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H.R. 4058 (116th): SWAP Act


The text of the bill below is as of Jul 25, 2019 (Introduced). The bill was not enacted into law.


I

116th CONGRESS

1st Session

H. R. 4058

IN THE HOUSE OF REPRESENTATIVES

July 25, 2019

(for himself and Mr. Lipinski) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Energy and Commerce, and Science, Space, and Technology, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 to impose a tax on greenhouse gas emissions, accordingly reduce tax rates on payroll, and for other purposes.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Stemming Warming and Augmenting Pay Act of 2019 or the SWAP Act.

(b)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings.

Title I—Greenhouse Gas Emissions

Sec. 101. Treatment of greenhouse gas emissions.

Title II—Carbon Reduced Payroll Tax

Sec. 201. Carbon reduced payroll tax.

Title III—Distribution of Revenues From Taxation of Greenhouse Gas Emissions

Sec. 301. Establishment of the Carbon Trust Fund.

Sec. 302. Appropriations from the Carbon Trust Fund.

Title IV—Amendments to Federal Environmental Statutes

Sec. 401. Amendments to the Clean Air Act.

2.

Findings

The Congress finds the following:

(1)

Climate change threatens global stability and our national economy.

(2)

Carbon emissions are a significant contributor to these threats and must be addressed.

(3)

The United States private sector can face these challenges and be a global leader in technology, innovation, and efficiency.

(4)

A price on carbon levels the economic playing field and spurs adoption of less carbon-intensive practices and technologies.

(5)

Recycling revenues back to employers and employees will neutralize the potential impacts of a tax.

I

Greenhouse Gas Emissions

101.

Treatment of greenhouse gas emissions

(a)

In general

The Internal Revenue Code of 1986 is amended by adding at the end the following:

L

Greenhouse Gas Emissions

Part 1. Taxation of Greenhouse Gas Emissions

Part 2. Tax Adjustments for Imports and Exports of Greenhouse Gas Intensive Products

1

Taxation of Greenhouse Gas Emissions

Sec. 9901. Imposition of tax on combusted fossil fuel greenhouse gas emissions.

Sec. 9902. Imposition of tax on greenhouse gas emissions from certain industrial processes.

Sec. 9903. Imposition of tax on greenhouse gas emissions from certain product uses.

Sec. 9904. Calculation of taxable emissions.

Sec. 9905. Credit for State payments.

Sec. 9906. Penalties for nonpayment.

Sec. 9907. Definitions.

9901.

Imposition of tax on combusted fossil fuel greenhouse gas emissions

(a)

In general

There is hereby imposed a tax on fossil fuels produced within, or imported into, the United States.

(b)

Rate of tax

(1)

Greenhouse gases that would be released if the fossil fuel were combusted

The tax imposed by subsection (a) shall be the applicable amount per ton of carbon dioxide equivalent of all greenhouse gases that would be released if the fossil fuel were combusted.

(2)

Applicable amount of carbon dioxide equivalent emissions

For purposes of paragraph (1)—

(A)

For calendar year 2021, the term applicable amount means $30 per metric ton of carbon dioxide equivalent emissions.

(B)

For each calendar year after 2021, the term applicable amount means the sum of—

(i)

the applicable amount for the previous calendar,

(ii)

the sum of—

(I)

5 percentage points, plus

(II)

a percentage increase in the previous year’s tax rate equal to the increase in the Consumer Price Index for the previous calendar year, plus

(iii)

the increase, if any, required by paragraph (3).

(C)

Consumer Price Index for any calendar year

For purposes of subparagraph (B), the Consumer Price Index for the previous calendar year is the average of the Consumer Price Index for all-urban consumers published by the Department of Labor as of the close of the 12-month period ending on August 31 of such calendar year. For purposes of the preceding sentence, the revision of the Consumer Price Index which is most consistent with the Consumer Price Index for calendar year 1986 shall be used.

(3)

Adjustment based on emission levels

(A)

In general

If, for calendar year 2023 and every second calendar year thereafter through calendar year 2031, the cumulative amount of emissions with respect to the calendar year reported under subparagraph (B) exceeds the cumulative amount of emissions specified for such calendar year in subparagraph (C), then the increase required by this paragraph for the calendar year beginning on the next January 1 following the determination in subparagraph (B) shall be $3 per metric ton.

(B)

Annual report

Not later than March 30, 2021, and annually thereafter, the Secretary and the Administrator shall jointly determine and report the emissions during the calendar year ending on the preceding December 31 from sources subject to taxation under this part. The report shall specify whether the cumulative amount of annual emissions reported for the period beginning in calendar year 2021 and ending at the end of the preceding calendar year exceeds the emission levels specified in subparagraph (C).

(C)

Emission schedule

The emission schedule specified in this subparagraph is as follows:

(i)

The total emissions through calendar year 2021 are 5,000 million metric tons of carbon dioxide equivalent.

(ii)

The total emissions through calendar year 2022 are 9,800 million metric tons of carbon dioxide equivalent.

(iii)

The total emissions through calendar year 2023 are 14,600 million metric tons of carbon dioxide equivalent.

(iv)

The total emissions through calendar year 2024 are 19,200 million metric tons of carbon dioxide equivalent.

(v)

The total emissions through calendar year 2025 are 23,800 million metric tons of carbon dioxide equivalent.

(vi)

The total emissions through calendar year 2026 are 28,300 million metric tons of carbon dioxide equivalent.

(vii)

The total emissions through calendar year 2027 are 32,700 million metric tons of carbon dioxide equivalent.

(viii)

The total emissions through calendar year 2028 are 37,000 million metric tons of carbon dioxide equivalent.

(ix)

The total emissions through calendar year 2029 are 41,300 million metric tons of carbon dioxide equivalent.

