Text of S. 3352 (112th): Expanding Industrial Energy and Water Efficiency Incentives Act of 2012 (Introduced version)

1.

(a)

This Act may be cited as the Expanding Industrial Energy and Water Efficiency Incentives Act of 2012.

(b)

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)

The table of contents for this Act is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

Sec. 2. Modifications in credit for combined heat and power system property.

Sec. 3. Motor energy efficiency improvement tax credit.

Sec. 4. Credit for replacement of CFC refrigerant chiller.

Sec. 5. Qualifying efficient industrial process water use project credit.

Sec. 6. Investment tax credit for biomass heating property.

2.

(a)

Section 48(c)(3)(B) is amended—

(1)

by striking 15 megawatts in clause (ii) and inserting 25 megawatts,

(2)

by striking 20,000 horsepower in clause (ii) and inserting 34,000 horsepower, and

(3)

by striking clause (iii).

(b)

Section 48(c)(3)(C) is amended by adding at the end the following new clause:

(iv)

For purposes of determining if the term combined heat and power system property includes technologies which generate electricity or mechanical power using back-pressure steam turbines in place of existing pressure-reducing valves or which make use of waste heat from industrial processes such as by using organic rankine, stirling, or kalina heat engine systems, subparagraph (A) shall be applied without regard to clause (ii).

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(c)

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

3.

(a)

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

45R.

(a)

For purposes of section 38, the motor energy efficiency improvement tax credit determined under this section for the taxable year is an amount equal to $120 multiplied by the motor horsepower of an appliance, machine, or equipment—

(1)

manufactured in such taxable year by a manufacturer which incorporates an advanced motor and drive system into a newly designed appliance, machine, or equipment or into a redesigned appliance, machine, or equipment which did not previously make use of the advanced motor and drive system, or

(2)

placed back into service in such taxable year by an end user which upgrades an existing appliance, machine, or equipment with an advanced motor and drive system.

For any advanced motor and drive system with a total horsepower of less than 10, such motor energy efficiency improvement tax credit is an amount which bears the same ratio to $120 as such total horsepower bears to 1 horsepower.

(b)

For purposes of this section, the term advanced motor and drive system means a motor and any required associated electronic control which—

(1)

offers variable or multiple speed operation, and

(2)

uses permanent magnet technology, electronically commutated motor technology, switched reluctance motor technology, synchronous reluctance, or such other motor and drive systems technologies as determined by the Secretary of Energy.

(c)

(1)

The amount of the credit determined under this section for any taxpayer for any taxable year shall not exceed the excess (if any) of $2,000,000 over the aggregate credits allowed under this section with respect to such taxpayer for all prior taxable years.

(2)

For purposes of this section, all persons treated as a single employer under subsections (a) and (b) of section 52 shall be treated as 1 taxpayer.

(d)

(1)

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.

(2)

No other credit shall be allowable under this chapter for property with respect to which a credit is allowed under this section.

(3)

No credit shall be allowable under subsection (a) with respect to any property referred to in section 50(b)(1).

(e)

This section shall not apply to property manufactured or placed back into service before the date which is 6 months after the date of the enactment of this section or after December 31, 2015.

.

(b)

(1)

Section 38(b) is amended by striking plus at the end of paragraph (34), by striking the period at the end of paragraph (35) and inserting , plus, and by adding at the end the following new paragraph:

(36)

the motor energy efficiency improvement tax credit determined under section 45R.

.

(2)

Section 1016(a) is amended by striking and at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and, and by adding at the end the following new paragraph:

(38)

to the extent provided in section 45R(d)(1).

.

(3)

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

Sec. 45R. Motor energy efficiency improvement tax credit.

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(c)

The amendments made by this section shall apply to property manufactured or placed back into service after the date which is 6 months after the date of the enactment of this Act.

4.

(a)

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

45S.

