-18-

D. Repeal of Investment Restrictions Applicable
to 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.

Possible Option

Include the proposal in section 4673 of H.R. 4210 as
passed by Congress. Under this proposal, the present-law
investment restrictions applicable to nuclear decommissioning
funds would be repealed.

Effective date.--The proposal would be effective for
taxable years beginning after December 31, 1992.



-12-
that particular year.
Fourth, the proposal would require the Energy Secretary

to establish a minimum standard or grade of crude oil to be
stored in the Reserve under the bill.



-3-

Ii. REVENUE-RELATED PROVISIONS OF H-R. 776
AS REPORTED BY COMMITTEE ON ENERGY AND COMMERCE

A. Tax-Exempt Bond Financing of Facilities for
Local Furnishing of Electricity or Gas
(sec. 732 of the Bill)

Present Law

in general

Interest on State and local government bonds generally
is excluded from income for purposes of the regular
individual and corporate income taxes if the proceeds of the
bonds are used to finance direct activities of these
governmental units (Code sec. 103). Present law also
excludes the interest on certain State and local government
bonds ("private activity bonds") when a governmental unit
incurs debt as a conduit to provide capital financing for
private parties if the financed activities are specified in
the Code. Tax-exempt private activity bonds may not be
issued to finance activities not specified in the Code.

Private activity bonds are bonds (1) more than 10
percent of the proceeds of which satisfy a private business
use and payment test, or (2) more than five percent ($5
million, if less) of the proceeds of which are used to
finance loans to persons other than State or local
governmental units. A special restriction reduces the
private business use and payment limits to five percent in
the case of private business activities that are unrelated to
direct governmental activities also being financed with a
bond issue.

Interest on the following private activity bonds
qualifies for the above-mentioned exclusions from income:

) Exempt-facility bonds;
) Qualified mortgage and qualified veterans’ mortgage

NE

bonds
Qualified small-issue bonds;
Qualified student loan bonds;
Qualified redevelopment bonds; and
Qualified 501(c)(3) bonds.

Aun AW

(
(
(
(
(

Exempt-facility bonds are bonds the proceeds of which
are used to finance the following: airports, docks and
wharves, mass commuting facilities or high-speed intercity
rail facilities; water, sewage, solid waste, or hazardous
waste disposal facilities; facilities for the local
furnishing of electricity or gas; local district heating or
cooling facilities; and certain low-income rental housing
projects.


-19-

&. Exclusion for Certain Utility Rebates
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.

Possible Option

Por taxable years beginning after 1992, the proposal
would provide an exclusion from the gross income of a
residential customer of a public utility for the value of any
subsidy provided by the utility for the purchase or
installation of an energy conservation measure. 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 65 percent of the
value of any subsidy provided by the utility for the purchase
or installation of an energy conservation measure. The
proposal would not apply to payments made to or from a
cogeneration facility or a small power production facility.

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.


-21-

States or property that is used by governmental units or
certain tax-exempt organizations.

Clean~burning fuel would be defined as natural gas,
liquefied petroleum gas, liquefied natural gas, hydrogen,
electricity, and any other fuel if at least 85 percent of the
fuel is methanol, ethanol, any other alcohol, or ether.

Other rules

The basis of any qualified property would be reduced by
the full amount of the credit allowed with respect to the
. Property. In addition, the credit would be recaptured if the
property ceases to be qualified property or the property is
prematurely disposed of.

The credit would be included as a general business
credit even though the credit would be available to taxpayers
that use the qualified property for non-business purposes.

In the case of qualified property that is not used
predominantly in a trade or business, however, any excess
credit would not be allowed to be carried back or carried
forward to other taxable years. In addition, the credit
would not be allowed to be carried back to any taxable year
ending before July 1, 1993.

Effective date.--The proposal would apply to qualified
property that is placed in service after June 30, 1993, and
before January 1, 2005.



-16-

B. Business Energy Tax Credits for
Solar and Geothermal 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
June 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.

