II 

109TH CONGRESS 

2D SESSION S. 3694 

To increase fuel economy standards for automobiles and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 19, 2006 

Mr. OBAMA (for himself, Mr. LUGAR, Mr. BIDEN, Mr. SMITH, Mr. BINGAMAN, 

Mr. HARKIN, Mr. COLEMAN, and Mr. DURBIN) introduced the following 

bill; which was read twice and referred to the Committee on Finance 

A BILL 

To increase fuel economy standards for automobiles 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. 

4 This Act may be cited as the ‘‘Fuel Economy Reform 

5 Act’’. 

6 SEC. 2. FINDINGS. 

7 Congress makes the following findings: 

8 (1) United States dependence on oil imports im9 poses tremendous burdens on America’s economy, 

10 foreign policy, and military. 


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1 (2) According to the Energy Information Ad2 ministration, 60 percent of the crude oil and petro3 leum products consumed in the United States be4 tween April 2005 and March 2006 (12,400,000 bar5 rels per day) was imported. At a cost of $75 per 

6 barrel of oil, Americans remit more than $600,000 

7 per minute to other countries for petroleum, money 

8 that could have been spent creating domestic jobs 

9 and strengthening our Nation’s economy. 

10 (3) A significant percentage of these petroleum 

11 imports originate in countries controlled by regimes 

12 that are unstable or openly hostile to the interests 

13 of the United States. Dependence on production 

14 from these countries contributes to the volatility of 

15 domestic and global markets and the ‘‘risk pre16 mium’’ paid by American consumers. 

17 (4) The Energy Information Administration 

18 projects that the total petroleum demand in the 

19 United States will increase by 23 percent between 

20 2006 and 2026, while domestic crude production is 

21 expected to decrease by 11 percent, resulting in an 

22 anticipated 28 percent increase in petroleum im23 ports. Absent significant action, our Nation will be24 come more vulnerable to oil price increases, more deVerDate Aug 31 2005 00:40 Jul 21, 2006 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3694.IS S3694

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1 pendent upon foreign oil, and less able to pursue our 

2 national interests. 

3 (5) America’s ability to broadly transition to al4 ternative fuels, such as cellulosic ethanol and hydro5 gen, is predicated upon producing more fuel-efficient 

6 vehicles. Failure to do so would tax scarce resources 

7 and increase long-term costs. 

8 (6) Two-thirds of all domestic oil use occurs in 

9 the transportation sector, which is 97 percent reliant 

10 upon petroleum-based fuels. Passenger vehicles, in11 cluding light trucks under 10,000 pounds gross vehi12 cle weight, represent over 60 percent of the oil used 

13 in the transportation sector. 

14 (7) Corporate average fuel economy of all cars 

15 and trucks improved by 70 percent between 1975 

16 and 1987. Between 1987 and 2006, fuel economy 

17 improvements have stagnated and are much worse 

18 than the vehicle fuel economy in many developed 

19 countries and some developing countries, including 

20 China. 

21 (8) Significant improvements in engine tech22 nology occurred between 1986 and 2006. These ad23 vances have been used to make vehicles larger and 

24 more powerful, rather than to increase fuel economy. 

25 Between 1985 and 2005, average vehicle horsepower 


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1 nearly doubled, average vehicle weight increased by 

2 25 percent, and acceleration times for new vehicles 

3 improved by 25 percent. During the same time pe4 riod, average vehicle fuel economy decreased by 2 

5 percent. 

6 (9) According to a 2002 fuel economy report by 

7 the National Academies of Science, improvements in 

8 gasoline engine technology offer the opportunity to 

9 increase fuel economy by 50 percent, while maintain10 ing vehicle size and performance and improving safe11 ty. The fleet analyzed by the Academies would aver12 age 37 miles per gallon. When the report was re13 leased in 2002, it noted that these technologies could 

14 be available for wide use within 10 to 15 years. 

15 (10) The 2002 fuel economy report study clear16 ly states that fuel economy can be increased without 

17 negatively impacting the safety of America’s cars 

18 and trucks. Some new technologies can increase both 

19 safety and fuel economy (such as high strength ma20 terials, unibody design, lower bumpers). Design 

21 changes related to fuel economy also present oppor22 tunities to reduce the incompatibility of tall, stiff, 

23 heavy vehicles with the majority of vehicles on the 

24 road. 


