II 111th CONGRESS 1st Session S. 271 IN THE SENATE OF THE UNITED STATES January 15, 2009 Ms. Cantwell (for herself, Mr. Hatch, Mr. Kerry, Mr. Alexander, Ms. Stabenow, and Mr. Nelson of Florida) 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 incentives to accelerate the production and adoption of plug-in electric vehicles and related component parts.

1.

Short title

This Act may be cited as the Fuel Reduction using Electrons to End Dependence on the Mid-East (FREEDOM) Act of 2009.

2.

Incentives for manufacturing facilities producing plug-in electric drive motor vehicle and components

(a)

Deduction for manufacturing facilities

Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to itemized deductions for individuals and corporations) is amended by inserting after section 179E the following new section:

179F.

Election to expense manufacturing facilities producing plug-in electric drive motor vehicle and components

(a)

Treatment as expenses

A taxpayer may elect to treat the applicable percentage of the cost of any qualified plug-in electric drive motor vehicle manufacturing facility property as an expense which is not chargeable to a capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the qualified manufacturing facility property is placed in service. (b)

Applicable percentage

For purposes of subsection (a), the applicable percentage is— (1)100 percent, in the case of qualified plug-in electric drive motor vehicle manufacturing facility property which is placed in service before January 1, 2012, and (2)50 percent, in the case of qualified plug-in electric drive motor vehicle manufacturing facility property which is placed in service after December 31, 2011, and before January 1, 2015. (c)

Election

(1)

In general

An election under this section for any taxable year shall be made on the taxpayer's return of the tax imposed by this chapter for the taxable year. Such election shall be made in such manner as the Secretary may by regulations prescribe. (2)

Election irrevocable

Any election made under this section may not be revoked except with the consent of the Secretary. (d)

Qualified plug-In electric drive motor vehicle manufacturing facility property

For purposes of this section— (1)

In general

The term qualified plug-in electric drive motor vehicle manufacturing facility property means any qualified property— (A)the original use of which commences with the taxpayer, (B)which is placed in service by the taxpayer after the date of the enactment of this section and before January 1, 2015, and (C)no written binding contract for the construction of which was in effect on or before the date of the enactment of this section. (2)

Qualified property

(A)

In general

The term qualified property means any property which is a facility or a portion of a facility used for the production of— (i)any new qualified plug-in electric drive motor vehicle (as defined by section 30D(c)), or (ii)any eligible component. (B)

Eligible component

The term eligible component means any battery, any electric motor or generator, or any power control unit which is designed specifically for use with a new qualified plug-in electric drive motor vehicle (as so defined). (e)

Special rule for dual use property

In the case of any qualified plug-in electric drive motor vehicle manufacturing facility property which is used to produce both qualified property and other property which is not qualified property, the amount of costs taken into account under subsection (a) shall be reduced by an amount equal to— (1)the total amount of such costs (determined before the application of this subsection), multiplied by (2)the percentage of property expected to be produced which is not qualified property.

. (b)

Refund of credit for prior year minimum tax liability

Section 53 of the Internal Revenue Code of 1986 (relating to credit for prior year minimum tax liability) is amended by adding at the end the following new subsection: (g)

Election To treat amounts attributable to qualified manufacturing facility

(1)

In general

In the case of an eligible taxpayer, the amount determined under subsection (c) for the taxable year (after the application of subsection (e)) shall be increased by an amount equal to the applicable percentage of any qualified plug-in electric drive motor vehicle manufacturing facility property which is placed in service during the taxable year. (2)

Applicable percentage

For purposes of paragraph (1), the applicable percentage is— (A)35 percent, in the case of qualified plug-in electric drive motor vehicle manufacturing facility property which is placed in service before January 1, 2012, and (B)17.5 percent, in the case of qualified plug-in electric drive motor vehicle manufacturing facility property which is placed in service after December 31, 2011, and before January 1, 2015. (3)

Eligible taxpayer

For purposes of this subsection, the term eligible taxpayer means any taxpayer— (A)who places in service qualified plug-in electric drive motor vehicle manufacturing facility property during the taxable year, (B)who does not make an election under section 179F(c), and (C)who makes an election under this subsection. (4)

Other definitions and special rules

(A)

Qualified plug-in electric drive motor vehicle manufacturing facility property

The term qualified plug-in electric drive motor vehicle manufacturing facility property has the meaning given such term under section 179F(d). (B)

Special rule for dual use property

In the case of any qualified plug-in electric drive motor vehicle manufacturing facility property which is used to produce both qualified property (as defined in section 179F(d)) and other property which is not qualified property, the amount of costs taken into account under paragraph (1) shall be reduced by an amount equal to— (i)the total amount of such costs (determined before the application of this subparagraph), multiplied by (ii)the percentage of property expected to be produced which is not qualified property. (C)

Election

(i)

In general

An election under this subsection for any taxable year shall be made on the taxpayer's return of the tax imposed by this chapter for the taxable year. Such election shall be made in such manner as the Secretary may by regulations prescribe. (ii)

Election irrevocable

Any election made under this subsection may not be revoked except with the consent of the Secretary. (5)

Credit refundable

For purposes of this title (other than this section), the credit allowed by reason of this subsection shall be treated as if it were allowed under subpart C. . (c)

Clerical amendment

The table of sections for part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: Sec. 179F. Election to expense manufacturing facilities producing plug-in electric drive motor vehicle and components. . (d)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

3.

Consumer incentives for plug-in electric drive motor vehicles

(a)

Increase in number of plug-In electric drive motor vehicles eligible for tax credit

(1)

In general

Subparagraph (B) of section 30D(b)(2) of the Internal Revenue Code of 1986 is amended by striking 250,000 and inserting 500,000. (2)

Effective date

The amendment made by this subsection shall apply to taxable years beginning after December 31, 2008. (b)

Conversion kits

(1)

In general

Section 30B of the Internal Revenue Code of 1986 (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 the lesser of— (A)an amount equal to— (i)$1,250, plus (ii)$100 for each half kilowatt hour of capacity of the plug-in traction battery module installed in such vehicle in excess of 2.5 kilowatt hours, or (B)50 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 $4,000 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, 2012. . (2)

Credit treated as part of alternative motor vehicle credit

Section 30B(a) of such Code 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) of such Code 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.. (4)

Effective date

The amendments made by this subsection shall apply to property placed in service after December 31, 2008, in taxable years beginning after such date. (c)

Certain 2- or 3-wheeled motor vehicles eligible for credit

(1)

In general

Section 30D of the Internal Revenue Code of 1986 is amended— (A)by redesignating subsections (f) and (g) as subsections (g) and (h), respectively, and (B)by inserting after subsection (e) the following new subsection: (f)

2- or 3-Wheeled Motor Vehicles

For purposes of this section— (1)

In general

Except as provided in paragraph (2), 2- or 3-wheeled motor vehicles shall be treated in the same manner as motor vehicles. (2)

Exceptions

(A)

Applicable amount

For purposes of this subsection, the applicable amount shall be $1,250. (B)

Other exceptions

(i)Subparagraph (B) of subsection (a)(2) shall be applied with respect to 2- or 3-wheeled motor vehicles by substituting $100 for each half kilowatt hour for $417 for each kilowatt hour. (ii)Subparagraph (A) of subsection (b)(1) shall be applied with respect to 2- or 3-wheeled motor vehicles by substituting $3,750 for $7,500. (iii)Subsection (c)(1) shall be applied with respect to 2- or 3-wheeled motor vehicles by substituting 2.5 kilowatt hours for 4 kilowatt hours. (iv)Subsection (c)(3) shall not apply with respect to 2- or 3-wheeled motor vehicles. (3)

Application of limitation

The limitation provided in subsection (b)(2) shall be applied separately with respect to 2- or 3-wheeled vehicles and with respect to other motor vehicles, and in applying such limitation to 2- or 3-wheeled vehicles, 50,000 shall be substituted for 500,000. (4)

2- or 3-wheeled motor vehicle

The term 2- or 3-wheeled vehicle means any vehicle— (A)which would be described in section 30(c)(2) except that it has 2 or 3 wheels, (B)with motive power having a seat or saddle for the use of the rider and designed to travel on not more than 3 wheels in contact with the ground, (C)which has an electric motor that produces in excess of 5-brake horsepower, (D)which draws propulsion from 1 or more traction batteries, and (E)which has been certified to the Department of Transportation pursuant to section 567 of title 49, Code of Federal Regulations, as conforming to all applicable Federal motor vehicle safety standards in effect on the date of the manufacture of the vehicle. . (2)

Effective date

The amendments made by this subsection shall apply to property placed in service after December 31, 2008, in taxable years beginning after such date. (d)

Credit with respect to low-speed vehicles

(1)

In general

Subsection (e) of section 30D of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (11)

Special rules for low-speed vehicles

In the case of a low-speed vehicle which meets the requirements of section 571.500 of title 49, Code of Federal Regulations— (A)subparagraph (A) of subsection (a)(2) shall be applied with respect low-speed vehicles by substituting $1,250 for $2,500, (B)subparagraph (B) of subsection (a)(2) shall be applied with respect to low-speed vehicles by substituting $100 for each half kilowatt hour for $417 for each kilowatt hour, (C)subparagraph (A) of subsection (b)(1) shall be applied with respect to low-speed vehicles by substituting $3,750 for $7,500, (D)the limitation provided in subsection (b)(2) shall be applied separately with respect to low-speed vehicles and with respect to other motor vehicles, and in applying such limitation to low-speed vehicles, 50,000 shall be substituted for 500,000, and (E)subsection (c)(3) shall not apply with respect to low-speed vehicles. . (2)

Effective date

The amendment made by this subsection shall apply to property placed in service after December 31, 2008, in taxable years beginning after such date.

4.

Recovery period for depreciation of smart meters and smart grid systems

(a)

5-year recovery period

(1)

In general

Subparagraph (B) of section 168(e)(3) of the Internal Revenue Code of 1986 is amended by striking and at the end of clause (vi), by striking the period at the end of clause (vii) and inserting , and, and by adding at the end the following new clauses: (viii)any qualified smart electric meter, and (ix)any qualified smart electric grid system. . (2)

Conforming amendments

Subparagraph (D) of section 168(e)(3) of such Code is amended by inserting and at the end of clause (i), by striking the comma at the end of clause (ii) and inserting a period, and by striking clauses (iii) and (iv). (b)

Technical amendments

Paragraphs (18)(A)(ii) and (19)(A)(ii) of section 168(i) of the Internal Revenue Code of 1986 are each amended by striking 16 years and inserting 10 years. (c)

Effective dates

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to property placed in service after the date of the enactment of this Act. (2)

Technical amendment

The amendments made by subsection (b) shall take effect as if included in section 306 of the Energy Improvement and Extension Act of 2008.

5.

Expansion and extension of electric and alternative fuel vehicle refueling property credit

(a)

In general

Section 30C of the Internal Revenue Code of 1986 is amended— (1)by striking 30 percent in subsection (a) and inserting 50 percent, and (2)by striking $30,000 in subsection (b)(1) and inserting $50,000. (b)

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.