(x)

The total emissions through calendar year 2030 are 45,500 million metric tons of carbon dioxide equivalent.

(xi)

The total emissions through calendar year 2031 are 49,700 million metric tons of carbon dioxide equivalent.

(c)

By Whom Paid

The tax imposed by subsection (a) shall be paid by the owner of the fossil fuel at the point of taxation.

(d)

Point of Taxation

(1)

For fossil fuels produced within the United States, the point of taxation shall be—

(A)

for coal, the mine mouth or, for washed coal, the exit from the coal preparation and processing plant,

(B)

for petroleum products, the exit point from the refinery, and

(C)

for natural gas, the exit from the gas processing plant or, for natural gas that is not treated at a gas processing plant, the point of sale to the person who combusts the gas or incorporates it into a product that is not intended for combustion.

(2)

For any fossil fuel imported into the United States, the point of taxation shall be the point at which it first enters the United States.

(e)

Exemptions

(1)

Exemption for Noncombustive uses

(A)

Refund for reduction or elimination of emissions

Any manufacturer of a product that incorporates a fossil fuel that has been taxed under this section who can demonstrate to the Secretary that the fossil fuel has been transformed via the manufacture of the product so that the fossil fuel’s emissions will be reduced or eliminated over the product’s lifetime shall be entitled to a refund of the tax paid under this section on the proportion of the emissions reduced thereby, as determined by the Secretary.

(B)

Rule

The Secretary, in consultation with the Administrator, shall establish by rule the criteria and process by which product manufacturers can demonstrate that the conditions in subparagraph (A) have been satisfied.

(C)

Publication of regulations

The Secretary shall publish the regulations required by this subsection no later than one year prior to the start of the calendar year referred to in section 9901(b)(2)(A). The Secretary may not collect the tax imposed by this section for any calendar year that begins less than one year after the regulations are published.

(2)

Exemption for Carbon Capture and Storage

(A)

Refund for sequesters

Any person who sequesters greenhouse gas emissions resulting from the combustion of fossil fuel that has passed through a point of taxation shall be entitled to a refund of the tax imposed by this section. Emissions that are used for enhanced oil recovery shall be entitled for such refund provided that these emissions meet all of the criteria applicable to other emissions that qualify for such refund. No refund shall be recognized for any amount of greenhouse gas which has been credited under section 45Q.

(B)

Rule

The Secretary shall establish by rule the procedures by which to apply for such refunds and such refunds shall be paid within six months of the Secretary receiving an approvable application.

(C)

Time of refund

The Secretary may not refund any amounts under this paragraph until such time as the Secretary has published the regulations described in section 45Q(d)(2).

(3)

Report to congress

The Secretary shall, by January 1st of each calendar year, report the total amount of refunds awarded in the previous fiscal year under this subsection and shall include, as appropriate, the amounts refunded under paragraphs (1) and (2).

9902.

Imposition of tax on greenhouse gas emissions from certain industrial processes

(a)

In general

There is hereby imposed a tax on industrial process greenhouse gas emissions by certain source categories.

(b)

List of source categories

(1)

Initial list

The Congress establishes for purposes of this section a list of source categories subject to this section as follows:

(A)

Iron and steel production and metallurgical coke production.

(B)

Underground coal mining.

(C)

Coal preparation and processing plants.

(D)

Refineries.

(E)

Cement production.

(F)

Petrochemical production.

(G)

Lime production.

(H)

Ammonia production.

(I)

Aluminum production.

(J)

Soda ash production.

(K)

Ferroalloy production.

(L)

Phosphoric acid production.

(M)

Glass production.

(N)

Zinc production.

(O)

Lead production.

(P)

Magnesium production and processing.

(Q)

Nitric acid production.

(R)

Adipic acid production.

(S)

Semiconductor manufacture.

(T)

Electrical transmission and distribution.

(2)

Revision of the List

The Administrator shall review the list of source categories established by this subsection not less than once every five years to determine if they should continue to be listed and publish the results of that review. The Administrator may, if appropriate, add any source categories to this list by rule.

(3)

Removal of a Source Category from the List

The Administrator may remove a source category from this list only if—

(A)

the total emissions from the entire source category which are taxable under this section have been less than 250,000 metric tons of carbon dioxide equivalent per year for each of three consecutive years,

(B)

the average emissions from facilities in the source category which are taxable under this section have been less than 25,000 metric tons of carbon dioxide equivalent per year for each of the years referred in subparagraph (A), and

(C)

the Administrator determines that there is no reasonable possibility that the total emissions from the entire source category which are taxable under this section will exceed 250,000 metric tons per year of carbon dioxide equivalent within any of the five years following such determination.

(4)

Addition of a Source Category to the List

The Administrator may add a source category to this list only if the Administrator determines that—

(A)

the total emissions from the entire source category which are taxable under this section have been greater than 250,000 metric tons per year of carbon dioxide equivalent in any two years out of the preceding five years,

(B)

the average emissions from facilities in the source category which are taxable under this section have been greater than 25,000 metric tons per year of carbon dioxide equivalent in the years in which emissions from the entire source category have been greater than 250,000 tons per year, and

(C)

there is a reasonable possibility that the total emissions from the entire source category which are taxable under this section will be greater than 250,000 metric tons per year of carbon dioxide equivalent in any year within the next five years following such determination.

(5)

The Administrator may add a source category to the list that has previously been removed pursuant to paragraph (3) if the addition of the source category otherwise meets the requirements per paragraph (4).

(c)

Rate of Tax

The rate of tax shall be the same as the rate given in section 9901(b)(2).

(d)

By Whom Paid

The tax imposed by subsection (a) shall be paid by the owner or operator of the point of taxation.