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1 (11) A 2004 report by David Greene of Oak 

2 Ridge National Labs entitled, ‘‘The Effect of Fuel 

3 Economy on Automobile Safety: A Reexamination’’, 

4 demonstrates that fuel economy is not linked with 

5 increased fatalities. The report notes that, ‘‘higher 

6 mpg is significantly correlated with fewer fatalities’’. 

7 In other words, a thorough analysis of data from 

8 1966 to 2002 indicates that vehicle manufacturers 

9 can simultaneously increase fuel economy and im10 prove vehicle safety. 

11 (12) A 2002 study entitled, ‘‘An Analysis of 

12 Traffic Deaths by Vehicle Type and Model’’, by 

13 Marc Ross and Tom Wenzel from the University of 

14 Michigan, demonstrates that large vehicles do not 

15 have lower fatality rates than smaller vehicles. Ross 

16 and Wenzel analyzed Federal accident data between 

17 1995 and 1999 and showed that the Honda Civic 

18 and Volkswagen Jetta both had lower fatality rates 

19 for the driver than the Ford Explorer, the Dodge 

20 Ram, or the Toyota 4Runner. Even the largest vehi21 cles, such as the Chevrolet Tahoe and Suburban, 

22 had fatality rates that were no better than the Jetta 

23 or the Nissan Maxima. In other words, a well-de24 signed compact car can be safer than an sport-utility 


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1 vehicle or a pickup truck. Design, rather than 

2 weight, is the key to vehicle safety. 

3 (13) Significant change must occur to strength4 en the economic competitiveness of the domestic 

5 auto industry. According to a recent study by the 

6 University of Michigan, a sustained gasoline price of 

7 $2.86 per gallon would lead Detroit’s Big 3 auto8 makers’ profits to shrink by $7,000,000,000 as they 

9 absorb 75 percent of the lost vehicle sales. This 

10 would put nearly 300,000 Americans out of work. 

11 (14) Opportunities exist to strengthen the do12 mestic vehicle industry while improving fuel econ13 omy. A 2004 study performed by the University of 

14 Michigan concludes that the provision of 

15 $1,500,000,000 in tax incentives over 10 years to 

16 enable the retrofit of domestic manufacturing and 

17 parts facilities to produce clean cars would lead to 

18 a gain of nearly 60,000 domestic jobs and pay for 

19 itself through the resulting increase in domestic tax 

20 receipts. 

21 SEC. 3. DEFINITION OF AUTOMOBILE. 

22 (a) IN GENERAL.—Section 32901(a)(3) of title 49, 

23 United States Code, is amended by striking ‘‘rated at— 

24 ’’ and all that follows through the period at the end and 


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1 inserting ‘‘rated at not more than 10,000 pounds gross 

2 vehicle weight.’’. 

3 (b) FUEL ECONOMY INFORMATION.—Section 

4 32908(a) of title 49, United States Code, is amended, by 

5 striking ‘‘section—’’ and all that follows through ‘‘(2)’’ 

6 and inserting ‘‘section, the term’’. 

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

8 this section shall apply to model year 2009 and each sub9 sequent model year. 

10 SEC. 4. AVERAGE FUEL ECONOMY STANDARDS. 

11 (a) STANDARDS.—Section 32902 of title 49, United 

12 States Code, is amended— 

13 (1) in subsection (a)— 

14 (A) in the header, by inserting ‘‘MANUFAC15 TURED BEFORE MODEL YEAR 2012’’ after 

16 ‘‘NON-PASSENGER AUTOMOBILES’’; and 

17 (B) by adding at the end the following: 

18 ‘‘This subsection shall not apply to automobiles 

19 manufactured after model year 2011.’’; 

20 (2) in subsection (b)— 

21 (A) in the header, by inserting ‘‘MANUFAC22 TURED BEFORE MODEL YEAR 2012’’ after 

23 ‘‘PASSENGER AUTOMOBILES’’; 

24 (B) by inserting ‘‘and before model year 

25 2009’’ after ‘‘1984’’; and 


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1 (C) by adding at the end the following: 

2 ‘‘Such standard shall be increased by 4 percent 

3 per year for model years 2009 through 2011 

4 (rounded to the nearest 1/10 mile per gallon)’’; 

