II

103D CONGRESS

1ST SESSION S. 1736

To amend the Internal Revenue Code of 1986 to enhance the Nation’s

energy security by promoting renewable energy resources and energy

conservation.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 20 (legislative day, NOVEMBER 2), 1993

Mr. DASCHLE 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 enhance

the Nation’s energy security by promoting renewable energy resources and energy conservation.

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 ‘‘Energy and Environment Tax Act of 1993’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise provided, whenever in this Act an amendment or re8 peal is expressed in terms of an amendment to, or repeal

9 of, a section or other provision, the reference shall be con-
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1 sidered to be made to a section or other provision of the

2 Internal Revenue Code of 1986.

3 TITLE I—INCENTIVES FOR RE4 NEWABLE ENERGY RE5 SOURCES

6 SEC. 101. ALCOHOL FUELS CREDIT MAY OFFSET MINIMUM

7 TAX.

8 (a) IN GENERAL.—Subsection (c) of section 38 (re9 lating to limitation based on amount of tax) is amended

10 by redesignating paragraph (3) as paragraph (4) and by

11 inserting after paragraph (2) the following new paragraph:

12 ‘‘(3) ALCOHOL FUELS CREDIT MAY OFFSET

13 MINIMUM TAX.—

14 ‘‘(A) IN GENERAL.—In the case of the al15 cohol fuels credit—

16 ‘‘(i) this section and section 39 shall

17 be applied separately with respect to such

18 credit, and

19 ‘‘(ii) for purposes of applying para20 graph (1) to such credit—

21 ‘‘(I) 50 percent of the tentative

22 minimum tax shall be substituted for

23 the tentative minimum tax under sub24 paragraph (A) thereof, and
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1 ‘‘(II) the limitation under para2 graph (1) (as modified by subclause

3 (I)) shall be reduced by the credit al4 lowed under subsection (a) for the

5 taxable year (other than the alcohol

6 fuels credit).

7 ‘‘(B) ALCOHOL FUELS CREDIT.—For pur8 poses of this subsection, the term ‘alcohol fuels

9 credit’ means the portion of the credit under

10 subsection (a) which is attributable to the alco11 hol fuels credit determined under section

12 40(a).’’.

13 (b) CONFORMING AMENDMENT.—Subclause (II) of

14 section 38(c)(2)(A)(ii) is amended by inserting ‘‘or the al15 cohol fuels credit’’ after ‘‘empowerment zone employment

16 credit’’.

17 (c) EFFECTIVE DATE.—

18 (1) IN GENERAL.—The amendment made by

19 this section shall apply to taxable years beginning

20 after December 31, 1993.

21 (2) EXCEPTION.—The amendment made by this

22 section shall not apply to—

23 (A) any credit which was determined in a

24 taxable year, or
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1 (B) the portion of any credit which is car2 ried back to a taxable year,

3 beginning on or before December 31, 1993.

4 SEC. 102. ENERGY CREDIT ALLOWED AGAINST MINIMUM

5 TAX.

6 (a) ENERGY CREDIT ALLOWABLE AGAINST ENTIRE

7 REGULAR TAX AND ALTERNATIVE MINIMUM TAX.—Sub8 section (c) of section 38 (relating to limitation based on

9 amount of tax), as amended by section 101, is amended

10 by redesignating paragraph (4) as paragraph (5) and by

11 inserting after paragraph (3) the following new paragraph:

12 ‘‘(4) SPECIAL RULES FOR ENERGY CREDIT.—

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

14 corporation, this section and section 39 shall be

15 applied separately—

16 ‘‘(i) first with respect to so much of

17 the credit allowed by subsection (a) as is

18 not attributable to the energy credit, and

19 ‘‘(ii) then with respect to the energy

20 credit.

21 ‘‘(B) RULES FOR APPLICATION OF ENERGY

22 CREDIT.—

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

24 energy credit, in lieu of applying the pre25 ceding paragraphs of this subsection, the
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1 amount of such credit allowed under sub2 section (a) for any taxable year shall not

3 exceed the net chapter 1 tax for such year.

4 ‘‘(ii) NET CHAPTER 1 TAX.—For pur5 poses of clause (i), the term ‘net chapter 1

6 tax’ means the sum of the regular tax li7 ability for the taxable year and the tax im8 posed by section 55 for the taxable year,

9 reduced by the sum of the credits allowable

10 under this part for the taxable year (other

11 than under section 34 and other than the

12 energy credit).

13 ‘‘(C) ENERGY CREDIT.—For purposes of

14 this subsection, the term ‘energy credit’ means

15 the credit allowable under subsection (a) by rea16 son of section 48(a).’’.

