I 

109TH CONGRESS 

1ST SESSION H. R. 2665 

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 

MAY 26, 2005 

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. 

6 (3) In 1973 OPEC placed an embargo on sales 

7 of oil to the United States, creating severe oil short8 ages and driving up oil prices in the United States. 

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

10 which followed shortly thereafter. 

11 (4) Under the ‘‘Carter Doctrine’’, announced by 

12 President Carter in 1980, ‘‘An attempt by any out13 side forces to gain control of the Persian Gulf region 

14 will be regarded as an assault on the vital interests 

15 of the United States of America, and such an as16 sault will be repelled by any means necessary, in17 cluding military force.’’. 

18 (5) Following the Iraqi invasion of Kuwait in 

19 1990, the United States sent more than 500,000 

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

21 liberate Kuwait, protect Saudi Arabia, and ensure 

22 access to Persian Gulf oil. 

23 (6) Many major oil producing nations do not 

24 share United States values of democracy, freedom of 
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1 expression, thought, and religion, and equality for 

2 women. 

3 (7) During the Afghanistan conflict and the 

4 war on terrorism, many oil producing nations did 

5 not openly support the United States campaign to 

6 end the terror, and many of the terrorists of Sep7 tember 11 came from major OPEC nations. 

8 (8) It is in the highest national security inter9 ests of the United States to substantially reduce our 

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

11 access to oil supplies, and to reduce our dependence 

12 on nations which do not share our interests and val13 ues. 

14 (9) Because most oil is consumed by the trans15 portation sector, reduction of our dependence on oil 

16 can only come from major increases in fuel efficiency 

17 in cars, sport utility vehicles, light trucks, and other 

18 vehicles. 

19 SEC. 2. FUEL EFFICIENCY VEHICLE 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: 

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

25 ‘‘(a) ALLOWANCE OF CREDIT.— 
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1 ‘‘(1) FUEL ECONOMY NOT LESS THAN 40 MILES

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

3 shall be allowed as a credit against the tax imposed 

4 by this chapter for the taxable year an amount equal 

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

6 cient vehicle placed in service by the taxpayer during 

7 the taxable year. 

8 ‘‘(2) FUEL ECONOMY NOT LESS THAN 50 MILES

9 PER GALLON.—In the case of a qualified fuel-effi10 cient vehicle in which the fuel economy (within the 

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

12 miles per gallon— 

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

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

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

16 substituting ‘$6,000’ for $5,000’. 

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

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

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

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

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

22 30(c)(2))— 

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

24 accordance with section 4064) of such vehicle is 

25 rated at not less than 40 miles per gallon, 
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1 ‘‘(2) which is— 

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

3 4064(b)), or 

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

5 gross vehicle weight rating not greater than 

6 7,500 pounds, and 

7 ‘‘(3) which has received a certificate that such 

8 vehicle meets or exceeds the Bin 5 Tier II emission 

9 level established in regulations prescribed by the Ad10 ministrator of the Environmental Protection Agency 

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

12 make and model year vehicle. 

13 ‘‘(d) SPECIAL RULES.— 

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

15 property for which a credit is allowable under sub16 section (a) shall be reduced by the amount of such 

17 credit. 

18 ‘‘(2) RECAPTURE.—The Secretary shall, by reg19 ulations, provide for recapturing the benefit of any 

20 credit allowable under subsection (a) with respect to 

21 any property which ceases to be property eligible for 

22 such credit. 

23 ‘‘(3) PROPERTY USED OUTSIDE UNITED

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

25 allowed under subsection (a) with respect to any 
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1 property referred to in section 50(b) or with respect 

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

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

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

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

6 exceeds— 

7 ‘‘(1) the regular tax for the taxable year re8 duced by the sum of the credits allowable under sub9 part A and this part (other than this section), over 

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

11 year, 

12 such excess shall be carried to the succeeding taxable year 

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

14 such taxable year.’’. 

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

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

17 relating to section 30A the following new item: 

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

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

19 this section shall apply to taxable years ending after the 

20 date of the enactment of this Act. 

21 SEC. 3. FUEL EFFICIENT VEHICLE ASSEMBLY CREDIT. 

22 (a) IN GENERAL.—Subpart D of part IV of sub23 chapter A of chapter 1 of the Internal Revenue Code of 

24 1986 (relating to business-related credits) is amended by 

25 adding at the end the following new section: 
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1 ‘‘SEC. 45G. FUEL-EFFICIENT VEHICLE ASSEMBLY CREDIT. 

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

3 the fuel-efficient vehicle assembly credit determined under 

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

5 the product of $2,000 and the number of qualified fuel6 efficient vehicles manufactured or produced in the United 

7 States by the taxpayer during the taxable year for their 

8 1st retail sale. 

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

10 purposes of subsection (a), the term ‘qualified fuel-effi11 cient vehicle’ has the meaning given to such term by sec12 tion 30B(c). 

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

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

15 such term by section 4002.’’. 

16 (b) CREDIT TO BE PART OF GENERAL BUSINESS

17 CREDIT.—Subsection (b) of section 38 of such Code (re18 lating to general business credit) is amended by striking 

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

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

21 by adding at the end the following new paragraph: 

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

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

24 (c) CONFORMING AMENDMENT.—The table of sec25 tions for subpart D of part IV of subchapter A of chapter 

26 1 of the Internal Revenue Code of 1986 is amended by 
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1 inserting after the item relating to section 45F the fol2 lowing new item: 

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

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

4 this section shall apply to taxable years ending after the 

5 date of the enactment of this Act. 

6 SEC. 4. LOAN GUARANTEES. 

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

8 may provide loan guarantees to manufacturers of motor 

9 vehicles or of motor vehicle engines for the purposes de10 scribed in subsection (b). 

11 (b) ELIGIBLE PURPOSES.—Loans guaranteed under 

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

13 the manufacture of motor vehicles or engines achieving 

14 less than 40 miles per gallon of gasoline to the manufac15 ture of motor vehicles or engines achieving more than 40 

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

17 for advertising or promotional costs. 

18 (c) AGGREGATE AMOUNT OF LOAN GUARANTEES.— 

19 The aggregate amount of loans that may be guaranteed 

20 under this section at any one time shall not exceed 

21 $1,000,000,000. 

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

23 Secretary shall not guarantee a loan under this section 

24 for an amount greater than $100,000,000. 
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1 (e) RATES OF INTEREST.—The Secretary shall not 

2 make a loan guarantee under this section if the interest 

3 rate for the loan exceeds that which the Secretary deter4 mines to be reasonable, taking into consideration the pre5 vailing interest rates and customary fees incurred under 

6 similar obligations in the private capital market. 

7 (f) ABILITY TO REPAY.—The Secretary shall not 

8 make a loan guarantee under this section unless the Sec9 retary has made a finding in writing that the recipient 

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

11 to its terms. 

12 (g) APPLICATIONS.—The Secretary shall prescribe 

13 the form and contents required of applications for assist14 ance under this section, to enable the Secretary to deter15 mine the eligibility of the applicant’s proposal, and shall 

16 establish terms and conditions for loan guarantees made 

17 under this section. 

18 (h) FULL FAITH AND CREDIT.—All guarantees en19 tered into by the Secretary under this section shall con20 stitute general obligations of the United States backed by 

21 the full faith and credit of the United States. 

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

23 modification of any term or condition of a loan guarantee 

24 or loan guarantee commitment, including the rate of inter-
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1 est, time of payment of interest or principal, or security 

2 requirements, if the Secretary finds in writing that— 

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

4 overall best interests of the United States; and 

5 (2) consent has been obtained from the appli6 cant and the holder of the obligation. 

7 (j) DEFAULT.—The Secretary shall prescribe regula8 tions setting forth procedures in the event of default on 

9 a loan guaranteed under this section. The Secretary shall 

10 ensure that each loan guarantee made under this section 

11 contains terms and conditions that provide that— 

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

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

14 Secretary shall pay to the holder of the obligation, 

15 or the holder’s agent, the amount of unpaid guaran16 teed interest; 

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

18 90 days, the Secretary shall pay to the holder of the 

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

20 unpaid guaranteed principal; 

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

22 liquidation or otherwise, the Secretary shall pay to 

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

24 any remaining amounts guaranteed but which were 

25 not recovered through the default’s resolution; 
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1 (4) the Secretary shall not be required to make 

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

3 the Secretary finds, before the expiration of the peri4 ods described in such paragraphs, that the default 

5 has been remedied; and 

6 (5) the holder of the obligation shall not receive 

7 payment or be entitled to retain payment in a total 

8 amount which, together with all other recoveries (in9 cluding any recovery based upon a security interest 

10 in equipment or facilities) exceeds the actual loss of 

11 such holder. 

12 (k) RIGHTS OF THE SECRETARY.— 

13 (1) SUBROGATION.—If the Secretary makes 

14 payment to a holder, or a holder’s agent, under sub15 section (j) in connection with a loan guarantee made 

16 under this section, the Secretary shall be subrogated 

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

18 obligor under the loan. 

