To amend the Internal Revenue Code of 1986 to provide an investment credit to promote the conversion of United States coal and domestic carbonaceous feedstocks into synthetic fuels and synthetic gas.

Summary: Foreign Oil Displacement Act of 2010 - Amends the Internal Revenue Code to: (1) allow a tax credit for investment in a carbonaceous fuels facility; (2) allow a new 30% tax credit for investment in a carbonaceous fuels conversion facility; and (3) exempt from the manufacturer's excise tax on fuels carbonaceous fuel or any portion of a blend that is carbonaceous fuel. Defines "carbonaceous fuels conversion facility" as a facility for producing fuels from nonconventional sources using coal, including peat and any byproduct (including synthetic gas) or chemical that is from a coal, culm, or silt preparation facility and that contains fixed carbon derived from coal.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Foreign Oil Displacement Act of 
2010''.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) the strategic interests of the United States would be 
        served by a reduction in the Nation's dependence upon imported 
        oil to produce transportation fuels and other products vital to 
        both the domestic economy and national security;
            (2) this goal would be served by the development of a 
        viable, commercially competitive synthetic fuels industry 
        reliant upon domestic coals and other plentiful, nontraditional 
        carbonaceous feedstocks; and
            (3) temporary financial incentives are required to foster 
        private investment in the technology, design, construction, and 
        operation of strategic facilities capable of producing 
        synthetic fuels or synthetic gas on a commercial scale.

SEC. 3. CARBONACEOUS FUELS FACILITY CREDIT.

    (a) Allowance of Carbonaceous Fuels Facility Credit.--Section 46 of 
the Internal Revenue Code of 1986 is amended by striking ``and'' at the 
end of paragraph (5), by striking the period at the end of paragraph 
(6) and inserting ``, and'' and by inserting after paragraph (6) the 
following new paragraph:
            ``(7) the carbonaceous fuels facility credit.''.
    (b) Amount of Carbonaceous Fuels Facility Credit.--Subpart E of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after section 48D the following new section:

``SEC. 48E. CARBONACEOUS FUELS FACILITY CREDIT.

