-18-

9. Increase Excise Tax on Certain Ozone-Depleting Chemicals
Present Law

An excise tax is imposed on certain ozone-depleting
chemicals. The amount of tax generally is determined by
multiplying the base tax rate applicable for the calendar
year by an ozone-depleting factor assigned to the chemical.
Certain chemicals are subject to a reduced rate of tax for
years prior to 1994.

Between 1992 and 1995 there are two base tax rates
applicable, depending upon whether the chemicals were
initially listed in the Omnibus Budget Reconciliation Act of
1989 or whether they were newly listed in the Omnibus Budget
Reconciliation Act of 1990. The base tax rate applicable to
initially listed chemicals is $1.67 per pound for 1992, $2.65
per pound for 1993 and 1994, and an additional 45 cents per
pound per year for each year thereafter. The base tax rate
applicable to newly listed chemicals is $1.37 per pound for
1992, $1.67 per pound for 1993, $3.00 per pound for 1994,
$3.10 per pound for 1995, and an additional 45 cents per
pound per year for each year thereafter.

Description of Proposal

The proposal would increase and conform the base tax
rate of both initially listed chemicals and newly listed
chemicals. The base tax rate of originally listed chemicals
would be increased by $0.18 per pound in 1992, by $0.10 per
pound in 1993, by $1.00 per pound in 1994, and by $1.45 per
pound in 1995 and every year thereafter. The base tax rate
of newly listed chemicals would be increased by $0.48 per
pound in 1992, by $1.08 per pound in 1993, by $0.65 per pound
in 1994, and by $1.45 per pound in 1995 and every year
thereafter. These increases in the base tax amount would be
in addition to those currently scheduled under present law.

In addition, the proposal would reduce the applicable
percentage used in the computation of the tax applied to
chemicals used in rigid foam insulation in 1992 and 1993.
The provision would reduce the applicable percentage from 15
percent to 13.5 percent for 1992 and would reduce the
applicable percentage from 10 percent to 9.6 percent for
1993, Similarly, the proposal would reduce the applicable
percentage applied to Halon-1211, Halon-1301, and Halon-2402
in 1992 and 1993. The following table contains the new
applicable percentages.



-12-

carryforward, carryback, and the limitation rules of the
general business credit (except that the production credit
from closed-loop biomass facilities could not be carried back
to a taxable year ending before January 1, 1993 and the
production credit from qualified wind energy facilities could
not be carried back to a taxable year ending before January
1, 1994).

Closed-loop biomass would be defined as the use of plant
matter on a renewable basis as an energy source to generate
electricity, where the plants are grown for the sole purpose
of being used to generate electricity. Accordingly, the
credit would not be available for the use of waste materials
(including, but not limited to, scrap wood, manure, and
municipal or agricultural waste) to generate electricity.
Moreover, the credit would not be available to a taxpayer who
uses standing timber to produce electricity.

The credit would be proportionately phased out over a
three cent per kilowatt hour range if the national average
price of electricity from the renewable source sold in
accordance with contracts entered into after December 31,
1989, exceeds a threshold price of 8 cents per kilowatt hour.
(This threshold is adjusted for inflation.) Thus, the credit
would not be available if the national average price of
electricity from the renewable source is greater than three
cents per kilowatt hour above the threshold price.

A facility which has received the business energy credit
or the investment credit would not be eligible for the
production credit. In addition, the credit would be reduced
proportionately for any governmental grants or subsidized
financing received (including the use of tax-exempt bonds) .

The proposal is similar to the tax credit for the
generation of electricity from renewable energy sources
included in H.R. 776 as passed by the House, except for the
computation of the phaseout reference price.

Effective Date

The credit would apply to electricity produced by a
qualified closed-loop biomass facility placed in service
after December 31, 1992 and before July 1, 1999, and to
electricity produced by a qualified wind energy facility
placed in service after December 31, 1993, and before July 1,
1999.



inte aR

-3-

II. DESCRIPTION OF PROVISIONS
1. Exclusion for Employer-Provided Transportation Benefits
Present Law

Under Treasury regulations, transit passes, tokens, fare
cards, vouchers, and cash reimbursements provided by an
employer to defray an employee’s costs of commuting on a
public transit system are excludable from the employee's
income (for both income and payroll tax purposes) as a de
minimis fringe benefit if the total value of the benefit does
not exceed $21. If the total value of the benefits exceeds
$21 per month, the full value of the benefits is includible
in income.

