102
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
More than 7,800 but not more than 7,950 ..........................
$.0095
$.0070.
‘‘(3) Where the clean coal technology facility is
producing fuel or chemicals:
‘‘(A) In the case of a facility originally
placed in service before 2008, if—
‘‘The facility design net thermal efficiency (HHV) is equal
to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not less than 40.6 percent ...................................................
$.0050
$.0030
Less than 40.6 but not less than 40 percent .......................
$.0010
$.0010
Less than 40 but not less than 39 percent ..........................
$.0005
$.0005.
‘‘(B) In the case of a facility originally
placed in service after 2007 and before 2012,
if—
‘‘The facility design net thermal efficiency (HHV) is equal
to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not less than 43.9 percent ...................................................
$.0090
$.0075
Less than 43.9 but not less than 42 percent .......................
$.0070
$.0050
Less than 42 but not less than 40.9 percent .......................
$.0060
$.0040.
‘‘(C) In the case of a facility originally
placed in service after 2011 and before 2015,
if—
‘‘The facility design net thermal efficiency (HHV) is equal
to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not less than 44.2 percent ...................................................
$.0120
$.0090
Less than 44.2 but not less than 43.6 percent ....................
$.0095
$.0070.
‘‘(c) INFLATION ADJUSTMENT FACTOR.—For cal-
endar years after 2001, each amount in paragraphs (1),
103
(2), and (3) shall be adjusted by multiplying such amount
by the inflation adjustment factor for the calendar year
in which the amount is applied. If any amount as in-
creased under the preceding sentence is not a multiple of
0.01 cent, such amount shall be rounded to the nearest
multiple of 0.01 cent.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—Any term used in this sec-
tion which is also used in section 48B shall have the
meaning given such term in section 48B.
‘‘(2) APPLICABLE RULES.—The rules of para-
graphs (3), (4), and (5) of section 45(d) and section
48B(e) shall apply.
‘‘(3) INFLATION
ADJUSTMENT
FACTOR.—The
term ‘inflation adjustment factor’ means, with re-
spect to a calendar year, a fraction the numerator
of which is the GDP implicit price deflator for the
preceding calendar year and the denominator of
which is the GDP implicit price deflator for the cal-
endar year 2000.
‘‘(4) GDP IMPLICIT
PRICE
DEFLATOR.—The
term ‘GDP implicit price deflator’ means the most
recent revision of the implicit price deflator for the
gross domestic product as computed by the Depart-
104
ment of Commerce before March 15 of the calendar
year.’’.
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b), as amended by section 201(b), is amended by
striking ‘‘plus’’ at the end of paragraph (14), by striking
the period at the end of paragraph (15) and inserting ‘‘,
plus’’, and by adding at the end the following:
‘‘(16) the qualifying advanced clean coal tech-
nology production credit determined under section
45G(a).’’.
(c) TRANSITIONAL RULE.—Section 39(d) (relating to
transitional rules), as amended by section 401(d), is
amended by adding at the end the following:
‘‘(14) NO CARRYBACK OF SECTION 45G CREDIT
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is
attributable to the qualifying advanced clean coal
technology production credit determined under sec-
tion 45G may be carried back to a taxable year end-
ing before the date of the enactment of section
45G.’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1,
as amended by section 201(g), is amended by adding at
the end the following:
105
‘‘Sec. 45G. Credit for production from qualifying advanced clean coal tech-
nology.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to production after the date of the
enactment of this Act.
SEC. 403. RISK POOL FOR QUALIFYING ADVANCED CLEAN
COAL TECHNOLOGY.
(a) ESTABLISHMENT.—The Secretary of the Treas-
ury shall establish a financial risk pool which shall be
available to any United States owner of a qualifying ad-
vanced clean coal technology which has qualified for an
advanced clean coal technology production credit (as de-
fined in section 45G of the Internal Revenue Code of
1986, as added by section 402) to offset for the first 3
years of the operation of such technology the costs (not
to exceed 5 percent of the total cost of installation) for
modifications resulting from the technology’s failure to
achieve its design performance.
