I 

109TH CONGRESS 

1ST SESSION H. R. 2828

To ensure that the United States leads the world in developing and manufacturing next generation energy technologies, to grow the economy of 

the United States, to create new highly trained, highly skilled American 

jobs, to eliminate American overdependence on foreign oil, and to address 

the threat of global warming. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 9, 2005

Mr. INSLEE (for himself, Mr. VAN HOLLEN, Mr. HOLT, Mr. ISRAEL, Mr. 

HONDA, Mr. MCDERMOTT, Mr. LARSEN of Washington, Mr. JACKSON of 

Illinois, Ms. SCHAKOWSKY, Mr. LANGEVIN, Mr. GRIJALVA, Mr. EMANUEL, Ms. BALDWIN, Mr. GEORGE MILLER of California, and Mr. SMITH

of Washington) introduced the following bill; which was referred to the 

Committee on Energy and Commerce, and in addition to the Committees 

on Science, Ways and Means, Financial Services, Transportation and Infrastructure, Education and the Workforce, Government Reform, and Agriculture, 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 ensure that the United States leads the world in developing and manufacturing next generation energy technologies, to grow the economy of the United States, 

to create new highly trained, highly skilled American 

jobs, to eliminate American overdependence on foreign 

oil, and to address the threat of global warming.
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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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘New Apollo Energy Act of 2005’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows:

Sec. 1. Short title; table of contents. 

TITLE I—FINDINGS AND PERFORMANCE GOALS 

Sec. 101. Findings. 

Sec. 102. Performance goals. 

TITLE II—FEDERAL RESEARCH AND DEVELOPMENT 

PARTNERSHIPS WITH INDUSTRY FOR NEW TECHNOLOGY 

Subtitle A—General provisions 

Sec. 201. Authorization of appropriations. 

Sec. 202. Participation. 

Sec. 203. Cost sharing. 

Sec. 204. Education and outreach. 

Sec. 205. Definition. 

Subtitle B—Clean energy technology research program 

Sec. 211. Definitions. 

Sec. 212. Enhanced clean energy research, development, and demonstration. 

Subtitle C—Energy efficiency research, development, and demonstration 

program 

Sec. 221. Enhanced energy efficiency research, development, and demonstration. 

Sec. 222. Enhanced aeronautical system energy efficiency research, development, and public-private partnership. 

Sec. 223. Next Generation Lighting Initiative. 

Sec. 224. National Building Performance Initiative. 

Subtitle D—Additional research programs 

PART 1—FUSION

Sec. 231. Plan for fusion experiment. 

Sec. 232. Definitions. 

PART 2—ULTRA-DEEPWATER AND EXTENDED REACH DRILLING AND CARBON

SEQUESTRATION TECHNOLOGIES
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Sec. 241. Program authority. 

Sec. 242. Ultra-deepwater and extended reach drilling and carbon sequestration 

and unconventional technologies program. 

Sec. 243. Sunset. 

Sec. 244. Definitions. 

TITLE III—TAX INCENTIVES FOR NEW TECHNOLOGIES 

Sec. 301. References. 

Sec. 302. Administration of title. 

Subtitle A—Near term tax incentives 

Sec. 311. Extension through 2015 for placing qualified facilities in service for 

producing renewable electric energy. 

Sec. 312. Expansion and modification of renewable resource credit. 

Sec. 313. Tradable renewable resource credit for public utilities and other tax 

exempt organizations. 

Sec. 314. Alternative motor vehicle credit. 

Sec. 315. Modification of credit for qualified electric vehicles. 

Sec. 316. Extension of biodiesel tax credits. 

Sec. 317. Credit for retail sale of alternative fuels as motor vehicle fuel. 

Sec. 318. Study of effectiveness of certain provisions by GAO. 

Sec. 319. Extension of deduction for certain refueling property. 

Sec. 320. Credit for installation of alternative fueling stations. 

Sec. 321. Incentive for certain energy efficient property used in business. 

Sec. 322. Energy efficient commercial buildings deduction. 

Sec. 323. Credit for construction of new highly energy-efficient homes. 

Sec. 324. Credit for energy efficient appliances. 

Sec. 325. Credit for distributed energy generation and demand management 

property. 

Sec. 326. Credit for energy efficient recycling or remanufacturing equipment. 

Sec. 327. Credit for distributed energy generation and demand management 

property used in residences. 

Sec. 328. Credit for energy management systems using residential real time 

metering systems. 

Sec. 329. Credit for flywheel property. 

Sec. 330. Credits for clean coal. 

Subtitle B—Long Term Incentives 

Sec. 331. Tax incentives for retooling and investment in new facilities and assets to produce energy efficiency technologies and domestic 

clean energy production technologies. 

Sec. 332. Special rules for automotive industry. 

Sec. 333. Special rules for high-capacity airplanes. 

Sec. 334. New electricity transmission lines designed primarily to carry electricity from renewable energy resources. 

Sec. 335. New energy technologies commission. 

Sec. 336. Expenditure limitation. 

TITLE IV—FEDERAL GOVERNMENT LEVERAGE TO MOVE NEW 

TECHNOLOGIES TO MARKET 

Sec. 401. Improved coordination of technology transfer activities. 

Sec. 402. Federal support for commercialization of new technologies. 

Sec. 403. Clean energy technology exports program. 
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Sec. 404. International energy technology deployment program. 

Sec. 405. Risk pool for qualifying advanced clean energy technology. 

Sec. 406. Federal renewable and clean energy use. 

Sec. 407. Require the Export-Import Bank of the United States to meet renewable energy targets in its lending practices. 

Sec. 408. Grants for transit programs. 

Sec. 409. Grants for water and sewer improvement programs. 

Sec. 410. Loans for high-efficiency vehicles. 

Sec. 411. Requirement regarding purchase of motor vehicles by Executive agencies. 

Sec. 412. Federal energy efficiency. 

Sec. 413. Federal agency ethanol-blended gasoline and biodiesel purchasing requirement. 

Sec. 414. Permitting of wind energy development projects on public lands. 

Sec. 415. Energy savings performance contracts. 

Sec. 416. Municipality grants for distributed energy plans. 

Sec. 417. Green building standards for Federal buildings. 

TITLE V—CONSUMER PROTECTION AND ASSISTANCE 

Sec. 501. Strategic Petroleum Reserve. 

Sec. 502. Regulatory oversight over energy trading markets and metals trading 

markets. 

Sec. 503. Increased funding for liheap, weatherization assistance. 

Sec. 504. National energy efficient housing. 

Sec. 505. National net metering requirement for utilities and interconnection 

standards for distributive energy generation. 

Sec. 506. Appliance standards. 

Sec. 507. Energy Star certification for solar water heaters. 

Sec. 508. Electric reliability standards. 

TITLE VI—MARKET-BASED INITIATIVES TO REDUCE 

GREENHOUSE GASES 

Sec. 600. Definitions. 

Subtitle A—Federal climate change research and related activities 

Sec. 601. National Science Foundation fellowships. 

Sec. 602. Research grants. 

Sec. 603. Abrupt climate change research. 

Sec. 604. NIST greenhouse gas functions. 

Sec. 605. Development of new measurement technologies. 

Sec. 606. Enhanced environmental measurements and standards. 

Sec. 607. Technology development and diffusion. 

Sec. 608. Agricultural outreach program. 

Sec. 609. NOAA report on climate change effects; preparation assistance. 

Subtitle B—National Greenhouse Gas Database 

Sec. 611. National Greenhouse Gas Database and registry established. 

Sec. 612. Inventory of greenhouse gas emissions for covered entities. 

Sec. 613. Greenhouse gas reduction reporting. 

Sec. 614. Measurement and verification. 

Subtitle C—Market-driven greenhouse gas reductions 
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CHAPTER 1—EMISSION REDUCTION REQUIREMENTS; USE OF TRADEABLE

ALLOWANCES

Sec. 621. Covered entities must submit allowances for emissions. 

Sec. 622. Compliance. 

Sec. 623. Borrowing against future reductions. 

Sec. 624. Other uses of tradeable allowances. 

Sec. 625. Exemption of source categories. 

CHAPTER 2—ESTABLISHMENT AND ALLOCATION OF TRADEABLE

ALLOWANCES

Sec. 631. Establishment of tradeable allowances. 

Sec. 632. Determination of tradeable allowance allocations. 

Sec. 633. Allocation of tradeable allowances. 

Sec. 634. Ensuring target adequacy. 

Sec. 635. Initial allocations for early participation and accelerated participation. 

Sec. 636. Bonus for accelerated participation. 

CHAPTER 3—CLIMATE CHANGE CREDIT CORPORATION

Sec. 641. Establishment. 

Sec. 642. Purposes and functions. 

CHAPTER 4—SEQUESTRATION ACCOUNTING; PENALTIES

Sec. 651. Penalties. 

Sec. 652. Sequestration accounting. 

TITLE VII—ENERGY INDEPENDENCE 

Subtitle A—Renewable fuels standard 

Sec. 701. Renewable fuels standard. 

Sec. 702. Elimination of oxygen content requirement for reformulated gasoline. 

Sec. 703. Public health and environmental impacts of fuels and fuel additives. 

Sec. 704. Analyses of motor vehicle fuel changes. 

Sec. 705. Additional Opt-in areas under reformulated gasoline program. 

Sec. 706. Federal enforcement of State fuels requirements. 

Sec. 707. Fuel system requirements harmonization study. 

Sec. 708. Report on renewable motor fuel. 

Subtitle B—Renewable portfolio standard 

Sec. 711. Renewable portfolio standard. 

Subtitle C—Oil Savings 

Sec. 721. Oil savings. 

Sec. 722. Determination of Equivalency between CAFE credits and greenhouse 

gas credits. 

Sec. 723. Elimination of 2–FLEET rule. 

Subtitle D—Loan guarantees for biorefineries and renewable electricity 

generation facilities 

Sec. 731. Loan guarantees for biorefineries and renewable energy production 

facilities. 
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TITLE VIII—TAX OFFSETS 

Sec. 801. References. 

Subtitle A—Budget neutrality 

Sec. 811. Tax reductions limited to revenue raised by tax offsets. 

Subtitle B—Denial of treaty benefits 

Sec. 821. Denial of treaty benefits for certain deductible payments. 

Subtitle C—Abusive tax shelter shutdown and taxpayer accountability 

Sec. 831. Findings and purpose. 

Sec. 832. Clarification of economic substance doctrine. 

Sec. 833. Penalty for understatements attributable to transactions lacking economic substance, etc. 

Sec. 834. Understatement of taxpayer’s liability by income tax return preparer. 

Sec. 835. Frivolous tax submissions. 

Sec. 836. Expanded authority to disallow tax benefits under section 269.

1 TITLE I—FINDINGS AND 

2 PERFORMANCE GOALS 

3 SEC. 101. FINDINGS. 

4 (a) FINDINGS.—The Congress finds the following: 

5 (1) The United States imports over half the oil 

6 it consumes and consumes about one fourth of the 

7 world’s daily oil production. 

8 (2) According to present trends, the United 

9 States reliance on foreign oil will increase to 68 per10 cent of total consumption by 2025. 

11 (3) Having only 3 percent of the world’s known 

12 oil reserves, the health of the United States economy 

13 is dependent on world oil prices. 

14 (4) World oil prices are overwhelmingly dictated 

15 by countries other than the United States, particu-
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1 larly by the member countries of the Organization of 

2 Petroleum Exporting Countries. 

3 (5) A major portion of the world’s oil supply is 

4 controlled by unstable governments and countries 

5 that are known to finance, harbor, or otherwise sup6 port terrorists and terrorist activities. 

7 (6) Since World War II, the United States has 

8 made significant expenditures of American taxpayer 

9 dollars in attempts to stabilize governments and pro10 tect American interests in the Middle East. 

11 (7) Countries such as Japan, Germany, Den12 mark, and Great Britain lead the United States in 

13 manufacturing alternative energy technologies that 

14 both decrease reliance on fossil fuels and do not con15 tribute to global warming. 

16 (8) The United States has led the world in the 

17 development of a wide array of technological ad18 vances and is now poised to lead the world, using its 

19 unique national genius for innovation, in the devel20 opment of a host of new energy technologies. 

21 (9) Development of renewable energy resources 

22 in the United States offers a substantial opportunity 

23 for economic development in rural, agriculture-de24 pendent areas. 
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1 (10) A bold new national energy plan can lead 

2 to a surge of investment in, development of, and de3 ployment of clean energy and energy efficient tech4 nologies that would result in the creation of millions 

5 of highly trained manufacturing and technical jobs 

6 throughout the American economy. 

7 (11) Innovative uses of tax incentives to encour8 age the manufacturing of new clean energy tech9 nologies in the United States will help create Amer10 ican jobs, decrease America’s dependence on foreign 

11 oil, and address pressing environmental concerns, 

12 and are preferable to large tax breaks for the 

13 wealthiest in society. 

14 (12) Human activities have caused rapid in15 creases in atmospheric concentrations of carbon di16 oxide and other greenhouse gases in the last century. 

17 (13) According to the Intergovernmental Panel 

18 on Climate Change and the National Research 

19 Council—

20 (A) the Earth has warmed in the last cen21 tury; and 

22 (B) the majority of the observed warming 

23 is attributable to human activities, including 

24 fossil fuel-generated carbon dioxide emissions. 
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1 (14) Despite the fact that many uncertainties 

2 in climate science remain, the potential impacts from 

3 human-induced climate change pose a substantial 

4 risk that should be managed in a responsible man5 ner. 

6 (15) The United States has ratified the 

7 UNFCCC (United Nations Framework Convention 

8 on Climate Change), which states, in part, ‘‘the Par9 ties to the Convention are to implement policies with 

10 the aim of returning to their 1990 levels anthropo11 genic emissions of carbon dioxide and other green12 house gases’’. 

13 (16) Global warming poses a significant threat 

14 to national security, the American economy, public 

15 health and welfare, and the global environment. Ac16 cording to a report commissioned by the Department 

17 of Defense in 2003 entitled ‘‘An Abrupt Climate 

18 Change Scenario and its Implications for United 

19 States National Security’’, the risk of abrupt climate 

20 change due to global warming should be elevated be21 yond a scientific debate to a US national security 

22 concern. 

23 SEC. 102. PERFORMANCE GOALS. 

24 (a) NEW APOLLO ENERGY ACT PERFORMANCE

25 GOALS.—In order to ensure that the national energy pol-
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1 icy of the United States is the most effective policy for 

2 protecting national and homeland security, expanding our 

3 economy and creating jobs, addressing global warming and 

4 environmental health concerns, and protecting the inter5 ests of American consumers, Congress establishes the New 

6 Apollo Energy Act Performance Goals, which the Presi7 dent shall consider when formulating and enforcing na8 tional energy policy. These goals are to—

9 (1) reduce demand for oil in the United States 

10 by at least 600,000 barrels per day from the de11 mand for oil projected by the Energy Information 

12 Administration for 2010, 1,700,000 barrels per day 

13 from projected demand for oil in 2015, and 

14 3,000,000 barrels per day from projected demand 

15 for oil in 2020; 

16 (2) create and retain 3,000,000 new highly 

17 skilled, high-waged jobs in the United States by 

18 2015; 

19 (3) meet 15 percent of the country’s electricity 

20 needs from electricity generated from renewable re21 sources by 2015, and 5 percent of the country’s elec22 tricity needs from electricity generated from carbon23 based zero emission carbon dioxide sources by 2015; 

24 (4) produce 8,100,000,000 gallons per year of 

25 renewable fuels, including traditional ethanol, cel-
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1 lulose ethanol, and biodiesel by 2013 without cre2 ating regional cost disparities for fuel; 

3 (5) lower energy costs for consumers by meet4 ing 25 percent of energy supply needs, as projected 

5 for the year 2013 by the Energy Information Ad6 ministration, through increased conservation and im7 proved energy efficiency; 

8 (6) maximize long-term production of existing 

9 domestic marginal and stripper oil reserves; 

10 (7) encourage stable energy prices and markets 

11 by promoting energy production and energy infra12 structure modernization, while maintaining existing 

13 environmental protections; 

14 (8) reduce total carbon dioxide emissions in the 

15 United States to 5,806,100,000 metric tons per year 

16 by 2015; 

17 (9) encourage domestic manufacturing and pro18 duction of new energy and energy efficient tech19 nologies; 

20 (10) redevelop and enhance existing industrial 

21 facilities in areas of the country adversely impacted 

22 by manufacturing job losses; and 

23 (11) promote rural economic development. 
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1 TITLE II—FEDERAL RESEARCH 

2 AND DEVELOPMENT PART3 NERSHIPS WITH INDUSTRY 

4 FOR NEW TECHNOLOGY 

5 Subtitle A—General Provisions 

6 SEC. 201. AUTHORIZATION OF APPROPRIATIONS. 

7 There are authorized to be appropriated for carrying 

8 out this title $36,000,000,000. 

9 SEC. 202. PARTICIPATION. 

10 The Secretary of Energy, in collaboration with the 

11 Secretary of Commerce, shall coordinate the participation 

12 of National Laboratories, universities, commercial indus13 try, and other organizations in carrying out this title. 

14 SEC. 203. COST SHARING. 

15 (a) IN GENERAL.—Unless otherwise specified, the 

16 Secretary shall require a commitment from non-Federal 

17 sources of at least 20 percent of the cost of proposed re18 search and development projects under this title. 

19 (b) REDUCTION OR ELIMINATION.—The Secretary 

20 may reduce or eliminate the cost sharing requirement 

21 under subsection (a)—

22 (1) if the Secretary determines that the re23 search and development is of a basic or fundamental 

24 nature; or 
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1 (2) for technical analyses, outreach activities, 

2 and educational programs that the Secretary does 

3 not expect to result in a marketable product. 

4 SEC. 204. EDUCATION AND OUTREACH. 

5 (a) PROGRAM.—The Secretary of Energy shall estab6 lish a program of education and outreach, including inno7 vative education and outreach techniques, on renewable 

8 energy and energy efficiency technologies to manufactur9 ers, consumers, engineers, architects, builders, energy 

10 service companies, universities, facility planners and man11 agers, State and local governments, and other appropriate 

12 entities. 

13 (b) AUTHORIZATION OF APPROPRIATIONS.—There 

14 are authorized to be appropriated to the Secretary of En15 ergy for carrying out this section $100,000,000 for each 

16 of the fiscal years 2006 through 2009, and such sums as 

17 may be necessary for each of the fiscal years 2010 through 

18 2022. 

19 SEC. 205. DEFINITION. 

20 For purposes of this title, the term ‘‘National Lab21 oratory’’ means any of the following laboratories owned 

22 by the Department of Energy: 

23 (1) Ames National Laboratory. 

24 (2) Argonne National Laboratory. 

25 (3) Brookhaven National Laboratory. 
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1 (4) Fermi National Laboratory. 

2 (5) Idaho National Engineering and Environ3 mental Laboratory. 

4 (6) Lawrence Berkeley National Laboratory. 

5 (7) Lawrence Livermore National Laboratory. 

6 (8) Los Alamos National Laboratory. 

7 (9) National Energy Technology Laboratory. 

8 (10) National Renewable Energy Laboratory. 

9 (11) Oak Ridge National Laboratory. 

10 (12) Pacific Northwest National Laboratory. 

11 (13) Princeton Plasma Physics Laboratory. 

12 (14) Sandia National Laboratories. 

13 (15) Savannah River National Laboratory. 

14 (16) Stanford Linear Accelerator Center. 

15 (17) Thomas Jefferson National Accelerator 

16 Facility. 

17 Subtitle B—Clean Energy 

18 Technology Research Program 

19 SEC. 211. DEFINITIONS. 

20 For purposes of this subtitle—

21 (1) the term ‘‘biomass’’ means any organic 

22 matter that is available on a renewable or recurring 

23 basis, including agricultural crops and trees, wood 

24 and wood wastes and residues, plants (including 
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1 aquatic plants), grasses, residues, fibers, animal 

2 wastes, and municipal wastes; 

3 (2) the term ‘‘clean energy source’’ means—

4 (A) wind; 

5 (B) biomass; 

6 (C) a geothermal source; 

7 (D) ocean waves; 

8 (E) a solar source; 

9 (F) a photovoltaic source; 

10 (G) additional hydroelectric generation ca11 pacity achieved from increased efficiency at an 

12 existing hydroelectric dam; or 

13 (H) minimal emission coal; and 

14 (3) the term ‘‘minimal emission coal’’ means 

15 coal resources that result in zero or near zero emis16 sions of sulfur dioxide, nitrogen oxides, and mercury, 

17 and 90 percent or more sequestration of carbon di18 oxide emissions. 

19 SEC. 212. ENHANCED CLEAN ENERGY RESEARCH, DEVEL20 OPMENT, AND DEMONSTRATION. 

21 (a) GOALS.—In order to achieve the goals stated in 

22 section 102 of this Act, the United States shall have an 

23 energy research, development, and demonstration program 

24 to enhance clean energy with the following goals: 
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1 (1) For wind power, the program should reduce 

2 the cost of wind-generated electricity by 40 percent 

3 by 2015, compared to the cost as of the date of the 

4 enactment of this Act, with concentration within the 

5 program on a variety of advanced wind turbine con6 cepts, manufacturing technologies, and optimal dem7 onstration locations. 

8 (2) For photovoltaics, the programs should pur9 sue research, development, and demonstration that 

10 would lead to photovoltaic systems with generation 

11 costs of 10 cents kWh by 2015, and 7 cents kWh 

12 by 2020. Program activities should include assisting 

13 industry in developing manufacturing technologies, 

14 giving greater attention to balance of system issues, 

15 and expanding fundamental research on relevant ad16 vanced materials. 

17 (3) For solar thermal electric systems the pro18 gram should strengthen ongoing research, develop19 ment, and demonstration combining high-efficiency 

20 and high-temperature receivers with advanced ther21 mal storage and power cycles, with the goal of mak22 ing solar-only power (including baseload solar power) 

23 widely competitive with fossil fuel power by 2017. 

24 (4) For geothermal energy, the program should 

25 continue work on hydrothermal systems, and reac-
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1 tivate research, development, and demonstration of 

2 advanced concepts, giving top priority to hot dryrock 

3 geothermal energy. 

4 (5) For ocean wave energy, the program should 

5 reactivate and strengthen ongoing research, develop6 ment, and demonstration programs that would lead 

7 to generating technologies for deriving electrical 

8 power from the ocean, including tidal power, wave 

9 power, and ocean thermal energy conversion. 

10 (6) For stationary power generation, the Sec11 retary shall work with domestic manufacturers and 

12 the utilities to encourage commercial production of 

13 cost-competitive, fuel cell power generating facilities. 

14 The program should provide new technologies that 

15 achieve an efficiency of 70–80 percent Lower Heat16 ing Value with an average cost of $400 per kilowatt 

17 by 2015. 

18 (7) For biomass energy—

19 (A) the program should enable the United 

20 States to triple biomass energy use by 2010; 

21 (B) for biomass-based power systems, the 

22 program should enable commercialization, with23 in five years after the date of the enactment of 

24 this Act, of integrated power-generating tech-
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1 nologies that employ gas turbines and fuel cells 

2 integrated with biomass gasifiers; and 

3 (C) for biofuels, the program should accel4 erate research, development, and demonstration 

5 on advanced cellulosic conversion, including re6 calcitrance of biomass, feedstock development, 

7 and co-products development. 

8 (8) For hydropower, the program should pro9 vide for a new generation of turbine technologies 

10 that will increase generating capacity and will be 

11 less damaging to fish and aquatic ecosystems. 

12 (9) For electric energy systems and storage, the 

13 program should develop—

14 (A) technologies for generators and trans15 mission, distribution, and storage systems that 

16 combine high capacity with high efficiency (par17 ticularly for electric transmission facilities in 

18 rural and remote areas); 

19 (B) new transmission and distribution 

20 technologies, including flexible alternating cur21 rent transmission systems, composite conductor 

22 materials, advanced protection devices, and con23 trollers; 
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1 (C) technologies for interconnection of dis2 tributed energy resources with electric power 

3 systems; 

4 (D) technologies to sequester 90 percent or 

5 more of carbon dioxide emissions; 

6 (E) high-temperature superconducting ma7 terials for power delivery equipment such as 

8 transmission and distribution cables, trans9 formers, and generators; and 

10 (F) real-time transmission and distribution 

11 system control technologies that provide for 

12 continual exchange of information between gen13 eration, transmission, distribution, and end-user 

14 facilities. 

15 (10) For minimum emission coal, the program 

16 shall pursue research that develops and dem17 onstrates facilities generating electricity from coal, 

18 in a cost-competitive manner, that by 2020—

19 (A) remove 99 percent of total sulfur diox20 ide emissions; 

21 (B) emit no more than .05 lbs of NOx per 

22 million BTU; 

23 (C) achieve a 90 percent reduction in mer24 cury emissions; 
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1 (D) sequester 90 percent or more of car2 bon dioxide emissions; and 

3 (E) achieve a thermal efficiency of—

4 (i) 60 percent for coal of more than 

5 9,000 Btu; 

6 (ii) 59 percent for coal of 7,000 to 

7 9,000 Btu; and 

8 (iii) 57 percent for coal of less than 

9 7,000 Btu. 

10 (11) The Secretary shall work to maximize the 

11 production of hydrogen from clean energy sources. 

12 (12) The Secretary shall support under this 

13 section any other technology that may help achieve 

14 the goals stated in section 102. 

15 (b) TECHNICAL CRITERIA FOR GASIFICATION.—In 

16 allocating the funds made available for minimum emission 

17 coal, the Secretary shall ensure that at least 80 percent 

18 of the funds are used for coal-based gasification tech19 nologies or coal-based projects that include gasification 

20 combined cycle, gasification fuel cells, gasification co-pro21 duction, or hybrid gasification/combustion. The Secretary 

22 shall set technical milestones specifying emissions levels 

23 that coal gasification projects must be designed to, and 

24 can reasonably be expected to, achieve. The milestones 

25 shall get more restrictive through the life of the program. 
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1 (c) COORDINATION WITH OTHER BENEFITS.—The 

2 Secretary shall not provide assistance under this section 

3 to any person if such person has received assistance under 

4 section 642 or 731. 

5 Subtitle C—Energy Efficiency Re6 search, Development, and Dem7 onstration Program 

8 SEC. 221. ENHANCED ENERGY EFFICIENCY RESEARCH, DE9 VELOPMENT, AND DEMONSTRATION. 

10 (a) GOALS.—In order to achieve the goal stated in 

11 section 102 of this Act, the United States shall have an 

12 energy research, development, and demonstration program 

13 to enhance energy efficiency with the following goals: 

14 (1) For energy efficiency in housing, the pro15 gram should develop technologies, housing compo16 nents, designs, and production methods that will, by 

17 2010—

18 (A) reduce the time needed to move en19 ergy-efficient technologies to market by 50 per20 cent, compared to the time needed as of the 

21 date of the enactment of this Act; 

22 (B) reduce the monthly cost of new hous23 ing by 20 percent, compared to the cost as of 

24 the date of the enactment of this Act; 
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1 (C) cut the environmental impact and en2 ergy use of new housing by 50 percent, com3 pared to the impact and use as of the date of 

4 the enactment of this Act; 

5 (D) ensure that at least 15,000,000 homes 

6 existing as of the date of the enactment of this 

7 Act reduce their total energy consumption by 

8 30 percent, compared to the use as of the date 

9 of the enactment of this Act; and 

10 (E) improve the durability and reduce 

11 maintenance costs of housing technology com12 ponents by 50 percent compared to the dura13 bility and costs as of the date of the enactment 

14 of this Act. 

15 (2) For industrial energy efficiency, the pro16 gram should, in cooperation with the affected indus17 tries—

18 (A) develop a microturbine (40 to 300 kilo19 watt) that is greater than 40 percent more effi20 cient by 2008, compared to the efficiency as of 

21 the date of the enactment of this Act; 

22 (B) develop a microturbine that is greater 

23 than 50 percent more efficient by 2012, com24 pared to the efficiency as of the date of the en25 actment of this Act; 
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1 (C) develop advanced materials for com2 bustion systems that reduce emissions of nitro3 gen oxides by 30 to 50 percent while increasing 

4 efficiency 5 to 10 percent by 2010, compared to 

5 such emissions as of the date of the enactment 

6 of this Act; and 

7 (D) improve the energy intensity of the 

8 major energy-consuming industries by at least 

9 25 percent by 2012, compared to the energy in10 tensity as of the date of the enactment of this 

11 Act. 

12 (3) For transportation energy efficiency, the 

13 Secretary shall work with domestic automobile man14 ufacturers to encourage commercial production of 

15 cost-competitive, highly fuel-efficient vehicles. In de16 veloping these public-private partnerships, the Sec17 retary shall take into consideration the following: 

18 (A) Hybrid gas/electric vehicles. 

19 (B) Fuel cells. 

20 (C) Alternative fuel driven engines. 

21 (D) Maximizing the production of hydro22 gen from clean energy sources. 

23 (4) The Secretary shall support under this sec24 tion any other technology that may help achieve the 

25 goals stated in section 102. 
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1 (b) DEFINITIONS.—For purposes of this section—

2 (1) the term ‘‘alternative fuel’’ has the meaning 

3 given that term in section 301(2) of the Energy Pol4 icy Act of 1992; and 

5 (2) the term ‘‘major energy-consuming indus6 tries’’ means—

7 (A) the forest product industry; 

8 (B) the steel industry; 

9 (C) the aluminum industry; 

10 (D) the metal casting industry; 

11 (E) the chemical industry; 

12 (F) the petroleum refining industry; and 

13 (G) the glass-making industry. 

14 (c) LIMITS ON USE OF FUNDS.—None of the funds 

15 authorized to be appropriated under this section may be 

16 used for—

17 (1) the promulgation and implementation of en18 ergy efficiency regulations; 

19 (2) the Weatherization Assistance Program 

20 under part A of title IV of the Energy Conservation 

21 and Production Act; 

22 (3) the State Energy Program under part D of 

23 title III of the Energy Policy and Conservation Act; 

24 or 
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1 (4) the Federal Energy Management Program 

2 under part 3 of title V of the National Energy Con3 servation Policy Act. 

4 SEC. 222. ENHANCED AERONAUTICAL SYSTEM ENERGY EF5 FICIENCY RESEARCH, DEVELOPMENT, AND 

6 PUBLIC-PRIVATE PARTNERSHIP. 

7 (a) GOALS.—For aeronautical system energy effi8 ciency, the Secretary of Energy, the Secretary of the 

9 Treasury, and the Secretary of Transportation shall de10 velop for commercial production by 2008 a superefficient, 

11 high-capacity commercial airplane. To carry out this sec12 tion, the Secretaries shall form a public-private partner13 ship research and development loan program such that—

14 (1) the Federal Government enters into an 

15 agreement with a domestic commercial airplane 

16 manufacturer in which the Federal Government pro17 vides loans for up to 49 percent of the research and 

18 development cost; and 

19 (2) the Federal Government receives repayment 

20 for loans under paragraph (1) from the commercial 

21 airplane manufacturer through a royalty system 

22 agreed upon by the Secretary of the Treasury. 

23 (b) DEFINITION.—For purposes of this section, the 

24 term ‘‘superefficient, high-capacity commercial airplane’’ 

25 means a commercial airplane with a passenger seating ca-
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1 pacity of no less than 200 people with a range of at least 

2 7,200 nautical miles which consumes at least 15 percent 

3 less fuel than comparable airplanes. 

4 SEC. 223. NEXT GENERATION LIGHTING INITIATIVE. 

5 (a) IN GENERAL.—The Secretary shall carry out a 

6 Next Generation Lighting Initiative in accordance with 

7 this section to support research, development, demonstra8 tion, and commercial application activities related to ad9 vanced solid-state lighting technologies based on white 

10 light emitting diodes. 

11 (b) OBJECTIVES.—The objectives of the initiative 

12 shall be—

13 (1) to develop, by 2012, advanced solid-state 

14 lighting technologies based on white light emitting 

15 diodes that, compared to incandescent and fluores16 cent lighting technologies, are—

17 (A) longer lasting; 

18 (B) more energy-efficient; and 

19 (C) cost-competitive; 

20 (2) to develop an inorganic white light emitting 

21 diode that has an efficiency of 160 lumens per watt 

22 and a 10-year lifetime; and 

23 (3) to develop an organic white light emitting 

24 diode with an efficiency of 100 lumens per watt with 

25 a 5-year lifetime that—
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1 (A) illuminates over a full color spectrum; 

2 (B) covers large areas over flexible sur3 faces; and 

4 (C) does not contain harmful pollutants, 

5 such as mercury, typical of fluorescent lamps. 

6 (c) FUNDAMENTAL RESEARCH.—

7 (1) CONSORTIUM.—The Secretary shall carry 

8 out the fundamental research activities of the Next 

9 Generation Lighting Initiative through a private 

10 consortium (which may include private firms, trade 

11 associations and institutions of higher education), 

12 which the Secretary shall select through a competi13 tive process. Each proposed consortium shall submit 

14 to the Secretary such information as the Secretary 

15 may require, including a program plan agreed to by 

16 all participants of the consortium. 

17 (2) JOINT VENTURE.—The consortium shall be 

18 structured as a joint venture among the participants 

19 of the consortium. The Secretary shall serve on the 

20 governing council of the consortium. 

21 (3) ELIGIBILITY.—To be eligible to be selected 

22 as the consortium under paragraph (1), an applicant 

23 must be broadly representative of United States 

24 solid-state lighting research, development, and man25 ufacturing expertise as a whole. 
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1 (4) GRANTS.—(A) The Secretary shall award 

2 grants for fundamental research to the consortium, 

3 which the consortium may disburse to researchers, 

4 including those who are not participants of the con5 sortium. 

6 (B) To receive a grant, the consortium must 

7 provide a description to the Secretary of the pro8 posed research and list the parties that will receive 

9 funding. 

10 (C) At least 20 percent of the cost of a research 

11 and development project for which a grant is made 

12 under this section shall be matched by the consor13 tium, and at least 50 percent of the cost of a dem14 onstration or commercial application project for 

15 which a grant is made under this section shall be 

16 matched by the consortium. 

17 (5) NATIONAL LABORATORIES.—National Lab18 oratories may participate in the research described 

19 in this section, and may receive funds from the con20 sortium. 

21 (6) INTELLECTUAL PROPERTY.—Participants in 

22 the consortium and the Federal Government shall 

23 have royalty-free nonexclusive rights to use intellec24 tual property derived from research funded pursuant 

25 to this subsection. 
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1 (d) DEVELOPMENT, DEMONSTRATION, AND COM2 MERCIAL APPLICATION.—The Secretary shall carry out 

3 the development, demonstration, and commercial applica4 tion activities of the Next Generation Lighting Initiative 

5 through awards to private firms, trade associations, and 

6 institutions of higher education. In selecting awardees, the 

7 Secretary may give preference to members of the consor8 tium selected pursuant to subsection (c). 

9 (e) PLANS AND ASSESSMENTS.—(1) The consortium 

10 shall formulate an annual operating plan which shall in11 clude research priorities, technical milestones, and plans 

12 for technology transfer, and which shall be subject to ap13 proval by the Secretary. 

14 (2) The Secretary shall enter into an arrangement 

15 with the National Academy of Sciences to conduct periodic 

16 reviews of the Next Generation Lighting Initiative. The 

17 Academy shall review the research priorities, technical 

18 milestones, and plans for technology transfer established 

19 under paragraph (1) and evaluate the progress toward 

20 achieving them. The Secretary shall consider the results 

21 of such reviews in evaluating the plans submitted under 

22 paragraph (1). 

23 (f) AUDIT.—The Secretary shall retain an inde24 pendent, commercial auditor to perform an audit of the 

25 consortium to determine the extent to which the funds au-
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1 thorized by this section have been expended in a manner 

2 consistent with the purposes of this section. The auditor 

3 shall transmit a report annually to the Secretary, who 

4 shall transmit the report to the Congress, along with a 

5 plan to remedy any deficiencies cited in the report. 

6 (g) SUNSET.—The Next Generation Lighting Initia7 tive shall terminate no later than September 30, 2013. 

8 (h) DEFINITIONS.—As used in this section: 

9 (1) ADVANCED SOLID-STATE LIGHTING.—The 

10 term ‘‘advanced solid-state lighting’’ means a 

11 semiconducting device package and delivery system 

12 that produces white light using externally applied 

13 voltage. 

14 (2) FUNDAMENTAL RESEARCH.—The term 

15 ‘‘fundamental research’’ includes basic research on 

16 both solid-state materials and manufacturing proc17 esses. 

18 (3) INORGANIC WHITE LIGHT EMITTING

19 DIODE.—The term ‘‘inorganic white light emitting 

20 diode’’ means an inorganic semiconducting package 

21 that produces white light using externally applied 

22 voltage. 

23 (4) ORGANIC WHITE LIGHT EMITTING DIODE.—

24 The term ‘‘organic white light emitting diode’’ 
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1 means an organic semiconducting compound that 

2 produces white light using externally applied voltage. 

3 SEC. 224. NATIONAL BUILDING PERFORMANCE INITIATIVE. 

4 (a) INTERAGENCY GROUP.—Not later than 3 months 

5 after the date of enactment of this Act, the Director of 

6 the Office of Science and Technology Policy shall establish 

7 an interagency group to develop, in coordination with the 

8 advisory committee established under subsection (e), a 

9 National Building Performance Initiative (in this section 

10 referred to as the ‘‘Initiative’’). The interagency group 

11 shall be cochaired by appropriate officials of the Depart12 ment and the Department of Commerce, who shall jointly 

13 arrange for the provision of necessary administrative sup14 port to the group. 

15 (b) INTEGRATION OF EFFORTS.—The Initiative shall 

16 integrate Federal, State, and voluntary private sector ef17 forts to reduce the costs of construction, operation, main18 tenance, and renovation of commercial, industrial, institu19 tional, and residential buildings. 

20 (c) PLAN.—Not later than 1 year after the date of 

21 enactment of this Act, the interagency group shall submit 

22 to Congress a plan for carrying out the appropriate Fed23 eral role in the Initiative. The plan shall include—

24 (1) research, development, demonstration, and 

25 commercial application of systems and materials for 
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1 new construction and retrofit relating to the building 

2 envelope and building system components; and 

3 (2) the collection, analysis, and dissemination of 

4 research results and other pertinent information on 

5 enhancing building performance to industry, govern6 ment entities, and the public. 

7 (d) DEPARTMENT OF ENERGY ROLE.—Within the 

8 Federal portion of the Initiative, the Department shall be 

9 the lead agency for all aspects of building performance re10 lated to use and conservation of energy. 

11 (e) ADVISORY COMMITTEE.—

12 (1) ESTABLISHMENT.—The Director of the Of13 fice of Science and Technology Policy shall establish 

14 an advisory committee to—

15 (A) analyze and provide recommendations 

16 on potential private sector roles and participa17 tion in the Initiative; and 

18 (B) review and provide recommendations 

19 on the plan described in subsection (c). 

20 (2) MEMBERSHIP.—Membership of the advisory 

21 committee shall include representatives with a broad 

22 range of appropriate expertise, including expertise 

23 in—

24 (A) building research and technology; 
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1 (B) architecture, engineering, and building 

2 materials and systems; and 

3 (C) the residential, commercial, and indus4 trial sectors of the construction industry. 

5 (f) CONSTRUCTION.—Nothing in this section provides 

6 any Federal agency with new authority to regulate build7 ing performance. 

8 Subtitle D—Additional Research 

9 Programs 

10 PART 1—FUSION 

11 SEC. 231. PLAN FOR FUSION EXPERIMENT. 

12 (a) IN GENERAL.—

13 (1) PRIORITY FOR INTERNATIONAL BURNING

14 PLASMA PROJECT.—The Secretary of Energy (in 

15 this part referred to as ‘‘the Secretary’’) is author16 ized to undertake full scientific and technological co17 operation in the international burning plasma 

18 project known as ITER. 

19 (2) ALTERNATIVE PROJECT.—If at any time 

20 during the negotiations on the ITER project, the 

21 Secretary determines that construction and oper22 ation of the ITER project is unlikely or infeasible, 

23 the Secretary shall send to Congress, as part of the 

24 budget request for the following year, a plan for im25 plementing an alternative plan, such as the domestic 
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1 burning plasma experiment known as FIRE, includ2 ing costs and schedules for such a plan. The Sec3 retary shall refine such plan in full consultation with 

4 the Fusion Energy Sciences Advisory Committee 

5 and shall also transmit such plan to the National 

6 Research Council for review. 

7 (b) UNITED STATES POLICY WITH RESPECT TO FU8 SION ENERGY SCIENCE.—

9 (1) DECLARATION OF POLICY.—It shall be the 

10 policy of the United States to develop the scientific, 

11 engineering, and commercial infrastructure nec12 essary to ensure that the United States is competi13 tive with other nations in providing fusion energy for 

14 its own needs and the needs of other nations, includ15 ing demonstrating electric hydrogen power produc16 tion for national power grid utilizing fusion energy 

17 by the earliest date possible. 

18 (2) FUSION ENERGY PLAN.—

19 (A) REQUIREMENT.—Within 6 months of 

20 the date of enactment of this Act, the Secretary 

21 shall transmit to Congress a plan for carrying 

22 out the policy set forth in paragraph (1), in23 cluding cost estimates, proposed budgets, poten24 tial international partners, and specific pro25 grams for implementing such policy. 
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1 (B) REQUIREMENTS OF PLAN.—Such plan 

2 shall also ensure that—

3 (i) existing fusion research facilities 

4 are more fully utilized; 

5 (ii) fusion science, technology, theory, 

6 advanced computation, modeling, and sim7 ulation are strengthened; 

8 (iii) new magnetic and inertial fusion 

9 research facilities are selected based on sci10 entific innovation, cost effectiveness, and 

11 their potential to advance the goal of prac12 tical fusion energy at the earliest date pos13 sible; 

14 (iv) such facilities that are selected 

15 are funded at a cost-effective rate; 

16 (v) communication of scientific results 

17 and methods between the fusion energy 

18 science community and the broader sci19 entific and technology communities is im20 proved; 

21 (vi) inertial confinement fusion facili22 ties are utilized to the extent practicable 

23 for the purpose of inertial fusion energy re24 search and development; and 
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1 (vii) attractive alternative inertial and 

2 magnetic fusion energy approaches are 

3 more fully explored. 

4 (C) REPORT ON FUSION MATERIALS AND

5 TECHNOLOGY PROJECT.—In addition, the plan 

6 required by this section shall also address the 

7 status of, and to the degree possible, the costs 

8 and schedules for—

9 (i) the design and implementation of 

10 international or national facilities for the 

11 testing of fusion materials; and 

12 (ii) the design and implementation of 

13 international or national facilities for the 

14 testing and development of key fusion tech15 nologies. 

16 SEC. 232. DEFINITIONS. 

17 As used in this part, the following definitions apply: 

18 (1) The term ‘‘ITER’’ refers to the inter19 national fusion research project whose design is 

20 complete and whose location and financing is cur21 rently being negotiated between Japan, Europe, the 

22 Russian Federation, Canada, China, and the United 

23 States. 

24 (2) The term ‘‘FIRE’’ refers to the Fusion Ig25 nition Research Experiment, the fusion research ex-
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1 periment for which design work has been supported 

2 by the Department of Energy as a possible alter3 native burning plasma experiment in the event that 

4 the ITER project fails to move forward. 

5 PART 2—ULTRA-DEEPWATER AND EXTENDED 

6 REACH DRILLING AND CARBON SEQUESTRA7 TION TECHNOLOGIES 

8 SEC. 241. PROGRAM AUTHORITY. 

9 (a) IN GENERAL.—The Secretary shall carry out a 

10 program under this part of research, development, dem11 onstration, and commercial application of technologies for 

12 ultra-deepwater and extended reach drilling and carbon 

13 sequestration. 

14 (b) PROGRAM.—The program under this part shall 

15 address the following areas, including improving safety 

16 and minimizing environmental impacts of activities within 

17 each area: 

18 (1) Ultra-deepwater technology. 

19 (2) Ultra-deepwater architecture. 

20 (3) Extended reach drilling. 

21 (4) Sequestration of carbon. 

22 (c) LIMITATION ON LOCATION OF FIELD ACTIVI23 TIES.—Field activities under the program under this part 

24 shall be carried out only—

25 (1) in—
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1 (A) areas in the territorial waters of the 

2 United States not under any Outer Continental 

3 Shelf moratorium as of September 30, 2002; 

4 (B) areas onshore in the United States on 

5 public land administered by the Secretary of the 

6 Interior available for oil and gas leasing, where 

7 consistent with applicable law and land use 

8 plans; and 

9 (C) areas onshore in the United States on 

10 State or private land, subject to applicable law; 

11 and 

12 (2) with the approval of the appropriate Fed13 eral or State land management agency or private 

14 land owner. 

15 (d) RESEARCH AT NATIONAL ENERGY TECHNOLOGY

16 LABORATORY.—The Secretary, through the National En17 ergy Technology Laboratory, shall carry out research com18 plementary to research under subsection (b). 

19 (e) CONSULTATION WITH SECRETARY OF THE INTE20 RIOR.—In carrying out this part, the Secretary shall con21 sult regularly with the Secretary of the Interior. 
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1 SEC. 242. ULTRA-DEEPWATER AND EXTENDED REACH 

2 DRILLING AND CARBON SEQUESTRATION 

3 AND UNCONVENTIONAL TECHNOLOGIES PRO4 GRAM. 

5 (a) IN GENERAL.—The Secretary shall carry out the 

6 activities under section 241(b), to—

7 (1) maximize the value of the ultra-deepwater 

8 natural gas and other petroleum resources of the 

9 United States by increasing the supply of such re10 sources and by reducing the cost and increasing the 

11 efficiency of exploration for and production of such 

12 resources, while improving safety and minimizing en13 vironmental impacts; 

14 (2) maximize the value of existing natural gas 

15 and petroleum production on existing lease sites by 

16 utilizing long range extended reach drilling tech17 nology; 

18 (3) maximize the value of the onshore uncon19 ventional natural gas resources of the United States 

20 by increasing supply of such resources and improv21 ing efficiencies; and 

22 (4) develop commercial carbon sequestration 

23 and carbon recapture methods with the goal of—

24 (A) sequestering 20 percent of the total 

25 quantity of direct greenhouse gas emissions 

26 from stationary sources in the United States 
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1 per year, expressed in units of carbon dioxide 

2 equivalence, by 2010; 

3 (B) sequestering 40 percent of the total 

4 quantity of direct greenhouse gas emissions 

5 from stationary sources in the United States 

6 per year, expressed in units of carbon dioxide 

7 equivalence, by 2015; and 

8 (C) sequestering 60 percent of the total 

9 quantity of direct greenhouse gas emissions 

10 from stationary sources in the United States 

11 per year, expressed in units of carbon dioxide 

12 equivalence, by 2020. 

13 (b) ROLE OF THE SECRETARY.—The Secretary shall 

14 have ultimate responsibility for, and oversight of, all as15 pects of the program under this section. 

16 (c) ROLE OF THE PROGRAM CONSORTIUM.—

17 (1) IN GENERAL.—The Secretary shall contract 

18 with a consortium to—

19 (A) manage awards pursuant to subsection 

20 (f)(4); 

21 (B) make recommendations to the Sec22 retary for project solicitations; 

23 (C) disburse funds awarded under sub24 section (f) as directed by the Secretary in ac-
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1 cordance with the annual plan under subsection 

2 (e); and 

3 (D) carry out other activities assigned to 

4 the program consortium by this section. 

5 (2) LIMITATION.—The Secretary may not as6 sign any activities to the program consortium except 

7 as specifically authorized under this section. 

8 (3) CONFLICT OF INTEREST.—

9 (A) The Secretary shall establish proce10 dures—

11 (i) to ensure that each board member, 

12 officer, or employee of the program consor13 tium who is in a decisionmaking capacity 

14 under subsection (f)(3) or (4) shall disclose 

15 to the Secretary any financial interests in, 

16 or financial relationships with, applicants 

17 for or recipients of awards under this sec18 tion, including those of his or her spouse 

19 or minor child, unless such relationships or 

20 interests would be considered to be remote 

21 or inconsequential; and 

22 (ii) to require any board member, offi23 cer, or employee with a financial relation24 ship or interest disclosed under clause (i) 

25 to recuse himself or herself from any re-
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1 view under subsection (f)(3) or oversight 

2 under subsection (f)(4) with respect to 

3 such applicant or recipient. 

4 (B) The Secretary may disqualify an appli5 cation or revoke an award under this section if 

6 a board member, officer, or employee has failed 

7 to comply with procedures required under sub8 paragraph (A)(ii). 

9 (d) SELECTION OF THE PROGRAM CONSORTIUM.—

10 (1) IN GENERAL.—The Secretary shall select 

11 the program consortium through an open, competi12 tive process. 

13 (2) MEMBERS.—The program consortium may 

14 include corporations, institutions of higher edu15 cation, National Laboratories, or other research in16 stitutions. After submitting a proposal under para17 graph (4), the program consortium may not add 

18 members without the consent of the Secretary. 

19 (3) TAX STATUS.—The program consortium 

20 shall be an entity that is exempt from tax under sec21 tion 501(c)(3) of the Internal Revenue Code of 

22 1986. 

23 (4) SCHEDULE.—Not later than 90 days after 

24 the date of enactment of this Act, the Secretary 

25 shall solicit proposals for the creation of the pro-
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1 gram consortium, which must be submitted not less 

2 than 180 days after the date of enactment of this 

3 Act. The Secretary shall select the program consor4 tium not later than 240 days after such date of en5 actment. 

6 (5) APPLICATION.—Applicants shall submit a 

7 proposal including such information as the Secretary 

8 may require. At a minimum, each proposal shall—

9 (A) list all members of the consortium; 

10 (B) fully describe the structure of the con11 sortium, including any provisions relating to in12 tellectual property; and 

13 (C) describe how the applicant would carry 

14 out the activities of the program consortium 

15 under this section. 

16 (6) ELIGIBILITY.—To be eligible to be selected 

17 as the program consortium, an applicant must be an 

18 entity whose members collectively have demonstrated 

19 capabilities in planning and managing research, de20 velopment, demonstration, and commercial applica21 tion programs in natural gas or other petroleum ex22 ploration or production. 

23 (7) CRITERION.—The Secretary may consider 

24 the amount of the fee an applicant proposes to re-
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1 ceive under subsection (g) in selecting a consortium 

2 under this section. 

3 (e) ANNUAL PLAN.—

4 (1) IN GENERAL.—The program under this sec5 tion shall be carried out pursuant to an annual plan 

6 prepared by the Secretary in accordance with para7 graph (2). 

8 (2) DEVELOPMENT.—(A) Before drafting an 

9 annual plan under this subsection, the Secretary 

10 shall solicit specific written recommendations from 

11 the program consortium for each element to be ad12 dressed in the plan, including those described in 

13 paragraph (4). The Secretary may request that the 

14 program consortium submit its recommendations in 

15 the form of a draft annual plan. 

16 (B) The Secretary shall consult regularly with 

17 the program consortium throughout the preparation 

18 of the annual plan. The Secretary may also solicit 

19 comments from any other experts. 

20 (3) PUBLICATION.—The Secretary shall trans21 mit to the Congress and publish in the Federal Reg22 ister the annual plan, along with any written com23 ments received under paragraph (2). The annual 

24 plan shall be transmitted and published not later 

25 than 60 days after the date of enactment of an Act 
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1 making appropriations for a fiscal year for the pro2 gram under this section. 

3 (4) CONTENTS.—The annual plan shall describe 

4 the ongoing and prospective activities of the pro5 gram under this section and shall include—

6 (A) a list of any solicitations for awards 

7 that the Secretary plans to issue to carry out 

8 research, development, demonstration, or com9 mercial application activities, including the top10 ics for such work, who would be eligible to 

11 apply, selection criteria, and the duration of 

12 awards; and 

13 (B) a description of the activities expected 

14 of the program consortium to carry out sub15 section (f)(4). 

16 (f) AWARDS.—

17 (1) IN GENERAL.—The Secretary shall make 

18 awards to carry out research, development, dem19 onstration, and commercial application activities 

20 under the program under this section. The program 

21 consortium shall not be eligible to receive such 

22 awards, but members of the program consortium 

23 may receive such awards. 

24 (2) PROPOSALS.—The Secretary shall solicit 

25 proposals for awards under this subsection in such 
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1 manner and at such time as the Secretary may pre2 scribe, in consultation with the program consortium. 

3 (3) REVIEW.—The Secretary shall make awards 

4 under this subsection through a competitive process, 

5 which shall include a review by individuals selected 

6 by the Secretary. Such individuals shall include, for 

7 each application, Federal officials, the program con8 sortium, and non-Federal experts who are not board 

9 members, officers, or employees of the program con10 sortium or of a member of the program consortium. 

11 (4) OVERSIGHT.—(A) The program consortium 

12 shall oversee the implementation of awards under 

13 this subsection, consistent with the annual plan 

14 under subsection (e), including disbursing funds and 

15 monitoring activities carried out under such awards 

16 for compliance with the terms and conditions of the 

17 awards. 

18 (B) Nothing in subparagraph (A) shall limit the 

19 authority or responsibility of the Secretary to over20 see awards, or limit the authority of the Secretary 

21 to review or revoke awards. 

22 (C) The Secretary shall provide to the program 

23 consortium the information necessary for the pro24 gram consortium to carry out its responsibilities 

25 under this paragraph. 
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1 (g) FEE.—

2 (1) IN GENERAL.—To compensate the program 

3 consortium for carrying out its activities under this 

4 section, the Secretary shall provide to the program 

5 consortium a fee in an amount not to exceed 7.5 

6 percent of the amounts awarded under subsection (f) 

7 for each fiscal year. 

8 (2) ADVANCE.—The Secretary shall advance 

9 funds to the program consortium upon selection of 

10 the consortium, which shall be deducted from 

11 amounts to be provided under paragraph (1). 

12 (h) AUDIT.—The Secretary shall retain an inde13 pendent, commercial auditor to determine the extent to 

14 which funds provided to the program consortium, and 

15 funds provided under awards made under subsection (f), 

16 have been expended in a manner consistent with the pur17 poses and requirements of this part. The auditor shall 

18 transmit a report annually to the Secretary, who shall 

19 transmit the report to Congress, along with a plan to rem20 edy any deficiencies cited in the report. 

21 SEC. 243. SUNSET. 

22 The authority provided by this part shall terminate 

23 on September 30, 2010. 

24 SEC. 244. DEFINITIONS. 

25 In this part: 
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1 (1) CARBON SEQUESTRATION.—The term ‘‘car2 bon sequestration’’ means the capture and secure 

3 storage of carbon dioxide emitted from the combus4 tion of fossil fuels or other organic matter. 

5 (2) EXTENDED REACH DRILLING.—The term 

6 ‘‘extended reach drilling’’ means technology designed 

7 to achieve a range up to 50,000 feet, so that more 

8 energy resources can be realized with fewer drilling 

9 facilities. 

10 (3) PROGRAM CONSORTIUM.—The term ‘‘pro11 gram consortium’’ means the consortium selected 

12 under section 242(d). 

13 (4) REMOTE OR INCONSEQUENTIAL.—The term 

14 ‘‘remote or inconsequential’’ has the meaning given 

15 that term in regulations issued by the Office of Gov16 ernment Ethics under section 208(b)(2) of title 18, 

17 United States Code. 

18 (5) ULTRA-DEEPWATER.—The term ‘‘ultra19 deepwater’’ means a water depth that is equal to or 

20 greater than 1,500 meters. 

21 (6) ULTRA-DEEPWATER ARCHITECTURE.—The 

22 term ‘‘ultra-deepwater architecture’’ means the inte23 gration of technologies for the exploration for, or 

24 production of, natural gas or other petroleum re25 sources located at ultra-deepwater depths. 
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1 (7) ULTRA-DEEPWATER TECHNOLOGY.—The 

2 term ‘‘ultra-deepwater technology’’ means a discrete 

3 technology that is specially suited to address one or 

4 more challenges associated with the exploration for, 

5 or production of, natural gas or other petroleum re6 sources located at ultra-deepwater depths. 

7 (8) UNCONVENTIONAL NATURAL GAS AND

8 OTHER PETROLEUM RESOURCE.—The term ‘‘uncon9 ventional natural gas and other petroleum resource’’ 

10 means natural gas and other petroleum resource lo11 cated onshore in an economically inaccessible geo12 logical formation. 

13 TITLE III—TAX INCENTIVES FOR 

14 NEW TECHNOLOGIES 

15 SEC. 301. REFERENCES. 

16 Except as otherwise expressly provided, whenever in 

17 this title an amendment or repeal is expressed in terms 

18 of an amendment to, or repeal of, a section or other provi19 sion, the reference shall be considered to be made to a 

20 section or other provision of the Internal Revenue Code 

21 of 1986. 

22 SEC. 302. ADMINISTRATION OF TITLE. 

23 (a) IN GENERAL.—Notwithstanding any other provi24 sion of law, the Secretary of the Treasury shall allocate 

25 the tax incentives provided in subtitles A and B among 
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1 taxpayers in accordance with regulations promulgated by 

2 the Secretary. 

3 (b) LIMITATION ON TOTAL ALLOCATED.—The total 

4 amount of incentives allocated under subsection (a) shall 

5 not exceed—

6 (1) $14,000,000,000 in the case of the tax in7 centives provided in subtitle A for the 10-year period 

8 beginning with taxable years beginning after the 

9 date of the enactment of this Act, and 

10 (2) $22,000,000,000 in the case of the tax in11 centives provided in subtitle B for the 10-year period 

12 beginning with taxable years beginning after the 

13 date of the enactment of this Act. 

14 Subtitle A—Near Term Tax 

15 Incentives 

16 SEC. 311. EXTENSION THROUGH 2015 FOR PLACING QUALI17 FIED FACILITIES IN SERVICE FOR PRO18 DUCING RENEWABLE ELECTRIC ENERGY. 

19 (a) IN GENERAL.—Subsection (d) of section 45 is 

20 amended by striking ‘‘January 1, 2006’’ each place it ap21 pears and inserting ‘‘January 1, 2015’’. 

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

23 this section shall apply to property originally placed in 

24 service on or after January 1, 2006. 
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1 SEC. 312. EXPANSION AND MODIFICATION OF RENEWABLE 

2 RESOURCE CREDIT. 

3 (a) ADDITIONAL QUALIFIED ENERGY RESOURCES.—

4 (1) IN GENERAL.—Section 45(c)(1) is amended 

5 by striking ‘‘and’’ at the end of subparagraph (F), 

6 by striking the period at the end of subparagraph 

7 (G), and by adding at the end the following new sub8 paragraphs: 

9 ‘‘(H) incremental hydropower, 

10 ‘‘(I) incremental geothermal, and 

11 ‘‘(J) ocean (tidal, wave, current, or ther12 mal).’’. 

13 (2) DEFINITION OF RESOURCES.—Section 45(c) 

14 is amended by adding at the end the following new 

15 paragraphs: 

16 ‘‘(8) INCREMENTAL HYDROPOWER.—The term 

17 ‘incremental hydropower’ means additional gener18 ating capacity achieved at a qualified facility before 

19 January 1, 2015, from increased efficiency . 

20 ‘‘(9) INCREMENTAL GEOTHERMAL.—The term 

21 ‘incremental geothermal’ means additional gener22 ating capacity achieved at a qualified facility before 

23 January 1, 2015, from—

24 ‘‘(A) increased efficiency, or 

25 ‘‘(B) additions of new capacity.’’. 
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1 (3) DEFINITION OF FACILITIES.—Section 45(d) 

2 is amended by adding at the end the following new 

3 paragraphs: 

4 ‘‘(9) INCREMENTAL HYDOPOWER FACILITIES.—

5 In the case of a facility producing electricity from 

6 incremental hydropower, the term ‘qualified facility’ 

7 means any facility which is—

8 ‘‘(A) owned by the taxpayer, 

9 ‘‘(B) originally placed in service before the 

10 date of the enactment of this paragraph, and 

11 ‘‘(C) licensed by the Federal Energy Regu12 latory Commission. 

13 ‘‘(10) INCREMENTAL GEOTHERMAL FACILI14 TIES.—In the case of a facility producing electricity 

15 from incremental geothermal, the term ‘qualified fa16 cility’ means any facility owned by the taxpayer 

17 which is originally placed in service before the date 

18 of the enactment of this paragraph. 

19 ‘‘(11) OCEAN FACILITIES.—In the case of a fa20 cility producing electricity from the ocean, the term 

21 ‘qualified facility’ means any facility owned by the 

22 taxpayer which is originally placed in service after 

23 the date of the enactment of this paragraph and be24 fore January 1, 2015.’’. 
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1 (b) MODIFICATIONS REGARDING OPEN-LOOP BIO2 MASS.—

3 (1) Subclause (I) of section 45(c)(3)(A)(ii) is 

4 amended by adding at the end ‘‘but not including 

5 old-growth timber or black liquor,’’. 

6 (2) Subclause (II) of section 45(c)(3)(A)(ii) is 

7 amended by striking ‘‘municipal solid waste, gas de8 rived from the biodegradation of solid waste, or 

9 paper which is commonly recycled’’ and inserting 

10 ‘‘unsegregated municipal solid waste (garbage) or 

11 postconsumer wastepaper which can be recycled 

12 affordably’’. 

13 (c) QUALIFIED FACILITIES WITH CO-PRODUC14 TION.—Section 45(b) is amended by striking paragraph 

15 (4) and inserting the following new paragraph: 

16 ‘‘(4) INCREASED CREDIT FOR CO-PRODUCTION

17 FACILITIES.—

18 ‘‘(A) IN GENERAL.—In the case of a quali19 fied facility described in paragraph (2) or (3) of 

20 subsection (c) which adds a co-production facil21 ity after the date of the enactment of this para22 graph, the amount in effect under subsection 

23 (a)(1) for an eligible taxable year of the tax24 payer shall (after adjustment under paragraphs 

25 (1), (2), and (3)) be increased by .25 cents. 
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•HR 2828 IH 

1 ‘‘(B) CO-PRODUCTION FACILITY.—For 

2 purposes of subparagraph (A), the term ‘co-pro3 duction facility’ means a facility which—

4 ‘‘(i) enables a qualified facility to 

5 produce heat, mechanical power, or min6 erals from qualified energy resources in ad7 dition to electricity, and 

8 ‘‘(ii) produces such energy on a con9 tinuous basis. 

10 ‘‘(C) ELIGIBLE TAXABLE YEAR.—For pur11 poses of subparagraph (A), the term ‘eligible 

12 taxable year’ means any taxable year in which 

13 the amount of gross receipts attributable to the 

14 co-production facility of a qualified facility are 

15 at least 10 percent of the amount of gross re16 ceipts attributable to electricity produced by 

17 such facility.’’. 

18 (d) QUALIFIED FACILITIES LOCATED WITHIN

19 QUALIFIED INDIAN LANDS.—Section 45(b) is amended by 

20 adding at the end the following new paragraph: 

21 ‘‘(5) INCREASED CREDIT FOR QUALIFIED FA22 CILITY LOCATED WITHIN QUALIFIED INDIAN

23 LAND.—In the case of a qualified facility described 

24 in subsection (d)(2)(A) which—

25 ‘‘(A) is located within—
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•HR 2828 IH 

1 ‘‘(i) qualified Indian lands (as defined 

2 in section 7871(c)(3)), or 

3 ‘‘(ii) lands which are held in trust by 

4 a Native Corporation (as defined in section 

5 3(m) of the Alaska Native Claims Settle6 ment Act (43 U.S.C. 1602(m))) for Alaska 

7 Natives, and 

8 ‘‘(B) is operated with the explicit written 

9 approval of the Indian tribal government or Na10 tive Corporation (as so defined) having jurisdic11 tion over such lands, the amount in effect under 

12 subsection (a)(1) for a taxable year shall (after 

13 adjustment under paragraphs (1), (2), (3), and 

14 (4)) be increased by .25 cents.’’. 

15 (e) TREATMENT OF QUALIFIED FACILITIES NOT IN

16 COMPLIANCE WITH POLLUTION LAWS.—Section 45(c) is 

17 further amended by adding at the end the following new 

18 paragraph: 

19 ‘‘(10) NONCOMPLIANCE WITH POLLUTION

20 LAWS.—A facility which is not in compliance with 

21 the applicable State and Federal pollution preven22 tion, control, and permit requirements for any period 

23 of time shall not be treated as a qualified facility 

24 during such period.’’. 
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•HR 2828 IH 

1 (f) COORDINATION WITH OTHER CREDITS.—Section 

2 45(e) is amended by adding at the end the following new 

3 paragraph: 

4 ‘‘(10) COORDINATION WITH OTHER CREDITS.—

5 This section shall not apply to any qualified facility 

6 with respect to which a credit under any other sec7 tion is allowed for the taxable year unless the tax8 payer elects to waive application of such credit to 

9 such facility.’’. 

10 (g) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to electricity and other energy pro12 duced in taxable years beginning after the date of the en13 actment of this Act. 

14 SEC. 313. TRADABLE RENEWABLE RESOURCE CREDIT FOR 

15 PUBLIC UTILITIES AND OTHER TAX EXEMPT 

16 ORGANIZATIONS. 

17 (a) CREDITS FOR CERTAIN TAX-EXEMPT ORGANIZA18 TIONS AND GOVERNMENTAL UNITS.—

19 (1) IN GENERAL.—Section 45(d) (relating to 

20 definitions and special rules), as amended by section 

21 312, is amended by adding at the end the following: 

22 ‘‘(10) CREDITS FOR CERTAIN TAX-EXEMPT OR23 GANIZATIONS AND GOVERNMENTAL UNITS.—

24 ‘‘(A) ALLOWANCE OF CREDIT.—Any credit 

25 which would be allowable under subsection (a) 
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•HR 2828 IH 

1 with respect to a qualified facility of an entity 

2 if such entity were not exempt from tax under 

3 this chapter shall be treated as a credit allow4 able under subpart D to such entity if such en5 tity is—

6 ‘‘(i) an organization described in sec7 tion 501(c)(12)(C) and exempt from tax 

8 under section 501(a), 

9 ‘‘(ii) an organization described in sec10 tion 1381(a)(2)(C), 

11 ‘‘(iii) an entity the income of which is 

12 excludable from gross income under section 

13 115, or 

14 ‘‘(iv) a State, the District of Colum15 bia, any territory or possession of the 

16 United States, or any political subdivision 

17 thereof. 

18 ‘‘(B) USE OF CREDIT.—

19 ‘‘(i) TRANSFER OF CREDIT.—An enti20 ty described in subparagraph (A) may as21 sign, trade, sell, or otherwise transfer any 

22 credit allowable to such entity under sub23 paragraph (A) to any taxpayer. 

24 ‘‘(ii) USE OF CREDIT AS AN OFF25 SET.—Notwithstanding any other provision 
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•HR 2828 IH 

1 of law, in the case of an entity described 

2 in clause (i) or (ii) of subparagraph (A), 

3 any credit allowable to such entity under 

4 subparagraph (A) may be applied by such 

5 entity, without penalty, as a prepayment of 

6 any loan, debt, or other obligation the enti7 ty has incurred under subchapter I of 

8 chapter 31 of title 7 of the Rural Elec9 trification Act of 1936 (7 U.S.C. 901 et 

10 seq.). 

11 ‘‘(C) CREDIT NOT INCOME.—Neither a 

12 transfer under clause (i) nor a use under clause 

13 (ii) of subparagraph (B) of any credit allowable 

14 under subparagraph (A) shall result in income 

15 for purposes of section 501(c)(12). 

16 ‘‘(D) TRANSFER PROCEEDS TREATED AS

17 ARISING FROM ESSENTIAL GOVERNMENT FUNC18 TION.—Any proceeds derived by an entity de19 scribed in subparagraph (A)(iii) from the trans20 fer of any credit under subparagraph (B)(i) 

21 shall be treated as arising from an essential 

22 government function. 

23 ‘‘(E) CREDITS NOT REDUCED BY TAX-EX24 EMPT BONDS OR CERTAIN OTHER SUBSIDIES.—

25 Subsection (b)(3) shall not apply to reduce any 
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•HR 2828 IH 

1 credit allowable under subparagraph (A) with 

2 respect to—

3 ‘‘(i) proceeds described in subpara4 graph (A)(ii) of such subsection, or 

5 ‘‘(ii) any loan, debt, or other obliga6 tion incurred under subchapter I of chap7 ter 31 of title 7 of the Rural Electrification 

8 Act of 1936 (7 U.S.C. 901 et seq.), used 

9 to provide financing for any qualified facil10 ity. 

11 ‘‘(F) TREATMENT OF UNRELATED PER12 SONS.—For purposes of this paragraph, sales 

13 among and between entities described in sub14 paragraph (A) shall be treated as sales between 

15 unrelated parties.’’. 

16 (2) INCLUSION OF INDIAN TRIBAL GOVERN17 MENTS.—Section 7871(a)(7) is amended by striking 

18 ‘‘and’’ at the end of subparagraph (A), by striking 

19 the period at the end of subparagraph (B), and by 

20 adding at the end the following: 

21 ‘‘(C) section 45 (relating to credit for elec22 tricity produced from certain renewable re23 sources).’’. 

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

25 this section shall apply to electricity and other energy pro-
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•HR 2828 IH 

1 duced in taxable years beginning after the date of the en2 actment of this Act. 

3 SEC. 314. ALTERNATIVE MOTOR VEHICLE CREDIT. 

4 (a) IN GENERAL.—Subpart B of part IV of sub5 chapter A of chapter 1 (relating to foreign tax credit, etc.) 

6 is amended by adding at the end the following new section: 

7 ‘‘SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT. 

8 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al9 lowed as a credit against the tax imposed by this chapter 

10 for the taxable year an amount equal to the sum of—

11 ‘‘(1) the new qualified fuel cell motor vehicle 

12 credit determined under subsection (b), 

13 ‘‘(2) the new qualified hybrid motor vehicle 

14 credit determined under subsection (c), 

15 ‘‘(3) the new qualified alternative fuel motor ve16 hicle credit determined under subsection (d), and 

17 ‘‘(4) the new qualified advanced diesel motor 

18 vehicle credit determined under subsection (e). 

19 ‘‘(b) NEW QUALIFIED FUEL CELL MOTOR VEHICLE

20 CREDIT.—

21 ‘‘(1) IN GENERAL.—For purposes of subsection 

22 (a), the new qualified fuel cell motor vehicle credit 

23 determined under this subsection with respect to a 

24 new qualified fuel cell motor vehicle placed in service 

25 by the taxpayer during the taxable year is—
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•HR 2828 IH 

1 ‘‘(A) $8,000 ($4,000 in the case of vehicles 

2 placed in service after December 31, 2008), if 

3 such vehicle has a gross vehicle weight rating of 

4 not more than 8,500 pounds, 

5 ‘‘(B) $10,000, if such vehicle has a gross 

6 vehicle weight rating of more than 8,500 

7 pounds but not more than 14,000 pounds, 

8 ‘‘(C) $20,000, if such vehicle has a gross 

9 vehicle weight rating of more than 14,000 

10 pounds but not more than 26,000 pounds, and 

11 ‘‘(D) $40,000, if such vehicle has a gross 

12 vehicle weight rating of more than 26,000 

13 pounds. 

14 ‘‘(2) INCREASE FOR FUEL EFFICIENCY.—

15 ‘‘(A) IN GENERAL.—The amount deter16 mined under paragraph (1)(A) with respect to 

17 a new qualified fuel cell motor vehicle which is 

18 a passenger automobile or light truck shall be 

19 increased by—

20 ‘‘(i) $1,000, if such vehicle achieves at 

21 least 150 percent but less than 175 per22 cent of the 2002 model year city fuel econ23 omy, 

24 ‘‘(ii) $1,500, if such vehicle achieves 

25 at least 175 percent but less than 200 per-
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•HR 2828 IH 

1 cent of the 2002 model year city fuel econ2 omy, 

3 ‘‘(iii) $2,000, if such vehicle achieves 

4 at least 200 percent but less than 225 per5 cent of the 2002 model year city fuel econ6 omy, 

7 ‘‘(iv) $2,500, if such vehicle achieves 

8 at least 225 percent but less than 250 per9 cent of the 2002 model year city fuel econ10 omy, 

11 ‘‘(v) $3,000, if such vehicle achieves 

12 at least 250 percent but less than 275 per13 cent of the 2002 model year city fuel econ14 omy, 

15 ‘‘(vi) $3,500, if such vehicle achieves 

16 at least 275 percent but less than 300 per17 cent of the 2002 model year city fuel econ18 omy, and 

19 ‘‘(vii) $4,000, if such vehicle achieves 

20 at least 300 percent of the 2002 model 

21 year city fuel economy. 

22 ‘‘(B) 2002 MODEL YEAR CITY FUEL ECON23 OMY.—For purposes of subparagraph (A), the 

24 2002 model year city fuel economy with respect 
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•HR 2828 IH 

1 to a vehicle shall be determined in accordance 

2 with the following tables: 

3 ‘‘(i) In the case of a passenger auto4 mobile:

The 2002 model year city 

‘‘‘‘If vehicle inertia weight class 

is: 

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 to 8,500 lbs .................................................................... 11.3 mpg.

5 ‘‘(ii) In the case of a light truck:

The 2002 model year city 

‘‘‘‘If vehicle inertia weight class 

is: 

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 

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 to 8,500 lbs .................................................................... 12.1 mpg.

6 ‘‘(C) VEHICLE INERTIA WEIGHT CLASS.—

7 For purposes of subparagraph (B), the term 

8 ‘vehicle inertia weight class’ has the same 

9 meaning as when defined in regulations pre10 scribed by the Administrator of the Environ-
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•HR 2828 IH 

1 mental Protection Agency for purposes of the 

2 administration of title II of the Clean Air Act 

3 (42 U.S.C. 7521 et seq.). 

4 ‘‘(3) NEW QUALIFIED FUEL CELL MOTOR VEHI5 CLE.—For purposes of this subsection, the term 

6 ‘new qualified fuel cell motor vehicle’ means a motor 

7 vehicle—

8 ‘‘(A) which is propelled by power derived 

9 from one or more cells which convert chemical 

10 energy directly into electricity by combining ox11 ygen with hydrogen fuel which is stored on 

12 board the vehicle in any form and may or may 

13 not require reformation prior to use, 

14 ‘‘(B) which, in the case of a passenger 

15 automobile or light truck—

16 ‘‘(i) for 2002 and later model vehicles, 

17 has received a certificate of conformity 

18 under the Clean Air Act and meets or ex19 ceeds the equivalent qualifying California 

20 low emission vehicle standard under sec21 tion 243(e)(2) of the Clean Air Act for 

22 that make and model year, and 

23 ‘‘(ii) for 2004 and later model vehi24 cles, has received a certificate that such ve25 hicle meets or exceeds the Bin 5 Tier II 
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•HR 2828 IH 

1 emission level established in regulations 

2 prescribed by the Administrator of the En3 vironmental Protection Agency under sec4 tion 202(i) of the Clean Air Act for that 

5 make and model year vehicle, 

6 ‘‘(C) the original use of which commences 

7 with the taxpayer, 

8 ‘‘(D) which is acquired for use or lease by 

9 the taxpayer and not for resale, and 

10 ‘‘(E) which is made by a manufacturer. 

11 ‘‘(c) NEW QUALIFIED HYBRID MOTOR VEHICLE

12 CREDIT.—

13 ‘‘(1) IN GENERAL.—For purposes of subsection 

14 (a), the new qualified hybrid motor vehicle credit de15 termined under this subsection with respect to a new 

16 qualified hybrid motor vehicle placed in service by 

17 the taxpayer during the taxable year is the credit 

18 amount determined under paragraph (2). 

19 ‘‘(2) CREDIT AMOUNT.—

20 ‘‘(A) IN GENERAL.—The credit amount de21 termined under this paragraph shall be deter22 mined in accordance with the following tables: 

23 ‘‘(i) In the case of a new qualified hy24 brid motor vehicle which is a passenger 

25 automobile, medium duty passenger vehi-
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•HR 2828 IH 

1 cle, or light truck and which provides the 

2 following percentage of the maximum 

3 available power: ‘‘‘‘If percentage of the maximum 

available power is: The credit amount is: 

At least 5 percent but less than 10 percent ............................ $250

At least 10 percent but less than 20 percent .......................... $500

At least 20 percent but less than 30 percent .......................... $750

At least 30 percent .................................................................. $1,000.

4 ‘‘(ii) In the case of a new qualified hy5 brid motor vehicle which is a heavy duty 

6 hybrid motor vehicle and which provides 

7 the following percentage of the maximum 

8 available power: 

9 ‘‘(I) If such vehicle has a gross 

10 vehicle weight rating of not more than 

11 14,000 pounds: ‘‘‘‘If percentage of the maximum 

available power is: The credit amount is: 

At least 20 percent but less than 30 percent .......................... $1,000

At least 30 percent but less than 40 percent .......................... $1,750

At least 40 percent but less than 50 percent .......................... $2,000

At least 50 percent but less than 60 percent .......................... $2,250

At least 60 percent .................................................................. $2,500.

12 ‘‘(II) If such vehicle has a gross 

13 vehicle weight rating of more than 

14 14,000 but not more than 26,000 

15 pounds: ‘‘‘‘If percentage of the maximum 

available power is: The credit amount is: 

At least 20 percent but less than 30 percent .......................... $4,000

At least 30 percent but less than 40 percent .......................... $4,500

At least 40 percent but less than 50 percent .......................... $5,000

At least 50 percent but less than 60 percent .......................... $5,500

At least 60 percent .................................................................. $6,000.
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1 ‘‘(III) If such vehicle has a gross 

2 vehicle weight rating of more than 

3 26,000 pounds: ‘‘‘‘If percentage of the maximum 

available power is: The credit amount is: 

At least 20 percent but less than 30 percent .......................... $6,000

At least 30 percent but less than 40 percent .......................... $7,000

At least 40 percent but less than 50 percent .......................... $8,000

At least 50 percent but less than 60 percent .......................... $9,000

At least 60 percent .................................................................. $10,000.

4 ‘‘(B) INCREASE FOR FUEL EFFICIENCY.—

5 ‘‘(i) AMOUNT.—The amount deter6 mined under subparagraph (A)(i) with re7 spect to a new qualified hybrid motor vehi8 cle which is a passenger automobile or 

9 light truck shall be increased by—

10 ‘‘(I) $500, if such vehicle 

11 achieves at least 125 percent but less 

12 than 150 percent of the 2002 model 

13 year city fuel economy, 

14 ‘‘(II) $1,000, if such vehicle 

15 achieves at least 150 percent but less 

16 than 175 percent of the 2002 model 

17 year city fuel economy, 

18 ‘‘(III) $1,500, if such vehicle 

19 achieves at least 175 percent but less 

20 than 200 percent of the 2002 model 

21 year city fuel economy, 
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•HR 2828 IH 

1 ‘‘(IV) $2,000, if such vehicle 

2 achieves at least 200 percent but less 

3 than 225 percent of the 2002 model 

4 year city fuel economy, 

5 ‘‘(V) $2,500, if such vehicle 

6 achieves at least 225 percent but less 

7 than 250 percent of the 2002 model 

8 year city fuel economy, and 

9 ‘‘(VI) $3,000, if such vehicle 

10 achieves at least 250 percent of the 

11 2002 model year city fuel economy. 

12 ‘‘(ii) 2002 MODEL YEAR CITY FUEL

13 ECONOMY.—For purposes of clause (i), the 

14 2002 model year city fuel economy with re15 spect to a vehicle shall be determined on a 

16 gasoline gallon equivalent basis as deter17 mined by the Administrator of the Envi18 ronmental Protection Agency using the ta19 bles provided in subsection (b)(2)(B) with 

20 respect to such vehicle. 

21 ‘‘(C) INCREASE FOR ACCELERATED EMIS22 SIONS PERFORMANCE.—The amount deter23 mined under subparagraph (A)(ii) with respect 

24 to an applicable heavy duty hybrid motor vehi25 cle shall be increased by the increased credit 
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•HR 2828 IH 

1 amount determined in accordance with the fol2 lowing tables: 

3 ‘‘(i) In the case of a vehicle which has 

4 a gross vehicle weight rating of not more 

5 than 14,000 pounds: ‘‘‘‘If the model year is: The increased credit amount is: 

2005 ......................................................................................... $3,000

2006 ......................................................................................... $2,500

2007 ......................................................................................... $2,000

2008 ......................................................................................... $1,500.

6 ‘‘(ii) In the case of a vehicle which 

7 has a gross vehicle weight rating of more 

8 than 14,000 pounds but not more than 

9 26,000 pounds: ‘‘‘‘If the model year is: The increased credit amount is: 

2005 ......................................................................................... $7,750

2006 ......................................................................................... $6,500

2007 ......................................................................................... $5,250

2008 ......................................................................................... $4,000.

10 ‘‘(iii) In the case of a vehicle which 

11 has a gross vehicle weight rating of more 

12 than 26,000 pounds: ‘‘‘‘If the model year is: The increased credit amount is: 

2005 ......................................................................................... $12,000

2006 ......................................................................................... $10,000

2007 ......................................................................................... $8,000

2008 ......................................................................................... $6,000.

13 ‘‘(D) DEFINITIONS RELATING TO CREDIT

14 AMOUNT.—

15 ‘‘(i) APPLICABLE HEAVY DUTY HY16 BRID MOTOR VEHICLE.—For purposes of 

17 subparagraph (C), the term ‘applicable 

18 heavy duty hybrid motor vehicle’ means a 

19 heavy duty hybrid motor vehicle which is 
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•HR 2828 IH 

1 powered by an internal combustion or heat 

2 engine which is certified as meeting the 

3 emission standards set in the regulations 

4 prescribed by the Administrator of the En5 vironmental Protection Agency for 2007 

6 and later model year diesel heavy duty en7 gines, or for 2008 and later model year 

8 ottocycle heavy duty engines, as applicable. 

9 ‘‘(ii) MAXIMUM AVAILABLE POWER.—

10 ‘‘(I) PASSENGER AUTOMOBILE, 

11 MEDIUM DUTY PASSENGER VEHICLE, 

12 OR LIGHT TRUCK.—For purposes of 

13 subparagraph (A)(i), the term ‘max14 imum available power’ means the 

15 maximum power available from the re16 chargeable energy storage system, 

17 during a standard 10 second pulse 

18 power or equivalent test, divided by 

19 such maximum power and the SAE 

20 net power of the heat engine. 

21 ‘‘(II) HEAVY DUTY HYBRID

22 MOTOR VEHICLE.—For purposes of 

23 subparagraph (A)(ii), the term ‘max24 imum available power’ means the 

25 maximum power available from the re-
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•HR 2828 IH 

1 chargeable energy storage system, 

2 during a standard 10 second pulse 

3 power or equivalent test, divided by 

4 the vehicle’s total traction power. The 

5 term ‘total traction power’ means the 

6 sum of the peak power from the re7 chargeable energy storage system and 

8 the heat engine peak power of the ve9 hicle, except that if such storage sys10 tem is the sole means by which the ve11 hicle can be driven, the total traction 

12 power is the peak power of such stor13 age system. 

14 ‘‘(3) NEW QUALIFIED HYBRID MOTOR VEHI15 CLE.—For purposes of this subsection, the term 

16 ‘new qualified hybrid motor vehicle’ means a motor 

17 vehicle—

18 ‘‘(A) which draws propulsion energy from 

19 onboard sources of stored energy which are 

20 both—

21 ‘‘(i) an internal combustion or heat 

22 engine using combustible fuel, and 

23 ‘‘(ii) a rechargeable energy storage 

24 system, 
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•HR 2828 IH 

1 ‘‘(B) which, in the case of a passenger 

2 automobile, medium duty passenger vehicle, or 

3 light truck—

4 ‘‘(i) for 2002 and later model vehicles, 

5 has received a certificate of conformity 

6 under the Clean Air Act and meets or ex7 ceeds the equivalent qualifying California 

8 low emission vehicle standard under sec9 tion 243(e)(2) of the Clean Air Act for 

10 that make and model year, and 

11 ‘‘(ii) for 2004 and later model vehi12 cles, has received a certificate that such ve13 hicle meets or exceeds the Bin 5 Tier II 

14 emission level established in regulations 

15 prescribed by the Administrator of the En16 vironmental Protection Agency under sec17 tion 202(i) of the Clean Air Act for that 

18 make and model year vehicle, 

19 ‘‘(C) which, in the case of a heavy duty hy20 brid motor vehicle, the internal combustion or 

21 heat engine of which has received a certificate 

22 of conformity under the Clean Air Act as meet23 ing the emission standards set in the regula24 tions prescribed by the Administrator of the 

25 Environmental Protection Agency for 2004 
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•HR 2828 IH 

1 through 2007 model year diesel heavy duty en2 gines or ottocycle heavy duty engines, as appli3 cable, 

4 ‘‘(D) the original use of which commences 

5 with the taxpayer, 

6 ‘‘(E) which is acquired for use or lease by 

7 the taxpayer and not for resale, and 

8 ‘‘(F) which is made by a manufacturer. 

9 ‘‘(4) HEAVY DUTY HYBRID MOTOR VEHICLE.—

10 For purposes of this subsection, the term ‘heavy 

11 duty hybrid motor vehicle’ means a new qualified hy12 brid motor vehicle which has a gross vehicle weight 

13 rating of more than 8,500 pounds. Such term does 

14 not include a medium duty passenger vehicle. 

15 ‘‘(d) NEW QUALIFIED ALTERNATIVE FUEL MOTOR

16 VEHICLE CREDIT.—

17 ‘‘(1) ALLOWANCE OF CREDIT.—Except as pro18 vided in paragraph (5), the new qualified alternative 

19 fuel motor vehicle credit determined under this sub20 section is an amount equal to the applicable percent21 age of the incremental cost of any new qualified al22 ternative fuel motor vehicle placed in service by the 

23 taxpayer during the taxable year. 

24 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

25 of paragraph (1), the applicable percentage with re-
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•HR 2828 IH 

1 spect to any new qualified alternative fuel motor ve2 hicle is—

3 ‘‘(A) 50 percent, plus 

4 ‘‘(B) 30 percent, if such vehicle—

5 ‘‘(i) has received a certificate of con6 formity under the Clean Air Act and meets 

7 or exceeds the most stringent standard 

8 available for certification under the Clean 

9 Air Act for that make and model year vehi10 cle (other than a zero emission standard), 

11 or 

12 ‘‘(ii) has received an order certifying 

13 the vehicle as meeting the same require14 ments as vehicles which may be sold or 

15 leased in California and meets or exceeds 

16 the most stringent standard available for 

17 certification under the State laws of Cali18 fornia (enacted in accordance with a waiv19 er granted under section 209(b) of the 

20 Clean Air Act) for that make and model 

21 year vehicle (other than a zero emission 

22 standard). 

23 For purposes of the preceding sentence, in the case 

24 of any new qualified alternative fuel motor vehicle 

25 which weighs more than 14,000 pounds gross vehicle 
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•HR 2828 IH 

1 weight rating, the most stringent standard available 

2 shall be such standard available for certification in 

3 2002. 

4 ‘‘(3) INCREMENTAL COST.—For purposes of 

5 this subsection, the incremental cost of any new 

6 qualified alternative fuel motor vehicle is equal to 

7 the amount of the excess of the manufacturer’s sug8 gested retail price for such vehicle over such price 

9 for a gasoline or diesel fuel motor vehicle of the 

10 same model, to the extent such amount does not ex11 ceed—

12 ‘‘(A) $5,000, if such vehicle has a gross ve13 hicle weight rating of not more than 8,500 

14 pounds, 

15 ‘‘(B) $10,000, if such vehicle has a gross 

16 vehicle weight rating of more than 8,500 

17 pounds but not more than 14,000 pounds, 

18 ‘‘(C) $25,000, if such vehicle has a gross 

19 vehicle weight rating of more than 14,000 

20 pounds but not more than 26,000 pounds, and 

21 ‘‘(D) $40,000, if such vehicle has a gross 

22 vehicle weight rating of more than 26,000 

23 pounds. 
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1 ‘‘(4) NEW QUALIFIED ALTERNATIVE FUEL

2 MOTOR VEHICLE.—For purposes of this sub3 section—

4 ‘‘(A) IN GENERAL.—The term ‘new quali5 fied alternative fuel motor vehicle’ means any 

6 motor vehicle—

7 ‘‘(i) which is only capable of operating 

8 on an alternative fuel, 

9 ‘‘(ii) the original use of which com10 mences with the taxpayer, 

11 ‘‘(iii) which is acquired by the tax12 payer for use or lease, but not for resale, 

13 and 

14 ‘‘(iv) which is made by a manufac15 turer. 

16 ‘‘(B) ALTERNATIVE FUEL.—The term ‘al17 ternative fuel’ means compressed natural gas, 

18 liquefied natural gas, liquefied petroleum gas, 

19 hydrogen, and any liquid at least 85 percent of 

20 the volume of which consists of methanol or 

21 ethanol. 

22 ‘‘(5) CREDIT FOR MIXED-FUEL VEHICLES.—

23 ‘‘(A) IN GENERAL.—In the case of a 

24 mixed-fuel vehicle placed in service by the tax25 payer during the taxable year, the credit deter-
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1 mined under this subsection is an amount equal 

2 to—

3 ‘‘(i) in the case of a 75/25 mixed-fuel 

4 vehicle, 70 percent of the credit which 

5 would have been allowed under this sub6 section if such vehicle was a qualified alter7 native fuel motor vehicle, and 

8 ‘‘(ii) in the case of a 90/10 mixed-fuel 

9 vehicle, 90 percent of the credit which 

10 would have been allowed under this sub11 section if such vehicle was a qualified alter12 native fuel motor vehicle. 

13 ‘‘(B) MIXED-FUEL VEHICLE.—For pur14 poses of this subsection, the term ‘mixed-fuel 

15 vehicle’ means any motor vehicle described in 

16 subparagraph (C) or (D) of paragraph (3), 

17 which—

18 ‘‘(i) is certified by the manufacturer 

19 as being able to perform efficiently in nor20 mal operation on a combination of an al21 ternative fuel and a petroleum-based fuel, 

22 ‘‘(ii) either—

23 ‘‘(I) has received a certificate of 

24 conformity under the Clean Air Act, 

25 or 
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1 ‘‘(II) has received an order certi2 fying the vehicle as meeting the same 

3 requirements as vehicles which may be 

4 sold or leased in California and meets 

5 or exceeds the low emission vehicle 

6 standard under section 88.105–94 of 

7 title 40, Code of Federal Regulations, 

8 for that make and model year vehicle, 

9 ‘‘(iii) the original use of which com10 mences with the taxpayer, 

11 ‘‘(iv) which is acquired by the tax12 payer for use or lease, but not for resale, 

13 and 

14 ‘‘(v) which is made by a manufac15 turer. 

16 ‘‘(C) 75/25 MIXED-FUEL VEHICLE.—For 

17 purposes of this subsection, the term ‘75/25 

18 mixed-fuel vehicle’ means a mixed-fuel vehicle 

19 which operates using at least 75 percent alter20 native fuel and not more than 25 percent petro21 leum-based fuel. 

22 ‘‘(D) 90/10 MIXED-FUEL VEHICLE.—For 

23 purposes of this subsection, the term ‘90/10 

24 mixed-fuel vehicle’ means a mixed-fuel vehicle 

25 which operates using at least 90 percent alter-
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1 native fuel and not more than 10 percent petro2 leum-based fuel. 

3 ‘‘(e) NEW QUALIFIED ADVANCED DIESEL MOTOR

4 VEHICLE CREDIT.—

5 ‘‘(1) IN GENERAL.—For purposes of subsection 

6 (a), the new qualified advanced diesel motor vehicle 

7 credit determined under this subsection with respect 

8 to a new qualified advanced diesel motor vehicle 

9 placed in service by the taxpayer during the taxable 

10 year is—

11 ‘‘(A) $3,000 for vehicles with a gross vehi12 cle weight rating of not more than 14,000 

13 pounds, placed in service before December 31, 

14 2009, if such vehicle has received a certificate 

15 that such vehicle meets or exceeds the Bin 5 

16 Tier II emission level established in regulations 

17 prescribed by the Administrator of the Environ18 mental Protection Agency under section 202(i) 

19 of the Clean Air Act for that make and model 

20 year, 

21 ‘‘(B) $5,000 for vehicles with a gross vehi22 cle weight rating of not more than 14,000 

23 pounds, placed in service before December 31, 

24 2013, if such vehicle has received a certificate 

25 that such vehicle meets or exceeds the Ultra 
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1 Low Emission Vehicle II (ULEV II) emission 

2 level established in regulations prescribed by the 

3 California Air Resources Board under chapter 1 

4 of division 3 of title 13, California Code of Reg5 ulations, for that make and model year, and 

6 ‘‘(C) zero in any other case. 

7 ‘‘(2) DEFINITIONS.—

8 ‘‘(A) VEHICLE INERTIA WEIGHT CLASS.—

9 For purposes of this subsection, the term ‘vehi10 cle inertia weight class’ has the same meaning 

11 as when defined in regulations prescribed by 

12 the Administrator of the Environmental Protec13 tion Agency for purposes of the administration 

14 of title II of the Clean Air Act (42 U.S.C. 7521 

15 et seq.). 

16 ‘‘(B) NEW QUALIFIED ADVANCED DIESEL

17 MOTOR VEHICLE.—For purposes of this sub18 section, the term ‘new qualified advanced diesel 

19 motor vehicle’ means any motor vehicle—

20 ‘‘(i) with a direct-injection diesel en21 gine which achieves at least 20% increased 

22 fuel efficiency over the comparably sized 

23 gasoline engine, as determined by the Sec24 retary, 
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1 ‘‘(ii) the original use of which com2 mences with the taxpayer, 

3 ‘‘(iii) which is acquired for use or 

4 lease by the taxpayer and not for resale, 

5 and 

6 ‘‘(iv) which is made by a manufac7 turer. 

8 ‘‘(f) APPLICATION WITH OTHER CREDITS.—The 

9 credit allowed under subsection (a) for any taxable year 

10 shall not exceed the excess (if any) of—

11 ‘‘(1) the regular tax for the taxable year re12 duced by the sum of the credits allowable under sub13 part A and sections 27, 29, and 30, over 

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

15 year. 

16 ‘‘(g) OTHER DEFINITIONS AND SPECIAL RULES.—

17 For purposes of this section—

18 ‘‘(1) CONSUMABLE FUEL.—The term 

19 ‘consumable fuel’ means any solid, liquid, or gaseous 

20 matter which releases energy when consumed by an 

21 auxiliary power unit. 

22 ‘‘(2) MOTOR VEHICLE.—The term ‘motor vehi23 cle’ has the meaning given such term by section 

24 30(c)(2). 
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1 ‘‘(3) CITY FUEL ECONOMY.—The city fuel econ2 omy with respect to any vehicle shall be measured in 

3 a manner which is substantially similar to the man4 ner city fuel economy is measured in accordance 

5 with procedures under part 600 of subchapter Q of 

6 chapter I of title 40, Code of Federal Regulations, 

7 as in effect on the date of the enactment of this sec8 tion. 

9 ‘‘(4) OTHER TERMS.—The terms ‘automobile’, 

10 ‘passenger automobile’, ‘medium duty passenger ve11 hicle’, ‘light truck’, and ‘manufacturer’ have the 

12 meanings given such terms in regulations prescribed 

13 by the Administrator of the Environmental Protec14 tion Agency for purposes of the administration of 

15 title II of the Clean Air Act (42 U.S.C. 7521 et 

16 seq.). 

17 ‘‘(5) REDUCTION IN BASIS.—For purposes of 

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

19 credit is allowable under subsection (a) shall be re20 duced by the amount of such credit so allowed (de21 termined without regard to subsection (e)). 

22 ‘‘(6) NO DOUBLE BENEFIT.—The amount of 

23 any deduction or other credit allowable under this 

24 chapter—
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1 ‘‘(A) for any incremental cost taken into 

2 account in computing the amount of the credit 

3 determined under subsection (d) shall be re4 duced by the amount of such credit attributable 

5 to such cost, and 

6 ‘‘(B) with respect to a vehicle described 

7 under subsection (b) or (c), shall be reduced by 

8 the amount of credit allowed under subsection 

9 (a) for such vehicle for the taxable year. 

10 ‘‘(7) PROPERTY USED BY TAX-EXEMPT ENTI11 TIES.—In the case of a credit amount which is al12 lowable with respect to a motor vehicle which is ac13 quired by an entity exempt from tax under this 

14 chapter, the person which sells or leases such vehicle 

15 to the entity shall be treated as the taxpayer with 

16 respect to the vehicle for purposes of this section 

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

18 only if the person clearly discloses to the entity at 

19 the time of any sale or lease the specific amount of 

20 any credit otherwise allowable to the entity under 

21 this section. 

22 ‘‘(8) RECAPTURE.—The Secretary shall, by reg23 ulations, provide for recapturing the benefit of any 

24 credit allowable under subsection (a) with respect to 

25 any property which ceases to be property eligible for 
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1 such credit (including recapture in the case of a 

2 lease period of less than the economic life of a vehi3 cle). 

4 ‘‘(9) PROPERTY USED OUTSIDE UNITED

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

6 allowed under subsection (a) with respect to any 

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

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

9 account under section 179. 

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

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

12 vehicle if the taxpayer elects to not have this section 

13 apply to such vehicle. 

14 ‘‘(11) CARRYBACK AND CARRYFORWARD AL15 LOWED.—

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

17 allowable under subsection (a) for a taxable 

18 year exceeds the amount of the limitation under 

19 subsection (e) for such taxable year (in this 

20 paragraph referred to as the ‘unused credit 

21 year’), such excess shall be allowed as a credit 

22 carryback for each of the 3 taxable years begin23 ning after the date of the enactment of this sec24 tion, which precede the unused credit year and 
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1 a credit carryforward for each of the 20 taxable 

2 years which succeed the unused credit year. 

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

4 section 39 shall apply with respect to the credit 

5 carryback and credit carryforward under sub6 paragraph (A). 

7 ‘‘(12) INTERACTION WITH AIR QUALITY AND

8 MOTOR VEHICLE SAFETY STANDARDS.—Unless oth9 erwise provided in this section, a motor vehicle shall 

10 not be considered eligible for a credit under this sec11 tion unless such vehicle is in compliance with—

12 ‘‘(A) the applicable provisions of the Clean 

13 Air Act for the applicable make and model year 

14 of the vehicle (or applicable air quality provi15 sions of State law in the case of a State which 

16 has adopted such provision under a waiver 

17 under section 209(b) of the Clean Air Act), and 

18 ‘‘(B) the motor vehicle safety provisions of 

19 sections 30101 through 30169 of title 49, 

20 United States Code. 

21 ‘‘(h) REGULATIONS.—

22 ‘‘(1) IN GENERAL.—Except as provided in para23 graph (2), the Secretary shall promulgate such regu24 lations as necessary to carry out the provisions of 

25 this section. 
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1 ‘‘(2) COORDINATION IN PRESCRIPTION OF CER2 TAIN REGULATIONS.—The Secretary of the Treas3 ury, in coordination with the Secretary of Transpor4 tation and the Administrator of the Environmental 

5 Protection Agency, shall prescribe such regulations 

6 as necessary to determine whether a motor vehicle 

7 meets the requirements to be eligible for a credit 

8 under this section. 

9 ‘‘(i) TERMINATION.—This section shall not apply to 

10 any property purchased after—

11 ‘‘(1) in the case of a new qualified fuel cell 

12 motor vehicle (as described in subsection (b)), De13 cember 31, 2013, 

14 ‘‘(2) in the case of a new qualified advanced 

15 diesel motor vehicle to which subsection (e)(1)(B) 

16 applies, December 31, 2013, and 

17 ‘‘(3) in the case of any other property, Decem18 ber 31, 2009.’’. 

19 (b) CONFORMING AMENDMENTS.—

20 (1) Section 1016(a) is amended by striking 

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

22 period at the end of paragraph (31) and inserting ‘‘, 

23 and’’, and by adding at the end the following new 

24 paragraph: 
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1 ‘‘(32) to the extent provided in section 

2 30B(g)(5).’’. 

3 (2) Section 55(c)(3) is amended by inserting 

4 ‘‘30B(f),’’ after ‘‘30(b)(3)’’. 

5 (3) Section 6501(m) is amended by inserting 

6 ‘‘30B(g)(10),’’ after ‘‘30(d)(4),’’. 

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

8 IV of subchapter A of chapter 1 is amended by in9 serting after the item relating to section 30A the fol10 lowing new item:

‘‘Sec. 30B. Alternative motor vehicle credit.’’.

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

12 this section shall apply to property placed in service after 

13 the date of the enactment of this Act, in taxable years 

14 ending after such date. 

15 SEC. 315. MODIFICATION OF CREDIT FOR QUALIFIED ELEC16 TRIC VEHICLES. 

17 (a) AMOUNT OF CREDIT.—

18 (1) IN GENERAL.—Section 30(a) (relating to al19 lowance of credit) is amended by striking ‘‘10 per20 cent of’’. 

21 (2) LIMITATION OF CREDIT ACCORDING TO

22 TYPE OF VEHICLE.—Section 30(b) (relating to limi23 tations) is amended—

24 (A) by striking paragraphs (1) and (2) and 

25 inserting the following new paragraph: 
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1 ‘‘(1) LIMITATION ACCORDING TO TYPE OF VE2 HICLE.—The amount of the credit allowed under 

3 subsection (a) for any vehicle shall not exceed the 

4 greatest of the following amounts applicable to such 

5 vehicle: 

6 ‘‘(A) In the case of a vehicle which con7 forms to the Motor Vehicle Safety Standard 

8 500 prescribed by the Secretary of Transpor9 tation, as in effect on the date of the enactment 

10 of the New Apollo Energy Act of 2005, the less11 er of—

12 ‘‘(i) 10 percent of the manufacturer’s 

13 suggested retail price of the vehicle, or 

14 ‘‘(ii) $1,500. 

15 ‘‘(B) In the case of a vehicle not described 

16 in subparagraph (A) with a gross vehicle weight 

17 rating not exceeding 8,500 pounds—

18 ‘‘(i) $4,000, or 

19 ‘‘(ii) $6,000, if such vehicle is—

20 ‘‘(I) capable of a driving range of 

21 at least 100 miles on a single charge 

22 of the vehicle’s rechargeable batteries 

23 as measured pursuant to the urban 

24 dynamometer schedules under appen-
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1 dix I to part 86 of title 40, Code of 

2 Federal Regulations, or 

3 ‘‘(II) capable of a payload capac4 ity of at least 1,000 pounds. 

5 ‘‘(C) In the case of a vehicle with a gross 

6 vehicle weight rating exceeding 8,500 but not 

7 exceeding 14,000 pounds, $10,000. 

8 ‘‘(D) In the case of a vehicle with a gross 

9 vehicle weight rating exceeding 14,000 but not 

10 exceeding 26,000 pounds, $20,000. 

11 ‘‘(E) In the case of a vehicle with a gross 

12 vehicle weight rating exceeding 26,000 pounds, 

13 $40,000.’’, and 

14 (B) by redesignating paragraph (3) as 

15 paragraph (2). 

16 (3) CONFORMING AMENDMENTS.—

17 (A) Section 53(d)(1)(B)(iii) is amended by 

18 striking ‘‘section 30(b)(3)(B)’’ and inserting 

19 ‘‘section 30(b)(2)(B)’’. 

20 (B) Section 55(c)(3) is amended by strik21 ing ‘‘30(b)(3)’’ and inserting ‘‘30(b)(2)’’. 

22 (b) QUALIFIED BATTERY ELECTRIC VEHICLE.—

23 (1) IN GENERAL.—Section 30(c)(1)(A) (defin24 ing qualified electric vehicle) is amended to read as 

25 follows: 
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1 ‘‘(A) which is—

2 ‘‘(i) operated solely by use of a bat3 tery or battery pack, or 

4 ‘‘(ii) powered primarily through the 

5 use of an electric battery or battery pack 

6 using a flywheel or capacitor which stores 

7 energy produced by an electric motor 

8 through regenerative braking to assist in 

9 vehicle operation,’’. 

10 (2) LEASED VEHICLES.—Section 30(c)(1)(C) is 

11 amended by inserting ‘‘or lease’’ after ‘‘use’’. 

12 (3) CONFORMING AMENDMENTS.—

13 (A) Subsections (a), (b)(2), and (c) of sec14 tion 30 are each amended by inserting ‘‘bat15 tery’’ after ‘‘qualified’’ each place it appears. 

16 (B) The heading of subsection (c) of sec17 tion 30 is amended by inserting ‘‘BATTERY’’ 

18 after ‘‘QUALIFIED’’. 

19 (C) The heading of section 30 is amended 

20 by inserting ‘‘BATTERY’’ after ‘‘QUALIFIED’’. 

21 (D) The item relating to section 30 in the 

22 table of sections for subpart B of part IV of 

23 subchapter A of chapter 1 is amended by in24 serting ‘‘battery’’ after ‘‘qualified’’. 
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1 (E) Section 179A(c)(3) is amended by in2 serting ‘‘battery’’ before ‘‘electric’’. 

3 (F) The heading of paragraph (3) of sec4 tion 179A(c) is amended by inserting ‘‘BAT5 TERY’’ before ‘‘ELECTRIC’’. 

6 (c) ADDITIONAL SPECIAL RULES.—

7 (1) IN GENERAL.—Section 30(d) (relating to 

8 special rules) is amended by adding at the end the 

9 following new paragraphs: 

10 ‘‘(5) NO DOUBLE BENEFIT.—The amount of 

11 any deduction or other credit allowable under this 

12 chapter for any cost taken into account in com13 puting the amount of the credit determined under 

14 subsection (a) shall be reduced by the amount of 

15 such credit attributable to such cost. 

16 ‘‘(6) PROPERTY USED BY TAX-EXEMPT ENTI17 TIES.—In the case of a credit amount which is al18 lowable with respect to a vehicle which is acquired 

19 by an entity exempt from tax under this chapter, the 

20 person which sells or leases such vehicle to the entity 

21 shall be treated as the taxpayer with respect to the 

22 vehicle for purposes of this section and the credit 

23 shall be allowed to such person, but only if the per24 son clearly discloses to the entity at the time of any 
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1 sale or lease the specific amount of any credit other2 wise allowable to the entity under this section. 

3 ‘‘(7) CARRYBACK AND CARRYFORWARD AL4 LOWED.—

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

6 allowable under subsection (a) for a taxable 

7 year exceeds the amount of the limitation under 

8 subsection (b)(2) for such taxable year (in this 

9 paragraph referred to as the ‘unused credit 

10 year’), such excess shall be allowed as a credit 

11 carryback for each of the 3 taxable years begin12 ning after the date of the enactment of this 

13 paragraph, which precede the unused credit 

14 year and a credit carryforward for each of the 

15 20 taxable years which succeed the unused 

16 credit year. 

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

18 section 39 shall apply with respect to the credit 

19 carryback and credit carryforward under sub20 paragraph (A).’’. 

21 (2) CONFORMING AMENDMENT.—Section 

22 179A(c) is amended by striking paragraph (3). 

23 (d) EXTENSION OF CREDIT.—Section 30(e) (relating 

24 to termination) is amended by striking ‘‘2006’’ and insert25 ing ‘‘2009’’. 
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1 (e) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to property placed in service after 

3 the date of the enactment of this Act, in taxable years 

4 ending after such date. 

5 SEC. 316. EXTENSION OF BIODIESEL TAX CREDITS. 

6 (a) IN GENERAL.—Sections 40A(e), 6426(c)(6), and 

7 6427(e)(3)(B) are each amended by stirking ‘‘2006’’ and 

8 inserting ‘‘2014’’. 

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

10 this section shall take effect on the date of the enactment 

11 of this Act. 

12 SEC. 317. CREDIT FOR RETAIL SALE OF ALTERNATIVE 

13 FUELS AS MOTOR VEHICLE FUEL. 

14 (a) IN GENERAL.—Subpart D of part IV of sub15 chapter A of chapter 1 (relating to business related cred16 its) is amended by inserting after section 40A the fol17 lowing new section: 

18 ‘‘SEC. 40B. CREDIT FOR RETAIL SALE OF ALTERNATIVE 

19 FUELS AS MOTOR VEHICLE FUEL. 

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

21 the alternative fuel retail sales credit for any taxable year 

22 is the applicable amount for each gasoline gallon equiva23 lent of alternative fuel sold at retail by the taxpayer during 

24 such year as a fuel to propel any qualified motor vehicle. 

25 ‘‘(b) DEFINITIONS.—For purposes of this section—
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1 ‘‘(1) APPLICABLE AMOUNT.—The term ‘applica2 ble amount’ means as follows: 

3 ‘‘(A) IN GENERAL.—Except as provided in 

4 subparagraph (B), the amount determined in 

5 accordance with the following table: ‘‘‘‘In the case of any taxable year 

ending in— The applicable amount is—

2006 ......................................................................................... 30 cents 

2007 ......................................................................................... 40 cents 

2008 and 2009 ......................................................................... 50 cents 

2010 ......................................................................................... 40 cents 

2011 ......................................................................................... 30 cents.

6 ‘‘(B) HYDROGEN FUEL.—In the case of an 

7 alternative fuel which is hydrogen fuel, the 

8 amount determined in accordance with the fol9 lowing table: ‘‘‘‘In the case of any taxable year 

ending in— The applicable amount is—

2006 ......................................................................................... 30 cents 

2007 ......................................................................................... 40 cents 

2008 through 2013 .................................................................. 50 cents 

2014 ......................................................................................... 40 cents 

2015 ......................................................................................... 30 cents.

10 ‘‘(2) ALTERNATIVE FUEL.—The term ‘alter11 native fuel’ means compressed natural gas, liquefied 

12 natural gas, liquefied petroleum gas, hydrogen, and 

13 any liquid at least 85 percent of the volume of which 

14 consists of methanol or ethanol. 

15 ‘‘(3) GASOLINE GALLON EQUIVALENT.—The 

16 term ‘gasoline gallon equivalent’ means, with respect 

17 to any alternative fuel, the amount (determined by 

18 the Secretary) of such fuel having a Btu content of 

19 114,000. 
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1 ‘‘(4) QUALIFIED MOTOR VEHICLE.—The term 

2 ‘qualified motor vehicle’ means any motor vehicle (as 

3 defined in section 30(c)(2)) which meets any appli4 cable Federal or State emissions standards with re5 spect to each fuel by which such vehicle is designed 

6 to be propelled. 

7 ‘‘(5) SOLD AT RETAIL.—

8 ‘‘(A) IN GENERAL.—The term ‘sold at re9 tail’ means the sale, for a purpose other than 

10 resale, after manufacture, production, or impor11 tation. 

12 ‘‘(B) USE TREATED AS SALE.—If any per13 son uses alternative fuel (including any use 

14 after importation) as a fuel to propel any quali15 fied alternative fuel motor vehicle (as defined in 

16 section 30B(d)(4)) before such fuel is sold at 

17 retail, then such use shall be treated in the 

18 same manner as if such fuel were sold at retail 

19 as a fuel to propel such a vehicle by such per20 son. 

21 ‘‘(c) ELECTION TO PASS CREDIT.—A person which 

22 sells alternative fuel at retail may elect to pass the credit 

23 allowable under this section to the purchaser of such fuel 

24 or, in the event the purchaser is a tax-exempt entity or 

25 otherwise declines to accept such credit, to the person 
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1 which supplied such fuel, under rules established by the 

2 Secretary. 

3 ‘‘(d) NO DOUBLE BENEFIT.—The amount of any de4 duction or other credit allowable under this chapter for 

5 any fuel taken into account in computing the amount of 

6 the credit determined under subsection (a) shall be re7 duced by the amount of such credit attributable to such 

8 fuel. 

9 ‘‘(e) PASS-THRU IN THE CASE OF ESTATES AND

10 TRUSTS.—Under regulations prescribed by the Secretary, 

11 rules similar to the rules of subsection (d) of section 52 

12 shall apply. 

13 ‘‘(f) TERMINATION.—

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graph (2), this section shall not apply to any fuel 

16 sold at retail after December 31, 2011. 

17 ‘‘(2) HYDROGEN FUEL.—In the case of an al18 ternative fuel which is hydrogen fuel, this section 

19 shall not apply to any fuel sold at retail after De20 cember 31, 2015.’’. 

21 (b) CREDIT TREATED AS BUSINESS CREDIT.—Sec22 tion 38(b) (relating to current year business credit) is 

23 amended by striking ‘‘plus’’ at the end of paragraph (18), 

24 by striking the period at the end of paragraph (19) and 
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1 inserting ‘‘, plus’’, and by adding at the end the following 

2 new paragraph: 

3 ‘‘(20) the alternative fuel retail sales credit de4 termined under section 40B(a).’’. 

5 (c) CLERICAL AMENDMENT.—The table of sections 

6 for subpart D of part IV of subchapter A of chapter 1 

7 is amended by inserting after the item relating to section 

8 40A the following new item:

‘‘Sec. 40B. Credit for retail sale of alternative fuels as motor vehicle fuel.’’.

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

10 this section shall apply to fuel sold at retail after Decem11 ber 31, 2005, in taxable years ending after such date. 

12 SEC. 318. STUDY OF EFFECTIVENESS OF CERTAIN PROVI13 SIONS BY GAO. 

14 (a) STUDY.—The Comptroller General of the United 

15 States shall undertake an ongoing analysis of—

16 (1) the effectiveness of the alternative motor ve17 hicles and fuel incentives provisions under this Act, 

18 and 

19 (2) the recipients of the tax benefits contained 

20 in such provisions, including an identification of 

21 such recipients by income and other appropriate 

22 measurements. 

23 Such analysis shall quantify the effectiveness of such pro24 visions by examining and comparing the Federal Govern25 ment’s forgone revenue to the aggregate amount of energy 
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1 actually conserved and tangible environmental benefits 

2 gained as a result of such provisions. 

3 (b) REPORTS.—The Comptroller General of the 

4 United States shall report the analysis required under sub5 section (a) to Congress not later than December 31, 2006, 

6 and annually thereafter. 

7 SEC. 319. EXTENSION OF DEDUCTION FOR CERTAIN RE8 FUELING PROPERTY. 

9 (a) IN GENERAL.—Section 179A(f) (relating to ter10 mination) is amended by striking ‘‘2006’’ and inserting 

11 ‘‘2009’’. 

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

13 this section shall apply to property placed in service after 

14 December 31, 2005, in taxable years ending after such 

15 date. 

16 SEC. 320. CREDIT FOR INSTALLATION OF ALTERNATIVE 

17 FUELING STATIONS. 

18 (a) IN GENERAL.—Subpart B of part IV of sub19 chapter A of chapter 1 (relating to foreign tax credit, etc.), 

20 as amended by this Act, is amended by adding at the end 

21 the following new section: 

22 ‘‘SEC. 30C. CLEAN-FUEL VEHICLE REFUELING PROPERTY 

23 CREDIT. 

24 ‘‘(a) CREDIT ALLOWED.—There shall be allowed as 

25 a credit against the tax imposed by this chapter for the 
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1 taxable year an amount equal to 50 percent of the amount 

2 paid or incurred by the taxpayer during the taxable year 

3 for the installation of qualified clean-fuel vehicle refueling 

4 property. 

5 ‘‘(b) LIMITATION.—

6 ‘‘(1) IN GENERAL.—The credit allowed under 

7 subsection (a)—

8 ‘‘(A) with respect to any retail clean-fuel 

9 vehicle refueling property, shall not exceed 

10 $30,000, and 

11 ‘‘(B) with respect to any residential clean12 fuel vehicle refueling property, shall not exceed 

13 $1,000. 

14 ‘‘(2) PHASEOUT.—

15 ‘‘(A) IN GENERAL.—Except as provided in 

16 subparagraph (B), in the case of any qualified 

17 clean-fuel vehicle refueling property placed in 

18 service after December 31, 2007, the limit oth19 erwise applicable under paragraph (1) shall be 

20 reduced by—

21 ‘‘(i) 25 percent in the case of any ve22 hicle placed in service in calendar year 

23 2008, and 
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1 ‘‘(ii) 50 percent in the case of any ve2 hicle placed in service in calendar year 

3 2009. 

4 ‘‘(B) HYDROGEN PROPERTY.—In the case 

5 of any qualified clean-fuel vehicle refueling 

6 property relating to hydrogen placed in service 

7 after December 31, 2011, the limit otherwise 

8 applicable under paragraph (1) shall be reduced 

9 by—

10 ‘‘(i) 25 percent in the case of any ve11 hicle placed in service in calendar year 

12 2012, and 

13 ‘‘(ii) 50 percent in the case of any ve14 hicle placed in service in calendar year 

15 2013. 

16 ‘‘(c) YEAR CREDIT ALLOWED.—The credit allowed 

17 under subsection (a) shall be allowed in the taxable year 

18 in which the qualified clean-fuel vehicle refueling property 

19 is placed in service by the taxpayer. 

20 ‘‘(d) DEFINITIONS.—For purposes of this section—

21 ‘‘(1) QUALIFIED CLEAN-FUEL VEHICLE RE22 FUELING PROPERTY.—The term ‘qualified clean-fuel 

23 vehicle refueling property’ has the same meaning 

24 given such term by section 179A(d). 
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1 ‘‘(2) RESIDENTIAL CLEAN-FUEL VEHICLE RE2 FUELING PROPERTY.—The term ‘residential clean3 fuel vehicle refueling property’ means qualified 

4 clean-fuel vehicle refueling property which is in5 stalled on property which is used as the principal 

6 residence (within the meaning of section 121) of the 

7 taxpayer. 

8 ‘‘(3) RETAIL CLEAN-FUEL VEHICLE REFUELING

9 PROPERTY.—The term ‘retail clean-fuel vehicle re10 fueling property’ means qualified clean-fuel vehicle 

11 refueling property which is installed on property 

12 (other than property described in paragraph (2)) 

13 used in a trade or business of the taxpayer. 

14 ‘‘(e) APPLICATION WITH OTHER CREDITS.—The 

15 credit allowed under subsection (a) for any taxable year 

16 shall not exceed the excess (if any) of—

17 ‘‘(1) the regular tax for the taxable year re18 duced by the sum of the credits allowable under sub19 part A and sections 27, 29, 30, and 30B, over 

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

21 year. 

22 ‘‘(f) BASIS REDUCTION.—For purposes of this title, 

23 the basis of any property shall be reduced by the portion 

24 of the cost of such property taken into account under sub25 section (a). 
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1 ‘‘(g) NO DOUBLE BENEFIT.—No deduction shall be 

2 allowed under section 179A with respect to any property 

3 with respect to which a credit is allowed under subsection 

4 (a). 

5 ‘‘(h) REFUELING PROPERTY INSTALLED FOR TAX6 EXEMPT ENTITIES.—In the case of qualified clean-fuel ve7 hicle refueling property installed on property owned or 

8 used by an entity exempt from tax under this chapter, the 

9 person which installs such refueling property for the entity 

10 shall be treated as the taxpayer with respect to the refuel11 ing property for purposes of this section (and such refuel12 ing property shall be treated as retail clean-fuel vehicle 

13 refueling property) and the credit shall be allowed to such 

14 person, but only if the person clearly discloses to the entity 

15 in any installation contract the specific amount of the 

16 credit allowable under this section. 

17 ‘‘(i) CARRYFORWARD ALLOWED.—

18 ‘‘(1) IN GENERAL.—If the credit amount allow19 able under subsection (a) for a taxable year exceeds 

20 the amount of the limitation under subsection (e) for 

21 such taxable year (referred to as the ‘unused credit 

22 year’ in this subsection), such excess shall be allowed 

23 as a credit carryforward for each of the 20 taxable 

24 years following the unused credit year. 
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1 ‘‘(2) RULES.—Rules similar to the rules of sec2 tion 39 shall apply with respect to the credit 

3 carryforward under paragraph (1). 

4 ‘‘(j) SPECIAL RULES.—Rules similar to the rules of 

5 paragraphs (4) and (5) of section 179A(e) shall apply. 

6 ‘‘(k) REGULATIONS.—The Secretary shall prescribe 

7 such regulations as necessary to carry out the provisions 

8 of this section. 

9 ‘‘(l) TERMINATION.—This section shall not apply to 

10 any property placed in service—

11 ‘‘(1) in the case of property relating to hydro12 gen, after December 31, 2013, and 

13 ‘‘(2) in the case of any other property, after 

14 December 31, 2009.’’. 

15 (b) INCENTIVE FOR PRODUCTION OF HYDROGEN AT

16 QUALIFIED CLEAN-FUEL VEHICLE REFUELING PROP17 ERTY.—Section 179A(d) (defining qualified clean-fuel ve18 hicle refueling property) is amended by adding at the end 

19 the following new flush sentence: 

20 ‘‘In the case of clean-burning fuel which is hydrogen pro21 duced from another clean-burning fuel, paragraph (3)(A) 

22 shall be applied by substituting ‘‘production, storage, or 

23 dispensing’’ for ‘‘storage or dispensing’’ both places it ap24 pears.’’. 
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1 (c) CONFORMING AMENDMENTS.—(1) Section 

2 1016(a), as amended by this Act, is amended by striking 

3 ‘‘and’’ at the end of paragraph (31), by striking the period 

4 at the end of paragraph (32) and inserting ‘‘, and’’, and 

5 by adding at the end the following new paragraph: 

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

7 30C(f).’’. 

8 (2) Section 55(c)(3) is amended by inserting 

9 ‘‘30C(e),’’ after ‘‘30B(e)’’. 

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

11 of subchapter A of chapter 1, as amended by this Act, 

12 is amended by inserting after the item relating to section 

13 30B the following new item:

‘‘Sec. 30C. Clean-fuel vehicle refueling property credit.’’.

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

15 this section shall apply to property placed in service after 

16 the date of the enactment of this Act, in taxable years 

17 ending after such date. 

18 SEC. 321. INCENTIVE FOR CERTAIN ENERGY EFFICIENT 

19 PROPERTY USED IN BUSINESS. 

20 (a) IN GENERAL.—Part VI of subchapter B of chap21 ter 1 is amended by adding at the end the following new 

22 section: 
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1 ‘‘SEC. 200. ENERGY PROPERTY DEDUCTION. 

2 ‘‘(a) IN GENERAL.—There shall be allowed as a de3 duction for the taxable year an amount equal to the sum 

4 of—

5 ‘‘(1) the amount determined under subsection 

6 (b) for each energy property of the taxpayer placed 

7 in service during such taxable year, and 

8 ‘‘(2) the energy efficient residential rental 

9 building property deduction determined under sub10 section (e). 

11 ‘‘(b) AMOUNT FOR ENERGY PROPERTY.—

12 ‘‘(1) IN GENERAL.—The amount determined 

13 under this subsection for the taxable year for each 

14 item of energy property shall equal the amount spec15 ified for such property in the following table:

Description of property: Allowable amount is:

Elected solar hot water property ..................................... $1.00 per each 

kwh/year of savings. 

Photovoltaic property ....................................................... $4.50 per peak 

watt. 

Advanced main air circulating fan or a Tier 1 natural 

gas, propane, or oil water heater.

$150. 

Tier 2 energy-efficient building property ......................... $900.

Tier 1 energy-efficient building property (other than an 

advanced main air circulating fan or a natural gas, 

propane, or oil water heater).

$450.’’

16 ‘‘(2) ELECTED SOLAR HOT WATER PROP17 ERTY.—In the case of elected solar hot water prop18 erty, the taxpayer may elect to substitute ‘$21 per 

19 annual Therm of natural gas savings’ for ‘$1.00 per 
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1 each kwh/year of savings’ in the table contained in 

2 paragraph (1). 

3 ‘‘(c) ENERGY PROPERTY DEFINED.—

4 ‘‘(1) IN GENERAL.—For purposes of this part, 

5 the term ‘energy property’ means any property—

6 ‘‘(A) which is—

7 ‘‘(i) solar energy property, 

8 ‘‘(ii) Tier 2 energy-efficient building 

9 property, or 

10 ‘‘(iii) Tier 1 energy-efficient building 

11 property, 

12 ‘‘(B)(i) the construction, reconstruction, or 

13 erection of which is completed by the taxpayer, 

14 or 

15 ‘‘(ii) which is acquired by the taxpayer if 

16 the original use of such property commences 

17 with the taxpayer, 

18 ‘‘(C) with respect to which depreciation (or 

19 amortization in lieu of depreciation) is allow20 able, and 

21 ‘‘(D) which meets the performance and 

22 quality standards, and the certification require23 ments (if any), which—

24 ‘‘(i) have been prescribed by the Sec25 retary by regulations (after consultation 
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1 with the Secretary of Energy or the Ad2 ministrator of the Environmental Protec3 tion Agency, as appropriate), 

4 ‘‘(ii) in the case of the energy effi5 ciency ratio (EER) for central air condi6 tioners and electric heat pumps—

7 ‘‘(I) require measurements to be 

8 based on published data which is test9 ed by manufacturers at 95 degrees 

10 Fahrenheit, and 

11 ‘‘(II) may be based on certified 

12 data of the Air Conditioning and Re13 frigeration Institute, 

14 ‘‘(iii) in the case of geothermal heat 

15 pumps—

16 ‘‘(I) shall be based on testing 

17 under the conditions of ARI/ISO 

18 Standard 13256–1 for Water Source 

19 Heat Pumps or ARI 870 for Direct 

20 Expansion GeoExchange Heat Pumps 

21 (DX), as appropriate, and 

22 ‘‘(II) shall include evidence that 

23 water heating services have been pro24 vided through a desuperheater or inte25 grated water heating system con-
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1 nected to the storage water heater 

2 tank, and 

3 ‘‘(iv) are in effect at the time of the 

4 acquisition of the property. 

5 ‘‘(2) SOLAR ENERGY PROPERTY.—In the case 

6 of—

7 ‘‘(A) elected solar hot water property, the 

8 regulations under paragraph (1)(D) shall be 

9 based on the OG–300 Standard for the Annual 

10 Performance of OG–300 Certified Systems of 

11 the Solar Rating and Certification Corporation, 

12 and 

13 ‘‘(B) photovoltaics, such regulations shall 

14 be based on the ASTM Standard E 1036 and 

15 E 1036M–96 Standard Test Method for Elec16 tric Performance of Nonconcentrator Terres17 trial Photovoltaic Modules and Arrays Using 

18 Reference Cells, 

19 to the extent the Secretary determines such stand20 ards carry out the purposes of this section. 

21 ‘‘(3) EXCEPTION.—Such term shall not include 

22 any property which is public utility property (as de23 fined in section 46(f)(5) as in effect on the day be24 fore the date of the enactment of the Revenue Rec25 onciliation Act of 1990). 
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1 ‘‘(d) DEFINITIONS RELATING TO TYPES OF ENERGY

2 PROPERTY.—For purposes of this section—

3 ‘‘(1) SOLAR ENERGY PROPERTY.—

4 ‘‘(A) IN GENERAL.—The term ‘solar en5 ergy property’ means equipment which uses 

6 solar energy—

7 ‘‘(i) to generate electricity, or 

8 ‘‘(ii) to provide hot water for use in a 

9 structure. 

10 ‘‘(B) ELECTED SOLAR HOT WATER PROP11 ERTY.—

12 ‘‘(i) IN GENERAL.—The term ‘elected 

13 solar hot water property’ means property 

14 which is solar energy property by reason of 

15 subparagraph (A)(ii) and for which an 

16 election under this subparagraph is in ef17 fect. 

18 ‘‘(ii) ELECTION.—For purposes of 

19 clause (i), a taxpayer may elect to treat 

20 property described in clause (i) as elected 

21 solar hot water property. 

22 ‘‘(C) PHOTOVOLTAIC PROPERTY.—The 

23 term ‘photovoltaic property’ means solar energy 

24 property which uses a solar photovoltaic process 

25 to generate electricity. 
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1 ‘‘(D) SWIMMING POOLS, ETC., USED AS

2 STORAGE MEDIUM.—The term ‘solar energy 

3 property’ shall not include a swimming pool, 

4 hot tub, or any other energy storage medium 

5 which has a function other than the function of 

6 such storage. 

7 ‘‘(E) SOLAR PANELS.—No solar panel or 

8 other property installed as a roof (or portion 

9 thereof) shall fail to be treated as solar energy 

10 property solely because it constitutes a struc11 tural component of the structure on which it is 

12 installed. 

13 ‘‘(2) TIER 2 ENERGY-EFFICIENT BUILDING

14 PROPERTY.—The term ‘Tier 2 energy-efficient build15 ing property’ means—

16 ‘‘(A) an electric heat pump water heater 

17 which yields an energy factor of at least 2.0 in 

18 the standard Department of Energy test proce19 dure, 

20 ‘‘(B) an electric heat pump which has a 

21 heating seasonal performance factor (HSPF) of 

22 at least 9, a seasonal energy efficiency ratio 

23 (SEER) of at least 15, and an energy efficiency 

24 ratio (EER) of at least 13, 

25 ‘‘(C) a geothermal heat pump which—
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1 ‘‘(i) in the case of a closed loop prod2 uct, has an energy efficiency ratio (EER) 

3 of at least 14.1 and a heating coefficient of 

4 performance (COP) of at least 3.3, 

5 ‘‘(ii) in the case of an open loop prod6 uct, has an energy efficiency ratio (EER) 

7 of at least 16.2 and a heating coefficient of 

8 performance (COP) of at least 3.6, and 

9 ‘‘(iii) in the case of a direct expansion 

10 (DX) product, has an energy efficiency 

11 ratio (EER) of at least 15 and a heating 

12 coefficient of performance (COP) of at 

13 least 3.5, 

14 ‘‘(D) a central air conditioner which has a 

15 seasonal energy efficiency ratio (SEER) of at 

16 least 15 and an energy efficiency ratio (EER) 

17 of at least 13, and 

18 ‘‘(E) a natural gas, propane, or oil water 

19 heater which has an energy factor of at least 

20 0.80. 

21 ‘‘(3) TIER 1 ENERGY-EFFICIENT BUILDING

22 PROPERTY.—The term ‘Tier 1 energy-efficient build23 ing property’ means—

24 ‘‘(A) an electric heat pump which has a 

25 heating system performance factor (HSPF) of 
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1 at least 8.5, a cooling seasonal energy efficiency 

2 ratio (SEER) of at least 14, and an energy effi3 ciency ratio (EER) of at least 12, 

4 ‘‘(B) a central air conditioner which has a 

5 cooling seasonal energy efficiency ratio (SEER) 

6 of at least 14 and an energy efficiency ratio 

7 (EER) of at least 12, 

8 ‘‘(C) a natural gas, propane, or oil water 

9 heater which has an energy factor of at least 

10 0.65, and 

11 ‘‘(D) an oil, natural gas, or propane fur12 nace or hot water boiler which achieves at least 

13 95 percent annual fuel utilization efficiency 

14 (AFUE). 

15 ‘‘(4) ADVANCED MAIN AIR CIRCULATING FAN.—

16 The term ‘advanced main air circulating fan’ means 

17 a fan used in a natural gas, propane, or oil furnace 

18 originally placed in service by the taxpayer during 

19 the taxable year, including a fan which uses a 

20 brushless permanent magnet motor or another type 

21 of motor which achieves similar or higher efficiency 

22 at full and half speed, as determined by the Sec23 retary. 

24 ‘‘(e) ENERGY EFFICIENT RESIDENTIAL RENTAL

25 BUILDING PROPERTY DEDUCTION.—
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1 ‘‘(1) DEDUCTION ALLOWED.—For purposes of 

2 subsection (a)—

3 ‘‘(A) IN GENERAL.—The energy efficient 

4 residential rental building property deduction 

5 determined under this subsection is an amount 

6 equal to energy efficient residential rental build7 ing property expenditures made by a taxpayer 

8 for the taxable year. 

9 ‘‘(B) MAXIMUM AMOUNT OF DEDUC10 TION.—The amount of energy efficient residen11 tial rental building property expenditures taken 

12 into account under subparagraph (A) with re13 spect to each dwelling unit shall not exceed—

14 ‘‘(i) $6,000 in the case of a percent15 age reduction of 50 percent as determined 

16 under paragraph (2)(B), and 

17 ‘‘(ii) $12,000 times the percentage re18 duction in the case of a percentage reduc19 tion of less than 50 percent as determined 

20 under paragraph (2)(B). 

21 ‘‘(C) YEAR DEDUCTION ALLOWED.—The 

22 deduction under subparagraph (A) shall be al23 lowed in the taxable year in which the construc24 tion, reconstruction, erection, or rehabilitation 

25 of the property is completed. 
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1 ‘‘(2) ENERGY EFFICIENT RESIDENTIAL RENTAL

2 BUILDING PROPERTY EXPENDITURES.—For pur3 poses of this subsection—

4 ‘‘(A) IN GENERAL.—The term ‘energy effi5 cient residential rental building property ex6 penditures’ means an amount paid or incurred 

7 in connection with construction, reconstruction, 

8 erection, or rehabilitation of energy efficient 

9 residential rental building property—

10 ‘‘(i) for which depreciation is allow11 able under section 167, 

12 ‘‘(ii) which is located in the United 

13 States, and 

14 ‘‘(iii) the construction, reconstruction, 

15 erection, or rehabilitation of which is com16 pleted by the taxpayer. 

17 Such term includes expenditures for labor costs 

18 properly allocable to the onsite preparation, as19 sembly, or original installation of the property. 

20 ‘‘(B) ENERGY EFFICIENT RESIDENTIAL

21 RENTAL BUILDING PROPERTY.—

22 ‘‘(i) IN GENERAL.—The term ‘energy 

23 efficient residential rental building prop24 erty’ means any property which reduces 

25 total annual energy and power costs with 
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1 respect to heating and cooling of the build2 ing by a percentage certified according to 

3 clause (ii). 

4 ‘‘(ii) PROCEDURES.—

5 ‘‘(I) IN GENERAL.—For purposes 

6 of clause (i), energy usage and costs 

7 shall be demonstrated by perform8 ance-based compliance. 

9 ‘‘(II) PERFORMANCE-BASED COM10 PLIANCE.—Performance-based compli11 ance shall be demonstrated by calcu12 lating the percent energy cost savings 

13 for heating and cooling, as applicable, 

14 with respect to a dwelling unit when 

15 compared to the original condition of 

16 the dwelling unit. 

17 ‘‘(III) COMPUTER SOFTWARE.—

18 Computer software shall be used in 

19 support of performance-based compli20 ance under subclause (II) and such 

21 software shall meet all of the proce22 dures and methods for calculating en23 ergy savings reductions which are pro24 mulgated by the Secretary of Energy. 

25 Such regulations on the specifications 
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1 for software and verification protocols 

2 shall be based on the 2005 California 

3 Residential Alternative Calculation 

4 Method Approval Manual. 

5 ‘‘(IV) CALCULATION REQUIRE6 MENTS.—In calculating tradeoffs and 

7 energy performance, the regulations 

8 prescribed under this clause shall pre9 scribe for the taxable year the costs 

10 per unit of energy and power, such as 

11 kilowatt hour, kilowatt, gallon of fuel 

12 oil, and cubic foot or Btu of natural 

13 gas, which may be dependent on time 

14 of usage. Where a State has developed 

15 annual energy usage and cost reduc16 tion procedures based on time of 

17 usage costs for use in the performance 

18 standards of the State’s building en19 ergy code prior to the effective date of 

20 this section, the State may use those 

21 annual energy usage and cost reduc22 tion procedures in lieu of those adopt23 ed by the Secretary. 

24 ‘‘(V) APPROVAL OF SOFTWARE

25 SUBMISSIONS.—The Secretary shall 
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1 approve software submissions which 

2 comply with the requirements of sub3 clause (III). 

4 ‘‘(VI) PROCEDURES FOR INSPEC5 TION AND TESTING OF HOMES.—The 

6 Secretary shall ensure that procedures 

7 for the inspection and testing for com8 pliance comply with the calculation re9 quirements under subclause (IV) of 

10 this clause and clause (iv). 

11 ‘‘(iii) DETERMINATIONS OF COMPLI12 ANCE.—A determination of compliance 

13 with respect to energy efficient residential 

14 rental building property made for the pur15 poses of this subparagraph shall be filed 

16 with the Secretary not later than 1 year 

17 after the date of such determination and 

18 shall include the TIN of the certifier, the 

19 address of the building in compliance, and 

20 the identity of the person for whom such 

21 determination was performed. Determina22 tions of compliance filed with the Secretary 

23 shall be available for inspection by the Sec24 retary of Energy. 

