Climate Change Tax Amendments of 1999

Summary: Includes as part of the investment tax credit the reduced greenhouse gas emissions facilities credit and makes such credit the applicable percentage of qualified investment in a reduced greenhouse gas emissions facility for a taxable year. Allows such credit to be increased by the aggregate of each qualified progress (emissions facility expansion or construction) expenditure for a taxable year.
Provides special rules for the recapture of such credit.
Directs the Secretaries of the Treasury and Energy to jointly study and report to Congress on possible additional incentives for, and removal of barriers to, voluntary, non- recoupable expenditures for the reduction of such emissions. Expresses the sense of Congress that such incentives should be available for individuals, organizations, and entities, including both for- profit and nonprofit institutions.
Directs the Secretaries to jointly study and report to Congress on possible additional measures that would provide nonprofit entities with economic incentives for such emission reductions comparable to those provided by this Act.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Climate Change Tax Amendments of 
1999''.

SEC. 2. PERMANENT TAX CREDIT FOR RESEARCH AND DEVELOPMENT REGARDING 
              GREENHOUSE GAS REDUCTION.

    (a) In General.--Section 41(h) of the Internal Revenue Code of 1986 
(relating to termination) is amended by adding at the end the 
following:
            ``(3) Exception for certain research.--Paragraph (1)(B) 
        shall not apply in the case of any qualified research expenses 
        if the research--
                    ``(A) has as 1 of its purposes the reducing or 
                sequestering of greenhouse gases, and
                    ``(B) has been reported to the Department of Energy 
                under section 1605(b) of the Energy Policy Act of 
                1992.''.
    (b) Effective Date.--The amendment made by subsection (a) applies 
with respect to amounts paid or incurred after the date of enactment of 
this Act, except that such amendment shall not take effect unless the 
Climate Change Energy Policy Response Act is enacted into law.

SEC. 3. TAX CREDIT FOR REDUCED GREENHOUSE GAS EMISSIONS FACILITIES.

    (a) Allowance of Reduced Greenhouse Gas Emissions Facilities 
Credit.--Section 46 of the Internal Revenue Code of 1986 (relating to 
amount of credit) is amended by striking ``and'' at the end of 
paragraph (2), by striking the period at the end of paragraph (3) and 
inserting ``, and'', and by adding at the end the following:
            ``(4) the reduced greenhouse gas emissions facilities 
        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 48 
the following:

``SEC. 48A. CREDIT FOR REDUCED GREENHOUSE GAS EMISSIONS FACILITIES.

