I 

108TH CONGRESS 

1ST SESSION H. R. 991

To amend the Internal Revenue Code of 1986 to expand the renewable 

resources production tax credit to include additional forms of renewable 

energy, and to expand the investment tax credit to include equipment 

used to produce electricity from renewable resources. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 27, 2003

Mr. HUNTER (for himself and Mr. UDALL of Colorado) introduced the 

following bill; which was referred to the Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to expand 

the renewable resources production tax credit to include 

additional forms of renewable energy, and to expand 

the investment tax credit to include equipment used to 

produce electricity from renewable resources.

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 ‘‘Renewable Fuel Equity 

5 Act’’. 
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1 SEC. 2. EXPANSION OF RENEWABLE RESOURCES CREDIT. 

2 (a) IN GENERAL.—Section 45(c)(1) of the Internal 

3 Revenue Code of 1986 (relating to qualified energy re4 sources) is amended by striking ‘‘and’’ at the end of sub5 paragraph (B), by striking the period at the end of the 

6 subparagraph (C) and inserting a comma, and by adding 

7 at the end the following new subparagraphs: 

8 ‘‘(D) geothermal energy, 

9 ‘‘(E) solar energy, 

10 ‘‘(F) incremental hydropower, and 

11 ‘‘(G) biomass (other than closed-loop bio12 mass).’’

13 (b) EXTENSION AND MODIFICATION OF PLACED-IN14 SERVICE RULES WITH RESPECT TO BIOMASS FACILI15 TIES.—

16 (1) IN GENERAL.—Paragraph (3) of section 

17 45(c) of the Internal Revenue Code of 1986 (defin18 ing qualified facility) is amended—

19 (A) by striking subparagraph (B) and in20 serting the following new subparagraph: 

21 ‘‘(B) CLOSED-LOOP BIOMASS FACILITY.—

22 In the case of a facility using closed-loop bio23 mass to produce electricity, the term ‘qualified 

24 facility’ means any facility—
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1 ‘‘(i) owned by the taxpayer which is 

2 originally placed in service after December 

3 31, 1992, and before January 1, 2009, or 

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

5 originally placed in service on or before 

6 December 31, 1992, and modified to use 

7 closed-loop biomass to co-fire with coal be8 fore January 1, 2009.’’, 

9 (B) by striking ‘‘2004’’ in subparagraph 

10 (C) and inserting ‘‘2009’’, and 

11 (C) by adding at the end the following new 

12 subparagraph: 

13 ‘‘(D) BIOMASS FACILITY.—In the case of a 

14 facility using biomass (other than closed-loop 

15 biomass) to produce electricity, the term ‘quali16 fied facility’ means any facility owned by the 

17 taxpayer which is originally placed in service be18 fore January 1, 2009.’’. 

19 (2) DEFINITION.—Subsection (c) of section 45 

20 of such Code (relating to definitions) is amended by 

21 adding at the end the following new paragraph: 

22 ‘‘(5) BIOMASS.—The term ‘biomass’ means any 

23 solid, nonhazardous, cellulosic waste material which 

24 is segregated from other waste materials and which 

25 is derived from—
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1 ‘‘(A) any of the following forest-related re2 sources: mill residues, precommercial thinnings, 

3 slash, and brush, but not including old-growth 

4 timber, 

5 ‘‘(B) solid wood waste materials, including 

6 waste pallets, crates, dunnage, manufacturing 

7 and construction wood wastes (other than pres8 sure-treated, chemically-treated, or painted 

9 wood wastes), and landscape or right-of-way 

10 tree trimmings, but not including municipal 

11 solid waste (garbage), gas derived from the bio12 degradation of solid waste, or paper that is 

13 commonly recycled, or 

14 ‘‘(C) agriculture sources, including orchard 

15 tree crops, vineyard, grain, legumes, sugar, and 

16 other crop by-products or residues.’’. 

