I 

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘Energy Independence Act of 2004’’. 

6 (b) TABLE OF CONTENTS.—

Sec. 1. Short title; table of contents. 

TITLE I—RENEWABLE FUELS INCENTIVES 
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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.

1 TITLE I—RENEWABLE FUELS 

2 INCENTIVES 

3 SEC. 101. RENEWABLE CONTENT OF MOTOR VEHICLE FUEL. 

4 (a) IN GENERAL.—Section 211 of the Clean Air Act 

5 (42 U.S.C. 7545) is amended—

6 (1) by redesignating subsection (o) as sub7 section (q); and 

8 (2) by inserting after subsection (n) the fol9 lowing: 

10 ‘‘(o) RENEWABLE FUEL PROGRAM.—

11 ‘‘(1) DEFINITIONS.—In this section: 

12 ‘‘(A) ETHANOL.—(i) The term ‘cellulosic 

13 biomass ethanol’ means ethanol derived from 

14 any lignocellulosic or hemicellulosic matter that 
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1 is available on a renewable or recurring basis, 

2 including—

3 ‘‘(I) dedicated energy crops and trees; 

4 ‘‘(II) wood and wood residues; 

5 ‘‘(III) plants; 

6 ‘‘(IV) grasses; 

7 ‘‘(V) agricultural residues; and 

8 ‘‘(VI) fibers. 

9 ‘‘(ii) The term ‘waste derived ethanol’ 

10 means ethanol derived from—

11 ‘‘(I) animal wastes, including poultry 

12 fats and poultry wastes, and other waste 

13 materials; or 

14 ‘‘(II) municipal solid waste. 

15 ‘‘(B) RENEWABLE FUEL.—

16 ‘‘(i) IN GENERAL.—The term ‘renew17 able fuel’ means motor vehicle fuel that—

18 ‘‘(I)(aa) is produced from grain, 

19 starch, oilseeds, or other biomass; or 

20 ‘‘(bb) is natural gas produced 

21 from a biogas source, including a 

22 landfill, sewage waste treatment plant, 

23 feedlot, or other place where decaying 

24 organic material is found; and 
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1 ‘‘(II) is used to replace or reduce 

2 the quantity of fossil fuel present in a 

3 fuel mixture used to operate a motor 

4 vehicle. 

5 ‘‘(ii) INCLUSION.—The term ‘renew6 able fuel’ includes cellulosic biomass eth7 anol, waste derived ethanol, and biodiesel 

8 (as defined in section 312(f) of the Energy 

9 Policy Act of 1992 (42 U.S.C. 13220(f)) 

10 and any blending components derived from 

11 renewable fuel (provided that only the re12 newable fuel portion of any such blending 

13 component shall be considered part of the 

14 applicable volume under the renewable fuel 

15 program established by this subsection). 

16 ‘‘(C) SMALL REFINERY.—The term ‘small 

17 refinery’ means a refinery for which average ag18 gregate daily crude oil throughput for the cal19 endar year (as determined by dividing the ag20 gregate throughput for the calendar year by the 

21 number of days in the calendar year) does not 

22 exceed 75,000 barrels. 

23 ‘‘(2) RENEWABLE FUEL PROGRAM.—

24 ‘‘(A) IN GENERAL.—Not later than 1 year 

25 after the enactment of this subsection, the Ad-
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1 ministrator shall promulgate regulations ensur2 ing that motor vehicle fuel sold or dispensed to 

3 consumers in the contiguous United States, on 

4 an annual average basis, contains the applicable 

5 volume of renewable fuel as specified in sub6 paragraph (B). Regardless of the date of pro7 mulgation, such regulations shall contain com8 pliance provisions for refiners, blenders, and 

9 importers, as appropriate, to ensure that the re10 quirements of this section are met, but shall not 

11 restrict where renewable fuel can be used, or 

12 impose any per-gallon obligation for the use of 

13 renewable fuel. If the Administrator does not 

14 promulgate such regulations, the applicable per15 centage referred to in paragraph (4), on a vol16 ume percentage of gasoline basis, shall be 2.2 

17 in 2005. 

18 ‘‘(B) APPLICABLE VOLUME.—

19 ‘‘(i) CALENDAR YEARS 2005 THROUGH

20 2012.—For the purpose of subparagraph 

21 (A), the applicable volume for any of cal22 endar years 2005 through 2012 shall be 

23 determined in accordance with the fol24 lowing table:
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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. 

1 ‘‘(ii) CALENDAR YEAR 2013 AND

2 THEREAFTER.—For the purpose of sub3 paragraph (A), the applicable volume for 

4 calendar year 2013 and each calendar year 

5 thereafter shall be equal to the product ob6 tained by multiplying— 

7 ‘‘(I) the number of gallons of 

8 gasoline that the Administrator esti9 mates will be sold or introduced into 

10 commerce in the calendar year; and 

11 ‘‘(II) the ratio that— 

12 ‘‘(aa) 5.0 billion gallons of 

13 renewable fuels; bears to 

14 ‘‘(bb) the number of gallons 

15 of gasoline sold or introduced 

16 into commerce in calendar year 

17 2012. 

18 ‘‘(3) NON-CONTIGUOUS STATE OPT-IN.—Upon 

19 the petition of a non-contiguous State, the Adminis20 trator may allow the renewable fuel program estab-
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1 lished by subtitle A of title XV of the Renewable Re2 sources Act of 2004 to apply in such non-contiguous 

3 State at the same time or any time after the Admin4 istrator promulgates regulations under paragraph 

5 (2). The Administrator may promulgate or revise 

6 regulations under paragraph (2), establish applicable 

7 percentages under paragraph (4), provide for the 

8 generation of credits under paragraph (6), and take 

9 such other actions as may be necessary to allow for 

10 the application of the renewable fuels program in a 

11 non-contiguous State. 

12 ‘‘(4) APPLICABLE PERCENTAGES.—

13 ‘‘(A) PROVISION OF ESTIMATE OF VOL14 UMES OF GASOLINE SALES.—Not later than Oc15 tober 31 of each of calendar years 2004 

16 through 2011, the Administrator of the Energy 

17 Information Administration shall provide to the 

18 Administrator of the Environmental Protection 

19 Agency an estimate of the volumes of gasoline 

20 that will be sold or introduced into commerce in 

21 the United States during the following calendar 

22 year. 

23 ‘‘(B) DETERMINATION OF APPLICABLE

24 PERCENTAGES.—
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1 ‘‘(i) IN GENERAL.—Not later than 

2 November 30 of each of the calendar years 

3 2004 through 2011, based on the estimate 

4 provided under subparagraph (A), the Ad5 ministrator shall determine and publish in 

6 the Federal Register, with respect to the 

7 following calendar year, the renewable fuel 

8 obligation that ensures that the require9 ments of paragraph (2) are met. 

10 ‘‘(ii) REQUIRED ELEMENTS.—The re11 newable fuel obligation determined for a 

12 calendar year under clause (i) shall—

13 ‘‘(I) be applicable to refiners, 

14 blenders, and importers, as appro15 priate; 

16 ‘‘(II) be expressed in terms of a 

17 volume percentage of gasoline sold or 

18 introduced into commerce; and 

19 ‘‘(III) subject to subparagraph 

20 (C)(i), consist of a single applicable 

21 percentage that applies to all cat22 egories of persons specified in sub23 clause (I). 
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1 ‘‘(C) ADJUSTMENTS.—In determining the 

2 applicable percentage for a calendar year, the 

3 Administrator shall make adjustments—

4 ‘‘(i) to prevent the imposition of re5 dundant obligations to any person specified 

6 in subparagraph (B)(ii)(I); and 

7 ‘‘(ii) to account for the use of renew8 able fuel during the previous calendar year 

9 by small refineries that are exempt under 

10 paragraph (11). 

11 ‘‘(5) EQUIVALENCY.—For the purpose of para12 graph (2), 1 gallon of either cellulosic biomass eth13 anol or waste derived ethanol—

14 ‘‘(A) shall be considered to be the equiva15 lent of 1.5 gallon of renewable fuel; or 

16 ‘‘(B) if the cellulosic biomass ethanol or 

17 waste derived ethanol is derived from agricul18 tural residue or is an agricultural byproduct (as 

19 that term is used in section 919 of the Renew20 able Resources Act of 2004), shall be consid21 ered to be the equivalent of 2.5 gallons of re22 newable fuel. 

23 ‘‘(6) CREDIT PROGRAM.—

24 ‘‘(A) IN GENERAL.—The regulations pro25 mulgated to carry out this subsection shall pro-
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1 vide for the generation of an appropriate 

2 amount of credits by any person that refines, 

3 blends, or imports gasoline that contains a 

4 quantity of renewable fuel that is greater than 

5 the quantity required under paragraph (2). 

6 Such regulations shall provide for the genera7 tion of an appropriate amount of credits for 

8 biodiesel fuel. If a small refinery notifies the 

9 Administrator that it waives the exemption pro10 vided paragraph (11), the regulations shall pro11 vide for the generation of credits by the small 

12 refinery beginning in the year following such 

13 notification. 

14 ‘‘(B) USE OF CREDITS.—A person that 

15 generates credits under subparagraph (A) may 

16 use the credits, or transfer all or a portion of 

17 the credits to another person, for the purpose 

18 of complying with paragraph (2). 

19 ‘‘(C) LIFE OF CREDITS.—A credit gen20 erated under this paragraph shall be valid to 

21 show compliance—

22 ‘‘(i) in the calendar year in which the 

23 credit was generated or the next calendar 

24 year; or 
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1 ‘‘(ii) in the calendar year in which the 

2 credit was generated or next two consecu3 tive calendar years if the Administrator 

4 promulgates regulations under paragraph 

5 (7). 

6 ‘‘(D) INABILITY TO PURCHASE SUFFICIENT

7 CREDITS.—The regulations promulgated to 

8 carry out this subsection shall include provi9 sions allowing any person that is unable to gen10 erate or purchase sufficient credits to meet the 

11 requirements under paragraph (2) to carry for12 ward a renewable fuel deficit provided that, in 

13 the calendar year following the year in which 

14 the renewable fuel deficit is created, such per15 son shall achieve compliance with the renewable 

16 fuel requirement under paragraph (2), and shall 

17 generate or purchase additional renewable fuel 

18 credits to offset the renewable fuel deficit of the 

19 previous year. 

20 ‘‘(7) SEASONAL VARIATIONS IN RENEWABLE

21 FUEL USE.—

22 ‘‘(A) STUDY.—For each of the calendar 

23 years 2005 through 2012, the Administrator of 

24 the Energy Information Administration shall 

25 conduct a study of renewable fuels blending to 
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1 determine whether there are excessive seasonal 

2 variations in the use of renewable fuels. 

3 ‘‘(B) REGULATION OF EXCESSIVE SEA4 SONAL VARIATIONS.—If, for any calendar year, 

5 the Administrator of the Energy Information 

6 Administration, based on the study under sub7 paragraph (A), makes the determinations speci8 fied in subparagraph (C), the Administrator 

9 shall promulgate regulations to ensure that 35 

10 percent or more of the quantity of renewable 

11 fuels necessary to meet the requirement of 

12 paragraph (2) is used during each of the peri13 ods specified in subparagraph (D) of each sub14 sequent calendar year. 

15 ‘‘(C) DETERMINATIONS.—The determina16 tions referred to in subparagraph (B) are 

17 that—

18 ‘‘(i) less than 35 percent of the quan19 tity of renewable fuels necessary to meet 

20 the requirement of paragraph (2) has been 

21 used during one of the periods specified in 

22 subparagraph (D) of the calendar year; 

23 ‘‘(ii) a pattern of excessive seasonal 

24 variation described in clause (i) will con25 tinue in subsequent calendar years; and 
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1 ‘‘(iii) promulgating regulations or 

2 other requirements to impose a 35 percent 

3 or more seasonal use of renewable fuels 

4 will not prevent or interfere with the at5 tainment of national ambient air quality 

6 standards or significantly increase the 

7 price of motor fuels to the consumer. 

8 ‘‘(D) PERIODS.—The two periods referred 

9 to in this paragraph are—

10 ‘‘(i) April through September; and 

11 ‘‘(ii) January through March and Oc12 tober through December. 

13 ‘‘(E) EXCLUSIONS.—Renewable fuels 

14 blended or consumed in 2005 in a State which 

15 has received a waiver under section 209(b) shall 

16 not be included in the study in subparagraph 

17 (A). 

18 ‘‘(8) WAIVERS.—

19 ‘‘(A) IN GENERAL.—The Administrator, in 

20 consultation with the Secretary of Agriculture 

21 and the Secretary of Energy, may waive the re22 quirement of paragraph (2) in whole or in part 

23 on petition by one or more States by reducing 

24 the national quantity of renewable fuel required 

25 under this subsection—
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1 ‘‘(i) based on a determination by the 

2 Administrator, after public notice and op3 portunity for comment, that implementa4 tion of the requirement would severely 

5 harm the economy or environment of a 

6 State, a region, or the United States; or 

7 ‘‘(ii) based on a determination by the 

8 Administrator, after public notice and op9 portunity for comment, that there is an in10 adequate domestic supply or distribution 

11 capacity to meet the requirement. 

12 ‘‘(B) PETITIONS FOR WAIVERS.—The Ad13 ministrator, in consultation with the Secretary 

14 of Agriculture and the Secretary of Energy, 

15 shall approve or disapprove a State petition for 

16 a waiver of the requirement of paragraph (2) 

17 within 90 days after the date on which the peti18 tion is received by the Administrator. 

19 ‘‘(C) TERMINATION OF WAIVERS.—A waiv20 er granted under subparagraph (A) shall termi21 nate after 1 year, but may be renewed by the 

22 Administrator after consultation with the Sec23 retary of Agriculture and the Secretary of En24 ergy. 
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1 ‘‘(9) STUDY AND WAIVER FOR INITIAL YEAR OF

2 PROGRAM.—Not later than 180 days after the enact3 ment of this subsection, the Secretary of Energy 

4 shall complete for the Administrator a study assess5 ing whether the renewable fuels requirement under 

6 paragraph (2) will likely result in significant adverse 

7 consumer impacts in 2005, on a national, regional, 

8 or State basis. Such study shall evaluate renewable 

9 fuel supplies and prices, blendstock supplies, and 

10 supply and distribution system capabilities. Based 

11 on such study, the Secretary shall make specific rec12 ommendations to the Administrator regarding waiv13 er of the requirements of paragraph (2), in whole or 

14 in part, to avoid any such adverse impacts. Within 

15 270 days after the enactment of this subsection, the 

16 Administrator shall, consistent with the rec17 ommendations of the Secretary, waive, in whole or in 

18 part, the renewable fuels requirement under para19 graph (2) by reducing the national quantity of re20 newable fuel required under this subsection in 2005. 

21 This paragraph shall not be interpreted as limiting 

22 the Administrator’s authority to waive the require23 ments of paragraph (2) in whole, or in part, under 

24 paragraph (8) or paragraph (10), pertaining to 

25 waivers. 
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1 ‘‘(10) ASSESSMENT AND WAIVER.—The Admin2 istrator, in consultation with the Secretary of En3 ergy and the Secretary of Agriculture, shall evaluate 

4 the requirement of paragraph (2) and determine, 

5 prior to January 1, 2007, and prior to January 1 

6 of any subsequent year in which the applicable vol7 ume of renewable fuel is increased under paragraph 

8 (2)(B), whether the requirement of paragraph (2), 

9 including the applicable volume of renewable fuel 

10 contained in paragraph (2)(B) should remain in ef11 fect, in whole or in part, during 2007 or any year 

12 or years subsequent to 2007. In evaluating the re13 quirement of paragraph (2) and in making any de14 termination under this section, the Administrator 

15 shall consider the best available information and 

16 data collected by accepted methods or best available 

17 means regarding—

18 ‘‘(A) the capacity of renewable fuel pro19 ducers to supply an adequate amount of renew20 able fuel at competitive prices to fulfill the re21 quirement of paragraph (2); 

22 ‘‘(B) the potential of the requirement of 

23 paragraph (2) to significantly raise the price of 

24 gasoline, food (excluding the net price impact 

25 on the requirement in paragraph (2) on com-
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1 modities used in the production of ethanol), or 

2 heating oil for consumers in any significant 

3 area or region of the country above the price 

4 that would otherwise apply to such commodities 

5 in the absence of such requirement; 

6 ‘‘(C) the potential of the requirement of 

7 paragraph (2) to interfere with the supply of 

8 fuel in any significant gasoline market or region 

9 of the country, including interference with the 

10 efficient operation of refiners, blenders, import11 ers, wholesale suppliers, and retail vendors of 

12 gasoline, and other motor fuels; and 

13 ‘‘(D) the potential of the requirement of 

14 paragraph (2) to cause or promote exceedances 

15 of Federal, State, or local air quality standards. 

