[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2828 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 2828

  To ensure that the United States leads the world in developing and 
manufacturing next generation energy technologies, to grow the economy 
  of the United States, to create new highly trained, highly skilled 
American jobs, to eliminate American overdependence on foreign oil, and 
                to address the threat of global warming.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              June 9, 2005

  Mr. Inslee (for himself, Mr. Van Hollen, Mr. Holt, Mr. Israel, Mr. 
    Honda, Mr. McDermott, Mr. Larsen of Washington, Mr. Jackson of 
Illinois, Ms. Schakowsky, Mr. Langevin, Mr. Grijalva, Mr. Emanuel, Ms. 
Baldwin, Mr. George Miller of California, and Mr. Smith of Washington) 
 introduced the following bill; which was referred to the Committee on 
Energy and Commerce, and in addition to the Committees on Science, Ways 
   and Means, Financial Services, Transportation and Infrastructure, 
Education and the Workforce, Government Reform, and Agriculture, for a 
 period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
  To ensure that the United States leads the world in developing and 
manufacturing next generation energy technologies, to grow the economy 
  of the United States, to create new highly trained, highly skilled 
American jobs, to eliminate American overdependence on foreign oil, and 
                to address the threat of global warming.

    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 ``New Apollo Energy 
Act of 2005''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                TITLE I--FINDINGS AND PERFORMANCE GOALS

Sec. 101. Findings.
Sec. 102. Performance goals.
 TITLE II--FEDERAL RESEARCH AND DEVELOPMENT PARTNERSHIPS WITH INDUSTRY 
                           FOR NEW TECHNOLOGY

                     Subtitle A--General provisions

Sec. 201. Authorization of appropriations.
Sec. 202. Participation.
Sec. 203. Cost sharing.
Sec. 204. Education and outreach.
Sec. 205. Definition.
          Subtitle B--Clean energy technology research program

Sec. 211. Definitions.
Sec. 212. Enhanced clean energy research, development, and 
                            demonstration.
Subtitle C--Energy efficiency research, development, and demonstration 
                                program

Sec. 221. Enhanced energy efficiency research, development, and 
                            demonstration.
Sec. 222. Enhanced aeronautical system energy efficiency research, 
                            development, and public-private 
                            partnership.
Sec. 223. Next Generation Lighting Initiative.
Sec. 224. National Building Performance Initiative.
                Subtitle D--Additional research programs

                             Part 1--Fusion

Sec. 231. Plan for fusion experiment.
Sec. 232. Definitions.
    Part 2--Ultra-deepwater and extended reach drilling and carbon 
                       sequestration technologies

Sec. 241. Program authority.
Sec. 242. Ultra-deepwater and extended reach drilling and carbon 
                            sequestration and unconventional 
                            technologies program.
Sec. 243. Sunset.
Sec. 244. Definitions.
             TITLE III--TAX INCENTIVES FOR NEW TECHNOLOGIES

Sec. 301. References.
Sec. 302. Administration of title.
                  Subtitle A--Near term tax incentives

Sec. 311. Extension through 2015 for placing qualified facilities in 
                            service for producing renewable electric 
                            energy.
Sec. 312. Expansion and modification of renewable resource credit.
Sec. 313. Tradable renewable resource credit for public utilities and 
                            other tax exempt organizations.
Sec. 314. Alternative motor vehicle credit.
Sec. 315. Modification of credit for qualified electric vehicles.
Sec. 316. Extension of biodiesel tax credits.
Sec. 317. Credit for retail sale of alternative fuels as motor vehicle 
                            fuel.
Sec. 318. Study of effectiveness of certain provisions by GAO.
Sec. 319. Extension of deduction for certain refueling property.
Sec. 320. Credit for installation of alternative fueling stations.
Sec. 321. Incentive for certain energy efficient property used in 
                            business.
Sec. 322. Energy efficient commercial buildings deduction.
Sec. 323. Credit for construction of new highly energy-efficient homes.
Sec. 324. Credit for energy efficient appliances.
Sec. 325. Credit for distributed energy generation and demand 
                            management property.
Sec. 326. Credit for energy efficient recycling or remanufacturing 
                            equipment.
Sec. 327. Credit for distributed energy generation and demand 
                            management property used in residences.
Sec. 328. Credit for energy management systems using residential real 
                            time metering systems.
Sec. 329. Credit for flywheel property.
Sec. 330. Credits for clean coal.
                    Subtitle B--Long Term Incentives

Sec. 331. Tax incentives for retooling and investment in new facilities 
                            and assets to produce energy efficiency 
                            technologies and domestic clean energy 
                            production technologies.
Sec. 332. Special rules for automotive industry.
Sec. 333. Special rules for high-capacity airplanes.
Sec. 334. New electricity transmission lines designed primarily to 
                            carry electricity from renewable energy 
                            resources.
Sec. 335. New energy technologies commission.
Sec. 336. Expenditure limitation.
   TITLE IV--FEDERAL GOVERNMENT LEVERAGE TO MOVE NEW TECHNOLOGIES TO 
                                 MARKET

Sec. 401. Improved coordination of technology transfer activities.
Sec. 402. Federal support for commercialization of new technologies.
Sec. 403. Clean energy technology exports program.
Sec. 404. International energy technology deployment program.
Sec. 405. Risk pool for qualifying advanced clean energy technology.
Sec. 406. Federal renewable and clean energy use.
Sec. 407. Require the Export-Import Bank of the United States to meet 
                            renewable energy targets in its lending 
                            practices.
Sec. 408. Grants for transit programs.
Sec. 409. Grants for water and sewer improvement programs.
Sec. 410. Loans for high-efficiency vehicles.
Sec. 411. Requirement regarding purchase of motor vehicles by Executive 
                            agencies.
Sec. 412. Federal energy efficiency.
Sec. 413. Federal agency ethanol-blended gasoline and biodiesel 
                            purchasing requirement.
Sec. 414. Permitting of wind energy development projects on public 
                            lands.
Sec. 415. Energy savings performance contracts.
Sec. 416. Municipality grants for distributed energy plans.
Sec. 417. Green building standards for Federal buildings.
              TITLE V--CONSUMER PROTECTION AND ASSISTANCE

Sec. 501. Strategic Petroleum Reserve.
Sec. 502. Regulatory oversight over energy trading markets and metals 
                            trading markets.
Sec. 503. Increased funding for liheap, weatherization assistance.
Sec. 504. National energy efficient housing.
Sec. 505. National net metering requirement for utilities and 
                            interconnection standards for distributive 
                            energy generation.
Sec. 506. Appliance standards.
Sec. 507. Energy Star certification for solar water heaters.
Sec. 508. Electric reliability standards.
     TITLE VI--MARKET-BASED INITIATIVES TO REDUCE GREENHOUSE GASES

Sec. 600. Definitions.
   Subtitle A--Federal climate change research and related activities

Sec. 601. National Science Foundation fellowships.
Sec. 602. Research grants.
Sec. 603. Abrupt climate change research.
Sec. 604. NIST greenhouse gas functions.
Sec. 605. Development of new measurement technologies.
Sec. 606. Enhanced environmental measurements and standards.
Sec. 607. Technology development and diffusion.
Sec. 608. Agricultural outreach program.
Sec. 609. NOAA report on climate change effects; preparation 
                            assistance.
              Subtitle B--National Greenhouse Gas Database

Sec. 611. National Greenhouse Gas Database and registry established.
Sec. 612. Inventory of greenhouse gas emissions for covered entities.
Sec. 613. Greenhouse gas reduction reporting.
Sec. 614. Measurement and verification.
          Subtitle C--Market-driven greenhouse gas reductions

Chapter 1--Emission reduction requirements; use of tradeable allowances

Sec. 621. Covered entities must submit allowances for emissions.
Sec. 622. Compliance.
Sec. 623. Borrowing against future reductions.
Sec. 624. Other uses of tradeable allowances.
Sec. 625. Exemption of source categories.
    Chapter 2--Establishment and allocation of tradeable allowances

Sec. 631. Establishment of tradeable allowances.
Sec. 632. Determination of tradeable allowance allocations.
Sec. 633. Allocation of tradeable allowances.
Sec. 634. Ensuring target adequacy.
Sec. 635. Initial allocations for early participation and accelerated 
                            participation.
Sec. 636. Bonus for accelerated participation.
              Chapter 3--Climate Change Credit Corporation

Sec. 641. Establishment.
Sec. 642. Purposes and functions.
             Chapter 4--Sequestration accounting; penalties

Sec. 651. Penalties.
Sec. 652. Sequestration accounting.
                     TITLE VII--ENERGY INDEPENDENCE

                  Subtitle A--Renewable fuels standard

Sec. 701. Renewable fuels standard.
Sec. 702. Elimination of oxygen content requirement for reformulated 
                            gasoline.
Sec. 703. Public health and environmental impacts of fuels and fuel 
                            additives.
Sec. 704. Analyses of motor vehicle fuel changes.
Sec. 705. Additional Opt-in areas under reformulated gasoline program.
Sec. 706. Federal enforcement of State fuels requirements.
Sec. 707. Fuel system requirements harmonization study.
Sec. 708. Report on renewable motor fuel.
                Subtitle B--Renewable portfolio standard

Sec. 711. Renewable portfolio standard.
                        Subtitle C--Oil Savings

Sec. 721. Oil savings.
Sec. 722. Determination of Equivalency between CAFE credits and 
                            greenhouse gas credits.
Sec. 723. Elimination of 2-FLEET rule.
Subtitle D--Loan guarantees for biorefineries and renewable electricity 
                         generation facilities

Sec. 731. Loan guarantees for biorefineries and renewable energy 
                            production facilities.
                        TITLE VIII--TAX OFFSETS

Sec. 801. References.
                     Subtitle A--Budget neutrality

Sec. 811. Tax reductions limited to revenue raised by tax offsets.
                 Subtitle B--Denial of treaty benefits

Sec. 821. Denial of treaty benefits for certain deductible payments.
  Subtitle C--Abusive tax shelter shutdown and taxpayer accountability

Sec. 831. Findings and purpose.
Sec. 832. Clarification of economic substance doctrine.
Sec. 833. Penalty for understatements attributable to transactions 
                            lacking economic substance, etc.
Sec. 834. Understatement of taxpayer's liability by income tax return 
                            preparer.
Sec. 835. Frivolous tax submissions.
Sec. 836. Expanded authority to disallow tax benefits under section 
                            269.

                TITLE I--FINDINGS AND PERFORMANCE GOALS

SEC. 101. FINDINGS.

    (a) Findings.--The Congress finds the following:
            (1) The United States imports over half the oil it consumes 
        and consumes about one fourth of the world's daily oil 
        production.
            (2) According to present trends, the United States reliance 
        on foreign oil will increase to 68 percent of total consumption 
        by 2025.
            (3) Having only 3 percent of the world's known oil 
        reserves, the health of the United States economy is dependent 
        on world oil prices.
            (4) World oil prices are overwhelmingly dictated by 
        countries other than the United States, particularly by the 
        member countries of the Organization of Petroleum Exporting 
        Countries.
            (5) A major portion of the world's oil supply is controlled 
        by unstable governments and countries that are known to 
        finance, harbor, or otherwise support terrorists and terrorist 
        activities.
            (6) Since World War II, the United States has made 
        significant expenditures of American taxpayer dollars in 
        attempts to stabilize governments and protect American 
        interests in the Middle East.
            (7) Countries such as Japan, Germany, Denmark, and Great 
        Britain lead the United States in manufacturing alternative 
        energy technologies that both decrease reliance on fossil fuels 
        and do not contribute to global warming.
            (8) The United States has led the world in the development 
        of a wide array of technological advances and is now poised to 
        lead the world, using its unique national genius for 
        innovation, in the development of a host of new energy 
        technologies.
            (9) Development of renewable energy resources in the United 
        States offers a substantial opportunity for economic 
        development in rural, agriculture-dependent areas.
            (10) A bold new national energy plan can lead to a surge of 
        investment in, development of, and deployment of clean energy 
        and energy efficient technologies that would result in the 
        creation of millions of highly trained manufacturing and 
        technical jobs throughout the American economy.
            (11) Innovative uses of tax incentives to encourage the 
        manufacturing of new clean energy technologies in the United 
        States will help create American jobs, decrease America's 
        dependence on foreign oil, and address pressing environmental 
        concerns, and are preferable to large tax breaks for the 
        wealthiest in society.
            (12) Human activities have caused rapid increases in 
        atmospheric concentrations of carbon dioxide and other 
        greenhouse gases in the last century.
            (13) According to the Intergovernmental Panel on Climate 
        Change and the National Research Council--
                    (A) the Earth has warmed in the last century; and
                    (B) the majority of the observed warming is 
                attributable to human activities, including fossil 
                fuel-generated carbon dioxide emissions.
            (14) Despite the fact that many uncertainties in climate 
        science remain, the potential impacts from human-induced 
        climate change pose a substantial risk that should be managed 
        in a responsible manner.
            (15) The United States has ratified the UNFCCC (United 
        Nations Framework Convention on Climate Change), which states, 
        in part, ``the Parties to the Convention are to implement 
        policies with the aim of returning to their 1990 levels 
        anthropogenic emissions of carbon dioxide and other greenhouse 
        gases''.
            (16) Global warming poses a significant threat to national 
        security, the American economy, public health and welfare, and 
        the global environment. According to a report commissioned by 
        the Department of Defense in 2003 entitled ``An Abrupt Climate 
        Change Scenario and its Implications for United States National 
        Security'', the risk of abrupt climate change due to global 
        warming should be elevated beyond a scientific debate to a US 
        national security concern.

SEC. 102. PERFORMANCE GOALS.

    (a) New Apollo Energy Act Performance Goals.--In order to ensure 
that the national energy policy of the United States is the most 
effective policy for protecting national and homeland security, 
expanding our economy and creating jobs, addressing global warming and 
environmental health concerns, and protecting the interests of American 
consumers, Congress establishes the New Apollo Energy Act Performance 
Goals, which the President shall consider when formulating and 
enforcing national energy policy. These goals are to--
            (1) reduce demand for oil in the United States by at least 
        600,000 barrels per day from the demand for oil projected by 
        the Energy Information Administration for 2010, 1,700,000 
        barrels per day from projected demand for oil in 2015, and 
        3,000,000 barrels per day from projected demand for oil in 
        2020;
            (2) create and retain 3,000,000 new highly skilled, high-
        waged jobs in the United States by 2015;
            (3) meet 15 percent of the country's electricity needs from 
        electricity generated from renewable resources by 2015, and 5 
        percent of the country's electricity needs from electricity 
        generated from carbon-based zero emission carbon dioxide 
        sources by 2015;
            (4) produce 8,100,000,000 gallons per year of renewable 
        fuels, including traditional ethanol, cellulose ethanol, and 
        biodiesel by 2013 without creating regional cost disparities 
        for fuel;
            (5) lower energy costs for consumers by meeting 25 percent 
        of energy supply needs, as projected for the year 2013 by the 
        Energy Information Administration, through increased 
        conservation and improved energy efficiency;
            (6) maximize long-term production of existing domestic 
        marginal and stripper oil reserves;
            (7) encourage stable energy prices and markets by promoting 
        energy production and energy infrastructure modernization, 
        while maintaining existing environmental protections;
            (8) reduce total carbon dioxide emissions in the United 
        States to 5,806,100,000 metric tons per year by 2015;
            (9) encourage domestic manufacturing and production of new 
        energy and energy efficient technologies;
            (10) redevelop and enhance existing industrial facilities 
        in areas of the country adversely impacted by manufacturing job 
        losses; and
            (11) promote rural economic development.

 TITLE II--FEDERAL RESEARCH AND DEVELOPMENT PARTNERSHIPS WITH INDUSTRY 
                           FOR NEW TECHNOLOGY

                     Subtitle A--General Provisions

SEC. 201. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated for carrying out this title 
$36,000,000,000.

SEC. 202. PARTICIPATION.

    The Secretary of Energy, in collaboration with the Secretary of 
Commerce, shall coordinate the participation of National Laboratories, 
universities, commercial industry, and other organizations in carrying 
out this title.

SEC. 203. COST SHARING.

    (a) In General.--Unless otherwise specified, the Secretary shall 
require a commitment from non-Federal sources of at least 20 percent of 
the cost of proposed research and development projects under this 
title.
    (b) Reduction or Elimination.--The Secretary may reduce or 
eliminate the cost sharing requirement under subsection (a)--
            (1) if the Secretary determines that the research and 
        development is of a basic or fundamental nature; or
            (2) for technical analyses, outreach activities, and 
        educational programs that the Secretary does not expect to 
        result in a marketable product.

SEC. 204. EDUCATION AND OUTREACH.

    (a) Program.--The Secretary of Energy shall establish a program of 
education and outreach, including innovative education and outreach 
techniques, on renewable energy and energy efficiency technologies to 
manufacturers, consumers, engineers, architects, builders, energy 
service companies, universities, facility planners and managers, State 
and local governments, and other appropriate entities.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary of Energy for carrying out this section 
$100,000,000 for each of the fiscal years 2006 through 2009, and such 
sums as may be necessary for each of the fiscal years 2010 through 
2022.

SEC. 205. DEFINITION.

    For purposes of this title, the term ``National Laboratory'' means 
any of the following laboratories owned by the Department of Energy:
            (1) Ames National Laboratory.
            (2) Argonne National Laboratory.
            (3) Brookhaven National Laboratory.
            (4) Fermi National Laboratory.
            (5) Idaho National Engineering and Environmental 
        Laboratory.
            (6) Lawrence Berkeley National Laboratory.
            (7) Lawrence Livermore National Laboratory.
            (8) Los Alamos National Laboratory.
            (9) National Energy Technology Laboratory.
            (10) National Renewable Energy Laboratory.
            (11) Oak Ridge National Laboratory.
            (12) Pacific Northwest National Laboratory.
            (13) Princeton Plasma Physics Laboratory.
            (14) Sandia National Laboratories.
            (15) Savannah River National Laboratory.
            (16) Stanford Linear Accelerator Center.
            (17) Thomas Jefferson National Accelerator Facility.

          Subtitle B--Clean Energy Technology Research Program

SEC. 211. DEFINITIONS.

    For purposes of this subtitle--
            (1) the term ``biomass'' means any organic matter that is 
        available on a renewable or recurring basis, including 
        agricultural crops and trees, wood and wood wastes and 
        residues, plants (including aquatic plants), grasses, residues, 
        fibers, animal wastes, and municipal wastes;
            (2) the term ``clean energy source'' means--
                    (A) wind;
                    (B) biomass;
                    (C) a geothermal source;
                    (D) ocean waves;
                    (E) a solar source;
                    (F) a photovoltaic source;
                    (G) additional hydroelectric generation capacity 
                achieved from increased efficiency at an existing 
                hydroelectric dam; or
                    (H) minimal emission coal; and
            (3) the term ``minimal emission coal'' means coal resources 
        that result in zero or near zero emissions of sulfur dioxide, 
        nitrogen oxides, and mercury, and 90 percent or more 
        sequestration of carbon dioxide emissions.

SEC. 212. ENHANCED CLEAN ENERGY RESEARCH, DEVELOPMENT, AND 
              DEMONSTRATION.

    (a) Goals.--In order to achieve the goals stated in section 102 of 
this Act, the United States shall have an energy research, development, 
and demonstration program to enhance clean energy with the following 
goals:
            (1) For wind power, the program should reduce the cost of 
        wind-generated electricity by 40 percent by 2015, compared to 
        the cost as of the date of the enactment of this Act, with 
        concentration within the program on a variety of advanced wind 
        turbine concepts, manufacturing technologies, and optimal 
        demonstration locations.
            (2) For photovoltaics, the programs should pursue research, 
        development, and demonstration that would lead to photovoltaic 
        systems with generation costs of 10 cents kWh by 2015, and 7 
        cents kWh by 2020. Program activities should include assisting 
        industry in developing manufacturing technologies, giving 
        greater attention to balance of system issues, and expanding 
        fundamental research on relevant advanced materials.
            (3) For solar thermal electric systems the program should 
        strengthen ongoing research, development, and demonstration 
        combining high-efficiency and high-temperature receivers with 
        advanced thermal storage and power cycles, with the goal of 
        making solar-only power (including baseload solar power) widely 
        competitive with fossil fuel power by 2017.
            (4) For geothermal energy, the program should continue work 
        on hydrothermal systems, and reactivate research, development, 
        and demonstration of advanced concepts, giving top priority to 
        hot dryrock geothermal energy.
            (5) For ocean wave energy, the program should reactivate 
        and strengthen ongoing research, development, and demonstration 
        programs that would lead to generating technologies for 
        deriving electrical power from the ocean, including tidal 
        power, wave power, and ocean thermal energy conversion.
            (6) For stationary power generation, the Secretary shall 
        work with domestic manufacturers and the utilities to encourage 
        commercial production of cost-competitive, fuel cell power 
        generating facilities. The program should provide new 
        technologies that achieve an efficiency of 70-80 percent Lower 
        Heating Value with an average cost of $400 per kilowatt by 
        2015.
            (7) For biomass energy--
                    (A) the program should enable the United States to 
                triple biomass energy use by 2010;
                    (B) for biomass-based power systems, the program 
                should enable commercialization, within five years 
                after the date of the enactment of this Act, of 
                integrated power-generating technologies that employ 
                gas turbines and fuel cells integrated with biomass 
                gasifiers; and
                    (C) for biofuels, the program should accelerate 
                research, development, and demonstration on advanced 
                cellulosic conversion, including recalcitrance of 
                biomass, feedstock development, and co-products 
                development.
            (8) For hydropower, the program should provide for a new 
        generation of turbine technologies that will increase 
        generating capacity and will be less damaging to fish and 
        aquatic ecosystems.
            (9) For electric energy systems and storage, the program 
        should develop--
                    (A) technologies for generators and transmission, 
                distribution, and storage systems that combine high 
                capacity with high efficiency (particularly for 
                electric transmission facilities in rural and remote 
                areas);
                    (B) new transmission and distribution technologies, 
                including flexible alternating current transmission 
                systems, composite conductor materials, advanced 
                protection devices, and controllers;
                    (C) technologies for interconnection of distributed 
                energy resources with electric power systems;
                    (D) technologies to sequester 90 percent or more of 
                carbon dioxide emissions;
                    (E) high-temperature superconducting materials for 
                power delivery equipment such as transmission and 
                distribution cables, transformers, and generators; and
                    (F) real-time transmission and distribution system 
                control technologies that provide for continual 
                exchange of information between generation, 
                transmission, distribution, and end-user facilities.
            (10) For minimum emission coal, the program shall pursue 
        research that develops and demonstrates facilities generating 
        electricity from coal, in a cost-competitive manner, that by 
        2020--
                    (A) remove 99 percent of total sulfur dioxide 
                emissions;
                    (B) emit no more than .05 lbs of NOx per million 
                BTU;
                    (C) achieve a 90 percent reduction in mercury 
                emissions;
                    (D) sequester 90 percent or more of carbon dioxide 
                emissions; and
                    (E) achieve a thermal efficiency of--
                            (i) 60 percent for coal of more than 9,000 
                        Btu;
                            (ii) 59 percent for coal of 7,000 to 9,000 
                        Btu; and
                            (iii) 57 percent for coal of less than 
                        7,000 Btu.
            (11) The Secretary shall work to maximize the production of 
        hydrogen from clean energy sources.
            (12) The Secretary shall support under this section any 
        other technology that may help achieve the goals stated in 
        section 102.
    (b) Technical Criteria for Gasification.--In allocating the funds 
made available for minimum emission coal, the Secretary shall ensure 
that at least 80 percent of the funds are used for coal-based 
gasification technologies or coal-based projects that include 
gasification combined cycle, gasification fuel cells, gasification co-
production, or hybrid gasification/combustion. The Secretary shall set 
technical milestones specifying emissions levels that coal gasification 
projects must be designed to, and can reasonably be expected to, 
achieve. The milestones shall get more restrictive through the life of 
the program.
    (c) Coordination With Other Benefits.--The Secretary shall not 
provide assistance under this section to any person if such person has 
received assistance under section 642 or 731.

Subtitle C--Energy Efficiency Research, Development, and Demonstration 
                                Program

SEC. 221. ENHANCED ENERGY EFFICIENCY RESEARCH, DEVELOPMENT, AND 
              DEMONSTRATION.

    (a) Goals.--In order to achieve the goal stated in section 102 of 
this Act, the United States shall have an energy research, development, 
and demonstration program to enhance energy efficiency with the 
following goals:
            (1) For energy efficiency in housing, the program should 
        develop technologies, housing components, designs, and 
        production methods that will, by 2010--
                    (A) reduce the time needed to move energy-efficient 
                technologies to market by 50 percent, compared to the 
                time needed as of the date of the enactment of this 
                Act;
                    (B) reduce the monthly cost of new housing by 20 
                percent, compared to the cost as of the date of the 
                enactment of this Act;
                    (C) cut the environmental impact and energy use of 
                new housing by 50 percent, compared to the impact and 
                use as of the date of the enactment of this Act;
                    (D) ensure that at least 15,000,000 homes existing 
                as of the date of the enactment of this Act reduce 
                their total energy consumption by 30 percent, compared 
                to the use as of the date of the enactment of this Act; 
                and
                    (E) improve the durability and reduce maintenance 
                costs of housing technology components by 50 percent 
                compared to the durability and costs as of the date of 
                the enactment of this Act.
            (2) For industrial energy efficiency, the program should, 
        in cooperation with the affected industries--
                    (A) develop a microturbine (40 to 300 kilowatt) 
                that is greater than 40 percent more efficient by 2008, 
                compared to the efficiency as of the date of the 
                enactment of this Act;
                    (B) develop a microturbine that is greater than 50 
                percent more efficient by 2012, compared to the 
                efficiency as of the date of the enactment of this Act;
                    (C) develop advanced materials for combustion 
                systems that reduce emissions of nitrogen oxides by 30 
                to 50 percent while increasing efficiency 5 to 10 
                percent by 2010, compared to such emissions as of the 
                date of the enactment of this Act; and
                    (D) improve the energy intensity of the major 
                energy-consuming industries by at least 25 percent by 
                2012, compared to the energy intensity as of the date 
                of the enactment of this Act.
            (3) For transportation energy efficiency, the Secretary 
        shall work with domestic automobile manufacturers to encourage 
        commercial production of cost-competitive, highly fuel-
        efficient vehicles. In developing these public-private 
        partnerships, the Secretary shall take into consideration the 
        following:
                    (A) Hybrid gas/electric vehicles.
                    (B) Fuel cells.
                    (C) Alternative fuel driven engines.
                    (D) Maximizing the production of hydrogen from 
                clean energy sources.
            (4) The Secretary shall support under this section any 
        other technology that may help achieve the goals stated in 
        section 102.
    (b) Definitions.--For purposes of this section--
            (1) the term ``alternative fuel'' has the meaning given 
        that term in section 301(2) of the Energy Policy Act of 1992; 
        and
            (2) the term ``major energy-consuming industries'' means--
                    (A) the forest product industry;
                    (B) the steel industry;
                    (C) the aluminum industry;
                    (D) the metal casting industry;
                    (E) the chemical industry;
                    (F) the petroleum refining industry; and
                    (G) the glass-making industry.
    (c) Limits on Use of Funds.--None of the funds authorized to be 
appropriated under this section may be used for--
            (1) the promulgation and implementation of energy 
        efficiency regulations;
            (2) the Weatherization Assistance Program under part A of 
        title IV of the Energy Conservation and Production Act;
            (3) the State Energy Program under part D of title III of 
        the Energy Policy and Conservation Act; or
            (4) the Federal Energy Management Program under part 3 of 
        title V of the National Energy Conservation Policy Act.

SEC. 222. ENHANCED AERONAUTICAL SYSTEM ENERGY EFFICIENCY RESEARCH, 
              DEVELOPMENT, AND PUBLIC-PRIVATE PARTNERSHIP.

    (a) Goals.--For aeronautical system energy efficiency, the 
Secretary of Energy, the Secretary of the Treasury, and the Secretary 
of Transportation shall develop for commercial production by 2008 a 
superefficient, high-capacity commercial airplane. To carry out this 
section, the Secretaries shall form a public-private partnership 
research and development loan program such that--
            (1) the Federal Government enters into an agreement with a 
        domestic commercial airplane manufacturer in which the Federal 
        Government provides loans for up to 49 percent of the research 
        and development cost; and
            (2) the Federal Government receives repayment for loans 
        under paragraph (1) from the commercial airplane manufacturer 
        through a royalty system agreed upon by the Secretary of the 
        Treasury.
    (b) Definition.--For purposes of this section, the term 
``superefficient, high-capacity commercial airplane'' means a 
commercial airplane with a passenger seating capacity of no less than 
200 people with a range of at least 7,200 nautical miles which consumes 
at least 15 percent less fuel than comparable airplanes.

SEC. 223. NEXT GENERATION LIGHTING INITIATIVE.

    (a) In General.--The Secretary shall carry out a Next Generation 
Lighting Initiative in accordance with this section to support 
research, development, demonstration, and commercial application 
activities related to advanced solid-state lighting technologies based 
on white light emitting diodes.
    (b) Objectives.--The objectives of the initiative shall be--
            (1) to develop, by 2012, advanced solid-state lighting 
        technologies based on white light emitting diodes that, 
        compared to incandescent and fluorescent lighting technologies, 
        are--
                    (A) longer lasting;
                    (B) more energy-efficient; and
                    (C) cost-competitive;
            (2) to develop an inorganic white light emitting diode that 
        has an efficiency of 160 lumens per watt and a 10-year 
        lifetime; and
            (3) to develop an organic white light emitting diode with 
        an efficiency of 100 lumens per watt with a 5-year lifetime 
        that--
                    (A) illuminates over a full color spectrum;
                    (B) covers large areas over flexible surfaces; and
                    (C) does not contain harmful pollutants, such as 
                mercury, typical of fluorescent lamps.
    (c) Fundamental Research.--
            (1) Consortium.--The Secretary shall carry out the 
        fundamental research activities of the Next Generation Lighting 
        Initiative through a private consortium (which may include 
        private firms, trade associations and institutions of higher 
        education), which the Secretary shall select through a 
        competitive process. Each proposed consortium shall submit to 
        the Secretary such information as the Secretary may require, 
        including a program plan agreed to by all participants of the 
        consortium.
            (2) Joint venture.--The consortium shall be structured as a 
        joint venture among the participants of the consortium. The 
        Secretary shall serve on the governing council of the 
        consortium.
            (3) Eligibility.--To be eligible to be selected as the 
        consortium under paragraph (1), an applicant must be broadly 
        representative of United States solid-state lighting research, 
        development, and manufacturing expertise as a whole.
            (4) Grants.--(A) The Secretary shall award grants for 
        fundamental research to the consortium, which the consortium 
        may disburse to researchers, including those who are not 
        participants of the consortium.
            (B) To receive a grant, the consortium must provide a 
        description to the Secretary of the proposed research and list 
        the parties that will receive funding.
            (C) At least 20 percent of the cost of a research and 
        development project for which a grant is made under this 
        section shall be matched by the consortium, and at least 50 
        percent of the cost of a demonstration or commercial 
        application project for which a grant is made under this 
        section shall be matched by the consortium.
            (5) National laboratories.--National Laboratories may 
        participate in the research described in this section, and may 
        receive funds from the consortium.
            (6) Intellectual property.--Participants in the consortium 
        and the Federal Government shall have royalty-free nonexclusive 
        rights to use intellectual property derived from research 
        funded pursuant to this subsection.
    (d) Development, Demonstration, and Commercial Application.--The 
Secretary shall carry out the development, demonstration, and 
commercial application activities of the Next Generation Lighting 
Initiative through awards to private firms, trade associations, and 
institutions of higher education. In selecting awardees, the Secretary 
may give preference to members of the consortium selected pursuant to 
subsection (c).
    (e) Plans and Assessments.--(1) The consortium shall formulate an 
annual operating plan which shall include research priorities, 
technical milestones, and plans for technology transfer, and which 
shall be subject to approval by the Secretary.
    (2) The Secretary shall enter into an arrangement with the National 
Academy of Sciences to conduct periodic reviews of the Next Generation 
Lighting Initiative. The Academy shall review the research priorities, 
technical milestones, and plans for technology transfer established 
under paragraph (1) and evaluate the progress toward achieving them. 
The Secretary shall consider the results of such reviews in evaluating 
the plans submitted under paragraph (1).
    (f) Audit.--The Secretary shall retain an independent, commercial 
auditor to perform an audit of the consortium to determine the extent 
to which the funds authorized by this section have been expended in a 
manner consistent with the purposes of this section. The auditor shall 
transmit a report annually to the Secretary, who shall transmit the 
report to the Congress, along with a plan to remedy any deficiencies 
cited in the report.
    (g) Sunset.--The Next Generation Lighting Initiative shall 
terminate no later than September 30, 2013.
    (h) Definitions.--As used in this section:
            (1) Advanced solid-state lighting.--The term ``advanced 
        solid-state lighting'' means a semiconducting device package 
        and delivery system that produces white light using externally 
        applied voltage.
            (2) Fundamental research.--The term ``fundamental 
        research'' includes basic research on both solid-state 
        materials and manufacturing processes.
            (3) Inorganic white light emitting diode.--The term 
        ``inorganic white light emitting diode'' means an inorganic 
        semiconducting package that produces white light using 
        externally applied voltage.
            (4) Organic white light emitting diode.--The term ``organic 
        white light emitting diode'' means an organic semiconducting 
        compound that produces white light using externally applied 
        voltage.

SEC. 224. NATIONAL BUILDING PERFORMANCE INITIATIVE.

    (a) Interagency Group.--Not later than 3 months after the date of 
enactment of this Act, the Director of the Office of Science and 
Technology Policy shall establish an interagency group to develop, in 
coordination with the advisory committee established under subsection 
(e), a National Building Performance Initiative (in this section 
referred to as the ``Initiative''). The interagency group shall be 
cochaired by appropriate officials of the Department and the Department 
of Commerce, who shall jointly arrange for the provision of necessary 
administrative support to the group.
    (b) Integration of Efforts.--The Initiative shall integrate 
Federal, State, and voluntary private sector efforts to reduce the 
costs of construction, operation, maintenance, and renovation of 
commercial, industrial, institutional, and residential buildings.
    (c) Plan.--Not later than 1 year after the date of enactment of 
this Act, the interagency group shall submit to Congress a plan for 
carrying out the appropriate Federal role in the Initiative. The plan 
shall include--
            (1) research, development, demonstration, and commercial 
        application of systems and materials for new construction and 
        retrofit relating to the building envelope and building system 
        components; and
            (2) the collection, analysis, and dissemination of research 
        results and other pertinent information on enhancing building 
        performance to industry, government entities, and the public.
    (d) Department of Energy Role.--Within the Federal portion of the 
Initiative, the Department shall be the lead agency for all aspects of 
building performance related to use and conservation of energy.
    (e) Advisory Committee.--
            (1) Establishment.--The Director of the Office of Science 
        and Technology Policy shall establish an advisory committee 
        to--
                    (A) analyze and provide recommendations on 
                potential private sector roles and participation in the 
                Initiative; and
                    (B) review and provide recommendations on the plan 
                described in subsection (c).
            (2) Membership.--Membership of the advisory committee shall 
        include representatives with a broad range of appropriate 
        expertise, including expertise in--
                    (A) building research and technology;
                    (B) architecture, engineering, and building 
                materials and systems; and
                    (C) the residential, commercial, and industrial 
                sectors of the construction industry.
    (f) Construction.--Nothing in this section provides any Federal 
agency with new authority to regulate building performance.

                Subtitle D--Additional Research Programs

                             PART 1--FUSION

SEC. 231. PLAN FOR FUSION EXPERIMENT.

    (a) In General.--
            (1) Priority for international burning plasma project.--The 
        Secretary of Energy (in this part referred to as ``the 
        Secretary'') is authorized to undertake full scientific and 
        technological cooperation in the international burning plasma 
        project known as ITER.
            (2) Alternative project.--If at any time during the 
        negotiations on the ITER project, the Secretary determines that 
        construction and operation of the ITER project is unlikely or 
        infeasible, the Secretary shall send to Congress, as part of 
        the budget request for the following year, a plan for 
        implementing an alternative plan, such as the domestic burning 
        plasma experiment known as FIRE, including costs and schedules 
        for such a plan. The Secretary shall refine such plan in full 
        consultation with the Fusion Energy Sciences Advisory Committee 
        and shall also transmit such plan to the National Research 
        Council for review.
    (b) United States Policy With Respect to Fusion Energy Science.--
            (1) Declaration of policy.--It shall be the policy of the 
        United States to develop the scientific, engineering, and 
        commercial infrastructure necessary to ensure that the United 
        States is competitive with other nations in providing fusion 
        energy for its own needs and the needs of other nations, 
        including demonstrating electric hydrogen power production for 
        national power grid utilizing fusion energy by the earliest 
        date possible.
            (2) Fusion energy plan.--
                    (A) Requirement.--Within 6 months of the date of 
                enactment of this Act, the Secretary shall transmit to 
                Congress a plan for carrying out the policy set forth 
                in paragraph (1), including cost estimates, proposed 
                budgets, potential international partners, and specific 
                programs for implementing such policy.
                    (B) Requirements of plan.--Such plan shall also 
                ensure that--
                            (i) existing fusion research facilities are 
                        more fully utilized;
                            (ii) fusion science, technology, theory, 
                        advanced computation, modeling, and simulation 
                        are strengthened;
                            (iii) new magnetic and inertial fusion 
                        research facilities are selected based on 
                        scientific innovation, cost effectiveness, and 
                        their potential to advance the goal of 
                        practical fusion energy at the earliest date 
                        possible;
                            (iv) such facilities that are selected are 
                        funded at a cost-effective rate;
                            (v) communication of scientific results and 
                        methods between the fusion energy science 
                        community and the broader scientific and 
                        technology communities is improved;
                            (vi) inertial confinement fusion facilities 
                        are utilized to the extent practicable for the 
                        purpose of inertial fusion energy research and 
                        development; and
                            (vii) attractive alternative inertial and 
                        magnetic fusion energy approaches are more 
                        fully explored.
                    (C) Report on fusion materials and technology 
                project.--In addition, the plan required by this 
                section shall also address the status of, and to the 
                degree possible, the costs and schedules for--
                            (i) the design and implementation of 
                        international or national facilities for the 
                        testing of fusion materials; and
                            (ii) the design and implementation of 
                        international or national facilities for the 
                        testing and development of key fusion 
                        technologies.

SEC. 232. DEFINITIONS.

    As used in this part, the following definitions apply:
            (1) The term ``ITER'' refers to the international fusion 
        research project whose design is complete and whose location 
        and financing is currently being negotiated between Japan, 
        Europe, the Russian Federation, Canada, China, and the United 
        States.
            (2) The term ``FIRE'' refers to the Fusion Ignition 
        Research Experiment, the fusion research experiment for which 
        design work has been supported by the Department of Energy as a 
        possible alternative burning plasma experiment in the event 
        that the ITER project fails to move forward.

    PART 2--ULTRA-DEEPWATER AND EXTENDED REACH DRILLING AND CARBON 
                       SEQUESTRATION TECHNOLOGIES

SEC. 241. PROGRAM AUTHORITY.

    (a) In General.--The Secretary shall carry out a program under this 
part of research, development, demonstration, and commercial 
application of technologies for ultra-deepwater and extended reach 
drilling and carbon sequestration.
    (b) Program.--The program under this part shall address the 
following areas, including improving safety and minimizing 
environmental impacts of activities within each area:
            (1) Ultra-deepwater technology.
            (2) Ultra-deepwater architecture.
            (3) Extended reach drilling.
            (4) Sequestration of carbon.
    (c) Limitation on Location of Field Activities.--Field activities 
under the program under this part shall be carried out only--
            (1) in--
                    (A) areas in the territorial waters of the United 
                States not under any Outer Continental Shelf moratorium 
                as of September 30, 2002;
                    (B) areas onshore in the United States on public 
                land administered by the Secretary of the Interior 
                available for oil and gas leasing, where consistent 
                with applicable law and land use plans; and
                    (C) areas onshore in the United States on State or 
                private land, subject to applicable law; and
            (2) with the approval of the appropriate Federal or State 
        land management agency or private land owner.
    (d) Research at National Energy Technology Laboratory.--The 
Secretary, through the National Energy Technology Laboratory, shall 
carry out research complementary to research under subsection (b).
    (e) Consultation With Secretary of the Interior.--In carrying out 
this part, the Secretary shall consult regularly with the Secretary of 
the Interior.

SEC. 242. ULTRA-DEEPWATER AND EXTENDED REACH DRILLING AND CARBON 
              SEQUESTRATION AND UNCONVENTIONAL TECHNOLOGIES PROGRAM.

    (a) In General.--The Secretary shall carry out the activities under 
section 241(b), to--
            (1) maximize the value of the ultra-deepwater natural gas 
        and other petroleum resources of the United States by 
        increasing the supply of such resources and by reducing the 
        cost and increasing the efficiency of exploration for and 
        production of such resources, while improving safety and 
        minimizing environmental impacts;
            (2) maximize the value of existing natural gas and 
        petroleum production on existing lease sites by utilizing long 
        range extended reach drilling technology;
            (3) maximize the value of the onshore unconventional 
        natural gas resources of the United States by increasing supply 
        of such resources and improving efficiencies; and
            (4) develop commercial carbon sequestration and carbon 
        recapture methods with the goal of--
                    (A) sequestering 20 percent of the total quantity 
                of direct greenhouse gas emissions from stationary 
                sources in the United States per year, expressed in 
                units of carbon dioxide equivalence, by 2010;
                    (B) sequestering 40 percent of the total quantity 
                of direct greenhouse gas emissions from stationary 
                sources in the United States per year, expressed in 
                units of carbon dioxide equivalence, by 2015; and
                    (C) sequestering 60 percent of the total quantity 
                of direct greenhouse gas emissions from stationary 
                sources in the United States per year, expressed in 
                units of carbon dioxide equivalence, by 2020.
    (b) Role of the Secretary.--The Secretary shall have ultimate 
responsibility for, and oversight of, all aspects of the program under 
this section.
    (c) Role of the Program Consortium.--
            (1) In general.--The Secretary shall contract with a 
        consortium to--
                    (A) manage awards pursuant to subsection (f)(4);
                    (B) make recommendations to the Secretary for 
                project solicitations;
                    (C) disburse funds awarded under subsection (f) as 
                directed by the Secretary in accordance with the annual 
                plan under subsection (e); and
                    (D) carry out other activities assigned to the 
                program consortium by this section.
            (2) Limitation.--The Secretary may not assign any 
        activities to the program consortium except as specifically 
        authorized under this section.
            (3) Conflict of interest.--
                    (A) The Secretary shall establish procedures--
                            (i) to ensure that each board member, 
                        officer, or employee of the program consortium 
                        who is in a decisionmaking capacity under 
                        subsection (f)(3) or (4) shall disclose to the 
                        Secretary any financial interests in, or 
                        financial relationships with, applicants for or 
                        recipients of awards under this section, 
                        including those of his or her spouse or minor 
                        child, unless such relationships or interests 
                        would be considered to be remote or 
                        inconsequential; and
                            (ii) to require any board member, officer, 
                        or employee with a financial relationship or 
                        interest disclosed under clause (i) to recuse 
                        himself or herself from any review under 
                        subsection (f)(3) or oversight under subsection 
                        (f)(4) with respect to such applicant or 
                        recipient.
                    (B) The Secretary may disqualify an application or 
                revoke an award under this section if a board member, 
                officer, or employee has failed to comply with 
                procedures required under subparagraph (A)(ii).
    (d) Selection of the Program Consortium.--
            (1) In general.--The Secretary shall select the program 
        consortium through an open, competitive process.
            (2) Members.--The program consortium may include 
        corporations, institutions of higher education, National 
        Laboratories, or other research institutions. After submitting 
        a proposal under paragraph (4), the program consortium may not 
        add members without the consent of the Secretary.
            (3) Tax status.--The program consortium shall be an entity 
        that is exempt from tax under section 501(c)(3) of the Internal 
        Revenue Code of 1986.
            (4) Schedule.--Not later than 90 days after the date of 
        enactment of this Act, the Secretary shall solicit proposals 
        for the creation of the program consortium, which must be 
        submitted not less than 180 days after the date of enactment of 
        this Act. The Secretary shall select the program consortium not 
        later than 240 days after such date of enactment.
            (5) Application.--Applicants shall submit a proposal 
        including such information as the Secretary may require. At a 
        minimum, each proposal shall--
                    (A) list all members of the consortium;
                    (B) fully describe the structure of the consortium, 
                including any provisions relating to intellectual 
                property; and
                    (C) describe how the applicant would carry out the 
                activities of the program consortium under this 
                section.
            (6) Eligibility.--To be eligible to be selected as the 
        program consortium, an applicant must be an entity whose 
        members collectively have demonstrated capabilities in planning 
        and managing research, development, demonstration, and 
        commercial application programs in natural gas or other 
        petroleum exploration or production.
            (7) Criterion.--The Secretary may consider the amount of 
        the fee an applicant proposes to receive under subsection (g) 
        in selecting a consortium under this section.
    (e) Annual Plan.--
            (1) In general.--The program under this section shall be 
        carried out pursuant to an annual plan prepared by the 
        Secretary in accordance with paragraph (2).
            (2) Development.--(A) Before drafting an annual plan under 
        this subsection, the Secretary shall solicit specific written 
        recommendations from the program consortium for each element to 
        be addressed in the plan, including those described in 
        paragraph (4). The Secretary may request that the program 
        consortium submit its recommendations in the form of a draft 
        annual plan.
            (B) The Secretary shall consult regularly with the program 
        consortium throughout the preparation of the annual plan. The 
        Secretary may also solicit comments from any other experts.
            (3) Publication.--The Secretary shall transmit to the 
        Congress and publish in the Federal Register the annual plan, 
        along with any written comments received under paragraph (2). 
        The annual plan shall be transmitted and published not later 
        than 60 days after the date of enactment of an Act making 
        appropriations for a fiscal year for the program under this 
        section.
            (4) Contents.--The annual plan shall describe the ongoing 
        and prospective activities of the program under this section 
        and shall include--
                    (A) a list of any solicitations for awards that the 
                Secretary plans to issue to carry out research, 
                development, demonstration, or commercial application 
                activities, including the topics for such work, who 
                would be eligible to apply, selection criteria, and the 
                duration of awards; and
                    (B) a description of the activities expected of the 
                program consortium to carry out subsection (f)(4).
    (f) Awards.--
            (1) In general.--The Secretary shall make awards to carry 
        out research, development, demonstration, and commercial 
        application activities under the program under this section. 
        The program consortium shall not be eligible to receive such 
        awards, but members of the program consortium may receive such 
        awards.
            (2) Proposals.--The Secretary shall solicit proposals for 
        awards under this subsection in such manner and at such time as 
        the Secretary may prescribe, in consultation with the program 
        consortium.
            (3) Review.--The Secretary shall make awards under this 
        subsection through a competitive process, which shall include a 
        review by individuals selected by the Secretary. Such 
        individuals shall include, for each application, Federal 
        officials, the program consortium, and non-Federal experts who 
        are not board members, officers, or employees of the program 
        consortium or of a member of the program consortium.
            (4) Oversight.--(A) The program consortium shall oversee 
        the implementation of awards under this subsection, consistent 
        with the annual plan under subsection (e), including disbursing 
        funds and monitoring activities carried out under such awards 
        for compliance with the terms and conditions of the awards.
            (B) Nothing in subparagraph (A) shall limit the authority 
        or responsibility of the Secretary to oversee awards, or limit 
        the authority of the Secretary to review or revoke awards.
            (C) The Secretary shall provide to the program consortium 
        the information necessary for the program consortium to carry 
        out its responsibilities under this paragraph.
    (g) Fee.--
            (1) In general.--To compensate the program consortium for 
        carrying out its activities under this section, the Secretary 
        shall provide to the program consortium a fee in an amount not 
        to exceed 7.5 percent of the amounts awarded under subsection 
        (f) for each fiscal year.
            (2) Advance.--The Secretary shall advance funds to the 
        program consortium upon selection of the consortium, which 
        shall be deducted from amounts to be provided under paragraph 
        (1).
    (h) Audit.--The Secretary shall retain an independent, commercial 
auditor to determine the extent to which funds provided to the program 
consortium, and funds provided under awards made under subsection (f), 
have been expended in a manner consistent with the purposes and 
requirements of this part. The auditor shall transmit a report annually 
to the Secretary, who shall transmit the report to Congress, along with 
a plan to remedy any deficiencies cited in the report.

SEC. 243. SUNSET.

    The authority provided by this part shall terminate on September 
30, 2010.

SEC. 244. DEFINITIONS.

    In this part:
            (1) Carbon sequestration.--The term ``carbon 
        sequestration'' means the capture and secure storage of carbon 
        dioxide emitted from the combustion of fossil fuels or other 
        organic matter.
            (2) Extended reach drilling.--The term ``extended reach 
        drilling'' means technology designed to achieve a range up to 
        50,000 feet, so that more energy resources can be realized with 
        fewer drilling facilities.
            (3) Program consortium.--The term ``program consortium'' 
        means the consortium selected under section 242(d).
            (4) Remote or inconsequential.--The term ``remote or 
        inconsequential'' has the meaning given that term in 
        regulations issued by the Office of Government Ethics under 
        section 208(b)(2) of title 18, United States Code.
            (5) Ultra-deepwater.--The term ``ultra-deepwater'' means a 
        water depth that is equal to or greater than 1,500 meters.
            (6) Ultra-deepwater architecture.--The term ``ultra-
        deepwater architecture'' means the integration of technologies 
        for the exploration for, or production of, natural gas or other 
        petroleum resources located at ultra-deepwater depths.
            (7) Ultra-deepwater technology.--The term ``ultra-deepwater 
        technology'' means a discrete technology that is specially 
        suited to address one or more challenges associated with the 
        exploration for, or production of, natural gas or other 
        petroleum resources located at ultra-deepwater depths.
            (8) Unconventional natural gas and other petroleum 
        resource.--The term ``unconventional natural gas and other 
        petroleum resource'' means natural gas and other petroleum 
        resource located onshore in an economically inaccessible 
        geological formation.

             TITLE III--TAX INCENTIVES FOR NEW TECHNOLOGIES

SEC. 301. REFERENCES.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 302. ADMINISTRATION OF TITLE.

    (a) In General.--Notwithstanding any other provision of law, the 
Secretary of the Treasury shall allocate the tax incentives provided in 
subtitles A and B among taxpayers in accordance with regulations 
promulgated by the Secretary.
    (b) Limitation on Total Allocated.--The total amount of incentives 
allocated under subsection (a) shall not exceed--
            (1) $14,000,000,000 in the case of the tax incentives 
        provided in subtitle A for the 10-year period beginning with 
        taxable years beginning after the date of the enactment of this 
        Act, and
            (2) $22,000,000,000 in the case of the tax incentives 
        provided in subtitle B for the 10-year period beginning with 
        taxable years beginning after the date of the enactment of this 
        Act.

                  Subtitle A--Near Term Tax Incentives

SEC. 311. EXTENSION THROUGH 2015 FOR PLACING QUALIFIED FACILITIES IN 
              SERVICE FOR PRODUCING RENEWABLE ELECTRIC ENERGY.

    (a) In General.--Subsection (d) of section 45 is amended by 
striking ``January 1, 2006'' each place it appears and inserting 
``January 1, 2015''.
    (b) Effective Date.--The amendments made by this section shall 
apply to property originally placed in service on or after January 1, 
2006.

SEC. 312. EXPANSION AND MODIFICATION OF RENEWABLE RESOURCE CREDIT.

    (a) Additional Qualified Energy Resources.--
            (1) In general.--Section 45(c)(1) is amended by striking 
        ``and'' at the end of subparagraph (F), by striking the period 
        at the end of subparagraph (G), and by adding at the end the 
        following new subparagraphs:
                    ``(H) incremental hydropower,
                    ``(I) incremental geothermal, and
                    ``(J) ocean (tidal, wave, current, or thermal).''.
            (2) Definition of resources.--Section 45(c) is amended by 
        adding at the end the following new paragraphs:
            ``(8) Incremental hydropower.--The term `incremental 
        hydropower' means additional generating capacity achieved at a 
        qualified facility before January 1, 2015, from increased 
        efficiency .
            ``(9) Incremental geothermal.--The term `incremental 
        geothermal' means additional generating capacity achieved at a 
        qualified facility before January 1, 2015, from--
                    ``(A) increased efficiency, or
                    ``(B) additions of new capacity.''.
            (3) Definition of facilities.--Section 45(d) is amended by 
        adding at the end the following new paragraphs:
            ``(9) Incremental hydopower facilities.--In the case of a 
        facility producing electricity from incremental hydropower, the 
        term `qualified facility' means any facility which is--
                    ``(A) owned by the taxpayer,
                    ``(B) originally placed in service before the date 
                of the enactment of this paragraph, and
                    ``(C) licensed by the Federal Energy Regulatory 
                Commission.
            ``(10) Incremental geothermal facilities.--In the case of a 
        facility producing electricity from incremental geothermal, the 
        term `qualified facility' means any facility owned by the 
        taxpayer which is originally placed in service before the date 
        of the enactment of this paragraph.
            ``(11) Ocean facilities.--In the case of a facility 
        producing electricity from the ocean, the term `qualified 
        facility' means any facility owned by the taxpayer which is 
        originally placed in service after the date of the enactment of 
        this paragraph and before January 1, 2015.''.
    (b) Modifications Regarding Open-Loop Biomass.--
            (1) Subclause (I) of section 45(c)(3)(A)(ii) is amended by 
        adding at the end ``but not including old-growth timber or 
        black liquor,''.
            (2) Subclause (II) of section 45(c)(3)(A)(ii) is amended by 
        striking ``municipal solid waste, gas derived from the 
        biodegradation of solid waste, or paper which is commonly 
        recycled'' and inserting ``unsegregated municipal solid waste 
        (garbage) or postconsumer wastepaper which can be recycled 
        affordably''.
    (c) Qualified Facilities With Co-production.--Section 45(b) is 
amended by striking paragraph (4) and inserting the following new 
paragraph:
            ``(4) Increased credit for co-production facilities.--
                    ``(A) In general.--In the case of a qualified 
                facility described in paragraph (2) or (3) of 
                subsection (c) which adds a co-production facility 
                after the date of the enactment of this paragraph, the 
                amount in effect under subsection (a)(1) for an 
                eligible taxable year of the taxpayer shall (after 
                adjustment under paragraphs (1), (2), and (3)) be 
                increased by .25 cents.
                    ``(B) Co-production facility.--For purposes of 
                subparagraph (A), the term `co-production facility' 
                means a facility which--
                            ``(i) enables a qualified facility to 
                        produce heat, mechanical power, or minerals 
                        from qualified energy resources in addition to 
                        electricity, and
                            ``(ii) produces such energy on a continuous 
                        basis.
                    ``(C) Eligible taxable year.--For purposes of 
                subparagraph (A), the term `eligible taxable year' 
                means any taxable year in which the amount of gross 
                receipts attributable to the co-production facility of 
                a qualified facility are at least 10 percent of the 
                amount of gross receipts attributable to electricity 
                produced by such facility.''.
    (d) Qualified Facilities Located Within Qualified Indian Lands.--
Section 45(b) is amended by adding at the end the following new 
paragraph:
            ``(5) Increased credit for qualified facility located 
        within qualified indian land.--In the case of a qualified 
        facility described in subsection (d)(2)(A) which--
                    ``(A) is located within--
                            ``(i) qualified Indian lands (as defined in 
                        section 7871(c)(3)), or
                            ``(ii) lands which are held in trust by a 
                        Native Corporation (as defined in section 3(m) 
                        of the Alaska Native Claims Settlement Act (43 
                        U.S.C. 1602(m))) for Alaska Natives, and
                    ``(B) is operated with the explicit written 
                approval of the Indian tribal government or Native 
                Corporation (as so defined) having jurisdiction over 
                such lands, the amount in effect under subsection 
                (a)(1) for a taxable year shall (after adjustment under 
                paragraphs (1), (2), (3), and (4)) be increased by .25 
                cents.''.
    (e) Treatment of Qualified Facilities not in Compliance With 
Pollution Laws.--Section 45(c) is further amended by adding at the end 
the following new paragraph:
            ``(10) Noncompliance with pollution laws.--A facility which 
        is not in compliance with the applicable State and Federal 
        pollution prevention, control, and permit requirements for any 
        period of time shall not be treated as a qualified facility 
        during such period.''.
    (f) Coordination With Other Credits.--Section 45(e) is amended by 
adding at the end the following new paragraph:
            ``(10) Coordination with other credits.--This section shall 
        not apply to any qualified facility with respect to which a 
        credit under any other section is allowed for the taxable year 
        unless the taxpayer elects to waive application of such credit 
        to such facility.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to electricity and other energy produced in taxable years 
beginning after the date of the enactment of this Act.

