I 

108TH CONGRESS 

1ST SESSION H. R. 1356

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. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 19, 2003

Mr. ENGEL introduced the following bill; which was referred to the Committee 

on Ways and Means, and in addition to the Committees on Financial 

Services and Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions 

as fall within the jurisdiction of the committee concerned 

A BILL

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. FINDINGS. 

4 The Congress makes the following findings: 

5 (1) Ensuring secure access to energy is in the 

6 highest national security interests of the United 

7 States. 
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1 (2) Without secure access to oil supplies, the 

2 United States economy, which depends heavily on oil 

3 for transportation, could be severely affected. Two4 thirds of the oil used in the United States is con5 sumed by the transportation sector. Passenger vehi6 cles alone account for 40 percent of United States 

7 oil use. 

8 (3) In the year 2000, the United States im9 ported 58 percent of its oil needs, 45 percent of 

10 which came from Organization of Petroleum Export11 ing Countries (OPEC) nations. 

12 (4) Over the next 20 years, according to the 

13 Energy Information Administration, the United 

14 States’s demand for oil is projected to increase by 

15 33 percent. 

16 (5) In 1973 OPEC placed an embargo on sales 

17 of oil to the United States, creating severe oil short18 ages and driving up oil prices in the United States. 

19 OPEC’s action was a major factor in the recession 

20 which followed shortly thereafter. 

21 (6) Under the ‘‘Carter Doctrine’’, announced by 

22 President Carter in 1980, ‘‘An attempt by any out23 side forces to gain control of the Persian Gulf region 

24 will be regarded as an assault on the vital interests 

25 of the United States of America, and such an as-
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1 sault will be repelled by any means necessary, in2 cluding military force.’’. 

3 (7) Following the Iraqi invasion of Kuwait in 

4 1990, the United States sent more than 500,000 

5 troops to the Persian Gulf to expel the Iraqi troops, 

6 liberate Kuwait, protect Saudi Arabia, and ensure 

7 access to Persian Gulf oil. 

8 (8) As of March 19, 2003, the United States is 

9 on the verge of fighting yet another war against Iraq 

10 to further ensure access to vital oil supplies. 

11 (9) Many major oil producing nations do not 

12 share United States values of democracy, freedom of 

13 expression, thought, and religion, and equality for 

14 women. 

15 (10) During the Afghanistan conflict and the 

16 war on terrorism, many oil producing nations did 

17 not openly support the United States campaign to 

18 end the terror, and many of the terrorists of Sep19 tember 11 came from major OPEC nations. 

20 (11) It is in the highest national security inter21 ests of the United States to substantially reduce our 

22 dependence on oil as soon as possible, to secure our 

23 access to oil supplies, and to reduce our dependence 

24 on nations which do not share our interests and val25 ues. 
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1 (12) Because most oil is consumed by the 

2 transportation sector, reduction of our dependence 

3 on oil can only come from major increases in fuel ef4 ficiency in cars, sport utility vehicles, light trucks, 

5 and other vehicles. 

6 (13) To protect United States national security 

7 interests after September 11, the United States Gov8 ernment has invested heavily in securing many in9 dustrial sectors, including airlines and the national 

10 health system. 

11 SEC. 2. FUEL EFFICIENCY VEHICLE CREDIT. 

12 (a) IN GENERAL.—Subpart B of part IV of sub13 chapter A of chapter 1 of the Internal Revenue Code of 

14 1986 (relating to foreign tax credit, etc.) is amended by 

15 adding at the end the following: 

16 ‘‘SEC. 30B. FUEL EFFICIENCY VEHICLE CREDIT. 

17 ‘‘(a) ALLOWANCE OF CREDIT.—

18 ‘‘(1) FUEL ECONOMY NOT LESS THAN 40 MILES

19 PER GALLON.—At the election of the taxpayer, there 

20 shall be allowed as a credit against the tax imposed 

21 by this chapter for the taxable year an amount equal 

22 to 25 percent of the cost of any qualified fuel-effi

23 cient vehicle placed in service by the taxpayer during 

24 the taxable year. 
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1 ‘‘(2) FUEL ECONOMY NOT LESS THAN 50 MILES

2 PER GALLON.—In the case of a qualified fuel-effi3 cient vehicle in which the fuel economy (within the 

4 meaning of subsection (c)(1)) is not less than 50 

5 miles per gallon—

6 ‘‘(A) paragraph (1) shall be applied by 

7 substituting ‘35 percent’ for ‘25 percent’, and 

8 ‘‘(B) subsection (b) shall be applied by 

9 substituting ‘$6,000’ for $5,000’. 

10 ‘‘(b) LIMITATION.—The amount of the credit allowed 

11 by subsection (a) shall not exceed $5,000. 

12 ‘‘(c) QUALIFIED FUEL-EFFICIENT VEHICLE.—For 

13 purposes of this section, the term ‘qualified fuel-efficient 

14 vehicle’ means a motor vehicle (as defined in section 

15 30(c)(2))—

16 ‘‘(1) in which the fuel economy (determined in 

17 accordance with section 4064) of such vehicle is 

18 rated at not less than 40 miles per gallon, 

19 ‘‘(2) which is—

20 ‘‘(A) an automobile (as defined in section 

21 4064(b)), or 

22 ‘‘(B) a truck or van with an unloaded 

23 gross vehicle weight rating not greater than 

24 7,500 pounds, and 
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1 ‘‘(3) which has received a certificate that such 

2 vehicle meets or exceeds the Bin 5 Tier II emission 

3 level established in regulations prescribed by the Ad4 ministrator of the Environmental Protection Agency 

5 under section 202(i) of the Clean Air Act for that 

6 make and model year vehicle. 

7 ‘‘(d) SPECIAL RULES.—

8 ‘‘(1) BASIS REDUCTION.—The basis of any 

9 property for which a credit is allowable under sub10 section (a) shall be reduced by the amount of such 

11 credit. 

12 ‘‘(2) RECAPTURE.—The Secretary shall, by reg13 ulations, provide for recapturing the benefit of any 

14 credit allowable under subsection (a) with respect to 

15 any property which ceases to be property eligible for 

16 such credit. 

17 ‘‘(3) PROPERTY USED OUTSIDE UNITED

18 STATES, ETC. NOT QUALIFIED.—No credit shall be 

19 allowed under subsection (a) with respect to any 

20 property referred to in section 50(b) or with respect 

21 to the portion of the cost of any property taken into 

22 account under section 30, 179, or 179A. 

23 ‘‘(e) CARRYFORWARD OF UNUSED CREDITS.—If the 

24 credit allowable under subsection (a) for any taxable year 

25 exceeds—
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1 ‘‘(1) the regular tax for the taxable year re2 duced by the sum of the credits allowable under sub3 part A and this part (other than this section), over 

4 ‘‘(2) the tentative minimum tax for the taxable 

5 year, 

6 such excess shall be carried to the succeeding taxable year 

7 and added to the credit allowable under subsection (a) for 

8 such taxable year.’’. 

9 (b) CLERICAL AMENDMENT.—The table of sections 

10 for such subpart B is amended by inserting after the item 

11 relating to section 30A the following new item: 

‘‘Sec. 30B. Fuel-efficiency vehicle credit.’’.

12 (c) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years ending after the 

14 date of the enactment of this Act. 

15 SEC. 3. FUEL EFFICIENT VEHICLE ASSEMBLY CREDIT. 

16 (a) IN GENERAL.—Subpart D of part IV of sub17 chapter A of chapter 1 of the Internal Revenue Code of 

18 1986 (relating to business-related credits) is amended by 

19 adding at the end the following new section: 

20 ‘‘SEC. 45G. FUEL-EFFICIENT VEHICLE ASSEMBLY CREDIT. 

21 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

22 the fuel-efficient vehicle assembly credit determined under 

23 this section for the taxable year is an amount equal to 

24 the product of $2,000 and the number of qualified fuel25 efficient vehicles manufactured or produced in the United 
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1 States by the taxpayer during the taxable year for their 

2 1st retail sale. 

3 ‘‘(b) QUALIFIED FUEL-EFFICIENT VEHICLE.—For 

4 purposes of subsection (a), the term ‘qualified fuel-effi5 cient vehicle’ has the meaning given to such term by sec6 tion 30B(c). 

7 ‘‘(c) 1ST RETAIL SALE.—For purposes of subsection 

8 (a), the term ‘1st retail sale’ has the meaning given to 

9 such term by section 4002.’’. 

10 (b) CREDIT TO BE PART OF GENERAL BUSINESS

11 CREDIT.—Subsection (b) of section 38 of such Code (re12 lating to general business credit) is amended by striking 

13 ‘‘plus’’ at the end of paragraph (14), by striking the period 

14 at the end of paragraph (15) and inserting ‘‘, plus’’, and 

15 by adding at the end the following new paragraph: 

16 ‘‘(16) the fuel-efficient vehicle assembly credit 

17 determined under section 45G(a).’’. 

18 (c) CONFORMING AMENDMENT.—The table of sec19 tions for subpart D of part IV of subchapter A of chapter 

20 1 of the Internal Revenue Code of 1986 is amended by 

21 inserting after the item relating to section 45F the fol22 lowing new item:

‘‘Sec. 45G. Fuel-efficient vehicle assembly credit.’’.

23 (d) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to taxable years ending after the 

25 date of the enactment of this Act. 
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1 SEC. 4. LOAN GUARANTEES. 

