I 
115TH CONGRESS 
2D SESSION 
H. R. 7196 
To amend the Internal Revenue Code of 1986 to provide investment and 
production tax credits for emerging energy technologies, and for other 
purposes. 
IN THE HOUSE OF REPRESENTATIVES 
NOVEMBER 29, 2018 
Mr. REED (for himself, Mr. LAHOOD, and Mr. PAULSEN) 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 provide 
investment and production tax credits for emerging en-
ergy technologies, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Energy Sector Innova-
tion Credit Act of 2018’’. 
SEC. 2. INVESTMENT CREDIT FOR EMERGING ENERGY 
TECHNOLOGY. 
(a) IN GENERAL.—Subpart E of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
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1986 is amended by inserting after section 48C the fol-
lowing new section: 
‘‘SEC. 48D. EMERGING ENERGY TECHNOLOGY CREDIT. 
‘‘(a) IN GENERAL.—For purposes of section 46, the 
emerging energy technology credit for any taxable year is 
an amount equal to 30 percent of the basis of any qualified 
emerging energy property placed in service by the taxpayer 
during such taxable year. 
‘‘(b) QUALIFIED EMERGING ENERGY PROPERTY.— 
For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified emerg-
ing energy property’ means property which is con-
structed, reconstructed, erected, or acquired by the 
taxpayer, the original use of which commences with 
the taxpayer, and which is— 
‘‘(A) a qualified production facility (as de-
fined in section 45T(d), determined without re-
gard to paragraph (2) thereof) which is a tier 
1 facility (as defined in section 45T(b)(2)(A)), 
or 
‘‘(B) property which is placed in service at 
and used in connection with an existing electric 
generating facility which is a point source of air 
pollutants to retrofit such facility and which, 
with respect to such facility— 
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‘‘(i) improves conversion efficiency (as 
defined in section 45T(e)(2)) or energy ef-
ficiency (as defined in section 45T(e)(3)) 
by at least 50 percent, 
‘‘(ii) decreases water consumption, in 
the case of a type of facility which has sig-
nificant water consumption, by at least 75 
percent, or 
‘‘(iii) as recognized by the Environ-
mental Protection Agency pursuant to its 
enforcement of the Clean Air Act (42 
U.S.C. 7401 et seq.) or by administrative 
action, reduces, sequesters, or controls by 
at least 50 percent the emission of air pol-
lutants which can be reasonably antici-
pated to endanger public health or welfare. 
‘‘(2) DENIAL
OF
DOUBLE
BENEFIT.—Such 
term shall not include— 
‘‘(A) any property which, 
‘‘(B) property any portion of which, or 
‘‘(C) property placed in service at and used 
in connection with a facility which, 
has been treated as a qualified facility for purposes 
of section 45(d), as an advanced nuclear power facil-
ity for purposes of section 45J, as a qualified facility 
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for purposes of section 45Q, as a qualified produc-
tion facility for purposes of section 45T, as energy 
property for purposes of section 48, or as a qualified 
investment for purposes of section 48A, 48B, or 
48C, for any taxable year. 
‘‘(3) POINT SOURCE.—For purposes of para-
graph (1)(B), the term ‘point source’ means a large, 
stationary and non-mobile, identifiable source of 
emissions that releases pollutants into the atmos-
phere. 
‘‘(c) FIRST OF ITS KIND TECHNOLOGY.— 
‘‘(1) IN GENERAL.—In the case of any qualified 
emerging energy property which is the first of its 
kind, subsection (a) shall be applied by substituting 
‘40 percent’ for ‘30 percent’. 
‘‘(2) FIRST OF ITS KIND.—Property shall be 
treated as the first of its kind if such property is 1 
of the first 3 original demonstrations in the United 
States of an engineering design for megawatt-scale 
electric power generation which generates revenue 
from sales of electric power. 
