[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 387 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                 S. 387

 To amend the Internal Revenue Code of 1986 to provide tax incentives 
for the investment in greenhouse gas intensity reduction projects, and 
                          for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 15, 2005

   Mr. Hagel (for himself, Mr. Alexander, Mr. Craig, and Mrs. Dole) 
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 provide tax incentives 
for the investment in greenhouse gas intensity reduction projects, 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 CODE.

    (a) Short Title.--This Act may be cited as the ``Climate Change 
Technology Tax Incentives Act of 2005''.
    (b) Amendment of 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.

       TITLE I--GREENHOUSE GAS INTENSITY REDUCTION TAX INCENTIVES

SEC. 101. 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:

``SEC. 45J. 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 accreditation panel, the 
        greenhouse gas intensity reduction investment credit determined 
        under this section for the taxable year is an amount equal to--
                    ``(A) percentage reduction in greenhouse gas 
                intensity certified for such project for such year by 
                the accreditation panel, multiplied by
                    ``(B) the investment in such project during such 
                year which is attributable, directly or indirectly, to 
                the taxpayer, as determined by the accreditation panel.
            ``(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 accreditation panel 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 accreditation panel.
            ``(3) Overall limitation on aggregate credit allowable.--
        The accreditation panel 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. Such limitation amount is--
                    ``(A) $245,000,000 for 2006,
                    ``(B) $224,000,000 for 2007,
                    ``(C) $216,000,000 for 2008,
                    ``(D) $103,000,000 for 2009,
                    ``(E) $27,000,000 for 2010, and
                    ``(F) except as provided in paragraph (2), 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; Accreditation Panel.--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 accreditation panel. 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.
            ``(3) Accreditation panel.--The term `accreditation panel' 
        means a panel certified by the Secretary of Commerce.
    ``(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 accreditation panel 
                at any time,
                    ``(B) the taxpayer adopts a practice which the 
                accreditation panel 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 
                accreditation panel has determined is attributable to 
                the project, unless the accreditation panel 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 
        accreditation panel, 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 accreditation panel certifies to the 
        Secretary constitutes an investment in a greenhouse gas 
        intensity reduction project that is attributable to such 
        taxpayer.
    ``(g) Certification to Secretary.--The accreditation panel shall 
certify to the Secretary 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 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 ``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 greenhouse gas intensity reduction investment 
        credit determined under section 45J(a).''.
    (c) Deduction for Unused Credit.--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 at the end the following new paragraph:
            ``(13) the greenhouse gas intensity reduction investment 
        credit determined under section 45J(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. 45J. Greenhouse gas intensity reduction investment credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to investments made after December 31, 2005.

                 TITLE II--ENERGY EFFICIENCY PROVISIONS

                      Subtitle A--Renewable Energy

SEC. 201. SENSE OF THE SENATE REGARDING EXTENSION OF RENEWABLE ENERGY 
              CREDIT.

    It is the sense of the Senate that the income tax credit for 
electricity produced from certain renewable resources under section 45 
of the Internal Revenue Code of 1986 should be extended through 2010.

                   Subtitle B--Clean Coal Incentives

 PART I--CREDIT FOR EMISSION REDUCTIONS AND EFFICIENCY IMPROVEMENTS IN 
         EXISTING COAL-BASED ELECTRICITY GENERATION FACILITIES

SEC. 211. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL TECHNOLOGY 
              UNIT.

    (a) Credit for Production From a Qualifying Clean Coal Technology 
Unit.--Subpart D of part IV of subchapter A of chapter 1 (relating to 
business related credits), as amended by this Act, is amended by adding 
at the end the following new section:

``SEC. 45K. 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--
            ``(1) the applicable amount of clean coal technology 
        production credit, multiplied by
            ``(2) the applicable percentage of 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 clean coal technology unit, but only if such 
                production occurs during the 10-year period beginning 
                on the date the unit was returned to service after 
                becoming a qualifying clean coal technology unit.
    ``(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.--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) Applicable Percentage.--For purposes of this section, with 
respect to any qualifying clean coal technology unit, the applicable 
percentage is the percentage equal to the ratio which the portion of 
the national megawatt capacity limitation allocated to the taxpayer 
with respect to such unit under subsection (e) bears to the total 
megawatt capacity of such unit.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualifying clean coal technology unit.--The term 
        `qualifying clean coal technology unit' means a clean coal 
        technology unit of the taxpayer which--
                    ``(A) on January 1, 2005--
                            ``(i) was a coal-based electricity 
                        generating steam generator-turbine unit which 
                        was not a clean coal technology unit, and
                            ``(ii) had a nameplate capacity rating of 
                        not more than 300 megawatts,
                    ``(B) becomes a clean coal technology unit as the 
                result of the retrofitting, repowering, or replacement 
                of the unit with clean coal technology during the 10-
                year period beginning on January 1, 2005,
                    ``(C) is not receiving nor is scheduled to receive 
                funding under the Clean Coal Technology Program, the 
                Power Plant Improvement Initiative, or the Clean Coal 
                Power Initiative administered by the Secretary of 
                Energy, and
                    ``(D) receives an allocation of a portion of the 
                national megawatt capacity limitation under subsection 
                (e).
            ``(2) Clean coal technology unit.--The term `clean coal 
        technology unit' means a unit which--
                    ``(A) uses clean coal technology, 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) uses an input of at least 75 percent coal to 
                produce at least 50 percent of its thermal output as 
                electricity,
                    ``(C) has a design net heat rate of at least 500 
                less than that of such unit as described in paragraph 
                (1)(A),
                    ``(D) has a maximum design net heat rate of not 
                more than 9,500, and
                    ``(E) meets the pollution control requirements of 
                paragraph (3).
            ``(3) Pollution control requirements.--
                    ``(A) In general.--A unit meets the requirements of 
                this paragraph if--
                            ``(i) its emissions of sulfur dioxide, 
                        nitrogen oxide, or particulates meet the lower 
                        of the emission levels for each such emission 
                        specified in--
                                    ``(I) subparagraph (B), or
                                    ``(II) the new source performance 
                                standards of the Clean Air Act (42 
                                U.S.C. 7411) which are in effect for 
                                the category of source at the time of 
                                the retrofitting, repowering, or 
                                replacement of the unit, and
                            ``(ii) its emissions do not exceed any 
                        relevant emission level specified by regulation 
                        pursuant to the hazardous air pollutant 
                        requirements of the Clean Air Act (42 U.S.C. 
                        7412) in effect at the time of the 
                        retrofitting, repowering, or replacement.
                    ``(B) Specific levels.--The levels specified in 
                this subparagraph are--
                            ``(i) in the case of sulfur dioxide 
                        emissions, 50 percent of the sulfur dioxide 
                        emission levels specified in the new source 
                        performance standards of the Clean Air Act (42 
                        U.S.C. 7411) in effect on the date of the 
                        enactment of this section for the category of 
                        source,
                            ``(ii) in the case of nitrogen oxide 
                        emissions--
                                    ``(I) 0.1 pound per million Btu of 
                                heat input if the unit is not a 
                                cyclone-fired boiler, and
                                    ``(II) if the unit is a cyclone-
                                fired boiler, 15 percent of the 
                                uncontrolled nitrogen oxide emissions 
                                from such boilers, and
                            ``(iii) in the case of particulate 
                        emissions, 0.02 pound per million Btu of heat 
                        input.
            ``(4) Design net heat rate.--The design net heat rate with 
        respect to any unit, measured in Btu per kilowatt hour (HHV)--
                    ``(A) shall be based on the design annual heat 
                input to and the design annual net electrical power, 
                fuels, and chemicals output from such unit (determined 
                without regard to such unit's co-generation of steam),
                    ``(B) shall be adjusted for the heat content of the 
                design coal to be used by the unit if it is less than 
                12,000 Btu per pound according to the following 
                formula:
        Design net heat rate = Unit net heat rate [l- {((12,000-design 
        coal heat content, Btu per pound)/1,000) 0.013}],
                    ``(C) shall be corrected for the site reference 
                conditions of--
                            ``(i) elevation above sea level of 500 
                        feet,
                            ``(ii) air pressure of 14.4 pounds per 
                        square inch absolute (psia),
                            ``(iii) temperature, dry bulb of 63 deg.F,
                            ``(iv) temperature, wet bulb of 54 deg.F, 
                        and
                            ``(v) relative humidity of 55 percent, and
                    ``(D) if carbon capture controls have been 
                installed with respect to any qualifying unit and such 
                controls remove at least 50 percent of the unit's 
                carbon dioxide emissions, shall be adjusted up to the 
                design heat rate level which would have resulted 
                without the installation of such controls.
            ``(5) HHV.--The term `HHV' means higher heating value.
            ``(6) Application of certain rules.--The rules of 
        paragraphs (3), (4), and (5) of section 45(e) shall apply.
            ``(7) Inflation adjustment factor.--
                    ``(A) In general.--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 2003.
                    ``(B) GDP implicit price deflator.--The term `GDP 
                implicit price deflator' means, for any calendar year, 
                the most recent revision of the implicit price deflator 
                for the gross domestic product as of June 30 of such 
                calendar year as computed by the Department of Commerce 
                before October 1 of such calendar year.
            ``(8) Noncompliance with pollution laws.--For purposes of 
        this section, a unit 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 qualifying clean coal technology unit during 
        such period.
    ``(e) National Limitation on the Aggregate Capacity of Qualifying 
Clean Coal Technology Units.--
            ``(1) In general.--For purposes of this section, the 
        national megawatt capacity limitation for qualifying clean coal 
        technology units is 4,000 megawatts.
            ``(2) Allocation of limitation.--The Secretary shall 
        allocate the national megawatt capacity limitation for 
        qualifying clean coal technology units in such manner as the 
        Secretary may prescribe under the regulations under paragraph 
        (3).
            ``(3) Regulations.--Not later than 6 months after the date 
        of the enactment of this section, the Secretary shall prescribe 
        such regulations as may be necessary or appropriate--
                    ``(A) to carry out the purposes of this subsection,
                    ``(B) to limit the capacity of any qualifying clean 
                coal technology unit to which this section applies so 
                that the megawatt capacity allocated to any unit under 
                this subsection does not exceed 300 megawatts and the 
                combined megawatt capacity allocated to all such units 
                when all such units are placed in service during the 
                10-year period described in subsection (d)(1)(B), does 
                not exceed 4,000 megawatts,
                    ``(C) to provide a certification process under 
                which the Secretary, in consultation with the Secretary 
                of Energy, shall approve and allocate the national 
                megawatt capacity limitation--
                            ``(i) to encourage that units with the 
                        highest thermal efficiencies, when adjusted for 
                        the heat content of the design coal and site 
                        reference conditions described in subsection 
                        (d)(4)(C), and environmental performance, be 
                        placed in service as soon as possible, and
                            ``(ii) to allocate capacity to taxpayers 
                        which have a definite and credible plan for 
                        placing into commercial operation a qualifying 
                        clean coal technology unit, including--
                                    ``(I) a site,
                                    ``(II) contractual commitments for 
                                procurement and construction or, in the 
                                case of regulated utilities, the 
                                agreement of the State utility 
                                commission,
                                    ``(III) filings for all necessary 
                                preconstruction approvals,
                                    ``(IV) a demonstrated record of 
                                having successfully completed 
                                comparable projects on a timely basis, 
                                and
                                    ``(V) such other factors that the 
                                Secretary determines are appropriate,
                    ``(D) to allocate the national megawatt capacity 
                limitation to a portion of the capacity of a qualifying 
                clean coal technology unit if the Secretary determines 
                that such an allocation would maximize the amount of 
                efficient production encouraged with the available tax 
                credits,
                    ``(E) to set progress requirements and conditional 
                approvals so that capacity allocations for clean coal 
                technology units which become unlikely to meet the 
                necessary conditions for qualifying can be reallocated 
                by the Secretary to other clean coal technology units, 
                and
                    ``(F) to provide taxpayers with opportunities to 
                correct administrative errors and omissions with 
                respect to allocations and record keeping within a 
                reasonable period after discovery, taking into account 
                the availability of regulations and other 
                administrative guidance from the Secretary.''.
    (b) Credit Treated as Business Credit.--Section 38(b) (relating to 
current year business credit), as amended by this Act, 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 new paragraph:
            ``(21) the qualifying clean coal technology production 
        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, as amended by this Act, is 
amended by adding at the end the following new item:

``Sec. 45K. Credit for production from a qualifying clean coal 
                            technology unit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to production after December 31, 2004, in taxable years ending 
after such date.

PART II--INCENTIVES FOR EARLY COMMERCIAL APPLICATIONS OF ADVANCED CLEAN 
                           COAL TECHNOLOGIES

SEC. 212. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN COAL 
              TECHNOLOGY.

    (a) Allowance of Qualifying Advanced Clean Coal Technology Unit 
Credit.--Section 46 (relating to amount of 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 qualifying advanced clean coal technology unit 
        credit.''.
    (b) Amount of Qualifying Advanced 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 48 the following new section:

``SEC. 48A. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY UNIT CREDIT.

    ``(a) In General.--For purposes of section 46, the qualifying 
advanced clean coal technology unit credit for any taxable year is an 
amount equal to 10 percent of the applicable percentage of the 
qualified investment in a qualifying advanced clean coal technology 
unit for such taxable year.
    ``(b) Qualifying Advanced Clean Coal Technology Unit.--
            ``(1) In general.--For purposes of subsection (a), the term 
        `qualifying advanced clean coal technology unit' means an 
        advanced clean coal technology unit of the taxpayer--
                    ``(A)(i) in the case of a unit first placed in 
                service after December 31, 2004, the original use of 
                which commences with the taxpayer, or
                    ``(ii) in the case of the retrofitting or 
                repowering of a unit first placed in service before 
                January 1, 2005, the retrofitting or repowering of 
                which is completed by the taxpayer after such date, or
                    ``(B) which is depreciable under section 167,
                    ``(C) which has a useful life of not less than 4 
                years,
                    ``(D) which is located in the United States,
                    ``(E) which is not receiving nor is scheduled to 
                receive funding under the Clean Coal Technology 
                Program, the Power Plant Improvement Initiative, or the 
                Clean Coal Power Initiative administered by the 
                Secretary of Energy,
                    ``(F) which is not a qualifying clean coal 
                technology unit, and
                    ``(G) which receives an allocation of a portion of 
                the national megawatt capacity limitation under 
                subsection (f).
            ``(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 unit 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) Noncompliance with pollution laws.--For purposes of 
        this subsection, a unit 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 qualifying advanced clean coal technology 
        unit during such period.
    ``(c) Applicable Percentage.--For purposes of this section, with 
respect to any qualifying advanced clean coal technology unit, the 
applicable percentage is the percentage equal to the ratio which the 
portion of the national megawatt capacity limitation allocated to the 
taxpayer with respect to such unit under subsection (f) bears to the 
total megawatt capacity of such unit.
    ``(d) Advanced Clean Coal Technology Unit.--For purposes of this 
section--
            ``(1) In general.--The term `advanced clean coal technology 
        unit' means a new, retrofit, or repowering unit of the taxpayer 
        which--
                    ``(A) is--
                            ``(i) an eligible advanced pulverized coal 
                        or atmospheric fluidized bed combustion 
                        technology unit,
                            ``(ii) an eligible pressurized fluidized 
                        bed combustion technology unit,
                            ``(iii) an eligible integrated gasification 
                        combined cycle technology unit, or
                            ``(iv) an eligible other technology unit, 
                        and
                    ``(B) meets the carbon emission rate requirements 
                of paragraph (6).
            ``(2) Eligible advanced pulverized coal or atmospheric 
        fluidized bed combustion technology unit.--The term `eligible 
        advanced pulverized coal or atmospheric fluidized bed 
        combustion technology unit' means a clean coal technology unit 
        using advanced pulverized coal or atmospheric fluidized bed 
        combustion technology which--
                    ``(A) is placed in service after December 31, 2004, 
                and before January 1, 2013, and
                    ``(B) has a design net heat rate of not more than 
                8,500 (8,900 in the case of units placed in service 
                before 2009).
            ``(3) Eligible pressurized fluidized bed combustion 
        technology unit.--The term `eligible pressurized fluidized bed 
        combustion technology unit' means a clean coal technology unit 
        using pressurized fluidized bed combustion technology which--
                    ``(A) is placed in service after December 31, 2004, 
                and before January 1, 2017, and
                    ``(B) has a design net heat rate of not more than 
                7,720 (8,900 in the case of units placed in service 
                before 2009, and 8,500 in the case of units placed in 
                service after 2008 and before 2013).
            ``(4) Eligible integrated gasification combined cycle 
        technology unit.--The term `eligible integrated gasification 
        combined cycle technology unit' means a clean coal technology 
        unit using integrated gasification combined cycle technology, 
        with or without fuel or chemical co-production, which--
                    ``(A) is placed in service after December 31, 2004, 
                and before January 1, 2017,
                    ``(B) has a design net heat rate of not more than 
                7,720 (8,900 in the case of units placed in service 
                before 2009, and 8,500 in the case of units placed in 
                service after 2008 and before 2013), and
                    ``(C) has a net thermal efficiency (HHV) using coal 
                with fuel or chemical co-production of not less than 
                44.2 percent (38.4 percent in the case of units placed 
                in service before 2009, and 40.2 percent in the case of 
                units placed in service after 2008 and before 2013).
            ``(5) Eligible other technology unit.--The term `eligible 
        other technology unit' means a clean coal technology unit using 
        any other technology for the production of electricity which is 
        placed in service after December 31, 2004, and before January 
        1, 2017.
            ``(6) Carbon emission rate requirements.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a unit meets the requirements of this 
                paragraph if--
                            ``(i) in the case of a unit using design 
                        coal with a heat content of not more than 9,000 
                        Btu per pound, the carbon emission rate is less 
                        than 0.60 pound of carbon per kilowatt hour, 
                        and
                            ``(ii) in the case of a unit using design 
                        coal with a heat content of more than 9,000 Btu 
                        per pound, the carbon emission rate is less 
                        than 0.54 pound of carbon per kilowatt hour.
                    ``(B) Eligible other technology unit.--In the case 
                of an eligible other technology unit, subparagraph (A) 
                shall be applied by substituting `0.51' and `0.459' for 
                `0.60' and `0.54', respectively.
    ``(e) General Definitions.--Any term used in this section which is 
also used in section 45K shall have the meaning given such term in 
section 45M.
    ``(f) National Limitation on the Aggregate Capacity of Advanced 
Clean Coal Technology Units.--
            ``(1) In general.--For purposes of subsection (b)(1)(G), 
        the national megawatt capacity limitation is--
                    ``(A) for qualifying advanced clean coal technology 
                units using advanced pulverized coal or atmospheric 
                fluidized bed combustion technology, not more than 
                1,000 megawatts (not more than 500 megawatts in the 
                case of units placed in service before 2009),
                    ``(B) for such units using pressurized fluidized 
                bed combustion technology, not more than 500 megawatts 
                (not more than 250 megawatts in the case of units 
                placed in service before 2009),
                    ``(C) for such units using integrated gasification 
                combined cycle technology, with or without fuel or 
                chemical co-production, not more than 2,000 megawatts 
                (not more than 1,000 megawatts in the case of units 
                placed in service before 2009), and
                    ``(D) for such units using other technology for the 
                production of electricity, not more than 500 megawatts 
                (not more than 250 megawatts in the case of units 
                placed in service before 2009).
            ``(2) Allocation of limitation.--The Secretary shall 
        allocate the national megawatt capacity limitation for 
        qualifying advanced clean coal technology units in such manner 
        as the Secretary may prescribe under the regulations under 
        paragraph (3).
            ``(3) Regulations.--Not later than 6 months after the date 
        of the enactment of this section, the Secretary shall prescribe 
        such regulations as may be necessary or appropriate--
                    ``(A) to carry out the purposes of this subsection 
                and section 45L,
                    ``(B) to limit the capacity of any qualifying 
                advanced clean coal technology unit to which this 
                section applies so that the combined megawatt capacity 
                of all such units to which this section applies does 
                not exceed 4,000 megawatts,
                    ``(C) to provide a certification process described 
                in section 45K(e)(3)(C),
                    ``(D) to carry out the purposes described in 
                subparagraphs (D), (E), and (F) of section 45K(e)(3), 
                and
                    ``(E) to reallocate capacity which is not allocated 
                to any technology described in subparagraphs (A) 
                through (D) of paragraph (1) because an insufficient 
                number of qualifying units request an allocation for 
                such technology, to another technology described in 
                such subparagraphs in order to maximize the amount of 
                energy efficient production encouraged with the 
                available tax credits.
            ``(4) Selection criteria.--For purposes of this subsection, 
        the selection criteria for allocating the national megawatt 
        capacity limitation to qualifying advanced clean coal 
        technology units--
                    ``(A) shall be established by the Secretary of 
                Energy as part of a competitive solicitation,
                    ``(B) shall include primary criteria of minimum 
                design net heat rate, maximum design thermal 
                efficiency, environmental performance, and lowest cost 
                to the Government, and
                    ``(C) shall include supplemental criteria as 
                determined appropriate by the Secretary of Energy.
    ``(g) 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 unit placed in 
service by the taxpayer during such taxable year (in the case of a unit 
described in subsection (b)(1)(A)(ii), only that portion of the basis 
of such unit which is properly attributable to the retrofitting or 
repowering of such unit).
    ``(h) 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 (g) 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 
        advanced clean coal technology unit 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 unit to be taken into account.--
                Construction shall be taken into account only if, for 
                purposes of this subpart, expenditures therefor 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.
    ``(i) 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 48 is allowed 
unless the taxpayer elects to waive the application of such credit to 
such property.''.
    (c) Recapture.--Section 50(a) (relating to other special rules) is 
amended by adding at the end the following new paragraph:
            ``(6) Special rules relating to qualifying advanced clean 
        coal technology unit.--For purposes of applying this subsection 
        in the case of any credit allowable by reason of section 48A, 
        the following rules 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 unit (as defined by section 48A(b)(1)) 
                multiplied by a fraction the numerator of which is the 
                number of years remaining to fully depreciate under 
                this title the qualifying advanced clean coal 
                technology unit disposed of, and the denominator of 
                which 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 advanced clean coal 
                technology unit 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 unit under section 48A, except that the 
                amount of the increase in tax under subparagraph (A) of 
                this paragraph shall be substituted for 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 unit.''.
    (d) Technical Amendments.--
            (1) 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 new clause:
                            ``(iv) the portion of the basis of any 
                        qualifying advanced clean coal technology unit 
                        attributable to any qualified investment (as 
                        defined by section 48A(g)).''.
            (2) Section 50(a)(4) is amended by striking ``and (2)'' and 
        inserting ``, (2), and (6)''.
            (3) Section 50(c) is amended by adding at the end the 
        following new paragraph:
            ``(6) Nonapplication.--Paragraphs (1) and (2) shall not 
        apply to any qualifying advanced clean coal technology unit 
        credit under section 48A.''.
            (4) 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 48 the following new item:

``Sec. 48A. Qualifying advanced clean coal technology unit credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to periods after December 31, 2004, 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. 213. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED CLEAN COAL 
              TECHNOLOGY UNIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits), as amended by this Act, is 
amended by adding at the end the following new section:

``SEC. 45L. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED CLEAN COAL 
              TECHNOLOGY UNIT.

    ``(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 applicable percentage (as determined under 
        section 48A(c)) of 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 unit, but 
                only if such production occurs during the 10-year 
                period beginning on the date the unit was originally 
                placed in service (or returned to service after 
                becoming a qualifying advanced clean coal technology 
                unit).
    ``(b) Applicable Amount.--For purposes of this section--
            ``(1) In general.--Except as provided in paragraph (2), the 
        applicable amount of advanced clean coal technology production 
        credit with respect to production from a qualifying advanced 
        clean coal technology unit shall be determined as follows:
                    ``(A) If the qualifying advanced clean coal 
                technology unit is producing electricity only:
                            ``(i) In the case of a unit originally 
                        placed in service before 2009, if--


------------------------------------------------------------------------
                                            The applicable amount is:
                                       ---------------------------------
    ``The design net heat rate is:      For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not more than 8,500...................          $.0060         $.0038
More than 8,500 but not more than               $.0025         $.0010
 8,750................................
More than 8,750 but less than 8,900...          $.0010          $.0010.
------------------------------------------------------------------------

                            ``(ii) In the case of a unit originally 
                        placed in service after 2008 and before 2013, 
                        if--


------------------------------------------------------------------------
                                            The applicable amount is:
                                       ---------------------------------
    ``The design net heat rate is:      For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not more than 7,770...................          $.0105         $.0090
More than 7,770 but not more than               $.0085         $.0068
 8,125................................
More than 8,125 but less than 8,500...          $.0075          $.0055.
------------------------------------------------------------------------

                            ``(iii) In the case of a unit originally 
                        placed in service after 2012 and before 2017, 
                        if--


------------------------------------------------------------------------
                                            The applicable amount is:
                                       ---------------------------------
    ``The design net heat rate is:      For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not more than 7,380...................          $.0140         $.0115
More than 7,380 but not more than               $.0120          $.0090.
 7,720................................
------------------------------------------------------------------------

                    ``(B) If the qualifying advanced clean coal 
                technology unit is producing fuel or chemicals:
                            ``(i) In the case of a unit originally 
                        placed in service before 2009, if--


------------------------------------------------------------------------
                                            The applicable amount is:
     ``The unit design net thermal     ---------------------------------
         efficiency (HHV) is:           For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not less than 40.2 percent............          $.0060         $.0038
Less than 40.2 but not less than 39             $.0025         $.0010
 percent..............................
Less than 39 but not less than 38.4             $.0010          $.0010.
 percent..............................
------------------------------------------------------------------------

                            ``(ii) In the case of a unit originally 
                        placed in service after 2008 and before 2013, 
                        if--


------------------------------------------------------------------------
                                            The applicable amount is:
     ``The unit design net thermal     ---------------------------------
         efficiency (HHV) is:           For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not less than 43.9 percent............          $.0105         $.0090
Less than 43.9 but not less than 42             $.0085         $.0068
 percent..............................
Less than 42 but not less than 40.2             $.0075          $.0055.
 percent..............................
------------------------------------------------------------------------

                            ``(iii) In the case of a unit originally 
                        placed in service after 2012 and before 2017, 
                        if--


------------------------------------------------------------------------
                                            The applicable amount is:
     ``The unit design net thermal     ---------------------------------
         efficiency (HHV) is:           For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not less than 46.3 percent............          $.0140         $.0115
Less than 46.3 but not less than 44.2           $.0120          $.0090.
 percent..............................
------------------------------------------------------------------------

            ``(2) Special rule for units qualifying for greater 
        applicable amount when placed in service.--If, at the time a 
        qualifying advanced clean coal technology unit is placed in 
        service, production from the unit would be entitled to a 
        greater applicable amount if such unit had been placed in 
        service at a later date, the applicable amount for such unit 
        shall be such greater amount.
    ``(c) Inflation Adjustment.--For calendar years after 2005, each 
dollar amount in subsection (b)(1) 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 45K or 48A shall have the meaning given 
        such term in such section.
            ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
        and (5) of section 45(e) shall apply.''.
    (b) Credit Treated as Business Credit.--Section 38(b) (relating to 
current year business credit), as amended by this Act, 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 qualifying advanced clean coal technology 
        production credit determined under section 45L(a).''.
    (c) Denial of Double Benefit.--Section 29(d) (relating to other 
definitions and special rules) is amended by adding at the end the 
following new paragraph:
            ``(9) Denial of double benefit.--This section shall not 
        apply with respect to any qualified fuel the production of 
        which may be taken into account for purposes of determining the 
        credit under section 45L.''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1, as amended by this Act, is 
amended by adding at the end the following new item:

``Sec. 45L. Credit for production from a qualifying advanced clean coal 
                            technology unit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to production after December 31, 2004, in taxable years ending 
after such date.

      PART III--TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT

SEC. 214. TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT.

    (a) In General.--Section 45K, as added by this Act, is amended by 
adding at the end the following new subsection:
    ``(f) Treatment of Person Not Able to Use Entire Credit.--
            ``(1) Allowance of credits.--
                    ``(A) In general.--Any credit allowable under this 
                section, section 45L, or section 48A with respect to a 
                facility owned by a person described in subparagraph 
                (B) may be transferred or used as provided in this 
                subsection, and the determination as to whether the 
                credit is allowable shall be made without regard to the 
                tax-exempt status of the person.
                    ``(B) Persons described.--A person is described in 
                this subparagraph 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)),
                            ``(iv) any State or political subdivision 
                        thereof, the District of Columbia, or any 
                        agency or instrumentality of any of the 
                        foregoing,
                            ``(v) any Indian tribal government (within 
                        the meaning of section 7871) or any agency or 
                        instrumentality thereof, or
                            ``(vi) the Tennessee Valley Authority.
            ``(2) Transfer of credit.--
                    ``(A) In general.--A person described in clause 
                (i), (ii), (iii), (iv), or (v) of paragraph (1)(B) may 
                transfer any credit to which paragraph (1)(A) applies 
                through an assignment to any other person not described 
                in paragraph (1)(B). Such transfer may be revoked only 
                with the consent of the Secretary.
                    ``(B) Regulations.--The Secretary shall prescribe 
                such regulations as necessary to ensure that any credit 
                described in subparagraph (A) is claimed once and not 
                reassigned by such other person.
                    ``(C) Transfer proceeds treated as arising from 
                essential government function.--Any proceeds derived by 
                a person described in clause (iii), (iv), or (v) of 
                paragraph (1)(B) from the transfer of any credit under 
                subparagraph (A) shall be treated as arising from the 
                exercise of an essential government function.
            ``(3) Use of credit as an offset.--Notwithstanding any 
        other provision of law, in the case of a person described in 
        clause (i), (ii), or (v) of paragraph (1)(B), any credit to 
        which paragraph (1)(A) applies may be applied by such person, 
        to the extent provided by the Secretary of Agriculture, 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.), as in 
        effect on the date of the enactment of this section.
            ``(4) Use by tva.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, in the case of a person described in 
                paragraph (1)(B)(vi), any credit to which paragraph 
                (1)(A) applies may be applied as a credit against the 
                payments required to be made in any fiscal year under 
                section 15d(e) of the Tennessee Valley Authority Act of 
                1933 (16 U.S.C. 831n-4(e)) as an annual return on the 
                appropriations investment and an annual repayment sum.
                    ``(B) Treatment of credits.--The aggregate amount 
                of credits described in paragraph (1)(A) with respect 
                to such person shall be treated in the same manner and 
                to the same extent as if such credits were a payment in 
                cash and shall be applied first against the annual 
                return on the appropriations investment.
                    ``(C) Credit carryover.--With respect to any fiscal 
                year, if the aggregate amount of credits described 
                paragraph (1)(A) with respect to such person exceeds 
                the aggregate amount of payment obligations described 
                in subparagraph (A), the excess amount shall remain 
                available for application as credits against the 
                amounts of such payment obligations in succeeding 
                fiscal years in the same manner as described in this 
                paragraph.
            ``(5) Credit not income.--Any transfer under paragraph (2) 
        or use under paragraph (3) of any credit to which paragraph 
        (1)(A) applies shall not be treated as income for purposes of 
        section 501(c)(12).
            ``(6) Treatment of unrelated persons.--For purposes of this 
        subsection, transfers among and between persons described in 
        clauses (i), (ii), (iii), (iv), and (v) of paragraph (1)(B) 
        shall be treated as transfers between unrelated parties.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to production after December 31, 2004, in taxable years ending after 
such date.

                       Subtitle C--Nuclear Power

SEC. 221. CREDIT FOR PRODUCTION FROM ADVANCED NUCLEAR POWER FACILITIES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits), as amended by this Act, is 
amended by adding at the end the following new section:

``SEC. 45M. CREDIT FOR PRODUCTION FROM ADVANCED NUCLEAR POWER 
              FACILITIES.

    ``(a) General Rule.--For purposes of section 38, the advanced 
nuclear power facility production credit of any taxpayer for any 
taxable year is equal to the product of--
            ``(1) 1.8 cents, multiplied by
            ``(2) the kilowatt hours of electricity--
                    ``(A) produced by the taxpayer at an advanced 
                nuclear power facility during the 8-year period 
                beginning on the date the facility was originally 
                placed in service, and
                    ``(B) sold by the taxpayer to an unrelated person 
                during the taxable year.
    ``(b) National Limitation.--
            ``(1) In general.--The amount of credit which would (but 
        for this subsection and subsection (c)) be allowed with respect 
        to any facility for any taxable year shall not exceed the 
        amount which bears the same ratio to such amount of credit as--
                    ``(A) the national megawatt capacity limitation 
                allocated to the facility, bears to
                    ``(B) the total megawatt nameplate capacity of such 
                facility.
            ``(2) Amount of national limitation.--The national megawatt 
        capacity limitation shall be 6,000 megawatts.
            ``(3) Allocation of limitation.--The Secretary shall 
        allocate the national megawatt capacity limitation in such 
        manner as the Secretary may prescribe.
            ``(4) Regulations.--Not later than 6 months after the date 
        of the enactment of this section, the Secretary shall prescribe 
        such regulations as may be necessary or appropriate to carry 
        out the purposes of this subsection. Such regulations shall 
        provide a certification process under which the Secretary, 
        after consultation with the Secretary of Energy, shall approve 
        and allocate the national megawatt capacity limitation.
    ``(c) Other Limitations.--
            ``(1) Annual limitation.--The amount of the credit 
        allowable under subsection (a) (after the application of 
        subsection (b)) for any taxable year with respect to any 
        facility shall not exceed an amount which bears the same ratio 
        to $125,000,000 as--
                    ``(A) the national megawatt capacity limitation 
                allocated under subsection (b) to the facility, bears 
                to
                    ``(B) 1000.
            ``(2) Other limitations.--Rules similar to the rules of 
        section 45(b) shall apply for purposes of this section, except 
        that paragraph (2) thereof shall not apply to the 1.8 cents 
        under subsection (a)(1).
    ``(d) Advanced Nuclear Power Facility.--For purposes of this 
section--
            ``(1) In general.--The term `advanced nuclear power 
        facility' means any advanced nuclear facility--
                    ``(A) which is owned by the taxpayer and which uses 
                nuclear energy to produce electricity, and
                    ``(B) which is originally placed in service after 
                the date of the enactment of this paragraph and before 
                January 1, 2021.
            ``(2) Advanced nuclear facility.--For purposes of paragraph 
        (1), the term `advanced nuclear facility' means any nuclear 
        facility the reactor design for which is approved after the 
        date of the enactment of this paragraph by the Nuclear 
        Regulatory Commission (and such design or a substantially 
        similar design of comparable capacity was not approved on or 
        before such date).
    ``(e) Other Rules to Apply.--Rules similar to the rules of 
paragraphs (1), (2), (3), (4), and (5) of section 45(e) shall apply for 
purposes of this section.''
    (b) Credit Treated as Business Credit.--Section 38(b), as amended 
by this Act, 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 advanced nuclear power facility production 
        credit determined under section 45M(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1, as amended by this Act, is 
amended by adding at the end the following:

``Sec. 45M. Credit for production from advanced nuclear power 
                            facilities.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to production in taxable years beginning after December 31, 2004.

                           Subtitle D--Sunset

SEC. 231. SUNSET.

    (a) In General.--All provisions of, and amendments made by, this 
title shall not apply to taxable years beginning after December 31, 
2010.
    (b) Application of Certain Laws.--The Internal Revenue Code of 1986 
shall be applied and administered to taxable years beginning after 
December 31, 2010, as if the provisions and amendments described in 
subsection (a) had never been enacted.

                      TITLE III--RESEARCH CREDITS

SEC. 301. SENSE OF THE SENATE REGARDING PERMANENT EXTENSION OF RESEARCH 
              CREDIT.

    It is the sense of the Senate that the income tax credit for 
increasing research activities under section 41 of the Internal Revenue 
Code of 1986 should be permanently extended, the rates of the 
alternative incremental credit under such section should be increased, 
and an alternative simplified credit for qualified research expenses 
should be instituted.
                                 <all>