S. 3478 (110th): Energy Independence and Investment Act of 2008

110th Congress, 2007–2009. Text as of Sep 11, 2008 (Introduced).

Status & Summary | PDF | Source: GPO

II

110th CONGRESS

2d Session

S. 3478

IN THE SENATE OF THE UNITED STATES

September 11, 2008

(for himself and Mr. Grassley) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide incentives for the production of energy, to provide transportation and domestic fuel security, and to provide incentives for energy conservation and energy efficiency, and for other purposes.

1.

Short title, etc

(a)

Short title

This Act may be cited as the Energy Independence and Investment Act of 2008.

(b)

Reference

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

(c)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title, etc.

TITLE I—Energy production incentives

Subtitle A—Renewable energy incentives

Sec. 101. Renewable energy credit.

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

Sec. 103. Energy credit.

Sec. 104. Credit for residential energy efficient property.

Sec. 105. New clean renewable energy bonds.

Sec. 106. Energy credit for small wind property.

Sec. 107. Energy credit for geothermal heat pump systems.

Subtitle B—Carbon mitigation and coal provisions

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

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

Sec. 113. Temporary increase in coal excise tax; funding of Black Lung Disability Trust Fund.

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

Sec. 115. Tax credit for carbon dioxide sequestration.

Sec. 116. Carbon audit of the tax code.

TITLE II—Transportation and domestic fuel security provisions

Sec. 201. Inclusion of cellulosic biofuel in bonus depreciation for biomass ethanol plant property.

Sec. 202. Credits for biodiesel and renewable diesel.

Sec. 203. Clarification that credits for fuel are designed to provide an incentive for United States production.

Sec. 204. Credit for new qualified plug-in electric drive motor vehicles.

Sec. 205. Extension and modification of alternative motor vehicle credit.

Sec. 206. Exclusion from heavy truck tax for idling reduction units and advanced insulation.

Sec. 207. Extension and modification of alternative fuel credit.

Sec. 208. Alternative fuel vehicle refueling property credit.

Sec. 209. Certain income and gains relating to alcohol fuels and mixtures, biodiesel fuels and mixtures, and alternative fuels and mixtures treated as qualifying income for publicly traded partnerships.

Sec. 210. Extension of ethanol production credit.

Sec. 211. Credit for producers of fossil free alcohol.

Sec. 212. Extension and modification of election to expense certain refineries.

Sec. 213. Extension of suspension of taxable income limit on percentage depletion for oil and natural gas produced from marginal properties.

TITLE III—Energy conservation and efficiency provisions

Sec. 301. Qualified energy conservation bonds.

Sec. 302. Credit for nonbusiness energy property.

Sec. 303. Energy efficient commercial buildings deduction.

Sec. 304. New energy efficient home credit.

Sec. 305. Modifications of energy efficient appliance credit for appliances produced after 2007.

Sec. 306. Accelerated recovery period for depreciation of smart meters and smart grid systems.

Sec. 307. Qualified green building and sustainable design projects.

Sec. 308. Special depreciation allowance for certain reuse and recycling property.

TITLE IV—Miscellaneous energy provisions

Sec. 401. Special rule to implement FERC and State electric restructuring policy.

Sec. 402. Modification of credit for production from advanced nuclear power facilities.

Sec. 403. Income averaging for amounts received in connection with the Exxon Valdez litigation.

TITLE V—Revenue provisions

Sec. 501. Limitation of deduction for income attributable to domestic production of oil, gas, or primary products thereof.

Sec. 502. Tax on crude oil and natural gas produced from the outer Continental Shelf in the Gulf of Mexico.

Sec. 503. 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. 504. Broker reporting of customer’s basis in securities transactions.

Sec. 505. Increase and extension of Oil Spill Liability Trust Fund tax.

TITLE VI—Other provisions

Sec. 601. Secure rural schools and community self-determination program.

Sec. 602. Clarification of uniform definition of child.

I

Energy production incentives

A

Renewable energy incentives

101.

Renewable energy credit

(a)

3-year extension

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

(1)

Paragraph (1).

(2)

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

(3)

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

(4)

Paragraph (4).

(5)

Paragraph (5).

(6)

Paragraph (6).

(7)

Paragraph (7).

(8)

Paragraph (8).

(9)

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

(b)

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.

(c)

Trash facility clarification

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

(1)

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

(2)

by striking combustion.

(d)

Expansion of biomass facilities

(1)

Open-loop biomass facilities

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

(B)

Expansion of facility

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

.

(2)

Closed-loop biomass facilities

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

(B)

Expansion of facility

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

.

(e)

Modification of rules for hydropower production

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

(C)

Nonhydroelectric dam

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

(i)

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

(ii)

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

(iii)

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

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

.

(f)

Effective date

(1)

In general

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

(2)

Refined coal

The amendments made by subsection (b) shall apply to coal produced and sold after December 31, 2008.

(3)

Trash facility clarification

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

(4)

Expansion of biomass facilities

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

102.

Production credit for electricity produced from marine renewables

(a)

In general

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

(I)

marine and hydrokinetic renewable energy.

.

(b)

Marine renewables

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

(10)

Marine and hydrokinetic renewable energy

(A)

In general

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

(i)

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

(ii)

free flowing water in rivers, lakes, and streams,

(iii)

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

(iv)

differentials in ocean temperature (ocean thermal energy conversion).

(B)

Exceptions

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

.

(c)

Definition of facility

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

(11)

Marine and hydrokinetic renewable energy facilities

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

(A)

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

(B)

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

.

(d)

Credit rate

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

(e)

Coordination with small irrigation power

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

(f)

Effective date

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

103.

Energy credit

(a)

Extension of credit

(1)

Solar energy property

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

(2)

Fuel cell property

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

(3)

Microturbine property

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

(b)

Allowance of energy credit against alternative minimum tax

Subparagraph (B) of section 38(c)(4), as amended by the Housing Assistance Tax Act of 2008, is amended by redesignating clauses (v) and (vi) as clauses (vi) and (vii), respectively, and by inserting after clause (iv) the following new clause:

(v)

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

.

(c)

Energy credit for combined heat and power system property

(1)

In general

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

(v)

combined heat and power system property,

.

(2)

Combined Heat and Power System Property

Subsection (c) of section 48 is amended—

(A)

by striking Qualified fuel cell property; qualified microturbine property in the heading and inserting Definitions, and

(B)

by adding at the end the following new paragraph:

(3)

Combined Heat and Power System Property

(A)

Combined heat and power system property

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

(i)

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),

(ii)

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),

(iii)

the energy efficiency percentage of which exceeds 60 percent, and

(iv)

which is placed in service before January 1, 2017.

(B)

Limitation

(i)

In general

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

(ii)

Applicable capacity

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

(iii)

Maximum capacity

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

(C)

Special rules

(i)

Energy efficiency percentage

For purposes of this paragraph, 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.

(ii)

Determinations made on btu basis

The energy efficiency percentage and the percentages under subparagraph (A)(ii) shall be determined on a Btu basis.

(iii)

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.

(D)

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—

(i)

subparagraph (A)(iii) shall not apply, but

(ii)

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 subparagraph) as the energy efficiency percentage of such system bears to 60 percent.

.

(d)

Increase of credit limitation for fuel cell property

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

(e)

Public utility property taken into account

(1)

In general

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

(2)

Conforming amendments

(A)

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

(B)

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

(f)

Effective date

(1)

In general

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

(2)

Allowance against alternative minimum tax

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

(3)

Combined heat and power and fuel cell property

The amendments made by subsections (c) and (d) shall apply to periods after the date of the enactment of this Act, in taxable years ending after such date, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

(4)

Public utility property

The amendments made by subsection (e) shall apply to periods after February 13, 2008, in taxable years ending after such date, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

104.

Credit for residential energy efficient property

(a)

Extension

Section 25D(g) is amended by striking December 31, 2008 and inserting December 31, 2016.

(b)

Maximum credit for solar electric property

(1)

In general

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

(2)

Conforming amendment

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

(c)

Credit for residential wind property

(1)

In general

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

(4)

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

.

(2)

Limitation

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

(D)

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

.

(3)

Qualified small wind energy property expenditures

(A)

In general

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

(4)

Qualified small wind energy property expenditure

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

.

(B)

No double benefit

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

(4)

Maximum expenditures in case of joint occupancy

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

(iv)

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

.

(d)

Credit for geothermal heat Pump systems

(1)

In general

Section 25D(a), as amended by subsection (c), is amended by striking and at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting , and, and by adding at the end the following new paragraph:

(5)

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

.

(2)

Limitation

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

(E)

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

.

(3)

Qualified geothermal heat pump property expenditure

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

(5)

Qualified geothermal heat pump property expenditure

(A)

In general

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

(B)

Qualified geothermal heat pump property

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

(i)

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

(ii)

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

.

(4)

Maximum expenditures in case of joint occupancy

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

(v)

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

.

(e)

Credit allowed against alternative minimum tax

(1)

In general

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

(c)

Limitation based on amount of tax; carryforward of unused credit

(1)

Limitation based on amount of tax

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

(A)

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

(B)

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

(2)

Carryforward of unused credit

(A)

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

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

(B)

Rule for other years

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

.

(2)

Conforming amendments

(A)

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

(B)

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

(C)

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

(D)

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

(f)

Effective date

(1)

In general

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

(2)

Application of EGTRRA sunset

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

105.

New clean renewable energy bonds

(a)

In general

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

54C.

New clean renewable energy bonds

(a)

New clean renewable energy bond

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

(1)

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

(2)

the bond is issued by a qualified issuer, and

(3)

the issuer designates such bond for purposes of this section.

(b)

Reduced credit amount

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

(c)

Limitation on amount of bonds designated

(1)

In general

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

(2)

National limitation on amount of bonds designated

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

(A)

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

(B)

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

(C)

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

(3)

Method of allocation

(A)

Allocation among public power providers

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

(B)

Allocation among governmental bodies and cooperative electric companies

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

(d)

Definitions

For purposes of this section—

(1)

Qualified renewable energy facility

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

(2)

Public power provider

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

(3)

Governmental body

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

(4)

Cooperative electric company

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

(5)

Clean renewable energy bond lender

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

(6)

Qualified issuer

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

.

(b)

Conforming amendments

(1)

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

(1)

Qualified tax credit bond

The term qualified tax credit bond means—

(A)

a qualified forestry conservation bond, or

(B)

a new clean renewable energy bond,

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

.

(2)

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

(C)

Qualified purpose

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

(i)

in the case of a qualified forestry conservation bond, a purpose specified in section 54B(e), and

(ii)

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

.

(3)

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

Sec. 54C. Qualified clean renewable energy bonds.

.

(c)

Extension for clean renewable energy bonds

Subsection (m) of section 54 is amended by striking December 31, 2008 and inserting December 31, 2009.

(d)

Effective date

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

106.

Energy credit for small wind property

(a)

In general

Section 48(a)(3)(A), as amended by subsection (c), is amended by striking or at the end of clause (iv), by adding or at the end of clause (v), and by inserting after clause (v) the following new clause:

(vi)

qualified small wind energy property,

.

(b)

30 percent credit

Section 48(a)(2)(A)(i) is amended by striking and at the end of subclause (II) and by inserting after subclause (III) the following new subclause:

(IV)

qualified small wind energy property, and

.

(c)

Qualified small wind energy property

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

(4)

Qualified small wind energy property

(A)

In general

The term qualified small wind energy property means property which uses a qualifying small wind turbine to generate electricity.

(B)

Limitation

In the case of qualified small wind energy property placed in service during the taxable year, the credit otherwise determined under subsection (a)(1) for such year with respect to such property shall not exceed $4,000 with respect to any taxpayer.

(C)

Qualifying small wind turbine

The term qualifying small wind turbine means a wind turbine which—

(i)

has a nameplate capacity of not more than 100 kilowatts, and

(ii)

meets the performance standards of the American Wind Energy Association.

(D)

Termination

The term qualified small wind energy property shall not include any property for any period after December 31, 2016.

.

(d)

Conforming amendment

Section 48(a)(1) is amended by striking paragraphs (1)(B) and (2)(B) and inserting paragraphs (1)(B), (2)(B), (3)(B), and (4)(B).

(e)

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).

107.

Energy credit for geothermal heat pump systems

(a)

In general

Subparagraph (A) of section 48(a)(3), as amended by this Act, is amended by striking or at the end of clause (v), by inserting or at the end of clause (vi), and by adding at the end the following new clause:

(vii)

equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, but only with respect to periods ending before January 1, 2017,

.

(b)

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).

B

Carbon mitigation and coal provisions

111.

Expansion and modification of advanced coal project investment credit

(a)

Modification of credit amount

Section 48A(a) is amended by striking and at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting , and, and by adding at the end the following new paragraph:

(3)

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

.

(b)

Expansion of aggregate credits

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

(c)

Authorization of Additional Projects

(1)

In general

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

(B)

Particular projects

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

(i)

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

(ii)

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

(iii)

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

.

