Agriculture Environmental Stewardship Act of 2019

To amend the Internal Revenue Code of 1986 to make qualified biogas property and qualified manure resource recovery property eligible for the energy credit and to permit renewable energy bonds to finance qualified biogas property, and for other purposes. 1. Short title This Act may be cited as the Agriculture Environmental Stewardship Act of 2019 2. Findings Congress finds the following: (1) Incentives and encouragement for the conservation and appropriate handling of nutrients contained in organic matter are necessary. (2) Biogas systems will save Federal, State, and local taxpayers money by converting waste into useful products, such as fuel, fertilizer, thermal heat, feedstock for hydrogen fuel cells, and renewable chemicals. (3) Manure resource recovery systems will save Federal, State, and local taxpayers money by recovering the nutrients contained in organic matter from their source, rather than recovering the nutrients after they have entered landfills or waterways. 3. Energy credit for qualified biogas property and qualified manure resource recovery property (a) In General Section 48(a)(3)(A) or (viii) qualified biogas property, or (ix) qualified manure resource recovery property, . (b) 30-Percent Credit Section 48(a)(2)(A)(i) of such Code is amended by striking and and (V) qualified biogas property, and (VI) qualified manure resource recovery property, and . (c) Definitions Section 48(c) of such Code is amended by adding at the end the following new paragraphs: (5) Qualified biogas property (A) In general The term qualified biogas property (i) uses anaerobic digesters, or other biological, chemical, thermal, or mechanical processes (alone or in combination), to convert biomass (as defined in section 45K(c)(3)) into a gas which consists of not less than 52 percent methane, and (ii) captures such gas for use as a fuel. (B) Inclusion of certain cleaning and conditioning equipment Such term shall include any property which cleans and conditions the gas referred to in subparagraph (A) for use as a fuel. (C) Termination No credit shall be determined under this section with respect to any qualified biogas property for any period after December 31, 2021. (6) Qualified manure resource recovery property (A) In general The term qualified manure resource recovery property (B) Inclusion of certain processing equipment Such term shall include— (i) any property which is used to recover the nutrients referred to in subparagraph (A), such as— (I) biological reactors, (II) crystallizers, (III) reverse osmosis membranes and other water purifiers, (IV) evaporators, (V) distillers, (VI) decanter centrifuges, and (VII) equipment that facilitates the process of dissolved air flotation, ammonia stripping, gasification, or ozonation, and (ii) any thermal drier which treats the nutrients recovered by the processes referred to in subparagraph (A). (C) Termination No credit shall be determined under this section with respect to any qualified manure resource recovery property for any period after December 31, 2021. . (d) Denial of Double Benefit for Qualified Biogas Property Section 45(e) of such Code is amended by adding at the end the following new paragraph: (12) Coordination with energy credit for qualified biogas property The term qualified facility . (e) Effective Date The amendments made by this section shall apply to periods after December 31, 2018, in taxable years ending after such date, under rules similar to the rules of section 48(m) of such Code (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990). 4. Renewable energy bonds relating to biogas property and manure resource recovery property (a) In General Part IV of subchapter A of chapter 1 H Nonrefundable credit to holders of certain bonds Sec. 54. Credit to holders of qualified renewable energy bonds. 54. Credit to holders of qualified renewable energy bonds (a) Allowance of Credit If a taxpayer holds a qualified renewable energy bond on one or more credit allowance dates of the bond during any taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 70 percent of the sum of the credits determined under subsection (b) with respect to such dates. (b) Amount of Credit (1) In general The amount of the credit determined under this subsection with respect to any credit allowance date for a qualified renewable energy bond is 25 percent of the annual credit determined with respect to such bond. (2) Annual credit The annual credit determined with respect to any qualified renewable energy bond is the product of— (A) the applicable credit rate, multiplied by (B) the outstanding face amount of the bond. (3) Applicable credit rate For purposes of paragraph (2), the applicable credit rate is the rate which the Secretary estimates will permit the issuance of qualified renewable energy bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer. The applicable credit rate with respect to any qualified renewable energy bond shall be determined as of the first day on which there is a binding, written contract for the sale or exchange of the bond. (4) Special rule for issuance and redemption In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this subsection with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed or matures. (c) Limitation based on amount of tax (1) In general The credit allowed under subsection (a) for any taxable year shall not exceed the excess of— (A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (B) the sum of the credits allowable under this part (other than subpart C and this subpart). (2) Carryover of unused credit If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year (determined before the application of paragraph (1) for such succeeding taxable year). (d) Qualified renewable energy bonds For purposes of this subpart— (1) In general The term qualified renewable energy bonds (A) the bond is issued by a qualified issuer pursuant to an allocation by the Secretary to such issuer of a portion of the national renewable energy bond limitation under paragraph (2), (B) 100 percent of the available project proceeds of such issue are to be used for capital expenditures incurred by a governmental body, public power provider, or cooperative electric company for property owned by the public power provider, a governmental body, or a cooperative electric company, as the case may be, that is— (i) qualified biogas property (as defined in section 48(c)(5)), or (ii) a qualified manure resource recovery property (as defined in section 48(c)(6)), (C) the qualified issuer designates such bond for purposes of this section, and (D) the issue meets the requirements of this section. (2) Limitation on amount of bonds designated (A) In general The maximum aggregate face amount of bonds which may be designated under paragraph (1)(C) by any issuer shall not exceed the limitation amount allocated under this paragraph to such issuer. (B) National limitation on amount of bonds designated There is a national renewable energy bond limitation of $800,000,000 which shall be allocated by the Secretary as provided in subparagraph (C), except that— (i) not more than 33 1/3 (ii) not more than 33 1/3 (iii) not more than 33 1/3 (C) Method of allocation (i) Allocation among public power providers After the Secretary determines the projects of public power providers which are appropriate for receiving an allocation of the national renewable energy bond limitation, the Secretary shall, to the maximum extent practicable, make allocations among such projects in such manner that the amount allocated to each such project bears the same ratio to the cost of such project as the limitation under subparagraph (B)(i) bears to the cost of all such projects. (ii) Allocation among governmental bodies and cooperative electric companies The Secretary shall make allocations of the amount of the national renewable energy bond limitation described in subparagraphs (B)(ii) and (B)(iii) among projects of governmental bodies and cooperative electric companies, respectively, in such manner as the Secretary determines appropriate. (e) Definitions For purposes of this section— (1) Qualified issuer The term qualified issuer (2) Public power provider The term public power provider (3) Governmental body The term governmental body (4) Cooperative electric company The term cooperative electric company (5) Renewable energy bond lender The term renewable energy bond lender (f) Other Definitions For purposes of this subchapter— (1) Credit allowance date The term credit allowance date (A) March 15, (B) June 15, (C) September 15, and (D) December 15. Such term includes the last day on which the bond is outstanding. (2) Bond The term bond (3) State The term State (4) Available project proceeds The term available project proceeds (A) the excess of— (i) the proceeds from the sale of an issue, over (ii) the issuance costs financed by the issue (to the extent that such costs do not exceed 2 percent of such proceeds), and (B) the proceeds from any investment of the excess described in subparagraph (A). (g) Credit Treated as Interest For purposes of this subtitle, the credit determined under subsection (a) shall be treated as interest which is includible in gross income. (h) S Corporations and Partnerships In the case of a renewable energy bond held by an S corporation or partnership, the allocation of the credit allowed by this section to the shareholders of such corporation or partners of such partnership shall be treated as a distribution. (i) Bonds Held by Real Estate Investment Trusts If any qualified renewable energy bond is held by a real estate investment trust, the credit determined under subsection (a) shall be allowed to beneficiaries of such trust (and any gross income included under subsection (f) with respect to such credit shall be distributed to such beneficiaries) under procedures prescribed by the Secretary. (j) Credits May be Stripped Under regulations prescribed by the Secretary— (1) In general There may be a separation (including at issuance) of the ownership of a qualified renewable energy bond and the entitlement to the credit under this section with respect to such bond. In case of any such separation, the credit under this section shall be allowed to the person who on the credit allowance date holds the instrument evidencing the entitlement to the credit and not to the holder of the bond. (2) Certain rules to apply In the case of a separation described in paragraph (1), the rules of section 1286 shall apply to the qualified renewable energy bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon. . (b) Payments to issuers Subchapter B of chapter 65 of such Code is amended by adding at the end the following: 6431. Credit for qualified renewable energy bonds allowed to issuer (a) In general The issuer of a qualified renewable energy bond (as defined in section 54(d)) shall be allowed a credit with respect to each interest payment under such bond which shall be payable by the Secretary as provided in subsection (b). (b) Payment of credit The Secretary shall pay (contemporaneously with each interest payment date under such bond) to the issuer of such bond (or to any person who makes such interest payments on behalf of the issuer) 35 percent of the interest payable under such bond on such date. (c) Application of arbitrage rules For purposes of section 148, the yield on such bonds shall be reduced by the credit allowed under this section. (d) Interest payment date For purposes of this subsection, the term interest payment date . (c) Conforming amendments (1) The table of subparts for part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item: Subpart H. Nonrefundable credit to holders of certain bonds. . (2) The table of sections for subchapter B of chapter 65 of such Code is amended by adding at the end the following new item: Sec. 6431. Credit for qualified renewable energy bonds allowed to issuer. . (3) Section 6211(b)(4)(A) of such Code is amended by striking ‘‘and 36B, 168(k)(4)’’ and inserting 36B, 168(k)(4), and 6431 (4) Section 6401(b)(1) of such Code is amended by striking ‘‘and G’’ and inserting ‘‘G, and H’’. (d) Effective Date The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act. 5. Study of biogas and nutrient reuse (a) In General The Secretary of the Treasury shall enter into an agreement with the National Renewable Energy Laboratory to undertake a study of biogas that addresses the following: (1) The quality of biogas, including a comparison of biogas to natural gas and the identification of any components of biogas which make biogas unsuitable for injection into existing natural gas pipelines. (2) Methods for obtaining the highest energy content in biogas, including the use of co-digestion and identifying the optimal feed mixture. (3) Recommendations for the expansion of biogas production, including an analysis of the extent to which increasing the methane content of biogas would result in the greater use of biogas and an analysis of how the expanded use of biogas could help meet the growing energy needs of the United States. (4) Methods for productive use of nutrients recovered from qualified manure resource recovery property that benefits the agricultural economy. (b) Report Not later than 2 years after the date of the enactment of this Act, the Secretary shall submit to Congress a report on the study conducted under subsection (a).

Summary: Agriculture Environmental Stewardship Act of 2019 This bill allows energy tax credits through 2021 for investments in (1) qualified biogas property, or (2) qualified manure resource recovery property. The bill also permits new clean renewable energy bonds to be used for such properties. "Qualified biogas property" comprises a system that (1) uses anaerobic digesters or other specified processes to convert biomass into a gas which is at least 52% methane, and (2) captures the gas for use as a fuel. The term includes property that cleans and conditions the gas for use as a fuel. "Qualified manure resource recovery property" comprises a system that uses specified processes to recover the nutrients nitrogen and phosphorus from a non-treated digestate or animal manure by reducing or separating at least 50% of the nutrients, excluding any reductions during the incineration, storage, composting, or field application of the non-treated digestate or animal manure. The term also includes certain processing equipment. The Department of the Treasury must enter into an agreement with the National Renewable Energy Laboratory for a study of biogas and report to Congress on the study.