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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4652 Introduced in House (IH)]

108th CONGRESS
  2d Session
                                H. R. 4652

To amend the Clean Air Act to prohibit the use of methyl tertiary butyl 
  ether as a fuel additive, to require Federal fleet vehicles to use 
                 ethanol fuel, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             June 23, 2004

Mr. Nussle (for himself and Mr. Latham) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addition 
      to the Committee on Energy and Commerce, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL

 
To amend the Clean Air Act to prohibit the use of methyl tertiary butyl 
  ether as a fuel additive, to require Federal fleet vehicles to use 
                 ethanol fuel, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Energy 
Independence Act of 2004''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.
                  TITLE I--RENEWABLE FUELS INCENTIVES

Sec. 101. Renewable content of motor vehicle fuel.
Sec. 102. Prohibition on use of MTBE as a fuel additive.
Sec. 103. Federal agency fleet vehicles.
                        TITLE II--TAX INCENTIVES

Sec. 201. Extension and expansion of credit for electricity produced 
                            from certain renewable resources.
Sec. 202. Small ethanol producer credit.
Sec. 203. Credit for energy efficient appliances.
Sec. 204. Repeal of 4.3-cent motor fuel excise taxes on railroads and 
                            inland waterway transportation which remain 
                            in general fund.
Sec. 205. Credit for construction of new energy efficient home.
Sec. 206. Credit for energy efficiency improvements to existing homes.
Sec. 207. Special rules for credit for electricity produced from 
                            certain renewable resources.
Sec. 208. Alcohol and biodiesel excise tax credit and extension of 
                            alcohol fuels income tax credit.
Sec. 209. Biodiesel income tax credit.
Sec. 210. Expansion of qualified small-issue bond program; treatment of 
                            renewable fuel production facilities.
Sec. 211. Alternative motor vehicle credit.
Sec. 212. Credit for engines complying with Tier 2, 3, or 4 emission 
                            levels.

                  TITLE I--RENEWABLE FUELS INCENTIVES

SEC. 101. RENEWABLE CONTENT OF MOTOR VEHICLE FUEL.

    (a) In General.--Section 211 of the Clean Air Act (42 U.S.C. 7545) 
is amended--
            (1) by redesignating subsection (o) as subsection (q); and
            (2) by inserting after subsection (n) the following:
    ``(o) Renewable Fuel Program.--
            ``(1) Definitions.--In this section:
                    ``(A) Ethanol.--(i) The term `cellulosic biomass 
                ethanol' means ethanol derived from any lignocellulosic 
                or hemicellulosic matter that is available on a 
                renewable or recurring basis, including--
                            ``(I) dedicated energy crops and trees;
                            ``(II) wood and wood residues;
                            ``(III) plants;
                            ``(IV) grasses;
                            ``(V) agricultural residues; and
                            ``(VI) fibers.
                    ``(ii) The term `waste derived ethanol' means 
                ethanol derived from--
                            ``(I) animal wastes, including poultry fats 
                        and poultry wastes, and other waste materials; 
                        or
                            ``(II) municipal solid waste.
                    ``(B) Renewable fuel.--
                            ``(i) In general.--The term `renewable 
                        fuel' means motor vehicle fuel that--
                                    ``(I)(aa) is produced from grain, 
                                starch, oilseeds, or other biomass; or
                                    ``(bb) is natural gas produced from 
                                a biogas source, including a landfill, 
                                sewage waste treatment plant, feedlot, 
                                or other place where decaying organic 
                                material is found; and
                                    ``(II) is used to replace or reduce 
                                the quantity of fossil fuel present in 
                                a fuel mixture used to operate a motor 
                                vehicle.
                            ``(ii) Inclusion.--The term `renewable 
                        fuel' includes cellulosic biomass ethanol, 
                        waste derived ethanol, and biodiesel (as 
                        defined in section 312(f) of the Energy Policy 
                        Act of 1992 (42 U.S.C. 13220(f)) and any 
                        blending components derived from renewable fuel 
                        (provided that only the renewable fuel portion 
                        of any such blending component shall be 
                        considered part of the applicable volume under 
                        the renewable fuel program established by this 
                        subsection).
                    ``(C) Small refinery.--The term `small refinery' 
                means a refinery for which average aggregate daily 
                crude oil throughput for the calendar year (as 
                determined by dividing the aggregate throughput for the 
                calendar year by the number of days in the calendar 
                year) does not exceed 75,000 barrels.
            ``(2) Renewable fuel program.--
                    ``(A) In general.--Not later than 1 year after the 
                enactment of this subsection, the Administrator shall 
                promulgate regulations ensuring that motor vehicle fuel 
                sold or dispensed to consumers in the contiguous United 
                States, on an annual average basis, contains the 
                applicable volume of renewable fuel as specified in 
                subparagraph (B). Regardless of the date of 
                promulgation, such regulations shall contain compliance 
                provisions for refiners, blenders, and importers, as 
                appropriate, to ensure that the requirements of this 
                section are met, but shall not restrict where renewable 
                fuel can be used, or impose any per-gallon obligation 
                for the use of renewable fuel. If the Administrator 
                does not promulgate such regulations, the applicable 
                percentage referred to in paragraph (4), on a volume 
                percentage of gasoline basis, shall be 2.2 in 2005.
                    ``(B) Applicable volume.--
                            ``(i) Calendar years 2005 through 2012.--
                        For the purpose of subparagraph (A), the 
                        applicable volume for any of calendar years 
                        2005 through 2012 shall be determined in 
                        accordance with the following table:

                                    Applicable volume of renewable fuel
  ``Calendar year                              (in billions of gallons)
        2005...................................................     3.1
        2006...................................................     3.3
        2007...................................................     3.5
        2008...................................................     3.8
        2009...................................................     4.1
        2010...................................................     4.4
        2011...................................................     4.7
        2012...................................................    5.0.
                            ``(ii) Calendar year 2013 and thereafter.--
                        For the purpose of subparagraph (A), the 
                        applicable volume for calendar year 2013 and 
                        each calendar year thereafter shall be equal to 
                        the product obtained by multiplying--
                                    ``(I) the number of gallons of 
                                gasoline that the Administrator 
                                estimates will be sold or introduced 
                                into commerce in the calendar year; and
                                    ``(II) the ratio that--
                                            ``(aa) 5.0 billion gallons 
                                        of renewable fuels; bears to
                                            ``(bb) the number of 
                                        gallons of gasoline sold or 
                                        introduced into commerce in 
                                        calendar year 2012.
            ``(3) Non-contiguous state opt-in.--Upon the petition of a 
        non-contiguous State, the Administrator may allow the renewable 
        fuel program established by subtitle A of title XV of the 
        Renewable Resources Act of 2004 to apply in such non-contiguous 
        State at the same time or any time after the Administrator 
        promulgates regulations under paragraph (2). The Administrator 
        may promulgate or revise regulations under paragraph (2), 
        establish applicable percentages under paragraph (4), provide 
        for the generation of credits under paragraph (6), and take 
        such other actions as may be necessary to allow for the 
        application of the renewable fuels program in a non-contiguous 
        State.
            ``(4) Applicable percentages.--
                    ``(A) Provision of estimate of volumes of gasoline 
                sales.--Not later than October 31 of each of calendar 
                years 2004 through 2011, the Administrator of the 
                Energy Information Administration shall provide to the 
                Administrator of the Environmental Protection Agency an 
                estimate of the volumes of gasoline that will be sold 
                or introduced into commerce in the United States during 
                the following calendar year.
                    ``(B) Determination of applicable percentages.--
                            ``(i) In general.--Not later than November 
                        30 of each of the calendar years 2004 through 
                        2011, based on the estimate provided under 
                        subparagraph (A), the Administrator shall 
                        determine and publish in the Federal Register, 
                        with respect to the following calendar year, 
                        the renewable fuel obligation that ensures that 
                        the requirements of paragraph (2) are met.
                            ``(ii) Required elements.--The renewable 
                        fuel obligation determined for a calendar year 
                        under clause (i) shall--
                                    ``(I) be applicable to refiners, 
                                blenders, and importers, as 
                                appropriate;
                                    ``(II) be expressed in terms of a 
                                volume percentage of gasoline sold or 
                                introduced into commerce; and
                                    ``(III) subject to subparagraph 
                                (C)(i), consist of a single applicable 
                                percentage that applies to all 
                                categories of persons specified in 
                                subclause (I).
                    ``(C) Adjustments.--In determining the applicable 
                percentage for a calendar year, the Administrator shall 
                make adjustments--
                            ``(i) to prevent the imposition of 
                        redundant obligations to any person specified 
                        in subparagraph (B)(ii)(I); and
                            ``(ii) to account for the use of renewable 
                        fuel during the previous calendar year by small 
                        refineries that are exempt under paragraph 
                        (11).
            ``(5) Equivalency.--For the purpose of paragraph (2), 1 
        gallon of either cellulosic biomass ethanol or waste derived 
        ethanol--
                    ``(A) shall be considered to be the equivalent of 
                1.5 gallon of renewable fuel; or
                    ``(B) if the cellulosic biomass ethanol or waste 
                derived ethanol is derived from agricultural residue or 
                is an agricultural byproduct (as that term is used in 
                section 919 of the Renewable Resources Act of 2004), 
                shall be considered to be the equivalent of 2.5 gallons 
                of renewable fuel.
            ``(6) Credit program.--
                    ``(A) In general.--The regulations promulgated to 
                carry out this subsection shall provide for the 
                generation of an appropriate amount of credits by any 
                person that refines, blends, or imports gasoline that 
                contains a quantity of renewable fuel that is greater 
                than the quantity required under paragraph (2). Such 
                regulations shall provide for the generation of an 
                appropriate amount of credits for biodiesel fuel. If a 
                small refinery notifies the Administrator that it 
                waives the exemption provided paragraph (11), the 
                regulations shall provide for the generation of credits 
                by the small refinery beginning in the year following 
                such notification.
                    ``(B) Use of credits.--A person that generates 
                credits under subparagraph (A) may use the credits, or 
                transfer all or a portion of the credits to another 
                person, for the purpose of complying with paragraph 
                (2).
                    ``(C) Life of credits.--A credit generated under 
                this paragraph shall be valid to show compliance--
                            ``(i) in the calendar year in which the 
                        credit was generated or the next calendar year; 
                        or
                            ``(ii) in the calendar year in which the 
                        credit was generated or next two consecutive 
                        calendar years if the Administrator promulgates 
                        regulations under paragraph (7).
                    ``(D) Inability to purchase sufficient credits.--
                The regulations promulgated to carry out this 
                subsection shall include provisions allowing any person 
                that is unable to generate or purchase sufficient 
                credits to meet the requirements under paragraph (2) to 
                carry forward a renewable fuel deficit provided that, 
                in the calendar year following the year in which the 
                renewable fuel deficit is created, such person shall 
                achieve compliance with the renewable fuel requirement 
                under paragraph (2), and shall generate or purchase 
                additional renewable fuel credits to offset the 
                renewable fuel deficit of the previous year.
            ``(7) Seasonal variations in renewable fuel use.--
                    ``(A) Study.--For each of the calendar years 2005 
                through 2012, the Administrator of the Energy 
                Information Administration shall conduct a study of 
                renewable fuels blending to determine whether there are 
                excessive seasonal variations in the use of renewable 
                fuels.
                    ``(B) Regulation of excessive seasonal 
                variations.--If, for any calendar year, the 
                Administrator of the Energy Information Administration, 
                based on the study under subparagraph (A), makes the 
                determinations specified in subparagraph (C), the 
                Administrator shall promulgate regulations to ensure 
                that 35 percent or more of the quantity of renewable 
                fuels necessary to meet the requirement of paragraph 
                (2) is used during each of the periods specified in 
                subparagraph (D) of each subsequent calendar year.
                    ``(C) Determinations.--The determinations referred 
                to in subparagraph (B) are that--
                            ``(i) less than 35 percent of the quantity 
                        of renewable fuels necessary to meet the 
                        requirement of paragraph (2) has been used 
                        during one of the periods specified in 
                        subparagraph (D) of the calendar year;
                            ``(ii) a pattern of excessive seasonal 
                        variation described in clause (i) will continue 
                        in subsequent calendar years; and
                            ``(iii) promulgating regulations or other 
                        requirements to impose a 35 percent or more 
                        seasonal use of renewable fuels will not 
                        prevent or interfere with the attainment of 
                        national ambient air quality standards or 
                        significantly increase the price of motor fuels 
                        to the consumer.
                    ``(D) Periods.--The two periods referred to in this 
                paragraph are--
                            ``(i) April through September; and
                            ``(ii) January through March and October 
                        through December.
                    ``(E) Exclusions.--Renewable fuels blended or 
                consumed in 2005 in a State which has received a waiver 
                under section 209(b) shall not be included in the study 
                in subparagraph (A).
            ``(8) Waivers.--
                    ``(A) In general.--The Administrator, in 
                consultation with the Secretary of Agriculture and the 
                Secretary of Energy, may waive the requirement of 
                paragraph (2) in whole or in part on petition by one or 
                more States by reducing the national quantity of 
                renewable fuel required under this subsection--
                            ``(i) based on a determination by the 
                        Administrator, after public notice and 
                        opportunity for comment, that implementation of 
                        the requirement would severely harm the economy 
                        or environment of a State, a region, or the 
                        United States; or
                            ``(ii) based on a determination by the 
                        Administrator, after public notice and 
                        opportunity for comment, that there is an 
                        inadequate domestic supply or distribution 
                        capacity to meet the requirement.
                    ``(B) Petitions for waivers.--The Administrator, in 
                consultation with the Secretary of Agriculture and the 
                Secretary of Energy, shall approve or disapprove a 
                State petition for a waiver of the requirement of 
                paragraph (2) within 90 days after the date on which 
                the petition is received by the Administrator.
                    ``(C) Termination of waivers.--A waiver granted 
                under subparagraph (A) shall terminate after 1 year, 
                but may be renewed by the Administrator after 
                consultation with the Secretary of Agriculture and the 
                Secretary of Energy.
            ``(9) Study and waiver for initial year of program.--Not 
        later than 180 days after the enactment of this subsection, the 
        Secretary of Energy shall complete for the Administrator a 
        study assessing whether the renewable fuels requirement under 
        paragraph (2) will likely result in significant adverse 
        consumer impacts in 2005, on a national, regional, or State 
        basis. Such study shall evaluate renewable fuel supplies and 
        prices, blendstock supplies, and supply and distribution system 
        capabilities. Based on such study, the Secretary shall make 
        specific recommendations to the Administrator regarding waiver 
        of the requirements of paragraph (2), in whole or in part, to 
        avoid any such adverse impacts. Within 270 days after the 
        enactment of this subsection, the Administrator shall, 
        consistent with the recommendations of the Secretary, waive, in 
        whole or in part, the renewable fuels requirement under 
        paragraph (2) by reducing the national quantity of renewable 
        fuel required under this subsection in 2005. This paragraph 
        shall not be interpreted as limiting the Administrator's 
        authority to waive the requirements of paragraph (2) in whole, 
        or in part, under paragraph (8) or paragraph (10), pertaining 
        to waivers.
            ``(10) Assessment and waiver.--The Administrator, in 
        consultation with the Secretary of Energy and the Secretary of 
        Agriculture, shall evaluate the requirement of paragraph (2) 
        and determine, prior to January 1, 2007, and prior to January 1 
        of any subsequent year in which the applicable volume of 
        renewable fuel is increased under paragraph (2)(B), whether the 
        requirement of paragraph (2), including the applicable volume 
        of renewable fuel contained in paragraph (2)(B) should remain 
        in effect, in whole or in part, during 2007 or any year or 
        years subsequent to 2007. In evaluating the requirement of 
        paragraph (2) and in making any determination under this 
        section, the Administrator shall consider the best available 
        information and data collected by accepted methods or best 
        available means regarding--
                    ``(A) the capacity of renewable fuel producers to 
                supply an adequate amount of renewable fuel at 
                competitive prices to fulfill the requirement of 
                paragraph (2);
                    ``(B) the potential of the requirement of paragraph 
                (2) to significantly raise the price of gasoline, food 
                (excluding the net price impact on the requirement in 
                paragraph (2) on commodities used in the production of 
                ethanol), or heating oil for consumers in any 
                significant area or region of the country above the 
                price that would otherwise apply to such commodities in 
                the absence of such requirement;
                    ``(C) the potential of the requirement of paragraph 
                (2) to interfere with the supply of fuel in any 
                significant gasoline market or region of the country, 
                including interference with the efficient operation of 
                refiners, blenders, importers, wholesale suppliers, and 
                retail vendors of gasoline, and other motor fuels; and
                    ``(D) the potential of the requirement of paragraph 
                (2) to cause or promote exceedances of Federal, State, 
                or local air quality standards.
        If the Administrator determines, by clear and convincing 
        information, after public notice and the opportunity for 
        comment, that the requirement of paragraph (2) would have 
        significant and meaningful adverse impact on the supply of fuel 
        and related infrastructure or on the economy, public health, or 
        environment of any significant area or region of the country, 
        the Administrator may waive, in whole or in part, the 
        requirement of paragraph (2) in any one year for which the 
        determination is made for that area or region of the country, 
        except that any such waiver shall not have the effect of 
        reducing the applicable volume of renewable fuel specified in 
        paragraph (2)(B) with respect to any year for which the 
        determination is made. In determining economic impact under 
        this paragraph, the Administrator shall not consider the 
        reduced revenues available from the Highway Trust Fund (section 
        9503 of the Internal Revenue Code of 1986) as a result of the 
        use of ethanol.
            ``(11) Small refineries.--
                    ``(A) In general.--The requirement of paragraph (2) 
                shall not apply to small refineries until the first 
                calendar year beginning more than 5 years after the 
                first year set forth in the table in paragraph 
                (2)(B)(i). Not later than December 31, 2007, the 
                Secretary of Energy shall complete for the 
                Administrator a study to determine whether the 
                requirement of paragraph (2) would impose a 
                disproportionate economic hardship on small refineries. 
                For any small refinery that the Secretary of Energy 
                determines would experience a disproportionate economic 
                hardship, the Administrator shall extend the small 
                refinery exemption for such small refinery for no less 
                than two additional years.
                    ``(B) Economic hardship.--
                            ``(i) Extension of exemption.--A small 
                        refinery may at any time petition the 
                        Administrator for an extension of the exemption 
                        from the requirement of paragraph (2) for the 
                        reason of disproportionate economic hardship. 
                        In evaluating a hardship petition, the 
                        Administrator, in consultation with the 
                        Secretary of Energy, shall consider the 
                        findings of the study in addition to other 
                        economic factors.
                            ``(ii) Deadline for action on petitions.--
                        The Administrator shall act on any petition 
                        submitted by a small refinery for a hardship 
                        exemption not later than 90 days after the 
                        receipt of the petition.
                    ``(C) Credit program.--If a small refinery notifies 
                the Administrator that it waives the exemption provided 
                by this Act, the regulations shall provide for the 
                generation of credits by the small refinery beginning 
                in the year following such notification.
                    ``(D) Opt-in for small refiners.--A small refinery 
                shall be subject to the requirements of this section if 
                it notifies the Administrator that it waives the 
                exemption under subparagraph (A).
            ``(12) Ethanol market concentration analysis.--
                    ``(A) Analysis.--
                            ``(i) In general.--Not later than 180 days 
                        after the date of enactment of this subsection, 
                        and annually thereafter, the Federal Trade 
                        Commission shall perform a market concentration 
                        analysis of the ethanol production industry 
                        using the Herfindahl-Hirschman Index to 
                        determine whether there is sufficient 
                        competition among industry participants to 
                        avoid price setting and other anticompetitive 
                        behavior.
                            ``(ii) Scoring.--For the purpose of scoring 
                        under clause (i) using the Herfindahl-Hirschman 
                        Index, all marketing arrangements among 
                        industry participants shall be considered.
                    ``(B) Report.--Not later than December 1, 2004, and 
                annually thereafter, the Federal Trade Commission shall 
                submit to Congress and the Administrator a report on 
                the results of the market concentration analysis 
                performed under subparagraph (A)(i).''.
    (b) Penalties and Enforcement.--Section 211(d) of the Clean Air Act 
(42 U.S.C. 7545(d)) is amended as follows:
            (1) In paragraph (1)--
                    (A) in the first sentence, by striking ``or (n)'' 
                each place it appears and inserting ``(n), or (o)''; 
                and
                    (B) in the second sentence, by striking ``or (m)'' 
                and inserting ``(m), or (o)''.
            (2) In the first sentence of paragraph (2), by striking 
        ``and (n)'' each place it appears and inserting ``(n), and 
        (o)''.
    (c) Survey of Renewable Fuel Market.--
            (1) Survey and report.--Not later than December 1, 2006, 
        and annually thereafter, the Administrator of the Environmental 
        Protection Agency (in consultation with the Secretary of Energy 
        acting through the Administrator of the Energy Information 
        Administration) shall--
                    (A) conduct, with respect to each conventional 
                gasoline use area and each reformulated gasoline use 
                area in each State, a survey to determine the market 
                shares of--
                            (i) conventional gasoline containing 
                        ethanol;
                            (ii) reformulated gasoline containing 
                        ethanol;
                            (iii) conventional gasoline containing 
                        renewable fuel; and
                            (iv) reformulated gasoline containing 
                        renewable fuel; and
                    (B) submit to Congress, and make publicly 
                available, a report on the results of the survey under 
                subparagraph (A).
            (2) Recordkeeping and reporting requirements.--The 
        Administrator of the Environmental Protection Agency 
        (hereinafter in this subsection referred to as the 
        ``Administrator'') may require any refiner, blender, or 
        importer to keep such records and make such reports as are 
        necessary to ensure that the survey conducted under paragraph 
        (1) is accurate. The Administrator, to avoid duplicative 
        requirements, shall rely, to the extent practicable, on 
        existing reporting and recordkeeping requirements and other 
        information available to the Administrator including gasoline 
        distribution patterns that include multistate use areas.
            (3) Applicable law.--Activities carried out under this 
        subsection shall be conducted in a manner designed to protect 
        confidentiality of individual responses.

