[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 727 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 727

To reauthorize a Department of Energy program to develop and implement 
   accelerated research, development, and demonstration projects for 
  advanced clean coal technologies for use in coal-based electricity 
 generating facilities, to amend the Internal Revenue Code of 1986 to 
  provide incentives for the use of those technologies, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 27, 2003

  Mr. Byrd (for himself, Mr. Rockefeller, Mr. Thomas, Mr. Burns, Mr. 
Dorgan, Mr. Allard, Mr. Durbin, Mr. Voinovich, Mr. Bayh, Mr. Enzi, Mr. 
Campbell, and Mr. Conrad) introduced the following bill; which was read 
             twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To reauthorize a Department of Energy program to develop and implement 
   accelerated research, development, and demonstration projects for 
  advanced clean coal technologies for use in coal-based electricity 
 generating facilities, to amend the Internal Revenue Code of 1986 to 
  provide incentives for the use of those technologies, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``National Coal 
Research, Development, and Demonstration Act of 2003''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                 TITLE I--COAL RESEARCH AND DEVELOPMENT

Sec. 101. Definitions.
Sec. 102. Cost and performance goals.
Sec. 103. Production and generation of coal-based power.
Sec. 104. Coal and related technologies research and development 
                            programs.
                 TITLE II--CLEAN COAL POWER INITIATIVE

Sec. 201. Definition of Secretary.
Sec. 202. Project criteria.
Sec. 203. Reports.
Sec. 204. Authorization of appropriations.
                    TITLE III--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements 
        in Existing Coal-Based Electricity Generation Facilities

Sec. 301. Credit for production from a qualifying clean coal technology 
                            unit.
 Subtitle B--Incentives for Early Commercial Applications of Advanced 
                        Clean Coal Technologies

Sec. 311. Credit for investment in qualifying advanced clean coal 
                            technology.
Sec. 312. Credit for production from a qualifying advanced clean coal 
                            technology unit.
     Subtitle C--Treatment of Persons Not Able To Use Entire Credit

Sec. 321. Treatment of persons not able to use entire credit.

                 TITLE I--COAL RESEARCH AND DEVELOPMENT

SEC. 101. DEFINITIONS.

    In this title:
            (1) Cost and performance goals.--The term ``cost and 
        performance goals'' means the cost and performance goals 
        identified under section 102.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy.

SEC. 102. COST AND PERFORMANCE GOALS.

    (a) Establishment of Cost and Performance Goals.--
            (1) In general.--The Secretary shall conduct an assessment 
        that identifies cost and performance goals of technologies that 
        would permit the continued cost-competitive use of coal for 
        electricity generation, as chemical feedstocks, and as 
        transportation fuel in--
                    (A) 2007;
                    (B) 2015; and
                    (C) 2020 and thereafter.
            (2) Consultation.--In identifying the cost and performance 
        goals, the Secretary shall--
                    (A) consider activities and studies undertaken by 
                industry in cooperation with the Department of Energy 
                in support of the assessment; and
                    (B) consult with interested entities, including--
                            (i) coal producers;
                            (ii) industries using coal;
                            (iii) organizations that promote coal and 
                        advanced coal technologies;
                            (iv) environmental organizations; and
                            (v) organizations representing workers.
            (3) Timing.--The Secretary shall--
                    (A) not later than 120 days after the date of 
                enactment of this Act, issue draft cost and performance 
                goals for public comment; and
                    (B) not later than 180 days after the date of 
                enactment of this Act, after taking into consideration 
                public comment, submit to Congress the final cost and 
                performance goals.
    (b) Study.--
            (1) In general.--Not later than 1 year after the date of 
        enactment of this Act, and once every 2 years thereafter 
        through 2016, the Secretary, in cooperation with other 
        appropriate Federal agencies, shall conduct a study to--
                    (A) identify technologies that, by themselves or in 
                combination with other technologies, may be capable of 
                achieving the cost and performance goals;
                    (B) assess the costs that would be incurred by, and 
                the period of time that would be required for, the 
                development and demonstration of technologies that, by 
                themselves or in combination with other technologies, 
                contribute to the achievement of the cost and 
performance goals;
                    (C) develop recommendations for technology 
                development programs that the Department of Energy 
                could carry out, in cooperation with industry, to 
                develop and demonstrate technologies that, by 
                themselves or in combination with other technologies, 
                achieve the cost and performance goals; and
                    (D)(i) develop recommendations for additional 
                authorities required to achieve the cost and 
                performance goals; and
                    (ii) review and recommend changes, if any, to the 
                cost and performance goals if the Secretary determines 
                that changes are necessary as a result of ongoing 
                research, development, and demonstration of 
                technologies.
            (2) Expert advice.--In carrying out this section, the 
        Secretary shall give due weight to the expert advice of 
        representatives of the entities described in subsection 
        (a)(2)(B).

SEC. 103. PRODUCTION AND GENERATION OF COAL-BASED POWER.

    (a) In General.--The Secretary shall carry out a technology 
research, development, and demonstration program to facilitate 
production and generation of coal-based power through methods and 
equipment under--
            (1) this title;
            (2) the Federal Nonnuclear Energy Research and Development 
        Act of 1974 (42 U.S.C. 5901 et seq.);
            (3) the Energy Reorganization Act of 1974 (42 U.S.C. 5801 
        et seq.); and
            (4) title XVI of the Energy Policy Act of 1992 (42 U.S.C. 
        13381 et seq.).
    (b) Cost and Performance Goals.--The program under subsection (a) 
shall be designed to achieve the cost and performance goals.

SEC. 104. COAL AND RELATED TECHNOLOGIES RESEARCH AND DEVELOPMENT 
              PROGRAMS.

    (a) In General.--The Secretary shall carry out coal and related 
technologies research and development programs that include--
            (1) innovations for existing plants;
            (2) integrated gasification combined cycle systems;
            (3) advanced combustion systems;
            (4) turbines for synthesis gas derived from coal;
            (5) carbon capture and sequestration research and 
        development;
            (6) coal-derived transportation fuels and chemicals;
            (7) solid fuels and feedstocks; and
            (8) advanced coal-related research.
    (b) Report.--At least 30 days before using funds made available 
under subsection (c), the Secretary shall submit to Congress a report 
that--
            (1) describes the proposed use of the funds; and
            (2) contains a plan that includes--
                    (A) a detailed description of the manner in which 
                any proposals will be solicited and evaluated, 
                including a list of all activities expected to be 
                undertaken;
                    (B) a detailed list of technical milestones for 
                each coal technology and related technology that will 
                be pursued; and
                    (C) a description of the manner in which the 
                programs authorized by this section will be carried out 
                so as to complement and not duplicate activities 
                authorized under title II.
    (c) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated to 
        carry out this section--
                    (A) $200,000,000 for fiscal year 2004;
                    (B) $210,000,000 for fiscal year 2005; and
                    (C) $220,500,000 for fiscal year 2006.
            (2) Availability.--Funds made available under paragraph (1) 
        shall remain available until expended.