25 ‘‘(iv) COMPLIANCE.—
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1 ‘‘(I) IN GENERAL.—The Sec2 retary, after consultation with the 

3 Secretary of Energy, shall establish 

4 requirements for certification and 

5 compliance procedures after exam6 ining the requirements for energy con7 sultants and home energy ratings pro8 viders specified by the Mortgage In9 dustry National Home Energy Rating 

10 Standards. 

11 ‘‘(II) INDIVIDUALS QUALIFIED

12 TO DETERMINE COMPLIANCE.—The 

13 determination of compliance may be 

14 provided by a local building regulatory 

15 authority, a utility, a manufactured 

16 home production inspection primary 

17 inspection agency (IPIA), or an ac18 credited home energy rating system 

19 provider. All providers shall be accred20 ited, or otherwise authorized to use 

21 approved energy performance meas22 urement methods, by the Residential 

23 Energy Services Network (RESNET). 

24 ‘‘(C) ALLOCATION OF DEDUCTION FOR

25 PUBLIC PROPERTY.—In the case of energy effi-
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1 cient residential rental building property which 

2 is public property, the Secretary shall promul3 gate a regulation to allow the allocation of the 

4 deduction to the person primarily responsible 

5 for designing the improvements to the property 

6 in lieu of the public entity which is the owner 

7 of such property. Such person shall be treated 

8 as the taxpayer for purposes of this subsection. 

9 ‘‘(f) SPECIAL RULES.—For purposes of this sec10 tion—

11 ‘‘(1) BASIS REDUCTION.—For purposes of this 

12 subtitle, if a deduction is allowed under this section 

13 with respect to any property, the basis of such prop14 erty shall be reduced by the amount of the deduction 

15 so allowed. 

16 ‘‘(2) DOUBLE BENEFIT.—Property which 

17 would, but for this paragraph, be eligible for deduc18 tion under more than one provision of this section 

19 shall be eligible only under one such provision, the 

20 provision specified by the taxpayer. 

21 ‘‘(g) REGULATIONS.—The Secretary shall promul22 gate such regulations as necessary to take into account 

23 new technologies regarding energy efficiency and renew24 able energy for purposes of determining energy efficiency 

25 and savings under this section. 
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1 ‘‘(h) TERMINATION.—This section shall not apply 

2 with respect to—

3 ‘‘(1) any energy property placed in service after 

4 December 31, 2010 (December 31, 2006, in the case 

5 of Tier 1 energy-efficient building property), and 

6 ‘‘(2) any energy efficient residential rental 

7 building property expenditures in connection with 

8 property—

9 ‘‘(A) placed in service after December 31, 

10 2008, or 

11 ‘‘(B) the construction, reconstruction, erec12 tion, or rehabilitation of which is not completed 

13 on or before December 31, 2008.’’. 

14 (b) CONFORMING AMENDMENTS.—

15 (1) Section 48(a)(3)(A) is amended to read as 

16 follows: 

17 ‘‘(A) which is equipment used to produce, 

18 distribute, or use energy derived from a geo19 thermal deposit (within the meaning of section 

20 613(e)(2)), but only, in the case of electricity 

21 generated by geothermal power, up to (but not 

22 including) the electrical transmission stage,’’. 

23 (2) Subparagraph (B) of section 168(e)(3) is 

24 amended—

25 (A) in clause (vi)(I)—
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1 (i) by striking ‘‘section 48(a)(3)’’ and 

2 inserting ‘‘section 200(d)(1)’’, and 

3 (ii) by striking ‘‘clause (i)’’ and in4 serting ‘‘such subparagraph (A)’’, and 

5 (B) in the last sentence, by striking ‘‘sec6 tion 48(a)(3)’’ and inserting ‘‘section 

7 200(c)(3)’’. 

8 (3) Section 1016(a) is amended by striking 

9 ‘‘and’’ at the end of paragraph (32), by striking the 

10 period at the end of paragraph (33) and inserting ‘‘, 

11 and’’, and by inserting the following new paragraph: 

12 ‘‘(34) for amounts allowed as a deduction under 

13 section 200(a).’’. 

14 (c) CLERICAL AMENDMENT.—The table of sections 

15 for part VI of subchapter B of chapter 1 is amended by 

16 adding at the end the following new item:

‘‘Sec. 200. Energy property deduction.’’.

17 (d) AUTHORIZATION OF APPROPRIATIONS.—There 

18 are authorized to be appropriated to the Department of 

19 Energy out of amounts not already appropriated such 

20 sums as necessary to carry out this section. 

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

22 this section shall apply to taxable years beginning after 

23 December 31, 2005. 
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1 SEC. 322. ENERGY EFFICIENT COMMERCIAL BUILDINGS DE2 DUCTION. 

3 (a) IN GENERAL.—Part VI of subchapter B of chap4 ter 1 (relating to itemized deductions for individuals and 

5 corporations) is amended by inserting after section 179B 

6 the following new section: 

7 ‘‘SEC. 179C. ENERGY EFFICIENT COMMERCIAL BUILDINGS 

8 DEDUCTION. 

9 ‘‘(a) IN GENERAL.—There shall be allowed as a de10 duction an amount equal to the cost of energy efficient 

11 commercial building property placed in service during the 

12 taxable year. 

13 ‘‘(b) MAXIMUM AMOUNT OF DEDUCTION.—The de14 duction under subsection (a) with respect to any building 

15 for the taxable year and all prior taxable years shall not 

16 exceed an amount equal to the product of—

17 ‘‘(1) $2.25, and 

18 ‘‘(2) the square footage of the building. 

19 ‘‘(c) DEFINITIONS.—For purposes of this section—

20 ‘‘(1) ENERGY EFFICIENT COMMERCIAL BUILD21 ING PROPERTY.—The term ‘energy efficient commer22 cial building property’ means property—

23 ‘‘(A) which is installed on or in any build24 ing located in the United States, 

25 ‘‘(B) which is installed as part of—

26 ‘‘(i) the interior lighting systems, 
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1 ‘‘(ii) the heating, cooling, ventilation, 

2 and hot water systems, or 

3 ‘‘(iii) the building envelope, and 

4 ‘‘(C) which is certified in accordance with 

5 subsection (d)(6) as being installed as part of 

6 a plan designed to reduce the total annual en7 ergy and power costs with respect to the inte8 rior lighting systems, heating, cooling, ventila9 tion, and hot water systems of the building by 

10 50 percent or more in comparison to a ref11 erence building which meets the minimum re12 quirements of Standard 90.1–2001 using meth13 ods of calculation under subsection (d)(2). 

14 A building described in subparagraph (A) may in15 clude any residential rental property, including any 

16 low-rise multifamily structure or single family hous17 ing property which is not within the scope of Stand18 ard 90.1–2001, but shall not include any highly en19 ergy-efficient principal residence (within the mean20 ing of section 45J(b)) for which a credit under sec21 tion 45J has been allowed. 

22 ‘‘(2) STANDARD 90.1–2001.—The term ‘Stand23 ard 90.1–2001’ means Standard 90.1–2001 of the 

24 American Society of Heating, Refrigerating, and Air 

25 Conditioning Engineers and the Illuminating Engi-
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1 neering Society of North America (as in effect on 

2 April 2, 2003). 

3 ‘‘(d) SPECIAL RULES.—

4 ‘‘(1) PARTIAL ALLOWANCE.—

5 ‘‘(A) IN GENERAL.—Except as provided in 

6 subsection (f), if—

7 ‘‘(i) the requirement of subsection 

8 (c)(1)(C) is not met, but 

9 ‘‘(ii) there is a certification in accord10 ance with paragraph (6) that any system 

11 referred to in subsection (c)(1)(B) satisfies 

12 the energy-savings targets established by 

13 the Secretary under subparagraph (B) 

14 with respect to such system, 

15 then the requirement of subsection (c)(1)(C) 

16 shall be treated as met with respect to such sys17 tem, and the deduction under subsection (a) 

18 shall be allowed with respect to energy efficient 

19 commercial building property installed as part 

20 of such system and as part of a plan to meet 

21 such targets, except that subsection (b) shall be 

22 applied to such property by substituting ‘$.75’ 

23 for ‘$2.25’. 

24 ‘‘(B) REGULATIONS.—The Secretary, after 

25 consultation with the Secretary of Energy, shall 
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1 establish a target for each system described in 

2 subsection (c)(1)(B) which, if such targets were 

3 met for all such systems, the building would 

4 meet the requirements of subsection (c)(1)(C). 

5 ‘‘(2) METHODS OF CALCULATION.—The Sec6 retary, after consultation with the Secretary of En7 ergy, shall promulgate regulations which describe in 

8 detail methods for calculating and verifying energy 

9 and power consumption and cost, based on the pro10 visions of the 2005 California Nonresidential Alter11 native Calculation Method Approval Manual or, in 

12 the case of residential property, the 2005 California 

13 Residential Alternative Calculation Method Approval 

14 Manual. These regulations shall meet the following 

15 requirements: 

16 ‘‘(A) In calculating tradeoffs and energy 

17 performance, the regulations shall prescribe the 

18 costs per unit of energy and power, such as kil19 owatt hour, kilowatt, gallon of fuel oil, and 

20 cubic foot or Btu of natural gas, which may be 

21 dependent on time of usage. If a State has de22 veloped annual energy usage and cost calcula23 tion procedures based on time of usage costs for 

24 use in the performance standards of the State’s 

25 building energy code before the effective date of 
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1 this section, the State may use those annual en2 ergy usage and cost calculation procedures in 

3 lieu of those adopted by the Secretary. 

4 ‘‘(B) The calculation methods under this 

5 paragraph need not comply fully with section 

6 11 of Standard 90.1–2001. 

7 ‘‘(C) The calculation methods shall be fuel 

8 neutral, such that the same energy efficiency 

9 features shall qualify a building for the deduc10 tion under this section regardless of whether 

11 the heating source is a gas or oil furnace or an 

12 electric heat pump. The reference building for 

13 a proposed design which employs electric resist14 ance heating shall be modeled as using a heat 

15 pump. 

16 ‘‘(D) The calculation methods shall provide 

17 appropriate calculated energy savings for design 

18 methods and technologies not otherwise credited 

19 in either Standard 90.1–2001 or in the 2005 

20 California Nonresidential Alternative Calcula21 tion Method Approval Manual, including the 

22 following: 

23 ‘‘(i) Natural ventilation. 

24 ‘‘(ii) Evaporative cooling. 
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1 ‘‘(iii) Automatic lighting controls such 

2 as occupancy sensors, photocells, and time3 clocks. 

4 ‘‘(iv) Daylighting. 

5 ‘‘(v) Designs utilizing semi-condi6 tioned spaces which maintain adequate 

7 comfort conditions without air conditioning 

8 or without heating. 

9 ‘‘(vi) Improved fan system efficiency, 

10 including reductions in static pressure. 

11 ‘‘(vii) Advanced unloading mecha12 nisms for mechanical cooling, such as mul13 tiple or variable speed compressors. 

14 ‘‘(viii) The calculation methods may 

15 take into account the extent of commis16 sioning in the building, and allow the tax17 payer to take into account measured per18 formance which exceeds typical perform19 ance. 

20 ‘‘(ix) On-site generation of electricity, 

21 including combined heat and power sys22 tems, fuel cells, and renewable energy gen23 eration such as solar energy. 

24 ‘‘(x) Wiring with lower energy losses 

25 than wiring satisfying Standard 90.1–2001 
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1 requirements for building power distribu2 tion systems. 

3 ‘‘(3) COMPUTER SOFTWARE.—

4 ‘‘(A) IN GENERAL.—Any calculation under 

5 paragraph (2) shall be prepared by qualified 

6 computer software. 

7 ‘‘(B) QUALIFIED COMPUTER SOFTWARE.—

8 For purposes of this paragraph, the term 

9 ‘qualified computer software’ means software—

10 ‘‘(i) for which the software designer 

11 has certified that the software meets all 

12 procedures and detailed methods for calcu13 lating energy and power consumption and 

14 costs as required by the Secretary, 

15 ‘‘(ii) which provides such forms as re16 quired to be filed by the Secretary in con17 nection with energy efficiency of property 

18 and the deduction allowed under this sec19 tion, and 

20 ‘‘(iii) which provides a notice form 

21 which documents the energy efficiency fea22 tures of the building and its projected an23 nual energy costs. 

24 ‘‘(4) ALLOCATION OF DEDUCTION FOR PUBLIC

25 PROPERTY.—In the case of energy efficient commer-
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1 cial building property installed on or in public prop2 erty, the Secretary shall promulgate a regulation to 

3 allow the allocation of the deduction to the person 

4 primarily responsible for designing the property in 

5 lieu of the public entity which is the owner of such 

6 property. Such person shall be treated as the tax7 payer for purposes of this section. 

8 ‘‘(5) NOTICE TO OWNER.—Each certification 

9 required under this section shall include an expla10 nation to the building owner regarding the energy 

11 efficiency features of the building and its projected 

12 annual energy costs as provided in the notice under 

13 paragraph (3)(B)(iii). 

14 ‘‘(6) CERTIFICATION.—

15 ‘‘(A) IN GENERAL.—The Secretary shall 

16 prescribe the manner and method for the mak17 ing of certifications under this section. 

18 ‘‘(B) PROCEDURES.—The Secretary shall 

19 include as part of the certification process pro20 cedures for inspection and testing by qualified 

21 individuals described in subparagraph (C) to 

22 ensure compliance of buildings with energy-sav23 ings plans and targets. Such procedures shall 

24 be comparable, given the difference between 

25 commercial and residential buildings, to the re-
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1 quirements in the Mortgage Industry National 

2 Accreditation Procedures for Home Energy 

3 Rating Systems. 

4 ‘‘(C) QUALIFIED INDIVIDUALS.—Individ5 uals qualified to determine compliance shall be 

6 only those individuals who are recognized by an 

7 organization certified by the Secretary for such 

8 purposes. 

9 ‘‘(e) BASIS REDUCTION.—For purposes of this sub10 title, if a deduction is allowed under this section with re11 spect to any energy efficient commercial building property, 

12 the basis of such property shall be reduced by the amount 

13 of the deduction so allowed. 

14 ‘‘(f) INTERIM RULES FOR LIGHTING SYSTEMS.—

15 Until such time as the Secretary issues final regulations 

16 under subsection (d)(1)(B) with respect to property which 

17 is part of a lighting system—

18 ‘‘(1) IN GENERAL.—The lighting system target 

19 under subsection (d)(1)(A)(ii) shall be a reduction in 

20 lighting power density of 25 percent (50 percent in 

21 the case of a warehouse) of the minimum require22 ments in Table 9.3.1.1 or Table 9.3.1.2 (not includ23 ing additional interior lighting power allowances) of 

24 Standard 90.1–2001. 
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1 ‘‘(2) REDUCTION IN DEDUCTION IF REDUCTION

2 LESS THAN 40 PERCENT.—

3 ‘‘(A) IN GENERAL.—If, with respect to the 

4 lighting system of any building other than a 

5 warehouse, the reduction in lighting power den6 sity of the lighting system is not at least 40 

7 percent, only the applicable percentage of the 

8 amount of deduction otherwise allowable under 

9 this section with respect to such property shall 

10 be allowed. 

11 ‘‘(B) APPLICABLE PERCENTAGE.—For 

12 purposes of subparagraph (A), the applicable 

13 percentage is the number of percentage points 

14 (not greater than 100) equal to the sum of—

15 ‘‘(i) 50, and 

16 ‘‘(ii) the amount which bears the same 

17 ratio to 50 as the excess of the reduction 

18 of lighting power density of the lighting 

19 system over 25 percentage points bears to 

20 15. 

21 ‘‘(C) EXCEPTIONS.—This subsection shall 

22 not apply to any system—

23 ‘‘(i) the controls and circuiting of 

24 which do not comply fully with the manda25 tory and prescriptive requirements of 
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1 Standard 90.1–2001 and which do not in2 clude provision for bilevel switching in all 

3 occupancies except hotel and motel guest 

4 rooms, store rooms, restrooms, and public 

5 lobbies, or 

6 ‘‘(ii) which does not meet the min7 imum requirements for calculated lighting 

8 levels as set forth in the Illuminating Engi9 neering Society of North America Lighting 

10 Handbook, Performance and Application, 

11 Ninth Edition, 2000. 

12 ‘‘(g) COORDINATION WITH OTHER TAX BENE13 FITS.—

14 ‘‘(1) NO DOUBLE BENEFIT.—No deduction 

15 shall be allowed under subsection (a) with respect to 

16 any building for which a credit under section 45J 

17 has been allowed. 

18 ‘‘(2) SPECIAL RULE WITH RESPECT TO BUILD19 INGS WITH ENERGY EFFICIENT PROPERTY.—In any 

20 case in which a deduction under section 200 or a 

21 credit under section 25C has been allowed with re22 spect to property in connection with a building, the 

23 annual energy and power costs of the reference 

24 building referred to in subsection (c)(1)(C) shall be 

25 determined assuming such reference building con-
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1 tains the property for which such deduction or credit 

2 has been allowed. 

3 ‘‘(h) REGULATIONS.—The Secretary shall promul4 gate such regulations as necessary—

5 ‘‘(1) to take into account new technologies re6 garding energy efficiency and renewable energy for 

7 purposes of determining energy efficiency and sav8 ings under this section, and 

9 ‘‘(2) to provide for a recapture of the deduction 

10 allowed under this section if the plan described in 

11 subsection (c)(1)(C) or (d)(1)(A) is not fully imple12 mented. 

13 ‘‘(i) TERMINATION.—This section shall not apply 

14 with respect to property placed in service after December 

15 31, 2010.’’. 

16 (b) CONFORMING AMENDMENTS.—

17 (1) Section 1016(a) is amended by striking 

18 ‘‘and’’ at the end of paragraph (33), by striking the 

19 period at the end of paragraph (34) and inserting ‘‘, 

20 and’’, and by adding at the end the following new 

21 paragraph: 

22 ‘‘(35) to the extent provided in section 

23 179C(e).’’. 
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1 (2) Section 1245(a) is amended by inserting 

2 ‘‘179C,’’ after ‘‘179B,’’ both places it appears in 

3 paragraphs (2)(C) and (3)(C). 

4 (3) Section 1250(b)(3) is amended by inserting 

5 before the period at the end of the first sentence ‘‘or 

6 by section 179C’’. 

7 (4) Section 263(a)(1) is amended by striking 

8 ‘‘or’’ at the end of subparagraph (H), by striking 

9 the period at the end of subparagraph (I) and in10 serting ‘‘, or’’, and by inserting after subparagraph 

11 (I) the following new subparagraph: 

12 ‘‘(J) expenditures for which a deduction is 

13 allowed under section 179C.’’. 

14 (5) Section 312(k)(3)(B) is amended by strik15 ing ‘‘section 179, 179A, or 179B’’ each place it ap16 pears in the heading and text and inserting ‘‘section 

17 179, 179A, 179B, or 179C’’. 

18 (c) CLERICAL AMENDMENT.—The table of sections 

19 for part VI of subchapter B of chapter 1 is amended by 

20 inserting after the item relating to section 179B the fol21 lowing new item:

‘‘Sec. 179C. Energy efficient commercial buildings deduction.’’.

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

23 this section shall apply to property placed in service after 

24 the date of the enactment of this Act in taxable years end25 ing after such date. 
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1 SEC. 323. CREDIT FOR CONSTRUCTION OF NEW HIGHLY EN2 ERGY-EFFICIENT HOMES. 

3 (a) IN GENERAL.—Subpart D of part IV of sub4 chapter A of chapter 1 (relating to business related cred5 its) is amended by inserting after section 45I the fol6 lowing: 

7 ‘‘SEC. 45J. NEW HIGHLY ENERGY-EFFICIENT HOME CREDIT. 

8 ‘‘(a) IN GENERAL.—For purposes of section 38, in 

9 the case of an eligible contractor, the credit determined 

10 under this section for the taxable year is an amount equal 

11 to the credit amount specified in the following table for 

12 a new, highly energy-efficient principal residence:

‘‘New, highly energy-efficient principal residence: Credit 

amount: 

30 percent property ........................................................................ $1,000

50 percent property ........................................................................ $2,000

13 ‘‘(b) HIGHLY ENERGY-EFFICIENT PRINCIPAL RESI14 DENCE.—For purposes of this section—

15 ‘‘(1) IN GENERAL.—The term ‘highly energy-ef16 ficient principal residence’ means a dwelling—

17 ‘‘(A) located in the United States, 

18 ‘‘(B) the construction of which is substan19 tially completed after December 31, 2005, 

20 ‘‘(C) the original use of which is as a prin21 cipal residence (within the meaning of section 

22 121) which commences with the person who ac-
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1 quires such dwelling from the eligible con2 tractor, and 

3 ‘‘(D) which is certified before such use 

4 commences as being 50 percent property or 30 

5 percent property. 

6 ‘‘(2) 50 OR 30 PERCENT PROPERTY.—

7 ‘‘(A) IN GENERAL.—For purposes of para8 graph (1), property is 50 percent property or 

9 30 percent property if the projected heating and 

10 cooling energy usage of such property, meas11 ured in terms of average annual energy cost to 

12 taxpayer, is reduced by 50 percent, or 30 per13 cent, respectively, in comparison to the energy 

14 usage of the standard design reference house as 

15 determined using the procedures under sub16 paragraph (D). 

17 ‘‘(B) STANDARD DESIGN REFERENCE

18 HOUSE.—For purposes of this subsection, the 

19 term ‘standard design reference house’ means a 

20 dwelling which conforms with the standards of 

21 chapter 4 of the 2000 International Energy 

22 Conservation Code of the International Code 

23 Council and the minimum equipment efficiency 

24 standards promulgated by the Department of 
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1 Energy under the National Appliance Energy 

2 Conservation Act. 

3 ‘‘(C) ENERGY EFFICIENT REFERENCE

4 HOUSE.—For purposes of this paragraph, the 

5 term ‘energy efficient reference house’ means a 

6 design of a dwelling which uses the same heat7 ing fuel type as the proposed design and which 

8 uses minimum standards equipment, as re9 quired by the Department of Energy under the 

10 National Appliance Energy Conservation Act 

11 and which achieves, on average over fuel type 

12 and house geometry, the required 30 percent or 

13 50 percent reductions in annual energy cost as 

14 calculated using the procedures under subpara15 graph (D). 

16 ‘‘(D) PROCEDURES.—

17 ‘‘(i) IN GENERAL.—For purposes of 

18 subparagraph (A), energy usage shall be 

19 demonstrated either by a component-based 

20 approach or a performance-based ap21 proach. 

22 ‘‘(ii) COMPONENT APPROACH.—Com23 pliance by the component approach is 

24 achieved when all of the components of the 

25 house comply with the requirements of pre-
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1 scriptive packages established by the Sec2 retary of Energy, in consultation with the 

3 Administrator of the Environmental Pro4 tection Agency, such that they are equiva5 lent, for the strong majority of houses 

6 which can use this method, to the results 

7 of using the performance-based approach 

8 of clause (iii) to achieve the required re9 duction in energy usage. 

10 ‘‘(iii) PERFORMANCE-BASED AP11 PROACH.—Performance-based compliance 

12 shall be demonstrated in terms of equiva13 lent or less energy usage when compared 

14 to the energy efficient reference house of 

15 the same heating fuel type as the dwelling 

16 concerned or through an alternate method 

17 prescribed by the Secretary which yields 

18 equivalent results. 

19 ‘‘(iv) COMPUTER SOFTWARE.—Com20 puter software shall be used in support of 

21 performance-based compliance under 

22 clause (iii) and such software shall meet all 

23 of the procedures and methods for calcu24 lating energy savings reductions that are 

25 promulgated by the Secretary of Energy. 
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1 Such regulations on the specifications for 

2 software and verification protocols shall be 

3 based on the 2005 California Residential 

4 Alternative Calculation Method Approval 

5 Manual. 

6 ‘‘(v) FUEL PARITY.—In the case of 

7 both the component and the performance8 based approaches, and any software used 

9 in support of either such approach, the 

10 Secretary shall assure fuel parity by re11 quiring both the energy efficient reference 

12 house and the prescriptive package under 

13 clause (ii) to employ the same envelope en14 ergy efficiency measures for a house heat15 ed by a gas furnace as for a house heated 

16 by an electric air source heat pump or by 

17 an oil furnace or boiler; and, for equipment 

18 efficiency, to employ electric, oil, or gas 

19 equipment efficiency of corresponding effi20 ciency improvement. Such determination of 

21 corresponding efficiency improvement shall 

22 be made on a linear scale between the min23 imum standard equipment efficiency and 

24 the best available marketplace technology 

25 efficiency as determined by the Secretary 
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1 after considering the information provided 

2 by the Air Conditioning and Refrigeration 

3 Institute (ARI) and the Gas Appliance 

4 Manufacturers Association (GAMA) guides 

5 for the respective electric, oil, and natural 

6 gas equipment of such type (such as heat7 ing and cooling). 

8 ‘‘(vi) APPROVAL OF SOFTWARE SUB9 MISSIONS.—The Secretary shall approve 

10 software submissions that comply with the 

11 calculation requirements of clause (iv). 

12 ‘‘(vii) PROCEDURES FOR INSPECTION

13 AND TESTING OF HOMES.—The Secretary 

14 shall ensure that procedures for the inspec15 tion and testing for compliance comply 

16 with the calculation requirements under 

17 clause (iv). 

18 ‘‘(3) DETERMINATIONS OF COMPLIANCE.—A 

19 determination of compliance made for the purposes 

20 of this subsection shall be filed with the Secretary 

21 within 1 year after the date of such determination 

22 and shall include the TIN of the certifier, the ad23 dress of the building in compliance, and the identity 

24 of the person for whom such determination was per25 formed. Determinations of compliance filed with the 
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1 Secretary shall be available for inspection by the 

2 Secretary of Energy. 

3 ‘‘(4) COMPLIANCE.—

4 ‘‘(A) IN GENERAL.—The Secretary, in con5 sultation with the Secretary of Energy shall es6 tablish requirements for certification and com7 pliance procedures after examining the require8 ments for energy consultants and home energy 

9 ratings providers specified by the Mortgage In10 dustry National Accreditation Procedures for 

11 Home Energy Rating Systems. 

12 ‘‘(B) INDIVIDUALS QUALIFIED TO DETER13 MINE COMPLIANCE.—Individuals qualified to 

14 determine compliance shall be only those indi15 viduals who are recognized by an organization 

16 certified by the Secretary for such purposes. 

17 The Secretary may qualify a Home Energy 

18 Rating Systems Organization, a local building 

19 code agency, a State or local energy office, a 

20 utility, or other organizations which meet the 

21 requirements prescribed under this section. 

22 ‘‘(5) FORM PROVIDED TO BUYER.—

23 ‘‘(A) IN GENERAL.—A form documenting 

24 the energy-efficiency of the dwelling, including 

25 the rated energy efficiency performance of 
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1 equipment installed in the dwelling, shall be 

2 provided to the buyer of the dwelling. The form 

3 shall include labeled R-value for insulation 

4 products, NFRC-labeled U-factor and Solar 

5 Heat Gain Coefficient for windows, skylights, 

6 and doors, labeled AFUE ratings for furnaces 

7 and boilers, labeled HSPF ratings for electric 

8 heat pumps, and labeled SEER ratings for air 

9 conditioners. 

10 ‘‘(B) RATINGS LABEL AFFIXED IN DWELL11 ING.—A permanent label documenting the rat12 ings in subparagraph (A) shall be affixed to the 

13 front of the electrical distribution panel of the 

14 dwelling, or shall be otherwise permanently dis15 played in a readily inspectable location in the 

16 dwelling. 

17 ‘‘(c) ADDITIONAL DEFINITIONS.—For purposes of 

18 this section—

19 ‘‘(1) ELIGIBLE CONTRACTOR.—The term ‘eligi20 ble contractor’ means the person who constructed 

21 the new energy-efficient home, or in the case of a 

22 manufactured home which conforms to Federal 

23 Manufactured Home Construction and Safety Stand24 ards (24 C.F.R. 3280), the manufactured home pro25 ducer of such home. 
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1 ‘‘(2) CONSTRUCTION.—The term ‘construction’ 

2 includes reconstruction and rehabilitation. 

3 ‘‘(3) ACQUIRE.—The term ‘acquire’ includes 

4 purchase and, in the case of reconstruction and re5 habilitation, such term includes a binding written 

6 contract for such reconstruction or rehabilitation. 

7 ‘‘(4) MANUFACTURED HOME INCLUDED.—The 

8 term ‘dwelling’ includes a manufactured home con9 forming to Federal Manufactured Home Construc10 tion and Safety Standards (24 C.F.R. 3280). 

11 ‘‘(d) COORDINATION WITH OTHER CREDITS.—Prop12 erty which would, but for this paragraph, be eligible for 

13 credit under more than one provision of this section shall 

14 be eligible only under one such provision, the provision 

15 specified by the taxpayer. 

16 ‘‘(e) BASIS ADJUSTMENT.—For purposes of this sub17 title, if a credit is allowed under this section for any ex18 penditure with respect to any property, the increase in the 

19 basis of such property which would (but for this sub20 section) result from such expenditure shall be reduced by 

21 the amount of the credit so allowed. 

22 ‘‘(f) TERMINATION.—Subsection (a) shall apply to 

23 dwellings purchased during the period beginning on Janu24 ary 1, 2006, and ending on December 31, 2010.’’. 
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1 (b) CREDIT MADE PART OF GENERAL BUSINESS

2 CREDIT.—Section 38(b) (relating to current year business 

3 credit) is amended by striking ‘‘plus’’ at the end of para4 graph (19), by striking the period at the end of paragraph 

5 (20) and inserting ‘‘, plus’’, and by adding at the end the 

6 following: 

7 ‘‘(21) the new highly energy-efficient home 

8 credit determined under section 45J.’’. 

9 (c) DENIAL OF DOUBLE BENEFIT.—Section 280C 

10 (relating to certain expenses for which credits are allow11 able) is amended by adding at the end the following: 

12 ‘‘(e) NEW ENERGY-EFFICIENT HOME EXPENSES.—

13 No deduction shall be allowed for that portion of expenses 

14 for a new highly energy-efficient home otherwise allowable 

15 as a deduction for the taxable year which is equal to the 

16 amount of the credit determined for such taxable year 

17 under section 45J.’’. 

18 (d) CREDIT ALLOWED AGAINST REGULAR AND MIN19 IMUM TAX.—

20 (1) IN GENERAL.—Section 38(c) (relating to 

21 limitation based on amount of tax) is amended by 

22 redesignating paragraph (5) as paragraph (6) and 

23 by inserting after paragraph (4) the following new 

24 paragraph: 
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1 ‘‘(5) SPECIAL RULES FOR NEW ENERGY EFFI2 CIENT HOME CREDIT.—

3 ‘‘(A) IN GENERAL.—In the case of the new 

4 energy efficient home credit—

5 ‘‘(i) this section and section 39 shall 

6 be applied separately with respect to the 

7 credit, and 

8 ‘‘(ii) in applying paragraph (1) to the 

9 credit—

10 ‘‘(I) subparagraphs (A) and (B) 

11 thereof shall not apply, and 

12 ‘‘(II) the limitation under para13 graph (1) (as modified by subclause 

14 (I)) shall be reduced by the credit al15 lowed under subsection (a) for the 

16 taxable year (other than the new en17 ergy efficient home credit). 

18 ‘‘(B) NEW HIGHLY ENERGY EFFICIENT

19 HOME CREDIT.—For purposes of this sub20 section, the term ‘new highly energy efficient 

21 home credit’ means the credit allowable under 

22 subsection (a) by reason of section 45J.’’. 

23 (2) CONFORMING AMENDMENT.—Subclause (II) 

24 of section 38(c)(2)(A)(ii) is amended by inserting 
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1 ‘‘or the new highly energy efficient home credit’’ 

2 after ‘‘employment credit’’. 

3 (e) DEDUCTION FOR CERTAIN UNUSED BUSINESS

4 CREDITS.—Subsection (c) of section 196 is amended by 

5 striking ‘‘and’’ at the end of paragraph (11), by striking 

6 the period at the end of paragraph (12) and inserting ‘‘, 

7 and’’, and by adding after paragraph (12) the following: 

8 ‘‘(13) the new highly energy-efficient home 

9 credit determined under section 45J.’’. 

10 (f) CLERICAL AMENDMENT.—The table of sections 

11 for subpart D of part IV of subchapter A of chapter 1 

12 is amended by inserting after the item relating to section 

13 45I the following:

‘‘Sec. 45J. New highly energy-efficient home credit.’’.

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

15 this section shall apply to taxable years ending after De16 cember 31, 2005. 

17 SEC. 324. CREDIT FOR ENERGY EFFICIENT APPLIANCES. 

18 (a) IN GENERAL.—Subpart D of part IV of sub19 chapter A of chapter 1 (relating to business-related cred20 its) is amended by adding after section 45J the following: 

21 ‘‘SEC. 45K. ENERGY EFFICIENT APPLIANCE CREDIT. 

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

23 the energy efficient appliance credit determined under this 

24 section for the taxable year is an amount equal to the ap25 plicable amount determined under subsection (b) with re-
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1 spect to qualified energy efficient appliances produced by 

2 the taxpayer during the calendar year ending with or with3 in the taxable year. 

4 ‘‘(b) APPLICABLE AMOUNT.—For purposes of sub5 section (a), the applicable amount determined under this 

6 subsection with respect to a taxpayer is the sum of—

7 ‘‘(1) in the case of an energy efficient clothes 

8 washer described in subsection (d)(2)(A) or an en9 ergy efficient refrigerator described in subsection 

10 (d)(3)(B)(i), an amount equal to—

11 ‘‘(A) $50, multiplied by 

12 ‘‘(B) the number of such washers and re13 frigerators produced by the taxpayer during 

14 such calendar year, and 

15 ‘‘(2) in the case of an energy efficient clothes 

16 washer described in subsection (d)(2)(B) or an en17 ergy efficient refrigerator described in subsection 

18 (d)(3)(B)(ii), an amount equal to—

19 ‘‘(A) $100, multiplied by 

20 ‘‘(B) the number of such washers and re21 frigerators produced by the taxpayer during 

22 such calendar year. 

23 ‘‘(c) LIMITATION ON MAXIMUM CREDIT.—
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1 ‘‘(1) IN GENERAL.—The maximum amount of 

2 credit allowed under subsection (a) with respect to 

3 a taxpayer for all taxable years shall be—

4 ‘‘(A) $30,000,000 with respect to the cred5 it determined under subsection (b)(1), and 

6 ‘‘(B) $30,000,000 with respect to the cred7 it determined under subsection (b)(2). 

8 ‘‘(2) LIMITATION BASED ON GROSS RE9 CEIPTS.—The credit allowed under subsection (a) 

10 with respect to a taxpayer for the taxable year shall 

11 not exceed an amount equal to 2 percent of the aver12 age annual gross receipts of the taxpayer for the 3 

13 taxable years preceding the taxable year in which 

14 the credit is determined. 

15 ‘‘(3) GROSS RECEIPTS.—For purposes of this 

16 subsection, the rules of paragraphs (2) and (3) of 

17 section 448(c) shall apply. 

18 ‘‘(d) QUALIFIED ENERGY EFFICIENT APPLIANCE.—

19 For purposes of this section—

20 ‘‘(1) IN GENERAL.—The term ‘qualified energy 

21 efficient appliance’ means—

22 ‘‘(A) an energy efficient clothes washer, or 

23 ‘‘(B) an energy efficient refrigerator. 

24 ‘‘(2) ENERGY EFFICIENT CLOTHES WASHER.—

25 The term ‘energy efficient clothes washer’ means a 
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1 residential clothes washer, including a residential 

2 style coin operated washer, which is manufactured 

3 with—

4 ‘‘(A) a 8.5 Water Factor (referred to in 

5 this paragraph as ‘WF’) (as determined by the 

6 Secretary) and a 1.60 Modified Energy Factor 

7 (referred to in this paragraph as ‘MEF’) (as 

8 determined by the Secretary of Energy) for cal9 endar years 2006 through 2008, or 

10 ‘‘(B) a 7.5 WF (as determined by the Sec11 retary) and a 1.80 MEF (as determined by the 

12 Secretary of Energy) for calendar years after 

13 2008. 

14 ‘‘(3) ENERGY EFFICIENT REFRIGERATOR.—The 

15 term ‘energy efficient refrigerator’ means an auto16 matic defrost refrigerator-freezer which—

17 ‘‘(A) has an internal volume of at least 

18 16.5 cubic feet, and 

19 ‘‘(B) consumes—

20 ‘‘(i) 15 percent less kw/hr/yr than the 

21 energy conservation standards promulgated 

22 by the Department of Energy for such re23 frigerator for 2005, or 

24 ‘‘(ii) 20 to 25 percent less kw/hr/yr 

25 than such energy conservation standards. 
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1 ‘‘(e) SPECIAL RULES.—

2 ‘‘(1) IN GENERAL.—Rules similar to the rules 

3 of subsections (c), (d), and (e) of section 52 shall 

4 apply for purposes of this section. 

5 ‘‘(2) AGGREGATION RULES.—All persons treat6 ed as a single employer under subsection (a) or (b) 

7 of section 52 or subsection (m) or (o) of section 414 

8 shall be treated as one person for purposes of sub9 section (a). 

10 ‘‘(f) VERIFICATION.—The taxpayer shall submit such 

11 information or certification as the Secretary, in consulta12 tion with the Secretary of Energy, determines necessary 

13 to claim the credit amount under subsection (a). 

14 ‘‘(g) TERMINATION.—This section shall not apply to 

15 qualified energy efficient appliances produced in calendar 

16 years beginning after 2010.’’. 

17 (b) CONFORMING AMENDMENT.—Section 38(b) (re18 lating to general business credit) is amended by striking 

19 ‘‘plus’’ at the end of paragraph (20), by striking the period 

20 at the end of paragraph (21) and inserting ‘‘, plus’’, and 

21 by adding at the end the following new paragraph: 

22 ‘‘(22) the energy efficient appliance credit de23 termined under section 45K(a).’’. 

24 (c) CLERICAL AMENDMENT.—The table of sections 

25 for subpart D of part IV of subchapter A of chapter 1 
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1 is amended by inserting after the item relating to section 

2 45J the following new item:

‘‘45K. Energy efficient appliance credit.’’.

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2005. 

6 SEC. 325. CREDIT FOR DISTRIBUTED ENERGY GENERATION 

7 AND DEMAND MANAGEMENT PROPERTY. 

8 (a) IN GENERAL.—Subpart E of part IV of sub9 chapter A of chapter 1 (relating to rules for computing 

10 investment credit) is amended by inserting after section 

11 48 the following: 

12 ‘‘SEC. 48A. ENERGY CREDIT. 

13 ‘‘(a) IN GENERAL.—For purposes of section 46, the 

14 energy credit for any taxable year is the energy percentage 

15 of the basis of each energy property placed in service dur16 ing such taxable year. 

17 ‘‘(b) ENERGY PERCENTAGE.—

18 ‘‘(1) IN GENERAL.—The energy percentage is—

19 ‘‘(A) except as otherwise provided in this 

20 subparagraph, 10 percent, 

21 ‘‘(B) in the case of energy property de22 scribed in clauses (ii), (iv), and (v) of sub23 section (c)(1)(A), 20 percent, 

24 ‘‘(C) in the case of energy property de25 scribed in subsection (c)(1)(A)(vii), 15 percent, 
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1 ‘‘(D) in the case of energy property de2 scribed in subsection (c)(1)(A)(iii) relating to a 

3 high risk geothermal well, 20 percent, and 

4 ‘‘(E) in the case of energy property de5 scribed in subsection (c)(1)(A)(i), 50 percent. 

6 ‘‘(2) COORDINATION WITH REHABILITATION.—

7 The energy percentage shall not apply to that por8 tion of the basis of any property which is attrib9 utable to qualified rehabilitation expenditures as de10 termined under section 47. 

11 ‘‘(c) ENERGY PROPERTY DEFINED.—

12 ‘‘(1) IN GENERAL.—For purposes of this sub13 part, the term ‘energy property’ means any prop14 erty—

15 ‘‘(A) which is—

16 ‘‘(i) photovoltaic property, 

17 ‘‘(ii) other solar energy property, 

18 ‘‘(iii) geothermal energy property, 

19 ‘‘(iv) energy-efficient building prop20 erty other than property described in 

21 clauses (iii)(I) and (v)(I) of subsection 

22 (d)(3)(A), 

23 ‘‘(v) combined heat and power system 

24 property, 
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1 ‘‘(vi) qualified anaerobic digester 

2 property, 

3 ‘‘(vii) waste conversion property, or 

4 ‘‘(viii) adjustable speed drive property, 

5 ‘‘(B)(i) the construction, reconstruction, or 

6 erection of which is completed by the taxpayer, 

7 or 

8 ‘‘(ii) which is acquired by the taxpayer if 

9 the original use of such property commences 

10 with the taxpayer, 

11 ‘‘(C) which can reasonably be expected to 

12 remain in operation for at least 5 years, 

13 ‘‘(D) with respect to which depreciation (or 

14 amortization in lieu of depreciation) is allow15 able, and 

16 ‘‘(E) which meets the performance and 

17 quality standards (if any) which—

18 ‘‘(i) have been prescribed by the Sec19 retary by regulations (after consultation 

20 with the Secretary of Energy), and 

21 ‘‘(ii) are in effect at the time of the 

22 acquisition of the property. 

23 ‘‘(2) EXCEPTION FOR PUBLIC UTILITY PROP24 ERTY.—Such term shall not include any property 

25 which is public utility property (as defined in section 
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1 46(f)(5) as in effect on the day before the date of 

2 the enactment of the Revenue Reconciliation Act of 

3 1990), except for property described in paragraph 

4 (1)(A)(iv). 

5 ‘‘(d) LIMITATION ON CREDIT FOR PHOTOVOLTAIC

6 PROPERTY.—

7 ‘‘(1) IN GENERAL.—The credit allowed under 

8 this section which is attributable to photovoltaic 

9 property shall not exceed the sum of—

10 ‘‘(A) the applicable low-wattage rate multi11 plied by the number of watts of generating ca12 pacity of the property which does not exceed 10 

13 kilowatts, plus 

14 ‘‘(B) the applicable high-wattage rate mul15 tiplied by the number of watts of generating ca16 pacity of the property in excess of 10 kilowatts 

17 (if any). 

18 ‘‘(2) APPLICABLE LOW- AND HIGH-WATTAGE

19 RATES.—For purposes of this subsection, the appli20 cable low- and high-wattage rates shall be deter21 mined under the following table:

‘‘In the case of taxable years beginning in calendar year: The applicable low-wattage rate is: 

The applicable highwattage rate 

is: 

2006 ......................................................... $3.00 $2.00

2007 ......................................................... $2.85 $1.90

2008 ......................................................... $2.70 $1.80

2009 ......................................................... $2.55 $1.70

2010 and thereafter ................................. $2.40 $1.60
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1 ‘‘(3) GENERATING CAPACITY.—For purposes of 

2 this subsection, generating capacity shall be meas3 ured as the rated peak power output of a system’s 

4 component modules as established by the American 

5 Society for Testing and Materials. Any photovoltaic 

6 property which is electrically contiguous or serves 

7 the same customer load shall be treated as one sys8 tem for purposes of this section. 

9 ‘‘(e) DEFINITIONS RELATING TO TYPES OF ENERGY

10 PROPERTY.—For purposes of this section—

11 ‘‘(1) SOLAR ENERGY PROPERTY.—

12 ‘‘(A) PHOTOVOLTAIC PROPERTY.—The 

13 term ‘photovoltaic property’ means equip14 ment—

15 ‘‘(i) which uses solar energy to gen16 erate electricity, and 

17 ‘‘(ii) which the taxpayer has elected 

18 (at such time and in such form and man19 ner as the Secretary may specify) to treat 

20 as photovoltaic property for purposes of 

21 this section. 

22 ‘‘(B) OTHER SOLAR ENERGY PROPERTY.—

23 The term ‘other solar energy property’ means 

24 equipment—
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1 ‘‘(i) which uses solar energy to gen2 erate electricity, to heat or cool (or provide 

3 hot water for use in) a structure, or to 

4 provide solar process heat, and 

5 ‘‘(ii) which is not photovoltaic prop6 erty. 

7 ‘‘(C) SWIMMING POOLS, ETC. USED AS

8 STORAGE MEDIUM.—Photovoltaic and other 

9 solar energy property shall not include property 

10 with respect to which expenditures are properly 

11 allocable to a swimming pool, hot tub, or any 

12 other energy storage medium which has a func13 tion other than the function of such storage. 

14 ‘‘(D) SOLAR PANELS.—No solar panel or 

15 other property installed as a roof (or portion 

16 thereof) shall fail to be treated as photovoltaic 

17 or other solar energy property solely because it 

18 constitutes a structural component of the struc19 ture on which it is installed. 

20 ‘‘(2) GEOTHERMAL ENERGY PROPERTY.—

21 ‘‘(A) IN GENERAL.—The term ‘geothermal 

22 energy property’ means equipment used to 

23 produce, distribute, or use energy derived from 

24 a geothermal deposit (within the meaning of 

25 section 613(e)(2)), but only, in the case of elec-
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1 tricity generated by geothermal power, up to 

2 (but not including) the electrical transmission 

3 stage. 

4 ‘‘(B) HIGH RISK GEOTHERMAL WELL.—

5 The term ‘high risk geothermal well’ means a 

6 geothermal deposit (within the meaning of sec7 tion 613(e)(2)) which requires high risk drilling 

8 techniques. Such deposit may not be located in 

9 a State or national park or in an area in which 

10 the relevant State park authority or the Na11 tional Park Service determines the development 

12 of such a deposit will negatively impact on a 

13 State or national park. 

14 ‘‘(3) ENERGY-EFFICIENT BUILDING PROP15 ERTY.—

16 ‘‘(A) IN GENERAL.—The term ‘energy-effi17 cient building property’ means—

18 ‘‘(i) a fuel cell which—

19 ‘‘(I) generates electricity using 

20 an electrochemical process, 

21 ‘‘(II) has an electricity-only gen22 eration efficiency greater than 30 per23 cent, and 

24 ‘‘(III) has a minimum generating 

25 capacity of 1 kilowatt, 
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1 ‘‘(ii) an electric heat pump hot water 

2 heater which yields an energy factor of 2.0 

3 or greater under test procedures prescribed 

4 by the Secretary of Energy, 

5 ‘‘(iii)(I) an electric heat pump which 

6 has a heating system performance factor 

7 (HSPF) of at least 8.5 but less than 9 and 

8 a cooling seasonal energy efficiency ratio 

9 (SEER) of at least 14 but less than 15 

10 and an energy efficiency ratio (EER) of at 

11 least 12, 

12 ‘‘(II) an electric heat pump which has 

13 a heating system performance factor 

14 (HSPF) of 9 or greater and a cooling sea15 sonal energy efficiency ratio (SEER) of 15 

16 or greater and an energy efficiency ratio 

17 (EER) of at least 13, 

18 ‘‘(iv) a natural gas heat pump which 

19 has a coefficient of performance of not less 

20 than 1.25 for heating and not less than 

21 0.80 for cooling, 

22 ‘‘(v)(I) a central air conditioner which 

23 has a cooling seasonal energy efficiency 

24 ratio (SEER) of at least 14 but less than 
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1 15 and an energy efficiency ratio (EER) of 

2 at least 12, 

3 ‘‘(II) a central air conditioner which 

4 has a cooling seasonal energy efficiency 

5 ratio (SEER) of 15 or greater and an en6 ergy efficiency ratio (EER) of at least 13, 

7 ‘‘(vi) an advanced natural gas water 

8 heater which—

9 ‘‘(I) increases steady state effi10 ciency and reduces standby and vent 

11 losses, and 

12 ‘‘(II) has an energy factor of at 

13 least 0.80, and 

14 ‘‘(vii) an advanced natural gas fur15 nace which achieves a 95 percent AFUE 

16 and rated for seasonal electricity use of 

17 less than 300 kWh per year. 

18 ‘‘(B) LIMITATIONS.—The credit under sub19 section (a) for the taxable year may not ex20 ceed—

21 ‘‘(i) $500 in the case of property de22 scribed in subparagraph (A) other than 

23 clauses (i) and (iv) thereof, 
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1 ‘‘(ii) $500 for each kilowatt of capac2 ity in the case of any fuel cell described in 

3 subparagraph (A)(i), and 

4 ‘‘(iii) $3,000 in the case of any nat5 ural gas heat pump described in subpara6 graph (A)(iv). 

7 ‘‘(4) COMBINED HEAT AND POWER SYSTEM

8 PROPERTY.—

9 ‘‘(A) IN GENERAL.—The term ‘combined 

10 heat and power system property’ means prop11 erty—

12 ‘‘(i) comprising a system for the same 

13 energy source for the simultaneous or se14 quential generation of electrical power, me15 chanical shaft power, or both, in combina16 tion with steam, heat, or other forms of 

17 useful energy, 

18 ‘‘(ii) which has an electrical capacity 

19 of more than 20 kilowatts or a mechanical 

20 energy capacity of more than 67 horse21 power or an equivalent combination of elec22 trical and mechanical energy capacities, 

23 ‘‘(iii) which produces—
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1 ‘‘(I) at least 20 percent of its 

2 total useful energy in the form of 

3 thermal energy, and 

4 ‘‘(II) at least 20 percent of its 

5 total useful energy in the form of elec6 trical or mechanical power (or a com7 bination thereof), and 

8 ‘‘(iv) the energy efficiency percentage 

9 of which exceeds—

10 ‘‘(I) 60 percent in the case of a 

11 system with an electrical capacity of 

12 less than 1 megawatt, 

13 ‘‘(II) 65 percent in the case of a 

14 system with an electrical capacity of 

15 not less than 1 megawatt and not in 

16 excess of 50 megawatts, and 

17 ‘‘(III) 70 percent in the case of a 

18 system with an electrical capacity in 

19 excess of 50 megawatts. 

20 ‘‘(B) SPECIAL RULES.—

21 ‘‘(i) ENERGY EFFICIENCY PERCENT22 AGE.—For purposes of subparagraph 

23 (A)(iv), the energy efficiency percentage of 

24 a system is the fraction—
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1 ‘‘(I) the numerator of which is 

2 the total useful electrical, thermal, 

3 and mechanical power produced by 

4 the system at normal operating rates, 

5 and 

6 ‘‘(II) the denominator of which is 

7 the lower heating value of the primary 

8 fuel source for the system. 

9 ‘‘(ii) DETERMINATIONS MADE ON BTU

10 BASIS.—The energy efficiency percentage 

11 shall be determined on a Btu basis. 

12 ‘‘(iii) INPUT AND OUTPUT PROPERTY

13 NOT INCLUDED.—The term ‘combined heat 

14 and power system property’ does not in15 clude property used to transport the en16 ergy source to the facility or to distribute 

17 energy produced by the facility. 

18 ‘‘(iv) ACCOUNTING RULE FOR PUBLIC

19 UTILITY PROPERTY.—If the combined heat 

20 and power system property is public utility 

21 property (as defined in section 46(f)(5) as 

22 in effect on the day before the date of the 

23 enactment of the Revenue Reconciliation 

24 Act of 1990), the taxpayer may only claim 

25 the credit under subsection (a)(1) if, with 
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1 respect to such property, the taxpayer uses 

2 a normalization method of accounting. 

3 ‘‘(5) QUALIFIED ANAEROBIC DIGESTER PROP4 ERTY.—The term ‘qualified anaerobic digester prop5 erty’ means an anaerobic digester for manure or 

6 crop waste which achieves at least 65 percent effi7 ciency measured in terms of the fraction of energy 

8 input converted to electricity and useful thermal en9 ergy. 

10 ‘‘(6) WASTE CONVERSION PROPERTY.—The 

11 term ‘waste conversion property’ means equipment 

12 used to produce a usable liquid or gaseous synthetic 

13 fuel derived from a waste feedstock (including plas14 tic waste and biomass (as defined in section 29(c)). 

15 ‘‘(7) ADJUSTABLE SPEED DRIVE PROPERTY.—

16 ‘‘(A) IN GENERAL.—The term ‘adjustable 

17 speed drive property’ means equipment installed 

18 as part of an electric motor driven system of 10 

19 horsepower or greater—

20 ‘‘(i) that is used to adjust the speed 

21 of the electric motor drive output to the re22 quirements of a fluctuating load, and 

23 ‘‘(ii) that achieves an energy savings 

24 of at least 20 percent during a complete 

25 cycle of operation. 
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1 ‘‘(B) LIMITATION.—In the case of adjust2 able speed drive property placed in service dur3 ing the taxable year, the credit under sub4 section (a) for such year may not exceed 

5 $10,000 for each item of such property. 

6 ‘‘(C) COORDINATION WITH DEDUCTION

7 FOR ENERGY-EFFICIENT COMMERCIAL BUILD8 ING PROPERTY.—The energy percentage shall 

9 apply to the basis of adjustable speed drive 

10 property after adjustment under section 

11 1016(a)(34). 

12 ‘‘(f) SPECIAL RULES.—For purposes of this sec13 tion—

14 ‘‘(1) SPECIAL RULE FOR PROPERTY FINANCED

15 BY SUBSIDIZED ENERGY FINANCING OR INDUSTRIAL

16 DEVELOPMENT BONDS.—

17 ‘‘(A) REDUCTION OF BASIS.—For purposes 

18 of applying the energy percentage to any prop19 erty, if such property is financed in whole or in 

20 part by—

21 ‘‘(i) subsidized energy financing, or 

22 ‘‘(ii) the proceeds of a private activity 

23 bond (within the meaning of section 141) 

24 the interest on which is exempt from tax 

25 under section 103, the amount taken into 
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1 account as the basis of such property shall 

2 not exceed the amount which (but for this 

3 subparagraph) would be so taken into ac4 count multiplied by the fraction deter5 mined under subparagraph (B). 

6 ‘‘(B) DETERMINATION OF FRACTION.—For 

7 purposes of subparagraph (A), the fraction de8 termined under this subparagraph is 1 reduced 

9 by a fraction—

10 ‘‘(i) the numerator of which is that 

11 portion of the basis of the property which 

12 is allocable to such financing or proceeds, 

13 and 

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

15 basis of the property. 

16 ‘‘(C) SUBSIDIZED ENERGY FINANCING.—

17 For purposes of subparagraph (A), the term 

18 ‘subsidized energy financing’ means financing 

19 provided under a Federal, State, or local pro20 gram a principal purpose of which is to provide 

21 subsidized financing for projects designed to 

22 conserve or produce energy. 

23 ‘‘(2) CERTAIN PROGRESS EXPENDITURE RULES

24 MADE APPLICABLE.—Rules similar to the rules of 

25 subsections (c)(4) and (d) of section 46 (as in effect 
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1 on the day before the date of the enactment of the 

2 Revenue Reconciliation Act of 1990) shall apply for 

3 purposes of this section. 

4 ‘‘(g) APPLICATION OF SECTION.—This section shall 

5 apply to property placed in service after December 31, 

6 2005, and before January 1, 2011.’’. 

7 (b) CONFORMING AMENDMENTS.—

8 (1) Section 48 is repealed. 

9 (2) Section 280C is amended by adding after 

10 subsection (e) the following: 

11 ‘‘(f) CREDIT FOR ENERGY PROPERTY EXPENSES.—

12 ‘‘(1) IN GENERAL.—No deduction shall be al13 lowed for that portion of the expenses for energy 

14 property (as defined in section 48A(c)) otherwise al15 lowable as a deduction for the taxable year which is 

16 equal to the amount of the credit determined for 

17 such taxable year under section 48A(a). 

18 ‘‘(2) SIMILAR RULE WHERE TAXPAYER CAP19 ITALIZES RATHER THAN DEDUCTS EXPENSES.—If—

20 ‘‘(A) the amount of the credit allowable for 

21 the taxable year under section 48A (determined 

22 without regard to section 38(c)), exceeds 

23 ‘‘(B) the amount allowable as a deduction 

24 for the taxable year for expenses for energy 

25 property (determined without regard to para-
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1 graph (1)), the amount chargeable to capital 

2 account for the taxable year for such expenses 

3 shall be reduced by the amount of such excess. 

4 ‘‘(3) CONTROLLED GROUPS.—Paragraph (3) of 

5 subsection (b) shall apply for purposes of this sub6 section.’’. 

7 (3) Section 29(b)(3)(A)(i)(III) is amended by 

8 striking ‘‘section 48(a)(4)(C)’’ and inserting ‘‘section 

9 48A(e)(1)(C)’’. 

10 (4) Section 50(a)(2)(E) is amended by striking 

11 ‘‘section 48(a)(5)’’ and inserting ‘‘section 

12 48A(e)(2)’’. 

13 (5) Section 168(e)(3)(B) is amended—

14 (A) by striking clause (vi)(I) and inserting 

15 the following: 

16 ‘‘(I) is described in paragraph (1) 

17 or (2) of section 48A(d) (or would be 

18 so described if ‘solar and wind’ were 

19 substituted for ‘solar’ in paragraph 

20 (1)(B)),’’, and 

21 (B) in the last sentence by striking ‘‘sec22 tion 48(a)(3)’’ and inserting ‘‘section 

23 48A(c)(2)(A)’’. 

24 (6) The table of sections for subpart E of part 

25 IV of subchapter A of chapter 1 is amended by 
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1 striking the item relating to section 48 and inserting 

2 the following:

‘‘Sec. 48A. Energy credit.’’.

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

4 this section shall apply to property placed in service after 

5 December 31, 2005, under rules similar to the rules of 

6 section 48(m) of the Internal Revenue Code of 1986 (as 

7 in effect on the day before the date of the enactment of 

8 the Revenue Reconciliation Act of 1990). 

9 SEC. 326. CREDIT FOR ENERGY EFFICIENT RECYCLING OR 

10 REMANUFACTURING EQUIPMENT. 

11 (a) IN GENERAL.—Section 46 (relating to amount of 

12 investment credit) is amended by striking ‘‘and’’ at the 

13 end of paragraph (1), by striking the period at the end 

14 of paragraph (2) and inserting ‘‘, and’’, and by adding 

15 at the end the following new paragraph: 

16 ‘‘(3) the reclamation credit.’’. 

17 (b) RECLAMATION CREDIT.—Subpart E of part IV 

18 of subchapter A of chapter 1 is amended by inserting be19 fore section 48A, as added by this Act, the following new 

20 section: 

21 ‘‘SEC. 48. RECLAMATION CREDIT. 

22 ‘‘(a) IN GENERAL.—For purposes of section 46, the 

23 reclamation credit for any taxable year is 20 percent of 

24 the basis of each qualified reclamation property placed in 

25 service during the taxable year. 
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1 ‘‘(b) QUALIFIED RECLAMATION PROPERTY.—

2 ‘‘(1) IN GENERAL.—For purposes of this sec3 tion, the term ‘qualified reclamation property’ means 

4 property—

5 ‘‘(A) which is qualified recycling property 

6 or qualified remanufacturing property, 

7 ‘‘(B) which is tangible property (not in8 cluding a building and its structural compo9 nents), 

10 ‘‘(C) with respect to which depreciation (or 

11 amortization in lieu of depreciation) is allow12 able, 

13 ‘‘(D) which has a useful life of at least 5 

14 years, and 

15 ‘‘(E) which is—

16 ‘‘(i) acquired by purchase (as defined 

17 in section 179(d)(2)) by the taxpayer if the 

18 original use of such property commences 

19 with the taxpayer, or 

20 ‘‘(ii) constructed by or for the tax21 payer. 

22 ‘‘(2) DOLLAR LIMITATION.—

23 ‘‘(A) IN GENERAL.—The basis of qualified 

24 reclamation property taken into account under 
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1 paragraph (1) for any taxable year shall not ex2 ceed $10,000,000 for a taxpayer. 

3 ‘‘(B) TREATMENT OF CONTROLLED

4 GROUP.—For purposes of clause (i)—

5 ‘‘(i) all component members of a con6 trolled group shall be treated as one tax7 payer, and 

8 ‘‘(ii) the Secretary shall apportion the 

9 dollar limitation in such clause among the 

10 component members of such controlled 

11 group in such manner as he shall by regu12 lation prescribe. 

13 ‘‘(C) TREATMENT OF PARTNERSHIPS AND

14 S CORPORATIONS.—In the case of a partner15 ship, the dollar limitation in clause (i) shall 

16 apply with respect to the partnership and with 

17 respect to each partner. A similar rule shall 

18 apply in the case of an S corporation and its 

19 shareholders. 

20 ‘‘(D) CONTROLLED GROUP DEFINED.—For 

21 purposes of clause (ii), the term ‘controlled 

22 group’ has the meaning given such term by sec23 tion 1563(a), except that ‘more than 50 per24 cent’ shall be substituted for ‘at least 80 per-
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1 cent’ each place it appears in section 

2 1563(a)(1). 

3 ‘‘(c) CERTAIN PROGRESS EXPENDITURE RULES

4 MADE APPLICABLE.—Rules similar to the rules of sub5 sections (c)(4) and (d) of section 46 (as in effect on the 

6 day before the date of the enactment of the Revenue Rec7 onciliation Act of 1990) shall apply for purposes of this 

8 subsection. 

9 ‘‘(d) DEFINITIONS.—For purposes of this sub10 section—

11 ‘‘(1) QUALIFIED RECYCLING PROPERTY.—The 

12 term ‘qualified recycling property’ means equipment 

13 used exclusively to collect, distribute, or sort used 

14 ferrous or nonferrous metals. The term does not in15 clude equipment used to collect, distribute, or sort 

16 precious metals such as gold, silver, or platinum un17 less such use is coincidental to the collection, dis18 tribution, or sorting of other used ferrous or non19 ferrous metals. 

20 ‘‘(2) QUALIFIED REMANUFACTURING PROP21 ERTY.—The term ‘qualified remanufacturing prop22 erty’ means equipment used primarily by the tax23 payer in the business of rebuilding or remanufac24 turing a used product or part, but only if—
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1 ‘‘(A) the rebuilt or remanufactured prod2 uct or part includes 50 percent or less virgin 

3 material, and 

4 ‘‘(B) the equipment is not used primarily 

5 in a process occurring after the product or part 

6 is rebuilt or remanufactured. 

7 ‘‘(3) COORDINATION WITH REHABILITATION

8 AND ENERGY CREDITS.—For purposes of this sec9 tion—

10 ‘‘(A) the basis of any qualified reclamation 

11 property shall be reduced by that portion of the 

12 basis of any property which is attributable to 

13 qualified rehabilitation expenditures (as defined 

14 in section 47(c)(2)) or to the energy percentage 

15 of energy property (as determined under section 

16 48A), and 

17 ‘‘(B) expenditures taken into account 

18 under either section 47 or 48A shall not be 

19 taken into account under this section.’’. 

20 (c) SPECIAL BASIS ADJUSTMENT RULE.—Paragraph 

21 (3) of section 50(c) (relating to basis adjustment to invest22 ment credit property) is amended by inserting ‘‘or rec23 lamation credit’’ after ‘‘energy credit’’. 

24 (d) CLERICAL AMENDMENT.—The table of sections 

25 for subpart E of part IV of subchapter A of chapter 1 
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1 is amended by inserting before the item relating to section 

2 48A the following:

‘‘Sec. 48. Reclamation credit.’’.

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

4 this section shall apply to property placed in service after 

5 the date of the enactment of this Act. 

6 SEC. 327. CREDIT FOR DISTRIBUTED ENERGY GENERATION 

7 AND DEMAND MANAGEMENT PROPERTY 

8 USED IN RESIDENCES. 

9 (a) IN GENERAL.—Subpart A of part IV of sub10 chapter A of chapter 1 (relating to nonrefundable personal 

11 credits) is amended by inserting after section 25B the fol12 lowing: 

13 ‘‘SEC. 25C. RESIDENTIAL DISTRIBUTED ENERGY GENERA14 TION AND DEMAND MANAGEMENT PROP15 ERTY. 

16 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in17 dividual, there shall be allowed as a credit against the tax 

18 imposed by this chapter for the taxable year an amount 

19 equal to the sum of—

20 ‘‘(1) 50 percent of the qualified photovoltaic 

21 property expenditures, 

22 ‘‘(2) 15 percent of the qualified solar water 

23 heating property expenditures, 

24 ‘‘(3) 25 percent of the qualified wind energy 

25 property expenditures, and 
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1 ‘‘(4) 20 percent for the qualified fuel cell prop2 erty expenditures, 

3 ‘‘(5) 20 percent for qualified energy-efficient 

4 building property expenditures (10 percent for ex5 penditures described in subsection (c)(5)(B)), made 

6 by the taxpayer during the taxable year. 

7 ‘‘(b) LIMITATIONS.—

8 ‘‘(1) MAXIMUM CREDIT.—

9 ‘‘(A) PHOTOVOLTAIC PROPERTY.—

10 ‘‘(i) IN GENERAL.—The credit allowed 

11 under subsection (a)(1) shall not exceed 

12 the applicable rate multiplied by the num13 ber of watts of generating capacity of the 

14 property which does not exceed 10 kilo15 watts. 

16 ‘‘(ii) APPLICABLE RATE.—For pur17 poses of this subparagraph, the applicable 

18 rate is the rate determined under the fol19 lowing table:

‘‘In the case of taxable years beginning in calendar year: The applicable rate is: 

2006 ................................................................................................ $3.00

2007 ................................................................................................ $2.75

2008 ................................................................................................ $2.50

2009 and thereafter ........................................................................ $2.25

20 ‘‘(iii) GENERATING CAPACITY.—For 

21 purposes of this subparagraph, generating 
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1 capacity shall be measured as the rated 

2 peak power output of a system’s compo3 nent modules as established by the Amer4 ican Society for Testing and Materials. 

5 Any photovoltaic property which is elec6 trically contiguous or serves the same cus7 tomer load shall be treated as one system 

8 for purposes of this section. 

9 ‘‘(B) SOLAR WATER HEATING.—The credit 

10 allowed under subsection (a)(2) shall not exceed 

11 $2,000 for each system of solar energy prop12 erty. 

13 ‘‘(C) WIND.—The credit allowed under 

14 subsection (a)(3) shall not exceed $5,000 for 

15 each system of wind energy property. 

16 ‘‘(D) ENERGY-EFFICIENT BUILDING PROP17 ERTY.—The credit allowed under subsection 

18 (a)(5) shall not exceed $500 for each item of 

19 energy-efficient building property. 

20 ‘‘(2) TYPE OF PROPERTY.—No expenditure may 

21 be taken into account under this section unless such 

22 expenditure is made by the taxpayer for property in23 stalled on or in connection with a dwelling unit 

24 which is located in the United States and which is 

25 used as a residence. 
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1 ‘‘(3) SAFETY CERTIFICATIONS.—No credit shall 

2 be allowed under this section for an item of property 

3 unless—

4 ‘‘(A) in the case of solar water heating 

5 property, such property is certified for perform6 ance and safety by the nonprofit Solar Rating 

7 Certification Corporation or a comparable enti8 ty endorsed by the government of the State in 

9 which such property is installed, and 

10 ‘‘(B) in the case of a photovoltaic, wind en11 ergy, or fuel cell property, such property meets 

12 appropriate fire and electric code requirements. 

13 ‘‘(c) DEFINITIONS AND SPECIAL RULES RELATING

14 TO EXPENDITURES.—For purposes of this section—

15 ‘‘(1) QUALIFIED PHOTOVOLTAIC PROPERTY EX16 PENDITURE.—The term ‘qualified photovoltaic prop17 erty expenditure’ means an expenditure for property 

18 which uses solar energy to generate electricity for 

19 use in a dwelling unit. 

20 ‘‘(2) QUALIFIED SOLAR WATER HEATING PROP21 ERTY EXPENDITURE.—The term ‘qualified solar 

22 water heating property expenditure’ means an ex23 penditure for property which uses solar energy to 

24 heat water for use in a dwelling unit with respect to 
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1 which a majority of the energy is derived from the 

2 sun. 

3 ‘‘(3) QUALIFIED WIND ENERGY PROPERTY EX4 PENDITURE.—The term ‘qualified wind energy prop5 erty expenditure’ means an expenditure for property 

6 which uses wind energy to generate electricity for 

7 use in a dwelling unit. 

8 ‘‘(4) QUALIFIED FUEL CELL PROPERTY EX9 PENDITURE.—The term ‘qualified fuel cell property 

10 expenditure’ means an expenditure for property 

11 which uses an electrochemical fuel cell system to 

12 generate electricity for use in a dwelling unit. 