5 (3) by amending subsection (c) to read as fol6 lows: 

7 ‘‘(c) AUTOMOBILES MANUFACTURED AFTER MODEL

8 YEAR 2011.—(1) Not later than 18 months before the be9 ginning of each model year after model year 2011, the 

10 Secretary of Transportation shall prescribe, by regula11 tion— 

12 ‘‘(A) an average fuel economy standard for 

13 automobiles manufactured by a manufacturer in 

14 that model year; or 

15 ‘‘(B) based on 1 or more vehicle attributes that 

16 relate to fuel economy— 

17 ‘‘(i) separate standards for different class18 es of automobiles; or 

19 ‘‘(ii) standards expressed in the form of a 

20 mathematical function. 

21 ‘‘(2)(A) Except as provided under paragraphs (3) and 

22 (4) and subsection (d), standards under paragraph (1) 

23 shall attain a projected aggregate level of average fuel 

24 economy of 27.5 miles per gallon for all automobiles man25 ufactured by all manufacturers for model year 2012. 


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1 ‘‘(B) The projected aggregate level of average fuel 

2 economy for model year 2013 and each succeeding model 

3 year shall be increased by 4 percent from the level for the 

4 prior model year (rounded to the nearest 1/10 mile per 

5 gallon). 

6 ‘‘(C) Notwithstanding subparagraphs (A) and (B), 

7 the fleetwide average fuel economy standard for passenger 

8 automobiles manufactured by a manufacturer in a model 

9 year for that manufacturer’s domestic fleet and for its for10 eign fleet as calculated under section 32904 as in effect 

11 before the date of enactment of the Fuel Economy Reform 

12 Act shall not be less than 92 percent of the average fuel 

13 economy projected by the Secretary for the combined do14 mestic and foreign fleets manufactured by all manufactur15 ers in that model year. 

16 ‘‘(3) If the actual aggregate level of average fuel 

17 economy achieved by manufacturers for each of 3 consecu18 tive model years is at least 5 percent less than the pro19 jected aggregate level of average fuel economy for such 

20 model year, the Secretary shall make appropriate adjust21 ments to the standards prescribed under this subsection. 

22 ‘‘(4)(A) Notwithstanding paragraphs (1) through (3) 

23 and subsection (b), the Secretary of Transportation may 

24 prescribe a lower average fuel economy standard for 1 or 

25 more model years if the Secretary of Transportation, in 


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1 consultation with the Secretary of Energy, determines that 

2 the minimum standards prescribed under paragraph (2) 

3 or (3) or subsection (b) for each model year— 

4 ‘‘(i) are technologically unachievable; 

5 ‘‘(ii) cannot be achieved without materially re6 ducing the overall safety of automobiles manufac7 tured or sold in the United States; or 

8 ‘‘(iii) is shown, by clear and convincing evi9 dence, not to be cost effective. 

10 ‘‘(B) If a lower standard is prescribed for a model 

11 year under subparagraph (A), such standard shall be the 

12 maximum standard that— 

13 ‘‘(i) is technologically achievable; 

14 ‘‘(ii) can be achieved without materially reduc15 ing the overall safety of automobiles manufactured 

16 or sold in the United States; and 

17 ‘‘(iii) is cost effective. 

18 ‘‘(5) In determining cost effectiveness under para19 graph (4)(A)(iii), the Secretary of Transportation shall 

20 take into account the total value to the Nation of reduced 

21 petroleum use, including the value of reducing external 

22 costs of petroleum use, using a value for such costs equal 

23 to 50 percent of the value of a gallon of gasoline saved 

24 or the amount determined in an analysis of the external 

25 costs of petroleum use that considers— 


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1 ‘‘(A) value to consumers; 

2 ‘‘(B) economic security; 

3 ‘‘(C) national security; 

4 ‘‘(D) foreign policy; 

5 ‘‘(E) the impact of oil use— 

6 ‘‘(i) on sustained cartel rents paid to for7 eign suppliers; 

8 ‘‘(ii) on long-run potential gross domestic 

9 product due to higher normal-market oil price 

10 levels, including inflationary impacts; 

11 ‘‘(iii) on import costs, wealth transfers, 

12 and potential gross domestic product due to in13 creased trade imbalances; 

