II

107TH CONGRESS

1ST SESSION S. 1293

To amend the Internal Revenue Code of 1986 to provide incentives for

the voluntary reduction, avoidance, and sequestration of greenhouse gas

emissions and to advance global climate science and technology development and deployment.

IN THE SENATE OF THE UNITED STATES

AUGUST 1, 2001

Mr. CRAIG (for himself and Mr. HAGEL) introduced the following bill; which

was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

incentives for the voluntary reduction, avoidance, and

sequestration of greenhouse gas emissions and to advance

global climate science and technology development and

deployment.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Climate Change Tax

5 Amendments of 2001’’.
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1 SEC. 2. PERMANENT TAX CREDIT FOR RESEARCH AND DE2 VELOPMENT REGARDING GREENHOUSE GAS

3 EMISSIONS REDUCTION, AVOIDANCE, OR SE4 QUESTRATION.

5 (a) IN GENERAL.—Section 41(h) of the Internal Rev6 enue Code of 1986 (relating to termination) is amended

7 by adding at the end the following:

8 ‘‘(3) EXCEPTION FOR CERTAIN RESEARCH.—

9 Paragraph (1)(B) shall not apply in the case of any

10 qualified research expenses if the research—

11 ‘‘(A) has as one of its purposes the reduc12 ing, avoiding, or sequestering of greenhouse gas

13 emissions, and

14 ‘‘(B) has been reported to the Department

15 of Energy under section 1605(b) of the Energy

16 Policy Act of 1992.’’.

17 (b) EFFECTIVE DATE.—The amendment made by

18 subsection (a) applies with respect to amounts paid or in19 curred after the date of enactment of this Act, except that

20 such amendment shall not take effect unless the Climate

21 Change Risk Management Act of 2001 is enacted into law.

22 SEC. 3. TAX CREDIT FOR GREENHOUSE GAS EMISSIONS FA23 CILITIES.

24 (a) ALLOWANCE OF GREENHOUSE GAS EMISSIONS

25 FACILITIES CREDIT.—Section 46 of the Internal Revenue

26 Code of 1986 (relating to amount of credit) is amended
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1 by striking ‘‘and’’ at the end of paragraph (2), by striking

2 the period at the end of paragraph (3) and inserting ‘‘,

3 and’’, and by adding at the end the following:

4 ‘‘(4) the greenhouse gas emissions facilities

5 credit.’’.

6 (b) AMOUNT OF CREDIT.—Subpart E of part IV of

7 subchapter A of chapter 1 of the Internal Revenue Code

8 of 1986 (relating to rules for computing investment credit)

9 is amended by inserting after section 48 the following:

10 ‘‘SEC. 48A. CREDIT FOR GREENHOUSE GAS EMISSIONS FA11 CILITIES.

12 ‘‘(a) IN GENERAL.—For purposes of section 46, the

13 greenhouse gas emissions facilities credit for any taxable

14 year is the applicable percentage of the qualified invest15 ment in a greenhouse gas emissions facility for such tax16 able year.

17 ‘‘(b) GREENHOUSE GAS EMISSIONS FACILITY.—For

18 purposes of subsection (a), the term ‘greenhouse gas emis19 sions facility’ means a facility of the taxpayer—

20 ‘‘(1)(A) the construction, reconstruction, or

21 erection of which is completed by the taxpayer, or

22 ‘‘(B) which is acquired by the taxpayer if the

23 original use of such facility commences with the tax24 payer,

25 ‘‘(2) the operation of which—
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1 ‘‘(A) replaces the operation of a facility of

2 the taxpayer,

3 ‘‘(B) reduces, avoids, or sequesters green4 house gas emissions on a per unit of output

5 basis as compared to such emissions of the re6 placed facility, and

7 ‘‘(C) uses the same type of fuel (or com8 bination of the same type of fuel and biomass

9 fuel) as was used in the replaced facility,

10 ‘‘(3) with respect to which depreciation (or am11 ortization in lieu of depreciation) is allowable, and

12 ‘‘(4) which meets the performance and quality

13 standards (if any) which—

14 ‘‘(A) have been jointly prescribed by the

15 Secretary and the Secretary of Energy by regu16 lations,

17 ‘‘(B) are consistent with regulations pre18 scribed under section 1605(b) of the Energy

19 Policy Act of 1992, and

20 ‘‘(C) are in effect at the time of the acqui21 sition of the facility.

22 ‘‘(c) APPLICABLE PERCENTAGE.—For purposes of

23 subsection (a), the applicable percentage is one-half of the

24 percentage reduction, avoidance, or sequestration of

25 greenhouse gas emissions described in subsection (b)(2)
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1 and reported and certified under section 1605(b) of the

2 Energy Policy Act of 1992.

3 ‘‘(d) QUALIFIED INVESTMENT.—For purposes of

4 subsection (a), the term ‘qualified investment’ means, with

5 respect to any taxable year, the basis of a greenhouse gas

6 emissions facility placed in service by the taxpayer during

7 such taxable year, but only with respect to that portion

8 of the investment attributable to providing production ca9 pacity not greater than the production capacity of the fa10 cility being replaced.

11 ‘‘(e) QUALIFIED PROGRESS EXPENDITURES.—

12 ‘‘(1) INCREASE IN QUALIFIED INVESTMENT.—

13 In the case of a taxpayer who has made an election

14 under paragraph (5), the amount of the qualified in15 vestment of such taxpayer for the taxable year (de16 termined under subsection (d) without regard to this

17 subsection) shall be increased by an amount equal to

18 the aggregate of each qualified progress expenditure

19 for the taxable year with respect to progress expend20 iture property.

21 ‘‘(2) PROGRESS EXPENDITURE PROPERTY DE22 FINED.—For purposes of this subsection, the term

23 ‘progress expenditure property’ means any property

24 being constructed by or for the taxpayer and which

25 it is reasonable to believe will qualify as a green-
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1 house gas emissions facility which is being con2 structed by or for the taxpayer when it is placed in

3 service.

4 ‘‘(3) QUALIFIED PROGRESS EXPENDITURES DE5 FINED.—For purposes of this subsection—

6 ‘‘(A) SELF-CONSTRUCTED PROPERTY.—In

7 the case of any self-constructed property, the

8 term ‘qualified progress expenditures’ means

9 the amount which, for purposes of this subpart,

10 is properly chargeable (during such taxable

11 year) to capital account with respect to such

12 property.

13 ‘‘(B) NON-SELF-CONSTRUCTED PROP14 ERTY.—In the case of non-self-constructed

15 property, the term ‘qualified progress expendi16 tures’ means the amount paid during the tax17 able year to another person for the construction

18 of such property.

19 ‘‘(4) OTHER DEFINITIONS.—For purposes of

20 this subsection—

21 ‘‘(A) SELF-CONSTRUCTED PROPERTY.—

22 The term ‘self-constructed property’ means

23 property for which it is reasonable to believe

24 that more than half of the construction expendi25 tures will be made directly by the taxpayer.
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1 ‘‘(B) NON-SELF-CONSTRUCTED PROP2 ERTY.—The term ‘non-self-constructed prop3 erty’ means property which is not self-con4 structed 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 GREEN10 HOUSE GAS EMISSIONS FACILITY TO BE TAKEN

11 INTO ACCOUNT.—Construction shall be taken

12 into account only if, for purposes of this sub13 part, expenditures therefor are properly charge14 able to capital account with respect to the prop15 erty.

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 (c) RECAPTURE.—Section 50(a) of the Internal Rev24 enue Code of 1986 (relating to other special rules) is

25 amended by adding at the end the following:
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1 ‘‘(6) SPECIAL RULES RELATING TO GREEN2 HOUSE GAS EMISSIONS FACILITY.—For purposes of

3 applying this subsection in the case of any credit al4 lowable by reason of section 48A, the following shall

5 apply:

6 ‘‘(A) GENERAL RULE.—In lieu of the

7 amount of the increase in tax under paragraph

8 (1), the increase in tax shall be an amount

9 equal to the investment tax credit allowed under

10 section 38 for all prior taxable years with re11 spect to a greenhouse gas emissions facility (as

12 defined by section 48A(b)) multiplied by a frac13 tion whose numerator is the number of years

14 remaining to fully depreciate under this title the

15 greenhouse gas emissions facility disposed of,

16 and whose denominator is the total number of

17 years over which such facility would otherwise

18 have been subject to depreciation. For purposes

19 of the preceding sentence, the year of disposi20 tion of the greenhouse gas emissions facility

21 property shall be treated as a year of remaining

22 depreciation.

23 ‘‘(B) PROPERTY CEASES TO QUALIFY FOR

24 PROGRESS EXPENDITURES.—Rules similar to

25 the rules of paragraph (2) shall apply in the
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1 case of qualified progress expenditures for a

2 greenhouse gas emissions facility under section

3 48A, except that the amount of the increase in

4 tax under subparagraph (A) of this paragraph

5 shall be substituted in lieu of the amount de6 scribed in such paragraph (2).

7 ‘‘(C) APPLICATION OF PARAGRAPH.—This

8 paragraph shall be applied separately with re9 spect to the credit allowed under section 38 re10 garding a greenhouse gas emissions facility.’’

11 (d) TECHNICAL AMENDMENTS.—

12 (1) Section 49(a)(1)(C) of the Internal Revenue

13 Code of 1986 is amended by striking ‘‘and’’ at the

14 end of clause (ii), by striking the period at the end

15 of clause (iii) and inserting ‘‘, and’’, and by adding

16 at the end the following:

17 ‘‘(iv) the portion of the basis of any

18 greenhouse gas emissions facility attrib19 utable to any qualified investment (as de20 fined by section 48A(d)).’’

21 (2) Section 50(a)(4) of such Code is amended

22 by striking ‘‘and (2)’’ and inserting ‘‘, (2), and (6)’’.

23 (3) The table of sections for subpart E of part

24 IV of subchapter A of chapter 1 of such Code is
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1 amended by inserting after the item relating to sec2 tion 48 the following:

‘‘Sec. 48A. Credit for greenhouse gas emissions facilities.’’

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, under rules similar

6 to the rules of section 48(m) of the Internal Revenue Code

7 of 1986 (as in effect on the day before the date of the

8 enactment of the Revenue Reconciliation Act of 1990).

9 (f) STUDY OF ADDITIONAL INCENTIVES FOR VOL10 UNTARY REDUCTION, AVOIDANCE, OR SEQUESTRATION

11 OF GREENHOUSE GAS EMISSIONS.—

12 (1) IN GENERAL.—The Secretary of the Treas13 ury and the Secretary of Energy shall jointly study

14 possible additional incentives for, and removal of

15 barriers to, voluntary, non recoupable expenditures

16 for the reduction, avoidance, or sequestration of

17 greenhouse gas emissions. For purposes of this sub18 section, an expenditure shall be considered voluntary

19 and non recoupable if the expenditure is not

20 recoupable—

21 (A) from revenues generated from the in22 vestment, determined under generally accepted

23 accounting standards (or under the applicable

24 rate-of-return regulation, in the case of a tax25 payer subject to such regulation), or
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1 (B) from any tax or other financial incen2 tive program established under Federal, State,

3 or local law.

4 (2) REPORT.—Within 6 months of the date of

5 enactment of this Act, the Secretary of the Treasury

6 and the Secretary of Energy shall jointly report to

7 Congress on the results of the study described in

8 paragraph (1), along with any recommendations for

9 legislative action.

10 (g) SCOPE AND IMPACT.—

11 (1) POLICY.—In order to achieve the broadest

12 response for reduction, avoidance, or sequestration

13 of greenhouse gas emissions and to ensure that the

14 incentives established by or pursuant to this Act do

15 not advantage one segment of an industry to the dis16 advantage of another, it is the sense of Congress

17 that such incentives should be available for individ18 uals, organizations, and entities, including both for19 profit and non-profit institutions.

20 (2) LEVEL PLAYING FIELD STUDY AND RE21 PORT.—

22 (A) IN GENERAL.—The Secretary of the

23 Treasury and the Secretary of Energy shall

24 jointly study possible additional measures that

25 would provide non-profit entities (such as mu-
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1 nicipal utilities and energy cooperatives) with

2 economic incentives for greenhouse gas emis3 sions facilities comparable to those incentives

4 provided to taxpayers under the amendments

5 made to the Internal Revenue Code of 1986 by

6 this Act.

7 (B) REPORT.—Within 6 months after the

8 date of enactment of this Act, the Secretary of

9 the Treasury and the Secretary of Energy shall

10 jointly report to Congress on the results of the

11 study described in subparagraph (A), along

12 with any recommendations for legislative action.

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