Credit to holders of clean energy bonds

(a)

In general

Part IV of subchapter A of chapter 1 (relating to credits against tax) is amended by adding at the end the following new subpart:

Nonrefundable credit to holders of clean energy bonds

Sec. 54. Credit to holders of clean energy bonds

54.

Credit to holders of clean energy bonds

(a)

Allowance of credit

In the case of a taxpayer who holds a clean energy bond on a credit allowance date of such bond, which occurs during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for such taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to credit allowance dates during such year on which the taxpayer holds such bond. (b)

Amount of credit

(1)

In general

The amount of the credit determined under this subsection with respect to any credit allowance date for a clean energy bond is 25 percent of the annual credit determined with respect to such bond. (2)

Annual credit

The annual credit determined with respect to any clean energy bond is the product of— (A)the credit rate determined by the Secretary under paragraph (3) for the day on which such bond was sold, multiplied by (B)the outstanding face amount of the bond. (3)

Determination

For purposes of paragraph (2), with respect to any clean energy bond, the Secretary shall determine daily or caused to be determined daily a credit rate which shall apply to the first day on which there is a binding, written contract for the sale or exchange of the bond. The credit rate for any day is the credit rate which the Secretary or the Secretary’s designee estimates will permit the issuance of clean energy bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer. (4)

Credit allowance date

For purposes of this section, the term credit allowance date means— (A)March 15, (B)June 15, (C)September 15, and (D)December 15.

Such term also includes the last day on which the bond is outstanding.

(5)

Special rule for issuance and redemption

In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this subsection with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed or matures. (c)

Limitation based on amount of tax

(1)

In general

The credit allowed under subsection (a) for any 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 this part (other than subpart C thereof, relating to refundable credits). (2)

Carryover of unused credit

If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year. (d)

Clean energy bond

For purposes of this section— (1)

In general

The term clean energy bond means any bond issued as part of an issue if— (A)the bond is issued by a qualified issuer, (B)95 percent or more of the proceeds from the sale of such issue are to be used for capital expenditures incurred by qualified borrowers for 1 or more qualified projects, (C)the qualified issuer designates such bond for purposes of this section and the bond is in registered form, and (D)the issue meets the requirements of subsections (e) and (g). (2)

Qualified project; special use rules

(A)

In general

The term qualified project means any qualified facility (as determined under section 45(d) without regard to any placed in service date) owned by a qualified borrower. (B)

Refinancing rules

For purposes of paragraph (1)(B), a qualified project may be refinanced with proceeds of a clean energy bond only if the indebtedness being refinanced (including any obligation directly or indirectly refinanced by such indebtedness) was originally incurred by a qualified borrower after the date of the enactment of this section. (C)

Reimbursement

For purposes of paragraph (1)(B), a clean energy bond may be issued to reimburse a qualified borrower for amounts paid after the date of the enactment of this section with respect to a qualified project, but only if prior to the payment of such expenditure, the qualified borrower declared its intent to reimburse such expenditure with the proceeds of a clean energy bond. (D)

Treatment of changes in use

For purposes of paragraph (1)(B), the proceeds of an issue shall not be treated as used for a qualified project to the extent that a qualified borrower takes any action within its control which causes such proceeds not to be used for a qualified project. The Secretary shall prescribe regulations specifying remedial actions that may be taken (including conditions to taking such remedial actions) to prevent an action described in the preceding sentence from causing a bond to fail to be a clean energy bond. (e)

Maturity limitations

(1)

Duration of term

A bond shall not be treated as a clean energy bond if such bond is issued as part of an issue and— (A)the average maturity of bonds issued as a part of such issue, exceeds (B)120 percent of the average reasonable expected economic life of the facilities being financed with the proceeds from the sale of such issue. (2)

Determination of averages

For purposes of paragraph (1), the determination of averages of an issue and economic life of any facility shall be determined in accordance with section 147(b). (3)

Ratable principal amortization required

A bond shall not be treated as a clean energy bond unless it is part of an issue which provides for an equal amount of principal to be paid by the qualified issuer during each calendar year that the issue is outstanding. (f)

Credit included in gross income

Gross income includes the amount of the credit allowed to the taxpayer under this section (determined without regard to subsection (c)) and the amount so included shall be treated as interest income. (g)

Special rules relating to expenditures

(1)

In general

An issue shall be treated as meeting the requirements of this subsection if— (A)at least 95 percent of the proceeds from the sale of the issue are to be spent for 1 or more qualified projects within the 5-year period beginning on the date of issuance of the clean energy bond, (B)a binding commitment with a third party to spend at least 10 percent of the proceeds from the sale of the issue will be incurred within the 6-month period beginning on the date of issuance of the clean energy bond or, in the case of a clean energy bond, the proceeds of which are to be loaned to 2 or more qualified borrowers, such binding commitment will be incurred within the 6-month period beginning on the date of the loan of such proceeds to a qualified borrower, and (C)such projects will be completed with due diligence and the proceeds from the sale of the issue will be spent with due diligence. (2)

