[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 683 Introduced in House (IH)]
110th CONGRESS
1st Session
H. R. 683
To amend the Internal Revenue Code of 1986 to promote investment in
energy independence through coal to liquid technology, biomass, and oil
shale.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 24, 2007
Mr. Lewis of Kentucky (for himself, Mr. Lincoln Davis of Tennessee, Mr.
Nunes, Mr. Rogers of Kentucky, Mrs. Capito, Mr. Davis of Kentucky, Mr.
Whitfield, Mr. Pickering, Mr. Shimkus, and Mr. McCotter) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to promote investment in
energy independence through coal to liquid technology, biomass, and oil
shale.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This Act may be cited as the ``Investment in
Energy Independence Act of 2006''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title, etc.
Sec. 2. Credit for investment in coal-to-liquid fuels projects.
Sec. 3. Temporary expensing for equipment used in coal-to-liquid fuels
process.
Sec. 4. Expansion and extension of alternative fuel credit.
Sec. 5. Modifications to enhanced oil, natural gas, and coalbed methane
recovery credit.
Sec. 6. Allowance of enhanced oil, natural gas, and coalbed methane
recovery credit against the alternative
minimum tax.
Sec. 7. Expansion of expensing of oil and alternative fuel refineries.
Sec. 8. Expensing for conversion of natural gas-fired facilities for
the production ethanol to coal-fired
facilities.
SEC. 2. CREDIT FOR INVESTMENT IN COAL-TO-LIQUID FUELS PROJECTS.
(a) In General.--Section 46 of the Internal Revenue Code of 1986
(relating to amount of credit) is amended by striking ``and'' at the
end of paragraph (3), by striking the period at the end of paragraph
(4) and inserting ``, and'', and by adding at the end the following new
paragraph:
``(5) the qualifying coal-to-liquid fuels project
credit.''.
(b) Amount of Credit.--Subpart E of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to rules for
computing investment credit) is amended by inserting after section 48B
the following new section:
``SEC. 48C. QUALIFYING COAL-TO-LIQUID FUELS PROJECT CREDIT.
``(a) In General.--For purposes of section 46, the qualifying coal-
to-liquid fuels project credit for any taxable year is an amount equal
to 20 percent of the qualified investment for such taxable year.
``(b) Qualified Investment.--
``(1) In general.--For purposes of subsection (a), the
qualified investment for any taxable year is the basis of
property placed in service by the taxpayer during such taxable
year which is part of a qualifying coal-to-liquid fuels
project--
``(A)(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, and
``(B) with respect to which depreciation (or
amortization in lieu of depreciation) is allowable.
``(2) Applicable rules.--For purposes of this section,
rules similar to the rules of subsection (a)(4) and (b) of
section 48 shall apply.
``(c) Definitions.--For purposes of this section--
``(1) Qualifying coal-to-liquid fuels project.--The term
`qualifying coal-to-liquid fuels project' means any domestic
project which--
``(A) employs the Fischer-Tropsch process to
produce at least 5,000 barrels per day of
transportation grade liquid fuels from coal, including
any property which allows for the capture,
transportation, or sequestration of by-products
resulting from such process, including carbon
emissions, and
``(B) any portion of the qualified investment in
which is certified under the qualifying coal-to-liquid
program as eligible for credit under this section in an
amount (not to exceed $200,000,000) determined by the
Secretary.
``(2) Coal.--The term `coal' means any carbonized or
semicarbonized matter, including peat and biomass.
``(3) Biomass.--The term `biomass' means any organic
material other than oil and natural gas (or any product
thereof).
``(d) Qualifying Coal-to-Liquid Fuels Project Program.--
``(1) In general.--The Secretary, in consultation with the
Secretary of Energy, shall establish a qualifying coal-to-
liquid fuels project program to consider and award
certifications for qualified investment eligible for credits
under this section to 10 qualifying coal-to-liquid fuels
project sponsors under this section, not less than 2 of which
shall not have the capacity to produce more than 10,000 barrels
of transportation grade liquid fuels from coal per day. The
total qualified investment which may be awarded eligibility for
credit under the program shall not exceed $2,000,000,000.
``(2) Period of issuance.--A certificate of eligibility
under paragraph (1) may be issued only during the 10-fiscal
year period beginning on October 1, 2006.
``(3) Selection criteria.--The Secretary shall not make a
competitive certification award for qualified investment for
credit eligibility under this section unless the recipient has
documented to the satisfaction of the Secretary that--
``(A) the award recipient is financially viable
without the receipt of additional Federal funding
associated with the proposed project,
``(B) the recipient will provide sufficient
information to the Secretary for the Secretary to
ensure that the qualified investment is spent
efficiently and effectively,
``(C) a market exists for the products of the
proposed project as evidenced by contracts or written
statements of intent from potential customers,
``(D) the fuels identified with respect to the
gasification technology for such project will comprise
at least 90 percent of the fuels required by the
project for the production of transportation grade
liquid fuels,
``(E) the award recipient's project team is
competent in the construction and operation of the
Fischer-Tropsch process, with preference given to those
recipients with experience which demonstrates
successful and reliable operations of such process, and
``(F) the award recipient has met other criteria
established and published by the Secretary.
``(e) Denial of Double Benefit.--No deduction or other credit shall
be allowed with respect to the basis of any property taken into account
in determining the credit allowed under this section.''.
(c) Conforming Amendments.--
(1) Section 49(a)(1)(C) of the Internal Revenue Code of
1986 is amended by striking ``and'' at the end of clause (iii),
by striking the period at the end of clause (iv) and inserting
``, and'', and by adding after clause (iv) the following new
clause:
``(v) the basis of any property which is
part of a qualifying coal-to-liquid fuels
project under section 48C.''.
(2) The table of sections for subpart E of part IV of
subchapter A of chapter 1 of such Code is amended by inserting
after the item relating to section 48B the following new item:
``Sec. 48C. Qualifying coal-to-liquid fuels project credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to periods after the date of the enactment of this Act, under
rules similar to the rules of section 48(m) of the Internal Revenue
Code of 1986 (as in effect on the day before the date of the enactment
of the Revenue Reconciliation Act of 1990).
SEC. 3. TEMPORARY EXPENSING FOR EQUIPMENT USED IN COAL-TO-LIQUID FUELS
PROCESS.
(a) In General.--Part VI of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
179D the following new section:
``SEC. 179E. ELECTION TO EXPENSE CERTAIN COAL-TO-LIQUID FUELS
FACILITIES.
``(a) Treatment as Expenses.--A taxpayer may elect to treat the
cost of any qualified coal-to-liquid fuels process property as an
expense which is not chargeable to capital account. Any cost so treated
shall be allowed as a deduction for the taxable year in which the
expense is incurred.
``(b) Election.--
``(1) In general.--An election under this section for any
taxable year shall be made on the taxpayer's return of the tax
imposed by this chapter for the taxable year. Such election
shall be made in such manner as the Secretary may by
regulations prescribe.
``(2) Election irrevocable.--Any election made under this
section may not be revoked except with the consent of the
Secretary.
``(c) Qualified Coal-to-Liquid Fuels Process Property.--The term
`qualified coal-to-liquid fuels process property' means any property
located in the United States--
``(1) which employs the Fischer-Tropsch process to produce
transportation grade liquid fuels from coal (as defined in
section 48C(c)(2)), including any property which allows for the
capture, transportation, or sequestration of by-products
resulting from such process, including carbon emissions,
``(2) the original use of which commences with the
taxpayer,
``(3) the construction of which--
``(A) except as provided in subparagraph (B), is
subject to a binding construction contract entered into
after the date of the enactment of this section and
before January 1, 2011, but only if there was no
written binding construction contract entered into on
or before such date of enactment, or
``(B) in the case of self-constructed property,
began after the date of the enactment of this section
and before January 1, 2011, and
``(4) which is placed in service by the taxpayer after the
date of the enactment of this section and before January 1,
2016.
``(d) Election to Allocate Deduction to Cooperative Owner.--If--
``(1) a taxpayer to which subsection (a) applies is an
organization to which part I of subchapter T applies, and
``(2) one or more persons directly holding an ownership
interest in the taxpayer are organizations to which part I of
subchapter T apply,
the taxpayer may elect to allocate all or a portion of the deduction
allowable under subsection (a) to such persons. Such allocation shall
be equal to the person's ratable share of the total amount allocated,
determined on the basis of the person's ownership interest in the
taxpayer. The taxable income of the taxpayer shall not be reduced under
section 1382 by reason of any amount to which the preceding sentence
applies.
``(e) Basis Reduction.--
``(1) In general.--For purposes of this title, if a
deduction is allowed under this section with respect to any
qualified coal-to-liquid fuels process property, the basis of
such property shall be reduced by the amount of the deduction
so allowed.
``(2) Ordinary income recapture.--For purposes of section
1245, the amount of the deduction allowable under subsection
(a) with respect to any property which is of a character
subject to the allowance for depreciation shall be treated as a
deduction allowed for depreciation under section 167.