13 ‘‘(5) QUALIFIED ENERGY-EFFICIENT BUILDING

14 PROPERTY EXPENDITURE.—

15 ‘‘(A) IN GENERAL.—The term ‘qualified 

16 energy-efficient building property expenditure’ 

17 means an expenditure for energy efficient build18 ing property defined in clauses (ii), (iii), (iv), 

19 (v), (vi), and (vii) of section 48A(d)(3)(A). 

20 ‘‘(B) 10 PERCENT CREDIT FOR CERTAIN

21 PROPERTY.—For purposes of subsection (a)(5), 

22 the expenditures described in this subparagraph 

23 are expenditures for energy efficient building 

24 property defined in clauses (iii)(II) and (iv)(II) 

25 of section 48A(d)(3)(A). 
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1 ‘‘(6) SOLAR PANELS.—No expenditure relating 

2 to a solar panel or other property installed as a roof 

3 (or portion thereof) shall fail to be treated as prop4 erty described in paragraph (1) or (2) solely because 

5 it constitutes a structural component of the struc6 ture on which it is installed. 

7 ‘‘(7) LABOR COSTS.—Expenditures for labor 

8 costs properly allocable to the onsite preparation, as9 sembly, or original installation of the property de10 scribed in paragraph (1), (2), (3), (4), or (5) and for 

11 piping or wiring to interconnect such property to the 

12 dwelling unit shall be taken into account for pur13 poses of this section. 

14 ‘‘(8) ENERGY STORAGE MEDIUM.—Expendi15 tures which are properly allocable to a swimming 

16 pool, hot tub, or any other energy storage medium 

17 which has a function other than the function of such 

18 storage shall not be taken into account for purposes 

19 of this section. 

20 ‘‘(d) SPECIAL RULES.—For purposes of this sec21 tion—

22 ‘‘(1) DOLLAR AMOUNTS IN CASE OF JOINT OC23 CUPANCY.—In the case of any dwelling unit which is 

24 jointly occupied and used during any calendar year 
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1 as a residence by 2 or more individuals the following 

2 shall apply: 

3 ‘‘(A) The amount of the credit allowable 

4 under subsection (a) by reason of expenditures 

5 (as the case may be) made during such cal6 endar year by any of such individuals with re7 spect to such dwelling unit shall be determined 

8 by treating all of such individuals as 1 taxpayer 

9 whose taxable year is such calendar year. 

10 ‘‘(B) There shall be allowable with respect 

11 to such expenditures to each of such individ12 uals, a credit under subsection (a) for the tax13 able year in which such calendar year ends in 

14 an amount which bears the same ratio to the 

15 amount determined under subparagraph (A) as 

16 the amount of such expenditures made by such 

17 individual during such calendar year bears to 

18 the aggregate of such expenditures made by all 

19 of such individuals during such calendar year. 

20 ‘‘(2) TENANT-STOCKHOLDER IN COOPERATIVE

21 HOUSING CORPORATION.—In the case of an indi22 vidual who is a tenant-stockholder (as defined in sec23 tion 216) in a cooperative housing corporation (as 

24 defined in such section), such individual shall be 

25 treated as having made his tenant-stockholder’s pro-
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1 portionate share (as defined in section 216(b)(3)) of 

2 any expenditures of such corporation. 

3 ‘‘(3) CONDOMINIUMS.—

4 ‘‘(A) IN GENERAL.—In the case of an indi5 vidual who is a member of a condominium man6 agement association with respect to a condo7 minium which such individual owns, such indi8 vidual shall be treated as having made his pro9 portionate share of any expenditures of such as10 sociation. 

11 ‘‘(B) CONDOMINIUM MANAGEMENT ASSO12 CIATION.—For purposes of this paragraph, the 

13 term ‘condominium management association’ 

14 means an organization which meets the require15 ments of paragraph (1) of section 528(c) (other 

16 than subparagraph (E) thereof) with respect to 

17 a condominium project substantially all of the 

18 units of which are used as residences. 

19 ‘‘(4) JOINT OWNERSHIP OF ITEMS OF SOLAR OR

20 WIND ENERGY PROPERTY.—

21 ‘‘(A) IN GENERAL.—Any expenditure oth22 erwise qualifying as an expenditure described in 

23 paragraph (1), (2), or (3) of subsection (c) shall 

24 not be treated as failing to so qualify merely be-
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1 cause such expenditure was made with respect 

2 to 2 or more dwelling units. 

3 ‘‘(B) LIMITS APPLIED SEPARATELY.—In 

4 the case of any expenditure described in sub5 paragraph (A), the amount of the credit allow6 able under subsection (a) shall (subject to para7 graph (1)) be computed separately with respect 

8 to the amount of the expenditure made for each 

9 dwelling unit. 

10 ‘‘(5) ALLOCATION IN CERTAIN CASES.—If less 

11 than 80 percent of the use of an item is for nonbusi12 ness residential purposes, only that portion of the 

13 expenditures for such item which is properly allo14 cable to use for nonbusiness residential purposes 

15 shall be taken into account. For purposes of this 

16 paragraph, use for a swimming pool shall be treated 

17 as use which is not for residential purposes. 

18 ‘‘(6) WHEN EXPENDITURE MADE; AMOUNT OF

19 EXPENDITURE.—

20 ‘‘(A) IN GENERAL.—Except as provided in 

21 subparagraph (B), an expenditure with respect 

22 to an item shall be treated as made when the 

23 original installation of the item is completed. 

24 ‘‘(B) EXPENDITURES PART OF BUILDING

25 CONSTRUCTION.—In the case of an expenditure 
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1 in connection with the construction or recon2 struction of a structure, such expenditure shall 

3 be treated as made when the original use of the 

4 constructed or reconstructed structure by the 

5 taxpayer begins. 

6 ‘‘(C) AMOUNT.—The amount of any ex7 penditure shall be the cost thereof. 

8 ‘‘(7) REDUCTION OF CREDIT FOR GRANTS, TAX9 EXEMPT BONDS, AND SUBSIDIZED ENERGY FINANC10 ING.—The rules of section 29(b)(3) shall apply for 

11 purposes of this section. 

12 ‘‘(e) BASIS ADJUSTMENTS.—For purposes of this 

13 subtitle, if a credit is allowed under this section for any 

14 expenditure with respect to any property, the increase in 

15 the basis of such property which would (but for this sub16 section) result from such expenditure shall be reduced by 

17 the amount of the credit so allowed. 

18 ‘‘(f) TERMINATION.—The credit allowed under this 

19 section shall not apply to taxable years beginning after 

20 December 31, 2009.’’. 

21 (b) CONFORMING AMENDMENTS.—

22 (1) Section 1016(a) is amended by striking 

23 ‘‘and’’ at the end of paragraph (34), by striking the 

24 period at the end of paragraph (35) and inserting ‘‘; 

25 and’’, and by adding at the end the following: 
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1 ‘‘(36) to the extent provided in section 25C(e), 

2 in the case of amounts with respect to which a credit 

3 has been allowed under section 25C.’’. 

4 (2) The table of sections for subpart A of part 

5 IV of subchapter A of chapter 1 is amended by in6 serting after the item relating to section 25B the fol7 lowing:

‘‘Sec. 25C. Residential solar, wind, and fuel cell energy property.’’.

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

9 this section shall apply to expenditures made after the 

10 date of the enactment of this Act, in taxable years ending 

11 after such date. 

12 SEC. 328. CREDIT FOR ENERGY MANAGEMENT SYSTEMS 

13 USING RESIDENTIAL REAL TIME METERING 

14 SYSTEMS. 

15 (a) CREDIT FOR ENERGY MANAGEMENT SYSTEMS.—

16 (1) IN GENERAL.—Subpart B of part IV of 

17 subchapter A of chapter 1 (relating to foreign tax 

18 credits, etc.) is amended by inserting after section 

19 30C the following new section: 

20 ‘‘SEC. 30D. CREDIT FOR ENERGY MANAGEMENT SYSTEMS. 

21 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al22 lowed as a credit against the tax imposed by this chapter 

23 for the taxable year—
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1 ‘‘(1) an amount equal to $20 for each qualified 

2 energy management device originally placed in serv3 ice during the taxable year, and 

4 ‘‘(2) for each qualified retrofitted meter origi5 nally placed in service during the taxable year, an 

6 amount equal to the lesser of—

7 ‘‘(A) $20, or 

8 ‘‘(B) the adjusted basis of such meter. 

9 ‘‘(b) DEFINITIONS.—

10 ‘‘(1) QUALIFIED ENERGY MANAGEMENT DE11 VICE.—For purposes of this section, the term ‘quali12 fied energy management device’ means any meter or 

13 metering device acquired and used by an electric en14 ergy or natural gas supplier or service provider to 

15 enable consumers or others to manage their pur16 chase, sale, or use of electricity or natural gas in re17 sponse to energy price and usage signals. 

18 ‘‘(2) QUALIFIED RETROFITTED METER.—For 

19 purposes of this section, the term ‘qualified retro20 fitted meter’ means an electric energy or natural gas 

21 meter or metering device that has been modified by 

22 the addition of equipment designed to enable users 

23 to manage the purchase, sale, or use of electricity 

24 and natural gas in response to energy price and 

25 usage signals. 
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1 ‘‘(3) PLACED IN SERVICE.—For purposes of 

2 this section, the term ‘placed in service’ means inter3 connected with other devices in a manner that per4 mits reading of energy price and usage signals on at 

5 least a daily basis. 

6 ‘‘(4) COST OF METERS INCLUDES COST OF IN7 STALLATION.—The cost of any qualified energy 

8 management device or qualified retrofitted meter re9 ferred to in paragraph (1) or (2) shall include the 

10 cost of the original installation of such property. 

11 ‘‘(c) SPECIAL RULES.—

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

13 property for which a credit is allowed under sub14 section (a) shall be reduced by the amount of such 

15 credit. 

16 ‘‘(2) RECAPTURE.—The Secretary shall, by reg17 ulations, provide for recapturing the benefit of any 

18 credit allowable under subsection (a) with respect to 

19 any property that ceases to be property eligible for 

20 such credit. 

21 ‘‘(3) PROPERTY USED OUTSIDE THE UNITED

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

23 allowed under subsection (a) with respect to any 

24 property referred to in section 50(b)(1) or with re-
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1 spect to the portion of the cost of any property 

2 taken into account under section 179. 

3 ‘‘(4) ELECTION TO NOT TAKE CREDIT.—No 

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

5 energy management device if the taxpayer elects to 

6 not have this section apply to such device. 

7 ‘‘(5) CREDITS FOR CERTAIN TAX EXEMPT OR8 GANIZATIONS AND GOVERNMENTAL UNITS.—

9 ‘‘(A) ALLOWANCE OF CREDIT.—Any credit 

10 which would be allowable under subsection (a) 

11 with respect to a qualified energy management 

12 device or a qualified retrofitted meter placed in 

13 service by an entity if such entity were not ex14 empt from tax under this chapter shall be treat15 ed as a credit allowable under subpart B to 

16 such entity if such entity is—

17 ‘‘(i) an organization described in sec18 tion 501(c)(12)(C) and exempt from tax 

19 under section 501(a), 

20 ‘‘(ii) an organization described in sec21 tion 1381(a)(2)(C), 

22 ‘‘(iii) an entity the income of which is 

23 excludable from gross income under section 

24 115, or 
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1 ‘‘(iv) a State, the District of Colum2 bia, any territory or possession of the 

3 United States, or any political subdivision 

4 thereof. 

5 ‘‘(B) USE OF CREDIT.—

6 ‘‘(i) TRANSFER OF CREDIT.—An enti7 ty described in subparagraph (A) may as8 sign, trade, sell, or otherwise transfer any 

9 credit allowable to such entity under sub10 paragraph (A) to any taxpayer. 

11 ‘‘(ii) USE OF CREDIT AS AN OFF12 SET.—Notwithstanding any other provision 

13 of law, in the case of an entity described 

14 in clause (i) or (ii) of subparagraph (A), 

15 any credit allowable to such entity under 

16 subparagraph (A) may be applied by such 

17 entity, without penalty, as a prepayment of 

18 any loan, debt, or other obligation the enti19 ty has incurred under subchapter I of 

20 chapter 31 of title 7 of the Rural Elec21 trification Act of 1936 (7 U.S.C. 901 et 

22 seq.). 

23 ‘‘(C) CREDIT NOT INCOME.—Neither a 

24 transfer under clause (i) nor a use under clause 

25 (ii) of subparagraph (B) of any credit allowable 
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1 under subparagraph (A) shall result in income 

2 for purposes of section 501(c)(12). 

3 ‘‘(D) TRANSFER PROCEEDS TREATED AS

4 ARISING FROM ESSENTIAL GOVERNMENT FUNC5 TION.—Any proceeds derived by an entity de6 scribed in subparagraph (A)(iii) from the trans7 fer of any credit under subparagraph (B)(i) 

8 shall be treated as arising from an essential 

9 government function. 

10 ‘‘(d) TERMINATION.—This section shall not apply to 

11 any property placed in service after December 31, 2012.’’. 

12 (2) INCLUSION OF INDIAN TRIBAL GOVERN13 MENTS.—Section 7871(a)(7) is amended by striking 

14 ‘‘and’’ at the end of subparagraph (B), by striking 

15 the period at the end of subparagraph (C), and by 

16 adding at the end the following: 

17 ‘‘(D) section 30D (relating to credit for en18 ergy management systems).’’. 

19 (3) CONFORMING AMENDMENTS.—

20 (A) The table of contents for subpart B of 

21 part IV of subchapter A of chapter 1 is amend22 ed by inserting after the item relating to section 

23 30C the following new item:

‘‘Sec. 30D. Credit for energy management systems.’’.

24 (B) Section 1016(a) is amended by strik25 ing ‘‘and’’ at the end of paragraph (35), by 
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1 striking the period at the end of paragraph (36) 

2 and inserting ‘‘, and’’, and by adding at the end 

3 the following new paragraph: 

4 ‘‘(37) to the extent provided in section 

5 30D(c)(1).’’. 

6 (4) EFFECTIVE DATE.—The amendments made 

7 by this subsection shall apply to qualified energy 

8 management devices placed in service after the date 

9 of the enactment of this Act and to qualified retro10 fitted meters that are placed in service on or after, 

11 or that are in use as of, January 1, 2006. 

12 (b) 5–Year Applicable Recovery Period for Deprecia13 tion of Qualified Energy Management Devices.—

14 (1) IN GENERAL.—Subparagraph (B) of section 

15 168(e)(3) (relating to classification of property) is 

16 amended by striking ‘‘and’’ at the end of clause (v), 

17 by striking the period at the end of clause (vi) and 

18 inserting ‘‘, and’’, and by adding at the end the fol19 lowing new clause: 

20 ‘‘(vii) any qualified energy manage21 ment device.’’. 

22 (2) DEFINITION OF QUALIFIED ENERGY MAN23 AGEMENT DEVICE.—Section 168(i) (relating to defi24 nitions and special rules) is amended by inserting at 

25 the end the following new paragraph: 
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1 ‘‘(17) QUALIFIED ENERGY MANAGEMENT DE2 VICE.—The term ‘qualified energy management de3 vice’ means a meter or metering device that is ac4 quired and used by an electric energy or natural gas 

5 supplier or service provider to enable consumers and 

6 others to manage their purchase, sale, and use of 

7 electricity or natural gas in response to energy price 

8 and usage signals that are readable on at least a 

9 daily basis. For purposes of the preceding sentence, 

10 the cost of any qualified energy management device 

11 shall (at the election of the taxpayer) include the 

12 cost of the original installation of such property.’’. 

13 (3) EFFECTIVE DATE.—The amendments made 

14 by this subsection shall apply to property placed in 

15 service after December 31, 2005, and before Janu16 ary 1, 2012. 

17 SEC. 329. CREDIT FOR FLYWHEEL PROPERTY. 

18 (a) IN GENERAL.—Subpart B of part IV of sub19 chapter A of chapter 1 (relating to foreign tax credits, 

20 etc.) is amended by inserting after section 30D the fol21 lowing new section: 

22 ‘‘SEC. 30E. CREDIT FOR FLYWHEEL PROPERTY. 

23 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al24 lowed as a credit against the tax imposed by this chapter 

25 for the taxable year an amount equal to 10 percent of the 
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1 cost of any qualified flywheel property placed in service 

2 by the taxpayer during the taxable year. 

3 ‘‘(b) LIMITATION.—The credit allowed under sub4 section (a) shall not exceed $2,000 for a taxable year. 

5 ‘‘(c) QUALIFIED FLYWHEEL PROPERTY.—For pur6 poses of this section, the term ‘qualified flywheel property’ 

7 means a flywheel designed exclusively to store energy that 

8 is used to generate electricity. 

9 ‘‘(d) SPECIAL RULES.—

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

11 property for which a credit is allowable under sub12 section (a) shall be reduced by the amount of such 

13 credit. 

14 ‘‘(2) RECAPTURE.—The Secretary shall, by reg15 ulations, provide for recapturing the benefit of any 

16 credit allowable under subsection (a) with respect to 

17 any property that ceases to be property eligible for 

18 such credit. 

19 ‘‘(3) PROPERTY USED OUTSIDE THE UNITED

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

21 allowed under subsection (a) with respect to any 

22 property referred to in section 50(b)(1) or with re23 spect to the portion of the cost of any property 

24 taken into account under section 179. 
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1 ‘‘(4) ELECTION TO NOT TAKE CREDIT.—No 

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

3 qualified flywheel property if the taxpayer elects to 

4 not have this section apply to such property. 

5 ‘‘(d) TERMINATION.—This section shall not apply to 

6 any property placed in service after December 31, 2009.’’. 

7 (b) CONFORMING AMENDMENTS.—

8 (1) The table of contents for subpart B of part 

9 IV of subchapter A of chapter 1 is amended by in10 serting after the item relating to section 30D the 

11 following new item:

‘‘Sec. 30E. Credit for qualified flywheel property.’’.

12 (2) Section 1016(a) is amended by striking 

13 ‘‘and’’ at the end of paragraph (36), by striking the 

14 period at the end of paragraph (37) and inserting ‘‘, 

15 and’’, and by adding at the end the following new 

16 paragraph: 

17 ‘‘(38) to the extent provided in section 

18 30E(c)(1).’’. 

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

20 this section shall apply to property placed in service in 

21 taxable years ending after the date of the enactment of 

22 this Act. 

23 SEC. 330. CREDITS FOR CLEAN COAL. 

24 (a) ALLOWANCE OF QUALIFYING CLEAN COAL

25 TECHNOLOGY UNIT CREDIT.—
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1 (1) IN GENERAL.—Section 46 (relating to 

2 amount of credit), as amended by this Act, is 

3 amended by striking ‘‘and’’ at the end of paragraph 

4 (2), by striking the period at the end of paragraph 

5 (3) and inserting ‘‘, and’’, and by adding at the end 

6 the following: 

7 ‘‘(4) the qualifying clean coal technology unit 

8 credit.’’. 

9 (2) AMOUNT OF QUALIFYING CLEAN COAL

10 TECHNOLOGY UNIT CREDIT.—Subpart E of part IV 

11 of subchapter A of chapter 1 (relating to rules for 

12 computing investment credit) is amended by insert13 ing after section 48A the following: 

14 ‘‘SEC. 48B. QUALIFYING CLEAN COAL TECHNOLOGY UNIT 

15 CREDIT. 

16 ‘‘(a) IN GENERAL.—For purposes of section 46, the 

17 qualifying clean coal technology unit credit for any taxable 

18 year is an amount equal to 10 percent of the qualified 

19 investment in a qualifying system of continuous emission 

20 control for such taxable year. 

21 ‘‘(b) QUALIFYING SYSTEM OF CONTINUOUS EMIS22 SION CONTROL.—

23 ‘‘(1) IN GENERAL.—For purposes of subsection 

24 (a), the term ‘qualifying system of continuous emis-
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1 sion control’ means a system of the taxpayer 

2 which—

3 ‘‘(A) serves, is added to, or retrofits an ex4 isting coal-based electricity generation unit, the 

5 construction, installation, or retrofitting of 

6 which is completed by the taxpayer (but only 

7 with respect to that portion of the basis which 

8 is properly attributable to such construction, in9 stallation, or retrofitting), 

10 ‘‘(B) removes or reduces—

11 ‘‘(i) 90 percent or more of carbon di12 oxide emissions, or 

13 ‘‘(ii) any pollutant subject to the re14 quirements of section 109 of the Clean Air 

15 Act or any hazardous pollutant listed 

16 under section 112(b) of such Act, to a 

17 greater extent than is required under such 

18 Act, 

19 ‘‘(C) is depreciable under section 167, 

20 ‘‘(D) has a useful life of not less than 4 

21 years, and 

22 ‘‘(E) is located in the United States. 

23 ‘‘(2) SPECIAL RULE FOR SALE-LEASEBACKS.—

24 For purposes of subparagraph (A) of paragraph (1), 

25 in the case of a unit which—
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1 ‘‘(A) is originally placed in service by a 

2 person, and 

3 ‘‘(B) is sold and leased back by such per4 son, or is leased to such person, within 3 

5 months after the date such unit was originally 

6 placed in service, for a period of not less than 

7 12 years, such unit shall be treated as originally 

8 placed in service not earlier than the date on 

9 which such property is used under the leaseback 

10 (or lease) referred to in subparagraph (B). The 

11 preceding sentence shall not apply to any prop12 erty if the lessee and lessor of such property 

13 make an election under this sentence. Such an 

14 election, once made, may be revoked only with 

15 the consent of the Secretary. 

16 ‘‘(c) EXISTING COAL-BASED ELECTRICITY GENERA17 TION UNIT.—For purposes of subsection (a), the term ‘ex18 isting coal-based electricity generating unit’ means, with 

19 respect to any taxable year, a steam generator-turbine 

20 unit which uses coal to produce 75 percent or more of 

21 its output as electricity and was in operation before the 

22 effective date of this section. 

23 ‘‘(d) LIMIT ON QUALIFYING CLEAN COAL TECH24 NOLOGY UNIT CREDIT.—For purposes of subsection (a), 

25 the credit shall be applicable to not more than the first 
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1 $100,000,000 of qualifying investment in a qualifying sys2 tem of continuous emission control at any 1 existing coal3 based electricity generating unit. 

4 ‘‘(e) QUALIFIED INVESTMENT.—For purposes of sub5 section (a), the term ‘qualified investment’ means, with 

6 respect to any taxable year, the basis of a qualifying sys7 tem of continuous emission control placed in service by 

8 the taxpayer during such taxable year. 

9 ‘‘(f) QUALIFIED PROGRESS EXPENDITURES.—

10 ‘‘(1) INCREASE IN QUALIFIED INVESTMENT.—

11 In the case of a taxpayer who has made an election 

12 under paragraph (5), the amount of the qualified in13 vestment of such taxpayer for the taxable year (de14 termined under subsection (e) without regard to this 

15 subsection) shall be increased by an amount equal to 

16 the aggregate of each qualified progress expenditure 

17 for the taxable year with respect to progress expend18 iture property. 

19 ‘‘(2) PROGRESS EXPENDITURE PROPERTY DE20 FINED.—For purposes of this subsection, the term 

21 ‘progress expenditure property’ means any property 

22 being constructed by or for the taxpayer and which 

23 it is reasonable to believe will qualify as a qualifying 

24 system of continuous emission control which is being 
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1 constructed by or for the taxpayer when it is placed 

2 in service. 

3 ‘‘(3) QUALIFIED PROGRESS EXPENDITURES DE4 FINED.—For purposes of this subsection—

5 ‘‘(A) SELF-CONSTRUCTED PROPERTY.—In 

6 the case of any self-constructed property, the 

7 term ‘qualified progress expenditures’ means 

8 the amount which, for purposes of this subpart, 

9 is properly chargeable (during such taxable 

10 year) to capital account with respect to such 

11 property. 

12 ‘‘(B) NONSELF-CONSTRUCTED PROP13 ERTY.—In the case of nonself-constructed prop14 erty, the term ‘qualified progress expenditures’ 

15 means the amount paid during the taxable year 

16 to another person for the construction of such 

17 property. 

18 ‘‘(4) OTHER DEFINITIONS.—For purposes of 

19 this subsection—

20 ‘‘(A) SELF-CONSTRUCTED PROPERTY.—

21 The term ‘self-constructed property’ means 

22 property for which it is reasonable to believe 

23 that more than half of the construction expendi24 tures will be made directly by the taxpayer. 
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1 ‘‘(B) NONSELF-CONSTRUCTED PROP2 ERTY.—The term ‘nonself-constructed property’ 

3 means property which is not self-constructed 

4 property. 

5 ‘‘(C) CONSTRUCTION, ETC.—The term 

6 ‘construction’ includes reconstruction and erec7 tion, and the term ‘constructed’ includes recon8 structed and erected. 

9 ‘‘(D) ONLY CONSTRUCTION OF QUALI10 FYING SYSTEM OF CONTINUOUS EMISSION CON11 TROL TO BE TAKEN INTO ACCOUNT.—Construc12 tion shall be taken into account only if, for pur13 poses of this subpart, expenditures therefore 

14 are properly chargeable to capital account with 

15 respect to the property. 

16 ‘‘(5) ELECTION.—An election under this sub17 section may be made at such time and in such man18 ner as the Secretary may by regulations prescribe. 

19 Such an election shall apply to the taxable year for 

20 which made and to all subsequent taxable years. 

21 Such an election, once made, may not be revoked ex22 cept with the consent of the Secretary. 

23 ‘‘(g) COORDINATION WITH OTHER CREDITS.—This 

24 section shall not apply to any property with respect to 

25 which the rehabilitation credit under section 47 or the en-
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1 ergy credit under section 48A is allowed unless the tax2 payer elects to waive the application of such credit to such 

3 property. 

4 ‘‘(h) TERMINATION.—This section shall not apply 

5 with respect to any qualified investment made more than 

6 10 years after the effective date of this section.’’. 

7 (3) RECAPTURE.—Section 50(a) (relating to 

8 other special rules) is amended by adding at the end 

9 the following: 

10 ‘‘(6) SPECIAL RULES RELATING TO QUALIFYING

11 SYSTEM OF CONTINUOUS EMISSION CONTROL.—For 

12 purposes of applying this subsection in the case of 

13 any credit allowable by reason of section 48B, the 

14 following shall apply: 

15 ‘‘(A) GENERAL RULE.—In lieu of the 

16 amount of the increase in tax under paragraph 

17 (1), the increase in tax shall be an amount 

18 equal to the investment tax credit allowed under 

19 section 38 for all prior taxable years with re20 spect to a qualifying system of continuous emis21 sion control (as defined by section 48B(b)(1)) 

22 multiplied by a fraction whose numerator is the 

23 number of years remaining to fully depreciate 

24 under this title the qualifying system of contin25 uous emission control disposed of, and whose 
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1 denominator is the total number of years over 

2 which such unit would otherwise have been sub3 ject to depreciation. For purposes of the pre4 ceding sentence, the year of disposition of the 

5 qualifying system of continuous emission con6 trol property shall be treated as a year of re7 maining depreciation. 

8 ‘‘(B) PROPERTY CEASES TO QUALIFY FOR

9 PROGRESS EXPENDITURES.—Rules similar to 

10 the rules of paragraph (2) shall apply in the 

11 case of qualified progress expenditures for a 

12 qualifying system of continuous emission con13 trol under section 48B, except that the amount 

14 of the increase in tax under subparagraph (A) 

15 of this paragraph shall be substituted in lieu of 

16 the amount described in such paragraph (2). 

17 ‘‘(C) APPLICATION OF PARAGRAPH.—This 

18 paragraph shall be applied separately with re19 spect to the credit allowed under section 38 re20 garding a qualifying system of continuous emis21 sion control.’’. 

22 (4) TECHNICAL AMENDMENTS.—

23 (A) Section 49(a)(1)(C) is amended by 

24 striking ‘‘and’’ at the end of clause (ii), by 

25 striking the period at the end of clause (iii) and 
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1 inserting ‘‘, and’’, and by adding at the end the 

2 following: 

3 ‘‘(iv) the portion of the basis of any 

4 qualifying system of continuous emission 

5 control attributable to any qualified invest6 ment (as defined by section 48B(e)).’’. 

7 (B) Section 50(a)(4) is amended by strik8 ing ‘‘and (2)’’ and inserting ‘‘, (2), and (6)’’. 

9 (C) Section 50(c) is amended by adding at 

10 the end the following: 

11 ‘‘(6) NONAPPLICATION.—Paragraphs (1) and 

12 (2) shall not apply to any qualifying clean coal tech13 nology unit credit under section 48B.’’. 

14 (D) The table of sections for subpart E of 

15 part IV of subchapter A of chapter 1 is amend16 ed by inserting after the item relating to section 

17 48A the following:

‘‘Sec. 48B. Qualifying clean coal technology unit credit.’’.

18 (5) EFFECTIVE DATE.—The amendments made 

19 by this subsection shall apply to periods after De20 cember 31, 2005, under rules similar to the rules of 

21 section 48(m) of the Internal Revenue Code of 1986 

22 (as in effect on the day before the date of enactment 

23 of the Revenue Reconciliation Act of 1990). 

24 (b) CREDIT FOR PRODUCTION FROM A QUALIFYING

25 CLEAN COAL TECHNOLOGY UNIT.—
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1 (1) IN GENERAL.—Subpart D of part IV of 

2 subchapter A of chapter 1 (relating to business re3 lated credits) is amended by adding at the end the 

4 following: 

5 ‘‘SEC. 45L. CREDIT FOR PRODUCTION FROM A QUALIFYING 

6 CLEAN COAL TECHNOLOGY UNIT. 

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

8 the qualifying clean coal technology production credit of 

9 any taxpayer for any taxable year is equal to the product 

10 of—

11 ‘‘(1) the applicable amount of clean coal tech12 nology production credit, multiplied by 

13 ‘‘(2) the kilowatt hours of electricity produced 

14 by the taxpayer during such taxable year at a quali15 fying clean coal technology unit during the 10-year 

16 period beginning on the date the unit was returned 

17 to service after retrofit, repowering, or replacement. 

18 ‘‘(b) Applicable Amount. 

19 ‘‘(1) IN GENERAL.—For purposes of this sec20 tion, the applicable amount of clean coal technology 

21 production credit is equal to $0.0034. 

22 ‘‘(2) INFLATION ADJUSTMENT FACTOR.—For 

23 calendar years after 2005, the applicable amount of 

24 clean coal technology production credit shall be ad25 justed by multiplying such amount by the inflation 
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1 adjustment factor for the calendar year in which the 

2 amount is applied. If any amount as increased under 

3 the preceding sentence is not a multiple of 0.01 cent, 

4 such amount shall be rounded to the nearest mul5 tiple of 0.01 cent. 

6 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur7 poses of this section—

8 ‘‘(1) QUALIFYING CLEAN COAL TECHNOLOGY

9 UNIT.—The term ‘qualifying clean coal technology 

10 unit’ means a unit of the taxpayer which—

11 ‘‘(A) is an existing coal-based electricity 

12 generating steam generator-turbine unit, 

13 ‘‘(B) has a nameplate capacity rating of 

14 not more than 300,000 kilowatts, and 

15 ‘‘(C) has been retrofitted, repowered, or re16 placed with a clean coal technology within 10 

17 years of the effective date of this section. 

18 ‘‘(2) CLEAN COAL TECHNOLOGY.—The term 

19 ‘clean coal technology’ means technology which—

20 ‘‘(A) uses coal to produce 50 percent or 

21 more of its thermal output as electricity, includ22 ing advanced pulverized coal or atmospheric flu23 idized bed combustion, pressurized fluidized bed 

24 combustion, integrated gasification combined 
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1 cycle, or any other technology for the produc2 tion of electricity, 

3 ‘‘(B) has a design heat rate not less than 

4 500 Btu/kWh below that of the existing unit be5 fore it is retrofit, repowered, or replaced with 

6 the qualifying clean coal technology, 

7 ‘‘(C) has a maximum design heat rate of 

8 not more than 9,000 Btu/kWh when the design 

9 coal has a heat content of more than 8,000 Btu 

10 per pound, and 

11 ‘‘(D) has a maximum design heat rate of 

12 not more than 10,500 Btu/kWh when the de13 sign coal has a heat content of 8,000 Btu per 

14 pound or less. 

15 ‘‘(3) APPLICATION OF CERTAIN RULES.—The 

16 rules of paragraphs (3), (4), and (5) of section 45(e) 

17 shall apply. 

18 ‘‘(4) INFLATION ADJUSTMENT FACTOR.—The 

19 term ‘inflation adjustment factor’ means, with re20 spect to a calendar year, a fraction the numerator 

21 of which is the GDP implicit price deflator for the 

22 preceding calendar year and the denominator of 

23 which is the GDP implicit price deflator for the cal24 endar year 2005. 
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1 ‘‘(5) GDP IMPLICIT PRICE DEFLATOR.—The 

2 term ‘GDP implicit price deflator’ means the most 

3 recent revision of the implicit price deflator for the 

4 gross domestic product as computed by the Depart5 ment of Commerce before March 15 of the calendar 

6 year. 

7 ‘‘(d) COORDINATION WITH OTHER CREDITS.—This 

8 section shall not apply to any property with respect to 

9 which the qualifying clean coal technology unit credit 

10 under section 48A is allowed unless the taxpayer elects 

11 to waive the application of such credit to such property.’’. 

12 (2) CREDIT TREATED AS BUSINESS CREDIT.—

13 Section 38(b) is amended by striking ‘‘plus’’ at the 

14 end of paragraph (21), by striking the period at the 

15 end of paragraph (22) and inserting ‘‘, plus’’, and 

16 by adding at the end the following: 

17 ‘‘(23) the qualifying clean coal technology pro18 duction credit determined under section 45L(a).’’. 

19 (3) CLERICAL AMENDMENT.—The table of sec20 tions for subpart D of part IV of subchapter A of 

21 chapter 1 is amended after the item relating to sec22 tion 45K the following:

‘‘Sec. 45L. Credit for production from a qualifying clean coal technology unit.’’.

23 (4) EFFECTIVE DATE.—The amendments made 

24 by this subsection shall apply to production after the 

25 date of enactment of this Act. 
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1 (c) CREDIT FOR INVESTMENT IN QUALIFYING AD2 VANCED CLEAN COAL TECHNOLOGY.—

3 (1) ALLOWANCE OF QUALIFYING ADVANCED

4 CLEAN COAL TECHNOLOGY FACILITY CREDIT.—Sec5 tion 46 (relating to amount of credit) is amended by 

6 striking ‘‘and’’ at the end of paragraph (3), by strik7 ing the period at the end of paragraph (4) and in8 serting ‘‘, and’’, and by adding at the end the fol9 lowing: 

10 ‘‘(5) the qualifying advanced clean coal tech11 nology facility credit.’’. 

12 (2) AMOUNT OF QUALIFYING ADVANCED CLEAN

13 COAL TECHNOLOGY FACILITY CREDIT.—Subpart E 

14 of part IV of subchapter A of chapter 1 (relating to 

15 rules for computing investment credit) is amended 

16 by inserting after section 48B the following: 

17 ‘‘SEC. 48C. QUALIFYING ADVANCED CLEAN COAL TECH18 NOLOGY FACILITY CREDIT. 

19 ‘‘(a) IN GENERAL.—For purposes of section 46, the 

20 qualifying advanced clean coal technology facility credit 

21 for any taxable year is an amount equal to 10 percent 

22 of the qualified investment in a qualifying advanced clean 

23 coal technology facility for such taxable year. 

24 ‘‘(b) QUALIFYING ADVANCED CLEAN COAL TECH25 NOLOGY FACILITY.—
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1 ‘‘(1) IN GENERAL.—For purposes of subsection 

2 (a), the term ‘qualifying advanced clean coal tech3 nology facility’ means a facility of the taxpayer 

4 which—

5 ‘‘(A)(i)(I) replaces a conventional tech6 nology facility of the taxpayer and the original 

7 use of which commences with the taxpayer, or 

8 ‘‘(II) is a retrofitted or repowered conven9 tional technology facility, the retrofitting or 

10 repowering of which is completed by the tax11 payer (but only with respect to that portion of 

12 the basis which is properly attributable to such 

13 retrofitting or repowering), or 

14 ‘‘(ii) is acquired through purchase (as de15 fined by section 179(d)(2)), 

16 ‘‘(B) is depreciable under section 167, 

17 ‘‘(C) has a useful life of not less than 4 

18 years, 

19 ‘‘(D) is located in the United States, and 

20 ‘‘(E) uses qualifying advanced clean coal 

21 technology. 

22 ‘‘(2) SPECIAL RULE FOR SALE-LEASEBACKS.—

23 For purposes of subparagraph (A) of paragraph (1), 

24 in the case of a facility which—
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•HR 2828 IH 

1 ‘‘(A) is originally placed in service by a 

2 person, and 

3 ‘‘(B) is sold and leased back by such per4 son, or is leased to such person, within 3 

5 months after the date such facility was origi6 nally placed in service, for a period of not less 

7 than 12 years, such facility shall be treated as 

8 originally placed in service not earlier than the 

9 date on which such property is used under the 

10 leaseback (or lease) referred to in subparagraph 

11 (B). The preceding sentence shall not apply to 

12 any property if the lessee and lessor of such 

13 property make an election under this sentence. 

14 Such an election, once made, may be revoked 

15 only with the consent of the Secretary. 

16 ‘‘(3) QUALIFYING ADVANCED CLEAN COAL

17 TECHNOLOGY.—For purposes of paragraph (1)—

18 ‘‘(A) IN GENERAL.—The term ‘qualifying 

19 advanced clean coal technology’ means, with re20 spect to clean coal technology—

21 ‘‘(i) multiple applications, with a 

22 combined capacity of not more than 

23 5,000 megawatts, of advanced pulver24 ized coal or atmospheric fluidized bed 

25 combustion technology—
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•HR 2828 IH 

1 ‘‘(I) installed as a new, ret2 rofit, or repowering application, 

3 ‘‘(II) operated between 2006 

4 and 2015, and 

5 ‘‘(III) with a design net heat 

6 rate of not more than 9,500 Btu 

7 per kilowatt hour when the de8 sign coal has a heat content of 

9 more than 8,000 Btu per pound, 

10 or a design net heat rate of not 

11 more than 9,900 Btu per kilo12 watt hour when the design coal 

13 has a heat content of 8,000 Btu 

14 per pound or less, 

15 ‘‘(ii) multiple applications, with a 

16 combined capacity of not more than 1,000 

17 megawatts, of pressurized fluidized bed 

18 combustion technology—

19 ‘‘(I) installed as a new, retrofit, 

20 or repowering application, 

21 ‘‘(II) operated between 2006 and 

22 2015, and 

23 ‘‘(III) with a design net heat rate 

24 of not more than 8,400 Btu per kilo25 watt hour when the design coal has a 
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•HR 2828 IH 

1 heat content of more than 8,000 Btu 

2 per pound, or a design net heat rate 

3 of not more than 9,900 Btu’s per kilo4 watt hour when the design coal has a 

5 heat content of 8,000 Btu per pound 

6 or less, 

7 ‘‘(iii) multiple applications, with a 

8 combined capacity of not more than 2,000 

9 megawatts, of integrated gasification com10 bined cycle technology, with or without fuel 

11 or chemical co-production—

12 ‘‘(I) installed as a new, retrofit, 

13 or repowering application, 

14 ‘‘(II) operated between 2006 and 

15 2015, 

16 ‘‘(III) with a design net heat rate 

17 of not more than 8,550 Btu per kilo18 watt hour when the design coal has a 

19 heat content of more than 8,000 Btu 

20 per pound, or a design net heat rate 

21 of not more than 9,900 Btu per kilo22 watt hour when the design coal has a 

23 heat content of 8,000 Btu per pound 

24 or less, and 
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•HR 2828 IH 

1 ‘‘(IV) with a net thermal effi2 ciency on any fuel or chemical co-pro3 duction of not less than 39 percent 

4 (higher heating value), and 

5 ‘‘(iv) multiple applications, with a 

6 combined capacity of not more than 2,000 

7 megawatts of technology for the production 

8 of electricity—

9 ‘‘(I) installed as a new, retrofit, 

10 or repowering application, 

11 ‘‘(II) operated between 2006 and 

12 2015, and 

13 ‘‘(III) with a carbon emission 

14 rate which is not more than 85 per15 cent of conventional technology. 

16 ‘‘(B) EXCEPTIONS.—Such term shall not 

17 include clean coal technology projects receiving 

18 or scheduled to receive funding under the Clean 

19 Coal Technology Program of the Department of 

20 Energy. 

21 ‘‘(C) CLEAN COAL TECHNOLOGY.—The 

22 term ‘clean coal technology’ means advanced 

23 technology which uses coal to produce 75 per24 cent or more of its thermal output as electricity 

25 including advanced pulverized coal or atmos-
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•HR 2828 IH 

1 pheric fluidized bed combustion, pressurized flu2 idized bed combustion, integrated gasification 

3 combined cycle with or without fuel or chemical 

4 co-production, and any other technology for the 

5 production of electricity which exceeds the per6 formance of conventional technology. 

7 ‘‘(D) CONVENTIONAL TECHNOLOGY.—The 

8 term ‘conventional technology’ means—

9 ‘‘(i) coal-fired combustion technology 

10 with a design net heat rate of not less than 

11 9,500 Btu per kilowatt hour (HHV) and a 

12 carbon equivalents emission rate of not 

13 more than 0.54 pounds of carbon per kilo14 watt hour when the design coal has a heat 

15 content of more than 8,000 Btu per 

16 pound, 

17 ‘‘(ii) coal-fired combustion technology 

18 with a design net heat rate of not less than 

19 10,500 Btu per kilowatt hour (HHV) and 

20 a carbon equivalents emission rate of not 

21 more than 0.60 pounds of carbon per kilo22 watt hour when the design coal has a heat 

23 content of 8,000 Btu per pound or less, or 

24 ‘‘(iii) natural gas-fired combustion 

25 technology with a design net heat rate of 
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•HR 2828 IH 

1 not less than 7,500 Btu per kilowatt hour 

2 (HHV) and a carbon equivalents emission 

3 rate of not more than 0.24 pounds of car4 bon per kilowatt hour. 

5 ‘‘(E) DESIGN NET HEAT RATE.—The de6 sign net heat rate shall be based on the design 

7 annual heat input to and the design annual net 

8 electrical output from the qualifying advanced 

9 clean coal technology (determined without re10 gard to such technology’s co-generation of 

11 steam). 

12 ‘‘(F) SELECTION CRITERIA.—Selection cri13 teria for clean coal technology facilities—

14 ‘‘(i) shall be established by the Sec15 retary of Energy as part of a competitive 

16 solicitation, 

17 ‘‘(ii) shall include primary criteria of 

18 minimum design net heat rate, maximum 

19 design thermal efficiency, and lowest cost 

20 to the government, and 

21 ‘‘(iii) shall include supplemental cri22 teria as determined appropriate by the 

23 Secretary of Energy. 

24 ‘‘(c) QUALIFIED INVESTMENT.—For purposes of sub25 section (a), the term ‘qualified investment’ means, with 
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1 respect to any taxable year, the basis of a qualifying ad2 vanced clean coal technology facility placed in service by 

3 the taxpayer during such taxable year. 

4 ‘‘(d) QUALIFIED PROGRESS EXPENDITURES.—

5 ‘‘(1) INCREASE IN QUALIFIED INVESTMENT.—

6 In the case of a taxpayer who has made an election 

7 under paragraph (5), the amount of the qualified in8 vestment of such taxpayer for the taxable year (de9 termined under subsection (c) without regard to this 

10 section) shall be increased by an amount equal to 

11 the aggregate of each qualified progress expenditure 

12 for the taxable year with respect to progress expend13 iture property. 

14 ‘‘(2) PROGRESS EXPENDITURE PROPERTY DE15 FINED.—For purposes of this subsection, the term 

16 ‘progress expenditure property’ means any property 

17 being constructed by or for the taxpayer and which 

18 it is reasonable to believe will qualify as a qualifying 

19 advanced clean coal technology facility which is 

20 being constructed by or for the taxpayer when it is 

21 placed in service. 

22 ‘‘(3) QUALIFIED PROGRESS EXPENDITURES DE23 FINED.—For purposes of this subsection—

24 ‘‘(A) SELF-CONSTRUCTED PROPERTY.—In 

25 the case of any self-constructed property, the 
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•HR 2828 IH 

1 term ‘qualified progress expenditures’ means 

2 the amount which, for purposes of this subpart, 

3 is properly chargeable (during such taxable 

4 year) to capital account with respect to such 

5 property. 

6 ‘‘(B) NONSELF-CONSTRUCTED PROP7 ERTY.—In the case of nonself-constructed prop8 erty, the term ‘qualified progress expenditures’ 

9 means the amount paid during the taxable year 

10 to another person for the construction of such 

11 property. 

12 ‘‘(4) OTHER DEFINITIONS.—For purposes of 

13 this subsection—

14 ‘‘(A) SELF-CONSTRUCTED PROPERTY.—

15 The term ‘self-constructed property’ means 

16 property for which it is reasonable to believe 

17 that more than half of the construction expendi18 tures will be made directly by the taxpayer. 

19 ‘‘(B) NONSELF-CONSTRUCTED PROP20 ERTY.—The term ‘nonself-constructed property’ 

21 means property which is not self-constructed 

22 property. 

23 ‘‘(C) CONSTRUCTION, ETC.—The term 

24 ‘construction’ includes reconstruction and erec-
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•HR 2828 IH 

1 tion, and the term ‘constructed’ includes recon2 structed and erected. 

3 ‘‘(D) ONLY CONSTRUCTION OF QUALI4 FYING ADVANCED CLEAN COAL TECHNOLOGY

5 FACILITY TO BE TAKEN INTO ACCOUNT.—Con6 struction shall be taken into account only if, for 

7 purposes of this subpart, expenditures therefore 

8 are properly chargeable to capital account with 

9 respect to the property. 

10 ‘‘(5) ELECTION.—An election under this sub11 section may be made at such time and in such man12 ner as the Secretary may by regulations prescribe. 

13 Such an election shall apply to the taxable year for 

14 which made and to all subsequent taxable years. 

15 Such an election, once made, may not be revoked ex16 cept with the consent of the Secretary. 

17 ‘‘(e) COORDINATION WITH OTHER CREDITS.—This 

18 section shall not apply to any property with respect to 

19 which the rehabilitation credit under section 47 or the en20 ergy credit under section 48A is allowed unless the tax21 payer elects to waive the application of such credit to such 

22 property. 

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

24 with respect to any qualified investment made more than 

25 10 years after the effective date of this section.’’. 
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•HR 2828 IH 

1 (3) RECAPTURE.—Section 50(a) (relating to 

2 other special rules) is amended by inserting after 

3 paragraph (6) the following: 

4 ‘‘(7) SPECIAL RULES RELATING TO QUALIFYING

5 ADVANCED CLEAN COAL TECHNOLOGY FACILITY.—

6 For purposes of applying this subsection in the case 

7 of any credit allowable by reason of section 48C, the 

8 following shall apply: 

9 ‘‘(A) GENERAL RULE.—In lieu of the 

10 amount of the increase in tax under paragraph 

11 (1), the increase in tax shall be an amount 

12 equal to the investment tax credit allowed under 

13 section 38 for all prior taxable years with re14 spect to a qualifying advanced clean coal tech15 nology facility (as defined by section 48C(b)(1)) 

16 multiplied by a fraction whose numerator is the 

17 number of years remaining to fully depreciate 

18 under this title the qualifying advanced clean 

19 coal technology facility disposed of, and whose 

20 denominator is the total number of years over 

21 which such facility would otherwise have been 

22 subject to depreciation. For purposes of the 

23 preceding sentence, the year of disposition of 

24 the qualifying advanced clean coal technology 
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•HR 2828 IH 

1 facility property shall be treated as a year of re2 maining depreciation. 

3 ‘‘(B) PROPERTY CEASES TO QUALIFY FOR

4 PROGRESS EXPENDITURES.—Rules similar to 

5 the rules of paragraph (2) shall apply in the 

6 case of qualified progress expenditures for a 

7 qualifying advanced clean coal technology facil8 ity under section 48C, except that the amount 

9 of the increase in tax under subparagraph (A) 

10 of this paragraph shall be substituted in lieu of 

11 the amount described in such paragraph (2). 

12 ‘‘(C) APPLICATION OF PARAGRAPH.—This 

13 paragraph shall be applied separately with re14 spect to the credit allowed under section 38 re15 garding a qualifying advanced clean coal tech16 nology facility.’’. 

17 (4) TECHNICAL AMENDMENTS.—

18 (A) Section 49(a)(1)(C) is amended by 

19 striking ‘‘and’’ at the end of clause (iii), by 

20 striking the period at the end of clause (iv) and 

21 inserting ‘‘, and’’, and by adding at the end the 

22 following: 

23 ‘‘(v) the portion of the basis of any 

24 qualifying advanced clean coal technology 
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•HR 2828 IH 

1 facility attributable to any qualified invest2 ment (as defined by section 48C(c)).’’. 

3 (B) Section 50(a)(4) of such Code is 

4 amended by striking ‘‘and (6)’’ and inserting 

5 ‘‘(6), and (7)’’. 

6 (C) Section 50(c)(6) of such Code, as 

7 added by section 201(e)(3), is amended by in8 serting ‘‘or any advanced clean coal technology 

9 facility credit under section 48C’’ after ‘‘section 

10 48B’’. 

11 (D) The table of sections for subpart E of 

12 part IV of subchapter A of chapter 1 is amend13 ed by inserting after the item relating to section 

14 48B the following:

‘‘Sec. 48C. Qualifying advanced clean coal technology facility credit.’’.

15 (5) EFFECTIVE DATE.—The amendments made 

16 by this subsection shall apply to periods after De17 cember 31, 2005, under rules similar to the rules of 

18 section 48(m) of the Internal Revenue Code of 1986 

19 (as in effect on the day before the date of enactment 

20 of the Revenue Reconciliation Act of 1990). 

21 (d) CREDIT FOR PRODUCTION FROM QUALIFYING

22 ADVANCED CLEAN COAL TECHNOLOGY.—

23 (1) IN GENERAL.—Subpart D of part IV of 

24 subchapter A of chapter 1 (relating to business re-
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•HR 2828 IH 

1 lated credits) is amended by inserting after section 

2 45L the following: 

3 ‘‘SEC. 45M. CREDIT FOR PRODUCTION FROM QUALIFYING 

4 ADVANCED CLEAN COAL TECHNOLOGY. 

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

6 the qualifying advanced clean coal technology production 

7 credit of any taxpayer for any taxable year is equal to—

8 ‘‘(1) the applicable amount of advanced clean 

9 coal technology production credit, multiplied by 

10 ‘‘(2) the sum of—

11 ‘‘(A) the kilowatt hours of electricity, plus 

12 ‘‘(B) each 3,413 Btu of fuels or chemicals, 

13 produced by the taxpayer during such taxable 

14 year at a qualifying advanced clean coal tech15 nology facility during the 10-year period begin16 ning on the date the facility was originally 

17 placed in service. 

18 ‘‘(b) APPLICABLE AMOUNT.—For purposes of this 

19 section, the applicable amount of advanced clean coal tech20 nology production credit with respect to production from 

21 a qualifying advanced clean coal technology facility shall 

22 be determined as follows: 

23 ‘‘(1) Where the design coal has a heat content 

24 of more than 8,000 Btu per pound: 
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1 ‘‘(A) In the case of a facility originally 

2 placed in service before 2008, if—

‘‘The facility design net heat rate, Btu/kWh (HHV) 

is: 

The applicable amount is: 

For 1st 5 years 

of such service 

For 2d 5 years of 

such service 

Not more than 8,400 ................................................. $.0050 $.0030

More than 8,400 but not more than 8,550 ............... $.0010 $.0010

More than 8,550 but less than 8,750 ........................ $.0005 $.0005. 

3 ‘‘(B) In the case of a facility originally 

4 placed in service after 2007 and before 2012, 

5 if—

‘‘The facility design net heat rate, Btu/kWh (HHV) 

is: 

The applicable amount is: 

For 1st 5 years 

of such service 

For 2d 5 years of 

such service 

Not more than 7,770 ................................................. $.0090 $.0075

More than 7,770 but not more than 8,125 ............... $.0070 $.0050

More than 8,125 but not more than 8,350 ............... $.0060 $.0040. 

6 ‘‘(C) In the case of a facility originally 

7 placed in service after 2011 and before 2015, 

8 if—

‘‘The facility design net heat rate, Btu/kWh (HHV) 

is: 

The applicable amount is: 

For 1st 5 years 

of such service 

For 2d 5 years of 

such service 

Not more than 7,380 ................................................. $.0120 $.0090

More than 7,380 but not more than 7,720 ............... $.0095 $.0070. 

9 ‘‘(2) Where the design coal has a heat content 

10 of not more than 8,000 Btu per pound: 

11 ‘‘(A) In the case of a facility originally 

12 placed in service before 2008, if—

‘‘The facility design net thermal efficiency (HHV) 

is: 

The applicable amount is: 

For 1st 5 years 

of such service 

For 2d 5 years of 

such service 

Not more than 8,500 ................................................. $.0050 $.0030

More than 8,500 but not more than 8,650 ............... $.0010 $.0010

More than 8,650 but not more than 8,750 ............... $.0005 $.0005. 
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1 ‘‘(B) In the case of a facility originally 

2 placed in service after 2007 and before 2012, 

3 if—

‘‘The facility design net heat rate, Btu/kWh (HHV) 

is: 

The applicable amount is: 

For 1st 5 years 

of such service 

For 2d 5 years of 

such service 

Not more than 8,000 ................................................. $.0090 $.0075

More than 8,000 but not more than 8,250 ............... $.0070 $.0050

More than 8,250 but not more than 8,400 ............... $.0060 $.0040. 

4 ‘‘(C) In the case of a facility originally 

5 placed in service after 2011 and before 2015, 

6 if—

The facility design net heat rate, Btu/kWh (HHV) 

is: 

The applicable amount is: 

For 1st 5 years 

of such service 

For 2d 5 years of 

such service 

Not more than 7,800 ................................................. $.0120 $.0090

More than 7,800 but not more than 7,950 ............... $.0095 $.0070. 

7 ‘‘(3) Where the clean coal technology facility is 

8 producing fuel or chemicals: 

9 ‘‘(A) In the case of a facility originally 

10 placed in service before 2008, if—

‘‘The facility design net thermal efficiency (HHV) 

is: 

The applicable amount is: 

For 1st 5 years 

of such service 

For 2d 5 years of 

such service 

Not less than 40.6 percent ........................................ $.0050 $.0030

Less than 40.6 but not less than 40 percent ............ $.0010 $.0010

Less than 40 but not less than 39 percent ............... $.0005 $.0005. 

11 ‘‘(B) In the case of a facility originally 

12 placed in service after 2007 and before 2012, 

13 if—

‘‘The facility design net thermal efficiency (HHV) 

is: 

The applicable amount is: 

For 1st 5 years 

of such service 

For 2d 5 years of 

such service 

Not less than 43.9 percent ........................................ $.0090 $.0075
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•HR 2828 IH 

‘‘The facility design net thermal efficiency (HHV) 

is: 

The applicable amount is: 

For 1st 5 years 

of such service 

For 2d 5 years of 

such service 

Less than 43.9 but not less than 42 percent ............ $.0070 $.0050

Less than 42 but not less than 40.9 percent ............ $.0060 $.0040. 

1 ‘‘(C) In the case of a facility originally 

2 placed in service after 2011 and before 2015, 

3 if—

‘‘The facility design net thermal efficiency (HHV) 

is: 

The applicable amount is: 

For 1st 5 years 

of such service 

For 2d 5 years of 

such service 

Not less than 44.2 percent ........................................ $.0120 $.0090

Less than 44.2 but not less than 43.6 percent ......... $.0095 $.0070

4 ‘‘(c) INFLATION ADJUSTMENT FACTOR.—For cal5 endar years after 2005, each amount in paragraphs (1), 

6 (2), and (3) shall be adjusted by multiplying such amount 

7 by the inflation adjustment factor for the calendar year 

8 in which the amount is applied. If any amount as in9 creased under the preceding sentence is not a multiple of 

10 0.01 cent, such amount shall be rounded to the nearest 

11 multiple of 0.01 cent. 

12 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur13 poses of this section—

14 ‘‘(1) IN GENERAL.—Any term used in this sec15 tion which is also used in section 48B shall have the 

16 meaning given such term in section 48B. 

17 ‘‘(2) APPLICABLE RULES.—The rules of para18 graphs (3), (4), and (5) of section 45(e) shall apply. 
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1 ‘‘(3) INFLATION ADJUSTMENT FACTOR.—The 

2 term ‘inflation adjustment factor’ means, with re3 spect to a calendar year, a fraction the numerator 

4 of which is the GDP implicit price deflator for the 

5 preceding calendar year and the denominator of 

6 which is the GDP implicit price deflator for the cal7 endar year 2005. 

8 ‘‘(4) GDP IMPLICIT PRICE DEFLATOR.—The 

9 term ‘GDP implicit price deflator’ means the most 

10 recent revision of the implicit price deflator for the 

11 gross domestic product as computed by the Depart12 ment of Commerce before March 15 of the calendar 

13 year.’’. 

14 (2) CREDIT TREATED AS BUSINESS CREDIT.—

15 Section 38(b) is amended by striking ‘‘plus’’ at the 

16 end of paragraph (22), by striking the period at the 

17 end of paragraph (23) and inserting ‘‘, plus’’, and 

18 by adding at the end the following: 

19 ‘‘(24) the qualifying advanced clean coal tech20 nology production credit determined under section 

21 45M(a).’’. 

22 (3) CLERICAL AMENDMENT.—The table of sec23 tions for subpart D of part IV of subchapter A of 

24 chapter 1 is amended by inserting after the item re25 lating to section 45I the following:
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‘‘Sec. 45M. Credit for production from qualifying advanced clean coal technology.’’.

1 (4) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to production after the 

3 date of enactment of this Act. 

4 Subtitle B—Long Term Incentives 

5 SEC. 331. TAX INCENTIVES FOR RETOOLING AND INVEST6 MENT IN NEW FACILITIES AND ASSETS TO 

7 PRODUCE ENERGY EFFICIENCY TECH8 NOLOGIES AND DOMESTIC CLEAN ENERGY 

9 PRODUCTION TECHNOLOGIES. 

10 (a) RESEARCH CREDIT.—Section 41 (relating to 

11 credit for increasing research activities) is amended by 

12 adding at the end the following new subsection: 

13 ‘‘(i) CERTAIN TECHNOLOGIES.—

14 ‘‘(1) INCREASED CREDIT AMOUNT.—In the case 

15 of expenses relating to a technology described in 

16 paragraph (2), subsection (a)(1) shall be applied by 

17 substituting ‘40 percent’ for ‘20 percent’. 

18 ‘‘(2) TECHNOLOGY DESCRIBED.—A technology 

19 described in this paragraph is—

20 ‘‘(A) a facility modified to use closed-loop 

21 biomass to co-fire with coal (within the meaning 

22 of section 45(d)(2)(A)(ii)), 
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1 ‘‘(B) a facility which uses qualified clean 

2 energy resources (as defined in section 

3 45(c)(1)), 

4 ‘‘(C) a technology which enables a vehicle 

5 to qualify for the alternative motor vehicle cred6 it under section 30B, as determined by the sec7 retary, and which is—

8 ‘‘(i) a fuel cell described in section 

9 30B(b)(3), 

10 ‘‘(ii) a hybrid motor vehicle technology 

11 described in paragraphs (2) or (3) of sec12 tion 30B(c), 

13 ‘‘(iii) an alternative fuel motor vehicle 

14 described in section 30B(d)(4), or 

15 ‘‘(iv) an advanced diesel motor vehicle 

16 described in section 30B(e), 

17 ‘‘(D) a qualified energy efficient appliance 

18 (as defined by section 45K(d)), 

19 ‘‘(E) energy property described in section 

20 48A(c), 

21 ‘‘(F) property, expenditures for which a 

22 credit is allowed under section 25C, 

23 ‘‘(G) qualified energy management device 

24 or qualified retrofitted meter (as defined by sec25 tion 30D(b)), 
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1 ‘‘(H) qualified flywheel property (as de2 fined by section 30E(c)), and 

3 ‘‘(I) new electricity transmission lines de4 signed and built primarily to transmit elec5 tricity from rural renewable energy resources 

6 which do not currently have access to such 

7 transmission lines. 

8 ‘‘(3) DOMESTIC PRODUCTION REQUIREMENT.—

9 An expense shall be treated as not described in para10 graph (1) unless any research qualified under this 

11 section is conducted substantially within the United 

12 States. 

13 ‘‘(4) TECHNOLOGY PORTION OF CREDIT RE14 FUNDABLE FOR SMALL BUSINESSES.—

15 ‘‘(A) IN GENERAL.—In the case of an eligi16 ble small business, the portion of the credit 

17 which is attributable to expenses relating to 

18 technologies described in paragraph (2) and 

19 which would (but for subparagraph (B)) be al20 lowable under this section shall be treated for 

21 purposes of this title as a credit allowed under 

22 subpart C. 

23 ‘‘(B) NO DOUBLE BENEFIT.—The amount 

24 of the credit allowed under this section shall be 

25 reduced by the amount of any credit treated as 
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1 allowed under subpart C by reason of subpara2 graph (A). 

3 ‘‘(C) ELIGIBLE SMALL BUSINESS.—For 

4 purposes of this paragraph, a taxpayer is an eli5 gible small business for any taxable year if the 

6 average annual gross receipts of the taxpayer 

7 for the 3 preceding taxable years do not exceed 

8 $5,000,000. For purposes of the preceding sen9 tence, rules similar to the rules of paragraphs 

10 (2) and (3) of section 448(c) shall apply.’’. 

11 (b) INVESTMENT TAX CREDIT FOR EQUIPMENT, 

12 STRUCTURES, AND ALL ASSETS INVOLVED IN PRODUC13 TION OF QUALIFIED TECHNOLOGIES.—

14 (1) IN GENERAL.—Section 46 (relating to 

15 amount of investment credit) is amended by striking 

16 ‘‘and’’ at the end of paragraph (4), by striking the 

17 period at the end of paragraph (5) and inserting ‘‘; 

18 and’’, and by adding at the end the following new 

19 paragraph: 

20 ‘‘(6) the qualified technology credit.’’. 

21 (2) QUALIFIED TECHNOLOGY CREDIT.—Sub22 part E of part IV of subchapter A of chapter 1 (re23 lating to rules for computing investment credit) is 

24 amended by inserting after section 48C the fol25 lowing: 
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1 ‘‘SEC. 48D. QUALIFIED TECHNOLOGY CREDIT. 

2 ‘‘(a) IN GENERAL.—For purposes of section 46, the 

3 qualified technology credit for any taxable year is 35 per4 cent of the basis of each facility placed in service in the 

5 United States during such taxable year which is primarily 

6 used in the production or manufacture of technology prop7 erty described in section 41(i)(2). 

8 ‘‘(b) CERTAIN PROGRESS EXPENDITURE RULES

9 MADE APPLICABLE.—Rules similar to the rules of sub10 sections (c)(4) and (d) of section 46 (as in effect on the 

11 day before the date of the enactment of the Revenue Rec12 onciliation Act of 1990) shall apply for purposes of this 

13 section.’’. 

14 (3) SPECIAL BASIS ADJUSTMENT RULE.—Para15 graph (3) of section 50(c) (relating to basis adjust16 ment to investment credit property) is amended by 

17 striking ‘‘or reclamation credit’’ and inserting ‘‘, rec18 lamation credit, or qualified technology credit’’. 

19 (4) CLERICAL AMENDMENT.—The table of sec20 tions for subpart E of part IV of subchapter A of 

21 chapter 1 is amended by inserting after the item re22 lating to section 48C the following new item:

‘‘Sec. 48D. Qualified technology credit.’’.

23 (5) EFFECTIVE DATE.—The amendments made 

24 by this subsection shall apply to property placed in 

25 service after the date of enactment of this Act. 
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1 (c) ACCELERATED DEPRECIATION.—Section 168 (re2 lating to accelerated cost recovery system) is amended by 

3 adding at the end the following new subsection: 

4 ‘‘(l) CERTAIN TECHNOLOGIES.—

5 ‘‘(1) INCREASED ADDITIONAL ALLOWANCE.—In 

6 the case of any property located in the United States 

7 which is primarily used in the production or manu8 facture of technology property described in section 

9 41(i)(2)—

10 ‘‘(A) the depreciation deduction provided 

11 by section 167(a) for the taxable year in which 

12 such property is placed in service shall include 

13 an allowance equal to the applicable percentage 

14 of the adjusted basis of such property; and 

15 ‘‘(B) the adjusted basis of such property 

16 shall be reduced by the amount of such deduc17 tion before computing the amount otherwise al18 lowable as a depreciation deduction under this 

19 chapter for such taxable year and any subse20 quent taxable year. 

21 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

22 of paragraph (1), the term ‘applicable percentage’ 

23 means—

24 ‘‘(A) 70 percent for taxable years begin25 ning in 2005, 2006, or 2007; 
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1 ‘‘(B) 50 percent for taxable years begin2 ning in 2008 or 2009; 

3 ‘‘(C) 30 percent for taxable years begin4 ning in 2010, 2011, 2012, 2013, or 2014; and 

5 ‘‘(D) zero thereafter.’’. 

6 (d) EXPENSING.—Section 179 is amended by adding 

7 at the end the following new subsection: 

8 ‘‘(e) PROPERTY PURCHASED FOR PRODUCTION OF

9 QUALIFIED TECHNOLOGY.—In the case of section 179 

10 property placed in service in the United States for the pri11 mary purpose of producing or manufacturing technology 

12 property described in section 41(i)(2), subsection (b)(1) 

13 shall be applied by substituting $500,000 for any dollar 

14 amount specified therein.’’. 

15 (e) EXCLUSION FOR INTEREST ON LOANS FOR PRO16 DUCTION OF QUALIFIED TECHNOLOGY.—

17 (1) IN GENERAL.—Part III of subchapter B of 

18 chapter 1 is amended by inserting after section 

19 139B the following new section: 

20 ‘‘SEC. 139C. INTEREST ON LOANS FOR PRODUCTION OF 

21 QUALIFIED TECHNOLOGY. 

22 ‘‘Gross income shall not include 50 percent of the in23 terest received on any obligation the proceeds of which are 

24 used exclusively in the production in the United States of 
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1 a qualified technology property described in section 

2 41(i)(2).’’. 

3 (2) CLERICAL AMENDMENT.—The table of sec4 tions for part III of subchapter B of chapter 1 is 

5 amended by inserting after the item relating to sec6 tion 139B the following new item:

‘‘Sec. 139C. Interest on loans for production of qualified technology.’’.

7 (f) INCREASED CARRYOVERS.—Subsection (a) of sec8 tion 39 is amended by adding at the end the following 

9 new paragraph: 

10 ‘‘(3) INCREASED CARRYOVERS FOR CREDITS

11 RELATING TO CERTAIN TECHNOLOGIES.—In the case 

12 of the credits allowable under section 38 by reason 

13 of section 41(i) or section 46(6)—

14 ‘‘(A) the carryback under paragraphs (1) 

15 and (2) shall be 5 years in lieu of 1 year; 

16 ‘‘(B) the carryforward paragraphs (1) and 

17 (2) shall be 25 years in lieu of 20 years; 

18 ‘‘(C) this paragraph shall be applied sepa19 rately with respect to any other carryover under 

20 this section; and 

21 ‘‘(D) the determination of the amounts 

22 carried over under this paragraph shall be made 

23 after this section is applied after the application 

24 of subparagraph (C).’’. 
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1 (g) ALTERNATIVE MINIMUM TAX.—Subsection (a) of 

2 section 56 is amended by adding at the end the following 

3 new paragraph: 

4 ‘‘(8) QUALIFIED TECHNOLOGIES.—Notwith5 standing any other provision of this part, no provi6 sion of this part shall apply with respect to sections 

7 41(i), 48D, 139C, 168(l), and 179(e).’’. 

8 (h) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to taxable years beginning after 

10 the date of the enactment of this Act. 