(b) AUTHORIZATION OF APPROPRIATIONS.—There is
authorized to be appropriated such sums as are necessary
to carry out the purposes of this section.
106
TITLE V—HEATING FUELS AND
STORAGE.
SEC. 501. FULL EXPENSING OF HOME HEATING OIL AND
PROPANE STORAGE FACILITIES.
(a) IN GENERAL.—Section 179(b) (relating to limita-
tions) is amended by adding at the end the following:
‘‘(5) FULL EXPENSING OF HOME HEATING OIL
AND
PROPANE
STORAGE
FACILITIES.—Paragraphs
(1) and (2) shall not apply to section 179 property
which is any storage facility (not including a build-
ing or its structural components) used in connection
with the distribution of home heating oil or liquefied
petroleum gas.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to property placed in service on
or after the date of the enactment of this Act.
SEC. 502. ARBITRAGE RULES NOT TO APPLY TO PREPAY-
MENTS FOR NATURAL GAS AND OTHER COM-
MODITIES.
(a) IN GENERAL.—Subsection (b) of section 148 (de-
fining higher yielding investments) is amended by adding
at the end the following:
‘‘(4) INVESTMENT PROPERTY NOT TO INCLUDE
CERTAIN
PREPAYMENTS
TO
ENSURE
COMMODITY
SUPPLY.—The term ‘investment property’ shall not
107
include a prepayment entered into for the purpose of
obtaining a supply of a commodity reasonably ex-
pected to be used in a business of one or more utili-
ties each of which is owned and operated by a State
or local government, any political subdivision or in-
strumentality thereof, or any governmental unit act-
ing for or on behalf of such a utility.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to obligations issued after the date
of the enactment of this Act.
SEC. 503. PRIVATE LOAN FINANCING TEST NOT TO APPLY
TO PREPAYMENTS FOR NATURAL GAS AND
OTHER COMMODITIES.
(a) IN GENERAL.—Section 141(c)(2) (providing ex-
ceptions to the private loan financing test) is amended by
striking ‘‘or’’ at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting
‘‘, or’’, and by adding at the end the following:
‘‘(C) arises from a transaction described in
section 148(b)(4).’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to obligations issued after the date
of the enactment of this Act.
109
such base oil meets industry standards for engine oil
as defined by the American Petroleum Institute doc-
ument API 1509 as in effect on the date of the en-
actment of this section.
‘‘(2) LIMITATION ON AMOUNT OF PRODUCTION
WHICH
MAY
QUALIFY.—Re-refined lubricating oil
produced during any taxable year shall not be treat-
ed as qualified re-refined lubricating oil production
but only to the extent average daily production dur-
ing the taxable year exceeds 7,000 barrels.
‘‘(3) BARREL.—The term ‘barrel’ has the
meaning given such term by section 613A(e)(4).
‘‘(4) 
NONCOMPLIANCE
WITH
POLLUTION
LAWS.—For purposes of paragraph (1), a facility
which is not in compliance with the applicable State
and Federal pollution prevention, control, and per-
mit requirements for any period of time shall not be
considered to be a qualified facility during such pe-
riod.
‘‘(c) INFLATION ADJUSTMENT.—In the case of any
taxable year beginning in a calendar year after 2001, the
dollar amount contained in subsection (a) shall be in-
creased to an amount equal to such dollar amount multi-
plied by the inflation adjustment factor for such calendar
110
year (determined under section 29(d)(2)(B) by sub-
stituting ‘2000’ for ‘1979’).’’.
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b) (relating to current year business credit), as
amended by section 402(b), is amended by striking ‘plus’
at the end of paragraph (15), by striking the period at
the end of paragraph (16), and inserting ‘, plus’, and by
adding at the end the following:
‘‘(17) the re-refined lubricating oil production
credit determined under section 45H(a).’’.
(c) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1,
as amended by section 402(d), is amended by adding at
the end the following:
‘‘Sec. 45H.
Credit for producing re-refined lubricating oil.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to production after the date of the
enactment of this Act.
SEC. 602. OIL AND GAS FROM MARGINAL WELLS.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business credits), as
amended by section 601(a), is amended by adding at the
end the following:
111
‘‘SEC. 45I.
