Repeal of tax subsidies for the oil and gas industry

(a)

Repeal of election To expense certain refineries

(1)Subparagraph (B) of section 179C(c)(2) of the Internal Revenue Code of 1986 is amended by striking January 1, 2012 and inserting the date of the enactment of the Climate Change Investment Act of 2006. (2)Paragraph (2) of section 179C(c) of such Code is amended by striking January 1, 2008 each place it appears and inserting the date of the enactment of the Climate Change Investment Act of 2006. (b)

Repeal of amortization of geological and geophysical expenditures

Subsection (h) of section 167 of such Code is amended by adding at the end the following new paragraph:

(5)

Termination

This subsection shall not apply to any expenses paid or incurred in any taxable year beginning after the date of the enactment of this Act.

(c)

Repeal of enhanced oil recovery credit

Section 43 of such Code (relating to enhanced oil recovery credit) is amended by adding at the end the following new subsection:

(f)

Termination

This section shall not apply to taxable years beginning after the date of the enactment of this subsection.

(d)

Repeal of credit for production of low sulfur diesel fuel

Section 45H of such Code (relating to credit for production of low sulfur diesel fuel) is amended by adding at the end the following new subsection:

(h)

Termination

This section shall not apply to taxable years beginning after the date of the enactment of this subsection.

(e)

Repeal of credit for producing fuel from a nonconventional source

Subpart D of part IV of subchapter A of chapter 1 of such Code is amended by striking section 45K (relating to credit for producing fuel from a nonconventional source). (f)

Repeal of deduction for capital costs incurred in complying with Environmental Protection Agency sulfur regulations

Section 179B of such Code (relating to deduction for capital costs incurred in complying with Environmental Protection Agency sulfur regulations) is amended by adding at the end the following new subsection:

(f)

Termination

This section shall not apply to taxable years beginning after the date of the enactment of this subsection.

(g)

Repeal of certain intangible drilling and development costs

Subsection (c) of section 263 of such Code (relating to intangible drilling and development costs in the case of oil and gas wells and geothermal wells) is amended by adding at the end the following new sentence: This subsection shall not apply to costs incurred after the date of the enactment of this sentence with respect to any oil or gas well.. (h)

Repeal of certain oil and gas provisions

(1)

In general

Part I of subchapter I of chapter 1 of such Code (relating to deductions) is amended by adding at the end the following new section:

618.

Oil and gas limitation

This part shall not apply with respect to any expenditure which relates to any oil or gas well and which is paid or incurred after the date of the enactment of this section.

(2)

Clerical amendment

The table of sections for part I of subchapter I of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 618. Oil and gas limitation.

(i)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of the enactment of this Act. (2)

Repeal of credit for producing fuel from a nonconventional source

The amendment made by subsection (e) shall apply with respect to fuels sold or produced after the date of the enactment of this Act.

Greenhouse gas intensity reduction investment tax credit

(a)

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 new section:

45N.

Greenhouse gas intensity reduction investment credit

(a)

Allowance of Credit

(1)

In general

For purposes of section 38, in the case of a taxpayer’s investment in a greenhouse gas intensity reduction project approved by the Secretary of Energy, the greenhouse gas intensity reduction investment credit determined under this section for the taxable year is an amount equal to— (A)the percentage reduction in greenhouse gas intensity certified for such project for such year by the Secretary of Energy, multiplied by (B)the investment in such project during such year which is attributable, directly or indirectly, to the taxpayer, as determined by the Secretary of Energy. (2)

Aggregate dollar limitation

The credit determined under paragraph (1) for any taxable year, when added to any credit allowed to the taxpayer with respect to the such project in any preceding taxable year, shall not exceed 50 percent of the investment attributable to the taxpayer with respect to such project through such taxable year. (b)

Limitation on aggregate credit allowable

(1)

In general

The amount of the greenhouse gas intensity reduction investment credit determined under subsection (a) for any project, when added to all such credits allowed to all taxpayers with respect to the such project shall not exceed the credit dollar amount allocated to such project under this subsection by the Secretary of Energy from the greenhouse gas intensity reduction investment credit limitation for the calendar year in which such allocation is made. (2)

Time for making allocation

An allocation shall be taken into account under paragraph (1) only if it is made not later than the close of the calendar year in which the greenhouse gas intensity reduction project proposal with respect to such project is approved by the Secretary of Energy. (3)

Overall limitation on aggregate credit allowable

The Secretary of Energy may allocate the aggregate credit dollar amount to any such project for a period not to exceed a 10-year period beginning with the calendar year described in paragraph (2). (c)

Limitation on amount of credits allocated

(1)

In general

There is a greenhouse gas intensity reduction investment credit limitation amount for each calendar year. Except as provided in paragraph (2), such limitation amount is $600,000,000 for each of calendar years 2008 through 2012, and zero thereafter. (2)

Carryover of unused issuance limitation

If for any calendar year the limitation amount imposed by paragraph (1) exceeds the amount of greenhouse gas intensity reduction investment credits allocated during such year, such excess shall be carried forward to the succeeding calendar year as an addition to the limitation imposed by paragraph (1). (d)

Greenhouse gas intensity reduction project; greenhouse gas intensity

For purposes of this section— (1)

Greenhouse gas intensity reduction project

The term greenhouse gas intensity reduction project means any project approved under this section by the Secretary of Energy. Such approval shall be based on the following criteria: (A)The extent of the reduction in greenhouse gas intensity proposed for the project. (B)Improvements in system efficiency. (C)In the case of projects located outside the United States, the extent of technology transfer. (D)The existence and nature of agreements for sharing project benefits and liability between the taxpayer and any host government. (2)

Greenhouse gas intensity

The greenhouse gas intensity for any period is equal to the volume of emissions divided by the economic activity associated with a project. (e)

Recapture of credit in certain cases

(1)

In general

If, at any time during the 20-year period of a greenhouse gas intensity reduction project, there is a recapture event with respect to such project, then the tax imposed by this chapter for the taxable year in which such event occurs shall be increased by the credit recapture amount. (2)

Credit recapture amount

For purposes of paragraph (1)— (A)

In general

The credit recapture amount is an amount equal to the recapture percentage of all greenhouse gas intensity reduction investment credits previously allowable to a taxpayer with respect to any investment in such project that is attributable to such taxpayer. (B)

Recapture percentage

The recapture percentage shall be 100 percent if the recapture event occurs during the first 5 years of the project, 75 percent if the recapture event occurs during the second 5 years of the project, 50 percent if the recapture event occurs during the third 5 years of the project, 25 percent if the recapture event occurs during the fourth 5 years of the project, and 0 percent if the recapture event occurs at any time after the 20th year of the project. (3)

Recapture event

For purposes of paragraph (1), there is a recapture event with respect to a greenhouse gas intensity reduction project if— (A)the taxpayer violates a term or condition of the approval of the project by the Secretary of Energy at any time, (B)the taxpayer adopts a practice which the Secretary of Energy has specified in its approval of the project as a practice which would tend to defeat the purposes of the program, or (C)the taxpayer disposes of any ownership interest arising out of its investment that the Secretary of Energy has determined is attributable to the project, unless the Secretary of Energy determines that such disposition will not have any adverse effect on the greenhouse gas intensity reduction project.

If an event which otherwise would be a recapture event is outside the control of the taxpayer, as determined by the Secretary of Energy, such event shall not be treated as a recapture event with respect to such taxpayer.

(4)

Special rules

(A)

Tax benefit rule

The tax for the taxable year shall be increased under paragraph (1) only with respect to credits allowed by reason of this section which were used to reduce tax liability. In the case of credits not so used to reduce tax liability, the carryforwards and carrybacks under section 39 shall be appropriately adjusted. (B)

No credits against tax

Any increase in tax under this subsection shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55. (f)

Disallowance of double benefit

(1)

Basis reduction

The basis of any investment in a greenhouse gas intensity reduction project shall be reduced by the amount of any credit determined under this section with respect to such investment. (2)

Charitable deduction disallowed

No deduction shall be allowed to a taxpayer under section 170 with respect to any contribution which the Secretary of Energy certifies to the Secretary of the Treasury constitutes an investment in a greenhouse gas intensity reduction project that is attributable to such taxpayer. (g)

Certification to Treasury

The Secretary of Energy shall certify to the Secretary of the Treasury before January 31 of each year with respect to each taxpayer which has made an investment in a greenhouse gas intensity reduction project— (1)the amount of the greenhouse gas intensity reduction investment credit allowable to such taxpayer for the preceding calendar year, (2)whether a recapture event occurred with respect to such taxpayer during the preceding calendar year, and (3)the credit recapture amount, if any, with respect to such taxpayer for the preceding calendar year. (h)

Regulations

The Secretary of the Treasury shall prescribe such regulations as may be appropriate to carry out this section, including regulations— (1)which limit the credit for investments which are directly or indirectly subsidized by other Federal benefits, (2)which prevent the abuse of the provisions of this section through the use of related parties, and (3)which impose appropriate reporting requirements.

(b)

Credit made part of general business credit

Subsection (b) of section 38 is amended by striking and at the end of paragraph (29), by striking the period at the end of paragraph (30) and inserting , and, and by adding at the end the following new paragraph:

(31)the greenhouse gas intensity reduction investment credit determined under section 45N(a).

(c)

Deduction for unused credit

Subsection (c) of section 196 is amended by striking and at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting , and, and by adding at the end the following new paragraph:

(14)the greenhouse gas intensity reduction investment credit determined under section 45N(a).

(d)

Clerical amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

Sec. 45N. Greenhouse gas intensity reduction investment credit.

(e)

Effective date

The amendments made by this section shall apply to investments made after December 31, 2007.