I 

108TH CONGRESS 

1ST SESSION H. R. 2209

To require that diesel fuel sold in the United States meet specifications 

designed to facilitate the widespread introduction of clean diesel vehicles 

in the United States, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 22, 2003

Mr. DINGELL introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on 

Ways and Means, 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 require that diesel fuel sold in the United States meet 

specifications designed to facilitate the widespread introduction of clean diesel vehicles in the United States, 

and for other purposes.

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Clean Diesel Act of 

5 2003’’. 

6 SEC. 2. FINDINGS. 

7 The Congress finds the following: 
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1 (1) Sulfur in diesel fuel is a source of air pollu2 tion. 

3 (2) Clean burning diesel technology is capable 

4 of high fuel economy (exceeding 125 percent of 

5 model year 2002 fuel economy). 

6 (3) Dependence on foreign oil is an issue of na7 tional security. 

8 (4) The fuel economy benefits of diesel vehicles 

9 can be seen in Europe, where diesel powered vehicles 

10 are widely available. 

11 (5) The introduction of clean burning diesel ve12 hicles would be facilitated greatly by the introduc13 tion of diesel fuel with the lowest feasible sulfur level 

14 and would result in significant fuel economy benefits 

15 for the United States. 

16 (6) It is in the national interest that American 

17 manufacturing and American workers are well posi18 tioned to meet the rising consumer demand for ad19 vanced technology vehicles. 

20 (7) In subpart I of part 80, title 40, Code of 

21 Federal Regulations, the Environmental Protection 

22 Agency requires that, beginning June 1, 2006, 

23 motor vehicle diesel fuel may not contain more than 

24 15 parts per million of sulfur, subject to certain lim25 ited exceptions ending on December 1, 2010. 
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1 SEC. 3. DEFINITIONS. 

2 For purposes of this Act: 

3 (1) The term ‘‘ Administrator’’ means the Ad4 ministrator of the Environmental Protection Agency. 

5 (2) The term ‘‘Secretary’’ means the Secretary 

6 of Energy. 

7 TITLE I—CLEAN MOTOR VEHI8 CLE DIESEL FUEL STAND9 ARDS 

10 SEC. 101. DEFINITIONS. 

11 For purposes of this title: 

12 (1) IN GENERAL.—The terms ‘‘import’’, ‘‘im13 porter’’, ‘‘ppm’’, ‘‘produce’’, ‘‘refiner’’, ‘‘refinery’’, 

14 and ‘‘motor vehicle diesel fuel’’ have the meanings 

15 given to those terms in regulations of the Adminis16 trator relating to motor vehicle diesel fuel. 

17 (2) CLEAN DIESEL FUEL.—The term ‘‘clean 

18 diesel fuel’’ means motor vehicle diesel fuel subject 

19 to the standards of section 102(c). 

20 SEC. 102. STANDARDS. 

21 (a) EFFECTIVE DATE.—The standards and require22 ments of this title apply to any motor vehicle diesel fuel 

23 produced or imported by any refiner or importer beginning 

24 on January 1, 2011. 

25 (b) EXCLUDED FUEL.—The provisions of this title 

26 do not apply to motor vehicle diesel fuel that is designated 
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1 for export outside the United States, and identified for 

2 export by a transfer document as required under regula3 tions of the Administrator. 

4 (c) STANDARDS.—Except as otherwise provided in 

5 this title, all motor vehicle diesel fuel is subject to the fol6 lowing per gallon standards: 

7 (1) SULFUR CONTENT.—A sulfur content as 

8 low as feasible, as determined by the Administrator 

9 taking into consideration costs, but not higher than 

10 10 ppm. Not less than every 5 years, the Adminis11 trator shall review and, as appropriate, revise the de12 termination made under this paragraph. 

13 (2) CETANE NUMBER.—A minimum cetane 

14 number of 55. 

15 (3) AROMATIC CONTENT.—A maximum aro16 matic content of 15 volume percent. 

17 (4) LUBRICITY LEVEL.—A maximum high-fre18 quency reciprocating rig wear scar diameter of 400 

19 microns.

20 (d) REGULATIONS.—Not later than January 1, 2006, 

21 the Administrator shall promulgate regulations to imple22 ment this title. Such regulations shall—

23 (1) require measures to minimize the extent of 

24 sulfur contamination in the motor vehicle diesel fuel 

25 distribution system; 
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1 (2) ensure that motor vehicle diesel fuel sold as 

2 clean diesel fuel at retail outlets or wholesale pur3 chaser-consumer facilities does not exceed the per 

4 gallon standards set forth in subsection (c); and 

5 (3) evaluate and, as necessary, promulgate re6 quirements to ensure the compatibility of motor oil 

7 intended for use in motor vehicle engines consistent 

8 with the purposes and requirements of this Act. 

