I

103D CONGRESS

2D SESSION H. R. 2026

To amend the Internal Revenue Code of 1986 to encourage energy efficiency

and the production and use of renewable energy.

IN THE HOUSE OF REPRESENTATIVES

MAY 6, 1993

Mr. MCDERMOTT introduced the following bill; which was referred to the

Committee on Ways and Means

JANUARY 27, 1994

Additional sponsors: Mr. HAMBURG and Mrs. UNSOELD

A BILL

To amend the Internal Revenue Code of 1986 to encourage

energy efficiency and the production and use of renewable energy.

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; AMENDMENT OF 1986 CODE.

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

5 ‘‘Renewables and Energy Efficiency Incentives Act of

6 1993’’.

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend-
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1 ment or repeal is expressed in terms of an amendment

2 to, or repeal of, a section or other provision, the reference

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986.

5 TITLE I—INCENTIVES FOR PRO6 DUCTION AND USE OF RE7 NEWABLE ENERGY SOURCES

8 SEC. 101. ENERGY-RELATED CREDITS MAY OFFSET 25 PER9 CENT OF MINIMUM TAX.

10 (a) IN GENERAL.—Section 38(c) (relating to limita11 tion based on amount of tax) is amended by redesignating

12 paragraph (2) as paragraph (3) and by inserting after

13 paragraph (1) the following new paragraph:

14 ‘‘(2) ENERGY CREDITS MAY OFFSET 25 PER15 CENT OF MINIMUM TAX.—

16 ‘‘(A) IN GENERAL.—In the case of the en17 ergy credit—

18 ‘‘(i) this section and section 39 shall

19 be applied separately with respect to such

20 credit, and

21 ‘‘(ii) for purposes of applying para22 graph (1) to such credit—

23 ‘‘(I) 75 percent of the tentative

24 minimum tax shall be substituted for
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1 the tentative minimum tax under sub2 paragraph (A) thereof, and

3 ‘‘(II) the limitation under para4 graph (1) (as modified by subclause

5 (I)) shall be reduced by the credit al6 lowed under subsection (a) for the

7 taxable year (other than the energy

8 credit).

9 ‘‘(B) ENERGY CREDIT.—For purposes of

10 this paragraph, the term ‘energy credit’ means

11 the portion of the credit under subsection (a)

12 which is attributable to the credits determined

13 under sections 45 and 48(a).’’

14 (b) EFFECTIVE DATE.—The amendment made by

15 subsection (a) shall apply to taxable years beginning after

16 December 31, 1993.

17 SEC. 102. SMALL WIND TURBINES ELIGIBLE FOR ENERGY

18 CREDIT.

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

20 48(a)(3) (defining energy property) is amended by strik21 ing ‘‘or’’ at the end of clause (i), by redesignating clause

22 (ii) as clause (iii), and by inserting after clause (i) the

23 following new clause:

24 ‘‘(ii) equipment which uses wind en25 ergy to generate electricity but only if such
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1 equipment has a rated capacity of 50 kilo2 watts or less and is not primarily used in

3 the trade or business of producing elec4 tricity for sale to an unrelated person, or’’.

5 (b) EFFECTIVE DATE.—The amendment made by

6 subsection (a) shall apply to property placed in service

7 after December 31, 1993.

8 SEC. 103. LESSEES ELIGIBLE FOR CREDIT FOR ELEC9 TRICITY PRODUCED FROM CERTAIN RENEW10 ABLE RESOURCES.

11 (a) IN GENERAL.—Paragraph (3) of section 45(c)

12 (defining qualified facility) is amended by striking ‘‘owned

13 by the taxpayer’’ and inserting ‘‘operated by the tax14 payer’’.

15 (b) EFFECTIVE DATE.—The amendment made by

16 subsection (a) shall apply to taxable years beginning after

17 December 31, 1993.

18 SEC. 104. CLARIFICATION OF APPLICATION OF ENERGY

19 CREDIT TO PROPERTY USING SOLAR EN20 ERGY.

21 (a) IN GENERAL.—Paragraph (3) of section 48(a)

22 (relating to energy credit) is amended by adding at the

23 end thereof the following: ‘‘Equipment shall be treated as

24 satisfying the requirement of subparagraph (A)(i) that it

25 use solar energy if its average annual use of energy from
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1 sources other than solar energy does not exceed 50 percent

2 of its total energy input.’’

3 (b) EFFECTIVE DATE.—The amendment made by

4 subsection (a) shall apply to property placed in service

5 after December 31, 1993.

6 TITLE II—INCENTIVES TO

7 PROMOTE ENERGY EFFICIENCY

8 SEC. 201. LARGE ELECTRIC TRUCKS, VANS, AND BUSES ELI9 GIBLE FOR DEDUCTION FOR CLEAN-FUEL VE10 HICLES.

11 (a) IN GENERAL.—Paragraph (3) of section 179A(c)

12 (defining qualified clean-fuel vehicle property) is amended

13 by adding at the end thereof the following: ‘‘The preceding

14 sentence shall not apply to any vehicle described in

15 subclause (I) or (II) of subsection (b)(1)(A)(iii).’’

16 (b) DENIAL OF CREDIT.—Subsection (c) of section

17 30 is amended by adding at the end thereof the following

18 new paragraph:

19 ‘‘(3) DENIAL OF CREDIT FOR VEHICLES FOR

20 WHICH DEDUCTION ALLOWABLE.—The term ‘quali21 fied electric vehicle’ shall not include any vehicle de22 scribed in subclause (I) or (II) of section

23 179A(b)(1)(A)(iii).’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to property placed in service after

3 December 31, 1993.

4 SEC. 202. DEDUCTION FOR ENERGY CONSERVATION EX5 PENDITURES BY CERTAIN UTILITIES.

6 (a) IN GENERAL.—Part VI of subchapter B of chap7 ter 1 (relating to itemized deductions for individuals and

8 corporations) is amended by inserting after section 196

9 the following new section:

10 ‘‘SEC. 197. ENERGY CONSERVATION EXPENDITURES BY

11 ELECTRIC AND GAS UTILITIES.

12 ‘‘(a) GENERAL RULE.—In the case of an electric or

13 gas utility, there shall be allowed as a deduction for the

14 taxable year an amount equal to the energy conservation

15 expenditures paid or incurred by the taxpayer during such

16 taxable year.

17 ‘‘(b) ENERGY CONSERVATION EXPENDITURES.—For

18 purposes of this section, the term ‘energy conservation ex19 penditures’ means expenditures for—

20 ‘‘(1) subsidies provided directly or indirectly to

21 customers for the purchase, installation, or modifica22 tion of—

23 ‘‘(A) any device or service primarily de24 signed to reduce consumption of electricity, nat-
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1 ural gas, or steam or to improve the manage2 ment of energy demand, or

3 ‘‘(B) any specially defined energy property

4 (as defined in section 136(c)(2)(A)),

5 ‘‘(2) energy use consulting and audits of com6 mercial, residential, and industrial properties, or

7 ‘‘(3) administrative, promotional, and other

8 costs associated with expenditures described in para9 graph (1) or (2).

10 Such term shall not include any expenditure taken into

11 account in determining the basis of any tangible property

12 which is owned by the taxpayer and which is of a character

13 subject to the allowance for depreciation.

14 ‘‘(c) ELECTRIC OR GAS UTILITY.—For purposes of

15 this section, the term ‘electric or gas utility’ means any

16 corporation engaged in the furnishing or sale of electric

17 energy, natural gas, or steam if the rates for such furnish18 ing or sale have been established or approved by a State

19 or political subdivision thereof, by any agency or instru20 mentality of the United States, or by a public utility or

21 public service commission or other similar body of any

22 State or political subdivision thereof or of the District of

23 Columbia.’’

24 (b) CONFORMING AMENDMENTS.—
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1 (1) Paragraph (1) of section 263(a) is amended

2 by striking ‘‘; or’’ at the end of subparagraph (F)

3 and inserting a comma, by striking the period at the

4 end of subparagraph (G) and inserting ‘‘, or’’, and

5 by adding at the end thereof the following new sub6 paragraph:

7 ‘‘(H) expenditures for which a deduction is

8 allowed under section 197.’’

9 (2) The table of sections for part VI of sub10 chapter B of chapter 1 is amended by adding at the

11 end thereof the following new item:

‘‘Sec. 197. Energy conservation expenditures by electric and gas

utilities.’’

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

13 this section shall apply to expenditures paid or incurred

14 in taxable years beginning after December 31, 1980.

15 SEC. 203. FULL EXCLUSION FOR ENERGY CONSERVATION

16 SUBSIDIES PROVIDED WITH RESPECT TO

17 NONRESIDENTIAL PROPERTY.

18 (a) IN GENERAL.—Subsection (a) of section 136 (re19 lating to energy conservation subsidies provided by public

20 utilities) is amended to read as follows:

21 ‘‘(a) EXCLUSION.—Gross income shall not include

22 the value of any subsidy provided (directly or indirectly)

23 by a public utility to a customer for the purchase or instal24 lation of any energy conservation measure.’’
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1 (b) CONFORMING AMENDMENT.—Paragraph (1) of

2 section 136(c) (defining energy conservation measure) is

3 amended by striking ‘‘demand—’’ and all that follows and

4 inserting ‘‘demand with respect to any property.’’

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

6 this section shall apply to subsidies provided after Decem7 ber 31, 1993.

8 TITLE III—REVENUE INCREASES

9 SEC. 301. REDUCTION OF TAX SUBSIDIES FOR ETHANOL

10 FUEL MIXTURES.

11 (a) REDUCTION OF CREDIT FOR ETHANOL BLEND12 ERS.—Subsection (h) of section 40 (relating to alcohol

13 used as fuel) is amended—

14 (1) by striking ‘‘54 cents’’ each place it appears

15 and inserting ‘‘35 cents’’, and

16 (2) by striking ‘‘40 cents’’ each place it appears

17 and inserting ‘‘21 cents’’.

18 (b) REDUCTION OF FUEL TAX SUBSIDIES.—

19 (1) Subparagraph (A) of section 4081(c)(1) (re20 lating to gasoline mixed with alcohol at refinery,

21 etc.) is amended—

22 (A) by striking ‘‘6.1 cents’’ each place it

23 appears and inserting ‘‘8.0 cents’’,

24 (B) by striking ‘‘7.342 cents’’ each place it

25 appears and inserting ‘‘8.805 cents’’, and
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1 (C) by striking ‘‘8.422 cents’’ each place it

2 appears and inserting ‘‘9.505 cents’’

3 (2) Clause (i) of section 4041(b)(2)(A) (relating

4 to reduction in special fuels tax for qualified meth5 anol and ethanol fuel) is amended by striking ‘‘5.4

6 cents’’ and inserting ‘‘3.5 cents’’.

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

8 this section shall take effect on January 1, 1994.

9 SEC. 302. REPEAL OF EXCLUSION FOR INTEREST ON BONDS

10 ISSUED TO FINANCE ELECTRIC GENERATING

11 FACILITIES FUELED BY COAL, PETROLEUM,

12 OR NUCLEAR POWER.

13 (a) IN GENERAL.—Section 149 (relating to bonds

14 must be registered to be tax exempt; other requirements)

15 is amended by adding at the end thereof the following new

16 subsection:

17 ‘‘(h) BONDS USED TO FINANCE CERTAIN ELECTRIC

18 GENERATING FACILITIES NOT TAX-EXEMPT.—Nothing

19 in section 103(a) or in any other provision of law shall

20 be construed to provide an exemption from Federal income

21 tax for interest on any bond issued as part of an issue

22 if any portion of such issue is used to provide facilities

23 for the furnishing of electricity if such electricity is gener24 ating using nuclear power, coal, crude oil, or any petro25 leum product.’’
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1 (b) CONFORMING AMENDMENT.—Paragraph (8) of

2 section 142(a) is amended by inserting ‘‘except as pro3 vided in section 149(h),’’ before ‘‘facilities’’.

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

5 this section shall apply to bonds issued after the date of

6 the enactment of this Act.

7 SEC. 303. REPEAL OF TAX-EXEMPT STATUS FOR ELECTRIC

8 COOPERATIVES.

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

10 501(c)(12) (relating to list of exempt organizations) is

11 amended by inserting ‘‘(other than electric companies)’’

12 after ‘‘like organizations’’.

13 (b) CONFORMING AMENDMENTS.—

14 (1) Paragraph (12) of section 501(c) is amend15 ed by striking subparagraph (C) and by redesignat16 ing subparagraph (D) as subparagraph (C).

17 (2) Subparagraph (C) of section 501(c)(12), as

18 redesignated by paragraph (1), is amended—

19 (A) by striking ‘‘or electric’’ each place it

20 appears, and

21 (B) by striking ‘‘of electricity or’’.

22 (3) Subsection (d) of section 513 is amended by

23 striking ‘‘or electric’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1993.

4 SEC. 304. INCREASED TAXES ON CRUDE OIL.

5 (a) IN GENERAL.—Paragraph (1) of section 4611(c)

6 (relating to rate of tax on petroleum) is amended by strik7 ing ‘‘and’’ at the end of subparagraph (A), by striking

8 the period at the end of subparagraph (B) and inserting

9 ‘‘, and’’, and by adding at the end thereof the following

10 new subparagraph:

11 ‘‘(C) the petroleum security rate.’’

12 (b) RATE OF TAX.—Paragraph (2) of section 4611(c)

13 is amended by striking ‘‘and’’ at the end of subparagraph

14 (A), by striking the period at the end of subparagraph

15 (B) and inserting ‘‘, and’’, and by adding at the end there16 of the following new subparagraph:

17 ‘‘(C) the petroleum security rate is 5 cents

18 a barrel.’’

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

20 this section shall take effect on January 1, 1994.

21 SEC. 305. DEDUCTION FOR PERCENTAGE DEPLETION FOR

22 OIL AND GAS WELLS LIMITED TO ADJUSTED

23 BASIS.

24 (a) IN GENERAL.—Subsection (d) of section 613A

25 (relating to limitations on percentage depletion in case of
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1 oil and gas wells) is amended by adding at the end thereof

2 the following new paragraph:

3 ‘‘(6) LIMITATION BASED ON ADJUSTED

4 BASIS.—The deduction for the taxable year attrib5 utable to the application of subsection (c) with re6 spect to any property shall not exceed the adjusted

7 basis of such property at the end of the taxable year

8 (determined without regard to the depletion deduc9 tion for such taxable year).’’

10 (b) EFFECTIVE DATE.—The amendment made by

11 this section shall apply to taxable years beginning after

12 December 31, 1993.

13 SEC. 306. REPEAL OF EXCEPTION FROM PASSIVE LOSS LIM14 ITATION FOR WORKING INTERESTS IN OIL

15 AND GAS PROPERTIES.

16 (a) IN GENERAL.—Subsection (c) of section 469 (re17 lating to passive activity losses and credits limited) is

18 amended by striking paragraph (3) and by redesignating

19 paragraphs (4) through (6) as paragraphs (3) through

20 (5), respectively.

21 (b) CONFORMING AMENDMENT.—Paragraph (3) of

22 section 469(c), as redesignated by subsection (a), is

23 amended—

24 (1) by striking ‘‘PARAGRAPHS (2) AND (3)’’ in

25 the heading and inserting ‘‘PARAGRAPH (2)’’, and
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1 (2) by striking ‘‘Paragraphs (2) and (3)’’ in the

2 text and inserting ‘‘Paragraph (2)’’.

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

4 this section shall apply to taxable years beginning after

5 December 31, 1993.

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