I 

109TH CONGRESS 

2D SESSION H. R. 5653 

To amend the Internal Revenue Code of 1986 to promote investment in 

energy independence through coal to liquid technology, biomass, and oil shale. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 20, 2006 

Mr. LEWIS of Kentucky introduced the following bill; which was referred to 

the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to promote 

investment in energy independence through coal to liquid 

technology, biomass, and oil shale. 

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, ETC. 

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

5 ‘‘Investment in Energy Independence Act of 2006’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title, etc. 

Sec. 2. Credit for investment in coal-to-liquid fuels projects. 

Sec. 3. Temporary expensing for equipment used in coal-to-liquid fuels process. 

Sec. 4. Expansion and extension of alternative fuel credit. 


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Sec. 5. Modifications to enhanced oil, natural gas, and coalbed methane recovery credit. 

Sec. 6. Allowance of enhanced oil, natural gas, and coalbed methane recovery 

credit against the alternative minimum tax. 

Sec. 7. Expansion of expensing of oil and alternative fuel refineries. 

Sec. 8. Expensing for conversion of natural gas-fired facilities for the production ethanol to coal-fired facilities. 

1 SEC. 2. CREDIT FOR INVESTMENT IN COAL-TO-LIQUID 

2 FUELS PROJECTS. 

3 (a) IN GENERAL.—Section 46 of the Internal Rev4 enue Code of 1986 (relating to amount of credit) is 

5 amended by striking ‘‘and’’ at the end of paragraph (3), 

6 by striking the period at the end of paragraph (4) and 

7 inserting ‘‘, and’’, and by adding at the end the following 

8 new paragraph: 

9 ‘‘(5) the qualifying coal-to-liquid fuels project 

10 credit.’’. 

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

12 subchapter A of chapter 1 of the Internal Revenue Code 

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

14 is amended by inserting after section 48B the following 

15 new section: 

16 ‘‘SEC. 48C. QUALIFYING COAL-TO-LIQUID FUELS PROJECT 

17 CREDIT. 

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

19 qualifying coal-to-liquid fuels project credit for any taxable 

20 year is an amount equal to 20 percent of the qualified 

21 investment for such taxable year. 

22 ‘‘(b) QUALIFIED INVESTMENT.— 


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1 ‘‘(1) IN GENERAL.—For purposes of subsection 

2 (a), the qualified investment for any taxable year is 

3 the basis of property placed in service by the tax4 payer during such taxable year which is part of a 

5 qualifying coal-to-liquid fuels project— 

6 ‘‘(A)(i) the construction, reconstruction, or 

7 erection of which is completed by the taxpayer, 

8 or 

9 ‘‘(ii) which is acquired by the taxpayer if 

10 the original use of such property commences 

11 with the taxpayer, and 

12 ‘‘(B) with respect to which depreciation (or 

13 amortization in lieu of depreciation) is allow14 able. 

15 ‘‘(2) APPLICABLE RULES.—For purposes of this 

16 section, rules similar to the rules of subsection 

17 (a)(4) and (b) of section 48 shall apply. 

18 ‘‘(c) DEFINITIONS.—For purposes of this section— 

19 ‘‘(1) QUALIFYING COAL-TO-LIQUID FUELS

20 PROJECT.—The term ‘qualifying coal-to-liquid fuels 

21 project’ means any domestic project which— 

22 ‘‘(A) employs the Fischer-Tropsch process 

23 to produce at least 5,000 barrels per day of 

24 transportation grade liquid fuels from coal, in25 cluding any property which allows for the capVerDate Aug 31 2005 03:05 Jun 22, 2006 Jkt 049200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5653.IH H5653

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1 ture, transportation, or sequestration of by2 products resulting from such process, including 

3 carbon emissions, and 

4 ‘‘(B) any portion of the qualified invest5 ment in which is certified under the qualifying 

6 coal-to-liquid program as eligible for credit 

7 under this section in an amount (not to exceed 

8 $200,000,000) determined by the Secretary. 

9 ‘‘(2) COAL.—The term ‘coal’ means any carbon10 ized or semicarbonized matter, including peat and 

11 biomass. 

12 ‘‘(3) BIOMASS.—The term ‘biomass’ means any 

13 organic material other than oil and natural gas (or 

14 any product thereof). 

15 ‘‘(d) QUALIFYING COAL-TO-LIQUID FUELS PROJECT

16 PROGRAM.— 

17 ‘‘(1) IN GENERAL.—The Secretary, in consulta18 tion with the Secretary of Energy, shall establish a 

19 qualifying coal-to-liquid fuels project program to 

20 consider and award certifications for qualified in21 vestment eligible for credits under this section to 10 

22 qualifying coal-to-liquid fuels project sponsors under 

23 this section, not less than 2 of which shall not have 

24 the capacity to produce more than 10,000 barrels of 

25 transportation grade liquid fuels from coal per day. 


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1 The total qualified investment which may be award2 ed eligibility for credit under the program shall not 

3 exceed $2,000,000,000. 

4 ‘‘(2) PERIOD OF ISSUANCE.—A certificate of 

5 eligibility under paragraph (1) may be issued only 

6 during the 10-fiscal year period beginning on Octo7 ber 1, 2006. 

8 ‘‘(3) SELECTION CRITERIA.—The Secretary 

9 shall not make a competitive certification award for 

10 qualified investment for credit eligibility under this 

11 section unless the recipient has documented to the 

12 satisfaction of the Secretary that— 

13 ‘‘(A) the award recipient is financially via14 ble without the receipt of additional Federal 

15 funding associated with the proposed project, 

16 ‘‘(B) the recipient will provide sufficient 

17 information to the Secretary for the Secretary 

18 to ensure that the qualified investment is spent 

19 efficiently and effectively, 

20 ‘‘(C) a market exists for the products of 

21 the proposed project as evidenced by contracts 

22 or written statements of intent from potential 

23 customers, 

24 ‘‘(D) the fuels identified with respect to 

25 the gasification technology for such project will 


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1 comprise at least 90 percent of the fuels re2 quired by the project for the production of 

3 transportation grade liquid fuels, 

4 ‘‘(E) the award recipient’s project team is 

5 competent in the construction and operation of 

6 the Fischer-Tropsch process, with preference 

7 given to those recipients with experience which 

8 demonstrates successful and reliable operations 

9 of such process, and 

10 ‘‘(F) the award recipient has met other cri11 teria established and published by the Sec12 retary. 

13 ‘‘(e) DENIAL OF DOUBLE BENEFIT.—No deduction 

14 or other credit shall be allowed with respect to the basis 

15 of any property taken into account in determining the 

16 credit allowed under this section.’’. 

17 (c) CONFORMING AMENDMENTS.— 

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

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

20 end of clause (iii), by striking the period at the end 

21 of clause (iv) and inserting ‘‘, and’’, and by adding 

22 after clause (iv) the following new clause: 

23 ‘‘(v) the basis of any property which 

24 is part of a qualifying coal-to-liquid fuels 

25 project under section 48C.’’. 


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1 (2) The table of sections for subpart E of part 

2 IV of subchapter A of chapter 1 of such Code is 

3 amended by inserting after the item relating to sec4 tion 48B the following new item: 

‘‘Sec. 48C. Qualifying coal-to-liquid fuels project credit.’’. 

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

6 this section shall apply to periods after the date of the 

7 enactment of this Act, under rules similar to the rules of 

8 section 48(m) of the Internal Revenue Code of 1986 (as 

9 in effect on the day before the date of the enactment of 

10 the Revenue Reconciliation Act of 1990). 

11 SEC. 3. TEMPORARY EXPENSING FOR EQUIPMENT USED IN 

12 COAL-TO-LIQUID FUELS PROCESS. 

13 (a) IN GENERAL.—Part VI of subchapter B of chap14 ter 1 of the Internal Revenue Code of 1986 is amended 

15 by inserting after section 179D the following new section: 

16 ‘‘SEC. 179E. ELECTION TO EXPENSE CERTAIN COAL-TO-LIQ17 UID FUELS FACILITIES. 

18 ‘‘(a) TREATMENT AS EXPENSES.—A taxpayer may 

19 elect to treat the cost of any qualified coal-to-liquid fuels 

20 process property as an expense which is not chargeable 

21 to capital account. Any cost so treated shall be allowed 

22 as a deduction for the taxable year in which the expense 

23 is incurred. 

24 ‘‘(b) ELECTION.— 


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1 ‘‘(1) IN GENERAL.—An election under this sec2 tion for any taxable year shall be made on the tax3 payer’s return of the tax imposed by this chapter for 

4 the taxable year. Such election shall be made in such 

5 manner as the Secretary may by regulations pre6 scribe. 