(e)

Point of Taxation

The point of taxation shall be any facility in a source category which emits more than 25,000 metric tons of carbon dioxide equivalent subject to taxation under this section in any calendar year.

9903.

Imposition of tax on greenhouse gas emissions from certain product uses

(a)

In general

There is hereby imposed a tax on non-fossil-fuel-greenhouse-gas emissions by certain manufactured products when used for their intended purposes that are manufactured within or imported into, the United States.

(b)

List of Products

(1)

Initial list

The Congress establishes for purposes of this section a list of products subject to this section as follows:

(A)

Fuel ethanol.

(B)

Industrial carbonates.

(C)

Carbon dioxide urea.

(D)

Soda ash.

(E)

Nitrous oxide.

(F)

Ozone depleting substances, but not if the United States has ratified the Kigali Amendment to the Montreal Protocol and is subject to Article 2J, paragraph 1 of the Amended Montreal Protocol.

(G)

Biodiesel.

(H)

Solid biomass fuels.

(2)

Revision of the List

The Administrator shall review the list of products established by this subsection not less than once every five years to determine if they should continue to be listed and publish the results of that review. The Administrator may, if appropriate, add any product to this list by rule.

(3)

Removal of a Product from the List

The Administrator may remove a product from this list only if—

(A)

the total emissions from all of the product used within the United States has been less than 250,000 metric tons per year of carbon dioxide equivalent for each of three consecutive years, and

(B)

the Administrator determines that there is no reasonable possibility that the total emissions from all of the product used in the United States will exceed 250,000 metric tons per year of carbon dioxide equivalent within any of the five years following such determination.

(4)

Addition of a Product to the List

The Administrator may add a product to this list only if the Administrator determines that—

(A)

the total emissions from all of the product used within the United States has been greater than 250,000 metric tons per year of carbon dioxide equivalent in any two years out of the preceding five years, and

(B)

there is a reasonable possibility that the total emissions from all of the product used within the United States will be greater than 250,000 metric tons per year of carbon dioxide equivalent in any year within the next five years following such determination.

(5)

The Secretary may add a product to the list that has previously been removed pursuant to paragraph (3) if the addition of the product otherwise meets the requirements of paragraph (4).

(c)

Rate of Tax

The rate of tax shall be the same as the rate given in section 9901(b)(2).

(d)

By Whom Paid

The tax imposed by subsection (a) shall be paid—

(1)

for products manufactured in the United States, by the owner or operator of the point of taxation, and

(2)

for products imported into the United States, by the owner of the product when it enters the United States.

(e)

Point of Taxation

The point of taxation shall be—

(1)

for products manufactured in the United States, the manufacturing facility,

(2)

for products imported into the United States, the point at which it first enters the United States, and

(3)

for domestically produced biomass fuel, any facility that emits from combusted biomass fuel more than 25,000 metric tons of carbon dioxide equivalent greenhouse gases in a year.

9904.

Calculation of taxable emissions

(a)

How To calculate taxable emissions

In consultation with the Department of Energy, the Administrator shall establish by rule (and may, from time to time, revise) the method by which taxable emissions under this part shall be calculated.

(b)

Categories and subcategories considered

For purposes of calculating emissions taxable under—

(1)

section 9901, the Administrator shall determine by rule the amount of carbon dioxide equivalent that would be emitted if each fossil fuel were combusted, and the Administrator may establish by rule such subcategories of each fuel and the means by which it is combusted as the Administrator deems appropriate,

(2)

section 9902, the Administrator may determine by rule such subcategories of any industrial process category listed in subsection 9902(b) as the Administrator deems appropriate, and

(3)

section 9903, for fuel ethanol, biodiesel, and solid biomass fuels the Administrator shall determine by rule the amount of carbon dioxide equivalent that would be emitted based on the lifecycle greenhouse gas emissions of the product, and the Administrator may determine by rule such subcategories of manufactured products listed in subsection 9903(b) as the Administrator deems appropriate.

(c)

Methods

Where greenhouse gas emissions subject to taxation under any section of this part are combined with greenhouse gas emissions subject to taxation under any other section of this part, the Administrator shall ensure, to the greatest degree possible, that the methods required to determine the emissions taxable under any section of this part do not include any emissions taxable under any other section of this part.

(d)

Method cost differences

The Administrator shall not require the use of any method to calculate taxable emissions whereby the difference in cost of the method compared to the next cheapest alternative method is greater than the amount of the tax that would be paid on the additional emissions determined by the more expensive method.

(e)

Publication of regulations

The Administrator shall publish the regulations required by this section no later than January 1, 2020. The Secretary may not collect the tax imposed by any section in this part for any calendar year that begins less than one year after the regulations applicable to each such section are published.

9905.

Credit for State payments

(a)

Credit for payments

The Secretary shall allow any person who is required to make payment for greenhouse gas emissions under this part a credit for payments made on those emissions required under any State law in the following manner:

(1)

For the year given in section 9901(b)(2)(A), a credit equal to 100 percent of the amount paid pursuant to requirements of State law.

(2)

For the first year following the year used in paragraph (1), a credit equal to 80 percent of the amount paid pursuant to requirements of State law.

(3)

For the second year following the year used in paragraph (1), a credit equal to 60 percent of the amount paid pursuant to requirements of State law.

(4)

For the third year following the year used in paragraph (1), a credit equal to 40 percent of the amount paid pursuant to requirements of State law.

(5)

For the fourth year following the year used in paragraph (1), a credit equal to 20 percent of the amount paid pursuant to requirements of State law.

(b)

No credit

For all years following the year used in paragraph (5), no credit shall be allowed.

9906.

