855 
ance date holds the instrument evidencing the entitle-
ment to the credit and not to the holder of the bond. 
‘‘(2) CERTAIN RULES TO APPLY.—In the case of 
a separation described in paragraph (1), the rules of 
section 1286 shall apply to the qualified tax credit 
bond as if it were a stripped bond and to the credit 
under this section as if it were a stripped coupon. 
‘‘SEC. 54B. NEW CLEAN RENEWABLE ENERGY BONDS. 
‘‘(a) NEW CLEAN RENEWABLE ENERGY BOND.—For 
purposes of this subpart, the term ‘new clean renewable en-
ergy bond’ means any bond issued as part of an issue if— 
‘‘(1) 100 percent of the available project proceeds 
of such issue are to be used for capital expenditures 
incurred by public power providers, governmental 
bodies, or cooperative electric companies for one or 
more qualified renewable energy facilities, 
‘‘(2) the bond is issued by a qualified issuer, and 
‘‘(3) the issuer designates such bond for purposes 
of this section. 
‘‘(b) LIMITATION
ON
AMOUNT
OF
BONDS
DES-
IGNATED.— 
‘‘(1) IN
GENERAL.—The maximum aggregate 
face amount of bonds which may be designated under 
subsection (a) by any issuer shall not exceed the limi-
856 
tation amount allocated under this subsection to such 
issuer. 
‘‘(2) NATIONAL
LIMITATION
ON
AMOUNT
OF 
BONDS DESIGNATED.—There is a national new clean 
renewable energy bond limitation of $2,000,000,000 
which shall be allocated by the Secretary as provided 
in paragraph (3), except that— 
‘‘(A) not more than 33 1⁄3 percent thereof 
may be allocated to qualified projects of public 
power providers, 
‘‘(B) not more than 33 1⁄3 percent thereof 
may be allocated to qualified projects of govern-
mental bodies, and 
‘‘(C) not more than 33 1⁄3 percent thereof 
may be allocated to qualified projects of coopera-
tive electric companies. 
‘‘(3) METHOD OF ALLOCATION.— 
‘‘(A) ALLOCATION
AMONG
PUBLIC
POWER 
PROVIDERS.—After the Secretary determines the 
qualified projects of public power providers 
which are appropriate for receiving an alloca-
tion of the national new clean renewable energy 
bond limitation, the Secretary shall, to the max-
imum 
extent 
practicable, 
make 
allocations 
among such projects in such manner that the
857 
amount allocated to each such project bears the 
same ratio to the cost of such project as the limi-
tation under paragraph (2)(A) bears to the cost 
of all such projects. 
‘‘(B) ALLOCATION
AMONG
GOVERNMENTAL 
BODIES
AND
COOPERATIVE
ELECTRIC
COMPA-
NIES.—The Secretary shall make allocations of 
the amount of the national new clean renewable 
energy bond limitation described in paragraphs 
(2)(B) and (2)(C) among qualified projects of 
governmental bodies and cooperative electric 
companies, respectively, in such manner as the 
Secretary determines appropriate. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED
RENEWABLE
ENERGY
FACIL-
ITY.—The term ‘qualified renewable energy facility’ 
means a qualified facility (as determined under sec-
tion 45(d) without regard to paragraphs (8) and (10) 
thereof and to any placed in service date) owned by 
a public power provider, a governmental body, or a 
cooperative electric company. 
‘‘(2) PUBLIC POWER PROVIDER.—The term ‘pub-
lic power provider’ means a State utility with a serv-
ice obligation, as such terms are defined in section
858 
217 of the Federal Power Act (as in effect on the date 
of the enactment of this paragraph). 
‘‘(3) GOVERNMENTAL BODY.—The term ‘govern-
mental body’ means any State or Indian tribal gov-
ernment, or any political subdivision thereof. 
‘‘(4) COOPERATIVE
ELECTRIC
COMPANY.—The 
term ‘cooperative electric company’ means a mutual 
or cooperative electric company described in section 
501(c)(12) or section 1381(a)(2)(C). 
‘‘(5) CLEAN RENEWABLE ENERGY BOND LEND-
ER.—The term ‘clean renewable energy bond lender’ 
means a lender which is a cooperative which is owned 
by, or has outstanding loans to, 100 or more coopera-
tive electric companies and is in existence on Feb-
ruary 1, 2002, and shall include any affiliated entity 
which is controlled by such lender. 
‘‘(6) QUALIFIED
ISSUER.—The term ‘qualified 
issuer’ means a public power provider, a govern-
mental body, a cooperative electric company, a clean 
renewable energy bond lender, or a not-for-profit elec-
tric utility which has received a loan or loan guar-
antee under the Rural Electrification Act.’’. 
(b) REPORTING.—Subsection (d) of section 6049 (relat-
ing to returns regarding payments of interest) is amended 
by adding at the end the following new paragraph:
859 
‘‘(9) REPORTING OF CREDIT ON QUALIFIED TAX 
CREDIT BONDS.— 
‘‘(A) IN GENERAL.—For purposes of sub-
section (a), the term ‘interest’ includes amounts 
includible in gross income under section 54A 
and such amounts shall be treated as paid on the 
credit allowance date (as defined in section 
54A(e)(1)). 
‘‘(B) REPORTING TO CORPORATIONS, ETC.— 
Except as otherwise provided in regulations, in 
the case of any interest described in subpara-
graph (A) of this paragraph, subsection (b)(4) of 
this section shall be applied without regard to 
subparagraphs (A), (H), (I), (J), (K), and 
(L)(i). 
‘‘(C) REGULATORY
AUTHORITY.—The Sec-
retary may prescribe such regulations as are nec-
essary or appropriate to carry out the purposes 
of this paragraph, including regulations which 
require more frequent or more detailed report-
ing.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Sections 54(c)(2) and 1400N(l)(3)(B) are 
each amended by striking ‘‘subpart C’’ and inserting 
‘‘subparts C and I’’.
862 
tion for which is submitted during the pe-
riod described in paragraph (2)(A)(i), 
‘‘(ii) $500,000,000 for projects which 
use other advanced coal-based generation 
technologies the application for which is 
submitted during the period described in 
paragraph (2)(A)(i), 
‘‘(iii) $1,000,000,000 for integrated 
gasification combined cycle projects the ap-
plication for which is submitted during the 
period described in paragraph (2)(A)(ii), 
and 
‘‘(iv) $500,000,000 for other advanced 
coal-based generation technology projects the 
application for which is submitted during 
the 
period 
described 
in 
paragraph 
(2)(A)(ii).’’. 
(2) APPLICATION
PERIOD
FOR
ADDITIONAL 
PROJECTS.—Subparagraph (A) of section 48A(d)(2) 
(relating to certification) is amended to read as fol-
lows: 
‘‘(A) APPLICATION
PERIOD.—Each appli-
cant for certification under this paragraph shall 
submit an application meeting the requirements
863 
of subparagraph (B). An applicant may only 
submit an application— 
‘‘(i) for an allocation from the dollar 
amount specified in clause (i) or (ii) of 
paragraph (3)(A) during the 3-year period 
beginning on the date the Secretary estab-
lishes the program under paragraph (1), 
and 
‘‘(ii) for an allocation from the dollar 
amount specified in clause (iii) or (iv) of 
paragraph (3)(A) during the 3-year period 
beginning at the earlier of the termination 
of the period described in clause (i) or the 
date prescribed by the Secretary.’’. 
(3) CAPTURE AND SEQUESTRATION OF CARBON 
DIOXIDE EMISSIONS REQUIREMENT.— 
(A) IN GENERAL.—Section 48A(e)(1) (relat-
ing to requirements) is amended by striking 
‘‘and’’ at the end of subparagraph (E), by strik-
ing the period at the end of subparagraph (F) 
and inserting ‘‘; and’’, and by adding at the end 
the following new subparagraph: 
‘‘(G) in the case of any project the applica-
tion for which is submitted during the period de-
scribed in subsection (d)(2)(A)(ii), the project in-
864 
cludes equipment which separates and sequesters 
at least 65 percent (70 percent in the case of an 
application for reallocated credits under sub-
section (d)(4)) of such project’s total carbon diox-
ide emissions.’’. 
(B) HIGHEST
PRIORITY
FOR
PROJECTS 
WHICH
SEQUESTER
CARBON
DIOXIDE
EMIS-
SIONS.—Section 48A(e)(3) is amended by strik-
ing ‘‘and’’ at the end of subparagraph (A)(iii), 
by striking the period at the end of subpara-
graph (B)(3) and inserting ‘‘, and’’, and by add-
ing at the end the following new subparagraph: 
‘‘(C) give highest priority to projects with 
the greatest separation and sequestration per-
centage of total carbon dioxide emissions.’’. 
(C) RECAPTURE OF CREDIT FOR FAILURE 
TO SEQUESTER.—Section 48A (relating to quali-
fying advanced coal project credit) is amended 
by adding at the end the following new sub-
section: 
‘‘(h) RECAPTURE OF CREDIT FOR FAILURE TO SE-
QUESTER.—The Secretary shall provide for recapturing the 
benefit of any credit allowable under subsection (a) with 
respect to any project which fails to attain or maintain
865 
the separation and sequestration requirements of subsection 
(e)(1)(G).’’. 
(4) ADDITIONAL PRIORITY FOR RESEARCH PART-
NERSHIPS.—Section 48A(e)(3)(B), as amended by 
paragraph (3)(B), is amended— 
(A) by striking ‘‘and’’ at the end of clause 
(ii), 
(B) by redesignating clause (iii) as clause 
(iv), and 
(C) by inserting after clause (ii) the fol-
lowing new clause: 
‘‘(iii) applicant participants who have 
a research partnership with an eligible edu-
cational institution (as defined in section 
529(e)(5)), and’’. 
(5) CLERICAL AMENDMENT.—Section 48A(e)(3) 
is amended by striking ‘‘INTEGRATED GASIFICATION 
COMBINED
CYCLE’’ in the heading and inserting 
‘‘CERTAIN’’. 
(d) COMPETITIVE CERTIFICATION AWARDS MODIFICA-
TION AUTHORITY.—Section 48A (relating to qualifying ad-
vanced coal project credit), as amended by subsection (c)(3), 
is amended by adding at the end the following new sub-
section:
866 
‘‘(i) COMPETITIVE CERTIFICATION AWARDS MODIFICA-
TION AUTHORITY.—In implementing this section or section 
48B, the Secretary is directed to modify the terms of any 
competitive certification award and any associated closing 
agreement where such modification— 
‘‘(1) is consistent with the objectives of such sec-
tion, 
‘‘(2) is requested by the recipient of the competi-
tive certification award, and 
‘‘(3) involves moving the project site to improve 
the potential to capture and sequester carbon dioxide 
emissions, reduce costs of transporting feedstock, and 
serve a broader customer base, 
unless the Secretary determines that the dollar amount of 
tax credits available to the taxpayer under such section 
would increase as a result of the modification or such modi-
fication would result in such project not being originally 
certified. In considering any such modification, the Sec-
retary shall consult with other relevant Federal agencies, 
including the Department of Energy.’’. 
(e) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to credits the application for which 
is submitted during the period described in section
869 
‘‘(A) give highest priority to projects with 
the greatest separation and sequestration per-
centage of total carbon dioxide emissions, and 
‘‘(B) give high priority to applicant par-
ticipants who have a research partnership with 
an eligible educational institution (as defined in 
section 529(e)(5)).’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to credits described in section 
48B(d)(1)(B) of the Internal Revenue Code of 1986 which 
are allocated or reallocated after the date of the enactment 
of this Act. 
