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S. 2642 (110th): American Renewable Energy Act of 2008


The text of the bill below is as of Feb 14, 2008 (Introduced). The bill was not enacted into law.


II

110th CONGRESS

2d Session

S. 2642

IN THE SENATE OF THE UNITED STATES

February 14, 2008

(for herself, Ms. Snowe, and Ms. Cantwell) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To establish a national renewable energy standard, to extend and create renewable energy tax incentives, and for other purposes.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the American Renewable Energy Act of 2008.

(b)

Table of contents

The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—Renewable energy standard

Sec. 101. Renewable portfolio standard.

TITLE II—Energy tax provisions

Sec. 200. Short title; etc.

Subtitle A—Energy advancement and investment

Part I—Advanced electricity infrastructure

Sec. 201. Extension and modification of renewable electricity, refined coal, and Indian coal production credit.

Sec. 202. Extension and modification of credit for clean renewable energy bonds.

Sec. 203. Extension and modification of energy credit.

Sec. 204. Energy credit for combined heat and power system property.

Sec. 205. Special depreciation allowance for certain electric transmission property.

Sec. 206. Extension of special rule to implement FERC restructuring policy.

Sec. 207. Extension and modification of credit for residential energy efficient property.

Sec. 208. Credit for residential wind property.

Sec. 209. Seven-year applicable recovery period for depreciation of qualified energy management devices.

Sec. 210. Landowner incentive to encourage electric transmission build-out.

Sec. 211. Partial exemption from passive activity limitations for qualified wind facilities.

Sec. 212. Credit for electricity produced from qualified wind facilities allowed against alternative minimum tax.

Part II—Domestic fuel security

Sec. 221. Credit for production of cellulosic biomass alcohol.

Sec. 222. Expansion of special allowance to cellulosic biomass alcohol fuel plant property.

Sec. 223. Extension of small ethanol producer credit.

Sec. 224. Credit for producers of fossil free alcohol.

Sec. 225. Modification of alcohol credit.

Sec. 226. Extension and modification of credit for biodiesel used as fuel.

Sec. 227. Extension and modification of alternative fuel credit.

Sec. 228. Extension of alternative fuel vehicle refueling property credit.

Sec. 229. Extension of suspension of taxable income limit on percentage depletion for oil and natural gas produced from marginal properties.

Sec. 230. Extension and modification of election to expense certain refineries.

Sec. 231. Ethanol tariff extension.

Sec. 232. Elimination and reductions of duty drawback on certain imported ethanol.

Sec. 233. Certain income and gains relating to alcohol fuel mixtures, biodiesel fuel mixtures, and alternative fuel treated as qualifying income for publicly traded partnerships.

Sec. 234. Technical amendments.

Part III—Advanced technology vehicles

Sec. 241. Expansion and modification of credit for alternative fuel motor vehicles.

Sec. 242. Credit for plug-in electric drive motor vehicles.

Sec. 243. Exclusion from heavy truck tax for idling reduction units and advanced insulation added after purchase.

Part IV—Conservation and energy efficiency

Sec. 251. Extension and modification of nonbusiness energy property credit.

Sec. 252. Extension and modification of new energy efficient home credit.

Sec. 253. Extension and modification of energy efficient commercial buildings deduction.

Sec. 254. Modifications of energy efficient appliance credit for appliances produced after 2007.

Sec. 255. Special depreciation allowance for certain reuse and recycling property.

Subtitle B—Revenue raising provisions

Sec. 261. Denial of deduction for major integrated oil companies for income attributable to domestic production of oil, natural gas, or primary products thereof.

Sec. 262. Elimination of the different treatment of foreign oil and gas extraction income and foreign oil related income for purposes of the foreign tax credit.

Sec. 263. Increase and extension of Oil Spill Liability Trust Fund tax.

Sec. 264. Limitation on drawback claimed for amounts deposited into the Oil Spill Liability Trust Fund.

Sec. 265. Tax on crude oil and natural gas produced from the outer Continental Shelf in the Gulf of Mexico.

Sec. 266. Taxation of taxable fuels in foreign trade zones.

Sec. 267. Clarification of penalty for sale of fuel failing to meet EPA regulations.

Sec. 268. Clarification of eligibility for certain fuels credits for fuel with insufficient nexus to the United States.

Sec. 269. Treatment of qualified alcohol fuel mixtures and qualified biodiesel fuel mixtures as taxable fuels.

Sec. 270. Calculation of volume of alcohol for fuel credits.

Sec. 271. Bulk transfer exception not to apply to finished gasoline.

Sec. 272. Application of rules treating inverted corporations as domestic corporations to certain transactions occurring after March 20, 2002.

Sec. 273. Modification of effective date of leasing provisions of the American Jobs Creation Act of 2004.

Sec. 274. Revision of tax rules on expatriation of individuals.

I

Renewable energy standard

101.

Renewable portfolio standard

(a)

In general

Title VI of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2601 et seq.) is amended by adding at the end the following:

610.

Federal renewable portfolio standard

(a)

Definitions

In this section:

(1)

Base amount of electricity

The term base amount of electricity means the total amount of electricity sold by an electric utility to electric consumers in a calendar year, excluding municipal waste and electricity generated by a hydroelectric facility (including a pumped storage facility, but excluding incremental hydropower).

(2)

Distributed generation facility

The term distributed generation facility means a facility at a customer site.

(3)

Existing renewable energy

The term existing renewable energy means, except as provided in paragraph (7)(B), electric energy generated at a facility (including a distributed generation facility) placed in service prior to January 1, 2001, from solar, wind, or geothermal energy, ocean energy, biomass (as defined in section 203(b) of the Energy Policy Act of 2005 (42 U.S.C. 15852(b)), or landfill gas.

(4)

Geothermal energy

The term geothermal energy means energy derived from a geothermal deposit (within the meaning of section 613(e)(2) of the Internal Revenue Code of 1986).

(5)

Incremental geothermal production

(A)

In general

The term incremental geothermal production means for any year the excess of—

(i)

the total kilowatt hours of electricity produced from a facility (including a distributed generation facility) using geothermal energy; over

(ii)

the average annual kilowatt hours produced at such facility for 5 of the previous 7 calendar years before the date of enactment of this section after eliminating the highest and the lowest kilowatt hour production years in such 7-year period.

(B)

Special rule

A facility described in subparagraph (A) that was placed in service at least 7 years before the date of enactment of this section shall, commencing with the year in which such date of enactment occurs, reduce the amount calculated under subparagraph (A)(ii) each year, on a cumulative basis, by the average percentage decrease in the annual kilowatt hour production for the 7-year period described in subparagraph (A)(ii) with such cumulative sum not to exceed 30 percent.

(6)

Incremental hydropower

(A)

In general

The term incremental hydropower means additional energy generated as a result of efficiency improvements or capacity additions made on or after January 1, 2001, or the effective date of an existing applicable State renewable portfolio standard program at a hydroelectric facility that was placed in service before that date.

(B)

Exclusion

The term incremental hydropower does not include additional energy generated as a result of operational changes not directly associated with efficiency improvements or capacity additions.

(C)

Measurement

Efficiency improvements and capacity additions shall be measured on the basis of the same water flow information used to determine a historic average annual generation baseline for the hydroelectric facility and certified by the Secretary or the Federal Energy Regulatory Commission.

(7)

New renewable energy

The term new renewable energy means—

(A)

electric energy generated at a facility (including a distributed generation facility) placed in service on or after January 1, 2001, from—

(i)

solar, wind, or geothermal energy or ocean energy;

(ii)

biomass (as defined in section 203(b) of the Energy Policy Act of 2005 (42 U.S.C. 15852(b));

(iii)

landfill gas; or

(iv)

incremental hydropower; and

(B)

for electric energy generated at a facility (including a distributed generation facility) placed in service prior to the date of enactment of this section—

(i)

the additional energy above the average generation during the 3-year period ending on the date of enactment of this section at the facility from—

(I)

solar or wind energy or ocean energy;

(II)

biomass (as defined in section 203(b) of the Energy Policy Act of 2005 (42 U.S.C. 15852(b));

(III)

landfill gas; or

(IV)

incremental hydropower; and

(ii)

incremental geothermal production.

(8)

Ocean energy

The term ocean energy includes current, wave, tidal, and thermal energy.

(b)

Renewable energy requirement

(1)

In general

Each electric utility that sells electricity to electric consumers shall obtain a percentage of the base amount of electricity the electric utility sells to electric consumers in any calendar year from new renewable energy or existing renewable energy.

(2)

Minimum annual percentage

The percentage obtained in a calendar year shall not be less than the amount specified in the following table:

Minimum annual
Calendar year:percentage:
20102
20114
20126
20138
201410
201511
201612
201713
201814
201915
202016
202117
202218
202319
202420.
(3)

Means of compliance

An electric utility shall meet the requirements of this subsection by—

(A)

submitting to the Secretary renewable energy credits issued under subsection (c);

(B)

making alternative compliance payments to the Secretary at the rate of 2 cents per kilowatt hour (as adjusted for inflation under subsection (h)); or

(C)

conducting a combination of activities described in subparagraphs (A) and (B).

(c)

Renewable energy credit trading program

(1)

In general

Not later than July 1, 2009, the Secretary shall establish a renewable energy credit trading program under which each electric utility shall submit to the Secretary renewable energy credits to certify the compliance of the electric utility with respect to obligations under subsection (b).

(2)

Administration

As part of the program, the Secretary shall—

(A)

issue tradeable renewable energy credits to generators of electric energy from new renewable energy;

(B)

issue nontradeable renewable energy credits to generators of electric energy from existing renewable energy;

(C)

issue renewable energy credits to electric utilities associated with State renewable portfolio standard compliance mechanisms pursuant to subsection (i);

(D)

ensure that a kilowatt hour, including the associated renewable energy credit, shall be used only once for purposes of compliance with this section;

(E)

allow double credits for generation from facilities on Indian land, and triple credits for generation from small renewable distributed generators (meaning those no larger than 1 megawatt); and

(F)

ensure that, with respect to a purchaser that as of the date of enactment of this section has a purchase agreement from a renewable energy facility placed in service before that date, the credit associated with the generation of renewable energy under the contract is issued to the purchaser of the electric energy.

(3)

Duration

A credit described in subparagraph (A) or (B) of paragraph (2) may only be used for compliance with this section during the 3-year period beginning on the date of issuance of the credit.

(4)

Transfers

An electric utility that holds credits in excess of the quantity of credits needed to comply with subsection (b) may transfer the credits to another electric utility in the same utility holding company system.

(5)

Delegation of market function

The Secretary may delegate to an appropriate entity that establishes markets the administration of a national tradeable renewable energy credit market for purposes of creating a transparent national market for the sale or trade of renewable energy credits.

(d)

Enforcement

(1)

Civil penalties

Any electric utility that fails to meet the compliance requirements of subsection (b) shall be subject to a civil penalty.

(2)

Amount of penalty

Subject to paragraph (3), the amount of the civil penalty shall be equal to the product obtained by multiplying—

(A)

the number of kilowatt-hours of electric energy sold to electric consumers in violation of subsection (b); by

(B)

the greater of—

(i)

2 cents (adjusted for inflation under subsection (h)); or

(ii)

200 percent of the average market value of renewable energy credits during the year in which the violation occurred.

(3)

Mitigation or waiver

(A)

In general

The Secretary may mitigate or waive a civil penalty under this subsection if the electric utility is unable to comply with subsection (b) for reasons outside of the reasonable control of the utility.

(B)

Reduction

The Secretary shall reduce the amount of any penalty determined under paragraph (2) by an amount paid by the electric utility to a State for failure to comply with the requirement of a State renewable energy program if the State requirement is greater than the applicable requirement of subsection (b).

(4)

Procedure for assessing penalty

The Secretary shall assess a civil penalty under this subsection in accordance with the procedures prescribed by section 333(d) of the Energy Policy and Conservation Act of 1954 (42 U.S.C. 6303).

(e)

State renewable energy account program

(1)

In general

Not later than December 31, 2008, the Secretary of the Treasury shall establish a State renewable energy account in the Treasury.

(2)

Deposits

(A)

In general

All money collected by the Secretary from alternative compliance payments and the assessment of civil penalties under this section shall be deposited into the renewable energy account established under paragraph (1).

(B)

Separate account

The State renewable energy account shall be maintained as a separate account in the Treasury and shall not be transferred to the general fund of the Treasury.

(3)

Use

Proceeds deposited in the State renewable energy account shall be used by the Secretary, subject to appropriations, for a program to provide grants to the State agency responsible for developing State energy conservation plans under section 362 of the Energy Policy and Conservation Act (42 U.S.C. 6322) for the purposes of promoting renewable energy production, including programs that promote technologies that reduce the use of electricity at customer sites such as solar water heating.

(4)

Administration

The Secretary may issue guidelines and criteria for grants awarded under this subsection. State energy offices receiving grants under this section shall maintain such records and evidence of compliance as the Secretary may require.

(5)

Preference

In allocating funds under this program, the Secretary shall give preference—

(A)

to States in regions which have a disproportionately small share of economically sustainable renewable energy generation capacity; and

(B)

to State programs to stimulate or enhance innovative renewable energy technologies.

(f)

Rules

The Secretary shall issue rules implementing this section not later than 1 year after the date of enactment of this section.

(g)

Exemptions

This section shall not apply in any calendar year to an electric utility—

(1)

that sold less than 4,000,000 megawatt-hours of electric energy to electric consumers during the preceding calendar year; or

(2)

in Hawaii.

(h)

Inflation adjustment

Not later than December 31, 2008, and December 31 of each year thereafter, the Secretary shall adjust for United States dollar inflation (as measured by the Consumer Price Index)—

(1)

the price of a renewable energy credit under subsection (c)(2); and

(2)

the amount of the civil penalty per kilowatt-hour under subsection (d)(2).

(i)

State programs

(1)

In general

Nothing in this section diminishes any authority of a State or political subdivision of a State to adopt or enforce any law or regulation respecting renewable energy, but, except as provided in subsection (d)(3), no such law or regulation shall relieve any person of any requirement otherwise applicable under this section.

(2)

Coordination

The Secretary, in consultation with States having such renewable energy programs, shall, to the maximum extent practicable, facilitate coordination between the Federal program and State programs.

(3)

Regulations

(A)

In general

The Secretary, in consultation with States, shall promulgate regulations to ensure that an electric utility subject to the requirements of this section that is also subject to a State renewable energy standard receives renewable energy credits in relation to equivalent quantities of renewable energy associated with compliance mechanisms, other than the generation or purchase of renewable energy by the electric utility, including the acquisition of certificates or credits and the payment of taxes, fees, surcharges, or other financial compliance mechanisms by the electric utility or a customer of the electric utility, directly associated with the generation or purchase of renewable energy.

(B)

Prohibition on double counting

The regulations promulgated under this paragraph shall ensure that a kilowatt hour associated with a renewable energy credit issued pursuant to this subsection shall not be used for compliance with this section more than once.

(j)

Recovery of costs

(1)

In general

The Commission shall issue and enforce such regulations as are necessary to ensure that an electric utility recovers all prudently incurred costs associated with compliance with this section.

(2)

Applicable law

A regulation under paragraph (1) shall be enforceable in accordance with the provisions of law applicable to enforcement of regulations under the Federal Power Act (16 U.S.C. 791a et seq.).

(k)

Wind energy development study

The Secretary, in consultation with appropriate Federal and State agencies, shall conduct, and submit to Congress a report describing the results of, a study on methods to increase transmission line capacity for wind energy development.

(l)

Sunset

This section expires on December 31, 2040.

.

(b)

Table of contents amendment

The table of contents of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. prec. 2601) is amended by adding at the end of the items relating to title VI the following:

Sec. 609. Rural and remote communities electrification grants.

Sec. 610. Federal renewable portfolio standard.

.

II

Energy tax provisions

200.