17 (3) SPECIAL RULES.—Subsection (d) of section 

18 45 of such Code (relating to definitions and special 

19 rules) is amended by adding at the end the following 

20 new paragraph: 

21 ‘‘(8) SPECIAL RULES WITH RESPECT TO BIO22 MASS.—In the case of a qualified facility described 

23 in subparagraph (B)(ii) or (D) of subsection 

24 (c)(3)—
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1 ‘‘(A) the 10-year period referred to in sub2 section (a) shall be treated as beginning no ear3 lier than the date of the enactment of this para4 graph, 

5 ‘‘(B) subsection (b)(3) shall not apply to 

6 any such facility originally placed in service be7 fore January 1, 1997, and 

8 ‘‘(C) if such a facility is leased and the op9 erator thereof is the lessee, such lessee (and not 

10 the owner) shall be treated for purposes of this 

11 section as owning such facility.’’

12 (c) QUALIFIED FACILITY TO INCLUDE GEO13 THERMAL, SOLAR ENERGY, AND INCREMENTAL HYDRO14 POWER FACILITY.—

15 (1) IN GENERAL.—Paragraph (3) of section 

16 45(c) of such Code, as amended by subsection (b), 

17 is amended by inserting after subparagraph (D) the 

18 following new subparagraphs: 

19 ‘‘(E) GEOTHERMAL FACILITY.—In the case 

20 of a facility using geothermal energy to produce 

21 electricity, the term ‘qualified facility’ means—

22 ‘‘(i) any facility owned by the tax23 payer which is originally placed in service 

24 after December 31, 2003, or
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1 ‘‘(ii) any facility owned by the tax2 payer which is originally placed in service 

3 before January 1, 2004, but only to the ex4 tent of its incremental production. 

5 If such a facility is leased and the operator 

6 thereof is the lessee, such lessee (and not the 

7 owner) shall be treated for purposes of this sec8 tion as owning such facility. 

9 ‘‘(F) SOLAR ENERGY FACILITY.—In the 

10 case of a facility using solar energy to produce 

11 electricity, the term ‘qualified facility’ means—

12 ‘‘(i) any facility owned by the tax13 payer which is originally placed in service 

14 after December 31, 2003, or 

15 ‘‘(ii) any facility owned by the tax16 payer which is originally placed in service 

17 before January 1, 2004, but only to the ex18 tent of its incremental production. 

19 If such a facility is leased and the operator 

20 thereof is the lessee, such lessee (and not the 

21 owner) shall be treated for purposes of this sec22 tion as owning such facility. 

23 ‘‘(G) INCREMENTAL HYDROPOWER FACIL24 ITY.—
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1 ‘‘(i) IN GENERAL.—In the case of a 

2 facility using incremental hydropower to 

3 produce electricity, the term ‘qualified fa4 cility’ means any facility owned by the tax5 payer that achieves additional generation 

6 from—

7 ‘‘(I) increased efficiency, or 

8 ‘‘(II) additions of new capacity, 

9 at a non-Federal hydroelectric project 

10 originally placed in service before the date 

11 of enactment of this subparagraph. Only 

12 the incremental hydropower production of 

13 such facility shall be taken into account 

14 under subsection (a). 

15 ‘‘(ii) INCREMENTAL HYDROPOWER

16 PRODUCTION.—For purposes of clause (i), 

17 the term ‘incremental hydropower produc18 tion’ means for any taxable year an 

19 amount equal to the percentage of total 

20 kilowatt hours of electricity produced from 

21 a hydropower facility described in clause 

22 (i) attributable to efficiency improvements 

23 or additions of capacity as determined 

24 under clause (iii). 
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1 ‘‘(iii) DETERMINATION OF INCRE2 MENTAL HYDROPOWER PRODUCTION.—For 

3 purposes of clause (i), incremental hydro4 power production for any hydropower facil5 ity for any taxable year shall be deter6 mined by establishing a percentage of aver7 age annual hydropower production at the 

8 facility attributable to the efficiency im9 provements or additions of capacity using 

10 the same water flow information used to 

11 determine an historic average annual hy12 dropower production baseline for such fa13 cility. Such percentage and baseline shall 

14 be certified by the Federal Energy Regu15 latory Commission. For purposes of the 

16 preceding sentence, the determination of 

17 incremental hydropower production shall 

18 not be based on any operational changes at 

19 such facility not directly associated with 

20 the efficiency improvements or additions of 

21 capacity.’’

22 (2) SPECIAL RULE.—Subsection (d) of section 

23 45 of such Code (relating to definitions and special 

24 rules), as amended by subsection (b)(3), is amended 

25 by adding at the end the following new paragraph:
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1 ‘‘(9) DEFINITION AND SPECIAL RULE WITH RE2 SPECT TO INCREMENTAL GEOTHERMAL AND SOLAR

3 PRODUCTION.—For purposes of subparagraphs (E) 

4 and (F) of paragraph (3)—

5 ‘‘(A) IN GENERAL.—The term ‘incremental 

6 production’ means, with respect to any applica7 ble facility for any taxable year, the excess of—

8 ‘‘(i) the total kilowatt hours of elec9 tricity produced from such facility, over 

10 ‘‘(ii) the average annual kilowatt 

11 hours produced at such facility for five of 

12 the previous seven calendar years prior to 

13 the date of the enactment of this para14 graph after eliminating the highest and 

15 lowest kilowatt hour production years in 

16 such seven-year period. 

17 ‘‘(B) SPECIAL RULE.—An applicable facil18 ity which was placed in service seven years or 

19 longer prior to the date of the enactment of this 

20 paragraph shall, commencing with the year of 

21 such enactment, reduce the amount calculated 

22 under subparagraph (A)(ii) each year, on a cu23 mulative basis, by the average decrease in an24 nual kilowatt hour production for the seven25 year period described in subparagraph (A)(ii) 
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1 with such cumulative sum not to exceed 30 per2 cent. 

3 ‘‘(C) APPLICABLE FACILITY.—The term 

4 ‘applicable facility’ means—

5 ‘‘(i) a facility described in subsection 

6 (c)(3)(E)(ii), and 

7 ‘‘(ii) a facility described in subsection 

8 (c)(3)(F)(ii).’’. 

9 (d) COORDINATION WITH OTHER CREDITS.—Sub10 section (d) of section 45 of such Code (relating to defini11 tions and special rules), as amended by subsection (c)(2), 

12 is amended by adding at the end the following: 

13 ‘‘(10) COORDINATION WITH OTHER CREDITS.—

14 This section shall not apply to any qualified facility 

15 with respect to which a credit under any other sec16 tion is allowed for the taxable year unless the tax17 payer elects to waive application of such credit to 

18 such facility.’’. 

19 (e) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to electricity sold after December 

21 31, 2003. 
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1 SEC. 3. EXPANSION OF INVESTMENT TAX CREDIT TO IN2 CLUDE EQUIPMENT USED TO PRODUCE 

3 ELECTRICITY FROM CERTAIN RENEWABLE 

4 RESOURCES. 

5 (a) IN GENERAL.—Subparagraph (A) of section 

6 48(a)(3) of the Internal Revenue Code of 1986 (relating 

7 to energy credit reforestation credit) is amended by strik8 ing ‘‘or’’ at the end of clause (i), inserting ‘‘or’’ at the 

9 end of clause (ii), and adding at the end the following new 

10 clause: 

11 ‘‘(iii) equipment used to produce elec12 tricity from a qualified facility (as defined 

13 in section 45).’’. 

14 (b) INCREASED CREDIT FOR CERTAIN EQUIP15 MENT.—Paragraph (2) of section 48(a) is amended—

16 (1) by redesignating subparagraph (B) as sub17 paragraph (C), 

18 (2) in subparagraph (A), by striking ‘‘The’’ and 

19 inserting ‘‘Except as provided in subparagraph (B), 

20 the’’, and 

21 (3) by inserting after subparagraph (A) the fol22 lowing new subparagraph: 

23 ‘‘(B) INCREASED PERCENTAGE FOR CER24 TAIN EQUIPMENT.—In the case of energy prop25 erty having a total installed electrical gener26 ating capacity of less than 1 megawatt and 
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1 placed in service before January 1, 2009, the 

2 energy percentage is 20 percent.’’. 

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

4 this section shall apply to equipment placed in service 

5 after December 31, 2003.

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