                 TITLE II--CLEAN COAL POWER INITIATIVE

SEC. 201. DEFINITION OF SECRETARY.

    In this title, the term ``Secretary'' means the Secretary of 
Energy.

SEC. 202. PROJECT CRITERIA.

    (a) In General.--The Secretary shall carry out a program under 
which the Secretary shall provide funding for projects that advance 
efficiency, environmental performance, and cost competitiveness well 
beyond the level of technologies that are in operation or have been 
demonstrated as of the date of enactment of this Act.
    (b) Technical Criteria for Clean Coal Power Initiative.--
            (1) Gasification.--
                    (A) In general.--In allocating the funds made 
                available under section 204, the Secretary shall ensure 
                that not less than 60 nor more than 80 percent of the 
                funds are used for--
                            (i) coal-based gasification technologies;
                            (ii) coal-based projects that include the 
                        separation and capture of carbon dioxide; or
                            (iii) coal-based projects that include 
                        gasification combined cycle systems, 
                        gasification fuel cells, gasification 
                        coproduction, or hybrid gasification or 
                        combustion.
                    (B) Technical milestones.--
                            (i) In general.--The Secretary shall 
                        establish technical milestones specifying 
                        emissions levels that coal gasification 
                        projects shall be designed, and reasonably 
                        expected, to achieve.
                            (ii) Increasing restrictiveness.--The 
                        milestones shall become more restrictive 
                        through the life of the program.
                            (iii) Requirements.--The milestones shall 
                        be designed to develop, not later than 2020, 
                        coal gasification projects that are capable 
                        of--
                                    (I) removing 99 percent of sulfur 
                                dioxide;
                                    (II) emitting not more than .05 lbs 
                                of NOx per million Btu;
                                    (III) achieving substantial 
                                reductions in mercury emissions; and
                                    (IV) achieving a thermal efficiency 
                                of--
                                            (aa) 60 percent for coal of 
                                        more than 9,000 Btu;
                                            (bb) 59 percent for coal of 
                                        7,000 to 9,000 Btu; and
                                            (cc) 57 percent for coal of 
                                        less than 7,000 Btu.
            (2) Other projects.--
                    (A) In general.--For projects not described in 
                paragraph (1), the Secretary shall establish technical 
                milestones specifying emissions levels that the 
                projects shall be designed, and reasonably expected, to 
                achieve.
                    (B) Increasing restrictiveness.--The milestones 
                shall become more restrictive through the life of the 
                program.
                    (C) Requirements.--The milestones shall be designed 
                to develop, by 2010, projects that are capable of--
                            (i) removing 97 percent of sulfur dioxide;
                            (ii) emitting not more than .08 lbs of NOx 
                        per million Btu;
                            (iii) achieving substantial reductions in 
                        mercury emissions; and
                            (iv) achieving a thermal efficiency of--
                                    (I) 45 percent for coal of more 
                                than 9,000 Btu;
                                    (II) 44 percent for coal of 7,000 
                                to 9,000 Btu; and
                                    (III) 42 percent for coal of less 
                                than 7,000 Btu.
            (3) Consultation.--Before establishing the technical 
        milestones under paragraphs (1) and (2), the Secretary shall 
        consult with--
                    (A) the Administrator of the Environmental 
                Protection Agency; and
                    (B) interested entities, including--
                            (i) coal producers;
                            (ii) industries using coal;
                            (iii) organizations promoting coal or 
                        advanced coal technologies;
                            (iv) environmental organizations; and
                            (v) organizations representing workers.
            (4) Existing units.--In the case of a project at a unit in 
        existence on the date of enactment of this Act, in lieu of the 
        thermal efficiency requirements specified in paragraphs 
        (1)(B)(iii)(IV) and (2)(C)(iv), the project shall be designed 
        to achieve an overall thermal design efficiency improvement, 
        compared to the efficiency of the unit as operated on the date 
        of enactment of this Act, of not less than--
                    (A) 7 percent for coal of more than 9,000 Btu;
                    (B) 6 percent for coal of 7,000 to 9,000 Btu; or
                    (C) 4 percent for coal of less than 7,000 Btu.
    (c) Financial Criteria.--The Secretary shall not provide funding 
under this title unless the recipient documents to the satisfaction of 
the Secretary that--
            (1) the recipient is financially viable without the receipt 
        of additional Federal funding;
            (2) the recipient will provide sufficient information to 
        the Secretary for the Secretary to ensure that the funds are 
        spent efficiently and effectively; and
            (3) a market exists for the technology to be demonstrated 
        or applied, as evidenced by statements of interest in writing 
        from potential purchasers of the technology.
    (d) Financial Assistance.--The Secretary shall provide financial 
assistance to projects that--
            (1) meet the requirements of subsections (a), (b), and (c); 
        and
            (2) are likely to--
                    (A) achieve overall cost reductions in the use of 
                coal to generate useful forms of energy;
                    (B) improve the competitiveness of coal among 
                various forms of energy in order to maintain a 
                diversity of fuel choices in the United States to meet 
                electricity generation requirements; and
                    (C) demonstrate methods and equipment that are 
                applicable to 25 percent of the electricity generating 
                facilities that use coal as the primary feedstock as of 
                the date of enactment of this Act.
    (e) Clean Coal Centers of Excellence.--
            (1) In general.--As part of the program authorized under 
        this section, the Secretary shall provide competitive, merit-
        based grants to universities for the establishment of Centers 
        of Excellence for Energy Systems of the Future.
            (2) Eligible universities.--The Secretary shall provide 
        grants under paragraph (1) to universities that show the 
        greatest potential for advancing new clean coal technologies.
    (f) Federal Share.--The Federal share of the cost of a coal or 
related technology project funded under this section shall not exceed 
50 percent.
    (g) Applicability.--No technology, or level of emission reduction, 
shall be treated as adequately demonstrated for purposes of section 111 
of the Clean Air Act (42 U.S.C. 7411), achievable for purposes of 
section 169 of that Act (42 U.S.C. 7479), or achievable in practice for 
purposes of section 171(3)(B) of that Act (42 U.S.C. 7501(3)(B)) solely 
by reason of the use of that technology, or the achievement of that 
emission reduction, by 1 or more facilities receiving assistance under 
this title.

SEC. 203. REPORTS.

