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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 971 Introduced in Senate (IS)]

109th CONGRESS
  1st Session
                                 S. 971

To amend the Internal Revenue Code of 1986 to encourage and accelerate 
 the nationwide production, retail sale, and consumer use of new motor 
 vehicles that are powered by fuel cell technology, hybrid technology, 
battery electric technology, alternative fuels, or other advanced motor 
             vehicle technologies, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             April 28, 2005

 Mr. Hatch (for himself, Mr. Rockefeller, Mr. Ensign, Mr. Chafee, Ms. 
    Collins, Ms. Snowe, Mr. Jeffords, Mr. Lieberman, and Mr. Smith) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL

 
To amend the Internal Revenue Code of 1986 to encourage and accelerate 
 the nationwide production, retail sale, and consumer use of new motor 
 vehicles that are powered by fuel cell technology, hybrid technology, 
battery electric technology, alternative fuels, or other advanced motor 
             vehicle technologies, and for other purposes.

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

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Clean Efficient 
Automobiles Resulting From Advanced Car Technologies (CLEAR ACT) Act of 
2005''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this division an amendment or repeal is expressed 
in terms of an amendment to, or repeal of, a section or other 
provision, the reference shall be considered to be made to a section or 
other provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.
Sec. 2. Findings and purposes.
Sec. 3. Alternative motor vehicle credit.
Sec. 4. Modification of credit for qualified electric vehicles.
Sec. 5. Credit for installation of alternative fueling stations.
Sec. 6. Credit for retail sale of alternative fuels as motor vehicle 
                            fuel.
Sec. 7. Study of effectiveness of certain provisions by GAO.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress finds the following:
            (1) The United States is a large and diverse geographic 
        area that includes densely populated urban and suburban areas 
        along with large sparsely populated rural areas separated by 
        long distances, and, as a result, Americans require reliable, 
        efficient, and diversified modes of transportation.
            (2) According to the Energy Information Administration's 
        (referred to in this section as the ``EIA'') March 2000 
        publication ``International Energy Outlook'', oil currently 
        provides a larger share of world energy consumption than any 
        other energy source and most of the growth in oil consumption 
        in industrialized countries, including the United States, is 
        projected for the transportation sector, where few alternatives 
        are currently economical.
            (3) To meet all its national security, economic 
        development, and public health and welfare needs, the United 
        States depends on oil as the primary fuel source for the 
        transportation of people and goods and services in intrastate 
        and interstate commerce.
            (4) Since 1994, the United States has imported over 50 
        percent of the oil it has consumed and the EIA expects North 
        American petroleum imports from the Persian Gulf to more than 
        double over the forecast period of 1997-2020, with additional 
        imports from offshore Atlantic Basin producers and refiners; 
        this increasingly heavy reliance on imported oil presents 
        national security risks, contributes negatively to the balance 
        of trade of the United States, and adversely affects the United 
        States economy, public health, and the environment.
            (5) The United States currently has 121 areas containing 
        over a third of its population that do not meet the National 
        Ambient Air Quality Standards resulting in losses of many 
        billions of dollars in extra economic costs and lost 
        opportunities, immeasurable health problems, and a general 
        reduction in the quality of life for millions of Americans.
            (6) Mobile sources have become a top cause of emissions in 
        the United States.
            (7) This heavy reliance on imported oil and failure to meet 
        the National Ambient Air Quality Standards demonstrate the need 
        to accelerate development of advanced fuel cell technology, 
        hybrid technology, battery electric technology, and alternative 
        fuels technology for new motor vehicles in the transportation 
        of people and goods and services as an important means of 
        helping to reverse the trends of increasing dependence on oil 
        imports and non-attainment of air quality standards, 
        contributing to lessening national security risks, improving 
        our balance of trade with other nations, increasing economic 
        growth, improving health and quality of life for millions of 
        Americans, and providing public health, welfare, and economic 
        benefits.
            (8) Despite the availability of significant Federal and 
        private sector funds and programs to encourage technological 
        advancement for the development and use of motor vehicles that 
        are powered by fuel cell and hybrid technologies, battery 
        electric technology, and alternative technologies, consumer 
        acceptance of such vehicles and fuels has been restrained by 3 
        major barriers--the increased costs of these technologies, the 
        cost of alternative fuels, and the lack of adequate 
        infrastructure to refuel the alternative-fueled vehicles.
    (b) Purposes.--The purposes of this Act are to--
            (1) help instill consumer confidence and acceptance of 
        alternative motor vehicles by lowering the 3 major barriers to 
        this confidence and acceptance;
            (2) enable the accelerated introduction into the 
        marketplace of new motor vehicle technologies without adverse 
        emission impact, while retaining a policy of fuel neutrality in 
        order to foster private innovation and commercialization and 
        allow market forces to decide the technologies and fuels that 
        are consumer-friendly, safe, environmentally sound, and 
        economic;
            (3) provide, for a limited time period, financial 
        incentives to encourage consumers nationwide to purchase or 
        lease new fuel cell, hybrid, battery electric, and alternative 
        fuel motor vehicles;
            (4) increase demand of such vehicles so as to make the 
        annual production by manufacturers and retail sale of such 
        vehicles economically and commercially viable for the consumer;
            (5) promote and expand the use of such vehicles nationwide; 
        and
            (6) promote a nationwide diversity of motor vehicle fuels 
        for advanced and hybrid technology and alternatively fueled 
        motor vehicles.

