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SEC. 1512. TEMPORARY EXPENSING FOR EQUIPMENT USED
IN REFINING OF LIQUID FUELS.
(A) IN GENERAL.—Part VI of subchapter B of chapter
1 is amended by inserting after section 179B the following
new section:
‘‘SEC. 179C. ELECTION TO EXPENSE CERTAIN REFINERIES.
‘‘(a) TREATMENT AS EXPENSES.—A taxpayer may
elect to treat the cost of any qualified refinery property as
an expense which is not chargeable to capital account. Any
cost so treated shall be allowed as a deduction for the taxable
year in which the qualified refinery is placed in service.
‘‘(b) ELECTION.—
‘‘(1) IN GENERAL.—An election under this sec-
tion for any taxable year shall be made on the tax-
payer’s return of the tax imposed by this chapter for
the taxable year. Such election shall be made in such
manner as the Secretary may by regulations pre-
scribe.
‘‘(2) ELECTION
IRREVOCABLE.—Any election
made under this section may not be revoked except
with the consent of the Secretary.
‘‘(c) QUALIFIED REFINERY PROPERTY.—The term
‘qualified refinery property’ means any refinery or portion
of a refinery—
‘‘(1) the original use of which commences with
the taxpayer,
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‘‘(2) the construction of which—
‘‘(A) except as provided in subparagraph
(B), is subject to a binding construction contract
entered into after June 14, 2005, and before Jan-
uary 1, 2008, but only if there was no written
binding construction contract entered into on or
before June 14, 2005, or
‘‘(B) in the case of self-constructed property,
began after June 14, 2005,
‘‘(3) which is placed in service by the taxpayer
after the date of the enactment of this section and be-
fore January 1, 2012,
‘‘(4) in the case of any portion of a refinery,
which meets the requirements of subsection (d), and
‘‘(5) which meets all applicable environmental
laws in effect on the date such refinery or portion
thereof was placed in service.
A waiver under the Clean Air Act shall not be taken into
account in determining whether the requirements of para-
graph (5) are met.
‘‘(d) PRODUCTION CAPACITY.—The requirements of
this subsection are met if the portion of the refinery—
‘‘(1) increases the rated capacity of the existing
refinery by 5 percent or more over the capacity of
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such refinery as reported by the Energy Information
Agency on January 1, 2005, or
‘‘(2) enables the existing refinery to process
qualified fuels (as defined in section 29(c)) at a rate
which is equal to or greater than 25 percent of the
total throughput of such refinery on an average daily
basis.
‘‘(e) ELECTION TO ALLOCATE DEDUCTION TO COOP-
ERATIVE OWNER.—If—
‘‘(1) a taxpayer to which subsection (a) applies
is an organization to which part I of subchapter T
applies, and
‘‘(2) one or more persons directly holding an
ownership interest in the taxpayer are organizations
to which part I of subchapter T apply,
the taxpayer may elect to allocate all or a portion of the
deduction allowable under subsection (a) to such persons.
Such allocation shall be equal to the person’s ratable share
of the total amount allocated, determined on the basis of
the person’s ownership interest in the taxpayer. The taxable
income of the taxpayer shall not be reduced under section
1382 by reason of any amount to which the preceding sen-
tence applies.
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‘‘(f) INELIGIBLE REFINERIES.—No deduction shall be
allowed under subsection (a) for any qualified refinery
property—
‘‘(1) the primary purpose of which is for use as
a topping plant, asphalt plant, lube oil facility, crude
or product terminal, or blending facility, or
‘‘(2) which is built solely to comply with Feder-
ally mandated projects or consent decrees.
‘‘(g) REPORTING.—No deduction shall be allowed
under subsection (a) to any taxpayer for any taxable year
unless such taxpayer files with the Secretary a report con-
taining such information with respect to the operation of
the refineries of the taxpayer as the Secretary shall re-
quire.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1245(a) is amended by inserting
‘‘179C,’’ after ‘‘179B,’’ both places it appears in para-
graphs (2)(C) and (3)(C).