SEC. 1509. SEVEN-YEAR APPLICABLE RECOVERY PERIOD 
FOR DEPRECIATION OF QUALIFIED CARBON 
DIOXIDE PIPELINE PROPERTY. 
(a) IN GENERAL.—Section 168(e)(3)(C) (defining 7- 
year property) is amended by striking ‘‘and’’ at the end 
of clause (iv), by redesignating clause (v) as clause (vi), 
and by inserting after clause (iv) the following new clause: 
‘‘(v) any qualified carbon dioxide pipe-
line property— 
‘‘(I) the original use of which 
commences with the taxpayer after the 
date of the enactment of this clause,
870 
‘‘(II) the original purpose of 
which is to transport carbon dioxide, 
and 
‘‘(III) which is placed in service 
before January 1, 2011, and’’. 
(b) DEFINITION
OF QUALIFIED CARBON DIOXIDE 
PIPELINE PROPERTY.—Section 168(e) (relating to classi-
fication of property) is amended by inserting at the end 
the following new paragraph: 
‘‘(8) QUALIFIED
CARBON
DIOXIDE
PIPELINE 
PROPERTY.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
carbon dioxide pipeline property’ means prop-
erty which is used in the United States solely to 
transmit qualified carbon dioxide from the point 
of capture to a secure geological storage or the 
point at which such qualified carbon dioxide is 
used as a tertiary injectant. 
‘‘(B) DEFINITIONS AND SPECIAL RULES.— 
For purposes of this paragraph— 
‘‘(i) QUALIFIED
CARBON
DIOXIDE.— 
The term ‘qualified carbon dioxide’ means 
carbon dioxide captured from an industrial 
source which—
871 
‘‘(I) would otherwise be released 
into the atmosphere as industrial emis-
sion of greenhouse gas, and 
‘‘(II) is measured at the source of 
capture and verified at the point of 
disposal or injection. 
‘‘(ii) SECURE GEOLOGICAL STORAGE.— 
The Secretary, in consultation with the Ad-
ministrator of the Environmental Protec-
tion Agency, shall establish regulations for 
determining adequate security measures for 
the geological storage of carbon dioxide 
under subparagraph (A) such that the car-
bon dioxide does not escape into the atmos-
phere. Such term shall include storage at 
deep saline formations and unminable coal 
seems under such conditions as the Sec-
retary may determine under such regula-
tions. 
‘‘(iii) 
TERTIARY
INJECTANT.—The 
term ‘tertiary injectant’ has the same mean-
ing as when used within section 193(b)(1).’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to property placed in service after the 
date of the enactment of this Act.
872 
SEC. 1510. SPECIAL RULES FOR REFUND OF THE COAL EX-
CISE TAX TO CERTAIN COAL PRODUCERS AND 
EXPORTERS. 
(a) REFUND.— 
(1) COAL PRODUCERS.— 
(A) IN
GENERAL.—Notwithstanding sub-
sections (a)(1) and (c) of section 6416 and sec-
tion 6511 of the Internal Revenue Code of 1986, 
if— 
(i) a coal producer establishes that 
such coal producer, or a party related to 
such coal producer, exported coal produced 
by such coal producer to a foreign country 
or shipped coal produced by such coal pro-
ducer to a possession of the United States, 
the export or shipment of which was other 
than through an exporter who has filed a 
claim for a refund under paragraph (2), 
(ii) such coal producer filed a return 
on or after October 1, 1990, and on or be-
fore the date of the enactment of this Act, 
and 
(iii) such coal producer files a claim 
for refund not later than the close of the 30- 
day period beginning on the date of the en-
actment of this Act,
873 
then the Secretary of the Treasury shall pay to 
such coal producer an amount equal to the tax 
paid under section 4121 of such Code on such 
coal exported by the coal producer or a party re-
lated to such coal producer. 
(B) SPECIAL
RULES
FOR
CERTAIN
TAX-
PAYERS.—For purposes of this section— 
(i) ESTABLISHMENT OF EXPORT.—If a 
coal producer or a party related to a coal 
producer has received a judgment described 
in clause (iii), such coal producer shall be 
deemed to have established the export of coal 
to a foreign country or shipment of coal to 
a possession of the United States under sub-
paragraph (A)(i). 
(ii) AMOUNT OF PAYMENT.—If a tax-
payer described in clause (i) is entitled to 
a payment under subparagraph (A), the 
amount of such payment shall be reduced by 
any amount awarded under the judgment 
described in clause (iii). 
(iii) JUDGMENT DESCRIBED.—A judg-
ment is described in this subparagraph if 
such judgment—
874 
(I) is made by a court of com-
petent jurisdiction within the United 
States, 
(II) relates to the constitutionality 
of any tax paid on exported coal under 
section 4121 of the Internal Revenue 
Code of 1986, and 
(III) is in favor of the coal pro-
ducer or the party related to the coal 
producer. 
(iv) RECAPTURE.—In the case any 
judgment described in clause (iii) is over-
turned, the coal producer shall pay to the 
Secretary the amount of any payment re-
ceived under subparagraph (A) unless the 
coal producer establishes the export of the 
coal to a foreign country or shipment of 
coal to a possession of the United States. 
(2) EXPORTERS.—Notwithstanding subsections 
(a)(1) and (c) of section 6416 and section 6511 of the 
Internal Revenue Code of 1986, and a judgment de-
scribed in paragraph (1)(B)(iii) of this subsection, 
if— 
(A) an exporter establishes that such ex-
porter exported coal to a foreign country or
875 
shipped coal to a possession of the United States, 
or caused such coal to be so exported or shipped, 
(B) such exporter filed a return on or after 
October 1, 1990, and on or before the date of the 
enactment of this Act, and 
(C) such exporter files a claim for refund 
not later than the close of the 30-day period be-
ginning on the date of the enactment of this Act, 
then the Secretary of the Treasury shall pay to such 
exporter an amount equal to $0.825 per ton of such 
coal exported by the exporter or caused to be exported 
by the exporter. 
(b) LIMITATIONS.—Subsection (a) shall not apply with 
respect to exported coal if a credit or refund of tax imposed 
by section 4121 of such Code on such coal has been allowed 
or made to, or if a settlement with the Federal Government 
has been made with and accepted by, the coal producer, a 
party related to such coal producer, or the exporter, of such 
coal, as of the date that the claim is filed under this section 
with respect to such exported coal. For purposes of this sub-
section, the term ‘‘settlement with the Federal Government’’ 
shall not include any settlement or stipulation entered into 
as of the date of the enactment of this Act, the terms of 
which contemplate a judgment concerning which any party
876 
has reserved the right to file an appeal, or has filed an ap-
peal. 
(c) SUBSEQUENT REFUND PROHIBITED.—No refund 
shall be made under this section to the extent that a credit 
or refund of such tax on such exported coal has been paid 
to any person. 
(d) DEFINITIONS.—For purposes of this section— 
(1) COAL PRODUCER.—The term ‘‘coal producer’’ 
means the person in whom is vested ownership of the 
coal immediately after the coal is severed from the 
ground, without regard to the existence of any con-
tractual arrangement for the sale or other disposition 
of the coal or the payment of any royalties between 
the producer and third parties. The term includes any 
person who extracts coal from coal waste refuse piles 
or from the silt waste product which results from the 
wet washing (or similar processing) of coal. 
(2) EXPORTER.—The term ‘‘exporter’’ means a 
person, other than a coal producer, who does not have 
a contract, fee arrangement, or any other agreement 
with a producer or seller of such coal to sell or export 
such coal to a third party on behalf of the producer 
or seller of such coal and—
877 
(A) is indicated in the shipper’s export dec-
laration or other documentation as the exporter 
of record, or 
(B) actually exported such coal to a foreign 
country or shipped such coal to a possession of 
the United States, or caused such coal to be so 
exported or shipped. 
(3) RELATED PARTY.—The term ‘‘a party related 
to such coal producer’’ means a person who— 
(A) is related to such coal producer through 
any degree of common management, stock owner-
ship, or voting control, 
(B) is related (within the meaning of sec-
tion 144(a)(3) of such Code) to such coal pro-
ducer, or 
(C) has a contract, fee arrangement, or any 
other agreement with such coal producer to sell 
such coal to a third party on behalf of such coal 
producer. 
(e) TIMING OF REFUND.—With respect to any claim 
for refund filed pursuant to this section, the Secretary of 
the Treasury shall determine whether the requirements of 
this section are met not later than 180 days after such claim 
is filed. If the Secretary determines that the requirements 
of this section are met, the claim for refund shall be paid
878 
not later than 180 days after the Secretary makes such de-
termination. 
(f) INTEREST.—Any refund paid pursuant to this sec-
tion shall be paid by the Secretary of the Treasury with 
interest from the date of overpayment determined by using 
the overpayment rate and method under section 6621 of 
such Code. 
(g) DENIAL
OF DOUBLE BENEFIT.—The payment 
under subsection (a) with respect to any coal shall not ex-
ceed— 
(1) in the case of a payment to a coal producer, 
the amount of tax paid under section 4121 of the In-
ternal Revenue Code of 1986 with respect to such coal 
by such coal producer or a party related to such coal 
producer, and 
(2) in the case of a payment to an exporter, an 
amount equal to $0.825 per ton with respect to such 
coal exported by the exporter or caused to be exported 
by the exporter. 
(h) APPLICATION OF SECTION.—This section applies 
only to claims on coal exported on or after October 1, 1990, 
through the date of the enactment of this Act. 
(i) STANDING NOT CONFERRED.— 
(1) EXPORTERS.—With respect to exporters, this 
section shall not confer standing upon an exporter to
879 
commence, or intervene in, any judicial or adminis-
trative proceeding concerning a claim for refund by 
a coal producer of any Federal or State tax, fee, or 
royalty paid by the coal producer. 
(2) COAL PRODUCERS.—With respect to coal pro-
ducers, this section shall not confer standing upon a 
coal producer to commence, or intervene in, any judi-
cial or administrative proceeding concerning a claim 
for refund by an exporter of any Federal or State tax, 
fee, or royalty paid by the producer and alleged to 
have been passed on to an exporter. 
SEC. 1511. EXTENSION OF TEMPORARY INCREASE IN COAL 
EXCISE TAX. 
Paragraph (2) of section 4121(e) (relating to tem-
porary increase termination date) is amended— 
(1) by striking ‘‘January 1, 2014’’ in clause (i) 
and inserting ‘‘December 31, 2017’’, and 
(2) by striking ‘‘January 1 after 1981’’ in clause 
(ii) and inserting ‘‘December 31 after 2007’’. 
SEC. 1512. CARBON AUDIT OF THE TAX CODE. 
(a) STUDY.—The Secretary of the Treasury shall enter 
into an agreement with the National Academy of Sciences 
to undertake a comprehensive review of the Internal Rev-
enue Code of 1986 to identify the types of and specific tax 
provisions that have the largest effects on carbon and other
880 
greenhouse gas emissions and to estimate the magnitude of 
those effects. 
(b) REPORT.—Not later than 2 years after the date 
of enactment of this Act, the National Academy of Sciences 
shall submit to Congress a report containing the results of 
study authorized under this section. 
(c) AUTHORIZATION OF APPROPRIATIONS.—There is 
authorized to be appropriated to carry out this section 
$1,500,000 for the period of fiscal years 2008 and 2009. 
Subtitle B—Transportation and 
Domestic Fuel Security 
PART I—BIOFUELS 
SEC. 1521. CREDIT FOR PRODUCTION OF CELLULOSIC BIO-
MASS ALCOHOL. 