SEC. 102. PROHIBITION ON USE OF MTBE AS A FUEL ADDITIVE.

    Section 211(c) of the Clean Air Act (42 U.S.C. 7545(c)) is amended 
by adding the following at the end of paragraph (1): ``Effective on the 
date of the enactment of this sentence, the use of methyl tertiary 
butyl ether (MTBE) as a fuel additive is prohibited.''. The 
Administrator of the Environmental Protection Agency shall amend the 
regulations under section 211(c) of the Clean Air Act (42 U.S.C. 
7545(c)) as promptly as practicable after the enactment of this Act to 
conform to the amendment made by this section.

SEC. 103. FEDERAL AGENCY FLEET VEHICLES.

    Section 248(f) of the Clean Air Act (42 U.S.C. 7588(f)) is amended 
by inserting the following before the period at the end thereof: ``, 
all such vehicles shall be clean fuel vehicles certified under this 
part capable of using ethanol as fuel and shall use ethanol wherever 
economically feasible, as determined by the Administrator, and all such 
agencies shall use biodiesel fuel to operate any Federal vehicle that 
uses diesel fuel, unless the cost of doing so is prohibitive''.

                        TITLE II--TAX INCENTIVES

SEC. 201. EXTENSION AND EXPANSION OF CREDIT FOR ELECTRICITY PRODUCED 
              FROM CERTAIN RENEWABLE RESOURCES.

    (a) Expansion of Qualified Energy Resources.--Subsection (c) of 
section 45 of the Internal Revenue Code of 1986 (relating to 
electricity produced from certain renewable resources) is amended to 
read as follows:
    ``(c) Qualified Energy Resources.--For purposes of this section--
            ``(1) In general.--The term `qualified energy resources' 
        means--
                    ``(A) wind,
                    ``(B) closed-loop biomass, and
                    ``(C) open-loop biomass.
            ``(2) Closed-loop biomass.--The term `closed-loop biomass' 
        means any organic material from a plant which is planted 
        exclusively for purposes of being used at a qualified facility 
        to produce electricity.
            ``(3) Open-loop biomass.--
                    ``(A) In general.--The term `open-loop biomass' 
                means--
                            ``(i) any agricultural livestock waste 
                        nutrients, or
                            ``(ii) any solid, nonhazardous, cellulosic 
                        waste material which is segregated from other 
                        waste materials and which is derived from--
                                    ``(I) any of the following forest-
                                related resources: mill and harvesting 
                                residues, precommercial thinnings, 
                                slash, and brush; but not including 
                                spent chemicals from pulp 
                                manufacturing,
                                    ``(II) solid wood waste materials, 
                                including waste pallets, crates, 
                                dunnage, manufacturing and construction 
                                wood wastes (other than pressure-
                                treated, chemically-treated, or painted 
                                wood wastes), and landscape or right-
                                of-way tree trimmings, but not 
                                including municipal solid waste, gas 
                                derived from the biodegradation of 
                                solid waste, or paper which is commonly 
                                recycled, or
                                    ``(III) agriculture sources, 
                                including orchard tree crops, vineyard, 
                                grain, legumes, sugar, and other crop 
                                by-products or residues.
                    ``(B) Agricultural livestock waste nutrients.--
                            ``(i) In general.--The term `agricultural 
                        livestock waste nutrients' means agricultural 
                        livestock manure and litter, including wood 
                        shavings, straw, rice hulls, and other bedding 
                        material for the disposition of manure.
                            ``(ii) Agricultural livestock.--The term 
                        `agricultural livestock' includes bovine, 
                        swine, poultry, and sheep.
                    ``(C) Exceptions.--The term `open-loop biomass' 
                does not include--
                            ``(i) closed-loop biomass, or
                            ``(ii) biomass burned in conjunction with 
                        fossil fuel (cofiring) beyond such fossil fuel 
                        required for startup and flame 
                        stabilization.''.
    (b) Extension and Expansion of Qualified Facilities.--Section 45 of 
such Code is amended by redesignating subsection (d) as subsection (e) 
and by inserting after subsection (c) the following new subsection:
    ``(d) Qualified Facilities.--For purposes of this section--
            ``(1) Wind facility.--In the case of a facility using wind 
        to produce electricity, the term `qualified facility' means any 
        facility owned by the taxpayer which is originally placed in 
        service after December 31, 1993.
            ``(2) Closed-loop biomass facility.--
                    ``(A) In general.--In the case of a facility using 
                closed-loop biomass to produce electricity, the term 
                `qualified facility' means any facility--
                            ``(i) owned by the taxpayer which is 
                        originally placed in service after December 31, 
                        1992, or
                            ``(ii) owned by the taxpayer which is 
                        originally placed in service and modified to 
                        use closed-loop biomass to co-fire with coal, 
                        with other biomass, or with both, but only if 
                        the modification is approved under the Biomass 
                        Power for Rural Development Programs or is part 
                        of a pilot project of the Commodity Credit 
                        Corporation as described in 65 Fed. Reg. 63052.
                    ``(B) Special rules.--In the case of a qualified 
                facility described in subparagraph (A)(ii)--
                            ``(i) the 10-year period referred to in 
                        subsection (a) shall be treated as beginning no 
                        earlier than January 1, 2005,
                            ``(ii) the amount of the credit determined 
                        under subsection (a) with respect to the 
                        facility shall be an amount equal to the amount 
                        determined without regard to this clause 
                        multiplied by the ratio of the thermal content 
                        of the closed-loop biomass used in such 
                        facility to the thermal content of all fuels 
                        used in such facility, and
                            ``(iii) if the owner of such facility is 
                        not the producer of the electricity, the person 
                        eligible for the credit allowable under 
                        subsection (a) shall be the lessee or the 
                        operator of such facility.
            ``(3) Open-loop biomass facility.--
                    ``(A) In general.--In the case of a facility using 
                open-loop biomass to produce electricity for grid sale 
                in excess of its internal requirements, the term 
                `qualified facility' means any facility owned by the 
                taxpayer which--
                            ``(i) in the case of a facility using 
                        agricultural livestock waste nutrients, is 
                        originally placed in service after December 31, 
                        2004, and
                            ``(ii) in the case of any other facility, 
                        is originally placed in service before January 
                        1, 2005.
                    ``(B) Special rules for preeffective date 
                facilities.--In the case of any facility described in 
                subparagraph (A)(ii) which is placed in service before 
                January 1, 2005--
                            ``(i) subsection (a)(1) shall be applied by 
                        substituting `1.2 cents' for `1.5 cents', and
                            ``(ii) the 5-year period beginning on 
                        January 1, 2005, shall be substituted for the 
                        10-year period in subsection (a)(2)(A)(ii).
                    ``(C) Credit eligibility.--In the case of any 
                facility described in subparagraph (A), if the owner of 
                such facility is not the producer of the electricity, 
                the person eligible for the credit allowable under 
                subsection (a) shall be the lessee or the operator of 
                such facility.''.
    (c) Credit Rate for Electricity Produced From New Facilities.--
            (1) In general.--Section 45(a) of such Code is amended by 
        adding at the end the following new flush sentence: ``In the 
        case of electricity produced after December 31, 2004, at any 
        qualified facility originally placed in service after such 
        date, paragraph (1) shall be applied by substituting `1.8 
        cents' for `1.5 cents'.''.
            (2) New rate not subject to inflation adjustment.--Section 
        45(b)(2) of such Code (relating to credit and phaseout 
        adjustment based on inflation) is amended by adding at the end 
        the following new sentence: ``This paragraph shall not apply to 
        any amount which is substituted for the 1.5 cent amount in 
        subsection (a) by reason of any provision of this section.''.
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        electricity produced and sold after December 31, 2004, in 
        taxable years ending after such date.
            (2) Certain biomass facilities.--With respect to any 
        facility described in section 45(d)(3)(A)(ii) of the Internal 
        Revenue Code of 1986, as added by subsection (b)(1), which is 
        placed in service before the date of the enactment of this Act, 
        the amendments made by this section shall apply to electricity 
        produced and sold after December 31, 2004, in taxable years 
        ending after such date.
            (3) Credit rate for new facilities.--The amendments made by 
        subsection (c) shall apply to electricity produced and sold 
        after December 31, 2004, in taxable years ending after such 
        date.
            (4) Nonapplication of amendments to preeffective date 
        poultry waste facilities.--The amendments made by this section 
        shall not apply with respect to any poultry waste facility 
        (within the meaning of section 45(c)(3)(C), as in effect on 
        December 31, 2004) placed in service on or before such date.

