[Congressional Record Volume 149, Number 38 (Monday, March 10, 2003)]
[Senate]
[Pages S3412-S3418]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BUNNING:
  S. 582. A bill to authorize the Department of Energy to develop and 
implement an accelerated research and development program for advanced 
clean coal technologies for use in coal-based electricity generating 
facilities and to amend the Internal Revenue Code of 1986 to provide 
financial incentives to encourage the retrofitting, repowering, or 
replacement of coal-based electricity generating facilities to protect 
the environment and improve efficiency and encourage the early 
commercial application of advanced clean coal technologies, so as to 
allow coal to help meet the growing need of the United States for the 
generation of reliable and affordable electricity; to the Committee on 
Finance.
  Mr. BUNNING. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 582

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       (a) Short Title.--This Act may be cited as the ``Coal 
     Energy Research Development and Demonstration Act of 2003''.

     SEC. 2. TABLE OF CONTENTS.

Sec. 1. Short title.
Sec. 2. Table of contents.

 TITLE I.--ACCELERATED TECHNOLOGY RESEARCH AND DEVELOPMENT PROGRAM FOR 
                     ADVANCED CLEAN COAL TECHNOLOGY

Sec. 101. Definitions.
Sec. 102. Cost and performance goals.
Sec. 103. Study.
Sec. 104. Technology research and development program.
Sec. 105. Authorization of appropriations.

                 TITLE II--CLEAN COAL POWER INITIATIVE

Sec. 201. Authorization of appropriations.
Sec. 202. Clean coal power initiative criteria.
Sec. 203. Report.
Sec. 204. Clean coal centers of excellence.

                    TITLE III--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements 
        in Existing Coal-Based Electricity Generation Facilities

Sec. 301. Credit for production from a qualifying clean coal technology 
              unit.

 Subtitle B--Incentives for Early Commercial Applications of Advanced 
                        Clean Coal Technologies

Sec. 302. Credit for investment in qualifying advanced clean coal 
              technology.
Sec. 303. Credit for production from a qualifying advanced clean coal 
              technology unit.

     Subtitle C--Treatment of persons Not Able To Use Entire Credit

Sec. 304. Treatment of persons not able to use entire credit.

 TITLE I--ACCELERATED TECHNOLOGY RESEARCH AND DEVELOPMENT PROGRAM FOR 
                     ADVANCED CLEAN COAL TECHNOLOGY

     SEC. 101. DEFINITIONS.

       In this title:
       (a) Cost and Performance Goals.--The term ``cost and 
     performance goals'' means the cost and performance goals 
     established under section 102.
       (b) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.

     SEC. 102. COST AND PERFORMANCE GOALS.

       (a) In General.--The Secretary shall perform an assessment 
     that identifies cost and performance goals of technologies 
     that would permit the continued cost-competitive use of coal 
     for electricity generation, as chemical feedstocks, and as 
     transportation fuel in 2007, 2015 and the years after 2020.
       (b) Consultation.--In establishing the cost and performance 
     goals, the Secretary shall--
       (1) consider activities and studies undertaken to date by 
     industry in cooperation with the Department of Energy in 
     support of such assessment; and
       (2) consult with interested entities, including coal 
     producers, industries using coal, organizations to promote 
     coal and advanced coal technologies, environmental 
     organizations and organizations representing workers.
       (c) Timing.--The Secretary shall--
       (1) Not later than 120 days after the date of enactment of 
     this Act, issue a set of draft cost and performance goals for 
     public comment; and
       (2) not later than 180 days after the date of enactment of 
     this Act, after taking into consideration any public comments 
     received, submit to Congress the final cost and performance 
     goals.

     SEC. 103. STUDY.

       (a) In General.--Not later than 1 year after the date of 
     enactment of this Act, and once every 2 years thereafter 
     through 2016, the Secretary, in cooperation with other 
     appropriate federal agencies, shall conduct a study to--
       (1) identify technologies that, by themselves or in 
     combination with other technologies, may be capable of 
     achieving the cost and performance goals;
       (2) assess the costs that would be incurred by, and the 
     period of time that would be required for, the development 
     and demonstration of technologies that, by themselves or in 
     combination with other technologies, contribute to the 
     achievement of the cost and performance goals;
       (3) develop recommendations for technology development 
     programs, which the Department of Energy could carry out in 
     cooperation with industry, to develop and demonstrate 
     technologies that, by themselves or in combination with other 
     technologies, achieves the cost and performance goals; and
       (4) develop recommendations for additional authorities 
     required to achieve the cost and performance goals, and 
     review and recommend changes, if any, to those cost and 
     performance goals if the Secretary determines that such 
     changes are necessary as a result of ongoing research, 
     development and demonstration of technologies.
       (b) Cooperation--In carrying out this section, the 
     Secretary shall give due weight to the expert advice of 
     representatives of the entities described in section 
     102(b)(2).

     SEC. 104. TECHNOLOGY RESEARCH, DEVELOPMENT AND DEMONSTRATION 
                   PROGRAM.

       (a) In General.--The Secretary shall carry out a technology 
     research, development and demonstration program to facilitate 
     production and generation of coal-based power through methods 
     and equipment under--
       (1) this Title;
       (2) the Federal Nonnuclear Energy Research and Development 
     Act of 1974 (42 U.S.C. 5901 et seq.);
       (3) the Energy Reorganization Act of 1974 (42 U.S.C. 5801 
     et seq.); and

[[Page S3413]]

       (4) title XVI of the Energy Policy Act of 1992 (42 U.S.C. 
     13381 et seq.).
       (b) Conditions.--The program described in subsection (a) 
     shall be designed to achieve the cost and performance goals 
     required by Section 102.

     SEC. 105. AUTHORIZATION OF APPROPRIATIONS.

       (a) In General.--There are authorized to be appropriated to 
     the Secretary $200,000,000 for fiscal year 2004, $210,000,000 
     for fiscal year 2005, and $220,500,000 for fiscal year 2006, 
     to remain available until expended, for coal and related 
     technologies research and development programs, which shall 
     include--
       (1) innovations for existing plants;
       (2) integrated gasification combined cycle;
       (3) advanced combustion systems;
       (4) turbines for synthesis gas derived from coal;
       (5) carbon capture and sequestration research and 
     development;
       (6) coal-derived transportation fuels and chemicals;
       (7) solid fuels and feedstocks; and
       (8) advanced coal-related research.
       (b) Limit on Use of Funds.--
       (1) Prior to the use of funds authorized by this section, 
     the Secretary shall transmit to the Congress a report 
     describing the proposed use of funds and containing a plan 
     that includes--
       (a) a detailed description of how proposals, if any, will 
     be solicited and evaluated, including a list of all 
     activities expected to be undertaken;
       (b) a detailed list of technical milestones for each coal 
     and related technology that will be pursued;
       (c) a description of how the programs authorized in this 
     section will be carried out so as to complement and not 
     duplicate activities authorized under the Clean Coal Power 
     Initiative authorized under Title II.
       (2) Thirty days shall elapse from receipt of the report 
     required by this subsection after which the Secretary may 
     then use the authorization of appropriations provided by this 
     section.