17 (b) CONFORMING AMENDMENTS.—

18 (1) Subclause (II) of section 38(c)(2)(A)(ii), as

19 amended by section 101(b), is amended by striking

20 ‘‘or the alcohol fuels credit’’ and inserting ‘‘, the al21 cohol fuels credit, or the energy credit’’.

22 (2) Subclause (II) of section 38(c)(3)(A)(ii), as

23 added by section 101(a), is amended by inserting

24 ‘‘or the energy credit’’ after ‘‘alcohol fuels credit’’.

25 (c) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The amendment made by

2 this section shall apply to taxable years beginning

3 after December 31, 1993.

4 (2) EXCEPTION.—The amendment made by this

5 section shall not apply to—

6 (A) any credit which was determined in a

7 taxable year, or

8 (B) the portion of any credit which is car9 ried back to a taxable year,

10 beginning on or before December 31, 1993.

11 SEC. 103. TAX CREDIT FOR BIODIESEL FUELS.

12 (a) IN GENERAL.—Section 40 (relating to credit for

13 alcohol used as a fuel) is amended by adding at the end

14 the following new subsection:

15 ‘‘(i) SPECIAL RULES FOR BIODIESEL.—

16 ‘‘(1) IN GENERAL.—In the case of biodiesel

17 used as a component of, or replacement for, diesel

18 fuel (as defined in section 4083(a)(3))—

19 ‘‘(A) the biodiesel shall be treated in the

20 same manner as alcohol for purposes of this

21 section, and

22 ‘‘(B) subsection (h) shall apply in comput23 ing the amount of any credit under this section

24 with respect to the biodiesel.
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1 ‘‘(2) BIODIESEL.—For purposes of this sub2 section, the term ‘biodiesel’ means a liquid derived

3 from biological materials (other than alcohol) for use

4 in compression ignition engines.’’.

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

6 this section shall apply to biodiesel produced, and sold or

7 used, in taxable years beginning after December 31, 1993.

8 SEC. 104. REPEAL OF ALCOHOL FUEL CREDIT INCOME IN9 CLUSION FOR BIODIESEL AND CERTAIN AL10 COHOLS.

11 (a) IN GENERAL.—Section 87 (relating to inclusion

12 in income of the alcohol fuels credit) is amended by adding

13 at the end the following new subsection:

14 ‘‘(b) EXCEPTION FOR BIODIESEL AND CERTAIN AL15 COHOL-BASED ETHERS.—Subsection (a) shall not apply

16 to any portion of the alcohol fuel credit determined for

17 the taxable year under section 40(a) which is attributable

18 to—

19 ‘‘(1) biodiesel (as defined in section 40(i)(2)),

20 ‘‘(2) ethanol which is used to produce ethyl ter21 tiary butyl ether, or

22 ‘‘(3) alcohol which is used to produce any ether

23 derived from alcohol in a chemical reaction in which

24 there is no significant loss in the energy content of

25 the alcohol.’’.
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1 (b) CONFORMING AMENDMENT.—Section 87 is

2 amended by striking ‘‘Gross’’ and inserting:

3 ‘‘(a) IN GENERAL.—Gross’’.

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

5 this section shall apply to taxable years beginning after

6 December 31, 1993.

7 SEC. 105. SMALL WIND TURBINES ELIGIBLE FOR ENERGY

8 CREDIT.

9 (a) IN GENERAL.—Subparagraph (A) of section

10 48(a)(3) (defining energy property) is amended by strik11 ing ‘‘or’’ at the end of clause (i), by redesignating clause

12 (ii) as clause (iii), and by inserting after clause (i) the

13 following new clause:

14 ‘‘(ii) equipment which uses wind en15 ergy to generate electricity but only if such

16 equipment has a rated capacity of 50 kilo17 watts or less and is not primarily used in

18 the trade or business of producing elec19 tricity for sale to an unrelated person, or’’.

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

21 subsection (a) shall apply to property placed in service

22 after December 31, 1993.
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1 SEC. 106. CLARIFICATION OF APPLICATION OF ENERGY

2 CREDIT TO PROPERTY USING SOLAR EN3 ERGY.

4 (a) IN GENERAL.—Paragraph (3) of section 48(a)

5 (relating to energy credit) is amended by adding at the

6 end the following: ‘‘For purposes of subparagraph (A)(i),

7 equipment shall be treated as using solar energy if its av8 erage annual use of energy from sources other than solar

9 energy does not exceed 50 percent of its total energy

10 input.’’.

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

12 subsection (a) shall apply to property placed in service

13 after December 31, 1993.