(2)

Application period for additional projects

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

(A)

Application period

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

(i)

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

(ii)

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

.

(3)

Capture and sequestration of carbon dioxide emissions requirement

(A)

In general

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

(G)

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

.

(B)

Highest priority for projects which sequester carbon dioxide emissions

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

(C)

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

.

(C)

Recapture of credit for failure to sequester

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

(i)

Recapture of credit for failure To sequester

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

.

(4)

Additional priority for research partnerships

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

(A)

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

(B)

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

(C)

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

(iii)

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

.

(5)

Clerical amendment

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

(d)

Disclosure of allocations

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

(5)

Disclosure of allocations

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

.

(e)

Effective dates

(1)

In general

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

(2)

Disclosure of allocations

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

(3)

Clerical amendment

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

112.

Expansion and modification of coal gasification investment credit

(a)

Modification of credit amount

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

(b)

Expansion of aggregate credits

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

shall not exceed—

(A)

$350,000,000, plus

(B)

$500,000,000 for qualifying gasification projects that include equipment which separates and sequesters at least 75 percent of such project’s total carbon dioxide emissions.

.

(c)

Recapture of credit for failure To sequester

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

(f)

Recapture of credit for failure To sequester

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

.

(d)

Selection priorities

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

(4)

Selection priorities

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

(A)

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

(B)

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

.

(e)

Effective date

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

113.

Temporary increase in coal excise tax; funding of Black Lung Disability Trust Fund

(a)

Extension of temporary increase

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

(1)

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

(2)

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

(b)

Restructuring of Trust Fund debt

(1)

Definitions

For purposes of this subsection—

(A)

Market value of the outstanding repayable advances, plus accrued interest

The term market value of the outstanding repayable advances, plus accrued interest means the present value (determined by the Secretary of the Treasury as of the refinancing date and using the Treasury rate as the discount rate) of the stream of principal and interest payments derived assuming that each repayable advance that is outstanding on the refinancing date is due on the 30th anniversary of the end of the fiscal year in which the advance was made to the Trust Fund, and that all such principal and interest payments are made on September 30 of the applicable fiscal year.

(B)

Refinancing date

The term refinancing date means the date occurring 2 days after the enactment of this Act.

(C)

Repayable advance

The term repayable advance means an amount that has been appropriated to the Trust Fund in order to make benefit payments and other expenditures that are authorized under section 9501 of the Internal Revenue Code of 1986 and are required to be repaid when the Secretary of the Treasury determines that monies are available in the Trust Fund for such purpose.

(D)

Treasury rate

The term Treasury rate means a rate determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable obligations of the United States of comparable maturities.

(E)

Treasury 1-year rate

The term Treasury 1-year rate means a rate determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable obligations of the United States with remaining periods to maturity of approximately 1 year, to have been in effect as of the close of business 1 business day prior to the date on which the Trust Fund issues obligations to the Secretary of the Treasury under paragraph (2)(B).

(2)

Refinancing of outstanding principal of repayable advances and unpaid interest on such advances

(A)

Transfer to general fund

On the refinancing date, the Trust Fund shall repay the market value of the outstanding repayable advances, plus accrued interest, by transferring into the general fund of the Treasury the following sums:

(i)

The proceeds from obligations that the Trust Fund shall issue to the Secretary of the Treasury in such amounts as the Secretaries of Labor and the Treasury shall determine and bearing interest at the Treasury rate, and that shall be in such forms and denominations and be subject to such other terms and conditions, including maturity, as the Secretary of the Treasury shall prescribe.

(ii)

All, or that portion, of the appropriation made to the Trust Fund pursuant to paragraph (3) that is needed to cover the difference defined in that paragraph.

(B)

Repayment of obligations

In the event that the Trust Fund is unable to repay the obligations that it has issued to the Secretary of the Treasury under subparagraph (A)(i) and this subparagraph, or is unable to make benefit payments and other authorized expenditures, the Trust Fund shall issue obligations to the Secretary of the Treasury in such amounts as may be necessary to make such repayments, payments, and expenditures, with a maturity of 1 year, and bearing interest at the Treasury 1-year rate. These obligations shall be in such forms and denominations and be subject to such other terms and conditions as the Secretary of the Treasury shall prescribe.

(C)

Authority to issue obligations

The Trust Fund is authorized to issue obligations to the Secretary of the Treasury under subparagraphs (A)(i) and (B). The Secretary of the Treasury is authorized to purchase such obligations of the Trust Fund. For the purposes of making such purchases, the Secretary of the Treasury may use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under such chapter are extended to include any purchase of such Trust Fund obligations under this subparagraph.

(3)

One-time appropriation

There is hereby appropriated to the Trust Fund an amount sufficient to pay to the general fund of the Treasury the difference between—

(A)

the market value of the outstanding repayable advances, plus accrued interest; and

(B)

the proceeds from the obligations issued by the Trust Fund to the Secretary of the Treasury under paragraph (2)(A)(i).

(4)

Prepayment of Trust Fund obligations

The Trust Fund is authorized to repay any obligation issued to the Secretary of the Treasury under subparagraphs (A)(i) and (B) of paragraph (2) prior to its maturity date by paying a prepayment price that would, if the obligation being prepaid (including all unpaid interest accrued thereon through the date of prepayment) were purchased by a third party and held to the maturity date of such obligation, produce a yield to the third-party purchaser for the period from the date of purchase to the maturity date of such obligation substantially equal to the Treasury yield on outstanding marketable obligations of the United States having a comparable maturity to this period.

114.

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

(a)

Refund

(1)

Coal producers

(A)

In general

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

(i)

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

(ii)

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

(iii)

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

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

Special rules for certain taxpayers

For purposes of this section—

(i)

In general

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

(ii)

Amount of payment

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

(iii)

Judgment described

A judgment is described in this subparagraph if such judgment—

(I)

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

(II)

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

(III)

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

(2)

Exporters

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

(A)

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

(B)

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

(C)

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

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

Limitations

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

(c)

Subsequent refund prohibited

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

(d)

Definitions

For purposes of this section—

(1)

Coal producer

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

(2)

Exporter

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

(A)

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

(B)

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

(3)

Related party

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

(A)

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

(B)

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

(C)

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

(4)

Secretary

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

(e)

Timing of refund

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

(f)

Interest

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

(g)

Denial of double benefit

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

(1)

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

(2)

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

(h)

Application of section

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

(i)

Standing not conferred

(1)

Exporters

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

(2)

Coal producers

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

115.

Tax credit for carbon dioxide sequestration

(a)

In general

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

45Q.

Credit for carbon dioxide sequestration

(a)

General rule

For purposes of section 38, the carbon dioxide sequestration credit for any taxable year is an amount equal to the sum of—

(1)

$20 per metric ton of qualified carbon dioxide which is—

(A)

captured by the taxpayer at a qualified facility, and

(B)

disposed of by the taxpayer in secure geological storage, and

(2)

$10 per metric ton of qualified carbon dioxide which is—

(A)

captured by the taxpayer at a qualified facility, and

(B)

used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project.

(b)

Qualified carbon dioxide

For purposes of this section—

(1)

In general

The term qualified carbon dioxide means carbon dioxide captured from an industrial source which—

(A)

would otherwise be released into the atmosphere as industrial emission of greenhouse gas, and

(B)

is measured at the source of capture and verified at the point of disposal or injection.

(2)

Recycled carbon dioxide

The term qualified carbon dioxide includes the initial deposit of captured carbon dioxide used as a tertiary injectant. Such term does not include carbon dioxide that is re-captured, recycled, and re-injected as part of the enhanced oil and natural gas recovery process.

(c)

Qualified facility

For purposes of this section, the term qualified facility means any industrial facility—

(1)

which is owned by the taxpayer,

(2)

at which carbon capture equipment is placed in service, and

(3)

which captures not less than 500,000 metric tons of carbon dioxide during the taxable year.

(d)

Special rules and other definitions

For purposes of this section—

(1)

Only carbon dioxide captured and disposed of or used within the United States taken into account

The credit under this section shall apply only with respect to qualified carbon dioxide the capture and disposal or use of which is within—

(A)

the United States (within the meaning of section 638(1)), or

(B)

a possession of the United States (within the meaning of section 638(2)).

(2)

Secure geological storage

The Secretary, in consultation with the Administrator of the Environmental Protection Agency, shall establish regulations for determining adequate security measures for the geological storage of carbon dioxide under subsection (a)(1)(B) such that the carbon dioxide does not escape into the atmosphere. Such term shall include storage at deep saline formations and unminable coal seems under such conditions as the Secretary may determine under such regulations.

(3)

Tertiary injectant

The term tertiary injectant has the same meaning as when used within section 193(b)(1).

(4)

Qualified enhanced oil or natural gas recovery project

The term qualified enhanced oil or natural gas recovery project has the meaning given the term qualified enhanced oil recovery project by section 43(c)(2), by substituting crude oil or natural gas for crude oil in subparagraph (A)(i) thereof.

(5)

Credit attributable to taxpayer

Any credit under this section shall be attributable to the person that captures and physically or contractually ensures the disposal of or the use as a tertiary injectant of the qualified carbon dioxide, except to the extent provided in regulations prescribed by the Secretary.

(6)

Recapture

The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any qualified carbon dioxide which ceases to be captured, disposed of, or used as a tertiary injectant in a manner consistent with the requirements of this section.

(7)

Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2009, there shall be substituted for each dollar amount contained in subsection (a) an amount equal to the product of—

(A)

such dollar amount, multiplied by

(B)

the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting 2008 for 1990.

(e)

Application of section

The credit under this section shall apply with respect to qualified carbon dioxide before the end of the calendar year in which the Secretary, in consultation with the Administrator of the Environmental Protection Agency, certifies that 75,000,000 metric tons of qualified carbon dioxide have been captured and disposed of or used as a tertiary injectant.

.

(b)

Conforming amendment

Section 38(b) (relating to general business credit) is amended by striking plus at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting , plus, and by adding at the end of following new paragraph:

(34)

the carbon dioxide sequestration credit determined under section 45Q(a).

.

(c)

Clerical amendment

The table of sections for 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:

Sec. 45Q. Credit for carbon dioxide sequestration.

.

(d)

Effective date

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

116.

Carbon audit of the tax code

(a)

Study

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

(b)

Report

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

(c)

Authorization of appropriations

There is authorized to be appropriated to carry out this section $1,500,000 for the period of fiscal years 2009 and 2010.

II

Transportation and domestic fuel security provisions

201.

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

(a)

In general

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

(3)

Cellulosic biofuel

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

.

(b)

Conforming amendments

Subsection (l) of section 168 is amended—

(1)

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

(2)

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

(3)

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

(c)

Effective date

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

202.

Credits for biodiesel and renewable diesel

(a)

In general

Sections 40A(g), 6426(c)(6), and 6427(e)(5)(B) are each amended by striking December 31, 2008 and inserting December 31, 2011.

(b)

Increase in rate of credit

(1)

Income tax credit

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

(2)

Excise tax credit

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

(2)

Applicable amount

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

.

(3)

Conforming amendments

(A)

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

(B)

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

(2)

Exception

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

.

(C)

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

(D)

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

(c)

Uniform treatment of diesel produced from biomass

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

(1)

by striking diesel fuel and inserting liquid fuel,

(2)

by striking using a thermal depolymerization process, and

(3)

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

(d)

Eligibility of certain aviation fuel

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

(4)

Certain aviation fuel

(A)

In general

Except as provided in the last sentence of paragraph (3), the term renewable diesel shall include fuel derived from biomass which meets the requirements of a Department of Defense specification for military jet fuel or an American Society of Testing and Materials specification for aviation turbine fuel.

(B)

Application of mixture credits

In the case of fuel which is treated as renewable diesel solely by reason of subparagraph (A), subsection (b)(1) and section 6426(c) shall be applied with respect to such fuel by treating kerosene as though it were diesel fuel.

.

(e)

Modification of credit for renewable diesel

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

(5)

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.

.

(f)

Effective date

(1)

In general

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

(2)

Coproduction of renewable diesel with petroleum feedstock

The amendments made by subsection (e) shall apply to fuel produced, and sold or used, after the date of the enactment of this Act.

203.

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

(a)

Alcohol fuels credit

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

(7)

Limitation to alcohol with connection to the United States

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

.

(b)

Biodiesel fuels credit

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

(5)

Limitation to biodiesel with connection to the United States

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

.

(c)

Excise tax credit

(1)

In general

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

(i)

Limitation to fuels with connection to the United States

(1)

Alcohol

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

(2)

Biodiesel and alternative fuels

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

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

.

(2)

Conforming amendment

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

(5)

Limitation to fuels with connection to the United States

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

.

(d)

Effective date

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

204.

Credit for new qualified plug-in electric drive motor vehicles

(a)

Plug-In electric drive motor vehicle credit

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.

New qualified plug-in electric drive motor vehicles

(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 in excess of 6 kilowatt hours.

(b)

Limitations

(1)

Limitation based on weight

The amount of the credit allowed under subsection (a) by reason of subsection (a)(2) 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

(A)

In general

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

(B)

Phaseout period

For purposes of this subsection, the phaseout period is the period beginning with the second calendar quarter following the calendar quarter which includes the first date on which the 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)

Applicable percentage

For purposes of subparagraph (A), the applicable percentage is—

(i)

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

(ii)

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

(iii)

0 percent for each calendar quarter thereafter.

(D)

Controlled groups

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

(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 primarily using a traction battery with at least 6 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

(A)

In general

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

(B)

Limitation based on amount of tax

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

(i)

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

(ii)

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

(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.

.

(b)

Coordination with alternative motor vehicle credit

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

(D)

Exclusion of plug-in vehicles

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

.

(c)

Credit made part of general business credit

Section 38(b) is amended by striking plus at the end of paragraph (33), by striking the period at the end of paragraph (34) and inserting plus, and by adding at the end the following new paragraph:

(35)

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

.

(d)

Conforming amendments

(1)
(A)

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

(B)

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

(C)

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

(D)

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

(E)

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

(2)

Section 1016(a) is amended by striking and at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting , and, and by adding at the end the following new paragraph:

(37)

to the extent provided in section 30D(e)(4).

.

(3)

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

(4)

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

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

.

(e)

Effective date

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

(f)

Application of EGTRRA sunset

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

205.

Extension and modification of alternative motor vehicle credit

(a)

Extension

(1)

New advanced lean burn technology motor vehicles and heavy new qualified hybrid motor vehicles

Paragraphs (2) and (3) of section 30B(j) are amended to read as follows:

(2)

in the case of a new advanced lean burn technology motor vehicle (as described in subsection (c)), December 31, 2011,

(3)

in the case of—

(A)

a new qualified hybrid motor vehicle (as described in subsection (d)(2)(A)), December 31, 2010, and

(B)

a new qualified hybrid motor vehicle (as described in subsection (d)(2)(B)), December 31, 2011, and

.

(2)

New qualified alternative fuel vehicles

Paragraph (4) of section 30B(j) is amended by striking December 31, 2010 and inserting December 31, 2011.

(b)

Increased credit for certain new qualified fuel cell motor vehicles

Subparagraph (A) of section 30B(b)(1) is amended by striking $4,000 and inserting $7,500.

(c)

Personal credit allowed against alternative minimum tax

(1)

In general

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

(2)

Personal credit

(A)

In general

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

(B)

Limitation based on amount of tax

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

(i)

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

(ii)

the sum of the credits allowable under subpart A (other than this section and sections 23, 25D, and 30D) and section 27 for the taxable year.

.

(2)

Conforming amendments

(A)
(i)

Section 24(b)(3)(B), as amended by this Act, is amended by striking and 30D and inserting 30B, and 30D.

(ii)

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

(iii)

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

(iv)

Section 26(a)(1), as amended by this Act, is amended by striking and 30D and inserting 30B, and 30D.

(v)

Section 1400C(d)(2), as amended by this Act, is amended by striking and 30D and inserting 30B, and 30D.

(B)

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

(C)

Section 55(c)(3) is amended by striking 30B(g)(2),.

(d)

Effective date

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

(e)

Application of EGTRRA sunset

The amendment made by subsection (c)(2)(A)(i) shall be subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 in the same manner as the provision of such Act to which such amendment relates.

206.

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

(a)

In general

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

(9)

Idling reduction device

Any device or system of devices which—

(A)

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

(B)

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

(10)

Advanced insulation

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

.

(b)

Effective date

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

207.

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, 2011.

(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, 2011.

(3)

Payments

Subparagraph (C) of section 6427(e)(5) (relating to termination) is amended by striking September 30, 2009 and inserting December 31, 2011.

(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 liquefied 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

(A)

In general

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

(B)

Applicable percentage

For purposes of subparagraph (A), the applicable percentage is—

(i)

50 percent in the case of fuel produced after the date of the enactment of this paragraph and on or before the earlier of—

(I)

the date the Secretary makes a determination under subparagraph (C), or

(II)

December 30, 2011, and

(ii)

75 percent in the case of fuel produced after the date on which the applicable percentage under clause (i) ceases to apply.

(C)

Determination to increase applicable percentage before December 31, 2011

If the Secretary, after considering the recommendations of the Carbon Sequestration Capability Panel, finds that the applicable percentage under subparagraph (B) should be 75 percent for fuel produced before December 31, 2011, the Secretary shall make a determination under this subparagraph. Any determination made under this subparagraph shall be made not later than 30 days after the Secretary receives from the Carbon Sequestration Panel the report required under section 331(c)(3)(D) of the Energy Independence and Investment Act of 2008.

.

(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.

(3)

Carbon sequestration capability panel

(A)

Establishment of panel

There is established a panel to be known as the Carbon Sequestration Capability Panel (hereafter in this paragraph referred to as the Panel).

(B)

Membership

The Panel shall be composed of—

(i)

1 representative from the National Academy of Sciences,

(ii)

1 representative from the University of Kentucky Center for Applied Energy Research, and

(iii)

1 individual appointed jointly by the representatives under clauses (i) and (ii).

(C)

Study

The Panel shall study the appropriate percentage of carbon dioxide for separation and sequestration under section 6426(d)(4) of the Internal Revenue Code of 1986 consistent with the purposes of such section. The panel shall consider whether it is feasible to separate and sequester 75 percent of the carbon dioxide emissions of a facility, including costs and other factors associated with separating and sequestering such percentage of carbon dioxide emissions.

(D)

Report

Not later than 6 months after the date of the enactment of this Act, the Panel shall report to the Secretary of Treasury, the Committee on Finance of the Senate, and the Committee on Ways and Means of the House of Representatives on the study under subparagraph (C).

(d)

Effective date

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

208.

Alternative fuel vehicle refueling property credit

(a)

Extension of credit

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

(b)

Inclusion of electricity as a clean-burning fuel

Section 30C(c)(2) is amended by adding at the end the following new subparagraph:

(C)

Electricity.

.

(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.

209.

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

(a)

In general

Subparagraph (E) of section 7704(d)(1) is amended by inserting “, or the transportation or storage of any fuel described in subsection (b), (c), (d), or (e) of section 6426, or any alcohol fuel defined in section 6426(b)(4)(A) or any biodiesel fuel as defined in section 40A(d)(1)” 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.

210.

Extension of ethanol production credit

(a)

Credit for alcohol used as fuel

Section 40 is amended—

(1)

by striking 2010 each place it appears in subsections (e)(1)(A) and (h) and inserting 2011, and

(2)

by striking January 1, 2011 in subsection (e)(1)(B) and inserting January 1, 2012.

(b)

Excise tax credits

Paragraph (6) of section 6426(b) is amended by striking 2010 and inserting 2011.

(c)

Payments

Subparagraph (A) of section 6427(e)(5) is amended by striking 2010 and inserting 2011.

211.

Credit for producers of fossil free 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 (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 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 10 cents for each gallon of not more than 60,000,000 gallons 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 is amended by adding at the end the following new subsection:

(i)

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 energy used in the production of alcohol is produced from biomass (as defined in section 45K(c)(3)).

(3)

Aggregation rule

For purposes of the 60,000,000 gallon limitation under paragraph (1) and subsection (b)(7)(A), 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) 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 10 cents for each gallon of such alcohol.

.

(2)

Conforming amendment

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

(e)

Effective date

The amendments made by this section shall apply to fuel produced after December 31, 2008.

212.

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.

213.

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, 2011.

III

Energy conservation and efficiency provisions

301.

Qualified energy conservation bonds

(a)

In general

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

54D.

Qualified energy conservation bonds

(a)

Qualified energy conservation bond

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

(1)

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

(2)

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

(3)

the issuer designates such bond for purposes of this section.

(b)

Reduced credit amount

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

(c)

Limitation on amount of bonds designated

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

(d)

National limitation on amount of bonds designated

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

(e)

Allocations

(1)

In general

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

(2)

Allocations to largest local governments

(A)

In general

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

(B)

Allocation of unused limitation to State

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

(C)

Large local government

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

(3)

Allocation to issuers; restriction on private activity bonds

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

(f)

Qualified conservation purpose

For purposes of this section—

(1)

In general

The term qualified conservation purpose means any of the following:

(A)

Capital expenditures incurred for purposes of—

(i)

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

(ii)

implementing green community programs,

(iii)

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

(iv)

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

(B)

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

(i)

development of cellulosic ethanol or other nonfossil fuels,

(ii)

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

(iii)

increasing the efficiency of existing technologies for producing nonfossil fuels,

(iv)

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

(v)

technologies to reduce energy use in buildings.

(C)

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

(D)

Demonstration projects designed to promote the commercialization of—

(i)

green building technology,

(ii)

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

(iii)

advanced battery manufacturing technologies,

(iv)

technologies to reduce peak use of electricity, or

(v)

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

(E)

Public education campaigns to promote energy efficiency.

(2)

Special rules for private activity bonds

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

(g)

Population

(1)

In general

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

(2)

Special rule for counties

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

(h)

Application to Indian tribal governments

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

(1)

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

(2)

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

.

(b)

Conforming amendments

(1)

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

(1)

Qualified tax credit bond

The term qualified tax credit bond means—

(A)

a qualified forestry conservation bond,

(B)

a new clean renewable energy bond, or

(C)

a qualified energy conservation bond,

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

.

(2)

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

(C)

Qualified purpose

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

(i)

in the case of a qualified forestry conservation bond, a purpose specified in section 54B(e),

(ii)

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

(iii)

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

.

(3)

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

Sec. 54D. Qualified energy conservation bonds.

.

(c)

Effective date

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

302.

Credit for nonbusiness energy property

(a)

Extension of credit

Section 25C(g) is amended by striking placed in service after December 31, 2007 and inserting “placed in service—

(1)

after December 31, 2007, and before January 1, 2009, or

(2)

after December 31, 2011.

.

(b)

Qualified biomass fuel property

(1)

In general

Section 25C(d)(3) is amended—

(A)

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

(B)

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

(C)

by adding at the end the following new subparagraph:

(F)

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

.

(2)

Biomass fuel

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

(6)

Biomass fuel

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

.

(c)

Modification of water heater requirements

Section 25C(d)(3)(E) is amended by inserting or a thermal efficiency of at least 90 percent after 0.80.

(d)

Coordination with credit for qualified geothermal heat Pump property expenditures

(1)

In general

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

(2)

Conforming amendment

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

(C)

Requirements and standards for air conditioners and heat pumps

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

(i)

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

(ii)

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

.

(e)

Modification of qualified energy efficiency improvements

(1)

In general

Paragraph (1) of section 25C(c) is amended by inserting , or an asphalt roof with appropriate cooling granules, before which meet the Energy Star program requirements.

(2)

Building envelope component

Subparagraph (D) of section 25C(c)(2) is amended—

(A)

by inserting or asphalt roof after metal roof, and

(B)

by inserting or cooling granules after pigmented coatings.

(f)

Effective dates

(1)

In general

Except as provided in paragraph (2), the amendments made this section shall apply to expenditures made after December 31, 2008.

(2)

Modification of qualified energy efficiency improvements

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

303.

Energy efficient commercial buildings deduction

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

304.

New energy efficient home credit

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

305.

Modifications of energy efficient appliance credit for appliances produced after 2007

(a)

In general

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

(b)

Applicable amount

For purposes of subsection (a)—

(1)

Dishwashers

The applicable amount is—

(A)

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

(B)

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

(2)

Clothes washers

The applicable amount is—

(A)

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

(B)

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

(C)

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

(D)

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

(3)

Refrigerators

The applicable amount is—

(A)

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

(B)

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

(C)

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

(D)

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

.

(b)

Eligible production

(1)

Similar treatment for all appliances

Subsection (c) of section 45M is amended—

(A)

by striking paragraph (2),

(B)

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

(C)

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

(D)

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

(2)

Modification of base period

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

(c)

Types of energy efficient appliances

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

(d)

Types of energy efficient appliance

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

(1)

dishwashers described in subsection (b)(1),

(2)

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

(3)

refrigerators described in subsection (b)(3).

.

(d)

Aggregate credit amount allowed

(1)

Increase in limit

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

(1)

Aggregate credit amount allowed

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

.

(2)

Exception for certain refrigerator and clothes washers

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

(2)

Amount allowed for certain refrigerators and clothes washers

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

.

(e)

Qualified energy efficient appliances

(1)

In general

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

(1)

Qualified energy efficient appliance

The term qualified energy efficient appliance means—

(A)

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

(B)

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

(C)

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

.

(2)

Clothes washer

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

(3)

Top-loading clothes washer

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

(4)

Top-loading clothes washer

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

.

(4)

Replacement of energy factor

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

(6)

Modified energy factor

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

.

(5)

Gallons per cycle; water consumption factor

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

(9)

Gallons per cycle

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

(10)

Water consumption factor

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

.

(f)

Effective date

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

306.