SEC. 202. SMALL ETHANOL PRODUCER CREDIT.

    (a) Allocation of Alcohol Fuels Credit to Patrons of a 
Cooperative.--Section 40(g) of the Internal Revenue Code of 1986 
(relating to definitions and special rules for eligible small ethanol 
producer credit) is amended by adding at the end the following new 
paragraph:
            ``(6) Allocation of small ethanol producer credit to 
        patrons of cooperative.--
                    ``(A) Election to allocate.--
                            ``(i) In general.--In the case of a 
                        cooperative organization described in section 
                        1381(a), any portion of the credit determined 
                        under subsection (a)(3) for the taxable year 
                        may, at the election of the organization, be 
                        apportioned pro rata among patrons of the 
                        organization on the basis of the quantity or 
                        value of business done with or for such patrons 
                        for the taxable year.
                            ``(ii) Form and effect of election.--An 
                        election under clause (i) for any taxable year 
                        shall be made on a timely filed return for such 
                        year. Such election, once made, shall be 
                        irrevocable for such taxable year.
                    ``(B) Treatment of organizations and patrons.--The 
                amount of the credit apportioned to patrons under 
                subparagraph (A)--
                            ``(i) shall not be included in the amount 
                        determined under subsection (a) with respect to 
                        the organization for the taxable year, and
                            ``(ii) shall be included in the amount 
                        determined under subsection (a) for the taxable 
                        year of each patron for which the patronage 
                        dividends for the taxable year described in 
                        subparagraph (A) are included in gross income.
                    ``(C) Special rules for decrease in credits for 
                taxable year.--If the amount of the credit of a 
                cooperative organization determined under subsection 
                (a)(3) for a taxable year is less than the amount of 
                such credit shown on the return of the cooperative 
                organization for such year, an amount equal to the 
                excess of--
                            ``(i) such reduction, over
                            ``(ii) the amount not apportioned to such 
                        patrons under subparagraph (A) for the taxable 
                        year,
                shall be treated as an increase in tax imposed by this 
                chapter on the organization. Such increase shall not be 
                treated as tax imposed by this chapter for purposes of 
                determining the amount of any credit under this chapter 
                or for purposes of section 55.''.
    (b) Improvements to Small Ethanol Producer Credit.--
            (1) Definition of small ethanol producer.--Section 40(g) of 
        such Code (relating to definitions and special rules for 
        eligible small ethanol producer credit) is amended by striking 
        ``30,000,000'' each place it appears and inserting 
        ``60,000,000''.
            (2) Small ethanol producer credit not a passive activity 
        credit.--Clause (i) of section 469(d)(2)(A) of such Code is 
        amended by striking ``subpart D'' and inserting ``subpart D, 
        other than section 40(a)(3),''.
            (3) Small ethanol producer credit not added back to income 
        under section 87.--Section 87 of such Code (relating to income 
        inclusion of alcohol fuel credit) is amended to read as 
        follows:

``SEC. 87. ALCOHOL FUEL CREDIT.

    ``Gross income includes an amount equal to the sum of--
            ``(1) the amount of the alcohol mixture credit determined 
        with respect to the taxpayer for the taxable year under section 
        40(a)(1), and
            ``(2) the alcohol credit determined with respect to the 
        taxpayer for the taxable year under section 40(a)(2).''.
    (c) Conforming Amendment.--Section 1388 of such Code (relating to 
definitions and special rules for cooperative organizations) is amended 
by adding at the end the following new subsection:
    ``(l) Cross Reference.--For provisions relating to the 
apportionment of the alcohol fuels credit between cooperative 
organizations and their patrons, see section 40(g)(6).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 203. CREDIT FOR ENERGY EFFICIENT APPLIANCES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business-related credits) is amended by adding after 
section 45F the following new section:

``SEC. 45G. ENERGY EFFICIENT APPLIANCE CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--For purposes of section 38, the energy 
        efficient appliance credit determined under this section for 
        the taxable year is an amount equal to the sum of the amounts 
        determined under paragraph (2) for qualified energy efficient 
        appliances produced by the taxpayer during the calendar year 
        ending with or within the taxable year.
            ``(2) Amount.--The amount determined under this paragraph 
        for any category described in subsection (b)(2)(B) shall be the 
        product of the applicable amount for appliances in the category 
        and the eligible production for the category.
    ``(b) Applicable Amount; Eligible Production.--For purposes of 
subsection (a)--
            ``(1) Applicable amount.--The applicable amount is--
                    ``(A) $50, in the case of--
                            ``(i) a clothes washer which is 
                        manufactured with at least a 1.42 MEF, or
                            ``(ii) a refrigerator which consumes at 
                        least 10 percent less kilowatt hours per year 
                        than the energy conservation standards for 
                        refrigerators promulgated by the Department of 
                        Energy and effective on July 1, 2001,
                    ``(B) $100, in the case of--
                            ``(i) a clothes washer which is 
                        manufactured with at least a 1.50 MEF, or
                            ``(ii) a refrigerator which consumes at 
                        least 15 percent (20 percent in the case of a 
                        refrigerator manufactured after 2006) less 
                        kilowatt hours per year than such energy 
                        conservation standards, and
                    ``(C) $150, in the case of a refrigerator 
                manufactured before 2007 which consumes at least 20 
                percent less kilowatt hours per year than such energy 
                conservation standards.
            ``(2) Eligible production.--
                    ``(A) In general.--The eligible production of each 
                category of qualified energy efficient appliances is 
                the excess of--
                            ``(i) the number of appliances in such 
                        category which are produced by the taxpayer 
                        during such calendar year, over
                            ``(ii) the average number of appliances in 
                        such category which were produced by the 
                        taxpayer during calendar years 2001, 2002, and 
                        2003.
                    ``(B) Categories.--For purposes of subparagraph 
                (A), the categories are--
                            ``(i) clothes washers described in 
                        paragraph (1)(A)(i),
                            ``(ii) clothes washers described in 
                        paragraph (1)(B)(i),
                            ``(iii) refrigerators described in 
                        paragraph (1)(A)(ii),
                            ``(iv) refrigerators described in paragraph 
                        (1)(B)(ii), and
                            ``(v) refrigerators described in paragraph 
                        (1)(C).
    ``(c) Limitation on Maximum Credit.--
            ``(1) In general.--The amount of credit allowed under 
        subsection (a) with respect to a taxpayer for all taxable years 
        shall not exceed $60,000,000, of which not more than 
        $30,000,000 may be allowed with respect to the credit 
        determined by using the applicable amount under subsection 
        (b)(1)(A).
            ``(2) Limitation based on gross receipts.--The credit 
        allowed under subsection (a) with respect to a taxpayer for the 
        taxable year shall not exceed an amount equal to 2 percent of 
        the average annual gross receipts of the taxpayer for the 3 
        taxable years preceding the taxable year in which the credit is 
        determined.
            ``(3) Gross receipts.--For purposes of this subsection, the 
        rules of paragraphs (2) and (3) of section 448(c) shall apply.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified energy efficient appliance.--The term 
        `qualified energy efficient appliance' means--
                    ``(A) a clothes washer described in subparagraph 
                (A)(i) or (B)(i) of subsection (b)(1), or
                    ``(B) a refrigerator described in subparagraph 
                (A)(ii), (B)(ii), or (C) of subsection (b)(1).
            ``(2) Clothes washer.--The term `clothes washer' means a 
        residential clothes washer, including a residential style coin 
        operated washer.
            ``(3) Refrigerator.--The term `refrigerator' means an 
        automatic defrost refrigerator-freezer which has an internal 
        volume of at least 16.5 cubic feet.
            ``(4) MEF.--The term `MEF' means Modified Energy Factor (as 
        determined by the Secretary of Energy).
    ``(e) Special Rules.--
            ``(1) In general.--Rules similar to the rules of 
        subsections (c), (d), and (e) of section 52 shall apply for 
        purposes of this section.
            ``(2) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52 or 
        subsection (m) or (o) of section 414 shall be treated as 1 
        person for purposes of subsection (a).
    ``(f) Verification.--The taxpayer shall submit such information or 
certification as the Secretary, in consultation with the Secretary of 
Energy, determines necessary to claim the credit amount under 
subsection (a).''.
    (b) Credit Made Part of General Business Credit.--Section 38(b) of 
such Code (relating to current year business credit) is amended by 
striking ``plus'' at the end of paragraph (14), by striking the period 
at the end of paragraph (15) and inserting ``, plus'', and by adding at 
the end the following new paragraph:
            ``(16) the energy efficient appliance credit determined 
        under section 45G(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``45G. Energy efficient appliance credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to appliances produced after December 31, 2004, in taxable years 
ending after such date.

SEC. 204. REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES ON RAILROADS AND 
              INLAND WATERWAY TRANSPORTATION WHICH REMAIN IN GENERAL 
              FUND.

    (a) Taxes on Trains.--
            (1) In general.--Subparagraph (A) of section 4041(a)(1) of 
        the Internal Revenue Code of 1986 is amended by striking ``or a 
        diesel-powered train'' each place it appears and by striking 
        ``or train''.
            (2) Conforming amendments.--
                    (A) Subparagraph (C) of section 4041(a)(1) of such 
                Code is amended by striking clause (ii) and by 
                redesignating clause (iii) as clause (ii).
                    (B) Subparagraph (C) of section 4041(b)(1) of such 
                Code is amended by striking all that follows ``section 
                6421(e)(2)'' and inserting a period.
                    (C) Subsection (d) of section 4041 of such Code is 
                amended by redesignating paragraph (3) as paragraph (4) 
                and by inserting after paragraph (2) the following new 
                paragraph:
            ``(3) Diesel fuel used in trains.--There is hereby imposed 
        a tax of 0.1 cent per gallon on any liquid other than gasoline 
        (as defined in section 4083)--
                    ``(A) sold by any person to an owner, lessee, or 
                other operator of a diesel-powered train for use as a 
                fuel in such train, or
                    ``(B) used by any person as a fuel in a diesel-
                powered train unless there was a taxable sale of such 
                fuel under subparagraph (A).
        No tax shall be imposed by this paragraph on the sale or use of 
        any liquid if tax was imposed on such liquid under section 
        4081.''
                    (D) Subsection (e) of section 4082 of such Code is 
                amended by striking ``section 4041(a)(1)'' and 
                inserting ``subsections (d)(3) and (a)(1) of section 
                4041, respectively''.
                    (E) Paragraph (3) of section 4083(a) of such Code 
                is amended by striking ``or a diesel-powered train''.
                    (F) Paragraph (3) of section 6421(f) of such Code 
                is amended to read as follows:
            ``(3) Gasoline used in trains.--In the case of gasoline 
        used as a fuel in a train, this section shall not apply with 
        respect to the Leaking Underground Storage Tank Trust Fund 
        financing rate under section 4081.''
                    (G) Paragraph (3) of section 6427(l) of such Code 
                is amended to read as follows:
            ``(3) Refund of certain taxes on fuel used in diesel-
        powered trains.--For purposes of this subsection, the term 
        `nontaxable use' includes fuel used in a diesel-powered train. 
        The preceding sentence shall not apply to the tax imposed by 
        section 4041(d) and the Leaking Underground Storage Tank Trust 
        Fund financing rate under section 4081 except with respect to 
        fuel sold for exclusive use by a State or any political 
        subdivision thereof.''
    (b) Fuel Used on Inland Waterways.--
            (1) In general.--Paragraph (1) of section 4042(b) of such 
        Code is amended by adding ``and'' at the end of subparagraph 
        (A), by striking ``, and'' at the end of subparagraph (B) and 
        inserting a period, and by striking subparagraph (C).
            (2) Conforming amendment.--Paragraph (2) of section 4042(b) 
        of such Code is amended by striking subparagraph (C).
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 205. CREDIT FOR CONSTRUCTION OF NEW ENERGY EFFICIENT HOME.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits) is amended by adding after 
section 45G the following new section:

``SEC. 45H. NEW ENERGY EFFICIENT HOME CREDIT.

