To promote biogas production, and for other purposes.

Summary: Biogas Production Incentive Act of 2008 - Amends the Internal Revenue Code to allow a business tax credit for the production and sale of biogas. Defines "biogas" as a gas that is derived by processing qualified energy feedstock (i.e., manure of agricultural livestock and other organic agricultural or food industry byproduct waste material) in an anaerobic digester and that contains at least 60% methane and carbon dioxide and trace gases. Provides an increased credit for biogas produced from qualified cellulosic energy feedstock.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Biogas Production Incentive Act of 
2008''.

SEC. 2. CREDIT FOR PRODUCTION OF BIOGAS FROM CERTAIN RENEWABLE 
              FEEDSTOCK.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 45P the following new section:

``SEC. 45Q. BIOGAS PRODUCED FROM CERTAIN RENEWABLE FEEDSTOCK.

    ``(a) Amount of Credit.--For purposes of section 38, the qualified 
biogas production credit for any taxable year is an amount equal to the 
product of--
            ``(1) $4.27, and
            ``(2) each million British thermal units (mmBtu) of 
        biogas--
                    ``(A) produced by the taxpayer--
                            ``(i) from qualified energy feedstock, and
                            ``(ii) at a qualified facility during the 
                        7-year period beginning on the date the 
                        facility was originally placed in service, and
                    ``(B)(i) sold by the taxpayer to an unrelated 
                person during the taxable year, or
                    ``(ii) used by the taxpayer as a fuel during the 
                taxable year.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Biogas.--The term `biogas' means a gas which--
                    ``(A) is derived by processing a qualified energy 
                feedstock, and
                    ``(B) contains--
                            ``(i) at least 60 percent methane, and
                            ``(ii) carbon dioxide and trace gases.
            ``(2) Qualified energy feedstock.--
                    ``(A) In general.--The term `qualified energy 
                feedstock' means--
                            ``(i) manure of livestock (including any 
                        litter, wood shavings, straw, rice hulls, 
                        bedding material, and other materials 
                        incidentally collected with the manure),
                            ``(ii) any nonhazardous, organic 
                        agricultural or food industry byproduct or 
                        waste material (cellulosic or otherwise) 
                        derived from--
                                    ``(I) renewable biomass,
                                    ``(II) harvesting residue,
                                    ``(III) any waste or byproduct from 
                                fermentation processes, ethanol 
                                production, biodiesel production, 
                                slaughter of livestock, food 
                                production, food processing, or food 
                                service, or
                                    ``(IV) other organic wastes, 
                                byproducts, or sources,
                            ``(iii) solid wood waste materials, 
                        including waste pallets, crates, dunnage, 
                        manufacturing and construction wood wastes, and 
                        tree trimmings,
                            ``(iv) agricultural or forestry crops, or
                            ``(v) landfill waste, sewage waste 
                        treatment materials, or other decaying organic 
                        materials.
                    ``(B) Renewable biomass.--The term `renewable 
                biomass' means materials from pre-commercial thinning 
                or invasive species from National Forest System land 
                and public lands (as defined in section 103 of the 
                Federal Land Policy and Management Act of 1976 (43 
                U.S.C. 1702)) that--
                            ``(i) are byproducts of preventive 
                        treatments that are removed--
                                    ``(I) to reduce or contain disease 
                                or insect infestation, or
                                    ``(II) to restore ecosystem health,
                            ``(ii) would not otherwise be used for 
                        higher-value products, and
                            ``(iii) are harvested in accordance with 
                        applicable law and land management plans and 
                        the requirements for--
                                    ``(I) old-growth maintenance, 
                                restoration, and management direction 
                                of paragraphs (2), (3), and (4) of 
                                subsection (e) of section 102 of the 
                                Healthy Forests Restoration Act of 2003 
                                (16 U.S.C. 6512), and
                                    ``(II) large tree retention of 
                                subsection (f) of that section, or
                            ``(iv) any organic matter that is available 
                        on a renewable or recurring basis from non-
                        Federal land or land belonging to an Indian or 
                        Indian tribe that is held in trust by the 
                        United States or subject to a restriction 
                        against alienation imposed by the United 
                        States, including--
                                    ``(I) renewable plant material 
                                (such as feed grains, other 
                                agricultural commodities, other plants 
                                and trees, and algae), and
                                    ``(II) waste material (such as crop 
                                residue, other vegetative waste 
                                material (including wood waste and wood 
                                residues), animal waste and byproducts 
                                (including fats, oils, greases, and 
                                manure), food waste, and yard waste).
                    ``(C) Livestock.--The term `livestock' includes 
                poultry, cattle, sheep, swine, goats, horses, mules, 
                and other equines.
            ``(3) Qualified facility.--The term `qualified facility' 
        means a facility that--
                    ``(A) uses anaerobic digesters or other biological, 
                chemical, or thermal processes to convert qualified 
                energy feedstock into biogas,