(2) Section 263(a)(1) is amended by striking
‘‘or’’ at the end of subparagraph (H), by striking the
period at the end of subparagraph (I) and inserting
‘‘, or’’, and by inserting after subparagraph (I) the
following new subparagraph:
‘‘(J) expenditures for which a deduction is
allowed under section 179C.’’.
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(3) Section 312(k)(3)(B) is amended by striking
‘‘179 179A, or 179B’’ each place it appears in the
heading and text and inserting ‘‘179, 179A, 179B, or
179C’’.
(4) The table of sections for part VI of sub-
chapter B of chapter 1 is amended by inserting after
the item relating to section 179B the following new
item:
‘‘Sec. 179C. Election to expense certain refineries.’’.
(c) EFFECTIVE DATE.— The amendments made by
this section shall apply to properties placed in service after
the date of the enactment of this Act.
SEC. 1513. PASS THROUGH TO OWNERS OF DEDUCTION FOR
CAPITAL COSTS INCURRED BY SMALL RE-
FINER COOPERATIVES IN COMPLYING WITH
ENVIRONMENTAL PROTECTION AGENCY SUL-
FUR REGULATIONS.
(a) IN GENERAL.—Section 179B (relating to deduc-
tion for capital costs incurred in complying with Environ-
mental Protection Agency sulfur regulations) is amended
by adding at the end the following new subsection:
‘‘(e) ELECTION TO ALLOCATE DEDUCTION TO COOP-
ERATIVE OWNER.—If—
‘‘(1) a small business refiner to which subsection
(a) applies is an organization to which part I of sub-
chapter T applies, and
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‘‘(2) one or more persons directly holding an
ownership interest in the refiner are organizations to
which part I of subchapter T apply,
the refiner may elect to allocate all or a portion of the de-
duction allowable under subsection (a) to such persons.
Such allocation shall be equal to the person’s ratable share
of the total amount allocated, determined on the basis of
the person’s ownership interest in the taxpayer. The taxable
income of the refiner shall not be reduced under section
1382 by reason of any amount to which the preceding sen-
tence applies.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect as if included in the amendment
made by section 338(a) of the American Jobs Creation Act
of 2004.
SEC. 1514. MODIFICATIONS TO ENHANCED OIL RECOVERY
CREDIT.
(a) ENHANCED CREDIT FOR CARBON DIOXIDE INJEC-
TIONS.—Section 43 is amended by adding at the end the
following new subsection:
‘‘(f) ENHANCED CREDIT FOR PROJECTS USING QUALI-
FIED CARBON DIOXIDE.—
‘‘(1) IN GENERAL.—In the case of any qualified
enhanced oil recovery project described in paragraph
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(2), subsection (a) shall be applied by substituting ‘20
percent’ for ‘15 percent’.
‘‘(2) SPECIFIED QUALIFIED ENHANCED OIL RE-
COVERY PROJECT.—
‘‘(A) IN GENERAL.—A qualified enhanced
oil recovery project is described in this para-
graph if—
‘‘(i) the project begins or is substan-
tially expanded after December 31, 2005,
and
‘‘(ii) the project uses qualified carbon
dioxide in an oil recovery method which in-
volves flooding or injection.
‘‘(B) 
QUALIFIED
CARBON
DIOXIDE.—For
purposes of this subsection, the term ‘qualified
carbon dioxide’ means carbon dioxide that is—
‘‘(i) from an industrial source, or
‘‘(ii) separated from natural gas and
natural gas liquids at a natural gas proc-
essing plant.
‘‘(3) TERMINATION.—This subsection shall not
apply to costs paid or incurred for any qualified en-
hanced oil recovery project after December 31, 2009.’’.
(b) DEEP GAS WELL PROJECTS.—Section 43(c) is
amended by adding at the end the following new paragraph: