1.This Act may be cited as the
Fuel Economy Reform
Act
.
2.Congress makes the following
findings:
(1)United States
dependence on oil imports imposes tremendous burdens on the economy, foreign
policy, and military of the United States.
(2)According to the
Energy Information Administration, 60 percent of the crude oil and petroleum
products consumed in the United States between April 2005 and March 2006
(12,400,000 barrels per day) were imported. At a cost of $75 per barrel of oil,
people in the United States remit more than $600,000 per minute to other
countries for petroleum.
(3)A significant
percentage of these petroleum imports originate in countries controlled by
regimes that are unstable or openly hostile to the interests of the United
States. Dependence on production from these countries contributes to the
volatility of domestic and global markets and the risk premium
paid by consumers in the United States.
(4)The Energy
Information Administration projects that the total petroleum demand in the
United States will increase by 23 percent between 2006 and 2026, while domestic
crude production is expected to decrease by 11 percent, resulting in an
anticipated 28 percent increase in petroleum imports. Absent significant
action, the United States will become more vulnerable to oil price increases,
more dependent upon foreign oil, and less able to pursue national
interests.
(5)Two-thirds of all
domestic oil use occurs in the transportation sector, which is 97 percent
reliant upon petroleum-based fuels. Passenger vehicles, including light trucks
under 10,000 pounds gross vehicle weight, represent over 60 percent of the oil
used in the transportation sector.
(6)Corporate average
fuel economy of all cars and trucks improved by 70 percent between 1975 and
1987. Between 1987 and 2006, fuel economy improvements have stagnated and the
fuel economy of the United States is lower than many developed countries and
some developing countries.
(7)Significant
improvements in engine technology occurred between 1986 and 2006. These
advances have been used to make vehicles larger and more powerful, and have not
focused solely on increasing fuel economy.
(8)According to a
2002 fuel economy report by the National Academies of Science, fuel economy can
be increased without negatively impacting the safety of cars and trucks in the
United States. Some new technologies can increase both safety and fuel economy
(such as high strength materials, unibody design, lower bumpers). Design
changes related to fuel economy also present opportunities to reduce the
incompatibility of tall, stiff, heavy vehicles with the majority of vehicles on
the road.
(9)Significant
change must occur to strengthen the economic competitiveness of the domestic
auto industry. According to a recent study by the University of Michigan, a
sustained gasoline price of $2.86 per gallon would lead Detroit’s Big 3
automakers’ profits to shrink by $7,000,000,000 as they absorb 75 percent of
the lost vehicle sales. This would put nearly 300,000 people in the United
States out of work.
(10)Opportunities
exist to strengthen the domestic vehicle industry while improving fuel economy.
A 2004 study performed by the University of Michigan concludes that providing
$1,500,000,000 in tax incentives over a 10-year period to encourage domestic
manufacturers and parts facilities to produce clean cars will lead to a gain of
nearly 60,000 domestic jobs and pay for itself through the resulting increase
in domestic tax receipts.
3.Definition of
automobile and passenger automobile
(a)
(1)Paragraph (3) of section 32901(a) of title 49, United
States Code, is amended by striking rated at—
and all that
follows through the period at the end and inserting rated at not more
than 10,000 pounds gross vehicle weight.
.
(2)Section 32908(a) of such title is amended, by
striking section—
and all that follows through
(2)
and inserting section, the term
.
(3)The amendments made by paragraphs (1) and (2) shall apply to
model year 2010 and each subsequent model year.
(b)Definition of
passenger automobile
(1)Paragraph (16) of section 32901(a) of such title is
amended by striking , but does not include
and all that follows
through the end and inserting a period.
(2)The amendment made by paragraph (1) shall apply to model
year 2012 and each subsequent model year.
4.Average fuel
economy standards
(a)Section 32902 of title 49, United States
Code, is amended—
(1)in subsection
(a)—
(A)in the heading,
by inserting manufactured
before model year 2013
after Non-passenger
automobiles
; and
(B)by adding at the
end the following: This subsection shall not apply to automobiles
manufactured after model year 2012.
;
(2)in subsection
(b)—
(A)in the heading,
by inserting manufactured
before model year 2013
after Passenger
automobiles
;
(B)by inserting
and before model year 2010
after 1984
; and
(C)by adding at the
end the following: Such standard shall be increased by 4 percent per
year for model years 2010 through 2012 (rounded to the nearest 1/10 mile per
gallon)
;
(3)by amending
subsection (c) to read as follows:
(c)Automobiles
manufactured after model year 2012(1)(A)Not later than 18
months before the beginning of each model year after model year 2012, the
Secretary of Transportation shall prescribe, by regulation—
(i)an average fuel economy standard for
automobiles manufactured by a manufacturer in that model year; or
(ii)based on 1 or more vehicle attributes
that relate to fuel economy—
(I)separate average fuel economy
standards for different classes of automobiles; or
(II)average fuel economy standards
expressed in the form of a mathematical function.
(B)(i)Except as provided
under paragraphs (3) and (4) and subsection (d), average fuel economy standards
under subparagraph (A) shall attain a projected aggregate level of average fuel
economy of 27.5 miles per gallon for all automobiles manufactured by all
manufacturers for model year 2013.
(ii)The projected aggregate level of
average fuel economy for model year 2014 and each model year thereafter shall
be increased by 4 percent over the level of the prior model year (rounded to
the nearest 1/10 mile per gallon).
(2)In addition to the average fuel
economy standards under paragraph (1), each manufacturer of passenger
automobiles shall be subject to an average fuel economy standard for passenger
automobiles manufactured by a manufacturer in a model year that shall be equal
to 92 percent of the average fuel economy projected by the Secretary for all
passenger automobiles manufactured by all manufacturers in that model year. An
average fuel economy standard under this subparagraph for a model year shall be
promulgated at the same time as the standard under paragraph (1) for such model
year.
(3)If the actual aggregate level of
average fuel economy achieved by manufacturers for each of 3 consecutive model
years is 5 percent or more less than the projected aggregate level of average
fuel economy for such model year, the Secretary may make appropriate
adjustments to the standards prescribed under this subsection.
(4)(A)Notwithstanding
paragraphs (1) through (3) and subsection (b), the Secretary of Transportation
may prescribe a lower average fuel economy standard for 1 or more model years
if the Secretary of Transportation, in consultation with the Secretary of
Energy, finds, by clear and convincing evidence, that the minimum standards
prescribed under paragraph (1)(B) or (3) or subsection (b) for each model
year—
(i)are technologically not
achievable;
(ii)cannot be achieved without materially
reducing the overall safety of automobiles manufactured or sold in the United
States and no offsetting safety improvements can be practicably implemented for
that model year; or
(iii)is shown not to be cost
effective.
(B)If a lower standard is prescribed for
a model year under subparagraph (A), such standard shall be the maximum
standard that—
(i)is technologically achievable;
(ii)can be achieved without materially
reducing the overall safety of automobiles manufactured or sold in the United
States; and
(iii)is cost effective.
(5)In determining cost effectiveness
under paragraph (4)(A)(iii), the Secretary of Transportation shall take into
account the total value to the United States of reduced petroleum use,
including the value of reducing external costs of petroleum use, using a value
for such costs equal to 50 percent of the value of a gallon of gasoline saved
or the amount determined in an analysis of the external costs of petroleum use
that considers—
(A)value to consumers;
(B)economic security;
(C)national security;
(D)foreign policy;
(E)the impact of oil use—
(i)on sustained cartel rents paid to
foreign suppliers;
(ii)on long-run potential gross
domestic product due to higher normal-market oil price levels, including
inflationary impacts;
(iii)on import costs, wealth
transfers, and potential gross domestic product due to increased trade
imbalances;
(iv)on import costs and wealth
transfers during oil shocks;
(v)on macroeconomic dislocation and
adjustment costs during oil shocks;
(vi)on the cost of existing energy
security policies, including the management of the Strategic Petroleum
Reserve;
(vii)on the timing and severity of the
oil peaking problem;
(viii)on the risk, probability, size,
and duration of oil supply disruptions;
(ix)on OPEC strategic behavior and
long-run oil pricing;
(x)on the short term elasticity of
energy demand and the magnitude of price increases resulting from a supply
shock;
(xi)on oil imports, military costs,
and related security costs, including intelligence, homeland security, sea lane
security and infrastructure, and other military activities;
(xii)on oil imports, diplomatic and
foreign policy flexibility, and connections to geopolitical strife, terrorism,
and international development activities;
(xiii)on all relevant environmental
hazards under the jurisdiction of the Environmental Protection Agency;
and
(xiv)on well-to-wheels urban and local
air emissions of pollutants
and their uninternalized
costs;
(F)the impact of the oil or energy
intensity of the United States economy on the sensitivity of the economy to oil
price changes, including the magnitude of gross domestic product losses in
response to short term price shocks or long term price increases;
(G)the impact of United States payments
for oil imports on political, economic, and military developments in unstable
or unfriendly oil exporting countries;
(H)the uninternalized costs of pipeline
and storage oil seepage, and for risk of oil spills from production, handling,
and transport, and related landscape damage; and
(I)additional relevant factors, as
determined by the Secretary.
(6)When considering the value to
consumers of a gallon of gasoline saved, the Secretary of Transportation may
not use a value that is less than the greatest of—
(A)the average national cost of a gallon
of gasoline sold in the United States during the 12-month period ending on the
date on which the new fuel economy standard is proposed;
(B)the most recent weekly estimate by the
Energy Information Administration of the Department of Energy of the average
national cost of a gallon of gasoline (all grades) sold in the United States;
or
(C)the gasoline prices projected by the
Energy Information Administration for the 20-year period beginning in the year
following the year in which the standards are established.
(7)In prescribing standards under this
subsection, the Secretary may prescribe standards for 1 or more model
years.
(8)(A)Not later than December
31, 2016, the Secretary of Transportation, the Secretary of Energy, and the
Administrator of the Environmental Protection Agency shall submit a joint
report to Congress on the state of global automotive efficiency technology
development, and on the accuracy of tests used to measure fuel economy of
automobiles under section 32904(c), utilizing the study and assessment of the
National Academy of Sciences referred to in subparagraph (B).
(B)The Secretary of Transportation shall
enter into appropriate arrangements with the National Academy of Sciences to
conduct a comprehensive study of the technological opportunities to enhance
fuel economy and an analysis and assessment of the accuracy of fuel economy
tests used by the Administrator of the Environmental Protection Agency to
measure fuel economy for each model under section 32904(c). Such analysis and
assessment shall identify any additional factors or methods that should be
included in tests to measure fuel economy for each model to more accurately
reflect actual fuel economy of automobiles. The Secretary of Transportation and
the Administrator of the Environmental Protection Agency shall furnish, at the
request of the Academy, any information that the Academy determines to be
necessary to conduct the study, analysis, and assessment under this
subparagraph.
(C)The report submitted under
subparagraph (A) shall include—
(i)the study of the National Academy of
Sciences referred to in subparagraph (B); and
(ii)an assessment by the Secretary of
Transportation of technological opportunities to enhance fuel economy and
opportunities to increase overall fleet safety.
(D)The report submitted under
subparagraph (A) shall identify and examine additional opportunities to reform
the regulatory structure under this chapter, including approaches that seek to
merge vehicle and fuel requirements into a single system that achieves equal or
greater reduction in petroleum use and environmental benefits than the amount
of petroleum use and environmental benefits that have been achieved as of the
date of the enactment of this Act.
(E)The report submitted under
subparagraph (A) shall—
(i)include conclusions reached by the
Administrator of the Environmental Protection Agency, as a result of detailed
analysis and public comment, on the accuracy of fuel economy tests as in use
during the period beginning on the date that is 5 years before the completion
of the report and ends on the date of such completion;
(ii)identify any additional factors that
the Administrator determines should be included in tests to measure fuel
economy for each model to more accurately reflect actual fuel economy of
automobiles; and
(iii)include a description of options,
formulated by the Secretary of Transportation and the Administrator, to
incorporate such additional factors in fuel economy tests in a manner that will
not effectively increase or decrease average fuel economy for any automobile
manufacturer.
;
and
(4)in subsection
(g)(2), by striking (and submit the amendment to Congress when required
under subsection (c)(2) of this section)
.
(b)
(1)Chapter 329 of title 49, United States Code, is
amended—
(A)in section
32903—
(i)by
striking passenger
each place it appears;
(ii)by
striking section 32902(b)–(d) of this title
each place it
appears and inserting subsection (c) or (d) of section
32902
;
(iii)by striking
subsection (e); and
(iv)by
redesignating subsection (f) as subsection (e); and
(B)in section
32904—
(i)in
subsection (a)—
(I)by striking
passenger
each place it appears; and
(II)in paragraph
(1), by striking subject to
and all that follows through
section 32902(b)–(d) of this title
and inserting subject
to subsection (c) or (d) of section 32902
; and
(ii)in subsection
(b)(1)(B), by striking under this chapter
and inserting
under section 32902(c)(2)
.
(2)The amendments made by this section shall apply to
automobiles manufactured after model year 2012.
5.Credit trading,
compliance, and judicial review
(a)Section 32903(a) of title 49, United States Code, is
amended—
(1)by inserting
Credits earned by a manufacturer under this section may be sold to any
other manufacturer and used as if earned by that manufacturer, except that
credits earned by a manufacturer described in clause (i) of section
32904(b)(1)(A) may only be sold to a manufacturer described such clause (i) and
credits earned by a manufacturer described in clause (ii) of such section may
only be sold to a manufacturer described in such clause (ii).
after
earns credits.
;
(2)by striking
3 consecutive model years immediately
each place it appears and
inserting model years
; and
(3)effective for
model years after 2012, the sentence added by paragraph (1) of this subsection
is amended by inserting for purposes of compliance with section
32902(c)(2)
after except that
.
(b)Multi-year
compliance periodSection 32904(c) of such title is
amended—
(1)by inserting
(1)
before The Administrator
; and
(2)by adding at the
end the following:
(2)The Secretary, by rule, may allow a
manufacturer to elect a multi-year compliance period of not more than 4
consecutive model years in lieu of the single model year compliance period
otherwise applicable under this
chapter.
.
(c)Judicial review
of regulationsSection 32909(a)(1) of such title is amended by
striking out adversely affected by
and inserting
aggrieved or adversely affected by, or suffering a legal wrong because
of,
.
6.
(a)Elimination on
number of new qualified hybrid and advanced lean burn technology vehicles
eligible for alternative motor vehicle credit
(1)Section 30B of the
Internal Revenue Code of 1986 is amended—
(A)by striking subsection (f); and
(B)by redesignating subsections (g) through
(j) as subsections (f) through (i), respectively.
(2)
(A)Paragraphs (4) and (6) of section 30B(h) of
such Code are each amended by striking (determined without regard to
subsection (g))
and inserting determined without regard to
subsection (f))
.
(B)Section 38(b)(25) of such Code is amended
by striking section 30B(g)(1)
and inserting section
30B(f)(1)
.
(C)Section 55(c)(2) of such Code is amended by
striking section 30B(g)(2)
and inserting section
30B(f)(2)
.
(D)Section 1016(a)(36) of such Code is amended
by striking section 30B(h)(4)
and inserting section
30B(g)(4)
.
(E)Section 6501(m) of such Code is amended by
striking section 30B(h)(9)
and inserting section
30B(g)(9)
.
(b)Extension of
alternative vehicle credit for new qualified hybrid motor
vehiclesParagraph (3) of
section 30B(i) of such Code (as redesignated by subsection (a)) is amended by
striking December 31, 2009
and inserting December 31,
2011
.
(c)Section 30B of such Code is amended by striking
city
each place it appears and inserting
combined
.
(d)The amendments made by
subsections (a) and (b) of this section shall apply to property placed in
service after December 31, 2007, in taxable years ending after such date. The
amendments made by subsection (c) shall apply to vehicles acquired after the
date of the enactment of this Act.
7.Advanced technology
motor vehicles manufacturing credit
(a)Subpart B of part IV
of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to
foreign tax credit, etc.) is amended by adding at the end the following new
section:
30D.Advanced technology
motor vehicles manufacturing credit
(a)There shall be
allowed as a credit against the tax imposed by this chapter for the taxable
year an amount equal to 35 percent of the qualified investment of an eligible
taxpayer for such taxable year.
(b)For purposes of
this section—
(1)The qualified
investment for any taxable year is equal to the incremental costs incurred
during such taxable year—
(A)to re-equip, expand, or establish any
manufacturing facility in the United States of the eligible taxpayer to produce
advanced technology motor vehicles or to produce eligible components,
(B)for engineering integration performed in
the United States of such vehicles and components as described in subsection
(d),
(C)for research and development performed in
the United States related to advanced technology motor vehicles and eligible
components, and
(D)for employee
retraining with respect to the manufacturing of such vehicles or components
(determined without regard to wages or salaries of such retrained
employees).
(2)In the event a facility
of the eligible taxpayer produces both advanced technology motor vehicles and
conventional motor vehicles, or eligible and non-eligible components, only the
qualified investment attributable to production of advanced technology motor
vehicles and eligible components shall be taken into account.
(c)In this section:
(1)Advanced
technology motor vehicleThe term advanced technology motor
vehicle means—
(A)any qualified
electric vehicle (as defined in section 30(c)(1)),
(B)any new qualified
fuel cell motor vehicle (as defined in section 30B(b)(3)),
(C)any new advanced
lean burn technology motor vehicle (as defined in section 30B(c)(3)),
(D)any new qualified
hybrid motor vehicle (as defined in section 30B(d)(2)(A) and determined without
regard to any gross vehicle weight rating),
(E)any new qualified
alternative fuel motor vehicle (as defined in section 30B(e)(4), including any
mixed-fuel vehicle (as defined in section 30B(e)(5)(B)), and
(F)any other motor
vehicle using electric drive transportation technology (as defined in paragraph
(3)).
(2)Electric drive
transportation technologyThe term electric drive
transportation technology means technology used by vehicles that use an
electric motor for all or part of their motive power and that may or may not
use off-board electricity, such as battery electric vehicles, fuel cell
vehicles, engine dominant hybrid electric vehicles, plug-in hybrid electric
vehicles, and plug-in hybrid fuel cell vehicles.
(3)The term
eligible component means any component inherent to any advanced
technology motor vehicle, including—
(A)with respect to any gasoline or
diesel-electric new qualified hybrid motor vehicle—
(i)electric motor or generator;
(ii)power split device;
(iii)power control unit;
(iv)power controls;
(v)integrated starter generator; or
(vi)battery;
(B)with respect to any hydraulic new qualified
hybrid motor vehicle—
(i)accumulator or other energy storage
device;
(ii)hydraulic pump;
(iii)hydraulic pump-motor assembly;
(iv)power control
unit; and
(v)power
controls;
(C)with respect to any new advanced lean burn
technology motor vehicle—
(i)diesel engine;
(ii)turbo charger;
(iii)fuel injection system; or
(iv)after-treatment system, such as a particle
filter or NOx absorber; and
(D)with respect to any advanced technology
motor vehicle, any other component submitted for approval by the
Secretary.
(4)The term
eligible taxpayer means any taxpayer if more than 20 percent of
the taxpayer’s gross receipts for the taxable year is derived from the
manufacture of motor vehicles or any component parts of such vehicles.
(d)Engineering
integration costsFor
purposes of subsection (b)(1)(B), costs for engineering integration are costs
incurred prior to the market introduction of advanced technology vehicles for
engineering tasks related to—
(1)establishing functional, structural, and
performance requirements for component and subsystems to meet overall vehicle
objectives for a specific application,
(2)designing interfaces for components and
subsystems with mating systems within a specific vehicle application,
(3)designing cost effective, efficient, and
reliable manufacturing processes to produce components and subsystems for a
specific vehicle application, and
(4)validating functionality and performance of
components and subsystems for a specific vehicle application.
(e)Limitation
based on amount of taxThe
credit allowed under subsection (a) for the taxable year shall not exceed the
excess of—
(1)the sum of—
(A)the regular tax liability (as defined in
section 26(b)) for such taxable year, plus
(B)the tax imposed by section 55 for such
taxable year and any prior taxable year beginning after 1986 and not taken into
account under section 53 for any prior taxable year, over
(2)the sum of the credits allowable under
subpart A and sections 27, 30, and 30B for the taxable year.
(f)For purposes of this
subtitle, if a credit is allowed under this section for any expenditure with
respect to any property, the increase in the basis of such property which would
(but for this paragraph) result from such expenditure shall be reduced by the
amount of the credit so allowed.
(g)
(1)Coordination
with other deductions and creditsExcept as provided in paragraph (2), the
amount of any deduction or other credit allowable under this chapter for any
cost taken into account in determining the amount of the credit under
subsection (a) shall be reduced by the amount of such credit attributable to
such cost.
(2)Research and
development costs
(A)Except as provided in
subparagraph (B), any amount described in subsection (b)(1)(C) taken into
account in determining the amount of the credit under subsection (a) for any
taxable year shall not be taken into account for purposes of determining the
credit under section 41 for such taxable year.
(B)Costs taken
into account in determining base period research expensesAny amounts described in subsection
(b)(1)(C) taken into account in determining the amount of the credit under
subsection (a) for any taxable year which are qualified research expenses
(within the meaning of section 41(b)) shall be taken into account in
determining base period research expenses for purposes of applying section 41
to subsequent taxable years.
(h)Business
carryovers allowedIf the
credit allowable under subsection (a) for a taxable year exceeds the limitation
under subsection (e) for such taxable year, such excess (to the extent of the
credit allowable with respect to property subject to the allowance for
depreciation) shall be allowed as a credit carryback to each of the 15 taxable
years immediately preceding the unused credit year and as a carryforward to
each of the 20 taxable years immediately following the unused credit
year.
(i)For purposes of this
section, rules similar to the rules of section 179A(e)(4) and paragraphs (1)
and (2) of section 41(f) shall apply.
(j)Allocation of
credit to purchasers
(1)
(A)In the case of an eligible taxpayer, any portion of the
credit determined under subsection (a) for the taxable year may, at the
election of such taxpayer, be apportioned among purchasers of qualifying
vehicles from the taxpayer in the taxable year (or in any year in which the
credit may be carried over).
(B)For purposes of this subsection, the term
qualifying vehicle means an advanced technology vehicle
manufactured at a facility described in subsection (b)(1)(A).
(C)Form and effect
of electionAn election under subparagraph (A) for any taxable
year shall be made on a timely filed return for such year. Such election, once
made, shall be irrevocable for such taxable year.
(2)Treatment of
taxpayer and purchasersThe amount of the credit apportioned to
any purchaser under paragraph (1)—
(A)shall not be
included in the amount determined under subsection (a) with respect to the
eligible taxpayer for the taxable year; and
(B)shall be treated
as an amount determined under subsection (a) for the taxable year of the
purchaser which ends in the calendar year of purchase.
(3)Special rules
for decrease in credits for taxable yearIf the amount of the
credit of an eligible taxpayer determined under subsection (a) for a taxable
year is less than the amount of such credit shown on the return of the taxpayer
for such year, an amount equal to the excess of—
(A)such reduction,
over
(B)the amount not
apportioned to such purchasers under paragraph (1) for the taxable year,
shall be
treated as an increase in tax imposed by this chapter on the eligible
taxpayer.(4)Written notice
to purchasersIf any portion of the credit available under
subsection (a) is allocated to purchasers under paragraph (1), the eligible
taxpayer shall provide any purchaser receiving an allocation written notice of
the amount of the allocation. Such notice may be provided either at the time of
purchase or at any time not later than 60 days after the close of the calendar
year in which the vehicle is purchased.
(k)Election not To
take creditNo credit shall
be allowed under subsection (a) for any property if the taxpayer elects not to
have this section apply to such property.
(l)The Secretary shall prescribe such
regulations as necessary to carry out the provisions of this section.
(m)This section shall not apply to any
qualified investment after December 31,
2011.
.
(b)
(1)Section 1016(a) of the Internal Revenue
Code of 1986 is amended by striking and
at the end of paragraph
(36), by striking the period at the end of paragraph (37) and inserting
, and
, and by adding at the end the following new
paragraph:
(38)to the extent provided in section
30D(g).
.
(2)Section 6501(m) of such Code is amended by
inserting 30D(k),
after 30C(e)(5),
.
(3)The table of sections for subpart B of part
IV of subchapter A of chapter 1 of such Code is amended by inserting after the
item relating to section 30C the following new item:
Sec. 30D. Advanced technology
motor vehicles manufacturing
credit.
.
(c)The amendments made by
this section shall apply to amounts incurred in taxable years beginning after
December 31, 1999.