[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 464 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 464

  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

                           February 27, 2003

Mr. Reid (for himself, Mr. Smith, Ms. Snowe, Ms. Cantwell, Mr. Harkin, 
    Mr. Lieberman, Mrs. Feinstein, Mr. Jeffords, Mr. Wyden, and Mr. 
   Coleman) 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 2002 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
                            ``(vi) 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 production.--
                            ``(i) In general.--The term `incremental 
                        geothermal production' means for any taxable 
                        year the excess of--
                                    ``(I) the total kilowatt hours of 
                                electricity produced from a geothermal 
                                facility described in paragraph 
                                (5)(D)(ii), over
                                    ``(II) the average annual kilowatt 
                                hours produced at such facility for 5 
                                of the previous 7 calendar years before 
                                the date of the enactment of this 
                                subparagraph after eliminating the 
                                highest and the lowest kilowatt hour 
                                production years in such 7-year period.
                            ``(ii) Special rule.--A facility described 
                        in paragraph (5)(D)(ii) which was placed in 
                        service at least 7 years before the date of the 
                        enactment of this subparagraph shall commencing 
                        with the year in which such date of enactment 
                        occurs, reduce the amount calculated under 
                        clause (i)(II) each year, on a cumulative 
                        basis, by the average percentage decrease in 
                        the annual kilowatt hour production for the 7-
                        year period described in clause (i)(II) with 
                        such cumulative sum not to exceed 30 percent.
                    ``(E) Incremental hydropower production.--
                            ``(i) In general.--The term `incremental 
                        hydropower production' means for any taxable 
                        year an amount equal to the percentage of total 
                        kilowatt hours of electricity produced from a 
                        hydropower facility described in paragraph 
                        (5)(D)(iii) attributable to efficiency 
                        improvements or additions of capacity as 
                        determined under clause (ii).
                            ``(ii) Determination of incremental 
                        hydropower production.--For purposes of clause 
                        (i), incremental hydropower production for any 
                        hydropower facility for any taxable year shall 
                        be determined by establishing a percentage of 
                        average annual hydropower production at the 
                        facility attributable to the efficiency 
                        improvements or additions of capacity using the 
                        same water flow information used to determine 
                        an historic average annual hydropower 
                        production baseline for such facility. Such 
                        percentage and baseline shall be certified by 
                        the Federal Energy Regulatory Commission. For 
                        purposes of the preceding sentence, the 
                        determination of incremental hydropower 
                        production shall not be based on any 
                        operational changes at such facility not 
                        directly associated with the efficiency 
                        improvements or additions of capacity.
                    ``(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 owned 
                        by 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 owned 
                        by the taxpayer which is originally placed in 
                        service before such date of enactment, but only 
                        to the extent of its incremental geothermal 
                        production.
                            ``(iii) Incremental hydropower facility.--
                        In the case of a facility using incremental 
                        hydropower to produce electricity, the term 
                        `qualified facility' means any non-Federal 
                        hydroelectric facility owned by the taxpayer 
                        which is originally placed in service before 
                        the date of the enactment of this subparagraph, 
                        but only to the extent of its incremental 
                        hydropower production.
                            ``(iv) Special rules.--In the case of a 
                        qualified facility described in clause (ii) or 
                        (iii), the 10-year period referred to in 
                        subsection (a) shall be treated as beginning 
                        not 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) Treatment of persons not able to use entire credit.--
                    (A) In general.--Section 45(d) (relating to 
                additional definitions and special rules) is amended by 
                adding at the end the following new paragraph:
            ``(8) Treatment of persons not able to use entire credit.--
                    ``(A) Allowance of credit.--
                            ``(i) In general.--Except as otherwise 
                        provided in this subsection--
                                    ``(I) any credit allowable under 
                                subsection (a) with respect to a 
                                qualified facility owned by a person 
                                described in clause (ii) may be 
                                transferred or used as provided in this 
                                paragraph, and
                                    ``(II) the determination as to 
                                whether the credit is allowable shall 
                                be made without regard to the tax-
                                exempt status of the person.
                            ``(ii) Persons described.--A person is 
                        described in this clause if the person 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) a public utility (as 
                                defined in section 136(c)(2)(B)), which 
                                is exempt from income tax under this 
                                subtitle,
                                    ``(IV) any State or political 
                                subdivision thereof, the District of 
                                Columbia, any possession of the United 
                                States, or any agency or 
                                instrumentality of any of the 
                                foregoing, or
                                    ``(V) any Indian tribal government 
                                (within the meaning of section 7871) or 
                                any agency or instrumentality thereof.
                    ``(B) Transfer of credit.--
                            ``(i) In general.--A person described in 
                        subparagraph (A)(ii) may transfer any credit to 
                        which subparagraph (A)(i) applies through an 
                        assignment to any other person not described in 
                        subparagraph (A)(ii). Such transfer may be 
                        revoked only with the consent of the Secretary.
                            ``(ii) Regulations.--The Secretary shall 
                        prescribe such regulations as necessary to 
                        ensure that any credit described in clause (i) 
                        is claimed once and not reassigned by such 
                        other person.
                            ``(iii) Transfer proceeds treated as 
                        arising from essential government function.--
                        Any proceeds derived by a person described in 
                        subclause (III), (IV), or (V) of subparagraph 
                        (A)(ii) from the transfer of any credit under 
                        clause (i) shall be treated as arising from the 
                        exercise of an essential government function.
                    ``(C) Credit not income.--Any transfer under 
                subparagraph (B) of any credit to which subparagraph 
                (A)(i) applies shall not be treated as income for 
                purposes of section 501(c)(12).
                    ``(D) Treatment of unrelated persons.--For purposes 
                of subsection (a)(2)(B), sales among and between 
                persons described in subparagraph (A)(ii) shall be 
                treated as sales between unrelated parties.''.
                    (B) Credits not reduced by tax-exempt bonds or 
                certain other subsidies.--Section 45(b)(3) (relating to 
                credit reduced for grants, tax-exempt bonds, subsidized 
                energy financing, and other credits) is amended--
                            (i) by striking clause (ii),
                            (ii) by redesignating clauses (iii) and 
                        (iv) as clauses (ii) and (iii),
                            (iii) by inserting ``(other than 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.), as in effect on the date of the 
                        enactment of the Renewable Energy Incentives 
                        Act, or proceeds of an issue of State or local 
                        government obligations the interest on which is 
exempt from tax under section 103)'' after ``project'' in clause (ii) 
(as so redesignated), and
                            (iv) by striking ``tax-exempt bonds,'' in 
                        the heading and inserting ``certain''.
            (2) Coordination with other credits.--Section 45(d), as 
        amended by paragraph (1)(A), 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 (4) as paragraph (5) and 
                inserting after paragraph (3) the following:
            ``(4) 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 amendments.--
                            (i) Subclause (II) of section 
                        38(c)(2)(A)(ii) of such Code is amended by 
                        inserting ``or the renewable electricity 
                        production credit'' after ``employee credit''.
                            (ii) Subclause (II) of section 
                        38(c)(3)(A)(ii) of such Code is amended by 
                        inserting ``or the renewable electricity 
                        production credit'' after ``employee 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)(A), is amended by striking 
        ``, and before January 1, 2004'' in subparagraphs (A) and (B).
    (d) Effective Date.--The amendments made by this section shall 
apply to electricity and other energy sold after the date of the 
enactment of this Act.
                                 <all>