[House Report 118-127]
[From the U.S. Government Publishing Office]


118th Congress }                                               {  Report
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                               {  118-127

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



 
                        BUILD IT IN AMERICA ACT

                                _______
                                

 June 30, 2023.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Smith of Missouri, from the Committee on Ways and Means, submitted 
                             the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3938]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 3938) to amend the Internal Revenue Code of 1986 to 
encourage economic growth, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. SUMMARY AND BACKGROUND..........................................13
          A. Purpose and Summary.................................    13
          B. Background and Need for Legislation.................    13
          C. Legislative History.................................    15
 II. EXPLANATION OF THE BILL.........................................16
    TITLE I--INVESTMENT IN AMERICA...............................    16
          1. Deduction for research and experimental expenditures 
              (sec. 101 of the bill and secs. 174 and 174A of the 
              Code)..............................................    16
          2. Extension of allowance for depreciation, 
              amortization, or depletion in determining the 
              limitation on business interest (sec. 102 of the 
              bill and sec. 163(j) of the Code)..................    21
          3. Extension of 100 percent bonus depreciation (sec. 
              103 of the bill and sec. 168(k) of the Code).......    25
    TITLE II--SUPPLY CHAIN SECURITY..............................    31
          1. Termination of Hazardous Substance Superfund 
              financing rate (sec. 201 of the bill and sec. 4611 
              of the Code).......................................    31
          2. Election to determine foreign income taxes paid or 
              accrued to certain Western Hemisphere countries 
              without regard to certain regulations (sec. 202 of 
              the bill)..........................................    32
          3. Imposition of tax on the acquisition of United 
              States agricultural interests by disqualified 
              persons (sec. 203 of the bill and sec. 897 and new 
              sec. 5000E of the Code)............................    37
    TITLE III--REPEAL OF SPECIAL INTEREST TAX PROVISIONS.........    41
          1. Repeal of clean electricity production credit (sec. 
              301 of the bill and sec. 45Y of the Code)..........    41
          2. Repeal of clean electricity investment credit (sec. 
              302 of the bill and sec. 48E of the Code)..........    48
          3. Modification of clean vehicle credit (sec. 303 of 
              the bill and sec. 30D of the Code).................    54
          4. Repeal of credit for previously-owned clean vehicles 
              (sec. 304 of the bill and sec. 25E of the Code)....    59
          5. Repeal of credit for qualified commercial clean 
              vehicles (sec. 305 of the bill and sec. 45W of the 
              Code)..............................................    61
III. VOTE OF THE COMMITTEE...........................................63
 IV. BUDGET EFFECTS OF THE BILL......................................67
          A. Committee Estimate of Budgetary Effects.............    67
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................    70
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................    70
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......70
          A. Committee Oversight Findings and Recommendations....    70
          B. Statement of General Performance Goals and 
              Objectives.........................................    70
          C. Information Relating to Unfunded Mandates...........    70
          D. Applicability of House Rule XXI, Clause 5(b)........    70
          E. Tax Complexity Analysis.............................    70
          F. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................    78
          G. Duplication of Federal Programs.....................    78
 VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........78
          A. Text of Existing Law Amended or Repealed by the 
              Bill, as Reported..................................    78
          B. Changes in Existing Law Proposed by the Bill, as 
              Reported...........................................    78
VII. DISSENTING VIEWS...............................................241

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS, ETC.

  (a) Short Title.--This Act may be cited as the ``Build It in America 
Act''.
  (b) Amendment of 1986 Code.--Except as otherwise expressly provided, 
whenever in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.
  (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents, etc.

                     TITLE I--INVESTMENT IN AMERICA

Sec. 101. Deduction for research and experimental expenditures.
Sec. 102. Extension of allowance for depreciation, amortization, or 
depletion in determining the limitation on business interest.
Sec. 103. Extension of 100 percent bonus depreciation.

                    TITLE II--SUPPLY CHAIN SECURITY

Sec. 201. Termination of Hazardous Substance Superfund financing rate.
Sec. 202. Election to determine foreign income taxes paid or accrued to 
certain Western Hemisphere countries without regard to certain 
regulations.
Sec. 203. Imposition of tax on the acquisition of United States 
agricultural interests by disqualified persons.

          TITLE III--REPEAL OF SPECIAL INTEREST TAX PROVISIONS

Sec. 301. Repeal of clean electricity production credit.
Sec. 302. Repeal of clean electricity investment credit.
Sec. 303. Modification of clean vehicle credit.
Sec. 304. Repeal of credit for previously-owned clean vehicles.
Sec. 305. Repeal of credit for qualified commercial clean vehicles.

                     TITLE I--INVESTMENT IN AMERICA

SEC. 101. DEDUCTION FOR RESEARCH AND EXPERIMENTAL EXPENDITURES.

  (a) Delay of Amortization of Research and Experimental 
Expenditures.--Section 174 is amended by adding at the end the 
following new subsection:
  ``(e) Suspension of Application.--This section shall apply to amounts 
paid or incurred in taxable years beginning after December 31, 2025 
(and shall not apply to amounts paid or incurred in taxable years 
beginning on or before such date).''.
  (b) Reinstatement of Expensing for Research and Experimental 
Expenditures.--Part VI of subchapter B of chapter 1 is amended by 
inserting after section 174 the following new section:

``SEC. 174A. TEMPORARY RULES FOR RESEARCH AND EXPERIMENTAL 
                    EXPENDITURES.

  ``(a) Treatment as Expenses.--Notwithstanding section 263, there 
shall be allowed as a deduction any research or experimental 
expenditures which are paid or incurred by the taxpayer during the 
taxable year in connection with the taxpayer's trade or business.
  ``(b) Amortization of Certain Research and Experimental 
Expenditures.--
          ``(1) In general.--At the election of the taxpayer, made in 
        accordance with regulations or other guidance provided by the 
        Secretary, research or experimental expenditures which--
                  ``(A) are paid or incurred by the taxpayer in 
                connection with his trade or business, and
                  ``(B) would (but for subsection (a)) be chargeable to 
                capital account but not chargeable to property of a 
                character which is subject to the allowance under 
                section 167 (relating to allowance for depreciation, 
                etc.) or section 611 (relating to allowance for 
                depletion),
        may be treated as deferred expenses to which subsection (a) 
        does not apply. In computing taxable income, such deferred 
        expenses shall be allowed as a deduction ratably over such 
        period of not less than 60 months as may be selected by the 
        taxpayer (beginning with the month in which the taxpayer first 
        realizes benefits from such expenditures). Such deferred 
        expenses are expenditures properly chargeable to capital 
        account for purposes of section 1016(a)(1) (relating to 
        adjustments to basis of property).
          ``(2) Time for and scope of election.--The election provided 
        by paragraph (1) may be made for any taxable year, but only if 
        made not later than the time prescribed by law for filing the 
        return for such taxable year (including extensions thereof). 
        The method so elected, and the period selected by the taxpayer, 
        shall be adhered to in computing taxable income for the taxable 
        year for which the election is made and for all subsequent 
        taxable years unless, with the approval of the Secretary, a 
        change to a different method (or to a different period) is 
        authorized with respect to part or all of such expenditures. 
        The election shall not apply to any expenditure paid or 
        incurred during any taxable year before the taxable year for 
        which the taxpayer makes the election.
  ``(c) Election to Capitalize Expenses.--In the case of a taxpayer 
which elects (at such time and in such manner as the Secretary may 
provide) the application of this subsection, subsections (a) and (b) 
shall not apply. Such election shall not apply to any expenditure paid 
or incurred during any taxable year before the taxable year for which 
the taxpayer makes the election and may be made with respect to part of 
the expenditures paid or incurred during any taxable year only with the 
approval of the Secretary.
  ``(d) Land and Other Property.--This section shall not apply to any 
expenditure for the acquisition or improvement of land, or for the 
acquisition or improvement of property to be used in connection with 
the research or experimentation and of a character which is subject to 
the allowance under section 167 (relating to allowance for 
depreciation, etc.) or section 611 (relating to allowance for 
depletion); but for purposes of this section allowances under section 
167, and allowances under section 611, shall be considered as 
expenditures.
  ``(e) Exploration Expenditures.--This section shall not apply to any 
expenditure paid or incurred for the purpose of ascertaining the 
existence, location, extent, or quality of any deposit of ore or other 
mineral (including oil and gas).
  ``(f) Software Development.--For purposes of this section, any amount 
paid or incurred in connection with the development of any software 
shall be treated as a research or experimental expenditure.
  ``(g) Only Reasonable Research Expenditures Eligible.--This section 
shall apply to a research or experimental expenditure only to the 
extent that the amount thereof is reasonable under the circumstances.
  ``(h) Coordination With Research Credit.--
          ``(1) In general.--Section 41(d)(1)(A) shall be applied by 
        substituting `expenses under section 174A' for `specified 
        research or experimental expenditures under section 174'.
          ``(2) Denial of double benefit.--
                  ``(A) In general.--Section 280C(c) shall not apply 
                and the amount taken into account under this section as 
                research or experimental expenditures shall be reduced 
                by the amount of the credit allowable under section 
                41(a).
                  ``(B) Election of reduced credit.--
                          ``(i) In general.--In the case of any taxable 
                        year for which an election is made under this 
                        subparagraph--
                                  ``(I) subparagraph (A) shall not 
                                apply, and
                                  ``(II) the amount of the credit under 
                                section 41(a) shall be the amount 
                                determined under clause (ii).
                          ``(ii) Amount of reduced credit.--The amount 
                        of credit determined under this clause for any 
                        taxable year shall be the amount equal to the 
                        excess of--
                                  ``(I) the amount of credit determined 
                                under section 41(a) without regard to 
                                this subparagraph, over
                                  ``(II) the product of the amount 
                                described in subclause (I), multiplied 
                                by the rate of tax under section 11(b).
                          ``(iii) Election.--An election under this 
                        subparagraph for any taxable year shall be made 
                        not later than the time for filing the return 
                        of tax for such year (including extensions), 
                        shall be made on such return, and shall be made 
                        in such manner as the Secretary may prescribe. 
                        Such an election, once made, shall be 
                        irrevocable.
                  ``(C) Controlled groups.--Paragraph (3) of section 
                280C(b) shall apply for purposes of this paragraph.
  ``(i) Coordination With Long-term Contract Rules.--For purposes of 
determining percentage of completion under section 460(b)(1)(A), any 
research or experimental expenditures paid or incurred by the taxpayer 
in connection with the taxpayer's trade or business shall be taken into 
account as a cost allocated to the contract for the taxable year in 
which so paid or incurred.
  ``(j) Coordination With Certain Other Provisions.--A reference to the 
corresponding provision of this section shall be treated as included in 
any reference to section 174 in section 56(b), 59(e), 144(a), 168(i), 
170(e), 195(c), 263(a), 263A(c), 469(c), 543(d), 864(g), 993(d), 
1016(a)(14), 1202(a), or 1298(e).
  ``(k) Termination.--
          ``(1) In general.--This section shall not apply to amounts 
        paid or incurred in taxable years beginning after December 31, 
        2025.
          ``(2) Change in method of accounting.--Paragraph (1) (and the 
        corresponding application of section 174) shall be treated as a 
        change in method of accounting for purposes of section 481 
        and--
                  ``(A) such change shall be treated as initiated by 
                the taxpayer,
                  ``(B) such change shall be treated as made with the 
                consent of the Secretary, and
                  ``(C) such change shall be applied only on a cut-off 
                basis for any research or experimental expenditures 
                paid or incurred in taxable years beginning after 
                December 31, 2025, and no adjustment under section 
                481(a) shall be made.''.
  (c) Coordination of Amortization With Certain Other Provisions.--
Section 174, as amended by subsection (a), is amended by redesignating 
subsection (e) as subsection (f) and by inserting after subsection (d) 
the following new subsection:
  ``(e) Coordination With Certain Other Provisions.--
          ``(1) Coordination with alternative minimum tax.--Sections 
        56(b)(2) and 59(e)(2)(B) shall not apply to specified research 
        or experimental expenditures to which this section applies.
          ``(2) Coordination with basis adjustment rules.--Section 
        1016(a)(14) shall be applied by substituting `an amortization 
        deduction under section 174(a)' for `deductions as deferred 
        expenses under section 174(b)(1)'.
          ``(3) Coordination with long-term contract rules.--For 
        purposes of determining percentage of completion under section 
        460(b)(1)(A), the amortization deduction under subsection (a) 
        shall be taken into account as a cost allocated to the 
        contract.''.
  (d) Conforming Amendments.--
          (1) Section 13206 of Public Law 115-97 is amended by striking 
        subsection (b) (relating to change in method of accounting).
          (2) The table of sections for part VI of subchapter B of 
        chapter 1 is amended by inserting after the item relating to 
        section 174 the following new item:

``Sec. 174A. Temporary rules for research and experimental 
expenditures.''.

  (e) Effective Date.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        amounts paid or incurred in taxable years beginning after 
        December 31, 2021.
          (2) Repeal of superceded change in method of accounting 
        rules.--The amendment made by subsection (d)(1) shall take 
        effect as if included in Public Law 115-97.
  (f) Transition Rules.--
          (1) Election regarding treatment as change in method of 
        accounting.--In the case of any taxpayer which (as of the date 
        of the enactment of this Act) had adopted a method of 
        accounting provided by section 174 of the Internal Revenue Code 
        of 1986 (as in effect prior to the amendments made by this 
        section) for the taxpayer's first taxable year beginning after 
        December 31, 2021, and elects the application of this 
        paragraph--
                  (A) the amendments made by this section shall be 
                treated as a change in method of accounting for 
                purposes of section 481 of such Code,
                  (B) such change shall be treated as initiated by the 
                taxpayer for the taxpayer's immediately succeeding 
                taxable year,
                  (C) such change shall be treated as made with the 
                consent of the Secretary, and
                  (D) such change shall be applied on a modified cut-
                off basis, taking into account for purposes of section 
                481(a) of such Code only the capitalized expenditures 
                which were not allowed as an amortization deduction by 
                reason of section 174 prior to amendment by this Act 
                for the taxpayer's first taxable year beginning after 
                December 31, 2021.
          (2) Election regarding 10-year writeoff.--
                  (A) In general.--An eligible taxpayer which files, 
                during the 1-year period beginning on the date of the 
                enactment of this Act, an amended income tax return for 
                the taxable year described in subparagraph (B)(ii) may 
                elect the application of section 59(e) of the Internal 
                Revenue Code of 1986 with respect to qualified 
                expenditures described in section 59(e)(2)(B) of such 
                Code with respect to such taxable year. Such election 
                shall be filed with such amended income tax return and 
                shall be effective only to the extent that such 
                election would have been effective if filed with the 
                original income tax return for such taxable year.
                  (B) Eligible taxpayer.--For purposes of subparagraph 
                (A), the term ``eligible taxpayer'' means any taxpayer 
                which--
                          (i) does not elect the application of 
                        paragraph (1), and
                          (ii) filed an income tax return for such 
                        taxpayer's first taxable year beginning after 
                        December 31, 2021, before the earlier of--
                                  (I) the due date for such return, and
                                  (II) the date of the enactment of 
                                this Act.

SEC. 102. EXTENSION OF ALLOWANCE FOR DEPRECIATION, AMORTIZATION, OR 
                    DEPLETION IN DETERMINING THE LIMITATION ON BUSINESS 
                    INTEREST.

  (a) In General.--Section 163(j)(8)(A)(v) is amended by striking 
``January 1, 2022'' and inserting ``January 1, 2026''.
  (b) Effective Date.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the amendment made by this section shall apply to 
        taxable years beginning after December 31, 2022.
          (2) Election to apply extension retroactively.--In the case 
        of a taxpayer which elects (at such time and in such manner as 
        the Secretary may provide) the application of this paragraph, 
        paragraph (1) shall be applied by substituting ``December 31, 
        2021'' for ``December 31, 2022''.

SEC. 103. EXTENSION OF 100 PERCENT BONUS DEPRECIATION.

  (a) In General.--Section 168(k)(6)(A) is amended--
          (1) in clause (i)--
                  (A) by striking ``2023'' and inserting ``2026'', and
                  (B) by adding ``and'' at the end, and
          (2) by striking clauses (ii), (iii), and (iv), and 
        redesignating clause (v) as clause (ii).
  (b) Property With Longer Production Periods.--Section 168(k)(6)(B) is 
amended--
          (1) in clause (i)--
                  (A) by striking ``2024'' and inserting ``2027'', and
                  (B) by adding ``and'' at the end, and
          (2) by striking clauses (ii), (iii), and (iv), and 
        redesignating clause (v) as clause (ii).
  (c) Plants Bearing Fruits and Nuts.--Section 168(k)(6)(C) is 
amended--
          (1) in clause (i)--
                  (A) by striking ``2023'' and inserting ``2026'', and
                  (B) by adding ``and'' at the end, and
          (2) by striking clauses (ii), (iii), and (iv), and 
        redesignating clause (v) as clause (ii).
  (d) Effective Dates.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        property placed in service after December 31, 2022.
          (2) Plants bearing fruits and nuts.--The amendments made by 
        subsection (c) shall apply to specified plants planted or 
        grafted after December 31, 2022.

                    TITLE II--SUPPLY CHAIN SECURITY

SEC. 201. TERMINATION OF HAZARDOUS SUBSTANCE SUPERFUND FINANCING RATE.

  (a) In General.--Section 4611 (as amended by section 13601 of Public 
Law 117-169) is amended by inserting after subsection (d) the following 
new subsection:
  ``(e) Application of Hazardous Substance Superfund Financing Rate.--
The Hazardous Substance Superfund financing rate under this section 
shall not apply after December 31, 2022.''.
  (b) Termination of Authority for Advances.--Section 9507(d)(3)(B) (as 
so amended) is amended--
          (1) by striking ``December 31, 2032'' and inserting ``the 
        date of the enactment of the Build It in America Act'', and
          (2) by striking ``on or before such date'' and inserting ``as 
        soon as practicable thereafter''.
  (c) Effective Date.--
          (1) In general.--The amendment made by subsection (a) shall 
        take effect on January 1, 2023.
          (2) Termination of authority for advances.--The amendments 
        made by subsection (b) shall take effect on the date of the 
        enactment of this Act.

SEC. 202. ELECTION TO DETERMINE FOREIGN INCOME TAXES PAID OR ACCRUED TO 
                    CERTAIN WESTERN HEMISPHERE COUNTRIES WITHOUT REGARD 
                    TO CERTAIN REGULATIONS.

  (a) Election With Respect to Determining Certain Foreign Income 
Taxes.--In the case of any taxpayer which elects (at such time and in 
such manner as the Secretary may provide) the application of this 
subsection, the determination of whether any Western Hemisphere tax 
paid or accrued by such taxpayer is an income, war profits, or excess 
profits tax for purposes of any provision of the Internal Revenue Code 
of 1986 shall be made without regard to any specified regulation.
  (b) Separate Election With Respect to Allocation and Apportionment of 
Foreign Income Taxes Relating to Disregarded Payments From Certain 
Disregarded Entities.--
          (1) In general.--If the owner of any specified disregarded 
        entity elects (at such time and in such manner as the Secretary 
        may provide) the application of this subsection with respect to 
        such entity, then for purposes of allocating and apportioning 
        any foreign income taxes (as defined in section 986(a)(4) of 
        the Internal Revenue Code of 1986 and determined after the 
        application of subsection (a) of this section) paid or accrued 
        by reason of any remittance made by such entity to such owner 
        during the applicable period, any items of foreign gross income 
        included by reason of the receipt of such remittance shall be 
        assigned to a category based on current and accumulated 
        earnings and profits of such entity (in lieu of being assigned 
        on the basis of the tax book value method described in a 
        specified regulation).
          (2) Specified disregarded entity.--For purposes of this 
        subsection, the term ``specified disregarded entity'' means any 
        entity (including any trade or business) if--
                  (A) such entity is disregarded as an entity separate 
                from its owner for purposes of applying chapter 1 of 
                the Internal Revenue Code of 1986,
                  (B) such entity is created or organized in a 
                possession of the United States or a foreign country 
                described in subsection (d)(1)(B),
                  (C) at all times after December 31, 2019 (or, if 
                later, the date on which such entity is created or 
                organized) substantially all of the income of such 
                entity is derived from trades or businesses conducted 
                in the possession or country referred to in 
                subparagraph (B), and
                  (D) at all times after the date on which such entity 
                is created or organized, such entity maintains separate 
                books and records.
  (c) Application to Deemed Paid Credit.--In the case of any tax paid 
or accrued by a controlled foreign corporation and deemed to have been 
paid by a United States shareholder under section 960 of the Internal 
Revenue Code of 1986--
          (1) any election under subsection (a) or (b) shall be made by 
        such controlled foreign corporation and shall be binding on all 
        United States shareholders of such controlled foreign 
        corporation, and
          (2) the applicable period under subsection (d) shall be 
        determined with respect to the taxable years of such controlled 
        foreign corporation.
  (d) Western Hemisphere Tax.--For purposes of this section--
          (1) In general.--The term ``Western Hemisphere tax'' means 
        any tax which is paid or accrued for a taxable year which is in 
        the applicable period to--
                  (A) any possession of the United States, or
                  (B) any foreign country (other than Cuba and 
                Venezuela) which is located in North, Central, or South 
                America (including the West Indies).
          (2) Applicable period.--The term ``applicable period'' 
        means--
                  (A) in the case of any election made under subsection 
                (a), all taxable years beginning after December 31, 
                2021, and before January 1, 2027, and
                  (B) in the case of any election made under subsection 
                (b), all taxable years beginning after December 31, 
                2019, and before January 1, 2027.
          (3) Determination based on taxable year for which tax 
        actually paid or accrued.--The determination of the taxable 
        year for which any tax is paid or accrued for purposes of 
        determining whether a foreign tax is paid or accrued for a 
        taxable year which is in the applicable period shall be made 
        without regard to any taxable year with respect to which such 
        tax is deemed to have been paid under section 904(c) or 960 of 
        the Internal Revenue Code of 1986.
  (e) Specified Regulation.--For purposes of this section, the term 
``specified regulation'' means--
          (1) Treasury Regulations relating to ``Guidance Related to 
        the Foreign Tax Credit; Clarification of Foreign-Derived 
        Intangible Income'' (87 Fed. Reg. 276; published on January 4, 
        2022),
          (2) proposed Treasury Regulations relating to ``Guidance 
        Related to the Foreign Tax Credit'' (87 Fed. Reg. 71271; 
        published on November 22, 2022), and
          (3) any regulation or other guidance published after January 
        4, 2022, to the extent that such regulation or other guidance 
        is substantially similar to, or predicated upon, any portion of 
        the regulations referred to in paragraph (1) or (2).
In the case of any regulation or other guidance which is published 
after the date of the enactment of this Act and any portion of which is 
described in paragraph (3), the Secretary shall identify such 
regulation or guidance (or portion thereof) as not applying with 
respect to taxpayers which have elected the application of subsection 
(a) or (b), as the case may be.
  (f) Secretary.--For purposes of this section, the term ``Secretary'' 
means the Secretary of the Treasury or the Secretary's delegate.

SEC. 203. IMPOSITION OF TAX ON THE ACQUISITION OF UNITED STATES 
                    AGRICULTURAL INTERESTS BY DISQUALIFIED PERSONS.

  (a) In General.--Subtitle D is amended by inserting after chapter 50A 
the following new chapter:

 ``CHAPTER 50B--ACQUISITION OF UNITED STATES AGRICULTURAL INTERESTS BY 
                          DISQUALIFIED PERSONS

``Sec. 5000E. Imposition of tax on acquisition of United States 
agricultural interests by disqualified persons.

``SEC. 5000E. IMPOSITION OF TAX ON ACQUISITION OF UNITED STATES 
                    AGRICULTURAL INTERESTS BY DISQUALIFIED PERSONS.

  ``(a) In General.--In the case of any acquisition of any United 
States agricultural interest by any disqualified person, there is 
hereby imposed on such person a tax equal to 60 percent of the amount 
paid for such interest.
  ``(b) Disqualified Person.--For purposes of this section--
          ``(1) In general.--The term `disqualified person' means--
                  ``(A) any citizen of a country of concern (other than 
                a citizen, or lawful permanent resident, of the United 
                States and other than an individual domiciled in Taiwan 
                possessing a valid identification card or number issued 
                by the government of Taiwan),
                  ``(B) any entity domiciled in a country of concern 
                (other than an entity domiciled in Taiwan),
                  ``(C) any country of concern and any political 
                subdivision, agency, or instrumentality thereof, and
                  ``(D) except as provided in paragraph (3), any entity 
                if persons described in subparagraph (A), (B), or (C) 
                (in the aggregate) 10-percent control such entity.
          ``(2) Country of concern.--The term `country of concern' 
        means any country the government of which is engaged in a long-
        term pattern or serious instances of conduct significantly 
        adverse to the national security of the United States or the 
        security and safety of United States persons, including the 
        People's Republic of China, the Russian Federation, Iran, North 
        Korea, Cuba, and the regime of Nicolas Maduro in Venezuela.
          ``(3) Exception for certain publicly traded corporations.--
                  ``(A) In general.--An entity shall not be treated as 
                described in paragraph (1)(D) if--
                          ``(i) such entity is a specified publicly 
                        traded corporation, or
                          ``(ii) specified publicly traded corporations 
                        (in the aggregate) control such entity.
                  ``(B) Specified publicly traded corporation.--
                          ``(i) In general.--The term `specified 
                        publicly traded corporation' means any 
                        corporation if--
                                  ``(I) the stock of such corporation 
                                is regularly traded on an established 
                                securities market located in the United 
                                States, and
                                  ``(II) specified disqualified persons 
                                do not (in the aggregate) control such 
                                corporation.
                          ``(ii) Specified disqualified persons.--The 
                        term `specified disqualified persons' means, 
                        with respect to any corporation referred to in 
                        clause (i), any person which--
                                  ``(I) is described in subparagraph 
                                (A), (B), or (C) of paragraph (1), and
                                  ``(II) 10-percent controls such 
                                corporation.
  ``(c) Prorated Tax on Acquisitions by Entities Not More Than 50 
Percent Controlled by Disqualified Persons.--
          ``(1) In general.--In the case of any disqualified person 
        described in subsection (b)(1)(D) with respect to which persons 
        described in subparagraphs (A), (B), or (C) of subsection 
        (b)(1) do not (in the aggregate) control such disqualified 
        person, subsection (a) shall be applied by substituting `the 
        applicable percentage of the amount' for `the amount'.
          ``(2) Applicable percentage.--For purposes of this section, 
        the term `applicable percentage' means, with respect to any 
        disqualified person to which paragraph (1) applies, the highest 
        percentage which could be substituted for `50 percent' both 
        places it appears in section 954(d)(3) without causing persons 
        described in subparagraph (A), (B), or (C) of subsection (b)(1) 
        (in the aggregate) to control (determined by taking into 
        account such substitution) such disqualified person.
  ``(d) Control.--For purposes of this section--
          ``(1) In general.--The term `control' has the meaning given 
        such term under section 954(d)(3), determined by treating the 
        rules of section 958(a)(2) as applying to both foreign and 
        domestic corporations, partnerships, trusts, and estates.
          ``(2) 10-percent control.--The term `10-percent control' 
        means control (as defined in paragraph (1)), determined by 
        substituting `10 percent' for `50 percent' both places it 
        appears in section 954(d)(3).
  ``(e) United States Agricultural Interest.--For purposes of this 
section--
          ``(1) In general.--The term `United States agricultural 
        interest' has the meaning which would be given the term `United 
        States real property interest' by section 897(c) if--
                  ``(A) paragraph (1)(A)(i) were applied by 
                substituting `an interest in agricultural land' for `an 
                interest in real property' and all that follows,
                  ``(B) paragraph (1)(A)(ii) were applied by 
                substituting `such corporation was not a United States 
                real property holding corporation at the time of 
                acquisition' for `such corporation' and all that 
                follows,
                  ``(C) paragraph (1)(B) did not apply, and
                  ``(D) paragraph (3) were applied by substituting `at 
                the time of acquisition' for `at some time during the 
                shorter of the periods described in paragraph 
                (1)(A)(ii)'.
          ``(2) Agricultural land.--For purposes of paragraph (1), the 
        term `agricultural land' means--
                  ``(A) agricultural land as defined in section 9 of 
                the Agricultural Foreign Investment Disclosure Act of 
                1978 (7 U.S.C. 3508), and
                  ``(B) land located in one or more States and used for 
                livestock production purposes (determined under rules 
                similar to the rules that apply under such section 
                9).''.
  (b) Reporting Requirements.--
          (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 is amended by adding at the end the following new 
        section:

``SEC. 6050AA. RETURNS RELATING TO ACQUISITION OF UNITED STATES 
                    AGRICULTURAL INTERESTS BY DISQUALIFIED PERSONS.

  ``(a) In General.--The required reporting person, with respect to any 
acquisition of any United States agricultural interest by a 
presumptively disqualified person to which section 5000E(a) applies, 
shall make a return at such time as the Secretary may provide setting 
forth--
          ``(1) the name, address, and TIN of such presumptively 
        disqualified person,
          ``(2) a description of such United States agricultural 
        interest (including the street address, if applicable), and
          ``(3) the amount paid for such United States agricultural 
        interest.
  ``(b) Statement to Be Furnished to Presumptively Disqualified 
Person.--Every person required to make a return under subsection (a) 
shall furnish, at such time as the Secretary may provide, to each 
presumptively disqualified person whose name is required to be set 
forth in such return a written statement showing--
          ``(1) the name and address of the information contact of the 
        required reporting person, and
          ``(2) the information described in paragraphs (1), (2), and 
        (3) of subsection (a) which relates to such disqualified 
        person.
  ``(c) Required Reporting Person.--For purposes of this section, the 
term `required reporting person' means, with respect to any acquisition 
of any United States agricultural interest--
          ``(1) the person (including any attorney or title company) 
        responsible for closing the transaction in which such United 
        States agricultural interest is acquired, or
          ``(2) if no one is responsible for closing such transaction 
        (or in such other cases as the Secretary may provide), the 
        transferor of such United States agricultural interest.
  ``(d) Presumptively Disqualified Person.--For purposes of this 
section, the term `presumptively disqualified person' means any person 
unless such person furnishes to the required reporting person an 
affidavit by the such person stating, under penalty of perjury, that 
such person is not a disqualified person (as defined in section 
5000E(b)).
  ``(e) Requirement to Request Affidavit.--If the required reporting 
person, with respect to any acquisition of any United States 
agricultural interest, has not, as of the time of such acquisition, 
been furnished the affidavit described in subsection (d) by the 
acquirer of such interest, such required reporting person shall furnish 
to such acquirer, at such time, a written statement informing such 
acquirer of the required reporting person's obligation to make the 
return described in subsection (a) with respect to such acquisition and 
including such other information as the Secretary may require.
  ``(f) United States Agricultural Interest.--For purposes of this 
section, the term `United States agricultural interest' has the meaning 
given such term in section 5000E.''.
          (2) Penalties.--Section 6724(d) is amended--
                  (A) in paragraph (1)(B), by striking ``or'' at the 
                end of clause (xxvii), by striking ``and'' at the end 
                of clause (xxviii) and inserting ``or'', and by adding 
                at the end the following new clause:
                          ``(xxix) section 6050AA(a) (relating to 
                        returns relating to acquisition of United 
                        States agricultural interests by disqualified 
                        persons), and'', and
                  (B) in paragraph (2), by striking ``or'' at the end 
                of subparagraph (KK), by striking the period at the end 
                of subparagraph (LL) and inserting ``, or'', and by 
                inserting after subparagraph (LL) the following new 
                subparagraph:
                  ``(MM) subsection (b) or (e) of section 6055AA 
                (relating to statements relating to acquisition of 
                United States agricultural interests by disqualified 
                persons).''.
  (c) Clerical Amendments.--
          (1) The table of chapters for subtitle D is amended by 
        inserting after the item relating to chapter 50A the following 
        new item:

 ``Chapter 50B. Acquisition of United States Agricultural Interests by 
                        Disqualified Persons.''.

          (2) The table of sections for subpart B of part III of 
        subchapter A of chapter 61 is amended by adding at the end the 
        following new item:

``Sec. 6050AA. Returns relating to acquisition of United States 
agricultural interests by disqualified persons.''.

  (d) Effective Date.--The amendments made by this section shall apply 
to acquisitions after the date of the enactment of this Act.

          TITLE III--REPEAL OF SPECIAL INTEREST TAX PROVISIONS

SEC. 301. REPEAL OF CLEAN ELECTRICITY PRODUCTION CREDIT.

  (a) In General.--Subpart D of part IV of subchapter A of chapter 1 is 
amended by striking section 45Y (and by striking the item relating to 
such section in the table of sections for such subpart).
  (b) Conforming Amendments.--
          (1) Section 38(b) is amended by striking paragraph (39) and 
        redesignating paragraphs (40) and (41) as paragraphs (39) and 
        (40), respectively.
          (2) Section 6417(b) is amended by striking paragraph (8) and 
        redesignating paragraphs (9) through (12) as paragraphs (8) 
        through (11), respectively.
          (3) Section 6418(f)(1) is amended--
                  (A) in subparagraph (A), by striking clause (vii) and 
                by redesignating clauses (viii) through (xi) as clauses 
                (vii) through (x), respectively, and
                  (B) in subparagraph (B), by striking ``(v), or 
                (vii)'' and inserting ``or (v)''.
  (c) Effective Date.--The amendments made by this section shall take 
effect as if included in section 13701 of Public Law 117-169.

SEC. 302. REPEAL OF CLEAN ELECTRICITY INVESTMENT CREDIT.

  (a) In General.--Subpart E of part IV of subchapter A of chapter 1 is 
amended by striking section 48E (and by striking the item relating to 
such section in the table of sections for such subpart).
  (b) Conforming Amendments.--
          (1) Section 46, as amended by Public Law 117-169, is 
        amended--
                  (A) in paragraph (5), by adding ``and'' at the end,
                  (B) in paragraph (6), by striking ``, and'' and 
                inserting a period, and
                  (C) by striking paragraph (7).
          (2) Section 48(e)(4)(D) is amended by striking ``except as 
        provided in section 48E(h)(4)(D)(ii)''.
          (3) Section 48C(f) is amended by striking ``48E,''.
          (4) Section 49(a)(1)(C), as amended by Public Law 117-169, is 
        amended--
                  (A) by adding ``and'' at the end of clause (v),
                  (B) by striking the comma at the end of clause (vi) 
                and inserting a period, and
                  (C) by striking clauses (vii) and (viii).
          (5) Section 50(a)(2)(E), as amended by Public Law 117-169, is 
        amended by striking ``48D(b)(5), or 48E(e)'' and inserting ``or 
        48D(b)(5)''.
          (6) Section 50(c)(3), as amended by Public Law 117-169, is 
        amended by striking ``or clean electricity investment credit''.
          (7) Section 168(e)(3)(B), as amended by Public Law 117-169, 
        is amended--
                  (A) in clause (vi)(III), by inserting ``and'' at the 
                end,
                  (B) in clause (vii), by striking ``, and'' and 
                inserting a period, and
                  (C) by striking clause (viii).
          (8) Section 6417(b), as amended by the preceding provisions 
        of this Act, is amended by striking paragraph (11).
          (9) Section 6418(f)(1)(A), as amended by the preceding 
        provisions of this Act, is amended by striking clause (x).
  (c) Effective Date.--The amendments made by this section shall take 
effect as if included in section 13702 of Public Law 117-169.

SEC. 303. MODIFICATION OF CLEAN VEHICLE CREDIT.

  (a) Per Vehicle Dollar Limitation.--Section 30D(b) is amended by 
striking paragraphs (2) and (3) and inserting the following:
          ``(2) Base amount.--The amount determined under this 
        paragraph is $2,500.
          ``(3) Battery capacity.--In the case of a vehicle which draws 
        propulsion energy from a battery with not less than 5 kilowatt 
        hours of capacity, the amount determined under this paragraph 
        is $417, plus $417 for each kilowatt hour of capacity in excess 
        of 5 kilowatt hours. The amount determined under this paragraph 
        shall not exceed $5,000.''.
  (b) Final Assembly.--Section 30D(d) is amended--
          (1) in paragraph (1), by striking subparagraph (G), and
          (2) by striking paragraph (5).
  (c) Additional Modifications to Vehicle Definition.--
          (1) In general.--Section 30D(d), as amended by subsection 
        (b), is amended--
                  (A) in the heading, by striking ``Clean'' and 
                inserting ``Qualified Plug-in Electric Drive Motor'',
                  (B) in paragraph (1)--
                          (i) in the matter preceding subparagraph (A), 
                        by striking ``clean'' and inserting ``qualified 
                        plug-in electric drive motor'',
                          (ii) in subparagraph (C), by striking 
                        ``qualified'' before ``manufacturer'',
                          (iii) in subparagraph (E), by adding ``and'' 
                        at the end,
                          (iv) in subparagraph (F)--
                                  (I) in clause (i), by striking ``7'' 
                                and inserting ``4'', and
                                  (II) in clause (ii), by striking the 
                                comma at the end and inserting a 
                                period, and
                          (v) by striking subparagraph (H),
                  (C) in paragraph (3)--
                          (i) in the heading, by striking ``qualified 
                        manufacturer'' and inserting ``Manufacturer'', 
                        and
                          (ii) by striking ``The term `qualified 
                        manufacturer' means'' and all that follows 
                        through the period and inserting ``The term 
                        `manufacturer' has the meaning given such term 
                        in regulations prescribed by the Administrator 
                        of the Environmental Protection Agency for 
                        purposes of the administration of title II of 
                        the Clean Air Act (42 U.S.C. 7521 et seq.).'', 
                        and
                  (D) by striking paragraph (6).
          (2) Conforming amendments.--Section 30D is amended--
                  (A) in subsection (a), by striking ``new clean 
                vehicle'' and inserting ``new qualified plug-in 
                electric drive motor vehicle'', and
                  (B) in subsection (b)(1), by striking ``new clean 
                vehicle'' and inserting ``new qualified plug-in 
                electric drive motor vehicle''.
  (d) Critical Mineral and Battery Component Requirement 
Modifications.--
          (1) In general.--Section 30D(e), as added by Public Law 117-
        169, is amended by striking paragraphs (1) and (2), by 
        redesignating paragraph (3) as paragraph (4), and by inserting 
        before paragraph (4) (as so redesignated) the following new 
        paragraphs:
          ``(1) Critical minerals requirement.--No credit shall be 
        allowed under this section with respect to any vehicle unless, 
        with respect to the battery from which the electric motor of 
        such vehicle draws electricity, the percentage of the value of 
        the applicable critical minerals (as defined in section 
        45X(c)(6)) contained in such battery that were--
                  ``(A) extracted or processed--
                          ``(i) in the United States, or
                          ``(ii) in any country with which the United 
                        States has a free trade agreement in effect, or
                  ``(B) recycled in North America,
        is equal to or greater than 80 percent (as certified by the 
        manufacturer, in such form or manner as prescribed by the 
        Secretary). For purposes of subparagraph (A)(ii), the term 
        `free trade agreement' means an international agreement 
        approved by Congress that eliminates duties and other 
        restrictive regulations of commerce on substantially all the 
        trade between the United States and one or more other 
        countries.
          ``(2) Battery components.--No credit shall be allowed under 
        this section with respect to any vehicle unless, with respect 
        to the battery from which the electric motor of such vehicle 
        draws electricity, all of the components contained in such 
        battery were manufactured or assembled in North America (as 
        certified by the manufacturer, in such form or manner as 
        prescribed by the Secretary).
          ``(3) Restriction on foreign entities of concern.--No credit 
        shall be allowed under this section which respect to any 
        vehicle placed in service after December 31, 2024, if any of 
        the applicable critical minerals contained in the battery of 
        such vehicle (as described in paragraph (1)) were extracted, 
        processed, or recycled by a foreign entity of concern (as 
        defined in section 40207(a)(5) of the Infrastructure Investment 
        and Jobs Act (42 U.S.C. 18741(a)(5))).''.
          (2) Conforming amendment.--Section 30D(d) is amended by 
        striking paragraph (7).
  (e) Transfer of Credit Repealed.--
          (1) In general.--Section 30D is amended by striking 
        subsection (g).
          (2) Conforming amendments reversed.--Section 30D(f) is 
        amended--
                  (A) by inserting after paragraph (2) the following:
  ``(3) Property Used by Tax-exempt Entity.--In the case of a vehicle 
the use of which is described in paragraph (3) or (4) of section 50(b) 
and which is not subject to a lease, the person who sold such vehicle 
to the person or entity using such vehicle shall be treated as the 
taxpayer that placed such vehicle in service, but only if such person 
clearly discloses to such person or entity in a document the amount of 
any credit allowable under subsection (a) with respect to such vehicle 
(determined without regard to subsection (c)). For purposes of 
subsection (c), property to which this paragraph applies shall be 
treated as of a character subject to an allowance for depreciation.'', 
and
                  (B) in paragraph (8), by striking ``, including any 
                vehicle with respect to which the taxpayer elects the 
                application of subsection (g)''.
  (f) Reinstatement of Limitation on Number of Vehicles Eligible for 
Credit.--Section 30D is amended by inserting after subsection (f) the 
following:
  ``(g) Limitation on Number of New Qualified Plug-in Electric Drive 
Motor Vehicles Eligible for Credit.--
          ``(1) In general.--In the case of a new qualified plug-in 
        electric drive motor vehicle sold during the phaseout period, 
        only the applicable percentage of the credit otherwise 
        allowable under subsection (a) shall be allowed.
          ``(2) Phaseout period.--For purposes of this subsection, the 
        phaseout period is the period beginning with the second 
        calendar quarter following the calendar quarter which includes 
        the first date on which the number of new qualified plug-in 
        electric drive motor vehicles manufactured by the manufacturer 
        of the vehicle referred to in paragraph (1) sold for use in the 
        United States after December 31, 2009, is at least 200,000.
          ``(3) Applicable percentage.--For purposes of paragraph (1), 
        the applicable percentage is--
                  ``(A) 50 percent for the first 2 calendar quarters of 
                the phaseout period,
                  ``(B) 25 percent for the 3rd and 4th calendar 
                quarters of the phaseout period, and
                  ``(C) 0 percent for each calendar quarter thereafter.
          ``(4) Controlled groups.--Rules similar to the rules of 
        section 30B(f)(4) shall apply for purposes of this 
        subsection.''.
  (g) Termination Repealed.--Section 30D is amended by striking 
subsection (h).
  (h) Additional Conforming Amendments.--
          (1) The heading of section 30D is amended by striking ``clean 
        vehicle credit'' and inserting ``new qualified plug-in electric 
        drive motor vehicles''.
          (2) Section 30B(h)(8) is amended by inserting ``, except that 
        no benefit shall be recaptured if such property ceases to be 
        eligible for such credit by reason of conversion to a qualified 
        plug-in electric drive motor vehicle'', before the period at 
        the end.
          (3) Section 38(b)(30) is amended by striking ``clean'' and 
        inserting ``qualified plug-in electric drive motor''.
          (4) The table of sections for subpart B of part IV of 
        subchapter A of chapter 1 is amended by striking the item 
        relating to section 30D and inserting after the item relating 
        to section 30C the following item:

``Sec. 30D. New qualified plug-in electric drive motor vehicles.''

  (i) Gross up Repealed.--Section 13401 of Public Law 117-169 is 
amended by striking subsection (j).
  (j) Effective Dates.--
          (1) In general.--Except as otherwise provided in this 
        subsection or subsection (k), the amendments made by this 
        section shall apply to vehicles placed in service after June 9, 
        2023.
          (2) Final assembly and manufacturer limitation.--The 
        amendments made by subsections (b) and (f) shall apply to 
        vehicles sold after June 9, 2023. Notwithstanding the preceding 
        sentence, the phaseout period (as defined in section 30D(g) of 
        the Internal Revenue Code of 1986, as amended by this section) 
        shall be determined by taking into account all vehicles 
        described in section 30D(g) of such Code (as so amended).
  (k) Transition Rule.--Notwithstanding subsection (j) (other than the 
last sentence of subsection (j)(2)), the amendments made by this 
section shall not apply with respect to any vehicle which is--
          (1) acquired by the taxpayer pursuant to a written binding 
        contract that was in effect on June 9, 2023, and
          (2) placed in service before June 9, 2024.
  (l) Coordination With Provisions Which Have Not Taken Effect.--
          (1) Transfer of credit.--Notwithstanding subsection (k)(4) of 
        section 13401 of Public Law 117-169, the amendments made by 
        subsection (g) of such section shall not apply.
          (2) Per vehicle dollar limits and related requirements.--
        Notwithstanding subsection (k)(3) of section 13401 of Public 
        Law 117-169, the amendments made by subsection (a) of such 
        section shall not apply unless the guidance referred to in such 
        subsection (k)(3) is issued on or before June 9, 2023.

SEC. 304. REPEAL OF CREDIT FOR PREVIOUSLY-OWNED CLEAN VEHICLES.

  (a) In General.--Subpart A of part IV of subchapter A of chapter 1 is 
amended by striking section 25E (and by striking the item relating to 
such section in the table of sections for such subpart).
  (b) Conforming Amendment.--Section 6213(g)(2) is amended--
          (1) in subparagraph (T), by adding ``and'' at the end,
          (2) by striking subparagraph (U), and
          (3) by redesignating subparagraph (V) as subparagraph (U).
  (c) Effective Date.--The amendments made by this section shall apply 
to vehicles acquired after June 9, 2023.
  (d) Transition Rule.--Notwithstanding subsection (c), the amendments 
made by this section shall not apply with respect to any vehicle which 
is--
          (1) acquired by the taxpayer pursuant to a written binding 
        contract that was in effect on June 9, 2023, and
          (2) placed in service before June 9, 2024.
  (e) Coordination With Provisions Which Have Not Taken Effect.--
Notwithstanding subsection (c)(2) of section 13402 of Public Law 117-
169, the amendments made by subsection (b) of such section shall not 
apply.

SEC. 305. REPEAL OF CREDIT FOR QUALIFIED COMMERCIAL CLEAN VEHICLES.

  (a) In General.--Subpart D of part IV of subchapter A of chapter 1 is 
amended by striking section 45W (and by striking the item relating to 
such section in the table of sections for such subpart).
  (b) Conforming Amendments.--
          (1) Section 38(b), as amended by the preceding provisions of 
        this section, is amended by striking paragraph (37) and 
        redesignating paragraphs (38) through (40) as paragraphs (37) 
        through (39), respectively.
          (2) Section 6213(g)(2), as amended by the preceding 
        provisions of this Act, is amended--
                  (A) in subparagraph (S), by adding ``and'' at the 
                end,
                  (B) in subparagraph (T), by striking ``, and'' and 
                inserting a period, and
                  (C) by striking subparagraph (U).
          (3) Section 6417(b), as amended by the preceding provisions 
        of this Act, is amended by striking paragraph (6) and 
        redesignating paragraphs (7) through (10) as paragraphs (6) 
        through (9), respectively.
  (c) Effective Date.--The amendments made by this section shall apply 
to vehicles acquired after June 9, 2023.
  (d) Transition Rule.--Notwithstanding subsection (c), the amendments 
made by this section shall not apply with respect to any vehicle which 
is--
          (1) acquired by the taxpayer pursuant to a written binding 
        contract that was in effect on June 9, 2023, and
          (2) placed in service before June 9, 2024.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 3938, the ``Build It in America Act,'' as 
ordered reported by the Committee on Ways and Means on June 13, 
2023, promotes jobs and growth, restores American business 
competitiveness, and secures our global supply chains.

                 B. Background and Need for Legislation

    Restores American competitiveness and innovation by 
extending the ability for companies to immediately deduct 
research and development (R&D) costs.
          Starting in 2022, companies could no longer 
        immediately deduct R&D costs and have been required to 
        gradually spread those expenses over time, for a 
        minimum of 5 years and as high as 15 years.
          Losing the immediate deduction has led to higher tax 
        bills for small, innovative businesses--forcing them to 
        slow their growth, reduce their workforce, or borrow 
        funds to pay a big tax bill to the IRS.
          This provision will ensure that the United States 
        sustains its status as a global innovation leader.
    Ensures that mid-sized businesses can deduct borrowing 
costs during this time of rising interest rates by extending 
interest deductibility.
          Starting in 2022, employers face a more restrictive 
        limit on the amount of business interest that they can 
        deduct each year. Instead of using ``earnings before 
        interest, taxes, depreciation, and amortization,'' 
        companies may deduct interest expenses only up to 30 
        percent of their ``earnings before interest and 
        taxes,'' resulting in higher tax costs.
          With today's higher interest rates, due to high 
        inflation in the current economy, the 2022 change has 
        increased costs for mid-sized companies and industries 
        that are required to finance their operations with debt 
        and do not have the ability to issue other financing 
        options like issuing stock.
          This provision will ensure that the United States is 
        a competitive location to hire, invest, and grow for 
        manufacturing, energy production, and other critical 
        industries.
    Promotes American jobs and manufacturing by extending 100 
percent expensing.
          Starting in 2023, job creators are able to 
        immediately deduct only 80 percent--rather than 100 
        percent--of the cost of equipment, machinery, and 
        vehicles, with the rest of the deduction claimed over 
        the life of each asset.
          This provision will ensure that businesses are 
        incentivized to re-shore their operations and 
        facilities from China back to the United States.
    Lowers the price at the pump by repealing Democrats' 
superfund tax on petroleum.
          Policies that harm affordable and clean American 
        energy production drive up gasoline prices and increase 
        American dependence on foreign countries.
          Repealing this tax on affordable and secure energy 
        resources from Democrats' so-called Inflation Reduction 
        Act will improve our energy security and lower prices 
        for consumers.
    Encourages supply chains to get out of China by protecting 
American companies from the Biden Administration's misguided 
tax regulations that discourage near-shoring to Western 
Hemisphere countries.
          The Biden Administration's foreign tax credit 
        regulations favor countries like China and Russia over 
        our neighboring, allied countries in Central and South 
        America.
          By rolling back these regulations, this provision 
        removes an unnecessary roadblock to moving operations 
        closer to home.
    Stops agricultural land purchases by foreign adversaries 
with a tax rule blocking the purchases of American farm and 
ranch land by buyers from ``Countries of Concern,'' including 
China, Russia, and Iran, and preventing undisclosed purchases 
of such land.
          America's foreign adversaries are attempting to 
        secure access to agricultural products by quietly 
        acquiring U.S. farmland. China's reported holdings of 
        farmland are said to be 384,000 acres and that acreage 
        has grown by more than 50 percent since 2019. What's 
        more, questions remain about whether China's ownership 
        has been fully reported.
          This provision builds off existing tax rules for real 
        estate sales by foreign companies and investors. The 
        rule applies to ``Countries of Concern,'' which are 
        those engaged in a long-term pattern of conduct 
        significantly adverse to the national security of the 
        United States, including the People's Republic of China 
        (not including Taiwan), the Russian Federation, Iran, 
        North Korea, Cuba, and the regime of Nicolas Maduro in 
        Venezuela.
          U.S. citizens and permanent residents, including dual 
        citizens, are exempt from this provision.
    Replaces Democrats' bad tax policy--which includes hundreds 
of billions of dollars in special interest tax breaks for big 
business and the wealthy--with good tax policy that returns 
money to American taxpayers and provides real assistance to our 
small businesses and job creators.
          The Inflation Reduction Act included handouts that 
        placed the American taxpayer on the hook for big 
        payouts to big corporations and big banks.
          Companies with over $1 billion in sales receive more 
        than 90 percent of special interest tax subsidies for 
        electricity. Banks and insurers receive over half of 
        these tax breaks, and more than three times as much as 
        any other industry.
          The Inflation Reduction Act also created new tax 
        credits for luxury electric vehicles purchased by the 
        wealthy. Nearly 80 percent of electric vehicle credits 
        flow to households earning over $100,000.
          Under the Build It in America Act, those bad tax 
        policies--which are intended to benefit a hand-picked 
        group of politically connected individuals and 
        corporations--are replaced in favor of broad-based 
        policies that create jobs and benefit hardworking 
        Americans.
          This provision repeals two special interest credits 
        not operative until 2025 or later and three electric 
        vehicle credits, which have ballooned in cost by over 
        700 percent since 2022.

                         C. Legislative History


Background

    H.R. 3938 was introduced on June 9, 2023, and was referred 
to the Committee on Ways and Means.

Committee Hearings

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearings were used to develop and consider H.R. 3938:
           On February 6, 2023, the Committee held a 
        hearing entitled ``Field Hearing on the State of the 
        American Economy: Appalachia.''
           On March 7, 2023, the Committee held a 
        hearing entitled ``Field Hearing on the State of the 
        American Economy: The Heartland.''
           On April 19, 2023, the Committee held a 
        hearing entitled ``Hearing on the U.S. Tax Code 
        Subsidizing Green Corporate Handouts and the Chinese 
        Communist Party.''
           On April 21, 2023, the Committee held a 
        hearing entitled ``Field Hearing on the State of the 
        American Economy: The South.''
           On May 9, 2023, the Committee held a hearing 
        entitled ``Field Hearing on Trade in America: Securing 
        Supply Chains and Protecting the American Worker--
        Staten Island.''

Committee Action

    The Committee on Ways and Means marked up H.R. 3938, the 
``Build It in America Act,'' on June 13, 2023, and ordered the 
bill, as amended, favorably reported (with a quorum being 
present).

                         D. Designated Hearings

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearings were used to consider H.R. 3938:
    Committee on Ways and Means hearing which took place on 
February 6, 2023, entitled, ``the State of the American 
Economy: Appalachia''.
    Committee on Ways and Means hearing which took place on 
March 7, 2023, entitled, ``the State of the American Economy: 
The Heartland''.
    Committee on Ways and Means hearing which took place on 
April 19, 2023, entitled, ``The U.S. Tax Code Subsidizing Green 
Corporate Handouts and the Chinese Communist Party''.
    Committee on Ways and Means hearing which took place on 
April 21, 2023, entitled: ``the State of the American Economy: 
The South''.
    Committee on Ways and Means hearing which took place on May 
9, 2023, entitled: ``Trade in America: Securing Supply Chains 
and Protecting the American Worker--Staten Island''.

                      II. EXPLANATION OF THE BILL


                     TITLE I--INVESTMENT IN AMERICA


 1. Deduction for Research and Experimental Expenditures (Sec. 101 of 
         the Bill and Secs. 174 and New Sec. 174A of the Code)


                              PRESENT LAW

    Public Law 115-97\1\ modified the cost recovery rules for 
research or experimental expenditures paid or incurred in 
taxable years beginning after December 31, 2021 (with 
conforming changes made to sections 41 and 280C).\2\ Section 
174 as applicable to amounts paid or incurred in taxable years 
beginning before January 1, 2022, is described first below, 
followed by a description of section 174 as applicable to 
amounts paid or incurred in taxable years beginning after 
December 31, 2021.
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    \1\December 22, 2017.
    \2\Sec. 174.
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Amounts paid or incurred in taxable years beginning before January 1, 
        2022

    Business expenses associated with the development or 
creation of an asset having a useful life extending beyond the 
current year generally must be capitalized and depreciated over 
such useful life.\3\ However, taxpayers may elect to deduct the 
amount of reasonable research or experimental expenditures paid 
or incurred in taxable years beginning before January 1, 2022 
in connection with a trade or business.\4\ Alternatively, 
taxpayers may elect to capitalize their research or 
experimental expenditures and recover them ratably over the 
useful life of the research, but in no case over a period of 
less than 60 months.\5\ Taxpayers may also elect to amortize 
their research or experimental expenditures over a period of 10 
years.\6\ Research and experimental expenditures deductible 
under section 174 are not required to be capitalized under 
either section 263(a)\7\ or section 263A.\8\ Section 174 
deductions are generally reduced by the amount of the 
taxpayer's research credit under section 41.\9\
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    \3\Secs. 167 and 263(a).
    \4\Former secs. 174(a) and (e).
    \5\Former sec. 174(b). Taxpayers that have a taxable loss or that 
would have taxable loss after allowance of the deduction for research 
and experimental expenses, including taxpayers that incur research and 
experimental expenses before the start of an active trade or business, 
may elect to capitalize these expenses under this rule.
    \6\Former secs. 174(f)(2) and 59(e). This special 10-year election 
is available to mitigate the effect of the individual alternative 
minimum taxable income adjustment for research expenditures set forth 
in section 56(b)(2). The election under section 59(e) to amortize 
research or experimental expenditures over a 10-year period does not 
apply to research or experimental expenditures paid or incurred in 
taxable years beginning after December 31, 2021. A technical correction 
may be necessary to reflect this intent.
    \7\Sec. 263(a)(1)(B).
    \8\Sec. 263A(c)(2).
    \9\Former secs. 280C(c)(1) and (2). Taxpayers may instead elect to 
claim a reduced research credit amount under section 41 in lieu of 
reducing deductions otherwise allowed. Sec. 280C(c)(3), as effective 
for amounts paid or incurred in taxable years beginning before January 
1, 2022.
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    Research or experimental expenditures generally include all 
costs incurred in the experimental or laboratory sense related 
to the development or improvement of a product.\10\ In 
particular, qualifying costs are those incurred for activities 
intended to discover information that would eliminate 
uncertainty concerning the development or improvement of a 
product.\11\ Uncertainty exists when information available to 
the taxpayer is not sufficient to ascertain the capability or 
method for developing, improving, and/or appropriately 
designing the product.\12\ The determination of whether 
expenditures qualify as deductible research expenses depends on 
the nature of the activity to which the costs relate, not the 
nature of the product or improvement being developed or the 
level of technological advancement the product or improvement 
represents.\13\ Examples of qualifying costs include salaries 
for those engaged in research or experimentation efforts, 
amounts incurred to operate and maintain research facilities 
(e.g., utilities, depreciation, rent, etc.), and expenditures 
for materials and supplies used and consumed in the course of 
research or experimentation (including amounts incurred in 
conducting trials).\14\ In addition, under administrative 
guidance, the costs of developing computer software have been 
accorded treatment similar to the cost recovery treatment of 
research and experimental expenditures.\15\
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    \10\Treas. Reg. sec. 1.174-2(a)(1) and (2). Product is defined to 
include any pilot model, process, formula, invention, technique, 
patent, or similar property, and includes products to be used by the 
taxpayer in its trade or business as well as products to be held for 
sale, lease, or license. Treas. Reg. sec. 1.174-2(a)(11), Example 10, 
provides an example of new process development costs for which the cost 
recovery rules of section 174 apply.
    \11\Treas. Reg. sec. 1.174-2(a)(1).
    \12\Ibid.
    \13\Ibid.
    \14\See Treas. Reg. sec. 1.174-4(c). The definition of research and 
experimental expenditures also includes the costs of obtaining a 
patent, such as attorneys' fees incurred in making and perfecting a 
patent application. Treas. Reg. sec. 1.174-2(a)(1).
    \15\Rev. Proc. 2000-50, 2000-2 C.B. 601.
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    Research or experimental expenditures do not include 
expenditures for quality control testing; efficiency surveys; 
management studies; consumer surveys; advertising or 
promotions; the acquisition of another's patent, model, 
production or process; or research in connection with literary, 
historical, or similar projects.\16\ For purposes of section 
174, quality control testing means testing to determine whether 
particular units of materials or products conform to specified 
parameters, but does not include testing to determine if the 
design of the product is appropriate.\17\
---------------------------------------------------------------------------
    \16\Treas. Reg. sec. 1.174-2(a)(6).
    \17\Treas. Reg. sec. 1.174-2(a)(7).
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    Generally, no deduction under section 174 is allowable for 
expenditures for the acquisition or improvement of land or of 
depreciable or depletable property used in connection with any 
research or experimentation.\18\ In addition, no deduction is 
allowed for any expenditure incurred for the purpose of 
ascertaining the existence, location, extent, or quality of any 
deposit of ore or other mineral, including oil and gas.\19\
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    \18\Former sec. 174(c). However, depreciation and depletion 
allowances may be considered section 174 expenditures. Ibid.
    \19\Former sec. 174(d). Special rules apply with respect to 
geological and geophysical costs (section 167(h)), qualified tertiary 
injectant expenses (section 193), intangible drilling costs (sections 
263(c) and 291(b)), and mining exploration and development costs 
(sections 616 and 617).
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    In the case of a long-term contract, the taxable income 
from the contract is determined under the percentage-of-
completion method, in part, by incorporating research and 
experimental expenditures.\20\ Under this method, the taxpayer 
must include in gross income for the taxable year an amount 
equal to the product of (1) the gross contract price and (2) 
the percentage of the contract completed during the taxable 
year.\21\ The percentage of the contract completed during the 
taxable year is determined by comparing costs allocated to the 
contract and incurred before the end of the taxable year with 
the estimated total contract costs.\22\ Costs allocated to the 
contract typically include all costs (including research and 
experimental costs) that directly benefit or are incurred by 
reason of the taxpayer's long-term contract activities.\23\
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    \20\Sec. 460(a).
    \21\See Treas. Reg. sec. 1.460-4. This calculation is done on a 
cumulative basis. Thus, the amount included in gross income in a 
particular year is that proportion of the expected contract price that 
the amount of costs incurred through the end of the taxable year bears 
to the total expected costs, reduced by the amounts of gross contract 
price included in gross income in previous taxable years.
    \22\Sec. 460(b)(1).
    \23\Sec. 460(c).
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Amounts paid or incurred in taxable years beginning after December 31, 
        2021

    For taxable years beginning after December 31, 2021, 
specified research or experimental expenditures must be 
capitalized and amortized ratably over a five-year period (or, 
in the case of expenditures that are attributable to research 
that is conducted outside of the United States, over a 15-year 
period),\24\ beginning with the midpoint of the taxable year in 
which such specified research or experimental expenditures are 
paid or incurred (referred to as a half-year convention).\25\ 
Specified research or experimental expenditures that are 
required to be capitalized include expenditures for software 
development.\26\ Specified research or experimental 
expenditures exclude expenditures for the acquisition or 
improvement of land or for depreciable or depletable property 
used in connection with the research or experimentation and 
include depreciation and depletion allowances in respect of 
that property.\27\ Also excluded are exploration expenditures 
incurred for ore or other minerals (including oil and gas).\28\
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    \24\For this purpose, the term ``United States'' includes the 
United States, the Commonwealth of Puerto Rico, and any possession of 
the United States. Sec. 174(a)(2)(B), by reference to sec. 41(d)(4)(F).
    \25\Sec. 174(a)(2)(B).
    \26\Sec. 174(c)(3).
    \27\Sec. 174(c)(3).
    \28\Sec. 174(c)(2).
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    In the case of retired, abandoned, or disposed property 
with respect to which specified research or experimental 
expenditures are paid or incurred, any remaining basis may not 
be recovered in the year of retirement, abandonment, or 
disposal, but instead must continue to be amortized over the 
remaining amortization period.\29\
---------------------------------------------------------------------------
    \29\Sec. 174(d).
---------------------------------------------------------------------------
    If a taxpayer's research credit under section 41 for a 
taxable year beginning after 2021 exceeds the amount allowed as 
an amortization deduction under section 174 for that taxable 
year, the amount chargeable to capital account under section 
174 for such taxable year must be reduced by that excess 
amount.\30\ A taxpayer instead may elect to claim a reduced 
research credit amount under section 41.\31\ If this election 
is made, the research credit is reduced by an amount equal to 
the amount of the credit multiplied by the highest corporate 
tax rate.\32\
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    \30\Sec. 280C(c)(1).
    \31\Sec. 280C(c)(2)(A).
    \32\Sec. 280C(c)(2)(B).
---------------------------------------------------------------------------
    Taxpayers must continue to include specified research and 
experimental expenditures incurred for a long-term contract as 
a contract cost under the percentage-of-completion method.\33\
---------------------------------------------------------------------------
    \33\Sec. 460(c).
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                           REASONS FOR CHANGE

    The Committee recognizes that the full and immediate 
expensing of research or experimental expenditures, including 
software development costs, lowers the tax burden on critical 
research and development. Forcing businesses to capitalize and 
amortize these expenditures during a time of high inflation 
erodes the value of those expenditures, increases the cost of 
important research, and inhibits investment in new and 
innovative products. The adverse treatment of research and 
experimental expenditures under current law will force domestic 
businesses to cut jobs and curtail research to pay a higher tax 
bill.
    The Committee believes that allowing businesses to 
immediately deduct research expenses will lower their cost of 
wages, supplies, and equipment to initiate or expand research 
programs.

                        EXPLANATION OF PROVISION

    The provision temporarily suspends the application of 
section 174 for research or experimental expenditures paid or 
incurred in taxable years beginning after December 31, 2021, 
and before January 1, 2026. For expenditures to which the 
suspension of the application of section 174 applies, the 
provision provides rules (in new section 174A) similar to the 
rules of prior law section 174.
    The provision provides that research or experimental 
expenditures paid or incurred by a taxpayer during the taxable 
year in connection with the taxpayer's trade or business are 
deductible. Alternatively, a taxpayer may elect to either (1) 
capitalize part or all of its research or experimental 
expenditures and recover them ratably over the useful life of 
the research (but in no case over a period of less than 60 
months), or (2) capitalize part or all of its research or 
experimental expenditures to a capital account.
    Similar to present law section 174, research or 
experimental expenditures include software development 
costs.\34\
---------------------------------------------------------------------------
    \34\Under former section 174, taxpayers relied on Rev. Proc. 2000 
50, supra, for the treatment of software development expenditures.
---------------------------------------------------------------------------
    The provision requires a taxpayer to reduce the amount 
taken into account as research or experimental expenditures 
(whether expensed or capitalized) by the amount of the research 
credit allowable under section 41. Taxpayers instead may elect 
to claim a reduced research credit amount under section 41.
    For purposes of recognizing taxable income under the 
percentage of completion method of section 460, a taxpayer that 
pays or incurs a research or experimental expenditure under a 
long-term contract must include the amount paid or incurred as 
a cost allocated to the contract for the taxable year. For 
example, a taxpayer that pays or incurs $100 of research or 
experimental expenditures under a long-term contract must 
include that $100 as a cost allocated to the contract in that 
year for purposes determining the percentage of completion 
under section 460, regardless of whether it deducts the full 
$100 or instead claims a smaller amortization deduction in that 
year.
    The provision treats the requirement to capitalize and 
amortize research or experimental expenditures paid or incurred 
in taxable years beginning after December 31, 2025, as a change 
in the taxpayer's method of accounting for purposes of section 
481. This change is treated as initiated by the taxpayer, is 
treated as made with the consent of the Secretary, and is 
applied prospectively on a cut-off basis with no corresponding 
catch-up adjustment to taxable income under section 481(a).
    For research or experimental expenditures paid or incurred 
in taxable years beginning after December 31, 2025, the 
provision coordinates the applicable rules (that is, the 
present law section 174 rules that the provision temporarily 
suspends) with the application of the alternative minimum tax 
rules for individuals, including the optional election under 
section 59(e), and the rules for making certain basis 
adjustments. Under these coordination rules, neither the 
adjustment to an individual's alternative minimum taxable 
income under section 56(b)(2) nor the election under section 
59(e)(2)(B) to capitalize and amortize research and 
experimental expenditures over 10 years apply to specified 
research or experimental expenditures. In addition, the 
provision clarifies that the basis of property is reduced by 
amortization deductions allowed under section 174(a). For 
purposes of recognizing taxable income under the percentage of 
completion method of section 460, a taxpayer that pays or 
incurs a specified research or experimental expenditure under a 
long-term contract in a taxable year must include the 
amortization deduction under section 174(a) as a cost allocated 
to the contract in that year.

                             EFFECTIVE DATE

    The provision is effective for amounts paid or incurred in 
taxable years beginning after December 31, 2021.
    The provision provides two elective transition rules. The 
first election allows a taxpayer that adopts a method of 
accounting under section 174 before the date of the provision's 
enactment for the taxpayer's first taxable year beginning after 
December 31, 2021, to treat the application of the temporary 
rules as a change in method of accounting initiated by the 
taxpayer for the taxpayer's immediately succeeding taxable year 
with a catch-up adjustment to taxable income under section 
481(a) made on a modified cut-off basis.\35\
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    \35\The section 481(a) adjustment only includes an adjustment for 
the capitalized expenditures which were not allowed as an amortization 
deduction by reason of section 174 prior to amendment by the provision 
for the taxpayer's first taxable year beginning after December 31, 
2021.
---------------------------------------------------------------------------
    The second transition rule allows an eligible taxpayer to 
make a late election under section 59(e)(2)(B) to capitalize 
and amortize research or experimental expenditures over 10 
years by filing an amended income tax return within one year of 
the date of enactment.\36\ An eligible taxpayer is any taxpayer 
that does not elect the application of the first transition 
rule, and that filed an income tax return for the taxpayer's 
first taxable year beginning after December 31, 2021, before 
the earlier of the due date for that return and the date of 
enactment.
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    \36\Generally, an election under section 59(e)(2)(B) must be filed 
no later than the date prescribed by law for filing the taxpayer's 
original income tax return (including extensions) for the tax year in 
which the amortization of the qualified expenditures subject to the 
election begins. See Treas. Reg. sec. 1.59-1(b)(1).
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2. Extension of Allowance for Depreciation, Amortization, or Depletion 
  in Determining the Limitation on Business Interest (Sec. 102 of the 
                   Bill and Sec. 163(j) of the Code)


                              PRESENT LAW

Limitation on deduction of business interest expense

    Interest paid or accrued by a business generally is 
deductible in the computation of taxable income, subject to a 
number of limitations.\37\ The deduction for business interest 
expense\38\ is generally limited to the sum of (1) business 
interest income of the taxpayer for the taxable year,\39\ (2) 
30 percent of the adjusted taxable income of the taxpayer for 
the taxable year (not less than zero), and (3) the floor plan 
financing interest\40\ of the taxpayer for the taxable 
year.\41\ Thus, other than floor plan financing interest, 
business interest expense in excess of business interest income 
is generally deductible only to the extent of 30 percent of 
adjusted taxable income.\42\
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    \37\Sec. 163(a). Interest deductions limitations that are not 
described in this document include: denial of the deduction for the 
disqualified portion of the original issue discount on an applicable 
high yield discount obligation (sec. 163(e)(5)), denial of deduction 
for interest on certain obligations not in registered form (sec. 
163(f)), reduction of the deduction for interest on indebtedness with 
respect to which a mortgage credit certificate has been issued under 
section 25 (sec. 163(g)), disallowance of deduction for interest on 
debt with respect to certain life insurance contracts (sec. 264(a)), 
and disallowance of deduction for interest relating to tax-exempt 
income (sec. 265(a)(2)). In some circumstances, interest expense is 
required to be capitalized. See, e.g., secs. 263A(f) (capitalization of 
interest incurred to produce certain tangible property) and 461(g) 
(prepaid interest). Section 385 also recharacterizes as equity some 
instruments that are purported to be indebtedness with the results that 
payments on the interest are treated as nondeductible dividends rather 
than deductible interest.
    \38\Business interest means any interest paid or accrued on 
indebtedness properly allocable to a trade or business and does not 
include investment interest (within the meaning of section 163(d)). 
Sec. 163(j)(5). Section 163(j) applies only to business interest that 
would otherwise be deductible in the current taxable year, absent the 
application of section 163(j). Treas. Reg. sec. 1.163(j)-3(b)(1). Thus, 
section 163(j) applies after the application of provisions that subject 
interest to deferral, capitalization, or other limitation (e.g., secs. 
163(e)(3), 163(e)(5)(A)(ii), 246A, 263A, 263(g), 267, 1277, and 1282), 
but before application of sections 461(l), 465, and 469. See Treas. 
Reg. sec. 1.163(j)-3(b)(2)-(6).
    \39\Business interest income means the amount of interest 
includible in the gross income of the taxpayer for the taxable year 
that is properly allocable to a trade or business and does not include 
investment income (within the meaning of section 163(d)). Sec. 
163(j)(6).
    \40\Floor plan financing interest means interest paid or accrued on 
floor plan financing indebtedness. Floor plan financing indebtedness 
means indebtedness used to finance the acquisition of motor vehicles 
held for sale or lease to retail customers and secured by the inventory 
so acquired. A motor vehicle means a motor vehicle that is: (1) any 
self-propelled vehicle designed for transporting person or property on 
a public street, highway, or road; (2) a boat; or (3) farm machinery or 
equipment. Sec. 163(j)(9).
    \41\These rules were modified for taxable years beginning in 2019 
or 2020 to permit certain taxpayers to deduct more business interest 
than would be allowed under the rules described herein. See sec. 
163(j)(10).
    \42\The business interest limitation does not apply in certain 
cases. The business interest limitation does not apply to any taxpayer 
(other than a tax shelter prohibited from using the cash method under 
section 448(a)(3)) that meets the $25 million gross receipts test of 
section 448(c). At a taxpayer's election, (1) any real property 
development, redevelopment, construction, reconstruction, acquisition, 
conversion, rental, operation, management, leasing, or brokerage trade 
or business (referred to as an ``electing real property trade or 
business'') or (2) any farming business or any business engaged in the 
trade or business of a specified agricultural or horticultural 
cooperative (referred to as an ``electing farming business'') is not 
treated as a trade or business for purposes of the limitation, with the 
result that the section 163(j) limitation does not apply to an electing 
real property trade or business or to an electing farming business. The 
limitation does not apply to certain regulated public utilities. See 
sec. 163(j)(7).
---------------------------------------------------------------------------
    The limitation generally applies at the taxpayer level 
(although special rules apply in the case of partnerships, 
described below). In the case of a group of affiliated 
corporations that file a consolidated return, the limitation 
applies at the consolidated tax return filing level.\43\ The 
amount of any business interest expense not allowed as a 
deduction for any taxable year is generally treated as business 
interest expense paid or accrued by the taxpayer in the 
succeeding taxable year. This business interest expense may be 
carried forward indefinitely.\44\
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    \43\See Treas. Reg. sec. 1.163(j)-4(d) (providing that a 
consolidated group has a single sec. 163(j) limitation and generally 
treating all members of the consolidated group as a single taxpayer for 
sec. 163(j) purposes).
    \44\Sec. 163(j)(2). With respect to corporations, any carryforward 
of disallowed business interest of a corporation is an item taken into 
account in the case of certain corporate acquisitions described in 
section 381 and is subject to limitation under section 382. Secs. 
381(c)(20) and 382(d)(3).
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Application to passthrough entities

            In general
    In the case of a partnership, the section 163(j) interest 
limitation is generally applied at the partnership level.\45\ A 
partner generally must apply 163(j) separately to any business 
interest expense it incurs. To prevent double counting, the 
business interest income and adjusted taxable income of each 
partner are generally determined without regard to the 
partner's distributive share of any items of income, gain, 
deduction, or loss of the partnership.\46\ However, in cases in 
which the partnership has an excess amount of business interest 
income, an excess amount of adjusted taxable income, or both, 
section 163(j) partnership items generally may to support 
additional business interest expense deductions by the 
partnership's partners. Specifically, a partner's business 
interest deduction limitation is increased by the sum of the 
partner's distributive share of the partnership's excess 
business interest income and 30 percent of the partner's 
distributive share of the partnership's excess taxable 
income.\47\
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    \45\Sec. 163(j)(4)(A)(i).
    \46\Sec. 163(j)(4)(A)(ii)(I); Treas. Reg. sec. 1.163(j)-6(e)(1).
    \47\Sec. 163(j)(4)(A)(ii)(II); Treas. Reg. sec. 1.163(j)-6(e)(1).
---------------------------------------------------------------------------
    Similar rules apply to an S corporation and its 
shareholders.\48\
---------------------------------------------------------------------------
    \48\Sec. 163(j)(4)(D).
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            Carryforward rules for partnerships
    Special rules for the carryforward of disallowed business 
interest expense apply only to partnerships and their 
partners.\49\ In the case of a partnership, the general 
taxpayer-level carryforward rule does not apply. Instead, any 
business interest expense that is not allowed as a deduction to 
the partnership for the taxable year (referred to as ``excess 
business interest expense'') is allocated to the partners.\50\ 
A partner may not deduct excess business interest expense in 
the year in which it is allocated to a partner. A partner may 
deduct its share of the partnership's excess business interest 
expense in any future year, but only in an amount that is based 
on the partner's distributive share of excess business interest 
income and excess taxable income of the partnership the 
activities of which gave rise to the disallowed business 
interest expense carryforward.\51\ Any amount that is not 
allowed as a deduction generally continues to be carried 
forward.\52\
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    \49\Sec. 163(j)(4)(B).
    \50\ Sec. 163(j)(4)(B)(i)(II).
    \51\Sec. 163(j)(4)(B)(ii)(I); Treas. Reg. sec. 1.163(j)-6(g)(2). 
See also Joint Committee on Taxation, General Explanation of Public Law 
115-97 (JCS-1-18), December 2018, pp. 175 178 (describing section 
163(j)(4) as it was intended to work).
    \52\Sec. 163(j)(4)(B)(ii)(II).
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    When excess business interest expense is allocated to a 
partner, the partner's basis in its partnership interest is 
reduced (but not below zero) by the amount of the allocation, 
even though the excess business interest expense does not give 
rise to a deduction in the year of the basis reduction.\53\ The 
partner's deduction in a subsequent year for excess business 
interest expense does not reduce the partner's basis in its 
partnership interest. If the partner disposes of a partnership 
interest the basis of which has been reduced by an allocation 
of excess business interest expense, the partner's basis in the 
interest is increased immediately before the disposition by the 
amount by which the basis reduction exceeds any amount of 
excess business interest expense that has been treated as 
business interest expense paid or accrued by the partner as a 
result of an allocation of excess business interest income or 
excess taxable income by the same partnership.\54\ This rule 
applies to both total and (on a proportionate basis) partial 
dispositions of a partnership interest.\55\
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    \53\Sec. 163(j)(4)(B)(iii)(I); Treas. Reg. sec. 1.163(j)-6(h)(2).
    \54\Sec. 163(j)(4)(B)(iii)(II); Treas. Reg. sec. 1.163(j)-6(h)(3). 
The special rule for dispositions also applies to transfers of a 
partnership interest (including by reason of death) in transactions in 
which gain is not recognized in whole or in part. Id. No deduction is 
allowed to the transferor or transferee for any disallowed business 
interest resulting in a basis increase under this rule. Id.
    \55\Ibid.
---------------------------------------------------------------------------
    The special carryforward rules do not apply to S 
corporations or their shareholders.\56\ Rather, any disallowed 
business interest expense is carried forward by the S 
corporation (as opposed to the shareholder) to the succeeding 
taxable year.\57\
---------------------------------------------------------------------------
    \56\Sec. 163(j)(4)(D).
    \57\Treas. Reg. sec. 1.163(j)-6(l)(5).
---------------------------------------------------------------------------

Adjusted taxable income

    For purposes of the section 163(j) interest limitation, 
adjusted taxable income means the taxable income of the 
taxpayer computed without regard to: (1) any item of income, 
gain, deduction, or loss that is not properly allocable to a 
trade or business; (2) any business interest or business 
interest income; (3) the amount of any net operating loss 
deduction; or (4) the amount of any deduction allowed under 
section 199A.
    For taxable years beginning before January 1, 2022, 
adjusted taxable income also is computed without regard to any 
deduction allowable for depreciation, amortization, or 
depletion.\58\ This definition of adjusted taxable income 
generally corresponds with the financial accounting concept of 
earnings before interest, taxes, depreciation, and 
amortization, or ``EBITDA'' (hereinafter referred to as the 
``EBITDA limitation'').
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    \58\Sec. 163(j)(8)(A). Treasury regulations provide other 
adjustments to the definition of adjusted taxable income. Sec. 
163(j)(8)(B); Treas. Reg. sec. 1.163(j)-1(b)(1).
---------------------------------------------------------------------------
    For taxable years beginning after December 31, 2021, 
adjusted taxable income is computed with regard to deductions 
allowable for depreciation, amortization, or depletion. This 
definition of adjusted taxable income generally corresponds 
with the financial accounting concept of earnings before 
interest and taxes, or ``EBIT'' (hereinafter referred to as the 
``EBIT limitation'').

