[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2642 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 2642

To establish a national renewable energy standard, to extend and create 
        renewable energy tax incentives, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 14, 2008

Ms. Klobuchar (for herself, Ms. Snowe, and Ms. Cantwell) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
To establish a national renewable energy standard, to extend and create 
        renewable energy tax incentives, 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 ``American Renewable 
Energy Act of 2008''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                   TITLE I--RENEWABLE ENERGY STANDARD

Sec. 101. Renewable portfolio standard.
                    TITLE II--ENERGY TAX PROVISIONS

Sec. 200. Short title; etc.
             Subtitle A--Energy Advancement and Investment

              Part I--Advanced Electricity Infrastructure

Sec. 201. Extension and modification of renewable electricity, refined 
                            coal, and Indian coal production credit.
Sec. 202. Extension and modification of credit for clean renewable 
                            energy bonds.
Sec. 203. Extension and modification of energy credit.
Sec. 204. Energy credit for combined heat and power system property.
Sec. 205. Special depreciation allowance for certain electric 
                            transmission property.
Sec. 206. Extension of special rule to implement FERC restructuring 
                            policy.
Sec. 207. Extension and modification of credit for residential energy 
                            efficient property.
Sec. 208. Credit for residential wind property.
Sec. 209. Seven-year applicable recovery period for depreciation of 
                            qualified energy management devices.
Sec. 210. Landowner incentive to encourage electric transmission build-
                            out.
Sec. 211. Partial exemption from passive activity limitations for 
                            qualified wind facilities.
Sec. 212. Credit for electricity produced from qualified wind 
                            facilities allowed against alternative 
                            minimum tax.
                    Part II--Domestic Fuel Security

Sec. 221. Credit for production of cellulosic biomass alcohol.
Sec. 222. Expansion of special allowance to cellulosic biomass alcohol 
                            fuel plant property.
Sec. 223. Extension of small ethanol producer credit.
Sec. 224. Credit for producers of fossil free alcohol.
Sec. 225. Modification of alcohol credit.
Sec. 226. Extension and modification of credit for biodiesel used as 
                            fuel.
Sec. 227. Extension and modification of alternative fuel credit.
Sec. 228. Extension of alternative fuel vehicle refueling property 
                            credit.
Sec. 229. Extension of suspension of taxable income limit on percentage 
                            depletion for oil and natural gas produced 
                            from marginal properties.
Sec. 230. Extension and modification of election to expense certain 
                            refineries.
Sec. 231. Ethanol tariff extension.
Sec. 232. Elimination and reductions of duty drawback on certain 
                            imported ethanol.
Sec. 233. Certain income and gains relating to alcohol fuel mixtures, 
                            biodiesel fuel mixtures, and alternative 
                            fuel treated as qualifying income for 
                            publicly traded partnerships.
Sec. 234. Technical amendments.
                 Part III--Advanced Technology Vehicles

Sec. 241. Expansion and modification of credit for alternative fuel 
                            motor vehicles.
Sec. 242. Credit for plug-in electric drive motor vehicles.
Sec. 243. Exclusion from heavy truck tax for idling reduction units and 
                            advanced insulation added after purchase.
              Part IV--Conservation and Energy Efficiency

Sec. 251. Extension and modification of nonbusiness energy property 
                            credit.
Sec. 252. Extension and modification of new energy efficient home 
                            credit.
Sec. 253. Extension and modification of energy efficient commercial 
                            buildings deduction.
Sec. 254. Modifications of energy efficient appliance credit for 
                            appliances produced after 2007.
Sec. 255. Special depreciation allowance for certain reuse and 
                            recycling property.
                 Subtitle B--Revenue Raising Provisions

Sec. 261. Denial of deduction for major integrated oil companies for 
                            income attributable to domestic production 
                            of oil, natural gas, or primary products 
                            thereof.
Sec. 262. Elimination of the different treatment of foreign oil and gas 
                            extraction income and foreign oil related 
                            income for purposes of the foreign tax 
                            credit.
Sec. 263. Increase and extension of Oil Spill Liability Trust Fund tax.
Sec. 264. Limitation on drawback claimed for amounts deposited into the 
                            Oil Spill Liability Trust Fund.
Sec. 265. Tax on crude oil and natural gas produced from the outer 
                            Continental Shelf in the Gulf of Mexico.
Sec. 266. Taxation of taxable fuels in foreign trade zones.
Sec. 267. Clarification of penalty for sale of fuel failing to meet EPA 
                            regulations.
Sec. 268. Clarification of eligibility for certain fuels credits for 
                            fuel with insufficient nexus to the United 
                            States.
Sec. 269. Treatment of qualified alcohol fuel mixtures and qualified 
                            biodiesel fuel mixtures as taxable fuels.
Sec. 270. Calculation of volume of alcohol for fuel credits.
Sec. 271. Bulk transfer exception not to apply to finished gasoline.
Sec. 272. Application of rules treating inverted corporations as 
                            domestic corporations to certain 
                            transactions occurring after March 20, 
                            2002.
Sec. 273. Modification of effective date of leasing provisions of the 
                            American Jobs Creation Act of 2004.
Sec. 274. Revision of tax rules on expatriation of individuals.

                   TITLE I--RENEWABLE ENERGY STANDARD

SEC. 101. RENEWABLE PORTFOLIO STANDARD.

    (a) In General.--Title VI of the Public Utility Regulatory Policies 
Act of 1978 (16 U.S.C. 2601 et seq.) is amended by adding at the end 
the following:

``SEC. 610. FEDERAL RENEWABLE PORTFOLIO STANDARD.

    ``(a) Definitions.--In this section:
            ``(1) Base amount of electricity.--The term `base amount of 
        electricity' means the total amount of electricity sold by an 
        electric utility to electric consumers in a calendar year, 
        excluding municipal waste and electricity generated by a 
        hydroelectric facility (including a pumped storage facility, 
        but excluding incremental hydropower).
            ``(2) Distributed generation facility.--The term 
        `distributed generation facility' means a facility at a 
        customer site.
            ``(3) Existing renewable energy.--The term `existing 
        renewable energy' means, except as provided in paragraph 
        (7)(B), electric energy generated at a facility (including a 
        distributed generation facility) placed in service prior to 
        January 1, 2001, from solar, wind, or geothermal energy, ocean 
        energy, biomass (as defined in section 203(b) of the Energy 
        Policy Act of 2005 (42 U.S.C. 15852(b)), or landfill gas.
            ``(4) Geothermal energy.--The term `geothermal energy' 
        means energy derived from a geothermal deposit (within the 
        meaning of section 613(e)(2) of the Internal Revenue Code of 
        1986).
            ``(5) Incremental geothermal production.--
                    ``(A) In general.--The term `incremental geothermal 
                production' means for any year the excess of--
                            ``(i) the total kilowatt hours of 
                        electricity produced from a facility (including 
                        a distributed generation facility) using 
                        geothermal energy; over
                            ``(ii) the average annual kilowatt hours 
                        produced at such facility for 5 of the previous 
                        7 calendar years before the date of enactment 
                        of this section after eliminating the highest 
                        and the lowest kilowatt hour production years 
                        in such 7-year period.
                    ``(B) Special rule.--A facility described in 
                subparagraph (A) that was placed in service at least 7 
                years before the date of enactment of this section 
                shall, commencing with the year in which such date of 
                enactment occurs, reduce the amount calculated under 
                subparagraph (A)(ii) each year, on a cumulative basis, 
                by the average percentage decrease in the annual 
                kilowatt hour production for the 7-year period 
                described in subparagraph (A)(ii) with such cumulative 
                sum not to exceed 30 percent.
            ``(6) Incremental hydropower.--
                    ``(A) In general.--The term `incremental 
                hydropower' means additional energy generated as a 
                result of efficiency improvements or capacity additions 
                made on or after January 1, 2001, or the effective date 
                of an existing applicable State renewable portfolio 
                standard program at a hydroelectric facility that was 
                placed in service before that date.
                    ``(B) Exclusion.--The term `incremental hydropower' 
                does not include additional energy generated as a 
                result of operational changes not directly associated 
                with efficiency improvements or capacity additions.
                    ``(C) Measurement.--Efficiency improvements and 
                capacity additions shall be measured on the basis of 
                the same water flow information used to determine a 
                historic average annual generation baseline for the 
                hydroelectric facility and certified by the Secretary 
                or the Federal Energy Regulatory Commission.
            ``(7) New renewable energy.--The term `new renewable 
        energy' means--
                    ``(A) electric energy generated at a facility 
                (including a distributed generation facility) placed in 
                service on or after January 1, 2001, from--
                            ``(i) solar, wind, or geothermal energy or 
                        ocean energy;
                            ``(ii) biomass (as defined in section 
                        203(b) of the Energy Policy Act of 2005 (42 
                        U.S.C. 15852(b));
                            ``(iii) landfill gas; or
                            ``(iv) incremental hydropower; and
                    ``(B) for electric energy generated at a facility 
                (including a distributed generation facility) placed in 
                service prior to the date of enactment of this 
                section--
                            ``(i) the additional energy above the 
                        average generation during the 3-year period 
                        ending on the date of enactment of this section 
                        at the facility from--
                                    ``(I) solar or wind energy or ocean 
                                energy;
                                    ``(II) biomass (as defined in 
                                section 203(b) of the Energy Policy Act 
                                of 2005 (42 U.S.C. 15852(b));
                                    ``(III) landfill gas; or
                                    ``(IV) incremental hydropower; and
                            ``(ii) incremental geothermal production.
            ``(8) Ocean energy.--The term `ocean energy' includes 
        current, wave, tidal, and thermal energy.
    ``(b) Renewable Energy Requirement.--
            ``(1) In general.--Each electric utility that sells 
        electricity to electric consumers shall obtain a percentage of 
        the base amount of electricity the electric utility sells to 
        electric consumers in any calendar year from new renewable 
        energy or existing renewable energy.
            ``(2) Minimum annual percentage.--The percentage obtained 
        in a calendar year shall not be less than the amount specified 
        in the following table:

                                                         Minimum annual
``Calendar year:                                            percentage:
        2010...............................................          2 
        2011...............................................          4 
        2012...............................................          6 
        2013...............................................          8 
        2014...............................................         10 
        2015...............................................         11 
        2016...............................................         12 
        2017...............................................         13 
        2018...............................................         14 
        2019...............................................         15 
        2020...............................................         16 
        2021...............................................         17 
        2022...............................................         18 
        2023...............................................         19 
        2024...............................................         20.
            ``(3) Means of compliance.--An electric utility shall meet 
        the requirements of this subsection by--
                    ``(A) submitting to the Secretary renewable energy 
                credits issued under subsection (c);
                    ``(B) making alternative compliance payments to the 
                Secretary at the rate of 2 cents per kilowatt hour (as 
                adjusted for inflation under subsection (h)); or
                    ``(C) conducting a combination of activities 
                described in subparagraphs (A) and (B).
    ``(c) Renewable Energy Credit Trading Program.--
            ``(1) In general.--Not later than July 1, 2009, the 
        Secretary shall establish a renewable energy credit trading 
        program under which each electric utility shall submit to the 
        Secretary renewable energy credits to certify the compliance of 
        the electric utility with respect to obligations under 
        subsection (b).
            ``(2) Administration.--As part of the program, the 
        Secretary shall--
                    ``(A) issue tradeable renewable energy credits to 
                generators of electric energy from new renewable 
                energy;
                    ``(B) issue nontradeable renewable energy credits 
                to generators of electric energy from existing 
                renewable energy;
                    ``(C) issue renewable energy credits to electric 
                utilities associated with State renewable portfolio 
                standard compliance mechanisms pursuant to subsection 
                (i);
                    ``(D) ensure that a kilowatt hour, including the 
                associated renewable energy credit, shall be used only 
                once for purposes of compliance with this section;
                    ``(E) allow double credits for generation from 
                facilities on Indian land, and triple credits for 
                generation from small renewable distributed generators 
                (meaning those no larger than 1 megawatt); and
                    ``(F) ensure that, with respect to a purchaser that 
                as of the date of enactment of this section has a 
                purchase agreement from a renewable energy facility 
                placed in service before that date, the credit 
                associated with the generation of renewable energy 
                under the contract is issued to the purchaser of the 
                electric energy.
            ``(3) Duration.--A credit described in subparagraph (A) or 
        (B) of paragraph (2) may only be used for compliance with this 
        section during the 3-year period beginning on the date of 
        issuance of the credit.
            ``(4) Transfers.--An electric utility that holds credits in 
        excess of the quantity of credits needed to comply with 
        subsection (b) may transfer the credits to another electric 
        utility in the same utility holding company system.
            ``(5) Delegation of market function.--The Secretary may 
        delegate to an appropriate entity that establishes markets the 
        administration of a national tradeable renewable energy credit 
        market for purposes of creating a transparent national market 
        for the sale or trade of renewable energy credits.
    ``(d) Enforcement.--
            ``(1) Civil penalties.--Any electric utility that fails to 
        meet the compliance requirements of subsection (b) shall be 
        subject to a civil penalty.
            ``(2) Amount of penalty.--Subject to paragraph (3), the 
        amount of the civil penalty shall be equal to the product 
        obtained by multiplying--
                    ``(A) the number of kilowatt-hours of electric 
                energy sold to electric consumers in violation of 
                subsection (b); by
                    ``(B) the greater of--
                            ``(i) 2 cents (adjusted for inflation under 
                        subsection (h)); or
                            ``(ii) 200 percent of the average market 
                        value of renewable energy credits during the 
                        year in which the violation occurred.
            ``(3) Mitigation or waiver.--
                    ``(A) In general.--The Secretary may mitigate or 
                waive a civil penalty under this subsection if the 
                electric utility is unable to comply with subsection 
                (b) for reasons outside of the reasonable control of 
                the utility.
                    ``(B) Reduction.--The Secretary shall reduce the 
                amount of any penalty determined under paragraph (2) by 
                an amount paid by the electric utility to a State for 
                failure to comply with the requirement of a State 
                renewable energy program if the State requirement is 
                greater than the applicable requirement of subsection 
                (b).
            ``(4) Procedure for assessing penalty.--The Secretary shall 
        assess a civil penalty under this subsection in accordance with 
        the procedures prescribed by section 333(d) of the Energy 
        Policy and Conservation Act of 1954 (42 U.S.C. 6303).
    ``(e) State Renewable Energy Account Program.--
            ``(1) In general.--Not later than December 31, 2008, the 
        Secretary of the Treasury shall establish a State renewable 
        energy account in the Treasury.
            ``(2) Deposits.--
                    ``(A) In general.--All money collected by the 
                Secretary from alternative compliance payments and the 
                assessment of civil penalties under this section shall 
                be deposited into the renewable energy account 
                established under paragraph (1).
                    ``(B) Separate account.--The State renewable energy 
                account shall be maintained as a separate account in 
                the Treasury and shall not be transferred to the 
                general fund of the Treasury.
            ``(3) Use.--Proceeds deposited in the State renewable 
        energy account shall be used by the Secretary, subject to 
        appropriations, for a program to provide grants to the State 
        agency responsible for developing State energy conservation 
        plans under section 362 of the Energy Policy and Conservation 
        Act (42 U.S.C. 6322) for the purposes of promoting renewable 
        energy production, including programs that promote technologies 
        that reduce the use of electricity at customer sites such as 
        solar water heating.
            ``(4) Administration.--The Secretary may issue guidelines 
        and criteria for grants awarded under this subsection. State 
        energy offices receiving grants under this section shall 
        maintain such records and evidence of compliance as the 
        Secretary may require.
            ``(5) Preference.--In allocating funds under this program, 
        the Secretary shall give preference--
                    ``(A) to States in regions which have a 
                disproportionately small share of economically 
                sustainable renewable energy generation capacity; and
                    ``(B) to State programs to stimulate or enhance 
                innovative renewable energy technologies.
    ``(f) Rules.--The Secretary shall issue rules implementing this 
section not later than 1 year after the date of enactment of this 
section.
    ``(g) Exemptions.--This section shall not apply in any calendar 
year to an electric utility--
            ``(1) that sold less than 4,000,000 megawatt-hours of 
        electric energy to electric consumers during the preceding 
        calendar year; or
            ``(2) in Hawaii.
    ``(h) Inflation Adjustment.--Not later than December 31, 2008, and 
December 31 of each year thereafter, the Secretary shall adjust for 
United States dollar inflation (as measured by the Consumer Price 
Index)--
            ``(1) the price of a renewable energy credit under 
        subsection (c)(2); and
            ``(2) the amount of the civil penalty per kilowatt-hour 
        under subsection (d)(2).
    ``(i) State Programs.--
            ``(1) In general.--Nothing in this section diminishes any 
        authority of a State or political subdivision of a State to 
        adopt or enforce any law or regulation respecting renewable 
        energy, but, except as provided in subsection (d)(3), no such 
        law or regulation shall relieve any person of any requirement 
        otherwise applicable under this section.
            ``(2) Coordination.--The Secretary, in consultation with 
        States having such renewable energy programs, shall, to the 
        maximum extent practicable, facilitate coordination between the 
        Federal program and State programs.
            ``(3) Regulations.--
                    ``(A) In general.--The Secretary, in consultation 
                with States, shall promulgate regulations to ensure 
                that an electric utility subject to the requirements of 
                this section that is also subject to a State renewable 
                energy standard receives renewable energy credits in 
                relation to equivalent quantities of renewable energy 
                associated with compliance mechanisms, other than the 
                generation or purchase of renewable energy by the 
                electric utility, including the acquisition of 
                certificates or credits and the payment of taxes, fees, 
                surcharges, or other financial compliance mechanisms by 
                the electric utility or a customer of the electric 
                utility, directly associated with the generation or 
                purchase of renewable energy.
                    ``(B) Prohibition on double counting.--The 
                regulations promulgated under this paragraph shall 
                ensure that a kilowatt hour associated with a renewable 
                energy credit issued pursuant to this subsection shall 
                not be used for compliance with this section more than 
                once.
    ``(j) Recovery of Costs.--
            ``(1) In general.--The Commission shall issue and enforce 
        such regulations as are necessary to ensure that an electric 
        utility recovers all prudently incurred costs associated with 
        compliance with this section.
            ``(2) Applicable law.--A regulation under paragraph (1) 
        shall be enforceable in accordance with the provisions of law 
        applicable to enforcement of regulations under the Federal 
        Power Act (16 U.S.C. 791a et seq.).
    ``(k) Wind Energy Development Study.--The Secretary, in 
consultation with appropriate Federal and State agencies, shall 
conduct, and submit to Congress a report describing the results of, a 
study on methods to increase transmission line capacity for wind energy 
development.
    ``(l) Sunset.--This section expires on December 31, 2040.''.
    (b) Table of Contents Amendment.--The table of contents of the 
Public Utility Regulatory Policies Act of 1978 (16 U.S.C. prec. 2601) 
is amended by adding at the end of the items relating to title VI the 
following:

``Sec. 609. Rural and remote communities electrification grants.
``Sec. 610. Federal renewable portfolio standard.''.

                    TITLE II--ENERGY TAX PROVISIONS

SEC. 200. SHORT TITLE; ETC.

    (a) Short Title.--This title may be cited as the ``Renewable Energy 
Tax Incentives Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this title 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.

             Subtitle A--Energy Advancement and Investment

              PART I--ADVANCED ELECTRICITY INFRASTRUCTURE

SEC. 201. EXTENSION AND MODIFICATION OF RENEWABLE ELECTRICITY, REFINED 
              COAL, AND INDIAN COAL PRODUCTION CREDIT.

    (a) Extension.--
            (1) In general.--Section 45(d) (relating to qualified 
        facilities) is amended--
                    (A) by striking ``January 1, 2009'' each place it 
                appears in paragraphs (1), (2), (3), (4), (5), (6), 
                (7), (8), and (9) and inserting ``January 1, 2014'', 
                and
                    (B) by striking ``7-year period'' both places it 
                appears in paragraph (10)(A) and inserting ``8-year 
                period''.
            (2) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act.
    (b) Credit Rate for Electricity Maintained at 2007 Level.--
            (1) In general.--Section 45(a)(1) (relating to general 
        rule) is amended by striking ``1.5 cents'' and inserting ``2 
        cents''.
            (2) No inflation adjustment.--Section 45(b)(2) (relating to 
        credit and phaseout adjustment based on inflation) is amended 
        by striking ``1.5 cent amount in subsection (a), the''.
            (3) Conforming amendments.--Section 45(b)(4)(A) is 
        amended--
                    (A) by striking ``2003'' and inserting ``2006'', 
                and
                    (B) by striking ``the amount in effect'' and all 
                that follows and inserting ``subsection (a)(1) shall be 
                applied by substituting `0.9 cent' for `2 cents'.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to electricity produced and sold after December 31, 
        2006.
    (c) Modification of Refined Coal as a Qualified Energy Resource.--
            (1) Elimination of increased market value test.--Section 
        45(c)(7)(A) (defining refined coal) is amended--
                    (A) by striking clause (iv),
                    (B) by adding ``and'' at the end of clause (ii), 
                and
                    (C) by striking ``, and'' at the end of clause 
                (iii) and inserting a period.
            (2) Increase in required emission reduction.--Section 
        45(c)(7)(B) (defining qualified emission reduction) is amended 
        by inserting ``at least 40 percent of the emissions of'' after 
        ``nitrogen oxide and''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to coal produced and sold after December 31, 2007.
    (d) Credit Allowed for On-Site Use of Electricity Produced From 
Biomass.--
            (1) On-site use.--Section 45(e) (relating to definitions 
        and special rules) is amended by adding at the end the 
        following new paragraph:
            ``(12) Credit allowed for on-site use of electricity 
        produced from biomass.--In the case of electricity produced 
        after December 31, 2007, at any facility described in paragraph 
        (2) or (3) which is equipped with net metering to determine 
        electricity consumption or sale (such consumption or sale to be 
        verified by a third party as determined by the Secretary), 
        subsection (a)(2) shall be applied without regard to 
        subparagraph (B) thereof.''.
            (2) Effective date.--The amendment made by this subsection 
        shall take effect on the date of the enactment of this Act.
    (e) Expansion of Resources to Wave, Current, Tidal, and Ocean 
Thermal Energy.--
            (1) In general.--Section 45(c)(1) (defining qualified 
        energy resources) is amended by striking ``and'' at the end of 
        subparagraph (G), by striking the period at the end of 
        subparagraph (H) and inserting ``, and'', and by adding at the 
        end the following new subparagraph:
                    ``(I) wave, current, tidal, and ocean thermal 
                energy.''.
            (2) Definition of resources.--Section 45(c) is amended by 
        adding at the end the following new paragraph:
            ``(10) Wave, current, tidal, and ocean thermal energy.--The 
        term `wave, current, tidal, and ocean thermal energy' means 
        electricity produced from any of the following:
                    ``(A) Free flowing ocean water derived from tidal 
                currents, ocean currents, waves, or estuary currents.
                    ``(B) Ocean thermal energy.''.
            (3) Facilities.--Section 45(d) is amended by adding at the 
        end the following new paragraph:
            ``(11) Wave, current, tidal, and ocean thermal facility.--
        In the case of a facility using resources described in 
        subparagraph (A), (B), or (C) of subsection (c)(10) to produce 
        electricity, the term `qualified facility' means any facility 
        owned by the taxpayer which is originally placed in service 
        after the date of the enactment of this paragraph and before 
        January 1, 2014, but such term shall not include a facility 
        which includes impoundment structures or a small irrigation 
        power facility.''.
            (4) Credit rate.--Section 45(b)(4)(A) (relating to credit 
        rate), as amended by this section, is amended by striking ``or 
        (9)'' and inserting ``(9), or (11)''.
            (5) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act.
    (f) Trash Facility Clarification.--
            (1) In general.--Paragraph (7) of section 45(d) is 
        amended--
                    (A) by striking ``facility which burns'' and 
                inserting ``facility (other than a facility described 
                in paragraph (6)) which uses'', and
                    (B) by striking ``combustion''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to electricity produced and sold before, on, or 
        after December 31, 2007.

SEC. 202. EXTENSION AND MODIFICATION OF CREDIT FOR CLEAN RENEWABLE 
              ENERGY BONDS.

    (a) Increase in Amount of Bonds Designated; 4-Year Extension.--
            (1) In general.--Section 54(f) (relating to limitation on 
        amount of bonds designated) is amended by adding at the end the 
        following new paragraph:
            ``(3) National annual limitation.--
                    ``(A) In general.--There is a national clean 
                renewable energy bond annual limitation for each 
                calendar year. Such limitation is $900,000,000 for 
                2008, 2009, 2010, and 2011, and, except as provided in 
                subparagraph (C), zero thereafter.
                    ``(B) Allocation by secretary.--The national clean 
                renewable energy bond limitation for a calendar year 
                shall be allocated by the Secretary among qualified 
                projects in such manner as the Secretary determines 
                appropriate, except that the Secretary may not allocate 
                more than $563,000,000 of such limitation for each 
                calendar year to finance qualified projects of 
                qualified borrowers which are governmental bodies, of 
                which not less than one-half of such amount shall be 
                allocated with respect to qualified projects equaling 
                or exceeding $10,000,000 in capital expenditures per 
                project.
                    ``(C) Carryover of unused limitation.--If for any 
                calendar year, the national clean renewable energy bond 
                annual limitation for such year exceeds the amount of 
                bonds allocated during such year, such limitation for 
                the following calendar year shall be increased by the 
                amount of such excess. Any carryforward of a limitation 
                may be carried only to the first year following the 
                unused limitation year. For purposes of the preceding 
                sentence, a limitation shall be treated as used on a 
                first-in first-out basis.''.
            (2) Conforming amendment.--Section 54 is amended by 
        striking subsection (m).
    (b) Limitation on Time for Issuance.--Section 54(d)(1)(A) (defining 
clean renewable energy bond) is amended by inserting ``, or is issued 
by the qualified issuer pursuant to an allocation by the Secretary to 
such issuer of a portion of the national clean renewable energy bond 
annual limitation under subsection (f)(3) by not later than the end of 
the calendar year following the year of such allocation'' after 
``subsection (f)(2)''.
    (c) Modification of Ratable Principal Amortization Requirement.--
            (1) In general.--Paragraph (5) of section 54(l) is amended 
        to read as follows:
            ``(5) Ratable principal amortization required.--A bond 
        shall not be treated as a clean renewable energy bond unless it 
        is part of an issue which provides for an equal amount of 
        principal to be paid by the qualified issuer during each 12-
        month period that the issue is outstanding (other than the 
        first 12-month period in the case of bonds issued pursuant to 
        an allocation under subsection (f)(3)).''.
            (2) Conforming amendment.--The third sentence of section 
        54(e)(2) is amended by striking ``subsection (l)(6)'' and 
        inserting ``subsection (l)(5)''.
    (d) Qualified Project Includes Certain Transmission Lines.--Section 
54(d)(2)(A) (defining qualified project) is amended by inserting ``and 
any electric transmission property capital expenditures (as defined in 
section 172(b)(1)(I)(v)(I)) related to such facility'' after 
``qualified borrower''.
    (e) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 203. EXTENSION AND MODIFICATION OF ENERGY CREDIT.

    (a) Extension.--
            (1) Qualified fuel cell property.--Subparagraph (E) of 
        section 48(c)(1) is amended by striking ``December 31, 2008'' 
        and inserting ``December 31, 2016''.
            (2) Qualified microturbine property.--Subparagraph (E) of 
        section 48(c)(2) is amended by striking ``December 31, 2008'' 
        and inserting ``December 31, 2016''.
            (3) Solar property.--Paragraphs (2)(i)(II) and (3)(A)(ii) 
        of section 48(a) are each amended by striking ``January 1, 
        2009'' and inserting ``January 1, 2017''.
    (b) Repeal of Public Utility Property Exclusion.--
            (1) In general.--Paragraph (3) of section 48(a), as amended 
        by subsection (a)(3), is amended by striking the first sentence 
        which follows subparagraph (D).
            (2) Conforming amendments.--
                    (A) Section 48(c)(1), as amended by subsection 
                (a)(1), is amended by striking subparagraph (D) and by 
                redesignating subparagraph (E) as subparagraph (D).
                    (B) Section 48(c)(2), as amended by subsection 
                (a)(2), is amended by striking subparagraph (D) and by 
                redesignating subparagraph (E) as subparagraph (D).
    (c) Repeal of Dollar Per Kilowatt Limitation for Fuel Cell 
Property.--
            (1) In general.--Section 48(c)(1), as amended by subsection 
        (b)(2)(A), is amended by striking subparagraph (B) and by 
        redesignating subparagraphs (C) and (D) as subparagraphs (B) 
        and (C), respectively.
            (2) Conforming amendment.--Section 48(a)(1) is amended by 
        striking ``paragraphs (1)(B) and (2)(B) of subsection (c)'' and 
        inserting ``subsection (c)(2)(B)''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by section shall apply to periods after the 
        date of the enactment of this Act, in taxable years ending 
        after such date, 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).
            (2) Extensions.--The amendments made by subsection (a) 
        shall take effect on the date of the enactment of this Act.

SEC. 204. ENERGY CREDIT FOR COMBINED HEAT AND POWER SYSTEM PROPERTY.

    (a) In General.--Section 48(a)(3)(A) (defining energy property) is 
amended by striking ``or'' at the end of clause (iii), by inserting 
``or'' at the end of clause (iv), and by adding at the end the 
following new clause:
                            ``(v) combined heat and power system 
                        property,''.
    (b) Combined Heat and Power System Property.--Section 48 (relating 
to energy credit; reforestation credit) is amended by adding at the end 
the following new subsection:
    ``(d) Combined Heat and Power System Property.--For purposes of 
subsection (a)(3)(A)(v)--
            ``(1) Combined heat and power system property.--The term 
        `combined heat and power system property' means property 
        comprising a system--
                    ``(A) which uses the same energy source for the 
                simultaneous or sequential generation of electrical 
                power, mechanical shaft power, or both, in combination 
                with the generation of steam or other forms of useful 
                thermal energy (including heating and cooling 
                applications),
                    ``(B) which has an electrical capacity of not more 
                than 15 megawatts or a mechanical energy capacity of 
                not more than 2,000 horsepower or an equivalent 
                combination of electrical and mechanical energy 
                capacities,
                    ``(C) which produces--
                            ``(i) at least 20 percent of its total 
                        useful energy in the form of thermal energy 
                        which is not used to produce electrical or 
                        mechanical power (or combination thereof), and
                            ``(ii) at least 20 percent of its total 
                        useful energy in the form of electrical or 
                        mechanical power (or combination thereof),
                    ``(D) the energy efficiency percentage of which 
                exceeds 60 percent, and
                    ``(E) which is placed in service before January 1, 
                2017.
            ``(2) Special rules.--
                    ``(A) Energy efficiency percentage.--For purposes 
                of this subsection, the energy efficiency percentage of 
                a system is the fraction--
                            ``(i) the numerator of which is the total 
                        useful electrical, thermal, and mechanical 
                        power produced by the system at normal 
                        operating rates, and expected to be consumed in 
                        its normal application, and
                            ``(ii) the denominator of which is the 
                        lower heating value of the fuel sources for the 
                        system.
                    ``(B) Determinations made on btu basis.--The energy 
                efficiency percentage and the percentages under 
                paragraph (1)(C) shall be determined on a Btu basis.
                    ``(C) Input and output property not included.--The 
                term `combined heat and power system property' does not 
                include property used to transport the energy source to 
                the facility or to distribute energy produced by the 
                facility.
            ``(3) Systems using biomass.--If a system is designed to 
        use biomass (within the meaning of paragraphs (2) and (3) of 
        section 45(c) without regard to the last sentence of paragraph 
        (3)(A)) for at least 90 percent of the energy source--
                    ``(A) paragraph (1)(D) shall not apply, but
                    ``(B) the amount of credit determined under 
                subsection (a) with respect to such system shall not 
                exceed the amount which bears the same ratio to such 
                amount of credit (determined without regard to this 
                paragraph) as the energy efficiency percentage of such 
                system bears to 60 percent.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this Act, in 
taxable years ending after such date, 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. 205. SPECIAL DEPRECIATION ALLOWANCE FOR CERTAIN ELECTRIC 
              TRANSMISSION PROPERTY.

    (a) In General.--Section 168 (relating to accelerated cost recovery 
system) is amended by adding at the end the following:
    ``(m) Special Allowance for Certain Electric Transmission 
Property.--
            ``(1) Additional allowance.--In the case of any specified 
        electric transmission property--
                    ``(A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which such 
                property is placed in service shall include an 
                allowance equal to 50 percent of the adjusted basis of 
                such property, and
                    ``(B) the adjusted basis of such property shall be 
                reduced by the amount of such deduction before 
                computing the amount otherwise allowable as a 
                depreciation deduction under this chapter for such 
                taxable year and any subsequent taxable year.
            ``(2) Specified electric transmission property.--The term 
        `specified electric transmission property' means property of a 
        character subject to the allowance for depreciation--
                    ``(A) which is used in the United States as a 
                generator tie to solely transmit electricity from any 
                qualified facility described in section 45(d) (without 
                regard to any placed in service date or the last 
                sentence of paragraph (4) thereof) to the grid,
                    ``(B) the original use of which commences with the 
                taxpayer after the date of the enactment of this 
                subsection,
                    ``(C) which is acquired by the taxpayer by purchase 
                (as defined in section 179(d)) after the date of the 
                enactment of this subsection, but only if no written 
                binding contract for the acquisition was in effect on 
                or before the date of the enactment of this subsection, 
                and
                    ``(D) which is placed in service by the taxpayer 
                before January 1, 2014.
            ``(3) Exceptions.--
                    ``(A) Alternative depreciation property.--Such term 
                shall not include any property described in section 
                168(k)(2)(D)(i).
                    ``(B) Election out.--If a taxpayer makes an 
                election under this subparagraph with respect to any 
                class of property for any taxable year, this subsection 
                shall not apply to all property in such class placed in 
                service during such taxable year.
            ``(4) Special rules.--For purposes of this subsection, 
        rules similar to the rules of subparagraph (E) of section 
        168(k)(2) shall apply, except that such subparagraph shall be 
        applied--
                    ``(A) by substituting `the date of the enactment of 
                subsection (l)' for `September 10, 2001' each place it 
                appears therein,
                    ``(B) by substituting `January 1, 2014' for 
                `January 1, 2005' in clause (i) thereof, and
                    ``(C) by substituting `specified electric 
                transmission property' for `qualified property' in 
                clause (iv) thereof.
            ``(5) Recapture.--For purposes of this subsection, rules 
        similar to the rules under section 179(d)(10) shall apply with 
        respect to any specified electric transmission property which 
        ceases to be specified electric transmission property.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after the date of the enactment of this 
Act in taxable years ending after such date.

SEC. 206. EXTENSION OF SPECIAL RULE TO IMPLEMENT FERC RESTRUCTURING 
              POLICY.

    (a) Qualifying Electric Transmission Transaction.--
            (1) In general.--Section 451(i)(3) (defining qualifying 
        electric transmission transaction) is amended by striking 
        ``January 1, 2008'' and inserting ``January 1, 2010''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to transactions after December 31, 2007.
    (b) Independent Transmission Company.--
            (1) In general.--Section 451(i)(4)(B)(ii) (defining 
        independent transmission company) is amended by striking 
        ``December 31, 2007'' and inserting ``the date which is 2 years 
        after the date of such transaction''.
            (2) Effective date.--The amendment made by this subsection 
        shall take effect as if included in the amendments made by 
        section 909 of the American Jobs Creation Act of 2004.

SEC. 207. EXTENSION AND MODIFICATION OF CREDIT FOR RESIDENTIAL ENERGY 
              EFFICIENT PROPERTY.

    (a) Extension.--Section 25D(g) (relating to termination) is amended 
by striking ``December 31, 2008'' and inserting ``December 31, 2014''.
    (b) Maximum Credit for Solar Electric Property.--
            (1) In general.--Section 25D(b)(1)(A) (relating to maximum 
        credit) is amended by striking ``$2,000'' and inserting 
        ``$4,000''.
            (2) Conforming amendment.--Section 25D(e)(4)(A)(i) is 
        amended by striking ``$6,667'' and inserting ``$13,334''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenditures made after December 31, 2007.

SEC. 208. CREDIT FOR RESIDENTIAL WIND PROPERTY.

    (a) In General.--Section 25D(a) (relating to allowance of credit) 
is amended by striking ``and'' at the end of paragraph (2), by striking 
the period at the end of paragraph (3) and inserting ``, and'', and by 
adding at the end the following new paragraph:
            ``(4) 30 percent of the qualified small wind energy 
        property expenditures made by the taxpayer during such year.''.
    (b) Limitation.--Section 25D(b)(1) (relating to maximum credit) is 
amended by striking ``and'' at the end of subparagraph (B), by striking 
the period at the end of subparagraph (A) and inserting ``, and'', and 
by adding at the end the following new subparagraph:
                    ``(D) $500 with respect to each half kilowatt of 
                capacity (not to exceed $4,000) of wind turbines for 
                which qualified small wind energy property expenditures 
                are made.''.
    (c) Qualified Small Wind Energy Property Expenditures.--
            (1) In general.--Section 25D(d) (relating to definitions) 
        is amended by adding at the end the following new paragraph:
            ``(4) Qualified small wind energy property expenditure.--
        The term `qualified small wind energy property expenditure' 
        means an expenditure for property which uses a wind turbine to 
        generate electricity for use in connection with a dwelling unit 
        located in the United States and used as a residence by the 
        taxpayer.''.
            (2) No double benefit.--Section 45(d)(1) (relating to wind 
        facility) is amended by adding at the end the following new 
        sentence: ``Such term shall not include any facility with 
        respect to which any qualified small wind energy property 
        expenditure (as defined in subsection (d)(4) of section 25D) is 
        taken into account in determining the credit under such 
        section.''.
    (d) Maximum Expenditures in Case of Joint Occupancy.--Section 
25D(e)(4)(A) (relating to maximum expenditures) is amended by striking 
``and'' at the end of clause (iii), by striking the period at the end 
of clause (iv) and inserting ``, and'', and by adding at the end the 
following new clause:
                            ``(v) $1,667 in the case of each half 
                        kilowatt of capacity of wind turbines for which 
                        qualified small wind energy property 
                        expenditures are made.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to expenditures after December 31, 2007.

SEC. 209. SEVEN-YEAR APPLICABLE RECOVERY PERIOD FOR DEPRECIATION OF 
              QUALIFIED ENERGY MANAGEMENT DEVICES.

    (a) In General.--Section 168(e)(3)(C) (defining 7-year property) is 
amended by striking ``and'' at the end of clause (iv), by redesignating 
clause (v) as clause (vi), and by inserting after clause (iv) the 
following new clause:
                            ``(v) any qualified energy management 
                        device, and''.
    (b) Definition of Qualified Energy Management Device.--Section 
168(i) (relating to definitions and special rules) is amended by 
inserting at the end the following new paragraph:
            ``(18) Qualified energy management device.--
                    ``(A) In general.--The term `qualified energy 
                management device' means any energy management device 
                which is placed in service before January 1, 2011, by a 
                taxpayer who is a supplier of electric energy or a 
                provider of electric energy services.
                    ``(B) Energy management device.--For purposes of 
                subparagraph (A), the term `energy management device' 
                means any two-way communications network and associated 
                equipment, including equipment installed on the 
                premises of a consumer, which is used by the taxpayer--
                            ``(i) to measure and record electricity 
                        usage data on a time-differentiated basis of at 
                        least 60 minutes, and
                            ``(ii) to provide such data on demand to 
                        both consumers and the taxpayer.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 210. LANDOWNER INCENTIVE TO ENCOURAGE ELECTRIC TRANSMISSION BUILD-
              OUT.

    (a) In General.--Part III of subchapter B of chapter 1 (relating to 
items specifically excluded from gross income) is amended by inserting 
after section 139A the following new section:

``SEC. 139B. ELECTRIC TRANSMISSION EASEMENT PAYMENTS.

    ``(a) In General.--Gross income shall not include any qualified 
electric transmission easement payment.
    ``(b) Qualified Electric Transmission Easement Payment.--For 
purposes of this section, the term `qualified electric transmission 
payment' means any payment by an electric utility or electric 
transmission entity pursuant to an easement or other agreement granted 
by the payee (or any predecessor of such payee) for the right of such 
entity (or any successors of such entity) to locate on such payee's 
property transmission lines and equipment used to transmit electricity 
at 230 or more kilovolts primarily from qualified facilities described 
in section 45(d) (without regard to any placed in service date or the 
last sentence of paragraph (4) thereof) or energy property (as defined 
in section 48(a)(3)) placed in service after the date of the enactment 
of this section.
    ``(c) No Increase in Basis.--Notwithstanding any other provision of 
this subtitle, no increase in the basis or adjusted basis of any 
property shall result from any amount excluded under this subsection 
with respect to such property.
    ``(d) Denial of Double Benefit.--Notwithstanding any other 
provision of this subtitle, no deduction or credit shall be allowed (to 
the person for whose benefit a qualified electric transmission easement 
payment is made) for, or by reason of, any expenditure to the extent of 
the amount excluded under this section with respect to such 
expenditure.''.
    (b) Clerical Amendment.--The table of sections for such part III is 
amended by inserting after the item relating to section 139A the 
following new item:

``Sec. 139B. Electric transmission easement payments.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments received after the date of the enactment of this Act.