16 If the Administrator determines, by clear and con17 vincing information, after public notice and the op18 portunity for comment, that the requirement of 

19 paragraph (2) would have significant and meaning20 ful adverse impact on the supply of fuel and related 

21 infrastructure or on the economy, public health, or 

22 environment of any significant area or region of the 

23 country, the Administrator may waive, in whole or 

24 in part, the requirement of paragraph (2) in any one 

25 year for which the determination is made for that 
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1 area or region of the country, except that any such 

2 waiver shall not have the effect of reducing the ap3 plicable volume of renewable fuel specified in para4 graph (2)(B) with respect to any year for which the 

5 determination is made. In determining economic im6 pact under this paragraph, the Administrator shall 

7 not consider the reduced revenues available from the 

8 Highway Trust Fund (section 9503 of the Internal 

9 Revenue Code of 1986) as a result of the use of eth10 anol. 

11 ‘‘(11) SMALL REFINERIES.—

12 ‘‘(A) IN GENERAL.—The requirement of 

13 paragraph (2) shall not apply to small refineries 

14 until the first calendar year beginning more 

15 than 5 years after the first year set forth in the 

16 table in paragraph (2)(B)(i). Not later than De17 cember 31, 2007, the Secretary of Energy shall 

18 complete for the Administrator a study to de19 termine whether the requirement of paragraph 

20 (2) would impose a disproportionate economic 

21 hardship on small refineries. For any small re22 finery that the Secretary of Energy determines 

23 would experience a disproportionate economic 

24 hardship, the Administrator shall extend the 
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1 small refinery exemption for such small refinery 

2 for no less than two additional years. 

3 ‘‘(B) ECONOMIC HARDSHIP.—

4 ‘‘(i) EXTENSION OF EXEMPTION.—A 

5 small refinery may at any time petition the 

6 Administrator for an extension of the ex7 emption from the requirement of para8 graph (2) for the reason of dispropor9 tionate economic hardship. In evaluating a 

10 hardship petition, the Administrator, in 

11 consultation with the Secretary of Energy, 

12 shall consider the findings of the study in 

13 addition to other economic factors. 

14 ‘‘(ii) DEADLINE FOR ACTION ON PETI15 TIONS.—The Administrator shall act on 

16 any petition submitted by a small refinery 

17 for a hardship exemption not later than 90 

18 days after the receipt of the petition. 

19 ‘‘(C) CREDIT PROGRAM.—If a small refin20 ery notifies the Administrator that it waives the 

21 exemption provided by this Act, the regulations 

22 shall provide for the generation of credits by 

23 the small refinery beginning in the year fol24 lowing such notification. 
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1 ‘‘(D) OPT-IN FOR SMALL REFINERS.—A 

2 small refinery shall be subject to the require3 ments of this section if it notifies the Adminis4 trator that it waives the exemption under sub5 paragraph (A). 

6 ‘‘(12) ETHANOL MARKET CONCENTRATION

7 ANALYSIS.—

8 ‘‘(A) ANALYSIS.—

9 ‘‘(i) IN GENERAL.—Not later than 

10 180 days after the date of enactment of 

11 this subsection, and annually thereafter, 

12 the Federal Trade Commission shall per13 form a market concentration analysis of 

14 the ethanol production industry using the 

15 Herfindahl-Hirschman Index to determine 

16 whether there is sufficient competition 

17 among industry participants to avoid price 

18 setting and other anticompetitive behavior. 

19 ‘‘(ii) SCORING.—For the purpose of 

20 scoring under clause (i) using the 

21 Herfindahl-Hirschman Index, all mar22 keting arrangements among industry par23 ticipants shall be considered. 

24 ‘‘(B) REPORT.—Not later than December 

25 1, 2004, and annually thereafter, the Federal 
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1 Trade Commission shall submit to Congress 

2 and the Administrator a report on the results 

3 of the market concentration analysis performed 

4 under subparagraph (A)(i).’’. 

5 (b) PENALTIES AND ENFORCEMENT.—Section 

6 211(d) of the Clean Air Act (42 U.S.C. 7545(d)) is 

7 amended as follows: 

8 (1) In paragraph (1)—

9 (A) in the first sentence, by striking ‘‘or 

10 (n)’’ each place it appears and inserting ‘‘(n), 

11 or (o)’’; and 

12 (B) in the second sentence, by striking ‘‘or 

13 (m)’’ and inserting ‘‘(m), or (o)’’. 

14 (2) In the first sentence of paragraph (2), by 

15 striking ‘‘and (n)’’ each place it appears and insert16 ing ‘‘(n), and (o)’’. 

17 (c) SURVEY OF RENEWABLE FUEL MARKET.—

18 (1) SURVEY AND REPORT.—Not later than De19 cember 1, 2006, and annually thereafter, the Admin20 istrator of the Environmental Protection Agency (in 

21 consultation with the Secretary of Energy acting 

22 through the Administrator of the Energy Informa23 tion Administration) shall—

24 (A) conduct, with respect to each conven25 tional gasoline use area and each reformulated 
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1 gasoline use area in each State, a survey to de2 termine the market shares of—

3 (i) conventional gasoline containing 

4 ethanol; 

5 (ii) reformulated gasoline containing 

6 ethanol; 

7 (iii) conventional gasoline containing 

8 renewable fuel; and 

9 (iv) reformulated gasoline containing 

10 renewable fuel; and 

11 (B) submit to Congress, and make publicly 

12 available, a report on the results of the survey 

13 under subparagraph (A). 

14 (2) RECORDKEEPING AND REPORTING RE15 QUIREMENTS.—The Administrator of the Environ16 mental Protection Agency (hereinafter in this sub17 section referred to as the ‘‘Administrator’’) may re18 quire any refiner, blender, or importer to keep such 

19 records and make such reports as are necessary to 

20 ensure that the survey conducted under paragraph 

21 (1) is accurate. The Administrator, to avoid duplica22 tive requirements, shall rely, to the extent prac23 ticable, on existing reporting and recordkeeping re24 quirements and other information available to the 
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1 Administrator including gasoline distribution pat2 terns that include multistate use areas. 

3 (3) APPLICABLE LAW.—Activities carried out 

4 under this subsection shall be conducted in a man5 ner designed to protect confidentiality of individual 

6 responses. 

7 SEC. 102. PROHIBITION ON USE OF MTBE AS A FUEL ADDI8 TIVE. 

9 Section 211(c) of the Clean Air Act (42 U.S.C. 

10 7545(c)) is amended by adding the following at the end 

11 of paragraph (1): ‘‘Effective on the date of the enactment 

12 of this sentence, the use of methyl tertiary butyl ether 

13 (MTBE) as a fuel additive is prohibited.’’. The Adminis14 trator of the Environmental Protection Agency shall 

15 amend the regulations under section 211(c) of the Clean 

16 Air Act (42 U.S.C. 7545(c)) as promptly as practicable 

17 after the enactment of this Act to conform to the amend18 ment made by this section. 

19 SEC. 103. FEDERAL AGENCY FLEET VEHICLES. 

20 Section 248(f) of the Clean Air Act (42 U.S.C. 

21 7588(f)) is amended by inserting the following before the 

22 period at the end thereof: ‘‘, all such vehicles shall be clean 

23 fuel vehicles certified under this part capable of using eth24 anol as fuel and shall use ethanol wherever economically 

25 feasible, as determined by the Administrator, and all such 
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1 agencies shall use biodiesel fuel to operate any Federal 

2 vehicle that uses diesel fuel, unless the cost of doing so 

3 is prohibitive’’. 

4 TITLE II—TAX INCENTIVES 

5 SEC. 201. EXTENSION AND EXPANSION OF CREDIT FOR 

6 ELECTRICITY PRODUCED FROM CERTAIN RE7 NEWABLE RESOURCES. 

8 (a) EXPANSION OF QUALIFIED ENERGY RE9 SOURCES.—Subsection (c) of section 45 of the Internal 

10 Revenue Code of 1986 (relating to electricity produced 

11 from certain renewable resources) is amended to read as 

12 follows: 

13 ‘‘(c) QUALIFIED ENERGY RESOURCES.—For pur14 poses of this section—

15 ‘‘(1) IN GENERAL.—The term ‘qualified energy 

16 resources’ means—

17 ‘‘(A) wind, 

18 ‘‘(B) closed-loop biomass, and 

19 ‘‘(C) open-loop biomass. 

20 ‘‘(2) CLOSED-LOOP BIOMASS.—The term 

21 ‘closed-loop biomass’ means any organic material 

22 from a plant which is planted exclusively for pur23 poses of being used at a qualified facility to produce 

24 electricity. 

25 ‘‘(3) OPEN-LOOP BIOMASS.—
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1 ‘‘(A) IN GENERAL.—The term ‘open-loop 

2 biomass’ means—

3 ‘‘(i) any agricultural livestock waste 

4 nutrients, or 

5 ‘‘(ii) any solid, nonhazardous, cel6 lulosic waste material which is segregated 

7 from other waste materials and which is 

8 derived from—

9 ‘‘(I) any of the following forest10 related resources: mill and harvesting 

11 residues, precommercial thinnings, 

12 slash, and brush; but not including 

13 spent chemicals from pulp manufac14 turing, 

15 ‘‘(II) solid wood waste materials, 

16 including waste pallets, crates, 

17 dunnage, manufacturing and con18 struction wood wastes (other than 

19 pressure-treated, chemically-treated, 

20 or painted wood wastes), and land21 scape or right-of-way tree trimmings, 

22 but not including municipal solid 

23 waste, gas derived from the bio24 degradation of solid waste, or paper 

25 which is commonly recycled, or 
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1 ‘‘(III) agriculture sources, includ2 ing orchard tree crops, vineyard, 

3 grain, legumes, sugar, and other crop 

4 by-products or residues. 

5 ‘‘(B) AGRICULTURAL LIVESTOCK WASTE

6 NUTRIENTS.—

7 ‘‘(i) IN GENERAL.—The term ‘agricul8 tural livestock waste nutrients’ means agri9 cultural livestock manure and litter, includ10 ing wood shavings, straw, rice hulls, and 

11 other bedding material for the disposition 

12 of manure. 

13 ‘‘(ii) AGRICULTURAL LIVESTOCK.—

14 The term ‘agricultural livestock’ includes 

15 bovine, swine, poultry, and sheep. 

16 ‘‘(C) EXCEPTIONS.—The term ‘open-loop 

17 biomass’ does not include—

18 ‘‘(i) closed-loop biomass, or 

19 ‘‘(ii) biomass burned in conjunction 

20 with fossil fuel (cofiring) beyond such fossil 

21 fuel required for startup and flame sta22 bilization.’’. 

23 (b) EXTENSION AND EXPANSION OF QUALIFIED FA24 CILITIES.—Section 45 of such Code is amended by redes-
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1 ignating subsection (d) as subsection (e) and by inserting 

2 after subsection (c) the following new subsection: 

3 ‘‘(d) QUALIFIED FACILITIES.—For purposes of this 

4 section—

5 ‘‘(1) WIND FACILITY.—In the case of a facility 

6 using wind to produce electricity, the term ‘qualified 

7 facility’ means any facility owned by the taxpayer 

8 which is originally placed in service after December 

9 31, 1993. 

10 ‘‘(2) CLOSED-LOOP BIOMASS FACILITY.—

11 ‘‘(A) IN GENERAL.—In the case of a facil12 ity using closed-loop biomass to produce elec13 tricity, the term ‘qualified facility’ means any 

14 facility—

15 ‘‘(i) owned by the taxpayer which is 

16 originally placed in service after December 

17 31, 1992, or 

18 ‘‘(ii) owned by the taxpayer which is 

19 originally placed in service and modified to 

20 use closed-loop biomass to co-fire with coal, 

21 with other biomass, or with both, but only 

22 if the modification is approved under the 

23 Biomass Power for Rural Development 

24 Programs or is part of a pilot project of 
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1 the Commodity Credit Corporation as de2 scribed in 65 Fed. Reg. 63052. 

3 ‘‘(B) SPECIAL RULES.—In the case of a 

4 qualified facility described in subparagraph 

5 (A)(ii)—

6 ‘‘(i) the 10-year period referred to in 

7 subsection (a) shall be treated as beginning 

8 no earlier than January 1, 2005, 

9 ‘‘(ii) the amount of the credit deter10 mined under subsection (a) with respect to 

11 the facility shall be an amount equal to the 

12 amount determined without regard to this 

13 clause multiplied by the ratio of the ther14 mal content of the closed-loop biomass 

15 used in such facility to the thermal content 

16 of all fuels used in such facility, and 

17 ‘‘(iii) if the owner of such facility is 

18 not the producer of the electricity, the per19 son eligible for the credit allowable under 

20 subsection (a) shall be the lessee or the op21 erator of such facility. 

22 ‘‘(3) OPEN-LOOP BIOMASS FACILITY.—

23 ‘‘(A) IN GENERAL.—In the case of a facil24 ity using open-loop biomass to produce elec25 tricity for grid sale in excess of its internal re-
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1 quirements, the term ‘qualified facility’ means 

2 any facility owned by the taxpayer which—

3 ‘‘(i) in the case of a facility using ag4 ricultural livestock waste nutrients, is 

5 originally placed in service after December 

6 31, 2004, and 

7 ‘‘(ii) in the case of any other facility, 

8 is originally placed in service before Janu9 ary 1, 2005. 

10 ‘‘(B) SPECIAL RULES FOR PREEFFECTIVE

11 DATE FACILITIES.—In the case of any facility 

12 described in subparagraph (A)(ii) which is 

13 placed in service before January 1, 2005—

14 ‘‘(i) subsection (a)(1) shall be applied 

15 by substituting ‘1.2 cents’ for ‘1.5 cents’, 

16 and 

17 ‘‘(ii) the 5-year period beginning on 

18 January 1, 2005, shall be substituted for 

19 the 10-year period in subsection 

20 (a)(2)(A)(ii). 

21 ‘‘(C) CREDIT ELIGIBILITY.—In the case of 

22 any facility described in subparagraph (A), if 

23 the owner of such facility is not the producer of 

24 the electricity, the person eligible for the credit 
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1 allowable under subsection (a) shall be the les2 see or the operator of such facility.’’. 

3 (c) CREDIT RATE FOR ELECTRICITY PRODUCED

4 FROM NEW FACILITIES.—

5 (1) IN GENERAL.—Section 45(a) of such Code 

6 is amended by adding at the end the following new 

7 flush sentence: ‘‘In the case of electricity produced 

8 after December 31, 2004, at any qualified facility 

9 originally placed in service after such date, para10 graph (1) shall be applied by substituting ‘1.8 cents’ 

11 for ‘1.5 cents’.’’. 

12 (2) NEW RATE NOT SUBJECT TO INFLATION

13 ADJUSTMENT.—Section 45(b)(2) of such Code (re14 lating to credit and phaseout adjustment based on 

15 inflation) is amended by adding at the end the fol16 lowing new sentence: ‘‘This paragraph shall not 

17 apply to any amount which is substituted for the 1.5 

18 cent amount in subsection (a) by reason of any pro19 vision of this section.’’. 

20 (d) EFFECTIVE DATES.—

21 (1) IN GENERAL.—Except as otherwise pro22 vided in this subsection, the amendments made by 

23 this section shall apply to electricity produced and 

24 sold after December 31, 2004, in taxable years end25 ing after such date. 
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1 (2) CERTAIN BIOMASS FACILITIES.—With re2 spect to any facility described in section 

3 45(d)(3)(A)(ii) of the Internal Revenue Code of 

4 1986, as added by subsection (b)(1), which is placed 

5 in service before the date of the enactment of this 

6 Act, the amendments made by this section shall 

7 apply to electricity produced and sold after Decem8 ber 31, 2004, in taxable years ending after such 

9 date. 

10 (3) CREDIT RATE FOR NEW FACILITIES.—The 

11 amendments made by subsection (c) shall apply to 

12 electricity produced and sold after December 31, 

13 2004, in taxable years ending after such date. 

14 (4) NONAPPLICATION OF AMENDMENTS TO

15 PREEFFECTIVE DATE POULTRY WASTE FACILI16 TIES.—The amendments made by this section shall 

17 not apply with respect to any poultry waste facility 

18 (within the meaning of section 45(c)(3)(C), as in ef19 fect on December 31, 2004) placed in service on or 

20 before such date. 