(a) IN GENERAL.—Subsection (a) of section 40 (relat-
ing to alcohol used as fuel) is amended by striking ‘‘plus’’ 
at the end of paragraph (2), by striking the period at the 
end of paragraph (3) and inserting ‘‘, plus’’, and by adding 
at the end the following new paragraph: 
‘‘(4) the cellulosic alcohol producer credit.’’. 
(b) CELLULOSIC ALCOHOL PRODUCER CREDIT.— 
(1) IN GENERAL.—Subsection (b) of section 40 is 
amended by redesignating paragraph (5) as para-
graph (6) and by inserting after paragraph (4) the 
following new paragraph:
881 
‘‘(5) CELLULOSIC
ALCOHOL
PRODUCER
CRED-
IT.— 
‘‘(A) IN
GENERAL.—The cellulosic alcohol 
producer credit for the taxable year is an 
amount equal to the applicable amount for each 
gallon of qualified cellulosic alcohol production. 
‘‘(B) APPLICABLE AMOUNT.—For purposes 
of subparagraph (A), the applicable amount 
means the excess of— 
‘‘(i) $1.01, over 
‘‘(ii) the amount of the credit in effect 
for alcohol which is ethanol under sub-
section (b)(1) (without regard to subsection 
(b)(3)) at the time of the qualified cellulosic 
alcohol production. 
‘‘(C) LIMITATION.— 
‘‘(i) IN GENERAL.—No credit shall be 
allowed to any taxpayer under subpara-
graph (A) with respect to any qualified cel-
lulosic alcohol production during the tax-
able year in excess of 60,000,000 gallons. 
‘‘(ii) AGGREGATION RULE.—For pur-
poses of clause (i), all members of the same 
controlled group of corporations (within the 
meaning of section 267(f)) and all persons
882 
under common control (within the meaning 
of section 52(b) but determined by treating 
an interest of more than 50 percent as a 
controlling interest) shall be treated as 1 
person. 
‘‘(iii) PARTNERSHIP, S CORPORATIONS, 
AND OTHER PASS-THRU ENTITIES.—In the 
case of a partnership, trust, S corporation, 
or other pass-thru entity, the limitation 
contained in clause (i) shall be applied at 
the entity level and at the partner or simi-
lar level. 
‘‘(D) QUALIFIED
CELLULOSIC
ALCOHOL 
PRODUCTION.—For purposes of this section, the 
term ‘qualified cellulosic alcohol production’ 
means any cellulosic biomass alcohol which is 
produced by the taxpayer and which during the 
taxable year— 
‘‘(i) is sold by the taxpayer to another 
person— 
‘‘(I) for use by such other person 
in the production of a qualified alcohol 
mixture in such other person’s trade or 
business (other than casual off-farm 
production),
883 
‘‘(II) for use by such other person 
as a fuel in a trade or business, or 
‘‘(III) who sells such cellulosic bio-
mass alcohol at retail to another per-
son and places such cellulosic biomass 
alcohol in the fuel tank of such other 
person, or 
‘‘(ii) is used or sold by the taxpayer for 
any purpose described in clause (i). 
The qualified cellulosic alcohol production of any 
taxpayer for any taxable year shall not include 
any alcohol which is purchased by the taxpayer 
and with respect to which such producer in-
creases the proof of the alcohol by additional dis-
tillation. 
‘‘(E) CELLULOSIC BIOMASS ALCOHOL.— 
‘‘(i) IN GENERAL.—The term ‘cellulosic 
biomass alcohol’ has the meaning given such 
term under section 168(l)(3), but does not 
include any alcohol with a proof of less 
than 150. 
‘‘(ii) DETERMINATION OF PROOF.—The 
determination of the proof of any alcohol 
shall be made without regard to any added 
denaturants.
884 
‘‘(F) COORDINATION WITH SMALL ETHANOL 
PRODUCER CREDIT.—No small ethanol producer 
credit shall be allowed with respect to any quali-
fied cellulosic alcohol production if credit is de-
termined with respect to such production under 
this paragraph. 
‘‘(G) ALLOCATION
OF
CELLULOSIC
PRO-
DUCER CREDIT TO PATRONS OF COOPERATIVE.— 
Rules similar to the rules under subsection (g)(6) 
shall apply for purposes of this paragraph. 
‘‘(H) APPLICATION
OF
PARAGRAPH.—This 
paragraph shall apply with respect to qualified 
cellulosic alcohol production after December 31, 
2007, and before January 1, 2014.’’. 
(2) TERMINATION DATE NOT TO APPLY.—Sub-
section (e) of section 40 (relating to termination) is 
amended— 
(A) by inserting ‘‘or subsection (b)(5)(H)’’ 
after ‘‘by reason of paragraph (1)’’ in paragraph 
(2), and 
(B) by adding at the end the following new 
paragraph: 
‘‘(3) EXCEPTION FOR CELLULOSIC ALCOHOL PRO-
DUCER CREDIT.—Paragraph (1) shall not apply to
885 
the portion of the credit allowed under this section by 
reason of subsection (a)(4).’’. 
(c) ALCOHOL NOT USED AS A FUEL, ETC.— 
(1) IN
GENERAL.—Paragraph (3) of section 
40(d) is amended by redesignating subparagraph (D) 
as subparagraph (E) and by inserting after subpara-
graph (C) the following new subparagraph: 
‘‘(D) CELLULOSIC
ALCOHOL
PRODUCER 
CREDIT.—If— 
‘‘(i) any credit is determined under 
subsection (a)(4), and 
‘‘(ii) any person does not use such fuel 
for a purpose described in subsection 
(b)(5)(D), 
then there is hereby imposed on such person a 
tax equal to the applicable amount for each gal-
lon of such cellulosic biomass alcohol.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Subparagraph (C) of section 40(d)(3) is 
amended by striking ‘‘PRODUCER’’ in the head-
ing and inserting ‘‘SMALL ETHANOL PRODUCER’’. 
(B) Subparagraph (E) of section 40(d)(3), 
as redesignated by paragraph (1), is amended by 
striking ‘‘or (C)’’ and inserting ‘‘(C), or (D)’’.
886 
(d) LIMITATION TO CELLULOSIC ALCOHOL WITH CON-
NECTION TO THE UNITED STATES.—Subsection (d) of sec-
tion 40, as amended by this Act, is amended by adding 
at the end the following new paragraph: 
‘‘(7) LIMITATION TO CELLULOSIC ALCOHOL WITH 
CONNECTION TO THE UNITED STATES.—No cellulosic 
alcohol producer credit shall be determined under sub-
section (a) with respect to any alcohol unless such al-
cohol is produced in the United States.’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to fuel produced after December 31, 
2007. 
SEC. 1522. EXPANSION OF SPECIAL ALLOWANCE TO CEL-
LULOSIC BIOMASS ALCOHOL FUEL PLANT 
PROPERTY. 
(a) IN GENERAL.—Paragraph (3) of section 168(l) (re-
lating to special allowance for cellulosic biomass ethanol 
plant property) is amended to read as follows: 
‘‘(3) CELLULOSIC BIOMASS ALCOHOL.—For pur-
poses of this subsection, the term ‘cellulosic biomass 
alcohol’ means any alcohol produced from any 
lignocellulosic or hemicellulosic matter that is avail-
able on a renewable or recurring basis.’’. 
(b) CONFORMING AMENDMENTS.—
887 
(1) Subsection (l) of section 168 is amended by 
striking ‘‘cellulosic biomass ethanol’’ each place it ap-
pears and inserting ‘‘cellulosic biomass alcohol’’. 
(2) The heading of section 168(l) is amended by 
striking ‘‘CELLULOSIC BIOMASS ETHANOL’’ and in-
serting ‘‘CELLULOSIC BIOMASS ALCOHOL’’. 
(3) The heading of paragraph (2) of section 
168(l) is amended by striking ‘‘CELLULOSIC BIOMASS 
ETHANOL’’ and inserting ‘‘CELLULOSIC BIOMASS AL-
COHOL’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to property placed in service after the 
date of the enactment of this Act, in taxable years ending 
after such date. 
SEC. 1523. MODIFICATION OF ALCOHOL CREDIT. 
(a) INCOME TAX CREDIT.—Subsection (h) of section 
40 (relating to reduced credit for ethanol blenders) is 
amended by adding at the end the following new paragraph: 
‘‘(3) 
REDUCED
AMOUNT
AFTER
SALE
OF 
7,500,000,000 GALLONS.— 
‘‘(A) IN GENERAL.—In the case of any cal-
endar year beginning after the calendar year de-
scribed in subparagraph (B), the last row in the 
table in paragraph (2) shall be applied by sub-
stituting ‘46 cents’ for ‘51 cents’.
888 
‘‘(B) CALENDAR
YEAR
DESCRIBED.—The 
calendar year described in this subparagraph is 
the first calendar year beginning after 2007 dur-
ing which 7,500,000,000 gallons of ethanol (in-
cluding cellulosic ethanol) have been produced in 
or imported into the United States, as certified 
by the Secretary, in consultation with the Ad-
ministrator of the Environmental Protection 
Agency.’’. 
(b) EXCISE TAX CREDIT.— 
(1) IN
GENERAL.—Paragraph (2) of section 
6426(b) (relating to alcohol fuel mixture credit) is 
amended by adding at the end the following new sub-
paragraph: 
‘‘(C) REDUCED
AMOUNT
AFTER
SALE
OF 
7,500,000,000 GALLONS.—In the case of any alco-
hol fuel mixture produced in a calendar year be-
ginning after the calendar year described in sec-
tion 40(h)(3)(B), subparagraph (A) shall be ap-
plied by substituting ‘46 cents’ for ‘51 cents’.’’. 
(2) CONFORMING
AMENDMENT.—Subparagraph 
(A) of section 6426(b)(2) is amended by striking ‘‘sub-
paragraph (B)’’ and inserting ‘‘subparagraphs (B) 
and (C)’’.
889 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall take effect on the date of the enactment of this 
Act. 
SEC. 1524. EXTENSION AND MODIFICATION OF CREDITS 
FOR BIODIESEL AND RENEWABLE DIESEL. 
(a) IN GENERAL.—Sections 40A(g), 6426(c)(6), and 
6427(e)(5)(B) are each amended by striking ‘‘December 31, 
2008’’ and inserting ‘‘December 31, 2010’’. 
(b) UNIFORM TREATMENT
OF DIESEL PRODUCED 
FROM BIOMASS.—Paragraph (3) of section 40A(f) is 
amended— 
(1) 
by 
striking 
‘‘using 
a 
thermal 
depolymerization process’’, and 
(2) by striking ‘‘or D396’’ in subparagraph (B) 
and inserting ‘‘or other equivalent standard approved 
by the Secretary for fuels to be used in diesel-powered 
highway vehicles’’. 
(c) ELIGIBILITY OF CERTAIN AVIATION FUEL.—Para-
graph (3) of section 40A(f) (defining renewable diesel) is 
amended by adding at the end the following new flush sen-
tence: 
‘‘The term ‘renewable diesel’ also means fuel derived 
from biomass which meets the requirements of a De-
partment of Defense specification for military jet fuel
890 
or an American Society of Testing and Materials 
specification for aviation turbine fuel.’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
apply to fuel produced, and sold or used, after the 
date of the enactment of this Act. 
(2) UNIFORM TREATMENT OF DIESEL PRODUCED 
FROM
BIOMASS.—The amendments made by sub-
section (b) shall apply to fuel produced, and sold or 
used, after the date which is 30 days after the date 
of the enactment of this Act. 
SEC. 1525. CLARIFICATION OF ELIGIBILITY FOR RENEW-
ABLE DIESEL CREDIT. 
(a) COPRODUCTION WITH PETROLEUM FEEDSTOCK.— 
(1) IN
GENERAL.—Paragraph (3) of section 
40A(f) (defining renewable diesel), as amended by this 
Act, is amended by adding at the end the following 
sentence: ‘‘Such term does not include any fuel de-
rived from coprocessing biomass with a feedstock 
which is not biomass. For purposes of this paragraph, 
the term ‘biomass’ has the meaning given such term 
by section 45K(c)(3).’’
892 
SEC. 1526. PROVISIONS CLARIFYING TREATMENT OF FUELS 
WITH NO NEXUS TO THE UNITED STATES. 
(a) ALCOHOL FUELS CREDIT.—Subsection (d) of sec-
tion 40 is amended by adding at the end the following new 
paragraph: 
‘‘(6) LIMITATION TO ALCOHOL WITH CONNECTION 
TO THE UNITED STATES.—No credit shall be deter-
mined under this section with respect to any alcohol 
which is produced outside the United States for use 
as a fuel outside the United States. For purposes of 
this paragraph, the term ‘United States’ includes any 
possession of the United States.’’. 
(b) BIODIESEL FUELS CREDIT.—Subsection (d) of sec-
tion 40A is amended by adding at the end the following 
new paragraph: 
‘‘(5) LIMITATION TO BIODIESEL WITH CONNEC-
TION TO THE UNITED STATES.—No credit shall be de-
termined under this section with respect to any bio-
diesel which is produced outside the United States for 
use as a fuel outside the United States. For purposes 
of this paragraph, the term ‘United States’ includes 
any possession of the United States.’’. 
(c) EXCISE TAX CREDIT.— 
(1) IN GENERAL.—Section 6426, as amended by 
this Act, is amended by adding at the end the fol-
lowing new subsection:
893 
‘‘(i) LIMITATION TO FUELS WITH CONNECTION TO 
THE UNITED STATES.— 
‘‘(1) ALCOHOL.—No credit shall be determined 
under this section with respect to any alcohol which 
is produced outside the United States for use as a fuel 
outside the United States. 
‘‘(2) BIODIESEL AND ALTERNATIVE FUELS.—No 
credit shall be determined under this section with re-
spect to any biodiesel or alternative fuel which is pro-
duced outside the United States for use as a fuel out-
side the United States. 
For purposes of this subsection, the term ‘United States’ in-
cludes any possession of the United States.’’. 
(2) CONFORMING
AMENDMENT.—Subsection (e) 
of section 6427 is amended by redesignating para-
graph (5) as paragraph (6) and by inserting after 
paragraph (4) the following new paragraph: 
‘‘(5) LIMITATION TO FUELS WITH CONNECTION 
TO THE UNITED STATES.—No amount shall be pay-
able under paragraph (1) or (2) with respect to any 
mixture or alternative fuel if credit is not allowed 
with respect to such mixture or alternative fuel by 
reason of section 6426(i).’’. 
(d) EFFECTIVE DATE.—
894 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall take effect as if included in section 301 of 
the American Jobs Creation Act of 2004. 
(2) ALTERNATIVE FUEL CREDITS.—So much of 
the amendments made by this section as relate to the 
alternative fuel credit or the alternative fuel mixture 
credit shall take effect as if included in section 11113 
of the Safe, Accountable, Flexible, Efficient Transpor-
tation Equity Act: A Legacy for Users. 
(3) RENEWABLE
DIESEL.—So much of the 
amendments made by this section as relate to renew-
able diesel shall take effect as if included in section 
1346 of the Energy Policy Act of 2005. 
SEC. 1527. COMPREHENSIVE STUDY OF BIOFUELS. 
(a) STUDY.—The Secretary of the Treasury, in con-
sultation with the Secretary of Agriculture, the Secretary 
of Energy, and the Administrator of the Environmental 
Protection Agency, shall enter into an agreement with the 
National Academy of Sciences to produce an analysis of 
current scientific findings to determine— 
(1) current biofuels production, as well as projec-
tions for future production, 
(2) the maximum amount of biofuels production 
capable on United States farmland,
895 
(3) the domestic effects of a dramatic increase in 
biofuels production on, for example— 
(A) the price of fuel, 
(B) the price of land in rural and suburban 
communities, 
(C) crop acreage and other land use, 
(D) the environment, due to changes in crop 
acreage, fertilizer use, runoff, water use, emis-
sions from vehicles utilizing biofuels, and other 
factors, 
(E) the price of feed, 
(F) the selling price of grain crops, 
(G) exports and imports of grains, 
(H) taxpayers, through cost or savings to 
commodity crop payments, and 
(I) the expansion of refinery capacity, 
(4) the ability to convert corn ethanol plants for 
other uses, such as cellulosic ethanol or biodiesel, 
(5) a comparative analysis of corn ethanol 
versus other biofuels and renewable energy sources, 
considering cost, energy output, and ease of imple-
mentation, and 
(6) the need for additional scientific inquiry, 
and specific areas of interest for future research.
896 
(b) REPORT.—The National Academy of Sciences shall 
submit an initial report of the findings of the report re-
quired under subsection (a) to the Congress not later than 
3 months after the date of the enactment of this Act, and 
a final report not later than 6 months after such date of 
enactment. 
PART II—ADVANCED TECHNOLOGY MOTOR 
VEHICLES 
SEC. 1528. CREDIT FOR NEW QUALIFIED PLUG-IN ELECTRIC 
DRIVE MOTOR VEHICLES. 
(a) IN GENERAL.—Subpart B of part IV of subchapter 
A of chapter 1 (relating to other credits) is amended by 
adding at the end the following new section: 
‘‘SEC. 30D. NEW QUALIFIED PLUG-IN ELECTRIC DRIVE 
MOTOR VEHICLES. 
‘‘(a) ALLOWANCE OF CREDIT.—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 the credit 
amounts determined under subsection (b) with respect to 
each new qualified plug-in electric drive motor vehicle 
placed in service by the taxpayer during the taxable year. 
‘‘(b) PER VEHICLE DOLLAR LIMITATION.— 
‘‘(1) IN
GENERAL.—The amount determined 
under this subsection with respect to any new quali-
fied plug-in electric drive motor vehicle is the sum of
897 
the amounts determined under paragraphs (2) and 
(3) with respect to such vehicle. 
‘‘(2) BASE
AMOUNT.—The amount determined 
under this paragraph is $3,000. 
‘‘(3) BATTERY CAPACITY.—In the case of a vehi-
cle which draws propulsion energy from a battery 
with not less than 5 kilowatt hours of capacity, the 
amount determined under this paragraph is $200, 
plus $200 for each kilowatt hour of capacity in excess 
of 5 kilowatt hours. The amount determined under 
this paragraph shall not exceed $2,000. 
‘‘(c) APPLICATION WITH OTHER CREDITS.— 
‘‘(1) BUSINESS CREDIT TREATED AS PART OF 
GENERAL BUSINESS CREDIT.—So much of the credit 
which would be allowed under subsection (a) for any 
taxable year (determined without regard to this sub-
section) that is attributable to property of a character 
subject to an allowance for depreciation shall be treat-
ed as a credit listed in section 38(b) for such taxable 
year (and not allowed under subsection (a)). 
‘‘(2) PERSONAL CREDIT.— 
‘‘(A) IN
GENERAL.—For purposes of this 
title, the credit allowed under subsection (a) for 
any taxable year (determined after application
898 
of paragraph (1)) shall be treated as a credit al-
lowable under subpart A for such taxable year. 
‘‘(B) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—In the case of a taxable year to which sec-
tion 26(a)(2) does not apply, the credit allowed 
under subsection (a) for any taxable year (deter-
mined after application of paragraph (1)) shall 
not exceed the excess of— 
‘‘(i) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax 
imposed by section 55, over 
‘‘(ii) the sum of the credits allowable 
under subpart A (other than this section 
and sections 23 and 25D) and section 27 
for the taxable year. 
‘‘(d) NEW QUALIFIED PLUG-IN ELECTRIC DRIVE 
MOTOR VEHICLE.—For purposes of this section— 
‘‘(1) IN
GENERAL.—The term ‘new qualified 
plug-in electric drive motor vehicle’ means a motor 
vehicle (as defined in section 30(c)(2))— 
‘‘(A) the original use of which commences 
with the taxpayer, 
‘‘(B) which is acquired for use or lease by 
the taxpayer and not for resale, 
‘‘(C) which is made by a manufacturer,
899 
‘‘(D) which has a gross vehicle weight rat-
ing of less than 14,000 pounds, 
‘‘(E) which has received a certificate of con-
formity under the Clean Air Act and meets or 
exceeds the Bin 5 Tier II emission standard es-
tablished in regulations prescribed by the Ad-
ministrator of the Environmental Protection 
Agency under section 202(i) of the Clean Air Act 
for that make and model year vehicle, and 
‘‘(F) which is propelled to a significant ex-
tent by an electric motor which draws electricity 
from a battery which— 
‘‘(i) has a capacity of not less than 4 
kilowatt hours, and 
‘‘(ii) is capable of being recharged from 
an external source of electricity. 
‘‘(2) EXCEPTION.—The term ‘new qualified plug- 
in electric drive motor vehicle’ shall not include any 
vehicle which is not a passenger automobile or light 
truck if such vehicle has a gross vehicle weight rating 
of less than 8,500 pounds. 
‘‘(3) OTHER TERMS.—The terms ‘passenger auto-
mobile’, ‘light truck’, and ‘manufacturer’ have the 
meanings given such terms in regulations prescribed 
by the Administrator of the Environmental Protection
900 
Agency for purposes of the administration of title II 
of the Clean Air Act (42 U.S.C. 7521 et seq.). 
‘‘(4) BATTERY CAPACITY.—The term ‘capacity’ 
means, with respect to any battery, the quantity of 
electricity which the battery is capable of storing, ex-
pressed in kilowatt hours, as measured from a 100 
percent state of charge to a 0 percent state of charge. 
‘‘(e) LIMITATION ON NUMBER OF NEW QUALIFIED 
PLUG-IN ELECTRIC DRIVE MOTOR VEHICLES ELIGIBLE 
FOR CREDIT.— 
‘‘(1) IN GENERAL.—In the case of a new quali-
fied plug-in electric drive motor vehicle sold during 
the phaseout period, only the applicable percentage of 
the credit otherwise allowable under subsection (a) 
shall be allowed. 
‘‘(2) PHASEOUT PERIOD.—For purposes of this 
subsection, the phaseout period is the period begin-
ning with the second calendar quarter following the 
calendar quarter which includes the first date on 
which the number of new qualified plug-in electric 
drive motor vehicles manufactured by the manufac-
turer of the vehicle referred to in paragraph (1) sold 
for use in the United States after the date of the en-
actment of this section, is at least 60,000.
901 
‘‘(3) APPLICABLE
PERCENTAGE.—For purposes 
of paragraph (1), the applicable percentage is— 
‘‘(A) 50 percent for the first 2 calendar 
quarters of the phaseout period, 
‘‘(B) 25 percent for the 3d and 4th calendar 
quarters of the phaseout period, and 
‘‘(C) 0 percent for each calendar quarter 
thereafter. 
‘‘(4) CONTROLLED
GROUPS.—Rules similar to 
the rules of section 30B(f)(4) shall apply for purposes 
of this subsection. 
‘‘(f) SPECIAL RULES.— 
‘‘(1) BASIS REDUCTION.—The basis of any prop-
erty for which a credit is allowable under subsection 
(a) shall be reduced by the amount of such credit (de-
termined without regard to subsection (c)). 
