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S 1531 IS

110th CONGRESS

1st Session

S. 1531

To amend the Internal Revenue Code of 1986 to provide incentives and extend existing incentives for the production and use of renewable energy resources, and for other purposes.

IN THE SENATE OF THE UNITED STATES

May 25, 2007

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

A BILL

To amend the Internal Revenue Code of 1986 to provide incentives and extend existing incentives for the production and use of renewable energy resources, 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; REFERENCES, TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the `Clean Renewable Energy and Economic Development Incentives Act of 2007'.

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

Sec. 1. Short title; references, table of contents.

TITLE I--TAX INCENTIVES FOR ENERGY CONSERVATION AND EXPLORATION

Sec. 101. Extension of renewable electricity production credit.

Sec. 102. Extension and modification of clean renewable energy bond credit.

Sec. 103. Water conservation, reuse and efficiency bonds.

Sec. 104. Credit for geothermal exploration expenditures.

Sec. 105. Credit for wind energy systems.

Sec. 106. Extension and modification of new energy efficient home credit.

Sec. 107. Investment tax credit for advanced battery production.

Sec. 108. Qualified renewable school energy bonds.

Sec. 109. Treatment of bonds issued to finance renewable energy resource facilities.

TITLE II--INVESTMENT TAX CREDIT WITH RESPECT TO SOLAR ENERGY PROPERTY AND MANUFACTURING

Subtitle A--Solar Energy Property

Sec. 201. Energy credit with respect to solar energy property.

Sec. 202. Repeal of exclusion for solar and geothermal public utility property under energy credit.

Sec. 203. Permanent extension and modification of credit for residential energy efficient property.

Sec. 204. 3-year accelerated depreciation period for solar energy property.

Subtitle B--Promotion of Solar Manufacturing in the United States

Sec. 211. Solar manufacturing credit.

TITLE I--TAX INCENTIVES FOR ENERGY CONSERVATION AND EXPLORATION

SEC. 101. EXTENSION OF RENEWABLE ELECTRICITY PRODUCTION CREDIT.

(a) In General- Paragraphs (1), (2), (3), (4), (5), (6), (7), and (9) of section 45(d) (relating to qualified facilities) are amended by striking `January 1, 2009' each place it appears and inserting `January 1, 2019'.

(b) Deemed Placed-In-Service Date for Renewable Electricity Facilities- Section 45(e) (relating to definitions and special rules) is amended by adding at the end the following new paragraph:

`(12) DEEMED PLACED-IN-SERVICE DATE FOR CERTAIN FACILITIES-

`(A) IN GENERAL- In the case of any facility described in paragraph (1), (2), (3), (4) (respect to geothermal energy), (5), (6), (7), or (9), for purposes of such paragraph, such facility shall be treated as being placed in service before January 1, 2019, if such facility is under construction before such date and is producing and selling electricity within 2 years after such date.

`(B) PERIOD OF CREDIT- If a facility is treated as placed in service pursuant to subparagraph (A), the 10-year period referred to in subsection (a) shall be treated as beginning on January 1, 2019.'.

SEC. 102. EXTENSION AND MODIFICATION OF CLEAN RENEWABLE ENERGY BOND CREDIT.

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

(b) Annual Volume Cap for Bonds Issued During Extension Period- Paragraph (1) of subsection 54(f) (relating to national limitation) is amended to read as follows:

`NATIONAL LIMITATION-

`(A) INITIAL NATIONAL LIMITATION- With respect to bonds issued after December 31, 2005, and before January 1, 2009, there is a national clean renewable energy bond limitation of $1,200,000,000.

`(B) ANNUAL NATIONAL LIMITATION- With respect to bonds issued after December 31, 2008, and before January 1, 2019, there is a national clean renewable energy bond limitation for each calendar year of $1,000,000,000.'.

(c) Allocation by Secretary- Paragraph (2) of subsection 54(f) (relating to allocation by Secretary) is amended by striking `, except that the Secretary' and inserting `, except that, in the case of bonds issued under paragraph (1)(A), the Secretary'.

(d) Publicity Regarding Allocation of Clean Renewable Energy Bonds-

(1) IN GENERAL- Section 54 is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

`(m) Publicity Regarding Allocation of Clean Renewable Energy Bonds- The Secretary shall prepare a report not later than 1 year after each allocation under subsection (f) to Congress, and make such report publicly available, which with respect to such allocation identifies the name of each applicant for such allocation, the name of the borrower (if other than the applicant), the type and location of the project that is the subject of such application, and the amount of the allocation under subsection (f) for such project in the event the project receives such an allocation.'.

(2) EFFECTIVE DATE- The amendments made by this subsection shall apply to applications for allocations made after the date of the enactment of this Act.

(e) Effective Date- Except as otherwise provided, the amendments made by this section shall apply to bonds issued after December 31, 2007.

SEC. 103. WATER CONSERVATION, REUSE AND EFFICIENCY BONDS.

(a) In General- Subpart H of part IV of subchapter A of chapter 1 (relating to credits against tax) is amended by adding at the end the following new section:

`SEC. 54A. CREDIT TO HOLDERS OF WATER CONSERVATION, REUSE AND EFFICIENCY BONDS.

`(a) Allowance of Credit- If a taxpayer holds a water conservation, reuse and efficiency bond on 1 or more credit allowance dates of the bond occurring during any taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to such dates.

`(b) Amount of Credit-

`(1) IN GENERAL- The amount of the credit determined under this subsection with respect to any credit allowance date for a water conservation, reuse and efficiency bond is 25 percent of the annual credit determined with respect to such bond.

`(2) ANNUAL CREDIT- The annual credit determined with respect to any water conservation, reuse and efficiency bond is the product of--

`(A) the credit rate determined by the Secretary under paragraph (3) for the day on which such bond was sold, multiplied by

`(B) the outstanding face amount of the bond.

`(3) DETERMINATION- For purposes of paragraph (2), with respect to any water conservation, reuse and efficiency bond, the Secretary shall determine daily or cause to be determined daily a credit rate which shall apply to the first day on which there is a binding, written contract for the sale or exchange of the bond. The credit rate for any day is the credit rate which the Secretary or the Secretary's designee estimates will permit the issuance of water conservation, reuse and efficiency bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer.

`(4) CREDIT ALLOWANCE DATE- For purposes of this section, the term `credit allowance date' means--

`(A) March 15,

`(B) June 15,

`(C) September 15, and

`(D) December 15.

Such term also includes the last day on which the bond is outstanding.

`(5) SPECIAL RULE FOR ISSUANCE AND REDEMPTION- In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this subsection with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed or matures.

`(c) Limitation Based on Amount of Tax- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--

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

`(2) the sum of the credits allowable under this part (other than subpart C, section 1400N(l), and this section).

`(d) Water Conservation, Reuse and Efficiency Bond- For purposes of this section--

`(1) IN GENERAL- The term `water conservation, reuse and efficiency bond' means any bond issued as part of an issue if--

`(A) the bond is issued by a qualified issuer pursuant to an allocation by the Secretary to such issuer of a portion of the national water conservation, reuse and efficiency bond limitation under subsection (f)(2),

`(B) 95 percent or more of the proceeds of such issue are to be used for capital expenditures incurred by qualified borrowers for 1 or more qualified projects,

`(C) the qualified issuer designates such bond for purposes of this section and the bond is in registered form, and

`(D) the issue meets the requirements of subsection (h).

`(2) QUALIFIED PROJECT; SPECIAL USE RULES-

`(A) IN GENERAL- The term `qualified project' means any rural water supply project (as defined in section 102(9) of the Rural Water Supply Act of 2006), owned by a qualified borrower, and which may include preparation and implementation of water conservation plans, development and deployment of water efficient products and processes, and xeriscaping projects consistent with that section.

`(B) REFINANCING RULES- For purposes of paragraph (1)(B), a qualified project may be refinanced with proceeds of a water conservation, reuse and efficiency bond only if the indebtedness being refinanced (including any obligation directly or indirectly refinanced by such indebtedness) was originally incurred by a qualified borrower after the date of the enactment of this section.

`(C) REIMBURSEMENT- For purposes of paragraph (1)(B), a water conservation, reuse and efficiency bond may be issued to reimburse a qualified borrower for amounts paid after the date of the enactment of this section with respect to a qualified project, but only if--

`(i) prior to the payment of the original expenditure, the qualified borrower declared its intent to reimburse such expenditure with the proceeds of a water conservation, reuse and efficiency bond,

`(ii) not later than 60 days after payment of the original expenditure, the qualified issuer adopts an official intent to reimburse the original expenditure with such proceeds, and

`(iii) the reimbursement is made not later than 18 months after the date the original expenditure is paid.

`(D) TREATMENT OF CHANGES IN USE- For purposes of paragraph (1)(B), the proceeds of an issue shall not be treated as used for a qualified project to the extent that a qualified borrower or qualified issuer takes any action within its control which causes such proceeds not to be used for a qualified project. The Secretary shall prescribe regulations specifying remedial actions that may be taken (including conditions to taking such remedial actions) to prevent an action described in the preceding sentence from causing a bond to fail to be a water conservation, reuse and efficiency bond.

`(e) Maturity Limitations-

`(1) DURATION OF TERM- A bond shall not be treated as a water conservation, reuse and efficiency bond if the maturity of such bond exceeds the maximum term determined by the Secretary under paragraph (2) with respect to such bond.

`(2) MAXIMUM TERM- During each calendar month, the Secretary shall determine the maximum term permitted under this paragraph for bonds issued during the following calendar month. Such maximum term shall be the term which the Secretary estimates will result in the present value of the obligation to repay the principal on the bond being equal to 50 percent of the face amount of such bond. Such present value shall be determined without regard to the requirements of subsection (l)(6) and using as a discount rate the average annual interest rate of tax-exempt obligations having a term of 10 years or more which are issued during the month. If the term as so determined is not a multiple of a whole year, such term shall be rounded to the next highest whole year.

`(f) Limitation on Amount of Bonds Designated-

`(1) NATIONAL LIMITATION- There is a national water conservation, reuse and efficiency bond limitation of $500,000,000 for each of the 10 calendar years beginning after the date of enactment of this section.

`(2) ALLOCATION BY SECRETARY- The Secretary shall allocate the amount described in paragraph (1) among qualified projects in such manner as the Secretary determines appropriate, except that the Secretary shall allocate the bond limitation for the financing of qualified projects in as geographically diverse a manner as practicable.

`(g) Credit Included in Gross Income- Gross income includes the amount of the credit allowed to the taxpayer under this section (determined without regard to subsection (c)), and the amount so included shall be treated as interest income.

`(h) Special Rules Relating to Expenditures-

`(1) IN GENERAL- An issue shall be treated as meeting the requirements of this subsection if, as of the date of issuance, the qualified issuer reasonably expects--

`(A) at least 95 percent of the proceeds of such issue are to be spent for 1 or more qualified projects within the 5-year period beginning on the date of issuance of the water conservation, reuse and efficiency bond,

`(B) a binding commitment with a 3rd party to spend at least 10 percent of the proceeds of such issue will be incurred within the 6-month period beginning on the date of issuance of the water conservation, reuse and efficiency bond or, in the case of a water conservation, reuse and efficiency bond the proceeds of which are to be loaned to 2 or more qualified borrowers, such binding commitment will be incurred within the 6-month period beginning on the date of the loan of such proceeds to a qualified borrower, and

`(C) such projects will be completed with due diligence and the proceeds of such issue will be spent with due diligence.

`(2) EXTENSION OF PERIOD- Upon submission of a request prior to the expiration of the period described in paragraph (1)(A), the Secretary may extend such period if the qualified issuer establishes that the failure to satisfy the 5-year requirement is due to reasonable cause and the related projects will continue to proceed with due diligence.

`(3) FAILURE TO SPEND REQUIRED AMOUNT OF BOND PROCEEDS WITHIN 5 YEARS- To the extent that less than 95 percent of the proceeds of such issue are expended by the close of the 5-year period beginning on the date of issuance (or if an extension has been obtained under paragraph (2), by the close of the extended period), the qualified issuer shall redeem all of the nonqualified bonds within 90 days after the end of such period. For purposes of this paragraph, the amount of the nonqualified bonds required to be redeemed shall be determined in the same manner as under section 142.

`(i) Special Rules Relating to Arbitrage- A bond which is part of an issue shall not be treated as a water conservation, reuse and efficiency bond unless, with respect to the issue of which the bond is a part, the qualified issuer satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue.

`(j) Municipal Water District; Qualified Water Systems Tax Credit Bond Lender; Governmental Body; Qualified Borrower- For purposes of this section--

`(1) MUNICIPAL WATER DISTRICT- The term `municipal water district' shall mean a non-profit private or public entity operated for the purpose of implementing rural water supply projects (as defined in section 102(9) of the Rural Water Supply Act of 2006).

`(2) QUALIFIED WATER SYSTEMS BOND LENDER- The term `qualified water systems bond lender' means a lender which is a municipal water district or a public water system which is owned by a governmental body, and shall include any affiliated entity which is controlled by such lender.

`(3) GOVERNMENTAL BODY- The term `governmental body' means any State, territory, or possession of the United States, the District of Columbia, Indian tribal government, and any political subdivision thereof.

`(4) QUALIFIED ISSUER- The term `qualified issuer' means--

`(A) a qualified water systems bond lender,

`(B) a municipal water district, or

`(C) a governmental body.

`(5) QUALIFIED BORROWER- The term `qualified borrower' means--

`(A) a municipal water district, or

`(B) a governmental body.

`(k) Special Rules Relating to Pool Bonds- No portion of a pooled financing bond may be allocable to any loan unless the borrower has entered into a written loan commitment for such portion prior to the issue date of such issue.

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

`(1) BOND- The term `bond' includes any obligation.

`(2) POOLED FINANCING BOND- The term `pooled financing bond' shall have the meaning given such term by section 149(f)(4)(A).

`(3) PARTNERSHIP; S CORPORATION; AND OTHER PASS-THRU ENTITIES-

`(A) IN GENERAL- Under regulations prescribed by the Secretary, in the case of a partnership, trusts corporation, or other pass-thru entity, rules similar to the rules of section 41(g) shall apply with respect to the credit allowable under subsection (a).

`(B) NO BASIS ADJUSTMENT- In the case of a bond held by a partnership or and corporation, rules similar to the rules under section 1397E(i) shall apply.

`(4) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any water conservation, reuse and efficiency bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.

`(5) RATABLE PRINCIPAL AMORTIZATION REQUIRED- A bond shall not be treated as a water conservation, reuse and efficiency bond unless it is part of an issue which provides for an equal amount of principal to be paid by the qualified issuer during each calendar year that the issue is outstanding.

`(6) REPORTING- Issuers of water conservation, reuse and efficiency bonds shall submit reports similar to the reports required under section 149(e).

`(m) Termination- This section shall not apply with respect to any bond issued after the tenth calendar year beginning after the date of the enactment of this section.'.

(b) Reporting- Subsection (d) of section 6049 (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph:

`(9) REPORTING OF CREDIT ON WATER CONSERVATION, REUSE AND EFFICIENCY BONDS-

`(A) IN GENERAL- For purposes of subsection (a), the term `interest' includes amounts includible in gross income under section 54A(g) and such amounts shall be treated as paid on the credit allowance date (as defined in section 54A(b)(4)).

`(B) REPORTING TO CORPORATIONS, ETC- Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A), subsection (b)(4) shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i) of such subsection.

`(C) REGULATORY AUTHORITY- The Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.'.

(c) Conforming Amendment- The table of sections for subpart H of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

`Sec. 54A. Credit to holders of water conservation, reuse and efficiency bonds.'.

(d) Issuance of Regulations- The Secretary of the Treasury shall issue regulations required under section 54A (as added by this section) not later than 120 days after the date of the enactment of this Act.

(e) Report on Use of Bond Authority- On April 1, 2008, and annually thereafter, the Secretary of Treasury shall submit a report to Congress including the number of applications for bonding authority received, granted and identifying the purposes and expected effects of projects supported by the bonding authority in the previous calendar year.

(f) Effective Date- The amendments made by this section shall apply to bonds issued after December 31, 2007.

SEC. 104. CREDIT FOR GEOTHERMAL EXPLORATION EXPENDITURES.

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

`SEC. 45O. CREDIT FOR GEOTHERMAL EXPLORATION EXPENDITURES.

`(a) In General- For purposes of section 38, the geothermal exploration expenditures credit for any taxable year is an amount equal to 10 percent of the qualifying geothermal exploration expenditures paid or incurred by the taxpayer during such taxable year.

`(b) Qualifying Geothermal Exploration Expenditures- For purposes of this section--

`(1) IN GENERAL- The term `qualifying geothermal exploration expenditures' means expenditures for drilling exploratory wells for geothermal deposits (as defined by section 613(e)(2)).

`(2) EXCEPTION- Such term shall not include expenditures for any equipment used to produce, distribute, or use energy derived from a geothermal deposit (as so defined) for which a credit is allowable under section 46 by reason of section 48.

`(c) Special Rules-

`(1) BASIS REDUCTION- For purposes of this subtitle, the basis of any property for which a credit is allowed under this section shall be reduced by the amount of the credit so allowed.

`(2) DENIAL OF DOUBLE BENEFIT- No deduction or credit (other than under section 45) shall be allowed under this subtitle with respect to any expenditures for which a credit is allowed under this section.'.

(b) Credit Made Part of General Business Credit- Section 38(b) (relating to current year business credit) is amended by striking `plus' at the end of paragraph (30), by striking the period at the end of paragraph (31) and inserting `, plus', and by adding at the end the following new paragraph:

`(32) the geothermal exploration expenditures credit determined under section 45O(a).'.

(c) Clerical Amendment- The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 45N the following new item:

`Sec. 45O. Credit for geothermal exploration expenditures.'.

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

SEC. 105. CREDIT FOR WIND ENERGY SYSTEMS.

(a) Residential-

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

`(4) 30 percent of the qualified small wind energy property expenditures made by the taxpayer during such year.'.

(2) LIMITATION- Section 25D(b)(1) is amended by striking `and' at the end of subparagraph (B), by striking the period at the end of subparagraph (A) and inserting `, and', and by adding at the end the following new subparagraph:

`(D) $500 with respect to each half kilowatt of capacity (not to exceed $5,000) of qualifying wind turbines for which qualified small wind energy property expenditures are made.'.

(3) QUALIFIED SMALL WIND ENERGY PROPERTY EXPENDITURES- Section 25D(d) is amended by adding at the end the following new paragraph:

`(4) QUALIFIED SMALL WIND ENERGY PROPERTY EXPENDITURE-

`(A) IN GENERAL- The term `qualified wind energy property expenditure' means an expenditure for property which uses a qualifying wind turbine to generate electricity for use in connection with a dwelling unit located in the United States and used as a residence by the taxpayer.

`(B) QUALIFYING WIND TURBINE- The term `qualifying wind turbine' means a wind turbine of 100 kilowatts of rated capacity or less which meets the latest performance rating standards published by the American Wind Energy Association and which is used to generate electricity and carries at least a 5-year limited warranty covering defects in design, material, or workmanship, and, for property that is not installed by the taxpayer, at least a 5-year limited warranty covering defects in installation.'.

(b) Business- Section 48(a)(3)(A) (defining energy property) is amended by striking `or' at the end of clause (iii), by adding `or' at the end of clause (iv), and by inserting after clause (iv) the following new clause:

`(v) qualifying wind turbine (as defined in section 25D(d)(B)),'.

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

SEC. 106. EXTENSION AND MODIFICATION OF NEW ENERGY EFFICIENT HOME CREDIT.

(a) Extension- Subsection (g) of section 45L (relating to termination) is amended by striking `2008' and inserting `2013'.

(b) Increase of Credit- Paragraph (2) of subsection 45L(a) (relating to applicable amount) is amended to read as follows:

`(2) APPLICABLE AMOUNT- For purposes of paragraph (1), the applicable amount is an amount equal to, in the case of a dwelling unit described in--

`(A) subsection (c)(1), $4,000,

`(B) subsection (c)(2), $2,000, and

`(C) subsection (c)(3), $1,000.'.

(c) Effective Date- The amendments made by this section shall apply to qualified new energy efficient homes acquired after the date of the enactment of this Act, in taxable years ending after such date.

SEC. 107. INVESTMENT TAX CREDIT FOR ADVANCED BATTERY PRODUCTION.

(a) In General- Section 48(a)(3)(A) is amended--

(1) by striking `or' at the end of clause (iii),

(2) by inserting `or' at the end of clause (iv), and

(3) by inserting after clause (iv) the following new clause:

`(v) equipment used to produce at least 75 percent of any advanced battery and related power electronics intended for use in--

`(I) any qualified electric vehicle (as defined in section 30(c)(1)(A)) or new qualified hybrid motor vehicle (as defined in section 30B(d)(3)(A), without regard to clauses (v) and (vi) thereof), or

`(II) any grid-enabled or distributed residential or small commercial application,'.

(b) Rate of Energy Percentage- Section 48(a)(2)(A) is amended--

(1) by striking `and' at the end of clause (i)(III),

(2) by striking `clause (i)' in clause (ii) and inserting `clause (i) or clause (ii)',

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

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

`(ii) 20 percent in the case of energy property described in paragraph (3)(A)(v), and'.

(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.

SEC. 108. QUALIFIED RENEWABLE SCHOOL ENERGY BONDS.

(a) In General- Subchapter U of chapter 1 (relating to incentives for education zones) is amended by redesignating section 1397F as section 1397G and by adding at the end of part IV of such subchapter the following new section:

`SEC. 1397F. QUALIFIED RENEWABLE SCHOOL ENERGY BONDS.

`(a) Allowance of Credit- If a taxpayer holds a qualified renewable school energy bond on 1 or more credit allowance dates of the bond occurring during any taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to such dates.

`(b) Amount of Credit-

`(1) IN GENERAL- The amount of the credit determined under this subsection with respect to any credit allowance date for a qualified renewable school energy bond is 25 percent of the annual credit determined with respect to such bond.

`(2) ANNUAL CREDIT- The annual credit determined with respect to any qualified renewable school energy bond is the product of--

`(A) the credit rate determined by the Secretary under paragraph (3) for the day on which such bond was sold, multiplied by

`(B) the outstanding face amount of the bond.

`(3) DETERMINATION- For purposes of paragraph (2), with respect to any qualified renewable school energy bond, the Secretary shall determine daily or cause to be determined daily a credit rate which shall apply to the first day on which there is a binding, written contract for the sale or exchange of the bond. The credit rate for any day is the credit rate which the Secretary or the Secretary's designee estimates will permit the issuance of qualified renewable school energy bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer.

`(4) CREDIT ALLOWANCE DATE- For purposes of this section, the term `credit allowance date' means--

`(A) March 15,

`(B) June 15,

`(C) September 15, and

`(D) December 15.

Such term also includes the last day on which the bond is outstanding.

`(c) Limitation Based on Amount of Tax- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--

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

`(2) the sum of the credits allowable under part IV of subchapter A (other than subpart C thereof, relating to refundable credits, subpart H thereof, section 1400N(l), and this section).

`(d) Qualified Renewable School Energy Bond- For purposes of this section--

`(1) IN GENERAL- The term `renewable school energy bond' means any bond issued as part of an issue if--

`(A) 95 percent or more of the proceeds of such issue are to be used for a qualified purpose with respect to a qualified school operated by an eligible local education agency,

`(B) the bond is issued by a State or local government of an eligible State within the jurisdiction of which such school is located,

`(C) the issuer--

`(i) designates such bond for purposes of this section, and

`(ii) certifies that it has the written approval of the eligible local education agency for such bond issuance, and

`(D) the term of each bond which is part of such issue is 20 years.

`(2) QUALIFIED SCHOOL- The term `qualified school' means any public school or public school system administrative building which is owned by or operated by an eligible local education agency.

`(3) ELIGIBLE LOCAL EDUCATION AGENCY- The term `eligible local education agency' means any local educational agency as defined in section 9101 of the Elementary and Secondary Education Act of 1965.

`(4) ELIGIBLE STATE- The term `eligible State' means, with respect to any calendar year, any State described in one of the following:

`(A) The 5 States within Region 4 of the United States Census with the greatest percentage population growth change between 2000 and 2006 as determined under the Cumulative Estimates of Population Change for the United States and States, and for Puerto Rico--April 1, 2000 to July 1, 2006, by the Bureau of the Census.

`(B) The State with a total percentage population growth change between 2000 and 2006 greater than 4.5 percent but less than 5.0 percent and a total population 19 years of age and younger which is greater than 200,000 but less than 250,000 as determined under such Cumulative Estimates and the 2005 American Community Survey by the Bureau of the Census.

`(5) QUALIFIED PURPOSE- The term `qualified purpose' means, with respect to any qualified school, the purchase and installation of renewable energy products.

`(e) Limitation on Amount of Bonds Designated-

`(1) NATIONAL LIMITATION- There is a national renewable school energy bond limitation for each calendar year. Such limitation is $50,000,000 for 2008, $100,000,000 for 2009, $150,000,000 for 2010, and, except as provided in paragraph (4), zero thereafter.

`(2) ALLOCATION OF LIMITATION- The national renewable school energy bond limitation for a calendar year shall be allocated by the Secretary--

`(A) among the eligible States described in subsection (d)(4)(A), 30 percent to the State with the greatest percentage population growth, 20 percent to each of second and third ranked States, and 10 percent to each of the fourth and fifth ranked States, and

`(B) to the State described in subsection (d)(4)(B), 10 percent.

The limitation amount allocated to an eligible State under the preceding sentence shall be allocated by the State education agency to qualified schools within such State.

`(3) DESIGNATION SUBJECT TO LIMITATION AMOUNT- The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (d)(1) with respect to any qualified school shall not exceed the limitation amount allocated to such school under paragraph (2) for such calendar year.

`(4) CARRYOVER OF UNUSED LIMITATION- If for any calendar year--

`(A) the limitation amount for any eligible State, exceeds

`(B) the amount of bonds issued during such year which are designated under subsection (d)(1) with respect to qualified schools within such State,

the limitation amount for such State for the following calendar year shall be increased by the amount of such excess. Any carryforward of a limitation amount may be carried only to the first 2 years following the unused limitation year. For purposes of the preceding sentence, a limitation amount shall be treated as used on a first-in first-out basis.

`(f) Other Definitions- For purposes of this section--

`(1) BOND- The term `bond' includes any obligation.

`(2) STATE- The term `State' includes the District of Columbia and any possession of the United States.

`(g) Credit Included in Gross Income- Gross income includes the amount of the credit allowed to the taxpayer under this section (determined without regard to subsection (c)).

`(h) Credits May Be Stripped- Under regulations prescribed by the Secretary--

`(1) IN GENERAL- There may be a separation (including at issuance) of the ownership of a qualified renewable school 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 which, on the credit allowance date, holds the instrument evidencing the entitlement to the credit and not to the holder of the bond.

`(2) CERTAIN RULES TO APPLY- In the case of a separation described in paragraph (1), the rules of section 1286 shall apply to the qualified renewable school energy bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon.

`(i) Credit Treated as Nonrefundable Bondholder Credit- For purposes of this title, the credit allowed by this section shall be treated as a credit allowable under subpart H of part IV of subchapter A of this chapter.

`(j) Special Rules- For purposes of this section, rules similar to the rules under paragraphs (3) and (4) of section 54(l) shall apply.'.

(b) Conforming Amendments- The table of sections for part V of such subchapter is amended by redesignating section 1397F as section 1397G and by adding at the end of the table of sections for part IV of such subchapter the following new item:

`Sec. 1397F. Credit for holders of qualified renewable school energy bonds.'.

SEC. 109. TREATMENT OF BONDS ISSUED TO FINANCE RENEWABLE ENERGY RESOURCE FACILITIES.

(a) In General- Subsection (a) of section 142 (relating to exempt facility bond) is amended--

(1) by striking `or' at the end of paragraph (14),

(2) by striking the period at the end of paragraph (15) and inserting `, or', and

(3) by inserting at the end the following new paragraph:

`(16) renewable energy resource facilities.'.

(b) Definition- Section 142 is amended by inserting at the end the following new subsection:

`(n) Renewable Energy Resource Facilities- For purposes of subsection (a)(16)--

`(1) IN GENERAL- The term `renewable energy resource facility' means any facility used to produce electric or thermal energy (including a distributed generation facility) from--

`(A) wind energy,

`(B) closed-loop biomass (within the meaning of section 45(c(2)),

`(C) open-loop biomass (as defined in section 45(c)(3),

`(D) geothermal energy (as defined in section 45(c)(4),

`(E) solar energy,

`(F) land fill gas derived from the biodegradation of municipal solid waste (as defined in section 45(c)(6),

`(G) incremental hydropower production (as determined under section 45(c)(8)(B), or

`(H) ocean energy.

`(2) OCEAN ENERGY- The term `ocean energy' includes current, wave, tidal, and thermal energy.'.

(c) Coordination With Section 45- Section 45(b)(3) is amended by adding at the end the following new sentence: `For purposes of this paragraph, proceeds of an issue used to provide financing for any qualified facility by reason of section 142(a)(16) shall not be taken into account under subparagraph (A)(ii).'.

(d) Effective Date- The amendments made by this section shall apply with respect to bonds issued on or after the date of the enactment of this Act.

TITLE II--INVESTMENT TAX CREDIT WITH RESPECT TO SOLAR ENERGY PROPERTY AND MANUFACTURING

Subtitle A--Solar Energy Property

SEC. 201. ENERGY CREDIT WITH RESPECT TO SOLAR ENERGY PROPERTY.

(a) Permanent Extension of Credit for Solar Energy Property- Paragraphs (2)(A)(i)(II) and (3)(A)(ii) of section 48(a) (relating to the energy credit) are each amended by striking `but only with respect to periods ending before January 1, 2009'.

(b) Energy Property To Include Excess Energy Storage Device- Clause (i) of section 48(a)(3)(A) (relating to energy property) 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,'.

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

(A) IN GENERAL- Subsection (a) of section 48 (relating to the energy credit) 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 ELECTRIC ENERGY PROPERTY-

`(A) IN GENERAL- For purposes of section 46, the energy credit for any taxable year for solar electric 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 direct current of installed capacity of such property. Paragraph (2)(A) 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 AMENDMENTS- Subsection (a) of section 48 is amended--

(i) in paragraph (1), by inserting `in paragraph (4) and' after `except as provided', and

(ii) in paragraph (2)(A)(i)(II), 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'.

(d) Credit Allowed Against the Alternative Minimum Tax- Section 38(c)(4)(B) (relating to specified credits) is amended by--

(1) striking `and' at the end of clause (i),

(2) striking the period at the end of clause (ii)(II) and inserting `, and', and

(3) adding at the end the following new clause:

`(iii) the portion of the investment credit under section 46(2) which is determined under clauses (i) and (ii) of section 48(a)(3)(A).'.

(e) Effective Date- The amendment made by subsection (a) shall apply to periods after December 31, 2007, in taxable years beginning after such date, under rules similar to the rules of section 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

SEC. 202. REPEAL OF EXCLUSION FOR SOLAR AND GEOTHERMAL PUBLIC UTILITY PROPERTY UNDER ENERGY CREDIT.

(a) In General- The second sentence of section 48(a)(3) is amended by inserting `(other than property described in clause (i) or (iii) of subparagraph (A))' after `any property'.

(b) Effective Date- The amendment made by subsection (a) shall apply to periods after December 31, 2007, in taxable years beginning after such date, under rules similar to the rules of section 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

SEC. 203. PERMANENT EXTENSION AND MODIFICATION OF CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.

(a) Permanent Extension- Section 25D is amended by striking subsection (g) (relating to termination).

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

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

`(1) MAXIMUM CREDIT- The credit allowed under subsection (a) (determined without regard to subsection (c)) for any taxable year shall not exceed--

`(A) $1,500 with respect to each half kilowatt of direct current 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 heating and cooling 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 Heating and Cooling Property Expenditure-

(1) IN GENERAL- Paragraph (1) of section 25D(d) (relating to definitions) is amended to read as follows:

`(2) QUALIFIED SOLAR HEATING AND COOLING PROPERTY EXPENDITURE- The term `qualified solar heating and cooling property expenditure' means an expenditure for property to heat or cool (or provide hot water for use in) a dwelling unit located in the United States and used as a residence by the taxpayer if at least half of the energy used by such property for such purpose is derived from the sun. Such term shall not include an expenditure which is a qualified solar electric property expenditure.'.

(2) CONFORMING AMENDMENTS- Section 25D (relating to residential energy efficient property) is amended--

(A) by striking `solar water heating' in subsections (a)(2) and (e)(4)(A)(ii) and inserting `solar heating and cooling', and

(B) by striking the heading for subsection (b)(2) and inserting the following new heading: `(2) CERTIFICATION OF SOLAR HEATING AND COOLING PROPERTY.'.

(e) Credit Allowed Against Alternative Minimum Tax-

(1) IN GENERAL- Section 25D(b) (relating to limitations), as amended by subsection (c), 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 (relating to carryforward of unused credit) 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) (relating to limitation based on amount of tax) is amended by inserting `and section 25D' after `this section'.

(C) Section 24(b)(3)(B) (relating to limitation based on amount of tax) is amended by striking `sections 23 and 25B' and inserting `sections 23, 25B, and 25D'.

(D) Section 26(a)(1) (relating to limitation based on amount of tax) is amended by striking `and 25B' and inserting `25B, and 25D'.

(f) Effective Date- The amendments made by this section shall apply to expenditures made in taxable years beginning after December 31, 2007.

SEC. 204. 3-YEAR ACCELERATED DEPRECIATION PERIOD FOR SOLAR ENERGY PROPERTY.

(a) In General- Subparagraph (A) of section 168(e)(3) (relating to 3-year property) is amended--

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

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

(3) by inserting after clause (iii) the following new clauses:

`(iv) any property which is described in clause (i) or (ii) of section 48(a)(3)(A) (or would be so described if the last sentence of such section did not apply to such clause), and

`(v) any property which is described in clause (iv) of section 48(a)(3)(A).'.

(b) Conforming Amendment- Subclause (I) of section 168(e)(3)(B)(vi) (relating to 5-year property) is amended to read as follows:

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

(c) Effective Date- The amendments made by this section shall apply to property placed in service after December 31, 2007.

Subtitle B--Promotion of Solar Manufacturing in the United States

SEC. 211. SOLAR MANUFACTURING CREDIT.

(a) In General- Subpart E of part IV of subchapter A of chapter 1 (relating to rules for computing investment credit) is amended by inserting after section 48B the following new section:

`SEC. 48C. SOLAR MANUFACTURING CREDIT.

`(a) Credit Allowed- For purposes of section 46, the solar manufacturing credit for any taxable year is an amount equal to 30 percent of the qualified investment for such taxable year.

`(b) Qualified Investment- For purposes of this section--

`(1) IN GENERAL- The qualified investment for any taxable year is equal to the incremental costs incurred during such taxable year to re-equip, expand, or establish an eligible manufacturing facility--

`(A) to produce polysilicon for use in solar cells, wafers manufactured for solar cells, and solar photovoltaic cells,

`(B) to produce or assemble solar photovoltaic modules,

`(C) to produce or assemble solar thermal panels and solar thermal storage tanks, or

`(D) to produce concentrated solar power equipment.

`(2) EXCEPTIONS- The qualified investment for any taxable year shall not include--

`(A) assets utilized to produce the materials consumed in the production of solar photovoltaic modules, such as aluminum extrusions, glass, encapsulants, inverters, and mounting hardware, and

`(B) assets utilized to produce the materials consumed in the production of solar thermal panels, such as aluminum extrusions, glass, copper, and mounting hardware.

`(3) CERTAIN QUALIFIED PROGRESS EXPENDITURES MADE APPLICABLE- Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.

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

`(1) ELIGIBLE MANUFACTURING FACILITY- The term `eligible manufacturing facility' means any manufacturing facility for which more than 50 percent of the gross receipts for the taxable year are derived from sales of solar equipment.

`(2) SOLAR PHOTOVOLTAIC CELL- The term `solar photovoltaic cell' means the semiconductor device which converts photons from light into electricity.

`(3) SOLAR PHOTOVOLTAIC MODULE- The term `solar photovoltaic module' means an assembly of multiple interconnected solar photovoltaic cells that are sized and packaged for installation and deployment in a specific application.'.

(b) Credit Treated as Part of Investment Credit- 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 solar manufacturing credit.'.

(c) Certain Nonrecourse Financing Excluded From Credit Base- Section 49(a)(1)(C) (defining credit base) 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 property which is part of the solar manufacturing credit under section 48C.'.

(d) Effective Date- The amendments made by this section shall apply to periods after December 31, 2007, in taxable years beginning after such date, under rules similar to the rules of section 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

END