2 (a) GENERAL AUTHORITY.—The Secretary of Energy 

3 may provide loan guarantees to manufacturers of motor 

4 vehicles or of motor vehicle engines for the purposes de5 scribed in subsection (b). 

6 (b) ELIGIBLE PURPOSES.—Loans guaranteed under 

7 this section shall be used for the costs of conversion from 

8 the manufacture of motor vehicles or engines achieving 

9 less than 40 miles per gallon of gasoline to the manufac10 ture of motor vehicles or engines achieving more than 40 

11 miles per gallon of gasoline. Such loans may not be used 

12 for advertising or promotional costs. 

13 (c) AGGREGATE AMOUNT OF LOAN GUARANTEES.—

14 The aggregate amount of loans that may be guaranteed 

15 under this section at any one time shall not exceed 

16 $1,000,000,000. 

17 (d) LIMITATION ON LOAN GUARANTEE SIZE.—The 

18 Secretary shall not guarantee a loan under this section 

19 for an amount greater than $100,000,000. 

20 (e) RATES OF INTEREST.—The Secretary shall not 

21 make a loan guarantee under this section if the interest 

22 rate for the loan exceeds that which the Secretary deter23 mines to be reasonable, taking into consideration the pre24 vailing interest rates and customary fees incurred under 

25 similar obligations in the private capital market. 
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1 (f) ABILITY TO REPAY.—The Secretary shall not 

2 make a loan guarantee under this section unless the Sec3 retary has made a finding in writing that the recipient 

4 of the loan is likely to be able to repay the loan according 

5 to its terms. 

6 (g) APPLICATIONS.—The Secretary shall prescribe 

7 the form and contents required of applications for assist8 ance under this section, to enable the Secretary to deter9 mine the eligibility of the applicant’s proposal, and shall 

10 establish terms and conditions for loan guarantees made 

11 under this section. 

12 (h) FULL FAITH AND CREDIT.—All guarantees en13 tered into by the Secretary under this section shall con14 stitute general obligations of the United States backed by 

15 the full faith and credit of the United States. 

16 (i) MODIFICATIONS.—The Secretary may approve the 

17 modification of any term or condition of a loan guarantee 

18 or loan guarantee commitment, including the rate of inter19 est, time of payment of interest or principal, or security 

20 requirements, if the Secretary finds in writing that—

21 (1) the modification is equitable and is in the 

22 overall best interests of the United States; and

23 (2) consent has been obtained from the appli24 cant and the holder of the obligation. 
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1 (j) DEFAULT.—The Secretary shall prescribe regula2 tions setting forth procedures in the event of default on 

3 a loan guaranteed under this section. The Secretary shall 

4 ensure that each loan guarantee made under this section 

5 contains terms and conditions that provide that—

6 (1) if a payment of principal or interest under 

7 the loan is in default for more than 30 days, the 

8 Secretary shall pay to the holder of the obligation, 

9 or the holder’s agent, the amount of unpaid guaran10 teed interest; 

11 (2) if the default has continued for more than 

12 90 days, the Secretary shall pay to the holder of the 

13 obligation, or the holder’s agent, 90 percent of the 

14 unpaid guaranteed principal; 

15 (3) after final resolution of the default, through 

16 liquidation or otherwise, the Secretary shall pay to 

17 the holder of the obligation, or the holder’s agent, 

18 any remaining amounts guaranteed but which were 

19 not recovered through the default’s resolution; 

20 (4) the Secretary shall not be required to make 

21 any payment under paragraphs (1) through (3) if 

22 the Secretary finds, before the expiration of the peri23 ods described in such paragraphs, that the default 

24 has been remedied; and 
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1 (5) the holder of the obligation shall not receive 

2 payment or be entitled to retain payment in a total 

3 amount which, together with all other recoveries (in4 cluding any recovery based upon a security interest 

5 in equipment or facilities) exceeds the actual loss of 

6 such holder. 

7 (k) RIGHTS OF THE SECRETARY.—

8 (1) SUBROGATION.—If the Secretary makes 

9 payment to a holder, or a holder’s agent, under sub10 section (j) in connection with a loan guarantee made 

11 under this section, the Secretary shall be subrogated 

12 to all of the rights of the holder with respect to the 

13 obligor under the loan. 

14 (2) DISPOSITION OF PROPERTY.—The Sec15 retary may complete, recondition, reconstruct, ren16 ovate, repair, maintain, operate, charter, rent, sell, 

17 or otherwise dispose of any property or other inter18 ests obtained pursuant to this section. The Secretary 

19 shall not be subject to any Federal or State regu20 latory requirements when carrying out this para21 graph. 

