A bill to amend the Internal Revenue Code of 1986 to provide a tax credit for the retrofit conversion of a nonhybrid motor vehicle to a hybrid.

Summary: Reducing Energy Use Through Retrofitting Older Vehicles Act or the RETRO Act - Amends the Internal Revenue Code to allow a tax credit for the cost of converting a motor vehicle into a hybrid motor vehicle, based on gross vehicle weight.  Limits the number of converted motor vehicles eligible for such credit.  Terminates such credit five years after the enactment of this Act.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Reducing Energy Use Through 
Retrofitting Older Vehicles Act'' or the ``RETRO Act''.

SEC. 2. CREDIT FOR HYBRID CONVERSION.

    (a) In General.--Section 30B of the Internal Revenue Code of 1986 
is amended by redesignating subsections (j) and (k) as subsections (k) 
and (l), respectively, and by inserting after subsection (i) the 
following new subsection:
    ``(j) Hybrid Conversion Credit.--
            ``(1) Credit allowed.--
                    ``(A) In general.--For purposes of subsection (a), 
                the hybrid conversion credit determined under this 
                subsection with respect to any motor vehicle which is 
                converted to a qualified hybrid motor vehicle is an 
                amount equal to so much of the cost of the conversion 
                of such vehicle as does not exceed the applicable 
                amount determined under the following table:

``If gross vehicle weight (prior to           The applicable amount is:
        conversion) is:
        Not more than 8,500 pounds.........................     $3,000 
        More than 8,500 pounds but not more than 14,000         $4,000 
            pounds.
        More than 14,000 pounds but not more than 26,000        $6,000 
            pounds.
        More than 26,000 pounds............................     $8,000.
            ``(2) Qualified hybrid motor vehicle.--For purposes of this 
        subsection, the term `qualified hybrid motor vehicle' means any 
        new qualified hybrid motor vehicle (as defined in subsection 
        (d)(3), determined without regard to whether such vehicle is 
        made by a manufacturer or whether the original use of such 
        vehicle commences with the taxpayer) which--
                    ``(A) is used or leased by the taxpayer and is not 
                for resale, and
                    ``(B) achieves the minimum required reduction in 
                fuel consumption determined under the following table, 
                relative to the fuel consumption of an uncoverted 
                vehicle of the same make and model under the Urban 
                Dynamometer Driving Schedule (UDDS) test procedure 
                issued by the Environmental Protection Agency (40 CFR 
                86.115 and appendix I to 40 CFR part 86):

``If vehicle (prior to conversion)   The minimum required reduction is:
        is:
        A passenger vehicle with a gross vehicle weight of  19 percent 
            not more than 8,500 pounds.
        A light truck with a gross vehicle weight of not    15 percent 
            more than 8,500 pounds.
        A diesel vehicle with a gross vehicle weight of     17 percent 
            more than 8,500 pounds but not more than 14,000 
            pounds.
        A gasoline vehicle with a gross vehicle weight of   12 percent 
            more than 8,500 pounds but not more than 14,000 
            pounds.
        A vehicle with a gross vehicle weight of more than  10 percent.
            14,000 pounds.
            ``(3) Credit allowed in addition to other credits.--The 
        credit allowed under this subsection shall be allowed with 
        respect to a motor vehicle notwithstanding whether a credit has 
        been allowed with respect to such motor vehicle under this 
        section (other than this subsection and subsection (i)) in any 
        preceding taxable year. No credit shall be allowed under this 
        subsection with respect to a motor vehicle if the credit under 
        subsection (i) is allowed with respect to such motor vehicle in 
        any taxable year.
            ``(4) Limitation on number of hybrid conversions eligible 
        for credit.--This subsection shall not apply to the conversion 
        of any motor vehicle after the last day of the calendar quarter 
        which includes the first date on which the total number of 
        conversions with respect to which a credit under this 
        subsection has been allowed for all taxable years is at least 
        equal to the applicable number determined under the following 
        table:

``If gross vehicle weight (prior to           The applicable number is:
        conversion) is:
        Not more than 8,500 pounds.........................    100,000 
        More than 8,500 pounds but not more than 14,000         70,000 
            pounds.
        More than 14,000 pounds but not more than 26,000        20,000 
            pounds.
        More than 26,000 pounds............................     10,000.
            ``(5) Termination.--This subsection shall not apply to 
        conversions made after the date which is 5 years after the date 
        of the enactment of the RETRO Act.''.
    (b) Credit Treated as Part of Alternative Motor Vehicle Credit.--
Subsection (a) of section 30B of the Internal Revenue Code of 1986 is 
amended--
            (1) by striking ``and'' at the end of paragraph (4),
            (2) by striking the period at the end of paragraph (5) and 
        inserting ``, and'', and
            (3) by adding at the end the following new paragraph:
            ``(6) the hybrid conversion credit determined under 
        subsection (j).''.
    (c) No Recapture for Vehicles Converted to Qualified Hybrid Motor 
Vehicles.--Paragraph (8) of section 30B(h) of the Internal Revenue Code 
of 1986 is amended by striking ``a vehicle)'' and all that follows and 
inserting ``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 or a 
qualified hybrid motor vehicle.''.
    (d) Denial of Double Benefit.--Paragraph (3) of section 30B(i) of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following: ``No credit shall be allowed under this subsection with 
respect to a motor vehicle if the credit under subsection (j) is 
allowed with respect to such motor vehicle in any taxable year.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.
    (f) Rescission of Unobligated Federal Funds to Offset Loss in 
Revenues.--
            (1) In general.--Notwithstanding any other provision of 
        law, of all available unobligated funds, appropriated 
        discretionary funds are hereby rescinded in such amounts as 
        determined by the Director of the Office of Management and 
        Budget such that the aggregate amount of such rescission equals 
        the reduction in revenues to the Treasury by reason of the 
        amendments made by this section.
            (2) Implementation.--The Director of the Office of 
        Management and Budget shall determine and identify from which 
        appropriation accounts the rescission under paragraph (1) shall 
        apply and the amount of such rescission that shall apply to 
        each such account. Not later than 60 days after the date of the 
        enactment of this Act, the Director of the Office of Management 
        and Budget shall submit a report to the Secretary of the 
        Treasury and Congress of the accounts and amounts determined 
        and identified for rescission under the preceding sentence.
            (3) Exception.--This subsection shall not apply to the 
        unobligated funds of the Department of Veterans Affairs, the 
        Department of Defense, or any funds appropriated for disaster 
        relief.