21 SEC. 202. SMALL ETHANOL PRODUCER CREDIT. 

22 (a) ALLOCATION OF ALCOHOL FUELS CREDIT TO

23 PATRONS OF A COOPERATIVE.—Section 40(g) of the In24 ternal Revenue Code of 1986 (relating to definitions and 

25 special rules for eligible small ethanol producer credit) is 
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•HR 4652 IH 

1 amended by adding at the end the following new para2 graph: 

3 ‘‘(6) ALLOCATION OF SMALL ETHANOL PRO4 DUCER CREDIT TO PATRONS OF COOPERATIVE.—

5 ‘‘(A) ELECTION TO ALLOCATE.—

6 ‘‘(i) IN GENERAL.—In the case of a 

7 cooperative organization described in sec8 tion 1381(a), any portion of the credit de9 termined under subsection (a)(3) for the 

10 taxable year may, at the election of the or11 ganization, be apportioned pro rata among 

12 patrons of the organization on the basis of 

13 the quantity or value of business done with 

14 or for such patrons for the taxable year. 

15 ‘‘(ii) FORM AND EFFECT OF ELEC16 TION.—An election under clause (i) for any 

17 taxable year shall be made on a timely 

18 filed return for such year. Such election, 

19 once made, shall be irrevocable for such 

20 taxable year. 

21 ‘‘(B) TREATMENT OF ORGANIZATIONS AND

22 PATRONS.—The amount of the credit appor23 tioned to patrons under subparagraph (A)—

24 ‘‘(i) shall not be included in the 

25 amount determined under subsection (a) 
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1 with respect to the organization for the 

2 taxable year, and 

3 ‘‘(ii) shall be included in the amount 

4 determined under subsection (a) for the 

5 taxable year of each patron for which the 

6 patronage dividends for the taxable year 

7 described in subparagraph (A) are included 

8 in gross income. 

9 ‘‘(C) SPECIAL RULES FOR DECREASE IN

10 CREDITS FOR TAXABLE YEAR.—If the amount 

11 of the credit of a cooperative organization de12 termined under subsection (a)(3) for a taxable 

13 year is less than the amount of such credit 

14 shown on the return of the cooperative organi15 zation for such year, an amount equal to the 

16 excess of—

17 ‘‘(i) such reduction, over 

18 ‘‘(ii) the amount not apportioned to 

19 such patrons under subparagraph (A) for 

20 the taxable year, 

21 shall be treated as an increase in tax imposed 

22 by this chapter on the organization. Such in23 crease shall not be treated as tax imposed by 

24 this chapter for purposes of determining the 
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1 amount of any credit under this chapter or for 

2 purposes of section 55.’’. 

3 (b) IMPROVEMENTS TO SMALL ETHANOL PRODUCER

4 CREDIT.—

5 (1) DEFINITION OF SMALL ETHANOL PRO6 DUCER.—Section 40(g) of such Code (relating to 

7 definitions and special rules for eligible small ethanol 

8 producer credit) is amended by striking 

9 ‘‘30,000,000’’ each place it appears and inserting 

10 ‘‘60,000,000’’. 

11 (2) SMALL ETHANOL PRODUCER CREDIT NOT A

12 PASSIVE ACTIVITY CREDIT.—Clause (i) of section 

13 469(d)(2)(A) of such Code is amended by striking 

14 ‘‘subpart D’’ and inserting ‘‘subpart D, other than 

15 section 40(a)(3),’’. 

16 (3) SMALL ETHANOL PRODUCER CREDIT NOT

17 ADDED BACK TO INCOME UNDER SECTION 87.—Sec18 tion 87 of such Code (relating to income inclusion 

19 of alcohol fuel credit) is amended to read as follows: 

20 ‘‘SEC. 87. ALCOHOL FUEL CREDIT. 

21 ‘‘Gross income includes an amount equal to the sum 

22 of—

23 ‘‘(1) the amount of the alcohol mixture credit 

24 determined with respect to the taxpayer for the tax25 able year under section 40(a)(1), and 
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1 ‘‘(2) the alcohol credit determined with respect 

2 to the taxpayer for the taxable year under section 

3 40(a)(2).’’. 

4 (c) CONFORMING AMENDMENT.—Section 1388 of 

5 such Code (relating to definitions and special rules for co6 operative organizations) is amended by adding at the end 

7 the following new subsection: 

8 ‘‘(l) CROSS REFERENCE.—For provisions relating to 

9 the apportionment of the alcohol fuels credit between coop10 erative organizations and their patrons, see section 

11 40(g)(6).’’. 

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

13 this section shall apply to taxable years ending after the 

14 date of the enactment of this Act. 

15 SEC. 203. CREDIT FOR ENERGY EFFICIENT APPLIANCES. 

16 (a) IN GENERAL.—Subpart D of part IV of sub17 chapter A of chapter 1 (relating to business-related cred18 its) is amended by adding after section 45F the following 

19 new section: 

20 ‘‘SEC. 45G. ENERGY EFFICIENT APPLIANCE CREDIT. 

21 ‘‘(a) ALLOWANCE OF CREDIT.—

22 ‘‘(1) IN GENERAL.—For purposes of section 38, 

23 the energy efficient appliance credit determined 

24 under this section for the taxable year is an amount 

25 equal to the sum of the amounts determined under 
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1 paragraph (2) for qualified energy efficient appli2 ances produced by the taxpayer during the calendar 

3 year ending with or within the taxable year. 

4 ‘‘(2) AMOUNT.—The amount determined under 

5 this paragraph for any category described in sub6 section (b)(2)(B) shall be the product of the applica7 ble amount for appliances in the category and the el8 igible production for the category. 

9 ‘‘(b) APPLICABLE AMOUNT; ELIGIBLE PRODUC10 TION.—For purposes of subsection (a)—

11 ‘‘(1) APPLICABLE AMOUNT.—The applicable 

12 amount is—

13 ‘‘(A) $50, in the case of—

14 ‘‘(i) a clothes washer which is manu15 factured with at least a 1.42 MEF, or 

16 ‘‘(ii) a refrigerator which consumes at 

17 least 10 percent less kilowatt hours per 

18 year than the energy conservation stand19 ards for refrigerators promulgated by the 

20 Department of Energy and effective on 

21 July 1, 2001, 

22 ‘‘(B) $100, in the case of—

23 ‘‘(i) a clothes washer which is manu24 factured with at least a 1.50 MEF, or 
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1 ‘‘(ii) a refrigerator which consumes at 

2 least 15 percent (20 percent in the case of 

3 a refrigerator manufactured after 2006) 

4 less kilowatt hours per year than such en5 ergy conservation standards, and 

6 ‘‘(C) $150, in the case of a refrigerator 

7 manufactured before 2007 which consumes at 

8 least 20 percent less kilowatt hours per year 

9 than such energy conservation standards. 

10 ‘‘(2) ELIGIBLE PRODUCTION.—

11 ‘‘(A) IN GENERAL.—The eligible produc12 tion of each category of qualified energy effi13 cient appliances is the excess of—

14 ‘‘(i) the number of appliances in such 

15 category which are produced by the tax16 payer during such calendar year, over 

17 ‘‘(ii) the average number of appliances 

18 in such category which were produced by 

19 the taxpayer during calendar years 2001, 

20 2002, and 2003. 

21 ‘‘(B) CATEGORIES.—For purposes of sub22 paragraph (A), the categories are—

23 ‘‘(i) clothes washers described in para24 graph (1)(A)(i), 
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1 ‘‘(ii) clothes washers described in 

2 paragraph (1)(B)(i), 

3 ‘‘(iii) refrigerators described in para4 graph (1)(A)(ii), 

5 ‘‘(iv) refrigerators described in para6 graph (1)(B)(ii), and 

7 ‘‘(v) refrigerators described in para8 graph (1)(C). 

9 ‘‘(c) LIMITATION ON MAXIMUM CREDIT.—

10 ‘‘(1) IN GENERAL.—The amount of credit al11 lowed under subsection (a) with respect to a tax12 payer for all taxable years shall not exceed 

13 $60,000,000, of which not more than $30,000,000 

14 may be allowed with respect to the credit determined 

15 by using the applicable amount under subsection 

16 (b)(1)(A). 

17 ‘‘(2) LIMITATION BASED ON GROSS RE18 CEIPTS.—The credit allowed under subsection (a) 

19 with respect to a taxpayer for the taxable year shall 

20 not exceed an amount equal to 2 percent of the aver21 age annual gross receipts of the taxpayer for the 3 

22 taxable years preceding the taxable year in which 

23 the credit is determined. 
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1 ‘‘(3) GROSS RECEIPTS.—For purposes of this 

2 subsection, the rules of paragraphs (2) and (3) of 

3 section 448(c) shall apply. 

4 ‘‘(d) DEFINITIONS.—For purposes of this section—

5 ‘‘(1) QUALIFIED ENERGY EFFICIENT APPLI6 ANCE.—The term ‘qualified energy efficient appli7 ance’ means—

8 ‘‘(A) a clothes washer described in sub9 paragraph (A)(i) or (B)(i) of subsection (b)(1), 

10 or 

11 ‘‘(B) a refrigerator described in subpara12 graph (A)(ii), (B)(ii), or (C) of subsection 

13 (b)(1). 

14 ‘‘(2) CLOTHES WASHER.—The term ‘clothes 

15 washer’ means a residential clothes washer, includ16 ing a residential style coin operated washer. 

17 ‘‘(3) REFRIGERATOR.—The term ‘refrigerator’ 

18 means an automatic defrost refrigerator-freezer 

19 which has an internal volume of at least 16.5 cubic 

20 feet. 

21 ‘‘(4) MEF.—The term ‘MEF’ means Modified 

22 Energy Factor (as determined by the Secretary of 

23 Energy). 

24 ‘‘(e) SPECIAL RULES.—
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1 ‘‘(1) IN GENERAL.—Rules similar to the rules 

2 of subsections (c), (d), and (e) of section 52 shall 

3 apply for purposes of this section. 

4 ‘‘(2) AGGREGATION RULES.—All persons treat5 ed as a single employer under subsection (a) or (b) 

6 of section 52 or subsection (m) or (o) of section 414 

7 shall be treated as 1 person for purposes of sub8 section (a). 

9 ‘‘(f) VERIFICATION.—The taxpayer shall submit such 

10 information or certification as the Secretary, in consulta11 tion with the Secretary of Energy, determines necessary 

12 to claim the credit amount under subsection (a).’’. 

13 (b) CREDIT MADE PART OF GENERAL BUSINESS

14 CREDIT.—Section 38(b) of such Code (relating to current 

15 year business credit) is amended by striking ‘‘plus’’ at the 

16 end of paragraph (14), by striking the period at the end 

17 of paragraph (15) and inserting ‘‘, plus’’, and by adding 

18 at the end the following new paragraph: 

19 ‘‘(16) the energy efficient appliance credit de20 termined under section 45G(a).’’. 

21 (c) CLERICAL AMENDMENT.—The table of sections 

22 for subpart D of part IV of subchapter A of chapter 1 

23 of such Code is amended by adding at the end the fol24 lowing new item:

‘‘45G. Energy efficient appliance credit.’’.
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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to appliances produced after De3 cember 31, 2004, in taxable years ending after such date. 

4 SEC. 204. REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES 

5 ON RAILROADS AND INLAND WATERWAY 

6 TRANSPORTATION WHICH REMAIN IN GEN7 ERAL FUND. 

8 (a) TAXES ON TRAINS.—

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

10 4041(a)(1) of the Internal Revenue Code of 1986 is 

11 amended by striking ‘‘or a diesel-powered train’’ 

12 each place it appears and by striking ‘‘or train’’. 

13 (2) CONFORMING AMENDMENTS.—

14 (A) Subparagraph (C) of section 

15 4041(a)(1) of such Code is amended by striking 

16 clause (ii) and by redesignating clause (iii) as 

17 clause (ii). 

18 (B) Subparagraph (C) of section 

19 4041(b)(1) of such Code is amended by striking 

20 all that follows ‘‘section 6421(e)(2)’’ and insert21 ing a period. 

22 (C) Subsection (d) of section 4041 of such 

23 Code is amended by redesignating paragraph 

24 (3) as paragraph (4) and by inserting after 

25 paragraph (2) the following new paragraph: 
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1 ‘‘(3) DIESEL FUEL USED IN TRAINS.—There is 

2 hereby imposed a tax of 0.1 cent per gallon on any 

3 liquid other than gasoline (as defined in section 

4 4083)—

5 ‘‘(A) sold by any person to an owner, les6 see, or other operator of a diesel-powered train 

7 for use as a fuel in such train, or 

8 ‘‘(B) used by any person as a fuel in a die9 sel-powered train unless there was a taxable 

10 sale of such fuel under subparagraph (A). 

11 No tax shall be imposed by this paragraph on the 

12 sale or use of any liquid if tax was imposed on such 

13 liquid under section 4081.’’

14 (D) Subsection (e) of section 4082 of such 

15 Code is amended by striking ‘‘section 

16 4041(a)(1)’’ and inserting ‘‘subsections (d)(3) 

17 and (a)(1) of section 4041, respectively’’. 

18 (E) Paragraph (3) of section 4083(a) of 

19 such Code is amended by striking ‘‘or a diesel20 powered train’’. 

21 (F) Paragraph (3) of section 6421(f) of 

22 such Code is amended to read as follows: 

23 ‘‘(3) GASOLINE USED IN TRAINS.—In the case 

24 of gasoline used as a fuel in a train, this section 

25 shall not apply with respect to the Leaking Under-
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1 ground Storage Tank Trust Fund financing rate 

2 under section 4081.’’

3 (G) Paragraph (3) of section 6427(l) of 

4 such Code is amended to read as follows: 

5 ‘‘(3) REFUND OF CERTAIN TAXES ON FUEL

6 USED IN DIESEL-POWERED TRAINS.—For purposes 

7 of this subsection, the term ‘nontaxable use’ includes 

8 fuel used in a diesel-powered train. The preceding 

9 sentence shall not apply to the tax imposed by sec10 tion 4041(d) and the Leaking Underground Storage 

11 Tank Trust Fund financing rate under section 4081 

12 except with respect to fuel sold for exclusive use by 

13 a State or any political subdivision thereof.’’

14 (b) FUEL USED ON INLAND WATERWAYS.—

15 (1) IN GENERAL.—Paragraph (1) of section 

16 4042(b) of such Code is amended by adding ‘‘and’’ 

17 at the end of subparagraph (A), by striking ‘‘, and’’ 

18 at the end of subparagraph (B) and inserting a pe19 riod, and by striking subparagraph (C). 

20 (2) CONFORMING AMENDMENT.—Paragraph (2) 

21 of section 4042(b) of such Code is amended by strik22 ing subparagraph (C). 

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

24 this section shall take effect on the date of the enactment 

25 of this Act. 
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1 SEC. 205. CREDIT FOR CONSTRUCTION OF NEW ENERGY EF2 FICIENT HOME. 

3 (a) IN GENERAL.—Subpart D of part IV of sub4 chapter A of chapter 1 (relating to business related cred5 its) is amended by adding after section 45G the following 

6 new section: 

7 ‘‘SEC. 45H. NEW ENERGY EFFICIENT HOME CREDIT. 

8 ‘‘(a) IN GENERAL.—For purposes of section 38, in 

9 the case of an eligible contractor, the credit determined 

10 under this section for the taxable year is an amount equal 

11 to the aggregate adjusted bases of all energy efficient 

12 property installed in a qualifying new home during con13 struction of such home. 

14 ‘‘(b) LIMITATIONS.—

15 ‘‘(1) MAXIMUM CREDIT.—

16 ‘‘(A) IN GENERAL.—The credit allowed by 

17 this section with respect to a qualifying new 

18 home shall not exceed—

19 ‘‘(i) in the case of a 30-percent home, 

20 $1,000, and 

21 ‘‘(ii) in the case of a 50-percent home, 

22 $2,000. 

23 ‘‘(B) 30- OR 50-PERCENT HOME.—For pur24 poses of subparagraph (A)—

25 ‘‘(i) 30-PERCENT HOME.—The term 

26 ‘30-percent home’ means—
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1 ‘‘(I) a qualifying new home which 

2 is certified to have a projected level of 

3 annual heating and cooling energy 

4 consumption, measured in terms of 

5 average annual energy cost to the 

6 homeowner, which is at least 30 per7 cent less than the annual level of 

8 heating and cooling energy consump9 tion of a qualifying new home con10 structed in accordance with the latest 

11 standards of chapter 4 of the Inter12 national Energy Conservation Code 

13 approved by the Department of En14 ergy before the construction of such 

15 qualifying new home and any applica16 ble Federal minimum efficiency stand17 ards for equipment, or 

18 ‘‘(II) in the case of a qualifying 

19 new home which is a manufactured 

20 home, a home which meets the appli21 cable standards required by the Ad22 ministrator of the Environmental Pro23 tection Agency under the Energy Star 

24 Labeled Homes program. 
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1 ‘‘(ii) 50-PERCENT HOME.—The term 

2 ‘50-percent home’ means a qualifying new 

3 home which would be described in clause 

4 (i)(I) if 50 percent were substituted for 30 

5 percent. 