(a)

For purposes of section 38, the CFC chiller replacement credit determined under this section for the taxable year is an amount equal to—

(1)

$150 multiplied by the tonnage rating of a CFC chiller replaced with a new efficient chiller that is placed in service by the taxpayer during the taxable year, plus

(2)

if all chilled water distribution pumps connected to the new efficient chiller include variable frequency drives, $100 multiplied by any tonnage downsizing.

(b)

For purposes of this section, the term CFC chiller includes property which—

(1)

was installed after 1980 and before 1993,

(2)

utilizes chlorofluorocarbon refrigerant, and

(3)

until replaced by a new efficient chiller, has remained in operation and utilized for cooling a commercial building.

(c)

For purposes of this section, the term new efficient chiller includes a water-cooled chiller which is certified to meet efficiency standards effective on January 1, 2010, as defined in table 6.8.1c in Addendum M to Standard 90.1–2007 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers.

(d)

For purposes of this section, the term tonnage downsizing means the amount by which the tonnage rating of the CFC chiller exceeds the tonnage rating of the new efficient chiller.

(e)

As a condition of receiving a tax credit under this section, an energy audit shall be performed on the building prior to installation of the new efficient chiller, identifying cost-effective energy-saving measures, particularly measures that could contribute to chiller downsizing. The audit shall satisfy criteria that shall be issued by the Secretary of Energy.

(f)

In the case of a CFC chiller replaced by a new efficient chiller the use of which is described in paragraph (3) or (4) of section 50(b), the person who sold such new efficient chiller to the entity shall be treated as the taxpayer that placed in service the new efficient chiller that replaced the CFC chiller, but only if such person clearly discloses to such entity in a document the amount of any credit allowable under subsection (a) and the person certifies to the Secretary that the person reduced the price the entity paid for such new efficient chiller by the entire amount of such credit.

(g)

This section shall not apply to replacements made after December 31, 2015.

.

(b)

(1)

Section 38(b), as amended by this Act, is amended by striking plus at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting , plus, and by adding at the end the following new paragraph:

(37)

the CFC chiller replacement credit determined under section 45S.

.

(2)

The table of sections for subpart D 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. 45S. CFC chiller replacement credit.

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(c)

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

5.

(a)

Section 46 is amended by striking and at the end of paragraph (4), by striking the period at the end of paragraph (5), and by adding at the end the following new paragraph:

(6)

the qualifying efficient industrial process water use project credit.

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(b)

Subpart E of part IV of subchapter A of chapter 1 is amended by inserting after section 48C the following new section:

48D.

(a)

(1)

For purposes of section 46, the qualifying efficient industrial process water use project credit for any taxable year is an amount equal to the applicable percentage of the qualified investment for such taxable year with respect to any qualifying efficient industrial process water use project of the taxpayer.

(2)

For purposes of subsection (a)—

(A)

The applicable percentage is—

(i)

10 percent in the case of a qualifying efficient industrial process water use project which achieves a 25 percent or greater (but less than 50 percent) reduction in water use for industrial purposes,

(ii)

20 percent in the case of a qualifying efficient industrial process water use project which achieves a 50 percent or greater (but less than 75 percent) reduction in water use for industrial purposes, and

(iii)

30 percent in the case of a qualifying efficient industrial process water use project which achieves a 75 percent or greater reduction in water use for industrial purposes.

(B)

For purposes of subparagraph (A)—

(i)

(I)

The taxpayer shall elect one of the methods specified in clause (ii) for measuring the reduction in water use achieved by a qualifying efficient industrial process water use project.

(II)

An election under subclause (I), once made with respect to a qualifying efficient industrial process water use project, shall apply to the taxable year for which made and all subsequent taxable years, and may not be revoked.

(III)

The credit under subsection (a) may be claimed on the basis of a reduction in water use which is projected, by a registered professional engineer who is not a related person (within the meaning of section 144(a)(3)(A)) to the taxpayer or the installer of eligible property, to be achieved by a qualifying efficient industrial process water use project. Such projection, if used as a basis for determining the credit under subsection (a), shall be included with the return of tax.

