To encourage the availability and use of motor vehicles that have improved fuel efficiency, in order to reduce the need to import oil into the United States.

SECTION 1. FINDINGS.

    The Congress makes the following findings:
            (1) Ensuring secure access to energy is in the highest 
        national security interests of the United States.
            (2) Without secure access to oil supplies, the United 
        States economy, which depends heavily on oil for 
        transportation, could be severely affected. Two-thirds of the 
        oil used in the United States is consumed by the transportation 
        sector. Passenger vehicles alone account for 40 percent of 
        United States oil use.
            (3) In the year 2000, the United States imported 58 percent 
        of its oil needs, 45 percent of which came from Organization of 
        Petroleum Exporting Countries (OPEC) nations.
            (4) Over the next 20 years, according to the Energy 
        Information Administration, the United States's demand for oil 
        is projected to increase by 33 percent.
            (5) In 1973 OPEC placed an embargo on sales of oil to the 
        United States, creating severe oil shortages and driving up oil 
        prices in the United States. OPEC's action was a major factor 
        in the recession which followed shortly thereafter.
            (6) Under the ``Carter Doctrine'', announced by President 
        Carter in 1980, ``An attempt by any outside forces to gain 
        control of the Persian Gulf region will be regarded as an 
        assault on the vital interests of the United States of America, 
        and such an assault will be repelled by any means necessary, 
        including military force.''.
            (7) Following the Iraqi invasion of Kuwait in 1990, the 
        United States sent more than 500,000 troops to the Persian Gulf 
        to expel the Iraqi troops, liberate Kuwait, protect Saudi 
        Arabia, and ensure access to Persian Gulf oil.
            (8) As of March 19, 2003, the United States is on the verge 
        of fighting yet another war against Iraq to further ensure 
        access to vital oil supplies.
            (9) Many major oil producing nations do not share United 
        States values of democracy, freedom of expression, thought, and 
        religion, and equality for women.
            (10) During the Afghanistan conflict and the war on 
        terrorism, many oil producing nations did not openly support 
        the United States campaign to end the terror, and many of the 
        terrorists of September 11 came from major OPEC nations.
            (11) It is in the highest national security interests of 
        the United States to substantially reduce our dependence on oil 
        as soon as possible, to secure our access to oil supplies, and 
        to reduce our dependence on nations which do not share our 
        interests and values.
            (12) Because most oil is consumed by the transportation 
        sector, reduction of our dependence on oil can only come from 
        major increases in fuel efficiency in cars, sport utility 
        vehicles, light trucks, and other vehicles.
            (13) To protect United States national security interests 
        after September 11, the United States Government has invested 
        heavily in securing many industrial sectors, including airlines 
        and the national health system.

SEC. 2. FUEL EFFICIENCY VEHICLE CREDIT.

    (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:

``SEC. 30B. FUEL EFFICIENCY VEHICLE CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) Fuel economy not less than 40 miles per gallon.--At 
        the election of the taxpayer, 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 any qualified 
        fuel-effi cient vehicle placed in service by the taxpayer 
during the taxable year.
            ``(2) Fuel economy not less than 50 miles per gallon.--In 
        the case of a qualified fuel-efficient vehicle in which the 
        fuel economy (within the meaning of subsection (c)(1)) is not 
        less than 50 miles per gallon--
                    ``(A) paragraph (1) shall be applied by 
                substituting `35 percent' for `25 percent', and
                    ``(B) subsection (b) shall be applied by 
                substituting `$6,000' for $5,000'.
    ``(b) Limitation.--The amount of the credit allowed by subsection 
(a) shall not exceed $5,000.
    ``(c) Qualified Fuel-Efficient Vehicle.--For purposes of this 
section, the term `qualified fuel-efficient vehicle' means a motor 
vehicle (as defined in section 30(c)(2))--
            ``(1) in which the fuel economy (determined in accordance 
        with section 4064) of such vehicle is rated at not less than 40 
        miles per gallon,
            ``(2) which is--
                    ``(A) an automobile (as defined in section 
                4064(b)), or
                    ``(B) a truck or van with an unloaded gross vehicle 
                weight rating not greater than 7,500 pounds, and
            ``(3) which has received a certificate that such vehicle 
        meets or exceeds the Bin 5 Tier II emission level established 
        in regulations prescribed by the Administrator of the 
        Environmental Protection Agency under section 202(i) of the 
        Clean Air Act for that make and model year vehicle.
    ``(d) Special Rules.--
            ``(1) Basis reduction.--The basis of any property for which 
        a credit is allowable under subsection (a) shall be reduced by 
        the amount of such credit.
            ``(2) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit allowable 
        under subsection (a) with respect to any property which ceases 
        to be property eligible for such credit.
            ``(3) Property used outside united states, etc. not 
        qualified.--No credit shall be allowed under subsection (a) 
        with respect to any property referred to in section 50(b) or 
        with respect to the portion of the cost of any property taken 
        into account under section 30, 179, or 179A.
    ``(e) Carryforward of Unused Credits.--If the credit allowable 
under subsection (a) for any taxable year exceeds--
            ``(1) the regular tax for the taxable year reduced by the 
        sum of the credits allowable under subpart A and this part 
        (other than this section), over
            ``(2) the tentative minimum tax for the taxable year,
such excess shall be carried to the succeeding taxable year and added 
to the credit allowable under subsection (a) for such taxable year.''.
    (b) Clerical Amendment.--The table of sections for such subpart B 
is amended by inserting after the item relating to section 30A the 
following new item:

                              ``Sec. 30B. Fuel-efficiency vehicle 
                                        credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 3. FUEL EFFICIENT VEHICLE ASSEMBLY CREDIT.

    (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 new section:

``SEC. 45G. FUEL-EFFICIENT VEHICLE ASSEMBLY CREDIT.

    ``(a) General Rule.--For purposes of section 38, the fuel-efficient 
vehicle assembly credit determined under this section for the taxable 
year is an amount equal to the product of $2,000 and the number of 
qualified fuel-efficient vehicles manufactured or produced in the 
United States by the taxpayer during the taxable year for their 1st 
retail sale.
    ``(b) Qualified Fuel-Efficient Vehicle.--For purposes of subsection 
(a), the term `qualified fuel-efficient vehicle' has the meaning given 
to such term by section 30B(c).
    ``(c) 1st Retail Sale.--For purposes of subsection (a), the term 
`1st retail sale' has the meaning given to such term by section 
4002.''.
    (b) Credit To Be Part of General Business Credit.--Subsection (b) 
of section 38 of such Code (relating to general business credit) is 
amended by striking ``plus'' at the end of paragraph (14), by striking 
the period at the end of paragraph (15) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(16) the fuel-efficient vehicle assembly credit 
        determined under section 45G(a).''.
    (c) Conforming 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 inserting after the item relating to section 45F the 
following new item:

                              ``Sec. 45G. Fuel-efficient vehicle 
                                        assembly credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 4. LOAN GUARANTEES.

    (a) General Authority.--The Secretary of Energy may provide loan 
guarantees to manufacturers of motor vehicles or of motor vehicle 
engines for the purposes described in subsection (b).
    (b) Eligible Purposes.--Loans guaranteed under this section shall 
be used for the costs of conversion from the manufacture of motor 
vehicles or engines achieving less than 40 miles per gallon of gasoline 
to the manufacture of motor vehicles or engines achieving more than 40 
miles per gallon of gasoline. Such loans may not be used for 
advertising or promotional costs.
    (c) Aggregate Amount of Loan Guarantees.--The aggregate amount of 
loans that may be guaranteed under this section at any one time shall 
not exceed $1,000,000,000.
    (d) Limitation on Loan Guarantee Size.--The Secretary shall not 
guarantee a loan under this section for an amount greater than 
$100,000,000.
    (e) Rates of Interest.--The Secretary shall not make a loan 
guarantee under this section if the interest rate for the loan exceeds 
that which the Secretary determines to be reasonable, taking into 
consideration the prevailing interest rates and customary fees incurred 
under similar obligations in the private capital market.
    (f) Ability To Repay.--The Secretary shall not make a loan 
guarantee under this section unless the Secretary has made a finding in 
writing that the recipient of the loan is likely to be able to repay 
the loan according to its terms.
    (g) Applications.--The Secretary shall prescribe the form and 
contents required of applications for assistance under this section, to 
enable the Secretary to determine the eligibility of the applicant's 
proposal, and shall establish terms and conditions for loan guarantees 
made under this section.
    (h) Full Faith and Credit.--All guarantees entered into by the 
Secretary under this section shall constitute general obligations of 
the United States backed by the full faith and credit of the United 
States.
    (i) Modifications.--The Secretary may approve the modification of 
any term or condition of a loan guarantee or loan guarantee commitment, 
including the rate of interest, time of payment of interest or 
principal, or security requirements, if the Secretary finds in writing 
that--
            (1) the modification is equitable and is in the overall 
        best interests of the United States; and
            (2) consent has been obtained from the applicant and the 
        holder of the obligation.
    (j) Default.--The Secretary shall prescribe regulations setting 
forth procedures in the event of default on a loan guaranteed under 
this section. The Secretary shall ensure that each loan guarantee made 
under this section contains terms and conditions that provide that--
            (1) if a payment of principal or interest under the loan is 
        in default for more than 30 days, the Secretary shall pay to 
        the holder of the obligation, or the holder's agent, the amount 
        of unpaid guaranteed interest;
            (2) if the default has continued for more than 90 days, the 
        Secretary shall pay to the holder of the obligation, or the 
        holder's agent, 90 percent of the unpaid guaranteed principal;
            (3) after final resolution of the default, through 
        liquidation or otherwise, the Secretary shall pay to the holder 
        of the obligation, or the holder's agent, any remaining amounts 
        guaranteed but which were not recovered through the default's 
        resolution;
            (4) the Secretary shall not be required to make any payment 
        under paragraphs (1) through (3) if the Secretary finds, before 
        the expiration of the periods described in such paragraphs, 
        that the default has been remedied; and
            (5) the holder of the obligation shall not receive payment 
        or be entitled to retain payment in a total amount which, 
        together with all other recoveries (including any recovery 
        based upon a security interest in equipment or facilities) 
        exceeds the actual loss of such holder.
    (k) Rights of the Secretary.--
            (1) Subrogation.--If the Secretary makes payment to a 
        holder, or a holder's agent, under subsection (j) in connection 
        with a loan guarantee made under this section, the Secretary 
        shall be subrogated to all of the rights of the holder with 
        respect to the obligor under the loan.
            (2) Disposition of property.--The Secretary may complete, 
        recondition, reconstruct, renovate, repair, maintain, operate, 
        charter, rent, sell, or otherwise dispose of any property or 
        other interests obtained pursuant to this section. The 
        Secretary shall not be subject to any Federal or State 
        regulatory requirements when carrying out this paragraph.
    (l) Action Against Obligor.--The Secretary may bring a civil action 
in an appropriate Federal court in the name of the holder of the 
obligation in the event of a default on a loan guaranteed under this 
section. The holder of a guarantee shall make available to the 
Secretary all records and evidence necessary to prosecute the civil 
action. The Secretary may accept property in full or partial 
satisfaction of any sums owed as a result of a default. If the 
Secretary receives, through the sale or other disposition of such 
property, an amount greater than the aggregate of--
            (1) the amount paid to the holder of a guarantee under 
        subsection (j); and
            (2) any other cost to the United States of remedying the 
        default,
the Secretary shall pay such excess to the obligor.
    (m) Breach of Conditions.--The Attorney General shall commence a 
civil action in an appropriate Federal court to enjoin any activity 
which the Secretary finds is in violation of this section, regulations 
issued hereunder, or any conditions which were duly agreed to, and to 
secure any other appropriate relief.
    (n) Attachment.--No attachment or execution may be issued against 
the Secretary, or any property in the control of the Secretary, prior 
to the entry of final judgment to such effect in any State, Federal, or 
other court.
    (o) Investigation Charge.--The Secretary may charge and collect 
from each applicant a reasonable charge for appraisal of the value of 
the equipment or facilities for which the loan guarantee is sought, and 
for making necessary determinations and findings. Such charge shall not 
aggregate more than one-half of 1 percent of the principal amount of 
the obligation.
    (p) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary of Energy for carrying out this section 
such sums as may be necessary for fiscal years 2003 through 2007.
    (q) Definitions.--For purposes of this section:
            (1) The term ``loan guarantee'' means any guarantee, 
        insurance, or other pledge with respect to the payment of all 
        or a part of the principal or interest on any debt obligation 
        of a non-Federal borrower to a non-Federal lender, but does not 
        include the insurance of deposits, shares, or other 
        withdrawable accounts in financial institutions.
            (2) The term ``loan guarantee commitment'' means a binding 
        agreement by the Secretary of Energy to make a loan guarantee 
        when specified conditions are fulfilled by the borrower, the 
        lender, or any other party to the guarantee agreement.
            (3) The term ``modification'' means any Government action 
        that alters the estimated cost of an outstanding loan guarantee 
        (or loan guarantee commitment) from the current estimate of 
        cash flows. This includes the sale of loan assets, with or 
        without recourse, and the purchase of guaranteed loans. This 
        also includes any action resulting from new legislation, or 
        from the exercise of administrative discretion under existing 
        law, that directly or indirectly alters the estimated cost of 
        outstanding loan guarantees (or loan guarantee commitments) 
        such as a change in collection procedures.