Possible Option

The proposal would permanently extend the business
credits for solar and geothermal property.

Effective date.--The proposal would be effective for
qualifying solar and geothermal property placed in service
after June 30, 1992.

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



-8-

electricity. However, to support the Nuclear Waste Fund,
there is a specific fee of 0.1 cent per kilowatt hour (kwh)
imposed by the Nuclear Waste Policy Act of 1982 on generation
of electricity from nuclear power.

The Nuclear Regulatory Commission currently assesses
other fees on the owners of nuclear power plants. Operators
of nuclear power plants are charged fees based upon the
number of staff hours required to inspect the facilities.
The fees recover the costs incurred in inspecting the
facilities, but do not recover all of the costs involved in
regulating nuclear power plants.

Description of the Bill

Uranium enrichment fund

Title XI of H.R. 776 as reported by the Committee on
Energy and Commerce establishes a new trust fund in the
Treasury, the Uranium Enrichment Decontamination and
Decommissioning Fund ("UEDD Fund"). Annual deposits of $500
million are to be made into the UEDD Fund until such time as
the balances in the UEDD Fund are sufficient to finance the
decommissioning and decontamination of DOE's uranium
enrichment facilities. The annual $500 million contribution
is to be indexed for future inflatign, by an index to be
determined by the Energy Secretary.

Financing of the uranium enrichment fund

The source of annual deposits to the UEDD Fund generally
will come from certain primary sources specified under the
bill. Included among those primary sources are funds received
by the Treasury as proceeds from the leasing of gaseous
diffusion uranium enrichment facilities and related property,
royalty payments from licensing atomic vapor laser isotope
separation technology (AVLIS), contributions to the Fund by
foreign utilities that purchase enriched uranium from the
Energy Department, or by their governments, and interest
earnings and proceeds from the disposition of debt
instruments held by the Fund. However, in the event that
funding from these primary sources is insufficient to provide
the annual mandated contribution to the UEDD Fund, the bill
authorizes the Energy Secretary to make a special assessment
on the owners of certain domestic utilities to fund the
required balance of the annual deposit. Owners subject to
the special assessment are those owners who in the past have

3 Phe bill (Title X) provides for separate use of assets in
the UEDD Fund to cover costs of decontamination,
decommissioning, and reclamation of active uranium and
thorium processing sites.



weds

5.

“have not been designed differently, sized larger, built
sooner, cr constructed in a more costly fashion than is
reasonably required solely for serving" the local furnishing
service area. (See, Ltr. 8319017.)

Finally, the IRS has addressed in one ruling letter the
effect on outstanding bonds for local furnishing of
electricity if a local furnishing utility were to merge with
another utility and no longer qualify as a local furnisher.
(See, Ltr. 9124030.) In that letter, the IRS held that
interest on the bonds would not become taxable if the bonds
were defeased within 90 days of the merger and redeemed on
the first possible redemption date.

Description of the Bill

As reported by the Committee on Energy and Commerce
("Energy and Commerce"), section 732 of H.R. 776 authorizes
the Federal Energy Regulatory Commission ("FERC") to order
electric utilities (including those qualifying under the
local furnishing exception) to provide wheeling services to
independent power producers ("IPPs"). These FERC orders also
May require the utilities to enlarge their transmission
systems to comply.

If wheeling activities pursuant to these orders were
conducted using bond-financed facilities, or if the utility
(viewed in light of both its wheeling and other activities)
became a net exporter of electricity, the local furnishing
exception could be violated. To prevent such an occurrence,
the bill modifies present law to provide that no
disqualification will result from wheeling activities
conducted pursuant to a FERC order authorized under the bill.