Short title; etc

(a)

Short title

This title may be cited as the Renewable Energy Tax Incentives Act.

(b)

Amendment of 1986 Code

Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

A

Energy advancement and investment

I

Advanced electricity infrastructure

201.

Extension and modification of renewable electricity, refined coal, and Indian coal production credit

(a)

Extension

(1)

In general

Section 45(d) (relating to qualified facilities) is amended—

(A)

by striking January 1, 2009 each place it appears in paragraphs (1), (2), (3), (4), (5), (6), (7), (8), and (9) and inserting January 1, 2014, and

(B)

by striking 7-year period both places it appears in paragraph (10)(A) and inserting 8-year period.

(2)

Effective date

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

(b)

Credit rate for electricity maintained at 2007 level

(1)

In general

Section 45(a)(1) (relating to general rule) is amended by striking 1.5 cents and inserting 2 cents.

(2)

No inflation adjustment

Section 45(b)(2) (relating to credit and phaseout adjustment based on inflation) is amended by striking 1.5 cent amount in subsection (a), the.

(3)

Conforming amendments

Section 45(b)(4)(A) is amended—

(A)

by striking 2003 and inserting 2006, and

(B)

by striking the amount in effect and all that follows and inserting subsection (a)(1) shall be applied by substituting 0.9 cent for 2 cents..

(4)

Effective date

The amendments made by this subsection shall apply to electricity produced and sold after December 31, 2006.

(c)

Modification of refined coal as a qualified energy resource

(1)

Elimination of increased market value test

Section 45(c)(7)(A) (defining refined coal) is amended—

(A)

by striking clause (iv),

(B)

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

(C)

by striking , and at the end of clause (iii) and inserting a period.

(2)

Increase in required emission reduction

Section 45(c)(7)(B) (defining qualified emission reduction) is amended by inserting at least 40 percent of the emissions of after nitrogen oxide and.

(3)

Effective date

The amendments made by this subsection shall apply to coal produced and sold after December 31, 2007.

(d)

Credit allowed for on-site use of electricity produced from biomass

(1)

On-site use

Section 45(e) (relating to definitions and special rules) is amended by adding at the end the following new paragraph:

(12)

Credit allowed for on-site use of electricity produced from biomass

In the case of electricity produced after December 31, 2007, at any facility described in paragraph (2) or (3) which is equipped with net metering to determine electricity consumption or sale (such consumption or sale to be verified by a third party as determined by the Secretary), subsection (a)(2) shall be applied without regard to subparagraph (B) thereof.

.

(2)

Effective date

The amendment made by this subsection shall take effect on the date of the enactment of this Act.

(e)

Expansion of resources to wave, current, tidal, and ocean thermal energy

(1)

In general

Section 45(c)(1) (defining qualified energy resources) 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)

wave, current, tidal, and ocean thermal energy.

.

(2)

Definition of resources

Section 45(c) is amended by adding at the end the following new paragraph:

(10)

Wave, current, tidal, and ocean thermal energy

The term wave, current, tidal, and ocean thermal energy means electricity produced from any of the following:

(A)

Free flowing ocean water derived from tidal currents, ocean currents, waves, or estuary currents.

(B)

Ocean thermal energy.

.

(3)

Facilities

Section 45(d) is amended by adding at the end the following new paragraph:

(11)

Wave, current, tidal, and ocean thermal facility

In the case of a facility using resources described in subparagraph (A), (B), or (C) of subsection (c)(10) to produce electricity, the term qualified facility means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2014, but such term shall not include a facility which includes impoundment structures or a small irrigation power facility.

.

(4)

Credit rate

Section 45(b)(4)(A) (relating to credit rate), as amended by this section, is amended by striking or (9) and inserting (9), or (11).

(5)

Effective date

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

(f)

Trash facility clarification

(1)

In general

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

(A)

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

(B)

by striking combustion.

(2)

Effective date

The amendments made by this subsection shall apply to electricity produced and sold before, on, or after December 31, 2007.

202.

Extension and modification of credit for clean renewable energy bonds

(a)

Increase in amount of bonds designated; 4-year extension

(1)

In general

Section 54(f) (relating to limitation on amount of bonds designated) is amended by adding at the end the following new paragraph:

(3)

National annual limitation

(A)

In general

There is a national clean renewable energy bond annual limitation for each calendar year. Such limitation is $900,000,000 for 2008, 2009, 2010, and 2011, and, except as provided in subparagraph (C), zero thereafter.

(B)

Allocation by secretary

The national clean renewable energy bond limitation for a calendar year shall be allocated by the Secretary among qualified projects in such manner as the Secretary determines appropriate, except that the Secretary may not allocate more than $563,000,000 of such limitation for each calendar year to finance qualified projects of qualified borrowers which are governmental bodies, of which not less than one-half of such amount shall be allocated with respect to qualified projects equaling or exceeding $10,000,000 in capital expenditures per project.

(C)

Carryover of unused limitation

If for any calendar year, the national clean renewable energy bond annual limitation for such year exceeds the amount of bonds allocated during such year, such limitation for the following calendar year shall be increased by the amount of such excess. Any carryforward of a limitation may be carried only to the first year following the unused limitation year. For purposes of the preceding sentence, a limitation shall be treated as used on a first-in first-out basis.

.

(2)

Conforming amendment

Section 54 is amended by striking subsection (m).

(b)

Limitation on time for issuance

Section 54(d)(1)(A) (defining clean renewable energy bond) is amended by inserting , or is issued by the qualified issuer pursuant to an allocation by the Secretary to such issuer of a portion of the national clean renewable energy bond annual limitation under subsection (f)(3) by not later than the end of the calendar year following the year of such allocation after subsection (f)(2).

(c)

Modification of ratable principal amortization requirement

(1)

In general

Paragraph (5) of section 54(l) is amended to read as follows:

(5)

Ratable principal amortization required

A bond shall not be treated as a clean renewable energy bond unless it is part of an issue which provides for an equal amount of principal to be paid by the qualified issuer during each 12-month period that the issue is outstanding (other than the first 12-month period in the case of bonds issued pursuant to an allocation under subsection (f)(3)).

.

(2)

Conforming amendment

The third sentence of section 54(e)(2) is amended by striking subsection (l)(6) and inserting subsection (l)(5).

(d)

Qualified project includes certain transmission lines

Section 54(d)(2)(A) (defining qualified project) is amended by inserting and any electric transmission property capital expenditures (as defined in section 172(b)(1)(I)(v)(I)) related to such facility after qualified borrower.

(e)

Effective date

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

203.

Extension and modification of energy credit

(a)

Extension

(1)

Qualified fuel cell property

Subparagraph (E) of section 48(c)(1) is amended by striking December 31, 2008 and inserting December 31, 2016.

(2)

Qualified microturbine property

Subparagraph (E) of section 48(c)(2) is amended by striking December 31, 2008 and inserting December 31, 2016.

(3)

Solar property

Paragraphs (2)(i)(II) and (3)(A)(ii) of section 48(a) are each amended by striking January 1, 2009 and inserting January 1, 2017.

(b)

Repeal of public utility property exclusion

(1)

In general

Paragraph (3) of section 48(a), as amended by subsection (a)(3), is amended by striking the first sentence which follows subparagraph (D).

(2)

Conforming amendments

(A)

Section 48(c)(1), as amended by subsection (a)(1), is amended by striking subparagraph (D) and by redesignating subparagraph (E) as subparagraph (D).

(B)

Section 48(c)(2), as amended by subsection (a)(2), is amended by striking subparagraph (D) and by redesignating subparagraph (E) as subparagraph (D).

(c)

Repeal of dollar per kilowatt limitation for fuel cell property

(1)

In general

Section 48(c)(1), as amended by subsection (b)(2)(A), is amended by striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively.

(2)

Conforming amendment

Section 48(a)(1) is amended by striking paragraphs (1)(B) and (2)(B) of subsection (c) and inserting subsection (c)(2)(B).

(d)

Effective Dates

(1)

In general

Except as provided in paragraph (2), the amendments made by section 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).

(2)

Extensions

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

204.

Energy credit for combined heat and power system property

(a)

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,

.

(b)

Combined Heat and Power System Property

Section 48 (relating to energy credit; reforestation credit) 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 has an electrical capacity of not more than 15 megawatts or a mechanical energy capacity of not more than 2,000 horsepower or an equivalent combination of electrical and mechanical energy capacities,

(C)

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),

(D)

the energy efficiency percentage of which exceeds 60 percent, and

(E)

which is placed in service before January 1, 2017.

(2)

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)(C) 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.

(3)

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)(D) 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.

.

(c)

Effective Date

The amendments made by this section 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).

205.

Special depreciation allowance for certain electric transmission property

(a)

In general

Section 168 (relating to accelerated cost recovery system) is amended by adding at the end the following:

(m)

Special allowance for certain electric transmission property

(1)

Additional allowance

In the case of any specified electric transmission property—

(A)

the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 50 percent of the adjusted basis of such property, and

(B)

the adjusted basis of such property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year.

(2)

Specified electric transmission property

The term specified electric transmission property means property of a character subject to the allowance for depreciation—

(A)

which is used in the United States as a generator tie to solely transmit electricity from any qualified facility described in section 45(d) (without regard to any placed in service date or the last sentence of paragraph (4) thereof) to the grid,

(B)

the original use of which commences with the taxpayer after the date of the enactment of this subsection,

(C)

which is acquired by the taxpayer by purchase (as defined in section 179(d)) after the date of the enactment of this subsection, but only if no written binding contract for the acquisition was in effect on or before the date of the enactment of this subsection, and

(D)

which is placed in service by the taxpayer before January 1, 2014.

(3)

Exceptions

(A)

Alternative depreciation property

Such term shall not include any property described in section 168(k)(2)(D)(i).

(B)

Election Out

If a taxpayer makes an election under this subparagraph with respect to any class of property for any taxable year, this subsection shall not apply to all property in such class placed in service during such taxable year.

(4)

Special Rules

For purposes of this subsection, rules similar to the rules of subparagraph (E) of section 168(k)(2) shall apply, except that such subparagraph shall be applied—

(A)

by substituting the date of the enactment of subsection (l) for September 10, 2001 each place it appears therein,

(B)

by substituting January 1, 2014 for January 1, 2005 in clause (i) thereof, and

(C)

by substituting specified electric transmission property for qualified property in clause (iv) thereof.

(5)

Recapture

For purposes of this subsection, rules similar to the rules under section 179(d)(10) shall apply with respect to any specified electric transmission property which ceases to be specified electric transmission property.

.

(b)

Effective date

The amendment 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.

206.

Extension of special rule to implement FERC restructuring policy

(a)

Qualifying electric transmission transaction

(1)

In general

Section 451(i)(3) (defining qualifying electric transmission transaction) is amended by striking January 1, 2008 and inserting January 1, 2010.

(2)

Effective date

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

(b)

Independent transmission company

(1)

In general

Section 451(i)(4)(B)(ii) (defining independent transmission company) is amended by striking December 31, 2007 and inserting the date which is 2 years after the date of such transaction.

(2)

Effective date

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

207.

Extension and modification of credit for residential energy efficient property

(a)

Extension

Section 25D(g) (relating to termination) 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) (relating to maximum credit) 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 $13,334.

(c)

Effective date

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

208.

Credit for residential wind property

(a)

In general

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

(4)

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

.

(b)

Limitation

Section 25D(b)(1) (relating to maximum credit) is amended by striking and at the end of subparagraph (B), by striking the period at the end of subparagraph (A) 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.

.

(c)

Qualified small wind energy property expenditures

(1)

In general

Section 25D(d) (relating to definitions) 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.

.

(2)

No double benefit

Section 45(d)(1) (relating to wind facility) 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..

(d)

Maximum expenditures in case of joint occupancy

Section 25D(e)(4)(A) (relating to maximum expenditures) 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)

$1,667 in the case of each half kilowatt of capacity of wind turbines for which qualified small wind energy property expenditures are made.

.

(e)

Effective date

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

209.

Seven-year applicable recovery period for depreciation of qualified energy management devices

(a)

In general

Section 168(e)(3)(C) (defining 7-year property) is amended by striking and at the end of clause (iv), by redesignating clause (v) as clause (vi), and by inserting after clause (iv) the following new clause:

(v)

any qualified energy management device, and

.

(b)

Definition of qualified energy management device

Section 168(i) (relating to definitions and special rules) is amended by inserting at the end the following new paragraph:

(18)

Qualified energy management device

(A)

In general

The term qualified energy management device means any energy management device which is placed in service before January 1, 2011, by a taxpayer who is a supplier of electric energy or a provider of electric energy services.

(B)

Energy management device

For purposes of subparagraph (A), the term energy management device means any two-way communications network and associated equipment, including equipment installed on the premises of a consumer, which is used by the taxpayer—

(i)

to measure and record electricity usage data on a time-differentiated basis of at least 60 minutes, and

(ii)

to provide such data on demand to both consumers and the taxpayer.

.

(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.

210.

Landowner incentive to encourage electric transmission build-out

(a)

In general

Part III of subchapter B of chapter 1 (relating to items specifically excluded from gross income) is amended by inserting after section 139A the following new section:

139B.

Electric transmission easement payments

(a)

In general

Gross income shall not include any qualified electric transmission easement payment.

(b)

Qualified electric transmission easement payment

For purposes of this section, the term qualified electric transmission payment means any payment by an electric utility or electric transmission entity pursuant to an easement or other agreement granted by the payee (or any predecessor of such payee) for the right of such entity (or any successors of such entity) to locate on such payee's property transmission lines and equipment used to transmit electricity at 230 or more kilovolts primarily from qualified facilities described in section 45(d) (without regard to any placed in service date or the last sentence of paragraph (4) thereof) or energy property (as defined in section 48(a)(3)) placed in service after the date of the enactment of this section.

(c)

No increase in basis

Notwithstanding any other provision of this subtitle, no increase in the basis or adjusted basis of any property shall result from any amount excluded under this subsection with respect to such property.

(d)

Denial of double benefit

Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed (to the person for whose benefit a qualified electric transmission easement payment is made) for, or by reason of, any expenditure to the extent of the amount excluded under this section with respect to such expenditure.

.

(b)

Clerical amendment

The table of sections for such part III is amended by inserting after the item relating to section 139A the following new item:

Sec. 139B. Electric transmission easement payments.

.

(c)

Effective date

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

211.

Partial exemption from passive activity limitations for qualified wind facilities

(a)

In general

Section 469 (relating to passive activity losses and credits limited) is amended by redesignating subsections (l) and (m) as subsections (m) and (n), respectively, and by inserting after subsection (k) the following new subsection:

(l)

$40,000 offset for qualified wind facilities

(1)

In general

In the case of any natural person, subsection (a) shall not apply to that portion of the passive activity loss or the deduction equivalent (within the meaning of subsection (j)(5)) of the passive activity credit for any taxable year which is attributable to any interest of such person in a facility described in section 45(d)(1) (relating to wind facility).

(2)

Dollar limitation

The aggregate amount to which paragraph (1) applies for any taxable year shall not exceed $40,000.

(3)

Special rule for estates

(A)

In general

In the case of taxable years of an estate ending less than 2 years after the date of the death of the decedent, this subsection shall apply to any interest in a facility described in section 45(d)(1) (relating to wind facility) held by the decedent on the date of his death.

(B)

Reduction for surviving spouse's exemption

For purposes of subparagraph (A), the $40,000 amount under paragraph (2) shall be reduced by the amount of the exemption under paragraph (1) allowable to the surviving spouse of the decedent for the taxable year ending with or within the taxable year of the estate.

(4)

Married individuals filing separately

(A)

In general

Except as provided in subparagraph (B), in the case of any married individual filing a separate return, this subsection shall be applied by substituting $20,000 for $40,000 each place it appears.

(B)

Taxpayers not living apart

This subsection shall not apply to a taxpayer who—

(i)

is a married individual filing a separate return for any taxable year, and

(ii)

does not live apart from his spouse at all times during such taxable year.

.

(b)

Effective date

The amendments made by this section shall apply to losses and credits taken into account in taxable years beginning after the date of the enactment of this Act.

212.

Credit for electricity produced from qualified wind facilities allowed against alternative minimum tax

(a)

In general

Subparagraph (B) of section 38(c)(4) (relating to specified credits) is amended—

(1)

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

(2)

by inserting (other than a facility described in clause (iii)) after facility in clause (ii)(I),

(3)

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

(4)

by adding at the end the following new clause:

(iii)

the credit determined under section 45 to the extent that such credit is attributable to electricity produced at a facility described in section 45(d)(1) (relating to wind facility).

.

(b)

Effective date

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

II

Domestic fuel security

221.

Credit for production of cellulosic biomass alcohol

(a)

In general

Subsection (a) of section 40 (relating to alcohol used as fuel) is amended by striking plus at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting , plus, and by adding at the end the following new paragraph:

(4)

the small cellulosic alcohol producer credit.

.

(b)

Small cellulosic alcohol producer credit

(1)

In general

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

(6)

Small cellulosic alcohol producer credit

(A)

In general

In addition to any other credit allowed under this section, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable amount for each gallon of qualified cellulosic alcohol production.

(B)

Applicable amount

For purposes of subparagraph (A), the applicable amount means the excess of—

(i)

$1.11, over

(ii)

the sum of—

(I)

the amount of the credit allowable for alcohol which is ethanol under subsection (b)(1) (without regard to subsection (b)(3)) at the time of the qualified cellulosic alcohol production, plus

(II)

the amount of the credit allowable under subsection (b)(4) at the time of such production.

(C)

Qualified cellulosic alcohol production

For purposes of this section, the term qualified cellulosic alcohol production means any cellulosic biomass alcohol which is produced by an eligible small cellulosic alcohol producer and which during the taxable year—

(i)

is sold by the taxpayer to another person—

(I)

for use by such other person in the production of a qualified alcohol mixture in such other person's trade or business (other than casual off-farm production),

(II)

for use by such other person as a fuel in a trade or business, or

(III)

who sells such cellulosic biomass alcohol at retail to another person and places such cellulosic biomass alcohol in the fuel tank of such other person, or

(ii)

is used or sold by the taxpayer for any purpose described in clause (i).

(D)

Additional distillation excluded

The qualified cellulosic alcohol production of any taxpayer for any taxable year shall not include any alcohol which is purchased by the taxpayer and with respect to which such producer increases the proof of the alcohol by additional distillation.

(E)

Application of paragraph

This paragraph shall apply with respect to qualified cellulosic alcohol production—

(i)

after December 31, 2007, and

(ii)

before the end of the later of—

(I)

December 31, 2012, or

(II)

the calendar year in which the Secretary, in consultation with the Administrator of the Environmental Protection Agency, certifies that 1,000,000,000 gallons of cellulosic biomass alcohol (as so defined) have been produced in or imported into the United States after such date.

.

(2)

Termination date not to apply

Subsection (e) of section 40 (relating to termination) is amended by adding at the end the following new paragraph:

(3)

Exception for small cellulosic alcohol producer credit

Paragraph (1) shall not apply to the portion of the credit allowed under this section by reason of subsection (a)(4).

.

(c)

Eligible small cellulosic alcohol producer

Section 40 is amended by adding at the end the following new subsection:

(i)

Definitions and special rules for small cellulosic alcohol producer

For purposes of this section—

(1)

In general

The term eligible small cellulosic alcohol producer means a person, who at all times during the taxable year, has a productive capacity for cellulosic biomass alcohol not in excess of 60,000,000 gallons.

(2)

Cellulosic biomass alcohol

(A)

In general

The term cellulosic biomass alcohol has the meaning given such term under section 168(l)(3), but does not include any alcohol with a proof of less than 150.

(B)

Determination of proof

The determination of the proof of any alcohol shall be made without regard to any added denaturants.

(3)

Aggregation rule

For purposes of the 60,000,000 gallon limitation under paragraph (1), all members of the same controlled group of corporations (within the meaning of section 267(f)) and all persons under common control (within the meaning of section 52(b) but determined by treating an interest of more than 50 percent as a controlling interest) shall be treated as 1 person.

(4)

Partnership, S corporations, and other pass-thru entities

In the case of a partnership, trust, S corporation, or other pass-thru entity, the limitation contained in paragraph (1) shall be applied at the entity level and at the partner or similar level.

(5)

Allocation

For purposes of this subsection, in the case of a facility in which more than 1 person has an interest, productive capacity shall be allocated among such persons in such manner as the Secretary may prescribe.

(6)

Regulations

The Secretary may prescribe such regulations as may be necessary to prevent the credit provided for in subsection (a)(4) from directly or indirectly benefitting any person with a direct or indirect productive capacity of more than 60,000,000 gallons of cellulosic biomass alcohol during the taxable year.

(7)

Allocation of small cellulosic producer credit to patrons of cooperative

Rules similar to the rules under subsection (g)(6) shall apply for purposes of this subsection.

.

(d)

Alcohol not used as a fuel, etc

(1)

In general

Paragraph (3) of section 40(d) is amended by redesignating subparagraph (D) as subparagraph (E) and by inserting after subparagraph (C) the following new subparagraph:

(D)

Small cellulosic alcohol producer credit

If—

(i)

any credit is allowed under subsection (a)(4), and

(ii)

any person does not use such fuel for a purpose described in subsection (b)(6)(C),

then there is hereby imposed on such person a tax equal to the applicable amount for each gallon of such cellulosic biomass alcohol.

.

(2)

Conforming amendments

(A)

Subparagraph (C) of section 40(d)(3) is amended by striking producer in the heading and inserting small ethanol producer.

(B)

Subparagraph (E) of section 40(d)(3), as redesignated by paragraph (1), is amended by striking or (C) and inserting (C), or (D).

(e)

Effective date

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

222.

Expansion of special allowance to cellulosic biomass alcohol fuel plant property

(a)

In general

Paragraph (3) of section 168(l) (relating to special allowance for cellulosic biomass ethanol plant property) is amended to read as follows:

(3)

Cellulosic biomass alcohol

For purposes of this subsection, the term cellulosic biomass alcohol means any alcohol produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis.

.

(b)

Conforming amendments

(1)

Subsection (l) of section 168 is amended by striking cellulosic biomass ethanol each place it appears and inserting cellulosic biomass alcohol.

(2)

The heading of section 168(l) is amended by striking cellulosic biomass ethanol and inserting cellulosic biomass alcohol.

(3)

The heading of paragraph (2) of section 168(l) is amended by striking cellulosic biomass ethanol and inserting cellulosic biomass alcohol.

(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.

223.

Extension of small ethanol producer credit

Paragraph (1) of section 40(e) (relating to termination) is amended—

(1)

in subparagraph (A), by inserting (December 31, 2012, in the case of the credit allowed by reason of subsection (a)(3)) after December 31, 2010, and

(2)

in subparagraph (B), by inserting (January 1, 2013, in the case of the credit allowed by reason of subsection (a)(3)) after January 1, 2011.

224.

Credit for producers of fossil free alcohol

(a)

In general

Subsection (a) of section 40 (relating to alcohol used as fuel), as amended by this Act, is amended by striking plus at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting , plus, and by adding at the end the following new paragraph:

(5)

the small fossil free alcohol producer credit.

.

(b)

Small fossil free alcohol producer credit

Subsection (b) of section 40, as amended by this Act, is amended by adding at the end the following new paragraph:

(7)

Small fossil free alcohol producer credit

(A)

In general

In addition to any other credit allowed under this section, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 25 cents for each gallon of qualified fossil free alcohol production.

(B)

Qualified fossil free alcohol production

For purposes of this section, the term qualified fossil free alcohol production means alcohol which is produced by an eligible small fossil free alcohol producer at a fossil free alcohol production facility and which during the taxable year—

(i)

is sold by the taxpayer to another person—

(I)

for use by such other person in the production of a qualified alcohol mixture in such other person's trade or business (other than casual off-farm production),

(II)

for use by such other person as a fuel in a trade or business, or

(III)

who sells such alcohol at retail to another person and places such alcohol in the fuel tank of such other person, or

(ii)

is used or sold by the taxpayer for any purpose described in clause (i).

(C)

Additional distillation excluded

The qualified fossil free alcohol production of any taxpayer for any taxable year shall not include any alcohol which is purchased by the taxpayer and with respect to which such producer increases the proof of the alcohol by additional distillation.

.

(c)

Eligible small fossil free alcohol producer

Section 40, as amended by this Act, is amended by adding at the end the following new subsection:

(j)

Definitions and special rules for small fossil free alcohol producer

For purposes of this section—

(1)

In general

The term eligible small fossil free alcohol producer means a person, who at all times during the taxable year, has a productive capacity for alcohol from all fossil free alcohol production facilities of the taxpayer which is not in excess of 60,000,000 gallons.

(2)

Fossil free alcohol production facility

The term fossil free alcohol production facility means any facility at which 90 percent of the fuel used in the production of alcohol is from biomass (as defined in section 45K(c)(3)).

(3)

Aggregation rule

For purposes of the 60,000,000 gallon limitation under paragraph (1), all members of the same controlled group of corporations (within the meaning of section 267(f)) and all persons under common control (within the meaning of section 52(b) but determined by treating an interest of more than 50 percent as a controlling interest) shall be treated as 1 person.

(4)

Partnership, S corporations, and other pass-thru entities

In the case of a partnership, trust, S corporation, or other pass-thru entity, the limitation contained in paragraph (1) shall be applied at the entity level and at the partner or similar level.

(5)

Allocation

For purposes of this subsection, in the case of a facility in which more than 1 person has an interest, productive capacity shall be allocated among such persons in such manner as the Secretary may prescribe.

(6)

Regulations

The Secretary may prescribe such regulations as may be necessary to prevent the credit provided for in subsection (a)(5) from directly or indirectly benefitting any person with a direct or indirect productive capacity of more than 60,000,000 gallons of alcohol from fossil free alcohol production facilities during the taxable year.

(7)

Allocation of small fossil free alcohol producer credit to patrons of cooperative

Rules similar to the rules under subsection (g)(6) shall apply for purposes of this subsection.

.

(d)

Alcohol not used as a fuel, etc

(1)

In general

Paragraph (3) of section 40(d), as amended by this Act, is amended by redesignating subparagraph (E) as subparagraph (F) and by inserting after subparagraph (D) the following new subparagraph:

(E)

Small fossil free alcohol producer credit

If—

(i)

any credit is allowed under subsection (a)(5), and

(ii)

any person does not use such fuel for a purpose described in subsection (b)(7)(B),

then there is hereby imposed on such person a tax equal to 25 cents for each gallon of such alcohol.

.

(2)

Conforming amendment

Subparagraph (E) of section 40(d)(3), as redesignated by paragraph (1) and amended by this Act, is amended by striking or (D) and inserting (C), or (E).

(e)

Termination

Paragraph (1) of section 40(e), as amended by this Act, is amended—

(1)

in subparagraph (A), by striking (December 31, 2012, in the case of the credit allowed by reason of subsection (a)(3)) and inserting (December 31, 2012, in the case of the credits allowed by reason of paragraphs (3) and (5) of subsection (a)), and

(2)

in subparagraph (B), by striking (January 1, 2013, in the case of the credit allowed by reason of subsection (a)(3)) and inserting (January 1, 2013, in the case of the credits allowed by reason of paragraphs (3) and (5) of subsection (a)).

(f)

Effective date

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

225.

Modification of alcohol credit

(a)

Income tax credit

Subsection (h) of section 40 (relating to reduced credit for ethanol blenders) is amended by adding at the end the following new paragraph:

(3)

Reduced amount after sale of 7,500,000,000 gallons

(A)

In general

In the case of any calendar year beginning after the date described in subparagraph (B), the last row in the table in paragraph (2) shall be applied by substituting 46 cents for 51 cents.

(B)

Date described

The date described in this subparagraph is the first date on which 7,500,000,000 gallons of ethanol (including cellulosic ethanol) have been produced in or imported into the United States after the date of the enactment of this paragraph, as certified by the Secretary, in consultation with the Administrator of the Environmental Protection Agency.

.

(b)

Excise tax credit

(1)

In general

Paragraph (2) of section 6426(b) (relating to alcohol fuel mixture credit) is amended by adding at the end the following new subparagraph:

(C)

Reduced amount after sale of 7,500,000,000 gallons

In the case of any alcohol fuel mixture produced in a calendar year beginning after the date described in section 40(h)(3)(B), subparagraph (A) shall be applied by substituting 46 cents for 51 cents.

.

(2)

Conforming amendment

Subparagraph (A) of section 6426(b)(2) is amended by striking subparagraph (B) and inserting subparagraphs (B) and (C).

(c)

Effective date

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

226.

Extension and modification of credit for biodiesel used as fuel

(a)

Extension

(1)

Income tax credits for biodiesel and renewable diesel and small agri-biodiesel producer credit

Section 40A(g) (relating to termination) is amended by striking December 31, 2008 and inserting December 31, 2010 (December 31, 2012, in the case of the credit allowed by reason of subsection (a)(3)).

(2)

Excise tax credit

Section 6426(c)(6) (relating to termination) is amended by striking 2008 and inserting 2010.

(3)

Fuels not used for taxable purposes

Section 6427(e)(5)(B) (relating to termination) is amended by striking 2008 and inserting 2010.

(b)

Modification of credit for renewable diesel

(1)

In general

Section 40A(f) (relating to renewable diesel) is amended by adding at the end the following new paragraph:

(4)

Special rule for co-processed renewable diesel

In the case of a taxpayer which produces renewable diesel through the co-processing of biomass and petroleum at any facility, this subsection shall not apply to so much of the renewable diesel produced at such facility and sold or used during the taxable year in a qualified biodiesel mixture as exceeds 60,000,000 gallons.

.

(c)

Modification relating to definition of agri-biodiesel

Paragraph (2) of section 40A(d) (relating to agri-biodiesel) is amended by striking and mustard seeds and inserting mustard seeds, and camelina.

(d)

Effective dates

The amendments made by this section shall apply to fuel sold or used after the date of the enactment of this Act.

227.

Extension and modification of alternative fuel credit

(a)

Extension

(1)

Alternative fuel credit

Paragraph (4) of section 6426(d) (relating to alternative fuel credit) is amended by striking September 30, 2009 and inserting December 31, 2012.

(2)

Alternative fuel mixture credit

Paragraph (3) of section 6426(e) (relating to alternative fuel mixture credit) is amended by striking September 30, 2009 and inserting December 31, 2012.

(3)

Payments

Subparagraph (C) of section 6427(e)(5) (relating to termination) is amended by striking September 30, 2009 and inserting December 31, 2012.

(b)

Modifications

(1)

Alternative fuel to include compressed or liquified biomass gas

Paragraph (2) of section 6426(d) (relating to alternative fuel credit) is amended by striking and at the end of subparagraph (E), by redesignating subparagraph (F) as subparagraph (G), and by inserting after subparagraph (E) the following new subparagraph:

(F)

compressed or liquified biomass gas, and

.

(2)

Credit allowed for aviation use of fuel

Paragraph (1) of section 6426(d) is amended by inserting sold by the taxpayer for use as a fuel in aviation, after motorboat,.

(c)

Carbon capture requirement for certain fuels

(1)

In general

Subsection (d) of section 6426, as amended by subsection (a), is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph:

(4)

Carbon capture requirement

The requirements of this paragraph are met if the fuel is certified, under such procedures as required by the Secretary, as having been produced at a facility which separates and sequesters not less than 75 percent of such facility's total carbon dioxide emissions.

.

(2)

Conforming amendment

Subparagraph (E) of section 6426(d)(2) is amended by inserting which meets the requirements of paragraph (4) and which is after any liquid fuel.