Penalties for nonpayment

Any person who fails to comply with the requirements of section 9901, 9902, or 9903 shall be liable for payment to the Secretary, without demand, of a penalty in the amount equal to 3 times the applicable amount specified by those sections for the same tax year as the year in which the person failed to comply with such requirements.

9907.

Definitions

Unless otherwise provided, the definitions provided herein are applicable to all provisions of this subtitle.

(1)

Administrator

The term Administrator means the Administrator of the Environmental Protection Agency.

(2)

Carbon dioxide equivalent

The term carbon dioxide equivalent means the number of metric tons of CO2 emissions with the same global warming potential over a 100-year period as one metric ton of another greenhouse gas.

(3)

Coal

The term coal means any of the recognized classifications and ranks of coal, including anthracite, bituminous, semibituminous, subbituminous, lignite, and peat.

(4)

Coal preparation and processing plant

The term coal preparation and processing plant means any facility (excluding underground mining operations) which prepares coal by one or more of the following processes: breaking, crushing, screening, wet or dry cleaning, and thermal drying.

(5)

Enhanced Oil Recovery

The term enhanced oil recovery has the meaning defined at section 1.193–1(b)(2) of title 26, Code of Federal Regulations, as of the date of enactment of this Act.

(6)

Facility

The term facility means any physical property, plant, building, structure, source, or stationary equipment located on one or more contiguous or adjacent properties in actual physical contact or separated solely by a public roadway or other public right-of-way and under common ownership or common control, that emits or may emit any greenhouse gas.

(7)

Fossil fuel

The term fossil fuel means coal, petroleum products, or natural gas.

(8)

Greenhouse gas

The term greenhouse gas means carbon dioxide, nitrous oxide, methane, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.

(9)

Greenhouse gas effects

The term greenhouse gas effects means the adverse effects of greenhouse gases on health or welfare caused by the greenhouse gas’s heat-trapping potential or its effect on ocean acidification.

(10)

Lifecycle greenhouse gas emissions

The term lifecycle greenhouse gas emissions has the meaning given that term in section 211 of the Clear Air Act (42 U.S.C. 7545(o)(1)(H)).

(11)

Natural gas

The term natural gas means any fuel consisting in whole or in part of natural gas, including components of natural gas such as methane and ethane; liquid petroleum gas; synthetic gas derived from coal, petroleum, or natural gas liquids; or any mixture of natural gas and synthetic gas.

(12)

Petroleum products

The term petroleum products means unfinished oils, liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil, petrochemical feedstocks, special naphthas, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous products obtained from the processing of crude oil (including lease condensate), natural gas, and other hydrocarbon compounds. The term does not include natural gas, liquefied natural gas, biofuels, methanol, and other nonpetroleum fuels.

(13)

Publish

The term publish means publication in the Federal Register.

(14)

Refinery

The term refinery means any facility engaged in producing gasoline, kerosene, distillate fuel oils, residual fuel oils, lubricants, or other products through distillation of petroleum or through redistillation, cracking or reforming of unfinished petroleum derivatives.

(15)

Owner

The term owner with respect to any fossil fuel means any person who has legal title to the fossil fuel.

(16)

Owner or operator

The term owner or operator with respect to any fossil fuel means any person who has legal title to the fossil fuel.

(17)

Sequesters

The term sequesters means the permanent storage of carbon dioxide or other greenhouse gas such that it does not escape into the atmosphere, and is in compliance with the regulations issued pursuant to section 45Q(d)(2).

(18)

Solid biomass

The term solid biomass means nonfossilized and biodegradable organic material originating from plants, animals, or microorganisms, including products, byproducts, residues and waste from agriculture, forestry and related industries as well as the nonfossilized and biodegradable organic fractions of industrial and municipal wastes, but does not include gases and liquids recovered from the decomposition of nonfossilized and biodegradable organic material.

(19)

Source category

The term source category means any category or subcategory regulated under part 60 of title 40, Code of Federal Regulations, or part 90 of title 40, Code of Federal Regulations.

2

Tax Adjustments for Imports and exports of Greenhouse Gas Intensive Products

Sec. 9911. Purposes.

Sec. 9912. Definitions.

Sec. 9913. Notification of foreign countries.

Sec. 9914. Border tax adjustment rate.

9911.

Purposes

(a)

Purposes of part

The purposes of this part are—

(1)

to promote a strong global effort to significantly reduce greenhouse gas emissions, and

(2)

to prevent carbon leakage.

(b)

Additional purposes of part

The purposes of this part are additionally—

(1)

to provide a rebate to exporters in domestic eligible industrial sectors for the greenhouse gas emission costs of the owners and operators incurred under this title, but not for costs associated with other related or unrelated market dynamics,

(2)

to ensure that imports from other countries, and, in particular, fast-growing developing countries, do not enjoy competitive advantages because of the carbon tax liability of domestic manufacturers, and therefore increase their emissions,

(3)

to encourage foreign countries to take substantial action with respect to their greenhouse gas emissions, and

(4)

to ensure that the measures described in this subpart are designed and implemented in a manner consistent with applicable international agreements to which the United States is a party.

9912.

Definitions

In this part:

(1)

Carbon leakage

The term carbon leakage means any substantial increase (as determined by the Secretary) in greenhouse gas emissions by entities located in other countries caused by a cost of production increase in the United States resulting from implementation of this title.

(2)

Border tax adjustment

The term border tax adjustment means the levying of a tax on imported covered goods equivalent to the amount of tax paid pursuant to part 1 of this subtitle in the manufacture of comparable domestic manufactured goods, and the rebating of the tax paid pursuant to part 1 of this subtitle that has been paid on covered goods exported from the United States.

(3)

Border tax adjustment rate

The term border tax adjustment rate means the amount of tax that would be paid on a covered good produced in the United States in the current year.