``(f) Application With Other Deductions and Credits.--
``(1) Other deductions.--No deduction shall be allowed
under any other provision of this chapter with respect to any
expenditure with respect to which a deduction is allowed under
subsection (a) to the taxpayer.
``(2) Credits.--No credit shall be allowed under section 38
with respect to any amount for which a deduction is allowed
under subsection (a).
``(g) Reporting.--No deduction shall be allowed under subsection
(a) to any taxpayer for any taxable year unless such taxpayer files
with the Secretary a report containing such information with respect to
the operation of the property of the taxpayer as the Secretary shall
require.''.
(b) Conforming Amendments.--
(1) Section 1016(a) of the Internal Revenue Code of 1986 is
amended by striking ``and'' at the end of paragraph (36), by
striking the period at the end of paragraph (37) and inserting
``, and'', and by adding at the end the following new
paragraph:
``(38) to the extent provided in section 179E(e)(1).''.
(2) Section 1245(a) of such Code is amended by inserting
``179E,'' after ``179D,'' both places it appears in paragraphs
(2)(C) and (3)(C).
(3) Section 263(a)(1) of such Code is amended by striking
``or'' at the end of subparagraph (J), by striking the period
at the end of subparagraph (K) and inserting ``, or'', and by
inserting after subparagraph (K) the following new
subparagraph:
``(L) expenditures for which a deduction is allowed
under section 179E.''.
(4) Section 312(k)(3)(B) of such Code is amended by
striking ``or 179D'' each place it appears in the heading and
text and inserting ``179D, or 179E''.
(5) The table of sections for part VI of subchapter B of
chapter 1 of such Code is amended by inserting after the item
relating to section 179D the following new item:
``Sec. 179E. Election to expense certain coal-to-liquid fuels
facilities.''.
(c) Effective Date.--The amendments made by this section shall
apply to properties placed in service after the date of the enactment
of this Act.
SEC. 4. EXPANSION AND EXTENSION OF ALTERNATIVE FUEL CREDIT.
(a) Expansion.--
(1) Paragraph (2) of section 6426(d) of the Internal
Revenue Code of 1986 (defining alternative fuel) is amended by
striking ``and'' at the end of subparagraph (E), by striking
the period at the end of subparagraph (F) and inserting ``,
and'', and by inserting after subparagraph (F) the following:
``(G) any liquid fuel derived from oil shale
extracted in the United States.''.
(2) Subparagraph (E) of section 6426(d)(2)(d) of such Code
is amended by inserting ``and biomass (as defined in section
45K(c)(3) without regard to subparagraph (B) thereof)'' after
``peat''.
(b) Extension.--
(1) Alternative fuel credit.--Paragraph (4) of section
6426(d) of such Code is amended to read as follows:
``(4) Termination.--This subsection shall not apply to--
``(A) any sale or use involving liquified hydrogen
for any period after September 30, 2020,
``(B) any sale or use involving liquid fuel derived
from coal (including peat and biomass) through the
Fischer-Tropsch process for any period after September
30, 2020,
``(C) any sale or use involving liquid hydrocarbons
derived from biomass (as specified in paragraph (2)(F)
for any period after September 30, 2020,
``(D) any sale or use involving liquid fuel derived
from oil shale for any period after September 30, 2020,
``(E) any other sale or use for any period after
September 30, 2009.''.
(2) Payments.--
(A) In general.--Paragraph (5) of section 6427(e)
of the Internal Revenue Code of 1986 is amended by
striking ``and'' and the end of subparagraph (C), by
striking the period at the end of subparagraph (D) and
inserting a comma, and by adding at the end the
following new subparagraphs:
``(E) any alternative fuel or alternative fuel
mixture (as so defined) involving liquid fuel derived
from coal (including peat and biomass) through the
Fischer-Tropsch process sold or used after September
30, 2020, and
``(F) any sale or use involving liquid derived from
oil shale for any period after September 30, 2020.''.
(B) Conforming amendment.--Section 6427(e)(5)(C) of
such Code is amended by striking ``subparagraph (D)''
and inserting ``subparagraphs (D), (E), and (F)''.
SEC. 5. MODIFICATIONS TO ENHANCED OIL, NATURAL GAS, AND COALBED METHANE
RECOVERY CREDIT.
(a) Enhanced Credit for Carbon Dioxide Injections.--Section 43 of
the Internal Revenue Code of 1986 is amended by adding at the end the
following new subsection:
``(f) Enhanced Credit for Projects Using Qualified Carbon
Dioxide.--
``(1) In general.--For purposes of this section--
``(A) the term `qualified project' includes a
project described in paragraph (2), and
``(B) in the case of a project described in
paragraph (2), subsection (a) shall be applied by
substituting `50 percent' for `15 percent'.
