To amend the Internal Revenue Code of 1986 to provide a nonrefundable credit for the purchase of energy efficient tires.

Summary: Amends the Internal Revenue Code to allow individual taxpayers a nonrefundable tax credit for the purchase of tires certified by the Department of Transportation as energy efficient.

Requires the Secretary of Transportation to establish a system for the permanent labeling of tires as energy efficient.

SECTION 1. NONREFUNDABLE CREDIT FOR ENERGY EFFICIENT TIRES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25D the 
following new section:

``SEC. 25E. ENERGY EFFICIENT TIRES.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to $15 for each qualified energy 
efficient tire--
            ``(1) which is purchased by the taxpayer during the taxable 
        year for use by the taxpayer,
            ``(2) the original use of which commences with the 
        taxpayer, and
            ``(3) which is placed in service by the taxpayer during the 
        taxable year.
    ``(b) Definition.--For purposes of this section, the term 
`qualified energy efficient tire' means a tire certified as a qualified 
energy efficient tire pursuant to regulations issued under section 
30123(d) of title 49, United States Code, that is purchased for use by 
the taxpayer and not for resale.
    ``(c) Limitation Based on Amount of Tax.--In the case of a taxable 
year to which section 26(a)(2) does not apply, the credit allowed under 
subsection (a) for any taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under this subpart 
        (other than this section) and section 27 for the taxable year.
    ``(d) Carryforwards of Unused Credit.--
            ``(1) Rule for years in which all personal credits allowed 
        against regular and alternative minimum tax.--In the case of a 
        taxable year to which section 26(a)(2) applies, if the credit 
        allowable under subsection (a) for any taxable year exceeds the 
        limitation imposed by section 26(a)(2) for such taxable year 
        reduced by the sum of the credits allowable under this subpart 
        (other than this section and sections 23, 25D, and 1400C), such 
        excess shall be carried to the succeeding taxable year and 
        added to the credit allowable under subsection (a) for such 
        taxable year.
            ``(2) Rule for other years.--In the case of a taxable year 
        to which section 26(a)(2) does not apply, if the credit 
        allowable under subsection (a) for any taxable year exceeds the 
        limitation imposed by subsection (c) for such taxable year, 
        such excess shall be carried to the succeeding taxable year and 
        added to the credit allowable under subsection (a) for such 
        taxable year.''.
    (b) Conforming Amendments.--
            (1) Section 23 of such Code is amended--
                    (A) in subsection (b)(4)(B) by inserting ``and 
                section 25E'' after ``this section'', and
                    (B) in subsection (c)(1) by striking ``25D and'' 
                and inserting ``25D, 25E, and''.
            (2) Section 24(b)(3)(B) of such Code is amended by striking 
        ``and 25B'' and inserting ``25B, 25E, and''.
            (3) Clauses (i) and (ii) of section 25(e)(1)(C) of such 
        Code is both amended by inserting ``25E,'' after ``25D,''.
            (4) Section 25D(c) of such Code is amended--
                    (A) in paragraph (1) by inserting ``and section 
                25E'' after ``this section'', and
                    (B) in paragraph (2) by striking ``and 25B'' and 
                inserting ``25B, and 25E''.
            (5) Section 904(i) of such Code is amended by striking 
        ``and 25D'' and inserting ``and 25E''.
            (6) Section 1400C(d) of such Code is amended--
                    (A) in paragraph (1) by striking ``and section 
                25D'' and inserting ``, 25D, and 25E'', and
                    (B) in paragraph (2) by striking ``and 25D'' and 
                inserting ``25D, and 25E''.
            (7) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code (relating to 
        nonrefundable personal credits) is amended by inserting after 
        the item relating to section 25D the following new item:

``Sec. 25E. Energy efficient tires.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 2006.

SEC. 2. ENERGY EFFICIENT TIRE LABELING.

    Section 30123 of title 49, United States Code, is amended by 
inserting after subsection (c) the following:
    ``(d) Energy Efficient Tire Labeling.--(1) The Secretary shall, by 
regulation, establish a system for the permanent labeling of tires, 
with respect to energy efficiency, similar to the system for other tire 
attributes contained in section 575.104 of title 49, Code of Federal 
Regulations. Such regulations shall establish criteria for certifying 
replacement passenger tires as qualified energy efficient tires.
    ``(2) The primary factor for certifying replacement tires as 
qualified energy efficient tires under the regulations required by this 
subsection shall be achieving a rolling resistance coefficient that is 
at least 10 percent lower than the average rolling resistance 
coefficient (determined by mathematical mean) among replacement 
passenger car tires of comparable price, size, traction, speed 
capability, and wear resistance, as determined for the year 2006.
    ``(3) No replacement tire shall be certified as a qualified energy 
efficient tire under the regulations required by this subsection if 
such tire has--
            ``(A) a uniform tire quality grade rating below--
                    ``(i) grade `A' for traction;
                    ``(ii) grade `300' for treadwear; or
                    ``(iii) grade `B' for temperature; and
            ``(B) a speed rating of S or T.
    ``(4) As used in this subsection--
            ``(A) the term `uniform tire quality grade' means the grade 
        given a tire under the National Highway Traffic Safety 
        Administration's Uniform Tire Quality Grading System (section 
        575.104 of title 49, Code of Federal Regulations);
            ``(B) the term `rolling resistance coefficient' means the 
        value of the rolling resistance force divided by the wheel 
        load, as determined by the `SAE J1269' or `SAE J2452' tests 
        developed by the Society of Automotive Engineers; and
            ``(C) the term `replacement passenger car tires' means 
        passenger car tires within the scope of section 575 of title 
        49, Code of Federal Regulations, that are not original tires 
        included on a passenger vehicle by the vehicle manufacturer.''.