7 ‘‘(2) ELECTION IRREVOCABLE.—Any election 

8 made under this section may not be revoked except 

9 with the consent of the Secretary. 

10 ‘‘(c) QUALIFIED COAL-TO-LIQUID FUELS PROCESS

11 PROPERTY.—The term ‘qualified coal-to-liquid fuels proc12 ess property’ means any property located in the United 

13 States— 

14 ‘‘(1) which employs the Fischer-Tropsch process 

15 to produce transportation grade liquid fuels from 

16 coal (as defined in section 48C(c)(2)), including any 

17 property which allows for the capture, transpor18 tation, or sequestration of by-products resulting 

19 from such process, including carbon emissions, 

20 ‘‘(2) the original use of which commences with 

21 the taxpayer, 

22 ‘‘(3) the construction of which— 

23 ‘‘(A) except as provided in subparagraph 

24 (B), is subject to a binding construction con25 tract entered into after the date of the enactVerDate Aug 31 2005 03:05 Jun 22, 2006 Jkt 049200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H5653.IH H5653

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1 ment of this section and before January 1, 

2 2011, but only if there was no written binding 

3 construction contract entered into on or before 

4 such date of enactment, or 

5 ‘‘(B) in the case of self-constructed prop6 erty, began after the date of the enactment of 

7 this section and before January 1, 2011, and 

8 ‘‘(4) which is placed in service by the taxpayer 

9 after the date of the enactment of this section and 

10 before January 1, 2016. 

11 ‘‘(d) ELECTION TO ALLOCATE DEDUCTION TO COOP12 ERATIVE OWNER.—If— 

13 ‘‘(1) a taxpayer to which subsection (a) applies 

14 is an organization to which part I of subchapter T 

15 applies, and 

16 ‘‘(2) one or more persons directly holding an 

17 ownership interest in the taxpayer are organizations 

18 to which part I of subchapter T apply, 

19 the taxpayer may elect to allocate all or a portion of the 

20 deduction allowable under subsection (a) to such persons. 

21 Such allocation shall be equal to the person’s ratable share 

22 of the total amount allocated, determined on the basis of 

23 the person’s ownership interest in the taxpayer. The tax24 able income of the taxpayer shall not be reduced under 


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1 section 1382 by reason of any amount to which the pre2 ceding sentence applies. 

3 ‘‘(e) BASIS REDUCTION.— 

4 ‘‘(1) IN GENERAL.—For purposes of this title, 

5 if a deduction is allowed under this section with re6 spect to any qualified coal-to-liquid fuels process 

7 property, the basis of such property shall be reduced 

8 by the amount of the deduction so allowed. 

9 ‘‘(2) ORDINARY INCOME RECAPTURE.—For 

10 purposes of section 1245, the amount of the deduc11 tion allowable under subsection (a) with respect to 

12 any property which is of a character subject to the 

13 allowance for depreciation shall be treated as a de14 duction allowed for depreciation under section 167. 

15 ‘‘(f) APPLICATION WITH OTHER DEDUCTIONS AND

16 CREDITS.— 

17 ‘‘(1) OTHER DEDUCTIONS.—No deduction shall 

18 be allowed under any other provision of this chapter 

19 with respect to any expenditure with respect to 

20 which a deduction is allowed under subsection (a) to 

21 the taxpayer. 

22 ‘‘(2) CREDITS.—No credit shall be allowed 

23 under section 38 with respect to any amount for 

24 which a deduction is allowed under subsection (a). 


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1 ‘‘(g) REPORTING.—No deduction shall be allowed 

2 under subsection (a) to any taxpayer for any taxable year 

3 unless such taxpayer files with the Secretary a report con4 taining such information with respect to the operation of 

5 the property of the taxpayer as the Secretary shall re6 quire.’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 1016(a) of the Internal Revenue 

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

10 end of paragraph (36), by striking the period at the 

11 end of paragraph (37) and inserting ‘‘, and’’, and by 

12 adding at the end the following new paragraph: 

13 ‘‘(38) to the extent provided in section 

14 179E(e)(1).’’. 

15 (2) Section 1245(a) of such Code is amended 

16 by inserting ‘‘179E,’’ after ‘‘179D,’’ both places it 

17 appears in paragraphs (2)(C) and (3)(C). 