SEC. 3. ALTERNATIVE MOTOR VEHICLE CREDIT.

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

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

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the sum of--
            ``(1) the new qualified fuel cell motor vehicle credit 
        determined under subsection (b),
            ``(2) the new qualified hybrid motor vehicle credit 
        determined under subsection (c), and
            ``(3) the new qualified alternative fuel motor vehicle 
        credit determined under subsection (d).
    ``(b) New Qualified Fuel Cell Motor Vehicle Credit.--
            ``(1) In general.--For purposes of subsection (a), the new 
        qualified fuel cell motor vehicle credit determined under this 
        subsection with respect to a new qualified fuel cell motor 
        vehicle placed in service by the taxpayer during the taxable 
        year is--
                    ``(A) $8,000 ($4,000 in the case of vehicles placed 
                in service after December 31, 2009), if such vehicle 
                has a gross vehicle weight rating of not more than 
                8,500 pounds,
                    ``(B) $10,000, if such vehicle has a gross vehicle 
                weight rating of more than 8,500 pounds but not more 
                than 14,000 pounds,
                    ``(C) $20,000, if such vehicle has a gross vehicle 
                weight rating of more than 14,000 pounds but not more 
                than 26,000 pounds, and
                    ``(D) $40,000, if such vehicle has a gross vehicle 
                weight rating of more than 26,000 pounds.
            ``(2) Increase for fuel efficiency.--
                    ``(A) In general.--The amount determined under 
                paragraph (1)(A) with respect to a new qualified fuel 
                cell motor vehicle which is a passenger automobile or 
                light truck shall be increased by--
                            ``(i) $1,000, if such vehicle achieves at 
                        least 150 percent but less than 175 percent of 
                        the 2002 model year city fuel economy,
                            ``(ii) $1,500, if such vehicle achieves at 
                        least 175 percent but less than 200 percent of 
                        the 2002 model year city fuel economy,
                            ``(iii) $2,000, if such vehicle achieves at 
                        least 200 percent but less than 225 percent of 
                        the 2002 model year city fuel economy,
                            ``(iv) $2,500, if such vehicle achieves at 
                        least 225 percent but less than 250 percent of 
                        the 2002 model year city fuel economy,
                            ``(v) $3,000, if such vehicle achieves at 
                        least 250 percent but less than 275 percent of 
                        the 2002 model year city fuel economy,
                            ``(vi) $3,500, if such vehicle achieves at 
                        least 275 percent but less than 300 percent of 
                        the 2002 model year city fuel economy, and
                            ``(vii) $4,000, if such vehicle achieves at 
                        least 300 percent of the 2002 model year city 
                        fuel economy.
                    ``(B) 2002 model year city fuel economy.--For 
                purposes of subparagraph (A), the 2002 model year city 
                fuel economy with respect to a vehicle shall be 
                determined in accordance with the following tables:
                            ``(i) In the case of a passenger 
                        automobile:

``If vehicle inertia                           The 2002 model year city
   weight class is:                                    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.
                            ``(ii) In the case of a light truck:

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

``If percentage of the maximum
   available power is:                            The credit amount is:
    At least 5 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.
                            ``(ii) In the case of a new qualified 
                        hybrid motor vehicle which is a heavy duty 
                        hybrid motor vehicle and which provides the 
                        following percentage of the maximum available 
                        power:
                                    ``(I) If such vehicle has a gross 
                                vehicle weight rating of not more than 
                                14,000 pounds:

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

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

``If the model year is:             The increased credit amount is:
    2005..........................................              $2,000 
    2006..........................................              $1,500.
                            ``(ii) In the case of a vehicle which has a 
                        gross vehicle weight rating of more than 14,000 
                        pounds but not more than 26,000 pounds:

``If the model year is:             The increased credit amount is:
    2005..........................................              $5,250 
    2006..........................................              $4,000.
                            ``(iii) In the case of a vehicle which has 
                        a gross vehicle weight rating of more than 
                        26,000 pounds:

``If the model year is:             The increased credit amount is:
    2005..........................................              $8,000 
    2006..........................................              $6,000.
                    ``(D) Definitions relating to credit amount.--
                            ``(i) Applicable heavy duty hybrid motor 
                        vehicle.--For purposes of subparagraph (C), the 
                        term `applicable heavy duty hybrid motor 
                        vehicle' means a heavy duty hybrid motor 
                        vehicle which is powered by an internal 
                        combustion or heat engine which is certified as 
                        meeting the emission standards set in the 
                        regulations prescribed by the Administrator of 
                        the Environmental Protection Agency for 2007 
                        and later model year diesel heavy duty engines, 
                        or for 2008 and later model year ottocycle 
                        heavy duty engines, as applicable.
                            ``(ii) Maximum available power.--
                                    ``(I) Passenger automobile, medium 
                                duty passenger vehicle, or light 
                                truck.--For purposes of subparagraph 
                                (A)(i), the term `maximum available 
                                power' means the maximum power 
                                available from the rechargeable energy 
                                storage system, during a standard 10 
                                second pulse power or equivalent test, 
                                divided by such maximum power and the 
                                SAE net power of the heat engine.
                                    ``(II) Heavy duty hybrid motor 
                                vehicle.--For purposes of subparagraph 
                                (A)(ii), the term `maximum available 
                                power' means the maximum power 
                                available from the rechargeable energy 
                                storage system, during a standard 10 
                                second pulse power or equivalent test, 
                                divided by the vehicle's total traction 
                                power. The term `total traction power' 
                                means the sum of the peak power from 
                                the rechargeable energy storage system 
                                and the heat engine peak power of the 
                                vehicle, except that if such storage 
                                system is the sole means by which the 
                                vehicle can be driven, the total 
                                traction power is the peak power of 
                                such storage system.
            ``(3) New qualified hybrid motor vehicle.--For purposes of 
        this subsection, the term `new qualified hybrid motor vehicle' 
        means a motor vehicle--
                    ``(A) which draws propulsion energy from onboard 
                sources of stored energy which are both--
                            ``(i) an internal combustion or heat engine 
                        using combustible fuel, and
                            ``(ii) a rechargeable energy storage 
                        system,
                    ``(B) which, in the case of a passenger automobile, 
                medium duty passenger vehicle, or light truck, has 
                received a certificate that such vehicle meets or 
                exceeds the Bin 5 Tier II emission level established in 
                regulations prescribed by the Administrator of the 
                Environmental Protection Agency under section 202(i) of 
                the Clean Air Act for that make and model year vehicle,
                    ``(C) which, in the case of a heavy duty hybrid 
                motor vehicle, the internal combustion or heat engine 
                of which has received a certificate of conformity under 
                the Clean Air Act as meeting the emission standards set 
                in the regulations prescribed by the Administrator of 
                the Environmental Protection Agency for 2004 through 
                2007 model year diesel heavy duty engines or ottocycle 
                heavy duty engines, as applicable,
                    ``(D) the original use of which commences with the 
                taxpayer,
                    ``(E) which is acquired for use or lease by the 
                taxpayer and not for resale, and
                    ``(F) which is made by a manufacturer.
            ``(4) Heavy duty hybrid motor vehicle.--For purposes of 
        this subsection, the term `heavy duty hybrid motor vehicle' 
        means a new qualified hybrid motor vehicle which has a gross 
        vehicle weight rating of more than 8,500 pounds. Such term does 
        not include a medium duty passenger vehicle.
    ``(d) New Qualified Alternative Fuel Motor Vehicle Credit.--
            ``(1) Allowance of credit.--Except as provided in paragraph 
        (5), the new qualified alternative fuel motor vehicle credit 
        determined under this subsection is an amount equal to the 
        applicable percentage of the incremental cost of any new 
        qualified alternative fuel motor vehicle placed in service by 
        the taxpayer during the taxable year.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage with respect to any new 
        qualified alternative fuel motor vehicle is--
                    ``(A) 50 percent, plus
                    ``(B) 30 percent, if such vehicle--
                            ``(i) has received a certificate of 
                        conformity under the Clean Air Act and meets or 
                        exceeds the most stringent standard available 
                        for certification under the Clean Air Act for 
                        that make and model year vehicle (other than a 
                        zero emission standard), or
                            ``(ii) has received an order certifying the 
                        vehicle as meeting the same requirements as 
                        vehicles which may be sold or leased in 
                        California and meets or exceeds the most 
                        stringent standard available for certification 
