I 
108TH CONGRESS 
1ST SESSION H. R. 1436
To amend the Internal Revenue Code of 1986 to enhance energy conservation, 
research, and development and to provide for security and diversity 
in the energy supply for the American people. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 25, 2003
Mr. SANDLIN 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 enhance 
energy conservation, research, and development and to 
provide for security and diversity in the energy supply 
for the American people.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Energy Independence and Security Act of 2003’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—
Sec. 1. Short title, etc. 
Sec. 2. Credit for residential solar energy property. 
Sec. 3. Credit for energy efficiency improvements to existing homes. 
Sec. 4. Alternative motor vehicle credit. 
Sec. 5. Extension and expansion of credit for electricity produced from renew-
able resources. 
Sec. 6. Credit for production from qualifying advanced clean coal technology. 
Sec. 7. Oil and gas from marginal wells. 
Sec. 8. Natural gas gathering lines treated as 7-year property. 
Sec. 9. Temporary suspension of limitation based on 65 percent of taxable in-
come and extension of suspension of taxable income limit with 
respect to marginal production. 
Sec. 10. Election to expense geological and geophysical expenditures. 
Sec. 11. Five-year net operating loss carryback for losses attributable to oper-
ating mineral interests of oil and gas producers. 
Sec. 12. Extension and modification of credit for producing fuel from a non-
conventional source.
SEC. 2. CREDIT FOR RESIDENTIAL SOLAR ENERGY PROP-
ERTY. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal 
credits) is amended by inserting after section 25B the fol-
lowing new section: 
‘‘SEC. 25C. RESIDENTIAL SOLAR ENERGY PROPERTY. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this chapter for the taxable year an amount 
equal to the sum of—
‘‘(1) 15 percent of the qualified photovoltaic 
property expenditures made by the taxpayer during 
such year, and 
‘‘(2) 15 percent of the qualified solar water 
heating property expenditures made by the taxpayer 
during the taxable year. 
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM
CREDIT.—The credit allowed 
under subsection (a) shall not exceed—
‘‘(A) $2,000 for each system of property 
described in subsection (c)(1), and 
‘‘(B) $2,000 for each system of property 
described in subsection (c)(2). 
‘‘(2) SAFETY CERTIFICATIONS.—No credit shall 
be allowed under this section for an item of property 
unless—
‘‘(A) in the case of solar water heating 
equipment, such equipment is certified for per-
formance and safety by the non-profit Solar 
Rating Certification Corporation or a com-
parable entity endorsed by the government of 
the State in which such property is installed, 
and
‘‘(B) in the case of a photovoltaic system, 
such system meets appropriate fire and electric 
code requirements. 
‘‘(3) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under subsection (a) for 
the 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 im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section and 
sections 23 and 25D) and section 27 for the 
taxable year. 
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED SOLAR WATER HEATING PROP-
ERTY
EXPENDITURE.—The term ‘qualified solar 
water heating property expenditure’ means an ex-
penditure for property to heat water for use in a 
dwelling unit located in the United States and used 
as a residence if at least half of the energy used by 
such property for such purpose is derived from the 
sun. 
‘‘(2) QUALIFIED PHOTOVOLTAIC PROPERTY EX-
PENDITURE.—The term ‘qualified photovoltaic prop-
erty expenditure’ means an expenditure for property
that uses solar energy to generate electricity for use 
in a dwelling unit. 
‘‘(3) SOLAR PANELS.—No expenditure relating 
to a solar panel or other property installed as a roof 
(or portion thereof) shall fail to be treated as prop-
erty described in paragraph (1) or (2) solely because 
it constitutes a structural component of the struc-
ture on which it is installed. 
‘‘(4) LABOR
COSTS.—Expenditures for labor 
costs properly allocable to the onsite preparation, as-
sembly, or original installation of the property de-
scribed in paragraph (1) or (2) and for piping or 
wiring to interconnect such property to the dwelling 
unit shall be taken into account for purposes of this 
section. 
‘‘(5) SWIMMING POOLS, ETC., USED AS STOR-
AGE MEDIUM.—Expenditures which are properly al-
locable to a swimming pool, hot tub, or any other 
energy storage medium which has a function other 
than the function of such storage shall not be taken 
into account for purposes of this section. 
‘‘(d) SPECIAL RULES.—
‘‘(1) DOLLAR AMOUNTS IN CASE OF JOINT OC-
CUPANCY.—In the case of any dwelling unit which is 
jointly occupied and used during any calendar year
as a residence by 2 or more individuals the following 
shall apply: 
‘‘(A) The amount of the credit allowable 
under subsection (a) by reason of expenditures 
(as the case may be) made during such cal-
endar year by any of such individuals with re-
spect to such dwelling unit shall be determined 
by treating all of such individuals as 1 taxpayer 
whose taxable year is such calendar year. 
‘‘(B) There shall be allowable with respect 
to such expenditures to each of such individ-
uals, a credit under subsection (a) for the tax-
able year in which such calendar year ends in 
an amount which bears the same ratio to the 
amount determined under subparagraph (A) as 
the amount of such expenditures made by such 
individual during such calendar year bears to 
the aggregate of such expenditures made by all 
of such individuals during such calendar year. 
‘‘(2) TENANT-STOCKHOLDER IN COOPERATIVE 
HOUSING CORPORATION.—In the case of an indi-
vidual who is a tenant-stockholder (as defined in sec-
tion 216) in a cooperative housing corporation (as 
defined in such section), such individual shall be 
treated as having made his tenant-stockholder’s pro-
portionate share (as defined in section 216(b)(3)) of 
any expenditures of such corporation. 
‘‘(3) CONDOMINIUMS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is a member of a condominium man-
agement association with respect to a condo-
minium which he owns, such individual shall be 
treated as having made his proportionate share 
of any expenditures of such association. 
‘‘(B) CONDOMINIUM
MANAGEMENT
ASSO-
CIATION.—For purposes of this paragraph, the 
term ‘condominium management association’ 
means an organization which meets the require-
ments of paragraph (1) of section 528(c) (other 
than subparagraph (E) thereof) with respect to 
a condominium project substantially all of the 
units of which are used as residences. 
‘‘(4) ALLOCATION IN CERTAIN CASES.—If less 
than 80 percent of the use of an item is for nonbusi-
ness purposes, only that portion of the expenditures 
for such item which is properly allocable to use for 
nonbusiness purposes shall be taken into account. 
‘‘(5) WHEN EXPENDITURE MADE; AMOUNT OF 
EXPENDITURE.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), an expenditure with respect 
to an item shall be treated as made when the 
original installation of the item is completed. 
‘‘(B) EXPENDITURES PART OF BUILDING 
CONSTRUCTION.—In the case of an expenditure 
in connection with the construction or recon-
struction of a structure, such expenditure shall 
be treated as made when the original use of the 
constructed or reconstructed structure by the 
taxpayer begins. 
‘‘(C) AMOUNT.—The amount of any ex-
penditure shall be the cost thereof. 