Possible Option

Substitute for section 732 of the bill, as reported by
Energy and Commerce, Internal Revenue Code amendments that
preserve access to tax-exempt financing for regulated public
utilities that qualify as local furnishers of electricity
except for being ordered by FERC to wheel electricity
generated by IPPs for use outside their service area. The
option provides that--

(1) In determining whether such a utility is a net
importer of electricity (as required under current IRS ruling
letters), electricity generated within the utility's service
area by an IPP and wheeled pursuant to the FERC order for use
outside the area is not considered;

(2) Such a utility will continue to be eligible for
bond-financing of its local furnishing facilities, including
facilities used for both local furnishing activities and
PERC-ordered wheeling (to the extent those facilities are to



-4-

Exempt-facility bonds for the local furnishing of
electricity or gas

The exempt-facility bond exception for facilities for
the local furnishing of electricity or gas is limited to
bonds used by electric or gas systems the service area of
which does not exceed either (1) twg contiguous counties or
(2) a city and a contiguous county. Property eligible for
financing under the exception includes depreciable property
and land used to “produce, collect, generate, transmit,
store, distribute, or convey electric energy" in a qualified
service area. (Treas. reg. sec. 1.103-8(f£)(2)(iii).)

The local furnishing exception does not apply to
facilities that are an integral part of the regional
supplying of electricity, e.g., long-line transmission.

(See, H. Rept. 90-1533, 90th Cong., 2d Sess., at 38.) The
Treasury Department's regulations interpreting this exception
provide, however, that an otherwise qualifying facility will
not be ineligible solely because the system of which it is a
part is interconnected with other utility systems for the
emergency transfer of power.

The Internal Revenue Service ("IRS"), in a series of
ruling letters, has provided specific, nonprecedential
guidance to several utilities regarding the extent to which
nonemergency interconnections with other utility systems are
permitted. (See, e.g., Ltrs. 8915021, 8508051, and 8319017
(supplemented by Ltrs. 8322009 and 8429091).) These ruling
letters make three significant factual points regarding the
extent to which local furnishing utilities may be
interconnected with other utilities.

First, each of these ruling letters specified that,
despite limited outbound electricity transfers, the systems
involved were, even after taking into account certain
transmission activities for the benefit of other utilities
("wheeling"), net importers of electricity. Second, in Ltr.
8915021, wheeling activities on dedicated facilities were
held not to disqualify a local furnishing system because the
cost of the facilities used were borne by the recipient of
the wheeled electricity, not the local furnishing utility or
its ratepayers. Third, in holding that certain incidental
interconnections not involving dedicated facilities such as
those described in Ltr. 8915021 did not violate the local
furnishing requirement, the IRS stressed that the facilities

2 Section 644 of the Tax Reform Act of 1984 (P. L. 98-369)
expanded the exception further to include the Long Island
Lighting Company and the Bradley Lake hydroelectric facility
system in Alaska, based on activities engaged in by those
systems as of the date of that Act's enactment.



-17-

Cc. 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.

Possible Option

The proposal would adopt the provision contained in the
conference agreement on H.R. 4210 (sec. 3205). Specifically,
the proposal would increase and apply the same base tax rate
to both initially listed chemicals and newly listed
chemicals. The new base tax rate would be $1.85 per pound
for 1992, $2.75 per pound in 1993, $3.65 per pound in 1994,
and $4.55 per pound in 1995. For years after 1995, the base
tax amount would increase (as under present law) by 45 cents
per pound per year. 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. The effect of this provision is to
continue present-law rates on these chemicals for 1992 and
1993.

Effective date.--The provision would be effective for
taxable chemicals sold or used on or after July 31, 1992.
Floor stocks taxes are imposed on taxed chemicals held on the
effective dates of changes in the base tax rate.



-7-

B. Uranium Enrichment Fund and Assessment
(Titles X and XI of the Bill)

Present Law

Under special tax rules (Internal Revenue Code secs. 468
and 468A), certain costs of coal mine and waste disposal site
reclamation and nuclear power plant decommissioning may be
deducted prior to the time that the reclamation or
decommissioning work is performed. These provisions are an
exception to the general rule which prohibits the accrual of
an expense prior to the time economic performance occurs
(sec. 461(h)).

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 Code section 501(c)(21).