SEC. 313. TRADABLE RENEWABLE RESOURCE CREDIT FOR PUBLIC UTILITIES AND 
              OTHER TAX EXEMPT ORGANIZATIONS.

    (a) Credits for Certain Tax-Exempt Organizations and Governmental 
Units.--
            (1) In general.--Section 45(d) (relating to definitions and 
        special rules), as amended by section 312, is amended by adding 
        at the end the following:
            ``(10) Credits for certain tax-exempt organizations and 
        governmental units.--
                    ``(A) Allowance of credit.--Any credit which would 
                be allowable under subsection (a) with respect to a 
                qualified facility of an entity if such entity were not 
                exempt from tax under this chapter shall be treated as 
                a credit allowable under subpart D to such entity if 
                such entity is--
                            ``(i) an organization described in section 
                        501(c)(12)(C) and exempt from tax under section 
                        501(a),
                            ``(ii) an organization described in section 
                        1381(a)(2)(C),
                            ``(iii) an entity the income of which is 
                        excludable from gross income under section 115, 
                        or
                            ``(iv) a State, the District of Columbia, 
                        any territory or possession of the United 
                        States, or any political subdivision thereof.
                    ``(B) Use of credit.--
                            ``(i) Transfer of credit.--An entity 
                        described in subparagraph (A) may assign, 
                        trade, sell, or otherwise transfer any credit 
                        allowable to such entity under subparagraph (A) 
                        to any taxpayer.
                            ``(ii) Use of credit as an offset.--
                        Notwithstanding any other provision of law, in 
                        the case of an entity described in clause (i) 
                        or (ii) of subparagraph (A), any credit 
                        allowable to such entity under subparagraph (A) 
                        may be applied by such entity, without penalty, 
                        as a prepayment of any loan, debt, or other 
                        obligation the entity has incurred under 
                        subchapter I of chapter 31 of title 7 of the 
                        Rural Electrification Act of 1936 (7 U.S.C. 901 
                        et seq.).
                    ``(C) Credit not income.--Neither a transfer under 
                clause (i) nor a use under clause (ii) of subparagraph 
                (B) of any credit allowable under subparagraph (A) 
                shall result in income for purposes of section 
                501(c)(12).
                    ``(D) Transfer proceeds treated as arising from 
                essential government function.--Any proceeds derived by 
                an entity described in subparagraph (A)(iii) from the 
                transfer of any credit under subparagraph (B)(i) shall 
                be treated as arising from an essential government 
                function.
                    ``(E) Credits not reduced by tax-exempt bonds or 
                certain other subsidies.--Subsection (b)(3) shall not 
                apply to reduce any credit allowable under subparagraph 
                (A) with respect to--
                            ``(i) proceeds described in subparagraph 
                        (A)(ii) of such subsection, or
                            ``(ii) any loan, debt, or other obligation 
                        incurred under subchapter I of chapter 31 of 
                        title 7 of the Rural Electrification Act of 
                        1936 (7 U.S.C. 901 et seq.), used to provide 
                        financing for any qualified facility.
                    ``(F) Treatment of unrelated persons.--For purposes 
                of this paragraph, sales among and between entities 
                described in subparagraph (A) shall be treated as sales 
                between unrelated parties.''.
            (2) Inclusion of indian tribal governments.--Section 
        7871(a)(7) is amended by striking ``and'' at the end of 
        subparagraph (A), by striking the period at the end of 
        subparagraph (B), and by adding at the end the following:
                    ``(C) section 45 (relating to credit for 
                electricity produced from certain renewable 
                resources).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to electricity and other energy produced in taxable years 
beginning after the date of the enactment of this Act.

SEC. 314. ALTERNATIVE MOTOR VEHICLE CREDIT.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
(relating to foreign tax credit, etc.) is amended by adding at the end 
the following new section:

``SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.