‘‘(3) DETERMINATION.— 
‘‘(A) IN GENERAL.—The Secretary, in con-
sultation with the Secretary of Energy, shall de-
velop a process to determine whether qualified 
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emerging energy property is first of its kind. 
Such process shall include a certification, at the 
request of the taxpayer before the commence-
ment of construction, that the property will be 
treated as first of its kind. Such process shall 
be designed to make a determination not later 
than 90 days after the submission of an appli-
cation for determination. 
‘‘(B) TERMINATION
IF
CONSTRUCTION 
DOES NOT PROCEED.—Except as otherwise pro-
vided by the Secretary, a certification of any 
qualified emerging energy property under sub-
paragraph (A) shall cease to have any force or 
effect if construction of such property does not 
begin before the date which is 5 years after the 
date of such certification or if the Secretary 
makes a determination that such construction 
has been suspended indefinitely. 
‘‘(d) CERTAIN QUALIFIED PROGRESS EXPENDITURE 
RULES MADE APPLICABLE.—Rules similar to the rules of 
subsections (c)(4) and (d) of section 46 (as in effect on 
the day before the enactment of the Revenue Reconcili-
ation Act of 1990) shall apply for purposes of this section. 
‘‘(e) TRANSFER OF CREDIT BY CERTAIN PUBLIC EN-
TITIES.— 
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‘‘(1) IN GENERAL.—If, with respect to a credit 
under subsection (a) for any taxable year— 
‘‘(A) a qualified public entity would be the 
taxpayer (but for this paragraph), and 
‘‘(B) such entity elects the application of 
this paragraph for such taxable year with re-
spect to all (or any portion specified in such 
election) of such credit, the eligible project part-
ner specified in such election, and not the quali-
fied public entity, shall be treated as the tax-
payer for purposes of this title with respect to 
such credit (or such portion thereof). 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) QUALIFIED
PUBLIC
ENTITY.—The 
term ‘qualified public entity’ means— 
‘‘(i) a Federal, State, or local govern-
ment entity, or any political subdivision, 
agency, or instrumentality thereof, 
‘‘(ii) a mutual or cooperative electric 
company described in section 501(c)(12) or 
1381(a)(2), or 
‘‘(iii) a not-for-profit electric utility 
which had or has received a loan or loan 
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guarantee under the Rural Electrification 
Act of 1936. 
‘‘(B) ELIGIBLE PROJECT PARTNER.—The 
term ‘eligible project partner’ means any person 
who— 
‘‘(i) is responsible for, or participates 
in, the design or construction of the quali-
fied emerging energy property to which the 
credit under subsection (a) relates, 
‘‘(ii) is a financial institution pro-
viding financing for the construction or op-
eration of such property, or 
‘‘(iii) has an ownership interest in 
such property. 
‘‘(3) SPECIAL RULES.— 
‘‘(A) APPLICATION TO PARTNERSHIPS.—In 
the case of a credit under subsection (a) which 
is determined at the partnership level— 
‘‘(i) for purposes of paragraph (1)(A), 
a qualified public entity shall be treated as 
the taxpayer with respect to such entity’s 
distributive share of such credit, and 
‘‘(ii) the term ‘eligible project partner’ 
shall include any partner of the partner-
ship. 
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‘‘(B) TAXABLE
YEAR
IN
WHICH
CREDIT 
TAKEN
INTO
ACCOUNT.—In the case of any 
credit (or portion thereof) with respect to which 
an election is made under paragraph (1), such 
credit shall be taken into account in the first 
taxable year of the eligible project partner end-
ing with, or after, the qualified public entity’s 
taxable year with respect to which the credit 
was determined. 
‘‘(C) TREATMENT
OF
TRANSFER
UNDER 
PRIVATE USE RULES.—For purposes of section 
141(b)(1), any benefit derived by an eligible 
project partner in connection with an election 
under this subsection shall not be taken into ac-
count as a private business use.’’. 