Parking at or near the employer’s business premises that
is paid for by the employer is excludable from the gross
income of the employee (for both income and payroll tax
purposes) as a working condition fringe benefit, regardless
of the value of the parking. This exclusion does not apply
to parking at the employee’s residence.

Description of Proposal

Under the proposal, gross income and wages (for both
income and payroll tax purposes) would not include qualified
transportation fringe benefits. In general, a qualified
transportation fringe would be (1) transportation in a
commuter highway vehicle if such transportation is in
connection with travel between the employee's residence and
place of employment, (2) a transit pass, or (3) qualified
parking. The maximum amount of qualified parking that would
be excludable from an employee’s gross income and wages would
be $155 per month (regardless of the total value of the
parking). Other qualified transportation fringes would be
excludable from gross income to the extent that the aggregate
value of the benefits does not exceed $60 per month
(regardless of the total value of the benefits). The $60 and
$155 limits would be indexed for inflation in $5 increments.

A commuter highway vehicle would be a highway vehicle
the seating capacity of which is at least 6 adults (not
including the driver) and at least 80 percent of the mileage
use of which can reasonably be expected to be for purposes of
transporting employees between their residences and their
place of employment on trips during which the number of
employees transported for such purpose is at least one-half
of the adult seating capacity of the vehicle (not including
the driver). Transportation furnished in a commuter highway
vehicle operated by or for the employer would be considered
provided by the employer. Cash reimbursements made by an
employer to an employee to cover the cost of commuting in a



-19-

Applicable Percentage- -

1992 1993
Halon-1211 4.5 3.0
Halon-1301 1.4 0.9
Halon-2402 2.3 1.5

The effect of this provision is to continue present-law rates
on these chemicals for 1992 and 1993.

The proposal also would provide for a reduced rate of
tax. for certain ozone-depleting chemicals used as medical
sterilants for 1992 (for sale or use on or after October 1,
1992) and 1993.

A similar proposal is included in H.R. 776.
Effective Date
The proposal would be effective for taxable chemicals
sold or used on or after October 1, 1992. Floor stocks taxes

are imposed on taxed chemicals held on the effective dates of
changes in the base tax rate.


-16-

7. ‘Treatment of Nuclear Decommissioning Funds
Present Law

A taxpayer that is required to decommission a nuclear
power plant may elect to deduct certain contributions that
are made to a nuclear decommissioning fund. A nuclear
decommissioning fund is a segregated fund the assets of which
are to be used exclusively to pay nuclear decommissioning
costs, taxes on fund income, and certain administrative
costs. The assets of a nuclear decommissioning fund that are
not currently required for these purposes must be invested in
(1) public debt securities of the United States, (2)
obligations of a State or local government that are not in
default as to principal or interest, or (3) time or demand
deposits in a bank or an insured credit union located in the
United States. These investment restrictions are the same
restrictions which apply to Black Lung trusts that are
established under section 501(c)(21) of the Code.

Description of Proposal

The present-law investment restrictions that apply to
nuclear decommissioning funds would be repealed. The
proposal was included in H.R. 4210 as passed by the House and
Senate.

Effective Date

The investment restrictions would be repealed for
taxable years beginning after December 31, 1992.



-8-

any applicable Federal or State emissions standards with
respect to each fuel by which the vehicle is designed to be
propelied.

In the case of any motor vehicle that may be propelled
by both a clean-burning fuel and any other fuel, the cost of
any qualified clean-fuel vehicle property that may be used by
both the clean-burning fuel and the other fuel would be taken
into account in determining the amount of the deduction only
to the extent that the cost of such property exceeds the cost
of the property which would have been used had the vehicle
been propelled solely by the fuel that is not a clean-burning
fuel.