                           REASON FOR CHANGE

    The Committee believes that a combination of rising 
interest rates and increased restrictions on interest 
deductions under current law will harm business expansion and 
job growth. The EBIT limitation is a tax on investment that 
impairs the ability of businesses to finance new equipment and 
expand operations. Increasing the cost of critical machinery 
and equipment for businesses discourages domestic investment, 
reduces wages, and costs jobs. The Committee believes that 
reinstating the EBITDA limitation will alleviate the burden on 
businesses and reduce barriers to domestic investment.

                        EXPLANATION OF PROVISION

    The provision temporarily extends the EBITDA limitation 
under section 163(j) to apply to taxable years beginning before 
January 1, 2026. Thus, under the provision, adjusted taxable 
income is computed without regard to the deduction for 
depreciation, amortization, or depletion for taxable years 
beginning before January 1, 2026.\59\
---------------------------------------------------------------------------
    \59\A partnership that has already filed Form 1065, U.S. Return of 
Partnership Income, for a taxable year beginning in 2022 may have to 
either supercede or amend its return, or file an administrative 
adjustment request (``AAR'') if it is subject to the Bipartisan Budget 
Act (``BBA'') centralized partnership audit regime of sections 6221 
through 6241. In general, only partnerships that are not subject to the 
BBA centralized partnership audit regime are able to file a superceding 
or amended Form 1065. Partnerships subject to those rules must instead 
file an AAR. See secs. 6221 and 6227. However, at times the IRS has 
exercised its authority under section 6031(b) and allowed BBA 
partnerships to instead file superceding or amended returns (while 
still being subject to the BBA centralized partnership audit regime). 
See, e.g., Rev. Proc. 2021-50, 2021-49 I.R.B. 844; Rev. Proc. 2021-29, 
2021-27 I.R.B. 12; Rev. Proc. 2020-23, 2020-18 I.R.B. 749; and Rev. 
Proc. 2019-32, 2019-33 I.R.B. 659.
---------------------------------------------------------------------------

                             EFFECTIVE DATE

    The provision is generally effective for taxable years 
beginning after December 31, 2022.
    The provision provides an elective transition rule that 
allows a taxpayer to elect to apply the extension of the EBITDA 
limitation under section 163(j) to taxable years beginning 
after December 31, 2021.

 3. Extension of 100 Percent Bonus Depreciation (Sec. 103 of the Bill 
                      and Sec. 168(k) of the Code)


                              PRESENT LAW

    A taxpayer generally must capitalize the cost of property 
used in a trade or business or held for the production of 
income and recover the cost over time through annual deductions 
for depreciation or amortization.\60\ The period for 
depreciation or amortization generally begins when the asset is 
placed in service by the taxpayer.\61\ Tangible property 
generally is depreciated under the modified accelerated cost 
recovery system (``MACRS''), which determines depreciation for 
different types of property based on an assigned applicable 
depreciation method, recovery period, and convention.\62\
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    \60\See secs. 263(a) and 167. In general, only the tax owner of 
property (i.e., the taxpayer with the benefits and burdens of 
ownership) is entitled to claim tax benefits such as cost recovery 
deductions with respect to the property. In addition, where property is 
not used exclusively in a taxpayer's business, the amount eligible for 
a deduction must be reduced by the amount related to personal use. See, 
e.g., sec. 280A.
    \61\See Treas. Reg. secs. 1.167(a)-10(b), -3, -14, and 1.197-2(f). 
See also Treas. Reg. sec. 1.167(a)-11(e)(1)(i).
    \62\Sec. 168.
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Bonus depreciation

    An additional first-year depreciation deduction equal to 
100 percent of the adjusted basis of qualified property is 
allowed for property acquired after September 27, 2017,\63\ and 
placed in service before January 1, 2023 (January 1, 2024, for 
certain property with a recovery period of at least 10 years or 
certain transportation property,\64\ and certain 
aircraft).\65\\66\ The 100-percent allowance is phased down by 
20 percentage points per calendar year for property acquired 
after September 27, 2017, and placed in service after December 
31, 2022 (after December 31, 2023, for longer production period 
property and certain aircraft).\67\ This additional first-year 
depreciation is commonly referred to as ``bonus depreciation.'' 
The bonus depreciation applicable percentages for qualified 
property acquired and placed in service after September 27, 
2017 (as well as for specified plants which are planted or 
grafted after September 27, 2017 (described below)) are as 
follows.
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    \63\For a description of section 168(k) as it applies to qualified 
property acquired before September 28, 2017, as well as a transition 
rule that permits a taxpayer to elect to apply a 50-percent allowance 
instead of the 100-percent allowance for a taxable year that includes 
September 28, 2017, see Joint Committee on Taxation, General 
Explanation of Public Law No. 115-97 (JCS-1-18), December 2018, pp. 
115-128. This document can be found on the Joint Committee on Taxation 
website at www.jct.gov.
    \64\Property qualifying for the extended placed-in-service date 
must have a recovery period of at least 10 years or constitute 
transportation property, have an estimated production period exceeding 
one year, and have a cost exceeding $1 million. Transportation property 
generally is defined as tangible personal property used in the trade or 
business of transporting persons or property. Sec. 168(k)(2)(B). 
Property defined in section 168(k)(2)(B) is hereinafter collectively 
referred to as ``longer production period property.''
    \65\Certain aircraft which is not transportation property, other 
than for agricultural or firefighting uses, also qualifies for the 
extended placed-in-service date, if at the time of the contract for 
purchase, the purchaser made a nonrefundable deposit of the lesser of 
10 percent of the cost or $100,000, and which has an estimated 
production period exceeding four months and a cost exceeding $200,000. 
Sec. 168(k)(2)(C).
    \66\Sec. 168(k). The bonus depreciation deduction is generally 
subject to the rules regarding whether a cost must be capitalized under 
section 263A. For a description of section 263A, see Joint Committee on 
Taxation, Present Law and Background Regarding the Federal Income 
Taxation of Small Businesses (JCX-10-23), June 5, 2023, pp. 15-17. This 
document can be found on the Joint Committee on Taxation website at 
www.jct.gov.
    \67\Sec. 168(k)(6)(A) and (B).

------------------------------------------------------------------------
                                       Bonus Depreciation Applicable
                                                Percentage
                                 ---------------------------------------
   Placed in Service Year\68\                          Longer Production
                                  Qualified Property   Period  Property
                                     in  General/         and Certain
                                   Specified Plants        Aircraft
------------------------------------------------------------------------
Sept. 28, 2017-Dec. 31, 2022....  100 percent.......  100 percent
2023............................  80 percent........  100 percent
2024............................  60 percent........  80 percent
2025............................  40 percent........  60 percent
2026............................  20 percent........  40 percent
2027............................  None..............  20 percent\69\
2028 and thereafter.............  None..............  None
------------------------------------------------------------------------

    The bonus depreciation deduction is allowed for both 
regular tax and alternative minimum tax purposes, but is not 
allowed in computing earnings and profits.\70\ The basis of the 
property and the depreciation allowances in the placed in 
service year and later years are adjusted to reflect the bonus 
depreciation deduction.\71\ The amount of the bonus 
depreciation deduction is not affected by a short taxable 
year.\72\ A taxpayer may elect out of bonus depreciation for 
any class of property for any taxable year.\73\ An election out 
of bonus depreciation may be revoked only with the consent of 
the Secretary.\74\
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    \68\In the case of specified plants, this is the year of planting 
or grafting, as discussed below.
    \69\Twenty percent applies to the adjusted basis attributable to 
manufacture, construction, or production before January 1, 2027, and 
the remaining adjusted basis does not qualify for bonus depreciation. 
Twenty percent applies to the entire adjusted basis of certain aircraft 
described in section 168(k)(2)(C) and placed in service in 2027.
    \70\Secs. 56A(c)(13), 168(k)(2)(G) and 312(k)(3).
    \71\Sec. 168(k)(1).
    \72\Treas. Reg. sec. 1.168(k)-2(e)(1)(ii).
    \73\For the definition of a class of property, see Treas. Reg. sec. 
1.168(k)-2(f)(1)(ii). Treas. Reg. sec. 1.168(k)-2(f)(1) provides the 
procedures for making an election not to deduct bonus depreciation.
    \74\Sec. 168(k)(7). See also Treas. Reg. sec. 1.168(k)-2(f)(5).
---------------------------------------------------------------------------
            Qualified property
    Property qualifying for the bonus depreciation deduction 
must meet all of the following requirements:
            The property must be:
                  1. property to which MACRS applies with an 
                applicable recovery period of 20 years or less,
                  2. computer software other than computer 
                software required to be amortized under section 
                197,
                  3. water utility property,\75\ or
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    \75\As defined in section 168(e)(5).
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                  4. a qualified film, television, or live 
                theatrical production,\76\ for which a 
                deduction otherwise would have been allowable 
                under section 181 without regard to the dollar 
                limitation or termination of that section;\77\
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    \76\As defined in section 181(d) and (e).
    \77\Under section 181, a taxpayer may generally elect to deduct up 
to $15 million of the aggregate production costs ($20 million in the 
case of productions in certain areas) of any qualified film, 
television, or live theatrical production, commencing prior to January 
1, 2026, in the year the costs are paid or incurred by the taxpayer, in 
lieu of capitalizing the costs and recovering them through depreciation 
allowances once the production is placed in service. The costs of the 
production in excess of the applicable dollar limitation are 
capitalized and recovered under the taxpayer's method of accounting for 
the recovery of such property once placed in service (e.g., under 
section 168(k) if eligible). For a description of section 181, see 
Joint Committee on Taxation, General Explanation of Certain Tax 
Legislation Enacted in the 116th Congress (JCS 1 22), February 2022, 
pp. 480 482. This document can be found on the Joint Committee on 
Taxation website at www.jct.gov.
---------------------------------------------------------------------------
           Either (i) the original use of the property 
        must commence with the taxpayer,\78\ or (ii) the 
        property must not have been used by the taxpayer at any 
        time before acquisition and the acquisition must meet 
        the requirements of section 179(d)(2)(A)-(C) and 
        (3);\79\ and
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    \78\See Treas. Reg. sec. 1.168(k)-2(b)(3)(ii).
    \79\Thus, used property must be purchased in an arm's length 
transaction. The property must not be acquired (i) from a member of the 
taxpayer's family, including a spouse, ancestors, and lineal 
descendants, or from another related entity as defined in section 267, 
(ii) from a person who controls, is controlled by, or is under common 
control with, the taxpayer, nor (iii) in a nontaxable exchange such as 
a reorganization. The property must not be received as a gift or from a 
decedent. In the case of trade-ins, like-kind exchanges, or involuntary 
conversions, bonus depreciation applies only to any money paid in 
addition to the traded-in property or in excess of the adjusted basis 
of the replaced property. See sec. 179(d)(2)(A)-(C) and (3); Treas. 
Reg. secs. 1.168(k)-2(b)(3)(iii) and 1.179-4(c) and (d). A special rule 
applies in the case of a syndication transaction. See sec. 
168(k)(2)(E)(iii); Treas. Reg. sec. 1.168(k)-2(b)(3)(vi).
---------------------------------------------------------------------------
           The property must be placed in service 
        before January 1, 2027.\80\
---------------------------------------------------------------------------
    \80\A qualified production is considered placed in service, and 
thus eligible for the bonus depreciation allowance, at the time of 
initial release, broadcast, or live staged performance. Sec. 
168(k)(2)(H); Treas. Reg. sec. 1.168(k)-2(b)(4)(iii).
---------------------------------------------------------------------------
    The bonus depreciation deduction is not allowed for any 
property that is required to be depreciated under the 
alternative depreciation system (``ADS''),\81\ or for listed 
property in respect of which the business use is not greater 
than 50 percent (as determined under section 280F(b)).\82\
---------------------------------------------------------------------------
    \81\See sec. 168(g) (determined without regard to an election to 
use ADS under section 168(g)(7)). See also Treas. Reg. sec. 1.168(k)  
2(b)(2)(ii)(B). ADS is required to be used for tangible property used 
predominantly outside the United States, certain tax-exempt use 
property, tax-exempt bond financed property, certain imported property 
covered by an Executive order, and certain property held by either a 
real property trade or business or a farming business electing out of 
the business interest limitation under section 163(j). In addition, an 
election to use ADS is available to taxpayers for any class of property 
for any taxable year. Under ADS, all property is depreciated using the 
straight line method and the applicable convention over recovery 
periods which generally are equal to the class life of the property, 
with certain exceptions.
    \82\Sec. 168(k)(2)(D). For a description of section 280F, see Joint 
Committee on Taxation, General Explanation of Public Law No. 115-97 
(JCS-1- 18), December 2018, pp. 128-130. This document can be found on 
the Joint Committee on Taxation website at www.jct.gov.
---------------------------------------------------------------------------
    In the case of longer production period property and 
certain aircraft, the property must also be acquired (or 
acquired pursuant to a written binding contract entered into) 
before January 1, 2027, and placed in service before January 1, 
2028.\83\ With respect to such property that is manufactured, 
constructed, or produced by the taxpayer for use by the 
taxpayer, the taxpayer must begin the manufacture, 
construction, or production of the property before January 1, 
2027.\84\ Additionally, a special rule limits the amount of 
costs of longer production period property eligible for bonus 
depreciation. With respect to this property, only the portion 
of the basis that is properly attributable to the costs 
incurred before January 1, 2027 (``progress expenditures'') is 
eligible for the bonus depreciation deduction.\85\
---------------------------------------------------------------------------
    \83\Secs. 168(k)(2)(B)(i)(II) and (III).
    \84\Sec. 168(k)(2)(E)(i).
    \85\Sec. 168(k)(2)(B)(ii). See also Treas. Reg. sec. 1.168(k)-
2(e)(1)(iii).
---------------------------------------------------------------------------
            Exception for certain businesses not subject to the 
                    limitation on interest expense
    Qualified property eligible for the bonus depreciation 
deduction does not include any property which is primarily used 
in the trade or business of the furnishing or sale of (1) 
electrical energy, water, or sewage disposal services, (2) gas 
or steam through a local distribution system, or (3) 
transportation of gas or steam by pipeline, if the rates for 
such furnishing or sale, as the case may be, have been 
established or approved by a State or political subdivision 
thereof, by any agency or instrumentality of the United States, 
by a public service or public utility commission or other 
similar body of any State or political subdivision thereof, or 
by the governing or ratemaking body of an electric 
cooperative.\86\
---------------------------------------------------------------------------
    \86\Secs. 168(k)(9)(A) and 163(j)(7)(A)(iv). See also Treas. Reg. 
sec. 1.168(k)-2(b)(2)(ii)(F).
---------------------------------------------------------------------------
    Qualified property also does not include any property used 
in a trade or business that has had floor plan financing 
indebtedness\87\ if the floor plan financing interest related 
to the indebtedness was taken into account to increase the 
taxpayer's section 163(j) interest limitation under section 
163(j)(1)(C).\88\
---------------------------------------------------------------------------
    \87\As defined in section 163(j)(9).
    \88\Sec. 168(k)(9)(B). See also Treas. Reg. sec. 1.168(k)-
2(b)(2)(ii)(G).
---------------------------------------------------------------------------

Special rules

            Passenger automobiles
    The limitation under section 280F on the amount of 
depreciation deductions allowed with respect to certain 
passenger automobiles is increased in the first year by $8,000 
for automobiles that qualify for (and for which the taxpayer 
does not elect out of) bonus depreciation.\89\ While the 
underlying section 280F limitation is indexed for 
inflation,\90\ the section 280F increase amount is not indexed 
for inflation.
---------------------------------------------------------------------------
    \89\Sec. 168(k)(2)(F). See Rev. Proc. 2019 13, 2019 09 I.R.B. 744, 
for a safe harbor method of accounting for determining depreciation 
deductions for passenger automobiles that qualify for bonus 
depreciation and are subject to the section 280F depreciation 
limitations.
    \90\Sec. 280F(d)(7). See Rev. Proc. 2023-14, 2023-6 I.R.B. 466, for 
the section 280F limitations that apply to passenger automobiles placed 
in service during calendar year 2023.
---------------------------------------------------------------------------
            Certain plants bearing fruits and nuts
    A farming business\91\ is allowed a special election in 
respect of certain costs of planting or grafting certain plants 
bearing fruits and nuts.\92\ Under the election, the applicable 
percentage of the adjusted basis of a specified plant which is 
planted or grafted after September 27, 2017, and before January 
1, 2027, is deductible for regular tax and AMT purposes in the 
year planted or grafted by the taxpayer in the ordinary course 
of the taxpayer's farming business (rather than in the year the 
specified plant is placed in service by the taxpayer\93\), and 
the adjusted basis is reduced by the amount of the 
deduction.\94\ The applicable percentage is 100 percent for 
specified plants planted or grafted after September 27, 2017, 
and before January 1, 2023, and then is phased down by 20 
percentage points per calendar year beginning in 2023.\95\ 
Thus, the applicable percentage is 80 percent for 2023, 60 
percent for 2024, 40 percent for 2025, and 20 percent for 2026.
---------------------------------------------------------------------------
    \91\For this purpose, the term ``farming business'' means the trade 
or business of farming, including the trade or business of operating a 
nursery or sod farm, the raising or harvesting of trees bearing fruit, 
nuts, or other crops, or ornamental trees (other than evergreen trees 
that are more than six years old at the time they are severed from 
their roots). Sec. 263A(e)(4).
    \92\Sec. 168(k)(5). Treas. Reg. sec. 1.168(k)-2(f)(2) provides the 
procedures for making a section 168(k)(5) election.
    \93\In the case of any tree or vine bearing fruits or nuts, the 
placed in service date generally does not occur until the tree or vine 
first reaches an income-producing stage. See Treas. Reg. sec. 1.46-
3(d)(2). See also Rev. Rul. 80 25, 1980-1 C.B. 65; and Rev. Rul. 69-
249, 1969-1 C.B. 31.
    \94\Any amount deducted under this election is not subject to 
capitalization under section 263A. Sec. 263A(c)(7).
    \95\Sec. 168(k)(6)(C).
---------------------------------------------------------------------------
    A specified plant is (i) any tree or vine that bears fruits 
or nuts, and (ii) any other plant that will have more than one 
crop or yield of fruits or nuts and which generally has a 
preproductive period of more than two years from the time of 
planting or grafting to the time it begins bearing a marketable 
crop or yield of fruits or nuts.\96\ A specified plant does not 
include any property that is planted or grafted outside of the 
United States. If the election is made with respect to any 
specified plant, the plant is not treated as qualified property 
eligible for bonus depreciation in the subsequent taxable year 
in which it is placed in service.\97\ Once made, the election 
is revocable only with the consent of the Secretary.\98\
---------------------------------------------------------------------------
    \96\ Sec. 168(k)(5)(B).
    \97\ Sec. 168(k)(5)(D). However, when placed in service, the 
remaining adjusted basis of the specified plant may be eligible for 
expensing under section 179.
    \98\ Sec. 168(k)(5)(C). See also Treas. Reg. sec. 1.168(k)-2(f)(5).
---------------------------------------------------------------------------

                          LONG-TERM CONTRACTS

    In general, in the case of a long-term contract, the 
taxable income from the contract is determined under the 
percentage-of-completion method.\99\ Solely for purposes of 
determining the percentage of completion under section 
460(b)(1)(A), the cost of qualified property with a MACRS 
recovery period of seven years or less is taken into account as 
a cost allocated to the contract as if bonus depreciation had 
not been enacted for property placed in service before January 
1, 2027 (January 1, 2028, in the case of longer production 
period property).\100\
---------------------------------------------------------------------------
    \99\ Sec. 460.
    \100\ Sec. 460(c)(6). businesses. Hotels, restaurants, catering 
companies, equipment rental facilities, transportation vendors, and 
many others benefit from these productions.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that providing full expensing for 
certain business assets will accelerate purchases of equipment 
and other assets, and promote capital investment, 
modernization, and growth. The Committee also believes that 
full expensing under section 168(k) for certain business assets 
is important for small businesses that qualify for section 179 
expensing because a business may only expense costs under 
section 179 to the extent of its taxable income for the year. 
Thus, increased expensing under section 168(k) will provide 
additional flexibility and accelerated cost recovery for most 
businesses.
    In addition, the Committee believes that providing full 
expensing for certain production costs of qualified film, 
television and live theatrical products (as defined in section 
181) once placed in service will encourage investment in and 
financing of these types of domestic productions, and will help 
to prevent the production of American projects abroad. The 
Committee also believes that these productions create broader 
economic effects in cities and towns across the United States, 
with revenues and jobs generated in a variety of other local
    The Committee further believes that allowing growers of 
certain plants bearing fruit or nuts to elect to claim full 
expensing in the year of planting or grafting, rather than 
having to wait until the year in which the plant produces a 
commercially viable or harvestable crop of fruits or nuts, 
encourages farmers to invest in long-term crop businesses.

                        EXPLANATION OF PROVISION

    The provision extends the allowance of a 100-percent bonus 
depreciation deduction for property placed in service after 
December 31, 2022, and before January 1, 2026 (January 1, 2027, 
for longer production period property and certain aircraft), as 
well as for specified plants planted or grafted after December 
31, 2022, and before January 1, 2026. The provision retains the 
present law 20-percent bonus depreciation deduction that is 
allowed for property placed in service after December 31, 2025, 
and before January 1, 2027 (after December 31, 2026, and before 
January 1, 2028, for longer production period property and 
certain aircraft), as well as for specified plants planted or 
grafted after December 31, 2025, and before January 1, 2027.
    Under the provision, the bonus depreciation percentage 
rates are as follows.

------------------------------------------------------------------------
                                       Bonus Depreciation Applicable
                                                Percentage
                                 ---------------------------------------
   Placed in Service Calendar                          Longer Production
            Year\101\             Qualified Property   Period  Property
                                     in  General/         and Certain
                                   Specified Plants        Aircraft
------------------------------------------------------------------------
2023-2025.......................  100 percent.......  100 percent
2026............................  20 percent........  100 percent
2027............................  None..............  20 percent\102\
2028 and thereafter.............  None..............  None
------------------------------------------------------------------------

                             EFFECTIVE DATE
---------------------------------------------------------------------------

    \101\In the case of specified plants, this is the year of planting 
or grafting.
    \102\Twenty percent applies to the adjusted basis attributable to 
manufacture, construction, or production before January 1, 2027, and 
the remaining adjusted basis does not qualify for bonus depreciation. 
Twenty percent applies to the entire adjusted basis of certain aircraft 
described in section 168(k)(2)(C) and placed in service in 2027.
---------------------------------------------------------------------------
    The provision applies to property placed in service after 
December 31, 2022, and to specified plants planted or grafted 
after that date.

                    TITLE II--SUPPLY CHAIN SECURITY


 1. Termination of Hazardous Substance Superfund Financing Rate (Sec. 
               201 of the Bill and Sec. 4611 of the Code)


                                PRESENT

    Law The Superfund program addresses cleanup activity of 
hazardous substances at contaminated sites. Before January 1, 
1996, an excise tax on domestic crude oil and imported 
petroleum products (the ``Hazardous Substance Superfund 
financing rate'') was imposed at the rate of 9.7 cents per 
barrel. The Hazardous Substance Superfund financing rate ceased 
to apply after December 31, 1995.
    As of January 1, 2023, the Inflation Reduction Act 
reinstated the Hazardous Substance Superfund financing rate at 
an increased rate of 16.4 cents per barrel.\103\ The tax is 
annually indexed for inflation beginning with calendar year 
2023. The Inflation Reduction Act also authorized borrowing for 
the Hazardous Substance Superfund Trust Fund through repayable 
advances from the General Fund until the end of 2032. The full 
amount borrowed plus interest is required to be repaid to the 
General Fund by December 31, 2032.
---------------------------------------------------------------------------
    \103\Sec. 4611(c)(2)(A). Section 4611(b) imposes a tax on certain 
uses or exports of domestic crude oil. This tax, in turn, partially 
funds the Oil Spill Liability Trust Fund and the Hazardous Substance 
Superfund Trust Fund at specified rates. The Fifth Circuit in Trafigura 
Trading LLC v. United States, 29 F.4th 286 (5th Cir. 2022), held that 
the tax on exports is unconstitutional. On March 6, 2023, the IRS 
announced it will no longer seek to collect the tax imposed by section 
4611(b)(1)(A) on domestic crude oil that is exported. Internal Revenue 
Service, Action on Decision: Trafigura Trading LLC v. United States, 29 
F.4th 286 (5th Cir. 2022), IRB 2023-10 (March 6, 2023) available at 
https://www.irs.gov/pub/irs-aod/aod-2023 01.pdf.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee notes, in general, that excise taxes on goods 
are ultimately passed on to the consumer. Therefore, a repeal 
of the Inflation Reduction Act's additional tax on oil, along 
with other factors, may reduce the cost of gasoline. The 
Committee believes that repealing the Superfund tax on 
petroleum will encourage more domestic energy production, 
reduce America's reliance on foreign sources of energy, and 
lower the price of gasoline and other petroleum product for 
consumers.

                        EXPLANATION OF PROVISION

    The provision repeals the Hazardous Substance Superfund 
financing rate. The provision also terminates the authority of 
the Hazardous Substance Superfund Trust Fund to borrow from the 
General Fund. All outstanding repayable advances are to be 
repaid as soon as practicable after the date of enactment.

                             EFFECTIVE DATE

    The provision terminating the financing rate is effective 
on January 1, 2023. The termination of borrowing authority is 
effective on the date of enactment.

   2. Election To Determine Foreign Income Taxes Paid or Accrued to 
    Certain Western Hemisphere Countries Without Regard to Certain 
                   Regulations (Sec. 202 of the Bill)


                              PRESENT LAW

In general

    Subject to certain limitations, U.S. citizens, resident 
individuals, and domestic corporations are allowed a credit for 
foreign income taxes they pay. In addition, a domestic 
corporation is allowed a credit for foreign income taxes paid 
or accrued by a controlled foreign corporation (``CFC'') with 
respect to income included by the domestic corporation as 
subpart F income or as global intangible low-taxed income 
(``GILTI''); the taxes paid by the CFC are deemed to have been 
paid by the domestic corporation for purposes of calculating 
the foreign tax credit.\104\
---------------------------------------------------------------------------
    \104\Secs. 901, 903, and 960; see also secs. 1291(g) and 1293(f) 
(providing, in the passive foreign investment company (``PFIC'') 
context, coordination with foreign tax credit rules).
---------------------------------------------------------------------------
    The foreign tax credit generally is limited to a taxpayer's 
U.S. tax liability on its foreign-source taxable income. The 
limit is intended to ensure that the credit mitigates double 
taxation of foreign-source income without offsetting U.S. tax 
on U.S.-source income.\105\ The limit for each year is computed 
by multiplying a taxpayer's total pre-credit U.S. tax liability 
for the year by the ratio of the taxpayer's foreign-source 
taxable income for the year to the taxpayer's total taxable 
income for the year. If the total amount of foreign income 
taxes paid and deemed paid for the year exceeds the taxpayer's 
foreign tax credit limitation for the year, the taxpayer may 
(in certain cases) carry back the excess foreign taxes to the 
previous year or carry forward the excess to one of the 10 
succeeding taxable years (and for purposes of applying the 
foreign tax credit limitation, the foreign income taxes 
generally are treated as paid in the year to which they are 
carried).\106\ No carryback or carryover of excess foreign tax 
credits are allowed in the GILTI foreign tax credit limitation 
category.
---------------------------------------------------------------------------
    \105\Secs. 901 and 904.
    \106\Sec. 904(c).
---------------------------------------------------------------------------

Deemed-paid taxes

    For any subpart F income included in the gross income of a 
domestic corporation, the corporation is deemed to have paid 
foreign taxes equal to the aggregate foreign income taxes paid 
or accrued with respect to such income by the CFC.
    For any GILTI included in the gross income of a domestic 
corporation, the corporation is deemed to have paid foreign 
taxes equal to 80 percent of the corporation's inclusion 
percentage multiplied by the aggregate foreign income taxes 
paid or accrued with respect to tested income (but not tested 
loss) by each CFC with respect to which the domestic 
corporation is a U.S. shareholder.\107\
---------------------------------------------------------------------------
    \107\Sec. 960(d)(1). The inclusion percentage means, with respect 
to any domestic corporation, the ratio of such corporation's GILTI 
divided by the aggregate amount of its pro rata share of the tested 
income (but not tested loss) of each CFC with respect to which it is a 
U.S. shareholder. Tested foreign income taxes do not include any 
foreign income tax paid or accrued by a CFC that is properly 
attributable to the CFC's tested loss (if any).
---------------------------------------------------------------------------

Allocation and apportionment of expenses

    To determine its foreign tax credit limitation, a taxpayer 
must first determine its taxable income from foreign sources by 
allocating and apportioning deductions between U.S.-source 
gross income and foreign-source gross income in each limitation 
category. In general, deductions are allocated and apportioned 
to the gross income to which the deductions factually 
relate.\108\ However, subject to certain exceptions, deductions 
for interest expense, stewardship expenses, and research and 
experimental expenditures are apportioned based on certain 
ratios.\109\ For example, interest expense is apportioned based 
on the ratio of the corporation's foreign or domestic (as 
applicable) assets to its worldwide assets.\110\
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    \108\ Treas. Reg. sec. 1.861-8(b) and (c) and Temp. Treas. Reg. 
sec. 1.861-8T(c).
    \109\ Treas. Reg. sec. 1.861-8 through Temp. Treas. Reg. sec. 
1.861-14T and Treas. Reg. sec. 1.861-17 set forth detailed rules 
relating to the allocation and apportionment of expenses.
    \110\ Sec. 864(e)(2).
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Limitation categories (``baskets'')

    The foreign tax credit limitation is applied separately to 
GILTI, foreign branch income,\111\ passive category income, and 
general category income.\112\ For this purpose, GILTI and 
foreign branch income include only income that is not passive 
category income. Passive category income means any income which 
is of a kind which would be foreign personal holding company 
income (as defined in section 954(c)), such as portfolio 
interest and dividend income.\113\ All other income is in the 
general category. Passive income is treated as general category 
income if earned by a qualifying financial services entity or 
if highly taxed (i.e., if the foreign tax rate is determined to 
exceed the highest tax rate specified in section 1 or 11, as 
applicable).\114\ Dividends (and subpart F inclusions), 
interest, rents, and royalties received by a U.S. shareholder 
from a CFC are assigned to the passive category to the extent 
the payments or inclusions are allocable to passive category 
income of the CFC.\115\ Dividends received by a 10-percent 
corporate shareholder of a foreign corporation that is not a 
CFC are also categorized on a look-through basis.\116\
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    \111\ Foreign branch income is defined for this purpose as ``the 
business profits of [the U.S. taxpayer] which are attributable to 1 or 
more qualified business units (as defined in section 989(a)) in 1 or 
more foreign countries.'' Sec. 904(d)(2)(J).
    \112\ Sec. 904(d); Treas. Reg. sec. 1.904-4(a). The foreign tax 
credit limitation is also applied separately to certain additional 
separate categories. See Treas. Reg. sec. 1.904-4(m).
    \113\ Sec. 904(d)(2)(A)(i) and (B).
    \114\ Sec. 904(d)(2)(B).
    \115\ Sec. 904(d)(3).
    \116\ Sec. 904(d)(4).
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    Foreign income taxes are allocated and apportioned to a 
limitation category or ``grouping'' in a three-step process 
that: (1) assigns items of foreign gross income to groupings, 
(2) allocates and apportions deductions allowed under foreign 
law to foreign gross income in those groupings, and (3) 
allocates and apportions foreign income tax by reference to the 
foreign taxable income in those groupings.\117\
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    \117\ Treas. Reg. sec. 1.861-20(c).
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    Special rules apply to the allocation of income and losses 
from foreign and U.S. sources within each category of 
income.\118\ Foreign losses from one category first offset 
foreign-source income from other categories. Any remaining 
overall foreign loss offsets U.S.-source income. The same 
principle applies to losses from U.S. sources. In subsequent 
years, any losses deducted against another category or source 
of income are recaptured. That is, an equal amount of income 
from the same category or source that generated a loss in a 
prior year is recharacterized as income from the other category 
or source against which the loss was deducted. Foreign-source 
income in a particular category may be fully recharacterized as 
income in another category, whereas only up to 50 percent of 
income from one source in any subsequent year may be 
recharacterized as income from the other source.
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    \118\ Sec. 904(f) and (g).
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    A matching rule intended to prevent the separation of 
creditable foreign taxes from the associated foreign income may 
delay (in some cases, indefinitely) the creditability of some 
foreign tax. Under this rule, a foreign tax generally is not 
taken into account for U.S. tax purposes, and thus no foreign 
tax credit is available with respect to that foreign tax, until 
the taxable year in which the related income is taken into 
account for U.S. tax purposes.\119\
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    \119\ Sec. 909.
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    Recent Treasury regulations On January 4, 2022, the 
Treasury Department published in the Federal Register final 
regulations (the ``FTC Final Regulations'') relating to the 
foreign tax credit, including modifications to the requirements 
for determining whether a foreign levy qualifies as a foreign 
income tax for purposes of section 901 or a tax in lieu of an 
income tax for purposes of section 903.\120\
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    \120\ T.D. 9959, 87 F.R. 276 (Jan. 4, 2022); see also Treas. Reg. 
secs. 1.901-2 and 1.903-1.
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    The FTC Final Regulations also include rules for allocating 
and apportioning foreign income taxes with respect to certain 
remittances\121\ made by a taxable unit, which includes an 
entity that is disregarded for U.S. federal income tax purposes 
(such entity, a ``disregarded entity payor''), to another 
taxable unit, which includes its regarded CFC owner.\122\
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    \121\ Treas. Reg. sec. 1.861-20(d)(3)(v)(E)(8).
    \122\ Treas. Reg. sec. 1.861-20(d)(3)(v)(A). In the case of a 
taxpayer that is a foreign corporation, the term taxable unit is 
defined to mean a tested unit, as defined in Treas. Reg. sec. 1.951A-
2(c)(7)(iv)(A) to include a CFC, an interest held directly or 
indirectly by a CFC in a pass-through entity that is a tax resident of 
a foreign country or that is not treated as fiscally transparent for 
foreign tax purposes, and a branch the activities of which are carried 
on directly or indirectly by a CFC.
---------------------------------------------------------------------------
    These rules assign the item of foreign gross income that 
arises from such remittance to a category out of which the 
disregarded entity payor made the remittance, which is 
considered to be made ratably out of the accumulated after-tax 
income of the payor.\123\ Accumulated after-tax income is in 
turn deemed to have arisen in the categories in the proportions 
in which the tax book value of the assets of the disregarded 
entity payor are assigned for purposes of apportioning interest 
expense under the asset method in Treasury regulation section 
1.861-9 in the taxable year in which the remittance is made 
(such assignment, ``the tax book value method'').\124\ Foreign 
income taxes withheld on such remittance are allocated and 
apportioned to a category based on the relative amounts of 
foreign taxable income in each category.\125\
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    \123\Treas. Reg. sec. 1.861-20(d)(3)(v)(C)(1)(i).
    \124\ Ibid.
    \125\ Treas. Reg. sec. 1.861 20(f).
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                           REASONS FOR CHANGE

    The Committee believes the FTC Final Regulations risk 
subjecting U.S. multinational corporations to double taxation 
and risk discouraging investment in crucial supply chain 
markets and were put forward on a timeline that did not allow 
taxpayers and foreign tax laws to adjust to the new standards. 
The Committee believes that the FTC Final Regulations are more 
burdensome in countries with which the U.S. does not have a tax 
treaty. The provision's elections out of the FTC Final 
Regulations would encourage multinationals to invest in Western 
Hemisphere countries, which is critical for global 
competitiveness, national security and trade.

                        EXPLANATION OF PROVISION

    The provision allows taxpayers two separate elections with 
respect to the application of certain Treasury regulations 
relating to the determination of foreign income taxes paid or 
accrued to certain Western Hemisphere countries. The first 
election relates to the determination of whether any Western 
Hemisphere tax paid or accrued by a taxpayer is an income, war 
profits, or excess profits tax. The second election relates to 
the allocation and apportionment of foreign income taxes 
relating to disregarded payments from certain disregarded 
entities. Each election is described below.

      ELECTION TO DEFER THE APPLICATION OF A SPECIFIED REGULATION

    The first election under the provision provides that a 
taxpayer may make an election to determine whether any Western 
Hemisphere tax paid or accrued by the taxpayer is an income, 
war profits, or excess profits tax for purposes of any 
provision of the Code without regard to any specified 
regulation. The election shall be made at such time and in such 
manner as the Secretary may provide.
    Western Hemisphere tax includes any tax which is paid or 
accrued for a taxable year which is in the applicable period to 
(A) any possession of the United States, or (B) any foreign 
country (other than Cuba and Venezuela) which is located in 
North, Central, or South America (including the West Indies).

   SEPARATE ELECTION WITH RESPECT TO ALLOCATION AND APPORTIONMENT OF 
  FOREIGN INCOME TAXES RELATING TO DISREGARDED PAYMENTS FROM CERTAIN 
                          DISREGARDED ENTITIES

    The second, separate election under the provision provides 
that the owner of any specified disregarded entity may 
separately elect, for purposes of allocating and apportioning 
any foreign income taxes paid or accrued by reason of any 
remittance made by such entity to such owner during the 
applicable period, to assign any items of foreign gross income 
included by reason of the receipt of such remittance to a 
category based on current and accumulated earnings and profits 
of such entity (instead of being assigned on the basis of the 
tax book value method described in a specified regulation). The 
election shall be made at such time and in such manner as the 
Secretary may provide. Foreign income taxes are defined in 
section 986(a)(4) and determined after the application of the 
election to defer the application of a specified regulation (as 
discussed above).
    The term ``specified disregarded entity'' means any entity 
(including any trade or business) if (i) such entity is 
disregarded as an entity separate from its owner for purposes 
of applying Chapter 1 of the Code (or is a trade or business); 
(ii) such entity is created or organized in (A) any possession 
of the United States, or (B) any foreign country identified 
above for purposes of determining a Western Hemisphere tax; 
(iii) at all times after December 31, 2019 (or, if later, the 
date on which such entity is created or organized), 
substantially all of the income of the entity is derived from 
trades or businesses conducted in the possession or country 
referred to in (A) or (B); and (iv) at all times after the date 
on which the entity is created or organized, the entity 
maintains separate books and records. The definition of 
specified disregarded entity is intended to include a branch as 
defined under 1.951A-2(c)(7)(iv)(A)(3) of the Treasury 
regulations.

     TAXPAYER ELECTION, SPECIFIED REGULATION, AND APPLICABLE PERIOD

    In the case of any tax paid or accrued by a CFC and deemed 
to have been paid by a U.S. shareholder under section 960, any 
election shall be made by such CFC and shall be binding on all 
U.S. shareholders of such CFC, and the applicable period shall 
be determined with respect to the taxable years of such CFC 
rather than the U.S. shareholder.
    Specified regulation is defined to include Treasury 
regulations relating to ``Guidance Related to the Foreign Tax 
Credit; Clarification of Foreign-Derived Intangible 
Income'';\126\ proposed Treasury regulations relating to 
``Guidance Related to the Foreign Tax Credit'';\127\ and any 
regulation or other guidance published after January 4, 2022 to 
the extent that the regulation or other guidance is 
substantially similar to, or predicated upon, any portion of 
the aforementioned regulations. In the case of any regulation 
or other guidance which is published after the date of the 
enactment of this Act and any portion of which is described 
immediately above, the Secretary shall identify such regulation 
or guidance (or portion thereof) as not applying with respect 
to taxpayers which have elected the application of either 
election described above, as the case may be. For purposes of 
the provision, Secretary means the Secretary of the Treasury or 
the Secretary's delegate.
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    \126\ 87 Fed. Reg. 276; January 4, 2022.
    \127\ 87 Fed. Reg. 71271; November 22, 2022
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    Applicable period means (1) with respect to the first 
election described above, all taxable years beginning after 
December 31, 2021, and before January 1, 2027, and (2) with 
respect to the second election described above, all taxable 
years beginning after December 31, 2019, and before January 1, 
2027. The determination of the taxable year for which any tax 
is paid or accrued, for purposes of determining whether a 
foreign tax is paid or accrued for a taxable year which is in 
the applicable period, shall be made without regard to any 
taxable year with respect to which such tax is deemed to have 
been paid under section 904(c) or 960.\128\
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    \128\ Several Code sections provide that a foreign tax is deemed to 
have been paid in a year other than the year in which the tax is paid 
or accrued. The domestic corporation is deemed to have paid the foreign 
income taxes of the CFC in the domestic corporation's tax year that 
includes the date on which the CFC's tax year ends. See sec. 905(a) 
(providing that the credit for foreign taxes may be taken in the year 
in which the foreign income taxes accrued, which is a year in which all 
events have occurred which establish the fact of liability, generally 
the end of the foreign tax year). See also sec. 960 and Treas. Reg. 
sec. 1.960-1(a). Foreign taxes that give rise to excess foreign tax 
credits are deemed to have been paid in the first preceding taxable 
year and in any of the first 10 succeeding taxable years, in that 
order. See sec. 904(c). For purposes of the applicable period, these 
deemed tax years are disregarded and the tax year of the foreign 
corporation is the year that is taken into account.
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                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

 3. Imposition of Tax on the Acquisition of United States Agricultural 
 Interests by Disqualified Persons (Sec. 203 of the Bill and Sec. 897 
                    and New Sec. 5000E of the Code)


                              PRESENT LAW

In general

    A foreign person is subject to U.S. net-basis taxation on 
income effectively connected with the conduct of a trade or 
business within the United States (``ECI''). ECI generally is 
subject to tax on a net basis under the same U.S. tax rules and 
rates that apply to business income earned by U.S. 
persons.\129\
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    \129\Secs. 871(b) and 882.
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                              FIRPTA\130\

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    \130\Sections 897 and 1445 were enacted in the Foreign Investment 
in Real Property Tax Act of 1980 (``FIRPTA''), part of Public Law 96-
499.
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    A foreign person's gain or loss from the disposition of a 
U.S. real property interest (``USRPI'') is treated as ECI.\131\ 
A foreign person subject to tax on such a disposition is 
required to file a U.S. tax return. In the case of a foreign 
corporation, the gain from the disposition of a USRPI may also 
be subject to the branch profits tax at a 30-percent rate (or 
lower treaty rate).
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    \131\Sec. 897(a).
---------------------------------------------------------------------------
    The payor of income that FIRPTA treats as ECI is generally 
required to withhold U.S. tax from the payment.\132\ The 
foreign person may request a refund with its U.S. tax return, 
if appropriate, based on that person's overall tax liability 
for the taxable year.
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    \132\Sec. 1445 and the regulations thereunder.
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    USRPI generally means an interest in real property 
(including an interest in a mine, well, or other natural 
deposit) located in the United States or the Virgin Islands, 
and any interest (other than an interest solely as a creditor) 
in any domestic corporation unless the taxpayer establishes (at 
such time and in such manner as the Secretary by regulations 
prescribes) that the corporation was at no time a United States 
real property holding corporation (``USRPHC'') during the 
shorter of (1) the period after June 18, 1980, during which the 
taxpayer held the interest, or (2) the five-year period ending 
on the date of the disposition of the interest (the ``USRPHC 
test'').\133\ A USRPHC is any corporation if (A) the fair 
market value of its USRPIs equals or exceeds 50 percent of (B) 
the fair market value of (i) its USRPIs, (ii) its interests in 
real property located outside the United States, plus (iii) any 
other of its assets which are used or held for use in a trade 
or business.\134\
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    \133\Sec. 897(c)(1)(A).
    \134\Sec. 897(c)(2).
---------------------------------------------------------------------------
    If any class of stock of a corporation is regularly traded 
on an established securities market, stock of that class is 
treated as a USRPI only in the case of a person who, at some 
time during the shorter of the periods described above, held 
more than five percent of that class of stock (the ``publicly 
traded test'').\135\ For real estate investment trusts 
(``REITs''), the threshold is 10 percent instead of five 
percent.\136\
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    \135\Sec. 897(c)(3).
    \136\Sec. 897(k)(1)(A).
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Penalties for failure to file certain returns

    Standard penalties apply for failure to file certain 
information returns or payee statements.\137\ The penalty is 
imposed with respect to each return or statement with respect 
to which a failure occurs and varies depending on whether the 
error is timely remedied or whether the failure was due to 
intentional disregard of rules and regulations. The penalties 
may be waived under certain circumstances, including a showing 
of reasonable cause. The penalty amounts are indexed for 
inflation.\138\
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    \137\These penalties are generally assessable penalties for failure 
to comply, or to correct errors timely, such as failure to file correct 
information returns (sec. 6721), failure to furnish correct payee 
statements (sec. 6722), and failure to comply with other information 
reporting requirements (secs. 6723 and 6725). Whether a statement or 
return is within the scope of these penalties is determined by whether 
the statement or return is identified in section 6724.
    \138\For information returns or statements due in calendar year 
2023, the applicable rates are $50 per statement or return if no more 
than 30 days late; $110 if more than 30 days late but filed on or 
before August 1; $290 if filed after August 1 or not filed; and $580 if 
the failure to file is due to intentional disregard of rules or 
regulations.
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                           REASONS FOR CHANGE

    Congress first acted to require disclosure of foreign 
ownership of U.S. farmland forty-five years ago in the 
Agricultural Foreign Investment Disclosure Act of 1978, but the 
means used by foreign buyers to obtain U.S. farmland have 
changed since then. Today it is far more common for foreign 
buyers to acquire land through a business entity that obscures 
the nationality of its owners, or for an interest in a U.S. 
business entity that owns U.S. farmland to be acquired by a 
foreign buyer indirectly. The acreage of U.S. farmland held by 
citizens countries that are engaged in conduct significantly 
adverse to the national security of the United States 
(Countries of Concern) has increased substantially in the past 
several years; a large portion of this increase is attributable 
to the purchase of U.S. food processing companies by Country of 
Concern buyers.
    The Committee believes that the attestation and 
notification requirements developed to ensure compliance with 
the Foreign Investment in Real Property Act (FIRPTA) can be 
used to better detect potential acquisitions of U.S. farm and 
ranch land by buyers who are citizens of a Country of Concern 
or companies owned directly, or indirectly, by a citizen or 
company domiciled within a Country of Concern before such 
acquisitions take place. The Committee also believes that an 
excise tax should be imposed at a level to ensure a thorough 
search of the direct and indirect ownership records of each 
potential buyer and to strongly deter or effectively prevent 
acquisitions that are not in the interest of United States 
national security.

                        EXPLANATION OF PROVISION

In general

    The provision creates a new tax under a new section 5000E.
    If a disqualified person acquires a U.S. agricultural 
interest (``USAI''), the disqualified person must pay a tax 
equal to 60 percent of the amount paid for the USAI.
    For this purpose, USAI has the meaning which would be given 
USRPI by section 897(c) if that provision applied generally 
with respect only to interests in agricultural land. In 
addition, the USRPHC test and the publicly traded test do not 
apply by looking backward; instead, each test is applied only 
at the time of acquisition. An interest in a domestic 
corporation is treated as a USAI only if the taxpayer fails to 
establish that the corporation was not a USRPHC at the time of 
acquisition. With respect to any class of stock of a 
corporation regularly traded on an establish securities market, 
the stock is treated as a USAI only if held by a person that 
holds more than five percent of the class of stock (10 percent 
in the case of a REIT) at the time of acquisition.
    For this purpose, agricultural land means any land used for 
agricultural, forestry, or timber production purposes, and land 
used for livestock production purposes, as determined by the 
Secretary of Agriculture under regulations to be prescribed by 
the Secretary of Agriculture.

Disqualified persons

    For purposes of the provision, disqualified person means: 
(A) any citizen of a country of concern (other than a citizen, 
or lawful permanent resident, of the United States and other 
than an individual domiciled in Taiwan possessing a valid 
identification card or number issued by the government of 
Taiwan); (B) any entity domiciled in a country of concern 
(other than an entity domiciled in Taiwan); (C) any country of 
concern and any political subdivision, agency, or 
instrumentality thereof; and (D) any entity (other than a 
specified publicly traded corporation or an entity controlled 
by specified publicly traded corporations) if persons described 
in subparagraph (A), (B), or (C) (in the aggregate) 10-percent 
control the entity.\139\
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    \139\ For this purpose, control has the meaning given such term 
under section 954(d)(3), determined by treating the rules of section 
958(a)(2) as applying to both foreign and domestic corporations, 
partnerships, trusts, and estates.
---------------------------------------------------------------------------
    For this purpose, 10-percent control means control as 
defined under section 954(d)(3) (generally, among other rules, 
ownership of more than 50 percent of the stock of a corporation 
by vote or value), determined by treating the rules of section 
958(a)(2) as applying to both foreign and domestic 
corporations, partnerships, trusts, and entities, and 
determined by substituting ``10 percent'' for ``50 percent'' in 
both places it appears in section 954(d)(3).
    For this purpose, country of concern means any country the 
government of which is engaged in a long-term pattern or 
serious instances of conduct significantly adverse to the 
national security of the United States or the security and 
safety of U.S. persons, including the People's Republic of 
China, the Russian Federation, Iran, North Korea, Cuba, and the 
regime of Nicolas Maduro in Venezuela.
    Also for this purpose, specified publicly traded 
corporation means any corporation if (1) the stock of the 
corporation is regularly traded on an established securities 
market located in the United States, and (2) specified 
disqualified persons do not (in the aggregate) control the 
corporation. Specified disqualified persons are, with respect 
to any corporation, any person described in (A), (B), or (C) 
above and has 10-percent control of the corporation.

            PRORATED TAX ON ACQUISITIONS BY CERTAIN ENTITIES

    In the case of any entity (other than a specified publicly 
traded corporation or an entity controlled by specified 
publicly traded corporations) controlled more than 10 percent 
but less than 50 percent by disqualified persons described in 
(A), (B), or (C) above, the tax is prorated and only the 
applicable percentage of the 60-percent tax is due. Applicable 
percentage means the highest percentage which could be 
substituted for ``50 percent'' in both places it appears in 
section 954(d)(3) without causing disqualified persons 
described in (A), (B), or (C) above (in the aggregate) to 
control (determined by taking into account the substitution) 
the entity.

                               REPORTING

    Under the provision, the required reporting person, with 
respect to any acquisition of any USAI by a presumptively 
disqualified person to which the proposed tax described above 
applies, must make a return at the time as the Secretary may 
provide setting forth (1) the name, address, and TIN of the 
presumptively disqualified person, (2) a description of the 
USAI (including the street address, if applicable), and (3) the 
amount paid for the USAI.
    Every person required to make a return described above must 
furnish, at the time as the Secretary may provide, to each 
presumptively disqualified person whose name is required to be 
set forth in the return a written statement showing (1) the 
name and address of the information contact of the required 
reporting person, and (2) the return information described 
above which relates to the disqualified person.
    For this purpose, required reporting person means, with 
respect to any acquisition of any USAI, (1) the person 
(including any attorney or title company) responsible for 
closing the transaction in which the USAI is acquired, or (2) 
if no one is responsible for closing the transaction (or in 
such other cases as the Secretary may provide), the transferor 
of the USAI.
    Also for this purpose, presumptively disqualified person 
means any person unless the person furnishes to the required 
reporting person an affidavit by the person stating, under 
penalty of perjury, that the person is not a disqualified 
person (as defined above).
    If the required reporting person, with respect to any 
acquisition of any USAI, has not (as of the time of the 
acquisition) been furnished the affidavit described above by 
the acquirer of the interest, the required reporting person 
must furnish to the acquirer (at such time) a written statement 
informing the acquirer of the required reporting person's 
obligation to make the return described above with respect to 
the acquisition and including such other information as the 
Secretary may require.
    The standard penalties apply for failure to file the return 
and the two written statements described above.

                             EFFECTIVE DATE

    The provision applies to acquisitions after the date of 
enactment.

          TITLE III--REPEAL OF SPECIAL INTEREST TAX PROVISIONS


1. Repeal of Clean Electricity Production Credit (Sec. 301 of the Bill 
                       and Sec. 45Y of the Code)


                              PRESENT LAW

Renewable electricity production credit

            In general
    An income tax credit is available for electricity produced 
from qualified energy resources at qualified facilities (the 
``renewable electricity production credit'') and sold to an 
unrelated person.\140\ Qualified energy resources comprise 
wind, solar, closed-loop biomass, open-loop biomass, geothermal 
energy, municipal solid waste, qualified hydropower production, 
and marine and hydrokinetic renewable energy. Qualified 
facilities are, generally, facilities that generate electricity 
using qualified energy resources.
---------------------------------------------------------------------------
    \140\Sec. 45. A number of changes to this Code section were made in 
August 2022 by Public Law 117-169 (the Inflation Reduction Act). This 
summary reflects those changes. Different rules continue to apply for 
certain older renewable electricity production facilities.
---------------------------------------------------------------------------
    The base credit rate is 0.3 cents per kilowatt-hour of 
electricity produced. The credit rate is increased to 1.5 cents 
per kilowatt-hour for facilities with a maximum output of less 
than one megawatt and for larger facilities that meet certain 
wage and apprenticeship requirements. These credit rates are 
adjusted annually for inflation using 1992 as the base year and 
rounded to the nearest twentieth of a cent. In 2022, for 
facilities placed in service after December 31, 2021, the 
inflation adjustment factor is 1.7593, making the base credit 
rate 0.55 cents per kilowatt-hour and the enhanced credit rate 
2.75 cents per kilowatt-hour.\141\
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    \141\Announcement 2022-23, 2022-48 I.R.B. 499, November 28, 2022.
---------------------------------------------------------------------------
    The credit expires for facilities the construction of which 
begins after December 31, 2024.
            Election to claim energy credit in lieu of renewable 
                    electricity production credit
    A taxpayer may make an irrevocable election to have certain 
property which is part of a qualified renewable electricity 
production facility treated as energy property eligible for an 
investment credit under section 48. The base credit rate is 6 
percent. This rate is increased to 30 percent if the wage and 
apprenticeship requirements are met. For purposes of the 
investment credit, qualified facilities are facilities 
otherwise eligible for the renewable electricity production 
credit with respect to which no credit under section 45 has 
been allowed. A taxpayer electing to treat a facility as energy 
property may not claim the renewable electricity production 
credit. The eligible basis for the investment credit for 
taxpayers making this election is the basis of the depreciable 
(or amortizable) property that is part of a facility capable of 
generating electricity eligible for the renewable electricity 
production credit.
            Prevailing wages
    A taxpayer can meet the prevailing wage requirements if it 
ensures that prevailing wages are paid to any laborers and 
mechanics employed by the taxpayer or any contractor or 
subcontractor in the construction of a qualified facility, and 
for the repair of such facility during the 10-year credit-
eligible production period. Prevailing wages are wages paid at 
rates not less than the prevailing wage rates for construction, 
alteration, or repair of a similar character in the locality as 
determined by the Secretary of Labor, in accordance with 
subchapter IV of chapter 31, of title 40, United States Code.
    A taxpayer that fails to pay prevailing wages may bring a 
facility into compliance with the prevailing wage requirement, 
and thus remain eligible for the increased credit rate, by 
paying any affected workers the difference between the actual 
compensation paid to such workers and the wages required to be 
paid to those workers to meet prevailing wage requirements, 
plus any applicable interest. This amount is multiplied by 
three in the case of intentional disregard of the requirements. 
In addition, such taxpayer must pay a penalty to the IRS equal 
to $5,000 per affected worker. The penalty is increased to 
$10,000 per affected worker in the case of intentional 
disregard of the requirements. The deficiency procedures do not 
apply with respect to the assessment or collection of these 
penalties, and payment must be made within 180 days of the 
penalty's determination.
            Apprenticeship requirements
    To be eligible for the enhanced credit, a taxpayer must 
also ensure that certain qualified apprenticeship requirements 
are satisfied by ensuring that not less than 15 percent (10 
percent for projects the construction of which begins before 
calendar year 2023 and 12.5 percent for projects beginning in 
calendar year 2023) of the total labor hours of construction, 
alteration, or repair work on any applicable project are 
performed by qualified apprentices (including such work 
performed by any contractor or subcontractor). Labor hours are 
the total number of hours devoted to construction, alteration, 
or repair work by employees of the contractor or subcontractor 
and excludes certain hours worked by managers, owners, or 
certain other bona fide executives, administrators, or 
professionals. A qualified apprentice is an employee of the 
contractor or subcontractor who is participating in a 
registered apprenticeship program. In addition, the ratio of 
apprentice-to-journeyworker must meet the standard set by the 
Department of Labor or applicable State apprenticeship agency.
    Each taxpayer, contractor, or subcontractor who employs 
four or more individuals to perform construction, alteration, 
or repair work with respect to the construction of a qualified 
facility must employ one or more qualified apprentices to 
perform such work. Exceptions from these requirements are 
provided for taxpayers that make a good faith effort to comply 
with the requirements by requesting qualified apprentices from 
a registered apprenticeship program but where such request is 
denied or where the registered apprenticeship program fails to 
respond to a request within five business days.
    A taxpayer that fails to satisfy the apprenticeship 
requirements can come into compliance and thus remain eligible 
for the increased rate by paying a penalty in the amount of $50 
per missing apprenticeship labor hour. In the case of 
intentional disregard of the apprenticeship rules, this amount 
is increased to $500 per labor hour.
            Domestic content bonus
    The credit rate is increased by 10 percent (calculated 
without regard to the application of the energy communities 
bonus described below) with respect to facilities that meet 
certain domestic content requirements. To meet these 
requirements, a taxpayer must certify to the Secretary that any 
steel, iron, or manufactured product which is a component of a 
qualified facility (upon completion of construction) was 
produced in the United States. For purposes of steel and iron, 
this requirement shall be applied consistent with section 661.5 
of title 49, Code of Federal Regulations. Manufactured products 
which are components of a qualified facilities are deemed to 
have been produced in the United States if not less than 40 
percent (20 percent in the case of offshore wind facilities) of 
the total costs of all manufactured products of such facility 
are attributable to manufactured products (including 
components) which are mined, produced, or manufactured in the 
United States.
            Reduction of elective payment if domestic content rules are 
                    not satisfied
    Certain taxpayers may elect to have the credit paid 
directly to the extent there is insufficient income tax 
liability to absorb the credit.\142\ The amount of this direct 
payment is reduced by 10 percent if the domestic content 
requirements described above for the domestic content bonus are 
not satisfied. This rule applies only to facilities having a 
maximum net output of at least one megawatt (as measured in 
alternating current) whose construction begins after December 
31, 2023. An exception to the rule applies if the Secretary 
determines that the inclusion of steel, iron, or manufactured 
products which are produced in the United States increases the 
overall costs of construction of qualified facilities by more 
than 25 percent, or if the relevant steel, iron, or 
manufactured products are not produced in the United States in 
sufficient and reasonably available quantities or of a 
satisfactory quality. This waiver does not apply for purposes 
of determining the availability of the domestic content bonus 
described above.
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    \142\Sec. 6417.
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            Energy communities bonus
    The credit rate is increased by 10 percent (calculated 
without regard to the domestic content bonus described above) 
with respect to facilities located in an ``energy community.'' 
An energy community is defined as: (1) a brownfield site; (2) a 
metropolitan statistical area or non-metropolitan area with an 
unemployment rate at or above the national average for the 
previous year which has (or had after 2009) 0.17 percent or 
greater direct employment or 25 percent or greater local tax 
revenues related to the extraction, processing, transport, or 
storage of coal, oil, or natural gas; or (3) a census tract (or 
directly adjoining tract) in which, in the period since 1999, a 
coal mine has closed, or, in the period since 2009, a coal-
fueled power plant has been retired.
            Credit reduced for tax-exempt bonds
    The credit is reduced for facilities financed with tax-
exempt bonds. With respect to such bond-financed facilities, 
the credit is reduced by the lesser of 15 percent or a 
percentage calculated using as the numerator the amount of tax-
exempt financing with respect to a facility (for the taxable 
year and all prior years) and as the denominator the aggregate 
amount of additions to the capital account for such facility 
(for the taxable year and all prior years). For purposes of 
this calculation, the numerator includes bond proceeds that are 
used for capital expenditures of qualified facilities but does 
not include proceeds that are used for other purposes, such as 
reserve funds.

Clean electricity production credit

            In general
    For facilities placed in service after December 31, 2024, 
the renewable electricity production credit described above is 
replaced by the clean electricity production credit.\143\
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    \143\Sec. 45Y.
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    The clean electricity production credit is available with 
respect to electricity produced by the taxpayer at a qualified 
facility and sold to an unrelated person during the taxable 
year. The credit is also available where such electricity is 
consumed or stored by the taxpayer during the taxable year and 
there is no third-party sale, but only if the qualified 
facility is equipped with a metering device owned and operated 
by an unrelated person. The credit is available for electricity 
produced during the 10-year period beginning when the qualified 
facility is originally placed in service. Consumption, sales, 
or storage are only taken into account with respect to 
electricity produced within the United States or a possession 
of the United States.
    Like the renewable electricity production credit, the clean 
electricity base credit rate is 0.3 cents per kilowatt-hour. 
This amount is increased to 1.5 cents per kilowatt-hour for 
facilities with a maximum output of less than one megawatt of 
electricity (as measured in alternating current) and for 
facilities that meet certain prevailing wage and apprenticeship 
requirements These amounts are adjusted for inflation in a 
manner similar to the inflation adjustments for the clean 
electricity production credit, with the credit adjusted using 
1992 as the base year and increased in increments of one-
twentieth of a cent for the base credit and one-tenth of a cent 
for the enhanced credit. The inflation adjustments must be 
published annually by the Secretary no later than April 1 of 
each calendar year.
    A qualified facility is an electricity generation facility 
owned by the taxpayer that is placed in service after December 
31, 2024, and for which the greenhouse gas emissions rate is 
not greater than zero. With respect to a facility placed in 
service before January 1, 2025, a qualified facility includes 
new units and additions to capacity placed in service after 
December 31, 2024. A qualified facility does not include any 
facility for which a credit is allowed under sections 45, 45J, 
45Q, 45U, 48, 48A, or 48E for the taxable year or any prior 
taxable year.
    The greenhouse gas emissions rate means the amount of 
greenhouse gases emitted into the atmosphere by a facility in 
the production of electricity, expressed as grams of carbon 
dioxide equivalents per kilowatt-hour (``CO2e per KWh''; see 
definitions below for how this is measured). In the case of a 
facility which produces electricity through combustion or 
gasification, the greenhouse gas emissions rate for such 
facility shall be equal to the net rate of greenhouse gases 
emitted into the atmosphere by such facility (taking into 
account lifecycle greenhouse gas emissions, as described in 
section 211(o)(1)(H) of the Clean Air Act) in the production of 
electricity, expressed as grams of CO2e per KWh.
    The Secretary must publish annually greenhouse gas 
emissions rates for types or categories of facilities, for use 
by taxpayers to determine whether a facility qualifies. In the 
case of any facility for which an emissions rate has not been 
established by the Secretary, a taxpayer which owns such a 
facility may file a petition with the Secretary for a 
determination of the emissions rate with respect to such 
facility.
    The amount of greenhouse gases emitted into the atmosphere 
by a facility in the production of electricity does not include 
any qualified carbon dioxide that is captured by the taxpayer 
and sequestered in secure geological storage under rules 
similar to the rules applicable under section 45Q(f) or 
utilized by the taxpayer in a manner described in section 
45Q(f)(5).\144\
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    \144\Thus, in addition to zero emission facilities that generate 
electricity from solar, wind, geothermal, and nuclear energy, 
facilities that generate electricity using a combustion technology 
could also theoretically qualify if sufficient carbon oxides are 
captured and sequestered or utilized.
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    The credit is part of the general business credit.
            Phaseout of credit
    The credit begins to phase out in the ``applicable year,'' 
which is defined as the later of 2032 or the calendar year in 
which the Secretary determines that the annual greenhouse gas 
emissions from the production of electricity in the United 
States are equal to or less than 25 percent of the annual 
greenhouse gas emissions from the production of electricity in 
the United States for calendar year 2022. The credit is reduced 
by 25 percent for a facility the construction of which begins 
during the second calendar year following the applicable year, 
by 50 percent for a facility the construction of which begins 
during the third calendar year following the applicable year, 
and by 100 percent for a facility the construction of which 
begins during any subsequent calendar year.
            Wage and apprenticeship requirements
    The prevailing wage and apprenticeship requirements follow 
a structure similar to those required by the renewable 
electricity production credit. Generally, the prevailing wage 
rules require that the taxpayer ensure that any laborers and 
mechanics employed by the taxpayer or any contractor or 
subcontractor in the construction, alteration, or repair of a 
project are paid wages at a rate not less than the prevailing 
wage rates for construction, alteration, or repair of a similar 
character in the locality where the project is located as 
determined by the Secretary of Labor, in accordance with 
subchapter IV of chapter 31, of title 40, United States Code. 
The apprenticeship requirements require that, generally, not 
less than a certain percentage of total labor hours of the 
construction, alteration, or repair work (including work 
performed by any contractor of subcontractor) on a project must 
be performed by qualified apprentices.\145\
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    \145\See the description of the renewable electricity production 
credit, above, for a more detailed explanation of these requirements, 
including procedural rules and penalties.
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            Definitions and guidance
    CO2e per KWh means, with respect to any greenhouse gas, the 
equivalent carbon dioxide (as determined based on global 
warming potential) per kilowatt hour of electricity produced. 
The term greenhouse gas has the same meaning given such term 
under section 211(o)(1)(G) of the Clean Air Act. Qualified 
carbon dioxide means carbon dioxide captured from an industrial 
source which (1) would otherwise be released into the 
atmosphere as industrial emission of greenhouse gas, (2) is 
measured at the source of capture and verified at the point of 
disposal or utilization, and (3) is captured and disposed or 
utilized within the United States or a possession of the United 
States.
    The Secretary is required to issue implementation guidance 
no later than January 1, 2025, including guidance on the 
calculation of greenhouse gas emission rates for qualified 
facilities and the determination of clean electricity 
production credits.
            Combined heat and power system property
    For purposes of determining the clean electricity 
production credit, the kilowatt hours of electricity produced 
by a taxpayer at a qualified facility include any production in 
the form of useful thermal energy by any combined heat and 
power system property within such facility, and the amount of 
greenhouse gases emitted into the atmosphere by such facility 
in the production of such useful thermal energy is included for 
purposes of determining the greenhouse gas emissions rate for 
such facility. For this purpose, the term combined heat and 
power system property has the same meaning given such term for 
purposes of the section 48 energy credit, without regard to the 
sunset date, capacity limitations, or special biomass rule. The 
amount of kilowatt-hours of electricity produced in the form of 
useful thermal energy equals the total useful thermal energy 
produced by the combined heat and power system property within 
the qualified facility divided by the heat rate for such 
facility. For this purpose, the heat rate means the amount of 
energy used by the qualified facility to generate one kilowatt-
hour of electricity, expressed as British thermal units per net 
kilowatt-hour generated.
            Energy communities bonus
    As with the renewable electricity production credit, in the 
case of any qualified facility which is located in an energy 
community the credit amount is increased by 10 percent.
            Credit reduced for tax-exempt bonds
    The credit is reduced for tax-exempt bonds under rules 
similar to the rules of section 45(b)(3).
            Domestic content bonus
    The credit is increased by 10 percent (calculated without 
regard to the energy communities bonus) if certain domestic 
content requirements are met. The domestic content requirements 
are generally the same as those set forth in section 45(b)(9), 
except that the percentage of content that must be domestically 
produced with respect to manufactured products is different. 
For the clean electricity production credit, except with 
respect to offshore wind facilities, the percentage is 40 
percent for a facility the construction of which begins before 
January 1, 2025, 45 percent for a facility the construction of 
which begins in calendar year 2025, 50 percent for a facility 
the construction of which begins in calendar year 2026, and 55 
percent for a facility the construction of which begins after 
December 31, 2026. For offshore wind facilities, the percentage 
is 20 percent for a facility the construction of which begins 
before January 1, 2025, 27.5 percent for a facility the 
construction of which begins in calendar year 2025, 35 percent 
for a facility the construction of which begins in calendar 
year 2026, and 45 percent for a facility the construction of 
which begins in calendar year 2027, and 55 percent for a 
facility the construction of which begins after December 31, 
2027.
            Reduction of elective payment if domestic content rules are 
                    not satisfied
    Like the renewable electricity production credit, certain 
taxpayers may elect to have the credit paid directly to the 
extent there is insufficient tax liability to absorb the 
credit. This direct payment is reduced if the domestic content 
requirements are not satisfied. This rule is similar to that 
provided in section 45(b)(10), except that the payment is 
reduced by 10 percent if construction of the facility begins in 
calendar year 2024, by 15 percent if construction the facility 
begins in calendar year 2025, and by 100 percent if the 
construction of the facility begins after December 31, 2025.
    As with the rule set forth in section 45(b)(10), an 
exception applies if the Secretary determines that the 
inclusion of steel, iron, or manufactured products which are 
produced in the United States increases the overall costs of 
construction of qualified facilities by more than 25 percent, 
or if the relevant steel, iron, or manufactured products are 
not produced in the United States in sufficient and reasonably 
available quantities or of a satisfactory quality.
            Special rules
    In the case of a qualified facility in which more than one 
person has an ownership interest, except to the extent provided 
in regulations prescribed by the Secretary, production from the 
facility shall be allocated among such persons in proportion to 
their respective ownership interests in the gross sales from 
such facility.
    Persons shall be treated as related to each other if such 
persons would be treated as a single employer under the 
regulations prescribed under section 52(b). In the case of a 
corporation which is a member of an affiliated group of 
corporations filing a consolidated return, such corporation 
shall be treated as selling electricity to an unrelated person 
if such electricity is sold to such a person by another member 
of such group.
    With respect to trusts and estates, under rules prescribed 
by the Secretary, rules similar to the rules of section 52(d) 
apply, which for any taxable year apportion the amount of a 
credit between an estate or trust and its beneficiaries on the 
basis of the income of the estate or trust allocable to each.
    In the case of agricultural cooperatives, rules similar to 
the rules of section 45(e)(11) apply, which allocate credits to 
patrons of such cooperatives.

                           REASONS FOR CHANGE

    The Committee believes that certain changes made by Public 
Law 117-169 (the Inflation Reduction Act) provide an unneeded 
tax benefit for certain favored corporations and high-income 
individuals. Given this and the size of the Federal debt, the 
Committee believes that certain future energy-related tax 
incentives are projected to be too costly and therefore should 
be repealed before they take effect.

                        EXPLANATION OF PROVISION

    The provision repeals the clean electricity production 
credit (section 45Y). The renewable electricity production 
credit (section 45) remains unchanged under the provision.

                             EFFECTIVE DATE

    The provision is effective as if included in section 13701 
of Public Law 117-169 (the Inflation Reduction Act).

