Credit for expenses incurred in restoring and protecting coastal lands

(a)

In general

Subpart B 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 section:

30B.

Credit for expenses incurred in restoring and protecting coastal lands

(a)

Allowance of credit

There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the qualified expenditures of the taxpayer for the taxable year. (b)

Limitations

(1)

Maximum credit

The credit allowed under subsection (a) for a taxable year shall not exceed $2,000,000. (2)

Limitation based on amount of tax

The credit allowed under subsection (a) for the taxable year shall not exceed the excess of— (A)the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (B)the sum of the credits allowable under subpart A and sections 27 and 30A for the taxable year. (c)

Qualified expenditures

For purposes of this section— (1)

In general

The term qualified expenditures means amounts paid or incurred by the taxpayer for an approved project. (2)

Approved project

The term approved project means any project approved by the Natural Resources Conservation Service to restore or protect coastal lands located in the United States. (d)

Carryovers allowed

(1)

In general

If the credit amount allowable under subsection (a) for a taxable year exceeds the amount of the limitation under subsection (c) for such taxable year (referred to as the ‘unused credit year’ in this paragraph), such excess shall be allowed as a credit carryforward for each of the taxable years following the unused credit year or as a credit carryback for each of the taxable years preceeding the unused credit year. (2)

Rules

For purposes of paragraph (1), rules similar to the rules of section 39 shall apply, except that— (A)subsection (a)(1) shall be applied— (i)by substituting 3 taxable years for 1 taxable years in subparagraph (A) thereof, and (ii)by substituting 5 taxable years for 20 taxable years in subparagraph (B) thereof, and (B)subsection (a)(2) shall be applied— (i)by substituting 8 taxable years for 21 taxable years in subparagraph (A) thereof, and (ii)by substituting 7 taxable years for 20 taxable years in subparagraph (B). (e)

Special rules

(1)

Basis reduction

The basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit (determined without regard to subsection (b)(2)). (2)

No double benefit

The amount of any deduction or credit allowable under this chapter (other than the credit allowable under subsection (a)), shall be reduced by the amount of credit allowed under subsection (a) (determined without regard to subsection (b)(2)) for the taxable year. (3)

Reduction for assistance

The amount taken into account under subsection (a) with respect to any project shall be reduced by the amount of any Federal, State, or local grant or other assistance received by the taxpayer during such taxable year or any prior taxable year which was used to make qualified expenditures and which was not included in the gross income of such taxpayer.

(b)

Basis adjustment

Section 1016(a) of such Code is amended by striking and at the end of paragraph (30), by striking the period at the end of paragraph (31) and inserting , and, and by adding at the end the following new paragraph:

(32)to the extent provided in section 30B(e)(1).

(c)

Clerical amendment

The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 30A the following new item:

Sec. 30B. Credit for expenses incurred in restoring and protecting coastal lands

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2004.