6 ‘‘(C) PRIOR CREDIT AMOUNTS ON SAME

7 HOME TAKEN INTO ACCOUNT.—The amount of 

8 the credit otherwise allowable for the taxable 

9 year with respect to a qualifying new home 

10 under clause (i) or (ii) of subparagraph (A) 

11 shall be reduced by the sum of the credits al12 lowed under subsection (a) to any taxpayer with 

13 respect to the home for all preceding taxable 

14 years. 

15 ‘‘(2) COORDINATION WITH CERTAIN CREDITS.—

16 For purposes of this section—

17 ‘‘(A) the basis of any property referred to 

18 in subsection (a) shall be reduced by that por19 tion of the basis of any property which is attrib20 utable to the rehabilitation credit (as deter21 mined under section 47(a)) or to the energy 

22 credit (as determined under section 48(a)), and 

23 ‘‘(B) expenditures taken into account 

24 under section 47, or 48(a) shall not be taken 

25 into account under this section. 
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1 ‘‘(3) PROVIDER LIMITATION.—Any eligible con2 tractor who directly or indirectly provides the guar3 antee of energy savings under a guarantee-based 

4 method of certification described in subsection 

5 (d)(1)(D) shall not be eligible to receive the credit 

6 allowed by this section. 

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

8 ‘‘(1) ELIGIBLE CONTRACTOR.—The term ‘eligi9 ble contractor’ means—

10 ‘‘(A) the person who constructed the quali11 fying new home, or 

12 ‘‘(B) in the case of a qualifying new home 

13 which is a manufactured home, the manufac14 tured home producer of such home. 

15 If more than 1 person is described in subparagraph 

16 (A) or (B) with respect to any qualifying new home, 

17 such term means the person designated as such by 

18 the owner of such home. 

19 ‘‘(2) ENERGY EFFICIENT PROPERTY.—The 

20 term ‘energy efficient property’ means any energy 

21 efficient building envelope component, and any en22 ergy efficient heating or cooling equipment or system 

23 which can, individually or in combination with other 

24 components, meet the requirements of this section. 

25 ‘‘(3) QUALIFYING NEW HOME.—
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1 ‘‘(A) IN GENERAL.—The term ‘qualifying 

2 new home’ means a dwelling—

3 ‘‘(i) located in the United States, 

4 ‘‘(ii) the construction of which is sub5 stantially completed after December 31, 

6 2004, and 

7 ‘‘(iii) the first use of which after con8 struction is as a principal residence (within 

9 the meaning of section 121). 

10 ‘‘(B) MANUFACTURED HOME INCLUDED.—

11 The term ‘qualifying new home’ includes a 

12 manufactured home conforming to Federal 

13 Manufactured Home Construction and Safety 

14 Standards (24 C.F.R. 3280). 

15 ‘‘(4) CONSTRUCTION.—The term ‘construction’ 

16 includes reconstruction and rehabilitation. 

17 ‘‘(5) BUILDING ENVELOPE COMPONENT.—The 

18 term ‘building envelope component’ means—

19 ‘‘(A) any insulation material or system 

20 which is specifically and primarily designed to 

21 reduce the heat loss or gain of a qualifying new 

22 home when installed in or on such home, 

23 ‘‘(B) exterior windows (including sky24 lights), and 

25 ‘‘(C) exterior doors. 
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1 ‘‘(d) CERTIFICATION.—

2 ‘‘(1) METHOD OF CERTIFICATION.—

3 ‘‘(A) IN GENERAL.—A certification de4 scribed in subsection (b)(1)(B) shall be deter5 mined either by a component-based method, a 

6 performance-based method, or a guarantee7 based method, or, in the case of a qualifying 

8 new home which is a manufactured home, by a 

9 method prescribed by the Administrator of the 

10 Environmental Protection Agency under the 

11 Energy Star Labeled Homes program. 

12 ‘‘(B) COMPONENT-BASED METHOD.—A 

13 component-based method is a method which 

14 uses the applicable technical energy efficiency 

15 specifications or ratings (including product la16 beling requirements) for the energy efficient 

17 building envelope component or energy efficient 

18 heating or cooling equipment. The Secretary 

19 shall, in consultation with the Administrator of 

20 the Environmental Protection Agency, develop 

21 prescriptive component-based packages which 

22 are equivalent in energy performance to prop23 erties which qualify under subparagraph (C). 

24 ‘‘(C) PERFORMANCE-BASED METHOD.—
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1 ‘‘(i) IN GENERAL.—A performance2 based method is a method which calculates 

3 projected energy usage and cost reductions 

4 in the qualifying new home in relation to 

5 a new home—

6 ‘‘(I) heated by the same fuel 

7 type, and 

8 ‘‘(II) constructed in accordance 

9 with the latest standards of chapter 4 

10 of the International Energy Conserva11 tion Code approved by the Depart12 ment of Energy before the construc13 tion of such qualifying new home and 

14 any applicable Federal minimum effi15 ciency standards for equipment. 

16 ‘‘(ii) COMPUTER SOFTWARE.—Com17 puter software shall be used in support of 

18 a performance-based method certification 

19 under clause (i). Such software shall meet 

20 procedures and methods for calculating en21 ergy and cost savings in regulations pro22 mulgated by the Secretary of Energy. 

23 ‘‘(D) GUARANTEE-BASED METHOD.—

24 ‘‘(i) IN GENERAL.—A guarantee-based 

25 method is a method which guarantees in 
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1 writing to the homeowner energy savings 

2 of either 30 percent or 50 percent over the 

3 2000 International Energy Conservation 

4 Code for heating and cooling costs. The 

5 guarantee shall be provided for a minimum 

6 of 2 years and shall fully reimburse the 

7 homeowner any heating and cooling costs 

8 in excess of the guaranteed amount. 

9 ‘‘(ii) COMPUTER SOFTWARE.—Com10 puter software shall be selected by the pro11 vider to support the guarantee-based meth12 od certification under clause (i). Such soft13 ware shall meet procedures and methods 

14 for calculating energy and cost savings in 

15 regulations promulgated by the Secretary 

16 of Energy. 

17 ‘‘(2) PROVIDER.—A certification described in 

18 subsection (b)(1)(B) shall be provided by—

19 ‘‘(A) in the case of a component-based 

20 method, a local building regulatory authority, a 

21 utility, or a home energy rating organization, 

22 ‘‘(B) in the case of a performance-based 

23 method or a guarantee-based method, an indi24 vidual recognized by an organization designated 

25 by the Secretary for such purposes, or 
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1 ‘‘(C) in the case of a qualifying new home 

2 which is a manufactured home, a manufactured 

3 home primary inspection agency. 

4 ‘‘(3) FORM.—

5 ‘‘(A) IN GENERAL.—A certification de6 scribed in subsection (b)(1)(B) shall be made in 

7 writing in a manner which specifies in readily 

8 verifiable fashion the energy efficient building 

9 envelope components and energy efficient heat10 ing or cooling equipment installed and their re11 spective rated energy efficiency performance, 

12 and 

13 ‘‘(i) in the case of a performance14 based method, accompanied by a written 

15 analysis documenting the proper applica16 tion of a permissible energy performance 

17 calculation method to the specific cir18 cumstances of such qualifying new home, 

19 and 

20 ‘‘(ii) in the case of a qualifying new 

21 home which is a manufactured home, ac22 companied by such documentation as re23 quired by the Administrator of the Envi24 ronmental Protection Agency under the 

25 Energy Star Labeled Homes program. 
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1 ‘‘(B) FORM PROVIDED TO BUYER.—A form 

2 documenting the energy efficient building enve3 lope components and energy efficient heating or 

4 cooling equipment installed and their rated en5 ergy efficiency performance shall be provided to 

6 the buyer of the qualifying new home. The form 

7 shall include labeled R-value for insulation 

8 products, NFRC-labeled U-factor and solar 

9 heat gain coefficient for windows, skylights, and 

10 doors, labeled annual fuel utilization efficiency 

11 (AFUE) ratings for furnaces and boilers, la12 beled heating seasonal performance factor 

13 (HSPF) ratings for electric heat pumps, and la14 beled seasonal energy efficiency ratio (SEER) 

15 ratings for air conditioners. 

16 ‘‘(C) RATINGS LABEL AFFIXED IN DWELL17 ING.—A permanent label documenting the rat18 ings in subparagraph (B) shall be affixed to the 

19 front of the electrical distribution panel of the 

20 qualifying new home, or shall be otherwise per21 manently displayed in a readily inspectable loca22 tion in such home. 

23 ‘‘(4) REGULATIONS.—

24 ‘‘(A) IN GENERAL.—In prescribing regula25 tions under this subsection for performance-
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1 based and guarantee-based certification meth2 ods, the Secretary shall prescribe procedures for 

3 calculating annual energy usage and cost reduc4 tions for heating and cooling and for the report5 ing of the results. Such regulations shall—

6 ‘‘(i) provide that any calculation pro7 cedures be fuel neutral such that the same 

8 energy efficiency measures allow a quali9 fying new home to be eligible for the credit 

10 under this section regardless of whether 

11 such home uses a gas or oil furnace or 

12 boiler or an electric heat pump, and 

13 ‘‘(ii) require that any computer soft14 ware allow for the printing of the Federal 

15 tax forms necessary for the credit under 

16 this section and for the printing of forms 

17 for disclosure to the homebuyer. 

18 ‘‘(B) PROVIDERS.—For purposes of para19 graph (2)(B), the Secretary shall establish re20 quirements for the designation of individuals 

21 based on the requirements for energy consult22 ants and home energy raters specified by the 

23 Mortgage Industry National Home Energy Rat24 ing Standards. 
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1 ‘‘(e) APPLICATION.—Subsection (a) shall apply to 

2 qualifying new homes the construction of which is substan3 tially completed after December 31, 2004.’’. 

4 (b) CREDIT MADE PART OF GENERAL BUSINESS

5 CREDIT.—Section 38(b) of such Code (relating to current 

6 year business credit) is amended by striking ‘‘plus’’ at the 

7 end of paragraph (15), by striking the period at the end 

8 of paragraph (16) and inserting ‘‘, plus’’, and by adding 

9 at the end the following new paragraph: 

10 ‘‘(17) the new energy efficient home credit de11 termined under section 45H(a).’’. 

12 (c) DENIAL OF DOUBLE BENEFIT.—Section 280C of 

13 such Code (relating to certain expenses for which credits 

14 are allowable) is amended by adding at the end the fol15 lowing new subsection: 

16 ‘‘(d) NEW ENERGY EFFICIENT HOME EXPENSES.—

17 No deduction shall be allowed for that portion of expenses 

18 for a qualifying new home otherwise allowable as a deduc19 tion for the taxable year which is equal to the amount 

20 of the credit determined for such taxable year under sec21 tion 45H(a).’’. 

22 (d) DEDUCTION FOR CERTAIN UNUSED BUSINESS

23 CREDITS.—Section 196(c) of such Code (defining quali24 fied business credits) is amended by striking ‘‘and’’ at the 

25 end of paragraph (9), by striking the period at the end 
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1 of paragraph (10) and inserting ‘‘, and’’, and by adding 

2 after paragraph (10) the following new paragraph: 

3 ‘‘(11) the new energy efficient home credit de4 termined under section 45H(a).’’. 

5 (e) CLERICAL AMENDMENT.—The table of sections 

6 for subpart D of part IV of subchapter A of chapter 1 

7 of such Code is amended by adding after the item relating 

8 to section 45G the following new item:

‘‘45H. New energy efficient home credit.’’.

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

10 this section shall apply to homes the construction of which 

11 is substantially completed after December 31, 2004. 

12 SEC. 206. CREDIT FOR ENERGY EFFICIENCY IMPROVE13 MENTS TO EXISTING HOMES. 

14 (a) IN GENERAL.—Subpart A of part IV of sub15 chapter A of chapter 1 of the Internal Revenue Code of 

16 1986 (relating to nonrefundable personal credits) is 

17 amended by inserting after section 25B the following new 

18 section: 

19 ‘‘SEC. 25C. ENERGY EFFICIENCY IMPROVEMENTS TO EXIST20 ING HOMES. 

21 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in22 dividual, there shall be allowed as a credit against the tax 

23 imposed by this chapter for the taxable year an amount 

24 equal to 20 percent of the amount paid or incurred by 
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1 the taxpayer for qualified energy efficiency improvements 

2 installed during such taxable year. 

3 ‘‘(b) LIMITATIONS.—

4 ‘‘(1) MAXIMUM CREDIT.—The credit allowed by 

5 this section with respect to a dwelling unit shall not 

6 exceed $2,000. 

7 ‘‘(2) PRIOR CREDIT AMOUNTS FOR TAXPAYER

8 ON SAME DWELLING TAKEN INTO ACCOUNT.—If a 

9 credit was allowed to the taxpayer under subsection 

10 (a) with respect to a dwelling unit in 1 or more prior 

11 taxable years, the amount of the credit otherwise al12 lowable for the taxable year with respect to that 

13 dwelling unit shall be reduced by the sum of the 

14 credits allowed under subsection (a) to the taxpayer 

15 with respect to the dwelling unit for all prior taxable 

16 years. 

17 ‘‘(c) QUALIFIED ENERGY EFFICIENCY IMPROVE18 MENTS.—For purposes of this section, the term ‘qualified 

19 energy efficiency improvements’ means any energy effi20 cient building envelope component which meets the pre21 scriptive criteria for such component established by the 

22 2000 International Energy Conservation Code, as such 

23 Code (including supplements) is in effect on the date of 

24 the enactment of this section (or, in the case of a metal 
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1 roof with appropriate pigmented coatings which meet the 

2 Energy Star program requirements), if—

3 ‘‘(1) such component is installed in or on a 

4 dwelling unit—

5 ‘‘(A) located in the United States, 

6 ‘‘(B) owned and used by the taxpayer as 

7 the taxpayer’s principal residence (within the 

8 meaning of section 121), and 

9 ‘‘(C) which has not been treated as a 

10 qualified new energy efficient home for pur11 poses of any credit allowed under section 45G, 

12 ‘‘(2) the original use of such component com13 mences with the taxpayer, and 

14 ‘‘(3) such component reasonably can be ex15 pected to remain in use for at least 5 years. 

16 If the aggregate cost of such components with respect to 

17 any dwelling unit exceeds $1,000, such components shall 

18 be treated as qualified energy efficiency improvements 

19 only if such components are also certified in accordance 

20 with subsection (d) as meeting such prescriptive criteria. 

21 ‘‘(d) CERTIFICATION.—The certification described in 

22 subsection (c) shall be—

23 ‘‘(1) determined on the basis of the technical 

24 specifications or applicable ratings (including prod25 uct labeling requirements) for the measurement of 
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1 energy efficiency (based upon energy use or building 

2 envelope component performance) for the energy ef3 ficient building envelope component, 

4 ‘‘(2) provided by a local building regulatory au5 thority, a utility, a manufactured home production 

6 inspection primary inspection agency (IPIA), or an 

7 accredited home energy rating system provider who 

8 is accredited by or otherwise authorized to use ap9 proved energy performance measurement methods by 

10 the Residential Energy Services Network 

11 (RESNET), and 

12 ‘‘(3) made in writing in a manner which speci13 fies in readily verifiable fashion the energy efficient 

14 building envelope components installed and their re15 spective energy efficiency levels. 

16 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur17 poses of this section—

18 ‘‘(1) BUILDING ENVELOPE COMPONENT.—The 

19 term ‘building envelope component’ means—

20 ‘‘(A) any insulation material or system 

21 which is specifically and primarily designed to 

22 reduce the heat loss or gain of a dwelling unit 

23 when installed in or on such dwelling unit, 

24 ‘‘(B) exterior windows (including sky25 lights), 
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1 ‘‘(C) exterior doors, and 

2 ‘‘(D) any metal roof installed on a dwelling 

3 unit, but only if such roof has appropriate pig4 mented coatings which are specifically and pri5 marily designed to reduce the heat gain of such 

6 dwelling unit. 

7 ‘‘(2) MANUFACTURED HOMES INCLUDED.—The 

8 term ‘dwelling unit’ includes a manufactured home 

9 which conforms to Federal Manufactured Home 

10 Construction and Safety Standards (section 3280 of 

11 title 24, Code of Federal Regulations). 

