SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Industrial Cogeneration Act of 
2007''.

SEC. 2. ENERGY CREDIT FOR COMBINED HEAT AND POWER SYSTEM PROPERTY.

    (a) In General.--Section 48(a)(3)(A) (defining energy property) is 
by striking ``or'' at the end of clause (iii), by inserting ``or'' at 
the end of clause (iv), and by adding at the end the following new 
clause:
    ``(v) combined heat and power system property,''.
    (b) Combined Heat and Power System Property.--Section 48 is amended 
by adding at the end the following new subsection:
    ``(d) Combined Heat and Power System Property.--For purposes of 
subsection (a)(3)(A)(v)--
            ``(1) Combined heat and power system property.--The term 
        `combined heat and power system property' means property 
        comprising a system--
                    ``(A) which uses the same energy source for the 
                simultaneous or sequential generation of electrical 
                power, mechanical shaft power, or both, in combination 
                with the generation of steam or other forms of useful 
                thermal energy (including heating and cooling 
                applications),
                    ``(B) which has an electrical capacity of not more 
                than 50 megawatts or a mechanical energy capacity of 
                not more than 67,000 horsepower or an equivalent 
                combination of electrical and mechanical energy 
                capacities,
                    ``(C) which produces--
                            ``(i) at least 20 percent of its total 
                        useful energy in the form of thermal energy 
                        which is not used to produce electrical or 
                        mechanical power (or combination thereof), and
                            ``(ii) at least 20 percent of its total 
                        useful energy in the form of electrical or 
                        mechanical power (or combination thereof),
                    ``(D) the energy efficiency percentage of which 
                exceeds 60 percent, and
                    ``(E) which is placed in service before January 1, 
                2011.
            ``(2) Special rules.--
                    ``(A) Energy efficiency percentage.--For purposes 
                of this subsection, the energy efficiency percentage of 
                a system is the fraction--
                            ``(i) the numerator of which is the total 
                        useful electrical, thermal, and mechanical 
                        power produced by the system at normal 
                        operating rates, and expected to be consumed in 
                        its normal application, and
                            ``(ii) the denominator of which is the 
                        higher heating value of the primary fuel 
                        sources for the system.
                    ``(B) Determinations made on btu basis.--The energy 
                efficiency percentage and the percentages under 
                paragraph (1)(C) shall be determined on a Btu basis.
                    ``(C) Input and output property not included.--The 
                term `combined heat and power system property' does not 
                include property used to transport the energy source to 
                the facility or to distribute energy produced by the 
                facility.
                    ``(D) Certain exception not to apply.--The first 
                sentence of the matter in subsection (a)(3) which 
                follows subparagraph (D) thereof shall not apply to 
                combined heat and power system property.
            ``(3) Systems using bagasse.--If a system is designed to 
        use bagasse for at least 90 percent of the energy source--
                    ``(A) paragraph (1)(D) shall not apply, but
                    ``(B) the amount of credit determined under 
                subsection (a) with respect to such system shall not 
                exceed the amount which bears the same ratio to such 
                amount of credit (determined without regard to this 
                subparagraph) as the energy efficiency percentage of 
                such system bears to 60 percent.
            ``(4) Nonapplication of certain rules.--For purposes of 
        determining if the term `combined heat and power system 
        property' includes technologies which generate electricity or 
        mechanical power using back-pressure steam turbines in place of 
        existing pressure-reducing valves or which make use of waste 
        heat from industrial processes such as by using organic 
        rankine, stirling, or kalina heat engine systems, paragraph (1) 
        shall be applied without regard to subparagraphs (C) and (D) 
        thereof.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to periods after December 31, 2007, in taxable years ending after 
such date, under rules similar to the rules of section 48(m) of the 
Internal Revenue Code of 1986 (as in effect on the day before the date 
of the enactment of the Revenue Reconciliation Act of 1990).
Industrial Cogeneration Act of 2007 - Amends the Internal Revenue Code to allow an energy tax credit for investment in combined heat and power system property placed in service before January 1, 2011.
To amend the Internal Revenue Code of 1986 to apply the energy credit to combined heat and power system property.