Definition of qualified clean-fuel vehicle refueling property

Qualified clean-fuel vehicle refueling property would be
defined as any property (other than a building or its
structural components) that is used for the storage or
dispensing of a clean-burning fuel into the fuel tank of
motor vehicles propelled by the fuel, but only if the storage
or dispensing (as the case may be) of the fuel is at the
point where the fuel is delivered into the fuel tank of the
motor vehicles. For this purpose, qualified clean-fuel
vehicle refueling property would include property (other than
a building or its structural components) that is dedicated to
the recharging of motor vehicles propelled by electricity but
only if the property is located at the point where the motor
vehicles are recharged.

In order for property to qualify as qualified clean-fuel
vehicle refueling property, the original use of the property
must commence with the taxpayer and the property must be of a
character that is subject to the allowance for depreciation
(i.e., unlike qualified clean-fuel vehicle property,
qualified clean-fuel vehicle refueling property would be
required to be used in a trade or business of the taxpayer).

Definition of clean-burning fuel and motor vehicle

Clean-burning fuel would be defined as natural gas,
liquefied natural gas, liquefied petroleum gas, hydrogen,
electricity, and any other fuel if at least 85 percent of the
fuel is methanol, ethanol, any other alcohol, ether, or any
combination of the foregoing. A motor vehicle would be
defined as any vehicle with at least four wheels that is
manufactured primarily for use on public streets, roads, and
highways (but not including a vehicle operated exclusively on
a rail or rails).

Limitations on deduction

The cost that may be taken into account in determining
the amount of the deduction with respect to any motor vehicle



2. Exclusion for Certain Conservation Measures Provided by
Public Utilities

Present Law

Section 8217(i) of the National Energy Conservation
Policy Act provided that the value of any subsidy provided by
a utility to a residential customer for the purchase or
installation of a residential energy conservation measure was
excluded from gross income. That exclusion expired on June
30, 1989.

In Technical Advice Memorandum 8924002, the IRS ruled
that cash payments by a utility to induce customers to
encourage the installation of alternative heating systems
were includible in the gross income of the recipients. The
heating systems were installed by third-party vendors. In
the ruling, the IRS distinguished the taxable utility rebates
from nontaxable automobile manufacturer rebates (which are
treated as adjustments to the purchase price of the
automobile). However, in Rev. Rul. 91-36, 1991-26 I.R.B. 14,
the IRS held that if a customer of an electric utility
company participates in an energy conservation program for
which the customer receives a rate reduction or nonrefundable
credit on the customer’s bill, the amount of the rate
reduction or nonrefundable credit is not included in the
customer’s gross income. In the ruling, the IRS reasoned
that the rate reduction or nonrefundable credit represented a
reduction in the purchase price of electricity and,
therefore, did not constitute taxable income.

Description of Proposal

The proposal would provide an exclusion from the gross
income of a customer of a public utility for the value of any
subsidy provided by a utility for the purchase or
installation of an energy conservation measure ina
residential building.

In addition, for taxable years beginning after 1993, the
proposal would provide an exclusion from the gross income of
a commercial or industrial customer of a public utility for
80 percent of the value of any subsidy provided by the
utility for the purchase or installation of an energy
conservation measure.

For purposes of the proposal, regulated public
utilities, rural electric cooperatives, state- and
municipality-owned utilities, and certain Federally-operated
utilities would be considered to be public utilities. In
addition, the proposal would apply to certain payments made
by public utilities to third party contractors and to certain
payments received pursuant to state-sponsored conservation


-4-

commuter highway vehicle also would qualify for the
exclusion, provided the reimbursements were made under a bona
fide reimbursement arrangement.

A transit pass would include any pass, token, fare card,
voucher, or similar item entitling a person to transportation
on mass transit facilities (whether publicly or privately
owned). Types of transit facilities that could qualify for
the exclusion would include, for example, rail, bus, and
ferry. Cash reimbursements made by an employer to an
employee to cover the cost of purchasing a transit pass
generally would not qualify for the exclusion, unless
vouchers or similar items are not readily available to the
employer, in which case reimbursements could be made under a
bona fide reimbursement arrangement.

Qualified parking would be parking provided to an
employee on or near the business premises of the employer or
on or near a location from which the employee commutes to
work by mass transit, in a commuter highway vehicle, or by
carpool. However, as under present law, the exclusion would
not apply to any parking facility or space located on
property owned or leased by the employee for residential
purposes. Cash reimbursements made by an employer to an
employee to cover the cost of qualified parking would qualify
for the exclusion, provided the reimbursements were made
under a bona fide reimbursement arrangement.

