II 

109TH CONGRESS 

1ST SESSION S. 1229 

To amend the Internal Revenue Code of 1986 to extend, modify, and expand 

the credit for electricity produced from renewable resources and waste 

products, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 13, 2005 

Mr. REID (for himself, Mrs. FEINSTEIN, Ms. CANTWELL, Ms. SNOWE, Mr. 

JEFFORDS, Mr. LIEBERMAN, and Mr. KERRY) 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 extend, 

modify, and expand the credit for electricity produced 

from renewable resources and waste products, and for 

other purposes. 

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; AMENDMENT OF 1986 CODE. 

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

5 ‘‘Renewable Energy Incentives Act’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 
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1 to, or repeal of, a section or other provision, the reference 

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986. 

4 SEC. 2. EXTENSION, MODIFICATION, AND EXPANSION OF 

5 CREDIT FOR ELECTRICITY PRODUCED FROM 

6 RENEWABLE RESOURCES AND WASTE PROD7 UCTS. 

8 (a) PERMANENT EXTENSION.— 

9 (1) Paragraphs (1) and (2)(A)(i) of section 

10 45(d) are each amended by striking ‘‘, and before 

11 January 1, 2006’’. 

12 (2) Section 45(d)(2)(A)(ii) is amended by strik13 ing ‘‘before January 1, 2006, is originally placed in 

14 service and’’ and insert ‘‘is’’. 

15 (3) Section 45(d)(3)(A) is amended— 

16 (A) by striking ‘‘owned by the taxpayer’’, 

17 (B) by inserting ‘‘owned by the taxpayer 

18 and’’ in clause (i)(I) after ‘‘is’’, 

19 (C) by striking ‘‘and before January 1, 

20 2006’’ in clause (i)(I), and 

21 (D) by striking ‘‘originally placed in serv22 ice before January 1, 2006’’ in clause (ii) and 

23 inserting ‘‘owned by the taxpayer’’. 

24 (4) Paragraphs (4), (5), (6), and (7) of section 

25 45(d) (relating to qualified facilities) are amended 
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1 by striking ‘‘and before January 1, 2006’’ each place 

2 it appears. 

3 (b) CREDIT RATE.— 

4 (1) INCREASE IN CREDIT RATE.— 

5 (A) IN GENERAL.—Section 45(a)(1) is 

6 amended by striking ‘‘1.5 cents’’ and inserting 

7 ‘‘1.9 cents’’. 

8 (B) CONFORMING AMENDMENTS.— 

9 (i) Section 45(b)(2) is amended by 

10 striking ‘‘1.5 cent’’ and inserting ‘‘1.9 

11 cent’’. 

12 (ii) Section 45(e)(2)(B) is amended by 

13 inserting ‘‘(calendar year 2004 in the case 

14 of the 1.9 cent amount in subsection (a))’’ 

15 after ‘‘1992’’. 

16 (2) FULL CREDIT RATE FOR ALL FACILITIES

17 PLACED IN SERVICE AFTER DATE OF ENACTMENT.— 

18 Section 45(b)(4)(A) (relating to credit rate) is 

19 amended by inserting ‘‘and placed in service before 

20 the date of the enactment of the Renewable Energy 

21 Incentives Act’’ after ‘‘subsection (d)’’. 

22 (c) FULL CREDIT PERIOD FOR ALL FACILITIES

23 PLACED IN SERVICE AFTER DATE OF ENACTMENT.—Sec24 tion 45(b)(4)(B)(i) (relating to credit period) is amended 

25 by inserting ‘‘and placed in service before the date of the 
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1 enactment of the Renewable Energy Incentives Act’’ after 

2 ‘‘subsection (d)’’ 

3 (d) EXPANSION OF QUALIFIED RESOURCES.— 

4 (1) IN GENERAL.—Section 45(c)(1) (defining 

5 qualified energy resources) is amended by striking 

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

7 the period at the end of subparagraph (G) and in8 serting a comma, and by adding at the end the fol9 lowing new subparagraphs: 

10 ‘‘(H) incremental geothermal energy pro11 duction, and 

12 ‘‘(I) incremental hydropower production.’’. 