‘‘(6) PROPERTY FINANCED BY SUBSIDIZED EN-
ERGY FINANCING.—For purposes of determining the 
amount of expenditures made by any individual with 
respect to any dwelling unit, there shall not be taken 
in to account expenditures which are made from 
subsidized energy financing (as defined in section 
48(a)(4)(A)). 
‘‘(e) BASIS ADJUSTMENTS.—For purposes of this 
subtitle, if a credit is allowed under this section for any 
expenditure with respect to any property, the increase in 
the basis of such property which would (but for this sub-
section) result from such expenditure shall be reduced by 
the amount of the credit so allowed. 
‘‘(f) TERMINATION.—The credit allowed under this 
section shall not apply to taxable years beginning after 
December 31, 2008 (December 31, 2009, with respect to 
qualified photovoltaic property expenditures).’’. 
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 1016 is amended 
by striking ‘‘and’’ at the end of paragraph (27), by 
striking the period at the end of paragraph (28) and 
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(29) to the extent provided in section 25C(e), 
in the case of amounts with respect to which a credit 
has been allowed under section 25C.’’. 
(2) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 25B the fol-
lowing new item:
‘‘Sec. 25C. Residential solar energy property.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after De-
cember 31, 2003.
SEC. 3. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS 
TO EXISTING HOMES. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal 
credits) is amended by inserting after section 25C the fol-
lowing new section: 
‘‘SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXIST-
ING HOMES. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this chapter for the taxable year an amount 
equal to 20 percent of the amount paid or incurred by 
the taxpayer for qualified energy efficiency improvements 
installed during such taxable year. 
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—The credit allowed by 
this section with respect to a dwelling shall not ex-
ceed $2,000. 
‘‘(2) PRIOR CREDIT AMOUNTS FOR TAXPAYER 
ON SAME DWELLING TAKEN INTO ACCOUNT.—If a 
credit was allowed to the taxpayer under subsection 
(a) with respect to a dwelling in 1 or more prior tax-
able years, the amount of the credit otherwise allow-
able for the taxable year with respect to that dwell-
ing shall not exceed the amount of $2,000 reduced 
by the sum of the credits allowed under subsection
(a) to the taxpayer with respect to the dwelling for 
all prior taxable years. 
‘‘(3) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under subsection (a) for 
the 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 im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section and 
section 23) and section 27 for the taxable year. 
‘‘(c) CARRYFORWARD OF UNUSED CREDIT.—If the 
credit allowable under subsection (a) exceeds the limita-
tion imposed by subsection (b)(3) 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 succeeding taxable year. 
‘‘(d) QUALIFIED ENERGY EFFICIENCY IMPROVE-
MENTS.—For purposes of this section, the term ‘qualified 
energy efficiency improvements’ means any energy effi-
cient building envelope component which meets the pre-
scriptive criteria for such component established by the 
1998 International Energy Conservation Code, if—
‘‘(1) such component is installed in or on a 
dwelling—
‘‘(A) located in the United States, and 
‘‘(B) owned and used by the taxpayer as 
the taxpayer’s principal residence (within the 
meaning of section 121), 
‘‘(2) the original use of such component com-
mences with the taxpayer, and 
‘‘(3) such component reasonably can be ex-
pected to remain in use for at least 5 years. 
If the aggregate cost of such components with respect to 
any dwelling exceeds $1,000, such components shall be 
treated as qualified energy efficiency improvements only 
if such components are also certified in accordance with 
subsection (e) as meeting such criteria. 
‘‘(e) CERTIFICATION.—The certification described in 
subsection (d) shall be—
‘‘(1) determined on the basis of the technical 
specifications or applicable ratings (including prod-
uct labeling requirements) for the measurement of 
energy efficiency, based upon energy use or building 
envelope component performance, for the energy effi-
cient building envelope component, 
‘‘(2) provided by a local building regulatory au-
thority, a utility, a manufactured home production 
inspection primary inspection agency (IPIA), or an 
accredited home energy rating system provider who
is accredited by or otherwise authorized to use ap-
proved energy performance measurement methods by 
the Home Energy Ratings Systems Council or the 
National Association of State Energy Officials, and 
‘‘(3) made in writing in a manner that specifies 
in readily verifiable fashion the energy efficient 
building envelope components installed and their re-
spective energy efficiency levels. 
‘‘(f) DEFINITIONS AND SPECIAL RULES.—
‘‘(1) TENANT-STOCKHOLDER IN COOPERATIVE 
HOUSING CORPORATION.—In the case of an indi-
vidual who is a tenant-stockholder (as defined in sec-
tion 216) in a cooperative housing corporation (as 
defined in such section), such individual shall be 
treated as having paid his tenant-stockholder’s pro-
portionate share (as defined in section 216(b)(3)) of 
the cost of qualified energy efficiency improvements 
made by such corporation. 
‘‘(2) CONDOMINIUMS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is a member of a condominium man-
agement association with respect to a condo-
minium which he owns, such individual shall be 
treated as having paid his proportionate share
of the cost of qualified energy efficiency im-
provements made by such association. 
‘‘(B) CONDOMINIUM
MANAGEMENT
ASSO-
CIATION.—For purposes of this paragraph, the 
term ‘condominium management association’ 
means an organization which meets the require-
ments of paragraph (1) of section 528(c) (other 
than subparagraph (E) thereof) with respect to 
a condominium project substantially all of the 
units of which are used as residences. 
‘‘(3) BUILDING ENVELOPE COMPONENT.—The 
term ‘building envelope component’ means insulation 
material or system which is specifically and pri-
marily designed to reduce the heat loss or gain of a 
dwelling when installed in or on such dwelling, exte-
rior windows (including skylights) and doors, and 
metal roofs with appropriate pigmented coatings 
which are specifically and primarily designed to re-
duce the heat gain of a dwelling when installed in 
or on such dwelling. 
‘‘(4) MANUFACTURED HOMES INCLUDED.—For 
purposes of this section, the term ‘dwelling’ includes 
a manufactured home which conforms to Federal 
Manufactured Home Construction and Safety Stand-
ards (24 CFR 3280).
‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is allowed under this section for any ex-
penditure with respect to any property, the increase in the 
basis of such property which would (but for this sub-
section) result from such expenditure shall be reduced by 
the amount of the credit so allowed. 
‘‘(h) APPLICATION OF SECTION.—This section shall 
apply to qualified energy efficiency improvements installed 
after December 31, 2003 and before January 1, 2009.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 1016 is amended 
by striking ‘‘and’’ at the end of paragraph (28), by 
striking the period at the end of paragraph (29) and 
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(30) to the extent provided in section 25D(g), 
in the case of amounts with respect to which a credit 
has been allowed under section 25D.’’. 
(2) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 25C the fol-
lowing new item:
‘‘Sec. 25D. Energy efficiency improvements to existing homes.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after De-
cember 31, 2003.
SEC. 4. ALTERNATIVE MOTOR VEHICLE CREDIT. 
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 (relating to other credits) is 
amended by adding at the end the following: 
‘‘SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT. 
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the sum of—
‘‘(1) the new qualified fuel cell motor vehicle 
credit determined under subsection (b), and 
‘‘(2) the new qualified hybrid motor vehicle 
credit determined under subsection (c). 
‘‘(b) NEW QUALIFIED FUEL CELL MOTOR VEHICLE 
CREDIT.—
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), the new qualified fuel cell motor vehicle credit 
determined under this subsection with respect to a 
new qualified fuel cell motor vehicle placed in service 
by the taxpayer during the taxable year is—
‘‘(A) $4,000, if such vehicle has a gross ve-
hicle weight rating of not more than 8,500 
pounds, 
‘‘(B) $10,000, if such vehicle has a gross 
vehicle weight rating of more than 8,500 
pounds but not more than 14,000 pounds,
‘‘(C) $20,000, if such vehicle has a gross 
vehicle weight rating of more than 14,000 
pounds but not more than 26,000 pounds, and 
‘‘(D) $40,000, if such vehicle has a gross 
vehicle weight rating of more than 26,000 
pounds. 
‘‘(2) INCREASE FOR FUEL EFFICIENCY.—
‘‘(A) IN
GENERAL.—The amount deter-
mined under paragraph (1)(A) with respect to 
a new qualified fuel cell motor vehicle which is 
a passenger automobile or light truck shall be 
increased by—
‘‘(i) $1,000, if such vehicle achieves at 
least 150 percent but less than 175 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(ii) $1,500, if such vehicle achieves 
at least 175 percent but less than 200 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(iii) $2,000, if such vehicle achieves 
at least 200 percent but less than 225 per-
cent of the 2002 model year city fuel econ-
omy,
‘‘(iv) $2,500, if such vehicle achieves 
at least 225 percent but less than 250 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(v) $3,000, if such vehicle achieves 
at least 250 percent but less than 275 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(vi) $3,500, if such vehicle achieves 
at least 275 percent but less than 300 per-
cent of the 2002 model year city fuel econ-
omy, and 
‘‘(vii) $4,000, if such vehicle achieves 
at least 300 percent of the 2002 model 
year city fuel economy. 
‘‘(B) 2002 MODEL YEAR CITY FUEL ECON-
OMY.—For purposes of subparagraph (A), the 
2002 model year city fuel economy with respect 
to a vehicle shall be determined in accordance 
with the following tables: 
‘‘(i) In the case of a passenger auto-
mobile:
‘‘If 
vehicle 
inertia 
weight 
class is: 
The 2002 model year city fuel 
economy is: 
1,500 or 1,750 lbs ....................................................................
43.7 mpg
2,000 lbs ..................................................................................
38.3 mpg
2,250 lbs ..................................................................................
34.1 mpg
2,500 lbs ..................................................................................
30.7 mpg
2,750 lbs ..................................................................................
27.9 mpg
‘‘If 
vehicle 
inertia 
weight 
class is: 
The 2002 model year city fuel 
economy is: 
3,000 lbs ..................................................................................
25.6 mpg
3,500 lbs ..................................................................................
22.0 mpg
4,000 lbs ..................................................................................
19.3 mpg
4,500 lbs ..................................................................................
17.2 mpg
5,000 lbs ..................................................................................
15.5 mpg
5,500 lbs ..................................................................................
14.1 mpg
6,000 lbs ..................................................................................
12.9 mpg
6,500 lbs ..................................................................................
11.9 mpg
7,000 or 8,500 lbs ....................................................................
11.1 mpg.
‘‘(ii) In the case of a light truck:
‘‘If 
vehicle 
inertia 
weight 
class is: 
The 2002 model year city fuel 
economy is: 
1,500 or 1,750 lbs ....................................................................
37.6 mpg
2,000 lbs ..................................................................................
33.7 mpg
2,250 lbs ..................................................................................
30.6 mpg
2,500 lbs ..................................................................................
28.0 mpg
2,750 lbs ..................................................................................
25.9 mpg
3,000 lbs ..................................................................................
24.1 mpg
3,500 lbs ..................................................................................
21.3 mpg
4,000 lbs ..................................................................................
19.0 mpg
4,500 lbs ..................................................................................
17.3 mpg
5,000 lbs ..................................................................................
15.8 mpg
5,500 lbs ..................................................................................
14.6 mpg
6,000 lbs ..................................................................................
13.6 mpg
6,500 lbs ..................................................................................
12.8 mpg
7,000 or 8,500 lbs ....................................................................
12.0 mpg.
‘‘(C) VEHICLE INERTIA WEIGHT CLASS.—
For purposes of subparagraph (B), the term 
‘vehicle inertia weight class’ has the same 
meaning as when defined in regulations pre-
scribed by the Administrator of the Environ-
mental Protection Agency for purposes of the 
administration of title II of the Clean Air Act 
(42 U.S.C. 7521 et seq.). 
‘‘(3) NEW QUALIFIED FUEL CELL MOTOR VEHI-
CLE.—For purposes of this subsection, the term
‘new qualified fuel cell motor vehicle’ means a motor 
vehicle—
‘‘(A) which is propelled by power derived 
from one or more cells which convert chemical 
energy directly into electricity by combining ox-
ygen with hydrogen fuel which is stored on 
board the vehicle in any form and may or may 
not require reformation prior to use, 
‘‘(B) which, in the case of a passenger 
automobile or light truck—
‘‘(i) for 2004 and later model vehicles, 
has received a certificate of conformity 
under the Clean Air Act and meets or ex-
ceeds the equivalent qualifying California 
low emission vehicle standard under sec-
tion 243(e)(2) of the Clean Air Act for 
that make and model year, and 
‘‘(ii) for 2006 and later model vehi-
cles, has received a certificate that such ve-
hicle meets or exceeds the Tier II emission 
level established in regulations prescribed 
by the Administrator of the Environmental 
Protection Agency under section 202(i) of 
the Clean Air Act for that make and model 
year vehicle,
‘‘(C) the original use of which commences 
with the taxpayer,
‘‘(D) which is acquired for use or lease by 
the taxpayer and not for resale, and 
‘‘(E) which is made by a manufacturer. 
‘‘(c) NEW QUALIFIED HYBRID MOTOR VEHICLE 
CREDIT.—
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), the new qualified hybrid motor vehicle credit de-
termined under this subsection with respect to a new 
qualified hybrid motor vehicle placed in service by 
the taxpayer during the taxable year is the credit 
amount determined under paragraph (2). 
‘‘(2) CREDIT AMOUNT.—
‘‘(A) IN GENERAL.—The credit amount de-
termined under this paragraph shall be deter-
mined in accordance with the following tables: 
‘‘(i) In the case of a new qualified hy-
brid motor vehicle which is a passenger 
automobile or light truck and which pro-
vides the following percentage of the max-
imum available power:
‘‘If percentage of the max-
imum available power is: 
The credit amount is: 
At least 2.5 percent but less than 10 percent .........................