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

(a)

In general

Section 168(e)(3)(C) is amended by striking and at the end of clause (iv), by redesignating clause (v) as clause (vii), and by inserting after clause (iv) the following new clauses:

(v)

any qualified smart electric meter,

(vi)

any qualified smart electric grid system, and

.

(b)

Definitions

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

(18)

Qualified smart electric meters

(A)

In general

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

(B)

Smart electric meter

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

(i)

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

(ii)

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

(iii)

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

(iv)

provides net metering.

(19)

Qualified smart electric grid systems

(A)

In general

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

(B)

Smart grid property

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

(i)

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

(ii)

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

(iii)

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

.

(c)

Continued application of 150 percent declining balance method

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

(C)

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

.

(d)

Effective date

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

307.

Qualified green building and sustainable design projects

(a)

In general

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

(b)

Treatment of current refunding bonds

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

(c)

Accountability

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

308.

Special depreciation allowance for certain reuse and recycling property

(a)

In general

Section 168 is amended by adding at the end the following new subsection:

(m)

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 August 31, 2008, and

(iv)

which is—

(I)

acquired by purchase (as defined in section 179(d)(2)) by the taxpayer after August 31, 2008, but only if no written binding contract for the acquisition was in effect before September 1, 2008, or

(II)

acquired by the taxpayer pursuant to a written binding contract which was entered into after August 31, 2008.

(B)

Exceptions

(i)

Bonus depreciation property under subsection (k)

The term qualified reuse and recycling property shall not include any property to which section 168(k) applies.

(ii)

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).

(iii)

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 August 31, 2008.

(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 collect, distribute, or recycle qualified reuse and recyclable materials.

(ii)

Exclusion

Such term does not include rolling stock or other equipment used to transport reuse and recyclable materials.

(B)

Qualified reuse and recyclable materials

(i)

In general

The term qualified reuse and recyclable materials means scrap plastic, scrap glass, scrap textiles, scrap rubber, 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) 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 August 31, 2008.

IV

Miscellaneous energy provisions

401.

Special rule to implement FERC and State electric restructuring policy

(a)

Extension for qualified electric utilities

(1)

In general

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

(2)

Qualified electric utility

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

(6)

Qualified electric utility

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

(A)

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

(B)

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

.

(b)

Extension of period for transfer of operational control authorized by FERC

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

(c)

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

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

(C)

Exception for property located outside the united states

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

.

(d)

Effective Dates

(1)

Extension

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

(2)

Transfers of operational control

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

(3)

Exception for property located outside the united states

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

402.

Modification of credit for production from advanced nuclear power facilities

(a)

In general

Paragraph (2) of section 45J(b) (relating to national limitation) is amended by striking 6,000 megawatts and inserting 8,000 megawatts.

(b)

Allocation of credit to private partners of tax-exempt entities

(1)

In general

Section 45J (relating to credit for production from advanced nuclear power facilities) is amended—

(A)

by redesignating subsection (e) as subsection (f), and

(B)

by inserting after subsection (d) the following new subsection:

(e)

Special rule for public-private partnerships

(1)

In general

In the case of an advanced nuclear power facility which is owned by a public-private partnership, any qualified public entity which is a member of such partnership may transfer such entity's allocation of the credit under subsection (a) to any non-public entity which is a member of such partnership, except that the aggregate allocations of such credit claimed by such non-public entity shall be subject to the limitations under subsections (b) and (c) and section 38(c).

(2)

Qualified public entity

For purposes of this subsection, the term qualified public entity means a Federal, State, or local government entity, or any political subdivision thereof, or a cooperative organization described in section 1381(a).

(3)

Verification of transfer of allocation

A qualified public entity that makes a transfer under paragraph (1), and a non-public entity that receives an allocation under such a transfer, shall provide verification of such transfer in such manner and at such time as the Secretary shall prescribe.

.

(2)

Coordination with general business credit

Subsection (c) of section 38 (relating to limitation based on amount of tax) is amended by adding at the end the following new paragraph:

(6)

Special rule for credit for production from advanced nuclear power facilities

(A)

In general

In the case of the credit for production from advanced nuclear power facilities determined under section 45J(a), paragraph (1) shall not apply with respect to any qualified public entity (as defined in section 45J(e)(2)) which transfers the entity's allocation of such credit to a non-public partner as provided in section 45J(e)(1).

(B)

Verification of transfer

Subparagraph (A) shall not apply to any qualified public entity unless such entity provides verification of a transfer of credit allocation as required under section 45J(e)(3).

.

(c)

Effective date

(1)

In general

The amendment made by subsection (a) shall apply to electricity produced in taxable years beginning after the date of the enactment of this Act.

(2)

Allocation of credit

The amendments made by subsection (b) shall apply to taxable years beginning after the date of the enactment of this Act.

403.

Income averaging for amounts received in connection with the Exxon Valdez litigation

(a)

Income averaging of amounts received from the Exxon Valdez litigation

For purposes of section 1301 of the Internal Revenue Code of 1986—

(1)

any qualified taxpayer who receives any qualified settlement income in any taxable year shall be treated as engaged in a fishing business (determined without regard to the commercial nature of the business), and

(2)

such qualified settlement income shall be treated as income attributable to such a fishing business for such taxable year.

(b)

Contributions of amounts received to retirement accounts

(1)

In general

Any qualified taxpayer who receives qualified settlement income during the taxable year may, at any time before the end of the taxable year in which such income was received, make one or more contributions to an eligible retirement plan of which such qualified taxpayer is a beneficiary in an aggregate amount not to exceed the lesser of—

(A)

$100,000 (reduced by the amount of qualified settlement income contributed to an eligible retirement plan in prior taxable years pursuant to this subsection), or

(B)

the amount of qualified settlement income received by the individual during the taxable year.

(2)

Time when contributions deemed made

For purposes of paragraph (1), a qualified taxpayer shall be deemed to have made a contribution to an eligible retirement plan on the last day of the taxable year in which such income is received if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).

(3)

Treatment of contributions to eligible retirement plans

For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to paragraph (1) with respect to qualified settlement income, then—

(A)

except as provided in paragraph (4)—

(i)

to the extent of such contribution, the qualified settlement income shall not be included in taxable income, and

(ii)

for purposes of section 72 of such Code, such contribution shall not be considered to be investment in the contract,

(B)

the qualified taxpayer shall, to the extent of the amount of the contribution, be treated—

(i)

as having received the qualified settlement income—

(I)

in the case of a contribution to an individual retirement plan (as defined under section 7701(a)(37) of such Code), in a distribution described in section 408(d)(3) of such Code, and

(II)

in the case of any other eligible retirement plan, in an eligible rollover distribution (as defined under section 402(f)(2) of such Code), and

(ii)

as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution,

(C)

section 408(d)(3)(B) of the Internal Revenue Code of 1986 shall not apply with respect to amounts treated as a rollover under this paragraph, and

(D)

section 408A(c)(3)(B) of the Internal Revenue Code of 1986 shall not apply with respect to amounts contributed to a Roth IRA (as defined under section 408A(b) of such Code) or a designated Roth contribution to an applicable retirement plan (within the meaning of section 402A of such Code) under this paragraph.

(4)

Special rule for Roth IRAs and Roth 401(k)s

For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to paragraph (1) with respect to qualified settlement income to a Roth IRA (as defined under section 408A(b) of such Code) or as a designated Roth contribution to an applicable retirement plan (within the meaning of section 402A of such Code), then—

(A)

the qualified settlement income shall be includible in taxable income, and

(B)

for purposes of section 72 of such Code, such contribution shall be considered to be investment in the contract.

(5)

Eligible retirement plan

For purpose of this subsection, the term eligible retirement plan has the meaning given such term under section 402(c)(8)(B) of the Internal Revenue Code of 1986.

(c)

Treatment of qualified settlement income under employment taxes

(1)

SECA

For purposes of chapter 2 of the Internal Revenue Code of 1986 and section 211 of the Social Security Act, no portion of qualified settlement income received by a qualified taxpayer shall be treated as self-employment income.

(2)

FICA

For purposes of chapter 21 of the Internal Revenue Code of 1986 and section 209 of the Social Security Act, no portion of qualified settlement income received by a qualified taxpayer shall be treated as wages.

(d)

Qualified taxpayer

For purposes of this section, the term qualified taxpayer means—

(1)

any individual who is a plaintiff in the civil action In re Exxon Valdez, No. 89–095–CV (HRH) (Consolidated) (D. Alaska); or

(2)

any individual who is a beneficiary of the estate of such a plaintiff who—

(A)

acquired the right to receive qualified settlement income from that plaintiff; and

(B)

was the spouse or an immediate relative of that plaintiff.

(e)

Qualified settlement income

For purposes of this section, the term qualified settlement income means any interest and punitive damage awards which are—

(1)

otherwise includible in taxable income, and

(2)

received (whether as lump sums or periodic payments) in connection with the civil action In re Exxon Valdez, No. 89–095–CV (HRH) (Consolidated) (D. Alaska) (whether pre- or post-judgment and whether related to a settlement or judgment).

V

Revenue provisions

501.

Limitation of deduction for income attributable to domestic production of oil, gas, or primary products thereof

(a)

Denial of deduction for major integrated oil companies and State-owned oil companies for income attributable to domestic production of oil, gas, or primary products thereof

(1)

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 disqualified oil company, the production, refining, processing, transportation, or distribution of oil, gas, or any primary product thereof.

.

(2)

Disqualified oil company

Section 199(c) of such Code is amended by adding at the end the following new paragraph:

(8)

Disqualified oil company

(A)

In general

The term disqualified oil company means—

(i)

any major integrated oil company (as defined in section 167(h)(5)(B)) during any taxable year described in section 167(h)(5)(B), or

(ii)

any controlled commercial entity (as defined in section 892(a)(2)(B)) the commercial activities of which during the taxable year includes the production, refining, processing, transportation, or distribution of oil, gas, or any primary product thereof.

(B)

Primary product

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

.

(b)

Limitation on oil related qualified production activities income for taxpayers other than major integrated oil companies and State-owned oil companies

(1)

In general

Section 199(d) of the Internal Revenue Code of 1986 is amended by redesignating paragraph (9) as paragraph (10) and by inserting after paragraph (8) the following new paragraph:

(9)

Special rule for taxpayers with oil related qualified production activities income

(A)

In general

If a taxpayer (other than a disqualified oil company) has oil related qualified production activities income for any taxable year beginning after 2009, the amount otherwise allowable as a deduction under subsection (a) shall be reduced by 3 percent of the least of—

(i)

the oil related qualified production activities income of the taxpayer for the taxable year,

(ii)

the qualified production activities income of the taxpayer for the taxable year, or

(iii)

taxable income (determined without regard to this section).

(B)

Oil related qualified production activities income

The term oil related qualified production activities income means for any taxable year the qualified production activities income which is attributable to the production, refining, processing, transportation, or distribution of oil, gas, or any primary product thereof during such taxable year.

.

(2)

Conforming amendment

Section 199(d)(2) of such Code (relating to application to individuals) is amended by striking subsection (a)(1)(B) and inserting subsections (a)(1)(B) and (d)(9)(A)(iii).

(c)

Effective date

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

502.

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 December 31, 2008.

503.

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-2009 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, 2009, 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 Independence and Investment Act of 2008) for preceding taxable years beginning after December 31, 1982.

(C)

Reduction for post-2008 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, 2008, over

(II)

so much of such aggregate amount as was recharacterized under this paragraph for preceding taxable years beginning after December 31, 2008.

(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 Independence and Investment Act of 2008.

.

(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-2009 and 2009 disallowed credits

(A)

Pre-2009 credits

In the case of any unused credit year beginning before January 1, 2009, 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, 2008—

(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)

2009 credits

In the case of any unused credit year beginning in 2009, the amendments made to this subsection by the Energy Independence and Investment Act of 2008 shall be treated as being in effect for any preceding year beginning before January 1, 2009, 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, 2008.

504.

Broker reporting of customer’s basis in securities transactions

(a)

In general

(1)

Broker reporting for securities transactions

Section 6045 is amended by adding at the end the following new subsection:

(g)

Additional information required in the case of securities transactions, etc

(1)

In general

If a broker is otherwise required to make a return under subsection (a) with respect to the gross proceeds of the sale of a covered security, the broker shall include in such return the information described in paragraph (2).

(2)

Additional information required

(A)

In general

The information required under paragraph (1) to be shown on a return with respect to a covered security of a customer shall include the customer’s adjusted basis in such security and whether any gain or loss with respect to such security is long-term or short-term (within the meaning of section 1222).

(B)

Determination of adjusted basis

For purposes of subparagraph (A)—

(i)

In general

The customer’s adjusted basis shall be determined—

(I)

in the case of any security (other than any stock for which an average basis method is permissible under section 1012), in accordance with the first-in first-out method unless the customer notifies the broker by means of making an adequate identification of the stock sold or transferred, and

(II)

in the case of any stock for which an average basis method is permissible under section 1012, in accordance with the broker’s default method unless the customer notifies the broker that he elects another acceptable method under section 1012 with respect to the account in which such stock is held.

(ii)

Exception for wash sales

Except as otherwise provided by the Secretary, the customer’s adjusted basis shall be determined without regard to section 1091 (relating to loss from wash sales of stock or securities) unless the transactions occur in the same account with respect to identical securities.

(3)

Covered security

For purposes of this subsection—

(A)

In general

The term covered security means any specified security acquired on or after the applicable date if such security—

(i)

was acquired through a transaction in the account in which such security is held, or

(ii)

was transferred to such account from an account in which such security was a covered security, but only if the broker received a statement under section 6045A with respect to the transfer.

(B)

Specified security

The term specified security means—

(i)

any share of stock in a corporation,

(ii)

any note, bond, debenture, or other evidence of indebtedness,

(iii)

any commodity, or contract or derivative with respect to such commodity, if the Secretary determines that adjusted basis reporting is appropriate for purposes of this subsection, and

(iv)

any other financial instrument with respect to which the Secretary determines that adjusted basis reporting is appropriate for purposes of this subsection.

(C)

Applicable date

The term applicable date means—

(i)

January 1, 2010, in the case of any specified security which is stock in a corporation (other than any stock described in clause (ii)),

(ii)

January 1, 2011, in the case of any stock for which an average basis method is permissible under section 1012, and

(iii)

January 1, 2012, or such later date determined by the Secretary in the case of any other specified security.

(4)

Treatment of S corporations

In the case of the sale of a covered security acquired by an S corporation (other than a financial institution) after December 31, 2011, such S corporation shall be treated in the same manner as a partnership for purposes of this section.

(5)

Special rules for short sales

In the case of a short sale, reporting under this section shall be made for the year in which such sale is closed.

.

(2)

Broker information required with respect to options

Section 6045, as amended by subsection (a), is amended by adding at the end the following new subsection:

(h)

Application to options on securities

(1)

Exercise of option

For purposes of this section, if a covered security is acquired or disposed of pursuant to the exercise of an option that was granted or acquired in the same account as the covered security, the amount received with respect to the grant or paid with respect to the acquisition of such option shall be treated as an adjustment to gross proceeds or as an adjustment to basis, as the case may be.

(2)

Lapse or closing transaction

In the case of the lapse (or closing transaction (as defined in section 1234(b)(2)(A))) of an option on a specified security or the exercise of a cash-settled option on a specified security, reporting under subsections (a) and (g) with respect to such option shall be made for the calendar year which includes the date of such lapse, closing transaction, or exercise.

(3)

Prospective application

Paragraphs (1) and (2) shall not apply to any option which is granted or acquired before January 1, 2012.

(4)

Definitions

For purposes of this subsection, the terms covered security and specified security shall have the meanings given such terms in subsection (g)(3).

.

(3)

Extension of period for statements sent to customers

(A)

In general

Subsection (b) of section 6045 is amended by striking January 31 and inserting February 15.

(B)

Statements related to substitute payments

Subsection (d) of section 6045 is amended—

(i)

by striking at such time and, and

(ii)

by inserting after other item. the following new sentence: The written statement required under the preceding sentence shall be furnished on or before February 15 of the year following the calendar year in which the payment was made..

(C)

Other statements

Subsection (b) of section 6045 is amended by adding at the end the following: In the case of a consolidated reporting statement (as defined in regulations) with respect to any account, any statement which would otherwise be required to be furnished on or before January 31 of a calendar year with respect to any item reportable to the taxpayer shall instead be required to be furnished on or before February 15 of such calendar year if furnished with such consolidated reporting statement..

(b)

Determination of basis of certain securities on account by account or average basis method

Section 1012 is amended—

(1)

by striking The basis of property and inserting the following:

(a)

In general

The basis of property

,

(2)

by striking The cost of real property and inserting the following:

(b)

Special rule for apportioned real estate taxes

The cost of real property

, and

(3)

by adding at the end the following new subsections:

(c)

Determinations by account

(1)

In general

In the case of the sale, exchange, or other disposition of a specified security on or after the applicable date, the conventions prescribed by regulations under this section shall be applied on an account by account basis.

(2)

Application to open-end funds

(A)

In general

Except as provided in subparagraph (B), any stock in an open-end fund acquired before January 1, 2011, shall be treated as a separate account from any such stock acquired on or after such date.

(B)

Election by open-end fund for treatment as single account

If an open-end fund elects to have this subparagraph apply with respect to one or more of its stockholders—

(i)

subparagraph (A) shall not apply with respect to any stock in such fund held by such stockholders, and

(ii)

all stock in such fund which is held by such stockholders shall be treated as covered securities described in section 6045(g)(3) without regard to the date of the acquisition of such stock.

A rule similar to the rule of the preceding sentence shall apply with respect to a broker holding stock in an open-end fund as a nominee.
(3)

Definitions

For purposes of this section—

(A)

Open-end fund

The term open-end fund means a regulated investment company (as defined in section 851) which is offering for sale or has outstanding any redeemable security of which it is the issuer. Any stock which is traded on an established securities exchange shall not be treated as stock in an open-end fund.

(B)

Specified security; applicable date

The terms specified security and applicable date shall have the meaning given such terms in section 6045(g).

(d)

Average basis for stock acquired pursuant to a dividend reinvestment plan

(1)

In general

In the case of any stock acquired after December 31, 2010, in connection with a dividend reinvestment plan, the basis of such stock while held as part of such plan shall be determined using one of the methods which may be used for determining the basis of stock in an open-end fund.

(2)

Treatment after transfer

In the case of the transfer to another account of stock to which paragraph (1) applies, such stock shall have a cost basis in such other account equal to its basis in the dividend reinvestment plan immediately before such transfer (properly adjusted for any fees or other charges taken into account in connection with such transfer).

(3)

Separate accounts; election for treatment as single account

Rules similar to the rules of subsection (c)(2) shall apply for purposes of this subsection.

(4)

Dividend reinvestment plan

For purposes of this subsection—

(A)

In general

The term dividend reinvestment plan means any arrangement under which dividends on any stock are reinvested in stock identical to the stock with respect to which the dividends are paid.

(B)

Initial stock acquisition treated as acquired in connection with plan

Stock shall be treated as acquired in connection with a dividend reinvestment plan if such stock is acquired pursuant to such plan or if the dividends paid on such stock are subject to such plan.

.

(c)

Information by transferors To aid brokers

(1)

In general

Subpart B of part III of subchapter A of chapter 61 is amended by inserting after section 6045 the following new section:

6045A.

Information required in connection with transfers of covered securities to brokers

(a)

Furnishing of information

Every applicable person which transfers to a broker (as defined in section 6045(c)(1)) a security which is a covered security (as defined in section 6045(g)(3)) in the hands of such applicable person shall furnish to such broker a written statement in such manner and setting forth such information as the Secretary may by regulations prescribe for purposes of enabling such broker to meet the requirements of section 6045(g).

(b)

Applicable person

For purposes of subsection (a), the term applicable person means—

(1)

any broker (as defined in section 6045(c)(1)), and

(2)

any other person as provided by the Secretary in regulations.

(c)

Time for furnishing statement

Except as otherwise provided by the Secretary, any statement required by subsection (a) shall be furnished not later than 15 days after the date of the transfer described in such subsection.

.

(2)

Assessable penalties

Paragraph (2) of section 6724(d), as amended by the Housing Assistance Tax Act of 2008, is amended by redesignating subparagraphs (I) through (DD) as subparagraphs (J) through (EE), respectively, and by inserting after subparagraph (H) the following new subparagraph:

(I)

section 6045A (relating to information required in connection with transfers of covered securities to brokers),

.

(3)

Clerical amendment

The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6045 the following new item:

Sec. 6045A. Information required in connection with transfers of covered securities to brokers.

.

(d)

Additional issuer information To aid brokers

(1)

In general

Subpart B of part III of subchapter A of chapter 61, as amended by subsection (b), is amended by inserting after section 6045A the following new section:

6045B.

Returns relating to actions affecting basis of specified securities

(a)

In general

According to the forms or regulations prescribed by the Secretary, any issuer of a specified security shall make a return setting forth—

(1)

a description of any organizational action which affects the basis of such specified security of such issuer,

(2)

the quantitative effect on the basis of such specified security resulting from such action, and

(3)

such other information as the Secretary may prescribe.

(b)

Time for filing return

Any return required by subsection (a) shall be filed not later than the earlier of—

(1)

45 days after the date of the action described in subsection (a), or

(2)

January 15 of the year following the calendar year during which such action occurred.

(c)

Statements To be furnished to holders of specified securities or their nominees

According to the forms or regulations prescribed by the Secretary, every person required to make a return under subsection (a) with respect to a specified security shall furnish to the nominee with respect to the specified security (or certificate holder if there is no nominee) a written statement showing—

(1)

the name, address, and phone number of the information contact of the person required to make such return,

(2)

the information required to be shown on such return with respect to such security, and

(3)

such other information as the Secretary may prescribe.

The written statement required under the preceding sentence shall be furnished to the holder on or before January 15 of the year following the calendar year during which the action described in subsection (a) occurred.
(d)

Specified security

For purposes of this section, the term specified security has the meaning given such term by section 6045(g)(3)(B). No return shall be required under this section with respect to actions described in subsection (a) with respect to a specified security which occur before the applicable date (as defined in section 6045(g)(3)(C)) with respect to such security.

(e)

Public reporting in lieu of return

The Secretary may waive the requirements under subsections (a) and (c) with respect to a specified security, if the person required to make the return under subsection (a) makes publicly available, in such form and manner as the Secretary determines necessary to carry out the purposes of this section—

(1)

the name, address, phone number, and email address of the information contact of such person, and

(2)

the information described in paragraphs (1), (2), and (3) of subsection (a).

.

(2)

Assessable penalties

(A)

Subparagraph (B) of section 6724(d)(1), as amended by the Housing Assistance Tax Act of 2008, is amended by redesignating clause (iv) and each of the clauses which follow as clauses (v) through (xxiii), respectively, and by inserting after clause (iii) the following new clause:

(iv)

section 6045B(a) (relating to returns relating to actions affecting basis of specified securities),

.

(B)

Paragraph (2) of section 6724(d), as amended by the Housing Assistance Tax Act of 2008 and by subsection (c)(2), is amended by redesignating subparagraphs (J) through (EE) as subparagraphs (K) through (FF), respectively, and by inserting after subparagraph (I) the following new subparagraph:

(J)

subsections (c) and (e) of section 6045B (relating to returns relating to actions affecting basis of specified securities),

.

(3)

Clerical amendment

The table of sections for subpart B of part III of subchapter A of chapter 61, as amended by subsection (b)(3), is amended by inserting after the item relating to section 6045A the following new item:

Sec. 6045B. Returns relating to actions affecting basis of specified securities.

.

(e)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall take effect on January 1, 2010.

(2)

Extension of period for statements sent to customers

The amendments made by subsection (a)(3) shall apply to statements required to be furnished after December 31, 2008.

505.

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 12 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.

VI

Other provisions

601.

Secure rural schools and community self-determination program

(a)

Reauthorization of the secure rural schools and community self-determination act of 2000

The Secure Rural Schools and Community Self-Determination Act of 2000 (16 U.S.C. 500 note; Public Law 106–393) is amended by striking sections 1 through 403 and inserting the following:

1.

Short title

This Act may be cited as the Secure Rural Schools and Community Self-Determination Act of 2000.

2.

Purposes

The purposes of this Act are—

(1)

to stabilize and transition payments to counties to provide funding for schools and roads that supplements other available funds;

(2)

to make additional investments in, and create additional employment opportunities through, projects that—

(A)
(i)

improve the maintenance of existing infrastructure;

(ii)

implement stewardship objectives that enhance forest ecosystems; and

(iii)

restore and improve land health and water quality;

(B)

enjoy broad-based support; and

(C)

have objectives that may include—

(i)

road, trail, and infrastructure maintenance or obliteration;

(ii)

soil productivity improvement;

(iii)

improvements in forest ecosystem health;

(iv)

watershed restoration and maintenance;

(v)

the restoration, maintenance, and improvement of wildlife and fish habitat;

(vi)

the control of noxious and exotic weeds; and

(vii)

the reestablishment of native species; and

(3)

to improve cooperative relationships among—

(A)

the people that use and care for Federal land; and

(B)

the agencies that manage the Federal land.

3.

Definitions

In this Act:

(1)

Adjusted share

The term adjusted share means the number equal to the quotient obtained by dividing—

(A)

the number equal to the quotient obtained by dividing—

(i)

the base share for the eligible county; by

(ii)

the income adjustment for the eligible county; by

(B)

the number equal to the sum of the quotients obtained under subparagraph (A) and paragraph (8)(A) for all eligible counties.

(2)

Base share

The term base share means the number equal to the average of—

(A)

the quotient obtained by dividing—

(i)

the number of acres of Federal land described in paragraph (7)(A) in each eligible county; by

(ii)

the total number acres of Federal land in all eligible counties in all eligible States; and

(B)

the quotient obtained by dividing—

(i)

the amount equal to the average of the 3 highest 25-percent payments and safety net payments made to each eligible State for each eligible county during the eligibility period; by

(ii)

the amount equal to the sum of the amounts calculated under clause (i) and paragraph (9)(B)(i) for all eligible counties in all eligible States during the eligibility period.

(3)

County payment

The term county payment means the payment for an eligible county calculated under section 101(b).

(4)

Eligible county

The term eligible county means any county that—

(A)

contains Federal land (as defined in paragraph (7)); and

(B)

elects to receive a share of the State payment or the county payment under section 102(b).

(5)

Eligibility period

The term eligibility period means fiscal year 1986 through fiscal year 1999.

(6)

Eligible state

The term eligible State means a State or territory of the United States that received a 25-percent payment for 1 or more fiscal years of the eligibility period.

(7)

Federal land

The term Federal land means—

(A)

land within the National Forest System, as defined in section 11(a) of the Forest and Rangeland Renewable Resources Planning Act of 1974 (16 U.S.C. 1609(a)) exclusive of the National Grasslands and land utilization projects designated as National Grasslands administered pursuant to the Act of July 22, 1937 (7 U.S.C. 1010–1012); and

(B)

such portions of the revested Oregon and California Railroad and reconveyed Coos Bay Wagon Road grant land as are or may hereafter come under the jurisdiction of the Department of the Interior, which have heretofore or may hereafter be classified as timberlands, and power-site land valuable for timber, that shall be managed, except as provided in the former section 3 of the Act of August 28, 1937 (50 Stat. 875; 43 U.S.C. 1181c), for permanent forest production.

(8)

50-Percent adjusted share

The term 50-percent adjusted share means the number equal to the quotient obtained by dividing—

(A)

the number equal to the quotient obtained by dividing—

(i)

the 50-percent base share for the eligible county; by

(ii)

the income adjustment for the eligible county; by

(B)

the number equal to the sum of the quotients obtained under subparagraph (A) and paragraph (1)(A) for all eligible counties.

(9)

50-Percent base share

The term 50-percent base share means the number equal to the average of—

(A)

the quotient obtained by dividing—

(i)

the number of acres of Federal land described in paragraph (7)(B) in each eligible county; by

(ii)

the total number acres of Federal land in all eligible counties in all eligible States; and

(B)

the quotient obtained by dividing—

(i)

the amount equal to the average of the 3 highest 50-percent payments made to each eligible county during the eligibility period; by

(ii)

the amount equal to the sum of the amounts calculated under clause (i) and paragraph (2)(B)(i) for all eligible counties in all eligible States during the eligibility period.

(10)

50-percent payment

The term 50-percent payment means the payment that is the sum of the 50-percent share otherwise paid to a county pursuant to title II of the Act of August 28, 1937 (chapter 876; 50 Stat. 875; 43 U.S.C. 1181f), and the payment made to a county pursuant to the Act of May 24, 1939 (chapter 144; 53 Stat. 753; 43 U.S.C. 1181f–1 et seq.).

(11)

Full funding amount

The term full funding amount means—

(A)

$500,000,000 for fiscal year 2008; and

(B)

for fiscal year 2009 and each fiscal year thereafter, the amount that is equal to 90 percent of the full funding amount for the preceding fiscal year.

(12)

Income adjustment

The term income adjustment means the square of the quotient obtained by dividing—

(A)

the per capita personal income for each eligible county; by

(B)

the median per capita personal income of all eligible counties.

(13)

Per capita personal income

The term per capita personal income means the most recent per capita personal income data, as determined by the Bureau of Economic Analysis.

(14)

Safety net payments

The term safety net payments means the special payment amounts paid to States and counties required by section 13982 or 13983 of the Omnibus Budget Reconciliation Act of 1993 (Public Law 103–66; 16 U.S.C. 500 note; 43 U.S.C. 1181f note).

(15)

Secretary concerned

The term Secretary concerned means—

(A)

the Secretary of Agriculture or the designee of the Secretary of Agriculture with respect to the Federal land described in paragraph (7)(A); and

(B)

the Secretary of the Interior or the designee of the Secretary of the Interior with respect to the Federal land described in paragraph (7)(B).

(16)

State payment

The term State payment means the payment for an eligible State calculated under section 101(a).

(17)

25-Percent payment

The term 25-percent payment means the payment to States required by the sixth paragraph under the heading of FOREST SERVICE in the Act of May 23, 1908 (35 Stat. 260; 16 U.S.C. 500), and section 13 of the Act of March 1, 1911 (36 Stat. 963; 16 U.S.C. 500).

I

SECURE PAYMENTS FOR STATES AND COUNTIES CONTAINING FEDERAL LAND

101.

Secure payments for States containing Federal land

(a)

State Payment

For each of fiscal years 2008 through 2011, the Secretary of Agriculture shall calculate for each eligible State an amount equal to the sum of the products obtained by multiplying—

(1)

the adjusted share for each eligible county within the eligible State; by

(2)

the full funding amount for the fiscal year.

(b)

County Payment

For each of fiscal years 2008 through 2011, the Secretary of the Interior shall calculate for each eligible county that received a 50-percent payment during the eligibility period an amount equal to the product obtained by multiplying—

(1)

the 50-percent adjusted share for the eligible county; by

(2)

the full funding amount for the fiscal year.

102.

Payments to States and counties

(a)

Payment Amounts

Except as provided in section 103, the Secretary of the Treasury shall pay to—

(1)

a State or territory of the United States an amount equal to the sum of the amounts elected under subsection (b) by each county within the State or territory for—

(A)

if the county is eligible for the 25-percent payment, the share of the 25-percent payment; or

(B)

the share of the State payment of the eligible county; and

(2)

a county an amount equal to the amount elected under subsection (b) by each county for—

(A)

if the county is eligible for the 50-percent payment, the 50-percent payment; or

(B)

the county payment for the eligible county.

(b)

Election To Receive Payment Amount

(1)

Election; submission of results

(A)

In general

The election to receive a share of the State payment, the county payment, a share of the State payment and the county payment, a share of the 25-percent payment, the 50-percent payment, or a share of the 25-percent payment and the 50-percent payment, as applicable, shall be made at the discretion of each affected county by August 1, 2008 (or as soon thereafter as the Secretary concerned determines is practicable), and August 1 of each second fiscal year thereafter, in accordance with paragraph (2), and transmitted to the Secretary concerned by the Governor of each eligible State.

(B)

Failure to transmit

If an election for an affected county is not transmitted to the Secretary concerned by the date specified under subparagraph (A), the affected county shall be considered to have elected to receive a share of the State payment, the county payment, or a share of the State payment and the county payment, as applicable.

(2)

Duration of election

(A)

In general

A county election to receive a share of the 25-percent payment or 50-percent payment, as applicable, shall be effective for 2 fiscal years.

(B)

Full funding amount

If a county elects to receive a share of the State payment or the county payment, the election shall be effective for all subsequent fiscal years through fiscal year 2011.

(3)

Source of payment amounts

The payment to an eligible State or eligible county under this section for a fiscal year shall be derived from—

(A)

any amounts that are appropriated to carry out this Act;

(B)

any revenues, fees, penalties, or miscellaneous receipts, exclusive of deposits to any relevant trust fund, special account, or permanent operating funds, received by the Federal Government from activities by the Bureau of Land Management or the Forest Service on the applicable Federal land; and

(C)

to the extent of any shortfall, out of any amounts in the Treasury of the United States not otherwise appropriated.

(c)

Distribution and Expenditure of Payments

(1)

Distribution method

A State that receives a payment under subsection (a) for Federal land described in section 3(7)(A) shall distribute the appropriate payment amount among the appropriate counties in the State in accordance with—

(A)

the Act of May 23, 1908 (16 U.S.C. 500); and

(B)

section 13 of the Act of March 1, 1911 (36 Stat. 963; 16 U.S.C. 500).

(2)

Expenditure purposes

Subject to subsection (d), payments received by a State under subsection (a) and distributed to counties in accordance with paragraph (1) shall be expended as required by the laws referred to in paragraph (1).

(d)

Expenditure Rules for Eligible Counties

(1)

Allocations

(A)

Use of portion in same manner as 25-percent payment or 50-percent payment, as applicable

Except as provided in paragraph (3)(B), if an eligible county elects to receive its share of the State payment or the county payment, not less than 80 percent, but not more than 85 percent, of the funds shall be expended in the same manner in which the 25-percent payments or 50-percent payment, as applicable, are required to be expended.

(B)

Election as to use of balance

Except as provided in subparagraph (C), an eligible county shall elect to do 1 or more of the following with the balance of any funds not expended pursuant to subparagraph (A):

(i)

Reserve any portion of the balance for projects in accordance with title II.

(ii)

Reserve not more than 7 percent of the total share for the eligible county of the State payment or the county payment for projects in accordance with title III.

(iii)

Return the portion of the balance not reserved under clauses (i) and (ii) to the Treasury of the United States.

(C)

Counties with modest distributions

In the case of each eligible county to which more than $100,000, but less than $350,000, is distributed for any fiscal year pursuant to either or both of paragraphs (1)(B) and (2)(B) of subsection (a), the eligible county, with respect to the balance of any funds not expended pursuant to subparagraph (A) for that fiscal year, shall—

(i)

reserve any portion of the balance for—

(I)

carrying out projects under title II;

(II)

carrying out projects under title III; or

(III)

a combination of the purposes described in subclauses (I) and (II); or

(ii)

return the portion of the balance not reserved under clause (i) to the Treasury of the United States.

(2)

Distribution of funds

(A)

In general

Funds reserved by an eligible county under subparagraph (B)(i) or (C)(i) of paragraph (1) for carrying out projects under title II shall be deposited in a special account in the Treasury of the United States.

(B)

Availability

Amounts deposited under subparagraph (A) shall—

(i)

be available for expenditure by the Secretary concerned, without further appropriation; and

(ii)

remain available until expended in accordance with title II.

(3)

Election

(A)

Notification

(i)

In general

An eligible county shall notify the Secretary concerned of an election by the eligible county under this subsection not later than September 30, 2008 (or as soon thereafter as the Secretary concerned determines is practicable), and September 30 of each fiscal year thereafter.

(ii)

Failure to elect

Except as provided in subparagraph (B), if the eligible county fails to make an election by the date specified in clause (i), the eligible county shall—

(I)

be considered to have elected to expend 85 percent of the funds in accordance with paragraph (1)(A); and

(II)

return the balance to the Treasury of the United States.

(B)

Counties with minor distributions

In the case of each eligible county to which less than $100,000 is distributed for any fiscal year pursuant to either or both of paragraphs (1)(B) and (2)(B) of subsection (a), the eligible county may elect to expend all the funds in the same manner in which the 25-percent payments or 50-percent payments, as applicable, are required to be expended.

(e)

Time for Payment

The payments required under this section for a fiscal year shall be made as soon as practicable after the end of that fiscal year.

103.

Transition payments to States

(a)

Definitions

In this section:

(1)

Adjusted amount

The term adjusted amount means, with respect to a covered State—

(A)

for fiscal year 2008, 90 percent of—

(i)

the sum of the amounts paid for fiscal year 2006 under section 102(a)(2) (as in effect on September 29, 2006) for the eligible counties in the covered State that have elected under section 102(b) to receive a share of the State payment for fiscal year 2008; and

(ii)

the sum of the amounts paid for fiscal year 2006 under section 103(a)(2) (as in effect on September 29, 2006) for the eligible counties in the State of Oregon that have elected under section 102(b) to receive the county payment for fiscal year 2008;

(B)

for fiscal year 2009, 76 percent of—

(i)

the sum of the amounts paid for fiscal year 2006 under section 102(a)(2) (as in effect on September 29, 2006) for the eligible counties in the covered State that have elected under section 102(b) to receive a share of the State payment for fiscal year 2009; and

(ii)

the sum of the amounts paid for fiscal year 2006 under section 103(a)(2) (as in effect on September 29, 2006) for the eligible counties in the State of Oregon that have elected under section 102(b) to receive the county payment for fiscal year 2009; and

(C)

for fiscal year 2010, 65 percent of—

(i)

the sum of the amounts paid for fiscal year 2006 under section 102(a)(2) (as in effect on September 29, 2006) for the eligible counties in the covered State that have elected under section 102(b) to receive a share of the State payment for fiscal year 2010; and

(ii)

the sum of the amounts paid for fiscal year 2006 under section 103(a)(2) (as in effect on September 29, 2006) for the eligible counties in the State of Oregon that have elected under section 102(b) to receive the county payment for fiscal year 2010.

(2)

Covered state

The term covered State means each of the States of California, Louisiana, Oregon, Pennsylvania, South Carolina, South Dakota, Texas, and Washington.