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

14 (relating to qualified energy resources and refined 

15 coal) is amended by adding at the end the following 

16 new paragraphs: 

17 ‘‘(8) INCREMENTAL GEOTHERMAL PRODUC18 TION.— 

19 ‘‘(A) IN GENERAL.—The term ‘incremental 

20 geothermal production’ means for any taxable 

21 year the excess of— 

22 ‘‘(i) the total kilowatt hours of elec23 tricity produced from an incremental geo24 thermal facility described in subsection 

25 (d)(9), over 
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1 ‘‘(ii) the average annual kilowatt 

2 hours produced at such facility for 5 of the 

3 previous 7 calendar years before the date 

4 of the enactment of this paragraph after 

5 eliminating the highest and the lowest kilo6 watt hour production years in such 7-year 

7 period. 

8 ‘‘(B) SPECIAL RULE.—A facility described 

9 in subsection (d)(9) which was placed in service 

10 at least 7 years before the date of the enact11 ment of this paragraph shall commencing with 

12 the year in which such date of enactment oc13 curs, reduce the amount calculated under sub14 paragraph (A)(ii) each year, on a cumulative 

15 basis, by the average percentage decrease in the 

16 annual kilowatt hour production for the 7-year 

17 period described in subparagraph (A)(ii) with 

18 such cumulative sum not to exceed 30 percent. 

19 ‘‘(9) INCREMENTAL HYDROPOWER PRODUC20 TION.— 

21 ‘‘(A) IN GENERAL.—The term ‘incremental 

22 hydropower production’ means for any taxable 

23 year an amount equal to the percentage of total 

24 kilowatt hours of electricity produced from an 

25 incremental hydropower facility described in 
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1 subsection (d)(10) attributable to efficiency im2 provements or additions of capacity as deter3 mined under subparagraph (B). 

4 ‘‘(B) DETERMINATION OF INCREMENTAL

5 HYDROPOWER PRODUCTION.—For purposes of 

6 subparagraph (A), incremental hydropower pro7 duction for any incremental hydropower facility 

8 for any taxable year shall be determined by es9 tablishing a percentage of average annual hy10 dropower production at the facility attributable 

11 to the efficiency improvements or additions of 

12 capacity using the same water flow information 

13 used to determine an historic average annual 

14 hydropower production baseline for such facil15 ity. Such percentage and baseline shall be cer16 tified by the Federal Energy Regulatory Com17 mission. For purposes of the preceding sen18 tence, the determination of incremental hydro19 power production shall not be based on any 

20 operational changes at such facility not directly 

21 associated with the efficiency improvements or 

22 additions of capacity.’’. 

23 (3) FACILITIES.—Section 45(d) (relating to 

24 qualified facilities) is amended by adding at the end 

25 the following new paragraphs: 
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1 ‘‘(9) INCREMENTAL GEOTHERMAL FACILITY.— 

2 In the case of a facility using incremental geo3 thermal to produce electricity, the term ‘qualified fa4 cility’ means any facility owned by the taxpayer 

5 which is originally placed in service before the date 

6 of the enactment of this paragraph, but only to the 

7 extent of its incremental geothermal production. In 

8 the case of a qualified facility described in the pre9 ceding sentence, the 10-year period referred to in 

10 subsection (a) shall be treated as beginning not ear11 lier than such date of enactment. Such term shall 

12 not include any property described in section 

13 48(a)(3) the basis of which is taken into account by 

14 the taxpayer for purposes of determining the energy 

15 credit under section 48. 

16 ‘‘(10) INCREMENTAL HYDROPOWER FACIL17 ITY.—In the case of a facility using incremental hy18 dropower to produce electricity, the term ‘qualified 

19 facility’ means any non-Federal hydroelectric facility 

20 owned by the taxpayer which is originally placed in 

21 service before the date of the enactment of this 

22 paragraph, but only to the extent of its incremental 

23 hydropower production. In the case of a qualified fa24 cility described in the preceding sentence, the 10- 

25 year period referred to in subsection (a) shall be 
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1 treated as beginning not earlier than such date of 

2 enactment.’’. 

3 (e) CREDIT ELIGIBILITY FOR LESSEES AND OPERA4 TORS EXTENDED TO ALL FACILITIES.—Paragraph (6) of 

5 section 45(d) is amended to read as follows: 

6 ‘‘(6) CREDIT ELIGIBILITY FOR LESSEES AND

7 OPERATORS.—In the case of any facility described in 

8 paragraph (1), (4), (5), (6), (7), (9), or (10), if the 

9 owner of such facility is not the producer of the elec10 tricity, the person eligible for the credit allowable 

11 under subsection (a) shall be the lessee or the oper12 ator of such facility.’’. 