Owners of coal mines are assessed a fee to help pay for
the reclamation of abandoned mines. These fees provide the
amounts available for appropriation from the Abandoned Mine
Reclamation Fund. The current rates are 35 cents per ton for
surface mined coal and 15 cents per ton for underground mined
coal. These fees are scheduled to expire after September 30,
1995,

Under present law, four different Superfund taxes are
imposed: (1) a tax on petroleum; (2) a tax on listed
hazardous chemicals; (3) a tax on imported substances that
contain or use chemical derivatives of one or more of the
specified hazardous chemicals; and (4) an environmental tax
based on the amount of modified alternative minimum taxable
income of a corporation that exceeds $2 million. The
receipts from these taxes are deposited in the Hazardous
Substance Superfund. Amounts in this trust fund generally
are available for expenditures incurred in connection with
releases or threats of releases of hazardous substances into
the environment.

Under present law, there is no general Federal excise
tax or user fee imposed on the generation or sale of



MARKUP OF REVENUE~-RELATED PROVISIONS
OF H.R. 776
("COMPREHENSIVE NATIONAL ENERGY POLICY ACT")
AND

ADDITIONAL ENERGY TAX PROVISIONS

Scheduled for a Markup
by the
HOUSE COMMITTEE ON WAYS AND MEANS

on April 29, 1992

Prepared by the Staff
of the
JOINT COMMITTEE ON TAXATION
April 28, 1992
JCX-16-92


-10-

C. Strategic Petroleum Reserve (Title XIV of the Bill)
- Present Law

There is no requirement under present law that specified
persons lend certain amounts of their crude oil or other
petroleum products to the Federal Government for the
Strategic Petroleum Reserve. In addition, there is no
provision under present law which assesses specified persons
for storage costs related to the Strategic Petroleum Reserve.

The Internal Revenue Code establishes an excise tax of 5
cents per barrel on domestic crude oil and imported petroleum
products (including imported crude oil) for the purpose of
funding the Oil Spill Liability Trust Fund. In addition, a
9.7 cents per barrel excise tax is imposed on domestic crude
oil and imported petroleum products for the purpose of
funding the Hazardous Substance Superfund. The excise taxes
on domestic crude oil are imposed on the operator of any
United States refinery receiving such crude oil, while the
taxes on imported petroleum products are imposed on the
person entering the product into the United States for
consumption, use, or warehousing. If domestic crude oil is
used in, or exported from, the United States before
imposition of the taxes on the operator of a refinery, the
taxes are imposed on the user or exporter of the oil.

Description of the Bill

Title XIV of H.R. 776 establishes a mechanism for
increasing the capacity of the nation's Strategic Petroleum
Reserve ("Reserve") by requiring importers and purchasers of
petroleum products to lend specified amounts of crude oil and
other petroleum products to the Federal Government until the
target quantity of the Reserve is reached. Under the bill,
importers and purchasers are required to provide for the
storage in the Reserve of an amount of petroleum product
equal to a specified percentage of the amount of their crude
oil or petroleum product. A person providing petroleum
product to the Reserve as a result of the bill's requirements
retains and may freely transfer title to the product stored
in the Reserve. An importer or purchaser may elect to

5 the Strategic Petroleum Reserve is a Federal
Government-owned stockpile of oil stored in Louisiana and
Texas. Its purpose is to provide a short-term supply of oil
to protect American consumers against the shock to the
economy resulting from crises such as the 1990 Iraqi invasion
of Kuwait and subsequent oil embargo. (Report of the
Committee on Energy and Commerce, H. Rept. No. 102-474, Part
1, 102d Cong., 2d Sess., at 148).



a eres

-9-
purchased fuel from the DoE. 4

The rate of assessment is to be determined by dividing
the remaining required balance of the annual deposit by the
total purchase of separative work units (the service of
enriching uranium) purchased by domestic utilities from the
DOE prior to the date of enactment. The total tax assessment
of each utility is then computed as the amount of separative
work units purchased from the DOE in the past by a domestic
utility multiplied by the rate of assessment determined as
described above.

The bill also directs the Energy Secretary to
periodically review and determine the adequacy of revenue for
the UEDD Fund and alter collections of the special assessment
if necessary.

Possible Option

The proposal would limit collections of the special
assessment to collections made during the first 15 years
following the date of enactment or the collection of $2.5
billion in special assessments, whichever occurs first. The
$500 million annual deposit would be indexed for future
inflation as measured by changes in the Consumer Price Index.
The Federal tax exemption provided to the Uranium Enrichment
Corporation ("Corporation") would be placed in the Internal
Revenue Code. The exemption would be limited to income taxes
only and would cease on the day the Corporation becomes
privately owned in whole or in part. Further, the $364
million loan from the Treasury Department to the Corporation,
as provided for in the bill, would be specifically authorized
under Chapter 31, Title 31 of the U.S. Code.

4 the special assessment applies to the past purchases by
public power corporations or authorities as well as to the
purchases by investor-owned utilities.



-6-
be used for local furnishing activities); and

{3) Interest on bonds issued before the date of the
FERC order that are used to finance facilities the use of
which changes (in whole or in part) due to the order wili
remain tax-exempt (and no change in use penalty will be
imposed under Code section 150) if the bonds (or an
appropriate portion thereof) are (a) defeased within 90 days
following the FERC order and (b) redeemed no later than the
earliest date on which the bonds may be redeemed. A bond is
defeased when monies sufficient to release liens created on
bond-financed property under the bond indenture are deposited
in an irrevocable escrow account.



-20-

F. Tax Credit for Certain Clean-Burning Motor Vehicles
and Property Used to Refuel Such Vehicles

Present Law

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

Possible Option
In general

An income tax credit would be provided to taxpayers that
invest in certain motor vehicles that are propelled by
clean-burning fuels and in certain property that is used to
refuel such motor vehicles. The amount of the credit for any
taxable year would equal a specified percentage of the basis
of the qualified property that is placed in service during
the taxable year. The specified percentage would vary based
on when the qualified property is placed in service as
follows: (1) 20 percent for the period July 1, 1993, through
December 31, 2001; (2) 15 percent for the period January 1,
2002, through December 31, 2002; (3) 10 percent for the
period January 1, 2003, through December 31, 2003; and (4) 5
percent for the period January 1, 2004, though December 31,
2004.

Definition of qualified property

Property would qualify for the credit only if: (1) the
original use of the property commences with the taxpayer; and
{2) the property is either: (a) equipment that modifies a
motor vehicle that was propelled by a fuel that is not a
clean-burning fuel so that the vehicle may be propelled by a
clean~-burning fuel; (b) a motor vehicle that is propelled
only by a clean-burning fuel but only to the extent of the
portion of the basis of the vehicle that is attributable to
the storage or delivery to the engine of the fuel or the
exhaust of gases from combustion of the fuel (in the case of
a motor vehicle that is propelled by electricity, however,
the portion of the basis of the vehicle that is attributable
to the engine would also qualify); or (c) depreciable
property that is used to store any clean-burning fuel at the
location where the fuel is to be delivered into the fuel tank
of a motor vehicle propelled by such fuel or that is used to
deliver any clean-burning fuel from such storage into the
fuel tank of a motor vehicle propelled by such fuel.

The credit generally would not be allowed with respect
to property that is used predominantly outside the United



-2-
I. LEGISLATIVE BACKGROUND

H.R. 776 ("Comprehensive National Energy Policy Act")
was reported by the House Committee on Energy and Commerce on
March 30, 1992 (H. Rept. 102-474, Part 1). Revenue-related
provisions of the bill as reported (sec. 732, and Titles xX,
XI, and XIV) were sequentially referred to the Committee on
Ways and Means for a period ending May 1, 1992.