    ``(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 sum of--
            ``(1) the new qualified fuel cell motor vehicle credit 
        determined under subsection (b),
            ``(2) the new qualified hybrid motor vehicle credit 
        determined under subsection (c),
            ``(3) the new qualified alternative fuel motor vehicle 
        credit determined under subsection (d), and
            ``(4) the new qualified advanced diesel motor vehicle 
        credit determined under subsection (e).
    ``(b) New Qualified Fuel Cell Motor Vehicle Credit.--
            ``(1) In general.--For purposes of subsection (a), the new 
        qualified fuel cell motor vehicle credit determined under this 
        subsection with respect to a new qualified fuel cell motor 
        vehicle placed in service by the taxpayer during the taxable 
        year is--
                    ``(A) $8,000 ($4,000 in the case of vehicles placed 
                in service after December 31, 2008), if such vehicle 
                has a gross vehicle weight rating of not more than 
                8,500 pounds,
                    ``(B) $10,000, if such vehicle has a gross vehicle 
                weight rating of more than 8,500 pounds but not more 
                than 14,000 pounds,
                    ``(C) $20,000, if such vehicle has a gross vehicle 
                weight rating of more than 14,000 pounds but not more 
                than 26,000 pounds, and
                    ``(D) $40,000, if such vehicle has a gross vehicle 
                weight rating of more than 26,000 pounds.
            ``(2) Increase for fuel efficiency.--
                    ``(A) In general.--The amount determined under 
                paragraph (1)(A) with respect to a new qualified fuel 
                cell motor vehicle which is a passenger automobile or 
                light truck shall be increased by--
                            ``(i) $1,000, if such vehicle achieves at 
                        least 150 percent but less than 175 percent of 
                        the 2002 model year city fuel economy,
                            ``(ii) $1,500, if such vehicle achieves at 
                        least 175 percent but less than 200 percent of 
                        the 2002 model year city fuel economy,
                            ``(iii) $2,000, if such vehicle achieves at 
                        least 200 percent but less than 225 percent of 
                        the 2002 model year city fuel economy,
                            ``(iv) $2,500, if such vehicle achieves at 
                        least 225 percent but less than 250 percent of 
                        the 2002 model year city fuel economy,
                            ``(v) $3,000, if such vehicle achieves at 
                        least 250 percent but less than 275 percent of 
                        the 2002 model year city fuel economy,
                            ``(vi) $3,500, if such vehicle achieves at 
                        least 275 percent but less than 300 percent of 
                        the 2002 model year city fuel economy, and
                            ``(vii) $4,000, if such vehicle achieves at 
                        least 300 percent of the 2002 model year city 
                        fuel economy.
                    ``(B) 2002 model year city fuel economy.--For 
                purposes of subparagraph (A), the 2002 model year city 
                fuel economy with respect to a vehicle shall be 
                determined in accordance with the following tables:
                            ``(i) In the case of a passenger 
                        automobile:
                                               The 2002 model year city
  ````If vehicle inertia weight                        fuel economy is:
        class is:
    1,500 or 1,750 lbs............................             45.2 mpg
    2,000 lbs.....................................             39.6 mpg
    2,250 lbs.....................................             35.2 mpg
    2,500 lbs.....................................             31.7 mpg
    2,750 lbs.....................................             28.8 mpg
    3,000 lbs.....................................             26.4 mpg
    3,500 lbs.....................................             22.6 mpg
    4,000 lbs.....................................             19.8 mpg
    4,500 lbs.....................................             17.6 mpg
    5,000 lbs.....................................             15.9 mpg
    5,500 lbs.....................................             14.4 mpg
    6,000 lbs.....................................             13.2 mpg
    6,500 lbs.....................................             12.2 mpg
    7,000 to 8,500 lbs............................            11.3 mpg.
                            ``(ii) In the case of a light truck:
                                               The 2002 model year city
  ````If vehicle inertia weight                        fuel economy is:
        class is:
    1,500 or 1,750 lbs............................             39.4 mpg
    2,000 lbs.....................................             35.2 mpg
    2,250 lbs.....................................             31.8 mpg
    2,500 lbs.....................................             29.0 mpg
    2,750 lbs.....................................             26.8 mpg
    3,000 lbs.....................................             24.9 mpg
    3,500 lbs.....................................             21.8 mpg
    4,000 lbs.....................................             19.4 mpg
    4,500 lbs.....................................             17.6 mpg
    5,000 lbs.....................................             16.1 mpg
    5,500 lbs.....................................             14.8 mpg
    6,000 lbs.....................................             13.7 mpg
    6,500 lbs.....................................             12.8 mpg
    7,000 to 8,500 lbs............................            12.1 mpg.
                    ``(C) Vehicle inertia weight class.--For purposes 
                of subparagraph (B), the term `vehicle inertia weight 
                class' has the same meaning as when defined in 
                regulations prescribed by the Administrator of the 
                Environmental Protection Agency for purposes of the 
                administration of title II of the Clean Air Act (42 
                U.S.C. 7521 et seq.).
            ``(3) New qualified fuel cell motor vehicle.--For purposes 
        of this subsection, the term `new qualified fuel cell motor 
        vehicle' means a motor vehicle--
                    ``(A) which is propelled by power derived from one 
                or more cells which convert chemical energy directly 
                into electricity by combining oxygen with hydrogen fuel 
                which is stored on board the vehicle in any form and 
                may or may not require reformation prior to use,
                    ``(B) which, in the case of a passenger automobile 
                or light truck--
                            ``(i) for 2002 and later model vehicles, 
                        has received a certificate of conformity under 
                        the Clean Air Act and meets or exceeds the 
                        equivalent qualifying California low emission 
                        vehicle standard under section 243(e)(2) of the 
                        Clean Air Act for that make and model year, and
                            ``(ii) for 2004 and later model vehicles, 
                        has received a certificate that such vehicle 
                        meets or exceeds the Bin 5 Tier II emission 
                        level established in regulations prescribed by 
                        the Administrator of the Environmental 
                        Protection Agency under section 202(i) of the 
                        Clean Air Act for that make and model year 
                        vehicle,
                    ``(C) the original use of which commences with the 
                taxpayer,
                    ``(D) which is acquired for use or lease by the 
                taxpayer and not for resale, and
                    ``(E) which is made by a manufacturer.
    ``(c) New Qualified Hybrid Motor Vehicle Credit.--
            ``(1) In general.--For purposes of subsection (a), the new 
        qualified hybrid motor vehicle credit determined under this 
        subsection with respect to a new qualified hybrid motor vehicle 
        placed in service by the taxpayer during the taxable year is 
        the credit amount determined under paragraph (2).
            ``(2) Credit amount.--
                    ``(A) In general.--The credit amount determined 
                under this paragraph shall be determined in accordance 
                with the following tables:
                            ``(i) In the case of a new qualified hybrid 
                        motor vehicle which is a passenger automobile, 
                        medium duty passenger vehicle, or light truck 
                        and which provides the following percentage of 
                        the maximum available power:
````If percentage of the maximum
   available power is:                            The credit amount is:
    At least 5 percent but less than 10 percent...                 $250
    At least 10 percent but less than 20 percent..                 $500
    At least 20 percent but less than 30 percent..                 $750
    At least 30 percent...........................              $1,000.
                            ``(ii) In the case of a new qualified 
                        hybrid motor vehicle which is a heavy duty 
                        hybrid motor vehicle and which provides the 
                        following percentage of the maximum available 
                        power:
                                    ``(I) If such vehicle has a gross 
                                vehicle weight rating of not more than 
                                14,000 pounds:
````If percentage of the maximum
   available power is:                            The credit amount is:
    At least 20 percent but less than 30 percent..               $1,000
    At least 30 percent but less than 40 percent..               $1,750
    At least 40 percent but less than 50 percent..               $2,000
    At least 50 percent but less than 60 percent..               $2,250
    At least 60 percent...........................              $2,500.
                                    ``(II) If such vehicle has a gross 
                                vehicle weight rating of more than 
                                14,000 but not more than 26,000 pounds:
````If percentage of the maximum
   available power is:                            The credit amount is:
    At least 20 percent but less than 30 percent..               $4,000
    At least 30 percent but less than 40 percent..               $4,500
    At least 40 percent but less than 50 percent..               $5,000
    At least 50 percent but less than 60 percent..               $5,500
    At least 60 percent...........................              $6,000.
                                    ``(III) If such vehicle has a gross 
                                vehicle weight rating of more than 
                                26,000 pounds:
````If percentage of the maximum
   available power is:                            The credit amount is:
    At least 20 percent but less than 30 percent..               $6,000
    At least 30 percent but less than 40 percent..               $7,000
    At least 40 percent but less than 50 percent..               $8,000
    At least 50 percent but less than 60 percent..               $9,000
    At least 60 percent...........................             $10,000.
                    ``(B) Increase for fuel efficiency.--
                            ``(i) Amount.--The amount determined under 
                        subparagraph (A)(i) with respect to a new 
                        qualified hybrid motor vehicle which is a 
                        passenger automobile or light truck shall be 
                        increased by--
                                    ``(I) $500, if such vehicle 
                                achieves at least 125 percent but less 
                                than 150 percent of the 2002 model year 
                                city fuel economy,
                                    ``(II) $1,000, if such vehicle 
                                achieves at least 150 percent but less 
                                than 175 percent of the 2002 model year 
                                city fuel economy,
                                    ``(III) $1,500, if such vehicle 
                                achieves at least 175 percent but less 
                                than 200 percent of the 2002 model year 
                                city fuel economy,
                                    ``(IV) $2,000, if such vehicle 
                                achieves at least 200 percent but less 
                                than 225 percent of the 2002 model year 
                                city fuel economy,
                                    ``(V) $2,500, if such vehicle 
                                achieves at least 225 percent but less 
                                than 250 percent of the 2002 model year 
                                city fuel economy, and
                                    ``(VI) $3,000, if such vehicle 
                                achieves at least 250 percent of the 
                                2002 model year city fuel economy.
                            ``(ii) 2002 model year city fuel economy.--
                        For purposes of clause (i), the 2002 model year 
                        city fuel economy with respect to a vehicle 
                        shall be determined on a gasoline gallon 
                        equivalent basis as determined by the 
                        Administrator of the Environmental Protection 
                        Agency using the tables provided in subsection 
                        (b)(2)(B) with respect to such vehicle.
                    ``(C) Increase for accelerated emissions 
                performance.--The amount determined under subparagraph 
                (A)(ii) with respect to an applicable heavy duty hybrid 
                motor vehicle shall be increased by the increased 
                credit amount determined in accordance with the 
                following tables:
                            ``(i) In the case of a vehicle which has a 
                        gross vehicle weight rating of not more than 
                        14,000 pounds:
````If the model year is:           The increased credit amount is:
    2005..........................................               $3,000
    2006..........................................               $2,500
    2007..........................................               $2,000
    2008..........................................              $1,500.
                            ``(ii) In the case of a vehicle which has a 
                        gross vehicle weight rating of more than 14,000 
                        pounds but not more than 26,000 pounds:
````If the model year is:           The increased credit amount is:
    2005..........................................               $7,750
    2006..........................................               $6,500
    2007..........................................               $5,250
    2008..........................................              $4,000.
                            ``(iii) In the case of a vehicle which has 
                        a gross vehicle weight rating of more than 
                        26,000 pounds:
````If the model year is:           The increased credit amount is:
    2005..........................................              $12,000
    2006..........................................              $10,000
    2007..........................................               $8,000
    2008..........................................              $6,000.
                    ``(D) Definitions relating to credit amount.--
                            ``(i) Applicable heavy duty hybrid motor 
                        vehicle.--For purposes of subparagraph (C), the 
                        term `applicable heavy duty hybrid motor 
                        vehicle' means a heavy duty hybrid motor 
                        vehicle which is powered by an internal 
                        combustion or heat engine which is certified as 
                        meeting the emission standards set in the 
                        regulations prescribed by the Administrator of 
                        the Environmental Protection Agency for 2007 
                        and later model year diesel heavy duty engines, 
                        or for 2008 and later model year ottocycle 
                        heavy duty engines, as applicable.
                            ``(ii) Maximum available power.--
                                    ``(I) Passenger automobile, medium 
                                duty passenger vehicle, or light 
                                truck.--For purposes of subparagraph 
                                (A)(i), the term `maximum available 
                                power' means the maximum power 
                                available from the rechargeable energy 
                                storage system, during a standard 10 
                                second pulse power or equivalent test, 
                                divided by such maximum power and the 
                                SAE net power of the heat engine.
                                    ``(II) Heavy duty hybrid motor 
                                vehicle.--For purposes of subparagraph 
                                (A)(ii), the term `maximum available 
                                power' means the maximum power 
                                available from the rechargeable energy 
                                storage system, during a standard 10 
                                second pulse power or equivalent test, 
                                divided by the vehicle's total traction 
                                power. The term `total traction power' 
                                means the sum of the peak power from 
                                the rechargeable energy storage system 
                                and the heat engine peak power of the 
                                vehicle, except that if such storage 
                                system is the sole means by which the 
                                vehicle can be driven, the total 
                                traction power is the peak power of 
                                such storage system.
            ``(3) New qualified hybrid motor vehicle.--For purposes of 
        this subsection, the term `new qualified hybrid motor vehicle' 
        means a motor vehicle--
                    ``(A) which draws propulsion energy from onboard 
                sources of stored energy which are both--
                            ``(i) an internal combustion or heat engine 
                        using combustible fuel, and
                            ``(ii) a rechargeable energy storage 
                        system,
                    ``(B) which, in the case of a passenger automobile, 
                medium duty passenger vehicle, or light truck--
                            ``(i) for 2002 and later model vehicles, 
                        has received a certificate of conformity under 
                        the Clean Air Act and meets or exceeds the 
                        equivalent qualifying California low emission 
                        vehicle standard under section 243(e)(2) of the 
                        Clean Air Act for that make and model year, and
                            ``(ii) for 2004 and later model vehicles, 
                        has received a certificate that such vehicle 
                        meets or exceeds the Bin 5 Tier II emission 
                        level established in regulations prescribed by 
                        the Administrator of the Environmental 
                        Protection Agency under section 202(i) of the 
                        Clean Air Act for that make and model year 
                        vehicle,
                    ``(C) which, in the case of a heavy duty hybrid 
                motor vehicle, the internal combustion or heat engine 
                of which has received a certificate of conformity under 
                the Clean Air Act as meeting the emission standards set 
                in the regulations prescribed by the Administrator of 
                the Environmental Protection Agency for 2004 through 
                2007 model year diesel heavy duty engines or ottocycle 
                heavy duty engines, as applicable,
                    ``(D) the original use of which commences with the 
                taxpayer,
                    ``(E) which is acquired for use or lease by the 
                taxpayer and not for resale, and
                    ``(F) which is made by a manufacturer.
            ``(4) Heavy duty hybrid motor vehicle.--For purposes of 
        this subsection, the term `heavy duty hybrid motor vehicle' 
        means a new qualified hybrid motor vehicle which has a gross 
        vehicle weight rating of more than 8,500 pounds. Such term does 
        not include a medium duty passenger vehicle.
    ``(d) New Qualified Alternative Fuel Motor Vehicle Credit.--
            ``(1) Allowance of credit.--Except as provided in paragraph 
        (5), the new qualified alternative fuel motor vehicle credit 
        determined under this subsection is an amount equal to the 
        applicable percentage of the incremental cost of any new 
        qualified alternative fuel motor vehicle placed in service by 
        the taxpayer during the taxable year.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage with respect to any new 
        qualified alternative fuel motor vehicle is--
                    ``(A) 50 percent, plus
                    ``(B) 30 percent, if such vehicle--
                            ``(i) has received a certificate of 
                        conformity under the Clean Air Act and meets or 
                        exceeds the most stringent standard available 
                        for certification under the Clean Air Act for 
                        that make and model year vehicle (other than a 
                        zero emission standard), or
                            ``(ii) has received an order certifying the 
                        vehicle as meeting the same requirements as 
                        vehicles which may be sold or leased in 
                        California and meets or exceeds the most 
                        stringent standard available for certification 
                        under the State laws of California (enacted in 
                        accordance with a waiver granted under section 
                        209(b) of the Clean Air Act) for that make and 
                        model year vehicle (other than a zero emission 
                        standard).
        For purposes of the preceding sentence, in the case of any new 
        qualified alternative fuel motor vehicle which weighs more than 
        14,000 pounds gross vehicle weight rating, the most stringent 
        standard available shall be such standard available for 
        certification in 2002.
            ``(3) Incremental cost.--For purposes of this subsection, 
        the incremental cost of any new qualified alternative fuel 
        motor vehicle is equal to the amount of the excess of the 
        manufacturer's suggested retail price for such vehicle over 
        such price for a gasoline or diesel fuel motor vehicle of the 
        same model, to the extent such amount does not exceed--
                    ``(A) $5,000, if such vehicle has a gross vehicle 
                weight rating of not more than 8,500 pounds,
                    ``(B) $10,000, if such vehicle has a gross vehicle 
                weight rating of more than 8,500 pounds but not more 
                than 14,000 pounds,
                    ``(C) $25,000, if such vehicle has a gross vehicle 
                weight rating of more than 14,000 pounds but not more 
                than 26,000 pounds, and
                    ``(D) $40,000, if such vehicle has a gross vehicle 
                weight rating of more than 26,000 pounds.
            ``(4) New qualified alternative fuel motor vehicle.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `new qualified 
                alternative fuel motor vehicle' means any motor 
                vehicle--
                            ``(i) which is only capable of operating on 
                        an alternative fuel,
                            ``(ii) the original use of which commences 
                        with the taxpayer,
                            ``(iii) which is acquired by the taxpayer 
                        for use or lease, but not for resale, and
                            ``(iv) which is made by a manufacturer.
                    ``(B) Alternative fuel.--The term `alternative 
                fuel' means compressed natural gas, liquefied natural 
                gas, liquefied petroleum gas, hydrogen, and any liquid 
                at least 85 percent of the volume of which consists of 
                methanol or ethanol.
            ``(5) Credit for mixed-fuel vehicles.--
                    ``(A) In general.--In the case of a mixed-fuel 
                vehicle placed in service by the taxpayer during the 
                taxable year, the credit determined under this 
                subsection is an amount equal to--
                            ``(i) in the case of a 75/25 mixed-fuel 
                        vehicle, 70 percent of the credit which would 
                        have been allowed under this subsection if such 
                        vehicle was a qualified alternative fuel motor 
                        vehicle, and
                            ``(ii) in the case of a 90/10 mixed-fuel 
                        vehicle, 90 percent of the credit which would 
                        have been allowed under this subsection if such 
                        vehicle was a qualified alternative fuel motor 
                        vehicle.
                    ``(B) Mixed-fuel vehicle.--For purposes of this 
                subsection, the term `mixed-fuel vehicle' means any 
                motor vehicle described in subparagraph (C) or (D) of 
                paragraph (3), which--
                            ``(i) is certified by the manufacturer as 
                        being able to perform efficiently in normal 
                        operation on a combination of an alternative 
                        fuel and a petroleum-based fuel,
                            ``(ii) either--
                                    ``(I) has received a certificate of 
                                conformity under the Clean Air Act, or
                                    ``(II) has received an order 
                                certifying the vehicle as meeting the 
                                same requirements as vehicles which may 
                                be sold or leased in California and 
                                meets or exceeds the low emission 
                                vehicle standard under section 88.105-
                                94 of title 40, Code of Federal 
                                Regulations, for that make and model 
                                year vehicle,
                            ``(iii) the original use of which commences 
                        with the taxpayer,
                            ``(iv) which is acquired by the taxpayer 
                        for use or lease, but not for resale, and
                            ``(v) which is made by a manufacturer.
                    ``(C) 75/25 mixed-fuel vehicle.--For purposes of 
                this subsection, the term `75/25 mixed-fuel vehicle' 
                means a mixed-fuel vehicle which operates using at 
                least 75 percent alternative fuel and not more than 25 
                percent petroleum-based fuel.
                    ``(D) 90/10 mixed-fuel vehicle.--For purposes of 
                this subsection, the term `90/10 mixed-fuel vehicle' 
                means a mixed-fuel vehicle which operates using at 
                least 90 percent alternative fuel and not more than 10 
                percent petroleum-based fuel.
    ``(e) New Qualified Advanced Diesel Motor Vehicle Credit.--
            ``(1) In general.--For purposes of subsection (a), the new 
        qualified advanced diesel motor vehicle credit determined under 
        this subsection with respect to a new qualified advanced diesel 
        motor vehicle placed in service by the taxpayer during the 
        taxable year is--
                    ``(A) $3,000 for vehicles with a gross vehicle 
                weight rating of not more than 14,000 pounds, placed in 
                service before December 31, 2009, if such vehicle has 
                received a certificate that such vehicle meets or 
                exceeds the Bin 5 Tier II emission level established in 
                regulations prescribed by the Administrator of the 
                Environmental Protection Agency under section 202(i) of 
                the Clean Air Act for that make and model year,
                    ``(B) $5,000 for vehicles with a gross vehicle 
                weight rating of not more than 14,000 pounds, placed in 
                service before December 31, 2013, if such vehicle has 
                received a certificate that such vehicle meets or 
                exceeds the Ultra Low Emission Vehicle II (ULEV II) 
                emission level established in regulations prescribed by 
                the California Air Resources Board under chapter 1 of 
                division 3 of title 13, California Code of Regulations, 
                for that make and model year, and
                    ``(C) zero in any other case.
            ``(2) Definitions.--
                    ``(A) Vehicle inertia weight class.--For purposes 
                of this subsection, the term `vehicle inertia weight 
                class' has the same meaning as when defined in 
                regulations prescribed by the Administrator of the 
                Environmental Protection Agency for purposes of the 
                administration of title II of the Clean Air Act (42 
                U.S.C. 7521 et seq.).
                    ``(B) New qualified advanced diesel motor 
                vehicle.--For purposes of this subsection, the term 
                `new qualified advanced diesel motor vehicle' means any 
                motor vehicle--
                            ``(i) with a direct-injection diesel engine 
                        which achieves at least 20% increased fuel 
                        efficiency over the comparably sized gasoline 
                        engine, as determined by the Secretary,
                            ``(ii) the original use of which commences 
                        with the taxpayer,
                            ``(iii) which is acquired for use or lease 
                        by the taxpayer and not for resale, and
                            ``(iv) which is made by a manufacturer.
    ``(f) Application With Other Credits.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess (if 
any) of--
            ``(1) the regular tax for the taxable year reduced by the 
        sum of the credits allowable under subpart A and sections 27, 
        29, and 30, over
            ``(2) the tentative minimum tax for the taxable year.
    ``(g) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Consumable fuel.--The term `consumable fuel' means 
        any solid, liquid, or gaseous matter which releases energy when 
        consumed by an auxiliary power unit.
            ``(2) Motor vehicle.--The term `motor vehicle' has the 
        meaning given such term by section 30(c)(2).
            ``(3) City fuel economy.--The city fuel economy with 
        respect to any vehicle shall be measured in a manner which is 
        substantially similar to the manner city fuel economy is 
        measured in accordance with procedures under part 600 of 
        subchapter Q of chapter I of title 40, Code of Federal 
        Regulations, as in effect on the date of the enactment of this 
        section.
            ``(4) Other terms.--The terms `automobile', `passenger 
        automobile', `medium duty passenger vehicle', `light truck', 
        and `manufacturer' have the meanings given such terms in 
        regulations prescribed by the Administrator of the 
        Environmental Protection Agency for purposes of the 
        administration of title II of the Clean Air Act (42 U.S.C. 7521 
        et seq.).
            ``(5) Reduction in basis.--For purposes of this subtitle, 
        the basis of any property for which a credit is allowable under 
        subsection (a) shall be reduced by the amount of such credit so 
        allowed (determined without regard to subsection (e)).
            ``(6) No double benefit.--The amount of any deduction or 
        other credit allowable under this chapter--
                    ``(A) for any incremental cost taken into account 
                in computing the amount of the credit determined under 
                subsection (d) shall be reduced by the amount of such 
                credit attributable to such cost, and
                    ``(B) with respect to a vehicle described under 
                subsection (b) or (c), shall be reduced by the amount 
                of credit allowed under subsection (a) for such vehicle 
                for the taxable year.
            ``(7) Property used by tax-exempt entities.--In the case of 
        a credit amount which is allowable with respect to a motor 
        vehicle which is acquired by an entity exempt from tax under 
        this chapter, the person which sells or leases such vehicle to 
        the entity shall be treated as the taxpayer with respect to the 
        vehicle for purposes of this section and the credit shall be 
        allowed to such person, but only if the person clearly 
        discloses to the entity at the time of any sale or lease the 
        specific amount of any credit otherwise allowable to the entity 
        under this section.
            ``(8) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit allowable 
        under subsection (a) with respect to any property which ceases 
        to be property eligible for such credit (including recapture in 
        the case of a lease period of less than the economic life of a 
        vehicle).
            ``(9) Property used outside united states, etc., not 
        qualified.--No credit shall be allowed under subsection (a) 
        with respect to any property referred to in section 50(b) or 
        with respect to the portion of the cost of any property taken 
        into account under section 179.
            ``(10) Election to not take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the taxpayer 
        elects to not have this section apply to such vehicle.
            ``(11) Carryback and carryforward allowed.--
                    ``(A) In general.--If the credit amount allowable 
                under subsection (a) for a taxable year exceeds the 
                amount of the limitation under subsection (e) for such 
                taxable year (in this paragraph referred to as the 
                `unused credit year'), such excess shall be allowed as 
                a credit carryback for each of the 3 taxable years 
                beginning after the date of the enactment of this 
                section, which precede the unused credit year and a 
                credit carryforward for each of the 20 taxable years 
                which succeed the unused credit year.
                    ``(B) Rules.--Rules similar to the rules of section 
                39 shall apply with respect to the credit carryback and 
                credit carryforward under subparagraph (A).
            ``(12) Interaction with air quality and motor vehicle 
        safety standards.--Unless otherwise provided in this section, a 
        motor vehicle shall not be considered eligible for a credit 
        under this section unless such vehicle is in compliance with--
                    ``(A) the applicable provisions of the Clean Air 
                Act for the applicable make and model year of the 
                vehicle (or applicable air quality provisions of State 
                law in the case of a State which has adopted such 
                provision under a waiver under section 209(b) of the 
                Clean Air Act), and
                    ``(B) the motor vehicle safety provisions of 
                sections 30101 through 30169 of title 49, United States 
                Code.
    ``(h) Regulations.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary shall promulgate such regulations as necessary to 
        carry out the provisions of this section.
            ``(2) Coordination in prescription of certain 
        regulations.--The Secretary of the Treasury, in coordination 
        with the Secretary of Transportation and the Administrator of 
        the Environmental Protection Agency, shall prescribe such 
        regulations as necessary to determine whether a motor vehicle 
        meets the requirements to be eligible for a credit under this 
        section.
    ``(i) Termination.--This section shall not apply to any property 
purchased after--
            ``(1) in the case of a new qualified fuel cell motor 
        vehicle (as described in subsection (b)), December 31, 2013,
            ``(2) in the case of a new qualified advanced diesel motor 
        vehicle to which subsection (e)(1)(B) applies, December 31, 
        2013, and
            ``(3) in the case of any other property, December 31, 
        2009.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) 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(g)(5).''.
            (2) Section 55(c)(3) is amended by inserting ``30B(f),'' 
        after ``30(b)(3)''.
            (3) Section 6501(m) is amended by inserting ``30B(g)(10),'' 
        after ``30(d)(4),''.
            (4) The table of sections for subpart B of part IV of 
        subchapter A of chapter 1 is amended by inserting after the 
        item relating to section 30A the following new item:

``Sec. 30B. Alternative motor vehicle credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act, in taxable years ending after such date.

SEC. 315. MODIFICATION OF CREDIT FOR QUALIFIED ELECTRIC VEHICLES.

    (a) Amount of Credit.--
            (1) In general.--Section 30(a) (relating to allowance of 
        credit) is amended by striking ``10 percent of''.
            (2) Limitation of credit according to type of vehicle.--
        Section 30(b) (relating to limitations) is amended--
                    (A) by striking paragraphs (1) and (2) and 
                inserting the following new paragraph:
            ``(1) Limitation according to type of vehicle.--The amount 
        of the credit allowed under subsection (a) for any vehicle 
        shall not exceed the greatest of the following amounts 
        applicable to such vehicle:
                    ``(A) In the case of a vehicle which conforms to 
                the Motor Vehicle Safety Standard 500 prescribed by the 
                Secretary of Transportation, as in effect on the date 
                of the enactment of the New Apollo Energy Act of 2005, 
                the lesser of--
                            ``(i) 10 percent of the manufacturer's 
                        suggested retail price of the vehicle, or
                            ``(ii) $1,500.
                    ``(B) In the case of a vehicle not described in 
                subparagraph (A) with a gross vehicle weight rating not 
                exceeding 8,500 pounds--
                            ``(i) $4,000, or
                            ``(ii) $6,000, if such vehicle is--
                                    ``(I) capable of a driving range of 
                                at least 100 miles on a single charge 
                                of the vehicle's rechargeable batteries 
                                as measured pursuant to the urban 
                                dynamometer schedules under appendix I 
                                to part 86 of title 40, Code of Federal 
                                Regulations, or
                                    ``(II) capable of a payload 
                                capacity of at least 1,000 pounds.
                    ``(C) In the case of a vehicle with a gross vehicle 
                weight rating exceeding 8,500 but not exceeding 14,000 
                pounds, $10,000.
                    ``(D) In the case of a vehicle with a gross vehicle 
                weight rating exceeding 14,000 but not exceeding 26,000 
                pounds, $20,000.
                    ``(E) In the case of a vehicle with a gross vehicle 
                weight rating exceeding 26,000 pounds, $40,000.'', and
                    (B) by redesignating paragraph (3) as paragraph 
                (2).
            (3) Conforming amendments.--
                    (A) Section 53(d)(1)(B)(iii) is amended by striking 
                ``section 30(b)(3)(B)'' and inserting ``section 
                30(b)(2)(B)''.
                    (B) Section 55(c)(3) is amended by striking 
                ``30(b)(3)'' and inserting ``30(b)(2)''.
    (b) Qualified Battery Electric Vehicle.--
            (1) In general.--Section 30(c)(1)(A) (defining qualified 
        electric vehicle) is amended to read as follows:
                    ``(A) which is--
                            ``(i) operated solely by use of a battery 
                        or battery pack, or
                            ``(ii) powered primarily through the use of 
                        an electric battery or battery pack using a 
                        flywheel or capacitor which stores energy 
                        produced by an electric motor through 
                        regenerative braking to assist in vehicle 
                        operation,''.
            (2) Leased vehicles.--Section 30(c)(1)(C) is amended by 
        inserting ``or lease'' after ``use''.
            (3) Conforming amendments.--
                    (A) Subsections (a), (b)(2), and (c) of section 30 
                are each amended by inserting ``battery'' after 
                ``qualified'' each place it appears.
                    (B) The heading of subsection (c) of section 30 is 
                amended by inserting ``Battery'' after ``Qualified''.
                    (C) The heading of section 30 is amended by 
                inserting ``battery'' after ``qualified''.
                    (D) The item relating to section 30 in the table of 
                sections for subpart B of part IV of subchapter A of 
                chapter 1 is amended by inserting ``battery'' after 
                ``qualified''.
                    (E) Section 179A(c)(3) is amended by inserting 
                ``battery'' before ``electric''.
                    (F) The heading of paragraph (3) of section 179A(c) 
                is amended by inserting ``battery'' before 
                ``electric''.
    (c) Additional Special Rules.--
            (1) In general.--Section 30(d) (relating to special rules) 
        is amended by adding at the end the following new paragraphs:
            ``(5) No double benefit.--The amount of any deduction or 
        other credit allowable under this chapter for any cost taken 
        into account in computing the amount of the credit determined 
        under subsection (a) shall be reduced by the amount of such 
        credit attributable to such cost.
            ``(6) Property used by tax-exempt entities.--In the case of 
        a credit amount which is allowable with respect to a vehicle 
        which is acquired by an entity exempt from tax under this 
        chapter, the person which sells or leases such vehicle to the 
        entity shall be treated as the taxpayer with respect to the 
        vehicle for purposes of this section and the credit shall be 
        allowed to such person, but only if the person clearly 
        discloses to the entity at the time of any sale or lease the 
        specific amount of any credit otherwise allowable to the entity 
        under this section.
            ``(7) Carryback and carryforward allowed.--
                    ``(A) In general.--If the credit amount allowable 
                under subsection (a) for a taxable year exceeds the 
                amount of the limitation under subsection (b)(2) for 
                such taxable year (in this paragraph referred to as the 
                `unused credit year'), such excess shall be allowed as 
                a credit carryback for each of the 3 taxable years 
                beginning after the date of the enactment of this 
                paragraph, which precede the unused credit year and a 
                credit carryforward for each of the 20 taxable years 
                which succeed the unused credit year.
                    ``(B) Rules.--Rules similar to the rules of section 
                39 shall apply with respect to the credit carryback and 
                credit carryforward under subparagraph (A).''.
            (2) Conforming amendment.--Section 179A(c) is amended by 
        striking paragraph (3).
    (d) Extension of Credit.--Section 30(e) (relating to termination) 
is amended by striking ``2006'' and inserting ``2009''.
    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act, in taxable years ending after such date.

SEC. 316. EXTENSION OF BIODIESEL TAX CREDITS.

    (a) In General.--Sections 40A(e), 6426(c)(6), and 6427(e)(3)(B) are 
each amended by stirking ``2006'' and inserting ``2014''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 317. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS MOTOR VEHICLE 
              FUEL.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits) is amended by inserting after 
section 40A the following new section:

``SEC. 40B. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS MOTOR 
              VEHICLE FUEL.

    ``(a) General Rule.--For purposes of section 38, the alternative 
fuel retail sales credit for any taxable year is the applicable amount 
for each gasoline gallon equivalent of alternative fuel sold at retail 
by the taxpayer during such year as a fuel to propel any qualified 
motor vehicle.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Applicable amount.--The term `applicable amount' 
        means as follows:
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the amount determined in accordance 
                with the following table:
````In the case of any taxable year
   ending in--                               The applicable amount is--
    2006..........................................             30 cents
    2007..........................................             40 cents
    2008 and 2009.................................             50 cents
    2010..........................................             40 cents
    2011..........................................            30 cents.
                    ``(B) Hydrogen fuel.--In the case of an alternative 
                fuel which is hydrogen fuel, the amount determined in 
                accordance with the following table:
````In the case of any taxable year
   ending in--                               The applicable amount is--
    2006..........................................             30 cents
    2007..........................................             40 cents
    2008 through 2013.............................             50 cents
    2014..........................................             40 cents
    2015..........................................            30 cents.
            ``(2) Alternative fuel.--The term `alternative fuel' means 
        compressed natural gas, liquefied natural gas, liquefied 
        petroleum gas, hydrogen, and any liquid at least 85 percent of 
        the volume of which consists of methanol or ethanol.
            ``(3) Gasoline gallon equivalent.--The term `gasoline 
        gallon equivalent' means, with respect to any alternative fuel, 
        the amount (determined by the Secretary) of such fuel having a 
        Btu content of 114,000.
            ``(4) Qualified motor vehicle.--The term `qualified motor 
        vehicle' means any motor vehicle (as defined in section 
        30(c)(2)) which meets any applicable Federal or State emissions 
        standards with respect to each fuel by which such vehicle is 
        designed to be propelled.
            ``(5) Sold at retail.--
                    ``(A) In general.--The term `sold at retail' means 
                the sale, for a purpose other than resale, after 
                manufacture, production, or importation.
                    ``(B) Use treated as sale.--If any person uses 
                alternative fuel (including any use after importation) 
                as a fuel to propel any qualified alternative fuel 
                motor vehicle (as defined in section 30B(d)(4)) before 
                such fuel is sold at retail, then such use shall be 
                treated in the same manner as if such fuel were sold at 
                retail as a fuel to propel such a vehicle by such 
                person.
    ``(c) Election to Pass Credit.--A person which sells alternative 
fuel at retail may elect to pass the credit allowable under this 
section to the purchaser of such fuel or, in the event the purchaser is 
a tax-exempt entity or otherwise declines to accept such credit, to the 
person which supplied such fuel, under rules established by the 
Secretary.
    ``(d) No Double Benefit.--The amount of any deduction or other 
credit allowable under this chapter for any fuel taken into account in 
computing the amount of the credit determined under subsection (a) 
shall be reduced by the amount of such credit attributable to such 
fuel.
    ``(e) Pass-Thru in the Case of Estates and Trusts.--Under 
regulations prescribed by the Secretary, rules similar to the rules of 
subsection (d) of section 52 shall apply.
    ``(f) Termination.--
            ``(1) In general.--Except as provided in paragraph (2), 
        this section shall not apply to any fuel sold at retail after 
        December 31, 2011.
            ``(2) Hydrogen fuel.--In the case of an alternative fuel 
        which is hydrogen fuel, this section shall not apply to any 
        fuel sold at retail after December 31, 2015.''.
    (b) Credit Treated as Business Credit.--Section 38(b) (relating to 
current year business credit) is amended by striking ``plus'' at the 
end of paragraph (18), by striking the period at the end of paragraph 
(19) and inserting ``, plus'', and by adding at the end the following 
new paragraph:
            ``(20) the alternative fuel retail sales credit determined 
        under section 40B(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 40A the following new item:

``Sec. 40B. Credit for retail sale of alternative fuels as motor 
                            vehicle fuel.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fuel sold at retail after December 31, 2005, in taxable years 
ending after such date.

SEC. 318. STUDY OF EFFECTIVENESS OF CERTAIN PROVISIONS BY GAO.

    (a) Study.--The Comptroller General of the United States shall 
undertake an ongoing analysis of--
            (1) the effectiveness of the alternative motor vehicles and 
        fuel incentives provisions under this Act, and
            (2) the recipients of the tax benefits contained in such 
        provisions, including an identification of such recipients by 
        income and other appropriate measurements.
Such analysis shall quantify the effectiveness of such provisions by 
examining and comparing the Federal Government's forgone revenue to the 
aggregate amount of energy actually conserved and tangible 
environmental benefits gained as a result of such provisions.
    (b) Reports.--The Comptroller General of the United States shall 
report the analysis required under subsection (a) to Congress not later 
than December 31, 2006, and annually thereafter.

SEC. 319. EXTENSION OF DEDUCTION FOR CERTAIN REFUELING PROPERTY.

    (a) In General.--Section 179A(f) (relating to termination) is 
amended by striking ``2006'' and inserting ``2009''.
    (b) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2005, in taxable 
years ending after such date.

SEC. 320. CREDIT FOR INSTALLATION OF ALTERNATIVE FUELING STATIONS.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
(relating to foreign tax credit, etc.), as amended by this Act, is 
amended by adding at the end the following new section:

``SEC. 30C. CLEAN-FUEL VEHICLE REFUELING PROPERTY CREDIT.

    ``(a) Credit Allowed.--There shall be allowed as a credit against 
the tax imposed by this chapter for the taxable year an amount equal to 
50 percent of the amount paid or incurred by the taxpayer during the 
taxable year for the installation of qualified clean-fuel vehicle 
refueling property.
    ``(b) Limitation.--
            ``(1) In general.--The credit allowed under subsection 
        (a)--
                    ``(A) with respect to any retail clean-fuel vehicle 
                refueling property, shall not exceed $30,000, and
                    ``(B) with respect to any residential clean-fuel 
                vehicle refueling property, shall not exceed $1,000.
            ``(2) Phaseout.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), in the case of any qualified clean-
                fuel vehicle refueling property placed in service after 
                December 31, 2007, the limit otherwise applicable under 
                paragraph (1) shall be reduced by--
                            ``(i) 25 percent in the case of any vehicle 
                        placed in service in calendar year 2008, and
                            ``(ii) 50 percent in the case of any 
                        vehicle placed in service in calendar year 
                        2009.
                    ``(B) Hydrogen property.--In the case of any 
                qualified clean-fuel vehicle refueling property 
                relating to hydrogen placed in service after December 
                31, 2011, the limit otherwise applicable under 
                paragraph (1) shall be reduced by--
                            ``(i) 25 percent in the case of any vehicle 
                        placed in service in calendar year 2012, and
                            ``(ii) 50 percent in the case of any 
                        vehicle placed in service in calendar year 
                        2013.
    ``(c) Year Credit Allowed.--The credit allowed under subsection (a) 
shall be allowed in the taxable year in which the qualified clean-fuel 
vehicle refueling property is placed in service by the taxpayer.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified clean-fuel vehicle refueling property.--The 
        term `qualified clean-fuel vehicle refueling property' has the 
        same meaning given such term by section 179A(d).
            ``(2) Residential clean-fuel vehicle refueling property.--
        The term `residential clean-fuel vehicle refueling property' 
        means qualified clean-fuel vehicle refueling property which is 
        installed on property which is used as the principal residence 
        (within the meaning of section 121) of the taxpayer.
            ``(3) Retail clean-fuel vehicle refueling property.--The 
        term `retail clean-fuel vehicle refueling property' means 
        qualified clean-fuel vehicle refueling property which is 
        installed on property (other than property described in 
        paragraph (2)) used in a trade or business of the taxpayer.
    ``(e) Application With Other Credits.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess (if 
any) of--
            ``(1) the regular tax for the taxable year reduced by the 
        sum of the credits allowable under subpart A and sections 27, 
        29, 30, and 30B, over
            ``(2) the tentative minimum tax for the taxable year.
    ``(f) Basis Reduction.--For purposes of this title, the basis of 
any property shall be reduced by the portion of the cost of such 
property taken into account under subsection (a).
    ``(g) No Double Benefit.--No deduction shall be allowed under 
section 179A with respect to any property with respect to which a 
credit is allowed under subsection (a).
    ``(h) Refueling Property Installed for Tax-Exempt Entities.--In the 
case of qualified clean-fuel vehicle refueling property installed on 
property owned or used by an entity exempt from tax under this chapter, 
the person which installs such refueling property for the entity shall 
be treated as the taxpayer with respect to the refueling property for 
purposes of this section (and such refueling property shall be treated 
as retail clean-fuel vehicle refueling property) and the credit shall 
be allowed to such person, but only if the person clearly discloses to 
the entity in any installation contract the specific amount of the 
credit allowable under this section.
    ``(i) Carryforward Allowed.--
            ``(1) In general.--If the credit amount allowable under 
        subsection (a) for a taxable year exceeds the amount of the 
        limitation under subsection (e) for such taxable year (referred 
        to as the `unused credit year' in this subsection), such excess 
        shall be allowed as a credit carryforward for each of the 20 
        taxable years following the unused credit year.
            ``(2) Rules.--Rules similar to the rules of section 39 
        shall apply with respect to the credit carryforward under 
        paragraph (1).
    ``(j) Special Rules.--Rules similar to the rules of paragraphs (4) 
and (5) of section 179A(e) shall apply.
    ``(k) Regulations.--The Secretary shall prescribe such regulations 
as necessary to carry out the provisions of this section.
    ``(l) Termination.--This section shall not apply to any property 
placed in service--
            ``(1) in the case of property relating to hydrogen, after 
        December 31, 2013, and
            ``(2) in the case of any other property, after December 31, 
        2009.''.
    (b) Incentive for Production of Hydrogen at Qualified Clean-Fuel 
Vehicle Refueling Property.--Section 179A(d) (defining qualified clean-
fuel vehicle refueling property) is amended by adding at the end the 
following new flush sentence:
 ``In the case of clean-burning fuel which is hydrogen produced from 
another clean-burning fuel, paragraph (3)(A) shall be applied by 
substituting ``production, storage, or dispensing'' for ``storage or 
dispensing'' both places it appears.''.
    (c) Conforming Amendments.--(1) Section 1016(a), as amended by this 
Act, is amended by striking ``and'' at the end of paragraph (31), by 
striking the period at the end of paragraph (32) and inserting ``, 
and'', and by adding at the end the following new paragraph:
            ``(33) to the extent provided in section 30C(f).''.
    (2) Section 55(c)(3) is amended by inserting ``30C(e),'' after 
``30B(e)''.
    (3) The table of sections for subpart B of part IV of subchapter A 
of chapter 1, as amended by this Act, is amended by inserting after the 
item relating to section 30B the following new item:

``Sec. 30C. Clean-fuel vehicle refueling property credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act, in taxable years ending after such date.

SEC. 321. INCENTIVE FOR CERTAIN ENERGY EFFICIENT PROPERTY USED IN 
              BUSINESS.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
adding at the end the following new section:

``SEC. 200. ENERGY PROPERTY DEDUCTION.

    ``(a) In General.--There shall be allowed as a deduction for the 
taxable year an amount equal to the sum of--
            ``(1) the amount determined under subsection (b) for each 
        energy property of the taxpayer placed in service during such 
        taxable year, and
            ``(2) the energy efficient residential rental building 
        property deduction determined under subsection (e).
    ``(b) Amount for Energy Property.--
            ``(1) In general.--The amount determined under this 
        subsection for the taxable year for each item of energy 
        property shall equal the amount specified for such property in 
        the following table:

------------------------------------------------------------------------
     Description of property:               Allowable amount is:
------------------------------------------------------------------------
Elected solar hot water property..      $1.00 per each kwh/year of
                                     savings.
Photovoltaic property.............      $4.50 per peak watt.
Advanced main air circulating fan       $150.
 or a Tier 1 natural gas, propane,
 or oil water heater.
Tier 2 energy-efficient building        $900.
 property.
Tier 1 energy-efficient building        $450.''
 property (other than an advanced
 main air circulating fan or a
 natural gas, propane, or oil
 water heater).
------------------------------------------------------------------------

            ``(2) Elected solar hot water property.--In the case of 
        elected solar hot water property, the taxpayer may elect to 
        substitute `$21 per annual Therm of natural gas savings' for 
        `$1.00 per each kwh/year of savings' in the table contained in 
        paragraph (1).
    ``(c) Energy Property Defined.--
            ``(1) In general.--For purposes of this part, the term 
        `energy property' means any property--
                    ``(A) which is--
                            ``(i) solar energy property,
                            ``(ii) Tier 2 energy-efficient building 
                        property, or
                            ``(iii) Tier 1 energy-efficient building 
                        property,
                    ``(B)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, or
                    ``(ii) which is acquired by the taxpayer if the 
                original use of such property commences with the 
                taxpayer,
                    ``(C) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable, and
                    ``(D) which meets the performance and quality 
                standards, and the certification requirements (if any), 
                which--
                            ``(i) have been prescribed by the Secretary 
                        by regulations (after consultation with the 
                        Secretary of Energy or the Administrator of the 
                        Environmental Protection Agency, as 
                        appropriate),
                            ``(ii) in the case of the energy efficiency 
                        ratio (EER) for central air conditioners and 
                        electric heat pumps--
                                    ``(I) require measurements to be 
                                based on published data which is tested 
                                by manufacturers at 95 degrees 
                                Fahrenheit, and
                                    ``(II) may be based on certified 
                                data of the Air Conditioning and 
                                Refrigeration Institute,
                            ``(iii) in the case of geothermal heat 
                        pumps--
                                    ``(I) shall be based on testing 
                                under the conditions of ARI/ISO 
                                Standard 13256-1 for Water Source Heat 
                                Pumps or ARI 870 for Direct Expansion 
                                GeoExchange Heat Pumps (DX), as 
                                appropriate, and
                                    ``(II) shall include evidence that 
                                water heating services have been 
                                provided through a desuperheater or 
                                integrated water heating system 
                                connected to the storage water heater 
                                tank, and
                            ``(iv) are in effect at the time of the 
                        acquisition of the property.
            ``(2) Solar energy property.--In the case of--
                    ``(A) elected solar hot water property, the 
                regulations under paragraph (1)(D) shall be based on 
                the OG-300 Standard for the Annual Performance of OG-
                300 Certified Systems of the Solar Rating and 
                Certification Corporation, and
                    ``(B) photovoltaics, such regulations shall be 
                based on the ASTM Standard E 1036 and E 1036M-96 
                Standard Test Method for Electric Performance of 
                Nonconcentrator Terrestrial Photovoltaic Modules and 
                Arrays Using Reference Cells,
        to the extent the Secretary determines such standards carry out 
        the purposes of this section.
            ``(3) Exception.--Such term shall not include any property 
        which is public utility property (as defined in section 
        46(f)(5) as in effect on the day before the date of the 
        enactment of the Revenue Reconciliation Act of 1990).
    ``(d) Definitions Relating to Types of Energy Property.--For 
purposes of this section--
            ``(1) Solar energy property.--
                    ``(A) In general.--The term `solar energy property' 
                means equipment which uses solar energy--
                            ``(i) to generate electricity, or
                            ``(ii) to provide hot water for use in a 
                        structure.
                    ``(B) Elected solar hot water property.--
                            ``(i) In general.--The term `elected solar 
                        hot water property' means property which is 
                        solar energy property by reason of subparagraph 
                        (A)(ii) and for which an election under this 
                        subparagraph is in effect.
                            ``(ii) Election.--For purposes of clause 
                        (i), a taxpayer may elect to treat property 
                        described in clause (i) as elected solar hot 
                        water property.
                    ``(C) Photovoltaic property.--The term 
                `photovoltaic property' means solar energy property 
                which uses a solar photovoltaic process to generate 
                electricity.
                    ``(D) Swimming pools, etc., used as storage 
                medium.--The term `solar energy property' shall not 
                include a swimming pool, hot tub, or any other energy 
                storage medium which has a function other than the 
                function of such storage.
                    ``(E) Solar panels.--No solar panel or other 
                property installed as a roof (or portion thereof) shall 
                fail to be treated as solar energy property solely 
                because it constitutes a structural component of the 
                structure on which it is installed.
            ``(2) Tier 2 energy-efficient building property.--The term 
        `Tier 2 energy-efficient building property' means--
                    ``(A) an electric heat pump water heater which 
                yields an energy factor of at least 2.0 in the standard 
                Department of Energy test procedure,
                    ``(B) an electric heat pump which has a heating 
                seasonal performance factor (HSPF) of at least 9, a 
                seasonal energy efficiency ratio (SEER) of at least 15, 
                and an energy efficiency ratio (EER) of at least 13,
                    ``(C) a geothermal heat pump which--
                            ``(i) in the case of a closed loop product, 
                        has an energy efficiency ratio (EER) of at 
                        least 14.1 and a heating coefficient of 
                        performance (COP) of at least 3.3,
                            ``(ii) in the case of an open loop product, 
                        has an energy efficiency ratio (EER) of at 
                        least 16.2 and a heating coefficient of 
                        performance (COP) of at least 3.6, and
                            ``(iii) in the case of a direct expansion 
                        (DX) product, has an energy efficiency ratio 
                        (EER) of at least 15 and a heating coefficient 
                        of performance (COP) of at least 3.5,
                    ``(D) a central air conditioner which has a 
                seasonal energy efficiency ratio (SEER) of at least 15 
                and an energy efficiency ratio (EER) of at least 13, 
                and
                    ``(E) a natural gas, propane, or oil water heater 
                which has an energy factor of at least 0.80.
            ``(3) Tier 1 energy-efficient building property.--The term 
        `Tier 1 energy-efficient building property' means--
                    ``(A) an electric heat pump which has a heating 
                system performance factor (HSPF) of at least 8.5, a 
                cooling seasonal energy efficiency ratio (SEER) of at 
                least 14, and an energy efficiency ratio (EER) of at 
                least 12,
                    ``(B) a central air conditioner which has a cooling 
                seasonal energy efficiency ratio (SEER) of at least 14 
                and an energy efficiency ratio (EER) of at least 12,
                    ``(C) a natural gas, propane, or oil water heater 
                which has an energy factor of at least 0.65, and
                    ``(D) an oil, natural gas, or propane furnace or 
                hot water boiler which achieves at least 95 percent 
                annual fuel utilization efficiency (AFUE).
            ``(4) Advanced main air circulating fan.--The term 
        `advanced main air circulating fan' means a fan used in a 
        natural gas, propane, or oil furnace originally placed in 
        service by the taxpayer during the taxable year, including a 
        fan which uses a brushless permanent magnet motor or another 
        type of motor which achieves similar or higher efficiency at 
        full and half speed, as determined by the Secretary.
    ``(e) Energy Efficient Residential Rental Building Property 
Deduction.--
            ``(1) Deduction allowed.--For purposes of subsection (a)--
                    ``(A) In general.--The energy efficient residential 
                rental building property deduction determined under 
                this subsection is an amount equal to energy efficient 
                residential rental building property expenditures made 
                by a taxpayer for the taxable year.
                    ``(B) Maximum amount of deduction.--The amount of 
                energy efficient residential rental building property 
                expenditures taken into account under subparagraph (A) 
                with respect to each dwelling unit shall not exceed--
                            ``(i) $6,000 in the case of a percentage 
                        reduction of 50 percent as determined under 
                        paragraph (2)(B), and
                            ``(ii) $12,000 times the percentage 
                        reduction in the case of a percentage reduction 
                        of less than 50 percent as determined under 
                        paragraph (2)(B).
                    ``(C) Year deduction allowed.--The deduction under 
                subparagraph (A) shall be allowed in the taxable year 
                in which the construction, reconstruction, erection, or 
                rehabilitation of the property is completed.
            ``(2) Energy efficient residential rental building property 
        expenditures.--For purposes of this subsection--
                    ``(A) In general.--The term `energy efficient 
                residential rental building property expenditures' 
                means an amount paid or incurred in connection with 
                construction, reconstruction, erection, or 
                rehabilitation of energy efficient residential rental 
                building property--
                            ``(i) for which depreciation is allowable 
                        under section 167,
                            ``(ii) which is located in the United 
                        States, and
                            ``(iii) the construction, reconstruction, 
                        erection, or rehabilitation of which is 
                        completed by the taxpayer.
                Such term includes expenditures for labor costs 
                properly allocable to the onsite preparation, assembly, 
                or original installation of the property.
                    ``(B) Energy efficient residential rental building 
                property.--
                            ``(i) In general.--The term `energy 
                        efficient residential rental building property' 
                        means any property which reduces total annual 
                        energy and power costs with respect to heating 
                        and cooling of the building by a percentage 
                        certified according to clause (ii).
                            ``(ii) Procedures.--
                                    ``(I) In general.--For purposes of 
                                clause (i), energy usage and costs 
                                shall be demonstrated by performance-
                                based compliance.
                                    ``(II) Performance-based 
                                compliance.--Performance-based 
                                compliance shall be demonstrated by 
                                calculating the percent energy cost 
                                savings for heating and cooling, as 
                                applicable, with respect to a dwelling 
                                unit when compared to the original 
                                condition of the dwelling unit.
                                    ``(III) Computer software.--
                                Computer software shall be used in 
                                support of performance-based compliance 
                                under subclause (II) and such software 
                                shall meet all of the procedures and 
                                methods for calculating energy savings 
                                reductions which are promulgated by the 
                                Secretary of Energy. Such regulations 
                                on the specifications for software and 
                                verification protocols shall be based 
                                on the 2005 California Residential 
                                Alternative Calculation Method Approval 
                                Manual.
                                    ``(IV) Calculation requirements.--
                                In calculating tradeoffs and energy 
                                performance, the regulations prescribed 
                                under this clause shall prescribe for 
                                the taxable year the costs per unit of 
                                energy and power, such as kilowatt 
                                hour, kilowatt, gallon of fuel oil, and 
                                cubic foot or Btu of natural gas, which 
                                may be dependent on time of usage. 
                                Where a State has developed annual 
                                energy usage and cost reduction 
                                procedures based on time of usage costs 
                                for use in the performance standards of 
                                the State's building energy code prior 
                                to the effective date of this section, 
                                the State may use those annual energy 
                                usage and cost reduction procedures in 
                                lieu of those adopted by the Secretary.
                                    ``(V) Approval of software 
                                submissions.--The Secretary shall 
                                approve software submissions which 
                                comply with the requirements of 
                                subclause (III).
                                    ``(VI) Procedures for inspection 
                                and testing of homes.--The Secretary 
                                shall ensure that procedures for the 
                                inspection and testing for compliance 
                                comply with the calculation 
                                requirements under subclause (IV) of 
                                this clause and clause (iv).
                            ``(iii) Determinations of compliance.--A 
                        determination of compliance with respect to 
                        energy efficient residential rental building 
                        property made for the purposes of this 
                        subparagraph shall be filed with the Secretary 
                        not later than 1 year after the date of such 
                        determination and shall include the TIN of the 
                        certifier, the address of the building in 
                        compliance, and the identity of the person for 
                        whom such determination was performed. 
                        Determinations of compliance filed with the 
                        Secretary shall be available for inspection by 
                        the Secretary of Energy.
                            ``(iv) Compliance.--
                                    ``(I) In general.--The Secretary, 
                                after consultation with the Secretary 
                                of Energy, shall establish requirements 
                                for certification and compliance 
                                procedures after examining the 
                                requirements for energy consultants and 
                                home energy ratings providers specified 
                                by the Mortgage Industry National Home 
                                Energy Rating Standards.
                                    ``(II) Individuals qualified to 
                                determine compliance.--The 
                                determination of compliance may be 
                                provided by a local building regulatory 
                                authority, a utility, a manufactured 
                                home production inspection primary 
                                inspection agency (IPIA), or an 
                                accredited home energy rating system 
                                provider. All providers shall be 
                                accredited, or otherwise authorized to 
                                use approved energy performance 
                                measurement methods, by the Residential 
                                Energy Services Network (RESNET).
                    ``(C) Allocation of deduction for public 
                property.--In the case of energy efficient residential 
                rental building property which is public property, the 
                Secretary shall promulgate a regulation to allow the 
                allocation of the deduction to the person primarily 
                responsible for designing the improvements to the 
                property in lieu of the public entity which is the 
                owner of such property. Such person shall be treated as 
                the taxpayer for purposes of this subsection.
    ``(f) Special Rules.--For purposes of this section--
            ``(1) Basis reduction.--For purposes of this subtitle, if a 
        deduction is allowed under this section with respect to any 
        property, the basis of such property shall be reduced by the 
        amount of the deduction so allowed.
            ``(2) Double benefit.--Property which would, but for this 
        paragraph, be eligible for deduction under more than one 
        provision of this section shall be eligible only under one such 
        provision, the provision specified by the taxpayer.
    ``(g) Regulations.--The Secretary shall promulgate such regulations 
as necessary to take into account new technologies regarding energy 
efficiency and renewable energy for purposes of determining energy 
efficiency and savings under this section.
    ``(h) Termination.--This section shall not apply with respect to--
            ``(1) any energy property placed in service after December 
        31, 2010 (December 31, 2006, in the case of Tier 1 energy-
        efficient building property), and
            ``(2) any energy efficient residential rental building 
        property expenditures in connection with property--
                    ``(A) placed in service after December 31, 2008, or
                    ``(B) the construction, reconstruction, erection, 
                or rehabilitation of which is not completed on or 
                before December 31, 2008.''.
    (b) Conforming Amendments.--
            (1) Section 48(a)(3)(A) is amended to read as follows:
                    ``(A) which is equipment used to produce, 
                distribute, or use energy derived from a geothermal 
                deposit (within the meaning of section 613(e)(2)), but 
                only, in the case of electricity generated by 
                geothermal power, up to (but not including) the 
                electrical transmission stage,''.
            (2) Subparagraph (B) of section 168(e)(3) is amended--
                    (A) in clause (vi)(I)--
                            (i) by striking ``section 48(a)(3)'' and 
                        inserting ``section 200(d)(1)'', and
                            (ii) by striking ``clause (i)'' and 
                        inserting ``such subparagraph (A)'', and
                    (B) in the last sentence, by striking ``section 
                48(a)(3)'' and inserting ``section 200(c)(3)''.
            (3) Section 1016(a) is amended by striking ``and'' at the 
        end of paragraph (32), by striking the period at the end of 
        paragraph (33) and inserting ``, and'', and by inserting the 
        following new paragraph:
            ``(34) for amounts allowed as a deduction under section 
        200(a).''.
    (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by adding at the end the following 
new item:

``Sec. 200. Energy property deduction.''.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated to the Department of Energy out of amounts not already 
appropriated such sums as necessary to carry out this section.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 322. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

    (a) In General.--Part VI of subchapter B of chapter 1 (relating to 
itemized deductions for individuals and corporations) is amended by 
inserting after section 179B the following new section:

``SEC. 179C. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

    ``(a) In General.--There shall be allowed as a deduction an amount 
equal to the cost of energy efficient commercial building property 
placed in service during the taxable year.
    ``(b) Maximum Amount of Deduction.--The deduction under subsection 
(a) with respect to any building for the taxable year and all prior 
taxable years shall not exceed an amount equal to the product of--
            ``(1) $2.25, and
            ``(2) the square footage of the building.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Energy efficient commercial building property.--The 
        term `energy efficient commercial building property' means 
        property--
                    ``(A) which is installed on or in any building 
                located in the United States,
                    ``(B) which is installed as part of--
                            ``(i) the interior lighting systems,
                            ``(ii) the heating, cooling, ventilation, 
                        and hot water systems, or
                            ``(iii) the building envelope, and
                    ``(C) which is certified in accordance with 
                subsection (d)(6) as being installed as part of a plan 
                designed to reduce the total annual energy and power 
                costs with respect to the interior lighting systems, 
                heating, cooling, ventilation, and hot water systems of 
                the building by 50 percent or more in comparison to a 
                reference building which meets the minimum requirements 
                of Standard 90.1-2001 using methods of calculation 
                under subsection (d)(2).
        A building described in subparagraph (A) may include any 
        residential rental property, including any low-rise multifamily 
        structure or single family housing property which is not within 
        the scope of Standard 90.1-2001, but shall not include any 
        highly energy-efficient principal residence (within the meaning 
        of section 45J(b)) for which a credit under section 45J has 
        been allowed.
            ``(2) Standard 90.1-2001.--The term `Standard 90.1-2001' 
        means Standard 90.1-2001 of the American Society of Heating, 
        Refrigerating, and Air Conditioning Engineers and the 
        Illuminating Engineering Society of North America (as in effect 
        on April 2, 2003).
    ``(d) Special Rules.--
            ``(1) Partial allowance.--
                    ``(A) In general.--Except as provided in subsection 
                (f), if--
                            ``(i) the requirement of subsection 
                        (c)(1)(C) is not met, but
                            ``(ii) there is a certification in 
                        accordance with paragraph (6) that any system 
                        referred to in subsection (c)(1)(B) satisfies 
                        the energy-savings targets established by the 
                        Secretary under subparagraph (B) with respect 
                        to such system,
                then the requirement of subsection (c)(1)(C) shall be 
                treated as met with respect to such system, and the 
                deduction under subsection (a) shall be allowed with 
                respect to energy efficient commercial building 
                property installed as part of such system and as part 
                of a plan to meet such targets, except that subsection 
                (b) shall be applied to such property by substituting 
                `$.75' for `$2.25'.
                    ``(B) Regulations.--The Secretary, after 
                consultation with the Secretary of Energy, shall 
                establish a target for each system described in 
                subsection (c)(1)(B) which, if such targets were met 
                for all such systems, the building would meet the 
                requirements of subsection (c)(1)(C).
            ``(2) Methods of calculation.--The Secretary, after 
        consultation with the Secretary of Energy, shall promulgate 
        regulations which describe in detail methods for calculating 
        and verifying energy and power consumption and cost, based on 
        the provisions of the 2005 California Nonresidential 
        Alternative Calculation Method Approval Manual or, in the case 
        of residential property, the 2005 California Residential 
        Alternative Calculation Method Approval Manual. These 
        regulations shall meet the following requirements:
                    ``(A) In calculating tradeoffs and energy 