CREDIT FOR PRODUCING OIL AND GAS FROM
MARGINAL WELLS.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the marginal well production credit for any taxable year
is an amount equal to the product of—
‘‘(1) the credit amount, and
‘‘(2) the qualified credit oil production and the
qualified natural gas production which is attrib-
utable to the taxpayer.
‘‘(b) CREDIT
AMOUNT.—For purposes of this
section—
‘‘(1) IN GENERAL.—The credit amount is—
‘‘(A) $3 per barrel of qualified crude oil
production, and
‘‘(B) 50 cents per 1,000 cubic feet of
qualified natural gas production.
‘‘(2) REDUCTION AS OIL AND GAS PRICES IN-
CREASE.—
‘‘(A) IN GENERAL.—The $3 and 50 cents
amounts under paragraph (1) shall each be re-
duced (but not below zero) by an amount which
bears the same ratio to such amount (deter-
mined without regard to this paragraph) as—
‘‘(i) the excess (if any) of the applica-
ble reference price over $14 ($1.56 for
qualified natural gas production), bears to
112
‘‘(ii) $3 ($0.33 for qualified natural
gas production).
The applicable reference price for a taxable
year is the reference price of the calendar year
preceding the calendar year in which the tax-
able year begins.
‘‘(B) INFLATION
ADJUSTMENT.—In the
case of any taxable year beginning in a calendar
year after 2001, each of the dollar amounts
contained in subparagraph (A) shall be in-
creased to an amount equal to such dollar
amount multiplied by the inflation adjustment
factor for such calendar year (determined under
section 43(b)(3)(B) by substituting ‘2000’ for
‘1990’).
‘‘(C) REFERENCE PRICE.—For purposes of
this paragraph, the term ‘reference price’
means, with respect to any calendar year—
‘‘(i) in the case of qualified crude oil
production, the reference price determined
under section 29(d)(2)(C), and
‘‘(ii) in the case of qualified natural
gas production, the Secretary’s estimate of
the annual average wellhead price per
113
1,000 cubic feet for all domestic natural
gas.
‘‘(c) QUALIFIED CRUDE OIL
AND NATURAL GAS
PRODUCTION.—For purposes of this section—
‘‘(1) IN GENERAL.—The terms ‘qualified crude
oil production’ and ‘qualified natural gas production’
mean domestic crude oil or natural gas which is pro-
duced from a qualified marginal well.
‘‘(2) LIMITATION ON AMOUNT OF PRODUCTION
WHICH MAY QUALIFY.—
‘‘(A) IN GENERAL.—Crude oil or natural
gas produced during any taxable year from any
well shall not be treated or qualified crude oil
production or qualified natural gas production
to the extent production from the well during
the taxable year exceeds 1,095 barrels or barrel
equivalents.
‘‘(B) PROPORTIONATE REDUCTIONS.—
‘‘(i) SHORT TAXABLE YEARS.—In the
case of a short taxable year, the limitations
under this paragraph shall be proportion-
ately reduced to reflect the ratio which the
number of days in such taxable year bears
to 365.
114
‘‘(ii) WELLS NOT IN PRODUCTION EN-
TIRE YEAR.—In the case of a well which is
not capable of production during each day
of a taxable year, the limitations under
this paragraph applicable to the well shall
be proportionately reduced to reflect the
ratio which the number of days of produc-
tion bears to the total number of days in
the taxable year.
‘‘(3) DEFINITIONS.—
‘‘(A) QUALIFIED
MARGINAL
WELL.—The
term ‘qualified marginal well’ means a domestic
well—
‘‘(i) the production from which during
the taxable year is treated as marginal
production under section 613A(c)(6), or
‘‘(ii) which, during the taxable year—
‘‘(I) has average daily production
of not more than 25 barrel equiva-
lents, and
‘‘(II) produces water at a rate
not less than 95 percent of total well
effluent.
‘‘(B) CRUDE OIL, ETC.—The terms ‘crude
oil’, ‘natural gas’, ‘domestic’, and ‘barrel’ have
115
the meanings given such terms by section
613A(e).
‘‘(C) BARREL
EQUIVALENT.—The term
‘barrel equivalent’ means, with respect to nat-
ural gas, a conversation ratio of 6,000 cubic
feet of natural gas to 1 barrel of crude oil.
‘‘(d) OTHER RULES.—
‘‘(1) PRODUCTION ATTRIBUTABLE TO THE TAX-
PAYER.—In the case of a qualified marginal well in
which there is more than one owner of operating in-
terests in the well and the crude oil or natural gas
production exceeds the limitation under subsection
(c)(2), qualifying crude oil production or qualifying
natural gas production attributable to the taxpayer
shall be determined on the basis of the ratio which
taxpayer’s revenue interest in the production bears
to the aggregate of the revenue interests of all oper-
ating interest owners in the production.
‘‘(2) OPERATING
INTEREST
REQUIRED.—Any
credit under this section may be claimed only on
production which is attributable to the holder of an
operating interest.
‘‘(3) PRODUCTION
FROM
NONCONVENTIONAL
SOURCES
EXCLUDED.—In the case of production
from a qualified marginal well which is eligible for
116
the credit allowed under section 29 for the taxable
year, no credit shall be allowable under this section
unless the taxpayer elects not to claim the credit
under section 29 with respect to the well.
‘‘(4) 
NONCOMPLIANCE
WITH
POLLUTION
LAWS.—For purposes of subsection (c)(3)(A), a
marginal well which is not in compliance with the
applicable State and Federal pollution prevention,
control, and permit requirements for any period of
time shall not be considered to be a qualified mar-
ginal well during such period.’’.
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b), as amended by section 601(b), is amended by
striking ‘plus’ at the end of paragraph (16), by striking
the period at the end of paragraph (17) and inserting ‘‘,
plus’’, and by adding at the end the following:
‘‘(18) the marginal oil and gas well production
credit determined under section 45I(a).’’.
(c) CREDIT ALLOWED AGAINST REGULAR AND MIN-
IMUM TAX.—
(1) IN GENERAL.—Subsection (c) of section 38
(relating to limitation based on amount of tax), as
amended by section 201(d)(1), is amended by redes-
ignating paragraph (4) as paragraph (5) and by in-
serting after paragraph (3) the following:
117
‘‘(4) SPECIAL RULES FOR MARGINAL OIL AND
GAS WELL PRODUCTION CREDIT.—
‘‘(A) IN
GENERAL.—In the case of the
marginal oil and gas well production credit—
‘‘(i) this section and section 39 shall
be applied separately with respect to the
credit, and
‘‘(ii) in applying paragraph (1) to the
credit—
‘‘(I) subparagraphs (A) and (B)
thereof shall not apply, and
‘‘(II) the limitation under para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the
taxable year (other than the marginal
oil and gas well production credit).
‘‘(B) MARGINAL OIL AND GAS WELL PRO-
DUCTION CREDIT.—For purposes of this sub-
section, the term ‘marginal oil and gas well pro-
duction credit’ means the credit allowable under
subsection (a) by reason of section 45I(a).’’.
(2) CONFORMING
AMENDMENTS.—Subclause
(II) of section 38(c)(2)(A)(ii), as amended by section
201(d)(2), 
and 
subclause 
(II) 
of 
section
118
38(c)(3)(A)(ii), as added by section 201(d)(1), are
each amended by inserting ‘‘or the marginal oil and
gas well production credit’’ after ‘‘home credit’’.
(d) CARRYBACK.—Subsection (a) of section 39 (relat-
ing to carryback and carryforward of unused credits gen-
erally) is amended by adding at the end the following:
‘‘(3) 10-YEAR CARRYBACK FOR MARGINAL OIL
AND GAS WELL PRODUCTION CREDIT.—In the case
of the marginal oil and gas well production credit—
‘‘(A) this section shall be applied sepa-
rately from the business credit (other than the
marginal oil and gas well production credit),
‘‘(B) paragraph (1) shall be applied by
substituting ‘10 taxable years’ for ‘1 taxable
years’ in subparagraph (A) thereof, and
‘‘(C) paragraph (2) shall be applied—
‘‘(i) by substituting ‘31 taxable years’
for ‘21 taxable years’ in subparagraph (A)
thereof, and
‘‘(ii) by substituting ‘30 taxable years’
for ‘20 taxable years’ in subparagraph (A)
thereof.’’.
(e) COORDINATION
WITH
SECTION
29.—Section
29(a) is amended by striking ‘‘There’’ and inserting ‘‘At
the election of the taxpayer, there’’.
119
(f) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter I,
as amended by section 601(c), is amended by adding at
the end the following:
‘‘Sec. 45I. Credit for producing oil and gas from marginal wells.’’.
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to production in taxable years be-
ginning after December 31, 2001.
SEC. 603. DEDUCTION FOR DELAY RENTAL PAYMENTS.
(a) IN GENERAL.—Section 263 (relating to capital
expenditures) is amended by adding at the end the fol-
lowing:
‘‘(j) DELAY RENTAL PAYMENTS FOR DOMESTIC OIL
AND GAS WELLS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(a), a taxpayer may elect to treat delay rental pay-
ments incurred in connection with the development
of oil or gas within the United States (as defined in
section 638) as payments which are not chargeable
to capital account. Any payments so treated shall be
allowed as a deduction in the taxable year in which
paid or incurred.
‘‘(2) DELAY RENTAL PAYMENTS.—For purposes
of paragraph (1), the term ‘delay rental payment’
means an amount paid for the privilege of deferring
120
development of an oil or gas well under an oil or gas
lease.’’.
(b) CONFORMING AMENDMENT.—Section 263A(c)(3)
is amended by inserting ‘‘263(j),’’ after ‘263(i),’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid or incurred in tax-
able years beginning after December 31, 2001.
SEC. 604. ELECTION TO EXPENSE GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES.
(a) IN GENERAL.—Section 263 (relating to capital
expenditures), as amended by section 603(a), is amended
by adding at the end the following:
‘‘(k) GEOLOGICAL
AND
GEOPHYSICAL
EXPENDI-
TURES FOR DOMESTIC OIL AND GAS WELLS.—Notwith-
standing subsection (a), a taxpayer may elect to treat geo-
logical and geophysical expenses incurred in connection
with the exploration for, or development of, oil or gas with-
in the United States (as defined in section 638) as ex-
penses which are not chargeable to capital account. Any
expenses so treated shall be allowed as a deduction in the
taxable year in which paid or incurred.’’.
(b) 
CONFORMING
AMENDMENT.—Section
263A(c)(3), as amended by section 603(b), is amended by
inserting ‘‘263(k),’’ after ‘‘263(j),’’.
121
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to costs paid or incurred in taxable
years beginning after December 31, 2001.
SEC. 605. GAS PIPELINES TREATED AS 7-YEAR PROPERTY.
(a) IN GENERAL.—Subparagraph (C) of section
168(e)(3) (relating to classification of certain property),
as amended by section 304(a)(1), is amended by striking
‘‘and’’ at the end of clause (iii), by redesignating clause
(iv) as clause (v), and by inserting after clause (iii) the
following:
‘‘(iv) any gas pipeline, and’’.
(b) GAS PIPELINE.—Subsection (i) of section 168, as
amended by section 304(b), is amended by adding at the
end the following:
‘‘(17) GAS PIPELINE.—The term ‘gas pipeline’
means the pipe, storage facilities, equipment, dis-
tribution infrastructure, and appurtenances used to
deliver natural gas.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to property placed in service
on or after the date of the enactment of this Act.
(2) ACCOUNTING
RULE
FOR
PUBLIC
UTILITY
PROPERTY.—If any gas pipeline is public utility
property (as defined in section 46(f)(5) of the Inter-
122
nal Revenue Code of 1986, as in effect on the day
before the date of the enactment of the Revenue
Reconciliation Act of 1990), the amendments made
by this section shall only apply to such property if,
with respect to such property, the taxpayer uses a
normalization method of accounting.
SEC. 606. CRUDE OIL AND NATURAL GAS DEVELOPMENT
CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its), as amended by section 602(a), is amended by adding
at the end the following:
‘‘SEC. 45J. CRUDE OIL AND NATURAL GAS DEVELOPMENT
CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 38, the
crude oil and natural gas development credit determined
under this section for any taxable year shall be an amount
equal to the taxpayer’s qualified investment for the taxable
year.
‘‘(b) REDUCTION
AS OIL
AND GAS PRICES IN-
CREASE.—
‘‘(1) IN GENERAL.—The amount which would
(but for this subsection) be taken into account under
subsection (a) for the taxable year shall be reduced
(but not below zero) by an amount which bears the
123
same ratio to such amount (determined without re-
gard to this subsection) as—
‘‘(A) the excess (if any) of the applicable
reference price over $11, bears to
‘‘(B) $3.
The applicable reference price for a taxable
year is the reference price of the calendar year
preceding the calendar year in which the tax-
able year begins.
‘‘(2) INFLATION ADJUSTMENT.—In the case of
any taxable year beginning in a calendar year after
2001, each of the dollar amounts contained in para-
graph (1) shall be increased to an amount equal to
such dollar amount multiplied by the inflation ad-
justment factor for such calendar year (determined
under section 43(b)(3)(B) by substituting ‘2000’ for
‘1990’).
‘‘(3) REFERENCE PRICE.—For purposes of this
subsection, the term ‘reference price’ means, with re-
spect to any calendar year, the reference price deter-
mined under section 29(d)(2)(C).
‘‘(c) QUALIFIED INVESTMENT.—For purposes of this
section, the term ‘qualified investment’ means amounts
paid or incurred—
124
‘‘(1) for the purpose of drilling and equipping
crude oil and natural gas wells (including pollution
control equipment used in connection with such
wells), or
‘‘(2) for the purpose of performing secondary or
tertiary recovery techniques,
on properties located within the United States (as defined
in section 638), but only to the extent that the expenditure
is not taken into account for purposes of a credit under
any other section.
‘‘(d) SPECIAL
RULES.—For purposes of this
section—
‘‘(1) AGGREGATION OF QUALIFIED INVESTMENT
EXPENSES.—
‘‘(A) CONTROLLED GROUPS; COMMON CON-
TROL.—In determining the amount of the cred-
it under this section, all members of the same
controlled group of corporations (within the
meaning of section 52(a)) and all persons under
common control (within the meaning of section
52(b)) shall be treated as a single taxpayer for
purposes of this section.
‘‘(B) APPORTIONMENT
OF
CREDIT.—The
credit (if any) allowable by this section to mem-
bers of any group (or to any person) described
125
in subparagraph (A) shall be such member’s or
person’s proportionate share of the qualified in-
vestment expenses giving rise to the credit de-
termined under regulations prescribed by the
Secretary.
‘‘(2) PARTNERSHIPS, S
CORPORATIONS, ES-
TATES AND TRUSTS.—
‘‘(A) PARTNERSHIPS
AND
S
CORPORA-
TIONS.—In the case of a partnership, the credit
shall be allocated among partners under regula-
tions prescribed by the Secretary. A similar rule
shall apply in the case of an S corporation and
its shareholders.
‘‘(B) PASS-THRU
IN
THE
CASE
OF
ES-
TATES
AND
TRUSTS.—Under regulations pre-
scribed by the Secretary, rules similar to the
rules of subsection (d) of section 52 shall apply.
‘‘(3) ADJUSTMENTS
FOR
CERTAIN
ACQUISI-
TIONS AND DISPOSITIONS.—Under regulations pre-
scribed by the Secretary, rules similar to the rules
contained in section 41(f)(3) shall apply with respect
to the acquisition or disposition of a taxpayer.
‘‘(4) SHORT TAXABLE YEARS.—In the case of
any short taxable year, qualified investment expenses
shall be annualized in such circumstances and under
126
such methods as the Secretary may prescribe by reg-
ulation.