11 SEC. 332. SPECIAL RULES FOR AUTOMOTIVE INDUSTRY. 

12 (a) IN GENERAL.—Chapter 77 is amended by adding 

13 at the end the following new section: 

14 ‘‘SEC. 7529. SPECIAL RULES FOR AUTOMOTIVE INDUSTRY. 

15 ‘‘(a) IN GENERAL.—For purposes of sections 41(i), 

16 48D, and 39(a)(3) any vehicle for which a credit is allowed 

17 by section 30B shall be treated as a technology described 

18 in section 41(i)(2), except that—

19 ‘‘(1) section 41(i)(1) shall be applied by sub20 stituting ‘60 percent’ for ‘40 percent’, 

21 ‘‘(2) section 48D shall be applied by sub22 stituting ‘50 percent’ for ‘35 percent’, and 

23 ‘‘(3) section 39(a)(3) shall be applied by sub24 stituting ‘30 years’ for ‘25 years’ and ‘10 years’ for 

25 ‘5 years’. 
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1 ‘‘(b) SPECIAL RULE RELATING TO ACCELERATED

2 DEPRECIATION.—For purposes of section 168(l), the ap3 plicable percentage shall be the percentage specified in 

4 subparagraphs (A), (B), and (C) of paragraph (2) thereof, 

5 increased by 10 percentage points.’’. 

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

7 for chapter 77 is amended by adding at the end the fol8 lowing new item:

‘‘Sec. 7529. Special rules for automotive industry.’’.

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

10 this section shall apply to taxable years beginning after 

11 the date of the enactment of this Act. 

12 SEC. 333. SPECIAL RULES FOR HIGH-CAPACITY AIRPLANES. 

13 (a) IN GENERAL.—Chapter 77 is amended by adding 

14 at the end the following new section: 

15 ‘‘SEC. 7530. SPECIAL RULES FOR HIGH-CAPACITY AIR16 PLANES. 

17 ‘‘(a) IN GENERAL.—For purposes of sections 41(i), 

18 48D, and 39(a)(3) any high-capacity airplane shall be 

19 treated as a technology described in section 41(i)(2), ex20 cept that—

21 ‘‘(1) section 41(i)(1) shall be applied by sub22 stituting ‘60 percent’ for ‘40 percent’; 

23 ‘‘(2) section 48D shall be applied by sub24 stituting ‘50 percent’ for ‘35 percent’; 
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1 ‘‘(3) section 39(a)(3) shall be applied by sub2 stituting ‘30 years’ for ‘25 years’ and ‘8 years’ for 

3 ‘5 years’. 

4 ‘‘(b) SPECIAL RULE RELATING TO ACCELERATED

5 DEPRECIATION.—For purposes of section 168(l), the ap6 plicable percentage shall be the percentage specified in 

7 subparagraphs (A), (B), and (C) of paragraph (2) thereof, 

8 increased by 10 percentage points. 

9 ‘‘(c) HIGH-CAPACITY AIRPLANE.—For purposes of 

10 this section, the term ‘high-capacity airplane’ means a 

11 commercial airplane which—

12 ‘‘(1) has a passenger seating capacity of no less 

13 than 200 people; 

14 ‘‘(2) has a range of at least 7,200 nautical 

15 miles; and 

16 ‘‘(3) consumes at least 15 percent less fuel than 

17 comparable airplanes.’’. 

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

19 for chapter 77 is amended by adding at the end the fol20 lowing new item:

‘‘Sec. 7530. Special rules for high-capacity airplanes.’’.

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

22 this section shall apply to taxable years beginning after 

23 the date of the enactment of this Act. 
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1 SEC. 334. NEW ELECTRICITY TRANSMISSION LINES DE2 SIGNED PRIMARILY TO CARRY ELECTRICITY 

3 FROM RENEWABLE ENERGY RESOURCES. 

4 The Secretary of the Treasury, in consultation with 

5 the Secretary of Energy, the Secretary of Commerce, and 

6 the Administrator of the Environmental Protection Agen7 cy, shall establish an appropriate investment tax credit for 

8 the construction of new electricity transmission lines de9 signed primarily to carry electricity from renewable energy 

10 resources. Such credit shall be sufficient to encourage the 

11 development of promising rural renewable energy domestic 

12 resources that otherwise would likely not be developed. 

13 SEC. 335. NEW ENERGY TECHNOLOGIES COMMISSION. 

14 (a) ESTABLISHMENT.—There is established a com15 mission to be known as the ‘‘New Energy Technologies 

16 Commission’’ (hereafter in this section referred to as the 

17 ‘‘Commission’’). 

18 (b) DUTIES.—

19 (1) IDENTIFY NEW ENERGY TECHNOLOGIES EL20 IGIBLE FOR TAX INCENTIVES.—

21 (A) IN GENERAL.—The Commission shall 

22 oversee—

23 (i) the identification of—

24 (I) Apollo Approved energy effi25 ciency technologies; and 
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1 (II) Apollo Approved domestic 

2 clean energy production technologies; 

3 that the Commission finds substan4 tially contributes to the goals of this 

5 Act and merits consideration for fa6 vorable tax incentives by Congress; 

7 and 

8 (ii) the identification of criteria and 

9 standards for determining technologies eli10 gible under clause (i) as qualifying energy 

11 efficiency standards used to determine eli12 gibility for the investment, production, and 

13 consumption tax incentives outlined in this 

14 title. 

15 (B) MATTERS TO BE CONSIDERED BY THE

16 COMMISSION.—In developing energy efficiency 

17 standards, the Commission shall—

18 (i) consult with the Environmental 

19 Protection Agency program known as ‘‘En20 ergy Star’’; and 

21 (ii) focus on technologies manufac22 tured domestically. 

23 (2) REPORT.—Not later than one year after the 

24 date of enactment of this Act, and every six months 
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1 thereafter the Commission shall submit to Congress 

2 a report that contains—

3 (A) a detailed statement of any technology 

4 that qualifies for or merits the tax incentives in 

5 this title; 

6 (B) recommendations for tax incentives 

7 specifically tailored to be beneficial to such 

8 technologies and any standards that should be 

9 defined in statute to determine eligibility for 

10 such benefits; and 

11 (C) recommendations for other legislation, 

12 administrative actions, and voluntary actions 

13 necessary to implement such incentives. 

14 (3) APOLLO APPROVED ENERGY TECH15 NOLOGIES.—For purposes of this section, the term 

16 ‘‘Apollo Approved energy technologies’’ means any 

17 final unit product that the Commission finds sub18 stantially contributes to the goals of this Act and 

19 merits consideration for favorable tax incentives by 

20 Congress not already included in this Act. 

21 (4) APOLLO APPROVED DOMESTIC CLEAN EN22 ERGY PRODUCTION TECHNOLOGIES.—For purposes 

23 of this section, the term ‘‘Apollo Approved domestic 

24 clean energy production technologies’’ means any do25 mestic energy production technology that the Com-
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1 mission finds substantially contributes to the goals 

2 of this Act and merits consideration for favorable 

3 tax incentives by Congress not already included in 

4 this Act. 

5 (c) MEMBERSHIP.—

6 (1) IN GENERAL.—The Commission shall be 

7 comprised of 11 members. 

8 (2) APPOINTMENTS BY THIS ACT.—The fol9 lowing are hereby designated as members of the 

10 Commission: 

11 (A) The Secretary of the Department of 

12 Energy, the Director of the Office of Energy 

13 Efficiency and Renewable Energy of the De14 partment of Energy, or the Administrator of 

15 the Energy Information Administration of the 

16 Department of Energy. 

17 (B) The Secretary of the Department of 

18 Commerce or designee. 

19 (C) The Secretary of the Department of 

20 Treasury or designee. 

21 (D) The Director of the Environmental 

22 Protection Agency or designee. 

23 (3) APPOINTMENTS BY THE SENATE AND

24 HOUSE OF REPRESENTATIVES.—7 members ap25 pointed jointly by the majority leader and minority 
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1 leader of the Senate and the Speaker and minority 

2 leader of the House of Representatives, of whom—

3 (A) 1 shall represent consumer advocacy 

4 organizations focusing on energy issues; 

5 (B) 1 shall represent auto manufacturers; 

6 (C) 1 shall represent the lending commu7 nity; 

8 (D) 1 shall represent environmental advo9 cacy organizations focusing on energy issues; 

10 (E) 1 shall represent organized labor; 

11 (F) 1 shall represent small business manu12 facturers; and 

13 (G) 1 shall represent the energy industry. 

14 (4) DATE OF APPOINTMENTS.—The appoint15 ment of a member of the Commission shall be made 

16 not later than 30 days after the date of enactment 

17 of this Act. 

18 (5) TERM.—A member shall be appointed for 5 

19 year terms. 

20 (d) POWERS OF COMMISSION.—

21 (1) HEARINGS AND SESSIONS.—The Commis22 sion may, for the purpose of carrying out this sec23 tion, hold hearings, sit and act at times and places, 

24 take testimony, and receive evidence to carry out its 

25 duties under subsection (b). The Commission may 
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1 administer oaths or affirmations to witnesses ap2 pearing before it. 

3 (2) POWERS OF MEMBERS AND AGENTS.—Any 

4 member or agent of the Commission may, if author5 ized by the Commission, take any action which the 

6 Commission is authorized to take by this section. 

7 (3) OBTAINING OFFICIAL INFORMATION.—

8 (A) REQUIREMENT TO FURNISH.—Except 

9 as provided in subparagraph (B), if the Com10 mission submits a request to a Federal depart11 ment or agency for information necessary to en12 able the Commission to carry out this section, 

13 the head of that department or agency shall 

14 furnish that information to the Commission. 

15 (B) EXCEPTION FOR NATIONAL SECU16 RITY.—If the head of a Federal department or 

17 agency determines that it is necessary to with18 hold requested information from disclosure to 

19 protect the national security interests of the 

20 United States, the department or agency head 

21 shall not furnish that information to the Com22 mission. 

23 (4) MAILS.—The Commission may use the 

24 United States mails in the same manner and under 
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1 the same conditions as other departments and agen2 cies of the United States. 

3 (5) ADMINISTRATIVE SUPPORT SERVICES.—

4 Upon the request of the Director, the Administrator 

5 of General Services shall provide to the Commission, 

6 on a reimbursable basis, the administrative support 

7 services necessary for the Commission to carry out 

8 this section. 

9 (6) GIFTS AND DONATIONS.—The Commission 

10 may accept, use, and dispose of gifts or donations of 

11 services or property to carry out this Act, but only 

12 to the extent or in the amounts provided in advance 

13 in appropriation Acts. 

14 (7) CONTRACTS.—The Commission may con15 tract with and compensate persons and government 

16 agencies for supplies and services, without regard to 

17 section 3709 of the Revised Statutes (41 U.S.C. 5). 

18 (e) INITIAL MEETING.—The Commission shall hold 

19 the initial meeting of the Commission not later than the 

20 earlier of—

21 (1) the date that is 30 days after the date on 

22 which all members of the Commission have been ap23 pointed; or 
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1 (2) the date that is 90 days after the date of 

2 enactment of this Act, regardless of whether all 

3 members have been appointed. 

4 (f) CHAIRPERSON AND VICE CHAIRPERSON.—The 

5 Commission shall select a Chairperson and Vice Chair6 person from among the members of the Commission deter7 mined under subsection (c)(2). 

8 (g) EXECUTIVE COMMITTEE.—The Commission shall 

9 have an executive committee comprised of any five mem10 bers of the Commission. 

11 (h) CONFLICTS OF INTEREST.—Each member ap12 pointed to the Commission shall submit a financial disclo13 sure report pursuant to the Ethics in Government Act of 

14 1978, notwithstanding the minimum required rate of com15 pensation or time period employed. 

16 (i) STAFF APPOINTMENT AND COMPENSATION.—The 

17 Chairperson, in consultation with the Vice Chairperson, in 

18 accordance with rules agreed upon by the Commission, 

19 may appoint and fix the compensation of a staff director 

20 and such other personnel as may be necessary to enable 

21 the Commission to carry out its functions, without regard 

22 to the provisions of title 5, United States Code, governing 

23 appointments in the competitive service, and without re24 gard to the provisions of chapter 51 and subchapter III 

25 of chapter 53 of such title relating to classification and 
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1 General Schedule pay rates; except that no rate of pay 

2 fixed under this subsection may exceed the equivalent of 

3 that payable for a position at level V of the Executive 

4 Schedule under section 5316 of title 5, United States 

5 Code. 

6 (j) PERSONNEL AS FEDERAL EMPLOYEES.—

7 (1) IN GENERAL.—The staff director and any 

8 personnel of the Commission who are employees 

9 shall be employees under section 2105 of title 5, 

10 United States Code, for purposes of chapters 63, 81, 

11 83, 84, 85, 87, 89, and 90 of that title. 

12 (2) MEMBERS OF COMMISSION.—Subparagraph 

13 (A) shall not be construed to apply to members of 

14 the Commission. 

15 (k) DETAILEES.—Any Federal Government employee 

16 may be detailed to the Commission without reimbursement 

17 from the Commission, and such detailee shall retain the 

18 rights, status, and privileges of his or her regular employ19 ment without interruption. 

20 (l) CONSULTANT SERVICES.—The Commission is au21 thorized to procure the services of experts and consultants 

22 in accordance with section 3109 of title 5, United States 

23 Code, but at rates not to exceed the daily rate paid a per24 son occupying a position at level IV of the Executive 
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1 Schedule under section 5315 of title 5, United States 

2 Code. 

3 (m) MEMBER COMPENSATION.—Each member of the 

4 Commission specified in subsection (c)(3) may be com5 pensated at a rate not to exceed the daily equivalent of 

6 the annual rate of basic pay in effect for a position at 

7 level IV of the Executive Schedule under section 5315 of 

8 title 5, United States Code, for each day during which that 

9 member is engaged in the actual performance of the duties 

10 of the Commission. 

11 (n) INFORMATION AND ADMINISTRATIVE EX12 PENSES.—The Federal agencies and members specified in 

13 subsection (c)(3) shall provide the Commission such infor14 mation and pay such administrative and members ex15 penses as the Commission requires to carry out this sec16 tion, consistent with the requirements and guidelines of 

17 the Federal Advisory Commission Act (5 U.S.C. App.). 

18 (o) TRAVEL EXPENSES.—While away from their 

19 homes or regular places of business in the performance 

20 of services for the Commission, members of the Commis21 sion shall be allowed travel expenses, including per diem 

22 in lieu of subsistence, in the same manner as persons em23 ployed intermittently in the Government service are al24 lowed expenses under section 5703 of title 5, United 

25 States Code. 
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1 (p) AUTHORIZATION OF APPROPRIATIONS.—

2 (1) IN GENERAL.—There is authorized to be 

3 appropriated to the Commission such sums as may 

4 be necessary to carry out this section. 

5 (2) AVAILABILITY.—Amounts appropriated 

6 under paragraph (1) are authorized to remain avail7 able until expended. 

8 SEC. 336. EXPENDITURE LIMITATION. 

9 Not later than 6 months after the date of the enact10 ment of this Act, the Secretary of the Treasury shall sub11 mit a report to the Congress on the tax expenditures in12 curred by reason of this subtitle, determined on both an 

13 annual basis and for the 10-year period beginning on Jan14 uary 1, 2006, together with such recommendations as the 

15 Secretary determines necessary or appropriate to achieve 

16 a national 10-year tax expenditure under this subtitle of—

17 (1) $10,000,000,000 with respect to auto18 mobiles, of which $7,000,000,000 shall be expended 

19 in the first 5 years of such 10-year period; 

20 (2) $1,500,000,000 with respect to airplanes, of 

21 which $1,000,000,000 shall be expended in the first 

22 5 years of such 10-year period, and 

23 (3) $10,500,000,000 with respect to all other 

24 tax expenditures under this subtitle, of which—
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1 (A) $6,500,000,000 shall be expended in 

2 the first 3 years of such 10-year period; 

3 (B) $2,000,000,000 shall be expended in 

4 the fourth and fifth years of such 10-year pe5 riod; and 

6 (C) $2,000,000,000 shall be expended over 

7 the last 5 years of such 10-year period. 

8 TITLE IV—FEDERAL GOVERN9 MENT LEVERAGE TO MOVE 

10 NEW TECHNOLOGIES TO MAR11 KET 

12 SEC. 401. IMPROVED COORDINATION OF TECHNOLOGY 

13 TRANSFER ACTIVITIES. 

14 (a) TECHNOLOGY TRANSFER COORDINATOR.—The 

15 Secretary shall designate a Technology Transfer Coordi16 nator to perform oversight of and policy development for 

17 technology transfer activities at the Department. The 

18 Technology Transfer Coordinator shall coordinate the ac19 tivities of the Technology Transfer Working Group, and 

20 shall oversee the expenditure of funds allocated to the 

21 Technology Transfer Working Group, and shall coordinate 

22 with each technology partnership ombudsman appointed 

23 under section 11 of the Technology Transfer Commer24 cialization Act of 2000 (42 U.S.C. 7261c). 
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1 (b) TECHNOLOGY TRANSFER WORKING GROUP.—

2 The Secretary shall establish a Technology Transfer 

3 Working Group, which shall consist of representatives of 

4 the National Laboratories and single-purpose research fa5 cilities, to—

6 (1) coordinate technology transfer activities oc7 curring at National Laboratories and single-purpose 

8 research facilities; 

9 (2) exchange information about technology 

10 transfer practices, including alternative approaches 

11 to resolution of disputes involving intellectual prop12 erty rights and other technology transfer matters; 

13 and 

14 (3) develop and disseminate to the public and 

15 prospective technology partners information about 

16 opportunities and procedures for technology transfer 

17 with the Department, including those related to al18 ternative approaches to resolution of disputes involv19 ing intellectual property rights and other technology 

20 transfer matters. 

21 (c) TECHNOLOGY TRANSFER RESPONSIBILITY.—

22 Nothing in this section shall affect the technology transfer 

23 responsibilities of Federal employees under the Stevenson24 Wydler Technology Innovation Act of 1980. 
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1 (d) DEFINITION.—For purposes of this section, the 

2 term ‘‘National Laboratory’’ means any of the following 

3 laboratories owned by the Department: 

4

5 (A) Ames National Laboratory. 

6 (B) Argonne National Laboratory. 

7 (C) Brookhaven National Laboratory. 

8 (D) Fermi National Laboratory. 

9 (E) Idaho National Engineering and Envi10 ronmental Laboratory. 

11 (F) Lawrence Berkeley National Labora12 tory. 

13 (G) Lawrence Livermore National Labora14 tory. 

15 (H) Los Alamos National Laboratory. 

16 (I) National Energy Technology Labora17 tory. 

18 (J) National Renewable Energy Labora19 tory. 

20 (K) Oak Ridge National Laboratory. 

21 (L) Pacific Northwest National Labora22 tory. 

23 (M) Princeton Plasma Physics Laboratory. 

24 (N) Sandia National Laboratories. 
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1 (O) Thomas Jefferson National Accel2 erator Facility. 

3 SEC. 402. FEDERAL SUPPORT FOR COMMERCIALIZATION 

4 OF NEW TECHNOLOGIES. 

5 (a) PROGRAM.—The Secretary of Energy shall estab6 lish a program of support, through grants, low-interest 

7 loans, and loan guarantees, for the commercialization, in8 cluding support for pilot projects, of new—

9 (1) renewable energy technologies; 

10 (2) technologies for energy generation from fos11 sil fuels that incorporate carbon sequestration; and 

12 (3) energy efficiency technologies. 

13 (b) AUTHORIZATION OF APPROPRIATIONS.—There 

14 are authorized to be appropriated to the Secretary of En15 ergy for carrying out this section $5,000,000,000. 

16 SEC. 403. CLEAN ENERGY TECHNOLOGY EXPORTS PRO17 GRAM. 

18 (a) DEFINITIONS.—In this section: 

19 (1) INTERAGENCY WORKING GROUP.—The term 

20 ‘‘interagency working group’’ means the Interagency 

21 Working Group on Clean Energy Technology Ex22 ports established under subsection (b). 

23 (2) UNITED STATES CLEAN ENERGY TECH24 NOLOGY.—The term ‘‘United States clean energy 

25 technology’’ means an energy supply or end-use 
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1 technology, including a technology using renewable 

2 energy sources, that—

3 (A) over its lifecycle and compared to a 

4 similar technology already in commercial use in 

5 developing countries, countries in transition, 

6 and other partner countries—

7 (i) emits substantially lower levels of 

8 pollutants and/or greenhouse gases; and 

9 (ii) may generate substantially smaller 

10 and/or less toxic volumes of solid or liquid 

11 waste; and 

12 (B) consists of manufactured articles, ma13 terials, and supplies produced in the United 

14 States substantially all from articles, materials, 

15 or supplies mined, produced, or manufactured 

16 in the United States, within the meaning of the 

17 Buy American Act (41 U.S.C. 10a). 

18 (b) INTERAGENCY WORKING GROUP.—

19 (1) ESTABLISHMENT.—Not later than 90 days 

20 after the date of enactment of this section, the Sec21 retary of Energy, the Secretary of Commerce, and 

22 the Administrator of the United States Agency for 

23 International Development shall jointly establish a 

24 Interagency Working Group on Clean Energy Tech25 nology Exports. The interagency working group will 
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1 focus on opening and expanding energy markets and 

2 transferring clean energy technology generated in 

3 the United States to developing countries, countries 

4 in transition, and other partner countries that are 

5 expected to experience, over the next 20 years, the 

6 most significant growth in energy production and as7 sociated greenhouse gas emissions, including through 

8 technology transfer programs under the Framework 

9 Convention on Climate Change, other international 

10 agreements, and relevant Federal efforts. 

11 (2) MEMBERSHIP.—The interagency working 

12 group shall be jointly chaired by representatives ap13 pointed by the agency heads under paragraph (1) 

14 and shall also include representatives from the De15 partment of State, the Department of the Treasury, 

16 the Environmental Protection Agency, the Export17 Import Bank, the Overseas Private Investment Cor18 poration, the Trade and Development Agency, and 

19 other Federal agencies as deemed appropriate by all 

20 three agency heads under paragraph (1). 

21 (3) DUTIES.—The interagency working group 

22 shall—

23 (A) analyze technology, policy, and market 

24 opportunities for international development, 
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1 demonstration, and deployment of clean energy 

2 technology developed in the United States; 

3 (B) investigate issues associated with 

4 building capacity to deploy clean energy tech5 nology generated in the United States in devel6 oping countries, countries in transition, and 

7 other partner countries, including—

8 (i) energy-sector reform; 

9 (ii) creation of open, transparent, and 

10 competitive markets for clean energy tech11 nologies; 

12 (iii) availability of trained personnel 

13 to deploy and maintain the technology; and 

14 (iv) demonstration and cost-buydown 

15 mechanisms to promote first adoption of 

16 the technology; 

17 (C) examine relevant trade, tax, inter18 national, and other policy issues to assess what 

19 policies would help open markets and improve 

20 United States clean energy technology exports 

21 in support of the following areas—

22 (i) enhancing energy innovation and 

23 cooperation, including energy sector and 

24 market reform, capacity building, and fi25 nancing measures; 
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1 (ii) improving energy end-use effi2 ciency technologies, including buildings and 

3 facilities, vehicle, industrial, and co-genera4 tion technology initiatives; and 

5 (iii) promoting energy supply tech6 nologies, including fossil, nuclear, and re7 newable technology initiatives; 

8 (D) establish an advisory committee involv9 ing the private sector and other interested 

10 groups on the export and deployment of United 

11 States clean energy technology; 

12 (E) monitor each agency’s progress to13 wards meeting goals in the 5-year strategic plan 

14 submitted to Congress pursuant to the Energy 

15 and Water Development Appropriations Act, 

16 2001, and the Energy and Water Development 

17 Appropriations Act, 2002; 

18 (F) make recommendations to heads of ap19 propriate Federal agencies on ways to stream20 line Federal programs and policies to improve 

21 each agency’s role in the international develop22 ment, demonstration, and deployment of United 

23 States clean energy technology; 

24 (G) make assessments and recommenda25 tions regarding the distinct technological, mar-
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1 ket, regional, and stakeholder challenges nec2 essary to carry out the program; and 

3 (H) recommend conditions and criteria 

4 that will help ensure that United States funds 

5 promote sound energy policies in participating 

6 countries while simultaneously opening their 

7 markets and exporting United States energy 

8 technology. 

9 (c) FEDERAL SUPPORT FOR CLEAN ENERGY TECH10 NOLOGY TRANSFER.—Notwithstanding any other provi11 sion of law, each Federal agency or Government corpora12 tion carrying out an assistance program in support of the 

13 activities of United States persons in the environment or 

14 energy sector of a developing country, country in transi15 tion, or other partner country shall support, to the max16 imum extent practicable, the transfer of United States 

17 clean energy technology as part of that program. 

18 (d) ANNUAL REPORT.—Not later than 90 days after 

19 the date of the enactment of this Act, and on March 31 

20 of each year thereafter, the Interagency Working Group 

21 shall submit a report to Congress on its activities during 

22 the preceding calendar year. The report shall include a 

23 description of the technology, policy, and market opportu24 nities for international development, demonstration, and 

25 deployment of United States clean energy technology in-
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1 vestigated by the Interagency Working Group in that year, 

2 as well as any policy recommendations to improve the ex3 pansion of clean energy markets and United States clean 

4 energy technology exports. 

5 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

6 are authorized to be appropriated to the appropriate de7 partments, agencies, and entities of the United States 

8 such sums as may be necessary for each of the fiscal years 

9 2006 through 2016 to support the transfer of United 

10 States clean energy technology, consistent with the sub11 sidy codes of the World Trade Organization, as part of 

12 assistance programs carried out by those departments, 

13 agencies, and entities in support of activities of United 

14 States persons in the energy sector of a developing coun15 try, country in transition, or other partner country. 

16 SEC. 404. INTERNATIONAL ENERGY TECHNOLOGY DEPLOY17 MENT PROGRAM. 

18 Section 1608 of the Energy Policy Act of 1992 (42 

19 U.S.C. 13387) is amended by striking subsection (l) and 

20 inserting the following: 

21 ‘‘(l) INTERNATIONAL ENERGY TECHNOLOGY DE22 PLOYMENT PROGRAM.—

23 ‘‘(1) DEFINITIONS.—In this subsection: 

24 ‘‘(A) INTERNATIONAL ENERGY DEPLOY25 MENT PROJECT.—The term ‘international en-
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1 ergy deployment project’ means a project to 

2 construct an energy production facility outside 

3 the United States—

4 ‘‘(i) the output of which will be con5 sumed outside the United States; and 

6 ‘‘(ii) the deployment of which will re7 sult in a greenhouse gas reduction per unit 

8 of energy produced when compared to the 

9 technology that would otherwise be imple10 mented—

11 ‘‘(I) 20 percentage points or 

12 more, in the case of a unit placed in 

13 service before January 1, 2010; 

14 ‘‘(II) 40 percentage points or 

15 more, in the case of a unit placed in 

16 service after December 31, 2009, and 

17 before January 1, 2020; or 

18 ‘‘(III) 60 percentage points or 

19 more, in the case of a unit placed in 

20 service after December 31, 2019, and 

21 before January 1, 2030. 

22 ‘‘(B) QUALIFYING INTERNATIONAL EN23 ERGY DEPLOYMENT PROJECT.—The term 

24 ‘qualifying international energy deployment 
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1 project’ means an international energy deploy2 ment project that—

3 ‘‘(i) is submitted by a United States 

4 firm to the Secretary in accordance with 

5 procedures established by the Secretary by 

6 regulation; 

7 ‘‘(ii) uses technology that has been 

8 successfully developed or deployed in the 

9 United States; 

10 ‘‘(iii) uses technology that consists of 

11 manufactured articles, materials, and sup12 plies produced in the United States sub13 stantially from articles, materials, or sup14 plies mined, produced, or manufactured in 

15 the United States, within the meaning of 

16 the Buy American Act (41 U.S.C. 10a); 

17 ‘‘(iv) meets the criteria of subsection 

18 (k); 

19 ‘‘(v) is approved by the Secretary, 

20 with notice of the approval being published 

21 in the Federal Register; and 

22 ‘‘(vi) complies with such terms and 

23 conditions as the Secretary establishes by 

24 regulation. 
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1 ‘‘(C) UNITED STATES.—For purposes of 

2 this paragraph, the term ‘United States’, when 

3 used in a geographical sense, means the 50 

4 States, the District of Columbia, Puerto Rico, 

5 Guam, the Virgin Islands, American Samoa, 

6 and the Commonwealth of the Northern Mar7 iana Islands. 

8 ‘‘(2) PILOT PROGRAM FOR FINANCIAL ASSIST9 ANCE.—

10 ‘‘(A) IN GENERAL.—Not later than 180 

11 days after the date of enactment of this sub12 section, the Secretary shall, by regulation, pro13 vide for a pilot program for financial assistance 

14 for qualifying international energy deployment 

15 projects. 

16 ‘‘(B) SELECTION CRITERIA.—After con17 sultation with the Secretary of State, the Sec18 retary of Commerce, and the United States 

19 Trade Representative, the Secretary shall select 

20 projects for participation in the program based 

21 solely on the criteria under this title and with22 out regard to the country in which the project 

23 is located. 

24 ‘‘(C) FINANCIAL ASSISTANCE.—
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1 ‘‘(i) IN GENERAL.—A United States 

2 firm that undertakes a qualifying inter3 national energy deployment project that is 

4 selected to participate in the pilot program 

5 shall be eligible to receive a loan or a loan 

6 guarantee from the Secretary. 

7 ‘‘(ii) RATE OF INTEREST.—The rate 

8 of interest of any loan made under clause 

9 (i) shall be equal to the rate for Treasury 

10 obligations then issued for periods of com11 parable maturities. 

12 ‘‘(iii) AMOUNT.—The amount of a 

13 loan or loan guarantee under clause (i) 

14 shall not exceed 50 percent of the total 

15 cost of the qualified international energy 

16 deployment project. 

17 ‘‘(iv) DEVELOPED COUNTRIES.—

18 Loans or loan guarantees made for 

19 projects to be located in a developed coun20 try, as listed in Annex I of the United Na21 tions Framework Convention on Climate 

22 Change, shall require at least a 50 percent 

23 contribution towards the total cost of the 

24 loan or loan guarantee by the host country. 
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1 ‘‘(v) DEVELOPING COUNTRIES.—

2 Loans or loan guarantees made for 

3 projects to be located in a developing coun4 try (those countries not listed in Annex I 

5 of the United Nations Framework Conven6 tion on Climate Change) shall require at 

7 least a 10 percent contribution towards the 

8 total cost of the loan or loan guarantee by 

9 the host country. 

10 ‘‘(vi) CAPACITY BUILDING RE11 SEARCH.—Proposals made for projects to 

12 be located in a developing country may in13 clude a research component intended to 

14 build technological capacity within the host 

15 country. Such research must be related to 

16 the technologies being deployed and must 

17 involve both an institution in the host 

18 country and an industry, university or na19 tional laboratory participant from the 

20 United States. The host institution shall 

21 contribute at least 50 percent of funds pro22 vided for the capacity building research. 

23 ‘‘(D) COORDINATION WITH OTHER PRO24 GRAMS.—A qualifying international energy de25 ployment project funded under this section shall 
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1 not be eligible as a qualifying clean coal tech2 nology under section 415 of the Clean Air Act 

3 (42 U.S.C. 7651n). 

4 ‘‘(E) REPORT.—Not later than 5 years 

5 after the date of enactment of this subsection, 

6 the Secretary shall submit to the President a 

7 report on the results of the pilot projects. 

8 ‘‘(F) RECOMMENDATION.—Not later than 

9 60 days after receiving the report under sub10 paragraph (E), the President shall submit to 

11 Congress a recommendation, based on the re12 sults of the pilot projects as reported by the 

13 Secretary of Energy, concerning whether the fi14 nancial assistance program under this section 

15 should be continued, expanded, reduced, or 

16 eliminated. 

17 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS.—

18 There are authorized to be appropriated to the Sec19 retary to carry out this section $500,000,000 for 

20 each of fiscal years 2006 through 2016, to remain 

21 available until expended.’’. 

22 SEC. 405. RISK POOL FOR QUALIFYING ADVANCED CLEAN 

23 ENERGY TECHNOLOGY. 

24 (a) ESTABLISHMENT.—The Secretary of the Treas25 ury shall establish a financial risk pool which shall be 
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1 available to any United States owner or developer of a 

2 technology that the Secretary determines will help achieve 

3 the goals stated in section 102 of this Act (whether or 

4 not such owner or developer receives any loan guaranteed 

5 under section 731), to offset for the first 3 years of the 

6 operation of such technology the costs (not to exceed 5 

7 percent of the total cost of installation) for modifications 

8 resulting from the technology’s failure to achieve its de9 sign performance. 

10 (b) AUTHORIZATION OF APPROPRIATIONS.—There 

11 are authorized to be appropriated $4,500,000,000 to carry 

12 out the purposes of this section. 

13 SEC. 406. FEDERAL RENEWABLE AND CLEAN ENERGY USE. 

14 (a) IN GENERAL.—The President shall take meas15 ures necessary to ensure that, within 10 years after the 

16 date of the enactment of this Act, at least 20 percent of 

17 the electricity consumed by nondefense related activities 

18 of the Federal Government shall be generated from renew19 able sources or zero-emission fossil fuel energy sources. 

20 (b) SOLAR PANELS AND PHOTOVOLTAICS.—The re21 quirement in subsection (a) may be achieved through the 

22 purchase and installation of solar panels or photovoltaics 

23 on executive agency properties. 
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1 SEC. 407. REQUIRE THE EXPORT-IMPORT BANK OF THE 

2 UNITED STATES TO MEET RENEWABLE EN3 ERGY TARGETS IN ITS LENDING PRACTICES. 

4 (a) ALLOCATION OF ASSISTANCE AMONG ENERGY

5 PROJECTS.—Of the total amount available to the Export6 Import Bank of the United States for the extension of 

7 credit for transactions related to energy projects, the 

8 Bank shall, not later than the beginning of fiscal year 

9 2008, use—

10 (1) not more than 85 percent for transactions 

11 related to fossil fuel projects; and 

12 (2) not less than 15 percent for transactions re13 lated to renewable energy and energy efficiency 

14 projects. 

15 (b) RENEWABLE ENERGY AND TECHNOLOGY COM16 MISSION.—

17 (1) ESTABLISHMENT.—Within 1 year after the 

18 date of the enactment of this Act, the Export-Import 

19 Bank of the United States (in this subsection re20 ferred to as the ‘‘Bank’’) shall establish a commis21 sion which shall be known as the ‘‘Renewable En22 ergy and Technology Commission’’ (in this sub23 section referred to as the ‘‘Commission’’). 

24 (2) FUNCTION.—The Commission shall help the 

25 Bank achieve the percentage goal set forth in sub26 section (a)(2) by the beginning of fiscal year 2008, 
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1 by proactively assisting the Bank in identifying new 

2 opportunities for renewable energy and energy effi3 ciency financing. 

4 (3) COMPOSITION.—The Commission shall be 

5 composed of—

6 (A) 6 representatives selected by compa7 nies involved in renewable energy and energy ef8 ficiency technology; 

9 (B) 2 representatives selected by environ10 mental organizations; 

11 (C) 2 members of the academic community 

12 who are knowledgeable about renewable energy; 

13 and 

14 (D) representatives of the Bank. 

15 (4) REPORTS.—The Commission shall submit 

16 annually to the Committee on Resources and the 

17 Committee on Financial Services of the House of 

18 Representatives and the Committee on Banking, 

19 Housing, and Urban Affairs of the Senate a report 

20 that contains the following information for the fiscal 

21 year covered by the report: 

22 (A) A detailed description of the activities 

23 of the Commission. 

24 (B) Any recommendations made by the 

25 Commission that were adopted by the Bank. 
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1 (C) An analysis comparing the level of 

2 credit extended by the Bank for renewable en3 ergy and energy efficiency projects with the 

4 level of credit so extended for the preceding fis5 cal year. 

6 (c) DEFINITION OF RENEWABLE ENERGY AND EN7 ERGY EFFICIENCY PROJECTS.—In this section, the term 

8 ‘‘renewable energy and energy efficiency projects’’ means 

9 projects related to solar, wind, biomass, or geothermal en10 ergy sources. 

11 SEC. 408. GRANTS FOR TRANSIT PROGRAMS. 

12 (a) IN GENERAL.—The Secretary of Transportation 

13 shall award grants to a State or local governmental au14 thority to improve mass transportation programs, includ15 ing capital projects. 

16 (b) AUTHORIZATION OF APPROPRIATIONS.—There 

17 are authorized to be appropriated to carry out this section 

18 $1,500,000,000 for each of 10 fiscal years beginning with 

19 the first fiscal year after the date of enactment of this 

20 Act. 

21 (c) LABOR STANDARDS.—The Secretary of Transpor22 tation shall not provide a grant under this section unless 

23 the Secretary receives reasonable assurances from a State 

24 that laborers and mechanics employed by contractors or 

25 subcontractors in the performance of construction or mod-
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1 ernization on the a transit project will be paid wages not 

2 less than those prevailing on similar construction or mod3 ernization in the locality as determined by the Secretary 

4 of Labor under the Act of March 3, 1931 (known as the 

5 Davis-Bacon Act) (40 U.S.C. 276a et seq.). 

6 (d) DEFINITIONS.—

7 (1) GENERAL DEFINITIONS.—For purposes of 

8 this section, the terms ‘‘capital project’’, ‘‘local gov9 ernmental authority’’, and ‘‘mass transportation’’ 

10 have the same meanings such terms have in section 

11 5302 of title 49, United States Code. 

12 (2) STATE DEFINED.—For purposes of this sec13 tion, the term ‘‘State’’ means a State of the United 

14 States, the District of Columbia, Puerto Rico, the 

15 Northern Mariana Islands, Guam, American Samoa, 

16 and the United States Virgin Islands. 

17 SEC. 409. GRANTS FOR WATER AND SEWER IMPROVEMENT 

18 PROGRAMS. 

19 (a) IN GENERAL.—The Secretary of Transportation 

20 shall award grants to a State or local governmental au21 thority to improve water and sewer systems by increasing 

22 energy efficiency in such systems by not less than 25 per23 cent. 

24 (b) AUTHORIZATION OF APPROPRIATIONS.—There 

25 are authorized to be appropriated to carry out this section 
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1 $1,000,000,000 for each of 10 fiscal years beginning with 

2 the first fiscal year after the date of enactment of this 

3 Act. 

4 (c) LABOR STANDARDS.—The Secretary of Transpor5 tation shall not provide a grant under this section unless 

6 the Secretary receives reasonable assurances from a State 

7 that laborers and mechanics employed by contractors or 

8 subcontractors in the performance of construction or mod9 ernization on a water or sewer system improvement 

10 project will be paid wages not less than those prevailing 

11 on similar construction or modernization in the locality as 

12 determined by the Secretary of Labor under the Act of 

13 March 3, 1931 (known as the Davis-Bacon Act) (40 

14 U.S.C. 276a et seq.). 

15 (d) DEFINITIONS.—

16 (1) GENERAL DEFINITIONS.—For purposes of 

17 this section, the terms ‘‘capital project’’, ‘‘local gov18 ernmental authority’’, and ‘‘mass transportation’’ 

19 have the same meanings such terms have in section 

20 5302 of title 49, United States Code. 

21 (2) STATE DEFINED.—For purposes of this sec22 tion, the term ‘‘State’’ means a State of the United 

23 States, the District of Columbia, Puerto Rico, the 

24 Northern Mariana Islands, Guam, American Samoa, 

25 and the United States Virgin Islands. 
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1 SEC. 410. LOANS FOR HIGH-EFFICIENCY VEHICLES. 

2 (a) LOAN PROGRAM AUTHORIZED.—Subject to the 

3 availability of appropriations, the Secretary of Transpor4 tation shall establish a program to offer federally financed, 

5 interest-free loans to local educational agencies, public in6 stitutions of higher education, municipalities, and local 

7 governments for the purchase of hybrid electric vehicles 

8 or high-efficiency vehicles. 

9 (b) REPAYMENT TERM.—The time for repayment of 

10 a loan under this section may not exceed 5 years. 

11 (c) SECURITY INTEREST.—The Secretary shall re12 quire, as a condition of a loan under this section, that 

13 the borrower grant to the United States a security interest 

14 in any vehicle purchased with the proceeds of such loan. 

15 (d) DEFINITIONS.—In this section: 

16 (1) The term ‘‘high-efficiency vehicle’’ means a 

17 motor vehicle the fuel economy of which is rated at 

18 not less than 40 miles per gallon. 

19 (2) The term ‘‘hybrid electric vehicle’’ means a 

20 motor vehicle with a fuel-efficient gasoline engine as21 sisted by an electric motor. 

22 (3) The term ‘‘motor vehicle’’ has the meaning 

23 given that term in section 30102(a)(6) of title 49, 

24 United States Code. 

25 (4) The term ‘‘local educational agency’’ has 

26 the meaning given that term in the Elementary and 
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1 Secondary Education Act of 1965 (20 U.S.C. 6301 

2 et seq.). 

3 (5) The term ‘‘public institution of higher edu4 cation’’ has the meaning given the term ‘‘institution 

5 of higher education’’ in section 101(a) of the Higher 

6 Education Act of 1965 (20 U.S.C. 1001(a)), but 

7 does not include private institutions described in 

8 that section. 

9 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

10 are authorized to be appropriated to carry out this section 

11 $50,000,000 for each of fiscal years 2006 through 2011 

12 and such sums as may be necessary for each fiscal year 

13 thereafter. 

14 SEC. 411. REQUIREMENT REGARDING PURCHASE OF 

15 MOTOR VEHICLES BY EXECUTIVE AGENCIES. 

16 (a) IN GENERAL.—At least ten percent of the motor 

17 vehicles purchased by an Executive agency in any fiscal 

18 year shall be comprised of high-efficiency vehicles or hy19 brid electric vehicles. 

20 (b) DEFINITIONS.—In this Act: 

21 (1) The term ‘‘Executive agency’’ has the 

22 meaning given that term in section 105 of title 5, 

23 United States Code, but also includes Amtrak, the 

24 Smithsonian Institution, and the United States 

25 Postal Service. 
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1 (2) The term ‘‘high-efficiency vehicle’’ means a 

2 motor vehicle the fuel economy of which is rated at 

3 not less than 40 miles per gallon. 

4 (3) The term ‘‘hybrid electric vehicle’’ means a 

5 motor vehicle with a fuel-efficient gasoline engine as6 sisted by an electric motor. 

7 (4) The term ‘‘motor vehicle’’ has the meaning 

8 given that term in section 102(7) of title 40, United 

9 States Code. 

10 (c) PRO-RATED APPLICABILITY IN YEAR OF ENACT11 MENT.—In the fiscal year in which this Act is enacted, 

12 the requirement in subsection (a) shall only apply with re13 spect to motor vehicles purchased after the date of the 

14 enactment of this Act in such fiscal year. 

15 SEC. 412. FEDERAL ENERGY EFFICIENCY. 

16 The President shall take measures necessary to en17 sure that electricity consumption for nondefense related 

18 activities of the Federal Government shall be decreased 

19 by 35 percent by 2015. 

20 SEC. 413. FEDERAL AGENCY ETHANOL-BLENDED GASOLINE 

21 AND BIODIESEL PURCHASING REQUIRE22 MENT. 

23 Title III of the Energy Policy Act of 1992 is amended 

24 by striking section 306 (42 U.S.C. 13215) and inserting 

25 the following: 
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1 ‘‘SEC. 306. FEDERAL AGENCY ETHANOL-BLENDED GASO2 LINE AND BIODIESEL PURCHASING REQUIRE3 MENT. 

4 ‘‘(a) ETHANOL-BLENDED GASOLINE.—The head of 

5 each Federal agency shall ensure that, in areas in which 

6 ethanol-blended gasoline is reasonably available at a gen7 erally competitive price, the Federal agency purchases eth8 anol-blended gasoline containing at least 85 percent eth9 anol rather than nonethanol-blended gasoline, for use in 

10 vehicles used by the agency that use gasoline. If 85 per11 cent ethanol-blended gasoline is not reasonably available, 

12 then each agency shall purchase ethanol-blended gasoline 

13 containing at least 10 percent ethanol in areas in which 

14 ethanol-blended gasoline is reasonably available at a gen15 erally competitive price. 

16 ‘‘(b) BIODIESEL.—

17 ‘‘(1) DEFINITION OF BIODIESEL.—In this sub18 section, the term ‘biodiesel’ has the meaning given 

19 the term in section 312(f). 

20 ‘‘(2) REQUIREMENT.—The head of each Fed21 eral agency shall ensure that the Federal agency 

22 purchases, for use in fueling fleet vehicles that use 

23 diesel fuel used by the Federal agency at the loca24 tion at which fleet vehicles of the Federal agency are 

25 centrally fueled, in areas in which the biodiesel26 blended diesel fuel described in subparagraphs (A) 
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1 and (B) is available at a generally competitive 

2 price—

3 ‘‘(A) as of the date that is 5 years after 

4 the date of enactment of this paragraph, bio5 diesel-blended diesel fuel that contains at least 

6 2 percent biodiesel, rather than nonbiodiesel7 blended diesel fuel; and 

8 ‘‘(B) as of the date that is 10 years after 

9 the date of enactment of this paragraph, bio10 diesel-blended diesel fuel that contains at least 

11 20 percent biodiesel, rather than nonbiodiesel12 blended diesel fuel. 

13 ‘‘(3) REQUIREMENT OF FEDERAL LAW.—The 

14 provisions of this subsection shall not be considered 

15 a requirement of Federal law for the purposes of 

16 section 312. 

17 ‘‘(c) EXEMPTION.—This section does not apply to 

18 fuel used in vehicles excluded from the definition of ‘fleet’ 

19 by subparagraphs (A) through (H) of section 301(9).’’. 

20 SEC. 414. PERMITTING OF WIND ENERGY DEVELOPMENT 

21 PROJECTS ON PUBLIC LANDS. 

22 (a) REQUIRED POLICIES AND PROCEDURES.—The 

23 Secretary of the Interior shall process right-of-way appli24 cations for wind energy site testing and monitoring facili25 ties on public lands administered by the Bureau of Land 
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1 Management in accordance with policies and procedures 

2 that are substantially the same as those set forth in Bu3 reau of Land Management Instruction Memorandum No. 

4 9 2003–020, dated October 16, 2002. 

5 (b) LIMITATION ON RENT AND OTHER CHARGES.—

6 (1) IN GENERAL.—The Secretary of the Inte7 rior may not impose rent and other charges with re8 spect to any wind energy development project on 

9 public lands that, in the aggregate, exceed 50 per10 cent of the maximum amount of rent that could be 

11 charged with respect to that project under the terms 

12 of the Bureau of Land Management Instruction 

13 Memorandum referred to in subsection (a). 

14 (2) TERMINATION.—Paragraph (1) shall not 

15 apply after the earlier of—

16 (A) the date on which the Secretary of the 

17 Interior determines there exists at least 10,000 

18 megawatts of electricity generating capacity 

19 from nonhydropower renewable energy re20 sources on public lands; or 

21 (B) the end of the 10-year period begin22 ning on the date of the enactment of this Act. 

23 (3) STATE SHARE NOT AFFECTED.—This sub24 section shall not affect any State share of rent and 
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1 other charges with respect to any wind energy devel2 opment project on public lands. 

3 SEC. 415. ENERGY SAVINGS PERFORMANCE CONTRACTS. 

4 (a) PERMANENT EXTENSION.—Section 801(c) of the 

5 National Energy Conservation Policy Act (42 U.S.C. 

6 8287(c)) is repealed. 

7 (b) PAYMENT OF COSTS.—Section 802 of the Na8 tional Energy Conservation Policy Act (42 U.S.C. 8287a) 

9 is amended by inserting ‘‘, water, or wastewater treat10 ment’’ after ‘‘payment of energy’’. 

11 (c) ENERGY SAVINGS.—Section 804(2) of the Na12 tional Energy Conservation Policy Act (42 U.S.C. 

13 8287c(2)) is amended to read as follows: 

14 ‘‘(2) The term ‘energy savings’ means a reduc15 tion in the cost of energy, water, or wastewater 

16 treatment, from a base cost established through a 

17 methodology set forth in the contract, used in an ex18 isting federally owned building or buildings or other 

19 federally owned facilities as a result of—

20 ‘‘(A) the lease or purchase of operating 

21 equipment, improvements, altered operation and 

22 maintenance, or technical services; 

23 ‘‘(B) the increased efficient use of existing 

24 energy sources by cogeneration or heat recov25 ery, excluding any cogeneration process for 
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1 other than a federally owned building or build2 ings or other federally owned facilities; or 

3 ‘‘(C) the increased efficient use of existing 

4 water sources in either interior or exterior ap5 plications.’’. 

6 (d) ENERGY SAVINGS CONTRACT.—Section 804(3) of 

7 the National Energy Conservation Policy Act (42 U.S.C. 

8 8287c(3)) is amended to read as follows: 

9 ‘‘(3) The terms ‘energy savings contract’ and 

10 ‘energy savings performance contract’ mean a con11 tract that provides for the performance of services 

12 for the design, acquisition, installation, testing, and, 

13 where appropriate, operation, maintenance, and re14 pair, of an identified energy or water conservation 

15 measure or series of measures at 1 or more loca16 tions. Such contracts shall, with respect to an agen17 cy facility that is a public building (as such term is 

18 defined in section 3301 of title 40, United States 

19 Code), be in compliance with the prospectus require20 ments and procedures of section 3307 of title 40, 

21 United States Code.’’. 

22 (e) ENERGY OR WATER CONSERVATION MEASURE.—

23 Section 804(4) of the National Energy Conservation Pol24 icy Act (42 U.S.C. 8287c(4)) is amended to read as fol25 lows: 
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1 ‘‘(4) The term ‘energy or water conservation 

2 measure’ means—

3 ‘‘(A) an energy conservation measure, as 

4 defined in section 551; or 

5 ‘‘(B) a water conservation measure that 

6 improves the efficiency of water use, is life-cycle 

7 cost-effective, and involves water conservation, 

8 water recycling or reuse, more efficient treat9 ment of wastewater or stormwater, improve10 ments in operation or maintenance efficiencies, 

11 retrofit activities, or other related activities, not 

12 at a Federal hydroelectric facility.’’. 

13 (f) REVIEW.—Not later than 180 days after the date 

14 of the enactment of this Act, the Secretary of Energy shall 

15 complete a review of the Energy Savings Performance 

16 Contract program to identify statutory, regulatory, and 

17 administrative obstacles that prevent Federal agencies 

18 from fully utilizing the program. In addition, this review 

19 shall identify all areas for increasing program flexibility 

20 and effectiveness, including audit and measurement 

21 verification requirements, accounting for energy use in de22 termining savings, contracting requirements, including the 

23 identification of additional qualified contractors, and en24 ergy efficiency services covered. The Secretary shall report 

25 these findings to Congress and shall implement identified 
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1 administrative and regulatory changes to increase pro2 gram flexibility and effectiveness to the extent that such 

3 changes are consistent with statutory authority. 

4 SEC. 416. MUNICIPALITY GRANTS FOR DISTRIBUTED EN5 ERGY PLANS. 

6 (a) PROGRAM.—The Secretary of Energy shall award 

7 grants to municipalities or tribes to facilitate the promul8 gation of distributed energy implementation plans. 

9 (b) AUTHORIZATION OF APPROPRIATIONS.—There 

10 are authorized to be appropriated to the Secretary of En11 ergy for carrying out this section $100,000,000. 

12 SEC. 417. GREEN BUILDING STANDARDS FOR FEDERAL 

13 BUILDINGS. 

14 (a) REQUIREMENT.—A Federal building for which 

15 the design phase for construction or major renovation is 

16 begun after the date of enactment of this Act shall be de17 signed, constructed, and certified to meet, at a minimum, 

18 the LEED silver standard. 

19 (b) EXCEPTIONS.—Subsection (a) shall not apply to 

20 Federal laboratories or defense facilities, or to a building 

21 of a type for which no LEED silver standard exists. 

22 (c) STUDY.—Not later than 1 year after the date of 

23 enactment of this Act, the Secretary of Energy shall trans24 mit to Congress the results of a study comparing the ex25 pected energy savings resulting from the implementation 
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1 of this section with energy savings under all other Federal 

2 energy savings requirements. The Secretary shall include 

3 any recommendations for changes to Federal law nec4 essary to reduce or eliminate duplicative or inconsistent 

5 Federal energy savings requirements. 

6 (d) DEFINITION.—For purposes of this section, the 

7 term ‘‘LEED silver standard’’ means the Leadership in 

8 Energy and Environmental Design green building rating 

9 standard identified as silver by the United States Green 

10 Building Council. 

11 TITLE V—CONSUMER 

12 PROTECTION AND ASSISTANCE 

13 SEC. 501. STRATEGIC PETROLEUM RESERVE. 

14 (a) FULL CAPACITY.—The President shall—

15 (1) fill the Strategic Petroleum Reserve estab16 lished pursuant to part B of title I of the Energy 

17 Policy and Conservation Act (42 U.S.C. 6231 et 

18 seq.) to full capacity as soon as practicable; and 

19 (2) ensure that the fill rate minimizes impacts 

20 on petroleum markets. 

21 (b) RECOMMENDATIONS.—Not later than 180 days 

22 after the date of enactment of this Act, the Secretary of 

23 Energy shall submit to Congress a plan to—

24 (1) eliminate any infrastructure impediments 

25 that may limit maximum drawdown capability; and 
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1 (2) determine whether the capacity of the Stra2 tegic Petroleum Reserve on the date of enactment of 

3 this section is adequate in light of the increasing 

4 consumption of petroleum and the reliance on im5 ported petroleum. 

6 SEC. 502. REGULATORY OVERSIGHT OVER ENERGY TRAD7 ING MARKETS AND METALS TRADING MAR8 KETS. 

9 (a) JURISDICTION OF THE COMMODITY FUTURES

10 TRADING COMMISSION OVER ENERGY TRADING MAR11 KETS AND METALS TRADING MARKETS.—

12 (1) FERC LIAISON.—Section 2(a)(8) of the 

13 Commodity Exchange Act (7 U.S.C. 2(a)(8)) is 

14 amended by adding at the end the following: 

15 ‘‘(C) FERC LIAISON.—The Commission shall, 

16 in cooperation with the Federal Energy Regulatory 

17 Commission, maintain a liaison between the Com18 mission and the Federal Energy Regulatory Com19 mission.’’. 

20 (2) EXEMPT TRANSACTIONS.—Section 2 of the 

21 Commodity Exchange Act (7 U.S.C. 2) is amend22 ed—

23 (A) in subsection (h), by adding at the end 

24 the following: 
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1 ‘‘(7) APPLICABILITY.—This subsection does not 

2 apply to an agreement, contract, or transaction in 

3 an exempt energy commodity or an exempt metal 

4 commodity described in subsection (j)(1).’’; and 

5 (B) by adding at the end the following: 

6 ‘‘(j) EXEMPT TRANSACTIONS.—

7 ‘‘(1) TRANSACTIONS IN EXEMPT ENERGY COM8 MODITIES AND EXEMPT METALS COMMODITIES.—An 

9 agreement, contract, or transaction (including a 

10 transaction described in section 2(g)) in an exempt 

11 energy commodity or exempt metal commodity shall 

12 be subject to—

13 ‘‘(A) sections 4b, 4c(a), 4c(b), 4o, and 5b; 

14 ‘‘(B) subsections (c) and (d) of section 6 

15 and sections 6c, 6d, and 8a, to the extent that 

16 those provisions—

17 ‘‘(i) provide for the enforcement of the 

18 requirements specified in this subsection; 

19 and 

20 ‘‘(ii) prohibit the manipulation of the 

21 market price of any commodity in inter22 state commerce or for future delivery on or 

23 subject to the rules of any contract mar24 ket; 
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1 ‘‘(C) sections 6c, 6d, 8a, and 9(a)(2), to 

2 the extent that those provisions prohibit the 

3 manipulation of the market price of any com4 modity in interstate commerce or for future de5 livery on or subject to the rules of any contract 

6 market; 

7 ‘‘(D) section 12(e)(2); and 

8 ‘‘(E) section 22(a)(4). 

9 ‘‘(2) BILATERAL DEALER MARKETS.—

10 ‘‘(A) IN GENERAL.—Except as provided in 

11 paragraph (6), a person or group of persons 

12 that constitutes, maintains, administers, or pro13 vides a physical or electronic facility or system 

14 in which a person has the ability to offer, exe15 cute, trade, or confirm the execution of an 

16 agreement, contract, or transaction (including a 

17 transaction described in section 2(g)) (other 

18 than an agreement, contract, or transaction in 

19 an excluded commodity) by making or accepting 

20 the bids and offers of 1 or more participants on 

21 the facility or system (including facilities or sys22 tems described in clauses (i) and (iii) of section 

23 1a(33)(B)), the person or group of persons, and 

24 the facility or system (referred to in this sub25 section as a ‘bilateral dealer market’) may offer 
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1 to enter into, enter into, or confirm the execu2 tion of any agreement, contract, or transaction 

3 under paragraph (1) (other than an agreement, 

4 contract, or transaction in an excluded com5 modity) if the bilateral dealer market meets the 

6 requirement of subparagraph (B). 

7 ‘‘(B) REQUIREMENT.—The requirement of 

8 this subparagraph is that a bilateral dealer 

9 market shall—

10 ‘‘(i) provide notice to the Commission 

11 in such form as the Commission may speci12 fy by rule or regulation; 

13 ‘‘(ii) file with the Commission any re14 ports (including large trader position re15 ports) that the Commission requires by 

16 rule or regulation; 

17 ‘‘(iii)(I) consistent with section 4i, 

18 maintain books and records relating to 

19 each transaction in such form as the Com20 mission may specify for a period of 5 years 

21 after the date of the transaction; and 

22 ‘‘(II) make those books and records 

23 available to representatives of the Commis24 sion and the Department of Justice for in-
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1 spection for a period of 5 years after the 

2 date of each transaction; and 

3 ‘‘(iv) make available to the public on 

4 a daily basis such information as total vol5 ume by commodity, settlement price, open 

6 interest, opening and closing ranges, and 

7 any other information that the Commission 

8 determines to be appropriate for public dis9 closure, except that the Commission may 

10 not—

11 ‘‘(I) require the real-time publi12 cation of proprietary information; or 

13 ‘‘(II) prohibit the commercial 

14 sale of real-time proprietary informa15 tion. 

16 ‘‘(3) REPORTING REQUIREMENTS.—On request 

17 of the Commission, an eligible contract participant 

18 that trades on a bilateral dealer market shall provide 

19 to the Commission, within the time period specified 

20 in the request and in such form and manner as the 

21 Commission may specify, any information relating to 

22 the transactions of the eligible contract participant 

23 on the bilateral dealer market within 5 years after 

24 the date of any transaction that the Commission de25 termines to be appropriate. 
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1 ‘‘(4) CAPITAL REQUIREMENTS.—

2 ‘‘(A) IN GENERAL.—Except as provided in 

3 subparagraph (B), a bilateral dealer market 

4 shall adopt a value-at-risk model approved by 

5 the Commission. 

6 ‘‘(B) CAPITAL COMMENSURATE WITH

7 RISK.—If there is an interaction of multiple 

8 bids and multiple offers on the bilateral dealer 

9 market in a predetermined, nondiscretionary 

10 automated trade matching and trade execution 

11 algorithm or bids and offers and acceptances of 

12 bids and offers made on the bilateral dealer 

13 market are binding, a bilateral dealer market 

14 shall maintain sufficient capital commensurate 

15 with the risk associated with transactions on 

16 the bilateral dealer market, as determined by 

17 the Commission. 

18 ‘‘(5) TRANSACTIONS EXEMPTED BY COMMIS19 SION ACTION.—Any agreement, contract, or trans20 action on a bilateral dealer market (other than an 

21 agreement, contract, or transaction in an excluded 

22 commodity) that would otherwise be exempted by the 

23 Commission under section 4(c) shall be subject to—

24 ‘‘(A) sections 4b, 4c(a), 4c(b), 4o, and 5b; 

25 and 
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1 ‘‘(B) subsections (c) and (d) of section 6 

2 and sections 6c, 6d, 8a, and 9(a)(2), to the ex3 tent that those provisions prohibit the manipu4 lation of the market price of any commodity in 

5 interstate commerce or for future delivery on or 

6 subject to the rules of any contract market. 

7 ‘‘(6) NO EFFECT ON OTHER FERC AUTHOR8 ITY.—This subsection does not affect the authority 

9 of the Federal Energy Regulatory Commission to 

10 regulate transactions under the Federal Power Act 

11 (16 U.S.C. 791a et seq.) or the Natural Gas Act (15 

12 U.S.C 717 et seq.). 

13 ‘‘(7) APPLICABILITY.—This subsection does not 

14 apply to—

15 ‘‘(A) a designated contract market regu16 lated under section 5; or 

17 ‘‘(B) a registered derivatives transaction 

18 execution facility regulated under section 5a.’’. 

19 (3) CONTRACTS DESIGNED TO DEFRAUD OR

20 MISLEAD.—Section 4b of the Commodity Exchange 

21 Act (7 U.S.C. 6b) is amended by striking subsection 

22 (a) and inserting the following: 

23 ‘‘(a) PROHIBITION.—It shall be unlawful for any 

24 member of a registered entity, or for any correspondent, 

25 agent, or employee of any member, in or in connection 
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1 with any order to make, or the making of, any contract 

2 of sale of any commodity in interstate commerce, made, 

3 or to be made on or subject to the rules of any registered 

4 entity, or for any person, in or in connection with any 

5 order to make, or the making of, any agreement, trans6 action, or contract in a commodity subject to this Act—

7 ‘‘(1) to cheat or defraud or attempt to cheat or 

8 defraud any person; 

9 ‘‘(2) willfully to make or cause to be made to 

10 any person any false report or statement, or willfully 

11 to enter or cause to be entered any false record; 

12 ‘‘(3) willfully to deceive or attempt to deceive 

13 any person by any means; or 

14 ‘‘(4) to bucket the order, or to fill the order by 

15 offset against the order of any person, or willfully, 

16 knowingly, and without the prior consent of any per17 son to become the buyer in respect to any selling 

18 order of any person, or to become the seller in re19 spect to any buying order of any person.’’. 

20 (4) CONFORMING AMENDMENTS.—The Com21 modity Exchange Act is amended—

22 (A) in section 2 (7 U.S.C. 2)—

23 (i) in subsection (h)—
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1 (I) in paragraph (1), by striking 

2 ‘‘paragraph (2)’’ and inserting ‘‘para3 graphs (2) and (7)’’; and 

4 (II) in paragraph (3), by striking 

5 ‘‘paragraph (4)’’ and inserting ‘‘para6 graphs (4) and (7)’’; and 

7 (ii) in subsection (i)(1)(A), by striking 

8 ‘‘section 2(h) or 4(c)’’ and inserting ‘‘sec9 tion 2(h), 2(j), or 4(c)’’; 

10 (B) in section 4i (7 U.S.C. 6i)—

11 (i) by striking ‘‘any contract market 

12 or’’ and inserting ‘‘any contract market,’’; 

13 and 

14 (ii) by inserting ‘‘, or pursuant to an 

15 exemption under section 4(c)’’ after 

16 ‘‘transaction execution facility’’; 

17 (C) in section 5a(g)(1) (7 U.S.C. 

18 7a(g)(1)), by striking ‘‘2(h)’’ and inserting 

19 ‘‘2(h) or 2(j)’’; 

20 (D) in section 5b (7 U.S.C. 7a–1)—

21 (i) in subsection (a)(1), by striking 

22 ‘‘2(h) or’’ and inserting ‘‘2(h), 2(j), or’’; 

23 and 
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1 (ii) in subsection (b), by striking 

2 ‘‘2(h) or’’ and inserting ‘‘2(h), 2(j), or’’; 

3 and 

4 (E) in section 12(e)(2)(B) (7 U.S.C. 

5 16(e)(2)(B)), by striking ‘‘2(h)’’ and inserting 

6 ‘‘2(h), 2(j),’’. 

7 (b) JURISDICTION OF THE FEDERAL ENERGY REGU8 LATORY COMMISSION OVER ENERGY TRADING MAR9 KETS.—Section 402 of the Department of Energy Organi10 zation Act (42 U.S.C. 7172) is amended by adding at the 

11 end the following: 

12 ‘‘(i) JURISDICTION OVER DERIVATIVES TRANS13 ACTIONS.—

14 ‘‘(1) IN GENERAL.—To the extent that the 

15 Commission determines that any contract that 

16 comes before the Commission is not under the juris17 diction of the Commission, the Commission shall 

18 refer the contract to the appropriate Federal agency. 

19 ‘‘(2) MEETINGS.—A designee of the Commis20 sion shall meet quarterly with a designee of the 

21 Commodity Futures Trading Commission, the Secu22 rities Exchange Commission, the Federal Trade 

23 Commission, and the Federal Reserve Board to dis24 cuss—
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1 ‘‘(A) conditions and events in energy trad2 ing markets; and 

3 ‘‘(B) any changes in Federal law (includ4 ing regulations) that may be appropriate to reg5 ulate energy trading markets. 

6 ‘‘(3) LIAISON.—The Commission shall, in co7 operation with the Commodity Futures Trading 

8 Commission, maintain a liaison between the Com9 mission and the Commodity Futures Trading Com10 mission.’’. 

11 SEC. 503. INCREASED FUNDING FOR LIHEAP, WEATHERIZA12 TION ASSISTANCE. 

13 (a) LIHEAP.—(1) Section 2602(b) of the Low-Income 

14 Home Energy Assistance Act of 1981 (42 U.S.C. 8621(b)) 

15 is amended by striking the first sentence and inserting 

16 ‘‘There are authorized to be appropriated to carry out the 

17 provisions of this title (other than section 2607A), 

18 $3,400,000,000 for each of fiscal years 2006 through 

19 2008.’’. 

20 (2) Section 2602(e) of the Low-Income Home Energy 

21 Assistance Act of 1981 (42 U.S.C. 8621(e)) is amended 

22 by striking ‘‘$600,000,000’’ and inserting 

23 ‘‘$1,000,000,000’’. 

24 (3) Section 2609A(a) of the Low-Income Energy As25 sistance Act of 1981 (42 U.S.C. 8628a(a)) is amended by 
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1 striking ‘‘not more than $300,000’’ and inserting ‘‘not 

2 more than $750,000’’. 

3 (b) WEATHERIZATION ASSISTANCE.—Section 422 of 

4 the Energy Conservation and Production Act (42 U.S.C. 

5 6872) is amended by striking ‘‘for fiscal years 1999 

6 through 2003 such sums as may be necessary.’’ and in7 serting ‘‘$325,000,000 for fiscal year 2006, $400,000,000 

8 for fiscal year 2007, and $500,000,000 for fiscal year 

9 2008.’’. 

10 SEC. 504. NATIONAL ENERGY EFFICIENT HOUSING. 

11 (a) ESTABLISHMENT.—There is created a body cor12 porate to be known as the ‘‘Federal Energy Efficient 

13 Home Mortgage Association’’ (in this section referred to 

14 as the ‘‘Corporation’’), which shall be regulated by the Of15 fice of Federal Housing Enterprise Oversight. The Cor16 poration shall have succession until dissolved by Act of 

17 Congress. The Corporation shall maintain its principal of18 fice in the District of Columbia and shall be deemed, for 

19 purposes of venue in civil actions, to be a resident thereof. 

20 The Corporation may establish agencies or offices in such 

21 other place or places as it may deem necessary or appro22 priate in the conduct of its business. 

23 (b) AUTHORITY.—The Corporation may—

24 (1) pursuant to commitments or otherwise, pur25 chase, service, sell, or otherwise deal in any mort-
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1 gages that meet or exceed the eligibility require2 ments for the Environmental Protection Agency pro3 gram known as ‘‘Energy Star’’ including mortgages 

4 that were previously purchased, serviced, or held by 

5 the Secretary of Housing and Urban Development 

6 pursuant to the National Housing Act, any Federal 

7 Home Loan Bank, the Government National Mort8 gage Association, the Department of Veterans Af9 fairs, the Federal National Mortgage Association, or 

10 the Federal Home Loan Mortgage Corporation; 

11 (2) purchase, service, sell, lend on the security 

12 of, and otherwise deal in loans or advances of credit 

13 for the purchase and installation of home energy 

14 conserving improvements; and 

15 (3) upon such terms and conditions as it may 

16 deem appropriate, issue, and guarantee the timely 

17 payment of principal of and interest on, such trust 

18 certificates or other securities that are based on and 

19 backed by a trust or pool composed of mortgages de20 scribed in paragraph (1), (2), or (3). 

21 (c) LIMITATION.—The price of a mortgage purchased 

22 by the Corporation pursuant to the authority under sub23 section (b) may not exceed 100 percent of the unpaid prin24 cipal amount of the mortgage at the time of purchase, with 

25 adjustments for interest and any comparable items. 
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1 (d) BORROWING FROM TREASURY.—

2 (1) AUTHORITY.—The Corporation may issue 

3 to the Secretary of the Treasury, and the Secretary 

4 may purchase, obligations as may be necessary to 

5 fund the operations of the Corporation. 

6 (2) TERMS.—Obligations issued under this sub7 section shall be in such forms and denomination, 

8 bear such maturities and rates of interest, and be 

9 subject to such other terms and conditions, as the 

10 Secretary of the Treasury shall determine. 

11 (3) PUBLIC DEBT TRANSACTIONS.—For the 

12 purpose of purchasing any such obligations, the Sec13 retary may use a public debt transaction the pro14 ceeds of the sale of any securities issued under chap15 ter 31 of title 31, United States Code, and the pur16 poses for which securities may be issued under such 

17 chapter are extended to include such purpose. 

18 (3) LIMITATION ON AMOUNT.—The Secretary of the 

19 Treasury shall not at any time purchase any obligations 

20 under this subsection if the purchase would increase the 

21 aggregate principal amount of the outstanding holdings of 

22 obligations under this subsection by the Secretary to an 

23 amount greater than $1,000,000,000. 

24 (4) SALE.—The Secretary of the Treasury may at 

25 any time sell, upon terms and conditions and at prices 
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1 determined by the Secretary, any of the obligations ac2 quired by the Secretary under this subsection. 

3 (5) TREATMENT.—All redemptions, purchases and 

4 sales by the Secretary of the Treasury of obligations under 

5 this subsection shall be treated as public debt transactions 

6 of the United States. 

7 SEC. 505. NATIONAL NET METERING REQUIREMENT FOR 

8 UTILITIES AND INTERCONNECTION STAND9 ARDS FOR DISTRIBUTIVE ENERGY GENERA10 TION. 

11 The Federal Power Act is amended by adding the fol12 lowing new part at the end thereof: 

13 ‘‘PART IV—NATIONAL REQUIREMENTS 

14 AFFECTING RETAIL ELECTRIC ENERGY 

15 ‘‘SEC. 401. NET METERING. 

16 ‘‘(a) DEFINITIONS.—As used in this section: 

17 ‘‘(1) The term ‘customer-generator’ means the 

18 owner or operator of an electric generation unit 

19 qualified for net metering under this section. 

20 ‘‘(2) The term ‘net metering’ means measuring 

21 the difference between the electricity supplied to a 

22 customer-generator and the electricity generated by 

23 a customer-generator that is delivered to a local dis24 tribution section system at the same point of inter25 connection during an applicable billing period. 
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1 ‘‘(3) The terms ‘electric generation unit quali2 fied for net metering’ and ‘qualified generation unit’ 

3 mean an electric energy generation unit that meets 

4 each of the following requirements: 

5 ‘‘(A) The unit is a fuel cell or uses as its 

6 energy source either solar, wind, or biomass. 

7 ‘‘(B) The unit has a generating capacity of 

8 not more than 100 kilowatts. 

9 ‘‘(C) The unit is located on premises that 

10 are owned, operated, leased, or otherwise con11 trolled by the customer-generator. 

12 ‘‘(D) The unit operates in parallel with the 

13 retail electric supplier. 

14 ‘‘(E) The unit is intended primarily to off15 set part or all of the customer-generator’s re16 quirements for electric energy. 

17 ‘‘(4) The term ‘retail electric supplier’ means 

18 any person that sells electric energy to the ultimate 

19 consumer thereof. 

20 ‘‘(5) The term ‘local distribution system’ means 

21 any system for the distribution section of electric en22 ergy to the ultimate consumer thereof, whether or 

23 not the owner or operator of such system is also a 

24 retail electric supplier. 
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1 ‘‘(b) ADOPTION.—Not later than one year after the 

2 enactment of this section, each retail electric supplier shall 

3 comply with each of the following requirements and notify 

4 all of its retail customers of such requirements not less 

5 frequently than quarterly: 

6 ‘‘(1) The supplier shall offer to arrange (either 

7 directly or through a local distribution company or 

8 other third party) to make available, on a first-come9 first-served basis, to each of its retail customers that 

10 has installed an energy generation unit that is in11 tended for net metering and that notifies the sup12 plier of its generating capacity an electric energy 

13 meter that is capable of net metering if the cus14 tomer-generator’s existing electrical meter cannot 

15 perform that function. 

16 ‘‘(2) Rates and charges and contract terms and 

17 conditions applicable to the sale by the supplier of 

18 electric energy to customer-generators shall be the 

19 same as the rates and charges and contract terms 

20 and conditions that would be applicable if the cus21 tomer-generator did not own or operate a qualified 

22 generation unit and use a net metering system. 

23 The requirements of this subsection are subject to the per24 cent limitations set forth in subsection (d). 
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1 ‘‘(c) NET ENERGY MEASUREMENT AND BILLING.—

2 Each retail electric supplier subject to subsection (b) shall 

3 calculate the net energy measurement for a customer 

4 using a net metering system in the following manner: 

5 ‘‘(1) The retail electric supplier shall measure 

6 the net electricity produced or consumed during the 

7 billing period using the metering referred to in para8 graph (1) of subsection (b) or in subsection (f). 

9 ‘‘(2) If the electricity supplied by the retail elec10 tric supplier exceeds the electricity generated by the 

11 customer-generator during the billing period, the 

12 customer-generator shall be billed for the net elec13 tricity supplied by the retail electric supplier in ac14 cordance with normal metering practices. 

15 ‘‘(3) If electricity generated by the customer16 generator exceeds the electricity supplied by the re17 tail electric supplier, the customer-generator—

18 ‘‘(A) shall be billed for the appropriate 

19 customer charges for that billing period; 

20 ‘‘(B) shall be credited for the excess elec21 tric energy generated during the billing period, 

22 with this credit appearing on the bill to be ap23 plied against charges for the following billing 

24 period (except for a billing period that ends in 

25 the next calendar year); and 
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1 ‘‘(C) shall not be charged for transmission 

2 losses. 

3 If the customer-generator is using a meter that re4 flects the time of generation (a ‘real time meter’), 

5 the credit shall be based on the retail rates for sale 

6 by the retail electric supplier at the time of such 

7 generation. At the beginning of each calendar year, 

8 any remaining unused kilowatt-hour credit accumu9 lated by a customer-generator during the previous 

10 year may be sold by the customer-generator to any 

11 electric supplier that agrees to purchase such credit. 

12 In the absence of any such purchase, the credit shall 

13 be assigned (at no cost) to the retail electric supplier 

14 that supplied electric energy to such customer-gener15 ator at the end of the previous year. 

16 ‘‘(d) PERCENT LIMITATIONS.—

17 ‘‘(1) TWO PERCENT LIMITATION.—A retail elec18 tric supplier shall not be required to comply with 

19 subsection (b) with respect to additional customer20 generators after the date during any calendar year 

21 on which the total generating capacity of all cus22 tomer-generators with qualified generation facilities 

23 and net metering systems served by that supplier is 

24 equal to or in excess of 2 percent of the capacity 

25 necessary to meet the supplier’s average forecasted 
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1 aggregate customer peak demand for that calendar 

2 year. 

3 ‘‘(2) ONE PERCENT LIMITATION.—A retail elec4 tric supplier shall not be required to comply with 

5 subsection (b) with respect to additional customer6 generators using a single type of qualified energy 

7 generation system after the date during any cal8 endar year on which the total generating capacity of 

9 all customer-generators with qualified generation fa10 cilities of that type and net metering systems served 

11 by that supplier is equal to or in excess of 1 percent 

12 of the capacity necessary to meet the supplier’s aver13 age forecasted aggregate customer peak demand for 

14 that calendar year. 

15 ‘‘(3) RECORDS AND NOTICE.—Each retail elec16 tric supplier shall maintain, and make available to 

17 the public, records of the total generating capacity 

18 of customer-generators of such supplier that are 

19 using net metering, the type of generating systems 

20 and energy source used by the electric generating 

21 systems used by such customer-generators. Each 

22 such supplier shall notify the Commission when the 

23 total generating capacity of such customer-genera24 tors is equal to or in excess of 2 percent of the ca25 pacity necessary to meet the supplier’s aggregate 
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1 customer peak demand during the previous calendar 

2 year and when the total generating capacity of such 

3 customer-generators using a single type of qualified 

4 generation is equal to or in excess of 1 percent of 

5 such capacity. 

6 ‘‘(e) SAFETY AND PERFORMANCE STANDARDS.—(1) 

7 A qualified generation unit and net metering system used 

8 by a customer-generator shall meet all applicable safety 

9 and performance and reliability standards established by 

10 the national electrical code, the Institute of Electrical and 

11 Electronics Engineers, Underwriters Laboratories, or the 

12 American National Standards Institute. 

13 ‘‘(2) The Commission, after consultation with State 

14 regulatory authorities and nonregulated local distribution 

15 systems and after notice and opportunity for comment, 

16 may adopt by regulation additional control and testing re17 quirements for customer-generators that the Commission 

18 determines are necessary to protect public safety and sys19 tem reliability. 

20 ‘‘(3) The Commission shall, after consultation with 

21 State regulatory authorities and nonregulated local dis22 tribution systems and after notice and opportunity for 

23 comment, prohibit by regulation the imposition of addi24 tional charges by electric suppliers and local distribution 

25 systems for equipment or services for safety or perform-
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1 ance that are additional to those necessary to meet the 

2 standards and requirements referred to in paragraphs (2) 

3 and (3). 

4 ‘‘(f) ADDITIONAL METERS.—Any retail electric sup5 plier or local distribution company may, at its own ex6 pense, install one or more additional electric energy meters 

7 to monitor the flow of electricity in either direction to and 

8 from customer-generators, to identify the time of genera9 tion by customer- generators, or both. 

10 ‘‘(g) FEDERAL CREDITS.—Whenever a customer-gen11 erator with a net metering system uses any energy genera12 tion system entitled to credits under a Federal minimum 

13 renewable energy generation requirement, the total 

14 amount of energy generated by that system shall be treat15 ed as generated by the retail electric supplier for purposes 

16 of such requirement. 

17 ‘‘(h) STATE AUTHORITY.—Nothing in this section 

18 shall preclude a State from establishing or imposing addi19 tional incentives or requirements to encourage qualified 

20 generation and net metering additional to that required 

21 under this section. 

22 ‘‘(i) INTERCONNECTION STANDARDS.—(1) Within 

23 one year after the enactment of this section the Commis24 sion shall publish model standards for the physical connec25 tion between local distribution systems and qualified gen-
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1 eration units and electric generation units that would be 

2 qualified generation units but for the fact that the unit 

3 has a generating capacity of more than 100 kilowatts (but 

4 not more than 250 kilowatts). Such model standards shall 

5 be designed to encourage the use of qualified generation 

6 units and to insure the safety and reliability of such units 

7 and the local distribution systems interconnected with 

8 such units. Within 2 years after the enactment of this sec9 tion, each State shall adopt such model standards, with 

10 or without modification, and submit such standards to the 

11 Commission for approval. The Commission shall approve 

12 a modification of the model standards only if the Commis13 sion determines that such modification is consistent with 

14 the purpose of such standards and is required by reason 

15 of local conditions. If standards have not been approved 

16 under this paragraph by the Commission for any State 

17 within 2 years after the enactment of this section, the 

18 Commission shall, by rule or order, enforce the Commis19 sion’s model standards in such State until such time as 

20 State standards are approved by the Commission. 

21 ‘‘(2) The standards under this section shall establish 

22 such measures for the safety and reliability of the affected 

23 equipment and local distribution systems as may be appro24 priate. Such standards shall be consistent with all applica25 ble safety and performance standards established by the 
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1 national electrical code, the Institute of Electrical and 

2 Electronics Engineers, Underwriters Laboratories, or the 

3 American National Standards Institute and with such ad4 ditional safety and reliability standards as the Commission 

5 shall, by rule, prescribe. Such standards shall ensure that 

6 generation units will automatically isolate themselves from 

7 the electrical system in the event of an electrical power 

8 outage. Such standards shall permit the owner or operator 

9 of the local distribution system to interrupt or reduce de10 liveries of available energy from the generation unit to the 

11 system when necessary in order to construct, install, main12 tain, repair, replace, remove, investigate, or inspect any 

13 of its equipment or part of its system; or if it determines 

14 that curtailment, interruption, or reduction is necessary 

15 because of emergencies, forced outages, force majeure, or 

16 compliance with prudent electrical practices. 

17 ‘‘(3) The model standards under this subsection pro18 hibit the imposition of additional charges by local distribu19 tion systems for equipment or services for interconnection 

20 that are additional to those necessary to meet such stand21 ards. 

22 ‘‘(j) INTERCONNECTION.—At the election of the 

23 owner or operator of the generation unit concerned, con24 nections meeting the standards applicable under sub25 section (g) may be made—
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1 ‘‘(1) by such owner or operator at such owner’s 

2 or operator’s expense, or 

3 ‘‘(2) by the owner or operator of the local dis4 tribution system upon the request of the owner or 

5 operator of the generating unit and pursuant to an 

6 offer by the owner or operator of the generating unit 

7 to reimburse the local distribution system in an 

8 amount equal to the minimum cost of such connec9 tion, consistent with the procurement procedures of 

10 the State in which the unit is located, except that 

11 the work on all such connections shall be performed 

12 by qualified electrical personnel certified by a re13 sponsible body or licensed by a State or local govern14 ment authority. 

15 ‘‘(k) CONSUMER FRIENDLY CONTRACTS.—The Com16 mission shall promulgate regulations insuring that sim17 plified contracts will be used for the interconnection of 

18 electric energy by electric energy transmission or distribu19 tion systems and generating facilities that have a power 

20 production capacity not greater than 250 kilowatts.’’. 

21 (b) CONFORMING AMENDMENTS.—Section 316A of 

22 the Federal Power Act is amended by striking out ‘‘or 

23 214’’ in both places it appears and inserting ‘‘214, or title 

24 IV’’. 
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1 SEC. 506. APPLIANCE STANDARDS. 

2 (a) STANDARDS FOR HOUSEHOLD APPLIANCES IN

3 STANDBY MODE.—Section 325 of the Energy Policy and 

4 Conservation Act (42 U.S.C. 6295) is amended by adding 

5 at the end the following: 

6 ‘‘(u) STANDBY MODE ELECTRIC ENERGY CONSUMP7 TION BY HOUSEHOLD APPLIANCES.—

8 ‘‘(1) DEFINITIONS.—In this subsection: 

9 ‘‘(A) HOUSEHOLD APPLIANCE.—The term 

10 ‘household appliance’ means any device that 

11 uses household electric current and operates in 

12 a standby mode except digital televisions, digital 

13 set top boxes, and digital video recorders. 

14 ‘‘(B) STANDBY MODE.—The term ‘standby 

15 mode’ means a mode in which a household ap16 pliance uses household electric current but is 

17 not in the active or primary operating mode. 

18 For products with more than one operating 

19 mode, the term ‘standby mode’ means the mode 

20 in which the appliance consumes the least 

21 amount of electric energy that the household 

22 appliance is capable of consuming without being 

23 completely switched off. 

24 ‘‘(2) STANDARD.—

25 ‘‘(A) IN GENERAL.—Except as provided in 

26 subparagraph (B), a household appliance that 
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1 is manufactured in, or imported for sale in, the 

2 United States on or after the date that is 3 

3 years after the date of enactment of this sub4 section shall not consume in standby mode 

5 more than 1 watt. 

6 ‘‘(B)(i) HOUSEHOLD APPLIANCES PARTICI7 PATING IN THE ENERGY STAR PROGRAM.—A 

8 household appliance model that, as of the date 

9 of enactment of this subsection, is recognized 

10 under the Energy Star program administered 

11 by the Administrator of the Environmental Pro12 tection Agency and the Secretary shall have 

13 until January 1, 2010, to meet the standard 

14 under subparagraph (A). 

15 ‘‘(ii) ANALOG TELEVISIONS.—In the case 

16 of analog televisions, the Secretary shall pre17 scribe, on or after the date that is 2 years after 

18 the date of enactment of this subsection, in ac19 cordance with subsections (o) and (p) of section 

20 325, an energy conservation standard that is 

21 technologically feasible and economically justi22 fied under section 325(o)(2)(A) (in lieu of the 

23 1 watt standard under subparagraph (A)). 

24 ‘‘(3) EXEMPTIONS.—
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1 ‘‘(A) APPLICATION.—A manufacturer or 

2 importer of a household appliance or their des3 ignated agent may submit to the Secretary an 

4 application for an exemption of a household ap5 pliance of class of appliances from the standard 

6 under paragraph (2). 

7 ‘‘(B) CRITERIA FOR EXEMPTION.—The 

8 Secretary shall grant an exemption for a house9 hold appliance of class of appliances for which 

10 an application is made under subparagraph (A) 

11 if the applicant provides evidence showing that, 

12 and the Secretary determines that—

13 ‘‘(i) it is not technically feasible to 

14 modify the household appliance or appli15 ances concerned to enable them to meet 

16 the standard; 

17 ‘‘(ii) the standard is incompatible with 

18 an energy efficiency standard applicable to 

19 the household appliance of class of appli20 ances under another subsection; or 

21 ‘‘(iii) The cost of electricity that a 

22 typical consumer would save in operating 

23 the household appliance of class of appli24 ances meeting the standard would not 

25 equal the increase in the price of the 
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1 household appliance or class of household 

2 appliances that would be attributable to 

3 the modifications that would be necessary 

4 to enable the household appliance or class 

5 of household appliances to meet the stand6 ard by the earlier of—

7 ‘‘(I) the date that is 7 years after 

8 the date of purchase of the household 

9 appliance concerned; or 

10 ‘‘(II) the end of the useful life of 

11 the household appliance. 

12 ‘‘(C) DETERMINATION OF TECHNICAL IN13 FEASIBILITY.—If the Secretary determines that 

14 it is not technically feasible to modify a house15 hold appliance or class of household appliances 

16 to meet the standard under paragraph (2), the 

17 Secretary shall establish a different standard 

18 for the household appliance or class of house19 hold appliances in accordance with the criteria 

20 under subsection (l). 

21 ‘‘(4) TEST PROCEDURE.—

22 ‘‘(A) IN GENERAL.—Not later than 1 year 

23 after the date of enactment of this subsection, 

24 the Secretary shall establish a test procedure 

25 for determining the amount of consumption of 
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1 power by a household appliance operating in 

2 standby mode. 

3 ‘‘(B) CONSIDERATIONS.—In establishing 

4 the test procedure, the Secretary shall con5 sider—

6 ‘‘(i) international test procedures 

7 under development; 

8 ‘‘(ii) test procedures used in connec9 tion with the Energy Star program; and 

10 ‘‘(iii) test procedures used for meas11 uring power consumption in standby mode 

12 in other countries. 

13 ‘‘(5) FURTHER REDUCTION OF STANDBY

14 POWER CONSUMPTION.—The Secretary shall provide 

15 technical assistance to manufacturers in achieving 

16 further reductions in standby mode electric energy 

17 consumption by household appliances. 

18 ‘‘(v) STANDBY MODE ELECTRIC ENERGY CONSUMP19 TION BY DIGITAL TELEVISIONS, DIGITAL SET TOP

20 BOXES, AND DIGITAL VIDEO RECORDERS.—The Sec21 retary shall initiate within 5 years of the date of enact22 ment of this subsection a rulemaking to prescribe, in ac23 cordance with subsections (o) and (p), an energy conserva24 tion standard of standby mode electric energy consump25 tion by digital television sets, digital set top boxes, and 
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1 digital video recorders. The Secretary shall issue a final 

2 rule prescribing such standards not later than 18 months 

3 thereafter. In determining whether a standard under this 

4 section is technologically feasible and economically justi5 fied under section 325(o)(2)(A), the Secretary shall con6 sider the potential negative effects on market penetration 

7 by digital products covered under this section, and shall 

8 consider any recommendations by the FCC regarding such 

9 effects.’’. 

10 (b) STANDARDS FOR NONCOVERED PRODUCTS.—

11 (1) Section 325(m) of the Energy Policy and 

12 Conservation Act (42 U.S.C. 6295(m)) is amended 

13 as follows: 

14 (A) Inserting ‘‘(1)’’ before ‘‘After’’. 

15 (B) Inserting the following at the end: 

16 ‘‘(2) Not later than one year after the date of enact17 ment of this paragraph, and every 5 years thereafter, the 

18 Secretary shall conduct a rulemaking to determine wheth19 er consumer or commercial products not classified as a 

20 covered product under section 322(a)(1) through (19) 

21 meet the criteria of section 322(b)(1). If the Secretary 

22 finds that a consumer or commercial product not classified 

23 as a covered product meets the criteria of section 

24 322(b)(1), the Secretary shall prescribe, in accordance 
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1 with subsections (o) and (p), an energy conservation 

2 standard for such consumer or commercial product.’’. 

3 (2) Part B of title III of such Act is amended 

4 as follows: 

5 (A) In the heading for such part by insert6 ing ‘‘AND COMMERCIAL’’ after ‘‘CON7 SUMER’’. 

8 (B) In section 321 by striking ‘‘consumer 

9 product of a type specified in section 322’’ and 

10 inserting: ‘‘consumer or commercial product of 

11 a type specified in section 322(a)’’. 

12 (C) In paragraphs (4), (5), (7), (12), (13), 

13 (14), and (15) of section 321 by striking ‘‘con14 sumer’’ in each place it appears and inserting 

15 ‘‘covered’’. 

16 (D) In section 322(a) by inserting ‘‘or 

17 commercial’’ after ‘‘consumer’’ in the first place 

18 it appears in the material preceding paragraph 

19 (1). 

20 (E) In section 322(b), by inserting ‘‘or 

21 commercial’’ after ‘‘consumer’’ in each place it 

22 appears. 

23 (F) In section 322(b)(1)(B) and (b)(2)(A), 

24 by inserting ‘‘(or per-business in the case of a 
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1 commercial product)’’ after ‘‘per-household’’ in 

2 each place it appears. 

3 (G) In section 322(b)(2)(A) by inserting 

4 ‘‘(or businesses in the case of commercial prod5 ucts)’’ after ‘‘households’’ in each place it ap6 pears. 

7 (H) In section 322(b)(2)(C) by striking 

8 ‘‘term’’ and inserting ‘‘terms’’ and by inserting 

9 ‘‘and ‘business’ ’’ after ‘‘household’’. 

10 (I) In sections 323 though 339, by insert11 ing ‘‘or commercial’’ after ‘‘consumer’’ in each 

12 place it appears. 

13 (c) CONSUMER EDUCATION ON ENERGY EFFICIENCY

14 BENEFITS OF AIR CONDITIONING, HEATING AND VEN15 TILATION MAINTENANCE.—Section 337 of the Energy 

16 Policy and Conservation Act (42 U.S.C. 6307) is amended 

17 by adding the following new subsection after subsection 

18 (b): 

19 ‘‘(c) HVAC MAINTENANCE.—For the purpose of en20 suring that installed air conditioning and heating systems 

21 operate at their maximum rated efficiency levels, the Sec22 retary shall, within 180 days of the date of enactment of 

23 this subsection, develop and implement a public education 

24 campaign to educate homeowners and small business own25 ers concerning the energy savings resulting from regularly 
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1 scheduled maintenance of air conditioning, heating, and 

2 ventilating systems. The public service information shall 

3 provide sufficient information to allow consumers to make 

4 informed choices from among professional, licensed (where 

5 State or local licensing is required) contractors. There are 

6 authorized to be appropriated to carry out this subsection 

7 $5,000,000 for the fiscal years 2006 and 2007 in addition 

8 to amounts otherwise appropriated in this part.’’. 

9 (d) EFFICIENCY STANDARDS FOR OTHER CONSUMER

10 AND COMMERCIAL PRODUCTS.—

11 (1) DEFINITIONS.—Section 321 of the Energy 

12 Policy and Conservation Act (42 U.S.C. 6291) is 

13 amended by adding the following at the end thereof: 

14 ‘‘(32) The term ‘residential furnace fan’ means 

15 an electric fan installed as part of a furnace for pur16 poses of circulating air through the system air fil17 ters, the heat exchangers or heating elements of the 

18 furnace, and the duct work. 

19 ‘‘(33) The terms ‘residential central air condi20 tioner fan’ and ‘heat pump circulation fan’ mean an 

21 electric fan installed as part of a central air condi22 tioner or heat pump for purposes of circulating air 

23 through the system air filters, the heat exchangers 

24 of the air conditioner or heat pump, and the duct 

25 work. 
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1 ‘‘(34) The term ‘suspended ceiling fan’ means 

2 a fan intended to be mounted to a ceiling outlet box, 

3 ceiling building structure, or to a vertical rod sus4 pended from the ceiling, and which as blades which 

5 rotate below the ceiling and consists of an electric 

6 motor, fan blades (which rotate in a direction par7 allel to the floor), an optional lighting kit, and one 

8 or more electrical controls (integral or remote) gov9 erning fan speed and lighting operation. 

10 ‘‘(35) The term ‘refrigerated bottled or canned 

11 beverage vending machine’ means a machine that 

12 cools bottled or canned beverages and dispenses 

13 them upon payment. 

14 ‘‘(36) AUTOMATIC COMMERCIAL ICEMAKER.—

15 The term ‘automatic commercial icemaker’ means a 

16 factory-made assembly that 

17 ‘‘(A) consists of a condensing unit and ice18 making section operating as an integrated unit, 

19 with means for making and harvesting ice; 

20 ‘‘(B) may include means for storing or dis21 pensing ice; and 

22 ‘‘(C) may or may not be shipped in 1 pack23 age. 
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1 ‘‘(37) COMMERCIAL FREEZER.—The term ‘com2 mercial freezer’ means a freezer that is not a con3 sumer product regulated under this Act. 

4 ‘‘(38) COMMERCIAL REFRIGERATOR.—The term 

5 ‘commercial refrigerator’ means a refrigerator that 

6 is not a consumer product regulated under this Act. 

7 ‘‘(39) COMMERCIAL REFRIGERATOR-FREEZ8 ER.—The term ‘commercial refrigerator-freezer’ 

9 means a refrigerator-freezer that is not a consumer 

10 product regulated under this Act. 

11 ‘‘(40) ICEMAKING HEAD.—The term ‘icemaking 

12 head’ means an automatic commercial icemaker that 

13 does not include a storage compartment in an inte14 gral cabinet. 

15 ‘‘(41) ILLUMINATED EXIT SIGN.—The term ‘il16 luminated exit sign’ means a sign that 

17 ‘‘(A) is designed to be permanently fixed in 

18 place to identify an exit; and 

19 ‘‘(B) CONSISTS OF.—

20 ‘‘(i) a light source that illuminates the 

21 sign or letters from within; and 

22 ‘‘(iii) a background that is not trans23 parent. 

24 ‘‘(42) REMOTE CONDENSING ICEMAKER.—The 

25 term ‘remote condensing icemaker’ means an auto-
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1 matic commercial icemaker in which the icemaking 

2 mechanism and condensing unit are in separate sec3 tions. 

4 ‘‘(43) TRAFFIC SIGNAL MODULE.—The term 

5 ‘traffic signal module’ means a standard 8-inch 

6 (200mm) or 12-inch (300mm) traffic signal indica7 tion, consisting of a light source, a lens, and all 

8 other parts necessary for operation, that commu9 nicates movement messages to drivers through red, 

10 amber, and green colors. 

11 ‘‘(44) TORCHIERE FIXTURE.—The term 

12 ‘torchiere fixture’ means a portable electric lighting 

13 fixture with a reflector bowl that directs light up14 ward so as to give indirect illumination. 

15 ‘‘(45) UNIT HEATER.—The term ‘unit heater’ 

16 means a self-contained fan-type heater designed to 

17 be installed within the heated space. Unit heaters in18 clude an apparatus or appliance to supply heat, and 

19 a fan for circulating air over a heat exchange sur20 face, all enclosed in a common casing. Unit heaters 

21 do not include furnaces as defined in this Act.’’. 

22 (2) TESTING REQUIREMENTS.—Section 323 of 

23 the Energy Policy and Conservation Act (42 U.S.C. 

24 6293) is amended by adding the following at the end 

25 thereof: 
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1 ‘‘(f) ADDITIONAL CONSUMER PRODUCTS.—The Sec2 retary shall within 18 months after the date of enactment 

3 of this subsection prescribe testing requirements for the 

4 consumer and commercial products referred to in para5 graphs (36) though (45) of section 321. Such testing re6 quirements shall be based on existing test procedures used 

7 in industry to the extent practical and reasonable. In the 

8 case of residential furnace fans, residential central air con9 ditioner fans or heat pump circulation fans, and sus10 pended ceiling fans unit heaters, such test procedures shall 

11 include efficiency at both maximum output and at an out12 put no more than 50 percent of the maximum output.’’. 

13 (3) STANDARDS FOR ADDITIONAL CONSUMER

14 PRODUCTS.—Section 325 of the Energy Policy and 

15 Conservation Act (42 U.S.C. 6295), as amended by 

16 subsection (a) of this section, is amended by adding 

17 the following at the end thereof: 

18 ‘‘(w) RESIDENTIAL, OTHER CONSUMER, AND COM19 MERCIAL PRODUCTS.—(1) The Secretary shall, within 18 

20 months after the date of enactment of this subsection, as21 sess the current and projected future market for the con22 sumer, and commercial products referred to in paragraphs 

23 (36) through (45) of section 321, furnace fans, residential 

24 central air conditioner fans and heat pump circulation 

25 fans, suspended ceiling fans, and refrigerated bottled or 
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1 canned beverage vending machines. This assessment shall 

2 include an examination of the types of these products sold, 

3 the number of these products in use, annual sales of these 

4 products, energy used by these products sold, estimates 

5 of the potential energy savings from specific technical im6 provements to these products, and an examination of the 

7 cost-effectiveness of these improvements. Prior to the end 

8 of this time period, the Secretary shall hold an initial 

9 scoping workshop to discuss and receive input to plans for 

10 developing minimum efficiency standards for these prod11 ucts. 

12 ‘‘(2) The Secretary shall within 24 months after the 

13 date on which testing requirements are prescribed by the 

14 Secretary pursuant to section 323(f), prescribe, by rule, 

15 energy conservation standards for residential furnace fans, 

16 residential central air conditioner fans and heat pump cir17 culation fans, suspended ceiling fans, and refrigerated bot18 tled or canned beverage vending machines. In establishing 

19 these standards, the Secretary shall use the criteria and 

20 procedures contained in this section. Any standard pre21 scribed under this section shall apply to products manu22 factured 36 months after the date such rule is published.’’. 

23 (4) LABELING.—Section 324(a) of the Energy 

24 Policy and Conservation Act (42 U.S.C. 6294(a)) is 

25 amended by adding the following at the end thereof: 
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1 ‘‘(5) The Secretary shall within 6 months after 

2 the date on which energy conservation standards are 

3 prescribed by the Secretary, prescribe, by rule, label4 ing requirements for the consumer and commercial 

5 products referred to in paragraphs (33) though (45) 

6 of section 321. These requirements shall take effect 

7 on the same date as the standards prescribed pursu8 ant to section 325(w).’’. 

9 (5) COVERED PRODUCTS.—Section 322(a) of 

10 the Energy Policy and Conservation Act (42 U.S.C. 

11 6292(a)) is amended by redesignating paragraph 

12 (19) as (20) and by inserting the following after 

13 paragraph (18): 

14 ‘‘(19) Beginning on the effective date for stand15 ards established pursuant to subsection (w) of sec16 tion 325, each product referred to in such subsection 

17 (w).’’. 

18 (e) AIR CONDITIONER ENERGY EFFICIENCY

19 RULES.—Section 325(o)(1) of the Energy Policy and Con20 servation Act is amended by adding the following at the 

21 end thereof: ‘‘Any rule relating to the energy efficiency 

22 of air conditioners that violates the preceding sentence 

23 shall have no force and effect after the date of the enact24 ment of this sentence.’’. 
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1 SEC. 507. ENERGY STAR CERTIFICATION FOR SOLAR 

2 WATER HEATERS. 

3 Not later than January 1, 2007, the Secretary, in 

4 consultation with the Administrator of the Environmental 

5 Protection Agency, shall adopt regulations establishing 

6 Energy Star Program requirements and an Energy Star 

7 rating program for commercial and residential solar water 

8 heating devices. 

9 SEC. 508. ELECTRIC RELIABILITY STANDARDS. 

10 Part II of the Federal Power Act (16 U.S.C. 824 et 

11 seq.) is amended by adding at the end the following: 

12 ‘‘SEC. 215. ELECTRIC RELIABILITY. 

13 ‘‘(a) DEFINITIONS.—In this section—

14 ‘‘(1) ‘bulk power system’ means the network of 

15 interconnected transmission facilities and generating 

16 facilities; 

17 ‘‘(2) ‘electric reliability organization’ means a 

18 self-regulating organization certified by the Commis19 sion under subsection (c) whose purpose is to pro20 mote the reliability of the bulk power system; and 

21 ‘‘(3) ‘reliability standard’ means a requirement 

22 to provide for reliable operation of the bulk power 

23 system approved by the Commission under this sec24 tion. 

25 ‘‘(b) JURISDICTION AND APPLICABILITY.—The Com26 mission shall have jurisdiction, within the United States, 
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1 over an electric reliability organization, any regional enti2 ties, and all users, owners and operators of the bulk power 

3 system, including but not limited to the entities described 

4 in section 201(f), for purposes of approving reliability 

5 standards and enforcing compliance with this section. All 

6 users, owners and operators of the bulk power system shall 

7 comply with reliability standards that take effect under 

8 this section. 

9 ‘‘(c) CERTIFICATION.—

10 ‘‘(1) The Commission shall issue a final rule to 

11 implement the requirements of this section not later 

12 than 180 days after the date of enactment of this 

13 section. 

14 ‘‘(2) Following the issuance of a Commission 

15 rule under paragraph (1), any person may submit an 

16 application to the Commission for certification as an 

17 electric reliability organization. The Commission 

18 may certify an applicant if the Commission deter19 mines that the applicant—

20 ‘‘(A) has the ability to develop, and enforce 

21 reliability standards that provide for an ade22 quate level of reliability of the bulk power sys23 tem; and 

24 ‘‘(B) has established rules that—
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1 ‘‘(i) assure the independence of the 

2 applicant from the users and owners and 

3 operators of the bulk power system while 

4 assuring fair stakeholder representation in 

5 the selection of its directors and balanced 

6 decision making in any committee or sub7 ordinate organizational structure; 

8 ‘‘(ii) allocate equitably dues, fees, and 

9 other charges among users for all activities 

10 under this section; 

11 ‘‘(iii) provide fair and impartial proce12 dures for enforcement of reliability stand13 ards through imposition of penalties (in14 cluding limitations on activities, functions, 

15 or operations, or other appropriate sanc16 tions) and 

17 ‘‘(iv) provide for reasonable notice and 

18 opportunity for public comment, due proc19 ess, openness, and balance of interests in 

20 developing reliability standards and other21 wise exercising its duties. 

22 ‘‘(3) If the Commission receives 2 or more time23 ly applications that satisfy the requirements of this 

24 subsection, the Commission shall approve only the 
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1 application the Commission concludes will best im2 plement the provisions of this section. 

3 ‘‘(d) RELIABILITY STANDARDS.—

4 ‘‘(1) An electric reliability organization shall file 

5 a proposed reliability standard or modification to a 

6 reliability standard with the Commission. 

7 ‘‘(2) The Commission may approve a proposed 

8 reliability standard or modification to a reliability 

9 standard if it determines that the standard is just, 

10 reasonable, not unduly discriminatory or pref11 erential, and in the public interest. The Commission 

12 shall give due weight to the technical expertise of the 

13 electric reliability organization with respect to the 

14 content of a proposed standard or modification to a 

15 reliability standard, but shall not defer with respect 

16 to its effect on competition. 

17 ‘‘(3) The electric reliability organization and the 

18 Commission shall rebuttably presume that a pro19 posal from a regional entity organized on an inter20 connection-wide basis for a reliability standard or 

21 modification to a reliability standard to be applicable 

22 on an interconnection-wide basis is just, reasonable, 

23 and not unduly discriminatory or preferential, and in 

24 the public interests. 
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1 ‘‘(4) The Commission shall remand to the elec2 tric reliability organization for further consideration 

3 a proposed reliability standard or a modification to 

4 a reliability standard that the Commission dis5 approves in whole or in part. 

6 ‘‘(5) The Commission, upon its own motion or 

7 upon complaint, may order an electric reliability or8 ganization to submit to the Commission a proposed 

9 reliability standard or a modification to a reliability 

10 standard that addresses a specific matter if the 

11 Commission considers such a new or modified reli12 ability standard appropriate to carry out this sec13 tion. 

14 ‘‘(e) ENFORCEMENT.—

15 ‘‘(1) An electric reliability organization may im16 pose a penalty on a user or owner or operator of the 

17 bulk power system if the electric reliability organiza18 tion, after notice and an opportunity for a hearing—

19 ‘‘(A) finds that the user or owner or oper20 ator of the bulk power system has violated a re21 liability standard approved by the Commission 

22 under subsection (d); and 

23 ‘‘(B) files notice with the Commission, 

24 which shall affirm, set aside, or modify the ac25 tion. 
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1 ‘‘(2) On its own motion or upon complaint, the 

2 Commission may order compliance with a reliability 

3 standard and may impose a penalty against a user 

4 or owner or operator of the bulk power system if the 

5 Commission finds, after notice and opportunity for 

6 a hearing, that the user or owner or operator of the 

7 bulk power system has violated or threatens to vio8 late a reliability standard. 

9 ‘‘(3) The Commission shall establish regulations 

10 authorizing the electric reliability organization to 

11 enter into an agreement to delegate authority to a 

12 regional entity for the purpose of proposing and en13 forcing reliability standards (including related activi14 ties) if the regional entity satisfies the provisions of 

15 subparagraphs (A) and (B) of subsection (c)(2) and 

16 the agreement promotes effective and efficient ad17 ministration of bulk power system reliability. The 

18 Commission may modify such delegation. The elec19 tric reliability organization and the Commission shall 

20 rebuttably presume that a proposal for delegation to 

21 a regional entity organized on a interconnection-wide 

22 basis promotes effective and efficient administration 

23 of bulk power system reliability and should be ap24 proved. Such regulation may provide that the Com25 mission may assign the electric reliability organiza-
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1 tion’s authority to enforce reliability standards di2 rectly to a regional entity consistent with the re3 quirements of this paragraph. 

4 ‘‘(4) The Commission may take such action as 

5 is necessary or appropriate against the electric reli6 ability organization or a regional entity to ensure 

7 compliance with a reliability standard or any Com8 mission order affecting the electric reliability organi9 zation or a regional entity. 

10 ‘‘(f) CHANGES IN ELECTRICITY RELIABILITY ORGA11 NIZATION RULES.—An electric reliability organization 

12 shall file with the Commission for approval any proposed 

13 rule or proposed rule change, accompanied by an expla14 nation of its basis and purpose. The Commission, upon 

15 its own motion or complaint, may propose a change to the 

16 rules of the electric reliability organization. A proposed 

17 rule or proposed rule change shall take effect upon a find18 ing by the Commission, after notice and opportunity for 

19 comment, that the change is just, reasonable, not unduly 

20 discriminatory or preferential, is in the public interest, and 

21 satisfies the requirements of subsection (c)(2). 

22 ‘‘(g) COORDINATION WITH CANADA AND MEXICO.—

23 ‘‘(1) The electric reliability organization shall 

24 take all appropriate steps to gain recognition in 

25 Canada and Mexico. 
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1 ‘‘(2) The President shall use his best efforts to 

2 enter into international agreements with the govern3 ments of Canada and Mexico to provide for effective 

4 compliance with reliability standards and the effec5 tiveness of the electric reliability organization in the 

6 United States and Canada or Mexico. 

7 ‘‘(h) RELIABILITY REPORTS.—The electric reliability 

8 organization shall conduct periodic assessments of the reli9 ability and adequacy of the interconnected bulk power sys10 tem in North America. 

11 ‘‘(i) SAVINGS PROVISIONS.—

12 ‘‘(1) The electric reliability organization shall 

13 have authority to develop and enforce compliance 

14 with standards for the reliable operation of only the 

15 bulk power system. 

16 ‘‘(2) This section does not provide the electric 

17 reliability organization or the Commission with au18 thority to order the construction of additional gen19 eration or transmission capacity or to set and en20 force compliance with standards for adequacy or 

21 safety of electric facilities or services. 

22 ‘‘(3) Nothing in this section shall be construed 

23 to preempt any authority of any State to take action 

24 to ensure the safety, adequacy, and reliability of 

25 electric service within that State, as long as such ac-
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1 tion is not inconsistent with any reliability standard 

2 established under this section. 

3 ‘‘(4) Not later than 90 days after the date of 

4 the application of the electric reliability organization 

5 or other affected party, and after notice and oppor6 tunity for comment, the Commission shall issue a 

7 final order determining whether a State action is in8 consistent with a reliability standard, taking into 

9 consideration any recommendation of the electric re10 liability organization. 

11 ‘‘(5) The Commission, after consultation with 

12 the electric reliability organization, may stay the ef13 fectiveness of any State action, pending the Commis14 sion’s issuance of a final order. 

15 ‘‘(j) APPLICATION OF ANTITRUST LAWS.—

16 ‘‘(1) To the extent undertaken to develop, im17 plement, or enforce a reliability standard, each of 

18 the following activities shall not, in any action under 

19 the antitrust laws, be deemed illegal per se: 

20 ‘‘(A) Activities undertaken by an electric 

21 reliability organization under this section. 

22 ‘‘(B) Activities of a user or owner or oper23 ator of the bulk power system undertaken in 

24 good faith under the rules of an electric reli25 ability organization. 
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1 ‘‘(2) In any action under the antitrust laws, an 

2 activity described in paragraph (1) shall be judged 

3 on the basis of its reasonableness, taking into ac4 count all relevant factors affecting competition and 

5 reliability. 

6 ‘‘(3) For purposes of this subsection, the term 

7 ‘antitrust laws’ has the meaning given the term in 

8 subsection (a) of the first section of the Clayton Act 

9 (15 U.S.C. 12(a)), except that it includes section 5 

10 of the Federal Trade Commission Act (15 U.S.C. 

11 45) to the extent that section 5 applies to unfair 

12 methods of competition. 

13 ‘‘(k) REGIONAL ADVISORY BODIES.—The Commis14 sion shall establish a regional advisory body on the petition 

of at least 2 15 ⁄3 of the States within a region that have more 

than 1 16 ⁄2 of their electric load served within the region. A 

17 regional advisory body shall be composed of one member 

18 from each participating State in the region, appointed by 

19 the Governor of each State, and may include representa20 tives of agencies, States, and provinces outside the United 

21 States. A regional advisory body may provide advice to the 

22 electric reliability organization, a regional reliability enti23 ty, or the Commission regarding the governance of an ex24 isting or proposed regional reliability entity within the 

25 same region, whether a standard proposed to apply within 
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1 the region is just, reasonable, not unduly discriminatory 

2 or preferential, and in the public interest, whether fees 

3 proposed to be assessed within the region are just, reason4 able, not unduly discriminatory or preferential, and in the 

5 public interest and any other responsibilities requested by 

6 the Commission. The Commission may give deference to 

7 the advice of any such regional advisory body if that body 

8 is organized on an interconnection-wide basis. 

9 ‘‘(l) APPLICATION TO ALASKA AND HAWAII.—The 

10 provisions of this section apply only to the contiguous 48 

11 States.’’. 

12 TITLE VI—MARKET-BASED INI13 TIATIVES TO REDUCE GREEN14 HOUSE GASES 

15 SEC. 600. DEFINITIONS. 

16 In this Act: 

17 (1) ADMINISTRATOR.—The term ‘‘Adminis18 trator’’ means the Administrator of the Environ19 mental Protection Agency. 

20 (2) BASELINE.—The term ‘‘baseline’’ means 

21 the historic greenhouse gas emission levels of an en22 tity, as adjusted upward by the Administrator to re23 flect actual reductions that are verified in accord24 ance with—
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1 (A) regulations promulgated under section 

2 611(c)(1); and 

3 (B) relevant standards and methods devel4 oped under this title. 

5 (3) CARBON DIOXIDE EQUIVALENTS.—The term 

6 ‘‘carbon dioxide equivalents’’ means, for each green7 house gas, the amount of each such greenhouse gas 

8 that makes the same contribution to global warming 

9 as one metric ton of carbon dioxide, as determined 

10 by the Administrator. 

11 (4) COVERED SECTORS.—The term ‘‘covered 

12 sectors’’ means the electricity, transportation, indus13 try, and commercial sectors, as such terms are used 

14 in the Inventory. 

15 (5) COVERED ENTITY.—The term ‘‘covered en16 tity’’ means an entity (including a branch, depart17 ment, agency, or instrumentality of Federal, State, 

18 or local government) that—

19 (A) owns or controls a source of green20 house gas emissions in the electric power, in21 dustrial, or commercial sector of the United 

22 States economy (as defined in the Inventory), 

23 refines or imports petroleum products for use in 

24 transportation, or produces or imports 
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1 hydrofluorocarbons, perfluorocarbons, or sulfur 

2 hexafluoride; and 

3 (B) emits, from any single facility owned 

4 by the entity, over 10,000 metric tons of green5 house gas per year, measured in units of carbon 

6 dioxide equivalents, or produces or imports—

7 (i) petroleum products that, when 

8 combusted, will emit, 

9 (ii) hydrofluorocarbons, 

10 perfluorocarbons, or sulfur hexafluoride 

11 that, when used, will emit, or 

12 (iii) other greenhouse gases that, 

13 when used, will emit, 

14 over 10,000 metric tons of greenhouse gas per 

15 year, measured in units of carbon dioxide 

16 equivalents. 

17 (6) DATABASE.—The term ‘‘database’’ means 

18 the national greenhouse gas database established 

19 under section 611. 

20 (7) DIRECT EMISSIONS.—The term ‘‘direct 

21 emissions’’ means greenhouse gas emissions by an 

22 entity from a facility that is owned or controlled by 

23 that entity. 

24 (8) FACILITY.—The term ‘‘facility’’ means a 

25 building, structure, or installation located on any 1 
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1 or more contiguous or adjacent properties of an enti2 ty in the United States. 

3 (9) GREENHOUSE GAS.—The term ‘‘greenhouse 

4 gas’’ means—

5 (A) carbon dioxide; 

6 (B) methane; 

7 (C) nitrous oxide; 

8 (D) hydrofluorocarbons; 

9 (E) perfluorocarbons; or 

10 (F) sulfur hexafluoride. 

11 (10) INDIRECT EMISSIONS.—The term ‘‘indirect 

12 emissions’’ means greenhouse gas emissions that 

13 are—

14 (A) a result of the activities of an entity; 

15 but 

16 (B) emitted from a facility owned or con17 trolled by another entity. 

18 (11) INVENTORY.—The term ‘‘Inventory’’ 

19 means the Inventory of U.S. Greenhouse Gas Emis20 sions and Sinks, prepared in compliance with the 

21 United Nations Framework Convention on Climate 

22 Change Decision 3/CP.5. 

23 (12) LEAKAGE.—The term ‘‘leakage’’ means—

24 (A) an increase in greenhouse gas emis25 sions by one facility or entity caused by a re-
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1 duction in greenhouse gas emissions by another 

2 facility or entity; or 

3 (B) a decrease in sequestration that is 

4 caused by an increase in sequestration at an5 other location. 

6 (13) PERMANENCE.—The term ‘‘permanence’’ 

7 means the extent to which greenhouse gases that are 

8 sequestered will not later be returned to the atmos9 phere. 

10 (14) REGISTRY.—The term ‘‘registry’’ means 

11 the registry of greenhouse gas emission reductions 

12 established under section 611(b)(2). 

13 (15) SECRETARY.—The term ‘‘Secretary’’ 

14 means the Secretary of Commerce. 

15 (16) SEQUESTRATION.—

16 (A) IN GENERAL.—The term ‘‘sequestra17 tion’’ means the capture, long-term separation, 

18 isolation, or removal of greenhouse gases from 

19 the atmosphere. 

20 (B) INCLUSIONS.—The term ‘‘sequestra21 tion’’ includes—

22 (i) agricultural and conservation prac23 tices; 

24 (ii) reforestation; 

25 (iii) forest preservation; and 
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1 (iv) any other appropriate method of 

2 capture, long-term separation, isolation, or 

3 removal of greenhouse gases from the at4 mosphere, as determined by the Adminis5 trator. 

6 (C) EXCLUSIONS.—The term ‘‘sequestra7 tion’’ does not include—

8 (i) any conversion of, or negative im9 pact on, a native ecosystem; or 

10 (ii) any introduction of non-native 

11 species. 

12 (17) SOURCE CATEGORY.—The term ‘‘source 

13 category’’ means a process or activity that leads to 

14 direct emissions of greenhouse gases, as listed in the 

15 Inventory. 

16 (18) STATIONARY SOURCE.—The term ‘‘sta17 tionary source’’ means generally any source of 

18 greenhouse gases except those emissions resulting di19 rectly from an engine for transportation purposes. 

20 Subtitle A—Federal Climate 

21 Change Research and Related 

22 Activities 

23 SEC. 601. NATIONAL SCIENCE FOUNDATION FELLOWSHIPS. 

24 The Director of the National Science Foundation 

25 shall establish a fellowship program for students pursuing 
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1 graduate studies in global climate change, including capa2 bility in observation, analysis, modeling, paleoclimatology, 

3 consequences, and adaptation. 

4 SEC. 602. RESEARCH GRANTS. 

5 Section 105 of the Global Change Research Act of 

6 1990 (15 U.S.C. 2935) is amended—

7 (1) by redesignating subsection (c) as sub8 section (d); and 

9 (2) by inserting after subsection (b) the fol10 lowing: 

11 ‘‘(c) RESEARCH GRANTS.—

12 ‘‘(1) COMMITTEE TO DEVELOP LIST OF PRI13 ORITY RESEARCH AREAS.—The Committee shall de14 velop a list of priority areas for research and devel15 opment on climate change that are not being ad16 dressed by Federal agencies. 

17 ‘‘(2) DIRECTOR OF OSTP TO TRANSMIT LIST TO

18 NSF.—The Director of the Office of Science and 

19 Technology Policy shall transmit the list to the Na20 tional Science Foundation. 

21 ‘‘(3) FUNDING THROUGH NSF.—

22 ‘‘(A) BUDGET REQUEST.—The National 

23 Science Foundation shall include, as part of the 

24 annual request for appropriations for the 

25 Science and Technology Policy Institute, a re-
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1 quest for appropriations to fund research in the 

2 priority areas on the list developed under para3 graph (1). 

4 ‘‘(B) AUTHORIZATION.—For fiscal year 

5 2006 and each fiscal year thereafter, there are 

6 authorized to be appropriated to the National 

7 Science Foundation not less than $25,000,000, 

8 to be made available through the Science and 

9 Technology Policy Institute, for research in 

10 those priority areas.’’. 

11 SEC. 603. ABRUPT CLIMATE CHANGE RESEARCH. 

12 (a) IN GENERAL.—The Secretary, through the Na13 tional Oceanic and Atmospheric Administration, shall 

14 carry out a program of scientific research on potential ab15 rupt climate change designed—

16 (1) to develop a global array of terrestrial and 

17 oceanographic indicators of paleoclimate in order to 

18 sufficiently to identify and describe past instances of 

19 abrupt climate change; 

20 (2) to improve understanding of thresholds and 

21 nonlinearities in geophysical systems related to the 

22 mechanisms of abrupt climate change; 

23 (3) to incorporate these mechanisms into ad24 vanced geophysical models of climate change; and 
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1 (4) to test the output of these models against 

2 an improved global array of records of past abrupt 

3 climate changes. 

4 (b) ABRUPT CLIMATE CHANGE DEFINED.—In this 

5 section, the term ‘‘abrupt climate change’’ means a change 

6 in climate that occurs so rapidly or unexpectedly that 

7 human or natural systems may have difficulty adapting 

8 to it. 

9 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

10 are authorized to be appropriated to the Secretary for fis11 cal year 2006 $60,000,000 to carry out this section, such 

12 sum to remain available until expended. 

13 SEC. 604. NIST GREENHOUSE GAS FUNCTIONS. 

14 Section 2(c) of the National Institute of Standards 

15 and Technology Act (15 U.S.C. 272(c)) is amended—

16 (1) by striking ‘‘and’’ after the semicolon in 

17 paragraph (21); 

18 (2) by redesignating paragraph (22) as para19 graph (23); and 

20 (3) by inserting after paragraph (21) the fol21 lowing: 

22 ‘‘(22) perform research to develop enhanced 

23 measurements, calibrations, standards, and tech24 nologies which will facilitate activities that reduce 

25 emissions of greenhouse gases or increase sequestra-
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1 tion of greenhouse gases, including carbon dioxide, 

2 methane, nitrous oxide, ozone, perfluorocarbons, 

3 hydrofluorocarbons, and sulfur hexafluoride; and’’. 

4 SEC. 605. DEVELOPMENT OF NEW MEASUREMENT TECH5 NOLOGIES. 

6 To facilitate implementation of section 614, the Sec7 retary shall initiate a program to develop, with technical 

8 assistance from appropriate Federal agencies, innovative 

9 standards and measurement technologies to calculate 

10 greenhouse gas emissions or reductions for which no accu11 rate or reliable measurement technology exists. The pro12 gram shall include—

13 (1) technologies (including remote sensing tech14 nologies) to measure carbon changes and other 

15 greenhouse gas emissions and reductions from agri16 culture, forestry, and other land use practices; and 

17 (2) technologies to calculate non-carbon dioxide 

18 greenhouse gas emissions from transportation. 

19 SEC. 606. ENHANCED ENVIRONMENTAL MEASUREMENTS 

20 AND STANDARDS. 

21 The National Institute of Standards and Technology 

22 Act (15 U.S.C. 271 et seq.) is amended—

23 (1) by redesignating sections 17 through 32 as 

24 sections 18 through 33, respectively; and 

25 (2) by inserting after section 16 the following: 
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1 ‘‘SEC. 17. CLIMATE CHANGE STANDARDS AND PROCESSES. 

2 ‘‘(a) IN GENERAL.—The Director shall establish 

3 within the Institute a program to perform and support re4 search on global climate change standards and processes, 

5 with the goal of providing scientific and technical knowl6 edge applicable to the reduction of greenhouse gases (as 

7 defined in section 600 of the New Apollo Energy Act of 

8 2005) and of facilitating implementation of section 614 

9 of that Act. 

10 ‘‘(b) RESEARCH PROGRAM.—

11 ‘‘(1) IN GENERAL.—The Director is authorized 

12 to conduct, directly or through contracts or grants, 

13 a global climate change standards and processes re14 search program. 

15 ‘‘(2) RESEARCH PROJECTS.—The specific con16 tents and priorities of the research program shall be 

17 determined in consultation with appropriate Federal 

18 agencies, including the Environmental Protection 

19 Agency, the National Oceanic and Atmospheric Ad20 ministration, and the National Aeronautics and 

21 Space Administration. The program generally shall 

22 include basic and applied research—

23 ‘‘(A) to develop and provide the enhanced 

24 measurements, calibrations, data, models, and 

25 reference material standards which will enable 

26 the monitoring of greenhouse gases; 
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1 ‘‘(B) to assist in establishing a baseline 

2 reference point for future trading in greenhouse 

3 gases and the measurement of progress in emis4 sions reduction; 

5 ‘‘(C) that will be exchanged internationally 

6 as scientific or technical information which has 

7 the stated purpose of developing mutually rec8 ognized measurements, standards, and proce9 dures for reducing greenhouse gases; and 

10 ‘‘(D) to assist in developing improved in11 dustrial processes designed to reduce or elimi12 nate greenhouse gases. 

13 ‘‘(c) NATIONAL MEASUREMENT LABORATORIES.—

14 ‘‘(1) IN GENERAL.—In carrying out this sec15 tion, the Director shall utilize the collective skills of 

16 the National Measurement Laboratories of the Na17 tional Institute of Standards and Technology to im18 prove the accuracy of measurements that will permit 

19 better understanding and control of industrial chem20 ical processes and result in the reduction or elimi21 nation of greenhouse gases. 

22 ‘‘(2) MATERIAL, PROCESS, AND BUILDING RE23 SEARCH.—The National Measurement Laboratories 

24 shall conduct research under this subsection that in25 cludes—
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1 ‘‘(A) developing material and manufac2 turing processes which are designed for energy 

3 efficiency and reduced greenhouse gas emissions 

4 into the environment; 

5 ‘‘(B) developing chemical processes to be 

6 used by industry that, compared to similar 

7 processes in commercial use, result in reduced 

8 emissions of greenhouse gases or increased se9 questration of greenhouse gases; and 

10 ‘‘(C) enhancing building performance with 

11 a focus in developing standards or tools which 

12 will help incorporate low- or no-emission tech13 nologies into building designs. 

14 ‘‘(3) STANDARDS AND TOOLS.—The National 

15 Measurement Laboratories shall develop standards 

16 and tools under this subsection that include software 

17 to assist designers in selecting alternate building 

18 materials, performance data on materials, artificial 

19 intelligence-aided design procedures for building sub20 systems and ‘smart buildings’, and improved test 

21 methods and rating procedures for evaluating the 

22 energy performance of residential and commercial 

23 appliances and products. 

24 ‘‘(d) NATIONAL VOLUNTARY LABORATORY ACCREDI25 TATION PROGRAM.—The Director shall utilize the Na-
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1 tional Voluntary Laboratory Accreditation Program under 

2 this section to establish a program to include specific cali3 bration or test standards and related methods and proto4 cols assembled to satisfy the unique needs for accredita5 tion in measuring the production of greenhouse gases. In 

6 carrying out this subsection the Director may cooperate 

7 with other departments and agencies of the Federal Gov8 ernment, State and local governments, and private organi9 zations.’’. 

10 SEC. 607. TECHNOLOGY DEVELOPMENT AND DIFFUSION. 

11 The Director of the National Institute of Standards 

12 and Technology, through the Manufacturing Extension 

13 Partnership Program, may develop a program to promote 

14 the use, by the more than 380,000 small manufacturers, 

15 of technologies and techniques that result in reduced emis16 sions of greenhouse gases or increased sequestration of 

17 greenhouse gases. 

18 SEC. 608. AGRICULTURAL OUTREACH PROGRAM. 

19 (a) IN GENERAL.—The Secretary of Agriculture, act20 ing through the Global Change Program Office and in 

21 consultation with the heads of other appropriate depart22 ments and agencies, shall establish the Climate Change 

23 Education and Outreach Initiative Program to educate, 

24 and reach out to, agricultural organizations and individual 

25 farmers on global climate change. 
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1 (b) PROGRAM COMPONENTS.—The program—

2 (1) shall be designed to ensure that agricultural 

3 organizations and individual farmers receive detailed 

4 information about—

5 (A) the potential impact of climate change 

6 on their operations and well-being; 

7 (B) market-driven economic opportunities 

8 that may come from storing carbon in soils and 

9 vegetation, including emerging private sector 

10 markets for carbon storage; and 

11 (C) techniques for measuring, monitoring, 

12 verifying, and inventorying such carbon capture 

13 efforts; 

14 (2) may incorporate existing efforts in any area 

15 of activity referenced in paragraph (1) or in related 

16 areas of activity; 

17 (3) shall provide—

18 (A) outreach materials to interested par19 ties; 

20 (B) workshops; and 

21 (C) technical assistance; and 

22 (4) may include the creation and development 

23 of regional centers on climate change or coordination 

24 with existing centers (including such centers within 
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1 NRCS and the Cooperative State Research Edu2 cation and Extension Service). 

3 SEC. 609. NOAA REPORT ON CLIMATE CHANGE EFFECTS; 

4 PREPARATION ASSISTANCE. 

5 The Coastal Zone Management Act of 1972 (16 

6 U.S.C. 1451 et seq.) is amended by adding at the end 

7 the following: 

8 ‘‘REPORT ON EFFECTS OF CLIMATE CHANGE

9 ‘‘SEC. 320. (a) IN GENERAL.—The Secretary shall 

10 report to the Congress not later than 2 years after the 

11 date of enactment of this section, and every 5 years there12 after, on the possible and projected impacts of climate 

13 change on—

14 ‘‘(1) oceanic and coastal ecosystems, including 

15 marine fish and wildlife and their habitat, and the 

16 commercial and recreational fisheries and tourism 

17 industries associated with them; and 

18 ‘‘(2) coastal communities, including private resi19 dential and commercial development and public in20 frastructure in the coastal zone. 

21 ‘‘(b) CONTENTS.—Each report under this section 

22 shall include information regarding—

23 ‘‘(1) the impacts that may be due to climate 

24 change that have occurred as of the date of the sub25 mission of the report; and 
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1 ‘‘(2) the projected future impacts of climate 

2 change. 

3 ‘‘(c) IMPACTS.—The impacts reported on under sub4 section (b) shall include any—

5 ‘‘(1) increases in sea level; 

6 ‘‘(2) increases in storm activity and intensity; 

7 ‘‘(3) increases in floods, droughts, and other ex8 tremes of weather; 

9 ‘‘(4) increases in the temperature of the air and 

10 the water on oceanic and coastal ecosystems, with a 

11 particular focus on vulnerable fisheries and eco12 systems; and 

13 ‘‘(5) changes in the acidity of the ocean surface 

14 associated with an increase in concentration of car15 bon dioxide in the atmosphere. 

16 ‘‘CLIMATE CHANGE PREPARATION ASSISTANCE

17 ‘‘SEC. 321. (a) IN GENERAL.—The Secretary shall 

18 provide technical assistance to each coastal state that has 

19 an approved coastal zone management plan under this 

20 title, to assist such States in preparing persons living with21 in their coastal zones to adapt to climate change. 

22 ‘‘(b) IDENTIFICATION OF AFFECTED AREAS AND AD23 APTATIONS.—In carrying out this section, the Secretary 

24 shall—
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1 ‘‘(1) identify the projected impacts of climate 

2 change to which persons located in coastal zones 

3 may need to adapt, including—

4 ‘‘(A) increases in sea level; 

5 ‘‘(B) increases in storm activity and inten6 sity; and 

7 ‘‘(C) increases in floods, droughts, and 

8 other extremes of weather; 

9 ‘‘(2) identify the specific coastal areas of the 

10 United States, and the public and private develop11 ment in coastal communities and the natural re12 sources of the coastal zone, that are vulnerable to 

13 the impacts identified under paragraph (1); 

14 ‘‘(3) identify the various adaptation measures 

15 that may be used to protect the areas and resources 

16 identified under paragraph (2) from the impacts 

17 identified under paragraph (1); and 

18 ‘‘(4) estimate the costs of the adaptation meas19 ures identified under paragraph (3).’’. 

20 Subtitle B—National Greenhouse 

21 Gas Database 

22 SEC. 611. NATIONAL GREENHOUSE GAS DATABASE AND 

23 REGISTRY ESTABLISHED. 

24 (a) ESTABLISHMENT.—As soon as practicable after 

25 the date of enactment of this Act, the Administrator, in 
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1 coordination with the Secretary, the Secretary of Energy, 

2 the Secretary of Agriculture, and private sector and non3 governmental organizations, shall establish, operate, and 

4 maintain a database, to be known as the ‘‘National Green5 house Gas Database’’, to collect, verify, and analyze infor6 mation on greenhouse gas emissions by entities. 

7 (b) NATIONAL GREENHOUSE GAS DATABASE COM8 PONENTS.—The database shall consist of—

9 (1) an inventory of greenhouse gas emissions; 

10 and 

11 (2) a registry of greenhouse gas emission reduc12 tions and increases in greenhouse gas sequestra13 tions. 

14 (c) COMPREHENSIVE SYSTEM.—

15 (1) IN GENERAL.—Not later than 2 years after 

16 the date of enactment of this Act, the Administrator 

17 shall promulgate regulations to implement a com18 prehensive system for greenhouse gas emissions re19 porting, inventorying, and reductions registration. 

20 (2) REQUIREMENTS.—The Administrator shall 

21 ensure, to the maximum extent practicable, that—

22 (A) the comprehensive system described in 

23 paragraph (1) is designed to—
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1 (i) maximize completeness, trans2 parency, and accuracy of information re3 ported; and 

4 (ii) minimize costs incurred by entities 

5 in measuring and reporting greenhouse gas 

6 emissions; and 

7 (B) the regulations promulgated under 

8 paragraph (1) establish procedures and proto9 cols necessary—

10 (i) to prevent the double-counting of 

11 greenhouse gas emissions or emission re12 ductions reported by more than 1 reporting 

13 entity; 

14 (ii) to provide for corrections to errors 

15 in data submitted to the database; 

16 (iii) to provide for adjustment to data 

17 by reporting entities that have had a sig18 nificant organizational change (including 

19 mergers, acquisitions, and divestiture), in 

20 order to maintain comparability among 

21 data in the database over time; 

22 (iv) to provide for adjustments to re23 flect new technologies or methods for 

24 measuring or calculating greenhouse gas 

25 emissions; 
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1 (v) to account for changes in registra2 tion of ownership of emission reductions 

3 resulting from a voluntary private trans4 action between reporting entities; and 

5 (vi) to clarify the responsibility for re6 porting in the case of any facility owned or 

7 controlled by more than 1 entity. 

8 (3) SERIAL NUMBERS.—Through regulations 

9 promulgated under paragraph (1), the Administrator 

10 shall develop and implement a system that pro11 vides—

12 (A) for the verification of submitted emis13 sions reductions registered under section 613; 

14 (B) for the provision of unique serial num15 bers to identify the registered emission reduc16 tions made by an entity relative to the baseline 

17 of the entity; 

18 (C) for the tracking of the registered re19 ductions associated with the serial numbers; 

20 and 

21 (D) for such action as may be necessary to 

22 prevent counterfeiting of the registered reduc23 tions. 
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1 SEC. 612. INVENTORY OF GREENHOUSE GAS EMISSIONS 

2 FOR COVERED ENTITIES. 

3 (a) IN GENERAL.—Not later than July 1st of each 

4 calendar year after 2008, each covered entity shall submit 

5 to the Administrator a report that states, for the pre6 ceding calendar year, the entity-wide greenhouse gas emis7 sions (as reported at the facility level), including—

8 (1) the total quantity of direct greenhouse gas 

9 emissions from stationary sources, expressed in units 

10 of carbon dioxide equivalents, except those reported 

11 under paragraph (3); 

12 (2) the amount of petroleum products sold or 

13 imported by the entity and the amount of green14 house gases, expressed in units of carbon dioxide 

15 equivalents, that would be emitted when these prod16 ucts are used for transportation in the United 

17 States, as determined by the Administrator under 

18 section 621(b); 

19 (3) the amount of hydrofluorocarbons, 

20 perfluorocarbons, or sulfur hexafluoride, expressed 

21 in units of carbon dioxide equivalents, that are sold 

22 or imported by the entity and will ultimately be 

23 emitted in the United States, as determined by the 

24 Administrator under section 621(d); and 

25 (4) such other categories of emissions as the 

26 Administrator determines in the regulations promul-
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1 gated under section 611(c)(1) may be practicable 

2 and useful for the purposes of this Act, such as—

3 (A) indirect emissions from imported elec4 tricity, heat, and steam; 

5 (B) process and fugitive emissions; and 

6 (C) production or importation of green7 house gases. 

8 (b) COLLECTION AND ANALYSIS OF DATA.—The Ad9 ministrator shall collect and analyze information reported 

10 under subsection (a) for use under subtitle C. 

11 SEC. 613. GREENHOUSE GAS REDUCTION REPORTING. 

12 (a) IN GENERAL.—Subject to the requirements de13 scribed in subsection (b)—

14 (1) a covered entity may register greenhouse 

15 gas emission reductions achieved after 1990 and be16 fore 2010 under this section; and 

17 (2) an entity that is not a covered entity may 

18 register greenhouse gas emission reductions achieved 

19 at any time since 1990 under this section. 

20 (b) REQUIREMENTS.—

21 (1) IN GENERAL.—The requirements referred 

22 to in subsection (a) are that an entity (other than 

23 an entity described in paragraph (2)) shall—

24 (A) establish a baseline; and 
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1 (B) submit the report described in sub2 section (c)(1). 

3 (2) REQUIREMENTS APPLICABLE TO ENTITIES

4 ENTERING INTO CERTAIN AGREEMENTS.—An entity 

5 that enters into an agreement with a participant in 

6 the registry for the purpose of a carbon sequestra7 tion project shall not be required to comply with the 

8 requirements specified in paragraph (1) unless that 

9 entity is required to comply with the requirements 

10 by reason of an activity other than the agreement. 

11 (c) REPORTS.—

12 (1) REQUIRED REPORT.—Not later than July 

13 1st of each calendar year beginning more than 2 

14 years after the date of enactment of this Act, but 

15 subject to paragraph (3), an entity described in sub16 section (a) shall submit to the Administrator a re17 port that states, for the preceding calendar year, the 

18 entity-wide greenhouse gas emissions (as reported at 

19 the facility level), including—

20 (A) the total quantity of direct greenhouse 

21 gas emissions from stationary sources, ex22 pressed in units of carbon dioxide equivalents; 

23 (B) the amount of petroleum products sold 

24 or imported by the entity and the amount of 

25 greenhouse gases, expressed in units of carbon 
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1 dioxide equivalents, that would be emitted when 

2 these products are used for transportation in 

3 the United States, as determined by the Admin4 istrator under section 621(b); 

5 (C) the amount of hydrofluorocarbons, 

6 perfluorocarbons, or sulfur hexafluoride, ex7 pressed in units of carbon dioxide equivalents, 

8 that are sold or imported by the entity and will 

9 ultimately be emitted in the United States, as 

10 determined by the Administrator under section 

11 621(d); and 

12 (D) such other categories of emissions as 

13 the Administrator determines in the regulations 

14 promulgated under section 611(c)(1) may be 

15 practicable and useful for the purposes of this 

16 Act, such as—

17 (i) indirect emissions from imported 

18 electricity, heat, and steam; 

19 (ii) process and fugitive emissions; 

20 and 

21 (iii) production or importation of 

22 greenhouse gases. 

23 (2) VOLUNTARY REPORTING.—An entity de24 scribed in subsection (a) may (along with estab-
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1 lishing a baseline and reporting emissions under this 

2 section)—

3 (A) submit a report described in paragraph 

4 (1) before the date specified in that paragraph 

5 for the purposes of achieving and 

6 commoditizing greenhouse gas reductions 

7 through use of the registry and for other pur8 poses; and 

9 (B) submit to the Administrator, for inclu10 sion in the registry, information that has been 

11 verified in accordance with regulations promul12 gated under section 611(c)(1) and that relates 

13 to—

14 (i) any activity that resulted in the 

15 net reduction of the greenhouse gas emis16 sions of the entity or a net increase in se17 questration by the entity that were carried 

18 out during or after 1990 and before the es19 tablishment of the database, verified in ac20 cordance with regulations promulgated 

21 under section 611(c)(1), and submitted to 

22 the Administrator before the date that is 4 

23 years after the date of enactment of this 

24 Act; and 
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1 (ii) with respect to the calendar year 

2 preceding the calendar year in which the 

3 information is submitted, any project or 

4 activity that resulted in the net reduction 

5 of the greenhouse gas emissions of the en6 tity or a net increase in net sequestration 

7 by the entity. 

8 (3) PROVISION OF VERIFICATION INFORMATION

9 BY REPORTING ENTITIES.—Each entity that submits 

10 a report under this subsection shall provide informa11 tion sufficient for the Administrator to verify, in ac12 cordance with measurement and verification methods 

13 and standards developed under section 614, that the 

14 greenhouse gas report of the reporting entity—

15 (A) has been accurately reported; and 

16 (B) in the case of each voluntary report 

17 under paragraph (2), represents—

18 (i) actual reductions in direct green19 house gas emissions—

20 (I) relative to historic emission 

21 levels of the entity; and 

22 (II) after accounting for any in23 creases in indirect emissions described 

24 in paragraph (1)(D)(i); or 
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1 (ii) actual increases in net sequestra2 tion. 

3 (4) FAILURE TO SUBMIT REPORT.—An entity 

4 that participates or has participated in the registry 

5 and that fails to submit a report required under this 

6 subsection shall be prohibited from using, or allow7 ing another entity to use, its registered emissions re8 ductions or increases in sequestration to satisfy the 

9 requirements of section 621. 

10 (5) INDEPENDENT THIRD-PARTY

11 VERIFICATION.—To meet the requirements of this 

12 section and section 614, an entity that is required 

13 to submit a report under this section may—

14 (A) obtain independent third-party 

15 verification; and 

16 (B) present the results of the third-party 

17 verification to the Administrator. 

18 (6) AVAILABILITY OF DATA.—

19 (A) IN GENERAL.—The Administrator 

20 shall ensure that information in the database 

21 is—

22 (i) published; and 

23 (ii) accessible to the public, including 

24 in electronic format on the Internet. 
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1 (B) EXCEPTION.—Subparagraph (A) shall 

2 not apply in any case in which the Adminis3 trator determines that publishing or otherwise 

4 making available information described in that 

5 subparagraph poses a risk to national security 

6 or discloses confidential business information 

7 that cannot be derived from information that is 

8 otherwise publicly available and that would 

9 cause competitive harm if published. 

10 (7) DATA INFRASTRUCTURE.—The Adminis11 trator shall ensure, to the maximum extent prac12 ticable, that the database uses, and is integrated 

13 with, Federal, State, and regional greenhouse gas 

14 data collection and reporting systems in effect as of 

15 the date of enactment of this Act. 

16 (8) ADDITIONAL ISSUES TO BE CONSIDERED.—

17 In promulgating the regulations under section 

18 611(c)(1) and implementing the database, the Ad19 ministrator shall take into consideration a broad 

20 range of issues involved in establishing an effective 

21 database, including—

22 (A) the data and information systems and 

23 measures necessary to identify, track, and 

24 verify greenhouse gas emissions in a manner 
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1 that will encourage private sector trading and 

2 exchanges; 

3 (B) the greenhouse gas reduction and se4 questration measurement and estimation meth5 ods and standards applied in other countries, as 

6 applicable or relevant; 

7 (C) the extent to which available fossil 

8 fuels, greenhouse gas emissions, and greenhouse 

9 gas production and importation data are ade10 quate to implement the database; and 

11 (D) the differences in, and potential 

12 uniqueness of, the facilities, operations, and 

13 business and other relevant practices of persons 

14 and entities in the private and public sectors 

15 that may be expected to participate in the data16 base. 

17 (d) ANNUAL REPORT.—The Administrator shall pub18 lish an annual report that—

19 (1) describes the total greenhouse gas emissions 

20 and emission reductions reported to the database 

21 during the year covered by the report; 

22 (2) provides entity-by-entity and sector-by-sec23 tor analyses of the emissions and emission reduc24 tions reported; 
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1 (3) describes the atmospheric concentrations of 

2 greenhouse gases; 

3 (4) provides a comparison of current and past 

4 atmospheric concentrations of greenhouse gases; and 

5 (5) describes the activity during the year cov6 ered by the period in the trading of greenhouse gas 

7 emission allowances. 

8 SEC. 614. MEASUREMENT AND VERIFICATION. 

9 (a) STANDARDS.—

10 (1) IN GENERAL.—Not later than 1 year after 

11 the date of enactment of this Act, the Secretary 

12 shall establish by rule, in coordination with the Ad13 ministrator, the Secretary of Energy, and the Sec14 retary of Agriculture, comprehensive measurement 

15 and verification methods and standards to ensure a 

16 consistent and technically accurate record of green17 house gas emissions, emission reductions, sequestra18 tion, and atmospheric concentrations for use in the 

19 registry. 

20 (2) REQUIREMENTS.—The methods and stand21 ards established under paragraph (1) shall include—

22 (A) a requirement that a covered entity 

23 use a continuous emissions monitoring system, 

24 or another system of measuring or estimating 

25 emissions that is determined by the Secretary 
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1 to provide information with precision, reli2 ability, accessibility, and timeliness similar to 

3 that provided by a continuous emissions moni4 toring system where technologically feasible; 

5 (B) establishment of standardized meas6 urement and verification practices for reports 

7 made by all entities participating in the reg8 istry, taking into account—

9 (i) protocols and standards in use by 

10 entities requiring or desiring to participate 

11 in the registry as of the date of develop12 ment of the methods and standards under 

13 paragraph (1); 

14 (ii) boundary issues, such as leakage; 

15 (iii) avoidance of double counting of 

16 greenhouse gas emissions and emission re17 ductions; 

18 (iv) protocols to prevent a covered en19 tity from avoiding the requirements of this 

20 Act by reorganization into multiple entities 

21 that are under common control; and 

22 (v) such other factors as the Sec23 retary, in consultation with the Adminis24 trator, determines to be appropriate; 

25 (C) establishment of methods of—
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1 (i) estimating greenhouse gas emis2 sions, for those cases in which the Sec3 retary determines that methods of moni4 toring, measuring or estimating such emis5 sions with precision, reliability, accessi6 bility, and timeliness similar to that pro7 vided by a continuous emissions monitoring 

8 system are not technologically feasible at 

9 present; and 

10 (ii) reporting the accuracy of such es11 timations; 

12 (D) establishment of measurement and 

13 verification standards applicable to actions 

14 taken to reduce, avoid, or sequester greenhouse 

15 gas emissions; 

16 (E) in coordination with the Secretary of 

17 Agriculture, standards to measure the results of 

18 the use of carbon sequestration and carbon re19 capture technologies, including—

20 (i) soil carbon sequestration practices; 

21 and 

22 (ii) forest preservation and reforest23 ation activities that adequately address the 

24 issues of permanence, leakage, and 

25 verification; 
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1 (F) establishment of such other measure2 ment and verification standards as the Sec3 retary, in consultation with the Secretary of Ag4 riculture, the Administrator, and the Secretary 

5 of Energy, determines to be appropriate; 

6 (G) establishment of standards for obtain7 ing the Secretary’s approval of the suitability of 

8 geological storage sites that include evaluation 

9 of both the geology of the site and the entity’s 

10 capacity to manage the site; and 

11 (H) establishment of other features that, 

12 as determined by the Secretary, will allow enti13 ties to adequately establish a fair and reliable 

14 measurement and reporting system. 

15 (b) REVIEW AND REVISION.—The Secretary shall pe16 riodically review, and revise as necessary, the methods and 

17 standards developed under subsection (a). 

18 (c) PUBLIC PARTICIPATION.—The Secretary shall—

19 (1) make available to the public for comment, 

20 in draft form and for a period of at least 90 days, 

21 the methods and standards developed under sub22 section (a); and 

23 (2) after the 90-day period referred to in para24 graph (1), in coordination with the Secretary of En25 ergy, the Secretary of Agriculture, and the Adminis-
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1 trator, adopt the methods and standards developed 

2 under subsection (a) for use in implementing the 

3 database. 

4 (d) EXPERTS AND CONSULTANTS.—

5 (1) IN GENERAL.—The Secretary may obtain 

6 the services of experts and consultants in the private 

7 and nonprofit sectors in accordance with section 

8 3109 of title 5, United States Code, in the areas of 

9 greenhouse gas measurement, certification, and 

10 emission trading. 

11 (2) AVAILABLE ARRANGEMENTS.—In obtaining 

12 any service described in paragraph (1), the Sec13 retary may use any available grant, contract, cooper14 ative agreement, or other arrangement authorized by 

15 law. 

16 Subtitle C—Market-driven 

17 Greenhouse Gas Reductions 

18 CHAPTER 1—EMISSION REDUCTION RE19 QUIREMENTS; USE OF TRADEABLE AL20 LOWANCES 

21 SEC. 621. COVERED ENTITIES MUST SUBMIT ALLOWANCES 

22 FOR EMISSIONS. 

23 (a) IN GENERAL.—Beginning with calendar year 

24 2010—
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1 (1) each covered entity in the electric genera2 tion, industrial, and commercial sectors shall submit 

3 to the Administrator one tradeable allowance for 

4 every metric ton of greenhouse gases, measured in 

5 units of carbon dioxide equivalents, that it emits 

6 from stationary sources, except those described in 

7 paragraph (2); 

8 (2) each producer or importer of 

9 hydrofluorocarbons, perfluorocarbons, or sulfur 

10 hexafluoride that is a covered entity shall submit to 

11 the Administrator one tradeable allowance for every 

12 metric ton of hydrofluorocarbons, perfluorocarbons, 

13 or sulfur hexafluoride, measured in units of carbon 

14 dioxide equivalents, that it produces or imports and 

15 that will ultimately be emitted in the United States, 

16 as determined by the Administrator under sub17 section (d) and 

18 (3) each petroleum refiner or importer that is 

19 a covered entity shall submit one tradeable allowance 

20 for every unit of petroleum product it sells that will 

21 produce one metric ton of greenhouse gases, meas22 ured in units of carbon dioxide equivalents, as deter23 mined by the Administrator under subsection (b), 

24 when used for transportation. 
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1 (b) DETERMINATION OF TRANSPORTATION SECTOR

2 AMOUNT.—For the transportation sector, the Adminis3 trator shall determine the amount of greenhouse gases, 

4 measured in units of carbon dioxide equivalents, that will 

5 be emitted when petroleum products are used for trans6 portation. 

7 (c) EXCEPTION FOR CERTAIN DEPOSITED EMIS8 SIONS.—Notwithstanding subsection (a), a covered entity 

9 is not required to submit a tradeable allowance for any 

10 amount of greenhouse gas that would otherwise have been 

11 emitted from a facility under the ownership or control of 

12 that entity if—

13 (1) the emission is deposited in a geological 

14 storage facility approved by the Administrator de15 scribed in section 614(a)(2)(G); and 

16 (2) the entity agrees to submit tradeable allow17 ances for any portion of the deposited emission that 

18 is subsequently emitted from that facility. 

19 (d) DETERMINATION OF HYDROFLUROCARBON, 

20 PERFLUOROCARBON, AND SULFUR HEXAFLUORIDE

21 AMOUNT.—The Administrator shall determine the 

22 amounts of hydrofluorocarbons, perfluorocarbons, or sul23 fur hexafluoride, measured in units of carbon dioxide 

24 equivalents, that will be deemed to be emitted for purposes 

25 of this Act. 
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1 SEC. 622. COMPLIANCE. 

2 (a) IN GENERAL.—

3 (1) SOURCE OF TRADEABLE ALLOWANCES

4 USED.—A covered entity may use a tradeable allow5 ance to meet the requirements of this section with6 out regard to whether the tradeable allowance was 

7 allocated to it under chapter 2 or acquired from an8 other entity or the Climate Change Credit Corpora9 tion established under section 641. 

10 (2) VERIFICATION BY ADMINISTRATOR.—At 

11 various times during each year, the Administrator 

12 shall determine whether each covered entity has met 

13 the requirements of this section. In making that de14 termination, the Administrator shall—

15 (A) take into account the tradeable allow16 ances submitted by the covered entity to the 

17 Administrator; and 

18 (B) retire the serial number assigned to 

19 each such tradeable allowance. 

20 (b) ALTERNATIVE MEANS OF COMPLIANCE.—For the 

21 years after 2010, a covered entity may satisfy up to 15 

22 percent of its total allowance submission requirement 

23 under this section by—

24 (1) submitting tradeable allowances from an25 other nation’s market in greenhouse gas emissions 

26 if—
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1 (A) the Secretary determines that the 

2 other nation’s system for trading in greenhouse 

3 gas emissions is complete, accurate, and trans4 parent and reviews that determination at least 

5 once every 5 years; 

6 (B) the other nation has adopted enforce7 able limits on its greenhouse gas emissions 

8 which the tradeable allowances were issued to 

9 implement; and 

10 (C) the covered entity certifies that the 

11 tradeable allowance has been retired unused in 

12 the other nation’s market; 

13 (2) submitting a registered net increase in se14 questration, as registered in the database, adjusted, 

15 if necessary, to comply with the accounting stand16 ards and methods established under section 651; 

17 (3) submitting a greenhouse gas emissions re18 duction (other than a registered net increase in se19 questration) that was registered in the database by 

20 a person that is not a covered entity; or 

21 (4) submitting credits obtained from the Ad22 ministrator under section 623. 

23 (c) DEDICATED PROGRAM FOR SEQUESTRATION IN

24 AGRICULTURAL SOILS.—If a covered entity chooses to 

25 satisfy 15 percent of its total allowance submission re-
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1 quirements under the provisions of subsection (b), it shall 

2 satisfy up to 1.5 percent of its total allowance submission 

3 requirement by submitting registered net increases in se4 questration in agricultural soils, as registered in the data5 base, adjusted, if necessary, to comply with the accounting 

6 standards and methods established under section 651. 

7 SEC. 623. BORROWING AGAINST FUTURE REDUCTIONS. 

8 (a) IN GENERAL.—The Administrator shall establish 

9 a program under which a covered entity may—

10 (1) receive a credit in the current calendar year 

11 for anticipated reductions in emissions in a future 

12 calendar year; and 

13 (2) use the credit in lieu of a tradeable allow14 ance to meet the requirements of this Act for the 

15 current calendar year, subject to the limitation im16 posed by section 622(b). 

17 (b) DETERMINATION OF TRADEABLE ALLOWANCE

18 CREDITS.—The Administrator may make credits available 

19 under subsection (a) only for anticipated reductions in 

20 emissions that—

21 (1) are attributable to the realization of capital 

22 investments in equipment, the construction, recon23 struction, or acquisition of facilities, or the deploy24 ment of new technologies—
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1 (A) for which the covered entity has exe2 cuted a binding contract and secured, or ap3 plied for, all necessary permits and operating or 

4 implementation authority; 

5 (B) that will not become operational within 

6 the current calendar year; and 

7 (C) that will become operational and begin 

8 to reduce emissions from the covered entity 

9 within 5 years after the year in which the credit 

10 is used; and 

11 (2) will be realized within 5 years after the year 

12 in which the credit is used. 

13 (c) CARRYING COST.—If a covered entity uses a cred14 it under this section to meet the requirements of this Act 

15 for a calendar year (referred to as the use year), the 

16 tradeable allowance requirement for the year from which 

17 the credit was taken (referred to as the source year) shall 

18 be increased by an amount equal to—

19 (1) 10 percent for each credit borrowed from 

20 the source year; multiplied by 

21 (2) the number of years beginning after the use 

22 year and before the source year. 

23 (d) MAXIMUM BORROWING PERIOD.—A credit from 

24 a year beginning more than 5 years after the current year 
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1 may not be used to meet the requirements of this Act for 

2 the current year. 

3 (e) FAILURE TO ACHIEVE REDUCTIONS GENERATING

4 CREDIT.—If a covered entity that uses a credit under this 

5 section fails to achieve the anticipated reduction for which 

6 the credit was granted for the year from which the credit 

7 was taken, then—

8 (1) the covered entity’s requirements under this 

9 Act for that year shall be increased by the amount 

10 of the credit, plus the amount determined under 

11 subsection (c); 

12 (2) any tradeable allowances submitted by the 

13 covered entity for that year shall be counted first 

14 against the increase in those requirements; and 

15 (3) the covered entity may not use credits 

16 under this section to meet the increased require17 ments. 

18 SEC. 624. OTHER USES OF TRADEABLE ALLOWANCES. 

19 (a) IN GENERAL.—Subject to subsection (b)(2), 

20 tradeable allowances may be sold, exchanged, purchased, 

21 retired, or used as provided in this section. 

22 (b) LIMITATIONS ON INTERSECTOR TRADING.—

23 (1) INTERSECTOR TRADING.—Subject to para24 graph (2), a covered entity in a covered sector may 

25 purchase or otherwise acquire tradeable allowances 
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1 from a covered entity in another covered sector to 

2 satisfy the requirements of section 621. 

3 (2) EXCEPTION.—A covered entity in the elec4 tricity sector may not purchase or otherwise acquire 

5 a tradeable allowance from, or sell a tradeable allow6 ance to, an entity in a sector other than the elec7 tricity sector. 

8 (c) CLIMATE CHANGE CREDIT ORGANIZATION.—The 

9 Climate Change Credit Corporation established under sec10 tion 641 may sell tradeable allowances allocated to it 

11 under section 632(a)(2) to any covered entity or to any 

12 investor, broker, or dealer in such tradeable allowances. 

13 The Climate Change Credit Corporation shall use all pro14 ceeds from such sales in accordance with the provisions 

15 of section 642. 

16 (d) BANKING OF TRADEABLE ALLOWANCES.—Not17 withstanding the requirements of section 621, a covered 

18 entity that has more than a sufficient amount of tradeable 

19 allowances to satisfy the requirements of section 621, may 

20 refrain from submitting a tradeable allowance to satisfy 

21 the requirements in order to sell, exchange, or use the 

22 tradeable allowance in the future. 

23 SEC. 625. EXEMPTION OF SOURCE CATEGORIES. 

24 (a) IN GENERAL.—The Administrator may grant an 

25 exemption from the requirements of this Act to a source 
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1 category if the Administrator determines, after public no2 tice and comment, that it is not feasible to measure or 

3 estimate emissions from that source category, until such 

4 time as measurement or estimation becomes feasible. 

5 (b) REDUCTION OF LIMITATIONS.—If the Adminis6 trator exempts a source category under subsection (a), the 

7 Administrator shall also reduce the total tradeable allow8 ances under section 631(a)(1) by the amount of green9 house gas emissions that the exempted source category 

10 emitted in calendar year 2000, as identified in the 2000 

11 Inventory. 

12 (c) LIMITATION ON EXEMPTION.—The Administrator 

13 may not grant an exemption under subsection (a) to car14 bon dioxide produced from fossil fuel. 

15 CHAPTER 2—ESTABLISHMENT AND ALLO16 CATION OF TRADEABLE ALLOWANCES 

17 SEC. 631. ESTABLISHMENT OF TRADEABLE ALLOWANCES. 

18 (a) IN GENERAL.—The Administrator shall promul19 gate regulations to establish tradeable allowances, denomi20 nated in units of carbon dioxide equivalents, for calendar 

21 years beginning after 2009, equal to—

22 (1) 5896 million metric tons, measured in units 

23 of carbon dioxide equivalents, reduced by 
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1 (2) the amount of emissions of greenhouse 

2 gases in calendar year 2000 from non-covered enti3 ties. 

4 (b) SERIAL NUMBERS.—The Administrator shall as5 sign a unique serial number to each tradeable allowance 

6 established under subsection (a), and shall take such ac7 tion as may be necessary to prevent counterfeiting of 

8 tradeable allowances. 

9 (c) NATURE OF TRADEABLE ALLOWANCES.—A 

10 tradeable allowance is not a property right, and nothing 

11 in this title or any other provision of law limits the author12 ity of the United States to terminate or limit a tradeable 

13 allowance. 

14 (d) NON-COVERED ENTITY.—In this section: 

15 (1) IN GENERAL.—The term ‘‘non-covered enti16 ty’’ means an entity that—

17 (A) owns or controls a source of green18 house gas emissions in the electric power, in19 dustrial, or commercial sector of the United 

20 States economy (as defined in the Inventory), 

21 refines or imports petroleum products for use in 

22 transportation, or produces or imports 

23 hydrofluorocarbons, perfluorocarbons, or sulfur 

24 hexafluoride; and 

25 (B) is not a covered entity. 
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1 (2) EXCEPTION.—Notwithstanding paragraph 

2 (1), an entity that is a covered entity for any cal3 endar year beginning after 2009 shall not be consid4 ered to be a non-covered entity for purposes of sub5 section (a) only because it emitted, or its products 

6 would have emitted, 10,000 metric tons or less of 

7 greenhouse gas, measured in units of carbon dioxide 

8 equivalents, in the year 2000. 

9 SEC. 632. DETERMINATION OF TRADEABLE ALLOWANCE 

10 ALLOCATIONS. 

11 (a) IN GENERAL.—The Secretary shall determine—

12 (1) the amount of tradeable allowances to be al13 located to each covered sector of that sector’s allot14 ments; and 

15 (2) the amount of tradeable allowances to be al16 located to the Climate Change Credit Corporation 

17 established under section 641. 

18 (b) ALLOCATION FACTORS.—In making the deter19 mination required by subsection (a), the Secretary shall 

20 consider—

21 (1) the distributive effect of the allocations on 

22 household income and net worth of individuals; 

23 (2) the impact of the allocations on corporate 

24 income, taxes, and asset value; 
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1 (3) the impact of the allocations on income lev2 els of consumers and on their energy consumption; 

3 (4) the effects of the allocations in terms of eco4 nomic efficiency; 

5 (5) the ability of covered entities to pass 

6 through compliance costs to their customers; 

7 (6) the degree to which the amount of alloca8 tions to the covered sectors should decrease over 

9 time; and 

10 (7) the need to maintain the international com11 petitiveness of United States manufacturing and 

12 avoid the additional loss of United States manufac13 turing jobs. 

14 (c) ALLOCATION RECOMMENDATIONS AND IMPLE15 MENTATION.—Before allocating or providing tradeable al16 lowances under subsection (a) and within 24 months after 

17 the date of enactment of this Act, the Secretary shall sub18 mit the determinations under subsection (a) to the Senate 

19 Committee on Commerce, Science, and Transportation, 

20 the Senate Committee on Environment and Public Works, 

21 the House of Representatives Committee on Science, and 

22 the House of Representatives Committee on Energy and 

23 Commerce. The Secretary’s determinations under sub24 section (a)(1), including the allocations and provision of 

25 tradeable allowances pursuant to that determination, are 
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1 deemed to be a major rule (as defined in section 804(2) 

2 of title 5, United States Code), and subject to the provi3 sions of chapter 8 of that title. 

4 SEC. 633. ALLOCATION OF TRADEABLE ALLOWANCES. 

5 (a) IN GENERAL.—Beginning with calendar year 

6 2010 and after taking into account any initial allocations 

7 under section 635, the Administrator shall—

8 (1) allocate to each covered sector that sector’s 

9 allotments determined by the Administrator under 

10 section 632 (adjusted for any such initial allocations 

11 and the allocation to the Climate Change Credit 

12 Corporation established under section 641); and 

13 (2) allocate to the Climate Change Credit Cor14 poration established under section 641 the tradeable 

15 allowances allocable to that Corporation. 

16 (b) INTRASECTORIAL ALLOTMENTS.—The Adminis17 trator shall, by regulation, establish a process for the allo18 cation of tradeable allowances under this section, without 

19 cost to covered entities (except with respect to new en20 trants as provided in subsection (g)), that will—

21 (1) encourage investments that increase the ef22 ficiency of the processes that produce greenhouse 

23 gas emissions; 

24 (2) minimize the costs to the Government of al25 locating the tradeable allowances; 
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1 (3) not penalize a covered entity for emissions 

2 reductions made before 2010 and registered with the 

3 database; and 

4 (4) provide for the allocation and sale of 

5 tradeable allowances to new entrants in accordance 

6 with subsection (g). 

7 (c) POINT SOURCE ALLOCATION.—The Adminis8 trator shall allocate the tradeable allowances for the elec9 tricity generation, industrial, and commercial sectors to 

10 the entities owning or controlling the point sources of 

11 greenhouse gas emissions within that sector. 

12 (d) HYDROFLUOROCARBONS, PERFLUOROCARBONS, 

13 AND SULFUR HEXAFLUORIDE.—The Administrator shall 

14 allocate the tradeable allowances for producers or import15 ers of hydrofluorocarbons, perfluorocarbons, or sulfur 

16 hexafluoride to such producers or importers. 

17 (e) SPECIAL RULE FOR ALLOCATION WITHIN THE

18 TRANSPORTATION SECTOR.—The Administrator shall al19 locate the tradeable allowances for the transportation sec20 tor to petroleum refiners or importers that produce or im21 port petroleum products that will be used as fuel for trans22 portation. 

23 (f) ALLOCATIONS TO RURAL ELECTRIC COOPERA24 TIVES.—
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1 (1) IN GENERAL.—The Administrator shall 

2 make the allocations described in paragraph (2) each 

3 year at no cost. The allocations shall be offset from 

4 the allowances allocated to the Climate Change 

5 Credit Corporation. 

6 (2) RURAL ELECTRIC COOPERATIVES.—For 

7 each electric generating unit that is owned or oper8 ated by a rural electric cooperative, the Adminis9 trator shall allocate allowances in an amount equal 

10 to the greenhouse gas emissions of each such unit in 

11 2000, plus an amount equal to the average emis12 sions growth expected for all such units. 

13 (g) NEW ENTRANTS.—

14 (1) ALLOCATION.—Of the tradeable allowances 

15 allocated under this section to a covered sector for 

16 a calendar year, the percentage of such allowances 

17 allocated to new entrants into the sector—

18 (A) shall be 5 percent for calendar year 

19 2010; and 

20 (B) shall be increased by 0.5 percent for 

21 2013 and each succeeding calendar year, except 

22 that such total percentage shall not exceed 10 

23 percent. 

24 (2) AUCTIONS.—For calendar year 2010 and 

25 each subsequent calendar year, the Administrator 
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1 shall conduct an auction for the purpose of selling 

2 to new entrants in each covered sector the tradeable 

3 allowances allocated for such purpose under para4 graph (1). 

5 SEC. 634. ENSURING TARGET ADEQUACY. 

6 (a) IN GENERAL.—Beginning 2 years after the date 

7 of enactment of this Act, the Under Secretary of Com8 merce for Oceans and Atmosphere shall review the allow9 ances established by section 631 no less frequently than 

10 biennially—

11 (1) to re-evaluate the levels established by that 

12 section, after taking into account the best available 

13 science and the most currently available data, and 

14 (2) to re-evaluate the environmental and public 

15 health impacts of specific concentration levels of 

16 greenhouse gases, 

17 to determine whether the allowances established by sub18 section (a) continue to be consistent with the objective of 

19 the United Nations’ Framework Convention on Climate 

20 Change of stabilizing levels of greenhouse gas emissions 

21 at a level that will prevent dangerous anthropogenic inter22 ference with the climate system. 

23 (b) REVIEW OF 2010 LEVELS.—The Under Secretary 

24 shall specifically review in 2008 the level established under 

25 section 631(a)(1), and transmit a report on his reviews, 
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1 together with any recommendations, including legislative 

2 recommendations, for modification of the levels, to the 

3 Senate Committee on Commerce, Science, and Transpor4 tation, the Senate Committee on Environment and Public 

5 Works, the House of Representatives Committee on 

6 Science, and the House of Representatives Committee on 

7 Energy and Commerce. 

8 SEC. 635. INITIAL ALLOCATIONS FOR EARLY PARTICIPA9 TION AND ACCELERATED PARTICIPATION. 

10 Before making any allocations under section 633, the 

11 Administrator shall allocate—

12 (1) to any covered entity an amount of 

13 tradeable allowances equivalent to the amount of 

14 greenhouse gas emissions reductions registered by 

15 that covered entity in the national greenhouse gas 

16 database if—

17 (A) the covered entity has requested to use 

18 the registered reduction in the year of alloca19 tion; 

20 (B) the reduction was registered prior to 

21 2010; and 

22 (C) the Administrator retires the unique 

23 serial number assigned to the reduction under 

24 section 611(c)(3); and 
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1 (2) to any covered entity that has entered into 

2 an accelerated participation agreement under section 

3 636, such tradeable allowances as the Administrator 

4 has determined to be appropriate under that section. 

5 SEC. 636. BONUS FOR ACCELERATED PARTICIPATION. 

6 (a) IN GENERAL.—If a covered entity executes an 

7 agreement with the Administrator under which it agrees 

8 to reduce its level of greenhouse gas emissions to a level 

9 no greater than the level of its greenhouse gas emissions 

10 for calendar year 1990 by the year 2010, then, for the 

11 6-year period beginning with calendar year 2010, the Ad12 ministrator shall—

13 (1) provide additional tradeable allowances to 

14 that entity when allocating allowances under section 

15 634 in order to recognize the additional emissions 

16 reductions that will be required of the covered entity; 

17 (2) allow that entity to satisfy 20 percent of its 

18 requirements under section 621 by—

19 (A) submitting tradeable allowances from 

20 another nation’s market in greenhouse gas 

21 emissions under the conditions described in sec22 tion 622(b)(1); 

23 (B) submitting a registered net increase in 

24 sequestration, as registered in the National 

25 Greenhouse Gas Database established under 
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1 section 611, and as adjusted by the appropriate 

2 sequestration discount rate established under 

3 section 651; or 

4 (C) submitting a greenhouse gas emission 

5 reduction (other than a registered net increase 

6 in sequestration) that was registered in the Na7 tional Greenhouse Gas Database by a person 

8 that is not a covered entity. 

9 (b) TERMINATION.—An entity that executes an 

10 agreement described in subsection (a) may terminate the 

11 agreement at any time. 

12 (c) FAILURE TO MEET COMMITMENT.—If an entity 

13 that executes an agreement described in subsection (a) 

14 fails to achieve the level of emissions to which it committed 

15 by calendar year 2010—

16 (1) its requirements under section 621 shall be 

17 increased by the amount of any tradeable allowances 

18 provided to it under subsection (a)(1); and 

19 (2) any tradeable allowances submitted there20 after shall be counted first against the increase in 

21 those requirements. 
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1 CHAPTER 3—CLIMATE CHANGE CREDIT 

2 CORPORATION 

3 SEC. 641. ESTABLISHMENT. 

4 (a) IN GENERAL.—The Climate Change Credit Cor5 poration is established as a nonprofit corporation without 

6 stock. The Corporation shall not be considered to be an 

7 agency or establishment of the United States Government. 

8 (b) APPLICABLE LAWS.—The Corporation shall be 

9 subject to the provisions of this title and, to the extent 

10 consistent with this title, to the District of Columbia Busi11 ness Corporation Act. 

12 (c) BOARD OF DIRECTORS.—The Corporation shall 

13 have a board of directors of 5 individuals who are citizens 

14 of the United States, of whom 1 shall be elected annually 

15 by the board to serve as chairman. No more than 3 mem16 bers of the board serving at any time may be affiliated 

17 with the same political party. The members of the board 

18 shall be appointed by the President of the United States, 

19 by and with the advice and consent of the Senate and shall 

20 serve for terms of 5 years. 

21 SEC. 642. PURPOSES AND FUNCTIONS. 

22 (a) TRADING.—The Corporation—

23 (1) shall receive and manage tradeable allow24 ances allocated to it under section 633(a)(2); and 
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1 (2) shall buy and sell tradeable allowances, 

2 whether allocated to it under that section or ob3 tained by purchase, trade, or donation from other 

4 entities; but 

5 (3) may not retire tradeable allowances unused. 

6 (b) USE OF TRADEABLE ALLOWANCES AND PRO7 CEEDS.—

8 (1) IN GENERAL.—The Corporation shall use 

9 the tradeable allowances, and proceeds derived from 

10 its trading activities in tradeable allowances, to re11 duce costs borne by consumers as a result of the 

12 greenhouse gas reduction requirements of this Act. 

13 The reductions—

14 (A) may be obtained by buy-down, subsidy, 

15 negotiation of discounts, consumer rebates, or 

16 otherwise; 

17 (B) shall be, as nearly as possible, equi18 tably distributed across all regions of the 

19 United States; and 

20 (C) may include arrangements for pref21 erential treatment to consumers who can least 

22 afford any such increased costs. 

23 (2) TRANSITION ASSISTANCE TO DISLOCATED

24 WORKERS AND COMMUNITIES.—The Corporation 

25 shall allocate a percentage of the proceeds derived 
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1 from its trading activities in tradeable allowances to 

2 provide transition assistance to dislocated workers 

3 and communities. Transition assistance may take 

4 the form of—

5 (A) grants to employers, employer associa6 tions, and representatives of employees—

7 (i) to provide training, adjustment as8 sistance, and employment services to dis9 located workers; and 

10 (ii) to make income-maintenance and 

11 needs-related payments to dislocated work12 ers; and 

13 (B) grants to State and local governments 

14 to assist communities in attracting new employ15 ers or providing essential local government serv16 ices. 

17 (3) PHASE-OUT OF TRANSITION ASSISTANCE.—

18 The percentage allocated by the Corporation under 

19 paragraph (2)—

20 (A) shall be 20 percent for 2010; 

21 (B) shall be reduced by 2 percentage 

22 points each year thereafter; and 

23 (C) may not be reduced below zero. 

24 (4) TECHNOLOGY DEPLOYMENT PROGRAMS.—

25 The Corporation shall establish and carry out a pro-
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1 gram, through direct grants, revolving loan pro2 grams, or other financial measures, to provide sup3 port for the deployment of technology to assist in 

4 compliance with this Act by distributing the pro5 ceeds from no less than 10 percent of the total al6 lowances allocated to it. The support shall include 

7 the following: 

8 (A) COAL GASIFICATION COMBINED-CYCLE

9 AND GEOLOGICAL CARBON STORAGE PRO10 GRAM.—The Corporation shall establish and 

11 carry out a program, through direct grants, to 

12 provide incentives for the repowering of existing 

13 facilities or construction of new facilities pro14 ducing electricity or other products from coal 

15 gasification combined-cycle plants that capture 

16 and geologically store at least 90 percent of the 

17 carbon dioxide produced at the facility in ac18 cordance with requirements established by the 

19 Administrator to ensure the permanence of the 

20 storage and that such storage will not cause or 

21 contribute to significant adverse effects on pub22 lic health or the environment. The Corporation 

23 shall ensure that no less than 20 percent of the 

24 funding under this program is distributed to 

25 rural electric cooperatives. 
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1 (B) AGRICULTURAL PROGRAMS.—The Cor2 poration shall establish and carry out a pro3 gram, through direct grants, revolving loan pro4 grams, or other financial measures, to provide 

5 incentives for greenhouse gas emissions reduc6 tions or net increases in greenhouse gas seques7 tration on agricultural lands. The program shall 

8 include incentives for—

9 (i) production of wind energy on agri10 cultural lands; 

11 (ii) agricultural management practices 

12 that achieve verified, incremental increases 

13 in net carbon sequestration, in accordance 

14 with the requirements established by the 

15 Administrator under section 651; and 

16 (iii) production of renewable fuels 

17 that, after consideration of the energy 

18 needed to produce such fuels, result in a 

19 net reduction in greenhouse gas emissions. 

20 (c) COORDINATION WITH OTHER BENEFITS.—The 

21 Corporation shall not provide assistance under this section 

22 to any person if such person has received assistance under 

23 section 212 or 731. 
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1 CHAPTER 4—SEQUESTRATION 

2 ACCOUNTING; PENALTIES 

3 SEC. 651. PENALTIES. 

4 Any covered entity that fails to meet the require5 ments of section 621 for a year shall be liable for a civil 

6 penalty, payable to the Administrator, equal to thrice the 

7 market value (determined as of the last day of the year 

8 at issue) of the tradeable allowances that would be nec9 essary for that covered entity to meet those requirements 

10 on the date of the emission that resulted in the violation. 

11 SEC. 652. SEQUESTRATION ACCOUNTING. 

12 (a) SEQUESTRATION ACCOUNTING.—If a covered en13 tity uses a registered net increase in sequestration to sat14 isfy the requirements of section 621 for any year, that 

15 covered entity shall submit information to the Adminis16 trator every 5 years thereafter sufficient to allow the Ad17 ministrator to determine, using the methods and stand18 ards created under section 614, whether that net increase 

19 in sequestration still exists. Unless the Administrator de20 termines that the net increase in sequestration continues 

21 to exist, the covered entity shall offset any loss of seques22 tration by submitting additional tradeable allowances of 

23 equivalent amount in the calender year following that de24 termination. 
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1 (b) REGULATIONS REQUIRED.—The Secretary, act2 ing through the Under Secretary of Commerce for Science 

3 and Technology, in coordination with the Secretary of Ag4 riculture, the Secretary of Energy, and the Administrator, 

5 shall issue regulations establishing the sequestration ac6 counting rules for all classes of sequestration projects. 

7 (c) CRITERIA FOR REGULATIONS.—In issuing regula8 tions under this section, the Secretary shall use the fol9 lowing criteria: 

10 (1) If the range of possible amounts of net in11 crease in sequestration for a particular class of se12 questration project is not more than 10 percent of 

13 the median of that range, the amount of sequestra14 tion awarded shall be equal to the median value of 

15 that range. 

16 (2) If the range of possible amounts of net in17 crease in sequestration for a particular class of se18 questration project is more than 10 percent of the 

19 median of that range, the amount of sequestration 

20 awarded shall be equal to the fifth percentile of that 

21 range. 

22 (3) The regulations shall include procedures for 

23 accounting for potential leakage from sequestration 

24 projects and for ensuring that any registered in25 crease in sequestration is in addition to that which 
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1 would have occurred if this Act had not been en2 acted. 

3 (d) UPDATES.—The Secretary shall update the se4 questration accounting rules for every class of sequestra5 tion project at least once every 5 years. 

6 TITLE VII—ENERGY 

7 INDEPENDENCE 

8 Subtitle A—Renewable Fuels 

9 Standard 

10 SEC. 701. RENEWABLE FUELS STANDARD. 

11 (a) IN GENERAL.—Section 211 of the Clean Air Act 

12 (42 U.S.C. 7545) is amended—

13 (1) by redesignating subsection (o) as sub14 section (q); and 

15 (2) by inserting after subsection (n) the fol16 lowing: 

17 ‘‘(o) RENEWABLE FUEL PROGRAM.—

18 ‘‘(1) DEFINITIONS.—In this subsection: 

19 ‘‘(A) CELLULOSIC BIOMASS ETHANOL.—

20 The term ‘cellulosic biomass ethanol’ means 

21 ethanol derived from any nonhazardous 

22 lignocellulosic or hemicellulosic matter that is 

23 available on a renewable or recurring basis, in24 cluding—

25 ‘‘(i) dedicated energy crops and trees; 
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1 ‘‘(ii) the following forest-related re2 sources—

3 ‘‘(I) harvesting residue 

4 ‘‘(II) pre-commercial thinnings; 

5 ‘‘(III) slash; and 

6 ‘‘(IV) bush; 

7 ‘‘(iii) plants; 

8 ‘‘(iv) grasses; 

9 ‘‘(v) agricultural residues; 

10 ‘‘(vi) fibers; 

11 ‘‘(vii) animal wastes and other waste 

12 materials; and 

13 ‘‘(viii) municipal solid waste. 

14 ‘‘(B) RENEWABLE FUEL.—

15 ‘‘(i) IN GENERAL.—The term ‘renew16 able fuel’ means motor vehicle fuel that—

17 ‘‘(I)(aa) is produced from grain, 

18 starch, oilseeds, or other biomass; or 

19 ‘‘(bb) is natural gas produced 

20 from a biogas source, including a 

21 landfill, sewage waste treatment plant, 

22 feedlot, or other place where decaying 

23 organic material is found; and 

24 ‘‘(II) is used to replace or reduce 

25 the quantity of fossil fuel present in a 
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1 fuel mixture used to operate a motor 

2 vehicle. 

3 ‘‘(ii) INCLUSION.—The term ‘renew4 able fuel’ includes cellulosic biomass eth5 anol and biodiesel (as defined in section 

6 312(f) of the Energy Policy Act of 1992). 

7 ‘‘(C) SMALL REFINERY.—The term ‘small 

8 refinery’ means a refinery for which average ag9 gregate daily crude oil throughput for the cal10 endar year (as determined by dividing the ag11 gregate throughput for the calendar year by the 

12 number of days in the calendar year) does not 

13 exceed 75,000 barrels. 

14 ‘‘(2) RENEWABLE FUEL PROGRAM.—

15 ‘‘(A) IN GENERAL.—Not later than the be16 ginning of calendar year 2007, the Adminis17 trator shall promulgate regulations ensuring 

18 that gasoline sold or dispensed to consumers in 

19 the United States, on an annual average basis, 

20 contains the applicable volume of renewable fuel 

21 as specified in subparagraph (B). Regardless of 

22 the date of promulgation, such regulations shall 

23 contain compliance provisions for refiners, 

24 blenders, and importers, as appropriate, to en25 sure that the requirements of this subsection 
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1 are met, but shall not restrict where renewables 

2 can be used, or impose any per-gallon obligation 

3 for the use of renewables. If the Administrator 

4 does not promulgate such regulations, the appli5 cable percentage, on a volume percentage of 

6 gasoline basis, shall be 1.62 in 2007. 

7 ‘‘(B) APPLICABLE VOLUME.—

8 ‘‘(i) CALENDAR YEARS 2007 THROUGH

9 2013.—For the purpose of subparagraph 

10 (A), the applicable volume for any of cal11 endar years 2007 through 2013 shall be 

12 determined in accordance with the fol13 lowing table:

‘‘Calendar year: (In billions of gallons)

2007 ....................................................................... 4.0

2008 ....................................................................... 4.5

2009 ....................................................................... 5.1

2010 ....................................................................... 5.7

2011 ....................................................................... 6.4

2012 ....................................................................... 7.2

2013 ....................................................................... 8.1

14 ‘‘(ii) CALENDAR YEAR 2014 AND

15 THEREAFTER.—For the purpose of sub16 paragraph (A), the applicable volume for 

17 calendar year 2014 and each calendar year 

18 thereafter shall be equal to the product ob19 tained by multiplying—
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1 ‘‘(I) the number of gallons of 

2 gasoline that the Administrator esti3 mates will be sold or introduced into 

4 commerce in the calendar year; and 

5 ‘‘(II) the ratio that—

6 ‘‘(aa) 8.1 billion gallons of 

7 renewable fuels; bears to 

8 ‘‘(bb) the number of gallons 

9 of gasoline sold or introduced 

10 into commerce in calendar year 

11 2013. 

12 ‘‘(iii) CELLULOSIC BIOMASS ETH13 ANOL.—For the purpose of subparagraph 

14 (A), the applicable volume shall include, as 

15 a percentage of the total applicable volume, 

16 cellulosic biomass ethanol as follows: 

17 ‘‘(I) For calendar year 2007, 1.0 

18 percent. 

19 ‘‘(II) For calendar year 2008, 

20 1.5 percent. 

21 ‘‘(III) For calendar year 2009, 

22 2.0 percent. 

23 ‘‘(IV) For calendar year 2010, 

24 2.5 percent. 
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1 ‘‘(V) For calendar year 2011, 3.0 

2 percent. 

3 ‘‘(VI) For calendar year 2012, 

4 3.5 percent. 

5 ‘‘(VII) For calendar year 2013 

6 and each subsequent calendar year, 

7 4.0 percent. 

8 ‘‘(3) APPLICABLE PERCENTAGES.—Not later 

9 than October 31 of each calendar year, through 

10 2012, the Administrator of the Energy Information 

11 Administration shall provide the Administrator an 

12 estimate of the volumes of gasoline sales in the 

13 United States for the coming calendar year. Based 

14 on such estimates, the Administrator shall by No15 vember 30 of each calendar year, through 2012, de16 termine and publish in the Federal Register, the re17 newable fuel obligation, on a volume percentage of 

18 gasoline basis, applicable to refiners, blenders, dis19 tributors and importers, as appropriate, for the com20 ing calendar year, to ensure that the requirements 

21 of paragraph (2) are met. For each calendar year, 

22 the Administrator shall establish a single applicable 

23 percentage that applies to all parties, and make pro24 vision to avoid redundant obligations. In determining 

25 the applicable percentages, the Administrator shall 
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1 make adjustments to account for the use of renew2 able fuels by exempt small refineries during the pre3 vious year. 

4 ‘‘(4) CELLULOSIC BIOMASS ETHANOL.—For the 

5 purpose of paragraph (2), 1 gallon of cellulosic bio6 mass ethanol shall be considered to be the equivalent 

7 of 3.0 gallons of renewable fuel. 

8 ‘‘(5) CREDIT PROGRAM.—

9 ‘‘(A) IN GENERAL.—The regulations pro10 mulgated to carry out this subsection shall pro11 vide for the generation of an appropriate 

12 amount of credits by any person that refines, 

13 blends, or imports gasoline that contains a 

14 quantity of renewable fuel that is greater than 

15 the quantity required under paragraph (2). 

16 Such regulations shall provide for the genera17 tion of an appropriate amount of credits for 

18 biodiesel fuel. If a small refinery notifies the 

19 Administrator that it waives the exemption pro20 vided by this Act, the regulations shall provide 

21 for the generation of credits by the small refin22 ery beginning in the year following such notifi23 cation. 

24 ‘‘(B) USE OF CREDITS.—A person that 

25 generates credits under subparagraph (A) may 
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1 use the credits, or transfer all or a portion of 

2 the credits to another person, for the purpose 

3 of complying with paragraph (2). 

4 ‘‘(C) LIFE OF CREDITS.—A credit gen5 erated under this paragraph shall be valid to 

6 show compliance—

7 ‘‘(i) in the calendar year in which the 

8 credit was generated or the next calendar 

9 year, or 

10 ‘‘(ii) in the calendar year in which the 

11 credit was generated or the next two con12 secutive calendar years if the Adminis13 trator promulgates regulations under para14 graph (6). 

15 ‘‘(D) INABILITY TO PURCHASE SUFFICIENT

16 CREDITS.—The regulations promulgated to 

17 carry out this subsection shall include provi18 sions allowing any person that is unable to gen19 erate or purchase sufficient credits to meet the 

20 requirements under paragraph (2) to carry for21 ward a renewables deficit provided that, in the 

22 calendar year following the year in which the 

23 renewables deficit is created, such person shall 

24 achieve compliance with the renewables require25 ment under paragraph (2), and shall generate 
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1 or purchase additional renewables credits to off2 set the renewables deficit of the previous year. 

3 ‘‘(6) SEASONAL VARIATIONS IN RENEWABLE

4 FUEL USE.—

5 ‘‘(A) STUDY.—For each of calendar years 

6 2007 through 2013, the Administrator of the 

7 Energy Information Administration shall con8 duct a study of renewable fuels blending to de9 termine whether there are excessive seasonal 

10 variations in the use of renewable fuels. 

11 ‘‘(B) REGULATION OF EXCESSIVE SEA12 SONAL VARIATIONS.—If, for any calendar year, 

13 the Administrator of the Energy Information 

14 Administration, based on the study under sub15 paragraph (A), makes the determinations speci16 fied in subparagraph (C), the Administrator 

17 shall promulgate regulations to ensure that 35 

18 percent or more of the quantity of renewable 

19 fuels necessary to meet the requirement of 

20 paragraph (2) is used during each of the peri21 ods specified in subparagraph (D) of each sub22 sequent calendar year. 

23 ‘‘(C) DETERMINATIONS.—The determina24 tions referred to in subparagraph (B) are 

25 that—
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1 ‘‘(i) less than 35 percent of the quan2 tity of renewable fuels necessary to meet 

3 the requirement of paragraph (2) has been 

4 used during one of the periods specified in 

5 subparagraph (D) of the calendar year; 

6 and 

7 ‘‘(ii) a pattern of excessive seasonal 

8 variation described in clause (i) will con9 tinue in subsequent calendar years. 

10 ‘‘(D) PERIODS.—The two periods referred 

11 to in this paragraph are—

12 ‘‘(i) April through September; and 

13 ‘‘(ii) January through March and Oc14 tober through December. 

15 ‘‘(E) EXCLUSIONS.—Renewable fuels 

16 blended or consumed in 2007 in a State which 

17 has received a waiver under section 209(b) shall 

18 not be included in the study in subparagraph 

19 (A). 

20 ‘‘(7) WAIVERS.—

21 ‘‘(A) IN GENERAL.—The Administrator, in 

22 consultation with the Secretary of Agriculture 

23 and the Secretary of Energy, may waive the re24 quirement of paragraph (2) in whole or in part 

25 on petition by one or more States by reducing 
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1 the national quantity of renewable fuel required 

2 under this subsection—

3 ‘‘(i) based on a determination by the 

4 Administrator, after public notice and op5 portunity for comment, that implementa6 tion of the requirement would severely 

7 harm the economy or environment of a 

8 State, a region, or the United States; or 

9 ‘‘(ii) based on a determination by the 

10 Administrator, after public notice and op11 portunity for comment, that there is an in12 adequate domestic supply or distribution 

13 capacity to meet the requirement. 

14 ‘‘(B) PETITIONS FOR WAIVERS.—The Ad15 ministrator, in consultation with the Secretary 

16 of Agriculture and the Secretary of Energy, 

17 shall approve or disapprove a State petition for 

18 a waiver of the requirement of paragraph (2) 

19 within 90 days after the date on which the peti20 tion is received by the Administrator. 

21 ‘‘(C) TERMINATION OF WAIVERS.—A waiv22 er granted under subparagraph (A) shall termi23 nate after 1 year, but may be renewed by the 

24 Administrator after consultation with the Sec-
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1 retary of Agriculture and the Secretary of En2 ergy. 

3 ‘‘(8) STUDY AND WAIVER FOR INITIAL YEAR OF

4 PROGRAM.—Not later than 180 days after the date 

5 of the enactment of this subsection, the Secretary of 

6 Energy (in this paragraph referred to as the ‘Sec7 retary’) shall complete for the Administrator a study 

8 assessing whether the renewable fuels requirement 

9 under paragraph (2) will likely result in significant 

10 adverse consumer impacts in 2007, on a national, 

11 regional, or State basis. Such study shall evaluate 

12 renewable fuel supplies and prices, blendstock sup13 plies, and supply and distribution system capabili14 ties. Based on such study, the Secretary shall make 

15 specific recommendations to the Administrator re16 garding waiver of the requirements of paragraph 

17 (2), in whole or in part, to avoid any such adverse 

18 impacts. Within 270 days after the date of the en19 actment of this subsection, the Administrator shall, 

20 consistent with the recommendations of the Sec21 retary waive, in whole or in part, the renewable fuels 

22 requirement under paragraph (2) by reducing the 

23 national quantity of renewable fuel required under 

24 this subsection in 2007. This provision shall not be 

25 interpreted as limiting the Administrator’s authority 
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1 to waive the requirements of paragraph (2) in whole, 

2 or in part, under paragraph (7), pertaining to waiv3 ers. 

4 ‘‘(9) SMALL REFINERIES.—

5 ‘‘(A) IN GENERAL.—The requirement of 

6 paragraph (2) shall not apply to small refineries 

7 until January 1, 2011. Not later than Decem8 ber 31, 2009, the Secretary of Energy shall 

9 complete for the Administrator a study to de10 termine whether the requirement of paragraph 

11 (2) would impose a disproportionate economic 

12 hardship on small refineries. For any small re13 finery that the Secretary of Energy determines 

14 would experience a disproportionate economic 

15 hardship, the Administrator shall extend the 

16 small refinery exemption for such small refinery 

17 for no less than two additional years. 

18 ‘‘(B) ECONOMIC HARDSHIP.—

19 ‘‘(i) EXTENSION OF EXEMPTION.—A 

20 small refinery may at any time petition the 

21 Administrator for an extension of the ex22 emption from the requirement of para23 graph (2) for the reason of dispropor24 tionate economic hardship. In evaluating a 

25 hardship petition, the Administrator, in 
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1 consultation with the Secretary of Energy, 

2 shall consider the findings of the study 

3 under subparagraph (A) in addition to 

4 other economic factors. 

5 ‘‘(ii) DEADLINE FOR ACTION ON PETI6 TIONS.—The Administrator shall act on 

7 any petition submitted by a small refinery 

8 for a hardship exemption not later than 90 

9 days after the receipt of the petition. 

10 ‘‘(C) CREDIT PROGRAM.—If a small refin11 ery notifies the Administrator that it waives the 

12 exemption provided by this paragraph, the reg13 ulations shall provide for the generation of 

14 credits by the small refinery beginning in the 

15 year following such notification. 

16 ‘‘(D) OPT-IN FOR SMALL REFINERS.—A 

17 small refinery shall be subject to the require18 ments of this subsection if it notifies the Ad19 ministrator that it waives the exemption under 

20 subparagraph (A).’’. 

21 (b) PENALTIES AND ENFORCEMENT.—Section 

22 211(d) of the Clean Air Act (42 U.S.C. 7545(d)) is 

23 amended—

24 (1) in paragraph (1)—
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1 (A) in the first sentence, by striking ‘‘or 

2 (n)’’ each place it appears and inserting ‘‘(n), 

3 or (o)’’; and 

4 (B) in the second sentence, by striking ‘‘or 

5 (m)’’ and inserting ‘‘(m), or (o)’’; and 

6 (2) in the first sentence of paragraph (2), by 

7 striking ‘‘and (n)’’ each place it appears and insert8 ing ‘‘(n), and (o)’’. 

9 (c) EXCLUSION FROM ETHANOL WAIVER.—Section 

10 211(h) of the Clean Air Act (42 U.S.C. 7545(h)) is 

11 amended—

12 (1) by redesignating paragraph (5) as para13 graph (6); and 

14 (2) by inserting after paragraph (4) the fol15 lowing: 

16 ‘‘(5) EXCLUSION FROM ETHANOL WAIVER.—

17 ‘‘(A) PROMULGATION OF REGULATIONS.—

18 Upon notification, accompanied by supporting 

19 documentation, from the Governor of a State 

20 that the Reid vapor pressure limitation estab21 lished by paragraph (4) will increase emissions 

22 that contribute to air pollution in any area in 

23 the State, the Administrator shall, by regula24 tion, apply, in lieu of the Reid vapor pressure 

25 limitation established by paragraph (4), the 
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1 Reid vapor pressure limitation established by 

2 paragraph (1) to all fuel blends containing gas3 oline and 10 percent denatured anhydrous eth4 anol that are sold, offered for sale, dispensed, 

5 supplied, offered for supply, transported or in6 troduced into commerce in the area during the 

7 high ozone season. 

8 ‘‘(B) DEADLINE FOR PROMULGATION.—

9 The Administrator shall promulgate regulations 

10 under subparagraph (A) not later than 90 days 

11 after the date of receipt of a notification from 

12 a Governor under that subparagraph. 

13 ‘‘(C) EFFECTIVE DATE.—

14 ‘‘(i) IN GENERAL.—With respect to an 

15 area in a State for which the Governor 

16 submits a notification under subparagraph 

17 (A), the regulations under that subpara18 graph shall take effect on the later of—

19 ‘‘(I) the first day of the first high 

20 ozone season for the area that begins 

21 after the date of receipt of the notifi22 cation; or 

23 ‘‘(II) 1 year after the date of re24 ceipt of the notification. 
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1 ‘‘(ii) EXTENSION OF EFFECTIVE DATE

2 BASED ON DETERMINATION OF INSUFFI3 CIENT SUPPLY.—

4 ‘‘(I) IN GENERAL.—If, after re5 ceipt of a notification with respect to 

6 an area from a Governor of a State 

7 under subparagraph (A), the Adminis8 trator determines, on the Administra9 tor’s own motion or on petition of any 

10 person and after consultation with the 

11 Secretary of Energy, that the promul12 gation of regulations described in sub13 paragraph (A) would result in an in14 sufficient supply of gasoline in the 

15 State, the Administrator, by regula16 tion—

17 ‘‘(aa) shall extend the effec18 tive date of the regulations under 

19 clause (i) with respect to the area 

20 for not more than 1 year; and 

21 ‘‘(bb) may renew the exten22 sion under item (aa) for two ad23 ditional periods, each of which 

24 shall not exceed 1 year. 
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1 ‘‘(II) DEADLINE FOR ACTION ON

2 PETITIONS.—The Administrator shall 

3 act on any petition submitted under 

4 subclause (I) not later than 180 days 

5 after the date of receipt of the peti6 tion.’’. 

7 (d) SURVEY OF RENEWABLE FUEL MARKET.—

8 (1) SURVEY AND REPORT.—Not later than De9 cember 1, 2008, and annually thereafter, the Admin10 istrator shall—

11 (A) conduct, with respect to each conven12 tional gasoline use area and each reformulated 

13 gasoline use area in each State, a survey to de14 termine the market shares of—

15 (i) conventional gasoline containing 

16 ethanol; 

17 (ii) reformulated gasoline containing 

18 ethanol; 

19 (iii) conventional gasoline containing 

20 renewable fuel; and 

21 (iv) reformulated gasoline containing 

22 renewable fuel; and 

23 (B) submit to the Congress, and make 

24 publicly available, a report on the results of the 

25 survey under subparagraph (A). 
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1 (2) RECORDKEEPING AND REPORTING RE2 QUIREMENTS.—The Administrator may require any 

3 refiner, blender, or importer to keep such records 

4 and make such reports as are necessary to ensure 

5 that the survey conducted under paragraph (1) is 

6 accurate. The Administrator shall rely, to the extent 

7 practicable, on existing reporting and recordkeeping 

8 requirements to avoid duplicative requirements. 

9 (3) APPLICABLE LAW.—Activities carried out 

10 under this subsection shall be conducted in a man11 ner designed to protect confidentiality of individual 

12 responses. 

13 SEC. 702. ELIMINATION OF OXYGEN CONTENT REQUIRE14 MENT FOR REFORMULATED GASOLINE. 

15 (a) ELIMINATION.—

16 (1) IN GENERAL.—Section 211(k) of the clean 

17 air act (42 U.S.C. 7545(k)) is amended—

18 (A) In paragraph (2)—

19 (i) in the second sentence of subpara20 graph (A), by striking ‘‘(including the oxy21 gen content requirement contained in sub22 paragraph (B))’’; 

23 (ii) by striking subparagraph (B); and 
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1 (iii) by redesignating subparagraphs 

2 (C) and (D) as subparagraphs (B) and 

3 (C), respectively; 

4 (B) in paragraph (3)(A), by striking clause 

5 (v); and 

6 (C) In paragraph (7)—

7 (i) In subparagraph (A) 

8 (I) by striking clause (i); and 

9 (II) by redesignating clauses (ii) 

10 and (iii) as clauses (i) and (ii), respec11 tively; and 

12 (ii) in subparagraph (C)—

13 (I) by striking clause (ii); and 

14 (II) by redesignating clause (iii) 

15 as clause (ii). 

16 (2) EFFECTIVE DATE.—The amendments made 

17 by paragraph (1) take effect on the date that is 1 

18 year after the date of enactment of this Act, except 

19 that the amendments shall take effect upon that 

20 date of enactment in any State that has received a 

21 waiver under section 209(b) of the Clean Air Act 

22 (42 U.S.C. 7543(b)). 

23 (b) MAINTENANCE OF TOXIC AIR POLLUTANT EMIS24 SION REDUCTIONS.—Section 211(k)(1) of the Clean Air 

25 Act (42 U.S.C. 7545(k)(1)) is amended—
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1 (1) by striking ‘‘Within 1 year after the enact2 ment of the Clean Air Act Amendments of 1990,’’ 

3 and inserting the following: 

4 ‘‘(A) IN GENERAL.—Not later than November 

5 15, 1991,’’; and 

6 (2) by adding at the end the following: 

7 ‘‘(B) MAINTENANCE OF TOXIC AIR POL8 LUTANT EMISSIONS REDUCTIONS FROM REFOR9 MULATED GASOLINE.—

10 ‘‘(i) DEFINITION OF PADD.—In this 

11 subparagraph, the term ‘PADD’ means a 

12 Petroleum Administration for Defense Dis13 trict 

14 ‘‘(ii) REGULATIONS REGARDING EMIS15 SIONS OF TOXIC AIR POLLUTANTS.—Not 

16 later than 270 days after the date of en17 actment of this subparagraph, the Admin18 istrator shall establish, for each refinery or 

19 importer, standards for toxic air pollutants 

20 from use of the reformulated gasoline pro21 duced or distributed by the refinery or im22 porter that maintain the reduction of the 

23 average annual aggregate emissions of 

24 toxic air pollutants for reformulated gaso25 line produced or distributed by the refinery 
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1 or importer during calendar years 2002 

2 and 2003, determined on the basis of data 

3 collected by the Administrator with respect 

4 to the refinery or importer. 

5 ‘‘(iii) STANDARDS APPLICABLE TO

6 SPECIFIC REFINERIES OR IMPORTERS.—

7 ‘‘(I) APPLICABILITY OF STAND8 ARDS.—For any calendar year, the 

9 standards applicable to a refinery or 

10 importer under clause (ii) shall apply 

11 to the quantity of gasoline produced 

12 or distributed by the refinery or im13 porter in the calendar year only to the 

14 extent that the quantity is less than 

15 or equal to the average annual quan16 tity of reformulated gasoline produced 

17 or distributed by the refinery or im18 porter during calendar years 2002 

19 and 2003. 

20 ‘‘(II) APPLICABILITY OF OTHER

21 STANDARDS.—For any calendar year, 

22 the quantity of gasoline produced or 

23 distributed by a refinery or importer 

24 that is in excess of the quantity sub25 ject to subclause (I) shall be subject 
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1 to standards for toxic air pollutants 

2 promulgated under subparagraph (A) 

3 and paragraph (3)(B). 

4 ‘‘(iv) CREDIT PROGRAM.—The Admin5 istrator shall provide for the granting and 

6 use of credits for emissions of toxic air pol7 lutants in the same manner as provided in 

8 paragraph (7). 

9 ‘‘(v) REGIONAL PROTECTION OF

10 TOXICS REDUCTION BASELINES.—

11 ‘‘(I) IN GENERAL.—Not later 

12 than 60 days after the date of enact13 ment of this subparagraph, and not 

14 later than April 1 of each calendar 

15 year that begins after that date of en16 actment, the Administrator shall pub17 lish in the Federal Register a report 

18 that specifies, with respect to the pre19 vious calendar year—

20 ‘‘(aa) the quantity of refor21 mulated gasoline produced that is 

22 in excess of the average annual 

23 quantity of reformulated gasoline 

24 produced in 2002 and 2003; and 
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1 ‘‘(bb) the reduction of the 

2 average annual aggregate emis3 sions of toxic air pollutants in 

4 each PADD, based on retail sur5 vey data or data from other ap6 propriate sources. 

7 ‘‘(II) EFFECT OF FAILURE TO

8 MAINTAIN AGGREGATE TOXICS RE9 DUCTIONS.—If, in any calendar year, 

10 the reduction of the average annual 

11 aggregate emissions of toxic air pol12 lutants in a PADD fails to meet or 

13 exceed the reduction of the average 

14 annual aggregate emissions of toxic 

15 air pollutants in the PADD in cal16 endar years 2002 and 2003, the Ad17 ministrator, not later than 90 days 

18 after the date of publication of the re19 port for the calendar year under sub20 clause (I), shall—

21 ‘‘(aa) identify, to the max22 imum extent practicable, the rea23 sons for the failure, including the 

24 sources, volumes, and character25 istics of reformulated gasoline 
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1 that contributed to the failure; 

2 and 

3 ‘‘(bb) promulgate revisions 

4 to the regulations promulgated 

5 under clause (ii), to take effect 

6 not earlier than 180 days but not 

7 later than 270 days after the 

8 date of promulgation, to provide 

9 that, notwithstanding clause 

10 (iii)(II), all reformulated gasoline 

11 produced or distributed at each 

12 refinery or importer shall meet 

13 the standards applicable under 

14 clause (ii) not later than April 1 

15 of the year following the report 

16 under this subclause and for sub17 sequent years. 

18 ‘‘(vi) REGULATIONS TO CONTROL

19 HAZARDOUS AIR POLLUTANTS FROM

20 MOTOR VEHICLES AND MOTOR VEHICLE

21 FUELS.—Not later than July 1, 2006, the 

22 Administrator shall promulgate final regu23 lations to control hazardous air pollutants 

24 from motor vehicles and motor vehicle 

25 fuels, as provided for in section 80.1045 of 
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1 title 40, Code of Federal Regulations (as 

2 in effect on the date of enactment of this 

3 subparagraph).’’. 

4 (c) CONSOLIDATION IN REFORMULATED GASOLINE

5 REGULATIONS.—Not later than 180 days after the date 

6 of enactment of this Act, the Administrator of the Envi7 ronmental Protection Agency shall revise the reformulated 

8 gasoline regulations under subpart D of part 80 of title 

9 40, Code of Federal Regulations (or any successor regula10 tions), to consolidate the regulations applicable to VOC–

11 Control Regions 1 and 2 under section 80.41 of that title 

12 by eliminating the less stringent requirements applicable 

13 to gasoline designated for VOC–Control Region 2 and in14 stead applying the more stringent requirements applicable 

15 to gasoline designated for VOC–Control Region 1. 