18 (3) Section 263(a)(1) of such Code is amended 

19 by striking ‘‘or’’ at the end of subparagraph (J), by 

20 striking the period at the end of subparagraph (K) 

21 and inserting ‘‘, or’’, and by inserting after subpara22 graph (K) the following new subparagraph: 

23 ‘‘(L) expenditures for which a deduction is 

24 allowed under section 179E.’’. 


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1 (4) Section 312(k)(3)(B) of such Code is 

2 amended by striking ‘‘or 179D’’ each place it ap3 pears in the heading and text and inserting ‘‘179D, 

4 or 179E’’. 

5 (5) The table of sections for part VI of sub6 chapter B of chapter 1 of such Code is amended by 

7 inserting after the item relating to section 179D the 

8 following new item: 

‘‘Sec. 179E. Election to expense certain coal-to-liquid fuels facilities.’’. 

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

10 this section shall apply to properties placed in service after 

11 the date of the enactment of this Act. 

12 SEC. 4. EXPANSION AND EXTENSION OF ALTERNATIVE 

13 FUEL CREDIT. 

14 (a) EXPANSION.— 

15 (1) Paragraph (2) of section 6426(d) of the In16 ternal Revenue Code of 1986 (defining alternative 

17 fuel) is amended by striking ‘‘and’’ at the end of 

18 subparagraph (E), by striking the period at the end 

19 of subparagraph (F) and inserting ‘‘, and’’, and by 

20 inserting after subparagraph (F) the following: 

21 ‘‘(G) any liquid fuel derived from oil shale 

22 extracted in the United States.’’. 

23 (2) Subparagraph (E) of section 6426(d)(2)(d) 

24 of such Code is amended by inserting ‘‘and biomass 


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1 (as defined in section 45K(c)(3) without regard to 

2 subparagraph (B) thereof)’’ after ‘‘peat’’. 

3 (b) EXTENSION.— 

4 (1) ALTERNATIVE FUEL CREDIT.—Paragraph 

5 (4) of section 6426(d) of such Code is amended to 

6 read as follows: 

7 ‘‘(4) TERMINATION.—This subsection shall not 

8 apply to— 

9 ‘‘(A) any sale or use involving liquified hy10 drogen for any period after September 30, 

11 2020, 

12 ‘‘(B) any sale or use involving liquid fuel 

13 derived from coal (including peat and biomass) 

14 through the Fischer-Tropsch process for any 

15 period after September 30, 2020, 

16 ‘‘(C) any sale or use involving liquid hydro17 carbons derived from biomass (as specified in 

18 paragraph (2)(F) for any period after Sep19 tember 30, 2020, 

20 ‘‘(D) any sale or use involving liquid fuel 

21 derived from oil shale for any period after Sep22 tember 30, 2020, 

23 ‘‘(E) any other sale or use for any period 

24 after September 30, 2009.’’. 

25 (2) PAYMENTS.— 


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1 (A) IN GENERAL.—Paragraph (5) of sec2 tion 6427(e) of the Internal Revenue Code of 

3 1986 is amended by striking ‘‘and’’ and the end 

4 of subparagraph (C), by striking the period at 

5 the end of subparagraph (D) and inserting a 

6 comma, and by adding at the end the following 

7 new subparagraphs: 

8 ‘‘(E) any alternative fuel or alternative fuel 

9 mixture (as so defined) involving liquid fuel de10 rived from coal (including peat and biomass) 

11 through the Fischer-Tropsch process sold or 

12 used after September 30, 2020, and 

13 ‘‘(F) any sale or use involving liquid de14 rived from oil shale for any period after Sep15 tember 30, 2020.’’. 

16 (B) CONFORMING AMENDMENT.—Section 

17 6427(e)(5)(C) of such Code is amended by 

18 striking ‘‘subparagraph (D)’’ and inserting 

19 ‘‘subparagraphs (D), (E), and (F)’’. 

20 SEC. 5. MODIFICATIONS TO ENHANCED OIL, NATURAL GAS, 

21 AND COALBED METHANE RECOVERY CREDIT. 

22 (a) ENHANCED CREDIT FOR CARBON DIOXIDE IN23 JECTIONS.—Section 43 of the Internal Revenue Code of 

24 1986 is amended by adding at the end the following new 

25 subsection: 


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1 ‘‘(f) ENHANCED CREDIT FOR PROJECTS USING

2 QUALIFIED CARBON DIOXIDE.— 

3 ‘‘(1) IN GENERAL.—For purposes of this sec4 tion— 

5 ‘‘(A) the term ‘qualified project’ includes a 

6 project described in paragraph (2), and 

7 ‘‘(B) in the case of a project described in 

8 paragraph (2), subsection (a) shall be applied 

9 by substituting ‘50 percent’ for ‘15 percent’. 

10 ‘‘(2) PROJECTS DESCRIBED.— 

11 ‘‘(A) IN GENERAL.—A project is described 

12 in this paragraph if— 

13 ‘‘(i) the project begins or is substan14 tially expanded after December 31, 2006, 

15 and 

16 ‘‘(ii) the project uses qualified carbon 

17 dioxide in an enhanced oil, natural gas, or 

18 coalbed methane recovery method which in19 volves flooding or injection. 

20 ‘‘(B) ENHANCED OIL RECOVERY.—For 

21 purposes of this subsection, the term ‘enhanced 

22 oil recovery’ means recovery of oil by injecting 

23 or flooding with qualified carbon dioxide. 

24 ‘‘(C) ENHANCED NATURAL GAS RECOV25 ERY.—The term ‘enhanced natural gas recovVerDate Aug 31 2005 03:05 Jun 22, 2006 Jkt 049200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\H5653.IH H5653

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1 ery’ means recovery of natural gas by injecting 

2 or flooding with qualified carbon dioxide. 

3 ‘‘(D) ENHANCED COALBED METHANE RE4 COVERY.—The term ‘enhanced coalbed methane 

5 recovery’ means recovery of coalbed methane by 

6 injecting or flooding with qualified carbon diox7 ide. 

8 ‘‘(E) QUALIFIED CARBON DIOXIDE.—For 

9 purposes of this subsection, the term ‘qualified 

10 carbon dioxide’ means carbon dioxide that is— 

11 ‘‘(i) separated from natural gas and 

12 natural gas liquids at a natural gas proc13 essing plant, or 

14 ‘‘(ii) from any other industrial source. 

15 ‘‘(3) TERMINATION.—This subsection shall not 

16 apply to costs paid or incurred for any qualified en17 hanced oil recovery project after December 31, 

18 2020.’’. 

19 (b) CONFORMING AMENDMENTS.— 

20 (1) Section 43 of such Code is amended— 

21 (A) in subsection (a) by striking ‘‘en22 hanced oil recovery credit’’ and inserting ‘‘en23 hanced oil, natural gas, and coalbed methane 

24 recovery credit’’, and 


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1 (B) by striking ‘‘qualified enhanced oil re2 covery costs’’ each place it appears and insert3 ing ‘‘qualified costs’’, 

4 (C) by striking ‘‘qualified enhanced oil re5 covery project’’ each place it appears and in6 serting ‘‘qualified project’’, and 

7 (D) in the section heading by inserting ‘‘, 

8 NATURAL GAS, AND COALBED METHANE’’ 

9 after ‘‘OIL’’. 

10 (2) The item in the table of sections for subpart 

11 D of part IV of subchapter A of chapter 1 of such 

12 Code relating to section 43 is amended to read as 

13 follows: 

‘‘Sec. 43. Enhanced oil, natural gas, and coalbed methane recovery credit.’’. 

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

15 this section shall apply to costs paid or incurred in taxable 

16 years ending after December 31, 2006. 

17 SEC. 6. ALLOWANCE OF ENHANCED OIL, NATURAL GAS, 

18 AND COALBED METHANE RECOVERY CREDIT 

19 AGAINST THE ALTERNATIVE MINIMUM TAX. 

20 (a) IN GENERAL.—Subsection (c) of section 38 of the 

21 Internal Revenue Code of 1986 (relating to limitation 

22 based on amount of tax) is amended by redesignating 

23 paragraph (4) as paragraph (5) and by inserting after 

24 paragraph (3) the following new paragraph: 


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1 ‘‘(4) SPECIAL RULES FOR ENHANCED OIL, NAT2 URAL GAS, AND COALBED METHANE RECOVERY

3 CREDIT.—In the case of the enhanced oil, natural 

4 gas, and coalbed methane recovery credit determined 

5 under section 43— 

6 ‘‘(A) this section and section 39 shall be 

7 applied separately with respect to such credit, 

8 and 

9 ‘‘(B) in applying paragraph (1) to such 

10 credit— 

11 ‘‘(i) the tentative minimum tax shall 

12 be treated as being zero, and 

13 ‘‘(ii) the limitation under paragraph 

14 (1) (as modified by clause (i)) shall be re15 duced by the credit allowed under sub16 section (a) for the taxable year (other than 

17 the enhanced oil recovery credit).’’. 