``(2) Projects described.--
``(A) In general.--A project is described in this
paragraph if--
``(i) the project begins or is
substantially expanded after December 31, 2006,
and
``(ii) the project uses qualified carbon
dioxide in an enhanced oil, natural gas, or
coalbed methane recovery method which involves
flooding or injection.
``(B) Enhanced oil recovery.--For purposes of this
subsection, the term `enhanced oil recovery' means
recovery of oil by injecting or flooding with qualified
carbon dioxide.
``(C) Enhanced natural gas recovery.--The term
`enhanced natural gas recovery' means recovery of
natural gas by injecting or flooding with qualified
carbon dioxide.
``(D) Enhanced coalbed methane recovery.--The term
`enhanced coalbed methane recovery' means recovery of
coalbed methane by injecting or flooding with qualified
carbon dioxide.
``(E) Qualified carbon dioxide.--For purposes of
this subsection, the term `qualified carbon dioxide'
means carbon dioxide that is--
``(i) separated from natural gas and
natural gas liquids at a natural gas processing
plant, or
``(ii) from any other industrial source.
``(3) Termination.--This subsection shall not apply to
costs paid or incurred for any qualified enhanced oil recovery
project after December 31, 2020.''.
(b) Conforming Amendments.--
(1) Section 43 of such Code is amended--
(A) in subsection (a) by striking ``enhanced oil
recovery credit'' and inserting ``enhanced oil, natural
gas, and coalbed methane recovery credit'', and
(B) by striking ``qualified enhanced oil recovery
costs'' each place it appears and inserting ``qualified
costs'',
(C) by striking ``qualified enhanced oil recovery
project'' each place it appears and inserting
``qualified project'', and
(D) in the section heading by inserting ``, natural
gas, and coalbed methane'' after ``oil''.
(2) The item in the table of sections for subpart D of part
IV of subchapter A of chapter 1 of such Code relating to
section 43 is amended to read as follows:
``Sec. 43. Enhanced oil, natural gas, and coalbed methane recovery
credit.''.
(c) Effective Date.--The amendments made by this section shall
apply to costs paid or incurred in taxable years ending after December
31, 2006.
SEC. 6. ALLOWANCE OF ENHANCED OIL, NATURAL GAS, AND COALBED METHANE
RECOVERY CREDIT AGAINST THE ALTERNATIVE MINIMUM TAX.
(a) In General.--Subsection (c) of section 38 of the Internal
Revenue Code of 1986 (relating to limitation based on amount of tax) is
amended by redesignating paragraph (4) as paragraph (5) and by
inserting after paragraph (3) the following new paragraph:
``(4) Special rules for enhanced oil, natural gas, and
coalbed methane recovery credit.--In the case of the enhanced
oil, natural gas, and coalbed methane recovery credit
determined under section 43--
``(A) this section and section 39 shall be applied
separately with respect to such credit, and
``(B) in applying paragraph (1) to such credit--
``(i) the tentative minimum tax shall be
treated as being zero, and
``(ii) the limitation under paragraph (1)
(as modified by clause (i)) shall be reduced by
the credit allowed under subsection (a) for the
taxable year (other than the enhanced oil
recovery credit).''.
(b) Conforming Amendments.--Paragraphs (2)(A)(ii)(II) and
(3)(A)(ii)(II) of section 38(c) of such Code are each amended by
inserting ``or the enhanced oil, natural gas, and coalbed methane
recovery credit'' after ``employee credit''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment of this
Act.
SEC. 7. EXPANSION OF EXPENSING OF OIL AND ALTERNATIVE FUEL REFINERIES.
(a) Extension of Placed in Service Requirement.--Subparagraph (B)
of section 179C(c)(1) of the Internal Revenue Code of 1986 (defining
qualified refinery property) is amended by striking ``January 1, 2012''
and inserting ``January 1, 2016''.
(b) Production Capacity.--Subsection (e) of section 179C of such
Code (relating to production capacity) is amended by striking ``or'' at
the end of paragraph (1), by striking the period at the end of
paragraph (2) and inserting ``, or'', and by inserting after paragraph
(2) the following new paragraph:
``(3) enables the existing qualified refinery to process
liquids from coal, oil shale, or biomass.''.
(c) Effective Date.--The amendments made by this section shall
apply to properties placed in service after the date of the enactment
of this Act.
SEC. 8. EXPENSING FOR CONVERSION OF NATURAL GAS-FIRED FACILITIES FOR
THE PRODUCTION ETHANOL TO COAL-FIRED FACILITIES.