A similar proposal is included in H.R. 776 as passed by
the House, and in H.R. 4210 as passed by the House and
Senate.

Effective Date

The proposal would apply to benefits provided by the
employer on or after January 1, 1993.



-17-

8. Deny Deduction for Club Dues
Present Law

No deduction is permitted for club dues unless the
taxpayer establishes that his or her use of the club was
primarily for the furtherance of the taxpayer’s trade or
business and the specific expense was directly related to the
active conduct of that trade or business. Luncheon club dues
are deductible to the same extent and subject to the same
rules as business meals in a restaurant and are not subject
to these special rules for club dues. No deduction is
permitted for an initiation or similar fee that is payable
only upon joining a club if the useful life of the fee
extends over more than one year. Such initiation fees are
nondeductible capital expenditures.

Description of Proposal

No deduction would be permitted for club dues. This
rule would apply to all types of clubs: business, social,
athletic, luncheon, or sporting clubs. Specific business
expenses (e.g. meals) incurred at a club would be deductible
only to the extent they otherwise satisfy present-law
standards for deductibility.

The proposal was included in H.R. 4210 as passed by the
House and the Senate.

Effective Date

The proposal would be effective for club dues paid on or
after the date of enactment.



-7-

3. Deduction for Clean-Fuel Vehicles and Certain Refueling
Property

Present Law

Present law does not provide a special deduction or
other income tax benefit for investing in a motor vehicle
that may be propelled by a clean-burning fuel or for
investing in property that is used to refuel a vehicle that
may be propelled by a clean-burning fuel.

Description of Proposal

In general

A deduction would be allowed for the cost of qualified
clean-fuel vehicle property and qualified clean-fuel vehicle
refueling property that is placed in service during any
taxable year. The amount of the deduction for qualified
clean-fuel vehicle property would be limited based on the
type of the motor vehicle of which the property is a part.
The amount of the deduction for qualified clean-fuel vehicle
refueling property generally would be limited to $100,000 for
each refueling location.

Definition of qualified clean-fuel vehicle property

Qualified clean-fuel vehicle property would be defined
as a motor vehicle that is produced by an original equipment
manufacturer and designed so that the vehicle may be
propelled by a clean-burning fuel, but only to the extent of
the portion of the basis of the vehicle that is attributable
to: (1) an engine which may use the clean-burning fuel; or
(2) any property which may be used in the storage or delivery
to the engine of the clean-burning fuel or the exhaust of
gases from the combustion of the clean-burning fuel.

In addition, qualified clean-fuel vehicle property would
be defined as any property that is installed on a motor
vehicle which is propelled by a fuel that is not a
clean-burning fuel for purposes of permitting the vehicle to
be propelled by a clean-burning fuel, but only to the extent
that: (1) the property is an engine (or modification thereof
which may use the clean-burning fuel; or (2) the property may
be used in the storage or delivery to the engine of the
clean-burning fuel or the exhaust of gases from the
combustion of the clean-burning fuel.

In order for property to qualify as qualified clean-fuel
vehicle property, the property must be acquired for use by
the taxpayer (and not for resale) and the original use of the
property must commence with the taxpayer. In addition, the
motor vehicle of which the property is a part must satisfy


CHAIRMAN’S MARK OF THE
REVENUE-RELATED PROVISIONS OF H.R. 776
("COMPREHENSIVE NATIONAL ENERGY ACT")

Scheduled for Markup
by the
SENATE COMMITTEE ON FINANCE

on June 16, 1992

Prepared by the Staff
of the
JOINT COMMITTEE ON TAXATION.
June 16, 1992

JCX-22-92


-10-

placed in service after December 31, 2001. The otherwise
applicable limitations would be reduced by: (1) 25 percent
for property that is placed in service during 2002; (2) 50
percent for property that is placed in service during 2003;
and (3! 75 percent for property that is placed in service
during 2004.



would be limited based on the type of the motor vehicle. In
the case of a truck or van with a gross vehicle weight rating
that is greater than 26,000 pounds or a bus which has a
seating capacity of at least 20 adults (not including the
driver}, the limitation would be $50,000. In the case of a
truck or van with a gross vehicle weight rating that is
greater than 10,000 but not greater than 26,000 pounds, the
limitation would be $5,000. In the case of any other motor
vehicle, the limitation would be $2,000.