(4)

Commissioner

The term Commissioner means the Commissioner of United States Customs and Border Protection.

(5)

Covered good

The term covered good means a good that is—

(A)

entered under a heading or subheading of the Harmonized Tariff Schedule of the United States that corresponds to the NAICS code for an eligible industrial sector, as established in the concordance between NAICS codes and the Harmonized Tariff Schedule of the United States prepared by the United States Census Bureau, or

(B)

a manufactured item for consumption.

(6)

Eligible industrial sector

The term eligible industrial sector means an industrial sector determined by the Secretary under section 9913.

(7)

Industrial sector

The term industrial sector means any sector that—

(A)

is in the manufacturing sector (as defined in NAICS codes 31, 32, and 33), or

(B)

is part of, or an entire sector that beneficiates or otherwise processes (including agglomeration) metal ores, including iron and copper ores, soda ash, and phosphate. The term industrial sector does not include any part of a sector that extracts fossil fuels, metal ores, soda ash, or phosphate.

(8)

Manufactured item for consumption

The term manufactured item for consumption means any good—

(A)

that includes in substantial quantities one or more goods like the goods produced by an eligible industrial sector, and

(B)

for which the Secretary has determined, with the concurrence of the Commissioner, that the application of the border tax adjustment program pursuant to this part is technically and administratively feasible and appropriate to achieve the purposes of this part, taking into account the greenhouse gas intensity, and where appropriate the trade intensity, of the industrial sector that produces the good, as measured consistent with section 9913 and the ability of the producers to recover cost increases in the marketplace and other appropriate factors.

(9)

NAICS

The term NAICS means the North American Industrial Classification System of 2002.

(10)

Output

The term output means the total tonnage or other standard unit of production (as determined by the Secretary) produced by an entity in an industrial sector.

9913.

Notification of foreign countries

(a)

In general

As soon as practicable after the date of the enactment of the Stemming Warming and Augmenting Pay Act of 2019, the President shall notify each foreign country—

(1)

requesting the foreign country to take appropriate measures to limit the greenhouse gas emissions of the foreign country, and

(2)

indicating that a border tax adjustment may apply to covered goods imported into and exported from the United States.

(b)

Lists

(1)

In general

Not later than 1 year after the date of the enactment of the Stemming Warming and Augmenting Pay Act of 2019, the Secretary shall promulgate a rule designating, based on the criteria under subsection (c)(2), industrial sectors where covered products are liable for the border tax adjustment.

(2)

Content

The list shall include the amount of the border tax adjustment rate for each covered good in the following calendar year pursuant to section 9914.

(3)

Subsequent lists

Not later than January 31 of each calendar year after the calendar year in which the Stemming Warming and Augmenting Pay Act of 2019 is enacted, the Secretary shall publish in the Federal Register an updated version of the list published under paragraph (1).

(c)

Eligible industrial sectors

(1)

Presumptively eligible industrial sectors

(A)

Eligibility criteria

(i)

In general

(I)

Imported covered goods are liable under this part if they are produced in the United States in an industrial sector that is included in a 6-digit classification of the NAICS that meets the criteria in both clauses (ii) and (iii).

(II)

Exported covered goods are eligible under this part if they are produced in the United States in an industrial sector that is included in a 6-digit classification of the NAICS that meets the criteria in clause (ii).

(ii)

Greenhouse gas intensity

As determined by the Secretary, an industrial sector meets the criteria of this clause if the United States industrial sector has a greenhouse gas intensity of at least 5 percent, calculated by dividing—

(I)

the number of metric tons of carbon dioxide equivalent greenhouse gas emissions (including direct emissions from fuel combustion, process emissions, and indirect emissions from the generation of electricity used to produce the output of the sector) of the sector based on data described in subparagraph (C), multiplied by the applicable rate in section 9901(b)(2), by

(II)

the value of the shipments of the sector, based on data described in subparagraph (C).

(iii)

Trade intensity

As determined by the Secretary, an industrial sector meets the criteria of this clause if the industrial sector has a trade intensity of at least 15 percent, calculated by dividing—

(I)

the value of the total imports and exports of the sector, by

(II)

the value of the shipments plus the value of imports of the sector, based on data described in subparagraph (C).

(B)

Metal and phosphate production classified under more than one naics code

For purposes of this section, the Secretary shall—

(i)

aggregate data for the beneficiation or other processing (including agglomeration) of metal ores, including iron and copper ores, soda ash, or phosphate with subsequent steps in the process of metal and phosphate manufacturing, regardless of the NAICS code under which the activity is classified, and

(ii)

aggregate data for the manufacturing of steel with the manufacturing of steel pipe and tube made from purchased steel in a nonintegrated process.

(C)

Data sources

(i)

Value of shipments

(I)

In general

The Secretary shall determine the value of shipments under this subsection from data from the United States Census Annual Survey of Manufacturers.

(II)

Average data available

The Secretary shall use the average of data from the most recent 3 years for which the data are available.

(III)

Average data not available

If data described in subclause (II) are unavailable, the Secretary shall make a determination based on—

(aa)

data from the most detailed industrial classification level of the Manufacturing Energy Consumption Survey of the Energy Information Administration, and

(bb)

data from the most recent Economic Census of the United States.

(IV)

Data not available for sector

If data from the Manufacturing Energy Consumption Survey or Economic Census are unavailable for any sector at the 6-digit classification level in the NAICS, the Secretary may use available Manufacturing Energy Consumption Survey or Economic Census data pertaining to a broader industrial category classified in the NAICS.