2. Repeal of Clean Electricity Investment Credit (Sec. 302 of the Bill 
                       and Sec. 48E of the Code)


                              PRESENT LAW

Energy credit

            In general
    An investment credit is available for qualified energy 
property originally placed in service by the taxpayer.\146\ The 
base credit rate is 6 percent. This rate is increased to 30 
percent if certain wage and apprenticeship requirements are 
met. The credit is generally available for property placed in 
service before January 1, 2025, except for geothermal heat pump 
property, which must be placed in service before January 1, 
2035.\147\
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    \146\Sec. 48. A number of changes to this Code section were made in 
August 2022 by Public Law 117-169 (the Inflation Reduction Act). This 
summary reflects those changes.
    \147\The credit rate for geothermal heat pump property is subject 
to certain phase-down rules in calendar years 2033 and 2034.
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            Qualified property
           The following types of property qualify for 
        the energy credit.
           Solar energy property
           Fuel cell property
           Geothermal power property
           Fiber optic solar and electrochromic glass 
        property
           Small wind property
           Waste energy recovery property
           Energy storage technology property
           Biogas property
           Microgrid controller property
           Combined heat and power system property, and
           Geothermal heat pump property
    A taxpayer may also make an irrevocable election to have 
certain property which is part of a qualified renewable 
electricity production facility treated as energy property 
eligible for an investment credit under section 48. For 
purposes of the investment credit, qualified facilities are 
facilities otherwise eligible for the renewable electricity 
production credit with respect to which no credit under section 
45 has been allowed. A taxpayer electing to treat a facility as 
energy property may not claim the renewable electricity 
production credit.
            Domestic content bonus
    Where certain domestic content requirements are satisfied, 
the energy credit rate is increased by two percentage points 
(ten percentage points where the wage and apprenticeship 
requirements are met). The domestic content requirements are 
similar to those provided for in section 45(b)(9).
            Reduction of elective payment if domestic content rules are 
                    not satisfied
    Certain taxpayers may elect to have the credit paid 
directly to the extent there is insufficient income tax 
liability to absorb the credit.\148\ The amount of this direct 
payment is reduced by 10 percent if the domestic content 
requirements described above for the domestic content bonus are 
not satisfied. This rule is similar to those provided in 
section 45(b)(10).
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    \148\Sec. 6417.
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            Credit reduced for tax-exempt bonds
    The energy credit is reduced when the qualified property is 
financed using tax-exempt bonds. The rules governing this 
reduction are similar to those provided in section 45(b)(3).
            Energy communities bonus
    If energy property is placed in service in an ``energy 
community,'' the energy credit rate increases by two percentage 
points (10 percentage points where the wage and apprenticeship 
requirements are met). The definition of energy community is 
the same as that set forth in section 45(b)(11).
            Low-income communities bonus for certain wind and solar 
                    facilities
    A credit rate bonus is available for certain qualified 
solar and wind facilities placed in service in connection with 
low-income communities. Qualified solar and wind facilities are 
facilities that generate electricity solely from solar or wind 
property,\149\ have a maximum net output of less than five 
megawatts (as measured in alternating current), and are either 
(1) located in a low-income community (as defined in section 
45D(e)) or on Indian land (as defined in section 2601(2) of the 
Energy Policy Act of 1992 (25 U.S.C. sec. 3501(2))) or (2) part 
of a qualified low-income residential building project or a 
qualified low-income economic benefit project. In the case of 
facilities located in a low-income community or on Indian land, 
the bonus credit rate is 10 percentage points. In the case of 
facilities that are part of a qualified low-income residential 
building project or a qualified low-income economic benefit 
project, the bonus credit rate is 20 percentage points.
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    \149\Eligible property includes energy storage technology installed 
in connection with such energy property. In the case of wind 
facilities, either the facilities must be small wind facilities under 
section 48(a)(3)(A)(vi) or an election for an investment credit in lieu 
of a production credit must have been made under section 48(a)(5).
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    A facility is treated as part of a qualified low-income 
residential building project if the facility is installed on a 
residential rental building\150\ which participates in a 
covered housing program (as defined in section 41411(a) of the 
Violence Against Women Act of 1994 (34 U.S.C. 12491(a)(3)), a 
housing assistance program administered by the Department of 
Agriculture under title V of the Housing Act of 1949, a housing 
program administered by a tribally designated housing entity 
(as defined in section 4(22) of the Native American Housing 
Assistance and Self-Determination Act of 1996 (25 U.S.C. 
4103(22))) or such other affordable housing programs as the 
Secretary may provide, and the financial benefits of the 
electricity produced by such facility are allocated equitably 
among the occupants of the dwelling units of such building.
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    \150\For this purpose, a facility installed next to a building or 
in a building complex's common area may be treated as installed on a 
residential building.
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    A facility is treated as part of a qualified low-income 
economic benefit project if at least 50 percent of the 
financial benefits of the electricity produced by such facility 
are provided to households with income of (1) less than 200 
percent of the poverty line (as defined in section 
36B(d)(3)(A)) applicable to a family of the size involved or 
(2) less than 80 percent of area median gross income (as 
determined under section 142(d)(2)(B)). For purposes of 
determining whether a facility is part of a qualified low-
income residential building project or a qualified low-income 
economic benefit project, electricity acquired at a below-
market rate shall be taken into account as a financial benefit.
    The bonus is subject to an annual capacity limitation of 
1.8 gigawatts for each of calendar years 2023 and 2024 and zero 
thereafter. The Secretary is required to establish a program to 
allocate the capacity limitation to qualified solar and wind 
facilities. In establishing such program, the Secretary must 
provide procedures to allow for an efficient allocation 
process, including, when appropriate, consideration of multiple 
projects in a single application if such projects will be 
placed in service by a single taxpayer.
    Facilities that have been awarded credits must be placed in 
service within four years of the date such facilities have been 
allocated electricity generation capacity by the Secretary. If 
a facility is not placed in service within this four-year 
period, the electric generation capacity allocated to such 
facility may be reallocated by the Secretary. In addition, if 
the annual capacity limitation for 2023 is not fully allocated, 
the unallocated portion is added to the amount available in 
calendar year 2024.
    The bonus credit is subject to recapture if the property to 
which it relates ceases to meet the applicable requirements, 
notwithstanding the fact such property still qualifies for the 
energy credit under section 50(a).

Clean electricity investment credit

            In general
    The clean electricity investment credit is equal to the 
applicable percentage of qualified investment for any taxable 
year with respect to any qualified facility and any energy 
storage technology. The base rate is 6 percent. This base rate 
is increased to 30 percent (the ``alternative rate'') for 
facilities with a maximum output of less than one megawatt of 
electricity (as measured in alternating current) and for 
facilities that meet certain prevailing wage and apprenticeship 
requirements (or for which construction began more than 60 days 
before the Secretary publishes guidance with respect to such 
prevailing wage and apprenticeship requirements).
    The clean electricity investment credit is allowable for 
property placed in service after December 31, 2024. The credit 
is part of the general business credit.
            Qualified investment with respect to a qualified facility
    For purposes of determining the amount of the credit, a 
qualified investment with respect to any qualified facility for 
the taxable year is the sum of the basis of any qualified 
property placed in service by the taxpayer during such taxable 
year which is part of a qualified facility, plus the amount of 
any expenditures that are paid or incurred by the taxpayer for 
qualified interconnection property (as defined in section 
48(a)(8)).
    Qualified property is tangible personal property or other 
tangible property (not including a building or its structural 
components), but only if such property is used as an integral 
part of a qualified facility. In addition, such property must 
consist of depreciable or amortizable property that is either 
built by the taxpayer or the original use of which begins with 
the taxpayer.
    A qualified facility is an electricity generation facility 
owned by the taxpayer that is placed in service after December 
31, 2024, and for which the greenhouse gas emissions rate is 
not greater than zero. With respect to a facility placed in 
service before January 1, 2025, a qualified facility includes 
new units and additions to capacity placed in service after 
December 31, 2024. The greenhouse gas emissions rate is 
determined using rules similar to the rules set forth in 
section 45Y(b)(2) and the terms ``greenhouse gas,'' 
``greenhouse gas emissions rate,'' and ``CO2e per KWh'' have 
the same meaning given such terms under section 45Y.
    A qualified facility does not include any facility for 
which a credit is allowed under sections 45, 45J, 45Q, 45U, 
45Y, 48, or 48A for the taxable year or any prior taxable year. 
The qualified investment with respect to any qualified facility 
for any taxable year does not include that portion of the basis 
of any property which is attributable to qualified 
rehabilitation expenditures (as defined in section 47(c)(2)).
            Qualified investment with respect to energy storage 
                    technology
    The qualified investment with respect to energy storage 
technology for any taxable year is the basis of any energy 
storage technology placed in service by the taxpayer during 
such taxable year. The term ``energy storage technology'' has 
the meaning given such term in section 48(c)(6) (except that 
subparagraph (D) of such section shall not apply).
            Wage and apprenticeship requirements
    The prevailing wage and apprenticeship requirements follow 
the structure established in sections 48(a)(10) and 45(b)(8), 
respectively. Generally, the prevailing wage rules require that 
the taxpayer ensure that any laborers and mechanics employed by 
the taxpayer or any contractor or subcontractor in the 
construction, alteration, or repair of a project are paid wages 
at a rate not less than the prevailing wage rates for 
construction, alteration, or repair of a similar character in 
the locality where the project is located as determined by the 
Secretary of Labor, in accordance with subchapter IV of chapter 
31, of title 40, United States Code. The apprenticeship 
requirements require that, generally, not less than a certain 
percentage of total labor hours of the construction, 
alteration, or repair work (including work performed by any 
contractor of subcontractor) on a project must be performed by 
qualified apprentices, similar to the rules of section 
45(b)(8).
            Certain progress expenditure rules made applicable
    Rules similar to the rules of subsections (c)(4) and (d) of 
section 46 (as in effect on the day before the date of the 
enactment of the Revenue Reconciliation Act of 1990) apply.
            Credit reduced for tax-exempt bonds
    The credit is reduced for tax-exempt bonds under rules 
similar to the rules of section 45(b)(3).
            Phaseout of credit
    The credit phases out under rules similar to the rules set 
forth in section 45Y(d)(3).
            Recapture of the credit
    If the Secretary determines that the greenhouse gas 
emissions rate for a qualified facility is greater than 10 
grams of CO2e per KWh, any property for which a credit was 
allowed under this section with respect to such facility ceases 
to be investment credit property in the taxable year in which 
the determination is made and such credit is subject to 
recapture under the rules of section 50.
            Energy communities bonus
    If energy property is placed in service in an ``energy 
community,'' the base rate is increased by two percentage 
points and the alternative rate by ten percentage points. The 
definition of energy community is the same as that set forth in 
section 45(b)(11)(B).
            Domestic content bonus
    An additional credit amount is available for property that 
meets certain domestic content requirements similar to those 
used in section 48 but applying the adjusted percentage set 
forth in section 45Y(g)(11)(C).\151\
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    \151\A technical correction may be necessary to reflect this 
intent.
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            Reduction of elective payment if domestic content rules are 
                    not satisfied
    In the case of a taxpayer making an election under section 
6417 with respect to a credit under this section, rules similar 
to the rules of section 45Y(g)(12) apply.
            Special rules for certain facilities placed in service in 
                    connection with low-income communities
    A bonus credit amount applies for certain qualified 
facilities placed in service in connection with low-income 
communities. The bonus credit amount is an allocated credit and 
follows rules similar to the rules set forth in section 48(e). 
Under the clean electricity investment credit, the annual 
capacity limitation is 1.8 gigawatts of direct current capacity 
for each calendar year beginning on January 1, 2025, and ending 
on December 31 of the applicable year (as defined by section 
45Y(d)(3)), and zero thereafter. Certain carryover rules apply 
with respect to unused limitation amounts.

                           REASONS FOR CHANGE

    The Committee believes that certain changes made by Public 
Law 117-169 (the Inflation Reduction Act) provide an unneeded 
tax benefit for certain favored corporations and high-income 
individuals. Given this and the size of the Federal debt, the 
Committee believes that certain future energy-related tax 
incentives are projected to be too costly and therefore should 
be repealed before they take effect.

                        EXPLANATION OF PROVISION

    The provision repeals the clean electricity investment 
credit (section 48E). The energy credit (section 48) remains 
unchanged under the provision.

                             EFFECTIVE DATE

    The provision is effective as if included in section 13702 
of Public Law 117-169 (the Inflation Reduction Act).

3. Modification of Clean Vehicle Credit (Sec. 303 of the Bill and Sec. 
                            30D of the Code)


                              PRESENT LAW

In general

    A credit is available for each new clean vehicle placed in 
service (the ``CV credit'').\152\ A new clean vehicle is a 
motor vehicle the original use of which commences with the 
taxpayer, is acquired for use or lease and not for resale, is 
made by a qualified manufacturer,\153\ has a gross vehicle 
weight rating of less than 14,000 pounds, is treated as a motor 
vehicle for purposes of title II of the Clean Air Act, and is 
propelled to a significant extent by an electric motor drawing 
electricity from a battery (1) with at least seven kilowatt-
hours of capacity and (2) which is capable of being recharged 
from an external source of electricity.\154\ The person who 
sells the vehicle must provide a report to the taxpayer and the 
Secretary that includes the name and taxpayer identification 
number of the taxpayer, the vehicle identification number of 
the vehicle, the battery capacity of the vehicle, verification 
that original use of the vehicle commences with the taxpayer, 
and the maximum credit allowable to the taxpayer with respect 
to the vehicle.\155\ A new clean vehicle must have final 
assembly occur within North America.\156\
---------------------------------------------------------------------------
    \152\Sec. 30D.
    \153\A qualified manufacturer must be a manufacturer as defined in 
regulations prescribed by the Administrator of the Environmental 
Protection Agency for purposes of the administration of title II of the 
Clean Air Act (42 U.S.C. 7521 et seq.) and must provide periodic 
written reports to the Secretary which include vehicle identification 
numbers. Sec. 30D(d)(3).
    \154\Sec. 30D(d)(1).
    \155\Sec. 30D(d)(1)(H).
    \156\Sec. 30D(d)(1)(G).
---------------------------------------------------------------------------
    New qualified fuel cell motor vehicles\157\ which have 
final assembly within North America and for which sellers 
provide a report, as described above, are new clean vehicles 
for purposes of the credit.\158\
---------------------------------------------------------------------------
    \157\As defined in section 30B(b)(3).
    \158\Sec. 30D(d)(6).
---------------------------------------------------------------------------
    Vehicles with any applicable critical minerals in the 
battery that are extracted, processed, or recycled by a foreign 
entity of concern that are placed in service after December 31, 
2024, or vehicles with any components contained in the battery 
of the vehicle that are manufactured or assembled by a foreign 
entity of concern that are placed in service after December 31, 
2023, do not qualify for the credit.\159\
---------------------------------------------------------------------------
    \159\Sec. 30(d)(7).
---------------------------------------------------------------------------

CV credit amount

    A new clean vehicle is eligible for two $3,750 amounts for 
satisfying certain criteria. One $3,750 amount is allowed if 
certain critical minerals requirements for the battery are 
met.\160\ Another $3,750 amount is allowed if certain battery 
components requirements are met.\161\ Therefore, a new clean 
vehicle is eligible for a maximum credit of $7,500 if both 
critical minerals and battery components requirements are met.
---------------------------------------------------------------------------
    \160\Sec. 30D(b)(2).
    \161\Sec. 30D(b)(3).
---------------------------------------------------------------------------
            Critical minerals requirement
    To satisfy the critical minerals requirement, a new clean 
vehicle's battery (from which the electric motor draws 
electricity) must have a percentage of the value of applicable 
critical minerals\162\ that were (1) extracted or processed in 
the United States or a country that has a free trade agreement 
with the United States or (2) recycled in North America equal 
to or greater than an applicable percentage.\163\
---------------------------------------------------------------------------
    \162\Critical minerals as defined in sec. 45X(c)(6).
    \163\Sec. 30D(e)(1)(A).
---------------------------------------------------------------------------
    For this purpose, the applicable percentage is 40 percent 
for a vehicle placed in service before January 1, 2024. The 
applicable percentage is 50 percent for a vehicle placed in 
service during calendar year 2024, 60 percent for 2025, 70 
percent for 2026, and 80 percent after 2026.\164\
---------------------------------------------------------------------------
    \164\Sec. 30D(e)(1)(B).
---------------------------------------------------------------------------
            Battery components requirement
    To satisfy the battery components requirement, a new clean 
vehicle's battery (from which the electric motor draws 
electricity) must have a percentage of the value of the 
components that were manufactured or assembled in North America 
equal to or greater than an applicable percentage.\165\
---------------------------------------------------------------------------
    \165\Sec. 30D(e)(2)(A).
---------------------------------------------------------------------------
    For this purpose, the applicable percentage is 50 percent 
for a vehicle placed in service before January 1, 2024. The 
applicable percentage is 60 percent for a vehicle placed in 
service during calendar year 2024 or 2025, 70 percent for 2026, 
80 percent for 2027, 90 percent for 2028, and 100 percent after 
2028.\166\
---------------------------------------------------------------------------
    \166\Sec. 30D(e)(2)(B).
---------------------------------------------------------------------------
            Regulations and guidance
    The Secretary is directed to issue regulations or other 
guidance to carry out the critical mineral and battery 
component requirements and must issue proposed guidance no 
later than December 31, 2022.\167\
---------------------------------------------------------------------------
    \167\Sec. 30D(e)(3).
---------------------------------------------------------------------------
            Vehicle price and AGI limitations
    The manufacturer's suggested retail price (``MSRP'') of a 
new clean vehicle purchased by the taxpayer may not exceed 
certain limitations. That is, the credit amount is $0 if the 
MSRP for the vehicle exceeds the applicable limitation. This 
limitation is $80,000 in the case of a van, sport utility 
vehicle, or pickup truck, and $55,000 in the case of any other 
vehicle. The Secretary is directed to release regulations or 
guidance to characterize vehicles into the appropriate category 
by applying rules similar to those employed by the 
Environmental Protection Agency (``EPA'') and the Department of 
Energy to determine vehicle class and size.\168\
---------------------------------------------------------------------------
    \168\Sec. 30D(f)(11).
---------------------------------------------------------------------------
    Additionally, no credit is allowed if the taxpayer's income 
exceeds $300,000 in the case of a joint return or surviving 
spouse, $225,000 in the case of a head of household, or 
$150,000 in the case of any other taxpayer.\169\ For purposes 
of this limitation, the taxpayer's income is the lesser of 
modified AGI of the current taxable year or modified AGI of the 
preceding taxable year.\170\
---------------------------------------------------------------------------
    \169\Sec. 30D(f)(10).
    \170\Modified AGI is AGI increased by any amount excluded from 
gross income under section 911, 931, or 933. Sec. 30D(f)(10)(C).
---------------------------------------------------------------------------

Transfer of credit

    For vehicles placed in service after December 31, 2023, a 
taxpayer who has purchased or leased a vehicle may elect to 
transfer the credit to an eligible entity, subject to 
regulations or guidance the Secretary deems necessary. The 
eligible entity is then treated as the taxpayer with respect to 
the credit.\171\ The Secretary is directed to establish a 
program to provide advance payments of these credit amounts to 
eligible entities.\172\ An election to transfer the credit must 
be made on or before the date of vehicle purchase.\173\
---------------------------------------------------------------------------
    \171\Sec. 30D(g)(1).
    \172\Sec. 30D(g)(7).
    \173\Sec. 30D(g)(3).
---------------------------------------------------------------------------
    An eligible entity is a dealer\174\ which meets the 
following requirements: First, the dealer must be registered 
with the Secretary. Second, prior to the election of transfer, 
the dealer must disclose information to the buyer on the MSRP 
of the vehicle, value of the credit and other incentives 
available, and the amount provided by the dealer as a condition 
of an election to transfer. Third, the dealer must pay the 
taxpayer for the amount of the credit allowable. Finally, the 
dealer must ensure that the availability or use of any other 
available manufacturer or dealer incentive does not limit the 
ability of the taxpayer to make an election and that the 
election will not limit the value or use of any such 
incentive.\175\ The Secretary may revoke the registration of 
dealers that fail to comply with these requirements.\176\
---------------------------------------------------------------------------
    \174\A dealer is a person licensed by a State, territory of the 
United States, Indian tribal government, or Alaska Native Corporation 
to engage in the sale of vehicles. Sec. 30D(g)(8).
    \175\Sec. 30D(g)(2).
    \176\Sec. 30D(g)(4).
---------------------------------------------------------------------------
    The payment made by dealers to buyers in connection with a 
credit transfer election is not includable in the gross income 
of the taxpayer and is not deductible to the dealer.\177\
---------------------------------------------------------------------------
    \177\Sec. 30D(g)(5).
---------------------------------------------------------------------------
    The tax liability of a taxpayer that does not meet the AGI 
requirements for the credit, that elects to transfer a credit, 
and that receives a payment in connection with such credit 
transfer, is increased by the amount of such payment.\178\
---------------------------------------------------------------------------
    \178\Sec. 30D(g)(10).
---------------------------------------------------------------------------

Other rules

    A vehicle that is predominantly used outside the United 
States does not qualify for the credit.\179\ A vehicle must 
meet certain emissions and safety standards in order to qualify 
for the credit.\180\
---------------------------------------------------------------------------
    \179\Sec. 30D(f)(4).
    \180\Sec. 30D(f)(7).
---------------------------------------------------------------------------
    The basis of any qualified vehicle is reduced by the amount 
of the credit.\181\ The portion of the credit attributable to 
vehicles of a character subject to an allowance for 
depreciation is treated as part of the general business credit; 
the nonbusiness portion of the credit is allowable to the 
extent of the excess of the regular tax and the alternative 
minimum tax (reduced by certain other credits) for the taxable 
year.\182\
---------------------------------------------------------------------------
    \181\Sec. 30D(f)(1).
    \182\Sec. 30D(c).
---------------------------------------------------------------------------
    A taxpayer must include the vehicle identification number 
of the vehicle on a tax return to claim the credit.\183\
---------------------------------------------------------------------------
    \183\Sec. 30D(f)(9).
---------------------------------------------------------------------------

Expiration

    No credit is allowed for any vehicle placed in service 
after December 31, 2032.\184\
---------------------------------------------------------------------------
    \184\Sec. 30D(h).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes the modification to the section 30D 
credit enacted by Public Law 117-169 (the Inflation Reduction 
Act) provides an unneeded tax benefit for certain favored 
corporations and high-income individuals. The Committee wishes 
to reverse many of these changes but still provide limitations 
to ensure high-income taxpayers cannot use the credit to buy 
expensive luxury electric vehicles. The Committee also wishes 
to ensure that batteries for credit-eligible vehicles will be 
comprised of materials sourced in the United States. The 
Committee believes that the reinstatement of the manufacturer 
limitation will prevent companies with established electric 
vehicle production from receiving tax subsidy windfalls. 
Finally, the Committee believes that the Federal debt is too 
large and the pool of potential beneficiaries insufficient to 
justify the revenue loss from this subsidy.

                        EXPLANATION OF PROVISION

In general

    The provision generally reverts the clean vehicle credit to 
how it appeared immediately prior to the enactment of Public 
Law 117-169 (the Inflation Reduction Act), providing a credit 
for ``new qualified plug-in electric drive motor vehicles.'' 
The provision retains limitations based on modified AGI and 
MSRP and continues to impose modified critical mineral and 
battery component requirements. The provision does not apply 
with respect to any vehicle which is acquired by the taxpayer 
pursuant to a written binding contract that was in effect on 
June 9, 2023, and which is placed in service before June 9, 
2024.
    The provision allows a credit for each new qualified plug-
in electric drive motor vehicle placed in service (the ``EV 
credit''). A``new qualified plug-in electric drive motor 
vehicle'' is a motor vehicle the original use of which 
commences with the taxpayer, is acquired for use or lease and 
not for resale, is made by a manufacturer,\185\ has a gross 
vehicle weight rating of less than 14,000 pounds, is treated as 
a motor vehicle for purposes of title II of the Clean Air Act, 
and is propelled to a significant extent by an electric motor 
drawing electricity from a battery (1) with at least four 
kilowatt-hours of capacity and (2) which is capable of being 
recharged from an external source of electricity.\186\
---------------------------------------------------------------------------
    \185\Manufacturer is defined in regulations prescribed by the 
Administrator of the Environmental Protection Agency for purposes of 
the administration of title II of the Clean Air Act (42 U.S.C. 7521 et 
seq.). Sec. 30D(d)(3).
    \186\Sec. 30D(d)(1).
---------------------------------------------------------------------------

EV credit amount

    The base amount of the EV credit is $2,500 and the credit 
is increased by $417 for each kilowatt-hour of battery capacity 
in excess of four kilowatt-hours. The maximum credit for a 
qualified vehicle is $7,500.\187\
---------------------------------------------------------------------------
    \187\Sec. 30D(b).
---------------------------------------------------------------------------
            Vehicle price and AGI limitations
    The requirements for vehicle price and taxpayer AGI under 
present law, described above, are not modified by the 
provision. No credit is allowed for vehicles and taxpayers that 
do not meet these limitations.
            Critical minerals and battery component requirement
    Under the provision no credit is allowed for a new clean 
vehicle unless such vehicle satisfies three sourcing 
requirements.
    First, 80 percent or more of the value of applicable 
critical minerals\188\ that are contained in a new clean 
vehicle's battery (from which the electric motor draws 
electricity) must come from applicable critical minerals that 
were (1) extracted or processed in the United States or a 
country that has a free trade agreement with the United States 
or (2) recycled in North America.\189\
---------------------------------------------------------------------------
    \188\Critical minerals as defined in sec. 45X(c)(6).
    \189\Sec. 30D(e)(1).
---------------------------------------------------------------------------
    Second, all the components contained in a new clean 
vehicle's battery (from which the electric motor draws 
electricity) must have been manufactured or assembled in North 
America.\190\
---------------------------------------------------------------------------
    \190\Sec. 30D(e)(2).
---------------------------------------------------------------------------
    Finally, vehicles placed in service after December 31, 
2024, may not have any applicable critical minerals in the 
battery that were extracted, processed, or recycled by a 
foreign entity of concern.\191\
---------------------------------------------------------------------------
    \191\Sec. 30D(e)(3).
---------------------------------------------------------------------------

Manufacturer limitation and phaseout

    For each manufacturer, once a total of 200,000 new plug-in 
electric drive motor vehicles have been manufactured and sold 
by such manufacturer for use in the United States after 
December 31, 2009, the credit phases out over four calendar 
quarters.\192\ The phaseout period begins in the second 
calendar quarter following the quarter during which the vehicle 
cap has been reached. Taxpayers may claim one-half of the 
otherwise allowable credit during the first two calendar 
quarters of the phaseout period and twenty-five percent of the 
otherwise allowable credit during the next two quarters. After 
this, no credit is available.\193\
---------------------------------------------------------------------------
    \192\This includes vehicles sold during the period in which the 
changes made to section 30D by Public Law 117-169 (the Inflation 
Reduction Act) are in effect.
    \193\Sec. 30D(g).
---------------------------------------------------------------------------

Other rules

    In general, the credit is available to the vehicle owner, 
including the lessor of a vehicle subject to lease. If the 
qualified vehicle is used by certain tax-exempt organizations, 
governments, or foreign persons and is not subject to a lease, 
the seller of the vehicle may claim the credit so long as the 
seller clearly discloses to the user in a document the amount 
that is allowable as a credit.\194\ Generally, the other rules 
described in the present law description above continue to 
apply.
---------------------------------------------------------------------------
    \194\Sec. 30D(f)(3).
---------------------------------------------------------------------------

                             EFFECTIVE DATE

    The provision is generally effective for vehicles placed in 
service after June 9, 2023. The final assembly changes and per 
manufacturer limitations are effective for vehicles sold after 
June 9, 2023. However, the per manufacturer phase out period is 
determined taking into account all vehicles described in 
section 30D(g), as amended by the provision.

 4. Repeal of Credit for Previously-Owned Clean Vehicles (Sec. 304 of 
                   the Bill and Sec. 25E of the Code)


                              PRESENT LAW

In general

    A credit is available for previously-owned clean vehicles 
(the ``previously-owned CV credit'') placed in service by a 
qualified buyer. A ``previously-owned clean vehicle'' is a 
motor vehicle with a model year at least two years earlier than 
the calendar year in which the taxpayer acquires the vehicle, 
the original use of which commences with a person other than 
the taxpayer, which has a gross vehicle weight rating of less 
than 14,000 pounds,\195\ which is acquired by the taxpayer in a 
qualified sale, and that meets certain emissions 
standards.\196\
---------------------------------------------------------------------------
    \195\Sec. 25E(c)(1).
    \196\Sec. 25E(e).
---------------------------------------------------------------------------
    A qualified sale is a sale by a dealer\197\ that is the 
first transfer since the date of enactment of this section to a 
qualified buyer other than the person with whom the original 
use of such vehicle commenced.\198\ A qualified sale does not 
include transfers to qualified buyers made after the vehicle 
has been used and owned by a person other than the person with 
whom the original use of such vehicle commenced, even if such 
use and ownership was not by a qualified buyer.\199\
---------------------------------------------------------------------------
    \197\A dealer is a person licensed by a State, territory of the 
United States, Indian tribal government, or Alaska Native Corporation 
to engage in the sale of vehicles. Sec. 30D(g)(8).
    \198\ Sec. 25E(c)(2).
    \199\A technical correction may be needed to reflect this intent.
---------------------------------------------------------------------------
    Additionally, a previously-owned clean vehicle must be an 
electric vehicle or a fuel-cell vehicle that satisfies certain 
criteria. Specifically, a previously-owned clean vehicle must 
either (1) be propelled to a significant extent by an electric 
motor drawing electricity from a battery (a) with at least 
seven kilowatt-hours of capacity and (b) which is capable of 
being recharged from an external source of electricity, made by 
a qualified manufacturer, and with respect to which the person 
who sells the vehicle provides a report to the taxpayer and 
Secretary that includes the name and taxpayer identification 
number of the taxpayer, the vehicle identification number of 
the vehicle, the battery capacity of the vehicle, and the 
maximum credit allowable to the taxpayer with respect to the 
vehicle,\200\ or (2) be propelled by power derived from one or 
more cells which convert chemical energy directly into 
electricity by combining oxygen with hydrogen fuel stored on 
board the vehicle and have received certain emissions-standard 
certification.\201\
---------------------------------------------------------------------------
    \200\Sec. 25E(c)(1)(D)(i).
    \201\Sec. 25E(c)(1)(D)(ii). Fuel cell vehicles must satisfy the 
requirements of section 30B(b)(3)(A) and (B).
---------------------------------------------------------------------------
    A taxpayer must include the vehicle identification number 
of the vehicle on a tax return to claim the credit.\202\
---------------------------------------------------------------------------
    \202\Sec. 25E(d).
---------------------------------------------------------------------------
    A qualified buyer is an individual who purchases a vehicle 
for use and not resale, who cannot be claimed as a dependent, 
and during the three-year period prior to such purchase, has 
not made any purchases for which a previously-owned CV credit 
was claimed.
            Previously-owned CV credit amount
    The amount of the credit is the lesser of (1) $4,000 or (2) 
30 percent of the sale price of the vehicle.\203\
---------------------------------------------------------------------------
    \203\Sec. 25E(a).
---------------------------------------------------------------------------
    The sale price of a previously-owned clean vehicle 
purchased by the taxpayer may not exceed $25,000.\204\ That is, 
the credit amount is $0 if the sale price for the vehicle 
exceeds this amount.
---------------------------------------------------------------------------
    \204\Sec. 25E(c)(2)(B).
---------------------------------------------------------------------------
    Additionally, no credit is allowed if the taxpayer's income 
exceeds $150,000 in the case of a joint return or surviving 
spouse, $112,500 in the case of a head of household, or $75,000 
in the case of any other taxpayer.\205\ For purposes of this 
limitation, the taxpayer's income is the lesser of modified AGI 
of the current taxable year or modified AGI of the preceding 
taxable \206\ year.
---------------------------------------------------------------------------
    \205\Sec. 25E(b).
    \206\Modified AGI is AGI increased by any amount excluded from 
gross income under section 911, 931, or 933. Sec. 25E(b)(3).
---------------------------------------------------------------------------

Other rules

    In general, the credit is available to the vehicle owner, 
including the lessor of a vehicle subject to lease. A vehicle 
must be used predominantly in the United States to qualify for 
the credit and the basis of any qualified vehicle is reduced by 
the amount of the credit.\207\
---------------------------------------------------------------------------
    \207\Secs. 25E(e) and 30D(f).
---------------------------------------------------------------------------

Transfer of credit

    For vehicles acquired after December 31, 2023, a taxpayer 
may elect to transfer the credit to an eligible entity under 
rules similar to those for the transfer of the clean vehicle 
credit.\208\ These rules are explained in the description of 
section 303 of the bill, modification of clean vehicle credit.
---------------------------------------------------------------------------
    \208\Sec. 25E(f).
---------------------------------------------------------------------------

Expiration

    No credit is allowed for any vehicle acquired after 
December 31, 2032.\209\
---------------------------------------------------------------------------
    \209\Sec. 25E(g).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that the previously-owned CV credit 
provides an unneeded tax benefit for certain favored 
corporations and individuals. The Committee believes that the 
Federal debt is too large and the pool of potential 
beneficiaries insufficient to justify the revenue loss from 
this subsidy.

                        EXPLANATION OF PROVISION

    The provision repeals the previously-owned CV credit. The 
provision does not apply with respect to any vehicle which is 
acquired by the taxpayer pursuant to a written binding contract 
that was in effect on June 9, 2023, and which is placed in 
service before June 9, 2024.

                             EFFECTIVE DATE

    The provision is effective for vehicles acquired after June 
9, 2023.

 5. Repeal of Credit for Qualified Commercial Clean Vehicles (Sec. 305 
                 of the Bill and Sec. 45W of the Code)


                              PRESENT LAW

    Present law allows for a credit for qualified commercial 
clean vehicles originally\210\ placed in service by a taxpayer. 
A qualified commercial clean vehicle is a vehicle made by a 
qualified manufacturer,\211\ acquired for use or lease by the 
taxpayer and not for resale, that either (1) is manufactured 
primarily for use on public streets, roads, and highways,\212\ 
or (2) is mobile machinery,\213\ and of a character subject to 
the allowance of depreciation.\214\
---------------------------------------------------------------------------
    \210\A technical correction may be necessary to reflect this 
intent.
    \211\Qualified manufacturer has the same meaning as in section 30D. 
For more detail see the description of section 303 of the bill, 
modification of clean vehicle credit.
    \212\Vehicles operated exclusively on a rail or rails are excluded.
    \213\This is mobile machinery as defined in section 4053(8) and 
includes vehicles not designed to perform a function of transporting a 
load over public highways.
    \214\Sec. 45W(c).
---------------------------------------------------------------------------
    Additionally, a qualified commercial clean vehicle must be 
an electric vehicle or a fuel-cell vehicle that satisfies 
certain criteria. Specifically, a qualified commercial clean 
vehicle must either (1) be propelled to a significant extent by 
an electric motor drawing electricity from a battery (a) with 
at least 15 kilowatt-hours of capacity (or seven kilowatt-hours 
for a vehicle with a gross vehicle weight rating of less than 
14,000 pounds) and (b) which is capable of being recharged from 
an external source of electricity\215\ or (2) be propelled by 
power derived from one or more cells which convert chemical 
energy directly into electricity by combining oxygen with 
hydrogen fuel stored on board the vehicle and have received 
certain emissions-standard certification.\216\
---------------------------------------------------------------------------
    \215\Sec. 45W(c)(3)(A).
    \216\Sec. 45W(c)(3)(B). Fuel cell vehicles must satisfy the 
requirements of sections 30B(b)(3)(A) and (B).
---------------------------------------------------------------------------
    A taxpayer must include the vehicle identification number 
of the vehicle on a tax return to claim the credit.\217\ Only 
one credit is allowed per vehicle, determined by such vehicle 
identification number.\218\
---------------------------------------------------------------------------
    \217\Sec. 45W(e).
    \218\Secs. 45W(d)(1) and 30D(f)(8).
---------------------------------------------------------------------------
    A qualified commercial clean vehicle must also meet certain 
emissions standards to be eligible for a credit.\219\
---------------------------------------------------------------------------
    \219\Sec. 45W(d)(1).
---------------------------------------------------------------------------

Qualified commercial clean vehicle credit amount

    A qualified commercial clean vehicle qualifies for a credit 
equal to the lesser of (1) 15 percent of the basis of such 
vehicle (30 percent if the vehicle is not powered by a gasoline 
or diesel internal combustion engine) or (2) the incremental 
cost of the vehicle.\220\ The credit is limited to $40,000 
($7,500 for a vehicle with a gross vehicle weight rating of 
less than 14,000 pounds).\221\
---------------------------------------------------------------------------
    \220\Sec. 45W(b)(1).
    \221\Sec. 45W(b)(4).
---------------------------------------------------------------------------
    The incremental cost of the vehicle is the amount by which 
the purchase price of the vehicle exceeds the purchase price of 
a comparable vehicle (one powered solely by gasoline or a 
diesel internal combustion engine which is comparable in size 
and use).\222\
---------------------------------------------------------------------------
    \222\Secs. 45W(b)(2) and (3).
---------------------------------------------------------------------------

Other rules

    The basis of any qualified vehicle is reduced by the amount 
of the credit.\223\ No credit is allowed for any vehicle for 
which a new clean vehicle credit is allowed.\224\
---------------------------------------------------------------------------
    \223\Secs. 45W(d)(1) and 30D(f)(1).
    \224\Sec. 45W(d)(3).
---------------------------------------------------------------------------
    The requirement that a qualified clean commercial vehicle 
is of a character subject to the allowance of depreciation does 
not apply to vehicles that are not subject to a lease and which 
are placed in service by certain tax-exempt entities.\225\
---------------------------------------------------------------------------
    \225\Sec. 45W(d)(2).
---------------------------------------------------------------------------
    A vehicle must be used predominantly in the United States 
to qualify for the credit.\226\
---------------------------------------------------------------------------
    \226\Secs. 45W(d)(1) and 30D(f)(4).
---------------------------------------------------------------------------

Regulations and guidance

    The Secretary is directed to issue regulations or other 
guidance relating to determining the incremental cost of any 
qualified commercial clean vehicle in addition to those 
necessary to carry out this provision.\227\
---------------------------------------------------------------------------
    \227\Sec. 45W(f).
---------------------------------------------------------------------------

Expiration

    No credit is allowed for any vehicle placed in service 
after December 31, 2032.\228\
---------------------------------------------------------------------------
    \228\Sec. 45W(g).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that the commercial clean vehicle 
credit provides an unneeded tax benefit for certain favored 
corporations and individuals. The Committee believes that the 
Federal debt is too large and the pool of potential 
beneficiaries insufficient to justify the revenue loss from 
this subsidy.

                        EXPLANATION OF PROVISION

    The provision repeals the credit for qualified commercial 
clean vehicles. The provision does not apply with respect to 
any vehicle which is acquired by the taxpayer pursuant to a 
written binding contract that was in effect on June 9, 2023, 
and which is placed in service before June 9, 2024.

                             EFFECTIVE DATE

    The provision is effective for vehicles acquired after June 
9, 2023.

                      III. VOTES OF THE COMMITTEE

    In compliance with the Rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3938, the ``Build It in America Act,'' on 
June 13, 2023.
    The vote on the amendment offered by Mr. Neal to the 
amendment in the nature of a substitute to H.R. 3938, which 
complicate the tax code by requiring allocation and separate 
amortization of research expenses depending on the location of 
the research activity was not agreed to by a roll call vote of 
18 yeas to 25 nays (with a quorum being present). The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......      X   .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......      X   .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......      X   .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3938, the ``Build It in America Act,'' on 
June 13, 2023.
    The vote on the amendment offered by Ms. Sanchez to the 
amendment in the nature of a substitute to H.R. 3938, which 
would create tax uncertainty for American businesses and 
disallow certain ordinary and necessary tax deductions was not 
agreed to by a roll call vote of 18 yeas to 24 nays (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......  ......  .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......      X   .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......      X   .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3938, the ``Build It in America Act,'' on 
June 13, 2023. The vote on the amendment offered by Mr. Kildee 
to the amendment in the nature of a substitute to H.R. 3938, 
which would expand the availability of tax benefits to high 
income households that purchase electric vehicles was not 
agreed to by a roll call vote of 17 yeas to 25 nays (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........  ......  ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......      X   .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......      X   .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......      X   .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3938, the ``Build It in America Act,'' on 
June 13, 2023.
    The vote on the amendment offered by Ms. Sewell to the 
amendment in the nature of a substitute to H.R. 3938, which 
would impose a complicated set of conditions on deductibility 
of research expenditures that would result in higher taxes for 
hospitality businesses was not agreed to by a roll call vote of 
18 yeas to 25 nays (with a quorum being present). The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......      X   .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......      X   .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......      X   .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3938, the ``Build It in America Act,'' on 
June 13, 2023.
    The vote on the amendment offered by Mr. Blumenauer to the 
amendment in the nature of a substitute to H.R. 3938, which 
would increase prices Americans pay at the pump by reinstating 
the superfund excise tax was not agreed to by a roll call vote 
of 18 yeas to 24 nays (with a quorum being present). The vote 
was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......  ......  .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......      X   .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......      X   .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......      X   .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3938, the ``Build It in America Act,'' on 
June 13, 2023.
    The vote on the amendment offered by Mr. Doggett to the 
amendment in the nature of a substitute to H.R. 3938, which 
would complicate the tax code and encourage more American 
businesses to expatriate by imposing burdensome new rules on 
relief from double taxation of foreign income was not agreed to 
by a roll call vote of 18 yeas to 25 nays (with a quorum being 
present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......      X   .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......  ......  .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......      X   .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3938, the ``Build It in America Act,'' on 
June 13, 2023.
    The vote on the amendment offered by Mr. Thompson to the 
amendment in the nature of a substitute to H.R. 3938, which 
would add a new section that would upend the tax treatment of 
professional sports leagues was not agreed to by a roll call 
vote of 18 yeas to 24 nays (with a quorum being present). The 
vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......      X   .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......  ......  .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......      X   .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3938, the ``Build It in America Act'' on 
June 13, 2023.
    H.R. 3938 was ordered favorably reported to the House of 
Representatives as amended by a roll call vote of 24 yeas to 18 
nays (with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................      X   ......  .........  Mr. Neal.............  ......      X   .........
Mr. Buchanan.......................      X   ......  .........  Mr. Doggett..........  ......      X   .........
Mr. Smith (NE).....................      X   ......  .........  Mr. Thompson.........  ......      X   .........
Mr. Kelly..........................      X   ......  .........  Mr. Larson...........  ......      X   .........
Mr. Schweikert.....................      X   ......  .........  Mr. Blumenauer.......  ......      X   .........
Mr. LaHood.........................      X   ......  .........  Mr. Pascrell.........  ......      X   .........
Dr. Wenstrup.......................      X   ......  .........  Mr. Davis............  ......      X   .........
Mr. Arrington......................      X   ......  .........  Ms. Sanchez..........  ......      X   .........
Dr. Ferguson.......................      X   ......  .........  Mr. Higgins..........  ......      X   .........
Mr. Estes..........................      X   ......  .........  Ms. Sewell...........  ......      X   .........
Mr. Smucker........................      X   ......  .........  Ms. DelBene..........  ......      X   .........
Mr. Hern...........................      X   ......  .........  Ms. Chu..............  ......      X   .........
Ms. Miller.........................      X   ......  .........  Ms. Moore............  ......      X   .........
Dr. Murphy.........................      X   ......  .........  Mr. Kildee...........  ......      X   .........
Mr. Kustoff........................      X   ......  .........  Mr. Beyer............  ......      X   .........
Mr. Fitzpatrick....................      X   ......  .........  Mr. Evans............  ......      X   .........
Mr. Steube.........................  ......  ......  .........  Mr. Schneider........  ......      X   .........
Ms. Tenney.........................      X   ......  .........  Mr. Panetta..........  ......      X   .........
Mrs. Fischbach.....................      X
Mr. Moore..........................      X
Mrs. Steel.........................      X
Ms. Van Duyne......................      X
Mr. Feenstra.......................      X
Ms. Malliotakis....................      X
Mr. Carey..........................      X
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 3938, as 
reported.


B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee states further that the bill involves no new or 
increased tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the cost estimate prepared by 
the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974 was not 
available.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives, the Committee made findings and 
recommendations that are reflected in this report.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill does not authorize funding, so no statement of general 
performance goals and objectives is required.

              C. Information Relating to Unfunded Mandates

    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 bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

            D. Applicability of House Rule XXI, Clause 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill, and states that the bill does not 
provide such a Federal income tax rate increase.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``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.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, for each such provision identified by 
the staff of the Joint Committee on Taxation, a summary 
description of the provision is provided below along with an 
estimate of the number and type of affected taxpayers, and a 
discussion regarding the relevant complexity and administrative 
issues.
    Following the analysis of the staff of the Joint Committee 
on Taxation are the comments of the IRS and Treasury regarding 
the provision included in the complexity analysis.

             List of Provisions in the Complexity Analysis


  1. Extension of 100 Percent Bonus Depreciation (Sec. 3 of the Bill)


Summary description of provision

    The provision extends the 100-percent additional first-year 
depreciation deduction for three years, generally through 2025 
(through 2026 for longer production period property and certain 
aircraft).
    The provision retains the 20-percent additional first-year 
depreciation deduction for qualified property placed in 
service, and specified plants planted or grafted, in 2026 (2027 
for longer production period property and certain aircraft).

Number of affected taxpayers

    It is estimated that the provision will affect over 10 
percent of small business tax returns.

Discussion

    The reporting requirements are unchanged by this provision. 
Capital assets purchased during the tax year will still need to 
be reported on Form 4562, Depreciation and Amortization 
(Including Information on Listed Property); however, the 
current year tax deduction associated with such assets will 
increase.

Comments from IRS and Treasury


  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

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

    With respect to the requirement of clause 3(e) of rule XIII 
of the Rules of the House of Representatives, changes in 
existing law made by the bill, as reported, are shown as 
follows:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter A--DETERMINATION OF TAX LIABILITY

           *       *       *       *       *       *       *


PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *



               Subpart A--NONREFUNDABLE PERSONAL CREDITS


Sec.
21. Expenses for household and dependent care services necessary for 
          gainful employment.
     * * * * * * *
[25E. Previously-owned clean vehicles].

           *       *       *       *       *       *       *


[SEC. 25E. PREVIOUSLY-OWNED CLEAN VEHICLES.

  [(a) Allowance of credit.--In the case of a qualified buyer 
who during a taxable year places in service a previously-owned 
clean vehicle, there shall be allowed as a credit against the 
tax imposed by this chapter for the taxable year an amount 
equal to the lesser of--
          [(1) $4,000, or
          [(2) the amount equal to 30 percent of the sale price 
        with respect to such vehicle.
  [(b) Limitation based on modified adjusted gross income.--
          [(1) In general.--No credit shall be allowed under 
        subsection (a) for any taxable year if--
                  [(A) the lesser of--
                          [(i) the modified adjusted gross 
                        income of the taxpayer for such taxable 
                        year, or
                          [(ii) the modified adjusted gross 
                        income of the taxpayer for the 
                        preceding taxable year, exceeds
                  [(B) the threshold amount.
          [(2) Threshold amount.--For purposes of paragraph 
        (1)(B), the threshold amount shall be--
                  [(A) in the case of a joint return or a 
                surviving spouse (as defined in section 2(a)), 
                $150,000,
                  [(B) in the case of a head of household (as 
                defined in section 2(b)), $112,500, and
                  [(C) in the case of a taxpayer not described 
                in subparagraph (A) or (B), $75,000.
          [(3) Modified adjusted gross income.--For purposes of 
        this subsection, the term ``modified adjusted gross 
        income'' means adjusted gross income increased by any 
        amount excluded from gross income under section 911, 
        931, or 933.
  [(c) Definitions.--For purposes of this section--
          [(1) Previously-owned clean vehicle.--The term 
        ``previously-owned clean vehicle'' means, with respect 
        to a taxpayer, a motor vehicle--
                  [(A) the model year of which is at least 2 
                years earlier than the calendar year in which 
                the taxpayer acquires such vehicle,
                  [(B) the original use of which commences with 
                a person other than the taxpayer,
                  [(C) which is acquired by the taxpayer in a 
                qualified sale, and
                  [(D) which--
                          [(i) meets the requirements of 
                        subparagraphs (C), (D), (E), (F), and 
                        (H) (except for clause (iv) thereof) of 
                        section 30D(d)(1), or
                          [(ii) is a motor vehicle which--
                                  [(I) satisfies the 
                                requirements under 
                                subparagraphs (A) and (B) of 
                                section 30B(b)(3), and
                                  [(II) has a gross vehicle 
                                weight rating of less than 
                                14,000 pounds.
          [(2) Qualified sale.--The term ``qualified sale'' 
        means a sale of a motor vehicle--
                  [(A) by a dealer (as defined in section 
                30D(g)(8)),
                  [(B) for a sale price which does not exceed 
                $25,000, and
                  [(C) which is the first transfer since the 
                date of the enactment of this section to a 
                qualified buyer other than the person with whom 
                the original use of such vehicle commenced.
          [(3) Qualified buyer.--The term ``qualified buyer'' 
        means, with respect to a sale of a motor vehicle, a 
        taxpayer--
                  [(A) who is an individual,
                  [(B) who purchases such vehicle for use and 
                not for resale,
                  [(C) with respect to whom no deduction is 
                allowable with respect to another taxpayer 
                under section 151, and
                  [(D) who has not been allowed a credit under 
                this section for any sale during the 3-year 
                period ending on the date of the sale of such 
                vehicle.
          [(4) Motor vehicle; capacity.--The terms ``motor 
        vehicle'' and ``capacity'' have the meaning given such 
        terms in paragraphs (2) and (4) of section 30D(d), 
        respectively.
  [(d) VIN number requirement.--No credit shall be allowed 
under subsection (a) with respect to any vehicle unless the 
taxpayer includes the vehicle identification number of such 
vehicle on the return of tax for the taxable year.
  [(e) Application of certain rules.--For purposes of this 
section, rules similar to the rules of section 30D(f) (without 
regard to paragraph (10) or (11) thereof) shall apply for 
purposes of this section.
  [(f) Transfer of credit.--Rules similar to the rules of 
section 30D(g) shall apply.
  [(g) Termination.--No credit shall be allowed under this 
section with respect to any vehicle acquired after December 31, 
2032.]

           *       *       *       *       *       *       *


                        Subpart B--OTHER CREDITS

Sec.
27. Taxes of foreign countries and possessions of the United States.
     * * * * * * *
[30D. Clean vehicle credit.]
Sec. 30D. New qualified plug-in electric drive motor vehicles.

           *       *       *       *       *       *       *


SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.

  (a) Allowance of credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an 
amount equal to the sum of--
          (1) the new qualified fuel cell motor vehicle credit 
        determined under subsection (b),
          (2) the new advanced lean burn technology motor 
        vehicle credit determined under subsection (c),
          (3) the new qualified hybrid motor vehicle credit 
        determined under subsection (d),
          (4) the new qualified alternative fuel motor vehicle 
        credit determined under subsection (e), and
          (5) the plug-in conversion credit determined under 
        subsection (i).
  (b) New qualified fuel cell motor vehicle credit.--
          (1) In general.--For purposes of subsection (a), the 
        new qualified fuel cell motor vehicle credit determined 
        under this subsection with respect to a new qualified 
        fuel cell motor vehicle placed in service by the 
        taxpayer during the taxable year is--
                  (A) $8,000 ($4,000 in the case of a vehicle 
                placed in service after December 31, 2009), if 
                such vehicle has a gross vehicle weight rating 
                of not more than 8,500 pounds,
                  (B) $10,000, if such vehicle has a gross 
                vehicle weight rating of more than 8,500 pounds 
                but not more than 14,000 pounds,
                  (C) $20,000, if such vehicle has a gross 
                vehicle weight rating of more than 14,000 
                pounds but not more than 26,000 pounds, and
                  (D) $40,000, if such vehicle has a gross 
                vehicle weight rating of more than 26,000 
                pounds.
          (2) Increase for fuel efficiency.--
                  (A) In general.--The amount determined under 
                paragraph (1)(A) with respect to a new 
                qualified fuel cell motor vehicle which is a 
                passenger automobile or light truck shall be 
                increased by--
                          (i) $1,000, if such vehicle achieves 
                        at least 150 percent but less than 175 
                        percent of the 2002 model year city 
                        fuel economy,
                          (ii) $1,500, if such vehicle achieves 
                        at least 175 percent but less than 200 
                        percent of the 2002 model year city 
                        fuel economy,
                          (iii) $2,000, if such vehicle 
                        achieves at least 200 percent but less 
                        than 225 percent of the 2002 model year 
                        city fuel economy,
                          (iv) $2,500, if such vehicle achieves 
                        at least 225 percent but less than 250 
                        percent of the 2002 model year city 
                        fuel economy,
                          (v) $3,000, if such vehicle achieves 
                        at least 250 percent but less than 275 
                        percent of the 2002 model year city 
                        fuel economy,
                          (vi) $3,500, if such vehicle achieves 
                        at least 275 percent but less than 300 
                        percent of the 2002 model year city 
                        fuel economy, and
                          (vii) $4,000, if such vehicle 
                        achieves at least 300 percent of the 
                        2002 model year city fuel economy.
                  (B) 2002 model year city fuel economy.--For 
                purposes of subparagraph (A), the 2002 model 
                year city fuel economy with respect to a 
                vehicle shall be determined in accordance with 
                the following tables:
                          (i) In the case of a passenger 
                        automobile:
                          (ii) In the case of a light truck:
                  (C) Vehicle inertia weight class.--For 
                purposes of subparagraph (B), the term 
                ``vehicle inertia weight class'' has the same 
                meaning as when defined in regulations 
                prescribed by the Administrator of the 
                Environmental Protection Agency for purposes of 
                the administration of title II of the Clean Air 
                Act (42 U.S.C. 7521 et seq.).
          (3) New qualified fuel cell motor vehicle.--For 
        purposes of this subsection, the term ``new qualified 
        fuel cell motor vehicle'' means a motor vehicle--
                  (A) which is propelled by power derived from 
                1 or more cells which convert chemical energy 
                directly into electricity by combining oxygen 
                with hydrogen fuel which is stored on board the 
                vehicle in any form and may or may not require 
                reformation prior to use,
                  (B) which, in the case of a passenger 
                automobile or light truck, has received on or 
                after the date of the enactment of this section 
                a certificate that such vehicle meets or 
                exceeds the Bin 5 Tier II emission level 
                established in regulations prescribed by the 
                Administrator of the Environmental Protection 
                Agency under section 202(i) of the Clean Air 
                Act for that make and model year vehicle,
                  (C) the original use of which commences with 
                the taxpayer,
                  (D) which is acquired for use or lease by the 
                taxpayer and not for resale, and
                  (E) which is made by a manufacturer.
  (c) New advanced lean burn technology motor vehicle credit.--
          (1) In general.--For purposes of subsection (a), the 
        new advanced lean burn technology motor vehicle credit 
        determined under this subsection for the taxable year 
        is the credit amount determined under paragraph (2) 
        with respect to a new advanced lean burn technology 
        motor vehicle placed in service by the taxpayer during 
        the taxable year.
          (2) Credit amount.--
                  (A) Fuel economy.--
                          (i) In general.--The credit amount 
                        determined under this paragraph shall 
                        be determined in accordance with the 
                        following table:
                          (ii) 2002 model year city fuel 
                        economy.--For purposes of clause (i), 
                        the 2002 model year city fuel economy 
                        with respect to a vehicle shall be 
                        determined on a gasoline gallon 
                        equivalent basis as determined by the 
                        Administrator of the Environmental 
                        Protection Agency using the tables 
                        provided in subsection (b)(2)(B) with 
                        respect to such vehicle.
                  (B) Conservation credit.--The amount 
                determined under subparagraph (A) with respect 
                to a new advanced lean burn technology motor 
                vehicle shall be increased by the conservation 
                credit amount determined in accordance with the 
                following table:
          (3) New advanced lean burn technology motor 
        vehicle.--For purposes of this subsection, the term 
        ``new advanced lean burn technology motor vehicle'' 
        means a passenger automobile or a light truck--
                  (A) with an internal combustion engine 
                which--
                          (i) is designed to operate primarily 
                        using more air than is necessary for 
                        complete combustion of the fuel,
                          (ii) incorporates direct injection,
                          (iii) achieves at least 125 percent 
                        of the 2002 model year city fuel 
                        economy,
                          (iv) for 2004 and later model 
                        vehicles, has received a certificate 
                        that such vehicle meets or exceeds--
                                  (I) in the case of a vehicle 
                                having a gross vehicle weight 
                                rating of 6,000 pounds or less, 
                                the Bin 5 Tier II emission 
                                standard established in 
                                regulations prescribed by the 
                                Administrator of the 
                                Environmental Protection Agency 
                                under section 202(i) of the 
                                Clean Air Act for that make and 
                                model year vehicle, and
                                  (II) in the case of a vehicle 
                                having a gross vehicle weight 
                                rating of more than 6,000 
                                pounds but not more than 8,500 
                                pounds, the Bin 8 Tier II 
                                emission standard which is so 
                                established,
                  (B) the original use of which commences with 
                the taxpayer,
                  (C) which is acquired for use or lease by the 
                taxpayer and not for resale, and
                  (D) which is made by a manufacturer.
          (4) Lifetime fuel savings.--For purposes of this 
        subsection, the term ``lifetime fuel savings'' means, 
        in the case of any new advanced lean burn technology 
        motor vehicle, an amount equal to the excess (if any) 
        of--
                  (A) 120,000 divided by the 2002 model year 
                city fuel economy for the vehicle inertia 
                weight class, over
                  (B) 120,000 divided by the city fuel economy 
                for such vehicle.
  (d) New qualified hybrid motor vehicle credit.--
          (1) In general.--For purposes of subsection (a), the 
        new qualified hybrid motor vehicle credit determined 
        under this subsection for the taxable year is the 
        credit amount determined under paragraph (2) with 
        respect to a new qualified hybrid motor vehicle placed 
        in service by the taxpayer during the taxable year.
          (2) Credit amount.--
                  (A) Credit amount for passenger automobiles 
                and light trucks.--In the case of a new 
                qualified hybrid motor vehicle which is a 
                passenger automobile or light truck and which 
                has a gross vehicle weight rating of not more 
                than 8,500 pounds, the amount determined under 
                this paragraph is the sum of the amounts 
                determined under clauses (i) and (ii).
                          (i) Fuel economy.--The amount 
                        determined under this clause is the 
                        amount which would be determined under 
                        subsection (c)(2)(A) if such vehicle 
                        were a vehicle referred to in such 
                        subsection.
                          (ii) Conservation credit.--The amount 
                        determined under this clause is the 
                        amount which would be determined under 
                        subsection (c)(2)(B) if such vehicle 
                        were a vehicle referred to in such 
                        subsection.
                  (B) Credit amount for other motor vehicles.--
                          (i) In general.--In the case of any 
                        new qualified hybrid motor vehicle to 
                        which subparagraph (A) does not apply, 
                        the amount determined under this 
                        paragraph is the amount equal to the 
                        applicable percentage of the qualified 
                        incremental hybrid cost of the vehicle 
                        as certified under clause (v).
                          (ii) Applicable percentage.--For 
                        purposes of clause (i), the applicable 
                        percentage is--
                                  (I) 20 percent if the vehicle 
                                achieves an increase in city 
                                fuel economy relative to a 
                                comparable vehicle of at least 
                                30 percent but less than 40 
                                percent,
                                  (II) 30 percent if the 
                                vehicle achieves such an 
                                increase of at least 40 percent 
                                but less than 50 percent, and
                                  (III) 40 percent if the 
                                vehicle achieves such an 
                                increase of at least 50 
                                percent.
                          (iii) Qualified incremental hybrid 
                        cost.--For purposes of this 
                        subparagraph, the qualified incremental 
                        hybrid cost of any vehicle is equal to 
                        the amount of the excess of the 
                        manufacturer's suggested retail price 
                        for such vehicle over such price for a 
                        comparable vehicle, to the extent such 
                        amount does not exceed--
                                  (I) $7,500, if such vehicle 
                                has a gross vehicle weight 
                                rating of not more than 14,000 
                                pounds,
                                  (II) $15,000, if such vehicle 
                                has a gross vehicle weight 
                                rating of more than 14,000 
                                pounds but not more than 26,000 
                                pounds, and
                                  (III) $30,000, if such 
                                vehicle has a gross vehicle 
                                weight rating of more than 
                                26,000 pounds.
                          (iv) Comparable vehicle.--For 
                        purposes of this subparagraph, the term 
                        ``comparable vehicle'' means, with 
                        respect to any new qualified hybrid 
                        motor vehicle, any vehicle which is 
                        powered solely by a gasoline or diesel 
                        internal combustion engine and which is 
                        comparable in weight, size, and use to 
                        such vehicle.
                          (v) Certification.--A certification 
                        described in clause (i) shall be made 
                        by the manufacturer and shall be 
                        determined in accordance with guidance 
                        prescribed by the Secretary. Such 
                        guidance shall specify procedures and 
                        methods for calculating fuel economy 
                        savings and incremental hybrid costs.
          (3) New qualified hybrid motor vehicle.--For purposes 
        of this subsection--
                  (A) In general.--The term ``new qualified 
                hybrid motor vehicle'' means a motor vehicle--
                          (i) which draws propulsion energy 
                        from onboard sources of stored energy 
                        which are both--
                                  (I) an internal combustion or 
                                heat engine using consumable 
                                fuel, and
                                  (II) a rechargeable energy 
                                storage system,
                          (ii) which, in the case of a vehicle 
                        to which paragraph (2)(A) applies, has 
                        received a certificate of conformity 
                        under the Clean Air Act and meets or 
                        exceeds the equivalent qualifying 
                        California low emission vehicle 
                        standard under section 243(e)(2) of the 
                        Clean Air Act for that make and model 
                        year, and
                                  (I) in the case of a vehicle 
                                having a gross vehicle weight 
                                rating of 6,000 pounds or less, 
                                the Bin 5 Tier II emission 
                                standard established in 
                                regulations prescribed by the 
                                Administrator of the 
                                Environmental Protection Agency 
                                under section 202(i) of the 
                                Clean Air Act for that make and 
                                model year vehicle, and
                                  (II) in the case of a vehicle 
                                having a gross vehicle weight 
                                rating of more than 6,000 
                                pounds but not more than 8,500 
                                pounds, the Bin 8 Tier II 
                                emission standard which is so 
                                established,
                          (iii) which has a maximum available 
                        power of at least--
                                  (I) 4 percent in the case of 
                                a vehicle to which paragraph 
                                (2)(A) applies,
                                  (II) 10 percent in the case 
                                of a vehicle which has a gross 
                                vehicle weight rating of more 
                                than 8,500 pounds and not more 
                                than 14,000 pounds, and
                                  (III) 15 percent in the case 
                                of a vehicle in excess of 
                                14,000 pounds,
                          (iv) which, in the case of a vehicle 
                        to which paragraph (2)(B) applies, has 
                        an internal combustion or heat engine 
                        which has received a certificate of 
                        conformity under the Clean Air Act as 
                        meeting the emission standards set in 
                        the regulations prescribed by the 
                        Administrator of the Environmental 
                        Protection Agency for 2004 through 2007 
                        model year diesel heavy duty engines or 
                        ottocycle heavy duty engines, as 
                        applicable,
                          (v) the original use of which 
                        commences with the taxpayer,
                          (vi) which is acquired for use or 
                        lease by the taxpayer and not for 
                        resale, and
                          (vii) which is made by a 
                        manufacturer.
                Such term shall not include any vehicle which 
                is not a passenger automobile or light truck if 
                such vehicle has a gross vehicle weight rating 
                of less than 8,500 pounds.
                  (B) Consumable fuel.--For purposes of 
                subparagraph (A)(i)(I), the term ``consumable 
                fuel'' means any solid, liquid, or gaseous 
                matter which releases energy when consumed by 
                an auxiliary power unit.
                  (C) Maximum available power.--
                          (i) Certain passenger automobiles and 
                        light trucks.--In the case of a vehicle 
                        to which paragraph (2)(A) applies, the 
                        term ``maximum available power'' means 
                        the maximum power available from the 
                        rechargeable energy storage system, 
                        during a standard 10 second pulse power 
                        or equivalent test, divided by such 
                        maximum power and the SAE net power of 
                        the heat engine.
                          (ii) Other motor vehicles.--In the 
                        case of a vehicle to which paragraph 
                        (2)(B) applies, the term ``maximum 
                        available power'' means the maximum 
                        power available from the rechargeable 
                        energy storage system, during a 
                        standard 10 second pulse power or 
                        equivalent test, divided by the 
                        vehicle's total traction power. For 
                        purposes of the preceding sentence, the 
                        term ``total traction power'' means the 
                        sum of the peak power from the 
                        rechargeable energy storage system and 
                        the heat engine peak power of the 
                        vehicle, except that if such storage 
                        system is the sole means by which the 
                        vehicle can be driven, the total 
                        traction power is the peak power of 
                        such storage system.
                  (D) Exclusion of plug-in vehicles.--Any 
                vehicle with respect to which a credit is 
                allowable under section 30D (determined without 
                regard to subsection (c) thereof) shall not be 
                taken into account under this section.
  (e) New qualified alternative fuel motor vehicle credit.--
          (1) Allowance of credit.--Except as provided in 
        paragraph (5), the new qualified alternative fuel motor 
        vehicle credit determined under this subsection is an 
        amount equal to the applicable percentage of the 
        incremental cost of any new qualified alternative fuel 
        motor vehicle placed in service by the taxpayer during 
        the taxable year.
          (2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage with respect to any new 
        qualified alternative fuel motor vehicle is--
                  (A) 50 percent, plus
                  (B) 30 percent, if such vehicle--
                          (i) has received a certificate of 
                        conformity under the Clean Air Act and 
                        meets or exceeds the most stringent 
                        standard available for certification 
                        under the Clean Air Act for that make 
                        and model year vehicle (other than a 
                        zero emission standard), or
                          (ii) has received an order certifying 
                        the vehicle as meeting the same 
                        requirements as vehicles which may be 
                        sold or leased in California and meets 
                        or exceeds the most stringent standard 
                        available for certification under the 
                        State laws of California (enacted in 
                        accordance with a waiver granted under 
                        section 209(b) of the Clean Air Act) 
                        for that make and model year vehicle 
                        (other than a zero emission standard).
        For purposes of the preceding sentence, in the case of 
        any new qualified alternative fuel motor vehicle which 
        weighs more than 14,000 pounds gross vehicle weight 
        rating, the most stringent standard available shall be 
        such standard available for certification on the date 
        of the enactment of the Energy Tax Incentives Act of 
        2005.
          (3) Incremental cost.--For purposes of this 
        subsection, the incremental cost of any new qualified 
        alternative fuel motor vehicle is equal to the amount 
        of the excess of the manufacturer's suggested retail 
        price for such vehicle over such price for a gasoline 
        or diesel fuel motor vehicle of the same model, to the 
        extent such amount does not exceed--
                  (A) $5,000, if such vehicle has a gross 
                vehicle weight rating of not more than 8,500 
                pounds,
                  (B) $10,000, if such vehicle has a gross 
                vehicle weight rating of more than 8,500 pounds 
                but not more than 14,000 pounds,
                  (C) $25,000, if such vehicle has a gross 
                vehicle weight rating of more than 14,000 
                pounds but not more than 26,000 pounds, and
                  (D) $40,000, if such vehicle has a gross 
                vehicle weight rating of more than 26,000 
                pounds.
          (4) New qualified alternative fuel motor vehicle.--
        For purposes of this subsection--
                  (A) In general.--The term ``new qualified 
                alternative fuel motor vehicle'' means any 
                motor vehicle--
                          (i) which is only capable of 
                        operating on an alternative fuel,
                          (ii) the original use of which 
                        commences with the taxpayer,
                          (iii) which is acquired by the 
                        taxpayer for use or lease, but not for 
                        resale, and
                          (iv) which is made by a manufacturer.
                  (B) Alternative fuel.--The term ``alternative 
                fuel'' means compressed natural gas, liquefied 
                natural gas, liquefied petroleum gas, hydrogen, 
                and any liquid at least 85 percent of the 
                volume of which consists of methanol.
          (5) Credit for mixed-fuel vehicles.--
                  (A) In general.--In the case of a mixed-fuel 
                vehicle placed in service by the taxpayer 
                during the taxable year, the credit determined 
                under this subsection is an amount equal to--
                          (i) in the case of a 75/25 mixed-fuel 
                        vehicle, 70 percent of the credit which 
                        would have been allowed under this 
                        subsection if such vehicle was a 
                        qualified alternative fuel motor 
                        vehicle, and
                          (ii) in the case of a 90/10 mixed-
                        fuel vehicle, 90 percent of the credit 
                        which would have been allowed under 
                        this subsection if such vehicle was a 
                        qualified alternative fuel motor 
                        vehicle.
                  (B) Mixed-fuel vehicle.--For purposes of this 
                subsection, the term ``mixed-fuel vehicle'' 
                means any motor vehicle described in 
                subparagraph (C) or (D) of paragraph (3), 
                which--
                          (i) is certified by the manufacturer 
                        as being able to perform efficiently in 
                        normal operation on a combination of an 
                        alternative fuel and a petroleum-based 
                        fuel,
                          (ii) either--
                                  (I) has received a 
                                certificate of conformity under 
                                the Clean Air Act, or
                                  (II) has received an order 
                                certifying the vehicle as 
                                meeting the same requirements 
                                as vehicles which may be sold 
                                or leased in California and 
                                meets or exceeds the low 
                                emission vehicle standard under 
                                section 88.105-94 of title 40, 
                                Code of Federal Regulations, 
                                for that make and model year 
                                vehicle,
                          (iii) the original use of which 
                        commences with the taxpayer,
                          (iv) which is acquired by the 
                        taxpayer for use or lease, but not for 
                        resale, and
                          (v) which is made by a manufacturer.
                  (C) 75/25 mixed-fuel vehicle.--For purposes 
                of this subsection, the term ``75/25 mixed-fuel 
                vehicle'' means a mixed-fuel vehicle which 
                operates using at least 75 percent alternative 
                fuel and not more than 25 percent petroleum-
                based fuel.
                  (D) 90/10 mixed-fuel vehicle.--For purposes 
                of this subsection, the term ``90/10 mixed-fuel 
                vehicle'' means a mixed-fuel vehicle which 
                operates using at least 90 percent alternative 
                fuel and not more than 10 percent petroleum-
                based fuel.
  (f) Limitation on number of new qualified hybrid and advanced 
lean-burn technology vehicles eligible for credit.--
          (1) In general.--In the case of a qualified vehicle 
        sold during the phaseout period, only the applicable 
        percentage of the credit otherwise allowable under 
        subsection (c) or (d) shall be allowed.
          (2) Phaseout period.--For purposes of this 
        subsection, the phaseout period is the period beginning 
        with the second calendar quarter following the calendar 
        quarter which includes the first date on which the 
        number of qualified vehicles manufactured by the 
        manufacturer of the vehicle referred to in paragraph 
        (1) sold for use in the United States after December 
        31, 2005, is at least 60,000.
          (3) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage is--
                  (A) 50 percent for the first 2 calendar 
                quarters of the phaseout period,
                  (B) 25 percent for the 3d and 4th calendar 
                quarters of the phaseout period, and
                  (C) 0 percent for each calendar quarter 
                thereafter.
          (4) Controlled groups.--
                  (A) In general.--For purposes of this 
                subsection, all persons treated as a single 
                employer under subsection (a) or (b) of section 
                52 or subsection (m) or (o) of section 414 
                shall be treated as a single manufacturer.
                  (B) Inclusion of foreign corporations.--For 
                purposes of subparagraph (A), in applying 
                subsections (a) and (b) of section 52 to this 
                section, section 1563 shall be applied without 
                regard to subsection (b)(2)(C) thereof.
          (5) Qualified vehicle.--For purposes of this 
        subsection, the term ``qualified vehicle'' means any 
        new qualified hybrid motor vehicle (described in 
        subsection (d)(2)(A)) and any new advanced lean burn 
        technology motor vehicle.
  (g) Application with other credits.--
          (1) Business credit treated as part of general 
        business credit.--So much of the credit which would be 
        allowed under subsection (a) for any taxable year 
        (determined without regard to this subsection) that is 
        attributable to property of a character subject to an 
        allowance for depreciation shall be treated as a credit 
        listed in section 38(b) for such taxable year (and not 
        allowed under subsection (a)).
          (2) Personal credit.--For purposes of this title, the 
        credit allowed under subsection (a) for any taxable 
        year (determined after application of paragraph (1)) 
        shall be treated as a credit allowable under subpart A 
        for such taxable year.
  (h) Other definitions and special rules.--For purposes of 
this section--
          (1) Motor vehicle.--The term ``motor vehicle'' means 
        any vehicle which is manufactured primarily for use on 
        public streets, roads, and highways (not including a 
        vehicle operated exclusively on a rail or rails) and 
        which has at least 4 wheels.
          (2) City fuel economy.--The city fuel economy with 
        respect to any vehicle shall be measured in a manner 
        which is substantially similar to the manner city fuel 
        economy is measured in accordance with procedures under 
        part 600 of subchapter Q of chapter I of title 40, Code 
        of Federal Regulations, as in effect on the date of the 
        enactment of this section.
          (3) Other terms.--The terms ``automobile'', 
        ``passenger automobile'', ``medium duty passenger 
        vehicle'', ``light truck'', and ``manufacturer'' have 
        the meanings given such terms in regulations prescribed 
        by the Administrator of the Environmental Protection 
        Agency for purposes of the administration of title II 
        of the Clean Air Act (42 U.S.C. 7521 et seq.).
          (4) Reduction in basis.--For purposes of this 
        subtitle, the basis of any property for which a credit 
        is allowable under subsection (a) shall be reduced by 
        the amount of such credit so allowed (determined 
        without regard to subsection (g)).
          (5) No double benefit.--The amount of any deduction 
        or other credit allowable under this chapter--
                  (A) for any incremental cost taken into 
                account in computing the amount of the credit 
                determined under subsection (e) shall be 
                reduced by the amount of such credit 
                attributable to such cost, and
                  (B) with respect to a vehicle described under 
                subsection (b) or (c), shall be reduced by the 
                amount of credit allowed under subsection (a) 
                for such vehicle for the taxable year 
                (determined without regard to subsection (g)).
          (6) Property used by tax-exempt entity.--In the case 
        of a vehicle whose use is described in paragraph (3) or 
        (4) of section 50(b) and which is not subject to a 
        lease, the person who sold such vehicle to the person 
        or entity using such vehicle shall be treated as the 
        taxpayer that placed such vehicle in service, but only 
        if such person clearly discloses to such person or 
        entity in a document the amount of any credit allowable 
        under subsection (a) with respect to such vehicle 
        (determined without regard to subsection (g)). For 
        purposes of subsection (g), property to which this 
        paragraph applies shall be treated as of a character 
        subject to an allowance for depreciation.
          (7) Property used outside United States, etc., not 
        qualified.--No credit shall be allowable under 
        subsection (a) with respect to any property referred to 
        in section 50(b)(1) or with respect to the portion of 
        the cost of any property taken into account under 
        section 179.
          (8) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit 
        allowable under subsection (a) with respect to any 
        property which ceases to be property eligible for such 
        credit (including recapture in the case of a lease 
        period of less than the economic life of a vehicle), 
        except that no benefit shall be recaptured if such 
        property ceases to be eligible for such credit by 
        reason of conversion to a qualified plug-in electric 
        drive motor vehicle.
          (9) Election to not take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the 
        taxpayer elects to not have this section apply to such 
        vehicle.
          (10) Interaction with air quality and motor vehicle 
        safety standards.--Unless otherwise provided in this 
        section, a motor vehicle shall not be considered 
        eligible for a credit under this section unless such 
        vehicle is in compliance with--
                  (A) the applicable provisions of the Clean 
                Air Act for the applicable make and model year 
                of the vehicle (or applicable air quality 
                provisions of State law in the case of a State 
                which has adopted such provision under a waiver 
                under section 209(b) of the Clean Air Act), and
                  (B) the motor vehicle safety provisions of 
                sections 30101 through 30169 of title 49, 
                United States Code..
  (j) Regulations.--
          (1) In general.--Except as provided in paragraph (2), 
        the Secretary shall promulgate such regulations as 
        necessary to carry out the provisions of this section.
          (2) Coordination in prescription of certain 
        regulations.--The Secretary of the Treasury, in 
        coordination with the Secretary of Transportation and 
        the Administrator of the Environmental Protection 
        Agency, shall prescribe such regulations as necessary 
        to determine whether a motor vehicle meets the 
        requirements to be eligible for a credit under this 
        section.
  (k) Termination.--This section shall not apply to any 
property purchased after--
          (1) in the case of a new qualified fuel cell motor 
        vehicle (as described in subsection (b)), December 31, 
        2021,
          (2) in the case of a new advanced lean burn 
        technology motor vehicle (as described in subsection 
        (c)) or a new qualified hybrid motor vehicle (as 
        described in subsection (d)(2)(A)), December 31, 2010,
          (3) in the case of a new qualified hybrid motor 
        vehicle (as described in subsection (d)(2)(B)), 
        December 31, 2009, and
          (4) in the case of a new qualified alternative fuel 
        vehicle (as described in subsection (e)), December 31, 
        2010.

           *       *       *       *       *       *       *


SEC. 30D. [CLEAN VEHICLE CREDIT]  NEW QUALIFIED PLUG-IN ELECTRIC DRIVE 
                    MOTOR VEHICLES.

  (a) Allowance of credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an 
amount equal to the sum of the credit amounts determined under 
subsection (b) with respect to each [new clean vehicle] new 
qualified plug-in electric drive motor vehicle placed in 
service by the taxpayer during the taxable year.
  (b) Per vehicle dollar limitation.--
          (1) In general.--The amount determined under this 
        subsection with respect to any [new clean vehicle] new 
        qualified plug-in electric drive motor vehicle is the 
        sum of the amounts determined under paragraphs (2) and 
        (3) with respect to such vehicle.
          [(2) Critical minerals.--In the case of a vehicle 
        with respect to which the requirement described in 
        subsection (e)(1)(A) is satisfied, the amount 
        determined under this paragraph is $3,750.
          [(3) Battery components.--In the case of a vehicle 
        with respect to which the requirement described in 
        subsection (e)(2)(A) is satisfied, the amount 
        determined under this paragraph is $3,750.]
          (2) Base amount.--The amount determined under this 
        paragraph is $2,500.
          (3) Battery capacity.--In the case of a vehicle which 
        draws propulsion energy from a battery with not less 
        than 5 kilowatt hours of capacity, the amount 
        determined under this paragraph is $417, plus $417 for 
        each kilowatt hour of capacity in excess of 5 kilowatt 
        hours. The amount determined under this paragraph shall 
        not exceed $5,000.
  (c) Application with other credits.--
          (1) Business credit treated as part of general 
        business credit.--So much of the credit which would be 
        allowed under subsection (a) for any taxable year 
        (determined without regard to this subsection) that is 
        attributable to property of a character subject to an 
        allowance for depreciation shall be treated as a credit 
        listed in section 38(b) for such taxable year (and not 
        allowed under subsection (a)).
          (2) Personal credit.--For purposes of this title, the 
        credit allowed under subsection (a) for any taxable 
        year (determined after application of paragraph (1)) 
        shall be treated as a credit allowable under subpart A 
        for such taxable year.
  (d) New [clean] Qualified Plug-in Electric Drive Motor 
vehicle.--For purposes of this section--
          (1) In general.--The term ``new [clean] qualified 
        plug-in electric drive motor vehicle'' means a motor 
        vehicle--
                  (A) the original use of which commences with 
                the taxpayer,
                  (B) which is acquired for use or lease by the 
                taxpayer and not for resale,
                  (C) which is made by a [qualified] 
                manufacturer,
                  (D) which is treated as a motor vehicle for 
                purposes of title II of the Clean Air Act,
                  (E) which has a gross vehicle weight rating 
                of less than 14,000 pounds, and
                  (F) which is propelled to a significant 
                extent by an electric motor which draws 
                electricity from a battery which--
                          (i) has a capacity of not less than 
                        [7] 4 kilowatt hours, and
                          (ii) is capable of being recharged 
                        from an external source of 
                        electricity[,].
                  [(G) the final assembly of which occurs 
                within North America, and
                  [(H) for which the person who sells any 
                vehicle to the taxpayer furnishes a report to 
                the taxpayer and to the Secretary, at such time 
                and in such manner as the Secretary shall 
                provide, containing--
                          [(i) the name and taxpayer 
                        identification number of the taxpayer,
                          [(ii) the vehicle identification 
                        number of the vehicle, unless, in 
                        accordance with any applicable rules 
                        promulgated by the Secretary of 
                        Transportation, the vehicle is not 
                        assigned such a number,
                          [(iii) the battery capacity of the 
                        vehicle,
                          [(iv) verification that original use 
                        of the vehicle commences with the 
                        taxpayer,
                          [(v) the maximum credit under this 
                        section allowable to the taxpayer with 
                        respect to the vehicle, and
                          [(vi) in the case of a taxpayer who 
                        makes an election under subsection 
                        (g)(1), any amount described in 
                        subsection (g)(2)(C) which has been 
                        provided to such taxpayer.]
          (2) Motor vehicle.--The term ``motor vehicle'' means 
        any vehicle which is manufactured primarily for use on 
        public streets, roads, and highways (not including a 
        vehicle operated exclusively on a rail or rails) and 
        which has at least 4 wheels.
          (3)  [Qualified manufacturer] Manufacturer.--[The 
        term ``qualified manufacturer'' means any manufacturer 
        (within the meaning of the regulations prescribed by 
        the Administrator of the Environmental Protection 
        Agency for purposes of the administration of title II 
        of the Clean Air Act (42 U.S.C. 7521 et seq.)) which 
        enters into a written agreement with the Secretary 
        under which such manufacturer agrees to make periodic 
        written reports to the Secretary (at such times and in 
        such manner as the Secretary may provide) providing 
        vehicle identification numbers and such other 
        information related to each vehicle manufactured by 
        such manufacturer as the Secretary may require.] The 
        term ``manufacturer'' has the meaning given such term 
        in regulations prescribed by the Administrator of the 
        Environmental Protection Agency for purposes of the 
        administration of title II of the Clean Air Act (42 
        U.S.C. 7521 et seq.).
          (4) Battery capacity.--The term ``capacity'' means, 
        with respect to any battery, the quantity of 
        electricity which the battery is capable of storing, 
        expressed in kilowatt hours, as measured from a 100 
        percent state of charge to a 0 percent state of charge.
          [(5) Final assembly.--For purposes of paragraph 
        (1)(G), the term ``final assembly'' means the process 
        by which a manufacturer produces a new clean vehicle 
        at, or through the use of, a plant, factory, or other 
        place from which the vehicle is delivered to a dealer 
        or importer with all component parts necessary for the 
        mechanical operation of the vehicle included with the 
        vehicle, whether or not the component parts are 
        permanently installed in or on the vehicle.
          [(6) New qualified fuel cell motor vehicle.--For 
        purposes of this section, the term ``new clean 
        vehicle'' shall include any new qualified fuel cell 
        motor vehicle (as defined in section 30B(b)(3)) which 
        meets the requirements under subparagraphs (G) and (H) 
        of paragraph (1).
          [(7) Excluded entities.--For purposes of this 
        section, the term ``new clean vehicle'' shall not 
        include--
                  [(A) any vehicle placed in service after 
                December 31, 2024, with respect to which any of 
                the applicable critical minerals contained in 
                the battery of such vehicle (as described in 
                subsection (e)(1)(A)) were extracted, 
                processed, or recycled by a foreign entity of 
                concern (as defined in section 40207(a)(5) of 
                the Infrastructure Investment and Jobs Act (42 
                U.S.C. 18741(a)(5))), or
                  [(B) any vehicle placed in service after 
                December 31, 2023, with respect to which any of 
                the components contained in the battery of such 
                vehicle (as described in subsection (e)(2)(A)) 
                were manufactured or assembled by a foreign 
                entity of concern (as so defined).]
  (e) Critical mineral and battery component requirements.--
          [(1) Critical minerals requirement.--
                  [(A) In general.--The requirement described 
                in this subparagraph with respect to a vehicle 
                is that, with respect to the battery from which 
                the electric motor of such vehicle draws 
                electricity, the percentage of the value of the 
                applicable critical minerals (as defined in 
                section 45X(c)(6)) contained in such battery 
                that were--
                          [(i) extracted or processed--
                                  [(I) in the United States, or
                                  [(II) in any country with 
                                which the United States has a 
                                free trade agreement in effect, 
                                or
                          [(ii) recycled in North America,
                is equal to or greater than the applicable 
                percentage (as certified by the qualified 
                manufacturer, in such form or manner as 
                prescribed by the Secretary).
                  [(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage 
                shall be--
                          [(i) in the case of a vehicle placed 
                        in service after the date on which the 
                        proposed guidance described in 
                        paragraph (3)(B) is issued by the 
                        Secretary and before January 1, 2024, 
                        40 percent,
                          [(ii) in the case of a vehicle placed 
                        in service during calendar year 2024, 
                        50 percent,
                          [(iii) in the case of a vehicle 
                        placed in service during calendar year 
                        2025, 60 percent,
                          [(iv) in the case of a vehicle placed 
                        in service during calendar year 2026, 
                        70 percent, and
                          [(v) in the case of a vehicle placed 
                        in service after December 31, 2026, 80 
                        percent.
          [(2) Battery components.--
                  [(A) In general.--The requirement described 
                in this subparagraph with respect to a vehicle 
                is that, with respect to the battery from which 
                the electric motor of such vehicle draws 
                electricity, the percentage of the value of the 
                components contained in such battery that were 
                manufactured or assembled in North America is 
                equal to or greater than the applicable 
                percentage (as certified by the qualified 
                manufacturer, in such form or manner as 
                prescribed by the Secretary).
                  [(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage 
                shall be--
                          [(i) in the case of a vehicle placed 
                        in service after the date on which the 
                        proposed guidance described in 
                        paragraph (3)(B) is issued by the 
                        Secretary and before January 1, 2024, 
                        50 percent,
                          [(ii) in the case of a vehicle placed 
                        in service during calendar year 2024 or 
                        2025, 60 percent,
                          [(iii) in the case of a vehicle 
                        placed in service during calendar year 
                        2026, 70 percent,
                          [(iv) in the case of a vehicle placed 
                        in service during calendar year 2027, 
                        80 percent,
                          [(v) in the case of a vehicle placed 
                        in service during calendar year 2028, 
                        90 percent,
                          [(vi) in the case of a vehicle placed 
                        in service after December 31, 2028, 100 
                        percent.]
          (1) Critical minerals requirement.--No credit shall 
        be allowed under this section with respect to any 
        vehicle unless, with respect to the battery from which 
        the electric motor of such vehicle draws electricity, 
        the percentage of the value of the applicable critical 
        minerals (as defined in section 45X(c)(6)) contained in 
        such battery that were--
                  (A) extracted or processed--
                          (i) in the United States, or
                          (ii) in any country with which the 
                        United States has a free trade 
                        agreement in effect, or
                  (B) recycled in North America,
        is equal to or greater than 80 percent (as certified by 
        the manufacturer, in such form or manner as prescribed 
        by the Secretary). For purposes of subparagraph 
        (A)(ii), the term ``free trade agreement'' means an 
        international agreement approved by Congress that 
        eliminates duties and other restrictive regulations of 
        commerce on substantially all the trade between the 
        United States and one or more other countries.
          (2) Battery components.--No credit shall be allowed 
        under this section with respect to any vehicle unless, 
        with respect to the battery from which the electric 
        motor of such vehicle draws electricity, all of the 
        components contained in such battery were manufactured 
        or assembled in North America (as certified by the 
        manufacturer, in such form or manner as prescribed by 
        the Secretary).
          (3) Restriction on foreign entities of concern.--No 
        credit shall be allowed under this section which 
        respect to any vehicle placed in service after December 
        31, 2024, if any of the applicable critical minerals 
        contained in the battery of such vehicle (as described 
        in paragraph (1)) were extracted, processed, or 
        recycled by a foreign entity of concern (as defined in 
        section 40207(a)(5) of the Infrastructure Investment 
        and Jobs Act (42 U.S.C. 18741(a)(5))).
          [(3)] (4) Regulations and guidance.--
                  (A) In general.--The Secretary shall issue 
                such regulations or other guidance as the 
                Secretary determines necessary to carry out the 
                purposes of this subsection, including 
                regulations or other guidance which provides 
                for requirements for recordkeeping or 
                information reporting for purposes of 
                administering the requirements of this 
                subsection.
                  (B) Deadline for proposed guidance.--Not 
                later than December 31, 2022, the Secretary 
                shall issue proposed guidance with respect to 
                the requirements under this subsection.
  (f) Special rules.--
          (1) Basis reduction.--For purposes of this subtitle, 
        the basis of any property for which a credit is 
        allowable under subsection (a) shall be reduced by the 
        amount of such credit so allowed (determined without 
        regard to subsection (c)).
          (2) No double benefit.--The amount of any deduction 
        or other credit allowable under this chapter for a 
        vehicle for which a credit is allowable under 
        subsection (a) shall be reduced by the amount of credit 
        allowed under such subsection for such vehicle 
        (determined without regard to subsection (c)).
  (3) Property Used by Tax-exempt Entity.-- In the case of a 
vehicle the use of which is described in paragraph (3) or (4) 
of section 50(b) and which is not subject to a lease, the 
person who sold such vehicle to the person or entity using such 
vehicle shall be treated as the taxpayer that placed such 
vehicle in service, but only if such person clearly discloses 
to such person or entity in a document the amount of any credit 
allowable under subsection (a) with respect to such vehicle 
(determined without regard to subsection (c)). For purposes of 
subsection (c), property to which this paragraph applies shall 
be treated as of a character subject to an allowance for 
depreciation.
          (4) Property used outside United States not 
        qualified.--No credit shall be allowable under 
        subsection (a) with respect to any property referred to 
        in section 50(b)(1).
          (5) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit 
        allowable under subsection (a) with respect to any 
        property which ceases to be property eligible for such 
        credit.
          (6) Election not to take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the 
        taxpayer elects to not have this section apply to such 
        vehicle.
          (7) Interaction with air quality and motor vehicle 
        safety standards.--A vehicle shall not be considered 
        eligible for a credit under this section unless such 
        vehicle is in compliance with--
                  (A) the applicable provisions of the Clean 
                Air Act for the applicable make and model year 
                of the vehicle (or applicable air quality 
                provisions of State law in the case of a State 
                which has adopted such provision under a waiver 
                under section 209(b) of the Clean Air Act), and
                  (B) the motor vehicle safety provisions of 
                sections 30101 through 30169 of title 49, 
                United States Code.
          (8) One credit per vehicle.--In the case of any 
        vehicle, the credit described in subsection (a) shall 
        only be allowed once with respect to such vehicle, as 
        determined based upon the vehicle identification number 
        of such vehicle[, including any vehicle with respect to 
        which the taxpayer elects the application of subsection 
        (g)].
          (9) VIN requirement.--No credit shall be allowed 
        under this section with respect to any vehicle unless 
        the taxpayer includes the vehicle identification number 
        of such vehicle on the return of tax for the taxable 
        year.
          (10) Limitation based on modified adjusted gross 
        income.--
                  (A) In general.--No credit shall be allowed 
                under subsection (a) for any taxable year if--
                          (i) the lesser of--
                                  (I) the modified adjusted 
                                gross income of the taxpayer 
                                for such taxable year, or
                                  (II) the modified adjusted 
                                gross income of the taxpayer 
                                for the preceding taxable year, 
                                exceeds
                          (ii) the threshold amount.
                  (B) Threshold amount.--For purposes of 
                subparagraph (A)(ii), the threshold amount 
                shall be--
                          (i) in the case of a joint return or 
                        a surviving spouse (as defined in 
                        section 2(a)), $300,000,
                          (ii) in the case of a head of 
                        household (as defined in section 2(b)), 
                        $225,000, and
                          (iii) in the case of a taxpayer not 
                        described in clause (i) or (ii), 
                        $150,000.
                  (C) Modified adjusted gross income.--For 
                purposes of this paragraph, the term ``modified 
                adjusted gross income'' means adjusted gross 
                income increased by any amount excluded from 
                gross income under section 911, 931, or 933.
          (11) Manufacturer's suggested retail price 
        limitation.--
                  (A) In general.--No credit shall be allowed 
                under subsection (a) for a vehicle with a 
                manufacturer's suggested retail price in excess 
                of the applicable limitation.
                  (B) Applicable limitation.--For purposes of 
                subparagraph (A), the applicable limitation for 
                each vehicle classification is as follows:
                          (i) Vans.--In the case of a van, 
                        $80,000.
                          (ii) Sport utility vehicles.--In the 
                        case of a sport utility vehicle, 
                        $80,000.
                          (iii) Pickup trucks.--In the case of 
                        a pickup truck, $80,000.
                          (iv) Other.--In the case of any other 
                        vehicle, $55,000.
                  (C) Regulations and guidance.--For purposes 
                of this paragraph, the Secretary shall 
                prescribe such regulations or other guidance as 
                the Secretary determines necessary for 
                determining vehicle classifications using 
                criteria similar to that employed by the 
                Environmental Protection Agency and the 
                Department of the Energy to determine size and 
                class of vehicles.
  [(g) Transfer of credit.--
          [(1) In general.--Subject to such regulations or 
        other guidance as the Secretary determines necessary, 
        if the taxpayer who acquires a new clean vehicle elects 
        the application of this subsection with respect to such 
        vehicle, the credit which would (but for this 
        subsection) be allowed to such taxpayer with respect to 
        such vehicle shall be allowed to the eligible entity 
        specified in such election (and not to such taxpayer).
          [(2) Eligible entity.--For purposes of this 
        subsection, the term ``eligible entity'' means, with 
        respect to the vehicle for which the credit is allowed 
        under subsection (a), the dealer which sold such 
        vehicle to the taxpayer and has--
                  [(A) subject to paragraph (4), registered 
                with the Secretary for purposes of this 
                paragraph, at such time, and in such form and 
                manner, as the Secretary may prescribe,
                  [(B) prior to the election described in 
                paragraph (1) and not later than at the time of 
                such sale, disclosed to the taxpayer purchasing 
                such vehicle--
                          [(i) the manufacturer's suggested 
                        retail price,
                          [(ii) the value of the credit allowed 
                        and any other incentive available for 
                        the purchase of such vehicle, and
                          [(iii) the amount provided by the 
                        dealer to such taxpayer as a condition 
                        of the election described in paragraph 
                        (1),
                  [(C) not later than at the time of such sale, 
                made payment to such taxpayer (whether in cash 
                or in the form of a partial payment or down 
                payment for the purchase of such vehicle) in an 
                amount equal to the credit otherwise allowable 
                to such taxpayer, and
                  [(D) with respect to any incentive otherwise 
                available for the purchase of a vehicle for 
                which a credit is allowed under this section, 
                including any incentive in the form of a rebate 
                or discount provided by the dealer or 
                manufacturer, ensured that--
                          [(i) the availability or use of such 
                        incentive shall not limit the ability 
                        of a taxpayer to make an election 
                        described in paragraph (1), and
                          [(ii) such election shall not limit 
                        the value or use of such incentive.
          [(3) Timing.--An election described in paragraph (1) 
        shall be made by the taxpayer not later than the date 
        on which the vehicle for which the credit is allowed 
        under subsection (a) is purchased.
          [(4) Revocation of registration.--Upon determination 
        by the Secretary that a dealer has failed to comply 
        with the requirements described in paragraph (2), the 
        Secretary may revoke the registration (as described in 
        subparagraph (A) of such paragraph) of such dealer.
          [(5) Tax treatment of payments.--With respect to any 
        payment described in paragraph (2)(C), such payment--
                  [(A) shall not be includible in the gross 
                income of the taxpayer, and
                  [(B) with respect to the dealer, shall not be 
                deductible under this title.
          [(6) Application of certain other requirements.--In 
        the case of any election under paragraph (1) with 
        respect to any vehicle--
                  [(A) the requirements of paragraphs (1) and 
                (2) of subsection (f) shall apply to the 
                taxpayer who acquired the vehicle in the same 
                manner as if the credit determined under this 
                section with respect to such vehicle were 
                allowed to such taxpayer,
                  [(B) paragraph (6) of such subsection shall 
                not apply, and
                  [(C) the requirement of paragraph (9) of such 
                subsection (f) shall be treated as satisfied if 
                the eligible entity provides the vehicle 
                identification number of such vehicle to the 
                Secretary in such manner as the Secretary may 
                provide.
          [(7) Advance payment to registered dealers.--
                  [(A) In general.--The Secretary shall 
                establish a program to make advance payments to 
                any eligible entity in an amount equal to the 
                cumulative amount of the credits allowed under 
                subsection (a) with respect to any vehicles 
                sold by such entity for which an election 
                described in paragraph (1) has been made.
                  [(B) Excessive payments.--Rules similar to 
                the rules of section 6417(d)(6) shall apply for 
                purposes of this paragraph.
                  [(C) Treatment of advance payments.--For 
                purposes of section 1324 of title 31, United 
                States Code, the payments under subparagraph 
                (A) shall be treated in the same manner as a 
                refund due from a credit provision referred to 
                in subsection (b)(2) of such section.
          [(8) Dealer.--For purposes of this subsection, the 
        term ``dealer'' means a person licensed by a State, the 
        District of Columbia, the Commonwealth of Puerto Rico, 
        any other territory or possession of the United States, 
        an Indian tribal government, or any Alaska Native 
        Corporation (as defined in section 3 of the Alaska 
        Native Claims Settlement Act (43 U.S.C. 1602(m)) to 
        engage in the sale of vehicles.
          [(9) Indian tribal government.--For purposes of this 
        subsection, the term ``Indian tribal government'' means 
        the recognized governing body of any Indian or Alaska 
        Native tribe, band, nation, pueblo, village, community, 
        component band, or component reservation, individually 
        identified (including parenthetically) in the list 
        published most recently as of the date of enactment of 
        this subsection pursuant to section 104 of the 
        Federally Recognized Indian Tribe List Act of 1994 (25 
        U.S.C. 5131).
          [(10) Recapture.--In the case of any taxpayer who has 
        made an election described in paragraph (1) with 
        respect to a new clean vehicle and received a payment 
        described in paragraph (2)(C) from an eligible entity, 
        if the credit under subsection (a) would otherwise (but 
        for this subsection) not be allowable to such taxpayer 
        pursuant to the application of subsection (f)(10), the 
        tax imposed on such taxpayer under this chapter for the 
        taxable year in which such vehicle was placed in 
        service shall be increased by the amount of the payment 
        received by such taxpayer.
  [(h) Termination.--No credit shall be allowed under this 
section with respect to any vehicle placed in service after 
December 31, 2032.]
  (g) Limitation on Number of New Qualified Plug-in Electric 
Drive Motor Vehicles Eligible for Credit.--
          (1) In general.--In the case of a new qualified plug-
        in electric drive motor vehicle sold during the 
        phaseout period, only the applicable percentage of the 
        credit otherwise allowable under subsection (a) shall 
        be allowed.
          (2) Phaseout period.--For purposes of this 
        subsection, the phaseout period is the period beginning 
        with the second calendar quarter following the calendar 
        quarter which includes the first date on which the 
        number of new qualified plug-in electric drive motor 
        vehicles manufactured by the manufacturer of the 
        vehicle referred to in paragraph (1) sold for use in 
        the United States after December 31, 2009, is at least 
        200,000.
          (3) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage is--
                  (A) 50 percent for the first 2 calendar 
                quarters of the phaseout period,
                  (B) 25 percent for the 3rd and 4th calendar 
                quarters of the phaseout period, and
                  (C) 0 percent for each calendar quarter 
                thereafter.
          (4) Controlled groups.--Rules similar to the rules of 
        section 30B(f)(4) shall apply for purposes of this 
        subsection.

           *       *       *       *       *       *       *


                  Subpart D--BUSINESS RELATED CREDITS

Sec.
38. General business credit.
     * * * * * * *
[45W. Qualified commercial clean vehicle credit.]
     * * * * * * *
[45Y. Clean electricity production credit.]

           *       *       *       *       *       *       *


SEC. 38. GENERAL BUSINESS CREDIT.

  (a) Allowance of credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an 
amount equal to the sum of--
          (1) the business credit carryforwards carried to such 
        taxable year,
          (2) the amount of the current year business credit, 
        plus
          (3) the business credit carrybacks carried to such 
        taxable year.
  (b) Current year business credit.--For purposes of this 
subpart, the amount of the current year business credit is the 
sum of the following credits determined for the taxable year:
          (1) the investment credit determined under section 
        46,
          (2) the work opportunity credit determined under 
        section 51(a),
          (3) the alcohol fuels credit determined under section 
        40(a),
          (4) the research credit determined under section 
        41(a),
          (5) the low-income housing credit determined under 
        section 42(a),
          (6) the enhanced oil recovery credit under section 
        43(a),
          (7) in the case of an eligible small business (as 
        defined in section 44(b)), the disabled access credit 
        determined under section 44(a),
          (8) the renewable electricity production credit under 
        section 45(a),
          (9) the empowerment zone employment credit determined 
        under section 1396(a),
          (10) the Indian employment credit as determined under 
        section 45A(a),
          (11) the employer social security credit determined 
        under section 45B(a),
          (12) the orphan drug credit determined under section 
        45C(a),
          (13) the new markets tax credit determined under 
        section 45D(a),
          (14) in the case of an eligible employer (as defined 
        in section 45E(c)), the small employer pension plan 
        startup cost credit determined under section 45E(a),
          (15) the employer-provided child care credit 
        determined under section 45F(a),
          (16) the railroad track maintenance credit determined 
        under section 45G(a),
          (17) the biodiesel fuels credit determined under 
        section 40A(a),
          (18) the low sulfur diesel fuel production credit 
        determined under section 45H(a),
          (19) the marginal oil and gas well production credit 
        determined under section 45I(a),
          (20) the distilled spirits credit determined under 
        section 5011(a),
          (21) the advanced nuclear power facility production 
        credit determined under section 45J(a),
          (22) the nonconventional source production credit 
        determined under section 45K(a),
          (23) the new energy efficient home credit determined 
        under section 45L(a),
          (24) the portion of the alternative motor vehicle 
        credit to which section 30B(g)(1) applies,
          (25) the portion of the alternative fuel vehicle 
        refueling property credit to which section 30C(d)(1) 
        applies,
          (26) the mine rescue team training credit determined 
        under section 45N(a),
          (27) in the case of an eligible agricultural business 
        (as defined in section 45O(e)), the agricultural 
        chemicals security credit determined under section 
        45O(a),
          (28) the differential wage payment credit determined 
        under section 45P(a),
          (29) the carbon dioxide sequestration credit 
        determined under section 45Q(a),
          (30) the portion of the new [clean] qualified plug-in 
        electric drive motor vehicle credit to which section 
        30D(c)(1) applies,
          (31) the small employer health insurance credit 
        determined under section 45R,
          (32) in the case of an eligible employer (as defined 
        in section 45S(c)), the paid family and medical leave 
        credit determined under section 45S(a),
          (33) in the case of an eligible employer (as defined 
        in section 45T(c)), the retirement auto-enrollment 
        credit determined under section 45T(a),
          (34) the zero-emission nuclear power production 
        credit determined under section 45U(a),
          (35) the sustainable aviation fuel credit determined 
        under section 40B,
          (36) the clean hydrogen production credit determined 
        under section 45V(a),
          [(37) the qualified commercial clean vehicle credit 
        determined under section 45W,]
          [(38)] (37) the advanced manufacturing production 
        credit determined under section 45X(a),
          [(39) the clean electricity production credit 
        determined under section 45Y(a), plus]
          [(40)] (38) the clean fuel production credit 
        determined under section 45Z(a).
          [(41)] (39) in the case of an eligible small employer 
        (as defined in section 45AA(c)), the military spouse 
        retirement plan eligibility credit determined under 
        section 45AA(a).
  (c) Limitation based on amount of tax.--
          (1) In general.--The credit allowed under subsection 
        (a) for any taxable year shall not exceed the excess 
        (if any) of the taxpayer's net income tax over the 
        greater of--
                  (A) the tentative minimum tax for the taxable 
                year, or
                  (B) 25 percent of so much of the taxpayer's 
                net regular tax liability as exceeds $25,000.
        For purposes of the preceding sentence, the term ``net 
        income tax'' means the sum of the regular tax liability 
        and the tax imposed by section 55, reduced by the 
        credits allowable under subparts A and B of this part, 
        and the term ``net regular tax liability'' means the 
        regular tax liability reduced by the sum of the credits 
        allowable under subparts A and B of this part.
          (2) Empowerment zone employment credit may offset 25 
        percent of minimum tax.--
                  (A) In general.--In the case of the 
                empowerment zone employment credit--
                          (i) this section and section 39 shall 
                        be applied separately with respect to 
                        such credit, and
                          (ii) for purposes of applying 
                        paragraph (1) to such credit--
                                  (I) 75 percent of the 
                                tentative minimum tax shall be 
                                substituted for the tentative 
                                minimum tax under subparagraph 
                                (A) thereof, and
                                  (II) the limitation under 
                                paragraph (1) (as modified by 
                                subclause (I)) shall be reduced 
                                by the credit allowed under 
                                subsection (a) for the taxable 
                                year (other than the 
                                empowerment zone employment 
                                credit and the specified 
                                credits).
                  (B) Empowerment zone employment credit.--For 
                purposes of this paragraph, the term 
                ``empowerment zone employment credit'' means 
                the portion of the credit under subsection (a) 
                which is attributable to the credit determined 
                under section 1396 (relating to empowerment 
                zone employment credit).
          (4) Special rules for specified credits.--
                  (A) In general.--In the case of specified 
                credits--
                          (i) this section and section 39 shall 
                        be applied separately with respect to 
                        such credits, and
                          (ii) in applying paragraph (1) to 
                        such credits--
                                  (I) the tentative minimum tax 
                                shall be treated as being zero, 
                                and
                                  (II) the limitation under 
                                paragraph (1) (as modified by 
                                subclause (I)) shall be reduced 
                                by the credit allowed under 
                                subsection (a) for the taxable 
                                year (other than the specified 
                                credits).
                  (B) Specified credits.--For purposes of this 
                subsection, the term ``specified credits'' 
                means--
                          (i) for taxable years beginning after 
                        December 31, 2004, the credit 
                        determined under section 40,
                          (ii) the credit determined under 
                        section 41 for the taxable year with 
                        respect to an eligible small business 
                        (as defined in paragraph (5)(A) after 
                        application of the rules of paragraph 
                        (5)(B)),
                          (iii) the credit determined under 
                        section 42 to the extent attributable 
                        to buildings placed in service after 
                        December 31, 2007,
                          (iv) the credit determined under 
                        section 45 to the extent that such 
                        credit is attributable to electricity 
                        or refined coal produced--
                                  (I) at a facility which is 
                                originally placed in service 
                                after the date of the enactment 
                                of this paragraph, and
                                  (II) during the 4-year period 
                                beginning on the date that such 
                                facility was originally placed 
                                in service,
                          (v) the credit determined under 
                        section 45 to the extent that such 
                        credit is attributable to section 
                        45(e)(10) (relating to Indian coal 
                        production facilities),
                          (vi) the credit determined under 
                        section 45B,
                          (vii) the credit determined under 
                        section 45G,
                          (viii) the credit determined under 
                        section 45R,
                          (ix) the credit determined under 
                        section 45S,
                          (x) the credit determined under 
                        section 46 to the extent that such 
                        credit is attributable to the energy 
                        credit determined under section 48,
                          (xi) the credit determined under 
                        section 46 to the extent that such 
                        credit is attributable to the 
                        rehabilitation credit under section 47, 
                        but only with respect to qualified 
                        rehabilitation expenditures properly 
                        taken into account for periods after 
                        December 31, 2007, and
                          (xii) the credit determined under 
                        section 51.
          (5) Rules related to eligible small businesses.--
                  (A) Eligible small business.--For purposes of 
                this subsection, the term ``eligible small 
                business'' means, with respect to any taxable 
                year--
                          (i) a corporation the stock of which 
                        is not publicly traded,
                          (ii) a partnership, or
                          (iii) a sole proprietorship,
                if the average annual gross receipts of such 
                corporation, partnership, or sole 
                proprietorship for the 3-taxable-year period 
                preceding such taxable year does not exceed 
                $50,000,000. For purposes of applying the test 
                under the preceding sentence, rules similar to 
                the rules of paragraphs (2) and (3) of section 
                448(c) shall apply.
                  (B) Treatment of partners and S corporation 
                shareholders.--For purposes of paragraph 
                (4)(B)(ii), any credit determined under section 
                41 with respect to a partnership or S 
                corporation shall not be treated as a specified 
                credit by any partner or shareholder unless 
                such partner or shareholder meets the gross 
                receipts test under subparagraph (A) for the 
                taxable year in which such credit is treated as 
                a current year business credit.
          (6) Special rules.--
                  (A) Married individuals.--In the case of a 
                husband or wife who files a separate return, 
                the amount specified under subparagraph (B) of 
                paragraph (1) shall be $12,500 in lieu of 
                $25,000. This subparagraph shall not apply if 
                the spouse of the taxpayer has no business 
                credit carryforward or carryback to, and has no 
                current year business credit for, the taxable 
                year of such spouse which ends within or with 
                the taxpayer's taxable year.
                  (B) Controlled groups.--In the case of a 
                controlled group, the $25,000 amount specified 
                under subparagraph (B) of paragraph (1) shall 
                be reduced for each component member of such 
                group by apportioning $25,000 among the 
                component members of such group in such manner 
                as the Secretary shall by regulations 
                prescribe. For purposes of the preceding 
                sentence, the term ``controlled group'' has the 
                meaning given to such term by section 1563(a).
                  (C) Limitations with respect to certain 
                persons.--In the case of a person described in 
                subparagraph (A) or (B) of section 46(e)(1) (as 
                in effect on the day before the date of the 
                enactment of the Revenue Reconciliation Act of 
                1990), the $25,000 amount specified under 
                subparagraph (B) of paragraph (1) shall equal 
                such person's ratable share (as determined 
                under section 46(e)(2) (as so in effect) of 
                such amount.
                  (D) Estates and trusts.--In the case of an 
                estate or trust, the $25,000 amount specified 
                under subparagraph (B) of paragraph (1) shall 
                be reduced to an amount which bears the same 
                ratio to $25,000 as the portion of the income 
                of the estate or trust which is not allocated 
                to beneficiaries bears to the total income of 
                the estate or trust.
                  (E) Corporations.--In the case of a 
                corporation--
                          (i) the first sentence of paragraph 
                        (1) shall be applied by substituting 
                        ``25 percent of the taxpayer's net 
                        income tax as exceeds $25,000'' for 
                        ``the greater of'' and all that 
                        follows,
                          (ii) paragraph (2)(A) shall be 
                        applied without regard to clause 
                        (ii)(I) thereof, and
                          (iii) paragraph (4)(A) shall be 
                        applied without regard to clause 
                        (ii)(I) thereof.
  (d) Ordering rules.--For purposes of any provision of this 
title where it is necessary to ascertain the extent to which 
the credits determined under any section referred to in 
subsection (b) are used in a taxable year or as a carryback or 
carryforward--
          (1) In general.--The order in which such credits are 
        used shall be determined on the basis of the order in 
        which they are listed in subsection (b) as of the close 
        of the taxable year in which the credit is used.
          (2) Components of investment credit.--The order in 
        which the credits listed in section 46 are used shall 
        be determined on the basis of the order in which such 
        credits are listed in section 46 as of the close of the 
        taxable year in which the credit is used.

           *       *       *       *       *       *       *


[SEC. 45W. CREDIT FOR QUALIFIED COMMERCIAL CLEAN VEHICLES.

  [(a) In general.--For purposes of section 38, the qualified 
commercial clean vehicle credit for any taxable year is an 
amount equal to the sum of the credit amounts determined under 
subsection (b) with respect to each qualified commercial clean 
vehicle placed in service by the taxpayer during the taxable 
year.
  [(b) Per vehicle amount.--
          [(1) In general.--Subject to paragraph (4), the 
        amount determined under this subsection with respect to 
        any qualified commercial clean vehicle shall be equal 
        to the lesser of--
                  [(A) 15 percent of the basis of such vehicle 
                (30 percent in the case of a vehicle not 
                powered by a gasoline or diesel internal 
                combustion engine), or
                  [(B) the incremental cost of such vehicle.
          [(2) Incremental cost.--For purposes of paragraph 
        (1)(B), the incremental cost of any qualified 
        commercial clean vehicle is an amount equal to the 
        excess of the purchase price for such vehicle over such 
        price of a comparable vehicle.
          [(3) Comparable vehicle.--For purposes of this 
        subsection, the term ``comparable vehicle'' means, with 
        respect to any qualified commercial clean vehicle, any 
        vehicle which is powered solely by a gasoline or diesel 
        internal combustion engine and which is comparable in 
        size and use to such vehicle.
          [(4) Limitation.--The amount determined under this 
        subsection with respect to any qualified commercial 
        clean vehicle shall not exceed--
                  [(A) in the case of a vehicle which has a 
                gross vehicle weight rating of less than 14,000 
                pounds, $7,500, and
                  [(B) in the case of a vehicle not described 
                in subparagraph (A), $40,000.
  [(c) Qualified commercial clean vehicle.--For purposes of 
this section, the term ``qualified commercial clean vehicle'' 
means any vehicle which--
          [(1) meets the requirements of section 30D(d)(1)(C) 
        and is acquired for use or lease by the taxpayer and 
        not for resale,
          [(2) either--
                  [(A) meets the requirements of subparagraph 
                (D) of section 30D(d)(1) and is manufactured 
                primarily for use on public streets, roads, and 
                highways (not including a vehicle operated 
                exclusively on a rail or rails), or
                  [(B) is mobile machinery, as defined in 
                section 4053(8) (including vehicles that are 
                not designed to perform a function of 
                transporting a load over the public highways),
          [(3) either--
                  [(A) is propelled to a significant extent by 
                an electric motor which draws electricity from 
                a battery which has a capacity of not less than 
                15 kilowatt hours (or, in the case of a vehicle 
                which has a gross vehicle weight rating of less 
                than 14,000 pounds, 7 kilowatt hours) and is 
                capable of being recharged from an external 
                source of electricity, or
                  [(B) is a motor vehicle which satisfies the 
                requirements under subparagraphs (A) and (B) of 
                section 30B(b)(3), and
          [(4) is of a character subject to the allowance for 
        depreciation.
  [(d) Special rules.--
          [(1) In general.--Rules similar to the rules under 
        subsection (f) of section 30D (without regard to 
        paragraph (10) or (11) thereof) shall apply for 
        purposes of this section.
          [(2) Vehicles placed in service by tax-exempt 
        entities.--Subsection (c)(4) shall not apply to any 
        vehicle which is not subject to a lease and which is 
        placed in service by a tax-exempt entity described in 
        clause (i), (ii), or (iv) of section 168(h)(2)(A).
          [(3) No double benefit.--No credit shall be allowed 
        under this section with respect to any vehicle for 
        which a credit was allowed under section 30D.
  [(e) VIN number requirement.--No credit shall be determined 
under subsection (a) with respect to any vehicle unless the 
taxpayer includes the vehicle identification number of such 
vehicle on the return of tax for the taxable year.
  [(f) Regulations and guidance.--The Secretary shall issue 
such regulations or other guidance as the Secretary determines 
necessary to carry out the purposes of this section, including 
regulations or other guidance relating to determination of the 
incremental cost of any qualified commercial clean vehicle.
  [(g) Termination.--No credit shall be determined under this 
section with respect to any vehicle acquired after December 31, 
2032.]

           *       *       *       *       *       *       *


[SEC. 45Y. CLEAN ELECTRICITY PRODUCTION CREDIT.

  [(a) Amount of credit.--
          [(1) In general.--For purposes of section 38, the 
        clean electricity production credit for any taxable 
        year is an amount equal to the product of--
                  [(A) the kilowatt hours of electricity--
                          [(i) produced by the taxpayer at a 
                        qualified facility, and
                          [(ii)(I) sold by the taxpayer to an 
                        unrelated person during the taxable 
                        year, or
                          [(II) in the case of a qualified 
                        facility which is equipped with a 
                        metering device which is owned and 
                        operated by an unrelated person, sold, 
                        consumed, or stored by the taxpayer 
                        during the taxable year, multiplied by
                  [(B) the applicable amount with respect to 
                such qualified facility.
          [(2) Applicable amount.--
                  [(A) Base amount.--Subject to subsection 
                (g)(7), in the case of any qualified facility 
                which is not described in clause (i) or (ii) of 
                subparagraph (B) and does not satisfy the 
                requirements described in clause (iii) of such 
                subparagraph, the applicable amount shall be 
                0.3 cents.
                  [(B) Alternative amount.--Subject to 
                subsection (g)(7), in the case of any qualified 
                facility--
                          [(i) with a maximum net output of 
                        less than 1 megawatt (as measured in 
                        alternating current),
                          [(ii) the construction of which 
                        begins prior to the date that is 60 
                        days after the Secretary publishes 
                        guidance with respect to the 
                        requirements of paragraphs (9) and (10) 
                        of subsection (g), or
                          [(iii) which--
                                  [(I) satisfies the 
                                requirements under paragraph 
                                (9) of subsection (g), and
                                  [(II) with respect to the 
                                construction of such facility, 
                                satisfies the requirements 
                                under paragraph (10) of 
                                subsection (g),
                the applicable amount shall be 1.5 cents.
  [(b) Qualified facility.--
          [(1) In general.--
                  [(A) Definition.--Subject to subparagraphs 
                (B), (C), and (D), the term ``qualified 
                facility'' means a facility owned by the 
                taxpayer--
                          [(i) which is used for the generation 
                        of electricity,
                          [(ii) which is placed in service 
                        after December 31, 2024, and
                          [(iii) for which the greenhouse gas 
                        emissions rate (as determined under 
                        paragraph (2)) is not greater than 
                        zero.
                  [(B) 10-year production credit.--For purposes 
                of this section, a facility shall only be 
                treated as a qualified facility during the 10-
                year period beginning on the date the facility 
                was originally placed in service.
                  [(C) Expansion of facility; incremental 
                production.--The term ``qualified facility'' 
                shall include either of the following in 
                connection with a facility described in 
                subparagraph (A) (without regard to clause (ii) 
                of such subparagraph) which was placed in 
                service before January 1, 2025, but only to the 
                extent of the increased amount of electricity 
                produced at the facility by reason of the 
                following:
                          [(i) A new unit which is placed in 
                        service after December 31, 2024.
                          [(ii) Any additions of capacity which 
                        are placed in service after December 
                        31, 2024.
                  [(D) Coordination with other credits.--The 
                term ``qualified facility'' shall not include 
                any facility for which a credit determined 
                under section 45, 45J, 45Q, 45U, 48, 48A, or 
                48E is allowed under section 38 for the taxable 
                year or any prior taxable year.
          [(2) Greenhouse gas emissions rate.--
                  [(A) In general.--For purposes of this 
                section, the term ``greenhouse gas emissions 
                rate'' means the amount of greenhouse gases 
                emitted into the atmosphere by a facility in 
                the production of electricity, expressed as 
                grams of CO2e per KWh.
                  [(B) Fuel combustion and gasification.--In 
                the case of a facility which produces 
                electricity through combustion or gasification, 
                the greenhouse gas emissions rate for such 
                facility shall be equal to the net rate of 
                greenhouse gases emitted into the atmosphere by 
                such facility (taking into account lifecycle 
                greenhouse gas emissions, as described in 
                section 211(o)(1)(H) of the Clean Air Act (42 
                U.S.C. 7545(o)(1)(H))) in the production of 
                electricity, expressed as grams of 
                CO2e per KWh.
                  [(C) Establishment of emissions rates for 
                facilities.--
                          [(i) Publishing emissions rates.--The 
                        Secretary shall annually publish a 
                        table that sets forth the greenhouse 
                        gas emissions rates for types or 
                        categories of facilities, which a 
                        taxpayer shall use for purposes of this 
                        section.
                          [(ii) Provisional emissions rate.--In 
                        the case of any facility for which an 
                        emissions rate has not been established 
                        by the Secretary, a taxpayer which owns 
                        such facility may file a petition with 
                        the Secretary for determination of the 
                        emissions rate with respect to such 
                        facility.
                  [(D) Carbon capture and sequestration 
                equipment.--For purposes of this subsection, 
                the amount of greenhouse gases emitted into the 
                atmosphere by a facility in the production of 
                electricity shall not include any qualified 
                carbon dioxide that is captured by the taxpayer 
                and--
                          [(i) pursuant to any regulations 
                        established under paragraph (2) of 
                        section 45Q(f), disposed of by the 
                        taxpayer in secure geological storage, 
                        or
                          [(ii) utilized by the taxpayer in a 
                        manner described in paragraph (5) of 
                        such section.
  [(c) Inflation adjustment.--
          [(1) In general.--In the case of a calendar year 
        beginning after 2024, the 0.3 cent amount in paragraph 
        (2)(A) of subsection (a) and the 1.5 cent amount in 
        paragraph (2)(B) of such subsection shall each be 
        adjusted by multiplying such amount by the inflation 
        adjustment factor for the calendar year in which the 
        sale, consumption, or storage of the electricity 
        occurs. If the 0.3 cent amount as increased under this 
        paragraph is not a multiple of 0.05 cent, such amount 
        shall be rounded to the nearest multiple of 0.05 cent. 
        If the 1.5 cent amount as increased under this 
        paragraph is not a multiple of 0.1 cent, such amount 
        shall be rounded to the nearest multiple of 0.1 cent.
          [(2) Annual computation.--The Secretary shall, not 
        later than April 1 of each calendar year, determine and 
        publish in the Federal Register the inflation 
        adjustment factor for such calendar year in accordance 
        with this subsection.
          [(3) Inflation adjustment factor.--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 1992. The 
        term ``GDP implicit price deflator'' means the most 
        recent revision of the implicit price deflator for the 
        gross domestic product as computed and published by the 
        Department of Commerce before March 15 of the calendar 
        year.
  [(d) Credit phase-out.--
          [(1) In general.--The amount of the clean electricity 
        production credit under subsection (a) for any 
        qualified facility the construction of which begins 
        during a calendar year described in paragraph (2) shall 
        be equal to the product of--
                  [(A) the amount of the credit determined 
                under subsection (a) without regard to this 
                subsection, multiplied by
                  [(B) the phase-out percentage under paragraph 
                (2).
          [(2) Phase-out percentage.--The phase-out percentage 
        under this paragraph is equal to--
                  [(A) for a facility the construction of which 
                begins during the first calendar year following 
                the applicable year, 100 percent,
                  [(B) for a facility the construction of which 
                begins during the second calendar year 
                following the applicable year, 75 percent,
                  [(C) for a facility the construction of which 
                begins during the third calendar year following 
                the applicable year, 50 percent, and
                  [(D) for a facility the construction of which 
                begins during any calendar year subsequent to 
                the calendar year described in subparagraph 
                (C), 0 percent.
          [(3) Applicable year.--For purposes of this 
        subsection, the term ``applicable year'' means the 
        later of--
                  [(A) the calendar year in which the Secretary 
                determines that the annual greenhouse gas 
                emissions from the production of electricity in 
                the United States are equal to or less than 25 
                percent of the annual greenhouse gas emissions 
                from the production of electricity in the 
                United States for calendar year 2022, or
                  [(B) 2032.
  [(e) Definitions.--For purposes of this section:
          [(1) COe per KWh.--The term ``CO2e per 
        KWh'' means, with respect to any greenhouse gas, the 
        equivalent carbon dioxide (as determined based on 
        global warming potential) per kilowatt hour of 
        electricity produced.
          [(2) Greenhouse gas.--The term ``greenhouse gas'' has 
        the same meaning given such term under section 
        211(o)(1)(G) of the Clean Air Act (42 U.S.C. 
        7545(o)(1)(G)), as in effect on the date of the 
        enactment of this section.
          [(3) Qualified carbon dioxide.--The term ``qualified 
        carbon dioxide'' means carbon dioxide captured from an 
        industrial source which--
                  [(A) would otherwise be released into the 
                atmosphere as industrial emission of greenhouse 
                gas,
                  [(B) is measured at the source of capture and 
                verified at the point of disposal or 
                utilization, and
                  [(C) is captured and disposed or utilized 
                within the United States (within the meaning of 
                section 638(1)) or a possession of the United 
                States (within the meaning of section 638(2)).
  [(f) Guidance.--Not later than January 1, 2025, the Secretary 
shall issue guidance regarding implementation of this section, 
including calculation of greenhouse gas emission rates for 
qualified facilities and determination of clean electricity 
production credits under this section.
  [(g) Special rules.--
          [(1) Only production in the United States taken into 
        account.--Consumption, sales, or storage shall be taken 
        into account under this section only with respect to 
        electricity the production of which is within--
                  [(A) the United States (within the meaning of 
                section 638(1)), or
                  [(B) a possession of the United States 
                (within the meaning of section 638(2)).
          [(2) Combined heat and power system property.--
                  [(A) In general.--For purposes of subsection 
                (a)--
                          [(i) the kilowatt hours of 
                        electricity produced by a taxpayer at a 
                        qualified facility shall include any 
                        production in the form of useful 
                        thermal energy by any combined heat and 
                        power system property within such 
                        facility, and
                          [(ii) the amount of greenhouse gases 
                        emitted into the atmosphere by such 
                        facility in the production of such 
                        useful thermal energy shall be included 
                        for purposes of determining the 
                        greenhouse gas emissions rate for such 
                        facility.
                  [(B) Combined heat and power system 
                property.--For purposes of this paragraph, the 
                term ``combined heat and power system 
                property'' has the same meaning given such term 
                by section 48(c)(3) (without regard to 
                subparagraphs (A)(iv), (B), and (D) thereof).
                  [(C) Conversion from BTU to KWh.--
                          [(i) In general.--For purposes of 
                        subparagraph (A)(i), the amount of 
                        kilowatt hours of electricity produced 
                        in the form of useful thermal energy 
                        shall be equal to the quotient of--
                                  [(I) the total useful thermal 
                                energy produced by the combined 
                                heat and power system property 
                                within the qualified facility, 
                                divided by
                                  [(II) the heat rate for such 
                                facility.
                          [(ii) Heat rate.--For purposes of 
                        this subparagraph, the term ``heat 
                        rate'' means the amount of energy used 
                        by the qualified facility to generate 1 
                        kilowatt hour of electricity, expressed 
                        as British thermal units per net 
                        kilowatt hour generated.
          [(3) Production attributable to the taxpayer.--In the 
        case of a qualified facility in which more than 1 
        person has an ownership interest, except to the extent 
        provided in regulations prescribed by the Secretary, 
        production from the facility shall be allocated among 
        such persons in proportion to their respective 
        ownership interests in the gross sales from such 
        facility.
          [(4) Related persons.--Persons shall be treated as 
        related to each other if such persons would be treated 
        as a single employer under the regulations prescribed 
        under section 52(b). In the case of a corporation which 
        is a member of an affiliated group of corporations 
        filing a consolidated return, such corporation shall be 
        treated as selling electricity to an unrelated person 
        if such electricity is sold to such a person by another 
        member of such group.
          [(5) Pass-thru in the case of estates and trusts.--
        Under regulations prescribed by the Secretary, rules 
        similar to the rules of subsection (d) of section 52 
        shall apply.
          [(6) Allocation of credit to patrons of agricultural 
        cooperative.--
                  [(A) Election to allocate.--
                          [(i) In general.--In the case of an 
                        eligible cooperative organization, any 
                        portion of the credit determined under 
                        subsection (a) for the taxable year 
                        may, at the election of the 
                        organization, be apportioned among 
                        patrons of the organization on the 
                        basis of the amount of business done by 
                        the patrons during the taxable year.
                          [(ii) Form and effect of election.--
                        An election under clause (i) 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. Such 
                        election shall not take effect unless 
                        the organization designates the 
                        apportionment as such in a written 
                        notice mailed to its patrons during the 
                        payment period described in section 
                        1382(d).
                  [(B) Treatment of organizations and 
                patrons.--The amount of the credit apportioned 
                to any patrons under subparagraph (A)--
                          [(i) shall not be included in the 
                        amount determined under subsection (a) 
                        with respect to the organization for 
                        the taxable year, and
                          [(ii) shall be included in the amount 
                        determined under subsection (a) for the 
                        first taxable year of each patron 
                        ending on or after the last day of the 
                        payment period (as defined in section 
                        1382(d)) for the taxable year of the 
                        organization or, if earlier, for the 
                        taxable year of each patron ending on 
                        or after the date on which the patron 
                        receives notice from the cooperative of 
                        the apportionment.
                  [(C) Special rules for decrease in credits 
                for taxable year.--If the amount of the credit 
                of a cooperative organization determined under 
                subsection (a) for a taxable year is less than 
                the amount of such credit shown on the return 
                of the cooperative organization for such year, 
                an amount equal to the excess of--
                          [(i) such reduction, over
                          [(ii) the amount not apportioned to 
                        such patrons under subparagraph (A) for 
                        the taxable year,
                shall be treated as an increase in tax imposed 
                by this chapter on the organization. Such 
                increase shall not be treated as tax imposed by 
                this chapter for purposes of determining the 
                amount of any credit under this chapter.
                  [(D) Eligible cooperative defined.--For 
                purposes of this section, the term ``eligible 
                cooperative'' means a cooperative organization 
                described in section 1381(a) which is owned 
                more than 50 percent by agricultural producers 
                or by entities owned by agricultural producers. 
                For this purpose an entity owned by an 
                agricultural producer is one that is more than 
                50 percent owned by agricultural producers.
          [(7) Increase in credit in energy communities.--In 
        the case of any qualified facility which is located in 
        an energy community (as defined in section 
        45(b)(11)(B)), for purposes of determining the amount 
        of the credit under subsection (a) with respect to any 
        electricity produced by the taxpayer at such facility 
        during the taxable year, the applicable amount under 
        paragraph (2) of such subsection shall be increased by 
        an amount equal to 10 percent of the amount otherwise 
        in effect under such paragraph.
          [(8) Credit reduced for tax-exempt bonds.--Rules 
        similar to the rules of section 45(b)(3) shall apply.
          [(9) Wage requirements.--Rules similar to the rules 
        of section 45(b)(7) shall apply.
          [(10) Apprenticeship requirements.--Rules similar to 
        the rules of section 45(b)(8) shall apply.
          [(11) Domestic content bonus credit amount.--
                  [(A) In general.--In the case of any 
                qualified facility which satisfies the 
                requirement under subparagraph (B)(i), the 
                amount of the credit determined under 
                subsection (a) shall be increased by an amount 
                equal to 10 percent of the amount so determined 
                (as determined without application of paragraph 
                (7)).
                  [(B) Requirement.--
                          [(i) In general.--The requirement 
                        described in this subclause is 
                        satisfied with respect to any qualified 
                        facility if the taxpayer certifies to 
                        the Secretary (at such time, and in 
                        such form and manner, as the Secretary 
                        may prescribe) that any steel, iron, or 
                        manufactured product which is a 
                        component of such facility (upon 
                        completion of construction) was 
                        produced in the United States (as 
                        determined under section 661 of title 
                        49, Code of Federal Regulations).
                          [(ii) Steel and iron.--In the case of 
                        steel or iron, clause (i) shall be 
                        applied in a manner consistent with 
                        section 661.5 of title 49, Code of 
                        Federal Regulations.
                          [(iii) Manufactured product.--For 
                        purposes of clause (i), the 
                        manufactured products which are 
                        components of a qualified facility upon 
                        completion of construction shall be 
                        deemed to have been produced in the 
                        United States if not less than the 
                        adjusted percentage (as determined 
                        under subparagraph (C)) of the total 
                        costs of all such manufactured products 
                        of such facility are attributable to 
                        manufactured products (including 
                        components) which are mined, produced, 
                        or manufactured in the United States.
                  [(C) Adjusted percentage.--
                          [(i) In general.--Subject to 
                        subclause (ii), for purposes of 
                        subparagraph (B)(iii), the adjusted 
                        percentage shall be--
                                  [(I) in the case of a 
                                facility the construction of 
                                which begins before January 1, 
                                2025, 40 percent,
                                  [(II) in the case of a 
                                facility the construction of 
                                which begins after December 31, 
                                2024, and before January 1, 
                                2026, 45 percent,
                                  [(III) in the case of a 
                                facility the construction of 
                                which begins after December 31, 
                                2025, and before January 1, 
                                2027, 50 percent, and
                                  [(IV) in the case of a 
                                facility the construction of 
                                which begins after December 31, 
                                2026, 55 percent.
                          [(ii) Offshore wind facility.--For 
                        purposes of subparagraph (B)(iii), in 
                        the case of a qualified facility which 
                        is an offshore wind facility, the 
                        adjusted percentage shall be--
                                  [(I) in the case of a 
                                facility the construction of 
                                which begins before January 1, 
                                2025, 20 percent,
                                  [(II) in the case of a 
                                facility the construction of 
                                which begins after December 31, 
                                2024, and before January 1, 
                                2026, 27.5 percent,
                                  [(III) in the case of a 
                                facility the construction of 
                                which begins after December 31, 
                                2025, and before January 1, 
                                2027, 35 percent,
                                  [(IV) in the case of a 
                                facility the construction of 
                                which begins after December 31, 
                                2026, and before January 1, 
                                2028, 45 percent, and
                                  [(V) in the case of a 
                                facility the construction of 
                                which begins after December 31, 
                                2027, 55 percent.
          [(12) Phaseout for elective payment.--
                  [(A) In general.--In the case of a taxpayer 
                making an election under section 6417 with 
                respect to a credit under this section, the 
                amount of such credit shall be replaced with--
                          [(i) the value of such credit 
                        (determined without regard to this 
                        paragraph), multiplied by
                          [(ii) the applicable percentage.
                  [(B) 100 percent applicable percentage for 
                certain qualified facilities.--In the case of 
                any qualified facility--
                          [(i) which satisfies the requirements 
                        under paragraph (11)(B), or
                          [(ii) with a maximum net output of 
                        less than 1 megawatt (as measured in 
                        alternating current),
                the applicable percentage shall be 100 percent.
                  [(C) Phased domestic content requirement.--
                Subject to subparagraph (D), in the case of any 
                qualified facility which is not described in 
                subparagraph (B), the applicable percentage 
                shall be--
                          [(i) if construction of such facility 
                        began before January 1, 2024, 100 
                        percent,
                          [(ii) if construction of such 
                        facility began in calendar year 2024, 
                        90 percent,
                          [(iii) if construction of such 
                        facility began in calendar year 2025, 
                        85 percent, and
                          [(iv) if construction of such 
                        facility began after December 31, 2025, 
                        0 percent.
                  [(D) Exception.--
                          [(i) In general.--For purposes of 
                        this paragraph, the Secretary shall 
                        provide exceptions to the requirements 
                        under this paragraph if--
                                  [(I) the inclusion of steel, 
                                iron, or manufactured products 
                                which are produced in the 
                                United States increases the 
                                overall costs of construction 
                                of qualified facilities by more 
                                than 25 percent, or
                                  [(II) relevant steel, iron, 
                                or manufactured products are 
                                not produced in the United 
                                States in sufficient and 
                                reasonably available quantities 
                                or of a satisfactory quality.
                          [(ii) Applicable percentage.--In any 
                        case in which the Secretary provides an 
                        exception pursuant to clause (i), the 
                        applicable percentage shall be 100 
                        percent.]

           *       *       *       *       *       *       *


            Subpart E--RULES FOR COMPUTING INVESTMENT CREDIT

Sec.
46. Amount of credit.
     * * * * * * *
[48E. Clean electricity investment credit.]

           *       *       *       *       *       *       *


SEC. 46. AMOUNT OF CREDIT.

  For purposes of section 38, the amount of the investment 
credit determined under this section for any taxable year shall 
be the sum of--
          (1) the rehabilitation credit,
          (2) the energy credit,
          (3) the qualifying advanced coal project credit,
          (4) the qualifying gasification project credit,
          (5) the qualifying advanced energy project credit, 
        and
          (6) the advanced manufacturing investment credit[, 
        and].
          [(7) the clean electricity investment credit.]

           *       *       *       *       *       *       *


SEC. 48. ENERGY CREDIT.

  (a) Energy credit.--
          (1) In general.--For purposes of section 46, except 
        as provided in paragraphs (1)(B), (2)(B), and (3)(B) of 
        subsection (c), the energy credit for any taxable year 
        is the energy percentage of the basis of each energy 
        property placed in service during such taxable year.
          (2) Energy percentage.--
                  (A) In general.--Except as provided in 
                paragraphs (6) and (7), the energy percentage 
                is--
                          (i) 6 percent in the case of--
                                  (I) qualified fuel cell 
                                property,
                                  (II) energy property 
                                described in clause (i) or 
                                (iii) of paragraph (3)(A) but 
                                only with respect to property 
                                the construction of which 
                                begins before January 1, 2025,
                                  (III) energy property 
                                described in paragraph 
                                (3)(A)(ii),
                                  (IV) qualified small wind 
                                energy property,
                                  (V) waste energy recovery 
                                property,
                                  (VI) energy storage 
                                technology,
                                  (VII) qualified biogas 
                                property,
                                  (VIII) microgrid controllers, 
                                and
                                  (IX) energy property 
                                described in clauses (v) and 
                                (vii) of paragraph (3)(A), and
                          (ii) in the case of any energy 
                        property to which clause (i) does not 
                        apply, 2 percent.
                  (B) Coordination with rehabilitation 
                credit.--The energy percentage shall not apply 
                to that portion of the basis of any property 
                which is attributable to qualified 
                rehabilitation expenditures.
          (3) Energy property.--For purposes of this subpart, 
        the term ``energy property'' means any property--
                  (A) which is--
                          (i) equipment which uses solar energy 
                        to generate electricity, to heat or 
                        cool (or provide hot water for use in) 
                        a structure, or to provide solar 
                        process heat, excepting property used 
                        to generate energy for the purposes of 
                        heating a swimming pool,
                          (ii) equipment which uses solar 
                        energy to illuminate the inside of a 
                        structure using fiber-optic distributed 
                        sunlight, or electrochromic glass which 
                        uses electricity to change its light 
                        transmittance properties in order to 
                        heat or cool a structure, but only with 
                        respect to property the construction of 
                        which begins before January 1, 2025,
                          (iii) equipment used to produce, 
                        distribute, or use energy derived from 
                        a geothermal deposit (within the 
                        meaning of section 613(e)(2)), but 
                        only, in the case of electricity 
                        generated by geothermal power, up to 
                        (but not including) the electrical 
                        transmission stage,
                          (iv) qualified fuel cell property or 
                        qualified microturbine property,
                          (v) combined heat and power system 
                        property,
                          (vi) qualified small wind energy 
                        property,
                          (vii) equipment which uses the ground 
                        or ground water as a thermal energy 
                        source to heat a structure or as a 
                        thermal energy sink to cool a 
                        structure, but only with respect to 
                        property the construction of which 
                        begins before January 1, 2035,
                          (viii) waste energy recovery 
                        property,
                          (ix) energy storage technology,
                          (x) qualified biogas property, or
                          (xi) microgrid controllers,
                  (B)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, 
                or
                  (ii) which is acquired by the taxpayer if the 
                original use of such property commences with 
                the taxpayer,
                  (C) with respect to which depreciation (or 
                amortization in lieu of depreciation) is 
                allowable, and
                  (D) which meets the performance and quality 
                standards (if any) which--
                          (i) have been prescribed by the 
                        Secretary by regulations (after 
                        consultation with the Secretary of 
                        Energy), and
                          (ii) are in effect at the time of the 
                        acquisition of the property.
        Such term shall not include any property which is part 
        of a facility the production from which is allowed as a 
        credit under section 45 for the taxable year or any 
        prior taxable year.
          (4) Special rule for property financed by tax-exempt 
        bonds.--Rules similar to the rule under section 
        45(b)(3) shall apply for purposes of this section.
          (5) Election to treat qualified facilities as energy 
        property.--
                  (A) In general.--In the case of any qualified 
                property which is part of a qualified 
                investment credit facility--
                          (i) such property shall be treated as 
                        energy property for purposes of this 
                        section, and
                          (ii) the energy percentage with 
                        respect to such property shall be 6 
                        percent.
                  (B) Denial of production credit.--No credit 
                shall be allowed under section 45 for any 
                taxable year with respect to any qualified 
                investment credit facility.
                  (C) Qualified investment credit facility.--
                For purposes of this paragraph, the term 
                ``qualified investment credit facility'' means 
                any facility--
                          (i) which is a qualified facility 
                        (within the meaning of section 45) 
                        described in paragraph (1), (2), (3), 
                        (4), (6), (7), (9), or (11) of section 
                        45(d),
                          (ii) which is placed in service after 
                        2008 and the construction of which 
                        begins before January 1, 2025, and
                          (iii) with respect to which--
                                  (I) no credit has been 
                                allowed under section 45, and
                                  (II) the taxpayer makes an 
                                irrevocable election to have 
                                this paragraph apply.
                  (D) Qualified property.--For purposes of this 
                paragraph, the term ``qualified property'' 
                means property--
                          (i) which is--
                                  (I) tangible personal 
                                property, or
                                  (II) other tangible property 
                                (not including a building or 
                                its structural components), but 
                                only if such property is used 
                                as an integral part of the 
                                qualified investment credit 
                                facility,
                          (ii) with respect to which 
                        depreciation (or amortization in lieu 
                        of depreciation) is allowable,
                          (iii) which is constructed, 
                        reconstructed, erected, or acquired by 
                        the taxpayer, and
                          (iv) the original use of which 
                        commences with the taxpayer.
                  (E) Phaseout of credit for wind facilities.--
                In the case of any facility using wind to 
                produce electricity which is placed in service 
                before January 1, 2022, and treated as energy 
                property by reason of this paragraph, the 
                amount of the credit determined under this 
                section (determined after the application of 
                paragraphs (1) and (2) and without regard to 
                this subparagraph) shall be reduced by--
                          (i) in the case of any facility the 
                        construction of which begins after 
                        December 31, 2016, and before January 
                        1, 2018, 20 percent,
                          (ii) in the case of any facility the 
                        construction of which begins after 
                        December 31, 2017, and before January 
                        1, 2019, 40 percent,
                          (iii) in the case of any facility the 
                        construction of which begins after 
                        December 31, 2018, and before January 
                        1, 2020, 60 percent, and
                          (iv) in the case of any facility the 
                        construction of which begins after 
                        December 31, 2019, and before January 
                        1, 2022, 40 percent.
                  (F) Qualified offshore wind facilities.--
                          (i) In general.--In the case of any 
                        qualified offshore wind facility, 
                        subparagraph (E) shall not apply.
                          (ii) Qualified offshore wind 
                        facility.--For purposes of this 
                        subparagraph, the term ``qualified 
                        offshore wind facility'' means a 
                        qualified facility (within the meaning 
                        of section 45) described in paragraph 
                        (1) of section 45(d) (determined 
                        without regard to any date by which the 
                        construction of the facility is 
                        required to begin) which is located in 
                        the inland navigable waters of the 
                        United States or in the coastal waters 
                        of the United States.
          (6) Phaseout for certain energy property.--In the 
        case of any qualified fuel cell property, qualified 
        small wind property, or energy property described in 
        clause (i) or clause (ii) of paragraph (3)(A) the 
        construction of which begins after December 31, 2019, 
        and which is placed in service before January 1, 2022, 
        the energy percentage determined under paragraph (2) 
        shall be equal to 26 percent.
          (7) Phaseout for certain energy property.--In the 
        case of any energy property described in clause (vii) 
        of paragraph (3)(A), the energy percentage determined 
        under paragraph (2) shall be equal to--
                  (A) in the case of any property the 
                construction of which begins before January 1, 
                2033, and which is placed in service after 
                December 31, 2021, 6 percent,
                  (B) in the case of any property the 
                construction of which begins after December 31, 
                2032, and before January 1, 2034, 5.2 percent, 
                and
                  (C) in the case of any property the 
                construction of which begins after December 31, 
                2033, and before January 1, 2035, 4.4 percent.
          (8) Interconnection property.--
                  (A) In general.--For purposes of determining 
                the credit under subsection (a), energy 
                property shall include amounts paid or incurred 
                by the taxpayer for qualified interconnection 
                property in connection with the installation of 
                energy property (as defined in paragraph (3)) 
                which has a maximum net output of not greater 
                than 5 megawatts (as measured in alternating 
                current), to provide for the transmission or 
                distribution of the electricity produced or 
                stored by such property, and which are properly 
                chargeable to the capital account of the 
                taxpayer.
                  (B) Qualified interconnection property.--The 
                term ``qualified interconnection property'' 
                means, with respect to an energy project which 
                is not a microgrid controller, any tangible 
                property--
                          (i) which is part of an addition, 
                        modification, or upgrade to a 
                        transmission or distribution system 
                        which is required at or beyond the 
                        point at which the energy project 
                        interconnects to such transmission or 
                        distribution system in order to 
                        accommodate such interconnection,
                          (ii) either--
                                  (I) which is constructed, 
                                reconstructed, or erected by 
                                the taxpayer, or
                                  (II) for which the cost with 
                                respect to the construction, 
                                reconstruction, or erection of 
                                such property is paid or 
                                incurred by such taxpayer, and
                          (iii) the original use of which, 
                        pursuant to an interconnection 
                        agreement, commences with a utility.
                  (C) Interconnection agreement.--The term 
                ``interconnection agreement'' means an 
                agreement with a utility for the purposes of 
                interconnecting the energy property owned by 
                such taxpayer to the transmission or 
                distribution system of such utility.
                  (D) Utility.--For purposes of this paragraph, 
                the term ``utility'' means the owner or 
                operator of an electrical transmission or 
                distribution system which is subject to the 
                regulatory authority of a State or political 
                subdivision thereof, any agency or 
                instrumentality of the United States, a public 
                service or public utility commission or other 
                similar body of any State or political 
                subdivision thereof, or the governing or 
                ratemaking body of an electric cooperative.
                  (E) Special rule for interconnection 
                property.--In the case of expenses paid or 
                incurred for interconnection property, amounts 
                otherwise chargeable to capital account with 
                respect to such expenses shall be reduced under 
                rules similar to the rules of section 50(c).
          (9) Increased credit amount for energy projects.--
                  (A) In general.--
                          (i) Rule.--In the case of any energy 
                        project which satisfies the 
                        requirements of subparagraph (B), the 
                        amount of the credit determined under 
                        this subsection (determined after the 
                        application of paragraphs (1) through 
                        (8) and paragraph (15) and without 
                        regard to this clause) shall be equal 
                        to such amount multiplied by 5.
                          (ii) Energy project defined.--For 
                        purposes of this subsection, the term 
                        ``energy project'' means a project 
                        consisting of one or more energy 
                        properties that are part of a single 
                        project.
                  (B) Project requirements.--A project meets 
                the requirements of this subparagraph if it is 
                one of the following:
                          (i) A project with a maximum net 
                        output of less than 1 megawatt of 
                        electrical (as measured in alternating 
                        current) or thermal energy.
                          (ii) A project the construction of 
                        which begins before the date that is 60 
                        days after the Secretary publishes 
                        guidance with respect to the 
                        requirements of paragraphs (10)(A) and 
                        (11).
                          (iii) A project which satisfies the 
                        requirements of paragraphs (10)(A) and 
                        (11).
          (10) Prevailing wage requirements.--
                  (A) In general.--The requirements described 
                in this subparagraph with respect to any energy 
                project are that the taxpayer shall ensure that 
                any laborers and mechanics employed by the 
                taxpayer or any contractor or subcontractor 
                in--
                          (i) the construction of such energy 
                        project, and
                          (ii) for the 5-year period beginning 
                        on the date such project is originally 
                        placed in service, the alteration or 
                        repair of such project,
                shall be paid wages at rates not less than the 
                prevailing rates for construction, alteration, 
                or repair of a similar character in the 
                locality in which such project is located as 
                most recently determined by the Secretary of 
                Labor, in accordance with subchapter IV of 
                chapter 31 of title 40, United States Code. 
                Subject to subparagraph (C), for purposes of 
                any determination under paragraph (9)(A)(i) for 
                the taxable year in which the energy project is 
                placed in service, the taxpayer shall be deemed 
                to satisfy the requirement under clause (ii) at 
                the time such project is placed in service.
                  (B) Correction and penalty related to failure 
                to satisfy wage requirements.--Rules similar to 
                the rules of section 45(b)(7)(B) shall apply.
                  (C) Recapture.--The Secretary shall, by 
                regulations or other guidance, provide for 
                recapturing the benefit of any increase in the 
                credit allowed under this subsection by reason 
                of this paragraph with respect to any project 
                which does not satisfy the requirements under 
                subparagraph (A) (after application of 
                subparagraph (B)) for the period described in 
                clause (ii) of subparagraph (A) (but which does 
                not cease to be investment credit property 
                within the meaning of section 50(a)). The 
                period and percentage of such recapture shall 
                be determined under rules similar to the rules 
                of section 50(a).
          (11) Apprenticeship requirements.--Rules similar to 
        the rules of section 45(b)(8) shall apply.
          (12) Domestic content bonus credit amount.--
                  (A) In general.--In the case of any energy 
                project which satisfies the requirement under 
                subparagraph (B), for purposes of applying 
                paragraph (2) with respect to such property, 
                the energy percentage shall be increased by the 
                applicable credit rate increase.
                  (B) Requirement.--Rules similar to the rules 
                of section 45(b)(9)(B) shall apply.
                  (C) Applicable credit rate increase.--For 
                purposes of subparagraph (A), the applicable 
                credit rate increase shall be--
                          (i) in the case of an energy project 
                        which does not satisfy the requirements 
                        of paragraph (9)(B), 2 percentage 
                        points, and
                          (ii) in the case of an energy project 
                        which satisfies the requirements of 
                        paragraph (9)(B), 10 percentage points.
          (13) Phaseout for elective payment.--In the case of a 
        taxpayer making an election under section 6417 with 
        respect to a credit under this section, rules similar 
        to the rules of section 45(b)(10) shall apply.
          (14) Increase in credit rate for energy 
        communities.--
                  (A) In general.--In the case of any energy 
                project that is placed in service within an 
                energy community (as defined in section 
                45(b)(11)(B), as applied by substituting 
                ``energy project'' for ``qualified facility'' 
                each place it appears), for purposes of 
                applying paragraph (2) with respect to energy 
                property which is part of such project, the 
                energy percentage shall be increased by the 
                applicable credit rate increase.
                  (B) Applicable credit rate increase.--For 
                purposes of subparagraph (A), the applicable 
                credit rate increase shall be equal to--
                          (i) in the case of any energy project 
                        which does not satisfy the requirements 
                        of paragraph (9)(B), 2 percentage 
                        points, and
                          (ii) in the case of any energy 
                        project which satisfies the 
                        requirements of paragraph (9)(B), 10 
                        percentage points.
          (15) Election to treat clean hydrogen production 
        facilities as energy property.--
                  (A) In general.--In the case of any qualified 
                property (as defined in paragraph (5)(D)) which 
                is part of a specified clean hydrogen 
                production facility--
                          (i) such property shall be treated as 
                        energy property for purposes of this 
                        section, and
                          (ii) the energy percentage with 
                        respect to such property is--
                                  (I) in the case of a facility 
                                which is designed and 
                                reasonably expected to produce 
                                qualified clean hydrogen which 
                                is described in a subparagraph 
                                (A) of section 45V(b)(2), 1.2 
                                percent,
                                  (II) in the case of a 
                                facility which is designed and 
                                reasonably expected to produce 
                                qualified clean hydrogen which 
                                is described in a subparagraph 
                                (B) of such section, 1.5 
                                percent,
                                  (III) in the case of a 
                                facility which is designed and 
                                reasonably expected to produce 
                                qualified clean hydrogen which 
                                is described in a subparagraph 
                                (C) of such section, 2 percent, 
                                and
                                  (IV) in the case of a 
                                facility which is designed and 
                                reasonably expected to produce 
                                qualified clean hydrogen which 
                                is described in subparagraph 
                                (D) of such section, 6 percent.
                  (B) Denial of production credit.--No credit 
                shall be allowed under section 45V or section 
                45Q for any taxable year with respect to any 
                specified clean hydrogen production facility or 
                any carbon capture equipment included at such 
                facility.
                  (C) Specified clean hydrogen production 
                facility.--For purposes of this paragraph, the 
                term ``specified clean hydrogen production 
                facility'' means any qualified clean hydrogen 
                production facility (as defined in section 
                45V(c)(3))--
                          (i) which is placed in service after 
                        December 31, 2022,
                          (ii) with respect to which--
                                  (I) no credit has been 
                                allowed under section 45V or 
                                45Q, and
                                  (II) the taxpayer makes an 
                                irrevocable election to have 
                                this paragraph apply, and
                          (iii) for which an unrelated third 
                        party has verified (in such form or 
                        manner as the Secretary may prescribe) 
                        that such facility produces hydrogen 
                        through a process which results in 
                        lifecycle greenhouse gas emissions 
                        which are consistent with the hydrogen 
                        that such facility was designed and 
                        expected to produce under subparagraph 
                        (A)(ii).
                  (D) Qualified clean hydrogen.--For purposes 
                of this paragraph, the term ``qualified clean 
                hydrogen'' has the meaning given such term by 
                section 45V(c)(2).
                  (E) Regulations.--The Secretary shall issue 
                such regulations or other guidance as the 
                Secretary determines necessary to carry out the 
                purposes of this section, including regulations 
                or other guidance which recaptures so much of 
                any credit allowed under this section as 
                exceeds the amount of the credit which would 
                have been allowed if the expected production 
                were consistent with the actual verified 
                production (or all of the credit so allowed in 
                the absence of such verification).
          (16) Regulations and guidance.--The Secretary shall 
        issue such regulations or other guidance as the 
        Secretary determines necessary to carry out the 
        purposes of this subsection, including regulations or 
        other guidance which provides for requirements for 
        recordkeeping or information reporting for purposes of 
        administering the requirements of this subsection.
  (b) Certain progress expenditure rules made applicable.--
Rules similar to the rules of subsections (c)(4) and (d) of 
section 46 (as in effect on the day before the date of the 
enactment of the Revenue Reconciliation Act of 1990) shall 
apply for purposes of subsection (a).
  (c) Definitions.--For purposes of this section--
          (1) Qualified fuel cell property.--
                  (A) In general.--The term ``qualified fuel 
                cell property'' means a fuel cell power plant 
                which--
                          (i) has a nameplate capacity of at 
                        least 0.5 kilowatt (1 kilowatt in the 
                        case of a fuel cell power plant with a 
                        linear generator assembly) of 
                        electricity using an electrochemical or 
                        electromechanical process, and
                          (ii) has an electricity-only 
                        generation efficiency greater than 30 
                        percent.
                  (B) Limitation.--In the case of qualified 
                fuel cell property placed in service during the 
                taxable year, the credit otherwise determined 
                under subsection (a) for such year with respect 
                to such property shall not exceed an amount 
                equal to $1,500 for each 0.5 kilowatt of 
                capacity of such property.
                  (C) Fuel cell power plant.--The term ``fuel 
                cell power plant'' means an integrated system 
                comprised of a fuel cell stack assembly, or 
                linear generator assembly, and associated 
                balance of plant components which converts a 
                fuel into electricity using electrochemical or 
                electromechanical means.
                  (D) Linear generator assembly.--The term 
                ``linear generator assembly'' does not include 
                any assembly which contains rotating parts.
                  (E) Termination.--The term ``qualified fuel 
                cell property'' shall not include any property 
                the construction of which does not begin before 
                January 1, 2025.
          (2) Qualified microturbine property.--
                  (A) In general.--The term ``qualified 
                microturbine property'' means a stationary 
                microturbine power plant which--
                          (i) has a nameplate capacity of less 
                        than 2,000 kilowatts, and
                          (ii) has an electricity-only 
                        generation efficiency of not less than 
                        26 percent at International Standard 
                        Organization conditions.
                  (B) Limitation.--In the case of qualified 
                microturbine property placed in service during 
                the taxable year, the credit otherwise 
                determined under subsection (a) for such year 
                with respect to such property shall not exceed 
                an amount equal to $200 for each kilowatt of 
                capacity of such property.
                  (C) Stationary microturbine power plant.--The 
                term ``stationary microturbine power plant'' 
                means an integrated system comprised of a gas 
                turbine engine, a combustor, a recuperator or 
                regenerator, a generator or alternator, and 
                associated balance of plant components which 
                converts a fuel into electricity and thermal 
                energy. Such term also includes all secondary 
                components located between the existing 
                infrastructure for fuel delivery and the 
                existing infrastructure for power distribution, 
                including equipment and controls for meeting 
                relevant power standards, such as voltage, 
                frequency, and power factors.
                  (D) Termination.--The term ``qualified 
                microturbine property'' shall not include any 
                property the construction of which does not 
                begin before January 1, 2025.
          (3) Combined heat and power system property.--
                  (A) Combined heat and power system 
                property.--The term ``combined heat and power 
                system property'' means property comprising a 
                system--
                          (i) which 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),
                          (ii) which produces--
                                  (I) at least 20 percent of 
                                its total useful energy in the 
                                form of thermal energy which is 
                                not used to produce electrical 
                                or mechanical power (or 
                                combination thereof), and
                                  (II) at least 20 percent of 
                                its total useful energy in the 
                                form of electrical or 
                                mechanical power (or 
                                combination thereof),
                          (iii) the energy efficiency 
                        percentage of which exceeds 60 percent, 
                        and
                          (iv) the construction of which begins 
                        before January 1, 2025.
                  (B) Limitation.--
                          (i) In general.--In the case of 
                        combined heat and power system property 
                        with an electrical capacity in excess 
                        of the applicable capacity placed in 
                        service during the taxable year, the 
                        credit under subsection (a)(1) 
                        (determined without regard to this 
                        paragraph) for such year shall be equal 
                        to the amount which bears the same 
                        ratio to such credit as the applicable 
                        capacity bears to the capacity of such 
                        property.
                          (ii) Applicable capacity.--For 
                        purposes of clause (i), the term 
                        ``applicable capacity'' means 15 
                        megawatts or a mechanical energy 
                        capacity of more than 20,000 horsepower 
                        or an equivalent combination of 
                        electrical and mechanical energy 
                        capacities.
                          (iii) Maximum capacity.--The term 
                        ``combined heat and power system 
                        property'' shall not include any 
                        property comprising a system if such 
                        system has a capacity in excess of 50 
                        megawatts or a mechanical energy 
                        capacity in excess of 67,000 horsepower 
                        or an equivalent combination of 
                        electrical and mechanical energy 
                        capacities.
                  (C) Special rules.--
                          (i) Energy efficiency percentage.--
                        For purposes of this paragraph, the 
                        energy efficiency percentage of a 
                        system is the fraction--
                                  (I) the numerator of which is 
                                the total useful electrical, 
                                thermal, and mechanical power 
                                produced by the system at 
                                normal operating rates, and 
                                expected to be consumed in its 
                                normal application, and
                                  (II) the denominator of which 
                                is the lower heating value of 
                                the fuel sources for the 
                                system.
                          (ii) Determinations made on Btu 
                        basis.--The energy efficiency 
                        percentage and the percentages under 
                        subparagraph (A)(ii) shall be 
                        determined on a Btu basis.
                          (iii) Input and output property not 
                        included.--The term ``combined heat and 
                        power system property'' does not 
                        include property used to transport the 
                        energy source to the facility or to 
                        distribute energy produced by the 
                        facility.
                  (D) Systems using biomass.--If a system is 
                designed to use biomass (within the meaning of 
                paragraphs (2) and (3) of section 45(c) without 
                regard to the last sentence of paragraph 
                (3)(A)) for at least 90 percent of the energy 
                source--
                          (i) subparagraph (A)(iii) shall not 
                        apply, but
                          (ii) the amount of credit determined 
                        under subsection (a) with respect to 
                        such system shall not exceed the amount 
                        which bears the same ratio to such 
                        amount of credit (determined without 
                        regard to this subparagraph) as the 
                        energy efficiency percentage of such 
                        system bears to 60 percent.
          (4) Qualified small wind energy property.--
                  (A) In general.--The term ``qualified small 
                wind energy property'' means property which 
                uses a qualifying small wind turbine to 
                generate electricity.
                  (B) Qualifying small wind turbine.--The term 
                ``qualifying small wind turbine'' means a wind 
                turbine which has a nameplate capacity of not 
                more than 100 kilowatts.
                  (C) Termination.--The term ``qualified small 
                wind energy property'' shall not include any 
                property the construction of which does not 
                begin before January 1, 2025.
          (5) Waste energy recovery property.--
                  (A) In general.--The term ``waste energy 
                recovery property'' means property that 
                generates electricity solely from heat from 
                buildings or equipment if the primary purpose 
                of such building or equipment is not the 
                generation of electricity.
                  (B) Capacity limitation.--The term ``waste 
                energy recovery property'' shall not include 
                any property which has a capacity in excess of 
                50 megawatts.
                  (C) No double benefit.--Any waste energy 
                recovery property (determined without regard to 
                this subparagraph) which is part of a system 
                which is a combined heat and power system 
                property shall not be treated as waste energy 
                recovery property for purposes of this section 
                unless the taxpayer elects to not treat such 
                system as a combined heat and power system 
                property for purposes of this section.
                  (D) Termination.--The term ``waste energy 
                recovery property'' shall not include any 
                property the construction of which does not 
                begin before January 1, 2025.
          (6) Energy storage technology.--
                  (A) In general.--The term ``energy storage 
                technology'' means--
                          (i) property (other than property 
                        primarily used in the transportation of 
                        goods or individuals and not for the 
                        production of electricity) which 
                        receives, stores, and delivers energy 
                        for conversion to electricity (or, in 
                        the case of hydrogen, which stores 
                        energy), and has a nameplate capacity 
                        of not less than 5 kilowatt hours, and
                          (ii) thermal energy storage property.
                  (B) Modifications of certain property.--In 
                the case of any property which either--
                          (i) was placed in service before the 
                        date of enactment of this section and 
                        would be described in subparagraph 
                        (A)(i), except that such property has a 
                        capacity of less than 5 kilowatt hours 
                        and is modified in a manner that such 
                        property (after such modification) has 
                        a nameplate capacity of not less than 5 
                        kilowatt hours, or
                          (ii) is described in subparagraph 
                        (A)(i) and is modified in a manner that 
                        such property (after such modification) 
                        has an increase in nameplate capacity 
                        of not less than 5 kilowatt hours,
                such property shall be treated as described in 
                subparagraph (A)(i) except that the basis of 
                any existing property prior to such 
                modification shall not be taken into account 
                for purposes of this section. In the case of 
                any property to which this subparagraph 
                applies, subparagraph (D) shall be applied by 
                substituting ``modification'' for 
                ``construction''.
                  (C) Thermal energy storage property.--
                          (i) In general.--Subject to clause 
                        (ii), for purposes of this paragraph, 
                        the term ``thermal energy storage 
                        property'' means property comprising a 
                        system which--
                                  (I) is directly connected to 
                                a heating, ventilation, or air 
                                conditioning system,
                                  (II) removes heat from, or 
                                adds heat to, a storage medium 
                                for subsequent use, and
                                  (III) provides energy for the 
                                heating or cooling of the 
                                interior of a residential or 
                                commercial building.
                          (ii) Exclusion.--The term ``thermal 
                        energy storage property'' shall not 
                        include--
                                  (I) a swimming pool,
                                  (II) combined heat and power 
                                system property, or
                                  (III) a building or its 
                                structural components.
                  (D) Termination.--The term ``energy storage 
                technology'' shall not include any property the 
                construction of which begins after December 31, 
                2024.
          (7) Qualified biogas property.--
                  (A) In general.--The term ``qualified biogas 
                property'' means property comprising a system 
                which--
                          (i) converts biomass (as defined in 
                        section 45K(c)(3), as in effect on the 
                        date of enactment of this paragraph) 
                        into a gas which--
                                  (I) consists of not less than 
                                52 percent methane by volume, 
                                or
                                  (II) is concentrated by such 
                                system into a gas which 
                                consists of not less than 52 
                                percent methane, and
                          (ii) captures such gas for sale or 
                        productive use, and not for disposal 
                        via combustion.
                  (B) Inclusion of cleaning and conditioning 
                property.--The term ``qualified biogas 
                property'' includes any property which is part 
                of such system which cleans or conditions such 
                gas.
                  (C) Termination.--The term ``qualified biogas 
                property'' shall not include any property the 
                construction of which begins after December 31, 
                2024.
          (8) Microgrid controller.--
                  (A) In general.--The term ``microgrid 
                controller'' means equipment which is--
                          (i) part of a qualified microgrid, 
                        and
                          (ii) designed and used to monitor and 
                        control the energy resources and loads 
                        on such microgrid.
                  (B) Qualified microgrid.--The term 
                ``qualified microgrid'' means an electrical 
                system which--
                          (i) includes equipment which is 
                        capable of generating not less than 4 
                        kilowatts and not greater than 20 
                        megawatts of electricity,
                          (ii) is capable of operating--
                                  (I) in connection with the 
                                electrical grid and as a single 
                                controllable entity with 
                                respect to such grid, and
                                  (II) independently (and 
                                disconnected) from such grid, 
                                and
                          (iii) is not part of a bulk-power 
                        system (as defined in section 215 of 
                        the Federal Power Act (16 U.S.C. 
                        824o)).
                  (C) Termination.--The term ``microgrid 
                controller'' shall not include any property the 
                construction of which begins after December 31, 
                2024.
  (d) Coordination with Department of Treasury grants.--In the 
case of any property with respect to which the Secretary makes 
a grant under section 1603 of the American Recovery and 
Reinvestment Tax Act of 2009--
          (1) Denial of production and investment credits.--No 
        credit shall be determined under this section or 
        section 45 with respect to such property for the 
        taxable year in which such grant is made or any 
        subsequent taxable year.
          (2) Recapture of credits for progress expenditures 
        made before grant.--If a credit was determined under 
        this section with respect to such property for any 
        taxable year ending before such grant is made--
                  (A) the tax imposed under subtitle A on the 
                taxpayer for the taxable year in which such 
                grant is made shall be increased by so much of 
                such credit as was allowed under section 38,
                  (B) the general business carryforwards under 
                section 39 shall be adjusted so as to recapture 
                the portion of such credit which was not so 
                allowed, and
                  (C) the amount of such grant shall be 
                determined without regard to any reduction in 
                the basis of such property by reason of such 
                credit.
          (3) Treatment of grants.--Any such grant--
                  (A) shall not be includible in the gross 
                income or alternative minimum taxable income of 
                the taxpayer, but
                  (B) shall be taken into account in 
                determining the basis of the property to which 
                such grant relates, except that the basis of 
                such property shall be reduced under section 
                50(c) in the same manner as a credit allowed 
                under subsection (a).
  (e) Special rules for certain solar and wind facilities 
placed in service in connection with low-income communities.--
          (1) In general.--In the case of any qualified solar 
        and wind facility with respect to which the Secretary 
        makes an allocation of environmental justice solar and 
        wind capacity limitation under paragraph (4)--
                  (A) the energy percentage otherwise 
                determined under paragraph (2) or (5) of 
                subsection (a) with respect to any eligible 
                property which is part of such facility shall 
                be increased by--
                          (i) in the case of a facility 
                        described in subclause (I) of paragraph 
                        (2)(A)(iii) and not described in 
                        subclause (II) of such paragraph, 10 
                        percentage points, and
                          (ii) in the case of a facility 
                        described in subclause (II) of 
                        paragraph (2)(A)(iii), 20 percentage 
                        points, and
                  (B) the increase in the credit determined 
                under subsection (a) by reason of this 
                subsection for any taxable year with respect to 
                all property which is part of such facility 
                shall not exceed the amount which bears the 
                same ratio to the amount of such increase 
                (determined without regard to this 
                subparagraph) as--
                          (i) the environmental justice solar 
                        and wind capacity limitation allocated 
                        to such facility, bears to
                          (ii) the total megawatt nameplate 
                        capacity of such facility, as measured 
                        in direct current.
          (2) Qualified solar and wind facility.--For purposes 
        of this subsection--
                  (A) In general.--The term ``qualified solar 
                and wind facility'' means any facility--
                          (i) which generates electricity 
                        solely from property described in 
                        section 45(d)(1) or in clause (i) or 
                        (vi) of subsection (a)(3)(A),
                          (ii) which has a maximum net output 
                        of less than 5 megawatts (as measured 
                        in alternating current), and
                          (iii) which--
                                  (I) is located in a low-
                                income community (as defined in 
                                section 45D(e)) or on Indian 
                                land (as defined in section 
                                2601(2) of the Energy Policy 
                                Act of 1992 (25 U.S.C. 
                                3501(2))), or
                                  (II) is part of a qualified 
                                low-income residential building 
                                project or a qualified low-
                                income economic benefit 
                                project.
                  (B) Qualified low-income residential building 
                project.--A facility shall be treated as part 
                of a qualified low-income residential building 
                project if--
                          (i) such facility is installed on a 
                        residential rental building which 
                        participates in a covered housing 
                        program (as defined in section 41411(a) 
                        of the Violence Against Women Act of 
                        1994 (34 U.S.C. 12491(a)(3)), a housing 
                        assistance program administered by the 
                        Department of Agriculture under title V 
                        of the Housing Act of 1949, a housing 
                        program administered by a tribally 
                        designated housing entity (as defined 
                        in section 4(22) of the Native American 
                        Housing Assistance and Self-
                        Determination Act of 1996 (25 U.S.C. 
                        4103(22))) or such other affordable 
                        housing programs as the Secretary may 
                        provide, and
                          (ii) the financial benefits of the 
                        electricity produced by such facility 
                        are allocated equitably among the 
                        occupants of the dwelling units of such 
                        building.
                  (C) Qualified low-income economic benefit 
                project.--A facility shall be treated as part 
                of a qualified low-income economic benefit 
                project if at least 50 percent of the financial 
                benefits of the electricity produced by such 
                facility are provided to households with income 
                of--
                          (i) less than 200 percent of the 
                        poverty line (as defined in section 
                        36B(d)(3)(A)) applicable to a family of 
                        the size involved, or
                          (ii) less than 80 percent of area 
                        median gross income (as determined 
                        under section 142(d)(2)(B)).
                  (D) Financial benefit.--For purposes of 
                subparagraphs (B) and (C), electricity acquired 
                at a below-market rate shall not fail to be 
                taken into account as a financial benefit.
          (3) Eligible property.--For purposes of this section, 
        the term ``eligible property'' means energy property 
        which--
                  (A) is part of a facility described in 
                section 45(d)(1) for which an election was made 
                under subsection (a)(5), or
                  (B) is described in clause (i) or (vi) of 
                subsection (a)(3)(A),
        including energy storage technology (as described in 
        subsection (a)(3)(A)(ix)) installed in connection with 
        such energy property.
          (4) Allocations.--
                  (A) In general.--Not later than 180 days 
                after the date of enactment of this subsection, 
                the Secretary shall establish a program to 
                allocate amounts of environmental justice solar 
                and wind capacity limitation to qualified solar 
                and wind facilities. In establishing such 
                program and to carry out the purposes of this 
                subsection, the Secretary shall provide 
                procedures to allow for an efficient allocation 
                process, including, when determined 
                appropriate, consideration of multiple projects 
                in a single application if such projects will 
                be placed in service by a single taxpayer.
                  (B) Limitation.--The amount of environmental 
                justice solar and wind capacity limitation 
                allocated by the Secretary under subparagraph 
                (A) during any calendar year shall not exceed 
                the annual capacity limitation with respect to 
                such year.
                  (C) Annual capacity limitation.--For purposes 
                of this paragraph, the term ``annual capacity 
                limitation'' means 1.8 gigawatts of direct 
                current capacity for each of calendar years 
                2023 and 2024, and zero thereafter.
                  (D) Carryover of unused limitation.--If the 
                annual capacity limitation for any calendar 
                year exceeds the aggregate amount allocated for 
                such year under this paragraph, such limitation 
                for the succeeding calendar year shall be 
                increased by the amount of such excess. No 
                amount may be carried under the preceding 
                sentence to any calendar year after 2024 
                [except as provided in section 
                48E(h)(4)(D)(ii)].
                  (E) Placed in service deadline.--
                          (i) In general.--Paragraph (1) shall 
                        not apply with respect to any property 
                        which is placed in service after the 
                        date that is 4 years after the date of 
                        the allocation with respect to the 
                        facility of which such property is a 
                        part.
                          (ii) Application of carryover.--Any 
                        amount of environmental justice solar 
                        and wind capacity limitation which 
                        expires under clause (i) during any 
                        calendar year shall be taken into 
                        account as an excess described in 
                        subparagraph (D) (or as an increase in 
                        such excess) for such calendar year, 
                        subject to the limitation imposed by 
                        the last sentence of such subparagraph.
          (5) Recapture.--The Secretary shall, by regulations 
        or other guidance, provide for recapturing the benefit 
        of any increase in the credit allowed under subsection 
        (a) by reason of this subsection with respect to any 
        property which ceases to be property eligible for such 
        increase (but which does not cease to be investment 
        credit property within the meaning of section 50(a)). 
        The period and percentage of such recapture shall be 
        determined under rules similar to the rules of section 
        50(a). To the extent provided by the Secretary, such 
        recapture may not apply with respect to any property 
        if, within 12 months after the date the taxpayer 
        becomes aware (or reasonably should have become aware) 
        of such property ceasing to be property eligible for 
        such increase, the eligibility of such property for 
        such increase is restored. The preceding sentence shall 
        not apply more than once with respect to any facility.