    ``(a) In General.--For purposes of section 38, in the case of an 
eligible contractor, the credit determined under this section for the 
taxable year is an amount equal to the aggregate adjusted bases of all 
energy efficient property installed in a qualifying new home during 
construction of such home.
    ``(b) Limitations.--
            ``(1) Maximum credit.--
                    ``(A) In general.--The credit allowed by this 
                section with respect to a qualifying new home shall not 
                exceed--
                            ``(i) in the case of a 30-percent home, 
                        $1,000, and
                            ``(ii) in the case of a 50-percent home, 
                        $2,000.
                    ``(B) 30- or 50-percent home.--For purposes of 
                subparagraph (A)--
                            ``(i) 30-percent home.--The term `30-
                        percent home' means--
                                    ``(I) a qualifying new home which 
                                is certified to have a projected level 
                                of annual heating and cooling energy 
                                consumption, measured in terms of 
                                average annual energy cost to the 
                                homeowner, which is at least 30 percent 
                                less than the annual level of heating 
                                and cooling energy consumption of a 
                                qualifying new home constructed in 
                                accordance with the latest standards of 
                                chapter 4 of the International Energy 
                                Conservation Code approved by the 
                                Department of Energy before the 
                                construction of such qualifying new 
                                home and any applicable Federal minimum 
                                efficiency standards for equipment, or
                                    ``(II) in the case of a qualifying 
                                new home which is a manufactured home, 
                                a home which meets the applicable 
                                standards required by the Administrator 
                                of the Environmental Protection Agency 
                                under the Energy Star Labeled Homes 
                                program.
                            ``(ii) 50-percent home.--The term `50-
                        percent home' means a qualifying new home which 
                        would be described in clause (i)(I) if 50 
                        percent were substituted for 30 percent.
                    ``(C) Prior credit amounts on same home taken into 
                account.--The amount of the credit otherwise allowable 
                for the taxable year with respect to a qualifying new 
                home under clause (i) or (ii) of subparagraph (A) shall 
                be reduced by the sum of the credits allowed under 
                subsection (a) to any taxpayer with respect to the home 
                for all preceding taxable years.
            ``(2) Coordination with certain credits.--For purposes of 
        this section--
                    ``(A) the basis of any property referred to in 
                subsection (a) shall be reduced by that portion of the 
                basis of any property which is attributable to the 
                rehabilitation credit (as determined under section 
                47(a)) or to the energy credit (as determined under 
                section 48(a)), and
                    ``(B) expenditures taken into account under section 
                47, or 48(a) shall not be taken into account under this 
                section.
            ``(3) Provider limitation.--Any eligible contractor who 
        directly or indirectly provides the guarantee of energy savings 
        under a guarantee-based method of certification described in 
        subsection (d)(1)(D) shall not be eligible to receive the 
        credit allowed by this section.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible contractor.--The term `eligible contractor' 
        means--
                    ``(A) the person who constructed the qualifying new 
                home, or
                    ``(B) in the case of a qualifying new home which is 
                a manufactured home, the manufactured home producer of 
                such home.
        If more than 1 person is described in subparagraph (A) or (B) 
        with respect to any qualifying new home, such term means the 
        person designated as such by the owner of such home.
            ``(2) Energy efficient property.--The term `energy 
        efficient property' means any energy efficient building 
        envelope component, and any energy efficient heating or cooling 
        equipment or system which can, individually or in combination 
        with other components, meet the requirements of this section.
            ``(3) Qualifying new home.--
                    ``(A) In general.--The term `qualifying new home' 
                means a dwelling--
                            ``(i) located in the United States,
                            ``(ii) the construction of which is 
                        substantially completed after December 31, 
                        2004, and
                            ``(iii) the first use of which after 
                        construction is as a principal residence 
                        (within the meaning of section 121).
                    ``(B) Manufactured home included.--The term 
                `qualifying new home' includes a manufactured home 
                conforming to Federal Manufactured Home Construction 
                and Safety Standards (24 C.F.R. 3280).
            ``(4) Construction.--The term `construction' includes 
        reconstruction and rehabilitation.
            ``(5) Building envelope component.--The term `building 
        envelope component' means--
                    ``(A) any insulation material or system which is 
                specifically and primarily designed to reduce the heat 
                loss or gain of a qualifying new home when installed in 
                or on such home,
                    ``(B) exterior windows (including skylights), and
                    ``(C) exterior doors.
    ``(d) Certification.--
            ``(1) Method of certification.--
                    ``(A) In general.--A certification described in 
                subsection (b)(1)(B) shall be determined either by a 
                component-based method, a performance-based method, or 
                a guarantee-based method, or, in the case of a 
                qualifying new home which is a manufactured home, by a 
                method prescribed by the Administrator of the 
                Environmental Protection Agency under the Energy Star 
                Labeled Homes program.
                    ``(B) Component-based method.--A component-based 
                method is a method which uses the applicable technical 
                energy efficiency specifications or ratings (including 
                product labeling requirements) for the energy efficient 
                building envelope component or energy efficient heating 
                or cooling equipment. The Secretary shall, in 
                consultation with the Administrator of the 
                Environmental Protection Agency, develop prescriptive 
                component-based packages which are equivalent in energy 
                performance to properties which qualify under 
                subparagraph (C).
                    ``(C) Performance-based method.--
                            ``(i) In general.--A performance-based 
                        method is a method which calculates projected 
                        energy usage and cost reductions in the 
                        qualifying new home in relation to a new home--
                                    ``(I) heated by the same fuel type, 
                                and
                                    ``(II) constructed in accordance 
                                with the latest standards of chapter 4 
                                of the International Energy 
                                Conservation Code approved by the 
                                Department of Energy before the 
                                construction of such qualifying new 
                                home and any applicable Federal minimum 
                                efficiency standards for equipment.
                            ``(ii) Computer software.--Computer 
                        software shall be used in support of a 
                        performance-based method certification under 
                        clause (i). Such software shall meet procedures 
                        and methods for calculating energy and cost 
                        savings in regulations promulgated by the 
                        Secretary of Energy.
                    ``(D) Guarantee-based method.--
                            ``(i) In general.--A guarantee-based method 
                        is a method which guarantees in writing to the 
                        homeowner energy savings of either 30 percent 
                        or 50 percent over the 2000 International 
                        Energy Conservation Code for heating and 
                        cooling costs. The guarantee shall be provided 
                        for a minimum of 2 years and shall fully 
                        reimburse the homeowner any heating and cooling 
                        costs in excess of the guaranteed amount.
                            ``(ii) Computer software.--Computer 
                        software shall be selected by the provider to 
                        support the guarantee-based method 
                        certification under clause (i). Such software 
                        shall meet procedures and methods for 
                        calculating energy and cost savings in 
                        regulations promulgated by the Secretary of 
                        Energy.
            ``(2) Provider.--A certification described in subsection 
        (b)(1)(B) shall be provided by--
                    ``(A) in the case of a component-based method, a 
                local building regulatory authority, a utility, or a 
                home energy rating organization,
                    ``(B) in the case of a performance-based method or 
                a guarantee-based method, an individual recognized by 
                an organization designated by the Secretary for such 
                purposes, or
                    ``(C) in the case of a qualifying new home which is 
                a manufactured home, a manufactured home primary 
                inspection agency.
            ``(3) Form.--
                    ``(A) In general.--A certification described in 
                subsection (b)(1)(B) shall be made in writing in a 
                manner which specifies in readily verifiable fashion 
                the energy efficient building envelope components and 
                energy efficient heating or cooling equipment installed 
                and their respective rated energy efficiency 
                performance, and
                            ``(i) in the case of a performance-based 
                        method, accompanied by a written analysis 
                        documenting the proper application of a 
                        permissible energy performance calculation 
                        method to the specific circumstances of such 
                        qualifying new home, and
                            ``(ii) in the case of a qualifying new home 
                        which is a manufactured home, accompanied by 
                        such documentation as required by the 
                        Administrator of the Environmental Protection 
                        Agency under the Energy Star Labeled Homes 
                        program.
                    ``(B) Form provided to buyer.--A form documenting 
                the energy efficient building envelope components and 
                energy efficient heating or cooling equipment installed 
                and their rated energy efficiency performance shall be 
                provided to the buyer of the qualifying new home. The 
                form shall include labeled R-value for insulation 
                products, NFRC-labeled U-factor and solar heat gain 
                coefficient for windows, skylights, and doors, labeled 
                annual fuel utilization efficiency (AFUE) ratings for 
                furnaces and boilers, labeled heating seasonal 
                performance factor (HSPF) ratings for electric heat 
                pumps, and labeled seasonal energy efficiency ratio 
                (SEER) ratings for air conditioners.
                    ``(C) Ratings label affixed in dwelling.--A 
                permanent label documenting the ratings in subparagraph 
                (B) shall be affixed to the front of the electrical 
                distribution panel of the qualifying new home, or shall 
                be otherwise permanently displayed in a readily 
                inspectable location in such home.
            ``(4) Regulations.--
                    ``(A) In general.--In prescribing regulations under 
                this subsection for performance-based and guarantee-
                based certification methods, the Secretary shall 
                prescribe procedures for calculating annual energy 
                usage and cost reductions for heating and cooling and 
                for the reporting of the results. Such regulations 
                shall--
                            ``(i) provide that any calculation 
                        procedures be fuel neutral such that the same 
                        energy efficiency measures allow a qualifying 
                        new home to be eligible for the credit under 
                        this section regardless of whether such home 
                        uses a gas or oil furnace or boiler or an 
                        electric heat pump, and
                            ``(ii) require that any computer software 
                        allow for the printing of the Federal tax forms 
                        necessary for the credit under this section and 
                        for the printing of forms for disclosure to the 
                        homebuyer.
                    ``(B) Providers.--For purposes of paragraph (2)(B), 
                the Secretary shall establish requirements for the 
                designation of individuals based on the requirements 
                for energy consultants and home energy raters specified 
                by the Mortgage Industry National Home Energy Rating 
                Standards.
    ``(e) Application.--Subsection (a) shall apply to qualifying new 
homes the construction of which is substantially completed after 
December 31, 2004.''.
    (b) Credit Made Part of General Business Credit.--Section 38(b) of 
such Code (relating to current year business credit) is amended by 
striking ``plus'' at the end of paragraph (15), by striking the period 
at the end of paragraph (16) and inserting ``, plus'', and by adding at 
the end the following new paragraph:
            ``(17) the new energy efficient home credit determined 
        under section 45H(a).''.
    (c) Denial of Double Benefit.--Section 280C of such Code (relating 
to certain expenses for which credits are allowable) is amended by 
adding at the end the following new subsection:
    ``(d) New Energy Efficient Home Expenses.--No deduction shall be 
allowed for that portion of expenses for a qualifying new home 
otherwise allowable as a deduction for the taxable year which is equal 
to the amount of the credit determined for such taxable year under 
section 45H(a).''.
    (d) Deduction for Certain Unused Business Credits.--Section 196(c) 
of such Code (defining qualified business credits) is amended by 
striking ``and'' at the end of paragraph (9), by striking the period at 
the end of paragraph (10) and inserting ``, and'', and by adding after 
paragraph (10) the following new paragraph:
            ``(11) the new energy efficient home credit determined 
        under section 45H(a).''.
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
after the item relating to section 45G the following new item:

``45H. New energy efficient home credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to homes the construction of which is substantially completed 
after December 31, 2004.

SEC. 206. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25B the 
following new section:

``SEC. 25C. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to 20 percent of the amount paid 
or incurred by the taxpayer for qualified energy efficiency 
improvements installed during such taxable year.
    ``(b) Limitations.--
            ``(1) Maximum credit.--The credit allowed by this section 
        with respect to a dwelling unit shall not exceed $2,000.
            ``(2) Prior credit amounts for taxpayer on same dwelling 
        taken into account.--If a credit was allowed to the taxpayer 
        under subsection (a) with respect to a dwelling unit in 1 or 
        more prior taxable years, the amount of the credit otherwise 
        allowable for the taxable year with respect to that dwelling 
        unit shall be reduced by the sum of the credits allowed under 
        subsection (a) to the taxpayer with respect to the dwelling 
        unit for all prior taxable years.
    ``(c) Qualified Energy Efficiency Improvements.--For purposes of 
this section, the term `qualified energy efficiency improvements' means 
any energy efficient building envelope component which meets the 
prescriptive criteria for such component established by the 2000 
International Energy Conservation Code, as such Code (including 
supplements) is in effect on the date of the enactment of this section 
(or, in the case of a metal roof with appropriate pigmented coatings 
which meet the Energy Star program requirements), if--
            ``(1) such component is installed in or on a dwelling 
        unit--
                    ``(A) located in the United States,
                    ``(B) owned and used by the taxpayer as the 
                taxpayer's principal residence (within the meaning of 
                section 121), and
                    ``(C) which has not been treated as a qualified new 
                energy efficient home for purposes of any credit 
                allowed under section 45G,
            ``(2) the original use of such component commences with the 
        taxpayer, and
            ``(3) such component reasonably can be expected to remain 
        in use for at least 5 years.
If the aggregate cost of such components with respect to any dwelling 
unit exceeds $1,000, such components shall be treated as qualified 
energy efficiency improvements only if such components are also 
certified in accordance with subsection (d) as meeting such 
prescriptive criteria.
    ``(d) Certification.--The certification described in subsection (c) 
shall be--
            ``(1) determined on the basis of the technical 
        specifications or applicable ratings (including product 
        labeling requirements) for the measurement of energy efficiency 
        (based upon energy use or building envelope component 
        performance) for the energy efficient building envelope 
        component,
            ``(2) provided by a local building regulatory authority, a 
        utility, a manufactured home production inspection primary 
        inspection agency (IPIA), or an accredited home energy rating 
        system provider who is accredited by or otherwise authorized to 
        use approved energy performance measurement methods by the 
        Residential Energy Services Network (RESNET), and
            ``(3) made in writing in a manner which specifies in 
        readily verifiable fashion the energy efficient building 
        envelope components installed and their respective energy 
        efficiency levels.
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Building envelope component.--The term `building 
        envelope component' means--
                    ``(A) any insulation material or system which is 
                specifically and primarily designed to reduce the heat 
                loss or gain of a dwelling unit when installed in or on 
                such dwelling unit,
                    ``(B) exterior windows (including skylights),
                    ``(C) exterior doors, and
                    ``(D) any metal roof installed on a dwelling unit, 
                but only if such roof has appropriate pigmented 
                coatings which are specifically and primarily designed 
                to reduce the heat gain of such dwelling unit.
            ``(2) Manufactured homes included.--The term `dwelling 
        unit' includes a manufactured home which conforms to Federal 
        Manufactured Home Construction and Safety Standards (section 
        3280 of title 24, Code of Federal Regulations).
            ``(3) Dollar amounts in case of joint occupancy.--In the 
        case of any dwelling unit which is jointly occupied and used 
        during any calendar year as a residence by 2 or more 
        individuals, the following rules shall apply:
                    ``(A) The amount of the credit allowable under 
                subsection (a) by reason of expenditures made during 
                such calendar year by any of such individuals with 
                respect to such dwelling unit shall be determined by 
                treating all of such individuals as 1 taxpayer whose 
                taxable year is such calendar year.
                    ``(B) There shall be allowable, with respect to 
                such expenditures to each of such individuals, a credit 
                under subsection (a) for the taxable year in which such 
                calendar year ends in an amount which bears the same 
                ratio to the amount determined under subparagraph (A) 
                as the amount of such expenditures made by such 
                individual during such calendar year bears to the 
                aggregate of such expenditures made by all of such 
                individuals during such calendar year.
            ``(4) Tenant-stockholder in cooperative housing 
        corporation.--In the case of an individual who is a tenant-
        stockholder (as defined in section 216) in a cooperative 
        housing corporation (as defined in such section), such 
        individual shall be treated as having made the individual's 
        tenant-stockholder's proportionate share (as defined in section 
        216(b)(3)) of any expenditures of such corporation.
            ``(5) Condominiums.--
                    ``(A) In general.--In the case of an individual who 
                is a member of a condominium management association 
                with respect to a condominium which the individual 
                owns, such individual shall be treated as having made 
                the individual's proportionate share of any 
                expenditures of such association.
                    ``(B) Condominium management association.--For 
                purposes of this paragraph, the term `condominium 
                management association' means an organization which 
                meets the requirements of paragraph (1) of section 
                528(c) (other than subparagraph (E) thereof) with 
                respect to a condominium project substantially all of 
                the units of which are used as residences.
    ``(f) Basis Adjustment.--For purposes of this subtitle, if a credit 
is allowed under this section for any expenditure with respect to any 
property, the increase in the basis of such property which would (but 
for this subsection) result from such expenditure shall be reduced by 
the amount of the credit so allowed.
    ``(g) Application of Section.--This section shall apply to 
qualified energy efficiency improvements installed after December 31, 
2003, and before January 1, 2007.''.
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 1016 of such Code is amended 
        by striking ``and'' at the end of paragraph (27), by striking 
        the period at the end of paragraph (28) and inserting ``, 
        and'', and by adding at the end the following new paragraph:
            ``(29) to the extent provided in section 25C(f), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25C.''.
            (2) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 25B the following new item:

``25C. Energy efficiency improvements to existing homes.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2003.

SEC. 207. SPECIAL RULES FOR CREDIT FOR ELECTRICITY PRODUCED FROM 
              CERTAIN RENEWABLE RESOURCES.

    (a) Elimination of Certain Credit Reductions.--Section 45(b)(3)(A) 
of the Internal Revenue Code of 1986 (relating to credit reduced for 
grants, tax-exempt bonds, subsidized energy financing, and other 
credits) is amended--
            (1) by striking clause (ii),
            (2) by redesignating clauses (iii) and (iv) as clauses (ii) 
        and (iii),
            (3) by inserting ``(other than proceeds of an issue of 
        State or local government obligations the interest on which is 
        exempt from tax under section 103, or any loan, debt, or other 
        obligation incurred under subchapter I of chapter 31 of title 7 
        of the Rural Electrification Act of 1936 (7 U.S.C. 901 et 
        seq.), as in effect on the date of the enactment of the Energy 
        Tax Incentives Act)'' after ``project'' in clause (ii) (as so 
        redesignated),
            (4) by adding at the end the following new sentence: ``This 
        paragraph shall not apply with respect to any facility 
        described in subsection (d)(2)(A)(ii).'', and
            (5) by striking ``tax-exempt bonds,'' in the heading and 
        inserting ``certain''.
    (b) Treatment of Persons not Able to Use Entire Credit.--Section 
45(e) of such Code (relating to definitions and special rules), as 
redesignated by section 201(b)(1), is amended by adding at the end the 
following new paragraph:
            ``(8) Treatment of persons not able to use entire credit.--
                    ``(A) Allowance of credit.--
                            ``(i) In general.--Except as otherwise 
                        provided in this subsection--
                                    ``(I) any credit allowable under 
                                subsection (a) with respect to a 
                                qualified facility owned by a person 
                                described in clause (ii) may be 
                                transferred or used as provided in this 
                                paragraph, and
                                    ``(II) the determination as to 
                                whether the credit is allowable shall 
                                be made without regard to the tax-
                                exempt status of the person.
                            ``(ii) Persons described.--A person is 
                        described in this clause if the person is--
                                    ``(I) an organization described in 
                                section 501(c)(12)(C) and exempt from 
                                tax under section 501(a),
                                    ``(II) an organization described in 
                                section 1381(a)(2)(C),
                                    ``(III) a public utility (as 
                                defined in section 136(c)(2)(B)), which 
                                is exempt from income tax under this 
                                subtitle,
                                    ``(IV) any State or political 
                                subdivision thereof, the District of 
                                Columbia, any possession of the United 
                                States, or any agency or 
                                instrumentality of any of the 
                                foregoing,
                                    ``(V) any Indian tribal government 
                                (within the meaning of section 7871) or 
                                any agency or instrumentality thereof, 
                                or
                                    ``(VI) the Tennessee Valley 
                                Authority.
                    ``(B) Transfer of credit.--
                            ``(i) In general.--A person described in 
                        subclause (I), (II), (III), (IV), or (V) of 
                        subparagraph (A)(ii) may transfer any credit to 
                        which subparagraph (A)(i) applies through an 
                        assignment to any other person not described in 
                        subparagraph (A)(ii). Such transfer may be 
                        revoked only with the consent of the Secretary.
                            ``(ii) Regulations.--The Secretary shall 
                        prescribe such regulations as necessary to 
                        ensure that any credit described in clause (i) 
                        is assigned once and not reassigned by such 
                        other person.
                            ``(iii) Transfer proceeds treated as 
                        arising from essential government function.--
                        Any proceeds derived by a person described in 
                        subclause (III), (IV), or (V) of subparagraph 
                        (A)(ii) from the transfer of any credit under 
                        clause (i) shall be treated as arising from the 
                        exercise of an essential government function.
                    ``(C) Use of credit as an offset.--Notwithstanding 
                any other provision of law, in the case of a person 
                described in subclause (I), (II), or (V) of 
                subparagraph (A)(ii), any credit to which subparagraph 
                (A)(i) applies may be applied by such person, to the 
                extent provided by the Secretary of Agriculture, as a 
                prepayment of any loan, debt, or other obligation the 
                entity has incurred under subchapter I of chapter 31 of 
                title 7 of the Rural Electrification Act of 1936 (7 
                U.S.C. 901 et seq.), as in effect on the date of the 
                enactment of the Energy Tax Incentives Act.
                    ``(D) Use by tva.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of law, in the case of a person 
                        described in subparagraph (A)(ii)(VI), any 
                        credit to which subparagraph (A)(i) applies may 
                        be applied as a credit against the payments 
                        required to be made in any fiscal year under 
                        section 15d(e) of the Tennessee Valley 
                        Authority Act of 1933 (16 U.S.C. 831n-4(e)) as 
                        an annual return on the appropriations 
                        investment and an annual repayment sum.
                            ``(ii) Treatment of credits.--The aggregate 
                        amount of credits described in subparagraph 
                        (A)(i) with respect to such person shall be 
                        treated in the same manner and to the same 
                        extent as if such credits were a payment in 
                        cash and shall be applied first against the 
                        annual return on the appropriations investment.
                            ``(iii) Credit carryover.--With respect to 
                        any fiscal year, if the aggregate amount of 
                        credits described subparagraph (A)(i) with 
                        respect to such person exceeds the aggregate 
                        amount of payment obligations described in 
                        clause (i), the excess amount shall remain 
                        available for application as credits against 
                        the amounts of such payment obligations in 
                        succeeding fiscal years in the same manner as 
                        described in this subparagraph.
                    ``(E) Credit not income.--Any transfer under 
                subparagraph (B) or use under subparagraph (C) of any 
                credit to which subparagraph (A)(i) applies shall not 
                be treated as income for purposes of section 
                501(c)(12).
                    ``(F) Treatment of unrelated persons.--For purposes 
                of subsection (a)(2)(B), sales of electricity among and 
                between persons described in subparagraph (A)(ii) shall 
                be treated as sales between unrelated parties.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to electricity produced and sold after December 31, 2004, in 
taxable years ending after such date.

SEC. 208. ALCOHOL AND BIODIESEL EXCISE TAX CREDIT AND EXTENSION OF 
              ALCOHOL FUELS INCOME TAX CREDIT.

    (a) In General.--Subchapter B of chapter 65 of the Internal Revenue 
Code of 1986 (relating to rules of special application) is amended by 
inserting after section 6425 the following new section:

``SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL MIXTURES.

    ``(a) Allowance of Credits.--There shall be allowed as a credit 
against the tax imposed by section 4081 an amount equal to the sum of--
            ``(1) the alcohol fuel mixture credit, plus
            ``(2) the biodiesel mixture credit.
    ``(b) Alcohol Fuel Mixture Credit.--
            ``(1) In general.--For purposes of this section, the 
        alcohol fuel mixture credit is the product of the applicable 
        amount and the number of gallons of alcohol used by the 
        taxpayer in producing any alcohol fuel mixture for sale or use 
        in a trade or business of the taxpayer.
            ``(2) Applicable amount.--For purposes of this subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the applicable amount is 52 cents (51 
                cents in the case of any sale or use after 2004).
                    ``(B) Mixtures not containing ethanol.--In the case 
                of an alcohol fuel mixture in which none of the alcohol 
                consists of ethanol, the applicable amount is 60 cents.
            ``(3) Alcohol fuel mixture.--For purposes of this 
        subsection, the term `alcohol fuel mixture' means a mixture of 
        alcohol and a taxable fuel which--
                    ``(A) is sold by the taxpayer producing such 
                mixture to any person for use as a fuel,
                    ``(B) is used as a fuel by the taxpayer producing 
                such mixture, or
                    ``(C) is removed from the refinery by a person 
                producing such mixture.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Alcohol.--The term `alcohol' includes 
                methanol and ethanol but does not include--
                            ``(i) alcohol produced from petroleum, 
                        natural gas, or coal (including peat), or
                            ``(ii) alcohol with a proof of less than 
                        190 (determined without regard to any added 
                        denaturants).
                Such term also includes an alcohol gallon equivalent of 
                ethyl tertiary butyl ether or other ethers produced 
                from such alcohol.
                    ``(B) Taxable fuel.--The term `taxable fuel' has 
                the meaning given such term by section 4083(a)(1).
    ``(c) Biodiesel Mixture Credit.--
            ``(1) In general.--For purposes of this section, the 
        biodiesel mixture credit is the product of the applicable 
        amount and the number of gallons of biodiesel used by the 
        taxpayer in producing any biodiesel mixture for sale or use in 
        a trade or business of the taxpayer.
            ``(2) Applicable amount.--For purposes of this subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the applicable amount is 50 cents.
                    ``(B) Amount for agri-biodiesel.--In the case of 
                any biodiesel which is agri-biodiesel, the applicable 
                amount is $1.00.
            ``(3) Biodiesel mixture.--For purposes of this section, the 
        term `biodiesel mixture' means a mixture of biodiesel and 
        diesel fuel (as defined in section 4083(a)(3)), determined 
        without regard to any use of kerosene, which--
                    ``(A) is sold by the taxpayer producing such 
                mixture to any person for use as a fuel,
                    ``(B) is used as a fuel by the taxpayer producing 
                such mixture, or
                    ``(C) is removed from the refinery by a person 
                producing such mixture.
            ``(4) Certification for biodiesel.--No credit shall be 
        allowed under this section unless the taxpayer obtains a 
        certification (in such form and manner as prescribed by the 
        Secretary) from the producer of the biodiesel which identifies 
        the product produced and the percentage of biodiesel and agri-
        biodiesel in the product.
    ``(d) Mixture not Used as a Fuel, Etc.--
            ``(1) Imposition of tax.--If--
                    ``(A) any credit was determined under this section 
                with respect to alcohol or biodiesel used in the 
                production of any alcohol fuel mixture or biodiesel 
                mixture, respectively, and
                    ``(B) any person--
                            ``(i) separates the alcohol or biodiesel 
                        from the mixture, or
                            ``(ii) without separation, uses the mixture 
                        other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to the product of the applicable amount and the number 
                of gallons of such alcohol or biodiesel.
            ``(2) Applicable laws.--All provisions of law, including 
        penalties, shall, insofar as applicable and not inconsistent 
        with this section, apply in respect of any tax imposed under 
        paragraph (1) as if such tax were imposed by section 4081 and 
        not by this section.
    ``(e) Coordination With Exemption From Excise Tax.--Rules similar 
to the rules under section 40(c) shall apply for purposes of this 
section.''.
    (b) Registration Requirement.--Section 4101(a)(1) (relating to 
registration), as amended by sections 871 and 880 of this Act, is 
amended by inserting ``and every person producing or importing 
biodiesel (as defined in section 40A(d)(1)) or alcohol (as defined in 
section 6426(b)(4)(A))'' after ``4081''.
    (c) Additional Amendments.--
            (1) Section 40(c) of such Code is amended by striking 
        ``subsection (b)(2), (k), or (m) of section 4041, section 
        4081(c), or section 4091(c)'' and inserting ``section 
        4041(b)(2), section 6426, or section 6427(e)''.
            (2) Paragraph (4) of section 40(d) of such Code is amended 
        to read as follows:
            ``(4) Volume of alcohol.--For purposes of determining under 
        subsection (a) the number of gallons of alcohol with respect to 
        which a credit is allowable under subsection (a), the volume of 
        alcohol shall include the volume of any denaturant (including 
        gasoline) which is added under any formulas approved by the 
        Secretary to the extent that such denaturants do not exceed 5 
        percent of the volume of such alcohol (including 
        denaturants).''.
            (3) Section 40(e) of such Code is hereby repealed.
            (4) Section 40(h) of such Code is amended--
                    (A) by striking ``through 2007'' in paragraph (1) 
                and inserting ``and thereafter'', and
                    (B) by striking paragraph (2) and inserting the 
                following:
            ``(2) Amounts.--For purposes of paragraph (1), the blender 
        amount is 51 cents and the low-proof blender amount is 37.78 
        cents.''.
            (5) Section 4041(b)(2)(B) of such Code is amended by 
        striking ``a substance other than petroleum or natural gas'' 
        and inserting ``coal (including peat)''.
            (6) Section 4041 of such Code is amended by striking 
        subsection (k).
            (7) Section 4081 of such Code is amended by striking 
        subsection (c).
            (8) Paragraph (2) of section 4083(a) of such Code is 
        amended to read as follows:
            ``(2) Gasoline.--The term `gasoline'--
                    ``(A) includes any gasoline blend, other than 
                qualified methanol or ethanol fuel (as defined in 
                section 4041(b)(2)(B)), partially exempt methanol or 
                ethanol fuel (as defined in section 4041(m)(2)), or a 
                denatured alcohol, and
                    ``(B) includes, to the extent prescribed in 
                regulations--
                            ``(i) any gasoline blend stock, and
                            ``(ii) any product commonly used as an 
                        additive in gasoline (other than alcohol).
        For purposes of subparagraph (B)(i), the term `gasoline blend 
        stock' means any petroleum product component of gasoline.''.
            (9) Section 6427 of such Code is amended by inserting after 
        subsection (d) the following new subsection:
    ``(e) Alcohol or Biodiesel Used to Produce Alcohol Fuel and 
Biodiesel Mixtures or Used as Fuels.--Except as provided in subsection 
(k)--
            ``(1) Used to produce a mixture.--If any person produces a 
        mixture described in section 6426 in such person's trade or 
        business, the Secretary shall pay (without interest) to such 
        person an amount equal to the alcohol fuel mixture credit or 
        the biodiesel mixture credit with respect to such mixture.
            ``(2) Used as fuel.--If alcohol (as defined in section 
        40(d)(1)) or biodiesel (as defined in section 40A(d)(1)) or 
        agri-biodiesel (as defined in section 40A(d)(2)) which is not 
        in a mixture described in section 6426--
                    ``(A) is used by any person as a fuel in a trade or 
                business, or
                    ``(B) is sold by any person at retail to another 
                person and placed in the fuel tank of such person's 
                vehicle,
        the Secretary shall pay (without interest) to such person an 
        amount equal to the alcohol credit (as determined under section 
        40(b)(2)) or the biodiesel credit (as determined under section 
        40A(b)(2)) with respect to such fuel.
            ``(3) Coordination with other repayment provisions.--No 
        amount shall be payable under paragraph (1) with respect to any 
        mixture with respect to which an amount is allowed as a credit 
        under section 6426.''.
            (10) Section 6427(i)(3) of such Code is amended--
                    (A) by striking ``subsection (f)'' both places it 
                appears in subparagraph (A) and inserting ``subsection 
                (e)(1)'',
                    (B) by striking ``gasoline, diesel fuel, or 
                kerosene used to produce a qualified alcohol mixture 
                (as defined in section 4081(c)(3))'' in subparagraph 
                (A) and inserting ``a mixture described in section 
                6426'',
                    (C) by adding at the end of subparagraph (A) the 
                following new flush sentence: ``In the case of an 
                electronic claim, this subparagraph shall be applied 
                without regard to clause (i).'',
                    (D) by striking ``subsection (f)(1)'' in 
                subparagraph (B) and inserting ``subsection (e)(1)'',
                    (E) by striking ``20 days of the date of the filing 
                of such claim'' in subparagraph (B) and inserting ``45 
                days of the date of the filing of such claim (20 days 
                in the case of an electronic claim)'', and
                    (F) by striking ``alcohol mixture'' in the heading 
                and inserting ``alcohol fuel and biodiesel mixture''.
            (11) Section 9503(b)(4) of such Code is amended--
                    (A) by adding ``or'' at the end of subparagraph 
                (C),
                    (B) by striking the comma at the end of 
                subparagraph (D)(iii) and inserting a period, and
                    (C) by striking subparagraphs (E) and (F).
            (12) The table of sections for subchapter B of chapter 65 
        of such Code is amended by inserting after the item relating to 
        section 6425 the following new item:

``6426. Credit for alcohol fuel and biodiesel mixtures.''.
            (13) Tariff schedule.--Headings 9901.00.50 and 9901.00.52 
        of the Harmonized Tariff Schedule of the United States (19 
        U.S.C. 3007) are each amended in the effective period column by 
        striking ``Before 10/1/2007,'' each place it appears.
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        fuel sold or used after September 30, 2004.
            (2) Registration requirement.--The amendment made by 
        subsection (b) shall take effect on April 1, 2005.
            (3) Extension of alcohol fuels credit.--The amendments made 
        by paragraphs (3), (4), and (13) of subsection (c) shall take 
        effect on the date of the enactment of this Act.
            (4) Repeal of general fund retention of certain alcohol 
        fuels taxes.--The amendments made by subsection (c)(12) shall 
        apply to fuel sold or used after September 30, 2003.
    (e) Format for Filing.--The Secretary of the Treasury shall 
describe the electronic format for filing claims described in section 
6427(i)(3)(B) of the Internal Revenue Code of 1986 (as amended by 
subsection (c)(10)(C)) not later than September 30, 2004.

SEC. 209. BIODIESEL INCOME TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by inserting after section 40 the following new 
section:

``SEC. 40A. BIODIESEL USED AS FUEL.

    ``(a) General Rule.--For purposes of section 38, the biodiesel 
fuels credit determined under this section for the taxable year is an 
amount equal to the sum of--
            ``(1) the biodiesel mixture credit, plus
            ``(2) the biodiesel credit.
    ``(b) Definition of Biodiesel Mixture Credit and Biodiesel 
Credit.--For purposes of this section--
            ``(1) Biodiesel mixture credit.--
                    ``(A) In general.--The biodiesel mixture credit of 
                any taxpayer for any taxable year is 50 cents for each 
                gallon of biodiesel used by the taxpayer in the 
                production of a qualified biodiesel mixture.
                    ``(B) Qualified biodiesel mixture.--The term 
                `qualified biodiesel mixture' means a mixture of 
                biodiesel and diesel fuel (as defined in section 
                4083(a)(3)), determined without regard to any use of 
                kerosene, which--
                            ``(i) is sold by the taxpayer producing 
                        such mixture to any person for use as a fuel, 
                        or
                            ``(ii) is used as a fuel by the taxpayer 
                        producing such mixture.
                    ``(C) Sale or use must be in trade or business, 
                etc.--Biodiesel used in the production of a qualified 
                biodiesel mixture shall be taken into account--
                            ``(i) only if the sale or use described in 
                        subparagraph (B) is in a trade or business of 
                        the taxpayer, and
                            ``(ii) for the taxable year in which such 
                        sale or use occurs.
                    ``(D) Casual off-farm production not eligible.--No 
                credit shall be allowed under this section with respect 
                to any casual off-farm production of a qualified 
                biodiesel mixture.
            ``(2) Biodiesel credit.--
                    ``(A) In general.--The biodiesel credit of any 
                taxpayer for any taxable year is 50 cents for each 
                gallon of biodiesel which is not in a mixture with 
                diesel fuel and which during the taxable year--
                            ``(i) is used by the taxpayer as a fuel in 
                        a trade or business, or
                            ``(ii) is sold by the taxpayer at retail to 
                        a person and placed in the fuel tank of such 
                        person's vehicle.
                    ``(B) User credit not to apply to biodiesel sold at 
                retail.--No credit shall be allowed under subparagraph 
                (A)(i) with respect to any biodiesel which was sold in 
                a retail sale described in subparagraph (A)(ii).
            ``(3) Credit for agri-biodiesel.--In the case of any 
        biodiesel which is agri-biodiesel, paragraphs (1)(A) and (2)(A) 
        shall be applied by substituting `$1.00' for `50 cents'.
            ``(4) Certification for biodiesel.--No credit shall be 
        allowed under this section unless the taxpayer obtains a 
        certification (in such form and manner as prescribed by the 
        Secretary) from the producer or importer of the biodiesel which 
        identifies the product produced and the percentage of biodiesel 
        and agri-biodiesel in the product.
    ``(c) Coordination With Credit Against Excise Tax.--The amount of 
the credit determined under this section with respect to any biodiesel 
shall be properly reduced to take into account any benefit provided 
with respect to such biodiesel solely by reason of the application of 
section 6426 or 6427(e).
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Biodiesel.--The term `biodiesel' means the monoalkyl 
        esters of long chain fatty acids derived from plant or animal 
        matter which meet--
                    ``(A) the registration requirements for fuels and 
                fuel additives established by the Environmental 
                Protection Agency under section 211 of the Clean Air 
                Act (42 U.S.C. 7545), and
                    ``(B) the requirements of the American Society of 
                Testing and Materials D6751.
            ``(2) Agri-biodiesel.--The term `agri-biodiesel' means 
        biodiesel derived solely from virgin oils, including esters 
        derived from virgin vegetable oils from corn, soybeans, 
        sunflower seeds, cottonseeds, canola, crambe, rapeseeds, 
        safflowers, flaxseeds, rice bran, and mustard seeds, and from 
        animal fats.
            ``(3) Mixture or biodiesel not used as a fuel, etc.--
                    ``(A) Mixtures.--If--
                            ``(i) any credit was determined under this 
                        section with respect to biodiesel used in the 
                        production of any qualified biodiesel mixture, 
                        and
                            ``(ii) any person--
                                    ``(I) separates the biodiesel from 
                                the mixture, or
                                    ``(II) without separation, uses the 
                                mixture other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to the product of the rate applicable under subsection 
                (b)(1)(A) and the number of gallons of such biodiesel 
                in such mixture.
                    ``(B) Biodiesel.--If--
                            ``(i) any credit was determined under this 
                        section with respect to the retail sale of any 
                        biodiesel, and
                            ``(ii) any person mixes such biodiesel or 
                        uses such biodiesel other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to the product of the rate applicable under subsection 
                (b)(2)(A) and the number of gallons of such biodiesel.
                    ``(C) Applicable laws.--All provisions of law, 
                including penalties, shall, insofar as applicable and 
                not inconsistent with this section, apply in respect of 
                any tax imposed under subparagraph (A) or (B) as if 
                such tax were imposed by section 4081 and not by this 
                chapter.
            ``(4) Pass-thru in the case of estates and trusts.--Under 
        regulations prescribed by the Secretary, rules similar to the 
        rules of subsection (d) of section 52 shall apply.''.
    (b) Credit Treated as Part of General Business Credit.--Section 
38(b) of such Code (relating to current year business credit) is 
amended by inserting after paragraph (3) the end the following new 
paragraph (and redesignating the succeeding paragraphs accordingly):
            ``(4) the biodiesel fuels credit determined under section 
        40A(a),''.
    (c) Conforming Amendments.--
            (1)(A) Section 87 of such Code, as amended by this Act, is 
        amended--
                    (i) by striking ``and'' at the end of paragraph 
                (1),
                    (ii) by striking the period at the end of paragraph 
                (2) and inserting ``, and'',
                    (iii) by adding at the end the following new 
                paragraph:
            ``(3) the biodiesel fuels credit determined with respect to 
        the taxpayer for the taxable year under section 40A(a).'', and
            (iv) by striking ``fuel credit'' in the heading and 
        inserting ``and biodiesel fuels credits''.
            (B) The item relating to section 87 in the table of 
        sections for part II of subchapter B of chapter 1 of such Code 
        is amended by striking ``fuel credit'' and inserting ``and 
        biodiesel fuels credits''.
            (2) Section 196(c) of such Code is amended by striking 
        ``and'' at the end of paragraph (10), by striking the period at 
        the end of paragraph (11) and inserting ``, and'', and by 
        adding at the end the following new paragraph:
            ``(12) the biodiesel fuels credit determined under section 
        40A(a).''.
            (3) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding 
        after the item relating to section 40 the following new item:

``40A. Biodiesel used as fuel.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fuel produced, and sold or used, after September 30, 2004, in 
taxable years ending after such date.

SEC. 210. EXPANSION OF QUALIFIED SMALL-ISSUE BOND PROGRAM; TREATMENT OF 
              RENEWABLE FUEL PRODUCTION FACILITIES.

    (a) Expansion.--
            (1) In general.--Clause (i) of section 144(a)(4)(A) of the 
        Internal Revenue Code of 1986 (relating to $10,000,000 limit in 
        certain cases) is amended by striking ``$10,000,000'' and 
        inserting ``$20,000,000''.
            (2) Inflation adjustment.--Paragraph (4) of section 144(a) 
        of such Code is amended by adding at the end the following new 
        subparagraph:
                    ``(G) Inflation adjustment of $20,000,000 limit.--
                In the case of obligations issued during any calendar 
                year after 2004, the $20,000,000 amount in subparagraph 
                (A) shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        by substituting `calendar year 2003' for 
                        `calendar year 1992' in subparagraph (B) 
                        thereof.
                If any amount as increased under clause (i) is not a 
                multiple of $10,000, such amount shall be rounded to 
                the nearest multiple of $10,000.''
            (3) Clerical amendment.--The heading of paragraph (4) of 
        section 144(a) of such Code is amended by striking 
        ``$10,000,000'' and inserting ``$20,000,000''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to--
                    (A) obligations issued after the date of the 
                enactment of this Act, and
                    (B) capital expenditures made after such date with 
                respect to obligations issued on or before such date.
    (b) Treatment of Renewable Fuel Production Facilities.--
            (1) In general.--Paragraph (12) of section 144(a) of such 
        Code is amended by adding at the end the following new 
        subparagraph:
                    ``(D) Renewable fuel production facility.--For 
                purposes of this paragraph, the term `manufacturing 
                property' includes any facility described in paragraph 
                (4)(F).''
            (2) Effective date.--The amendments made by this subsection 
        shall apply to bonds issued after the date of the enactment of 
        this Act.