14 ‘‘(iv) on import costs and wealth transfers 

15 during oil shocks; 

16 ‘‘(v) on macroeconomic dislocation and ad17 justment costs during oil shocks; 

18 ‘‘(vi) on the cost of existing energy security 

19 policies, including the management of the Stra20 tegic Petroleum Reserve; 

21 ‘‘(vii) on the timing and severity of the oil 

22 peaking problem; 

23 ‘‘(viii) on the risk, probability, size, and 

24 duration of oil supply disruptions; 


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1 ‘‘(ix) on OPEC strategic behavior and 

2 long-run oil pricing; 

3 ‘‘(x) on the short term elasticity of energy 

4 demand and the magnitude of price increases 

5 resulting from a supply shock; 

6 ‘‘(xi) on oil imports, military costs, and re7 lated security costs, including intelligence, 

8 homeland security, sea lane security and infra9 structure, and other military activities; 

10 ‘‘(xii) on oil imports, diplomatic and for11 eign policy flexibility, and connections to geo12 political strife, terrorism, and international de13 velopment activities; 

14 ‘‘(xiii) all relevant environmental hazards 

15 under the jurisdiction of the Environmental 

16 Protection Agency; and 

17 ‘‘(xiv) on well-to-wheels urban and local air 

18 emissions of ‘pollutants’ and their 

19 uninternalized costs; 

20 ‘‘(F) the impact of the oil or energy intensity 

21 of the United States economy on the sensitivity of 

22 the economy to oil price changes, including the mag23 nitude of gross domestic product losses in response 

24 to short term price shocks or long term price in25 creases; 


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1 ‘‘(G) the impact of United States payments for 

2 oil imports on political, economic, and military devel3 opments in unstable or unfriendly oil exporting 

4 countries; 

5 ‘‘(H) the uninternalized costs of pipeline and 

6 storage oil seepage, and for risk of oil spills from 

7 production, handling, and transport, and related 

8 landscape damage; and 

9 ‘‘(I) additional relevant factors, as determined 

10 by the Secretary. 

11 ‘‘(6) When considering the value to consumers of a 

12 gallon of gasoline saved, the Secretary of Transportation 

13 may not use a value less than the greatest of— 

14 ‘‘(A) the average national cost of a gallon of 

15 gasoline sold in the United States during the 12- 

16 month period ending on the date on which the new 

17 fuel economy standard is proposed; 

18 ‘‘(B) the most recent weekly estimate by the 

19 Energy Information Administration of the Depart20 ment of Energy of the average national cost of a 

21 gallon of gasoline (all grades) sold in the United 

22 States; or 

23 ‘‘(C) the gasoline prices projected by the En24 ergy Information Administration for the 20-year peVerDate Aug 31 2005 00:40 Jul 21, 2006 Jkt 049200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S3694.IS S3694

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1 riod beginning in the year following the year in 

2 which the standards are established. 

3 ‘‘(7) In prescribing standards under this subsection, 

4 the Secretary may prescribe standards for 1 or more 

5 model years. 

6 ‘‘(8)(A) Not later than December 31, 2016, the Sec7 retary of Transportation, the Secretary of Energy, and the 

8 Administrator of the Environmental Protection Agency 

9 shall submit a joint report to Congress on the state of 

10 global automotive efficiency technology development, and 

11 on the accuracy of tests used to measure fuel economy 

12 of automobiles under section 32904(c), utilizing the study 

13 and assessment of the National Academy of Sciences re14 ferred to in subparagraph (B). 

15 ‘‘(B) The Secretary shall enter into appropriate ar16 rangements with the National Academy of Sciences to con17 duct a comprehensive study of the technological opportuni18 ties to enhance fuel economy and an analysis and assess19 ment of the accuracy of fuel economy tests used by the 

20 Administrator of the Environmental Protection Agency to 

21 measure fuel economy for each model under section 

22 32904(c). Such analysis and assessment shall identify any 

23 additional factors or methods that should be included in 

24 tests to measure fuel economy for each model to more ac25 curately reflect actual fuel economy of automobiles. The 


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1 Secretary and the Administrator of the Environmental 

2 Protection Agency shall furnish, at the request of the 

3 Academy, any information which the Academy determines 

4 to be necessary to conduct the study, analysis, and assess5 ment under this subparagraph. 

6 ‘‘(C) The report submitted under subparagraph (A) 

7 shall include— 

8 ‘‘(i) the study of the National Academy of 

9 Sciences referred to in subparagraph (B); and 

10 ‘‘(ii) an assessment by the Secretary of techno11 logical opportunities to enhance fuel economy and 

12 opportunities to increase overall fleet safety. 

13 ‘‘(D) The report submitted under subparagraph (A) 

14 shall identify and examine additional opportunities to re15 form the regulatory structure under this chapter, includ16 ing approaches that seek to merge vehicle and fuel require17 ments into a single system that achieves equal or greater 

18 reduction in petroleum use and environmental benefits. 

19 ‘‘(E) The report submitted under subparagraph (A) 

20 shall— 

21 ‘‘(i) include conclusions reached by the Admin22 istrator of the Environmental Protection Agency, as 

23 a result of detailed analysis and public comment, on 

24 the accuracy of current fuel economy tests; 


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1 ‘‘(ii) identify any additional factors that the Ad2 ministrator determines should be included in tests to 

3 measure fuel economy for each model to more accu4 rately reflect actual fuel economy of automobiles; 

5 and 

6 ‘‘(iii) include a description of options, formu7 lated by the Secretary and the Administrator, to in8 corporate such additional factors in fuel economy 

9 tests in a manner that will not effectively increase 

10 or decrease average fuel economy for any automobile 

11 manufacturer. 

12 ‘‘(F) There is authorized to be appropriated to the 

13 Secretary such amounts as are required to carry out the 

14 study, analysis, and assessment required by subparagraph 

15 (B).’’; and 

16 (4) in subsection (g)(2), by striking ‘‘(and sub17 mit the amendment to Congress when required 

18 under subsection (c)(2) of this section)’’. 

19 (b) CONFORMING AMENDMENTS.— 

20 (1) IN GENERAL.—Chapter 329 of title 49, 

21 United States Code, is amended— 

22 (A) in section 32903— 

23 (i) by striking ‘‘passenger’’ each place 

24 it appears; 


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1 (ii) by striking ‘‘section 32902(b)–(d) 

2 of this title’’ each place it appears and in3 serting ‘‘subsection (c) or (d) of section 

4 32902’’; 

5 (iii) by striking subsection (e); and 

6 (iv) by redesignating subsection (f) as 

7 subsection (e); and 

8 (B) in section 32904(a)— 

9 (i) by striking ‘‘passenger’’ each place 

10 it appears; and 

11 (ii) in paragraph (1), by striking 

12 ‘‘subject to’’ and all that follows through 

13 ‘‘section 32902(b)–(d) of this title’’ and in14 serting ‘‘subsection (c) or (d) of section 

15 32902’’. 

16 (2) EFFECTIVE DATE.—The amendments made 

17 by paragraph (1) shall apply to automobiles manu18 factured after model year 2011. 

19 SEC. 5. CREDIT TRADING AND COMPLIANCE. 

20 (a) CREDIT TRADING.—Section 32903(a) of title 49, 

21 United States Code, is amended— 

22 (1) by inserting ‘‘Credits earned by a manufac23 turer under this section may be sold to any other 

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1 turer described in section 32904(b)(1)(A)(i) may not 

2 be sold to or purchased by a manufacturer described 

3 in 32904(b)(1)(A)(ii),’’ after ‘‘earns credits.’’; and 

4 (2) by striking ‘‘3 consecutive model years im5 mediately’’ each place it appears and inserting 

6 ‘‘model years’’. 

7 (b) TREATMENT OF IMPORTS.— 

8 (1) CONFORMING AMENDMENT.—Section 

9 32904(b) is amended by striking ‘‘passenger’’ each 

10 place it appears. 

11 (2) APPLICABILITY.—The amendments made 

12 by paragraph (1) shall apply to automobiles manu13 factured after model year 2011. 

14 (c) MULTI-YEAR COMPLIANCE PERIOD.—Section 

15 32904(c) of such title is amended— 

16 (1) by inserting ‘‘(1)’’ before ‘‘The Adminis17 trator’’; and 

18 (2) by adding at the end the following: 

19 ‘‘(2) The Secretary, by rule, may allow a manufac20 turer to elect a multi-year compliance period of not more 

21 than 4 consecutive model years in lieu of the single model 

22 year compliance period otherwise applicable under this 

23 chapter.’’. 