                 TITLE II--CLEAN COAL POWER INITIATIVE

     SEC. 201. AUTHORIZATION OF APPROPRIATIONS.

       (a) Clean Coal Power Initiative.--Except as provided in 
     subsection (b), there are authorized to be appropriated to 
     the Secretary to carry out the activities authorized by this 
     title $200,000,000 for each of the fiscal years 2003 through 
     2011, to remain available until expended.
       (b) Limit on Use of Funds.--
       (1) Notwithstanding subsection (a), the Secretary is 
     authorized to obligate the use of funds prior to the date 
     authorized herein, subject to appropriations.
       (2) The Secretary shall transmit to the Committee on Energy 
     and Commerce and the Committee on Science of the House of 
     Representatives, and to the Senate, a report, with respect to 
     subsection (a), containing--
       (A) a detailed assessment of whether the aggregate funding 
     levels provided under subsection (a) are the appropriate 
     funding levels for that program;
       (B) a detailed description of how proposals will be 
     solicited and evaluated, including a list of all activities 
     expected to be undertaken;
       (C) a detailed list of technical milestones for each coal 
     and related technology that will be pursued; and
       (D) a detailed description of how the program will avoid 
     problems enumerated in General Accounting Office reports on 
     the Clean Coal Technology Program, including problems that 
     have resulted in unspent funds and projects that failed 
     either financially or scientifically.
       (3) Thirty days elapse from receipt of the report required 
     by this subsection after which the Secretary may then use the 
     authorization of appropriations provided by this section.
       (c) Applicability.--Subsection (b) shall not apply to any 
     project begun before September 30, 2003.

     SEC. 202. CLEAN COAL POWER INITIATIVE CRITERIA.

       (a) In General.--The Secretary shall not provide funding 
     under this title for any project that does not advance 
     efficiency, environmental performance, and cost 
     competitiveness well beyond the level of technologies that 
     are in operation or have been demonstrated as of the date of 
     the enactment of this Act.
       (b) Technical Criteria for Clean Coal Power Initiative.--
       (1) Gasification.--
       (A) In allocating the funds made available under section 
     201(a), the Secretary shall ensure that not less than 55 
     percent, but not more than 80 percent, of the funds are used 
     for coal-based gasification technologies, coal based projects 
     that includes the separation and capture of carbon dioxide, 
     or coal based projects that include gasification combined 
     cycle, gasification fuel cells, gasification coproduction, or 
     hybrid gasification/combustion.
       (B) The Secretary shall set technical milestones specifying 
     emissions levels that coal gasification projects must be 
     designed to and reasonably expected to achieve. The 
     milestones shall get more restrictive through the life of the 
     program. The milestones shall be designed to achieve by 2020 
     coal gasification projects able--
       (i) to remove 99 percent of sulfur dioxide;
       (ii) to emit no more than .05 lbs of NOX per 
     million BTU;
       (iii) to achieve substantial reductions in mercury 
     emissions; and
       (iv) to achieve a thermal efficiency of--
       (I) 60 percent for coal of more than 9,000 Btu;
       (II) 59 percent for coal of 7,000 to 9,000 Btu; and
       (III) 57 percent for coal of less than 7,000 Btu.
       (2) Other projects.--For projects not described in 
     paragraph (1), the Secretary shall set technical milestones 
     specifying emissions levels that the projects must be 
     designed to and reasonably expected to achieve. The 
     milestones shall get more restrictive through the life of the 
     program. The milestones hall be designed to achieve by 2010 
     projects able--
       (A) to remove 97 percent of sulfur dioxide;
       (B) to emit no more than .08 lbs of NOx per million BTU;
       (C) to achieve substantial reductions in mercury emissions; 
     and
       (D) to achieve a thermal efficiency of--
       (i) 45 percent for coal of more than 9,000 Btu;
       (ii) 44 percent for coal 7,000 to 9,000 Btu; and
       (iii) 42 percent for coal of less than 7,000 Btu.
       (3) Consultation.--Before setting the technical milestones 
     under paragraphs (1)(B) and (2), the Secretary shall consult 
     with the Administrator of the Environmental Protection Agency 
     and interested entities, including coal producers, industries 
     using coal, organizations to promote coal or advanced coal 
     technologies, environmental organizations, and organizations 
     representing workers.
       (4) Existing units.--In the case of projects at existing 
     units, in lieu of the thermal efficiency requirements set 
     forth in paragraph (1)(B)(iv) and (2)(D), the projects shall 
     be designed to achieve an overall thermal design efficiency 
     improvement compared to the efficiency of the unit as 
     operated, of not less than--
       (A) 7 percent for coal of more than 9,000 Btu;
       (B) 6 percent for coal of 7,000 to 9,000 Btu; or
       (C) 4 percent for coal of less than 7,000 Btu.
       (c) Financial Criteria.--The Secretary shall not provide a 
     funding award under this title unless the recipient has 
     documented to the satisfaction of the Secretary that--
       (1) the award recipient is financially viable without the 
     receipt of additional Federal funding;
       (2) the recipient will provide sufficient information to 
     the Secretary for the Secretary to ensure that the award 
     funds are spent efficiently and effectively; and
       (3) a market exists for the technology being demonstrated 
     or applied, as evidenced by statements of interest in writing 
     from potential purchasers of the technology.
       (d) Financial Assistance.--The Secretary shall provide 
     financial assistance to projects that meet the requirements 
     of subsections (a), (b), and (c) and are likely to--
       (1) achieve overall cost reductions in the utilization of 
     coal to generate useful forms of energy;
       (2) improve the competitiveness of coal among various forms 
     of energy in order to maintain a diversity of fuel choices in 
     the United States to meet electricity generation 
     requirements; and
       (3) demonstrate methods and equipment that are applicable 
     to 25 percent of the electricity generating facilities that 
     use coal as the primary feedstock as of the date of the 
     enactment of this Act.
       (e) Federal Share.--The Federal share of the cost of a coal 
     or related technology project funded by the Secretary shall 
     not exceed 50 percent. The Federal share may repaid over a 
     reasonable period of time as agreed upon with the Secretary.
       (f) Applicability.--No technology, or level of emission 
     reduction, shall be treated as adequately demonstrated for 
     purposes of section 111 of the Clean Air Act, achievable for 
     purposes of section 169 of that Act, or achievable in 
     practice for purposes of section 171 of that Act solely by 
     reason of the use of such technology, or the achievement of 
     such emission reduction, by one or more facilities 
     receiving assistance under this title.

     SEC. 203. REPORT.

       (a) Not later than 1 year after the date of the enactment 
     of this Act, and once every 2 years thereafter through 2011, 
     the Secretary, in consultation with other appropriate Federal 
     agencies, shall transmit to the Committee on Energy and 
     Commerce and the Committee on Science of the House of 
     Representatives, and to the Senate, a report describing--
       (1) the technical milestones set forth in section 202 and 
     how those milestones ensure progress toward meeting the 
     requirements of subsections (b)(1)(B) and (b)(2) of section 
     202; and

     SEC. 204. CLEAN COAL CENTERS OF EXCELLENCE.

       As part of the program authorized in section 201, the 
     Secretary shall award competitive, merit-based grants to 
     universities for the establishment of Centers of Excellence 
     for Energy Systems of the Future. The Secretary shall provide 
     grants to universities that can show the greatest potential 
     for advancing new clean coal technologies.

                    TITLE III--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements 
        in Existing Coal-Based Electricity Generation Facilities

     SEC. 301. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL 
                   TECHNOLOGY UNIT.

       (a) Credit for Production From a Qualifying Clean Coal 
     Technology Unit.--Subpart D of part IV of subchapter A of 
     chapter

[[Page S3414]]

     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. 451. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN 
                   COAL TECHNOLOGY UNIT.

       ``(a) General Rule.--For purposes of section 38, the 
     qualifying clean coal technology production credit of any 
     taxpayer for any taxable year is equal to the product of--
       ``(1) the applicable amount of clean technology production 
     credit, multiplied by
       ``(2) the applicable percentage of the kilowatt hours of 
     electricity produced and the equivalent heat value of other 
     fuels or chemicals produced by the taxpayer during such 
     taxable year at a qualifying clean coal technology unit, but 
     only if such production occurs during the 10-year period 
     beginning on the date the unit was returned to service after 
     becoming a qualifying clean coal technology unit.
       ``(b) Applicable Amount.--
       ``(1) In general.--For purposes of this section, the 
     applicable amount of clean coal technology production credit 
     is equal to $0.0034 per kilowatt-hour of electricity produced 
     and the equivalent heat value of other fuels or chemicals 
     produced from not more than 300,000 kilowatts of nameplate 
     capacity at the same qualifying clean coal technology unit.
       ``(2) Inflation adjustment.--For calendar years after 2003, 
     the applicable amount of clean coal technology production 
     credit shall be adjusted by multiplying such amount by the 
     inflation adjustment factor for the calendar year in which 
     the amount is applied. If any amount as increased under the 
     preceding sentence is not a multiple of 0.01 cent, such 
     amount shall be rounded to the nearest multiple of 0.01 cent.
       ``(c) Applicable Percentage.--For purposes of this section, 
     with respect to any qualifying clean coal technology unit, 
     the applicable percentage is the percentage equal to the 
     ratio which the portion of the national megawatt capacity 
     limitation allocated to the taxpayer with respect to such 
     unit under subsection (e) bears to the total megawatt 
     capacity of such unit.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualifying clean coal technology unit.--The term 
     ``qualifying clean coal technology unit'' means a clean coal 
     technology unit of the taxpayer which--
       ``(A) on the date of the enactment of this section was a 
     coal-based electricity generating steam generator-turbine 
     unit which was not a clean coal technology unit;
       ``(B) has a nameplate capacity rating of not more than 
     300,000 kilowatts as of the date of enactment of this 
     section;
       ``(C) becomes a clean coal technology unit as the result of 
     the retrofitting, repowering, or replacement of the unit with 
     clean coal technology, which nameplate capacity may then be 
     greater than 300,000 kilowatts, during the 10-year period 
     beginning on the date of the enactment of this section;
       ``(D) is not receiving nor is scheduled to receive funding 
     under the Clean Coal Technology Program, the Power Plant 
     Improvement Initiative, or the Clean Coal Power Initiative 
     administered by the Secretary of Energy; and
       ``(E) receives an allocation of a portion of the national 
     megawatt capacity limitation under subsection (e), which 
     shall not exceed 300,000 kilowatts.
       ``(2) Clean coal technology unit.--The term ``clean coal 
     technology unit'' means a unit which--
       ``(A) uses clean coal technology, including advanced 
     pulverized coal or atmosphere fluidized bed combustion, 
     pressurized fluidized bed combustion, integrated gasification 
     combined cycle, or any other technology for the production of 
     electricity;
       ``(B) uses at least 75 percent coal to produce 50 percent 
     or more of its thermal output as electricity;
       ``(C) has a design net heat rate of at least 500 less than 
     that of such unit as described in paragraph (1)(A);
       ``(D) has a maximum design net heat rate of not more than 
     9,500; and
       ``(E) meets the pollution control requirements of paragraph 
     (3).
       ``(3) Pollution control requirements.--
       ``(A) In general.--A unit meets the requirements of this 
     paragraph if--
       ``(i) its emissions of sulfur dioxide, nitrogen oxide, or 
     particulates meet the lower of the emission levels for each 
     such emission specified in--
       ``(I) subparagraph (B), or
       ``(II) the new source performance standards of the Clean 
     Air Act (42 U.S.C. 7411) which are in effect for the category 
     of source at the time of the retrofitting, repowering, or 
     replacement of the unit, and
       ``(ii) its emissions do not exceed any relevant emission 
     level specified by regulation pursuant to the hazardous air 
     pollutant requirements of the Clean Air Act (42 U.S.C. 7412) 
     is effect at the time of the retrofitting, repowering, or 
     replacement.
       ``(B) Specific levels.--The levels specified in this 
     subparagraph are--
       ``(i) in the case of sulfur dioxide emissions, 50 percent 
     of the sulfur dioxide emission levels specified in the new 
     source performance standards of the Clean Air Act (42 U.S.C. 
     7411) in effect on the date of the enactment of this section 
     for the category of source,
       ``(ii) in the case of nitrogen oxide emissions--
       ``(I) 0.1 pound per million Btu of heat input if the unit 
     is not a cyclone-fired boiler, and
       ``(II) if the unit is a cyclone-fired boiler, 15 percent of 
     the uncontrolled nitrogen oxide emissions from such boilers, 
     and
       ``(ii) in the case of particulate emissions, 0.02 pound per 
     million Btu of heat input.
       ``(4) Design net heat rate.--The design net heat rate with 
     respect to any unit, measured in Btu per kilowatt hour 
     (HHV)--
       ``(A) shall be based on the design annual heat input to and 
     the design annual net electrical power, fuels and chemicals 
     output from such unit (determined without regard to such 
     unit's co-generation of steam),
       ``(B) shall be adjusted for the heat content of the design 
     coal to be used by the unit if it is less than 12,000 Btu per 
     pound according to the following formula:

     Design net heat rate = Unit net heat rate [1-{((12,000-design 
     coal heat content, Btu per pound)/1,000) 0.013 ],
       ``(C) shall be corrected for the site reference conditions 
     of--
       ``(i) elevation above sea level of 500 feet,
       ``(ii) air pressure of 14.4 pounds per square inch absolute 
     (psia),
       ``(iii) temperature, dry bulb of 63 deg.F,
       ``(iv) temperature, wet bulb of 54 deg.F, and
       ``(v) relative humidity of 55 percent, and
       ``(D) shall be adjusted (or credit given) for any 
     qualifying unit that installs carbon capture controls that 
     remove not less than 50 percent of the unit's carbon dioxide 
     emissions up to the design heat rate level that would have 
     resulted without installation of carbon capture controls.
       ``(5) HHV.--The term ``HHV'' means higher heating value.
       ``(6) Application of certain rules.--The rules of 
     paragraphs (3), (4), and (5) of section 45(d) shall apply.
       ``(7) Inflation adjustment factor.--
       ``(A) In general.-- The term ``inflation adjustment 
     factor'' means, with respect to a calendar year, a fraction 
     the numerator of which is the GDP implicit price deflator for 
     the preceding calendar year and the denominator of which is 
     the GDP implicit price deflator for the calendar year 2003.
       ``(B) GDP Implicit price deflator.--The term ``GDP implicit 
     price deflator'' means the most recent revision of the 
     implicit price deflator for the gross domestic product as 
     computed by the Department of Commerce before March 15 of the 
     calendar year.
       ``(8) Noncompliance with pollution laws.--For purposes of 
     this section, a unit which is not in compliance with the 
     applicable State and Federal pollution prevention, control, 
     and permit requirements for any period of time shall not be 
     considered to be a qualifying clean coal technology unit 
     during such period.
       ``(e) National Limitation on the Aggregate Capability of 
     Qualifying Clean Coal Technology Units.--
       ``(1) In general.--For purposes of subsection (d)(1)(E), 
     the national megawatt capacity limitation for qualifying 
     clean coal technology units is 4,000 megawatts.
       ``(2) Allocation of limitation.--The Secretary shall 
     allocate the national megawatt capacity limitation for 
     qualifying clean coal technology units in such manner as the 
     Secretary may prescribe under the regulations under paragraph 
     (3) provided, however, that such allocation shall not exceed 
     300,000 kilowatts per qualifying clean coal technology unit.
       ``(3) Regulations.--Not later than 6 months after the date 
     of the enactment of this section, the Secretary shall 
     prescribe such regulations as may be necessary or 
     appropriate--
       ``(A) to carry out the purposes of this subsection,
       ``(B) to limit the capacity of any qualifying clean coal 
     technology unit to which this section applies so that the 
     combined megawatt capacity allocated to all such units under 
     this subsection when all such units are placed in service 
     during the 10-year period described in subsection (d)(1)(C), 
     does not exceed 4,000 megawatts,
       ``(C) to provide a certification process under which the 
     Secretary, in consultation with the Secretary of Energy, 
     shall approve and allocate the national megawatt capacity 
     limitation--
       ``(i) to encourage the units with the highest thermal 
     efficiencies, when adjusted for the heat content of the 
     design coal and site reference conditions described in 
     subsection (d)(4)(C), and superior environmental performance 
     compared to other proposals, be placed in service as soon as 
     possible,
       ``(ii) to allocate capacity to taxpayers that have a 
     definite and credible plan for placing into commercial 
     operation a qualifying clean coal technology unit, 
     including--
       ``(I) a site,
       ``(II) contractual commitments for procurement and 
     construction or, in the case of regulated utilities, the 
     agreement of the State utility commission,
       ``(III) filings for all necessary preconstruction 
     approvals,
       ``(IV) a demonstrated record of having successfully 
     completed comparable projects on a timely basis, and
       ``(V) such other factors that the Secretary determines are 
     appropriate,
       ``(D) to allocate the national megawatt capacity limitation 
     to a portion of the capacity of a qualifying clean coal 
     technology unit if the Secretary determines that such an 
     allocation would maximize the amount of efficient production 
     encouraged with the available tax credits,
       ``(E) to set progress requirements and conditional 
     approvals so that capacity allocations for clean coal 
     technology units that become unlikely to meet the necessary 
     conditions for qualifying can be reallocated by the

[[Page S3415]]

     Secretary to other clean coal technology units, and
       ``(F) to provide taxpayers with opportunities to correct 
     administrative errors and omissions with respect to 
     allocations and record keeping within a reasonable period 
     after discovery, taking into account the availability of 
     regulations and other administrative guidance from the 
     Secretary.''.
       (b) Credit Treated as Business Credit.--Section 38(b) of 
     the Internal Revenue Code of 1986, as amended by this Act, is 
     amended by striking ``plus'' at the end of paragraph (18), by 
     striking the period at the end of paragraph (19) and 
     inserting ``, plus'', and by adding at the end the following 
     new paragraph:
       ``(20) the qualifying clean coal technology production 
     credit determined under section 45I(a).''.
       (c) Transitional Rule.--Section 39(d) of the Internal 
     Revenue Code of 1986 (relating to transitional rules), as 
     amended by this Act, is amended by adding at the end the 
     following new paragraph:
       ``(16) No carryback of section 45I credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying clean 
     coal technology production credit determined under section 
     45I may be carried back to a taxable year ending on or before 
     the date of the enactment of section 45I.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986, as amended by this Act, is amended by 
     adding at the end the following new item:

``Sec. 45I. Credit for production from a qualifying clean coal 
              technology unit.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this act, in taxable years ending after such date.

 Subtitle B--Incentives for Early Commercial Applications of Advanced 
                        Clean Coal Technologies

     SEC. 302. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN 
                   COAL TECHNOLOGY.

       (a) Allowance of Qualifying Advanced Clean Coal Technology 
     Unit Credit.--Section 46 of the Internal Revenue Code of 1986 
     (relating to amount 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) the qualifying advanced clean coal technology unit 
     credit.''.
       (b) Amount of Qualifying Advanced Clean Coal Technology 
     Unit Credit.--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 48 the following new section:

     ``SEC. 48A. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY UNIT 
                   CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     qualifying advanced clean coal technology unit credit for any 
     taxable year is an amount equal to 10 percent of the 
     applicable percentage of the qualified investment in a 
     qualifying advanced clean coal technology unit for such 
     taxable year.
       ``(b) Qualifying Advanced Clean Coal Technology Unit.--
       ``(1) In general.--For purposes of subsection (a), the term 
     ``q1ualifying advanced clean coal technology unit'' means an 
     advanced clean coal technology unit of the taxpayer--
       ``(A)(i)(I) in the case of a unit first placed in service 
     after the date of the enactment of this section, the original 
     use of which commences with the taxpayer, or
       ``(II) in the case of the retrofitting or repowering of a 
     unit first placed in service before such date of enactment, 
     the retrofitting or repowering of which is completed by the 
     taxpayer after such date, or
       ``(ii) which is acquired through purchase (as defined by 
     section 179(d)(2)),
       ``(B) which is depreciable under section 167,
       ``(C) which has a useful life of not less than 4 years,
       ``(D) which is located in the United States,
       ``(E) which is not receiving nor is scheduled to receive 
     funding under the Clean Coal Technology Program, the Power 
     Plant Improvement Initiative, or the Clean Coal Power 
     Initiative administered by the Secretary of Energy,
       ``(F) which is not a qualifying clean coal technology unit, 
     and
       ``(G) which receives an allocation of a portion of the 
     national megawatt capacity limitation under subsection (f).
       ``(2) Special rule for sale-leasebacks.--For purposes of 
     subparagraph (A) of paragraph (1), in the case of a unit 
     which--
       ``(A) is originally placed in service by a person, and
       ``(B) is sold and leased back by such person, or is leased 
     to such person, within 3 months after the date such unit was 
     originally placed in service, for a period of not less than 
     12 years, such unit shall be treated as originally placed in 
     service not earlier than the date on which such unit is used 
     under the leaseback (or lease) referred to in subparagraph 
     (B). The preceding sentence shall not apply to any property 
     if the lessee and lessor of such property make an 
     election under this sentence. Such as election, once made, 
     may be revoked only with the consent of the Secretary.
       ``(3) Noncompliance with pollution laws.--For purposes of 
     this subsection, a unit which is not in compliance with the 
     applicable State and Federal pollution prevention, control, 
     and permit requirements for any period of time shall not be 
     considered to be a qualifying advanced clean coal technology 
     unit during such period.
       ``(c) Applicable Percentage.--For purposes of this section, 
     with respect to any qualifying advanced clean coal technology 
     unit, the applicable percentage is the percentage equal to 
     the ratio which the portion of the national megawatt capacity 
     limitation allocated to the taxpayer with respect to such 
     unit under subsection (f) bears to the total megawatt 
     capacity of such unit.
       ``(d) Advanced Clean Coal Technology Unit.--For purposes of 
     this section--
       ``(1) In general.--The term ``advanced clean coal 
     technology unit'' means a new, retrofit, or repowering unit 
     of the taxpayer which--
       ``(A) is--
       ``(i) an eligible advanced pulverized coal or atmospheric 
     fluidized bed combustion technology unit,
       ``(ii) an eligible pressurized fluidized bed combustion 
     technology unit,
       ``(iii) an eligible integrated gasification combined cycle 
     technology unit, or
       ``(iv) an eligible other technology unit, and
       ``(B) meets the carbon emission rate requirements of 
     paragraph (6).
       ``(2) Eligible advanced pulverized coal or atmospheric 
     fluidized bed combustion technology unit.--The term 
     ``eligible advanced pulverized coal or atmospheric fluidized 
     bed combustion technology unit'' means a clean coal 
     technology unit using advanced pulverized coal or atmospheric 
     fluidized bed combustion technology which--
       ``(A) is placed in service after the date of the enactment 
     of this section and before January 1, 2015, and
       ``(B) has a design net heat of not more than 8,500 (8,900 
     in the case of units placed in service before 2011).
       ``(3) Eligible pressurized fluidized bed combustion 
     technology unit.--The term ``eligible pressurized fluidized 
     bed combustion technology unit'' means a clean coal 
     technology unit using pressurized fluidized bed combustion 
     technology which--
       ``(A) is placed in service after the date of the enactment 
     of this section and before January 1, 2019, and
       ``(B) has a design net heat of not more than 7,720 (8,900 
     in the case of units placed in service before 2011, and 8,500 
     in the case of units placed in service after 2010 and before 
     2015).
       ``(4) Eligible integrated gasification combined cycle 
     technology unit.--The term ``eligible integrated gasification 
     combined cycle technology unit'' means a clean coal 
     technology unit using integrated gasification combined cycle 
     technology, with or without fuel or chemical co-production, 
     which--
       ``(A) is placed in service after the date of the enactment 
     of this section and before January 1, 2019.
       ``(B) has a design net heat rate of not more than 7,720 
     (8,900 in the case of units placed in service before 2011, 
     and 8,500 in the case of units placed in service after 2010 
     and before 2015) and
       ``(C) has a net thermal efficiency (HHV) using coal with 
     fuel or chemical co-production of not less than 44.2 percent 
     (38.4 percent in the case of units placed in service before 
     2011, and 40.2 percent in the case of units placed in service 
     after 2010 and before 2015).
       ``(5) Eligible other technology unit.--The term ``eligible 
     other technology unit'' means a clean coal technology unit 
     using any other technology for the production of electricity 
     which is placed in service after the date of the enactment of 
     this section and before January 1, 2019.
       ``(6) Carbon emission rate requirements--
       ``A) In general--Except as provided in subparagraph (B), a 
     unit meets the requirements of this paragraph if--
       ``(i) in the case of a unit design coal with a heat content 
     of not more than 9,000 Btu per pound, the carbon emission 
     rate is less than 0.60 pound of carbon per kilowatt hour, and
       ``(ii) in the case of a unit design coal with a heat 
     content of more than 9,000 Btu per pound, the carbon emission 
     rate is less than 0.54 pound of carbon per kilowatt hour.
       ``(B) Eligible other technology unit.--In the case of an 
     eligible other technology unit, subparagraph (A) shall be 
     applied by substituting ``0.51'' and ``0.459'' for ``0.60'' 
     and ``0.54'', respectively.
       ``(e) General Definitions.--Any term used in this section 
     which is also used in section 45I shall have the meaning 
     given such term in section 45I.
       ``(f) National Limitation on the Aggregate Capacity of 
     Advanced Clean Coal Technology Units--
       ``(1) In general.--For purposes of subsection (b)(1)(G), 
     the national megawatt capacity limitation is--
       ``(A) for qualifying advanced clean coal technology units 
     using advanced pulverized coal or atmospheric fluidized bed 
     combustion technology, not more than 1,000 megawatts (not 
     more than 500 megawatts in the case of units placed in 
     service before 2011),
       ``(B) for such units using pressurized fluidized bed 
     combustion technology, not more than 500 megawatts (not more 
     than 250 megawatts in the case of units placed in service 
     before 2011),
       ``(C) for such units using integrated gasification combined 
     cycle technology, with or without fuel or chemical co-
     production, not more than 2,000 megawatts (not more than 750 
     megawatts, or not more than one project with a design net 
     heat rate greater than 8900 Btu per kilowatt hour, whichever 
     is less, in the case of units placed in service before 2011), 
     and

[[Page S3416]]

       ``(D) for such units using other technology for the 
     production of electricity, not more than 500 megawatts (not 
     more than 250 megawatts in the case of units placed in 
     service before 2011).
       ``(2) Allocation of limitation.--The Secretary shall 
     allocate the national megawatt capacity limitation for 
     qualifying advanced clean coal technology units in such 
     manner as the Secretary may prescribe under the regulations 
     under paragraph (3).
       ``(3) Regulations.--Not later than 6 months after the date 
     of the enactment of this section, the Secretary shall 
     prescribe such regulations as may be necessary or 
     appropriate--
       ``(A) to carry out the purposes of this subsection and 
     section 45J,
       ``(B) to limit the capacity of any qualifying advanced 
     clean coal technology unit to which this section applies so 
     that the combined megawatt capacity of all such units to 
     which this section applies does not exceed 4,000 megawatts.
       ``(C) to provide a certification process described in 
     section 45I(e)(3)(C)(i)-(ii),
       ``(D) to carry out the purposes described in subparagraphs 
     (D), (E), and (F) of section 45I(e)(3), and
       ``(E) to reallocate capacity which is not allocated to any 
     technology described in subparagraphs (A) through (D) of 
     paragraph (1) because an insufficient number of qualifying 
     units request an allocation for such technology, to another 
     technology described in such subparagraphs in order to 
     maximize the amount of energy efficient production 
     encouraged with the available tax credits.
       ``(4) Selection criteria.--For purposes of paragraph 
     (3)(C), the selection criteria for allocating the national 
     megawatt capacity limitation to qualifying advanced clean 
     coal technology units--
       ``(A) shall be established by the Secretary of Energy as 
     part of a competitive solicitation,
       ``(B) shall include primary criteria of minimum design net 
     heat rate, maximum design thermal efficiency, environmental 
     performance, and lowest cost to the Government,
       ``(C) shall include criteria for the selection of a unit(s) 
     that achieves a thermal efficiency of lower than 8,900 Btu 
     per kilowatt hour in that instance where two or more projects 
     are otherwise eligible for the credit provided by this 
     section, and have applied to the Secretary for selection at 
     or near the same period in time, and
       ``(D) shall include supplemental criteria as determined 
     appropriate by the Secretary of Energy.
       ``(g) Qualified Investment.--For purposes of subsection 
     (a), the term ``qualified investment'' means, with respect to 
     any taxable year, the basis of a qualifying advanced clean 
     coal technology unit placed in service by the taxpayer during 
     such taxable year (in the case of a unit described in 
     subsection (b)(1)(A)(i)(II), only that portion of the basis 
     of such unit which is properly attributable to the 
     retrofitting or repowering of such unit).
       ``(h) Qualified Progress Expenditures--
       ``(1) Increase in qualified investment.--In the case of a 
     taxpayer who has made an election under paragraph (5), the 
     amount of the qualified investment of such taxpayer for the 
     taxable year (determined under subsection (g) without regard 
     to this subsection) shall be increased by an amount equal to 
     the aggregate of each qualified progress expenditure for the 
     taxable year with respect to progress expenditure property.
       ``(2) Progress expenditure property defined.--For purposes 
     of this subsection, the term ``progress expenditure 
     property'' means any property being constructed by or for the 
     taxpayer and which it is reasonable to believe will qualify 
     as a qualifying advanced clean coal technology unit which is 
     being constructed by or for the taxpayer when it is placed in 
     service.
       ``(3) Qualified progress expenditures defined.--For 
     purposes of this subsection--
       ``(A) Self-constructed property.--In the case of any self-
     constructed property, the term ``qualified progress 
     expenditures'' means the amount which, for purposes of this 
     subpart, is properly chargeable (during such taxable year) to 
     capital account with respect to such property.
       ``(B) Nonself-constructed property.--In the case of 
     nonself-constructed property, the term ``qualified progress 
     expenditures'' means the amount paid during the taxable year 
     to another person for the construction of such property.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Self-constructed property.--The term ``self-
     constructed property'' means property for which it is 
     reasonable to believe that more than half of the construction 
     expenditures will be made directly by the taxpayer.
       ``(B) Nonself-constructed property.--The term ``nonself-
     constructed property'' means property which is not self-
     constructed property.
       ``(C) Construction, etc.--The term ``construction'' 
     includes reconstruction and erection, and the term 
     ``constructed'' includes reconstructed and erected.
       ``(D) Only construction of qualifying advanced clean coal 
     technology unit to be taken into account.--Construction shall 
     be taken into account only if, for purposes of this subpart, 
     expenditures therefor are properly chargeable to capital 
     account with respect to the property.
       ``(5) Election.--An election under this subsection may be 
     made at such time and in such manner as the Secretary may by 
     regulations prescribe. Such an election shall apply to the 
     taxable year for which made and to all subsequent taxable 
     years. Such an election, once made, may not be revoked except 
     with the consent of the Secretary.
       ``(i) Coordination With Other Credits.--This section shall 
     not apply to any property with respect to which the 
     rehabilitation credit under section 47 or the energy credit 
     under section 48 is allowed unless the taxpayer elects to 
     waive the application of such credit to such property.''.
       (c) Recapture.--Section 50(a) of the Internal Revenue Code 
     of 1986 (relating to other special rules) is amended by 
     adding at the end the following new paragraph:
       ``(6) Special rules relating to qualifying advanced clean 
     coal technology unit.--For purposes of applying this 
     subsection in the case of any credit allowable by reason of 
     section 48A, the following shall apply:
       ``(A) General rule.--In lieu of the amount of the increase 
     in tax under paragraph (1), the increase in tax shall be an 
     amount equal to the investment tax credit allowed under 
     section 38 for all prior taxable years with respect to a 
     qualifying advanced clean coal technology unit (as defined by 
     section 48A(b)(1)) multiplied by a fraction whose numerator 
     is the number of years remaining to fully depreciate under 
     this title the qualifying advanced clean coal technology unit 
     disposed of, and whose denominator is the total number of 
     years over which such unit would otherwise have been subject 
     to depreciation. For purposes of the preceding sentence, the 
     year of disposition of the qualifying advanced clean coal 
     technology unit shall be treated as a year of remaining 
     depreciation.
       ``(B) Property ceases to qualify for progress 
     expenditures.--Rules similar to the rules of paragraph (2) 
     shall apply in the case of qualified progress expenditures 
     for a qualifying advanced clean coal technology unit under 
     section 48A, except that the amount of the increase in tax 
     under subparagraph (A) of this paragraph shall be substituted 
     for the amount described in such paragraph (2).
       ``(C) Application of paragraph.--This paragraph shall be 
     applied separately with respect to the credit allowed under 
     section 38 regarding a qualifying advanced clean coal 
     technology unit.''.
       (d) Transitional Rule.--Section 39(d) of the Internal 
     Revenue Code of 1986 (relating to transitional rules), as 
     amended by this Act, is amended by adding at the end the 
     following new paragraph:
       ``(17) No carryback of section 48a credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying advanced 
     clean coal technology unit credit determined under section 
     48A may be carried back to a taxable year ending on or before 
     the date of the enactment of section 48A.''.
       (e) Technical Amendments--
       (1) Section 49(a)(1)(C) of the Internal Revenue Code of 
     1986 is amended by striking ``and'' at the end of clause 
     (ii), by striking the period at the end of clause (iii) and 
     inserting ``, and'', and by adding at the end the following 
     new clause:
       ``(iv) the portion of the basis of any qualifying advanced 
     clean coal technology unit attributable to any qualified 
     investment (as defined by section 48A(g)).''.
       (2) Section 50(a)(4) of the Internal Revenue Code of 1986 
     is amended by striking ``and (2)'' and inserting ``(2), and 
     (6)''.
       (3) Section 50(c) of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new paragraph:
       ``(6) Nonapplication.--Paragraphs (1) and (2) shall not 
     apply to any qualifying advanced clean coal technology unit 
     credit under section 48A.''.
       (4) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1 of the Internal Revenue Code of 
     1986 is amended by inserting after the item relating to 
     section 48 the following new item:

``Sec. 48A. Qualifying advanced clean coal technology unit credit.''.

       (f) 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. 2212. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED 
                   CLEAN COAL TECHNOLOGY UNIT.

       (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), as amended by this Act, is amended 
     by adding at the end the following new section:

     ``SEC. 45J. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED 
                   CLEAN COAL TECHNOLOGY UNIT.

       ``(a) General Rule.--For purposes of section 38, the 
     qualifying advanced clean coal technology production credit 
     of any taxpayer for any taxable year is equal to--
       ``(1) the applicable amount of advanced clean coal 
     technology production credit, multiplied by
       ``(2) the applicable percentage (as determined under 
     section 48A(c)) of the sum of--
       ``(A) the kilowatt hours of electricity, plus
       ``(B) each 3,413 Btu of fuels or chemicals,

     produced by the taxpayer during such taxable year at a 
     qualifying advanced clean coal technology unit during the 10-
     year period beginning on the date the unit was originally

[[Page S3417]]

     placed in service (or returned to service after becoming a 
     qualifying advanced clean coal technology unit).
       ``(b) Applicable Amount.--For purposes of this section, the 
     applicable amount of advanced clean coal technology 
     production credit with respect to production from a 
     qualifying advanced clean coal technology unit shall be 
     determined as follows:
       ``(1) Where the qualifying advanced clean coal technology 
     unit is producing electricity only:
       ``(A) In the case of a unit originally placed in service 
     before 2011, if--

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
          ``The design net heat rate is:            For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not more than 8,500...............................     $.0060     $.0038
More than 8,500 but not more than 8,750...........     $.0025     $.0010
More than 8,750 but less than 8,900...............     $.0010    $.0010.
------------------------------------------------------------------------

       ``(B) In the case of a unit originally placed in service 
     after 2010 and before 2015, if--

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
          ``The design net heat rate is:            For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not more than 7,770...............................     $.0105     $.0090
More than 7,770 but not more than 8,125...........     $.0085     $.0068
More than 8,125 but less than 8,350...............     $.0075    $.0055.
------------------------------------------------------------------------

       ``(C) In the case of a unit originally placed in service 
     after 2014 and before 2019, if--

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
          ``The design net heat rate is:            For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not more than 7,380...............................     $.0140     $.0115
More than 7,380 but not more than 7,720...........     $.0120    $.0090.
------------------------------------------------------------------------

       ``(2) Where the qualifying advanced clean coal technology 
     unit is producing fuel or chemicals:
       ``(A) In the case of a unit originally placed in service 
     before 2011, if--

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
``The unit design net thermal efficiency (HHV) is:  For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not less than 40.6 percent........................     $.0060     $.0038
Less than 40.6 but not less than 40 percent.......     $.0025     $.0010
Less than 40 but not less than 38.4 percent.......     $.0010    $.0010.
------------------------------------------------------------------------

       ``(B) In the case of a nit originally placed in service 
     after 2010 and before 2015, if--

------------------------------------------------------------------------
                                                        The applicable
                                                         amount is:
                                                   ---------------------
                                                     For the
``The unit design net thermal efficiency (HHV) is:    1st 5     For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not less than 43.6 percent........................     $.0105     $.0090
Less than 43.6 but not less than 42 percent.......     $.0085     $.0068
Less than 42 but not less than 40.2 percent.......     $.0075    $.0055.
------------------------------------------------------------------------

       ``(C) In the case of a unit originally placed in service 
     after 2014 and before 2019, if--

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
``The unit design net thermal efficiency (HHV) is:  For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not less than 44.2 percent........................     $.0140     $.0115
Less than 44.2 but not less than 43.9 percent.....     $.0120    $.0090.
------------------------------------------------------------------------

       ``(c) A qualifying clean coal technology facility 
     originally placed in service before 2009 that has a design 
     heat rate that meets a lower heat rate test in paragraphs 
     (1)(A)(B) and (C) and (2) (A)(B) and (C) above or a 
     qualifying clean coal technology facility originally placed 
     in service before 2013 that has a design heat rate that meets 
     a lower heat rate test in paragraphs (1)(C), or (2)(C) above 
     shall receive the highest applicable amount with respect to a 
     production tax credit for which it qualifies.
       ``(d) Inflation Adjustment.--For calendar years after 2003, 
     each amount in paragraphs (1) and (2) of subsection (b) shall 
     be adjusted by multiplying such amount by the inflation 
     adjustment factor for the calendar year in which the amount 
     is applied. If any amount as increased under the preceding 
     sentence is not a multiple of 0.01 cent, such amount shall be 
     rounded to the nearest multiple of 0.01 cent.
       ``(e) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) In general.--Any term used in this section which is 
     also used in section 451 or 48A of the Internal Revenue Code 
     of 1986 shall have the meaning given such term in such 
     section.
       ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
     and (5) of section 45(d) of the Internal Revenue Code of 1986 
     shall apply.''.
       (b) Credit Treated as Business Credit.--Section 38(b) of 
     the Internal Revenue Code of 1986, as amended by this Act, is 
     amended by striking ``plus'' at the end of paragraph (19), by 
     striking the period at the end of paragraph (2) and inserting 
     ``, plus'', and by adding at the end the following new 
     paragraph:
       ``(21) the qualifying advanced clean coal technology 
     production credit determined under section 45J(a).''.
       (c) Transitional Rule.--Section 39(d) of the Internal 
     Revenue Code of 1986 (relating to transitional rules), as 
     amended by this Act, is amended by adding at the end the 
     following new paragraph:
       ``(18) No carryback of section 45j credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying advanced 
     clean coal technology production credit determined under 
     section 45J may be carried back to a taxable year ending on 
     or before the date of the enactment of section 45J.''.
       (d) Denial of Double Benefit.--Section 29(d) of the 
     Internal Revenue Code of 1986 (relating to other definitions 
     and special rules) is amended by adding at the end the 
     following paragraph:
       ``(9) Denial of double benefit.--This section shall not 
     apply with respect to any qualified fuel the production of 
     which may be taken into account for purposes of determining 
     the credit under section 45J.''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986, as amended by this Act, is amended by 
     adding at the end the following new item.

``Sec. 45J. Credit for production from a qualifying advanced clean coal 
              technology unit.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this Act, in taxable years ending after such date.

     Subtitle C--Treatment of Persons Not Able To Use Entire Credit

     SEC. 2221. TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE 
                   CREDIT.

       (a) In General.--Section 45I of the Internal Revenue Code 
     of 1986, as added by this Act, is amended by adding at the 
     end the following new subsection:
       ``(f) Treatment of Persons Not Able to Use Entire Credit--
       ``(1) Allowance of Credits--
       ``(A) In general.--Any credit allowable under this section, 
     section 45J, or section 48A with respect to a facility owned 
     by a person described in subparagraph (B) may be transferred 
     or used as provided in this subsection, and the determination 
     as to whether the credit is allowable shall be made without 
     regard to the tax-exempt status of the person.
       ``(B) Persons described.--A person is described in this 
     subparagraph if the person is--
       ``(i) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(ii) an organization described in section 1381(a)(2)(C),
       ``(iii) a public utility (as defined in section 
     136(c)(2)(B)),
       ``(iv) any State or political subdivision thereof, the 
     District of Columbia, or any agency or instrumentality of any 
     of the foregoing,
       ``(v) any Indian tribal government (within the meaning of 
     section 7871) or any agency or instrumentality thereof, or 
     ``(vi) the Tennessee Valley Authority.
       ``(2) Transfer of credit--
       ``(A) In general.--A person described in clause (i), (ii), 
     (iii), (iv), or (v) of paragraph (1)(B) may transfer any 
     credit to which paragraph (1)(A) applies through an 
     assignment to any other person not described in paragraph 
     (1)(B). Such transfer may be revoked only with the consent of 
     the Secretary.
       ``(B) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to insure that any credit described 
     in subparagraph (A) is claimed once and not reassigned by 
     such other person.
       ``(C) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by a person 
     described in clause (iii), (iv), or (v) of paragraph (1)(B) 
     from the transfer of any credit under subparagraph (A) shall 
     be treated as arising from the exercise of an essential 
     government function.
       ``(3) Use by tva.--
       ``(A) In general.--Notwithstanding any other provision of 
     law, in the case of a person described in paragraph 
     (1)(B)(vi), any credit to which paragraph (1)(A) applies may 
     be applied as a credit against the payments required to be 
     made in any fiscal year under section 15d(e) of the Tennessee 
     Valley Authority Act of 1933 (16 U.S.C. 831n-4(e)) as an 
     annual return on the appropriations investment and an annual 
     repayment sum.
       ``(B) Treatment of credits.--The aggregate amount of 
     credits described in paragraph (1)(A) with respect to such 
     person shall be treated in the same manner and to the same 
     extent as if such credits were a payment in cash and shall be 
     applied first against the annual return on the appropriations 
     investment.
       ``(C) Credit carryover.--With respect to any fiscal year, 
     if the aggregate amount of credits described in paragraph 
     (1)(A) with respect to such person exceeds the aggregate 
     amount of payment obligations described in subparagraph (A), 
     the excess amount shall remain available for application as 
     credits against the amounts of such payment obligations in 
     succeeding fiscal years in the same manner as described in 
     this paragraph.
       ``(5) Credit not income.--Any transfer under paragraph (2) 
     or use under paragraph (3) of any credit to which paragraph 
     (1)(A) applies shall not be treated as income for purposes of 
     section 501(c)(12).
       ``(6) Treatment of unrelated persons.--For purposes of this 
     subsection, sales among and between persons described in 
     clauses (i),

[[Page S3418]]

     (ii), (iii), and (v) of paragraph (1)(A) shall be treated as 
     sales between unrelated parties.''.
       ``(b) Effective Date.--The amendment made by this section 
     shall apply to production after the date of the enactment of 
     this Act, in taxable years ending after such date.
                                 ______