    ``(a) In General.--For purposes of section 46, the reduced 
greenhouse gas emissions facilities credit for any taxable year is the 
applicable percentage of the qualified investment in a reduced 
greenhouse gas emissions facility for such taxable year.
    ``(b) Reduced Greenhouse Gas Emissions Facility.--For purposes of 
subsection (a), the term `reduced greenhouse gas emissions facility' 
means a facility of the taxpayer--
            ``(1)(A) the construction, reconstruction, or erection of 
        which is completed by the taxpayer, or
            ``(B) which is acquired by the taxpayer if the original use 
        of such facility commences with the taxpayer,
            ``(2) the operation of which--
                    ``(A) replaces the operation of a facility of the 
                taxpayer,
                    ``(B) reduces greenhouse gas emissions on a per 
                unit of output basis as compared to such emissions of 
                the replaced facility, and
                    ``(C) uses the same type of fuel (or combination of 
                the same type of fuel and biomass fuel) as was used in 
                the replaced facility,
            ``(3) with respect to which depreciation (or amortization 
        in lieu of depreciation) is allowable, and
            ``(4) which meets the performance and quality standards (if 
        any) which--
                    ``(A) have been jointly prescribed by the Secretary 
                and the Secretary of Energy by regulations,
                    ``(B) are consistent with regulations prescribed 
                under section 1605(b) of the Energy Policy Act of 1992, 
                and
                    ``(C) are in effect at the time of the acquisition 
                of the facility.
    ``(c) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is one-half of the percentage reduction in 
greenhouse gas emissions described in subsection (b)(2) and reported 
and certified under section 1605(b) of the Energy Policy Act of 1992.
    ``(d) Qualified Investment.--For purposes of subsection (a), the 
term `qualified investment' means, with respect to any taxable year, 
the basis of a reduced greenhouse gas emissions facility placed in 
service by the taxpayer during such taxable year, but only with respect 
to that portion of the investment attributable to providing production 
capacity not greater than the production capacity of the facility being 
replaced.
    ``(e) Qualified Progress Expenditures.--
            ``(1) Increase in qualified investment.--In the case of a 
        taxpayer who has made an election under paragraph (5), the 
        amount of the qualified investment of such taxpayer for the 
        taxable year (determined under subsection (d) without regard to 
        this subsection) shall be increased by an amount equal to the 
        aggregate of each qualified progress expenditure for the 
        taxable year with respect to progress expenditure property.
            ``(2) Progress expenditure property defined.--For purposes 
        of this subsection, the term `progress expenditure property' 
        means any property being constructed by or for the taxpayer and 
        which it is reasonable to believe will qualify as a reduced 
        greenhouse gas emissions facility which is being constructed by 
        or for the taxpayer when it is placed in service.
            ``(3) Qualified progress expenditures defined.--For 
        purposes of this subsection--
                    ``(A) Self-constructed property.--In the case of 
                any self-constructed property, the term `qualified 
                progress expenditures' means the amount which, for 
                purposes of this subpart, is properly chargeable 
                (during such taxable year) to capital account with 
                respect to such property.
                    ``(B) Non-self-constructed property.--In the case 
                of non-self-constructed property, the term `qualified 
                progress expenditures' means the amount paid during the 
                taxable year to another person for the construction of 
                such property.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Self-constructed property.--The term `self-
                constructed property' means property for which it is 
                reasonable to believe that more than half of the 
                construction expenditures will be made directly by the 
                taxpayer.
                    ``(B) Non-self-constructed property.--The term 
                `non-self-constructed property' means property which is 
                not self-constructed property.
                    ``(C) Construction, etc.--The term `construction' 
                includes reconstruction and erection, and the term 
                `constructed' includes reconstructed and erected.
                    ``(D) Only construction of reduced greenhouse gas 
                emissions facility to be taken into account.--
                Construction shall be taken into account only if, for 
                purposes of this subpart, expenditures therefor are 
                properly chargeable to capital account with respect to 
                the property.
            ``(5) Election.--An election under this subsection may be 
        made at such time and in such manner as the Secretary may by 
        regulations prescribe. Such an election shall apply to the 
        taxable year for which made and to all subsequent taxable 
        years. Such an election, once made, may not be revoked except 
        with the consent of the Secretary.''
    (c) Recapture.--Section 50(a) of the Internal Revenue Code of 1986 
(relating to other special rules) is amended by adding at the end the 
following:
            ``(6) Special rules relating to reduced greenhouse gas 
        emissions facility.--For purposes of applying this subsection 
        in the case of any credit allowable by reason of section 48A, 
        the following shall apply:
                    ``(A) General rule.--In lieu of the amount of the 
                increase in tax under paragraph (1), the increase in 
                tax shall be an amount equal to the investment tax 
                credit allowed under section 38 for all prior taxable 
                years with respect to a reduced greenhouse gas 
                emissions facility (as defined by section 48A(b)) 
                multiplied by a fraction whose numerator is the number 
                of years remaining to fully depreciate under this title 
                the reduced greenhouse gas emissions facility disposed 
                of, and whose denominator is the total number of years 
                over which such facility would otherwise have been 
                subject to depreciation. For purposes of the preceding 
                sentence, the year of disposition of the reduced 
                greenhouse gas emissions facility property shall be 
                treated as a year of remaining depreciation.
                    ``(B) Property ceases to qualify for progress 
                expenditures.--Rules similar to the rules of paragraph 
                (2) shall apply in the case of qualified progress 
expenditures for a reduced greenhouse gas emissions facility under 
section 48A, except that the amount of the increase in tax under 
subparagraph (A) of this paragraph shall be substituted in lieu of the 
amount described in such paragraph (2).
                    ``(C) Application of paragraph.--This paragraph 
                shall be applied separately with respect to the credit 
                allowed under section 38 regarding a reduced greenhouse 
                gas emissions facility.''
    (d) Technical Amendments.--
            (1) Section 49(a)(1)(C) of the Internal Revenue Code of 
        1986 is amended by striking ``and'' at the end of clause (ii), 
        by striking the period at the end of clause (iii) and inserting 
        ``, and'', and by adding at the end the following:
                            ``(iv) the portion of the basis of any 
                        reduced greenhouse gas emissions facility 
                        attributable to any qualified investment (as 
                        defined by section 48A(d)).''
            (2) Section 50(a)(4) of such Code is amended by striking 
        ``and (5)'' and inserting ``, (5), and (6)''.
            (3) 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 48 the following:

                              ``Sec. 48A. Credit for reduced greenhouse 
                                        gas emissions facilities.''
    (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, 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).
    (f) Study of Additional Incentives for Voluntary Reduction of 
Greenhouse Gas Emissions.--
            (1) In general.--The Secretary of the Treasury and the 
        Secretary of Energy shall jointly study possible additional 
        incentives for, and removal of barriers to, voluntary, non 
        recoupable expenditures for the reduction of greenhouse gas 
        emissions. For purposes of this subsection, an expenditure 
        shall be considered voluntary and non recoupable if the 
        expenditure is not recoupable--
                    (A) from revenues generated from the investment, 
                determined under generally accepted accounting 
                standards (or under the applicable rate-of-return 
                regulation, in the case of a taxpayer subject to such 
                regulation),
                    (B) from any tax or other financial incentive 
                program established under Federal, State, or local law, 
                or
                    (C) pursuant to any credit-trading or other 
                mechanism established under any international agreement 
                or protocol that is in force.
            (2) Report.--Within 6 months of the date of enactment of 
        this Act, the Secretary of the Treasury and the Secretary of 
        Energy shall jointly report to Congress on the results of the 
        study described in paragraph (1), along with any 
        recommendations for legislative action.
    (g) Scope and Impact.--
            (1) Policy.--In order to achieve the broadest response for 
        reduction of greenhouse gas emissions and to ensure that the 
        incentives established by or pursuant to this Act do not 
        advantage one segment of an industry to the disadvantage of 
        another, it is the sense of Congress that incentives for 
        greenhouse gas reductions should be available for individuals, 
        organizations, and entities, including both for-profit and non-
        profit institutions.
            (2) Level playing field study and report.--
                    (A) In general.--The Secretary of the Treasury and 
                the Secretary of Energy shall jointly study possible 
                additional measures that would provide non-profit 
                entities (such as municipal utilities and energy 
                cooperatives) with economic incentives for greenhouse 
                gas emission reductions comparable to those incentives 
                provided to taxpayers under the amendments made to the 
                Internal Revenue Code of 1986 by this Act.
                    (B) Report.--Within 6 months after the date of 
                enactment of this Act, the Secretary of the Treasury 
                and the Secretary of Energy shall jointly report to 
                Congress on the results of the study described in 
                subparagraph (A), along with any recommendations for 
                legislative action.