                        under the State laws of California (enacted in 
                        accordance with a waiver granted under section 
                        209(b) of the Clean Air Act) for that make and 
                        model year vehicle (other than a zero emission 
                        standard).
        For purposes of the preceding sentence, in the case of any new 
        qualified alternative fuel motor vehicle which weighs more than 
        14,000 pounds gross vehicle weight rating, the most stringent 
        standard available shall be such standard available for 
        certification in 2002.
            ``(3) Incremental cost.--For purposes of this subsection, 
        the incremental cost of any new qualified alternative fuel 
        motor vehicle is equal to the amount of the excess of the 
        manufacturer's suggested retail price for such vehicle over 
        such price for a gasoline or diesel fuel motor vehicle of the 
        same model, to the extent such amount does not exceed--
                    ``(A) $5,000, if such vehicle has a gross vehicle 
                weight rating of not more than 8,500 pounds,
                    ``(B) $10,000, if such vehicle has a gross vehicle 
                weight rating of more than 8,500 pounds but not more 
                than 14,000 pounds,
                    ``(C) $25,000, if such vehicle has a gross vehicle 
                weight rating of more than 14,000 pounds but not more 
                than 26,000 pounds, and
                    ``(D) $40,000, if such vehicle has a gross vehicle 
                weight rating of more than 26,000 pounds.
            ``(4) New qualified alternative fuel motor vehicle.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `new qualified 
                alternative fuel motor vehicle' means any motor 
                vehicle--
                            ``(i) which is only capable of operating on 
                        an alternative fuel,
                            ``(ii) the original use of which commences 
                        with the taxpayer,
                            ``(iii) which is acquired by the taxpayer 
                        for use or lease, but not for resale, and
                            ``(iv) which is made by a manufacturer.
                    ``(B) Alternative fuel.--The term `alternative 
                fuel' means compressed natural gas, liquefied natural 
                gas, liquefied petroleum gas, hydrogen, and any liquid 
                at least 85 percent of the volume of which consists of 
                methanol.
            ``(5) Credit for mixed-fuel vehicles.--
                    ``(A) In general.--In the case of a mixed-fuel 
                vehicle placed in service by the taxpayer during the 
                taxable year, the credit determined under this 
                subsection is an amount equal to--
                            ``(i) in the case of a 75/25 mixed-fuel 
                        vehicle, 70 percent of the credit which would 
                        have been allowed under this subsection if such 
                        vehicle was a qualified alternative fuel motor 
                        vehicle, and
                            ``(ii) in the case of a 90/10 mixed-fuel 
                        vehicle, 90 percent of the credit which would 
                        have been allowed under this subsection if such 
                        vehicle was a qualified alternative fuel motor 
                        vehicle.
                    ``(B) Mixed-fuel vehicle.--For purposes of this 
                subsection, the term `mixed-fuel vehicle' means any 
                motor vehicle described in subparagraph (C) or (D) of 
                paragraph (3), which--
                            ``(i) is certified by the manufacturer as 
                        being able to perform efficiently in normal 
                        operation on a combination of an alternative 
                        fuel and a petroleum-based fuel,
                            ``(ii) either--
                                    ``(I) has received a certificate of 
                                conformity under the Clean Air Act, or
                                    ``(II) has received an order 
                                certifying the vehicle as meeting the 
                                same requirements as vehicles which may 
                                be sold or leased in California and 
                                meets or exceeds the low emission 
                                vehicle standard under section 88.105-
                                94 of title 40, Code of Federal 
                                Regulations, for that make and model 
                                year vehicle,
                            ``(iii) the original use of which commences 
                        with the taxpayer,
                            ``(iv) which is acquired by the taxpayer 
                        for use or lease, but not for resale, and
                            ``(v) which is made by a manufacturer.
                    ``(C) 75/25 mixed-fuel vehicle.--For purposes of 
                this subsection, the term `75/25 mixed-fuel vehicle' 
                means a mixed-fuel vehicle which operates using at 
                least 75 percent alternative fuel and not more than 25 
                percent petroleum-based fuel.
                    ``(D) 90/10 mixed-fuel vehicle.--For purposes of 
                this subsection, the term `90/10 mixed-fuel vehicle' 
                means a mixed-fuel vehicle which operates using at 
                least 90 percent alternative fuel and not more than 10 
                percent petroleum-based fuel.
    ``(e) Application With Other Credits.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess (if 
any) of--
            ``(1) the regular tax for the taxable year reduced by the 
        sum of the credits allowable under subpart A and sections 27, 
        29, and 30, over
            ``(2) the tentative minimum tax for the taxable year.
    ``(f) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Consumable fuel.--The term `consumable fuel' means 
        any solid, liquid, or gaseous matter which releases energy when 
        consumed by an auxiliary power unit.
            ``(2) Motor vehicle.--The term `motor vehicle' has the 
        meaning given such term by section 30(c)(2).
