To amend the Internal Revenue Code of 1986 to provide a credit for the purchase of plug-in hybrid vehicles.

Summary: Amends the Internal Revenue Code to allow a tax credit for 10% of the cost of a qualified plug-in hybrid vehicle. Limits the amount of such credit to $4,000 for vehicles with a 4kWh traction battery, and $250 for each additional kWh of traction battery capacity as exceeds 4kWh but does not exceed 50kWh.

Defines "qualified plug-in hybrid vehicle" as a passenger motor vehicle which has received a certificate of conformity under the Clean Air Act and which has not less than two onboard sources of stored energy, one of which is energized by plugging into an external source of electric power.

Terminates such credit after 2014.

SECTION 1. CREDIT FOR PLUG-IN HYBRID VEHICLES.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to other credits) is 
amended by adding at the end the following new section:

``SEC. 30D. PLUG-IN HYBRID 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 10 percent of the cost of any qualified plug-in hybrid vehicle 
placed in service by the taxpayer during the taxable year.
    ``(b) Limitations.--
            ``(1) Limitation per vehicle.--The amount of the credit 
        allowed under subsection (a) for any vehicle shall not exceed 
        the sum of--
                    ``(A) $4,000 in the case of a plug-in electric 
                drive vehicle with 4kWh traction battery, and
                    ``(B) $250 for each additional kWh of traction 
                battery capacity of such vehicle as exceeds 4kWh but 
                does not exceed 50kWh.
            ``(2) Application with other credits.--
                    ``(A) 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 paragraph) 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)).
                    ``(B) Personal credits.--The credit allowed by 
                subsection (a) for any taxable year shall not exceed 
                the excess (if any) of--
                            ``(i) the sum of the regular tax liability 
                        (as defined in section 26(b)) plus the tax 
                        imposed by section 55, over
                            ``(ii) the sum of the credits allowable 
                        under subpart A and subpart B (other than this 
                        section).
    ``(c) Qualified Plug-In Hybrid Vehicle.--For purposes of this 
section--
            ``(1) In general.--The term `qualified plug-in hybrid 
        vehicle' means a motor vehicle (as defined in section 
        30(c)(2))--
                    ``(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 manufacturer,
                    ``(D) which has received a certificate of 
                conformity under the Clean Air Act, and
                    ``(E) which has not less than 2 onboard sources of 
                stored energy, different in character from each other, 
                from which to draw propulsion energy, where--
                            ``(i) at least 1 of such sources is 
                        energized by plugging into an external source 
                        of electric power, and
                            ``(ii) at least 1 of such sources is 
                        energized from an internal combustion engine, 
                        fuel cell, or other means, and such source is 
                        utilized to provide mechanical propulsion to 
                        the vehicle.
            ``(2) Exception.--The term `qualified plug-in hybrid 
        vehicle' 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.
            ``(3) Other terms.--The terms ``automobile'', ``passenger 
        automobile'', ``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) Kwh traction battery capacity.--The term `kWh 
        traction battery capacity' means the size of an electro 
        chemical storage device, expressed in kWh, as measured from a 
        100 percent state of charge to 0 percent state of charge.
    ``(d) Special Rules.--
            ``(1) Basis reduction.--The basis of any property for which 
        a credit is allowable under subsection (a) shall be reduced by 
        the amount of such credit (determined without regard to 
        subsection (b)(2)).
            ``(2) 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.
            ``(3) Property used outside united states, etc., not 
        qualified.--No credit shall be allowed under subsection (a) 
        with respect to any property referred to in section 50(b) or 
        with respect to the portion of the cost of any property taken 
        into account under section 179.
            ``(4) Denial of double benefit.--No credit shall be allowed 
        under this section with respect to a vehicle if a credit or 
        deduction is allowed with respect to such vehicle under any 
        other provision of this title.
            ``(5) 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.
            ``(6) Property used by tax-exempt entity; interaction with 
        air quality and motor vehicle safety standards.--Rules similar 
        to the rules of paragraphs (6) and (10) of section 30B(h) shall 
        apply for purposes of this section.
    ``(e) Termination.--This section shall not apply to any property 
placed in service after December 31, 2014.''.
    (b) Plug-in Hybrid Vehicles Not Counted Toward Limitation on Number 
of New Qualified Hybrid Vehicles Eligible for 30B Credit.--Section 
(30)(B)(f)(5) of such Code (defining qualified vehicle) is amended by 
adding at the end the following new sentence: ``Such term shall not 
include a qualified plug-in hybrid vehicle (as defined in section 
30D(c)).''.
    (c) Credit Made Part of General Business Credit.--Section 38(b) of 
such Code is amended by striking ``and'' at the end of paragraph (30), 
by striking the period at the end of paragraph (31) and inserting ``, 
plus'', and by adding at the end the following new paragraph:
            ``(32) the portion of the plug-in hybrid vehicle credit to 
        which section 30D(b)(2)(A) applies.''.
    (d) Conforming Amendment.--Section 6501(m) of such Code is amended 
by inserting ``30D(d)(5),'' after ``30C(e)(5),''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.