‘‘(2) RECAPTURE.—The Secretary shall, by regu-
lations, 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. 
‘‘(3) PROPERTY USED OUTSIDE UNITED STATES, 
ETC., NOT
QUALIFIED.—No credit shall be allowed 
under subsection (a) with respect to any property re-
ferred to in section 50(b)(1) or with respect to the
902 
portion of the cost of any property taken into account 
under section 179. 
‘‘(4) ELECTION NOT TO 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. 
‘‘(5) PROPERTY USED BY TAX-EXEMPT ENTITY; 
INTERACTION WITH AIR QUALITY AND MOTOR VEHICLE 
SAFETY STANDARDS.—Rules similar to the rules of 
paragraphs (6) and (10) of section 30B(h) shall apply 
for purposes of this section.’’. 
(b) COORDINATION WITH ALTERNATIVE MOTOR VEHI-
CLE CREDIT.—Section 30B(d)(3) is amended by adding at 
the end the following new subparagraph: 
‘‘(D) EXCLUSION OF PLUG-IN VEHICLES.— 
Any vehicle with respect to which a credit is al-
lowable under section 30D (determined without 
regard to subsection (c) thereof) shall not be 
taken into account under this section.’’. 
(c) CREDIT MADE PART
OF GENERAL BUSINESS 
CREDIT.—Section 38(b), as amended by this Act, is amend-
ed— 
(1) by striking ‘‘and’’ each place it appears at 
the end of any paragraph,
903 
(2) by striking ‘‘plus’’ each place it appears at 
the end of any paragraph, 
(3) by striking the period at the end of para-
graph (31) and inserting ‘‘, plus’’, and 
(4) by adding at the end the following new para-
graph: 
‘‘(32) the portion of the new qualified plug-in 
electric drive motor vehicle credit to which section 
30D(c)(1) applies.’’. 
(d) CONFORMING AMENDMENTS.— 
(1)(A) Section 24(b)(3)(B), as amended by this 
Act, is amended by striking ‘‘and 25D’’ and inserting 
‘‘25D, and 30D’’. 
(B) Section 25(e)(1)(C)(ii) is amended by insert-
ing ‘‘30D,’’ after ‘‘25D,’’. 
(C) Section 25B(g)(2), as amended by this Act, 
is amended by striking ‘‘and 25D’’ and inserting ‘‘, 
25D, and 30D’’. 
(D) Section 26(a)(1), as amended by this Act, is 
amended by striking ‘‘and 25D’’ and inserting ‘‘25D, 
and 30D’’. 
(E) Section 1400C(d)(2) is amended by striking 
‘‘and 25D’’ and inserting ‘‘25D, and 30D’’. 
(2) Section 1016(a) is amended by striking 
‘‘and’’ at the end of paragraph (36), by striking the
904 
period at the end of paragraph (37) and inserting ‘‘, 
and’’, and by adding at the end the following new 
paragraph: 
‘‘(38) 
to 
the 
extent 
provided 
in 
section 
30D(f)(1).’’. 
(3) Section 6501(m) is amended by inserting 
‘‘30D(f)(4),’’ after ‘‘30C(e)(5),’’. 
(4) The table of sections for subpart B of part IV 
of subchapter A of chapter 1 is amended by adding 
at the end the following new item: 
‘‘Sec. 30D. New qualified plug-in electric drive motor vehicles.’’. 
(e) TREATMENT OF ALTERNATIVE MOTOR VEHICLE 
CREDIT AS A PERSONAL CREDIT.— 
(1) IN
GENERAL.—Paragraph (2) of section 
30B(g) is amended to read as follows: 
‘‘(2) PERSONAL
CREDIT.—The credit allowed 
under subsection (a) for any taxable year (after ap-
plication of paragraph (1)) shall be treated as a cred-
it allowable under subpart A for such taxable year.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Subparagraph (A) of section 30C(d)(2) 
is amended by striking ‘‘sections 27, 30, and 
30B’’ and inserting ‘‘sections 27 and 30’’. 
(B) Paragraph (3) of section 55(c) is 
amended by striking ‘‘30B(g)(2),’’. 
(f) EFFECTIVE DATE.—
905 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to taxable years beginning after De-
cember 31, 2007. 
(2) TREATMENT OF ALTERNATIVE MOTOR VEHI-
CLE CREDIT AS PERSONAL CREDIT.—The amendments 
made by subsection (e) shall apply to taxable years 
beginning after December 31, 2006. 
(g) APPLICATION OF EGTRRA SUNSET.—The amend-
ment made by subsection (d)(1)(A) shall be subject to title 
IX of the Economic Growth and Tax Relief Reconciliation 
Act of 2001 in the same manner as the provision of such 
Act to which such amendment relates. 
SEC. 1529. EXCLUSION FROM HEAVY TRUCK TAX FOR 
IDLING REDUCTION UNITS AND ADVANCED 
INSULATION. 
(a) IN GENERAL.—Section 4053 (relating to exemp-
tions) is amended by adding at the end the following new 
paragraphs: 
‘‘(9) IDLING REDUCTION DEVICE.—Any device or 
system of devices which— 
‘‘(A) is designed to provide to a vehicle 
those services (such as heat, air conditioning, or 
electricity) that would otherwise require the oper-
ation of the main drive engine while the vehicle
906 
is temporarily parked or remains stationary 
using either— 
‘‘(i) an all electric unit, such as a bat-
tery powered unit or from grid-supplied 
electricity, or 
‘‘(ii) a dual fuel unit powered by diesel 
or other fuels, and capable of providing such 
services from grid-supplied electricity or on- 
truck batteries alone, and 
‘‘(B) is certified by the Secretary of Energy, 
in consultation with the Administrator of the 
Environmental Protection Agency and the Sec-
retary of Transportation, to reduce long-dura-
tion idling of such vehicle at a motor vehicle rest 
stop or other location where such vehicles are 
temporarily parked or remain stationary. 
For purposes of subparagraph (B), the term ‘long-du-
ration idling’ means the operation of a main drive 
engine, for a period greater than 15 consecutive min-
utes, where the main drive engine is not engaged in 
gear. Such term does not apply to routine stoppages 
associated with traffic movement or congestion. 
‘‘(10) ADVANCED INSULATION.—Any insulation 
that has an R value of not less than R35 per inch.’’.
907 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to sales or installations after December 
31, 2007. 
PART III—OTHER TRANSPORTATION PROVISIONS 
SEC. 1530. RESTRUCTURING OF NEW YORK LIBERTY ZONE 
TAX CREDITS. 
(a) IN GENERAL.—Part I of subchapter Y of chapter 
1 is amended by redesignating section 1400L as section 
1400K and by adding at the end the following new section: 
‘‘SEC. 1400L. NEW YORK LIBERTY ZONE TAX CREDITS. 
‘‘(a) IN GENERAL.—In the case of a New York Liberty 
Zone governmental unit, there shall be allowed as a credit 
against any taxes imposed for any payroll period by section 
3402 for which such governmental unit is liable under sec-
tion 3403 an amount equal to so much of the portion of 
the qualifying project expenditure amount allocated under 
subsection (b)(3) to such governmental unit for the calendar 
year as is allocated by such governmental unit to such pe-
riod under subsection (b)(4). 
‘‘(b) QUALIFYING PROJECT EXPENDITURE AMOUNT.— 
For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualifying project 
expenditure amount’ means, with respect to any cal-
endar year, the sum of—
908 
‘‘(A) the total expenditures paid or incurred 
during such calendar year by all New York Lib-
erty Zone governmental units and the Port Au-
thority of New York and New Jersey for any 
portion of qualifying projects located wholly 
within the City of New York, New York, and 
‘‘(B) any such expenditures— 
‘‘(i) paid or incurred in any preceding 
calendar year which begins after the date of 
enactment of this section, and 
‘‘(ii) not previously allocated under 
paragraph (3). 
‘‘(2) QUALIFYING
PROJECT.—The term ‘quali-
fying project’ means any transportation infrastruc-
ture project, including highways, mass transit sys-
tems, railroads, airports, ports, and waterways, in or 
connecting with the New York Liberty Zone (as de-
fined in section 1400K(h)), which is designated as a 
qualifying project under this section jointly by the 
Governor of the State of New York and the Mayor of 
the City of New York, New York. 
‘‘(3) GENERAL ALLOCATION.— 
‘‘(A) IN
GENERAL.—The Governor of the 
State of New York and the Mayor of the City of 
New York, New York, shall jointly allocate to
909 
each New York Liberty Zone governmental unit 
the portion of the qualifying project expenditure 
amount which may be taken into account by 
such governmental unit under subsection (a) for 
any calendar year in the credit period. 
‘‘(B) AGGREGATE
LIMIT.—The aggregate 
amount which may be allocated under subpara-
graph (A) for all calendar years in the credit pe-
riod shall not exceed $2,000,000,000. 
‘‘(C) 
ANNUAL
LIMIT.—The 
aggregate 
amount which may be allocated under subpara-
graph (A) for any calendar year in the credit pe-
riod shall not exceed the sum of— 
‘‘(i) $115,000,000 ($425,000,000 in the 
case of the last 2 years in the credit period), 
plus 
‘‘(ii) the aggregate amount authorized 
to be allocated under this paragraph for all 
preceding calendar years in the credit pe-
riod which was not so allocated. 
‘‘(D) UNALLOCATED AMOUNTS AT END OF 
CREDIT PERIOD.—If, as of the close of the credit 
period, the amount under subparagraph (B) ex-
ceeds the aggregate amount allocated under sub-
paragraph (A) for all calendar years in the cred-
910 
it period, the Governor of the State of New York 
and the Mayor of the City of New York, New 
York, may jointly allocate to New York Liberty 
Zone governmental units for any calendar year 
in the 5-year period following the credit period 
an amount equal to— 
‘‘(i) the lesser of— 
‘‘(I) such excess, or 
‘‘(II) the qualifying project ex-
penditure amount for such calendar 
year, reduced by 
‘‘(ii) the aggregate amount allocated 
under this subparagraph for all preceding 
calendar years. 
‘‘(4) ALLOCATION TO PAYROLL PERIODS.—Each 
New York Liberty Zone governmental unit which has 
been allocated a portion of the qualifying project ex-
penditure amount under paragraph (3) for a cal-
endar year may allocate such portion to payroll peri-
ods beginning in such calendar year as such govern-
mental unit determines appropriate. 
‘‘(c) CARRYOVER OF UNUSED ALLOCATIONS.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), if the amount allocated under subsection 
(b)(3) to a New York Liberty Zone governmental unit
911 
for any calendar year exceeds the aggregate taxes im-
posed by section 3402 for which such governmental 
unit is liable under section 3403 for periods begin-
ning in such year, such excess shall be carried to the 
succeeding calendar year and added to the allocation 
of such governmental unit for such succeeding cal-
endar year. 
‘‘(2) REALLOCATION.—If a New York Liberty 
Zone governmental unit does not use an amount allo-
cated to it under subsection (b)(3) within the time 
prescribed by the Governor of the State of New York 
and the Mayor of the City of New York, New York, 
then such amount shall after such time be treated for 
purposes of subsection (b)(3) in the same manner as 
if it had never been allocated. 
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) CREDIT PERIOD.—The term ‘credit period’ 
means the 12-year period beginning on January 1, 
2008. 
‘‘(2) NEW YORK LIBERTY ZONE GOVERNMENTAL 
UNIT.—The term ‘New York Liberty Zone govern-
mental unit’ means— 
‘‘(A) the State of New York, 
‘‘(B) the City of New York, New York, and
912 
‘‘(C) any agency or instrumentality of such 
State or City. 