(d)

Effective dates

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to fuel sold or used after the date of the enactment of this Act.

(2)

Carbon capture requirements

The amendments made by subsection (c) shall apply to fuel sold or used after December 31, 2007.

228.

Extension of alternative fuel vehicle refueling property credit

Paragraph (2) of section 30C(g) (relating to termination) is amended by striking December 31, 2009 and inserting December 31, 2012.

229.

Extension of suspension of taxable income limit on percentage depletion for oil and natural gas produced from marginal properties

Subparagraph (H) of section 613A(c)(6) (relating to oil and gas produced from marginal properties) is amended by striking January 1, 2008 and inserting January 1, 2010.

230.

Extension and modification of election to expense certain refineries

(a)

Extension

Paragraph (1) of section 179C(c) (relating to qualified refinery property) is amended—

(1)

by striking January 1, 2012 in subparagraph (B) and inserting January 1, 2014, and

(2)

by striking January 1, 2008 each place it appears in subparagraph (F) and inserting January 1, 2010.

(b)

Inclusion of fuel derived from shale and tar sands

(1)

In general

Subsection (d) of section 179C is amended by inserting , or directly from shale or tar sands after (as defined in section 45K(c)).

(2)

Conforming amendment

Paragraph (2) of section 179C(e) is amended by inserting shale, tar sands, or before qualified fuels.

(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.

231.

Ethanol tariff extension

Headings 9901.00.50 and 9901.00.52 of the Harmonized Tariff Schedule of the United States are each amended in the effective period column by striking 1/1/2009 and inserting 1/1/2011.

232.

Elimination and reductions of duty drawback on certain imported ethanol

(a)

In general

Section 313(p)(3)(A)(i)(I) of the Tariff Act of 1930 (19 U.S.C. 1313(p)(3)(A)(i)(I)) is amended by striking or and inserting the following: “other than an article that contains either—

(aa)

imported ethyl alcohol (provided for in subheading 2207.10.60 or 2207.20.00 of such Schedule), or

(bb)

any imported mixture (provided for in heading 2710 or 3824 of such Schedule) that contains ethyl alcohol, or

.

(b)

Limitations on, and Reductions of, Drawbacks

Section 313 of the Tariff Act of 1930 (19 U.S.C. 1313) is amended by adding at the end the following new subsection:

(z)

Limitations on, and reductions of, drawbacks

(1)

Limitations

(A)

In general

Ethyl alcohol or mixture containing ethyl alcohol described in subparagraph (B) may be treated as being of the same kind and quality under subsection (b) of this section or may be treated as being commercially interchangeable with any other ethyl alcohol or mixture containing ethyl alcohol under subsection (j)(2) of this section, only if the other ethyl alcohol or mixture—

(i)

if imported, is subject to the additional duty under subheading 9901.00.50 of the Harmonized Tariff Schedule of the United States; or

(ii)

if domestic, is subject to Federal excise tax under section 4041 or 4081 of the Internal Revenue Code of 1986 in an amount equal to or greater than the amount of drawback claimed.

(B)

Ethyl alcohol or mixture containing ethyl alcohol described

Ethyl alcohol or mixture containing ethyl alcohol described in this subparagraph means—

(i)

ethyl alcohol classifiable under subheading 2207.10.60 or 2207.20.00 of the Harmonized Tariff Schedule of the United States, or

(ii)

a mixture containing ethyl alcohol classifiable under heading 2710 or 3824 of the Harmonized Tariff Schedule of the United States,

which, if imported would be subject to additional duty under subheading 9901.00.50 of such Schedule.
(2)

Reduction of drawback

For purposes of subsections (b), (j)(2), and (p) of this section, the amount of the refund as drawback under this section shall be reduced by an amount equal to any Federal tax credit or refund of any Federal tax paid on the merchandise with respect to which the drawback is claimed.

.

(c)

Effective date

The amendments made by this section apply to articles exported on or after the date that is 15 days after the date of the enactment of this Act.

233.

Certain income and gains relating to alcohol fuel mixtures, biodiesel fuel mixtures, and alternative fuel treated as qualifying income for publicly traded partnerships

(a)

In general

Subparagraph (E) of section 7704(d)(1) (defining qualifying income)is amended by inserting , or the transportation or storage of any fuel described in subsection (b), (c), or (d) of section 6426 after timber).

(b)

Effective date

The amendment made by this section shall take effect on the date of the enactment of this Act, in taxable years ending after such date.

234.

Technical amendments

(a)

Amendments related to section 11113 of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users

(1)

Paragraph (3) of section 6427(i) is amended—

(A)

by inserting or under subsection (e)(2) by any person with respect to an alternative fuel (as defined in section 6426(d)(2)) after section 6426 in subparagraph (A),

(B)

by inserting or (e)(2) after subsection (e)(1) in subparagraphs (A)(i) and (B), and

(C)

by inserting and alternative fuel credit after mixture credit in the heading thereof.

(2)
(A)

Subparagraph (G) of section 6426(d)(2), as redesignated by section 227, is amended by striking hydrocarbons and inserting fuel.

(B)

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

(h)

Denial of double benefit

No credit shall be determined under subsection (d) or (e) with respect to any fuel which is described in subsection (b) or (c) or section 40 or 40A.

.

(3)

The amendments made by this subsection shall take effect as if included in section 11113 of the SAFETEA–LU.

(b)

Amendments related to the Energy Policy Act of 2005

(1)

Amendment related to section 1342 of the Act

(A)

So much of subsection (b) of section 30C as precedes paragraph (1) thereof is amended to read as follows:

(b)

Limitation

The credit allowed under subsection (a) with respect to all alternative fuel vehicle refueling property placed in service by the taxpayer during the taxable year at a location shall not exceed—

.

(B)

Subsection (c) of section 30C is amended to read as follows:

(c)

Qualified alternative fuel vehicle refueling property

For purposes of this section, the term qualified alternative fuel vehicle refueling property has the same meaning as the term qualified clean-fuel vehicle refueling property would have under section 179A if—

(1)

paragraph (1) of section 179A(d) did not apply to property installed on property which is used as the principal residence (within the meaning of section 121) of the taxpayer, and

(2)

only the following were treated as clean burning fuels for purposes of section 179A(d):

(A)

Any fuel at least 85 percent of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquified natural gas, liquefied petroleum gas, or hydrogen.

(B)

Biodiesel (as defined in section 40A(d)(1)).

(C)

Any mixture—

(i)

which consists of two or more of the following: biodiesel (as so defined), diesel fuel (as defined in section 4083(a)(3)), or kerosene, and

(ii)

at least 20 percent of the volume of which consists of biodiesel (as so defined) determined without regard to any kerosene in such mixture.

.

(2)

Amendments related to section 1362 of the Act

(A)
(i)

Paragraph (1) of section 4041(d) is amended by adding at the end the following new sentence: No tax shall be imposed under the preceding sentence on the sale or use of any liquid if tax was imposed with respect to such liquid under section 4081 at the Leaking Underground Storage Tank Trust Fund financing rate..

(ii)

Paragraph (3) of section 4042(b) is amended to read as follows:

(3)

Exception for fuel on which Leaking Underground Storage Tank Trust Fund financing rate separately imposed

The Leaking Underground Storage Tank Trust Fund financing rate under paragraph (2)(B) shall not apply to the use of any fuel if tax was imposed with respect to such fuel under section 4041(d) or 4081 at the Leaking Underground Storage Tank Trust Fund financing rate.

.

(iii)

Notwithstanding section 6430 of the Internal Revenue Code of 1986, a refund, credit, or payment may be made under subchapter B of chapter 65 of such Code for taxes imposed with respect to any liquid after September 30, 2005, and before the date of the enactment of this Act under section 4041(d)(1) or 4042 of such Code at the Leaking Underground Storage Tank Trust Fund financing rate to the extent that tax was imposed with respect to such liquid under section 4081 at the Leaking Underground Storage Tank Trust Fund financing rate.

(B)
(i)

Paragraph (5) of section 4041(d) is amended—

(I)

by striking (other than with respect to any sale for export under paragraph (3) thereof), and

(II)

by adding at the end the following new sentence: The preceding sentence shall not apply with respect to subsection (g)(3) and so much of subsection (g)(1) as relates to vessels (within the meaning of section 4221(d)(3)) employed in foreign trade or trade between the United States and any of its possessions.

(ii)

Section 4082 is amended—

(I)

by striking (other than such tax at the Leaking Underground Storage Tank Trust Fund financing rate imposed in all cases other than for export) in subsection (a), and

(II)

by redesignating subsections (f) and (g) as subsections (g) and (h) and by inserting after subsection (e) the following new subsection:

(f)

Exception for Leaking Underground Storage Tank Trust Fund financing rate

(1)

In general

Subsection (a) shall not apply to the tax imposed under section 4081 at the Leaking Underground Storage Tank Trust Fund financing rate.

(2)

Exception for export, etc

Paragraph (1) shall not apply with respect to any fuel if the Secretary determines that such fuel is destined for export or for use by the purchaser as supplies for vessels (within the meaning of section 4221(d)(3)) employed in foreign trade or trade between the United States and any of its possessions.

.

(iii)

Subsection (e) of section 4082 is amended—

(I)

by striking an aircraft, the rate of tax under section 4081(a)(2)(A)(iii) shall be zero. and inserting

an aircraft—

(1)

the rate of tax under section 4081(a)(2)(A)(iii) shall be zero, and

(2)

if such aircraft is employed in foreign trade or trade between the United States and any of its possessions, the increase in such rate under section 4081(a)(2)(B) shall be zero.

; and

(II)

by moving the last sentence flush with the margin of such subsection (following the paragraph (2) added by clause (i)).

(iv)

Section 6430 is amended to read as follows:

6430.

Treatment of tax imposed at Leaking Underground Storage Tank Trust Fund financing rate

No refunds, credits, or payments shall be made under this subchapter for any tax imposed at the Leaking Underground Storage Tank Trust Fund financing rate, except in the case of fuels—

(1)

which are exempt from tax under section 4081(a) by reason of section 4081(f)(2),

(2)

which are exempt from tax under section 4041(d) by reason of the last sentence of paragraph (5) thereof, or

(3)

with respect to which the rate increase under section 4081(a)(2)(B) is zero by reason of section 4082(e)(2).

.

(C)

Paragraph (5) of section 4041(d) is amended by inserting (b)(1)(A) after subsections.

(3)

Effective date

(A)

In general

Except as otherwise provided in this paragraph, the amendments made by this subsection shall take effect as if included in the provisions of the Energy Policy Act of 2005 to which they relate.

(B)

Nonapplication of exemption for off-highway business use

The amendment made by paragraph (2)(C) shall apply to fuel sold for use or used after the date of the enactment of this Act.

(C)

Amendment made by the SAFETEA–LU

The amendment made by paragraph (2)(B)(iii)(II) shall take effect as if included in section 11161 of the SAFETEA–LU.

(c)

Amendments related to section 339 of the American Jobs Creation Act of 2004

(1)
(A)

Section 45H is amended by striking subsection (d) and by redesignating subsections (e), (f), and (g) as subsections (d), (e), and (f), respectively.

(B)

Subsection (d) of section 280C is amended to read as follows:

(d)

Credit for low sulfur diesel fuel production

The deductions otherwise allowed under this chapter for the taxable year shall be reduced by the amount of the credit determined for the taxable year under section 45H(a).

.

(C)

Subsection (a) of section 1016 is amended by striking paragraph (31) and by redesignating paragraphs (32) through (37) as paragraphs (31) through (36), respectively.

(2)
(A)

Section 45H, as amended by paragraph (1), is amended by adding at the end the following new subsection:

(g)

Election To not take credit

No credit shall be determined under subsection (a) for the taxable year if the taxpayer elects not to have subsection (a) apply to such taxable year.

.

(B)

Subsection (m) of section 6501 is amended by inserting 45H(g), after 45C(d)(4),.

(3)
(A)

Subsections (b)(1)(A), (c)(2), (e)(1), and (e)(2) of section 45H (as amended by paragraph (1)) and section 179B(a) are each amended by striking qualified capital costs and inserting qualified costs.

(B)

The heading of paragraph (2) of section 45H(c) is amended by striking capital.

(C)

Subsection (a) of section 179B is amended by inserting and which are properly chargeable to capital account before the period at the end.

(4)

The amendments made by this subsection shall take effect as if included in section 339 of the American Jobs Creation Act of 2004.

III

Advanced technology vehicles

241.

Expansion and modification of credit for alternative fuel motor vehicles

(a)

Extension

Section 30B(j) (relating to termination) is amended—

(1)

by striking December 31, 2014 in paragraph (1) and inserting December 31, 2016,

(2)

by striking December 31, 2010 in paragraph (2) and inserting December 31, 2012,

(3)

by striking December 31, 2009 in paragraph (3) and inserting December 31, 2012, and

(4)

by striking December 31, 2010 in paragraph (4) and inserting December 31, 2012.

(b)

Modification relating to new qualified alternative fuel motor vehicle credit

The last sentence of section 30B(e)(2) is amended to read as follows: A new qualified alternative fuel motor vehicle which weighs more than 14,000 pounds gross vehicle weight rating shall be deemed to satisfy the preceding sentence if it is certified as exceeding the most stringent standard applicable to the model year in which such motor vehicle was produced..

(c)

Effective date

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

242.

Credit for plug-in electric drive motor vehicles

(a)

Plug-In electric drive motor vehicle credit

(1)

In general

Subpart B of part IV of subchapter A of chapter 1 (relating to other credits) is amended by adding at the end the following new section:

30D.

Plug-in electric drive motor vehicle credit

(a)

Allowance of credit

(1)

In general

There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable amount with respect to each new qualified plug-in electric drive motor vehicle placed in service by the taxpayer during the taxable year.

(2)

Applicable amount

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

(A)

$2,500, plus

(B)

$400 for each kilowatt hour of traction battery capacity of at least 5 kilowatt hours, plus

(C)

$400 for each kilowatt hour of traction battery capacity in excess of 5 kilowatt hours.

(b)

Limitations

(1)

Limitation based on weight

The amount of the credit allowed under subsection (a) by reason of subsection (a)(2)(A) shall not exceed—

(A)

$7,500, in the case of any new qualified plug-in electric drive motor vehicle with a gross vehicle weight rating of not more than 10,000 pounds,

(B)

$10,000, in the case of any new qualified plug-in electric drive motor vehicle with a gross vehicle weight rating of more than 10,000 pounds but not more than 14,000 pounds,

(C)

$12,500, in the case of any new qualified plug-in electric drive motor vehicle with a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and

(D)

$15,000, in the case of any new qualified plug-in electric drive motor vehicle with a gross vehicle weight rating of more than 26,000 pounds.

(2)

Limitation on number of passenger vehicles and light trucks eligible for credit

No credit shall be allowed under subsection (a) for any new qualified plug-in electric drive motor vehicle which is a passenger vehicle or light truck in any calendar year following the calendar year which includes the first date on which the total number of such new qualified plug-in electric drive motor vehicles sold for use in the United States after December 31, 2007, is at least 250,000.

(c)

New qualified plug-In electric drive motor vehicle

For purposes of this section, the term new qualified plug-in electric drive motor vehicle means a motor vehicle—

(1)

which draws propulsion using a traction battery with at least 4 kilowatt hours of capacity,

(2)

which uses an offboard source of energy to recharge such battery,

(3)

which, in the case of a passenger vehicle or light truck which has a gross vehicle weight rating of not more than 8,500 pounds, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and

(A)

in the case of a vehicle having a gross vehicle weight rating of 6,000 pounds or less, 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

(B)

in the case of a vehicle having a gross vehicle weight rating of more than 6,000 pounds but not more than 8,500 pounds, the Bin 8 Tier II emission standard which is so established,

(4)

the original use of which commences with the taxpayer,

(5)

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

(6)

which is made by a manufacturer.

(d)

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

The credit allowed under subsection (a) (after the application of paragraph (1)) for any taxable year shall not exceed the excess (if any) of—

(A)

the regular tax liability (as defined in section 26(b)) reduced by the sum of the credits allowable under subpart A and sections 27, 30, 30B, and 30C, over

(B)

the tentative minimum tax for the taxable year.

(e)

Other definitions and special rules

For purposes of this section—

(1)

Motor vehicle

The term motor vehicle has the meaning given such term by section 30(c)(2).

(2)

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.).

(3)

Traction battery capacity

Traction battery capacity shall be measured in kilowatt hours from a 100 percent state of charge to a zero percent state of charge.

(4)

Reduction in basis

For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed.

(5)

No double benefit

The amount of any deduction or other credit allowable under this chapter for a new qualified plug-in electric drive motor vehicle shall be reduced by the amount of credit allowed under subsection (a) for such vehicle for the taxable year.

(6)

Property used by tax-exempt entity

In the case of a vehicle the use of which is described in paragraph (3) or (4) of section 50(b) and which is not subject to a lease, the person who sold such vehicle to the person or entity using such vehicle shall be treated as the taxpayer that placed such vehicle in service, but only if such person clearly discloses to such person or entity in a document the amount of any credit allowable under subsection (a) with respect to such vehicle (determined without regard to subsection (b)(2)).

(7)

Property used outside United States, etc., not qualified

No credit shall be allowable 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.

(8)

Recapture

The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit (including recapture in the case of a lease period of less than the economic life of a vehicle).

(9)

Election to not take credit

No credit shall be allowed under subsection (a) for any vehicle if the taxpayer elects not to have this section apply to such vehicle.

(10)

Interaction with air quality and motor vehicle safety standards

Unless otherwise provided in this section, a motor vehicle shall not be considered eligible for a credit under this section unless such vehicle is in compliance with—

(A)

the applicable provisions of the Clean Air Act for the applicable make and model year of the vehicle (or applicable air quality provisions of State law in the case of a State which has adopted such provision under a waiver under section 209(b) of the Clean Air Act), and

(B)

the motor vehicle safety provisions of sections 30101 through 30169 of title 49, United States Code.

(f)

Regulations

(1)

In general

Except as provided in paragraph (2), the Secretary shall promulgate such regulations as necessary to carry out the provisions of this section.

(2)

Coordination in prescription of certain regulations

The Secretary of the Treasury, in coordination with the Secretary of Transportation and the Administrator of the Environmental Protection Agency, shall prescribe such regulations as necessary to determine whether a motor vehicle meets the requirements to be eligible for a credit under this section.

(g)

Termination

This section shall not apply to property purchased after December 31, 2014.

.

(2)

Coordination with other motor vehicle credits

(A)

New qualified fuel cell motor vehicles

Paragraph (3) of section 30B(b) is amended by adding at the end the following new flush sentence:

Such term shall not include any motor vehicle which is a new qualified plug-in electric drive motor vehicle (as defined by section 30D(c)).

.

(B)

New qualified hybrid motor vehicles

Paragraph (3) of section 30B(d) is amended by adding at the end the following new flush sentence:

Such term shall not include any motor vehicle which is a new qualified plug-in electric drive motor vehicle (as defined by section 30D(c)).

.

(3)

Conforming amendments

(A)

Section 38(b) is amended by striking plus at the end of paragraph (30), by striking the period at the end of paragraph (31) and inserting plus, and 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(d)(1) applies.

.

(B)

Section 55(c)(3) is amended by inserting 30D(d)(2), after 30C(d)(2),.

(C)

Section 1016(a), as amended by this Act, 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(e)(4).

.

(D)

Section 6501(m) is amended by inserting 30D(e)(9) after 30C(e)(5).

(E)

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. Plug-in electric drive motor vehicle credit.

.

(b)

Conversion kits

(1)

In general

Section 30B (relating to alternative motor vehicle credit) is amended by redesignating subsections (i) and (j) as subsections (j) and (k), respectively, and by inserting after subsection (h) the following new subsection:

(i)

Plug-In conversion credit

(1)

In general

For purposes of subsection (a), the plug-in conversion credit determined under this subsection with respect to any motor vehicle which is converted to a qualified plug-in electric drive motor vehicle is an amount equal to 10 percent of the cost of the plug-in traction battery module installed in such vehicle as part of such conversion.

(2)

Limitations

The amount of the credit allowed under this subsection shall not exceed $2,500 with respect to the conversion of any motor vehicle.

(3)

Definitions and special rules

For purposes of this subsection—

(A)

Qualified plug-in electric drive motor vehicle

The term qualified plug-in electric drive motor vehicle means any new qualified plug-in electric drive motor vehicle (as defined in section 30D(c), determined without regard to paragraphs (4) and (6) thereof).

(B)

Plug-in traction battery module

The term plug-in traction battery module means an electro-chemical energy storage device which—

(i)

has a traction battery capacity of not less than 2.5 kilowatt hours,

(ii)

is equipped with an electrical plug by means of which it can be energized and recharged when plugged into an external source of electric power,

(iii)

consists of a standardized configuration and is mass produced,

(iv)

has been tested and approved by the National Highway Transportation Safety Administration as compliant with applicable motor vehicle and motor vehicle equipment safety standards when installed by a mechanic with standardized training in protocols established by the battery manufacturer as part of a nationwide distribution program, and

(v)

is certified by a battery manufacturer as meeting the requirements of clauses (i) through (iv).

(C)

Credit allowed to lessor of battery module

In the case of a plug-in traction battery module which is leased to the taxpayer, the credit allowed under this subsection shall be allowed to the lessor of the plug-in traction battery module.

(D)

Credit allowed in addition to other credits

The credit allowed under this subsection shall be allowed with respect to a motor vehicle notwithstanding whether a credit has been allowed with respect to such motor vehicle under this section (other than this subsection) in any preceding taxable year.

(4)

Termination

This subsection shall not apply to conversions made after December 31, 2009.

.

(2)

Credit treated as part of alternative motor vehicle credit

Section 30B(a) 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)

the plug-in conversion credit determined under subsection (i).

.

(3)

No recapture for vehicles converted to qualified plug-in electric drive motor vehicles

Paragraph (8) of section 30B(h) is amended by adding at the end the following: , except that no benefit shall be recaptured if such property ceases to be eligible for such credit by reason of conversion to a qualified plug-in electric drive motor vehicle.

(c)

Effective date

The amendments made by this section shall apply to property placed in service after December 31, 2007, in taxable years beginning after such date.

243.

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

(a)

In general

Section 4053 (relating to exemptions) is amended by adding at the end the following new paragraphs:

(7)

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 either—

(i)

an all electric unit, such as a battery powered unit or from grid-supplied electricity, or

(ii)

a dual fuel unit powered by diesel or other fuels, and capable of providing such services from grid-supplied electricity or on-truck batteries alone, 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 long-duration idling of such vehicle at a motor vehicle rest stop or other location where such vehicles are temporarily parked or remain stationary.

For purposes of subparagraph (B), the term long-duration idling means the operation of a main drive engine, for a period greater than 15 consecutive minutes, where the main drive engine is not engaged in gear. Such term does not apply to routine stoppages associated with traffic movement or congestion.
(8)

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 December 31, 2007.

IV

Conservation and energy efficiency

251.

Extension and modification of nonbusiness energy property credit

(a)

Extension of credit

Section 25C(g) (relating to termination) is amended by striking December 31, 2007 and inserting December 31, 2009.

(b)

Natural gas fired heat pumps

Section 25C(d)(3) (relating to energy-efficient building property) is amended—

(1)

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

(2)

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

(3)

by adding at the end the following new subparagraph:

(F)

a natural gas fired heat pump with a heating coefficient of performance (COP) of at least 1.1.

.

(c)

Modifications of standards for energy-efficient building property

(1)

Increased limitation for oil furnaces and natural gas, propane, and oil hot water boilers

(A)

In general

Subparagraphs (B) and (C) of section 25C(b)(3) are amended to read as follows:

(B)

$150 for any qualified natural gas furnace or qualified propane furnace, and

(C)

$300 for—

(i)

any item of energy-efficient building property, and

(ii)

any qualified oil furnace, qualified natural gas hot water boiler, qualified propane hot water boiler, or qualified oil hot water boiler.

.

(B)

Conforming amendment

Clause (ii) of section 25C(d)(2)(A) is amended to read as follows:

(ii)

any qualified natural gas furnace, qualified propane furnace, qualified oil furnace, qualified natural gas hot water boiler, qualified propane hot water boiler, or qualified oil hot water boiler, or

.

(2)

Electric heat pumps

Subparagraph (B) of section 25C(d)(3) is amended to read as follows:

(B)

an electric heat pump which achieves the highest efficiency tier established by the Consortium for Energy Efficiency, as in effect on January 1, 2008.

.

(3)

Water Heaters

Subparagraph (E) of section 25C(d)(3) is amended to read as follows:

(E)

a natural gas, propane, or oil water heater which has either an energy factor of at least 0.80 or a thermal efficiency of at least 90 percent.

.

(4)

Oil furnaces and hot water boilers

Paragraph (4) of section 25C(d) is amended to read as follows:

(4)

Qualified natural gas, propane, and oil furnaces and hot water boilers

(A)

Qualified natural gas furnace

The term qualified natural gas furnace means any natural gas furnace which achieves an annual fuel utilization efficiency rate of not less than 95.

(B)

Qualified natural gas hot water boiler

The term qualified natural gas hot water boiler means any natural gas hot water boiler which achieves an annual fuel utilization efficiency rate of not less than 90.

(C)

Qualified propane furnace

The term qualified propane furnace means any propane furnace which achieves an annual fuel utilization efficiency rate of not less than 95.

(D)

Qualified propane hot water boiler

The term qualified propane hot water boiler means any propane hot water boiler which achieves an annual fuel utilization efficiency rate of not less than 90.

(E)

Qualified oil furnaces

The term qualified oil furnace means any oil furnace which achieves an annual fuel utilization efficiency rate of not less than 90.

(F)

Qualified oil hot water boiler

The term qualified oil hot water boiler means any oil hot water boiler which achieves an annual fuel utilization efficiency rate of not less than 90.

.

(d)

Effective date

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

252.

Extension and modification of new energy efficient home credit

(a)

Extension of credit

Subsection (g) of section 45L (relating to termination) is amended by striking December 31, 2008 and inserting December 31, 2011.

(b)

Modification

(1)

In general

Subparagraph (B) of section 45L(a)(1) is amended to read as follows:

(B)
(i)

acquired by a person from such eligible contractor and used by any person as a residence during the taxable year, or

(ii)

used by such eligible contractor as a residence during the taxable year.

.

(2)

Effective date

The amendments made by this subsection shall apply to homes purchased after December 31, 2008.

253.

Extension and modification of energy efficient commercial buildings deduction

(a)

Extension

Section 179D(h) (relating to termination) is amended by striking December 31, 2008 and inserting December 31, 2013.

(b)

Adjustment of maximum deduction amount

(1)

In general

Subparagraph (A) of section 179D(b)(1) (relating to maximum amount of deduction) is amended by striking $1.80 and inserting $2.25.

(2)

Partial allowance

Paragraph (1) of section 179D(d) is amended—

(A)

by striking $.60 and inserting $0.75, and

(B)

by striking $1.80 and inserting $2.25.

(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.

254.

Modifications of energy efficient appliance credit for appliances produced after 2007

(a)

In general

Section 45M of the Internal Revenue Code of 1986 is amended to read as follows:

45M.

Energy efficient appliance credit

(a)

General rule

(1)

In general

For purposes of section 38, the energy efficient appliance credit determined under this section for any taxable year is an amount equal to the sum of the credit amounts determined under paragraph (2) for each type of qualified energy efficient appliance produced by the taxpayer during the calendar year ending with or within the taxable year.

(2)

Credit amounts

The credit amount determined for any type of qualified energy efficient appliance is—

(A)

the applicable amount determined under subsection (b) with respect to such type, multiplied by

(B)

the eligible production for such type.

(b)

Applicable amount

For purposes of subsection (a)—

(1)

Dishwashers

The applicable amount is $75 in the case of a residential model dishwasher which—

(A)

is manufactured in calendar year 2008, 2009, or 2010, and

(B)

uses not more than 307 kilowatt hours per year and 5.0 gallons per cycle (5.5 gallons for dishwashers designed for greater than 12 place settings).

(2)

Clothes washers

The applicable amount is—

(A)

$125 in the case of a residential model top-loading clothes washer which—

(i)

is manufactured in calendar year 2008 or 2009, and

(ii)

meets or exceeds a 1.8 MEF and does not exceed a 7.5 water consumption factor,

(B)

$150 in the case of a residential or commercial model clothes washer which—

(i)

is manufactured in calendar year 2008, 2009, or 2010, and

(ii)

meets or exceeds a 2.0 MEF and does not exceed a 6.0 water consumption factor, and

(C)

$250 in the case of a residential or commercial model clothes washer which—

(i)

is manufactured in calendar year 2008, 2009, or 2010, and

(ii)

meets or exceeds a 2.2 MEF and does not exceed a 4.5 water consumption factor.

(3)

Refrigerators

The applicable amount is—

(A)

$75 in the case of a residential model refrigerator which—

(i)

is manufactured in calendar year 2008 or 2009, and

(ii)

consumes at least 23 percent, but not more than 24.9 percent, fewer kilowatt hours per year than the 2001 energy conservation standards,

(B)

$100 in the case of a residential model refrigerator which—

(i)

is manufactured in calendar year 2008, 2009, or 2010, and

(ii)

consumes at least 25 percent, but not more than 29.9 percent, fewer kilowatt hours per year than the 2001 energy conservation standards, and

(C)

$200 in the case of a residential model refrigerator which—

(i)

is manufactured in calendar year 2008, 2009, or 2010, and

(ii)

consumes at least 30 percent fewer kilowatt hours per year than the 2001 energy conservation standards.

(c)

Eligible production

The eligible production in a calendar year with respect to each type of qualified energy efficient appliance is the excess of—

(1)

the number of appliances of such type which are produced in the United States by the taxpayer during such calendar year, over

(2)

the average number of appliances of such type which were produced in the United States by the taxpayer (or any predecessor) during the preceding 2-calendar year period.

(d)

Types of qualified energy efficient appliances

For purposes of this section, the types of qualified 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).

(e)

Limitations

(1)

Aggregate credit amount allowed

Except as provided in paragraph (2), 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)

Limitation based on gross receipts

The credit allowed under subsection (a) with respect to a taxpayer for the taxable year shall not exceed an amount equal to 2 percent of the average annual gross receipts of the taxpayer for the 3 taxable years preceding the taxable year in which the credit is determined beginning after December 31, 2007.

(3)

Gross receipts

For purposes of this subsection, the rules of paragraphs (2) and (3) of section 448(c) shall apply.

(f)

Definitions

For purposes of this section:

(1)

Dishwasher

The term dishwasher means a dishwasher subject to the energy conservation standards established by the Department of Energy.

(2)

Clothes washer

The term clothes washer includes a clothes washer subject to the energy conservation standards established by the Department of Energy.

(3)

Top-loading clothes washer

The term top-loading clothes washer means a clothes washer with the clothes container compartment access located on the top of the machine.

(4)

Refrigerator

The term refrigerator means an automatic defrost refrigerator-freezer which has an internal volume of at least 16.5 cubic feet.

(5)

Gallons per cycle

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

(6)

MEF

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

(7)

Water consumption factor

The term water consumption factor means the quotient of the total weighted per-cycle water consumption divided by the cubic foot capacity of the clothes washer.

(8)

2001 energy conservation standard

The term 2001 energy conservation standard means the energy conservation standards promulgated by the Department of Energy and effective July 1, 2001.

(g)

Special rules

For purposes of this section:

(1)

In general

Rules similar to the rules of subsections (c), (d), and (e) of section 52 shall apply.

(2)

Controlled group

(A)

In general

All persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as a single producer.

(B)

Inclusion of foreign corporations

For purposes of subparagraph (A), in applying subsections (a) and (b) of section 52 to this section, section 1563 shall be applied without regard to subsection (b)(2)(C) thereof.

(3)

Verification

No amount shall be allowed as a credit under subsection (a) with respect to which the taxpayer has not submitted such information or certification as the Secretary, in consultation with the Secretary of Energy, determines necessary.

.

(b)

Effective date

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

255.

Special depreciation allowance for certain reuse and recycling property

(a)

In general

Section 168 of the Internal Revenue Code of 1986 (relating to accelerated cost recovery system) (as amended by section 205) is amended by adding at the end the following new subsection:

(n)

Special allowance for certain reuse and recycling property

(1)

In general

In the case of any qualified reuse and recycling property—

(A)

the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 50 percent of the adjusted basis of the qualified reuse and recycling property, and

(B)

the adjusted basis of the qualified reuse and recycling property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year.

(2)

Qualified reuse and recycling property

For purposes of this subsection—

(A)

In general

The term qualified reuse and recycling property means any reuse and recycling property—

(i)

to which this section applies,

(ii)

which has a useful life of at least 5 years,

(iii)

the original use of which commences with the taxpayer after December 31, 2006, and

(iv)

which is—

(I)

acquired by purchase (as defined in section 179(d)(2)) by the taxpayer after December 31, 2006, but only if no written binding contract for the acquisition was in effect before January 1, 2007, or

(II)

acquired by the taxpayer pursuant to a written binding contract which was entered into after December 31, 2006.

(B)

Exceptions

(i)

Alternative depreciation property

The term qualified reuse and recycling property shall not include any property to which the alternative depreciation system under subsection (g) applies, determined without regard to paragraph (7) of subsection (g) (relating to election to have system apply).

(ii)

Election out

If a taxpayer makes an election under this clause with respect to any class of property for any taxable year, this subsection shall not apply to all property in such class placed in service during such taxable year.

(C)

Special rule for self-constructed property

In the case of a taxpayer manufacturing, constructing, or producing property for the taxpayer's own use, the requirements of clause (iv) of subparagraph (A) shall be treated as met if the taxpayer begins manufacturing, constructing, or producing the property after December 31, 2006.

(D)

Deduction allowed in computing minimum tax

For purposes of determining alternative minimum taxable income under section 55, the deduction under subsection (a) for qualified reuse and recycling property shall be determined under this section without regard to any adjustment under section 56.

(3)

Definitions

For purposes of this subsection—

(A)

Reuse and recycling property

(i)

In general

The term reuse and recycling property means any machinery and equipment (not including buildings or real estate), along with all appurtenances thereto, including software necessary to operate such equipment, which is used exclusively to recycle qualified materials.

(ii)

Exclusion

Such term does not include—

(I)

rolling stock or other equipment used to transport qualified materials, and

(II)

equipment used to produce new products or commodities from recycled products.

(B)

Qualified materials

(i)

In general

The term qualified materials means scrap plastic, scrap glass, scrap textiles, scrap rubber (including used tires), scrap packaging, recovered fiber, scrap ferrous and nonferrous metals, or electronic scrap generated by an individual or business.

(ii)

Electronic scrap

For purposes of clause (i), the term electronic scrap means—

(I)

any cathode ray tube, flat panel screen, or similar video display device with a screen size greater than 4 inches measured diagonally, or

(II)

any central processing unit.

(C)

Recycling or recycle

The term recycling or recycle means that process (including sorting and collecting) by which worn or superfluous materials are manufactured or processed into specification grade commodities that are suitable for use as a replacement or substitute for virgin materials in manufacturing tangible consumer and commercial products, including packaging.

.

(b)

Effective date

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

B

Revenue raising provisions

261.

Denial of deduction for major integrated oil companies for income attributable to domestic production of oil, natural gas, or primary products thereof

(a)

In general

Subparagraph (B) of section 199(c)(4) of the Internal Revenue Code of 1986 (relating to exceptions) is amended by striking or at the end of clause (ii), by striking the period at the end of clause (iii) and inserting , or, and by inserting after clause (iii) the following new clause:

(iv)

in the case of any major integrated oil company (as defined in section 167(h)(5)(B)), the production, refining, processing, transportation, or distribution of oil, natural gas, or any primary product thereof during any taxable year described in section 167(h)(5)(B).

.

(b)

Primary product

Section 199(c)(4)(B) of such Code is amended by adding at the end the following flush sentence:

For purposes of clause (iv), the term primary product has the same meaning as when used in section 927(a)(2)(C), as in effect before its repeal.

.

(c)

Conforming amendments

Section 199(c)(4) of such Code is amended—

(1)

in subparagraph (A)(i)(III) by striking electricity, natural gas, and inserting electricity, and

(2)

in subparagraph (B)(ii) by striking electricity, natural gas, and inserting electricity.

(d)

Effective date

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

262.

Elimination of the different treatment of foreign oil and gas extraction income and foreign oil related income for purposes of the foreign tax credit

(a)

In general

Subsections (a) and (b) of section 907 (relating to special rules in case of foreign oil and gas income) are amended to read as follows:

(a)

Reduction in amount allowed as foreign tax under section 901

In applying section 901, the amount of any foreign oil and gas taxes paid or accrued (or deemed to have been paid) during the taxable year which would (but for this subsection) be taken into account for purposes of section 901 shall be reduced by the amount (if any) by which the amount of such taxes exceeds the product of—

(1)

the amount of the combined foreign oil and gas income for the taxable year,

(2)

multiplied by—

(A)

in the case of a corporation, the percentage which is equal to the highest rate of tax specified under section 11(b), or

(B)

in the case of an individual, a fraction the numerator of which is the tax against which the credit under section 901(a) is taken and the denominator of which is the taxpayer's entire taxable income.

(b)

Combined foreign oil and gas income; foreign oil and gas taxes

For purposes of this section—

(1)

Combined foreign oil and gas income

The term combined foreign oil and gas income means, with respect to any taxable year, the sum of—

(A)

foreign oil and gas extraction income, and

(B)

foreign oil related income.

(2)

Foreign oil and gas taxes

The term foreign oil and gas taxes means, with respect to any taxable year, the sum of—

(A)

oil and gas extraction taxes, and

(B)

any income, war profits, and excess profits taxes paid or accrued (or deemed to have been paid or accrued under section 902 or 960) during the taxable year with respect to foreign oil related income (determined without regard to subsection (c)(4)) or loss which would be taken into account for purposes of section 901 without regard to this section.

.

(b)

Recapture of foreign oil and gas losses

Paragraph (4) of section 907(c) (relating to recapture of foreign oil and gas extraction losses by recharacterizing later extraction income) is amended to read as follows:

(4)

Recapture of foreign oil and gas losses by recharacterizing later combined foreign oil and gas income

(A)

In general

The combined foreign oil and gas income of a taxpayer for a taxable year (determined without regard to this paragraph) shall be reduced—

(i)

first by the amount determined under subparagraph (B), and

(ii)

then by the amount determined under subparagraph (C).

The aggregate amount of such reductions shall be treated as income (from sources without the United States) which is not combined foreign oil and gas income.
(B)

Reduction for pre-2008 foreign oil extraction losses

The reduction under this paragraph shall be equal to the lesser of—

(i)

the foreign oil and gas extraction income of the taxpayer for the taxable year (determined without regard to this paragraph), or

(ii)

the excess of—

(I)

the aggregate amount of foreign oil extraction losses for preceding taxable years beginning after December 31, 1982, and before January 1, 2008, over

(II)

so much of such aggregate amount as was recharacterized under this paragraph (as in effect before and after the date of the enactment of the Energy Advancement and Investment Act of 2007) for preceding taxable years beginning after December 31, 1982.

(C)

Reduction for post-2007 foreign oil and gas losses

The reduction under this paragraph shall be equal to the lesser of—

(i)

the combined foreign oil and gas income of the taxpayer for the taxable year (determined without regard to this paragraph), reduced by an amount equal to the reduction under subparagraph (A) for the taxable year, or

(ii)

the excess of—

(I)

the aggregate amount of foreign oil and gas losses for preceding taxable years beginning after December 31, 2007, over

(II)

so much of such aggregate amount as was recharacterized under this paragraph for preceding taxable years beginning after December 31, 2007.

(D)

Foreign oil and gas loss defined

(i)

In general

For purposes of this paragraph, the term foreign oil and gas loss means the amount by which—

(I)

the gross income for the taxable year from sources without the United States and its possessions (whether or not the taxpayer chooses the benefits of this subpart for such taxable year) taken into account in determining the combined foreign oil and gas income for such year, is exceeded by

(II)

the sum of the deductions properly apportioned or allocated thereto.

(ii)

Net operating loss deduction not taken into account

For purposes of clause (i), the net operating loss deduction allowable for the taxable year under section 172(a) shall not be taken into account.

(iii)

Expropriation and casualty losses not taken into account

For purposes of clause (i), there shall not be taken into account—

(I)

any foreign expropriation loss (as defined in section 172(h) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990)) for the taxable year, or

(II)

any loss for the taxable year which arises from fire, storm, shipwreck, or other casualty, or from theft,

to the extent such loss is not compensated for by insurance or otherwise.
(iv)

Foreign oil extraction loss

For purposes of subparagraph (B)(ii)(I), foreign oil extraction losses shall be determined under this paragraph as in effect on the day before the date of the enactment of the Energy Advancement and Investment Act of 2007.

.

(c)

Carryback and carryover of disallowed credits

Section 907(f) (relating to carryback and carryover of disallowed credits) is amended—

(1)

by striking oil and gas extraction taxes each place it appears and inserting foreign oil and gas taxes, and

(2)

by adding at the end the following new paragraph:

(4)

Transition rules for pre-2008 and 2008 disallowed credits

(A)

Pre-2008 credits

In the case of any unused credit year beginning before January 1, 2008, this subsection shall be applied to any unused oil and gas extraction taxes carried from such unused credit year to a year beginning after December 31, 2007—

(i)

by substituting oil and gas extraction taxes for foreign oil and gas taxes each place it appears in paragraphs (1), (2), and (3), and

(ii)

by computing, for purposes of paragraph (2)(A), the limitation under subparagraph (A) for the year to which such taxes are carried by substituting foreign oil and gas extraction income for foreign oil and gas income in subsection (a).

(B)

2008 credits

In the case of any unused credit year beginning in 2008, the amendments made to this subsection by the Energy Advancement and Investment Act of 2007 shall be treated as being in effect for any preceding year beginning before January 1, 2008, solely for purposes of determining how much of the unused foreign oil and gas taxes for such unused credit year may be deemed paid or accrued in such preceding year.

.

(d)

Conforming amendment

Section 6501(i) is amended by striking oil and gas extraction taxes and inserting foreign oil and gas taxes.

(e)

Effective date

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

263.

Increase and extension of Oil Spill Liability Trust Fund tax

(a)

Increase in rate

(1)

In general

Section 4611(c)(2)(B) (relating to rates) is amended by striking 5 cents and inserting 10 cents.

(2)

Effective date

The amendment made by this subsection shall apply on and after the first day of the first calendar quarter beginning more than 60 days after the date of the enactment of this Act.

(b)

Extension

(1)

In general

Section 4611(f) (relating to application of Oil Spill Liability Trust Fund financing rate) is amended by striking paragraphs (2) and (3) and inserting the following new paragraph:

(2)

Termination

The Oil Spill Liability Trust Fund financing rate shall not apply after December 31, 2017.

.

(2)

Conforming amendment

Section 4611(f)(1) is amended by striking paragraphs (2) and (3) and inserting paragraph (2).

(3)

Effective date

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

264.

Limitation on drawback claimed for amounts deposited into the Oil Spill Liability Trust Fund

Section 313(j) of the Tariff Act of 1930 (19 U.S. C. 1313(j)) is amended by adding at the end the following new paragraph:

(5)

Limitation on certain drawbacks

Any tax or fee imposed under section 4611 of the Internal Revenue Code of 1986 for deposit in the Oil Spill Liability Trust Fund pursuant to section 9509 of such Code shall not be eligible for refund as drawback under this section.

.

265.

Tax on crude oil and natural gas produced from the outer Continental Shelf in the Gulf of Mexico

(a)

In general

Subtitle E (relating to alcohol, tobacco, and certain other excise taxes) is amended by adding at the end the following new chapter:

56

Tax on severance of crude oil and natural gas from the outer Continental Shelf in the Gulf of Mexico

Sec. 5896. Imposition of tax.

Sec. 5897. Taxable crude oil or natural gas and removal price.

Sec. 5898. Special rules and definitions.

5896.

Imposition of tax

(a)

In general

In addition to any other tax imposed under this title, there is hereby imposed a tax equal to 13 percent of the removal price of any taxable crude oil or natural gas removed from the premises during any taxable period.

(b)

Credit for Federal royalties paid

(1)

In general

There shall be allowed as a credit against the tax imposed by subsection (a) with respect to the production of any taxable crude oil or natural gas an amount equal to the aggregate amount of royalties paid under Federal law with respect to such production.

(2)

Limitation

The aggregate amount of credits allowed under paragraph (1) to any taxpayer for any taxable period shall not exceed the amount of tax imposed by subsection (a) for such taxable period.

(c)

Tax paid by producer

The tax imposed by this section shall be paid by the producer of the taxable crude oil or natural gas.

5897.

Taxable crude oil or natural gas and removal price

(a)

Taxable crude oil or natural gas

For purposes of this chapter, the term taxable crude oil or natural gas means crude oil or natural gas which is produced from Federal submerged lands on the outer Continental Shelf in the Gulf of Mexico pursuant to a lease entered into with the United States which authorizes the production.

(b)

Removal price

For purposes of this chapter—

(1)

In general

Except as otherwise provided in this subsection, the term removal price means—

(A)

in the case of taxable crude oil, the amount for which a barrel of such crude oil is sold, and

(B)

in the case of taxable natural gas, the amount per 1,000 cubic feet for which such natural gas is sold.

(2)

Sales between related persons

In the case of a sale between related persons, the removal price shall not be less than the constructive sales price for purposes of determining gross income from the property under section 613.

(3)

Oil or gas removed from property before sale

If crude oil or natural gas is removed from the property before it is sold, the removal price shall be the constructive sales price for purposes of determining gross income from the property under section 613.

(4)

Refining begun on property

If the manufacture or conversion of crude oil into refined products begins before such oil is removed from the property—

(A)

such oil shall be treated as removed on the day such manufacture or conversion begins, and

(B)

the removal price shall be the constructive sales price for purposes of determining gross income from the property under section 613.

(5)

Property

The term property has the meaning given such term by section 614.

5898.

Special rules and definitions

(a)

Administrative requirements

(1)

Withholding and deposit of tax

The Secretary shall provide for the withholding and deposit of the tax imposed under section 5896 on a quarterly basis.

(2)

Records and information

Each taxpayer liable for tax under section 5896 shall keep such records, make such returns, and furnish such information (to the Secretary and to other persons having an interest in the taxable crude oil or natural gas) with respect to such oil as the Secretary may by regulations prescribe.

(3)

Taxable periods; return of tax

(A)

Taxable period

Except as provided by the Secretary, each calendar year shall constitute a taxable period.

(B)

Returns

The Secretary shall provide for the filing, and the time for filing, of the return of the tax imposed under section 5896.

(b)

Definitions

For purposes of this chapter—

(1)

Producer

The term producer means the holder of the economic interest with respect to the crude oil or natural gas.

(2)

Crude oil

The term crude oil includes crude oil condensates and natural gasoline.

(3)

Premises and crude oil product

The terms premises and crude oil product have the same meanings as when used for purposes of determining gross income from the property under section 613.

(c)

Adjustment of removal price

In determining the removal price of oil or natural gas from a property in the case of any transaction, the Secretary may adjust the removal price to reflect clearly the fair market value of oil or natural gas removed.

(d)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this chapter.

.

(b)

Deductibility of tax

The first sentence of section 164(a) (relating to deduction for taxes) is amended by inserting after paragraph (5) the following new paragraph:

(6)

The tax imposed by section 5896(a) (after application of section 5896(b)) on the severance of crude oil or natural gas from the outer Continental Shelf in the Gulf of Mexico.

.

(c)

Clerical amendment

The table of chapters for subtitle E is amended by adding at the end the following new item:

Chapter 56. Tax on severance of crude oil and natural gas from the outer Continental Shelf in the Gulf of Mexico.

.

(d)

Effective date

The amendments made by this section shall apply to crude oil or natural gas removed after the date of the enactment of this Act.

266.

Taxation of taxable fuels in foreign trade zones

(a)

Tax imposed on removals and entries in foreign trade zones

(1)

In general

Subsection (a) of section 4083 (relating to definitions) is amended by adding at the end the following new paragraph:

(4)

United States

The term United States includes any foreign trade zone or bonded warehouse located in the United States.

.

(2)

Conforming amendment

Section 4081(a)(1)(A) (relating to imposition of tax) is amended—

(A)

in clause (i), by inserting in the United States after refinery; and

(B)

in clause (ii), by inserting in the United States after terminal.

(b)

Treatment of taxable fuel in foreign trade zones

Paragraph (2) of section 81c(a) of title 19, United States Code, is amended by inserting (other than the provisions relating to taxable fuel (as defined under section 4083(a) of the Internal Revenue Code of 1986)) after thereunder.

(c)

Effective dates

(1)

Subsection (a)

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

(2)

Subsection (b)

The amendment made by subsection (b) shall take effect on January 1, 2008.

267.

Clarification of penalty for sale of fuel failing to meet EPA regulations

(a)

In general

Subsection (a) of section 6720A (relating to penalty with respect to certain adulterated fuels) is amended by striking applicable EPA regulations (as defined in section 45H(c)(3)) and inserting the requirements for diesel fuel under section 211 of the Clean Air Act, as determined by the Secretary,.

(b)

Effective date

The amendments made by this section shall apply to any transfer, sale, or holding out for sale or resale occurring after the date of the enactment of this Act.

268.

Clarification of eligibility for certain fuels credits for fuel with insufficient nexus to the United States

(a)

In general

(1)

Alcohol 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

(A)

Alcohol credit

No alcohol credit shall be determined under this section with respect to any alcohol unless such alcohol is produced in the United States for consumption in the United States or entered into the United States for consumption in the United States.

(B)

Alcohol mixture credit

No alcohol mixture credit shall be determined under this section with respect to any mixture unless such mixture is produced in the United States for consumption in the United States or entered into the United States for consumption in the United States.

(C)

No credits for alcohol destined for export

No credit (other than the small ethanol producer credit) shall be determined under this section with respect to any mixture or alcohol if such mixture or alcohol is destined for export from the United States (as determined by the Secretary).

(D)

Special rule for small producer credits

No small ethanol producer credit, small cellulosic alcohol producer credit, or small fossil free alcohol producer credit shall be determined under this section with respect to any alcohol unless such alcohol is produced in the United States.

.

(2)

Biodiesel 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

(A)

Biodiesel credit

No biodiesel credit shall be determined under this section with respect to any biodiesel unless such biodiesel is produced in the United States for consumption in the United States or is entered into the United States for consumption in the United States.

(B)

Biodiesel mixture credit

No biodiesel mixture credit shall be determined under this section with respect to any mixture unless such mixture is produced in the United States for consumption in the United States or is entered into the United States for consumption in the United States.

(C)

No credits for biodiesel destined for export

No credit (other than the small agri-biodiesel producer credit) shall be determined under this section with respect to any mixture or biodiesel if such mixture or biodiesel is destined for export from the United States (as determined by the Secretary).

(D)

Special rule for small agri-biodiesel producer credit

No small agri-biodiesel producer credit shall be determined under this section with respect to any agri-biodiesel unless such agri-biodiesel is produced in the United States.

.

(3)

Excise tax credits

Section 6426, as amended by section 233, is amended by adding at the end the following new subsection:

(i)

Limitation to fuels with connection to the United States

(1)

Mixture credits

No credit shall be determined under this section with respect to any mixture unless such mixture is produced in the United States for consumption in the United States or is entered into the United States for consumption in the United States.

(2)

Alternative fuel credit

No alternative fuel credit shall be determined under this section with respect to any alternative fuel unless such alternative fuel is produced in the United States for consumption in the United States or is entered into the United States for consumption in the United States.

(3)

No credits for fuels destined for export

No credit shall be determined under this section with respect to any mixture or alternative fuel if such mixture or alternative fuel is destined for export from the United States (as determined by the Secretary).

.

(4)

Payments

Subsection (e) of section 6427 is amended by redesignating paragraph (5), as amended by this Act, 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).

.

(b)

Effective date

The amendments made by this section shall apply to fuel sold or used after the date of the enactment of this Act.

269.

Treatment of qualified alcohol fuel mixtures and qualified biodiesel fuel mixtures as taxable fuels

(a)

In general

Subparagraph (A) of section 4083(a)(3) (relating to diesel fuel) is amended by striking and at the end of clause (ii), by redesignating clause (iii) as clause (v), and inserting after clause (ii) the following new clauses:

(iii)

any qualified mixture (as defined in section 40(b)(1)(B)) which is a mixture of alcohol and special fuel,

(iv)

any qualified biodiesel mixture (as defined in section 40A(b)(1)(B)), and

.

(b)

Effective date

The amendments made by this section shall apply to fuels removed, entered, or sold after December 31, 2007.

270.

Calculation of volume of alcohol for fuel credits

(a)

In general

Paragraph (4) of section 40(d) (relating to volume of alcohol) is amended by striking the volume of alcohol and all that follows and inserting the volume of alcohol shall not include any denaturant added to such alcohol..

(b)

Effective date

The amendment made by this section shall apply to fuel sold or used after December 31, 2007.

271.

Bulk transfer exception not to apply to finished gasoline

(a)

In general

Subparagraph (B) of section 4081(a)(1) (relating to tax on removal, entry, or sale) is amended by adding at the end the following new clause:

(iii)

Exception for finished gasoline

Clause (i) shall not apply to any gasoline which meets the requirements for gasoline under section 211 of the Clean Air Act.

.

(b)

Exception to tax on finished gasoline for prior taxable removals

Paragraph (1) of section 4081(a) is amended by adding at the end the following new subparagraph:

(C)

Exemption for previously taxed finished gasoline

The tax imposed by this paragraph shall not apply to the removal of gasoline described in subparagraph (B)(iii) from any terminal if there was a prior taxable removal or entry of such fuel under clause (i), (ii), or (iii) of subparagraph (A). The preceding sentence shall not apply to the volume of any product added to such gasoline at the terminal unless there was a prior taxable removal or entry of such product under clause (i), (ii), or (iii) of subparagraph (A).

.

(c)

Effective date

The amendment made by this section shall apply to fuel removed, entered, or sold after December 31, 2007.

272.

Application of rules treating inverted corporations as domestic corporations to certain transactions occurring after March 20, 2002

(a)

In general

Section 7874(b) (relating to inverted corporations treated as domestic corporations) is amended to read as follows:

(b)

Inverted corporations treated as domestic corporations

(1)

In general

Notwithstanding section 7701(a)(4), a foreign corporation shall be treated for purposes of this title as a domestic corporation if such corporation would be a surrogate foreign corporation if subsection (a)(2) were applied by substituting 80 percent for 60 percent.

(2)

Special rule for certain transactions occurring after March 20, 2002

(A)

In general

If—

(i)

paragraph (1) does not apply to a foreign corporation, but

(ii)

paragraph (1) would apply to such corporation if, in addition to the substitution under paragraph (1), subsection (a)(2) were applied by substituting March 20, 2002 for March 4, 2003 each place it appears,

then paragraph (1) shall apply to such corporation but only with respect to taxable years of such corporation beginning after December 31, 2006.
(B)

Special rules

Subject to such rules as the Secretary may prescribe, in the case of a corporation to which paragraph (1) applies by reason of this paragraph—

(i)

the corporation shall be treated, as of the close of its last taxable year beginning before January 1, 2007, as having transferred all of its assets, liabilities, and earnings and profits to a domestic corporation in a transaction with respect to which no tax is imposed under this title,

(ii)

the bases of the assets transferred in the transaction to the domestic corporation shall be the same as the bases of the assets in the hands of the foreign corporation, subject to any adjustments under this title for built-in losses,

(iii)

the basis of the stock of any shareholder in the domestic corporation shall be the same as the basis of the stock of the shareholder in the foreign corporation for which it is treated as exchanged, and

(iv)

the transfer of any earnings and profits by reason of clause (i) shall be disregarded in determining any deemed dividend or foreign tax creditable to the domestic corporation with respect to such transfer.

(C)

Regulations

The Secretary may prescribe such regulations as may be necessary or appropriate to carry out this paragraph, including regulations to prevent the avoidance of the purposes of this paragraph.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2006.

273.

Modification of effective date of leasing provisions of the American Jobs Creation Act of 2004

(a)

Leases to Foreign Entities

Section 849(b) of the American Jobs Creation Act of 2004 is amended by adding at the end the following new paragraph:

(5)

Leases to foreign entities

In the case of tax-exempt use property leased to a tax-exempt entity which is a foreign person or entity, the amendments made by this part shall apply to taxable years beginning after December 31, 2006, with respect to leases entered into on or before March 12, 2004.

.

(b)

Effective Date

The amendment made by this section shall take effect as if included in the enactment of the American Jobs Creation Act of 2004.

274.

Revision of tax rules on expatriation of individuals

(a)

In General

Subpart A of part II of subchapter N of chapter 1 is amended by inserting after section 877 the following new section:

877A.

Tax responsibilities of expatriation

(a)

General Rules

For purposes of this subtitle—

(1)

Mark to market

Except as provided in subsections (d) and (f), all property of a covered expatriate to whom this section applies shall be treated as sold on the day before the expatriation date for its fair market value.

(2)

Recognition of gain or loss

In the case of any sale under paragraph (1)—

(A)

notwithstanding any other provision of this title, any gain arising from such sale shall be taken into account for the taxable year of the sale, and

(B)

any loss arising from such sale shall be taken into account for the taxable year of the sale to the extent otherwise provided by this title, except that section 1091 shall not apply to any such loss.

Proper adjustment shall be made in the amount of any gain or loss subsequently realized for gain or loss taken into account under the preceding sentence.
(3)

Exclusion for certain gain

(A)

In general

The amount which, but for this paragraph, would be includible in the gross income of any individual by reason of this section shall be reduced (but not below zero) by $600,000. For purposes of this paragraph, allocable expatriation gain taken into account under subsection (f)(2) shall be treated in the same manner as an amount required to be includible in gross income.

(B)

Cost-of-living adjustment

(i)

In general

In the case of an expatriation date occurring in any calendar year after 2007, the $600,000 amount under subparagraph (A) shall be increased by an amount equal to—

(I)

such dollar amount, multiplied by

(II)

the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting calendar year 2006 for calendar year 1992 in subparagraph (B) thereof.

(ii)

Rounding rules

If any amount after adjustment under clause (i) is not a multiple of $1,000, such amount shall be rounded to the next lower multiple of $1,000.

(4)

Election to continue to be taxed as united states citizen

(A)

In general

If a covered expatriate elects the application of this paragraph—

(i)

this section (other than this paragraph and subsection (i)) shall not apply to the expatriate, but

(ii)

in the case of property to which this section would apply but for such election, the expatriate shall be subject to tax under this title in the same manner as if the individual were a United States citizen.

(B)

Requirements

Subparagraph (A) shall not apply to an individual unless the individual—

(i)

provides security for payment of tax in such form and manner, and in such amount, as the Secretary may require,

(ii)

consents to the waiver of any right of the individual under any treaty of the United States which would preclude assessment or collection of any tax which may be imposed by reason of this paragraph, and

(iii)

complies with such other requirements as the Secretary may prescribe.

(C)

Election

An election under subparagraph (A) shall apply to all property to which this section would apply but for the election and, once made, shall be irrevocable. Such election shall also apply to property the basis of which is determined in whole or in part by reference to the property with respect to which the election was made.

(b)

Election To Defer Tax

(1)

In general

If the taxpayer elects the application of this subsection with respect to any property treated as sold by reason of subsection (a), the payment of the additional tax attributable to such property shall be postponed until the due date of the return for the taxable year in which such property is disposed of (or, in the case of property disposed of in a transaction in which gain is not recognized in whole or in part, until such other date as the Secretary may prescribe).

(2)

Determination of tax with respect to property

For purposes of paragraph (1), the additional tax attributable to any property is an amount which bears the same ratio to the additional tax imposed by this chapter for the taxable year solely by reason of subsection (a) as the gain taken into account under subsection (a) with respect to such property bears to the total gain taken into account under subsection (a) with respect to all property to which subsection (a) applies.

(3)

Termination of postponement

No tax may be postponed under this subsection later than the due date for the return of tax imposed by this chapter for the taxable year which includes the date of death of the expatriate (or, if earlier, the time that the security provided with respect to the property fails to meet the requirements of paragraph (4), unless the taxpayer corrects such failure within the time specified by the Secretary).

(4)

Security

(A)

In general

No election may be made under paragraph (1) with respect to any property unless adequate security is provided to the Secretary with respect to such property.

(B)

Adequate security

For purposes of subparagraph (A), security with respect to any property shall be treated as adequate security if—

(i)

it is a bond in an amount equal to the deferred tax amount under paragraph (2) for the property, or

(ii)

the taxpayer otherwise establishes to the satisfaction of the Secretary that the security is adequate.

(5)

Waiver of certain rights

No election may be made under paragraph (1) unless the taxpayer consents to the waiver of any right under any treaty of the United States which would preclude assessment or collection of any tax imposed by reason of this section.

(6)

Elections

An election under paragraph (1) shall only apply to property described in the election and, once made, is irrevocable. An election may be made under paragraph (1) with respect to an interest in a trust with respect to which gain is required to be recognized under subsection (f)(1).

(7)

Interest

For purposes of section 6601—

(A)

the last date for the payment of tax shall be determined without regard to the election under this subsection, and

(B)

section 6621(a)(2) shall be applied by substituting 5 percentage points for 3 percentage points in subparagraph (B) thereof.

(c)

Covered Expatriate

For purposes of this section—

(1)

In general

Except as provided in paragraph (2), the term covered expatriate means an expatriate.

(2)

Exceptions

An individual shall not be treated as a covered expatriate if—

(A)

the individual—

(i)

became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country, and

(ii)

has not been a resident of the United States (as defined in section 7701(b)(1)(A)(ii)) during the 5 taxable years ending with the taxable year during which the expatriation date occurs, or

(B)
(i)

the individual’s relinquishment of United States citizenship occurs before such individual attains age 181/2, and

(ii)

the individual has been a resident of the United States (as so defined) for not more than 5 taxable years before the date of relinquishment.

(d)

Exempt Property; Special Rules for Pension Plans

(1)

Exempt property

This section shall not apply to the following:

(A)

United states real property interests

Any United States real property interest (as defined in section 897(c)(1)), other than stock of a United States real property holding corporation which does not, on the day before the expatriation date, meet the requirements of section 897(c)(2).

(B)

Specified property

Any property or interest in property not described in subparagraph (A) which the Secretary specifies in regulations.

(2)

Special rules for certain retirement plans

(A)

In general

If a covered expatriate holds on the day before the expatriation date any interest in a retirement plan to which this paragraph applies—

(i)

such interest shall not be treated as sold for purposes of subsection (a)(1), but

(ii)

an amount equal to the present value of the expatriate’s nonforfeitable accrued benefit shall be treated as having been received by such individual on such date as a distribution under the plan.