                    ``(B) is owned by the taxpayer,
                    ``(C) is located in the United States,
                    ``(D) is originally placed in service after the 
                date of the enactment of this section and before 
                January 1, 2018, and
                    ``(E) the biogas output of which is--
                            ``(i) marketed through interconnection with 
                        a gas distribution or transmission pipeline,
                            ``(ii) marketed as a gaseous or liquid fuel 
                        such as hydrogen or natural gas and then used 
                        as a fuel, or
                            ``(iii) reasonably expected to be used in a 
                        quantity sufficient to offset the consumption 
                        of at least 5,000 mmBtu annually of 
                        commercially-marketed fuel derived from coal, 
                        crude oil, natural gas, propane, or other 
                        fossil fuel.
    ``(c) Special Rules.--For purposes of this section--
            ``(1) Increased credit for qualified cellulosic energy 
        feedstock.--
                    ``(A) In general.--In the case of biogas is 
                produced from qualified cellulosic energy feedstock, 
                subsection (a) shall be applied by substituting the 
                dollar amount in effect for the taxable year under 
                subsection (a)(1) with an amount equal to 125 percent 
                of such dollar amount.
                    ``(B) Qualified cellulosic energy feedstock.--For 
                purposes of subparagraph (A), the term `qualified 
                cellulosic energy feedstock' means an qualified energy 
                feedstock that is composed of any lignocellulosic or 
                hemicellulosic matter.
            ``(2) Production attributable to the taxpayer.--In the case 
        of a facility in which more than 1 person has an ownership 
        interest, except to the extent provided in regulations 
        prescribed by the Secretary, production from the qualified 
        facility shall be allocated among such persons in proportion to 
        their respective ownership interests in the gross sales from 
        such qualified facility.
            ``(3) Related persons.--Persons shall be treated as related 
        to each other if such persons would be treated as a single 
        employer under the regulations prescribed under section 52(b). 
        In the case of a corporation which is a member of an affiliated 
        group of corporations filing a consolidated return, such 
        corporation shall be treated as selling biogas to an unrelated 
        person if such biogas is sold to such a person by another 
        member of such group.
            ``(4) Pass-thru in the case of estates and trusts.--Under 
        regulations prescribed by the Secretary, rules similar to the 
        rules of subsection (d) of section 52 shall apply.
            ``(5) Coordination with credit from producing fuel from a 
        nonconventional source.--The amount of biogas produced and sold 
        or used by the taxpayer during any taxable year which is taken 
        into account under this section shall be reduced by the amount 
        of biogas produced and sold by the taxpayer in such taxable 
        year which is taken into account under section 45K.
            ``(6) Coordination with credit from producing electricity 
        from renewable resources.--The amount of biogas produced and 
        sold or used by the taxpayer during any taxable year which is 
        taken into account under this section shall be reduced by the 
        amount of biogas produced and sold by the taxpayer in such 
        taxable year which is taken into account under section 45.
            ``(7) Credit eligibility in the case of government-owned 
        facilities.--In the case of any facility producing biogas and 
        that is owned by a governmental unit, subparagraph (B) of 
        subsection (b)(3) shall be applied by substituting `is leased 
        or operated by the taxpayer' for `is owned by the taxpayer'.
    ``(d) Transferability of Credit.--
            ``(1) In general.--A taxpayer may transfer the credit under 
        this section through an assignment to any person. Such transfer 
        may be revoked only with the consent of the Secretary.
            ``(2) Regulations.--The Secretary shall prescribe such 
        regulations as necessary to ensure that any credit transferred 
        under paragraph (1) is claimed once and not reassigned by such 
        other person.
    ``(e) Adjustment Based on Inflation.--
            ``(1) In general.--The dollar amount under subsection 
        (a)(1) shall be adjusted by multiplying such amount by the 
        inflation adjustment factor for the calendar year in which the 
        sale occurs. If any amount as increased under the preceding 
        sentence is not a multiple of 1 cent, such amount shall be 
        rounded to the nearest multiple of 1 cent.
            ``(2) Computation of inflation adjustment factor.--
                    ``(A) In general.--The Secretary shall, not later 
                than April 1 of each calendar year, determine and 
                publish in the Federal Register the inflation 
                adjustment factor in accordance with this paragraph.
                    ``(B) Inflation adjustment factor.--The term 
                `inflation adjustment factor' means, with respect to a 
                calendar year, a fraction the numerator of which is the 
                GDP implicit price deflator for the preceding calendar 
                year and the denominator of which is the GDP implicit 
                price deflator for calendar year 2007. The term `GDP 
                implicit price deflator' means the most recent revision 
                of the implicit price deflator for the gross domestic 
                product as computed and published by the Department of 
                Commerce before March 15 of the calendar year.''.
    (b) Credit Treated as Business Credit.--Section 38(b) of the 
Internal Revenue Code of 1986 is amended by striking ``plus'' at the 
end of paragraph (32), by striking the period at the end of paragraph 
(33) and inserting ``, plus'', and by adding at the end the following 
new paragraph:
            ``(34) the qualified biogas production credit under section 
        45Q(a).''.
    (c) Credit Allowed Against AMT.--Section 38(c)(4)(B) 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 at the end the following new clause:
    ``(v) the credit determined under section 45Q.''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new item:

``Sec. 45Q. Biogas produced from certain renewable feedstock.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to biogas produced and sold (or used) in taxable years beginning 
after the date of the enactment of this Act.