(a) In General.--Part VI of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
179E the following new section:
``SEC. 179F. ELECTION TO EXPENSE COAL-FIRED FACILITIES FOR PRODUCTION
OF ETHANOL.
``(a) Treatment as Expenses.--A taxpayer may elect to treat 50
percent of the cost of any qualified ethanol plant fueling property as
an expense which is not chargeable to capital account. Any cost so
treated shall be allowed as a deduction for the taxable year in which
the qualified ethanol plant fueling property is placed in service.
``(b) Election.--
``(1) In general.--An election under this section for any
taxable year shall be made on the taxpayer's return of the tax
imposed by this chapter for the taxable year. Such election
shall be made in such manner as the Secretary may by
regulations prescribe.
``(2) Election irrevocable.--Any election made under this
section may not be revoked except with the consent of the
Secretary.
``(c) Qualified Ethanol Plant Fueling Property.--
``(1) In general.--The term `qualified ethanol plant
fueling property' means, with respect to a qualified ethanol
refinery, property using coal to produce energy used to produce
ethanol--
``(A) the original use of which commences with the
taxpayer,
``(B) which is placed in service by the taxpayer
after the date of the enactment of this section and
before January 1, 2016, and
``(C) which meets all applicable environmental laws
in effect on the date such portion was placed in
service.
``(2) Special rule for sale-leasebacks.--For purposes of
paragraph (1)(A), if property is--
``(A) originally placed in service after the date
of the enactment of this section by a person, and
``(B) sold and leased back by such person within 3
months after the date such property was originally
placed in service,
such property shall be treated as originally placed in service
not earlier than the date on which such property is used under
the leaseback referred to in subparagraph (B).
``(3) Effect of waiver under clean air act.--A waiver under
the Clean Air Act shall not be taken into account in
determining whether the requirements of paragraph (1)(C) are
met.
``(d) Qualified Ethanol Refinery.--For purposes of this section,
the term `qualified ethanol refinery' means any refinery located in the
United States which--
``(1) is designed to serve the primary purpose of
processing material into ethanol,
``(2) on the date of the enactment of this section, used
natural gas to produce energy in the ethanol production
process, and
``(3) after the date of the enactment of this section,
converted to the use of coal to produce energy in the ethanol
production process.
``(e) Ineligible Refinery Property.--No deduction shall be allowed
under subsection (a) for any qualified refinery property which is built
solely to comply with consent decrees or projects mandated by Federal,
State, or local governments.
``(f) Election to Allocate Deduction to Cooperative Owner.--
``(1) In general.--If--
``(A) a taxpayer to which subsection (a) applies is
an organization to which part I of subchapter T
applies, and
``(B) one or more persons directly holding an
ownership interest in the taxpayer are organizations to
which part I of subchapter T apply,
the taxpayer may elect to allocate all or a portion of the
deduction allowable under subsection (a) to such persons. Such
allocation shall be equal to the person's ratable share of the
total amount allocated, determined on the basis of the person's
ownership interest in the taxpayer. The taxable income of the
taxpayer shall not be reduced under section 1382 by reason of
any amount to which the preceding sentence applies.
``(2) Form and effect of election.--An election under
paragraph (1) 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.
``(3) Written notice to owners.--If any portion of the
deduction available under subsection (a) is allocated to owners
under paragraph (1), the cooperative shall provide any owner
receiving an allocation written notice of the amount of the
allocation. Such notice shall be provided before the date on
which the return described in paragraph (2) is due.
``(g) Reporting.--No deduction shall be allowed under subsection
(a) to any taxpayer for any taxable year unless such taxpayer files
with the Secretary a report containing such information with respect to
the operation of the refineries of the taxpayer as the Secretary shall
require.''.
(b) Conforming Amendments.--
(1) Section 1245(a) of such Code is amended by inserting
``179F,'' after ``179E,'' both places it appears in paragraphs
(2)(C) and (3)(C).
(2) Section 263(a)(1) of such Code is amended by striking
``or'' at the end of subparagraph (K), by striking the period
at the end of subparagraph (L) and inserting ``, or'', and by
inserting after subparagraph (L) the following new
subparagraph:
``(M) expenditures for which a deduction is allowed
under section 179F.''.
(3) Section 312(k)(3)(B) of such Code is amended by
striking ``or 179E'' each place it appears in the heading and
text and inserting ``179E, or 179F''.
(4) The table of sections for part VI of subchapter B of
chapter 1 is amended by inserting after the item relating to
section 179E the following new item:
``Sec. 179F. Election to expense coal-fired facilities for production
of ethanol.''.
(c) Effective Date.--The amendments made by this section shall
apply to properties placed in service after the date of the enactment
of this Act.
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