Provisions of H.R. 776 were also referred to other
committees through May 1, 1992, as follows: Committee on
Poreign Affairs (Titles XII and XIII); Committee on
Government Operations (Title III); Committee on the Judiciary
(Titles VI and VII); Committee on Interior and Insular
Affairs (Titles VIII, IX, X, XI, and XIX); Committee on
Merchant Marine and Fisheries (Titles II, XVI, and XVII);
Committee on Public Works and Transportation (Titles I, IV,
and XVIII); and Committee on Science, Space, and Technology
(Titles VI, IX, XII, and XIII).

On April 8, 1992, the Committee on Interior and Insular
Affairs ordered reported H.R. 776 with amendments, including
an extension of the coal reclamation fee.


-13-

III. REVENUE-RELATED PROVISION OF H.R. 776 AS REPORTED BY
COMMITTEE ON INTERIOR AND INSULAR AFFAIRS

Abandoned Mine Reclamation Fund

Present Law

The Surface Mining Control and Reclamation Act of 1977,
as amended (30 U.S.C. 1232(b)), imposes a reclamation fee on
coal mining operators, payable quarterly to the Secretary of
the Interior for deposit in the Abandoned Mine Reclamation
Fund ("Reclamation Fund"). The fee generally is the lesser
of (1) 35 cents per ton of coal produced by surface coal
mining and 15 cents per ton of coal produced by underground
mining, or (2) 10 percent of the value of the coal at the
mine. The fee for lignite is the lesser of 2 percent of the
value of the coal at the mine or 10 cents per ton.

The reclamation fee is scheduled to expire after
September 30, 1995 (as extended in the Omnibus Budget
Reconciliation Act of 1990).

Description of the Bill

As reported by the Committee on Interior and Insular
Affairs, the bill extends the coal reclamation fee through
September 30, 2010, and provides that $50 million of the
amounts available in the Reclamation Fund in each fiscal year
be deposited into a new "Coal Industry Retiree Benefit Fund"
(yet to be established).

Possible Option

The proposal would request the Rules Committee to
exclude the provision.



-15-

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 tc an employee to cover the cost of commuting in a
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. As under present law, cash reimbursements made by an
employer to an employee to cover the cost of purchasing a
transit pass would qualify for the exclusion, provided the
reimbursements were 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.

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



INTRODUCTION

The House Committee on Ways and Means has scheduled a
markup on April 29, 1992, on the revenue-related provisions
of H.R. 776 ("Comprehensive National Energy Policy Act"), as
reported by the House Committee on Energy and Commerce on
March 30, 1992. The revenue-related provisions of the bill
as reported (sec. 732, and Titles X, XI, and XIV) have been
sequentially referred to the Committee on Ways and Means for
a period ending May 1, 1992. Also, the Committee on Ways and
Means will consider a provision added to H.R. 776 by the
Committee on Interior and Insular Affairs relating to the
coal reclamation fee and the Abandoned Mine Reclamation Fund.
Further, the Committee on Ways and Means will consider
possible additional energy tax provisions in its markup of
H.R. 776.

This document ,+ prepared by the staff of the Joint
Committee on Taxation, provides a description of the
revenue-related provisions of H.R. 776, and certain
additional energy tax provisions for markup. Part I of the
document is a legislative background on H.R. 776. Part II is
a description of the revenue-related provisions of the bill
as reported by the Committee on Energy and Commerce,
including present-law rules and possible options with respect
to the provisions referred to the Committee on Ways and
Means. Part III is a description of the provision added by
the Committee on Interior and Insular Affairs relating to the
coal reclamation fee and the Abandoned Mine Reclamation Fund.
Finally, Part IV describes certain possible additional energy
tax provisions for markup by the Committee on Ways and Means.

1 this document may be cited as follows: Joint Committee on
Taxation, Markup of Revenue-Related Provisions of H.R. 776
("Comprehensive National Energy Policy Act") and Additional
Energy Tax Provisions (JCX-16-92), April 28, 1992.



CONTENTS

INTRODUCTION. cece scceccceneceeecseuucceencceuneces

I.