(b) CREDIT MADE PART OF INVESTMENT CREDIT.— 
Section 46 of such Code is amended by striking ‘‘and’’ 
at the end of paragraph (5), by striking the period at the 
end of paragraph (6) and inserting ‘‘, and’’, and by adding 
at the end the following new paragraph: 
‘‘(7) the emerging energy technology credit.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 49(a)(1)(C) of such Code is amend-
ed by striking ‘‘and’’ at the end of clause (iv), by 
striking the period at the end of clause (v) and in-
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serting ‘‘, and’’, and by adding at the end the fol-
lowing new clause: 
‘‘(vi) the basis of any qualified emerg-
ing energy property (as defined in section 
48D(b)).’’. 
(2) The table of sections for subpart E of part 
IV of subchapter A of chapter 1 of such Code is 
amended by inserting after the item relating to sec-
tion 48D the following new item: 
‘‘Sec. 48D. Emerging energy technology credit.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service in 
taxable years beginning after the date of the enactment 
of this Act, under rules similar to the rules of section 
48(m) of the Internal Revenue Code of 1986 (as in effect 
on the day before the date of the enactment of the Rev-
enue Reconciliation Act of 1990). 
SEC. 3. PRODUCTION CREDIT FOR EMERGING ENERGY 
TECHNOLOGY. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
section: 
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‘‘SEC. 45T. EMERGING ENERGY TECHNOLOGY PRODUCTION 
CREDIT. 
‘‘(a) IN GENERAL.—For purposes of section 38, the 
emerging energy technology production credit determined 
under this section for any taxable year beginning in the 
credit period with respect to a qualified production facility 
of the taxpayer is an amount equal to the applicable per-
centage of the lesser of— 
‘‘(1) the annual gross receipts of the taxpayer 
from the sale of electricity generated at the qualified 
production facility to an unrelated person during 
such taxable year, or 
‘‘(2) the product of— 
‘‘(A) the national average wholesale price 
of a kilowatt hour of electricity in the taxable 
year, as determined by the Secretary in con-
sultation with the Administrator of the Energy 
Information Administration, multiplied by 
‘‘(B) the number of kilowatt hours of elec-
tricity produced at the qualified production fa-
cility and sold to an unrelated person during 
the taxable year. 
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The applicable percentage 
is— 
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‘‘(A) in the case of a tier 1 facility, 60 per-
cent, 
‘‘(B) in the case of a tier 2 facility, 45 per-
cent, 
‘‘(C) in the case of a tier 3 facility, 30 per-
cent, 
‘‘(D) in the case of a tier 4 facility, 15 per-
cent, and 
‘‘(E) in the case of any other facility, zero 
percent. 
‘‘(2) FACILITY TIERS.— 
‘‘(A) TIER 1 FACILITY.—The term ‘tier 1 
facility’ means, with respect to any taxable 
year, an electric generating facility using a type 
of technology which accounts for less than .5 
percent of annual domestic electricity produc-
tion in the preceding taxable year, as deter-
mined by the Secretary on the basis of data re-
ported by the Energy Information Administra-
tion. 
‘‘(B) TIER 2 FACILITY.—The term ‘tier 2 
facility’ means, with respect to any taxable 
year, an electric generating facility using a type 
of technology which accounts for at least .5 per-
cent but less than 1 percent of annual domestic 
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electricity production in the preceding taxable 
year, as determined by the Secretary on the 
basis of data reported by the Energy Informa-
tion Administration. 
‘‘(C) TIER 3 FACILITY.—The term ‘tier 3 
facility’ means, with respect to any taxable 
year, an electric generating facility using a type 
of technology which accounts for at least 1 per-
cent but less than 1.5 percent of annual domes-
tic electricity production in the preceding tax-
able year, as determined by the Secretary on 
the basis of data reported by the Energy Infor-
mation Administration. 
‘‘(D) TIER 4 FACILITY.—The term ‘tier 4 
facility’ means, with respect to any taxable 
year, an electric generating facility using a type 
of technology which accounts for at least 1.5 
percent but less than 2 percent of annual do-
mestic electricity production in the preceding 
taxable year, as determined by the Secretary on 
the basis of data reported by the Energy Infor-
mation Administration. 
‘‘(c) CREDIT PERIOD.—For purposes of this section, 
the credit period with respect to any qualified production 
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facility is the 10-year period beginning with the date the 
facility was originally placed in service. 
‘‘(d) QUALIFIED PRODUCTION FACILITY.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified produc-
tion facility’ means any facility which— 
‘‘(A) was originally placed in service after 
the date of the enactment of this Act, 
‘‘(B) generates electricity, 
‘‘(C) is located in the United States or a 
possession of the United States (as such terms 
are used in section 638), 
‘‘(D) utilizes emerging technology, and 
‘‘(E) is certified by the Secretary, after 
consultation with the Secretary of Energy, as a 
qualified production facility for purposes of this 
section. 
‘‘(2) DENIAL
OF
DOUBLE
BENEFIT.—Such 
term shall not include any facility which has been 
treated as a qualified facility for purposes of section 
45(d), as an advanced nuclear power facility for pur-
poses of section 45J, as a qualified facility for pur-
poses of section 45Q, as energy property for pur-
poses of section 48, as a qualified investment for 
purposes of section 48A, 48B, or 48C, or as quali-
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fied emerging energy property for purposes of sec-
tion 48D, for any taxable year. 
‘‘(e) EMERGING TECHNOLOGY.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—The term ‘emerging tech-
nology’ means— 
‘‘(A) any new or improved power conver-
sion fuel-based technology— 
‘‘(i) which— 
‘‘(I) reduces emission of air pol-
lutants that can be reasonably antici-
pated to endanger public health or 
welfare to below the volume or rate 
required by the Clean Air Act, in the 
case of a type of facility which has 
significant emission of air pollutants, 
or 
‘‘(II) yields at least a 50 percent 
improvement in energy efficiency, as 
compared to existing fuel-based elec-
tric generating commercial technology, 
and 
‘‘(ii) which operates with a capacity 
factor of at least 50 percent, 
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‘‘(B) any new or improved reactor design 
licensed by the Nuclear Regulatory Commission 
which produces electricity through nuclear fis-
sion or a fusion chain reaction and which (when 
compared to existing nuclear commercial tech-
nologies)— 
‘‘(i) reduces the high-level radioactive 
waste or spent nuclear fuel per unit of en-
ergy yield, 
‘‘(ii) improves fuel utilization, 
‘‘(iii) decreases core damage frequency 
or large early release frequency by at least 
a factor of 10, or 
‘‘(iv) increases thermal efficiency, 
‘‘(C) any new technology or new improve-
ment to technology which generates electricity 
from renewable energy (as defined in section 
203(b)(2) of the Energy Policy Act of 2005) 
and which generates at least a 25 percent in-
crease in the conversion efficiency of the facility 
as compared with the commercial technology of 
the same type as such technology which is con-
sidered to be the best of its type in commercial 
use, or 
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‘‘(D) technology which the Secretary, in 
consultation with the Secretary of Energy, de-
termines would improve energy efficiency or 
conversion efficiency of electric generating com-
mercial technology by not less than 15 percent. 
‘‘(2) CONVERSION
EFFICIENCY.—The term 
‘conversion efficiency’ means the fraction— 
‘‘(A) the numerator of which is the total 
useful electrical or thermal power produced by 
an electric generating facility at normal oper-
ating rates, and expected to be consumed in its 
normal application, and 
‘‘(B) the denominator of which is the inci-
dent energy, whether mechanical, radiation, or 
thermal energy, which is measurable at the 
input of the electric generating facility. 
‘‘(3) ENERGY EFFICIENCY.—The term ‘energy 
efficiency’ means the fraction— 
‘‘(A) the numerator of which is the total 
useful electrical, thermal, and mechanical power 
which is produced by the facility at normal op-
erating rates and expected to be consumed in 
its normal operation, and 
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