[Congressional Record Volume 153, Number 38 (Tuesday, March 6, 2007)]
[Senate]
[Pages S2700-S2706]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. OBAMA (for himself, Mr. Lugar, Mr. Biden, Mr. Smith, Mr. 
        Bingaman, Mr. Coleman, and Mr. Specter):
  S. 768. A bill to increase fuel economy standards for automobiles and 
for other purposes; to the Committee on Finance.
  Mr. OBAMA. Mr. President, 33 years ago, this Nation faced a crisis 
that touched every American. In 1973, in the shadow of a war against 
Israel, the Arab nations of OPEC decided to embargo shipments of crude 
oil to the West.
  The economic effects were devastating. For American drivers, the 
price at the gas pump rose from a national average of 38.5 cents per 
gallon in May 1973 to 55.1 cents per gallon in June 1974. The stock 
market fell, and countries across the world faced terrible cycles of 
inflation and recession that lasted well into the 1980s.
  Lawmakers in Washington reacted by calling for a nationwide daylight 
savings time and a national speed limit. They established a new 
Department of Energy that eventually created a strategic petroleum 
reserve. Perhaps most important, Congress enacted the Corporate Average 
Fuel Economy standards, or CAFE, the first-ever requirements for 
automakers to improve gas mileage on the vehicles we drive.
  At the time, auto executives protested, saying there was no way to 
increase fuel economy without making cars smaller. One company 
predicted that Americans would all be driving sub-compacts as a result 
of CAFE. But CAFE did work, and under the direction of Congress, the 
National Highway Traffic Safety Administration, NHSTA, nearly doubled 
the average gas mileage of cars from 14 miles per gallon in 1976 to 
27.5 mpg for cars in 1985. Today, CAFE standards save us about 3 
million barrels of oil per day, making it the most successful energy-
saving measure ever adopted.
  Now 30 years later, Americans again are feeling the pain at the pump. 
The price of oil has reached up to $78 a barrel, and Americans have 
paid more than $3.00 a gallon for gas. America's 20-million-barrel-a-
day habit costs our economy $800 million a day, or $300 billion 
annually. Because we import 60 percent of our oil, much of it from the 
Middle East, our dependence on oil is also a national security issue as 
well. Al-Qaida knows that oil is America's Achilles heel. Osama bin 
Laden has urged his supporters to ``Focus your operations on oil, 
especially in Iraq and the gulf area, since this will cause them to die 
off.''
  At a time when the energy and security stakes couldn't be higher, 
CAFE standards have been stagnant. In fact, because of a long-standing 
deadlock in Washington, CAFE standards that initially increased so 
quickly have remained stagnant for the last 20 years.
  Since 1985, efforts to raise the CAFE standard have been stymied by 
opponents who have argued that Congress does not possess the expertise 
to set specific benchmarks and that an inflexible congressional mandate 
would result in the production of less safe cars and a loss of American 
jobs. This has been a bureaucratic logjam that

[[Page S2701]]

has ignored technological innovations in the auto industry and crippled 
our ability to increase fuel efficiency.

  To attempt to break this two-decade-Iong deadlock and start the U.S. 
on the path towards energy independence, I have joined with Senators 
Lugar, Biden, Smith, Bingaman, Coleman, and Specter to introduce the 
Fuel Economy Reform Act of 2007. This bill would set a new course by 
establishing regular, continual, and incremental progress in miles per 
gallon, targeting 4 percent annually, but preserving NHTSA expertise 
and flexibility on how to meet those targets.
  Over the past 20 years, NHTSA's efforts to improve fuel economy have 
been encumbered with loopholes and resistance. With this bill, CAFE 
standards would increase by 4 percent every year unless NHTSA can 
justify a deviation in that rate by proving that the increase is 
technologically unachievable, does not materially reduce the safety of 
automobiles manufactured or sold in the U.S., or can prove it is not 
cost-effective when comparing with the economic and geopolitical value 
of a gallon of gasoline saved. We specifically define the grounds upon 
which NHTSA can determine cost-effectiveness. By flipping the 
presumption that has served as a barrier to action, we replace the 
status quo of continued stagnation with steady, measured progress.
  Under this system, if the 4 percent annualized improvement occurs 
over ten years, this bill would save 1.3 million barrels of oil per 
day--or 20 billion gallons of gasoline per year. If gasoline is just 
$2.50 per gallon, consumers will save $50 billion at the pump in 2018. 
By 2018, we would be cutting global warming pollution by 220 million 
metric tons of carbon dioxide equivalent gases.
  The Fuel Economy Reform Act also would provide fairness and 
flexibility to domestic automakers by establishing different standards 
for different types of cars. Currently, manufacturers have to meet 
broad standards over their whole fleet of cars. This disadvantages 
companies like Ford and General Motors that produce full lines of small 
and large cars and trucks rather than manufacturers that only sell 
small cars.
  In order to enable domestic manufacturers to develop advanced-
technology vehicles, this legislation provides tax incentives to retool 
parts and assembly plants. This will strengthen the U.S. auto industry 
by allowing it to compete with foreign hybrid and other fuel efficient 
vehicles. It is our expectation that NHTSA will use its enhanced 
authority to bring greater market-based flexibility into CAFE 
compliance by allowing the banking and trading of credits among certain 
vehicle types and between manufacturers.
  Finally, the bill also would expand the tax incentives that encourage 
consumers to buy advanced technology vehicles. The bill would lift the 
current 60,000-per-manufacturer cap on buyer tax credits to allow more 
Americans to buy ultra-efficient vehicles like hybrids.
  By ending a 20-year stalemate on CAFE, the Fuel Economy Reform Act 
will recapture the innovation that Congress and the auto industry 
launched in response to the OPEC crisis. In the process, we will 
safeguard our national security, protect our economy, reduce consumer 
pain at the pump, and protect our climate, environment, and public 
health. I urge my colleagues to join our bipartisan coalition and 
support the Fuel Economy Reform Act.
  I ask unanimous consent that the text of these two bills be printed 
in the Record.
  There being no objection, the text of the bills were ordered to be 
printed in the Record, as follows:

                                 S. 767

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Fuel Economy Reform Act''.

     SEC. 2. FINDINGS.

       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.

     SEC. 3. DEFINITION OF AUTOMOBILE AND PASSENGER AUTOMOBILE.

       (a) Definition of Automobile.--
       (1) In general.--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) Fuel economy information.--Section 32908(a) of such 
     title is amended, by striking ``section--'' and all that 
     follows through ``(2)'' and inserting ``section, the term''.
       (3) Effective date.--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) In general.--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) Effective date.--The amendment made by paragraph (1) 
     shall apply to model year 2012 and each subsequent model 
     year.

     SEC. 4. AVERAGE FUEL ECONOMY STANDARDS.

       (a) Standards.--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--

[[Page S2702]]

       ``(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) Conforming Amendments.--
       (1) In general.--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

[[Page S2703]]

       (ii) in subsection (b)(1)(B), by striking ``under this 
     chapter'' and inserting ``under section 32902(c)(2)''.
       (2) Effective date.--The amendments made by this section 
     shall apply to automobiles manufactured after model year 
     2012.

     SEC. 5. CREDIT TRADING, COMPLIANCE, AND JUDICIAL REVIEW.

       (a) Credit Trading.--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 Period.--Section 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 Regulations.--Section 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,''.
                                  ____


                                 S. 768

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Fuel Economy Reform Act''.

     SEC. 2. FINDINGS.

       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.

     SEC. 3. DEFINITION OF AUTOMOBILE AND PASSENGER AUTOMOBILE.

       (a) Definition of Automobile.--
       (1) In general.--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) Fuel economy information.--Section 32908(a) of such 
     title is amended, by striking ``section--'' and all that 
     follows through ``(2)'' and inserting ``section, the term''.
       (3) Effective date.--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) In general.--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) Effective date.--The amendment made by paragraph (1) 
     shall apply to model year 2012 and each subsequent model 
     year.

     SEC. 4. AVERAGE FUEL ECONOMY STANDARDS.

       (a) Standards.--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--

[[Page S2704]]

       ``(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) Conforming Amendments.--
       (1) In general.--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) Effective date.--The amendments made by this section 
     shall apply to automobiles manufactured after model year 
     2012.

     SEC. 5. CREDIT TRADING, COMPLIANCE, AND JUDICIAL REVIEW.

       (a) Credit Trading.--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 Period.--Section 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 Regulations.--Section 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,''.

     SEC. 6. CONSUMER TAX CREDIT.

       (a) Elimination on Number of New Qualified Hybrid and 
     Advanced Lean Burn Technology Vehicles Eligible for 
     Alternative Motor Vehicle Credit.--
       (1) In general.--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) Conforming amendments.--
       (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)''.

[[Page S2705]]

       (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 Vehicles.--Paragraph (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) Computation of Credit.--Section 30B of such Code is 
     amended by striking ``city'' each place it appears and 
     inserting ``combined''.
       (d) Effective Dates.--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.

     SEC. 7. ADVANCED TECHNOLOGY MOTOR VEHICLES MANUFACTURING 
                   CREDIT.

       (a) In General.--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:

     ``SEC. 30D. ADVANCED TECHNOLOGY MOTOR VEHICLES MANUFACTURING 
                   CREDIT.

       ``(a) Credit Allowed.--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) Qualified Investment.--For purposes of this section--
       ``(1) In general.--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) Attribution rules.--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) Definitions.--In this section:
       ``(1) Advanced technology motor vehicle.--The 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 technology.--The 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) Eligible components.--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) Eligible taxpayer.--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 Costs.--For 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 Tax.--The 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) Reduction in Basis.--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) No Double Benefit.--
       ``(1) Coordination with other deductions and credits.--
     Except 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) In general.--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 expenses.--Any 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 Allowed.--If 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) Special Rules.--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) Election to allocate.--
       ``(A) In general.--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) Qualifying vehicles.--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 election.--An 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 purchasers.--The 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 
     year.--If the amount of the

[[Page S2706]]

     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 purchasers.--If 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 Credit.--No credit shall be 
     allowed under subsection (a) for any property if the taxpayer 
     elects not to have this section apply to such property.
       ``(l) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to carry out the provisions of this 
     section.
       ``(m) Termination.--This section shall not apply to any 
     qualified investment after December 31, 2011.''.
       (b) Conforming Amendments.--
       (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) Effective Date.--The amendments made by this section 
     shall apply to amounts incurred in taxable years beginning 
     after December 31, 1999.
                                 ______