[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1566 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1566

  To amend the Internal Revenue Code of 1986 to modify and expand the 
  credit for electricity produced from renewable resources and waste 
                   products, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 18, 2001

Mr. Reid (for himself and Mr. Smith of Oregon) 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 modify and expand the 
  credit for electricity produced from renewable resources and waste 
                   products, 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; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Renewable Energy 
Incentives Act''.
    (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. 2. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED FROM RENEWABLE 
              RESOURCES AND WASTE PRODUCTS.

    (a) Increase in Credit Rate.--
            (1) In general.--Section 45(a)(1) is amended by striking 
        ``1.5 cents'' and inserting ``1.8 cents''.
            (2) Conforming amendments.--
                    (A) Section 45(b)(2) is amended by striking ``1.5 
                cent'' and inserting ``1.8 cent''.
                    (B) Section 45(d)(2)(B) is amended by inserting 
                ``(calendar year 2001 in the case of the 1.8 cent 
                amount in subsection (a))'' after ``1992''.
    (b) Expansion of Qualified Resources.--
            (1) In general.--Section 45(c)(1) (relating to qualified 
        energy resources) is amended by striking ``and'' at the end of 
        subparagraph (B), by striking the period at the end of 
        subparagraph (C) and inserting ``, and'', and by adding at the 
        end the following:
                    ``(D) alternative resources.''.
            (2) Definition of alternative resources.--Section 45(c) 
        (relating to definitions) is amended--
                    (A) by redesignating paragraph (3) as paragraph 
                (5),
                    (B) by redesignating paragraph (4) as paragraph 
                (3), and
                    (C) by inserting after paragraph (3), as 
                redesignated by subparagraph (B), the following:
            ``(4) Alternative Resources.--
                    ``(A) In general.--The term `alternative resources' 
                means--
                            ``(i) solar,
                            ``(ii) open loop biomass,
                            ``(iii) geothermal,
                            ``(iv) incremental geothermal,
                            ``(v) incremental hydropower, and
                            ``(v) landfill gas.
                    ``(B) Open loop biomass.--The term `open loop 
                biomass' means any nonhazardous, cellulosic waste 
                material, which is segregated from other waste 
                materials and derived from--
                            ``(i) a forest-related resource, including 
                        mill and harvesting residue, precommercial 
                        thinnings, slash, and brush,
                            ``(ii) an agricultural source, including 
                        orchard tree crops, vineyards, grain, legumes, 
                        sugar, and other crop by-products or residues, 
                        or
                            ``(iii) a miscellaneous source, including 
                        waste pallets, crates, dunnage, and landscape 
                        or right-of-way tree trimmings, but not 
                        including--
                                    ``(I) municipal solid waste,
                                    ``(II) recyclable post-consumer 
                                wastepaper,
                                    ``(III) painted, treated, or 
                                pressurized wood,
                                    ``(IV) wood contaminated with 
                                plastic or metals, or
                                    ``(V) tires.
                    ``(C) Geothermal.--The term `geothermal' means 
                energy derived from a geothermal deposit (within the 
                meaning of section 613(e)(2)).
                    ``(D) Incremental geothermal.--The term 
                `incremental geothermal' means additional generating 
                capacity achieved from--
                            ``(i) increased efficiency, or
                            ``(ii) additions of new capacity,
                at a non-Federal geothermal project originally placed 
                in service before the date of enactment of this 
                paragraph.
                    ``(E) Incremental hydropower.--The term 
                `incremental hydropower' means additional generating 
                capacity achieved from--
                            ``(i) increased efficiency, or
                            ``(ii) additions of new capacity,
                at a licensed non-Federal hydroelectric project 
                originally placed in service before the date of 
                enactment of this paragraph.
                    ``(F) Landfill gas.--The term `landfill gas' means 
                gas generated from the decomposition of any household 
                solid waste, commercial solid waste, and industrial 
                solid waste disposed of in a municipal solid waste 
                landfill unit (as such terms are defined in regulations 
                promulgated under subtitle D of the Solid Waste 
                Disposal Act (42 U.S.C. 6941 et seq.).''.
