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HR 2652 IH

110th CONGRESS

1st Session

H. R. 2652

To amend the Internal Revenue Code of 1986 to generate renewable energy and encourage novel technologies related to the production of energy, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

June 11, 2007

Mr. ENGLISH of Pennsylvania introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to generate renewable energy and encourage novel technologies related to the production of energy, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE, ETC.

(a) Short Title- This Act may be cited as the `Generating Renewable Energy and Encouraging Novel Technologies Act of 2007'.

(b) Amendment of 1986 Code- 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.

Sec. 1. Short title, etc.

TITLE I--INVESTMENT INCENTIVES

Sec. 101. Expensing for certain energy property.

Sec. 102. Modifications relating to clean renewable energy bonds.

Sec. 103. Extension and modification of investment tax credit with respect to solar energy property and qualified fuel cell property.

Sec. 104. Extension and modification of credit for residential energy efficient property.

Sec. 105. 15-year recovery period for property used in the transmission or distribution of electricity for sale.

TITLE II--PRODUCTION INCENTIVES

Sec. 201. Extension of production credit for wind, solar, and geothermal.

Sec. 202. Electricity produced from ocean energy.

TITLE III--INCENTIVES FOR ALTERNATIVE FUELS

Sec. 301. Technology neutral diesel credit.

Sec. 302. Extension of credit for alcohol used as fuel.

Sec. 303. Extension of credit for alternative fuels.

Sec. 304. Investment tax credit for cellulosic biomass ethanol plant property.

TITLE IV--INCENTIVES TO CONSERVE ENERGY

Sec. 401. Extension of nonbusiness energy property.

Sec. 402. Modifications of energy efficient appliance credit for appliances produced after 2007.

Sec. 403. Increase and extension of energy efficient commercial buildings deduction.

TITLE V--CREDIT FOR OIL SHALE RECOVERY COSTS

Sec. 501. Incentives for extraction and processing of oil shale.

TITLE VI--PROVISIONS RELATING TO ADVANCED COAL AND NUCLEAR ENERGY

Sec. 601. Alternative method for satisfying certain requirements relating to production of refined coal.

Sec. 602. Advanced Nuclear Power Production.

TITLE VII--COAL TO LIQUIDS TECHNOLOGY

Sec. 701. Credit for investment in coal-to-liquid fuels projects.

Sec. 702. Temporary expensing for equipment used in coal-to-liquid fuels process.

Sec. 703. Extension of alternative fuel credit for fuel derived from coal through the Fischer-Tropsch process.

Sec. 704. Modifications to enhanced oil recovery credit.

Sec. 705. Allowance of enhanced oil, natural gas, and coalbed methane recovery, and capture and sequestration credit against the alternative minimum tax.

TITLE I--INVESTMENT INCENTIVES

SEC. 101. EXPENSING FOR CERTAIN ENERGY PROPERTY.

(a) In General- Part VI of subchapter B of chapter 1 of is amended by inserting after section 179E the following new section:

`SEC. 179F. ELECTION TO EXPENSE CERTAIN ENERGY PROPERTY.

`(a) Treatment as Expenses- A taxpayer may elect to treat the cost of any qualified energy property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the expense is incurred.

`(b) Election-

`(1) IN GENERAL- An election under this section for any taxable year shall be made on the taxpayer's return of the tax imposed by this chapter for the taxable year. Such election shall be made in such manner as the Secretary may by regulations prescribe.

`(2) ELECTION IRREVOCABLE- Any election made under this section may not be revoked except with the consent of the Secretary.

`(c) Qualified Energy Property- For purposes of this section--

`(1) The term `qualified energy property' means any property located in the United States--

`(A) which--

`(i) is described in subparagraph (A) of section 48(a)(3) (or would be so described if `solar or wind energy' were substituted for `solar energy' in clause (i) thereof and the last sentence of such section did not apply to such subparagraph),

`(ii) is described in paragraph (15) of section 48(l) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) and is a qualifying small power production facility within the meaning of section 3(17)(C) of the Federal Power Act (16 U.S.C. 796(17)(C)), as in effect on September 1, 1986,

`(iii) is described in section 48(l)(3)(A)(ix) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990), or

`(iv) ocean energy property,

`(B) the original use of which commences with the taxpayer,

`(C) the construction of which--

`(i) except as provided in subparagraph (B), is subject to a binding construction contract entered into after the date of the enactment of this section and before January 1, 2011, but only if there was no written binding construction contract entered into on or before such date of enactment, or

`(ii) in the case of self-constructed property, began after the date of the enactment of this section and before January 1, 2011, and

`(D) which is placed in service by the taxpayer after the date of the enactment of this section and before January 1, 2016.

`(2) OCEAN ENERGY PROPERTY- The term `ocean energy property' means property--

`(A) for hydro thermal energy generation through closed-cycle, open-cycle and hybrid processes, or

`(B) for hydro mechanical energy generation through channel systems, float systems, and oscillating water column systems.

`(3) SPECIAL RULE- Nothing in any provision of law shall be construed to treat property as not being described in paragraph (1)(A)(i) (or the corresponding provisions of prior law) by reason of being public utility property (within the meaning of section 48(a)(3)).

`(d) Election To Allocate Deduction to Cooperative Owner- If--

`(1) a taxpayer to which subsection (a) applies is an organization to which part I of subchapter T applies, and

`(2) one or more persons directly holding an ownership interest in the taxpayer are organizations to which part I of subchapter T apply,

the taxpayer may elect to allocate all or a portion of the deduction allowable under subsection (a) to such persons. Such allocation shall be equal to the person's ratable share of the total amount allocated, determined on the basis of the person's ownership interest in the taxpayer. The taxable income of the taxpayer shall not be reduced under section 1382 by reason of any amount to which the preceding sentence applies.

`(e) Basis Reduction-

`(1) IN GENERAL- For purposes of this title, if a deduction is allowed under this section with respect to any qualified energy property, the basis of such property shall be reduced by the amount of the deduction so allowed.

`(2) ORDINARY INCOME RECAPTURE- For purposes of section 1245, the amount of the deduction allowable under subsection (a) with respect to any property which is of a character subject to the allowance for depreciation shall be treated as a deduction allowed for depreciation under section 167.

`(f) Application With Other Deductions and Credits-

`(1) OTHER DEDUCTIONS- No deduction shall be allowed under any other provision of this chapter with respect to any expenditure with respect to which a deduction is allowed under subsection (a) to the taxpayer.

`(2) CREDITS- No credit shall be allowed under section 38 with respect to any amount for which a deduction is allowed under subsection (a).

`(g) Reporting- No deduction shall be allowed under subsection (a) to any taxpayer for any taxable year unless such taxpayer files with the Secretary a report containing such information with respect to the operation of the property of the taxpayer as the Secretary shall require.'.

(b) Conforming Amendments-

(1) 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 179F(e)(1).'.

(2) Section 1245(a) is amended by inserting `179F,' after `179D,' both places it appears in paragraphs (2)(C) and (3)(C).

(3) Section 263(a)(1) is amended by striking `or' at the end of subparagraph (J), by striking the period at the end of subparagraph (K) and inserting `, or', and by inserting after subparagraph (K) the following new subparagraph:

`(L) expenditures for which a deduction is allowed under section 179F.'.

