[Senate Report 114-23]
[From the U.S. Government Publishing Office]


                                                        Calendar No. 46
114th Congress     }                                   {         Report
                                 SENATE
 1st Session       }                                   {         114-23

======================================================================



 
  A BILL TO PROVIDE AN INVESTMENT TAX CREDIT FOR WASTE HEAT TO POWER 
                               TECHNOLOGY

                                _______
                                

                 April 14, 2015.--Ordered to be printed

                                _______
                                

               Mr. Hatch, from the Committee on Finance, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 913]

    The Committee on Finance, having considered an original 
bill, S. 913, to amend the Internal Revenue Code of 1986 to 
provide an investment tax credit for waste heat to power 
technology, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
  I. LEGISLATIVE BACKGROUND...........................................1
 II. EXPLANATION OF THE BILL..........................................2
        A. Waste-Heat-to-Power Investment Tax Credit (sec. 1 of 
            the bill and sec. 48 of the Code)....................     2
        B. Increase Continuous Levy Authority on Payments to 
            Medicare Providers and Suppliers (sec. 2 of the bill 
            and sec. 6331 of the Code)...........................     4
III. BUDGET EFFECTS OF THE BILL.......................................5
 IV. VOTES OF THE COMMITTEE...........................................7
  V. REGULATORY IMPACT AND OTHER MATTERS..............................7
 VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............8

                       I. LEGISLATIVE BACKGROUND

    The Committee on Finance, having considered S. 913, a bill 
to amend the Internal Revenue Code of 1986 to provide an 
investment tax credit for waste heat to power technology, 
reports favorably thereon without amendment and recommends that 
the bill do pass.

Background and need for legislative action

    Background.--Based on a proposal recommended by Senators 
Carper and Heller, the Committee on Finance marked up original 
legislation (a bill to amend the Internal Revenue Code of 1986 
to provide an investment tax credit for waste heat to power 
technology) on February 11, 2015, and, with a majority present, 
ordered the bill favorably reported.
    Need for legislative action.--Waste heat is an industrial 
energy byproduct generated at factories across the country. 
Similar to combined heat and power (CHP) systems, waste heat to 
power (WHP) systems can convert otherwise wasted thermal energy 
into electricity, limiting the environmental consequences of 
continued reliance on power generated from fossil fuels. While 
both technologies involve the use of otherwise wasted heat, 
combined heat and power systems are currently eligible for a 10 
percent business investment tax credit. Both CHP and WHP 
systems reduce the need for additional energy and fuel 
consumption by reducing the amount of wasted thermal energy, 
but they are treated differently for tax purposes.
    In addition, it has been reported that many thousands of 
Medicare providers and suppliers have outstanding Federal 
employment and income tax liability, which contribute to the 
tax gap. The permissible percentage of payments to a Medicare 
provider subject to levy should be increased.

                      II. EXPLANATION OF THE BILL


 A. Waste-Heat-to-Power Investment Tax Credit (sec. 1 of the bill and 
                          sec. 48 of the Code)


                              PRESENT LAW

    A nonrefundable, 10-percent business investment credit is 
allowed for the cost of new combined heat and power (``CHP'') 
property placed in service prior to January 1, 2017.\1\ CHP 
property is property: (1) that uses the same energy source for 
the simultaneous or sequential generation of electrical power, 
mechanical shaft power, or both, in combination with the 
generation of steam or other forms of useful thermal energy 
(including heating and cooling applications); (2) that has an 
electrical capacity of not more than 50 megawatts or a 
mechanical energy capacity of not more than 67,000 horsepower 
or an equivalent combination of electrical and mechanical 
energy capacities; (3) that produces at least 20 percent of its 
total useful energy in the form of thermal energy that is not 
used to produce electrical or mechanical power, and produces at 
least 20 percent of its total useful energy in the form of 
electrical or mechanical power (or a combination thereof); and 
(4) the energy efficiency percentage of which exceeds 60 
percent. CHP property does not include property used to 
transport the energy source to the generating facility or to 
distribute energy produced by the facility.
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    \1\Sec. 48. Unless otherwise stated, all section references are to 
the Internal Revenue Code of 1986, as amended (the ``Code'').
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    The otherwise allowable credit with respect to CHP property 
is reduced to the extent the property has an electrical 
capacity or mechanical capacity in excess of any applicable 
limits. Property in excess of the applicable limit (15 
megawatts or a mechanical energy capacity of more than 20,000 
horsepower or an equivalent combination of electrical and 
mechanical energy capacities) is permitted to claim a fraction 
of the otherwise allowable credit. The fraction is equal to the 
applicable limit divided by the capacity of the property. For 
example, a 45 megawatt property would be eligible to claim 15/
45ths, or one third, of the otherwise allowable credit. Again, 
no credit is allowed if the property exceeds the 50 megawatt or 
67,000 horsepower limitations described above.
    Additionally, systems whose fuel source is at least 90 
percent open-loop biomass and that would qualify for the credit 
but for the failure to meet the efficiency standard are 
eligible for a credit that is reduced in proportion to the 
degree to which the system fails to meet the efficiency 
standard. For example, a system that would otherwise be 
required to meet the 60-percent efficiency standard, but which 
only achieves 30-percent efficiency, would be permitted a 
credit equal to one-half of the otherwise allowable credit 
(i.e., a 5-percent credit).
    Waste-heat-to-power systems, including systems that 
generate electricity through the recovery of exhaust heat from 
industrial processes that do not have as a primary purpose the 
production of electricity, do not qualify for tax incentives.