The aggregate cost that may be taken into account in
determining the amount of the deduction with respect to
qualified clean-fuel vehicle refueling property that is
placed in service at any location could not exceed the excess
(if any) of (1) $100,000, over (2) the aggregate amount taken
into account under the provision by the taxpayer (or any
related person or predecessor) with respect to property
placed in service at such location for all preceding taxable
years.

Other rules

The basis of any property with respect to which a
deduction is allowed would be reduced by the portion of the
cost of the property that is taken into account in
determining the deduction. In addition, the Treasury
Department would be required to promulgate regulations that
provide for the recapture of the benefit of the deduction if
the property ceases to be qualified property.

The deduction for qualified clean-fuel vehicle property
and qualified clean-fuel vehicle refueling property generally
would not be allowed with respect to property that is used
predominantly outside the United States or property that is
used by governmental units or certain tax-exempt
organizations. In addition, the deduction for qualified
clean-fuel vehicle property would be allowed as an adjustment
to gross income rather than as an itemized deduction.
Consequently, the deduction would not be subject to the
2-percent adjusted gross income floor that otherwise applies
to miscellaneous itemized deductions or to the limitation on
itemized deductions that applies to taxpayers with adjusted
gross income in excess of a specified amount ($105,250 for
taxable years beginning in 1992).

The proposal is included in H.R. 776 as passed by the
House.

Effective Date

The proposal would apply to qualified property that is
placed in service after June 30, 1993, and before January 1,
2005. The cost limitations that apply to qualified
clean-fuel vehicle property would be reduced for property



programs.

The proposal would not apply to payments made to or from
a qualified cogeneration facility or a qualifying szall power
production facility pursuant to section 210 of the Fublic
Utility Regulatory Policy Act of 1978.

The proposal would deny a deduction or credit, or in
appropriate cases require a reduction in adjusted basis of
property, for any expenditure to the extent that a subsidy
related to that expenditure was excluded from the gross
income of the recipient.

Effective Date

The proposal would be effective with respect to amounts
received after December 31, 1992.



-2-

I. LEGISLATIVE BACKGROUND

H.R. 776 ("Comprehensive National Energy Policy Act")
was passed by the House of Representatives on May 27, 1992.
The bill was referred to the Senate Committee on Finance on
June 4, 1992, for consideration of the revenue-related
provisions. On February 19, 1992, the Senate passed S. 2166
("National Energy Security Act of 1992"), which did not
include tax provisions. S. 2166 was debated by the Senate on
February 5-7 and 18-19, 1992.

The Subcommittee on Energy and Agricultural Taxation of
the Committee on Finance held hearings on June 13-14, 1991,
on proposals relating to renewable energy and energy
conservation tax incentives. The Subcommittee hearings
included the following energy-related tax bills: (1) S. 26

(exclusion for certain employer-provided transportation); (2)
S. 83 (exclusion for public utility payments for energy or
water conservation measures); (3) S. 129 (exclusion for
certain employer-provided transportation); (4) S. 141
(extension of business energy tax credits); (5) S. 201
{increase in gas guzzler excise tax and tax credit for
purchase of fuel-efficient automobiles); (6) S. 326

{exclusion for public utility payments for energy
conservation measures, tax credit for retrofit of residential
oil heaters, and employer deduction for employer parking) ;
(7) S. 466 (tax credit for production of qualified
electricity and extension of business energy tax credits);
(8) S. 661 (tax credit for production of qualified
electricity, extension of business energy tax credits, and
tax credit for telecommuting); (9) S. 679 (exclusion for
public utility payments for residential energy conservation
measures); and (10) S. 731 (extension of business energy tax
credits).

The Subcommittee on Taxation held a hearing on February
19, 1992, on the effects of the alternative minimum tax.

2 S. 1220 was the predecessor bill to S. 2166. S. 1220 was
reported by the Senate Committee on Energy and Natural
Resources on June 5, 1991 (S. Rept. 102-72).



-13-

5. Repeal of Certain Minimum Tax Preferences Relating to Oil
and Gas Production

Present Law

The difference between the amount of a taxpayer's
deductions for intangible drilling costs (IDCs) and the
amount which would have been currently deductible had IDCs
been capitalized and recovered over a 10-year period is an
item of tax preference for the alternative minimum tax
("AMT") to the extent that this amount exceeds 65 percent of
the taxpayer’s net income from oil and gas properties for the
taxable year (the "excess IDC preference"). In addition, for
purposes of computing the adjusted current earnings ("ACE")
adjustment of the corporate AMT, IDCs are capitalized and
amortized over the 60-month period beginning with the month
in which they are paid or incurred.

Independent producers and royalty owners generally are
allowed a deduction for percentage depletion in computing
their taxable income. A taxpayer’s overall deduction for
percentage depletion is limited to an amount that is equal to
65 percent of the taxpayer’s pre-depletion taxable income for
the taxable year. The amount by which the depletion
deduction exceeds the adjusted basis of the property is an
AMT preference (the "excess percentage depletion
preference"). Corporations must use cost depletion in
computing their ACE adjustment.

A taxpayer other than an integrated oil company is
entitled to an "energy deduction" for certain IDC and
depletion items. The energy deduction is the sum of 75
percent of the portion of the IDC preference attributable to
qualified exploratory costs and 15 percent of the remaining
IDC preference plus 50 percent of the marginal production
depletion preference. The energy deduction may not reduce
the taxpayer’s alternative minimum taxable income by more
than 40 percent.

Description of Proposal

The proposal is similar to the provision included in
H.R. 776 as passed by the House. For taxpayers other than
integrated oil companies, the proposal would repeal (1) the
excess IDC preference and (2) the excess percentage depletion
preference for oil and gas. The repeal of the excess IDC
preference may not result in the reduction of the amount of
the taxpayer's alternative minimum taxable income by more
than 40 percent (30 percent for taxable years beginning in
1993) of the amount that the taxpayer’s alternative minimum
taxable income would have been had the present-law excess IDC
preference not been repealed.



-15-

6. Business Energy Tax Credits for Solar, Geothermai, and
Ocean Thermal Property

Present Law

Nonrefundable business energy tax credits are allowed
for 10 percent of the cost of qualified solar and geothermal
energy property (Code sec. 48(a)). Solar energy property that
qualifies for the credit includes any equipment that uses
solar energy to generate electricity, to heat or cool (or
provide hot water for use in) a structure, or to provide
solar process heat. Qualifying geothermal property includes
equipment that produces, distributes, or uses energy derived
from a geothermal deposit, but, in the case of electricity
generated by geothermal power, only up to (but not including)
the electrical transmission stage.

The business energy tax credits currently are scheduled
to expire with respect to property placed in service after
dune 30, 1992.

The business energy tax credits are components of the
general business credit (sec. 38(b)(1)). The business energy
tax credits, when combined with all other components of the
general business credit, generally may not exceed for any
taxable year the excess of the taxpayer’s net income tax over
the greater of (1) 25 percent of net regular tax liability
above $25,000 or (2) the tentative minimum tax. An unused
general business credit generally may be carried back 3 years
and carried forward 15 years.

Description of Proposal

The proposal is similar to the provision in H.R. 776 as
passed by the House. Under the proposal, the business
credits for qualified investments in solar and geothermal
property would be permanently extended. In addition, the
proposal would add a credit equal to 10 percent of qualified
ocean thermal property placed in service by a taxpayer after
June 30, 1992. For this purpose, qualified ocean thermal
property would be equipment which converts ocean thermal
energy to usable energy. Qualified ocean thermal property
would be located at either of two locations designated by the
Secretary of Treasury after consultation with the Secretary
of Energy.

Effective Date

The proposal would be effective after June 30, 1992.



INTRODUCTION

The Senate Committee on Finance has scheduled a markup
on June 1@, 1992, on the revenue-related provisions included
in Title XIX of H.R. 776 ("Comprehensive National Energy
Policy Act"), as passed by the House on May 27, 1992. The
bill was referred to the Committee on Finance on June 4,
1992.