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1 SEC. 6. CONSUMER TAX CREDIT. 

2 (a) ELIMINATION ON NUMBER OF NEW QUALIFIED

3 HYBRID AND ADVANCED LEAN BURN TECHNOLOGY VE4 HICLES ELIGIBLE FOR ALTERNATIVE MOTOR VEHICLE

5 CREDIT.— 

6 (1) IN GENERAL.—Section 30B of the Internal 

7 Revenue Code of 1986 is amended— 

8 (A) by striking subsection (f); and 

9 (B) by redesignating subsections (g) 

10 through (j) as subsections (f) through (i), re11 spectively. 

12 (2) CONFORMING AMENDMENTS.— 

13 (A) Paragraphs (4) and (6) of section 

14 30B(h) of such Code are each amended by 

15 striking ‘‘(determined without regard to sub16 section (g))’’ and inserting ‘‘determined without 

17 regard to subsection (f))’’. 

18 (B) Section 38(b)(25) of such Code is 

19 amended by striking ‘‘section 30B(g)(1)’’ and 

20 inserting ‘‘section 30B(f)(1)’’. 

21 (C) Section 55(c)(2) of such Code is 

22 amended by striking ‘‘section 30B(g)(2)’’ and 

23 inserting ‘‘section 30B(f)(2)’’. 

24 (D) Section 1016(a)(36) of such Code is 

25 amended by striking ‘‘section 30B(h)(4)’’ and 

26 inserting ‘‘section 30B(g)(4)’’. 


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1 (E) Section 6501(m) of such Code is 

2 amended by striking ‘‘section 30B(h)(9)’’ and 

3 inserting ‘‘section 30B(g)(9)’’. 

4 (b) EXTENSION OF ALTERNATIVE VEHICLE CREDIT

5 FOR NEW QUALIFIED HYBRID MOTOR VEHICLES.—Para6 graph (3) of section 30B(i) of such Code (as redesignated 

7 by subsection (a)) is amended by striking ‘‘December 31, 

8 2009’’ and inserting ‘‘December 31, 2010’’. 

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

10 this section shall apply to property placed in service after 

11 December 31, 2005, in taxable years ending after such 

12 date. 

13 SEC. 7. ADVANCED TECHNOLOGY MOTOR VEHICLES MANU14 FACTURING CREDIT. 

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

17 1986 (relating to foreign tax credit, etc.) is amended by 

18 adding at the end the following new section: 

19 ‘‘SEC. 30D. ADVANCED TECHNOLOGY MOTOR VEHICLES 

20 MANUFACTURING CREDIT. 

21 ‘‘(a) CREDIT ALLOWED.—There shall be allowed as 

22 a credit against the tax imposed by this chapter for the 

23 taxable year an amount equal to 35 percent of the quali24 fied investment of an eligible taxpayer for such taxable 

25 year. 


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1 ‘‘(b) QUALIFIED INVESTMENT.—For purposes of this 

2 section— 

3 ‘‘(1) IN GENERAL.—The qualified investment 

4 for any taxable year is equal to the incremental costs 

5 incurred during such taxable year— 

6 ‘‘(A) to re-equip, expand, or establish any 

7 manufacturing facility in the United States of 

8 the eligible taxpayer to produce advanced tech9 nology motor vehicles or to produce eligible 

10 components, 

11 ‘‘(B) for engineering integration performed 

12 in the United States of such vehicles and com13 ponents as described in subsection (d), 

14 ‘‘(C) for research and development per15 formed in the United States related to advanced 

16 technology motor vehicles and eligible compo17 nents, and 

18 ‘‘(D) for employee retraining with respect 

19 to the manufacturing of such vehicles or compo20 nents (determined without regard to wages or 

21 salaries of such retrained employees). 

22 ‘‘(2) ATTRIBUTION RULES.—In the event a fa23 cility of the eligible taxpayer produces both advanced 

24 technology motor vehicles and conventional motor 

25 vehicles, or eligible and non-eligible components, only 


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1 the qualified investment attributable to production 

2 of advanced technology motor vehicles and eligible 

3 components shall be taken into account. 

