[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 4000 Introduced in Senate (IS)]








109th CONGRESS
  2d Session
                                S. 4000

To amend the Internal Revenue Code of 1986 to modify the alcohol credit 
and the alternative fuel credit, to amend the Clean Air Act to promote 
the installation of fuel pumps for E-85 fuel, to amend title 49 of the 
     United States Code to require the manufacture of dual fueled 
                  automobiles, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 29, 2006

   Mr. Lugar 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 modify the alcohol credit 
and the alternative fuel credit, to amend the Clean Air Act to promote 
the installation of fuel pumps for E-85 fuel, to amend title 49 of the 
     United States Code to require the manufacture of dual fueled 
                  automobiles, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``National Fuels 
Initiative''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Declaration of United States policy on the development and use 
                            of renewable alternative fuels.
Sec. 4. Modification to alcohol credit and alternative fuel credit.
Sec. 5. Installation of E-85 fuel pumps by major oil companies at owned 
                            stations and branded stations.
Sec. 6. Requirement to manufacture dual fueled automobiles.
Sec. 7. Definition of automobile.
Sec. 8. Average fuel economy standards.
Sec. 9. Credit trading and compliance.
Sec. 10. Consumer tax credit.
Sec. 11. Advanced technology motor vehicles manufacturing credit.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) The national security and economic prosperity of the 
        United States is threatened by our oil dependence, and the 
        reliance of the United States on oil imports impinges on our 
        foreign policy. Adversarial regimes rich in oil and natural gas 
        are using their energy supplies as leverage against import-
        dependent countries and are using increased revenues from oil 
        and gas exports to gain international influence, fund anti-
        American appeals, entrench authoritarianism, and support 
        terrorism.
            (2) Global competition for oil reserves is increasing as 
        supply is depleted, demand increases, and foreign governments 
        attempt to exert more control over reserves. Supplies of oil 
        are vulnerable to disruption resulting from war, political 
        manipulation, natural disasters, and terrorist attacks. A major 
        loss in oil supply could result in a price shock extremely 
        damaging to the economy of the United States and our way of 
        life, and competition over scarce resources could create 
        conflict.
            (3) Inefficient and unclean use of oil damages the 
        environment and worsens the threat of global climate change.

SEC. 3. DECLARATION OF UNITED STATES POLICY ON THE DEVELOPMENT AND USE 
              OF RENEWABLE ALTERNATIVE FUELS.

    Congress declares that:
            (1) It is the policy of the United States to reduce 
        dependence on imported oil through increased efficiency and 
        diversification of fuel sources through dramatically expanded 
        use of clean alternative fuels. Such a reduction will increase 
        the foreign policy flexibility of the United States, make the 
        United States less vulnerable to oil supply disruption, and 
        promote economic growth. The United States will continue to 
        promote research and development of a range of alternatives 
        fuels, and it will implement policies to accelerate the 
        deployment and commercialization of existing efficiency and 
        alternative fuels technologies.
            (2) It is the policy goal of the United States to produce 
        and utilize the equivalent of at least 100,000,000,000 gallons 
        of renewable fuel per year by 2025. This amount of renewable 
        fuel, along with innovation in fuel efficiency, will 
        substantially reduce the need for oil imports in the United 
        States.
            (3) It is the policy of the United States to promote the 
        development of a global biofuels market through partnerships 
        with other nations and to reduce trade barriers for renewable 
        fuels.

SEC. 4. MODIFICATION TO ALCOHOL CREDIT AND ALTERNATIVE FUEL CREDIT.

    (a) Income Tax Credit for Alcohol.--
            (1) Rate based on price of oil.--Section 40 of the Internal 
        Revenue Code of 1986 (relating to alcohol used as fuel) is 
        amended by striking ``60 cents'' each place it appears and 
        inserting ``the applicable amount''.
            (2) Applicable amount.--Subsection (h) of section 40 of 
        such Code is amended to read as follows:
    ``(h) Applicable Amount.--
            ``(1) In general.--For purposes of this section, the term 
        `applicable amount' means, with respect to any quarter--
                    ``(A) $.05 for each $1 (or any fraction thereof) by 
                which $45 exceeds--
                            ``(i) in the case of the alcohol mixture 
                        credit, the average price of a barrel of oil 
                        for the quarter during which the qualified 
                        mixture in which the alcohol was used is sold 
                        or used, and
                            ``(ii) in the case of the alcohol credit, 
                        the average price of a barrel of oil for the 
                        quarter during which the alcohol was sold or 
                        used, and
                    ``(B) $0 for any quarter in which the price of a 
                barrel of oil is greater than $45.
            ``(2) Determination of average price.--The average price of 
        a barrel of oil shall be determined under regulations 
        prescribed by the Secretary.
            ``(3) Barrel.--For purposes of this subsection, the term 
        `barrel' means 42 United States gallons.''.
            (3) Elimination of small ethanol producer credit.--
                    (A) Section 40(a) of such Code is amended--
                            (i) by striking ``, plus'' at the end of 
                        paragraph (2) and inserting a period, and
                            (ii) by striking paragraph (3).
                    (B) Section 40(b) of such Code is amended by 
                striking paragraph (4) and by redesignating paragraph 
                (5) as paragraph (4).
                    (C)(i) Section 40(d)(3) of such Code is amended by 
                striking subparagraph (C) and redesignating 
                subparagraph (D) as subparagraph (C).
                    (ii) Section 40(d)(3)(C) of such Code, as 
                redesignated by clause (i), is amended by striking 
                ``subparagraph (A), (B), or (C)'' and inserting 
                ``subparagraph (A) or (C)''.
                    (D) Section 40 of such Code is amended by striking 
                subsection (g) and by redesignating subsection (h), as 
                amended by paragraph (2), as subsection (g).
            (4) Extension of credit.--Paragraph (1) of section 40(e) of 
        such Code is amended--
                    (A) in subparagraph (A), by striking ``2010'' and 
                inserting ``2020'', and
                    (B) in subparagraph (B), by striking ``2011'' and 
                inserting ``2021''.
            (5) Conforming amendment.--Section 40(b) of such Code, as 
        amended by subsection (a), is amended by striking paragraph (3) 
        and by redesignating paragraph (4) as paragraph (3).
    (b) Modifications to Excise Tax Credit and Payments for Alcohol.--
            (1) In general.--Paragraph (2) of section 6426(b) of the 
        Internal Revenue Code of 1986 is amended to read as follows:
            ``(2) Applicable amount.--For purposes of this subsection, 
        the applicable amount shall be the amount determined under 
        section 40(g).''.
            (2) Extension.--
                    (A) Alcohol fuel mixture credit.--Paragraph (5) of 
                section 6426(b) of such Code is amended by striking 
                ``2010'' and inserting ``2020''.
                    (B) Payments.--Subparagraph (A) of section 
                6427(e)(5) of such Code is amended by striking ``2010'' 
                and inserting ``2020''.
    (c) Modifications to Excise Tax and Payments for Alternative 
Fuel.--
            (1) Alternative fuel credit.--
                    (A) Rate.--
                            (i) In general.--Paragraph (1) of section 
                        6426(d) of the Internal Revenue Code of 1986 is 
                        amended by striking ``50 cents'' and inserting 
                        ``the applicable amount''.
                            (ii) Applicable amount.--Subsection (d) of 
                        section 6426 of such Code is amended by 
                        redesignating paragraphs (2), (3), and (4) as 
                        paragraphs (3), (4), and (5), respectively, and 
                        by inserting after paragraph (1) the following 
                        new paragraph:
            ``(2) Applicable amount.--For purposes of this subsection, 
        the applicable amount shall be the amount determined under 
        section 40(g).''.
                    (B) Extension.--Paragraph (5) of section 6426(d) of 
                such Code, as redesignated by paragraph (1), is amended 
                by striking ``2009 (September 30, 2014, in the case of 
                any sale or use involving liquified hydrogen)'' and 
                inserting ``2020''.
            (2) Alternative fuel mixture credit.--
                    (A) Rate.--
                            (i) In general.--Paragraph (1) of section 
                        6426(e) of the Internal Revenue Code of 1986 is 
                        amended by striking ``50 cents'' and inserting 
                        ``the applicable amount''.
                            (ii) Applicable amount.--Subsection (e) of 
                        section 6426 of such Code is amended by 
                        redesignating paragraphs (2) and (3) as 
                        paragraphs (3) and (4), respectively, and by 
                        inserting after paragraph (1) the following new 
                        paragraph:
            ``(2) Applicable amount.--For purposes of this subsection, 
        the applicable amount shall be the amount determined under 
        section 40(g).''.
                    (B) Extension.--Paragraph (4) of section 6426(e) of 
                such Code, as redesignated by paragraph (1), is amended 
                by striking ``2009 (September 30, 2014, in the case of 
                any sal or use involving liquified hydrogen)'' and 
                inserting ``2020''.
            (3) Payments.--Paragraph (5) of section 6427(e) is amended 
        by inserting ``and'' at the end of subparagraph (B), by 
        striking subparagraphs (C) and (D), and by inserting after 
        subparagraph (B) the following:
                    ``(C) any alternative fuel or alternative fuel 
                mixture (as defined in subsection (d)(3) or (e)(3) of 
                section 6426) sold or used after September 30, 2020.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fuel used or sold in quarters beginning after the date of the 
enactment of this Act.

SEC. 5. INSTALLATION OF E-85 FUEL PUMPS BY MAJOR OIL COMPANIES AT OWNED 
              STATIONS AND BRANDED STATIONS.

    Section 211(o) of the Clean Air Act (42 U.S.C. 7545(o)) is amended 
by adding at the end the following:
            ``(11) Installation of e-85 fuel pumps by major oil 
        companies at owned stations and branded stations.--
                    ``(A) Definitions.--In this paragraph:
                            ``(i) E-85 fuel.--The term `E-85 fuel' 
                        means a blend of gasoline approximately 85 
                        percent of the content of which is derived from 
                        ethanol produced in the United States.
                            ``(ii) Major oil company.--The term `major 
                        oil company' means any person that, 
                        individually or together with any other person 
                        with respect to which the person has an 
                        affiliate relationship or significant ownership 
                        interest, has not less than 4,500 retail 
                        station outlets according to the latest 
                        publication of the Petroleum News Annual 
                        Factbook.
                            ``(iii) Secretary.--The term `Secretary' 
                        means the Secretary of Energy, acting in 
                        consultation with the Administrator of the 
                        Environmental Protection Agency and the 
                        Secretary of Agriculture.
                    ``(B) Regulations.--The Secretary shall promulgate 
                regulations to ensure that each major oil company that 
                sells or introduces gasoline into commerce in the 
                United States through wholly-owned stations or branded 
                stations installs or otherwise makes available 1 or 
                more pumps that dispense E-85 fuel (including any other 
                equipment necessary, such as including tanks, to ensure 
                that the pumps function properly) at not less than the 
                applicable percentage of the wholly-owned stations and 
                the branded stations of the major oil company specified 
                in subparagraph (C).
                    ``(C) Applicable percentage.--For the purpose of 
                subparagraph (B), the applicable percentage of the 
                wholly-owned stations and the branded stations shall be 
                determined in accordance with the following table:

                                               Applicable percentage of
                                              wholly-owned stations and
``Calendar year:                            branded stations (percent):
        2008...................................................      5 
        2009...................................................     10 
        2010...................................................     15 
        2011...................................................     20 
        2012...................................................     25 
        2013...................................................     30 
        2014...................................................     35 
        2015...................................................     40 
        2016...................................................     45 
        2017 and each calendar year thereafter.................     50.
                    ``(D) Geographic distribution.--
                            ``(i) In general.--Subject to clause (ii), 
                        in promulgating regulations under subparagraph 
                        (B), the Secretary shall ensure that each major 
                        oil company described in subparagraph (B) 
                        installs or otherwise makes available 1 or more 
                        pumps that dispense E-85 fuel at not less than 
                        a minimum percentage (specified in the 
                        regulations) of the wholly-owned stations and 
                        the branded stations of the major oil company 
                        in each State.
                            ``(ii) Requirement.--In specifying the 
                        minimum percentage under clause (i), the 
                        Secretary shall ensure that each major oil 
                        company installs or otherwise makes available 1 
                        or more pumps described in that clause in each 
                        State in which the major oil company operates.
                    ``(E) Financial responsibility.--In promulgating 
                regulations under subparagraph (B), the Secretary shall 
                ensure that each major oil company described in that 
                subparagraph assumes full financial responsibility for 
                the costs of installing or otherwise making available 
                the pumps described in that subparagraph and any other 
                equipment necessary (including tanks) to ensure that 
                the pumps function properly.
                    ``(F) Production credits for exceeding e-85 fuel 
                pumps installation requirement.--
                            ``(i) Earning and period for applying 
                        credits.--If the percentage of the wholly-owned 
                        stations and the branded stations of a major 
                        oil company at which the major oil company 
                        installs E-85 fuel pumps in a particular 
                        calendar year exceeds the percentage required 
                        under subparagraph (C), the major oil company 
                        earns credits under this paragraph, which may 
                        be applied to any of the 3 consecutive calendar 
                        years immediately after the calendar year for 
                        which the credits are earned.
                            ``(ii) Trading credits.--Subject to clause 
                        (iii), a major oil company that has earned 
                        credits under clause (i) may sell credits to 
                        another major oil company to enable the 
                        purchaser to meet the requirement under 
                        subparagraph (C).
                            ``(iii) Exception.--A major oil company may 
                        not use credits purchased under clause (ii) to 
                        fulfill the geographic distribution requirement 
                        in subparagraph (D).''.

SEC. 6. REQUIREMENT TO MANUFACTURE DUAL FUELED AUTOMOBILES.

    (a) Requirement.--
            (1) In general.--Chapter 329 of title 49, United States 
        Code, is amended by inserting after section 32902 the 
        following:
``Sec. 32902A. Requirement to manufacture dual fueled automobiles
    ``(a) Requirement.--Each manufacturer of new automobiles that are 
capable of operating on gasoline or diesel fuel shall ensure that the 
percentage of such automobiles, manufactured in any model year after 
model year 2007 and distributed in commerce for sale in the United 
States, which are dual fueled automobiles is equal to not less than the 
applicable percentage set forth in the following table:

                                                      The percentage of
                                                dual fueled automobiles
                                                  manufactured shall be
``For the model year:                                    not less than:
        2008.........................................        10 percent
        2009.........................................        20 percent
        2010.........................................        30 percent
        2011.........................................        40 percent
        1012.........................................        50 percent
        2013.........................................        60 percent
        2014.........................................        70 percent
        2015.........................................        80 percent
        2016.........................................        90 percent
        2017 and beyond..............................       100 percent
    ``(b) Production Credits for Exceeding Flexible Fuel Automobile 
Production Requirement.--
            ``(1) Earning and period for applying credits.--If the 
        number of dual fueled automobiles manufactured by a 
        manufacturer in a particular model year exceeds the number 
        required under subsection (a), the manufacturer earns credits 
        under this section, which may be applied to any of the 3 
        consecutive model years immediately after the model year for 
        which such credits are earned.
            ``(2) Trading credits.--A manufacturer that has earned 
        credits under paragraph (1) may sell credits to another 
        manufacturer to enable the purchaser to meet the requirement 
        under subsection (a).''.
            (2) Technical amendment.--The table of sections for chapter 
        329 of title 49, United States Code, is amended by inserting 
        after the item relating to section 32902 the following:

``32902A. Requirement to manufacture dual fueled automobiles.''.
    (b) Activities to Promote the Use of Certain Alternative Fuels.--
The Secretary of Transportation shall carry out activities to promote 
the use of fuel mixtures containing gasoline or diesel fuel and 1 or 
more alternative fuels, including a mixture containing at least 85 
percent of methanol, denatured ethanol, and other alcohols by volume 
with gasoline or other fuels, to power automobiles in the United 
States.

SEC. 7. DEFINITION OF AUTOMOBILE.

    (a) In General.--Section 32901(a)(3) of title 49, United States 
Code, is amended by striking ``rated at--'' and all that follows 
through the period at the end and inserting ``rated at not more than 
10,000 pounds gross vehicle weight.''.
    (b) Fuel Economy Information.--Section 32908(a) of title 49, United 
States Code, is amended, by striking ``section--'' and all that follows 
through ``(2)'' and inserting ``section, the term''.
    (c) Effective Date.--The amendments made by this section shall 
apply to model year 2009 and each subsequent model year.

SEC. 8. AVERAGE FUEL ECONOMY STANDARDS.

    (a) Standards.--Section 32902 of title 49, United States Code, is 
amended--
            (1) in subsection (a)--
                    (A) in the header, by inserting ``Manufactured 
                Before Model Year 2012'' after ``Non-Passenger 
                Automobiles''; and
                    (B) by adding at the end the following: ``This 
                subsection shall not apply to automobiles manufactured 
                after model year 2011.'';
            (2) in subsection (b)--
                    (A) in the header, by inserting ``Manufactured 
                Before Model Year 2012'' after ``Passenger 
                Automobiles'';
                    (B) by inserting ``and before model year 2009'' 
                after ``1984''; and
                    (C) by adding at the end the following: ``Such 
                standard shall be increased by 4 percent per year for 
                model years 2009 through 2011 (rounded to the nearest 
                1/10 mile per gallon)'';
            (3) by amending subsection (c) to read as follows:
    ``(c) Automobiles Manufactured After Model Year 2011.--(1) Not 
later than 18 months before the beginning of each model year after 
model year 2011, the Secretary of Transportation shall prescribe, by 
regulation--
            ``(A) an average fuel economy standard for automobiles 
        manufactured by a manufacturer in that model year; or
            ``(B) based on 1 or more vehicle attributes that relate to 
        fuel economy--
                    ``(i) separate standards for different classes of 
                automobiles; or
                    ``(ii) standards expressed in the form of a 
                mathematical function.
    ``(2)(A) Except as provided under paragraphs (3) and (4) and 
subsection (d), standards under paragraph (1) shall attain a projected 
aggregate level of average fuel economy of 27.5 miles per gallon for 
all automobiles manufactured by all manufacturers for model year 2012.
    ``(B) The projected aggregate level of average fuel economy for 
model year 2013 and each succeeding model year shall be increased by 4 
percent from the level for the prior model year (rounded to the nearest 
1/10 mile per gallon).
    ``(C) Notwithstanding subparagraphs (A) and (B), the fleetwide 
average fuel economy standard for passenger automobiles manufactured by 
a manufacturer in a model year for that manufacturer's domestic fleet 
and for its foreign fleet as calculated under section 32904 as in 
effect before the date of enactment of the National Fuels Initiative 
shall not be less than 92 percent of the average fuel economy projected 
by the Secretary for the combined domestic and foreign fleets 
manufactured by all manufacturers in that model year.
    ``(3) If the actual aggregate level of average fuel economy 
achieved by manufacturers for each of 3 consecutive model years is at 
least 5 percent less than the projected aggregate level of average fuel 
economy for such model year, the Secretary shall make appropriate 
adjustments to the standards prescribed under this subsection.
    ``(4)(A) Notwithstanding paragraphs (1) through (3) and subsection 
(b), the Secretary of Transportation may prescribe a lower average fuel 
economy standard for 1 or more model years if the Secretary of 
Transportation, in consultation with the Secretary of Energy, 
determines that the minimum standards prescribed under paragraph (2) or 
(3) or subsection (b) for each model year--
            ``(i) are technologically unachievable;
            ``(ii) cannot be achieved without materially reducing the 
        overall safety of automobiles manufactured or sold in the 
        United States; or
            ``(iii) is shown, by clear and convincing evidence, not to 
        be cost effective.
    ``(B) If a lower standard is prescribed for a model year under 
subparagraph (A), such standard shall be the maximum standard that--
            ``(i) is technologically achievable;
            ``(ii) can be achieved without materially reducing the 
        overall safety of automobiles manufactured or sold in the 
        United States; and
            ``(iii) is cost effective.
    ``(5) In determining cost effectiveness under paragraph 
(4)(A)(iii), the Secretary of Transportation shall take into account 
the total value to the Nation of reduced petroleum use, including the 
value of reducing external costs of petroleum use, using a value for 
such costs equal to 50 percent of the value of a gallon of gasoline 
saved or the amount determined in an analysis of the external costs of 
petroleum use that considers--
            ``(A) value to consumers;
            ``(B) economic security;
            ``(C) national security;
            ``(D) foreign policy;
            ``(E) the impact of oil use--
                    ``(i) on sustained cartel rents paid to foreign 
                suppliers;
                    ``(ii) on long-run potential gross domestic product 
                due to higher normal-market oil price levels, including 
                inflationary impacts;
                    ``(iii) on import costs, wealth transfers, and 
                potential gross domestic product due to increased trade 
                imbalances;
                    ``(iv) on import costs and wealth transfers during 
                oil shocks;
                    ``(v) on macroeconomic dislocation and adjustment 
                costs during oil shocks;
                    ``(vi) on the cost of existing energy security 
                policies, including the management of the Strategic 
                Petroleum Reserve;
                    ``(vii) on the timing and severity of the oil 
                peaking problem;
                    ``(viii) on the risk, probability, size, and 
                duration of oil supply disruptions;
                    ``(ix) on OPEC strategic behavior and long-run oil 
                pricing;
                    ``(x) on the short term elasticity of energy demand 
                and the magnitude of price increases resulting from a 
                supply shock;
                    ``(xi) on oil imports, military costs, and related 
                security costs, including intelligence, homeland 
                security, sea lane security and infrastructure, and 
                other military activities;
                    ``(xii) on oil imports, diplomatic and foreign 
                policy flexibility, and connections to geopolitical 
                strife, terrorism, and international development 
                activities;
                    ``(xiii) all relevant environmental hazards under 
                the jurisdiction of the Environmental Protection 
                Agency; and
                    ``(xiv) on well-to-wheels urban and local air 
                emissions of `pollutants' and their uninternalized 
                costs;
            ``(F) the impact of the oil or energy intensity of the 
        United States economy on the sensitivity of the economy to oil 
        price changes, including the magnitude of gross domestic 
        product losses in response to short term price shocks or long 
        term price increases;
            ``(G) the impact of United States payments for oil imports 
        on political, economic, and military developments in unstable 
        or unfriendly oil exporting countries;
            ``(H) the uninternalized costs of pipeline and storage oil 
        seepage, and for risk of oil spills from production, handling, 
        and transport, and related landscape damage; and
            ``(I) additional relevant factors, as determined by the 
        Secretary.
    ``(6) When considering the value to consumers of a gallon of 
gasoline saved, the Secretary of Transportation may not use a value 
less than the greatest of--
            ``(A) the average national cost of a gallon of gasoline 
        sold in the United States during the 12-month period ending on 
        the date on which the new fuel economy standard is proposed;
            ``(B) the most recent weekly estimate by the Energy 
        Information Administration of the Department of Energy of the 
        average national cost of a gallon of gasoline (all grades) sold 
        in the United States; or
            ``(C) the gasoline prices projected by the Energy 
        Information Administration for the 20-year period beginning in 
        the year following the year in which the standards are 
        established.
    ``(7) In prescribing standards under this subsection, the Secretary 
may prescribe standards for 1 or more model years.
    ``(8)(A) Not later than December 31, 2016, the Secretary of 
Transportation, the Secretary of Energy, and the Administrator of the 
Environmental Protection Agency shall submit a joint report to Congress 
on the state of global automotive efficiency technology development, 
and on the accuracy of tests used to measure fuel economy of 
automobiles under section 32904(c), utilizing the study and assessment 
of the National Academy of Sciences referred to in subparagraph (B).
    ``(B) The Secretary shall enter into appropriate arrangements with 
the National Academy of Sciences to conduct a comprehensive study of 
the technological opportunities to enhance fuel economy and an analysis 
and assessment of the accuracy of fuel economy tests used by the 
Administrator of the Environmental Protection Agency to measure fuel 
economy for each model under section 32904(c). Such analysis and 
assessment shall identify any additional factors or methods that should 
be included in tests to measure fuel economy for each model to more 
accurately reflect actual fuel economy of automobiles. The Secretary 
and the Administrator of the Environmental Protection Agency shall 
furnish, at the request of the Academy, any information which the 
Academy determines to be necessary to conduct the study, analysis, and 
assessment under this subparagraph.
    ``(C) The report submitted under subparagraph (A) shall include--
            ``(i) the study of the National Academy of Sciences 
        referred to in subparagraph (B); and
            ``(ii) an assessment by the Secretary of technological 
        opportunities to enhance fuel economy and opportunities to 
        increase overall fleet safety.
    ``(D) The report submitted under subparagraph (A) shall identify 
and examine additional opportunities to reform the regulatory structure 
under this chapter, including approaches that seek to merge vehicle and 
fuel requirements into a single system that achieves equal or greater 
reduction in petroleum use and environmental benefits.
    ``(E) The report submitted under subparagraph (A) shall--
            ``(i) include conclusions reached by the Administrator of 
        the Environmental Protection Agency, as a result of detailed 
        analysis and public comment, on the accuracy of current fuel 
        economy tests;
            ``(ii) identify any additional factors that the 
        Administrator determines should be included in tests to measure 
        fuel economy for each model to more accurately reflect actual 
        fuel economy of automobiles; and
            ``(iii) include a description of options, formulated by the 
        Secretary and the Administrator, to incorporate such additional 
        factors in fuel economy tests in a manner that will not 
        effectively increase or decrease average fuel economy for any 
        automobile manufacturer.
    ``(F) There is authorized to be appropriated to the Secretary such 
amounts as are required to carry out the study, analysis, and 
assessment required by subparagraph (B).''; and
            (4) in subsection (g)(2), by striking ``(and submit the 
        amendment to Congress when required under subsection (c)(2) of 
        this section)''.
    (b) Conforming Amendments.--
            (1) In general.--Chapter 329 of title 49, United States 
        Code, is amended--
                    (A) in section 32903--
                            (i) by striking ``passenger'' each place it 
                        appears;
                            (ii) by striking ``section 32902(b)-(d) of 
                        this title'' each place it appears and 
                        inserting ``subsection (c) or (d) of section 
                        32902'';
                            (iii) by striking subsection (e); and
                            (iv) by redesignating subsection (f) as 
                        subsection (e); and
                    (B) in section 32904(a)--
                            (i) by striking ``passenger'' each place it 
                        appears; and
                            (ii) in paragraph (1), by striking 
                        ``subject to'' and all that follows through 
                        ``section 32902(b)-(d) of this title'' and 
                        inserting ``subsection (c) or (d) of section 
                        32902''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to automobiles manufactured after model year 2011.

SEC. 9. CREDIT TRADING AND COMPLIANCE.

    (a) Credit Trading.--Section 32903(a) of title 49, United States 
Code, is amended--
            (1) by inserting ``Credits earned by a manufacturer under 
        this section may be sold to any other manufacturer and used as 
        if earned by that manufacturer; except that credits earned by a 
        manufacturer described in section 32904(b)(1)(A)(i) may not be 
        sold to or purchased by a manufacturer described in 
        32904(b)(1)(A)(ii),'' after ``earns credits.''; and
            (2) by striking ``3 consecutive model years immediately'' 
        each place it appears and inserting ``model years''.
    (b) Treatment of Imports.--
            (1) Conforming amendment.--Section 32904(b) is amended by 
        striking ``passenger'' each place it appears.
            (2) Applicability.--The amendments made by paragraph (1) 
        shall apply to automobiles manufactured after model year 2011.
    (c) Multi-Year Compliance Period.--Section 32904(c) of such title 
is amended--
            (1) by inserting ``(1)'' before ``The Administrator''; and
            (2) by adding at the end the following:
    ``(2) The Secretary, by rule, may allow a manufacturer to elect a 
multi-year compliance period of not more than 4 consecutive model years 
in lieu of the single model year compliance period otherwise applicable 
under this chapter.''.

SEC. 10. CONSUMER TAX CREDIT.

    (a) Elimination on Number of New Qualified Hybrid and Advanced Lean 
Burn Technology Vehicles Eligible for Alternative Motor Vehicle 
Credit.--
            (1) In general.--Section 30B of the Internal Revenue Code 
        of 1986 is amended--
                    (A) by striking subsection (f); and
                    (B) by redesignating subsections (g) through (j) as 
                subsections (f) through (i), respectively.
            (2) Conforming amendments.--
                    (A) Paragraphs (4) and (6) of section 30B(h) of 
                such Code are each amended by striking ``(determined 
                without regard to subsection (g))'' and inserting 
                ``determined without regard to subsection (f))''.
                    (B) Section 38(b)(25) of such Code is amended by 
                striking ``section 30B(g)(1)'' and inserting ``section 
                30B(f)(1)''.
                    (C) Section 55(c)(2) of such Code is amended by 
                striking ``section 30B(g)(2)'' and inserting ``section 
                30B(f)(2)''.
                    (D) Section 1016(a)(36) of such Code is amended by 
                striking ``section 30B(h)(4)'' and inserting ``section 
                30B(g)(4)''.
                    (E) Section 6501(m) of such Code is amended by 
                striking ``section 30B(h)(9)'' and inserting ``section 
                30B(g)(9)''.
    (b) Extension of Alternative Vehicle Credit for New Qualified 
Hybrid Motor Vehicles.--Paragraph (3) of section 30B(i) of such Code 
(as redesignated by subsection (a)) is amended by striking ``December 
31, 2009'' and inserting ``December 31, 2010''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2005, in taxable 
years ending after such date.

SEC. 11. ADVANCED TECHNOLOGY MOTOR VEHICLES MANUFACTURING CREDIT.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to foreign tax credit, 
etc.) is amended by adding at the end the following new section:

``SEC. 30D. ADVANCED TECHNOLOGY MOTOR VEHICLES MANUFACTURING CREDIT.

    ``(a) Credit Allowed.--There shall be allowed as a credit against 
the tax imposed by this chapter for the taxable year an amount equal to 
35 percent of the qualified investment of an eligible taxpayer for such 
taxable year.
    ``(b) Qualified Investment.--For purposes of this section--
            ``(1) In general.--The qualified investment for any taxable 
        year is equal to the incremental costs incurred during such 
        taxable year--
                    ``(A) to re-equip, expand, or establish any 
                manufacturing facility in the United States of the 
                eligible taxpayer to produce advanced technology motor 
                vehicles or to produce eligible components,
                    ``(B) for engineering integration performed in the 
                United States of such vehicles and components as 
                described in subsection (d),
                    ``(C) for research and development performed in the 
                United States related to advanced technology motor 
                vehicles and eligible components, and
                    ``(D) for employee retraining with respect to the 
                manufacturing of such vehicles or components 
                (determined without regard to wages or salaries of such 
                retrained employees).
            ``(2) Attribution rules.--In the event a facility of the 
        eligible taxpayer produces both advanced technology motor 
        vehicles and conventional motor vehicles, or eligible and non-
        eligible components, only the qualified investment attributable 
        to production of advanced technology motor vehicles and 
        eligible components shall be taken into account.
    ``(c) Definitions.--In this section:
            ``(1) Advanced technology motor vehicle.--The term 
        `advanced technology motor vehicle' means--
                    ``(A) any qualified electric vehicle (as defined in 
                section 30(c)(1)),
                    ``(B) any new qualified fuel cell motor vehicle (as 
                defined in section 30B(b)(3)),
                    ``(C) any new advanced lean burn technology motor 
                vehicle (as defined in section 30B(c)(3)),
                    ``(D) any new qualified hybrid motor vehicle (as 
                defined in section 30B(d)(2)(A) and determined without 
                regard to any gross vehicle weight rating),
                    ``(E) any new qualified alternative fuel motor 
                vehicle (as defined in section 30B(e)(4), including any 
                mixed-fuel vehicle (as defined in section 
                30B(e)(5)(B)), and
                    ``(F) any other motor vehicle using electric drive 
                transportation technology (as defined in paragraph 
                (3)).
            ``(2) Electric drive transportation technology.--The term 
        `electric drive transportation technology' means technology 
        used by vehicles that use an electric motor for all or part of 
        their motive power and that may or may not use off-board 
        electricity, such as battery electric vehicles, fuel cell 
        vehicles, engine dominant hybrid electric vehicles, plug-in 
        hybrid electric vehicles, and plug-in hybrid fuel cell 
        vehicles.
            ``(3) Eligible components.--The term `eligible component' 
        means any component inherent to any advanced technology motor 
        vehicle, including--
                    ``(A) with respect to any gasoline or diesel-
                electric new qualified hybrid motor vehicle--
                            ``(i) electric motor or generator;
                            ``(ii) power split device;
                            ``(iii) power control unit;
                            ``(iv) power controls;
                            ``(v) integrated starter generator; or
                            ``(vi) battery;
                    ``(B) with respect to any hydraulic new qualified 
                hybrid motor vehicle--
                            ``(i) accumulator or other energy storage 
                        device;
                            ``(ii) hydraulic pump;
                            ``(iii) hydraulic pump-motor assembly;
                            ``(iv) power control unit; and
                            ``(v) power controls;
                    ``(C) with respect to any new advanced lean burn 
                technology motor vehicle--
                            ``(i) diesel engine;
                            ``(ii) turbo charger;
                            ``(iii) fuel injection system; or
                            ``(iv) after-treatment system, such as a 
                        particle filter or NOx absorber; and
                    ``(D) with respect to any advanced technology motor 
                vehicle, any other component submitted for approval by 
                the Secretary.
            ``(4) Eligible taxpayer.--The term `eligible taxpayer' 
        means any taxpayer if more than 20 percent of the taxpayer's 
        gross receipts for the taxable year is derived from the 
        manufacture of motor vehicles or any component parts of such 
        vehicles.
    ``(d) Engineering Integration Costs.--For purposes of subsection 
(b)(1)(B), costs for engineering integration are costs incurred prior 
to the market introduction of advanced technology vehicles for 
engineering tasks related to--
            ``(1) establishing functional, structural, and performance 
        requirements for component and subsystems to meet overall 
        vehicle objectives for a specific application,
            ``(2) designing interfaces for components and subsystems 
        with mating systems within a specific vehicle application,
            ``(3) designing cost effective, efficient, and reliable 
        manufacturing processes to produce components and subsystems 
        for a specific vehicle application, and
            ``(4) validating functionality and performance of 
        components and subsystems for a specific vehicle application.
    ``(e) Limitation Based on Amount of Tax.--The credit allowed under 
subsection (a) for the taxable year shall not exceed the excess of--
            ``(1) the sum of--
                    ``(A) the regular tax liability (as defined in 
                section 26(b)) for such taxable year, plus
                    ``(B) the tax imposed by section 55 for such 
                taxable year and any prior taxable year beginning after 
                1986 and not taken into account under section 53 for 
                any prior taxable year, over
            ``(2) the sum of the credits allowable under subpart A and 
        sections 27, 30, and 30B for the taxable year.
    ``(f) Reduction in Basis.--For purposes of this subtitle, if a 
credit is allowed under this section for any expenditure with respect 
to any property, the increase in the basis of such property which would 
(but for this paragraph) result from such expenditure shall be reduced 
by the amount of the credit so allowed.
    ``(g) No Double Benefit.--
            ``(1) Coordination with other deductions and credits.--
        Except as provided in paragraph (2), the amount of any 
        deduction or other credit allowable under this chapter for any 
        cost taken into account in determining the amount of the credit 
        under subsection (a) shall be reduced by the amount of such 
        credit attributable to such cost.
            ``(2) Research and development costs.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), any amount described in subsection 
                (b)(1)(C) taken into account in determining the amount 
                of the credit under subsection (a) for any taxable year 
                shall not be taken into account for purposes of 
                determining the credit under section 41 for such 
                taxable year.
                    ``(B) Costs taken into account in determining base 
                period research expenses.--Any amounts described in 
                subsection (b)(1)(C) taken into account in determining 
                the amount of the credit under subsection (a) for any 
                taxable year which are qualified research expenses 
                (within the meaning of section 41(b)) shall be taken 
                into account in determining base period research 
                expenses for purposes of applying section 41 to 
                subsequent taxable years.
    ``(h) Business Carryovers Allowed.--If the credit allowable under 
subsection (a) for a taxable year exceeds the limitation under 
subsection (e) for such taxable year, such excess (to the extent of the 
credit allowable with respect to property subject to the allowance for 
depreciation) shall be allowed as a credit carryback to each of the 15 
taxable years immediately preceding the unused credit year and as a 
carryforward to each of the 20 taxable years immediately following the 
unused credit year.
    ``(i) Special Rules.--For purposes of this section, rules similar 
to the rules of section 179A(e)(4) and paragraphs (1) and (2) of 
section 41(f) shall apply
    ``(j) Election Not to Take Credit.--No credit shall be allowed 
under subsection (a) for any property if the taxpayer elects not to 
have this section apply to such property.
    ``(k) Regulations.--The Secretary shall prescribe such regulations 
as necessary to carry out the provisions of this section.
    ``(l) Termination.--This section shall not apply to any qualified 
investment after December 31, 2010.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) of the Internal Revenue Code of 1986 is 
        amended by striking ``and'' at the end of paragraph (36), by 
        striking the period at the end of paragraph (37) and inserting 
        ``, and'', and by adding at the end the following new 
        paragraph:
            ``(38) to the extent provided in section 30D(g).''.
            (2) Section 6501(m) of such Code is amended by inserting 
        ``30D(k),'' after ``30C(e)(5),''.
            (3) The table of sections for subpart B of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 30C the following new item:

``Sec. 30D. Advanced technology motor vehicles manufacturing credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts incurred in taxable years beginning after December 31, 
1999.
                                 <all>