(V)

Data not available for processing

If data relating to the beneficiation or other processing (including agglomeration) of metal ores (including iron and copper ores, soda ash, or phosphate) are not available from the specified data sources, the Secretary—

(aa)

shall use the best available Federal or State government data, and

(bb)

may use, to the extent necessary, representative data submitted by entities that perform the beneficiation or other processing (including agglomeration), in making a determination.

(ii)

Imports and exports

(I)

In general

The Secretary shall base the value of imports and exports under this subsection on United States International Trade Commission data.

(II)

Average data available

The Secretary shall use the average of data from the three most recent years for which the data are available.

(III)

Average data not available

If data from the United States International Trade Commission are unavailable for any sector at the 6-digit classification level in the NAICS, the Secretary may use United States International Trade Commission data pertaining to a broader industrial category classified in the NAICS.

(iii)

Percentages

The Secretary shall round the greenhouse gas intensity and trade intensity percentages under subparagraph (A) to the nearest whole number.

(iv)

Greenhouse gas emission calculations

When calculating the metric tons of carbon dioxide equivalent greenhouse gas emissions for each sector under subparagraph (A)(ii)(I), the Secretary—

(I)

shall use the best available data from the three most recent years for which the data are available, and

(II)

may, to the extent necessary with respect to a sector, use economic and engineering models and the best available information on technology performance levels for the sector.

(2)

Administrative determination of additional eligible industrial sectors

(A)

Updated trade intensity data

The Secretary shall designate as liable for border tax adjustment rate on imported products under this part an industrial sector that—

(i)

met the greenhouse gas intensity criteria in paragraph (1)(A)(ii) as of the date of promulgation of the rule under paragraph (1), and

(ii)

meets the trade intensity criteria established under paragraph (1)(A)(iii), using data sources described in paragraph (1)(C) from any year after the passage of this Act.

(B)

Individual showing petition

(i)

Petition

In addition to designation under subparagraph (A), the owner or operator of an entity or a group of entities that collectively produce not less than 80 percent of the average annual value of shipments from within the sector of the group consistent with subclause (I), that manufacture similar products in an industrial sector may petition the Secretary to designate as eligible industrial sectors under this part an entity or a group of entities that—

(I)

represent a sector using a standard product classification, and

(II)

meet the respective import and/or export eligibility criteria in paragraph (1)(A)(i).

(ii)

Data

In making a determination under this subparagraph, the Secretary shall consider—

(I)

data submitted by the petitioner,

(II)

data solicited by the Secretary from other entities in the sector, and

(III)

data specified in paragraph (1)(C).

(iii)

Basis of subsector determination

(I)

In general

Except as provided in subclause (II), the Secretary shall determine an entity or group of entities to be a subsector of a 6-digit section of the NAICS code based only on the products manufactured and not the industrial process by which the products are manufactured.

(II)

Type of material

The Secretary may determine an entity or group of entities that manufacture a product from primarily virgin material to be a separate subsector from another entity or group of entities that manufacture the same product primarily from recycled material.

(iv)

Use of most recent data

In determining whether to designate a sector or subsector as an eligible industrial sector under this subparagraph, the Secretary shall use the most recent data available from the sources described in paragraph (1)(C), rather than the data from the years specified in paragraph (1)(C), to determine the trade intensity of the sector or subsector, but only for determining the trade intensity.

(v)

Final action

The Secretary shall take final action on a petition described in this subparagraph not later than 180 days after the date the completed petition is received by the Secretary.

(3)

Cessation of qualifying activities

If, as determined by the Secretary, an industrial sector or a covered good within the sector is no longer liable to be designated under this section, the Commissioner shall cease to apply the border tax adjustment on the relevant covered goods with effect from January 1 of the following year.

9914.

Border tax adjustment rate

(a)

Establishment

Not later than January 1, 2020, the Secretary, with the concurrence of the Commissioner, shall promulgate regulations—

(1)

establishing the products which are liable for, and requiring payment of, the border tax adjustment rate,

(2)

establishing a general methodology for calculating the level of the border tax adjustment rate that a domestic importer of any covered good must submit and the rebate that an exporter will receive,

(3)

establishing an administrative process whereby any determination by the Secretary under this subsection may be appealed,

(4)

exempting from this section products that originate from—

(A)

any country that the United Nations has identified as among the least developed of developing countries, or

(B)

any country that the President has determined to be responsible for less than 0.5 percent of total global greenhouse gas emissions and less than 5 percent of global production in the eligible industrial sector,

(5)

specifying the procedures that the Commissioner will apply for the declaration and entry of covered goods with respect to the eligible industrial sector into the customs territory of the United States, and

(6)

establishing procedures that prevent circumvention of the carbon tax liability for covered goods that are manufactured or processed in more than one foreign country.

(b)

Presidential discretion

The President may elect not to levy the border tax adjustment for an eligible industrial sector or for specific products within that sector if the President determines and certifies to Congress that the program would not be in the national interest, economic interest or environmental interest of the United States.

(c)

Limitation on imposition of tax

A border tax adjustment pursuant to this subpart may not be imposed with respect to any calendar year that begins less than one year after regulations are published under subsection (a).

.

(b)

Clerical amendment

The table of subtitles for the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Subtitle L. Greenhouse Gas Emissions

.

(c)

Effective date

The amendments made by this section shall apply to emissions after December 31, 2019.

II

Carbon Reduced Payroll Tax

201.

Carbon reduced payroll tax

(a)

In general

Notwithstanding any other provision of law—

(1)

with respect to any taxable year which begins after December 31, 2020, the rate of tax under section 1401(a) of the Internal Revenue Code of 1986 shall be 12.4 percent minus the reduced carbon rate, and

(2)

with respect to remuneration received after December 31, 2020—

(A)

the rate of tax under 3101(a) of such Code shall be 6.2 percent minus one-half of the reduced carbon rate (including for purposes of determining the applicable percentage under sections 3201(a) and 3211(a)(1) of such Code), and

(B)

the rate of tax under subsection (a) of section 3111 of such Code shall be 6.2 percent minus one-half of the reduced carbon rate (including for purposes of subsections (e) and (f) of such section and determining the applicable percentage under section 3221(a) of such Code).