(b)

Transition Payments

For each of fiscal years 2008 through 2010, in lieu of the payment amounts that otherwise would have been made under paragraphs (1)(B) and (2)(B) of section 102(a), the Secretary of the Treasury shall pay the adjusted amount to each covered State and the eligible counties within the covered State, as applicable.

(c)

Distribution of Adjusted Amount

Except as provided in subsection (d), it is the intent of Congress that the method of distributing the payments under subsection (b) among the counties in the covered States for each of fiscal years 2008 through 2010 be in the same proportion that the payments were distributed to the eligible counties in fiscal year 2006.

(d)

Distribution of Payments in California

The following payments shall be distributed among the eligible counties in the State of California in the same proportion that payments under section 102(a)(2) (as in effect on September 29, 2006) were distributed to the eligible counties for fiscal year 2006:

(1)

Payments to the State of California under subsection (b).

(2)

The shares of the eligible counties of the State payment for California under section 102 for fiscal year 2011.

(e)

Treatment of Payments

For purposes of this Act, any payment made under subsection (b) shall be considered to be a payment made under section 102(a).

II

SPECIAL PROJECTS ON FEDERAL LAND

201.

Definitions

In this title:

(1)

Participating county

The term participating county means an eligible county that elects under section 102(d) to expend a portion of the Federal funds received under section 102 in accordance with this title.

(2)

Project funds

The term project funds means all funds an eligible county elects under section 102(d) to reserve for expenditure in accordance with this title.

(3)

Resource advisory committee

The term resource advisory committee means—

(A)

an advisory committee established by the Secretary concerned under section 205; or

(B)

an advisory committee determined by the Secretary concerned to meet the requirements of section 205.

(4)

Resource management plan

The term resource management plan means—

(A)

a land use plan prepared by the Bureau of Land Management for units of the Federal land described in section 3(7)(B) pursuant to section 202 of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1712); or

(B)

a land and resource management plan prepared by the Forest Service for units of the National Forest System pursuant to section 6 of the Forest and Rangeland Renewable Resources Planning Act of 1974 (16 U.S.C. 1604).

202.

General limitation on use of project funds

(a)

Limitation

Project funds shall be expended solely on projects that meet the requirements of this title.

(b)

Authorized Uses

Project funds may be used by the Secretary concerned for the purpose of entering into and implementing cooperative agreements with willing Federal agencies, State and local governments, private and nonprofit entities, and landowners for protection, restoration, and enhancement of fish and wildlife habitat, and other resource objectives consistent with the purposes of this Act on Federal land and on non-Federal land where projects would benefit the resources on Federal land.

203.

Submission of project proposals

(a)

Submission of Project Proposals to Secretary Concerned

(1)

Projects funded using project funds

Not later than September 30 for fiscal year 2008 (or as soon thereafter as the Secretary concerned determines is practicable), and each September 30 thereafter for each succeeding fiscal year through fiscal year 2011, each resource advisory committee shall submit to the Secretary concerned a description of any projects that the resource advisory committee proposes the Secretary undertake using any project funds reserved by eligible counties in the area in which the resource advisory committee has geographic jurisdiction.

(2)

Projects funded using other funds

A resource advisory committee may submit to the Secretary concerned a description of any projects that the committee proposes the Secretary undertake using funds from State or local governments, or from the private sector, other than project funds and funds appropriated and otherwise available to do similar work.

(3)

Joint projects

Participating counties or other persons may propose to pool project funds or other funds, described in paragraph (2), and jointly propose a project or group of projects to a resource advisory committee established under section 205.

(b)

Required Description of Projects

In submitting proposed projects to the Secretary concerned under subsection (a), a resource advisory committee shall include in the description of each proposed project the following information:

(1)

The purpose of the project and a description of how the project will meet the purposes of this title.

(2)

The anticipated duration of the project.

(3)

The anticipated cost of the project.

(4)

The proposed source of funding for the project, whether project funds or other funds.

(5)
(A)

Expected outcomes, including how the project will meet or exceed desired ecological conditions, maintenance objectives, or stewardship objectives.

(B)

An estimate of the amount of any timber, forage, and other commodities and other economic activity, including jobs generated, if any, anticipated as part of the project.

(6)

A detailed monitoring plan, including funding needs and sources, that—

(A)

tracks and identifies the positive or negative impacts of the project, implementation, and provides for validation monitoring; and

(B)

includes an assessment of the following:

(i)

Whether or not the project met or exceeded desired ecological conditions; created local employment or training opportunities, including summer youth jobs programs such as the Youth Conservation Corps where appropriate.

(ii)

Whether the project improved the use of, or added value to, any products removed from land consistent with the purposes of this title.

(7)

An assessment that the project is to be in the public interest.

(c)

Authorized Projects

Projects proposed under subsection (a) shall be consistent with section 2.

204.

Evaluation and approval of projects by Secretary concerned

(a)

Conditions for Approval of Proposed Project

The Secretary concerned may make a decision to approve a project submitted by a resource advisory committee under section 203 only if the proposed project satisfies each of the following conditions:

(1)

The project complies with all applicable Federal laws (including regulations).

(2)

The project is consistent with the applicable resource management plan and with any watershed or subsequent plan developed pursuant to the resource management plan and approved by the Secretary concerned.

(3)

The project has been approved by the resource advisory committee in accordance with section 205, including the procedures issued under subsection (e) of that section.

(4)

A project description has been submitted by the resource advisory committee to the Secretary concerned in accordance with section 203.

(5)

The project will improve the maintenance of existing infrastructure, implement stewardship objectives that enhance forest ecosystems, and restore and improve land health and water quality.

(b)

Environmental Reviews

(1)

Request for payment by county

The Secretary concerned may request the resource advisory committee submitting a proposed project to agree to the use of project funds to pay for any environmental review, consultation, or compliance with applicable environmental laws required in connection with the project.

(2)

Conduct of environmental review

If a payment is requested under paragraph (1) and the resource advisory committee agrees to the expenditure of funds for this purpose, the Secretary concerned shall conduct environmental review, consultation, or other compliance responsibilities in accordance with Federal laws (including regulations).

(3)

Effect of refusal to pay

(A)

In general

If a resource advisory committee does not agree to the expenditure of funds under paragraph (1), the project shall be deemed withdrawn from further consideration by the Secretary concerned pursuant to this title.

(B)

Effect of withdrawal

A withdrawal under subparagraph (A) shall be deemed to be a rejection of the project for purposes of section 207(c).

(c)

Decisions of Secretary Concerned

(1)

Rejection of projects

(A)

In general

A decision by the Secretary concerned to reject a proposed project shall be at the sole discretion of the Secretary concerned.

(B)

No administrative appeal or judicial review

Notwithstanding any other provision of law, a decision by the Secretary concerned to reject a proposed project shall not be subject to administrative appeal or judicial review.

(C)

Notice of rejection

Not later than 30 days after the date on which the Secretary concerned makes the rejection decision, the Secretary concerned shall notify in writing the resource advisory committee that submitted the proposed project of the rejection and the reasons for rejection.

(2)

Notice of project approval

The Secretary concerned shall publish in the Federal Register notice of each project approved under subsection (a) if the notice would be required had the project originated with the Secretary.

(d)

Source and Conduct of Project

Once the Secretary concerned accepts a project for review under section 203, the acceptance shall be deemed a Federal action for all purposes.

(e)

Implementation of Approved Projects

(1)

Cooperation

Notwithstanding chapter 63 of title 31, United States Code, using project funds the Secretary concerned may enter into contracts, grants, and cooperative agreements with States and local governments, private and nonprofit entities, and landowners and other persons to assist the Secretary in carrying out an approved project.

(2)

Best value contracting

(A)

In general

For any project involving a contract authorized by paragraph (1) the Secretary concerned may elect a source for performance of the contract on a best value basis.

(B)

Factors

The Secretary concerned shall determine best value based on such factors as—

(i)

the technical demands and complexity of the work to be done;

(ii)
(I)

the ecological objectives of the project; and

(II)

the sensitivity of the resources being treated;

(iii)

the past experience by the contractor with the type of work being done, using the type of equipment proposed for the project, and meeting or exceeding desired ecological conditions; and

(iv)

the commitment of the contractor to hiring highly qualified workers and local residents.

(3)

Merchantable timber contracting pilot program

(A)

Establishment

The Secretary concerned shall establish a pilot program to implement a certain percentage of approved projects involving the sale of merchantable timber using separate contracts for—

(i)

the harvesting or collection of merchantable timber; and

(ii)

the sale of the timber.

(B)

Annual percentages

Under the pilot program, the Secretary concerned shall ensure that, on a nationwide basis, not less than the following percentage of all approved projects involving the sale of merchantable timber are implemented using separate contracts:

(i)

For fiscal year 2008, 35 percent.

(ii)

For fiscal year 2009, 45 percent.

(iii)

For each of fiscal years 2010 and 2011, 50 percent.

(C)

Inclusion in pilot program

The decision whether to use separate contracts to implement a project involving the sale of merchantable timber shall be made by the Secretary concerned after the approval of the project under this title.

(D)

Assistance

(i)

In general

The Secretary concerned may use funds from any appropriated account available to the Secretary for the Federal land to assist in the administration of projects conducted under the pilot program.

(ii)

Maximum amount of assistance

The total amount obligated under this subparagraph may not exceed $1,000,000 for any fiscal year during which the pilot program is in effect.

(E)

Review and report

(i)

Initial report

Not later than September 30, 2010, the Comptroller General shall submit to the Committees on Agriculture, Nutrition, and Forestry and Energy and Natural Resources of the Senate and the Committees on Agriculture and Natural Resources of the House of Representatives a report assessing the pilot program.

(ii)

Annual report

The Secretary concerned shall submit to the Committees on Agriculture, Nutrition, and Forestry and Energy and Natural Resources of the Senate and the Committees on Agriculture and Natural Resources of the House of Representatives an annual report describing the results of the pilot program.

(f)

Requirements for Project Funds

The Secretary shall ensure that at least 50 percent of all project funds be used for projects that are primarily dedicated—

(1)

to road maintenance, decommissioning, or obliteration; or

(2)

to restoration of streams and watersheds.

205.

Resource advisory Committees

(a)

Establishment and Purpose of Resource Advisory Committees

(1)

Establishment

The Secretary concerned shall establish and maintain resource advisory committees to perform the duties in subsection (b), except as provided in paragraph (4).

(2)

Purpose

The purpose of a resource advisory committee shall be—

(A)

to improve collaborative relationships; and

(B)

to provide advice and recommendations to the land management agencies consistent with the purposes of this title.

(3)

Access to resource advisory committees

To ensure that each unit of Federal land has access to a resource advisory committee, and that there is sufficient interest in participation on a committee to ensure that membership can be balanced in terms of the points of view represented and the functions to be performed, the Secretary concerned may, establish resource advisory committees for part of, or 1 or more, units of Federal land.

(4)

Existing advisory committees

(A)

In general

An advisory committee that meets the requirements of this section, a resource advisory committee established before September 29, 2006, or an advisory committee determined by the Secretary concerned before September 29, 2006, to meet the requirements of this section may be deemed by the Secretary concerned to be a resource advisory committee for the purposes of this title.

(B)

Charter

A charter for a committee described in subparagraph (A) that was filed on or before September 29, 2006, shall be considered to be filed for purposes of this Act.

(C)

Bureau of land management advisory committees

The Secretary of the Interior may deem a resource advisory committee meeting the requirements of subpart 1784 of part 1780 of title 43, Code of Federal Regulations, as a resource advisory committee for the purposes of this title.

(b)

Duties

A resource advisory committee shall—

(1)

review projects proposed under this title by participating counties and other persons;

(2)

propose projects and funding to the Secretary concerned under section 203;

(3)

provide early and continuous coordination with appropriate land management agency officials in recommending projects consistent with purposes of this Act under this title;

(4)

provide frequent opportunities for citizens, organizations, tribes, land management agencies, and other interested parties to participate openly and meaningfully, beginning at the early stages of the project development process under this title;

(5)
(A)

monitor projects that have been approved under section 204; and

(B)

advise the designated Federal official on the progress of the monitoring efforts under subparagraph (A); and

(6)

make recommendations to the Secretary concerned for any appropriate changes or adjustments to the projects being monitored by the resource advisory committee.

(c)

Appointment by the Secretary

(1)

Appointment and term

(A)

In general

The Secretary concerned, shall appoint the members of resource advisory committees for a term of 4 years beginning on the date of appointment.

(B)

Reappointment

The Secretary concerned may reappoint members to subsequent 4-year terms.

(2)

Basic requirements

The Secretary concerned shall ensure that each resource advisory committee established meets the requirements of subsection (d).

(3)

Initial appointment

Not later than 180 days after the date of the enactment of this Act, the Secretary concerned shall make initial appointments to the resource advisory committees.

(4)

Vacancies

The Secretary concerned shall make appointments to fill vacancies on any resource advisory committee as soon as practicable after the vacancy has occurred.

(5)

Compensation

Members of the resource advisory committees shall not receive any compensation.

