Tax on carbon dioxide content of certain substances

(a)

In general

Chapter 38 of the Internal Revenue Code of 1986 (relating to environmental taxes) is amended by adding at the end thereof the following new subchapter:

Tax on carbon dioxide content of certain substances

Sec. 4691. Imposition of tax.

Sec. 4692. Refunds or credits.

Sec. 4693. Definitions and special rules.

4691.

Imposition of tax

(a)

In general

There is hereby imposed a tax on any taxable carbon substance sold by the manufacturer, producer, or importer thereof. (b)

Amount of tax

(1)

In general

The amount of tax imposed by subsection (a) on any taxable carbon substance shall be the applicable amount per ton of carbon dioxide content of such substance, as determined by the Secretary in consultation with the Secretary of Energy. (2)

Fractional part of ton

In the case of a fraction of a ton, the tax imposed by subsection (a) shall be the same fraction of the amount of such tax imposed on a whole ton. (3)

Applicable amount

For purposes of paragraph (1)— (A)

Calendar year 2008

The applicable amount for calender year 2008 is $15. (B)

Years after 2008

For a calendar year after 2008, the applicable amount is the product of— (i)the amount in effect under this paragraph for the preceding calendar year, (ii)1.1, and (iii)1 plus the cost of living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting calendar year 2007 for calendar year 1992 in subparagraph (B) thereof. (c)

Substance taxed only once

No tax shall be imposed by subsection (a) with respect to a taxable carbon substance if the person who would be liable for such tax establishes that a prior tax imposed by such section has been imposed with respect to such product.

4692.

Refunds or credits

(a)

Sequestered carbon

Under regulations prescribed by the Secretary, if a person uses a taxable carbon substance as a feedstock so that the carbon associated with such substance will not be emitted, then an amount equal to the amount of tax in effect under section 4691(b) with respect to such substance for the calendar year in which such use begins shall be allowed as a credit or refund (without interest) to such person in the same manner as if it were an overpayment of tax imposed by section 4691. (b)

Offset projects

(1)

In general

Under regulations prescribed by the Secretary, if a person carries out a qualified offset project, then an amount equal to the amount of tax in effect under section 4691(b) with respect to such substance for the calendar year in which such project is completed shall be allowed as a credit or refund (without interest) to such person in the same manner as if it were an overpayment of tax imposed by section 4691. (2)

Qualified offset project

For purposes of paragraph (1), the term qualified offset project means a project carried out in the United States that— (A)reduces greenhouse gas emissions, (B)sequesters a greenhouse gas, or (C)destroys hydrofluorocarbons. (3)

Exception

Such term does not include a project that involves enhanced oil recovery. (c)

Previously taxed carbon substances used to make another taxable carbon substance

Under regulations prescribed by the Secretary, if— (1)a tax under section 4691 was paid with respect to any taxable carbon substance, and (2)such substance was used by any person in the manufacture or production of any other substance which is a taxable carbon substance,

then an amount equal to the tax so paid shall be allowed as a credit or refund (without interest) to such person in the same manner as if it were an overpayment of tax imposed by subsection (a). In any case to which this paragraph applies, the amount of any such credit or refund shall not exceed the amount of tax imposed by subsection (a) on the other taxable fuel manufactured or produced (or which would have been imposed by such subsection on such other fuel but for subsection (c)).

(d)

Exemption for exports

(1)

Tax-free sales

(A)

In general

No tax shall be imposed under subsection (a) on the sale by the manufacturer or producer of any taxable carbon substance for export or for resale by the purchaser to a second purchaser for export. (B)

Proof of export required

Rules similar to the rules of section 4221(b) shall apply for purposes of subparagraph (A). (2)

Credit or refund where tax paid

(A)

In general

Except as provided in subparagraph (B), if— (i)tax under subsection (a) was paid with respect to any taxable carbon substance, and (ii)(I)such substance was exported by any person, or (II)such substance was used as a material in the manufacture or production of a taxable carbon substance which was exported by any person and which, at the time of export, was a taxable carbon substance,

credit or refund (without interest) of such tax shall be allowed or made to the person who paid such tax.

(B)

Condition to allowance

No credit or refund shall be allowed or made under subparagraph (A) unless the person who paid the tax establishes that he— (i)has repaid or agreed to repay the amount of the tax to the person who exported the taxable carbon substance, or (ii)has obtained the written consent of such exporter to the allowance of the credit or the making of the refund. (C)

Refunds directly to exporter

The Secretary shall provide, in regulations, the circumstances under which a credit or refund (without interest) of the tax under subsection (a) shall be allowed or made to the person who exported the taxable carbon substance, where— (i)the person who paid the tax waives his claim to the amount of such credit or refund, and (ii)the person exporting the taxable carbon substance provides such information as the Secretary may require in such regulations. (3)

Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection.

4693.

Definitions and special rules

(a)

Definitions

For purposes of this subchapter— (1)

Taxable carbon substance

The term taxable carbon substance means— (A)coal (including lignite and peat), (B)petroleum and any petroleum product (as defined in section 4612(a)(3)), and (C)natural gas,

which is extracted, manufactured, or produced in the United States or entered into the United States for consumption, use, or warehousing.

(2)

United States

The term United States has the meaning given such term by section 4612(a)(4). (3)

Importer

The term importer means the person entering the taxable carbon substance for consumption, use, or warehousing. (4)

Ton

The term ton means 2,000 pounds. In the case of any taxable carbon substance which is a gas, the term ton means the amount of such gas in cubic feet which is the equivalent of 2,000 pounds on a molecular weight basis. (b)

Use treated as sale

If any person manufactures, produces, or imports any taxable carbon substance and uses such substance, then such person shall be liable for tax under section 4691 in the same manner as if such substance were sold by such person. (c)

Special rules for inventory exchanges

(1)

In general

Except as provided in this paragraph, in any case in which a manufacturer, producer, or importer of a taxable carbon substance exchanges such substance as part of an inventory exchange with another person— (A)such exchange shall not be treated as a sale, and (B)such other person shall, for purposes of section 4691, be treated as the manufacturer, producer, or importer of such substance. (2)

Registration requirement

Paragraph (1) shall not apply to any inventory exchange unless— (A)both parties are registered with the Secretary as manufacturers, producers, or importers of taxable carbon substances, and (B)the person receiving the taxable carbon substance has, at such time as the Secretary may prescribe, notified the manufacturer, producer, or importer of such person’s registration number and the internal revenue district in which such person is registered. (3)

Inventory exchange

For purposes of this subsection, the term inventory exchange means any exchange in which 2 persons exchange property which is, in the hands of each person, property described in section 1221(a)(1).

(b)

Establishment of America’s Energy Security Trust Fund

Subchapter A of chapter 98 of such Code (relating to trust fund code) is amended by adding at the end the following:

9511.

America’s Energy Security Trust Fund

(a)

Creation of Trust Fund

There is established in the Treasury of the United States a trust fund to be known as America’s Energy Security Trust Fund (referred to in this section as the Trust Fund), consisting of such amounts as may be appropriated or credited to the Trust Fund as provided in this section or section 9602(b). (b)

Transfers to Trust Fund

There is hereby appropriated to the Trust Fund an amount equivalent to the increase in revenues received in the Treasury as the result of the tax imposed under section 4691. (c)

Distribution of amounts in Trust Fund

Amounts in the Trust Fund equivalent to the taxes received in the Treasury under section 4691 for a calendar year shall be available without further appropriation, as follows: (1)First, the lesser of 1/6 of such amount or $10,000,000,000 shall be available for a tax credit for research, development, or investment into clean energy technology. (2)Second, the affected industry transition assistance amount shall be available for transition assistance to industries negatively affected by this Act, as determined by the Secretary of the Treasury in consultation with the Secretary of Labor. (3)Third, the amount remaining after the application of paragraphs (1) and (2) shall be available for payroll tax relief under rebate paid under section 36. (d)

Affected industry transition assistance amount

For purposes of subsection (c)(2), the affected industry transition assistance amount is the amount determined as follows: (1)For calendar year 2008, 1/12 of the amount in the Trust Fund equivalent to the taxes received in the Treasury under section 4691 for calendar year 2008, determined after the application of subsection (c)(1). (2)For calendar year 2009, 9/10 of the amount made available under paragraph (1) for calendar year 2008. (3)For calendar year 2010, 4/5 of the amount made available under paragraph (1) for calendar year 2008. (4)For calendar year 2011, 7/10 of the amount made available under paragraph (1) for calendar year 2008. (5)For calendar year 2012, 3/5 of the amount made available under paragraph (1) for calendar year 2008. (6)For calendar year 2013, ½ of the amount made available under paragraph (1) for calendar year 2008. (7)For calendar year 2014, 2/5 of the amount made available under paragraph (1) for calendar year 2008. (8)For calendar year 2015, 3/10 of the amount made available under paragraph (1) for calendar year 2008. (9)For calendar year 2016, 1/5 of the amount made available under paragraph (1) for calendar year 2008. (10)For calendar year 2017, 1/10 of the amount made available under paragraph (1) for calendar year 2008. (11)For calendar years after 2017, zero.

(c)

Clerical amendments

(1)The table of subchapters for chapter 38 of such Code is amended by adding at the end thereof the following new item:

Subchapter E. Tax on carbon dioxide content of certain substances.

(2)The table of sections for subchapter A of chapter 98 of such Code is amended by adding at the end the following:

Sec. 9511. Taxable Carbon Substances Trust Fund.

(d)

Effective date

The amendments made by this section shall take effect on January 1, 2008.

Carbon tax rebate of payroll tax

(a)

In general

Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by redesignating section 36 as section 37 and inserting after section 35 the following new section:

36.

Carbon tax rebate of payroll tax

(a)

In general

In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the carbon tax rebate. (b)

Carbon tax rebate

(1)

In general

For purposes of this section, the term carbon tax rebate means with respect to a taxable year the individual’s share of the amount determined by the Secretary on a per capita basis to be the amount available under section 9511(c)(3) for the calendar year in which or with which the taxable year begins. (2)

Determination based on estimates

The determination under paragraph (1) shall be made on the basis of estimates by the Secretary, and proper adjustments shall be made in amounts available under section 9511(c)(3) for the succeeding taxable year to the extent prior estimates were in excess of or less than the amounts actually available under such section for the prior taxable year. (c)

Limitation based on payroll taxes paid and Social Security benefits

(1)

In general

The amount allowed as a credit under subsection (a) with respect to any individual for a taxable year shall not exceed the greater of— (A)the total amount of taxes paid with respect to such individual for such taxable year under section 1401 and chapters 21 and 22, determined after taking into account any refund under section 31(b) and 6413(c), or (B)10 percent of the aggregate amount of social security benefits (within the meaning of section 86(d)) received by such individual for the taxable year. (2)

Special rule for Social Security benefits received for less than 12 months

For purposes of paragraph (1)(B), if Social Security benefits (as so defined) were not received for each month in the taxable year, such benefits shall be annualized by multiplying the Social Security benefits received by 12 and dividing the result by the number of months in such taxable year for which such benefits were received. (d)

Denial of credit to dependents

No credit shall be allowed under subsection (a) to an individual for such individual’s taxable year if a deduction under section 151 with respect to such individual is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins.

(b)

Conforming amendments

(1)Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period , or from section 36 of such Code. (2)The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 36 as section 37 and inserting after section 35 the following new section:

Sec. 36. Carbon tax rebate of payroll tax.

Sec. 37. Overpayments of tax.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2007.