‘‘(5) DENIAL OF DOUBLE BENEFIT.—
‘‘(A) DISALLOWANCE
OF
DEDUCTION.—
Any deduction allowable under this chapter for
any costs taken into account in computing the
amount of the credit determined under sub-
section (a) shall be reduced by the amount of
such credit attributable to such costs.
‘‘(B) BASIS ADJUSTMENTS.—For purposes
of this subtitle, if a credit is determined under
this section for any expenditure with respect to
any property, the increase in the basis of such
property which would (but for this subsection)
result from such expenditures shall be reduced
by the amount of the credit so allowed.’’.
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b), as amended by section 602(b), is amended by
striking ‘‘plus’’ at the end of paragraph (17), by striking
the period at the end of paragraph (18) and inserting
‘‘, plus’’, and by adding at the end the following:
‘‘(19) the crude oil and natural gas develop-
ment credit determined under section 45J(a).’’.
127
(c) TRANSITIONAL RULE.—Section 39(d) (relating to
transitional rules), as amended by section 402(c), is
amended by adding at the end the following:
‘‘(15) NO CARRYBACK OF SECTION 45J CREDIT
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is
attributable to the crude oil and natural gas develop-
ment credit determined under section 48J may be
carried back to a taxable year ending before January
1, 2002.’’.
(d) CREDIT ALLOWED AGAINST REGULAR AND MIN-
IMUM TAX.—
(1) IN GENERAL.—Subsection (c) of section 38
(relating to limitation based on amount of tax), as
amended by section 602(c)(1), is amended by redes-
ignating paragraph (5) as paragraph (6) and by in-
serting after paragraph (4) the following:
‘‘(5) SPECIAL RULES FOR CRUDE OIL AND NAT-
URAL GAS DEVELOPMENT CREDIT.—
‘‘(A) IN
GENERAL.—In the case of the
crude oil and natural gas development credit—
‘‘(i) this section and section 39 shall
be applied separately with respect to the
credit, and
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taxable year shall be treated as an increase in
tax imposed by this chapter on the organiza-
tion. Any such increase shall not be treated as
tax imposed by this chapter for purposes of de-
termining the amount of any credit under this
subpart or subpart A, B, E, or G of this part.’’.
(b) TECHNICAL AMENDMENT.—Section 1388 (relat-
ing to definitions and special rules for cooperative organi-
zations) is amended by adding at the end the following:
‘‘(k) CROSS REFERENCE.—For provisions relating to
the apportionment of the alcohol fuels credit between coop-
erative organizations and their patrons, see section
40(d)(6).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 609. EXTENSION OF CREDIT FOR PRODUCING FUEL
FROM A NONCONVENTIONAL SOURCE.
(a) INCLUSION OF ALASKA NATURAL GAS.—Section
29(c)(1) (defining qualified fuels) is amended by striking
‘‘and’’ at the end of subparagraph (B)(ii), by striking the
period at the end of subparagraph (C) and inserting ‘‘,
and’’, and by adding at the end the following:
‘‘(D) Alaska natural gas.’’.
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(b) DEFINITION.—Section 29(c) is amended by add-
ing at the end the following:
‘‘(4) ALASKA NATURAL GAS.—The term ‘Alaska
natural gas’ means gas produced in compliance with
the applicable State and Federal pollution preven-
tion, control, and permit requirements from the area
generally known as the North Slope of Alaska (in-
cluding the continental shelf thereof within the
meaning of section 638(1)), determined without re-
gard to the area of the Alaska National Wildlife Ref-
uge (including the continental shelf thereof within
the meaning of section 638(1)).’’.
(c) AMOUNT OF CREDIT.—
(1) IN GENERAL.—Section 29(a)(1) (relating to
allowance of credit) is amended by inserting ‘‘($1.45
in the case of a qualified fuel described in subsection
(c)(1)(D))’’ after ‘‘$3’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 29(b)(2) is amended by strik-
ing ‘‘The $3 amount’’ and inserting ‘‘The $3
and $1.45 amounts’’.
(B) Section 29(d)(2)(B) is amended by in-
serting ‘‘(calendar year 2001 in the case of the
$1.45 amount in subsection (a)(1))’’ after
‘‘1979’’.