SEC. 211. ALTERNATIVE MOTOR VEHICLE CREDIT.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to foreign tax credit, 
etc.) is amended by adding at the end the following new section:

``SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the sum of--
            ``(1) the new qualified fuel cell motor vehicle credit 
        determined under subsection (b),
            ``(2) the new qualified hybrid motor vehicle credit 
        determined under subsection (c), and
            ``(3) the new qualified alternative fuel motor vehicle 
        credit determined under subsection (d).
    ``(b) New Qualified Fuel Cell Motor Vehicle Credit.--
            ``(1) In general.--For purposes of subsection (a), the new 
        qualified fuel cell motor vehicle credit determined under this 
        subsection with respect to a new qualified fuel cell motor 
        vehicle placed in service by the taxpayer during the taxable 
        year is--
                    ``(A) $4,000, if such vehicle has a gross vehicle 
                weight rating of not more than 8,500 pounds,
                    ``(B) $10,000, if such vehicle has a gross vehicle 
                weight rating of more than 8,500 pounds but not more 
                than 14,000 pounds,
                    ``(C) $20,000, if such vehicle has a gross vehicle 
                weight rating of more than 14,000 pounds but not more 
                than 26,000 pounds, and
                    ``(D) $40,000, if such vehicle has a gross vehicle 
                weight rating of more than 26,000 pounds.
            ``(2) Increase for fuel efficiency.--
                    ``(A) In general.--The amount determined under 
                paragraph (1)(A) with respect to a new qualified fuel 
                cell motor vehicle which is a passenger automobile or 
                light truck shall be increased by--
                            ``(i) $1,000, if such vehicle achieves at 
                        least 150 percent but less than 175 percent of 
                        the 2002 model year city fuel economy,
                            ``(ii) $1,500, if such vehicle achieves at 
                        least 175 percent but less than 200 percent of 
                        the 2002 model year city fuel economy,
                            ``(iii) $2,000, if such vehicle achieves at 
                        least 200 percent but less than 225 percent of 
                        the 2002 model year city fuel economy,
                            ``(iv) $2,500, if such vehicle achieves at 
                        least 225 percent but less than 250 percent of 
                        the 2002 model year city fuel economy,
                            ``(v) $3,000, if such vehicle achieves at 
                        least 250 percent but less than 275 percent of 
                        the 2002 model year city fuel economy,
                            ``(vi) $3,500, if such vehicle achieves at 
                        least 275 percent but less than 300 percent of 
                        the 2002 model year city fuel economy, and
                            ``(vii) $4,000, if such vehicle achieves at 
                        least 300 percent of the 2002 model year city 
                        fuel economy.
                    ``(B) 2002 model year city fuel economy.--For 
                purposes of subparagraph (A), the 2002 model year city 
                fuel economy with respect to a vehicle shall be 
                determined in accordance with the following tables:
                            ``(i) In the case of a passenger 
                        automobile:

 
 
 
``If vehicle inertia weight class   The 2002 model year city fuel
 is:                                 economy is:
  1,500 or 1,750 lbs..............  45.2 mpg
  2,000 lbs.......................  39.6 mpg
  2,250 lbs.......................  35.2 mpg
  2,500 lbs.......................  31.7 mpg
  2,750 lbs.......................  28.8 mpg
  3,000 lbs.......................  26.4 mpg
  3,500 lbs.......................  22.6 mpg
  4,000 lbs.......................  19.8 mpg
  4,500 lbs.......................  17.6 mpg
  5,000 lbs.......................  15.9 mpg
  5,500 lbs.......................  14.4 mpg
  6,000 lbs.......................  13.2 mpg
  6,500 lbs.......................  12.2 mpg
  7,000 to 8,500 lbs..............  11.3 mpg.

                            ``(ii) In the case of a light truck:

 
 
 
``If vehicle inertia weight class   The 2002 model year city fuel
 is:                                 economy is:
  1,500 or 1,750 lbs..............  39.4 mpg
  2,000 lbs.......................  35.2 mpg
  2,250 lbs.......................  31.8 mpg
  2,500 lbs.......................  29.0 mpg
  2,750 lbs.......................  26.8 mpg
  3,000 lbs.......................  24.9 mpg
  3,500 lbs.......................  21.8 mpg
  4,000 lbs.......................  19.4 mpg
  4,500 lbs.......................  17.6 mpg
  5,000 lbs.......................  16.1 mpg
  5,500 lbs.......................  14.8 mpg
  6,000 lbs.......................  13.7 mpg
  6,500 lbs.......................  12.8 mpg
  7,000 to 8,500 lbs..............  12.1 mpg.

                    ``(C) Vehicle inertia weight class.--For purposes 
                of subparagraph (B), the term `vehicle inertia weight 
                class' has the same meaning as when defined in 
                regulations prescribed by the Administrator of the 
                Environmental Protection Agency for purposes of the 
                administration of title II of the Clean Air Act (42 
                U.S.C. 7521 et seq.).
            ``(3) New qualified fuel cell motor vehicle.--For purposes 
        of this subsection, the term `new qualified fuel cell motor 
        vehicle' means a motor vehicle--
                    ``(A) which is propelled by power derived from 1 or 
                more cells which convert chemical energy directly into 
                electricity by combining oxygen with hydrogen fuel 
                which is stored on board the vehicle in any form and 
                may or may not require reformation prior to use,
                    ``(B) which, in the case of a passenger automobile 
                or light truck--
                            ``(i) for 2002 and later model vehicles, 
                        has received a certificate of conformity under 
                        the Clean Air Act and meets or exceeds the 
                        equivalent qualifying California low emission 
                        vehicle standard under section 243(e)(2) of the 
                        Clean Air Act for that make and model year, and
                            ``(ii) for 2004 and later model vehicles, 
                        has received a certificate that such vehicle 
                        meets or exceeds the Bin 5 Tier II emission 
                        level established in regulations prescribed by 
                        the Administrator of the Environmental 
                        Protection Agency under section 202(i) of the 
                        Clean Air Act for that make and model year 
                        vehicle,
                    ``(C) the original use of which commences with the 
                taxpayer,
                    ``(D) which is acquired for use or lease by the 
                taxpayer and not for resale, and
                    ``(E) which is made by a manufacturer.
    ``(c) New Qualified Hybrid Motor Vehicle Credit.--
            ``(1) In general.--For purposes of subsection (a), the new 
        qualified hybrid motor vehicle credit determined under this 
        subsection with respect to a new qualified hybrid motor vehicle 
        placed in service by the taxpayer during the taxable year is 
        the credit amount determined under paragraph (2).
            ``(2) Credit amount.--
                    ``(A) In general.--The credit amount determined 
                under this paragraph shall be determined in accordance 
                with the following tables:
                            ``(i) In the case of a new qualified hybrid 
                        motor vehicle which is a passenger automobile, 
                        medium duty passenger vehicle, or light truck 
                        and which provides the following percentage of 
                        the maximum available power:

 
 
 
``If percentage of the maximum      The credit amount is:
 available power is:
  At least 4 percent but less than  $250
   10 percent.
  At least 10 percent but less      $500
   than 20 percent.
  At least 20 percent but less      $750
   than 30 percent.
  At least 30 percent.............  $1,000.

                            ``(ii) In the case of a new qualified 
                        hybrid motor vehicle which is a heavy duty 
                        hybrid motor vehicle and which provides the 
                        following percentage of the maximum available 
                        power:
                                    ``(I) If such vehicle has a gross 
                                vehicle weight rating of not more than 
                                14,000 pounds:

 
 
 
``If percentage of the maximum      The credit amount is:
 available power is:
  At least 20 percent but less      $1,000
   than 30 percent.
  At least 30 percent but less      $1,750
   than 40 percent.
  At least 40 percent but less      $2,000
   than 50 percent.
  At least 50 percent but less      $2,250
   than 60 percent.
  At least 60 percent.............  $2,500.

                                    ``(II) If such vehicle has a gross 
                                vehicle weight rating of more than 
                                14,000 but not more than 26,000 pounds:

 
 
 
``If percentage of the maximum      The credit amount is:
 available power is:
  At least 20 percent but less      $4,000
   than 30 percent.
  At least 30 percent but less      $4,500
   than 40 percent.
  At least 40 percent but less      $5,000
   than 50 percent.
  At least 50 percent but less      $5,500
   than 60 percent.
  At least 60 percent.............  $6,000.

                                    ``(III) If such vehicle has a gross 
                                vehicle weight rating of more than 
                                26,000 pounds:

 
 
 
``If percentage of the maximum      The credit amount is:
 available power is:
  At least 20 percent but less      $6,000
   than 30 percent.
  At least 30 percent but less      $7,000
   than 40 percent.
  At least 40 percent but less      $8,000
   than 50 percent.
  At least 50 percent but less      $9,000
   than 60 percent.
  At least 60 percent.............  $10,000.

                    ``(B) Increase for fuel efficiency.--
                            ``(i) Amount.--The amount determined under 
                        subparagraph (A)(i) with respect to a new 
                        qualified hybrid motor vehicle which is a 
                        passenger automobile or light truck shall be 
                        increased by--
                                    ``(I) $500, if such vehicle 
                                achieves at least 125 percent but less 
                                than 150 percent of the 2002 model year 
                                city fuel economy,
                                    ``(II) $1,000, if such vehicle 
                                achieves at least 150 percent but less 
                                than 175 percent of the 2002 model year 
                                city fuel economy,
                                    ``(III) $1,500, if such vehicle 
                                achieves at least 175 percent but less 
                                than 200 percent of the 2002 model year 
                                city fuel economy,
                                    ``(IV) $2,000, if such vehicle 
                                achieves at least 200 percent but less 
                                than 225 percent of the 2002 model year 
                                city fuel economy,
                                    ``(V) $2,500, if such vehicle 
                                achieves at least 225 percent but less 
                                than 250 percent of the 2002 model year 
                                city fuel economy, and
                                    ``(VI) $3,000, if such vehicle 
                                achieves at least 250 percent of the 
                                2002 model year city fuel economy.
                            ``(ii) 2002 model year city fuel economy.--
                        For purposes of clause (i), the 2002 model year 
                        city fuel economy with respect to a vehicle 
                        shall be determined on a gasoline gallon 
                        equivalent basis as determined by the 
                        Administrator of the Environmental Protection 
                        Agency using the tables provided in subsection 
                        (b)(2)(B) with respect to such vehicle.
                    ``(C) Increase for accelerated emissions 
                performance.--The amount determined under subparagraph 
                (A)(ii) with respect to an applicable heavy duty hybrid 
                motor vehicle shall be increased by the increased 
                credit amount determined in accordance with the 
                following tables:
                            ``(i) In the case of a vehicle which has a 
                        gross vehicle weight rating of not more than 
                        14,000 pounds:

 
 
 
``If the model year is:             The increased credit amount is:
  2004............................  $2,500
  2005............................  $2,000
  2006............................  $1,500.

                            ``(ii) In the case of a vehicle which has a 
                        gross vehicle weight rating of more than 14,000 
                        pounds but not more than 26,000 pounds:

 
 
 
``If the model year is:             The increased credit amount is:
  2004............................  $6,500
  2005............................  $5,250
  2006............................  $4,000.

                            ``(iii) In the case of a vehicle which has 
                        a gross vehicle weight rating of more than 
                        26,000 pounds:

 
 
 
``If the model year is:             The increased credit amount is:
  2004............................  $10,000
  2005............................  $8,000
  2006............................  $6,000.