9 (e) SAVINGS.—Nothing in this title shall be construed 

10 to relieve any person of any emission control requirement 

11 or obligation under the Clean Air Act. 

12 SEC. 103. WAIVERS; EXEMPTION. 

13 (a) WAIVER ON PETITION OF STATE.—

14 (1) IN GENERAL.—On petition by 1 or more 

15 States, the Administrator, in consultation with the 

16 Secretary, may, in whole or in part, waive the re17 quirements of section 102 relating to clean diesel 

18 fuel by reducing the amount of clean diesel fuel re19 quired under such section, if the Administrator de20 termines, after public notice and opportunity for 

21 comment, that implementation of such requirements, 

22 without an appropriate waiver, would severely harm 

23 the economy of a State or region due to inadequate 

24 supply or distribution capacity sufficient to meet 

25 such requirements. 
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1 (2) DURATION; RENEWAL.—A waiver under 

2 this subsection shall terminate after 180 days and 

3 may be renewed by the Administrator for not more 

4 than 1 additional period of 180 days after consulta5 tion with the Secretary. 

6 (3) EXPIRATION OF AUTHORITY.—No waiver 

7 may be granted under this subsection after Decem8 ber 31, 2010. 

9 (b) ECONOMIC HARDSHIP EXEMPTION.—

10 (1) EXEMPTION.—A small business refiner may 

11 petition the Administrator for an exemption from 

12 the requirements of section 102 for the reason of 

13 disproportionate economic hardship. If the Adminis14 trator fails to act on such a petition within 120 days 

15 after receipt of the petition, the petition shall be 

16 deemed granted. 

17 (2) DEFINITIONS.—For purposes of this sub18 section: 

19 (A) The term ‘‘disproportionate economic 

20 hardship’’ means economic impact resulting in 

21 substantial economic losses that threaten the vi22 ability of the entity in question, as determined 

23 by the Administrator in consultation with the 

24 Secretary. 
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1 (B) The term ‘‘small business refiner’’ 

2 means, with respect to any calendar year, a re3 finer of crude oil with respect to which not 

4 more than 1,500 persons are engaged in the re5 finery operations of the business on any day 

6 during such calendar year and whose average 

7 daily domestic refinery run for such calendar 

8 year did not exceed 205,000 barrels. 

9 SEC. 104. MISFUELING. 

10 (a) PROHIBITION.—After December 31, 2010, no 

11 person shall knowingly introduce, or cause or allow the 

12 introduction of, fuel other than clean diesel fuel into any 

13 motor vehicle that is designed to operate with diesel fuel. 

14 (b) PENALTY.—Any person that violates this section 

15 shall be subject to the same penalties applicable to a per16 son that violates section 211(g) of the Clean Air Act (42 

17 U.S.C. 7545(g)). 

18 SEC. 105. PENALTIES AND INJUNCTIONS. 

19 (a) CIVIL PENALTIES.—Subject to penalties applica20 ble to misfueling under section 104, any person who vio21 lates any provision of this title or the regulations pre22 scribed under this title or who fails to furnish any infor23 mation or conduct any tests required by the Administrator 

24 under regulations under this title shall be liable to the 

25 United States for a civil penalty of not more than the sum 
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1 of $25,000 for every day of such violation and the amount 

2 of economic benefit or savings resulting from the violation. 

3 (b) INJUNCTIVE AUTHORITY.—The district courts of 

4 the United States shall have jurisdiction to restrain viola5 tions of this title and of the regulations prescribed under 

6 this title, to award other appropriate relief, and to compel 

7 the furnishing of information and the conduct of tests re8 quired by the Administrator under regulations under this 

9 title. Actions to restrain such violations and compel such 

10 actions shall be brought by and in the name of the United 

11 States. In any such action, subpoenas for witnesses who 

12 are required to attend a district court in any district may 

13 run into any other district. 

14 TITLE II—INCENTIVES TO EN15 COURAGE CLEAN DIESEL 

16 MOTOR VEHICLES 

17 SEC. 201. DETERMINATION OF CREDIT AMOUNTS FOR 

18 CLEAN DIESEL MOTOR VEHICLE CREDIT AND 

19 LIFETIME FUEL SAVINGS CREDIT. 

20 (a) IN GENERAL.—Not later than 120 days after the 

21 date of the enactment of this Act, the Secretary of Energy 

22 shall determine credit amounts for the clean diesel motor 

23 vehicle credit under section 30B, and the lifetime fuel sav24 ings credit under section 30C, of the Internal Revenue 

25 Code of 1986 in amounts which the Secretary determines 
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1 will provide appropriate incentives to encourage the wide2 spread consumer acceptance of clean diesel motor vehicles. 

3 In making determinations under the preceding sentence, 

4 the Secretary—

5 (1) may not increase or decrease the credit 

6 amount specified for a category in the table in sub7 section (b) by more than $500; 

8 (2) may not increase the maximum fuel econ9 omy for a category above the maximum fuel econ10 omy specified for that category in the table in sub11 section (b);

12 (3) may not increase or decrease the lifetime 

13 fuel savings amount specified for a category in the 

14 table in subsection (c) by more than $500; and 

15 (4) may not increase the number of gallons for 

16 the category of lifetime fuel savings in the table in 

17 subsection (c). 

18 (b) ALTERNATIVE CREDIT AMOUNT FOR CLEAN

19 DIESEL MOTOR VEHICLE CREDIT.—In the case that the 

20 Secretary of Energy does not meet the 120-day period 

21 specified in subsection (a), the credit amounts for the 

22 clean diesel motor vehicle credit under section 30B of the 

23 Internal Revenue Code of 1986 shall be determined in ac24 cordance with the following table:
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Category 

Fuel economy based on

percentage of 2002 model year

city fuel economy Credit amount 

At least but less than 

1 .................... 125% 150% $1,500

2 .................... 150% 175% $2,000

3 .................... 175% 200% $2,500

4 .................... 200% 225% $3,000

1 (c) ALTERNATIVE CREDIT AMOUNT FOR LIFETIME

2 FUEL SAVINGS CREDIT.—In the case that the Secretary 

3 of Energy does not meet the 120-day period specified in 

4 subsection (a), the credit amounts for the lifetime fuel sav5 ings credit under section 30C of the Internal Revenue 

6 Code of 1986 shall be determined in accordance with the 

7 following table:

Lifetime Fuel Credit 

Savings (gallons): Amount:

1,200 .......................... $1,500

1,800 .......................... $2,000

2,400 .......................... $2,500

3,000 .......................... $3,000.

8 (d) OPTION TO USE LIKE VEHICLE.—At the option 

9 of the vehicle manufacturer, the increase for fuel economy 

10 and lifetime fuel savings may be calculated by comparing 

11 the new clean diesel motor vehicle to a like vehicle. 

12 (e) DEFINITIONS.—For purposes of this section: 

13 (1) CLEAN DIESEL MOTOR VEHICLE.—The term 

14 ‘‘clean diesel motor vehicle’’ means a motor vehicle 

15 with an internal combustion engine that—
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1 (A) is designed to operate primarily using 

2 more air than is necessary for complete com3 bustion of the fuel; 

4 (B) incorporates direct injection; 

5 (C) achieves at least 125 percent of the 

6 2002 model year city fuel economy; and 

7 (D) for 2004 and later model vehicles, has 

8 received a certificate that such vehicle meets or 

9 exceeds the Bin 5, Tier 2 emission levels (for 

10 passenger vehicles) or Bin 8, Tier 2 emission 

11 levels (for light trucks) established in regula12 tions prescribed by the Administrator under 

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

14 make and model year vehicle. 

15 (2) LIFETIME FUEL SAVINGS.—The lifetime 

16 fuel savings shall be calculated by dividing 120,000 

17 by the difference between the 2002 model year city 

18 fuel economy for the vehicle inertia weight class and 

19 the city fuel economy for the new clean diesel motor 

20 vehicle. 

21 (3) LIKE VEHICLE.—The term ‘‘like vehicle’’ 

22 for a clean diesel motor vehicle derived from a con23 ventional production vehicle produced in the same 

24 model year means a model that is equivalent in the 

25 following areas: 
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1 (A) Body style (2-door or 4-door). 

2 (B) Transmission (automatic or manual). 

3 (C) Acceleration performance (± 0.05 sec4 onds). 

5 (D) Drivetrain (2-wheel drive or 4-wheel 

6 drive). 

7 (E) Certification by the Administrator. 

8 (4) 2002 MODEL YEAR CITY FUEL ECONOMY.—

9 The 2002 model year city fuel economy with respect 

10 to a vehicle shall be determined in accordance with 

11 the following tables: 

12 (A) In the case of a passenger automobile:

If vehicle inertia The 2002 model year 

weight class is: city fuel economy is:

1,500 or 1,750 lbs ................................................. 45.2 mpg

2,000 lbs ................................................................ 39.6 mpg

2,250 lbs ................................................................ 35.2 mpg

2,500 lbs ................................................................ 31.7 mpg

2,750 lbs ................................................................ 28.8 mpg

3,000 lbs ................................................................ 26.4 mpg

3,500 lbs ................................................................ 22.6 mpg

4,000 lbs ................................................................ 19.8 mpg

4,500 lbs ................................................................ 17.6 mpg

5,000 lbs ................................................................ 15.9 mpg

5,500 lbs ................................................................ 14.4 mpg

6,000 lbs ................................................................ 13.2 mpg

6,500 lbs ................................................................ 12.2 mpg

7,000 or 8,500 lbs ................................................. 11.3 mpg.

13 (B) In the case of a light truck:

If vehicle inertia The 2002 model year 

weight class is: city fuel economy is:

1,500 or 1,750 lbs ................................................. 39.4 mpg

2,000 lbs ................................................................ 35.2 mpg

2,250 lbs ................................................................ 31.8 mpg

2,500 lbs ................................................................ 29.0 mpg

2,750 lbs ................................................................ 26.8 mpg

3,000 lbs ................................................................ 24.9 mpg

3,500 lbs ................................................................ 21.8 mpg
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If vehicle inertia The 2002 model year 

weight class is: city fuel economy is:

4,000 lbs ................................................................ 19.4 mpg

4,500 lbs ................................................................ 17.6 mpg

5,000 lbs ................................................................ 16.1 mpg

5,500 lbs ................................................................ 14.8 mpg

6,000 lbs ................................................................ 13.7 mpg

6,500 lbs ................................................................ 12.8 mpg

7,000 or 8,500 lbs ................................................. 12.1 mpg.

1 (5) VEHICLE INERTIA WEIGHT CLASS.—The 

2 term ‘‘vehicle inertia weight class’’ has the same 

3 meaning as when defined in regulations prescribed 

4 by the Administrator for purposes of the administra5 tion of title II of the Clean Air Act (42 U.S.C. 7521 

6 et seq.). 

7 (6) MOTOR VEHICLE.—The term ‘‘motor vehi8 cle’’ means any vehicle which is manufactured pri9 marily for use on public streets, roads, and highways 

10 (not including a vehicle operated exclusively on a rail 

11 or rails) and which has at least 4 wheels. 

12 (7) OTHER TERMS.—The terms ‘‘automobile’’, 

13 ‘‘passenger automobile’’, ‘‘light truck’’, and ‘‘manu14 facturer’’ have the meanings given such terms in 

15 regulations prescribed by the Administrator for pur16 poses of the administration of title II of the Clean 

17 Air Act (42 U.S.C. 7521 et seq.). 

18 SEC. 202. CLEAN DIESEL MOTOR VEHICLE CREDIT. 

19 (a) IN GENERAL.—Subpart B of part IV of sub20 chapter A of chapter 1 of the Internal Revenue Code of 
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1 1986 (relating to foreign tax credit, etc.) is amended by 

2 adding at the end the following: 

3 ‘‘SEC. 30B. CLEAN DIESEL MOTOR VEHICLE CREDIT. 

4 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al5 lowed as a credit against the tax imposed by this chapter 

6 for the taxable year an amount equal to the clean diesel 

7 motor vehicle credit determined under subsection (b). 

8 ‘‘(b) CLEAN DIESEL MOTOR VEHICLE CREDIT.—For 

9 purposes of subsection (a), the clean diesel motor vehicle 

10 credit is the credit amount determined under section 

11 201(b) of the Clean Diesel Act of 2003 with respect to 

12 a new qualified clean diesel motor vehicle placed in service 

13 by the taxpayer during the taxable year.

14 ‘‘(c) CLEAN DIESEL MOTOR VEHICLE.—The term 

15 ‘clean diesel motor vehicle’ has the meaning given to such 

16 term by section 201(e)(1) of the Clean Diesel Act of 2003. 

17 ‘‘(d) LIMITATION BASED ON AMOUNT OF TAX.—The 

18 credit allowed under subsection (a) for the taxable year 

19 shall not exceed the excess of—

20 ‘‘(1) the sum of the regular tax liability (as de21 fined in section 26(b)) plus the tax imposed by sec22 tion 55, over 

23 ‘‘(2) the sum of the credits allowable under sub24 part A and sections 27, 29, and 30A for the taxable 

25 year. 
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1 ‘‘(e) SPECIAL RULES.—For purposes of this sec2 tion—

3 ‘‘(1) REDUCTION IN BASIS.—For purposes of 

4 this subtitle, the basis of any property for which a 

5 credit is allowable under subsection (a) shall be re6 duced by the amount of such credit so allowed. 

7 ‘‘(2) PROPERTY USED BY TAX-EXEMPT ENTI8 TIES.—In the case of a credit amount which is al9 lowable with respect to a motor vehicle which is ac10 quired by an entity exempt from tax under this 

11 chapter, the person which sells or leases such vehicle 

12 to the entity shall be treated as the taxpayer with 

13 respect to the vehicle for purposes of this section 

14 and the credit shall be allowed to such person, but 

15 only if the person clearly discloses to the entity in 

16 any sale or lease document the specific amount of 

17 any credit otherwise allowable to the entity under 

18 this section. 

19 ‘‘(3) RECAPTURE.—The Secretary shall, by reg20 ulations, provide for recapturing the benefit of any 

21 credit allowable under subsection (a) with respect to 

22 any property which ceases to be property eligible for 

23 such credit (including recapture in the case of a 

24 lease period of less than the economic life of a vehi25 cle). 
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1 ‘‘(4) PROPERTY USED OUTSIDE UNITED

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

3 allowed under subsection (a) with respect to any 

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

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

6 account under section 179. 

7 ‘‘(5) ELECTION TO NOT TAKE CREDIT.—No 

8 credit shall be allowed under subsection (a) for any 

9 vehicle if the taxpayer elects to not have this section 

10 apply to such vehicle. 

11 ‘‘(6) CARRYOVERS ALLOWED.—

12 ‘‘(A) IN GENERAL.—If the credit amount 

13 allowable under subsection (a) for a taxable 

14 year exceeds the amount of the limitation under 

15 subsection (d) for such taxable year (referred to 

16 as the ‘unused credit year’ in this paragraph), 

17 such excess shall be allowed as a credit 

18 carryforward for each of the 20 taxable years 

19 following the unused credit year and a 

20 carryback for each of the 3 preceding years. 

21 ‘‘(B) RULES.—Rules similar to the rules of 

22 section 39 shall apply with respect to the credit 

23 carryforward under subparagraph (A). 

24 ‘‘(f) TERMINATION.—This section shall not apply to 

25 any property placed in service after December 31, 2010.’’. 
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1 (b) CONFORMING AMENDMENTS.—

2 (1) Section 1016(a) of such Code is amended 

3 by striking ‘‘and’’ at the end of paragraph (29), by 

4 striking the period at the end of paragraph (30) and 

5 inserting ‘‘, and’’, and by adding at the end the fol6 lowing: 

7 ‘‘(31) to the extent provided in section 

8 30B(e)(1).’’. 

9 (2) Section 6501(m) of such Code is amended 

10 by inserting ‘‘30B(e)(5),’’ after ‘‘30(d)(4),’’. 

11 (3) The table of sections for subpart B of part 

12 IV of subchapter A of chapter 1 of such Code is 

13 amended by inserting after the item relating to sec14 tion 30A the following:

‘‘Sec. 30B. Clean diesel motor vehicle credit.’’.

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

16 this section shall apply to property placed in service after 

17 December 31, 2004, in taxable years beginning after such 

18 date. 

19 SEC. 203. LIFETIME FUEL SAVINGS CREDIT. 

20 (a) IN GENERAL.—Subpart B of part IV of sub21 chapter A of chapter 1 of the Internal Revenue Code of 

22 1986 (relating to foreign tax credit, etc.) is amended by 

23 adding at the end the following: 
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1 ‘‘SEC. 30C. LIFETIME FUEL SAVINGS CREDIT. 

2 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al3 lowed as a credit against the tax imposed by this chapter 

4 for the taxable year an amount equal to the lifetime fuel 

5 savings credit determined under subsection (b). 

6 ‘‘(b) LIFETIME FUEL SAVINGS CREDIT.—For pur7 poses of subsection (a), the lifetime fuel savings credit is 

8 the credit amount determined under section 201(c) of the 

9 Clean Diesel Act of 2003 with respect to a new qualified 

10 clean diesel motor vehicle placed in service by the taxpayer 

11 during the taxable year. 

12 ‘‘(c) CLEAN DIESEL MOTOR VEHICLE.—The term 

13 ‘clean diesel motor vehicle’ has the meaning given to such 

14 term by section 201(e)(1) of the Clean Diesel Act of 2003. 

15 ‘‘(d) LIMITATION BASED ON AMOUNT OF TAX.—The 

16 credit allowed under subsection (a) for the taxable year 

17 shall not exceed the excess of—

18 ‘‘(1) the sum of the regular tax liability (as de19 fined in section 26(b)) plus the tax imposed by sec20 tion 55, over 

21 ‘‘(2) the sum of the credits allowable under sub22 part A and sections 27, 29, 30A, and 30B for the 

23 taxable year. 

24 ‘‘(e) SPECIAL RULES.—For purposes of this sec25 tion—
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1 ‘‘(1) REDUCTION IN BASIS.—For purposes of 

2 this subtitle, the basis of any property for which a 

3 credit is allowable under subsection (a) shall be re4 duced by the amount of such credit so allowed. 

5 ‘‘(2) PROPERTY USED BY TAX-EXEMPT ENTI6 TIES.—In the case of a credit amount which is al7 lowable with respect to a motor vehicle which is ac8 quired by an entity exempt from tax under this 

9 chapter, the person which sells or leases such vehicle 

10 to the entity shall be treated as the taxpayer with 

11 respect to the vehicle for purposes of this section 

12 and the credit shall be allowed to such person, but 

13 only if the person clearly discloses to the entity in 

14 any sale or lease document the specific amount of

15 any credit otherwise allowable to the entity under 

16 this section. 

17 ‘‘(3) RECAPTURE.—The Secretary shall, by reg18 ulations, provide for recapturing the benefit of any 

19 credit allowable under subsection (a) with respect to 

20 any property which ceases to be property eligible for 

21 such credit (including recapture in the case of a 

22 lease period of less than the economic life of a vehi23 cle). 

24 ‘‘(4) PROPERTY USED OUTSIDE UNITED

25 STATES, ETC., NOT QUALIFIED.—No credit shall be 
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1 allowed under subsection (a) with respect to any 

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

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

4 account under section 179. 

5 ‘‘(5) ELECTION TO NOT TAKE CREDIT.—No 

6 credit shall be allowed under subsection (a) for any 

7 vehicle if the taxpayer elects to not have this section 

8 apply to such vehicle. 

9 ‘‘(6) CARRYOVERS ALLOWED.—

10 ‘‘(A) IN GENERAL.—If the credit amount 

11 allowable under subsection (a) for a taxable 

12 year exceeds the amount of the limitation under 

13 subsection (d) for such taxable year (referred to 

14 as the ‘unused credit year’ in this paragraph), 

15 such excess shall be allowed as a credit 

16 carryforward for each of the 20 taxable years 

17 following the unused credit year and a 

18 carryback for each of the 3 preceding years. 

19 ‘‘(B) RULES.—Rules similar to the rules of 

20 section 39 shall apply with respect to the credit 

21 carryforward under subparagraph (A). 

22 ‘‘(f) TERMINATION.—This section shall not apply to 

23 any property placed in service after December 31, 2010.’’. 

24 (b) CONFORMING AMENDMENTS.—
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1 (1) Section 1016(a) of such Code is amended 

2 by striking ‘‘and’’ at the end of paragraph (30), by 

3 striking the period at the end of paragraph (31) and 

4 inserting ‘‘, and’’, and by adding at the end the fol5 lowing: 

6 ‘‘(32) to the extent provided in section 

7 30C(e)(1).’’. 

8 (2) Section 6501(m) of such Code is amended 

9 by inserting ‘‘30C(e)(5),’’ after ‘‘30B(e)(5),’’. 

10 (3) The table of sections for subpart B of part 

11 IV of subchapter A of chapter 1 of such Code is 

12 amended by inserting after the item relating to sec13 tion 30B the following:

‘‘Sec. 30C. Lifetime fuel savings credit.’’.

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

15 this section shall apply to property placed in service after 

16 December 31, 2004, in taxable years beginning after such 

17 date. 

18 SEC. 204. EXPENSING OF CAPITAL COSTS INCURRED IN 

19 COMPLYING WITH ENVIRONMENTAL PROTEC20 TION AGENCY SULFUR REGULATIONS. 

21 (a) IN GENERAL.—Section 179(b) of the Internal 

22 Revenue Code of 1986 (relating to election to expense cer23 tain depreciable business assets) is amended by adding at 

24 the end the following new paragraph: 

25 ‘‘(5) LIMITATION FOR REFINERS.—
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1 ‘‘(A) IN GENERAL.—In the case of a tax2 payer electing to expense qualified costs, in lieu 

3 of the dollar limitations in paragraph (1), the 

4 limitation on the aggregate costs which may be 

5 taken into account under subsection (a) for any 

6 taxable year shall not exceed 75 percent of the 

7 qualified costs. 

8 ‘‘(B) QUALIFIED COSTS.—For purposes of 

9 this paragraph, the term ‘qualified costs’ 

10 means, with respect to any facility, those costs 

11 paid or incurred for purposes of—

12 ‘‘(i) complying with the Highway Die13 sel Fuel Sulfur Control Requirements of 

14 the Environmental Protection Agency, as 

15 determined by the Administrator of the 

16 Environmental Protection Agency in con17 sultation with the Secretary; or 

18 ‘‘(ii) meeting the standards for sulfur 

19 content specified in section 102(c)(1) of 

20 the Clean Diesel Act of 2003, as deter21 mined by the Administrator of the Envi22 ronmental Protection Agency in consulta23 tion with the Secretary. 

24 Such costs shall include expenditures for the 

25 construction of new process operation units or 
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1 the dismantling and reconstruction of existing 

2 process units to be used in the production of 

3 clean diesel fuel (as defined in section 101(2) of 

4 the Clean Diesel Fuel Act of 2003, associated 

5 adjacent or offsite equipment (including tank6 age, catalyst, and power supply), engineering, 

7 construction period interest, and sitework.’’. 

8 (b) DETERMINATION BY ADMINISTRATOR OF ENVI9 RONMENTAL PROTECTION AGENCY.—For purposes of 

10 paragraph (5) of section 179(b) of the Internal Revenue 

11 Code of 1986, as added by subsection (a), the Adminis12 trator of Environmental Protection Agency shall, by regu13 lation, identify those costs which are eligible for expensing 

14 under such section for purposes of complying with the 

15 Highway Diesel Fuel Sulfur Control Requirements of the 

16 Environmental Protection Agency and meeting the stand17 ards for sulfur content specified in section 102(c)(1) of 

18 this Act. 

19 (c) EFFECTIVE DATE.—The amendment made by 

20 this section shall apply to expenses paid or incurred after 

21 the date of the enactment of this Act. 

22 SEC. 205. CREDIT FOR PRODUCING LOW SULFUR CONTENT 

23 DIESEL FUEL. 

24 (a) IN GENERAL.—Subpart B of part IV of sub25 chapter A of chapter 1 of the Internal Revenue Code of 
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1 1986 (relating to other credits) is amended by inserting 

2 after section 30C the following new section: 

3 ‘‘SEC. 30D. CREDIT FOR PRODUCING CLEAN DIESEL FUEL. 

4 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al5 lowed as a credit against the tax imposed by this chapter 

6 for the taxable year an amount equal to—

7 ‘‘(1) $2.52, multiplied by 

8 ‘‘(2) the barrel-of-oil equivalent of clean diesel 

9 fuel—

10 ‘‘(A) sold by the taxpayer to an unrelated 

11 person during the taxable year; and 

12 ‘‘(B) the production of which is attrib13 utable to the taxpayer. 

14 ‘‘(b) LIMITATIONS AND ADJUSTMENTS.—

15 ‘‘(1) CREDIT REDUCED FOR GRANTS, TAX-EX16 EMPT BONDS, AND SUBSIDIZED ENERGY FINANC17 ING.—

18 ‘‘(A) IN GENERAL.—The amount of the 

19 credit allowable under subsection (a) with re20 spect to any project for any taxable year shall 

21 be reduced by the amount which is the product 

22 of the amount so determined for such year and 

23 a fraction—
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1 ‘‘(i) the numerator of which is the 

2 sum, for the taxable year and all prior tax3 able years, of—

4 ‘‘(I) grants provided by the 

5 United States, a State, or a political 

6 subdivision of a State for use in con7 nection with the project; 

8 ‘‘(II) proceeds of any issue of 

9 State or local government obligations 

10 used to provide financing for the 

11 project the interest on which is ex12 empt from tax under section 103; and 

13 ‘‘(III) the aggregate amount of 

14 subsidized energy financing (within 

15 the meaning of section 48(a)(4)(C)) 

16 provided in connection with the 

17 project; and 

18 ‘‘(ii) the denominator of which is the 

19 aggregate amount of additions to the cap20 ital account for the project for the taxable 

21 year and all prior taxable years. 

22 ‘‘(B) AMOUNTS DETERMINED AT CLOSE OF

23 YEAR.—The amounts under subparagraph (A) 

24 for any taxable year shall be determined as of 

25 the close of the taxable year. 
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1 ‘‘(2) CREDIT REDUCED FOR ENHANCED OIL RE2 COVERY CREDIT.—The amount allowable as a credit 

3 under subsection (a) with respect to any project for 

4 any taxable year (determined after application of 

5 paragraphs (1) and (2)) shall be reduced by the ex6 cess (if any) of—

7 ‘‘(A) the aggregate amount allowed under 

8 section 38 for the taxable year and any prior 

9 taxable year by reason of any enhanced oil re10 covery credit determined under section 43 with 

11 respect to such project, over 

12 ‘‘(B) the aggregate amount recaptured 

13 with respect to the amount described in sub14 paragraph (A) under this paragraph for any 

15 prior taxable year. 

16 ‘‘(3) APPLICATION WITH OTHER CREDITS.—

17 The credit allowed by subsection (a) for any taxable 

18 year shall not exceed the excess (if any) of—

19 ‘‘(A) the regular tax for the taxable year 

20 reduced by the sum of the credits allowable 

21 under subpart A and this subpart (other than 

22 this section), over 

23 ‘‘(B) the tentative minimum tax for the 

24 taxable year. 
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1 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this section—

3 ‘‘(1) CLEAN DIESEL FUEL.—The term ‘clean 

4 diesel fuel’ has the meaning given such term by sec5 tion 101(2) of the Clean Diesel Act of 2003. 

