II

106TH CONGRESS

1ST SESSION S. 1777

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

the voluntary reduction of greenhouse gas emissions and to advance

global climate science and technology development.

IN THE SENATE OF THE UNITED STATES

OCTOBER 25, 1999

Mr. CRAIG (for himself, Mr. HAGEL, Mr. ROBERTS, Mr. ENZI, and Mr.

GRAMS) 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 of greenhouse gas

emissions and to advance global climate science and technology development.

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 1999’’.
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1 SEC. 2. PERMANENT TAX CREDIT FOR RESEARCH AND DE2 VELOPMENT REGARDING GREENHOUSE GAS

3 REDUCTION.

4 (a) IN GENERAL.—Section 41(h) of the Internal Rev5 enue Code of 1986 (relating to termination) is amended

6 by adding at the end the following:

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

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

9 qualified research expenses if the research—

10 ‘‘(A) has as 1 of its purposes the reducing

11 or sequestering of greenhouse gases, and

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

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

14 Policy Act of 1992.’’.

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

16 subsection (a) applies with respect to amounts paid or in17 curred after the date of enactment of this Act, except that

18 such amendment shall not take effect unless the Climate

19 Change Energy Policy Response Act is enacted into law.

20 SEC. 3. TAX CREDIT FOR REDUCED GREENHOUSE GAS

21 EMISSIONS FACILITIES.

22 (a) ALLOWANCE OF REDUCED GREENHOUSE GAS

23 EMISSIONS FACILITIES CREDIT.—Section 46 of the Inter24 nal Revenue Code of 1986 (relating to amount of credit)

25 is amended by striking ‘‘and’’ at the end of paragraph (2),
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1 by striking the period at the end of paragraph (3) and

2 inserting ‘‘, and’’, and by adding at the end the following:

3 ‘‘(4) the reduced greenhouse gas emissions fa4 cilities credit.’’

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

6 subchapter A of chapter 1 of the Internal Revenue Code

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

8 is amended by inserting after section 48 the following:

9 ‘‘SEC. 48A. CREDIT FOR REDUCED GREENHOUSE GAS EMIS10 SIONS FACILITIES.

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

12 reduced greenhouse gas emissions facilities credit for any

13 taxable year is the applicable percentage of the qualified

14 investment in a reduced greenhouse gas emissions facility

15 for such taxable year.

16 ‘‘(b) REDUCED GREENHOUSE GAS EMISSIONS FA17 CILITY.—For purposes of subsection (a), the term ‘re18 duced greenhouse gas emissions facility’ means a facility

19 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 greenhouse gas emissions on

4 a per unit of output basis as compared to such

5 emissions of the replaced facility, and

6 ‘‘(C) uses the same type of fuel (or com7 bination of the same type of fuel and biomass

8 fuel) as was used in the replaced facility,

9 ‘‘(3) with respect to which depreciation (or am10 ortization in lieu of depreciation) is allowable, and

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

12 standards (if any) which—

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

14 Secretary and the Secretary of Energy by regu15 lations,

16 ‘‘(B) are consistent with regulations pre17 scribed under section 1605(b) of the Energy

18 Policy Act of 1992, and

19 ‘‘(C) are in effect at the time of the acqui20 sition of the facility.

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

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

23 percentage reduction in greenhouse gas emissions de24 scribed in subsection (b)(2) and reported and certified

25 under section 1605(b) of the Energy Policy Act of 1992.
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1 ‘‘(d) QUALIFIED INVESTMENT.—For purposes of

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

3 respect to any taxable year, the basis of a reduced green4 house gas emissions facility placed in service by the tax5 payer during such taxable year, but only with respect to

6 that portion of the investment attributable to providing

7 production capacity not greater than the production ca8 pacity of the facility being replaced.

9 ‘‘(e) QUALIFIED PROGRESS EXPENDITURES.—

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

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

12 under paragraph (5), the amount of the qualified in13 vestment of such taxpayer for the taxable year (de14 termined under subsection (d) without regard to this

15 subsection) shall be increased by an amount equal to

16 the aggregate of each qualified progress expenditure

17 for the taxable year with respect to progress expend18 iture property.

19 ‘‘(2) PROGRESS EXPENDITURE PROPERTY DE20 FINED.—For purposes of this subsection, the term

21 ‘progress expenditure property’ means any property

22 being constructed by or for the taxpayer and which

23 it is reasonable to believe will qualify as a reduced

24 greenhouse gas emissions facility which is being con-
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1 structed by or for the taxpayer when it is placed in

2 service.

3 ‘‘(3) QUALIFIED PROGRESS EXPENDITURES DE4 FINED.—For purposes of this subsection—

5 ‘‘(A) SELF-CONSTRUCTED PROPERTY.—In

6 the case of any self-constructed property, the

7 term ‘qualified progress expenditures’ means

8 the amount which, for purposes of this subpart,

9 is properly chargeable (during such taxable

10 year) to capital account with respect to such

11 property.

12 ‘‘(B) NON-SELF-CONSTRUCTED PROP13 ERTY.—In the case of non-self-constructed

14 property, the term ‘qualified progress expendi15 tures’ means the amount paid during the tax16 able year to another person for the construction

17 of such property.

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

19 this subsection—

20 ‘‘(A) SELF-CONSTRUCTED PROPERTY.—

21 The term ‘self-constructed property’ means

22 property for which it is reasonable to believe

23 that more than half of the construction expendi24 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 REDUCED

10 GREENHOUSE GAS EMISSIONS FACILITY TO BE

11 TAKEN INTO ACCOUNT.—Construction shall be

12 taken into account only if, for purposes of this

13 subpart, expenditures therefor are properly

14 chargeable to capital account with respect to

15 the property.

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 REDUCED

2 GREENHOUSE GAS EMISSIONS FACILITY.—For pur3 poses of applying this subsection in the case of any

4 credit allowable by reason of section 48A, the fol5 lowing shall 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 reduced greenhouse gas emissions fa12 cility (as defined by section 48A(b)) multiplied

13 by a fraction whose numerator is the number of

14 years remaining to fully depreciate under this

15 title the reduced greenhouse gas emissions facil16 ity disposed of, and whose denominator is the

17 total number of years over which such facility

18 would otherwise have been subject to deprecia19 tion. For purposes of the preceding sentence,

20 the year of disposition of the reduced green21 house gas emissions facility property shall be

22 treated as a year of remaining 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 re2 duced greenhouse gas emissions facility under

3 section 48A, except that the amount of the in4 crease in tax under subparagraph (A) of this

5 paragraph shall be substituted in lieu of the

6 amount described 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 reduced greenhouse gas emissions fa11 cility.’’

12 (d) TECHNICAL AMENDMENTS.—

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

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

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

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

17 at the end the following:

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

19 reduced greenhouse gas emissions facility

20 attributable to any qualified investment (as

21 defined by section 48A(d)).’’

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

23 by striking ‘‘and (5)’’ and inserting ‘‘, (5), and (6)’’.

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

25 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 reduced 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 OF GREENHOUSE GAS EMISSIONS.—

11 (1) IN GENERAL.—The Secretary of the Treas12 ury and the Secretary of Energy shall jointly study

13 possible additional incentives for, and removal of

14 barriers to, voluntary, non recoupable expenditures

15 for the reduction of greenhouse gas emissions. For

16 purposes of this subsection, an expenditure shall be

17 considered voluntary and non recoupable if the ex18 penditure is not recoupable—

19 (A) from revenues generated from the in20 vestment, determined under generally accepted

21 accounting standards (or under the applicable

22 rate-of-return regulation, in the case of a tax23 payer subject to such regulation),
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1 (B) from any tax or other financial incen2 tive program established under Federal, State,

3 or local law, or

4 (C) pursuant to any credit-trading or other

5 mechanism established under any international

6 agreement or protocol that is in force.

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

8 enactment of this Act, the Secretary of the Treasury

9 and the Secretary of Energy shall jointly report to

10 Congress on the results of the study described in

11 paragraph (1), along with any recommendations for

12 legislative action.

13 (g) SCOPE AND IMPACT.—

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

15 response for reduction of greenhouse gas emissions

16 and to ensure that the incentives established by or

17 pursuant to this Act do not advantage one segment

18 of an industry to the disadvantage of another, it is

19 the sense of Congress that incentives for greenhouse

20 gas reductions should be available for individuals,

21 organizations, and entities, including both for-profit

22 and non-profit institutions.

23 (2) LEVEL PLAYING FIELD STUDY AND RE24 PORT.—
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1 (A) IN GENERAL.—The Secretary of the

2 Treasury and the Secretary of Energy shall

3 jointly study possible additional measures that

4 would provide non-profit entities (such as mu5 nicipal utilities and energy cooperatives) with

6 economic incentives for greenhouse gas emission

7 reductions comparable to those incentives pro8 vided to taxpayers under the amendments made

9 to the Internal Revenue Code of 1986 by this

10 Act.

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

12 date of enactment of this Act, the Secretary of

13 the Treasury and the Secretary of Energy shall

14 jointly report to Congress on the results of the

15 study described in subparagraph (A), along

16 with any recommendations for legislative action.

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