(d)

Composition of Advisory Committee

(1)

Number

Each resource advisory committee shall be comprised of 15 members.

(2)

Community interests represented

Committee members shall be representative of the interests of the following 3 categories:

(A)

5 persons that—

(i)

represent organized labor or non-timber forest product harvester groups;

(ii)

represent developed outdoor recreation, off highway vehicle users, or commercial recreation activities;

(iii)

represent—

(I)

energy and mineral development interests; or

(II)

commercial or recreational fishing interests;

(iv)

represent the commercial timber industry; or

(v)

hold Federal grazing or other land use permits, or represent nonindustrial private forest land owners, within the area for which the committee is organized.

(B)

5 persons that represent—

(i)

nationally recognized environmental organizations;

(ii)

regionally or locally recognized environmental organizations;

(iii)

dispersed recreational activities;

(iv)

archaeological and historical interests; or

(v)

nationally or regionally recognized wild horse and burro interest groups, wildlife or hunting organizations, or watershed associations.

(C)

5 persons that—

(i)

hold State elected office (or a designee);

(ii)

hold county or local elected office;

(iii)

represent American Indian tribes within or adjacent to the area for which the committee is organized;

(iv)

are school officials or teachers; or

(v)

represent the affected public at large.

(3)

Balanced representation

In appointing committee members from the 3 categories in paragraph (2), the Secretary concerned shall provide for balanced and broad representation from within each category.

(4)

Geographic distribution

The members of a resource advisory committee shall reside within the State in which the committee has jurisdiction and, to extent practicable, the Secretary concerned shall ensure local representation in each category in paragraph (2).

(5)

Chairperson

A majority on each resource advisory committee shall select the chairperson of the committee.

(e)

Approval Procedures

(1)

In general

Subject to paragraph (3), each resource advisory committee shall establish procedures for proposing projects to the Secretary concerned under this title.

(2)

Quorum

A quorum must be present to constitute an official meeting of the committee.

(3)

Approval by majority of members

A project may be proposed by a resource advisory committee to the Secretary concerned under section 203(a), if the project has been approved by a majority of members of the committee from each of the 3 categories in subsection (d)(2).

(f)

Other Committee Authorities and Requirements

(1)

Staff assistance

A resource advisory committee may submit to the Secretary concerned a request for periodic staff assistance from Federal employees under the jurisdiction of the Secretary.

(2)

Meetings

All meetings of a resource advisory committee shall be announced at least 1 week in advance in a local newspaper of record and shall be open to the public.

(3)

Records

A resource advisory committee shall maintain records of the meetings of the committee and make the records available for public inspection.

206.

Use of project funds

(a)

Agreement Regarding Schedule and Cost of Project

(1)

Agreement between parties

The Secretary concerned may carry out a project submitted by a resource advisory committee under section 203(a) using project funds or other funds described in section 203(a)(2), if, as soon as practicable after the issuance of a decision document for the project and the exhaustion of all administrative appeals and judicial review of the project decision, the Secretary concerned and the resource advisory committee enter into an agreement addressing, at a minimum, the following:

(A)

The schedule for completing the project.

(B)

The total cost of the project, including the level of agency overhead to be assessed against the project.

(C)

For a multiyear project, the estimated cost of the project for each of the fiscal years in which it will be carried out.

(D)

The remedies for failure of the Secretary concerned to comply with the terms of the agreement consistent with current Federal law.

(2)

Limited use of federal funds

The Secretary concerned may decide, at the sole discretion of the Secretary concerned, to cover the costs of a portion of an approved project using Federal funds appropriated or otherwise available to the Secretary for the same purposes as the project.

(b)

Transfer of Project Funds

(1)

Initial transfer required

As soon as practicable after the agreement is reached under subsection (a) with regard to a project to be funded in whole or in part using project funds, or other funds described in section 203(a)(2), the Secretary concerned shall transfer to the applicable unit of National Forest System land or Bureau of Land Management District an amount of project funds equal to—

(A)

in the case of a project to be completed in a single fiscal year, the total amount specified in the agreement to be paid using project funds, or other funds described in section 203(a)(2); or

(B)

in the case of a multiyear project, the amount specified in the agreement to be paid using project funds, or other funds described in section 203(a)(2) for the first fiscal year.

(2)

Condition on project commencement

The unit of National Forest System land or Bureau of Land Management District concerned, shall not commence a project until the project funds, or other funds described in section 203(a)(2) required to be transferred under paragraph (1) for the project, have been made available by the Secretary concerned.

(3)

Subsequent transfers for multiyear projects

(A)

In general

For the second and subsequent fiscal years of a multiyear project to be funded in whole or in part using project funds, the unit of National Forest System land or Bureau of Land Management District concerned shall use the amount of project funds required to continue the project in that fiscal year according to the agreement entered into under subsection (a).

(B)

Suspension of work

The Secretary concerned shall suspend work on the project if the project funds required by the agreement in the second and subsequent fiscal years are not available.

207.

Availability of project funds

(a)

Submission of Proposed Projects To Obligate Funds

By September 30, 2008 (or as soon thereafter as the Secretary concerned determines is practicable), and each September 30 thereafter for each succeeding fiscal year through fiscal year 2011, a resource advisory committee shall submit to the Secretary concerned pursuant to section 203(a)(1) a sufficient number of project proposals that, if approved, would result in the obligation of at least the full amount of the project funds reserved by the participating county in the preceding fiscal year.

(b)

Use or Transfer of Unobligated Funds

Subject to section 208, if a resource advisory committee fails to comply with subsection (a) for a fiscal year, any project funds reserved by the participating county in the preceding fiscal year and remaining unobligated shall be available for use as part of the project submissions in the next fiscal year.

(c)

Effect of Rejection of Projects

Subject to section 208, any project funds reserved by a participating county in the preceding fiscal year that are unobligated at the end of a fiscal year because the Secretary concerned has rejected one or more proposed projects shall be available for use as part of the project submissions in the next fiscal year.

(d)

Effect of Court Orders

(1)

In general

If an approved project under this Act is enjoined or prohibited by a Federal court, the Secretary concerned shall return the unobligated project funds related to the project to the participating county or counties that reserved the funds.

(2)

Expenditure of funds

The returned funds shall be available for the county to expend in the same manner as the funds reserved by the county under subparagraph (B) or (C)(i) of section 102(d)(1).

208.

Termination of authority

(a)

In General

The authority to initiate projects under this title shall terminate on September 30, 2011.

(b)

Deposits in Treasury

Any project funds not obligated by September 30, 2012, shall be deposited in the Treasury of the United States.

III

COUNTY FUNDS

301.

Definitions

In this title:

(1)

County funds

The term county funds means all funds an eligible county elects under section 102(d) to reserve for expenditure in accordance with this title.

(2)

Participating county

The term participating county means an eligible county that elects under section 102(d) to expend a portion of the Federal funds received under section 102 in accordance with this title.

302.

Use

(a)

Authorized Uses

A participating county, including any applicable agencies of the participating county, shall use county funds, in accordance with this title, only—

(1)

to carry out activities under the Firewise Communities program to provide to homeowners in fire-sensitive ecosystems education on, and assistance with implementing, techniques in home siting, home construction, and home landscaping that can increase the protection of people and property from wildfires;

(2)

to reimburse the participating county for search and rescue and other emergency services, including firefighting, that are—

(A)

performed on Federal land after the date on which the use was approved under subsection (b);

(B)

paid for by the participating county; and

(3)

to develop community wildfire protection plans in coordination with the appropriate Secretary concerned.

(b)

Proposals

A participating county shall use county funds for a use described in subsection (a) only after a 45-day public comment period, at the beginning of which the participating county shall—

(1)

publish in any publications of local record a proposal that describes the proposed use of the county funds; and

(2)

submit the proposal to any resource advisory committee established under section 205 for the participating county.

303.

Certification

(a)

In General

Not later than February 1 of the year after the year in which any county funds were expended by a participating county, the appropriate official of the participating county shall submit to the Secretary concerned a certification that the county funds expended in the applicable year have been used for the uses authorized under section 302(a), including a description of the amounts expended and the uses for which the amounts were expended.

(b)

Review

The Secretary concerned shall review the certifications submitted under subsection (a) as the Secretary concerned determines to be appropriate.

304.

Termination of authority

(a)

In General

The authority to initiate projects under this title terminates on September 30, 2011.

(b)

Availability

Any county funds not obligated by September 30, 2012, shall be returned to the Treasury of the United States.

IV

MISCELLANEOUS PROVISIONS

401.

Regulations

The Secretary of Agriculture and the Secretary of the Interior shall issue regulations to carry out the purposes of this Act.

402.

Authorization of appropriations

There are authorized to be appropriated such sums as are necessary to carry out this Act for each of fiscal years 2008 through 2011.

403.

Treatment of funds and revenues

(a)

Relation to Other Appropriations

Funds made available under section 402 and funds made available to a Secretary concerned under section 206 shall be in addition to any other annual appropriations for the Forest Service and the Bureau of Land Management.

(b)

Deposit of Revenues and Other Funds

All revenues generated from projects pursuant to title II, including any interest accrued from the revenues, shall be deposited in the Treasury of the United States.

.

(b)

Forest receipt payments to eligible states and counties

(1)

Act of May 23, 1908

The sixth paragraph under the heading FOREST SERVICE in the Act of May 23, 1908 (16 U.S.C. 500) is amended in the first sentence by striking twenty-five percentum and all that follows through shall be paid and inserting the following: an amount equal to the annual average of 25 percent of all amounts received for the applicable fiscal year and each of the preceding 6 fiscal years from each national forest shall be paid.

(2)

Weeks law

Section 13 of the Act of March 1, 1911 (commonly known as the Weeks Law) (16 U.S.C. 500) is amended in the first sentence by striking twenty-five percentum and all that follows through shall be paid and inserting the following: an amount equal to the annual average of 25 percent of all amounts received for the applicable fiscal year and each of the preceding 6 fiscal years from each national forest shall be paid.

(c)

Payments in lieu of taxes

(1)

In general

Section 6906 of title 31, United States Code, is amended to read as follows:

6906.

Funding

For each of fiscal years 2008 through 2012—

(1)

each county or other eligible unit of local government shall be entitled to payment under this chapter; and

(2)

sums shall be made available to the Secretary of the Interior for obligation or expenditure in accordance with this chapter.

.

(2)

Conforming amendment

The table of sections for chapter 69 of title 31, United States Code, is amended by striking the item relating to section 6906 and inserting the following:

6906. Funding.

.

(3)

Budget scorekeeping

(A)

In general

Notwithstanding the Budget Scorekeeping Guidelines and the accompanying list of programs and accounts set forth in the joint explanatory statement of the committee of conference accompanying Conference Report 105–217, the section in this title regarding Payments in Lieu of Taxes shall be treated in the baseline for purposes of section 257 of the Balanced Budget and Emergency Deficit Control Act of 1985 (as in effect prior to September 30, 2002), and by the Chairmen of the House and Senate Budget Committees, as appropriate, for purposes of budget enforcement in the House and Senate, and under the Congressional Budget Act of 1974 as if Payment in Lieu of Taxes (14–1114–0–1–806) were an account designated as Appropriated Entitlements and Mandatories for Fiscal Year 1997 in the joint explanatory statement of the committee of conference accompanying Conference Report 105–217.

(B)

Effective date

This paragraph shall remain in effect for the fiscal years to which the entitlement in section 6906 of title 31, United States Code (as amended by paragraph (1)), applies.

602.

Clarification of uniform definition of child

(a)

Child must be younger than claimant

Section 152(c)(3)(A) is amended by inserting is younger than the taxpayer claiming such individual as a qualifying child and after such individual.

(b)

Child must be unmarried

Section 152(c)(1) is amended by striking and at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting , and, and by adding at the end the following new subparagraph:

(E)

who has not filed a joint return (other than only for a claim of refund) with the individual's spouse under section 6013 for the taxable year beginning in the calendar year in which the taxable year of the taxpayer begins.

.

(c)

Restrict qualifying child tax benefits to child's parent

(1)

Child tax credit

Subsection (a) of section 24 is amended by inserting for which the taxpayer is allowed a deduction under section 151 after of the taxpayer.

(2)

Persons other than parents claiming qualifying child

(A)

In general

Paragraph (4) of section 152(c) is amended by adding at the end the following new subparagraph:

(C)

No parent claiming qualifying child

If the parents of an individual may claim such individual as a qualifying child but no parent so claims the individual, such individual may be claimed as the qualifying child of another taxpayer but only if the adjusted gross income of such taxpayer is higher than the highest adjusted gross income of any parent of the individual.

.

(B)

Conforming amendments

(i)

Subparagraph (A) of section 152(c)(4) is amended by striking Except through 2 or more taxpayers and inserting Except as provided in subparagraphs (B) and (C), if (but for this paragraph) an individual may be claimed as a qualifying child by 2 or more taxpayers.

(ii)

The heading for paragraph (4) of section 152(c) is amended by striking claiming and inserting who can claim the same.

(d)

Effective date

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