6 ‘‘(2) ONLY PRODUCTION WITHIN THE UNITED

7 STATES TAKEN INTO ACCOUNT.—Sales shall be 

8 taken into account under this section only with re9 spect to diesel fuel the production of which is with10 in—

11 ‘‘(A) the United States (within the mean12 ing of section 638(1)); or 

13 ‘‘(B) a possession of the United States 

14 (within the meaning of section 638(2)). 

15 ‘‘(3) PRODUCTION ATTRIBUTABLE TO THE TAX16 PAYER.—In the case of a property or facility in 

17 which more than 1 person has an interest, except to 

18 the extent provided in regulations prescribed by the 

19 Secretary, production from the property or facility 

20 (as the case may be) shall be allocated among such 

21 persons in proportion to their respective interests in 

22 the gross sales from such property or facility. 

23 ‘‘(4) BARREL-OF-OIL EQUIVALENT.—The term 

24 ‘barrel-of-oil equivalent’ with respect to any fuel 
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1 means that amount of such fuel which has a Btu 

2 content of 5.8 million. 

3 ‘‘(5) BARREL DEFINED.—The term ‘barrel’ 

4 means 42 United States gallons. 

5 ‘‘(6) RELATED PERSONS.—Persons shall be 

6 treated as related to each other if such persons 

7 would be treated as a single employer under the reg8 ulations prescribed under section 52(b). In the case 

9 of a corporation which is a member of an affiliated 

10 group of corporations filing a consolidated return, 

11 such corporation shall be treated as selling clean die12 sel fuel to an unrelated person if such fuel is sold 

13 to such a person by another member of such group. 

14 ‘‘(7) PASS-THRU IN THE CASE OF ESTATES AND

15 TRUSTS.—Under regulations prescribed by the Sec16 retary, rules similar to the rules of subsection (d) of 

17 section 52 shall apply.

18 ‘‘(e) APPLICATION OF SECTION.—This section shall 

19 apply with respect to clean diesel fuel which is sold at re20 tail before January 1, 2007.’’. 

21 (b) CONFORMING AMENDMENTS.—

22 (1) Section 53(d)(1)(B)(iii) of such Code is 

23 amended by striking ‘‘or’’ and inserting before the 

24 period at the end the following: ‘‘, or under section 
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1 30D solely by reason of the application of section 

2 30D(b)(4)’’. 

3 (2) Section 55(c)(2) of such Code is amended 

4 by inserting ‘‘, 30D(b)(4),’’ after ‘‘30(b)(3)’’. 

5 (3) Section 772 of such Code is amended—

6 (A) in subsection (a) by striking ‘‘and’’ at 

7 the end of paragraph (10), by redesignating 

8 paragraph (11) as paragraph (12), and by in9 serting after paragraph (10) the following new 

10 paragraph: 

11 ‘‘(11) the credit allowable under section 30D, 

12 and’’; and 

13 (B) in subsection (d)(5), by striking 

14 ‘‘and’’, and by inserting before the period the 

15 following: ‘‘, and the credit allowable under sec16 tion 30D’’. 

17 (4) The table of sections for subpart B of part 

18 IV of subchapter A of chapter 1 of such Code is 

19 amended by inserting after the item relating to sec20 tion 30C the following:

‘‘Sec. 30D. Credit for producing clean diesel fuel.’’.

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

22 this section shall apply to sales after December 31, 2002, 

23 in taxable years beginning after such date. 
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1 TITLE III—GRANTS TO IN2 CREASE PRODUCTION OF 

3 CLEAN DIESEL MOTOR VEHI4 CLES 

5 SEC. 301. GRANTS TO INCREASE PRODUCTION OF CLEAN 

6 DIESEL MOTOR VEHICLES. 

7 (a) GRANTS.—The Secretary of Commerce (in this 

8 section referred to as the ‘‘Secretary’’) may award grants 

9 to States and cities for the purpose of converting old 

10 plants to produce clean diesel motor vehicles. 

11 (b) USE OF FUNDS.—The Secretary may not award 

12 a grant to a State or city under this section unless the 

13 State or city agrees to use the grant—

14 (1) to convert an old plant to produce clean die15 sel motor vehicles; or 

16 (2) to improve infrastructure related to any 

17 such plant. 

18 (c) APPLICATION.—To seek a grant under this sec19 tion, a State or city shall submit an application to the 

20 Secretary at such time, in such manner, and containing 

21 such information as the Secretary may reasonably require. 

22 (d) CLEAN DIESEL MOTOR VEHICLE.—For purposes 

23 of this section, the term ‘‘clean diesel motor vehicle’’ has 

24 the meaning given to that term in section 201(e)(1). 
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1 (e) AUTHORIZATION OF APPROPRIATIONS.—There is 

2 authorized to be appropriated such sums as may be nec3 essary to carry out this section.

Æ