12 ‘‘(3) DOLLAR AMOUNTS IN CASE OF JOINT OC13 CUPANCY.—In the case of any dwelling unit which is 

14 jointly occupied and used during any calendar year 

15 as a residence by 2 or more individuals, the fol16 lowing rules shall apply: 

17 ‘‘(A) The amount of the credit allowable 

18 under subsection (a) by reason of expenditures 

19 made during such calendar year by any of such 

20 individuals with respect to such dwelling unit 

21 shall be determined by treating all of such indi22 viduals as 1 taxpayer whose taxable year is 

23 such calendar year. 

24 ‘‘(B) There shall be allowable, with respect 

25 to such expenditures to each of such individ-
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1 uals, a credit under subsection (a) for the tax2 able year in which such calendar year ends in 

3 an amount which bears the same ratio to the 

4 amount determined under subparagraph (A) as 

5 the amount of such expenditures made by such 

6 individual during such calendar year bears to 

7 the aggregate of such expenditures made by all 

8 of such individuals during such calendar year. 

9 ‘‘(4) TENANT-STOCKHOLDER IN COOPERATIVE

10 HOUSING CORPORATION.—In the case of an indi11 vidual who is a tenant-stockholder (as defined in sec12 tion 216) in a cooperative housing corporation (as 

13 defined in such section), such individual shall be 

14 treated as having made the individual’s tenant-stock15 holder’s proportionate share (as defined in section 

16 216(b)(3)) of any expenditures of such corporation. 

17 ‘‘(5) CONDOMINIUMS.—

18 ‘‘(A) IN GENERAL.—In the case of an indi19 vidual who is a member of a condominium man20 agement association with respect to a condo21 minium which the individual owns, such indi22 vidual shall be treated as having made the indi23 vidual’s proportionate share of any expenditures 

24 of such association. 
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1 ‘‘(B) CONDOMINIUM MANAGEMENT ASSO2 CIATION.—For purposes of this paragraph, the 

3 term ‘condominium management association’ 

4 means an organization which meets the require5 ments of paragraph (1) of section 528(c) (other 

6 than subparagraph (E) thereof) with respect to 

7 a condominium project substantially all of the 

8 units of which are used as residences. 

9 ‘‘(f) BASIS ADJUSTMENT.—For purposes of this sub10 title, if a credit is allowed under this section for any ex11 penditure with respect to any property, the increase in the 

12 basis of such property which would (but for this sub13 section) result from such expenditure shall be reduced by 

14 the amount of the credit so allowed. 

15 ‘‘(g) APPLICATION OF SECTION.—This section shall 

16 apply to qualified energy efficiency improvements installed 

17 after December 31, 2003, and before January 1, 2007.’’. 

18 (b) CONFORMING AMENDMENTS.—

19 (1) Subsection (a) of section 1016 of such Code 

20 is amended by striking ‘‘and’’ at the end of para21 graph (27), by striking the period at the end of 

22 paragraph (28) and inserting ‘‘, and’’, and by add23 ing at the end the following new paragraph: 
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1 ‘‘(29) to the extent provided in section 25C(f), 

2 in the case of amounts with respect to which a credit 

3 has been allowed under section 25C.’’. 

4 (2) The table of sections for subpart A of part 

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

6 amended by inserting after the item relating to sec7 tion 25B the following new item:

‘‘25C. Energy efficiency improvements to existing homes.’’.

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

9 this section shall apply to taxable years ending after De10 cember 31, 2003. 

11 SEC. 207. SPECIAL RULES FOR CREDIT FOR ELECTRICITY 

12 PRODUCED FROM CERTAIN RENEWABLE RE13 SOURCES. 

14 (a) ELIMINATION OF CERTAIN CREDIT REDUC15 TIONS.—Section 45(b)(3)(A) of the Internal Revenue 

16 Code of 1986 (relating to credit reduced for grants, tax17 exempt bonds, subsidized energy financing, and other 

18 credits) is amended—

19 (1) by striking clause (ii), 

20 (2) by redesignating clauses (iii) and (iv) as 

21 clauses (ii) and (iii), 

22 (3) by inserting ‘‘(other than proceeds of an 

23 issue of State or local government obligations the in24 terest on which is exempt from tax under section 

25 103, or any loan, debt, or other obligation incurred 
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1 under subchapter I of chapter 31 of title 7 of the 

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

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

4 the Energy Tax Incentives Act)’’ after ‘‘project’’ in 

5 clause (ii) (as so redesignated), 

6 (4) by adding at the end the following new sen7 tence: ‘‘This paragraph shall not apply with respect 

8 to any facility described in subsection (d)(2)(A)(ii).’’, 

9 and 

10 (5) by striking ‘‘tax-exempt bonds,’’ in the 

11 heading and inserting ‘‘certain’’. 

12 (b) TREATMENT OF PERSONS NOT ABLE TO USE EN13 TIRE CREDIT.—Section 45(e) of such Code (relating to 

14 definitions and special rules), as redesignated by section 

15 201(b)(1), is amended by adding at the end the following 

16 new paragraph: 

17 ‘‘(8) TREATMENT OF PERSONS NOT ABLE TO

18 USE ENTIRE CREDIT.—

19 ‘‘(A) ALLOWANCE OF CREDIT.—

20 ‘‘(i) IN GENERAL.—Except as other21 wise provided in this subsection—

22 ‘‘(I) any credit allowable under 

23 subsection (a) with respect to a quali24 fied facility owned by a person de25 scribed in clause (ii) may be trans-
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1 ferred or used as provided in this 

2 paragraph, and 

3 ‘‘(II) the determination as to 

4 whether the credit is allowable shall 

5 be made without regard to the tax-ex6 empt status of the person. 

7 ‘‘(ii) PERSONS DESCRIBED.—A person 

8 is described in this clause if the person 

9 is—

10 ‘‘(I) an organization described in 

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

12 from tax under section 501(a), 

13 ‘‘(II) an organization described 

14 in section 1381(a)(2)(C), 

15 ‘‘(III) a public utility (as defined 

16 in section 136(c)(2)(B)), which is ex17 empt from income tax under this sub18 title, 

19 ‘‘(IV) any State or political sub20 division thereof, the District of Co21 lumbia, any possession of the United 

22 States, or any agency or instrumen23 tality of any of the foregoing, 

24 ‘‘(V) any Indian tribal govern25 ment (within the meaning of section 
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1 7871) or any agency or instrumen2 tality thereof, or 

3 ‘‘(VI) the Tennessee Valley Au4 thority. 

5 ‘‘(B) TRANSFER OF CREDIT.—

6 ‘‘(i) IN GENERAL.—A person de7 scribed in subclause (I), (II), (III), (IV), or 

8 (V) of subparagraph (A)(ii) may transfer 

9 any credit to which subparagraph (A)(i) 

10 applies through an assignment to any 

11 other person not described in subpara12 graph (A)(ii). Such transfer may be re13 voked only with the consent of the Sec14 retary. 

15 ‘‘(ii) REGULATIONS.—The Secretary 

16 shall prescribe such regulations as nec17 essary to ensure that any credit described 

18 in clause (i) is assigned once and not reas19 signed by such other person. 

20 ‘‘(iii) TRANSFER PROCEEDS TREATED

21 AS ARISING FROM ESSENTIAL GOVERN22 MENT FUNCTION.—Any proceeds derived 

23 by a person described in subclause (III), 

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

25 the transfer of any credit under clause (i) 
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1 shall be treated as arising from the exer2 cise of an essential government function. 

3 ‘‘(C) USE OF CREDIT AS AN OFFSET.—

4 Notwithstanding any other provision of law, in 

5 the case of a person described in subclause (I), 

6 (II), or (V) of subparagraph (A)(ii), any credit 

7 to which subparagraph (A)(i) applies may be 

8 applied by such person, to the extent provided 

9 by the Secretary of Agriculture, as a prepay10 ment of any loan, debt, or other obligation the 

11 entity has incurred under subchapter I of chap12 ter 31 of title 7 of the Rural Electrification Act 

13 of 1936 (7 U.S.C. 901 et seq.), as in effect on 

14 the date of the enactment of the Energy Tax 

15 Incentives Act. 

16 ‘‘(D) USE BY TVA.—

17 ‘‘(i) IN GENERAL.—Notwithstanding 

18 any other provision of law, in the case of 

19 a person described in subparagraph 

20 (A)(ii)(VI), any credit to which subpara21 graph (A)(i) applies may be applied as a 

22 credit against the payments required to be 

23 made in any fiscal year under section 

24 15d(e) of the Tennessee Valley Authority 

25 Act of 1933 (16 U.S.C. 831n–4(e)) as an 
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1 annual return on the appropriations invest2 ment and an annual repayment sum. 

3 ‘‘(ii) TREATMENT OF CREDITS.—The 

4 aggregate amount of credits described in 

5 subparagraph (A)(i) with respect to such 

6 person shall be treated in the same manner 

7 and to the same extent as if such credits 

8 were a payment in cash and shall be ap9 plied first against the annual return on the 

10 appropriations investment. 

11 ‘‘(iii) CREDIT CARRYOVER.—With re12 spect to any fiscal year, if the aggregate 

13 amount of credits described subparagraph 

14 (A)(i) with respect to such person exceeds 

15 the aggregate amount of payment obliga16 tions described in clause (i), the excess 

17 amount shall remain available for applica18 tion as credits against the amounts of such 

19 payment obligations in succeeding fiscal 

20 years in the same manner as described in 

21 this subparagraph. 

22 ‘‘(E) CREDIT NOT INCOME.—Any transfer 

23 under subparagraph (B) or use under subpara24 graph (C) of any credit to which subparagraph 
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1 (A)(i) applies shall not be treated as income for 

2 purposes of section 501(c)(12). 

3 ‘‘(F) TREATMENT OF UNRELATED PER4 SONS.—For purposes of subsection (a)(2)(B), 

5 sales of electricity among and between persons 

6 described in subparagraph (A)(ii) shall be treat7 ed as sales between unrelated parties.’’. 

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

9 this section shall apply to electricity produced and sold 

10 after December 31, 2004, in taxable years ending after 

11 such date. 

12 SEC. 208. ALCOHOL AND BIODIESEL EXCISE TAX CREDIT 

13 AND EXTENSION OF ALCOHOL FUELS IN14 COME TAX CREDIT. 

15 (a) IN GENERAL.—Subchapter B of chapter 65 of the 

16 Internal Revenue Code of 1986 (relating to rules of special 

17 application) is amended by inserting after section 6425 

18 the following new section: 

19 ‘‘SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL 

20 MIXTURES. 

21 ‘‘(a) ALLOWANCE OF CREDITS.—There shall be al22 lowed as a credit against the tax imposed by section 4081 

23 an amount equal to the sum of—

24 ‘‘(1) the alcohol fuel mixture credit, plus 

25 ‘‘(2) the biodiesel mixture credit. 
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1 ‘‘(b) ALCOHOL FUEL MIXTURE CREDIT.—

2 ‘‘(1) IN GENERAL.—For purposes of this sec3 tion, the alcohol fuel mixture credit is the product 

4 of the applicable amount and the number of gallons 

5 of alcohol used by the taxpayer in producing any al6 cohol fuel mixture for sale or use in a trade or busi7 ness of the taxpayer. 

8 ‘‘(2) APPLICABLE AMOUNT.—For purposes of 

9 this subsection—

10 ‘‘(A) IN GENERAL.—Except as provided in 

11 subparagraph (B), the applicable amount is 52 

12 cents (51 cents in the case of any sale or use 

13 after 2004). 

14 ‘‘(B) MIXTURES NOT CONTAINING ETH15 ANOL.—In the case of an alcohol fuel mixture 

16 in which none of the alcohol consists of ethanol, 

17 the applicable amount is 60 cents. 

18 ‘‘(3) ALCOHOL FUEL MIXTURE.—For purposes 

19 of this subsection, the term ‘alcohol fuel mixture’ 

20 means a mixture of alcohol and a taxable fuel 

21 which—

22 ‘‘(A) is sold by the taxpayer producing 

23 such mixture to any person for use as a fuel, 

24 ‘‘(B) is used as a fuel by the taxpayer pro25 ducing such mixture, or 
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1 ‘‘(C) is removed from the refinery by a 

2 person producing such mixture. 

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

4 this subsection—

5 ‘‘(A) ALCOHOL.—The term ‘alcohol’ in6 cludes methanol and ethanol but does not in7 clude—

8 ‘‘(i) alcohol produced from petroleum, 

9 natural gas, or coal (including peat), or 

10 ‘‘(ii) alcohol with a proof of less than 

11 190 (determined without regard to any 

12 added denaturants). 

13 Such term also includes an alcohol gallon equiv14 alent of ethyl tertiary butyl ether or other 

15 ethers produced from such alcohol. 

16 ‘‘(B) TAXABLE FUEL.—The term ‘taxable 

17 fuel’ has the meaning given such term by sec18 tion 4083(a)(1). 

19 ‘‘(c) BIODIESEL MIXTURE CREDIT.—

20 ‘‘(1) IN GENERAL.—For purposes of this sec21 tion, the biodiesel mixture credit is the product of 

22 the applicable amount and the number of gallons of 

23 biodiesel used by the taxpayer in producing any bio24 diesel mixture for sale or use in a trade or business 

25 of the taxpayer. 
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1 ‘‘(2) APPLICABLE AMOUNT.—For purposes of 

2 this subsection—

3 ‘‘(A) IN GENERAL.—Except as provided in 

4 subparagraph (B), the applicable amount is 50 

5 cents. 

6 ‘‘(B) AMOUNT FOR AGRI-BIODIESEL.—In 

7 the case of any biodiesel which is agri-biodiesel, 

8 the applicable amount is $1.00. 

9 ‘‘(3) BIODIESEL MIXTURE.—For purposes of 

10 this section, the term ‘biodiesel mixture’ means a 

11 mixture of biodiesel and diesel fuel (as defined in 

12 section 4083(a)(3)), determined without regard to 

13 any use of kerosene, which—

14 ‘‘(A) is sold by the taxpayer producing 

15 such mixture to any person for use as a fuel, 

16 ‘‘(B) is used as a fuel by the taxpayer pro17 ducing such mixture, or 

18 ‘‘(C) is removed from the refinery by a 

19 person producing such mixture. 

20 ‘‘(4) CERTIFICATION FOR BIODIESEL.—No 

21 credit shall be allowed under this section unless the 

22 taxpayer obtains a certification (in such form and 

23 manner as prescribed by the Secretary) from the 

24 producer of the biodiesel which identifies the product 
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1 produced and the percentage of biodiesel and agri2 biodiesel in the product. 

3 ‘‘(d) MIXTURE NOT USED AS A FUEL, ETC.—

4 ‘‘(1) IMPOSITION OF TAX.—If—

5 ‘‘(A) any credit was determined under this 

6 section with respect to alcohol or biodiesel used 

7 in the production of any alcohol fuel mixture or 

8 biodiesel mixture, respectively, and 

9 ‘‘(B) any person—

10 ‘‘(i) separates the alcohol or biodiesel 

11 from the mixture, or 

12 ‘‘(ii) without separation, uses the mix13 ture other than as a fuel, 

14 then there is hereby imposed on such person a 

15 tax equal to the product of the applicable 

16 amount and the number of gallons of such alco17 hol or biodiesel. 

18 ‘‘(2) APPLICABLE LAWS.—All provisions of law, 

19 including penalties, shall, insofar as applicable and 

20 not inconsistent with this section, apply in respect of 

21 any tax imposed under paragraph (1) as if such tax 

22 were imposed by section 4081 and not by this sec23 tion. 
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1 ‘‘(e) COORDINATION WITH EXEMPTION FROM EX2 CISE TAX.—Rules similar to the rules under section 40(c) 

3 shall apply for purposes of this section.’’. 

4 (b) REGISTRATION REQUIREMENT.—Section 

5 4101(a)(1) (relating to registration), as amended by sec6 tions 871 and 880 of this Act, is amended by inserting 

7 ‘‘and every person producing or importing biodiesel (as de8 fined in section 40A(d)(1)) or alcohol (as defined in sec9 tion 6426(b)(4)(A))’’ after ‘‘4081’’. 

10 (c) ADDITIONAL AMENDMENTS.—

11 (1) Section 40(c) of such Code is amended by 

12 striking ‘‘subsection (b)(2), (k), or (m) of section 

13 4041, section 4081(c), or section 4091(c)’’ and in14 serting ‘‘section 4041(b)(2), section 6426, or section 

15 6427(e)’’. 

16 (2) Paragraph (4) of section 40(d) of such Code 

17 is amended to read as follows: 

18 ‘‘(4) VOLUME OF ALCOHOL.—For purposes of 

19 determining under subsection (a) the number of gal20 lons of alcohol with respect to which a credit is al21 lowable under subsection (a), the volume of alcohol 

22 shall include the volume of any denaturant (includ23 ing gasoline) which is added under any formulas ap24 proved by the Secretary to the extent that such de-
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1 naturants do not exceed 5 percent of the volume of 

2 such alcohol (including denaturants).’’. 

3 (3) Section 40(e) of such Code is hereby re4 pealed. 

5 (4) Section 40(h) of such Code is amended—

6 (A) by striking ‘‘through 2007’’ in para7 graph (1) and inserting ‘‘and thereafter’’, and 

8 (B) by striking paragraph (2) and insert9 ing the following: 

10 ‘‘(2) AMOUNTS.—For purposes of paragraph 

11 (1), the blender amount is 51 cents and the low12 proof blender amount is 37.78 cents.’’. 

13 (5) Section 4041(b)(2)(B) of such Code is 

14 amended by striking ‘‘a substance other than petro15 leum or natural gas’’ and inserting ‘‘coal (including 

16 peat)’’. 

17 (6) Section 4041 of such Code is amended by 

18 striking subsection (k). 

19 (7) Section 4081 of such Code is amended by 

20 striking subsection (c). 

21 (8) Paragraph (2) of section 4083(a) of such 

22 Code is amended to read as follows: 

23 ‘‘(2) GASOLINE.—The term ‘gasoline’—

24 ‘‘(A) includes any gasoline blend, other 

25 than qualified methanol or ethanol fuel (as de-
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1 fined in section 4041(b)(2)(B)), partially ex2 empt methanol or ethanol fuel (as defined in 

3 section 4041(m)(2)), or a denatured alcohol, 

4 and 

5 ‘‘(B) includes, to the extent prescribed in 

6 regulations—

7 ‘‘(i) any gasoline blend stock, and 

8 ‘‘(ii) any product commonly used as 

9 an additive in gasoline (other than alco10 hol). 

11 For purposes of subparagraph (B)(i), the term ‘gas12 oline blend stock’ means any petroleum product 

13 component of gasoline.’’. 

14 (9) Section 6427 of such Code is amended by 

15 inserting after subsection (d) the following new sub16 section: 

17 ‘‘(e) ALCOHOL OR BIODIESEL USED TO PRODUCE

18 ALCOHOL FUEL AND BIODIESEL MIXTURES OR USED AS

19 FUELS.—Except as provided in subsection (k)—

20 ‘‘(1) USED TO PRODUCE A MIXTURE.—If any 

21 person produces a mixture described in section 6426 

22 in such person’s trade or business, the Secretary 

23 shall pay (without interest) to such person an 

24 amount equal to the alcohol fuel mixture credit or 
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1 the biodiesel mixture credit with respect to such mix2 ture. 

3 ‘‘(2) USED AS FUEL.—If alcohol (as defined in 

4 section 40(d)(1)) or biodiesel (as defined in section 

5 40A(d)(1)) or agri-biodiesel (as defined in section 

6 40A(d)(2)) which is not in a mixture described in 

7 section 6426—

8 ‘‘(A) is used by any person as a fuel in a 

9 trade or business, or 

10 ‘‘(B) is sold by any person at retail to an11 other person and placed in the fuel tank of such 

12 person’s vehicle, 

13 the Secretary shall pay (without interest) to such 

14 person an amount equal to the alcohol credit (as de15 termined under section 40(b)(2)) or the biodiesel 

16 credit (as determined under section 40A(b)(2)) with 

17 respect to such fuel. 

18 ‘‘(3) COORDINATION WITH OTHER REPAYMENT

19 PROVISIONS.—No amount shall be payable under 

20 paragraph (1) with respect to any mixture with re21 spect to which an amount is allowed as a credit 

22 under section 6426.’’. 

23 (10) Section 6427(i)(3) of such Code is amend24 ed—
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1 (A) by striking ‘‘subsection (f)’’ both 

2 places it appears in subparagraph (A) and in3 serting ‘‘subsection (e)(1)’’, 

4 (B) by striking ‘‘gasoline, diesel fuel, or 

5 kerosene used to produce a qualified alcohol 

6 mixture (as defined in section 4081(c)(3))’’ in 

7 subparagraph (A) and inserting ‘‘a mixture de8 scribed in section 6426’’, 

9 (C) by adding at the end of subparagraph 

10 (A) the following new flush sentence: ‘‘In the 

11 case of an electronic claim, this subparagraph 

12 shall be applied without regard to clause (i).’’, 

13 (D) by striking ‘‘subsection (f)(1)’’ in sub14 paragraph (B) and inserting ‘‘subsection 

15 (e)(1)’’, 

16 (E) by striking ‘‘20 days of the date of the 

17 filing of such claim’’ in subparagraph (B) and 

18 inserting ‘‘45 days of the date of the filing of 

19 such claim (20 days in the case of an electronic 

20 claim)’’, and 

21 (F) by striking ‘‘alcohol mixture’’ in the 

22 heading and inserting ‘‘alcohol fuel and bio23 diesel mixture’’. 

24 (11) Section 9503(b)(4) of such Code is amend25 ed—
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1 (A) by adding ‘‘or’’ at the end of subpara2 graph (C), 

3 (B) by striking the comma at the end of 

4 subparagraph (D)(iii) and inserting a period, 

5 and 

6 (C) by striking subparagraphs (E) and 

7 (F). 

8 (12) The table of sections for subchapter B of 

9 chapter 65 of such Code is amended by inserting 

10 after the item relating to section 6425 the following 

11 new item:

‘‘6426. Credit for alcohol fuel and biodiesel mixtures.’’.

12 (13) TARIFF SCHEDULE.—Headings 

13 9901.00.50 and 9901.00.52 of the Harmonized Tar14 iff Schedule of the United States (19 U.S.C. 3007) 

15 are each amended in the effective period column by 

16 striking ‘‘Before 10/1/2007,’’ each place it appears. 

17 (d) EFFECTIVE DATES.—

18 (1) IN GENERAL.—Except as otherwise pro19 vided in this subsection, the amendments made by 

20 this section shall apply to fuel sold or used after 

21 September 30, 2004. 

22 (2) REGISTRATION REQUIREMENT.—The 

23 amendment made by subsection (b) shall take effect 

24 on April 1, 2005. 
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1 (3) EXTENSION OF ALCOHOL FUELS CREDIT.—

2 The amendments made by paragraphs (3), (4), and 

3 (13) of subsection (c) shall take effect on the date 

4 of the enactment of this Act. 

5 (4) REPEAL OF GENERAL FUND RETENTION OF

6 CERTAIN ALCOHOL FUELS TAXES.—The amend7 ments made by subsection (c)(12) shall apply to fuel 

8 sold or used after September 30, 2003. 

9 (e) FORMAT FOR FILING.—The Secretary of the 

10 Treasury shall describe the electronic format for filing 

11 claims described in section 6427(i)(3)(B) of the Internal 

12 Revenue Code of 1986 (as amended by subsection 

13 (c)(10)(C)) not later than September 30, 2004. 

14 SEC. 209. BIODIESEL INCOME TAX CREDIT. 

15 (a) IN GENERAL.—Subpart D of part IV of sub16 chapter A of chapter 1 of the Internal Revenue Code of 

17 1986 (relating to business related credits) is amended by 

18 inserting after section 40 the following new section: 

19 ‘‘SEC. 40A. BIODIESEL USED AS FUEL. 

20 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

21 the biodiesel fuels credit determined under this section for 

22 the taxable year is an amount equal to the sum of—

23 ‘‘(1) the biodiesel mixture credit, plus 

24 ‘‘(2) the biodiesel credit. 
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1 ‘‘(b) DEFINITION OF BIODIESEL MIXTURE CREDIT

2 AND BIODIESEL CREDIT.—For purposes of this section—

3 ‘‘(1) BIODIESEL MIXTURE CREDIT.—

4 ‘‘(A) IN GENERAL.—The biodiesel mixture 

5 credit of any taxpayer for any taxable year is 

6 50 cents for each gallon of biodiesel used by the 

7 taxpayer in the production of a qualified bio8 diesel mixture. 

9 ‘‘(B) QUALIFIED BIODIESEL MIXTURE.—

10 The term ‘qualified biodiesel mixture’ means a 

11 mixture of biodiesel and diesel fuel (as defined 

12 in section 4083(a)(3)), determined without re13 gard to any use of kerosene, which—

14 ‘‘(i) is sold by the taxpayer producing 

15 such mixture to any person for use as a 

16 fuel, or 

17 ‘‘(ii) is used as a fuel by the taxpayer 

18 producing such mixture. 

19 ‘‘(C) SALE OR USE MUST BE IN TRADE OR

20 BUSINESS, ETC.—Biodiesel used in the produc21 tion of a qualified biodiesel mixture shall be 

22 taken into account—

23 ‘‘(i) only if the sale or use described 

24 in subparagraph (B) is in a trade or busi25 ness of the taxpayer, and 
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1 ‘‘(ii) for the taxable year in which 

2 such sale or use occurs. 

3 ‘‘(D) CASUAL OFF-FARM PRODUCTION NOT

4 ELIGIBLE.—No credit shall be allowed under 

5 this section with respect to any casual off-farm 

6 production of a qualified biodiesel mixture. 

7 ‘‘(2) BIODIESEL CREDIT.—

8 ‘‘(A) IN GENERAL.—The biodiesel credit of 

9 any taxpayer for any taxable year is 50 cents 

10 for each gallon of biodiesel which is not in a 

11 mixture with diesel fuel and which during the 

12 taxable year—

13 ‘‘(i) is used by the taxpayer as a fuel 

14 in a trade or business, or 

15 ‘‘(ii) is sold by the taxpayer at retail 

16 to a person and placed in the fuel tank of 

17 such person’s vehicle. 

18 ‘‘(B) USER CREDIT NOT TO APPLY TO BIO19 DIESEL SOLD AT RETAIL.—No credit shall be 

20 allowed under subparagraph (A)(i) with respect 

21 to any biodiesel which was sold in a retail sale 

22 described in subparagraph (A)(ii). 

23 ‘‘(3) CREDIT FOR AGRI-BIODIESEL.—In the 

24 case of any biodiesel which is agri-biodiesel, para-
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1 graphs (1)(A) and (2)(A) shall be applied by sub2 stituting ‘$1.00’ for ‘50 cents’. 

3 ‘‘(4) CERTIFICATION FOR BIODIESEL.—No 

4 credit shall be allowed under this section unless the 

5 taxpayer obtains a certification (in such form and 

6 manner as prescribed by the Secretary) from the 

7 producer or importer of the biodiesel which identifies 

8 the product produced and the percentage of biodiesel 

9 and agri-biodiesel in the product. 

10 ‘‘(c) COORDINATION WITH CREDIT AGAINST EXCISE

11 TAX.—The amount of the credit determined under this 

12 section with respect to any biodiesel shall be properly re13 duced to take into account any benefit provided with re14 spect to such biodiesel solely by reason of the application 

15 of section 6426 or 6427(e). 

16 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur17 poses of this section—

18 ‘‘(1) BIODIESEL.—The term ‘biodiesel’ means 

19 the monoalkyl esters of long chain fatty acids de20 rived from plant or animal matter which meet—

21 ‘‘(A) the registration requirements for 

22 fuels and fuel additives established by the Envi23 ronmental Protection Agency under section 211 

24 of the Clean Air Act (42 U.S.C. 7545), and 
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1 ‘‘(B) the requirements of the American So2 ciety of Testing and Materials D6751. 

3 ‘‘(2) AGRI-BIODIESEL.—The term ‘agri-bio4 diesel’ means biodiesel derived solely from virgin oils, 

5 including esters derived from virgin vegetable oils 

6 from corn, soybeans, sunflower seeds, cottonseeds, 

7 canola, crambe, rapeseeds, safflowers, flaxseeds, rice 

8 bran, and mustard seeds, and from animal fats. 

9 ‘‘(3) MIXTURE OR BIODIESEL NOT USED AS A

10 FUEL, ETC.—

11 ‘‘(A) MIXTURES.—If—

12 ‘‘(i) any credit was determined under 

13 this section with respect to biodiesel used 

14 in the production of any qualified biodiesel 

15 mixture, and 

16 ‘‘(ii) any person—

17 ‘‘(I) separates the biodiesel from 

18 the mixture, or 

19 ‘‘(II) without separation, uses the 

20 mixture other than as a fuel, 

21 then there is hereby imposed on such person a 

22 tax equal to the product of the rate applicable 

23 under subsection (b)(1)(A) and the number of 

24 gallons of such biodiesel in such mixture. 

25 ‘‘(B) BIODIESEL.—If—
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1 ‘‘(i) any credit was determined under 

2 this section with respect to the retail sale 

3 of any biodiesel, and 

4 ‘‘(ii) any person mixes such biodiesel 

5 or uses such biodiesel other than as a fuel, 

6 then there is hereby imposed on such person a 

7 tax equal to the product of the rate applicable 

8 under subsection (b)(2)(A) and the number of 

9 gallons of such biodiesel. 

10 ‘‘(C) APPLICABLE LAWS.—All provisions of 

11 law, including penalties, shall, insofar as appli12 cable and not inconsistent with this section, 

13 apply in respect of any tax imposed under sub14 paragraph (A) or (B) as if such tax were im15 posed by section 4081 and not by this chapter. 

16 ‘‘(4) PASS-THRU IN THE CASE OF ESTATES AND

17 TRUSTS.—Under regulations prescribed by the Sec18 retary, rules similar to the rules of subsection (d) of 

19 section 52 shall apply.’’. 

20 (b) CREDIT TREATED AS PART OF GENERAL BUSI21 NESS CREDIT.—Section 38(b) of such Code (relating to 

22 current year business credit) is amended by inserting after 

23 paragraph (3) the end the following new paragraph (and 

24 redesignating the succeeding paragraphs accordingly): 
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1 ‘‘(4) the biodiesel fuels credit determined under 

2 section 40A(a),’’. 

3 (c) CONFORMING AMENDMENTS.—

4 (1)(A) Section 87 of such Code, as amended by 

5 this Act, is amended—

6 (i) by striking ‘‘and’’ at the end of para7 graph (1), 

8 (ii) by striking the period at the end of 

9 paragraph (2) and inserting ‘‘, and’’, 

10 (iii) by adding at the end the following new 

11 paragraph: 

12 ‘‘(3) the biodiesel fuels credit determined with 

13 respect to the taxpayer for the taxable year under 

14 section 40A(a).’’, and 

15 (iv) by striking ‘‘FUEL CREDIT’’ in the head16 ing and inserting ‘‘AND BIODIESEL FUELS CRED17 ITS’’. 

18 (B) The item relating to section 87 in the table 

19 of sections for part II of subchapter B of chapter 1 

20 of such Code is amended by striking ‘‘fuel credit’’ 

21 and inserting ‘‘and biodiesel fuels credits’’. 

22 (2) Section 196(c) of such Code is amended by 

23 striking ‘‘and’’ at the end of paragraph (10), by 

24 striking the period at the end of paragraph (11) and 
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1 inserting ‘‘, and’’, and by adding at the end the fol2 lowing new paragraph: 

3 ‘‘(12) the biodiesel fuels credit determined 

4 under section 40A(a).’’. 

5 (3) The table of sections for subpart D of part 

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

7 amended by adding after the item relating to section 

8 40 the following new item:

‘‘40A. Biodiesel used as fuel.’’.

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

10 this section shall apply to fuel produced, and sold or used, 

11 after September 30, 2004, in taxable years ending after 

12 such date. 

13 SEC. 210. EXPANSION OF QUALIFIED SMALL-ISSUE BOND 

14 PROGRAM; TREATMENT OF RENEWABLE 

15 FUEL PRODUCTION FACILITIES. 

16 (a) EXPANSION.—

17 (1) IN GENERAL.—Clause (i) of section 

18 144(a)(4)(A) of the Internal Revenue Code of 1986 

19 (relating to $10,000,000 limit in certain cases) is 

20 amended by striking ‘‘$10,000,000’’ and inserting 

21 ‘‘$20,000,000’’. 