           *       *       *       *       *       *       *


SEC. 48C. QUALIFYING ADVANCED ENERGY PROJECT CREDIT.

  (a) In general.--For purposes of section 46, the qualifying 
advanced energy project credit for any taxable year is an 
amount equal to 30 percent of the qualified investment for such 
taxable year with respect to any qualifying advanced energy 
project of the taxpayer.
  (b) Qualified investment.--
          (1) In general.--For purposes of subsection (a), the 
        qualified investment for any taxable year is the basis 
        of eligible property placed in service by the taxpayer 
        during such taxable year which is part of a qualifying 
        advanced energy project.
          (2) Certain qualified progress expenditures rules 
        made applicable.--Rules similar to the rules of 
        subsections (c)(4) and (d) of section 46 (as in effect 
        on the day before the enactment of the Revenue 
        Reconciliation Act of 1990) shall apply for purposes of 
        this section.
          (3) Limitation.--The amount which is treated as the 
        qualified investment for all taxable years with respect 
        to any qualifying advanced energy project shall not 
        exceed the amount designated by the Secretary as 
        eligible for the credit under this section.
  (c) Definitions.--
          (1) Qualifying advanced energy project.--
                  (A) In general.--The term ``qualifying 
                advanced energy project'' means a project, any 
                portion of the qualified investment of which is 
                certified by the Secretary under subsection (e) 
                as eligible for a credit under this section--
                          (i) which re-equips, expands, or 
                        establishes an industrial or 
                        manufacturing facility for the 
                        production or recycling of--
                                  (I) property designed to be 
                                used to produce energy from the 
                                sun, water, wind, geothermal 
                                deposits (within the meaning of 
                                section 613(e)(2)), or other 
                                renewable resources,
                                  (II) fuel cells, 
                                microturbines, or energy 
                                storage systems and components,
                                  (III) electric grid 
                                modernization equipment or 
                                components,
                                  (IV) property designed to 
                                capture, remove, use, or 
                                sequester carbon oxide 
                                emissions,
                                  (V) equipment designed to 
                                refine, electrolyze, or blend 
                                any fuel, chemical, or product 
                                which is--
                                          (aa) renewable, or
                                          (bb) low-carbon and 
                                        low-emission,
                                  (VI) property designed to 
                                produce energy conservation 
                                technologies (including 
                                residential, commercial, and 
                                industrial applications),
                                  (VII) light-, medium-, or 
                                heavy-duty electric or fuel 
                                cell vehicles, as well as--
                                          (aa) technologies, 
                                        components, or 
                                        materials for such 
                                        vehicles, and
                                          (bb) associated 
                                        charging or refueling 
                                        infrastructure,
                                  (VIII) hybrid vehicles with a 
                                gross vehicle weight rating of 
                                not less than 14,000 pounds, as 
                                well as technologies, 
                                components, or materials for 
                                such vehicles, or
                                  (IX) other advanced energy 
                                property designed to reduce 
                                greenhouse gas emissions as may 
                                be determined by the Secretary,
                          (ii) which re-equips an industrial or 
                        manufacturing facility with equipment 
                        designed to reduce greenhouse gas 
                        emissions by at least 20 percent 
                        through the installation of--
                                  (I) low- or zero-carbon 
                                process heat systems,
                                  (II) carbon capture, 
                                transport, utilization and 
                                storage systems,
                                  (III) energy efficiency and 
                                reduction in waste from 
                                industrial processes, or
                                  (IV) any other industrial 
                                technology designed to reduce 
                                greenhouse gas emissions, as 
                                determined by the Secretary, or
                          (iii) which re-equips, expands, or 
                        establishes an industrial facility for 
                        the processing, refining, or recycling 
                        of critical materials (as defined in 
                        section 7002(a) of the Energy Act of 
                        2020 (30 U.S.C. 1606(a)).
                  (B) Exception.--Such term shall not include 
                any portion of a project for the production of 
                any property which is used in the refining or 
                blending of any transportation fuel (other than 
                renewable fuels).
          (2) Eligible property.--The term ``eligible 
        property'' means any property--
                  (A) which is necessary for--
                          (i) the production or recycling of 
                        property described in clause (i) of 
                        paragraph (1)(A),
                          (ii) re-equipping an industrial or 
                        manufacturing facility described in 
                        clause (ii) of such paragraph, or
                          (iii) re-equipping, expanding, or 
                        establishing an industrial facility 
                        described in clause (iii) of such 
                        paragraph,
                  (B) which is--
                          (i) tangible personal property, or
                          (ii) other tangible property (not 
                        including a building or its structural 
                        components), but only if such property 
                        is used as an integral part of the 
                        qualified investment credit facility, 
                        and
                  (C) with respect to which depreciation (or 
                amortization in lieu of depreciation) is 
                allowable.
  (d) Qualifying advanced energy project program.--
          (1) Establishment.--
                  (A) In general.--Not later than 180 days 
                after the date of enactment of this section, 
                the Secretary, in consultation with the 
                Secretary of Energy, shall establish a 
                qualifying advanced energy project program to 
                consider and award certifications for qualified 
                investments eligible for credits under this 
                section to qualifying advanced energy project 
                sponsors.
                  (B) Limitation.--The total amount of credits 
                that may be allocated under the program shall 
                not exceed $2,300,000,000.
          (2) Certification.--
                  (A) Application period.--Each applicant for 
                certification under this paragraph shall submit 
                an application containing such information as 
                the Secretary may require during the 2-year 
                period beginning on the date the Secretary 
                establishes the program under paragraph (1).
                  (B) Time to meet criteria for 
                certification.--Each applicant for 
                certification shall have 1 year from the date 
                of acceptance by the Secretary of the 
                application during which to provide to the 
                Secretary evidence that the requirements of the 
                certification have been met.
                  (C) Period of issuance.--An applicant which 
                receives a certification shall have 3 years 
                from the date of issuance of the certification 
                in order to place the project in service and if 
                such project is not placed in service by that 
                time period, then the certification shall no 
                longer be valid.
          (3) Selection criteria.--In determining which 
        qualifying advanced energy projects to certify under 
        this section, the Secretary--
                  (A) shall take into consideration only those 
                projects where there is a reasonable 
                expectation of commercial viability, and
                  (B) shall take into consideration which 
                projects--
                          (i) will provide the greatest 
                        domestic job creation (both direct and 
                        indirect) during the credit period,
                          (ii) will provide the greatest net 
                        impact in avoiding or reducing air 
                        pollutants or anthropogenic emissions 
                        of greenhouse gases,
                          (iii) have the greatest potential for 
                        technological innovation and commercial 
                        deployment,
                          (iv) have the lowest levelized cost 
                        of generated or stored energy, or of 
                        measured reduction in energy 
                        consumption or greenhouse gas emission 
                        (based on costs of the full supply 
                        chain), and
                          (v) have the shortest project time 
                        from certification to completion.
          (4) Review and redistribution.--
                  (A) Review.--Not later than 4 years after the 
                date of enactment of this section, the 
                Secretary shall review the credits allocated 
                under this section as of such date.
                  (B) Redistribution.--The Secretary may 
                reallocate credits awarded under this section 
                if the Secretary determines that--
                          (i) there is an insufficient quantity 
                        of qualifying applications for 
                        certification pending at the time of 
                        the review, or
                          (ii) any certification made pursuant 
                        to paragraph (2) has been revoked 
                        pursuant to paragraph (2)(B) because 
                        the project subject to the 
                        certification has been delayed as a 
                        result of third party opposition or 
                        litigation to the proposed project.
                  (C) Reallocation.--If the Secretary 
                determines that credits under this section are 
                available for reallocation pursuant to the 
                requirements set forth in paragraph (2), the 
                Secretary is authorized to conduct an 
                additional program for applications for 
                certification.
          (5) Disclosure of allocations.--The Secretary shall, 
        upon making a certification under this subsection, 
        publicly disclose the identity of the applicant and the 
        amount of the credit with respect to such applicant.
  (e) Additional allocations.--
          (1) In general.--Not later than 180 days after the 
        date of enactment of this subsection, the Secretary 
        shall establish a program to consider and award 
        certifications for qualified investments eligible for 
        credits under this section to qualifying advanced 
        energy project sponsors.
          (2) Limitation.--The total amount of credits which 
        may be allocated under the program established under 
        paragraph (1) shall not exceed $10,000,000,000, of 
        which not greater than $6,000,000,000 may be allocated 
        to qualified investments which are not located within a 
        census tract which--
                  (A) is described in clause (iii) of section 
                45(b)(11)(B), and
                  (B) prior to the date of enactment of this 
                subsection, had no project which received a 
                certification and allocation of credits under 
                subsection (d).
          (3) Certifications.--
                  (A) Application requirement.--Each applicant 
                for certification under this subsection shall 
                submit an application at such time and 
                containing such information as the Secretary 
                may require.
                  (B) Time to meet criteria for 
                certification.--Each applicant for 
                certification shall have 2 years from the date 
                of acceptance by the Secretary of the 
                application during which to provide to the 
                Secretary evidence that the requirements of the 
                certification have been met.
                  (C) Period of issuance.--An applicant which 
                receives a certification shall have 2 years 
                from the date of issuance of the certification 
                in order to place the project in service and to 
                notify the Secretary that such project has been 
                so placed in service, and if such project is 
                not placed in service by that time period, then 
                the certification shall no longer be valid. If 
                any certification is revoked under this 
                subparagraph, the amount of the limitation 
                under paragraph (2) shall be increased by the 
                amount of the credit with respect to such 
                revoked certification.
                  (D) Location of project.--In the case of an 
                applicant which receives a certification, if 
                the Secretary determines that the project has 
                been placed in service at a location which is 
                materially different than the location 
                specified in the application for such project, 
                the certification shall no longer be valid.
          (4) Credit rate conditioned upon wage and 
        apprenticeship requirements.--
                  (A) Base rate.--For purposes of allocations 
                under this subsection, the amount of the credit 
                determined under subsection (a) shall be 
                determined by substituting ``6 percent'' for 
                ``30 percent''.
                  (B) Alternative rate.--In the case of any 
                project which satisfies the requirements of 
                paragraphs (5)(A) and (6), subparagraph (A) 
                shall not apply.
          (5) Prevailing wage requirements.--
                  (A) In general.--The requirements described 
                in this subparagraph with respect to a project 
                are that the taxpayer shall ensure that any 
                laborers and mechanics employed by the taxpayer 
                or any contractor or subcontractor in the re-
                equipping, expansion, or establishment of a 
                manufacturing facility shall be paid wages at 
                rates not less than the prevailing rates for 
                construction, alteration, or repair of a 
                similar character in the locality in which such 
                project is located as most recently determined 
                by the Secretary of Labor, in accordance with 
                subchapter IV of chapter 31 of title 40, United 
                States Code.
                  (B) Correction and penalty related to failure 
                to satisfy wage requirements.--Rules similar to 
                the rules of section 45(b)(7)(B) shall apply.
          (6) Apprenticeship requirements.--Rules similar to 
        the rules of section 45(b)(8) shall apply.
          (7) Disclosure of allocations.--The Secretary shall, 
        upon making a certification under this subsection, 
        publicly disclose the identity of the applicant and the 
        amount of the credit with respect to such applicant.
  (f) Denial of double benefit.--A credit shall not be allowed 
under this section for any qualified investment for which a 
credit is allowed under section 48, 48A, 48B, [48E,] 45Q, or 
45V.

           *       *       *       *       *       *       *


[SEC. 48E. CLEAN ELECTRICITY INVESTMENT CREDIT.

  [(a) Investment credit for qualified property.--
          [(1) In general.--For purposes of section 46, the 
        clean electricity investment credit for any taxable 
        year is an amount equal to the applicable percentage of 
        the qualified investment for such taxable year with 
        respect to--
                  [(A) any qualified facility, and
                  [(B) any energy storage technology.
          [(2) Applicable percentage.--
                  [(A) Qualified facilities.--Subject to 
                paragraph (3)--
                          [(i) Base rate.--In the case of any 
                        qualified facility which is not 
                        described in subclause (I) or (II) of 
                        clause (ii) and does not satisfy the 
                        requirements described in subclause 
                        (III) of such clause, the applicable 
                        percentage shall be 6 percent.
                          [(ii) Alternative rate.--In the case 
                        of any qualified facility--
                                  [(I) with a maximum net 
                                output of less than 1 megawatt 
                                (as measured in alternating 
                                current),
                                  [(II) the construction of 
                                which begins prior to the date 
                                that is 60 days after the 
                                Secretary publishes guidance 
                                with respect to the 
                                requirements of paragraphs (3) 
                                and (4) of subsection (d), or
                                  [(III) which--
                                          [(aa) satisfies the 
                                        requirements of 
                                        subsection (d)(3), and
                                          [(bb) with respect to 
                                        the construction of 
                                        such facility, 
                                        satisfies the 
                                        requirements of 
                                        subsection (d)(4),
                 the applicable percentage shall be 30 percent.
                  [(B) Energy storage technology.--Subject to 
                paragraph (3)--
                          [(i) Base rate.--In the case of any 
                        energy storage technology which is not 
                        described in subclause (I) or (II) of 
                        clause (ii) and does not satisfy the 
                        requirements described in subclause 
                        (III) of such clause, the applicable 
                        percentage shall be 6 percent.
                          [(ii) Alternative rate.--In the case 
                        of any energy storage technology--
                                  [(I) with a capacity of less 
                                than 1 megawatt,
                                  [(II) the construction of 
                                which begins prior to the date 
                                that is 60 days after the 
                                Secretary publishes guidance 
                                with respect to the 
                                requirements of paragraphs (3) 
                                and (4) of subsection (d), or
                                  [(III) which--
                                          [(aa) satisfies the 
                                        requirements of 
                                        subsection (d)(3), and
                                          [(bb) with respect to 
                                        the construction of 
                                        such property, 
                                        satisfies the 
                                        requirements of 
                                        subsection (d)(4),
                 the applicable percentage shall be 30 percent.
          [(3) Increase in credit rate in certain cases.--
                  [(A) Energy communities.--
                          [(i) In general.--In the case of any 
                        qualified investment with respect to a 
                        qualified facility or with respect to 
                        energy storage technology which is 
                        placed in service within an energy 
                        community (as defined in section 
                        45(b)(11)(B)), for purposes of applying 
                        paragraph (2) with respect to such 
                        property or investment, the applicable 
                        percentage shall be increased by the 
                        applicable credit rate increase.
                          [(ii) Applicable credit rate 
                        increase.--For purposes of clause (i), 
                        the applicable credit rate increase 
                        shall be an amount equal to--
                                  [(I) in the case of any 
                                qualified investment with 
                                respect to a qualified facility 
                                described in paragraph 
                                (2)(A)(i) or with respect to 
                                energy storage technology 
                                described in paragraph 
                                (2)(B)(i), 2 percentage points, 
                                and
                                  [(II) in the case of any 
                                qualified investment with 
                                respect to a qualified facility 
                                described in paragraph 
                                (2)(A)(ii) or with respect to 
                                energy storage technology 
                                described in paragraph 
                                (2)(B)(ii), 10 percentage 
                                points.
                  [(B) Domestic content.--Rules similar to the 
                rules of section 48(a)(12) shall apply.
  [(b) Qualified investment with respect to a qualified 
facility.--
          [(1) In general.--For purposes of subsection (a), the 
        qualified investment with respect to any qualified 
        facility for any taxable year is the sum of--
                  [(A) the basis of any qualified property 
                placed in service by the taxpayer during such 
                taxable year which is part of a qualified 
                facility, plus
                  [(B) the amount of any expenditures which 
                are--
                          [(i) paid or incurred by the taxpayer 
                        for qualified interconnection 
                        property--
                                  [(I) in connection with a 
                                qualified facility which has a 
                                maximum net output of not 
                                greater than 5 megawatts (as 
                                measured in alternating 
                                current), and
                                  [(II) placed in service 
                                during the taxable year of the 
                                taxpayer, and
                          [(ii) properly chargeable to capital 
                        account of the taxpayer.
          [(2) Qualified property.--For purposes of this 
        section, the term ``qualified property'' means 
        property--
                  [(A) which is--
                          [(i) tangible personal property, or
                          [(ii) other tangible property (not 
                        including a building or its structural 
                        components), but only if such property 
                        is used as an integral part of the 
                        qualified facility,
                  [(B) with respect to which depreciation (or 
                amortization in lieu of depreciation) is 
                allowable, and
                  [(C)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, 
                or
                  [(ii) which is acquired by the taxpayer if 
                the original use of such property commences 
                with the taxpayer.
          [(3) Qualified facility.--
                  [(A) In general.--For purposes of this 
                section, the term ``qualified facility'' means 
                a facility--
                          [(i) which is used for the generation 
                        of electricity,
                          [(ii) which is placed in service 
                        after December 31, 2024, and
                          [(iii) for which the anticipated 
                        greenhouse gas emissions rate (as 
                        determined under subparagraph (B)(ii)) 
                        is not greater than zero.
                  [(B) Additional rules.--
                          [(i) Expansion of facility; 
                        incremental production.--Rules similar 
                        to the rules of section 45Y(b)(1)(C) 
                        shall apply for purposes of this 
                        paragraph.
                          [(ii) Greenhouse gas emissions 
                        rate.--Rules similar to the rules of 
                        section 45Y(b)(2) shall apply for 
                        purposes of this paragraph.
                  [(C) Exclusion.--The term ``qualified 
                facility'' shall not include any facility for 
                which--
                          [(i) a renewable electricity 
                        production credit determined under 
                        section 45,
                          [(ii) an advanced nuclear power 
                        facility production credit determined 
                        under section 45J,
                          [(iii) a carbon oxide sequestration 
                        credit determined under section 45Q,
                          [(iv) a zero-emission nuclear power 
                        production credit determined under 
                        section 45U,
                          [(v) a clean electricity production 
                        credit determined under section 45Y,
                          [(vi) an energy credit determined 
                        under section 48, or
                          [(vii) a qualifying advanced coal 
                        project credit under section 48A,
                is allowed under section 38 for the taxable 
                year or any prior taxable year.
          [(4) Qualified interconnection property.--For 
        purposes of this paragraph, the term ``qualified 
        interconnection property'' has the meaning given such 
        term in section 48(a)(8)(B).
          [(5) Coordination with rehabilitation credit.--The 
        qualified investment with respect to any qualified 
        facility for any taxable year shall not include that 
        portion of the basis of any property which is 
        attributable to qualified rehabilitation expenditures 
        (as defined in section 47(c)(2)).
          [(6) Definitions.--For purposes of this subsection, 
        the terms ``CO2e per KWh'' and ``greenhouse gas 
        emissions rate'' have the same meaning given such terms 
        under section 45Y.
  [(c) Qualified investment with respect to energy storage 
technology.--
          [(1) Qualified investment.--For purposes of 
        subsection (a), the qualified investment with respect 
        to energy storage technology for any taxable year is 
        the basis of any energy storage technology placed in 
        service by the taxpayer during such taxable year.
          [(2) Energy storage technology.--For purposes of this 
        section, the term ``energy storage technology'' has the 
        meaning given such term in section 48(c)(6) (except 
        that subparagraph (D) of such section shall not apply).
  [(d) Special rules.--
          [(1) Certain progress expenditure rules made 
        applicable.--Rules similar to the rules of subsections 
        (c)(4) and (d) of section 46 (as in effect on the day 
        before the date of the enactment of the Revenue 
        Reconciliation Act of 1990) shall apply for purposes of 
        subsection (a).
          [(2) Special rule for property financed by subsidized 
        energy financing or private activity bonds.--Rules 
        similar to the rules of section 45(b)(3) shall apply.
          [(3) Prevailing wage requirements.--Rules similar to 
        the rules of section 48(a)(10) shall apply.
          [(4) Apprenticeship requirements.--Rules similar to 
        the rules of section 45(b)(8) shall apply.
          [(5) Domestic content requirement for elective 
        payment.--In the case of a taxpayer making an election 
        under section 6417 with respect to a credit under this 
        section, rules similar to the rules of section 
        45Y(g)(12) shall apply.
  [(e) Credit phase-out.--
          [(1) In general.--The amount of the clean electricity 
        investment credit under subsection (a) for any 
        qualified investment with respect to any qualified 
        facility or energy storage technology the construction 
        of which begins during a calendar year described in 
        paragraph (2) shall be equal to the product of--
                  [(A) the amount of the credit determined 
                under subsection (a) without regard to this 
                subsection, multiplied by
                  [(B) the phase-out percentage under paragraph 
                (2).
          [(2) Phase-out percentage.--The phase-out percentage 
        under this paragraph is equal to--
                  [(A) for any qualified investment with 
                respect to any qualified facility or energy 
                storage technology the construction of which 
                begins during the first calendar year following 
                the applicable year, 100 percent,
                  [(B) for any qualified investment with 
                respect to any qualified facility or energy 
                storage technology the construction of which 
                begins during the second calendar year 
                following the applicable year, 75 percent,
                  [(C) for any qualified investment with 
                respect to any qualified facility or energy 
                storage technology the construction of which 
                begins during the third calendar year following 
                the applicable year, 50 percent, and
                  [(D) for any qualified investment with 
                respect to any qualified facility or energy 
                storage technology the construction of which 
                begins during any calendar year subsequent to 
                the calendar year described in subparagraph 
                (C), 0 percent.
          [(3) Applicable year.--For purposes of this 
        subsection, the term ``applicable year'' has the same 
        meaning given such term in section 45Y(d)(3).
  [(f) Greenhouse gas.--In this section, the term ``greenhouse 
gas'' has the same meaning given such term under section 
45Y(e)(2).
  [(g) Recapture of credit.--For purposes of section 50, if the 
Secretary determines that the greenhouse gas emissions rate for 
a qualified facility is greater than 10 grams of 
CO2e per KWh, any property for which a credit was 
allowed under this section with respect to such facility shall 
cease to be investment credit property in the taxable year in 
which the determination is made.
  [(h) Special rules for certain facilities placed in service 
in connection with low-income communities.--
          [(1) In general.--In the case of any applicable 
        facility with respect to which the Secretary makes an 
        allocation of environmental justice capacity limitation 
        under paragraph (4)--
                  [(A) the applicable percentage otherwise 
                determined under subsection (a)(2) with respect 
                to any eligible property which is part of such 
                facility shall be increased by--
                          [(i) in the case of a facility 
                        described in subclause (I) of paragraph 
                        (2)(A)(iii) and not described in 
                        subclause (II) of such paragraph, 10 
                        percentage points, and
                          [(ii) in the case of a facility 
                        described in subclause (II) of 
                        paragraph (2)(A)(iii), 20 percentage 
                        points, and
                  [(B) the increase in the credit determined 
                under subsection (a) by reason of this 
                subsection for any taxable year with respect to 
                all property which is part of such facility 
                shall not exceed the amount which bears the 
                same ratio to the amount of such increase 
                (determined without regard to this 
                subparagraph) as--
                          [(i) the environmental justice 
                        capacity limitation allocated to such 
                        facility, bears to
                          [(ii) the total megawatt nameplate 
                        capacity of such facility, as measured 
                        in direct current.
          [(2) Applicable facility.--For purposes of this 
        subsection--
                  [(A) In general.--The term ``applicable 
                facility'' means any qualified facility--
                          [(i) which is not described in 
                        section 45Y(b)(2)(B),
                          [(ii) which has a maximum net output 
                        of less than 5 megawatts (as measured 
                        in alternating current), and
                          [(iii) which--
                                  [(I) is located in a low-
                                income community (as defined in 
                                section 45D(e)) or on Indian 
                                land (as defined in section 
                                2601(2) of the Energy Policy 
                                Act of 1992 (25 U.S.C. 
                                3501(2))), or
                                  [(II) is part of a qualified 
                                low-income residential building 
                                project or a qualified low-
                                income economic benefit 
                                project.
                  [(B) Qualified low-income residential 
                building project.--A facility shall be treated 
                as part of a qualified low-income residential 
                building project if--
                          [(i) such facility is installed on a 
                        residential rental building which 
                        participates in a covered housing 
                        program (as defined in section 41411(a) 
                        of the Violence Against Women Act of 
                        1994 (34 U.S.C. 12491(a)(3)), a housing 
                        assistance program administered by the 
                        Department of Agriculture under title V 
                        of the Housing Act of 1949, a housing 
                        program administered by a tribally 
                        designated housing entity (as defined 
                        in section 4(22) of the Native American 
                        Housing Assistance and Self-
                        Determination Act of 1996 (25 U.S.C. 
                        4103(22))) or such other affordable 
                        housing programs as the Secretary may 
                        provide, and
                          [(ii) the financial benefits of the 
                        electricity produced by such facility 
                        are allocated equitably among the 
                        occupants of the dwelling units of such 
                        building.
                  [(C) Qualified low-income economic benefit 
                project.--A facility shall be treated as part 
                of a qualified low-income economic benefit 
                project if at least 50 percent of the financial 
                benefits of the electricity produced by such 
                facility are provided to households with income 
                of--
                          [(i) less than 200 percent of the 
                        poverty line (as defined in section 
                        36B(d)(3)(A)) applicable to a family of 
                        the size involved, or
                          [(ii) less than 80 percent of area 
                        median gross income (as determined 
                        under section 142(d)(2)(B)).
                  [(D) Financial benefit.--For purposes of 
                subparagraphs (B) and (C), electricity acquired 
                at a below-market rate shall not fail to be 
                taken into account as a financial benefit.
          [(3) Eligible property.--For purposes of this 
        subsection, the term ``eligible property'' means a 
        qualified investment with respect to any applicable 
        facility.
          [(4) Allocations.--
                  [(A) In general.--Not later than January 1, 
                2025, the Secretary shall establish a program 
                to allocate amounts of environmental justice 
                capacity limitation to applicable facilities. 
                In establishing such program and to carry out 
                the purposes of this subsection, the Secretary 
                shall provide procedures to allow for an 
                efficient allocation process, including, when 
                determined appropriate, consideration of 
                multiple projects in a single application if 
                such projects will be placed in service by a 
                single taxpayer.
                  [(B) Limitation.--The amount of environmental 
                justice capacity limitation allocated by the 
                Secretary under subparagraph (A) during any 
                calendar year shall not exceed the annual 
                capacity limitation with respect to such year.
                  [(C) Annual capacity limitation.--For 
                purposes of this paragraph, the term ``annual 
                capacity limitation'' means 1.8 gigawatts of 
                direct current capacity for each calendar year 
                during the period beginning on January 1, 2025, 
                and ending on December 31 of the applicable 
                year (as defined in section 45Y(d)(3)), and 
                zero thereafter.
                  [(D) Carryover of unused limitation.--
                          [(i) In general.--If the annual 
                        capacity limitation for any calendar 
                        year exceeds the aggregate amount 
                        allocated for such year under this 
                        paragraph, such limitation for the 
                        succeeding calendar year shall be 
                        increased by the amount of such excess. 
                        No amount may be carried under the 
                        preceding sentence to any calendar year 
                        after the third calendar year following 
                        the applicable year (as defined in 
                        section 45Y(d)(3)).
                          [(ii) Carryover from section 48 for 
                        calendar year 2025.--If the annual 
                        capacity limitation for calendar year 
                        2024 under section 48(e)(4)(D) exceeds 
                        the aggregate amount allocated for such 
                        year under such section, such excess 
                        amount may be carried over and applied 
                        to the annual capacity limitation under 
                        this subsection for calendar year 2025. 
                        The annual capacity limitation for 
                        calendar year 2025 shall be increased 
                        by the amount of such excess.
                  [(E) Placed in service deadline.--
                          [(i) In general.--Paragraph (1) shall 
                        not apply with respect to any property 
                        which is placed in service after the 
                        date that is 4 years after the date of 
                        the allocation with respect to the 
                        facility of which such property is a 
                        part.
                          [(ii) Application of carryover.--Any 
                        amount of environmental justice 
                        capacity limitation which expires under 
                        clause (i) during any calendar year 
                        shall be taken into account as an 
                        excess described in subparagraph (D)(i) 
                        (or as an increase in such excess) for 
                        such calendar year, subject to the 
                        limitation imposed by the last sentence 
                        of such subparagraph.
          [(5) Recapture.--The Secretary shall, by regulations 
        or other guidance, provide for recapturing the benefit 
        of any increase in the credit allowed under subsection 
        (a) by reason of this subsection with respect to any 
        property which ceases to be property eligible for such 
        increase (but which does not cease to be investment 
        credit property within the meaning of section 50(a)). 
        The period and percentage of such recapture shall be 
        determined under rules similar to the rules of section 
        50(a). To the extent provided by the Secretary, such 
        recapture may not apply with respect to any property 
        if, within 12 months after the date the taxpayer 
        becomes aware (or reasonably should have become aware) 
        of such property ceasing to be property eligible for 
        such increase, the eligibility of such property for 
        such increase is restored. The preceding sentence shall 
        not apply more than once with respect to any facility.
  [(i) Guidance.--Not later than January 1, 2025, the Secretary 
shall issue guidance regarding implementation of this section.]

SEC. 49. AT-RISK RULES.

  (a) General rule.--
          (1) Certain nonrecourse financing excluded from 
        credit base.--
                  (A) Limitation.--The credit base of any 
                property to which this paragraph applies shall 
                be reduced by the nonqualified nonrecourse 
                financing with respect to such credit base (as 
                of the close of the taxable year in which 
                placed in service).
                  (B) Property to which paragraph applies.--
                This paragraph applies to any property which--
                          (i) is placed in service during the 
                        taxable year by a taxpayer described in 
                        section 465(a)(1), and
                          (ii) is used in connection with an 
                        activity with respect to which any loss 
                        is subject to limitation under section 
                        465.
                  (C) Credit base defined.--For purposes of 
                this paragraph, the term ``credit base'' 
                means--
                          (i) the portion of the basis of any 
                        qualified rehabilitated building 
                        attributable to qualified 
                        rehabilitation expenditures,
                          (ii) the basis of any energy 
                        property,
                          (iii) the basis of any property which 
                        is part of a qualifying advanced coal 
                        project under section 48A,
                          (iv) the basis of any property which 
                        is part of a qualifying gasification 
                        project under section 48B,
                          (v) the basis of any property which 
                        is part of a qualifying advanced energy 
                        project under section 48C, and
                          (vi) the basis of any qualified 
                        property (as defined in subsection 
                        (b)(2) of section 48D) which is part of 
                        an advanced manufacturing facility (as 
                        defined in subsection (b)(3) of such 
                        section)[,].
                          [(vii) the basis of any qualified 
                        property which is part of a qualified 
                        facility under section 48E, and
                          [(viii) the basis of any energy 
                        storage technology under section 48E.]
                  (D) Nonqualified nonrecourse financing.--
                          (i) In general.--For purposes of this 
                        paragraph and paragraph (2), the term 
                        ``nonqualified nonrecourse financing'' 
                        means any nonrecourse financing which 
                        is not qualified commercial financing.
                          (ii) Qualified commercial 
                        financing.--For purposes of this 
                        paragraph, the term ``qualified 
                        commercial financing'' means any 
                        financing with respect to any property 
                        if--
                                  (I) such property is acquired 
                                by the taxpayer from a person 
                                who is not a related person,
                                  (II) the amount of the 
                                nonrecourse financing with 
                                respect to such property does 
                                not exceed 80 percent of the 
                                credit base of such property, 
                                and
                                  (III) such financing is 
                                borrowed from a qualified 
                                person or represents a loan 
                                from any Federal, State, or 
                                local government or 
                                instrumentality thereof, or is 
                                guaranteed by any Federal, 
                                State, or local government.
                 Such term shall not include any convertible 
                debt.
                          (iii) Nonrecourse financing.--For 
                        purposes of this subparagraph, the term 
                        ``nonrecourse financing'' includes--
                                  (I) any amount with respect 
                                to which the taxpayer is 
                                protected against loss through 
                                guarantees, stop-loss 
                                agreements, or other similar 
                                arrangements, and
                                  (II) except to the extent 
                                provided in regulations, any 
                                amount borrowed from a person 
                                who has an interest (other than 
                                as a creditor) in the activity 
                                in which the property is used 
                                or from a related person to a 
                                person (other than the 
                                taxpayer) having such an 
                                interest.
                 In the case of amounts borrowed by a 
                corporation from a shareholder, subclause (II) 
                shall not apply to an interest as a 
                shareholder.
                          (iv) Qualified person.--For purposes 
                        of this paragraph, the term ``qualified 
                        person'' means any person which is 
                        actively and regularly engaged in the 
                        business of lending money and which is 
                        not--
                                  (I) a related person with 
                                respect to the taxpayer,
                                  (II) a person from which the 
                                taxpayer acquired the property 
                                (or a related person to such 
                                person), or
                                  (III) a person who receives a 
                                fee with respect to the 
                                taxpayer's investment in the 
                                property (or a related person 
                                to such person).
                          (v) Related person.--For purposes of 
                        this subparagraph, the term ``related 
                        person'' has the meaning given such 
                        term by section 465(b)(3)(C). Except as 
                        otherwise provided in regulations 
                        prescribed by the Secretary, the 
                        determination of whether a person is a 
                        related person shall be made as of the 
                        close of the taxable year in which the 
                        property is placed in service.
                  (E) Application to partnerships and S 
                corporations.--For purposes of this paragraph 
                and paragraph (2)--
                          (i) In general.--Except as otherwise 
                        provided in this subparagraph, in the 
                        case of any partnership or S 
                        corporation, the determination of 
                        whether a partner's or shareholder's 
                        allocable share of any financing is 
                        nonqualified nonrecourse financing 
                        shall be made at the partner or 
                        shareholder level.
                          (ii) Special rule for certain 
                        recourse financing of S corporation.--A 
                        shareholder of an S corporation shall 
                        be treated as liable for his allocable 
                        share of any financing provided by a 
                        qualified person to such corporation 
                        if--
                                  (I) such financing is 
                                recourse financing (determined 
                                at the corporate level), and
                                  (II) such financing is 
                                provided with respect to 
                                qualified business property of 
                                such corporation.
                          (iii) Qualified business property.--
                        For purposes of clause (ii), the term 
                        ``qualified business property'' means 
                        any property if--
                                  (I) such property is used by 
                                the corporation in the active 
                                conduct of a trade or business,
                                  (II) during the entire 12-
                                month period ending on the last 
                                day of the taxable year, such 
                                corporation had at least 3 
                                full-time employees who were 
                                not owner-employees (as defined 
                                in section 465(c)(7)(E)(i)) and 
                                substantially all the services 
                                of whom were services directly 
                                related to such trade or 
                                business, and
                                  (III) during the entire 12-
                                month period ending on the last 
                                day of such taxable year, such 
                                corporation had at least 1 
                                full-time employee 
                                substantially all of the 
                                services of whom were in the 
                                active management of the trade 
                                or business.
                          (iv) Determination of allocable 
                        share.--The determination of any 
                        partner's or shareholder's allocable 
                        share of any financing shall be made in 
                        the same manner as the credit allowable 
                        by section 38 with respect to such 
                        property.
                  (F) Special rules for energy property.--Rules 
                similar to the rules of subparagraph (F) of 
                section 46(c)(8) (as in effect on the day 
                before the date of the enactment of the Revenue 
                Reconciliation Act of 1990) shall apply for 
                purposes of this paragraph.
          (2) Subsequent decreases in nonqualified nonrecourse 
        financing with respect to the property.--
                  (A) In general.--If, at the close of a 
                taxable year following the taxable year in 
                which the property was placed in service, there 
                is a net decrease in the amount of nonqualified 
                nonrecourse financing with respect to such 
                property, such net decrease shall be taken into 
                account as an increase in the credit base for 
                such property in accordance with subparagraph 
                (C).
                  (B) Certain transactions not taken into 
                account.--For purposes of this paragraph, 
                nonqualified nonrecourse financing shall not be 
                treated as decreased through the surrender or 
                other use of property financed by nonqualified 
                nonrecourse financing.
                  (C) Manner in which taken into account.--
                          (i) Credit determined by reference to 
                        taxable year property placed in 
                        service.--For purposes of determining 
                        the amount of credit allowable under 
                        section 38 and the amount of credit 
                        subject to the early disposition or 
                        cessation rules under section 50(a), 
                        any increase in a taxpayer's credit 
                        base for any property by reason of this 
                        paragraph shall be taken into account 
                        as if it were property placed in 
                        service by the taxpayer in the taxable 
                        year in which the property referred to 
                        in subparagraph (A) was first placed in 
                        service.
                          (ii) Credit allowed for year of 
                        decrease in nonqualified nonrecourse 
                        financing.--Any credit allowable under 
                        this subpart for any increase in 
                        qualified investment by reason of this 
                        paragraph shall be treated as earned 
                        during the taxable year of the decrease 
                        in the amount of nonqualified 
                        nonrecourse financing.
  (b) Increases in nonqualified nonrecourse financing.--
          (1) In general.--If, as of the close of the taxable 
        year, there is a net increase with respect to the 
        taxpayer in the amount of nonqualified nonrecourse 
        financing (within the meaning of subsection (a)(1)) 
        with respect to any property to which subsection (a)(1) 
        applied, then the tax under this chapter for such 
        taxable year shall be increased by an amount equal to 
        the aggregate decrease in credits allowed under section 
        38 for all prior taxable years which would have 
        resulted from reducing the credit base (as defined in 
        subsection (a)(1)(C)) taken into account with respect 
        to such property by the amount of such net increase. 
        For purposes of determining the amount of credit 
        subject to the early disposition or cessation rules of 
        section 50(a), the net increase in the amount of the 
        nonqualified nonrecourse financing with respect to the 
        property shall be treated as reducing the property's 
        credit base in the year in which the property was first 
        placed in service.
          (2) Transfers of debt more than 1 year after initial 
        borrowing not treated as increasing nonqualified 
        nonrecourse financing.--For purposes of paragraph (1), 
        the amount of nonqualified nonrecourse financing 
        (within the meaning of subsection (a)(1)(D)) with 
        respect to the taxpayer shall not be treated as 
        increased by reason of a transfer of (or agreement to 
        transfer) any evidence of any indebtedness if such 
        transfer occurs (or such agreement is entered into) 
        more than 1 year after the date such indebtedness was 
        incurred.
          (3) Special rules for certain energy property.--Rules 
        similar to the rules of section 47(d)(3) (as in effect 
        on the day before the date of the enactment of the 
        Revenue Reconciliation Act of 1990) shall apply for 
        purposes of this subsection.
          (4) Special rule.--Any increase in tax under 
        paragraph (1) shall not be treated as tax imposed by 
        this chapter for purposes of determining the amount of 
        any credit allowable under this chapter.

SEC. 50. OTHER SPECIAL RULES.

  (a) Recapture in case of dispositions, etc..--Under 
regulations prescribed by the Secretary--
          (1) Early disposition, etc..--
                  (A) General rule.--If, during any taxable 
                year, investment credit property is disposed 
                of, or otherwise ceases to be investment credit 
                property with respect to the taxpayer, before 
                the close of the recapture period, then the tax 
                under this chapter for such taxable year shall 
                be increased by the recapture percentage of the 
                aggregate decrease in the credits allowed under 
                section 38 for all prior taxable years which 
                would have resulted solely from reducing to 
                zero any credit determined under this subpart 
                with respect to such property.
                  (B) Recapture percentage.--For purposes of 
                subparagraph (A), the recapture percentage 
                shall be determined in accordance with the 
                following table:
          (2) Property ceases to qualify for progress 
        expenditures.--
                  (A) In general.--If during any taxable year 
                any building to which section 47(d) applied 
                ceases (by reason of sale or other disposition, 
                cancellation or abandonment of contract, or 
                otherwise) to be, with respect to the taxpayer, 
                property which, when placed in service, will be 
                a qualified rehabilitated building, then the 
                tax under this chapter for such taxable year 
                shall be increased by an amount equal to the 
                aggregate decrease in the credits allowed under 
                section 38 for all prior taxable years which 
                would have resulted solely from reducing to 
                zero the credit determined under this subpart 
                with respect to such building.
                  (B) Certain excess credit recaptured.--Any 
                amount which would have been applied as a 
                reduction under paragraph (2) of section 47(b) 
                but for the fact that a reduction under such 
                paragraph cannot reduce the amount taken into 
                account under section 47(b)(1) below zero shall 
                be treated as an amount required to be 
                recaptured under subparagraph (A) for the 
                taxable year during which the building is 
                placed in service.
                  (C) Certain sales and leasebacks.--Under 
                regulations prescribed by the Secretary, a sale 
                by, and leaseback to, a taxpayer who, when the 
                property is placed in service, will be a lessee 
                to whom the rules referred to in subsection 
                (d)(5) apply shall not be treated as a 
                cessation described in subparagraph (A) to the 
                extent that the amount which will be passed 
                through to the lessee under such rules with 
                respect to such property is not less than the 
                qualified rehabilitation expenditures properly 
                taken into account by the lessee under section 
                47(d) with respect to such property.
                  (D) Coordination with paragraph (1).--If, 
                after property is placed in service, there is a 
                disposition or other cessation described in 
                paragraph (1), then paragraph (1) shall be 
                applied as if any credit which was allowable by 
                reason of section 47(d) and which has not been 
                required to be recaptured before such 
                disposition, cessation, or change in use were 
                allowable for the taxable year the property was 
                placed in service.
                  (E) Special rules.--Rules similar to the 
                rules of this paragraph shall apply in cases 
                where qualified progress expenditures were 
                taken into account under the rules referred to 
                in section 48(b), 48A(b)(3), 48B(b)(3), 
                48C(b)(2), [48D(b)(5), or 48E(e)] or 48D(b)(5).
          (3) Certain expansions in connection with advanced 
        manufacturing facilities.--
                  (A) In general.--If there is a an applicable 
                transaction by an applicable taxpayer before 
                the close of the 10-year period beginning on 
                the date such taxpayer placed in service 
                investment credit property which is eligible 
                for the advanced manufacturing investment 
                credit under section 48D(a), then the tax under 
                this chapter for the taxable year in which such 
                transaction occurs shall be increased by 100 
                percent of the aggregate decrease in the 
                credits allowed under section 38 for all prior 
                taxable years which would have resulted solely 
                from reducing to zero any credit determined 
                under section 46 which is attributable to the 
                advanced manufacturing investment credit under 
                section 48D(a) with respect to such property.
                  (B) Exception.--Subparagraph (A) shall not 
                apply if the applicable taxpayer demonstrates 
                to the satisfaction of the Secretary that the 
                applicable transaction has been ceased or 
                abandoned within 45 days of a determination and 
                notice by the Secretary.
                  (C) Regulations and guidance.--The Secretary 
                shall issue such regulations or other guidance 
                as the Secretary determines necessary or 
                appropriate to carry out the purposes of this 
                paragraph, including regulations or other 
                guidance which provide for requirements for 
                recordkeeping or information reporting for 
                purposes of administering the requirements of 
                this paragraph.
          (4) Carrybacks and carryovers adjusted.--In the case 
        of any cessation described in paragraph (1) or (2), or 
        any applicable transaction to which paragraph (3)(A) 
        applies, the carrybacks and carryovers under section 39 
        shall be adjusted by reason of such cessation or 
        applicable transaction.
          (5) Subsection not to apply in certain cases.--
        Paragraphs (1) and (2) shall not apply to--
                  (A) a transfer by reason of death, or
                  (B) a transaction to which section 381(a) 
                applies.
        For purposes of this subsection, property shall not be 
        treated as ceasing to be investment credit property 
        with respect to the taxpayer by reason of a mere change 
        in the form of conducting the trade or business so long 
        as the property is retained in such trade or business 
        as investment credit property and the taxpayer retains 
        a substantial interest in such trade or business.
          (6) Definitions and special rules.--
                  (A) Investment credit property.--For purposes 
                of this subsection, the term ``investment 
                credit property'' means any property eligible 
                for a credit determined under this subpart.
                  (B) Transfer between spouses or incident to 
                divorce.--In the case of any transfer described 
                in subsection (a) of section 1041--
                          (i) the foregoing provisions of this 
                        subsection shall not apply, and
                          (ii) the same tax treatment under 
                        this subsection with respect to the 
                        transferred property shall apply to the 
                        transferee as would have applied to the 
                        transferor.
                  (C) Special rule.--Any increase in tax under 
                paragraph (1), (2), or (3) shall not be treated 
                as tax imposed by this chapter for purposes of 
                determining the amount of any credit allowable 
                under this chapter.
                  (D) Applicable transaction.--For purposes of 
                this subsection--
                          (i) In general.--The term 
                        ``applicable transaction'' means, with 
                        respect to any applicable taxpayer, any 
                        significant transaction (as determined 
                        by the Secretary, in coordination with 
                        the Secretary of Commerce and the 
                        Secretary of Defense) involving the 
                        material expansion of semiconductor 
                        manufacturing capacity of such 
                        applicable taxpayer in the People's 
                        Republic of China or a foreign country 
                        of concern (as defined in section 
                        9901(7) of the William M. (Mac) 
                        Thornberry National Defense 
                        Authorization Act for Fiscal Year 
                        2021).
                          (ii) Exception.--Such term shall not 
                        include a transaction which primarily 
                        involves the expansion of manufacturing 
                        capacity for legacy semiconductors (as 
                        defined in section 9902(a)(6) of the 
                        William M. (Mac) Thornberry National 
                        Defense Authorization Act for Fiscal 
                        Year 2021).
                  (E) Applicable taxpayer.--For purposes of 
                this subsection, the term ``applicable 
                taxpayer'' means any taxpayer who has been 
                allowed a credit under section 48D(a) for any 
                prior taxable year.
  (b) Certain property not eligible.--No credit shall be 
determined under this subpart with respect to--
          (1) Property used outside United States.--
                  (A) In general.--Except as provided in 
                subparagraph (B), no credit shall be determined 
                under this subpart with respect to any property 
                which is used predominantly outside the United 
                States.
                  (B) Exceptions.--Subparagraph (A) shall not 
                apply to any property described in section 
                168(g)(4).
          (2) Property used for lodging.--No credit shall be 
        determined under this subpart with respect to any 
        property which is used predominantly to furnish lodging 
        or in connection with the furnishing of lodging. The 
        preceding sentence shall not apply to--
                  (A) nonlodging commercial facilities which 
                are available to persons not using the lodging 
                facilities on the same basis as they are 
                available to persons using the lodging 
                facilities;
                  (B) property used by a hotel or motel in 
                connection with the trade or business of 
                furnishing lodging where the predominant 
                portion of the accommodations is used by 
                transients;
                  (C) a certified historic structure to the 
                extent of that portion of the basis which is 
                attributable to qualified rehabilitation 
                expenditures; and
                  (D) any energy property.
          (3) Property used by certain tax-exempt 
        organization.--No credit shall be determined under this 
        subpart with respect to any property used by an 
        organization (other than a cooperative described in 
        section 521) which is exempt from the tax imposed by 
        this chapter unless such property is used predominantly 
        in an unrelated trade or business the income of which 
        is subject to tax under section 511. If the property is 
        debt-financed property (as defined in section 514(b)), 
        the amount taken into account for purposes of 
        determining the amount of the credit under this subpart 
        with respect to such property shall be that percentage 
        of the amount (which but for this paragraph would be so 
        taken into account) which is the same percentage as is 
        used under section 514(a), for the year the property is 
        placed in service, in computing the amount of gross 
        income to be taken into account during such taxable 
        year with respect to such property. If any qualified 
        rehabilitated building is used by the tax-exempt 
        organization pursuant to a lease, this paragraph shall 
        not apply for purposes of determining the amount of the 
        rehabilitation credit.
          (4) Property used by governmental units or foreign 
        persons or entities.--
                  (A) In general.--No credit shall be 
                determined under this subpart with respect to 
                any property used--
                          (i) by the United States, any State 
                        or political subdivision thereof, any 
                        possession of the United States, or any 
                        agency or instrumentality of any of the 
                        foregoing, or
                          (ii) by any foreign person or entity 
                        (as defined in section 168(h)(2)(C)), 
                        but only with respect to property to 
                        which section 168(h)(2)(A)(iii) applies 
                        (determined after the application of 
                        section 168(h)(2)(B)).
                  (B) Exception for short-term leases.--This 
                paragraph and paragraph (3) shall not apply to 
                any property by reason of use under a lease 
                with a term of less than 6 months (determined 
                under section 168(i)(3)).
                  (C) Exception for qualified rehabilitated 
                buildings leased to governments, etc..--If any 
                qualified rehabilitated building is leased to a 
                governmental unit (or a foreign person or 
                entity) this paragraph shall not apply for 
                purposes of determining the rehabilitation 
                credit with respect to such building.
                  (D) Special rules for partnerships, etc..--
                For purposes of this paragraph and paragraph 
                (3), rules similar to the rules of paragraphs 
                (5) and (6) of section 168(h) shall apply.
                  (E) Cross reference.--For special rules for 
                the application of this paragraph and paragraph 
                (3), see section 168(h).
  (c) Basis adjustment to investment credit property.--
          (1) In general.--For purposes of this subtitle, if a 
        credit is determined under this subpart with respect to 
        any property, the basis of such property shall be 
        reduced by the amount of the credit so determined.
          (2) Certain dispositions.--If during any taxable year 
        there is a recapture amount determined with respect to 
        any property the basis of which was reduced under 
        paragraph (1), the basis of such property (immediately 
        before the event resulting in such recapture) shall be 
        increased by an amount equal to such recapture amount. 
        For purposes of the preceding sentence, the term 
        ``recapture amount'' means any increase in tax (or 
        adjustment in carrybacks or carryovers) determined 
        under subsection (a).
          (3) Special rule.--In the case of any energy credit 
        [or clean electricity investment credit]--
                  (A) only 50 percent of such credit shall be 
                taken into account under paragraph (1),
                  (B) only 50 percent of any recapture amount 
                attributable to such credit shall be taken into 
                account under paragraph (2), and
                  (C) paragraph (1) shall not apply for 
                purposes of determining eligible basis under 
                section 42.
          (4) Recapture of reductions.--
                  (A) In general.--For purposes of sections 
                1245 and 1250, any reduction under this 
                subsection shall be treated as a deduction 
                allowed for depreciation.
                  (B) Special rule for section 1250.--For 
                purposes of section 1250(b), the determination 
                of what would have been the depreciation 
                adjustments under the straight line method 
                shall be made as if there had been no reduction 
                under this section.
          (5) Adjustment in basis of interest in partnership or 
        S corporation.--The adjusted basis of--
                  (A) a partner's interest in a partnership, 
                and
                  (B) stock in an S corporation,
        shall be appropriately adjusted to take into account 
        adjustments made under this subsection in the basis of 
        property held by the partnership or S corporation (as 
        the case may be).
  (d) Certain rules made applicable.--For purposes of this 
subpart, rules similar to the rules of the following provisions 
(as in effect on the day before the date of the enactment of 
the Revenue Reconciliation Act of 1990) shall apply:
          (1) Section 46(e) (relating to limitations with 
        respect to certain persons).
          (2) Section 46(f) (relating to limitation in case of 
        certain regulated companies). At the election of a 
        taxpayer, this paragraph shall not apply to any energy 
        storage technology (as defined in section 48(c)(6)), 
        provided--
                  (A) no election under this paragraph shall be 
                permitted if the making of such election is 
                prohibited by a State or political subdivision 
                thereof, by any agency or instrumentality of 
                the United States, or by a public service or 
                public utility commission or other similar body 
                of any State or political subdivision that 
                regulates public utilities as described in 
                section 7701(a)(33)(A),
                  (B) an election under this paragraph shall be 
                made separately with respect to each energy 
                storage technology by the due date (including 
                extensions) of the Federal tax return for the 
                taxable year in which the energy storage 
                technology is placed in service by the 
                taxpayer, and once made, may be revoked only 
                with the consent of the Secretary, and
                  (C) an election shall not apply with respect 
                to any energy storage technology if such energy 
                storage technology has a maximum capacity equal 
                to or less than 500 kilowatt hours.
          (3) Section 46(h) (relating to special rules for 
        cooperatives).
          (4) Paragraphs (2) and (3) of section 48(b) (relating 
        to special rule for sale-leasebacks).
          (5) Section 48(d) (relating to certain leased 
        property).
          (6) Section 48(f) (relating to estates and trusts).
          (7) Section 48(r) (relating to certain 501(d) 
        organizations).
Paragraphs (1)(A), (2)(A), and (4) of the section 46(e) 
referred to in paragraph (1) of this subsection shall not apply 
to any taxable year beginning after December 31, 1995. In the 
case of a real estate investment trust making an election under 
section 6418, paragraphs (1)(B) and (2)(B) of the section 46(e) 
referred to in paragraph (1) of this subsection shall not apply 
to any investment credit property of such real estate 
investment trust to which such election applies. In the case of 
a real estate investment trust making an election under section 
6418, paragraphs (1)(B) and (2)(B) of the section 46(e) 
referred to in paragraph (1) of this subsection shall not apply 
to any investment credit property of such real estate 
investment trust to which such election applies.

           *       *       *       *       *       *       *


Subchapter B--COMPUTATION OF TAXABLE INCOME

           *       *       *       *       *       *       *


     PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS

Sec.
161. Allowance of deductions.
     * * * * * * *
Sec. 174A. Temporary rules for research and experimental expenditures.

           *       *       *       *       *       *       *


SEC. 163. INTEREST.

  (a) General rule.--There shall be allowed as a deduction all 
interest paid or accrued within the taxable year on 
indebtedness.
  (b) Installment purchases where interest charge is not 
separately stated.--
          (1) General rule.--If personal property or 
        educational services are purchased under a contract--
                  (A) which provides that payment of part or 
                all of the purchase price is to be made in 
                installments, and
                  (B) in which carrying charges are separately 
                stated but the interest charge cannot be 
                ascertained,
        then the payments made during the taxable year under 
        the contract shall be treated for purposes of this 
        section as if they included interest equal to 6 percent 
        of the average unpaid balance under the contract during 
        the taxable year. For purposes of the preceding 
        sentence, the average unpaid balance is the sum of the 
        unpaid balance outstanding on the first day of each 
        month beginning during the taxable year, divided by 12. 
        For purposes of this paragraph, the term ``educational 
        services'' means any service (including lodging) which 
        is purchased from an educational organization described 
        in section 170(b)(1)(A)(ii) and which is provided for a 
        student of such organization.
          (2) Limitation.--In the case of any contract to which 
        paragraph (1) applies, the amount treated as interest 
        for any taxable year shall not exceed the aggregate 
        carrying charges which are properly attributable to 
        such taxable year.
  (c) Redeemable ground rents.--For purposes of this subtitle, 
any annual or periodic rental under a redeemable ground rent 
(excluding amounts in redemption thereof) shall be treated as 
interest on an indebtedness secured by a mortgage.
  (d) Limitation on investment interest.--
          (1) In general.--In the case of a taxpayer other than 
        a corporation, the amount allowed as a deduction under 
        this chapter for investment interest for any taxable 
        year shall not exceed the net investment income of the 
        taxpayer for the taxable year.
          (2) Carryforward of disallowed interest.--The amount 
        not allowed as a deduction for any taxable year by 
        reason of paragraph (1) shall be treated as investment 
        interest paid or accrued by the taxpayer in the 
        succeeding taxable year.
          (3) Investment interest.--For purposes of this 
        subsection--
                  (A) In general.--The term ``investment 
                interest'' means any interest allowable as a 
                deduction under this chapter (determined 
                without regard to paragraph (1)) which is paid 
                or accrued on indebtedness properly allocable 
                to property held for investment.
                  (B) Exceptions.--The term ``investment 
                interest'' shall not include--
                          (i) any qualified residence interest 
                        (as defined in subsection (h)(3)), or
                          (ii) any interest which is taken into 
                        account under section 469 in computing 
                        income or loss from a passive activity 
                        of the taxpayer.
                  (C) Personal property used in short sale.--
                For purposes of this paragraph, the term 
                ``interest'' includes any amount allowable as a 
                deduction in connection with personal property 
                used in a short sale.
          (4) Net investment income.--For purposes of this 
        subsection--
                  (A) In general.--The term ``net investment 
                income'' means the excess of--
                          (i) investment income, over
                          (ii) investment expenses.
                  (B) Investment income.--The term ``investment 
                income'' means the sum of--
                          (i) gross income from property held 
                        for investment (other than any gain 
                        taken into account under clause 
                        (ii)(I)),
                          (ii) the excess (if any) of--
                                  (I) the net gain attributable 
                                to the disposition of property 
                                held for investment, over
                                  (II) the net capital gain 
                                determined by only taking into 
                                account gains and losses from 
                                dispositions of property held 
                                for investment, plus
                          (iii) so much of the net capital gain 
                        referred to in clause (ii)(II) (or, if 
                        lesser, the net gain referred to in 
                        clause (ii)(I)) as the taxpayer elects 
                        to take into account under this clause.
                Such term shall include qualified dividend 
                income (as defined in section 1(h)(11)(B)) only 
                to the extent the taxpayer elects to treat such 
                income as investment income for purposes of 
                this subsection.
                  (C) Investment expenses.--The term 
                ``investment expenses'' means the deductions 
                allowed under this chapter (other than for 
                interest) which are directly connected with the 
                production of investment income.
                  (D) Income and expenses from passive 
                activities.--Investment income and investment 
                expenses shall not include any income or 
                expenses taken into account under section 469 
                in computing income or loss from a passive 
                activity.
          (5) Property held for investment.--For purposes of 
        this subsection--
                  (A) In general.--The term ``property held for 
                investment'' shall include--
                          (i) any property which produces 
                        income of a type described in section 
                        469(e)(1), and
                          (ii) any interest held by a taxpayer 
                        in an activity involving the conduct of 
                        a trade or business--
                                  (I) which is not a passive 
                                activity, and
                                  (II) with respect to which 
                                the taxpayer does not 
                                materially participate.
                  (B) Investment expenses.--In the case of 
                property described in subparagraph (A)(i), 
                expenses shall be allocated to such property in 
                the same manner as under section 469.
                  (C) Terms.--For purposes of this paragraph, 
                the terms ``activity'', ``passive activity'', 
                and ``materially participate'' have the 
                meanings given such terms by section 469.
  (e) Original issue discount.--
          (1) In general.--The portion of the original issue 
        discount with respect to any debt instrument which is 
        allowable as a deduction to the issuer for any taxable 
        year shall be equal to the aggregate daily portions of 
        the original issue discount for days during such 
        taxable year.
          (2) Definitions and special rules.--For purposes of 
        this subsection--
                  (A) Debt instrument.--The term ``debt 
                instrument'' has the meaning given such term by 
                section 1275(a)(1).
                  (B) Daily portions.--The daily portion of the 
                original issue discount for any day shall be 
                determined under section 1272(a) (without 
                regard to paragraph (7) thereof and without 
                regard to section 1273(a)(3)).
                  (C) Short-term obligations.--In the case of 
                an obligor of a short-term obligation (as 
                defined in section 1283(a)(1)(A)) who uses the 
                cash receipts and disbursements method of 
                accounting, the original issue discount (and 
                any other interest payable) on such obligation 
                shall be deductible only when paid.
          (3) Special rule for original issue discount on 
        obligation held by related foreign person.--
                  (A) In general.--If any debt instrument 
                having original issue discount is held by a 
                related foreign person, any portion of such 
                original issue discount shall not be allowable 
                as a deduction to the issuer until paid. The 
                preceding sentence shall not apply to the 
                extent that the original issue discount is 
                effectively connected with the conduct by such 
                foreign related person of a trade or business 
                within the United States unless such original 
                issue discount is exempt from taxation (or is 
                subject to a reduced rate of tax) pursuant to a 
                treaty obligation of the United States.
                  (B) Special rule for certain foreign 
                entities.--
                          (i) In general.--In the case of any 
                        debt instrument having original issue 
                        discount which is held by a related 
                        foreign person which is a controlled 
                        foreign corporation (as defined in 
                        section 957) or a passive foreign 
                        investment company (as defined in 
                        section 1297), a deduction shall be 
                        allowable to the issuer with respect to 
                        such original issue discount for any 
                        taxable year before the taxable year in 
                        which paid only to the extent such 
                        original issue discount is includible 
                        (determined without regard to properly 
                        allocable deductions and qualified 
                        deficits under section 952(c)(1)(B)) 
                        during such prior taxable year in the 
                        gross income of a United States person 
                        who owns (within the meaning of section 
                        958(a)) stock in such corporation.
                          (ii) Secretarial authority.--The 
                        Secretary may by regulation exempt 
                        transactions from the application of 
                        clause (i), including any transaction 
                        which is entered into by a payor in the 
                        ordinary course of a trade or business 
                        in which the payor is predominantly 
                        engaged.
                  (C) Related foreign person.--For purposes of 
                subparagraph (A), the term ``related foreign 
                person'' means any person--
                          (i) who is not a United States 
                        person, and
                          (ii) who is related (within the 
                        meaning of section 267(b)) to the 
                        issuer.
          (4) Exception.--This subsection shall not apply to 
        any debt instrument described in section 1272(a)(2)(D) 
        (relating to loans between natural persons).
          (5) Special rules for original issue discount on 
        certain high yield obligations.--
                  (A) In general.--In the case of an applicable 
                high yield discount obligation issued by a 
                corporation--
                          (i) no deduction shall be allowed 
                        under this chapter for the disqualified 
                        portion of the original issue discount 
                        on such obligation, and
                          (ii) the remainder of such original 
                        issue discount shall not be allowable 
                        as a deduction until paid.
                For purposes of this paragraph, rules similar 
                to the rules of subsection (i)(3)(B) shall 
                apply in determining the amount of the original 
                issue discount and when the original issue 
                discount is paid.
                  (B) Disqualified portion treated as stock 
                distribution for purposes of dividend received 
                deduction.--
                          (i) In general.--Solely for purposes 
                        of sections 243, 245, 246, and 246A, 
                        the dividend equivalent portion of any 
                        amount includible in gross income of a 
                        corporation under section 1272(a) in 
                        respect of an applicable high yield 
                        discount obligation shall be treated as 
                        a dividend received by such corporation 
                        from the corporation issuing such 
                        obligation.
                          (ii) Dividend equivalent portion.--
                        For purposes of clause (i), the 
                        dividend equivalent portion of any 
                        amount includible in gross income under 
                        section 1272(a) in respect of an 
                        applicable high yield discount 
                        obligation is the portion of the amount 
                        so includible--
                                  (I) which is attributable to 
                                the disqualified portion of the 
                                original issue discount on such 
                                obligation, and
                                  (II) which would have been 
                                treated as a dividend if it had 
                                been a distribution made by the 
                                issuing corporation with 
                                respect to stock in such 
                                corporation.
                  (C) Disqualified portion.--
                          (i) In general.--For purposes of this 
                        paragraph, the disqualified portion of 
                        the original issue discount on any 
                        applicable high yield discount 
                        obligation is the lesser of--
                                  (I) the amount of such 
                                original issue discount, or
                                  (II) the portion of the total 
                                return on such obligation which 
                                bears the same ratio to such 
                                total return as the 
                                disqualified yield on such 
                                obligation bears to the yield 
                                to maturity on such obligation.
                          (ii) Definitions.--For purposes of 
                        clause (i), the term ``disqualified 
                        yield'' means the excess of the yield 
                        to maturity on the obligation over the 
                        sum referred to in subsection (i)(1)(B) 
                        plus 1 percentage point, and the term 
                        ``total return'' is the amount which 
                        would have been the original issue 
                        discount on the obligation if interest 
                        described in the parenthetical in 
                        section 1273(a)(2) were included in the 
                        stated redemption price at maturity.
                  (D) Exception for S corporations.--This 
                paragraph shall not apply to any obligation 
                issued by any corporation for any period for 
                which such corporation is an S corporation.
                  (E) Effect on earnings and profits.--This 
                paragraph shall not apply for purposes of 
                determining earnings and profits; except that, 
                for purposes of determining the dividend 
                equivalent portion of any amount includible in 
                gross income under section 1272(a) in respect 
                of an applicable high yield discount 
                obligation, no reduction shall be made for any 
                amount attributable to the disqualified portion 
                of any original issue discount on such 
                obligation.
                  (F) Suspension of application of paragraph.--
                          (i) Temporary suspension.--This 
                        paragraph shall not apply to any 
                        applicable high yield discount 
                        obligation issued during the period 
                        beginning on September 1, 2008, and 
                        ending on December 31, 2009, in 
                        exchange (including an exchange 
                        resulting from a modification of the 
                        debt instrument) for an obligation 
                        which is not an applicable high yield 
                        discount obligation and the issuer (or 
                        obligor) of which is the same as the 
                        issuer (or obligor) of such applicable 
                        high yield discount obligation. The 
                        preceding sentence shall not apply to 
                        any obligation the interest on which is 
                        interest described in section 871(h)(4) 
                        (without regard to subparagraph (D) 
                        thereof) or to any obligation issued to 
                        a related person (within the meaning of 
                        section 108(e)(4)).
                          (ii) Successive application.--Any 
                        obligation to which clause (i) applies 
                        shall not be treated as an applicable 
                        high yield discount obligation for 
                        purposes of applying this subparagraph 
                        to any other obligation issued in 
                        exchange for such obligation.
                          (iii) Secretarial authority to 
                        suspend application.--The Secretary may 
                        apply this paragraph with respect to 
                        debt instruments issued in periods 
                        following the period described in 
                        clause (i) if the Secretary determines 
                        that such application is appropriate in 
                        light of distressed conditions in the 
                        debt capital markets.
                  (G) Cross reference.--For definition of 
                applicable high yield discount obligation, see 
                subsection (i).
          (6) Cross references.--For provision relating to 
        deduction of original issue discount on tax-exempt 
        obligation, see section 1288.
          For special rules in the case of the borrower under 
        certain loans for personal use, see section 1275(b).
  (f) Denial of deduction for interest on certain obligations 
not in registered form.--
          (1) In general.--Nothing in subsection (a) or in any 
        other provision of law shall be construed to provide a 
        deduction for interest on any registration-required 
        obligation unless such obligation is in registered 
        form.
          (2) Registration-required obligation.--For purposes 
        of this section--
                  (A) In general.--The term ``registration-
                required obligation'' means any obligation 
                (including any obligation issued by a 
                governmental entity) other than an obligation 
                which--
                          (i) is issued by a natural person,
                          (ii) is not of a type offered to the 
                        public, or
                          (iii) has a maturity (at issue) of 
                        not more than 1 year.
                  (B) Authority to include other obligations.--
                Clauses (ii) and (iii) of subparagraph (A) 
                shall not apply to any obligation if--
                          (i) such obligation is of a type 
                        which the Secretary has determined by 
                        regulations to be used frequently in 
                        avoiding Federal taxes, and
                          (ii) such obligation is issued after 
                        the date on which the regulations 
                        referred to in clause (i) take effect.
          (3) Book entries permitted, etc..--For purposes of 
        this subsection, rules similar to the rules of section 
        149(a)(3) shall apply, except that a dematerialized 
        book entry system or other book entry system specified 
        by the Secretary shall be treated as a book entry 
        system described in such section.
  (g) Reduction of deduction where section 25 credit taken.--
The amount of the deduction under this section for interest 
paid or accrued during any taxable year on indebtedness with 
respect to which a mortgage credit certificate has been issued 
under section 25 shall be reduced by the amount of the credit 
allowable with respect to such interest under section 25 
(determined without regard to section 26).
  (h) Disallowance of deduction for personal interest.--
          (1) In general.--In the case of a taxpayer other than 
        a corporation, no deduction shall be allowed under this 
        chapter for personal interest paid or accrued during 
        the taxable year.
          (2) Personal interest.--For purposes of this 
        subsection, the term ``personal interest'' means any 
        interest allowable as a deduction under this chapter 
        other than--
                  (A) interest paid or accrued on indebtedness 
                properly allocable to a trade or business 
                (other than the trade or business of performing 
                services as an employee),
                  (B) any investment interest (within the 
                meaning of subsection (d)),
                  (C) any interest which is taken into account 
                under section 469 in computing income or loss 
                from a passive activity of the taxpayer,
                  (D) any qualified residence interest (within 
                the meaning of paragraph (3)),
                  (E) any interest payable under section 6601 
                on any unpaid portion of the tax imposed by 
                section 2001 for the period during which an 
                extension of time for payment of such tax is in 
                effect under section 6163, and
                  (F) any interest allowable as a deduction 
                under section 221 (relating to interest on 
                educational loans).
          (3) Qualified residence interest.--For purposes of 
        this subsection--
                  (A) In general.--The term ``qualified 
                residence interest'' means any interest which 
                is paid or accrued during the taxable year on--
                          (i) acquisition indebtedness with 
                        respect to any qualified residence of 
                        the taxpayer, or
                          (ii) home equity indebtedness with 
                        respect to any qualified residence of 
                        the taxpayer.
                For purposes of the preceding sentence, the 
                determination of whether any property is a 
                qualified residence of the taxpayer shall be 
                made as of the time the interest is accrued.
                  (B) Acquisition indebtedness.--
                          (i) In general.--The term 
                        ``acquisition indebtedness'' means any 
                        indebtedness which--
                                  (I) is incurred in acquiring, 
                                constructing, or substantially 
                                improving any qualified 
                                residence of the taxpayer, and
                                  (II) is secured by such 
                                residence.
                 Such term also includes any indebtedness 
                secured by such residence resulting from the 
                refinancing of indebtedness meeting the 
                requirements of the preceding sentence (or this 
                sentence); but only to the extent the amount of 
                the indebtedness resulting from such 
                refinancing does not exceed the amount of the 
                refinanced indebtedness.
                          (ii) $1,000,000 limitation.--The 
                        aggregate amount treated as acquisition 
                        indebtedness for any period shall not 
                        exceed $1,000,000 ($500,000 in the case 
                        of a married individual filing a 
                        separate return).
                  (C) Home equity indebtedness.--
                          (i) In general.--The term ``home 
                        equity indebtedness'' means any 
                        indebtedness (other than acquisition 
                        indebtedness) secured by a qualified 
                        residence to the extent the aggregate 
                        amount of such indebtedness does not 
                        exceed--
                                  (I) the fair market value of 
                                such qualified residence, 
                                reduced by
                                  (II) the amount of 
                                acquisition indebtedness with 
                                respect to such residence.
                          (ii) Limitation.--The aggregate 
                        amount treated as home equity 
                        indebtedness for any period shall not 
                        exceed $100,000 ($50,000 in the case of 
                        a separate return by a married 
                        individual).
                  (D) Treatment of indebtedness incurred on or 
                before October 13, 1987.--
                          (i) In general.--In the case of any 
                        pre-October 13, 1987, indebtedness--
                                  (I) such indebtedness shall 
                                be treated as acquisition 
                                indebtedness, and
                                  (II) the limitation of 
                                subparagraph (B)(ii) shall not 
                                apply.
                          (ii) Reduction in $1,000,000 
                        limitation.--The limitation of 
                        subparagraph (B)(ii) shall be reduced 
                        (but not below zero) by the aggregate 
                        amount of outstanding pre-October 13, 
                        1987, indebtedness.
                          (iii) Pre-October 13, 1987, 
                        indebtedness.--The term ``pre-October 
                        13, 1987, indebtedness'' means--
                                  (I) any indebtedness which 
                                was incurred on or before 
                                October 13, 1987, and which was 
                                secured by a qualified 
                                residence on October 13, 1987, 
                                and at all times thereafter 
                                before the interest is paid or 
                                accrued, or
                                  (II) any indebtedness which 
                                is secured by the qualified 
                                residence and was incurred 
                                after October 13, 1987, to 
                                refinance indebtedness 
                                described in subclause (I) (or 
                                refinanced indebtedness meeting 
                                the requirements of this 
                                subclause) to the extent 
                                (immediately after the 
                                refinancing) the principal 
                                amount of the indebtedness 
                                resulting from the refinancing 
                                does not exceed the principal 
                                amount of the refinanced 
                                indebtedness (immediately 
                                before the refinancing).
                          (iv) Limitation on period of 
                        refinancing.--Subclause (II) of clause 
                        (iii) shall not apply to any 
                        indebtedness after--
                                  (I) the expiration of the 
                                term of the indebtedness 
                                described in clause (iii)(I), 
                                or
                                  (II) if the principal of the 
                                indebtedness described in 
                                clause (iii)(I) is not 
                                amortized over its term, the 
                                expiration of the term of the 
                                1st refinancing of such 
                                indebtedness (or if earlier, 
                                the date which is 30 years 
                                after the date of such 1st 
                                refinancing).
                  (E) Mortgage insurance premiums treated as 
                interest.--
                          (i) In general.--Premiums paid or 
                        accrued for qualified mortgage 
                        insurance by a taxpayer during the 
                        taxable year in connection with 
                        acquisition indebtedness with respect 
                        to a qualified residence of the 
                        taxpayer shall be treated for purposes 
                        of this section as interest which is 
                        qualified residence interest.
                          (ii) Phaseout.--The amount otherwise 
                        treated as interest under clause (i) 
                        shall be reduced (but not below zero) 
                        by 10 percent of such amount for each 
                        $1,000 ($500 in the case of a married 
                        individual filing a separate return) 
                        (or fraction thereof) that the 
                        taxpayer's adjusted gross income for 
                        the taxable year exceeds $100,000 
                        ($50,000 in the case of a married 
                        individual filing a separate return).
                          (iii) Limitation.--Clause (i) shall 
                        not apply with respect to any mortgage 
                        insurance contracts issued before 
                        January 1, 2007.
                          (iv) Termination.--Clause (i) shall 
                        not apply to amounts--
                                  (I) paid or accrued after 
                                December 31, 2021, or
                                  (II) properly allocable to 
                                any period after such date.
                  (F) Special rules for taxable years 2018 
                through 2025.--
                          (i) In general.--In the case of 
                        taxable years beginning after December 
                        31, 2017, and before January 1, 2026--
                                  (I) Disallowance of home 
                                equity indebtedness interest.--
                                Subparagraph (A)(ii) shall not 
                                apply.
                                  (II) Limitation on 
                                acquisition indebtedness.--
                                Subparagraph (B)(ii) shall be 
                                applied by substituting 
                                ``$750,000 ($375,000'' for 
                                ``$1,000,000 ($500,000''.
                                  (III) Treatment of 
                                indebtedness incurred on or 
                                before December 15, 2017.--
                                Subclause (II) shall not apply 
                                to any indebtedness incurred on 
                                or before December 15, 2017, 
                                and, in applying such subclause 
                                to any indebtedness incurred 
                                after such date, the limitation 
                                under such subclause shall be 
                                reduced (but not below zero) by 
                                the amount of any indebtedness 
                                incurred on or before December 
                                15, 2017, which is treated as 
                                acquisition indebtedness for 
                                purposes of this subsection for 
                                the taxable year.
                                  (IV) Binding contract 
                                exception.--In the case of a 
                                taxpayer who enters into a 
                                written binding contract before 
                                December 15, 2017, to close on 
                                the purchase of a principal 
                                residence before January 1, 
                                2018, and who purchases such 
                                residence before April 1, 2018, 
                                subclause (III) shall be 
                                applied by substituting ``April 
                                1, 2018'' for ``December 15, 
                                2017''.
                          (ii) Treatment of limitation in 
                        taxable years after December 31, 
                        2025.--In the case of taxable years 
                        beginning after December 31, 2025, the 
                        limitation under subparagraph (B)(ii) 
                        shall be applied to the aggregate 
                        amount of indebtedness of the taxpayer 
                        described in subparagraph (B)(i) 
                        without regard to the taxable year in 
                        which the indebtedness was incurred.
                          (iii) Treatment of refinancings of 
                        indebtedness.--
                                  (I) In general.--In the case 
                                of any indebtedness which is 
                                incurred to refinance 
                                indebtedness, such refinanced 
                                indebtedness shall be treated 
                                for purposes of clause (i)(III) 
                                as incurred on the date that 
                                the original indebtedness was 
                                incurred to the extent the 
                                amount of the indebtedness 
                                resulting from such refinancing 
                                does not exceed the amount of 
                                the refinanced indebtedness.
                                  (II) Limitation on period of 
                                refinancing.--Subclause (I) 
                                shall not apply to any 
                                indebtedness after the 
                                expiration of the term of the 
                                original indebtedness or, if 
                                the principal of such original 
                                indebtedness is not amortized 
                                over its term, the expiration 
                                of the term of the 1st 
                                refinancing of such 
                                indebtedness (or if earlier, 
                                the date which is 30 years 
                                after the date of such 1st 
                                refinancing).
                          (iv) Coordination with exclusion of 
                        income from discharge of 
                        indebtedness.--Section 108(h)(2) shall 
                        be applied without regard to this 
                        subparagraph.
          (4) Other definitions and special rules.--For 
        purposes of this subsection--
                  (A) Qualified residence.--
                          (i) In general.--The term ``qualified 
                        residence'' means--
                                  (I) the principal residence 
                                (within the meaning of section 
                                121) of the taxpayer, and
                                  (II) 1 other residence of the 
                                taxpayer which is selected by 
                                the taxpayer for purposes of 
                                this subsection for the taxable 
                                year and which is used by the 
                                taxpayer as a residence (within 
                                the meaning of section 
                                280A(d)(1)).
                          (ii) Married individuals filing 
                        separate returns.--If a married couple 
                        does not file a joint return for the 
                        taxable year--
                                  (I) such couple shall be 
                                treated as 1 taxpayer for 
                                purposes of clause (i), and
                                  (II) each individual shall be 
                                entitled to take into account 1 
                                residence unless both 
                                individuals consent in writing 
                                to 1 individual taking into 
                                account the principal residence 
                                and 1 other residence.
                          (iii) Residence not rented.--For 
                        purposes of clause (i)(II), 
                        notwithstanding section 280A(d)(1), if 
                        the taxpayer does not rent a dwelling 
                        unit at any time during a taxable year, 
                        such unit may be treated as a residence 
                        for such taxable year.
                  (B) Special rule for cooperative housing 
                corporations.--Any indebtedness secured by 
                stock held by the taxpayer as a tenant-
                stockholder (as defined in section 216) in a 
                cooperative housing corporation (as so defined) 
                shall be treated as secured by the house or 
                apartment which the taxpayer is entitled to 
                occupy as such a tenant-stockholder. If stock 
                described in the preceding sentence may not be 
                used to secure indebtedness, indebtedness shall 
                be treated as so secured if the taxpayer 
                establishes to the satisfaction of the 
                Secretary that such indebtedness was incurred 
                to acquire such stock.
                  (C) Unenforceable security interests.--
                Indebtedness shall not fail to be treated as 
                secured by any property solely because, under 
                any applicable State or local homestead or 
                other debtor protection law in effect on August 
                16, 1986, the security interest is ineffective 
                or the enforceability of the security interest 
                is restricted.
                  (D) Special rules for estates and trusts.--
                For purposes of determining whether any 
                interest paid or accrued by an estate or trust 
                is qualified residence interest, any residence 
                held by such estate or trust shall be treated 
                as a qualified residence of such estate or 
                trust if such estate or trust establishes that 
                such residence is a qualified residence of a 
                beneficiary who has a present interest in such 
                estate or trust or an interest in the residuary 
                of such estate or trust.
                  (E) Qualified mortgage insurance.--The term 
                ``qualified mortgage insurance'' means--
                          (i) mortgage insurance provided by 
                        the Department of Veterans Affairs, the 
                        Federal Housing Administration, or the 
                        Rural Housing Service, and
                          (ii) private mortgage insurance (as 
                        defined by section 2 of the Homeowners 
                        Protection Act of 1998 (12 U.S.C. 
                        4901), as in effect on the date of the 
                        enactment of this subparagraph).
                  (F) Special rules for prepaid qualified 
                mortgage insurance.--Any amount paid by the 
                taxpayer for qualified mortgage insurance that 
                is properly allocable to any mortgage the 
                payment of which extends to periods that are 
                after the close of the taxable year in which 
                such amount is paid shall be chargeable to 
                capital account and shall be treated as paid in 
                such periods to which so allocated. No 
                deduction shall be allowed for the unamortized 
                balance of such account if such mortgage is 
                satisfied before the end of its term. The 
                preceding sentences shall not apply to amounts 
                paid for qualified mortgage insurance provided 
                by the Department of Veterans Affairs or the 
                Rural Housing Service.
  (i) Applicable high yield discount obligation.--
          (1) In general.--For purposes of this section, the 
        term ``applicable high yield discount obligation'' 
        means any debt instrument if--
                  (A) the maturity date of such instrument is 
                more than 5 years from the date of issue,
                  (B) the yield to maturity on such instrument 
                equals or exceeds the sum of--
                          (i) the applicable Federal rate in 
                        effect under section 1274(d) for the 
                        calendar month in which the obligation 
                        is issued, plus
                          (ii) 5 percentage points, and
                  (C) such instrument has significant original 
                issue discount.
        For purposes of subparagraph (B)(i), the Secretary may 
        by regulation (i) permit a rate to be used with respect 
        to any debt instrument which is higher than the 
        applicable Federal rate if the taxpayer establishes to 
        the satisfaction of the Secretary that such higher rate 
        is based on the same principles as the applicable 
        Federal rate and is appropriate for the term of the 
        instrument, or (ii) permit, on a temporary basis, a 
        rate to be used with respect to any debt instrument 
        which is higher than the applicable Federal rate if the 
        Secretary determines that such rate is appropriate in 
        light of distressed conditions in the debt capital 
        markets.
          (2) Significant original issue discount.--For 
        purposes of paragraph (1)(C), a debt instrument shall 
        be treated as having significant original issue 
        discount if--
                  (A) the aggregate amount which would be 
                includible in gross income with respect to such 
                instrument for periods before the close of any 
                accrual period (as defined in section 
                1272(a)(5)) ending after the date 5 years after 
                the date of issue, exceeds--
                  (B) the sum of--
                          (i) the aggregate amount of interest 
                        to be paid under the instrument before 
                        the close of such accrual period, and
                          (ii) the product of the issue price 
                        of such instrument (as defined in 
                        sections 1273(b) and 1274(a)) and its 
                        yield to maturity.
          (3) Special rules.--For purposes of determining 
        whether a debt instrument is an applicable high yield 
        discount obligation--
                  (A) any payment under the instrument shall be 
                assumed to be made on the last day permitted 
                under the instrument, and
                  (B) any payment to be made in the form of 
                another obligation of the issuer (or a related 
                person within the meaning of section 453(f)(1)) 
                shall be assumed to be made when such 
                obligation is required to be paid in cash or in 
                property other than such obligation.
        Except for purposes of paragraph (1)(B), any reference 
        to an obligation in subparagraph (B) of this paragraph 
        shall be treated as including a reference to stock.
          (4) Debt instrument.--For purposes of this 
        subsection, the term ``debt instrument'' means any 
        instrument which is a debt instrument as defined in 
        section 1275(a).
          (5) Regulations.--The Secretary shall prescribe such 
        regulations as may be appropriate to carry out the 
        purposes of this subsection and subsection (e)(5), 
        including--
                  (A) regulations providing for modifications 
                to the provisions of this subsection and 
                subsection (e)(5) in the case of varying rates 
                of interest, put or call options, indefinite 
                maturities, contingent payments, assumptions of 
                debt instruments, conversion rights, or other 
                circumstances where such modifications are 
                appropriate to carry out the purposes of this 
                subsection and subsection (e)(5), and
                  (B) regulations to prevent avoidance of the 
                purposes of this subsection and subsection 
                (e)(5) through the use of issuers other than C 
                corporations, agreements to borrow amounts due 
                under the debt instrument, or other 
                arrangements.
  (j) Limitation on business interest.--
          (1) In general.--The amount allowed as a deduction 
        under this chapter for any taxable year for business 
        interest shall not exceed the sum of--
                  (A) the business interest income of such 
                taxpayer for such taxable year,
                  (B) 30 percent of the adjusted taxable income 
                of such taxpayer for such taxable year, plus
                  (C) the floor plan financing interest of such 
                taxpayer for such taxable year.
        The amount determined under subparagraph (B) shall not 
        be less than zero.
          (2) Carryforward of disallowed business interest.--
        The amount of any business interest not allowed as a 
        deduction for any taxable year by reason of paragraph 
        (1) shall be treated as business interest paid or 
        accrued in the succeeding taxable year.
          (3) Exemption for certain small businesses.--In the 
        case of any taxpayer (other than a tax shelter 
        prohibited from using the cash receipts and 
        disbursements method of accounting under section 
        448(a)(3)) which meets the gross receipts test of 
        section 448(c) for any taxable year, paragraph (1) 
        shall not apply to such taxpayer for such taxable year. 
        In the case of any taxpayer which is not a corporation 
        or a partnership, the gross receipts test of section 
        448(c) shall be applied in the same manner as if such 
        taxpayer were a corporation or partnership.
          (4) Application to partnerships, etc..--
                  (A) In general.--In the case of any 
                partnership--
                          (i) this subsection shall be applied 
                        at the partnership level and any 
                        deduction for business interest shall 
                        be taken into account in determining 
                        the non-separately stated taxable 
                        income or loss of the partnership, and
                          (ii) the adjusted taxable income of 
                        each partner of such partnership--
                                  (I) shall be determined 
                                without regard to such 
                                partner's distributive share of 
                                any items of income, gain, 
                                deduction, or loss of such 
                                partnership, and
                                  (II) shall be increased by 
                                such partner's distributive 
                                share of such partnership's 
                                excess taxable income.
                 For purposes of clause (ii)(II), a partner's 
                distributive share of partnership excess 
                taxable income shall be determined in the same 
                manner as the partner's distributive share of 
                nonseparately stated taxable income or loss of 
                the partnership.
                  (B) Special rules for carryforwards.--
                          (i) In general.--The amount of any 
                        business interest not allowed as a 
                        deduction to a partnership for any 
                        taxable year by reason of paragraph (1) 
                        for any taxable year--
                                  (I) shall not be treated 
                                under paragraph (2) as business 
                                interest paid or accrued by the 
                                partnership in the succeeding 
                                taxable year, and
                                  (II) shall, subject to clause 
                                (ii), be treated as excess 
                                business interest which is 
                                allocated to each partner in 
                                the same manner as the non-
                                separately stated taxable 
                                income or loss of the 
                                partnership.
                          (ii) Treatment of excess business 
                        interest allocated to partners.--If a 
                        partner is allocated any excess 
                        business interest from a partnership 
                        under clause (i) for any taxable year--
                                  (I) such excess business 
                                interest shall be treated as 
                                business interest paid or 
                                accrued by the partner in the 
                                next succeeding taxable year in 
                                which the partner is allocated 
                                excess taxable income from such 
                                partnership, but only to the 
                                extent of such excess taxable 
                                income, and
                                  (II) any portion of such 
                                excess business interest 
                                remaining after the application 
                                of subclause (I) shall, subject 
                                to the limitations of subclause 
                                (I), be treated as business 
                                interest paid or accrued in 
                                succeeding taxable years.
                 For purposes of applying this paragraph, 
                excess taxable income allocated to a partner 
                from a partnership for any taxable year shall 
                not be taken into account under paragraph 
                (1)(A) with respect to any business interest 
                other than excess business interest from the 
                partnership until all such excess business 
                interest for such taxable year and all 
                preceding taxable years has been treated as 
                paid or accrued under clause (ii).
                          (iii) Basis adjustments.--
                                  (I) In general.--The adjusted 
                                basis of a partner in a 
                                partnership interest shall be 
                                reduced (but not below zero) by 
                                the amount of excess business 
                                interest allocated to the 
                                partner under clause (i)(II).
                                  (II) Special rule for 
                                dispositions.--If a partner 
                                disposes of a partnership 
                                interest, the adjusted basis of 
                                the partner in the partnership 
                                interest shall be increased 
                                immediately before the 
                                disposition by the amount of 
                                the excess (if any) of the 
                                amount of the basis reduction 
                                under subclause (I) over the 
                                portion of any excess business 
                                interest allocated to the 
                                partner under clause (i)(II) 
                                which has previously been 
                                treated under clause (ii) as 
                                business interest paid or 
                                accrued by the partner. The 
                                preceding sentence shall also 
                                apply to transfers of the 
                                partnership interest (including 
                                by reason of death) in a 
                                transaction in which gain is 
                                not recognized in whole or in 
                                part. No deduction shall be 
                                allowed to the transferor or 
                                transferee under this chapter 
                                for any excess business 
                                interest resulting in a basis 
                                increase under this subclause.
                  (C) Excess taxable income.--The term ``excess 
                taxable income'' means, with respect to any 
                partnership, the amount which bears the same 
                ratio to the partnership's adjusted taxable 
                income as--
                          (i) the excess (if any) of--
                                  (I) the amount determined for 
                                the partnership under paragraph 
                                (1)(B), over
                                  (II) the amount (if any) by 
                                which the business interest of 
                                the partnership, reduced by the 
                                floor plan financing interest, 
                                exceeds the business interest 
                                income of the partnership, 
                                bears to
                          (ii) the amount determined for the 
                        partnership under paragraph (1)(B).
                  (D) Application to S corporations.--Rules 
                similar to the rules of subparagraphs (A) and 
                (C) shall apply with respect to any S 
                corporation and its shareholders.
          (5) Business interest.--For purposes of this 
        subsection, the term ``business interest'' means any 
        interest paid or accrued on indebtedness properly 
        allocable to a trade or business. Such term shall not 
        include investment interest (within the meaning of 
        subsection (d)).
          (6) Business interest income.--For purposes of this 
        subsection, the term ``business interest income'' means 
        the amount of interest includible in the gross income 
        of the taxpayer for the taxable year which is properly 
        allocable to a trade or business. Such term shall not 
        include investment income (within the meaning of 
        subsection (d)).
          (7) Trade or business.--For purposes of this 
        subsection--
                  (A) In general.--The term ``trade or 
                business'' shall not include--
                          (i) the trade or business of 
                        performing services as an employee,
                          (ii) any electing real property trade 
                        or business,
                          (iii) any electing farming business, 
                        or
                          (iv) the trade or business of the 
                        furnishing or sale of--
                                  (I) electrical energy, water, 
                                or sewage disposal services,
                                  (II) gas or steam through a 
                                local distribution system, or
                                  (III) transportation of gas 
                                or steam by pipeline,
                 if the rates for such furnishing or sale, as 
                the case may be, have been established or 
                approved by a State or political subdivision 
                thereof, by any agency or instrumentality of 
                the United States, by a public service or 
                public utility commission or other similar body 
                of any State or political subdivision thereof, 
                or by the governing or ratemaking body of an 
                electric cooperative.
                  (B) Electing real property trade or 
                business.--For purposes of this paragraph, the 
                term ``electing real property trade or 
                business'' means any trade or business which is 
                described in section 469(c)(7)(C) and which 
                makes an election under this subparagraph. Any 
                such election shall be made at such time and in 
                such manner as the Secretary shall prescribe, 
                and, once made, shall be irrevocable.
                  (C) Electing farming business.--For purposes 
                of this paragraph, the term ``electing farming 
                business'' means--
                          (i) a farming business (as defined in 
                        section 263A(e)(4)) which makes an 
                        election under this subparagraph, or
                          (ii) any trade or business of a 
                        specified agricultural or horticultural 
                        cooperative (as defined in section 
                        199A(g)(2)) with respect to which the 
                        cooperative makes an election under 
                        this subparagraph.
                Any such election shall be made at such time 
                and in such manner as the Secretary shall 
                prescribe, and, once made, shall be 
                irrevocable.
          (8) Adjusted taxable income.--For purposes of this 
        subsection, the term ``adjusted taxable income'' means 
        the taxable income of the taxpayer--
                  (A) computed without regard to--
                          (i) any item of income, gain, 
                        deduction, or loss which is not 
                        properly allocable to a trade or 
                        business,
                          (ii) any business interest or 
                        business interest income,
                          (iii) the amount of any net operating 
                        loss deduction under section 172,
                          (iv) the amount of any deduction 
                        allowed under section 199A, and
                          (v) in the case of taxable years 
                        beginning before [January 1, 2022] 
                        January 1, 2026, any deduction 
                        allowable for depreciation, 
                        amortization, or depletion, and
                  (B) computed with such other adjustments as 
                provided by the Secretary.
          (9) Floor plan financing interest defined.--For 
        purposes of this subsection--
                  (A) In general.--The term ``floor plan 
                financing interest'' means interest paid or 
                accrued on floor plan financing indebtedness.
                  (B) Floor plan financing indebtedness.--The 
                term ``floor plan financing indebtedness'' 
                means indebtedness--
                          (i) used to finance the acquisition 
                        of motor vehicles held for sale or 
                        lease, and
                          (ii) secured by the inventory so 
                        acquired.
                  (C) Motor vehicle.--The term ``motor 
                vehicle'' means a motor vehicle that is any of 
                the following:
                          (i) Any self-propelled vehicle 
                        designed for transporting persons or 
                        property on a public street, highway, 
                        or road.
                          (ii) A boat.
                          (iii) Farm machinery or equipment.
          (10) Special rule for taxable years beginning in 2019 
        and 2020.--
                  (A) In general.--
                          (i) In general.--Except as provided 
                        in clause (ii) or (iii), in the case of 
                        any taxable year beginning in 2019 or 
                        2020, paragraph (1)(B) shall be applied 
                        by substituting ``50 percent'' for ``30 
                        percent''.
                          (ii) Special rule for partnerships.--
                        In the case of a partnership--
                                  (I) clause (i) shall not 
                                apply to any taxable year 
                                beginning in 2019, but
                                  (II) unless a partner elects 
                                not to have this subclause 
                                apply, in the case of any 
                                excess business interest of the 
                                partnership for any taxable 
                                year beginning in 2019 which is 
                                allocated to the partner under 
                                paragraph (4)(B)(i)(II)--
                                          (aa) 50 percent of 
                                        such excess business 
                                        interest shall be 
                                        treated as business 
                                        interest which, 
                                        notwithstanding 
                                        paragraph (4)(B)(ii), 
                                        is paid or accrued by 
                                        the partner in the 
                                        partner's first taxable 
                                        year beginning in 2020 
                                        and which is not 
                                        subject to the limits 
                                        of paragraph (1), and
                                          (bb) 50 percent of 
                                        such excess business 
                                        interest shall be 
                                        subject to the 
                                        limitations of 
                                        paragraph (4)(B)(ii) in 
                                        the same manner as any 
                                        other excess business 
                                        interest so allocated.
                          (iii) Election out.--A taxpayer may 
                        elect, at such time and in such manner 
                        as the Secretary may prescribe, not to 
                        have clause (i) apply to any taxable 
                        year. Such an election, once made, may 
                        be revoked only with the consent of the 
                        Secretary. In the case of a 
                        partnership, any such election shall be 
                        made by the partnership and may be made 
                        only for taxable years beginning in 
                        2020.
                  (B) Election to use 2019 adjusted taxable 
                income for taxable years beginning in 2020.--
                          (i) In general.--Subject to clause 
                        (ii), in the case of any taxable year 
                        beginning in 2020, the taxpayer may 
                        elect to apply this subsection by 
                        substituting the adjusted taxable 
                        income of the taxpayer for the last 
                        taxable year beginning in 2019 for the 
                        adjusted taxable income for such 
                        taxable year. In the case of a 
                        partnership, any such election shall be 
                        made by the partnership.
                          (ii) Special rule for short taxable 
                        years.--If an election is made under 
                        clause (i) for a taxable year which is 
                        a short taxable year, the adjusted 
                        taxable income for the taxpayer's last 
                        taxable year beginning in 2019 which is 
                        substituted under clause (i) shall be 
                        equal to the amount which bears the 
                        same ratio to such adjusted taxable 
                        income determined without regard to 
                        this clause as the number of months in 
                        the short taxable year bears to 12
          (11) Cross references.--(A) For requirement that an 
        electing real property trade or business use the 
        alternative depreciation system, see section 
        168(g)(1)(F).
          (B) For requirement that an electing farming business 
        use the alternative depreciation system, see section 
        168(g)(1)(G).
  (k) Section 6166 interest.--No deduction shall be allowed 
under this section for any interest payable under section 6601 
on any unpaid portion of the tax imposed by section 2001 for 
the period during which an extension of time for payment of 
such tax is in effect under section 6166.
  (l) Disallowance of deduction on certain debt instruments of 
corporations.--
          (1) In general.--No deduction shall be allowed under 
        this chapter for any interest paid or accrued on a 
        disqualified debt instrument.
          (2) Disqualified debt instrument.--For purposes of 
        this subsection, the term ``disqualified debt 
        instrument'' means any indebtedness of a corporation 
        which is payable in equity of the issuer or a related 
        party or equity held by the issuer (or any related 
        party) in any other person.
          (3) Special rules for amounts payable in equity.--For 
        purposes of paragraph (2), indebtedness shall be 
        treated as payable in equity of the issuer or any other 
        person only if--
                  (A) a substantial amount of the principal or 
                interest is required to be paid or converted, 
                or at the option of the issuer or a related 
                party is payable in, or convertible into, such 
                equity,
                  (B) a substantial amount of the principal or 
                interest is required to be determined, or at 
                the option of the issuer or a related party is 
                determined, by reference to the value of such 
                equity, or
                  (C) the indebtedness is part of an 
                arrangement which is reasonably expected to 
                result in a transaction described in 
                subparagraph (A) or (B).
        For purposes of this paragraph, principal or interest 
        shall be treated as required to be so paid, converted, 
        or determined if it may be required at the option of 
        the holder or a related party and there is a 
        substantial certainty the option will be exercised.
          (4) Capitalization allowed with respect to equity of 
        persons other than issuer and related parties.--If the 
        disqualified debt instrument of a corporation is 
        payable in equity held by the issuer (or any related 
        party) in any other person (other than a related 
        party), the basis of such equity shall be increased by 
        the amount not allowed as a deduction by reason of 
        paragraph (1) with respect to the instrument.
          (5) Exception for certain instruments issued by 
        dealers in securities.--For purposes of this 
        subsection, the term ``disqualified debt instrument'' 
        does not include indebtedness issued by a dealer in 
        securities (or a related party) which is payable in, or 
        by reference to, equity (other than equity of the 
        issuer or a related party) held by such dealer in its 
        capacity as a dealer in securities. For purposes of 
        this paragraph, the term ``dealer in securities'' has 
        the meaning given such term by section 475.
          (6) Related party.--For purposes of this subsection, 
        a person is a related party with respect to another 
        person if such person bears a relationship to such 
        other person described in section 267(b) or 707(b).
          (7) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry 
        out the purposes of this subsection, including 
        regulations preventing avoidance of this subsection 
        through the use of an issuer other than a corporation.
  (m) Interest on unpaid taxes attributable to nondisclosed 
reportable transactions.--No deduction shall be allowed under 
this chapter for any interest paid or accrued under section 
6601 on any underpayment of tax which is attributable to the 
portion of any reportable transaction understatement (as 
defined in section 6662A(b)) with respect to which the 
requirement of section 6664(d)(2)(A) 1 is not met.
  (n) Cross references.--
                  (1) For disallowance of certain amounts paid 
                in connection with insurance, endowment, or 
                annuity contracts, see section 264.
                  (2) For disallowance of deduction for 
                interest relating to tax-exempt income, see 
                section 265(a)(2).
                  (3) For disallowance of deduction for 
                carrying charges chargeable to capital account, 
                see section 266.
                  (4) For disallowance of interest with respect 
                to transactions between related taxpayers, see 
                section 267.
                  (5) For treatment of redeemable ground rents 
                and real property held subject to liabilities 
                under redeemable ground rents, see section 
                1055.

           *       *       *       *       *       *       *


SEC. 168. ACCELERATED COST RECOVERY SYSTEM.