14 TITLE II—INCENTIVES TO PRO15 MOTE ENERGY CONSERVA16 TION

17 SEC. 201. ENERGY CONSERVATION EXPENDITURES BY

18 ELECTRIC AND GAS UTILITIES.

19 (a) IN GENERAL.—Part VI of subchapter B of chap20 ter 1 (relating to itemized deductions for individuals and

21 corporations) is amended by inserting after section 197

22 the following new section:

23 ‘‘SEC. 198. ENERGY CONSERVATION EXPENDITURES BY

24 ELECTRIC AND GAS UTILITIES.

25 ‘‘(a) GENERAL RULE.—In the case of an electric or

26 gas utility, there shall be allowed as a deduction for the
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1 taxable year an amount equal to the energy conservation

2 expenditures paid or incurred by the taxpayer during such

3 taxable year.

4 ‘‘(b) ENERGY CONSERVATION EXPENDITURES.—For

5 purposes of this section, the term ‘energy conservation ex6 penditures’ means expenditures for—

7 ‘‘(1) subsidies provided directly or indirectly to

8 customers for the purchase, installation, or modifica9 tion of—

10 ‘‘(A) any device or service primarily de11 signed to reduce consumption of electricity, nat12 ural gas, or steam or to improve the manage13 ment of energy demand, or

14 ‘‘(B) any specially defined energy property

15 (as defined in section 136(c)(2)(A)),

16 ‘‘(2) energy use consulting and audits of com17 mercial, residential, and industrial properties, or

18 ‘‘(3) administrative, promotional, and other

19 costs associated with expenditures described in para20 graph (1) or (2).

21 Such term shall not include any expenditure taken into

22 account in determining the basis of any tangible property

23 which is owned by the taxpayer and which is of a character

24 subject to the allowance for depreciation.
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1 ‘‘(c) ELECTRIC OR GAS UTILITY.—For purposes of

2 this section, the term ‘electric or gas utility’ means any

3 corporation engaged in the furnishing or sale of electric

4 energy, natural gas, or steam if the rates for such furnish5 ing or sale have been established or approved by a State

6 or political subdivision thereof, by any agency or instru7 mentality of the United States, or by a public utility or

8 public service commission or other similar body of any

9 State or political subdivision thereof or of the District of

10 Columbia.’’.

11 (b) CONFORMING AMENDMENTS.—

12 (1) Paragraph (1) of section 263(a) is amended

13 by striking ‘‘; or’’ at the end of subparagraph (F)

14 and inserting a comma, by striking the period at the

15 end of subparagraph (G) and inserting ‘‘, or’’, and

16 by adding at the end the following new subpara17 graph:

18 ‘‘(H) expenditures for which a deduction is

19 allowed under section 198.’’.

20 (2) The table of sections for part VI of sub21 chapter B of chapter 1 is amended by adding at the

22 end the following new item:

‘‘Sec. 198. Energy conservation expenditures by electric and gas

utilities.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to expenditures paid or incurred

3 in taxable years beginning after December 31, 1980.

4 SEC. 202. LARGE ELECTRIC TRUCKS, VANS, AND BUSES ELI5 GIBLE FOR DEDUCTION FOR CLEAN-FUEL VE6 HICLES.

7 (a) DEDUCTION ALLOWED IN LIEU OF CREDIT.—

8 Subsection (c) of section 30 is amended by adding at the

9 end the following new paragraph:

10 ‘‘(3) EXCEPTION FOR TRUCKS, VANS, AND

11 BUSES.—The term ‘qualified electric vehicle’ shall

12 not include any vehicle described in subclause (I) or

13 (II) of section 179A(b)(1)(A)(iii).’’.

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

15 this section shall apply to property placed in service after

16 December 31, 1993.

17 SEC. 203. CREDIT FOR PROPERTY USED IN CERTAIN AGRI18 CULTURE-RELATED ACTIVITIES TO CONTROL

19 ENVIRONMENTAL POLLUTION AND FOR SOIL

20 AND WATER CONSERVATION EXPENDITURES.

21 (a) IN GENERAL.—Section 46 (relating to amount of

22 investment credit) is amended by striking ‘‘and’’ at the

23 end of paragraph (2), by striking the period at the end

24 of paragraph (3) and inserting ‘‘, and’’, and by adding

25 at the end the following new paragraph:
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1 ‘‘(4) in the case of an eligible taxpayer (as de2 fined in section 48(c)), the agricultural environ3 mental credit.’’.

4 (b) AGRICULTURAL ENVIRONMENTAL CREDIT.—Sec5 tion 48 is amended by adding at the end the following

6 new subsection:

7 ‘‘(c) AGRICULTURAL ENVIRONMENTAL CREDIT.—

8 ‘‘(1) IN GENERAL.—For purposes of section 46,

9 in the case of an eligible taxpayer, the agricultural

10 environmental credit for any taxable year is equal to

11 the lesser of—

12 ‘‘(A) the sum of—

13 ‘‘(i) 15 percent of the aggregate bases

14 of all agricultural environmental properties

15 placed in service by the taxpayer during

16 such taxable year, and

17 ‘‘(ii) 15 percent of the amount allowed

18 as a deduction under section 175 (deter19 mined without regard to paragraph (4)(B))

20 for such taxable year, or

21 ‘‘(B) the lesser of—

22 ‘‘(i) $15,000, or

23 ‘‘(ii) the excess of—

24 ‘‘(I) $150,000, over
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1 ‘‘(II) the amount of the credit

2 taken into account under this section

3 by the taxpayer for taxable years pre4 ceding the taxable year.