(b)

Coordination With Deductions for Employment Taxes

(1)

Deduction in computing net earnings from self-employment

For purposes of applying section 1402(a)(12) of the Internal Revenue Code of 1986, the rate of tax imposed by subsection 1401(a) of such Code shall be determined without regard to the reduction in such rate under this section.

(2)

Individual deduction

In the case of the taxes imposed by section 1401 of such Code for any taxable year which begins in the payroll tax carbon period, the deduction under section 164(f) with respect to such taxes shall be equal to the sum of—

(A)

one-half of the portion of such taxes attributable to the tax imposed by section 1401(a) (determined after the application of this section), plus

(B)

one-half of the portion of such taxes attributable to the tax imposed by section 1401(b).

(c)

Reduced carbon rate

For purposes of this section—

(1)

In general

The term reduced carbon rate means the number of percentage points determined by the Secretary to be—

(A)

1 percentage point in the case of any taxable year which begins during calendar year 2021, and

(B)

in the case of any taxable year beginning in a calendar year beginning after calendar year 2021, the number of percentage points determined by the Secretary to be, for the calendar year the product of—

(i)

12.4, and

(ii)

52.5 percent of amounts of estimated taxes received in the Treasury under subtitle L of the Internal Revenue Code of 1986 (relating to greenhouse gas emissions), divided by estimated taxes that would have been received in the Treasury with respect to a calendar year under sections 1401(a), 3101(a), 3111(a), and the applicable percentage of such taxes under 3201(a), 3211(a)(1), and 3221(a), were this section not in effect.

(2)

Estimates

For purposes of paragraph (1), the determination of amounts received in the Treasury shall be made on the basis of estimates by the Secretary of the Treasury (or the Secretary’s delegate), and proper adjustments shall be made in the amounts subsequently estimated to the extent prior estimates were in excess of or less than actual receipts.

(3)

Publication of reduced carbon rate

Not later than October 31 of each calendar year, the Secretary shall publish the reduced carbon rate determined under this subsection for the succeeding calendar year.

(d)

Employer Notification

The Secretary of the Treasury shall notify employers of the payroll tax holiday period in any manner the Secretary deems appropriate.

(e)

Transfers of Funds

(1)

Transfers to federal old-age and survivors insurance trust fund

There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsection (a). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted.

(2)

Transfers to social security equivalent benefit account

There are hereby appropriated to the Social Security Equivalent Benefit Account established under section 15A(a) of the Railroad Retirement Act of 1974 (45 U.S.C. 231n–1(a)) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsection (a)(2). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Account had such amendments not been enacted.

(3)

Coordination with other Federal laws

For purposes of applying any provision of Federal law other than the provisions of the Internal Revenue Code of 1986, the rate of tax in effect under section 3101(a) of such Code shall be determined without regard to the reduction in such rate under this section.

(f)

Special rule

Not later than October 1 of each fiscal year beginning after fiscal year 2021 (January 1, 2021 in the case of fiscal year 2021), from amounts in the general fund of the Treasury not otherwise appropriated, the Commissioner of Social Security shall pay an amount, equal to 7.5 percent of amounts of taxes received in the Treasury under subtitle L of the Internal Revenue Code of 1986 (relating greenhouse gas emissions), to be distributed equally among each individual entitled to monthly insurance benefits under title II of the Social Security Act, or to an annuity under section 2 of the Railroad Retirement Act of 1974 for the first month of each year.

III

Distribution of Revenues From Taxation of Greenhouse Gas Emissions

301.

Establishment of the Carbon Trust Fund

(a)

Creation of Trust Fund

There is hereby created in the Treasury of the United States a trust fund to be known as the CARBON Trust Fund.

(b)

Transfers to Trust Fund

There are hereby appropriated to the CARBON Trust Fund amounts equivalent to 15 percent of the taxes received in the Treasury under subtitle L of the Internal Revenue Code of 1986 (as added by title I of this Act).

302.

Appropriations from the CARBON Trust Fund

Amounts in the CARBON Trust Fund for a fiscal year shall be available, as provided by appropriation Acts, as follows:

(1)

Fifty percent of such amounts shall be available for State block grants to be used to offset higher energy costs for low-income households.

(2)

Fifty percent of such amounts shall be available for climate adaptation, carbon sequestration, energy efficiency, and advanced R&D programs.

IV

Amendments to Federal Environmental Statutes

401.

Amendments to the Clean Air Act

(a)

In general

Title III of the Clean Air Act (42 U.S.C. 7601) is amended by adding at the end the following:

330.

Moratorium against certain regulations based on greenhouse gas effects

(a)

Fuels

Unless specifically authorized in section 202, 211, 213, 231, or this section, after a fossil fuel has passed through a point of taxation as provided in section 9901(d) of the Internal Revenue Code of 1986, subject to subsection (g), the Administrator shall not publish or enforce any rule limiting the emission of greenhouse gases from the combustion of that fuel under this Act (or impose any requirement on any State to limit such emission) on the basis of the emission’s greenhouse gas effects.

(b)

Emissions

Unless specifically authorized in section 202, 211, 213, 231, or this section, if emission of any greenhouse gas is subject to taxation pursuant to any of sections 9902 through 9903 of the Internal Revenue Code of 1986, the Administrator shall not publish or enforce any rule limiting such emission under this Act (or impose any requirement on any State to limit such emission) on the basis of the emission’s greenhouse gas effects.