    (a) Report on Technical Milestones.--Not later than 1 year after 
the date of enactment of this Act, and once every 2 years thereafter 
through 2011, the Secretary, in consultation with other Federal 
agencies as appropriate, shall submit to the Committee on Energy and 
Commerce and the Committee on Science of the House of Representatives, 
and to the Senate, a report that describes--
            (1) the technical milestones established under section 202, 
        including a description of how the milestones ensure that 
        progress will be made toward meeting the requirements of 
        paragraphs (1)(B) and (2) of section 202(b); and
            (2) the status of projects funded under this title.
    (b) Report Before Using Funding.--At least 30 days before using 
funds made available under subsection (c), the Secretary shall submit 
to the Committee on Energy and Commerce and the Committee on Science of 
the House of Representatives, and to the Senate, a report that--
            (1) describes the proposed use of funds; and
            (2) includes--
                    (A) a detailed assessment of whether the aggregate 
                funding levels provided under section 204 are the 
                appropriate funding levels for the program under this 
                title;
                    (B) a detailed description of the manner in which 
                proposals will be solicited and evaluated, including a 
                list of all activities expected to be undertaken;
                    (C) a detailed list of technical milestones for 
                each coal technology and related technology that will 
                be pursued; and
                    (D) a detailed description of how the program will 
                avoid problems enumerated in General Accounting Office 
                reports on the Clean Coal Technology Program, including 
                problems that resulted in the failure to expend funds 
                and in projects that failed financially or 
                scientifically.
    (c) Applicability.--Paragraph (1) shall not apply to a project 
selected before September 30, 2003.

SEC. 204. AUTHORIZATION OF APPROPRIATIONS.

    (a) In General.--There are authorized to be appropriated to carry 
out this title $200,000,000 for each of fiscal years 2003 through 2011.
    (b) Availability.--Funds made available under subsection (a) shall 
remain available until expended.

                    TITLE III--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements 
        in Existing Coal-Based Electricity Generation Facilities

SEC. 301. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL TECHNOLOGY 
              UNIT.

    (a) Credit for Production From a Qualifying Clean Coal Technology 
Unit.--Subpart D of part IV of subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 (relating to business related credits) is 
amended by adding at the end the following new section:

``SEC. 45G. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL 
              TECHNOLOGY UNIT.

    ``(a) General Rule.--For purposes of section 38, the qualifying 
clean coal technology production credit of any taxpayer for any taxable 
year is equal to the product of--
            ``(1) the applicable amount of clean coal technology 
        production credit, multiplied by
            ``(2) the applicable percentage of the kilowatt hours of 
        electricity produced by the taxpayer during such taxable year 
        at a qualifying clean coal technology unit, but only if such 
        production occurs during the 10-year period beginning on the 
        date the unit was returned to service after becoming a 
        qualifying clean coal technology unit.
    ``(b) Applicable Amount.--
            ``(1) In general.--For purposes of this section, the 
        applicable amount of clean coal technology production credit is 
        equal to $0.0034 per kilowatt-hour of electricity produced and 
        the equivalent heat value of other fuels or chemicals produced 
        from not more than 300,000 kilowatts of nameplate capacity at 
        the same qualifying clean coal technology unit.
            ``(2) Inflation adjustment.--For calendar years after 2003, 
        the applicable amount of clean coal technology production 
        credit shall be adjusted by multiplying such amount by the 
        inflation adjustment factor for the calendar year in which the 
        amount is applied. If any amount as increased under the 
        preceding sentence is not a multiple of 0.01 cent, such amount 
        shall be rounded to the nearest multiple of 0.01 cent.
    ``(c) Applicable Percentage.--For purposes of this section, with 
respect to any qualifying clean coal technology unit, the applicable 
percentage is the percentage equal to the ratio which the portion of 
the national megawatt capacity limitation allocated to the taxpayer 
with respect to such unit under subsection (e) bears to the total 
megawatt capacity of such unit.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualifying clean coal technology unit.--The term 
        `qualifying clean coal technology unit' means a clean coal 
        technology unit of the taxpayer which--
                    ``(A) on the date of the enactment of this section 
                was a coal-based electricity generating steam 
                generator-turbine unit which was not a clean coal 
                technology unit,
                    ``(B) on such date of enactment had a nameplate 
                capacity rating of not more than 300,000 kilowatts,
                    ``(C) becomes a clean coal technology unit as the 
                result of the retrofitting, repowering, or replacement 
                of the unit with clean coal technology, which nameplate 
                capacity may then be greater than 300,000 kilowatts, 
                during the 10-year period beginning on such date of 
                enactment,
                    ``(D) is not receiving nor is scheduled to receive 
                funding under the Clean Coal Technology Program, the 
                Power Plant Improvement Initiative, or the Clean Coal 
                Power Initiative administered by the Secretary of 
                Energy, and
                    ``(E) receives an allocation of a portion of the 
                national megawatt capacity limitation under subsection 
                (e).
            ``(2) Clean coal technology unit.--The term `clean coal 
        technology unit' means a unit which--
                    ``(A) uses clean coal technology, including 
                advanced pulverized coal or atmospheric fluidized bed 
                combustion, pressurized fluidized bed combustion, 
                integrated gasification combined cycle, or any other 
                technology for the production of electricity,
                    ``(B) uses at least 75 percent coal to produce 50 
                percent or more of its thermal output as electricity,
                    ``(C) has a design net heat rate of at least 500 
                less than that of such unit as described in paragraph 
                (1)(A),
                    ``(D) has a maximum design net heat rate of not 
                more than 9,500, and
                    ``(E) meets the pollution control requirements of 
                paragraph (3).
            ``(3) Pollution control requirements.--
                    ``(A) In general.--A unit meets the requirements of 
                this paragraph if--
                            ``(i) its emissions of sulfur dioxide, 
                        nitrogen oxide, or particulates meet the lower 
                        of the emission levels for each such emission 
                        specified in--
                                    ``(I) subparagraph (B), or
                                    ``(II) the new source performance 
                                standards of the Clean Air Act (42 
                                U.S.C. 7411) which are in effect for 
                                the category of source at the time of 
                                the retrofitting, repowering, or 
                                replacement of the unit, and
                            ``(ii) its emissions do not exceed any 
                        relevant emission level specified by regulation 
                        pursuant to the hazardous air pollutant 
                        requirements of the Clean Air Act (42 U.S.C. 
                        7412) in effect at the time of the 
                        retrofitting, repowering, or replacement.
                    ``(B) Specific levels.--The levels specified in 
                this subparagraph are--
                            ``(i) in the case of sulfur dioxide 
                        emissions, 50 percent of the sulfur dioxide 
                        emission levels specified in the new source 
                        performance standards of the Clean Air Act (42 
                        U.S.C. 7411) in effect on the date of the 
                        enactment of this section for the category of 
                        source,
                            ``(ii) in the case of nitrogen oxide 
                        emissions--
                                    ``(I) 0.1 pound per million Btu of 
                                heat input if the unit is not a 
                                cyclone-fired boiler, and
                                    ``(II) if the unit is a cyclone-
                                fired boiler, 15 percent of the 
                                uncontrolled nitrogen oxide emissions 
                                from such boilers, and
                            ``(iii) in the case of particulate 
                        emissions, 0.02 pound per million Btu of heat 
                        input.
            ``(4) Design net heat rate.--The design net heat rate with 
        respect to any unit, measured in Btu per kilowatt hour (HHV)--
                    ``(A) shall be based on the design annual heat 
                input to and the design annual net electrical power, 
                fuels, and chemicals output from such unit (determined 
                without regard to such unit's co-generation of steam),
                    ``(B) shall be adjusted for the heat content of the 
                design coal to be used by the unit if it is less than 
                12,000 Btu per pound according to the following 
                formula:

 Design net heat rate = Unit net heat rate X [l- {((12,000-design coal 
             heat content, Btu per pound)/1,000) X 0.013}],

                    ``(C) shall be corrected for the site reference 
                conditions of--
                            ``(i) elevation above sea level of 500 
                        feet,
                            ``(ii) air pressure of 14.4 pounds per 
                        square inch absolute (psia),
                            ``(iii) temperature, dry bulb of 63 deg.F,
                            ``(iv) temperature, wet bulb of 54 deg.F, 
                        and
                            ``(v) relative humidity of 55 percent, and
                    ``(D) shall be adjusted (or credit given) for any 
                unit which installs carbon capture controls which 
                remove not less than 50 percent of the unit's carbon 
                dioxide emissions up to the design net heat rate level 
                which would have resulted without installation of 
                carbon capture controls.
            ``(5) HHV.--The term `HHV' means higher heating value.
            ``(6) Application of certain rules.--The rules of 
        paragraphs (3), (4), and (5) of section 45(d) shall apply.
            ``(7) Inflation adjustment factor.--
                    ``(A) In general.--The term `inflation adjustment 
                factor' means, with respect to a calendar year, a 
                fraction the numerator of which is the GDP implicit 
                price deflator for the preceding calendar year and the 
                denominator of which is the GDP implicit price deflator 
                for the calendar year 2002.
                    ``(B) GDP implicit price deflator.--The term `GDP 
                implicit price deflator' means the most recent revision 
                of the implicit price deflator for the gross domestic 
                product as computed by the Department of Commerce 
                before March 15 of the calendar year.
            ``(8) Noncompliance with pollution laws.--For purposes of 
        this section, a unit 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 qualifying clean coal technology unit during 
        such period.
    ``(e) National Limitation on the Aggregate Capacity of Qualifying 
Clean Coal Technology Units.--
            ``(1) In general.--For purposes of subsection (d)(1)(E), 
        the national megawatt capacity limitation for qualifying clean 
        coal technology units is 4,000 megawatts.
            ``(2) Allocation of limitation.--The Secretary shall 
        allocate the national megawatt capacity limitation for 
        qualifying clean coal technology units in such manner as the 
        Secretary may prescribe under the regulations under paragraph 
        (3), except that the allocation with respect to each such unit 
        shall not exceed 300,000 kilowatts.
            ``(3) Regulations.--Not later than 6 months after the date 
        of the enactment of this section, the Secretary shall prescribe 
        such regulations as may be necessary or appropriate--
                    ``(A) to carry out the purposes of this subsection,
                    ``(B) to limit the capacity of any qualifying clean 
                coal technology unit to which this section applies so 
                that the combined megawatt capacity allocated to all 
such units under this subsection when all such units are placed in 
service during the 10-year period described in subsection (d)(1)(C), 
does not exceed 4,000 megawatts,
                    ``(C) to provide a certification process under 
                which the Secretary, in consultation with the Secretary 
                of Energy, shall approve and allocate the national 
                megawatt capacity limitation--
                            ``(i) to encourage that units with the 
                        highest thermal efficiencies, when adjusted for 
                        the heat content of the design coal and site 
                        reference conditions described in subsection 
                        (d)(4)(C), and superior environmental 
                        performance compared to other proposals, be 
                        placed in service as soon as possible, and
                            ``(ii) to allocate capacity to taxpayers 
                        which have a definite and credible plan for 
                        placing into commercial operation a qualifying 
                        clean coal technology unit, including--
                                    ``(I) a site,
                                    ``(II) contractual commitments for 
                                procurement and construction or, in the 
                                case of regulated utilities, the 
                                agreement of the State utility 
                                commission,
                                    ``(III) filings for all necessary 
                                preconstruction approvals,
                                    ``(IV) a demonstrated record of 
                                having successfully completed 
                                comparable projects on a timely basis, 
                                and
                                    ``(V) such other factors that the 
                                Secretary determines are appropriate,
                    ``(D) to allocate the national megawatt capacity 
                limitation to a portion of the capacity of a qualifying 
                clean coal technology unit if the Secretary determines 
                that such an allocation would maximize the amount of 
                efficient production encouraged with the available tax 
                credits,
                    ``(E) to set progress requirements and conditional 
                approvals so that capacity allocations for clean coal 
                technology units which become unlikely to meet the 
                necessary conditions for qualifying can be reallocated 
                by the Secretary to other clean coal technology units, 
                and
                    ``(F) to provide taxpayers with opportunities to 
                correct administrative errors and omissions with 
                respect to allocations and record keeping within a 
                reasonable period after discovery, taking into account 
                the availability of regulations and other 
                administrative guidance from the Secretary.''.
    (b) Credit Treated as Business Credit.--Section 38(b) of the 
Internal Revenue Code of 1986 (relating to current year business 
credit) is amended by striking ``plus'' at the end of paragraph (14), 
by striking the period at the end of paragraph (15) and inserting ``, 
plus'', and by adding at the end the following new paragraph:
            ``(16) the qualifying clean coal technology production 
        credit determined under section 45G(a).''.
    (c) Transitional Rule.--Section 39(d) of the Internal Revenue Code 
of 1986 (relating to transitional rules) is amended by adding at the 
end the following new paragraph:
            ``(11) No carryback of section 45g credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the qualifying clean coal 
        technology production credit determined under section 45G may 
        be carried back to a taxable year ending on or before the date 
        of the enactment of section 45G.''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new item:

``Sec. 45G. Credit for production from a qualifying clean coal 
                            technology unit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to production after the date of the enactment of this Act, in 
taxable years ending after such date.

 Subtitle B--Incentives for Early Commercial Applications of Advanced 
                        Clean Coal Technologies

SEC. 311. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN COAL 
              TECHNOLOGY.

    (a) Allowance of Qualifying Advanced Clean Coal Technology Unit 
Credit.--Section 46 of the Internal Revenue Code of 1986 (relating to 
amount of credit) 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) the qualifying advanced clean coal technology unit 
        credit.''.
    (b) Amount of Qualifying Advanced Clean Coal Technology Unit 
Credit.--Subpart E of part IV of subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 (relating to rules for computing 
investment credit) is amended by inserting after section 48 the 
following new section:

``SEC. 48A. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY UNIT CREDIT.

    ``(a) In General.--For purposes of section 46, the qualifying 
advanced clean coal technology unit credit for any taxable year is an 
amount equal to 10 percent of the applicable percentage of the 
qualified investment in a qualifying advanced clean coal technology 
unit for such taxable year.
    ``(b) Qualifying Advanced Clean Coal Technology Unit.--
            ``(1) In general.--For purposes of subsection (a), the term 
        `qualifying advanced clean coal technology unit' means an 
        advanced clean coal technology unit of the taxpayer--
                    ``(A)(i)(I) in the case of a unit first placed in 
                service after the date of the enactment of this 
                section, the original use of which commences with the 
                taxpayer, or
                    ``(II) in the case of the retrofitting or 
                repowering of a unit first placed in service before 
                such date of enactment, the retrofitting or repowering 
                of which is completed by the taxpayer after such date, 
                or
                    ``(ii) which is acquired through purchase (as 
                defined by section 179(d)(2)),
                    ``(B) which is depreciable under section 167,
                    ``(C) which has a useful life of not less than 4 
                years,
                    ``(D) which is located in the United States,
                    ``(E) which is not receiving nor is scheduled to 
                receive funding under the Clean Coal Technology 
                Program, the Power Plant Improvement Initiative, or the 
                Clean Coal Power Initiative administered by the 
                Secretary of Energy,
                    ``(F) which is not a qualifying clean coal 
                technology unit, and
                    ``(G) which receives an allocation of a portion of 
                the national megawatt capacity limitation under 
                subsection (f).
            ``(2) Special rule for sale-leasebacks.--For purposes of 
        subparagraph (A) of paragraph (1), in the case of a unit 
        which--
                    ``(A) is originally placed in service by a person, 
                and
                    ``(B) is sold and leased back by such person, or is 
                leased to such person, within 3 months after the date 
                such unit was originally placed in service, for a 
                period of not less than 12 years,
        such unit shall be treated as originally placed in service not 
        earlier than the date on which such unit is used under the 
        leaseback (or lease) referred to in subparagraph (B). The 
        preceding sentence shall not apply to any property if the 
        lessee and lessor of such property make an election under this 
        sentence. Such an election, once made, may be revoked only with 
        the consent of the Secretary.
            ``(3) Noncompliance with pollution laws.--For purposes of 
        this subsection, a unit 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 qualifying advanced clean coal technology 
        unit during such period.
    ``(c) Applicable Percentage.--For purposes of this section, with 
respect to any qualifying advanced clean coal technology unit, the 
applicable percentage is the percentage equal to the ratio which the 
portion of the national megawatt capacity limitation allocated to the 
taxpayer with respect to such unit under subsection (f) bears to the 
total megawatt capacity of such unit.
    ``(d) Advanced Clean Coal Technology Unit.--For purposes of this 
section--
            ``(1) In general.--The term `advanced clean coal technology 
        unit' means a new, retrofit, or repowering unit of the taxpayer 
        which--
                    ``(A) is--
                            ``(i) an eligible advanced pulverized coal 
                        or atmospheric fluidized bed combustion 
                        technology unit,
                            ``(ii) an eligible pressurized fluidized 
                        bed combustion technology unit,
                            ``(iii) an eligible integrated gasification 
                        combined cycle technology unit, or
                            ``(iv) an eligible other technology unit, 
                        and
                    ``(B) meets the carbon emission rate requirements 
                of paragraph (6).
            ``(2) Eligible advanced pulverized coal or atmospheric 
        fluidized bed combustion technology unit.--The term `eligible 
        advanced pulverized coal or atmospheric fluidized bed 
        combustion technology unit' means a clean coal technology unit 
        using advanced pulverized coal or atmospheric fluidized bed 
        combustion technology which--
                    ``(A) is placed in service after the date of the 
                enactment of this section and before January 1, 2015, 
                and
                    ``(B) has a design net heat rate of not more than 
                8,500 (8,900 in the case of units placed in service 
                before 2011).
            ``(3) Eligible pressurized fluidized bed combustion 
        technology unit.--The term `eligible pressurized fluidized bed 
        combustion technology unit' means a clean coal technology unit 
        using pressurized fluidized bed combustion technology which--
                    ``(A) is placed in service after the date of the 
                enactment of this section and before January 1, 2019, 
                and
                    ``(B) has a design net heat rate of not more than 
                7,720 (8,900 in the case of units placed in service 
                before 2011, and 8,500 in the case of units placed in 
                service after 2010 and before 2015).
            ``(4) Eligible integrated gasification combined cycle 
        technology unit.--The term `eligible integrated gasification 
        combined cycle technology unit' means a clean coal technology 
        unit using integrated gasification combined cycle technology, 
        with or without fuel or chemical co-production, which--
                    ``(A) is placed in service after the date of the 
                enactment of this section and before January 1, 2019,
                    ``(B) has a design net heat rate of not more than 
                7,720 (8,900 in the case of units placed in service 
                before 2011, and 8,500 in the case of units placed in 
                service after 2010 and before 2015), and
                    ``(C) has a net thermal efficiency (HHV) using coal 
                with fuel or chemical co-production of not less than 
                44.2 percent (38.4 percent in the case of units placed 
                in service before 2011, and 40.2 percent in the case of 
                units placed in service after 2010 and before 2015).
            ``(5) Eligible other technology unit.--The term `eligible 
        other technology unit' means a clean coal technology unit using 
        any other technology for the production of electricity which is 
        placed in service after the date of the enactment of this 
        section and before January 1, 2019.
            ``(6) Carbon emission rate requirements.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a unit meets the requirements of this 
                paragraph if--
                            ``(i) in the case of a unit using design 
                        coal with a heat content of not more than 9,000 
                        Btu per pound, the carbon emission rate is less 
                        than 0.60 pound of carbon per kilowatt hour, 
                        and
                            ``(ii) in the case of a unit using design 
                        coal with a heat content of more than 9,000 Btu 
                        per pound, the carbon emission rate is less 
                        than 0.54 pound of carbon per kilowatt hour.
                    ``(B) Eligible other technology unit.--In the case 
                of an eligible other technology unit, subparagraph (A) 
                shall be applied by substituting `0.51' and `0.459' for 
                `0.60' and `0.54', respectively.
    ``(e) General Definitions.--Any term used in this section which is 
also used in section 45G shall have the meaning given such term in 
section 45G.
    ``(f) National Limitation on the Aggregate Capacity of Advanced 
Clean Coal Technology Units.--
            ``(1) In general.--For purposes of subsection (b)(1)(G), 
        the national megawatt capacity limitation is--
                    ``(A) for qualifying advanced clean coal technology 
                units using advanced pulverized coal or atmospheric 
                fluidized bed combustion technology, not more than 
                1,000 megawatts (not more than 500 megawatts in the 
                case of units placed in service before 2011),
                    ``(B) for such units using pressurized fluidized 
                bed combustion technology, not more than 500 megawatts 
                (not more than 250 megawatts in the case of units 
                placed in service before 2011),
                    ``(C) for such units using integrated gasification 
                combined cycle technology, with or without fuel or 
                chemical co-production, not more than 2,000 megawatts 
                (not more than 750 megawatts, or not more than 1 
                project with a design net heat rate greater than 8,900 
                Btu per kilowatt hour, whichever is less, in the case 
                of units placed in service before 2011), and
                    ``(D) for such units using other technology for the 
                production of electricity, not more than 500 megawatts 
                (not more than 250 megawatts in the case of units 
                placed in service before 2011).
            ``(2) Allocation of limitation.--The Secretary shall 
        allocate the national megawatt capacity limitation for 
        qualifying advanced clean coal technology units in such manner 
        as the Secretary may prescribe under the regulations under 
        paragraph (3).
            ``(3) Regulations.--Not later than 6 months after the date 
        of the enactment of this section, the Secretary shall prescribe 
        such regulations as may be necessary or appropriate--
                    ``(A) to carry out the purposes of this subsection 
                and section 45H,
                    ``(B) to limit the capacity of any qualifying 
                advanced clean coal technology unit to which this 
                section applies so that the combined megawatt capacity 
                of all such units to which this section applies does 
                not exceed 4,000 megawatts,
                    ``(C) to provide a certification process described 
                in section 45G(e)(3)(C),
                    ``(D) to carry out the purposes described in 
                subparagraphs (D), (E), and (F) of section 45G(e)(3), 
                and
                    ``(E) to reallocate capacity which is not allocated 
                to any technology described in subparagraphs (A) 
                through (D) of paragraph (1) because an insufficient 
                number of qualifying units request an allocation for 
                such technology, to another technology described in 
                such subparagraphs in order to maximize the amount of 
                energy efficient production encouraged with the 
                available tax credits.
            ``(4) Selection criteria.--For purposes of paragraph 
        (3)(C), the selection criteria for allocating the national 
        megawatt capacity limitation to qualifying advanced clean coal 
        technology units--
                    ``(A) shall be established by the Secretary of 
                Energy as part of a competitive solicitation,
                    ``(B) shall include primary criteria of minimum 
                design net heat rate, maximum design thermal 
                efficiency, environmental performance, and lowest cost 
                to the Government,
                    ``(C) shall include criteria for the selection of 1 
                or more units which achieve a thermal efficiency of 
                lower than 8,900 Btu per kilowatt hour in that instance 
                where 2 or more projects are otherwise eligible for the 
                credit under this section, and have applied to the 
                Secretary for selection during approximately the same 
                time period, and
                    ``(D) shall include supplemental criteria as 
                determined appropriate by the Secretary of Energy.
    ``(g) Qualified Investment.--For purposes of subsection (a), the 
term `qualified investment' means, with respect to any taxable year, 
the basis of a qualifying advanced clean coal technology unit placed in 
service by the taxpayer during such taxable year (in the case of a unit 
described in subsection (b)(1)(A)(i)(II), only that portion of the 
basis of such unit which is properly attributable to the retrofitting 
or repowering of such unit).
    ``(h) Qualified Progress Expenditures.--
            ``(1) Increase in qualified investment.--In the case of a 
        taxpayer who has made an election under paragraph (5), the 
        amount of the qualified investment of such taxpayer for the 
        taxable year (determined under subsection (g) without regard to 
        this subsection) shall be increased by an amount equal to the 
        aggregate of each qualified progress expenditure for the 
        taxable year with respect to progress expenditure property.
            ``(2) Progress expenditure property defined.--For purposes 
        of this subsection, the term `progress expenditure property' 
        means any property being constructed by or for the taxpayer and 
        which it is reasonable to believe will qualify as a qualifying 
advanced clean coal technology unit which is being constructed by or 
for the taxpayer when it is placed in service.
            ``(3) Qualified progress expenditures defined.--For 
        purposes of this subsection--
                    ``(A) Self-constructed property.--In the case of 
                any self-constructed property, the term `qualified 
                progress expenditures' means the amount which, for 
                purposes of this subpart, is properly chargeable 
                (during such taxable year) to capital account with 
                respect to such property.
                    ``(B) Nonself-constructed property.--In the case of 
                nonself-constructed property, the term `qualified 
                progress expenditures' means the amount paid during the 
                taxable year to another person for the construction of 
                such property.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Self-constructed property.--The term `self-
                constructed property' means property for which it is 
                reasonable to believe that more than half of the 
                construction expenditures will be made directly by the 
                taxpayer.
                    ``(B) Nonself-constructed property.--The term 
                `nonself-constructed property' means property which is 
                not self-constructed property.
                    ``(C) Construction, etc.--The term `construction' 
                includes reconstruction and erection, and the term 
                `constructed' includes reconstructed and erected.
                    ``(D) Only construction of qualifying advanced 
                clean coal technology unit to be taken into account.--
                Construction shall be taken into account only if, for 
                purposes of this subpart, expenditures therefor are 
                properly chargeable to capital account with respect to 
                the property.
            ``(5) Election.--An election under this subsection may be 
        made at such time and in such manner as the Secretary may by 
        regulations prescribe. Such an election shall apply to the 
        taxable year for which made and to all subsequent taxable 
        years. Such an election, once made, may not be revoked except 
        with the consent of the Secretary.
    ``(i) Coordination With Other Credits.--This section shall not 
apply to any property with respect to which the rehabilitation credit 
under section 47 or the energy credit under section 48 is allowed 
unless the taxpayer elects to waive the application of such credit to 
such property.''.
    (c) Recapture.--Section 50(a) of the Internal Revenue Code of 1986 
(relating to other special rules) is amended by adding at the end the 
following new paragraph:
            ``(6) Special rules relating to qualifying advanced clean 
        coal technology unit.--For purposes of applying this subsection 
        in the case of any credit allowable by reason of section 48A, 
        the following shall apply:
                    ``(A) General rule.--In lieu of the amount of the 
                increase in tax under paragraph (1), the increase in 
                tax shall be an amount equal to the investment tax 
                credit allowed under section 38 for all prior taxable 
                years with respect to a qualifying advanced clean coal 
                technology unit (as defined by section 48A(b)(1)) 
                multiplied by a fraction whose numerator is the number 
                of years remaining to fully depreciate under this title 
                the qualifying advanced clean coal technology unit 
                disposed of, and whose denominator is the total number 
                of years over which such unit would otherwise have been 
                subject to depreciation. For purposes of the preceding 
                sentence, the year of disposition of the qualifying 
                advanced clean coal technology unit shall be treated as 
                a year of remaining depreciation.
                    ``(B) Property ceases to qualify for progress 
                expenditures.--Rules similar to the rules of paragraph 
                (2) shall apply in the case of qualified progress 
                expenditures for a qualifying advanced clean coal 
                technology unit under section 48A, except that the 
                amount of the increase in tax under subparagraph (A) of 
                this paragraph shall be substituted for the amount 
                described in such paragraph (2).
                    ``(C) Application of paragraph.--This paragraph 
                shall be applied separately with respect to the credit 
                allowed under section 38 regarding a qualifying 
                advanced clean coal technology unit.''.
    (d) Transitional Rule.--Section 39(d) of the Internal Revenue Code 
of 1986 (relating to transitional rules), as amended by this Act, is 
amended by adding at the end the following new paragraph:
            ``(12) No carryback of section 48a credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the qualifying advanced clean 
        coal technology unit credit determined under section 48A may be 
        carried back to a taxable year ending on or before the date of 
        the enactment of section 48A.''.
    (e) Technical Amendments.--
            (1) Section 49(a)(1)(C) of the Internal Revenue Code of 
        1986 is amended by striking ``and'' at the end of clause (ii), 
        by striking the period at the end of clause (iii) and inserting 
        ``, and'', and by adding at the end the following new clause:
                            ``(iv) the portion of the basis of any 
                        qualifying advanced clean coal technology unit 
                        attributable to any qualified investment (as 
                        defined by section 48A(g)).''.
            (2) Section 50(a)(4) of such Code is amended by striking 
        ``and (2)'' and inserting ``(2), and (6)''.
            (3) Section 50(c) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(6) Nonapplication.--Paragraphs (1) and (2) shall not 
        apply to any qualifying advanced clean coal technology unit 
        credit under section 48A.''.
            (4) The table of sections for subpart E of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 48 the following new item:

``Sec. 48A. Qualifying advanced clean coal technology unit credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this Act, under 
rules similar to the rules of section 48(m) of the Internal Revenue 
Code of 1986 (as in effect on the day before the date of the enactment 
of the Revenue Reconciliation Act of 1990).

SEC. 312. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED CLEAN COAL 
              TECHNOLOGY UNIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits), as amended by this Act, is amended by adding at the end the 
following new section:

``SEC. 45H. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED CLEAN COAL 
              TECHNOLOGY UNIT.

    ``(a) General Rule.--For purposes of section 38, the qualifying 
advanced clean coal technology production credit of any taxpayer for 
any taxable year is equal to--
            ``(1) the applicable amount of advanced clean coal 
        technology production credit, multiplied by
            ``(2) the applicable percentage (as determined under 
        section 48A(c)) of the sum of--
                    ``(A) the kilowatt hours of electricity, plus
                    ``(B) each 3,413 Btu of fuels or chemicals,
        produced by the taxpayer during such taxable year at a 
        qualifying advanced clean coal technology unit during the 10-
        year period beginning on the date the unit was originally 
        placed in service (or returned to service after becoming a 
        qualifying advanced clean coal technology unit).
    ``(b) Applicable Amount.--For purposes of this section, the 
applicable amount of advanced clean coal technology production credit 
with respect to production from a qualifying advanced clean coal 
technology unit shall be determined as follows:
            ``(1) Where the qualifying advanced clean coal technology 
        unit is producing electricity only:
                    ``(A) In the case of a unit originally placed in 
                service before 2011, if--
      

------------------------------------------------------------------------
                                     The applicable amount is:
         ``The design net ----------------------------------------------
          heat rate is:      For 1st 5 years of      For 2d 5 years of
                                such service            such service
------------------------------------------------------------------------
 
        Not more than              $.0060                  $.0038
        More than 8,500            $.0025                  $.0010
         but not more
         than 8,750.
        More than 8,750            $.0010                 $.0010.
         but less than
         8,900.
------------------------------------------------------------------------

                    ``(B) In the case of a unit originally placed in 
                service after 2010 and before 2015, if--
      

------------------------------------------------------------------------
                                     The applicable amount is:
         ``The design net ----------------------------------------------
          heat rate is:      For 1st 5 years of      For 2d 5 years of
                                such service            such service
------------------------------------------------------------------------
 
        Not more than              $.0105                  $.0090
        More than 7,770            $.0085                  $.0068
         but not more
         than 8,125.
        More than 8,125            $.0075                 $.0055.
         but less than
         8,350.
------------------------------------------------------------------------

                    ``(C) In the case of a unit originally placed in 
                service after 2014 and before 2019, if--
      

------------------------------------------------------------------------
                                     The applicable amount is:
         ``The design net ----------------------------------------------
          heat rate is:      For 1st 5 years of      For 2d 5 years of
                                such service            such service
------------------------------------------------------------------------
 
        Not more than              $.0140                  $.0115
        More than 7,380            $.0120                 $.0090.
         but not more
         than 7,720.
------------------------------------------------------------------------

            ``(2) Where the qualifying advanced clean coal technology 
        unit is producing fuel or chemicals:
                    ``(A) In the case of a unit originally placed in 
                service before 2011, if--
      

------------------------------------------------------------------------
        ``The unit design            The applicable amount is:
           net thermal    ----------------------------------------------
         efficiency (HHV)    For 1st 5 years of      For 2d 5 years of
               is:              such service            such service
------------------------------------------------------------------------
 
        Not less than              $.0060                  $.0038
        Less than 40.6             $.0025                  $.0010
         but not less
         than 40 percent.
        Less than 40 but           $.0010                 $.0010.
         not less than
         38.4 percent.
------------------------------------------------------------------------

                    ``(B) In the case of a unit originally placed in 
                service after 2010 and before 2015, if--
      

------------------------------------------------------------------------
        ``The unit design            The applicable amount is:
           net thermal    ----------------------------------------------
         efficiency (HHV)    For 1st 5 years of      For 2d 5 years of
               is:              such service            such service
------------------------------------------------------------------------
 
        Not less than              $.0105                  $.0090
        Less than 43.6             $.0085                  $.0068
         but not less
         than 42 percent.
        Less than 42 but           $.0075                 $.0055.
         not less than
         40.2 percent.
------------------------------------------------------------------------