(ii)

The methods specified in this clause are—

(I)

a measurement of the percentage reduction in water use per unit of product manufactured by the taxpayer, and

(II)

a measurement of the percentage reduction in water use per pound of product manufactured by the taxpayer.

(b)

(1)

For purposes of subsection (a), the qualified investment for any taxable year is the basis of eligible property placed in service by the taxpayer during such taxable year which is part of a qualifying efficient industrial process water use project.

(2)

Such term shall not include any portion of the basis related to—

(A)

permitting,

(B)

land acquisition, or

(C)

infrastructure not directly associated with the implementation of the technology or process improvements of the qualifying efficient industrial process water use project.

(3)

Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.

(4)

Rules similar to the rules of section 48(a)(4) (without regard to subparagraph (D) thereof) shall apply for purposes of this section.

(5)

The amount which is treated for all taxable years with respect to any qualifying efficient industrial process water use project with respect to any site shall not exceed $10,000,000.

(c)

For purposes of this section—

(1)

(A)

The term qualifying efficient industrial process water use project means, with respect to any site, a project which retrofits or expands an existing facility to implement technology or process improvements which are designed to reduce water use for systems that use any form of water in the production of goods in the manufacturing sector (as defined in North American Industrial Classification System codes 31, 32, and 33), including any system that uses water for heating, cooling, or energy production for the production of goods in the trade or business of manufacturing. Such term shall not include a project which alters an existing facility to change the type of goods produced by such facility.

(B)

For purposes of subparagraph (A), the term system does not include any system which does not encompass 1 or more complete processes.

(2)

The term eligible property means any property—

(A)

which is part of a qualifying efficient industrial process water use project and which is necessary for the reduction in water use described in paragraph (1),

(B)

(i)

the construction, reconstruction, or erection of which is completed by the taxpayer, or

(ii)

which is acquired by the taxpayer if the original use of such property commences with the taxpayer, and

(C)

with respect to which depreciation (or amortization in lieu of depreciation) is allowable.

(3)

(A)

The term water use means all water taken for use at the site directly from ground and surface water sources together with any water supplied to the site by a regulated water system.

(B)

The term regulated water system means a system that supplies water that has been treated to potable standards.

(d)

This section shall not apply to periods after December 31, 2016, under rules similar to the rules of section 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

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(c)

(1)

Section 49(a)(1)(C) is amended by striking and at the end of clause (iv), by striking the period at the end of clause (v) and inserting , and, and by adding after clause (v) the following new clause:

(vi)

the basis of any property which is part of a qualifying efficient industrial use water project under section 48D.

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(2)

The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 48B the following new item:

Sec. 48D. Qualifying efficient industrial process water use project credit.

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(d)

The amendments made by this section shall apply to periods after January 1, 2013, 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).

6.

(a)

Subparagraph (A) of section 48(a)(3) is amended by striking or at the end of clause (vi), by inserting or at the end of clause (vii), and by inserting after clause (vii) the following new clause:

(viii)

open-loop biomass (within the meaning of section 45(c)(3)) heating property, including boilers or furnaces which operate at output efficiencies of not less than 65 percent (measured by the higher heating value of the fuel) and which provide thermal energy in the form of heat, hot water, or steam for space heating, air conditioning, domestic hot water, or industrial process heat, but only with respect to periods ending before January 1, 2016,

.

(b)

(1)

Subparagraph (A) of section 48(a)(2) is amended—

(A)

by redesignating clause (ii) as clause (iii),

(B)

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

(ii)

except as provided in clause (i)(V), 15 percent in the case of energy property described in paragraph (3)(A)(viii), and

, and

(C)

by inserting or (ii) after clause (i) in clause (iii), as so redesignated.

(2)

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

(V)

energy property described in paragraph (3)(A)(viii) which operates at an output efficiency of not less than 80 percent (measured by the higher heating value of the fuel),

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(c)

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).