22 (l) ACTION AGAINST OBLIGOR.—The Secretary may 

23 bring a civil action in an appropriate Federal court in the 

24 name of the holder of the obligation in the event of a de25 fault on a loan guaranteed under this section. The holder 
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1 of a guarantee shall make available to the Secretary all 

2 records and evidence necessary to prosecute the civil ac3 tion. The Secretary may accept property in full or partial 

4 satisfaction of any sums owed as a result of a default. 

5 If the Secretary receives, through the sale or other disposi6 tion of such property, an amount greater than the aggre7 gate of—

8 (1) the amount paid to the holder of a guar9 antee under subsection (j); and 

10 (2) any other cost to the United States of rem11 edying the default, 

12 the Secretary shall pay such excess to the obligor. 

13 (m) BREACH OF CONDITIONS.—The Attorney Gen14 eral shall commence a civil action in an appropriate Fed15 eral court to enjoin any activity which the Secretary finds 

16 is in violation of this section, regulations issued hereunder, 

17 or any conditions which were duly agreed to, and to secure 

18 any other appropriate relief. 

19 (n) ATTACHMENT.—No attachment or execution may 

20 be issued against the Secretary, or any property in the 

21 control of the Secretary, prior to the entry of final judg22 ment to such effect in any State, Federal, or other court. 

23 (o) INVESTIGATION CHARGE.—The Secretary may 

24 charge and collect from each applicant a reasonable charge 

25 for appraisal of the value of the equipment or facilities 
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1 for which the loan guarantee is sought, and for making 

2 necessary determinations and findings. Such charge shall 

3 not aggregate more than one-half of 1 percent of the prin4 cipal amount of the obligation. 

5 (p) AUTHORIZATION OF APPROPRIATIONS.—There 

6 are authorized to be appropriated to the Secretary of En7 ergy for carrying out this section such sums as may be 

8 necessary for fiscal years 2003 through 2007. 

9 (q) DEFINITIONS.—For purposes of this section: 

10 (1) The term ‘‘loan guarantee’’ means any 

11 guarantee, insurance, or other pledge with respect to 

12 the payment of all or a part of the principal or inter13 est on any debt obligation of a non-Federal borrower 

14 to a non-Federal lender, but does not include the in15 surance of deposits, shares, or other withdrawable 

16 accounts in financial institutions. 

17 (2) The term ‘‘loan guarantee commitment’’ 

18 means a binding agreement by the Secretary of En19 ergy to make a loan guarantee when specified condi20 tions are fulfilled by the borrower, the lender, or any 

21 other party to the guarantee agreement. 

22 (3) The term ‘‘modification’’ means any Gov23 ernment action that alters the estimated cost of an 

24 outstanding loan guarantee (or loan guarantee com25 mitment) from the current estimate of cash flows. 
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1 This includes the sale of loan assets, with or without 

2 recourse, and the purchase of guaranteed loans. This 

3 also includes any action resulting from new legisla4 tion, or from the exercise of administrative discre5 tion under existing law, that directly or indirectly al6 ters the estimated cost of outstanding loan guaran7 tees (or loan guarantee commitments) such as a 

8 change in collection procedures. 

9 SEC. 5. PERMANENT EXTENSION OF RESEARCH

10 CREDIT. 

11 (a) IN GENERAL.—Section 41 of the Internal Rev12 enue Code of 1986 (relating to credit for increasing re13 search activities) is amended by striking subsection (h). 

14 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

15 section 45C(b) of such Code is amended by striking sub16 paragraph (D). 

17 (c) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to amounts paid or incurred after 

19 the date of the enactment of this Act. 

20 SEC. 6. INCREASE IN RATES OF ALTERNATIVE INCRE21 MENTAL CREDIT. 

22 (a) IN GENERAL.—Subparagraph (A) of section 

23 41(c)(4) of the Internal Revenue Code of 1986 (relating 

24 to election of alternative incremental credit) is amended—
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1 (1) by striking ‘‘2.65 percent’’ and inserting ‘‘3 

2 percent’’, 

3 (2) by striking ‘‘3.2 percent’’ and inserting ‘‘4 

4 percent’’, and 

5 (3) by striking ‘‘3.75 percent’’ and inserting ‘‘5 

6 percent’’. 

7 (b) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to taxable years ending after the 

9 date of the enactment of this Act. 

10 SEC. 7. EXCLUSION OF QUALIFIED FUEL-EFFICIENT VEHI11 CLES FROM CALCULATION OF AVERAGE 

12 FUEL ECONOMY OF A MANUFACTURER. 

13 Section 32904(a) of title 49, United States Code, is 

14 amended by adding at the end the following: 

15 ‘‘(3) In calculating the average fuel economy of a 

16 manufacturer under paragraph (1), the Administrator 

17 shall not consider any automobile manufactured by the 

18 manufacturer for which a credit is allowed under section 

19 38(a)(16) of the Internal Revenue Code of 1986.’’.

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