[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1048 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                S. 1048

  To provide for a more competitive electric power industry, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 13, 1999

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

_______________________________________________________________________

                                 A BILL


 
  To provide for a more competitive electric power industry, 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.

    This Act may be cited as the ``Comprehensive Electricity 
Competition Tax Act''.

SEC. 2. TABLE OF CONTENTS.

Sec. 1. Short title.
Sec. 2. Table of contents.
              TITLE I--AMENDMENTS TO INTERNAL REVENUE CODE

Sec. 101. Treatment of bonds issued to finance electric output 
                            facilities.
Sec. 102. Nuclear decommissioning costs.
Sec. 103. Depreciation treatment of distributed power property.
Sec. 104. Tax credit for combined heat and power system property.

              TITLE I--AMENDMENTS TO INTERNAL REVENUE CODE

SEC. 101. TREATMENT OF BONDS ISSUED TO FINANCE ELECTRIC OUTPUT 
              FACILITIES.

    (a) In General.--Section 141 of the Internal Revenue Code of 1986 
(relating to private activity bond; qualified bond) is amended by 
redesignating subsection (e) as subsection (f) and inserting after 
subsection (d) the following new subsection:
    ``(e) Bonds for Electric Output Facilities.--
            ``(1) Bonds issued before enactment of comprehensive 
        electricity competition act.--
                    ``(A) In general.--The determination of whether any 
                pre-effective date electric output facility bond is a 
                private activity bond (or an industrial development 
                bond under the Internal Revenue Code of 1954) shall be 
                made without regard to any permissible competitive 
                actions taken by the issuer.
                    ``(B) Pre-effective date electric output facility 
                bond.--For purposes of subparagraph (A), the term `pre-
                effective date electric output facility bond' means any 
                bond issued as part of an issue if--
                            ``(i) such bond was issued before the date 
                        of the enactment of the Comprehensive 
                        Electricity Competition Act,
                            ``(ii) any portion of the proceeds of such 
                        issue was used with respect to an electric 
                        output facility, and
                            ``(iii) the bond was not, as of such date 
                        of enactment, a private activity bond (or an 
                        industrial development bond under the Internal 
                        Revenue Code of 1954).
                    ``(C) Permissible competitive actions.--For 
                purposes of subparagraph (A), the term `permissible 
                competitive actions' means any action taken by the 
                issuer on or after the date of the enactment of the 
                Comprehensive Electricity Competition Act regarding--
                            ``(i) transmission property owned by the 
                        issuer if the issuer is subject to an order of 
                        the Federal Energy Regulatory Commission 
                        requiring nondiscriminatory, open access to 
                        transmission facilities in a manner consistent 
                        with rules promulgated by the Commission 
under sections 205 and 206 of the Federal Power Act (as in effect on 
the date of the enactment of the Comprehensive Electricity Competition 
Act), or
                            ``(ii) generation property or distribution 
                        property owned by the issuer if the issuer--
                                    ``(I) implements retail competition 
                                under section 609 of the Public Utility 
                                Regulatory Policies Act of 1978, or
                                    ``(II) enters into a contract for 
                                the sale of electricity or use of its 
                                distribution property which will not 
                                become effective prior to the date that 
                                the issuer implements retail 
                                competition under section 609 of the 
                                Public Utility Regulatory Policies Act 
                                of 1978.
            ``(2) Bond issued on or after enactment of comprehensive 
        electricity competition act.--
                    ``(A) In general.--For purposes of this title, the 
                term `private activity bond' includes any bond issued 
                as part of an issue any of the proceeds of which are to 
                be used (directly on indirectly) for electric output 
                facilities other than distribution property.
                    ``(B) Distribution property.--For purposes of 
                subparagraph (A), the term `distribution property' 
                means any output facility, including functionally 
                related and subordinate property, that operates at 69 
                kilovolts or less.''.
    (b) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendment made by this section shall apply to 
        obligations issued on or after the date of the enactment of 
        this Act.
            (2) Treatment of pre-effective date bonds.--Section 
        141(e)(1) of the Internal Revenue Code of 1986, as added by 
        this section, shall take effect on the date of enactment of 
        this Act.
            (3) Refunding bonds.--
                    (A) In general.--For purposes of this subsection 
                and the amendment made by this section, section 
                141(e)(2) of the Internal Revenue Code of 1986, as 
                added by this section, shall not apply to any qualified 
                refunding bond.
                    (B) Qualified refunding bond.--For purposes of 
                subparagraph (A), the term ``qualified refunding bond'' 
                means any bond (or a bond that is part of a series of 
                refundings) issued to refund a pre-effective date 
                electric output facility bond if--
                            (i) the weighted average maturity of the 
                        issue of which the refunding bond is a part 
                        does not exceed 120 percent of the average 
                        reasonably expected economic life of the 
                        facilities being financed with the net proceeds 
                        of such issue (determined under section 147(b) 
                        of such Code),
                            (ii) the amount of the refunding bond does 
                        not exceed the outstanding amount of the 
                        refunded bond, and
                            (iii) the net proceeds of the refunding 
                        bond are used to redeem the refunded bond not 
                        later than 90 days after the date of issuance 
                        of the refunding bond.

SEC. 102. NUCLEAR DECOMMISSIONING COSTS.

    (a) In General.--Subsection (b) of section 468A of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(b) Limitation on Amount Paid Into Fund.--The amount which a 
taxpayer may pay into the Fund for any taxable year shall not exceed 
the ruling amount applicable to such taxable year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 103. DEPRECIATION TREATMENT OF DISTRIBUTED POWER PROPERTY.

    (a) In General.--Section 168(e)(3)(E) of the Internal Revenue Code 
(classifying certain property as 15-year property) is amended by 
striking ``and'' at the end of clause (ii), striking the period at the 
end of clause (iii) and inserting ``, and'', and by adding the 
following new clause:
                            ``(iv) any distributed power property.''.
    (b) Conforming Amendments.--(1) Section 168(i) is amended by adding 
at the end following new paragraph:
            ``(15) Distributed power property.--The term `distributed 
        power property' means property--
                    ``(A) which is used in the generation of 
                electricity for primary use--
                            ``(i) in nonresidential real or residential 
                        rental property used in the taxpayer's trade or 
                        business, or
                            ``(ii) in the taxpayer's industrial 
                        manufacturing process or plant activity, with a 
                        rated total capacity in excess of 500 
                        kilowatts,
                    ``(B) which also may produce usable thermal energy 
                or mechanical power for use in a heating or cooling 
                application, as long as at least 40 percent of the 
                total useful energy produced consists of--
                            ``(i) with respect to assets described in 
                        subparagraph (A)(i), electrical power (whether 
                        sold or used by the taxpayer), or
                            ``(ii) with respect to assets described in 
                        subparagraph (A)(ii), electrical power (whether 
                        sold or used by the taxpayer) and thermal or 
                        mechanical energy used in the taxpayer's 
                        industrial manufacturing process or plant 
                        activity,
                    ``(C) which is not used to transport primary fuel 
                to the generating facility or to distribute energy 
                within or outside of the facility, and
                    ``(D) where it is reasonably expected that not more 
                than 50 percent of the produced electricity will be 
                sold to, or used by, unrelated persons.
        For purposes of subparagraph (B), energy output is determined 
        on the basis of expected annual output levels, measured in 
        British thermal units (Btu), using standard conversion factors 
        established by the Secretary.''.
            (2) Subparagraph (B) of section 168(g)(3) is amended by 
        inserting after the item relating to subparagraph (E)(iii) in 
        the table contained therein the following new line:
                    ``(E)(iv) 22''.
    (c) Effective Date.--The amendments made by this section are 
effective for property placed in service on or after the date of 
enactment.

SEC. 104. TAX CREDIT FOR COMBINED HEAT AND POWER SYSTEM PROPERTY.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 48 the following new section:

``SEC. 48A. ENERGY CREDIT.

    ``(a) In General.--For purposes of section 46, the energy credit 
for any taxable year is the amount equal to the energy percentage of 
the basis of each energy property placed in service during such taxable 
year.
    ``(b) Energy Percentage.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the energy percentage is 10 percent.
            ``(2) Combined heat and power property.--The energy 
        percentage is 8 percent in the case of combined heat and power 
        property.
            ``(3) Period for which credit is allowed for combined heat 
        and power property.--In the case of combined heat and power 
        property, the credit under subsection (a) shall be allowed only 
        for the period beginning on January 1, 2000 and ending on 
        December 31, 2002.
            ``(4) Coordination with rehabilitation.--The energy 
        percentage does not apply to that portion of the basis of any 
        property which is attributable to qualified rehabilitation 
        expenditures.
            ``(5) Transition rules.--Rules similar to the rule of 
        section 48(m) (as in effect on the day before the date of the 
        enactment of the Revenue Reconciliation Act of 1990) shall 
        apply for purposes of this subsection.
    ``(c) Energy Property Defined.--
            ``(1) In general.--For purposes of this subpart, the term 
        `energy property' means any property--
                    ``(A) which is--
                            ``(i) solar energy property,
                            ``(ii) geothermal energy property, or
                            ``(iii) combined heat and power system 
                        property,
                    ``(B)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, or
                    ``(ii) which is acquired by the taxpayer if the 
                original use of such property commences with the 
                taxpayer,
                    ``(C) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable, and
                    ``(D) which meets--
                            ``(i) the performance and quality standards 
                        (if any), and the certification requirements 
                        (if any), which have been prescribed by the 
                        Secretary by regulations (after consultation 
                        with the Secretary of Energy or the EPA 
                        Administrator, as appropriate), and
                            ``(ii) are in effect at the time the 
                        property is placed in service.
            ``(2) Exception.--Such term shall not include any property 
        which is public utility property (as defined in section 
        46(f)(5) as in effect on the day before the date of the 
        enactment of the Revenue Reconciliation Act of 1990). The 
        preceding sentence shall not apply to combined heat and power 
        system property.
    ``(d) Definitions Relating to Types of Energy Property.--For 
purposes of this section--
            ``(1) Solar energy property.--The term `solar energy 
        property' means equipment which uses solar energy--
                    ``(A) to generate electricity,
                    ``(B) to heat or cool (or provide hot water for use 
                in) a structure, or
                    ``(C) to provide solar process heat.
            ``(2) Geothermal energy property.--The term `geothermal 
        energy property' means equipment used to produce, distribute, 
        or use energy derived from a geothermal deposit (within the 
        meaning of section 613(e)(2)), but only, in the case of 
        electricity generated by geothermal power, up to (but not 
        including) the electrical transmission stage.
            ``(3) Combined heat and power system property.--
                    ``(A) In general.--The term `combined heat and 
                power system property' means property comprising a 
                system--
                            ``(i) which uses the same energy source for 
                        the simultaneous or sequential generation of 
                        electrical power, mechanical shaft power, or 
                        both, in combination with the generation of 
                        steam or other forms of useful thermal energy 
                        (including heating and cooling applications),
                            ``(ii) which has an electrical capacity of 
                        more than 50 kilowatts or a mechanical energy 
                        capacity of more than 67 horsepower or an 
                        equivalent combination of electrical and 
                        mechanical energy capacities,
                            ``(iii) which produces--
                                    ``(I) at least 20 percent of its 
                                total useful energy in the form of 
                                thermal energy, and
                                    ``(II) at least 20 percent of its 
                                total energy in the form of electrical 
                                or mechanical power (or a combination 
                                thereof), and
                            ``(iv) the energy efficiency percentage of 
                        which exceeds 60 percent (70 percent in the 
                        case of a system with an electrical capacity in 
                        excess of 50 megawatts or a mechanical energy 
                        capacity in excess of 67,000 horsepower (or a 
                        combination thereof)).
                    ``(B) Special rules.--
                            ``(i) Energy efficiency percentage.--For 
                        purposes of subparagraph (A)(iv), the energy 
                        efficiency percentage of a system is the 
                        fraction--
                                    ``(I) the numerator of which is the 
                                total useful electrical, thermal, and 
                                mechanical power produced by the system 
                                at normal operating rates, and
                                    ``(II) the denominator of which is 
                                the lower heating value of the primary 
                                fuel source for the system.
                            ``(ii) Determinations made on btu basis.--
                        The energy efficiency percentage and the 
                        percentages under subparagraph (A)(iii) shall 
                        be determined on a Btu basis.
                            ``(iii) Input and output property not 
                        included.--The term `combined heat and power 
system property' does not include property used to transport the energy 
source to the facility or to distribute energy produced by the 
facility.
                            ``(iv) Accounting rule for public utility 
                        property.--In the case that combined heat and 
                        power system property is public utility 
                        property (as defined in section 46(f)(5) as in 
                        effect on the day before the date of the 
                        enactment of the Revenue Reconciliation Act of 
                        1990), the taxpayer may claim the credit under 
                        subsection (a)(1) only if, with respect to such 
                        property, the taxpayer uses a normalization 
                        method of accounting.
                            ``(v) Depreciation.--No credit shall be 
                        allowed for any combined heat and power system 
                        property unless the taxpayer elects to treat 
                        such property for purposes of section 168 as 
                        having a class life of not less than 22 years.
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Special rule for property financed by subsidized 
        energy financing or industrial development bonds.--
                    ``(A) Reduction of basis.--For purposes of applying 
                the energy percentage to any property, if such property 
                is financed in whole or in part by--
                            ``(i) subsidized energy financing, or
                            ``(ii) the proceeds of a private activity 
                        bond (within the meaning of section 141) the 
                        interest on which is exempt from tax under 
                        section 103, the amount taken into account as 
                        the basis of such property shall not exceed the 
                        amount which (but for this subparagraph) would 
                        be so taken into account multiplied by the 
                        fraction determined under subparagraph (B).
                    ``(B) Determination of fraction.--For purposes of 
                subparagraph (A), the fraction determined under this 
                subparagraph is 1 reduced by a fraction--
                            ``(i) the numerator of which is that 
                        portion of the basis of the property which is 
                        allocable to such financing or proceeds, and
                            ``(ii) the denominator of which is the 
                        basis of the property.
                    ``(C) Subsidized energy financing.--For purposes of 
                subparagraph (A), the term `subsidized energy 
                financing' means financing provided under a Federal, 
                State, or local program a principal purpose of which is 
                to provide subsidized financing for projects designed 
                to conserve or produce energy.
            ``(2) Certain progress expenditure rules made applicable.--
        Rules similar to the rules of subsections (c)(4) and (d) of 
        section 46 (as in effect on the day before the date of the 
        enactment of the Revenue Reconciliation Act of 1990) shall 
        apply for purposes of this section.''.
    (b) Conforming Amendments.--
            (1) Section 48 of such Code is amended to read as follows:

``SEC. 48. REFORESTATION CREDIT.

    ``(a) In General.--For purposes of section 46, the reforestation 
credit for any taxable year is 10 percent of the portion of the 
amortizable basis of any qualified timber property which was acquired 
during such taxable year and which is taken into account under section 
194 (after the application of section 194(b)(1)).
    ``(b) Definitions.--For purposes of this subpart, the terms 
`amortizable basis' and `qualified timber property' have the respective 
meanings given to such terms by section 194.''.
            (2) Subsection (d) of section 39 of such Code is amended by 
        adding at the end the following new paragraph:
            ``(9) No carryback of energy credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the energy credit determined 
        under section 48A, except for the credit determined with 
        respect to solar energy property and geothermal energy 
        property, may be carried back to a taxable year ending before 
        the date of the enactment of section 48A.''.
            (3) Paragraph (3) of section 50(c) of such Code is amended 
        by adding at the end the following flush sentence:
``In the case of the energy credit, the preceding sentence shall apply 
only to so much of such credit as relates to solar energy property and 
geothermal property (as such terms are defined in section 48A(e)).''.
            (4) Subclause (III) of section 29(b)(3)(A)(i) of such Code 
        is amended by striking ``section 48(a)(4)(C)'' and inserting 
        ``section 48A(g)(1)(C)''.
            (5) Subparagraph (E) of section 50(a)(2) of such Code is 
        amended by striking ``section 48(a)(5)'' and inserting 
        ``section 48A(g)(2)''.
            (6) Subparagraph (B) of section 168(e)(3) of such Code is 
        amended--
                    (A) in clause (vi)(I) by striking ``section 
                48(a)(3)'' and inserting ``paragraphs (1) and (2) of 
                section 48A(d)'', and
                    (B) in the last sentence by striking ``section 
                48(a)(3)'' and inserting ``section 48A(c)(2)''.
            (7) Subparagraph (E) of section 168(e)(3) of such Code, as 
        amended by section 803(a), is further 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 
        inserting after clause (iv) the following new clause:
                            ``(v) any combined heat and power system 
                        property (as defined in section 48A(d)(4)) for 
                        which a credit is allowed under section 48A and 
                        which, but for this clause, would have a 
                        recovery period of less than 15 years.''.
            (8) The table contained in subparagraph (B) of section 
        168(g)(3) of such Code, as amended by section 803(b)(2), is 
        further amended by adding at the end the following:
                    ``(E)(v) 22''.
    (c) Clerical Amendment.--The table of sections for subpart E of 
part IV of subchapter A of chapter 1 of such Code is amended by 
striking the item relating to section 48 and inserting the following 
new items:

                              ``Sec. 48. Reforestation credit.
                              ``Sec. 48A. Energy credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to periods after December 31, 1999, 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).
                                 <all>