                performance, the regulations shall prescribe the costs 
                per unit of energy and power, such as kilowatt hour, 
                kilowatt, gallon of fuel oil, and cubic foot or Btu of 
                natural gas, which may be dependent on time of usage. 
                If a State has developed annual energy usage and cost 
                calculation procedures based on time of usage costs for 
                use in the performance standards of the State's 
                building energy code before the effective date of this 
                section, the State may use those annual energy usage 
                and cost calculation procedures in lieu of those 
                adopted by the Secretary.
                    ``(B) The calculation methods under this paragraph 
                need not comply fully with section 11 of Standard 90.1-
                2001.
                    ``(C) The calculation methods shall be fuel 
                neutral, such that the same energy efficiency features 
                shall qualify a building for the deduction under this 
                section regardless of whether the heating source is a 
                gas or oil furnace or an electric heat pump. The 
                reference building for a proposed design which employs 
                electric resistance heating shall be modeled as using a 
                heat pump.
                    ``(D) The calculation methods shall provide 
                appropriate calculated energy savings for design 
                methods and technologies not otherwise credited in 
                either Standard 90.1-2001 or in the 2005 California 
                Nonresidential Alternative Calculation Method Approval 
                Manual, including the following:
                            ``(i) Natural ventilation.
                            ``(ii) Evaporative cooling.
                            ``(iii) Automatic lighting controls such as 
                        occupancy sensors, photocells, and timeclocks.
                            ``(iv) Daylighting.
                            ``(v) Designs utilizing semi-conditioned 
                        spaces which maintain adequate comfort 
                        conditions without air conditioning or without 
                        heating.
                            ``(vi) Improved fan system efficiency, 
                        including reductions in static pressure.
                            ``(vii) Advanced unloading mechanisms for 
                        mechanical cooling, such as multiple or 
                        variable speed compressors.
                            ``(viii) The calculation methods may take 
                        into account the extent of commissioning in the 
                        building, and allow the taxpayer to take into 
                        account measured performance which exceeds 
                        typical performance.
                            ``(ix) On-site generation of electricity, 
                        including combined heat and power systems, fuel 
                        cells, and renewable energy generation such as 
                        solar energy.
                            ``(x) Wiring with lower energy losses than 
                        wiring satisfying Standard 90.1-2001 
                        requirements for building power distribution 
                        systems.
            ``(3) Computer software.--
                    ``(A) In general.--Any calculation under paragraph 
                (2) shall be prepared by qualified computer software.
                    ``(B) Qualified computer software.--For purposes of 
                this paragraph, the term `qualified computer software' 
                means software--
                            ``(i) for which the software designer has 
                        certified that the software meets all 
                        procedures and detailed methods for calculating 
                        energy and power consumption and costs as 
                        required by the Secretary,
                            ``(ii) which provides such forms as 
                        required to be filed by the Secretary in 
                        connection with energy efficiency of property 
                        and the deduction allowed under this section, 
                        and
                            ``(iii) which provides a notice form which 
                        documents the energy efficiency features of the 
                        building and its projected annual energy costs.
            ``(4) Allocation of deduction for public property.--In the 
        case of energy efficient commercial building property installed 
        on or in public property, the Secretary shall promulgate a 
        regulation to allow the allocation of the deduction to the 
        person primarily responsible for designing the property in lieu 
        of the public entity which is the owner of such property. Such 
        person shall be treated as the taxpayer for purposes of this 
        section.
            ``(5) Notice to owner.--Each certification required under 
        this section shall include an explanation to the building owner 
        regarding the energy efficiency features of the building and 
        its projected annual energy costs as provided in the notice 
        under paragraph (3)(B)(iii).
            ``(6) Certification.--
                    ``(A) In general.--The Secretary shall prescribe 
                the manner and method for the making of certifications 
                under this section.
                    ``(B) Procedures.--The Secretary shall include as 
                part of the certification process procedures for 
                inspection and testing by qualified individuals 
                described in subparagraph (C) to ensure compliance of 
                buildings with energy-savings plans and targets. Such 
                procedures shall be comparable, given the difference 
                between commercial and residential buildings, to the 
                requirements in the Mortgage Industry National 
                Accreditation Procedures for Home Energy Rating 
                Systems.
                    ``(C) Qualified individuals.--Individuals qualified 
                to determine compliance shall be only those individuals 
                who are recognized by an organization certified by the 
                Secretary for such purposes.
    ``(e) Basis Reduction.--For purposes of this subtitle, if a 
deduction is allowed under this section with respect to any energy 
efficient commercial building property, the basis of such property 
shall be reduced by the amount of the deduction so allowed.
    ``(f) Interim Rules for Lighting Systems.--Until such time as the 
Secretary issues final regulations under subsection (d)(1)(B) with 
respect to property which is part of a lighting system--
            ``(1) In general.--The lighting system target under 
        subsection (d)(1)(A)(ii) shall be a reduction in lighting power 
        density of 25 percent (50 percent in the case of a warehouse) 
        of the minimum requirements in Table 9.3.1.1 or Table 9.3.1.2 
        (not including additional interior lighting power allowances) 
        of Standard 90.1-2001.
            ``(2) Reduction in deduction if reduction less than 40 
        percent.--
                    ``(A) In general.--If, with respect to the lighting 
                system of any building other than a warehouse, the 
                reduction in lighting power density of the lighting 
                system is not at least 40 percent, only the applicable 
                percentage of the amount of deduction otherwise 
                allowable under this section with respect to such 
                property shall be allowed.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage is the 
                number of percentage points (not greater than 100) 
                equal to the sum of--
                            ``(i) 50, and
                            ``(ii) the amount which bears the same 
                        ratio to 50 as the excess of the reduction of 
                        lighting power density of the lighting system 
                        over 25 percentage points bears to 15.
                    ``(C) Exceptions.--This subsection shall not apply 
                to any system--
                            ``(i) the controls and circuiting of which 
                        do not comply fully with the mandatory and 
                        prescriptive requirements of Standard 90.1-2001 
                        and which do not include provision for bilevel 
                        switching in all occupancies except hotel and 
                        motel guest rooms, store rooms, restrooms, and 
                        public lobbies, or
                            ``(ii) which does not meet the minimum 
                        requirements for calculated lighting levels as 
                        set forth in the Illuminating Engineering 
                        Society of North America Lighting Handbook, 
                        Performance and Application, Ninth Edition, 
                        2000.
    ``(g) Coordination With Other Tax Benefits.--
            ``(1) No double benefit.--No deduction shall be allowed 
        under subsection (a) with respect to any building for which a 
        credit under section 45J has been allowed.
            ``(2) Special rule with respect to buildings with energy 
        efficient property.--In any case in which a deduction under 
        section 200 or a credit under section 25C has been allowed with 
        respect to property in connection with a building, the annual 
        energy and power costs of the reference building referred to in 
        subsection (c)(1)(C) shall be determined assuming such 
        reference building contains the property for which such 
        deduction or credit has been allowed.
    ``(h) Regulations.--The Secretary shall promulgate such regulations 
as necessary--
            ``(1) to take into account new technologies regarding 
        energy efficiency and renewable energy for purposes of 
        determining energy efficiency and savings under this section, 
        and
            ``(2) to provide for a recapture of the deduction allowed 
        under this section if the plan described in subsection 
        (c)(1)(C) or (d)(1)(A) is not fully implemented.
    ``(i) Termination.--This section shall not apply with respect to 
property placed in service after December 31, 2010.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) is amended by striking ``and'' at the 
        end of paragraph (33), by striking the period at the end of 
        paragraph (34) and inserting ``, and'', and by adding at the 
        end the following new paragraph:
            ``(35) to the extent provided in section 179C(e).''.
            (2) Section 1245(a) is amended by inserting ``179C,'' after 
        ``179B,'' both places it appears in paragraphs (2)(C) and 
        (3)(C).
            (3) Section 1250(b)(3) is amended by inserting before the 
        period at the end of the first sentence ``or by section 179C''.
            (4) Section 263(a)(1) is amended by striking ``or'' at the 
        end of subparagraph (H), by striking the period at the end of 
        subparagraph (I) and inserting ``, or'', and by inserting after 
        subparagraph (I) the following new subparagraph:
                    ``(J) expenditures for which a deduction is allowed 
                under section 179C.''.
            (5) Section 312(k)(3)(B) is amended by striking ``section 
        179, 179A, or 179B'' each place it appears in the heading and 
        text and inserting ``section 179, 179A, 179B, or 179C''.
    (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by inserting after the item 
relating to section 179B the following new item:

``Sec. 179C. Energy efficient commercial buildings deduction.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act in taxable years ending after such date.

SEC. 323. CREDIT FOR CONSTRUCTION OF NEW HIGHLY ENERGY-EFFICIENT HOMES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits) is amended by inserting after 
section 45I the following:

``SEC. 45J. NEW HIGHLY ENERGY-EFFICIENT HOME CREDIT.

    ``(a) In General.--For purposes of section 38, in the case of an 
eligible contractor, the credit determined under this section for the 
taxable year is an amount equal to the credit amount specified in the 
following table for a new, highly energy-efficient principal residence:


------------------------------------------------------------------------
                                                                Credit
    ``New, highly energy-efficient principal residence:        amount:
------------------------------------------------------------------------
30 percent property........................................       $1,000
50 percent property........................................       $2,000
------------------------------------------------------------------------

    ``(b) Highly Energy-Efficient Principal Residence.--For purposes of 
this section--
            ``(1) In general.--The term `highly energy-efficient 
        principal residence' means a dwelling--
                    ``(A) located in the United States,
                    ``(B) the construction of which is substantially 
                completed after December 31, 2005,
                    ``(C) the original use of which is as a principal 
                residence (within the meaning of section 121) which 
                commences with the person who acquires such dwelling 
                from the eligible contractor, and
                    ``(D) which is certified before such use commences 
                as being 50 percent property or 30 percent property.
            ``(2) 50 or 30 percent property.--
                    ``(A) In general.--For purposes of paragraph (1), 
                property is 50 percent property or 30 percent property 
                if the projected heating and cooling energy usage of 
                such property, measured in terms of average annual 
                energy cost to taxpayer, is reduced by 50 percent, or 
                30 percent, respectively, in comparison to the energy 
                usage of the standard design reference house as 
                determined using the procedures under subparagraph (D).
                    ``(B) Standard design reference house.--For 
                purposes of this subsection, the term `standard design 
                reference house' means a dwelling which conforms with 
                the standards of chapter 4 of the 2000 International 
                Energy Conservation Code of the International Code 
                Council and the minimum equipment efficiency standards 
                promulgated by the Department of Energy under the 
                National Appliance Energy Conservation Act.
                    ``(C) Energy efficient reference house.--For 
                purposes of this paragraph, the term `energy efficient 
                reference house' means a design of a dwelling which 
                uses the same heating fuel type as the proposed design 
                and which uses minimum standards equipment, as required 
                by the Department of Energy under the National 
                Appliance Energy Conservation Act and which achieves, 
                on average over fuel type and house geometry, the 
                required 30 percent or 50 percent reductions in annual 
                energy cost as calculated using the procedures under 
                subparagraph (D).
                    ``(D) Procedures.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), energy usage shall be 
                        demonstrated either by a component-based 
                        approach or a performance-based approach.
                            ``(ii) Component approach.--Compliance by 
                        the component approach is achieved when all of 
                        the components of the house comply with the 
                        requirements of prescriptive packages 
                        established by the Secretary of Energy, in 
                        consultation with the Administrator of the 
                        Environmental Protection Agency, such that they 
                        are equivalent, for the strong majority of 
                        houses which can use this method, to the 
                        results of using the performance-based approach 
                        of clause (iii) to achieve the required 
                        reduction in energy usage.
                            ``(iii) Performance-based approach.--
                        Performance-based compliance shall be 
                        demonstrated in terms of equivalent or less 
                        energy usage when compared to the energy 
                        efficient reference house of the same heating 
                        fuel type as the dwelling concerned or through 
                        an alternate method prescribed by the Secretary 
                        which yields equivalent results.
                            ``(iv) Computer software.--Computer 
                        software shall be used in support of 
                        performance-based compliance under clause (iii) 
                        and such software shall meet all of the 
                        procedures and methods for calculating energy 
                        savings reductions that are promulgated by the 
                        Secretary of Energy. Such regulations on the 
                        specifications for software and verification 
                        protocols shall be based on the 2005 California 
                        Residential Alternative Calculation Method 
                        Approval Manual.
                            ``(v) Fuel parity.--In the case of both the 
                        component and the performance-based approaches, 
                        and any software used in support of either such 
                        approach, the Secretary shall assure fuel 
                        parity by requiring both the energy efficient 
                        reference house and the prescriptive package 
                        under clause (ii) to employ the same envelope 
                        energy efficiency measures for a house heated 
                        by a gas furnace as for a house heated by an 
                        electric air source heat pump or by an oil 
                        furnace or boiler; and, for equipment 
                        efficiency, to employ electric, oil, or gas 
                        equipment efficiency of corresponding 
                        efficiency improvement. Such determination of 
                        corresponding efficiency improvement shall be 
                        made on a linear scale between the minimum 
                        standard equipment efficiency and the best 
                        available marketplace technology efficiency as 
                        determined by the Secretary after considering 
                        the information provided by the Air 
                        Conditioning and Refrigeration Institute (ARI) 
                        and the Gas Appliance Manufacturers Association 
                        (GAMA) guides for the respective electric, oil, 
                        and natural gas equipment of such type (such as 
                        heating and cooling).
                            ``(vi) Approval of software submissions.--
                        The Secretary shall approve software 
                        submissions that comply with the calculation 
                        requirements of clause (iv).
                            ``(vii) Procedures for inspection and 
                        testing of homes.--The Secretary shall ensure 
                        that procedures for the inspection and testing 
                        for compliance comply with the calculation 
                        requirements under clause (iv).
            ``(3) Determinations of compliance.--A determination of 
        compliance made for the purposes of this subsection shall be 
        filed with the Secretary within 1 year after the date of such 
        determination and shall include the TIN of the certifier, the 
        address of the building in compliance, and the identity of the 
        person for whom such determination was performed. 
        Determinations of compliance filed with the Secretary shall be 
        available for inspection by the Secretary of Energy.
            ``(4) Compliance.--
                    ``(A) In general.--The Secretary, in consultation 
                with the Secretary of Energy shall establish 
                requirements for certification and compliance 
                procedures after examining the requirements for energy 
                consultants and home energy ratings providers specified 
                by the Mortgage Industry National Accreditation 
                Procedures for Home Energy Rating Systems.
                    ``(B) Individuals qualified to determine 
                compliance.--Individuals qualified to determine 
                compliance shall be only those individuals who are 
                recognized by an organization certified by the 
                Secretary for such purposes. The Secretary may qualify 
                a Home Energy Rating Systems Organization, a local 
                building code agency, a State or local energy office, a 
                utility, or other organizations which meet the 
                requirements prescribed under this section.
            ``(5) Form provided to buyer.--
                    ``(A) In general.--A form documenting the energy-
                efficiency of the dwelling, including the rated energy 
                efficiency performance of equipment installed in the 
                dwelling, shall be provided to the buyer of the 
                dwelling. The form shall include labeled R-value for 
                insulation products, NFRC-labeled U-factor and Solar 
                Heat Gain Coefficient for windows, skylights, and 
                doors, labeled AFUE ratings for furnaces and boilers, 
                labeled HSPF ratings for electric heat pumps, and 
                labeled SEER ratings for air conditioners.
                    ``(B) Ratings label affixed in dwelling.--A 
                permanent label documenting the ratings in subparagraph 
                (A) shall be affixed to the front of the electrical 
                distribution panel of the dwelling, or shall be 
                otherwise permanently displayed in a readily 
                inspectable location in the dwelling.
    ``(c) Additional Definitions.--For purposes of this section--
            ``(1) Eligible contractor.--The term `eligible contractor' 
        means the person who constructed the new energy-efficient home, 
        or in the case of a manufactured home which conforms to Federal 
        Manufactured Home Construction and Safety Standards (24 C.F.R. 
        3280), the manufactured home producer of such home.
            ``(2) Construction.--The term `construction' includes 
        reconstruction and rehabilitation.
            ``(3) Acquire.--The term `acquire' includes purchase and, 
        in the case of reconstruction and rehabilitation, such term 
        includes a binding written contract for such reconstruction or 
        rehabilitation.
            ``(4) Manufactured home included.--The term `dwelling' 
        includes a manufactured home conforming to Federal Manufactured 
        Home Construction and Safety Standards (24 C.F.R. 3280).
    ``(d) Coordination With Other Credits.--Property which would, but 
for this paragraph, be eligible for credit under more than one 
provision of this section shall be eligible only under one such 
provision, the provision specified by the taxpayer.
    ``(e) Basis Adjustment.--For purposes of this subtitle, if a credit 
is allowed under this section for any expenditure with respect to any 
property, the increase in the basis of such property which would (but 
for this subsection) result from such expenditure shall be reduced by 
the amount of the credit so allowed.
    ``(f) Termination.--Subsection (a) shall apply to dwellings 
purchased during the period beginning on January 1, 2006, and ending on 
December 31, 2010.''.
    (b) Credit Made Part of General Business Credit.--Section 38(b) 
(relating to current year business credit) is amended by striking 
``plus'' at the end of paragraph (19), by striking the period at the 
end of paragraph (20) and inserting ``, plus'', and by adding at the 
end the following:
            ``(21) the new highly energy-efficient home credit 
        determined under section 45J.''.
    (c) Denial of Double Benefit.--Section 280C (relating to certain 
expenses for which credits are allowable) is amended by adding at the 
end the following:
    ``(e) New Energy-Efficient Home Expenses.--No deduction shall be 
allowed for that portion of expenses for a new highly energy-efficient 
home otherwise allowable as a deduction for the taxable year which is 
equal to the amount of the credit determined for such taxable year 
under section 45J.''.
    (d) Credit Allowed Against Regular and Minimum Tax.--
            (1) In general.--Section 38(c) (relating to limitation 
        based on amount of tax) is amended by redesignating paragraph 
        (5) as paragraph (6) and by inserting after paragraph (4) the 
        following new paragraph:
            ``(5) Special rules for new energy efficient home credit.--
                    ``(A) In general.--In the case of the new energy 
                efficient home credit--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to the credit, 
                        and
                            ``(ii) in applying paragraph (1) to the 
                        credit--
                                    ``(I) subparagraphs (A) and (B) 
                                thereof shall not apply, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the new energy 
                                efficient home credit).
                    ``(B) New highly energy efficient home credit.--For 
                purposes of this subsection, the term `new highly 
                energy efficient home credit' means the credit 
                allowable under subsection (a) by reason of section 
                45J.''.
            (2) Conforming amendment.--Subclause (II) of section 
        38(c)(2)(A)(ii) is amended by inserting ``or the new highly 
        energy efficient home credit'' after ``employment credit''.
    (e) Deduction for Certain Unused Business Credits.--Subsection (c) 
of section 196 is amended by striking ``and'' at the end of paragraph 
(11), by striking the period at the end of paragraph (12) and inserting 
``, and'', and by adding after paragraph (12) the following:
            ``(13) the new highly energy-efficient home credit 
        determined under section 45J.''.
    (f) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 45I the following:

``Sec. 45J. New highly energy-efficient home credit.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2005.

SEC. 324. CREDIT FOR ENERGY EFFICIENT APPLIANCES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business-related credits) is amended by adding after 
section 45J the following:

``SEC. 45K. ENERGY EFFICIENT APPLIANCE CREDIT.

    ``(a) General Rule.--For purposes of section 38, the energy 
efficient appliance credit determined under this section for the 
taxable year is an amount equal to the applicable amount determined 
under subsection (b) with respect to qualified energy efficient 
appliances produced by the taxpayer during the calendar year ending 
with or within the taxable year.
    ``(b) Applicable Amount.--For purposes of subsection (a), the 
applicable amount determined under this subsection with respect to a 
taxpayer is the sum of--
            ``(1) in the case of an energy efficient clothes washer 
        described in subsection (d)(2)(A) or an energy efficient 
        refrigerator described in subsection (d)(3)(B)(i), an amount 
        equal to--
                    ``(A) $50, multiplied by
                    ``(B) the number of such washers and refrigerators 
                produced by the taxpayer during such calendar year, and
            ``(2) in the case of an energy efficient clothes washer 
        described in subsection (d)(2)(B) or an energy efficient 
        refrigerator described in subsection (d)(3)(B)(ii), an amount 
        equal to--
                    ``(A) $100, multiplied by
                    ``(B) the number of such washers and refrigerators 
                produced by the taxpayer during such calendar year.
    ``(c) Limitation on Maximum Credit.--
            ``(1) In general.--The maximum amount of credit allowed 
        under subsection (a) with respect to a taxpayer for all taxable 
        years shall be--
                    ``(A) $30,000,000 with respect to the credit 
                determined under subsection (b)(1), and
                    ``(B) $30,000,000 with respect to the credit 
                determined under subsection (b)(2).
            ``(2) Limitation based on gross receipts.--The credit 
        allowed under subsection (a) with respect to a taxpayer for the 
        taxable year shall not exceed an amount equal to 2 percent of 
        the average annual gross receipts of the taxpayer for the 3 
        taxable years preceding the taxable year in which the credit is 
        determined.
            ``(3) Gross receipts.--For purposes of this subsection, the 
        rules of paragraphs (2) and (3) of section 448(c) shall apply.
    ``(d) Qualified Energy Efficient Appliance.--For purposes of this 
section--
            ``(1) In general.--The term `qualified energy efficient 
        appliance' means--
                    ``(A) an energy efficient clothes washer, or
                    ``(B) an energy efficient refrigerator.
            ``(2) Energy efficient clothes washer.--The term `energy 
        efficient clothes washer' means a residential clothes washer, 
        including a residential style coin operated washer, which is 
        manufactured with--
                    ``(A) a 8.5 Water Factor (referred to in this 
                paragraph as `WF') (as determined by the Secretary) and 
                a 1.60 Modified Energy Factor (referred to in this 
                paragraph as `MEF') (as determined by the Secretary of 
                Energy) for calendar years 2006 through 2008, or
                    ``(B) a 7.5 WF (as determined by the Secretary) and 
                a 1.80 MEF (as determined by the Secretary of Energy) 
                for calendar years after 2008.
            ``(3) Energy efficient refrigerator.--The term `energy 
        efficient refrigerator' means an automatic defrost 
        refrigerator-freezer which--
                    ``(A) has an internal volume of at least 16.5 cubic 
                feet, and
                    ``(B) consumes--
                            ``(i) 15 percent less kw/hr/yr than the 
                        energy conservation standards promulgated by 
                        the Department of Energy for such refrigerator 
                        for 2005, or
                            ``(ii) 20 to 25 percent less kw/hr/yr than 
                        such energy conservation standards.
    ``(e) Special Rules.--
            ``(1) In general.--Rules similar to the rules of 
        subsections (c), (d), and (e) of section 52 shall apply for 
        purposes of this section.
            ``(2) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52 or 
        subsection (m) or (o) of section 414 shall be treated as one 
        person for purposes of subsection (a).
    ``(f) Verification.--The taxpayer shall submit such information or 
certification as the Secretary, in consultation with the Secretary of 
Energy, determines necessary to claim the credit amount under 
subsection (a).
    ``(g) Termination.--This section shall not apply to qualified 
energy efficient appliances produced in calendar years beginning after 
2010.''.
    (b) Conforming Amendment.--Section 38(b) (relating to general 
business credit) is amended by striking ``plus'' at the end of 
paragraph (20), by striking the period at the end of paragraph (21) and 
inserting ``, plus'', and by adding at the end the following new 
paragraph:
            ``(22) the energy efficient appliance credit determined 
        under section 45K(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 45J the following new item:

``45K. Energy efficient appliance credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 325. CREDIT FOR DISTRIBUTED ENERGY GENERATION AND DEMAND 
              MANAGEMENT PROPERTY.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
(relating to rules for computing investment credit) is amended by 
inserting after section 48 the following:

``SEC. 48A. ENERGY CREDIT.

    ``(a) In General.--For purposes of section 46, the energy credit 
for any taxable year is the energy percentage of the basis of each 
energy property placed in service during such taxable year.
    ``(b) Energy Percentage.--
            ``(1) In general.--The energy percentage is--
                    ``(A) except as otherwise provided in this 
                subparagraph, 10 percent,
                    ``(B) in the case of energy property described in 
                clauses (ii), (iv), and (v) of subsection (c)(1)(A), 20 
                percent,
                    ``(C) in the case of energy property described in 
                subsection (c)(1)(A)(vii), 15 percent,
                    ``(D) in the case of energy property described in 
                subsection (c)(1)(A)(iii) relating to a high risk 
                geothermal well, 20 percent, and
                    ``(E) in the case of energy property described in 
                subsection (c)(1)(A)(i), 50 percent.
            ``(2) Coordination with rehabilitation.--The energy 
        percentage shall not apply to that portion of the basis of any 
        property which is attributable to qualified rehabilitation 
        expenditures as determined under section 47.
    ``(c) Energy Property Defined.--
            ``(1) In general.--For purposes of this subpart, the term 
        `energy property' means any property--
                    ``(A) which is--
                            ``(i) photovoltaic property,
                            ``(ii) other solar energy property,
                            ``(iii) geothermal energy property,
                            ``(iv) energy-efficient building property 
                        other than property described in clauses 
                        (iii)(I) and (v)(I) of subsection (d)(3)(A),
                            ``(v) combined heat and power system 
                        property,
                            ``(vi) qualified anaerobic digester 
                        property,
                            ``(vii) waste conversion property, or
                            ``(viii) adjustable speed drive property,
                    ``(B)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, or
                    ``(ii) which is acquired by the taxpayer if the 
                original use of such property commences with the 
                taxpayer,
                    ``(C) which can reasonably be expected to remain in 
                operation for at least 5 years,
                    ``(D) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable, and
                    ``(E) which meets the performance and quality 
                standards (if any) which--
                            ``(i) have been prescribed by the Secretary 
                        by regulations (after consultation with the 
                        Secretary of Energy), and
                            ``(ii) are in effect at the time of the 
                        acquisition of the property.
            ``(2) Exception for public utility property.--Such term 
        shall not include any property which is public utility property 
        (as defined in section 46(f)(5) as in effect on the day before 
        the date of the enactment of the Revenue Reconciliation Act of 
        1990), except for property described in paragraph (1)(A)(iv).
    ``(d) Limitation on Credit for Photovoltaic Property.--
            ``(1) In general.--The credit allowed under this section 
        which is attributable to photovoltaic property shall not exceed 
        the sum of--
                    ``(A) the applicable low-wattage rate multiplied by 
                the number of watts of generating capacity of the 
                property which does not exceed 10 kilowatts, plus
                    ``(B) the applicable high-wattage rate multiplied 
                by the number of watts of generating capacity of the 
                property in excess of 10 kilowatts (if any).
            ``(2) Applicable low- and high-wattage rates.--For purposes 
        of this subsection, the applicable low- and high-wattage rates 
        shall be determined under the following table:


 
                                                                                                  The applicable
   ``In the case of taxable years beginning in         The applicable low-wattage rate is:         high-wattage
                 calendar year:                                                                      rate is:
 
2006............................................  $3.00                                                   $2.00
2007............................................  $2.85                                                   $1.90
2008............................................  $2.70                                                   $1.80
2009............................................  $2.55                                                   $1.70
2010 and thereafter.............................  $2.40                                                   $1.60
 

            ``(3) Generating capacity.--For purposes of this 
        subsection, generating capacity shall be measured as the rated 
        peak power output of a system's component modules as 
        established by the American Society for Testing and Materials. 
        Any photovoltaic property which is electrically contiguous or 
        serves the same customer load shall be treated as one system 
        for purposes of this section.
    ``(e) Definitions Relating to Types of Energy Property.--For 
purposes of this section--
            ``(1) Solar energy property.--
                    ``(A) Photovoltaic property.--The term 
                `photovoltaic property' means equipment--
                            ``(i) which uses solar energy to generate 
                        electricity, and
                            ``(ii) which the taxpayer has elected (at 
                        such time and in such form and manner as the 
                        Secretary may specify) to treat as photovoltaic 
                        property for purposes of this section.
                    ``(B) Other solar energy property.--The term `other 
                solar energy property' means equipment--
                            ``(i) which uses solar energy to generate 
                        electricity, to heat or cool (or provide hot 
                        water for use in) a structure, or to provide 
                        solar process heat, and
                            ``(ii) which is not photovoltaic property.
                    ``(C) Swimming pools, etc. used as storage 
                medium.--Photovoltaic and other solar energy property 
                shall not include property with respect to which 
                expenditures are properly allocable to a swimming pool, 
                hot tub, or any other energy storage medium which has a 
                function other than the function of such storage.
                    ``(D) Solar panels.--No solar panel or other 
                property installed as a roof (or portion thereof) shall 
                fail to be treated as photovoltaic or other solar 
                energy property solely because it constitutes a 
                structural component of the structure on which it is 
                installed.
            ``(2) Geothermal energy property.--
                    ``(A) In general.--The term `geothermal energy 
                property' means equipment used to produce, distribute, 
                or use energy derived from a geothermal deposit (within 
                the meaning of section 613(e)(2)), but only, in the 
                case of electricity generated by geothermal power, up 
                to (but not including) the electrical transmission 
                stage.
                    ``(B) High risk geothermal well.--The term `high 
                risk geothermal well' means a geothermal deposit 
                (within the meaning of section 613(e)(2)) which 
                requires high risk drilling techniques. Such deposit 
                may not be located in a State or national park or in an 
                area in which the relevant State park authority or the 
                National Park Service determines the development of 
                such a deposit will negatively impact on a State or 
                national park.
            ``(3) Energy-efficient building property.--
                    ``(A) In general.--The term `energy-efficient 
                building property' means--
                            ``(i) a fuel cell which--
                                    ``(I) generates electricity using 
                                an electrochemical process,
                                    ``(II) has an electricity-only 
                                generation efficiency greater than 30 
                                percent, and
                                    ``(III) has a minimum generating 
                                capacity of 1 kilowatt,
                            ``(ii) an electric heat pump hot water 
                        heater which yields an energy factor of 2.0 or 
                        greater under test procedures prescribed by the 
                        Secretary of Energy,
                            ``(iii)(I) an electric heat pump which has 
                        a heating system performance factor (HSPF) of 
                        at least 8.5 but less than 9 and a cooling 
                        seasonal energy efficiency ratio (SEER) of at 
                        least 14 but less than 15 and an energy 
                        efficiency ratio (EER) of at least 12,
                            ``(II) an electric heat pump which has a 
                        heating system performance factor (HSPF) of 9 
                        or greater and a cooling seasonal energy 
                        efficiency ratio (SEER) of 15 or greater and an 
                        energy efficiency ratio (EER) of at least 13,
                            ``(iv) a natural gas heat pump which has a 
                        coefficient of performance of not less than 
                        1.25 for heating and not less than 0.80 for 
                        cooling,
                            ``(v)(I) a central air conditioner which 
                        has a cooling seasonal energy efficiency ratio 
                        (SEER) of at least 14 but less than 15 and an 
                        energy efficiency ratio (EER) of at least 12,
                            ``(II) a central air conditioner which has 
                        a cooling seasonal energy efficiency ratio 
                        (SEER) of 15 or greater and an energy 
                        efficiency ratio (EER) of at least 13,
                            ``(vi) an advanced natural gas water heater 
                        which--
                                    ``(I) increases steady state 
                                efficiency and reduces standby and vent 
                                losses, and
                                    ``(II) has an energy factor of at 
                                least 0.80, and
                            ``(vii) an advanced natural gas furnace 
                        which achieves a 95 percent AFUE and rated for 
                        seasonal electricity use of less than 300 kWh 
                        per year.
                    ``(B) Limitations.--The credit under subsection (a) 
                for the taxable year may not exceed--
                            ``(i) $500 in the case of property 
                        described in subparagraph (A) other than 
                        clauses (i) and (iv) thereof,
                            ``(ii) $500 for each kilowatt of capacity 
                        in the case of any fuel cell described in 
                        subparagraph (A)(i), and
                            ``(iii) $3,000 in the case of any natural 
                        gas heat pump described in subparagraph 
                        (A)(iv).
            ``(4) Combined heat and power system property.--
                    ``(A) In general.--The term `combined heat and 
                power system property' means property--
                            ``(i) comprising a system for the same 
                        energy source for the simultaneous or 
                        sequential generation of electrical power, 
                        mechanical shaft power, or both, in combination 
                        with steam, heat, or other forms of useful 
                        energy,
                            ``(ii) which has an electrical capacity of 
                        more than 20 kilowatts or a mechanical energy 
                        capacity of more than 67 horsepower or an 
                        equivalent combination of electrical and 
                        mechanical energy capacities,
                            ``(iii) which produces--
                                    ``(I) at least 20 percent of its 
                                total useful energy in the form of 
                                thermal energy, and
                                    ``(II) at least 20 percent of its 
                                total useful energy in the form of 
                                electrical or mechanical power (or a 
                                combination thereof), and
                            ``(iv) the energy efficiency percentage of 
                        which exceeds--
                                    ``(I) 60 percent in the case of a 
                                system with an electrical capacity of 
                                less than 1 megawatt,
                                    ``(II) 65 percent in the case of a 
                                system with an electrical capacity of 
                                not less than 1 megawatt and not in 
                                excess of 50 megawatts, and
                                    ``(III) 70 percent in the case of a 
                                system with an electrical capacity in 
                                excess of 50 megawatts.
                    ``(B) Special rules.--
                            ``(i) Energy efficiency percentage.--For 
                        purposes of subparagraph (A)(iv), the energy 
                        efficiency percentage of a system is the 
                        fraction--
                                    ``(I) the numerator of which is the 
                                total useful electrical, thermal, and 
                                mechanical power produced by the system 
                                at normal operating rates, and
                                    ``(II) the denominator of which is 
                                the lower heating value of the primary 
                                fuel source for the system.
                            ``(ii) Determinations made on btu basis.--
                        The energy efficiency percentage shall be 
                        determined on a Btu basis.
                            ``(iii) Input and output property not 
                        included.--The term `combined heat and power 
                        system property' does not include property used 
                        to transport the energy source to the facility 
                        or to distribute energy produced by the 
                        facility.
                            ``(iv) Accounting rule for public utility 
                        property.--If the combined heat and power 
                        system property is public utility property (as 
                        defined in section 46(f)(5) as in effect on the 
                        day before the date of the enactment of the 
                        Revenue Reconciliation Act of 1990), the 
                        taxpayer may only claim the credit under 
                        subsection (a)(1) if, with respect to such 
                        property, the taxpayer uses a normalization 
                        method of accounting.
            ``(5) Qualified anaerobic digester property.--The term 
        `qualified anaerobic digester property' means an anaerobic 
        digester for manure or crop waste which achieves at least 65 
        percent efficiency measured in terms of the fraction of energy 
        input converted to electricity and useful thermal energy.
            ``(6) Waste conversion property.--The term `waste 
        conversion property' means equipment used to produce a usable 
        liquid or gaseous synthetic fuel derived from a waste feedstock 
        (including plastic waste and biomass (as defined in section 
        29(c)).
            ``(7) Adjustable speed drive property.--
                    ``(A) In general.--The term `adjustable speed drive 
                property' means equipment installed as part of an 
                electric motor driven system of 10 horsepower or 
                greater--
                            ``(i) that is used to adjust the speed of 
                        the electric motor drive output to the 
                        requirements of a fluctuating load, and
                            ``(ii) that achieves an energy savings of 
                        at least 20 percent during a complete cycle of 
                        operation.
                    ``(B) Limitation.--In the case of adjustable speed 
                drive property placed in service during the taxable 
                year, the credit under subsection (a) for such year may 
                not exceed $10,000 for each item of such property.
                    ``(C) Coordination with deduction for energy-
                efficient commercial building property.--The energy 
                percentage shall apply to the basis of adjustable speed 
                drive property after adjustment under section 
                1016(a)(34).
    ``(f) Special Rules.--For purposes of this section--
            ``(1) Special rule for property financed by subsidized 
        energy financing or industrial development bonds.--
                    ``(A) Reduction of basis.--For purposes of applying 
                the energy percentage to any property, if such property 
                is financed in whole or in part by--
                            ``(i) subsidized energy financing, or
                            ``(ii) the proceeds of a private activity 
                        bond (within the meaning of section 141) the 
                        interest on which is exempt from tax under 
                        section 103, the amount taken into account as 
                        the basis of such property shall not exceed the 
                        amount which (but for this subparagraph) would 
                        be so taken into account multiplied by the 
                        fraction determined under subparagraph (B).
                    ``(B) Determination of fraction.--For purposes of 
                subparagraph (A), the fraction determined under this 
                subparagraph is 1 reduced by a fraction--
                            ``(i) the numerator of which is that 
                        portion of the basis of the property which is 
                        allocable to such financing or proceeds, and
                            ``(ii) the denominator of which is the 
                        basis of the property.
                    ``(C) Subsidized energy financing.--For purposes of 
                subparagraph (A), the term `subsidized energy 
                financing' means financing provided under a Federal, 
                State, or local program a principal purpose of which is 
                to provide subsidized financing for projects designed 
                to conserve or produce energy.
            ``(2) Certain progress expenditure rules made applicable.--
        Rules similar to the rules of subsections (c)(4) and (d) of 
        section 46 (as in effect on the day before the date of the 
        enactment of the Revenue Reconciliation Act of 1990) shall 
        apply for purposes of this section.
    ``(g) Application of Section.--This section shall apply to property 
placed in service after December 31, 2005, and before January 1, 
2011.''.
    (b) Conforming Amendments.--
            (1) Section 48 is repealed.
            (2) Section 280C is amended by adding after subsection (e) 
        the following:
    ``(f) Credit for Energy Property Expenses.--
            ``(1) In general.--No deduction shall be allowed for that 
        portion of the expenses for energy property (as defined in 
        section 48A(c)) otherwise allowable as a deduction for the 
        taxable year which is equal to the amount of the credit 
        determined for such taxable year under section 48A(a).
            ``(2) Similar rule where taxpayer capitalizes rather than 
        deducts expenses.--If--
                    ``(A) the amount of the credit allowable for the 
                taxable year under section 48A (determined without 
                regard to section 38(c)), exceeds
                    ``(B) the amount allowable as a deduction for the 
                taxable year for expenses for energy property 
                (determined without regard to paragraph (1)), the 
                amount chargeable to capital account for the taxable 
                year for such expenses shall be reduced by the amount 
                of such excess.
            ``(3) Controlled groups.--Paragraph (3) of subsection (b) 
        shall apply for purposes of this subsection.''.
            (3) Section 29(b)(3)(A)(i)(III) is amended by striking 
        ``section 48(a)(4)(C)'' and inserting ``section 48A(e)(1)(C)''.
            (4) Section 50(a)(2)(E) is amended by striking ``section 
        48(a)(5)'' and inserting ``section 48A(e)(2)''.
            (5) Section 168(e)(3)(B) is amended--
                    (A) by striking clause (vi)(I) and inserting the 
                following:
                                    ``(I) is described in paragraph (1) 
                                or (2) of section 48A(d) (or would be 
                                so described if `solar and wind' were 
                                substituted for `solar' in paragraph 
                                (1)(B)),'', and
                    (B) in the last sentence by striking ``section 
                48(a)(3)'' and inserting ``section 48A(c)(2)(A)''.
            (6) The table of sections for subpart E of part IV of 
        subchapter A of chapter 1 is amended by striking the item 
        relating to section 48 and inserting the following:

``Sec. 48A. Energy credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2005, 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. 326. CREDIT FOR ENERGY EFFICIENT RECYCLING OR REMANUFACTURING 
              EQUIPMENT.

    (a) In General.--Section 46 (relating to amount of investment 
credit) is amended by striking ``and'' at the end of paragraph (1), by 
striking the period at the end of paragraph (2) and inserting ``, 
and'', and by adding at the end the following new paragraph:
            ``(3) the reclamation credit.''.
    (b) Reclamation Credit.--Subpart E of part IV of subchapter A of 
chapter 1 is amended by inserting before section 48A, as added by this 
Act, the following new section:

``SEC. 48. RECLAMATION CREDIT.

    ``(a) In General.--For purposes of section 46, the reclamation 
credit for any taxable year is 20 percent of the basis of each 
qualified reclamation property placed in service during the taxable 
year.
    ``(b) Qualified Reclamation Property.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified reclamation property' means property--
                    ``(A) which is qualified recycling property or 
                qualified remanufacturing property,
                    ``(B) which is tangible property (not including a 
                building and its structural components),
                    ``(C) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable,
                    ``(D) which has a useful life of at least 5 years, 
                and
                    ``(E) which is--
                            ``(i) acquired by purchase (as defined in 
                        section 179(d)(2)) by the taxpayer if the 
                        original use of such property commences with 
                        the taxpayer, or
                            ``(ii) constructed by or for the taxpayer.
            ``(2) Dollar limitation.--
                    ``(A) In general.--The basis of qualified 
                reclamation property taken into account under paragraph 
                (1) for any taxable year shall not exceed $10,000,000 
                for a taxpayer.
                    ``(B) Treatment of controlled group.--For purposes 
                of clause (i)--
                            ``(i) all component members of a controlled 
                        group shall be treated as one taxpayer, and
                            ``(ii) the Secretary shall apportion the 
                        dollar limitation in such clause among the 
                        component members of such controlled group in 
                        such manner as he shall by regulation 
                        prescribe.
                    ``(C) Treatment of partnerships and s 
                corporations.--In the case of a partnership, the dollar 
                limitation in clause (i) shall apply with respect to 
                the partnership and with respect to each partner. A 
                similar rule shall apply in the case of an S 
                corporation and its shareholders.
                    ``(D) Controlled group defined.--For purposes of 
                clause (ii), the term `controlled group' has the 
                meaning given such term by section 1563(a), except that 
                `more than 50 percent' shall be substituted for `at 
                least 80 percent' each place it appears in section 
                1563(a)(1).
    ``(c) Certain Progress Expenditure Rules Made Applicable.--Rules 
similar to the rules of subsections (c)(4) and (d) of section 46 (as in 
effect on the day before the date of the enactment of the Revenue 
Reconciliation Act of 1990) shall apply for purposes of this 
subsection.
    ``(d) Definitions.--For purposes of this subsection--
            ``(1) Qualified recycling property.--The term `qualified 
        recycling property' means equipment used exclusively to 
        collect, distribute, or sort used ferrous or nonferrous metals. 
        The term does not include equipment used to collect, 
        distribute, or sort precious metals such as gold, silver, or 
        platinum unless such use is coincidental to the collection, 
        distribution, or sorting of other used ferrous or nonferrous 
        metals.
            ``(2) Qualified remanufacturing property.--The term 
        `qualified remanufacturing property' means equipment used 
        primarily by the taxpayer in the business of rebuilding or 
        remanufacturing a used product or part, but only if--
                    ``(A) the rebuilt or remanufactured product or part 
                includes 50 percent or less virgin material, and
                    ``(B) the equipment is not used primarily in a 
                process occurring after the product or part is rebuilt 
                or remanufactured.
            ``(3) Coordination with rehabilitation and energy 
        credits.--For purposes of this section--
                    ``(A) the basis of any qualified reclamation 
                property shall be reduced by that portion of the basis 
                of any property which is attributable to qualified 
                rehabilitation expenditures (as defined in section 
                47(c)(2)) or to the energy percentage of energy 
                property (as determined under section 48A), and
                    ``(B) expenditures taken into account under either 
                section 47 or 48A shall not be taken into account under 
                this section.''.
    (c) Special Basis Adjustment Rule.--Paragraph (3) of section 50(c) 
(relating to basis adjustment to investment credit property) is amended 
by inserting ``or reclamation credit'' after ``energy credit''.
    (d) Clerical Amendment.--The table of sections for subpart E of 
part IV of subchapter A of chapter 1 is amended by inserting before the 
item relating to section 48A the following:

``Sec. 48. Reclamation credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 327. CREDIT FOR DISTRIBUTED ENERGY GENERATION AND DEMAND 
              MANAGEMENT PROPERTY USED IN RESIDENCES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 25B the following:

``SEC. 25C. RESIDENTIAL DISTRIBUTED ENERGY GENERATION AND DEMAND 
              MANAGEMENT PROPERTY.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the sum of--
            ``(1) 50 percent of the qualified photovoltaic property 
        expenditures,
            ``(2) 15 percent of the qualified solar water heating 
        property expenditures,
            ``(3) 25 percent of the qualified wind energy property 
        expenditures, and
            ``(4) 20 percent for the qualified fuel cell property 
        expenditures,
            ``(5) 20 percent for qualified energy-efficient building 
        property expenditures (10 percent for expenditures described in 
        subsection (c)(5)(B)), made by the taxpayer during the taxable 
        year.
    ``(b) Limitations.--
            ``(1) Maximum credit.--
                    ``(A) Photovoltaic property.--
                            ``(i) In general.--The credit allowed under 
                        subsection (a)(1) shall not exceed the 
                        applicable rate multiplied by the number of 
                        watts of generating capacity of the property 
                        which does not exceed 10 kilowatts.
                            ``(ii) Applicable rate.--For purposes of 
                        this subparagraph, the applicable rate is the 
                        rate determined under the following table:


 
                                                                 The
 ``In the case of taxable years beginning in calendar year:   applicable
                                                               rate is:
 
2006.......................................................        $3.00
2007.......................................................        $2.75
2008.......................................................        $2.50
2009 and thereafter........................................        $2.25
 

                            ``(iii) Generating capacity.--For purposes 
                        of this subparagraph, generating capacity shall 
                        be measured as the rated peak power output of a 
                        system's component modules as established by 
                        the American Society for Testing and Materials. 
                        Any photovoltaic property which is electrically 
                        contiguous or serves the same customer load 
                        shall be treated as one system for purposes of 
                        this section.
                    ``(B) Solar water heating.--The credit allowed 
                under subsection (a)(2) shall not exceed $2,000 for 
                each system of solar energy property.
                    ``(C) Wind.--The credit allowed under subsection 
                (a)(3) shall not exceed $5,000 for each system of wind 
                energy property.
                    ``(D) Energy-efficient building property.--The 
                credit allowed under subsection (a)(5) shall not exceed 
                $500 for each item of energy-efficient building 
                property.
            ``(2) Type of property.--No expenditure may be taken into 
        account under this section unless such expenditure is made by 
        the taxpayer for property installed on or in connection with a 
        dwelling unit which is located in the United States and which 
        is used as a residence.
            ``(3) Safety certifications.--No credit shall be allowed 
        under this section for an item of property unless--
                    ``(A) in the case of solar water heating property, 
                such property is certified for performance and safety 
                by the nonprofit Solar Rating Certification Corporation 
                or a comparable entity endorsed by the government of 
                the State in which such property is installed, and
                    ``(B) in the case of a photovoltaic, wind energy, 
                or fuel cell property, such property meets appropriate 
                fire and electric code requirements.
    ``(c) Definitions and Special Rules Relating to Expenditures.--For 
purposes of this section--
            ``(1) Qualified photovoltaic property expenditure.--The 
        term `qualified photovoltaic property expenditure' means an 
        expenditure for property which uses solar energy to generate 
        electricity for use in a dwelling unit.
            ``(2) Qualified solar water heating property expenditure.--
        The term `qualified solar water heating property expenditure' 
        means an expenditure for property which uses solar energy to 
        heat water for use in a dwelling unit with respect to which a 
        majority of the energy is derived from the sun.
            ``(3) Qualified wind energy property expenditure.--The term 
        `qualified wind energy property expenditure' means an 
        expenditure for property which uses wind energy to generate 
        electricity for use in a dwelling unit.
            ``(4) Qualified fuel cell property expenditure.--The term 
        `qualified fuel cell property expenditure' means an expenditure 
        for property which uses an electrochemical fuel cell system to 
        generate electricity for use in a dwelling unit.
            ``(5) Qualified energy-efficient building property 
        expenditure.--
                    ``(A) In general.--The term `qualified energy-
                efficient building property expenditure' means an 
                expenditure for energy efficient building property 
                defined in clauses (ii), (iii), (iv), (v), (vi), and 
                (vii) of section 48A(d)(3)(A).
                    ``(B) 10 percent credit for certain property.--For 
                purposes of subsection (a)(5), the expenditures 
                described in this subparagraph are expenditures for 
                energy efficient building property defined in clauses 
                (iii)(II) and (iv)(II) of section 48A(d)(3)(A).
            ``(6) Solar panels.--No expenditure relating to a solar 
        panel or other property installed as a roof (or portion 
        thereof) shall fail to be treated as property described in 
        paragraph (1) or (2) solely because it constitutes a structural 
        component of the structure on which it is installed.
            ``(7) Labor costs.--Expenditures for labor costs properly 
        allocable to the onsite preparation, assembly, or original 
        installation of the property described in paragraph (1), (2), 
        (3), (4), or (5) and for piping or wiring to interconnect such 
        property to the dwelling unit shall be taken into account for 
        purposes of this section.
            ``(8) Energy storage medium.--Expenditures which are 
        properly allocable to a swimming pool, hot tub, or any other 
        energy storage medium which has a function other than the 
        function of such storage shall not be taken into account for 
        purposes of this section.
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Dollar amounts in case of joint occupancy.--In the 
        case of any dwelling unit which is jointly occupied and used 
        during any calendar year as a residence by 2 or more 
        individuals the following shall apply:
                    ``(A) The amount of the credit allowable under 
                subsection (a) by reason of expenditures (as the case 
                may be) made during such calendar year by any of such 
                individuals with respect to such dwelling unit shall be 
                determined by treating all of such individuals as 1 
                taxpayer whose taxable year is such calendar year.
                    ``(B) There shall be allowable with respect to such 
                expenditures to each of such individuals, a credit 
                under subsection (a) for the taxable year in which such 
                calendar year ends in an amount which bears the same 
                ratio to the amount determined under subparagraph (A) 
                as the amount of such expenditures made by such 
                individual during such calendar year bears to the 
                aggregate of such expenditures made by all of such 
                individuals during such calendar year.
            ``(2) Tenant-stockholder in cooperative housing 
        corporation.--In the case of an individual who is a tenant-
        stockholder (as defined in section 216) in a cooperative 
        housing corporation (as defined in such section), such 
        individual shall be treated as having made his tenant-
        stockholder's proportionate share (as defined in section 
        216(b)(3)) of any expenditures of such corporation.
            ``(3) Condominiums.--
                    ``(A) In general.--In the case of an individual who 
                is a member of a condominium management association 
                with respect to a condominium which such individual 
                owns, such individual shall be treated as having made 
                his proportionate share of any expenditures of such 
                association.
                    ``(B) Condominium management association.--For 
                purposes of this paragraph, the term `condominium 
                management association' means an organization which 
                meets the requirements of paragraph (1) of section 
                528(c) (other than subparagraph (E) thereof) with 
                respect to a condominium project substantially all of 
                the units of which are used as residences.
            ``(4) Joint ownership of items of solar or wind energy 
        property.--
                    ``(A) In general.--Any expenditure otherwise 
                qualifying as an expenditure described in paragraph 
                (1), (2), or (3) of subsection (c) shall not be treated 
                as failing to so qualify merely because such 
                expenditure was made with respect to 2 or more dwelling 
                units.
                    ``(B) Limits applied separately.--In the case of 
                any expenditure described in subparagraph (A), the 
                amount of the credit allowable under subsection (a) 
                shall (subject to paragraph (1)) be computed separately 
                with respect to the amount of the expenditure made for 
                each dwelling unit.
            ``(5) Allocation in certain cases.--If less than 80 percent 
        of the use of an item is for nonbusiness residential purposes, 
        only that portion of the expenditures for such item which is 
        properly allocable to use for nonbusiness residential purposes 
        shall be taken into account. For purposes of this paragraph, 
        use for a swimming pool shall be treated as use which is not 
        for residential purposes.
            ``(6) When expenditure made; amount of expenditure.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), an expenditure with respect to an 
                item shall be treated as made when the original 
                installation of the item is completed.
                    ``(B) Expenditures part of building construction.--
                In the case of an expenditure in connection with the 
                construction or reconstruction of a structure, such 
                expenditure shall be treated as made when the original 
                use of the constructed or reconstructed structure by 
                the taxpayer begins.
                    ``(C) Amount.--The amount of any expenditure shall 
                be the cost thereof.
            ``(7) Reduction of credit for grants, tax-exempt bonds, and 
        subsidized energy financing.--The rules of section 29(b)(3) 
        shall apply for purposes of this section.
    ``(e) Basis Adjustments.--For purposes of this subtitle, if a 
credit is allowed under this section for any expenditure with respect 
to any property, the increase in the basis of such property which would 
(but for this subsection) result from such expenditure shall be reduced 
by the amount of the credit so allowed.
    ``(f) Termination.--The credit allowed under this section shall not 
apply to taxable years beginning after December 31, 2009.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) is amended by striking ``and'' at the 
        end of paragraph (34), by striking the period at the end of 
        paragraph (35) and inserting ``; and'', and by adding at the 
        end the following:
            ``(36) to the extent provided in section 25C(e), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25C.''.
            (2) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 is amended by inserting after the 
        item relating to section 25B the following:

``Sec. 25C. Residential solar, wind, and fuel cell energy property.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenditures made after the date of the enactment of this Act, 
in taxable years ending after such date.

SEC. 328. CREDIT FOR ENERGY MANAGEMENT SYSTEMS USING RESIDENTIAL REAL 
              TIME METERING SYSTEMS.

    (a) Credit for Energy Management Systems.--
            (1) In general.--Subpart B of part IV of subchapter A of 
        chapter 1 (relating to foreign tax credits, etc.) is amended by 
        inserting after section 30C the following new section:

``SEC. 30D. CREDIT FOR ENERGY MANAGEMENT SYSTEMS.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year--
            ``(1) an amount equal to $20 for each qualified energy 
        management device originally placed in service during the 
        taxable year, and
            ``(2) for each qualified retrofitted meter originally 
        placed in service during the taxable year, an amount equal to 
        the lesser of--
                    ``(A) $20, or
                    ``(B) the adjusted basis of such meter.
    ``(b) Definitions.--
            ``(1) Qualified energy management device.--For purposes of 
        this section, the term `qualified energy management device' 
        means any meter or metering device acquired and used by an 
        electric energy or natural gas supplier or service provider to 
        enable consumers or others to manage their purchase, sale, or 
        use of electricity or natural gas in response to energy price 
        and usage signals.
            ``(2) Qualified retrofitted meter.--For purposes of this 
        section, the term `qualified retrofitted meter' means an 
        electric energy or natural gas meter or metering device that 
        has been modified by the addition of equipment designed to 
        enable users to manage the purchase, sale, or use of 
        electricity and natural gas in response to energy price and 
        usage signals.
            ``(3) Placed in service.--For purposes of this section, the 
        term `placed in service' means interconnected with other 
        devices in a manner that permits reading of energy price and 
        usage signals on at least a daily basis.
            ``(4) Cost of meters includes cost of installation.--The 
        cost of any qualified energy management device or qualified 
        retrofitted meter referred to in paragraph (1) or (2) shall 
        include the cost of the original installation of such property.
    ``(c) Special Rules.--
            ``(1) Basis reduction.--The basis of any property for which 
        a credit is allowed under subsection (a) shall be reduced by 
        the amount of such credit.
            ``(2) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit allowable 
        under subsection (a) with respect to any property that ceases 
        to be property eligible for such credit.
            ``(3) Property used outside the united states, etc., not 
        qualified.--No credit shall be allowed under subsection (a) 
        with respect to any property referred to in section 50(b)(1) or 
        with respect to the portion of the cost of any property taken 
        into account under section 179.
            ``(4) Election to not take credit.--No credit shall be 
        allowed under subsection (a) for any energy management device 
        if the taxpayer elects to not have this section apply to such 
        device.
            ``(5) Credits for certain tax exempt organizations and 
        governmental units.--
                    ``(A) Allowance of credit.--Any credit which would 
                be allowable under subsection (a) with respect to a 
                qualified energy management device or a qualified 
                retrofitted meter placed in service by an entity if 
                such entity were not exempt from tax under this chapter 
                shall be treated as a credit allowable under subpart B 
                to such entity if such entity is--
                            ``(i) an organization described in section 
                        501(c)(12)(C) and exempt from tax under section 
                        501(a),
                            ``(ii) an organization described in section 
                        1381(a)(2)(C),
                            ``(iii) an entity the income of which is 
                        excludable from gross income under section 115, 
                        or
                            ``(iv) a State, the District of Columbia, 
                        any territory or possession of the United 
                        States, or any political subdivision thereof.
                    ``(B) Use of credit.--
                            ``(i) Transfer of credit.--An entity 
                        described in subparagraph (A) may assign, 
                        trade, sell, or otherwise transfer any credit 
                        allowable to such entity under subparagraph (A) 
                        to any taxpayer.
                            ``(ii) Use of credit as an offset.--
                        Notwithstanding any other provision of law, in 
                        the case of an entity described in clause (i) 
                        or (ii) of subparagraph (A), any credit 
                        allowable to such entity under subparagraph (A) 
                        may be applied by such entity, without penalty, 
                        as a prepayment of any loan, debt, or other 
                        obligation the entity has incurred under 
                        subchapter I of chapter 31 of title 7 of the 
                        Rural Electrification Act of 1936 (7 U.S.C. 901 
                        et seq.).
                    ``(C) Credit not income.--Neither a transfer under 
                clause (i) nor a use under clause (ii) of subparagraph 
                (B) of any credit allowable under subparagraph (A) 
                shall result in income for purposes of section 
                501(c)(12).
                    ``(D) Transfer proceeds treated as arising from 
                essential government function.--Any proceeds derived by 
                an entity described in subparagraph (A)(iii) from the 
                transfer of any credit under subparagraph (B)(i) shall 
                be treated as arising from an essential government 
                function.
    ``(d) Termination.--This section shall not apply to any property 
placed in service after December 31, 2012.''.
            (2) Inclusion of indian tribal governments.--Section 
        7871(a)(7) is amended by striking ``and'' at the end of 
        subparagraph (B), by striking the period at the end of 
        subparagraph (C), and by adding at the end the following:
                    ``(D) section 30D (relating to credit for energy 
                management systems).''.
            (3) Conforming amendments.--
                    (A) The table of contents for subpart B of part IV 
                of subchapter A of chapter 1 is amended by inserting 
                after the item relating to section 30C the following 
                new item:

``Sec. 30D. Credit for energy management systems.''.
                    (B) Section 1016(a) is amended by striking ``and'' 
                at the end of paragraph (35), by striking the period at 
                the end of paragraph (36) and inserting ``, and'', and 
                by adding at the end the following new paragraph:
            ``(37) to the extent provided in section 30D(c)(1).''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to qualified energy management devices placed in 
        service after the date of the enactment of this Act and to 
        qualified retrofitted meters that are placed in service on or 
        after, or that are in use as of, January 1, 2006.
    (b) 5-Year Applicable Recovery Period for Depreciation of Qualified 
Energy Management Devices.--
            (1) In general.--Subparagraph (B) of section 168(e)(3) 
        (relating to classification of property) is amended by striking 
        ``and'' at the end of clause (v), by striking the period at the 
        end of clause (vi) and inserting ``, and'', and by adding at 
        the end the following new clause:
                            ``(vii) any qualified energy management 
                        device.''.
            (2) Definition of qualified energy management device.--
        Section 168(i) (relating to definitions and special rules) is 
        amended by inserting at the end the following new paragraph:
            ``(17) Qualified energy management device.--The term 
        `qualified energy management device' means a meter or metering 
        device that is acquired and used by an electric energy or 
        natural gas supplier or service provider to enable consumers 
        and others to manage their purchase, sale, and use of 
        electricity or natural gas in response to energy price and 
        usage signals that are readable on at least a daily basis. For 
        purposes of the preceding sentence, the cost of any qualified 
        energy management device shall (at the election of the 
        taxpayer) include the cost of the original installation of such 
        property.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to property placed in service after December 31, 
        2005, and before January 1, 2012.

SEC. 329. CREDIT FOR FLYWHEEL PROPERTY.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
(relating to foreign tax credits, etc.) is amended by inserting after 
section 30D the following new section:

``SEC. 30E. CREDIT FOR FLYWHEEL PROPERTY.

    ``(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 10 percent of the cost of any qualified flywheel property 
placed in service by the taxpayer during the taxable year.
    ``(b) Limitation.--The credit allowed under subsection (a) shall 
not exceed $2,000 for a taxable year.
    ``(c) Qualified Flywheel Property.--For purposes of this section, 
the term `qualified flywheel property' means a flywheel designed 
exclusively to store energy that is used to generate electricity.
    ``(d) 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.
            ``(2) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit allowable 
        under subsection (a) with respect to any property that ceases 
        to be property eligible for such credit.
            ``(3) Property used outside the united states, etc., not 
        qualified.--No credit shall be allowed under subsection (a) 
        with respect to any property referred to in section 50(b)(1) or 
        with respect to the portion of the cost of any property taken 
        into account under section 179.
            ``(4) Election to not take credit.--No credit shall be 
        allowed under subsection (a) for any qualified flywheel 
        property if the taxpayer elects to not have this section apply 
        to such property.
    ``(d) Termination.--This section shall not apply to any property 
placed in service after December 31, 2009.''.
    (b) Conforming Amendments.--
            (1) The table of contents for subpart B of part IV of 
        subchapter A of chapter 1 is amended by inserting after the 
        item relating to section 30D the following new item:

``Sec. 30E. Credit for qualified flywheel property.''.
            (2) Section 1016(a) is amended by striking ``and'' at the 
        end of paragraph (36), by striking the period at the end of 
        paragraph (37) and inserting ``, and'', and by adding at the 
        end the following new paragraph:
            ``(38) to the extent provided in section 30E(c)(1).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years ending after the 
date of the enactment of this Act.

SEC. 330. CREDITS FOR CLEAN COAL.

    (a) Allowance of Qualifying Clean Coal Technology Unit Credit.--
            (1) In general.--Section 46 (relating to amount of credit), 
        as amended by this Act, 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:
            ``(4) the qualifying clean coal technology unit credit.''.
            (2) Amount of qualifying clean coal technology unit 
        credit.--Subpart E of part IV of subchapter A of chapter 1 
        (relating to rules for computing investment credit) is amended 
        by inserting after section 48A the following:

``SEC. 48B. QUALIFYING CLEAN COAL TECHNOLOGY UNIT CREDIT.

    ``(a) In General.--For purposes of section 46, the qualifying clean 
coal technology unit credit for any taxable year is an amount equal to 
10 percent of the qualified investment in a qualifying system of 
continuous emission control for such taxable year.
    ``(b) Qualifying System of Continuous Emission Control.--
            ``(1) In general.--For purposes of subsection (a), the term 
        `qualifying system of continuous emission control' means a 
        system of the taxpayer which--
                    ``(A) serves, is added to, or retrofits an existing 
                coal-based electricity generation unit, the 
                construction, installation, or retrofitting of which is 
                completed by the taxpayer (but only with respect to 
                that portion of the basis which is properly 
                attributable to such construction, installation, or 
                retrofitting),
                    ``(B) removes or reduces--
                            ``(i) 90 percent or more of carbon dioxide 
                        emissions, or
                            ``(ii) any pollutant subject to the 
                        requirements of section 109 of the Clean Air 
                        Act or any hazardous pollutant listed under 
                        section 112(b) of such Act, to a greater extent 
                        than is required under such Act,
                    ``(C) is depreciable under section 167,
                    ``(D) has a useful life of not less than 4 years, 
                and
                    ``(E) is located in the United States.
            ``(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 property 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.
    ``(c) Existing Coal-Based Electricity Generation Unit.--For 
purposes of subsection (a), the term `existing coal-based electricity 
generating unit' means, with respect to any taxable year, a steam 
generator-turbine unit which uses coal to produce 75 percent or more of 
its output as electricity and was in operation before the effective 
date of this section.
    ``(d) Limit on Qualifying Clean Coal Technology Unit Credit.--For 
purposes of subsection (a), the credit shall be applicable to not more 
than the first $100,000,000 of qualifying investment in a qualifying 
system of continuous emission control at any 1 existing coal-based 
electricity generating unit.
    ``(e) Qualified Investment.--For purposes of subsection (a), the 
term `qualified investment' means, with respect to any taxable year, 
the basis of a qualifying system of continuous emission control placed 
in service by the taxpayer during such taxable year.
    ``(f) 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 (e) 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 
        system of continuous emission control 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 system of 
                continuous emission control to be taken into account.--
                Construction shall be taken into account only if, for 
                purposes of this subpart, expenditures therefore 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.
    ``(g) 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 48A is allowed 
unless the taxpayer elects to waive the application of such credit to 
such property.
    ``(h) Termination.--This section shall not apply with respect to 
any qualified investment made more than 10 years after the effective 
date of this section.''.
            (3) Recapture.--Section 50(a) (relating to other special 
        rules) is amended by adding at the end the following:
            ``(6) Special rules relating to qualifying system of 
        continuous emission control.--For purposes of applying this 
        subsection in the case of any credit allowable by reason of 
        section 48B, 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 system of continuous 
                emission control (as defined by section 48B(b)(1)) 
                multiplied by a fraction whose numerator is the number 
                of years remaining to fully depreciate under this title 
                the qualifying system of continuous emission control 
                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 
                system of continuous emission control property 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 system of continuous 
                emission control under section 48B, except that the 
                amount of the increase in tax under subparagraph (A) of 
                this paragraph shall be substituted in lieu of 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 system 
                of continuous emission control.''.
            (4) Technical amendments.--
                    (A) Section 49(a)(1)(C) 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:
                            ``(iv) the portion of the basis of any 
                        qualifying system of continuous emission 
                        control attributable to any qualified 
                        investment (as defined by section 48B(e)).''.
                    (B) Section 50(a)(4) is amended by striking ``and 
                (2)'' and inserting ``, (2), and (6)''.
                    (C) Section 50(c) is amended by adding at the end 
                the following:
            ``(6) Nonapplication.--Paragraphs (1) and (2) shall not 
        apply to any qualifying clean coal technology unit credit under 
        section 48B.''.
                    (D) The table of sections for subpart E of part IV 
                of subchapter A of chapter 1 is amended by inserting 
                after the item relating to section 48A the following:

``Sec. 48B. Qualifying clean coal technology unit credit.''.
            (5) Effective date.--The amendments made by this subsection 
        shall apply to periods after December 31, 2005, 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 
        enactment of the Revenue Reconciliation Act of 1990).
    (b) Credit for Production From a Qualifying Clean Coal Technology 
Unit.--
            (1) In general.--Subpart D of part IV of subchapter A of 
        chapter 1 (relating to business related credits) is amended by 
        adding at the end the following:

``SEC. 45L. 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 kilowatt hours of electricity produced by the 
        taxpayer during such taxable year at a qualifying clean coal 
        technology unit during the 10-year period beginning on the date 
        the unit was returned to service after retrofit, repowering, or 
        replacement.
    ``(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.
            ``(2) Inflation adjustment factor.--For calendar years 
        after 2005, 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) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualifying clean coal technology unit.--The term 
        `qualifying clean coal technology unit' means a unit of the 
        taxpayer which--
                    ``(A) is an existing coal-based electricity 
                generating steam generator-turbine unit,
                    ``(B) has a nameplate capacity rating of not more 
                than 300,000 kilowatts, and
                    ``(C) has been retrofitted, repowered, or replaced 
                with a clean coal technology within 10 years of the 
                effective date of this section.
            ``(2) Clean coal technology.--The term `clean coal 
        technology' means technology which--
                    ``(A) uses coal to produce 50 percent or more of 
                its thermal output as electricity, 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) has a design heat rate not less than 500 Btu/
                kWh below that of the existing unit before it is 
                retrofit, repowered, or replaced with the qualifying 
                clean coal technology,
                    ``(C) has a maximum design heat rate of not more 
                than 9,000 Btu/kWh when the design coal has a heat 
                content of more than 8,000 Btu per pound, and
                    ``(D) has a maximum design heat rate of not more 
                than 10,500 Btu/kWh when the design coal has a heat 
                content of 8,000 Btu per pound or less.
            ``(3) Application of certain rules.--The rules of 
        paragraphs (3), (4), and (5) of section 45(e) shall apply.
            ``(4) Inflation adjustment factor.--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 
        2005.
            ``(5) 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.
    ``(d) Coordination With Other Credits.--This section shall not 
apply to any property with respect to which the qualifying clean coal 
technology unit credit under section 48A is allowed unless the taxpayer 
elects to waive the application of such credit to such property.''.
            (2) Credit treated as business credit.--Section 38(b) is 
        amended by striking ``plus'' at the end of paragraph (21), by 
        striking the period at the end of paragraph (22) and inserting 
        ``, plus'', and by adding at the end the following:
            ``(23) the qualifying clean coal technology production 
        credit determined under section 45L(a).''.
            (3) Clerical amendment.--The table of sections for subpart 
        D of part IV of subchapter A of chapter 1 is amended after the 
        item relating to section 45K the following:

``Sec. 45L. Credit for production from a qualifying clean coal 
                            technology unit.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to production after the date of enactment of this 
        Act.
    (c) Credit for Investment in Qualifying Advanced Clean Coal 
Technology.--
            (1) Allowance of qualifying advanced clean coal technology 
        facility credit.--Section 46 (relating to amount of credit) is 
        amended by striking ``and'' at the end of paragraph (3), by 
        striking the period at the end of paragraph (4) and inserting 
        ``, and'', and by adding at the end the following:
            ``(5) the qualifying advanced clean coal technology 
        facility credit.''.
            (2) Amount of qualifying advanced clean coal technology 
        facility credit.--Subpart E of part IV of subchapter A of 
        chapter 1 (relating to rules for computing investment credit) 
        is amended by inserting after section 48B the following:

``SEC. 48C. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY FACILITY CREDIT.

    ``(a) In General.--For purposes of section 46, the qualifying 
advanced clean coal technology facility credit for any taxable year is 
an amount equal to 10 percent of the qualified investment in a 
qualifying advanced clean coal technology facility for such taxable 
year.
    ``(b) Qualifying Advanced Clean Coal Technology Facility.--
            ``(1) In general.--For purposes of subsection (a), the term 
        `qualifying advanced clean coal technology facility' means a 
        facility of the taxpayer which--
                    ``(A)(i)(I) replaces a conventional technology 
                facility of the taxpayer and the original use of which 
                commences with the taxpayer, or
                    ``(II) is a retrofitted or repowered conventional 
                technology facility, the retrofitting or repowering of 
                which is completed by the taxpayer (but only with 
                respect to that portion of the basis which is properly 
                attributable to such retrofitting or repowering), or
                    ``(ii) is acquired through purchase (as defined by 
                section 179(d)(2)),
                    ``(B) is depreciable under section 167,
                    ``(C) has a useful life of not less than 4 years,
                    ``(D) is located in the United States, and
                    ``(E) uses qualifying advanced clean coal 
                technology.
            ``(2) Special rule for sale-leasebacks.--For purposes of 
        subparagraph (A) of paragraph (1), in the case of a facility 
        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 facility was originally placed in service, for a 
                period of not less than 12 years, such facility shall 
                be treated as originally placed in service not earlier 
                than the date on which such property 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) Qualifying advanced clean coal technology.--For 
        purposes of paragraph (1)--
                    ``(A) In general.--The term `qualifying advanced 
                clean coal technology' means, with respect to clean 
                coal technology--
                                    ``(i) multiple applications, with a 
                                combined capacity of not more than 
                                5,000 megawatts, of advanced pulverized 
                                coal or atmospheric fluidized bed 
                                combustion technology--
                                            ``(I) installed as a new, 
                                        retrofit, or repowering 
                                        application,
                                            ``(II) operated between 
                                        2006 and 2015, and
                                            ``(III) with a design net 
                                        heat rate of not more than 
                                        9,500 Btu per kilowatt hour 
                                        when the design coal has a heat 
                                        content of more than 8,000 Btu 
                                        per pound, or a design net heat 
                                        rate of not more than 9,900 Btu 
                                        per kilowatt hour when the 
                                        design coal has a heat content 
                                        of 8,000 Btu per pound or less,
                            ``(ii) multiple applications, with a 
                        combined capacity of not more than 1,000 
                        megawatts, of pressurized fluidized bed 
                        combustion technology--
                                    ``(I) installed as a new, retrofit, 
                                or repowering application,
                                    ``(II) operated between 2006 and 
                                2015, and
                                    ``(III) with a design net heat rate 
                                of not more than 8,400 Btu per kilowatt 
                                hour when the design coal has a heat 
                                content of more than 8,000 Btu per 
                                pound, or a design net heat rate of not 
                                more than 9,900 Btu's per kilowatt hour 
                                when the design coal has a heat content 
                                of 8,000 Btu per pound or less,
                            ``(iii) multiple applications, with a 
                        combined capacity of not more than 2,000 
                        megawatts, of integrated gasification combined 
                        cycle technology, with or without fuel or 
                        chemical co-production--
                                    ``(I) installed as a new, retrofit, 
                                or repowering application,
                                    ``(II) operated between 2006 and 
                                2015,
                                    ``(III) with a design net heat rate 
                                of not more than 8,550 Btu per kilowatt 
                                hour when the design coal has a heat 
                                content of more than 8,000 Btu per 
                                pound, or a design net heat rate of not 
                                more than 9,900 Btu per kilowatt hour 
                                when the design coal has a heat content 
                                of 8,000 Btu per pound or less, and
                                    ``(IV) with a net thermal 
                                efficiency on any fuel or chemical co-
                                production of not less than 39 percent 
                                (higher heating value), and
                            ``(iv) multiple applications, with a 
                        combined capacity of not more than 2,000 
                        megawatts of technology for the production of 
                        electricity--
                                    ``(I) installed as a new, retrofit, 
                                or repowering application,
                                    ``(II) operated between 2006 and 
                                2015, and
                                    ``(III) with a carbon emission rate 
                                which is not more than 85 percent of 
                                conventional technology.
                    ``(B) Exceptions.--Such term shall not include 
                clean coal technology projects receiving or scheduled 
                to receive funding under the Clean Coal Technology 
                Program of the Department of Energy.
                    ``(C) Clean coal technology.--The term `clean coal 
                technology' means advanced technology which uses coal 
                to produce 75 percent or more of its thermal output as 
                electricity including advanced pulverized coal or 
                atmospheric fluidized bed combustion, pressurized 
                fluidized bed combustion, integrated gasification 
                combined cycle with or without fuel or chemical co-
                production, and any other technology for the production 
                of electricity which exceeds the performance of 
                conventional technology.
                    ``(D) Conventional technology.--The term 
                `conventional technology' means--
                            ``(i) coal-fired combustion technology with 
                        a design net heat rate of not less than 9,500 
                        Btu per kilowatt hour (HHV) and a carbon 
                        equivalents emission rate of not more than 0.54 
                        pounds of carbon per kilowatt hour when the 
                        design coal has a heat content of more than 
                        8,000 Btu per pound,
                            ``(ii) coal-fired combustion technology 
                        with a design net heat rate of not less than 
                        10,500 Btu per kilowatt hour (HHV) and a carbon 
                        equivalents emission rate of not more than 0.60 
                        pounds of carbon per kilowatt hour when the 
                        design coal has a heat content of 8,000 Btu per 
                        pound or less, or
                            ``(iii) natural gas-fired combustion 
                        technology with a design net heat rate of not 
                        less than 7,500 Btu per kilowatt hour (HHV) and 
                        a carbon equivalents emission rate of not more 
                        than 0.24 pounds of carbon per kilowatt hour.
                    ``(E) Design net heat rate.--The design net heat 
                rate shall be based on the design annual heat input to 
                and the design annual net electrical output from the 
                qualifying advanced clean coal technology (determined 
                without regard to such technology's co-generation of 
                steam).
                    ``(F) Selection criteria.--Selection criteria for 
                clean coal technology facilities--
                            ``(i) shall be established by the Secretary 
                        of Energy as part of a competitive 
                        solicitation,
                            ``(ii) shall include primary criteria of 
                        minimum design net heat rate, maximum design 
                        thermal efficiency, and lowest cost to the 
                        government, and
                            ``(iii) shall include supplemental criteria 
                        as determined appropriate by the Secretary of 
                        Energy.
    ``(c) 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 facility 
placed in service by the taxpayer during such taxable year.
    ``(d) 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 (c) without regard to 
        this section) 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 facility 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 facility to be taken into 
                account.--Construction shall be taken into account only 
                if, for purposes of this subpart, expenditures 
                therefore 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.
    ``(e) 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 48A is allowed 
unless the taxpayer elects to waive the application of such credit to 
such property.
    ``(f) Termination.--This section shall not apply with respect to 
any qualified investment made more than 10 years after the effective 
date of this section.''.
            (3) Recapture.--Section 50(a) (relating to other special 
        rules) is amended by inserting after paragraph (6) the 
        following:
            ``(7) Special rules relating to qualifying advanced clean 
        coal technology facility.--For purposes of applying this 
        subsection in the case of any credit allowable by reason of 
        section 48C, 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 facility (as defined by section 48C(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 facility 
                disposed of, and whose denominator is the total number 
                of years over which such facility would otherwise have 
                been subject to depreciation. For purposes of the 
                preceding sentence, the year of disposition of the 
                qualifying advanced clean coal technology facility 
                property 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 facility under section 48C, except that the 
                amount of the increase in tax under subparagraph (A) of 
                this paragraph shall be substituted in lieu of 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 facility.''.
            (4) Technical amendments.--
                    (A) Section 49(a)(1)(C) is amended by striking 
                ``and'' at the end of clause (iii), by striking the 
                period at the end of clause (iv) and inserting ``, 
                and'', and by adding at the end the following:
                            ``(v) the portion of the basis of any 
                        qualifying advanced clean coal technology 
                        facility attributable to any qualified 
                        investment (as defined by section 48C(c)).''.
                    (B) Section 50(a)(4) of such Code is amended by 
                striking ``and (6)'' and inserting ``(6), and (7)''.
                    (C) Section 50(c)(6) of such Code, as added by 
                section 201(e)(3), is amended by inserting ``or any 
                advanced clean coal technology facility credit under 
                section 48C'' after ``section 48B''.
                    (D) The table of sections for subpart E of part IV 
                of subchapter A of chapter 1 is amended by inserting 
                after the item relating to section 48B the following:

``Sec. 48C. Qualifying advanced clean coal technology facility 
                            credit.''.
            (5) Effective date.--The amendments made by this subsection 
        shall apply to periods after December 31, 2005, 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 
        enactment of the Revenue Reconciliation Act of 1990).
    (d) Credit for Production From Qualifying Advanced Clean Coal 
Technology.--
            (1) In general.--Subpart D of part IV of subchapter A of 
        chapter 1 (relating to business related credits) is amended by 
        inserting after section 45L the following:

``SEC. 45M. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED CLEAN COAL 
              TECHNOLOGY.

    ``(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 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 facility 
                during the 10-year period beginning on the date the 
                facility was originally placed in service.
    ``(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 facility shall be determined as follows:
            ``(1) Where the design coal has a heat content of more than 
        8,000 Btu per pound:
                    ``(A) In the case of a facility originally placed 
                in service before 2008, if--


------------------------------------------------------------------------
          ``The facility             The applicable amount is:
         design net heat  ----------------------------------------------
          rate, Btu/kWh      For 1st 5 years of      For 2d 5 years of
            (HHV) is:           such service            such service
------------------------------------------------------------------------
        Not more than      $.0050                  $.0030
         8,400.
        More than 8,400    $.0010                  $.0010
         but not more
         than 8,550.
        More than 8,550    $.0005                  $.0005.
         but less than
         8,750.
------------------------------------------------------------------------

                    ``(B) In the case of a facility originally placed 
                in service after 2007 and before 2012, if--


------------------------------------------------------------------------
          ``The facility             The applicable amount is:
         design net heat  ----------------------------------------------
          rate, Btu/kWh      For 1st 5 years of      For 2d 5 years of
            (HHV) is:           such service            such service
------------------------------------------------------------------------
        Not more than      $.0090                  $.0075
         7,770.
        More than 7,770    $.0070                  $.0050
         but not more
         than 8,125.
        More than 8,125    $.0060                  $.0040.
         but not more
         than 8,350.
------------------------------------------------------------------------

                    ``(C) In the case of a facility originally placed 
                in service after 2011 and before 2015, if--


------------------------------------------------------------------------
          ``The facility             The applicable amount is:
         design net heat  ----------------------------------------------
          rate, Btu/kWh      For 1st 5 years of      For 2d 5 years of
            (HHV) is:           such service            such service
------------------------------------------------------------------------
        Not more than      $.0120                  $.0090
         7,380.
        More than 7,380    $.0095                  $.0070.
         but not more
         than 7,720.
------------------------------------------------------------------------

            ``(2) Where the design coal has a heat content of not more 
        than 8,000 Btu per pound:
                    ``(A) In the case of a facility originally placed 
                in service before 2008, if--


------------------------------------------------------------------------
          ``The facility             The applicable amount is:
            design net    ----------------------------------------------
             thermal
         efficiency (HHV)    For 1st 5 years of      For 2d 5 years of
               is:              such service            such service
------------------------------------------------------------------------
        Not more than      $.0050                  $.0030
         8,500.
        More than 8,500    $.0010                  $.0010
         but not more
         than 8,650.
        More than 8,650    $.0005                  $.0005.
         but not more
         than 8,750.
------------------------------------------------------------------------

                    ``(B) In the case of a facility originally placed 
                in service after 2007 and before 2012, if--


------------------------------------------------------------------------
          ``The facility             The applicable amount is:
         design net heat  ----------------------------------------------
          rate, Btu/kWh      For 1st 5 years of      For 2d 5 years of
            (HHV) is:           such service            such service
------------------------------------------------------------------------
        Not more than      $.0090                  $.0075
         8,000.
        More than 8,000    $.0070                  $.0050
         but not more
         than 8,250.
        More than 8,250    $.0060                  $.0040.
         but not more
         than 8,400.
------------------------------------------------------------------------

                    ``(C) In the case of a facility originally placed 
                in service after 2011 and before 2015, if--


------------------------------------------------------------------------
           The facility              The applicable amount is:
         design net heat  ----------------------------------------------
          rate, Btu/kWh      For 1st 5 years of      For 2d 5 years of
            (HHV) is:           such service            such service
------------------------------------------------------------------------
        Not more than      $.0120                  $.0090
         7,800.
        More than 7,800    $.0095                  $.0070.
         but not more
         than 7,950.
------------------------------------------------------------------------

            ``(3) Where the clean coal technology facility is producing 
        fuel or chemicals:
                    ``(A) In the case of a facility originally placed 
                in service before 2008, if--


------------------------------------------------------------------------
          ``The facility             The applicable amount is:
            design net    ----------------------------------------------
             thermal
         efficiency (HHV)    For 1st 5 years of      For 2d 5 years of
               is:              such service            such service
------------------------------------------------------------------------
        Not less than      $.0050                  $.0030
         40.6 percent.
        Less than 40.6     $.0010                  $.0010
         but not less
         than 40 percent.
        Less than 40 but   $.0005                  $.0005.
         not less than 39
         percent.
------------------------------------------------------------------------

                    ``(B) In the case of a facility originally placed 
                in service after 2007 and before 2012, if--


------------------------------------------------------------------------
          ``The facility             The applicable amount is:
            design net    ----------------------------------------------
             thermal
         efficiency (HHV)    For 1st 5 years of      For 2d 5 years of
               is:              such service            such service
------------------------------------------------------------------------
        Not less than      $.0090                  $.0075
         43.9 percent.
        Less than 43.9     $.0070                  $.0050
         but not less
         than 42 percent.
        Less than 42 but   $.0060                  $.0040.
         not less than
         40.9 percent.
------------------------------------------------------------------------

                    ``(C) In the case of a facility originally placed 
                in service after 2011 and before 2015, if--


------------------------------------------------------------------------
          ``The facility             The applicable amount is:
            design net    ----------------------------------------------
             thermal
         efficiency (HHV)    For 1st 5 years of      For 2d 5 years of
               is:              such service            such service
------------------------------------------------------------------------
        Not less than      $.0120                  $.0090
         44.2 percent.
        Less than 44.2     $.0095                  $.0070
         but not less
         than 43.6
         percent.
------------------------------------------------------------------------

    ``(c) Inflation Adjustment Factor.--For calendar years after 2005, 
each amount in paragraphs (1), (2), and (3) 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.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) In general.--Any term used in this section which is 
        also used in section 48B shall have the meaning given such term 
        in section 48B.
            ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
        and (5) of section 45(e) shall apply.
            ``(3) Inflation adjustment factor.--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 
        2005.
            ``(4) 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.''.
            (2) Credit treated as business credit.--Section 38(b) is 
        amended by striking ``plus'' at the end of paragraph (22), by 
        striking the period at the end of paragraph (23) and inserting 
        ``, plus'', and by adding at the end the following:
            ``(24) the qualifying advanced clean coal technology 
        production credit determined under section 45M(a).''.
            (3) Clerical amendment.--The table of sections for subpart 
        D of part IV of subchapter A of chapter 1 is amended by 
        inserting after the item relating to section 45I the following:

``Sec. 45M. Credit for production from qualifying advanced clean coal 
                            technology.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to production after the date of enactment of this 
        Act.

                    Subtitle B--Long Term Incentives

SEC. 331. TAX INCENTIVES FOR RETOOLING AND INVESTMENT IN NEW FACILITIES 
              AND ASSETS TO PRODUCE ENERGY EFFICIENCY TECHNOLOGIES AND 
              DOMESTIC CLEAN ENERGY PRODUCTION TECHNOLOGIES.

    (a) Research Credit.--Section 41 (relating to credit for increasing 
research activities) is amended by adding at the end the following new 
subsection:
    ``(i) Certain Technologies.--
            ``(1) Increased credit amount.--In the case of expenses 
        relating to a technology described in paragraph (2), subsection 
        (a)(1) shall be applied by substituting `40 percent' for `20 
        percent'.
            ``(2) Technology described.--A technology described in this 
        paragraph is--
                    ``(A) a facility modified to use closed-loop 
                biomass to co-fire with coal (within the meaning of 
                section 45(d)(2)(A)(ii)),
                    ``(B) a facility which uses qualified clean energy 
                resources (as defined in section 45(c)(1)),
                    ``(C) a technology which enables a vehicle to 
                qualify for the alternative motor vehicle credit under 
                section 30B, as determined by the secretary, and which 
                is--
                            ``(i) a fuel cell described in section 
                        30B(b)(3),
                            ``(ii) a hybrid motor vehicle technology 
                        described in paragraphs (2) or (3) of section 
                        30B(c),
                            ``(iii) an alternative fuel motor vehicle 
                        described in section 30B(d)(4), or
                            ``(iv) an advanced diesel motor vehicle 
                        described in section 30B(e),
                    ``(D) a qualified energy efficient appliance (as 
                defined by section 45K(d)),
                    ``(E) energy property described in section 48A(c),
                    ``(F) property, expenditures for which a credit is 
                allowed under section 25C,
                    ``(G) qualified energy management device or 
                qualified retrofitted meter (as defined by section 
                30D(b)),
                    ``(H) qualified flywheel property (as defined by 
                section 30E(c)), and
                    ``(I) new electricity transmission lines designed 
                and built primarily to transmit electricity from rural 
                renewable energy resources which do not currently have 
                access to such transmission lines.
            ``(3) Domestic production requirement.--An expense shall be 
        treated as not described in paragraph (1) unless any research 
        qualified under this section is conducted substantially within 
        the United States.
            ``(4) Technology portion of credit refundable for small 
        businesses.--
                    ``(A) In general.--In the case of an eligible small 
                business, the portion of the credit which is 
                attributable to expenses relating to technologies 
                described in paragraph (2) and which would (but for 
                subparagraph (B)) be allowable under this section shall 
                be treated for purposes of this title as a credit 
                allowed under subpart C.
                    ``(B) No double benefit.--The amount of the credit 
                allowed under this section shall be reduced by the 
                amount of any credit treated as allowed under subpart C 
                by reason of subparagraph (A).
                    ``(C) Eligible small business.--For purposes of 
                this paragraph, a taxpayer is an eligible small 
                business for any taxable year if the average annual 
                gross receipts of the taxpayer for the 3 preceding 
                taxable years do not exceed $5,000,000. For purposes of 
                the preceding sentence, rules similar to the rules of 
                paragraphs (2) and (3) of section 448(c) shall 
                apply.''.
    (b) Investment Tax Credit for Equipment, Structures, and All Assets 
Involved in Production of Qualified Technologies.--
            (1) In general.--Section 46 (relating to amount of 
        investment credit) is amended by striking ``and'' at the end of 
        paragraph (4), by striking the period at the end of paragraph 
        (5) and inserting ``; and'', and by adding at the end the 
        following new paragraph:
            ``(6) the qualified technology credit.''.
            (2) Qualified technology credit.--Subpart E of part IV of 
        subchapter A of chapter 1 (relating to rules for computing 
        investment credit) is amended by inserting after section 48C 
        the following:

``SEC. 48D. QUALIFIED TECHNOLOGY CREDIT.

    ``(a) In General.--For purposes of section 46, the qualified 
technology credit for any taxable year is 35 percent of the basis of 
each facility placed in service in the United States during such 
taxable year which is primarily used in the production or manufacture 
of technology property described in section 41(i)(2).
    ``(b) Certain Progress Expenditure Rules Made Applicable.--Rules 
similar to the rules of subsections (c)(4) and (d) of section 46 (as in 
effect on the day before the date of the enactment of the Revenue 
Reconciliation Act of 1990) shall apply for purposes of this 
section.''.
            (3) Special basis adjustment rule.--Paragraph (3) of 
        section 50(c) (relating to basis adjustment to investment 
        credit property) is amended by striking ``or reclamation 
        credit'' and inserting ``, reclamation credit, or qualified 
        technology credit''.
            (4) Clerical amendment.--The table of sections for subpart 
        E of part IV of subchapter A of chapter 1 is amended by 
        inserting after the item relating to section 48C the following 
        new item:

``Sec. 48D. Qualified technology credit.''.
            (5) Effective date.--The amendments made by this subsection 
        shall apply to property placed in service after the date of 
        enactment of this Act.
    (c) Accelerated Depreciation.--Section 168 (relating to accelerated 
cost recovery system) is amended by adding at the end the following new 
subsection:
    ``(l) Certain Technologies.--
            ``(1) Increased additional allowance.--In the case of any 
        property located in the United States which is primarily used 
        in the production or manufacture of technology property 
        described in section 41(i)(2)--
                    ``(A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which such 
                property is placed in service shall include an 
                allowance equal to the applicable percentage of the 
                adjusted basis of such property; and
                    ``(B) the adjusted basis of such property shall be 
                reduced by the amount of such deduction before 
                computing the amount otherwise allowable as a 
                depreciation deduction under this chapter for such 
                taxable year and any subsequent taxable year.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means--
                    ``(A) 70 percent for taxable years beginning in 
                2005, 2006, or 2007;
                    ``(B) 50 percent for taxable years beginning in 
                2008 or 2009;
                    ``(C) 30 percent for taxable years beginning in 
                2010, 2011, 2012, 2013, or 2014; and
                    ``(D) zero thereafter.''.
    (d) Expensing.--Section 179 is amended by adding at the end the 
following new subsection:
    ``(e) Property Purchased for Production of Qualified Technology.--
In the case of section 179 property placed in service in the United 
States for the primary purpose of producing or manufacturing technology 
property described in section 41(i)(2), subsection (b)(1) shall be 
applied by substituting $500,000 for any dollar amount specified 
therein.''.
    (e) Exclusion for Interest on Loans for Production of Qualified 
Technology.--
            (1) In general.--Part III of subchapter B of chapter 1 is 
        amended by inserting after section 139B the following new 
        section:

``SEC. 139C. INTEREST ON LOANS FOR PRODUCTION OF QUALIFIED TECHNOLOGY.

    ``Gross income shall not include 50 percent of the interest 
received on any obligation the proceeds of which are used exclusively 
in the production in the United States of a qualified technology 
property described in section 41(i)(2).''.
            (2) Clerical amendment.--The table of sections for part III 
        of subchapter B of chapter 1 is amended by inserting after the 
        item relating to section 139B the following new item:

``Sec. 139C. Interest on loans for production of qualified 
                            technology.''.
    (f) Increased Carryovers.--Subsection (a) of section 39 is amended 
by adding at the end the following new paragraph:
            ``(3) Increased carryovers for credits relating to certain 
        technologies.--In the case of the credits allowable under 
        section 38 by reason of section 41(i) or section 46(6)--
                    ``(A) the carryback under paragraphs (1) and (2) 
                shall be 5 years in lieu of 1 year;
                    ``(B) the carryforward paragraphs (1) and (2) shall 
                be 25 years in lieu of 20 years;
                    ``(C) this paragraph shall be applied separately 
                with respect to any other carryover under this section; 
                and
                    ``(D) the determination of the amounts carried over 
                under this paragraph shall be made after this section 
                is applied after the application of subparagraph 
                (C).''.
    (g) Alternative Minimum Tax.--Subsection (a) of section 56 is 
amended by adding at the end the following new paragraph:
            ``(8) Qualified technologies.--Notwithstanding any other 
        provision of this part, no provision of this part shall apply 
        with respect to sections 41(i), 48D, 139C, 168(l), and 
        179(e).''.
    (h) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 332. SPECIAL RULES FOR AUTOMOTIVE INDUSTRY.

    (a) In General.--Chapter 77 is amended by adding at the end the 
following new section:

``SEC. 7529. SPECIAL RULES FOR AUTOMOTIVE INDUSTRY.

    ``(a) In General.--For purposes of sections 41(i), 48D, and 
39(a)(3) any vehicle for which a credit is allowed by section 30B shall 
be treated as a technology described in section 41(i)(2), except that--
            ``(1) section 41(i)(1) shall be applied by substituting `60 
        percent' for `40 percent',
            ``(2) section 48D shall be applied by substituting `50 
        percent' for `35 percent', and
            ``(3) section 39(a)(3) shall be applied by substituting `30 
        years' for `25 years' and `10 years' for `5 years'.
    ``(b) Special Rule Relating to Accelerated Depreciation.--For 
purposes of section 168(l), the applicable percentage shall be the 
percentage specified in subparagraphs (A), (B), and (C) of paragraph 
(2) thereof, increased by 10 percentage points.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:

``Sec. 7529. Special rules for automotive industry.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 333. SPECIAL RULES FOR HIGH-CAPACITY AIRPLANES.

    (a) In General.--Chapter 77 is amended by adding at the end the 
following new section:

``SEC. 7530. SPECIAL RULES FOR HIGH-CAPACITY AIRPLANES.

    ``(a) In General.--For purposes of sections 41(i), 48D, and 
39(a)(3) any high-capacity airplane shall be treated as a technology 
described in section 41(i)(2), except that--
            ``(1) section 41(i)(1) shall be applied by substituting `60 
        percent' for `40 percent';
            ``(2) section 48D shall be applied by substituting `50 
        percent' for `35 percent';
            ``(3) section 39(a)(3) shall be applied by substituting `30 
        years' for `25 years' and `8 years' for `5 years'.
    ``(b) Special Rule Relating to Accelerated Depreciation.--For 
purposes of section 168(l), the applicable percentage shall be the 
percentage specified in subparagraphs (A), (B), and (C) of paragraph 
(2) thereof, increased by 10 percentage points.
    ``(c) High-Capacity Airplane.--For purposes of this section, the 
term `high-capacity airplane' means a commercial airplane which--
            ``(1) has a passenger seating capacity of no less than 200 
        people;
            ``(2) has a range of at least 7,200 nautical miles; and
            ``(3) consumes at least 15 percent less fuel than 
        comparable airplanes.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:

``Sec. 7530. Special rules for high-capacity airplanes.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 334. NEW ELECTRICITY TRANSMISSION LINES DESIGNED PRIMARILY TO 
              CARRY ELECTRICITY FROM RENEWABLE ENERGY RESOURCES.

    The Secretary of the Treasury, in consultation with the Secretary 
of Energy, the Secretary of Commerce, and the Administrator of the 
Environmental Protection Agency, shall establish an appropriate 
investment tax credit for the construction of new electricity 
transmission lines designed primarily to carry electricity from 
renewable energy resources. Such credit shall be sufficient to 
encourage the development of promising rural renewable energy domestic 
resources that otherwise would likely not be developed.

SEC. 335. NEW ENERGY TECHNOLOGIES COMMISSION.

    (a) Establishment.--There is established a commission to be known 
as the ``New Energy Technologies Commission'' (hereafter in this 
section referred to as the ``Commission'').
    (b) Duties.--
            (1) Identify new energy technologies eligible for tax 
        incentives.--
                    (A) In general.--The Commission shall oversee--
                            (i) the identification of--
                                    (I) Apollo Approved energy 
                                efficiency technologies; and
                                    (II) Apollo Approved domestic clean 
                                energy production technologies; that 
                                the Commission finds substantially 
                                contributes to the goals of this Act 
                                and merits consideration for favorable 
                                tax incentives by Congress; and
                            (ii) the identification of criteria and 
                        standards for determining technologies eligible 
                        under clause (i) as qualifying energy 
                        efficiency standards used to determine 
                        eligibility for the investment, production, and 
                        consumption tax incentives outlined in this 
                        title.
                    (B) Matters to be considered by the commission.--In 
                developing energy efficiency standards, the Commission 
                shall--
                            (i) consult with the Environmental 
                        Protection Agency program known as ``Energy 
                        Star''; and
                            (ii) focus on technologies manufactured 
                        domestically.
            (2) Report.--Not later than one year after the date of 
        enactment of this Act, and every six months thereafter the 
        Commission shall submit to Congress a report that contains--
                    (A) a detailed statement of any technology that 
                qualifies for or merits the tax incentives in this 
                title;
                    (B) recommendations for tax incentives specifically 
                tailored to be beneficial to such technologies and any 
                standards that should be defined in statute to 
                determine eligibility for such benefits; and
                    (C) recommendations for other legislation, 
                administrative actions, and voluntary actions necessary 
                to implement such incentives.
            (3) Apollo approved energy technologies.--For purposes of 
        this section, the term ``Apollo Approved energy technologies'' 
        means any final unit product that the Commission finds 
        substantially contributes to the goals of this Act and merits 
        consideration for favorable tax incentives by Congress not 
        already included in this Act.
            (4) Apollo approved domestic clean energy production 
        technologies.--For purposes of this section, the term ``Apollo 
        Approved domestic clean energy production technologies'' means 
        any domestic energy production technology that the Commission 
        finds substantially contributes to the goals of this Act and 
        merits consideration for favorable tax incentives by Congress 
        not already included in this Act.
    (c) Membership.--
            (1) In general.--The Commission shall be comprised of 11 
        members.
            (2) Appointments by this act.--The following are hereby 
        designated as members of the Commission:
                    (A) The Secretary of the Department of Energy, the 
                Director of the Office of Energy Efficiency and 
                Renewable Energy of the Department of Energy, or the 
                Administrator of the Energy Information Administration 
                of the Department of Energy.
                    (B) The Secretary of the Department of Commerce or 
                designee.
                    (C) The Secretary of the Department of Treasury or 
                designee.
                    (D) The Director of the Environmental Protection 
                Agency or designee.
            (3) Appointments by the senate and house of 
        representatives.--7 members appointed jointly by the majority 
        leader and minority leader of the Senate and the Speaker and 
        minority leader of the House of Representatives, of whom--
                    (A) 1 shall represent consumer advocacy 
                organizations focusing on energy issues;
                    (B) 1 shall represent auto manufacturers;
                    (C) 1 shall represent the lending community;
                    (D) 1 shall represent environmental advocacy 
                organizations focusing on energy issues;
                    (E) 1 shall represent organized labor;
                    (F) 1 shall represent small business manufacturers; 
                and
                    (G) 1 shall represent the energy industry.
            (4) Date of appointments.--The appointment of a member of 
        the Commission shall be made not later than 30 days after the 
        date of enactment of this Act.
            (5) Term.--A member shall be appointed for 5 year terms.
    (d) Powers of Commission.--
            (1) Hearings and sessions.--The Commission may, for the 
        purpose of carrying out this section, hold hearings, sit and 
        act at times and places, take testimony, and receive evidence 
        to carry out its duties under subsection (b). The Commission 
        may administer oaths or affirmations to witnesses appearing 
        before it.
            (2) Powers of members and agents.--Any member or agent of 
        the Commission may, if authorized by the Commission, take any 
        action which the Commission is authorized to take by this 
        section.
            (3) Obtaining official information.--
                    (A) Requirement to furnish.--Except as provided in 
                subparagraph (B), if the Commission submits a request 
                to a Federal department or agency for information 
                necessary to enable the Commission to carry out this 
                section, the head of that department or agency shall 
                furnish that information to the Commission.
                    (B) Exception for national security.--If the head 
                of a Federal department or agency determines that it is 
                necessary to withhold requested information from 
                disclosure to protect the national security interests 
                of the United States, the department or agency head 
                shall not furnish that information to the Commission.
            (4) Mails.--The Commission may use the United States mails 
        in the same manner and under the same conditions as other 
        departments and agencies of the United States.
            (5) Administrative support services.--Upon the request of 
        the Director, the Administrator of General Services shall 
        provide to the Commission, on a reimbursable basis, the 
        administrative support services necessary for the Commission to 
        carry out this section.
            (6) Gifts and donations.--The Commission may accept, use, 
        and dispose of gifts or donations of services or property to 
        carry out this Act, but only to the extent or in the amounts 
        provided in advance in appropriation Acts.
            (7) Contracts.--The Commission may contract with and 
        compensate persons and government agencies for supplies and 
        services, without regard to section 3709 of the Revised 
        Statutes (41 U.S.C. 5).
    (e) Initial Meeting.--The Commission shall hold the initial meeting 
of the Commission not later than the earlier of--
            (1) the date that is 30 days after the date on which all 
        members of the Commission have been appointed; or
            (2) the date that is 90 days after the date of enactment of 
        this Act, regardless of whether all members have been 
        appointed.
    (f) Chairperson and Vice Chairperson.--The Commission shall select 
a Chairperson and Vice Chairperson from among the members of the 
Commission determined under subsection (c)(2).
    (g) Executive Committee.--The Commission shall have an executive 
committee comprised of any five members of the Commission.
    (h) Conflicts of Interest.--Each member appointed to the Commission 
shall submit a financial disclosure report pursuant to the Ethics in 
Government Act of 1978, notwithstanding the minimum required rate of 
compensation or time period employed.
    (i) Staff Appointment and Compensation.--The Chairperson, in 
consultation with the Vice Chairperson, in accordance with rules agreed 
upon by the Commission, may appoint and fix the compensation of a staff 
director and such other personnel as may be necessary to enable the 
Commission to carry out its functions, without regard to the provisions 
of title 5, United States Code, governing appointments in the 
competitive service, and without regard to the provisions of chapter 51 
and subchapter III of chapter 53 of such title relating to 
classification and General Schedule pay rates; except that no rate of 
pay fixed under this subsection may exceed the equivalent of that 
payable for a position at level V of the Executive Schedule under 
section 5316 of title 5, United States Code.
    (j) Personnel as Federal Employees.--
            (1) In general.--The staff director and any personnel of 
        the Commission who are employees shall be employees under 
        section 2105 of title 5, United States Code, for purposes of 
        chapters 63, 81, 83, 84, 85, 87, 89, and 90 of that title.
            (2) Members of commission.--Subparagraph (A) shall not be 
        construed to apply to members of the Commission.
    (k) Detailees.--Any Federal Government employee may be detailed to 
the Commission without reimbursement from the Commission, and such 
detailee shall retain the rights, status, and privileges of his or her 
regular employment without interruption.
    (l) Consultant Services.--The Commission is authorized to procure 
the services of experts and consultants in accordance with section 3109 
of title 5, United States Code, but at rates not to exceed the daily 
rate paid a person occupying a position at level IV of the Executive 
Schedule under section 5315 of title 5, United States Code.
    (m) Member Compensation.--Each member of the Commission specified 
in subsection (c)(3) may be compensated at a rate not to exceed the 
daily equivalent of the annual rate of basic pay in effect for a 
position at level IV of the Executive Schedule under section 5315 of 
title 5, United States Code, for each day during which that member is 
engaged in the actual performance of the duties of the Commission.
    (n) Information and Administrative Expenses.--The Federal agencies 
and members specified in subsection (c)(3) shall provide the Commission 
such information and pay such administrative and members expenses as 
the Commission requires to carry out this section, consistent with the 
requirements and guidelines of the Federal Advisory Commission Act (5 
U.S.C. App.).
    (o) Travel Expenses.--While away from their homes or regular places 
of business in the performance of services for the Commission, members 
of the Commission shall be allowed travel expenses, including per diem 
in lieu of subsistence, in the same manner as persons employed 
intermittently in the Government service are allowed expenses under 
section 5703 of title 5, United States Code.
    (p) Authorization of Appropriations.--
            (1) In general.--There is authorized to be appropriated to 
        the Commission such sums as may be necessary to carry out this 
        section.
            (2) Availability.--Amounts appropriated under paragraph (1) 
        are authorized to remain available until expended.

SEC. 336. EXPENDITURE LIMITATION.

    Not later than 6 months after the date of the enactment of this 
Act, the Secretary of the Treasury shall submit a report to the 
Congress on the tax expenditures incurred by reason of this subtitle, 
determined on both an annual basis and for the 10-year period beginning 
on January 1, 2006, together with such recommendations as the Secretary 
determines necessary or appropriate to achieve a national 10-year tax 
expenditure under this subtitle of--
            (1) $10,000,000,000 with respect to automobiles, of which 
        $7,000,000,000 shall be expended in the first 5 years of such 
        10-year period;
            (2) $1,500,000,000 with respect to airplanes, of which 
        $1,000,000,000 shall be expended in the first 5 years of such 
        10-year period, and
            (3) $10,500,000,000 with respect to all other tax 
        expenditures under this subtitle, of which--
                    (A) $6,500,000,000 shall be expended in the first 3 
                years of such 10-year period;
                    (B) $2,000,000,000 shall be expended in the fourth 
                and fifth years of such 10-year period; and
                    (C) $2,000,000,000 shall be expended over the last 
                5 years of such 10-year period.

   TITLE IV--FEDERAL GOVERNMENT LEVERAGE TO MOVE NEW TECHNOLOGIES TO 
                                 MARKET

SEC. 401. IMPROVED COORDINATION OF TECHNOLOGY TRANSFER ACTIVITIES.

    (a) Technology Transfer Coordinator.--The Secretary shall designate 
a Technology Transfer Coordinator to perform oversight of and policy 
development for technology transfer activities at the Department. The 
Technology Transfer Coordinator shall coordinate the activities of the 
Technology Transfer Working Group, and shall oversee the expenditure of 
funds allocated to the Technology Transfer Working Group, and shall 
coordinate with each technology partnership ombudsman appointed under 
section 11 of the Technology Transfer Commercialization Act of 2000 (42 
U.S.C. 7261c).
    (b) Technology Transfer Working Group.--The Secretary shall 
establish a Technology Transfer Working Group, which shall consist of 
representatives of the National Laboratories and single-purpose 
research facilities, to--
            (1) coordinate technology transfer activities occurring at 
        National Laboratories and single-purpose research facilities;
            (2) exchange information about technology transfer 
        practices, including alternative approaches to resolution of 
        disputes involving intellectual property rights and other 
        technology transfer matters; and
            (3) develop and disseminate to the public and prospective 
        technology partners information about opportunities and 
        procedures for technology transfer with the Department, 
        including those related to alternative approaches to resolution 
        of disputes involving intellectual property rights and other 
        technology transfer matters.
    (c) Technology Transfer Responsibility.--Nothing in this section 
shall affect the technology transfer responsibilities of Federal 
employees under the Stevenson-Wydler Technology Innovation Act of 1980.
    (d) Definition.--For purposes of this section, the term ``National 
Laboratory'' means any of the following laboratories owned by the 
Department:
            
                    (A) Ames National Laboratory.
                    (B) Argonne National Laboratory.
                    (C) Brookhaven National Laboratory.
                    (D) Fermi National Laboratory.
                    (E) Idaho National Engineering and Environmental 
                Laboratory.
                    (F) Lawrence Berkeley National Laboratory.
                    (G) Lawrence Livermore National Laboratory.
                    (H) Los Alamos National Laboratory.
                    (I) National Energy Technology Laboratory.
                    (J) National Renewable Energy Laboratory.
                    (K) Oak Ridge National Laboratory.
                    (L) Pacific Northwest National Laboratory.
                    (M) Princeton Plasma Physics Laboratory.
                    (N) Sandia National Laboratories.
                    (O) Thomas Jefferson National Accelerator Facility.

SEC. 402. FEDERAL SUPPORT FOR COMMERCIALIZATION OF NEW TECHNOLOGIES.

    (a) Program.--The Secretary of Energy shall establish a program of 
support, through grants, low-interest loans, and loan guarantees, for 
the commercialization, including support for pilot projects, of new--
            (1) renewable energy technologies;
            (2) technologies for energy generation from fossil fuels 
        that incorporate carbon sequestration; and
            (3) energy efficiency technologies.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary of Energy for carrying out this section 
$5,000,000,000.

SEC. 403. CLEAN ENERGY TECHNOLOGY EXPORTS PROGRAM.

    (a) Definitions.--In this section:
            (1) Interagency working group.--The term ``interagency 
        working group'' means the Interagency Working Group on Clean 
        Energy Technology Exports established under subsection (b).
            (2) United states clean energy technology.--The term 
        ``United States clean energy technology'' means an energy 
        supply or end-use technology, including a technology using 
        renewable energy sources, that--
                    (A) over its lifecycle and compared to a similar 
                technology already in commercial use in developing 
                countries, countries in transition, and other partner 
                countries--
                            (i) emits substantially lower levels of 
                        pollutants and/or greenhouse gases; and
                            (ii) may generate substantially smaller 
                        and/or less toxic volumes of solid or liquid 
                        waste; and
                    (B) consists of manufactured articles, materials, 
                and supplies produced in the United States 
                substantially all from articles, materials, or supplies 
                mined, produced, or manufactured in the United States, 
                within the meaning of the Buy American Act (41 U.S.C. 
                10a).
    (b) Interagency Working Group.--
            (1) Establishment.--Not later than 90 days after the date 
        of enactment of this section, the Secretary of Energy, the 
        Secretary of Commerce, and the Administrator of the United 
        States Agency for International Development shall jointly 
        establish a Interagency Working Group on Clean Energy 
        Technology Exports. The interagency working group will focus on 
        opening and expanding energy markets and transferring clean 
        energy technology generated in the United States to developing 
        countries, countries in transition, and other partner countries 
        that are expected to experience, over the next 20 years, the 
        most significant growth in energy production and associated 
        greenhouse gas emissions, including through technology transfer 
        programs under the Framework Convention on Climate Change, 
        other international agreements, and relevant Federal efforts.
            (2) Membership.--The interagency working group shall be 
        jointly chaired by representatives appointed by the agency 
        heads under paragraph (1) and shall also include 
        representatives from the Department of State, the Department of 
        the Treasury, the Environmental Protection Agency, the Export-
        Import Bank, the Overseas Private Investment Corporation, the 
        Trade and Development Agency, and other Federal agencies as 
        deemed appropriate by all three agency heads under paragraph 
        (1).
            (3) Duties.--The interagency working group shall--
                    (A) analyze technology, policy, and market 
                opportunities for international development, 
                demonstration, and deployment of clean energy 
                technology developed in the United States;
                    (B) investigate issues associated with building 
                capacity to deploy clean energy technology generated in 
                the United States in developing countries, countries in 
                transition, and other partner countries, including--
                            (i) energy-sector reform;
                            (ii) creation of open, transparent, and 
                        competitive markets for clean energy 
                        technologies;
                            (iii) availability of trained personnel to 
                        deploy and maintain the technology; and
                            (iv) demonstration and cost-buydown 
                        mechanisms to promote first adoption of the 
                        technology;
                    (C) examine relevant trade, tax, international, and 
                other policy issues to assess what policies would help 
                open markets and improve United States clean energy 
                technology exports in support of the following areas--
                            (i) enhancing energy innovation and 
                        cooperation, including energy sector and market 
                        reform, capacity building, and financing 
                        measures;
                            (ii) improving energy end-use efficiency 
                        technologies, including buildings and 
                        facilities, vehicle, industrial, and co-
                        generation technology initiatives; and
                            (iii) promoting energy supply technologies, 
                        including fossil, nuclear, and renewable 
                        technology initiatives;
                    (D) establish an advisory committee involving the 
                private sector and other interested groups on the 
                export and deployment of United States clean energy 
                technology;
                    (E) monitor each agency's progress towards meeting 
                goals in the 5-year strategic plan submitted to 
                Congress pursuant to the Energy and Water Development 
                Appropriations Act, 2001, and the Energy and Water 
                Development Appropriations Act, 2002;
                    (F) make recommendations to heads of appropriate 
                Federal agencies on ways to streamline Federal programs 
                and policies to improve each agency's role in the 
                international development, demonstration, and 
                deployment of United States clean energy technology;
                    (G) make assessments and recommendations regarding 
                the distinct technological, market, regional, and 
                stakeholder challenges necessary to carry out the 
                program; and
                    (H) recommend conditions and criteria that will 
                help ensure that United States funds promote sound 
                energy policies in participating countries while 
                simultaneously opening their markets and exporting 
                United States energy technology.
    (c) Federal Support for Clean Energy Technology Transfer.--
Notwithstanding any other provision of law, each Federal agency or 
Government corporation carrying out an assistance program in support of 
the activities of United States persons in the environment or energy 
sector of a developing country, country in transition, or other partner 
country shall support, to the maximum extent practicable, the transfer 
of United States clean energy technology as part of that program.
    (d) Annual Report.--Not later than 90 days after the date of the 
enactment of this Act, and on March 31 of each year thereafter, the 
Interagency Working Group shall submit a report to Congress on its 
activities during the preceding calendar year. The report shall include 
a description of the technology, policy, and market opportunities for 
international development, demonstration, and deployment of United 
States clean energy technology investigated by the Interagency Working 
Group in that year, as well as any policy recommendations to improve 
the expansion of clean energy markets and United States clean energy 
technology exports.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated to the appropriate departments, agencies, and entities of 
the United States such sums as may be necessary for each of the fiscal 
years 2006 through 2016 to support the transfer of United States clean 
energy technology, consistent with the subsidy codes of the World Trade 
Organization, as part of assistance programs carried out by those 
departments, agencies, and entities in support of activities of United 
States persons in the energy sector of a developing country, country in 
transition, or other partner country.

SEC. 404. INTERNATIONAL ENERGY TECHNOLOGY DEPLOYMENT PROGRAM.

    Section 1608 of the Energy Policy Act of 1992 (42 U.S.C. 13387) is 
amended by striking subsection (l) and inserting the following:
    ``(l) International Energy Technology Deployment Program.--
            ``(1) Definitions.--In this subsection:
                    ``(A) International energy deployment project.--The 
                term `international energy deployment project' means a 
                project to construct an energy production facility 
                outside the United States--
                            ``(i) the output of which will be consumed 
                        outside the United States; and
                            ``(ii) the deployment of which will result 
                        in a greenhouse gas reduction per unit of 
                        energy produced when compared to the technology 
                        that would otherwise be implemented--
                                    ``(I) 20 percentage points or more, 
                                in the case of a unit placed in service 
                                before January 1, 2010;
                                    ``(II) 40 percentage points or 
                                more, in the case of a unit placed in 
                                service after December 31, 2009, and 
                                before January 1, 2020; or
                                    ``(III) 60 percentage points or 
                                more, in the case of a unit placed in 
                                service after December 31, 2019, and 
                                before January 1, 2030.
                    ``(B) Qualifying international energy deployment 
                project.--The term `qualifying international energy 
                deployment project' means an international energy 
                deployment project that--
                            ``(i) is submitted by a United States firm 
                        to the Secretary in accordance with procedures 
                        established by the Secretary by regulation;
                            ``(ii) uses technology that has been 
                        successfully developed or deployed in the 
                        United States;
                            ``(iii) uses technology that consists of 
                        manufactured articles, materials, and supplies 
                        produced in the United States substantially 
                        from articles, materials, or supplies mined, 
                        produced, or manufactured in the United States, 
                        within the meaning of the Buy American Act (41 
                        U.S.C. 10a);
                            ``(iv) meets the criteria of subsection 
                        (k);
                            ``(v) is approved by the Secretary, with 
                        notice of the approval being published in the 
                        Federal Register; and
                            ``(vi) complies with such terms and 
                        conditions as the Secretary establishes by 
                        regulation.
                    ``(C) United states.--For purposes of this 
                paragraph, the term `United States', when used in a 
                geographical sense, means the 50 States, the District 
                of Columbia, Puerto Rico, Guam, the Virgin Islands, 
                American Samoa, and the Commonwealth of the Northern 
                Mariana Islands.
            ``(2) Pilot program for financial assistance.--
                    ``(A) In general.--Not later than 180 days after 
                the date of enactment of this subsection, the Secretary 
                shall, by regulation, provide for a pilot program for 
                financial assistance for qualifying international 
                energy deployment projects.
                    ``(B) Selection criteria.--After consultation with 
                the Secretary of State, the Secretary of Commerce, and 
                the United States Trade Representative, the Secretary 
                shall select projects for participation in the program 
                based solely on the criteria under this title and 
                without regard to the country in which the project is 
                located.
                    ``(C) Financial assistance.--
                            ``(i) In general.--A United States firm 
                        that undertakes a qualifying international 
                        energy deployment project that is selected to 
                        participate in the pilot program shall be 
                        eligible to receive a loan or a loan guarantee 
                        from the Secretary.
                            ``(ii) Rate of interest.--The rate of 
                        interest of any loan made under clause (i) 
                        shall be equal to the rate for Treasury 
                        obligations then issued for periods of 
                        comparable maturities.
                            ``(iii) Amount.--The amount of a loan or 
                        loan guarantee under clause (i) shall not 
                        exceed 50 percent of the total cost of the 
                        qualified international energy deployment 
                        project.
                            ``(iv) Developed countries.--Loans or loan 
                        guarantees made for projects to be located in a 
                        developed country, as listed in Annex I of the 
                        United Nations Framework Convention on Climate 
                        Change, shall require at least a 50 percent 
                        contribution towards the total cost of the loan 
                        or loan guarantee by the host country.
                            ``(v) Developing countries.--Loans or loan 
                        guarantees made for projects to be located in a 
                        developing country (those countries not listed 
                        in Annex I of the United Nations Framework 
                        Convention on Climate Change) shall require at 
                        least a 10 percent contribution towards the 
                        total cost of the loan or loan guarantee by the 
                        host country.
                            ``(vi) Capacity building research.--
                        Proposals made for projects to be located in a 
                        developing country may include a research 
                        component intended to build technological 
                        capacity within the host country. Such research 
                        must be related to the technologies being 
                        deployed and must involve both an institution 
                        in the host country and an industry, university 
                        or national laboratory participant from the 
                        United States. The host institution shall 
                        contribute at least 50 percent of funds 
                        provided for the capacity building research.
                    ``(D) Coordination with other programs.--A 
                qualifying international energy deployment project 
                funded under this section shall not be eligible as a 
                qualifying clean coal technology under section 415 of 
                the Clean Air Act (42 U.S.C. 7651n).
                    ``(E) Report.--Not later than 5 years after the 
                date of enactment of this subsection, the Secretary 
                shall submit to the President a report on the results 
                of the pilot projects.
                    ``(F) Recommendation.--Not later than 60 days after 
                receiving the report under subparagraph (E), the 
                President shall submit to Congress a recommendation, 
                based on the results of the pilot projects as reported 
                by the Secretary of Energy, concerning whether the 
                financial assistance program under this section should 
                be continued, expanded, reduced, or eliminated.
            ``(3) Authorization of appropriations.--There are 
        authorized to be appropriated to the Secretary to carry out 
        this section $500,000,000 for each of fiscal years 2006 through 
        2016, to remain available until expended.''.

SEC. 405. RISK POOL FOR QUALIFYING ADVANCED CLEAN ENERGY TECHNOLOGY.

    (a) Establishment.--The Secretary of the Treasury shall establish a 
financial risk pool which shall be available to any United States owner 
or developer of a technology that the Secretary determines will help 
achieve the goals stated in section 102 of this Act (whether or not 
such owner or developer receives any loan guaranteed under section 
731), to offset for the first 3 years of the operation of such 
technology the costs (not to exceed 5 percent of the total cost of 
installation) for modifications resulting from the technology's failure 
to achieve its design performance.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated $4,500,000,000 to carry out the purposes of this section.

SEC. 406. FEDERAL RENEWABLE AND CLEAN ENERGY USE.

    (a) In General.--The President shall take measures necessary to 
ensure that, within 10 years after the date of the enactment of this 
Act, at least 20 percent of the electricity consumed by nondefense 
related activities of the Federal Government shall be generated from 
renewable sources or zero-emission fossil fuel energy sources.
    (b) Solar Panels and Photovoltaics.--The requirement in subsection 
(a) may be achieved through the purchase and installation of solar 
panels or photovoltaics on executive agency properties.

SEC. 407. REQUIRE THE EXPORT-IMPORT BANK OF THE UNITED STATES TO MEET 
              RENEWABLE ENERGY TARGETS IN ITS LENDING PRACTICES.

    (a) Allocation of Assistance Among Energy Projects.--Of the total 
amount available to the Export-Import Bank of the United States for the 
extension of credit for transactions related to energy projects, the 
Bank shall, not later than the beginning of fiscal year 2008, use--
            (1) not more than 85 percent for transactions related to 
        fossil fuel projects; and
            (2) not less than 15 percent for transactions related to 
        renewable energy and energy efficiency projects.
    (b) Renewable Energy and Technology Commission.--
            (1) Establishment.--Within 1 year after the date of the 
        enactment of this Act, the Export-Import Bank of the United 
        States (in this subsection referred to as the ``Bank'') shall 
        establish a commission which shall be known as the ``Renewable 
        Energy and Technology Commission'' (in this subsection referred 
        to as the ``Commission'').
            (2) Function.--The Commission shall help the Bank achieve 
        the percentage goal set forth in subsection (a)(2) by the 
        beginning of fiscal year 2008, by proactively assisting the 
        Bank in identifying new opportunities for renewable energy and 
        energy efficiency financing.
            (3) Composition.--The Commission shall be composed of--
                    (A) 6 representatives selected by companies 
                involved in renewable energy and energy efficiency 
                technology;
                    (B) 2 representatives selected by environmental 
                organizations;
                    (C) 2 members of the academic community who are 
                knowledgeable about renewable energy; and
                    (D) representatives of the Bank.
            (4) Reports.--The Commission shall submit annually to the 
        Committee on Resources and the Committee on Financial Services 
        of the House of Representatives and the Committee on Banking, 
        Housing, and Urban Affairs of the Senate a report that contains 
        the following information for the fiscal year covered by the 
        report:
                    (A) A detailed description of the activities of the 
                Commission.
                    (B) Any recommendations made by the Commission that 
                were adopted by the Bank.
                    (C) An analysis comparing the level of credit 
                extended by the Bank for renewable energy and energy 
                efficiency projects with the level of credit so 
                extended for the preceding fiscal year.
    (c) Definition of Renewable Energy and Energy Efficiency 
Projects.--In this section, the term ``renewable energy and energy 
efficiency projects'' means projects related to solar, wind, biomass, 
or geothermal energy sources.

SEC. 408. GRANTS FOR TRANSIT PROGRAMS.

    (a) In General.--The Secretary of Transportation shall award grants 
to a State or local governmental authority to improve mass 
transportation programs, including capital projects.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section $1,500,000,000 for each of 10 
fiscal years beginning with the first fiscal year after the date of 
enactment of this Act.
    (c) Labor Standards.--The Secretary of Transportation shall not 
provide a grant under this section unless the Secretary receives 
reasonable assurances from a State that laborers and mechanics employed 
by contractors or subcontractors in the performance of construction or 
modernization on the a transit project will be paid wages not less than 
those prevailing on similar construction or modernization in the 
locality as determined by the Secretary of Labor under the Act of March 
3, 1931 (known as the Davis-Bacon Act) (40 U.S.C. 276a et seq.).
    (d) Definitions.--
            (1) General definitions.--For purposes of this section, the 
        terms ``capital project'', ``local governmental authority'', 
        and ``mass transportation'' have the same meanings such terms 
        have in section 5302 of title 49, United States Code.
            (2) State defined.--For purposes of this section, the term 
        ``State'' means a State of the United States, the District of 
        Columbia, Puerto Rico, the Northern Mariana Islands, Guam, 
        American Samoa, and the United States Virgin Islands.

SEC. 409. GRANTS FOR WATER AND SEWER IMPROVEMENT PROGRAMS.

    (a) In General.--The Secretary of Transportation shall award grants 
to a State or local governmental authority to improve water and sewer 
systems by increasing energy efficiency in such systems by not less 
than 25 percent.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section $1,000,000,000 for each of 10 
fiscal years beginning with the first fiscal year after the date of 
enactment of this Act.
    (c) Labor Standards.--The Secretary of Transportation shall not 
provide a grant under this section unless the Secretary receives 
reasonable assurances from a State that laborers and mechanics employed 
by contractors or subcontractors in the performance of construction or 
modernization on a water or sewer system improvement project will be 
paid wages not less than those prevailing on similar construction or 
modernization in the locality as determined by the Secretary of Labor 
under the Act of March 3, 1931 (known as the Davis-Bacon Act) (40 
U.S.C. 276a et seq.).
    (d) Definitions.--
            (1) General definitions.--For purposes of this section, the 
        terms ``capital project'', ``local governmental authority'', 
        and ``mass transportation'' have the same meanings such terms 
        have in section 5302 of title 49, United States Code.
            (2) State defined.--For purposes of this section, the term 
        ``State'' means a State of the United States, the District of 
        Columbia, Puerto Rico, the Northern Mariana Islands, Guam, 
        American Samoa, and the United States Virgin Islands.

SEC. 410. LOANS FOR HIGH-EFFICIENCY VEHICLES.

    (a) Loan Program Authorized.--Subject to the availability of 
appropriations, the Secretary of Transportation shall establish a 
program to offer federally financed, interest-free loans to local 
educational agencies, public institutions of higher education, 
municipalities, and local governments for the purchase of hybrid 
electric vehicles or high-efficiency vehicles.
    (b) Repayment Term.--The time for repayment of a loan under this 
section may not exceed 5 years.
    (c) Security Interest.--The Secretary shall require, as a condition 
of a loan under this section, that the borrower grant to the United 
States a security interest in any vehicle purchased with the proceeds 
of such loan.
    (d) Definitions.--In this section:
            (1) The term ``high-efficiency vehicle'' means a motor 
        vehicle the fuel economy of which is rated at not less than 40 
        miles per gallon.
            (2) The term ``hybrid electric vehicle'' means a motor 
        vehicle with a fuel-efficient gasoline engine assisted by an 