Ii.

LEGISLATIVE BACKGROUND........c eee ee cece cece

REVENUE-RELATED PROVISIONS OF H.R. 776

A.

B.

Cc.

AS REPORTED BY COMMITTEE ON
ENERGY AND COMMERCE... ...e cece cece ce ec ences

Tax-Exempt Bond Financing of Facilities
for Local Furnishing of Electricity or
Gas (Sec. 732 of the Bill).........ceeeee

Uranium Enrichment Fund and Assessment
(Titles X and XI of the Bill)............

Strategic Petroleum Reserve
(Title XIV of the Bill).......... cece eee

REVENUE-RELATED PROVISION OF H.R. 776
AS REPORTED BY COMMITTEE ON
INTERIOR AND INSULAR AFFAIRS........eeeeeee:

Abandoned Mine Reclamation Fund.............

ADDITIONAL ENERGY TAX PROVISIONS.............

A.

B.

Exclusion for Employer-Provided
Transportation Benefits...........eeeeee

Business Energy Tax Credits for
Solar and Geothermal Property...........

Increase in Excise Tax on Certain
Ozone-Depleting Chemicals...............

Repeal of Investment Restrictions
Applicable to Nuclear Decommissioning

Soa bes C- D
Exclusion for Certain Utility Rebates....
Tax Credit for Certain Clean-Burning

Motor Vehicles and Property Used
to Refuel Such Vehicles..............0.-

Page
1

2

10

13
13
14

14

16

17

18

19

20


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provide, in lieu of petroleum product, an amount equal to the
cash equivalent of the amount of petroleum product required
to be stc:ed by it in the Reserve. The bill also authorizes
the Energy Department to assess and collect storage charges,
beginning in the 1993 fiscal year, from each importer ané
purchaser who has petroleum product stored in the Reserve.

When the petroleum product stored in the Reserve under
the bill is sold as a result of a drawdown on the Reserve,
the Energy Department is required to provide for the payment
of the amount received for the sale to the importer or
purchaser, or to such person's assignee, who held title to
the petroleum product that was sold. In carrying out this
requirement, the Energy Department will consider the first
amount of petroleum product withdrawn from the Reserve to be
the petroleum product stored in the Reserve under this
provision of the bill (to the extent thereof). The Energy
Department also must provide for the payments to importers
and purchasers to be made on the basis of the order in which
such persons provided for the storage of petroleum product in
the Reserve.

Possible Option

The proposal would make several technical amendments to
this provision of the bill.

First, the proposal would alter the bill's point of
imposition of the set-aside requirement. Under the proposal,
the point of collection of petroleum product for the Reserve
{or cash-equivalent payments) would be as follows: (1) for
imported crude oil and products, removal from customs
custody, unless transferred to a registered and bonded
refinery; (2) for domestic crude oil and imported oil and
products (transferred to a refinery without Payment of tax),
on receipt at the refinery. In addition, the Proposal would
provide credits for crude oil and products on which the
set-aside has already been made and which are transferred
from one refinery to another for further processing and for
certain exports.

Second, the operation of the bill's cash-equivalent
payment regime would be clarified by requiring that all funds
received in the form of cash-equivalent payments be used by
the Federal Government specifically for the purchase of crude
oil or refined petroleum product for the Reserve. Moreover,
the proposal provides that title to any such oil or refined
product so purchased would be passed to the persons making
cash-equivalent payments.

Third, the proposal would require all in-kind
contributions under the bill in a given fiscal year to
consist of crude oil and refined petroleum product in the
Proportion specified in the bill for filling the Reserve for


-14-

IV. ADDITIONAL ENERGY TAX PROVISIONS

A. 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 commuting costs 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.

Possible Option

The proposal would include the provision in the
conference agreement on H.R. 4210 (sec. 1006) relating to the
treatment of employer-provided transportation benefits.

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 ina
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 $160 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
$160 limits would be indexed for inflation, rounded down to
the next whole dollar.

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