    ``(a) In General.--For purposes of section 46, the carbonaceous 
fuels facility credit for any taxable year is an amount equal to 30 
percent of the qualified investment in a carbonaceous fuels conversion 
facility for such taxable year.
    ``(b) Qualified Investment.--For purposes of this section--
            ``(1) In general.--The term `qualified investment' means, 
        with respect to any taxable year, the basis of property placed 
        in service by the taxpayer during the taxable year as part of a 
        carbonaceous fuels conversion facility--
                    ``(A)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, or
                    ``(ii) which is acquired by the taxpayer if the 
                original use of such property commences with the 
                taxpayer,
                    ``(B) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable, and
                    ``(C) which has a useful life of not less than 3 
                years.
            ``(2) Special rule for sale-leasebacks.--For purposes of 
        paragraph (1)(A), in the case of a facility that--
                    ``(A) is originally placed in service by a person, 
                and
                    ``(B) is sold and leased back by such person, or is 
                leased to such person, within 3 months after the date 
                such facility was originally placed in service, for a 
                period of not less than 12 years,
        such facility shall be treated as originally placed in service 
        not earlier than the date on which such property is used under 
        the leaseback (or lease) referred to in subparagraph (B). The 
        preceding sentence shall not apply to any property if the 
        lessee and lessor of such property make an election under this 
        sentence. Such an election, once made, may be revoked only with 
        the consent of the Secretary.
            ``(3) Certain qualified progress expenditures rules made 
        applicable.--Rules similar to the rules of subsections (c)(4) 
        and (d) of section 46 (as in effect on the day before the 
        enactment of the Revenue Reconciliation Act of 1990) shall 
        apply for purposes of this section.
    ``(c) Carbonaceous Fuels Conversion Facility.--
            ``(1) In general.--For purposes of this section, the term 
        `carbonaceous fuels conversion facility' means a facility of 
        the taxpayer used to produce a qualified fuel.
            ``(2) Qualified fuel.--For purposes of paragraph (1), the 
        term `qualified fuel'--
                    ``(A) has the meaning given such term by section 
                45K(c), except that
                    ``(B) in applying section 45K(c)(1)(C), the term 
                `coal' includes--
                            ``(i) peat, and
                            ``(ii) any byproduct (including synthetic 
                        gas) or chemical--
                                    ``(I) that is from a coal, culm, or 
                                silt preparation facility, and
                                    ``(II) that contains fixed carbon 
                                derived from coal.
    ``(d) Coordination With Other Credits.--This section shall not 
apply to any property with respect to which any other credit is allowed 
unless the taxpayer elects to waive the application of such other 
credits to such property.
    ``(e) Credit May Be Assigned.--
            ``(1) In general.--If any taxpayer elects the application 
        of this subsection for any taxable year, the amount of credit 
        determined under this section for such year which would (but 
        for this subsection) be allowable to the taxpayer shall be 
        allowable to the person designated by the taxpayer. Such amount 
        shall be determined by applying this section separately from 
        section 38 for such year. The person so designated shall be 
        treated as the taxpayer with respect to this section (other 
        than this subsection) for purposes of this title (other than 
        this paragraph).
            ``(2) Treatment of amounts paid for assignment.--If any 
        amount is paid to the person who assigns the credit determined 
        under this section, no portion of such amount shall be 
        includible in such person's gross income.
    ``(f) Application of Section.--This section shall apply to periods 
after the date of the enactment of this section and before January 1, 
2024, under rules similar to the rules of section 48(m) (as in effect 
on the day before the date of the enactment of the Revenue 
Reconciliation Act of 1990).''.
    (c) Recapture.--
            (1) In general.--Subsection (a) of section 50 of such Code 
        is amended by adding at the end the following new paragraph:
            ``(6) Special rules relating to carbonaceous fuels 
        conversion facility.--For purposes of applying this subsection 
        in the case of any credit allowable by reason of section 48E, 
        the following shall apply:
                    ``(A) In general.--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 carbonaceous fuels conversion 
                facility (as defined by section 48E(c)) multiplied by a 
                fraction whose numerator is the number of years 
                remaining to fully depreciate under this chapter the 
                carbonaceous fuels conversion 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 carbonaceous 
                fuels conversion 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 carbonaceous fuels conversion 
                facility under section 48E, 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).''.
            (2) Paragraph (4) of section 50(a) of such Code is amended 
        by striking ``and (2)'' and inserting ``, (2), and (6)''.
    (d) Application of At-Risk Rules.--Subparagraph (C) of section 
49(a)(1) of such Code is amended by striking ``and'' at the end of 
clause (v), by striking the period at the end of clause (vi) and 
inserting ``, and'', and by adding at the end thereof the following new 
clause:
                            ``(vii) the portion of the basis of any 
                        carbonaceous fuels conversion facility 
                        attributable to any qualified investment (as 
                        defined by section 48E(b)).''.
    (e) Clerical Amendment.--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 48D the following new 
item:

``Sec. 48E. Carbonaceous fuels facility credit.''
    (f) Effective Date.--The amendments made by this section shall 
apply taxable years ending after the date of the enactment of this Act.

SEC. 4. EXEMPTION FROM MANUFACTURERS EXCISE TAX ON FUELS.

    (a) In General.--Subsection (a) of section 4083 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
paragraph:
            ``(4) Qualified carbonaceous fuel.--
                    ``(A) Exemption.--The terms `taxable fuel', 
                `gasoline', `diesel fuel' and `kerosene' do not include 
                qualified carbonaceous fuel or that portion of a blend 
                that is qualified carbonaceous fuel.
                    ``(B) Qualified carbonaceous fuel defined.--For 
                purposes of subparagraph (A), the term `qualified 
                carbonaceous fuel' means qualified fuel produced by a 
                carbonaceous fuels conversion facility.
                    ``(C) Other definitions.--For purposes of 
                subparagraph (B), the terms `qualified fuel' and 
                `carbonaceous fuels conversion facility' have the 
                meaning given such terms by section 48E.
                    ``(D) Application of paragraph.--This paragraph 
                shall apply during the period beginning on the 91st day 
                after the date of the enactment of this paragraph and 
                ending on December 31, 2023.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.