This document ,* prepared by the staff of the Joint
Committee on Taxation, provides a description of the
Chairman‘s proposed mark for the revenue-related provisions
of H.R. 776. Part I of the document is a legislative
background on H.R. 776. Part II is a description of the
Chairman's mark for the revenue-related provisions of the
bill. The description includes a reference to whether the
proposal is included in H.R. 776 as passed by the House or in
H.R. 4210 as passed by the House and the Senate.

The Chairman’s mark is proposed as a substitute for the
revenue provisions of Title XIX of H.R. 776 as passed by the
House.

1 This document may be cited as follows: Joint Committee on
Taxation, Chairman’s Mark of the Revenue-Related Provisions

of H.R. 776 ("Comprehensive National Energy Policy Act")
(GCX-22-92), June 16, 1992.


CONTENTS

Page
INTRODUCTION... 2... 0... e eee eee tees cenaee sete ewes 1
I. LEGISLATIVE BACKGROUND............... sete tee eeee 2
II. DESCRIPTION OF PROVISIONS..... scene eee eet cer eare 3
1. Exclusion for employer-provided
transportation benefits....... see e ee eee 3
2. Exclusion for certain energy conservation
measures provided by public
utilities...... see cece ence eee wee 5
3. Deduction for clean-fuel vehicles
and certain refueling property.......... 7
4. Income tax credit for electricity
generated using certain renewable
resources........ cee c eee ee eee eee eee 11
5. Repeal of certain minimum tax
preferences relating to oil
and gas production...................-.. 13
6. Business energy tax credits for
solar, geothermal, and
ocean thermal property...............+.. 15
7. ‘Treatment of nuclear decommissioning
funds...... Bec eeeeeeeee eee nee - 16
8. Deny deduction for club dues.......... sees 17
9. Increase excise tax on certain

ozone-depleting chemicals............... 18



-11-

4. Income Tax Credit for Electricity Generated Using Certain
Renewable Resources

Present Law

An investment-type tax credit against income tax
liability is allowed for investments in property producing
energy from certain specified renewable sources (sec. 48).
The nonrefundable credit, which is referred to as the
business energy credit, equals 10 percent of the cost of
qualified solar or geothermal energy property. Solar energy
property that qualifies for this tax credit includes any
equipment that uses solar energy to generate electricity, to
heat or cool (or provide hot water for use in) a structure,
or to provide solar process heat. Qualifying geothermal
property includes equipment that produces, distributes, or
uses energy derived from a geothermal deposit, but in the
case of electricity generated by geothermal power, only
property used up to (but not including) the transmission
stage.

_A production-type tax credit is allowed against income
tax liability for the production of certain nonconventional

fuels (sec. 29). For 1991, the credit amount is equal to
$5.35 per barrel of oil or BTU oil equivalent. (This credit
amount is adjusted for inflation.) Qualified fuels must be

produced from a well drilled, or facility placed in service,
before January 1, 1993, and must be sold before January 1,
2003. Qualified fuels include: (1) oil produced from shale
and tar sands; (2) gas produced from geopressurized brine,
Devonian shale, coal seams, a tight formation, or biomass;
and (3) liquid, gaseous, or solid synthetic fuels produced
from coal (including lignite), including such fuels when used
as feedstocks.

Description of Proposal

A production-type credit against income tax liability
would be provided for electricity produced from either
qualified wind energy or qualified "closed-loop biomass"
facilities. The credit would equal 1.5 cents (adjusted for
inflation) per kilowatt hour of electricity produced from
these qualified sources during the 10-year period after the
facility is placed in service. This production credit would
be part of the general business credit, subject to the

For purposes of the business energy credit, a geothermal
energy deposit is defined as a domestic geothermal reservoir
of natural heat which is stored in rocks or in an aqueous
liquid or vapor, whether or not under pressure (sec.
613 (e) (2)).


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In addition, for corporations other than integrated oil
companies, the proposal would repeal the ACE adjustments for
(1) IDCs paid or incurred in taxable years beginning after
December 31, 1992, and (2) percentage depletion for oil and

gas.

As a conforming amendment, the proposal would also
repeal the AMT energy deduction.

Effective Date
Except as provided above regarding the repeal of the ACE

treatment of IDCs, the proposal would apply to taxable years
beginning after December 31, 1992.