SEC. 211. PARTIAL EXEMPTION FROM PASSIVE ACTIVITY LIMITATIONS FOR 
              QUALIFIED WIND FACILITIES.

    (a) In General.--Section 469 (relating to passive activity losses 
and credits limited) is amended by redesignating subsections (l) and 
(m) as subsections (m) and (n), respectively, and by inserting after 
subsection (k) the following new subsection:
    ``(l) $40,000 Offset for Qualified Wind Facilities.--
            ``(1) In general.--In the case of any natural person, 
        subsection (a) shall not apply to that portion of the passive 
        activity loss or the deduction equivalent (within the meaning 
        of subsection (j)(5)) of the passive activity credit for any 
        taxable year which is attributable to any interest of such 
        person in a facility described in section 45(d)(1) (relating to 
        wind facility).
            ``(2) Dollar limitation.--The aggregate amount to which 
        paragraph (1) applies for any taxable year shall not exceed 
        $40,000.
            ``(3) Special rule for estates.--
                    ``(A) In general.--In the case of taxable years of 
                an estate ending less than 2 years after the date of 
                the death of the decedent, this subsection shall apply 
                to any interest in a facility described in section 
                45(d)(1) (relating to wind facility) held by the 
                decedent on the date of his death.
                    ``(B) Reduction for surviving spouse's exemption.--
                For purposes of subparagraph (A), the $40,000 amount 
                under paragraph (2) shall be reduced by the amount of 
                the exemption under paragraph (1) allowable to the 
                surviving spouse of the decedent for the taxable year 
                ending with or within the taxable year of the estate.
            ``(4) Married individuals filing separately.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), in the case of any married individual 
                filing a separate return, this subsection shall be 
                applied by substituting `$20,000' for `$40,000' each 
                place it appears.
                    ``(B) Taxpayers not living apart.--This subsection 
                shall not apply to a taxpayer who--
                            ``(i) is a married individual filing a 
                        separate return for any taxable year, and
                            ``(ii) does not live apart from his spouse 
                        at all times during such taxable year.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to losses and credits taken into account in taxable years 
beginning after the date of the enactment of this Act.

SEC. 212. CREDIT FOR ELECTRICITY PRODUCED FROM QUALIFIED WIND 
              FACILITIES ALLOWED AGAINST ALTERNATIVE MINIMUM TAX.

    (a) In General.--Subparagraph (B) of section 38(c)(4) (relating to 
specified credits) is amended--
            (1) by striking ``and'' at the end of clause (i),
            (2) by inserting ``(other than a facility described in 
        clause (iii))'' after ``facility'' in clause (ii)(I),
            (3) by striking the period at the end of clause (ii) and 
        inserting ``, and'', and
            (4) by adding at the end the following new clause:
                            ``(iii) the credit determined under section 
                        45 to the extent that such credit is 
                        attributable to electricity produced at a 
                        facility described in section 45(d)(1) 
                        (relating to wind facility).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

                    PART II--DOMESTIC FUEL SECURITY

SEC. 221. CREDIT FOR PRODUCTION OF CELLULOSIC BIOMASS ALCOHOL.

    (a) In General.--Subsection (a) of section 40 (relating to alcohol 
used as fuel) is amended by striking ``plus'' at the end of paragraph 
(2), by striking the period at the end of paragraph (3) and inserting 
``, plus'', and by adding at the end the following new paragraph:
            ``(4) the small cellulosic alcohol producer credit.''.
    (b) Small Cellulosic Alcohol Producer Credit.--
            (1) In general.--Subsection (b) of section 40 is amended by 
        adding at the end the following new paragraph:
            ``(6) Small cellulosic alcohol producer credit.--
                    ``(A) In general.--In addition to any other credit 
                allowed under this section, there shall be allowed as a 
                credit against the tax imposed by this chapter for the 
                taxable year an amount equal to the applicable amount 
                for each gallon of qualified cellulosic alcohol 
                production.
                    ``(B) Applicable amount.--For purposes of 
                subparagraph (A), the applicable amount means the 
                excess of--
                            ``(i) $1.11, over
                            ``(ii) the sum of--
                                    ``(I) the amount of the credit 
                                allowable for alcohol which is ethanol 
                                under subsection (b)(1) (without regard 
                                to subsection (b)(3)) at the time of 
                                the qualified cellulosic alcohol 
                                production, plus
                                    ``(II) the amount of the credit 
                                allowable under subsection (b)(4) at 
                                the time of such production.
                    ``(C) Qualified cellulosic alcohol production.--For 
                purposes of this section, the term `qualified 
                cellulosic alcohol production' means any cellulosic 
                biomass alcohol which is produced by an eligible small 
                cellulosic alcohol producer and which during the 
                taxable year--
                            ``(i) is sold by the taxpayer to another 
                        person--
                                    ``(I) for use by such other person 
                                in the production of a qualified 
                                alcohol mixture in such other person's 
                                trade or business (other than casual 
                                off-farm production),
                                    ``(II) for use by such other person 
                                as a fuel in a trade or business, or
                                    ``(III) who sells such cellulosic 
                                biomass alcohol at retail to another 
                                person and places such cellulosic 
                                biomass alcohol in the fuel tank of 
                                such other person, or
                            ``(ii) is used or sold by the taxpayer for 
                        any purpose described in clause (i).
                    ``(D) Additional distillation excluded.--The 
                qualified cellulosic alcohol production of any taxpayer 
                for any taxable year shall not include any alcohol 
                which is purchased by the taxpayer and with respect to 
                which such producer increases the proof of the alcohol 
                by additional distillation.
                    ``(E) Application of paragraph.--This paragraph 
                shall apply with respect to qualified cellulosic 
                alcohol production--
                            ``(i) after December 31, 2007, and
                            ``(ii) before the end of the later of--
                                    ``(I) December 31, 2012, or
                                    ``(II) the calendar year in which 
                                the Secretary, in consultation with the 
                                Administrator of the Environmental 
                                Protection Agency, certifies that 
                                1,000,000,000 gallons of cellulosic 
                                biomass alcohol (as so defined) have 
                                been produced in or imported into the 
                                United States after such date.''.
            (2) Termination date not to apply.--Subsection (e) of 
        section 40 (relating to termination) is amended by adding at 
        the end the following new paragraph:
            ``(3) Exception for small cellulosic alcohol producer 
        credit.--Paragraph (1) shall not apply to the portion of the 
        credit allowed under this section by reason of subsection 
        (a)(4).''.
    (c) Eligible Small Cellulosic Alcohol Producer.--Section 40 is 
amended by adding at the end the following new subsection:
    ``(i) Definitions and Special Rules for Small Cellulosic Alcohol 
Producer.--For purposes of this section--
            ``(1) In general.--The term `eligible small cellulosic 
        alcohol producer' means a person, who at all times during the 
        taxable year, has a productive capacity for cellulosic biomass 
        alcohol not in excess of 60,000,000 gallons.
            ``(2) Cellulosic biomass alcohol.--
                    ``(A) In general.--The term `cellulosic biomass 
                alcohol' has the meaning given such term under section 
                168(l)(3), but does not include any alcohol with a 
                proof of less than 150.
                    ``(B) Determination of proof.--The determination of 
                the proof of any alcohol shall be made without regard 
                to any added denaturants.
            ``(3) Aggregation rule.--For purposes of the 60,000,000 
        gallon limitation under paragraph (1), all members of the same 
        controlled group of corporations (within the meaning of section 
        267(f)) and all persons under common control (within the 
        meaning of section 52(b) but determined by treating an interest 
        of more than 50 percent as a controlling interest) shall be 
        treated as 1 person.
            ``(4) Partnership, s corporations, and other pass-thru 
        entities.--In the case of a partnership, trust, S corporation, 
        or other pass-thru entity, the limitation contained in 
        paragraph (1) shall be applied at the entity level and at the 
        partner or similar level.
            ``(5)  Allocation.--For purposes of this subsection, in the 
        case of a facility in which more than 1 person has an interest, 
        productive capacity shall be allocated among such persons in 
        such manner as the Secretary may prescribe.
            ``(6) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary to prevent the credit provided 
        for in subsection (a)(4) from directly or indirectly 
        benefitting any person with a direct or indirect productive 
        capacity of more than 60,000,000 gallons of cellulosic biomass 
        alcohol during the taxable year.
            ``(7) Allocation of small cellulosic producer credit to 
        patrons of cooperative.--Rules similar to the rules under 
        subsection (g)(6) shall apply for purposes of this 
        subsection.''.
    (d) Alcohol Not Used as a Fuel, etc.--
            (1) In general.--Paragraph (3) of section 40(d) is amended 
        by redesignating subparagraph (D) as subparagraph (E) and by 
        inserting after subparagraph (C) the following new 
        subparagraph:
                    ``(D) Small cellulosic alcohol producer credit.--
                If--
                            ``(i) any credit is allowed under 
                        subsection (a)(4), and
                            ``(ii) any person does not use such fuel 
                        for a purpose described in subsection 
                        (b)(6)(C),
                then there is hereby imposed on such person a tax equal 
                to the applicable amount for each gallon of such 
                cellulosic biomass alcohol.''.
            (2) Conforming amendments.--
                    (A) Subparagraph (C) of section 40(d)(3) is amended 
                by striking ``producer'' in the heading and inserting 
                ``small ethanol producer''.
                    (B) Subparagraph (E) of section 40(d)(3), as 
                redesignated by paragraph (1), is amended by striking 
                ``or (C)'' and inserting ``(C), or (D)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to fuel produced after December 31, 2007.

SEC. 222. EXPANSION OF SPECIAL ALLOWANCE TO CELLULOSIC BIOMASS ALCOHOL 
              FUEL PLANT PROPERTY.

    (a) In General.--Paragraph (3) of section 168(l) (relating to 
special allowance for cellulosic biomass ethanol plant property) is 
amended to read as follows:
            ``(3) Cellulosic biomass alcohol.--For purposes of this 
        subsection, the term `cellulosic biomass alcohol' means any 
        alcohol produced from any lignocellulosic or hemicellulosic 
        matter that is available on a renewable or recurring basis.''.
    (b) Conforming Amendments.--
            (1) Subsection (l) of section 168 is amended by striking 
        ``cellulosic biomass ethanol'' each place it appears and 
        inserting ``cellulosic biomass alcohol''.
            (2) The heading of section 168(l) is amended by striking 
        ``Cellulosic Biomass Ethanol'' and inserting ``Cellulosic 
        Biomass Alcohol''.
            (3) The heading of paragraph (2) of section 168(l) is 
        amended by striking ``cellulosic biomass ethanol'' and 
        inserting ``cellulosic biomass alcohol''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act, in taxable years ending after such date.

SEC. 223. EXTENSION OF SMALL ETHANOL PRODUCER CREDIT.

    Paragraph (1) of section 40(e) (relating to termination) is 
amended--
            (1) in subparagraph (A), by inserting ``(December 31, 2012, 
        in the case of the credit allowed by reason of subsection 
        (a)(3))'' after ``December 31, 2010'', and
            (2) in subparagraph (B), by inserting ``(January 1, 2013, 
        in the case of the credit allowed by reason of subsection 
        (a)(3))'' after ``January 1, 2011''.

SEC. 224. CREDIT FOR PRODUCERS OF FOSSIL FREE ALCOHOL.

    (a) In General.--Subsection (a) of section 40 (relating to alcohol 
used as fuel), as amended by this Act, is amended by striking ``plus'' 
at the end of paragraph (3), by striking the period at the end of 
paragraph (4) and inserting ``, plus'', and by adding at the end the 
following new paragraph:
            ``(5) the small fossil free alcohol producer credit.''.
    (b) Small Fossil Free Alcohol Producer Credit.--Subsection (b) of 
section 40, as amended by this Act, is amended by adding at the end the 
following new paragraph:
            ``(7) Small fossil free alcohol producer credit.--
                    ``(A) In general.--In addition to any other credit 
                allowed under this section, there shall be allowed as a 
                credit against the tax imposed by this chapter for the 
                taxable year an amount equal to 25 cents for each 
                gallon of qualified fossil free alcohol production.
                    ``(B) Qualified fossil free alcohol production.--
                For purposes of this section, the term `qualified 
                fossil free alcohol production' means alcohol which is 
                produced by an eligible small fossil free alcohol 
                producer at a fossil free alcohol production facility 
                and which during the taxable year--
                            ``(i) is sold by the taxpayer to another 
                        person--
                                    ``(I) for use by such other person 
                                in the production of a qualified 
                                alcohol mixture in such other person's 
                                trade or business (other than casual 
                                off-farm production),
                                    ``(II) for use by such other person 
                                as a fuel in a trade or business, or
                                    ``(III) who sells such alcohol at 
                                retail to another person and places 
                                such alcohol in the fuel tank of such 
                                other person, or
                            ``(ii) is used or sold by the taxpayer for 
                        any purpose described in clause (i).
                    ``(C) Additional distillation excluded.--The 
                qualified fossil free alcohol production of any 
                taxpayer for any taxable year shall not include any 
                alcohol which is purchased by the taxpayer and with 
                respect to which such producer increases the proof of 
                the alcohol by additional distillation.''.
    (c) Eligible Small Fossil Free Alcohol Producer.--Section 40, as 
amended by this Act, is amended by adding at the end the following new 
subsection:
    ``(j) Definitions and Special Rules for Small Fossil Free Alcohol 
Producer.--For purposes of this section--
            ``(1) In general.--The term `eligible small fossil free 
        alcohol producer' means a person, who at all times during the 
        taxable year, has a productive capacity for alcohol from all 
        fossil free alcohol production facilities of the taxpayer which 
        is not in excess of 60,000,000 gallons.
            ``(2) Fossil free alcohol production facility.--The term 
        `fossil free alcohol production facility' means any facility at 
        which 90 percent of the fuel used in the production of alcohol 
        is from biomass (as defined in section 45K(c)(3)).
            ``(3) Aggregation rule.--For purposes of the 60,000,000 
        gallon limitation under paragraph (1), all members of the same 
        controlled group of corporations (within the meaning of section 
        267(f)) and all persons under common control (within the 
        meaning of section 52(b) but determined by treating an interest 
        of more than 50 percent as a controlling interest) shall be 
        treated as 1 person.
            ``(4) Partnership, s corporations, and other pass-thru 
        entities.--In the case of a partnership, trust, S corporation, 
        or other pass-thru entity, the limitation contained in 
        paragraph (1) shall be applied at the entity level and at the 
        partner or similar level.
            ``(5)  Allocation.--For purposes of this subsection, in the 
        case of a facility in which more than 1 person has an interest, 
        productive capacity shall be allocated among such persons in 
        such manner as the Secretary may prescribe.
            ``(6) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary to prevent the credit provided 
        for in subsection (a)(5) from directly or indirectly 
        benefitting any person with a direct or indirect productive 
        capacity of more than 60,000,000 gallons of alcohol from fossil 
        free alcohol production facilities during the taxable year.
            ``(7) Allocation of small fossil free alcohol producer 
        credit to patrons of cooperative.--Rules similar to the rules 
        under subsection (g)(6) shall apply for purposes of this 
        subsection.''.
    (d) Alcohol Not Used as a Fuel, etc.--
            (1) In general.--Paragraph (3) of section 40(d), as amended 
        by this Act, is amended by redesignating subparagraph (E) as 
        subparagraph (F) and by inserting after subparagraph (D) the 
        following new subparagraph:
                    ``(E) Small fossil free alcohol producer credit.--
                If--
                            ``(i) any credit is allowed under 
                        subsection (a)(5), and
                            ``(ii) any person does not use such fuel 
                        for a purpose described in subsection 
                        (b)(7)(B),
                then there is hereby imposed on such person a tax equal 
                to 25 cents for each gallon of such alcohol.''.
            (2) Conforming amendment.--Subparagraph (E) of section 
        40(d)(3), as redesignated by paragraph (1) and amended by this 
        Act, is amended by striking ``or (D)'' and inserting ``(C), or 
        (E)''.
    (e) Termination.--Paragraph (1) of section 40(e), as amended by 
this Act, is amended--
            (1) in subparagraph (A), by striking ``(December 31, 2012, 
        in the case of the credit allowed by reason of subsection 
        (a)(3))'' and inserting ``(December 31, 2012, in the case of 
        the credits allowed by reason of paragraphs (3) and (5) of 
        subsection (a))'', and
            (2) in subparagraph (B), by striking ``(January 1, 2013, in 
        the case of the credit allowed by reason of subsection 
        (a)(3))'' and inserting ``(January 1, 2013, in the case of the 
        credits allowed by reason of paragraphs (3) and (5) of 
        subsection (a))''.
    (f) Effective Date.--The amendments made by this section shall 
apply to fuel produced after December 31, 2007.

SEC. 225. MODIFICATION OF ALCOHOL CREDIT.

    (a) Income Tax Credit.--Subsection (h) of section 40 (relating to 
reduced credit for ethanol blenders) is amended by adding at the end 
the following new paragraph:
            ``(3) Reduced amount after sale of 7,500,000,000 gallons.--
                    ``(A) In general.--In the case of any calendar year 
                beginning after the date described in subparagraph (B), 
                the last row in the table in paragraph (2) shall be 
                applied by substituting `46 cents' for `51 cents'.
                    ``(B) Date described.--The date described in this 
                subparagraph is the first date on which 7,500,000,000 
                gallons of ethanol (including cellulosic ethanol) have 
                been produced in or imported into the United States 
                after the date of the enactment of this paragraph, as 
                certified by the Secretary, in consultation with the 
                Administrator of the Environmental Protection 
                Agency.''.
    (b) Excise Tax Credit.--
            (1) In general.--Paragraph (2) of section 6426(b) (relating 
        to alcohol fuel mixture credit) is amended by adding at the end 
        the following new subparagraph:
                    ``(C) Reduced amount after sale of 7,500,000,000 
                gallons.--In the case of any alcohol fuel mixture 
                produced in a calendar year beginning after the date 
                described in section 40(h)(3)(B), subparagraph (A) 
                shall be applied by substituting `46 cents' for `51 
                cents'.''.
            (2) Conforming amendment.--Subparagraph (A) of section 
        6426(b)(2) is amended by striking ``subparagraph (B)'' and 
        inserting ``subparagraphs (B) and (C)''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 226. EXTENSION AND MODIFICATION OF CREDIT FOR BIODIESEL USED AS 
              FUEL.

    (a) Extension.--
            (1) Income tax credits for biodiesel and renewable diesel 
        and small agri-biodiesel producer credit.--Section 40A(g) 
        (relating to termination) is amended by striking ``December 31, 
        2008'' and inserting ``December 31, 2010 (December 31, 2012, in 
        the case of the credit allowed by reason of subsection 
        (a)(3))''.
            (2) Excise tax credit.--Section 6426(c)(6) (relating to 
        termination) is amended by striking ``2008'' and inserting 
        ``2010''.
            (3) Fuels not used for taxable purposes.--Section 
        6427(e)(5)(B) (relating to termination) is amended by striking 
        ``2008'' and inserting ``2010''.
    (b) Modification of Credit for Renewable Diesel.--
            (1) In general.--Section 40A(f) (relating to renewable 
        diesel) is amended by adding at the end the following new 
        paragraph:
            ``(4) Special rule for co-processed renewable diesel.--In 
        the case of a taxpayer which produces renewable diesel through 
        the co-processing of biomass and petroleum at any facility, 
        this subsection shall not apply to so much of the renewable 
        diesel produced at such facility and sold or used during the 
        taxable year in a qualified biodiesel mixture as exceeds 
        60,000,000 gallons.''.
    (c) Modification Relating to Definition of Agri-Biodiesel.--
Paragraph (2) of section 40A(d) (relating to agri-biodiesel) is amended 
by striking ``and mustard seeds'' and inserting ``mustard seeds, and 
camelina''.
    (d) Effective Dates.--The amendments made by this section shall 
apply to fuel sold or used after the date of the enactment of this Act.

SEC. 227. EXTENSION AND MODIFICATION OF ALTERNATIVE FUEL CREDIT.

    (a) Extension.--
            (1) Alternative fuel credit.--Paragraph (4) of section 
        6426(d) (relating to alternative fuel credit) is amended by 
        striking ``September 30, 2009'' and inserting ``December 31, 
        2012''.
            (2) Alternative fuel mixture credit.--Paragraph (3) of 
        section 6426(e) (relating to alternative fuel mixture credit) 
        is amended by striking ``September 30, 2009'' and inserting 
        ``December 31, 2012''.
            (3) Payments.--Subparagraph (C) of section 6427(e)(5) 
        (relating to termination) is amended by striking ``September 
        30, 2009'' and inserting ``December 31, 2012''.
    (b) Modifications.--
            (1) Alternative fuel to include compressed or liquified 
        biomass gas.--Paragraph (2) of section 6426(d) (relating to 
        alternative fuel credit) is amended by striking ``and'' at the 
        end of subparagraph (E), by redesignating subparagraph (F) as 
        subparagraph (G), and by inserting after subparagraph (E) the 
        following new subparagraph:
                    ``(F) compressed or liquified biomass gas, and''.
            (2) Credit allowed for aviation use of fuel.--Paragraph (1) 
        of section 6426(d) is amended by inserting ``sold by the 
        taxpayer for use as a fuel in aviation,'' after ``motorboat,''.
    (c) Carbon Capture Requirement for Certain Fuels.--
            (1) In general.--Subsection (d) of section 6426, as amended 
        by subsection (a), is amended by redesignating paragraph (4) as 
        paragraph (5) and by inserting after paragraph (3) the 
        following new paragraph:
            ``(4) Carbon capture requirement.--The requirements of this 
        paragraph are met if the fuel is certified, under such 
        procedures as required by the Secretary, as having been 
        produced at a facility which separates and sequesters not less 
        than 75 percent of such facility's total carbon dioxide 
        emissions.''.
            (2) Conforming amendment.--Subparagraph (E) of section 
        6426(d)(2) is amended by inserting ``which meets the 
        requirements of paragraph (4) and which is'' after ``any liquid 
        fuel''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to fuel sold or 
        used after the date of the enactment of this Act.
            (2) Carbon capture requirements.--The amendments made by 
        subsection (c) shall apply to fuel sold or used after December 
        31, 2007.

SEC. 228. EXTENSION OF ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY 
              CREDIT.

    Paragraph (2) of section 30C(g) (relating to termination) is 
amended by striking ``December 31, 2009'' and inserting ``December 31, 
2012''.

SEC. 229. EXTENSION OF SUSPENSION OF TAXABLE INCOME LIMIT ON PERCENTAGE 
              DEPLETION FOR OIL AND NATURAL GAS PRODUCED FROM MARGINAL 
              PROPERTIES.

    Subparagraph (H) of section 613A(c)(6) (relating to oil and gas 
produced from marginal properties) is amended by striking ``January 1, 
2008'' and inserting ``January 1, 2010''.

SEC. 230. EXTENSION AND MODIFICATION OF ELECTION TO EXPENSE CERTAIN 
              REFINERIES.

    (a) Extension.--Paragraph (1) of section 179C(c) (relating to 
qualified refinery property) is amended--
            (1) by striking ``January 1, 2012'' in subparagraph (B) and 
        inserting ``January 1, 2014'', and
            (2) by striking ``January 1, 2008'' each place it appears 
        in subparagraph (F) and inserting ``January 1, 2010''.
    (b) Inclusion of Fuel Derived From Shale and Tar Sands.--
            (1) In general.--Subsection (d) of section 179C is amended 
        by inserting ``, or directly from shale or tar sands'' after 
        ``(as defined in section 45K(c))''.
            (2) Conforming amendment.--Paragraph (2) of section 179C(e) 
        is amended by inserting ``shale, tar sands, or'' before 
        ``qualified fuels''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 231. ETHANOL TARIFF EXTENSION.

    Headings 9901.00.50 and 9901.00.52 of the Harmonized Tariff 
Schedule of the United States are each amended in the effective period 
column by striking ``1/1/2009'' and inserting ``1/1/2011''.

SEC. 232. ELIMINATION AND REDUCTIONS OF DUTY DRAWBACK ON CERTAIN 
              IMPORTED ETHANOL.

    (a) In General.--Section 313(p)(3)(A)(i)(I) of the Tariff Act of 
1930 (19 U.S.C. 1313(p)(3)(A)(i)(I)) is amended by striking ``or'' and 
inserting the following: ``other than an article that contains either--
                                            ``(aa) imported ethyl 
                                        alcohol (provided for in 
                                        subheading 2207.10.60 or 
                                        2207.20.00 of such Schedule), 
                                        or
                                            ``(bb) any imported mixture 
                                        (provided for in heading 2710 
                                        or 3824 of such Schedule) that 
                                        contains ethyl alcohol, or''.
    (b) Limitations on, and Reductions of, Drawbacks.--Section 313 of 
the Tariff Act of 1930 (19 U.S.C. 1313) is amended by adding at the end 
the following new subsection:
    ``(z) Limitations on, and Reductions of, Drawbacks.--
            ``(1) Limitations.--
                    ``(A) In general.--Ethyl alcohol or mixture 
                containing ethyl alcohol described in subparagraph (B) 
                may be treated as being of the same kind and quality 
                under subsection (b) of this section or may be treated 
                as being commercially interchangeable with any other 
                ethyl alcohol or mixture containing ethyl alcohol under 
                subsection (j)(2) of this section, only if the other 
                ethyl alcohol or mixture--
                            ``(i) if imported, is subject to the 
                        additional duty under subheading 9901.00.50 of 
                        the Harmonized Tariff Schedule of the United 
                        States; or
                            ``(ii) if domestic, is subject to Federal 
                        excise tax under section 4041 or 4081 of the 
                        Internal Revenue Code of 1986 in an amount 
                        equal to or greater than the amount of drawback 
                        claimed.
                    ``(B) Ethyl alcohol or mixture containing ethyl 
                alcohol described.--Ethyl alcohol or mixture containing 
                ethyl alcohol described in this subparagraph means--
                            ``(i) ethyl alcohol classifiable under 
                        subheading 2207.10.60 or 2207.20.00 of the 
                        Harmonized Tariff Schedule of the United 
                        States, or
                            ``(ii) a mixture containing ethyl alcohol 
                        classifiable under heading 2710 or 3824 of the 
                        Harmonized Tariff Schedule of the United 
                        States,
                which, if imported would be subject to additional duty 
                under subheading 9901.00.50 of such Schedule.
            ``(2) Reduction of drawback.--For purposes of subsections 
        (b), (j)(2), and (p) of this section, the amount of the refund 
        as drawback under this section shall be reduced by an amount 
        equal to any Federal tax credit or refund of any Federal tax 
        paid on the merchandise with respect to which the drawback is 
        claimed.''.
    (c) Effective Date.--The amendments made by this section apply to 
articles exported on or after the date that is 15 days after the date 
of the enactment of this Act.

SEC. 233. CERTAIN INCOME AND GAINS RELATING TO ALCOHOL FUEL MIXTURES, 
              BIODIESEL FUEL MIXTURES, AND ALTERNATIVE FUEL TREATED AS 
              QUALIFYING INCOME FOR PUBLICLY TRADED PARTNERSHIPS.

    (a) In General.--Subparagraph (E) of section 7704(d)(1) (defining 
qualifying income)is amended by inserting ``, or the transportation or 
storage of any fuel described in subsection (b), (c), or (d) of section 
6426'' after ``timber)''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act, in taxable years 
ending after such date.

SEC. 234. TECHNICAL AMENDMENTS.

    (a) Amendments Related to Section 11113 of the Safe, Accountable, 
Flexible, Efficient Transportation Equity Act: A Legacy for Users.--
            (1) Paragraph (3) of section 6427(i) is amended--
                    (A) by inserting ``or under subsection (e)(2) by 
                any person with respect to an alternative fuel (as 
                defined in section 6426(d)(2))'' after ``section 6426'' 
                in subparagraph (A),
                    (B) by inserting ``or (e)(2)'' after ``subsection 
                (e)(1)'' in subparagraphs (A)(i) and (B), and
                    (C) by inserting ``and alternative fuel credit'' 
                after ``mixture credit'' in the heading thereof.
            (2)(A) Subparagraph (G) of section 6426(d)(2), as 
        redesignated by section 227, is amended by striking 
        ``hydrocarbons'' and inserting ``fuel''.
            (B) Section 6426 is amended by adding at the end the 
        following new subsection:
    ``(h) Denial of Double Benefit.--No credit shall be determined 
under subsection (d) or (e) with respect to any fuel which is described 
in subsection (b) or (c) or section 40 or 40A.''.
            (3) The amendments made by this subsection shall take 
        effect as if included in section 11113 of the SAFETEA-LU.
    (b) Amendments Related to the Energy Policy Act of 2005.--
            (1) Amendment related to section 1342 of the act.--
                    (A) So much of subsection (b) of section 30C as 
                precedes paragraph (1) thereof is amended to read as 
                follows:
    ``(b) Limitation.--The credit allowed under subsection (a) with 
respect to all alternative fuel vehicle refueling property placed in 
service by the taxpayer during the taxable year at a location shall not 
exceed--''.
                    (B) Subsection (c) of section 30C is amended to 
                read as follows:
    ``(c) Qualified Alternative Fuel Vehicle Refueling Property.--For 
purposes of this section, the term `qualified alternative fuel vehicle 
refueling property' has the same meaning as the term `qualified clean-
fuel vehicle refueling property' would have under section 179A if--
            ``(1) paragraph (1) of section 179A(d) did not apply to 
        property installed on property which is used as the principal 
        residence (within the meaning of section 121) of the taxpayer, 
        and
            ``(2) only the following were treated as clean burning 
        fuels for purposes of section 179A(d):
                    ``(A) Any fuel at least 85 percent of the volume of 
                which consists of one or more of the following: 
                ethanol, natural gas, compressed natural gas, liquified 
                natural gas, liquefied petroleum gas, or hydrogen.
                    ``(B) Biodiesel (as defined in section 40A(d)(1)).
                    ``(C) Any mixture--
                            ``(i) which consists of two or more of the 
                        following: biodiesel (as so defined), diesel 
                        fuel (as defined in section 4083(a)(3)), or 
                        kerosene, and
                            ``(ii) at least 20 percent of the volume of 
                        which consists of biodiesel (as so defined) 
                        determined without regard to any kerosene in 
                        such mixture.''.
            (2) Amendments related to section 1362 of the act.--
                    (A)(i) Paragraph (1) of section 4041(d) is amended 
                by adding at the end the following new sentence: ``No 
                tax shall be imposed under the preceding sentence on 
                the sale or use of any liquid if tax was imposed with 
                respect to such liquid under section 4081 at the 
                Leaking Underground Storage Tank Trust Fund financing 
                rate.''.
                    (ii) Paragraph (3) of section 4042(b) is amended to 
                read as follows:
            ``(3) Exception for fuel on which leaking underground 
        storage tank trust fund financing rate separately imposed.--The 
        Leaking Underground Storage Tank Trust Fund financing rate 
        under paragraph (2)(B) shall not apply to the use of any fuel 
        if tax was imposed with respect to such fuel under section 
        4041(d) or 4081 at the Leaking Underground Storage Tank Trust 
        Fund financing rate.''.
                    (iii) Notwithstanding section 6430 of the Internal 
                Revenue Code of 1986, a refund, credit, or payment may 
                be made under subchapter B of chapter 65 of such Code 
                for taxes imposed with respect to any liquid after 
                September 30, 2005, and before the date of the 
                enactment of this Act under section 4041(d)(1) or 4042 
                of such Code at the Leaking Underground Storage Tank 
                Trust Fund financing rate to the extent that tax was 
                imposed with respect to such liquid under section 4081 
                at the Leaking Underground Storage Tank Trust Fund 
                financing rate.
                    (B)(i) Paragraph (5) of section 4041(d) is 
                amended--
                            (I) by striking ``(other than with respect 
                        to any sale for export under paragraph (3) 
                        thereof)'', and
                            (II) by adding at the end the following new 
                        sentence: ``The preceding sentence shall not 
                        apply with respect to subsection (g)(3) and so 
                        much of subsection (g)(1) as relates to vessels 
                        (within the meaning of section 4221(d)(3)) 
                        employed in foreign trade or trade between the 
                        United States and any of its possessions.''
                    (ii) Section 4082 is amended--
                            (I) by striking ``(other than such tax at 
                        the Leaking Underground Storage Tank Trust Fund 
                        financing rate imposed in all cases other than 
                        for export)'' in subsection (a), and
                            (II) by redesignating subsections (f) and 
                        (g) as subsections (g) and (h) and by inserting 
                        after subsection (e) the following new 
                        subsection:
    ``(f) Exception for Leaking Underground Storage Tank Trust Fund 
Financing Rate.--
            ``(1) In general.--Subsection (a) shall not apply to the 
        tax imposed under section 4081 at the Leaking Underground 
        Storage Tank Trust Fund financing rate.
            ``(2) Exception for export, etc.--Paragraph (1) shall not 
        apply with respect to any fuel if the Secretary determines that 
        such fuel is destined for export or for use by the purchaser as 
        supplies for vessels (within the meaning of section 4221(d)(3)) 
        employed in foreign trade or trade between the United States 
        and any of its possessions.''.
                    (iii) Subsection (e) of section 4082 is amended--
                            (I) by striking ``an aircraft, the rate of 
                        tax under section 4081(a)(2)(A)(iii) shall be 
                        zero.'' and inserting ``an aircraft--
            ``(1) the rate of tax under section 4081(a)(2)(A)(iii) 
        shall be zero, and
            ``(2) if such aircraft is employed in foreign trade or 
        trade between the United States and any of its possessions, the 
        increase in such rate under section 4081(a)(2)(B) shall be 
        zero.''; and
                            (II) by moving the last sentence flush with 
                        the margin of such subsection (following the 
                        paragraph (2) added by clause (i)).
                    (iv) Section 6430 is amended to read as follows:

``SEC. 6430. TREATMENT OF TAX IMPOSED AT LEAKING UNDERGROUND STORAGE 
              TANK TRUST FUND FINANCING RATE.

    ``No refunds, credits, or payments shall be made under this 
subchapter for any tax imposed at the Leaking Underground Storage Tank 
Trust Fund financing rate, except in the case of fuels--
            ``(1) which are exempt from tax under section 4081(a) by 
        reason of section 4081(f)(2),
            ``(2) which are exempt from tax under section 4041(d) by 
        reason of the last sentence of paragraph (5) thereof, or
            ``(3) with respect to which the rate increase under section 
        4081(a)(2)(B) is zero by reason of section 4082(e)(2).''.
                    (C) Paragraph (5) of section 4041(d) is amended by 
                inserting ``(b)(1)(A)'' after ``subsections''.
            (3) Effective date.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the amendments made by this subsection 
                shall take effect as if included in the provisions of 
                the Energy Policy Act of 2005 to which they relate.
                    (B) Nonapplication of exemption for off-highway 
                business use.--The amendment made by paragraph (2)(C) 
                shall apply to fuel sold for use or used after the date 
                of the enactment of this Act.
                    (C) Amendment made by the safetea-lu.--The 
                amendment made by paragraph (2)(B)(iii)(II) shall take 
                effect as if included in section 11161 of the SAFETEA-
                LU.
    (c) Amendments Related to Section 339 of the American Jobs Creation 
Act of 2004.--
            (1)(A) Section 45H is amended by striking subsection (d) 
        and by redesignating subsections (e), (f), and (g) as 
        subsections (d), (e), and (f), respectively.
            (B) Subsection (d) of section 280C is amended to read as 
        follows:
    ``(d) Credit for Low Sulfur Diesel Fuel Production.--The deductions 
otherwise allowed under this chapter for the taxable year shall be 
reduced by the amount of the credit determined for the taxable year 
under section 45H(a).''.
            (C) Subsection (a) of section 1016 is amended by striking 
        paragraph (31) and by redesignating paragraphs (32) through 
        (37) as paragraphs (31) through (36), respectively.
            (2)(A) Section 45H, as amended by paragraph (1), is amended 
        by adding at the end the following new subsection:
    ``(g) Election To Not Take Credit.--No credit shall be determined 
under subsection (a) for the taxable year if the taxpayer elects not to 
have subsection (a) apply to such taxable year.''.
            (B) Subsection (m) of section 6501 is amended by inserting 
        ``45H(g),'' after ``45C(d)(4),''.
            (3)(A) Subsections (b)(1)(A), (c)(2), (e)(1), and (e)(2) of 
        section 45H (as amended by paragraph (1)) and section 179B(a) 
        are each amended by striking ``qualified capital costs'' and 
        inserting ``qualified costs''.
            (B) The heading of paragraph (2) of section 45H(c) is 
        amended by striking ``capital''.
            (C) Subsection (a) of section 179B is amended by inserting 
        ``and which are properly chargeable to capital account'' before 
        the period at the end.
            (4) The amendments made by this subsection shall take 
        effect as if included in section 339 of the American Jobs 
        Creation Act of 2004.

                 PART III--ADVANCED TECHNOLOGY VEHICLES

SEC. 241. EXPANSION AND MODIFICATION OF CREDIT FOR ALTERNATIVE FUEL 
              MOTOR VEHICLES.

    (a) Extension.--Section 30B(j) (relating to termination) is 
amended--
            (1) by striking ``December 31, 2014'' in paragraph (1) and 
        inserting ``December 31, 2016'',
            (2) by striking ``December 31, 2010'' in paragraph (2) and 
        inserting ``December 31, 2012'',
            (3) by striking ``December 31, 2009'' in paragraph (3) and 
        inserting ``December 31, 2012'', and
            (4) by striking ``December 31, 2010'' in paragraph (4) and 
        inserting ``December 31, 2012''.
    (b) Modification Relating to New Qualified Alternative Fuel Motor 
Vehicle Credit.--The last sentence of section 30B(e)(2) is amended to 
read as follows: ``A new qualified alternative fuel motor vehicle which 
weighs more than 14,000 pounds gross vehicle weight rating shall be 
deemed to satisfy the preceding sentence if it is certified as 
exceeding the most stringent standard applicable to the model year in 
which such motor vehicle was produced.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 242. CREDIT FOR PLUG-IN ELECTRIC DRIVE MOTOR VEHICLES.

    (a) Plug-In Electric Drive Motor Vehicle Credit.--
            (1) In general.--Subpart B of part IV of subchapter A of 
        chapter 1 (relating to other credits) is amended by adding at 
        the end the following new section:

``SEC. 30D. PLUG-IN ELECTRIC DRIVE MOTOR VEHICLE CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--There shall be allowed as a credit 
        against the tax imposed by this chapter for the taxable year an 
        amount equal to the applicable amount with respect to each new 
        qualified plug-in electric drive motor vehicle placed in 
        service by the taxpayer during the taxable year.
            ``(2) Applicable amount.--For purposes of paragraph (1), 
        the applicable amount is sum of--
                    ``(A) $2,500, plus
                    ``(B) $400 for each kilowatt hour of traction 
                battery capacity of at least 5 kilowatt hours, plus
                    ``(C) $400 for each kilowatt hour of traction 
                battery capacity in excess of 5 kilowatt hours.
    ``(b) Limitations.--
            ``(1) Limitation based on weight.--The amount of the credit 
        allowed under subsection (a) by reason of subsection (a)(2)(A) 
        shall not exceed--
                    ``(A) $7,500, in the case of any new qualified 
                plug-in electric drive motor vehicle with a gross 
                vehicle weight rating of not more than 10,000 pounds,
                    ``(B) $10,000, in the case of any new qualified 
                plug-in electric drive motor vehicle with a gross 
                vehicle weight rating of more than 10,000 pounds but 
                not more than 14,000 pounds,
                    ``(C) $12,500, in the case of any new qualified 
                plug-in electric drive motor vehicle with a gross 
                vehicle weight rating of more than 14,000 pounds but 
                not more than 26,000 pounds, and
                    ``(D) $15,000, in the case of any new qualified 
                plug-in electric drive motor vehicle with a gross 
                vehicle weight rating of more than 26,000 pounds.
            ``(2) Limitation on number of passenger vehicles and light 
        trucks eligible for credit.--No credit shall be allowed under 
        subsection (a) for any new qualified plug-in electric drive 
        motor vehicle which is a passenger vehicle or light truck in 
        any calendar year following the calendar year which includes 
        the first date on which the total number of such new qualified 
        plug-in electric drive motor vehicles sold for use in the 
        United States after December 31, 2007, is at least 250,000.
    ``(c) New Qualified Plug-In Electric Drive Motor Vehicle.--For 
purposes of this section, the term `new qualified plug-in electric 
drive motor vehicle' means a motor vehicle--
            ``(1) which draws propulsion using a traction battery with 
        at least 4 kilowatt hours of capacity,
            ``(2) which uses an offboard source of energy to recharge 
        such battery,
            ``(3) which, in the case of a passenger vehicle or light 
        truck which has a gross vehicle weight rating of not more than 
        8,500 pounds, has received a certificate of conformity under 
        the Clean Air Act and meets or exceeds the equivalent 
        qualifying California low emission vehicle standard under 
        section 243(e)(2) of the Clean Air Act for that make and model 
        year, and
                    ``(A) in the case of a vehicle having a gross 
                vehicle weight rating of 6,000 pounds or less, the Bin 
                5 Tier II emission standard established in regulations 
                prescribed by the Administrator of the Environmental 
                Protection Agency under section 202(i) of the Clean Air 
                Act for that make and model year vehicle, and
                    ``(B) in the case of a vehicle having a gross 
                vehicle weight rating of more than 6,000 pounds but not 
                more than 8,500 pounds, the Bin 8 Tier II emission 
                standard which is so established,
            ``(4) the original use of which commences with the 
        taxpayer,
            ``(5) which is acquired for use or lease by the taxpayer 
        and not for resale, and
            ``(6) which is made by a manufacturer.
    ``(d) Application With Other Credits.--
            ``(1) Business credit treated as part of general business 
        credit.--So much of the credit which would be allowed under 
        subsection (a) for any taxable year (determined without regard 
        to this subsection) that is attributable to property of a 
        character subject to an allowance for depreciation shall be 
        treated as a credit listed in section 38(b) for such taxable 
        year (and not allowed under subsection (a)).
            ``(2) Personal credit.--The credit allowed under subsection 
        (a) (after the application of paragraph (1)) for any taxable 
        year shall not exceed the excess (if any) of--
                    ``(A) the regular tax liability (as defined in 
                section 26(b)) reduced by the sum of the credits 
                allowable under subpart A and sections 27, 30, 30B, and 
                30C, over
                    ``(B) the tentative minimum tax for the taxable 
                year.
    ``(e) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Motor vehicle.--The term `motor vehicle' has the 
        meaning given such term by section 30(c)(2).
            ``(2) Other terms.--The terms `passenger automobile', 
        `light truck', and `manufacturer' have the meanings given such 
        terms in regulations prescribed by the Administrator of the 
        Environmental Protection Agency for purposes of the 
        administration of title II of the Clean Air Act (42 U.S.C. 7521 
        et seq.).
            ``(3) Traction battery capacity.--Traction battery capacity 
        shall be measured in kilowatt hours from a 100 percent state of 
        charge to a zero percent state of charge.
            ``(4) Reduction in basis.--For purposes of this subtitle, 
        the basis of any property for which a credit is allowable under 
        subsection (a) shall be reduced by the amount of such credit so 
        allowed.
            ``(5) No double benefit.--The amount of any deduction or 
        other credit allowable under this chapter for a new qualified 
        plug-in electric drive motor vehicle shall be reduced by the 
        amount of credit allowed under subsection (a) for such vehicle 
        for the taxable year.
            ``(6) Property used by tax-exempt entity.--In the case of a 
        vehicle the use of which is described in paragraph (3) or (4) 
        of section 50(b) and which is not subject to a lease, the 
        person who sold such vehicle to the person or entity using such 
        vehicle shall be treated as the taxpayer that placed such 
        vehicle in service, but only if such person clearly discloses 
        to such person or entity in a document the amount of any credit 
        allowable under subsection (a) with respect to such vehicle 
        (determined without regard to subsection (b)(2)).
            ``(7) Property used outside united states, etc., not 
        qualified.--No credit shall be allowable under subsection (a) 
        with respect to any property referred to in section 50(b)(1) or 
        with respect to the portion of the cost of any property taken 
        into account under section 179.
            ``(8) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit allowable 
        under subsection (a) with respect to any property which ceases 
        to be property eligible for such credit (including recapture in 
        the case of a lease period of less than the economic life of a 
        vehicle).
            ``(9) Election to not take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the taxpayer 
        elects not to have this section apply to such vehicle.
            ``(10) Interaction with air quality and motor vehicle 
        safety standards.--Unless otherwise provided in this section, a 
        motor vehicle shall not be considered eligible for a credit 
        under this section unless such vehicle is in compliance with--
                    ``(A) the applicable provisions of the Clean Air 
                Act for the applicable make and model year of the 
                vehicle (or applicable air quality provisions of State 
                law in the case of a State which has adopted such 
                provision under a waiver under section 209(b) of the 
                Clean Air Act), and
                    ``(B) the motor vehicle safety provisions of 
                sections 30101 through 30169 of title 49, United States 
                Code.
    ``(f) Regulations.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary shall promulgate such regulations as necessary to 
        carry out the provisions of this section.
            ``(2) Coordination in prescription of certain 
        regulations.--The Secretary of the Treasury, in coordination 
        with the Secretary of Transportation and the Administrator of 
        the Environmental Protection Agency, shall prescribe such 
        regulations as necessary to determine whether a motor vehicle 
        meets the requirements to be eligible for a credit under this 
        section.
    ``(g) Termination.--This section shall not apply to property 
purchased after December 31, 2014.''.
            (2) Coordination with other motor vehicle credits.--
                    (A) New qualified fuel cell motor vehicles.--
                Paragraph (3) of section 30B(b) is amended by adding at 
                the end the following new flush sentence:
        ``Such term shall not include any motor vehicle which is a new 
        qualified plug-in electric drive motor vehicle (as defined by 
        section 30D(c)).''.
                    (B) New qualified hybrid motor vehicles.--Paragraph 
                (3) of section 30B(d) is amended by adding at the end 
                the following new flush sentence:
        ``Such term shall not include any motor vehicle which is a new 
        qualified plug-in electric drive motor vehicle (as defined by 
        section 30D(c)).''.
            (3) Conforming amendments.--
                    (A) Section 38(b) is amended by striking ``plus'' 
                at the end of paragraph (30), by striking the period at 
                the end of paragraph (31) and inserting ``plus'', and 
                by adding at the end the following new paragraph:
            ``(32) the portion of the new qualified plug-in electric 
        drive motor vehicle credit to which section 30D(d)(1) 
        applies.''.
                    (B) Section 55(c)(3) is amended by inserting 
                ``30D(d)(2),'' after ``30C(d)(2),''.
                    (C) Section 1016(a), as amended by this Act, is 
                amended by striking ``and'' at the end of paragraph 
                (35), by striking the period at the end of paragraph 
                (36) and inserting ``, and'', and by adding at the end 
                the following new paragraph:
            ``(37) to the extent provided in section 30D(e)(4).''.
                    (D) Section 6501(m) is amended by inserting 
                ``30D(e)(9)'' after ``30C(e)(5)''.
                    (E) The table of sections for subpart B of part IV 
                of subchapter A of chapter 1 is amended by adding at 
                the end the following new item:

``Sec. 30D. Plug-in electric drive motor vehicle credit.''.
    (b) Conversion Kits.--
            (1) In general.--Section 30B (relating to alternative motor 
        vehicle credit) is amended by redesignating subsections (i) and 
        (j) as subsections (j) and (k), respectively, and by inserting 
        after subsection (h) the following new subsection:
    ``(i) Plug-In Conversion Credit.--
            ``(1) In general.--For purposes of subsection (a), the 
        plug-in conversion credit determined under this subsection with 
        respect to any motor vehicle which is converted to a qualified 
        plug-in electric drive motor vehicle is an amount equal to 10 
        percent of the cost of the plug-in traction battery module 
        installed in such vehicle as part of such conversion.
            ``(2) Limitations.--The amount of the credit allowed under 
        this subsection shall not exceed $2,500 with respect to the 
        conversion of any motor vehicle.
            ``(3) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Qualified plug-in electric drive motor 
                vehicle.--The term `qualified plug-in electric drive 
                motor vehicle' means any new qualified plug-in electric 
                drive motor vehicle (as defined in section 30D(c), 
                determined without regard to paragraphs (4) and (6) 
                thereof).
                    ``(B) Plug-in traction battery module.--The term 
                `plug-in traction battery module' means an electro-
                chemical energy storage device which--
                            ``(i) has a traction battery capacity of 
                        not less than 2.5 kilowatt hours,
                            ``(ii) is equipped with an electrical plug 
                        by means of which it can be energized and 
                        recharged when plugged into an external source 
                        of electric power,
                            ``(iii) consists of a standardized 
                        configuration and is mass produced,
                            ``(iv) has been tested and approved by the 
                        National Highway Transportation Safety 
                        Administration as compliant with applicable 
                        motor vehicle and motor vehicle equipment 
                        safety standards when installed by a mechanic 
                        with standardized training in protocols 
                        established by the battery manufacturer as part 
                        of a nationwide distribution program, and
                            ``(v) is certified by a battery 
                        manufacturer as meeting the requirements of 
                        clauses (i) through (iv).
                    ``(C) Credit allowed to lessor of battery module.--
                In the case of a plug-in traction battery module which 
                is leased to the taxpayer, the credit allowed under 
                this subsection shall be allowed to the lessor of the 
                plug-in traction battery module.
                    ``(D) Credit allowed in addition to other 
                credits.--The credit allowed under this subsection 
                shall be allowed with respect to a motor vehicle 
                notwithstanding whether a credit has been allowed with 
                respect to such motor vehicle under this section (other 
                than this subsection) in any preceding taxable year.
            ``(4) Termination.--This subsection shall not apply to 
        conversions made after December 31, 2009.''.
            (2) Credit treated as part of alternative motor vehicle 
        credit.--Section 30B(a) is amended by striking ``and'' at the 
        end of paragraph (3), by striking the period at the end of 
        paragraph (4) and inserting ``, and'', and by adding at the end 
        the following new paragraph:
            ``(5) the plug-in conversion credit determined under 
        subsection (i).''.
            (3) No recapture for vehicles converted to qualified plug-
        in electric drive motor vehicles.--Paragraph (8) of section 
        30B(h) is amended by adding at the end the following: ``, 
        except that no benefit shall be recaptured if such property 
        ceases to be eligible for such credit by reason of conversion 
        to a qualified plug-in electric drive motor vehicle.''
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2007, in taxable 
years beginning after such date.

SEC. 243. EXCLUSION FROM HEAVY TRUCK TAX FOR IDLING REDUCTION UNITS AND 
              ADVANCED INSULATION ADDED AFTER PURCHASE.

    (a) In General.--Section 4053 (relating to exemptions) is amended 
by adding at the end the following new paragraphs:
            ``(7) Idling reduction device.--Any device or system of 
        devices which--
                    ``(A) is designed to provide to a vehicle those 
                services (such as heat, air conditioning, or 
                electricity) that would otherwise require the operation 
                of the main drive engine while the vehicle is 
                temporarily parked or remains stationary using either--
                            ``(i) an all electric unit, such as a 
                        battery powered unit or from grid-supplied 
                        electricity, or
                            ``(ii) a dual fuel unit powered by diesel 
                        or other fuels, and capable of providing such 
                        services from grid-supplied electricity or on-
                        truck batteries alone, and
                    ``(B) is certified by the Secretary of Energy, in 
                consultation with the Administrator of the 
                Environmental Protection Agency and the Secretary of 
                Transportation, to reduce long-duration idling of such 
                vehicle at a motor vehicle rest stop or other location 
                where such vehicles are temporarily parked or remain 
                stationary.
        For purposes of subparagraph (B), the term `long-duration 
        idling' means the operation of a main drive engine, for a 
        period greater than 15 consecutive minutes, where the main 
        drive engine is not engaged in gear. Such term does not apply 
        to routine stoppages associated with traffic movement or 
        congestion.
            ``(8) Advanced insulation.--Any insulation that has an R 
        value of not less than R35 per inch.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to sales or installations after December 31, 2007.

              PART IV--CONSERVATION AND ENERGY EFFICIENCY

SEC. 251. EXTENSION AND MODIFICATION OF NONBUSINESS ENERGY PROPERTY 
              CREDIT.

    (a) Extension of Credit.--Section 25C(g) (relating to termination) 
is amended by striking ``December 31, 2007'' and inserting ``December 
31, 2009''.
    (b) Natural Gas Fired Heat Pumps.--Section 25C(d)(3) (relating to 
energy-efficient building property) is amended--
            (1) by striking ``and'' at the end of subparagraph (D),
            (2) by striking the period at the end of subparagraph (E) 
        and inserting ``, and'', and
            (3) by adding at the end the following new subparagraph:
                    ``(F) a natural gas fired heat pump with a heating 
                coefficient of performance (COP) of at least 1.1.''.
    (c) Modifications of Standards for Energy-Efficient Building 
Property.--
            (1) Increased limitation for oil furnaces and natural gas, 
        propane, and oil hot water boilers.--
                    (A) In general.--Subparagraphs (B) and (C) of 
                section 25C(b)(3) are amended to read as follows:
                    ``(B) $150 for any qualified natural gas furnace or 
                qualified propane furnace, and
                    ``(C) $300 for--
                            ``(i) any item of energy-efficient building 
                        property, and
                            ``(ii) any qualified oil furnace, qualified 
                        natural gas hot water boiler, qualified propane 
                        hot water boiler, or qualified oil hot water 
                        boiler.''.
                    (B) Conforming amendment.--Clause (ii) of section 
                25C(d)(2)(A) is amended to read as follows:
                            ``(ii) any qualified natural gas furnace, 
                        qualified propane furnace, qualified oil 
                        furnace, qualified natural gas hot water 
                        boiler, qualified propane hot water boiler, or 
                        qualified oil hot water boiler, or''.
            (2) Electric heat pumps.--Subparagraph (B) of section 
        25C(d)(3) is amended to read as follows:
                    ``(B) an electric heat pump which achieves the 
                highest efficiency tier established by the Consortium 
                for Energy Efficiency, as in effect on January 1, 
                2008.''.
            (3) Water heaters.--Subparagraph (E) of section 25C(d)(3) 
        is amended to read as follows:
                    ``(E) a natural gas, propane, or oil water heater 
                which has either an energy factor of at least 0.80 or a 
                thermal efficiency of at least 90 percent.''.
            (4) Oil furnaces and hot water boilers.--Paragraph (4) of 
        section 25C(d) is amended to read as follows:
            ``(4) Qualified natural gas, propane, and oil furnaces and 
        hot water boilers.--
                    ``(A) Qualified natural gas furnace.--The term 
                `qualified natural gas furnace' means any natural gas 
                furnace which achieves an annual fuel utilization 
                efficiency rate of not less than 95.
                    ``(B) Qualified natural gas hot water boiler.--The 
                term `qualified natural gas hot water boiler' means any 
                natural gas hot water boiler which achieves an annual 
                fuel utilization efficiency rate of not less than 90.
                    ``(C) Qualified propane furnace.--The term 
                `qualified propane furnace' means any propane furnace 
                which achieves an annual fuel utilization efficiency 
                rate of not less than 95.
                    ``(D) Qualified propane hot water boiler.--The term 
                `qualified propane hot water boiler' means any propane 
                hot water boiler which achieves an annual fuel 
                utilization efficiency rate of not less than 90.
                    ``(E) Qualified oil furnaces.--The term `qualified 
                oil furnace' means any oil furnace which achieves an 
                annual fuel utilization efficiency rate of not less 
                than 90.
                    ``(F) Qualified oil hot water boiler.--The term 
                `qualified oil hot water boiler' means any oil hot 
                water boiler which achieves an annual fuel utilization 
                efficiency rate of not less than 90.''.
    (d) Effective Date.--The amendments made this section shall apply 
to expenditures made after December 31, 2007.

SEC. 252. EXTENSION AND MODIFICATION OF NEW ENERGY EFFICIENT HOME 
              CREDIT.

    (a) Extension of Credit.--Subsection (g) of section 45L (relating 
to termination) is amended by striking ``December 31, 2008'' and 
inserting ``December 31, 2011''.
    (b) Modification.--
            (1) In general.--Subparagraph (B) of section 45L(a)(1) is 
        amended to read as follows:
                    ``(B)(i) acquired by a person from such eligible 
                contractor and used by any person as a residence during 
                the taxable year, or
                    ``(ii) used by such eligible contractor as a 
                residence during the taxable year.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to homes purchased after December 31, 2008.

SEC. 253. EXTENSION AND MODIFICATION OF ENERGY EFFICIENT COMMERCIAL 
              BUILDINGS DEDUCTION.

    (a) Extension.--Section 179D(h) (relating to termination) is 
amended by striking ``December 31, 2008'' and inserting ``December 31, 
2013''.
    (b) Adjustment of Maximum Deduction Amount.--
            (1) In general.--Subparagraph (A) of section 179D(b)(1) 
        (relating to maximum amount of deduction) is amended by 
        striking ``$1.80'' and inserting ``$2.25''.
            (2) Partial allowance.--Paragraph (1) of section 179D(d) is 
        amended--
                    (A) by striking ``$.60'' and inserting ``$0.75'', 
                and
                    (B) by striking ``$1.80'' and inserting ``$2.25''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 254. MODIFICATIONS OF ENERGY EFFICIENT APPLIANCE CREDIT FOR 
              APPLIANCES PRODUCED AFTER 2007.

    (a) In General.--Section 45M of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 45M. ENERGY EFFICIENT APPLIANCE CREDIT.

    ``(a) General Rule.--
            ``(1) In general.--For purposes of section 38, the energy 
        efficient appliance credit determined under this section for 
        any taxable year is an amount equal to the sum of the credit 
        amounts determined under paragraph (2) for each type of 
        qualified energy efficient appliance produced by the taxpayer 
        during the calendar year ending with or within the taxable 
        year.
            ``(2) Credit amounts.--The credit amount determined for any 
        type of qualified energy efficient appliance is--
                    ``(A) the applicable amount determined under 
                subsection (b) with respect to such type, multiplied by
                    ``(B) the eligible production for such type.
    ``(b) Applicable Amount.--For purposes of subsection (a)--
            ``(1) Dishwashers.--The applicable amount is $75 in the 
        case of a residential model dishwasher which--
                    ``(A) is manufactured in calendar year 2008, 2009, 
                or 2010, and
                    ``(B) uses not more than 307 kilowatt hours per 
                year and 5.0 gallons per cycle (5.5 gallons for 
                dishwashers designed for greater than 12 place 
                settings).
            ``(2) Clothes washers.--The applicable amount is--
                    ``(A) $125 in the case of a residential model top-
                loading clothes washer which--
                            ``(i) is manufactured in calendar year 2008 
                        or 2009, and
                            ``(ii) meets or exceeds a 1.8 MEF and does 
                        not exceed a 7.5 water consumption factor,
                    ``(B) $150 in the case of a residential or 
                commercial model clothes washer which--
                            ``(i) is manufactured in calendar year 
                        2008, 2009, or 2010, and
                            ``(ii) meets or exceeds a 2.0 MEF and does 
                        not exceed a 6.0 water consumption factor, and
                    ``(C) $250 in the case of a residential or 
                commercial model clothes washer which--
                            ``(i) is manufactured in calendar year 
                        2008, 2009, or 2010, and
                            ``(ii) meets or exceeds a 2.2 MEF and does 
                        not exceed a 4.5 water consumption factor.
            ``(3) Refrigerators.--The applicable amount is--
                    ``(A) $75 in the case of a residential model 
                refrigerator which--
                            ``(i) is manufactured in calendar year 2008 
                        or 2009, and
                            ``(ii) consumes at least 23 percent, but 
                        not more than 24.9 percent, fewer kilowatt 
                        hours per year than the 2001 energy 
                        conservation standards,
                    ``(B) $100 in the case of a residential model 
                refrigerator which--
                            ``(i) is manufactured in calendar year 
                        2008, 2009, or 2010, and
                            ``(ii) consumes at least 25 percent, but 
                        not more than 29.9 percent, fewer kilowatt 
                        hours per year than the 2001 energy 
                        conservation standards, and
                    ``(C) $200 in the case of a residential model 
                refrigerator which--
                            ``(i) is manufactured in calendar year 
                        2008, 2009, or 2010, and
                            ``(ii) consumes at least 30 percent fewer 
                        kilowatt hours per year than the 2001 energy 
                        conservation standards.
    ``(c) Eligible Production.--The eligible production in a calendar 
year with respect to each type of qualified energy efficient appliance 
is the excess of--
            ``(1) the number of appliances of such type which are 
        produced in the United States by the taxpayer during such 
        calendar year, over
            ``(2) the average number of appliances of such type which 
        were produced in the United States by the taxpayer (or any 
        predecessor) during the preceding 2-calendar year period.
    ``(d) Types of Qualified Energy Efficient Appliances.--For purposes 
of this section, the types of qualified energy efficient appliances 
are--
            ``(1) dishwashers described in subsection (b)(1),
            ``(2) clothes washers described in subsection (b)(2), and
            ``(3) refrigerators described in subsection (b)(3).
    ``(e) Limitations.--
            ``(1) Aggregate credit amount allowed.--Except as provided 
        in paragraph (2), the aggregate amount of credit allowed under 
        subsection (a) with respect to a taxpayer for any taxable year 
        shall not exceed $75,000,000 reduced by the amount of the 
        credit allowed under subsection (a) to the taxpayer (or any 
        predecessor) for all prior taxable years beginning after 
        December 31, 2007.
            ``(2) Limitation based on gross receipts.--The credit 
        allowed under subsection (a) with respect to a taxpayer for the 
        taxable year shall not exceed an amount equal to 2 percent of 
        the average annual gross receipts of the taxpayer for the 3 
        taxable years preceding the taxable year in which the credit is 
        determined beginning after December 31, 2007.
            ``(3) Gross receipts.--For purposes of this subsection, the 
        rules of paragraphs (2) and (3) of section 448(c) shall apply.
    ``(f) Definitions.--For purposes of this section:
            ``(1) Dishwasher.--The term `dishwasher' means a dishwasher 
        subject to the energy conservation standards established by the 
        Department of Energy.
            ``(2) Clothes washer.--The term `clothes washer' includes a 
        clothes washer subject to the energy conservation standards 
        established by the Department of Energy.
            ``(3) Top-loading clothes washer.--The term `top-loading 
        clothes washer' means a clothes washer with the clothes 
        container compartment access located on the top of the machine.
            ``(4) Refrigerator.--The term `refrigerator' means an 
        automatic defrost refrigerator-freezer which has an internal 
        volume of at least 16.5 cubic feet.
            ``(5) Gallons per cycle.--The term `gallons per cycle' 
        means the amount of water, expressed in gallons, required to 
        complete a normal cycle of a dishwasher.
            ``(6) MEF.--The term `MEF' means the modified energy factor 
        established by the Department of Energy for compliance with the 
        Federal energy conservation standard.
            ``(7) Water consumption factor.--The term `water 
        consumption factor' means the quotient of the total weighted 
        per-cycle water consumption divided by the cubic foot capacity 
        of the clothes washer.
            ``(8) 2001 energy conservation standard.--The term `2001 
        energy conservation standard' means the energy conservation 
        standards promulgated by the Department of Energy and effective 
        July 1, 2001.
    ``(g) Special Rules.--For purposes of this section:
            ``(1) In general.--Rules similar to the rules of 
        subsections (c), (d), and (e) of section 52 shall apply.
            ``(2) Controlled group.--
                    ``(A) In general.--All persons treated as a single 
                employer under subsection (a) or (b) of section 52 or 
                subsection (m) or (o) of section 414 shall be treated 
                as a single producer.
                    ``(B) Inclusion of foreign corporations.--For 
                purposes of subparagraph (A), in applying subsections 
                (a) and (b) of section 52 to this section, section 1563 
                shall be applied without regard to subsection (b)(2)(C) 
                thereof.
            ``(3) Verification.--No amount shall be allowed as a credit 
        under subsection (a) with respect to which the taxpayer has not 
        submitted such information or certification as the Secretary, 
        in consultation with the Secretary of Energy, determines 
        necessary.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to appliances produced after December 31, 2007.

SEC. 255. SPECIAL DEPRECIATION ALLOWANCE FOR CERTAIN REUSE AND 
              RECYCLING PROPERTY.

    (a) In General.--Section 168 of the Internal Revenue Code of 1986 
(relating to accelerated cost recovery system) (as amended by section 
205) is amended by adding at the end the following new subsection:
    ``(n) Special Allowance for Certain Reuse and Recycling Property.--
            ``(1) In general.--In the case of any qualified reuse and 
        recycling property--
                    ``(A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which such 
                property is placed in service shall include an 
                allowance equal to 50 percent of the adjusted basis of 
                the qualified reuse and recycling property, and
                    ``(B) the adjusted basis of the qualified reuse and 
                recycling property shall be reduced by the amount of 
                such deduction before computing the amount otherwise 
                allowable as a depreciation deduction under this 
                chapter for such taxable year and any subsequent 
                taxable year.
            ``(2) Qualified reuse and recycling property.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `qualified reuse and 
                recycling property' means any reuse and recycling 
                property--
                            ``(i) to which this section applies,
                            ``(ii) which has a useful life of at least 
                        5 years,
                            ``(iii) the original use of which commences 
                        with the taxpayer after December 31, 2006, and
                            ``(iv) which is--
                                    ``(I) acquired by purchase (as 
                                defined in section 179(d)(2)) by the 
                                taxpayer after December 31, 2006, but 
                                only if no written binding contract for 
                                the acquisition was in effect before 
                                January 1, 2007, or
                                    ``(II) acquired by the taxpayer 
                                pursuant to a written binding contract 
                                which was entered into after December 
                                31, 2006.
                    ``(B) Exceptions.--
                            ``(i) Alternative depreciation property.--
                        The term `qualified reuse and recycling 
                        property' shall not include any property to 
                        which the alternative depreciation system under 
                        subsection (g) applies, determined without 
                        regard to paragraph (7) of subsection (g) 
                        (relating to election to have system apply).
                            ``(ii) Election out.--If a taxpayer makes 
                        an election under this clause with respect to 
                        any class of property for any taxable year, 
                        this subsection shall not apply to all property 
                        in such class placed in service during such 
                        taxable year.
                    ``(C) Special rule for self-constructed property.--
                In the case of a taxpayer manufacturing, constructing, 
                or producing property for the taxpayer's own use, the 
                requirements of clause (iv) of subparagraph (A) shall 
                be treated as met if the taxpayer begins manufacturing, 
                constructing, or producing the property after December 
                31, 2006.
                    ``(D) Deduction allowed in computing minimum tax.--
                For purposes of determining alternative minimum taxable 
                income under section 55, the deduction under subsection 
                (a) for qualified reuse and recycling property shall be 
                determined under this section without regard to any 
                adjustment under section 56.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Reuse and recycling property.--
                            ``(i) In general.--The term `reuse and 
                        recycling property' means any machinery and 
                        equipment (not including buildings or real 
                        estate), along with all appurtenances thereto, 
                        including software necessary to operate such 
                        equipment, which is used exclusively to recycle 
                        qualified materials.
                            ``(ii) Exclusion.--Such term does not 
                        include--
                                    ``(I) rolling stock or other 
                                equipment used to transport qualified 
                                materials, and
                                    ``(II) equipment used to produce 
                                new products or commodities from 
                                recycled products.
                    ``(B) Qualified materials.--
                            ``(i) In general.--The term `qualified 
                        materials' means scrap plastic, scrap glass, 
                        scrap textiles, scrap rubber (including used 
                        tires), scrap packaging, recovered fiber, scrap 
                        ferrous and nonferrous metals, or electronic 
                        scrap generated by an individual or business.
                            ``(ii) Electronic scrap.--For purposes of 
                        clause (i), the term `electronic scrap' means--
                                    ``(I) any cathode ray tube, flat 
                                panel screen, or similar video display 
                                device with a screen size greater than 
                                4 inches measured diagonally, or
                                    ``(II) any central processing unit.
                    ``(C) Recycling or recycle.--The term `recycling' 
                or `recycle' means that process (including sorting and 
                collecting) by which worn or superfluous materials are 
                manufactured or processed into specification grade 
                commodities that are suitable for use as a replacement 
                or substitute for virgin materials in manufacturing 
                tangible consumer and commercial products, including 
                packaging.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2007.

                 Subtitle B--Revenue Raising Provisions

SEC. 261. DENIAL OF DEDUCTION FOR MAJOR INTEGRATED OIL COMPANIES FOR 
              INCOME ATTRIBUTABLE TO DOMESTIC PRODUCTION OF OIL, 
              NATURAL GAS, OR PRIMARY PRODUCTS THEREOF.

    (a) In General.--Subparagraph (B) of section 199(c)(4) of the 
Internal Revenue Code of 1986 (relating to exceptions) is amended by 
striking ``or'' at the end of clause (ii), by striking the period at 
the end of clause (iii) and inserting ``, or'', and by inserting after 
clause (iii) the following new clause:
                            ``(iv) in the case of any major integrated 
                        oil company (as defined in section 
                        167(h)(5)(B)), the production, refining, 
                        processing, transportation, or distribution of 
                        oil, natural gas, or any primary product 
                        thereof during any taxable year described in 
                        section 167(h)(5)(B).''.
    (b) Primary Product.--Section 199(c)(4)(B) of such Code is amended 
by adding at the end the following flush sentence:
                ``For purposes of clause (iv), the term `primary 
                product' has the same meaning as when used in section 
                927(a)(2)(C), as in effect before its repeal.''.
    (c) Conforming Amendments.--Section 199(c)(4) of such Code is 
amended--
            (1) in subparagraph (A)(i)(III) by striking ``electricity, 
        natural gas,'' and inserting ``electricity'', and
            (2) in subparagraph (B)(ii) by striking ``electricity, 
        natural gas,'' and inserting ``electricity''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 262. ELIMINATION OF THE DIFFERENT TREATMENT OF FOREIGN OIL AND GAS 
              EXTRACTION INCOME AND FOREIGN OIL RELATED INCOME FOR 
              PURPOSES OF THE FOREIGN TAX CREDIT.

    (a) In General.--Subsections (a) and (b) of section 907 (relating 
to special rules in case of foreign oil and gas income) are amended to 
read as follows:
    ``(a) Reduction in Amount Allowed as Foreign Tax Under Section 
901.--In applying section 901, the amount of any foreign oil and gas 
taxes paid or accrued (or deemed to have been paid) during the taxable 
year which would (but for this subsection) be taken into account for 
purposes of section 901 shall be reduced by the amount (if any) by 
which the amount of such taxes exceeds the product of--
            ``(1) the amount of the combined foreign oil and gas income 
        for the taxable year,
            ``(2) multiplied by--
                    ``(A) in the case of a corporation, the percentage 
                which is equal to the highest rate of tax specified 
                under section 11(b), or
                    ``(B) in the case of an individual, a fraction the 
                numerator of which is the tax against which the credit 
                under section 901(a) is taken and the denominator of 
                which is the taxpayer's entire taxable income.
    ``(b) Combined Foreign Oil and Gas Income; Foreign Oil and Gas 
Taxes.--For purposes of this section--
            ``(1) Combined foreign oil and gas income.--The term 
        `combined foreign oil and gas income' means, with respect to 
        any taxable year, the sum of--
                    ``(A) foreign oil and gas extraction income, and
                    ``(B) foreign oil related income.
            ``(2) Foreign oil and gas taxes.--The term `foreign oil and 
        gas taxes' means, with respect to any taxable year, the sum 
        of--
                    ``(A) oil and gas extraction taxes, and
                    ``(B) any income, war profits, and excess profits 
                taxes paid or accrued (or deemed to have been paid or 
                accrued under section 902 or 960) during the taxable 
                year with respect to foreign oil related income 
                (determined without regard to subsection (c)(4)) or 
                loss which would be taken into account for purposes of 
                section 901 without regard to this section.''.
    (b) Recapture of Foreign Oil and Gas Losses.--Paragraph (4) of 
section 907(c) (relating to recapture of foreign oil and gas extraction 
losses by recharacterizing later extraction income) is amended to read 
as follows:
            ``(4) Recapture of foreign oil and gas losses by 
        recharacterizing later combined foreign oil and gas income.--
                    ``(A) In general.--The combined foreign oil and gas 
                income of a taxpayer for a taxable year (determined 
                without regard to this paragraph) shall be reduced--
                            ``(i) first by the amount determined under 
                        subparagraph (B), and
                            ``(ii) then by the amount determined under 
                        subparagraph (C).
                The aggregate amount of such reductions shall be 
                treated as income (from sources without the United 
                States) which is not combined foreign oil and gas 
                income.
                    ``(B) Reduction for pre-2008 foreign oil extraction 
                losses.--The reduction under this paragraph shall be 
                equal to the lesser of--
                            ``(i) the foreign oil and gas extraction 
                        income of the taxpayer for the taxable year 
                        (determined without regard to this paragraph), 
                        or
                            ``(ii) the excess of--
                                    ``(I) the aggregate amount of 
                                foreign oil extraction losses for 
                                preceding taxable years beginning after 
                                December 31, 1982, and before January 
                                1, 2008, over
                                    ``(II) so much of such aggregate 
                                amount as was recharacterized under 
                                this paragraph (as in effect before and 
                                after the date of the enactment of the 
                                Energy Advancement and Investment Act 
                                of 2007) for preceding taxable years 
                                beginning after December 31, 1982.
                    ``(C) Reduction for post-2007 foreign oil and gas 
                losses.--The reduction under this paragraph shall be 
                equal to the lesser of--
                            ``(i) the combined foreign oil and gas 
                        income of the taxpayer for the taxable year 
                        (determined without regard to this paragraph), 
                        reduced by an amount equal to the reduction 
                        under subparagraph (A) for the taxable year, or
                            ``(ii) the excess of--
                                    ``(I) the aggregate amount of 
                                foreign oil and gas losses for 
                                preceding taxable years beginning after 
                                December 31, 2007, over
                                    ``(II) so much of such aggregate 
                                amount as was recharacterized under 
                                this paragraph for preceding taxable 
                                years beginning after December 31, 
                                2007.
                    ``(D) Foreign oil and gas loss defined.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the term `foreign oil and gas loss' 
                        means the amount by which--
                                    ``(I) the gross income for the 
                                taxable year from sources without the 
                                United States and its possessions 
                                (whether or not the taxpayer chooses 
                                the benefits of this subpart for such 
                                taxable year) taken into account in 
                                determining the combined foreign oil 
                                and gas income for such year, is 
                                exceeded by
                                    ``(II) the sum of the deductions 
                                properly apportioned or allocated 
                                thereto.
                            ``(ii) Net operating loss deduction not 
                        taken into account.--For purposes of clause 
                        (i), the net operating loss deduction allowable 
                        for the taxable year under section 172(a) shall 
                        not be taken into account.
                            ``(iii) Expropriation and casualty losses 
                        not taken into account.--For purposes of clause 
                        (i), there shall not be taken into account--
                                    ``(I) any foreign expropriation 
                                loss (as defined in section 172(h) (as 
                                in effect on the day before the date of 
                                the enactment of the Revenue 
                                Reconciliation Act of 1990)) for the 
                                taxable year, or
                                    ``(II) any loss for the taxable 
                                year which arises from fire, storm, 
                                shipwreck, or other casualty, or from 
                                theft,
                        to the extent such loss is not compensated for 
                        by insurance or otherwise.
                            ``(iv) Foreign oil extraction loss.--For 
                        purposes of subparagraph (B)(ii)(I), foreign 
                        oil extraction losses shall be determined under 
                        this paragraph as in effect on the day before 
                        the date of the enactment of the Energy 
                        Advancement and Investment Act of 2007.''.
    (c) Carryback and Carryover of Disallowed Credits.--Section 907(f) 
(relating to carryback and carryover of disallowed credits) is 
amended--
            (1) by striking ``oil and gas extraction taxes'' each place 
        it appears and inserting ``foreign oil and gas taxes'', and
            (2) by adding at the end the following new paragraph:
            ``(4) Transition rules for pre-2008 and 2008 disallowed 
        credits.--
                    ``(A) Pre-2008 credits.--In the case of any unused 
                credit year beginning before January 1, 2008, this 
                subsection shall be applied to any unused oil and gas 
                extraction taxes carried from such unused credit year 
                to a year beginning after December 31, 2007--
                            ``(i) by substituting `oil and gas 
                        extraction taxes' for `foreign oil and gas 
                        taxes' each place it appears in paragraphs (1), 
                        (2), and (3), and
                            ``(ii) by computing, for purposes of 
                        paragraph (2)(A), the limitation under 
                        subparagraph (A) for the year to which such 
                        taxes are carried by substituting `foreign oil 
                        and gas extraction income' for `foreign oil and 
                        gas income' in subsection (a).
                    ``(B) 2008 credits.--In the case of any unused 
                credit year beginning in 2008, the amendments made to 
                this subsection by the Energy Advancement and 
                Investment Act of 2007 shall be treated as being in 
                effect for any preceding year beginning before January 
                1, 2008, solely for purposes of determining how much of 
                the unused foreign oil and gas taxes for such unused 
                credit year may be deemed paid or accrued in such 
                preceding year.''.
    (d) Conforming Amendment.--Section 6501(i) is amended by striking 
``oil and gas extraction taxes'' and inserting ``foreign oil and gas 
taxes''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 263. INCREASE AND EXTENSION OF OIL SPILL LIABILITY TRUST FUND TAX.

    (a) Increase in Rate.--
            (1) In general.--Section 4611(c)(2)(B) (relating to rates) 
        is amended by striking ``5 cents'' and inserting ``10 cents''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply on and after the first day of the first calendar 
        quarter beginning more than 60 days after the date of the 
        enactment of this Act.
    (b) Extension.--
            (1) In general.--Section 4611(f) (relating to application 
        of Oil Spill Liability Trust Fund financing rate) is amended by 
        striking paragraphs (2) and (3) and inserting the following new 
        paragraph:
            ``(2) Termination.--The Oil Spill Liability Trust Fund 
        financing rate shall not apply after December 31, 2017.''.
            (2) Conforming amendment.--Section 4611(f)(1) is amended by 
        striking ``paragraphs (2) and (3)'' and inserting ``paragraph 
        (2)''.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act.

SEC. 264. LIMITATION ON DRAWBACK CLAIMED FOR AMOUNTS DEPOSITED INTO THE 
              OIL SPILL LIABILITY TRUST FUND.

    Section 313(j) of the Tariff Act of 1930 (19 U.S. C. 1313(j)) is 
amended by adding at the end the following new paragraph:
            ``(5) Limitation on certain drawbacks.--Any tax or fee 
        imposed under section 4611 of the Internal Revenue Code of 1986 
        for deposit in the Oil Spill Liability Trust Fund pursuant to 
        section 9509 of such Code shall not be eligible for refund as 
        drawback under this section.''.

SEC. 265. TAX ON CRUDE OIL AND NATURAL GAS PRODUCED FROM THE OUTER 
              CONTINENTAL SHELF IN THE GULF OF MEXICO.

    (a) In General.--Subtitle E (relating to alcohol, tobacco, and 
certain other excise taxes) is amended by adding at the end the 
following new chapter:

 ``CHAPTER 56--TAX ON SEVERANCE OF CRUDE OIL AND NATURAL GAS FROM THE 
             OUTER CONTINENTAL SHELF IN THE GULF OF MEXICO

``Sec. 5896. Imposition of tax.
``Sec. 5897. Taxable crude oil or natural gas and removal price.
``Sec. 5898. Special rules and definitions.

``SEC. 5896. IMPOSITION OF TAX.

    ``(a) In General.--In addition to any other tax imposed under this 
title, there is hereby imposed a tax equal to 13 percent of the removal 
price of any taxable crude oil or natural gas removed from the premises 
during any taxable period.
    ``(b) Credit for Federal Royalties Paid.--
            ``(1) In general.--There shall be allowed as a credit 
        against the tax imposed by subsection (a) with respect to the 
        production of any taxable crude oil or natural gas an amount 
        equal to the aggregate amount of royalties paid under Federal 
        law with respect to such production.
            ``(2) Limitation.--The aggregate amount of credits allowed 
        under paragraph (1) to any taxpayer for any taxable period 
        shall not exceed the amount of tax imposed by subsection (a) 
        for such taxable period.
    ``(c) Tax Paid by Producer.--The tax imposed by this section shall 
be paid by the producer of the taxable crude oil or natural gas.

``SEC. 5897. TAXABLE CRUDE OIL OR NATURAL GAS AND REMOVAL PRICE.

    ``(a) Taxable Crude Oil or Natural Gas.--For purposes of this 
chapter, the term `taxable crude oil or natural gas' means crude oil or 
natural gas which is produced from Federal submerged lands on the outer 
Continental Shelf in the Gulf of Mexico pursuant to a lease entered 
into with the United States which authorizes the production.
    ``(b) Removal Price.--For purposes of this chapter--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `removal price' means--
                    ``(A) in the case of taxable crude oil, the amount 
                for which a barrel of such crude oil is sold, and
                    ``(B) in the case of taxable natural gas, the 
                amount per 1,000 cubic feet for which such natural gas 
                is sold.
            ``(2) Sales between related persons.--In the case of a sale 
        between related persons, the removal price shall not be less 
        than the constructive sales price for purposes of determining 
        gross income from the property under section 613.
            ``(3) Oil or gas removed from property before sale.--If 
        crude oil or natural gas is removed from the property before it 
        is sold, the removal price shall be the constructive sales 
        price for purposes of determining gross income from the 
        property under section 613.
            ``(4) Refining begun on property.--If the manufacture or 
        conversion of crude oil into refined products begins before 
        such oil is removed from the property--
                    ``(A) such oil shall be treated as removed on the 
                day such manufacture or conversion begins, and
                    ``(B) the removal price shall be the constructive 
                sales price for purposes of determining gross income 
                from the property under section 613.
            ``(5) Property.--The term `property' has the meaning given 
        such term by section 614.

``SEC. 5898. SPECIAL RULES AND DEFINITIONS.

    ``(a) Administrative Requirements.--
            ``(1) Withholding and deposit of tax.--The Secretary shall 
        provide for the withholding and deposit of the tax imposed 
        under section 5896 on a quarterly basis.
            ``(2) Records and information.--Each taxpayer liable for 
        tax under section 5896 shall keep such records, make such 
        returns, and furnish such information (to the Secretary and to 
        other persons having an interest in the taxable crude oil or 
        natural gas) with respect to such oil as the Secretary may by 
        regulations prescribe.
            ``(3) Taxable periods; return of tax.--
                    ``(A) Taxable period.--Except as provided by the 
                Secretary, each calendar year shall constitute a 
                taxable period.
                    ``(B) Returns.--The Secretary shall provide for the 
                filing, and the time for filing, of the return of the 
                tax imposed under section 5896.
    ``(b) Definitions.--For purposes of this chapter--
            ``(1) Producer.--The term `producer' means the holder of 
        the economic interest with respect to the crude oil or natural 
        gas.
            ``(2) Crude oil.--The term `crude oil' includes crude oil 
        condensates and natural gasoline.
            ``(3) Premises and crude oil product.--The terms `premises' 
        and `crude oil product' have the same meanings as when used for 
        purposes of determining gross income from the property under 
        section 613.
    ``(c) Adjustment of Removal Price.--In determining the removal 
price of oil or natural gas from a property in the case of any 
transaction, the Secretary may adjust the removal price to reflect 
clearly the fair market value of oil or natural gas removed.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
chapter.''.
    (b) Deductibility of Tax.--The first sentence of section 164(a) 
(relating to deduction for taxes) is amended by inserting after 
paragraph (5) the following new paragraph:
            ``(6) The tax imposed by section 5896(a) (after application 
        of section 5896(b)) on the severance of crude oil or natural 
        gas from the outer Continental Shelf in the Gulf of Mexico.''.
    (c) Clerical Amendment.--The table of chapters for subtitle E is 
amended by adding at the end the following new item:

                              ``Chapter 56. Tax on severance of crude 
                                        oil and natural gas from the 
                                        outer Continental Shelf in the 
                                        Gulf of Mexico.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to crude oil or natural gas removed after the date of the 
enactment of this Act.

SEC. 266. TAXATION OF TAXABLE FUELS IN FOREIGN TRADE ZONES.

    (a) Tax Imposed on Removals and Entries in Foreign Trade Zones.--
            (1) In general.--Subsection (a) of section 4083 (relating 
        to definitions) is amended by adding at the end the following 
        new paragraph:
            ``(4) United states.--The term `United States' includes any 
        foreign trade zone or bonded warehouse located in the United 
        States.''.
            (2) Conforming amendment.--Section 4081(a)(1)(A) (relating 
        to imposition of tax) is amended--
                    (A) in clause (i), by inserting ``in the United 
                States'' after ``refinery''; and
                    (B) in clause (ii), by inserting ``in the United 
                States'' after ``terminal''.
    (b) Treatment of Taxable Fuel in Foreign Trade Zones.--Paragraph 
(2) of section 81c(a) of title 19, United States Code, is amended by 
inserting ``(other than the provisions relating to taxable fuel (as 
defined under section 4083(a) of the Internal Revenue Code of 1986))'' 
after ``thereunder''.
    (c) Effective Dates.--
            (1) Subsection (a).--The amendments made by subsection (a) 
        shall apply to removals and entries after December 31, 2007.
            (2) Subsection (b).--The amendment made by subsection (b) 
        shall take effect on January 1, 2008.

SEC. 267. CLARIFICATION OF PENALTY FOR SALE OF FUEL FAILING TO MEET EPA 
              REGULATIONS.

    (a) In General.--Subsection (a) of section 6720A (relating to 
penalty with respect to certain adulterated fuels) is amended by 
striking ``applicable EPA regulations (as defined in section 
45H(c)(3))'' and inserting ``the requirements for diesel fuel under 
section 211 of the Clean Air Act, as determined by the Secretary,''.
    (b) Effective Date.--The amendments made by this section shall 
apply to any transfer, sale, or holding out for sale or resale 
occurring after the date of the enactment of this Act.

SEC. 268. CLARIFICATION OF ELIGIBILITY FOR CERTAIN FUELS CREDITS FOR 
              FUEL WITH INSUFFICIENT NEXUS TO THE UNITED STATES.

    (a) In General.--
            (1) Alcohol credit.--Subsection (d) of section 40 is 
        amended by adding at the end the following new paragraph:
            ``(6) Limitation to alcohol with connection to the united 
        states.--
                    ``(A) Alcohol credit.--No alcohol credit shall be 
                determined under this section with respect to any 
                alcohol unless such alcohol is produced in the United 
                States for consumption in the United States or entered 
                into the United States for consumption in the United 
                States.
                    ``(B) Alcohol mixture credit.--No alcohol mixture 
                credit shall be determined under this section with 
                respect to any mixture unless such mixture is produced 
                in the United States for consumption in the United 
                States or entered into the United States for 
                consumption in the United States.
                    ``(C) No credits for alcohol destined for export.--
                No credit (other than the small ethanol producer 
                credit) shall be determined under this section with 
                respect to any mixture or alcohol if such mixture or 
                alcohol is destined for export from the United States 
                (as determined by the Secretary).
                    ``(D) Special rule for small producer credits.--No 
                small ethanol producer credit, small cellulosic alcohol 
                producer credit, or small fossil free alcohol producer 
                credit shall be determined under this section with 
                respect to any alcohol unless such alcohol is produced 
                in the United States.''.
            (2) Biodiesel credit.--Subsection (d) of section 40A is 
        amended by adding at the end the following new paragraph:
            ``(5) Limitation to biodiesel with connection to the united 
        states.--
                    ``(A) Biodiesel credit.--No biodiesel credit shall 
                be determined under this section with respect to any 
                biodiesel unless such biodiesel is produced in the 
                United States for consumption in the United States or 
                is entered into the United States for consumption in 
                the United States.
                    ``(B) Biodiesel mixture credit.--No biodiesel 
                mixture credit shall be determined under this section 
                with respect to any mixture unless such mixture is 
                produced in the United States for consumption in the 
                United States or is entered into the United States for 
                consumption in the United States.
                    ``(C) No credits for biodiesel destined for 
                export.--No credit (other than the small agri-biodiesel 
                producer credit) shall be determined under this section 
                with respect to any mixture or biodiesel if such 
                mixture or biodiesel is destined for export from the 
                United States (as determined by the Secretary).
                    ``(D) Special rule for small agri-biodiesel 
                producer credit.--No small agri-biodiesel producer 
                credit shall be determined under this section with 
                respect to any agri-biodiesel unless such agri-
                biodiesel is produced in the United States.''.
            (3) Excise tax credits.--Section 6426, as amended by 
        section 233, is amended by adding at the end the following new 
        subsection:
    ``(i) Limitation to Fuels With Connection to the United States.--
            ``(1) Mixture credits.--No credit shall be determined under 
        this section with respect to any mixture unless such mixture is 
        produced in the United States for consumption in the United 
        States or is entered into the United States for consumption in 
        the United States.
            ``(2) Alternative fuel credit.--No alternative fuel credit 
        shall be determined under this section with respect to any 
        alternative fuel unless such alternative fuel is produced in 
        the United States for consumption in the United States or is 
        entered into the United States for consumption in the United 
        States.
            ``(3) No credits for fuels destined for export.--No credit 
        shall be determined under this section with respect to any 
        mixture or alternative fuel if such mixture or alternative fuel 
        is destined for export from the United States (as determined by 
        the Secretary).''.
            (4) Payments.--Subsection (e) of section 6427 is amended by 
        redesignating paragraph (5), as amended by this Act, as 
        paragraph (6) and by inserting after paragraph (4) the 
        following new paragraph:
            ``(5) Limitation to fuels with connection to the united 
        states.--No amount shall be payable under paragraph (1) or (2) 
        with respect to any mixture or alternative fuel if credit is 
        not allowed with respect to such mixture or alternative fuel by 
        reason of section 6426(i).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to fuel sold or used after the date of the enactment of this Act.

SEC. 269. TREATMENT OF QUALIFIED ALCOHOL FUEL MIXTURES AND QUALIFIED 
              BIODIESEL FUEL MIXTURES AS TAXABLE FUELS.

    (a) In General.--Subparagraph (A) of section 4083(a)(3) (relating 
to diesel fuel) is amended by striking ``and'' at the end of clause 
(ii), by redesignating clause (iii) as clause (v), and inserting after 
clause (ii) the following new clauses:
                            ``(iii) any qualified mixture (as defined 
                        in section 40(b)(1)(B)) which is a mixture of 
                        alcohol and special fuel,
                            ``(iv) any qualified biodiesel mixture (as 
                        defined in section 40A(b)(1)(B)), and''.
    (b) Effective Date.--The amendments made by this section shall 
apply to fuels removed, entered, or sold after December 31, 2007.

SEC. 270. CALCULATION OF VOLUME OF ALCOHOL FOR FUEL CREDITS.

    (a) In General.--Paragraph (4) of section 40(d) (relating to volume 
of alcohol) is amended by striking ``the volume of alcohol'' and all 
that follows and inserting ``the volume of alcohol shall not include 
any denaturant added to such alcohol.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to fuel sold or used after December 31, 2007.

SEC. 271. BULK TRANSFER EXCEPTION NOT TO APPLY TO FINISHED GASOLINE.

    (a) In General.--Subparagraph (B) of section 4081(a)(1) (relating 
to tax on removal, entry, or sale) is amended by adding at the end the 
following new clause:
                            ``(iii) Exception for finished gasoline.--
                        Clause (i) shall not apply to any gasoline 
                        which meets the requirements for gasoline under 
                        section 211 of the Clean Air Act.''.
    (b) Exception to Tax on Finished Gasoline for Prior Taxable 
Removals.--Paragraph (1) of section 4081(a) is amended by adding at the 
end the following new subparagraph:
                    ``(C) Exemption for previously taxed finished 
                gasoline.--The tax imposed by this paragraph shall not 
                apply to the removal of gasoline described in 
                subparagraph (B)(iii) from any terminal if there was a 
                prior taxable removal or entry of such fuel under 
                clause (i), (ii), or (iii) of subparagraph (A). The 
                preceding sentence shall not apply to the volume of any 
                product added to such gasoline at the terminal unless 
                there was a prior taxable removal or entry of such 
                product under clause (i), (ii), or (iii) of 
                subparagraph (A).''.
    (c) Effective Date.--The amendment made by this section shall apply 
to fuel removed, entered, or sold after December 31, 2007.

SEC. 272. APPLICATION OF RULES TREATING INVERTED CORPORATIONS AS 
              DOMESTIC CORPORATIONS TO CERTAIN TRANSACTIONS OCCURRING 
              AFTER MARCH 20, 2002.

    (a) In General.--Section 7874(b) (relating to inverted corporations 
treated as domestic corporations) is amended to read as follows:
    ``(b) Inverted Corporations Treated as Domestic Corporations.--
            ``(1) In general.--Notwithstanding section 7701(a)(4), a 
        foreign corporation shall be treated for purposes of this title 
        as a domestic corporation if such corporation would be a 
        surrogate foreign corporation if subsection (a)(2) were applied 
        by substituting `80 percent' for `60 percent'.
            ``(2) Special rule for certain transactions occurring after 
        march 20, 2002.--
                    ``(A) In general.--If--
                            ``(i) paragraph (1) does not apply to a 
                        foreign corporation, but
                            ``(ii) paragraph (1) would apply to such 
                        corporation if, in addition to the substitution 
                        under paragraph (1), subsection (a)(2) were 
                        applied by substituting `March 20, 2002' for 
                        `March 4, 2003' each place it appears,
                then paragraph (1) shall apply to such corporation but 
                only with respect to taxable years of such corporation 
                beginning after December 31, 2006.
                    ``(B) Special rules.--Subject to such rules as the 
                Secretary may prescribe, in the case of a corporation 
                to which paragraph (1) applies by reason of this 
                paragraph--
                            ``(i) the corporation shall be treated, as 
                        of the close of its last taxable year beginning 
                        before January 1, 2007, as having transferred 
                        all of its assets, liabilities, and earnings 
                        and profits to a domestic corporation in a 
                        transaction with respect to which no tax is 
                        imposed under this title,
                            ``(ii) the bases of the assets transferred 
                        in the transaction to the domestic corporation 
                        shall be the same as the bases of the assets in 
                        the hands of the foreign corporation, subject 
                        to any adjustments under this title for built-
                        in losses,
                            ``(iii) the basis of the stock of any 
                        shareholder in the domestic corporation shall 
                        be the same as the basis of the stock of the 
                        shareholder in the foreign corporation for 
                        which it is treated as exchanged, and
                            ``(iv) the transfer of any earnings and 
                        profits by reason of clause (i) shall be 
                        disregarded in determining any deemed dividend 
                        or foreign tax creditable to the domestic 
                        corporation with respect to such transfer.
                    ``(C) Regulations.--The Secretary may prescribe 
                such regulations as may be necessary or appropriate to 
                carry out this paragraph, including regulations to 
                prevent the avoidance of the purposes of this 
                paragraph.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2006.

SEC. 273. MODIFICATION OF EFFECTIVE DATE OF LEASING PROVISIONS OF THE 
              AMERICAN JOBS CREATION ACT OF 2004.

    (a) Leases to Foreign Entities.--Section 849(b) of the American 
Jobs Creation Act of 2004 is amended by adding at the end the following 
new paragraph:
            ``(5) Leases to foreign entities.--In the case of tax-
        exempt use property leased to a tax-exempt entity which is a 
        foreign person or entity, the amendments made by this part 
        shall apply to taxable years beginning after December 31, 2006, 
        with respect to leases entered into on or before March 12, 
        2004.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect as if included in the enactment of the American Jobs Creation 
Act of 2004.

SEC. 274. REVISION OF TAX RULES ON EXPATRIATION OF INDIVIDUALS.

    (a) In General.--Subpart A of part II of subchapter N of chapter 1 
is amended by inserting after section 877 the following new section:

``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

    ``(a) General Rules.--For purposes of this subtitle--
            ``(1) Mark to market.--Except as provided in subsections 
        (d) and (f), all property of a covered expatriate to whom this 
        section applies shall be treated as sold on the day before the 
        expatriation date for its fair market value.
            ``(2) Recognition of gain or loss.--In the case of any sale 
        under paragraph (1)--
                    ``(A) notwithstanding any other provision of this 
                title, any gain arising from such sale shall be taken 
                into account for the taxable year of the sale, and
                    ``(B) any loss arising from such sale shall be 
                taken into account for the taxable year of the sale to 
                the extent otherwise provided by this title, except 
                that section 1091 shall not apply to any such loss.
        Proper adjustment shall be made in the amount of any gain or 
        loss subsequently realized for gain or loss taken into account 
        under the preceding sentence.
            ``(3) Exclusion for certain gain.--
                    ``(A) In general.--The amount which, but for this 
                paragraph, would be includible in the gross income of 
                any individual by reason of this section shall be 
                reduced (but not below zero) by $600,000. For purposes 
                of this paragraph, allocable expatriation gain taken 
                into account under subsection (f)(2) shall be treated 
                in the same manner as an amount required to be 
                includible in gross income.
                    ``(B) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of an 
                        expatriation date occurring in any calendar 
                        year after 2007, the $600,000 amount under 
                        subparagraph (A) shall be increased by an 
                        amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for such calendar year, 
                                determined by substituting `calendar 
                                year 2006' for `calendar year 1992' in 
                                subparagraph (B) thereof.
                            ``(ii) Rounding rules.--If any amount after 
                        adjustment under clause (i) is not a multiple 
                        of $1,000, such amount shall be rounded to the 
                        next lower multiple of $1,000.
            ``(4) Election to continue to be taxed as united states 
        citizen.--
                    ``(A) In general.--If a covered expatriate elects 
                the application of this paragraph--
                            ``(i) this section (other than this 
                        paragraph and subsection (i)) shall not apply 
                        to the expatriate, but
                            ``(ii) in the case of property to which 
                        this section would apply but for such election, 
                        the expatriate shall be subject to tax under 
                        this title in the same manner as if the 
                        individual were a United States citizen.
                    ``(B) Requirements.--Subparagraph (A) shall not 
                apply to an individual unless the individual--
                            ``(i) provides security for payment of tax 
                        in such form and manner, and in such amount, as 
                        the Secretary may require,
                            ``(ii) consents to the waiver of any right 
                        of the individual under any treaty of the 
                        United States which would preclude assessment 
                        or collection of any tax which may be imposed 
                        by reason of this paragraph, and
                            ``(iii) complies with such other 
                        requirements as the Secretary may prescribe.
                    ``(C) Election.--An election under subparagraph (A) 
                shall apply to all property to which this section would 
                apply but for the election and, once made, shall be 
                irrevocable. Such election shall also apply to property 
                the basis of which is determined in whole or in part by 
                reference to the property with respect to which the 
                election was made.
    ``(b) Election To Defer Tax.--
            ``(1) In general.--If the taxpayer elects the application 
        of this subsection with respect to any property treated as sold 
        by reason of subsection (a), the payment of the additional tax 
        attributable to such property shall be postponed until the due 
        date of the return for the taxable year in which such property 
        is disposed of (or, in the case of property disposed of in a 
        transaction in which gain is not recognized in whole or in 
        part, until such other date as the Secretary may prescribe).
            ``(2) Determination of tax with respect to property.--For 
        purposes of paragraph (1), the additional tax attributable to 
        any property is an amount which bears the same ratio to the 
        additional tax imposed by this chapter for the taxable year 
        solely by reason of subsection (a) as the gain taken into 
        account under subsection (a) with respect to such property 
        bears to the total gain taken into account under subsection (a) 
        with respect to all property to which subsection (a) applies.
            ``(3) Termination of postponement.--No tax may be postponed 
        under this subsection later than the due date for the return of 
        tax imposed by this chapter for the taxable year which includes 
        the date of death of the expatriate (or, if earlier, the time 
        that the security provided with respect to the property fails 
        to meet the requirements of paragraph (4), unless the taxpayer 
        corrects such failure within the time specified by the 
        Secretary).
            ``(4) Security.--
                    ``(A) In general.--No election may be made under 
                paragraph (1) with respect to any property unless 
                adequate security is provided to the Secretary with 
                respect to such property.
                    ``(B) Adequate security.--For purposes of 
                subparagraph (A), security with respect to any property 
                shall be treated as adequate security if--
                            ``(i) it is a bond in an amount equal to 
                        the deferred tax amount under paragraph (2) for 
                        the property, or
                            ``(ii) the taxpayer otherwise establishes 
                        to the satisfaction of the Secretary that the 
                        security is adequate.
            ``(5) Waiver of certain rights.--No election may be made 
        under paragraph (1) unless the taxpayer consents to the waiver 
        of any right under any treaty of the United States which would 
        preclude assessment or collection of any tax imposed by reason 
        of this section.
            ``(6) Elections.--An election under paragraph (1) shall 
        only apply to property described in the election and, once 
        made, is irrevocable. An election may be made under paragraph 
        (1) with respect to an interest in a trust with respect to 
        which gain is required to be recognized under subsection 
        (f)(1).
            ``(7) Interest.--For purposes of section 6601--
                    ``(A) the last date for the payment of tax shall be 
                determined without regard to the election under this 
                subsection, and
                    ``(B) section 6621(a)(2) shall be applied by 
                substituting `5 percentage points' for `3 percentage 
                points' in subparagraph (B) thereof.
    ``(c) Covered Expatriate.--For purposes of this section--
            ``(1) In general.--Except as provided in paragraph (2), the 
        term `covered expatriate' means an expatriate.
            ``(2) Exceptions.--An individual shall not be treated as a 
        covered expatriate if--
                    ``(A) the individual--
                            ``(i) became at birth a citizen of the 
                        United States and a citizen of another country 
                        and, as of the expatriation date, continues to 
                        be a citizen of, and is taxed as a resident of, 
                        such other country, and
                            ``(ii) has not been a resident of the 
                        United States (as defined in section 
                        7701(b)(1)(A)(ii)) during the 5 taxable years 
                        ending with the taxable year during which the 
                        expatriation date occurs, or
                    ``(B)(i) the individual's relinquishment of United 
                States citizenship occurs before such individual 
                attains age 18\1/2\, and
                    ``(ii) the individual has been a resident of the 
                United States (as so defined) for not more than 5 
                taxable years before the date of relinquishment.
    ``(d) Exempt Property; Special Rules for Pension Plans.--
            ``(1) Exempt property.--This section shall not apply to the 
        following:
                    ``(A) United states real property interests.--Any 
                United States real property interest (as defined in 
                section 897(c)(1)), other than stock of a United States 
                real property holding corporation which does not, on 
                the day before the expatriation date, meet the 
                requirements of section 897(c)(2).
                    ``(B) Specified property.--Any property or interest 
                in property not described in subparagraph (A) which the 
                Secretary specifies in regulations.
            ``(2) Special rules for certain retirement plans.--
                    ``(A) In general.--If a covered expatriate holds on 
                the day before the expatriation date any interest in a 
                retirement plan to which this paragraph applies--
                            ``(i) such interest shall not be treated as 
                        sold for purposes of subsection (a)(1), but
                            ``(ii) an amount equal to the present value 
                        of the expatriate's nonforfeitable accrued 
                        benefit shall be treated as having been 
                        received by such individual on such date as a 
                        distribution under the plan.
                    ``(B) Treatment of subsequent distributions.--In 
                the case of any distribution on or after the 
                expatriation date to or on behalf of the covered 
                expatriate from a plan from which the expatriate was 
                treated as receiving a distribution under subparagraph 
                (A), the amount otherwise includible in gross income by 
                reason of the subsequent distribution shall be reduced 
                by the excess of the amount includible in gross income 
                under subparagraph (A) over any portion of such amount 
                to which this subparagraph previously applied.
                    ``(C) Treatment of subsequent distributions by 
                plan.--For purposes of this title, a retirement plan to 
                which this paragraph applies, and any person acting on 
                the plan's behalf, shall treat any subsequent 
                distribution described in subparagraph (B) in the same 
                manner as such distribution would be treated without 
                regard to this paragraph.
                    ``(D) Applicable plans.--This paragraph shall apply 
                to--
                            ``(i) any qualified retirement plan (as 
                        defined in section 4974(c)),
                            ``(ii) an eligible deferred compensation 
                        plan (as defined in section 457(b)) of an 
                        eligible employer described in section 
                        457(e)(1)(A), and
                            ``(iii) to the extent provided in 
                        regulations, any foreign pension plan or 
                        similar retirement arrangements or programs.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Expatriate.--The term `expatriate' means--
                    ``(A) any United States citizen who relinquishes 
                citizenship, and
                    ``(B) any long-term resident of the United States 
                who--
                            ``(i) ceases to be a lawful permanent 
                        resident of the United States (within the 
                        meaning of section 7701(b)(6)), or
                            ``(ii) commences to be treated as a 
                        resident of a foreign country under the 
                        provisions of a tax treaty between the United 
                        States and the foreign country and who does not 
                        waive the benefits of such treaty applicable to 
                        residents of the foreign country.
            ``(2) Expatriation date.--The term `expatriation date' 
        means--
                    ``(A) the date an individual relinquishes United 
                States citizenship, or
                    ``(B) in the case of a long-term resident of the 
                United States, the date of the event described in 
                clause (i) or (ii) of paragraph (1)(B).
            ``(3) Relinquishment of citizenship.--A citizen shall be 
        treated as relinquishing United States citizenship on the 
        earliest of--
                    ``(A) the date the individual renounces such 
                individual's United States nationality before a 
                diplomatic or consular officer of the United States 
                pursuant to paragraph (5) of section 349(a) of the 
                Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
                    ``(B) the date the individual furnishes to the 
                United States Department of State a signed statement of 
                voluntary relinquishment of United States nationality 
                confirming the performance of an act of expatriation 
                specified in paragraph (1), (2), (3), or (4) of section 
                349(a) of the Immigration and Nationality Act (8 U.S.C. 
                1481(a)(1)-(4)),
                    ``(C) the date the United States Department of 
                State issues to the individual a certificate of loss of 
                nationality, or
                    ``(D) the date a court of the United States cancels 
                a naturalized citizen's certificate of naturalization.
        Subparagraph (A) or (B) shall not apply to any individual 
        unless the renunciation or voluntary relinquishment is 
        subsequently approved by the issuance to the individual of a 
        certificate of loss of nationality by the United States 
        Department of State.
            ``(4) Long-term resident.--The term `long-term resident' 
        has the meaning given to such term by section 877(e)(2).
    ``(f) Special Rules Applicable to Beneficiaries' Interests in 
Trust.--
            ``(1) In general.--Except as provided in paragraph (2), if 
        an individual is determined under paragraph (3) to hold an 
        interest in a trust on the day before the expatriation date--
                    ``(A) the individual shall not be treated as having 
                sold such interest,
                    ``(B) such interest shall be treated as a separate 
                share in the trust, and
                    ``(C)(i) such separate share shall be treated as a 
                separate trust consisting of the assets allocable to 
                such share,
                    ``(ii) the separate trust shall be treated as 
                having sold its assets on the day before the 
                expatriation date for their fair market value and as 
                having distributed all of its assets to the individual 
                as of such time, and
                    ``(iii) the individual shall be treated as having 
                recontributed the assets to the separate trust.
        Subsection (a)(2) shall apply to any income, gain, or loss of 
        the individual arising from a distribution described in 
        subparagraph (C)(ii). In determining the amount of such 
        distribution, proper adjustments shall be made for liabilities 
        of the trust allocable to an individual's share in the trust.
            ``(2) Special rules for interests in qualified trusts.--
                    ``(A) In general.--If the trust interest described 
                in paragraph (1) is an interest in a qualified trust--
                            ``(i) paragraph (1) and subsection (a) 
                        shall not apply, and
                            ``(ii) in addition to any other tax imposed 
                        by this title, there is hereby imposed on each 
                        distribution with respect to such interest a 
                        tax in the amount determined under subparagraph 
                        (B).
                    ``(B) Amount of tax.--The amount of tax under 
                subparagraph (A)(ii) shall be equal to the lesser of--
                            ``(i) the highest rate of tax imposed by 
                        section 1(e) for the taxable year which 
                        includes the day before the expatriation date, 
                        multiplied by the amount of the distribution, 
                        or
                            ``(ii) the balance in the deferred tax 
                        account immediately before the distribution 
                        determined without regard to any increases 
                        under subparagraph (C)(ii) after the 30th day 
                        preceding the distribution.
                    ``(C) Deferred tax account.--For purposes of 
                subparagraph (B)(ii)--
                            ``(i) Opening balance.--The opening balance 
                        in a deferred tax account with respect to any 
                        trust interest is an amount equal to the tax 
                        which would have been imposed on the allocable 
                        expatriation gain with respect to the trust 
                        interest if such gain had been included in 
                        gross income under subsection (a).
                            ``(ii) Increase for interest.--The balance 
                        in the deferred tax account shall be increased 
                        by the amount of interest determined (on the 
                        balance in the account at the time the interest 
                        accrues), for periods after the 90th day after 
                        the expatriation date, by using the rates and 
                        method applicable under section 6621 for 
                        underpayments of tax for such periods, except 
                        that section 6621(a)(2) shall be applied by 
                        substituting `5 percentage points' for `3 
                        percentage points' in subparagraph (B) thereof.
                            ``(iii) Decrease for taxes previously 
                        paid.--The balance in the tax deferred account 
                        shall be reduced--
                                    ``(I) by the amount of taxes 
                                imposed by subparagraph (A) on any 
                                distribution to the person holding the 
                                trust interest, and
                                    ``(II) in the case of a person 
                                holding a nonvested interest, to the 
                                extent provided in regulations, by the 
                                amount of taxes imposed by subparagraph 
                                (A) on distributions from the trust 
                                with respect to nonvested interests not 
                                held by such person.
                    ``(D) Allocable expatriation gain.--For purposes of 
                this paragraph, the allocable expatriation gain with 
                respect to any beneficiary's interest in a trust is the 
                amount of gain which would be allocable to such 
                beneficiary's vested and nonvested interests in the 
                trust if the beneficiary held directly all assets 
                allocable to such interests.
                    ``(E) Tax deducted and withheld.--
                            ``(i) In general.--The tax imposed by 
                        subparagraph (A)(ii) shall be deducted and 
                        withheld by the trustees from the distribution 
                        to which it relates.
                            ``(ii) Exception where failure to waive 
                        treaty rights.--If an amount may not be 
                        deducted and withheld under clause (i) by 
                        reason of the distributee failing to waive any 
                        treaty right with respect to such 
                        distribution--
                                    ``(I) the tax imposed by 
                                subparagraph (A)(ii) shall be imposed 
                                on the trust and each trustee shall be 
                                personally liable for the amount of 
                                such tax, and
                                    ``(II) any other beneficiary of the 
                                trust shall be entitled to recover from 
                                the distributee the amount of such tax 
                                imposed on the other beneficiary.
                    ``(F) Disposition.--If a trust ceases to be a 
                qualified trust at any time, a covered expatriate 
                disposes of an interest in a qualified trust, or a 
                covered expatriate holding an interest in a qualified 
                trust dies, then, in lieu of the tax imposed by 
                subparagraph (A)(ii), there is hereby imposed a tax 
                equal to the lesser of--
                            ``(i) the tax determined under paragraph 
                        (1) as if the day before the expatriation date 
                        were the date of such cessation, disposition, 
                        or death, whichever is applicable, or
                            ``(ii) the balance in the tax deferred 
                        account immediately before such date.
                Such tax shall be imposed on the trust and each trustee 
                shall be personally liable for the amount of such tax 
                and any other beneficiary of the trust shall be 
                entitled to recover from the covered expatriate or the 
                estate the amount of such tax imposed on the other 
                beneficiary.
                    ``(G) Definitions and special rules.--For purposes 
                of this paragraph--
                            ``(i) Qualified trust.--The term `qualified 
                        trust' means a trust which is described in 
                        section 7701(a)(30)(E).
                            ``(ii) Vested interest.--The term `vested 
                        interest' means any interest which, as of the 
                        day before the expatriation date, is vested in 
                        the beneficiary.
                            ``(iii) Nonvested interest.--The term 
                        `nonvested interest' means, with respect to any 
                        beneficiary, any interest in a trust which is 
                        not a vested interest. Such interest shall be 
                        determined by assuming the maximum exercise of 
                        discretion in favor of the beneficiary and the 
                        occurrence of all contingencies in favor of the 
                        beneficiary.
                            ``(iv) Adjustments.--The Secretary may 
                        provide for such adjustments to the bases of 
                        assets in a trust or a deferred tax account, 
                        and the timing of such adjustments, in order to 
                        ensure that gain is taxed only once.
                            ``(v) Coordination with retirement plan 
                        rules.--This subsection shall not apply to an 
                        interest in a trust which is part of a 
                        retirement plan to which subsection (d)(2) 
                        applies.
            ``(3) Determination of beneficiaries' interest in trust.--
                    ``(A) Determinations under paragraph (1).--For 
                purposes of paragraph (1), a beneficiary's interest in 
                a trust shall be based upon all relevant facts and 
                circumstances, including the terms of the trust 
                instrument and any letter of wishes or similar 
                document, historical patterns of trust distributions, 
                and the existence of and functions performed by a trust 
                protector or any similar adviser.
                    ``(B) Other determinations.--For purposes of this 
                section--
                            ``(i) Constructive ownership.--If a 
                        beneficiary of a trust is a corporation, 
                        partnership, trust, or estate, the 
                        shareholders, partners, or beneficiaries shall 
                        be deemed to be the trust beneficiaries for 
                        purposes of this section.
                            ``(ii) Taxpayer return position.--A 
                        taxpayer shall clearly indicate on its income 
                        tax return--
                                    ``(I) the methodology used to 
                                determine that taxpayer's trust 
                                interest under this section, and
                                    ``(II) if the taxpayer knows (or 
                                has reason to know) that any other 
                                beneficiary of such trust is using a 
                                different methodology to determine such 
                                beneficiary's trust interest under this 
                                section.
    ``(g) Termination of Deferrals, etc.--In the case of any covered 
expatriate, notwithstanding any other provision of this title--
            ``(1) any period during which recognition of income or gain 
        is deferred shall terminate on the day before the expatriation 
        date, and
            ``(2) any extension of time for payment of tax shall cease 
        to apply on the day before the expatriation date and the unpaid 
        portion of such tax shall be due and payable at the time and in 
        the manner prescribed by the Secretary.
    ``(h) Imposition of Tentative Tax.--
            ``(1) In general.--If an individual is required to include 
        any amount in gross income under subsection (a) for any taxable 
        year, there is hereby imposed, immediately before the 
        expatriation date, a tax in an amount equal to the amount of 
        tax which would be imposed if the taxable year were a short 
        taxable year ending on the expatriation date.
            ``(2) Due date.--The due date for any tax imposed by 
        paragraph (1) shall be the 90th day after the expatriation 
        date.
            ``(3) Treatment of tax.--Any tax paid under paragraph (1) 
        shall be treated as a payment of the tax imposed by this 
        chapter for the taxable year to which subsection (a) applies.
            ``(4) Deferral of tax.--The provisions of subsection (b) 
        shall apply to the tax imposed by this subsection to the extent 
        attributable to gain includible in gross income by reason of 
        this section.
    ``(i) Special Liens for Deferred Tax Amounts.--
            ``(1) Imposition of lien.--
                    ``(A) In general.--If a covered expatriate makes an 
                election under subsection (a)(4) or (b) which results 
                in the deferral of any tax imposed by reason of 
                subsection (a), the deferred amount (including any 
                interest, additional amount, addition to tax, 
                assessable penalty, and costs attributable to the 
                deferred amount) shall be a lien in favor of the United 
                States on all property of the expatriate located in the 
                United States (without regard to whether this section 
                applies to the property).
                    ``(B) Deferred amount.--For purposes of this 
                subsection, the deferred amount is the amount of the 
                increase in the covered expatriate's income tax which, 
                but for the election under subsection (a)(4) or (b), 
                would have occurred by reason of this section for the 
                taxable year including the expatriation date.
            ``(2) Period of lien.--The lien imposed by this subsection 
        shall arise on the expatriation date and continue until--
                    ``(A) the liability for tax by reason of this 
                section is satisfied or has become unenforceable by 
                reason of lapse of time, or
                    ``(B) it is established to the satisfaction of the 
                Secretary that no further tax liability may arise by 
                reason of this section.
            ``(3) Certain rules apply.--The rules set forth in 
        paragraphs (1), (3), and (4) of section 6324A(d) shall apply 
        with respect to the lien imposed by this subsection as if it 
        were a lien imposed by section 6324A.
    ``(j) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''.
    (b) Inclusion in Income of Gifts and Bequests Received by United 
States Citizens and Residents From Expatriates.--Section 102 (relating 
to gifts, etc. not included in gross income) is amended by adding at 
the end the following new subsection:
    ``(d) Gifts and Inheritances From Covered Expatriates.--
            ``(1) Treatment of gifts and inheritances.--
                    ``(A) In general.--Subsection (a) shall not exclude 
                from gross income the value of any property acquired by 
                gift, bequest, devise, or inheritance from a covered 
                expatriate after the expatriation date.
                    ``(B) Determination of basis.--Notwithstanding 
                sections 1015 or 1022, the basis of any property 
                described in subparagraph (A) in the hands of the donee 
                or the person acquiring such property from the decedent 
                shall be equal to the fair market value of the property 
                at the time of the gift, bequest, devise, or 
                inheritance.
            ``(2) Exceptions for transfers otherwise subject to estate 
        or gift tax.--Paragraph (1) shall not apply to any property if 
        either--
                    ``(A) the gift, bequest, devise, or inheritance 
                is--
                            ``(i) shown on a timely filed return of tax 
                        imposed by chapter 12 as a taxable gift by the 
                        covered expatriate, or
                            ``(ii) included in the gross estate of the 
                        covered expatriate for purposes of chapter 11 
                        and shown on a timely filed return of tax 
                        imposed by chapter 11 of the estate of the 
                        covered expatriate, or
                    ``(B) no such return was timely filed but no such 
                return would have been required to be filed even if the 
                covered expatriate were a citizen or long-term resident 
                of the United States.
            ``(3) Definitions.--For purposes of this subsection, any 
        term used in this subsection which is also used in section 877A 
        shall have the same meaning as when used in section 877A.''.
    (c) Definition of Termination of United States Citizenship.--
Section 7701(a) is amended by adding at the end the following new 
paragraph:
            ``(50) Termination of united states citizenship.--
                    ``(A) In general.--An individual shall not cease to 
                be treated as a United States citizen before the date 
                on which the individual's citizenship is treated as 
                relinquished under section 877A(e)(3).
                    ``(B) Dual citizens.--Under regulations prescribed 
                by the Secretary, subparagraph (A) shall not apply to 
                an individual who became at birth a citizen of the 
                United States and a citizen of another country.''.
    (d) Ineligibility for Visa or Admission to United States.--
            (1) In general.--Section 212(a)(10)(E) of the Immigration 
        and Nationality Act (8 U.S.C. 1182(a)(10)(E)) is amended to 
        read as follows:
                    ``(E) Former citizens not in compliance with 
                expatriation revenue provisions.--Any alien who is a 
                former citizen of the United States who relinquishes 
                United States citizenship (within the meaning of 
                section 877A(e)(3) of the Internal Revenue Code of 
                1986) and who is not in compliance with section 877A of 
                such Code (relating to expatriation) is 
                inadmissible.''.
            (2) Availability of information.--
                    (A) In general.--Section 6103(l) (relating to 
                disclosure of returns and return information for 
                purposes other than tax administration) is amended by 
                adding at the end the following new paragraph:
            ``(21) Disclosure to deny visa or admission to certain 
        expatriates.--Upon written request of the Attorney General or 
        the Attorney General's delegate, the Secretary shall disclose 
        whether an individual is in compliance with section 877A (and 
        if not in compliance, any items of noncompliance) to officers 
        and employees of the Federal agency responsible for 
        administering section 212(a)(10)(E) of the Immigration and 
        Nationality Act solely for the purpose of, and to the extent 
        necessary in, administering such section 212(a)(10)(E).''.
                    (B) Safeguards.--Section 6103(p)(4) (relating to 
                safeguards) is amended by striking ``or (20)'' each 
                place it appears and inserting ``(20), or (21)''.
            (3) Effective dates.--The amendments made by this 
        subsection shall apply to individuals who relinquish United 
        States citizenship on or after the date of the enactment of 
        this Act.
    (e) Conforming Amendments.--
            (1) Section 877 is amended by adding at the end the 
        following new subsection:
    ``(h) Application.--This section shall not apply to an expatriate 
(as defined in section 877A(e)) whose expatriation date (as so defined) 
occurs on or after the date of the enactment of this subsection.''.
            (2) Section 2107 is amended by adding at the end the 
        following new subsection:
    ``(f) Application.--This section shall not apply to any expatriate 
subject to section 877A.''.
            (3) Section 2501(a)(3) is amended by adding at the end the 
        following new subparagraph:
                    ``(C) Application.--This paragraph shall not apply 
                to any expatriate subject to section 877A.''.
            (4) Section 6039G(a) is amended by inserting ``or 877A'' 
        after ``section 877(b)''.
            (5) The second sentence of section 6039G(d) is amended by 
        inserting ``or who relinquishes United States citizenship 
        (within the meaning of section 877A(e)(3))'' after ``section 
        877(a))''.
            (6) Section 7701(n) is amended by adding at the end the 
        following new paragraph:
            ``(3) Application.--This subsection shall not apply to any 
        expatriate subject to section 877A.''.
    (f) Clerical Amendment.--The table of sections for subpart A of 
part II of subchapter N of chapter 1 is amended by inserting after the 
item relating to section 877 the following new item:

``Sec. 877A. Tax responsibilities of expatriation.''.
    (g) Effective Date.--
            (1) In general.--Except as provided in this subsection, the 
        amendments made by this section shall apply to expatriates 
        (within the meaning of section 877A(e) of the Internal Revenue 
        Code of 1986, as added by this section) whose expatriation date 
        (as so defined) occurs on or after the date of the enactment of 
        this Act.
            (2) Gifts and bequests.--Section 102(d) of the Internal 
        Revenue Code of 1986 (as added by subsection (b)) shall apply 
        to gifts and bequests received on or after the date of the 
        enactment of this Act, from an individual or the estate of an 
        individual whose expatriation date (as so defined) occurs after 
        such date.
            (3) Due date for tentative tax.--The due date under section 
        877A(h)(2) of the Internal Revenue Code of 1986, as added by 
        this section, shall in no event occur before the 90th day after 
        the date of the enactment of this Act.
                                 <all>