$250
At least 10 percent but less than 20 percent ..........................
$500
At least 20 percent but less than 30 percent ..........................
$750
At least 30 percent ..................................................................
$1,000.
‘‘(ii) In the case of a new qualified hy-
brid motor vehicle which is a heavy duty 
hybrid motor vehicle and which provides 
the following percentage of the maximum 
available power: 
‘‘(I) If such vehicle has a gross 
vehicle weight rating of not more than 
14,000 pounds:
‘‘If percentage of the max-
imum available power is: 
The credit amount is: 
At least 20 percent but less than 30 percent ..........................
$1,500
At least 30 percent but less than 40 percent ..........................
$1,750
At least 40 percent but less than 50 percent ..........................
$2,000
At least 50 percent but less than 60 percent ..........................
$2,250
At least 60 percent ..................................................................
$2,500.
‘‘(II) If such vehicle has a gross 
vehicle weight rating of more than 
14,000 but not more than 26,000 
pounds:
‘‘If percentage of the max-
imum available power is: 
The credit amount is: 
At least 20 percent but less than 30 percent ..........................
$4,000
At least 30 percent but less than 40 percent ..........................
$4,500
At least 40 percent but less than 50 percent ..........................
$5,000
At least 50 percent but less than 60 percent ..........................
$5,500
At least 60 percent ..................................................................
$6,000.
‘‘(III) If such vehicle has a gross 
vehicle weight rating of more than 
26,000 pounds:
‘‘If percentage of the max-
imum available power is: 
The credit amount is: 
At least 20 percent but less than 30 percent ..........................
$6,000
At least 30 percent but less than 40 percent ..........................
$7,000
At least 40 percent but less than 50 percent ..........................
$8,000
At least 50 percent but less than 60 percent ..........................
$9,000
At least 60 percent ..................................................................
$10,000.
‘‘(B) INCREASE FOR FUEL EFFICIENCY.—
‘‘(i) AMOUNT.—The amount deter-
mined under subparagraph (A)(i) with re-
spect to a passenger automobile or light 
truck shall be increased by—
‘‘(I) $1,000, if such vehicle 
achieves at least 125 percent but less 
than 150 percent of the 2002 model 
year city fuel economy, 
‘‘(II) $1,500, if such vehicle 
achieves at least 150 percent but less 
than 175 percent of the 2002 model 
year city fuel economy, 
‘‘(III) $2,000, if such vehicle 
achieves at least 175 percent but less 
than 200 percent of the 2002 model 
year city fuel economy, 
‘‘(IV) $2,500, if such vehicle 
achieves at least 200 percent but less 
than 225 percent of the 2002 model 
year city fuel economy, 
‘‘(V) $3,000, if such vehicle 
achieves at least 225 percent but less 
than 250 percent of the 2002 model 
year city fuel economy, and
‘‘(VI) $3,500, if such vehicle 
achieves at least 250 percent of the 
2002 model year city fuel economy. 
‘‘(ii) 2002 MODEL YEAR CITY FUEL 
ECONOMY.—For purposes of clause (i), the 
2002 model year city fuel economy with re-
spect to a vehicle shall be determined using 
the tables provided in subsection (b)(2)(B) 
with respect to such vehicle. 
‘‘(iii) OPTION
TO
USE
LIKE
VEHI-
CLE.—For purposes of clause (i), at the 
option of the vehicle manufacturer, the in-
crease for fuel efficiency may be calculated 
by comparing the new qualified hybrid 
motor vehicle to a ‘like vehicle’. 
‘‘(C) INCREASE FOR ACCELERATED EMIS-
SIONS
PERFORMANCE.—The amount deter-
mined under subparagraph (A)(ii) with respect 
to an applicable heavy duty hybrid motor vehi-
cle shall be increased by the increase credit 
amount determined in accordance with the fol-
lowing tables: 
‘‘(i) In the case of a vehicle which has 
a gross vehicle weight rating of not more 
than 14,000 pounds:
‘‘If the model year is: 
The increase credit amount is: 
2004 .........................................................................................
$3,500
2005 .........................................................................................
$3,000
2006 .........................................................................................
$2,500
2007 .........................................................................................
$2,000
2008 .........................................................................................
$1,500.
‘‘(ii) In the case of a vehicle which 
has a gross vehicle weight rating of more 
than 14,000 pounds but not more than 
26,000 pounds:
‘‘If the model year is: 
The increase credit amount is: 
2004 .........................................................................................
$9,000
2005 .........................................................................................
$7,750
2006 .........................................................................................
$6,500
2007 .........................................................................................
$5,250
2008 .........................................................................................
$4,000.
‘‘(iii) In the case of a vehicle which 
has a gross vehicle weight rating of more 
than 26,000 pounds:
‘‘If the model year is: 
The increase credit amount is: 
2004 .........................................................................................
$14,000
2005 .........................................................................................
$12,000
2006 .........................................................................................
$10,000
2007 .........................................................................................
$8,000
2008 .........................................................................................
$6,000.
‘‘(D) CONSERVATION CREDIT.—
‘‘(i) AMOUNT.—The amount deter-
mined under subparagraph (A)(i) with re-
spect to a passenger automobile or light 
truck shall be increased by—
‘‘(I) 
$250, 
if 
such 
vehicle 
achieves a lifetime fuel savings of at 
least 1,500 gallons of gasoline, and
‘‘(II) 
$500, 
if 
such 
vehicle 
achieves a lifetime fuel savings of at 
least 2,500 gallons of gasoline. 
‘‘(ii) LIFETIME
FUEL
SAVINGS
FOR 
LIKE
VEHICLE.—For purposes of clause 
(i), at the option of the vehicle manufac-
turer, the lifetime fuel savings fuel may be 
calculated by comparing the new qualified 
hybrid motor vehicle to a ‘like vehicle’. 
‘‘(E) DEFINITIONS.—
‘‘(i) APPLICABLE
HEAVY
DUTY
HY-
BRID MOTOR VEHICLE.—For purposes of 
subparagraph (C), the term ‘applicable 
heavy duty hybrid motor vehicle’ means a 
heavy duty hybrid motor vehicle which is 
powered by an internal combustion or heat 
engine which is certified as meeting the 
emission standards set in the regulations 
prescribed by the Administrator of the En-
vironmental Protection Agency for 2009 
and later model year diesel heavy duty en-
gines or 2010 and later model year 
ottocycle heavy duty engines, as applicable. 
‘‘(ii) HEAVY DUTY HYBRID MOTOR VE-
HICLE.—For purposes of this paragraph,
the term ‘heavy duty hybrid motor vehicle’ 
means a new qualified hybrid motor vehicle 
which has a gross vehicle weight rating of 
more than 10,000 pounds and draws pro-
pulsion energy from both of the following 
onboard sources of stored energy: 
‘‘(I) An internal combustion or 
heat engine using consumable fuel 
which, for 2004 and later model vehi-
cles, has received a certificate of con-
formity under the Clean Air Act and 
meets or exceeds a level of not greater 
than 3.0 grams per brake horsepower-
hour of oxides of nitrogen and 0.01 
per brake horsepower-hour of particu-
late matter. 
‘‘(II) A rechargeable energy stor-
age system. 
‘‘(iii) MAXIMUM AVAILABLE POWER.—
‘‘(I) PASSENGER
AUTOMOBILE 
OR LIGHT TRUCK.—For purposes of 
subparagraph (A)(i), the term ‘max-
imum available power’ means the 
maximum power available from the 
battery or other electrical storage de-
vice, during a standard 10 second 
pulse power test, divided by the sum 
of the battery or other electrical stor-
age device and the SAE net power of 
the heat engine. 
‘‘(II) 
HEAVY
DUTY
HYBRID 
MOTOR
VEHICLE.—For purposes of 
subparagraph (A)(ii), the term ‘max-
imum available power’ means the 
maximum power available from the 
battery or other electrical storage de-
vice, during a standard 10 second 
pulse power test, divided by the vehi-
cle’s total traction power. The term 
‘total traction power’ means the sum 
of the electric motor peak power and 
the heat engine peak power of the ve-
hicle, except that if the electric motor 
is the sole means by which the vehicle 
can be driven, the total traction power 
is the peak electric motor power. 
‘‘(iv) LIKE
VEHICLE.—For purposes 
of subparagraph (B)(iii), the term ‘like ve-
hicle’ for a new qualified hybrid motor ve-
hicle derived from a conventional produc-
tion vehicle produced in the same model 
year means a model that is equivalent in 
the following areas: 
‘‘(I) Body style (2-door or 4-
door). 
‘‘(II) Transmission (automatic or 
manual). 
‘‘(III) Acceleration performance 
(± 0.05 seconds). 
‘‘(IV) Drivetrain (2-wheel drive 
or 4-wheel drive). 
‘‘(V) Certification by the Admin-
istrator of the Environmental Protec-
tion Agency. 
‘‘(v) LIFETIME FUEL SAVINGS.—For 
purposes of subsection (c)(2)(D), the term 
‘lifetime fuel savings’ shall be calculated by 
dividing 120,000 by the difference between 
the 2002 model year city fuel economy for 
the vehicle inertia weight class and the city 
fuel economy for the new qualified hybrid 
motor vehicle. 
‘‘(3) NEW
QUALIFIED
HYBRID
MOTOR
VEHI-
CLE.—For purposes of this subsection, the term
‘new qualified hybrid motor vehicle’ means a motor 
vehicle—
‘‘(A) which draws propulsion energy from 
onboard sources of stored energy which are 
both—
‘‘(i) an internal combustion or heat 
engine using combustible fuel, and 
‘‘(ii) a rechargeable energy storage 
system, 
‘‘(B) which, in the case of a passenger 
automobile or light truck, for 2004 and later 
model vehicles, has received a certificate of con-
formity under the Clean Air Act and meets or 
exceeds the equivalent qualifying California low 
emission 
vehicle 
standard 
under 
section 
243(e)(2) of the Clean Air Act for that make 
and model year, 
‘‘(C) the original use of which commences 
with the taxpayer, 
‘‘(D) which is acquired for use or lease by 
the taxpayer and not for resale, and 
‘‘(E) which is made by a manufacturer. 
‘‘(d) LIMITATION BASED ON AMOUNT OF TAX.—The 
credit allowed under subsection (a) for the taxable year 
shall not exceed the excess of—
‘‘(1) the sum of the regular tax liability (as de-
fined in section 26(b)) plus the tax imposed by sec-
tion 55, over 
‘‘(2) the sum of the credits allowable under sub-
part A and sections 27, 29, and 30A for the taxable 
year. 
‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) 
CONSUMABLE
FUEL.—The 
term 
‘consumable fuel’ means any solid, liquid, or gaseous 
matter which releases energy when consumed by an 
auxiliary power unit. 
‘‘(2) MOTOR VEHICLE.—The term ‘motor vehi-
cle’ has the meaning given such term by section 
30(c)(2). 
‘‘(3) 2002 MODEL
YEAR
CITY
FUEL
ECON-
OMY.—The 2002 model year city fuel economy with 
respect to any vehicle shall be measured under rules 
similar to the rules under section 4064(c). 
‘‘(4) OTHER TERMS.—The terms ‘automobile’, 
‘passenger automobile’, ‘light truck’, and ‘manufac-
turer’ have the meanings given such terms in regula-
tions prescribed by the Administrator of the Envi-
ronmental Protection Agency for purposes of the ad-
ministration of title II of the Clean Air Act (42 
U.S.C. 7521 et seq.). 
‘‘(5) REDUCTION IN BASIS.—For purposes of 
this subtitle, the basis of any property for which a 
credit is allowable under subsection (a) shall be re-
duced by the amount of such credit so allowed. 
‘‘(6) NO
DOUBLE
BENEFIT.—The amount of 
any deduction or credit allowable under this chapter 
(other than the credit allowable under this section) 
shall be reduced by the amount of credit allowed 
under subsection (a) for such vehicle for the taxable 
year. 
‘‘(7) PROPERTY USED BY TAX-EXEMPT ENTI-
TIES.—In the case of a credit amount which is al-
lowable with respect to a motor vehicle which is ac-
quired by an entity exempt from tax under this 
chapter, the person which sells or leases such vehicle 
to the entity shall be treated as the taxpayer with 
respect to the vehicle for purposes of this section 
and the credit shall be allowed to such person, but 
only if the person clearly discloses to the entity in 
any sale or lease document the specific amount of 
any credit otherwise allowable to the entity under 
this section and reduces the sale or lease price of 
such vehicle by an equivalent amount of such credit.
‘‘(8) RECAPTURE.—The Secretary shall, by reg-
ulations, provide for recapturing the benefit of any 
credit allowable under subsection (a) with respect to 
any property which ceases to be property eligible for 
such credit (including recapture in the case of a 
lease period of less than the economic life of a vehi-
cle). 
‘‘(9) 
PROPERTY
USED
OUTSIDE
UNITED 
STATES, ETC., NOT QUALIFIED.—No credit shall be 
allowed under subsection (a) with respect to any 
property referred to in section 50(b) or with respect 
to the portion of the cost of any property taken into 
account under section 179. 
‘‘(10) ELECTION TO NOT TAKE CREDIT.—No 
credit shall be allowed under subsection (a) for any 
vehicle if the taxpayer elects to not have this section 
apply to such vehicle. 
‘‘(11) CARRYFORWARD ALLOWED.—
‘‘(A) IN GENERAL.—If the credit amount 
allowable under subsection (a) for a taxable 
year exceeds the amount of the limitation under 
subsection (c) for such taxable year (referred to 
as the ‘unused credit year’ in this paragraph), 
such excess shall be allowed as a credit
carryforward for each of the 20 taxable years 
following the unused credit year. 
‘‘(B) RULES.—Rules similar to the rules of 
section 39 shall apply with respect to the credit 
carryforward under subparagraph (A). 
‘‘(12) INTERACTION
WITH
AIR
QUALITY
AND 
MOTOR VEHICLE SAFETY STANDARDS.—Unless oth-
erwise provided in this section, a motor vehicle shall 
not be considered eligible for a credit under this sec-
tion unless such vehicle is in compliance with—
‘‘(A) the applicable provisions of the Clean 
Air Act for the applicable make and model year 
of the vehicle (or applicable air quality provi-
sions of State law in the case of a State which 
has adopted such provision under a waiver 
under section 209(b) of the Clean Air Act), and 
‘‘(B) the motor vehicle safety provisions of 
sections 30101 through 30169 of title 49, 
United States Code. 
‘‘(f) REGULATIONS.—
‘‘(1) IN GENERAL.—The Secretary shall pro-
mulgate such regulations as necessary to carry out 
the provisions of this section. 
‘‘(2) 
ADMINISTRATOR
OF
ENVIRONMENTAL 
PROTECTION
AGENCY.—The Administrator of the
Environmental Protection Agency, in coordination 
with the Secretary of Transportation and the Sec-
retary of the Treasury, shall prescribe such regula-
tions as necessary to determine whether a motor ve-
hicle meets the requirements to be eligible for a 
credit under this section. 
‘‘(g) TERMINATION.—This section shall not apply to 
any property placed in service after—
‘‘(1) in the case of a new qualified fuel cell 
motor vehicle (as described in subsection (b)), De-
cember 31, 2013, and 
‘‘(2) in the case of any other property, Decem-
ber 31, 2009.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Section 1016(a) is amended by striking 
‘‘and’’ at the end of paragraph (29), by striking the 
period at the end of paragraph (30) and inserting ‘‘, 
and’’, and by adding at the end the following: 
‘‘(31) to the extent provided in section 
30B(e)(5).’’. 
(2) Section 6501(m) is amended by inserting 
‘‘30B(e)(10),’’ after ‘‘30(d)(4),’’. 
(3) The table of sections for subpart B of part 
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 30A the fol-
lowing:
‘‘Sec. 30B. Alternative motor vehicle credit.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
December 31, 2003, in taxable years ending after such 
date. 
SEC. 5. EXTENSION AND EXPANSION OF CREDIT FOR ELEC-
TRICITY PRODUCED FROM RENEWABLE RE-
SOURCES. 
(a) EXTENSION OF CREDIT FOR WIND AND CLOSED-
LOOP BIOMASS FACILITIES.—Subparagraphs (A) and (B) 
of section 45(c)(3) are each amended by striking ‘‘2004’’ 
and inserting ‘‘2009’’. 
(b) EXPANSION OF CREDIT FOR OPEN-LOOP BIO-
MASS AND LANDFILL GAS FACILITIES.—Paragraph (3) of 
section 45(c) is amended by adding at the end the fol-
lowing new subparagraphs: 
‘‘(D) OPEN-LOOP BIOMASS FACILITIES.—
In the case of a facility using open-loop biomass 
to produce electricity, the term ‘qualified facil-
ity’ means any facility owned by the taxpayer 
which is originally placed in service before Jan-
uary 1, 2009. 
‘‘(E) LANDFILL GAS FACILITIES.—In the 
case of a facility producing electricity from gas
derived from the biodegradation of municipal 
solid waste, the term ‘qualified facility’ means 
any facility owned by the taxpayer which is 
originally placed in service before January 1, 
2009.’’. 
(c) DEFINITION AND SPECIAL RULES.—Subsection 
(c) of section 45 is amended by adding at the end the 
following new paragraphs: 
‘‘(5) OPEN-LOOP
BIOMASS.—The term ‘open-
loop biomass’ means any solid, nonhazardous, cel-
lulosic waste material which is segregated from other 
waste materials and which is derived from—
‘‘(A) any of the following forest-related re-
sources: mill residues, precommercial thinnings, 
slash, and brush, but not including old-growth 
timber, 
‘‘(B) solid wood waste materials, including 
waste pallets, crates, dunnage, manufacturing 
and construction wood wastes (other than pres-
sure-treated, 
chemically-treated, 
or 
painted 
wood wastes), and landscape or right-of-way 
tree trimmings, but not including municipal 
solid waste (garbage), gas derived from the bio-
degradation of solid waste, or paper that is 
commonly recycled, or
‘‘(C) agriculture sources, including orchard 
tree crops, vineyard, grain, legumes, sugar, and 
other crop by-products or residues. 
Such term shall not include closed-loop biomass. 
‘‘(6) 
REDUCED
CREDIT
FOR
CERTAIN 
PREEFFECTIVE DATE FACILITIES.—In the case of 
any facility described in subparagraph (D) or (E) of 
paragraph (3) which is placed in service before the 
date of the enactment of this subparagraph—
‘‘(A) subsection (a)(1) shall be applied by 
substituting ‘1.0 cents’ for ‘1.5 cents’, and 
‘‘(B) the 5-year period beginning on the 
date of the enactment of this paragraph shall 
be substituted in lieu of the 10-year period in 
subsection (a)(2)(A)(ii). 
‘‘(7) LIMIT ON REDUCTIONS FOR GRANTS, ETC., 
FOR
OPEN-LOOP
BIOMASS
FACILITIES.—If 
the 
amount of the credit determined under subsection 
(a) with respect to any open-loop biomass facility is 
required to be reduced under paragraph (3) of sub-
section (b), the fraction under such paragraph shall 
in no event be greater than 4⁄5. 
‘‘(8) COORDINATION
WITH
SECTION
29.—The 
term ‘qualified facility’ shall not include any facility 
the production from which is allowed as a credit
under section 29 for the taxable year or any prior 
taxable year.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to electricity sold after the date 
of the enactment of this Act. 
SEC. 6. CREDIT FOR PRODUCTION FROM QUALIFYING AD-
VANCED CLEAN COAL TECHNOLOGY. 
(a) CREDIT FOR PRODUCTION FROM QUALIFYING 
ADVANCED CLEAN COAL TECHNOLOGY.—Subpart D of 
part IV of subchapter A of chapter 1 (relating to business 
related credits) is amended by adding after section 45F 
the following: 
‘‘SEC. 45G. CREDIT FOR PRODUCTION FROM QUALIFYING 
ADVANCED CLEAN COAL TECHNOLOGY. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
the qualifying advanced clean coal technology production 
credit of any taxpayer for any taxable year is equal to—
‘‘(1) the applicable amount of advanced clean 
coal technology production credit, multiplied by 
‘‘(2) the sum of—
‘‘(A) the kilowatt hours of electricity, plus 
‘‘(B) each 3,413 Btu of fuels or chemicals, 
produced by the taxpayer during such taxable year 
at a qualifying advanced clean coal technology facil-
ity during the 10-year period beginning on the date 
the facility was originally placed in service. 
‘‘(b) APPLICABLE AMOUNT.—For purposes of this 
section, the applicable amount of advanced clean coal tech-
nology production credit with respect to production from 
a qualifying advanced clean coal technology facility shall 
be determined as follows: 
‘‘(1) Where the design coal has a heat content 
of more than 9,000 Btu per pound: 
‘‘(A) In the case of a facility originally 
placed in service before 2009, if—
‘‘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 
Not more than 8,400 ............................................................
$.0060
$.0038
More than 8,400 but not more than 8,550 ..........................
$.0025
$.0010
More than 8,550 but not more than 8,750 ..........................
$.0010
$.0010. 
‘‘(B) In the case of a facility originally 
placed in service after 2008 and before 2013, 
if—
‘‘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 
Not more than 7,770 ............................................................
$.0105
$.0090
More than 7,770 but not more than 8,125 ..........................
$.0085
$.0068
More than 8,125 but not more than 8,350 ..........................
$.0075
$.0055. 
‘‘(C) In the case of a facility originally 
placed in service after 2012 and before 2017, 
if—
‘‘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 
Not more than 7,380 ............................................................
$.0140
$.01
More than 7,380 but not more than 7,720 ..........................
$.0120
$.0090. 
‘‘(2) Where the design coal has a heat content 
of not more than 9,000 Btu per pound: 
‘‘(A) In the case of a facility originally 
placed in service before 2009, if—
‘‘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 
Not more than 8,500 ............................................................
$.0060
$.0038
More than 8,500 but not more than 8,650 ..........................
$.0025
$.0010
More than 8,650 but not more than 8,750 ..........................
$.0010
$.0010. 
‘‘(B) In the case of a facility originally 
placed in service after 2008 and before 2013, 
if—
‘‘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 
Not more than 8,000 ............................................................
$.0105
$.009
More than 8,000 but not more than 8,250 ..........................
$.0085
$.0068
More than 8,250 but not more than 8,400 ..........................
$.0075
$.0055. 
‘‘(C) In the case of a facility originally 
placed in service after 2012 and before 2017, 
if—
‘‘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 
Not more than 7,800 ............................................................
$.0140
$.0115
More than 7,800 but not more than 7,950 ..........................
$.0120
$.0090. 
‘‘(3) Where the clean coal technology facility is 
producing fuel or chemicals:
‘‘(A) In the case of a facility originally 
placed in service before 2009, 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 ...................................................
$.0060
$.0038
Less than 40.6 but not less than 40 percent .......................
$.0025
$.0010
Less than 40 but not less than 39 percent ..........................
$.0010
$.0010. 
‘‘(B) In the case of a facility originally 
placed in service after 2008 and before 2013, 
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 ...................................................
$.0105
$.009
Less than 43.9 but not less than 42 percent .......................
$.0085
$.0068
Less than 42 but not less than 40.9 percent .......................
$.0075
$.0055. 
‘‘(C) In the case of a facility originally 
placed in service after 2012 and before 2017, 
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 ...................................................
$.0140
$.0115
Less than 44.2 but not less than 43.6 percent ....................
$.0120
$.0090. 
‘‘(c) INFLATION ADJUSTMENT FACTOR.—For cal-
endar years after 2003, each amount in paragraphs (1), 
(2), and (3) of subsection (b) shall be adjusted by multi-
plying such amount by the inflation adjustment factor for 
the calendar year in which the amount is applied. If any 
amount as increased 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 48A shall have the 
meaning given such term in section 48A. 
‘‘(2) APPLICABLE RULES.—The rules of para-
graphs (3), (4), and (5) of section 45 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 2003. 
‘‘(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-
ment of Commerce before March 15 of the calendar 
year.’’. 
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b) is amended by striking ‘‘plus’’ at the end of 
paragraph (14), by striking the period at the end of para-
graph (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) is amended by adding after paragraph 
(10) the following: 
‘‘(11) 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 
is amended by adding at the end the following:
‘‘Sec. 45G. Credit for production from qualifying advanced clean 
coal technology.’’.
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to production after the date of the 
enactment of this Act.
SEC. 7. 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) is 
amended by adding at the end the following: 
‘‘SEC. 45H. 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 sec-
tion—
‘‘(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 $15 ($1.67 for 
qualified natural gas production), bears to 
‘‘(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 2003, 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 ‘2002’ 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 
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. 
‘‘(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 
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 
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) is amended by striking ‘‘plus’’ at the end of 
paragraph (15), by striking the period at the end of para-
graph (16) and inserting ‘‘, plus’’, and by adding at the 
end the following:
‘‘(17) the marginal oil and gas well production 
credit determined under section 45H(a).’’. 
(c) 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.’’. 
(d) COORDINATION WITH SECTION 29.—Section 
29(a) is amended by striking ‘‘There’’ and inserting ‘‘At 
the election of the taxpayer, there’’.
(e) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter I 
is amended by adding at the end the following:
‘‘Sec. 45H. Credit for producing oil and gas from marginal 
wells.’’.
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to production in taxable years be-
ginning after December 31, 2003. 
SEC. 8. NATURAL GAS GATHERING LINES TREATED AS 7-
YEAR PROPERTY. 
(a) IN GENERAL.—Subparagraph (C) of section 
168(e)(3) (relating to classification of certain property) is 
amended by striking ‘‘and’’ at the end of clause (i), by 
redesignating clause (ii) as clause (iii), and by inserting 
after clause (i) the following new clause: 
‘‘(ii) any natural gas gathering line, 
and’’. 
(b) NATURAL GAS GATHERING LINE.—Subsection (i) 
of section 168 is amended by adding after paragraph (14) 
the following new paragraph: 
‘‘(15) NATURAL
GAS
GATHERING
LINE.—The 
term ‘natural gas gathering line’ means—
‘‘(A) the pipe, equipment, and appur-
tenances determined to be a gathering line by 
the Federal Energy Regulatory Commission, or
‘‘(B) the pipe, equipment, and appur-
tenances used to deliver natural gas from the 
wellhead or a commonpoint to the point at 
which such gas first reaches—
‘‘(i) a gas processing plant, 
‘‘(ii) an interconnection with a trans-
mission pipeline certificated by the Federal 
Energy Regulatory Commission as an 
interstate transmission pipeline, 
‘‘(iii) an interconnection with an 
intrastate transmission pipeline, or 
‘‘(iv) a direct interconnection with a 
local distribution company, a gas storage 
facility, or an industrial consumer.’’. 
(c) ALTERNATIVE SYSTEM.—The table contained in 
section 168(g)(3)(B) is amended by inserting after the 
item relating to subparagraph (C)(i) the following:
‘‘(C)(ii) .......................................................................................................
10’’.
(d) ALTERNATIVE MINIMUM TAX EXCEPTION.—Sub-
paragraph (B) of section 56(a)(1) is amended by inserting 
before the period the following: ‘‘or in clause (ii) of section 
168(e)(3)(C)’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
the date of the enactment of this Act.
SEC. 9. TEMPORARY SUSPENSION OF LIMITATION BASED 
ON 65 PERCENT OF TAXABLE INCOME AND 
EXTENSION OF SUSPENSION OF TAXABLE IN-
COME LIMIT WITH RESPECT TO MARGINAL 
PRODUCTION. 
(a) LIMITATION BASED ON 65 PERCENT OF TAX-
ABLE INCOME.—Subsection (d) of section 613A (relating 
to limitation on percentage depletion in case of oil and 
gas wells) is amended by adding at the end the following 
new paragraph: 
‘‘(6) TEMPORARY SUSPENSION OF TAXABLE IN-
COME LIMIT.—Paragraph (1) shall not apply to tax-
able years beginning after December 31, 2003, and 
before January 1, 2009, including with respect to 
amounts carried under the second sentence of para-
graph (1) to such taxable years.’’. 
(b) EXTENSION OF SUSPENSION OF TAXABLE IN-
COME LIMIT WITH RESPECT
TO MARGINAL PRODUC-
TION.—Subparagraph (H) of section 613A(c)(6) (relating 
to temporary suspension of taxable income limit with re-
spect to marginal production) is amended by striking 
‘‘2004’’ and inserting ‘‘2009’’. 
(c) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2003.
SEC. 10. ELECTION TO EXPENSE GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES. 
(a) IN GENERAL.—Section 263 (relating to capital 
expenditures) is amended by adding after subsection (i) 
the following: 
‘‘(j) 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) 
is amended by inserting ‘‘263(j),’’ after ‘‘263(i),’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to costs paid or incurred in taxable 
years beginning after December 31, 2003. 
SEC. 11. FIVE-YEAR NET OPERATING LOSS CARRYBACK 
FOR LOSSES ATTRIBUTABLE TO OPERATING 
MINERAL INTERESTS OF OIL AND GAS PRO-
DUCERS. 
(a) IN GENERAL.—Paragraph (1) of section 172(b) 
(relating to years to which loss may be carried) is amended 
by adding at the end the following new subparagraph:
‘‘(I) LOSSES ON OPERATING MINERAL IN-
TERESTS OF OIL AND GAS PRODUCERS.—In the 
case of a taxpayer which has an eligible oil and 
gas loss (as defined in subsection (k)) for a tax-
able year, such eligible oil and gas loss shall be 
a net operating loss carryback to each of the 5 
taxable years preceding the taxable year of such 
loss.’’. 
(b) ELIGIBLE OIL AND GAS LOSS.—Section 172 is 
amended by redesignating subsection (k) as subsection (l) 
and by inserting after subsection (j) the following new sub-
section: 
‘‘(k) ELIGIBLE OIL AND GAS LOSS.—For purposes 
of this section—
‘‘(1) IN GENERAL.—The term ‘eligible oil and 
gas loss’ means the lesser of—
‘‘(A) the amount which would be the net 
operating loss for the taxable year if only in-
come and deductions attributable to operating 
mineral interests (as defined in section 614(d)) 
in oil and gas wells are taken into account, or 
‘‘(B) the amount of the net operating loss 
for such taxable year. 
‘‘(2) 
COORDINATION
WITH
SUBSECTION 
(b)(2).—For purposes of applying subsection (b)(2),
an eligible oil and gas loss for any taxable year shall 
be treated in a manner similar to the manner in 
which a specified liability loss is treated. 
‘‘(3) ELECTION.—Any taxpayer entitled to a 5-
year carryback under subsection (b)(1)(H) from any 
loss year may elect to have the carryback period 
with respect to such loss year determined without re-
gard to subsection (b)(1)(H).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to net operating losses for taxable 
years beginning after December 31, 2003. 
SEC. 12. EXTENSION AND MODIFICATION OF CREDIT FOR 
PRODUCING FUEL FROM A NONCONVEN-
TIONAL SOURCE. 
(a) IN GENERAL.—Section 29 is amended by adding 
at the end the following new subsection: 
‘‘(h) EXTENSION FOR OTHER FACILITIES.—
‘‘(1) EXTENSION FOR OIL AND CERTAIN GAS.—
In the case of a well for producing qualified fuels de-
scribed in subparagraph (A) or (B)(i) of subsection 
(c)(1)—
‘‘(A) APPLICATION OF CREDIT FOR NEW 
WELLS.—Notwithstanding subsection (f), this 
section shall apply with respect to such fuels—
‘‘(i) which are produced from a well 
drilled after the date of the enactment of 
this subsection and before January 1, 
2014, and 
‘‘(ii) which are sold not later than the 
close of the 4-year period beginning on the 
date that such well is drilled. 
‘‘(B) EXTENSION
OF
CREDIT
FOR
OLD 
WELLS.—Subsection (f)(2) shall be applied by 
substituting ‘2009’ for ‘2003’ with respect to 
wells described in subsection (f)(1)(A) with re-
spect to such fuels. 
‘‘(2) EXTENSION FOR FACILITIES PRODUCING 
QUALIFIED FUEL FROM LANDFILL GAS.—
‘‘(A) IN GENERAL.—In the case of a facil-
ity for producing qualified fuel from landfill gas 
which was placed in service after June 30, 
1998, and before January 1, 2009, this section 
shall apply to fuel produced at such facility dur-
ing the 5-year period beginning on the later 
of—
‘‘(i) the date such facility was placed 
in service, or 
‘‘(ii) the date of the enactment of this 
subsection.
‘‘(B) REDUCTION OF CREDIT FOR CERTAIN 
LANDFILL FACILITIES.—In the case of a facility 
to which paragraph (1) applies and which is 
subject to the 1996 New Source Performance 
Standards/Emissions Guidelines of the Environ-
mental Protection Agency, subsection (a)(1) 
shall be applied by substituting ‘$2’ for ‘$3’. 
‘‘(3) SPECIAL
RULES.—In determining the 
amount of credit allowable under this section solely 
by reason of this subsection—
‘‘(A) DAILY LIMIT.—The amount of quali-
fied fuels sold during any taxable year which 
may be taken into account by reason of this 
subsection with respect to any project shall not 
exceed an average barrel-of-oil equivalent of 
200,000 cubic feet of natural gas per day. Days 
before the date the project is placed in service 
shall not be taken into account in determining 
such average. 
‘‘(B) EXTENSION PERIOD TO COMMENCE 
WITH UNADJUSTED CREDIT AMOUNT.—In the 
case of fuels sold during 2003 and 2004, the 
dollar amount applicable under subsection 
(a)(1) shall be $3 (without regard to subsection 
(b)(2)). In the case of fuels sold after 2004,
subparagraph (B) of subsection (d)(2) shall be 
applied by substituting ‘2004’ for ‘1979’.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to fuel sold after the date of the 
enactment of this Act.
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