13 (f) QUALIFIED FACILITIES WITH CO-PRODUCTION.— 

14 Section 45(b) (relating to limitations and adjustments) is 

15 amended by adding at the end the following: 

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

17 FACILITIES.— 

18 ‘‘(A) IN GENERAL.—In the case of a quali19 fied facility described in any paragraph of sub20 section (d) (other than paragraph (8)) which 

21 adds a co-production facility after the date of 

22 the enactment of this paragraph, the amount in 

23 effect under subsection (a)(1) for an eligible 

24 taxable year of a taxpayer shall (after adjust25 ment under paragraph (2) and before adjust-
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1 ment under paragraphs (1) and (3)) be in2 creased by .25 cents. 

3 ‘‘(B) CO-PRODUCTION FACILITY.—For 

4 purposes of subparagraph (A), the term ‘co-pro5 duction facility’ means a facility which— 

6 ‘‘(i) enables a qualified facility to 

7 produce heat, mechanical power, chemicals, 

8 liquid fuels, or minerals from qualified en9 ergy resources in addition to electricity, 

10 and 

11 ‘‘(ii) produces such energy on a con12 tinuous basis. 

13 ‘‘(C) ELIGIBLE TAXABLE YEAR.—For pur14 poses of subparagraph (A), the term ‘eligible 

15 taxable year’ means any taxable year in which 

16 the amount of gross receipts attributable to the 

17 co-production facility of a qualified facility are 

18 at least 10 percent of the amount of gross re19 ceipts attributable to electricity produced by 

20 such facility.’’. 

21 (g) QUALIFIED FACILITIES LOCATED WITHIN

22 QUALIFIED INDIAN LANDS.—Section 45(b) (relating to 

23 limitations and adjustments), as amended by subsection 

24 (f), is amended by adding at the end the following: 
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1 ‘‘(6) INCREASED CREDIT FOR QUALIFIED FA2 CILITY LOCATED WITHIN QUALIFIED INDIAN

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

4 in any paragraph of subsection (d) (other than para5 graphs (1), (2) and (8)) which— 

6 ‘‘(A) is located within— 

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

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

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

10 a Native Corporation (as defined in section 

11 3(m) of the Alaska Native Claims Settle12 ment Act (43 U.S.C. 1602(m)) for Alaska 

13 Natives, and 

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

15 approval of the Indian tribal government or Na16 tive Corporation (as so defined) having jurisdic17 tion over such lands, the amount in effect under 

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

19 adjustment under paragraphs (2) and (5) and 

20 before adjustment under paragraphs (1) and 

21 (3)) be increased by .25 cents.’’. 

22 (h) ADDITIONAL MODIFICATIONS.— 

23 (1) TREATMENT OF PERSONS NOT ABLE TO

24 USE ENTIRE CREDIT.—Section 45(e) (relating to ad25 ditional definitions and special rules), as amended by 
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1 subsection (a)(2), is amended by adding at the end 

2 the following new paragraph: 

3 ‘‘(11) TREATMENT OF PERSONS NOT ABLE TO

4 USE ENTIRE CREDIT.— 

5 ‘‘(A) ALLOWANCE OF CREDIT.— 

6 ‘‘(i) IN GENERAL.—Except as other7 wise provided in this subsection— 

8 ‘‘(I) any credit allowable under 

9 subsection (a) with respect to a quali10 fied facility owned by a person de11 scribed in clause (ii) may be trans12 ferred or used as provided in this 

13 paragraph, and 

14 ‘‘(II) the determination as to 

15 whether the credit is allowable shall 

16 be made without regard to the tax-ex17 empt status of the person. 