  (a) General rule.--Except as otherwise provided in this 
section, the depreciation deduction provided by section 167(a) 
for any tangible property shall be determined by using--
          (1) the applicable depreciation method,
          (2) the applicable recovery period, and
          (3) the applicable convention.
  (b) Applicable depreciation method.--For purposes of this 
section--
          (1) In general.--Except as provided in paragraphs (2) 
        and (3), the applicable depreciation method is--
                  (A) the 200 percent declining balance method,
                  (B) switching to the straight line method for 
                the 1st taxable year for which using the 
                straight line method with respect to the 
                adjusted basis as of the beginning of such year 
                will yield a larger allowance.
          (2) 150 percent declining balance method in certain 
        cases.--Paragraph (1) shall be applied by substituting 
        ``150 percent'' for ``200 percent'' in the case of--
                  (A) any 15-year or 20-year property not 
                referred to in paragraph (3),
                  (B) any property (other than property 
                described in paragraph (3)) which is a 
                qualified smart electric meter or qualified 
                smart electric grid system, or
                  (C) any property (other than property 
                described in paragraph (3)) with respect to 
                which the taxpayer elects under paragraph (5) 
                to have the provisions of this paragraph apply.
          (3) Property to which straight line method applies.--
        The applicable depreciation method shall be the 
        straight line method in the case of the following 
        property:
                  (A) Nonresidential real property.
                  (B) Residential rental property.
                  (C) Any railroad grading or tunnel bore.
                  (D) Property with respect to which the 
                taxpayer elects under paragraph (5) to have the 
                provisions of this paragraph apply.
                  (E) Property described in subsection 
                (e)(3)(D)(ii).
                  (F) Water utility property described in 
                subsection (e)(5).
                  (G) Qualified improvement property described 
                in subsection (e)(6).
          (4) Salvage value treated as zero.--Salvage value 
        shall be treated as zero.
          (5) Election.--An election under paragraph (2)(D) or 
        (3)(D) may be made with respect to 1 or more classes of 
        property for any taxable year and once made with 
        respect to any class shall apply to all property in 
        such class placed in service during such taxable year. 
        Such an election, once made, shall be irrevocable.
  (c) Applicable recovery period.--For purposes of this 
section, the applicable recovery period shall be determined in 
accordance with the following table:
  (d) Applicable convention.--For purposes of this section--
          (1) In general.--Except as otherwise provided in this 
        subsection, the applicable convention is the half-year 
        convention.
          (2) Real property.--In the case of--
                  (A) nonresidential real property,
                  (B) residential rental property, and
                  (C) any railroad grading or tunnel bore,
        the applicable convention is the mid-month convention.
          (3) Special rule where substantial property placed in 
        service during last 3 months of taxable year.--
                  (A) In general.--Except as provided in 
                regulations, if during any taxable year--
                          (i) the aggregate bases of property 
                        to which this section applies placed in 
                        service during the last 3 months of the 
                        taxable year, exceed
                          (ii) 40 percent of the aggregate 
                        bases of property to which this section 
                        applies placed in service during such 
                        taxable year,
        the applicable convention for all property to which 
        this section applies placed in service during such 
        taxable year shall be the mid-quarter convention.
                  (B) Certain property not taken into 
                account.--For purposes of subparagraph (A), 
                there shall not be taken into account--
                          (i) any nonresidential real property, 
                        residential rental property, and 
                        railroad grading or tunnel bore, and
                          (ii) any other property placed in 
                        service and disposed of during the same 
                        taxable year.
          (4) Definitions.--
                  (A) Half-year convention.--The half-year 
                convention is a convention which treats all 
                property placed in service during any taxable 
                year (or disposed of during any taxable year) 
                as placed in service (or disposed of) on the 
                mid-point of such taxable year.
                  (B) Mid-month convention.--The mid-month 
                convention is a convention which treats all 
                property placed in service during any month (or 
                disposed of during any month) as placed in 
                service (or disposed of) on the mid-point of 
                such month.
                  (C) Mid-quarter convention.--The mid-quarter 
                convention is a convention which treats all 
                property placed in service during any quarter 
                of a taxable year (or disposed of during any 
                quarter of a taxable year) as placed in service 
                (or disposed of) on the mid-point of such 
                quarter.
  (e) Classification of property.--For purposes of this 
section--
          (1) In general.--Except as otherwise provided in this 
        subsection, property shall be classified under the 
        following table:
          (2) Residential rental or nonresidential real 
        property.--
                  (A) Residential rental property.--
                          (i) Residential rental property.--The 
                        term ``residential rental property'' 
                        means any building or structure if 80 
                        percent or more of the gross rental 
                        income from such building or structure 
                        for the taxable year is rental income 
                        from dwelling units.
                          (ii) Definitions.--For purposes of 
                        clause (i)--
                                  (I) the term ``dwelling 
                                unit'' means a house or 
                                apartment used to provide 
                                living accommodations in a 
                                building or structure, but does 
                                not include a unit in a hotel, 
                                motel, or other establishment 
                                more than one-half of the units 
                                in which are used on a 
                                transient basis, and
                                  (II) if any portion of the 
                                building or structure is 
                                occupied by the taxpayer, the 
                                gross rental income from such 
                                building or structure shall 
                                include the rental value of the 
                                portion so occupied.
                  (B) Nonresidential real property.--The term 
                ``nonresidential real property'' means section 
                1250 property which is not--
                          (i) residential rental property, or
                          (ii) property with a class life of 
                        less than 27.5 years.
          (3) Classification of certain property.--
                  (A) 3-year property.--The term ``3-year 
                property'' includes--
                          (i) any race horse--
                                  (I) which is placed in 
                                service before January 1, 2022, 
                                and
                                  (II) which is placed in 
                                service after December 31, 
                                2021, and which is more than 2 
                                years old at the time such 
                                horse is placed in service by 
                                such purchaser,
                          (ii) any horse other than a race 
                        horse which is more than 12 years old 
                        at the time it is placed in service, 
                        and
                          (iii) any qualified rent-to-own 
                        property.
                  (B) 5-year property.--The term ``5-year 
                property'' includes--
                          (i) any automobile or light general 
                        purpose truck,
                          (ii) any semi-conductor manufacturing 
                        equipment,
                          (iii) any computer-based telephone 
                        central office switching equipment,
                          (iv) any qualified technological 
                        equipment,
                          (v) any section 1245 property used in 
                        connection with research and 
                        experimentation,
                          (vi) any property which--
                                  (I) is described in 
                                subparagraph (A) of section 
                                48(a)(3) (or would be so 
                                described if ``solar or wind 
                                energy'' were substituted for 
                                ``solar energy'' in clause (i) 
                                thereof and the last sentence 
                                of such section did not apply 
                                to such subparagraph),
                                  (II) is described in 
                                paragraph (15) of section 48(l) 
                                (as in effect on the day before 
                                the date of the enactment of 
                                the Revenue Reconciliation Act 
                                of 1990) and has a power 
                                production capacity of not 
                                greater than 80 megawatts, or
                                  (III) is described in section 
                                48(l)(3)(A)(ix) (as in effect 
                                on the day before the date of 
                                the enactment of the Revenue 
                                Reconciliation Act of 1990), 
                                and
                          (vii) any machinery or equipment 
                        (other than any grain bin, cotton 
                        ginning asset, fence, or other land 
                        improvement) which is used in a farming 
                        business (as defined in section 
                        263A(e)(4)), the original use of which 
                        commences with the taxpayer after 
                        December 31, 2017[, and].
                          [(viii) any qualified facility (as 
                        defined in section 45Y(b)(1)(A)), any 
                        qualified property (as defined in 
                        subsection (b)(2) of section 48E) which 
                        is a qualified investment (as defined 
                        in subsection (b)(1) of such section), 
                        or any energy storage technology (as 
                        defined in subsection (c)(2) of such 
                        section).]
                Nothing in any provision of law shall be 
                construed to treat property as not being 
                described in subclause (I) or (II) of clause 
                (vi) by reason of being public utility 
                property.
                  (C) 7-year property.--The term ``7-year 
                property'' includes--
                          (i) any railroad track,
                          (ii) any motorsports entertainment 
                        complex,
                          (iii) any Alaska natural gas 
                        pipeline,
                          (iv) any natural gas gathering line 
                        the original use of which commences 
                        with the taxpayer after April 11, 2005, 
                        and
                          (v) any property which--
                                  (I) does not have a class 
                                life, and
                                  (II) is not otherwise 
                                classified under paragraph (2) 
                                or this paragraph.
                  (D) 10-year property.--The term ``10-year 
                property'' includes--
                          (i) any single purpose agricultural 
                        or horticultural structure (within the 
                        meaning of subsection (i)(13)),
                          (ii) any tree or vine bearing fruit 
                        or nuts,
                          (iii) any qualified smart electric 
                        meter, and
                          (iv) any qualified smart electric 
                        grid system.
                  (E) 15-year property.--The term ``15-year 
                property'' includes--
                          (i) any municipal wastewater 
                        treatment plant,
                          (ii) any telephone distribution plant 
                        and comparable equipment used for 2-way 
                        exchange of voice and data 
                        communications,
                          (iii) any section 1250 property which 
                        is a retail motor fuels outlet (whether 
                        or not food or other convenience items 
                        are sold at the outlet),
                          (iv) initial clearing and grading 
                        land improvements with respect to gas 
                        utility property,
                          (v) any section 1245 property (as 
                        defined in section 1245(a)(3)) used in 
                        the transmission at 69 or more 
                        kilovolts of electricity for sale and 
                        the original use of which commences 
                        with the taxpayer after April 11, 2005,
                          (vi) any natural gas distribution 
                        line the original use of which 
                        commences with the taxpayer after April 
                        11, 2005, and which is placed in 
                        service before January 1, 2011, and
                          (vii) any qualified improvement 
                        property.
                  (F) 20-year property.--The term ``20-year 
                property'' means initial clearing and grading 
                land improvements with respect to any electric 
                utility transmission and distribution plant.
          (4) Railroad grading or tunnel bore.--The term 
        ``railroad grading or tunnel bore'' means all 
        improvements resulting from excavations (including 
        tunneling), construction of embankments, clearings, 
        diversions of roads and streams, sodding of slopes, and 
        from similar work necessary to provide, construct, 
        reconstruct, alter, protect, improve, replace, or 
        restore a roadbed or right-of-way for railroad track.
          (5) Water utility property.--The term ``water utility 
        property'' means property--
                  (A) which is an integral part of the 
                gathering, treatment, or commercial 
                distribution of water, and which, without 
                regard to this paragraph, would be 20-year 
                property, and
                  (B) any municipal sewer.
          (6) Qualified improvement property.--
                  (A) In general.--The term ``qualified 
                improvement property'' means any improvement 
                made by the taxpayer to an interior portion of 
                a building which is nonresidential real 
                property if such improvement is placed in 
                service after the date such building was first 
                placed in service.
                  (B) Certain improvements not included.--Such 
                term shall not include any improvement for 
                which the expenditure is attributable to--
                          (i) the enlargement of the building,
                          (ii) any elevator or escalator, or
                          (iii) the internal structural 
                        framework of the building.
  (f) Property to which section does not apply.--This section 
shall not apply to--
          (1) Certain methods of depreciation.--Any property 
        if--
                  (A) the taxpayer elects to exclude such 
                property from the application of this section, 
                and
                  (B) for the 1st taxable year for which a 
                depreciation deduction would be allowable with 
                respect to such property in the hands of the 
                taxpayer, the property is properly depreciated 
                under the unit-of-production method or any 
                method of depreciation not expressed in a term 
                of years (other than the retirement-
                replacement-betterment method or similar 
                method).
          (2) Certain public utility property.--Any public 
        utility property (within the meaning of subsection 
        (i)(10)) if the taxpayer does not use a normalization 
        method of accounting.
          (3) Films and video tape.--Any motion picture film or 
        video tape.
          (4) Sound recordings.--Any works which result from 
        the fixation of a series of musical, spoken, or other 
        sounds, regardless of the nature of the material (such 
        as discs, tapes, or other phonorecordings) in which 
        such sounds are embodied.
          (5) Certain property placed in service in churning 
        transactions.--
                  (A) In general.--Property--
                          (i) described in paragraph (4) of 
                        section 168(e) (as in effect before the 
                        amendments made by the Tax Reform Act 
                        of 1986), or
                          (ii) which would be described in such 
                        paragraph if such paragraph were 
                        applied by substituting ``1987'' for 
                        ``1981'' and ``1986'' for ``1980'' each 
                        place such terms appear.
                  (B) Subparagraph (A)(ii) not to apply.--
                Clause (ii) of subparagraph (A) shall not apply 
                to--
                          (i) any residential rental property 
                        or nonresidential real property,
                          (ii) any property if, for the 1st 
                        taxable year in which such property is 
                        placed in service--
                                  (I) the amount allowable as a 
                                deduction under this section 
                                (as in effect before the date 
                                of the enactment of this 
                                paragraph) with respect to such 
                                property is greater than,
                                  (II) the amount allowable as 
                                a deduction under this section 
                                (as in effect on or after such 
                                date and using the half-year 
                                convention) for such taxable 
                                year, or
                          (iii) any property to which this 
                        section (as amended by the Tax Reform 
                        Act of 1986) applied in the hands of 
                        the transferor.
                  (C) Special rule.--In the case of any 
                property to which this section would apply but 
                for this paragraph, the depreciation deduction 
                under section 167 shall be determined under the 
                provisions of this section as in effect before 
                the amendments made by section 201 of the Tax 
                Reform Act of 1986.
  (g) Alternative depreciation system for certain property.--
          (1) In general.--In the case of--
                  (A) any tangible property which during the 
                taxable year is used predominantly outside the 
                United States,
                  (B) any tax-exempt use property,
                  (C) any tax-exempt bond financed property,
                  (D) any imported property covered by an 
                Executive order under paragraph (6),
                  (E) any property to which an election under 
                paragraph (7) applies,
                  (F) any property described in paragraph (8), 
                and
                  (G) any property with a recovery period of 10 
                years or more which is held by an electing 
                farming business (as defined in section 
                163(j)(7)(C)),
        the depreciation deduction provided by section 167(a) 
        shall be determined under the alternative depreciation 
        system.
          (2) Alternative depreciation system.--For purposes of 
        paragraph (1), the alternative depreciation system is 
        depreciation determined by using--
                  (A) the straight line method (without regard 
                to salvage value),
                  (B) the applicable convention determined 
                under subsection (d), and
                  (C) a recovery period determined under the 
                following table:
          (3) Special rules for determining class life.--
                  (A) Tax-exempt use property subject to 
                lease.--In the case of any tax-exempt use 
                property subject to a lease, the recovery 
                period used for purposes of paragraph (2) shall 
                (notwithstanding any other subparagraph of this 
                paragraph) in no event be less than 125 percent 
                of the lease term.
                  (B) Special rule for certain property 
                assigned to classes.--For purposes of paragraph 
                (2), in the case of property described in any 
                of the following subparagraphs of subsection 
                (e)(3), the class life shall be determined as 
                follows:
                  (C) Qualified technological equipment.--In 
                the case of any qualified technological 
                equipment, the recovery period used for 
                purposes of paragraph (2) shall be 5 years.
                  (D) Automobiles, etc..--In the case of any 
                automobile or light general purpose truck, the 
                recovery period used for purposes of paragraph 
                (2) shall be 5 years.
                  (E) Certain real property.--In the case of 
                any section 1245 property which is real 
                property with no class life, the recovery 
                period used for purposes of paragraph (2) shall 
                be 40 years.
          (4) Exception for certain property used outside 
        United States.--Subparagraph (A) of paragraph (1) shall 
        not apply to--
                  (A) any aircraft which is registered by the 
                Administrator of the Federal Aviation Agency 
                and which is operated to and from the United 
                States or is operated under contract with the 
                United States;
                  (B) rolling stock which is used within and 
                without the United States and which is--
                          (i) of a rail carrier subject to part 
                        A of subtitle IV of title 49, or
                          (ii) of a United States person (other 
                        than a corporation described in clause 
                        (i)) but only if the rolling stock is 
                        not leased to one or more foreign 
                        persons for periods aggregating more 
                        than 12 months in any 24-month period;
                  (C) any vessel documented under the laws of 
                the United States which is operated in the 
                foreign or domestic commerce of the United 
                States;
                  (D) any motor vehicle of a United States 
                person (as defined in section 7701(a)(30)) 
                which is operated to and from the United 
                States;
                  (E) any container of a United States person 
                which is used in the transportation of property 
                to and from the United States;
                  (F) any property (other than a vessel or an 
                aircraft) of a United States person which is 
                used for the purpose of exploring for, 
                developing, removing, or transporting resources 
                from the outer Continental Shelf (within the 
                meaning of section 2 of the Outer Continental 
                Shelf Lands Act, as amended and supplemented; 
                (43 U.S.C. 1331));
                  (G) any property which is owned by a domestic 
                corporation or by a United States citizen 
                (other than a citizen entitled to the benefits 
                of section 931 or 933) and which is used 
                predominantly in a possession of the United 
                States by such a corporation or such a citizen, 
                or by a corporation created or organized in, or 
                under the law of, a possession of the United 
                States;
                  (H) any communications satellite (as defined 
                in section 103(3) of the Communications 
                Satellite Act of 1962, 47 U.S.C. 702(3)), or 
                any interest therein, of a United States 
                person;
                  (I) any cable, or any interest therein, of a 
                domestic corporation engaged in furnishing 
                telephone service to which section 
                168(i)(10)(C) applies (or of a wholly owned 
                domestic subsidiary of such a corporation), if 
                such cable is part of a submarine cable system 
                which constitutes part of a communication link 
                exclusively between the United States and one 
                or more foreign countries;
                  (J) any property (other than a vessel or an 
                aircraft) of a United States person which is 
                used in international or territorial waters 
                within the northern portion of the Western 
                Hemisphere for the purpose of exploring for, 
                developing, removing, or transporting resources 
                from ocean waters or deposits under such 
                waters;
                  (K) any property described in section 
                48(l)(3)(A)(ix) (as in effect on the day before 
                the date of the enactment of the Revenue 
                Reconciliation Act of 1990) which is owned by a 
                United States person and which is used in 
                international or territorial waters to generate 
                energy for use in the United States; and
                  (L) any satellite (not described in 
                subparagraph (H)) or other spacecraft (or any 
                interest therein) held by a United States 
                person if such satellite or other spacecraft 
                was launched from within the United States.
        For purposes of subparagraph (J), the term ``northern 
        portion of the Western Hemisphere'' means the area 
        lying west of the 30th meridian west of Greenwich, east 
        of the international dateline, and north of the 
        Equator, but not including any foreign country which is 
        a country of South America.
          (5) Tax-exempt bond financed property.--For purposes 
        of this subsection--
                  (A) In general.--Except as otherwise provided 
                in this paragraph, the term ``tax-exempt bond 
                financed property'' means any property to the 
                extent such property is financed (directly or 
                indirectly) by an obligation the interest on 
                which is exempt from tax under section 103(a).
                  (B) Allocation of bond proceeds.--For 
                purposes of subparagraph (A), the proceeds of 
                any obligation shall be treated as used to 
                finance property acquired in connection with 
                the issuance of such obligation in the order in 
                which such property is placed in service.
                  (C) Qualified residential rental projects.--
                The term ``tax-exempt bond financed property'' 
                shall not include any qualified residential 
                rental project (within the meaning of section 
                142(a)(7)).
          (6) Imported property.--
                  (A) Countries maintaining trade restrictions 
                or engaging in discriminatory acts.--If the 
                President determines that a foreign country--
                          (i) maintains nontariff trade 
                        restrictions, including variable import 
                        fees, which substantially burden United 
                        States commerce in a manner 
                        inconsistent with provisions of trade 
                        agreements, or
                          (ii) engages in discriminatory or 
                        other acts (including tolerance of 
                        international cartels) or policies 
                        unjustifiably restricting United States 
                        commerce,
                the President may by Executive order provide 
                for the application of paragraph (1)(D) to any 
                article or class of articles manufactured or 
                produced in such foreign country for such 
                period as may be provided by such Executive 
                order. Any period specified in the preceding 
                sentence shall not apply to any property 
                ordered before (or the construction, 
                reconstruction, or erection of which began 
                before) the date of the Executive order unless 
                the President determines an earlier date to be 
                in the public interest and specifies such date 
                in the Executive order.
                  (B) Imported property.--For purposes of this 
                subsection, the term ``imported property'' 
                means any property if--
                          (i) such property was completed 
                        outside the United States, or
                          (ii) less than 50 percent of the 
                        basis of such property is attributable 
                        to value added within the United 
                        States.
                For purposes of this subparagraph, the term 
                ``United States'' includes the Commonwealth of 
                Puerto Rico and the possessions of the United 
                States.
          (7) Election to use alternative depreciation 
        system.--
                  (A) In general.--If the taxpayer makes an 
                election under this paragraph with respect to 
                any class of property for any taxable year, the 
                alternative depreciation system under this 
                subsection shall apply to all property in such 
                class placed in service during such taxable 
                year. Notwithstanding the preceding sentence, 
                in the case of nonresidential real property or 
                residential rental property, such election may 
                be made separately with respect to each 
                property.
                  (B) Election irrevocable.--An election under 
                subparagraph (A), once made, shall be 
                irrevocable.
          (8) Electing real property trade or business.--The 
        property described in this paragraph shall consist of 
        any nonresidential real property, residential rental 
        property, and qualified improvement property held by an 
        electing real property trade or business (as defined in 
        163(j)(7)(B)).
  (h) Tax-exempt use property.--
          (1) In general.--For purposes of this section--
                  (A) Property other than nonresidential real 
                property.--Except as otherwise provided in this 
                subsection, the term ``tax-exempt use 
                property'' means that portion of any tangible 
                property (other than nonresidential real 
                property) leased to a tax-exempt entity.
                  (B) Nonresidential real property.--
                          (i) In general.--In the case of 
                        nonresidential real property, the term 
                        ``tax-exempt use property'' means that 
                        portion of the property leased to a 
                        tax-exempt entity in a disqualified 
                        lease.
                          (ii) Disqualified lease.--For 
                        purposes of this subparagraph, the term 
                        ``disqualified lease'' means any lease 
                        of the property to a tax-exempt entity, 
                        but only if--
                                  (I) part or all of the 
                                property was financed (directly 
                                or indirectly) by an obligation 
                                the interest on which is exempt 
                                from tax under section 103(a) 
                                and such entity (or a related 
                                entity) participated in such 
                                financing,
                                  (II) under such lease there 
                                is a fixed or determinable 
                                price purchase or sale option 
                                which involves such entity (or 
                                a related entity) or there is 
                                the equivalent of such an 
                                option,
                                  (III) such lease has a lease 
                                term in excess of 20 years, or
                                  (IV) such lease occurs after 
                                a sale (or other transfer) of 
                                the property by, or lease of 
                                the property from, such entity 
                                (or a related entity) and such 
                                property has been used by such 
                                entity (or a related entity) 
                                before such sale (or other 
                                transfer) or lease.
                          (iii) 35-percent threshold test.--
                        Clause (i) shall apply to any property 
                        only if the portion of such property 
                        leased to tax-exempt entities in 
                        disqualified leases is more than 35 
                        percent of the property.
                          (iv) Treatment of improvements.--For 
                        purposes of this subparagraph, 
                        improvements to a property (other than 
                        land) shall not be treated as a 
                        separate property.
                          (v) Leasebacks during 1st 3 months of 
                        use not taken into account.--Subclause 
                        (IV) of clause (ii) shall not apply to 
                        any property which is leased within 3 
                        months after the date such property is 
                        first used by the tax-exempt entity (or 
                        a related entity).
                  (C) Exception for short-term leases.--
                          (i) In general.--Property shall not 
                        be treated as tax-exempt use property 
                        merely by reason of a short-term lease.
                          (ii) Short-term lease.--For purposes 
                        of clause (i), the term ``short-term 
                        lease'' means any lease the term of 
                        which is--
                                  (I) less than 3 years, and
                                  (II) less than the greater of 
                                1 year or 30 percent of the 
                                property's present class life.
                 In the case of nonresidential real property 
                and property with no present class life, 
                subclause (II) shall not apply.
                  (D) Exception where property used in 
                unrelated trade or business.--The term ``tax-
                exempt use property'' shall not include any 
                portion of a property if such portion is 
                predominantly used by the tax-exempt entity 
                (directly or through a partnership of which 
                such entity is a partner) in an unrelated trade 
                or business the income of which is subject to 
                tax under section 511. For purposes of 
                subparagraph (B)(iii), any portion of a 
                property so used shall not be treated as leased 
                to a tax-exempt entity in a disqualified lease.
                  (E) Nonresidential real property defined.--
                For purposes of this paragraph, the term 
                ``nonresidential real property'' includes 
                residential rental property.
          (2) Tax-exempt entity.--
                  (A) In general.--For purposes of this 
                subsection, the term ``tax-exempt entity'' 
                means--
                          (i) the United States, any State or 
                        political subdivision thereof, any 
                        possession of the United States, or any 
                        agency or instrumentality of any of the 
                        foregoing,
                          (ii) an organization (other than a 
                        cooperative described in section 521) 
                        which is exempt from tax imposed by 
                        this chapter,
                          (iii) any foreign person or entity, 
                        and
                          (iv) any Indian tribal government 
                        described in section 7701(a)(40).
                For purposes of applying this subsection, any 
                Indian tribal government referred to in clause 
                (iv) shall be treated in the same manner as a 
                State.
                  (B) Exception for certain property subject to 
                United States tax and used by foreign person or 
                entity.--Clause (iii) of subparagraph (A) shall 
                not apply with respect to any property if more 
                than 50 percent of the gross income for the 
                taxable year derived by the foreign person or 
                entity from the use of such property is--
                          (i) subject to tax under this 
                        chapter, or
                          (ii) included under section 951 in 
                        the gross income of a United States 
                        shareholder for the taxable year with 
                        or within which ends the taxable year 
                        of the controlled foreign corporation 
                        in which such income was derived.
                For purposes of the preceding sentence, any 
                exclusion or exemption shall not apply for 
                purposes of determining the amount of the gross 
                income so derived, but shall apply for purposes 
                of determining the portion of such gross income 
                subject to tax under this chapter.
                  (C) Foreign person or entity.--For purposes 
                of this paragraph, the term ``foreign person or 
                entity'' means--
                          (i) any foreign government, any 
                        international organization, or any 
                        agency or instrumentality of any of the 
                        foregoing, and
                          (ii) any person who is not a United 
                        States person.
                Such term does not include any foreign 
                partnership or other foreign pass-thru entity.
                  (D) Treatment of certain taxable 
                instrumentalities.--For purposes of this 
                subsection, a corporation shall not be treated 
                as an instrumentality of the United States or 
                of any State or political subdivision thereof 
                if--
                          (i) all of the activities of such 
                        corporation are subject to tax under 
                        this chapter, and
                          (ii) a majority of the board of 
                        directors of such corporation is not 
                        selected by the United States or any 
                        State or political subdivision thereof.
                  (E) Certain previously tax-exempt 
                organizations.--
                          (i) In general.--For purposes of this 
                        subsection, an organization shall be 
                        treated as an organization described in 
                        subparagraph (A)(ii) with respect to 
                        any property (other than property held 
                        by such organization) if such 
                        organization was an organization (other 
                        than a cooperative described in section 
                        521) exempt from tax imposed by this 
                        chapter at any time during the 5-year 
                        period ending on the date such property 
                        was first used by such organization. 
                        The preceding sentence and subparagraph 
                        (D)(ii) shall not apply to the Federal 
                        Home Loan Mortgage Corporation.
                          (ii) Election not to have clause (i) 
                        apply.--
                                  (I) In general.--In the case 
                                of an organization formerly 
                                exempt from tax under section 
                                501(a) as an organization 
                                described in section 
                                501(c)(12), clause (i) shall 
                                not apply to such organization 
                                with respect to any property if 
                                such organization elects not to 
                                be exempt from tax under 
                                section 501(a) during the tax-
                                exempt use period with respect 
                                to such property.
                                  (II) Tax-exempt use period.--
                                For purposes of subclause (I), 
                                the term ``tax-exempt use 
                                period'' means the period 
                                beginning with the taxable year 
                                in which the property described 
                                in subclause (I) is first used 
                                by the organization and ending 
                                with the close of the 15th 
                                taxable year following the last 
                                taxable year of the applicable 
                                recovery period of such 
                                property.
                                  (III) Election.--Any election 
                                under subclause (I), once made, 
                                shall be irrevocable.
                          (iii) Treatment of successor 
                        organizations.--Any organization which 
                        is engaged in activities substantially 
                        similar to those engaged in by a 
                        predecessor organization shall succeed 
                        to the treatment under this 
                        subparagraph of such predecessor 
                        organization.
                          (iv) First used.--For purposes of 
                        this subparagraph, property shall be 
                        treated as first used by the 
                        organization--
                                  (I) when the property is 
                                first placed in service under a 
                                lease to such organization, or
                                  (II) in the case of property 
                                leased to (or held by) a 
                                partnership (or other pass-thru 
                                entity) in which the 
                                organization is a member, the 
                                later of when such property is 
                                first used by such partnership 
                                or pass-thru entity or when 
                                such organization is first a 
                                member of such partnership or 
                                pass-thru entity.
          (3) Special rules for certain high technology 
        equipment.--
                  (A) Exemption where lease term is 5 years or 
                less.--For purposes of this section, the term 
                ``tax-exempt use property'' shall not include 
                any qualified technological equipment if the 
                lease to the tax-exempt entity has a lease term 
                of 5 years or less. Notwithstanding subsection 
                (i)(3)(A)(i), in determining a lease term for 
                purposes of the preceding sentence, there shall 
                not be taken into account any option of the 
                lessee to renew at the fair market value rent 
                determined at the time of renewal; except that 
                the aggregate period not taken into account by 
                reason of this sentence shall not exceed 24 
                months.
                  (B) Exception for certain property.--
                          (i) In general.--For purposes of 
                        subparagraph (A), the term ``qualified 
                        technological equipment'' shall not 
                        include any property leased to a tax-
                        exempt entity if--
                                  (I) part or all of the 
                                property was financed (directly 
                                or indirectly) by an obligation 
                                the interest on which is exempt 
                                from tax under section 103(a),
                                  (II) such lease occurs after 
                                a sale (or other transfer) of 
                                the property by, or lease of 
                                such property from, such entity 
                                (or related entity) and such 
                                property has been used by such 
                                entity (or a related entity) 
                                before such sale (or other 
                                transfer) or lease, or
                                  (III) such tax-exempt entity 
                                is the United States or any 
                                agency or instrumentality of 
                                the United States.
                          (ii) Leasebacks during 1st 3 months 
                        of use not taken into account.--
                        Subclause (II) of clause (i) shall not 
                        apply to any property which is leased 
                        within 3 months after the date such 
                        property is first used by the tax-
                        exempt entity (or a related entity).
          (4) Related entities.--For purposes of this 
        subsection--
                  (A)(i) Each governmental unit and each agency 
                or instrumentality of a governmental unit is 
                related to each other such unit, agency, or 
                instrumentality which directly or indirectly 
                derives its powers, rights, and duties in whole 
                or in part from the same sovereign authority.
                  (ii) For purposes of clause (i), the United 
                States, each State, and each possession of the 
                United States shall be treated as a separate 
                sovereign authority.
                  (B) Any entity not described in subparagraph 
                (A)(i) is related to any other entity if the 2 
                entities have--
                          (i) significant common purposes and 
                        substantial common membership, or
                          (ii) directly or indirectly 
                        substantial common direction or 
                        control.
                  (C)(i) An entity is related to another entity 
                if either entity owns (directly or through 1 or 
                more entities) a 50 percent or greater interest 
                in the capital or profits of the other entity.
                  (ii) For purposes of clause (i), entities 
                treated as related under subparagraph (A) or 
                (B) shall be treated as 1 entity.
                  (D) An entity is related to another entity 
                with respect to a transaction if such 
                transaction is part of an attempt by such 
                entities to avoid the application of this 
                subsection.
          (5) Tax-exempt use of property leased to 
        partnerships, etc., determined at partner level.--For 
        purposes of this subsection--
                  (A) In general.--In the case of any property 
                which is leased to a partnership, the 
                determination of whether any portion of such 
                property is tax-exempt use property shall be 
                made by treating each tax-exempt entity 
                partner's proportionate share (determined under 
                paragraph (6)(C)) of such property as being 
                leased to such partner.
                  (B) Other pass-thru entities; tiered 
                entities.--Rules similar to the rules of 
                subparagraph (A) shall also apply in the case 
                of any pass-thru entity other than a 
                partnership and in the case of tiered 
                partnerships and other entities.
                  (C) Presumption with respect to foreign 
                entities.--Unless it is otherwise established 
                to the satisfaction of the Secretary, it shall 
                be presumed that the partners of a foreign 
                partnership (and the beneficiaries of any other 
                foreign pass-thru entity) are persons who are 
                not United States persons.
          (6) Treatment of property owned by partnerships, 
        etc..--
                  (A) In general.--For purposes of this 
                subsection, if--
                          (i) any property which (but for this 
                        subparagraph) is not tax-exempt use 
                        property is owned by a partnership 
                        which has both a tax-exempt entity and 
                        a person who is not a tax-exempt entity 
                        as partners, and
                          (ii) any allocation to the tax-exempt 
                        entity of partnership items is not a 
                        qualified allocation,
                an amount equal to such tax-exempt entity's 
                proportionate share of such property shall 
                (except as provided in paragraph (1)(D)) be 
                treated as tax-exempt use property.
                  (B) Qualified allocation.--For purposes of 
                subparagraph (A), the term ``qualified 
                allocation'' means any allocation to a tax-
                exempt entity which--
                          (i) is consistent with such entity's 
                        being allocated the same distributive 
                        share of each item of income, gain, 
                        loss, deduction, credit, and basis and 
                        such share remains the same during the 
                        entire period the entity is a partner 
                        in the partnership, and
                          (ii) has substantial economic effect 
                        within the meaning of section 
                        704(b)(2).
                For purposes of this subparagraph, items 
                allocated under section 704(c) shall not be 
                taken into account.
                  (C) Determination of proportionate share.--
                          (i) In general.--For purposes of 
                        subparagraph (A), a tax-exempt entity's 
                        proportionate share of any property 
                        owned by a partnership shall be 
                        determined on the basis of such 
                        entity's share of partnership items of 
                        income or gain (excluding gain 
                        allocated under section 704(c)), 
                        whichever results in the largest 
                        proportionate share.
                          (ii) Determination where allocations 
                        vary.--For purposes of clause (i), if a 
                        tax-exempt entity's share of 
                        partnership items of income or gain 
                        (excluding gain allocated under section 
                        704(c)) may vary during the period such 
                        entity is a partner in the partnership, 
                        such share shall be the highest share 
                        such entity may receive.
                  (D) Determination of whether property used in 
                unrelated trade or business.--For purposes of 
                this subsection, in the case of any property 
                which is owned by a partnership which has both 
                a tax-exempt entity and a person who is not a 
                tax-exempt entity as partners, the 
                determination of whether such property is used 
                in an unrelated trade or business of such an 
                entity shall be made without regard to section 
                514.
                  (E) Other pass-thru entities; tiered 
                entities.--Rules similar to the rules of 
                subparagraphs (A), (B), (C), and (D) shall also 
                apply in the case of any pass-thru entity other 
                than a partnership and in the case of tiered 
                partnerships and other entities.
                  (F) Treatment of certain taxable entities.--
                          (i) In general.--For purposes of this 
                        paragraph and paragraph (5), except as 
                        otherwise provided in this 
                        subparagraph, any tax-exempt controlled 
                        entity shall be treated as a tax-exempt 
                        entity.
                          (ii) Election.--If a tax-exempt 
                        controlled entity makes an election 
                        under this clause--
                                  (I) such entity shall not be 
                                treated as a tax-exempt entity 
                                for purposes of this paragraph 
                                and paragraph (5), and
                                  (II) any gain recognized by a 
                                tax-exempt entity on any 
                                disposition of an interest in 
                                such entity (and any dividend 
                                or interest received or accrued 
                                by a tax-exempt entity from 
                                such tax-exempt controlled 
                                entity) shall be treated as 
                                unrelated business taxable 
                                income for purposes of section 
                                511.
                 Any such election shall be irrevocable and 
                shall bind all tax-exempt entities holding 
                interests in such tax-exempt controlled entity. 
                For purposes of subclause (II), there shall 
                only be taken into account dividends which are 
                properly allocable to income of the tax-exempt 
                controlled entity which was not subject to tax 
                under this chapter.
                          (iii) Tax-exempt controlled entity.--
                                  (I) In general.--The term 
                                ``tax-exempt controlled 
                                entity'' means any corporation 
                                (which is not a tax-exempt 
                                entity determined without 
                                regard to this subparagraph and 
                                paragraph (2)(E)) if 50 percent 
                                or more (in value) of the stock 
                                in such corporation is held by 
                                1 or more tax-exempt entities 
                                (other than a foreign person or 
                                entity).
                                  (II) Only 5-percent 
                                shareholders taken into account 
                                in case of publicly traded 
                                stock.--For purposes of 
                                subclause (I), in the case of a 
                                corporation the stock of which 
                                is publicly traded on an 
                                established securities market, 
                                stock held by a tax-exempt 
                                entity shall not be taken into 
                                account unless such entity 
                                holds at least 5 percent (in 
                                value) of the stock in such 
                                corporation. For purposes of 
                                this subclause, related 
                                entities (within the meaning of 
                                paragraph (4)) shall be treated 
                                as 1 entity.
                                  (III) Section 318 to apply.--
                                For purposes of this clause, a 
                                tax-exempt entity shall be 
                                treated as holding stock which 
                                it holds through application of 
                                section 318 (determined without 
                                regard to the 50-percent 
                                limitation contained in 
                                subsection (a)(2)(C) thereof).
                  (G) Regulations.--For purposes of determining 
                whether there is a qualified allocation under 
                subparagraph (B), the regulations prescribed 
                under paragraph (8) for purposes of this 
                paragraph--
                          (i) shall set forth the proper 
                        treatment for partnership guaranteed 
                        payments, and
                          (ii) may provide for the exclusion or 
                        segregation of items.
          (7) Lease.--For purposes of this subsection, the term 
        ``lease'' includes any grant of a right to use 
        property.
          (8) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry 
        out the purposes of this subsection.
  (i) Definitions and special rules.--For purposes of this 
section--
          (1) Class life.--Except as provided in this section, 
        the term ``class life'' means the class life (if any) 
        which would be applicable with respect to any property 
        as of January 1, 1986, under subsection (m) of section 
        167 (determined without regard to paragraph (4) and as 
        if the taxpayer had made an election under such 
        subsection). The Secretary, through an office 
        established in the Treasury, shall monitor and analyze 
        actual experience with respect to all depreciable 
        assets. The reference in this paragraph to subsection 
        (m) of section 167 shall be treated as a reference to 
        such subsection as in effect on the day before the date 
        of the enactment of the Revenue Reconciliation Act of 
        1990.
          (2) Qualified technological equipment.--
                  (A) In general.--The term ``qualified 
                technological equipment'' means--
                          (i) any computer or peripheral 
                        equipment,
                          (ii) any high technology telephone 
                        station equipment installed on the 
                        customer's premises, and
                          (iii) any high technology medical 
                        equipment.
                  (B) Computer or peripheral equipment 
                defined.--For purposes of this paragraph--
                          (i) In general.--The term ``computer 
                        or peripheral equipment'' means--
                                  (I) any computer, and
                                  (II) any related peripheral 
                                equipment.
                          (ii) Computer.--The term ``computer'' 
                        means a programmable electronically 
                        activated device which--
                                  (I) is capable of accepting 
                                information, applying 
                                prescribed processes to the 
                                information, and supplying the 
                                results of these processes with 
                                or without human intervention, 
                                and
                                  (II) consists of a central 
                                processing unit containing 
                                extensive storage, logic, 
                                arithmetic, and control 
                                capabilities.
                          (iii) Related peripheral equipment.--
                        The term ``related peripheral 
                        equipment'' means any auxiliary machine 
                        (whether on-line or off-line) which is 
                        designed to be placed under the control 
                        of the central processing unit of a 
                        computer.
                          (iv) Exceptions.--The term ``computer 
                        or peripheral equipment'' shall not 
                        include--
                                  (I) any equipment which is an 
                                integral part of other property 
                                which is not a computer,
                                  (II) typewriters, 
                                calculators, adding and 
                                accounting machines, copiers, 
                                duplicating equipment, and 
                                similar equipment, and
                                  (III) equipment of a kind 
                                used primarily for amusement or 
                                entertainment of the user.
                  (C) High technology medical equipment.--For 
                purposes of this paragraph, the term ``high 
                technology medical equipment'' means any 
                electronic, electromechanical, or computer-
                based high technology equipment used in the 
                screening, monitoring, observation, diagnosis, 
                or treatment of patients in a laboratory, 
                medical, or hospital environment.
          (3) Lease term.--
                  (A) In general.--In determining a lease 
                term--
                          (i) there shall be taken into account 
                        options to renew,
                          (ii) the term of a lease shall 
                        include the term of any service 
                        contract or similar arrangement 
                        (whether or not treated as a lease 
                        under section 7701(e))--
                                  (I) which is part of the same 
                                transaction (or series of 
                                related transactions) which 
                                includes the lease, and
                                  (II) which is with respect to 
                                the property subject to the 
                                lease or substantially similar 
                                property, and
                          (iii) 2 or more successive leases 
                        which are part of the same transaction 
                        (or a series of related transactions) 
                        with respect to the same or 
                        substantially similar property shall be 
                        treated as 1 lease.
                  (B) Special rule for fair rental options on 
                nonresidential real property or residential 
                rental property.--For purposes of clause (i) of 
                subparagraph (A), in the case of nonresidential 
                real property or residential rental property, 
                there shall not be taken into account any 
                option to renew at fair market value, 
                determined at the time of renewal.
          (4) General asset accounts.--Under regulations, a 
        taxpayer may maintain 1 or more general asset accounts 
        for any property to which this section applies. Except 
        as provided in regulations, all proceeds realized on 
        any disposition of property in a general asset account 
        shall be included in income as ordinary income.
          (5) Changes in use.--The Secretary shall, by 
        regulations, provide for the method of determining the 
        deduction allowable under section 167(a) with respect 
        to any tangible property for any taxable year (and the 
        succeeding taxable years) during which such property 
        changes status under this section but continues to be 
        held by the same person.
          (6) Treatments of additions or improvements to 
        property.--In the case of any addition to (or 
        improvement of) any property--
                  (A) any deduction under subsection (a) for 
                such addition or improvement shall be computed 
                in the same manner as the deduction for such 
                property would be computed if such property had 
                been placed in service at the same time as such 
                addition or improvement, and
                  (B) the applicable recovery period for such 
                addition or improvement shall begin on the 
                later of--
                          (i) the date on which such addition 
                        (or improvement) is placed in service, 
                        or
                          (ii) the date on which the property 
                        with respect to which such addition (or 
                        improvement) was made is placed in 
                        service.
          (7) Treatment of certain transferees.--
                  (A) In general.--In the case of any property 
                transferred in a transaction described in 
                subparagraph (B), the transferee shall be 
                treated as the transferor for purposes of 
                computing the depreciation deduction determined 
                under this section with respect to so much of 
                the basis in the hands of the transferee as 
                does not exceed the adjusted basis in the hands 
                of the transferor. In any case where this 
                section as in effect before the amendments made 
                by section 201 of the Tax Reform Act of 1986 
                applied to the property in the hands of the 
                transferor, the reference in the preceding 
                sentence to this section shall be treated as a 
                reference to this section as so in effect.
                  (B) Transactions covered.--The transactions 
                described in this subparagraph are--
                          (i) any transaction described in 
                        section 332, 351, 361, 721, or 731, and
                          (ii) any transaction between members 
                        of the same affiliated group during any 
                        taxable year for which a consolidated 
                        return is made by such group.
                  (C) Property reacquired by the taxpayer.--
                Under regulations, property which is disposed 
                of and then reacquired by the taxpayer shall be 
                treated for purposes of computing the deduction 
                allowable under subsection (a) as if such 
                property had not been disposed of.
          (8) Treatment of leasehold improvements.--
                  (A) In general.--In the case of any building 
                erected (or improvements made) on leased 
                property, if such building or improvement is 
                property to which this section applies, the 
                depreciation deduction shall be determined 
                under the provisions of this section.
                  (B) Treatment of lessor improvements which 
                are abandoned at termination of lease.--An 
                improvement--
                          (i) which is made by the lessor of 
                        leased property for the lessee of such 
                        property, and
                          (ii) which is irrevocably disposed of 
                        or abandoned by the lessor at the 
                        termination of the lease by such 
                        lessee,
                shall be treated for purposes of determining 
                gain or loss under this title as disposed of by 
                the lessor when so disposed of or abandoned.
                  (C) Cross reference.--For treatment of 
                qualified long-term real property constructed 
                or improved in connection with cash or rent 
                reduction from lessor to lessee, see section 
                110(b).
          (9) Normalization rules.--
                  (A) In general.--In order to use a 
                normalization method of accounting with respect 
                to any public utility property for purposes of 
                subsection (f)(2)--
                          (i) the taxpayer must, in computing 
                        its tax expense for purposes of 
                        establishing its cost of service for 
                        ratemaking purposes and reflecting 
                        operating results in its regulated 
                        books of account, use a method of 
                        depreciation with respect to such 
                        property that is the same as, and a 
                        depreciation period for such property 
                        that is no shorter than, the method and 
                        period used to compute its depreciation 
                        expense for such purposes; and
                          (ii) if the amount allowable as a 
                        deduction under this section with 
                        respect to such property (respecting 
                        all elections made by the taxpayer 
                        under this section) differs from the 
                        amount that would be allowable as a 
                        deduction under section 167 using the 
                        method (including the period, first and 
                        last year convention, and salvage 
                        value) used to compute regulated tax 
                        expense under clause (i), the taxpayer 
                        must make adjustments to a reserve to 
                        reflect the deferral of taxes resulting 
                        from such difference.
                  (B) Use of inconsistent estimates and 
                projections, etc..--
                          (i) In general.--One way in which the 
                        requirements of subparagraph (A) are 
                        not met is if the taxpayer, for 
                        ratemaking purposes, uses a procedure 
                        or adjustment which is inconsistent 
                        with the requirements of subparagraph 
                        (A).
                          (ii) Use of inconsistent estimates 
                        and projections.--The procedures and 
                        adjustments which are to be treated as 
                        inconsistent for purposes of clause (i) 
                        shall include any procedure or 
                        adjustment for ratemaking purposes 
                        which uses an estimate or projection of 
                        the taxpayer's tax expense, 
                        depreciation expense, or reserve for 
                        deferred taxes under subparagraph 
                        (A)(ii) unless such estimate or 
                        projection is also used, for ratemaking 
                        purposes, with respect to the other 2 
                        such items and with respect to the rate 
                        base.
                          (iii) Regulatory authority.--The 
                        Secretary may by regulations prescribe 
                        procedures and adjustments (in addition 
                        to those specified in clause (ii)) 
                        which are to be treated as inconsistent 
                        for purposes of clause (i).
                  (C) Public utility property which does not 
                meet normalization rules.--In the case of any 
                public utility property to which this section 
                does not apply by reason of subsection (f)(2), 
                the allowance for depreciation under section 
                167(a) shall be an amount computed using the 
                method and period referred to in subparagraph 
                (A)(i).
          (10) Public utility property.--The term ``public 
        utility property'' means property used predominantly in 
        the trade or business of the furnishing or sale of--
                  (A) electrical energy, water, or sewage 
                disposal services,
                  (B) gas or steam through a local distribution 
                system,
                  (C) telephone services, or other 
                communication services if furnished or sold by 
                the Communications Satellite Corporation for 
                purposes authorized by the Communications 
                Satellite Act of 1962 (47 U.S.C. 701), or
                  (D) transportation of gas or steam by 
                pipeline,
        if the rates for such furnishing or sale, as the case 
        may be, have been established or approved by a State or 
        political subdivision thereof, by any agency or 
        instrumentality of the United States, or by a public 
        service or public utility commission or other similar 
        body of any State or political subdivision thereof.
          (11) Research and experimentation.--The term 
        ``research and experimentation'' has the same meaning 
        as the term research and experimental has under section 
        174.
          (12) Section 1245 and 1250 property.--The terms 
        ``section 1245 property'' and ``section 1250 property'' 
        have the meanings given such terms by sections 
        1245(a)(3) and 1250(c), respectively.
          (13) Single purpose agricultural or horticultural 
        structure.--
                  (A) In general.--The term ``single purpose 
                agricultural or horticultural structure'' 
                means--
                          (i) a single purpose livestock 
                        structure, and
                          (ii) a single purpose horticultural 
                        structure.
                  (B) Definitions.--For purposes of this 
                paragraph--
                          (i) Single purpose livestock 
                        structure.--The term ``single purpose 
                        livestock structure'' means any 
                        enclosure or structure specifically 
                        designed, constructed, and used--
                                  (I) for housing, raising, and 
                                feeding a particular type of 
                                livestock and their produce, 
                                and
                                  (II) for housing the 
                                equipment (including any 
                                replacements) necessary for the 
                                housing, raising, and feeding 
                                referred to in subclause (I).
                          (ii) Single purpose horticultural 
                        structure.--The term ``single purpose 
                        horticultural structure'' means--
                                  (I) a greenhouse specifically 
                                designed, constructed, and used 
                                for the commercial production 
                                of plants, and
                                  (II) a structure specifically 
                                designed, constructed, and used 
                                for the commercial production 
                                of mushrooms.
                          (iii) Structures which include work 
                        space.--An enclosure or structure which 
                        provides work space shall be treated as 
                        a single purpose agricultural or 
                        horticultural structure only if such 
                        work space is solely for--
                                  (I) the stocking, caring for, 
                                or collecting of livestock or 
                                plants (as the case may be) or 
                                their produce,
                                  (II) the maintenance of the 
                                enclosure or structure, and
                                  (III) the maintenance or 
                                replacement of the equipment or 
                                stock enclosed or housed 
                                therein.
                          (iv) Livestock.--The term 
                        ``livestock'' includes poultry.
          (14) Qualified rent-to-own property.--
                  (A) In general.--The term ``qualified rent-
                to-own property'' means property held by a 
                rent-to-own dealer for purposes of being 
                subject to a rent-to-own contract.
                  (B) Rent-to-own dealer.--The term ``rent-to-
                own dealer'' means a person that, in the 
                ordinary course of business, regularly enters 
                into rent-to-own contracts with customers for 
                the use of consumer property, if a substantial 
                portion of those contracts terminate and the 
                property is returned to such person before the 
                receipt of all payments required to transfer 
                ownership of the property from such person to 
                the customer.
                  (C) Consumer property.--The term ``consumer 
                property'' means tangible personal property of 
                a type generally used within the home for 
                personal use.
                  (D) Rent-to-own contract.--The term ``rent-
                to-own contract'' means any lease for the use 
                of consumer property between a rent-to-own 
                dealer and a customer who is an individual 
                which--
                          (i) is titled ``Rent-to-Own 
                        Agreement'' or ``Lease Agreement with 
                        Ownership Option,'' or uses other 
                        similar language,
                          (ii) provides for level (or 
                        decreasing where no payment is less 
                        than 40 percent of the largest 
                        payment), regular periodic payments 
                        (for a payment period which is a week 
                        or month),
                          (iii) provides that legal title to 
                        such property remains with the rent-to-
                        own dealer until the customer makes all 
                        the payments described in clause (ii) 
                        or early purchase payments required 
                        under the contract to acquire legal 
                        title to the item of property,
                          (iv) provides a beginning date and a 
                        maximum period of time for which the 
                        contract may be in effect that does not 
                        exceed 156 weeks or 36 months from such 
                        beginning date (including renewals or 
                        options to extend),
                          (v) provides for payments within the 
                        156-week or 36-month period that, in 
                        the aggregate, generally exceed the 
                        normal retail price of the consumer 
                        property plus interest,
                          (vi) provides for payments under the 
                        contract that, in the aggregate, do not 
                        exceed $10,000 per item of consumer 
                        property,
                          (vii) provides that the customer does 
                        not have any legal obligation to make 
                        all the payments referred to in clause 
                        (ii) set forth under the contract, and 
                        that at the end of each payment period 
                        the customer may either continue to use 
                        the consumer property by making the 
                        payment for the next payment period or 
                        return such property to the rent-to-own 
                        dealer in good working order, in which 
                        case the customer does not incur any 
                        further obligations under the contract 
                        and is not entitled to a return of any 
                        payments previously made under the 
                        contract, and
                          (viii) provides that the customer has 
                        no right to sell, sublease, mortgage, 
                        pawn, pledge, encumber, or otherwise 
                        dispose of the consumer property until 
                        all the payments stated in the contract 
                        have been made.
          (15) Motorsports entertainment complex.--
                  (A) In general.--The term ``motorsports 
                entertainment complex'' means a racing track 
                facility which--
                          (i) is permanently situated on land, 
                        and
                          (ii) during the 36-month period 
                        following the first day of the month in 
                        which the asset is placed in service, 
                        hosts 1 or more racing events for 
                        automobiles (of any type), trucks, or 
                        motorcycles which are open to the 
                        public for the price of admission.
                  (B) Ancillary and support facilities.--Such 
                term shall include, if owned by the taxpayer 
                who owns the complex and provided for the 
                benefit of patrons of the complex--
                          (i) ancillary facilities and land 
                        improvements in support of the 
                        complex's activities (including parking 
                        lots, sidewalks, waterways, bridges, 
                        fences, and landscaping),
                          (ii) support facilities (including 
                        food and beverage retailing, souvenir 
                        vending, and other nonlodging 
                        accommodations), and
                          (iii) appurtenances associated with 
                        such facilities and related attractions 
                        and amusements (including ticket 
                        booths, race track surfaces, suites and 
                        hospitality facilities, grandstands and 
                        viewing structures, props, walls, 
                        facilities that support the delivery of 
                        entertainment services, other special 
                        purpose structures, facades, shop 
                        interiors, and buildings).
                  (C) Exception.--Such term shall not include 
                any transportation equipment, administrative 
                services assets, warehouses, administrative 
                buildings, hotels, or motels.
                  (D) Termination.--Such term shall not include 
                any property placed in service after December 
                31, 2025.
          (16) Alaska natural gas pipeline.--The term ``Alaska 
        natural gas pipeline'' means the natural gas pipeline 
        system located in the State of Alaska which--
                  (A) has a capacity of more than 
                500,000,000,000 Btu of natural gas per day, and
                  (B) is--
                          (i) placed in service after December 
                        31, 2013, or
                          (ii) treated as placed in service on 
                        January 1, 2014, if the taxpayer who 
                        places such system in service before 
                        January 1, 2014, elects such treatment.
        Such term includes the pipe, trunk lines, related 
        equipment, and appurtenances used to carry natural gas, 
        but does not include any gas processing plant.
          (17) Natural gas gathering line.--The term ``natural 
        gas gathering line'' means--
                  (A) the pipe, equipment, and appurtenances 
                determined to be a gathering line by the 
                Federal Energy Regulatory Commission, and
                  (B) the pipe, equipment, and appurtenances 
                used to deliver natural gas from the wellhead 
                or a commonpoint to the point at which such gas 
                first reaches--
                          (i) a gas processing plant,
                          (ii) an interconnection with a 
                        transmission pipeline for which a 
                        certificate as an interstate 
                        transmission pipeline has been issued 
                        by the Federal Energy Regulatory 
                        Commission,
                          (iii) an interconnection with an 
                        intrastate transmission pipeline, or
                          (iv) a direct interconnection with a 
                        local distribution company, a gas 
                        storage facility, or an industrial 
                        consumer.
          (18) Qualified smart electric meters.--
                  (A) In general.--The term ``qualified smart 
                electric meter'' means any smart electric meter 
                which--
                          (i) is placed in service by a 
                        taxpayer who is a supplier of electric 
                        energy or a provider of electric energy 
                        services, and
                          (ii) does not have a class life 
                        (determined without regard to 
                        subsection (e)) of less than 16 years.
                  (B) Smart electric meter.--For purposes of 
                subparagraph (A), the term ``smart electric 
                meter'' means any time-based meter and related 
                communication equipment which is capable of 
                being used by the taxpayer as part of a system 
                that--
                          (i) measures and records electricity 
                        usage data on a time-differentiated 
                        basis in at least 24 separate time 
                        segments per day,
                          (ii) provides for the exchange of 
                        information between supplier or 
                        provider and the customer's electric 
                        meter in support of time-based rates or 
                        other forms of demand response,
                          (iii) provides data to such supplier 
                        or provider so that the supplier or 
                        provider can provide energy usage 
                        information to customers 
                        electronically, and
                          (iv) provides net metering.
          (19) Qualified smart electric grid systems.--
                  (A) In general.--The term ``qualified smart 
                electric grid system'' means any smart grid 
                property which--
                          (i) is used as part of a system for 
                        electric distribution grid 
                        communications, monitoring, and 
                        management placed in service by a 
                        taxpayer who is a supplier of electric 
                        energy or a provider of electric energy 
                        services, and
                          (ii) does not have a class life 
                        (determined without regard to 
                        subsection (e)) of less than 16 years.
                  (B) Smart grid property.--For the purposes of 
                subparagraph (A), the term ``smart grid 
                property'' means electronics and related 
                equipment that is capable of--
                          (i) sensing, collecting, and 
                        monitoring data of or from all portions 
                        of a utility's electric distribution 
                        grid,
                          (ii) providing real-time, two-way 
                        communications to monitor or manage 
                        such grid, and
                          (iii) providing real time analysis of 
                        and event prediction based upon 
                        collected data that can be used to 
                        improve electric distribution system 
                        reliability, quality, and performance.
  (j) Property on Indian reservations.--
          (1) In general.--For purposes of subsection (a), the 
        applicable recovery period for qualified Indian 
        reservation property shall be determined in accordance 
        with the table contained in paragraph (2) in lieu of 
        the table contained in subsection (c).
          (2) Applicable recovery period for Indian reservation 
        property.--For purposes of paragraph (1)--
          (3) Deduction allowed in computing minimum tax.--For 
        purposes of determining alternative minimum taxable 
        income under section 55, the deduction under subsection 
        (a) for qualified Indian reservation property shall be 
        determined under this section without regard to any 
        adjustment under section 56.
          (4) Qualified Indian reservation property defined.--
        For purposes of this subsection--
                  (A) In general.--The term ``qualified Indian 
                reservation property'' means property which is 
                property described in the table in paragraph 
                (2) and which is--
                          (i) used by the taxpayer 
                        predominantly in the active conduct of 
                        a trade or business within an Indian 
                        reservation,
                          (ii) not used or located outside the 
                        Indian reservation on a regular basis,
                          (iii) not acquired (directly or 
                        indirectly) by the taxpayer from a 
                        person who is related to the taxpayer 
                        (within the meaning of section 
                        465(b)(3)(C)), and
                          (iv) not property (or any portion 
                        thereof) placed in service for purposes 
                        of conducting or housing class I, II, 
                        or III gaming (as defined in section 4 
                        of the Indian Regulatory Act (25 U.S.C. 
                        2703)).
                  (B) Exception for alternative depreciation 
                property.--The term ``qualified Indian 
                reservation property'' does not include any 
                property to which the alternative depreciation 
                system under subsection (g) applies, 
                determined--
                          (i) without regard to subsection 
                        (g)(7) (relating to election to use 
                        alternative depreciation system), and
                          (ii) after the application of section 
                        280F(b) (relating to listed property 
                        with limited business use).
                  (C) Special rule for reservation 
                infrastructure investment.--
                          (i) In general.--Subparagraph (A)(ii) 
                        shall not apply to qualified 
                        infrastructure property located outside 
                        of the Indian reservation if the 
                        purpose of such property is to connect 
                        with qualified infrastructure property 
                        located within the Indian reservation.
                          (ii) Qualified infrastructure 
                        property.--For purposes of this 
                        subparagraph, the term ``qualified 
                        infrastructure property'' means 
                        qualified Indian reservation property 
                        (determined without regard to 
                        subparagraph (A)(ii)) which--
                                  (I) benefits the tribal 
                                infrastructure,
                                  (II) is available to the 
                                general public, and
                                  (III) is placed in service in 
                                connection with the taxpayer's 
                                active conduct of a trade or 
                                business within an Indian 
                                reservation.
                 Such term includes, but is not limited to, 
                roads, power lines, water systems, railroad 
                spurs, and communications facilities.
          (5) Real estate rentals.--For purposes of this 
        subsection, the rental to others of real property 
        located within an Indian reservation shall be treated 
        as the active conduct of a trade or business within an 
        Indian reservation.
          (6) Indian reservation defined.--For purposes of this 
        subsection, the term ``Indian reservation'' means a 
        reservation, as defined in--
                  (A) section 3(d) of the Indian Financing Act 
                of 1974 (25 U.S.C. 1452(d)), or
                  (B) section 4(10) of the Indian Child Welfare 
                Act of 1978 (25 U.S.C. 1903(10)).
        For purposes of the preceding sentence, such section 
        3(d) shall be applied by treating the term ``former 
        Indian reservations in Oklahoma'' as including only 
        lands which are within the jurisdictional area of an 
        Oklahoma Indian tribe (as determined by the Secretary 
        of the Interior) and are recognized by such Secretary 
        as eligible for trust land status under 25 CFR Part 151 
        (as in effect on the date of the enactment of this 
        sentence).
          (7) Coordination with nonrevenue laws.--Any reference 
        in this subsection to a provision not contained in this 
        title shall be treated for purposes of this subsection 
        as a reference to such provision as in effect on the 
        date of the enactment of this paragraph.
          (8) Election out.--If a taxpayer makes an election 
        under this paragraph with respect to any class of 
        property for any taxable year, paragraph (1) shall not 
        apply to all property in such class placed in service 
        during such taxable year. Such election, once made, 
        shall be irrevocable.
          (9) Termination.--This subsection shall not apply to 
        property placed in service after December 31, 2021.
  (k) Special allowance for certain property.--
          (1) Additional allowance.--In the case of any 
        qualified property--
                  (A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which 
                such property is placed in service shall 
                include an allowance equal to the applicable 
                percentage of the adjusted basis of the 
                qualified property, and
                  (B) the adjusted basis of the qualified 
                property shall be reduced by the amount of such 
                deduction before computing the amount otherwise 
                allowable as a depreciation deduction under 
                this chapter for such taxable year and any 
                subsequent taxable year.
          (2) Qualified property.--For purposes of this 
        subsection--
                  (A) In general.--The term ``qualified 
                property'' means property--
                          (i)(I) to which this section applies 
                        which has a recovery period of 20 years 
                        or less,
                          (II) which is computer software (as 
                        defined in section 167(f)(1)(B)) for 
                        which a deduction is allowable under 
                        section 167(a) without regard to this 
                        subsection,
                          (III) which is water utility 
                        property, or
                          (IV) which is a qualified film or 
                        television production (as defined in 
                        subsection (d) of section 181) for 
                        which a deduction would have been 
                        allowable under section 181 without 
                        regard to subsections (a)(2) and (g) of 
                        such section or this subsection, or
                          (V) which is a qualified live 
                        theatrical production (as defined in 
                        subsection (e) of section 181) for 
                        which a deduction would have been 
                        allowable under section 181 without 
                        regard to subsections (a)(2) and (g) of 
                        such section or this subsection,
                          (ii) the original use of which begins 
                        with the taxpayer or the acquisition of 
                        which by the taxpayer meets the 
                        requirements of clause (ii) of 
                        subparagraph (E), and
                          (iii) which is placed in service by 
                        the taxpayer before January 1, 2027.
                  (B) Certain property having longer production 
                periods treated as qualified property.--
                          (i) In general.--The term ``qualified 
                        property'' includes any property if 
                        such property--
                                  (I) meets the requirements of 
                                clauses (i) and (ii) of 
                                subparagraph (A),
                                  (II) is placed in service by 
                                the taxpayer before January 1, 
                                2028,
                                  (III) is acquired by the 
                                taxpayer (or acquired pursuant 
                                to a written binding contract 
                                entered into) before January 1, 
                                2027,
                                  (IV) has a recovery period of 
                                at least 10 years or is 
                                transportation property,
                                  (V) is subject to section 
                                263A, and
                                  (VI) meets the requirements 
                                of clause (iii) of section 
                                263A(f)(1)(B) (determined as if 
                                such clause also applies to 
                                property which has a long 
                                useful life (within the meaning 
                                of section 263A(f))).
                          (ii) Only pre-January 1, 2027 basis 
                        eligible for additional allowance.--In 
                        the case of property which is qualified 
                        property solely by reason of clause 
                        (i), paragraph (1) shall apply only to 
                        the extent of the adjusted basis 
                        thereof attributable to manufacture, 
                        construction, or production before 
                        January 1, 2027.
                          (iii) Transportation property.--For 
                        purposes of this subparagraph, the term 
                        ``transportation property'' means 
                        tangible personal property used in the 
                        trade or business of transporting 
                        persons or property.
                          (iv) Application of subparagraph.--
                        This subparagraph shall not apply to 
                        any property which is described in 
                        subparagraph (C).
                  (C) Certain aircraft.--The term ``qualified 
                property'' includes property--
                          (i) which meets the requirements of 
                        subparagraph (A)(ii) and subclauses 
                        (II) and (III) of subparagraph (B)(i),
                          (ii) which is an aircraft which is 
                        not a transportation property (as 
                        defined in subparagraph (B)(iii)) other 
                        than for agricultural or firefighting 
                        purposes,
                          (iii) which is purchased and on which 
                        such purchaser, at the time of the 
                        contract for purchase, has made a 
                        nonrefundable deposit of the lesser 
                        of--
                                  (I) 10 percent of the cost, 
                                or
                                  (II) $100,000, and
                          (iv) which has--
                                  (I) an estimated production 
                                period exceeding 4 months, and
                                  (II) a cost exceeding 
                                $200,000.
                  (D) Exception for alternative depreciation 
                property.--The term ``qualified property'' 
                shall not include any property to which the 
                alternative depreciation system under 
                subsection (g) applies, determined--
                          (i) without regard to paragraph (7) 
                        of subsection (g) (relating to election 
                        to have system apply), and
                          (ii) after application of section 
                        280F(b) (relating to listed property 
                        with limited business use).
                  (E) Special rules.--
                          (i) Self-constructed property.--In 
                        the case of a taxpayer manufacturing, 
                        constructing, or producing property for 
                        the taxpayer's own use, the 
                        requirements of subclause (III) of 
                        subparagraph (B)(i) shall be treated as 
                        met if the taxpayer begins 
                        manufacturing, constructing, or 
                        producing the property before January 
                        1, 2027.
                          (ii) Acquisition requirements.--An 
                        acquisition of property meets the 
                        requirements of this clause if--
                                  (I) such property was not 
                                used by the taxpayer at any 
                                time prior to such acquisition, 
                                and
                                  (II) the acquisition of such 
                                property meets the requirements 
                                of paragraphs (2)(A), (2)(B), 
                                (2)(C), and (3) of section 
                                179(d).
                          (iii) Syndication.--For purposes of 
                        subparagraph (A)(ii), if--
                                  (I) property is used by a 
                                lessor of such property and 
                                such use is the lessor's first 
                                use of such property,
                                  (II) such property is sold by 
                                such lessor or any subsequent 
                                purchaser within 3 months after 
                                the date such property was 
                                originally placed in service 
                                (or, in the case of multiple 
                                units of property subject to 
                                the same lease, within 3 months 
                                after the date the final unit 
                                is placed in service, so long 
                                as the period between the time 
                                the first unit is placed in 
                                service and the time the last 
                                unit is placed in service does 
                                not exceed 12 months), and
                                  (III) the user of such 
                                property after the last sale 
                                during such 3-month period 
                                remains the same as when such 
                                property was originally placed 
                                in service,
                 such property shall be treated as originally 
                placed in service not earlier than the date of 
                such last sale.
                  (F) Coordination with section 280F.--For 
                purposes of section 280F--
                          (i) Automobiles.--In the case of a 
                        passenger automobile (as defined in 
                        section 280F(d)(5)) which is qualified 
                        property, the Secretary shall increase 
                        the limitation under section 
                        280F(a)(1)(A)(i) by $8,000.
                          (ii) Listed property.--The deduction 
                        allowable under paragraph (1) shall be 
                        taken into account in computing any 
                        recapture amount under section 
                        280F(b)(2).
                          (iii) Phase down.--In the case of a 
                        passenger automobile acquired by the 
                        taxpayer before September 28, 2017, and 
                        placed in service by the taxpayer after 
                        September 27, 2017, clause (i) shall be 
                        applied by substituting for 
                        ``$8,000''--
                                  (I) in the case of an 
                                automobile placed in service 
                                during 2018, $6,400, and
                                  (II) in the case of an 
                                automobile placed in service 
                                during 2019, $4,800.
                  (G) Deduction allowed in computing minimum 
                tax.--For purposes of determining alternative 
                minimum taxable income under section 55, the 
                deduction under section 167 for qualified 
                property shall be determined without regard to 
                any adjustment under section 56.
                  (H) Production placed in service.--For 
                purposes of subparagraph (A)--
                          (i) a qualified film or television 
                        production shall be considered to be 
                        placed in service at the time of 
                        initial release or broadcast, and
                          (ii) a qualified live theatrical 
                        production shall be considered to be 
                        placed in service at the time of the 
                        initial live staged performance.
          (5) Special rules for certain plants bearing fruits 
        and nuts.--
                  (A) In general.--In the case of any specified 
                plant which is planted before January 1, 2027, 
                or is grafted before such date to a plant that 
                has already been planted, by the taxpayer in 
                the ordinary course of the taxpayer's farming 
                business (as defined in section 263A(e)(4)) 
                during a taxable year for which the taxpayer 
                has elected the application of this paragraph--
                          (i) a depreciation deduction equal to 
                        the applicable percentage of the 
                        adjusted basis of such specified plant 
                        shall be allowed under section 167(a) 
                        for the taxable year in which such 
                        specified plant is so planted or 
                        grafted, and
                          (ii) the adjusted basis of such 
                        specified plant shall be reduced by the 
                        amount of such deduction.
                  (B) Specified plant.--For purposes of this 
                paragraph, the term ``specified plant'' means--
                          (i) any tree or vine which bears 
                        fruits or nuts, and
                          (ii) any other plant which will have 
                        more than one crop or yield of fruits 
                        or nuts and which generally has a pre-
                        productive period of more than 2 years 
                        from the time of planting or grafting 
                        to the time at which such plant begins 
                        bearing a marketable crop or yield of 
                        fruits or nuts.
                Such term shall not include any property which 
                is planted or grafted outside of the United 
                States.
                  (C) Election revocable only with consent.--An 
                election under this paragraph may be revoked 
                only with the consent of the Secretary.
                  (D) Additional depreciation may be claimed 
                only once.--If this paragraph applies to any 
                specified plant, such specified plant shall not 
                be treated as qualified property in the taxable 
                year in which placed in service.
                  (E) Deduction allowed in computing minimum 
                tax.--Rules similar to the rules of paragraph 
                (2)(G) shall apply for purposes of this 
                paragraph.
          (6) Applicable percentage.--For purposes of this 
        subsection--
                  (A) In general.--Except as otherwise provided 
                in this paragraph, the term ``applicable 
                percentage'' means--
                          (i) in the case of property placed in 
                        service after September 27, 2017, and 
                        before January 1, [2023] 2026, 100 
                        percent, and
                          [(ii) in the case of property placed 
                        in service after December 31, 2022, and 
                        before January 1, 2024, 80 percent,
                          [(iii) in the case of property placed 
                        in service after December 31, 2023, and 
                        before January 1, 2025, 60 percent,
                          [(iv) in the case of property placed 
                        in service after December 31, 2024, and 
                        before January 1, 2026, 40 percent, 
                        and]
                          [(v)] (ii) in the case of property 
                        placed in service after December 31, 
                        2025, and before January 1, 2027, 20 
                        percent.
                  (B) Rule for property with longer production 
                periods.--In the case of property described in 
                subparagraph (B) or (C) of paragraph (2), the 
                term ``applicable percentage'' means--
                          (i) in the case of property placed in 
                        service after September 27, 2017, and 
                        before January 1, [2024] 2027, 100 
                        percent, and
                          [(ii) in the case of property placed 
                        in service after December 31, 2023, and 
                        before January 1, 2025, 80 percent,
                          [(iii) in the case of property placed 
                        in service after December 31, 2024, and 
                        before January 1, 2026, 60 percent,
                          [(iv) in the case of property placed 
                        in service after December 31, 2025, and 
                        before January 1, 2027, 40 percent, 
                        and]
                          [(v)] (ii) in the case of property 
                        placed in service after December 31, 
                        2026, and before January 1, 2028, 20 
                        percent.
                  (C) Rule for plants bearing fruits and 
                nuts.--In the case of a specified plant 
                described in paragraph (5), the term 
                ``applicable percentage'' means--
                          (i) in the case of a plant which is 
                        planted or grafted after September 27, 
                        2017, and before January 1, [2023] 
                        2026, 100 percent, and
                          [(ii) in the case of a plant which is 
                        planted or grafted after December 31, 
                        2022, and before January 1, 2024, 80 
                        percent,
                          [(iii) in the case of a plant which 
                        is planted or grafted after December 
                        31, 2023, and before January 1, 2025, 
                        60 percent,
                          [(iv) in the case of a plant which is 
                        planted or grafted after December 31, 
                        2024, and before January 1, 2026, 40 
                        percent, and]
                          [(v)] (ii) in the case of a plant 
                        which is planted or grafted after 
                        December 31, 2025, and before January 
                        1, 2027, 20 percent.
          (7) Election out.--If a taxpayer makes an election 
        under this paragraph with respect to any class of 
        property for any taxable year, paragraphs (1) and 
        (2)(F) shall not apply to any qualified property in 
        such class placed in service during such taxable year. 
        An election under this paragraph may be revoked only 
        with the consent of the Secretary.
          (8) Phase down.--In the case of qualified property 
        acquired by the taxpayer before September 28, 2017, and 
        placed in service by the taxpayer after September 27, 
        2017, paragraph (6) shall be applied by substituting 
        for each percentage therein--
                  (A) ``50 percent'' in the case of--
                          (i) property placed in service before 
                        January 1, 2018, and
                          (ii) property described in 
                        subparagraph (B) or (C) of paragraph 
                        (2) which is placed in service in 2018,
                  (B) ``40 percent'' in the case of--
                          (i) property placed in service in 
                        2018 (other than property described in 
                        subparagraph (B) or (C) of paragraph 
                        (2)), and
                          (ii) property described in 
                        subparagraph (B) or (C) of paragraph 
                        (2) which is placed in service in 2019,
                  (C) ``30 percent'' in the case of--
                          (i) property placed in service in 
                        2019 (other than property described in 
                        subparagraph (B) or (C) of paragraph 
                        (2)), and
                          (ii) property described in 
                        subparagraph (B) or (C) of paragraph 
                        (2) which is placed in service in 2020, 
                        and
                  (D) ``0 percent'' in the case of--
                          (i) property placed in service after 
                        2019 (other than property described in 
                        subparagraph (B) or (C) of paragraph 
                        (2)), and
                          (ii) property described in 
                        subparagraph (B) or (C) of paragraph 
                        (2) which is placed in service after 
                        2020.
          (9) Exception for certain property.--The term 
        ``qualified property'' shall not include--
                  (A) any property which is primarily used in a 
                trade or business described in clause (iv) of 
                section 163(j)(7)(A), or
                  (B) any property used in a trade or business 
                that has had floor plan financing indebtedness 
                (as defined in paragraph (9) of section 
                163(j)), if the floor plan financing interest 
                related to such indebtedness was taken into 
                account under paragraph (1)(C) of such section.
          (10) Special rule for property placed in service 
        during certain periods.--
                  (A) In general.--In the case of qualified 
                property placed in service by the taxpayer 
                during the first taxable year ending after 
                September 27, 2017, if the taxpayer elects to 
                have this paragraph apply for such taxable 
                year, paragraphs (1)(A) and (5)(A)(i) shall be 
                applied by substituting ``50 percent'' for 
                ``the applicable percentage''.
                  (B) Form of election.--Any election under 
                this paragraph shall be made at such time and 
                in such form and manner as the Secretary may 
                prescribe.
  (l) Special allowance for second generation biofuel plant 
property.--
          (1) Additional allowance.--In the case of any 
        qualified second generation biofuel plant property--
                  (A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which 
                such property is placed in service shall 
                include an allowance equal to 50 percent of the 
                adjusted basis of such property, and
                  (B) the adjusted basis of such property shall 
                be reduced by the amount of such deduction 
                before computing the amount otherwise allowable 
                as a depreciation deduction under this chapter 
                for such taxable year and any subsequent 
                taxable year.
          (2) Qualified second generation biofuel plant 
        property.--The term ``qualified second generation 
        biofuel plant property'' means property of a character 
        subject to the allowance for depreciation--
                  (A) which is used in the United States solely 
                to produce second generation biofuel (as 
                defined in section 40(b)(6)(E)),
                  (B) the original use of which commences with 
                the taxpayer after the date of the enactment of 
                this subsection,
                  (C) which is acquired by the taxpayer by 
                purchase (as defined in section 179(d)) after 
                the date of the enactment of this subsection, 
                but only if no written binding contract for the 
                acquisition was in effect on or before the date 
                of the enactment of this subsection, and
                  (D) which is placed in service by the 
                taxpayer before January 1, 2021.
          (3) Exceptions.--
                  (A) Bonus depreciation property under 
                subsection (k).--Such term shall not include 
                any property to which subsection (k) applies.
                  (B) Alternative depreciation property.--Such 
                term shall not include any property described 
                in subsection (k)(2)(D).
                  (C) Tax-exempt bond-financed property.--Such 
                term shall not include any property any portion 
                of which is financed with the proceeds of any 
                obligation the interest on which is exempt from 
                tax under section 103.
                  (D) Election out.--If a taxpayer makes an 
                election under this subparagraph with respect 
                to any class of property for any taxable year, 
                this subsection shall not apply to all property 
                in such class placed in service during such 
                taxable year.
          (4) Special rules.--For purposes of this subsection, 
        rules similar to the rules of subsection (k)(2)(E) 
        shall apply.
          (5) Allowance against alternative minimum tax.--For 
        purposes of this subsection, rules similar to the rules 
        of subsection (k)(2)(G) shall apply.
          (6) Recapture.--For purposes of this subsection, 
        rules similar to the rules under section 179(d)(10) 
        shall apply with respect to any qualified second 
        generation biofuel plant property which ceases to be 
        qualified second generation biofuel plant property.
          (7) Denial of double benefit.--Paragraph (1) shall 
        not apply to any qualified second generation biofuel 
        plant property with respect to which an election has 
        been made under section 179C (relating to election to 
        expense certain refineries).
  (m) Special allowance for certain reuse and recycling 
property.--
          (1) In general.--In the case of any qualified reuse 
        and recycling property--
                  (A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which 
                such property is placed in service shall 
                include an allowance equal to 50 percent of the 
                adjusted basis of the qualified reuse and 
                recycling property, and
                  (B) the adjusted basis of the qualified reuse 
                and recycling property shall be reduced by the 
                amount of such deduction before computing the 
                amount otherwise allowable as a depreciation 
                deduction under this chapter for such taxable 
                year and any subsequent taxable year.
          (2) Qualified reuse and recycling property.--For 
        purposes of this subsection--
                  (A) In general.--The term ``qualified reuse 
                and recycling property'' means any reuse and 
                recycling property--
                          (i) to which this section applies,
                          (ii) which has a useful life of at 
                        least 5 years,
                          (iii) the original use of which 
                        commences with the taxpayer after 
                        August 31, 2008, and
                          (iv) which is--
                                  (I) acquired by purchase (as 
                                defined in section 179(d)(2)) 
                                by the taxpayer after August 
                                31, 2008, but only if no 
                                written binding contract for 
                                the acquisition was in effect 
                                before September 1, 2008, or
                                  (II) acquired by the taxpayer 
                                pursuant to a written binding 
                                contract which was entered into 
                                after August 31, 2008.
                  (B) Exceptions.--
                          (i) Bonus depreciation property under 
                        subsection (k).--The term ``qualified 
                        reuse and recycling property'' shall 
                        not include any property to which 
                        subsection (k) (determined without 
                        regard to paragraph (4) thereof) 
                        applies.
                          (ii) Alternative depreciation 
                        property.--The term ``qualified reuse 
                        and recycling property'' shall not 
                        include any property to which the 
                        alternative depreciation system under 
                        subsection (g) applies, determined 
                        without regard to paragraph (7) of 
                        subsection (g) (relating to election to 
                        have system apply).
                          (iii) Election out.--If a taxpayer 
                        makes an election under this clause 
                        with respect to any class of property 
                        for any taxable year, this subsection 
                        shall not apply to all property in such 
                        class placed in service during such 
                        taxable year.
                  (C) Special rule for self-constructed 
                property.--In the case of a taxpayer 
                manufacturing, constructing, or producing 
                property for the taxpayer's own use, the 
                requirements of clause (iv) of subparagraph (A) 
                shall be treated as met if the taxpayer begins 
                manufacturing, constructing, or producing the 
                property after August 31, 2008.
                  (D) Deduction allowed in computing minimum 
                tax.--For purposes of determining alternative 
                minimum taxable income under section 55, the 
                deduction under subsection (a) for qualified 
                reuse and recycling property shall be 
                determined under this section without regard to 
                any adjustment under section 56.
          (3) Definitions.--For purposes of this subsection--
                  (A) Reuse and recycling property.--
                          (i) In general.--The term ``reuse and 
                        recycling property'' means any 
                        machinery and equipment (not including 
                        buildings or real estate), along with 
                        all appurtenances thereto, including 
                        software necessary to operate such 
                        equipment, which is used exclusively to 
                        collect, distribute, or recycle 
                        qualified reuse and recyclable 
                        materials.
                          (ii) Exclusion.--Such term does not 
                        include rolling stock or other 
                        equipment used to transport reuse and 
                        recyclable materials.
                  (B) Qualified reuse and recyclable 
                materials.--
                          (i) In general.--The term ``qualified 
                        reuse and recyclable materials'' means 
                        scrap plastic, scrap glass, scrap 
                        textiles, scrap rubber, scrap 
                        packaging, recovered fiber, scrap 
                        ferrous and nonferrous metals, or 
                        electronic scrap generated by an 
                        individual or business.
                          (ii) Electronic scrap.--For purposes 
                        of clause (i), the term ``electronic 
                        scrap'' means--
                                  (I) any cathode ray tube, 
                                flat panel screen, or similar 
                                video display device with a 
                                screen size greater than 4 
                                inches measured diagonally, or
                                  (II) any central processing 
                                unit.
                  (C) Recycling or recycle.--The term 
                ``recycling'' or ``recycle'' means that process 
                (including sorting) by which worn or 
                superfluous materials are manufactured or 
                processed into specification grade commodities 
                that are suitable for use as a replacement or 
                substitute for virgin materials in 
                manufacturing tangible consumer and commercial 
                products, including packaging.

           *       *       *       *       *       *       *


SEC. 174. AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

  (a) In general.--In the case of a taxpayer's specified 
research or experimental expenditures for any taxable year--
          (1) except as provided in paragraph (2), no deduction 
        shall be allowed for such expenditures, and
          (2) the taxpayer shall--
                  (A) charge such expenditures to capital 
                account, and
                  (B) be allowed an amortization deduction of 
                such expenditures ratably over the 5-year 
                period (15-year period in the case of any 
                specified research or experimental expenditures 
                which are attributable to foreign research 
                (within the meaning of section 41(d)(4)(F))) 
                beginning with the midpoint of the taxable year 
                in which such expenditures are paid or 
                incurred.
  (b) Specified research or experimental expenditures.--For 
purposes of this section, the term ``specified research or 
experimental expenditures'' means, with respect to any taxable 
year, research or experimental expenditures which are paid or 
incurred by the taxpayer during such taxable year in connection 
with the taxpayer's trade or business.
  (c) Special rules.--
          (1) Land and other property.--This section shall not 
        apply to any expenditure for the acquisition or 
        improvement of land, or for the acquisition or 
        improvement of property to be used in connection with 
        the research or experimentation and of a character 
        which is subject to the allowance under section 167 
        (relating to allowance for depreciation, etc.) or 
        section 611 (relating to allowance for depletion); but 
        for purposes of this section allowances under section 
        167, and allowances under section 611, shall be 
        considered as expenditures.
          (2) Exploration expenditures.--This section shall not 
        apply to any expenditure paid or incurred for the 
        purpose of ascertaining the existence, location, 
        extent, or quality of any deposit of ore or other 
        mineral (including oil and gas).
          (3) Software development.--For purposes of this 
        section, any amount paid or incurred in connection with 
        the development of any software shall be treated as a 
        research or experimental expenditure.
  (d) Treatment upon disposition, retirement, or abandonment.--
If any property with respect to which specified research or 
experimental expenditures are paid or incurred is disposed, 
retired, or abandoned during the period during which such 
expenditures are allowed as an amortization deduction under 
this section, no deduction shall be allowed with respect to 
such expenditures on account of such disposition, retirement, 
or abandonment and such amortization deduction shall continue 
with respect to such expenditures.
  (e) Coordination With Certain Other Provisions.--
          (1) Coordination with alternative minimum tax.--
        Sections 56(b)(2) and 59(e)(2)(B) shall not apply to 
        specified research or experimental expenditures to 
        which this section applies.
          (2) Coordination with basis adjustment rules.--
        Section 1016(a)(14) shall be applied by substituting 
        ``an amortization deduction under section 174(a)'' for 
        ``deductions as deferred expenses under section 
        174(b)(1)''.
          (3) Coordination with long-term contract rules.--For 
        purposes of determining percentage of completion under 
        section 460(b)(1)(A), the amortization deduction under 
        subsection (a) shall be taken into account as a cost 
        allocated to the contract.
   (f) Suspension of Application.--This section shall apply to 
amounts paid or incurred in taxable years beginning after 
December 31, 2025 (and shall not apply to amounts paid or 
incurred in taxable years beginning on or before such date).

SEC. 174A. TEMPORARY RULES FOR RESEARCH AND EXPERIMENTAL EXPENDITURES.

  (a) Treatment as Expenses.--Notwithstanding section 263, 
there shall be allowed as a deduction any research or 
experimental expenditures which are paid or incurred by the 
taxpayer during the taxable year in connection with the 
taxpayer's trade or business.
  (b) Amortization of Certain Research and Experimental 
Expenditures.--
          (1) In general.--At the election of the taxpayer, 
        made in accordance with regulations or other guidance 
        provided by the Secretary, research or experimental 
        expenditures which--
                  (A) are paid or incurred by the taxpayer in 
                connection with his trade or business, and
                  (B) would (but for subsection (a)) be 
                chargeable to capital account but not 
                chargeable to property of a character which is 
                subject to the allowance under section 167 
                (relating to allowance for depreciation, etc.) 
                or section 611 (relating to allowance for 
                depletion),
        may be treated as deferred expenses to which subsection 
        (a) does not apply. In computing taxable income, such 
        deferred expenses shall be allowed as a deduction 
        ratably over such period of not less than 60 months as 
        may be selected by the taxpayer (beginning with the 
        month in which the taxpayer first realizes benefits 
        from such expenditures). Such deferred expenses are 
        expenditures properly chargeable to capital account for 
        purposes of section 1016(a)(1) (relating to adjustments 
        to basis of property).
          (2) Time for and scope of election.--The election 
        provided by paragraph (1) may be made for any taxable 
        year, but only if made not later than the time 
        prescribed by law for filing the return for such 
        taxable year (including extensions thereof). The method 
        so elected, and the period selected by the taxpayer, 
        shall be adhered to in computing taxable income for the 
        taxable year for which the election is made and for all 
        subsequent taxable years unless, with the approval of 
        the Secretary, a change to a different method (or to a 
        different period) is authorized with respect to part or 
        all of such expenditures. The election shall not apply 
        to any expenditure paid or incurred during any taxable 
        year before the taxable year for which the taxpayer 
        makes the election.
  (c) Election to Capitalize Expenses.--In the case of a 
taxpayer which elects (at such time and in such manner as the 
Secretary may provide) the application of this subsection, 
subsections (a) and (b) shall not apply. Such election shall 
not apply to any expenditure paid or incurred during any 
taxable year before the taxable year for which the taxpayer 
makes the election and may be made with respect to part of the 
expenditures paid or incurred during any taxable year only with 
the approval of the Secretary.
  (d) Land and Other Property.--This section shall not apply to 
any expenditure for the acquisition or improvement of land, or 
for the acquisition or improvement of property to be used in 
connection with the research or experimentation and of a 
character which is subject to the allowance under section 167 
(relating to allowance for depreciation, etc.) or section 611 
(relating to allowance for depletion); but for purposes of this 
section allowances under section 167, and allowances under 
section 611, shall be considered as expenditures.
  (e) Exploration Expenditures.--This section shall not apply 
to any expenditure paid or incurred for the purpose of 
ascertaining the existence, location, extent, or quality of any 
deposit of ore or other mineral (including oil and gas).
  (f) Software Development.--For purposes of this section, any 
amount paid or incurred in connection with the development of 
any software shall be treated as a research or experimental 
expenditure.
  (g) Only Reasonable Research Expenditures Eligible.--This 
section shall apply to a research or experimental expenditure 
only to the extent that the amount thereof is reasonable under 
the circumstances.
  (h) Coordination With Research Credit.--
          (1) In general.--Section 41(d)(1)(A) shall be applied 
        by substituting ``expenses under section 174A'' for 
        ``specified research or experimental expenditures under 
        section 174''.
          (2) Denial of double benefit.--
                  (A) In general.--Section 280C(c) shall not 
                apply and the amount taken into account under 
                this section as research or experimental 
                expenditures shall be reduced by the amount of 
                the credit allowable under section 41(a).
                  (B) Election of reduced credit.--
                          (i) In general.--In the case of any 
                        taxable year for which an election is 
                        made under this subparagraph--
                                  (I) subparagraph (A) shall 
                                not apply, and
                                  (II) the amount of the credit 
                                under section 41(a) shall be 
                                the amount determined under 
                                clause (ii).
                          (ii) Amount of reduced credit.--The 
                        amount of credit determined under this 
                        clause for any taxable year shall be 
                        the amount equal to the excess of--
                                  (I) the amount of credit 
                                determined under section 41(a) 
                                without regard to this 
                                subparagraph, over
                                  (II) the product of the 
                                amount described in subclause 
                                (I), multiplied by the rate of 
                                tax under section 11(b).
                          (iii) Election.--An election under 
                        this subparagraph for any taxable year 
                        shall be made not later than the time 
                        for filing the return of tax for such 
                        year (including extensions), shall be 
                        made on such return, and shall be made 
                        in such manner as the Secretary may 
                        prescribe. Such an election, once made, 
                        shall be irrevocable.
                  (C) Controlled groups.--Paragraph (3) of 
                section 280C(b) shall apply for purposes of 
                this paragraph.
  (i) Coordination With Long-term Contract Rules.--For purposes 
of determining percentage of completion under section 
460(b)(1)(A), any research or experimental expenditures paid or 
incurred by the taxpayer in connection with the taxpayer's 
trade or business shall be taken into account as a cost 
allocated to the contract for the taxable year in which so paid 
or incurred.
  (j) Coordination With Certain Other Provisions.--A reference 
to the corresponding provision of this section shall be treated 
as included in any reference to section 174 in section 56(b), 
59(e), 144(a), 168(i), 170(e), 195(c), 263(a), 263A(c), 469(c), 
543(d), 864(g), 993(d), 1016(a)(14), 1202(a), or 1298(e).
  (k) Termination.--
          (1) In general.--This section shall not apply to 
        amounts paid or incurred in taxable years beginning 
        after December 31, 2025.
          (2) Change in method of accounting.--Paragraph (1) 
        (and the corresponding application of section 174) 
        shall be treated as a change in method of accounting 
        for purposes of section 481 and--
                  (A) such change shall be treated as initiated 
                by the taxpayer,
                  (B) such change shall be treated as made with 
                the consent of the Secretary, and
                  (C) such change shall be applied only on a 
                cut-off basis for any research or experimental 
                expenditures paid or incurred in taxable years 
                beginning after December 31, 2025, and no 
                adjustment under section 481(a) shall be made.

           *       *       *       *       *       *       *


                 Subtitle D--Miscellaneous Excise Taxes

Chapter                                                             Sec.
      Retail excise taxes...........................................4001
     * * * * * * *
50B.  Acquisition of United States agricultural interests by 
5000E disqualified persons............................................

           *       *       *       *       *       *       *


CHAPTER 38--ENVIRONMENTAL TAXES

           *       *       *       *       *       *       *


Subchapter A--TAX ON PETROLEUM

           *       *       *       *       *       *       *


SEC. 4611. IMPOSITION OF TAX.

  (a) General Rule.--There is hereby imposed a tax at the rate 
specified in subsection (c) on--
          (1) crude oil received at a United States refinery, 
        and
          (2) petroleum products entered into the United States 
        for consumption, use, or warehousing.
  (b) Tax on certain uses and exportation.--
          (1) In general.--If--
                  (A) any domestic crude oil is used in or 
                exported from the United States, and
                  (B) before such use or exportation, no tax 
                was imposed on such crude oil under subsection 
                (a),
        then a tax at the rate specified in subsection (c) is 
        hereby imposed on such crude oil.
          (2) Exception for use on premises where produced.--
        Paragraph (1) shall not apply to any use of crude oil 
        for extracting oil or natural gas on the premises where 
        such crude oil was produced.
  (c) Rate of tax.--
          (1) In general.--The rate of the taxes imposed by 
        this section is the sum of--
                  (A) the Hazardous Substance Superfund 
                financing rate, and
                  (B) the Oil Spill Liability Trust Fund 
                financing rate.
          (2) Rates.--For purposes of paragraph (1)--
                  (A) the Hazardous Substance Superfund 
                financing rate is 16.4 cents a barrel, and
                  (B) the Oil Spill Liability Trust Fund 
                financing rate is--
                          (i) in the case of crude oil received 
                        or petroleum products entered before 
                        January 1, 2017, 8 cents a barrel, and
                          (ii) in the case of crude oil 
                        received or petroleum products entered 
                        after December 31, 2016, 9 cents a 
                        barrel.
          (3) Adjustment for inflation.--
                  (A) In general.--In the case of a year 
                beginning after 2023, the amount in paragraph 
                (2)(A) shall be increased by an amount equal 
                to--
                          (i) such amount, multiplied by
                          (ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for 
                        the calendar year, determined by 
                        substituting ``calendar year 2022'' for 
                        ``calendar year 2016'' in subparagraph 
                        (A)(ii) thereof.
                  (B) Rounding.--If any amount as adjusted 
                under subparagraph (A) is not a multiple of 
                $0.01, such amount shall be rounded to the next 
                lowest multiple of $0.01.
  (d) Persons liable for tax.--
          (1) Crude oil received at refinery.--The tax imposed 
        by subsection (a)(1) shall be paid by the operator of 
        the United States refinery.
          (2) Imported petroleum product.--The tax imposed by 
        subsection (a)(2) shall be paid by the person entering 
        the product for consumption, use, or warehousing.
          (3) Tax on certain uses or exports.--The tax imposed 
        by subsection (b) shall be paid by the person using or 
        exporting the crude oil, as the case may be.
  (e) Application of Hazardous Substance Superfund Financing 
Rate.--The Hazardous Substance Superfund financing rate under 
this section shall not apply after December 31, 2022.
  (f) Application of Oil Spill Liability Trust Fund financing 
rate.--
          (1) In general.--Except as provided in paragraph (2), 
        the Oil Spill Liability Trust Fund financing rate under 
        subsection (c) shall apply on and after April 1, 2006, 
        or if later, the date which is 30 days after the last 
        day of any calendar quarter for which the Secretary 
        estimates that, as of the close of that quarter, the 
        unobligated balance in the Oil Spill Liability Trust 
        Fund is less than $2,000,000,000.
          (2) Termination.--The Oil Spill Liability Trust Fund 
        financing rate shall not apply after December 31, 2025.

           *       *       *       *       *       *       *


  CHAPTER 50B--ACQUISITION OF UNITED STATES AGRICULTURAL INTERESTS BY 
                          DISQUALIFIED PERSONS

Sec. 5000E. Imposition of tax on acquisition of United States 
          agricultural interests by disqualified persons.

SEC. 5000E. IMPOSITION OF TAX ON ACQUISITION OF UNITED STATES 
                    AGRICULTURAL INTERESTS BY DISQUALIFIED PERSONS.

  (a) In General.--In the case of any acquisition of any United 
States agricultural interest by any disqualified person, there 
is hereby imposed on such person a tax equal to 60 percent of 
the amount paid for such interest.
  (b) Disqualified Person.--For purposes of this section--
          (1) In general.--The term ``disqualified person'' 
        means--
                  (A) any citizen of a country of concern 
                (other than a citizen, or lawful permanent 
                resident, of the United States and other than 
                an individual domiciled in Taiwan possessing a 
                valid identification card or number issued by 
                the government of Taiwan),
                  (B) any entity domiciled in a country of 
                concern (other than an entity domiciled in 
                Taiwan),
                  (C) any country of concern and any political 
                subdivision, agency, or instrumentality 
                thereof, and
                  (D) except as provided in paragraph (3), any 
                entity if persons described in subparagraph 
                (A), (B), or (C) (in the aggregate) 10-percent 
                control such entity.
          (2) Country of concern.--The term ``country of 
        concern'' means any country the government of which is 
        engaged in a long-term pattern or serious instances of 
        conduct significantly adverse to the national security 
        of the United States or the security and safety of 
        United States persons, including the People's Republic 
        of China, the Russian Federation, Iran, North Korea, 
        Cuba, and the regime of Nicolas Maduro in Venezuela.
          (3) Exception for certain publicly traded 
        corporations.--
                  (A) In general.--An entity shall not be 
                treated as described in paragraph (1)(D) if--
                          (i) such entity is a specified 
                        publicly traded corporation, or
                          (ii) specified publicly traded 
                        corporations (in the aggregate) control 
                        such entity.
                  (B) Specified publicly traded corporation.--
                          (i) In general.--The term ``specified 
                        publicly traded corporation'' means any 
                        corporation if--
                                  (I) the stock of such 
                                corporation is regularly traded 
                                on an established securities 
                                market located in the United 
                                States, and
                                  (II) specified disqualified 
                                persons do not (in the 
                                aggregate) control such 
                                corporation.
                          (ii) Specified disqualified 
                        persons.--The term ``specified 
                        disqualified persons'' means, with 
                        respect to any corporation referred to 
                        in clause (i), any person which--
                                  (I) is described in 
                                subparagraph (A), (B), or (C) 
                                of paragraph (1), and
                                  (II) 10-percent controls such 
                                corporation.
  (c) Prorated Tax on Acquisitions by Entities Not More Than 50 
Percent Controlled by Disqualified Persons.--
          (1) In general.--In the case of any disqualified 
        person described in subsection (b)(1)(D) with respect 
        to which persons described in subparagraphs (A), (B), 
        or (C) of subsection (b)(1) do not (in the aggregate) 
        control such disqualified person, subsection (a) shall 
        be applied by substituting ``the applicable percentage 
        of the amount'' for ``the amount''.
          (2) Applicable percentage.--For purposes of this 
        section, the term ``applicable percentage'' means, with 
        respect to any disqualified person to which paragraph 
        (1) applies, the highest percentage which could be 
        substituted for ``50 percent'' both places it appears 
        in section 954(d)(3) without causing persons described 
        in subparagraph (A), (B), or (C) of subsection (b)(1) 
        (in the aggregate) to control (determined by taking 
        into account such substitution) such disqualified 
        person.
  (d) Control.--For purposes of this section--
          (1) In general.--The term ``control'' has the meaning 
        given such term under section 954(d)(3), determined by 
        treating the rules of section 958(a)(2) as applying to 
        both foreign and domestic corporations, partnerships, 
        trusts, and estates.
          (2) 10-percent control.--The term ``10-percent 
        control'' means control (as defined in paragraph (1)), 
        determined by substituting ``10 percent'' for ``50 
        percent'' both places it appears in section 954(d)(3).
  (e) United States Agricultural Interest.--For purposes of 
this section--
          (1) In general.--The term ``United States 
        agricultural interest'' has the meaning which would be 
        given the term ``United States real property interest'' 
        by section 897(c) if--
                  (A) paragraph (1)(A)(i) were applied by 
                substituting ``an interest in agricultural 
                land'' for ``an interest in real property'' and 
                all that follows,
                  (B) paragraph (1)(A)(ii) were applied by 
                substituting ``such corporation was not a 
                United States real property holding corporation 
                at the time of acquisition'' for ``such 
                corporation'' and all that follows,
                  (C) paragraph (1)(B) did not apply, and
                  (D) paragraph (3) were applied by 
                substituting ``at the time of acquisition'' for 
                ``at some time during the shorter of the 
                periods described in paragraph (1)(A)(ii)''.
          (2) Agricultural land.--For purposes of paragraph 
        (1), the term ``agricultural land'' means--
                  (A) agricultural land as defined in section 9 
                of the Agricultural Foreign Investment 
                Disclosure Act of 1978 (7 U.S.C. 3508), and
                  (B) land located in one or more States and 
                used for livestock production purposes 
                (determined under rules similar to the rules 
                that apply under such section 9).

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *


                     PART III--INFORMATION RETURNS

Sec.
6041. Information at source.
     * * * * * * *
Sec. 6050AA. Returns relating to acquisition of United States 
          agricultural interests by disqualified persons.

           *       *       *       *       *       *       *


SEC. 6050AA. RETURNS RELATING TO ACQUISITION OF UNITED STATES 
                    AGRICULTURAL INTERESTS BY DISQUALIFIED PERSONS.

  (a) In General.--The required reporting person, with respect 
to any acquisition of any United States agricultural interest 
by a presumptively disqualified person to which section 
5000E(a) applies, shall make a return at such time as the 
Secretary may provide setting forth--
          (1) the name, address, and TIN of such presumptively 
        disqualified person,
          (2) a description of such United States agricultural 
        interest (including the street address, if applicable), 
        and
          (3) the amount paid for such United States 
        agricultural interest.
  (b) Statement to be Furnished to Presumptively Disqualified 
Person.--Every person required to make a return under 
subsection (a) shall furnish, at such time as the Secretary may 
provide, to each presumptively disqualified person whose name 
is required to be set forth in such return a written statement 
showing--
          (1) the name and address of the information contact 
        of the required reporting person, and
          (2) the information described in paragraphs (1), (2), 
        and (3) of subsection (a) which relates to such 
        disqualified person.
  (c) Required Reporting Person.--For purposes of this section, 
the term ``required reporting person'' means, with respect to 
any acquisition of any United States agricultural interest--
          (1) the person (including any attorney or title 
        company) responsible for closing the transaction in 
        which such United States agricultural interest is 
        acquired, or
          (2) if no one is responsible for closing such 
        transaction (or in such other cases as the Secretary 
        may provide), the transferor of such United States 
        agricultural interest.
  (d) Presumptively Disqualified Person.--For purposes of this 
section, the term ``presumptively disqualified person'' means 
any person unless such person furnishes to the required 
reporting person an affidavit by the such person stating, under 
penalty of perjury, that such person is not a disqualified 
person (as defined in section 5000E(b)).
  (e) Requirement to Request Affidavit.--If the required 
reporting person, with respect to any acquisition of any United 
States agricultural interest, has not, as of the time of such 
acquisition, been furnished the affidavit described in 
subsection (d) by the acquirer of such interest, such required 
reporting person shall furnish to such acquirer, at such time, 
a written statement informing such acquirer of the required 
reporting person's obligation to make the return described in 
subsection (a) with respect to such acquisition and including 
such other information as the Secretary may require.
  (f) United States Agricultural Interest.--For purposes of 
this section, the term ``United States agricultural interest'' 
has the meaning given such term in section 5000E.

           *       *       *       *       *       *       *


Subpart B--Information Concerning Transactions With Other Persons

           *       *       *       *       *       *       *


                         CHAPTER 63--ASSESSMENT

  Subchapter B--DEFICIENCY PROCEDURES IN THE CASE OF INCOME, ESTATE, 
GIFT, AND CERTAIN EXCISE TAXES

           *       *       *       *       *       *       *


SEC. 6213. RESTRICTIONS APPLICABLE TO DEFICIENCIES; PETITION TO TAX 
                    COURT.

  (a) Time for filing petition and restriction on assessment.--
Within 90 days, or 150 days if the notice is addressed to a 
person outside the United States, after the notice of 
deficiency authorized in section 6212 is mailed (not counting 
Saturday, Sunday, or a legal holiday in the District of 
Columbia as the last day), the taxpayer may file a petition 
with the Tax Court for a redetermination of the deficiency. 
Except as otherwise provided in section 6851, 6852, or 6861 no 
assessment of a deficiency in respect of any tax imposed by 
subtitle A, or B, chapter 41, 42, 43, or 44 and no levy or 
proceeding in court for its collection shall be made, begun, or 
prosecuted until such notice has been mailed to the taxpayer, 
nor until the expiration of such 90-day or 150-day period, as 
the case may be, nor, if a petition has been filed with the Tax 
Court, until the decision of the Tax Court has become final. 
Notwithstanding the provisions of section 7421(a), the making 
of such assessment or the beginning of such proceeding or levy 
during the time such prohibition is in force may be enjoined by 
a proceeding in the proper court, including the Tax Court, and 
a refund may be ordered by such court of any amount collected 
within the period during which the Secretary is prohibited from 
collecting by levy or through a proceeding in court under the 
provisions of this subsection. The Tax Court shall have no 
jurisdiction to enjoin any action or proceeding or order any 
refund under this subsection unless a timely petition for a 
redetermination of the deficiency has been filed and then only 
in respect of the deficiency that is the subject of such 
petition. Any petition filed with the Tax Court on or before 
the last date specified for filing such petition by the 
Secretary in the notice of deficiency shall be treated as 
timely filed.
  (b) Exceptions to restrictions on assessment.--
          (1) Assessments arising out of mathematical or 
        clerical errors.--If the taxpayer is notified that, on 
        account of a mathematical or clerical error appearing 
        on the return, an amount of tax in excess of that shown 
        on the return is due, and that an assessment of the tax 
        has been or will be made on the basis of what would 
        have been the correct amount of tax but for the 
        mathematical or clerical error, such notice shall not 
        be considered as a notice of deficiency for the 
        purposes of subsection (a) (prohibiting assessment and 
        collection until notice of the deficiency has been 
        mailed), or of section 6212(c)(1) (restricting further 
        deficiency letters), or of section 6512(a) (prohibiting 
        credits or refunds after petition to the Tax Court), 
        and the taxpayer shall have no right to file a petition 
        with the Tax Court based on such notice, nor shall such 
        assessment or collection be prohibited by the 
        provisions of subsection (a) of this section. Each 
        notice under this paragraph shall set forth the error 
        alleged and an explanation thereof.
          (2) Abatement of assessment of mathematical or 
        clerical errors.--
                  (A) Request for abatement.--Notwithstanding 
                section 6404(b), a taxpayer may file with the 
                Secretary within 60 days after notice is sent 
                under paragraph (1) a request for an abatement 
                of any assessment specified in such notice, and 
                upon receipt of such request, the Secretary 
                shall abate the assessment. Any reassessment of 
                the tax with respect to which an abatement is 
                made under this subparagraph shall be subject 
                to the deficiency procedures prescribed by this 
                subchapter.
                  (B) Stay of collection.--In the case of any 
                assessment referred to in paragraph (1), 
                notwithstanding paragraph (1), no levy or 
                proceeding in court for the collection of such 
                assessment shall be made, begun, or prosecuted 
                during the period in which such assessment may 
                be abated under this paragraph.
          (3) Assessments arising out of tentative carryback or 
        refund adjustments.--If the Secretary determines that 
        the amount applied, credited, or refunded under section 
        6411 is in excess of the overassessment attributable to 
        the carryback or the amount described in section 
        1341(b)(1) with respect to which such amount was 
        applied, credited, or refunded, he may assess without 
        regard to the provisions of paragraph (2) the amount of 
        the excess as a deficiency as if it were due to a 
        mathematical or clerical error appearing on the return.
          (4) Assessment of amount paid.--Any amount paid as a 
        tax or in respect of a tax may be assessed upon the 
        receipt of such payment notwithstanding the provisions 
        of subsection (a). In any case where such amount is 
        paid after the mailing of a notice of deficiency under 
        section 6212, such payment shall not deprive the Tax 
        Court of jurisdiction over such deficiency determined 
        under section 6211 without regard to such assessment.
          (5) Certain orders of criminal restitution.--If the 
        taxpayer is notified that an assessment has been or 
        will be made pursuant to section 6201(a)(4)--
                  (A) such notice shall not be considered as a 
                notice of deficiency for the purposes of 
                subsection (a) (prohibiting assessment and 
                collection until notice of the deficiency has 
                been mailed), section 6212(c)(1) (restricting 
                further deficiency letters), or section 6512(a) 
                (prohibiting credits or refunds after petition 
                to the Tax Court), and
                  (B) subsection (a) shall not apply with 
                respect to the amount of such assessment.
  (c) Failure to file petition.--If the taxpayer does not file 
a petition with the Tax Court within the time prescribed in 
subsection (a), the deficiency, notice of which has been mailed 
to the taxpayer, shall be assessed, and shall be paid upon 
notice and demand from the Secretary.
  (d) Waiver of restrictions.--The taxpayer shall at any time 
(whether or not a notice of deficiency has been issued) have 
the right, by a signed notice in writing filed with the 
Secretary, to waive the restrictions provided in subsection (a) 
on the assessment and collection of the whole or any part of 
the deficiency.
  (e) Suspension of filing period for certain excise taxes.--
The running of the time prescribed by subsection (a) for filing 
a petition in the Tax Court with respect to the taxes imposed 
by section 4941 (relating to taxes on self-dealing), 4942 
(relating to taxes on failure to distribute income), 4943 
(relating to taxes on excess business holdings), 4944 (relating 
to investments which jeopardize charitable purpose), 4945 
(relating to taxes on taxable expenditures), 4951 (relating to 
taxes on self-dealing), or 4952 (relating to taxes on taxable 
expenditures), 4955 (relating to taxes on political 
expenditures), 4958 (relating to private excess benefit), 4971 
(relating to excise taxes on failure to meet minimum funding 
standard), 4975 (relating to excise taxes on prohibited 
transactions) shall be suspended for any period during which 
the Secretary has extended the time allowed for making 
correction under section 4963(e).
  (f) Coordination with title 11.--
          (1) Suspension of running of period for filing 
        petition in title 11 cases.--In any case under title 11 
        of the United States Code, the running of the time 
        prescribed by subsection (a) for filing a petition in 
        the Tax Court with respect to any deficiency shall be 
        suspended for the period during which the debtor is 
        prohibited by reason of such case from filing a 
        petition in the Tax Court with respect to such 
        deficiency, and for 60 days thereafter.
          (2) Certain action not taken into account.--For 
        purposes of the second and third sentences of 
        subsection (a), the filing of a proof of claim or 
        request for payment (or the taking of any other action) 
        in a case under title 11 of the United States Code 
        shall not be treated as action prohibited by such 
        second sentence.
  (g) Definitions.--For purposes of this section--
          (1) Return.--The term ``return'' includes any return, 
        statement, schedule, or list, and any amendment or 
        supplement thereto, filed with respect to any tax 
        imposed by subtitle A or B, or chapter 41, 42, 43, or 
        44.
          (2) Mathematical or clerical error.--The term 
        ``mathematical or clerical error'' means--
                  (A) an error in addition, subtraction, 
                multiplication, or division shown on any 
                return,
                  (B) an incorrect use of any table provided by 
                the Internal Revenue Service with respect to 
                any return if such incorrect use is apparent 
                from the existence of other information on the 
                return,
                  (C) an entry on a return of an item which is 
                inconsistent with another entry of the same or 
                another item on such return,
                  (D) an omission of information which is 
                required to be supplied on the return to 
                substantiate an entry on the return,
                  (E) an entry on a return of a deduction or 
                credit in an amount which exceeds a statutory 
                limit imposed by subtitle A or B, or chapter 
                41, 42, 43, or 44, if such limit is expressed--
                          (i) as a specified monetary amount, 
                        or
                          (ii) as a percentage, ratio, or 
                        fraction,
                and if the items entering into the application 
                of such limit appear on such return,
                  (F) an omission of a correct taxpayer 
                identification number required under section 32 
                (relating to the earned income credit) to be 
                included on a return,
                  (G) an entry on a return claiming the credit 
                under section 32 with respect to net earnings 
                from self-employment described in section 
                32(c)(2)(A) to the extent the tax imposed by 
                section 1401 (relating to self-employment tax) 
                on such net earnings has not been paid,
                  (H) an omission of a correct TIN required 
                under section 21 (relating to expenses for 
                household and dependent care services necessary 
                for gainful employment) or section 151 
                (relating to allowance of deductions for 
                personal exemptions),
                  (I) an omission of a correct TIN required 
                under section 24(e) (relating to child tax 
                credit) to be included on a return,
                  (J) an omission of a correct TIN required 
                under section 25A(g)(1) (relating to higher 
                education tuition and related expenses) to be 
                included on a return,
                  (K) an omission of information required by 
                section 32(k)(2) (relating to taxpayers making 
                improper prior claims of earned income credit) 
                or an entry on the return claiming the credit 
                under section 32 for a taxable year for which 
                the credit is disallowed under subsection 
                (k)(1) thereof,
                  (L) the inclusion on a return of a TIN 
                required to be included on the return under 
                section 21, 24, 32, 6428, or 6428A if--
                          (i) such TIN is of an individual 
                        whose age affects the amount of the 
                        credit under such section, and
                          (ii) the computation of the credit on 
                        the return reflects the treatment of 
                        such individual as being of an age 
                        different from the individual's age 
                        based on such TIN,
                  (M) the entry on the return claiming the 
                credit under section 32 with respect to a child 
                if, according to the Federal Case Registry of 
                Child Support Orders established under section 
                453(h) of the Social Security Act, the taxpayer 
                is a noncustodial parent of such child,
                  (N) an omission of any increase required 
                under section 36(f) with respect to the 
                recapture of a credit allowed under section 36,
                  (O) the inclusion on a return of an 
                individual taxpayer identification number 
                issued under section 6109(i) which has expired, 
                been revoked by the Secretary, or is otherwise 
                invalid,
                  (P) an omission of information required by 
                section 24(g)(2) or an entry on the return 
                claiming the credit under section 24 for a 
                taxable year for which the credit is disallowed 
                under subsection (g)(1) thereof,
                  (Q) an omission of information required by 
                section 25A(b)(4)(B) or an entry on the return 
                claiming the American Opportunity Tax Credit 
                for a taxable year for which such credit is 
                disallowed under section 25A(b)(4)(A),
                  (R) an omission of information or 
                documentation required under section 
                25C(b)(6)(B) (relating to home energy audits) 
                to be included on a return,
                  (S) an omission of a correct product 
                identification number required under section 
                25C(h) (relating to credit for nonbusiness 
                energy property) to be included on a return, 
                and
                  (T) an omission of a correct vehicle 
                identification number required under section 
                30D(f)(9) (relating to credit for new clean 
                vehicles) to be included on a return[,].
                  [(U) an omission of a correct vehicle 
                identification number required under section 
                25E(d) (relating to credit for previously-owned 
                clean vehicles) to be included on a return, and
                  [(V) an omission of a correct vehicle 
                identification number required under section 
                45W(e) (relating to commercial clean vehicle 
                credit) to be included on a return.]
        A taxpayer shall be treated as having omitted a correct 
        TIN for purposes of the preceding sentence if 
        information provided by the taxpayer on the return with 
        respect to the individual whose TIN was provided 
        differs from the information the Secretary obtains from 
        the person issuing the TIN.
  (h) Cross references.--
                  (1) For assessment as if a mathematical error 
                on the return, in the case of erroneous claims 
                for income tax prepayment credits, see section 
                6201(a)(3).
                  (2) For assessments without regard to 
                restrictions imposed by this section in the 
                case of--
                          (A) Recovery of foreign income taxes, 
                        see section 905(c).
                          (B) Recovery of foreign estate tax, 
                        see section 2016.
                  (3) For provisions relating to application of 
                this subchapter in the case of certain 
                partnership items, etc., see section 6230(a).