(4) Section 312(k)(3)(B) is amended by striking `or 179E' each place it appears in the heading and text and inserting `179E, or 179F'.

(5) Section 168(e)(B) is amended by inserting `and' after clause (iv), by striking `and' at the end of clause (v) and inserting a period, by striking clause (vi), and by striking the last sentence at the end.

(6) The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 179E the following new item:

`Sec. 179F. Election to expense certain energy property.'.

(c) Effective Date- The amendments made by this section shall apply to properties placed in service after the date of the enactment of this Act.

SEC. 102. MODIFICATIONS RELATING TO CLEAN RENEWABLE ENERGY BONDS.

(a) Clean Renewable Energy Bond- Paragraph (1) of section 54(d) (defining clean renewable energy bond) is amended--

(1) in subparagraph (A) by striking `pursuant' and all that follows through `subsection (f)(2)',

(2) in subparagraph (B) by striking `95 percent or more of the proceeds' and inserting `90 percent or more of the net proceeds', and

(3) in subparagraph (D) by striking `subsection (h)' and inserting `subsection (g)'.

(b) Qualified Project- Subparagraph (A) of section 54(d)(2) (defining qualified project) is amended to read as follows:

`(A) IN GENERAL- The term `qualified project' means any qualified facility (as determined under section 45(d) without regard to paragraphs (8) and (10) thereof and to any placed in service requirement) owned by a qualified borrower and also without regard to the following--

`(i) in the case of a qualified facility described in section 45(d)(9) (regarding incremental hydropower production), any determination of incremental hydropower production and related calculations shall be determined by the qualified borrower based on a methodology that meets Federal Energy Regulatory Commission standards; and

`(ii) in the case of a qualified facility described in section 45(d)(9) (regarding non-hydropower production), the facility need not be licensed by the Federal Energy Regulation Commission if the facility, when constructed, will meet Federal Energy Regulatory Commission licensing requirements and other applicable environmental, licensing, and regulatory requirements.'.

`(C) REIMBURSEMENT- For purposes of paragraph (1)(B), proceeds of a clean renewable energy bond may be issued to reimburse a qualified borrower for amounts paid after the date of the enactment of this section in the same manner as proceeds of State and local government obligations the interest upon which is exempt from tax under section 103.'.

(d) Change in Use- Subparagraph (D) of section 54(d)(2) (relating to treatment of changes in use) is amended by striking `or qualified issuer'.

(e) Maximum Term- Paragraph (2) of section 54(e) (relating to maximum term) is amended by striking `without regard to the requirements of subsection (1)(6) and'.

(f) Repeal of Limitation on Amount of Bonds Designated- Section 54 is amended by striking subsection (f) (relating to repeal of limitation on amount of bonds designated).

(g) Special Rules Relating to Expenditures- Subsection (h) of section 54 (relating to special rules relating to expenditures) is amended--

(1) in paragraph (1)(A) by striking `95 percent of the proceeds' and inserting `90 percent of the net proceeds',

(2) in paragraph (1)(B)--

(A) by striking `10 percent of the proceeds' and inserting `5 percent of the net proceeds', and

(B) by striking `the 6-month period beginning on' both places it appears and inserting `1 year of', and

(3) in paragraph (1)(C) by inserting `net' before `proceeds',

(4) in paragraph (3) by striking `95 percent of the proceeds' and inserting `90 percent of the net proceeds'.

(h) Repeal of Special Rules Relating to Arbitrage- Section 54 is amended by striking subsection (i) (relating to repeal of special rules relating to arbitrage).

(i) Public Power Entity- Subsection (j) of section 54 (defining cooperative electric company; qualified energy tax credit bond lender; governmental body; qualified borrower) is amended--

(1) by redesignating paragraphs (4) and (5) as paragraph (5) and (6) and by inserting after paragraph (3) the following new paragraph:

`(4) PUBLIC POWER ENTITY- The term `public power entity' 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 enactment of this paragraph).',

(2) in paragraph (5), as so redesignated, by striking `or' at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting `, or', and by adding at the end the following:

`(D) a public power entity.', and

(3) in paragraph (6), as so redesignated, by striking `or' at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting `, or', and by adding at the end the following:

`(C) a public power entity.'.

(j) Repeal of Ratable Principal Amortization Requirement- Subsection (l) of section 54 (relating to other definitions and special rules) is amended by striking paragraph (5) and redesignating paragraph (6) as paragraph (5).

(k) Net Proceeds- Subsection (i) of section 54 (relating to other definitions and special rules), as amended by subsection (j), is amended by redesignating paragraphs (2), (3), (4), and (5) as paragraphs (4), (5), (6), and (7), respectively, and by inserting after paragraph (1) the following new paragraphs:

`(2) NET PROCEEDS- The term `net proceeds' means, with respect to an issue, the proceeds of such issue reduced by amounts in a reasonably required reserve or replacement fund.

`(3) LIMITATION ON AMOUNT IN RESERVE OR REPLACEMENT FUND WHICH MAY BE FINANCED BY ISSUE- A bond issued as part of an issue shall not be treated as a clean renewable energy bond if the amount of the proceeds from the sale of such issue which is part of any reserve or replacement fund exceeds 10 percent of the proceeds of the issue (or such higher amount which the issuer establishes is necessary to the satisfaction of the Secretary).'.

(l) Other Special Rules- Subsection (i) of section 54 ((relating to other definitions and special rules), as amended by subsections (j) and (k)) is amended by adding at the end the following new paragraphs:

`(8) CREDITS MAY BE SEPARATED- There may be a separation (including at issuance) of the ownership of a clean renewable energy bond and the entitlement to the credit under this section with respect to such bond. In case of any such separation, the credit under this section shall be allowed to the person who on the credit allowance date holds the instrument evidencing the entitlement to the credit and not to the holder of the bond.

`(9) TREATMENT FOR ESTIMATED TAX PURPOSES- Solely for the purposes of sections 6654 and 6655, the credit allowed by this section to a taxpayer by reason of holding a qualified energy tax credit bond on a credit allowance date (or the credit in the case of a separation as provided in paragraph (8)) shall be treated as if it were a payment of estimated tax made by the taxpayer on such date.

`(10) CARRYBACK AND CARRYFORWARD OF UNUSED CREDITS- If the sum of the credit exceeds the limitation imposed by subsection (c) for any taxable year, any credits may be applied in a manner similar to the rules set forth in section 39.'.

(m) Termination- Subsection (m) of section 54 (relating to termination) is amended by striking `2008' and inserting `2018'.

(n) Clerical Redesignations- Section 54, as amended by the preceding provisions of this section, is amended by redesignating subsections (g), (h), (j), (k), (l), and (m) as subsections (f), (g), (h), (i), (j), and (k), respectively.

(o) Effective Date- The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.

SEC. 103. EXTENSION AND MODIFICATION OF INVESTMENT TAX CREDIT WITH RESPECT TO SOLAR ENERGY PROPERTY AND QUALIFIED FUEL CELL PROPERTY.

(a) Solar Energy Property- Paragraphs (2)(A)(i)(II) and (3)(A)(ii) of section 48(a) are each amended by striking `2008' and inserting `2019'.

(b) Eligible Fuel Cell Property- Paragraph (1)(E) of section 48(c) is amended by striking `2007' and inserting `2018'.

(c) Energy Property To Include Excess Energy Storage Device- Clause (i) of section 48(a)(3)(A) is amended to read as follows:

`(i) equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, or advanced energy storage systems installed as an integrated component of the foregoing, excepting property used to generate energy for purposes of heating a swimming pool,'.

(d) Solar Lighting Equipment To Include Solar Hybrid Lighting Systems- Clause (ii) of section 48(a)(3)(A) is amended to read as follows:

`(ii) equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight,'.

(e) Modifications-

(1) SOLAR PHOTOVOLTAIC ENERGY PROPERTY CREDIT DETERMINED SOLELY BY KILOWATT CAPACITY-

(A) IN GENERAL- Subsection (a) of section 48 is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph:

`(4) SPECIAL RULE FOR ENERGY CREDIT FOR SOLAR PHOTOVOLTAIC ENERGY PROPERTY-

`(A) IN GENERAL- For purposes of section 46, the energy credit for any taxable year for solar photovoltaic energy property described in paragraph (3)(A)(i) which is used to generate electricity and which is placed in service during the taxable year is $1,500 with respect to each half kilowatt of capacity of such property. Paragraph (2)(A)(ii) shall not apply to property to which the preceding sentence applies.

`(B) APPLICATION OF SPECIAL RULES FOR REHABILITATED OR SUBSIDIZED PROPERTY- Rules similar to the rules of paragraphs (2)(B) and (5) shall apply to property to which this paragraph applies.'.

(B) CONFORMING AMENDMENT- Subclause (II) of section 48(a)(2)(A)(i) is amended by striking `described in paragraph (3)(A)(i)' and inserting `which is described in paragraph (3)(A)(i) and to which paragraph (4) does not apply'.

(f) Credits Allowed Against the Alternative Minimum Tax- Section 38(c)(4)(B) (defining specified credits) is amended by striking the period at the end of clause (ii)(II) and inserting `, and', and by adding at the end the following new clause:

`(iii) the portion of the investment credit under section 46(2) as determined under clauses (i) and (ii) of section 48(a)(2)(A).'.

(g) Effective Dates-

(1) Except as provided in paragraph (2), the amendments made by this section shall take effect on January 1, 2007.

(2) The amendments made by subsection (c) shall apply to property placed in service after December 31, 2006.

SEC. 104. EXTENSION AND MODIFICATION OF CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.

(a) Extension- Subsection (g) of section 25D of the Internal Revenue Code of 1986 (relating to termination) is amended by striking `2008' and inserting `2016'.

(b) Solar Electric Property- Paragraph (1) of section 25D(a) of such Code (relating to allowance of credit) is amended by striking `30 percent of'.

(c) Modification of Maximum Credit- Paragraph (1) of section 25D(b) of the Internal Revenue Code of 1986 (relating to limitations) is amended to read as follows:

`(1) MAXIMUM CREDIT- The credit allowed under subsection (a) for any taxable year shall not exceed--

`(A) $1,500 with respect to each half kilowatt of installed capacity of qualified solar electric property for which qualified solar electric property expenditures are made,

`(B) $2,000 with respect to any qualified solar water heating property expenditures, and

`(C) $500 with respect to each half kilowatt of capacity of qualified fuel cell property (as defined in section 48(c)(1)) for which qualified fuel cell property expenditures are made.'.

(d) Definition of Qualified Solar Water Heating Property Expenditure- Paragraph (1) of section 25D(d) of such Code is amended by striking `to heat water for use in' and inserting `to heat or cool (or provide hot water for use in)'.

(e) Definition of Qualified Photovoltaic Property Expenditure- Paragraph (2) of section 25D(d) of such Code is amended by inserting `, including advanced energy storage systems installed as an integrated component of the foregoing' after `taxpayer'.

(f) Credit Allowed Against Alternative Minimum Tax-

(1) IN GENERAL- Section 25D(b) of the Internal Revenue Code of 1986 (as amended by subsection (b)) is amended by adding at the end the following new paragraph:

`(3) CREDIT ALLOWED AGAINST ALTERNATIVE MINIMUM TAX- 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 subpart A of part IV of subchapter A (other than this section) and section 27 for the taxable year.'.

(2) CONFORMING AMENDMENTS-

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

`(c) Carryforward of Unused Credit- If the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by subsection (b)(3) 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.'.

(B) Section 23(b)(4)(B) of such Code is amended by inserting `and section 25D' after `this section'.

(C) Section 24(b)(3)(B) of such Code is amended by striking `sections 23 and 25B' and inserting `sections 23, 25B, and 25D'.

(D) Section 26(a)(1) of such Code is amended by striking `and 25B' and inserting `25B, and 25D'.

(g) Effective Date- The amendments made by this section shall apply to expenditures made in taxable years beginning after December 31, 2006.

SEC. 105. 15-YEAR RECOVERY PERIOD FOR PROPERTY USED IN THE TRANSMISSION OR DISTRIBUTION OF ELECTRICITY FOR SALE.

(a) In General- Subparagraph (E) of section 168(e)(3) is amended by striking clause (vii), by redesignating clause (viii) as clause (ix), and by inserting after clause (vi) the following new clauses:

`(vii) any section 1245 property (as defined in section 1245(a)(3))--

`(I) used in the transmission at 69 or more kilovolts of electricity for sale and the original use of which commences with the taxpayer after April 11, 2005, or

`(II) used in the transmission or distribution of electricity for sale and which is originally placed in service after the date of the enactment of this subclause,

`(viii) initial clearing and grading land improvements with respect to any electric utility transmission and distribution plant, and'.

(b) Conforming Amendments-

(1) Paragraph (3) of section 168(e) is amended by striking subparagraph (F).

(2) The table contained in section 168(g)(3)(B) is amended by striking the items relating to subparagraphs (E)(viii) and (F) and inserting the following new items:

----------------

----------------

`(E)(viii) 25

(E)(ix)    35'.

----------------

(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.

TITLE II--PRODUCTION INCENTIVES

SEC. 201. EXTENSION OF PRODUCTION CREDIT FOR WIND, SOLAR, AND GEOTHERMAL.

Subsection (d) of section 45 is amended--

(1) in paragraph (1) by striking `January 1, 2009' and inserting `January 1, 2018', and

(2) in paragraph (4) by striking `January 1, 2009 (January 1, 2006, in the case of a facility using solar energy)' and inserting `January 1, 2018'.

SEC. 202. ELECTRICITY PRODUCED FROM OCEAN ENERGY.

(a) In General- Section 45(c)(1) (defining qualified energy resources) is amended by striking `and' at the end of subparagraph (G), by striking the period at the end of subparagraph (H) and inserting `, and', and by adding at the end the following new subparagraph:

`(I) ocean energy.'.

(b) Definition of Resources- Section 45(c) is amended by adding at the end the following new paragraph:

`(10) OCEAN ENERGY- The term `ocean energy' means energy derived--

`(A) in the case of ocean thermal energy, generation through closed-cycle, open-cycle and hybrid processes, and

`(B) in the case of ocean mechanical energy, generation through channel systems, float systems, and oscillating water column systems.'.

`(11) OCEAN ENERGY FACILITY- In the case of a facility using ocean energy to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2018.'.

(d) Credit Rate-

(1) IN GENERAL- Section 45(b) is amended by adding at the end the following new paragraph:

`(5) CREDIT RATE FOR ELECTRICITY PRODUCED AND SOLD FROM OCEAN ENERGY FACILITY- In the case of electricity produced and sold in any calendar year after the date of the enactment of this paragraph at any qualified facility described in subsection (d)(11)--

`(A) subsection (a)(1) shall be applied for such calendar year by substituting `1.9 cents' for `1.5 cents', and

`(B) paragraph (2) shall be applied by substituting `2005' for `2002'.'.

(2) ADJUSTMENT FOR INFLATION- Section 45(b)(2) is amended by inserting `the 1.9 cent amount in paragraph (5)'.

(e) Effective Date- The amendments made by this section shall apply to electricity produced after the date of the enactment of this Act.

TITLE III--INCENTIVES FOR ALTERNATIVE FUELS

SEC. 301. TECHNOLOGY NEUTRAL DIESEL CREDIT.

(a) In General- Section 40A is amended to read as follows:

`SEC. 40A. QUALIFIED DIESEL USED AS FUEL.

`(a) General Rule- For purposes of section 38, the qualified diesel fuels credit determined under this section for the taxable year is an amount equal to the sum of--

`(1) the qualified diesel mixture credit, plus

`(2) the qualified diesel credit.

`(b) Definition of Qualified Diesel Mixture Credit and Qualified Diesel Credit- For purposes of this section--

`(1) QUALIFIED DIESEL MIXTURE CREDIT-

`(A) IN GENERAL- The qualified diesel mixture credit of any taxpayer for any taxable year is $1.00 for each gallon of biodiesel used by the taxpayer in the production of a qualified biodiesel mixture.

`(B) QUALIFIED DIESEL MIXTURE- The term `qualified biodiesel mixture' means a mixture of qualified diesel and diesel fuel (as defined in section 4083(a)(3)), determined without regard to any use of kerosene, which--

`(i) is sold by the taxpayer producing such mixture to any person for use as a fuel, or

`(ii) is used as a fuel by the taxpayer producing such mixture.

`(C) SALE OR USE MUST BE IN TRADE OR BUSINESS, ETC- Biodiesel used in the production of a qualified diesel mixture shall be taken into account--

`(i) only if the sale or use described in subparagraph (B) is in a trade or business of the taxpayer, and

`(ii) for the taxable year in which such sale or use occurs.

`(D) CASUAL OFF-FARM PRODUCTION NOT ELIGIBLE- No credit shall be allowed under this section with respect to any casual off-farm production of a qualified diesel mixture.

`(2) BIODIESEL CREDIT-

`(A) IN GENERAL- The diesel credit of any taxpayer for any taxable year is $1.00 for each gallon of diesel which is not in a mixture with diesel fuel and which during the taxable year--

`(i) is used by the taxpayer as a fuel in a trade or business, or

`(ii) is sold by the taxpayer at retail to a person and placed in the fuel tank of such person's vehicle.

`(B) USER CREDIT NOT TO APPLY TO DIESEL SOLD AT RETAIL- No credit shall be allowed under subparagraph (A)(i) with respect to any diesel which was sold in a retail sale described in subparagraph (A)(ii).

`(3) CERTIFICATION FOR DIESEL- No credit shall be allowed under paragraph (1) or (2) of subsection (a) unless the taxpayer obtains a certification (in such form and manner as prescribed by the Secretary) from the producer or importer of the biodiesel which identifies the product produced and the percentage of biodiesel and agri-biodiesel in the product.

`(4) SMALL QUALIFIED DIESEL PRODUCER CREDIT-

`(A) IN GENERAL- The small qualified diesel producer credit of any eligible small qualified diesel producer for any taxable year is 10 cents for each gallon of qualified diesel production of such producer.

`(B) QUALIFIED DIESEL PRODUCTION- For purposes of this paragraph, the term `qualified agri-biodiesel production' means any qualified diesel which is produced by an eligible small qualified diesel producer, and which during the taxable year--

`(i) is sold by such producer to another person--

`(I) for use by such other person in the production of a qualified diesel 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 qualified diesel at retail to another person and places such qualified diesel in the fuel tank of such other person, or

`(ii) is used or sold by such producer for any purpose described in clause (i).

`(C) LIMITATION- The qualified diesel production of any producer for any taxable year shall not exceed 15,000,000 gallons.

`(c) Coordination With Credit Against Excise Tax- The amount of the credit determined under this section with respect to any biodiesel shall be properly reduced to take into account any benefit provided with respect to such biodiesel solely by reason of the application of section 6426 or 6427(e).

`(d) Definitions and Special Rules- For purposes of this section--

`(1) QUALIFIED DIESEL-

`(A) IN GENERAL- The term `qualified diesel' means any diesel made from a renewable source, as certified by the Secretary of Energy.

`(B) PROCEDURE FOR CERTIFICATION- For purposes of subparagraph (A), not later than 90 days after the date on which a request for certification is submitted to the Secretary of Energy (in accordance with regulations promulgated by the Secretary of Energy), the Secretary of Energy shall make a determination on such request.

`(C) TRANSITIONAL RULE- Any diesel product eligible for the credit under this section on the day before the date of the enactment of the Generating Renewable Energy and Encouraging Novel Technologies Act of 2007 shall be deemed to be qualified diesel for purposes of this section after such date.

`(2) MIXTURE OR BIODIESEL NOT USED AS A FUEL, ETC-

`(A) MIXTURES- If--

`(i) any credit was determined under this section with respect to diesel used in the production of any qualified diesel mixture, and

`(ii) any person--

`(I) separates the biodiesel from the mixture, or

`(II) without separation, uses the mixture other than as a fuel,

then there is hereby imposed on such person a tax equal to the product of the rate applicable under subsection (b)(1)(A) and the number of gallons of such diesel in such mixture.

`(B) DIESEL- If--

`(i) any credit was determined under this section with respect to the retail sale of any diesel, and

`(ii) any person mixes such diesel or uses such diesel other than as a fuel,

then there is hereby imposed on such person a tax equal to the product of the rate applicable under subsection (b)(2)(A) and the number of gallons of such diesel.

`(C) PRODUCER CREDIT- If--

`(i) any credit was determined under subsection (a)(3), and

`(ii) any person does not use such fuel for a purpose described in subsection (b)(5)(B),

then there is hereby imposed on such person a tax equal to 10 cents a gallon for each gallon of such diesel.

`(D) APPLICABLE LAWS- All provisions of law, including penalties, shall, insofar as applicable and not inconsistent with this section, apply in respect of any tax imposed under subparagraph (A) or (B) as if such tax were imposed by section 4081 and not by this chapter.

`(3) PASS-THRU IN THE CASE OF ESTATES AND TRUSTS- Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.

`(e) Definitions and Special Rules for Small Qualified Diesel Producer Credit- For purposes of this section--

`(1) ELIGIBLE SMALL QUALIFIED DIESEL PRODUCER- The term `eligible small qualified diesel producer' means a person who, at all times during the taxable year, has a productive capacity for qualified diesel not in excess of 60,000,000 gallons.

`(2) AGGREGATION RULE- For purposes of the 15,000,000 gallon limitation under subsection (b)(5)(C) and the 60,000,000 gallon limitation under paragraph (1), all members of the same controlled group of corporations (within the meaning of section 267(f)) and all persons under common control (within the meaning of section 52(b) but determined by treating an interest of more than 50 percent as a controlling interest) shall be treated as 1 person.

`(3) PARTNERSHIP, S CORPORATION, AND OTHER PASS-THRU ENTITIES- In the case of a partnership, trust, S corporation, or other pass-thru entity, the limitations contained in subsection (b)(5)(C) and paragraph (1) shall be applied at the entity level and at the partner or similar level.

`(4) 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.

`(5) REGULATIONS- The Secretary may prescribe such regulations as may be necessary--

`(A) to prevent the credit provided for in subsection (a)(3) from directly or indirectly benefitting any person with a direct or indirect productive capacity of more than 60,000,000 gallons of agri-biodiesel during the taxable year, or

`(B) to prevent any person from directly or indirectly benefitting with respect to more than 15,000,000 gallons during the taxable year.

`(6) ALLOCATION OF SMALL QUALIFIED DIESEL CREDIT TO PATRONS OF COOPERATIVE-

`(A) ELECTION TO ALLOCATE-

`(i) IN GENERAL- In the case of a cooperative organization described in section 1381(a), any portion of the credit determined under subsection (a)(3) for the taxable year may, at the election of the organization, be apportioned pro rata among patrons of the organization on the basis of the quantity or value of business done with or for such patrons for the taxable year.

`(ii) FORM AND EFFECT OF ELECTION- An election under clause (i) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d).

`(B) TREATMENT OF ORGANIZATIONS AND PATRONS-

`(i) ORGANIZATIONS- The amount of the credit not apportioned to patrons pursuant to subparagraph (A) shall be included in the amount determined under subsection (a)(3) for the taxable year of the organization.

`(ii) PATRONS- The amount of the credit apportioned to patrons pursuant to subparagraph (A) shall be included in the amount determined under such subsection for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.

`(iii) SPECIAL RULES FOR DECREASE IN CREDITS FOR TAXABLE YEAR- If the amount of the credit of the organization determined under such subsection for a taxable year is less than the amount of such credit shown on the return of the organization for such year, an amount equal to the excess of--

`(I) such reduction, over

`(II) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,

shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.

`(f) Termination- This section shall not apply to any sale or use after December 31, 2018.'.

(b) Clerical Amendment- The item relating to section 40A in the table of sections for subpart D of part IV of subchapter A of chapter 1 is amended to read as follows:

`Sec. 40A. Qualified diesel used as fuel.'.

(c) Effective Date- The amendments made by this section shall apply to fuel produced after the date of the enactment of this Act.

SEC. 302. EXTENSION OF CREDIT FOR ALCOHOL USED AS FUEL.

(a) Income Tax Credit- Paragraph (1) of section 40(e) is amended--

(1) in subparagraph (A) by striking `December 31, 2010' and inserting `December 31, 2018', and

(2) in subparagraph (B) by striking `January 1, 2011' and inserting `January 1, 2019'.

(b) Excise Tax Credit- Section 6426(b)(5) is amended by striking `December 31, 2010' and inserting `December 31, 2018'.

(c) Fuels Not Used for Taxable Purposes- Section 6427(e)(5)(A) is amended by striking `December 31, 2010' and inserting `December 31, 2018'.

SEC. 303. EXTENSION OF CREDIT FOR ALTERNATIVE FUELS.

(a) Alternative Fuel- Paragraph (4) of section 6426(d) is amended to read as follows:

`(4) TERMINATION- This subsection shall not apply to any sale or use for any period after December 31, 2018.'.

(b) Alternative Fuel Mixture- Paragraph (3) of section 6426(e) is amended to read as follows:

`(3) TERMINATION- This subsection shall not apply to any sale or use for any period after December 31, 2018.'.

(c) Fuels Not Used for Taxable Purposes- Section 6427(e)(5)(C) is amended by striking `September 30, 2009' and inserting `December 31, 2018'.

SEC. 304. INVESTMENT TAX CREDIT FOR CELLULOSIC BIOMASS ETHANOL PLANT PROPERTY.

(a) Allowance of Credit- Subpart E of part IV of subchapter A of chapter 1 is amended by inserting after section 48B the following new section:

`SEC. 48C. CELLULOSIC BIOMASS ETHANOL PLANT FACILITY.

`(a) General Rule- For purposes of section 46, the cellulosic biomass ethanol plant credit for any taxable year is 30 percent of the cost of any qualified cellulosic biomass ethanol plant property.

`(b) Qualified Cellulosic Biomass Ethanol Plant Property- The term `qualified cellulosic biomass ethanol plant property' means property of a character subject to the allowance for depreciation--

`(1) which is used in the United States solely to produce cellulosic biomass ethanol,

`(2) the original use of which commences with the taxpayer after the date of the enactment of this section,

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

`(4) which is placed in service by the taxpayer before January 1, 2019.

`(c) Cellulosic Biomass Ethanol- For purposes of this section, the term `cellulosic biomass ethanol' means ethanol produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis.

`(d) Special Rule for Certain Subsidized Property- For purposes of this section, rules similar to the rules of section 48(a)(4) shall apply.

`(e) Denial of Double Benefit- A deduction or credit shall not be allowed under any other provision of this chapter for the cost taken into account under subsection (a).'.

(b) Credit Treated as Part of Investment Credit- Section 46 is amended by striking `and' at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting `, and', and by adding at the end the following new paragraph:

`(5) the cellulosic biomass ethanol plant credit.'.

(1) Section 49(a)(1)(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) the basis of any qualified cellulosic biomass ethanol plant property.'.

(2) Section 168 is amended by striking subsection (l).

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

`Sec. 48C. Cellulosic biomass ethanol plant facility.'.

TITLE IV--INCENTIVES TO CONSERVE ENERGY

SEC. 401. EXTENSION OF NONBUSINESS ENERGY PROPERTY.

Subsection (g) of section 25C is amended by striking `December 31, 2007' and inserting `December 31, 2018'.

SEC. 402. MODIFICATIONS OF ENERGY EFFICIENT APPLIANCE CREDIT FOR APPLIANCES PRODUCED AFTER 2007.

(a) In General- Subsection (b) of section 45M (relating to applicable amount) 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.

`(4) DEHUMIDIFIERS- The applicable amount is--

`(A) $15 in the case of a dehumidifier manufactured in calendar year 2008 that has a capacity less than or equal to 45 pints per day and is 7.5 percent more efficient than the applicable Department of Energy energy conservation standard effective October 2012, and

`(B) $25 in the case of a dehumidifier manufactured in calendar year 2008 that has a capacity greater than 45 pints per day and is 7.5 percent more efficient than the applicable Department of Energy energy conservation standard effective October 2012.'.

(b) Eligible Production-

(1) SIMILAR TREATMENT FOR ALL APPLIANCES- Subsection (c) of section 45M (relating to eligible production) is amended--

(A) by striking paragraph (2),

(B) by striking `(1) IN GENERAL' and all that follows through `the eligible' and inserting `The eligible', and

(C) by moving the text of such subsection in line with the subsection heading and redesignating subparagraphs (A) and (B) as paragraphs (1) and (2), respectively.

(2) MODIFICATION OF BASE PERIOD- Paragraph (2) of section 45M(c), as amended by paragraph (1) of this section, is amended by striking `3-calendar year' and inserting `2-calendar year'.

(c) Types of Energy Efficient Appliances- Subsection (d) of section 45M (defining types of energy efficient appliances) is amended to read as follows:

`(d) Types of Energy Efficient Appliance- For purposes of this section, the types of energy efficient appliances are--

`(1) dishwashers described in subsection (b)(1),

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

`(3) refrigerators described in subsection (b)(3), and

`(4) dehumidifiers described in subsection (b)(4).'.

(d) Aggregate Credit Amount Allowed-

(1) INCREASE IN LIMIT- Paragraph (1) of section 45M(e) (relating to aggregate credit amount allowed) 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 $100,000,000 reduced by the amount of the credit allowed under subsection (a) to the taxpayer (or any predecessor) for all prior taxable years beginning after December 31, 2007.'.

(2) EXCEPTION FOR CERTAIN REFRIGERATOR AND CLOTHES WASHERS- Paragraph (2) of section 45M(e) is amended to read as follows:

`(2) AMOUNT ALLOWED FOR CERTAIN REFRIGERATORS AND CLOTHES WASHERS- Refrigerators described in subsection (b)(3)(D) and clothes washers described in subsection (b)(2)(D) shall not be taken into account under paragraph (1).'.

(e) Qualified Energy Efficient Appliances-

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

`(1) QUALIFIED ENERGY EFFICIENT APPLIANCE- The term `qualified energy efficient appliance' means--

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

`(B) any clothes washer described in subsection (b)(2),

`(C) any refrigerator described in subsection (b)(3), and

`(D) any dehumidifier described in subsection (b)(4).'.

(2) CLOTHES WASHER- Section 45M(f)(3) (defining clothes washer) is amended by inserting `commercial' before `residential' the second place it appears.

(3) TOP-LOADING CLOTHES WASHER- Subsection (f) of section 45M (relating to definitions) 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) DEHUMIDIFIER- Subsection (f) of section 45M, as amended by paragraph (3), is amended by redesignating paragraphs (6), (7), and (8) as paragraphs (7), (8) and (9), respectively, and by inserting after paragraph (5) the following new paragraph:

`(6) DEHUMIDIFIER- The term `dehumidifier' means a self-contained, electrically operated, and mechanically refrigerated encased assembly consisting of--

`(A) a refrigerated surface that condenses moisture from the atmosphere,

`(B) a refrigerating system, including an electric motor,

`(C) an air-circulating fan, and

`(D) means for collecting or disposing of condensate.'.

(5) REPLACEMENT OF ENERGY FACTOR- Section 45M(f)(7), as amended by paragraph (4), is amended to read as follows:

`(7) 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.'.

(6) GALLONS PER CYCLE; WATER CONSUMPTION FACTOR- Section 45M(f) (relating to definitions) is amended by adding at the end the following:

`(10) 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.

`(11) 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.

SEC. 403. INCREASE AND EXTENSION OF ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

(a) Increase in Amount of Deduction- Section 179D (relating to energy efficient commercial buildings deduction) is amended--

(1) in subsection (b)(1)(A) by striking `$1.80' and inserting `$2.25', and

(2) in subsection (d)(1)(A) by striking `$.60 for $1.80' and inserting `$.75 for $2.25'.

(b) Extension- Subsection (h) of section 179D (relating to termination) is amended by striking `December 31, 2008' and inserting `December 31, 2018'.

(c) Effective Date- The amendments made by this section shall apply to property placed in service in taxable years beginning after December 31, 2006.

TITLE V--CREDIT FOR OIL SHALE RECOVERY COSTS

SEC. 501. INCENTIVES FOR EXTRACTION AND PROCESSING OF OIL SHALE.

(a) Investment Tax Credit for Extraction and Processing of Oil Shale Using In-Situ Conversion Technology-

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

`SEC. 48D. OIL SHALE EXTRACTION AND PROCESSING FACILITY.

`(a) General Rule- For purposes of section 46, the oil shale extraction and processing credit for any taxable year is 30 percent of the cost of any qualified oil shale extraction and processing property.

`(b) Qualified Oil Shale Extraction and Processing Property- The term `qualified oil shale extraction and processing property' means property of a character subject to the allowance for depreciation--

`(1) which is used in the United States solely to extract and process oil shale using in-situ conversion technology,

`(2) the original use of which commences with the taxpayer after the date of the enactment of this section,

`(4) which is placed in service by the taxpayer before January 1, 2019.

`(c) Special Rule for Certain Subsidized Property- For purposes of this section, rules similar to the rules of section 48(a)(4) shall apply.

`(d) Denial of Double Benefit- A deduction or credit shall not be allowed under any other provision of this chapter for the cost taken into account under subsection (a).'.

(2) CREDIT TREATED AS PART OF INVESTMENT CREDIT- Section 46 is amended by striking `and' at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting `, and', and by adding at the end the following new paragraph:

`(6) the oil shale extraction and processing credit.'.

(3) CONFORMING AMENDMENTS-

(A) 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 at the end the following new clause:

`(vi) the basis of any qualified oil shale extraction and processing property.'.

(B) 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 48C the following new item:

`Sec. 48D. Oil shale extraction and processing facility.'.

(b) Expensing Oil Shale Extraction and Processing Property- Part VI of subchapter B of chapter 1 of is amended by inserting after section 179F the following new section:

`SEC. 179G. ELECTION TO EXPENSE CERTAIN OIL SHALE EXTRACTION AND PROCESSING PROPERTY.

`(a) Treatment as Expenses- A taxpayer may elect to treat the cost of any qualified oil shale extraction and processing property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the expense is incurred.

`(b) Election-

`(2) ELECTION IRREVOCABLE- Any election made under this section may not be revoked except with the consent of the Secretary.

`(c) Qualified Oil Shale Extraction and Processing Property- For purposes of this section--

`(1) The term `qualified oil shale extraction and processing property' means any property located in the United States--

`(A) the original use of which commences with the taxpayer and which original use is solely to extract or process oil shale, and

`(B) which is placed in service by the taxpayer after the date of the enactment of this section and before January 1, 2019.

`(d) Election To Allocate Deduction to Cooperative Owner- If--

`(1) a taxpayer to which subsection (a) applies is an organization to which part I of subchapter T applies, and

`(2) one or more persons directly holding an ownership interest in the taxpayer are organizations to which part I of subchapter T apply,

`(e) Basis Reduction-

`(1) IN GENERAL- For purposes of this title, if a deduction is allowed under this section with respect to any qualified oil shale extraction and processing property, the basis of such property shall be reduced by the amount of the deduction so allowed.

`(f) Application With Other Deductions and Credits-

`(2) CREDITS- No credit shall be allowed under section 38 with respect to any amount for which a deduction is allowed under subsection (a).

(1) Section 1016(a) is amended by striking `and' at the end of paragraph (37), by striking the period at the end of paragraph (38) and inserting `, and', and by adding at the end the following new paragraph:

`(39) to the extent provided in section 179F(e)(1).'.

(2) Section 1245(a) is amended by inserting `179F,' after `179E,' both places it appears in paragraphs (2)(C) and (3)(C).

(3) Section 263(a)(1) is amended by striking `or' at the end of subparagraph (K), by striking the period at the end of subparagraph (L) and inserting `, or', and by inserting after subparagraph (L) the following new subparagraph:

`(M) expenditures for which a deduction is allowed under section 179F.'.

(4) Section 312(k)(3)(B) is amended by striking `or 179E' each place it appears in the heading and text and inserting `179E, or 179F'.

(5) The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 179F the following new item:

`Sec. 179F. Election to expense certain oil shale extraction and processing property.'.

(d) Effective Date- The amendments made by this section shall apply to properties placed in service after the date of the enactment of this Act.

TITLE VI--PROVISIONS RELATING TO ADVANCED COAL AND NUCLEAR ENERGY

SEC. 601. ALTERNATIVE METHOD FOR SATISFYING CERTAIN REQUIREMENTS RELATING TO PRODUCTION OF REFINED COAL.

(a) In General- Subparagraph (A) of section 45(c)(7) is amended by inserting `and' at the end of clause (ii) and by amending clause (iii) to read as follows:

`(iii)(I) is certified by the taxpayer as resulting (when used in the production of steam) in a qualified emission reduction and is produced in such a manner as to result in an increase of at least 50 percent in the market value of the refined coal (excluding any increase caused by materials combined or added during the production process), as compared to the value of feedstock coal, or

`(II) is certified by the taxpayer as resulting (when used in the production of steam) in a double emission reduction.'.

(b) Double Emission Reduction- Paragraph (7) of section 45(c) is amended by adding at the end the following new subparagraph:

`(C) DOUBLE EMISSION REDUCTION- The term `double emission reduction' means an aggregate reduction totaling at least 80 percent of the sum of the individual emission reductions of nitrogen oxide, sulfur dioxide and mercury released when burning the refined coal (excluding any dilution caused by materials combined or added during the production process), as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of January 1, 2003.'.

SEC. 602. ADVANCED NUCLEAR POWER PRODUCTION.

(a) Increase in Rate- Section 45J(a)(1) is amended by striking `1.8 cents' and inserting `2.25 cents'.

(b) Increase in National Limitation- Section 45J(b)(2) is amended by striking `6,000 megawatts' and inserting `12,000 megawatts'.

(d) Extension of Placed in Service Date- Section 45J(d)(1)(B) is amended by striking `January 1, 2021' and inserting `January 1, 2041'.

(e) Effective Date- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

TITLE VII--COAL TO LIQUIDS TECHNOLOGY

SEC. 701. CREDIT FOR INVESTMENT IN COAL-TO-LIQUID FUELS PROJECTS.

(a) In General- Section 46 (relating to amount of credit) is amended by striking `and' at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting `, and', and by adding at the end the following new paragraph:

`(5) the qualifying coal-to-liquid fuels project credit.'.

(b) Amount of Credit- Subpart E of part IV of subchapter A of chapter 1 (relating to rules for computing investment credit) is amended by inserting after section 48D the following new section:

`SEC. 48E. QUALIFYING COAL-TO-LIQUID FUELS PROJECT CREDIT.

`(a) In General- For purposes of section 46, the qualifying coal-to-liquid fuels project credit for any taxable year is an amount equal to 20 percent of the qualified investment for such taxable year.

`(b) Qualified Investment-

`(1) IN GENERAL- For purposes of subsection (a), the qualified investment for any taxable year is the basis of property placed in service by the taxpayer during such taxable year which is part of a qualifying coal-to-liquid fuels project--

`(A)(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

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

`(2) APPLICABLE RULES- For purposes of this section, rules similar to the rules of subsection (a)(4) and (b) of section 48 shall apply.

`(c) Definitions- For purposes of this section--

`(1) QUALIFYING COAL-TO-LIQUID FUELS PROJECT- The term `qualifying coal-to-liquid fuels project' means any domestic project which--

`(A) employs the class of reactions known as Fischer-Tropsch to produce at least 10,000 barrels per day of transportation grade liquid fuels from a feedstock that is primarily domestic coal (including any property which allows for the capture, transportation, or sequestration of by-products resulting from such process, including carbon emissions), and

`(B) any portion of the qualified investment in which is certified under the qualifying coal-to-liquid program as eligible for credit under this section in an amount (not to exceed $200,000,000) determined by the Secretary.

`(2) COAL- The term `coal' means any carbonized or semicarbonized matter, including peat.

`(d) Qualifying Coal-to-Liquid Fuels Project Program-

`(1) IN GENERAL- The Secretary, in consultation with the Secretary of Energy, shall establish a qualifying coal-to-liquid fuels project program to consider and award certifications for qualified investment eligible for credits under this section to 10 qualifying coal-to-liquid fuels project sponsors under this section. The total qualified investment which may be awarded eligibility for credit under the program shall not exceed $2,000,000,000.

`(2) PERIOD OF ISSUANCE- A certificate of eligibility under paragraph (1) may be issued only during the 10-fiscal year period beginning on October 1, 2007.

`(3) SELECTION CRITERIA- The Secretary shall not make a competitive certification award for qualified investment for credit eligibility under this section unless the recipient has documented to the satisfaction of the Secretary that--

`(A) the proposal of the award recipient is financially viable,

`(B) the recipient will provide sufficient information to the Secretary for the Secretary to ensure that the qualified investment is spent efficiently and effectively,

`(C) the fuels identified with respect to the gasification technology for such project will comprise at least 90 percent of the fuels required by the project for the production of transportation grade liquid fuels,

`(D) the award recipient's project team is competent in the planning and construction of coal gasification facilities and familiar with operation of the Fischer-Tropsch process, with preference given to those recipients with experience which demonstrates successful and reliable operations of such process, and

`(E) the award recipient has met other criteria established and published by the Secretary.

`(e) Denial of Double Benefit- No deduction or other credit shall be allowed with respect to the basis of any property taken into account in determining the credit allowed under this section.'.

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

`(vii) the basis of any property which is part of a qualifying coal-to-liquid fuels project under section 48E.'.

(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 48D the following new item:

`Sec. 48E. Qualifying coal-to-liquid fuels project credit.'.

(d) Effective Date- 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).

SEC. 702. TEMPORARY EXPENSING FOR EQUIPMENT USED IN COAL-TO-LIQUID FUELS PROCESS.

(a) In General- Part VI of subchapter B of chapter 1 is amended by inserting after section 179F the following new section:

`SEC. 179G. ELECTION TO EXPENSE CERTAIN COAL-TO-LIQUID FUELS FACILITIES.

`(a) Treatment as Expenses- A taxpayer may elect to treat the cost of any qualified coal-to-liquid fuels process property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the expense is incurred.

`(b) Election-

`(2) ELECTION IRREVOCABLE- Any election made under this section may not be revoked except with the consent of the Secretary.

`(c) Qualified Coal-to-Liquid Fuels Process Property- The term `qualified coal-to-liquid fuels process property' means any property located in the United States--

`(1) which employs the Fischer-Tropsch process to produce transportation grade liquid fuels from a feedstock that is primarily domestic coal (including any property which allows for the capture, transportation, or sequestration of by-products resulting from such process, including carbon emissions),

`(2) the original use of which commences with the taxpayer,

`(3) the construction of which--

`(A) except as provided in subparagraph (B), is subject to a binding construction contract entered into after the date of the enactment of this section and before January 1, 2011, but only if there was no written binding construction contract entered into on or before such date of enactment, or

`(B) in the case of self-constructed property, began after the date of the enactment of this section and before January 1, 2011, and

`(4) which is placed in service by the taxpayer after the date of the enactment of this section and before January 1, 2016.

`(d) Election To Allocate Deduction to Cooperative Owner- If--

`(1) a taxpayer to which subsection (a) applies is an organization to which part I of subchapter T applies, and

`(2) one or more persons directly holding an ownership interest in the taxpayer are organizations to which part I of subchapter T apply,

`(e) Basis Reduction-

`(1) IN GENERAL- For purposes of this title, if a deduction is allowed under this section with respect to any qualified coal-to-liquid fuels process property, the basis of such property shall be reduced by the amount of the deduction so allowed.

`(f) Application With Other Deductions and Credits-

`(2) CREDITS- No credit shall be allowed under section 38 with respect to any amount for which a deduction is allowed under subsection (a).

(b) Conforming Amendments-

(1) Section 1016(a) is amended by striking `and' at the end of paragraph (38), by striking the period at the end of paragraph (39) and inserting `, and', and by adding at the end the following new paragraph:

`(40) to the extent provided in section 179G(e)(1).'.

(2) Section 1245(a) is amended by inserting `179G,' after `179F,' both places it appears in paragraphs (2)(C) and (3)(C).

(3) Section 263(a)(1) is amended by striking `or' at the end of subparagraph (L), by striking the period at the end of subparagraph (M) and inserting `, or', and by inserting after subparagraph (M) the following new subparagraph:

`(N) expenditures for which a deduction is allowed under section 179G.'.

(4) Section 312(k)(3)(B) is amended by striking `or 179G' each place it appears in the heading and text and inserting `179F, or 179G'.

(5) The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 179F the following new item:

`Sec. 179G. Election to expense certain coal-to-liquid fuels facilities.'.

(c) Effective Date- The amendments made by this section shall apply to properties placed in service after the date of the enactment of this Act.

SEC. 703. EXTENSION OF ALTERNATIVE FUEL CREDIT FOR FUEL DERIVED FROM COAL THROUGH THE FISCHER-TROPSCH PROCESS.

(a) Alternative Fuel Credit- Paragraph (4) of section 6426(d) is amended to read as follows:

`(4) TERMINATION- This subsection shall not apply to--

`(A) any sale or use involving liquid fuel derived from a feedstock that is primarily domestic coal (including peat) through the Fischer-Tropsch process for any period after September 30, 2020,

`(B) any sale or use involving liquified hydrogen for any period after September 30, 2014, and

`(C) any other sale or use for any period after September 30, 2009.'.

(b) Payments-

(1) IN GENERAL- Paragraph (5) of section 6427(e) is amended by striking `and' and 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) any alternative fuel or alternative fuel mixture (as so defined) involving liquid fuel derived from coal (including peat) through the Fischer-Tropsch process sold or used after September 30, 2020.'.

(2) CONFORMING AMENDMENT- Section 6427(e)(5)(C) is amended by striking `subparagraph (D)' and inserting `subparagraphs (D) and (E)'.

SEC. 704. MODIFICATIONS TO ENHANCED OIL RECOVERY CREDIT.

(a) Enhanced Credit for Carbon Dioxide Injections- Section 43 is amended by adding at the end the following new subsection:

`(f) Enhanced Credit for Projects Using Qualified Carbon Dioxide-

`(1) IN GENERAL- For purposes of this section--

`(A) the term `qualified project' includes a project described in paragraph (2), and

`(B) in the case of a project described in paragraph (2), subsection (a) shall be applied by substituting `50 percent' for `15 percent'.

`(2) PROJECTS DESCRIBED- A project is described in this paragraph if it begins or is substantially expanded after December 31, 2007, and

`(A) uses qualified carbon dioxide in an enhanced oil, natural gas, or coalbed methane recovery method, which involves flooding or injection, or

`(B) enables the capture or sequestration of qualified carbon dioxide.

`(3) DEFINITIONS- For purposes of this subsection--

`(A) ENHANCED OIL RECOVERY- The term `enhanced oil recovery' means recovery of oil by injecting or flooding with qualified carbon dioxide.

`(B) ENHANCED NATURAL GAS RECOVERY- The term `enhanced natural gas recovery' means recovery of natural gas by injecting or flooding with qualified carbon dioxide.

`(C) ENHANCED COALBED METHANE RECOVERY- The term `enhanced coalbed methane recovery' means recovery of coalbed methane by injecting or flooding with qualified carbon dioxide.

`(D) QUALIFIED CARBON DIOXIDE- The term `qualified carbon dioxide' means carbon dioxide which is produced from the gasification and subsequent refinement of a feedstock which is primarily domestic coal, at a facility which produces coal-to-liquid fuel.

`(E) CAPTURE OR SEQUESTRATION- The term `capture or sequestration' means any equipment or facility necessary to--

`(i) capture or separate qualified carbon dioxide from other emissions,

`(ii) transport qualified carbon dioxide, or

`(iii) process and use qualified carbon dioxide in a qualified project.

`(4) TERMINATION- This subsection shall not apply to costs paid or incurred for any qualified project after December 31, 2020.'.

(b) Conforming Amendments-

(1) Section 43 is amended--

(A) by striking `enhanced oil recovery credit' in subsection (a) and inserting `enhanced oil, natural gas, and coalbed methane recovery, and capture and sequestration credit',

(B) by striking `qualified enhanced oil recovery costs' each place it appears and inserting `qualified costs',

(D) by striking the heading and inserting:

`SEC. 43. ENHANCED OIL, NATURAL GAS, AND COALBED METHANE RECOVERY, AND CAPTURE AND SEQUESTRATION CREDIT.'.

(2) The item in the table of sections for subpart D of part IV of subchapter A of chapter 1 relating to section 43 is amended to read as follows:

`Sec. 43. Enhanced oil, natural gas, and coalbed methane recovery, and capture and sequestration credit.'.

(c) Effective Date- The amendments made by this section shall apply to costs paid or incurred in taxable years ending after December 31, 2007.

SEC. 705. ALLOWANCE OF ENHANCED OIL, NATURAL GAS, AND COALBED METHANE RECOVERY, AND CAPTURE AND SEQUESTRATION CREDIT AGAINST THE ALTERNATIVE MINIMUM TAX.

(a) In General- Subsection (c) of section 38 (relating to limitation based on amount of tax) is amended by redesignating paragraphs (4) and (5) as paragraphs (5) and (6), respectively, and by inserting after paragraph (3) the following new paragraph:

`(4) SPECIAL RULES FOR ENHANCED OIL, NATURAL GAS, AND COALBED METHANE RECOVERY, AND CAPTURE AND SEQUESTRATION CREDIT- In the case of the enhanced oil, natural gas, and coalbed methane recovery, and capture and sequestration credit determined under section 43--

`(A) this section and section 39 shall be applied separately with respect to such credit, and

`(B) in applying paragraph (1) to such credit--

`(i) the tentative minimum tax shall be treated as being zero, and

`(ii) the limitation under paragraph (1) (as modified by clause (i)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the enhanced oil, natural gas, and coalbed methane recovery, and capture and sequestration credit and the specified credits).'.

(b) Conforming Amendments-

(1) Section 38(c)(2)(A)(ii)(II) is amended by inserting `the enhanced oil, natural gas, and coalbed methane recovery, and capture and sequestration credit,' after `employee credit,'.

(2) Section 38(c)(3)(A)(ii)(II) is amended by inserting `, the enhanced oil, natural gas, coalbed methane recovery, capture and sequestration credit,' after `employee credit'.

END