        electric motor.
            (3) The term ``motor vehicle'' has the meaning given that 
        term in section 30102(a)(6) of title 49, United States Code.
            (4) The term ``local educational agency'' has the meaning 
        given that term in the Elementary and Secondary Education Act 
        of 1965 (20 U.S.C. 6301 et seq.).
            (5) The term ``public institution of higher education'' has 
        the meaning given the term ``institution of higher education'' 
        in section 101(a) of the Higher Education Act of 1965 (20 
        U.S.C. 1001(a)), but does not include private institutions 
        described in that section.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section $50,000,000 for each of fiscal 
years 2006 through 2011 and such sums as may be necessary for each 
fiscal year thereafter.

SEC. 411. REQUIREMENT REGARDING PURCHASE OF MOTOR VEHICLES BY EXECUTIVE 
              AGENCIES.

    (a) In General.--At least ten percent of the motor vehicles 
purchased by an Executive agency in any fiscal year shall be comprised 
of high-efficiency vehicles or hybrid electric vehicles.
    (b) Definitions.--In this Act:
            (1) The term ``Executive agency'' has the meaning given 
        that term in section 105 of title 5, United States Code, but 
        also includes Amtrak, the Smithsonian Institution, and the 
        United States Postal Service.
            (2) The term ``high-efficiency vehicle'' means a motor 
        vehicle the fuel economy of which is rated at not less than 40 
        miles per gallon.
            (3) The term ``hybrid electric vehicle'' means a motor 
        vehicle with a fuel-efficient gasoline engine assisted by an 
        electric motor.
            (4) The term ``motor vehicle'' has the meaning given that 
        term in section 102(7) of title 40, United States Code.
    (c) Pro-Rated Applicability in Year of Enactment.--In the fiscal 
year in which this Act is enacted, the requirement in subsection (a) 
shall only apply with respect to motor vehicles purchased after the 
date of the enactment of this Act in such fiscal year.

SEC. 412. FEDERAL ENERGY EFFICIENCY.

    The President shall take measures necessary to ensure that 
electricity consumption for nondefense related activities of the 
Federal Government shall be decreased by 35 percent by 2015.

SEC. 413. FEDERAL AGENCY ETHANOL-BLENDED GASOLINE AND BIODIESEL 
              PURCHASING REQUIREMENT.

    Title III of the Energy Policy Act of 1992 is amended by striking 
section 306 (42 U.S.C. 13215) and inserting the following:

``SEC. 306. FEDERAL AGENCY ETHANOL-BLENDED GASOLINE AND BIODIESEL 
              PURCHASING REQUIREMENT.

    ``(a) Ethanol-Blended Gasoline.--The head of each Federal agency 
shall ensure that, in areas in which ethanol-blended gasoline is 
reasonably available at a generally competitive price, the Federal 
agency purchases ethanol-blended gasoline containing at least 85 
percent ethanol rather than nonethanol-blended gasoline, for use in 
vehicles used by the agency that use gasoline. If 85 percent ethanol-
blended gasoline is not reasonably available, then each agency shall 
purchase ethanol-blended gasoline containing at least 10 percent 
ethanol in areas in which ethanol-blended gasoline is reasonably 
available at a generally competitive price.
    ``(b) Biodiesel.--
            ``(1) Definition of biodiesel.--In this subsection, the 
        term `biodiesel' has the meaning given the term in section 
        312(f).
            ``(2) Requirement.--The head of each Federal agency shall 
        ensure that the Federal agency purchases, for use in fueling 
        fleet vehicles that use diesel fuel used by the Federal agency 
        at the location at which fleet vehicles of the Federal agency 
        are centrally fueled, in areas in which the biodiesel-blended 
        diesel fuel described in subparagraphs (A) and (B) is available 
        at a generally competitive price--
                    ``(A) as of the date that is 5 years after the date 
                of enactment of this paragraph, biodiesel-blended 
                diesel fuel that contains at least 2 percent biodiesel, 
                rather than nonbiodiesel-blended diesel fuel; and
                    ``(B) as of the date that is 10 years after the 
                date of enactment of this paragraph, biodiesel-blended 
                diesel fuel that contains at least 20 percent 
                biodiesel, rather than nonbiodiesel-blended diesel 
                fuel.
            ``(3) Requirement of federal law.--The provisions of this 
        subsection shall not be considered a requirement of Federal law 
        for the purposes of section 312.
    ``(c) Exemption.--This section does not apply to fuel used in 
vehicles excluded from the definition of `fleet' by subparagraphs (A) 
through (H) of section 301(9).''.

SEC. 414. PERMITTING OF WIND ENERGY DEVELOPMENT PROJECTS ON PUBLIC 
              LANDS.

    (a) Required Policies and Procedures.--The Secretary of the 
Interior shall process right-of-way applications for wind energy site 
testing and monitoring facilities on public lands administered by the 
Bureau of Land Management in accordance with policies and procedures 
that are substantially the same as those set forth in Bureau of Land 
Management Instruction Memorandum No. 9 2003-020, dated October 16, 
2002.
    (b) Limitation on Rent and Other Charges.--
            (1) In general.--The Secretary of the Interior may not 
        impose rent and other charges with respect to any wind energy 
        development project on public lands that, in the aggregate, 
        exceed 50 percent of the maximum amount of rent that could be 
        charged with respect to that project under the terms of the 
        Bureau of Land Management Instruction Memorandum referred to in 
        subsection (a).
            (2) Termination.--Paragraph (1) shall not apply after the 
        earlier of--
                    (A) the date on which the Secretary of the Interior 
                determines there exists at least 10,000 megawatts of 
                electricity generating capacity from nonhydropower 
                renewable energy resources on public lands; or
                    (B) the end of the 10-year period beginning on the 
                date of the enactment of this Act.
            (3) State share not affected.--This subsection shall not 
        affect any State share of rent and other charges with respect 
        to any wind energy development project on public lands.

SEC. 415. ENERGY SAVINGS PERFORMANCE CONTRACTS.

    (a) Permanent Extension.--Section 801(c) of the National Energy 
Conservation Policy Act (42 U.S.C. 8287(c)) is repealed.
    (b) Payment of Costs.--Section 802 of the National Energy 
Conservation Policy Act (42 U.S.C. 8287a) is amended by inserting ``, 
water, or wastewater treatment'' after ``payment of energy''.
    (c) Energy Savings.--Section 804(2) of the National Energy 
Conservation Policy Act (42 U.S.C. 8287c(2)) is amended to read as 
follows:
            ``(2) The term `energy savings' means a reduction in the 
        cost of energy, water, or wastewater treatment, from a base 
        cost established through a methodology set forth in the 
        contract, used in an existing federally owned building or 
        buildings or other federally owned facilities as a result of--
                    ``(A) the lease or purchase of operating equipment, 
                improvements, altered operation and maintenance, or 
                technical services;
                    ``(B) the increased efficient use of existing 
                energy sources by cogeneration or heat recovery, 
                excluding any cogeneration process for other than a 
                federally owned building or buildings or other 
                federally owned facilities; or
                    ``(C) the increased efficient use of existing water 
                sources in either interior or exterior applications.''.
    (d) Energy Savings Contract.--Section 804(3) of the National Energy 
Conservation Policy Act (42 U.S.C. 8287c(3)) is amended to read as 
follows:
            ``(3) The terms `energy savings contract' and `energy 
        savings performance contract' mean a contract that provides for 
        the performance of services for the design, acquisition, 
        installation, testing, and, where appropriate, operation, 
        maintenance, and repair, of an identified energy or water 
        conservation measure or series of measures at 1 or more 
        locations. Such contracts shall, with respect to an agency 
        facility that is a public building (as such term is defined in 
        section 3301 of title 40, United States Code), be in compliance 
        with the prospectus requirements and procedures of section 3307 
        of title 40, United States Code.''.
    (e) Energy or Water Conservation Measure.--Section 804(4) of the 
National Energy Conservation Policy Act (42 U.S.C. 8287c(4)) is amended 
to read as follows:
            ``(4) The term `energy or water conservation measure' 
        means--
                    ``(A) an energy conservation measure, as defined in 
                section 551; or
                    ``(B) a water conservation measure that improves 
                the efficiency of water use, is life-cycle cost-
                effective, and involves water conservation, water 
                recycling or reuse, more efficient treatment of 
                wastewater or stormwater, improvements in operation or 
                maintenance efficiencies, retrofit activities, or other 
                related activities, not at a Federal hydroelectric 
                facility.''.
    (f) Review.--Not later than 180 days after the date of the 
enactment of this Act, the Secretary of Energy shall complete a review 
of the Energy Savings Performance Contract program to identify 
statutory, regulatory, and administrative obstacles that prevent 
Federal agencies from fully utilizing the program. In addition, this 
review shall identify all areas for increasing program flexibility and 
effectiveness, including audit and measurement verification 
requirements, accounting for energy use in determining savings, 
contracting requirements, including the identification of additional 
qualified contractors, and energy efficiency services covered. The 
Secretary shall report these findings to Congress and shall implement 
identified administrative and regulatory changes to increase program 
flexibility and effectiveness to the extent that such changes are 
consistent with statutory authority.

SEC. 416. MUNICIPALITY GRANTS FOR DISTRIBUTED ENERGY PLANS.

    (a) Program.--The Secretary of Energy shall award grants to 
municipalities or tribes to facilitate the promulgation of distributed 
energy implementation plans.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary of Energy for carrying out this section 
$100,000,000.

SEC. 417. GREEN BUILDING STANDARDS FOR FEDERAL BUILDINGS.

    (a) Requirement.--A Federal building for which the design phase for 
construction or major renovation is begun after the date of enactment 
of this Act shall be designed, constructed, and certified to meet, at a 
minimum, the LEED silver standard.
    (b) Exceptions.--Subsection (a) shall not apply to Federal 
laboratories or defense facilities, or to a building of a type for 
which no LEED silver standard exists.
    (c) Study.--Not later than 1 year after the date of enactment of 
this Act, the Secretary of Energy shall transmit to Congress the 
results of a study comparing the expected energy savings resulting from 
the implementation of this section with energy savings under all other 
Federal energy savings requirements. The Secretary shall include any 
recommendations for changes to Federal law necessary to reduce or 
eliminate duplicative or inconsistent Federal energy savings 
requirements.
    (d) Definition.--For purposes of this section, the term ``LEED 
silver standard'' means the Leadership in Energy and Environmental 
Design green building rating standard identified as silver by the 
United States Green Building Council.

              TITLE V--CONSUMER PROTECTION AND ASSISTANCE

SEC. 501. STRATEGIC PETROLEUM RESERVE.

    (a) Full Capacity.--The President shall--
            (1) fill the Strategic Petroleum Reserve established 
        pursuant to part B of title I of the Energy Policy and 
        Conservation Act (42 U.S.C. 6231 et seq.) to full capacity as 
        soon as practicable; and
            (2) ensure that the fill rate minimizes impacts on 
        petroleum markets.
    (b) Recommendations.--Not later than 180 days after the date of 
enactment of this Act, the Secretary of Energy shall submit to Congress 
a plan to--
            (1) eliminate any infrastructure impediments that may limit 
        maximum drawdown capability; and
            (2) determine whether the capacity of the Strategic 
        Petroleum Reserve on the date of enactment of this section is 
        adequate in light of the increasing consumption of petroleum 
        and the reliance on imported petroleum.

SEC. 502. REGULATORY OVERSIGHT OVER ENERGY TRADING MARKETS AND METALS 
              TRADING MARKETS.

    (a) Jurisdiction of the Commodity Futures Trading Commission Over 
Energy Trading Markets and Metals Trading Markets.--
            (1) FERC liaison.--Section 2(a)(8) of the Commodity 
        Exchange Act (7 U.S.C. 2(a)(8)) is amended by adding at the end 
        the following:
            ``(C) FERC liaison.--The Commission shall, in cooperation 
        with the Federal Energy Regulatory Commission, maintain a 
        liaison between the Commission and the Federal Energy 
        Regulatory Commission.''.
            (2) Exempt transactions.--Section 2 of the Commodity 
        Exchange Act (7 U.S.C. 2) is amended--
                    (A) in subsection (h), by adding at the end the 
                following:
            ``(7) Applicability.--This subsection does not apply to an 
        agreement, contract, or transaction in an exempt energy 
        commodity or an exempt metal commodity described in subsection 
        (j)(1).''; and
                    (B) by adding at the end the following:
    ``(j) Exempt Transactions.--
            ``(1) Transactions in exempt energy commodities and exempt 
        metals commodities.--An agreement, contract, or transaction 
        (including a transaction described in section 2(g)) in an 
        exempt energy commodity or exempt metal commodity shall be 
        subject to--
                    ``(A) sections 4b, 4c(a), 4c(b), 4o, and 5b;
                    ``(B) subsections (c) and (d) of section 6 and 
                sections 6c, 6d, and 8a, to the extent that those 
                provisions--
                            ``(i) provide for the enforcement of the 
                        requirements specified in this subsection; and
                            ``(ii) prohibit the manipulation of the 
                        market price of any commodity in interstate 
                        commerce or for future delivery on or subject 
                        to the rules of any contract market;
                    ``(C) sections 6c, 6d, 8a, and 9(a)(2), to the 
                extent that those provisions prohibit the manipulation 
                of the market price of any commodity in interstate 
                commerce or for future delivery on or subject to the 
                rules of any contract market;
                    ``(D) section 12(e)(2); and
                    ``(E) section 22(a)(4).
            ``(2) Bilateral dealer markets.--
                    ``(A) In general.--Except as provided in paragraph 
                (6), a person or group of persons that constitutes, 
                maintains, administers, or provides a physical or 
                electronic facility or system in which a person has the 
                ability to offer, execute, trade, or confirm the 
                execution of an agreement, contract, or transaction 
                (including a transaction described in section 2(g)) 
                (other than an agreement, contract, or transaction in 
                an excluded commodity) by making or accepting the bids 
                and offers of 1 or more participants on the facility or 
                system (including facilities or systems described in 
                clauses (i) and (iii) of section 1a(33)(B)), the person 
                or group of persons, and the facility or system 
                (referred to in this subsection as a `bilateral dealer 
                market') may offer to enter into, enter into, or 
                confirm the execution of any agreement, contract, or 
                transaction under paragraph (1) (other than an 
                agreement, contract, or transaction in an excluded 
                commodity) if the bilateral dealer market meets the 
                requirement of subparagraph (B).
                    ``(B) Requirement.--The requirement of this 
                subparagraph is that a bilateral dealer market shall--
                            ``(i) provide notice to the Commission in 
                        such form as the Commission may specify by rule 
                        or regulation;
                            ``(ii) file with the Commission any reports 
                        (including large trader position reports) that 
                        the Commission requires by rule or regulation;
                            ``(iii)(I) consistent with section 4i, 
                        maintain books and records relating to each 
                        transaction in such form as the Commission may 
                        specify for a period of 5 years after the date 
                        of the transaction; and
                            ``(II) make those books and records 
                        available to representatives of the Commission 
                        and the Department of Justice for inspection 
                        for a period of 5 years after the date of each 
                        transaction; and
                            ``(iv) make available to the public on a 
                        daily basis such information as total volume by 
                        commodity, settlement price, open interest, 
                        opening and closing ranges, and any other 
                        information that the Commission determines to 
                        be appropriate for public disclosure, except 
                        that the Commission may not--
                                    ``(I) require the real-time 
                                publication of proprietary information; 
                                or
                                    ``(II) prohibit the commercial sale 
                                of real-time proprietary information.
            ``(3) Reporting requirements.--On request of the 
        Commission, an eligible contract participant that trades on a 
        bilateral dealer market shall provide to the Commission, within 
        the time period specified in the request and in such form and 
        manner as the Commission may specify, any information relating 
        to the transactions of the eligible contract participant on the 
        bilateral dealer market within 5 years after the date of any 
        transaction that the Commission determines to be appropriate.
            ``(4) Capital requirements.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a bilateral dealer market shall adopt 
                a value-at-risk model approved by the Commission.
                    ``(B) Capital commensurate with risk.--If there is 
                an interaction of multiple bids and multiple offers on 
                the bilateral dealer market in a predetermined, 
                nondiscretionary automated trade matching and trade 
                execution algorithm or bids and offers and acceptances 
                of bids and offers made on the bilateral dealer market 
                are binding, a bilateral dealer market shall maintain 
                sufficient capital commensurate with the risk 
                associated with transactions on the bilateral dealer 
                market, as determined by the Commission.
            ``(5) Transactions exempted by commission action.--Any 
        agreement, contract, or transaction on a bilateral dealer 
        market (other than an agreement, contract, or transaction in an 
        excluded commodity) that would otherwise be exempted by the 
        Commission under section 4(c) shall be subject to--
                    ``(A) sections 4b, 4c(a), 4c(b), 4o, and 5b; and
                    ``(B) subsections (c) and (d) of section 6 and 
                sections 6c, 6d, 8a, and 9(a)(2), to the extent that 
                those provisions prohibit the manipulation of the 
                market price of any commodity in interstate commerce or 
                for future delivery on or subject to the rules of any 
                contract market.
            ``(6) No effect on other ferc authority.--This subsection 
        does not affect the authority of the Federal Energy Regulatory 
        Commission to regulate transactions under the Federal Power Act 
        (16 U.S.C. 791a et seq.) or the Natural Gas Act (15 U.S.C 717 
        et seq.).
            ``(7) Applicability.--This subsection does not apply to--
                    ``(A) a designated contract market regulated under 
                section 5; or
                    ``(B) a registered derivatives transaction 
                execution facility regulated under section 5a.''.
            (3) Contracts designed to defraud or mislead.--Section 4b 
        of the Commodity Exchange Act (7 U.S.C. 6b) is amended by 
        striking subsection (a) and inserting the following:
    ``(a) Prohibition.--It shall be unlawful for any member of a 
registered entity, or for any correspondent, agent, or employee of any 
member, in or in connection with any order to make, or the making of, 
any contract of sale of any commodity in interstate commerce, made, or 
to be made on or subject to the rules of any registered entity, or for 
any person, in or in connection with any order to make, or the making 
of, any agreement, transaction, or contract in a commodity subject to 
this Act--
            ``(1) to cheat or defraud or attempt to cheat or defraud 
        any person;
            ``(2) willfully to make or cause to be made to any person 
        any false report or statement, or willfully to enter or cause 
        to be entered any false record;
            ``(3) willfully to deceive or attempt to deceive any person 
        by any means; or
            ``(4) to bucket the order, or to fill the order by offset 
        against the order of any person, or willfully, knowingly, and 
        without the prior consent of any person to become the buyer in 
        respect to any selling order of any person, or to become the 
        seller in respect to any buying order of any person.''.
            (4) Conforming amendments.--The Commodity Exchange Act is 
        amended--
                    (A) in section 2 (7 U.S.C. 2)--
                            (i) in subsection (h)--
                                    (I) in paragraph (1), by striking 
                                ``paragraph (2)'' and inserting 
                                ``paragraphs (2) and (7)''; and
                                    (II) in paragraph (3), by striking 
                                ``paragraph (4)'' and inserting 
                                ``paragraphs (4) and (7)''; and
                            (ii) in subsection (i)(1)(A), by striking 
                        ``section 2(h) or 4(c)'' and inserting 
                        ``section 2(h), 2(j), or 4(c)'';
                    (B) in section 4i (7 U.S.C. 6i)--
                            (i) by striking ``any contract market or'' 
                        and inserting ``any contract market,''; and
                            (ii) by inserting ``, or pursuant to an 
                        exemption under section 4(c)'' after 
                        ``transaction execution facility'';
                    (C) in section 5a(g)(1) (7 U.S.C. 7a(g)(1)), by 
                striking ``2(h)'' and inserting ``2(h) or 2(j)'';
                    (D) in section 5b (7 U.S.C. 7a-1)--
                            (i) in subsection (a)(1), by striking 
                        ``2(h) or'' and inserting ``2(h), 2(j), or''; 
                        and
                            (ii) in subsection (b), by striking ``2(h) 
                        or'' and inserting ``2(h), 2(j), or''; and
                    (E) in section 12(e)(2)(B) (7 U.S.C. 16(e)(2)(B)), 
                by striking ``2(h)'' and inserting ``2(h), 2(j),''.
    (b) Jurisdiction of the Federal Energy Regulatory Commission Over 
Energy Trading Markets.--Section 402 of the Department of Energy 
Organization Act (42 U.S.C. 7172) is amended by adding at the end the 
following:
    ``(i) Jurisdiction Over Derivatives Transactions.--
            ``(1) In general.--To the extent that the Commission 
        determines that any contract that comes before the Commission 
        is not under the jurisdiction of the Commission, the Commission 
        shall refer the contract to the appropriate Federal agency.
            ``(2) Meetings.--A designee of the Commission shall meet 
        quarterly with a designee of the Commodity Futures Trading 
        Commission, the Securities Exchange Commission, the Federal 
        Trade Commission, and the Federal Reserve Board to discuss--
                    ``(A) conditions and events in energy trading 
                markets; and
                    ``(B) any changes in Federal law (including 
                regulations) that may be appropriate to regulate energy 
                trading markets.
            ``(3) Liaison.--The Commission shall, in cooperation with 
        the Commodity Futures Trading Commission, maintain a liaison 
        between the Commission and the Commodity Futures Trading 
        Commission.''.

SEC. 503. INCREASED FUNDING FOR LIHEAP, WEATHERIZATION ASSISTANCE.

    (a) Liheap.--(1) Section 2602(b) of the Low-Income Home Energy 
Assistance Act of 1981 (42 U.S.C. 8621(b)) is amended by striking the 
first sentence and inserting ``There are authorized to be appropriated 
to carry out the provisions of this title (other than section 2607A), 
$3,400,000,000 for each of fiscal years 2006 through 2008.''.
    (2) Section 2602(e) of the Low-Income Home Energy Assistance Act of 
1981 (42 U.S.C. 8621(e)) is amended by striking ``$600,000,000'' and 
inserting ``$1,000,000,000''.
    (3) Section 2609A(a) of the Low-Income Energy Assistance Act of 
1981 (42 U.S.C. 8628a(a)) is amended by striking ``not more than 
$300,000'' and inserting ``not more than $750,000''.
    (b) Weatherization Assistance.--Section 422 of the Energy 
Conservation and Production Act (42 U.S.C. 6872) is amended by striking 
``for fiscal years 1999 through 2003 such sums as may be necessary.'' 
and inserting ``$325,000,000 for fiscal year 2006, $400,000,000 for 
fiscal year 2007, and $500,000,000 for fiscal year 2008.''.

SEC. 504. NATIONAL ENERGY EFFICIENT HOUSING.

    (a) Establishment.--There is created a body corporate to be known 
as the ``Federal Energy Efficient Home Mortgage Association'' (in this 
section referred to as the ``Corporation''), which shall be regulated 
by the Office of Federal Housing Enterprise Oversight. The Corporation 
shall have succession until dissolved by Act of Congress. The 
Corporation shall maintain its principal office in the District of 
Columbia and shall be deemed, for purposes of venue in civil actions, 
to be a resident thereof. The Corporation may establish agencies or 
offices in such other place or places as it may deem necessary or 
appropriate in the conduct of its business.
    (b) Authority.--The Corporation may--
            (1) pursuant to commitments or otherwise, purchase, 
        service, sell, or otherwise deal in any mortgages that meet or 
        exceed the eligibility requirements for the Environmental 
        Protection Agency program known as ``Energy Star'' including 
        mortgages that were previously purchased, serviced, or held by 
        the Secretary of Housing and Urban Development pursuant to the 
        National Housing Act, any Federal Home Loan Bank, the 
        Government National Mortgage Association, the Department of 
        Veterans Affairs, the Federal National Mortgage Association, or 
        the Federal Home Loan Mortgage Corporation;
            (2) purchase, service, sell, lend on the security of, and 
        otherwise deal in loans or advances of credit for the purchase 
        and installation of home energy conserving improvements; and
            (3) upon such terms and conditions as it may deem 
        appropriate, issue, and guarantee the timely payment of 
        principal of and interest on, such trust certificates or other 
        securities that are based on and backed by a trust or pool 
        composed of mortgages described in paragraph (1), (2), or (3).
    (c) Limitation.--The price of a mortgage purchased by the 
Corporation pursuant to the authority under subsection (b) may not 
exceed 100 percent of the unpaid principal amount of the mortgage at 
the time of purchase, with adjustments for interest and any comparable 
items.
    (d) Borrowing From Treasury.--
            (1) Authority.--The Corporation may issue to the Secretary 
        of the Treasury, and the Secretary may purchase, obligations as 
        may be necessary to fund the operations of the Corporation.
            (2) Terms.--Obligations issued under this subsection shall 
        be in such forms and denomination, bear such maturities and 
        rates of interest, and be subject to such other terms and 
        conditions, as the Secretary of the Treasury shall determine.
            (3) Public debt transactions.--For the purpose of 
        purchasing any such obligations, the Secretary may use a public 
        debt transaction the proceeds of the sale of any securities 
        issued under chapter 31 of title 31, United States Code, and 
        the purposes for which securities may be issued under such 
        chapter are extended to include such purpose.
    (3) Limitation on Amount.--The Secretary of the Treasury shall not 
at any time purchase any obligations under this subsection if the 
purchase would increase the aggregate principal amount of the 
outstanding holdings of obligations under this subsection by the 
Secretary to an amount greater than $1,000,000,000.
    (4) Sale.--The Secretary of the Treasury may at any time sell, upon 
terms and conditions and at prices determined by the Secretary, any of 
the obligations acquired by the Secretary under this subsection.
    (5) Treatment.--All redemptions, purchases and sales by the 
Secretary of the Treasury of obligations under this subsection shall be 
treated as public debt transactions of the United States.

SEC. 505. NATIONAL NET METERING REQUIREMENT FOR UTILITIES AND 
              INTERCONNECTION STANDARDS FOR DISTRIBUTIVE ENERGY 
              GENERATION.

    The Federal Power Act is amended by adding the following new part 
at the end thereof:

   ``PART IV--NATIONAL REQUIREMENTS AFFECTING RETAIL ELECTRIC ENERGY

``SEC. 401. NET METERING.

    ``(a) Definitions.--As used in this section:
            ``(1) The term `customer-generator' means the owner or 
        operator of an electric generation unit qualified for net 
        metering under this section.
            ``(2) The term `net metering' means measuring the 
        difference between the electricity supplied to a customer-
        generator and the electricity generated by a customer-generator 
        that is delivered to a local distribution section system at the 
        same point of interconnection during an applicable billing 
        period.
            ``(3) The terms `electric generation unit qualified for net 
        metering' and `qualified generation unit' mean an electric 
        energy generation unit that meets each of the following 
        requirements:
                    ``(A) The unit is a fuel cell or uses as its energy 
                source either solar, wind, or biomass.
                    ``(B) The unit has a generating capacity of not 
                more than 100 kilowatts.
                    ``(C) The unit is located on premises that are 
                owned, operated, leased, or otherwise controlled by the 
                customer-generator.
                    ``(D) The unit operates in parallel with the retail 
                electric supplier.
                    ``(E) The unit is intended primarily to offset part 
                or all of the customer-generator's requirements for 
                electric energy.
            ``(4) The term `retail electric supplier' means any person 
        that sells electric energy to the ultimate consumer thereof.
            ``(5) The term `local distribution system' means any system 
        for the distribution section of electric energy to the ultimate 
        consumer thereof, whether or not the owner or operator of such 
        system is also a retail electric supplier.
    ``(b) Adoption.--Not later than one year after the enactment of 
this section, each retail electric supplier shall comply with each of 
the following requirements and notify all of its retail customers of 
such requirements not less frequently than quarterly:
            ``(1) The supplier shall offer to arrange (either directly 
        or through a local distribution company or other third party) 
        to make available, on a first-come-first-served basis, to each 
        of its retail customers that has installed an energy generation 
        unit that is intended for net metering and that notifies the 
        supplier of its generating capacity an electric energy meter 
        that is capable of net metering if the customer-generator's 
        existing electrical meter cannot perform that function.
            ``(2) Rates and charges and contract terms and conditions 
        applicable to the sale by the supplier of electric energy to 
        customer-generators shall be the same as the rates and charges 
        and contract terms and conditions that would be applicable if 
        the customer-generator did not own or operate a qualified 
        generation unit and use a net metering system.
The requirements of this subsection are subject to the percent 
limitations set forth in subsection (d).
    ``(c) Net Energy Measurement and Billing.--Each retail electric 
supplier subject to subsection (b) shall calculate the net energy 
measurement for a customer using a net metering system in the following 
manner:
            ``(1) The retail electric supplier shall measure the net 
        electricity produced or consumed during the billing period 
        using the metering referred to in paragraph (1) of subsection 
        (b) or in subsection (f).
            ``(2) If the electricity supplied by the retail electric 
        supplier exceeds the electricity generated by the customer-
        generator during the billing period, the customer-generator 
        shall be billed for the net electricity supplied by the retail 
        electric supplier in accordance with normal metering practices.
            ``(3) If electricity generated by the customer-generator 
        exceeds the electricity supplied by the retail electric 
        supplier, the customer-generator--
                    ``(A) shall be billed for the appropriate customer 
                charges for that billing period;
                    ``(B) shall be credited for the excess electric 
                energy generated during the billing period, with this 
                credit appearing on the bill to be applied against 
                charges for the following billing period (except for a 
                billing period that ends in the next calendar year); 
                and
                    ``(C) shall not be charged for transmission losses.
        If the customer-generator is using a meter that reflects the 
        time of generation (a `real time meter'), the credit shall be 
        based on the retail rates for sale by the retail electric 
        supplier at the time of such generation. At the beginning of 
        each calendar year, any remaining unused kilowatt-hour credit 
        accumulated by a customer-generator during the previous year 
        may be sold by the customer-generator to any electric supplier 
        that agrees to purchase such credit. In the absence of any such 
        purchase, the credit shall be assigned (at no cost) to the 
        retail electric supplier that supplied electric energy to such 
        customer-generator at the end of the previous year.
    ``(d) Percent Limitations.--
            ``(1) Two percent limitation.--A retail electric supplier 
        shall not be required to comply with subsection (b) with 
        respect to additional customer-generators after the date during 
        any calendar year on which the total generating capacity of all 
        customer-generators with qualified generation facilities and 
        net metering systems served by that supplier is equal to or in 
        excess of 2 percent of the capacity necessary to meet the 
        supplier's average forecasted aggregate customer peak demand 
        for that calendar year.
            ``(2) One percent limitation.--A retail electric supplier 
        shall not be required to comply with subsection (b) with 
        respect to additional customer-generators using a single type 
        of qualified energy generation system after the date during any 
        calendar year on which the total generating capacity of all 
        customer-generators with qualified generation facilities of 
        that type and net metering systems served by that supplier is 
        equal to or in excess of 1 percent of the capacity necessary to 
        meet the supplier's average forecasted aggregate customer peak 
        demand for that calendar year.
            ``(3) Records and notice.--Each retail electric supplier 
        shall maintain, and make available to the public, records of 
        the total generating capacity of customer-generators of such 
        supplier that are using net metering, the type of generating 
        systems and energy source used by the electric generating 
        systems used by such customer-generators. Each such supplier 
        shall notify the Commission when the total generating capacity 
        of such customer-generators is equal to or in excess of 2 
        percent of the capacity necessary to meet the supplier's 
        aggregate customer peak demand during the previous calendar 
        year and when the total generating capacity of such customer-
        generators using a single type of qualified generation is equal 
        to or in excess of 1 percent of such capacity.
    ``(e) Safety and Performance Standards.--(1) A qualified generation 
unit and net metering system used by a customer-generator shall meet 
all applicable safety and performance and reliability standards 
established by the national electrical code, the Institute of 
Electrical and Electronics Engineers, Underwriters Laboratories, or the 
American National Standards Institute.
    ``(2) The Commission, after consultation with State regulatory 
authorities and nonregulated local distribution systems and after 
notice and opportunity for comment, may adopt by regulation additional 
control and testing requirements for customer-generators that the 
Commission determines are necessary to protect public safety and system 
reliability.
    ``(3) The Commission shall, after consultation with State 
regulatory authorities and nonregulated local distribution systems and 
after notice and opportunity for comment, prohibit by regulation the 
imposition of additional charges by electric suppliers and local 
distribution systems for equipment or services for safety or 
performance that are additional to those necessary to meet the 
standards and requirements referred to in paragraphs (2) and (3).
    ``(f) Additional Meters.--Any retail electric supplier or local 
distribution company may, at its own expense, install one or more 
additional electric energy meters to monitor the flow of electricity in 
either direction to and from customer-generators, to identify the time 
of generation by customer- generators, or both.
    ``(g) Federal Credits.--Whenever a customer-generator with a net 
metering system uses any energy generation system entitled to credits 
under a Federal minimum renewable energy generation requirement, the 
total amount of energy generated by that system shall be treated as 
generated by the retail electric supplier for purposes of such 
requirement.
    ``(h) State Authority.--Nothing in this section shall preclude a 
State from establishing or imposing additional incentives or 
requirements to encourage qualified generation and net metering 
additional to that required under this section.
    ``(i) Interconnection Standards.--(1) Within one year after the 
enactment of this section the Commission shall publish model standards 
for the physical connection between local distribution systems and 
qualified generation units and electric generation units that would be 
qualified generation units but for the fact that the unit has a 
generating capacity of more than 100 kilowatts (but not more than 250 
kilowatts). Such model standards shall be designed to encourage the use 
of qualified generation units and to insure the safety and reliability 
of such units and the local distribution systems interconnected with 
such units. Within 2 years after the enactment of this section, each 
State shall adopt such model standards, with or without modification, 
and submit such standards to the Commission for approval. The 
Commission shall approve a modification of the model standards only if 
the Commission determines that such modification is consistent with the 
purpose of such standards and is required by reason of local 
conditions. If standards have not been approved under this paragraph by 
the Commission for any State within 2 years after the enactment of this 
section, the Commission shall, by rule or order, enforce the 
Commission's model standards in such State until such time as State 
standards are approved by the Commission.
    ``(2) The standards under this section shall establish such 
measures for the safety and reliability of the affected equipment and 
local distribution systems as may be appropriate. Such standards shall 
be consistent with all applicable safety and performance standards 
established by the national electrical code, the Institute of 
Electrical and Electronics Engineers, Underwriters Laboratories, or the 
American National Standards Institute and with such additional safety 
and reliability standards as the Commission shall, by rule, prescribe. 
Such standards shall ensure that generation units will automatically 
isolate themselves from the electrical system in the event of an 
electrical power outage. Such standards shall permit the owner or 
operator of the local distribution system to interrupt or reduce 
deliveries of available energy from the generation unit to the system 
when necessary in order to construct, install, maintain, repair, 
replace, remove, investigate, or inspect any of its equipment or part 
of its system; or if it determines that curtailment, interruption, or 
reduction is necessary because of emergencies, forced outages, force 
majeure, or compliance with prudent electrical practices.
    ``(3) The model standards under this subsection prohibit the 
imposition of additional charges by local distribution systems for 
equipment or services for interconnection that are additional to those 
necessary to meet such standards.
    ``(j) Interconnection.--At the election of the owner or operator of 
the generation unit concerned, connections meeting the standards 
applicable under subsection (g) may be made--
            ``(1) by such owner or operator at such owner's or 
        operator's expense, or
            ``(2) by the owner or operator of the local distribution 
        system upon the request of the owner or operator of the 
        generating unit and pursuant to an offer by the owner or 
        operator of the generating unit to reimburse the local 
        distribution system in an amount equal to the minimum cost of 
        such connection, consistent with the procurement procedures of 
        the State in which the unit is located, except that the work on 
        all such connections shall be performed by qualified electrical 
        personnel certified by a responsible body or licensed by a 
        State or local government authority.
    ``(k) Consumer Friendly Contracts.--The Commission shall promulgate 
regulations insuring that simplified contracts will be used for the 
interconnection of electric energy by electric energy transmission or 
distribution systems and generating facilities that have a power 
production capacity not greater than 250 kilowatts.''.
    (b) Conforming Amendments.--Section 316A of the Federal Power Act 
is amended by striking out ``or 214'' in both places it appears and 
inserting ``214, or title IV''.

SEC. 506. APPLIANCE STANDARDS.

    (a) Standards for Household Appliances in Standby Mode.--Section 
325 of the Energy Policy and Conservation Act (42 U.S.C. 6295) is 
amended by adding at the end the following:
    ``(u) Standby Mode Electric Energy Consumption by Household 
Appliances.--
            ``(1) Definitions.--In this subsection:
                    ``(A) Household appliance.--The term `household 
                appliance' means any device that uses household 
                electric current and operates in a standby mode except 
                digital televisions, digital set top boxes, and digital 
                video recorders.
                    ``(B) Standby mode.--The term `standby mode' means 
                a mode in which a household appliance uses household 
                electric current but is not in the active or primary 
                operating mode. For products with more than one 
                operating mode, the term `standby mode' means the mode 
                in which the appliance consumes the least amount of 
                electric energy that the household appliance is capable 
                of consuming without being completely switched off.
            ``(2) Standard.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a household appliance that is 
                manufactured in, or imported for sale in, the United 
                States on or after the date that is 3 years after the 
                date of enactment of this subsection shall not consume 
                in standby mode more than 1 watt.
                    ``(B)(i) Household appliances participating in the 
                energy star program.--A household appliance model that, 
                as of the date of enactment of this subsection, is 
                recognized under the Energy Star program administered 
                by the Administrator of the Environmental Protection 
                Agency and the Secretary shall have until January 1, 
                2010, to meet the standard under subparagraph (A).
                    ``(ii) Analog televisions.--In the case of analog 
                televisions, the Secretary shall prescribe, on or after 
                the date that is 2 years after the date of enactment of 
                this subsection, in accordance with subsections (o) and 
                (p) of section 325, an energy conservation standard 
                that is technologically feasible and economically 
                justified under section 325(o)(2)(A) (in lieu of the 1 
                watt standard under subparagraph (A)).
            ``(3) Exemptions.--
                    ``(A) Application.--A manufacturer or importer of a 
                household appliance or their designated agent may 
                submit to the Secretary an application for an exemption 
                of a household appliance of class of appliances from 
                the standard under paragraph (2).
                    ``(B) Criteria for exemption.--The Secretary shall 
                grant an exemption for a household appliance of class 
                of appliances for which an application is made under 
                subparagraph (A) if the applicant provides evidence 
                showing that, and the Secretary determines that--
                            ``(i) it is not technically feasible to 
                        modify the household appliance or appliances 
                        concerned to enable them to meet the standard;
                            ``(ii) the standard is incompatible with an 
                        energy efficiency standard applicable to the 
                        household appliance of class of appliances 
                        under another subsection; or
                            ``(iii) The cost of electricity that a 
                        typical consumer would save in operating the 
                        household appliance of class of appliances 
                        meeting the standard would not equal the 
                        increase in the price of the household 
                        appliance or class of household appliances that 
                        would be attributable to the modifications that 
                        would be necessary to enable the household 
                        appliance or class of household appliances to 
                        meet the standard by the earlier of--
                                    ``(I) the date that is 7 years 
                                after the date of purchase of the 
                                household appliance concerned; or
                                    ``(II) the end of the useful life 
                                of the household appliance.
                    ``(C) Determination of technical infeasibility.--If 
                the Secretary determines that it is not technically 
                feasible to modify a household appliance or class of 
                household appliances to meet the standard under 
                paragraph (2), the Secretary shall establish a 
                different standard for the household appliance or class 
                of household appliances in accordance with the criteria 
                under subsection (l).
            ``(4) Test procedure.--
                    ``(A) In general.--Not later than 1 year after the 
                date of enactment of this subsection, the Secretary 
                shall establish a test procedure for determining the 
                amount of consumption of power by a household appliance 
                operating in standby mode.
                    ``(B) Considerations.--In establishing the test 
                procedure, the Secretary shall consider--
                            ``(i) international test procedures under 
                        development;
                            ``(ii) test procedures used in connection 
                        with the Energy Star program; and
                            ``(iii) test procedures used for measuring 
                        power consumption in standby mode in other 
                        countries.
            ``(5) Further reduction of standby power consumption.--The 
        Secretary shall provide technical assistance to manufacturers 
        in achieving further reductions in standby mode electric energy 
        consumption by household appliances.
    ``(v) Standby Mode Electric Energy Consumption by Digital 
Televisions, Digital Set Top Boxes, and Digital Video Recorders.--The 
Secretary shall initiate within 5 years of the date of enactment of 
this subsection a rulemaking to prescribe, in accordance with 
subsections (o) and (p), an energy conservation standard of standby 
mode electric energy consumption by digital television sets, digital 
set top boxes, and digital video recorders. The Secretary shall issue a 
final rule prescribing such standards not later than 18 months 
thereafter. In determining whether a standard under this section is 
technologically feasible and economically justified under section 
325(o)(2)(A), the Secretary shall consider the potential negative 
effects on market penetration by digital products covered under this 
section, and shall consider any recommendations by the FCC regarding 
such effects.''.
    (b) Standards for Noncovered Products.--
            (1) Section 325(m) of the Energy Policy and Conservation 
        Act (42 U.S.C. 6295(m)) is amended as follows:
                    (A) Inserting ``(1)'' before ``After''.
                    (B) Inserting the following at the end:
    ``(2) Not later than one year after the date of enactment of this 
paragraph, and every 5 years thereafter, the Secretary shall conduct a 
rulemaking to determine whether consumer or commercial products not 
classified as a covered product under section 322(a)(1) through (19) 
meet the criteria of section 322(b)(1). If the Secretary finds that a 
consumer or commercial product not classified as a covered product 
meets the criteria of section 322(b)(1), the Secretary shall prescribe, 
in accordance with subsections (o) and (p), an energy conservation 
standard for such consumer or commercial product.''.
            (2) Part B of title III of such Act is amended as follows:
                    (A) In the heading for such part by inserting ``AND 
                COMMERCIAL'' after ``CONSUMER''.
                    (B) In section 321 by striking ``consumer product 
                of a type specified in section 322'' and inserting: 
                ``consumer or commercial product of a type specified in 
                section 322(a)''.
                    (C) In paragraphs (4), (5), (7), (12), (13), (14), 
                and (15) of section 321 by striking ``consumer'' in 
                each place it appears and inserting ``covered''.
                    (D) In section 322(a) by inserting ``or 
                commercial'' after ``consumer'' in the first place it 
                appears in the material preceding paragraph (1).
                    (E) In section 322(b), by inserting ``or 
                commercial'' after ``consumer'' in each place it 
                appears.
                    (F) In section 322(b)(1)(B) and (b)(2)(A), by 
                inserting ``(or per-business in the case of a 
                commercial product)'' after ``per-household'' in each 
                place it appears.
                    (G) In section 322(b)(2)(A) by inserting ``(or 
                businesses in the case of commercial products)'' after 
                ``households'' in each place it appears.
                    (H) In section 322(b)(2)(C) by striking ``term'' 
                and inserting ``terms'' and by inserting ``and 
                `business''' after ``household''.
                    (I) In sections 323 though 339, by inserting ``or 
                commercial'' after ``consumer'' in each place it 
                appears.
    (c) Consumer Education on Energy Efficiency Benefits of Air 
Conditioning, Heating and Ventilation Maintenance.--Section 337 of the 
Energy Policy and Conservation Act (42 U.S.C. 6307) is amended by 
adding the following new subsection after subsection (b):
    ``(c) HVAC Maintenance.--For the purpose of ensuring that installed 
air conditioning and heating systems operate at their maximum rated 
efficiency levels, the Secretary shall, within 180 days of the date of 
enactment of this subsection, develop and implement a public education 
campaign to educate homeowners and small business owners concerning the 
energy savings resulting from regularly scheduled maintenance of air 
conditioning, heating, and ventilating systems. The public service 
information shall provide sufficient information to allow consumers to 
make informed choices from among professional, licensed (where State or 
local licensing is required) contractors. There are authorized to be 
appropriated to carry out this subsection $5,000,000 for the fiscal 
years 2006 and 2007 in addition to amounts otherwise appropriated in 
this part.''.
    (d) Efficiency Standards for Other Consumer and Commercial 
Products.--
            (1) Definitions.--Section 321 of the Energy Policy and 
        Conservation Act (42 U.S.C. 6291) is amended by adding the 
        following at the end thereof:
            ``(32) The term `residential furnace fan' means an electric 
        fan installed as part of a furnace for purposes of circulating 
        air through the system air filters, the heat exchangers or 
        heating elements of the furnace, and the duct work.
            ``(33) The terms `residential central air conditioner fan' 
        and `heat pump circulation fan' mean an electric fan installed 
        as part of a central air conditioner or heat pump for purposes 
        of circulating air through the system air filters, the heat 
        exchangers of the air conditioner or heat pump, and the duct 
        work.
            ``(34) The term `suspended ceiling fan' means a fan 
        intended to be mounted to a ceiling outlet box, ceiling 
        building structure, or to a vertical rod suspended from the 
        ceiling, and which as blades which rotate below the ceiling and 
        consists of an electric motor, fan blades (which rotate in a 
        direction parallel to the floor), an optional lighting kit, and 
        one or more electrical controls (integral or remote) governing 
        fan speed and lighting operation.
            ``(35) The term `refrigerated bottled or canned beverage 
        vending machine' means a machine that cools bottled or canned 
        beverages and dispenses them upon payment.
            ``(36) Automatic commercial icemaker.--The term `automatic 
        commercial icemaker' means a factory-made assembly that
                    ``(A) consists of a condensing unit and icemaking 
                section operating as an integrated unit, with means for 
                making and harvesting ice;
                    ``(B) may include means for storing or dispensing 
                ice; and
                    ``(C) may or may not be shipped in 1 package.
            ``(37) Commercial freezer.--The term `commercial freezer' 
        means a freezer that is not a consumer product regulated under 
        this Act.
            ``(38) Commercial refrigerator.--The term `commercial 
        refrigerator' means a refrigerator that is not a consumer 
        product regulated under this Act.
            ``(39) Commercial refrigerator-freezer.--The term 
        `commercial refrigerator-freezer' means a refrigerator-freezer 
        that is not a consumer product regulated under this Act.
            ``(40) Icemaking head.--The term `icemaking head' means an 
        automatic commercial icemaker that does not include a storage 
        compartment in an integral cabinet.
            ``(41) Illuminated exit sign.--The term `illuminated exit 
        sign' means a sign that
                    ``(A) is designed to be permanently fixed in place 
                to identify an exit; and
                    ``(B) Consists of.--
                            ``(i) a light source that illuminates the 
                        sign or letters from within; and
                            ``(iii) a background that is not 
                        transparent.
            ``(42) Remote condensing icemaker.--The term `remote 
        condensing icemaker' means an automatic commercial icemaker in 
        which the icemaking mechanism and condensing unit are in 
        separate sections.
            ``(43) Traffic signal module.--The term `traffic signal 
        module' means a standard 8-inch (200mm) or 12-inch (300mm) 
        traffic signal indication, consisting of a light source, a 
        lens, and all other parts necessary for operation, that 
        communicates movement messages to drivers through red, amber, 
        and green colors.
            ``(44) Torchiere fixture.--The term `torchiere fixture' 
        means a portable electric lighting fixture with a reflector 
        bowl that directs light upward so as to give indirect 
        illumination.
            ``(45) Unit heater.--The term `unit heater' means a self-
        contained fan-type heater designed to be installed within the 
        heated space. Unit heaters include an apparatus or appliance to 
        supply heat, and a fan for circulating air over a heat exchange 
        surface, all enclosed in a common casing. Unit heaters do not 
        include furnaces as defined in this Act.''.
            (2) Testing requirements.--Section 323 of the Energy Policy 
        and Conservation Act (42 U.S.C. 6293) is amended by adding the 
        following at the end thereof:
    ``(f) Additional Consumer Products.--The Secretary shall within 18 
months after the date of enactment of this subsection prescribe testing 
requirements for the consumer and commercial products referred to in 
paragraphs (36) though (45) of section 321. Such testing requirements 
shall be based on existing test procedures used in industry to the 
extent practical and reasonable. In the case of residential furnace 
fans, residential central air conditioner fans or heat pump circulation 
fans, and suspended ceiling fans unit heaters, such test procedures 
shall include efficiency at both maximum output and at an output no 
more than 50 percent of the maximum output.''.
            (3) Standards for additional consumer products.--Section 
        325 of the Energy Policy and Conservation Act (42 U.S.C. 6295), 
        as amended by subsection (a) of this section, is amended by 
        adding the following at the end thereof:
    ``(w) Residential, Other Consumer, and Commercial Products.--(1) 
The Secretary shall, within 18 months after the date of enactment of 
this subsection, assess the current and projected future market for the 
consumer, and commercial products referred to in paragraphs (36) 
through (45) of section 321, furnace fans, residential central air 
conditioner fans and heat pump circulation fans, suspended ceiling 
fans, and refrigerated bottled or canned beverage vending machines. 
This assessment shall include an examination of the types of these 
products sold, the number of these products in use, annual sales of 
these products, energy used by these products sold, estimates of the 
potential energy savings from specific technical improvements to these 
products, and an examination of the cost-effectiveness of these 
improvements. Prior to the end of this time period, the Secretary shall 
hold an initial scoping workshop to discuss and receive input to plans 
for developing minimum efficiency standards for these products.
    ``(2) The Secretary shall within 24 months after the date on which 
testing requirements are prescribed by the Secretary pursuant to 
section 323(f), prescribe, by rule, energy conservation standards for 
residential furnace fans, residential central air conditioner fans and 
heat pump circulation fans, suspended ceiling fans, and refrigerated 
bottled or canned beverage vending machines. In establishing these 
standards, the Secretary shall use the criteria and procedures 
contained in this section. Any standard prescribed under this section 
shall apply to products manufactured 36 months after the date such rule 
is published.''.
            (4) Labeling.--Section 324(a) of the Energy Policy and 
        Conservation Act (42 U.S.C. 6294(a)) is amended by adding the 
        following at the end thereof:
            ``(5) The Secretary shall within 6 months after the date on 
        which energy conservation standards are prescribed by the 
        Secretary, prescribe, by rule, labeling requirements for the 
        consumer and commercial products referred to in paragraphs (33) 
        though (45) of section 321. These requirements shall take 
        effect on the same date as the standards prescribed pursuant to 
        section 325(w).''.
            (5) Covered products.--Section 322(a) of the Energy Policy 
        and Conservation Act (42 U.S.C. 6292(a)) is amended by 
        redesignating paragraph (19) as (20) and by inserting the 
        following after paragraph (18):
            ``(19) Beginning on the effective date for standards 
        established pursuant to subsection (w) of section 325, each 
        product referred to in such subsection (w).''.
    (e) Air Conditioner Energy Efficiency Rules.--Section 325(o)(1) of 
the Energy Policy and Conservation Act is amended by adding the 
following at the end thereof: ``Any rule relating to the energy 
efficiency of air conditioners that violates the preceding sentence 
shall have no force and effect after the date of the enactment of this 
sentence.''.

SEC. 507. ENERGY STAR CERTIFICATION FOR SOLAR WATER HEATERS.

    Not later than January 1, 2007, the Secretary, in consultation with 
the Administrator of the Environmental Protection Agency, shall adopt 
regulations establishing Energy Star Program requirements and an Energy 
Star rating program for commercial and residential solar water heating 
devices.

SEC. 508. ELECTRIC RELIABILITY STANDARDS.

    Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is amended 
by adding at the end the following:

``SEC. 215. ELECTRIC RELIABILITY.

    ``(a) Definitions.--In this section--
            ``(1) `bulk power system' means the network of 
        interconnected transmission facilities and generating 
        facilities;
            ``(2) `electric reliability organization' means a self-
        regulating organization certified by the Commission under 
        subsection (c) whose purpose is to promote the reliability of 
        the bulk power system; and
            ``(3) `reliability standard' means a requirement to provide 
        for reliable operation of the bulk power system approved by the 
        Commission under this section.
    ``(b) Jurisdiction and Applicability.--The Commission shall have 
jurisdiction, within the United States, over an electric reliability 
organization, any regional entities, and all users, owners and 
operators of the bulk power system, including but not limited to the 
entities described in section 201(f), for purposes of approving 
reliability standards and enforcing compliance with this section. All 
users, owners and operators of the bulk power system shall comply with 
reliability standards that take effect under this section.
    ``(c) Certification.--
            ``(1) The Commission shall issue a final rule to implement 
        the requirements of this section not later than 180 days after 
        the date of enactment of this section.
            ``(2) Following the issuance of a Commission rule under 
        paragraph (1), any person may submit an application to the 
        Commission for certification as an electric reliability 
        organization. The Commission may certify an applicant if the 
        Commission determines that the applicant--
                    ``(A) has the ability to develop, and enforce 
                reliability standards that provide for an adequate 
                level of reliability of the bulk power system; and
                    ``(B) has established rules that--
                            ``(i) assure the independence of the 
                        applicant from the users and owners and 
                        operators of the bulk power system while 
                        assuring fair stakeholder representation in the 
                        selection of its directors and balanced 
                        decision making in any committee or subordinate 
                        organizational structure;
                            ``(ii) allocate equitably dues, fees, and 
                        other charges among users for all activities 
                        under this section;
                            ``(iii) provide fair and impartial 
                        procedures for enforcement of reliability 
                        standards through imposition of penalties 
                        (including limitations on activities, 
                        functions, or operations, or other appropriate 
                        sanctions) and
                            ``(iv) provide for reasonable notice and 
                        opportunity for public comment, due process, 
                        openness, and balance of interests in 
                        developing reliability standards and otherwise 
                        exercising its duties.
            ``(3) If the Commission receives 2 or more timely 
        applications that satisfy the requirements of this subsection, 
        the Commission shall approve only the application the 
        Commission concludes will best implement the provisions of this 
        section.
    ``(d) Reliability Standards.--
            ``(1) An electric reliability organization shall file a 
        proposed reliability standard or modification to a reliability 
        standard with the Commission.
            ``(2) The Commission may approve a proposed reliability 
        standard or modification to a reliability standard if it 
        determines that the standard is just, reasonable, not unduly 
        discriminatory or preferential, and in the public interest. The 
        Commission shall give due weight to the technical expertise of 
        the electric reliability organization with respect to the 
        content of a proposed standard or modification to a reliability 
        standard, but shall not defer with respect to its effect on 
        competition.
            ``(3) The electric reliability organization and the 
        Commission shall rebuttably presume that a proposal from a 
        regional entity organized on an interconnection-wide basis for 
        a reliability standard or modification to a reliability 
        standard to be applicable on an interconnection-wide basis is 
        just, reasonable, and not unduly discriminatory or 
        preferential, and in the public interests.
            ``(4) The Commission shall remand to the electric 
        reliability organization for further consideration a proposed 
        reliability standard or a modification to a reliability 
        standard that the Commission disapproves in whole or in part.
            ``(5) The Commission, upon its own motion or upon 
        complaint, may order an electric reliability organization to 
        submit to the Commission a proposed reliability standard or a 
        modification to a reliability standard that addresses a 
        specific matter if the Commission considers such a new or 
        modified reliability standard appropriate to carry out this 
        section.
    ``(e) Enforcement.--
            ``(1) An electric reliability organization may impose a 
        penalty on a user or owner or operator of the bulk power system 
        if the electric reliability organization, after notice and an 
        opportunity for a hearing--
                    ``(A) finds that the user or owner or operator of 
                the bulk power system has violated a reliability 
                standard approved by the Commission under subsection 
                (d); and
                    ``(B) files notice with the Commission, which shall 
                affirm, set aside, or modify the action.
            ``(2) On its own motion or upon complaint, the Commission 
        may order compliance with a reliability standard and may impose 
        a penalty against a user or owner or operator of the bulk power 
        system if the Commission finds, after notice and opportunity 
        for a hearing, that the user or owner or operator of the bulk 
        power system has violated or threatens to violate a reliability 
        standard.
            ``(3) The Commission shall establish regulations 
        authorizing the electric reliability organization to enter into 
        an agreement to delegate authority to a regional entity for the 
        purpose of proposing and enforcing reliability standards 
        (including related activities) if the regional entity satisfies 
        the provisions of subparagraphs (A) and (B) of subsection 
        (c)(2) and the agreement promotes effective and efficient 
        administration of bulk power system reliability. The Commission 
        may modify such delegation. The electric reliability 
        organization and the Commission shall rebuttably presume that a 
        proposal for delegation to a regional entity organized on a 
        interconnection-wide basis promotes effective and efficient 
        administration of bulk power system reliability and should be 
        approved. Such regulation may provide that the Commission may 
        assign the electric reliability organization's authority to 
        enforce reliability standards directly to a regional entity 
        consistent with the requirements of this paragraph.
            ``(4) The Commission may take such action as is necessary 
        or appropriate against the electric reliability organization or 
        a regional entity to ensure compliance with a reliability 
        standard or any Commission order affecting the electric 
        reliability organization or a regional entity.
    ``(f) Changes in Electricity Reliability Organization Rules.--An 
electric reliability organization shall file with the Commission for 
approval any proposed rule or proposed rule change, accompanied by an 
explanation of its basis and purpose. The Commission, upon its own 
motion or complaint, may propose a change to the rules of the electric 
reliability organization. A proposed rule or proposed rule change shall 
take effect upon a finding by the Commission, after notice and 
opportunity for comment, that the change is just, reasonable, not 
unduly discriminatory or preferential, is in the public interest, and 
satisfies the requirements of subsection (c)(2).
    ``(g) Coordination With Canada and Mexico.--
            ``(1) The electric reliability organization shall take all 
        appropriate steps to gain recognition in Canada and Mexico.
            ``(2) The President shall use his best efforts to enter 
        into international agreements with the governments of Canada 
        and Mexico to provide for effective compliance with reliability 
        standards and the effectiveness of the electric reliability 
        organization in the United States and Canada or Mexico.
    ``(h) Reliability Reports.--The electric reliability organization 
shall conduct periodic assessments of the reliability and adequacy of 
the interconnected bulk power system in North America.
    ``(i) Savings Provisions.--
            ``(1) The electric reliability organization shall have 
        authority to develop and enforce compliance with standards for 
        the reliable operation of only the bulk power system.
            ``(2) This section does not provide the electric 
        reliability organization or the Commission with authority to 
        order the construction of additional generation or transmission 
        capacity or to set and enforce compliance with standards for 
        adequacy or safety of electric facilities or services.
            ``(3) Nothing in this section shall be construed to preempt 
        any authority of any State to take action to ensure the safety, 
        adequacy, and reliability of electric service within that 
        State, as long as such action is not inconsistent with any 
        reliability standard established under this section.
            ``(4) Not later than 90 days after the date of the 
        application of the electric reliability organization or other 
        affected party, and after notice and opportunity for comment, 
        the Commission shall issue a final order determining whether a 
        State action is inconsistent with a reliability standard, 
        taking into consideration any recommendation of the electric 
        reliability organization.
            ``(5) The Commission, after consultation with the electric 
        reliability organization, may stay the effectiveness of any 
        State action, pending the Commission's issuance of a final 
        order.
    ``(j) Application of Antitrust Laws.--
            ``(1) To the extent undertaken to develop, implement, or 
        enforce a reliability standard, each of the following 
        activities shall not, in any action under the antitrust laws, 
        be deemed illegal per se:
                    ``(A) Activities undertaken by an electric 
                reliability organization under this section.
                    ``(B) Activities of a user or owner or operator of 
                the bulk power system undertaken in good faith under 
                the rules of an electric reliability organization.
            ``(2) In any action under the antitrust laws, an activity 
        described in paragraph (1) shall be judged on the basis of its 
        reasonableness, taking into account all relevant factors 
        affecting competition and reliability.
            ``(3) For purposes of this subsection, the term `antitrust 
        laws' has the meaning given the term in subsection (a) of the 
        first section of the Clayton Act (15 U.S.C. 12(a)), except that 
        it includes section 5 of the Federal Trade Commission Act (15 
        U.S.C. 45) to the extent that section 5 applies to unfair 
        methods of competition.
    ``(k) Regional Advisory Bodies.--The Commission shall establish a 
regional advisory body on the petition of at least \2/3\ of the States 
within a region that have more than \1/2\ of their electric load served 
within the region. A regional advisory body shall be composed of one 
member from each participating State in the region, appointed by the 
Governor of each State, and may include representatives of agencies, 
States, and provinces outside the United States. A regional advisory 
body may provide advice to the electric reliability organization, a 
regional reliability entity, or the Commission regarding the governance 
of an existing or proposed regional reliability entity within the same 
region, whether a standard proposed to apply within the region is just, 
reasonable, not unduly discriminatory or preferential, and in the 
public interest, whether fees proposed to be assessed within the region 
are just, reasonable, not unduly discriminatory or preferential, and in 
the public interest and any other responsibilities requested by the 
Commission. The Commission may give deference to the advice of any such 
regional advisory body if that body is organized on an interconnection-
wide basis.
    ``(l) Application to Alaska and Hawaii.--The provisions of this 
section apply only to the contiguous 48 States.''.

     TITLE VI--MARKET-BASED INITIATIVES TO REDUCE GREENHOUSE GASES

SEC. 600. DEFINITIONS.

    In this Act:
            (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Environmental Protection Agency.
            (2) Baseline.--The term ``baseline'' means the historic 
        greenhouse gas emission levels of an entity, as adjusted upward 
        by the Administrator to reflect actual reductions that are 
        verified in accordance with--
                    (A) regulations promulgated under section 
                611(c)(1); and
                    (B) relevant standards and methods developed under 
                this title.
            (3) Carbon dioxide equivalents.--The term ``carbon dioxide 
        equivalents'' means, for each greenhouse gas, the amount of 
        each such greenhouse gas that makes the same contribution to 
        global warming as one metric ton of carbon dioxide, as 
        determined by the Administrator.
            (4) Covered sectors.--The term ``covered sectors'' means 
        the electricity, transportation, industry, and commercial 
        sectors, as such terms are used in the Inventory.
            (5) Covered entity.--The term ``covered entity'' means an 
        entity (including a branch, department, agency, or 
        instrumentality of Federal, State, or local government) that--
                    (A) owns or controls a source of greenhouse gas 
                emissions in the electric power, industrial, or 
                commercial sector of the United States economy (as 
                defined in the Inventory), refines or imports petroleum 
                products for use in transportation, or produces or 
                imports hydrofluorocarbons, perfluorocarbons, or sulfur 
                hexafluoride; and
                    (B) emits, from any single facility owned by the 
                entity, over 10,000 metric tons of greenhouse gas per 
                year, measured in units of carbon dioxide equivalents, 
                or produces or imports--
                            (i) petroleum products that, when 
                        combusted, will emit,
                            (ii) hydrofluorocarbons, perfluorocarbons, 
                        or sulfur hexafluoride that, when used, will 
                        emit, or
                            (iii) other greenhouse gases that, when 
                        used, will emit,
                over 10,000 metric tons of greenhouse gas per year, 
                measured in units of carbon dioxide equivalents.
            (6) Database.--The term ``database'' means the national 
        greenhouse gas database established under section 611.
            (7) Direct emissions.--The term ``direct emissions'' means 
        greenhouse gas emissions by an entity from a facility that is 
        owned or controlled by that entity.
            (8) Facility.--The term ``facility'' means a building, 
        structure, or installation located on any 1 or more contiguous 
        or adjacent properties of an entity in the United States.
            (9) Greenhouse gas.--The term ``greenhouse gas'' means--
                    (A) carbon dioxide;
                    (B) methane;
                    (C) nitrous oxide;
                    (D) hydrofluorocarbons;
                    (E) perfluorocarbons; or
                    (F) sulfur hexafluoride.
            (10) Indirect emissions.--The term ``indirect emissions'' 
        means greenhouse gas emissions that are--
                    (A) a result of the activities of an entity; but
                    (B) emitted from a facility owned or controlled by 
                another entity.
            (11) Inventory.--The term ``Inventory'' means the Inventory 
        of U.S. Greenhouse Gas Emissions and Sinks, prepared in 
        compliance with the United Nations Framework Convention on 
        Climate Change Decision 3/CP.5.
            (12) Leakage.--The term ``leakage'' means--
                    (A) an increase in greenhouse gas emissions by one 
                facility or entity caused by a reduction in greenhouse 
                gas emissions by another facility or entity; or
                    (B) a decrease in sequestration that is caused by 
                an increase in sequestration at another location.
            (13) Permanence.--The term ``permanence'' means the extent 
        to which greenhouse gases that are sequestered will not later 
        be returned to the atmosphere.
            (14) Registry.--The term ``registry'' means the registry of 
        greenhouse gas emission reductions established under section 
        611(b)(2).
            (15) Secretary.--The term ``Secretary'' means the Secretary 
        of Commerce.
            (16) Sequestration.--
                    (A) In general.--The term ``sequestration'' means 
                the capture, long-term separation, isolation, or 
                removal of greenhouse gases from the atmosphere.
                    (B) Inclusions.--The term ``sequestration'' 
                includes--
                            (i) agricultural and conservation 
                        practices;
                            (ii) reforestation;
                            (iii) forest preservation; and
                            (iv) any other appropriate method of 
                        capture, long-term separation, isolation, or 
                        removal of greenhouse gases from the 
                        atmosphere, as determined by the Administrator.
                    (C) Exclusions.--The term ``sequestration'' does 
                not include--
                            (i) any conversion of, or negative impact 
                        on, a native ecosystem; or
                            (ii) any introduction of non-native 
                        species.
            (17) Source category.--The term ``source category'' means a 
        process or activity that leads to direct emissions of 
        greenhouse gases, as listed in the Inventory.
            (18) Stationary source.--The term ``stationary source'' 
        means generally any source of greenhouse gases except those 
        emissions resulting directly from an engine for transportation 
        purposes.

   Subtitle A--Federal Climate Change Research and Related Activities

SEC. 601. NATIONAL SCIENCE FOUNDATION FELLOWSHIPS.

    The Director of the National Science Foundation shall establish a 
fellowship program for students pursuing graduate studies in global 
climate change, including capability in observation, analysis, 
modeling, paleoclimatology, consequences, and adaptation.

SEC. 602. RESEARCH GRANTS.

    Section 105 of the Global Change Research Act of 1990 (15 U.S.C. 
2935) is amended--
            (1) by redesignating subsection (c) as subsection (d); and
            (2) by inserting after subsection (b) the following:
    ``(c) Research Grants.--
            ``(1) Committee to develop list of priority research 
        areas.--The Committee shall develop a list of priority areas 
        for research and development on climate change that are not 
        being addressed by Federal agencies.
            ``(2) Director of ostp to transmit list to nsf.--The 
        Director of the Office of Science and Technology Policy shall 
        transmit the list to the National Science Foundation.
            ``(3) Funding through nsf.--
                    ``(A) Budget request.--The National Science 
                Foundation shall include, as part of the annual request 
                for appropriations for the Science and Technology 
                Policy Institute, a request for appropriations to fund 
                research in the priority areas on the list developed 
                under paragraph (1).
                    ``(B) Authorization.--For fiscal year 2006 and each 
                fiscal year thereafter, there are authorized to be 
                appropriated to the National Science Foundation not 
                less than $25,000,000, to be made available through the 
                Science and Technology Policy Institute, for research 
                in those priority areas.''.

SEC. 603. ABRUPT CLIMATE CHANGE RESEARCH.

    (a) In General.--The Secretary, through the National Oceanic and 
Atmospheric Administration, shall carry out a program of scientific 
research on potential abrupt climate change designed--
            (1) to develop a global array of terrestrial and 
        oceanographic indicators of paleoclimate in order to 
        sufficiently to identify and describe past instances of abrupt 
        climate change;
            (2) to improve understanding of thresholds and 
        nonlinearities in geophysical systems related to the mechanisms 
        of abrupt climate change;
            (3) to incorporate these mechanisms into advanced 
        geophysical models of climate change; and
            (4) to test the output of these models against an improved 
        global array of records of past abrupt climate changes.
    (b) Abrupt Climate Change Defined.--In this section, the term 
``abrupt climate change'' means a change in climate that occurs so 
rapidly or unexpectedly that human or natural systems may have 
difficulty adapting to it.
    (c) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary for fiscal year 2006 $60,000,000 to carry 
out this section, such sum to remain available until expended.

SEC. 604. NIST GREENHOUSE GAS FUNCTIONS.

    Section 2(c) of the National Institute of Standards and Technology 
Act (15 U.S.C. 272(c)) is amended--
            (1) by striking ``and'' after the semicolon in paragraph 
        (21);
            (2) by redesignating paragraph (22) as paragraph (23); and
            (3) by inserting after paragraph (21) the following:
            ``(22) perform research to develop enhanced measurements, 
        calibrations, standards, and technologies which will facilitate 
        activities that reduce emissions of greenhouse gases or 
        increase sequestration of greenhouse gases, including carbon 
        dioxide, methane, nitrous oxide, ozone, perfluorocarbons, 
        hydrofluorocarbons, and sulfur hexafluoride; and''.

SEC. 605. DEVELOPMENT OF NEW MEASUREMENT TECHNOLOGIES.

    To facilitate implementation of section 614, the Secretary shall 
initiate a program to develop, with technical assistance from 
appropriate Federal agencies, innovative standards and measurement 
technologies to calculate greenhouse gas emissions or reductions for 
which no accurate or reliable measurement technology exists. The 
program shall include--
            (1) technologies (including remote sensing technologies) to 
        measure carbon changes and other greenhouse gas emissions and 
        reductions from agriculture, forestry, and other land use 
        practices; and
            (2) technologies to calculate non-carbon dioxide greenhouse 
        gas emissions from transportation.

SEC. 606. ENHANCED ENVIRONMENTAL MEASUREMENTS AND STANDARDS.

    The National Institute of Standards and Technology Act (15 U.S.C. 
271 et seq.) is amended--
            (1) by redesignating sections 17 through 32 as sections 18 
        through 33, respectively; and
            (2) by inserting after section 16 the following:

``SEC. 17. CLIMATE CHANGE STANDARDS AND PROCESSES.

    ``(a) In General.--The Director shall establish within the 
Institute a program to perform and support research on global climate 
change standards and processes, with the goal of providing scientific 
and technical knowledge applicable to the reduction of greenhouse gases 
(as defined in section 600 of the New Apollo Energy Act of 2005) and of 
facilitating implementation of section 614 of that Act.
    ``(b) Research Program.--
            ``(1) In general.--The Director is authorized to conduct, 
        directly or through contracts or grants, a global climate 
        change standards and processes research program.
            ``(2) Research projects.--The specific contents and 
        priorities of the research program shall be determined in 
        consultation with appropriate Federal agencies, including the 
        Environmental Protection Agency, the National Oceanic and 
        Atmospheric Administration, and the National Aeronautics and 
        Space Administration. The program generally shall include basic 
        and applied research--
                    ``(A) to develop and provide the enhanced 
                measurements, calibrations, data, models, and reference 
                material standards which will enable the monitoring of 
                greenhouse gases;
                    ``(B) to assist in establishing a baseline 
                reference point for future trading in greenhouse gases 
                and the measurement of progress in emissions reduction;
                    ``(C) that will be exchanged internationally as 
                scientific or technical information which has the 
                stated purpose of developing mutually recognized 
                measurements, standards, and procedures for reducing 
                greenhouse gases; and
                    ``(D) to assist in developing improved industrial 
                processes designed to reduce or eliminate greenhouse 
                gases.
    ``(c) National Measurement Laboratories.--
            ``(1) In general.--In carrying out this section, the 
        Director shall utilize the collective skills of the National 
        Measurement Laboratories of the National Institute of Standards 
        and Technology to improve the accuracy of measurements that 
        will permit better understanding and control of industrial 
        chemical processes and result in the reduction or elimination 
        of greenhouse gases.
            ``(2) Material, process, and building research.--The 
        National Measurement Laboratories shall conduct research under 
        this subsection that includes--
                    ``(A) developing material and manufacturing 
                processes which are designed for energy efficiency and 
                reduced greenhouse gas emissions into the environment;
                    ``(B) developing chemical processes to be used by 
                industry that, compared to similar processes in 
                commercial use, result in reduced emissions of 
                greenhouse gases or increased sequestration of 
                greenhouse gases; and
                    ``(C) enhancing building performance with a focus 
                in developing standards or tools which will help 
                incorporate low- or no-emission technologies into 
                building designs.
            ``(3) Standards and tools.--The National Measurement 
        Laboratories shall develop standards and tools under this 
        subsection that include software to assist designers in 
        selecting alternate building materials, performance data on 
        materials, artificial intelligence-aided design procedures for 
        building subsystems and `smart buildings', and improved test 
        methods and rating procedures for evaluating the energy 
        performance of residential and commercial appliances and 
        products.
    ``(d) National Voluntary Laboratory Accreditation Program.--The 
Director shall utilize the National Voluntary Laboratory Accreditation 
Program under this section to establish a program to include specific 
calibration or test standards and related methods and protocols 
assembled to satisfy the unique needs for accreditation in measuring 
the production of greenhouse gases. In carrying out this subsection the 
Director may cooperate with other departments and agencies of the 
Federal Government, State and local governments, and private 
organizations.''.

SEC. 607. TECHNOLOGY DEVELOPMENT AND DIFFUSION.

    The Director of the National Institute of Standards and Technology, 
through the Manufacturing Extension Partnership Program, may develop a 
program to promote the use, by the more than 380,000 small 
manufacturers, of technologies and techniques that result in reduced 
emissions of greenhouse gases or increased sequestration of greenhouse 
gases.

SEC. 608. AGRICULTURAL OUTREACH PROGRAM.

    (a) In General.--The Secretary of Agriculture, acting through the 
Global Change Program Office and in consultation with the heads of 
other appropriate departments and agencies, shall establish the Climate 
Change Education and Outreach Initiative Program to educate, and reach 
out to, agricultural organizations and individual farmers on global 
climate change.
    (b) Program Components.--The program--
            (1) shall be designed to ensure that agricultural 
        organizations and individual farmers receive detailed 
        information about--
                    (A) the potential impact of climate change on their 
                operations and well-being;
                    (B) market-driven economic opportunities that may 
                come from storing carbon in soils and vegetation, 
                including emerging private sector markets for carbon 
                storage; and
                    (C) techniques for measuring, monitoring, 
                verifying, and inventorying such carbon capture 
                efforts;
            (2) may incorporate existing efforts in any area of 
        activity referenced in paragraph (1) or in related areas of 
        activity;
            (3) shall provide--
                    (A) outreach materials to interested parties;
                    (B) workshops; and
                    (C) technical assistance; and
            (4) may include the creation and development of regional 
        centers on climate change or coordination with existing centers 
        (including such centers within NRCS and the Cooperative State 
        Research Education and Extension Service).

SEC. 609. NOAA REPORT ON CLIMATE CHANGE EFFECTS; PREPARATION 
              ASSISTANCE.

    The Coastal Zone Management Act of 1972 (16 U.S.C. 1451 et seq.) is 
amended by adding at the end the following:

                 ``report on effects of climate change

    ``Sec. 320. (a) In General.--The Secretary shall report to the 
Congress not later than 2 years after the date of enactment of this 
section, and every 5 years thereafter, on the possible and projected 
impacts of climate change on--
            ``(1) oceanic and coastal ecosystems, including marine fish 
        and wildlife and their habitat, and the commercial and 
        recreational fisheries and tourism industries associated with 
        them; and
            ``(2) coastal communities, including private residential 
        and commercial development and public infrastructure in the 
        coastal zone.
    ``(b) Contents.--Each report under this section shall include 
information regarding--
            ``(1) the impacts that may be due to climate change that 
        have occurred as of the date of the submission of the report; 
        and
            ``(2) the projected future impacts of climate change.
    ``(c) Impacts.--The impacts reported on under subsection (b) shall 
include any--
            ``(1) increases in sea level;
            ``(2) increases in storm activity and intensity;
            ``(3) increases in floods, droughts, and other extremes of 
        weather;
            ``(4) increases in the temperature of the air and the water 
        on oceanic and coastal ecosystems, with a particular focus on 
        vulnerable fisheries and ecosystems; and
            ``(5) changes in the acidity of the ocean surface 
        associated with an increase in concentration of carbon dioxide 
        in the atmosphere.

                ``climate change preparation assistance

    ``Sec. 321. (a) In General.--The Secretary shall provide technical 
assistance to each coastal state that has an approved coastal zone 
management plan under this title, to assist such States in preparing 
persons living within their coastal zones to adapt to climate change.
    ``(b) Identification of Affected Areas and Adaptations.--In 
carrying out this section, the Secretary shall--
            ``(1) identify the projected impacts of climate change to 
        which persons located in coastal zones may need to adapt, 
        including--
                    ``(A) increases in sea level;
                    ``(B) increases in storm activity and intensity; 
                and
                    ``(C) increases in floods, droughts, and other 
                extremes of weather;
            ``(2) identify the specific coastal areas of the United 
        States, and the public and private development in coastal 
        communities and the natural resources of the coastal zone, that 
        are vulnerable to the impacts identified under paragraph (1);
            ``(3) identify the various adaptation measures that may be 
        used to protect the areas and resources identified under 
        paragraph (2) from the impacts identified under paragraph (1); 
        and
            ``(4) estimate the costs of the adaptation measures 
        identified under paragraph (3).''.

              Subtitle B--National Greenhouse Gas Database

SEC. 611. NATIONAL GREENHOUSE GAS DATABASE AND REGISTRY ESTABLISHED.

    (a) Establishment.--As soon as practicable after the date of 
enactment of this Act, the Administrator, in coordination with the 
Secretary, the Secretary of Energy, the Secretary of Agriculture, and 
private sector and nongovernmental organizations, shall establish, 
operate, and maintain a database, to be known as the ``National 
Greenhouse Gas Database'', to collect, verify, and analyze information 
on greenhouse gas emissions by entities.
    (b) National Greenhouse Gas Database Components.--The database 
shall consist of--
            (1) an inventory of greenhouse gas emissions; and
            (2) a registry of greenhouse gas emission reductions and 
        increases in greenhouse gas sequestrations.
    (c) Comprehensive System.--
            (1) In general.--Not later than 2 years after the date of 
        enactment of this Act, the Administrator shall promulgate 
        regulations to implement a comprehensive system for greenhouse 
        gas emissions reporting, inventorying, and reductions 
        registration.
            (2) Requirements.--The Administrator shall ensure, to the 
        maximum extent practicable, that--
                    (A) the comprehensive system described in paragraph 
                (1) is designed to--
                            (i) maximize completeness, transparency, 
                        and accuracy of information reported; and
                            (ii) minimize costs incurred by entities in 
                        measuring and reporting greenhouse gas 
                        emissions; and
                    (B) the regulations promulgated under paragraph (1) 
                establish procedures and protocols necessary--
                            (i) to prevent the double-counting of 
                        greenhouse gas emissions or emission reductions 
                        reported by more than 1 reporting entity;
                            (ii) to provide for corrections to errors 
                        in data submitted to the database;
                            (iii) to provide for adjustment to data by 
                        reporting entities that have had a significant 
                        organizational change (including mergers, 
                        acquisitions, and divestiture), in order to 
                        maintain comparability among data in the 
                        database over time;
                            (iv) to provide for adjustments to reflect 
                        new technologies or methods for measuring or 
                        calculating greenhouse gas emissions;
                            (v) to account for changes in registration 
                        of ownership of emission reductions resulting 
                        from a voluntary private transaction between 
                        reporting entities; and
                            (vi) to clarify the responsibility for 
                        reporting in the case of any facility owned or 
                        controlled by more than 1 entity.
            (3) Serial numbers.--Through regulations promulgated under 
        paragraph (1), the Administrator shall develop and implement a 
        system that provides--
                    (A) for the verification of submitted emissions 
                reductions registered under section 613;
                    (B) for the provision of unique serial numbers to 
                identify the registered emission reductions made by an 
                entity relative to the baseline of the entity;
                    (C) for the tracking of the registered reductions 
                associated with the serial numbers; and
                    (D) for such action as may be necessary to prevent 
                counterfeiting of the registered reductions.

SEC. 612. INVENTORY OF GREENHOUSE GAS EMISSIONS FOR COVERED ENTITIES.

    (a) In General.--Not later than July 1st of each calendar year 
after 2008, each covered entity shall submit to the Administrator a 
report that states, for the preceding calendar year, the entity-wide 
greenhouse gas emissions (as reported at the facility level), 
including--
            (1) the total quantity of direct greenhouse gas emissions 
        from stationary sources, expressed in units of carbon dioxide 
        equivalents, except those reported under paragraph (3);
            (2) the amount of petroleum products sold or imported by 
        the entity and the amount of greenhouse gases, expressed in 
        units of carbon dioxide equivalents, that would be emitted when 
        these products are used for transportation in the United 
        States, as determined by the Administrator under section 
        621(b);
            (3) the amount of hydrofluorocarbons, perfluorocarbons, or 
        sulfur hexafluoride, expressed in units of carbon dioxide 
        equivalents, that are sold or imported by the entity and will 
        ultimately be emitted in the United States, as determined by 
        the Administrator under section 621(d); and
            (4) such other categories of emissions as the Administrator 
        determines in the regulations promulgated under section 
        611(c)(1) may be practicable and useful for the purposes of 
        this Act, such as--
                    (A) indirect emissions from imported electricity, 
                heat, and steam;
                    (B) process and fugitive emissions; and
                    (C) production or importation of greenhouse gases.
    (b) Collection and Analysis of Data.--The Administrator shall 
collect and analyze information reported under subsection (a) for use 
under subtitle C.

SEC. 613. GREENHOUSE GAS REDUCTION REPORTING.

    (a) In General.--Subject to the requirements described in 
subsection (b)--
            (1) a covered entity may register greenhouse gas emission 
        reductions achieved after 1990 and before 2010 under this 
        section; and
            (2) an entity that is not a covered entity may register 
        greenhouse gas emission reductions achieved at any time since 
        1990 under this section.
    (b) Requirements.--
            (1) In general.--The requirements referred to in subsection 
        (a) are that an entity (other than an entity described in 
        paragraph (2)) shall--
                    (A) establish a baseline; and
                    (B) submit the report described in subsection 
                (c)(1).
            (2) Requirements applicable to entities entering into 
        certain agreements.--An entity that enters into an agreement 
        with a participant in the registry for the purpose of a carbon 
        sequestration project shall not be required to comply with the 
        requirements specified in paragraph (1) unless that entity is 
        required to comply with the requirements by reason of an 
        activity other than the agreement.
    (c) Reports.--
            (1) Required report.--Not later than July 1st of each 
        calendar year beginning more than 2 years after the date of 
        enactment of this Act, but subject to paragraph (3), an entity 
        described in subsection (a) shall submit to the Administrator a 
        report that states, for the preceding calendar year, the 
        entity-wide greenhouse gas emissions (as reported at the 
        facility level), including--
                    (A) the total quantity of direct greenhouse gas 
                emissions from stationary sources, expressed in units 
                of carbon dioxide equivalents;
                    (B) the amount of petroleum products sold or 
                imported by the entity and the amount of greenhouse 
                gases, expressed in units of carbon dioxide 
                equivalents, that would be emitted when these products 
                are used for transportation in the United States, as 
                determined by the Administrator under section 621(b);
                    (C) the amount of hydrofluorocarbons, 
                perfluorocarbons, or sulfur hexafluoride, expressed in 
                units of carbon dioxide equivalents, that are sold or 
                imported by the entity and will ultimately be emitted 
                in the United States, as determined by the 
                Administrator under section 621(d); and
                    (D) such other categories of emissions as the 
                Administrator determines in the regulations promulgated 
                under section 611(c)(1) may be practicable and useful 
                for the purposes of this Act, such as--
                            (i) indirect emissions from imported 
                        electricity, heat, and steam;
                            (ii) process and fugitive emissions; and
                            (iii) production or importation of 
                        greenhouse gases.
            (2) Voluntary reporting.--An entity described in subsection 
        (a) may (along with establishing a baseline and reporting 
        emissions under this section)--
                    (A) submit a report described in paragraph (1) 
                before the date specified in that paragraph for the 
                purposes of achieving and commoditizing greenhouse gas 
                reductions through use of the registry and for other 
                purposes; and
                    (B) submit to the Administrator, for inclusion in 
                the registry, information that has been verified in 
                accordance with regulations promulgated under section 
                611(c)(1) and that relates to--
                            (i) any activity that resulted in the net 
                        reduction of the greenhouse gas emissions of 
                        the entity or a net increase in sequestration 
                        by the entity that were carried out during or 
                        after 1990 and before the establishment of the 
                        database, verified in accordance with 
                        regulations promulgated under section 
                        611(c)(1), and submitted to the Administrator 
                        before the date that is 4 years after the date 
                        of enactment of this Act; and
                            (ii) with respect to the calendar year 
                        preceding the calendar year in which the 
                        information is submitted, any project or 
                        activity that resulted in the net reduction of 
                        the greenhouse gas emissions of the entity or a 
                        net increase in net sequestration by the 
                        entity.
            (3) Provision of verification information by reporting 
        entities.--Each entity that submits a report under this 
        subsection shall provide information sufficient for the 
        Administrator to verify, in accordance with measurement and 
        verification methods and standards developed under section 614, 
        that the greenhouse gas report of the reporting entity--
                    (A) has been accurately reported; and
                    (B) in the case of each voluntary report under 
                paragraph (2), represents--
                            (i) actual reductions in direct greenhouse 
                        gas emissions--
                                    (I) relative to historic emission 
                                levels of the entity; and
                                    (II) after accounting for any 
                                increases in indirect emissions 
                                described in paragraph (1)(D)(i); or
                            (ii) actual increases in net sequestration.
            (4) Failure to submit report.--An entity that participates 
        or has participated in the registry and that fails to submit a 
        report required under this subsection shall be prohibited from 
        using, or allowing another entity to use, its registered 
        emissions reductions or increases in sequestration to satisfy 
        the requirements of section 621.
            (5) Independent third-party verification.--To meet the 
        requirements of this section and section 614, an entity that is 
        required to submit a report under this section may--
                    (A) obtain independent third-party verification; 
                and
                    (B) present the results of the third-party 
                verification to the Administrator.
            (6) Availability of data.--
                    (A) In general.--The Administrator shall ensure 
                that information in the database is--
                            (i) published; and
                            (ii) accessible to the public, including in 
                        electronic format on the Internet.
                    (B) Exception.--Subparagraph (A) shall not apply in 
                any case in which the Administrator determines that 
                publishing or otherwise making available information 
                described in that subparagraph poses a risk to national 
                security or discloses confidential business information 
                that cannot be derived from information that is 
                otherwise publicly available and that would cause 
                competitive harm if published.
            (7) Data infrastructure.--The Administrator shall ensure, 
        to the maximum extent practicable, that the database uses, and 
        is integrated with, Federal, State, and regional greenhouse gas 
        data collection and reporting systems in effect as of the date 
        of enactment of this Act.
            (8) Additional issues to be considered.--In promulgating 
        the regulations under section 611(c)(1) and implementing the 
        database, the Administrator shall take into consideration a 
        broad range of issues involved in establishing an effective 
        database, including--
                    (A) the data and information systems and measures 
                necessary to identify, track, and verify greenhouse gas 
                emissions in a manner that will encourage private 
                sector trading and exchanges;
                    (B) the greenhouse gas reduction and sequestration 
                measurement and estimation methods and standards 
                applied in other countries, as applicable or relevant;
                    (C) the extent to which available fossil fuels, 
                greenhouse gas emissions, and greenhouse gas production 
                and importation data are adequate to implement the 
                database; and
                    (D) the differences in, and potential uniqueness 
                of, the facilities, operations, and business and other 
                relevant practices of persons and entities in the 
                private and public sectors that may be expected to 
                participate in the database.
    (d) Annual Report.--The Administrator shall publish an annual 
report that--
            (1) describes the total greenhouse gas emissions and 
        emission reductions reported to the database during the year 
        covered by the report;
            (2) provides entity-by-entity and sector-by-sector analyses 
        of the emissions and emission reductions reported;
            (3) describes the atmospheric concentrations of greenhouse 
        gases;
            (4) provides a comparison of current and past atmospheric 
        concentrations of greenhouse gases; and
            (5) describes the activity during the year covered by the 
        period in the trading of greenhouse gas emission allowances.

SEC. 614. MEASUREMENT AND VERIFICATION.

    (a) Standards.--
            (1) In general.--Not later than 1 year after the date of 
        enactment of this Act, the Secretary shall establish by rule, 
        in coordination with the Administrator, the Secretary of 
        Energy, and the Secretary of Agriculture, comprehensive 
        measurement and verification methods and standards to ensure a 
        consistent and technically accurate record of greenhouse gas 
        emissions, emission reductions, sequestration, and atmospheric 
        concentrations for use in the registry.
            (2) Requirements.--The methods and standards established 
        under paragraph (1) shall include--
                    (A) a requirement that a covered entity use a 
                continuous emissions monitoring system, or another 
                system of measuring or estimating emissions that is 
                determined by the Secretary to provide information with 
                precision, reliability, accessibility, and timeliness 
                similar to that provided by a continuous emissions 
                monitoring system where technologically feasible;
                    (B) establishment of standardized measurement and 
                verification practices for reports made by all entities 
                participating in the registry, taking into account--
                            (i) protocols and standards in use by 
                        entities requiring or desiring to participate 
                        in the registry as of the date of development 
                        of the methods and standards under paragraph 
                        (1);
                            (ii) boundary issues, such as leakage;
                            (iii) avoidance of double counting of 
                        greenhouse gas emissions and emission 
                        reductions;
                            (iv) protocols to prevent a covered entity 
                        from avoiding the requirements of this Act by 
                        reorganization into multiple entities that are 
                        under common control; and
                            (v) such other factors as the Secretary, in 
                        consultation with the Administrator, determines 
                        to be appropriate;
                    (C) establishment of methods of--
                            (i) estimating greenhouse gas emissions, 
                        for those cases in which the Secretary 
                        determines that methods of monitoring, 
                        measuring or estimating such emissions with 
                        precision, reliability, accessibility, and 
                        timeliness similar to that provided by a 
                        continuous emissions monitoring system are not 
                        technologically feasible at present; and
                            (ii) reporting the accuracy of such 
                        estimations;
                    (D) establishment of measurement and verification 
                standards applicable to actions taken to reduce, avoid, 
                or sequester greenhouse gas emissions;
                    (E) in coordination with the Secretary of 
                Agriculture, standards to measure the results of the 
                use of carbon sequestration and carbon recapture 
                technologies, including--
                            (i) soil carbon sequestration practices; 
                        and
                            (ii) forest preservation and reforestation 
                        activities that adequately address the issues 
                        of permanence, leakage, and verification;
                    (F) establishment of such other measurement and 
                verification standards as the Secretary, in 
                consultation with the Secretary of Agriculture, the 
                Administrator, and the Secretary of Energy, determines 
                to be appropriate;
                    (G) establishment of standards for obtaining the 
                Secretary's approval of the suitability of geological 
                storage sites that include evaluation of both the 
                geology of the site and the entity's capacity to manage 
                the site; and
                    (H) establishment of other features that, as 
                determined by the Secretary, will allow entities to 
                adequately establish a fair and reliable measurement 
                and reporting system.
    (b) Review and Revision.--The Secretary shall periodically review, 
and revise as necessary, the methods and standards developed under 
subsection (a).
    (c) Public Participation.--The Secretary shall--
            (1) make available to the public for comment, in draft form 
        and for a period of at least 90 days, the methods and standards 
        developed under subsection (a); and
            (2) after the 90-day period referred to in paragraph (1), 
        in coordination with the Secretary of Energy, the Secretary of 
        Agriculture, and the Administrator, adopt the methods and 
        standards developed under subsection (a) for use in 
        implementing the database.
    (d) Experts and Consultants.--
            (1) In general.--The Secretary may obtain the services of 
        experts and consultants in the private and nonprofit sectors in 
        accordance with section 3109 of title 5, United States Code, in 
        the areas of greenhouse gas measurement, certification, and 
        emission trading.
            (2) Available arrangements.--In obtaining any service 
        described in paragraph (1), the Secretary may use any available 
        grant, contract, cooperative agreement, or other arrangement 
        authorized by law.

          Subtitle C--Market-driven Greenhouse Gas Reductions

CHAPTER 1--EMISSION REDUCTION REQUIREMENTS; USE OF TRADEABLE ALLOWANCES

SEC. 621. COVERED ENTITIES MUST SUBMIT ALLOWANCES FOR EMISSIONS.

    (a) In General.--Beginning with calendar year 2010--
            (1) each covered entity in the electric generation, 
        industrial, and commercial sectors shall submit to the 
        Administrator one tradeable allowance for every metric ton of 
        greenhouse gases, measured in units of carbon dioxide 
        equivalents, that it emits from stationary sources, except 
        those described in paragraph (2);
            (2) each producer or importer of hydrofluorocarbons, 
        perfluorocarbons, or sulfur hexafluoride that is a covered 
        entity shall submit to the Administrator one tradeable 
        allowance for every metric ton of hydrofluorocarbons, 
        perfluorocarbons, or sulfur hexafluoride, measured in units of 
        carbon dioxide equivalents, that it produces or imports and 
        that will ultimately be emitted in the United States, as 
        determined by the Administrator under subsection (d) and
            (3) each petroleum refiner or importer that is a covered 
        entity shall submit one tradeable allowance for every unit of 
        petroleum product it sells that will produce one metric ton of 
        greenhouse gases, measured in units of carbon dioxide 
        equivalents, as determined by the Administrator under 
        subsection (b), when used for transportation.
    (b) Determination of Transportation Sector Amount.--For the 
transportation sector, the Administrator shall determine the amount of 
greenhouse gases, measured in units of carbon dioxide equivalents, that 
will be emitted when petroleum products are used for transportation.
    (c) Exception for Certain Deposited Emissions.--Notwithstanding 
subsection (a), a covered entity is not required to submit a tradeable 
allowance for any amount of greenhouse gas that would otherwise have 
been emitted from a facility under the ownership or control of that 
entity if--
            (1) the emission is deposited in a geological storage 
        facility approved by the Administrator described in section 
        614(a)(2)(G); and
            (2) the entity agrees to submit tradeable allowances for 
        any portion of the deposited emission that is subsequently 
        emitted from that facility.
    (d) Determination of Hydroflurocarbon, Perfluorocarbon, and Sulfur 
Hexafluoride Amount.--The Administrator shall determine the amounts of 
hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride, measured 
in units of carbon dioxide equivalents, that will be deemed to be 
emitted for purposes of this Act.

SEC. 622. COMPLIANCE.

    (a) In General.--
            (1) Source of tradeable allowances used.--A covered entity 
        may use a tradeable allowance to meet the requirements of this 
        section without regard to whether the tradeable allowance was 
        allocated to it under chapter 2 or acquired from another entity 
        or the Climate Change Credit Corporation established under 
        section 641.
            (2) Verification by administrator.--At various times during 
        each year, the Administrator shall determine whether each 
        covered entity has met the requirements of this section. In 
        making that determination, the Administrator shall--
                    (A) take into account the tradeable allowances 
                submitted by the covered entity to the Administrator; 
                and
                    (B) retire the serial number assigned to each such 
                tradeable allowance.
    (b) Alternative Means of Compliance.--For the years after 2010, a 
covered entity may satisfy up to 15 percent of its total allowance 
submission requirement under this section by--
            (1) submitting tradeable allowances from another nation's 
        market in greenhouse gas emissions if--
                    (A) the Secretary determines that the other 
                nation's system for trading in greenhouse gas emissions 
                is complete, accurate, and transparent and reviews that 
                determination at least once every 5 years;
                    (B) the other nation has adopted enforceable limits 
                on its greenhouse gas emissions which the tradeable 
                allowances were issued to implement; and
                    (C) the covered entity certifies that the tradeable 
                allowance has been retired unused in the other nation's 
                market;
            (2) submitting a registered net increase in sequestration, 
        as registered in the database, adjusted, if necessary, to 
        comply with the accounting standards and methods established 
        under section 651;
            (3) submitting a greenhouse gas emissions reduction (other 
        than a registered net increase in sequestration) that was 
        registered in the database by a person that is not a covered 
        entity; or
            (4) submitting credits obtained from the Administrator 
        under section 623.
    (c) Dedicated Program for Sequestration in Agricultural Soils.--If 
a covered entity chooses to satisfy 15 percent of its total allowance 
submission requirements under the provisions of subsection (b), it 
shall satisfy up to 1.5 percent of its total allowance submission 
requirement by submitting registered net increases in sequestration in 
agricultural soils, as registered in the database, adjusted, if 
necessary, to comply with the accounting standards and methods 
established under section 651.

SEC. 623. BORROWING AGAINST FUTURE REDUCTIONS.

    (a) In General.--The Administrator shall establish a program under 
which a covered entity may--
            (1) receive a credit in the current calendar year for 
        anticipated reductions in emissions in a future calendar year; 
        and
            (2) use the credit in lieu of a tradeable allowance to meet 
        the requirements of this Act for the current calendar year, 
        subject to the limitation imposed by section 622(b).
    (b) Determination of Tradeable Allowance Credits.--The 
Administrator may make credits available under subsection (a) only for 
anticipated reductions in emissions that--
            (1) are attributable to the realization of capital 
        investments in equipment, the construction, reconstruction, or 
        acquisition of facilities, or the deployment of new 
        technologies--
                    (A) for which the covered entity has executed a 
                binding contract and secured, or applied for, all 
                necessary permits and operating or implementation 
                authority;
                    (B) that will not become operational within the 
                current calendar year; and
                    (C) that will become operational and begin to 
                reduce emissions from the covered entity within 5 years 
                after the year in which the credit is used; and
            (2) will be realized within 5 years after the year in which 
        the credit is used.
    (c) Carrying Cost.--If a covered entity uses a credit under this 
section to meet the requirements of this Act for a calendar year 
(referred to as the use year), the tradeable allowance requirement for 
the year from which the credit was taken (referred to as the source 
year) shall be increased by an amount equal to--
            (1) 10 percent for each credit borrowed from the source 
        year; multiplied by
            (2) the number of years beginning after the use year and 
        before the source year.
    (d) Maximum Borrowing Period.--A credit from a year beginning more 
than 5 years after the current year may not be used to meet the 
requirements of this Act for the current year.
    (e) Failure to Achieve Reductions Generating Credit.--If a covered 
entity that uses a credit under this section fails to achieve the 
anticipated reduction for which the credit was granted for the year 
from which the credit was taken, then--
            (1) the covered entity's requirements under this Act for 
        that year shall be increased by the amount of the credit, plus 
        the amount determined under subsection (c);
            (2) any tradeable allowances submitted by the covered 
        entity for that year shall be counted first against the 
        increase in those requirements; and
            (3) the covered entity may not use credits under this 
        section to meet the increased requirements.

SEC. 624. OTHER USES OF TRADEABLE ALLOWANCES.

    (a) In General.--Subject to subsection (b)(2), tradeable allowances 
may be sold, exchanged, purchased, retired, or used as provided in this 
section.
    (b) Limitations on Intersector Trading.--
            (1) Intersector trading.--Subject to paragraph (2), a 
        covered entity in a covered sector may purchase or otherwise 
        acquire tradeable allowances from a covered entity in another 
        covered sector to satisfy the requirements of section 621.
            (2) Exception.--A covered entity in the electricity sector 
        may not purchase or otherwise acquire a tradeable allowance 
        from, or sell a tradeable allowance to, an entity in a sector 
        other than the electricity sector.
    (c) Climate Change Credit Organization.--The Climate Change Credit 
Corporation established under section 641 may sell tradeable allowances 
allocated to it under section 632(a)(2) to any covered entity or to any 
investor, broker, or dealer in such tradeable allowances. The Climate 
Change Credit Corporation shall use all proceeds from such sales in 
accordance with the provisions of section 642.
    (d) Banking of Tradeable Allowances.--Notwithstanding the 
requirements of section 621, a covered entity that has more than a 
sufficient amount of tradeable allowances to satisfy the requirements 
of section 621, may refrain from submitting a tradeable allowance to 
satisfy the requirements in order to sell, exchange, or use the 
tradeable allowance in the future.

SEC. 625. EXEMPTION OF SOURCE CATEGORIES.

    (a) In General.--The Administrator may grant an exemption from the 
requirements of this Act to a source category if the Administrator 
determines, after public notice and comment, that it is not feasible to 
measure or estimate emissions from that source category, until such 
time as measurement or estimation becomes feasible.
    (b) Reduction of Limitations.--If the Administrator exempts a 
source category under subsection (a), the Administrator shall also 
reduce the total tradeable allowances under section 631(a)(1) by the 
amount of greenhouse gas emissions that the exempted source category 
emitted in calendar year 2000, as identified in the 2000 Inventory.
    (c) Limitation on Exemption.--The Administrator may not grant an 
exemption under subsection (a) to carbon dioxide produced from fossil 
fuel.

    CHAPTER 2--ESTABLISHMENT AND ALLOCATION OF TRADEABLE ALLOWANCES

SEC. 631. ESTABLISHMENT OF TRADEABLE ALLOWANCES.

    (a) In General.--The Administrator shall promulgate regulations to 
establish tradeable allowances, denominated in units of carbon dioxide 
equivalents, for calendar years beginning after 2009, equal to--
            (1) 5896 million metric tons, measured in units of carbon 
        dioxide equivalents, reduced by
            (2) the amount of emissions of greenhouse gases in calendar 
        year 2000 from non-covered entities.
    (b) Serial Numbers.--The Administrator shall assign a unique serial 
number to each tradeable allowance established under subsection (a), 
and shall take such action as may be necessary to prevent 
counterfeiting of tradeable allowances.
    (c) Nature of Tradeable Allowances.--A tradeable allowance is not a 
property right, and nothing in this title or any other provision of law 
limits the authority of the United States to terminate or limit a 
tradeable allowance.
    (d) Non-Covered Entity.--In this section:
            (1) In general.--The term ``non-covered entity'' means an 
        entity that--
                    (A) owns or controls a source of greenhouse gas 
                emissions in the electric power, industrial, or 
                commercial sector of the United States economy (as 
                defined in the Inventory), refines or imports petroleum 
                products for use in transportation, or produces or 
                imports hydrofluorocarbons, perfluorocarbons, or sulfur 
                hexafluoride; and
                    (B) is not a covered entity.
            (2) Exception.--Notwithstanding paragraph (1), an entity 
        that is a covered entity for any calendar year beginning after 
        2009 shall not be considered to be a non-covered entity for 
        purposes of subsection (a) only because it emitted, or its 
        products would have emitted, 10,000 metric tons or less of 
        greenhouse gas, measured in units of carbon dioxide 
        equivalents, in the year 2000.

SEC. 632. DETERMINATION OF TRADEABLE ALLOWANCE ALLOCATIONS.

    (a) In General.--The Secretary shall determine--
            (1) the amount of tradeable allowances to be allocated to 
        each covered sector of that sector's allotments; and
            (2) the amount of tradeable allowances to be allocated to 
        the Climate Change Credit Corporation established under section 
        641.
    (b) Allocation Factors.--In making the determination required by 
subsection (a), the Secretary shall consider--
            (1) the distributive effect of the allocations on household 
        income and net worth of individuals;
            (2) the impact of the allocations on corporate income, 
        taxes, and asset value;
            (3) the impact of the allocations on income levels of 
        consumers and on their energy consumption;
            (4) the effects of the allocations in terms of economic 
        efficiency;
            (5) the ability of covered entities to pass through 
        compliance costs to their customers;
            (6) the degree to which the amount of allocations to the 
        covered sectors should decrease over time; and
            (7) the need to maintain the international competitiveness 
        of United States manufacturing and avoid the additional loss of 
        United States manufacturing jobs.
    (c) Allocation Recommendations and Implementation.--Before 
allocating or providing tradeable allowances under subsection (a) and 
within 24 months after the date of enactment of this Act, the Secretary 
shall submit the determinations under subsection (a) to the Senate 
Committee on Commerce, Science, and Transportation, the Senate 
Committee on Environment and Public Works, the House of Representatives 
Committee on Science, and the House of Representatives Committee on 
Energy and Commerce. The Secretary's determinations under subsection 
(a)(1), including the allocations and provision of tradeable allowances 
pursuant to that determination, are deemed to be a major rule (as 
defined in section 804(2) of title 5, United States Code), and subject 
to the provisions of chapter 8 of that title.

SEC. 633. ALLOCATION OF TRADEABLE ALLOWANCES.

    (a) In General.--Beginning with calendar year 2010 and after taking 
into account any initial allocations under section 635, the 
Administrator shall--
            (1) allocate to each covered sector that sector's 
        allotments determined by the Administrator under section 632 
        (adjusted for any such initial allocations and the allocation 
        to the Climate Change Credit Corporation established under 
        section 641); and
            (2) allocate to the Climate Change Credit Corporation 
        established under section 641 the tradeable allowances 
        allocable to that Corporation.
    (b) Intrasectorial Allotments.--The Administrator shall, by 
regulation, establish a process for the allocation of tradeable 
allowances under this section, without cost to covered entities (except 
with respect to new entrants as provided in subsection (g)), that 
will--
            (1) encourage investments that increase the efficiency of 
        the processes that produce greenhouse gas emissions;
            (2) minimize the costs to the Government of allocating the 
        tradeable allowances;
            (3) not penalize a covered entity for emissions reductions 
        made before 2010 and registered with the database; and
            (4) provide for the allocation and sale of tradeable 
        allowances to new entrants in accordance with subsection (g).
    (c) Point Source Allocation.--The Administrator shall allocate the 
tradeable allowances for the electricity generation, industrial, and 
commercial sectors to the entities owning or controlling the point 
sources of greenhouse gas emissions within that sector.
    (d) Hydrofluorocarbons, Perfluorocarbons, and Sulfur 
Hexafluoride.--The Administrator shall allocate the tradeable 
allowances for producers or importers of hydrofluorocarbons, 
perfluorocarbons, or sulfur hexafluoride to such producers or 
importers.
    (e) Special Rule for Allocation Within the Transportation Sector.--
The Administrator shall allocate the tradeable allowances for the 
transportation sector to petroleum refiners or importers that produce 
or import petroleum products that will be used as fuel for 
transportation.
    (f) Allocations to Rural Electric Cooperatives.--
            (1) In general.--The Administrator shall make the 
        allocations described in paragraph (2) each year at no cost. 
        The allocations shall be offset from the allowances allocated 
        to the Climate Change Credit Corporation.
            (2) Rural electric cooperatives.--For each electric 
        generating unit that is owned or operated by a rural electric 
        cooperative, the Administrator shall allocate allowances in an 
        amount equal to the greenhouse gas emissions of each such unit 
        in 2000, plus an amount equal to the average emissions growth 
        expected for all such units.
    (g) New Entrants.--
            (1) Allocation.--Of the tradeable allowances allocated 
        under this section to a covered sector for a calendar year, the 
        percentage of such allowances allocated to new entrants into 
        the sector--
                    (A) shall be 5 percent for calendar year 2010; and
                    (B) shall be increased by 0.5 percent for 2013 and 
                each succeeding calendar year, except that such total 
                percentage shall not exceed 10 percent.
            (2) Auctions.--For calendar year 2010 and each subsequent 
        calendar year, the Administrator shall conduct an auction for 
        the purpose of selling to new entrants in each covered sector 
        the tradeable allowances allocated for such purpose under 
        paragraph (1).

SEC. 634. ENSURING TARGET ADEQUACY.

    (a) In General.--Beginning 2 years after the date of enactment of 
this Act, the Under Secretary of Commerce for Oceans and Atmosphere 
shall review the allowances established by section 631 no less 
frequently than biennially--
            (1) to re-evaluate the levels established by that section, 
        after taking into account the best available science and the 
        most currently available data, and
            (2) to re-evaluate the environmental and public health 
        impacts of specific concentration levels of greenhouse gases,
to determine whether the allowances established by subsection (a) 
continue to be consistent with the objective of the United Nations' 
Framework Convention on Climate Change of stabilizing levels of 
greenhouse gas emissions at a level that will prevent dangerous 
anthropogenic interference with the climate system.
    (b) Review of 2010 Levels.--The Under Secretary shall specifically 
review in 2008 the level established under section 631(a)(1), and 
transmit a report on his reviews, together with any recommendations, 
including legislative recommendations, for modification of the levels, 
to the Senate Committee on Commerce, Science, and Transportation, the 
Senate Committee on Environment and Public Works, the House of 
Representatives Committee on Science, and the House of Representatives 
Committee on Energy and Commerce.

SEC. 635. INITIAL ALLOCATIONS FOR EARLY PARTICIPATION AND ACCELERATED 
              PARTICIPATION.

    Before making any allocations under section 633, the Administrator 
shall allocate--
            (1) to any covered entity an amount of tradeable allowances 
        equivalent to the amount of greenhouse gas emissions reductions 
        registered by that covered entity in the national greenhouse 
        gas database if--
                    (A) the covered entity has requested to use the 
                registered reduction in the year of allocation;
                    (B) the reduction was registered prior to 2010; and
                    (C) the Administrator retires the unique serial 
                number assigned to the reduction under section 
                611(c)(3); and
            (2) to any covered entity that has entered into an 
        accelerated participation agreement under section 636, such 
        tradeable allowances as the Administrator has determined to be 
        appropriate under that section.

SEC. 636. BONUS FOR ACCELERATED PARTICIPATION.

    (a) In General.--If a covered entity executes an agreement with the 
Administrator under which it agrees to reduce its level of greenhouse 
gas emissions to a level no greater than the level of its greenhouse 
gas emissions for calendar year 1990 by the year 2010, then, for the 6-
year period beginning with calendar year 2010, the Administrator 
shall--
            (1) provide additional tradeable allowances to that entity 
        when allocating allowances under section 634 in order to 
        recognize the additional emissions reductions that will be 
        required of the covered entity;
            (2) allow that entity to satisfy 20 percent of its 
        requirements under section 621 by--
                    (A) submitting tradeable allowances from another 
                nation's market in greenhouse gas emissions under the 
                conditions described in section 622(b)(1);
                    (B) submitting a registered net increase in 
                sequestration, as registered in the National Greenhouse 
                Gas Database established under section 611, and as 
                adjusted by the appropriate sequestration discount rate 
                established under section 651; or
                    (C) submitting a greenhouse gas emission reduction 
                (other than a registered net increase in sequestration) 
                that was registered in the National Greenhouse Gas 
                Database by a person that is not a covered entity.
    (b) Termination.--An entity that executes an agreement described in 
subsection (a) may terminate the agreement at any time.
    (c) Failure to Meet Commitment.--If an entity that executes an 
agreement described in subsection (a) fails to achieve the level of 
emissions to which it committed by calendar year 2010--
            (1) its requirements under section 621 shall be increased 
        by the amount of any tradeable allowances provided to it under 
        subsection (a)(1); and
            (2) any tradeable allowances submitted thereafter shall be 
        counted first against the increase in those requirements.

              CHAPTER 3--CLIMATE CHANGE CREDIT CORPORATION

SEC. 641. ESTABLISHMENT.

    (a) In General.--The Climate Change Credit Corporation is 
established as a nonprofit corporation without stock. The Corporation 
shall not be considered to be an agency or establishment of the United 
States Government.
    (b) Applicable Laws.--The Corporation shall be subject to the 
provisions of this title and, to the extent consistent with this title, 
to the District of Columbia Business Corporation Act.
    (c) Board of Directors.--The Corporation shall have a board of 
directors of 5 individuals who are citizens of the United States, of 
whom 1 shall be elected annually by the board to serve as chairman. No 
more than 3 members of the board serving at any time may be affiliated 
with the same political party. The members of the board shall be 
appointed by the President of the United States, by and with the advice 
and consent of the Senate and shall serve for terms of 5 years.

SEC. 642. PURPOSES AND FUNCTIONS.

    (a) Trading.--The Corporation--
            (1) shall receive and manage tradeable allowances allocated 
        to it under section 633(a)(2); and
            (2) shall buy and sell tradeable allowances, whether 
        allocated to it under that section or obtained by purchase, 
        trade, or donation from other entities; but
            (3) may not retire tradeable allowances unused.
    (b) Use of Tradeable Allowances and Proceeds.--
            (1) In general.--The Corporation shall use the tradeable 
        allowances, and proceeds derived from its trading activities in 
        tradeable allowances, to reduce costs borne by consumers as a 
        result of the greenhouse gas reduction requirements of this 
        Act. The reductions--
                    (A) may be obtained by buy-down, subsidy, 
                negotiation of discounts, consumer rebates, or 
                otherwise;
                    (B) shall be, as nearly as possible, equitably 
                distributed across all regions of the United States; 
                and
                    (C) may include arrangements for preferential 
                treatment to consumers who can least afford any such 
                increased costs.
            (2) Transition assistance to dislocated workers and 
        communities.--The Corporation shall allocate a percentage of 
        the proceeds derived from its trading activities in tradeable 
        allowances to provide transition assistance to dislocated 
        workers and communities. Transition assistance may take the 
        form of--
                    (A) grants to employers, employer associations, and 
                representatives of employees--
                            (i) to provide training, adjustment 
                        assistance, and employment services to 
                        dislocated workers; and
                            (ii) to make income-maintenance and needs-
                        related payments to dislocated workers; and
                    (B) grants to State and local governments to assist 
                communities in attracting new employers or providing 
                essential local government services.
            (3) Phase-out of transition assistance.--The percentage 
        allocated by the Corporation under paragraph (2)--
                    (A) shall be 20 percent for 2010;
                    (B) shall be reduced by 2 percentage points each 
                year thereafter; and
                    (C) may not be reduced below zero.
            (4) Technology deployment programs.--The Corporation shall 
        establish and carry out a program, through direct grants, 
        revolving loan programs, or other financial measures, to 
        provide support for the deployment of technology to assist in 
        compliance with this Act by distributing the proceeds from no 
        less than 10 percent of the total allowances allocated to it. 
        The support shall include the following:
                    (A) Coal gasification combined-cycle and geological 
                carbon storage program.--The Corporation shall 
                establish and carry out a program, through direct 
                grants, to provide incentives for the repowering of 
                existing facilities or construction of new facilities 
                producing electricity or other products from coal 
                gasification combined-cycle plants that capture and 
                geologically store at least 90 percent of the carbon 
                dioxide produced at the facility in accordance with 
                requirements established by the Administrator to ensure 
                the permanence of the storage and that such storage 
                will not cause or contribute to significant adverse 
                effects on public health or the environment. The 
                Corporation shall ensure that no less than 20 percent 
                of the funding under this program is distributed to 
                rural electric cooperatives.
                    (B) Agricultural programs.--The Corporation shall 
                establish and carry out a program, through direct 
                grants, revolving loan programs, or other financial 
                measures, to provide incentives for greenhouse gas 
                emissions reductions or net increases in greenhouse gas 
                sequestration on agricultural lands. The program shall 
                include incentives for--
                            (i) production of wind energy on 
                        agricultural lands;
                            (ii) agricultural management practices that 
                        achieve verified, incremental increases in net 
                        carbon sequestration, in accordance with the 
                        requirements established by the Administrator 
                        under section 651; and
                            (iii) production of renewable fuels that, 
                        after consideration of the energy needed to 
                        produce such fuels, result in a net reduction 
                        in greenhouse gas emissions.
    (c) Coordination With Other Benefits.--The Corporation shall not 
provide assistance under this section to any person if such person has 
received assistance under section 212 or 731.

             CHAPTER 4--SEQUESTRATION ACCOUNTING; PENALTIES

SEC. 651. PENALTIES.

    Any covered entity that fails to meet the requirements of section 
621 for a year shall be liable for a civil penalty, payable to the 
Administrator, equal to thrice the market value (determined as of the 
last day of the year at issue) of the tradeable allowances that would 
be necessary for that covered entity to meet those requirements on the 
date of the emission that resulted in the violation.

SEC. 652. SEQUESTRATION ACCOUNTING.

    (a) Sequestration Accounting.--If a covered entity uses a 
registered net increase in sequestration to satisfy the requirements of 
section 621 for any year, that covered entity shall submit information 
to the Administrator every 5 years thereafter sufficient to allow the 
Administrator to determine, using the methods and standards created 
under section 614, whether that net increase in sequestration still 
exists. Unless the Administrator determines that the net increase in 
sequestration continues to exist, the covered entity shall offset any 
loss of sequestration by submitting additional tradeable allowances of 
equivalent amount in the calender year following that determination.
    (b) Regulations Required.--The Secretary, acting through the Under 
Secretary of Commerce for Science and Technology, in coordination with 
the Secretary of Agriculture, the Secretary of Energy, and the 
Administrator, shall issue regulations establishing the sequestration 
accounting rules for all classes of sequestration projects.
    (c) Criteria for Regulations.--In issuing regulations under this 
section, the Secretary shall use the following criteria:
            (1) If the range of possible amounts of net increase in 
        sequestration for a particular class of sequestration project 
        is not more than 10 percent of the median of that range, the 
        amount of sequestration awarded shall be equal to the median 
        value of that range.
            (2) If the range of possible amounts of net increase in 
        sequestration for a particular class of sequestration project 
        is more than 10 percent of the median of that range, the amount 
        of sequestration awarded shall be equal to the fifth percentile 
        of that range.
            (3) The regulations shall include procedures for accounting 
        for potential leakage from sequestration projects and for 
        ensuring that any registered increase in sequestration is in 
        addition to that which would have occurred if this Act had not 
        been enacted.
    (d) Updates.--The Secretary shall update the sequestration 
accounting rules for every class of sequestration project at least once 
every 5 years.

                     TITLE VII--ENERGY INDEPENDENCE

                  Subtitle A--Renewable Fuels Standard

SEC. 701. RENEWABLE FUELS STANDARD.

    (a) In General.--Section 211 of the Clean Air Act (42 U.S.C. 7545) 
is amended--
            (1) by redesignating subsection (o) as subsection (q); and
            (2) by inserting after subsection (n) the following:
    ``(o) Renewable Fuel Program.--
            ``(1) Definitions.--In this subsection:
                    ``(A) Cellulosic biomass ethanol.--The term 
                `cellulosic biomass ethanol' means ethanol derived from 
                any nonhazardous lignocellulosic or hemicellulosic 
                matter that is available on a renewable or recurring 
                basis, including--
                            ``(i) dedicated energy crops and trees;
                            ``(ii) the following forest-related 
                        resources--
                                    ``(I) harvesting residue
                                    ``(II) pre-commercial thinnings;
                                    ``(III) slash; and
                                    ``(IV) bush;
                            ``(iii) plants;
                            ``(iv) grasses;
                            ``(v) agricultural residues;
                            ``(vi) fibers;
                            ``(vii) animal wastes and other waste 
                        materials; and
                            ``(viii) municipal solid waste.
                    ``(B) Renewable fuel.--
                            ``(i) In general.--The term `renewable 
                        fuel' means motor vehicle fuel that--
                                    ``(I)(aa) is produced from grain, 
                                starch, oilseeds, or other biomass; or
                                    ``(bb) is natural gas produced from 
                                a biogas source, including a landfill, 
                                sewage waste treatment plant, feedlot, 
                                or other place where decaying organic 
                                material is found; and
                                    ``(II) is used to replace or reduce 
                                the quantity of fossil fuel present in 
                                a fuel mixture used to operate a motor 
                                vehicle.
                            ``(ii) Inclusion.--The term `renewable 
                        fuel' includes cellulosic biomass ethanol and 
                        biodiesel (as defined in section 312(f) of the 
                        Energy Policy Act of 1992).
                    ``(C) Small refinery.--The term `small refinery' 
                means a refinery for which average aggregate daily 
                crude oil throughput for the calendar year (as 
                determined by dividing the aggregate throughput for the 
                calendar year by the number of days in the calendar 
                year) does not exceed 75,000 barrels.
            ``(2) Renewable fuel program.--
                    ``(A) In general.--Not later than the beginning of 
                calendar year 2007, the Administrator shall promulgate 
                regulations ensuring that gasoline sold or dispensed to 
                consumers in the United States, on an annual average 
                basis, contains the applicable volume of renewable fuel 
                as specified in subparagraph (B). Regardless of the 
                date of promulgation, such regulations shall contain 
                compliance provisions for refiners, blenders, and 
                importers, as appropriate, to ensure that the 
                requirements of this subsection are met, but shall not 
                restrict where renewables can be used, or impose any 
                per-gallon obligation for the use of renewables. If the 
                Administrator does not promulgate such regulations, the 
                applicable percentage, on a volume percentage of 
                gasoline basis, shall be 1.62 in 2007.
                    ``(B) Applicable volume.--
                            ``(i) Calendar years 2007 through 2013.--
                        For the purpose of subparagraph (A), the 
                        applicable volume for any of calendar years 
                        2007 through 2013 shall be determined in 
                        accordance with the following table:


 
 
 
``Calendar year:                    (In billions of gallons)
  2007............................  4.0
  2008............................  4.5
  2009............................  5.1
  2010............................  5.7
  2011............................  6.4
  2012............................  7.2
  2013............................  8.1

                            ``(ii) Calendar year 2014 and thereafter.--
                        For the purpose of subparagraph (A), the 
                        applicable volume for calendar year 2014 and 
                        each calendar year thereafter shall be equal to 
                        the product obtained by multiplying--
                                    ``(I) the number of gallons of 
                                gasoline that the Administrator 
                                estimates will be sold or introduced 
                                into commerce in the calendar year; and
                                    ``(II) the ratio that--
                                            ``(aa) 8.1 billion gallons 
                                        of renewable fuels; bears to
                                            ``(bb) the number of 
                                        gallons of gasoline sold or 
                                        introduced into commerce in 
                                        calendar year 2013.
                            ``(iii) Cellulosic biomass ethanol.--For 
                        the purpose of subparagraph (A), the applicable 
                        volume shall include, as a percentage of the 
                        total applicable volume, cellulosic biomass 
                        ethanol as follows:
                                    ``(I) For calendar year 2007, 1.0 
                                percent.
                                    ``(II) For calendar year 2008, 1.5 
                                percent.
                                    ``(III) For calendar year 2009, 2.0 
                                percent.
                                    ``(IV) For calendar year 2010, 2.5 
                                percent.
                                    ``(V) For calendar year 2011, 3.0 
                                percent.
                                    ``(VI) For calendar year 2012, 3.5 
                                percent.
                                    ``(VII) For calendar year 2013 and 
                                each subsequent calendar year, 4.0 
                                percent.
            ``(3) Applicable percentages.--Not later than October 31 of 
        each calendar year, through 2012, the Administrator of the 
        Energy Information Administration shall provide the 
        Administrator an estimate of the volumes of gasoline sales in 
        the United States for the coming calendar year. Based on such 
        estimates, the Administrator shall by November 30 of each 
        calendar year, through 2012, determine and publish in the 
        Federal Register, the renewable fuel obligation, on a volume 
        percentage of gasoline basis, applicable to refiners, blenders, 
        distributors and importers, as appropriate, for the coming 
        calendar year, to ensure that the requirements of paragraph (2) 
        are met. For each calendar year, the Administrator shall 
        establish a single applicable percentage that applies to all 
        parties, and make provision to avoid redundant obligations. In 
        determining the applicable percentages, the Administrator shall 
        make adjustments to account for the use of renewable fuels by 
        exempt small refineries during the previous year.
            ``(4) Cellulosic biomass ethanol.--For the purpose of 
        paragraph (2), 1 gallon of cellulosic biomass ethanol shall be 
        considered to be the equivalent of 3.0 gallons of renewable 
        fuel.
            ``(5) Credit program.--
                    ``(A) In general.--The regulations promulgated to 
                carry out this subsection shall provide for the 
                generation of an appropriate amount of credits by any 
                person that refines, blends, or imports gasoline that 
                contains a quantity of renewable fuel that is greater 
                than the quantity required under paragraph (2). Such 
                regulations shall provide for the generation of an 
                appropriate amount of credits for biodiesel fuel. If a 
                small refinery notifies the Administrator that it 
                waives the exemption provided by this Act, the 
                regulations shall provide for the generation of credits 
                by the small refinery beginning in the year following 
                such notification.
                    ``(B) Use of credits.--A person that generates 
                credits under subparagraph (A) may use the credits, or 
                transfer all or a portion of the credits to another 
                person, for the purpose of complying with paragraph 
                (2).
                    ``(C) Life of credits.--A credit generated under 
                this paragraph shall be valid to show compliance--
                            ``(i) in the calendar year in which the 
                        credit was generated or the next calendar year, 
                        or
                            ``(ii) in the calendar year in which the 
                        credit was generated or the next two 
                        consecutive calendar years if the Administrator 
                        promulgates regulations under paragraph (6).
                    ``(D) Inability to purchase sufficient credits.--
                The regulations promulgated to carry out this 
                subsection shall include provisions allowing any person 
                that is unable to generate or purchase sufficient 
                credits to meet the requirements under paragraph (2) to 
                carry forward a renewables deficit provided that, in 
                the calendar year following the year in which the 
                renewables deficit is created, such person shall 
                achieve compliance with the renewables requirement 
                under paragraph (2), and shall generate or purchase 
                additional renewables credits to offset the renewables 
                deficit of the previous year.
            ``(6) Seasonal variations in renewable fuel use.--
                    ``(A) Study.--For each of calendar years 2007 
                through 2013, the Administrator of the Energy 
                Information Administration shall conduct a study of 
                renewable fuels blending to determine whether there are 
                excessive seasonal variations in the use of renewable 
                fuels.
                    ``(B) Regulation of excessive seasonal 
                variations.--If, for any calendar year, the 
                Administrator of the Energy Information Administration, 
                based on the study under subparagraph (A), makes the 
                determinations specified in subparagraph (C), the 
                Administrator shall promulgate regulations to ensure 
                that 35 percent or more of the quantity of renewable 
                fuels necessary to meet the requirement of paragraph 
                (2) is used during each of the periods specified in 
                subparagraph (D) of each subsequent calendar year.
                    ``(C) Determinations.--The determinations referred 
                to in subparagraph (B) are that--
                            ``(i) less than 35 percent of the quantity 
                        of renewable fuels necessary to meet the 
                        requirement of paragraph (2) has been used 
                        during one of the periods specified in 
                        subparagraph (D) of the calendar year; and
                            ``(ii) a pattern of excessive seasonal 
                        variation described in clause (i) will continue 
                        in subsequent calendar years.
                    ``(D) Periods.--The two periods referred to in this 
                paragraph are--
                            ``(i) April through September; and
                            ``(ii) January through March and October 
                        through December.
                    ``(E) Exclusions.--Renewable fuels blended or 
                consumed in 2007 in a State which has received a waiver 
                under section 209(b) shall not be included in the study 
                in subparagraph (A).
            ``(7) Waivers.--
                    ``(A) In general.--The Administrator, in 
                consultation with the Secretary of Agriculture and the 
                Secretary of Energy, may waive the requirement of 
                paragraph (2) in whole or in part on petition by one or 
                more States by reducing the national quantity of 
                renewable fuel required under this subsection--
                            ``(i) based on a determination by the 
                        Administrator, after public notice and 
                        opportunity for comment, that implementation of 
                        the requirement would severely harm the economy 
                        or environment of a State, a region, or the 
                        United States; or
                            ``(ii) based on a determination by the 
                        Administrator, after public notice and 
                        opportunity for comment, that there is an 
                        inadequate domestic supply or distribution 
                        capacity to meet the requirement.
                    ``(B) Petitions for waivers.--The Administrator, in 
                consultation with the Secretary of Agriculture and the 
                Secretary of Energy, shall approve or disapprove a 
                State petition for a waiver of the requirement of 
                paragraph (2) within 90 days after the date on which 
                the petition is received by the Administrator.
                    ``(C) Termination of waivers.--A waiver granted 
                under subparagraph (A) shall terminate after 1 year, 
                but may be renewed by the Administrator after 
                consultation with the Secretary of Agriculture and the 
                Secretary of Energy.
            ``(8) Study and waiver for initial year of program.--Not 
        later than 180 days after the date of the enactment of this 
        subsection, the Secretary of Energy (in this paragraph referred 
        to as the `Secretary') shall complete for the Administrator a 
        study assessing whether the renewable fuels requirement under 
        paragraph (2) will likely result in significant adverse 
        consumer impacts in 2007, on a national, regional, or State 
        basis. Such study shall evaluate renewable fuel supplies and 
        prices, blendstock supplies, and supply and distribution system 
        capabilities. Based on such study, the Secretary shall make 
        specific recommendations to the Administrator regarding waiver 
        of the requirements of paragraph (2), in whole or in part, to 
        avoid any such adverse impacts. Within 270 days after the date 
        of the enactment of this subsection, the Administrator shall, 
        consistent with the recommendations of the Secretary waive, in 
        whole or in part, the renewable fuels requirement under 
        paragraph (2) by reducing the national quantity of renewable 
        fuel required under this subsection in 2007. This provision 
        shall not be interpreted as limiting the Administrator's 
        authority to waive the requirements of paragraph (2) in whole, 
        or in part, under paragraph (7), pertaining to waivers.
            ``(9) Small refineries.--
                    ``(A) In general.--The requirement of paragraph (2) 
                shall not apply to small refineries until January 1, 
                2011. Not later than December 31, 2009, the Secretary 
                of Energy shall complete for the Administrator a study 
                to determine whether the requirement of paragraph (2) 
                would impose a disproportionate economic hardship on 
                small refineries. For any small refinery that the 
                Secretary of Energy determines would experience a 
                disproportionate economic hardship, the Administrator 
                shall extend the small refinery exemption for such 
                small refinery for no less than two additional years.
                    ``(B) Economic hardship.--
                            ``(i) Extension of exemption.--A small 
                        refinery may at any time petition the 
                        Administrator for an extension of the exemption 
                        from the requirement of paragraph (2) for the 
                        reason of disproportionate economic hardship. 
                        In evaluating a hardship petition, the 
                        Administrator, in consultation with the 
                        Secretary of Energy, shall consider the 
                        findings of the study under subparagraph (A) in 
                        addition to other economic factors.
                            ``(ii) Deadline for action on petitions.--
                        The Administrator shall act on any petition 
                        submitted by a small refinery for a hardship 
                        exemption not later than 90 days after the 
                        receipt of the petition.
                    ``(C) Credit program.--If a small refinery notifies 
                the Administrator that it waives the exemption provided 
                by this paragraph, the regulations shall provide for 
                the generation of credits by the small refinery 
                beginning in the year following such notification.
                    ``(D) Opt-in for small refiners.--A small refinery 
                shall be subject to the requirements of this subsection 
                if it notifies the Administrator that it waives the 
                exemption under subparagraph (A).''.
    (b) Penalties and Enforcement.--Section 211(d) of the Clean Air Act 
(42 U.S.C. 7545(d)) is amended--
            (1) in paragraph (1)--
                    (A) in the first sentence, by striking ``or (n)'' 
                each place it appears and inserting ``(n), or (o)''; 
                and
                    (B) in the second sentence, by striking ``or (m)'' 
                and inserting ``(m), or (o)''; and
            (2) in the first sentence of paragraph (2), by striking 
        ``and (n)'' each place it appears and inserting ``(n), and 
        (o)''.
    (c) Exclusion From Ethanol Waiver.--Section 211(h) of the Clean Air 
Act (42 U.S.C. 7545(h)) is amended--
            (1) by redesignating paragraph (5) as paragraph (6); and
            (2) by inserting after paragraph (4) the following:
            ``(5) Exclusion from ethanol waiver.--
                    ``(A) Promulgation of regulations.--Upon 
                notification, accompanied by supporting documentation, 
                from the Governor of a State that the Reid vapor 
                pressure limitation established by paragraph (4) will 
                increase emissions that contribute to air pollution in 
                any area in the State, the Administrator shall, by 
                regulation, apply, in lieu of the Reid vapor pressure 
                limitation established by paragraph (4), the Reid vapor 
                pressure limitation established by paragraph (1) to all 
                fuel blends containing gasoline and 10 percent 
                denatured anhydrous ethanol that are sold, offered for 
                sale, dispensed, supplied, offered for supply, 
                transported or introduced into commerce in the area 
                during the high ozone season.
                    ``(B) Deadline for promulgation.--The Administrator 
                shall promulgate regulations under subparagraph (A) not 
                later than 90 days after the date of receipt of a 
                notification from a Governor under that subparagraph.
                    ``(C) Effective date.--
                            ``(i) In general.--With respect to an area 
                        in a State for which the Governor submits a 
                        notification under subparagraph (A), the 
                        regulations under that subparagraph shall take 
                        effect on the later of--
                                    ``(I) the first day of the first 
                                high ozone season for the area that 
                                begins after the date of receipt of the 
                                notification; or
                                    ``(II) 1 year after the date of 
                                receipt of the notification.
                            ``(ii) Extension of effective date based on 
                        determination of insufficient supply.--
                                    ``(I) In general.--If, after 
                                receipt of a notification with respect 
                                to an area from a Governor of a State 
                                under subparagraph (A), the 
                                Administrator determines, on the 
                                Administrator's own motion or on 
                                petition of any person and after 
                                consultation with the Secretary of 
                                Energy, that the promulgation of 
                                regulations described in subparagraph 
                                (A) would result in an insufficient 
                                supply of gasoline in the State, the 
                                Administrator, by regulation--
                                            ``(aa) shall extend the 
                                        effective date of the 
                                        regulations under clause (i) 
                                        with respect to the area for 
                                        not more than 1 year; and
                                            ``(bb) may renew the 
                                        extension under item (aa) for 