SEC. 5. PERMANENT EXTENSION OF RESEARCH
              CREDIT.

    (a) In General.--Section 41 of the Internal Revenue Code of 1986 
(relating to credit for increasing research activities) is amended by 
striking subsection (h).
    (b) Conforming Amendment.--Paragraph (1) of section 45C(b) of such 
Code is amended by striking subparagraph (D).
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after the date of the enactment of 
this Act.

SEC. 6. INCREASE IN RATES OF ALTERNATIVE INCREMENTAL CREDIT.

    (a) In General.--Subparagraph (A) of section 41(c)(4) of the 
Internal Revenue Code of 1986 (relating to election of alternative 
incremental credit) is amended--
            (1) by striking ``2.65 percent'' and inserting ``3 
        percent'',
            (2) by striking ``3.2 percent'' and inserting ``4 
        percent'', and
            (3) by striking ``3.75 percent'' and inserting ``5 
        percent''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 7. EXCLUSION OF QUALIFIED FUEL-EFFICIENT VEHICLES FROM CALCULATION 
              OF AVERAGE FUEL ECONOMY OF A MANUFACTURER.

    Section 32904(a) of title 49, United States Code, is amended by 
adding at the end the following:
    ``(3) In calculating the average fuel economy of a manufacturer 
under paragraph (1), the Administrator shall not consider any 
automobile manufactured by the manufacturer for which a credit is 
allowed under section 38(a)(16) of the Internal Revenue Code of 
1986.''.

Summary: Amends the Internal Revenue Code to allow a taxpayer as credits against income tax: (1) a fuel efficiency vehicle credit equal to 25 percent of the cost of any qualified fuel-efficient vehicle placed in service during the taxable year. And (2) a fuel-efficient vehicle assembly credit equal to $2,000 for every qualified fuel-efficient vehicle manufactured or produced in the United States during such year for first retail sale. Authorizes the Secretary of Energy to provide loan guarantees of up to $100 million per loan to manufacturers of motor vehicles or of motor vehicle engines for the costs of conversion from the manufacture of motor vehicles or engines achieving less than 40 miles per gallon of gasoline to the manufacture of such products achieving more than 40 miles per gallon Amends the Internal Revenue Code to: (1) extend permanently the credit for increasing research activities, and (2) increase the alternative incremental credit rates.