To provide incentives for investment in renewable energy facilities.

Summary: Renewable Energy Financing Incentive Act of 2004 - Amends the Internal Revenue Code to provide for the nonrecognition of gain from the sale of real property if such gain is reinvested in renewable energy property within two years after the sale. Defines "renewable energy property" as a facility located in the United States which uses renewable energy sources as a primary feedstock for the generation of electricity or the manufacture of motor vehicle fuels.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Renewable Energy Financing Incentive 
Act of 2004''.

SEC. 2. NONRECOGNITION OF GAIN FROM SALE OF REAL PROPERTY UPON 
              SUBSEQUENT PURCHASE OF RENEWABLE ENERGY PROPERTY.

    (a) In General.--Part III of subchapter O of chapter 1 of the 
Internal Revenue Code of 1986 (relating to common nontaxable exchanges) 
is amended by adding at the end the following new section:

``SEC. 1046. NONRECOGNITION OF GAIN FROM SALE OF REAL PROPERTY UPON 
              SUBSEQUENT PURCHASE OF RENEWABLE ENERGY PROPERTY.

    ``(a) General Rule.--If--
            ``(1) the taxpayer elects in such form as the Secretary may 
        prescribe the application of this section with respect to any 
        sale of real property located in the United States,
            ``(2) such sale gives rise to gain, and
            ``(3) the seller of such property acquires renewable energy 
        property within the replacement period,
then, except as provided in subsections (b) and (e), no gain shall 
result to the taxpayer from the sale of such property.
    ``(b) Amount of Gain Resulting.--
            ``(1) In general.--In the case of an acquisition of 
        renewable energy property to which subsection (a) applies, gain 
        shall result from such acquisition to the extent that the price 
        for which such real property is sold exceeds the cost of the 
        renewable energy property acquired.
            ``(2) Gain recognized.--Except as provided in this section, 
        the gain determined under paragraph (1) shall be recognized, 
        notwithstanding any other provision of this subtitle.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Renewable energy property.--The term `renewable 
        energy property' means a facility located in the United States 
        which uses renewable energy sources as a primary feedstock for 
        the generation of electricity or the manufacture of motor 
        vehicle fuels.
            ``(2) Special rule relating to stock and interests in 
        partnerships.--
                    ``(A) Partnership interest.--An interest in a 
                partnership shall be treated as an interest in each of 
                the assets of the partnership and not as an interest in 
                the partnership.
                    ``(B) Stock in corporation.--Stock in a corporation 
                the principal business of which is owning or operating 
                renewable energy property shall be treated as such 
                property.
                    ``(C) Cooperatives.--Rules similar to the rules of 
                subparagraph (A) or (B), as appropriate, shall apply in 
                the case of an organization which is subject to section 
                521 or to which part I of subchapter T applies.
            ``(3) Replacement period.--The term `replacement period' 
        means the 2-year period beginning on the date of the sale of 
        real property with respect to which there is in effect an 
        election under subsection (a).
            ``(4) Requirement that property be identified.--For 
        purposes of this section, any property received by the taxpayer 
        shall be treated as property which is not like-kind property if 
        such property is not identified as property to be received in 
        the exchange on or before the day which is 180 days after the 
        date on which the taxpayer transfers the property relinquished 
        in the exchange.
    ``(d) Basis of Renewable Energy Property.--The basis shall be the 
same as that of the property exchanged, decreased in the amount of any 
money received by the taxpayer and increased in the amount of gain or 
decreased in the amount of loss to the taxpayer that was recognized on 
such exchange.
    ``(e) Recapture.--
            ``(1) In general.--If a taxpayer disposes of any renewable 
        energy property, then, notwithstanding any other provision of 
        this title, gain (if any) shall be recognized to the extent of 
        the gain which was not recognized under subsection (a) by 
        reason of the acquisition by such taxpayer of such renewable 
        energy property.
            ``(2) Certain dispositions not taken into account.--For 
        purposes of paragraph (1), there shall not be taken into 
        account any disposition--
                    ``(A) after the death of the taxpayer,
                    ``(B) in a compulsory or involuntary conversion 
                (within the meaning of section 1033) if the exchange 
                occurred before the threat or imminence of such 
                conversion, or
                    ``(C) with respect to which it is established to 
                the satisfaction of the Secretary that such disposition 
                had as one of its principal purposes the avoidance of 
                Federal income tax.
    ``(f) Statute of Limitations.--If any gain is realized by the 
taxpayer on the sale or exchange of any renewable energy property and 
there is in effect an election under subsection (a) with respect to 
such gain, then--
            ``(1) the statutory period for the assessment of any 
        deficiency with respect to such gain shall not expire before 
        the expiration of 3 years from the date the Secretary is 
        notified by the taxpayer (in such manner as the Secretary may 
        by regulations prescribe) of--
                    ``(A) the taxpayer's cost of purchasing renewable 
                energy property which the taxpayer claims results in 
                nonrecognition of any part of such gain,
                    ``(B) the taxpayer's intention not to purchase 
                renewable energy property within the replacement 
                period, or
                    ``(C) a failure to make such purchase within the 
                replacement period, and
            ``(2) such deficiency may be assessed before the expiration 
        of such 3-year period notwithstanding the provisions of any 
        other law or rule of law which would otherwise prevent such 
        assessment.''.
    (b) Conforming Amendment.--Section 1016(a) of such Code is amended 
by striking ``and'' at the end of paragraph (27), by striking the 
period at the end of paragraph (28) and inserting ``, and'', and by 
adding at the end the following new paragraph:
            ``(29) in the case of property the acquisition of which 
        resulted under section 1046 in the nonrecognition of any part 
        of the gain realized on the sale of other property, to the 
        extent provided in section 1046.''.
    (c) Clerical Amendment.--The table of sections for part III of 
subchapter O of chapter 1 of such Code is amended by adding at the end 
the following new item:

``Sec. 1046. Nonrecognition of gain from sale of real property upon 
                            subsequent purchase of renewable energy 
                            property.''.
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to real property sold after December 31, 2004.