                           REASONS FOR CHANGE

    Waste heat is an industrial energy byproduct generated at 
factories across the country. Companies can invest in 
technology that converts this wasted heat--that would otherwise 
be released into the atmosphere--into usable electricity, but 
often these investments are very costly. Tax credits are one 
way to reduce costs and encourage the deployment of this clean 
technology.

                        EXPLANATION OF PROVISION

    The provision provides a 10-percent investment credit for 
qualified waste-heat-to-power property placed in service before 
January 1, 2017. Qualified waste-heat-to-power property is 
defined as property comprising a system that generates 
electricity through the recovery of a qualified waste heat 
resource. Qualified waste heat resources consists of exhaust 
heat from any industrial process that does not have as its 
primary purpose the production of electricity, and a pressure 
drop in any gas for an industrial or commercial process. Where 
waste-heat-to-power property is fully integrated into other 
industrial property, the amount eligible for credit is the 
incremental difference in cost between the property that has 
the ability to capture and convert waste heat to electricity 
and similar property that lacks such functionality. Waste-heat-
to-power capacity cannot be in excess of 50 megawatts.

                             EFFECTIVE DATE

    The provision is effective for property placed in service 
after the date of enactment.

B. Increase Continuous Levy Authority on Payments to Medicare Providers 
      and Suppliers (sec. 2 of the bill and sec. 6331 of the Code)


                              PRESENT LAW

In general

    Levy is the administrative authority of the IRS to seize a 
taxpayer's property, or rights to property, to pay the 
taxpayer's tax liability.\2\ Generally, the IRS is entitled to 
seize a taxpayer's property by levy if a Federal tax lien has 
attached to such property,\3\ the property is not exempt from 
levy,\4\ and the IRS has provided both notice of intention to 
levy\5\ and notice of the right to an administrative hearing 
(the notice is referred to as a ``collections due process 
notice'' or ``CDP notice'' and the hearing is referred to as 
the ``CDP hearing'')\6\ at least 30 days before the levy is 
made. A levy on salary or wages generally is continuously in 
effect until released.\7\ A Federal tax lien arises 
automatically when: (1) a tax assessment has been made; (2) the 
taxpayer has been given notice of the assessment stating the 
amount and demanding payment; and (3) the taxpayer has failed 
to pay the amount assessed within 10 days after the notice and 
demand.\8\
---------------------------------------------------------------------------
    \2\Sec. 6331(a). Levy specifically refers to the legal process by 
which the IRS orders a third party to turn over property in its 
possession that belongs to the delinquent taxpayer named in a notice of 
levy.
    \3\Ibid.
    \4\Sec. 6334.
    \5\Sec. 6331(d).
    \6\Sec. 6330. The notice and the hearing are referred to 
collectively as the CDP requirements.
    \7\Secs. 6331(e) and 6343.
    \8\ Sec. 6321.
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    The notice of intent to levy is not required if the 
Secretary finds that collection would be jeopardized by delay. 
The standard for determining whether jeopardy exists is similar 
to the standard applicable when determining whether assessment 
of tax without following the normal deficiency procedures is 
permitted.\9\
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    \9\Secs. 6331(d)(3) and 6861.
---------------------------------------------------------------------------
    The CDP notice (and pre-levy CDP hearing) is not required 
if: (1) the Secretary finds that collection would be 
jeopardized by delay; (2) the Secretary has served a levy on a 
State to collect a Federal tax liability from a State tax 
refund; (3) the taxpayer subject to the levy requested a CDP 
hearing with respect to unpaid employment taxes arising in the 
two-year period before the beginning of the taxable period with 
respect to which the employment tax levy is served; or (4) the 
Secretary has served a Federal contractor levy. In each of 
these four cases, however, the taxpayer is provided an 
opportunity for a hearing within a reasonable period of time 
after the levy.\10\
---------------------------------------------------------------------------
    \10\Sec. 6330(f).
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Federal payment levy program