22 (2) INFLATION ADJUSTMENT.—Paragraph (4) 

23 of section 144(a) of such Code is amended by adding 

24 at the end the following new subparagraph: 
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1 ‘‘(G) INFLATION ADJUSTMENT OF

2 $20,000,000 LIMIT.—In the case of obligations 

3 issued during any calendar year after 2004, the 

4 $20,000,000 amount in subparagraph (A) shall 

5 be increased by an amount equal to—

6 ‘‘(i) such dollar amount, multiplied by 

7 ‘‘(ii) the cost-of-living adjustment de8 termined under section 1(f)(3) for the cal9 endar year in which the taxable year be10 gins, by substituting ‘calendar year 2003’ 

11 for ‘calendar year 1992’ in subparagraph 

12 (B) thereof. 

13 If any amount as increased under clause (i) is 

14 not a multiple of $10,000, such amount shall be 

15 rounded to the nearest multiple of $10,000.’’

16 (3) CLERICAL AMENDMENT.—The heading of 

17 paragraph (4) of section 144(a) of such Code is 

18 amended by striking ‘‘$10,000,000’’ and inserting 

19 ‘‘$20,000,000’’. 

20 (4) EFFECTIVE DATE.—The amendments made 

21 by this subsection shall apply to—

22 (A) obligations issued after the date of the 

23 enactment of this Act, and 
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1 (B) capital expenditures made after such 

2 date with respect to obligations issued on or be3 fore such date. 

4 (b) TREATMENT OF RENEWABLE FUEL PRODUCTION

5 FACILITIES.—

6 (1) IN GENERAL.—Paragraph (12) of section 

7 144(a) of such Code is amended by adding at the 

8 end the following new subparagraph: 

9 ‘‘(D) RENEWABLE FUEL PRODUCTION FA10 CILITY.—For purposes of this paragraph, the 

11 term ‘manufacturing property’ includes any fa12 cility described in paragraph (4)(F).’’

13 (2) EFFECTIVE DATE.—The amendments made 

14 by this subsection shall apply to bonds issued after 

15 the date of the enactment of this Act. 

16 SEC. 211. ALTERNATIVE MOTOR VEHICLE CREDIT. 

17 (a) IN GENERAL.—Subpart B of part IV of sub18 chapter A of chapter 1 of the Internal Revenue Code of 

19 1986 (relating to foreign tax credit, etc.) is amended by 

20 adding at the end the following new section: 

21 ‘‘SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT. 

22 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al23 lowed as a credit against the tax imposed by this chapter 

24 for the taxable year an amount equal to the sum of—
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1 ‘‘(1) the new qualified fuel cell motor vehicle 

2 credit determined under subsection (b), 

3 ‘‘(2) the new qualified hybrid motor vehicle 

4 credit determined under subsection (c), and 

5 ‘‘(3) the new qualified alternative fuel motor ve6 hicle credit determined under subsection (d). 

7 ‘‘(b) NEW QUALIFIED FUEL CELL MOTOR VEHICLE

8 CREDIT.—

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

10 (a), the new qualified fuel cell motor vehicle credit 

11 determined under this subsection with respect to a 

12 new qualified fuel cell motor vehicle placed in service 

13 by the taxpayer during the taxable year is—

14 ‘‘(A) $4,000, if such vehicle has a gross ve15 hicle weight rating of not more than 8,500 

16 pounds, 

17 ‘‘(B) $10,000, if such vehicle has a gross 

18 vehicle weight rating of more than 8,500 

19 pounds but not more than 14,000 pounds, 

20 ‘‘(C) $20,000, if such vehicle has a gross 

21 vehicle weight rating of more than 14,000 

22 pounds but not more than 26,000 pounds, and 

23 ‘‘(D) $40,000, if such vehicle has a gross 

24 vehicle weight rating of more than 26,000 

25 pounds. 
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1 ‘‘(2) INCREASE FOR FUEL EFFICIENCY.—

2 ‘‘(A) IN GENERAL.—The amount deter3 mined under paragraph (1)(A) with respect to 

4 a new qualified fuel cell motor vehicle which is 

5 a passenger automobile or light truck shall be 

6 increased by—

7 ‘‘(i) $1,000, if such vehicle achieves at 

8 least 150 percent but less than 175 per9 cent of the 2002 model year city fuel econ10 omy, 

11 ‘‘(ii) $1,500, if such vehicle achieves 

12 at least 175 percent but less than 200 per13 cent of the 2002 model year city fuel econ14 omy, 

15 ‘‘(iii) $2,000, if such vehicle achieves 

16 at least 200 percent but less than 225 per17 cent of the 2002 model year city fuel econ18 omy, 

19 ‘‘(iv) $2,500, if such vehicle achieves 

20 at least 225 percent but less than 250 per21 cent of the 2002 model year city fuel econ22 omy, 

23 ‘‘(v) $3,000, if such vehicle achieves 

24 at least 250 percent but less than 275 per-
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1 cent of the 2002 model year city fuel econ2 omy, 

3 ‘‘(vi) $3,500, if such vehicle achieves 

4 at least 275 percent but less than 300 per5 cent of the 2002 model year city fuel econ6 omy, and 

7 ‘‘(vii) $4,000, if such vehicle achieves 

8 at least 300 percent of the 2002 model 

9 year city fuel economy. 

10 ‘‘(B) 2002 MODEL YEAR CITY FUEL ECON11 OMY.—For purposes of subparagraph (A), the 

12 2002 model year city fuel economy with respect 

13 to a vehicle shall be determined in accordance 

14 with the following tables: 

15 ‘‘(i) In the case of a passenger auto16 mobile: 

‘‘If vehicle inertia weight class is: The 2002 model 

year city fuel 

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. 
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1 ‘‘(ii) In the case of a light truck: 

‘‘If vehicle inertia weight class is: The 2002 model 

year city fuel 

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. 

2 ‘‘(C) VEHICLE INERTIA WEIGHT CLASS.— 

3 For purposes of subparagraph (B), the term 

4 ‘vehicle inertia weight class’ has the same 

5 meaning as when defined in regulations pre6 scribed by the Administrator of the Environ7 mental Protection Agency for purposes of the 

8 administration of title II of the Clean Air Act 

9 (42 U.S.C. 7521 et seq.). 

10 ‘‘(3) NEW QUALIFIED FUEL CELL MOTOR VEHI11 CLE.—For purposes of this subsection, the term 

12 ‘new qualified fuel cell motor vehicle’ means a motor 

13 vehicle— 

14 ‘‘(A) which is propelled by power derived 

15 from 1 or more cells which convert chemical en16 ergy directly into electricity by combining oxy-
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1 gen with hydrogen fuel which is stored on board 

2 the vehicle in any form and may or may not re3 quire reformation prior to use, 

4 ‘‘(B) which, in the case of a passenger 

5 automobile or light truck— 

6 ‘‘(i) for 2002 and later model vehicles, 

7 has received a certificate of conformity 

8 under the Clean Air Act and meets or ex9 ceeds the equivalent qualifying California 

10 low emission vehicle standard under sec11 tion 243(e)(2) of the Clean Air Act for 

12 that make and model year, and 

13 ‘‘(ii) for 2004 and later model vehi14 cles, has received a certificate that such ve15 hicle meets or exceeds the Bin 5 Tier II 

16 emission level established in regulations 

17 prescribed by the Administrator of the En18 vironmental Protection Agency under sec19 tion 202(i) of the Clean Air Act for that 

20 make and model year vehicle, 

21 ‘‘(C) the original use of which commences 

22 with the taxpayer, 

23 ‘‘(D) which is acquired for use or lease by 

24 the taxpayer and not for resale, and 

25 ‘‘(E) which is made by a manufacturer. 
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1 ‘‘(c) NEW QUALIFIED HYBRID MOTOR VEHICLE

2 CREDIT.— 

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

4 (a), the new qualified hybrid motor vehicle credit de5 termined under this subsection with respect to a new 

6 qualified hybrid motor vehicle placed in service by 

7 the taxpayer during the taxable year is the credit 

8 amount determined under paragraph (2). 

9 ‘‘(2) CREDIT AMOUNT.— 

10 ‘‘(A) IN GENERAL.—The credit amount de11 termined under this paragraph shall be deter12 mined in accordance with the following tables: 

13 ‘‘(i) In the case of a new qualified hy14 brid motor vehicle which is a passenger 

15 automobile, medium duty passenger vehi16 cle, or light truck and which provides the 

17 following percentage of the maximum 

18 available power: 

‘‘If percentage of the maximum available 

power is: 

The credit 

amount is: 

At least 4 percent but less than 10 percent ........... $250 

At least 10 percent but less than 20 percent ......... $500 

At least 20 percent but less than 30 percent ......... $750 

At least 30 percent ................................................. $1,000. 

19 ‘‘(ii) In the case of a new qualified hy20 brid motor vehicle which is a heavy duty 

21 hybrid motor vehicle and which provides 
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1 the following percentage of the maximum 

2 available power: 

3 ‘‘(I) If such vehicle has a gross 

4 vehicle weight rating of not more than 

5 14,000 pounds: 

‘‘If percentage of the maximum available 

power is: 

The credit 

amount is: 

At least 20 percent but less than 30 percent ......... $1,000 

At least 30 percent but less than 40 percent ......... $1,750 

At least 40 percent but less than 50 percent ......... $2,000 

At least 50 percent but less than 60 percent ......... $2,250 

At least 60 percent ................................................. $2,500. 

6 ‘‘(II) If such vehicle has a gross 

7 vehicle weight rating of more than 

8 14,000 but not more than 26,000 

9 pounds: 

‘‘If percentage of the maximum available 

power is: 

The credit 

amount is: 

At least 20 percent but less than 30 percent ......... $4,000 

At least 30 percent but less than 40 percent ......... $4,500 

At least 40 percent but less than 50 percent ......... $5,000 

At least 50 percent but less than 60 percent ......... $5,500 

At least 60 percent ................................................. $6,000. 

10 ‘‘(III) If such vehicle has a gross 

11 vehicle weight rating of more than 

12 26,000 pounds: 

‘‘If percentage of the maximum available 

power is: 

The credit 

amount is: 

At least 20 percent but less than 30 percent ......... $6,000 

At least 30 percent but less than 40 percent ......... $7,000 

At least 40 percent but less than 50 percent ......... $8,000 

At least 50 percent but less than 60 percent ......... $9,000 

At least 60 percent ................................................. $10,000. 
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1 ‘‘(B) INCREASE FOR FUEL EFFICIENCY.— 

2 ‘‘(i) AMOUNT.—The amount deter3 mined under subparagraph (A)(i) with re4 spect to a new qualified hybrid motor vehi5 cle which is a passenger automobile or 

6 light truck shall be increased by— 

7 ‘‘(I) $500, if such vehicle 

8 achieves at least 125 percent but less 

9 than 150 percent of the 2002 model 

10 year city fuel economy, 

11 ‘‘(II) $1,000, if such vehicle 

12 achieves at least 150 percent but less 

13 than 175 percent of the 2002 model 

14 year city fuel economy, 

15 ‘‘(III) $1,500, if such vehicle 

16 achieves at least 175 percent but less 

17 than 200 percent of the 2002 model 

18 year city fuel economy, 

19 ‘‘(IV) $2,000, if such vehicle 

20 achieves at least 200 percent but less 

21 than 225 percent of the 2002 model 

22 year city fuel economy, 

23 ‘‘(V) $2,500, if such vehicle 

24 achieves at least 225 percent but less 
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1 than 250 percent of the 2002 model 

2 year city fuel economy, and 

3 ‘‘(VI) $3,000, if such vehicle 

4 achieves at least 250 percent of the 

5 2002 model year city fuel economy. 

6 ‘‘(ii) 2002 MODEL YEAR CITY FUEL

7 ECONOMY.—For purposes of clause (i), the 

8 2002 model year city fuel economy with re9 spect to a vehicle shall be determined on a 

10 gasoline gallon equivalent basis as deter11 mined by the Administrator of the Envi12 ronmental Protection Agency using the ta13 bles provided in subsection (b)(2)(B) with 

14 respect to such vehicle. 

15 ‘‘(C) INCREASE FOR ACCELERATED EMIS16 SIONS PERFORMANCE.—The amount deter17 mined under subparagraph (A)(ii) with respect 

18 to an applicable heavy duty hybrid motor vehi19 cle shall be increased by the increased credit 

20 amount determined in accordance with the fol21 lowing tables: 

22 ‘‘(i) In the case of a vehicle which has 

23 a gross vehicle weight rating of not more 

24 than 14,000 pounds: 
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‘‘If the model year is: The increased 

credit amount 

is: 

2004 ....................................................................... $2,500 

2005 ....................................................................... $2,000 

2006 ....................................................................... $1,500. 

1 ‘‘(ii) In the case of a vehicle which 

2 has a gross vehicle weight rating of more 

3 than 14,000 pounds but not more than 

4 26,000 pounds: 

‘‘If the model year is: The increased 

credit amount 

is: 

2004 ....................................................................... $6,500 

2005 ....................................................................... $5,250 

2006 ....................................................................... $4,000. 

5 ‘‘(iii) In the case of a vehicle which 

6 has a gross vehicle weight rating of more 

7 than 26,000 pounds: 

‘‘If the model year is: The increased 

credit amount 

is: 

2004 ....................................................................... $10,000 

2005 ....................................................................... $8,000 

2006 ....................................................................... $6,000. 

8 ‘‘(D) DEFINITIONS RELATING TO CREDIT

9 AMOUNT.— 

10 ‘‘(i) APPLICABLE HEAVY DUTY HY11 BRID MOTOR VEHICLE.—For purposes of 

12 subparagraph (C), the term ‘applicable 

13 heavy duty hybrid motor vehicle’ means a 
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1 heavy duty hybrid motor vehicle which is 

2 powered by an internal combustion or heat 

3 engine which is certified as meeting the 

4 emission standards set in the regulations 

5 prescribed by the Administrator of the En6 vironmental Protection Agency for 2007 

7 and later model year diesel heavy duty en8 gines, or for 2008 and later model year 

9 ottocycle heavy duty engines, as applicable. 

10 ‘‘(ii) MAXIMUM AVAILABLE POWER.— 

11 ‘‘(I) PASSENGER AUTOMOBILE, 

12 MEDIUM DUTY PASSENGER VEHICLE, 

13 OR LIGHT TRUCK.—For purposes of 

14 subparagraph (A)(i), the term ‘max15 imum available power’ means the 

16 maximum power available from the re17 chargeable energy storage system, 

18 during a standard 10 second pulse 

19 power or equivalent test, divided by 

20 such maximum power and the SAE 

21 net power of the heat engine. 

22 ‘‘(II) HEAVY DUTY HYBRID

23 MOTOR VEHICLE.—For purposes of 

24 subparagraph (A)(ii), the term ‘max25 imum available power’ means the 
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1 maximum power available from the re2 chargeable energy storage system, 

3 during a standard 10 second pulse 

4 power or equivalent test, divided by 

5 the vehicle’s total traction power. The 

6 term ‘total traction power’ means the 

7 sum of the peak power from the re8 chargeable energy storage system and 

9 the heat engine peak power of the ve10 hicle, except that if such storage sys11 tem is the sole means by which the ve12 hicle can be driven, the total traction 

13 power is the peak power of such stor14 age system. 

15 ‘‘(3) NEW QUALIFIED HYBRID MOTOR VEHI16 CLE.—For purposes of this subsection— 

17 ‘‘(A) IN GENERAL.—The term ‘new quali18 fied hybrid motor vehicle’ means a motor vehi19 cle— 

20 ‘‘(i) which draws propulsion energy 

21 from onboard sources of stored energy 

22 which are both— 

23 ‘‘(I) an internal combustion or 

24 heat engine using consumable fuel, 

25 and 
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1 ‘‘(II) a rechargeable energy stor2 age system, 

3 ‘‘(ii) which, in the case of a passenger 

4 automobile, medium duty passenger vehi5 cle, or light truck— 

6 ‘‘(I) for 2002 and later model ve7 hicles, has received a certificate of 

8 conformity under the Clean Air Act 

9 and meets or exceeds the equivalent 

10 qualifying California low emission ve11 hicle standard under section 243(e)(2) 

12 of the Clean Air Act for that make 

13 and model year, and 

14 ‘‘(II) for 2004 and later model 

15 vehicles, has received a certificate that 

16 such vehicle meets or exceeds the Bin 

17 5 Tier II emission level established in 

18 regulations prescribed by the Adminis19 trator of the Environmental Protec20 tion Agency under section 202(i) of 

21 the Clean Air Act for that make and 

22 model year vehicle, 

23 ‘‘(iii) which, in the case of a heavy 

24 duty hybrid motor vehicle, has an internal 

25 combustion or heat engine which has re-
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1 ceived a certificate of conformity under the 

2 Clean Air Act as meeting the emission 

3 standards set in the regulations prescribed 

4 by the Administrator of the Environmental 

5 Protection Agency for 2004 through 2007 

6 model year diesel heavy duty engines or 

7 ottocycle heavy duty engines, as applicable, 

8 ‘‘(iv) the original use of which com9 mences with the taxpayer, 

10 ‘‘(v) which is acquired for use or lease 

11 by the taxpayer and not for resale, and 

12 ‘‘(vi) which is made by a manufac13 turer. 

14 ‘‘(B) CONSUMABLE FUEL.—For purposes 

15 of subparagraph (A)(i)(I), the term ‘consumable 

16 fuel’ means any solid, liquid, or gaseous matter 

17 which releases energy when consumed by an 

18 auxiliary power unit. 

19 ‘‘(4) HEAVY DUTY HYBRID MOTOR VEHICLE.— 

20 For purposes of this subsection, the term ‘heavy 

21 duty hybrid motor vehicle’ means a new qualified hy22 brid motor vehicle which has a gross vehicle weight 

23 rating of more than 8,500 pounds. Such term does 

24 not include a medium duty passenger vehicle. 
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1 ‘‘(d) NEW QUALIFIED ALTERNATIVE FUEL MOTOR

2 VEHICLE CREDIT.— 

3 ‘‘(1) ALLOWANCE OF CREDIT.—Except as pro4 vided in paragraph (5), the new qualified alternative 

5 fuel motor vehicle credit determined under this sub6 section is an amount equal to the applicable percent7 age of the incremental cost of any new qualified al8 ternative fuel motor vehicle placed in service by the 

9 taxpayer during the taxable year. 

10 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

11 of paragraph (1), the applicable percentage with re12 spect to any new qualified alternative fuel motor ve13 hicle is— 

14 ‘‘(A) 40 percent, plus 

15 ‘‘(B) 30 percent, if such vehicle— 

16 ‘‘(i) has received a certificate of con17 formity under the Clean Air Act and meets 

18 or exceeds the most stringent standard 

19 available for certification under the Clean 

20 Air Act for that make and model year vehi21 cle (other than a zero emission standard), 

22 or 

23 ‘‘(ii) has received an order certifying 

24 the vehicle as meeting the same require25 ments as vehicles which may be sold or 
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1 leased in California and meets or exceeds 

2 the most stringent standard available for 

3 certification under the State laws of Cali4 fornia (enacted in accordance with a waiv5 er granted under section 209(b) of the 

6 Clean Air Act) for that make and model 

7 year vehicle (other than a zero emission 

8 standard). 

9 For purposes of the preceding sentence, in the case 

10 of any new qualified alternative fuel motor vehicle 

11 which weighs more than 14,000 pounds gross vehicle 

12 weight rating, the most stringent standard available 

13 shall be such standard available for certification on 

14 the date of the enactment of the Energy Tax Incen15 tives Act. 

16 ‘‘(3) INCREMENTAL COST.—For purposes of 

17 this subsection, the incremental cost of any new 

18 qualified alternative fuel motor vehicle is equal to 

19 the amount of the excess of the manufacturer’s sug20 gested retail price for such vehicle over such price 

21 for a gasoline or diesel fuel motor vehicle of the 

22 same model, to the extent such amount does not ex23 ceed— 
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1 ‘‘(A) $5,000, if such vehicle has a gross ve2 hicle weight rating of not more than 8,500 

3 pounds, 

4 ‘‘(B) $10,000, if such vehicle has a gross 

5 vehicle weight rating of more than 8,500 

6 pounds but not more than 14,000 pounds, 

7 ‘‘(C) $25,000, if such vehicle has a gross 

8 vehicle weight rating of more than 14,000 

9 pounds but not more than 26,000 pounds, and 

10 ‘‘(D) $40,000, if such vehicle has a gross 

11 vehicle weight rating of more than 26,000 

12 pounds. 

13 ‘‘(4) NEW QUALIFIED ALTERNATIVE FUEL

14 MOTOR VEHICLE.—For purposes of this sub15 section— 

16 ‘‘(A) IN GENERAL.—The term ‘new quali17 fied alternative fuel motor vehicle’ means any 

18 motor vehicle— 

19 ‘‘(i) which is only capable of operating 

20 on an alternative fuel, 

21 ‘‘(ii) the original use of which com22 mences with the taxpayer, 

23 ‘‘(iii) which is acquired by the tax24 payer for use or lease, but not for resale, 

25 and 
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1 ‘‘(iv) which is made by a manufac2 turer. 

3 ‘‘(B) ALTERNATIVE FUEL.—The term ‘al4 ternative fuel’ means compressed natural gas, 

5 liquefied natural gas, liquefied petroleum gas, 

6 hydrogen, and any liquid at least 85 percent of 

7 the volume of which consists of methanol. 

8 ‘‘(5) CREDIT FOR MIXED-FUEL VEHICLES.— 

9 ‘‘(A) IN GENERAL.—In the case of a 

10 mixed-fuel vehicle placed in service by the tax11 payer during the taxable year, the credit deter12 mined under this subsection is an amount equal 

13 to— 

14 ‘‘(i) in the case of a 75/25 mixed-fuel 

15 vehicle, 70 percent of the credit which 

16 would have been allowed under this sub17 section if such vehicle was a qualified alter18 native fuel motor vehicle, and 

19 ‘‘(ii) in the case of a 90/10 mixed-fuel 

20 vehicle, 90 percent of the credit which 

21 would have been allowed under this sub22 section if such vehicle was a qualified alter23 native fuel motor vehicle. 

24 ‘‘(B) MIXED-FUEL VEHICLE.—For pur25 poses of this subsection, the term ‘mixed-fuel 
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1 vehicle’ means any motor vehicle described in 

2 subparagraph (C) or (D) of paragraph (3), 

3 which— 

4 ‘‘(i) is certified by the manufacturer 

5 as being able to perform efficiently in nor6 mal operation on a combination of an al7 ternative fuel and a petroleum-based fuel, 

8 ‘‘(ii) either— 

9 ‘‘(I) has received a certificate of 

10 conformity under the Clean Air Act, 

11 or 

12 ‘‘(II) has received an order certi13 fying the vehicle as meeting the same 

14 requirements as vehicles which may be 

15 sold or leased in California and meets 

16 or exceeds the low emission vehicle 

17 standard under section 88.105–94 of 

18 title 40, Code of Federal Regulations, 

19 for that make and model year vehicle, 

20 ‘‘(iii) the original use of which com21 mences with the taxpayer, 

22 ‘‘(iv) which is acquired by the tax23 payer for use or lease, but not for resale, 

24 and 
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1 ‘‘(v) which is made by a manufac2 turer. 

3 ‘‘(C) 75/25 MIXED-FUEL VEHICLE.—For 

4 purposes of this subsection, the term ‘75/25 

5 mixed-fuel vehicle’ means a mixed-fuel vehicle 

6 which operates using at least 75 percent alter7 native fuel and not more than 25 percent petro8 leum-based fuel. 

9 ‘‘(D) 90/10 MIXED-FUEL VEHICLE.—For 

10 purposes of this subsection, the term ‘90/10 

11 mixed-fuel vehicle’ means a mixed-fuel vehicle 

12 which operates using at least 90 percent alter13 native fuel and not more than 10 percent petro14 leum-based fuel. 

15 ‘‘(e) APPLICATION WITH OTHER CREDITS.—The 

16 credit allowed under subsection (a) for any taxable year 

17 shall not exceed the excess (if any) of— 

18 ‘‘(1) the regular tax for the taxable year re19 duced by the sum of the credits allowable under sub20 part A and sections 27, 29, and 30, over 

21 ‘‘(2) the tentative minimum tax for the taxable 

22 year. 

23 ‘‘(f) OTHER DEFINITIONS AND SPECIAL RULES.— 

24 For purposes of this section— 
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1 ‘‘(1) MOTOR VEHICLE.—The term ‘motor vehi2 cle’ has the meaning given such term by section 

3 30(c)(2). 

4 ‘‘(2) CITY FUEL ECONOMY.—The city fuel econ5 omy with respect to any vehicle shall be measured in 

6 a manner which is substantially similar to the man7 ner city fuel economy is measured in accordance 

8 with procedures under part 600 of subchapter Q of 

9 chapter I of title 40, Code of Federal Regulations, 

10 as in effect on the date of the enactment of this sec11 tion. 

12 ‘‘(3) OTHER TERMS.—The terms ‘automobile’, 

13 ‘passenger automobile’, ‘medium duty passenger ve14 hicle’, ‘light truck’, and ‘manufacturer’ have the 

15 meanings given such terms in regulations prescribed 

16 by the Administrator of the Environmental Protec17 tion Agency for purposes of the administration of 

18 title II of the Clean Air Act (42 U.S.C. 7521 et 

19 seq.). 

20 ‘‘(4) REDUCTION IN BASIS.—For purposes of 

21 this subtitle, the basis of any property for which a 

22 credit is allowable under subsection (a) shall be re23 duced by the amount of such credit so allowed (de24 termined without regard to subsection (e)). 
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1 ‘‘(5) NO DOUBLE BENEFIT.—The amount of 

2 any deduction or other credit allowable under this 

3 chapter— 

4 ‘‘(A) for any incremental cost taken into 

5 account in computing the amount of the credit 

6 determined under subsection (d) shall be re7 duced by the amount of such credit attributable 

8 to such cost, and 

9 ‘‘(B) with respect to a vehicle described 

10 under subsection (b) or (c), shall be reduced by 

11 the amount of credit allowed under subsection 

12 (a) for such vehicle for the taxable year. 

13 ‘‘(6) PROPERTY USED BY TAX-EXEMPT ENTI14 TIES.—In the case of a credit amount which is al15 lowable with respect to a motor vehicle which is ac16 quired by an entity exempt from tax under this 

17 chapter, the person which sells or leases such vehicle 

18 to the entity shall be treated as the taxpayer with 

19 respect to the vehicle for purposes of this section 

20 and the credit shall be allowed to such person, but 

21 only if the person clearly discloses to the entity at 

22 the time of any sale or lease the specific amount of 

23 any credit otherwise allowable to the entity under 

24 this section. 
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1 ‘‘(7) RECAPTURE.—The Secretary shall, by reg2 ulations, provide for recapturing the benefit of any 

3 credit allowable under subsection (a) with respect to 

4 any property which ceases to be property eligible for 

5 such credit (including recapture in the case of a 

6 lease period of less than the economic life of a vehi7 cle). 

8 ‘‘(8) PROPERTY USED OUTSIDE UNITED

9 STATES, ETC., NOT QUALIFIED.—No credit shall be 

10 allowed under subsection (a) with respect to any 

11 property referred to in section 50(b) or with respect 

12 to the portion of the cost of any property taken into 

13 account under section 179. 

14 ‘‘(9) ELECTION TO NOT TAKE CREDIT.—No 

15 credit shall be allowed under subsection (a) for any 

16 vehicle if the taxpayer elects to not have this section 

17 apply to such vehicle. 

18 ‘‘(10) CARRYBACK AND CARRYFORWARD AL19 LOWED.— 

20 ‘‘(A) IN GENERAL.—If the credit allowable 

21 under subsection (a) for a taxable year exceeds 

22 the amount of the limitation under subsection 

23 (e) for such taxable year (in this paragraph re24 ferred to as the ‘unused credit year’), such ex25 cess shall be a credit carryback to each of the 
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1 3 taxable years preceding the unused credit 

2 year and a credit carryforward to each of the 

3 20 taxable years following the unused credit 

4 year, except that no excess may be carried to a 

5 taxable year beginning before January 1, 2005. 

6 ‘‘(B) RULES.—Rules similar to the rules of 

7 section 39 shall apply with respect to the credit 

8 carryback and credit carryforward under sub9 paragraph (A). 

10 ‘‘(11) INTERACTION WITH AIR QUALITY AND

11 MOTOR VEHICLE SAFETY STANDARDS.—Unless oth12 erwise provided in this section, a motor vehicle shall 

13 not be considered eligible for a credit under this sec14 tion unless such vehicle is in compliance with— 

15 ‘‘(A) the applicable provisions of the Clean 

16 Air Act for the applicable make and model year 

17 of the vehicle (or applicable air quality provi18 sions of State law in the case of a State which 

19 has adopted such provision under a waiver 

20 under section 209(b) of the Clean Air Act), and 

21 ‘‘(B) the motor vehicle safety provisions of 

22 sections 30101 through 30169 of title 49, 

23 United States Code. 

24 ‘‘(g) REGULATIONS.— 
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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), the Secretary shall promulgate such regu3 lations as necessary to carry out the provisions of 

4 this section. 

5 ‘‘(2) COORDINATION IN PRESCRIPTION OF CER6 TAIN REGULATIONS.—The Secretary of the Treas7 ury, in coordination with the Secretary of Transpor8 tation and the Administrator of the Environmental 

9 Protection Agency, shall prescribe such regulations 

10 as necessary to determine whether a motor vehicle 

11 meets the requirements to be eligible for a credit 

12 under this section.’’. 

13 (b) CONFORMING AMENDMENTS.— 

14 (1) Section 1016(a) of such Code is amended 

15 by striking ‘‘and’’ at the end of paragraph (28), by 

16 striking the period at the end of paragraph (29) and 

17 inserting ‘‘, and’’, and by adding at the end the fol18 lowing new paragraph: 

19 ‘‘(30) to the extent provided in section 

20 30B(f)(4).’’. 

21 (2) Section 55(c)(2) of such Code is amended 

22 by inserting ‘‘30B(e),’’ after ‘‘30(b)(2),’’. 

23 (3) Section 6501(m) of such Code is amended 

24 by inserting ‘‘30B(f)(9),’’ after ‘‘30(d)(4),’’. 
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1 (4) The table of sections for subpart B of part 

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

3 amended by inserting after the item relating to sec4 tion 30A the following new item: 

‘‘30B. Alternative motor vehicle credit.’’. 

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

6 this section shall apply to property placed in service after 

7 December 31, 2004, in taxable years ending after such 

8 date. 

9 SEC. 212. CREDIT FOR ENGINES COMPLYING WITH TIER 2, 

10 3, OR 4 EMISSION LEVELS. 

11 (a) IN GENERAL.—Subpart D of part IV of sub12 chapter A of chapter 1 (relating to business-related cred13 its) is amended by adding after section 45H the following 

14 new section: 

15 ‘‘SEC. 45I. CREDIT FOR ENGINES COMPLYING WITH TIER 2, 

16 3, OR 4 EMISSIONS LEVELS. 

17 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec18 tion 38, the emissions compliant engine credit determined 

19 under this section for the taxable year is, for each emis20 sions compliant engine incorporated into a product manu21 factured by the taxpayer during the taxable year, an 

22 amount equal to— 

23 ‘‘(1) $100 for each such engine which is an 

24 emissions compliant engine with respect to the Tier 

25 2 emissions level established in regulations pre-
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1 scribed by the Administrator of the Environmental 

2 Protection Agency under section 213 of the Clean 

3 Air Act, 

4 ‘‘(2) $150 for each such engine which is an 

5 emissions compliant engine with respect to the Tier 

6 3 emissions level so established, and 

7 ‘‘(3) $200 for each such engine which is an 

8 emissions compliant engine with respect to the Tier 

9 4 emissions level so established. 

10 ‘‘(b) EMISSIONS COMPLIANT ENGINE.—For purposes 

11 of this section, the term ‘emissions compliant engine’ 

12 means any engine— 

13 ‘‘(1) which is required to meet the Tier 2, 3 or 

14 4 emissions level established in regulations pre15 scribed by the Administrator of the Environmental 

16 Protection Agency under section 213 of the Clean 

17 Air Act, and 

18 ‘‘(2) which meets such requirement.’’. 

19 (b) CREDIT MADE PART OF GENERAL BUSINESS

20 CREDIT.—Section 38(b) of such Code (relating to current 

21 year business credit), as previously amended by this Act, 

22 is amended by striking ‘‘plus’’ at the end of paragraph 

23 (17), by striking the period at the end of paragraph (18) 

24 and inserting ‘‘, plus’’, and by adding at the end of the 

25 following new paragraph: 
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1 ‘‘(19) the emissions compliant engine credit de2 termined under section 45I(a).’’. 

3 (c) CLERICAL AMENDMENT.—The table of sections 

4 for subpart D of part IV of subchapter A of chapter 1 

5 of such code is amended by adding after the item relating 

6 to section 45H the following new item: 

‘‘Sec. 45I. Credit for engines complying with Tier 2, 3, or 4 emissions levels.’’. 

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

8 this section shall apply to engines incorporated into prod9 ucts produced after December 31, 2004, in taxable years 

10 ending after such date. 

Æ