‘‘(3) TREATMENT OF FUNDS.—Any expenditure 
for a qualifying project taken into account for pur-
poses of the credit under this section shall be consid-
ered State and local funds for the purpose of any Fed-
eral program. 
‘‘(4) TREATMENT OF CREDIT AMOUNTS FOR PUR-
POSES
OF
WITHHOLDING
TAXES.—For purposes of 
this title, a New York Liberty Zone governmental 
unit shall be treated as having paid to the Secretary, 
on the day on which wages are paid to employees, an 
amount equal to the amount of the credit allowed to 
such entity under subsection (a) with respect to such 
wages, but only if such governmental unit deducts 
and withholds wages for such payroll period under 
section 3401 (relating to wage withholding). 
‘‘(e) REPORTING.—The Governor of the State of New 
York and the Mayor of the City of New York, New York, 
shall jointly submit to the Secretary an annual report— 
‘‘(1) which certifies— 
‘‘(A) the qualifying project expenditure 
amount for the calendar year, and
913 
‘‘(B) the amount allocated to each New York 
Liberty Zone governmental unit under sub-
section (b)(3) for the calendar year, and 
‘‘(2) includes such other information as the Sec-
retary may require to carry out this section. 
‘‘(f) GUIDANCE.—The Secretary may prescribe such 
guidance as may be necessary or appropriate to ensure com-
pliance with the purposes of this section.’’. 
(b) TERMINATION OF SPECIAL ALLOWANCE AND EX-
PENSING.—Subparagraph (A) of section 1400K(b)(2), as re-
designated by subsection (a), is amended by striking the 
parenthetical therein and inserting ‘‘(in the case of nonresi-
dential real property and residential rental property, the 
date of the enactment of the Clean Renewable Energy and 
Conservation Tax Act of 2007 or, if acquired pursuant to 
a binding contract in effect on such enactment date, Decem-
ber 31, 2009)’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 38(c)(3)(B) is amended by striking 
‘‘section 1400L(a)’’ and inserting ‘‘section 1400K(a)’’. 
(2) Section 168(k)(2)(D)(ii) is amended by strik-
ing ‘‘section 1400L(c)(2)’’ and inserting ‘‘section 
1400K(c)(2)’’. 
(3) The table of sections for part I of subchapter 
Y of chapter 1 is amended by redesignating the item
914 
relating to section 1400L as an item relating to sec-
tion 1400K and by inserting after such item the fol-
lowing new item: 
‘‘Sec. 1400L. New York Liberty Zone tax credits.’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall take effect on the date of the enactment of this 
Act. 
SEC. 1531. EXTENSION OF TRANSPORTATION FRINGE BEN-
EFIT TO BICYCLE COMMUTERS. 
(a) IN GENERAL.—Paragraph (1) of section 132(f) of 
the Internal Revenue Code of 1986 (relating to general rule 
for qualified transportation fringe) is amended by adding 
at the end the following: 
‘‘(D) Any qualified bicycle commuting re-
imbursement.’’. 
(b) LIMITATION ON EXCLUSION.—Paragraph (2) of 
section 132(f) of such Code is amended by striking ‘‘and’’ 
at the end of subparagraph (A), by striking the period at 
the end of subparagraph (B) and inserting ‘‘, and’’, and 
by adding at the end the following new subparagraph: 
‘‘(C) the applicable annual limitation in 
the case of any qualified bicycle commuting re-
imbursement.’’. 
(c) DEFINITIONS.—Paragraph (5) of section 132(f) of 
such Code (relating to definitions) is amended by adding 
at the end the following:
915 
‘‘(F) DEFINITIONS
RELATED
TO
BICYCLE 
COMMUTING REIMBURSEMENT.— 
‘‘(i) QUALIFIED
BICYCLE
COMMUTING 
REIMBURSEMENT.—The term ‘qualified bi-
cycle commuting reimbursement’ means, 
with respect to any calendar year, any em-
ployer reimbursement during the 15-month 
period beginning with the first day of such 
calendar year for reasonable expenses in-
curred by the employee during such cal-
endar year for the purchase of a bicycle and 
bicycle improvements, repair, and storage, 
if such bicycle is regularly used for travel 
between the employee’s residence and place 
of employment. 
‘‘(ii) APPLICABLE
ANNUAL
LIMITA-
TION.—The term ‘applicable annual limita-
tion’ means, with respect to any employee 
for any calendar year, the product of $20 
multiplied by the number of qualified bicy-
cle commuting months during such year. 
‘‘(iii) QUALIFIED BICYCLE COMMUTING 
MONTH.—The term ‘qualified bicycle com-
muting month’ means, with respect to any
916 
employee, any month during which such 
employee— 
‘‘(I) regularly uses the bicycle for 
a substantial portion of the travel be-
tween the employee’s residence and 
place of employment, and 
‘‘(II) does not receive any benefit 
described in subparagraph (A), (B), or 
(C) of paragraph (1).’’. 
(d) CONSTRUCTIVE RECEIPT
OF BENEFIT.—Para-
graph (4) of section 132(f) is amended by inserting ‘‘(other 
than a qualified bicycle commuting reimbursement)’’ after 
‘‘qualified transportation fringe’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2007. 
Subtitle C—Energy Conservation 
and Efficiency 
PART I—CONSERVATION TAX CREDIT BONDS 
SEC. 1541. QUALIFIED ENERGY CONSERVATION BONDS. 
(a) IN GENERAL.—Subpart I of part IV of subchapter 
A of chapter 1, as added by this title, is amended by adding 
at the end the following new section:
917 
‘‘SEC. 54C. QUALIFIED ENERGY CONSERVATION BONDS. 
‘‘(a) QUALIFIED ENERGY CONSERVATION BOND.—For 
purposes of this subchapter, the term ‘qualified energy con-
servation bond’ means any bond issued as part of an issue 
if— 
‘‘(1) 100 percent of the available project proceeds 
of such issue are to be used for one or more qualified 
conservation purposes, 
‘‘(2) the bond is issued by a State or local gov-
ernment, and 
‘‘(3) the issuer designates such bond for purposes 
of this section. 
‘‘(b) LIMITATION
ON
AMOUNT
OF
BONDS
DES-
IGNATED.—The maximum aggregate face amount of bonds 
which may be designated under subsection (a) by any issuer 
shall not exceed the limitation amount allocated to such 
issuer under subsection (d). 
‘‘(c) NATIONAL LIMITATION ON AMOUNT OF BONDS 
DESIGNATED.—There is a national qualified energy con-
servation bond limitation of $3,000,000,000. 
‘‘(d) ALLOCATIONS.— 
‘‘(1) IN
GENERAL.—The limitation applicable 
under subsection (c) shall be allocated by the Sec-
retary among the States in proportion to the popu-
lation of the States.
918 
‘‘(2) ALLOCATIONS TO LARGEST LOCAL GOVERN-
MENTS.— 
‘‘(A) IN
GENERAL.—In the case of any 
State in which there is a large local government, 
each such local government shall be allocated a 
portion of such State’s allocation which bears the 
same ratio to the State’s allocation (determined 
without regard to this subparagraph) as the pop-
ulation of such large local government bears to 
the population of such State. 
‘‘(B) ALLOCATION OF UNUSED LIMITATION 
TO
STATE.—The amount allocated under this 
subsection to a large local government may be re-
allocated by such local government to the State 
in which such local government is located. 
‘‘(C) LARGE
LOCAL
GOVERNMENT.—For 
purposes of this section, the term ‘large local gov-
ernment’ means any municipality or county if 
such municipality or county has a population of 
100,000 or more. 
‘‘(3) ALLOCATION TO ISSUERS; RESTRICTION ON 
PRIVATE ACTIVITY BONDS.—Any allocation under this 
subsection to a State or large local government shall 
be allocated by such State or large local government 
to issuers within the State in a manner that results
919 
in not less than 70 percent of the allocation to such 
State or large local government being used to des-
ignate bonds which are not private activity bonds. 
‘‘(e) QUALIFIED CONSERVATION PURPOSE.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified conserva-
tion purpose’ means any of the following: 
‘‘(A) Capital expenditures incurred for pur-
poses of— 
‘‘(i) reducing energy consumption in 
publicly-owned buildings by at least 20 per-
cent, 
‘‘(ii) implementing green community 
programs, or 
‘‘(iii) rural development involving the 
production of electricity from renewable en-
ergy resources. 
‘‘(B) Expenditures with respect to research 
facilities, and research grants, to support re-
search in— 
‘‘(i) development of cellulosic ethanol 
or other nonfossil fuels, 
‘‘(ii) technologies for the capture and 
sequestration of carbon dioxide produced 
through the use of fossil fuels,
920 
‘‘(iii) increasing the efficiency of exist-
ing technologies for producing nonfossil 
fuels, 
‘‘(iv) automobile battery technologies 
and other technologies to reduce fossil fuel 
consumption in transportation, or 
‘‘(v) technologies to reduce energy use 
in buildings. 
‘‘(C) Mass commuting facilities and related 
facilities that reduce the consumption of energy, 
including expenditures to reduce pollution from 
vehicles used for mass commuting. 
‘‘(D) Demonstration projects designed to 
promote the commercialization of— 
‘‘(i) green building technology, 
‘‘(ii) conversion of agricultural waste 
for use in the production of fuel or other-
wise, 
‘‘(iii) advanced battery manufacturing 
technologies, 
‘‘(iv) technologies to reduce peak use of 
electricity, or 
‘‘(v) technologies for the capture and 
sequestration of carbon dioxide emitted from
921 
combusting fossil fuels in order to produce 
electricity. 
‘‘(E) Public education campaigns to pro-
mote energy efficiency. 
‘‘(2) SPECIAL
RULES
FOR
PRIVATE
ACTIVITY 
BONDS.—For purposes of this section, in the case of 
any private activity bond, the term ‘qualified con-
servation purposes’ shall not include any expenditure 
which is not a capital expenditure. 
‘‘(f) POPULATION.— 
‘‘(1) IN GENERAL.—The population of any State 
or local government shall be determined for purposes 
of this section as provided in section 146(j) for the 
calendar year which includes the date of the enact-
ment of this section. 
‘‘(2) SPECIAL RULE FOR COUNTIES.—In deter-
mining the population of any county for purposes of 
this section, any population of such county which is 
taken into account in determining the population of 
any municipality which is a large local government 
shall not be taken into account in determining the 
population of such county. 
‘‘(g) APPLICATION
TO
INDIAN
TRIBAL
GOVERN-
MENTS.—An Indian tribal government shall be treated for
923 
‘‘(C) QUALIFIED
PURPOSE.—For purposes 
of this paragraph, the term ‘qualified purpose’ 
means— 
‘‘(i) in the case of a new clean renew-
able energy bond, a purpose specified in sec-
tion 54B(a)(1), and 
‘‘(ii) in the case of a qualified energy 
conservation bond, a purpose specified in 
section 54C(a)(1).’’. 
(3) The table of sections for subpart I of part IV 
of subchapter A of chapter 1, as amended by this title, 
is amended by adding at the end the following new 
item: 
‘‘Sec. 54C. Qualified energy conservation bonds.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to obligations issued after the date of 
the enactment of this Act. 
SEC. 1542. QUALIFIED FORESTRY CONSERVATION BONDS. 
(a) IN GENERAL.—Subpart I of part IV of subchapter 
A of chapter 1, as added by this title, is amended by adding 
at the end the following new section: 
‘‘SEC. 54D. QUALIFIED FORESTRY CONSERVATION BONDS. 