           *       *       *       *       *       *       *


CHAPTER 65--ABATEMENTS, CREDITS, AND REFUNDS

           *       *       *       *       *       *       *


Subchapter B--RULES OF SPECIAL APPLICATION

           *       *       *       *       *       *       *


SEC. 6417. ELECTIVE PAYMENT OF APPLICABLE CREDITS.

  (a) In general.--In the case of an applicable entity making 
an election (at such time and in such manner as the Secretary 
may provide) under this section with respect to any applicable 
credit determined with respect to such entity, such entity 
shall be treated as making a payment against the tax imposed by 
subtitle A (for the taxable year with respect to which such 
credit was determined) equal to the amount of such credit.
  (b) Applicable credit.--The term ``applicable credit'' means 
each of the following:
          (1) So much of the credit for alternative fuel 
        vehicle refueling property allowed under section 30C 
        which, pursuant to subsection (d)(1) of such section, 
        is treated as a credit listed in section 38(b).
          (2) So much of the renewable electricity production 
        credit determined under section 45(a) as is 
        attributable to qualified facilities which are 
        originally placed in service after December 31, 2022.
          (3) So much of the credit for carbon oxide 
        sequestration determined under section 45Q(a) as is 
        attributable to carbon capture equipment which is 
        originally placed in service after December 31, 2022.
          (4) The zero-emission nuclear power production credit 
        determined under section 45U(a).
          (5) So much of the credit for production of clean 
        hydrogen determined under section 45V(a) as is 
        attributable to qualified clean hydrogen production 
        facilities which are originally placed in service after 
        December 31, 2012.
          [(6) In the case of a tax-exempt entity described in 
        clause (i), (ii), or (iv) of section 168(h)(2)(A), the 
        credit for qualified commercial vehicles determined 
        under section 45W by reason of subsection (d)(3) 
        thereof.]
          [(7)] (6) The credit for advanced manufacturing 
        production under section 45X(a).
          [(8) The clean electricity production credit 
        determined under section 45Y(a).]
          [(9)] (7) The clean fuel production credit determined 
        under section 45Z(a).
          [(10)] (8) The energy credit determined under section 
        48.
          [(11)] (9) The qualifying advanced energy project 
        credit determined under section 48C.
          [(12) The clean electricity investment credit 
        determined under section 48E.]
  (c) Application to partnerships and S corporations.--
          (1) In general.--In the case of any applicable credit 
        determined with respect to any facility or property 
        held directly by a partnership or S corporation, any 
        election under subsection (a) shall be made by such 
        partnership or S corporation. If such partnership or S 
        corporation makes an election under such subsection (in 
        such manner as the Secretary may provide) with respect 
        to such credit--
                  (A) the Secretary shall make a payment to 
                such partnership or S corporation equal to the 
                amount of such credit,
                  (B) subsection (e) shall be applied with 
                respect to such credit before determining any 
                partner's distributive share, or shareholder's 
                pro rata share, of such credit,
                  (C) any amount with respect to which the 
                election in subsection (a) is made shall be 
                treated as tax exempt income for purposes of 
                sections 705 and 1366, and
                  (D) a partner's distributive share of such 
                tax exempt income shall be based on such 
                partner's distributive share of the otherwise 
                applicable credit for each taxable year.
          (2) Coordination with application at partner or 
        shareholder level.--In the case of any facility or 
        property held directly by a partnership or S 
        corporation, no election by any partner or shareholder 
        shall be allowed under subsection (a) with respect to 
        any applicable credit determined with respect to such 
        facility or property.
          (3) Treatment of payments to partnerships and S 
        corporations.--For purposes of section 1324 of title 
        31, United States Code, the payments under paragraph 
        (1)(A) shall be treated in the same manner as a refund 
        due from a credit provision referred to in subsection 
        (b)(2) of such section.
  (d) Special rules.--For purposes of this section--
          (1) Applicable entity.--
                  (A) In general.--The term ``applicable 
                entity'' means--
                          (i) any organization exempt from the 
                        tax imposed by subtitle A,
                          (ii) any State or political 
                        subdivision thereof,
                          (iii) the Tennessee Valley Authority,
                          (iv) an Indian tribal government (as 
                        defined in section 30D(g)(9)),
                          (v) any Alaska Native Corporation (as 
                        defined in section 3 of the Alaska 
                        Native Claims Settlement Act (43 U.S.C. 
                        1602(m)), or
                          (vi) any corporation operating on a 
                        cooperative basis which is engaged in 
                        furnishing electric energy to persons 
                        in rural areas.
                  (B) Election with respect to credit for 
                production of clean hydrogen.--If a taxpayer 
                other than an entity described in subparagraph 
                (A) makes an election under this subparagraph 
                with respect to any taxable year in which such 
                taxpayer has placed in service a qualified 
                clean hydrogen production facility (as defined 
                in section 45V(c)(3)), such taxpayer shall be 
                treated as an applicable entity for purposes of 
                this section for such taxable year, but only 
                with respect to the credit described in 
                subsection (b)(5).
                  (C) Election with respect to credit for 
                carbon oxide sequestration.--If a taxpayer 
                other than an entity described in subparagraph 
                (A) makes an election under this subparagraph 
                with respect to any taxable year in which such 
                taxpayer has, after December 31, 2022, placed 
                in service carbon capture equipment at a 
                qualified facility (as defined in section 
                45Q(d)), such taxpayer shall be treated as an 
                applicable entity for purposes of this section 
                for such taxable year, but only with respect to 
                the credit described in subsection (b)(3).
                  (D) Election with respect to advanced 
                manufacturing production credit.--
                          (i) In general.--If a taxpayer other 
                        than an entity described in 
                        subparagraph (A) makes an election 
                        under this subparagraph with respect to 
                        any taxable year in which such taxpayer 
                        has, after December 31, 2022, produced 
                        eligible components (as defined in 
                        section 45X(c)(1)), such taxpayer shall 
                        be treated as an applicable entity for 
                        purposes of this section for such 
                        taxable year, but only with respect to 
                        the credit described in subsection 
                        (b)(7).
                          (ii) Limitation.--
                                  (I) In general.--Except as 
                                provided in subclause (II), if 
                                a taxpayer makes an election 
                                under this subparagraph with 
                                respect to any taxable year, 
                                such taxpayer shall be treated 
                                as having made such election 
                                for each of the 4 succeeding 
                                taxable years ending before 
                                January 1, 2033.
                                  (II) Exception.--A taxpayer 
                                may elect to revoke the 
                                application of the election 
                                made under this subparagraph to 
                                any taxable year described in 
                                subclause (I). Any such 
                                election, if made, shall apply 
                                to the applicable year 
                                specified in such election and 
                                each subsequent taxable year 
                                within the period described in 
                                subclause (I). Any election 
                                under this subclause may not be 
                                subsequently revoked.
                          (iii) Prohibition on transfer.--For 
                        any taxable year described in clause 
                        (ii)(I), no election may be made by the 
                        taxpayer under section 6418(a) for such 
                        taxable year with respect to eligible 
                        components for purposes of the credit 
                        described in subsection (b)(7).
                  (E) Other rules.--
                          (i) In general.--An election made 
                        under subparagraph (B), (C), or (D) 
                        shall be made at such time and in such 
                        manner as the Secretary may provide.
                          (ii) Limitation.--No election may be 
                        made under subparagraph (B), (C), or 
                        (D) with respect to any taxable year 
                        beginning after December 31, 2032.
          (2) Application.--In the case of any applicable 
        entity which makes the election described in subsection 
        (a), any applicable credit shall be determined--
                  (A) without regard to paragraphs (3) and 
                (4)(A)(i) of section 50(b), and
                  (B) by treating any property with respect to 
                which such credit is determined as used in a 
                trade or business of the applicable entity.
          (3) Elections.--
                  (A) In general.--
                          (i) Due date.--Any election under 
                        subsection (a) shall be made not later 
                        than--
                                  (I) in the case of any 
                                government, or political 
                                subdivision, described in 
                                paragraph (1) and for which no 
                                return is required under 
                                section 6011 or 6033(a), such 
                                date as is determined 
                                appropriate by the Secretary, 
                                or
                                  (II) in any other case, the 
                                due date (including extensions 
                                of time) for the return of tax 
                                for the taxable year for which 
                                the election is made, but in no 
                                event earlier than 180 days 
                                after the date of the enactment 
                                of this section.
                          (ii) Additional rules.--Any election 
                        under subsection (a), once made, shall 
                        be irrevocable and shall apply (except 
                        as otherwise provided in this 
                        paragraph) with respect to any credit 
                        for the taxable year for which the 
                        election is made.
                  (B) Renewable electricity production 
                credit.--In the case of the credit described in 
                subsection (b)(2), any election under 
                subsection (a) shall--
                          (i) apply separately with respect to 
                        each qualified facility,
                          (ii) be made for the taxable year in 
                        which such qualified facility is 
                        originally placed in service, and
                          (iii) shall apply to such taxable 
                        year and to any subsequent taxable year 
                        which is within the period described in 
                        subsection (a)(2)(A)(ii) of section 45 
                        with respect to such qualified 
                        facility.
                  (C) Credit for carbon oxide sequestration.--
                          (i) In general.--In the case of the 
                        credit described in subsection (b)(3), 
                        any election under subsection (a) 
                        shall--
                                  (I) apply separately with 
                                respect to the carbon capture 
                                equipment originally placed in 
                                service by the applicable 
                                entity during a taxable year, 
                                and
                                  (II)(aa) in the case of a 
                                taxpayer who makes an election 
                                described in paragraph (1)(C), 
                                apply to the taxable year in 
                                which such equipment is placed 
                                in service and the 4 subsequent 
                                taxable years with respect to 
                                such equipment which end before 
                                January 1, 2033, and
                                  (bb) in any other case, apply 
                                to such taxable year and to any 
                                subsequent taxable year which 
                                is within the period described 
                                in paragraph (3)(A) or (4)(A) 
                                of section 45Q(a) with respect 
                                to such equipment.
                          (ii) Prohibition on transfer.--For 
                        any taxable year described in clause 
                        (i)(II)(aa) with respect to carbon 
                        capture equipment, no election may be 
                        made by the taxpayer under section 
                        6418(a) for such taxable year with 
                        respect to such equipment for purposes 
                        of the credit described in subsection 
                        (b)(3).
                          (iii) Revocation of election.--In the 
                        case of a taxpayer who makes an 
                        election described in paragraph (1)(C) 
                        with respect to carbon capture 
                        equipment, such taxpayer may, at any 
                        time during the period described in 
                        clause (i)(II)(aa), revoke the 
                        application of such election with 
                        respect to such equipment for any 
                        subsequent taxable years during such 
                        period. Any such election, if made, 
                        shall apply to the applicable year 
                        specified in such election and each 
                        subsequent taxable year within the 
                        period described in clause (i)(II)(aa). 
                        Any election under this subclause may 
                        not be subsequently revoked.
                  (D) Credit for production of clean 
                hydrogen.--
                          (i) In general.--In the case of the 
                        credit described in subsection (b)(5), 
                        any election under subsection (a) 
                        shall--
                                  (I) apply separately with 
                                respect to each qualified clean 
                                hydrogen production facility,
                                  (II) be made for the taxable 
                                year in which such facility is 
                                placed in service (or within 
                                the 1-year period subsequent to 
                                the date of enactment of this 
                                section in the case of 
                                facilities placed in service 
                                before December 31, 2022), and
                                  (III)(aa) in the case of a 
                                taxpayer who makes an election 
                                described in paragraph (1)(B), 
                                apply to such taxable year and 
                                the 4 subsequent taxable years 
                                with respect to such facility 
                                which end before January 1, 
                                2033, and
                                  (bb) in any other case, apply 
                                to such taxable year and all 
                                subsequent taxable years with 
                                respect to such facility.
                          (ii) Prohibition on transfer.--For 
                        any taxable year described in clause 
                        (i)(III)(aa) with respect to a 
                        qualified clean hydrogen production 
                        facility, no election may be made by 
                        the taxpayer under section 6418(a) for 
                        such taxable year with respect to such 
                        facility for purposes of the credit 
                        described in subsection (b)(5).
                          (iii) Revocation of election.--In the 
                        case of a taxpayer who makes an 
                        election described in paragraph (1)(B) 
                        with respect to a qualified clean 
                        hydrogen production facility, such 
                        taxpayer may, at any time during the 
                        period described in clause 
                        (i)(III)(aa), revoke the application of 
                        such election with respect to such 
                        facility for any subsequent taxable 
                        years during such period. Any such 
                        election, if made, shall apply to the 
                        applicable year specified in such 
                        election and each subsequent taxable 
                        year within the period described in 
                        clause (i)(II)(aa). Any election under 
                        this subclause may not be subsequently 
                        revoked.
                  (E) Clean electricity production credit.--In 
                the case of the credit described in subsection 
                (b)(8), any election under subsection (a) 
                shall--
                          (i) apply separately with respect to 
                        each qualified facility,
                          (ii) be made for the taxable year in 
                        which such facility is placed in 
                        service, and
                          (iii) shall apply to such taxable 
                        year and to any subsequent taxable year 
                        which is within the period described in 
                        subsection (b)(1)(B) of section 45Y 
                        with respect to such facility.
          (4) Timing.--The payment described in subsection (a) 
        shall be treated as made on--
                  (A) in the case of any government, or 
                political subdivision, described in paragraph 
                (1) and for which no return is required under 
                section 6011 or 6033(a), the later of the date 
                that a return would be due under section 
                6033(a) if such government or subdivision were 
                described in that section or the date on which 
                such government or subdivision submits a claim 
                for credit or refund (at such time and in such 
                manner as the Secretary shall provide), and
                  (B) in any other case, the later of the due 
                date (determined without regard to extensions) 
                of the return of tax for the taxable year or 
                the date on which such return is filed.
          (5) Additional information.--As a condition of, and 
        prior to, any amount being treated as a payment which 
        is made by an applicable entity under subsection (a), 
        the Secretary may require such information or 
        registration as the Secretary deems necessary for 
        purposes of preventing duplication, fraud, improper 
        payments, or excessive payments under this section.
          (6) Excessive payment.--
                  (A) In general.--In the case of any amount 
                treated as a payment which is made by the 
                applicable entity under subsection (a), or the 
                amount of the payment made pursuant to 
                subsection (c), which the Secretary determines 
                constitutes an excessive payment, the tax 
                imposed on such entity by chapter 1 (regardless 
                of whether such entity would otherwise be 
                subject to tax under such chapter) for the 
                taxable year in which such determination is 
                made shall be increased by an amount equal to 
                the sum of--
                          (i) the amount of such excessive 
                        payment, plus
                          (ii) an amount equal to 20 percent of 
                        such excessive payment.
                  (B) Reasonable cause.--Subparagraph (A)(ii) 
                shall not apply if the applicable entity 
                demonstrates to the satisfaction of the 
                Secretary that the excessive payment resulted 
                from reasonable cause.
                  (C) Excessive payment defined.--For purposes 
                of this paragraph, the term ``excessive 
                payment'' means, with respect to a facility or 
                property for which an election is made under 
                this section for any taxable year, an amount 
                equal to the excess of--
                          (i) the amount treated as a payment 
                        which is made by the applicable entity 
                        under subsection (a), or the amount of 
                        the payment made pursuant to subsection 
                        (c), with respect to such facility or 
                        property for such taxable year, over
                          (ii) the amount of the credit which, 
                        without application of this section, 
                        would be otherwise allowable (as 
                        determined pursuant to paragraph (2) 
                        and without regard to section 38(c)) 
                        under this title with respect to such 
                        facility or property for such taxable 
                        year.
  (e) Denial of double benefit.--In the case of an applicable 
entity making an election under this section with respect to an 
applicable credit, such credit shall be reduced to zero and 
shall, for any other purposes under this title, be deemed to 
have been allowed to such entity for such taxable year.
  (f) Mirror code possessions.--In the case of any possession 
of the United States with a mirror code tax system (as defined 
in section 24(k)), this section shall not be treated as part of 
the income tax laws of the United States for purposes of 
determining the income tax law of such possession unless such 
possession elects to have this section be so treated.
  (g) Basis reduction and recapture.--Except as otherwise 
provided in subsection (c)(2)(A), rules similar to the rules of 
section 50 shall apply for purposes of this section.
  (h) Regulations.--The Secretary shall issue such regulations 
or other guidance as may be necessary to carry out the purposes 
of this section, including guidance to ensure that the amount 
of the payment or deemed payment made under this section is 
commensurate with the amount of the credit that would be 
otherwise allowable (determined without regard to section 
38(c)).

SEC. 6418. TRANSFER OF CERTAIN CREDITS.

  (a) In general.--In the case of an eligible taxpayer which 
elects to transfer all (or any portion specified in the 
election) of an eligible credit determined with respect to such 
taxpayer for any taxable year to a taxpayer (referred to in 
this section as the ``transferee taxpayer'') which is not 
related (within the meaning of section 267(b) or 707(b)(1)) to 
the eligible taxpayer, the transferee taxpayer specified in 
such election (and not the eligible taxpayer) shall be treated 
as the taxpayer for purposes of this title with respect to such 
credit (or such portion thereof).
  (b) Treatment of payments made in connection with transfer.--
With respect to any amount paid by a transferee taxpayer to an 
eligible taxpayer as consideration for a transfer described in 
subsection (a), such consideration--
          (1) shall be required to be paid in cash,
          (2) shall not be includible in gross income of the 
        eligible taxpayer, and
          (3) with respect to the transferee taxpayer, shall 
        not be deductible under this title.
  (c) Application to partnerships and S corporations.--
          (1) In general.--In the case of any eligible credit 
        determined with respect to any facility or property 
        held directly by a partnership or S corporation, if 
        such partnership or S corporation makes an election 
        under subsection (a) (in such manner as the Secretary 
        may provide) with respect to such credit--
                  (A) any amount received as consideration for 
                a transfer described in such subsection shall 
                be treated as tax exempt income for purposes of 
                sections 705 and 1366, and
                  (B) a partner's distributive share of such 
                tax exempt income shall be based on such 
                partner's distributive share of the otherwise 
                eligible credit for each taxable year.
          (2) Coordination with application at partner or 
        shareholder level.--In the case of any facility or 
        property held directly by a partnership or S 
        corporation, no election by any partner or shareholder 
        shall be allowed under subsection (a) with respect to 
        any eligible credit determined with respect to such 
        facility or property.
  (d) Taxable year in which credit taken into account.--In the 
case of any credit (or portion thereof) with respect to which 
an election is made under subsection (a), such credit shall be 
taken into account in the first taxable year of the transferee 
taxpayer ending with, or after, the taxable year of the 
eligible taxpayer with respect to which the credit was 
determined.
  (e) Limitations on election.--
          (1) Time for election.--An election under subsection 
        (a) to transfer any portion of an eligible credit shall 
        be made not later than the due date (including 
        extensions of time) for the return of tax for the 
        taxable year for which the credit is determined, but in 
        no event earlier than 180 days after the date of the 
        enactment of this section. Any such election, once 
        made, shall be irrevocable.
          (2) No additional transfers.--No election may be made 
        under subsection (a) by a transferee taxpayer with 
        respect to any portion of an eligible credit which has 
        been previously transferred to such taxpayer pursuant 
        to this section.
  (f) Definitions.--For purposes of this section--
          (1) Eligible credit.--
                  (A) In general.--The term ``eligible credit'' 
                means each of the following:
                          (i) So much of the credit for 
                        alternative fuel vehicle refueling 
                        property allowed under section 30C 
                        which, pursuant to subsection (d)(1) of 
                        such section, is treated as a credit 
                        listed in section 38(b).
                          (ii) The renewable electricity 
                        production credit determined under 
                        section 45(a).
                          (iii) The credit for carbon oxide 
                        sequestration determined under section 
                        45Q(a).
                          (iv) The zero-emission nuclear power 
                        production credit determined under 
                        section 45U(a).
                          (v) The clean hydrogen production 
                        credit determined under section 45V(a).
                          (vi) The advanced manufacturing 
                        production credit determined under 
                        section 45X(a).
                          [(vii) The clean electricity 
                        production credit determined under 
                        section 45Y(a).]
                          [(viii)] (vii) The clean fuel 
                        production credit determined under 
                        section 45Z(a).
                          [(ix)] (viii) The energy credit 
                        determined under section 48.
                          [(x)] (ix) The qualifying advanced 
                        energy project credit determined under 
                        section 48C.
                          [(xi) The clean electricity 
                        investment credit determined under 
                        section 48E.]
                  (B) Election for certain credits.--In the 
                case of any eligible credit described in clause 
                (ii), (iii), [(v), or (vii)] or (v) of 
                subparagraph (A), an election under subsection 
                (a) shall be made--
                          (i) separately with respect to each 
                        facility for which such credit is 
                        determined, and
                          (ii) for each taxable year during the 
                        10-year period beginning on the date 
                        such facility was originally placed in 
                        service (or, in the case of the credit 
                        described in clause (iii), for each 
                        year during the 12-year period 
                        beginning on the date the carbon 
                        capture equipment was originally placed 
                        in service at such facility).
                  (C) Exception for business credit 
                carryforwards or carrybacks.--The term 
                ``eligible credit'' shall not include any 
                business credit carryforward or business credit 
                carryback determined under section 39.
          (2) Eligible taxpayer.--The term ``eligible 
        taxpayer'' means any taxpayer which is not described in 
        section 6417(d)(1)(A).
  (g) Special rules.--For purposes of this section--
          (1) Additional information.--As a condition of, and 
        prior to, any transfer of any portion of an eligible 
        credit pursuant to subsection (a), the Secretary may 
        require such information (including, in such form or 
        manner as is determined appropriate by the Secretary, 
        such information returns) or registration as the 
        Secretary deems necessary for purposes of preventing 
        duplication, fraud, improper payments, or excessive 
        payments under this section.
          (2) Excessive credit transfer.--
                  (A) In general.--In the case of any portion 
                of an eligible credit which is transferred to a 
                transferee taxpayer pursuant to subsection (a) 
                which the Secretary determines constitutes an 
                excessive credit transfer, the tax imposed on 
                the transferee taxpayer by chapter 1 
                (regardless of whether such entity would 
                otherwise be subject to tax under such chapter) 
                for the taxable year in which such 
                determination is made shall be increased by an 
                amount equal to the sum of--
                          (i) the amount of such excessive 
                        credit transfer, plus
                          (ii) an amount equal to 20 percent of 
                        such excessive credit transfer.
                  (B) Reasonable cause.--Subparagraph (A)(ii) 
                shall not apply if the transferee taxpayer 
                demonstrates to the satisfaction of the 
                Secretary that the excessive credit transfer 
                resulted from reasonable cause.
                  (C) Excessive credit transfer defined.--For 
                purposes of this paragraph, the term 
                ``excessive credit transfer'' means, with 
                respect to a facility or property for which an 
                election is made under subsection (a) for any 
                taxable year, an amount equal to the excess 
                of--
                          (i) the amount of the eligible credit 
                        claimed by the transferee taxpayer with 
                        respect to such facility or property 
                        for such taxable year, over
                          (ii) the amount of such credit which, 
                        without application of this section, 
                        would be otherwise allowable under this 
                        title with respect to such facility or 
                        property for such taxable year.
          (3) Basis reduction; notification of recapture.--In 
        the case of any election under subsection (a) with 
        respect to any portion of an eligible credit described 
        in clauses (ix) through (xi) of subsection (f)(1)(A)--
                  (A) subsection (c) of section 50 shall apply 
                to the applicable investment credit property 
                (as defined in subsection (a)(5) of such 
                section) as if such eligible credit was allowed 
                to the eligible taxpayer, and
                  (B) if, during any taxable year, the 
                applicable investment credit property (as 
                defined in subsection (a)(5) of section 50) is 
                disposed of, or otherwise ceases to be 
                investment credit property with respect to the 
                eligible taxpayer, before the close of the 
                recapture period (as described in subsection 
                (a)(1) of such section)--
                          (i) such eligible taxpayer shall 
                        provide notice of such occurrence to 
                        the transferee taxpayer (in such form 
                        and manner as the Secretary shall 
                        prescribe), and
                          (ii) the transferee taxpayer shall 
                        provide notice of the recapture amount 
                        (as defined in subsection (c)(2) of 
                        such section), if any, to the eligible 
                        taxpayer (in such form and manner as 
                        the Secretary shall prescribe).
          (4) Prohibition on election or transfer with respect 
        to progress expenditures.--This section shall not apply 
        with respect to any amount of an eligible credit which 
        is allowed pursuant to rules similar to the rules of 
        subsections (c)(4) and (d) of section 46 (as in effect 
        on the day before the date of the enactment of the 
        Revenue Reconciliation Act of 1990).
  (h) Regulations.--The Secretary shall issue such regulations 
or other guidance as may be necessary to carry out the purposes 
of this section, including regulations or other guidance 
providing rules for determining a partner's distributive share 
of the tax exempt income described in subsection (c)(1).

           *       *       *       *       *       *       *


 CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE 
PENALTIES

           *       *       *       *       *       *       *


Subchapter B--ASSESSABLE PENALTIES

           *       *       *       *       *       *       *


     PART II--FAILURE TO COMPLY WITH CERTAIN INFORMATION REPORTING 
REQUIREMENTS

           *       *       *       *       *       *       *


SEC. 6724. WAIVER; DEFINITIONS AND SPECIAL RULES.

  (a) Reasonable cause waiver.--No penalty shall be imposed 
under this part with respect to any failure if it is shown that 
such failure is due to reasonable cause and not to willful 
neglect.
  (b) Payment of penalty.--Any penalty imposed by this part 
shall be paid on notice and demand by the Secretary and in the 
same manner as tax.
  (c) Special rule for failure to meet magnetic media 
requirements.--No penalty shall be imposed under section 6721 
solely by reason of any failure to comply with the requirements 
of the regulations prescribed under section 6011(e)(2), except 
to the extent that such a failure occurs with respect to more 
than the applicable number (determined under section 6011(e)(5) 
with respect to the calendar year to which such returns relate) 
of information returns or with respect to a return described in 
section 6011(e)(4).
  (d) Definitions.--For purposes of this part--
          (1) Information return.--The term ``information 
        return'' means--
                  (A) any statement of the amount of payments 
                to another person required by--
                          (i) section 6041(a) or (b) (relating 
                        to certain information at source),
                          (ii) section 6042(a)(1) (relating to 
                        payments of dividends),
                          (iii) section 6044(a)(1) (relating to 
                        payments of patronage dividends),
                          (iv) section 6049(a) (relating to 
                        payments of interest),
                          (v) section 6050A(a) (relating to 
                        reporting requirements of certain 
                        fishing boat operators),
                          (vi) section 6050N(a) (relating to 
                        payments of royalties),
                          (vii) section 6051(d) (relating to 
                        information returns with respect to 
                        income tax withheld),
                          (viii) section 6050R (relating to 
                        returns relating to certain purchases 
                        of fish), or
                          (ix) section 110(d) (relating to 
                        qualified lessee construction 
                        allowances for short-term leases),
                  (B) any return required by--
                          (i) section 6041A(a) or (b) (relating 
                        to returns of direct sellers),
                          (ii) section 6043A(a) (relating to 
                        returns relating to taxable mergers and 
                        acquisitions),
                          (iii) section 6045(a) or (d) 
                        (relating to returns of brokers),
                          (iv) section 6045B(a) (relating to 
                        returns relating to actions affecting 
                        basis of specified securities),
                          (v) section 6050H(a) or (h)(1) 
                        (relating to mortgage interest received 
                        in trade or business from individuals),
                          (vi) section 6050I(a) or (g)(1) 
                        (relating to cash received in trade or 
                        business, etc.),
                          (vii) section 6050J(a) (relating to 
                        foreclosures and abandonments of 
                        security),
                          (viii) section 6050K(a) (relating to 
                        exchanges of certain partnership 
                        interests),
                          (ix) section 6050L(a) (relating to 
                        returns relating to certain 
                        dispositions of donated property),
                          (x) section 6050P (relating to 
                        returns relating to the cancellation of 
                        indebtedness by certain financial 
                        entities),
                          (xi) section 6050Q (relating to 
                        certain long-term care benefits),
                          (xii) section 6050S (relating to 
                        returns relating to payments for 
                        qualified tuition and related 
                        expenses),
                          (xiii) section 6050T (relating to 
                        returns relating to credit for health 
                        insurance costs of eligible 
                        individuals),
                          (xiv) section 6052(a) (relating to 
                        reporting payment of wages in the form 
                        of group-life insurance),
                          (xv) section 6050V (relating to 
                        returns relating to applicable 
                        insurance contracts in which certain 
                        exempt organizations hold interests),
                          (xvi) section 6053(c)(1) (relating to 
                        reporting with respect to certain 
                        tips),
                          (xvii) subsection (b) or (e) of 
                        section 1060 (relating to reporting 
                        requirements of transferors and 
                        transferees in certain asset 
                        acquisitions),
                          (xviii) section 4101(d) (relating to 
                        information reporting with respect to 
                        fuels taxes),
                          (xix) subparagraph (C) of section 
                        338(h)(10) (relating to information 
                        required to be furnished to the 
                        Secretary in case of elective 
                        recognition of gain or loss),
                          (xx) section 264(f)(5)(A)(iv) 
                        (relating to reporting with respect to 
                        certain life insurance and annuity 
                        contracts),
                          (xxi) section 6050U (relating to 
                        charges or payments for qualified long-
                        term care insurance contracts under 
                        combined arrangements),
                          (xxii) section 6039(a) (relating to 
                        returns required with respect to 
                        certain options),
                          (xxiii) section 6050W (relating to 
                        returns to payments made in settlement 
                        of payment card transactions),
                          (xxiv) section 6055 (relating to 
                        returns relating to information 
                        regarding health insurance coverage),
                          (xxv) section 6056 (relating to 
                        returns relating to certain employers 
                        required to report on health insurance 
                        coverage),
                          (xxvi) section 6050Y (relating to 
                        returns relating to certain life 
                        insurance contract transactions),
                          (xxvii) section 6045A(d) (relating to 
                        returns for certain digital assets), 
                        [or]
                          (xxviii) section 6050Z (relating to 
                        reports relating to long-term care 
                        premium statements), [and] or
                          (xxix) section 6050AA(a) (relating to 
                        returns relating to acquisition of 
                        United States agricultural interests by 
                        disqualified persons), and
                  (C) any statement of the amount of payments 
                to another person required to be made to the 
                Secretary under--
                          (i) section 408(i) (relating to 
                        reports with respect to individual 
                        retirement accounts or annuities), or
                          (ii) section 6047(d) (relating to 
                        reports by employers, plan 
                        administrators, etc.), and
                  (D) any statement required to be filed with 
                the Secretary under section 6035.
        Such term also includes any form, statement, or 
        schedule required to be filed with the Secretary under 
        chapter 4 or with respect to any amount from which tax 
        was required to be deducted and withheld under chapter 
        3 (or from which tax would be required to be so 
        deducted and withheld but for an exemption under this 
        title or any treaty obligation of the United States).
          (2) Payee statement.--The term ``payee statement'' 
        means any statement required to be furnished under--
                  (A) section 6031(b) or (c), 6034A, or 6037(b) 
                (relating to statements furnished by certain 
                pass-thru entities),
                  (B) section 6039(b) (relating to information 
                required in connection with certain options),
                  (C) section 6041(d) (relating to information 
                at source),
                  (D) section 6041A(e) (relating to returns 
                regarding payments of remuneration for services 
                and direct sales),
                  (E) section 6042(c) (relating to returns 
                regarding payments of dividends and corporate 
                earnings and profits),
                  (F) subsections (b) and (d) of section 6043A 
                (relating to returns relating to taxable 
                mergers and acquisitions),
                  (G) section 6044(e) (relating to returns 
                regarding payments of patronage dividends),
                  (H) section 6045(b) or (d) (relating to 
                returns of brokers),
                  (I) section 6045A (relating to information 
                required in connection with transfers of 
                covered securities to brokers),
                  (J) subsections (c) and (e) of section 6045B 
                (relating to returns relating to actions 
                affecting basis of specified securities),
                  (K) section 6049(c) (relating to returns 
                regarding payments of interest),
                  (L) section 6050A(b) (relating to reporting 
                requirements of certain fishing boat 
                operators),
                  (M) section 6050H(d) or (h)(2) (relating to 
                returns relating to mortgage interest received 
                in trade or business from individuals),
                  (N) section 6050I(e) or paragraph (4) or (5) 
                of section 6050I(g) (relating to cash received 
                in trade or business, etc.),
                  (O) section 6050J(e) (relating to returns 
                relating to foreclosures and abandonments of 
                security),
                  (P) section 6050K(b) (relating to returns 
                relating to exchanges of certain partnership 
                interests),
                  (Q) section 6050L(c) (relating to returns 
                relating to certain dispositions of donated 
                property),
                  (R) section 6050N(b) (relating to returns 
                regarding payments of royalties),
                  (S) section 6050P(d) (relating to returns 
                relating to the cancellation of indebtedness by 
                certain financial entities),
                  (T) section 6050Q(b) (relating to certain 
                long-term care benefits),
                  (U) section 6050R(c) (relating to returns 
                relating to certain purchases of fish),
                  (V) section 6051 (relating to receipts for 
                employees),
                  (W) section 6052(b) (relating to returns 
                regarding payment of wages in the form of 
                group-term life insurance),
                  (X) section 6053(b) or (c) (relating to 
                reports of tips),
                  (Y) section 6048(b)(1)(B) (relating to 
                foreign trust reporting requirements),
                  (Z) section 408(i) (relating to reports with 
                respect to individual retirement plans) to any 
                person other than the Secretary with respect to 
                the amount of payments made to such person,
                  (AA) section 6047(d) (relating to reports by 
                plan administrators) to any person other than 
                the Secretary with respect to the amount of 
                payments made to such person,
                  (BB) section 6050S(d) (relating to returns 
                relating to qualified tuition and related 
                expenses),
                  (CC) section 264(f)(5)(A)(iv) (relating to 
                reporting with respect to certain life 
                insurance and annuity contracts),
                  (DD) section 6050T (relating to returns 
                relating to credit for health insurance costs 
                of eligible individuals),
                  (EE) section 6050U (relating to charges or 
                payments for qualified long-term care insurance 
                contracts under combined arrangements),
                  (FF) section 6050W(f) (relating to returns 
                relating to payments made in settlement of 
                payment card transactions),
                  (GG) section 6055(c) (relating to statements 
                relating to information regarding health 
                insurance coverage),
                  (HH) section 6056(c) (relating to statements 
                relating to certain employers required to 
                report on health insurance coverage),
                  (II) section 6035 (other than a statement 
                described in paragraph (1)(D)),
                  (JJ) section 6226(a)(2) (relating to 
                statements relating to alternative to payment 
                of imputed underpayment by partnership) or 
                under any other provision of this title which 
                provides for the application of rules similar 
                to such section,
                  (KK) subsection (a)(2), (b)(2), or (c)(2) of 
                section 6050Y (relating to returns relating to 
                certain life insurance contract transactions), 
                [or]
                  (LL) section 6050Z (relating to reports 
                relating to long-term care premium 
                statements)[.], or
                  (MM) subsection (b) or (e) of section 6055AA 
                (relating to statements relating to acquisition 
                of United States agricultural interests by 
                disqualified persons).
        Such term also includes any form, statement, or 
        schedule required to be furnished to the recipient of 
        any amount from which tax was required to be deducted 
        and withheld under chapter 3 or 4 (or from which tax 
        would be required to be so deducted and withheld but 
        for an exemption under this title or any treaty 
        obligation of the United States).
          (3) Specified information reporting requirement.--The 
        term ``specified information reporting requirement'' 
        means--
                  (A) the notice required by section 
                6050K(c)(1) (relating to requirement that 
                transferor notify partnership of exchange),
                  (B) any requirement contained in the 
                regulations prescribed under section 6109 that 
                a person--
                          (i) include his TIN on any return, 
                        statement, or other document (other 
                        than an information return or payee 
                        statement),
                          (ii) furnish his TIN to another 
                        person, or
                          (iii) include on any return, 
                        statement, or other document (other 
                        than an information return or payee 
                        statement) made with respect to another 
                        person the TIN of such person,
                  (C) any requirement under section 6109(h) 
                that--
                          (i) a person include on his return 
                        the name, address, and TIN of another 
                        person, or
                          (ii) a person furnish his TIN to 
                        another person.
          (4) Required filing date.--The term ``required filing 
        date'' means the date prescribed for filing an 
        information return with the Secretary (determined with 
        regard to any extension of time for filing).
  (e) Special rule for certain partnership returns.--If any 
partnership return under section 6031(a) is required under 
section 6011(e) to be filed on magnetic media or in other 
machine-readable form, for purposes of this part, each schedule 
required to be included with such return with respect to each 
partner shall be treated as a separate information return.
  (f) Special rule for returns of educational institutions 
related to higher education tuition and related expenses.--No 
penalty shall be imposed under section 6721 or 6722 solely by 
reason of failing to provide the TIN of an individual on a 
return or statement required by section 6050S(a)(1) if the 
eligible educational institution required to make such return 
contemporaneously makes a true and accurate certification under 
penalty of perjury (and in such form and manner as may be 
prescribed by the Secretary) that it has complied with 
standards promulgated by the Secretary for obtaining such 
individual's TIN.
  (g) Special rule for reporting certain additional taxes.--No 
penalty shall be imposed under section 6721 or 6722 if--
          (1) a person makes a return or report under section 
        6047(d) or 408(i) with respect to any distribution,
          (2) such distribution is made following a rollover, 
        transfer, or exchange described in section 72(t)(4)(C) 
        or section 72(q)(3)(C),
          (3) in making such return or report the person relies 
        upon a certification provided by the taxpayer that the 
        distributions satisfy the requirements of section 
        72(t)(4)(C)(iii) or section 72(q)(3)(B)(iii), as 
        applicable, and
          (4) such person does not have actual knowledge that 
        the distributions do not satisfy such requirements.

           *       *       *       *       *       *       *


                      Subtitle I--Trust Fund Code

CHAPTER 98--TRUST FUND CODE

           *       *       *       *       *       *       *


Subchapter A--ESTABLISHMENT OF TRUST FUNDS

           *       *       *       *       *       *       *


SEC. 9507. HAZARDOUS SUBSTANCE SUPERFUND.

  (a) Creation of Trust Fund.--There is established in the 
Treasury of the United States a trust fund to be known as the 
``Hazardous Substance Superfund'' (hereinafter in this section 
referred to as the ``Superfund''), consisting of such amounts 
as may be--
          (1) appropriated to the Superfund as provided in this 
        section,
          (2) appropriated to the Superfund pursuant to section 
        517(b) of the Superfund Revenue Act of 1986, or
          (3) credited to the Superfund as provided in section 
        9602(b).
  (b) Transfers to Superfund.--There are hereby appropriated to 
the Superfund amounts equivalent to--
          (1) the taxes received in the Treasury under section 
        4611, 4661, or 4671 (relating to environmental taxes),
          (2) amounts recovered on behalf of the Superfund 
        under the Comprehensive Environmental Response, 
        Compensation, and Liability Act of 1980 (hereinafter in 
        this section referred to as ``CERCLA''),
          (3) all moneys recovered or collected under section 
        311(b)(6)(B) of the Clean Water Act,
          (4) penalties assessed under title I of CERCLA, and
          (5) punitive damages under section 107(c)(3) of 
        CERCLA.
In the case of the tax imposed by section 4611, paragraph (1) 
shall apply only to so much of such tax as is attributable to 
the Hazardous Substance Superfund financing rate under section 
4611(c).
  (c) Expenditures from Superfund.--
          (1) In general.--Amounts in the Superfund shall be 
        available, as provided in appropriation Acts, only for 
        purposes of making expenditures--
                  (A) to carry out the purposes of--
                          (i) paragraphs (1), (2), (5), and (6) 
                        of section 111(a) of CERCLA as in 
                        effect on the date of the enactment of 
                        the Superfund Amendments and 
                        Reauthorization Act of 1986,
                          (ii) section 111(c) of CERCLA (as so 
                        in effect), other than paragraphs (1) 
                        and (2) thereof, and
                          (iii) section 111(m) of CERCLA (as so 
                        in effect), or
                  (B) hereafter authorized by a law which does 
                not authorize the expenditure out of the 
                Superfund for a general purpose not covered by 
                subparagraph (A) (as so in effect).
          (2) Exception for certain transfers, etc., of 
        hazardous substances.--No amount in the Superfund or 
        derived from the Superfund shall be available or used 
        for the transfer or disposal of hazardous waste carried 
        out pursuant to a cooperative agreement between the 
        Administrator of the Environmental Protection Agency 
        and a State if the following conditions apply--
                  (A) the transfer or disposal, if made on 
                December 13, 1985, would not comply with a 
                State or local requirement,
                  (B) the transfer is to a facility for which a 
                final permit under section 3005(a) of the Solid 
                Waste Disposal Act was issued after January 1, 
                1983, and before November 1, 1984, and
                  (C) the transfer is from a facility 
                identified as the McColl Site in Fullerton, 
                California.
  (d) Authority to borrow.--
          (1) In general.--There are authorized to be 
        appropriated to the Superfund, as repayable advances, 
        such sums as may be necessary to carry out the purposes 
        of the Superfund.
          (2) Limitation on aggregate advances.--The maximum 
        aggregate amount of repayable advances to the Superfund 
        which is outstanding at any one time shall not exceed 
        an amount equal to the amount which the Secretary 
        estimates will be equal to the sum of the amounts 
        appropriated to the Superfund under subsection (b)(1) 
        during the following 24 months.
          (3) Repayment of advances.--
                  (A) In general.--Advances made to the 
                Superfund shall be repaid, and interest on such 
                advances shall be paid, to the general fund of 
                the Treasury when the Secretary determines that 
                moneys are available for such purposes in the 
                Superfund.
                  (B) Final repayment.--No advance shall be 
                made to the Superfund after [December 31, 2032] 
                the date of the enactment of the Build It in 
                America Act, and all advances to such Fund 
                shall be repaid [on or before such date] as 
                soon as practicable thereafter.
                  (C) Rate of interest.--Interest on advances 
                made to the Superfund shall be at a rate 
                determined by the Secretary of the Treasury (as 
                of the close of the calendar month preceding 
                the month in which the advance is made) to be 
                equal to the current average market yield on 
                outstanding marketable obligations of the 
                United States with remaining periods to 
                maturity comparable to the anticipated period 
                during which the advance will be outstanding 
                and shall be compounded annually.
  (e) Liability of United States limited to amount in Trust 
Fund.--
          (1) General rule.--Any claim filed against the 
        Superfund may be paid only out of the Superfund.
          (2) Coordination with other provisions.--Nothing in 
        CERCLA or the Superfund Amendments and Reauthorization 
        Act of 1986 (or in any amendment made by either of such 
        Acts) shall authorize the payment by the United States 
        Government of any amount with respect to any such claim 
        out of any source other than the Superfund.
          (3) Order in which unpaid claims are to be paid.--If 
        at any time the Superfund has insufficient funds to pay 
        all of the claims payable out of the Superfund at such 
        time, such claims shall, to the extent permitted under 
        paragraph (1), be paid in full in the order in which 
        they were finally determined.

           *       *       *       *       *       *       *

                              ----------                              


                           PUBLIC LAW 115-97

AN ACT To provide for reconciliation pursuant to titles II and V of the 
        concurrent resolution on the budget for fiscal year 2018

TITLE I

           *       *       *       *       *       *       *


Subtitle C--Business-related Provisions

           *       *       *       *       *       *       *


             PART III--COST RECOVERY AND ACCOUNTING METHODS

Subpart A--Cost Recovery

           *       *       *       *       *       *       *


SEC. 13206. AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

  (a) In general.--Section 174 is amended to read as follows:

           *       *       *       *       *       *       *

  [(b) Change in Method of Accounting.--The amendments made by 
subsection (a) shall be treated as a change in method of 
accounting for purposes of section 481 of the Internal Revenue 
Code of 1986 and--
          [(1) such change shall be treated as initiated by the 
        taxpayer,
          [(2) such change shall be treated as made with the 
        consent of the Secretary, and
          [(3) such change shall be applied only on a cut-off 
        basis for any research or experimental expenditures 
        paid or incurred in taxable years beginning after 
        December 31, 2021, and no adjustments under section 
        481(a) shall be made.]
  (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by striking the item 
relating to section 174 and inserting the following new item:

``Sec. 174. Amortization of research and experimental expenditures.''.
  (d) Conforming Amendments.--
          (1) Section 41(d)(1)(A) is amended by striking 
        ``expenses under section 174'' and inserting 
        ``specified research or experimental expenditures under 
        section 174''.
          (2) Subsection (c) of section 280C is amended--
                  (A) by striking paragraph (1) and inserting 
                the following:
          ``(1) In general.--If--
                  ``(A) the amount of the credit determined for 
                the taxable year under section 41(a)(1), 
                exceeds
                  ``(B) the amount allowable as a deduction for 
                such taxable year for qualified research 
                expenses or basic research expenses,
        the amount chargeable to capital account for the 
        taxable year for such expenses shall be reduced by the 
        amount of such excess.'',
                  (B) by striking paragraph (2),
                  (C) by redesignating paragraphs (3) (as 
                amended by this Act) and (4) as paragraphs (2) 
                and (3), respectively, and
                  (D) in paragraph (2), as redesignated by 
                subparagraph (C), by striking ``paragraphs (1) 
                and (2)'' and inserting ``paragraph (1)''.
  (e) Effective Date.--The amendments made by this section 
shall apply to amounts paid or incurred in taxable years 
beginning after December 31, 2021.
          * * * * * * *
                              ----------                              


                    INFLATION REDUCTION ACT OF 2022

                          (Public Law 117-169)
          * * * * * * *

                     TITLE I--COMMITTEE ON FINANCE

          * * * * * * *

                      Subtitle D--Energy Security

          * * * * * * *

                         PART 4--CLEAN VEHICLES

SEC. 13401. CLEAN VEHICLE CREDIT.

  (a) Per Vehicle Dollar Limitation.--Section 30D(b) is amended 
by striking paragraphs (2) and (3) and inserting the following:
          ``(2) Critical minerals.--In the case of a vehicle 
        with respect to which the requirement described in 
        subsection (e)(1)(A) is satisfied, the amount 
        determined under this paragraph is $3,750.
          ``(3) Battery components.--In the case of a vehicle 
        with respect to which the requirement described in 
        subsection (e)(2)(A) is satisfied, the amount 
        determined under this paragraph is $3,750.''.
  (b) Final Assembly.--Section 30D(d) is amended--
          (1) in paragraph (1)--
                  (A) in subparagraph (E), by striking ``and'' 
                at the end,
                  (B) in subparagraph (F)(ii), by striking the 
                period at the end and inserting ``, and'', and
                  (C) by adding at the end the following:
                  ``(G) the final assembly of which occurs 
                within North America.'',
          (2) by adding at the end the following:
          ``(5) Final assembly.--For purposes of paragraph 
        (1)(G), the term `final assembly' means the process by 
        which a manufacturer produces a new clean vehicle at, 
        or through the use of, a plant, factory, or other place 
        from which the vehicle is delivered to a dealer or 
        importer with all component parts necessary for the 
        mechanical operation of the vehicle included with the 
        vehicle, whether or not the component parts are 
        permanently installed in or on the vehicle.''.
  (c) Definition of New Clean Vehicle.--
          (1) In general.--Section 30D(d), as amended by the 
        preceding provisions of this section, is amended--
                  (A) in the heading, by striking ``Qualified 
                Plug-in Electric Drive Motor'' and inserting 
                ``Clean'',
                  (B) in paragraph (1)--
                          (i) in the matter preceding 
                        subparagraph (A), by striking 
                        ``qualified plug-in electric drive 
                        motor'' and inserting ``clean'',
                          (ii) in subparagraph (C), by 
                        inserting ``qualified'' before 
                        ``manufacturer'',
                          (iii) in subparagraph (F)--
                                  (I) in clause (i), by 
                                striking ``4'' and inserting 
                                ``7'', and
                                  (II) in clause (ii), by 
                                striking ``and'' at the end,
                          (iv) in subparagraph (G), by striking 
                        the period at the end and inserting ``, 
                        and'', and
                          (v) by adding at the end the 
                        following:
                  ``(H) for which the person who sells any 
                vehicle to the taxpayer furnishes a report to 
                the taxpayer and to the Secretary, at such time 
                and in such manner as the Secretary shall 
                provide, containing--
                          ``(i) the name and taxpayer 
                        identification number of the taxpayer,
                          ``(ii) the vehicle identification 
                        number of the vehicle, unless, in 
                        accordance with any applicable rules 
                        promulgated by the Secretary of 
                        Transportation, the vehicle is not 
                        assigned such a number,
                          ``(iii) the battery capacity of the 
                        vehicle,
                          ``(iv) verification that original use 
                        of the vehicle commences with the 
                        taxpayer, and
                          ``(v) the maximum credit under this 
                        section allowable to the taxpayer with 
                        respect to the vehicle.'',
                  (C) in paragraph (3)--
                          (i) in the heading, by striking 
                        ``Manufacturer'' and inserting 
                        ``Qualified manufacturer'',
                          (ii) by striking ``The term 
                        `manufacturer' has the meaning given 
                        such term in'' and inserting ``The term 
                        `qualified manufacturer' means any 
                        manufacturer (within the meaning of 
                        the'', and
                          (iii) by inserting ``) which enters 
                        into a written agreement with the 
                        Secretary under which such manufacturer 
                        agrees to make periodic written reports 
                        to the Secretary (at such times and in 
                        such manner as the Secretary may 
                        provide) providing vehicle 
                        identification numbers and such other 
                        information related to each vehicle 
                        manufactured by such manufacturer as 
                        the Secretary may require'' before the 
                        period at the end, and
                  (D) by adding at the end the following:
          ``(6) New qualified fuel cell motor vehicle.--For 
        purposes of this section, the term `new clean vehicle' 
        shall include any new qualified fuel cell motor vehicle 
        (as defined in section 30B(b)(3)) which meets the 
        requirements under subparagraphs (G) and (H) of 
        paragraph (1).''.
          (2) Conforming amendments.--Section 30D is amended--
                  (A) in subsection (a), by striking ``new 
                qualified plug-in electric drive motor 
                vehicle'' and inserting ``new clean vehicle'', 
                and
                  (B) in subsection (b)(1), by striking ``new 
                qualified plug-in electric drive motor 
                vehicle'' and inserting ``new clean vehicle''.
  (d) Elimination of Limitation on Number of Vehicles Eligible 
for Credit.--Section 30D is amended by striking subsection (e).
  (e) Critical Mineral and Battery Component Requirements.--
          (1) In general.--Section 30D, as amended by the 
        preceding provisions of this section, is amended by 
        inserting after subsection (d) the following:
  ``(e) Critical Mineral and Battery Component Requirements.--
          ``(1) Critical minerals requirement.--
                  ``(A) In general.--The requirement described 
                in this subparagraph with respect to a vehicle 
                is that, with respect to the battery from which 
                the electric motor of such vehicle draws 
                electricity, the percentage of the value of the 
                applicable critical minerals (as defined in 
                section 45X(c)(6)) contained in such battery 
                that were--
                          ``(i) extracted or processed--
                                  ``(I) in the United States, 
                                or
                                  ``(II) in any country with 
                                which the United States has a 
                                free trade agreement in effect, 
                                or
                          ``(ii) recycled in North America,is 
                        equal to or greater than the applicable 
                        percentage (as certified by the 
                        qualified manufacturer, in such form or 
                        manner as prescribed by the Secretary).
                  ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage 
                shall be--
                          ``(i) in the case of a vehicle placed 
                        in service after the date on which the 
                        proposed guidance described in 
                        paragraph (3)(B) is issued by the 
                        Secretary and before January 1, 2024, 
                        40 percent,
                          ``(ii) in the case of a vehicle 
                        placed in service during calendar year 
                        2024, 50 percent,
                          ``(iii) in the case of a vehicle 
                        placed in service during calendar year 
                        2025, 60 percent,
                          ``(iv) in the case of a vehicle 
                        placed in service during calendar year 
                        2026, 70 percent, and
                          ``(v) in the case of a vehicle placed 
                        in service after December 31, 2026, 80 
                        percent.
          ``(2) Battery components.--
                  ``(A) In general.--The requirement described 
                in this subparagraph with respect to a vehicle 
                is that, with respect to the battery from which 
                the electric motor of such vehicle draws 
                electricity, the percentage of the value of the 
                components contained in such battery that were 
                manufactured or assembled in North America is 
                equal to or greater than the applicable 
                percentage (as certified by the qualified 
                manufacturer, in such form or manner as 
                prescribed by the Secretary).
                  ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage 
                shall be--
                          ``(i) in the case of a vehicle placed 
                        in service after the date on which the 
                        proposed guidance described in 
                        paragraph (3)(B) is issued by the 
                        Secretary and before January 1, 2024, 
                        50 percent,
                          ``(ii) in the case of a vehicle 
                        placed in service during calendar year 
                        2024 or 2025, 60 percent,
                          ``(iii) in the case of a vehicle 
                        placed in service during calendar year 
                        2026, 70 percent,
                          ``(iv) in the case of a vehicle 
                        placed in service during calendar year 
                        2027, 80 percent,
                          ``(v) in the case of a vehicle placed 
                        in service during calendar year 2028, 
                        90 percent,
                          ``(vi) in the case of a vehicle 
                        placed in service after December 31, 
                        2028, 100 percent.
          ``(3) Regulations and guidance.--
                  ``(A) In general.--The Secretary shall issue 
                such regulations or other guidance as the 
                Secretary determines necessary to carry out the 
                purposes of this subsection, including 
                regulations or other guidance which provides 
                for requirements for recordkeeping or 
                information reporting for purposes of 
                administering the requirements of this 
                subsection.
                  ``(B) Deadline for proposed guidance.--Not 
                later than December 31, 2022, the Secretary 
                shall issue proposed guidance with respect to 
                the requirements under this subsection.''.
          (2) Excluded entities.--Section 30D(d), as amended by 
        the preceding provisions of this section, is amended by 
        adding at the end the following:
          ``(7) Excluded entities.--For purposes of this 
        section, the term `new clean vehicle' shall not 
        include--
                  ``(A) any vehicle placed in service after 
                December 31, 2024, with respect to which any of 
                the applicable critical minerals contained in 
                the battery of such vehicle (as described in 
                subsection (e)(1)(A)) were extracted, 
                processed, or recycled by a foreign entity of 
                concern (as defined in section 40207(a)(5) of 
                the Infrastructure Investment and Jobs Act (42 
                U.S.C. 18741(a)(5))), or
                  ``(B) any vehicle placed in service after 
                December 31, 2023, with respect to which any of 
                the components contained in the battery of such 
                vehicle (as described in subsection (e)(2)(A)) 
                were manufactured or assembled by a foreign 
                entity of concern (as so defined).''.
  (f) Special Rules.--Section 30D(f) is amended by adding at 
the end the following:
          ``(8) One credit per vehicle.--In the case of any 
        vehicle, the credit described in subsection (a) shall 
        only be allowed once with respect to such vehicle, as 
        determined based upon the vehicle identification number 
        of such vehicle.
          ``(9) VIN requirement.--No credit shall be allowed 
        under this section with respect to any vehicle unless 
        the taxpayer includes the vehicle identification number 
        of such vehicle on the return of tax for the taxable 
        year.
          ``(10) Limitation based on modified adjusted gross 
        income.--
                  ``(A) In general.--No credit shall be allowed 
                under subsection (a) for any taxable year if--
                          ``(i) the lesser of--
                                  ``(I) the modified adjusted 
                                gross income of the taxpayer 
                                for such taxable year, or
                                  ``(II) the modified adjusted 
                                gross income of the taxpayer 
                                for the preceding taxable year, 
                                exceeds
                          ``(ii) the threshold amount.
                  ``(B) Threshold amount.--For purposes of 
                subparagraph (A)(ii), the threshold amount 
                shall be--
                          ``(i) in the case of a joint return 
                        or a surviving spouse (as defined in 
                        section 2(a)), $300,000,
                          ``(ii) in the case of a head of 
                        household (as defined in section 2(b)), 
                        $225,000, and
                          ``(iii) in the case of a taxpayer not 
                        described in clause (i) or (ii), 
                        $150,000.
                  ``(C) Modified adjusted gross income.--For 
                purposes of this paragraph, the term `modified 
                adjusted gross income' means adjusted gross 
                income increased by any amount excluded from 
                gross income under section 911, 931, or 933.
          ``(11) Manufacturer's suggested retail price 
        limitation.--
                  ``(A) In general.--No credit shall be allowed 
                under subsection (a) for a vehicle with a 
                manufacturer's suggested retail price in excess 
                of the applicable limitation.
                  ``(B) Applicable limitation.--For purposes of 
                subparagraph (A), the applicable limitation for 
                each vehicle classification is as follows:
                          ``(i) Vans.--In the case of a van, 
                        $80,000.
                          ``(ii) Sport utility vehicles.--In 
                        the case of a sport utility vehicle, 
                        $80,000.
                          ``(iii) Pickup trucks.--In the case 
                        of a pickup truck, $80,000.
                          ``(iv) Other.--In the case of any 
                        other vehicle, $55,000.
                  ``(C) Regulations and guidance.--For purposes 
                of this paragraph, the Secretary shall 
                prescribe such regulations or other guidance as 
                the Secretary determines necessary for 
                determining vehicle classifications using 
                criteria similar to that employed by the 
                Environmental Protection Agency and the 
                Department of the Energy to determine size and 
                class of vehicles.''.
  (g) Transfer of Credit.--
          (1) In general.--Section 30D is amended by striking 
        subsection (g) and inserting the following:
  ``(g) Transfer of Credit.--
          ``(1) In general.--Subject to such regulations or 
        other guidance as the Secretary determines necessary, 
        if the taxpayer who acquires a new clean vehicle elects 
        the application of this subsection with respect to such 
        vehicle, the credit which would (but for this 
        subsection) be allowed to such taxpayer with respect to 
        such vehicle shall be allowed to the eligible entity 
        specified in such election (and not to such taxpayer).
          ``(2) Eligible entity.--For purposes of this 
        subsection, the term `eligible entity' means, with 
        respect to the vehicle for which the credit is allowed 
        under subsection (a), the dealer which sold such 
        vehicle to the taxpayer and has--
                  ``(A) subject to paragraph (4), registered 
                with the Secretary for purposes of this 
                paragraph, at such time, and in such form and 
                manner, as the Secretary may prescribe,
                  ``(B) prior to the election described in 
                paragraph (1) and not later than at the time of 
                such sale, disclosed to the taxpayer purchasing 
                such vehicle--
                          ``(i) the manufacturer's suggested 
                        retail price,
                          ``(ii) the value of the credit 
                        allowed and any other incentive 
                        available for the purchase of such 
                        vehicle, and
                          ``(iii) the amount provided by the 
                        dealer to such taxpayer as a condition 
                        of the election described in paragraph 
                        (1),
                  ``(C) not later than at the time of such 
                sale, made payment to such taxpayer (whether in 
                cash or in the form of a partial payment or 
                down payment for the purchase of such vehicle) 
                in an amount equal to the credit otherwise 
                allowable to such taxpayer, and
                  ``(D) with respect to any incentive otherwise 
                available for the purchase of a vehicle for 
                which a credit is allowed under this section, 
                including any incentive in the form of a rebate 
                or discount provided by the dealer or 
                manufacturer, ensured that--
                          ``(i) the availability or use of such 
                        incentive shall not limit the ability 
                        of a taxpayer to make an election 
                        described in paragraph (1), and
                          ``(ii) such election shall not limit 
                        the value or use of such incentive.
          ``(3) Timing.--An election described in paragraph (1) 
        shall be made by the taxpayer not later than the date 
        on which the vehicle for which the credit is allowed 
        under subsection (a) is purchased.
          ``(4) Revocation of registration.--Upon determination 
        by the Secretary that a dealer has failed to comply 
        with the requirements described in paragraph (2), the 
        Secretary may revoke the registration (as described in 
        subparagraph (A) of such paragraph) of such dealer.
          ``(5) Tax treatment of payments.--With respect to any 
        payment described in paragraph (2)(C), such payment--
                  ``(A) shall not be includible in the gross 
                income of the taxpayer, and
                  ``(B) with respect to the dealer, shall not 
                be deductible under this title.
          ``(6) Application of certain other requirements.--In 
        the case of any election under paragraph (1) with 
        respect to any vehicle--
                  ``(A) the requirements of paragraphs (1) and 
                (2) of subsection (f) shall apply to the 
                taxpayer who acquired the vehicle in the same 
                manner as if the credit determined under this 
                section with respect to such vehicle were 
                allowed to such taxpayer,
                  ``(B) paragraph (6) of such subsection shall 
                not apply, and
                  ``(C) the requirement of paragraph (9) of 
                such subsection (f) shall be treated as 
                satisfied if the eligible entity provides the 
                vehicle identification number of such vehicle 
                to the Secretary in such manner as the 
                Secretary may provide.
          ``(7) Advance payment to registered dealers.--
                  ``(A) In general.--The Secretary shall 
                establish a program to make advance payments to 
                any eligible entity in an amount equal to the 
                cumulative amount of the credits allowed under 
                subsection (a) with respect to any vehicles 
                sold by such entity for which an election 
                described in paragraph (1) has been made.
                  ``(B) Excessive payments.--Rules similar to 
                the rules of section 6417(d)(6) shall apply for 
                purposes of this paragraph.
                  ``(C) Treatment of advance payments.--For 
                purposes of section 1324 of title 31, United 
                States Code, the payments under subparagraph 
                (A) shall be treated in the same manner as a 
                refund due from a credit provision referred to 
                in subsection (b)(2) of such section.
          ``(8) Dealer.--For purposes of this subsection, the 
        term `dealer' means a person licensed by a State, the 
        District of Columbia, the Commonwealth of Puerto Rico, 
        any other territory or possession of the United States, 
        an Indian tribal government, or any Alaska Native 
        Corporation (as defined in section 3 of the Alaska 
        Native Claims Settlement Act (43 U.S.C. 1602(m)) to 
        engage in the sale of vehicles.
          ``(9) Indian tribal government.--For purposes of this 
        subsection, the term `Indian tribal government' means 
        the recognized governing body of any Indian or Alaska 
        Native tribe, band, nation, pueblo, village, community, 
        component band, or component reservation, individually 
        identified (including parenthetically) in the list 
        published most recently as of the date of enactment of 
        this subsection pursuant to section 104 of the 
        Federally Recognized Indian Tribe List Act of 1994 (25 
        U.S.C. 5131).
          ``(10) Recapture.--In the case of any taxpayer who 
        has made an election described in paragraph (1) with 
        respect to a new clean vehicle and received a payment 
        described in paragraph (2)(C) from an eligible entity, 
        if the credit under subsection (a) would otherwise (but 
        for this subsection) not be allowable to such taxpayer 
        pursuant to the application of subsection (f)(10), the 
        tax imposed on such taxpayer under this chapter for the 
        taxable year in which such vehicle was placed in 
        service shall be increased by the amount of the payment 
        received by such taxpayer.''.
          (2) Conforming amendments.--Section 30D, as amended 
        by the preceding provisions of this section, is 
        amended--
                  (A) in subsection (d)(1)(H) of such section--
                          (i) in clause (iv), by striking 
                        ``and'' at the end,
                          (ii) in clause (v), by striking the 
                        period at the end and inserting ``, 
                        and'', and
                          (iii) by adding at the end the 
                        following:
                          ``(vi) in the case of a taxpayer who 
                        makes an election under subsection 
                        (g)(1), any amount described in 
                        subsection (g)(2)(C) which has been 
                        provided to such taxpayer.'', and
                  (B) in subsection (f)--
                          (i) by striking paragraph (3), and
                          (ii) in paragraph (8), by inserting 
                        ``, including any vehicle with respect 
                        to which the taxpayer elects the 
                        application of subsection (g)'' before 
                        the period at the end.
  (h) Termination.--Section 30D is amended by adding at the end 
the following:
  ``(h) Termination.--No credit shall be allowed under this 
section with respect to any vehicle placed in service after 
December 31, 2032.''.
  (i) Additional Conforming Amendments.--
          (1) The heading of section 30D is amended by striking 
        ``new qualified plug-in electric drive motor vehicles'' 
        and inserting ``clean vehicle credit''.
          (2) Section 30B is amended--
                  (A) in subsection (h)(8), by striking ``, 
                except that no benefit shall be recaptured if 
                such property ceases to be eligible for such 
                credit by reason of conversion to a qualified 
                plug-in electric drive motor vehicle'', and
                  (B) by striking subsection (i).
          (3) Section 38(b)(30) is amended by striking 
        ``qualified plug-in electric drive motor'' and 
        inserting ``clean''.
          (4) Section 6213(g)(2), as amended by the preceding 
        provisions of this Act, is amended--
                  (A) in subparagraph (R), by striking ``and'' 
                at the end,
                  (B) in subparagraph (S), by striking the 
                period at the end and inserting ``, and'', and
                  (C) by inserting after subparagraph (S) the 
                following:
                  ``(T) an omission of a correct vehicle 
                identification number required under section 
                30D(f)(9) (relating to credit for new clean 
                vehicles) to be included on a return.''.
          (5) Section 6501(m) is amended by striking 
        ``30D(e)(4)'' and inserting ``30D(f)(6)''.
          (6) The table of sections for subpart B of part IV of 
        subchapter A of chapter 1 is amended by striking the 
        item relating to section 30D and inserting after the 
        item relating to section 30C the following item:

``Sec. 30D. Clean vehicle credit.''.
  [(j) Gross-up of Direct Spending.--Beginning in fiscal year 
2023 and each fiscal year thereafter, the portion of any credit 
allowed to an eligible entity (as defined in section 30D(g)(2) 
of the Internal Revenue Code of 1986) pursuant to an election 
made under section 30D(g) of the Internal Revenue Code of 1986 
that is direct spending shall be increased by 6.0445 percent.]
  (k) Effective Dates.--
          (1) In general.--Except as provided in paragraphs 
        (2), (3), (4), and (5), the amendments made by this 
        section shall apply to vehicles placed in service after 
        December 31, 2022.
          (2) Final assembly.--The amendments made by 
        subsection (b) shall apply to vehicles sold after the 
        date of enactment of this Act.
          (3) Per vehicle dollar limitation and related 
        requirements.--The amendments made by subsections (a) 
        and (e) shall apply to vehicles placed in service after 
        the date on which the proposed guidance described in 
        paragraph (3)(B) of section 30D(e) of the Internal 
        Revenue Code of 1986 (as added by subsection (e)) is 
        issued by the Secretary of the Treasury (or the 
        Secretary's delegate).
          (4) Transfer of credit.--The amendments made by 
        subsection (g) shall apply to vehicles placed in 
        service after December 31, 2023.
          (5) Elimination of manufacturer limitation.--The 
        amendment made by subsection (d) shall apply to 
        vehicles sold after December 31, 2022.
  (l) Transition Rule.--Solely for purposes of the application 
of section 30D of the Internal Revenue Code of 1986, in the 
case of a taxpayer that--
          (1) after December 31, 2021, and before the date of 
        enactment of this Act, purchased, or entered into a 
        written binding contract to purchase, a new qualified 
        plug-in electric drive motor vehicle (as defined in 
        section 30D(d)(1) of the Internal Revenue Code of 1986, 
        as in effect on the day before the date of enactment of 
        this Act), and
          (2) placed such vehicle in service on or after the 
        date of enactment of this Act,such taxpayer may elect 
        (at such time, and in such form and manner, as the 
        Secretary of the Treasury, or the Secretary's delegate, 
        may prescribe) to treat such vehicle as having been 
        placed in service on the day before the date of 
        enactment of this Act.
          * * * * * * *

                         VII. DISSENTING VIEWS

    H.R. 3938, the ``Build It In America Act'', has little to 
do with the creation of U.S. jobs and spurring domestic 
investments. What the legislation really accomplishes is 
providing tax cuts to wealthy businesses and shareholders. In 
many cases the proposals have, at best, tenuous connections to 
American workers or manufacturing. The bill would only 
temporarily extend three business-favorable Tax Cuts and Jobs 
Act (TCJA) provisions that expired in 2022, hiding the true 
cost of H.R. 3938's policy goals. It would override regulations 
issued by the Treasury Department and the IRS on requirements 
for claiming foreign tax credits. It would let big oil 
companies off the hook by repealing the Superfund tax. And, it 
contains an overbroad proposal to penalize individuals from 
certain ``countries of concern'' who purchase farmland in the 
U.S.--even if those individuals are lawfully in the U.S. and 
are in fact fleeing their countries to start a new life in 
America. The bill would attempt to do all this by repealing key 
provisions from the Inflation Reduction Act (IRA) that combat 
the climate crisis, strengthen American supply chains, and 
create high-paying, high-quality domestic jobs.
    The fact that H.R. 3938 aims to reward large corporations 
and wealthy individuals is clear. According to the latest 
distributional data made available by the Joint Committee on 
Taxation (JCT), two-thirds of the benefits of the TCJA bonus 
depreciation provisions (i.e., both sections 168(k) and 179) 
accrue to the benefit of businesses with revenue in excess of 
$250 million. Half of the benefits of the TCJA section 163(j) 
interest limitation changes will accrue to businesses with 
revenue over $1 billion. The Superfund tax repeal benefits oil 
and petroleum companies--at the expense of everyday taxpayers, 
who would have to foot the bill for cleaning up the waste and 
pollution caused by these companies. While there is some 
bipartisan interest in examining and potentially extending some 
of the expiring TCJA provisions, any such legislation must be 
accompanied by provisions that significantly benefit low-and 
middle-income taxpayers and working families. For instance, 
Democrats continue to support expanding the Child Tax Credit, 
the Earned Income Tax Credit, and the Child and Dependent Care 
Credit. H.R. 3938--and, indeed, the entire suite of bills 
considered by the Committee--contained none of these proposals.
    The fact that this bill is merely setting the stage for a 
multi-trillion-dollar tax cut is also clear. The temporary and 
retroactive business tax benefits contained in Title I of the 
bill are designed to minimize the actual cost of the 
provisions. According to analysis by JCT, making permanent the 
immediate deduction for research and experimental deduction 
would cost $276 billion over a 10-year budget window and making 
permanent the 168(k) ``bonus depreciation'' provisions would 
cost $325 billion over a 10-year budget window. According to 
calculations based on prior JCT estimates, making permanent the 
163(j) interest limitation changes would cost approximately 
$100 billion over a 10-year budget window. The actual cost of 
just these three provisions is $700 billion--a remarkably large 
tax cut, given the recent Republican-driven debt ceiling crisis 
and Republican-proposed spending cuts proffered in the name of 
fiscal austerity.
    Finally, H.R. 3938 repeals many of the climate-related 
investment provisions in the IRA. These provisions contain 
first-of-their-kind requirements that have strengthened 
American supply chains and created high-quality, high-paying 
jobs. In less than a year, the U.S. has seen a significant 
increase in new battery manufacturing sites, electric vehicle 
manufacturing sites, and wind and solar manufacturing sites. A 
May 2023 study by ClimatePower found that clean energy 
companies announced 191 new clean energy projects in 41 states 
since the passage of IRA in August 2022.\1\ These projects 
total $243 billion in investment and are creating 142,000 new 
domestic jobs. Another analysis commissioned by the BlueGreen 
Alliance from the University of Massachusetts Amherst found 
that the climate investments in the IRA will create an average 
of 1 million American jobs per year over the next decade, for a 
total of over 9 million jobs over the next decade.\2\ That 
includes 1.7 million jobs from tax credits related to solar, 
wind, and other clean energy projects; 670,000 jobs from clean 
manufacturing credits for domestic wind turbine, solar panel, 
and battery manufacturing; 260,000 jobs from green vehicle tax 
credits and expanding access to EV charging; and 720,000 jobs 
from tax preferences that support residential and commercial 
building retrofits that boost energy efficiency. These are 
actual, real-world results that--despite its name and purported 
goals--H.R. 3938 simply does not deliver, and in fact seeks to 
reverse.
---------------------------------------------------------------------------
    \1\ Climate Power, The Clean Energy Boom in the States (May 3, 
2023), available at https://climatepower.us/wp-content/uploads/sites/
23/2023/05/Clean-Energy-Boom-in-States.pdf.
    \2\Robert Pollin, Chirag Lala, Shouvik Chakraborty, ``Job Creation 
Estimates Through Proposed Inflation Reduction Act (Aug. 4, 2022), 
available at https://peri.umass.edu/publication/
item/1633-job-creation-estimates-throughproposed-inflation-reduction-
act.
---------------------------------------------------------------------------
                                           Richard E. Neal,
                                                    Ranking Member.

Ranking Member Richard E. Neal Opening Statement Committee on Ways and 
           Means Markup of H.R. 3938, Tuesday, June 13, 2023

    One of the centerpieces of this legislation is the 
Republicans' reversal of a decision they made back in 2017, to 
hide the true cost of the TCJA. Republicans snuck in a 
provision that created a huge cliff, requiring research and 
development costs to be amortized over five years, and 15 years 
for research conducted abroad.
    Now they want to revert back to the way things were. 
Generally, I'm fine with that, but the irony of their policy 
here needs to be pointed out.
    Under this bill, foreign research, which currently must be 
depreciated over 15 years, is getting more of a benefit than 
domestic research, which only has to be depreciated over five.
    We sat here in the hearing room a month ago for four hours, 
listening to my colleagues on the other side of the aisle wail 
and moan about how Democrats' green energy provisions were 
benefitting CHINA. No matter what we did, my Republican 
colleagues would play ``six degrees of separation'' to try to 
connect it to CHINA.
    Well here the connection is quite clear. Take two firms--a 
firm that is conducting R&D here in the United States, and a 
firm that is conducting R&D in China. Who gets the bigger tax 
benefit from this bill? The firm who is conducting their 
research in China.
    So this amendment changes that. It provides that we do not 
change the rule that research expenses in the People's Republic 
of China are subject to 15-year depreciation. Our Republican 
colleagues accuse our side of the aisle of being ``soft on 
China.'' So I assume they will gladly support this amendment.