Extension of period

Upon submission of a request prior to the expiration of the period described in paragraph (1)(A), the Secretary may extend such period if the qualified issuer establishes that the failure to satisfy the 5-year requirement is due to reasonable cause and the related projects will continue to proceed with due diligence. (3)

Failure to spend required amount of bond proceeds within 5 years

To the extent that less than 95 percent of the proceeds of such issue are expended within such 5-year period (and no extension has been obtained under paragraph (2)), the qualified issuer shall redeem all of the nonqualified bonds on the earliest call date subsequent to the expiration of the 5-year period. If such earliest call date is more than 90 days subsequent to the expiration of the 5-year period, the qualified issuer shall establish a yield-restricted defeasance escrow within such 90 days to retire such nonqualified bonds on the earlier of the date which is 10 years after the issue date or the first call date. For purposes of this paragraph, the term nonqualified bonds means the portion of the outstanding bonds in an amount that, if the remaining bonds were issued on the fifth anniversary of the date of the issuance of the issue, at least 95 percent of the proceeds of the remaining bonds would be used to provide qualified projects. (h)

Special rules relating to arbitrage

(1)

In general

A bond which is part of an issue shall not be treated as a clean energy bond unless, with respect to the issue of which the bond is a part, the qualified issuer satisfies the arbitrage rebate requirements of section 148 with respect to gross proceeds of the issue (other than any amounts applied in accordance with subsection (g)). For purposes of such requirements, yield over the term of an issue shall be determined under the principles of section 148 based on the qualified issuer’s payments of principal, interest (if any), and fees for qualified guarantees on such issue. (2)

Exception

Amounts on deposit in a bona fide debt service fund with regard to any clean energy bond are not subject to the arbitrage rebate requirements of section 148. (i)

Cooperative electric company; qualified energy tax credit bond lender; governmental body; qualified borrower

For purposes of this section— (1)

Cooperative electric company

The term cooperative electric company means a mutual or cooperative electric company described in section 501(c)(12) or section 1381(a)(2)(C), or a not-for-profit electric utility which has received a loan or loan guarantee under the Rural Electrification Act. (2)

Clean energy bond lender

The term clean energy bond lender means a lender which is a cooperative which is owned by, or has outstanding loans to, 100 or more cooperative electric companies and is in existence on February 1, 2002, and shall include any affiliated entity which is controlled by such lender. (3)

Governmental body

The term governmental body means any State, territory, possession of the United States, the District of Columbia, Indian tribal government, and any political subdivision thereof. (4)

Qualified issuer

The term qualified issuer means— (A)a clean energy bond lender, (B)a cooperative electric company, (C)a governmental body, or (D)the Tennessee Valley Authority. (5)

Qualified borrower

The term qualified borrower means— (A)a cooperative electric company, (B)a governmental body, or (C)the Tennessee Valley Authority. (j)

Special rules relating to pool bonds

No portion of a pooled financing bond may be allocable to loan unless the borrower has entered into a written loan commitment for such portion prior to the issue date of such issue. (k)

Other definitions and special rules

For purposes of this section— (1)

Bond

The term bond includes any obligation. (2)

Pooled financing bond

The term pooled financing bond shall have the meaning given such term by section 149(f)(4)(A). (3)

Partnership; s corporation; and other pass-thru entities

Under regulations prescribed by the Secretary, in the case of a partnership, trust, S corporation, or other pass-thru entity, rules similar to the rules of section 41(g) shall apply with respect to the credit allowable under subsection (a). (4)

Bonds held by regulated investment companies

If any clean energy bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary. (5)

Treatment for estimated tax purposes

Solely for purposes of sections 6654 and 6655, the credit allowed by this section to a taxpayer by reason of holding a clean energy bond on a credit allowance date shall be treated as if it were a payment of estimated tax made by the taxpayer on such date. (6)

Reporting

Issuers of clean energy bonds shall submit reports similar to the reports required under section 149(e). (l)

Termination

This section shall not apply with respect to any bond issued after December 31, 2008.

(b)

Reporting

Subsection (d) of section 6049 (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph:

(8)

Reporting of credit on clean energy bonds

(A)

In general

For purposes of subsection (a), the term interest includes amounts includible in gross income under section 54(f) and such amounts shall be treated as paid on the credit allowance date (as defined in section 54(b)(4)). (B)

Reporting to corporations, etc

Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A), subsection (b)(4) shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i) of such subsection. (C)

Regulatory authority

The Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.

(c)

Clerical amendments

(1)The table of subparts for part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

Subpart H. nonrefundable credit to holders of clean energy bonds

(2)Section 6401(b)(1) is amended by striking and G and inserting G, and H. (d)

Issuance of regulations

The Secretary of Treasury shall issue regulations required under section 54 of the Internal Revenue Code of 1986 (as added by this section) not later than 120 days after the date of the enactment of this Act. (e)

Effective date

The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.