16 (d) AUTHORITY OF ADMINISTRATOR.—Nothing in 

17 this section affects or prejudices any legal claim or action 

18 with respect to regulations promulgated by the Adminis19 trator of the Environmental Protection Agency before the 

20 date of enactment of this act regarding—

21 (1) emissions of toxic air pollutants from motor 

22 vehicles; or 

23 (2) the adjustment of standards applicable to a 

24 specific refinery or importer made under the prior 

25 regulations. 
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1 (e) DETERMINATION REGARDING A STATE PETI2 TION.—Section 211(k) of the Clean Air Act (42 U.S.C. 

3 7545(k)) is amended by inserting after paragraph (10) the 

4 following: 

5 ‘‘(11) DETERMINATION REGARDING A STATE

6 PETITION.—

7 ‘‘(A) IN GENERAL.—Notwithstanding any 

8 other provision of this section, not later than 30 

9 days after the date of enactment of this para10 graph, the Administrator shall determine the 

11 adequacy of any petition received from a Gov12 ernor of a State to exempt gasoline sold in that 

13 State from the requirements under paragraph 

14 (2)(B). 

15 ‘‘(B) APPROVAL.—If a determination 

16 under subparagraph (A) is not made by the 

17 date that is 30 days after the date of enactment 

18 of this paragraph, the petition shall be consid19 ered to be approved.’’. 

20 SEC. 703. PUBLIC HEALTH AND ENVIRONMENTAL IMPACTS 

21 OF FUELS AND FUEL ADDITIVES. 

22 Section 211(b) of the Clean Air Act (42 U.S.C. 

23 7545(b)) is amended—

24 (1) in paragraph (2)—
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1 (A) by striking ‘‘may also’’ and inserting 

2 ‘‘shall, on a regular basis,’’; and 

3 (B) by striking subparagraph (A) and in4 serting the following: 

5 ‘‘(A) to conduct tests to determine poten6 tial public health and environmental effects of 

7 the fuel or additive (including carcinogenic, 

8 teratogenic, or mutagenic effects); and’’; and 

9 (2) by adding at the end the following: 

10 ‘‘(4) STUDY ON CERTAIN FUEL ADDITIVES AND

11 BLENDSTOCKS.—

12 ‘‘(A) IN GENERAL.—Not later than 2 years 

13 after the date of enactment of this paragraph, 

14 the Administrator shall—

15 ‘‘(i) conduct a study on the effects on 

16 public health, air quality, and water re17 sources of increased use of, and the feasi18 bility of using as substitutes for methyl 

19 tertiary butyl ether in gasoline 

20 ‘‘(I) ethyl tertiary butyl ether; 

21 ‘‘(II) tertiary amyl methyl ether; 

22 ‘‘(III) di-isopropyl ether; 

23 ‘‘(IV) tertiary butyl alcohol; 
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1 ‘‘(V) other ethers and heavy alco2 hols, as determined by the Adminis3 trator; 

4 ‘‘(VI) ethanol; 

5 ‘‘(VII) iso-octane; and 

6 ‘‘(VIII) alkylates; 

7 ‘‘(ii) conduct a study on the effects on 

8 public health, air quality, and water re9 sources of the adjustment for ethanol10 blended reformulated gasoline to the VOC 

11 performance requirements otherwise appli12 cable under sections 211(k)(1) and 

13 211(k)(3); and 

14 ‘‘(iii) submit to the Committee on En15 vironment and Public Works of the Senate 

16 and the Committee on Energy and Com17 merce of the House of Representatives a 

18 report describing the results of these stud19 ies. 

20 ‘‘(B) CONTRACTS FOR STUDY.—In car21 rying out this paragraph, the Administrator 

22 may enter into one or more contracts with non23 governmental entities including but not limited 

24 to National Energy Laboratories and institu25 tions of higher education (as defined in section 
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1 101 of the Higher Education Act of 1965 (20 

2 U.S.C. 1001)).’’. 

3 SEC. 704. ANALYSES OF MOTOR VEHICLE FUEL CHANGES. 

4 Section 211 of the Clean Air Act (42 U.S.C. 7545) 

5 is amended by inserting after subsection (o) (as added by 

6 section 101(a)(2)) the following: 

7 ‘‘(p) ANALYSES OF MOTOR VEHICLE FUEL CHANGES

8 AND EMISSIONS MODEL.—

9 ‘‘(1) ANTI-BACKSLIDING ANALYSIS.—

10 ‘‘(A) DRAFT ANALYSIS.—Not later than 4 

11 years after the date of enactment of this sub12 section, the Administrator shall publish for pub13 lic comment a draft analysis of the changes in 

14 emissions of air pollutants and air quality due 

15 to the use of motor vehicle fuel and fuel addi16 tives resulting from implementation of the 

17 amendments made by the New Apollo Energy 

18 Act of 2005. 

19 ‘‘(B) FINAL ANALYSIS.—After providing a 

20 reasonable opportunity for comment, but not 

21 later than 5 years after the date of enactment 

22 of this paragraph, the Administrator shall pub23 lish the analysis in final form. 

24 ‘‘(2) EMISSIONS MODEL.—For the purposes of 

25 this subsection, as soon as the necessary data are 
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1 available, the Administrator shall develop and final2 ize an emissions model that reasonably reflects the 

3 effects of gasoline characteristics or components on 

4 emissions from vehicles in the motor vehicle fleet 

5 during calendar year 2005.’’. 

6 SEC. 705. ADDITIONAL OPT-IN AREAS UNDER REFORMU7 LATED GASOLINE PROGRAM. 

8 Section 211(k)(6) of the Clean Air Act (42 U.S.C. 

9 7545(k)(6)) is amended—

10 (1) by striking ‘‘(6) Opt-in areas.—(A) Upon’’ 

11 and inserting the following: 

12 ‘‘(6) OPT-IN AREAS.—

13 ‘‘(A) CLASSIFIED AREAS.—

14 ‘‘(i) IN GENERAL.—Upon’’; 

15 (2) in subparagraph (B), by striking ‘‘(B) If’’ 

16 and inserting the following: 

17 ‘‘(ii) EFFECT OF INSUFFICIENT DO18 MESTIC CAPACITY TO PRODUCE REFORMU19 LATED GASOLINE.—If’’; 

20 (3) in subparagraph (A)(ii) (as redesignated by 

21 paragraph (2))—

22 (A) in the first sentence, by striking ‘‘sub23 paragraph (A)’’ and inserting ‘‘clause (i)’’; and 
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1 (B) in the second sentence, by striking 

2 ‘‘this paragraph’’ and inserting ‘‘this subpara3 graph’’; and 

4 (4) by adding at the end the following: 

5 ‘‘(B) OZONE TRANSPORT REGION.—

6 ‘‘(i) APPLICATION OF PROHIBITION.—

7 ‘‘(I) IN GENERAL.—In addition 

8 to the provisions of subparagraph (A), 

9 upon the application of the Governor 

10 of a State in the ozone transport re11 gion established by section 184(a), the 

12 Administrator, not later than 180 

13 days after the date of receipt of the 

14 application, shall apply the prohibition 

15 specified in paragraph (5) to any area 

16 in the State (other than an area clas17 sified as a marginal, moderate, seri18 ous, or severe ozone nonattainment 

19 area under subpart 2 of part D of 

20 title I) unless the Administrator deter21 mines under clause (iii) that there is 

22 insufficient capacity to supply refor23 mulated gasoline. 

24 ‘‘(II) PUBLICATION OF APPLICA25 TION.—As soon as practicable after 
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1 the date of receipt of an application 

2 under subclause (I), the Adminis3 trator shall publish the application in 

4 the Federal Register. 

5 ‘‘(ii) PERIOD OF APPLICABILITY.—

6 Under clause (i), the prohibition specified 

7 in paragraph (5) shall apply in a State—

8 ‘‘(I) commencing as soon as prac9 ticable but not later than 2 years 

10 after the date of approval by the Ad11 ministrator of the application of the 

12 Governor of the State; and 

13 ‘‘(II) ending not earlier than 4 

14 years after the commencement date 

15 determined under subclause (I). 

16 ‘‘(iii) EXTENSION OF COMMENCEMENT

17 DATE BASED ON INSUFFICIENT CAPAC18 ITY.—

19 ‘‘(I) IN GENERAL.—If, after re20 ceipt of an application from a Gov21 ernor of a State under clause (i), the 

22 Administrator determines, on the Ad23 ministrator’s own motion or on peti24 tion of any person, after consultation 

25 with the Secretary of Energy, that 
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1 there is insufficient capacity to supply 

2 reformulated gasoline, the Adminis3 trator, by regulation—

4 ‘‘(aa) shall extend the com5 mencement date with respect to 

6 the State under clause (ii)(I) for 

7 not more than 1 year; and 

8 ‘‘(bb) may renew the exten9 sion under item (aa) for 2 addi10 tional periods, each of which 

11 shall not exceed 1 year. 

12 ‘‘(II) DEADLINE FOR ACTION ON

13 PETITIONS.—The Administrator shall 

14 act on any petition submitted under 

15 subclause (I) not later than 180 days 

16 after the date of receipt of the peti17 tion.’’. 

18 SEC. 706. FEDERAL ENFORCEMENT OF STATE FUELS RE19 QUIREMENTS. 

20 Section 211(c)(4)(C) of the Clean Air Act (42 U.S.C. 

21 7545(c)(4)(C)) is amended—

22 (1) by striking ‘‘(C) A State’’ and inserting the 

23 following: 
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1 ‘‘(C) AUTHORITY OF STATE TO CONTROL

2 FUELS AND FUEL ADDITIVES FOR REASONS OF

3 NECESSITY.—

4 ‘‘(i) IN GENERAL.—A State’’; and 

5 (2) by adding at the end the following: 

6 ‘‘(ii) ENFORCEMENT BY THE ADMIN7 ISTRATOR.—In any case in which a State 

8 prescribes and enforces a control or prohi9 bition under clause (i), the Administrator, 

10 at the request of the State, shall enforce 

11 the control or prohibition as if the control 

12 or prohibition had been adopted under the 

13 other provisions of this section.’’. 

14 SEC. 707. FUEL SYSTEM REQUIREMENTS HARMONIZATION 

15 STUDY. 

16 (a) STUDY.—

17 (1) IN GENERAL.—The Administrator of the 

18 Environmental Protection Agency and the Secretary 

19 of Energy shall jointly conduct a study of Federal, 

20 State, and local requirements concerning motor vehi21 cle fuels, including—

22 (A) requirements relating to reformulated 

23 gasoline, volatility (measured in Reid vapor 

24 pressure), oxygenated fuel, and diesel fuel; and 
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1 (B) other requirements that vary from 

2 State to State, region to region, or locality to 

3 locality. 

4 (2) REQUIRED ELEMENTS.—The study shall as5 sess—

6 (A) the effect of the variety of require7 ments described in paragraph (1) on the supply, 

8 quality, and price of motor vehicle fuels avail9 able to the consumer; 

10 (B) the effect of the requirements de11 scribed in paragraph (1) on achievement of—

12 (i) national, regional, and local air 

13 quality standards and goals; and 

14 (ii) related environmental and public 

15 health protection standards and goals; 

16 (C) the effect of Federal, State, and local 

17 motor vehicle fuel regulations, including mul18 tiple motor vehicle fuel requirements, on—

19 (i) domestic refineries; 

20 (ii) the fuel distribution system; and 

21 (iii) industry investment in new capac22 ity; 

23 (D) the effect of the requirements de24 scribed in paragraph (1) on emissions from ve25 hicles, refineries, and fuel handling facilities; 
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1 (E) the feasibility of developing national or 

2 regional motor vehicle fuel slates for the 48 

3 contiguous States that, while protecting and im4 proving air quality at the national, regional, 

5 and local levels, could—

6 (i) enhance flexibility in the fuel dis7 tribution infrastructure and improve fuel 

8 fungibility; 

9 (ii) reduce price volatility and costs to 

10 consumers and producers; 

11 (iii) provide increased liquidity to the 

12 gasoline market; and 

13 (iv) enhance fuel quality, consistency, 

14 and supply; and 

15 (F) the feasibility of providing incentives, 

16 and the need for the development of national 

17 standards necessary, to promote cleaner burn18 ing motor vehicle fuel. 

19 (b) REPORT.—

20 (1) IN GENERAL.—Not later than June 1, 

21 2006, the Administrator of the Environmental Pro22 tection Agency and the Secretary of Energy shall 

23 submit to Congress a report on the results of the 

24 study conducted under subsection (a). 

25 (2) RECOMMENDATIONS.—
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1 (A) IN GENERAL.—The report shall con2 tain recommendations for legislative and admin3 istrative actions that may be taken—

4 (i) to improve air quality; 

5 (ii) to reduce costs to consumers and 

6 producers; and 

7 (iii) to increase supply liquidity. 

8 (B) REQUIRED CONSIDERATIONS.—The 

9 recommendations under subparagraph (A) shall 

10 take into account the need to provide advance 

11 notice of required modifications to refinery and 

12 fuel distribution systems in order to ensure an 

13 adequate supply of motor vehicle fuel in all 

14 States. 

15 (3) CONSULTATION.—In developing the report, 

16 the Administrator of the Environmental Protection 

17 Agency and the Secretary of Energy shall consult 

18 with—

19 (A) the Governors of the States; 

20 (B) automobile manufacturers; 

21 (C) motor vehicle fuel producers and dis22 tributors; and 

23 (D) the public. 
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1 SEC. 708. REPORT ON RENEWABLE MOTOR FUEL. 

2 Not later than January 1, 2007, the Secretary of En3 ergy and the Secretary of Agriculture shall jointly prepare 

4 and submit to Congress a report containing recommenda5 tions for achieving, by January 1, 2025, at least 25 per6 cent renewable fuel content (calculated on an average an7 nual basis) for all gasoline sold or introduced into com8 merce in the United States. 

9 Subtitle B—Renewable Portfolio 

10 Standard 

11 SEC. 711. RENEWABLE PORTFOLIO STANDARD. 

12 (a) IN GENERAL.—Title VI of the Public Utility Reg13 ulatory Policies Act of 1978 is amended by adding at the 

14 end the following: 

15 ‘‘SEC. 609. FEDERAL RENEWABLE PORTFOLIO STANDARD. 

16 ‘‘(a) MINIMUM RENEWABLE GENERATION REQUIRE17 MENT.—For each calendar year beginning in calendar 

18 year 2007, each retail electric supplier shall submit to the 

19 Secretary, not later than April 1 of the following calendar 

20 year, renewable energy credits in an amount equal to the 

21 required annual percentage specified in subsection (b). 

22 ‘‘(b) REQUIRED ANNUAL PERCENTAGE.—(1) For 

23 calendar years 2007 through 2022, the required annual 

24 percentage of the retail electric supplier’s base amount 

25 that shall be generated from renewable energy resources 

26 shall be the percentage specified in the following table:
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‘‘Calendar years Required annual 

percentage

2007 through 2008 ................................................ 1.0

2009 through 2010 ................................................ 2.2

2011 through 2012 ................................................ 3.4

2013 through 2014 ................................................ 4.6

2015 through 2016 ................................................ 5.8

2017 through 2018 ................................................ 7.0

2019 through 2020 ................................................ 8.5

2021 through 2022 ................................................ 10.0

1 ‘‘(2) Not later than January 1, 2017, the Secretary 

2 may, by rule, establish required annual percentages in 

3 amounts not less than 10.0 for calendar years 2022 

4 through 2030. 

5 ‘‘(c) SUBMISSION OF CREDITS.—(1) A retail electric 

6 supplier may satisfy the requirements of subsection (a) 

7 through the submission of renewable energy credits—

8 ‘‘(A) issued to the retail electric supplier under 

9 subsection (d); 

10 ‘‘(B) obtained by purchase or exchange under 

11 subsection (e); or 

12 ‘‘(C) borrowed under subsection (f). 

13 ‘‘(2) A credit may be counted toward compliance with 

14 subsection (a) only once. 

15 ‘‘(d) ISSUANCE OF CREDITS.—(1) The Secretary 

16 shall establish, not later than 1 year after the date of en17 actment of this section, a program to issue, monitor the 

18 sale or exchange of, and track renewable energy credits. 
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1 ‘‘(2) Under the program, an entity that generates 

2 electric energy through the use of a renewable energy re3 source may apply to the Secretary for the issuance of re4 newable energy credits. The application shall indicate—

5 ‘‘(A) the type of renewable energy resource used 

6 to produce the electricity, 

7 ‘‘(B) the location where the electric energy was 

8 produced, and 

9 ‘‘(C) any other information the Secretary deter10 mines appropriate. 

11 ‘‘(3)(A) Except as provided in paragraphs (B), (C), 

12 and (D), the Secretary shall issue to an entity one renew13 able energy credit for each kilowatt-hour of electric energy 

14 the entity generates after the date of enactment of this 

15 section and in each subsequent calendar year through the 

16 use of a renewable energy resource at an eligible facility. 

17 ‘‘(B) For incremental hydropower, the credits shall 

18 be calculated based on the expected increase in average 

19 annual generation resulting from the efficiency improve20 ments or capacity additions. The number of credits shall 

21 be calculated using the same water flow information used 

22 to determine a historic average annual generation baseline 

23 for the hydroelectric facility and certified by the Secretary 

24 or the Federal Energy Regulatory Commission. The cal25 culation of the credits for incremental hydropower shall 
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1 not be based on any operational changes at the hydro2 electric facility not directly associated with the efficiency 

3 improvements or capacity additions. 

4 ‘‘(C) The Secretary shall issue two renewable energy 

5 credits for each kilowatt-hour of electric energy generated 

6 and supplied to the grid in that calendar year through the 

7 use of a renewable energy resource at an eligible facility 

8 located on Indian land. For purposes of this paragraph, 

9 renewable energy generated by biomass cofired with other 

10 fuels is eligible for two credits only if the biomass was 

11 grown on the land eligible under this paragraph. 

12 ‘‘(D) For renewable energy resources produced from 

13 a generation offset, the Secretary shall issue two renew14 able energy credits for each kilowatt-hour generated. 

15 ‘‘(E) To be eligible for a renewable energy credit, the 

16 unit of electric energy generated through the use of a re17 newable energy resource may be sold or may be used by 

18 the generator. If both a renewable energy resource and 

19 a nonrenewable energy resource are used to generate the 

20 electric energy, the Secretary shall issue credits based on 

21 the proportion of the renewable energy resource used. The 

22 Secretary shall identify renewable energy credits by type 

23 and date of generation. 

24 ‘‘(5) When a generator sells electric energy generated 

25 through the use of a renewable energy resource to a retail 
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1 electric supplier under a contract subject to section 210 

2 of this Act, the retail electric supplier is treated as the 

3 generator of the electric energy for the purposes of this 

4 section for the duration of the contract. 

5 ‘‘(6) The Secretary may issue credits for existing fa6 cility offsets to be applied against a retail electric sup7 plier’s own required annual percentage. The credits are 

8 not tradeable and may only be used in the calendar year 

9 generation actually occurs. 

10 ‘‘(e) CREDIT TRADING.—A renewable energy credit 

11 may be sold or exchanged by the entity to whom issued 

12 or by any other entity who acquires the credit. A renew13 able energy credit for any year that is not used to satisfy 

14 the minimum renewable generation requirement of sub15 section (a) for that year may be carried forward for use 

16 within the next 4 years. 

17 ‘‘(f) CREDIT BORROWING.—At any time before the 

18 end of calendar year 2007, a retail electric supplier that 

19 has reason to believe it will not have sufficient renewable 

20 energy credits to comply with subsection (a) may—

21 ‘‘(1) submit a plan to the Secretary dem22 onstrating that the retail electric supplier will earn 

23 sufficient credits within the next 3 calendar years 

24 which, when taken into account, will enable the re25 tail electric supplier’s to meet the requirements of 
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1 subsection (a) for calendar year 2007 and the subse2 quent calendar years involved; and 

3 ‘‘(2) upon the approval of the plan by the Sec4 retary, apply credits that the plan demonstrates will 

5 be earned within the next 3 calendar years to meet 

6 the requirements of subsection (a) for each calendar 

7 year involved. 

8 ‘‘(g) CREDIT COST CAP.—The Secretary shall offer 

9 renewable energy credits for sale at the lesser of 3 cents 

10 per kilowatt-hour or 200 percent of the average market 

11 value of credits for the applicable compliance period. On 

12 January 1 of each year following calendar year 2007, the 

13 Secretary shall adjust for inflation the price charged per 

14 credit for such calendar year, based on the Gross Domestic 

15 Product Implicit Price Deflator. Amounts received by the 

16 Secretary under this subsection are authorized to be ap17 propriated for purposes of section 610. 

18 ‘‘(h) ENFORCEMENT.—The Secretary may bring an 

19 action in the appropriate United States district court to 

20 impose a civil penalty on a retail electric supplier that does 

21 not comply with subsection (a), unless the retail electric 

22 supplier was unable to comply with subsection (a) for rea23 sons outside of the supplier’s reasonable control (including 

24 weather-related damage, mechanical failure, lack of trans25 mission capacity or availability, strikes, lockouts, actions 
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1 of a governmental authority). A retail electric supplier who 

2 does not submit the required number of renewable energy 

3 credits under subsection (a) shall be subject to a civil pen4 alty of not more than the greater of 3 cents or 200 percent 

5 of the average market value of credits for the compliance 

6 period for each renewable energy credit not submitted. 

7 ‘‘(i) INFORMATION COLLECTION.—The Secretary 

8 may collect the information necessary to verify and 

9 audit—

10 ‘‘(1) the annual electric energy generation and 

11 renewable energy generation of any entity applying 

12 for renewable energy credits under this section, 

13 ‘‘(2) the validity of renewable energy credits 

14 submitted by a retail electric supplier to the Sec15 retary, and 

16 ‘‘(3) the quantity of electricity sales of all retail 

17 electric suppliers. 

18 ‘‘(j) ENVIRONMENTAL SAVINGS CLAUSE.—Incre19 mental hydropower shall be subject to all applicable envi20 ronmental laws and licensing and regulatory requirements. 

21 ‘‘(k) STATE SAVINGS CLAUSE.—This section does not 

22 preclude a State from requiring additional renewable en23 ergy generation in that State, or from specifying tech24 nology mix. 

25 ‘‘(l) DEFINITIONS.—For purposes of this section: 
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1 ‘‘(1) BIOMASS.—The term ‘biomass’ means any 

2 organic material that is available on a renewable or 

3 recurring basis, including dedicated energy crops, 

4 trees grown for energy production, wood waste and 

5 wood residues, plants (including aquatic plants, 

6 grasses, and agricultural crops), residues, fibers, 

7 animal wastes and other organic waste materials, 

8 and fats and oils, except that with respect to mate9 rial removed from National Forest System lands the 

10 term includes only organic material from—

11 ‘‘(A) thinnings from trees that are less 

12 than 12 inches in diameter; 

13 ‘‘(B) slash; 

14 ‘‘(C) brush; and 

15 ‘‘(D) mill residues. 

16 ‘‘(2) ELIGIBLE FACILITY.—The term ‘eligible 

17 facility’ means—

18 ‘‘(A) a facility for the generation of electric 

19 energy from a renewable energy resource that is 

20 placed in service on or after the date of enact21 ment of this section; or 

22 ‘‘(B) a repowering or cofiring increment 

23 that is placed in service on or after the date of 

24 enactment of this section at a facility for the 

25 generation of electric energy from a renewable 
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1 energy resource that was placed in service be2 fore that date. 

3 ‘‘(3) ELIGIBLE RENEWABLE ENERGY RE4 SOURCE.—The term ‘renewable energy resource’ 

5 means solar, wind, ocean, or geothermal energy, bio6 mass (excluding solid waste and paper that is com7 monly recycled), landfill gas, a generation offset, or 

8 incremental hydropower. 

9 ‘‘(4) GENERATION OFFSET.—The term ‘genera10 tion offset’ means reduced electricity usage metered 

11 at a site where a customer consumes energy from a 

12 renewable energy technology. 

13 ‘‘(5) EXISTING FACILITY OFFSET.—The term 

14 ‘existing facility offset’ means renewable energy gen15 erated from an existing facility, not classified as an 

16 eligible facility, that is owned or under contract to 

17 a retail electric supplier on the date of enactment of 

18 this section. 

19 ‘‘(6) INCREMENTAL HYDROPOWER.—The term 

20 ‘incremental hydropower’ means additional genera21 tion that is achieved from increased efficiency or ad22 ditions of capacity after the date of enactment of 

23 this section at a hydroelectric dam that was placed 

24 in service before that date. 
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1 ‘‘(7) INDIAN LAND.—The term ‘Indian land’ 

2 means—

3 ‘‘(A) any land within the limits of any In4 dian reservation, pueblo, or rancheria, 

5 ‘‘(B) any land not within the limits of any 

6 Indian reservation, pueblo, or rancheria title to 

7 which was on the date of enactment of this 

8 paragraph either held by the United States for 

9 the benefit of any Indian tribe or individual or 

10 held by any Indian tribe or individual subject to 

11 restriction by the United States against alien12 ation, 

13 ‘‘(C) any dependent Indian community, 

14 and 

15 ‘‘(D) any land conveyed to any Alaska Na16 tive corporation under the Alaska Native 

17 Claims Settlement Act. 

18 ‘‘(8) INDIAN TRIBE.—The term ‘Indian tribe’ 

19 means any Indian tribe, band, nation, or other orga20 nized group or community, including any Alaskan 

21 Native village or regional or village corporation as 

22 defined in or established pursuant to the Alaska Na23 tive Claims Settlement Act (43 U.S.C. 1601 et seq.), 

24 which is recognized as eligible for the special pro-
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1 grams and services provided by the United States to 

2 Indians because of their status as Indians. 

3 ‘‘(9) RENEWABLE ENERGY.—The term ‘renew4 able energy’ means electric energy generated by a re5 newable energy resource. 

6 ‘‘(10) RENEWABLE ENERGY RESOURCE.—The 

7 term ‘renewable energy resource’ means solar, wind, 

8 ocean, or geothermal energy, biomass (including mu9 nicipal solid waste), landfill gas, a generation offset, 

10 or incremental hydropower. 

11 ‘‘(11) REPOWERING OR COFIRING INCRE12 MENT.—The term ‘repowering or cofiring increment’ 

13 means the additional generation from a modification 

14 that is placed in service on or after the date of en15 actment of this section to expand electricity produc16 tion at a facility used to generate electric energy 

17 from a renewable energy resource or to cofire bio18 mass that was placed in service before the date of 

19 enactment of this section, or the additional genera20 tion above the average generation in the 3 years pre21 ceding the date of enactment of this section, to ex22 pand electricity production at a facility used to gen23 erate electric energy from a renewable energy re24 source or to cofire biomass that was placed in serv25 ice before the date of enactment of this section. 
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1 ‘‘(12) RETAIL ELECTRIC SUPPLIER.—The term 

2 ‘retail electric supplier’ means a person that sells 

3 electric energy to electric consumers and sold not 

4 less than 1,000,000 megawatt-hours of electric en5 ergy to electric consumers for purposes other than 

6 resale during the preceding calendar year; except 

7 that such term does not include the United States, 

8 a State or any political subdivision of a State, or any 

9 agency, authority, or instrumentality of any one or 

10 more of the foregoing, or a rural electric cooperative. 

11 ‘‘(13) RETAIL ELECTRIC SUPPLIER’S BASE

12 AMOUNT.—The term ‘retail electric supplier’s base 

13 amount’ means the total amount of electric energy 

14 sold by the retail electric supplier to electric cus15 tomers during the most recent calendar year for 

16 which information is available, excluding electric en17 ergy generated by—

18 ‘‘(A) an eligible renewable energy resource; 

19 ‘‘(B) municipal solid waste; or 

20 ‘‘(C) a hydroelectric facility. 

21 ‘‘(m) SUNSET.—This section expires December 31, 

22 2030. 

23 ‘‘SEC. 610. STATE GRANT PROGRAM. 

24 ‘‘(a) IN GENERAL.—The Secretary is authorized to 

25 distribute, subject to available appropriations, amounts re-
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1 ceived from sales under subsection (g) of section 609 to 

2 States to be used for the purposes of the program estab3 lished under subsection (b) of this section. 

4 ‘‘(b) GRANT PROGRAM.— 

5 ‘‘(1) IN GENERAL.—Not later than 1 year after 

6 the date of enactment of this Act, the Secretary 

7 shall establish a program to promote State renew8 able energy production and use. 

9 ‘‘(2) USE OF FUND.—The Secretary shall make 

10 funds available under this section to State energy 

11 agencies for grant programs for the construction of 

12 renewable energy facilities. 

13 ‘‘(c) PREFERENCE.—In allocating funds under the 

14 program, the Secretary shall give preference to the fol15 lowing: 

16 ‘‘(1) States that have a disproportionately small 

17 share of economically sustainable renewable energy 

18 generation capacity. 

19 ‘‘(2) State grant programs that are most likely 

20 to stimulate or enhance innovative renewable energy 

21 technologies.’’. 

22 (b) TABLE OF CONTENTS.—The table of contents for 

23 such title VI is amended by adding the following new items 

24 at the end thereof: 

‘‘Sec. 609. Federal renewable portfolio standard. 

‘‘Sec. 610. State grant program.’’. 
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1 Subtitle C—Oil Savings 

2 SEC. 721. OIL SAVINGS. 

3 (a) IN GENERAL.—Appropriate Federal departments 

4 and agencies, as identified by the President, shall propose 

5 voluntary, regulatory, and other actions sufficient to 

6 achieve—

7 (1) by 2010 a reduction in the demand for oil 

8 in the United States by at least 600,000 barrels per 

9 day from the demand projected, as of January 1, 

10 2005, by the Energy Information Administration for 

11 the year 2010; 

12 (2) by 2015 a reduction in the demand for oil 

13 in the United States by at least 1,700,000 barrels 

14 per day from the demand projected, as of January 

15 1, 2005, by the Energy Information Administration 

16 for the year 2015; and 

17 (3) by 2020 a reduction in the demand for oil 

18 in the United States by at least 3,000,000 barrels 

19 per day from the demand projected, as of January 

20 1, 2005, by the Energy Information Administration 

21 for the year 2020. 

22 (b) MONITORING AND REPORTS TO CONGRESS.—Not 

23 later than 12 months after the date of the enactment of 

24 this Act, and each year thereafter, the departments and 
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1 agencies referred to in subsection (a) shall report to the 

2 Congress on—

3 (1) proposed and finalized regulatory and other 

4 actions taken to achieve the requirements under sub5 section (a); 

6 (2) progress made in achieving the actions re7 quired under subsection (a); and 

8 (3) lack of funding or authority preventing the 

9 implementation of the actions required under sub10 section (a). 

11 (c) REQUEST TO CONGRESS.—If the President deter12 mines that the departments and agencies referred to in 

13 subsection (a) lack authority or funding to implement the 

14 actions proposed under subsection (a), the President shall 

15 request the necessary authority or funding from the Con16 gress not later than 9 months after the date of enactment 

17 of this Act. 

18 (d) FINAL ACTIONS.—Not later than 12 months after 

19 the date of the enactment of this Act, the departments 

20 and agencies referred to in subsection (a) shall finalize the 

21 actions proposed pursuant to subsection (a) for which they 

22 have authority and funding. 
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1 SEC. 722. DETERMINATION OF EQUIVALENCY BETWEEN 

2 CAFE CREDITS AND GREENHOUSE GAS CRED3 ITS. 

4 The Secretary of Transportation, the Administrator 

5 of the Environmental Protection Agency, and the Sec6 retary of Commerce shall jointly conduct and submit to 

7 the Congress within 2 years of the date of the enactment 

8 of this section a study—

9 (1) showing a methodology for determining the 

10 equivalency of credits earned under Section 32903 of 

11 title 49, United States Code, and tradeable allow12 ances under title VI of the New Apollo Energy Act 

13 of 2005; and 

14 (2) recommending an appeals process for re15 solving any dispute that may arise out of such a de16 termination, which may incorporate an arbitration 

17 option. 

18 SEC. 723. ELIMINATION OF 2–FLEET RULE. 

19 (a) IN GENERAL.—Section 32904 of title 49, United 

20 States Code, is amended—

21 (1) by striking subsection (b); and 

22 (2) by redesignating subsections (c) through (e) 

23 as subsections (b) through (d), respectively. 

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

25 subsection (a) shall apply to model years 2010 and later. 
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1 Subtitle D—Loan Guarantees for 

2 Biorefineries and Renewable 

3 Electricity Generation Facilities 

4 SEC. 731. LOAN GUARANTEES FOR BIOREFINERIES AND RE5 NEWABLE ENERGY PRODUCTION FACILITIES. 

6 (a) AUTHORITY.—The Secretary of Energy may 

7 guarantee not more than 80 percent of the principal of 

8 any loan made to any person or other entity for any of 

9 the following: 

10 (1) The construction of any new facility that 

11 primarily makes cellulosic biomass ethanol or bio12 methanol or generates electricity, or any combina13 tion thereof, from wind energy, biomass, solar en14 ergy, ocean energy or geothermal sources. 

15 (2) The modification of any facility that pri16 marily generates electricity from wind energy, bio17 mass, solar energy, ocean energy, or geothermal 

18 sources if such modification adds additional electric 

19 generation capacity from any of such sources. 

20 (3) The modification of any facility that pri21 marily makes cellulosic biomass ethanol, biometh22 anol, or electricity from wind energy, biomass, solar 

23 energy, ocean energy or geothermal sources if such 

24 modification adds additional capacity to make cel-
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1 lulosic biomass ethanol or biomethanol from any 

2 such source or combination of sources. 

3 (4) The conversion of any facility that primarily 

4 makes ethanol to a facility that primarily makes cel5 lulosic biomass ethanol. 

6 (5) The construction of any new ninety percent 

7 sequestration coal power facility. 

8 (b) CONDITIONS.—

9 (1) LOAN MAKER.—A loan guaranteed under 

10 this section shall be made by a financial institution 

11 subject to the examination of the Secretary. 

12 (2) ENVIRONMENTAL LAWS.—Any project for 

13 which a loan guarantee is issued under this section 

14 shall be required by the Secretary as a condition of 

15 the loan guarantee to comply with all applicable 

16 Federal, State, and local environmental laws. 

17 (3) OTHER REQUIREMENTS.—Loan require18 ments, including term, fees, maximum size, collateral 

19 requirements, and other features, shall be deter20 mined by the Secretary. 

21 (c) LIMITATION ON AMOUNT.—The Secretary of En22 ergy may make commitments to guarantee loans under 

23 this section only to the extent that the total amount of 

24 loan principal guaranteed by the Secretary does not exceed 
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1 $49,000,000,000. Of such total amount, the Secretary 

2 may make commitments to guarantee—

3 (1) not more than $7,000,000,000 of loan prin4 cipal for each of the following project types—

5 (A) biomass facilities; 

6 (B) geothemal energy facilities; 

7 (C) ninety percent sequestration coal 

8 power facilities; 

9 (D) ocean energy facilities; and 

10 (E) solar energy facilities; 

11 (2) not more than $7,000,000,000 of loan prin12 cipal for cellulosic biomass ethanol; 

13 (3) not more than $2,000,000,000 of loan prin14 cipal for biomethanol facilities; and 

15 (4) not more than $5,000,000,000 of loan prin16 cipal for wind energy facilities. 

17 (d) COORDINATION WITH OTHER BENEFITS.—The 

18 Secretary shall not guarantee under this section any loan 

19 made to any person if such person has received assistance 

20 under section 212 or 642. 

21 (e) REGULATIONS.—The Secretary of Energy may 

22 issue regulations to carry out the provisions of this sec23 tion. 

24 (f) DEFINITIONS.—As used in this section: 
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1 (1) The term ‘‘agricultural livestock’’ includes 

2 bovine, swine, poultry, and sheep. 

3 (2) The term ‘‘agricultural livestock waste nu4 trients’’ means agricultural livestock manure and lit5 ter, including wood shavings, straw, rice hulls, and 

6 other bedding material for the disposition of ma7 nure. 

8 (3) The term ‘‘biomass facility’’ means a facil9 ity that generates electricity from closed-loop bio10 mass, open-loop biomass, or both. 

11 (4) The term ‘‘biomethanol facility’’ means a 

12 facility that generates methanol from biomass, ani13 mal waste, or municipal solid waste. 

14 (5) The term ‘‘cellulosic biomass ethanol’’ 

15 means ethanol derived from any nonhazardous 

16 lignocellulosic or hemicellulosic matter that is avail17 able on a renewable or recurring basis, including—

18 (A) dedicated energy crops and trees; 

19 (B) the following forest-related resources—

20 (i) harvesting residue; 

21 (ii) pre-commercial thinnings; 

22 (iii) slash; and 

23 (iv) bush; 

24 (C) plants; 

25 (D) grasses 
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1 (E) agricultural residues 

2 (F) fibers; 

3 (G) animal wastes and other waste mate4 rials; and 

5 (H) municipal solid waste. 

6 (6) The term ‘‘cellulosic biomass ethanol facil7 ity’’ means a facility that produces cellulosic biomass 

8 ethanol. 

9 (7) The term ‘‘closed-loop biomass’’ means any 

10 organic material from a plant which is planted exclu11 sively for purposes of being used at a biomass facil12 ity to produce electricity.’’ 

13 (8) The term ‘‘geothermal energy facility’’ 

14 means a facility that generates electricity from geo15 thermal energy. 

16 (9) The term ‘‘ninety percent sequestration coal 

17 power facility’’ means a facility that generates elec18 tricity using coal as a fuel source and sequesters, 

19 rather than releases to the atmosphere, at least 90 

20 percent of the carbon dioxide emissions resulting 

21 from such coal combustion. 

22 (10) The term ‘‘ocean energy facility’’ means a 

23 facility that generates electricity from ocean tidal, 

24 wave, current or thermal processes. 
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1 (11) The term ‘‘open-loop biomass’’ means any 

2 agricultural livestock waste nutrients, or any solid, 

3 nonhazardous, cellulosic waste material which is seg4 regated from other waste materials and which is de5 rived from: 

6 (A) any of the following forest-related re7 sources: mill and harvesting residues, 

8 precommercial thinnings, slash, and brush, but 

9 not including old-growth timber or black liquor, 

10 (B) old wood waste materials, including 

11 waste pallets, crates, dunnage, manufacturing 

12 and construction wood wastes (other than pres13 sure-treated, chemically-treated, or painted 

14 wood wastes), and landscape or right-of-way 

15 tree trimmings, but not including unsegregated 

16 municipal solid waste (garbage) or 

17 postconsumer wastepaper which can be recycled 

18 affordably, or 

19 (C) agriculture sources, including orchard 

20 tree crops, vineyard, grain, legumes, sugar, and 

21 other crop by-products or residues. 

22 Such term shall not include closed-loop biomass or 

23 biomass burned in conjunction with fossil fuel (co24 firing) beyond such fossil fuel required for startup 

25 and flame stabilization. 
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1 (12) The term ‘‘sequestration’’ means the cap2 ture, long-term separation, isolation, or removal of 

3 greenhouse gases from the atmosphere. 

4 (13) The term ‘‘solar energy facility’’ means a 

5 facility that generates electricity from solar energy 

6 with a capacity of 25 kilowatts or more. 

7 (14) The term ‘‘wind energy facility’’ means a 

8 facility that generates electricity from from wind en9 ergy. 

10 (g) AUTHORIZATION OF APPROPRIATIONS.—There 

11 are authorized to be appropriated to the Secretary of En12 ergy such sums as may be necessary to cover the cost of 

13 loan guarantees, as defined by section 502(5) of the Fed14 eral Credit Reform Act of 1990 (2 U.S.C. 661a(5)). 

15 TITLE VIII—TAX OFFSETS 

16 SEC. 801. REFERENCES. 

17 (a) SHORT TITLE.—This title may be cited as the 

18 ‘‘Balanced Energy Supply Tax Policy Act of 2005’’ . 

19 (b) AMENDMENT OF 1986 CODE.—Except as other20 wise expressly provided, whenever in this title an amend21 ment or repeal is expressed in terms of an amendment 

22 to, or repeal of, a section or other provision, the reference 

23 shall be considered to be made to a section or other provi24 sion of the Internal Revenue Code of 1986. 
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1 Subtitle A—Budget Neutrality 

2 SEC. 811. TAX REDUCTIONS LIMITED TO REVENUE RAISED 

3 BY TAX OFFSETS. 

4 (a) IN GENERAL.—The aggregate tax benefits pro5 vided by this Act, and any amendment made by this Act, 

6 shall not exceed the revenue raised by this Act, and any 

7 amendment made by this Act. 

8 (b) ADJUSTMENT OF TAX BENEFITS.—If the Sec9 retary of the Treasury determines for any year that the 

10 tax benefits provided by this Act, and any amendment 

11 made by this Act, exceed the revenue raised by this Act, 

12 and any amendment made by this Act, the Secretary shall 

13 reduce such excess to zero by adjusting such benefits in 

14 the manner determined by the Secretary in his sole discre15 tion. 

16 (c) REPORT TO CONGRESS.—Not later than 1 year 

17 after the date of the enactment of this Act, and annually 

18 thereafter, the Secretary of the Treasury shall submit a 

19 report to Congress on the total budget authority granted 

20 by this Act, and the amendments made by this Act, to21 gether with such recommendations as the Secretary deter22 mines necessary or appropriate to either—

23 (1) reduce such authority, or 

24 (2) to increase receipts to the Treasury of the 

25 United States to pay for such authority. 
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1 Subtitle B—Denial of Treaty 

2 Benefits 

3 SEC. 821. DENIAL OF TREATY BENEFITS FOR CERTAIN DE4 DUCTIBLE PAYMENTS. 

5 (a) IN GENERAL.—Section 894 (relating to income 

6 affected by treaty) is amended by adding at the end the 

7 following new subsection: 

8 ‘‘(d) DENIAL OF TREATY BENEFITS FOR CERTAIN

9 DEDUCTIBLE PAYMENTS.—

10 ‘‘(1) IN GENERAL.—A foreign entity shall not 

11 be entitled under any income tax treaty of the 

12 United States with a foreign country to any reduced 

13 rate of any withholding tax imposed by this title on 

14 any deductible foreign payment unless such entity is 

15 predominantly owned by individuals who are resi16 dents of such foreign country. 

17 ‘‘(2) DEDUCTIBLE FOREIGN PAYMENT.—For 

18 purposes of paragraph (1), the term ‘deductible for19 eign payment’ means any payment—

20 ‘‘(A) which is made by a domestic entity 

21 directly or indirectly to a related person which 

22 is a foreign entity, and 

23 ‘‘(B) which is allowable as a deduction 

24 under this chapter. 
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1 ‘‘(3) DOMESTIC AND FOREIGN ENTITIES; RE2 LATED PERSON.—For purposes of this subsection—

3 ‘‘(A) DOMESTIC ENTITY.—The term ‘do4 mestic entity’ means any domestic corporation 

5 or domestic partnership. 

6 ‘‘(B) FOREIGN ENTITY.—The term ‘for7 eign entity’ means any foreign corporation or 

8 foreign partnership. 

9 ‘‘(C) RELATED PERSON.—The term ‘re10 lated person’ has the meaning given such term 

11 by section 954(d)(3) (determined by sub12 stituting ‘domestic entity’ for ‘controlled foreign 

13 corporation’ each place it appears). 

14 ‘‘(4) PREDOMINANT OWNERSHIP.—For pur15 poses of this subsection—

16 ‘‘(A) IN GENERAL.—An entity is predomi17 nantly owned by individuals who are residents 

18 of a foreign country if—

19 ‘‘(i) in the case of a corporation, more 

20 than 50 percent (by value) of the stock of 

21 such corporation is owned (within the 

22 meaning of section 883(c)(4)) by individ23 uals who are residents of such foreign 

24 country, or 
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1 ‘‘(ii) in the case of a partnership, 

2 more than 50 percent (by value) of the 

3 beneficial interests in such partnership are 

4 so owned. 

5 ‘‘(B) PUBLICLY TRADED CORPORATIONS.—

6 A foreign corporation also shall be treated as 

7 predominantly owned by individuals who are 

8 residents of a foreign country if—

9 ‘‘(i)(I) the stock of such corporation is 

10 primarily and regularly traded on an estab11 lished securities market in such foreign 

12 country, and 

13 ‘‘(II) such corporation has activities 

14 within such foreign country which are sub15 stantial in relation to the total activities of 

16 such corporation and its related persons, 

17 or 

18 ‘‘(ii) such corporation is wholly owned 

19 (directly or indirectly) by another foreign 

20 corporation which is described in clause (i). 

21 ‘‘(C) SPECIAL RULE.—

22 ‘‘(i) IN GENERAL.—A foreign corpora23 tion shall be treated as meeting the re24 quirements of subparagraph (A) if—
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1 ‘‘(I) such requirements would be 

2 met if ‘30 percent’ were substituted 

3 for ‘50 percent’ in subparagraph 

4 (A)(i), 

5 ‘‘(II) the treaty country is a 

6 member of a multinational economic 

7 association such as the European 

8 Union, and 

9 ‘‘(III) at least 50 percent of the 

10 value of the stock of the corporation is 

11 owned (within the meaning of section 

12 883(c)(4)) by individuals who are resi13 dents of the treaty country or other 

14 qualified foreign countries. 

15 ‘‘(ii) QUALIFIED FOREIGN COUN16 TRY.—For purposes of this subparagraph, 

17 the term ‘qualified foreign country’ means 

18 any foreign country if—

19 ‘‘(I) such foreign country is a 

20 member of the multinational economic 

21 association of which the treaty coun22 try is a member, and 

23 ‘‘(II) such foreign country has a 

24 tax treaty with the United States pro25 viding a withholding tax rate reduc-
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1 tion which is not less than the with2 holding tax rate reduction applicable 

3 (without regard to this subsection) to 

4 the payment received by such foreign 

5 corporation. 

6 ‘‘(5) EXCEPTION FOR CORPORATIONS WITH

7 SUBSTANTIAL BUSINESS ACTIVITIES IN TREATY

8 COUNTRY.—Paragraph (1) shall not apply to a pay9 ment received by a foreign corporation if such cor10 poration has substantial business activities in the 

11 treaty country and if such corporation establishes to 

12 the satisfaction of the Secretary that the payment is 

13 subject to an effective rate of income tax imposed by 

14 such country greater than 90 percent of the max15 imum rate of tax specified in section 11. 

16 ‘‘(6) EXCEPTION FOR PAYMENTS RECEIVED BY

17 CONTROLLED FOREIGN CORPORATION.—Paragraph 

18 (1) shall not apply to any deductible foreign pay19 ment made by a corporation if the recipient of the 

20 payment is a controlled foreign corporation and the 

21 payor is a United States shareholder (as defined in 

22 section 951(b)) of such corporation. 

23 ‘‘(7) CONDUIT PAYMENTS.—Under regulations 

24 prescribed by the Secretary, paragraph (1) shall not 
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1 apply to a payment received by a foreign entity re2 ferred to in paragraph (1) if—

3 ‘‘(A) within a reasonable period after such 

4 entity receives such payment, such entity makes 

5 a comparable payment directly or indirectly to 

6 another related person, 

7 ‘‘(B) such related person is a resident of a 

8 foreign country with which the United States 

9 has an income tax treaty, 

10 ‘‘(C) such related person is predominantly 

11 owned by individuals who are residents of such 

12 country, and 

13 ‘‘(D) the withholding tax rate applicable 

14 under such treaty is equal to or greater than 

15 the withholding tax rate applicable (without re16 gard to this paragraph) to the payment received 

17 by such foreign entity. 

18 A similar rule shall apply where the payment is in19 cludible in the gross income of a related person by 

20 reason of a foreign law comparable to subpart F of 

21 part III of subchapter N.’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall take effect on the date of the enactment 

24 of this Act. 
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1 Subtitle C—Abusive Tax Shelter 

2 Shutdown and Taxpayer Ac3 countability 

4 SEC. 831. FINDINGS AND PURPOSE. 

5 (a) FINDINGS.—The Congress hereby finds that: 

6 (1) Many corporate tax shelter transactions are 

7 complicated ways of accomplishing nothing aside 

8 from claimed tax benefits, and the legal opinions 

9 justifying those transactions take an inappropriately 

10 narrow and restrictive view of well-developed court 

11 doctrines under which—

12 (A) the taxation of a transaction is deter13 mined in accordance with its substance and not 

14 merely its form, 

15 (B) transactions which have no significant 

16 effect on the taxpayer’s economic or beneficial 

17 interests except for tax benefits are treated as 

18 sham transactions and disregarded, 

19 (C) transactions involving multiple steps 

20 are collapsed when those steps have no substan21 tial economic meaning and are merely designed 

22 to create tax benefits, 

23 (D) transactions with no business purpose 

24 are not given effect, and 
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1 (E) in the absence of a specific congres2 sional authorization, it is presumed that Con3 gress did not intend a transaction to result in 

4 a negative tax where the taxpayer’s economic 

5 position or rate of return is better after tax 

6 than before tax. 

7 (2) Permitting aggressive and abusive tax shel8 ters not only results in large revenue losses but also 

9 undermines voluntary compliance with the Internal 

10 Revenue Code of 1986. 

11 (b) PURPOSE.—The purpose of this subtitle is to 

12 eliminate abusive tax shelters by denying tax attributes 

13 claimed to arise from transactions that do not meet a 

14 heightened economic substance requirement and by repeal15 ing the provision that permits legal opinions to be used 

16 to avoid penalties on tax underpayments resulting from 

17 transactions without significant economic substance or 

18 business purpose. 

19 SEC. 832. CLARIFICATION OF ECONOMIC SUBSTANCE DOC20 TRINE. 

21 (a) IN GENERAL.—Section 7701 is amended by re22 designating subsection (o) as subsection (p) and by insert23 ing after subsection (n) the following new subsection: 

24 ‘‘(o) CLARIFICATION OF ECONOMIC SUBSTANCE

25 DOCTRINE; ETC.—
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1 ‘‘(1) GENERAL RULES.—

2 ‘‘(A) IN GENERAL.—In applying the eco3 nomic substance doctrine, the determination of 

4 whether a transaction has economic substance 

5 shall be made as provided in this paragraph. 

6 ‘‘(B) DEFINITION OF ECONOMIC SUB7 STANCE.—For purposes of subparagraph (A)—

8 ‘‘(i) IN GENERAL.—A transaction has 

9 economic substance only if—

10 ‘‘(I) the transaction changes in a 

11 meaningful way (apart from Federal 

12 tax effects and, if there are any Fed13 eral tax effects, also apart from any 

14 foreign, State, or local tax effects) the 

15 taxpayer’s economic position, and 

16 ‘‘(II) the taxpayer has a substan17 tial nontax purpose for entering into 

18 such transaction and the transaction 

19 is a reasonable means of accom20 plishing such purpose. 

21 ‘‘(ii) SPECIAL RULE WHERE TAX22 PAYER RELIES ON PROFIT POTENTIAL.—A 

23 transaction shall not be treated as having 

24 economic substance by reason of having a 

25 potential for profit unless—
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1 ‘‘(I) the present value of the rea2 sonably expected pre-tax profit from 

3 the transaction is substantial in rela4 tion to the present value of the ex5 pected net tax benefits that would be 

6 allowed if the transaction were re7 spected, and 

8 ‘‘(II) the reasonably expected 

9 pre-tax profit from the transaction ex10 ceeds a risk-free rate of return. 

11 ‘‘(C) TREATMENT OF FEES AND FOREIGN

12 TAXES.—Fees and other transaction expenses 

13 and foreign taxes shall be taken into account as 

14 expenses in determining pre-tax profit under 

15 subparagraph (B)(ii). 

16 ‘‘(2) SPECIAL RULES FOR TRANSACTIONS WITH

17 TAX-INDIFFERENT PARTIES.—

18 ‘‘(A) SPECIAL RULES FOR FINANCING

19 TRANSACTIONS.—The form of a transaction 

20 which is in substance the borrowing of money 

21 or the acquisition of financial capital directly or 

22 indirectly from a tax-indifferent party shall not 

23 be respected if the present value of the deduc24 tions to be claimed with respect to the trans25 action is substantially in excess of the present 
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1 value of the anticipated economic returns of the 

2 person lending the money or providing the fi3 nancial capital. A public offering shall be treat4 ed as a borrowing, or an acquisition of financial 

5 capital, from a tax-indifferent party if it is rea6 sonably expected that at least 50 percent of the 

7 offering will be placed with tax-indifferent par8 ties. 

9 ‘‘(B) ARTIFICIAL INCOME SHIFTING AND

10 BASIS ADJUSTMENTS.—The form of a trans11 action with a tax-indifferent party shall not be 

12 respected if—

13 ‘‘(i) it results in an allocation of in14 come or gain to the tax-indifferent party in 

15 excess of such party’s economic income or 

16 gain, or 

17 ‘‘(ii) it results in a basis adjustment 

18 or shifting of basis on account of over19 stating the income or gain of the tax-indif20 ferent party. 

21 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—For 

22 purposes of this subsection—

23 ‘‘(A) ECONOMIC SUBSTANCE DOCTRINE.—

24 The term ‘economic substance doctrine’ means 

25 the common law doctrine under which tax bene-
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1 fits under subtitle A with respect to a trans2 action are not allowable if the transaction does 

3 not have economic substance or lacks a business 

4 purpose. 

5 ‘‘(B) TAX-INDIFFERENT PARTY.—The 

6 term ‘tax-indifferent party’ means any person 

7 or entity not subject to tax imposed by subtitle 

8 A. A person shall be treated as a tax-indifferent 

9 party with respect to a transaction if the items 

10 taken into account with respect to the trans11 action have no substantial impact on such per12 son’s liability under subtitle A. 

13 ‘‘(C) SUBSTANTIAL NONTAX PURPOSE.—In 

14 applying subclause (II) of paragraph (1)(B)(i), 

15 a purpose of achieving a financial accounting 

16 benefit shall not be taken into account in deter17 mining whether a transaction has a substantial 

18 nontax purpose if the origin of such financial 

19 accounting benefit is a reduction of income tax. 

20 ‘‘(D) EXCEPTION FOR PERSONAL TRANS21 ACTIONS OF INDIVIDUALS.—In the case of an 

22 individual, this subsection shall apply only to 

23 transactions entered into in connection with a 

24 trade or business or an activity engaged in for 

25 the production of income. 
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1 ‘‘(E) TREATMENT OF LESSORS.—In apply2 ing subclause (I) of paragraph (1)(B)(ii) to the 

3 lessor of tangible property subject to a lease, 

4 the expected net tax benefits shall not include 

5 the benefits of depreciation, or any tax credit, 

6 with respect to the leased property and sub7 clause (II) of paragraph (1)(B)(ii) shall be dis8 regarded in determining whether any of such 

9 benefits are allowable. 

10 ‘‘(4) OTHER COMMON LAW DOCTRINES NOT AF11 FECTED.—Except as specifically provided in this 

12 subsection, the provisions of this subsection shall not 

13 be construed as altering or supplanting any other 

14 rule of law, and the requirements of this subsection 

15 shall be construed as being in addition to any such 

16 other rule of law. 

17 ‘‘(5) REGULATIONS.—The Secretary shall pre18 scribe such regulations as may be necessary or ap19 propriate to carry out the purposes of this sub20 section. Such regulations may include exemptions 

21 from the application of this subsection.’’

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

23 this section shall apply to transactions entered into after 

24 the date of the enactment of this Act. 
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1 SEC. 833. PENALTY FOR UNDERSTATEMENTS ATTRIB2 UTABLE TO TRANSACTIONS LACKING ECO3 NOMIC SUBSTANCE, ETC. 

4 (a) IN GENERAL.—Subchapter A of chapter 68 is 

5 amended by inserting after section 6662A the following 

6 new section: 

7 ‘‘SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIB8 UTABLE TO TRANSACTIONS LACKING ECO9 NOMIC SUBSTANCE, ETC. 

10 ‘‘(a) IMPOSITION OF PENALTY.—If a taxpayer has an 

11 noneconomic substance transaction understatement for 

12 any taxable year, there shall be added to the tax an 

13 amount equal to 40 percent of the amount of such under14 statement. 

15 ‘‘(b) REDUCTION OF PENALTY FOR DISCLOSED

16 TRANSACTIONS.—Subsection (a) shall be applied by sub17 stituting ‘20 percent’ for ‘40 percent’ with respect to the 

18 portion of any noneconomic substance transaction under19 statement with respect to which the relevant facts affect20 ing the tax treatment of the item are adequately disclosed 

21 in the return or a statement attached to the return. 

22 ‘‘(c) NONECONOMIC SUBSTANCE TRANSACTION UN23 DERSTATEMENT.—For purposes of this section—

24 ‘‘(1) IN GENERAL.—The term ‘noneconomic 

25 substance transaction understatement’ means any 

26 amount which would be an understatement under 
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1 section 6662A(b)(1) if section 6662A were applied 

2 by taking into account items attributable to non3 economic substance transactions rather than items 

4 to which section 6662A would apply without regard 

5 to this paragraph. 

6 ‘‘(2) NONECONOMIC SUBSTANCE TRANS7 ACTION.—The term ‘noneconomic substance trans8 action’ means any transaction if—

9 ‘‘(A) there is a lack of economic substance 

10 (within the meaning of section 7701(m)(1)) for 

11 the transaction giving rise to the claimed tax 

12 benefit or the transaction was not respected 

13 under section 7701(m)(2), or 

14 ‘‘(B) the transaction fails to meet the re15 quirements of any similar rule of law. 

16 ‘‘(d) RULES APPLICABLE TO COMPROMISE OF PEN17 ALTY.—

18 ‘‘(1) IN GENERAL.—If the 1st letter of pro19 posed deficiency which allows the taxpayer an oppor20 tunity for administrative review in the Internal Rev21 enue Service Office of Appeals has been sent with 

22 respect to a penalty to which this section applies, 

23 only the Commissioner of Internal Revenue may 

24 compromise all or any portion of such penalty. 
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1 ‘‘(2) APPLICABLE RULES.—The rules of para2 graphs (3), (4), and (5) of section 6707A(d) shall 

3 apply for purposes of paragraph (1). 

4 ‘‘(e) COORDINATION WITH OTHER PENALTIES.—Ex5 cept as otherwise provided in this part, the penalty im6 posed by this section shall be in addition to any other pen7 alty imposed by this title. 

8 ‘‘(f) CROSS REFERENCES.—

9 ‘‘(1) For coordination of penalty with under10 statements under section 6662 and other special 

11 rules, see section 6662A(e). 

12 ‘‘(2) For reporting of penalty imposed under 

13 this section to the Securities and Exchange Commis14 sion, see section 6707A(e).’’

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

16 for part II of subchapter A of chapter 68 is amended by 

17 inserting after the item relating to section 6662A the fol18 lowing new item:

‘‘Sec. 6662B. Penalty for understatements attributable to transactions lacking 

economic substance, etc.’’

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

20 this section shall apply to transactions entered into after 

21 January 1, 2006. 
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1 SEC. 834. UNDERSTATEMENT OF TAXPAYER’S LIABILITY BY 

2 INCOME TAX RETURN PREPARER. 

3 (a) STANDARDS CONFORMED TO TAXPAYER STAND4 ARDS.—Section 6694(a) (relating to understatements due 

5 to unrealistic positions) is amended—

6 (1) by striking ‘‘realistic possibility of being 

7 sustained on its merits’’ in paragraph (1) and in8 serting ‘‘reasonable belief that the tax treatment in 

9 such position was more likely than not the proper 

10 treatment’’, 

11 (2) by striking ‘‘or was frivolous’’ in paragraph 

12 (3) and inserting ‘‘or there was no reasonable basis 

13 for the tax treatment of such position’’, and 

14 (3) by striking ‘‘Unrealistic’’ in the heading and 

15 inserting ‘‘Improper’’. 

16 (b) AMOUNT OF PENALTY.—Section 6694 is amend17 ed—

18 (1) by striking ‘‘$250’’ in subsection (a) and in19 serting ‘‘$1,000’’, and 

20 (2) by striking ‘‘$1,000’’ in subsection (b) and 

21 inserting ‘‘$5,000’’. 

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

23 this section shall apply to documents prepared after the 

24 date of the enactment of this Act. 
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1 SEC. 835. FRIVOLOUS TAX SUBMISSIONS. 

2 (a) CIVIL PENALTIES.—Section 6702 is amended to 

3 read as follows: 

4 ‘‘SEC. 6702. FRIVOLOUS TAX SUBMISSIONS. 

5 ‘‘(a) CIVIL PENALTY FOR FRIVOLOUS TAX RE6 TURNS.—A person shall pay a penalty of $5,000 if—

7 ‘‘(1) such person files what purports to be a re8 turn of a tax imposed by this title but which—

9 ‘‘(A) does not contain information on 

10 which the substantial correctness of the self-as11 sessment may be judged, or 

12 ‘‘(B) contains information that on its face 

13 indicates that the self-assessment is substan14 tially incorrect; and 

15 ‘‘(2) the conduct referred to in paragraph (1)—

16 ‘‘(A) is based on a position which the Sec17 retary has identified as frivolous under sub18 section (c), or 

19 ‘‘(B) reflects a desire to delay or impede 

20 the administration of Federal tax laws. 

21 ‘‘(b) CIVIL PENALTY FOR SPECIFIED FRIVOLOUS

22 SUBMISSIONS.—

23 ‘‘(1) IMPOSITION OF PENALTY.—Except as pro24 vided in paragraph (3), any person who submits a 

25 specified frivolous submission shall pay a penalty of 

26 $5,000. 
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1 ‘‘(2) SPECIFIED FRIVOLOUS SUBMISSION.—For 

2 purposes of this section—

3 ‘‘(A) SPECIFIED FRIVOLOUS SUBMIS4 SION.—The term ‘specified frivolous submis5 sion’ means a specified submission if any por6 tion of such submission—

7 ‘‘(i) is based on a position which the 

8 Secretary has identified as frivolous under 

9 subsection (c), or 

10 ‘‘(ii) reflects a desire to delay or im11 pede the administration of Federal tax 

12 laws. 

13 ‘‘(B) SPECIFIED SUBMISSION.—The term 

14 ‘specified submission’ means—

15 ‘‘(i) a request for a hearing under—

16 ‘‘(I) section 6320 (relating to no17 tice and opportunity for hearing upon 

18 filing of notice of lien), or 

19 ‘‘(II) section 6330 (relating to 

20 notice and opportunity for hearing be21 fore levy), and 

22 ‘‘(ii) an application under—

23 ‘‘(I) section 6159 (relating to 

24 agreements for payment of tax liabil25 ity in installments), 
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1 ‘‘(II) section 7122 (relating to 

2 compromises), or 

3 ‘‘(III) section 7811 (relating to 

4 taxpayer assistance orders). 

5 ‘‘(3) OPPORTUNITY TO WITHDRAW SUBMIS6 SION.—If the Secretary provides a person with no7 tice that a submission is a specified frivolous sub8 mission and such person withdraws such submission 

9 within 30 days after such notice, the penalty im10 posed under paragraph (1) shall not apply with re11 spect to such submission. 

12 ‘‘(c) LISTING OF FRIVOLOUS POSITIONS.—The Sec13 retary shall prescribe (and periodically revise) a list of po14 sitions which the Secretary has identified as being frivo15 lous for purposes of this subsection. The Secretary shall 

16 not include in such list any position that the Secretary 

17 determines meets the requirement of section 

18 6662(d)(2)(B)(ii)(II). 

19 ‘‘(d) REDUCTION OF PENALTY.—The Secretary may 

20 reduce the amount of any penalty imposed under this sec21 tion if the Secretary determines that such reduction would 

22 promote compliance with and administration of the Fed23 eral tax laws. 
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1 ‘‘(e) PENALTIES IN ADDITION TO OTHER PEN2 ALTIES.—The penalties imposed by this section shall be 

3 in addition to any other penalty provided by law.’’

4 (b) TREATMENT OF FRIVOLOUS REQUESTS FOR

5 HEARINGS BEFORE LEVY.—

6 (1) FRIVOLOUS REQUESTS DISREGARDED.—

7 Section 6330 (relating to notice and opportunity for 

8 hearing before levy) is amended by adding at the 

9 end the following new subsection: 

10 ‘‘(g) FRIVOLOUS REQUESTS FOR HEARING, ETC.—

11 Notwithstanding any other provision of this section, if the 

12 Secretary determines that any portion of a request for a 

13 hearing under this section or section 6320 meets the re14 quirement of clause (i) or (ii) of section 6702(b)(2)(A), 

15 then the Secretary may treat such portion as if it were 

16 never submitted and such portion shall not be subject to 

17 any further administrative or judicial review.’’

18 (2) PRECLUSION FROM RAISING FRIVOLOUS

19 ISSUES AT HEARING.—Section 6330(c)(4) is amend20 ed—

21 (A) by striking ‘‘(A)’’ and inserting 

22 ‘‘(A)(i)’’; 

23 (B) by striking ‘‘(B)’’ and inserting ‘‘(ii)’’; 

24 (C) by striking the period at the end of the 

25 first sentence and inserting ‘‘; or’’; and 
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1 (D) by inserting after subparagraph (A)(ii) 

2 (as so redesignated) the following: 

3 ‘‘(B) the issue meets the requirement of 

4 clause (i) or (ii) of section 6702(b)(2)(A).’’

5 (3) STATEMENT OF GROUNDS.—Section 

6 6330(b)(1) is amended by striking ‘‘under sub7 section (a)(3)(B)’’ and inserting ‘‘in writing under 

8 subsection (a)(3)(B) and states the grounds for the 

9 requested hearing’’. 

10 (c) TREATMENT OF FRIVOLOUS REQUESTS FOR

11 HEARINGS UPON FILING OF NOTICE OF LIEN.—Section 

12 6320 is amended—

13 (1) in subsection (b)(1), by striking ‘‘under sub14 section (a)(3)(B)’’ and inserting ‘‘in writing under 

15 subsection (a)(3)(B) and states the grounds for the 

16 requested hearing’’, and 

17 (2) in subsection (c), by striking ‘‘and (e)’’ and 

18 inserting ‘‘(e), and (g)’’. 

19 (d) TREATMENT OF FRIVOLOUS APPLICATIONS FOR

20 OFFERS-IN-COMPROMISE AND INSTALLMENT AGREE21 MENTS.—Section 7122 is amended by adding at the end 

22 the following new subsection: 

23 ‘‘(e) FRIVOLOUS SUBMISSIONS, ETC.—Notwith24 standing any other provision of this section, if the Sec25 retary determines that any portion of an application for 
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1 an offer-in-compromise or installment agreement sub2 mitted under this section or section 6159 meets the re3 quirement of clause (i) or (ii) of section 6702(b)(2)(A), 

4 then the Secretary may treat such portion as if it were 

5 never submitted and such portion shall not be subject to 

6 any further administrative or judicial review.’’

7 (e) CLERICAL AMENDMENT.—The table of sections 

8 for part I of subchapter B of chapter 68 is amended by 

9 striking the item relating to section 6702 and inserting 

10 the following new item:

‘‘Sec. 6702. Frivolous tax submissions.’’

11 (f) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to submissions made and issues 

13 raised after the date on which the Secretary first pre14 scribes a list under section 6702(c) of the Internal Rev15 enue Code of 1986, as amended by subsection (a). 

16 SEC. 836. EXPANDED AUTHORITY TO DISALLOW TAX BENE17 FITS UNDER SECTION 269. 

18 (a) IN GENERAL.—Subsection (a) of section 269 (re19 lating to acquisitions made to evade or avoid income tax) 

20 is amended to read as follows: 

21 ‘‘(a) IN GENERAL.—If—

22 ‘‘(1)(A) any person acquires stock in a corpora23 tion, or 

24 ‘‘(B) any corporation acquires, directly or indi25 rectly, property of another corporation and the basis 
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1 of such property, in the hands of the acquiring cor2 poration, is determined by reference to the basis in 

3 the hands of the transferor corporation, and 

4 ‘‘(2) the principal purpose for which such acqui5 sition was made is evasion or avoidance of Federal 

6 income tax by securing the benefit of a deduction, 

7 credit, or other allowance, 

8 then the Secretary may disallow such deduction, credit, 

9 or other allowance.’’

10 (b) EFFECTIVE DATE.—The amendment made by 

11 this section shall apply to stock and property acquired 

12 after January 1, 2006.

Æ