To amend the Internal Revenue Code of 1986 to provide incentives for used oil re-refining, and for other purposes.

Summary: Amends the Internal Revenue Code to: (1) expand the definition of "qualified refinery" for purposes of the taxpayer election to expense the costs of refinery property to include refineries for processing non-virgin lube oil from used, refined products (including used lube oil originally derived from crude oil or qualified fuels); (2) extend through 2016 the expensing allowance with respect to such refineries; and (3) allow a business-related tax credit for the production of qualified re-refined lubricating oil.

SECTION 1. EXTENSION AND MODIFICATION OF ELECTION TO EXPENSE CERTAIN 
              REFINERIES.

    (a) In General.--
            (1) Definition of qualified refinery.--Subsection (d) of 
        section 179C of the Internal Revenue Code of 1986 (relating to 
        qualified refinery) is amended to read as follows:
    ``(d) Qualified Refinery.--For purposes of this section, the term 
`qualified refinery' means any refinery located in the United States 
which is designed to serve the primary purpose of--
            ``(1) processing liquid fuel--
                    ``(A) from crude oil or qualified fuels (as defined 
                in section 45K(c)), or
                    ``(B) directly from shale or tar sands, or
            ``(2) processing non-virgin lube oil from used, refined 
        products (including used lube oil originally derived from crude 
        oil or qualified fuels).''.
            (2) Definition of qualified refinery property.--Subsection 
        (c) of section 179C of such Code is amended by adding at the 
        end the following new paragraph:
            ``(4) Special rule for qualified refineries producing re-
        refined lubricating oil.--In the case of a refinery described 
        in subsection (d)(2)--
                    ``(A) paragraph (1)(B) shall be applied by 
                substituting `January 1, 2017' for `January 1, 2014', 
                and
                    ``(B) paragraph (1)(F) shall be applied by 
                substituting `January 1, 2013' for `January 1, 2010' 
                each place it appears.''.
    (b) Conforming Amendments.--
            (1) Subsection (e) of section 179C of the Internal Revenue 
        Code of 1986 is amended--
                    (A) by inserting ``virgin'' before ``lube oil'' in 
                paragraph (1), and
                    (B) by inserting ``or other products from used 
                refined products'' after ``(as defined in section 
                45K(c))'' in paragraph (2).
            (2) Subsection (f) of section 179C of such Code is amended 
        by inserting ``virgin'' before ``lube oil facility''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 2. CREDIT FOR PRODUCTION OF RE-REFINED LUBRICATING OIL.

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

``SEC. 45R. CREDIT FOR PRODUCTION OF RE-REFINED LUBRICATING OIL.

    ``(a) General Rule.--For purposes of section 38, the re-refined 
lubricating oil production credit determined under this section for any 
taxable year is equal to 20 cents per gallon of qualified re-refined 
lubricating oil which is produced by the taxpayer during the taxable 
year.
    ``(b) Qualified Re-Refined Lubricating Oil- For Purposes of This 
Section.--
            ``(1) In general.--The term `qualified re-refined 
        lubricating oil' means a base oil which--
                    ``(A) meets the American Society of Testing and 
                Materials standard for hydrocarbon lubricant base oils 
                (ASTM D6074), and
                    ``(B) which is manufactured--
                            ``(i) at a qualified facility, and
                            ``(ii) from at least 95 percent used oil by 
                        a re-refining process which effectively removes 
                        physical and chemical impurities and spent and 
                        unspent additives.
            ``(2) Qualified facility.--The term `qualified facility' 
        means a qualified refinery (as defined in section 179C(d)).
            ``(3) Noncompliance with pollution control laws.--For 
        purposes of paragraph (2), a facility that is not in material 
        compliance with all applicable State and Federal pollution 
        prevention, control, and permit requirements for any period of 
        time during a taxable year shall not be a qualified facility 
        during such period.
    ``(c) Adjustment for Inflation.--In the case of a taxable year 
beginning in a calendar year after 2009, the 20 cents amount in 
subsection (a) shall be increased by an amount equal to--
            ``(1) such amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year by substituting 
        `calendar year 2008' for `calendar year 1992' in subparagraph 
        (B) thereof.''.
    (b) Credit Made Part of General Business Credit.--Section 38(b) of 
the Internal Revenue Code of 1986 is amended--
            (1) by striking ``plus'' at the end of paragraph (34),
            (2) by striking the period at the end of paragraph (35) and 
        inserting ``, plus'', and
            (3) by adding at the end the following new paragraph:
            ``(36) the re-refined lubricating oil production credit 
        determined under section 45R(a).''.
    (c) 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:

``Sec. 45R. Credit for production of re-refined lubricating oil.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to oil produced after the date of the enactment of this Act.