5 ‘‘(2) ELIGIBLE TAXPAYER.—

6 ‘‘(A) IN GENERAL.—For purposes of this

7 subsection, the term ‘eligible taxpayer’ means

8 any taxpayer primarily engaged in a farming9 related business.

10 ‘‘(B) FARMING-RELATED BUSINESS.—For

11 purposes of this subsection, the term ‘farming12 related business’ means—

13 ‘‘(i) a farming business (as defined in

14 section 263A(e)(4)),

15 ‘‘(ii) a trade or business of mixing fer16 tilizers from purchased fertilizer materials,

17 and

18 ‘‘(iii) a trade or business of the whole19 sale distribution of animal feeds, fertilizers,

20 agricultural chemicals, pesticides, seeds, or

21 other farm supplies (other than grains).

22 ‘‘(3) AGRICULTURAL ENVIRONMENTAL PROP23 ERTY.—

24 ‘‘(A) IN GENERAL.—For purposes of this

25 subsection, the term ‘agricultural environmental
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1 property’ means any new identifiable treatment

2 facility—

3 ‘‘(i) which is used in a farming-related

4 business for the primary purpose of com5 plying with Federal, State, and local envi6 ronmental laws dealing with the abatement

7 or control of water, soil, or atmospheric

8 pollution or contamination by removing, al9 tering, disposing, storing, or preventing the

10 creation or emission of pollutants, contami11 nants, wastes, or heat, and

12 ‘‘(ii) which does not significantly—

13 ‘‘(I) increase the output or capac14 ity, extend the useful life, or reduce

15 the total operating costs of plant or

16 property to which such facility relates,

17 or

18 ‘‘(II) alter the nature of any

19 manufacturing or production process

20 or facility.

21 ‘‘(B) NEW IDENTIFIABLE TREATMENT FA22 CILITY.—The term ‘new identifiable treatment

23 facility’ has the meaning given such term by

24 section 169(e)(4)(A), determined by substitut-
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1 ing ‘December 31, 1993’ for ‘December 31,

2 1968’ each place it appears.

3 ‘‘(4) SPECIAL RULES.—

4 ‘‘(A) COORDINATION WITH ENERGY AND

5 REHABILITATION CREDITS.—This subsection

6 shall not apply to—

7 ‘‘(i) any property to the extent the

8 basis of such property is attributable to

9 qualified rehabilitation expenditures (as de10 fined in section 47(c)(2)), or

11 ‘‘(ii) energy property.

12 ‘‘(B) COORDINATION WITH DEDUCTION

13 FOR SOIL AND WATER CONSERVATION EXPEND14 ITURES.—The amount which would (but for

15 this subparagraph) be allowed as a deduction

16 under section 175 for any taxable year shall be

17 reduced by the lesser of the amount of the cred18 it determined under paragraph (1)(A)(ii) for

19 the taxable year or the credit allowed under

20 paragraph (1) for the taxable year.

21 ‘‘(C) COORDINATION WITH AMORTIZATION

22 OF POLLUTION CONTROL FACILITIES.—This

23 subsection shall not apply to any property to

24 the extent an election is made under section
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1 169 with respect to the basis of such prop2 erty.’’.

3 (c) CLERICAL AMENDMENTS.—

4 (1) The section heading for section 48 is

5 amended to read as follows:

6 ‘‘SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; AGRI7 CULTURAL ENVIRONMENTAL CREDIT.’’

8 (2) The item relating to section 48 in the table

9 of sections for subpart E of part IV of subchapter

10 A of chapter 1 is amended to read as follows:

‘‘Sec. 48. Energy credit; reforestation credit; agricultural environmental credit.’’.

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

12 this section shall apply to periods after December 31,

13 1993, under rules similar to the rules of section 48(m)

14 of the Internal Revenue Code of 1986 (as in effect on the

15 day before the date of the enactment of the Revenue Rec16 onciliation Act of 1990).

17 SEC. 204. AMORTIZATION OF POLLUTION CONTROL FACILI18 TIES.

19 (a) IN GENERAL.—Paragraph (1) of section 169(d)

20 (defining certified pollution control facility) is amended by

21 striking ‘‘January 1, 1976’’ and inserting ‘‘January 1,

22 1994’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to additions to basis in taxable

3 years beginning after December 31, 1993.

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