(B)

Treatment of subsequent distributions

In the case of any distribution on or after the expatriation date to or on behalf of the covered expatriate from a plan from which the expatriate was treated as receiving a distribution under subparagraph (A), the amount otherwise includible in gross income by reason of the subsequent distribution shall be reduced by the excess of the amount includible in gross income under subparagraph (A) over any portion of such amount to which this subparagraph previously applied.

(C)

Treatment of subsequent distributions by plan

For purposes of this title, a retirement plan to which this paragraph applies, and any person acting on the plan’s behalf, shall treat any subsequent distribution described in subparagraph (B) in the same manner as such distribution would be treated without regard to this paragraph.

(D)

Applicable plans

This paragraph shall apply to—

(i)

any qualified retirement plan (as defined in section 4974(c)),

(ii)

an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A), and

(iii)

to the extent provided in regulations, any foreign pension plan or similar retirement arrangements or programs.

(e)

Definitions

For purposes of this section—

(1)

Expatriate

The term expatriate means—

(A)

any United States citizen who relinquishes citizenship, and

(B)

any long-term resident of the United States who—

(i)

ceases to be a lawful permanent resident of the United States (within the meaning of section 7701(b)(6)), or

(ii)

commences to be treated as a resident of a foreign country under the provisions of a tax treaty between the United States and the foreign country and who does not waive the benefits of such treaty applicable to residents of the foreign country.

(2)

Expatriation date

The term expatriation date means—

(A)

the date an individual relinquishes United States citizenship, or

(B)

in the case of a long-term resident of the United States, the date of the event described in clause (i) or (ii) of paragraph (1)(B).

(3)

Relinquishment of citizenship

A citizen shall be treated as relinquishing United States citizenship on the earliest of—

(A)

the date the individual renounces such individual’s United States nationality before a diplomatic or consular officer of the United States pursuant to paragraph (5) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),

(B)

the date the individual furnishes to the United States Department of State a signed statement of voluntary relinquishment of United States nationality confirming the performance of an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)–(4)),

(C)

the date the United States Department of State issues to the individual a certificate of loss of nationality, or

(D)

the date a court of the United States cancels a naturalized citizen’s certificate of naturalization.

Subparagraph (A) or (B) shall not apply to any individual unless the renunciation or voluntary relinquishment is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the United States Department of State.
(4)

Long-term resident

The term long-term resident has the meaning given to such term by section 877(e)(2).

(f)

Special Rules Applicable to Beneficiaries’ Interests in Trust

(1)

In general

Except as provided in paragraph (2), if an individual is determined under paragraph (3) to hold an interest in a trust on the day before the expatriation date—

(A)

the individual shall not be treated as having sold such interest,

(B)

such interest shall be treated as a separate share in the trust, and

(C)
(i)

such separate share shall be treated as a separate trust consisting of the assets allocable to such share,

(ii)

the separate trust shall be treated as having sold its assets on the day before the expatriation date for their fair market value and as having distributed all of its assets to the individual as of such time, and

(iii)

the individual shall be treated as having recontributed the assets to the separate trust.

Subsection (a)(2) shall apply to any income, gain, or loss of the individual arising from a distribution described in subparagraph (C)(ii). In determining the amount of such distribution, proper adjustments shall be made for liabilities of the trust allocable to an individual’s share in the trust.
(2)

Special rules for interests in qualified trusts

(A)

In general

If the trust interest described in paragraph (1) is an interest in a qualified trust—

(i)

paragraph (1) and subsection (a) shall not apply, and

(ii)

in addition to any other tax imposed by this title, there is hereby imposed on each distribution with respect to such interest a tax in the amount determined under subparagraph (B).

(B)

Amount of tax

The amount of tax under subparagraph (A)(ii) shall be equal to the lesser of—

(i)

the highest rate of tax imposed by section 1(e) for the taxable year which includes the day before the expatriation date, multiplied by the amount of the distribution, or

(ii)

the balance in the deferred tax account immediately before the distribution determined without regard to any increases under subparagraph (C)(ii) after the 30th day preceding the distribution.

(C)

Deferred tax account

For purposes of subparagraph (B)(ii)—

(i)

Opening balance

The opening balance in a deferred tax account with respect to any trust interest is an amount equal to the tax which would have been imposed on the allocable expatriation gain with respect to the trust interest if such gain had been included in gross income under subsection (a).

(ii)

Increase for interest

The balance in the deferred tax account shall be increased by the amount of interest determined (on the balance in the account at the time the interest accrues), for periods after the 90th day after the expatriation date, by using the rates and method applicable under section 6621 for underpayments of tax for such periods, except that section 6621(a)(2) shall be applied by substituting 5 percentage points for 3 percentage points in subparagraph (B) thereof.

(iii)

Decrease for taxes previously paid

The balance in the tax deferred account shall be reduced—

(I)

by the amount of taxes imposed by subparagraph (A) on any distribution to the person holding the trust interest, and

(II)

in the case of a person holding a nonvested interest, to the extent provided in regulations, by the amount of taxes imposed by subparagraph (A) on distributions from the trust with respect to nonvested interests not held by such person.

(D)

Allocable expatriation gain

For purposes of this paragraph, the allocable expatriation gain with respect to any beneficiary’s interest in a trust is the amount of gain which would be allocable to such beneficiary’s vested and nonvested interests in the trust if the beneficiary held directly all assets allocable to such interests.

(E)

Tax deducted and withheld

(i)

In general

The tax imposed by subparagraph (A)(ii) shall be deducted and withheld by the trustees from the distribution to which it relates.

(ii)

Exception where failure to waive treaty rights

If an amount may not be deducted and withheld under clause (i) by reason of the distributee failing to waive any treaty right with respect to such distribution—

(I)

the tax imposed by subparagraph (A)(ii) shall be imposed on the trust and each trustee shall be personally liable for the amount of such tax, and

(II)

any other beneficiary of the trust shall be entitled to recover from the distributee the amount of such tax imposed on the other beneficiary.

(F)

Disposition

If a trust ceases to be a qualified trust at any time, a covered expatriate disposes of an interest in a qualified trust, or a covered expatriate holding an interest in a qualified trust dies, then, in lieu of the tax imposed by subparagraph (A)(ii), there is hereby imposed a tax equal to the lesser of—

(i)

the tax determined under paragraph (1) as if the day before the expatriation date were the date of such cessation, disposition, or death, whichever is applicable, or

(ii)

the balance in the tax deferred account immediately before such date.

Such tax shall be imposed on the trust and each trustee shall be personally liable for the amount of such tax and any other beneficiary of the trust shall be entitled to recover from the covered expatriate or the estate the amount of such tax imposed on the other beneficiary.
(G)

Definitions and special rules

For purposes of this paragraph—

(i)

Qualified trust

The term qualified trust means a trust which is described in section 7701(a)(30)(E).

(ii)

Vested interest

The term vested interest means any interest which, as of the day before the expatriation date, is vested in the beneficiary.

(iii)

Nonvested interest

The term nonvested interest means, with respect to any beneficiary, any interest in a trust which is not a vested interest. Such interest shall be determined by assuming the maximum exercise of discretion in favor of the beneficiary and the occurrence of all contingencies in favor of the beneficiary.

(iv)

Adjustments

The Secretary may provide for such adjustments to the bases of assets in a trust or a deferred tax account, and the timing of such adjustments, in order to ensure that gain is taxed only once.

(v)

Coordination with retirement plan rules

This subsection shall not apply to an interest in a trust which is part of a retirement plan to which subsection (d)(2) applies.

(3)

Determination of beneficiaries’ interest in trust

(A)

Determinations under paragraph (1)

For purposes of paragraph (1), a beneficiary’s interest in a trust shall be based upon all relevant facts and circumstances, including the terms of the trust instrument and any letter of wishes or similar document, historical patterns of trust distributions, and the existence of and functions performed by a trust protector or any similar adviser.

(B)

Other determinations

For purposes of this section—

(i)

Constructive ownership

If a beneficiary of a trust is a corporation, partnership, trust, or estate, the shareholders, partners, or beneficiaries shall be deemed to be the trust beneficiaries for purposes of this section.

(ii)

Taxpayer return position

A taxpayer shall clearly indicate on its income tax return—

(I)

the methodology used to determine that taxpayer’s trust interest under this section, and

(II)

if the taxpayer knows (or has reason to know) that any other beneficiary of such trust is using a different methodology to determine such beneficiary’s trust interest under this section.

(g)

Termination of Deferrals, etc

In the case of any covered expatriate, notwithstanding any other provision of this title—

(1)

any period during which recognition of income or gain is deferred shall terminate on the day before the expatriation date, and

(2)

any extension of time for payment of tax shall cease to apply on the day before the expatriation date and the unpaid portion of such tax shall be due and payable at the time and in the manner prescribed by the Secretary.

(h)

Imposition of Tentative Tax

(1)

In general

If an individual is required to include any amount in gross income under subsection (a) for any taxable year, there is hereby imposed, immediately before the expatriation date, a tax in an amount equal to the amount of tax which would be imposed if the taxable year were a short taxable year ending on the expatriation date.

(2)

Due date

The due date for any tax imposed by paragraph (1) shall be the 90th day after the expatriation date.

(3)

Treatment of tax

Any tax paid under paragraph (1) shall be treated as a payment of the tax imposed by this chapter for the taxable year to which subsection (a) applies.

(4)

Deferral of tax

The provisions of subsection (b) shall apply to the tax imposed by this subsection to the extent attributable to gain includible in gross income by reason of this section.

(i)

Special Liens for Deferred Tax Amounts

(1)

Imposition of lien

(A)

In general

If a covered expatriate makes an election under subsection (a)(4) or (b) which results in the deferral of any tax imposed by reason of subsection (a), the deferred amount (including any interest, additional amount, addition to tax, assessable penalty, and costs attributable to the deferred amount) shall be a lien in favor of the United States on all property of the expatriate located in the United States (without regard to whether this section applies to the property).

(B)

Deferred amount

For purposes of this subsection, the deferred amount is the amount of the increase in the covered expatriate’s income tax which, but for the election under subsection (a)(4) or (b), would have occurred by reason of this section for the taxable year including the expatriation date.

(2)

Period of lien

The lien imposed by this subsection shall arise on the expatriation date and continue until—

(A)

the liability for tax by reason of this section is satisfied or has become unenforceable by reason of lapse of time, or

(B)

it is established to the satisfaction of the Secretary that no further tax liability may arise by reason of this section.

(3)

Certain rules apply

The rules set forth in paragraphs (1), (3), and (4) of section 6324A(d) shall apply with respect to the lien imposed by this subsection as if it were a lien imposed by section 6324A.

(j)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.

.

(b)

Inclusion in Income of Gifts and Bequests Received by United States Citizens and Residents From Expatriates

Section 102 (relating to gifts, etc. not included in gross income) is amended by adding at the end the following new subsection:

(d)

Gifts and Inheritances From Covered Expatriates

(1)

Treatment of gifts and inheritances

(A)

In general

Subsection (a) shall not exclude from gross income the value of any property acquired by gift, bequest, devise, or inheritance from a covered expatriate after the expatriation date.

(B)

Determination of basis

Notwithstanding sections 1015 or 1022, the basis of any property described in subparagraph (A) in the hands of the donee or the person acquiring such property from the decedent shall be equal to the fair market value of the property at the time of the gift, bequest, devise, or inheritance.

(2)

Exceptions for transfers otherwise subject to estate or gift tax

Paragraph (1) shall not apply to any property if either—

(A)

the gift, bequest, devise, or inheritance is—

(i)

shown on a timely filed return of tax imposed by chapter 12 as a taxable gift by the covered expatriate, or

(ii)

included in the gross estate of the covered expatriate for purposes of chapter 11 and shown on a timely filed return of tax imposed by chapter 11 of the estate of the covered expatriate, or

(B)

no such return was timely filed but no such return would have been required to be filed even if the covered expatriate were a citizen or long-term resident of the United States.

(3)

Definitions

For purposes of this subsection, any term used in this subsection which is also used in section 877A shall have the same meaning as when used in section 877A.

.

(c)

Definition of Termination of United States Citizenship

Section 7701(a) is amended by adding at the end the following new paragraph:

(50)

Termination of united states citizenship

(A)

In general

An individual shall not cease to be treated as a United States citizen before the date on which the individual’s citizenship is treated as relinquished under section 877A(e)(3).

(B)

Dual citizens

Under regulations prescribed by the Secretary, subparagraph (A) shall not apply to an individual who became at birth a citizen of the United States and a citizen of another country.

.

(d)

Ineligibility for Visa or Admission to United States

(1)

In general

Section 212(a)(10)(E) of the Immigration and Nationality Act (8 U.S.C. 1182(a)(10)(E)) is amended to read as follows:

(E)

Former citizens not in compliance with expatriation revenue provisions

Any alien who is a former citizen of the United States who relinquishes United States citizenship (within the meaning of section 877A(e)(3) of the Internal Revenue Code of 1986) and who is not in compliance with section 877A of such Code (relating to expatriation) is inadmissible.

.

(2)

Availability of information

(A)

In general

Section 6103(l) (relating to disclosure of returns and return information for purposes other than tax administration) is amended by adding at the end the following new paragraph:

(21)

Disclosure to deny visa or admission to certain expatriates

Upon written request of the Attorney General or the Attorney General’s delegate, the Secretary shall disclose whether an individual is in compliance with section 877A (and if not in compliance, any items of noncompliance) to officers and employees of the Federal agency responsible for administering section 212(a)(10)(E) of the Immigration and Nationality Act solely for the purpose of, and to the extent necessary in, administering such section 212(a)(10)(E).

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(B)

Safeguards

Section 6103(p)(4) (relating to safeguards) is amended by striking or (20) each place it appears and inserting (20), or (21).

(3)

Effective dates

The amendments made by this subsection shall apply to individuals who relinquish United States citizenship on or after the date of the enactment of this Act.

(e)

Conforming Amendments

(1)

Section 877 is amended by adding at the end the following new subsection:

(h)

Application

This section shall not apply to an expatriate (as defined in section 877A(e)) whose expatriation date (as so defined) occurs on or after the date of the enactment of this subsection.

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(2)

Section 2107 is amended by adding at the end the following new subsection:

(f)

Application

This section shall not apply to any expatriate subject to section 877A.

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(3)

Section 2501(a)(3) is amended by adding at the end the following new subparagraph:

(C)

Application

This paragraph shall not apply to any expatriate subject to section 877A.

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(4)

Section 6039G(a) is amended by inserting or 877A after section 877(b).

(5)

The second sentence of section 6039G(d) is amended by inserting or who relinquishes United States citizenship (within the meaning of section 877A(e)(3)) after section 877(a)).

(6)

Section 7701(n) is amended by adding at the end the following new paragraph:

(3)

Application

This subsection shall not apply to any expatriate subject to section 877A.

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(f)

Clerical Amendment

The table of sections for subpart A of part II of subchapter N of chapter 1 is amended by inserting after the item relating to section 877 the following new item:

Sec. 877A. Tax responsibilities of expatriation.

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(g)

Effective Date

(1)

In general

Except as provided in this subsection, the amendments made by this section shall apply to expatriates (within the meaning of section 877A(e) of the Internal Revenue Code of 1986, as added by this section) whose expatriation date (as so defined) occurs on or after the date of the enactment of this Act.

(2)

Gifts and bequests

Section 102(d) of the Internal Revenue Code of 1986 (as added by subsection (b)) shall apply to gifts and bequests received on or after the date of the enactment of this Act, from an individual or the estate of an individual whose expatriation date (as so defined) occurs after such date.

(3)

Due date for tentative tax

The due date under section 877A(h)(2) of the Internal Revenue Code of 1986, as added by this section, shall in no event occur before the 90th day after the date of the enactment of this Act.