[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1229 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                S. 1229

   To amend the Internal Revenue Code of 1986 to extend, modify, and 
expand the credit for electricity produced from renewable resources and 
                waste products, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 13, 2005

  Mr. Reid (for himself, Mrs. Feinstein, Ms. Cantwell, Ms. Snowe, Mr. 
Jeffords, Mr. Lieberman, and Mr. Kerry) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to extend, modify, and 
expand the credit for electricity produced from renewable resources and 
                waste products, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Renewable Energy 
Incentives Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act 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. 2. EXTENSION, MODIFICATION, AND EXPANSION OF CREDIT FOR 
              ELECTRICITY PRODUCED FROM RENEWABLE RESOURCES AND WASTE 
              PRODUCTS.

    (a) Permanent Extension.--
            (1) Paragraphs (1) and (2)(A)(i) of section 45(d) are each 
        amended by striking ``, and before January 1, 2006''.
            (2) Section 45(d)(2)(A)(ii) is amended by striking ``before 
        January 1, 2006, is originally placed in service and'' and 
        insert ``is''.
            (3) Section 45(d)(3)(A) is amended--
                    (A) by striking ``owned by the taxpayer'',
                    (B) by inserting ``owned by the taxpayer and'' in 
                clause (i)(I) after ``is'',
                    (C) by striking ``and before January 1, 2006'' in 
                clause (i)(I), and
                    (D) by striking ``originally placed in service 
                before January 1, 2006'' in clause (ii) and inserting 
                ``owned by the taxpayer''.
            (4) Paragraphs (4), (5), (6), and (7) of section 45(d) 
        (relating to qualified facilities) are amended by striking 
        ``and before January 1, 2006'' each place it appears.
    (b) Credit Rate.--
            (1) Increase in credit rate.--
                    (A) In general.--Section 45(a)(1) is amended by 
                striking ``1.5 cents'' and inserting ``1.9 cents''.
                    (B) Conforming amendments.--
                            (i) Section 45(b)(2) is amended by striking 
                        ``1.5 cent'' and inserting ``1.9 cent''.
                            (ii) Section 45(e)(2)(B) is amended by 
                        inserting ``(calendar year 2004 in the case of 
                        the 1.9 cent amount in subsection (a))'' after 
                        ``1992''.
            (2) Full credit rate for all facilities placed in service 
        after date of enactment.--Section 45(b)(4)(A) (relating to 
        credit rate) is amended by inserting ``and placed in service 
        before the date of the enactment of the Renewable Energy 
        Incentives Act'' after ``subsection (d)''.
    (c) Full Credit Period for All Facilities Placed in Service After 
Date of Enactment.--Section 45(b)(4)(B)(i) (relating to credit period) 
is amended by inserting ``and placed in service before the date of the 
enactment of the Renewable Energy Incentives Act'' after ``subsection 
(d)''
    (d) Expansion of Qualified Resources.--
            (1) In general.--Section 45(c)(1) (defining qualified 
        energy resources) is amended by striking ``and'' at the end of 
        subparagraph (F), by striking the period at the end of 
        subparagraph (G) and inserting a comma, and by adding at the 
        end the following new subparagraphs:
                    ``(H) incremental geothermal energy production, and
                    ``(I) incremental hydropower production.''.
            (2) Definition of resources.--Section 45(c) (relating to 
        qualified energy resources and refined coal) is amended by 
        adding at the end the following new paragraphs:
            ``(8) Incremental geothermal production.--
                    ``(A) In general.--The term `incremental geothermal 
                production' means for any taxable year the excess of--
                            ``(i) the total kilowatt hours of 
                        electricity produced from an incremental 
                        geothermal facility described in subsection 
                        (d)(9), over
                            ``(ii) the average annual kilowatt hours 
                        produced at such facility for 5 of the previous 
                        7 calendar years before the date of the 
                        enactment of this paragraph after eliminating 
                        the highest and the lowest kilowatt hour 
                        production years in such 7-year period.
                    ``(B) Special rule.--A facility described in 
                subsection (d)(9) which was placed in service at least 
                7 years before the date of the enactment of this 
                paragraph shall commencing with the year in which such 
                date of enactment occurs, reduce the amount calculated 
                under subparagraph (A)(ii) each year, on a cumulative 
                basis, by the average percentage decrease in the annual 
                kilowatt hour production for the 7-year period 
                described in subparagraph (A)(ii) with such cumulative 
                sum not to exceed 30 percent.
            ``(9) Incremental hydropower production.--
                    ``(A) In general.--The term `incremental hydropower 
                production' means for any taxable year an amount equal 
                to the percentage of total kilowatt hours of 
                electricity produced from an incremental hydropower 
                facility described in subsection (d)(10) attributable 
                to efficiency improvements or additions of capacity as 
                determined under subparagraph (B).
                    ``(B) Determination of incremental hydropower 
                production.--For purposes of subparagraph (A), 
                incremental hydropower production for any incremental 
                hydropower facility for any taxable year shall be 
                determined by establishing a percentage of average 
                annual hydropower production at the facility 
                attributable to the efficiency improvements or 
                additions of capacity using the same water flow 
                information used to determine an historic average 
                annual hydropower production baseline for such 
                facility. Such percentage and baseline shall be 
                certified by the Federal Energy Regulatory Commission. 
                For purposes of the preceding sentence, the 
                determination of incremental hydropower production 
                shall not be based on any operational changes at such 
                facility not directly associated with the efficiency 
                improvements or additions of capacity.''.
            (3) Facilities.--Section 45(d) (relating to qualified 
        facilities) is amended by adding at the end the following new 
        paragraphs:
            ``(9) Incremental geothermal facility.--In the case of a 
        facility using incremental geothermal to produce electricity, 
        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, but only to the extent of 
        its incremental geothermal production. In the case of a 
        qualified facility described in the preceding sentence, the 10-
        year period referred to in subsection (a) shall be treated as 
        beginning not earlier than such date of enactment. Such term 
        shall not include any property described in section 48(a)(3) 
        the basis of which is taken into account by the taxpayer for 
        purposes of determining the energy credit under section 48.
            ``(10) Incremental hydropower facility.--In the case of a 
        facility using incremental hydropower to produce electricity, 
        the term `qualified facility' means any non-Federal 
        hydroelectric facility owned by the taxpayer which is 
        originally placed in service before the date of the enactment 
        of this paragraph, but only to the extent of its incremental 
        hydropower production. In the case of a qualified facility 
        described in the preceding sentence, the 10-year period 
        referred to in subsection (a) shall be treated as beginning not 
        earlier than such date of enactment.''.
    (e) Credit Eligibility for Lessees and Operators Extended to All 
Facilities.--Paragraph (6) of section 45(d) is amended to read as 
follows:
            ``(6) Credit eligibility for lessees and operators.--In the 
        case of any facility described in paragraph (1), (4), (5), (6), 
        (7), (9), or (10), if the owner of such facility is not the 
        producer of the electricity, the person eligible for the credit 
        allowable under subsection (a) shall be the lessee or the 
        operator of such facility.''.
    (f) Qualified Facilities With Co-production.--Section 45(b) 
(relating to limitations and adjustments) is amended by adding at the 
end the following:
            ``(5) Increased credit for co-production facilities.--
                    ``(A) In general.--In the case of a qualified 
                facility described in any paragraph of subsection (d) 
                (other than paragraph (8)) 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 a taxpayer shall (after 
                adjustment under paragraph (2) and before adjustment 
                under paragraphs (1) 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, chemicals, 
                        liquid fuels, 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.''.
    (g) Qualified Facilities Located Within Qualified Indian Lands.--
Section 45(b) (relating to limitations and adjustments), as amended by 
subsection (f), is amended by adding at the end the following:
            ``(6) Increased credit for qualified facility located 
        within qualified indian land.--In the case of a qualified 
        facility described in any paragraph of subsection (d) (other 
        than paragraphs (1), (2) and (8)) 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 (2) and (5) and before adjustment under 
                paragraphs (1) and (3)) be increased by .25 cents.''.
    (h) Additional Modifications.--
            (1) Treatment of persons not able to use entire credit.--
        Section 45(e) (relating to additional definitions and special 
        rules), as amended by subsection (a)(2), is amended by adding 
        at the end the following new paragraph:
            ``(11) Treatment of persons not able to use entire 
        credit.--
                    ``(A) Allowance of credit.--
                            ``(i) In general.--Except as otherwise 
                        provided in this subsection--
                                    ``(I) any credit allowable under 
                                subsection (a) with respect to a 
                                qualified facility owned by a person 
                                described in clause (ii) may be 
                                transferred or used as provided in this 
                                paragraph, and
                                    ``(II) the determination as to 
                                whether the credit is allowable shall 
                                be made without regard to the tax-
                                exempt status of the person.
                            ``(ii) Persons described.--A person is 
                        described in this clause if the person is--
                                    ``(I) an organization described in 
                                section 501(c)(12)(C) and exempt from 
                                tax under section 501(a),
                                    ``(II) an organization described in 
                                section 1381(a)(2)(C),
                                    ``(III) a public utility (as 
                                defined in section 136(c)(2)(B)), which 
                                is exempt from income tax under this 
                                subtitle,
                                    ``(IV) any State or political 
                                subdivision thereof, the District of 
                                Columbia, any possession of the United 
                                States, or any agency or 
                                instrumentality of any of the 
                                foregoing, or
                                    ``(V) any Indian tribal government 
                                (within the meaning of section 7871) or 
                                any agency or instrumentality thereof.
                    ``(B) Transfer of credit.--
                            ``(i) In general.--A person described in 
                        subparagraph (A)(ii) may transfer any credit to 
                        which subparagraph (A)(i) applies through an 
                        assignment to any other person not described in 
                        subparagraph (A)(ii). Such transfer may be 
                        revoked only with the consent of the Secretary.
                            ``(ii) Regulations.--The Secretary shall 
                        prescribe such regulations as necessary to 
                        ensure that any credit described in clause (i) 
                        is assigned once and not reassigned by such 
                        other person.
                            ``(iii) Transfer proceeds treated as 
                        arising from essential government function.--
                        Any proceeds derived by a person described in 
                        subclause (III), (IV), or (V) of subparagraph 
                        (A)(ii) from the transfer of any credit under 
                        clause (i) shall be treated as arising from the 
                        exercise of an essential government function.
                    ``(C) Credit not income.--Any transfer under 
                subparagraph (B) of any credit to which subparagraph 
                (A)(i) applies shall not be treated as income for 
                purposes of section 501(c)(12).
                    ``(D) Treatment of unrelated persons.--For purposes 
                of subsection (a)(2)(B), sales among and between 
                persons described in subparagraph (A)(ii) shall be 
                treated as sales between unrelated parties.''.
            (2) Credits not reduced by tax-exempt bonds or certain 
        other subsidies.--Section 45(b)(3) (relating to credit reduced 
        for grants, tax-exempt bonds, subsidized energy financing, and 
        other credits) is amended--
                    (A) by striking clause (ii),
                    (B) by redesignating clauses (iii) and (iv) as 
                clauses (ii) and (iii),
                    (C) by inserting ``(other than 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.), as in effect on the date of the 
                enactment of the Renewable Energy Incentives Act, or 
                proceeds of an issue of State or local government 
                obligations the interest on which is exempt from tax 
                under section 103)'' after ``project'' in clause (ii) 
                (as so redesignated), and
                    (D) by striking ``tax-exempt bonds,'' in the 
                heading and inserting ``certain''.
            (3) Credit allowable against minimum tax without 
        limitation.--Clause (ii) of section 38(c)(4)(B) (defining 
        specified credits) is amended to read as follows:
                            ``(ii) the credit determined under section 
                        45 to the extent that such credit is 
                        attributable to electricity or refined coal 
                        produced at a facility which is originally 
                        placed in service after October 22, 2004.''.
            (4) Treatment of qualified facilities not in compliance 
        with pollution laws.--Section 45(d) (relating to qualified 
        facilities), as amended by subsection (d)(3), is amended by 
        adding at the end the following:
            ``(11) Noncompliance with pollution laws.--For purposes of 
        this subsection, 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 
        considered to be a qualified facility during such period.''.
    (i) Effective Date.--The amendments made by this section shall 
apply to electricity and other energy produced and sold after the date 
of the enactment of this Act, in taxable years ending after such date.
                                 <all>