                    ``(C) In the case of a unit originally placed in 
                service after 2014 and before 2019, if--
      

------------------------------------------------------------------------
        ``The unit design            The applicable amount is:
           net thermal    ----------------------------------------------
         efficiency (HHV)    For 1st 5 years of      For 2d 5 years of
               is:              such service            such service
------------------------------------------------------------------------
 
        Not less than              $.0140                  $.0115
        Less than 44.2             $.0120                 $.0090.
         but not less
         than 43.9
         percent.
------------------------------------------------------------------------

    ``(c) Special Rule.--A qualifying clean coal technology facility 
originally placed in service before 2009 which has a design net heat 
rate which meets a lower heat rate test in subparagraphs (A), (B), and 
(C) of subsection (b)(1) and subparagraphs (A), (B), and (C) of 
subsection (b)(2) or a qualifying clean coal technology facility 
originally placed in service before 2013 which has a design net heat 
rate which meets a lower heat rate test in paragraph (1)(C) or (2)(C) 
of subsection (b) shall receive the highest applicable amount with 
respect to a production credit for which such facility qualifies.
    ``(d) Inflation Adjustment.--For calendar years after 2003, each 
amount in paragraphs (1) and (2) of subsection (b) shall be adjusted by 
multiplying such amount by the inflation adjustment factor for the 
calendar year in which the amount is applied. If any amount as 
increased under the preceding sentence is not a multiple of 0.01 cent, 
such amount shall be rounded to the nearest multiple of 0.01 cent.
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) In general.--Any term used in this section which is 
        also used in section 45G or 48A shall have the meaning given 
        such term in such section.
            ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
        and (5) of section 45(d) shall apply.''.
    (b) Credit Treated as Business Credit.--Section 38(b) of the 
Internal Revenue Code of 1986 (relating to current year business 
credit), as amended by this Act, is amended by striking ``plus'' at the 
end of paragraph (15), by striking the period at the end of paragraph 
(16) and inserting ``, plus'', and by adding at the end the following 
new paragraph:
            ``(17) the qualifying advanced clean coal technology 
        production credit determined under section 45H(a).''.
    (c) Transitional Rule.--Section 39(d) of the Internal Revenue Code 
of 1986 (relating to transitional rules), as amended by this Act, is 
amended by adding at the end the following new paragraph:
            ``(13) No carryback of section 45h credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the qualifying advanced clean 
        coal technology production credit determined under section 45H 
        may be carried back to a taxable year ending on or before the 
        date of the enactment of section 45H.''.
    (d) Denial of Double Benefit.--Section 29(d) of the Internal 
Revenue Code of 1986 (relating to other definitions and special rules) 
is amended by adding at the end the following new paragraph:
            ``(9) Denial of double benefit.--This section shall not 
        apply with respect to any qualified fuel the production of 
        which may be taken into account for purposes of determining the 
        credit under section 45H.''.
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986, as amended by this Act, is amended by adding at the end the 
following new item:

``Sec. 45H. Credit for production from a qualifying advanced clean coal 
                            technology unit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to production after the date of the enactment of this Act, in 
taxable years ending after such date.

     Subtitle C--Treatment of Persons Not Able To Use Entire Credit

SEC. 321. TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT.

    (a) In General.--Section 45G of the Internal Revenue Code of 1986, 
as added by this Act, is amended by adding at the end the following new 
subsection:
    ``(f) Treatment of Person Not Able To Use Entire Credit.--
            ``(1) Allowance of credits.--
                    ``(A) In general.--Any credit allowable under this 
                section, section 45H, or section 48A with respect to a 
                facility owned by a person described in subparagraph 
                (B) may be transferred or used as provided in this 
                subsection, and the determination as to whether the 
                credit is allowable shall be made without regard to the 
                tax-exempt status of the person.
                    ``(B) Persons described.--A person is described in 
                this subparagraph 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)),
                            ``(iv) any State or political subdivision 
                        thereof, the District of Columbia, or any 
                        agency or instrumentality of any of the 
                        foregoing,
                            ``(v) any Indian tribal government (within 
                        the meaning of section 7871) or any agency or 
                        instrumentality thereof, or
                            ``(vi) the Tennessee Valley Authority.
            ``(2) Transfer of credit.--
                    ``(A) In general.--A person described in clause 
                (i), (ii), (iii), (iv), or (v) of paragraph (1)(B) may 
                transfer any credit to which paragraph (1)(A) applies 
                through an assignment to any other person not described 
                in paragraph (1)(B). Such transfer may be revoked only 
                with the consent of the Secretary.
                    ``(B) Regulations.--The Secretary shall prescribe 
                such regulations as necessary to insure that any credit 
                described in subparagraph (A) is claimed once and not 
                reassigned by such other person.
                    ``(C) Transfer proceeds treated as arising from 
                essential government function.--Any proceeds derived by 
                a person described in clause (iii), (iv), or (v) of 
                paragraph (1)(B) from the transfer of any credit under 
                subparagraph (A) shall be treated as arising from the 
                exercise of an essential government function.
            ``(3) Use by tva.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, in the case of a person described in 
                paragraph (1)(B)(vi), any credit to which paragraph 
                (1)(A) applies may be applied as a credit against the 
                payments required to be made in any fiscal year under 
                section 15d(e) of the Tennessee Valley Authority Act of 
                1933 (16 U.S.C. 831n-4(e)) as an annual return on the 
                appropriations investment and an annual repayment sum.
                    ``(B) Treatment of credits.--The aggregate amount 
                of credits described in paragraph (1)(A) with respect 
                to such person shall be treated in the same manner and 
                to the same extent as if such credits were a payment in 
                cash and shall be applied first against the annual 
                return on the appropriations investment.
                    ``(C) Credit carryover.--With respect to any fiscal 
                year, if the aggregate amount of credits described 
                paragraph (1)(A) with respect to such person exceeds 
                the aggregate amount of payment obligations described 
                in subparagraph (A), the excess amount shall remain 
                available for application as credits against the 
                amounts of such payment obligations in succeeding 
                fiscal years in the same manner as described in this 
                paragraph.
            ``(4) Credit not income.--Any transfer under paragraph (2) 
        or use under paragraph (3) of any credit to which paragraph 
        (1)(A) applies shall not be treated as income for purposes of 
        section 501(c)(12).
            ``(5) Treatment of unrelated persons.--For purposes of this 
        subsection, sales among and between persons described in 
        clauses (i), (ii), (iii), (iv), and (v) of paragraph (1)(A) 
        shall be treated as sales between unrelated parties.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to production after the date of the enactment of this Act, in taxable 
years ending after such date.
                                 <all>