            ``(3) City fuel economy.--The city fuel economy with 
        respect to any vehicle shall be measured in a manner which is 
        substantially similar to the manner city fuel economy is 
        measured in accordance with procedures under part 600 of 
        subchapter Q of chapter I of title 40, Code of Federal 
        Regulations, as in effect on the date of the enactment of this 
        section.
            ``(4) Other terms.--The terms `automobile', `passenger 
        automobile', `medium duty passenger vehicle', `light truck', 
        and `manufacturer' have the meanings given such terms in 
        regulations prescribed by the Administrator of the 
        Environmental Protection Agency for purposes of the 
        administration of title II of the Clean Air Act (42 U.S.C. 7521 
        et seq.).
            ``(5) Reduction in basis.--For purposes of this subtitle, 
        the basis of any property for which a credit is allowable under 
        subsection (a) shall be reduced by the amount of such credit so 
        allowed (determined without regard to subsection (e)).
            ``(6) No double benefit.--The amount of any deduction or 
        other credit allowable under this chapter--
                    ``(A) for any incremental cost taken into account 
                in computing the amount of the credit determined under 
                subsection (d) shall be reduced by the amount of such 
                credit attributable to such cost, and
                    ``(B) with respect to a vehicle described under 
                subsection (b) or (c), shall be reduced by the amount 
                of credit allowed under subsection (a) for such vehicle 
                for the taxable year.
            ``(7) Property used by tax-exempt entities.--In the case of 
        a credit amount which is allowable with respect to a motor 
        vehicle which is acquired by an entity exempt from tax under 
        this chapter, the person which sells or leases such vehicle to 
        the entity shall be treated as the taxpayer with respect to the 
        vehicle for purposes of this section and the credit shall be 
        allowed to such person, but only if the person clearly 
        discloses to the entity at the time of any sale or lease the 
        specific amount of any credit otherwise allowable to the entity 
        under this section.
            ``(8) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit allowable 
        under subsection (a) with respect to any property which ceases 
        to be property eligible for such credit (including recapture in 
        the case of a lease period of less than the economic life of a 
        vehicle).
            ``(9) Property used outside united states, etc., not 
        qualified.--No credit shall be allowed under subsection (a) 
        with respect to any property referred to in section 50(b) or 
        with respect to the portion of the cost of any property taken 
        into account under section 179.
            ``(10) Election to not take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the taxpayer 
        elects to not have this section apply to such vehicle.
            ``(11) Carryback and carryforward allowed.--
                    ``(A) In general.--If the credit amount allowable 
                under subsection (a) for a taxable year exceeds the 
                amount of the limitation under subsection (e) for such 
                taxable year (in this paragraph referred to as the 
                `unused credit year'), such excess shall be allowed as 
                a credit carryback for each of the 3 taxable years 
                beginning after the date of the enactment of this 
                section, which precede the unused credit year and a 
                credit carryforward for each of the 20 taxable years 
                which succeed the unused credit year.
                    ``(B) Rules.--Rules similar to the rules of section 
                39 shall apply with respect to the credit carryback and 
                credit carryforward under subparagraph (A).
            ``(12) Interaction with air quality and motor vehicle 
        safety standards.--Unless otherwise provided in this section, a 
        motor vehicle shall not be considered eligible for a credit 
        under this section unless such vehicle is in compliance with--
                    ``(A) the applicable provisions of the Clean Air 
                Act for the applicable make and model year of the 
                vehicle (or applicable air quality provisions of State 
                law in the case of a State which has adopted such 
                provision under a waiver under section 209(b) of the 
                Clean Air Act), and
                    ``(B) the motor vehicle safety provisions of 
                sections 30101 through 30169 of title 49, United States 
                Code.
    ``(g) Regulations.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary shall promulgate such regulations as necessary to 
        carry out the provisions of this section.
            ``(2) Coordination in prescription of certain 
        regulations.--The Secretary of the Treasury, in coordination 
        with the Secretary of Transportation and the Administrator of 
        the Environmental Protection Agency, shall prescribe such 
        regulations as necessary to determine whether a motor vehicle 
        meets the requirements to be eligible for a credit under this 
        section.
    ``(h) Termination.--This section shall not apply to any property 
purchased after--
            ``(1) in the case of a new qualified fuel cell motor 
        vehicle (as described in subsection (b)), December 31, 2014, 
        and
            ``(2) in the case of any other property, December 31, 
        2010.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) is amended by striking ``and'' at the 
        end of paragraph (30), by striking the period at the end of 
        paragraph (31) and inserting ``, and'', and by adding at the 
        end the following new paragraph:
            ``(32) to the extent provided in section 30B(f)(5).''.
            (2) Section 55(c)(2) is amended by inserting ``30B(e),'' 
        after ``30(b)(3)''.
            (3) Section 6501(m) is amended by inserting ``30B(f)(10),'' 
        after ``30(d)(4),''.
            (4) The table of sections for subpart B of part IV of 
        subchapter A of chapter 1 is amended by inserting after the 
        item relating to section 30A the following new item:

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

SEC. 4. MODIFICATION AND EXTENSION OF CREDIT FOR QUALIFIED ELECTRIC 
              VEHICLES.

    (a) Amount of Credit.--
            (1) In general.--Section 30(a) (relating to allowance of 
        credit) is amended by striking ``10 percent of''.
            (2) Limitation of credit according to type of vehicle.--
        Section 30(b) (relating to limitations) is amended--
                    (A) by striking paragraphs (1) and (2) and 
                inserting the following new paragraph:
            ``(1) Limitation according to type of vehicle.--The amount 
        of the credit allowed under subsection (a) for any vehicle 
        shall not exceed the greatest of the following amounts 
        applicable to such vehicle:
                    ``(A) In the case of a vehicle which conforms to 
                the Motor Vehicle Safety Standard 500 prescribed by the 
                Secretary of Transportation, as in effect on the date 
                of the enactment of the Clean Efficient Automobiles 
                Resulting From Advanced Car Technologies (CLEAR ACT) 
                Act of 2005, the lesser of--
                            ``(i) 10 percent of the manufacturer's 
                        suggested retail price of the vehicle, or
                            ``(ii) $1,500.
                    ``(B) In the case of a vehicle not described in 
                subparagraph (A) with a gross vehicle weight rating not 
                exceeding 8,500 pounds--
                            ``(i) $4,000, or
                            ``(ii) $6,000, if such vehicle is--
                                    ``(I) capable of a driving range of 
                                at least 100 miles on a single charge 
                                of the vehicle's rechargeable batteries 
                                as measured pursuant to the urban 
                                dynamometer schedules under appendix I 
                                to part 86 of title 40, Code of Federal 
                                Regulations, or
                                    ``(II) capable of a payload 
                                capacity of at least 1,000 pounds.
                    ``(C) In the case of a vehicle with a gross vehicle 
                weight rating exceeding 8,500 but not exceeding 14,000 
                pounds, $10,000.
                    ``(D) In the case of a vehicle with a gross vehicle 
                weight rating exceeding 14,000 but not exceeding 26,000 
                pounds, $20,000.
                    ``(E) In the case of a vehicle with a gross vehicle 
                weight rating exceeding 26,000 pounds, $40,000.'', and
                    (B) by redesignating paragraph (3) as paragraph 
                (2).
            (3) Conforming amendments.--
                    (A) Section 53(d)(1)(B)(iii) is amended by striking 
                ``section 30(b)(3)(B)'' and inserting ``section 
                30(b)(2)(B)''.
                    (B) Section 55(c)(2), as amended by this Act, is 
                amended by striking ``30(b)(3)'' and inserting 
                ``30(b)(2)''.
    (b) Qualified Battery Electric Vehicle.--
            (1) In general.--Section 30(c)(1)(A) (defining qualified 
        electric vehicle) is amended to read as follows:
                    ``(A) which is--
                            ``(i) operated solely by use of a battery 
                        or battery pack, or
                            ``(ii) powered primarily through the use of 
                        an electric battery or battery pack using a 
                        flywheel or capacitor which stores energy 
                        produced by an electric motor through 
                        regenerative braking to assist in vehicle 
                        operation,''.
            (2) Leased vehicles.--Section 30(c)(1)(C) is amended by 
        inserting ``or lease'' after ``use''.
            (3) Conforming amendments.--
                    (A) Subsections (a), (b)(2), and (c) of section 30 
                are each amended by inserting ``battery'' after 
                ``qualified'' each place it appears.
                    (B) The heading of subsection (c) of section 30 is 
                amended by inserting ``Battery'' after ``Qualified''.
                    (C) The heading of section 30 is amended by 
                inserting ``battery'' after ``qualified''.
                    (D) The item relating to section 30 in the table of 
                sections for subpart B of part IV of subchapter A of 
                chapter 1 is amended by inserting ``battery'' after 
                ``qualified''.
                    (E) Section 179A(c)(3) is amended by inserting 
                ``battery'' before ``electric''.
                    (F) The heading of paragraph (3) of section 179A(c) 
                is amended by inserting ``battery'' before 
                ``electric''.
    (c) Additional Special Rules.--Section 30(d) (relating to special 
rules) is amended by adding at the end the following new paragraphs:
            ``(5) No double benefit.--The amount of any deduction or 
        other credit allowable under this chapter for any cost taken 
        into account in computing the amount of the credit determined 
        under subsection (a) shall be reduced by the amount of such 
        credit attributable to such cost.
            ``(6) Property used by tax-exempt entities.--In the case of 
        a credit amount which is allowable with respect to a vehicle 
        which is acquired by an entity exempt from tax under this 
        chapter, the person which sells or leases such vehicle to the 
        entity shall be treated as the taxpayer with respect to the 
        vehicle for purposes of this section and the credit shall be 
        allowed to such person, but only if the person clearly 
        discloses to the entity at the time of any sale or lease the 
        specific amount of any credit otherwise allowable to the entity 
        under this section.
            ``(7) Carryback and carryforward allowed.--
                    ``(A) In general.--If the credit amount allowable 
                under subsection (a) for a taxable year exceeds the 
                amount of the limitation under subsection (b)(2) for 
                such taxable year (in this paragraph referred to as the 
                `unused credit year'), such excess shall be allowed as 
                a credit carryback for each of the 3 taxable years 
                beginning after the date of the enactment of this 
                paragraph, which precede the unused credit year and a 
                credit carryforward for each of the 20 taxable years 
                which succeed the unused credit year.
                    ``(B) Rules.--Rules similar to the rules of section 
                39 shall apply with respect to the credit carryback and 
                credit carryforward under subparagraph (A).''.
    (d) Extension of Credit.--Section 30(e) (relating to termination) 
is amended by striking ``2006'' and inserting ``2010''.
    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act, in taxable years ending after such date.

SEC. 5. CREDIT FOR INSTALLATION OF ALTERNATIVE FUELING STATIONS.

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

``SEC. 30C. CLEAN-FUEL VEHICLE REFUELING PROPERTY CREDIT.