18 ‘‘(ii) PERSONS DESCRIBED.—A person 

19 is described in this clause if the person 

20 is— 

21 ‘‘(I) an organization described in 

22 section 501(c)(12)(C) and exempt 

23 from tax under section 501(a), 

24 ‘‘(II) an organization described 

25 in section 1381(a)(2)(C), 
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1 ‘‘(III) a public utility (as defined 

2 in section 136(c)(2)(B)), which is ex3 empt from income tax under this sub4 title, 

5 ‘‘(IV) any State or political sub6 division thereof, the District of Co7 lumbia, any possession of the United 

8 States, or any agency or instrumen9 tality of any of the foregoing, or 

10 ‘‘(V) any Indian tribal govern11 ment (within the meaning of section 

12 7871) or any agency or instrumen13 tality thereof. 

14 ‘‘(B) TRANSFER OF CREDIT.— 

15 ‘‘(i) IN GENERAL.—A person de16 scribed in subparagraph (A)(ii) may trans17 fer any credit to which subparagraph 

18 (A)(i) applies through an assignment to 

19 any other person not described in subpara20 graph (A)(ii). Such transfer may be re21 voked only with the consent of the Sec22 retary. 

23 ‘‘(ii) REGULATIONS.—The Secretary 

24 shall prescribe such regulations as nec25 essary to ensure that any credit described 
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1 in clause (i) is assigned once and not reas2 signed by such other person. 

3 ‘‘(iii) TRANSFER PROCEEDS TREATED

4 AS ARISING FROM ESSENTIAL GOVERN5 MENT FUNCTION.—Any proceeds derived 

6 by a person described in subclause (III), 

7 (IV), or (V) of subparagraph (A)(ii) from 

8 the transfer of any credit under clause (i) 

9 shall be treated as arising from the exer10 cise of an essential government function. 

11 ‘‘(C) CREDIT NOT INCOME.—Any transfer 

12 under subparagraph (B) of any credit to which 

13 subparagraph (A)(i) applies shall not be treated 

14 as income for purposes of section 501(c)(12). 

15 ‘‘(D) TREATMENT OF UNRELATED PER16 SONS.—For purposes of subsection (a)(2)(B), 

17 sales among and between persons described in 

18 subparagraph (A)(ii) shall be treated as sales 

19 between unrelated parties.’’. 

20 (2) CREDITS NOT REDUCED BY TAX-EXEMPT

21 BONDS OR CERTAIN OTHER SUBSIDIES.—Section 

22 45(b)(3) (relating to credit reduced for grants, tax23 exempt bonds, subsidized energy financing, and 

24 other credits) is amended— 

25 (A) by striking clause (ii), 
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1 (B) by redesignating clauses (iii) and (iv) 

2 as clauses (ii) and (iii), 

3 (C) by inserting ‘‘(other than any loan, 

4 debt, or other obligation incurred under sub5 chapter I of chapter 31 of title 7 of the Rural 

6 Electrification Act of 1936 (7 U.S.C. 901 et 

7 seq.), as in effect on the date of the enactment 

8 of the Renewable Energy Incentives Act, or pro9 ceeds of an issue of State or local government 

10 obligations the interest on which is exempt from 

11 tax under section 103)’’ after ‘‘project’’ in 

12 clause (ii) (as so redesignated), and 

13 (D) by striking ‘‘TAX-EXEMPT BONDS,’’ 

14 in the heading and inserting ‘‘CERTAIN’’. 

15 (3) CREDIT ALLOWABLE AGAINST MINIMUM

16 TAX WITHOUT LIMITATION.—Clause (ii) of section 

17 38(c)(4)(B) (defining specified credits) is amended 

18 to read as follows: 

19 ‘‘(ii) the credit determined under sec20 tion 45 to the extent that such credit is at21 tributable to electricity or refined coal pro22 duced at a facility which is originally 

23 placed in service after October 22, 2004.’’. 

24 (4) TREATMENT OF QUALIFIED FACILITIES NOT

25 IN COMPLIANCE WITH POLLUTION LAWS.—Section 
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1 45(d) (relating to qualified facilities), as amended by 

2 subsection (d)(3), is amended by adding at the end 

3 the following: 

4 ‘‘(11) NONCOMPLIANCE WITH POLLUTION

5 LAWS.—For purposes of this subsection, a facility 

6 which is not in compliance with the applicable State 

7 and Federal pollution prevention, control, and per8 mit requirements for any period of time shall not be 

9 considered to be a qualified facility during such pe10 riod.’’. 

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

12 this section shall apply to electricity and other energy pro13 duced and sold after the date of the enactment of this 

14 Act, in taxable years ending after such date. 

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