‘‘(a) QUALIFIED FORESTRY CONSERVATION BOND.— 
For purposes of this subchapter, the term ‘qualified forestry 
conservation bond’ means any bond issued as part of an 
issue if—
924 
‘‘(1) 100 percent of the available proceeds of such 
issue are to be used for one or more qualified forestry 
conservation projects, 
‘‘(2) the bond is issued by a qualified issuer, and 
‘‘(3) the issuer designates such bond for purposes 
of this section. 
‘‘(b) LIMITATION
ON
AMOUNT
OF
BONDS
DES-
IGNATED.—The maximum aggregate face amount of bonds 
which may be designated under subsection (a) by any issuer 
shall not exceed the limitation amount allocated to such 
issuer under subsection (d). 
‘‘(c) NATIONAL LIMITATION ON AMOUNT OF BONDS 
DESIGNATED.—There is a national qualified forestry con-
servation bond limitation of $500,000,000. 
‘‘(d) ALLOCATIONS.— 
‘‘(1) IN GENERAL.—The Secretary shall make al-
locations of the amount of the national qualified for-
estry conservation bond limitation described in sub-
section (c) among qualified forestry conservation 
projects in such manner as the Secretary determines 
appropriate so as to ensure that all of such limitation 
is allocated before the date which is 24 months after 
the date of the enactment of this section. 
‘‘(2) SOLICITATION OF APPLICATIONS.—The Sec-
retary shall solicit applications for allocations of the
925 
national qualified forestry conservation bond limita-
tion described in subsection (c) not later than 90 days 
after the date of the enactment of this section. 
‘‘(e) 
QUALIFIED
FORESTRY
CONSERVATION 
PROJECT.—For purposes of this section, the term ‘qualified 
forestry conservation project’ means the acquisition by a 
State or 501(c)(3) organization (as defined in section 
150(a)(4)) from an unrelated person of forest and forest 
land that meets the following qualifications: 
‘‘(1) Some portion of the land acquired must be 
adjacent to United States Forest Service Land. 
‘‘(2) At least half of the land acquired must be 
transferred to the United States Forest Service at no 
net cost to the United States and not more than half 
of the land acquired may either remain with or be do-
nated to a State. 
‘‘(3) All of the land must be subject to a native 
fish habitat conservation plan approved by the United 
States Fish and Wildlife Service. 
‘‘(4) The amount of acreage acquired must be at 
least 40,000 acres. 
‘‘(f) QUALIFIED ISSUER.—For purposes of this section, 
the term ‘qualified issuer’ means a State or 501(c)(3) orga-
nization (as defined in section 150(a)(4)).
926 
‘‘(g) SPECIAL ARBITRAGE RULE.—In the case of any 
qualified forestry conservation bond issued as part of an 
issue, section 54A(d)(4)(C) shall be applied to such issue 
without regard to clause (i).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (1) of section 54A(d), as added by 
this title, is amended to read as follows: 
‘‘(1) QUALIFIED TAX CREDIT BOND.—The term 
‘qualified tax credit bond’ means— 
‘‘(A) a new clean renewable energy bond, 
‘‘(B) a qualified energy conservation bond, 
or 
‘‘(C) a qualified forestry conservation bond, 
which is part of an issue that meets requirements of 
paragraphs (2), (3), (4), and (5).’’. 
(2) Subparagraph (C) of section 54A(d)(2), as 
added by this title, is amended to read as follows: 
‘‘(C) QUALIFIED
PURPOSE.—For purposes 
of this paragraph, the term ‘qualified purpose’ 
means— 
‘‘(i) in the case of a new clean renew-
able energy bond, a purpose specified in sec-
tion 54B(a)(1),
927 
‘‘(ii) in the case of a qualified energy 
conservation bond, a purpose specified in 
section 54C(a)(1), and 
‘‘(iii) in the case of a qualified forestry 
conservation bond, a purpose specified in 
section 54D(a)(1).’’. 
(3) The table of sections for subpart I of part IV 
of subchapter A of chapter 1, as amended by this title, 
is amended by adding at the end the following new 
item: 
‘‘Sec. 54C. Qualified forestry conservation bonds.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to obligations issued after the date of 
the enactment of this Act. 
PART II—EFFICIENCY 
SEC. 1543. EXTENSION AND MODIFICATION OF ENERGY EF-
FICIENT EXISTING HOMES CREDIT. 
(a) EXTENSION OF CREDIT.—Section 25C(g) (relating 
to termination) is amended by striking ‘‘December 31, 
2007’’ and inserting ‘‘December 31, 2008’’. 
(b) QUALIFIED BIOMASS FUEL PROPERTY.— 
(1) IN GENERAL.—Section 25C(d)(3) is amend-
ed— 
(A) by striking ‘‘and’’ at the end of sub-
paragraph (D),
928 
(B) by striking the period at the end of sub-
paragraph (E) and inserting ‘‘, and’’, and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(F) a stove which uses the burning of bio-
mass fuel to heat a dwelling unit located in the 
United States and used as a residence by the 
taxpayer, or to heat water for use in such a 
dwelling unit, and which has a thermal effi-
ciency rating of at least 75 percent.’’. 
(2) BIOMASS FUEL.—Section 25C(d) (relating to 
residential energy property expenditures) is amended 
by adding at the end the following new paragraph: 
‘‘(6) BIOMASS FUEL.—The term ‘biomass fuel’ 
means any plant-derived fuel available on a renew-
able or recurring basis, including agricultural crops 
and trees, wood and wood waste and residues (includ-
ing wood pellets), plants (including aquatic plants), 
grasses, residues, and fibers.’’. 
(c) EFFECTIVE DATE.—The amendments made this 
section shall apply to expenditures made after December 31, 
2007.
930 
‘‘(2) 
CLOTHES
WASHERS.—The 
applicable 
amount is— 
‘‘(A) $75 in the case of a residential top- 
loading clothes washer manufactured in calendar 
year 2008 which meets or exceeds a 1.72 modi-
fied energy factor and does not exceed a 8.0 
water consumption factor, 
‘‘(B) $125 in the case of a residential top- 
loading clothes washer manufactured in calendar 
year 2008 or 2009 which meets or exceeds a 1.8 
modified energy factor and does not exceed a 7.5 
water consumption factor, 
‘‘(C) $150 in the case of a residential or 
commercial clothes washer manufactured in cal-
endar year 2008, 2009 or 2010 which meets or 
exceeds 2.0 modified energy factor and does not 
exceed a 6.0 water consumption factor, and 
‘‘(D) $250 in the case of a residential or 
commercial clothes washer manufactured in cal-
endar year 2008, 2009, or 2010 which meets or 
exceeds 2.2 modified energy factor and does not 
exceed a 4.5 water consumption factor. 
‘‘(3) REFRIGERATORS.—The applicable amount 
is—
931 
‘‘(A) $50 in the case of a refrigerator which 
is manufactured in calendar year 2008, and con-
sumes at least 20 percent but not more than 22.9 
percent less kilowatt hours per year than the 
2001 energy conservation standards, 
‘‘(B) $75 in the case of a refrigerator which 
is manufactured in calendar year 2008 or 2009, 
and consumes at least 23 percent but no more 
than 24.9 percent less kilowatt hours per year 
than the 2001 energy conservation standards, 
‘‘(C) $100 in the case of a refrigerator 
which is manufactured in calendar year 2008, 
2009, or 2010, and consumes at least 25 percent 
but not more than 29.9 percent less kilowatt 
hours per year than the 2001 energy conserva-
tion standards, and 
‘‘(D) $200 in the case of a refrigerator man-
ufactured in calendar year 2008, 2009, or 2010 
and which consumes at least 30 percent less en-
ergy than the 2001 energy conservation stand-
ards.’’. 
(b) ELIGIBLE PRODUCTION.— 
(1) SIMILAR
TREATMENT
FOR
ALL
APPLI-
ANCES.—Subsection (c) of section 45M (relating to el-
igible production) is amended—
932 
(A) by striking paragraph (2), 
(B) by striking ‘‘(1) IN GENERAL’’ and all 
that follows through ‘‘the eligible’’ and inserting 
‘‘The eligible’’, and 
(C) by moving the text of such subsection in 
line with the subsection heading and redesig-
nating subparagraphs (A) and (B) as para-
graphs (1) and (2), respectively. 
(2) MODIFICATION
OF
BASE
PERIOD.—Para-
graph (2) of section 45M(c), as amended by para-
graph (1) of this section, is amended by striking ‘‘3- 
calendar year’’ and inserting ‘‘2-calendar year’’. 
(c) TYPES OF ENERGY EFFICIENT APPLIANCES.—Sub-
section (d) of section 45M (defining types of energy efficient 
appliances) is amended to read as follows: 
‘‘(d) TYPES OF ENERGY EFFICIENT APPLIANCE.—For 
purposes of this section, the types of energy efficient appli-
ances are— 
‘‘(1) dishwashers described in subsection (b)(1), 
‘‘(2) clothes washers described in subsection 
(b)(2), and 
‘‘(3) refrigerators described in subsection (b)(3).’’ 
(d) AGGREGATE CREDIT AMOUNT ALLOWED.—
933 
(1) INCREASE IN LIMIT.—Paragraph (1) of sec-
tion 45M(e) (relating to aggregate credit amount al-
lowed) is amended to read as follows: 
‘‘(1) AGGREGATE CREDIT AMOUNT ALLOWED.— 
The aggregate amount of credit allowed under sub-
section (a) with respect to a taxpayer for any taxable 
year shall not exceed $75,000,000 reduced by the 
amount of the credit allowed under subsection (a) to 
the taxpayer (or any predecessor) for all prior taxable 
years beginning after December 31, 2007.’’. 
(2) EXCEPTION
FOR
CERTAIN
REFRIGERATOR 
AND CLOTHES WASHERS.—Paragraph (2) of section 
45M(e) is amended to read as follows: 
‘‘(2) AMOUNT ALLOWED FOR CERTAIN REFRIG-
ERATORS AND CLOTHES WASHERS.—Refrigerators de-
scribed in subsection (b)(3)(D) and clothes washers 
described in subsection (b)(2)(D) shall not be taken 
into account under paragraph (1).’’. 
(e) QUALIFIED ENERGY EFFICIENT APPLIANCES.— 
(1) IN
GENERAL.—Paragraph (1) of section 
45M(f) (defining qualified energy efficient appliance) 
is amended to read as follows: 
‘‘(1) QUALIFIED
ENERGY
EFFICIENT
APPLI-
ANCE.—The term ‘qualified energy efficient appliance’ 
means—
934 
‘‘(A) any dishwasher described in subsection 
(b)(1), 
‘‘(B) any clothes washer described in sub-
section (b)(2), and 
‘‘(C) any refrigerator described in sub-
section (b)(3).’’. 
(2) CLOTHES WASHER.—Section 45M(f)(3) (de-
fining clothes washer) is amended by inserting ‘‘com-
mercial’’ before ‘‘residential’’ the second place it ap-
pears. 
(3) 
TOP-LOADING
CLOTHES
WASHER.—Sub-
section (f) of section 45M (relating to definitions) is 
amended by redesignating paragraphs (4), (5), (6), 
and (7) as paragraphs (5), (6), (7), and (8), respec-
tively, and by inserting after paragraph (3) the fol-
lowing new paragraph: 
‘‘(4) 
TOP-LOADING
CLOTHES
WASHER.—The 
term ‘top-loading clothes washer’ means a clothes 
washer which has the clothes container compartment 
access located on the top of the machine and which 
operates on a vertical axis.’’. 
(4) REPLACEMENT OF ENERGY FACTOR.—Section 
45M(f)(7), as redesignated by paragraph (3), is 
amended to read as follows:
935 
‘‘(7) MODIFIED
ENERGY
FACTOR.—The term 
‘modified energy factor’ means the modified energy 
factor established by the Department of Energy for 
compliance with the Federal energy conservation 
standard.’’. 
(5) GALLONS PER CYCLE; WATER CONSUMPTION 
FACTOR.—Section 45M(f) (relating to definitions) is 
amended by adding at the end the following: 
‘‘(9) GALLONS PER CYCLE.—The term ‘gallons 
per cycle’ means, with respect to a dishwasher, the 
amount of water, expressed in gallons, required to 
complete a normal cycle of a dishwasher. 
‘‘(10) WATER CONSUMPTION FACTOR.—The term 
‘water consumption factor’ means, with respect to a 
clothes washer, the quotient of the total weighted per- 
cycle water consumption divided by the cubic foot (or 
liter) capacity of the clothes washer.’’. 
(f) EFFECTIVE DATE.—The amendments made by this 
section shall apply to appliances produced after December 
31, 2007. 
SEC. 1546. SEVEN-YEAR APPLICABLE RECOVERY PERIOD 
FOR DEPRECIATION OF QUALIFIED ENERGY 
MANAGEMENT DEVICES. 
(a) IN GENERAL.—Section 168(e)(3)(C) (relating to 7- 
year property), as amended by this Act, is amended by
936 
striking ‘‘and’’ at the end of clause (v), by redesignating 
clause (vi) as clause (vii), and by inserting after clause (v) 
the following new clause: 
‘‘(vi) any qualified energy manage-
ment device, and’’. 
(b) DEFINITION OF QUALIFIED ENERGY MANAGEMENT 
DEVICE.—Section 168(i) (relating to definitions and spe-
cial rules) is amended by inserting at the end the following 
new paragraph: 
‘‘(18) QUALIFIED
ENERGY
MANAGEMENT
DE-
VICE.— 
‘‘(A) IN GENERAL.—The term ‘qualified en-
ergy management device’ means any energy 
management device which is installed on real 
property of a customer of the taxpayer and is 
placed in service by a taxpayer who— 
‘‘(i) is a supplier of electric energy or 
a provider of electric energy services, and 
‘‘(ii) provides all commercial and resi-
dential customers of such supplier or pro-
vider with net metering upon the request of 
such customer. 
‘‘(B) ENERGY MANAGEMENT DEVICE.—For 
purposes of subparagraph (A), the term ‘energy 
management device’ means any time-based meter
937 
and related communication equipment which is 
capable of being used by the taxpayer as part of 
a system that— 
‘‘(i) measures and records electricity 
usage data on a time-differentiated basis in 
at least 24 separate time segments per day, 
‘‘(ii) provides for the exchange of infor-
mation between supplier or provider and 
the customer’s energy management device in 
support of time-based rates or other forms of 
demand response, and 
‘‘(iii) provides data to such supplier or 
provider so that the supplier or provider 
can provide energy usage information to 
customers electronically. 
‘‘(C) NET METERING.—For purposes of sub-
paragraph (A), the term ‘net metering’ means al-
lowing customers a credit for providing elec-
tricity to the supplier or provider.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to property placed in service after De-
cember 31, 2007.
938 
Subtitle D—Other Provisions 
PART I—FORESTRY PROVISIONS 
SEC. 1551. DEDUCTION FOR QUALIFIED TIMBER GAIN. 
(a) IN GENERAL.—Part I of subchapter P of chapter 
1 is amended by adding at the end the following new sec-
tion: 
‘‘SEC. 1203. DEDUCTION FOR QUALIFIED TIMBER GAIN. 
‘‘(a) IN GENERAL.—In the case of a taxpayer which 
elects the application of this section for a taxable year, there 
shall be allowed a deduction against gross income in an 
amount equal to 60 percent of the lesser of— 
‘‘(1) the taxpayer’s qualified timber gain for 
such year, or 
‘‘(2) the taxpayer’s net capital gain for such 
year. 
‘‘(b) QUALIFIED TIMBER GAIN.—For purposes of this 
section, the term ‘qualified timber gain’ means, with respect 
to any taxpayer for any taxable year, the excess (if any) 
of— 
‘‘(1) the sum of the taxpayer’s gains described in 
subsections (a) and (b) of section 631 for such year, 
over 
‘‘(2) the sum of the taxpayer’s losses described in 
such subsections for such year. 
‘‘(c) SPECIAL RULES FOR PASS-THRU ENTITIES.—
939 
‘‘(1) In the case of any qualified timber gain of 
a pass-thru entity (as defined in section 1(h)(10)) 
other than a real estate investment trust, the election 
under this section shall be made separately by each 
taxpayer subject to tax on such gain. 
‘‘(2) In the case of any qualified timber gain of 
a real estate investment trust, the election under this 
section shall be made by the real estate investment 
trust. 
‘‘(d) ELECTION.—An election under this section may 
be made only with respect to the first taxable year begin-
ning after the date of the enactment of this section.’’. 
(b) COORDINATION WITH MAXIMUM CAPITAL GAINS 
RATES.— 
(1) TAXPAYERS OTHER THAN CORPORATIONS.— 
Paragraph (2) of section 1(h) is amended to read as 
follows: 
‘‘(2) REDUCTION OF NET CAPITAL GAIN.—For 
purposes of this subsection, the net capital gain for 
any taxable year shall be reduced (but not below zero) 
by the sum of— 
‘‘(A) the amount which the taxpayer takes 
into account as investment income under section 
163(d)(4)(B)(iii), and
940 
‘‘(B) in the case of a taxable year with re-
spect to which an election is in effect under sec-
tion 1203, the taxpayer’s qualified timber gain 
(as defined in section 1203(b)).’’. 
(2) CORPORATIONS.—Section 1201 is amended 
by redesignating subsection (b) as subsection (c) and 
inserting after subsection (a) the following new sub-
section: 
‘‘(b) QUALIFIED TIMBER GAIN NOT TAKEN INTO AC-
COUNT.—For purposes of this section, in the case of a cor-
poration with respect to which an election is in effect under 
section 1203, the net capital gain for any taxable year shall 
be reduced (but not below zero) by the corporation’s quali-
fied timber gain (as defined in section 1203(b)).’’. 
(c) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) of 
section 62 is amended by inserting before the last sentence 
the following new paragraph: 
‘‘(22) QUALIFIED TIMBER GAINS.—The deduction 
allowed by section 1203.’’. 
(d) DEDUCTION ALLOWED IN COMPUTING ADJUSTED 
CURRENT
EARNINGS.—Subparagraph 
(C) 
of 
section 
56(g)(4) is amended by adding at the end the following new 
clause:
942 
‘‘(ii) ADJUSTMENT TO SHAREHOLDER’S 
BASIS ATTRIBUTABLE TO DEDUCTION FOR 
QUALIFIED TIMBER GAINS.— 
‘‘(I) IN GENERAL.—The adjusted 
basis of shares in the hands of the 
shareholder shall be increased by the 
amount of the deduction allowable 
under section 1203(a) as provided in 
subclauses (II) and (III). 
‘‘(II) ALLOCATION
OF
BASIS
IN-
CREASE
FOR
DISTRIBUTIONS
MADE 
DURING TAXABLE YEAR.—For any tax-
able year of a real estate investment 
trust for which an election is in effect 
under section 1203, in the case of a 
distribution made with respect to 
shares during such taxable year of 
amounts attributable to the deduction 
allowable under section 1203(a), the 
adjusted basis of such shares shall be 
increased by the amount of such dis-
tributions. 
‘‘(III) ALLOCATION OF EXCESS.— 
If the deduction allowable under sec-
tion 1203(a) for a taxable year exceeds
943 
the amount of distributions described 
in subclause (II), the excess shall be al-
located to every shareholder of the real 
estate investment trust at the close of 
the trust’s taxable year in the same 
manner as if a distribution of such ex-
cess were made with respect to such 
shares. 
‘‘(IV) DESIGNATIONS.—To the ex-
tent provided in regulations, a real es-
tate investment trust shall designate 
the amounts described in subclauses 
(II) and (III) in a manner similar to 
the designations provided with respect 
to capital gains described in subpara-
graphs (C) and (D). 
‘‘(V) DEFINITIONS.—As used in 
this subparagraph, the terms ‘share’ 
and ‘shareholder’ shall include bene-
ficial interests and holders of beneficial 
interests, respectively. 
‘‘(iii) EARNINGS AND PROFITS DEDUC-
TION FOR QUALIFIED TIMBER GAINS.—The 
deduction allowable under section 1203(a) 
for a taxable year shall be allowed as a de-
944 
duction in computing the earnings and 
profits of the real estate investment trust for 
such taxable year. The earnings and profits 
of any such shareholder which is a corpora-
tion shall be appropriately adjusted in ac-
cordance with regulations prescribed by the 
Secretary.’’. 
(g) LOSS ATTRIBUTABLE TO BASIS ADJUSTMENT FOR 
DEDUCTION FOR QUALIFIED TIMBER GAIN OF REAL ES-
TATE INVESTMENT TRUSTS.— 
(1) Section 857(b)(8) is amended by redesig-
nating subparagraphs (B) and (C) as subparagraphs 
(C) and (D), respectively, and by inserting after sub-
paragraph (A) the following new subparagraph: 
‘‘(B) LOSS
ATTRIBUTABLE
TO
BASIS
AD-
JUSTMENT FOR DEDUCTION FOR QUALIFIED TIM-
BER GAIN.—If— 
‘‘(i) a shareholder of a real estate in-
vestment trust receives a basis adjustment 
provided under subsection (b)(3)(G)(ii), and 
‘‘(ii) the taxpayer has held such share 
or interest for 6 months or less, 
then any loss on the sale or exchange of such 
share or interest shall, to the extent of the 
amount described in clause (i), be disallowed.’’.
945 
(2) Subparagraph (D) of section 857(b)(8), as 
redesignated by paragraph (1), is amended by strik-
ing ‘‘subparagraph (A)’’ and inserting ‘‘subpara-
graphs (A) and (B)’’. 
(h) CONFORMING AMENDMENTS.— 
(1) Subparagraph (B) of section 172(d)(2) is 
amended to read as follows: 
‘‘(B) the exclusion under section 1202, and 
the deduction under section 1203, shall not be al-
lowed.’’. 
(2) Paragraph (4) of section 642(c) is amended 
by striking the first sentence and inserting ‘‘To the 
extent that the amount otherwise allowable as a de-
duction under this subsection consists of gain de-
scribed in section 1202(a) or qualified timber gain 
(as defined in section 1203(b)), proper adjustment 
shall be made for any exclusion allowable to the estate 
or trust under section 1202 and for any deduction al-
lowable to the estate or trust under section 1203.’’ 
(3) Paragraph (3) of section 643(a) is amended 
by striking the last sentence and inserting ‘‘The exclu-
sion under section 1202 and the deduction under sec-
tion 1203 shall not be taken into account.’’. 
(4) Subparagraph (C) of section 643(a)(6) is 
amended to read as follows:
946 
‘‘(C) Paragraph (3) shall not apply to a 
foreign trust. In the case of such a trust— 
‘‘(i) there shall be included gains from 
the sale or exchange of capital assets, re-
duced by losses from such sales or exchanges 
to the extent such losses do not exceed gains 
from such sales or exchanges, and 
‘‘(ii) the deduction under section 1203 
shall not be taken into account.’’. 
(5) