to such entity under subsection (a) with respect to such wages, but only if such governmental unit deducts and withholds wages for such payroll period under section 3401 (relating to wage withholding).

(e)

Reporting

The Governor of the State of New York and the Mayor of the City of New York, New York, shall jointly submit to the Secretary an annual report—

(1)

which certifies—

(A)

the qualifying project expenditure amount for the calendar year, and

(B)

the amount allocated to each New York Liberty Zone governmental unit under subsection (b)(3) for the calendar year, and

(2)

includes such other information as the Secretary may require to carry out this section.

(f)

Guidance

The Secretary may prescribe such guidance as may be necessary or appropriate to ensure compliance with the purposes of this section.

.

(b)

Termination of special allowance and expensing

Subparagraph (A) of section 1400K(b)(2), as redesignated by subsection (a), is amended by striking the parenthetical therein and inserting (in the case of nonresidential real property and residential rental property, the date of the enactment of the Renewable Energy and Job Creation Act of 2008 or, if acquired pursuant to a binding contract in effect on such enactment date, December 31, 2009).

(c)

Conforming amendments

(1)

Section 38(c)(3)(B) is amended by striking section 1400L(a) and inserting section 1400K(a).

(2)

Section 168(k)(2)(D)(ii) is amended by striking section 1400L(c)(2) and inserting section 1400K(c)(2).

(3)

The table of sections for part I of subchapter Y of chapter 1 is amended by redesignating the item relating to section 1400L as an item relating to section 1400K and by inserting after such item the following new item:

Sec. 1400L. New York Liberty Zone tax credits.

.

(d)

Effective date

The amendments made by this section shall take effect on the date of the enactment of this Act.

127.

Transportation fringe benefit to bicycle commuters

(a)

In general

Paragraph (1) of section 132(f) is amended by adding at the end the following:

(D)

Any qualified bicycle commuting reimbursement.

.

(b)

Limitation on exclusion

Paragraph (2) of section 132(f) is amended by striking and at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting , and, and by adding at the end the following new subparagraph:

(C)

the applicable annual limitation in the case of any qualified bicycle commuting reimbursement.

.

(c)

Definitions

Paragraph (5) of section 132(f) is amended by adding at the end the following:

(F)

Definitions related to bicycle commuting reimbursement

(i)

Qualified bicycle commuting reimbursement

The term qualified bicycle commuting reimbursement means, with respect to any calendar year, any employer reimbursement during the 15-month period beginning with the first day of such calendar year for reasonable expenses incurred by the employee during such calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if such bicycle is regularly used for travel between the employee’s residence and place of employment.

(ii)

Applicable annual limitation

The term applicable annual limitation means, with respect to any employee for any calendar year, the product of $20 multiplied by the number of qualified bicycle commuting months during such year.

(iii)

Qualified bicycle commuting month

The term qualified bicycle commuting month means, with respect to any employee, any month during which such employee—

(I)

regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and place of employment, and

(II)

does not receive any benefit described in subparagraph (A), (B), or (C) of paragraph (1).

.

(d)

Constructive receipt of benefit

Paragraph (4) of section 132(f) is amended by inserting (other than a qualified bicycle commuting reimbursement) after qualified transportation fringe.

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

128.

Alternative fuel vehicle refueling property credit

(a)

Increase in credit amount

Section 30C is amended—

(1)

by striking 30 percent in subsection (a) and inserting 50 percent, and

(2)

by striking $30,000 in subsection (b)(1) and inserting $50,000.

(b)

Extension of credit

Paragraph (2) of section 30C(g) is amended by striking December 31, 2009 and inserting December 31, 2010.

(c)

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.

C

Energy conservation and efficiency provisions

141.

Qualified energy conservation bonds

(a)

In general

Subpart I of part IV of subchapter A of chapter 1, as added by section 106, is amended by adding at the end the following new section:

54C.

Qualified energy conservation bonds

(a)

Qualified energy conservation bond

For purposes of this subchapter, the term qualified energy conservation bond means any bond issued as part of an issue if—

(1)

100 percent of the available project proceeds of such issue are to be used for one or more qualified conservation purposes,

(2)

the bond is issued by a State or local government, and

(3)

the issuer designates such bond for purposes of this section.

(b)

Reduced credit amount

The annual credit determined under section 54A(b) with respect to any qualified energy conservation bond shall be 70 percent of the amount so determined without regard to this subsection.

(c)

Limitation on amount of bonds designated

The maximum aggregate face amount of bonds which may be designated under subsection (a) by any issuer shall not exceed the limitation amount allocated to such issuer under subsection (e).

(d)

National limitation on amount of bonds designated

There is a national qualified energy conservation bond limitation of $3,000,000,000.

(e)

Allocations

(1)

In general

The limitation applicable under subsection (d) shall be allocated by the Secretary among the States in proportion to the population of the States.

(2)

Allocations to largest local governments

(A)

In general

In the case of any State in which there is a large local government, each such local government shall be allocated a portion of such State’s allocation which bears the same ratio to the State’s allocation (determined without regard to this subparagraph) as the population of such large local government bears to the population of such State.

(B)

Allocation of unused limitation to State

The amount allocated under this subsection to a large local government may be reallocated by such local government to the State in which such local government is located.

(C)

Large local government

For purposes of this section, the term large local government means any municipality or county if such municipality or county has a population of 100,000 or more.

(3)

Allocation to issuers; restriction on private activity bonds

Any allocation under this subsection to a State or large local government shall be allocated by such State or large local government to issuers within the State in a manner that results in not less than 70 percent of the allocation to such State or large local government being used to designate bonds which are not private activity bonds.

(f)

Qualified conservation purpose

For purposes of this section—

(1)

In general

The term qualified conservation purpose means any of the following:

(A)

Capital expenditures incurred for purposes of—

(i)

reducing energy consumption in publicly-owned buildings by at least 20 percent,

(ii)

implementing green community programs,

(iii)

rural development involving the production of electricity from renewable energy resources, or

(iv)

any qualified facility (as determined under section 45(d) without regard to paragraphs (8) and (10) thereof and without regard to any placed in service date).

(B)

Expenditures with respect to research facilities, and research grants, to support research in—

(i)

development of cellulosic ethanol or other nonfossil fuels,

(ii)

technologies for the capture and sequestration of carbon dioxide produced through the use of fossil fuels,

(iii)

increasing the efficiency of existing technologies for producing nonfossil fuels,

(iv)

automobile battery technologies and other technologies to reduce fossil fuel consumption in transportation, or

(v)

technologies to reduce energy use in buildings.

(C)

Mass commuting facilities and related facilities that reduce the consumption of energy, including expenditures to reduce pollution from vehicles used for mass commuting.

(D)

Demonstration projects designed to promote the commercialization of—

(i)

green building technology,

(ii)

conversion of agricultural waste for use in the production of fuel or otherwise,

(iii)

advanced battery manufacturing technologies,

(iv)

technologies to reduce peak use of electricity, or

(v)

technologies for the capture and sequestration of carbon dioxide emitted from combusting fossil fuels in order to produce electricity.

(E)

Public education campaigns to promote energy efficiency.

(2)

Special rules for private activity bonds

For purposes of this section, in the case of any private activity bond, the term qualified conservation purposes shall not include any expenditure which is not a capital expenditure.

(g)

Population

(1)

In general

The population of any State or local government shall be determined for purposes of this section as provided in section 146(j) for the calendar year which includes the date of the enactment of this section.

(2)

Special rule for counties

In determining the population of any county for purposes of this section, any population of such county which is taken into account in determining the population of any municipality which is a large local government shall not be taken into account in determining the population of such county.

(h)

Application to Indian tribal governments

An Indian tribal government shall be treated for purposes of this section in the same manner as a large local government, except that—

(1)

an Indian tribal government shall be treated for purposes of subsection (e) as located within a State to the extent of so much of the population of such government as resides within such State, and

(2)

any bond issued by an Indian tribal government shall be treated as a qualified energy conservation bond only if issued as part of an issue the available project proceeds of which are used for purposes for which such Indian tribal government could issue bonds to which section 103(a) applies.

.

(b)

Conforming amendments

(1)

Paragraph (1) of section 54A(d), as added by section 106, is amended to read as follows:

(1)

Qualified tax credit bond

The term qualified tax credit bond means—

(A)

a new clean renewable energy bond, or

(B)

a qualified energy conservation bond,

which is part of an issue that meets requirements of paragraphs (2), (3), (4), (5), and (6).

.

(2)

Subparagraph (C) of section 54A(d)(2), as added by section 106, is amended to read as follows:

(C)

Qualified purpose

For purposes of this paragraph, the term qualified purpose means—

(i)

in the case of a new clean renewable energy bond, a purpose specified in section 54B(a)(1), and

(ii)

in the case of a qualified energy conservation bond, a purpose specified in section 54C(a)(1).

.

(3)

The table of sections for subpart I of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

Sec. 54C. Qualified energy conservation bonds.

.

(c)

Effective date

The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.

142.

Credit for nonbusiness energy property

(a)

Extension of credit

Section 25C(g) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Qualified biomass fuel property

(1)

In general

Section 25C(d)(3) is amended—

(A)

by striking and at the end of subparagraph (D),

(B)

by striking the period at the end of subparagraph (E) and inserting , and, and

(C)

by adding at the end the following new subparagraph:

(F)

a stove which uses the burning of biomass fuel to heat a dwelling unit located in the United States and used as a residence by the taxpayer, or to heat water for use in such a dwelling unit, and which has a thermal efficiency rating of at least 75 percent.

.

(2)

Biomass fuel

Section 25C(d) is amended by adding at the end the following new paragraph:

(6)

Biomass fuel

The term biomass fuel means any plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers.

.

(c)

Coordination with credit for qualified geothermal heat Pump property expenditures

(1)

In general

Paragraph (3) of section 25C(d), as amended by subsection (b), is amended by striking subparagraph (C) and by redesignating subparagraphs (D), (E), and (F) as subparagraphs (C), (D), and (E), respectively.

(2)

Conforming amendment

Subparagraph (C) of section 25C(d)(2) is amended to read as follows:

(C)

Requirements and standards for air conditioners and heat pumps

The standards and requirements prescribed by the Secretary under subparagraph (B) with respect to the energy efficiency ratio (EER) for central air conditioners and electric heat pumps—

(i)

shall require measurements to be based on published data which is tested by manufacturers at 95 degrees Fahrenheit, and

(ii)

may be based on the certified data of the Air Conditioning and Refrigeration Institute that are prepared in partnership with the Consortium for Energy Efficiency.

.

(d)

Effective date

The amendments made this section shall apply to expenditures made after December 31, 2007.

143.

Energy efficient commercial buildings deduction

Subsection (h) of section 179D is amended by striking December 31, 2008 and inserting December 31, 2013.

144.

Modifications of energy efficient appliance credit for appliances produced after 2007

(a)

In general

Subsection (b) of section 45M is amended to read as follows:

(b)

Applicable amount

For purposes of subsection (a)—

(1)

Dishwashers

The applicable amount is—

(A)

$45 in the case of a dishwasher which is manufactured in calendar year 2008 or 2009 and which uses no more than 324 kilowatt hours per year and 5.8 gallons per cycle, and

(B)

$75 in the case of a dishwasher which is manufactured in calendar year 2008, 2009, or 2010 and which uses no more than 307 kilowatt hours per year and 5.0 gallons per cycle (5.5 gallons per cycle for dishwashers designed for greater than 12 place settings).

(2)

Clothes washers

The applicable amount is—

(A)

$75 in the case of a residential top-loading clothes washer manufactured in calendar year 2008 which meets or exceeds a 1.72 modified energy factor and does not exceed a 8.0 water consumption factor,

(B)

$125 in the case of a residential top-loading clothes washer manufactured in calendar year 2008 or 2009 which meets or exceeds a 1.8 modified energy factor and does not exceed a 7.5 water consumption factor,

(C)

$150 in the case of a residential or commercial clothes washer manufactured in calendar year 2008, 2009, or 2010 which meets or exceeds 2.0 modified energy factor and does not exceed a 6.0 water consumption factor, and

(D)

$250 in the case of a residential or commercial clothes washer manufactured in calendar year 2008, 2009, or 2010 which meets or exceeds 2.2 modified energy factor and does not exceed a 4.5 water consumption factor.

(3)

Refrigerators

The applicable amount is—

(A)

$50 in the case of a refrigerator which is manufactured in calendar year 2008, and consumes at least 20 percent but not more than 22.9 percent less kilowatt hours per year than the 2001 energy conservation standards,

(B)

$75 in the case of a refrigerator which is manufactured in calendar year 2008 or 2009, and consumes at least 23 percent but no more than 24.9 percent less kilowatt hours per year than the 2001 energy conservation standards,

(C)

$100 in the case of a refrigerator which is manufactured in calendar year 2008, 2009, or 2010, and consumes at least 25 percent but not more than 29.9 percent less kilowatt hours per year than the 2001 energy conservation standards, and

(D)

$200 in the case of a refrigerator manufactured in calendar year 2008, 2009, or 2010 and which consumes at least 30 percent less energy than the 2001 energy conservation standards.

.

(b)

Eligible production

(1)

Similar treatment for all appliances

Subsection (c) of section 45M is amended—

(A)

by striking paragraph (2),

(B)

by striking (1) In general and all that follows through the eligible and inserting The eligible,

(C)

by moving the text of such subsection in line with the subsection heading, and

(D)

by redesignating subparagraphs (A) and (B) as paragraphs (1) and (2), respectively, and by moving such paragraphs 2 ems to the left.

(2)

Modification of base period

Paragraph (2) of section 45M(c), as amended by paragraph (1), is amended by striking 3-calendar year and inserting 2-calendar year.

(c)

Types of energy efficient appliances

Subsection (d) of section 45M (defining types of energy efficient appliances) is amended to read as follows:

(d)

Types of energy efficient appliance

For purposes of this section, the types of energy efficient appliances are—

(1)

dishwashers described in subsection (b)(1),

(2)

clothes washers described in subsection (b)(2), and

(3)

refrigerators described in subsection (b)(3).

.

(d)

Aggregate credit amount allowed

(1)

Increase in limit

Paragraph (1) of section 45M(e) is amended to read as follows:

(1)

Aggregate credit amount allowed

The aggregate amount of credit allowed under subsection (a) with respect to a taxpayer for any taxable year shall not exceed $75,000,000 reduced by the amount of the credit allowed under subsection (a) to the taxpayer (or any predecessor) for all prior taxable years beginning after December 31, 2007.

.

(2)

Exception for certain refrigerator and clothes washers

Paragraph (2) of section 45M(e) is amended to read as follows:

(2)

Amount allowed for certain refrigerators and clothes washers

Refrigerators described in subsection (b)(3)(D) and clothes washers described in subsection (b)(2)(D) shall not be taken into account under paragraph (1).

.

(e)

Qualified energy efficient appliances

(1)

In general

Paragraph (1) of section 45M(f) (defining qualified energy efficient appliance) is amended to read as follows:

(1)

Qualified energy efficient appliance

The term qualified energy efficient appliance means—

(A)

any dishwasher described in subsection (b)(1),

(B)

any clothes washer described in subsection (b)(2), and

(C)

any refrigerator described in subsection (b)(3).

.

(2)

Clothes washer

Section 45M(f)(3) is amended by inserting commercial before residential the second place it appears.

(3)

Top-loading clothes washer

Subsection (f) of section 45M is amended by redesignating paragraphs (4), (5), (6), and (7) as paragraphs (5), (6), (7), and (8), respectively, and by inserting after paragraph (3) the following new paragraph:

(4)

Top-loading clothes washer

The term top-loading clothes washer means a clothes washer which has the clothes container compartment access located on the top of the machine and which operates on a vertical axis.

.

(4)

Replacement of energy factor

Section 45M(f)(6), as redesignated by paragraph (3), is amended to read as follows:

(6)

Modified energy factor

The term modified energy factor means the modified energy factor established by the Department of Energy for compliance with the Federal energy conservation standard.

.

(5)

Gallons per cycle; water consumption factor

Section 45M(f), as amended by paragraph (3), is amended by adding at the end the following:

(9)

Gallons per cycle

The term gallons per cycle means, with respect to a dishwasher, the amount of water, expressed in gallons, required to complete a normal cycle of a dishwasher.

(10)

Water consumption factor

The term water consumption factor means, with respect to a clothes washer, the quotient of the total weighted per-cycle water consumption divided by the cubic foot (or liter) capacity of the clothes washer.

.

(f)

Effective date

The amendments made by this section shall apply to appliances produced after December 31, 2007.

145.

Accelerated recovery period for depreciation of smart meters and smart grid systems

(a)

In general

Section 168(e)(3)(D) is amended by striking and at the end of clause (i), by striking the period at the end of clause (ii) and inserting a comma, and by inserting after clause (ii) the following new clauses:

(iii)

any qualified smart electric meter, and

(iv)

any qualified smart electric grid system.

.

(b)

Definitions

Section 168(i) is amended by inserting at the end the following new paragraph:

(18)

Qualified smart electric meters

(A)

In general

The term qualified smart electric meter means any smart electric meter which is placed in service by a taxpayer who is a supplier of electric energy or a provider of electric energy services.

(B)

Smart electric meter

For purposes of subparagraph (A), the term smart electric meter means any time-based meter and related communication equipment which is capable of being used by the taxpayer as part of a system that—

(i)

measures and records electricity usage data on a time-differentiated basis in at least 24 separate time segments per day,

(ii)

provides for the exchange of information between supplier or provider and the customer’s electric meter in support of time-based rates or other forms of demand response,

(iii)

provides data to such supplier or provider so that the supplier or provider can provide energy usage information to customers electronically, and

(iv)

provides net metering.

(19)

Qualified smart electric grid systems

(A)

In general

The term qualified smart electric grid system means any smart grid property used as part of a system for electric distribution grid communications, monitoring, and management placed in service by a taxpayer who is a supplier of electric energy or a provider of electric energy services.

(B)

Smart grid property

For the purposes of subparagraph (A), the term smart grid property means electronics and related equipment that is capable of—

(i)

sensing, collecting, and monitoring data of or from all portions of a utility’s electric distribution grid,

(ii)

providing real-time, two-way communications to monitor or manage such grid, and

(iii)

providing real time analysis of and event prediction based upon collected data that can be used to improve electric distribution system reliability, quality, and performance.

.

(c)

Continued application of 150 percent declining balance method

Paragraph (2) of section 168(b) is amended by striking or at the end of subparagraph (B), by redesignating subparagraph (C) as subparagraph (D), and by inserting after subparagraph (B) the following new subparagraph:

(C)

any property (other than property described in paragraph (3)) which is a qualified smart electric meter or qualified smart electric grid system, or

.

(d)

Effective date

The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.

146.

Qualified green building and sustainable design projects

(a)

In general

Paragraph (8) of section 142(l) is amended by striking September 30, 2009 and inserting September 30, 2012.

(b)

Treatment of current refunding bonds

Paragraph (9) of section 142(l) is amended by striking October 1, 2009 and inserting October 1, 2012.

(c)

Accountability

The second sentence of section 701(d) of the American Jobs Creation Act of 2004 is amended by striking issuance, and inserting issuance of the last issue with respect to such project,.

II

One-year extension of temporary provisions

A

Extensions Primarily Affecting Individuals

201.

Deduction for State and local sales taxes

(a)

In general

Subparagraph (I) of section 164(b)(5) is amended by striking January 1, 2008 and inserting January 1, 2009.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2007.

202.

Deduction of qualified tuition and related expenses

(a)

In general

Subsection (e) of section 222 is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2007.

203.

Treatment of certain dividends of regulated investment companies

(a)

Interest-related dividends

Subparagraph (C) of section 871(k)(1) (defining interest-related dividend) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Short-term capital gain dividends

Subparagraph (C) of section 871(k)(2) (defining short-term capital gain dividend) is amended by striking December 31, 2007 and inserting December 31, 2008.

(c)

Effective date

The amendments made by this section shall apply to dividends with respect to taxable years of regulated investment companies beginning after December 31, 2007.

204.

Tax-free distributions from individual retirement plans for charitable purposes

(a)

In general

Subparagraph (F) of section 408(d)(8) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to distributions made in taxable years beginning after December 31, 2007.

