SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Clean Engine Technology Act of 
2003''.

SEC. 2. CREDIT FOR QUALIFYING CLEAN TECHNOLOGY ENGINES.

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

``SEC. 30B. CREDIT FOR QUALIFYING CLEAN TECHNOLOGY ENGINES.

    ``(a) Credit Allowed.--There shall be allowed as a credit against 
the tax imposed by this chapter for the taxable year an amount equal to 
25 percent of the cost of each qualifying clean technology engine 
placed in service during the taxable year by any taxpayer in connection 
with such taxpayer's trade or business.
    ``(b) Limitation.--
            ``(1) In general.--The credit allowed under subsection (a) 
        shall not exceed $15,000 for any taxpayer for any taxable year.
            ``(2) Maximum credit per ton.--The credit allowed under 
        subsection (a) shall not exceed $13,600 for each ton of 
        emissions eliminated, as determined by regulations promulgated 
        by the Secretary.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualifying clean technology engine.--
                    ``(A) In general.--The term `qualifying clean 
                technology engine' means an engine--
                            ``(i) which replaces a diesel engine (which 
                        is not a qualifying clean technology engine) 
                        used by the taxpayer immediately before such 
                        engine is placed in service,
                            ``(ii) which is used--
                                    ``(I) in a heavy duty truck or a 
                                bus, or
                                    ``(II) for off-highway use,
                            ``(iii) 75 percent of emissions from which 
                        are in an area designated as a severe or 
                        extreme 1 hour ozone nonattainment area (as 
                        determined by the Administrator of the 
                        Environmental Protection Agency) as of the date 
                        of the enactment of this section,
                            ``(iv) which--
                                    ``(I) emits at least 30 percent 
                                fewer ozone forming pollutants than the 
                                engine which it replaces, and
                                    ``(II) meets any Federal and State 
                                pollution control requirements 
                                applicable to the year in which such 
                                engine is placed in service, and
                            ``(v) which is certified as meeting the 
                        requirements of this section by the local air 
                        pollution control authority in such area.
                    ``(B) Engines in new motor vehicles included.--
                            ``(i) In general.--Such term includes an 
                        engine that otherwise meets the requirements of 
                        subparagraph (A) and is in a new motor vehicle 
                        purchased by the taxpayer which replaces a 
                        motor vehicle with a diesel engine (which is 
                        not a qualifying clean technology engine) used 
                        by the taxpayer immediately before such new 
                        motor vehicle is placed in service.
                            ``(ii) Engine in new vehicle replaces 
                        engine in old vehicle.--For purposes of this 
                        section, a qualifying clean technology engine 
                        in a new motor vehicle shall be considered to 
                        have replaced the engine in the vehicle used by 
                        the taxpayer immediately before the new motor 
                        vehicle is placed in service.
            ``(2) Old engine must be destroyed.--No credit shall be 
        allowed under subsection (a) unless the taxpayer destroys or 
        otherwise retires the engine which is replaced by the 
        qualifying clean technology engine.
    ``(d) Application With Other Credits.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess (if 
any) of--
            ``(1) the regular tax for the taxable year reduced by the 
        sum of the credits allowable under subpart A and sections 27, 
        29, and 30, over
            ``(2) the tentative minimum tax for the taxable year.
    ``(e) Basis Reduction.--For purposes of this title, the basis of 
any property shall be reduced by the portion of the cost of such 
property taken into account under subsection (a).
    ``(f) No Double Benefit.--The amount of any deduction or other 
credit allowable under this chapter for any cost taken into account in 
computing the amount of the credit determined under subsection (a) 
shall be reduced by the amount of such credit attributable to such 
cost.
    ``(g) Carryback and Carryforward Allowed.--
            ``(1) In general.--If the credit allowable under subsection 
        (a) for a taxable year exceeds the amount of the limitation 
        under subsection (d) for such taxable year (in this paragraph 
        referred to as the `unused credit year'), such excess shall be 
        a credit carryback to each of the 3 taxable years preceding the 
        unused credit year and a credit carryforward to each of the 20 
        taxable years following unused credit year, except that no 
        excess may be carried to a taxable year beginning before the 
        date of the enactment of this paragraph.
            ``(2) Rules.--Rules similar to the rules of section 39 
        shall apply with respect to the credit carryback and credit 
        carryforward under paragraph (1).
    ``(h) Other Special Rules.--Rules similar to the rules of 
paragraphs (4) and (5) of section 179A(e) shall apply.
    ``(i) Regulations.--The Secretary shall, after consulting with the 
Administrator of the Environmental Protection Agency and the California 
Air Resources Board, prescribe such regulations as necessary to carry 
out the provisions of this section.
    ``(j) Termination.--This section shall not apply to any property 
placed in service after December 31, 2009.''.
    (b) Conforming Amendments.--
            (1) 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) to the extent provided in section 30B(e).''.
            (2) Section 55(c)(2) of such Code is amended by inserting 
        ``30B(d),'' after ``30(b)(3),''.
            (3) The table of sections for subpart B of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 30A the following new item:

``30B. Credit for qualifying clean technology engines.''.
    (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, in taxable years ending after such date.
Clean Engine Technology Act of 2003 - Amends the Internal Revenue Code to allow a limited credit, through December 31, 2009 for the cost of each qualifying clean technology engine placed in service by a taxpayer in connection with the taxpayer's trade or business.
To amend the Internal Revenue Code of 1986 to provide a credit for qualifying clean technology engines.