    To help the IRS collect taxes more effectively, the 
Taxpayer Relief Act of 1997\11\ authorized the establishment of 
the Federal Payment Levy Program (``FPLP''), which allows the 
IRS to continuously levy up to 15 percent of certain 
``specified payments'' by the Federal government if the payees 
are delinquent on their tax obligations. With respect to 
payments to vendors of goods, services, or property sold or 
leased to the Federal government, the continuous levy may be up 
to 100 percent of each payment.\12\ For payments to Medicare 
providers and suppliers, the levy is up to 15 percent for 
payments made within 180 days after December 19, 2014. For 
payments made after that date, the levy is up to 30 
percent.\13\
---------------------------------------------------------------------------
    \11\Pub. L. No. 105-34.
    \12\Sec. 6331(h)(3).
    \13\Pub. L. No. 113-295, Division B.
---------------------------------------------------------------------------
    Under FPLP, the IRS matches its accounts receivable records 
with Federal payment records maintained by the Department of 
the Treasury's Bureau of Fiscal Service (``BFS''), such as 
certain Social Security benefit and Federal wage records. When 
these records match, the delinquent taxpayer is provided both 
the notice of intention to levy and the CDP notice. If the 
taxpayer does not respond after 30 days, the IRS can instruct 
the BFS to levy the taxpayer's Federal payments. Subsequent 
payments are continuously levied until such time that the tax 
debt is paid or the IRS releases the levy.

                           REASONS FOR CHANGE

    It has also been reported that many thousands of Medicare 
providers and suppliers have outstanding Federal employment and 
income tax liability, which contribute to the tax gap. 
Consequently, the Committee believes that it is appropriate to 
increase the permissible percentage of payments to a Medicare 
provider subject to levy.

                        EXPLANATION OF PROVISION

    The provision provides that the present limitation of 30 
percent of certain specified payments be increased by an amount 
sufficient to offset the estimated revenue loss of the 
provision described in Part A, above.

                             EFFECTIVE DATE

    The provision is effective for payments made after 180 days 
after the date of enactment.

                    III. BUDGET EFFECTS OF THE BILL


                         A. Committee Estimates

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 308(a)(1) of the 
Congressional Budget and Impoundment Control Act of 1974, as 
amended (the ``Budget Act''), the following statement is made 
concerning the estimated budget effects of the revenue 
provisions of the bill as reported.
    The bill is estimated to reduce Federal fiscal year budget 
receipts by the following amounts for the period 2015-2025:


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                B. Budget Authority and Tax Expenditures


                            BUDGET AUTHORITY

    In compliance with section 308(a)(1) of the Budget Act, the 
Committee states that no provisions of the bill as reported 
involve new or increased budget authority.

                            TAX EXPENDITURES

    In compliance with section 308(a)(1) of the Budget Act, the 
Committee states that certain provisions of the bill as 
reported affect the levels of tax expenditures (see revenue 
table in part A., above).

            C. Consultation with Congressional Budget Office

    In accordance with section 402 of the Budget Act, the 
Committee advises that the Congressional Budget Office has not 
submitted a statement on the bill. The letter from the 
Congressional Budget Office will be provided separately.

                       IV. VOTES OF THE COMMITTEE

    In compliance with paragraph 7(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee states that, with a 
majority present, the bill was ordered favorably reported by 
voice vote on February 11, 2015. Senator Toomey was separately 
listed as voting against adoption of the provision.

                 V. REGULATORY IMPACT AND OTHER MATTERS


                          A. Regulatory Impact

    Pursuant to paragraph 11(b) of rule XXVI of the Standing 
Rules of the Senate, the Committee makes the following 
statement concerning the regulatory impact that might be 
incurred in carrying out the provisions of the bill.

Impact on individuals and businesses, personal privacy and paperwork

    The bill provides an investment tax credit for waste-heat-
to-energy property. It also increases the IRS's continuous levy 
authority on payments to Medicare providers and suppliers. The 
provisions of the bill are not expected to impose additional 
administrative requirements or regulatory burdens on 
individuals or businesses.
    The provisions of the bill do not impact personal privacy.

                     B. Unfunded Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the tax provisions of the 
reported bill do not contain Federal private sector mandates or 
Federal intergovernmental mandates on State, local, or tribal 
governments within the meaning of Public Law 104-4, the 
Unfunded Mandates Reform Act of 1995.

                       C. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (``IRS Reform Act'') requires the 
staff of the Joint Committee on Taxation (in consultation with 
the Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses. The staff of the Joint Committee on Taxation has 
determined that there are no provisions that are of widespread 
applicability to individuals or small businesses.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In the opinion of the Committee, it is necessary in order 
to expedite the business of the Senate, to dispense with the 
requirements of paragraph 12 of rule XXVI of the Standing Rules 
of the Senate (relating to the showing of changes in existing 
law made by the bill as reported by the Committee).

                                  [all]