                                        two additional periods, each of 
                                        which shall not exceed 1 year.
                                    ``(II) Deadline for action on 
                                petitions.--The Administrator shall act 
                                on any petition submitted under 
                                subclause (I) not later than 180 days 
                                after the date of receipt of the 
                                petition.''.
    (d) Survey of Renewable Fuel Market.--
            (1) Survey and report.--Not later than December 1, 2008, 
        and annually thereafter, the Administrator shall--
                    (A) conduct, with respect to each conventional 
                gasoline use area and each reformulated gasoline use 
                area in each State, a survey to determine the market 
                shares of--
                            (i) conventional gasoline containing 
                        ethanol;
                            (ii) reformulated gasoline containing 
                        ethanol;
                            (iii) conventional gasoline containing 
                        renewable fuel; and
                            (iv) reformulated gasoline containing 
                        renewable fuel; and
                    (B) submit to the Congress, and make publicly 
                available, a report on the results of the survey under 
                subparagraph (A).
            (2) Recordkeeping and reporting requirements.--The 
        Administrator may require any refiner, blender, or importer to 
        keep such records and make such reports as are necessary to 
        ensure that the survey conducted under paragraph (1) is 
        accurate. The Administrator shall rely, to the extent 
        practicable, on existing reporting and recordkeeping 
        requirements to avoid duplicative requirements.
            (3) Applicable law.--Activities carried out under this 
        subsection shall be conducted in a manner designed to protect 
        confidentiality of individual responses.

SEC. 702. ELIMINATION OF OXYGEN CONTENT REQUIREMENT FOR REFORMULATED 
              GASOLINE.

    (a) Elimination.--
            (1) In general.--Section 211(k) of the clean air act (42 
        U.S.C. 7545(k)) is amended--
                    (A) In paragraph (2)--
                            (i) in the second sentence of subparagraph 
                        (A), by striking ``(including the oxygen 
                        content requirement contained in subparagraph 
                        (B))'';
                            (ii) by striking subparagraph (B); and
                            (iii) by redesignating subparagraphs (C) 
                        and (D) as subparagraphs (B) and (C), 
                        respectively;
                    (B) in paragraph (3)(A), by striking clause (v); 
                and
                    (C) In paragraph (7)--
                            (i) In subparagraph (A)
                                    (I) by striking clause (i); and
                                    (II) by redesignating clauses (ii) 
                                and (iii) as clauses (i) and (ii), 
                                respectively; and
                            (ii) in subparagraph (C)--
                                    (I) by striking clause (ii); and
                                    (II) by redesignating clause (iii) 
                                as clause (ii).
            (2) Effective date.--The amendments made by paragraph (1) 
        take effect on the date that is 1 year after the date of 
        enactment of this Act, except that the amendments shall take 
        effect upon that date of enactment in any State that has 
        received a waiver under section 209(b) of the Clean Air Act (42 
        U.S.C. 7543(b)).
    (b) Maintenance of Toxic Air Pollutant Emission Reductions.--
Section 211(k)(1) of the Clean Air Act (42 U.S.C. 7545(k)(1)) is 
amended--
            (1) by striking ``Within 1 year after the enactment of the 
        Clean Air Act Amendments of 1990,'' and inserting the 
        following:
            ``(A) In general.--Not later than November 15, 1991,''; and
            (2) by adding at the end the following:
                    ``(B) Maintenance of toxic air pollutant emissions 
                reductions from reformulated gasoline.--
                            ``(i) Definition of padd.--In this 
                        subparagraph, the term `PADD' means a Petroleum 
                        Administration for Defense District
                            ``(ii) Regulations regarding emissions of 
                        toxic air pollutants.--Not later than 270 days 
                        after the date of enactment of this 
                        subparagraph, the Administrator shall 
                        establish, for each refinery or importer, 
                        standards for toxic air pollutants from use of 
                        the reformulated gasoline produced or 
                        distributed by the refinery or importer that 
                        maintain the reduction of the average annual 
                        aggregate emissions of toxic air pollutants for 
                        reformulated gasoline produced or distributed 
                        by the refinery or importer during calendar 
                        years 2002 and 2003, determined on the basis of 
                        data collected by the Administrator with 
                        respect to the refinery or importer.
                            ``(iii) Standards applicable to specific 
                        refineries or importers.--
                                    ``(I) Applicability of standards.--
                                For any calendar year, the standards 
                                applicable to a refinery or importer 
                                under clause (ii) shall apply to the 
                                quantity of gasoline produced or 
                                distributed by the refinery or importer 
                                in the calendar year only to the extent 
                                that the quantity is less than or equal 
                                to the average annual quantity of 
                                reformulated gasoline produced or 
                                distributed by the refinery or importer 
                                during calendar years 2002 and 2003.
                                    ``(II) Applicability of other 
                                standards.--For any calendar year, the 
                                quantity of gasoline produced or 
                                distributed by a refinery or importer 
                                that is in excess of the quantity 
                                subject to subclause (I) shall be 
                                subject to standards for toxic air 
                                pollutants promulgated under 
                                subparagraph (A) and paragraph (3)(B).
                            ``(iv) Credit program.--The Administrator 
                        shall provide for the granting and use of 
                        credits for emissions of toxic air pollutants 
                        in the same manner as provided in paragraph 
                        (7).
                            ``(v) Regional protection of toxics 
                        reduction baselines.--
                                    ``(I) In general.--Not later than 
                                60 days after the date of enactment of 
                                this subparagraph, and not later than 
                                April 1 of each calendar year that 
                                begins after that date of enactment, 
                                the Administrator shall publish in the 
                                Federal Register a report that 
                                specifies, with respect to the previous 
                                calendar year--
                                            ``(aa) the quantity of 
                                        reformulated gasoline produced 
                                        that is in excess of the 
                                        average annual quantity of 
                                        reformulated gasoline produced 
                                        in 2002 and 2003; and
                                            ``(bb) the reduction of the 
                                        average annual aggregate 
                                        emissions of toxic air 
                                        pollutants in each PADD, based 
                                        on retail survey data or data 
                                        from other appropriate sources.
                                    ``(II) Effect of failure to 
                                maintain aggregate toxics reductions.--
                                If, in any calendar year, the reduction 
                                of the average annual aggregate 
                                emissions of toxic air pollutants in a 
                                PADD fails to meet or exceed the 
                                reduction of the average annual 
                                aggregate emissions of toxic air 
                                pollutants in the PADD in calendar 
                                years 2002 and 2003, the Administrator, 
                                not later than 90 days after the date 
                                of publication of the report for the 
                                calendar year under subclause (I), 
                                shall--
                                            ``(aa) identify, to the 
                                        maximum extent practicable, the 
                                        reasons for the failure, 
                                        including the sources, volumes, 
                                        and characteristics of 
                                        reformulated gasoline that 
                                        contributed to the failure; and
                                            ``(bb) promulgate revisions 
                                        to the regulations promulgated 
                                        under clause (ii), to take 
                                        effect not earlier than 180 
                                        days but not later than 270 
                                        days after the date of 
                                        promulgation, to provide that, 
                                        notwithstanding clause 
                                        (iii)(II), all reformulated 
                                        gasoline produced or 
                                        distributed at each refinery or 
                                        importer shall meet the 
                                        standards applicable under 
                                        clause (ii) not later than 
                                        April 1 of the year following 
                                        the report under this subclause 
                                        and for subsequent years.
                            ``(vi) Regulations to control hazardous air 
                        pollutants from motor vehicles and motor 
                        vehicle fuels.--Not later than July 1, 2006, 
                        the Administrator shall promulgate final 
                        regulations to control hazardous air pollutants 
                        from motor vehicles and motor vehicle fuels, as 
                        provided for in section 80.1045 of title 40, 
                        Code of Federal Regulations (as in effect on 
                        the date of enactment of this subparagraph).''.
    (c) Consolidation in Reformulated Gasoline Regulations.--Not later 
than 180 days after the date of enactment of this Act, the 
Administrator of the Environmental Protection Agency shall revise the 
reformulated gasoline regulations under subpart D of part 80 of title 
40, Code of Federal Regulations (or any successor regulations), to 
consolidate the regulations applicable to VOC-Control Regions 1 and 2 
under section 80.41 of that title by eliminating the less stringent 
requirements applicable to gasoline designated for VOC-Control Region 2 
and instead applying the more stringent requirements applicable to 
gasoline designated for VOC-Control Region 1.
    (d) Authority of Administrator.--Nothing in this section affects or 
prejudices any legal claim or action with respect to regulations 
promulgated by the Administrator of the Environmental Protection Agency 
before the date of enactment of this act regarding--
            (1) emissions of toxic air pollutants from motor vehicles; 
        or
            (2) the adjustment of standards applicable to a specific 
        refinery or importer made under the prior regulations.
    (e) Determination Regarding a State Petition.--Section 211(k) of 
the Clean Air Act (42 U.S.C. 7545(k)) is amended by inserting after 
paragraph (10) the following:
            ``(11) Determination regarding a state petition.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this section, not later than 30 days after 
                the date of enactment of this paragraph, the 
                Administrator shall determine the adequacy of any 
                petition received from a Governor of a State to exempt 
                gasoline sold in that State from the requirements under 
                paragraph (2)(B).
                    ``(B) Approval.--If a determination under 
                subparagraph (A) is not made by the date that is 30 
                days after the date of enactment of this paragraph, the 
                petition shall be considered to be approved.''.

SEC. 703. PUBLIC HEALTH AND ENVIRONMENTAL IMPACTS OF FUELS AND FUEL 
              ADDITIVES.

    Section 211(b) of the Clean Air Act (42 U.S.C. 7545(b)) is 
amended--
            (1) in paragraph (2)--
                    (A) by striking ``may also'' and inserting ``shall, 
                on a regular basis,''; and
                    (B) by striking subparagraph (A) and inserting the 
                following:
                    ``(A) to conduct tests to determine potential 
                public health and environmental effects of the fuel or 
                additive (including carcinogenic, teratogenic, or 
                mutagenic effects); and''; and
            (2) by adding at the end the following:
            ``(4) Study on certain fuel additives and blendstocks.--
                    ``(A) In general.--Not later than 2 years after the 
                date of enactment of this paragraph, the Administrator 
                shall--
                            ``(i) conduct a study on the effects on 
                        public health, air quality, and water resources 
                        of increased use of, and the feasibility of 
                        using as substitutes for methyl tertiary butyl 
                        ether in gasoline
                                    ``(I) ethyl tertiary butyl ether;
                                    ``(II) tertiary amyl methyl ether;
                                    ``(III) di-isopropyl ether;
                                    ``(IV) tertiary butyl alcohol;
                                    ``(V) other ethers and heavy 
                                alcohols, as determined by the 
                                Administrator;
                                    ``(VI) ethanol;
                                    ``(VII) iso-octane; and
                                    ``(VIII) alkylates;
                            ``(ii) conduct a study on the effects on 
                        public health, air quality, and water resources 
                        of the adjustment for ethanol-blended 
                        reformulated gasoline to the VOC performance 
                        requirements otherwise applicable under 
                        sections 211(k)(1) and 211(k)(3); and
                            ``(iii) submit to the Committee on 
                        Environment and Public Works of the Senate and 
                        the Committee on Energy and Commerce of the 
                        House of Representatives a report describing 
                        the results of these studies.
                    ``(B) Contracts for study.--In carrying out this 
                paragraph, the Administrator may enter into one or more 
                contracts with nongovernmental entities including but 
                not limited to National Energy Laboratories and 
                institutions of higher education (as defined in section 
                101 of the Higher Education Act of 1965 (20 U.S.C. 
                1001)).''.

SEC. 704. ANALYSES OF MOTOR VEHICLE FUEL CHANGES.

    Section 211 of the Clean Air Act (42 U.S.C. 7545) is amended by 
inserting after subsection (o) (as added by section 101(a)(2)) the 
following:
    ``(p) Analyses of Motor Vehicle Fuel Changes and Emissions Model.--
            ``(1) Anti-backsliding analysis.--
                    ``(A) Draft analysis.--Not later than 4 years after 
                the date of enactment of this subsection, the 
                Administrator shall publish for public comment a draft 
                analysis of the changes in emissions of air pollutants 
                and air quality due to the use of motor vehicle fuel 
                and fuel additives resulting from implementation of the 
                amendments made by the New Apollo Energy Act of 2005.
                    ``(B) Final analysis.--After providing a reasonable 
                opportunity for comment, but not later than 5 years 
                after the date of enactment of this paragraph, the 
                Administrator shall publish the analysis in final form.
            ``(2) Emissions model.--For the purposes of this 
        subsection, as soon as the necessary data are available, the 
        Administrator shall develop and finalize an emissions model 
        that reasonably reflects the effects of gasoline 
        characteristics or components on emissions from vehicles in the 
        motor vehicle fleet during calendar year 2005.''.

SEC. 705. ADDITIONAL OPT-IN AREAS UNDER REFORMULATED GASOLINE PROGRAM.

    Section 211(k)(6) of the Clean Air Act (42 U.S.C. 7545(k)(6)) is 
amended--
            (1) by striking ``(6) Opt-in areas.--(A) Upon'' and 
        inserting the following:
            ``(6) Opt-in areas.--
                    ``(A) Classified areas.--
                            ``(i) In general.--Upon'';
            (2) in subparagraph (B), by striking ``(B) If'' and 
        inserting the following:
                            ``(ii) Effect of insufficient domestic 
                        capacity to produce reformulated gasoline.--
                        If'';
            (3) in subparagraph (A)(ii) (as redesignated by paragraph 
        (2))--
                    (A) in the first sentence, by striking 
                ``subparagraph (A)'' and inserting ``clause (i)''; and
                    (B) in the second sentence, by striking ``this 
                paragraph'' and inserting ``this subparagraph''; and
            (4) by adding at the end the following:
                    ``(B) Ozone transport region.--
                            ``(i) Application of prohibition.--
                                    ``(I) In general.--In addition to 
                                the provisions of subparagraph (A), 
                                upon the application of the Governor of 
                                a State in the ozone transport region 
                                established by section 184(a), the 
                                Administrator, not later than 180 days 
                                after the date of receipt of the 
                                application, shall apply the 
                                prohibition specified in paragraph (5) 
                                to any area in the State (other than an 
                                area classified as a marginal, 
                                moderate, serious, or severe ozone 
                                nonattainment area under subpart 2 of 
                                part D of title I) unless the 
                                Administrator determines under clause 
                                (iii) that there is insufficient 
                                capacity to supply reformulated 
                                gasoline.
                                    ``(II) Publication of 
                                application.--As soon as practicable 
                                after the date of receipt of an 
                                application under subclause (I), the 
                                Administrator shall publish the 
                                application in the Federal Register.
                            ``(ii) Period of applicability.--Under 
                        clause (i), the prohibition specified in 
                        paragraph (5) shall apply in a State--
                                    ``(I) commencing as soon as 
                                practicable but not later than 2 years 
                                after the date of approval by the 
                                Administrator of the application of the 
                                Governor of the State; and
                                    ``(II) ending not earlier than 4 
                                years after the commencement date 
                                determined under subclause (I).
                            ``(iii) Extension of commencement date 
                        based on insufficient capacity.--
                                    ``(I) In general.--If, after 
                                receipt of an application from a 
                                Governor of a State under clause (i), 
                                the Administrator determines, on the 
                                Administrator's own motion or on 
                                petition of any person, after 
                                consultation with the Secretary of 
                                Energy, that there is insufficient 
                                capacity to supply reformulated 
                                gasoline, the Administrator, by 
                                regulation--
                                            ``(aa) shall extend the 
                                        commencement date with respect 
                                        to the State under clause 
                                        (ii)(I) for not more than 1 
                                        year; and
                                            ``(bb) may renew the 
                                        extension under item (aa) for 2 
                                        additional periods, each of 
                                        which shall not exceed 1 year.
                                    ``(II) Deadline for action on 
                                petitions.--The Administrator shall act 
                                on any petition submitted under 
                                subclause (I) not later than 180 days 
                                after the date of receipt of the 
                                petition.''.

SEC. 706. FEDERAL ENFORCEMENT OF STATE FUELS REQUIREMENTS.

    Section 211(c)(4)(C) of the Clean Air Act (42 U.S.C. 7545(c)(4)(C)) 
is amended--
            (1) by striking ``(C) A State'' and inserting the 
        following:
                    ``(C) Authority of state to control fuels and fuel 
                additives for reasons of necessity.--
                            ``(i) In general.--A State''; and
            (2) by adding at the end the following:
                            ``(ii) Enforcement by the administrator.--
                        In any case in which a State prescribes and 
                        enforces a control or prohibition under clause 
                        (i), the Administrator, at the request of the 
                        State, shall enforce the control or prohibition 
                        as if the control or prohibition had been 
                        adopted under the other provisions of this 
                        section.''.

SEC. 707. FUEL SYSTEM REQUIREMENTS HARMONIZATION STUDY.

    (a) Study.--
            (1) In general.--The Administrator of the Environmental 
        Protection Agency and the Secretary of Energy shall jointly 
        conduct a study of Federal, State, and local requirements 
        concerning motor vehicle fuels, including--
                    (A) requirements relating to reformulated gasoline, 
                volatility (measured in Reid vapor pressure), 
                oxygenated fuel, and diesel fuel; and
                    (B) other requirements that vary from State to 
                State, region to region, or locality to locality.
            (2) Required elements.--The study shall assess--
                    (A) the effect of the variety of requirements 
                described in paragraph (1) on the supply, quality, and 
                price of motor vehicle fuels available to the consumer;
                    (B) the effect of the requirements described in 
                paragraph (1) on achievement of--
                            (i) national, regional, and local air 
                        quality standards and goals; and
                            (ii) related environmental and public 
                        health protection standards and goals;
                    (C) the effect of Federal, State, and local motor 
                vehicle fuel regulations, including multiple motor 
                vehicle fuel requirements, on--
                            (i) domestic refineries;
                            (ii) the fuel distribution system; and
                            (iii) industry investment in new capacity;
                    (D) the effect of the requirements described in 
                paragraph (1) on emissions from vehicles, refineries, 
                and fuel handling facilities;
                    (E) the feasibility of developing national or 
                regional motor vehicle fuel slates for the 48 
                contiguous States that, while protecting and improving 
                air quality at the national, regional, and local 
                levels, could--
                            (i) enhance flexibility in the fuel 
                        distribution infrastructure and improve fuel 
                        fungibility;
                            (ii) reduce price volatility and costs to 
                        consumers and producers;
                            (iii) provide increased liquidity to the 
                        gasoline market; and
                            (iv) enhance fuel quality, consistency, and 
                        supply; and
                    (F) the feasibility of providing incentives, and 
                the need for the development of national standards 
                necessary, to promote cleaner burning motor vehicle 
                fuel.
    (b) Report.--
            (1) In general.--Not later than June 1, 2006, the 
        Administrator of the Environmental Protection Agency and the 
        Secretary of Energy shall submit to Congress a report on the 
        results of the study conducted under subsection (a).
            (2) Recommendations.--
                    (A) In general.--The report shall contain 
                recommendations for legislative and administrative 
                actions that may be taken--
                            (i) to improve air quality;
                            (ii) to reduce costs to consumers and 
                        producers; and
                            (iii) to increase supply liquidity.
                    (B) Required considerations.--The recommendations 
                under subparagraph (A) shall take into account the need 
                to provide advance notice of required modifications to 
                refinery and fuel distribution systems in order to 
                ensure an adequate supply of motor vehicle fuel in all 
                States.
            (3) Consultation.--In developing the report, the 
        Administrator of the Environmental Protection Agency and the 
        Secretary of Energy shall consult with--
                    (A) the Governors of the States;
                    (B) automobile manufacturers;
                    (C) motor vehicle fuel producers and distributors; 
                and
                    (D) the public.

SEC. 708. REPORT ON RENEWABLE MOTOR FUEL.

    Not later than January 1, 2007, the Secretary of Energy and the 
Secretary of Agriculture shall jointly prepare and submit to Congress a 
report containing recommendations for achieving, by January 1, 2025, at 
least 25 percent renewable fuel content (calculated on an average 
annual basis) for all gasoline sold or introduced into commerce in the 
United States.

                Subtitle B--Renewable Portfolio Standard

SEC. 711. RENEWABLE PORTFOLIO STANDARD.

    (a) In General.--Title VI of the Public Utility Regulatory Policies 
Act of 1978 is amended by adding at the end the following:

``SEC. 609. FEDERAL RENEWABLE PORTFOLIO STANDARD.

    ``(a) Minimum Renewable Generation Requirement.--For each calendar 
year beginning in calendar year 2007, each retail electric supplier 
shall submit to the Secretary, not later than April 1 of the following 
calendar year, renewable energy credits in an amount equal to the 
required annual percentage specified in subsection (b).
    ``(b) Required Annual Percentage.--(1) For calendar years 2007 
through 2022, the required annual percentage of the retail electric 
supplier's base amount that shall be generated from renewable energy 
resources shall be the percentage specified in the following table:


 
 
 
``Calendar years                    Required annual percentage
  2007 through 2008...............  1.0
  2009 through 2010...............  2.2
  2011 through 2012...............  3.4
  2013 through 2014...............  4.6
  2015 through 2016...............  5.8
  2017 through 2018...............  7.0
  2019 through 2020...............  8.5
  2021 through 2022...............  10.0

    ``(2) Not later than January 1, 2017, the Secretary may, by rule, 
establish required annual percentages in amounts not less than 10.0 for 
calendar years 2022 through 2030.
    ``(c) Submission of Credits.--(1) A retail electric supplier may 
satisfy the requirements of subsection (a) through the submission of 
renewable energy credits--
            ``(A) issued to the retail electric supplier under 
        subsection (d);
            ``(B) obtained by purchase or exchange under subsection 
        (e); or
            ``(C) borrowed under subsection (f).
    ``(2) A credit may be counted toward compliance with subsection (a) 
only once.
    ``(d) Issuance of Credits.--(1) The Secretary shall establish, not 
later than 1 year after the date of enactment of this section, a 
program to issue, monitor the sale or exchange of, and track renewable 
energy credits.
    ``(2) Under the program, an entity that generates electric energy 
through the use of a renewable energy resource may apply to the 
Secretary for the issuance of renewable energy credits. The application 
shall indicate--
            ``(A) the type of renewable energy resource used to produce 
        the electricity,
            ``(B) the location where the electric energy was produced, 
        and
            ``(C) any other information the Secretary determines 
        appropriate.
    ``(3)(A) Except as provided in paragraphs (B), (C), and (D), the 
Secretary shall issue to an entity one renewable energy credit for each 
kilowatt-hour of electric energy the entity generates after the date of 
enactment of this section and in each subsequent calendar year through 
the use of a renewable energy resource at an eligible facility.
    ``(B) For incremental hydropower, the credits shall be calculated 
based on the expected increase in average annual generation resulting 
from the efficiency improvements or capacity additions. The number of 
credits shall be calculated using the same water flow information used 
to determine a historic average annual generation baseline for the 
hydroelectric facility and certified by the Secretary or the Federal 
Energy Regulatory Commission. The calculation of the credits for 
incremental hydropower shall not be based on any operational changes at 
the hydroelectric facility not directly associated with the efficiency 
improvements or capacity additions.
    ``(C) The Secretary shall issue two renewable energy credits for 
each kilowatt-hour of electric energy generated and supplied to the 
grid in that calendar year through the use of a renewable energy 
resource at an eligible facility located on Indian land. For purposes 
of this paragraph, renewable energy generated by biomass cofired with 
other fuels is eligible for two credits only if the biomass was grown 
on the land eligible under this paragraph.
    ``(D) For renewable energy resources produced from a generation 
offset, the Secretary shall issue two renewable energy credits for each 
kilowatt-hour generated.
    ``(E) To be eligible for a renewable energy credit, the unit of 
electric energy generated through the use of a renewable energy 
resource may be sold or may be used by the generator. If both a 
renewable energy resource and a nonrenewable energy resource are used 
to generate the electric energy, the Secretary shall issue credits 
based on the proportion of the renewable energy resource used. The 
Secretary shall identify renewable energy credits by type and date of 
generation.
    ``(5) When a generator sells electric energy generated through the 
use of a renewable energy resource to a retail electric supplier under 
a contract subject to section 210 of this Act, the retail electric 
supplier is treated as the generator of the electric energy for the 
purposes of this section for the duration of the contract.
    ``(6) The Secretary may issue credits for existing facility offsets 
to be applied against a retail electric supplier's own required annual 
percentage. The credits are not tradeable and may only be used in the 
calendar year generation actually occurs.
    ``(e) Credit Trading.--A renewable energy credit may be sold or 
exchanged by the entity to whom issued or by any other entity who 
acquires the credit. A renewable energy credit for any year that is not 
used to satisfy the minimum renewable generation requirement of 
subsection (a) for that year may be carried forward for use within the 
next 4 years.
    ``(f) Credit Borrowing.--At any time before the end of calendar 
year 2007, a retail electric supplier that has reason to believe it 
will not have sufficient renewable energy credits to comply with 
subsection (a) may--
            ``(1) submit a plan to the Secretary demonstrating that the 
        retail electric supplier will earn sufficient credits within 
        the next 3 calendar years which, when taken into account, will 
        enable the retail electric supplier's to meet the requirements 
        of subsection (a) for calendar year 2007 and the subsequent 
        calendar years involved; and
            ``(2) upon the approval of the plan by the Secretary, apply 
        credits that the plan demonstrates will be earned within the 
        next 3 calendar years to meet the requirements of subsection 
        (a) for each calendar year involved.
    ``(g) Credit Cost Cap.--The Secretary shall offer renewable energy 
credits for sale at the lesser of 3 cents per kilowatt-hour or 200 
percent of the average market value of credits for the applicable 
compliance period. On January 1 of each year following calendar year 
2007, the Secretary shall adjust for inflation the price charged per 
credit for such calendar year, based on the Gross Domestic Product 
Implicit Price Deflator. Amounts received by the Secretary under this 
subsection are authorized to be appropriated for purposes of section 
610.
    ``(h) Enforcement.--The Secretary may bring an action in the 
appropriate United States district court to impose a civil penalty on a 
retail electric supplier that does not comply with subsection (a), 
unless the retail electric supplier was unable to comply with 
subsection (a) for reasons outside of the supplier's reasonable control 
(including weather-related damage, mechanical failure, lack of 
transmission capacity or availability, strikes, lockouts, actions of a 
governmental authority). A retail electric supplier who does not submit 
the required number of renewable energy credits under subsection (a) 
shall be subject to a civil penalty of not more than the greater of 3 
cents or 200 percent of the average market value of credits for the 
compliance period for each renewable energy credit not submitted.
    ``(i) Information Collection.--The Secretary may collect the 
information necessary to verify and audit--
            ``(1) the annual electric energy generation and renewable 
        energy generation of any entity applying for renewable energy 
        credits under this section,
            ``(2) the validity of renewable energy credits submitted by 
        a retail electric supplier to the Secretary, and
            ``(3) the quantity of electricity sales of all retail 
        electric suppliers.
    ``(j) Environmental Savings Clause.--Incremental hydropower shall 
be subject to all applicable environmental laws and licensing and 
regulatory requirements.
    ``(k) State Savings Clause.--This section does not preclude a State 
from requiring additional renewable energy generation in that State, or 
from specifying technology mix.
    ``(l) Definitions.--For purposes of this section:
            ``(1) Biomass.--The term `biomass' means any organic 
        material that is available on a renewable or recurring basis, 
        including dedicated energy crops, trees grown for energy 
        production, wood waste and wood residues, plants (including 
        aquatic plants, grasses, and agricultural crops), residues, 
        fibers, animal wastes and other organic waste materials, and 
        fats and oils, except that with respect to material removed 
        from National Forest System lands the term includes only 
        organic material from--
                    ``(A) thinnings from trees that are less than 12 
                inches in diameter;
                    ``(B) slash;
                    ``(C) brush; and
                    ``(D) mill residues.
            ``(2) Eligible facility.--The term `eligible facility' 
        means--
                    ``(A) a facility for the generation of electric 
                energy from a renewable energy resource that is placed 
                in service on or after the date of enactment of this 
                section; or
                    ``(B) a repowering or cofiring increment that is 
                placed in service on or after the date of enactment of 
                this section at a facility for the generation of 
                electric energy from a renewable energy resource that 
                was placed in service before that date.
            ``(3) Eligible renewable energy resource.--The term 
        `renewable energy resource' means solar, wind, ocean, or 
        geothermal energy, biomass (excluding solid waste and paper 
        that is commonly recycled), landfill gas, a generation offset, 
        or incremental hydropower.
            ``(4) Generation offset.--The term `generation offset' 
        means reduced electricity usage metered at a site where a 
        customer consumes energy from a renewable energy technology.
            ``(5) Existing facility offset.--The term `existing 
        facility offset' means renewable energy generated from an 
        existing facility, not classified as an eligible facility, that 
        is owned or under contract to a retail electric supplier on the 
        date of enactment of this section.
            ``(6) Incremental hydropower.--The term `incremental 
        hydropower' means additional generation that is achieved from 
        increased efficiency or additions of capacity after the date of 
        enactment of this section at a hydroelectric dam that was 
        placed in service before that date.
            ``(7) Indian land.--The term `Indian land' means--
                    ``(A) any land within the limits of any Indian 
                reservation, pueblo, or rancheria,
                    ``(B) any land not within the limits of any Indian 
                reservation, pueblo, or rancheria title to which was on 
                the date of enactment of this paragraph either held by 
                the United States for the benefit of any Indian tribe 
                or individual or held by any Indian tribe or individual 
                subject to restriction by the United States against 
                alienation,
                    ``(C) any dependent Indian community, and
                    ``(D) any land conveyed to any Alaska Native 
                corporation under the Alaska Native Claims Settlement 
                Act.
            ``(8) Indian tribe.--The term `Indian tribe' means any 
        Indian tribe, band, nation, or other organized group or 
        community, including any Alaskan Native village or regional or 
        village corporation as defined in or established pursuant to 
        the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et 
        seq.), which is recognized as eligible for the special programs 
        and services provided by the United States to Indians because 
        of their status as Indians.
            ``(9) Renewable energy.--The term `renewable energy' means 
        electric energy generated by a renewable energy resource.
            ``(10) Renewable energy resource.--The term `renewable 
        energy resource' means solar, wind, ocean, or geothermal 
        energy, biomass (including municipal solid waste), landfill 
        gas, a generation offset, or incremental hydropower.
            ``(11) Repowering or cofiring increment.--The term 
        `repowering or cofiring increment' means the additional 
        generation from a modification that is placed in service on or 
        after the date of enactment of this section to expand 
        electricity production at a facility used to generate electric 
        energy from a renewable energy resource or to cofire biomass 
        that was placed in service before the date of enactment of this 
        section, or the additional generation above the average 
        generation in the 3 years preceding the date of enactment of 
        this section, to expand electricity production at a facility 
        used to generate electric energy from a renewable energy 
        resource or to cofire biomass that was placed in service before 
        the date of enactment of this section.
            ``(12) Retail electric supplier.--The term `retail electric 
        supplier' means a person that sells electric energy to electric 
        consumers and sold not less than 1,000,000 megawatt-hours of 
        electric energy to electric consumers for purposes other than 
        resale during the preceding calendar year; except that such 
        term does not include the United States, a State or any 
        political subdivision of a State, or any agency, authority, or 
        instrumentality of any one or more of the foregoing, or a rural 
        electric cooperative.
            ``(13) Retail electric supplier's base amount.--The term 
        `retail electric supplier's base amount' means the total amount 
        of electric energy sold by the retail electric supplier to 
        electric customers during the most recent calendar year for 
        which information is available, excluding electric energy 
        generated by--
                    ``(A) an eligible renewable energy resource;
                    ``(B) municipal solid waste; or
                    ``(C) a hydroelectric facility.
    ``(m) Sunset.--This section expires December 31, 2030.

``SEC. 610. STATE GRANT PROGRAM.

    ``(a) In General.--The Secretary is authorized to distribute, 
subject to available appropriations, amounts received from sales under 
subsection (g) of section 609 to States to be used for the purposes of 
the program established under subsection (b) of this section.
    ``(b) Grant Program.--
            ``(1) In general.--Not later than 1 year after the date of 
        enactment of this Act, the Secretary shall establish a program 
        to promote State renewable energy production and use.
            ``(2) Use of fund.--The Secretary shall make funds 
        available under this section to State energy agencies for grant 
        programs for the construction of renewable energy facilities.
    ``(c) Preference.--In allocating funds under the program, the 
Secretary shall give preference to the following:
            ``(1) States that have a disproportionately small share of 
        economically sustainable renewable energy generation capacity.
            ``(2) State grant programs that are most likely to 
        stimulate or enhance innovative renewable energy 
        technologies.''.
    (b) Table of Contents.--The table of contents for such title VI is 
amended by adding the following new items at the end thereof:

``Sec. 609. Federal renewable portfolio standard.
``Sec. 610. State grant program.''.

                        Subtitle C--Oil Savings

SEC. 721. OIL SAVINGS.

    (a) In General.--Appropriate Federal departments and agencies, as 
identified by the President, shall propose voluntary, regulatory, and 
other actions sufficient to achieve--
            (1) by 2010 a reduction in the demand for oil in the United 
        States by at least 600,000 barrels per day from the demand 
        projected, as of January 1, 2005, by the Energy Information 
        Administration for the year 2010;
            (2) by 2015 a reduction in the demand for oil in the United 
        States by at least 1,700,000 barrels per day from the demand 
        projected, as of January 1, 2005, by the Energy Information 
        Administration for the year 2015; and
            (3) by 2020 a reduction in the demand for oil in the United 
        States by at least 3,000,000 barrels per day from the demand 
        projected, as of January 1, 2005, by the Energy Information 
        Administration for the year 2020.
    (b) Monitoring and Reports to Congress.--Not later than 12 months 
after the date of the enactment of this Act, and each year thereafter, 
the departments and agencies referred to in subsection (a) shall report 
to the Congress on--
            (1) proposed and finalized regulatory and other actions 
        taken to achieve the requirements under subsection (a);
            (2) progress made in achieving the actions required under 
        subsection (a); and
            (3) lack of funding or authority preventing the 
        implementation of the actions required under subsection (a).
    (c) Request to Congress.--If the President determines that the 
departments and agencies referred to in subsection (a) lack authority 
or funding to implement the actions proposed under subsection (a), the 
President shall request the necessary authority or funding from the 
Congress not later than 9 months after the date of enactment of this 
Act.
    (d) Final Actions.--Not later than 12 months after the date of the 
enactment of this Act, the departments and agencies referred to in 
subsection (a) shall finalize the actions proposed pursuant to 
subsection (a) for which they have authority and funding.

SEC. 722. DETERMINATION OF EQUIVALENCY BETWEEN CAFE CREDITS AND 
              GREENHOUSE GAS CREDITS.

    The Secretary of Transportation, the Administrator of the 
Environmental Protection Agency, and the Secretary of Commerce shall 
jointly conduct and submit to the Congress within 2 years of the date 
of the enactment of this section a study--
            (1) showing a methodology for determining the equivalency 
        of credits earned under Section 32903 of title 49, United 
        States Code, and tradeable allowances under title VI of the New 
        Apollo Energy Act of 2005; and
            (2) recommending an appeals process for resolving any 
        dispute that may arise out of such a determination, which may 
        incorporate an arbitration option.

SEC. 723. ELIMINATION OF 2-FLEET RULE.

    (a) In General.--Section 32904 of title 49, United States Code, is 
amended--
            (1) by striking subsection (b); and
            (2) by redesignating subsections (c) through (e) as 
        subsections (b) through (d), respectively.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to model years 2010 and later.

Subtitle D--Loan Guarantees for Biorefineries and Renewable Electricity 
                         Generation Facilities

SEC. 731. LOAN GUARANTEES FOR BIOREFINERIES AND RENEWABLE ENERGY 
              PRODUCTION FACILITIES.

    (a) Authority.--The Secretary of Energy may guarantee not more than 
80 percent of the principal of any loan made to any person or other 
entity for any of the following:
            (1) The construction of any new facility that primarily 
        makes cellulosic biomass ethanol or biomethanol or generates 
        electricity, or any combination thereof, from wind energy, 
        biomass, solar energy, ocean energy or geothermal sources.
            (2) The modification of any facility that primarily 
        generates electricity from wind energy, biomass, solar energy, 
        ocean energy, or geothermal sources if such modification adds 
        additional electric generation capacity from any of such 
        sources.
            (3) The modification of any facility that primarily makes 
        cellulosic biomass ethanol, biomethanol, or electricity from 
        wind energy, biomass, solar energy, ocean energy or geothermal 
        sources if such modification adds additional capacity to make 
        cellulosic biomass ethanol or biomethanol from any such source 
        or combination of sources.
            (4) The conversion of any facility that primarily makes 
        ethanol to a facility that primarily makes cellulosic biomass 
        ethanol.
            (5) The construction of any new ninety percent 
        sequestration coal power facility.
    (b) Conditions.--
            (1) Loan maker.--A loan guaranteed under this section shall 
        be made by a financial institution subject to the examination 
        of the Secretary.
            (2) Environmental laws.--Any project for which a loan 
        guarantee is issued under this section shall be required by the 
        Secretary as a condition of the loan guarantee to comply with 
        all applicable Federal, State, and local environmental laws.
            (3) Other requirements.--Loan requirements, including term, 
        fees, maximum size, collateral requirements, and other 
        features, shall be determined by the Secretary.
    (c) Limitation on Amount.--The Secretary of Energy may make 
commitments to guarantee loans under this section only to the extent 
that the total amount of loan principal guaranteed by the Secretary 
does not exceed $49,000,000,000. Of such total amount, the Secretary 
may make commitments to guarantee--
            (1) not more than $7,000,000,000 of loan principal for each 
        of the following project types--
                    (A) biomass facilities;
                    (B) geothemal energy facilities;
                    (C) ninety percent sequestration coal power 
                facilities;
                    (D) ocean energy facilities; and
                    (E) solar energy facilities;
            (2) not more than $7,000,000,000 of loan principal for 
        cellulosic biomass ethanol;
            (3) not more than $2,000,000,000 of loan principal for 
        biomethanol facilities; and
            (4) not more than $5,000,000,000 of loan principal for wind 
        energy facilities.
    (d) Coordination With Other Benefits.--The Secretary shall not 
guarantee under this section any loan made to any person if such person 
has received assistance under section 212 or 642.
    (e) Regulations.--The Secretary of Energy may issue regulations to 
carry out the provisions of this section.
    (f) Definitions.--As used in this section:
            (1) The term ``agricultural livestock'' includes bovine, 
        swine, poultry, and sheep.
            (2) The term ``agricultural livestock waste nutrients'' 
        means agricultural livestock manure and litter, including wood 
        shavings, straw, rice hulls, and other bedding material for the 
        disposition of manure.
            (3) The term ``biomass facility'' means a facility that 
        generates electricity from closed-loop biomass, open-loop 
        biomass, or both.
            (4) The term ``biomethanol facility'' means a facility that 
        generates methanol from biomass, animal waste, or municipal 
        solid waste.
            (5) The term ``cellulosic biomass ethanol'' means ethanol 
        derived from any nonhazardous lignocellulosic or hemicellulosic 
        matter that is available on a renewable or recurring basis, 
        including--
                    (A) dedicated energy crops and trees;
                    (B) the following forest-related resources--
                            (i) harvesting residue;
                            (ii) pre-commercial thinnings;
                            (iii) slash; and
                            (iv) bush;
                    (C) plants;
                    (D) grasses
                    (E) agricultural residues
                    (F) fibers;
                    (G) animal wastes and other waste materials; and
                    (H) municipal solid waste.
            (6) The term ``cellulosic biomass ethanol facility'' means 
        a facility that produces cellulosic biomass ethanol.
            (7) The term ``closed-loop biomass'' means any organic 
        material from a plant which is planted exclusively for purposes 
        of being used at a biomass facility to produce electricity.''
            (8) The term ``geothermal energy facility'' means a 
        facility that generates electricity from geothermal energy.
            (9) The term ``ninety percent sequestration coal power 
        facility'' means a facility that generates electricity using 
        coal as a fuel source and sequesters, rather than releases to 
        the atmosphere, at least 90 percent of the carbon dioxide 
        emissions resulting from such coal combustion.
            (10) The term ``ocean energy facility'' means a facility 
        that generates electricity from ocean tidal, wave, current or 
        thermal processes.
            (11) The term ``open-loop biomass'' means any agricultural 
        livestock waste nutrients, or any solid, nonhazardous, 
        cellulosic waste material which is segregated from other waste 
        materials and which is derived from:
                    (A) any of the following forest-related resources: 
                mill and harvesting residues, precommercial thinnings, 
                slash, and brush, but not including old-growth timber 
                or black liquor,
                    (B) old wood waste materials, including waste 
                pallets, crates, dunnage, manufacturing and 
                construction wood wastes (other than pressure-treated, 
                chemically-treated, or painted wood wastes), and 
                landscape or right-of-way tree trimmings, but not 
                including unsegregated municipal solid waste (garbage) 
                or postconsumer wastepaper which can be recycled 
                affordably, or
                    (C) agriculture sources, including orchard tree 
                crops, vineyard, grain, legumes, sugar, and other crop 
                by-products or residues.
        Such term shall not include closed-loop biomass or biomass 
        burned in conjunction with fossil fuel (cofiring) beyond such 
        fossil fuel required for startup and flame stabilization.
            (12) The term ``sequestration'' means the capture, long-
        term separation, isolation, or removal of greenhouse gases from 
        the atmosphere.
            (13) The term ``solar energy facility'' means a facility 
        that generates electricity from solar energy with a capacity of 
        25 kilowatts or more.
            (14) The term ``wind energy facility'' means a facility 
        that generates electricity from from wind energy.
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary of Energy such sums as may be necessary 
to cover the cost of loan guarantees, as defined by section 502(5) of 
the Federal Credit Reform Act of 1990 (2 U.S.C. 661a(5)).

                        TITLE VIII--TAX OFFSETS

SEC. 801. REFERENCES.

    (a) Short Title.--This title may be cited as the ``Balanced Energy 
Supply Tax Policy Act of 2005'' .
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this title an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

                     Subtitle A--Budget Neutrality

SEC. 811. TAX REDUCTIONS LIMITED TO REVENUE RAISED BY TAX OFFSETS.

    (a) In General.--The aggregate tax benefits provided by this Act, 
and any amendment made by this Act, shall not exceed the revenue raised 
by this Act, and any amendment made by this Act.
    (b) Adjustment of Tax Benefits.--If the Secretary of the Treasury 
determines for any year that the tax benefits provided by this Act, and 
any amendment made by this Act, exceed the revenue raised by this Act, 
and any amendment made by this Act, the Secretary shall reduce such 
excess to zero by adjusting such benefits in the manner determined by 
the Secretary in his sole discretion.
    (c) Report to Congress.--Not later than 1 year after the date of 
the enactment of this Act, and annually thereafter, the Secretary of 
the Treasury shall submit a report to Congress on the total budget 
authority granted by this Act, and the amendments made by this Act, 
together with such recommendations as the Secretary determines 
necessary or appropriate to either--
            (1) reduce such authority, or
            (2) to increase receipts to the Treasury of the United 
        States to pay for such authority.

                 Subtitle B--Denial of Treaty Benefits

SEC. 821. DENIAL OF TREATY BENEFITS FOR CERTAIN DEDUCTIBLE PAYMENTS.

    (a) In General.--Section 894 (relating to income affected by 
treaty) is amended by adding at the end the following new subsection:
    ``(d) Denial of Treaty Benefits for Certain Deductible Payments.--
            ``(1) In general.--A foreign entity shall not be entitled 
        under any income tax treaty of the United States with a foreign 
        country to any reduced rate of any withholding tax imposed by 
        this title on any deductible foreign payment unless such entity 
        is predominantly owned by individuals who are residents of such 
        foreign country.
            ``(2) Deductible foreign payment.--For purposes of 
        paragraph (1), the term `deductible foreign payment' means any 
        payment--
                    ``(A) which is made by a domestic entity directly 
                or indirectly to a related person which is a foreign 
                entity, and
                    ``(B) which is allowable as a deduction under this 
                chapter.
            ``(3) Domestic and foreign entities; related person.--For 
        purposes of this subsection--
                    ``(A) Domestic entity.--The term `domestic entity' 
                means any domestic corporation or domestic partnership.
                    ``(B) Foreign entity.--The term `foreign entity' 
                means any foreign corporation or foreign partnership.
                    ``(C) Related person.--The term `related person' 
                has the meaning given such term by section 954(d)(3) 
                (determined by substituting `domestic entity' for 
                `controlled foreign corporation' each place it 
                appears).
            ``(4) Predominant ownership.--For purposes of this 
        subsection--
                    ``(A) In general.--An entity is predominantly owned 
                by individuals who are residents of a foreign country 
                if--
                            ``(i) in the case of a corporation, more 
                        than 50 percent (by value) of the stock of such 
                        corporation is owned (within the meaning of 
                        section 883(c)(4)) by individuals who are 
                        residents of such foreign country, or
                            ``(ii) in the case of a partnership, more 
                        than 50 percent (by value) of the beneficial 
                        interests in such partnership are so owned.
                    ``(B) Publicly traded corporations.--A foreign 
                corporation also shall be treated as predominantly 
                owned by individuals who are residents of a foreign 
                country if--
                            ``(i)(I) the stock of such corporation is 
                        primarily and regularly traded on an 
                        established securities market in such foreign 
                        country, and
                            ``(II) such corporation has activities 
                        within such foreign country which are 
                        substantial in relation to the total activities 
                        of such corporation and its related persons, or
                            ``(ii) such corporation is wholly owned 
                        (directly or indirectly) by another foreign 
                        corporation which is described in clause (i).
                    ``(C) Special rule.--
                            ``(i) In general.--A foreign corporation 
                        shall be treated as meeting the requirements of 
                        subparagraph (A) if--
                                    ``(I) such requirements would be 
                                met if `30 percent' were substituted 
                                for `50 percent' in subparagraph 
                                (A)(i),
                                    ``(II) the treaty country is a 
                                member of a multinational economic 
                                association such as the European Union, 
                                and
                                    ``(III) at least 50 percent of the 
                                value of the stock of the corporation 
                                is owned (within the meaning of section 
                                883(c)(4)) by individuals who are 
                                residents of the treaty country or 
                                other qualified foreign countries.
                            ``(ii) Qualified foreign country.--For 
                        purposes of this subparagraph, the term 
                        `qualified foreign country' means any foreign 
                        country if--
                                    ``(I) such foreign country is a 
                                member of the multinational economic 
                                association of which the treaty country 
                                is a member, and
                                    ``(II) such foreign country has a 
                                tax treaty with the United States 
                                providing a withholding tax rate 
                                reduction which is not less than the 
                                withholding tax rate reduction 
                                applicable (without regard to this 
                                subsection) to the payment received by 
                                such foreign corporation.
            ``(5) Exception for corporations with substantial business 
        activities in treaty country.--Paragraph (1) shall not apply to 
        a payment received by a foreign corporation if such corporation 
        has substantial business activities in the treaty country and 
        if such corporation establishes to the satisfaction of the 
        Secretary that the payment is subject to an effective rate of 
        income tax imposed by such country greater than 90 percent of 
        the maximum rate of tax specified in section 11.
            ``(6) Exception for payments received by controlled foreign 
        corporation.--Paragraph (1) shall not apply to any deductible 
        foreign payment made by a corporation if the recipient of the 
        payment is a controlled foreign corporation and the payor is a 
        United States shareholder (as defined in section 951(b)) of 
        such corporation.
            ``(7) Conduit payments.--Under regulations prescribed by 
        the Secretary, paragraph (1) shall not apply to a payment 
        received by a foreign entity referred to in paragraph (1) if--
                    ``(A) within a reasonable period after such entity 
                receives such payment, such entity makes a comparable 
                payment directly or indirectly to another related 
                person,
                    ``(B) such related person is a resident of a 
                foreign country with which the United States has an 
                income tax treaty,
                    ``(C) such related person is predominantly owned by 
                individuals who are residents of such country, and
                    ``(D) the withholding tax rate applicable under 
                such treaty is equal to or greater than the withholding 
                tax rate applicable (without regard to this paragraph) 
                to the payment received by such foreign entity.
        A similar rule shall apply where the payment is includible in 
        the gross income of a related person by reason of a foreign law 
        comparable to subpart F of part III of subchapter N.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

  Subtitle C--Abusive Tax Shelter Shutdown and Taxpayer Accountability

SEC. 831. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress hereby finds that:
            (1) Many corporate tax shelter transactions are complicated 
        ways of accomplishing nothing aside from claimed tax benefits, 
        and the legal opinions justifying those transactions take an 
        inappropriately narrow and restrictive view of well-developed 
        court doctrines under which--
                    (A) the taxation of a transaction is determined in 
                accordance with its substance and not merely its form,
                    (B) transactions which have no significant effect 
                on the taxpayer's economic or beneficial interests 
                except for tax benefits are treated as sham 
                transactions and disregarded,
                    (C) transactions involving multiple steps are 
                collapsed when those steps have no substantial economic 
                meaning and are merely designed to create tax benefits,
                    (D) transactions with no business purpose are not 
                given effect, and
                    (E) in the absence of a specific congressional 
                authorization, it is presumed that Congress did not 
                intend a transaction to result in a negative tax where 
                the taxpayer's economic position or rate of return is 
                better after tax than before tax.
            (2) Permitting aggressive and abusive tax shelters not only 
        results in large revenue losses but also undermines voluntary 
        compliance with the Internal Revenue Code of 1986.
    (b) Purpose.--The purpose of this subtitle is to eliminate abusive 
tax shelters by denying tax attributes claimed to arise from 
transactions that do not meet a heightened economic substance 
requirement and by repealing the provision that permits legal opinions 
to be used to avoid penalties on tax underpayments resulting from 
transactions without significant economic substance or business 
purpose.

SEC. 832. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

    (a) In General.--Section 7701 is amended by redesignating 
subsection (o) as subsection (p) and by inserting after subsection (n) 
the following new subsection:
    ``(o) Clarification of Economic Substance Doctrine; Etc.--
            ``(1) General rules.--
                    ``(A) In general.--In applying the economic 
                substance doctrine, the determination of whether a 
                transaction has economic substance shall be made as 
                provided in this paragraph.
                    ``(B) Definition of economic substance.--For 
                purposes of subparagraph (A)--
                            ``(i) In general.--A transaction has 
                        economic substance only if--
                                    ``(I) the transaction changes in a 
                                meaningful way (apart from Federal tax 
                                effects and, if there are any Federal 
                                tax effects, also apart from any 
                                foreign, State, or local tax effects) 
                                the taxpayer's economic position, and
                                    ``(II) the taxpayer has a 
                                substantial nontax purpose for entering 
                                into such transaction and the 
                                transaction is a reasonable means of 
                                accomplishing such purpose.
                            ``(ii) Special rule where taxpayer relies 
                        on profit potential.--A transaction shall not 
                        be treated as having economic substance by 
                        reason of having a potential for profit 
                        unless--
                                    ``(I) the present value of the 
                                reasonably expected pre-tax profit from 
                                the transaction is substantial in 
                                relation to the present value of the 
                                expected net tax benefits that would be 
                                allowed if the transaction were 
                                respected, and
                                    ``(II) the reasonably expected pre-
                                tax profit from the transaction exceeds 
                                a risk-free rate of return.
                    ``(C) Treatment of fees and foreign taxes.--Fees 
                and other transaction expenses and foreign taxes shall 
                be taken into account as expenses in determining pre-
                tax profit under subparagraph (B)(ii).
            ``(2) Special rules for transactions with tax-indifferent 
        parties.--
                    ``(A) Special rules for financing transactions.--
                The form of a transaction which is in substance the 
                borrowing of money or the acquisition of financial 
                capital directly or indirectly from a tax-indifferent 
                party shall not be respected if the present value of 
                the deductions to be claimed with respect to the 
                transaction is substantially in excess of the present 
                value of the anticipated economic returns of the person 
                lending the money or providing the financial capital. A 
                public offering shall be treated as a borrowing, or an 
                acquisition of financial capital, from a tax-
                indifferent party if it is reasonably expected that at 
                least 50 percent of the offering will be placed with 
                tax-indifferent parties.
                    ``(B) Artificial income shifting and basis 
                adjustments.--The form of a transaction with a tax-
                indifferent party shall not be respected if--
                            ``(i) it results in an allocation of income 
                        or gain to the tax-indifferent party in excess 
                        of such party's economic income or gain, or
                            ``(ii) it results in a basis adjustment or 
                        shifting of basis on account of overstating the 
                        income or gain of the tax-indifferent party.
            ``(3) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Economic substance doctrine.--The term 
                `economic substance doctrine' means the common law 
                doctrine under which tax benefits under subtitle A with 
                respect to a transaction are not allowable if the 
                transaction does not have economic substance or lacks a 
                business purpose.
                    ``(B) Tax-indifferent party.--The term `tax-
                indifferent party' means any person or entity not 
                subject to tax imposed by subtitle A. A person shall be 
                treated as a tax-indifferent party with respect to a 
                transaction if the items taken into account with 
                respect to the transaction have no substantial impact 
                on such person's liability under subtitle A.
                    ``(C) Substantial nontax purpose.--In applying 
                subclause (II) of paragraph (1)(B)(i), a purpose of 
                achieving a financial accounting benefit shall not be 
                taken into account in determining whether a transaction 
                has a substantial nontax purpose if the origin of such 
                financial accounting benefit is a reduction of income 
                tax.
                    ``(D) Exception for personal transactions of 
                individuals.--In the case of an individual, this 
                subsection shall apply only to transactions entered 
                into in connection with a trade or business or an 
                activity engaged in for the production of income.
                    ``(E) Treatment of lessors.--In applying subclause 
                (I) of paragraph (1)(B)(ii) to the lessor of tangible 
                property subject to a lease, the expected net tax 
                benefits shall not include the benefits of 
                depreciation, or any tax credit, with respect to the 
                leased property and subclause (II) of paragraph 
                (1)(B)(ii) shall be disregarded in determining whether 
                any of such benefits are allowable.
            ``(4) Other common law doctrines not affected.--Except as 
        specifically provided in this subsection, the provisions of 
        this subsection shall not be construed as altering or 
        supplanting any other rule of law, and the requirements of this 
        subsection shall be construed as being in addition to any such 
        other rule of law.
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this subsection. Such regulations may include 
        exemptions from the application of this subsection.''
    (b) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after the date of the enactment of 
this Act.

SEC. 833. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS 
              LACKING ECONOMIC SUBSTANCE, ETC.

    (a) In General.--Subchapter A of chapter 68 is amended by inserting 
after section 6662A the following new section:

``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS 
              LACKING ECONOMIC SUBSTANCE, ETC.

    ``(a) Imposition of Penalty.--If a taxpayer has an noneconomic 
substance transaction understatement for any taxable year, there shall 
be added to the tax an amount equal to 40 percent of the amount of such 
understatement.
    ``(b) Reduction of Penalty for Disclosed Transactions.--Subsection 
(a) shall be applied by substituting `20 percent' for `40 percent' with 
respect to the portion of any noneconomic substance transaction 
understatement with respect to which the relevant facts affecting the 
tax treatment of the item are adequately disclosed in the return or a 
statement attached to the return.
    ``(c) Noneconomic Substance Transaction Understatement.--For 
purposes of this section--
            ``(1) In general.--The term `noneconomic substance 
        transaction understatement' means any amount which would be an 
        understatement under section 6662A(b)(1) if section 6662A were 
        applied by taking into account items attributable to 
        noneconomic substance transactions rather than items to which 
        section 6662A would apply without regard to this paragraph.
            ``(2) Noneconomic substance transaction.--The term 
        `noneconomic substance transaction' means any transaction if--
                    ``(A) there is a lack of economic substance (within 
                the meaning of section 7701(m)(1)) for the transaction 
                giving rise to the claimed tax benefit or the 
                transaction was not respected under section 7701(m)(2), 
                or
                    ``(B) the transaction fails to meet the 
                requirements of any similar rule of law.
    ``(d) Rules Applicable to Compromise of Penalty.--
            ``(1) In general.--If the 1st letter of proposed deficiency 
        which allows the taxpayer an opportunity for administrative 
        review in the Internal Revenue Service Office of Appeals has 
        been sent with respect to a penalty to which this section 
        applies, only the Commissioner of Internal Revenue may 
        compromise all or any portion of such penalty.
            ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
        and (5) of section 6707A(d) shall apply for purposes of 
        paragraph (1).
    ``(e) Coordination With Other Penalties.--Except as otherwise 
provided in this part, the penalty imposed by this section shall be in 
addition to any other penalty imposed by this title.
    ``(f) Cross References.--
            ``(1) For coordination of penalty with understatements 
        under section 6662 and other special rules, see section 
        6662A(e).
            ``(2) For reporting of penalty imposed under this section 
        to the Securities and Exchange Commission, see section 
        6707A(e).''
    (b) Clerical Amendment.--The table of sections for part II of 
subchapter A of chapter 68 is amended by inserting after the item 
relating to section 6662A the following new item:

``Sec. 6662B. Penalty for understatements attributable to transactions 
                            lacking economic substance, etc.''
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after January 1, 2006.

SEC. 834. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME TAX RETURN 
              PREPARER.

    (a) Standards Conformed to Taxpayer Standards.--Section 6694(a) 
(relating to understatements due to unrealistic positions) is amended--
            (1) by striking ``realistic possibility of being sustained 
        on its merits'' in paragraph (1) and inserting ``reasonable 
        belief that the tax treatment in such position was more likely 
        than not the proper treatment'',
            (2) by striking ``or was frivolous'' in paragraph (3) and 
        inserting ``or there was no reasonable basis for the tax 
        treatment of such position'', and
            (3) by striking ``Unrealistic'' in the heading and 
        inserting ``Improper''.
    (b) Amount of Penalty.--Section 6694 is amended--
            (1) by striking ``$250'' in subsection (a) and inserting 
        ``$1,000'', and
            (2) by striking ``$1,000'' in subsection (b) and inserting 
        ``$5,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to documents prepared after the date of the enactment of this 
Act.

SEC. 835. FRIVOLOUS TAX SUBMISSIONS.

    (a) Civil Penalties.--Section 6702 is amended to read as follows:

``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

    ``(a) Civil Penalty for Frivolous Tax Returns.--A person shall pay 
a penalty of $5,000 if--
            ``(1) such person files what purports to be a return of a 
        tax imposed by this title but which--
                    ``(A) does not contain information on which the 
                substantial correctness of the self-assessment may be 
                judged, or
                    ``(B) contains information that on its face 
                indicates that the self-assessment is substantially 
                incorrect; and
            ``(2) the conduct referred to in paragraph (1)--
                    ``(A) is based on a position which the Secretary 
                has identified as frivolous under subsection (c), or
                    ``(B) reflects a desire to delay or impede the 
                administration of Federal tax laws.
    ``(b) Civil Penalty for Specified Frivolous Submissions.--
            ``(1) Imposition of penalty.--Except as provided in 
        paragraph (3), any person who submits a specified frivolous 
        submission shall pay a penalty of $5,000.
            ``(2) Specified frivolous submission.--For purposes of this 
        section--
                    ``(A) Specified frivolous submission.--The term 
                `specified frivolous submission' means a specified 
                submission if any portion of such submission--
                            ``(i) is based on a position which the 
                        Secretary has identified as frivolous under 
                        subsection (c), or
                            ``(ii) reflects a desire to delay or impede 
                        the administration of Federal tax laws.
                    ``(B) Specified submission.--The term `specified 
                submission' means--
                            ``(i) a request for a hearing under--
                                    ``(I) section 6320 (relating to 
                                notice and opportunity for hearing upon 
                                filing of notice of lien), or
                                    ``(II) section 6330 (relating to 
                                notice and opportunity for hearing 
                                before levy), and
                            ``(ii) an application under--
                                    ``(I) section 6159 (relating to 
                                agreements for payment of tax liability 
                                in installments),
                                    ``(II) section 7122 (relating to 
                                compromises), or
                                    ``(III) section 7811 (relating to 
                                taxpayer assistance orders).
            ``(3) Opportunity to withdraw submission.--If the Secretary 
        provides a person with notice that a submission is a specified 
        frivolous submission and such person withdraws such submission 
        within 30 days after such notice, the penalty imposed under 
        paragraph (1) shall not apply with respect to such submission.
    ``(c) Listing of Frivolous Positions.--The Secretary shall 
prescribe (and periodically revise) a list of positions which the 
Secretary has identified as being frivolous for purposes of this 
subsection. The Secretary shall not include in such list any position 
that the Secretary determines meets the requirement of section 
6662(d)(2)(B)(ii)(II).
    ``(d) Reduction of Penalty.--The Secretary may reduce the amount of 
any penalty imposed under this section if the Secretary determines that 
such reduction would promote compliance with and administration of the 
Federal tax laws.
    ``(e) Penalties in Addition to Other Penalties.--The penalties 
imposed by this section shall be in addition to any other penalty 
provided by law.''
    (b) Treatment of Frivolous Requests for Hearings Before Levy.--
            (1) Frivolous requests disregarded.--Section 6330 (relating 
        to notice and opportunity for hearing before levy) is amended 
        by adding at the end the following new subsection:
    ``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding any 
other provision of this section, if the Secretary determines that any 
portion of a request for a hearing under this section or section 6320 
meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A), 
then the Secretary may treat such portion as if it were never submitted 
and such portion shall not be subject to any further administrative or 
judicial review.''
            (2) Preclusion from raising frivolous issues at hearing.--
        Section 6330(c)(4) is amended--
                    (A) by striking ``(A)'' and inserting ``(A)(i)'';
                    (B) by striking ``(B)'' and inserting ``(ii)'';
                    (C) by striking the period at the end of the first 
                sentence and inserting ``; or''; and
                    (D) by inserting after subparagraph (A)(ii) (as so 
                redesignated) the following:
                    ``(B) the issue meets the requirement of clause (i) 
                or (ii) of section 6702(b)(2)(A).''
            (3) Statement of grounds.--Section 6330(b)(1) is amended by 
        striking ``under subsection (a)(3)(B)'' and inserting ``in 
        writing under subsection (a)(3)(B) and states the grounds for 
        the requested hearing''.
    (c) Treatment of Frivolous Requests for Hearings Upon Filing of 
Notice of Lien.--Section 6320 is amended--
            (1) in subsection (b)(1), by striking ``under subsection 
        (a)(3)(B)'' and inserting ``in writing under subsection 
        (a)(3)(B) and states the grounds for the requested hearing'', 
        and
            (2) in subsection (c), by striking ``and (e)'' and 
        inserting ``(e), and (g)''.
    (d) Treatment of Frivolous Applications for Offers-in-Compromise 
and Installment Agreements.--Section 7122 is amended by adding at the 
end the following new subsection:
    ``(e) Frivolous Submissions, Etc.--Notwithstanding any other 
provision of this section, if the Secretary determines that any portion 
of an application for an offer-in-compromise or installment agreement 
submitted under this section or section 6159 meets the requirement of 
clause (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
treat such portion as if it were never submitted and such portion shall 
not be subject to any further administrative or judicial review.''
    (e) Clerical Amendment.--The table of sections for part I of 
subchapter B of chapter 68 is amended by striking the item relating to 
section 6702 and inserting the following new item:

``Sec. 6702. Frivolous tax submissions.''
    (f) Effective Date.--The amendments made by this section shall 
apply to submissions made and issues raised after the date on which the 
Secretary first prescribes a list under section 6702(c) of the Internal 
Revenue Code of 1986, as amended by subsection (a).

SEC. 836. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER SECTION 
              269.

    (a) In General.--Subsection (a) of section 269 (relating to 
acquisitions made to evade or avoid income tax) is amended to read as 
follows:
    ``(a) In General.--If--
            ``(1)(A) any person acquires stock in a corporation, or
            ``(B) any corporation acquires, directly or indirectly, 
        property of another corporation and the basis of such property, 
        in the hands of the acquiring corporation, is determined by 
        reference to the basis in the hands of the transferor 
        corporation, and
            ``(2) the principal purpose for which such acquisition was 
        made is evasion or avoidance of Federal income tax by securing 
        the benefit of a deduction, credit, or other allowance,
then the Secretary may disallow such deduction, credit, or other 
allowance.''
    (b) Effective Date.--The amendment made by this section shall apply 
to stock and property acquired after January 1, 2006.
                                 <all>