4 ‘‘(c) DEFINITIONS.—In this section: 

5 ‘‘(1) ADVANCED TECHNOLOGY MOTOR VEHI6 CLE.—The term ‘advanced technology motor vehicle’ 

7 means— 

8 ‘‘(A) any qualified electric vehicle (as de9 fined in section 30(c)(1)), 

10 ‘‘(B) any new qualified fuel cell motor ve11 hicle (as defined in section 30B(b)(3)), 

12 ‘‘(C) any new advanced lean burn tech13 nology motor vehicle (as defined in section 

14 30B(c)(3)), 

15 ‘‘(D) any new qualified hybrid motor vehi16 cle (as defined in section 30B(d)(2)(A) and de17 termined without regard to any gross vehicle 

18 weight rating), 

19 ‘‘(E) any new qualified alternative fuel 

20 motor vehicle (as defined in section 30B(e)(4), 

21 including any mixed-fuel vehicle (as defined in 

22 section 30B(e)(5)(B)), and 

23 ‘‘(F) any other motor vehicle using electric 

24 drive transportation technology (as defined in 

25 paragraph (3)). 


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1 ‘‘(2) ELECTRIC DRIVE TRANSPORTATION TECH2 NOLOGY.—The term ‘electric drive transportation 

3 technology’ means technology used by vehicles that 

4 use an electric motor for all or part of their motive 

5 power and that may or may not use off-board elec6 tricity, such as battery electric vehicles, fuel cell ve7 hicles, engine dominant hybrid electric vehicles, plug8 in hybrid electric vehicles, and plug-in hybrid fuel 

9 cell vehicles. 

10 ‘‘(3) ELIGIBLE COMPONENTS.—The term ‘eligi11 ble component’ means any component inherent to 

12 any advanced technology motor vehicle, including— 

13 ‘‘(A) with respect to any gasoline or diesel14 electric new qualified hybrid motor vehicle— 

15 ‘‘(i) electric motor or generator; 

16 ‘‘(ii) power split device; 

17 ‘‘(iii) power control unit; 

18 ‘‘(iv) power controls; 

19 ‘‘(v) integrated starter generator; or 

20 ‘‘(vi) battery; 

21 ‘‘(B) with respect to any hydraulic new 

22 qualified hybrid motor vehicle— 

23 ‘‘(i) accumulator or other energy stor24 age device; 

25 ‘‘(ii) hydraulic pump; 


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1 ‘‘(iii) hydraulic pump-motor assembly; 

2 ‘‘(iv) power control unit; and 

3 ‘‘(v) power controls; 

4 ‘‘(C) with respect to any new advanced 

5 lean burn technology motor vehicle— 

6 ‘‘(i) diesel engine; 

7 ‘‘(ii) turbo charger; 

8 ‘‘(iii) fuel injection system; or 

9 ‘‘(iv) after-treatment system, such as 

10 a particle filter or NOx absorber; and 

11 ‘‘(D) with respect to any advanced tech12 nology motor vehicle, any other component sub13 mitted for approval by the Secretary. 

14 ‘‘(4) ELIGIBLE TAXPAYER.—The term ‘eligible 

15 taxpayer’ means any taxpayer if more than 20 per16 cent of the taxpayer’s gross receipts for the taxable 

17 year is derived from the manufacture of motor vehi18 cles or any component parts of such vehicles. 

19 ‘‘(d) ENGINEERING INTEGRATION COSTS.—For pur20 poses of subsection (b)(1)(B), costs for engineering inte21 gration are costs incurred prior to the market introduction 

22 of advanced technology vehicles for engineering tasks re23 lated to— 

24 ‘‘(1) establishing functional, structural, and 

25 performance requirements for component and subVerDate Aug 31 2005 00:40 Jul 21, 2006 Jkt 049200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\S3694.IS S3694

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1 systems to meet overall vehicle objectives for a spe2 cific application, 

3 ‘‘(2) designing interfaces for components and 

4 subsystems with mating systems within a specific ve5 hicle application, 

6 ‘‘(3) designing cost effective, efficient, and reli7 able manufacturing processes to produce components 

8 and subsystems for a specific vehicle application, 

9 and 

10 ‘‘(4) validating functionality and performance of 

11 components and subsystems for a specific vehicle ap12 plication. 

13 ‘‘(e) LIMITATION BASED ON AMOUNT OF TAX.—The 

14 credit allowed under subsection (a) for the taxable year 

15 shall not exceed the excess of— 

16 ‘‘(1) the sum of— 

17 ‘‘(A) the regular tax liability (as defined in 

18 section 26(b)) for such taxable year, plus 

19 ‘‘(B) the tax imposed by section 55 for 

20 such taxable year and any prior taxable year 

21 beginning after 1986 and not taken into ac22 count under section 53 for any prior taxable 

23 year, over 


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1 ‘‘(2) the sum of the credits allowable under sub2 part A and sections 27, 30, and 30B for the taxable 

3 year. 

4 ‘‘(f) REDUCTION IN BASIS.—For purposes of this 

5 subtitle, if a credit is allowed under this section for any 

6 expenditure with respect to any property, the increase in 

7 the basis of such property which would (but for this para8 graph) result from such expenditure shall be reduced by 

9 the amount of the credit so allowed. 

10 ‘‘(g) NO DOUBLE BENEFIT.— 

11 ‘‘(1) COORDINATION WITH OTHER DEDUCTIONS

12 AND CREDITS.—Except as provided in paragraph 

13 (2), the amount of any deduction or other credit al14 lowable under this chapter for any cost taken into 

15 account in determining the amount of the credit 

16 under subsection (a) shall be reduced by the amount 

17 of such credit attributable to such cost. 

18 ‘‘(2) RESEARCH AND DEVELOPMENT COSTS.— 

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

20 subparagraph (B), any amount described in 

21 subsection (b)(1)(C) taken into account in de22 termining the amount of the credit under sub23 section (a) for any taxable year shall not be 

24 taken into account for purposes of determining 


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1 the credit under section 41 for such taxable 

2 year. 

3 ‘‘(B) COSTS TAKEN INTO ACCOUNT IN DE4 TERMINING BASE PERIOD RESEARCH EX5 PENSES.—Any amounts described in subsection 

6 (b)(1)(C) taken into account in determining the 

7 amount of the credit under subsection (a) for 

8 any taxable year which are qualified research 

9 expenses (within the meaning of section 41(b)) 

10 shall be taken into account in determining base 

11 period research expenses for purposes of apply12 ing section 41 to subsequent taxable years. 

13 ‘‘(h) BUSINESS CARRYOVERS ALLOWED.—If the 

14 credit allowable under subsection (a) for a taxable year 

15 exceeds the limitation under subsection (e) for such tax16 able year, such excess (to the extent of the credit allowable 

17 with respect to property subject to the allowance for depre18 ciation) shall be allowed as a credit carryback to each of 

19 the 15 taxable years immediately preceding the unused 

20 credit year and as a carryforward to each of the 20 taxable 

21 years immediately following the unused credit year. 

22 ‘‘(i) SPECIAL RULES.—For purposes of this section, 

23 rules similar to the rules of section 179A(e)(4) and para24 graphs (1) and (2) of section 41(f) shall apply 


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1 ‘‘(j) ELECTION NOT TO TAKE CREDIT.—No credit 

2 shall be allowed under subsection (a) for any property if 

3 the taxpayer elects not to have this section apply to such 

4 property. 

5 ‘‘(k) REGULATIONS.—The Secretary shall prescribe 

6 such regulations as necessary to carry out the provisions 

7 of this section. 

8 ‘‘(l) TERMINATION.—This section shall not apply to 

9 any qualified investment after December 31, 2010.’’. 

10 (b) CONFORMING AMENDMENTS.— 

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

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

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

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

15 adding at the end the following new paragraph: 

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

17 30D(g).’’. 

18 (2) Section 6501(m) of such Code is amended 

19 by inserting ‘‘30D(k),’’ after ‘‘30C(e)(5),’’. 

20 (3) The table of sections for subpart B of part 

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

22 amended by inserting after the item relating to sec23 tion 30C the following new item: 

‘‘Sec. 30D. Advanced technology motor vehicles manufacturing credit.’’. 


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

2 this section shall apply to amounts incurred in taxable 

3 years beginning after December 31, 1999. 

Æ 


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