    ``(a) Credit Allowed.--There shall be allowed as a credit against 
the tax imposed by this chapter for the taxable year an amount equal to 
50 percent of the amount paid or incurred by the taxpayer during the 
taxable year for the installation of qualified clean-fuel vehicle 
refueling property.
    ``(b) Limitation.--
            ``(1) In general.--The credit allowed under subsection 
        (a)--
                    ``(A) with respect to any retail clean-fuel vehicle 
                refueling property, shall not exceed $30,000, and
                    ``(B) with respect to any residential clean-fuel 
                vehicle refueling property, shall not exceed $1,000.
            ``(2) Phaseout.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), in the case of any qualified clean-
                fuel vehicle refueling property placed in service after 
                December 31, 2008, the limit otherwise applicable under 
                paragraph (1) shall be reduced by--
                            ``(i) 25 percent in the case of any 
                        property placed in service in calendar year 
                        2009, and
                            ``(ii) 50 percent in the case of any 
                        property placed in service in calendar year 
                        2010.
                    ``(B) Hydrogen property.--In the case of any 
                qualified clean-fuel vehicle refueling property 
                relating to hydrogen placed in service after December 
                31, 2012, the limit otherwise applicable under 
                paragraph (1) shall be reduced by--
                            ``(i) 25 percent in the case of any 
                        property placed in service in calendar year 
                        2013, and
                            ``(ii) 50 percent in the case of any 
                        property placed in service in calendar year 
                        2014.
    ``(c) Year Credit Allowed.--The credit allowed under subsection (a) 
shall be allowed in the taxable year in which the qualified clean-fuel 
vehicle refueling property is placed in service by the taxpayer.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified clean-fuel vehicle refueling property.--The 
        term `qualified clean-fuel vehicle refueling property' has the 
        same meaning given such term by section 179A(d).
            ``(2) Residential clean-fuel vehicle refueling property.--
        The term `residential clean-fuel vehicle refueling property' 
        means qualified clean-fuel vehicle refueling property which is 
        installed on property which is used as the principal residence 
        (within the meaning of section 121) of the taxpayer.
            ``(3) Retail clean-fuel vehicle refueling property.--The 
        term `retail clean-fuel vehicle refueling property' means 
        qualified clean-fuel vehicle refueling property which is 
        installed on property (other than property described in 
        paragraph (2)) used in a trade or business of the taxpayer.
    ``(e) Application With Other Credits.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess (if 
any) of--
            ``(1) the regular tax for the taxable year reduced by the 
        sum of the credits allowable under subpart A and sections 27, 
        29, 30, and 30B, over
            ``(2) the tentative minimum tax for the taxable year.
    ``(f) Basis Reduction.--For purposes of this title, the basis of 
any property shall be reduced by the portion of the cost of such 
property taken into account under subsection (a).
    ``(g) No Double Benefit.--No deduction shall be allowed under 
section 179A with respect to any property with respect to which a 
credit is allowed under subsection (a).
    ``(h) Refueling Property Installed for Tax-Exempt Entities.--In the 
case of qualified clean-fuel vehicle refueling property installed on 
property owned or used by an entity exempt from tax under this chapter, 
the person which installs such refueling property for the entity shall 
be treated as the taxpayer with respect to the refueling property for 
purposes of this section (and such refueling property shall be treated 
as retail clean-fuel vehicle refueling property) and the credit shall 
be allowed to such person, but only if the person clearly discloses to 
the entity in any installation contract the specific amount of the 
credit allowable under this section.
    ``(i) Carryforward Allowed.--
            ``(1) In general.--If the credit amount allowable under 
        subsection (a) for a taxable year exceeds the amount of the 
        limitation under subsection (e) for such taxable year (referred 
        to as the `unused credit year' in this subsection), such excess 
        shall be allowed as a credit carryforward for each of the 20 
        taxable years following the unused credit year.
            ``(2) Rules.--Rules similar to the rules of section 39 
        shall apply with respect to the credit carryforward under 
        paragraph (1).
    ``(j) Special Rules.--Rules similar to the rules of paragraphs (4) 
and (5) of section 179A(e) shall apply.
    ``(k) Regulations.--The Secretary shall prescribe such regulations 
as necessary to carry out the provisions of this section.
    ``(l) Termination.--This section shall not apply to any property 
placed in service--
            ``(1) in the case of property relating to hydrogen, after 
        December 31, 2014, and
            ``(2) in the case of any other property, after December 31, 
        2010.''.
    (b) Incentive for Production of Hydrogen at Qualified Clean-Fuel 
Vehicle Refueling Property.--Section 179A(d) (defining qualified clean-
fuel vehicle refueling property) is amended by adding at the end the 
following new flush sentence:
``In the case of clean-burning fuel which is hydrogen produced from 
another clean-burning fuel, paragraph (3)(A) shall be applied by 
substituting `production, storage, or dispensing' for `storage or 
dispensing' both places it appears.''.
    (c) Conforming Amendments.--
            (1) Section 1016(a), as amended by this Act, is amended by 
        striking ``and'' at the end of paragraph (28), by striking the 
        period at the end of paragraph (29) and inserting ``, and'', 
        and by adding at the end the following new paragraph:
            ``(30) to the extent provided in section 30C(f).''.
            (2) Section 55(c)(2), as amended by this Act, is amended by 
        inserting ``30C(e),'' after ``30B(e)''.
            (3) The table of sections for subpart B of part IV of 
        subchapter A of chapter 1, as amended by this Act, is amended 
        by inserting after the item relating to section 30B the 
        following new item:

``Sec. 30C. Clean-fuel vehicle refueling property credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act, in taxable years ending after such date.

SEC. 6. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS MOTOR VEHICLE 
              FUEL.

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

``SEC. 40B. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS MOTOR 
              VEHICLE FUEL.

    ``(a) General Rule.--For purposes of section 38, the alternative 
fuel retail sales credit for any taxable year is the applicable amount 
for each gasoline gallon equivalent of alternative fuel sold at retail 
by the taxpayer during such year as a fuel to propel any qualified 
motor vehicle.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Applicable amount.--The term `applicable amount' 
        means as follows:
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the amount determined in accordance 
                with the following table:

``In the case of any taxable year
   ending in--                               The applicable amount is--
    2005 or 2006..................................            50 cents 
    2007..........................................            40 cents 
    2008 or 2009..................................            30 cents.
                    ``(B) Hydrogen fuel.--In the case of an alternative 
                fuel which is hydrogen fuel, the amount determined in 
                accordance with the following table:

``In the case of any taxable year
   ending in--                               The applicable amount is--
    2005 through 2011.............................            50 cents 
    2012..........................................            40 cents 
    2013 or 2014..................................            30 cents.
            ``(2) Alternative fuel.--The term `alternative fuel' means 
        compressed natural gas, liquefied natural gas, liquefied 
        petroleum gas, hydrogen, and any liquid at least 85 percent of 
        the volume of which consists of methanol or ethanol.
            ``(3) Gasoline gallon equivalent.--The term `gasoline 
        gallon equivalent' means, with respect to any alternative fuel, 
        the amount (determined by the Secretary) of such fuel having a 
        Btu content of 114,000.
            ``(4) Qualified motor vehicle.--The term `qualified motor 
        vehicle' means any motor vehicle (as defined in section 
        30(c)(2)) which meets any applicable Federal or State emissions 
        standards with respect to each fuel by which such vehicle is 
        designed to be propelled.
            ``(5) Sold at retail.--
                    ``(A) In general.--The term `sold at retail' means 
                the sale, for a purpose other than resale, after 
                manufacture, production, or importation.
                    ``(B) Use treated as sale.--If any person uses 
                alternative fuel (including any use after importation) 
                as a fuel to propel any qualified alternative fuel 
                motor vehicle (as defined in section 30B(d)(4)) before 
                such fuel is sold at retail, then such use shall be 
                treated in the same manner as if such fuel were sold at 
                retail as a fuel to propel such a vehicle by such 
                person.
    ``(c) Election to Pass Credit.--A person which sells alternative 
fuel at retail may elect to pass the credit allowable under this 
section to the purchaser of such fuel or, in the event the purchaser is 
a tax-exempt entity or otherwise declines to accept such credit, to the 
person which supplied such fuel, under rules established by the 
Secretary.
    ``(d) No Double Benefit.--The amount of any deduction or other 
credit allowable under this chapter for any fuel taken into account in 
computing the amount of the credit determined under subsection (a) 
shall be reduced by the amount of such credit attributable to such 
fuel.
    ``(e) Pass-Thru in the Case of Estates and Trusts.--Under 
regulations prescribed by the Secretary, rules similar to the rules of 
subsection (d) of section 52 shall apply.
    ``(f) Termination.--
            ``(1) In general.--Except as provided in paragraph (2), 
        this section shall not apply to any fuel sold at retail after 
        December 31, 2009.
            ``(2) Hydrogen fuel.--In the case of an alternative fuel 
        which is hydrogen fuel, this section shall not apply to any 
        fuel sold at retail after December 31, 2014.''.
    (b) Credit Treated as Business Credit.--Section 38(b) (relating to 
current year business credit) is amended by striking ``plus'' at the 
end of paragraph (18), by striking the period at the end of paragraph 
(19) and inserting ``, plus'', and by adding at the end the following 
new paragraph:
            ``(20) the alternative fuel retail sales credit determined 
        under section 40B(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 40 the following new item:

``Sec. 40B. Credit for retail sale of alternative fuels as motor 
                            vehicle fuel.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fuel sold at retail after the date of the enactment of this 
Act, in taxable years ending after such date.

SEC. 7. STUDY OF EFFECTIVENESS OF CERTAIN PROVISIONS BY GAO.

    (a) Study.--The Comptroller General of the United States shall 
undertake an ongoing analysis of--
            (1) the effectiveness of the alternative motor vehicles and 
        fuel incentives provisions under this Act, and
            (2) the recipients of the tax benefits contained in such 
        provisions, including an identification of such recipients by 
        income and other appropriate measurements.
Such analysis shall quantify the effectiveness of such provisions by 
examining and comparing the Federal Government's forgone revenue to the 
aggregate amount of energy actually conserved and tangible 
environmental benefits gained as a result of such provisions.
    (b) Reports.--The Comptroller General of the United States shall 
report the analysis required under subsection (a) to Congress not later 
than December 31, 2006, and annually thereafter.
                                 <all>
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