To amend the Internal Revenue Code of 1986 to increase and extend the alternative motor vehicle credit for certain flexible fuel hybrid vehicles.

SECTION 1. INCREASE AND EXTENSION OF CREDIT FOR CERTAIN FLEXIBLE FUEL 
              HYBRID VEHICLES.

    (a) In General.--Subsection (a) of section 30B of the Internal 
Revenue Code of 1986 is amended by striking ``and'' at the end of 
paragraph (3), by striking paragraph (4), and by inserting after 
paragraph (3) the following new paragraphs:
            ``(4) the new flexible fuel hybrid motor vehicle credit 
        determined under subsection (e), and
            ``(5) the new qualified alternative fuel motor vehicle 
        credit determined under subsection (f).''.
    (b) New Flexible Fuel Hybrid Motor Vehicle Credit.--Section 30B of 
such Code is amended by redesignating subsections (e) through (j) as 
subsections (f) through (k), respectively, and by inserting after 
subsection (d) the following new subsection:
    ``(e) New Flexible Fuel Hybrid Motor Vehicle Credit.--
            ``(1) In general.--For purposes of subsection (a), the new 
        flexible fuel hybrid motor vehicle credit determined under this 
        subsection for the taxable year is the credit amount determined 
        under paragraph (2) with respect to a new hybrid flexible fuel 
        motor vehicle placed in service by the taxpayer during the 
        taxable year.
            ``(2) Credit amount.--
                    ``(A) In general.--The credit amount determined 
                under this paragraph shall be determined in accordance 
                with the following table:


``In the case of a vehicle the      The credit amount is--
 city fuel economy of which
 (expressed as a percentage of the
 city fuel economy of the
 comparable vehicle referred to in
 paragraph (3)(B)) is--
  At least 125 percent but less     $1,500
   than 150 percent.
  At least 150 percent but less     $2,000
   than 175 percent.
  At least 175 percent but less     $2,500
   than 200 percent.
  At least 200 percent but less     $3,000
   than 225 percent.
  At least 225 percent............  $3,500

                    ``(B) Fuel economy.--For purposes of subparagraph 
                (A), the city fuel economy of the vehicle for which the 
                credit is being determined shall be determined on a E-
                85 ethanol gallon equivalent basis (as determined by 
                the Administrator of the Environmental Protection 
                Agency), and the city fuel economy of the comparable 
                vehicle referred to in paragraph (3)(B) shall be 
                determined on a gasoline gallon equivalent basis (as so 
                determined).
            ``(3) New flexible fuel hybrid motor vehicle.--For purposes 
        of this subsection, the term `new flexible fuel hybrid motor 
        vehicle' means a new qualified hybrid motor vehicle--
                    ``(A) which is capable of operating on an 
                alternative fuel, on gasoline, and on any blend 
                thereof, and
                    ``(B) which is certified by the Administrator of 
                the Environmental Protection Agency, in consultation 
                with the manufacturer, to have achieved a city fuel 
                economy using E-85 ethanol which is at least 125 
                percent of the city fuel economy of a comparable 
                vehicle that is a nonhybrid internal combustion vehicle 
                fueled by gasoline.
            ``(4) Coordination with new qualified hybrid motor vehicle 
        credit.--Subsection (d) shall not apply to any motor vehicle 
        for which credit is allowed under this subsection.''.
    (c) Extension of Termination.--Subsection (k) of section 30B of 
such Code, as redesignated by this section, is amended by striking 
``and'' at the end of paragraph (3), by redesignating paragraph (4) as 
paragraph (5), and by inserting after paragraph (3) the following new 
paragraph:
            ``(4) in the case of a new flexible fuel hybrid motor 
        vehicle (as described in subsection (e)), December 31, 2014, 
        and''.
    (d) Vehicles Included in Numeric Limitation.--Paragraph (1) of 
section 30B(g) of such Code, as redesignated by this section, is 
amended by striking ``or (d)'' and inserting ``, (d), or (e)''.
    (e) Conforming Amendments.--
            (1) Subparagraph (A) of section 30B(i)(5) of such Code, as 
        redesignated by this section, is amended by striking 
        ``subsection (e)'' and inserting ``subsection (f)''.
            (2) Paragraph (6) of section 30B(i) of such Code, as 
        redesignated by this section, is amended by striking 
        ``subsection (g)'' and inserting ``subsection (h)''.
            (3) Subsection (k) of section 30(B) of such Code, as 
        redesignated by this section, is amended--
                    (A) in paragraph (2), by inserting ``other than a 
                new flexible fuel hybrid motor vehicle described in 
                subsection (e)'' after ``a new qualified hybrid motor 
                vehicle (as described in subsection (d)(2)(A))'',
                    (B) in paragraph (3), by inserting ``other than a 
                new flexible fuel hybrid motor vehicle described in 
                subsection (e)'' after ``a new qualified hybrid motor 
                vehicle (as described in subsection (d)(2)(B))'', and
                    (C) in paragraph (5), as redesignated by this 
                section, by striking ``subsection (e)'' and inserting 
                ``subsection (f)''.
            (4) Subsection (b) of section 38 of such Code is amended by 
        striking ``section 30B(g)(1)'' and inserting ``section 
        30B(h)(1)''.
            (5) Paragraph (36) of section 1016(a) of such Code is 
        amended by striking ``section 30B(h)(4)'' and inserting 
        ``section 30B(i)(4)''.
    (f) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2006.

Summary: Amends the Internal Revenue Code to qualify new flexible fuel hybrid motor vehicles for the alternative motor vehicle tax credit through December 31, 2014. Defines new flexible fuel hybrid motor vehicle as a qualified hybrid motor vehicle which is capable of operating on an alternative fuel, on gasoline, and on any blend thereof, and which is certified by the Administrator of the Environmental Protection Agency to have achieved a certain level of city fuel economy using E-85 ethanol fuel.