            (3) Qualified facility.--Section 45(c)(5) (defining 
        qualified facility), as redesignated by paragraph 2(A), is 
        amended by adding at the end the following:
                    ``(D) Alternative resources facility.--
                            ``(i) In general.--In the case of a 
                        facility using alternative resources other than 
                        incremental geothermal or incremental 
                        hydropower to produce electricity, the term 
                        `qualified facility' means any facility of the 
                        taxpayer which is originally placed in service 
                        after the date of the enactment of this 
                        subparagraph.
                            ``(ii) Incremental geothermal facility.--In 
                        the case of a facility using incremental 
                        geothermal to produce electricity, the term 
                        `qualified facility' means any facility of the 
                        taxpayer described in paragraph (4)(D).
                            ``(iii) Incremental hydropower facility.--
                        In the case of a facility using incremental 
                        hydropower to produce electricity, the term 
                        `qualified facility' means any facility of the 
                        taxpayer described in paragraph (4)(E).
                            ``(iv) Special rules.--In the case of a 
                        qualified facility described in this 
                        subparagraph, the 10-year period referred to in 
                        subsection (a) shall be treated as beginning no 
                        earlier than the date of the enactment of this 
                        subparagraph.''.
            (4) Government-owned facility.--Section 45(d)(6) (relating 
        to credit eligibility in the case of government-owned 
        facilities using poultry waste) is amended--
                    (A) by inserting ``or alternative resources'' after 
                ``poultry waste'', and
                    (B) by inserting ``or alternative resources'' after 
                ``poultry waste'' in the heading thereof.
            (5) Qualified facilities with co-production.--Section 45(b) 
        (relating to limitations and adjustments) is amended by adding 
        at the end the following:
            ``(4) Increased credit for co-production facilities.--
                    ``(A) In general.--In the case of a qualified 
                facility described in subparagraph (C)(i) or (D)(i) of 
                subsection (c)(5) which has a co-production facility or 
                a qualified facility described in subparagraph (A), 
                (B), (C)(ii), (D)(ii), or (D)(iii) of subsection (c)(5) 
                which adds a co-production facility after the date of 
                the enactment of this paragraph, the amount in effect 
                under subsection (a)(1) for an eligible taxable year of 
                a taxpayer shall (after adjustment under paragraph (2) 
                and before adjustment under paragraphs (1) and (3)) be 
                increased by .25 cents.
                    ``(B) Co-production facility.--For purposes of 
                subparagraph (A), the term `co-production facility' 
                means a facility which--
                            ``(i) enables a qualified facility to 
                        produce heat, mechanical power, chemicals, 
                        liquid fuels, or minerals from qualified energy 
                        resources in addition to electricity, and
                            ``(ii) produces such energy on a continuous 
                        basis.
                    ``(C) Eligible taxable year.--For purposes of 
                subparagraph (A), the term `eligible taxable year' 
                means any taxable year in which the amount of gross 
                receipts attributable to the co-production facility of 
                a qualified facility are at least 10 percent of the 
                amount of gross receipts attributable to electricity 
                produced by such facility.''.
            (6) Qualified facilities located within qualified indian 
        lands.--Section 45(b) (relating to limitations and 
        adjustments), as amended by paragraph (5), is amended by adding 
        at the end the following:
            ``(5) Increased credit for qualified facility located 
        within qualified indian land.--In the case of a qualified 
        facility described in subsection (c)(5)(D) which--
                    ``(A) is located within--
                            ``(i) qualified Indian lands (as defined in 
                        section 7871(c)(3)), or
                            ``(ii) lands which are held in trust by a 
                        Native Corporation (as defined in section 3(m) 
                        of the Alaska Native Claims Settlement Act (43 
                        U.S.C. 1602(m)) for Alaska Natives, and
                    ``(B) is operated with the explicit written 
                approval of the Indian tribal government or Native 
                Corporation (as so defined) having jurisdiction over 
                such lands,
        the amount in effect under subsection (a)(1) for a taxable year 
        shall (after adjustment under paragraphs (2) and (4) and before 
        adjustment under paragraphs (1) and (3)) be increased by .25 
        cents.''.