19 (2) DISPOSITION OF PROPERTY.—The Sec20 retary may complete, recondition, reconstruct, ren21 ovate, repair, maintain, operate, charter, rent, sell, 

22 or otherwise dispose of any property or other inter23 ests obtained pursuant to this section. The Secretary 

24 shall not be subject to any Federal or State regu-
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1 latory requirements when carrying out this para2 graph. 

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

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

5 name of the holder of the obligation in the event of a de6 fault on a loan guaranteed under this section. The holder 

7 of a guarantee shall make available to the Secretary all 

8 records and evidence necessary to prosecute the civil ac9 tion. The Secretary may accept property in full or partial 

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

11 If the Secretary receives, through the sale or other disposi12 tion of such property, an amount greater than the aggre13 gate of— 

14 (1) the amount paid to the holder of a guar15 antee under subsection (j); and 

16 (2) any other cost to the United States of rem17 edying the default, 

18 the Secretary shall pay such excess to the obligor. 

19 (m) BREACH OF CONDITIONS.—The Attorney Gen20 eral shall commence a civil action in an appropriate Fed21 eral court to enjoin any activity which the Secretary finds 

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

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

24 any other appropriate relief. 
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1 (n) ATTACHMENT.—No attachment or execution may 

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

3 control of the Secretary, prior to the entry of final judg4 ment to such effect in any State, Federal, or other court. 

5 (o) INVESTIGATION CHARGE.—The Secretary may 

6 charge and collect from each applicant a reasonable charge 

7 for appraisal of the value of the equipment or facilities 

8 for which the loan guarantee is sought, and for making 

9 necessary determinations and findings. Such charge shall 

10 not aggregate more than one-half of 1 percent of the prin11 cipal amount of the obligation. 

12 (p) AUTHORIZATION OF APPROPRIATIONS.—There 

13 are authorized to be appropriated to the Secretary of En14 ergy for carrying out this section such sums as may be 

15 necessary for fiscal years 2006 through 2010. 

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

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

18 guarantee, insurance, or other pledge with respect to 

19 the payment of all or a part of the principal or inter20 est on any debt obligation of a non-Federal borrower 

21 to a non-Federal lender, but does not include the in22 surance of deposits, shares, or other withdrawable 

23 accounts in financial institutions. 

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

25 means a binding agreement by the Secretary of En-
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1 ergy to make a loan guarantee when specified condi2 tions are fulfilled by the borrower, the lender, or any 

3 other party to the guarantee agreement. 

4 (3) The term ‘‘modification’’ means any Gov5 ernment action that alters the estimated cost of an 

6 outstanding loan guarantee (or loan guarantee com7 mitment) from the current estimate of cash flows. 

8 This includes the sale of loan assets, with or without 

9 recourse, and the purchase of guaranteed loans. This 

10 also includes any action resulting from new legisla11 tion, or from the exercise of administrative discre12 tion under existing law, that directly or indirectly al13 ters the estimated cost of outstanding loan guaran14 tees (or loan guarantee commitments) such as a 

15 change in collection procedures. 

16 SEC. 5. PERMANENT EXTENSION OF RESEARCH 

17 CREDIT. 

18 (a) IN GENERAL.—Section 41 of the Internal Rev19 enue Code of 1986 (relating to credit for increasing re20 search activities) is amended by striking subsection (h). 

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

22 section 45C(b) of such Code is amended by striking sub23 paragraph (D). 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to amounts paid or incurred after 

3 the date of the enactment of this Act. 

4 SEC. 6. INCREASE IN RATES OF ALTERNATIVE INCRE5 MENTAL CREDIT. 

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

7 41(c)(4) of the Internal Revenue Code of 1986 (relating 

8 to election of alternative incremental credit) is amended— 

9 (1) by striking ‘‘2.65 percent’’ and inserting ‘‘3 

10 percent’’, 

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

12 percent’’, and 

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

14 percent’’. 

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

16 this section shall apply to taxable years ending after the 

17 date of the enactment of this Act. 

18 SEC. 7. EXCLUSION OF QUALIFIED FUEL-EFFICIENT VEHI19 CLES FROM CALCULATION OF AVERAGE 

20 FUEL ECONOMY OF A MANUFACTURER. 

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

22 amended by adding at the end the following: 

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

24 manufacturer under paragraph (1), the Administrator 

25 shall not consider any automobile manufactured by the 
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1 manufacturer for which a credit is allowed under section 

2 38(a)(16) of the Internal Revenue Code of 1986.’’. 

Æ