                    ``(D) Definitions relating to credit amount.--
                            ``(i) Applicable heavy duty hybrid motor 
                        vehicle.--For purposes of subparagraph (C), the 
                        term `applicable heavy duty hybrid motor 
                        vehicle' means a heavy duty hybrid motor 
                        vehicle which is powered by an internal 
                        combustion or heat engine which is certified as 
                        meeting the emission standards set in the 
                        regulations prescribed by the Administrator of 
                        the Environmental Protection Agency for 2007 
                        and later model year diesel heavy duty engines, 
                        or for 2008 and later model year ottocycle 
                        heavy duty engines, as applicable.
                            ``(ii) Maximum available power.--
                                    ``(I) Passenger automobile, medium 
                                duty passenger vehicle, or light 
                                truck.--For purposes of subparagraph 
                                (A)(i), the term `maximum available 
                                power' means the maximum power 
                                available from the rechargeable energy 
                                storage system, during a standard 10 
                                second pulse power or equivalent test, 
                                divided by such maximum power and the 
                                SAE net power of the heat engine.
                                    ``(II) Heavy duty hybrid motor 
                                vehicle.--For purposes of subparagraph 
                                (A)(ii), the term `maximum available 
                                power' means the maximum power 
                                available from the rechargeable energy 
                                storage system, during a standard 10 
                                second pulse power or equivalent test, 
                                divided by the vehicle's total traction 
                                power. The term `total traction power' 
                                means the sum of the peak power from 
                                the rechargeable energy storage system 
                                and the heat engine peak power of the 
                                vehicle, except that if such storage 
                                system is the sole means by which the 
                                vehicle can be driven, the total 
                                traction power is the peak power of 
                                such storage system.
            ``(3) New qualified hybrid motor vehicle.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `new qualified hybrid 
                motor vehicle' means a motor vehicle--
                            ``(i) which draws propulsion energy from 
                        onboard sources of stored energy which are 
                        both--
                                    ``(I) an internal combustion or 
                                heat engine using consumable fuel, and
                                    ``(II) a rechargeable energy 
                                storage system,
                            ``(ii) which, in the case of a passenger 
                        automobile, medium duty passenger vehicle, or 
                        light truck--
                                    ``(I) for 2002 and later model 
                                vehicles, has received a certificate of 
                                conformity under the Clean Air Act and 
                                meets or exceeds the equivalent 
                                qualifying California low emission 
                                vehicle standard under section 
                                243(e)(2) of the Clean Air Act for that 
                                make and model year, and
                                    ``(II) for 2004 and later model 
                                vehicles, has received a certificate 
                                that such vehicle meets or exceeds the 
                                Bin 5 Tier II emission level 
                                established in regulations prescribed 
                                by the Administrator of the 
                                Environmental Protection Agency under 
                                section 202(i) of the Clean Air Act for 
                                that make and model year vehicle,
                            ``(iii) which, in the case of a heavy duty 
                        hybrid motor vehicle, has an internal 
                        combustion or heat engine which has received a 
                        certificate of conformity under the Clean Air 
                        Act as meeting the emission standards set in 
                        the regulations prescribed by the Administrator 
                        of the Environmental Protection Agency for 2004 
                        through 2007 model year diesel heavy duty 
                        engines or ottocycle heavy duty engines, as 
                        applicable,
                            ``(iv) the original use of which commences 
                        with the taxpayer,
                            ``(v) which is acquired for use or lease by 
                        the taxpayer and not for resale, and
                            ``(vi) which is made by a manufacturer.
                    ``(B) Consumable fuel.--For purposes of 
                subparagraph (A)(i)(I), the term `consumable fuel' 
                means any solid, liquid, or gaseous matter which 
                releases energy when consumed by an auxiliary power 
                unit.
            ``(4) Heavy duty hybrid motor vehicle.--For purposes of 
        this subsection, the term `heavy duty hybrid motor vehicle' 
        means a new qualified hybrid motor vehicle which has a gross 
        vehicle weight rating of more than 8,500 pounds. Such term does 
        not include a medium duty passenger vehicle.
    ``(d) New Qualified Alternative Fuel Motor Vehicle Credit.--
            ``(1) Allowance of credit.--Except as provided in paragraph 
        (5), the new qualified alternative fuel motor vehicle credit 
        determined under this subsection is an amount equal to the 
        applicable percentage of the incremental cost of any new 
        qualified alternative fuel motor vehicle placed in service by 
        the taxpayer during the taxable year.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage with respect to any new 
        qualified alternative fuel motor vehicle is--
                    ``(A) 40 percent, plus
                    ``(B) 30 percent, if such vehicle--
                            ``(i) has received a certificate of 
                        conformity under the Clean Air Act and meets or 
                        exceeds the most stringent standard available 
                        for certification under the Clean Air Act for 
                        that make and model year vehicle (other than a 
                        zero emission standard), or
                            ``(ii) has received an order certifying the 
                        vehicle as meeting the same requirements as 
                        vehicles which may be sold or leased in 
                        California and meets or exceeds the most 
                        stringent standard available for certification 
                        under the State laws of California (enacted in 
                        accordance with a waiver granted under section 
                        209(b) of the Clean Air Act) for that make and 
                        model year vehicle (other than a zero emission 
                        standard).
        For purposes of the preceding sentence, in the case of any new 
        qualified alternative fuel motor vehicle which weighs more than 
        14,000 pounds gross vehicle weight rating, the most stringent 
        standard available shall be such standard available for 
        certification on the date of the enactment of the Energy Tax 
        Incentives Act.
            ``(3) Incremental cost.--For purposes of this subsection, 
        the incremental cost of any new qualified alternative fuel 
        motor vehicle is equal to the amount of the excess of the 
        manufacturer's suggested retail price for such vehicle over 
        such price for a gasoline or diesel fuel motor vehicle of the 
        same model, to the extent such amount does not exceed--
                    ``(A) $5,000, if such vehicle has a gross vehicle 
                weight rating of not more than 8,500 pounds,
                    ``(B) $10,000, if such vehicle has a gross vehicle 
                weight rating of more than 8,500 pounds but not more 
                than 14,000 pounds,
                    ``(C) $25,000, if such vehicle has a gross vehicle 
                weight rating of more than 14,000 pounds but not more 
                than 26,000 pounds, and
                    ``(D) $40,000, if such vehicle has a gross vehicle 
                weight rating of more than 26,000 pounds.
            ``(4) New qualified alternative fuel motor vehicle.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `new qualified 
                alternative fuel motor vehicle' means any motor 
                vehicle--
                            ``(i) which is only capable of operating on 
                        an alternative fuel,
                            ``(ii) the original use of which commences 
                        with the taxpayer,
                            ``(iii) which is acquired by the taxpayer 
                        for use or lease, but not for resale, and
                            ``(iv) which is made by a manufacturer.
                    ``(B) Alternative fuel.--The term `alternative 
                fuel' means compressed natural gas, liquefied natural 
                gas, liquefied petroleum gas, hydrogen, and any liquid 
                at least 85 percent of the volume of which consists of 
                methanol.
            ``(5) Credit for mixed-fuel vehicles.--
                    ``(A) In general.--In the case of a mixed-fuel 
                vehicle placed in service by the taxpayer during the 
                taxable year, the credit determined under this 
                subsection is an amount equal to--
                            ``(i) in the case of a 75/25 mixed-fuel 
                        vehicle, 70 percent of the credit which would 
                        have been allowed under this subsection if such 
                        vehicle was a qualified alternative fuel motor 
                        vehicle, and
                            ``(ii) in the case of a 90/10 mixed-fuel 
                        vehicle, 90 percent of the credit which would 
                        have been allowed under this subsection if such 
                        vehicle was a qualified alternative fuel motor 
                        vehicle.
                    ``(B) Mixed-fuel vehicle.--For purposes of this 
                subsection, the term `mixed-fuel vehicle' means any 
                motor vehicle described in subparagraph (C) or (D) of 
                paragraph (3), which--
                            ``(i) is certified by the manufacturer as 
                        being able to perform efficiently in normal 
                        operation on a combination of an alternative 
                        fuel and a petroleum-based fuel,
                            ``(ii) either--
                                    ``(I) has received a certificate of 
                                conformity under the Clean Air Act, or
                                    ``(II) has received an order 
                                certifying the vehicle as meeting the 
                                same requirements as vehicles which may 
                                be sold or leased in California and 
                                meets or exceeds the low emission 
                                vehicle standard under section 88.105-
                                94 of title 40, Code of Federal 
                                Regulations, for that make and model 
                                year vehicle,
                            ``(iii) the original use of which commences 
                        with the taxpayer,
                            ``(iv) which is acquired by the taxpayer 
                        for use or lease, but not for resale, and
                            ``(v) which is made by a manufacturer.
                    ``(C) 75/25 mixed-fuel vehicle.--For purposes of 
                this subsection, the term `75/25 mixed-fuel vehicle' 
                means a mixed-fuel vehicle which operates using at 
                least 75 percent alternative fuel and not more than 25 
                percent petroleum-based fuel.
                    ``(D) 90/10 mixed-fuel vehicle.--For purposes of 
                this subsection, the term `90/10 mixed-fuel vehicle' 
                means a mixed-fuel vehicle which operates using at 
                least 90 percent alternative fuel and not more than 10 
                percent petroleum-based fuel.
    ``(e) Application With Other Credits.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess (if 
any) of--
            ``(1) the regular tax for the taxable year reduced by the 
        sum of the credits allowable under subpart A and sections 27, 
        29, and 30, over
            ``(2) the tentative minimum tax for the taxable year.
    ``(f) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Motor vehicle.--The term `motor vehicle' has the 
        meaning given such term by section 30(c)(2).
            ``(2) City fuel economy.--The city fuel economy with 
        respect to any vehicle shall be measured in a manner which is 
        substantially similar to the manner city fuel economy is 
        measured in accordance with procedures under part 600 of 
        subchapter Q of chapter I of title 40, Code of Federal 
        Regulations, as in effect on the date of the enactment of this 
        section.
            ``(3) Other terms.--The terms `automobile', `passenger 
        automobile', `medium duty passenger vehicle', `light truck', 
        and `manufacturer' have the meanings given such terms in 
        regulations prescribed by the Administrator of the 
        Environmental Protection Agency for purposes of the 
        administration of title II of the Clean Air Act (42 U.S.C. 7521 
        et seq.).
            ``(4) Reduction in basis.--For purposes of this subtitle, 
        the basis of any property for which a credit is allowable under 
        subsection (a) shall be reduced by the amount of such credit so 
        allowed (determined without regard to subsection (e)).
            ``(5) No double benefit.--The amount of any deduction or 
        other credit allowable under this chapter--
                    ``(A) for any incremental cost taken into account 
                in computing the amount of the credit determined under 
                subsection (d) shall be reduced by the amount of such 
                credit attributable to such cost, and
                    ``(B) with respect to a vehicle described under 
                subsection (b) or (c), shall be reduced by the amount 
                of credit allowed under subsection (a) for such vehicle 
                for the taxable year.
            ``(6) Property used by tax-exempt entities.--In the case of 
        a credit amount which is allowable with respect to a motor 
        vehicle which is acquired by an entity exempt from tax under 
        this chapter, the person which sells or leases such vehicle to 
        the entity shall be treated as the taxpayer with respect to the 
        vehicle for purposes of this section and the credit shall be 
        allowed to such person, but only if the person clearly 
        discloses to the entity at the time of any sale or lease the 
        specific amount of any credit otherwise allowable to the entity 
        under this section.
            ``(7) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit allowable 
        under subsection (a) with respect to any property which ceases 
        to be property eligible for such credit (including recapture in 
        the case of a lease period of less than the economic life of a 
        vehicle).
            ``(8) Property used outside united states, etc., not 
        qualified.--No credit shall be allowed under subsection (a) 
        with respect to any property referred to in section 50(b) or 
        with respect to the portion of the cost of any property taken 
        into account under section 179.
            ``(9) Election to not take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the taxpayer 
        elects to not have this section apply to such vehicle.
            ``(10) Carryback and carryforward allowed.--
                    ``(A) In general.--If the credit allowable under 
                subsection (a) for a taxable year exceeds the amount of 
                the limitation under subsection (e) for such taxable 
                year (in this paragraph referred to as the `unused 
                credit year'), such excess shall be a credit carryback 
                to each of the 3 taxable years preceding the unused 
                credit year and a credit carryforward to each of the 20 
                taxable years following the unused credit year, except 
                that no excess may be carried to a taxable year 
                beginning before January 1, 2005.
                    ``(B) Rules.--Rules similar to the rules of section 
                39 shall apply with respect to the credit carryback and 
                credit carryforward under subparagraph (A).
            ``(11) Interaction with air quality and motor vehicle 
        safety standards.--Unless otherwise provided in this section, a 
        motor vehicle shall not be considered eligible for a credit 
        under this section unless such vehicle is in compliance with--
                    ``(A) the applicable provisions of the Clean Air 
                Act for the applicable make and model year of the 
                vehicle (or applicable air quality provisions of State 
                law in the case of a State which has adopted such 
                provision under a waiver under section 209(b) of the 
                Clean Air Act), and
                    ``(B) the motor vehicle safety provisions of 
                sections 30101 through 30169 of title 49, United States 
                Code.
    ``(g) Regulations.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary shall promulgate such regulations as necessary to 
        carry out the provisions of this section.
            ``(2) Coordination in prescription of certain 
        regulations.--The Secretary of the Treasury, in coordination 
        with the Secretary of Transportation and the Administrator of 
        the Environmental Protection Agency, shall prescribe such 
        regulations as necessary to determine whether a motor vehicle 
        meets the requirements to be eligible for a credit under this 
        section.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) of such Code is amended by striking 
        ``and'' at the end of paragraph (28), by striking the period at 
        the end of paragraph (29) and inserting ``, and'', and by 
        adding at the end the following new paragraph:
            ``(30) to the extent provided in section 30B(f)(4).''.
            (2) Section 55(c)(2) of such Code is amended by inserting 
        ``30B(e),'' after ``30(b)(2),''.
            (3) Section 6501(m) of such Code is amended by inserting 
        ``30B(f)(9),'' after ``30(d)(4),''.
            (4) The table of sections for subpart B of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 30A the following new item:

``30B. Alternative motor vehicle credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2004, in taxable 
years ending after such date.

SEC. 212. CREDIT FOR ENGINES COMPLYING WITH TIER 2, 3, OR 4 EMISSION 
              LEVELS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business-related credits) is amended by adding after 
section 45H the following new section:

``SEC. 45I. CREDIT FOR ENGINES COMPLYING WITH TIER 2, 3, OR 4 EMISSIONS 
              LEVELS.

    ``(a) Allowance of Credit.--For purposes of section 38, the 
emissions compliant engine credit determined under this section for the 
taxable year is, for each emissions compliant engine incorporated into 
a product manufactured by the taxpayer during the taxable year, an 
amount equal to--
            ``(1) $100 for each such engine which is an emissions 
        compliant engine with respect to the Tier 2 emissions level 
        established in regulations prescribed by the Administrator of 
        the Environmental Protection Agency under section 213 of the 
        Clean Air Act,
            ``(2) $150 for each such engine which is an emissions 
        compliant engine with respect to the Tier 3 emissions level so 
        established, and
            ``(3) $200 for each such engine which is an emissions 
        compliant engine with respect to the Tier 4 emissions level so 
        established.
    ``(b) Emissions Compliant Engine.--For purposes of this section, 
the term `emissions compliant engine' means any engine--
            ``(1) which is required to meet the Tier 2, 3 or 4 
        emissions level established in regulations prescribed by the 
        Administrator of the Environmental Protection Agency under 
        section 213 of the Clean Air Act, and
            ``(2) which meets such requirement.''.
    (b) Credit Made Part of General Business Credit.--Section 38(b) of 
such Code (relating to current year business credit), as previously 
amended by this Act, is amended by striking ``plus'' at the end of 
paragraph (17), by striking the period at the end of paragraph (18) and 
inserting ``, plus'', and by adding at the end of the following new 
paragraph:
            ``(19) the emissions compliant engine credit determined 
        under section 45I(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such code is amended by adding 
after the item relating to section 45H the following new item:

``Sec. 45I. Credit for engines complying with Tier 2, 3, or 4 emissions 
                            levels.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to engines incorporated into products produced after December 31, 
2004, in taxable years ending after such date.
                                 <all>
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