205.

Deduction for certain expenses of elementary and secondary school teachers

(a)

In general

Subparagraph (D) of section 62(a)(2) is amended by striking or 2007 and inserting 2007, or 2008.

(b)

Effective date

The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2007.

206.

Election to include combat pay as earned income for purposes of earned income tax credit

(a)

In general

Subclause (II) of section 32(c)(2)(B)(vi) (defining earned income) is amended by striking January 1, 2008 and inserting January 1, 2009.

(b)

Conforming amendment

Paragraph (4) of section 6428(e) is amended by striking except that and all that follows through such term and inserting except that such term.

(c)

Effective date

The amendment made by this section shall apply to taxable years ending after December 31, 2007.

207.

Modification of mortgage revenue bonds for veterans

(a)

Qualified mortgage bonds used To finance residences for veterans without regard to first-time homebuyer requirement

Subparagraph (D) of section 143(d)(2) is amended by striking January 1, 2008 and inserting January 1, 2009.

(b)

Effective date

The amendment made by this section shall apply to bonds issued after December 31, 2007.

208.

Distributions from retirement plans to individuals called to active duty

(a)

In general

Clause (iv) of section 72(t)(2)(G) is amended by striking December 31, 2007 and inserting January 1, 2009.

(b)

Effective date

The amendment made by this section shall apply to individuals ordered or called to active duty on or after December 31, 2007.

209.

Stock in RIC for purposes of determining estates of nonresidents not citizens

(a)

In general

Paragraph (3) of section 2105(d) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to decedents dying after December 31, 2007.

210.

Qualified investment entities

(a)

In general

Clause (ii) of section 897(h)(4)(A) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by subsection (a) shall take effect on January 1, 2008, except that such amendment shall not apply to the application of withholding requirements with respect to any payment made on or before the date of the enactment of this Act.

211.

Exclusion of amounts received under qualified group legal services plans

(a)

In general

Subsection (e) of section 120 is amended by striking shall not apply to taxable years beginning after June 30, 1992 and inserting shall apply to taxable years beginning after December 31, 2007, and before January 1, 2009.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

B

Extensions Primarily Affecting Businesses

221.

Research credit

(a)

In general

Subparagraph (B) of section 41(h)(1) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Computation of credit for taxable year in which credit terminates

Paragraph (2) of section 41(h) is amended to read as follows:

(2)

Computation of credit for taxable year in which credit terminates

(A)

In general

In the case of any taxable year with respect to which this section applies to a number of days which is less than the total number of days in such taxable year, the applicable base amount with respect to such taxable year shall be the amount which bears the same ratio to such applicable amount (determined without regard to this paragraph) as the number of days in such taxable year to which this section applies bears to the total number of days in such taxable year.

(B)

Applicable base amount

For purposes of subparagraph (A), the term applicable base amount means, with respect to any taxable year—

(i)

except as otherwise provided in this subparagraph, the base amount for the taxable year,

(ii)

in the case of a taxable year with respect to which an election under subsection (c)(4) (relating to election of alternative incremental credit) is in effect, the average described in subsection (c)(1)(B) for the taxable year, and

(iii)

in the case of a taxable year with respect to which an election under subsection (c)(5) (relating to election of alternative simplified credit) is in effect, the average qualified research expenses for the 3 taxable years preceding the taxable year.

.

(c)

Conforming amendment

Subparagraph (D) of section 45C(b)(1) is amended by striking December 31, 2007 and inserting December 31, 2008.

(d)

Effective date

The amendments made by this section shall apply to amounts paid or incurred after December 31, 2007.

222.

Indian employment credit

(a)

In general

Subsection (f) of section 45A is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2007.

223.

New markets tax credit

Subparagraph (D) of section 45D(f)(1) is amended by striking and 2008 and inserting 2008, and 2009.

224.

Railroad track maintenance

(a)

In general

Subsection (f) of section 45G is amended by striking January 1, 2008 and inserting January 1, 2009.

(b)

Effective date

The amendment made by this section shall apply to expenditures paid or incurred during taxable years beginning after December 31, 2007.

225.

Fifteen-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant property

(a)

In general

Clauses (iv) and (v) of section 168(e)(3)(E) are each amended by striking January 1, 2008 and inserting January 1, 2009.

(b)

Effective date

The amendments made by this section shall apply to property placed in service after December 31, 2007.

226.

Seven-year cost recovery period for motorsports racing track facility

(a)

In general

Subparagraph (D) of section 168(i)(15) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to property placed in service after December 31, 2007.

227.

Accelerated depreciation for business property on Indian reservation

(a)

In general

Paragraph (8) of section 168(j) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to property placed in service after December 31, 2007.

228.

Expensing of environmental remediation costs

(a)

In general

Subsection (h) of section 198 is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to expenditures paid or incurred after December 31, 2007.

229.

Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico

(a)

In general

Subparagraph (C) of section 199(d)(8) is amended—

(1)

by striking first 2 taxable years and inserting first 3 taxable years, and

(2)

by striking January 1, 2008 and inserting January 1, 2009.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

230.

Modification of tax treatment of certain payments to controlling exempt organizations

(a)

In general

Clause (iv) of section 512(b)(13)(E) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to payments received or accrued after December 31, 2007.

231.

Qualified zone academy bonds

(a)

In general

Subpart I of part IV of subchapter A of chapter 1, as amended by sections 106 and 141, is amended by adding at the end the following new section:

54D.

Qualified zone academy bonds

(a)

Qualified zone academy bonds

For purposes of this subchapter, the term qualified zone academy bond means any bond issued as part of an issue if—

(1)

100 percent of the available project proceeds of such issue are to be used for a qualified purpose with respect to a qualified zone academy established by an eligible local education agency,

(2)

the bond is issued by a State or local government within the jurisdiction of which such academy is located, and

(3)

the issuer—

(A)

designates such bond for purposes of this section,

(B)

certifies that it has written assurances that the private business contribution requirement of subsection (b) will be met with respect to such academy, and

(C)

certifies that it has the written approval of the eligible local education agency for such bond issuance.

(b)

Private business contribution requirement

For purposes of subsection (a), the private business contribution requirement of this subsection is met with respect to any issue if the eligible local education agency that established the qualified zone academy has written commitments from private entities to make qualified contributions having a present value (as of the date of issuance of the issue) of not less than 10 percent of the proceeds of the issue.

(c)

Limitation on amount of bonds designated

(1)

National limitation

There is a national zone academy bond limitation for each calendar year. Such limitation is $400,000,000 for 2008, and, except as provided in paragraph (4), zero thereafter.

(2)

Allocation of limitation

The national zone academy bond limitation for a calendar year shall be allocated by the Secretary among the States on the basis of their respective populations of individuals below the poverty line (as defined by the Office of Management and Budget). The limitation amount allocated to a State under the preceding sentence shall be allocated by the State education agency to qualified zone academies within such State.

(3)

Designation subject to limitation amount

The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (a) with respect to any qualified zone academy shall not exceed the limitation amount allocated to such academy under paragraph (2) for such calendar year.

(4)

Carryover of unused limitation

(A)

In general

If for any calendar year—

(i)

the limitation amount for any State, exceeds

(ii)

the amount of bonds issued during such year which are designated under subsection (a) with respect to qualified zone academies within such State,

the limitation amount for such State for the following calendar year shall be increased by the amount of such excess.
(B)

Limitation on carryover

Any carryforward of a limitation amount may be carried only to the first 2 years following the unused limitation year. For purposes of the preceding sentence, a limitation amount shall be treated as used on a first-in first-out basis.

(C)

Coordination with section 1397E

Any carryover determined under section 1397E(e)(4) (relating to carryover of unused limitation) with respect to any State to calendar year 2008 shall be treated for purposes of this section as a carryover with respect to such State for such calendar year under subparagraph (A), and the limitation of subparagraph (B) shall apply to such carryover taking into account the calendar years to which such carryover relates.

(d)

Definitions

For purposes of this section—

(1)

Qualified zone academy

The term qualified zone academy means any public school (or academic program within a public school) which is established by and operated under the supervision of an eligible local education agency to provide education or training below the postsecondary level if—

(A)

such public school or program (as the case may be) is designed in cooperation with business to enhance the academic curriculum, increase graduation and employment rates, and better prepare students for the rigors of college and the increasingly complex workforce,

(B)

students in such public school or program (as the case may be) will be subject to the same academic standards and assessments as other students educated by the eligible local education agency,

(C)

the comprehensive education plan of such public school or program is approved by the eligible local education agency, and

(D)
(i)

such public school is located in an empowerment zone or enterprise community (including any such zone or community designated after the date of the enactment of this section), or

(ii)

there is a reasonable expectation (as of the date of issuance of the bonds) that at least 35 percent of the students attending such school or participating in such program (as the case may be) will be eligible for free or reduced-cost lunches under the school lunch program established under the National School Lunch Act.

(2)

Eligible local education agency

For purposes of this section, the term eligible local education agency means any local educational agency as defined in section 9101 of the Elementary and Secondary Education Act of 1965.

(3)

Qualified purpose

The term qualified purpose means, with respect to any qualified zone academy—

(A)

rehabilitating or repairing the public school facility in which the academy is established,

(B)

providing equipment for use at such academy,

(C)

developing course materials for education to be provided at such academy, and

(D)

training teachers and other school personnel in such academy.

(4)

Qualified contributions

The term qualified contribution means any contribution (of a type and quality acceptable to the eligible local education agency) of—

(A)

equipment for use in the qualified zone academy (including state-of-the-art technology and vocational equipment),

(B)

technical assistance in developing curriculum or in training teachers in order to promote appropriate market driven technology in the classroom,

(C)

services of employees as volunteer mentors,

(D)

internships, field trips, or other educational opportunities outside the academy for students, or

(E)

any other property or service specified by the eligible local education agency.

.

(b)

Conforming amendments

(1)

Paragraph (1) of section 54A(d), as amended by sections 106 and 141, is amended by striking or at the end of subparagraph (A), by inserting or at the end of subparagraph (B), and by inserting after subparagraph (B) the following new subparagraph:

(C)

a qualified zone academy bond,

.

(2)

Subparagraph (C) of section 54A(d)(2), as amended by sections 106 and 141, is amended by striking and at the end of clause (i), by striking the period at the end of clause (ii) and inserting , and, and by adding at the end the following new clause:

(iii)

in the case of a qualified zone academy bond, a purpose specified in section 54D(a)(1).

.

(3)

Section 1397E is amended by adding at the end the following new subsection:

(m)

Termination

This section shall not apply to any obligation issued after the date of the enactment of this Act.

.

(4)

The table of sections for subpart I of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

Sec. 54D. Qualified zone academy bonds.

.

(c)

Effective date

The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.

232.

Tax incentives for investment in the District of Columbia

(a)

Designation of Zone

(1)

In general

Subsection (f) of section 1400 is amended by striking 2007 both places it appears and inserting 2008.

(2)

Effective date

The amendments made by this subsection shall apply to periods beginning after December 31, 2007.

(b)

Tax-Exempt Economic Development Bonds

(1)

In general

Subsection (b) of section 1400A is amended by striking 2007 and inserting 2008.

(2)

Effective date

The amendment made by this subsection shall apply to bonds issued after December 31, 2007.

(c)

Zero Percent Capital Gains Rate

(1)

In general

Subsection (b) of section 1400B is amended by striking 2008 each place it appears and inserting 2009.

(2)

Conforming amendments

(A)

Section 1400B(e)(2) is amended—

(i)

by striking 2012 and inserting 2013, and

(ii)

by striking 2012 in the heading thereof and inserting 2013.

(B)

Section 1400B(g)(2) is amended by striking 2012 and inserting 2013.

(C)

Section 1400F(d) is amended by striking 2012 and inserting 2013.

(3)

Effective dates

(A)

Extension

The amendments made by paragraph (1) shall apply to acquisitions after December 31, 2007.

(B)

Conforming amendments

The amendments made by paragraph (2) shall take effect on the date of the enactment of this Act.

(d)

First-Time Homebuyer Credit

(1)

In general

Subsection (i) of section 1400C is amended by striking 2008 and inserting 2009.

(2)

Effective date

The amendment made by this subsection shall apply to property purchased after December 31, 2007.

233.

Economic development credit for American Samoa

(a)

In general

Subsection (d) of section 119 of division A of the Tax Relief and Health Care Act of 2006 is amended—

(1)

by striking first two taxable years and inserting first 3 taxable years, and

(2)

by striking January 1, 2008 and inserting January 1, 2009.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2007.

234.

Enhanced charitable deduction for contributions of food inventory

(a)

In general

Clause (iv) of section 170(e)(3)(C) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to contributions made after December 31, 2007.

235.

Enhanced charitable deduction for contributions of book inventory to public schools

(a)

In general

Clause (iv) of section 170(e)(3)(D) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to contributions made after December 31, 2007.

236.

Enhanced deduction for qualified computer contributions

(a)

In general

Subparagraph (G) of section 170(e)(6) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to contributions made during taxable years beginning after December 31, 2007.

237.

Basis adjustment to stock of S corporations making charitable contributions of property

(a)

In general

The last sentence of section 1367(a)(2) is amended by striking December 31, 2007 and inserting December 31, 2008.

(b)

Effective date

The amendment made by this section shall apply to contributions made in taxable years beginning after December 31, 2007.

238.

Work opportunity tax credit for Hurricane Katrina employees

(a)

In general

Paragraph (1) of section 201(b) of the Katrina Emergency Tax Relief Act of 2005 is amended by striking 2-year and inserting 3-year.

(b)

Effective date

The amendment made by subsection (a) shall apply to individuals hired after August 27, 2007.

239.

Subpart F exception for active financing income

(a)

Exempt insurance income

Paragraph (10) of section 953(e) (relating to application) is amended—

(1)

by striking January 1, 2009 and inserting January 1, 2010, and

(2)

by striking December 31, 2008 and inserting December 31, 2009.

(b)

Exception to treatment as foreign personal holding company income

Paragraph (9) of section 954(h) (relating to application) is amended by striking January 1, 2009 and inserting January 1, 2010.

240.

Look-thru rule for related controlled foreign corporations

(a)

In general

Subparagraph (C) of section 954(c)(6) (relating to application) is amended by striking January 1, 2009 and inserting January 1, 2010.

(b)

Effective date

The amendment made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2008, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.

241.

Expensing for certain qualified film and television productions

(a)

In general

Subsection (f) of section 181 is amended by striking December 31, 2008 and inserting December 31, 2009.

(b)

Effective date

The amendment made by this section shall apply to productions commencing after December 31, 2008.

C

Other Extensions

251.

Authority to disclose information related to terrorist activities made permanent

(a)

In general

Subparagraph (C) of section 6103(i)(3) is amended by striking clause (iv).

(b)

Disclosure on request

Paragraph (7) of section 6103(i) is amended by striking subparagraph (E).

(c)

Effective date

The amendments made by this section shall apply to disclosures after the date of the enactment of this Act.

252.

Authority for undercover operations made permanent

(a)

In general

Subsection (c) of section 7608 is amended by striking paragraph (6).

(b)

Effective date

The amendment made by this section shall take effect on January 1, 2008.

253.

Authority to disclose return information for certain veterans programs made permanent

(a)

In general

Paragraph (7) of section 6103(l) is amended by striking the last sentence thereof.

(b)

Conforming amendment

Section 6103(l)(7)(D)(viii)(III) is amended by striking sections 1710(a)(1)(I), 1710(a)(2), 1710(b), and 1712(a)(2)(B) and inserting sections 1710(a)(2)(G), 1710(a)(3), and 1710(b).

(c)

Effective date

The amendment made by subsection (a) shall apply to requests made after September 30, 2008.

254.

Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands

(a)

In general

Paragraph (1) of section 7652(f) is amended by striking January 1, 2008 and inserting January 1, 2009.

(b)

Effective date

The amendment made by this section shall apply to distilled spirits brought into the United States after December 31, 2007.

255.

Parity in the application of certain limits to mental health benefits

Subsection (f) of section 9812 is amended—

(1)

by striking and at the end of paragraph (2), and

(2)

by striking paragraph (3) and inserting the following new paragraphs:

(3)

on or after January 1, 2008, and before the date of the enactment of the Renewable Energy and Job Creation Act of 2008, and

(4)

after December 31, 2008.

.

III

Additional Tax Relief

A

Individual tax relief

301.

Additional standard deduction for real property taxes for nonitemizers

(a)

In general

Section 63(c)(1) (defining standard deduction) is amended by striking and at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting , and, and by adding at the end the following new subparagraph:

(C)

in the case of any taxable year beginning in 2008, the real property tax deduction.

.

(b)

Definition

Section 63(c) is amended by adding at the end the following new paragraph:

(7)

Real property tax deduction

For purposes of paragraph (1), the real property tax deduction is the lesser of—

(A)

the amount allowable as a deduction under this chapter for State and local taxes described in section 164(a)(1), or

(B)

$350 ($700 in the case of a joint return).

Any taxes taken into account under section 62(a) shall not be taken into account under this paragraph.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

302.

Refundable child credit

(a)

Modification of threshold amount

Clause (i) of section 24(d)(1)(B) is amended by inserting ($8,500 in the case of taxable years beginning in 2008) after $10,000.

(b)

Effective date

The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2007.

303.

Increase of AMT refundable credit amount for individuals with long-term unused credits for prior year minimum tax liability, etc

(a)

In general

Paragraph (2) of section 53(e) is amended to read as follows:

(2)

AMT refundable credit amount

For purposes of paragraph (1), the term AMT refundable credit amount means, with respect to any taxable year, the amount (not in excess of the long-term unused minimum tax credit for such taxable year) equal to the greater of—

(A)

50 percent of the long-term unused minimum tax credit for such taxable year, or

(B)

the amount (if any) of the AMT refundable credit amount for the taxpayer’s preceding taxable year (determined without regard to subsection (f)(2)).

.

(b)

Treatment of certain underpayments, interest, and penalties attributable to the treatment of incentive stock options

Section 53 is amended by adding at the end the following new subsection:

(f)

Treatment of certain underpayments, interest, and penalties attributable to the treatment of incentive stock options

(1)

Abatement

Any underpayment of tax outstanding on the date of the enactment of this subsection which is attributable to the application of section 56(b)(3) for any taxable year ending before January 1, 2008 (and any interest or penalty with respect to such underpayment which is outstanding on such date of enactment), is hereby abated. The amount determined under subsection (b)(1) shall not include any tax abated under the preceding sentence.

(2)

Increase in credit for certain interest and penalties already paid

The AMT refundable credit amount, and the minimum tax credit determined under subsection (b), for the taxpayer’s first 2 taxable years beginning after December 31, 2007, shall each be increased by 50 percent of the aggregate amount of the interest and penalties which were paid by the taxpayer before the date of the enactment of this subsection and which would (but for such payment) have been abated under paragraph (1).

.

(c)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendment made by this section shall apply to taxable years beginning after December 31, 2007.

(2)

Abatement

Section 53(f)(1) of the Internal Revenue Code of 1986, as added by subsection (b), shall take effect on the date of the enactment of this Act.

B

Business related provisions

311.

Uniform treatment of attorney-advanced expenses and court costs in contingency fee cases

(a)

In general

Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:

(q)

Attorney-advanced expenses and court costs in contingency fee cases

In the case of any expense or court cost which is paid or incurred in the course of the trade or business of practicing law and the repayment of which is contingent on a recovery by judgment or settlement in the action to which such expense or cost relates, the deduction under subsection (a) shall be determined as if such expense or cost was not subject to repayment.

.

(b)

Effective date

The amendment made by this section shall apply to expenses and costs paid or incurred in taxable years beginning after the date of the enactment of this Act.

312.

Provisions related to film and television productions

(a)

Modification of limitation on expensing

Subparagraph (A) of section 181(a)(2) is amended to read as follows:

(A)

In general

Paragraph (1) shall not apply to so much of the aggregate cost of any qualified film or television production as exceeds $15,000,000.

.

(b)

Modifications to deduction for domestic activities

(1)

Determination of W-2 wages

Paragraph (2) of section 199(b) is amended by adding at the end the following new subparagraph:

(D)

Special rule for qualified film

In the case of a qualified film, such term shall include compensation for services performed in the United States by actors, production personnel, directors, and producers.

.

(2)

Definition of qualified film

Paragraph (6) of section 199(c) is amended by adding at the end the following: A qualified film shall include any copyrights, trademarks, or other intangibles with respect to such film. The methods and means of distributing a qualified film shall not affect the availability of the deduction under this section..

(3)

Partnerships

Subparagraph (A) of section 199(d)(1) is amended by striking and at the end of clause (ii), by striking the period at the end of clause (iii) and inserting , and, and by adding at the end the following new clause:

(iv)

in the case of each partner of a partnership, or shareholder of an S corporation, who owns (directly or indirectly) at least 20 percent of the capital interests in such partnership or of the stock of such S corporation—

(I)

such partner or shareholder shall be treated as having engaged directly in any film produced by such partnership or S corporation, and

(II)

such partnership or S corporation shall be treated as having engaged directly in any film produced by such partner or shareholder.

.

(c)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2007.

(2)

Expensing

The amendments made by subsection (a) shall apply to qualified film and television productions commencing after December 31, 2007.

C

Modification of penalty on understatement of taxpayer’s liability by tax return preparer

321.

Modification of penalty on understatement of taxpayer’s liability by tax return preparer

(a)

In general

Subsection (a) of section 6694 (relating to understatement due to unreasonable positions) is amended to read as follows:

(a)

Understatement due to unreasonable positions

(1)

In general

If a tax return preparer—

(A)

prepares any return or claim of refund with respect to which any part of an understatement of liability is due to a position described in paragraph (2), and

(B)

knew (or reasonably should have known) of the position,

such tax return preparer shall pay a penalty with respect to each such return or claim in an amount equal to the greater of $1,000 or 50 percent of the income derived (or to be derived) by the tax return preparer with respect to the return or claim.
(2)

Unreasonable position

(A)

In general

Except as otherwise provided in this paragraph, a position is described in this paragraph unless there is or was substantial authority for the position.

(B)

Disclosed positions

If the position was disclosed as provided in section 6662(d)(2)(B)(ii)(I) and is not a position to which subparagraph (C) applies, the position is described in this paragraph unless there is a reasonable basis for the position.

(C)

Tax shelters and reportable transactions

If the position is with respect to a tax shelter (as defined in section 6662(d)(2)(C)(ii)) or a reportable transaction to which section 6662A applies, the position is described in this paragraph unless it is reasonable to believe that the position would more likely than not be sustained on its merits.

(3)

Reasonable cause exception

No penalty shall be imposed under this subsection if it is shown that there is reasonable cause for the understatement and the tax return preparer acted in good faith.

.

(b)

Effective date

The amendment made by this section shall apply—

(1)

in the case of a position other than a position described in subparagraph (C) of section 6694(a)(2) of the Internal Revenue Code of 1986 (as amended by this section), to returns prepared after May 25, 2007, and

(2)

in the case of a position described in such subparagraph (C), to returns prepared for taxable years ending after the date of the enactment of this Act.

D

Extension and expansion of certain GO Zone incentives

331.

Certain GO Zone incentives

(a)

Use of amended income tax returns To take into account receipt of certain hurricane-related casualty loss grants by disallowing previously taken casualty loss deductions

(1)

In general

Notwithstanding any other provision of the Internal Revenue Code of 1986, if a taxpayer claims a deduction for any taxable year with respect to a casualty loss to a principal residence (within the meaning of section 121 of such Code) resulting from Hurricane Katrina, Hurricane Rita, or Hurricane Wilma and in a subsequent taxable year receives a grant under Public Law 109–148, 109–234, or 110–116 as reimbursement for such loss, such taxpayer may elect to file an amended income tax return for the taxable year in which such deduction was allowed (and for any taxable year to which such deduction is carried) and reduce (but not below zero) the amount of such deduction by the amount of such reimbursement.

(2)

Time of filing amended return

Paragraph (1) shall apply with respect to any grant only if any amended income tax returns with respect to such grant are filed not later than the later of—

(A)

the due date for filing the tax return for the taxable year in which the taxpayer receives such grant, or

(B)

the date which is 1 year after the date of the enactment of this Act.

(3)

Waiver of penalties and interest

Any underpayment of tax resulting from the reduction under paragraph (1) of the amount otherwise allowable as a deduction shall not be subject to any penalty or interest under such Code if such tax is paid not later than 1 year after the filing of the amended return to which such reduction relates.

(b)

Waiver of deadline on construction of GO Zone property eligible for bonus depreciation

(1)

In general

Subparagraph (B) of section 1400N(d)(3) is amended to read as follows:

(B)

without regard to and before January 1, 2009 in clause (i) thereof, and

.

(2)

Effective date

The amendment made by this subsection shall apply to property placed in service after December 31, 2007.

(c)

Inclusion of certain counties in Gulf Opportunity Zone for purposes of tax-exempt bond financing

(1)

In general

Subsection (a) of section 1400N is amended by adding at the end the following new paragraph:

(8)

Inclusion of certain counties

For purposes of this subsection, the Gulf Opportunity Zone includes Colbert County, Alabama and Dallas County, Alabama.

.

(2)

Effective date

The amendment made by this subsection shall take effect as if included in the provisions of the Gulf Opportunity Zone Act of 2005 to which it relates.

IV

Revenue Provisions

401.

Nonqualified deferred compensation from certain tax indifferent parties

(a)

In general

Subpart B of part II of subchapter E of chapter 1 is amended by inserting after section 457 the following new section:

457A.

Nonqualified deferred compensation from certain tax indifferent parties

(a)

In general

Any compensation which is deferred under a nonqualified deferred compensation plan of a nonqualified entity shall be includible in gross income when there is no substantial risk of forfeiture of the rights to such compensation.

(b)

Nonqualified entity

For purposes of this section, the term nonqualified entity means—

(1)

any foreign corporation unless substantially all of its income is—

(A)

effectively connected with the conduct of a trade or business in the United States, or

(B)

subject to a comprehensive foreign income tax, and

(2)

any partnership unless substantially all of its income is allocated to persons other than—

(A)

foreign persons with respect to whom such income is not subject to a comprehensive foreign income tax, and

(B)

organizations which are exempt from tax under this title.

(c)

Determinability of amounts of compensation

(1)

In general

If the amount of any compensation is not determinable at the time that such compensation is otherwise includible in gross income under subsection (a)—

(A)

such amount shall be so includible in gross income when determinable, and

(B)

the tax imposed under this chapter for the taxable year in which such compensation is includible in gross income shall be increased by the sum of—

(i)

the amount of interest determined under paragraph (2), and

(ii)

an amount equal to 20 percent of the amount of such compensation.

(2)

Interest

For purposes of paragraph (1)(B)(i), the interest determined under this paragraph for any taxable year is the amount of interest at the underpayment rate under section 6621 plus 1 percentage point on the underpayments that would have occurred had the deferred compensation been includible in gross income for the taxable year in which first deferred or, if later, the first taxable year in which such deferred compensation is not subject to a substantial risk of forfeiture.

(d)

Other definitions and special rules

For purposes of this section—

(1)

Substantial risk of forfeiture

(A)

In general

The rights of a person to compensation shall be treated as subject to a substantial risk of forfeiture only if such person’s rights to such compensation are conditioned upon the future performance of substantial services by any individual.

(B)

Exception for compensation based on gain recognized on an investment asset

(i)

In general

To the extent provided in regulations prescribed by the Secretary, if compensation is determined solely by reference to the amount of gain recognized on the disposition of an investment asset, such compensation shall be treated as subject to a substantial risk of forfeiture until the date of such disposition.

(ii)

Investment asset

For purposes of clause (i), the term investment asset means any single asset (other than an investment fund or similar entity)—

(I)

acquired directly by an investment fund or similar entity,

(II)

with respect to which such entity does not (nor does any person related to such entity) participate in the active management of such asset (or if such asset is an interest in an entity, in the active management of the activities of such entity), and

(III)

substantially all of any gain on the disposition of which (other than such deferred compensation) is allocated to investors in such entity.

(iii)

Coordination with special rule

Paragraph (3)(B) shall not apply to any compensation to which clause (i) applies.

(2)

Comprehensive foreign income tax

The term comprehensive foreign income tax means, with respect to any foreign person, the income tax of a foreign country if—

(A)

such person is eligible for the benefits of a comprehensive income tax treaty between such foreign country and the United States, or

(B)

such person demonstrates to the satisfaction of the Secretary that such foreign country has a comprehensive income tax.

(3)

Nonqualified deferred compensation plan

(A)

In general

The term nonqualified deferred compensation plan has the meaning given such term under section 409A(d), except that such term shall include any plan that provides a right to compensation based on the appreciation in value of a specified number of equity units of the service recipient.

(B)

Exception

Compensation shall not be treated as deferred for purposes of this section if the service provider receives payment of such compensation not later than 12 months after the end of the taxable year of the service recipient during which the right to the payment of such compensation is no longer subject to a substantial risk of forfeiture.

(4)

Exception for certain compensation with respect to effectively connected income

In the case a foreign corporation with income which is taxable under section 882, this section shall not apply to compensation which, had such compensation had been paid in cash on the date that such compensation ceased to be subject to a substantial risk of forfeiture, would have been deductible by such foreign corporation against such income.

(5)

Application of rules

Rules similar to the rules of paragraphs (5) and (6) of section 409A(d) shall apply.

(e)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations disregarding a substantial risk of forfeiture in cases where necessary to carry out the purposes of this section.

.

(b)

Conforming amendment

Section 26(b)(2) is amended by striking and at the end of subparagraph (U), by striking the period at the end of subparagraph (V) and inserting , and, and by adding at the end the following new subparagraph:

(W)

section 457A(c)(1)(B) (relating to determinability of amounts of compensation).

.

(c)

Clerical amendment

The table of sections of subpart B of part II of subchapter E of chapter 1 is amended by inserting after the item relating to section 457 the following new item:

Sec. 457A. Nonqualified deferred compensation from certain tax indifferent parties.

.

(d)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to amounts deferred which are attributable to services performed after December 31, 2008.

(2)

Application to existing deferrals

In the case of any amount deferred to which the amendments made by this section do not apply solely by reason of the fact that the amount is attributable to services performed before January 1, 2009, to the extent such amount is not includible in gross income in a taxable year beginning before 2018, such amounts shall be includible in gross income in the later of—

(A)

the last taxable year beginning before 2018, or

(B)

the taxable year in which there is no substantial risk of forfeiture of the rights to such compensation (determined in the same manner as determined for purposes of section 457A of the Internal Revenue Code of 1986, as added by this section).

(3)

Charitable contributions of existing deferrals permitted

(A)

In general

Subsection (b) of section 170 of the Internal Revenue Code of 1986 shall not apply to (and subsections (b) and (d) of such section shall be applied without regard to) so much of the taxpayer’s qualified contributions made during the taxpayer’s last taxable year beginning before 2018 as does not exceed the taxpayer’s qualified inclusion amount. For purposes of subsection (b) of section 170 of such Code, the taxpayer’s contribution base for such last taxable year shall be reduced by the amount of the taxpayer’s qualified contributions to which such subsection does not apply by reason the preceding sentence.

(B)

Qualified contributions

For purposes of this paragraph, the term qualified contributions means the aggregate charitable contributions (as defined in section 170(c) of such Code) paid in cash by the taxpayer to organizations described in section 170(b)(1)(A) of such Code (other than any organization described in section 509(a)(3) of such Code or any fund or account described in section 4966(d)(2) of such Code).

(C)

Qualified inclusion amount

For purposes of this paragraph, the term qualified inclusion amount means the amount includible in the taxpayer’s gross income for the last taxable year beginning before 2018 by reason of paragraph (2).

(4)

Accelerated payments

No later than 120 days after the date of the enactment of this Act, the Secretary shall issue guidance providing a limited period of time during which a nonqualified deferred compensation arrangement attributable to services performed on or before December 31, 2008, may, without violating the requirements of section 409A(a) of the Internal Revenue Code of 1986, be amended to conform the date of distribution to the date the amounts are required to be included in income.

(5)

Certain back-to-back arrangements

If the taxpayer is also a service recipient and maintains one or more nonqualified deferred compensation arrangements for its service providers under which any amount is attributable to services performed on or before December 31, 2008, the guidance issued under paragraph (4) shall permit such arrangements to be amended to conform the dates of distribution under such arrangement to the date amounts are required to be included in the income of such taxpayer under this subsection.

(6)

Accelerated payment not treated as material modification

Any amendment to a nonqualified deferred compensation arrangement made pursuant to paragraph (4) or (5) shall not be treated as a material modification of the arrangement for purposes of section 409A of the Internal Revenue Code of 1986.

402.

Delay in application of worldwide allocation of interest

(a)

In general

Paragraphs (5)(D) and (6) of section 864(f) are each amended by striking December 31, 2008 and inserting December 31, 2018.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

403.

Time for payment of corporate estimated taxes

(a)

Repeal of adjustment for 2012

Subparagraph (B) of section 401(1) of the Tax Increase Prevention and Reconciliation Act of 2005 is amended by striking the percentage contained therein and inserting 100 percent.

(b)

Modification of adjustment for 2013

The percentage under subparagraph (C) of section 401(1) of the Tax Increase Prevention and Reconciliation Act of 2005 in effect on the date of the enactment of this Act is increased by 37.75 percentage points.

Passed the House of Representatives May 21, 2008.

Lorraine C. Miller,

Clerk.