[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 3208 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 3208

 To amend the Internal Revenue Code of 1986 to provide tax incentives 
           for clean coal technology, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 26, 2008

 Mr. Conrad (for himself and Mr. Hatch) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide tax incentives 
           for clean coal technology, 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; FINDINGS.

    (a) Short Title.--This Act may be cited as the ``Carbon Reduction 
Technology Bridge Act of 2008''.
    (b) Findings.--The Congress finds the following:
            (1) Significantly reducing greenhouse gas emissions from 
        U.S. coal plants must be part of a strategy to address climate 
        change.
            (2) Carbon capture and sequestration is the key to 
        continued enjoyment of the energy security and economic 
        benefits associated with the use of the Nation's abundant 
        domestic coal resources for power generation.
            (3) Multiple technology demonstrations that increase the 
        efficiency of power plants and thereby reduce carbon dioxide 
        emissions and that demonstrate carbon dioxide capture and 
        sequestration are needed in the near-term as a bridge to a 
        reliable and affordable power system that can achieve future 
        greenhouse gas reduction goals.

SEC. 2. SEVEN-YEAR AMORTIZATION FOR CERTAIN SYSTEMS INSTALLED ON COAL-
              FIRED ELECTRIC GENERATION UNITS AFTER 2007.

    (a) In General.--Subsection (d) of section 169 of the Internal 
Revenue Code of 1986 (relating to amortization of pollution control 
facilities) is amended by adding at the end the following new 
paragraph:
            ``(6) Special rule for systems installed on coal-fired 
        electric generation units after 2007.--
                    ``(A) In general.--Any mechanical or electronic 
                system--
                            ``(i) which is installed on a coal-fired 
                        electric generation unit after December 31, 
                        2007, and
                            ``(ii) which reduces carbon dioxide 
                        emissions per net megawatt hour of electricity 
                        generation by 1 or more of the means described 
                        in subparagraph (B) or any other means,
                shall be treated for purposes of this section as an 
                identifiable treatment facility which abates or 
                controls atmospheric pollution or contamination by 
                removing, altering, disposing, storing, or preventing 
                the creation or emission of pollutants, contaminants, 
                wastes, or heat. Paragraph (1)(C) of this subsection, 
                and subsection (e), shall not apply to any system which 
                is so treated.
                    ``(B) Means for reducing emissions.--The means 
                described in this subparagraph are--
                            ``(i) optimizing combustion,
                            ``(ii) optimizing sootblowing and heat 
                        transfer,
                            ``(iii) upgrading steam temperature control 
                        capabilities,
                            ``(iv) reducing exit gas temperatures (air 
                        heater modifications),
                            ``(v) predrying low rank coals using power 
                        plant waste heat,
                            ``(vi) modifying steam turbines or change 
                        the steam path/blading,
                            ``(vii) replacing single speed motors with 
                        variable speed drives for fans and pumps, and
                            ``(viii) improving operational controls, 
                        including neural networks.
                    ``(C) Special rule for minimum tax.--Section 
                56(a)(5) shall not apply to property to which this 
                paragraph applies.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2007.

SEC. 3. CREDIT FOR CLOSED-LOOP BIOMASS CO-FIRED WITH COAL.

    (a) In General.--Subparagraph (A) of section 45(d)(2) of the 
Internal Revenue Code of 1986 (relating to closed-loop biomass 
facility) is amended by striking the period at the end of clause (ii) 
and inserting ``, or'' and by adding after clause (ii) the following 
new clause:
                            ``(iii) owned by the taxpayer which before 
                        January 1, 2014, is originally placed in 
                        service as--
                                    ``(I) a facility to use closed-loop 
                                biomass to co-fire (or, in the case of 
                                an integrated gasification combined 
                                cycle facility, co-process) with coal, 
                                or
                                    ``(II) a coal-fired facility which 
                                is modified to use closed-loop biomass 
                                to co-fire (or, in the case of an 
                                integrated gasification combined cycle 
                                facility, co-process) with coal.''.
    (b) Conforming Amendment.--Subparagraph (B) of section 45(d)(2) of 
such Code is amended by striking ``subparagraph (A)(ii)'' and inserting 
``clause (ii) or (iii) of subparagraph (A)''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 4. CREDIT FOR INVESTMENT IN QUALIFIED NEW CLEAN COAL ELECTRIC 
              GENERATION UNITS.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to rules for computing 
investment credit) is amended by inserting after section 48B the 
following new section:

``SEC. 48C. QUALIFYING NEW CLEAN COAL ELECTRIC GENERATION UNIT CREDIT.

    ``(a) General Rule.--For purposes of section 46, the qualifying new 
clean coal electric generation credit for any taxable year is an amount 
equal to the applicable percentage of the qualified investment for such 
taxable year.
    ``(b) Applicable Percentage.--For purposes of subsection (a)--
            ``(1) In general.--Except as provided in paragraph (2), the 
        applicable percentage is the percentage determined under the 
        following table using the design net heat rate of the qualified 
        clean coal electric generation unit.


----------------------------------------------------------------------------------------------------------------
        ``Design Net Heat Rate in Btus/kilowatt hour                              Percentage
----------------------------------------------------------------------------------------------------------------
More than 8,322 but not more than 8,530 (40%)..............  10
More than 8,120 but not more than 8,322 (41%)..............  10
More than 7,940 but not more than 8,120 (42%)..............  20
More than 7,760 but not more than 7,940 (43%)..............  26
More than 7,580 but not more than 7,760 (44%)..............  28
Not more than 7,580 (45%)..................................  30
----------------------------------------------------------------------------------------------------------------

            ``(2) Election to use alternative method for determining 
        percentage.--In the case of a qualified clean coal electric 
        generation unit which is designed to emit carbon dioxide at an 
        average annual rate of not more than 800 pounds per net 
        megawatt hour of electricity generation, in lieu of applying 
        paragraph (1), the taxpayer may elect an applicable percentage 
        of 30 percent.
    ``(c) Qualified Investment.--
            ``(1) In general.--For purposes of subsection (a), the 
        qualified investment for any taxable year is the basis of 
        property placed in service by the taxpayer during such taxable 
        year as part of, or in connection with, a qualified clean coal 
        electric generation unit--
                    ``(A)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, or
                    ``(ii) which is acquired by the taxpayer if the 
                original use of such property commences with the 
                taxpayer, and
                    ``(B) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable.
            ``(2) Special rule for certain subsidized property.--Rules 
        similar to section 48(a)(4) shall apply for purposes of this 
        section.
            ``(3) Certain qualified progress expenditures rules made 
        applicable.--Rules similar to the rules of subsections (c)(4) 
        and (d) of section 46 (as in effect on the day before the 
        enactment of the Revenue Reconciliation Act of 1990) shall 
        apply for purposes of this section.
    ``(d) Aggregate Credits.--
            ``(1) In general.--No credit shall be allowed under this 
        section with respect to any qualified clean coal electric 
        generation unit unless such unit is certified by the Secretary 
        under subsection (f).
            ``(2) Limitation on units certified.--The Secretary may 
        certify under subsection (f) in the aggregate no more than 
        6,000 megawatts of electric generation units.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Qualified clean coal electric generation unit.--The 
        term `qualified clean coal electric generation unit' means a 
        coal-based electric generation unit if--
                    ``(A) the unit achieves a design net heat rate of 
                not more than 8,530 Btu/Kw-hr,
                    ``(B) the unit is designed to meet the performance 
                requirements specified in the table contained in 
                section 48A(f)(1)(B),
                    ``(C) the unit includes--
                            ``(i) carbon dioxide capture, transport, 
                        and storage property (as defined in section 
                        48D(c)) for carbon dioxide produced by such 
                        unit, and
                            ``(ii) 1 or more sites for the storage of 
                        such carbon dioxide,
                    ``(D) the unit is designed to capture, and store, 
                at least--
                            ``(i) 500,000 metric tons per year of 
                        carbon dioxide if such unit is among the first 
                        1,000 megawatts of electric generation units 
                        certified by the Secretary under subsection 
                        (f), and
                            ``(ii) 1,000,000 metric tons per year of 
                        carbon dioxide if such unit is among the next 
                        3,000 megawatts of electric generation units 
                        certified by the Secretary under subsection 
                        (f), and
                            ``(iii) 2,000,000 metric tons per year of 
                        carbon dioxide for any other unit,
                    ``(E) the fuel input for the unit, when completed, 
                is at least 75 percent coal, and
                    ``(F) the unit is located in the United States.
            ``(2) Design net heat rate.--Design net heat rate shall be 
        determined as provided in section 48A(f)(2) and before any 
        energy loss resulting from the operation of the carbon dioxide 
        capture process.
            ``(3) Coal.--The term `coal' means bituminous coal, 
        subbituminous coal, and lignite.
            ``(4) Electric generation unit.--The term `electric 
        generation unit' means any unit at least 50 percent of the 
        total annual net output of which is electrical power, including 
        an otherwise eligible unit which is used in an industrial 
        application.
    ``(f) Certification.--
            ``(1) Certification process.--The Secretary, in 
        consultation with the Secretary of Energy and the Administrator 
        of the Environmental Protection Agency, shall establish a 
        certification process to determine if a coal-based electric 
        generation unit meets all criteria and other requirements to be 
        recognized as a qualified clean coal electric generation unit. 
        The certification process shall also be designed to determine 
        the efficiency (and, in the case of an election under 
        subsection (b)(2), the carbon dioxide emission rate) of such 
        unit to establish the amount of the credit under subsection 
        (a).
            ``(2) Priority for units exceeding capture and storage 
        requirements.--In determining which qualified clean coal 
        generation units to certify under subsection (f), the Secretary 
        shall give high priority to those units which exceed the carbon 
        dioxide and storage requirements provided in subsection 
        (e)(1)(D).
            ``(3) Feedstock requirements.--After the date of 
        publication by the Secretary of the final certification process 
        referred to in subsection (d), the Secretary shall allocate the 
        limitation in subsection (d)(2) in equal amounts among--
                    ``(A) units using bituminous coal as a primary 
                feedstock,
                    ``(B) units using subbituminous coal as a primary 
                feedstock, and
                    ``(C) units using lignite as a primary feedstock.
            ``(4) Redistribution.--The Secretary may reallocate credits 
        if the Secretary determines that there is an insufficient 
        quantity of qualifying applications for certification, pending 
        at the time of review, to comply with the feedstock 
        requirements of paragraph (3). The Secretary may conduct an 
        additional program for applications for certification and 
        reallocate available credits without regard to the feedstock 
        requirement which was not satisfied as a result of insufficient 
        applications for certification.
            ``(5) Requirements for applications for certification.--An 
        application for certification shall contain such information as 
        the Secretary may require in order to make a determination to 
        accept or reject the application and establish applicable 
        credit entitlement. Any information contained in the 
        application shall be protected as provided in section 552(b)(4) 
        of title 5, United States Code.
    ``(g) Denial of Double Benefit.--No credit shall be allowed under 
this section for any property for which credit is allowed under 
sections 48A, 48B, or 48D.''.
    (b) Conforming Amendments.--
            (1) Section 46 of such Code (relating to amount of credit) 
        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 qualifying new clean coal electric generation 
        credit.''.
            (2) Subparagraph (C) of section 49(a)(1) of such Code 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 after clause (iv) the following new 
        clause:
                            ``(v) the basis of any property which is 
                        part of a qualifying clean coal electric 
                        generation unit under section 48C.''.
            (3) The table of sections for subpart E of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 48B the following new item:

``Sec. 48C. Qualifying new clean coal electric generation unit 
                            credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this Act 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. 5. TAX CREDIT FOR INSTALLATION OF CARBON DIOXIDE CAPTURE, 
              TRANSPORT, AND STORAGE EQUIPMENT.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to rules for computing 
investment credit) is amended by inserting after section 48C the 
following new section:

``SEC. 48D. QUALIFYING CARBON DIOXIDE CAPTURE, TRANSPORT, AND STORAGE 
              EQUIPMENT CREDIT.

    ``(a) General Rule.--For purposes of section 46, the qualifying 
carbon dioxide equipment credit for any taxable year is an amount equal 
to 30 percent of the qualified investment for such taxable year.
    ``(b) Qualified Investment.--
            ``(1) In general.--For purposes of subsection (a), the 
        qualified investment for any taxable year is the basis eligible 
        property which is placed in service by the taxpayer during such 
        taxable year.
            ``(2) Special rule for certain subsidized property.--Rules 
        similar to section 48(a)(4) shall apply for purposes of this 
        section.
            ``(3) Certain qualified progress expenditures rules made 
        applicable.--Rules similar to the rules of subsections (c)(4) 
        and (d) of section 46 (as in effect on the day before the 
        enactment of the Revenue Reconciliation Act of 1990) shall 
        apply for purposes of this section.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible property.--The term `eligible property' 
        means carbon dioxide capture, transport, and storage property--
                    ``(A) which is part of (or used in connection with) 
                a qualified coal-fired electric generation unit of the 
                taxpayer,
                    ``(B)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, or
                    ``(ii) which is acquired by the taxpayer if the 
                original use of such property commences with the 
                taxpayer, and
                    ``(C) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable.
            ``(2) Carbon dioxide capture, transport, and storage 
        property.--The term `carbon dioxide capture, transport, and 
        storage property' means equipment to capture, transport, or 
        store carbon dioxide produced at such unit, including--
                    ``(A) equipment to separate and pressurize carbon 
                dioxide for transport (including equipment to operate 
                such equipment), and
                    ``(B) equipment to transport, inject, and monitor 
                such carbon dioxide.
            ``(3) Qualified coal-fired electric generation unit.--The 
        term `qualified coal-fired electric generation unit' means any 
        coal-fired electric generation unit--
                    ``(A) which, after installation of eligible 
                property, is designed--
                            ``(i) to emit carbon dioxide at an average 
                        annual rate of less than 1,100 pounds of carbon 
                        dioxide per net megawatt hour of electricity 
                        generation, or
                            ``(ii) to capture and store in a secure 
                        geologic formation at least 500,000 metric tons 
                        of carbon dioxide per year,
                    ``(B) the fuel input for which is at least 75 
                percent coal, and
                    ``(C) which is located in the United States.
            ``(4) Coal.--The term `coal' means bituminous coal, 
        subbituminous coal, and lignite.
    ``(d) Aggregate Credits.--
            ``(1) In general.--No credit shall be allowed under this 
        section for property which is part of (or used in connection 
        with) a qualified coal-fired electric generation unit unless 
        such unit is certified by the Secretary under subsection (e).
            ``(2) Limitation on units certified.--The Secretary may 
        certify under subsection (e) in the aggregate no more than 
        9,000 megawatts of electric generation units.
    ``(e) Certification.--
            ``(1) Certification process.--The Secretary shall establish 
        a certification process for purposes of this section.
            ``(2) Feedstock requirements.--During the first 24 months 
        after the date of publication by the Secretary of the final 
        certification process referred to in paragraph (1), the 
        Secretary shall allocate the limitation in subsection (d)(2) in 
        equal amounts among--
                    ``(A) units using bituminous coal as a primary 
                feedstock,
                    ``(B) units using subbituminous coal as a primary 
                feedstock, and
                    ``(C) units using lignite as a primary feedstock.
            ``(3) Redistribution.--The Secretary may reallocate credits 
        if the Secretary determines that there is an insufficient 
        quantity of qualifying applications for certification, pending 
        at the time of review, to comply with the feedstock 
        requirements of paragraph (2). The Secretary may conduct an 
        additional program for applications for certification and 
        reallocate available credits without regard to the feedstock 
        requirement which was not satisfied as a result of insufficient 
        applications for certification.
            ``(4) Requirements for applications for certification.--An 
        application for certification shall contain such information as 
        the Secretary may require in order to establish credit 
        entitlement. Any information contained in an application shall 
        be protected as provided in section 552(b)(4) of title 5, 
        United States Code.''.
    (b) Conforming Amendments.--
            (1) Section 46 of such Code (relating to amount of credit), 
        as amended by this Act, is amended by striking ``and'' at the 
        end of paragraph (4), by striking the period at the end of 
        paragraph (5) and inserting ``, and'', and by adding at the end 
        the following new paragraph:
            ``(6) the qualifying carbon dioxide equipment credit.''.
            (2) Subparagraph (C) of section 49(a)(1) of such Code, as 
        amended by this Act, is amended by striking ``and'' at the end 
        of clause (iv), by striking the period at the end of clause (v) 
        and inserting ``, and'', and by adding after clause (v) the 
        following new clause:
                            ``(vi) the basis of any eligible property 
                        (as defined in section 48D(c)(1)).''.
            (3) The table of sections for such subpart E is amended by 
        inserting after the item relating to section 48C the following 
        new item:

``Sec. 48D. Qualifying carbon dioxide capture, transport, and storage 
                            equipment credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this Act 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. 6. TAX CREDIT FOR CARBON DIOXIDE SEQUESTRATION.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45Q. CREDIT FOR CARBON DIOXIDE SEQUESTRATION.

    ``(a) General Rule.--For purposes of section 38, the carbon dioxide 
sequestration credit for any taxable year is an amount equal to the sum 
of--
            ``(1) $30 per metric ton of qualified carbon dioxide which 
        is stored by the taxpayer in secure geological storage,
            ``(2) $20 per metric ton of qualified carbon dioxide which 
        is compressed, and transferred, by the taxpayer to the United 
        States at a facility under such rules and conditions as the 
        Federal Government shall prescribe not later than 18 months 
        prior to any transfer, and
            ``(3) $15 per metric ton of qualified carbon dioxide which 
        is used by the taxpayer as a tertiary injectant in a qualified 
        enhanced oil or natural gas recovery project.
    ``(b) Qualified Carbon Dioxide.--For purposes of this section, the 
term `qualified carbon dioxide' means carbon dioxide--
            ``(1) which is captured from a qualified electric 
        generation unit during the 10-year period beginning on the date 
        that carbon dioxide capture equipment was originally placed in 
        service at such unit,
            ``(2) which would otherwise be released into the 
        atmosphere, and
            ``(3) which is measured at the source of capture and 
        verified at the point of disposal or injection.
    ``(c) Qualified Electric Generation Unit.--For purposes of this 
section, the term `qualified electric generation unit' means any 
electric generation unit (as defined in section 48A(c)(6))--
            ``(1) which is owned by the taxpayer,
            ``(2) at which the fuel input is at least 75 percent coal,
            ``(3) at which carbon dioxide capture equipment is placed 
        in service,
            ``(4) which--
                    ``(A) captures not less than 500,000 metric tons of 
                carbon dioxide during the taxable year, or
                    ``(B) is designed to emit carbon dioxide at an 
                average annual rate of less than 1,100 pounds of carbon 
                dioxide per net megawatt hour of electricity generated 
                during the taxable year, and
            ``(5) which is located in--
                    ``(A) the United States (within the meaning of 
                section 638(1)), or
                    ``(B) a possession of the United States (within the 
                meaning of section 638(2)).
    ``(d) Aggregate Credits.--
            ``(1) In general.--No credit shall be allowed under this 
        section for carbon dioxide captured from a qualified facility 
        unless such facility is certified by the Secretary for purposes 
        of this section. The owner of a qualified facility may request 
        to be certified for purposes of this section by submitted a 
        request to the Secretary containing such information as the 
        Secretary may require.
            ``(2) Limitation on units certified.--The Secretary may 
        certify in the aggregate no more than 9,000 megawatts of 
        electric generation units.
    ``(e) Certification.--
            ``(1) Certification process.--The Secretary shall establish 
        a certification process for purposes of this section.
            ``(2) Feedstock requirements.--During the first 24 months 
        after the date of publication by the Secretary of the final 
        certification process referred to in paragraph (1), the 
        Secretary shall allocate the limitation in subsection (d)(2) in 
        equal amounts among--
                    ``(A) units using bituminous coal as a primary 
                feedstock,
                    ``(B) units using subbituminous coal as a primary 
                feedstock, and
                    ``(C) units using lignite as a primary feedstock.
            ``(3) Redistribution.--The Secretary may reallocate credits 
        if the Secretary determines that there is an insufficient 
        quantity of qualifying applications for certification, pending 
        at the time of review, to comply with the feedstock 
        requirements of paragraph (2). The Secretary may conduct an 
        additional program for applications for certification and 
        reallocate available credits without regard to the feedstock 
        requirement which was not satisfied as a result of insufficient 
        applications for certification.
            ``(4) Requirements for applications for certification.--An 
        application for certification shall contain such information as 
        the Secretary may require in order to make a determination to 
        accept or reject the application and establish applicable 
        credit entitlement. Any information contained in the 
        application shall be protected as provided in section 552(b)(4) 
        of title 5, United States Code.
    ``(f) Special Rules and Other Definitions.--For purposes of this 
section--
            ``(1) Secure geological storage.--The Secretary, in 
        consultation with the Administrator of the Environmental 
        Protection Agency, shall establish regulations for determining 
        adequate security measures for the geological storage of carbon 
        dioxide under subsection (a)(1)(B). Such regulation shall 
        include storage within deep saline formations and umninable 
        coal seams under such conditions as the Secretary may determine 
        under such regulations.
            ``(2) Rules relating to use as tertiary injectant.--
                    ``(A) Tertiary injectant.--The term `tertiary 
                injectant' has the same meaning as when used within 
                section 193(b)(1).
                    ``(B) Qualified enhanced oil or natural gas 
                recovery project.--The term `qualified enhanced oil or 
                natural gas recovery project' has the meaning given the 
                term `qualified enhanced oil recovery project' by 
                section 43(c)(2), determined by substituting `crude oil 
                or natural gas' for `crude oil' in subparagraph (A)(i) 
                thereof.
                    ``(C) Recycled carbon dioxide.--No credit shall be 
                allowed under this section for carbon dioxide that is 
                recaptured, recycled, and reinjected as part of the 
                enhanced oil and natural gas recovery process.
            ``(3) Credit attributable to taxpayer.--Any credit under 
        this section shall be attributable to the person that captures 
        and physically or contractually ensures the disposal of or the 
        use as a tertiary injectant of the qualified carbon dioxide, 
        except to the extent provided in regulations prescribed by the 
        Secretary.
            ``(4) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit allowable 
        under subsection (a) with respect to any qualified carbon 
        dioxide which ceases to be captured, disposed of, or used as a 
        tertiary injectant in a manner consistent with the requirements 
        of this section.
            ``(5) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2008, there shall be 
        substituted for each dollar amount contained in subsection (a) 
        an amount equal to the product of--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the inflation adjustment factor for such 
                calendar year determined under section 43(b)(3)(B) for 
                such calendar year, determined by substituting `2008' 
                for `1990'.
            ``(6) Coal.--The term `coal' means bituminous coal, 
        subbituminous coal, and lignite.''.
    (b) Conforming Amendment.--Section 38(b) of such Code is amended by 
striking ``plus'' at the end of paragraph (32), by striking the period 
at the end of paragraph (33) and inserting ``, plus'', and by adding at 
the end of following new paragraph:
            ``(34) the carbon dioxide sequestration credit determined 
        under section 45Q(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 45Q. Credit for carbon dioxide sequestration.''.
    (d) Effective Date.--The amendments made by this section shall 
apply carbon dioxide captured after the date of the enactment of this 
Act.

SEC. 7. CLEAN ENERGY COAL BONDS.

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

``SEC. 54C. CLEAN ENERGY COAL BONDS.

    ``(a) Clean Energy Coal Bond.--For purposes of this subchapter--
            ``(1) In general.--The term `clean energy coal bond' means 
        any bond issued as part of an issue if--
                    ``(A) the bond is issued by a qualified issuer 
                pursuant to an allocation by the Secretary to such 
                issuer of a portion of the national clean energy coal 
                bond limitation under subsection (b)(2);
                    ``(B) 100 percent of the available project proceeds 
                from the sale of such issue are to be used for capital 
                expenditures incurred by qualified borrowers for 1 or 
                more qualified projects;
                    ``(C) the qualified issuer designates such bond for 
                purposes of this section and the bond is in registered 
                form; and
                    ``(D) in lieu of the requirements of section 
                54A(d)(2), the issue meets the requirements of 
                subsection (c).
            ``(2) Qualified project; special use rules.--
                    ``(A) In general.--The term `qualified project' 
                means a qualified clean coal project (as defined in 
                subsection (f)(1)) placed in service by a qualified 
                borrower.
                    ``(B) Refinancing rules.--For purposes of paragraph 
                (1)(B), a qualified project may be refinanced with 
                proceeds of a clean energy coal bond only if the 
                indebtedness being refinanced (including any obligation 
                directly or indirectly refinanced by such indebtedness) 
                was originally incurred by a qualified borrower after 
                the date of the enactment of this section.
                    ``(C) Reimbursement.--For purposes of paragraph 
                (1)(B), a clean energy coal bond may be issued to 
                reimburse a qualified borrower for amounts paid after 
                the date of the enactment of this section with respect 
                to a qualified project, but only if--
                            ``(i) prior to the payment of the original 
                        expenditure, the qualified borrower declared 
                        its intent to reimburse such expenditure with 
                        the proceeds of a clean energy coal bond;
                            ``(ii) not later than 60 days after payment 
                        of the original expenditure, the qualified 
                        issuer adopts an official intent to reimburse 
                        the original expenditure with such proceeds; 
                        and
                            ``(iii) reimbursement is not made later 
                        than 18 months after the date the original 
                        expenditure is paid or the date the project is 
                        placed in service or abandoned, but in no event 
                        more than 3 years after the original 
                        expenditure is paid.
                    ``(D) Treatment of changes in use.--For purposes of 
                paragraph (1)(B), the proceeds of an issue shall not be 
                treated as used for a qualified project to the extent 
                that a qualified borrower takes any action within its 
                control which causes such proceeds not to be used for a 
                qualified project. The Secretary shall prescribe 
                regulations specifying remedial actions that may be 
                taken (including conditions to taking such remedial 
                actions) to prevent an action described in the 
                preceding sentence from causing a bond to fail to be a 
                clean energy coal bond.
    ``(b) Limitation on Amount of Bonds Designated.--
            ``(1) National limitation.--There is a national clean 
        energy coal bond limitation of $5,000,000,000.
            ``(2) Allocation by secretary.--The Secretary shall 
        allocate the amount described in paragraph (1) among qualified 
        projects in such manner as the Secretary determines 
        appropriate.
    ``(c) Special Rules Relating to Expenditures.--
            ``(1) In general.--An issue shall be treated as meeting the 
        requirements of this subsection if, as of the date of issuance, 
        the qualified issuer reasonably expects--
                    ``(A) 100 percent or more of the available project 
                proceeds from the sale of the issue are to be spent for 
                1 or more qualified projects within the 5-year period 
                beginning on the date of issuance of the clean energy 
                bond;
                    ``(B) a binding commitment with a third party to 
                spend at least 10 percent of such available project 
                proceeds from the sale of the issue will be incurred 
                within the 6-month period beginning on the date of 
                issuance of the clean energy bond or, in the case of a 
                clean energy bond the available project proceeds of 
                which are to be loaned to 2 or more qualified 
                borrowers, such binding commitment will be incurred 
                within the 6-month period beginning on the date of the 
                loan of such proceeds to a qualified borrower; and
                    ``(C) such projects will be completed with due 
                diligence and the available project proceeds from the 
                sale of the issue will be spent with due diligence.
            ``(2) Extension of period.--Upon submission of a request 
        prior to the expiration of the period described in paragraph 
        (1)(A), the Secretary may extend such period if the qualified 
        issuer establishes that the failure to satisfy the 5-year 
        requirement is due to reasonable cause and the related projects 
        will continue to proceed with due diligence.
            ``(3) Failure to spend required amount of bond proceeds 
        within 5 years.--To the extent that less than 100 percent of 
        the available project proceeds of such issue are expended by 
        the close of the 5-year period beginning on the date of 
        issuance (or if an extension has been obtained under paragraph 
        (2), by the close of the extended period), the qualified issuer 
        shall redeem all of the nonqualified bonds within 90 days after 
        the end of such period. For purposes of this paragraph, the 
        amount of the nonqualified bonds required to be redeemed shall 
        be determined in the same manner as under section 142.
    ``(d) Cooperative Electric Company; Qualified Energy Tax Credit 
Bond Lender; Governmental Body; Qualified Borrower.--For purposes of 
this section--
            ``(1) Cooperative electric company.--The term `cooperative 
        electric company' means a mutual or cooperative electric 
        company described in section 501(c)(12) or section 
        1381(a)(2)(C), or a not-for-profit electric utility which has 
        received a loan or loan guarantee under the Rural 
        Electrification Act.
            ``(2) Clean energy bond lender.--The term `clean energy 
        bond lender' means a lender which is a cooperative which is 
        owned by, or has outstanding loans to, 100 or more cooperative 
        electric companies and is in existence on February 1, 2002, and 
        shall include any affiliated entity which is controlled by such 
        lender.
            ``(3) Public power entity.--The term `public power entity' 
        means a State utility with a service obligation, as such terms 
        are defined in section 217 of the Federal Power Act (as in 
        effect on the date of enactment of this paragraph).
            ``(4) Qualified issuer.--The term `qualified issuer' 
        means--
                    ``(A) a clean energy bond lender;
                    ``(B) a cooperative electric company; or
                    ``(C) a public power entity.
            ``(5) Qualified borrower.--The term `qualified borrower' 
        means--
                    ``(A) a mutual or cooperative electric company 
                described in section 501(c)(12) or 1381(a)(2)(C); or
                    ``(B) a public power entity.
    ``(e) Special Rules Relating to Pool Bonds.--No portion of a pooled 
financing bond may be allocable to any loan unless the borrower has 
entered into a written loan commitment for such portion prior to the 
issue date of such issue.
    ``(f) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified clean coal project.--For purposes of this 
        section, the term `qualified clean coal project' means--
                    ``(A) an atmospheric pollution control facility 
                (within the meaning of section 169(d)(6));
                    ``(B) a closed-loop biomass facility (within the 
                meaning of section 45(d)(2));
                    ``(C) a qualified new clean coal electric 
                generation unit (within the meaning of section 
                48C(d)(1));
                    ``(D) qualifying carbon dioxide equipment described 
                in section 48D(c)(1); or
                    ``(E) a qualified facility (within the meaning of 
                section 45Q(c)).
            ``(2) Pooled financing bond.--The term `pooled financing 
        bond' shall have the meaning given such term by section 
        149(f)(4)(A).
    ``(g) Termination.--This section shall not apply with respect to 
any bond issued after December 31, 2018.''.
    (b) Conforming Amendments.--
            (1) Paragraph (1) of section 54A(d) of the Internal Revenue 
        Code of 1986 is amended to read as follows:
            ``(1) Qualified tax credit bond.--The term `qualified tax 
        credit bond' means--
                    ``(A) a qualified forestry conservation bond, or
                    ``(B) a clean energy coal bond,
        which is part of an issue that meets requirements of paragraphs 
        (2), (3), (4), (5), and (6).''.
            (2) Subparagraph (C) of section 54A(d)(2) of such Code is 
        amended to read as follows:
                    ``(C) Qualified purpose.--For purposes of this 
                paragraph, the term `qualified purpose' means--
                            ``(i) in the case of a qualified forestry 
                        conservation bond, a purpose specified in 
                        section 54B(e), and
                            ``(ii) in the case of a clean energy coal 
                        bond, a purpose specified in section 
                        54C(f)(1).''.
    (c) Clerical Amendment.--The table of sections for subpart I of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new item:

``Sec. 54C. Clean energy coal bonds.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 2008.

SEC. 8. CERTAIN INCOME AND GAINS RELATING TO INDUSTRIAL SOURCE CARBON 
              DIOXIDE TREATED AS QUALIFYING INCOME FOR PUBLICLY TRADED 
              PARTNERSHIPS.

    (a) In General.--Subparagraph (E) of section 7704(d)(1) of the 
Internal Revenue Code of 1986 (defining qualifying income) is amended--
            (1) by striking ``or the marketing'' and inserting ``the 
        marketing'', and
            (2) by inserting ``or industrial source carbon dioxide'' 
        after ``timber)''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act, in taxable years 
ending after such date.
                                 <all>