18 (b) CONFORMING AMENDMENTS.—Paragraphs 

19 (2)(A)(ii)(II) and (3)(A)(ii)(II) of section 38(c) of such 

20 Code are each amended by inserting ‘‘or the enhanced oil, 

21 natural gas, and coalbed methane recovery credit’’ after 

22 ‘‘employee credit’’. 

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

24 this section shall apply to taxable years ending after the 

25 date of the enactment of this Act. 


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1 SEC. 7. EXPANSION OF EXPENSING OF OIL AND ALTER2 NATIVE FUEL REFINERIES. 

3 (a) EXTENSION OF PLACED IN SERVICE REQUIRE4 MENT.—Subparagraph (B) of section 179C(c)(1) of the 

5 Internal Revenue Code of 1986 (defining qualified refinery 

6 property) is amended by striking ‘‘January 1, 2012’’ and 

7 inserting ‘‘January 1, 2016’’. 

8 (b) PRODUCTION CAPACITY.—Subsection (e) of sec9 tion 179C of such Code (relating to production capacity) 

10 is amended by striking ‘‘or’’ at the end of paragraph (1), 

11 by striking the period at the end of paragraph (2) and 

12 inserting ‘‘, or’’, and by inserting after paragraph (2) the 

13 following new paragraph: 

14 ‘‘(3) enables the existing qualified refinery to 

15 process liquids from coal, oil shale, or biomass.’’. 

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

17 this section shall apply to properties placed in service after 

18 the date of the enactment of this Act. 

19 SEC. 8. EXPENSING FOR CONVERSION OF NATURAL GAS20 FIRED FACILITIES FOR THE PRODUCTION 

21 ETHANOL TO COAL-FIRED FACILITIES. 

22 (a) IN GENERAL.—Part VI of subchapter B of chap23 ter 1 of the Internal Revenue Code of 1986 is amended 

24 by inserting after section 179E the following new section: 


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1 ‘‘SEC. 179F. ELECTION TO EXPENSE COAL-FIRED FACILI2 TIES FOR PRODUCTION OF ETHANOL. 

3 ‘‘(a) TREATMENT AS EXPENSES.—A taxpayer may 

4 elect to treat 50 percent of the cost of any qualified eth5 anol plant fueling property as an expense which is not 

6 chargeable to capital account. Any cost so treated shall 

7 be allowed as a deduction for the taxable year in which 

8 the qualified ethanol plant fueling property is placed in 

9 service. 

10 ‘‘(b) ELECTION.— 

11 ‘‘(1) IN GENERAL.—An election under this sec12 tion for any taxable year shall be made on the tax13 payer’s return of the tax imposed by this chapter for 

14 the taxable year. Such election shall be made in such 

15 manner as the Secretary may by regulations pre16 scribe. 

17 ‘‘(2) ELECTION IRREVOCABLE.—Any election 

18 made under this section may not be revoked except 

19 with the consent of the Secretary. 

20 ‘‘(c) QUALIFIED ETHANOL PLANT FUELING PROP21 ERTY.— 

22 ‘‘(1) IN GENERAL.—The term ‘qualified ethanol 

23 plant fueling property’ means, with respect to a 

24 qualified ethanol refinery, property using coal to 

25 produce energy used to produce ethanol— 


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1 ‘‘(A) the original use of which commences 

2 with the taxpayer, 

3 ‘‘(B) which is placed in service by the tax4 payer after the date of the enactment of this 

5 section and before January 1, 2016, and 

6 ‘‘(C) which meets all applicable environ7 mental laws in effect on the date such portion 

8 was placed in service. 

9 ‘‘(2) SPECIAL RULE FOR SALE-LEASEBACKS.— 

10 For purposes of paragraph (1)(A), if property is— 

11 ‘‘(A) originally placed in service after the 

12 date of the enactment of this section by a per13 son, and 

14 ‘‘(B) sold and leased back by such person 

15 within 3 months after the date such property 

16 was originally placed in service, 

17 such property shall be treated as originally placed in 

18 service not earlier than the date on which such prop19 erty is used under the leaseback referred to in sub20 paragraph (B). 

21 ‘‘(3) EFFECT OF WAIVER UNDER CLEAN AIR

22 ACT.—A waiver under the Clean Air Act shall not be 

23 taken into account in determining whether the re24 quirements of paragraph (1)(C) are met. 


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1 ‘‘(d) QUALIFIED ETHANOL REFINERY.—For pur2 poses of this section, the term ‘qualified ethanol refinery’ 

3 means any refinery located in the United States which— 

4 ‘‘(1) is designed to serve the primary purpose 

5 of processing material into ethanol, 

6 ‘‘(2) on the date of the enactment of this sec7 tion, used natural gas to produce energy in the eth8 anol production process, and 

9 ‘‘(3) after the date of the enactment of this sec10 tion, converted to the use of coal to produce energy 

11 in the ethanol production process. 

12 ‘‘(e) INELIGIBLE REFINERY PROPERTY.—No deduc13 tion shall be allowed under subsection (a) for any qualified 

14 refinery property which is built solely to comply with con15 sent decrees or projects mandated by Federal, State, or 

16 local governments. 

17 ‘‘(f) ELECTION TO ALLOCATE DEDUCTION TO COOP18 ERATIVE OWNER.— 

19 ‘‘(1) IN GENERAL.—If— 

20 ‘‘(A) a taxpayer to which subsection (a) 

21 applies is an organization to which part I of 

22 subchapter T applies, and 

23 ‘‘(B) one or more persons directly holding 

24 an ownership interest in the taxpayer are orga25 nizations to which part I of subchapter T apply, 


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1 the taxpayer may elect to allocate all or a portion of 

2 the deduction allowable under subsection (a) to such 

3 persons. Such allocation shall be equal to the per4 son’s ratable share of the total amount allocated, de5 termined on the basis of the person’s ownership in6 terest in the taxpayer. The taxable income of the 

7 taxpayer shall not be reduced under section 1382 by 

8 reason of any amount to which the preceding sen9 tence applies. 

10 ‘‘(2) FORM AND EFFECT OF ELECTION.—An 

11 election under paragraph (1) for any taxable year 

12 shall be made on a timely filed return for such year. 

13 Such election, once made, shall be irrevocable for 

14 such taxable year. 

15 ‘‘(3) WRITTEN NOTICE TO OWNERS.—If any 

16 portion of the deduction available under subsection 

17 (a) is allocated to owners under paragraph (1), the 

18 cooperative shall provide any owner receiving an al19 location written notice of the amount of the alloca20 tion. Such notice shall be provided before the date 

21 on which the return described in paragraph (2) is 

22 due. 

23 ‘‘(g) REPORTING.—No deduction shall be allowed 

24 under subsection (a) to any taxpayer for any taxable year 

25 unless such taxpayer files with the Secretary a report conVerDate Aug 31 2005 03:05 Jun 22, 2006 Jkt 049200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\H5653.IH H5653

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24 

•HR 5653 IH

1 taining such information with respect to the operation of 

2 the refineries of the taxpayer as the Secretary shall re3 quire.’’. 

4 (b) CONFORMING AMENDMENTS.— 

5 (1) Section 1245(a) of such Code is amended 

6 by inserting ‘‘179F,’’ after ‘‘179E,’’ both places it 

7 appears in paragraphs (2)(C) and (3)(C). 

8 (2) Section 263(a)(1) of such Code is amended 

9 by striking ‘‘or’’ at the end of subparagraph (K), by 

10 striking the period at the end of subparagraph (L) 

11 and inserting ‘‘, or’’, and by inserting after subpara12 graph (L) the following new subparagraph: 

13 ‘‘(M) expenditures for which a deduction is 

14 allowed under section 179F.’’. 

15 (3) Section 312(k)(3)(B) of such Code is 

16 amended by striking ‘‘or 179E’’ each place it ap17 pears in the heading and text and inserting ‘‘179E, 

18 or 179F’’. 

19 (4) The table of sections for part VI of sub20 chapter B of chapter 1 is amended by inserting after 

21 the item relating to section 179E the following new 

22 item: 

‘‘Sec. 179F. Election to expense coal-fired facilities for production of ethanol.’’. 


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•HR 5653 IH

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

2 this section shall apply to properties placed in service after 

3 the date of the enactment of this Act. 

Æ 


jcorcoran on PROD1PC62 with BILLS