            (7) Conforming amendments.--
                    (A) The heading for section 45 is amended by 
                inserting ``and waste products'' after ``resources''.
                    (B) The item relating to section 45 in the table of 
                sections subpart D of part IV of subchapter A of 
                chapter 1 is amended by inserting ``and waste 
                products'' after ``resources''.
    (c) Additional Modifications of Renewable Resources and Waste 
Products Credit.--
            (1) Credits for certain tax exempt organizations and 
        governmental units.--Section 45(d) (relating to definitions and 
        special rules) is amended by adding at the end the following:
            ``(8) Credits for certain tax exempt organizations and 
        governmental units.--
                    ``(A) Allowance of credit.--Any credit which would 
                be allowable under subsection (a) with respect to a 
                qualified facility of an entity if such entity were not 
                exempt from tax under this chapter shall be treated as 
                a credit allowable under subpart C to such entity if 
                such entity is--
                            ``(i) an organization described in section 
                        501(c)(12)(C) and exempt from tax under section 
                        501(a),
                            ``(ii) an organization described in section 
                        1381(a)(2)(C),
                            ``(iii) an entity the income of which is 
                        excludable from gross income under section 115, 
                        or
                            ``(iv) any State or political subdivision 
                        thereof, the District of Columbia, any 
                        possession of the United States, any Indian 
                        tribal government (within the meaning of 
                        section 7871), or any agency or instrumentality 
                        of any of the foregoing.
                    ``(B) Transfer and use of credit.--
                            ``(i) Transfer of credit by tax-exempt 
                        organizations and governmental units.--An 
                        entity described in subparagraph (A) may 
                        assign, trade, sell, or otherwise transfer any 
                        credit allowable to such entity under 
                        subparagraph (A) to any taxpayer.
                            ``(ii) Limitations on transfer of credit.--
                        A taxpayer which acquires a credit from an 
                        entity described in subparagraph (A) may not 
                        assign, trade, sell, or otherwise transfer the 
                        credit.
                            ``(iii) Use of credit as an offset.--
                        Notwithstanding any other provision of law, in 
                        the case of an entity described in clause (i) 
                        or (ii) of subparagraph (A), any credit 
                        allowable to such entity under subparagraph (A) 
                        may be applied by such entity, without penalty, 
                        as a prepayment of any loan, debt, or other 
                        obligation the entity has incurred under 
                        subchapter I of chapter 31 of title 7 of the 
                        Rural Electrification Act of 1936 (7 U.S.C. 901 
                        et seq.).
                    ``(C) Credit not income.--Neither a transfer under 
                clause (i) or a use under clause (iii) of subparagraph 
                (B) of any credit allowable under subparagraph (A) 
                shall result in income for purposes of section 
                501(c)(12).
                    ``(D) Transfer proceeds treated as arising from 
                essential government function.--Any proceeds derived by 
                an entity described in subparagraph (A)(iii) from the 
                transfer of any credit under subparagraph (B)(i) shall 
                be treated as arising from an essential government 
                function.
                    ``(E) Credits not reduced by tax-exempt bonds or 
                certain other subsidies.--Subsection (b)(3) shall not 
                apply to reduce any credit allowable under subparagraph 
                (A) with respect to--
                            ``(i) proceeds described in subparagraph 
                        (A)(ii) of such subsection, or
                            ``(ii) any loan, debt, or other obligation 
                        incurred under subchapter I of chapter 31 of 
                        title 7 of the Rural Electrification Act of 
                        1936 (7 U.S.C. 901 et seq.),
                used to provide financing for any qualified facility.
                    ``(F) Treatment of unrelated persons.--For purposes 
                of this paragraph and subsection (a)(2)(B), sales among 
                and between entities described in subparagraph (A) 
                shall be treated as sales between unrelated parties.''.