(c)

Authorized regulation

Notwithstanding subsections (a) and (b), nothing in this section limits the Administrator’s authority pursuant to any other provision of this Act—

(1)

to limit the emission of any greenhouse gas because of any adverse impact on health or welfare other than its greenhouse gas effects;

(2)

in limiting emissions as described in paragraph (1), to consider the collateral benefits of limiting the emissions because of greenhouse gas effects;

(3)

to limit the emission of any other pollutant that is not a greenhouse gas that the Administrator determines by rule has heat-trapping properties; or

(4)

to take any action with respect to any greenhouse gas other than limiting its emission, including—

(A)

monitoring, reporting, and record-keeping requirements;

(B)

conducting or supporting investigations; and

(C)

information collection.

(d)

Exception for certain greenhouse gas emissions

Notwithstanding subsections (a) and (b), nothing in this section limits the Administrator’s authority to regulate greenhouse gas emissions from—

(1)

facilities that are subject to—

(A)

subparts OOOO or OOOOa of part 60 of title 40, Code of Federal Regulations, as in effect on January 1, 2018, or

(B)

would be subject to either subpart OOOO or subpart OOOOa if those subparts applied to such facilities regardless of the date on which construction, modification, or reconstruction commenced, and

(2)

POTW Treatment Plants (as defined in section 403.3(r) of title 40, Code of Federal Regulations).

(e)

Definitions

In this section, the terms greenhouse gas and greenhouse gas effects have the meanings given to those terms in section 9907 of the Internal Revenue Code of 1986.

(f)

Moratorium expiration

The moratoria on the Administrator publishing or enforcing rules limiting the emission of greenhouse gases in subsections (a) and (b) and section 211(c)(5) of this Act shall expire on January 1, 2034.

(g)

Exceptions

(1)

2024

Notwithstanding subsections (a) and (b) and section 211(c)(5) of this Act, if the Administrator determines by March 30, 2026, pursuant to the report required by section 9901(b)(3)(B) of the Internal Revenue Code of 1986, that total greenhouse gas emissions subject to taxation under sections 9901 through 9903 of such Code during the period 2021 through 2025 exceed the emission level specified in section 9901(b)(3)(C) of such Code for calendar year 2025, then beginning on October 1, 2026, the prohibition in subsections (a) and (b) and section 211(c)(5) of this Act on publishing or enforcing rules limiting the emission of greenhouse gases (and imposing any requirement on any State to limit such emission) shall not apply.

(2)

2028

Notwithstanding subsections (a) and (b) and section 211(c)(5) of this Act, if the Administrator determines by March 30, 2030, pursuant to the report required by section 9901(b)(3)(B) of the Internal Revenue Code of 1986, that total greenhouse gas emissions subject to taxation under sections 9901 through 9903 of such Code during the period 2021 through 2029 exceed the emission level specified in section 9901(b)(3)(C) of such Code for calendar year 2029, then beginning on October 1, 2030, the prohibition in subsections (a) and (b) and section 211(c)(5) of this Act on publishing or enforcing rules limiting the emission of greenhouse gases (and imposing any requirement on any State to limit such emission) shall not apply.

.

(b)

New motor vehicles and new motor vehicle engines

Section 202(b) of the Clean Air Act (42 U.S.C. 7521(b)) is amended—

(1)

by redesignating the second paragraph (3) (as redesignated by section 230(4)(C) of Public Law 101–549 (104 Stat. 2529)) as paragraph (4); and

(2)

by adding at the end the following:

(5)

Notwithstanding section 330(a), the Administrator may—

(A)

limit the emission of any greenhouse gas (as defined in section 9907 of the Internal Revenue Code of 1986) on the basis of the emission’s greenhouse gas effects (as defined in section 9907 of the Internal Revenue Code of 1986) from any class or classes of new motor vehicles or new motor vehicle engines subject to regulation under subsection (a)(1); and

(B)

grant a waiver under section 209(b)(1) for standards for the control of greenhouse gas emissions.

.

(c)

Fuels

Section 211(c) of the Clean Air Act (42 U.S.C. 7545(c)) is amended by adding at the end the following new paragraph:

(5)

Except as required in section 211(o), the Administrator shall not, pursuant to this subsection, impose on any manufacturer, processor, or distributor of fuel any requirement for the purpose of reducing the emission of any greenhouse gas (as defined in section 9907 of the Internal Revenue Code of 1986) produced by combustion of the fuel on the basis of the emission’s greenhouse gas effects (as defined in section 9907 of the Internal Revenue Code of 1986).

.

(d)

Nonroad engines and vehicles emissions standards

Section 213 of the Clean Air Act (42 U.S.C. 7547) is amended by adding at the end the following:

(e)

Greenhouse gas emissions

Notwithstanding subsections (a) and (b) of section 330, the Administrator may limit the emission of any greenhouse gas (as defined in section 9907 of the Internal Revenue Code of 1986) on the basis of the emission’s greenhouse gas effects (as defined in section 9907 of the Internal Revenue Code of 1986) from any nonroad engines and nonroad vehicles subject to regulation under this section.

.

(e)

Aircraft emission standards

Section 231 of the Clean Air Act (42 U.S.C. 757) is amended by adding at the end the following new subsection:

(d)

Notwithstanding subsections (a) and (b) of section 330, the Administrator may limit the emission of any greenhouse gas (as defined in section 9907 of the Internal Revenue Code of 1986) on the basis of the emission’s greenhouse gas effects (as defined in section 9907 of the Internal Revenue Code of 1986) from any class or classes of aircraft engines, so long as any such limitation is not more stringent than the standards adopted by the International Civil Aviation Organization.

.