            (2) Coordination with other credits.--Section 45(d), as 
        amended by paragraph (1), is amended by adding at the end the 
        following:
            ``(9) Coordination with other credits.--This section shall 
        not apply to any qualified facility with respect to which a 
        credit under any other section is allowed for the taxable year 
        unless the taxpayer elects to waive the application of such 
        credit to such facility.''.
            (3) Credit allowable against regular and portion of minimum 
        tax.--
                    (A) In general.--Section 38(c) (relating to 
                limitation based on amount of tax) is amended by 
                redesignating paragraph (3) as paragraph (4) and 
                inserting after paragraph (2) the following:
            ``(3) Special rules for renewable electricity production 
        credit.--
                    ``(A) In general.--In the case of the renewable 
                electricity production credit--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to the credit, 
                        and
                            ``(ii) for purposes of applying paragraph 
                        (1) to such credit--
                                    ``(I) 75 percent of the tentative 
                                minimum tax shall be substituted for 
                                the tentative minimum tax under 
                                subparagraph (A) thereof, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the renewable 
                                electricity production credit).
                    ``(B) Renewable electricity production credit.--For 
                purposes of this subsection, the term `renewable 
                electricity production credit' means the credit 
                allowable under subsection (a) by reason of section 
                45(a).''.
                    (B) Conforming amendment.--Subclause (II) of 
                section 38(c)(2)(A)(ii) of such Code is amended by 
                inserting ``or the renewable electricity production 
                credit'' after ``employment credit''.
            (4) Expansion to include animal waste.--Section 45 
        (relating to electricity produced from certain renewable 
        resources), as amended by paragraphs (2) and (4) of subsection 
        (b), is amended--
                    (A) by striking ``poultry'' each place it appears 
                in subsection (c)(1)(C) and subsection (d)(6) and 
                inserting ``animal'',
                    (B) by striking ``poultry'' in the heading of 
                paragraph (6) of subsection (d) and inserting 
                ``animal'',
                    (C) by striking paragraph (3) of subsection (c) and 
                inserting the following:
            ``(3) Animal waste.--The term `animal waste' means manure 
        and litter and other animal wastes, including--
                    ``(A) wood shavings, straw, rice hulls, and other 
                bedding material for the disposition of manure, and
                    ``(B) byproducts, packaging, and other materials 
                which are nontoxic and biodegradable and are associated 
                with the processing, feeding, selling, transporting, 
                and disposal of such animal wastes.'', and
                    (D) by striking subparagraph (C) of subsection 
                (c)(5) and inserting the following:
                    ``(C) Animal waste facility.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), in the case of a facility using 
                        animal waste (other than poultry) to produce 
                        electricity, the term `qualified facility' 
                        means any facility of the taxpayer which is 
                        originally placed in service after the date of 
                        the enactment of this clause.
                            ``(ii) Poultry waste.--In the case of a 
                        facility using animal waste relating to poultry 
                        to produce electricity, the term `qualified 
                        facility' means any facility of the taxpayer 
                        which is originally placed in service after 
                        December 31, 1999.''.
            (5) Treatment of qualified facilities not in compliance 
        with pollution laws.--Section 45(c)(5) (relating to qualified 
        facilities), as amended by paragraphs (2) and (3) of subsection 
        (b), is amended by adding at the end the following:
                    ``(E) Noncompliance with pollution laws.--For 
                purposes of this paragraph, a facility which is not in 
                compliance with the applicable State and Federal 
                pollution prevention, control, and permit requirements 
                for any period of time shall not be considered to be a 
                qualified facility during such period.''.
            (6) Permanent extension of qualified facility dates.--
        Section 45(c)(5) (relating to qualified facility), as 
        redesignated by subsection (b)(2), is amended by striking ``, 
        and before January 1, 2002'' in subparagraphs (A) and (B).
    (d) Effective Date.--The amendments made by this section shall 
apply to electricity and other energy produced after the date of the 
enactment of this Act.
                                 <all>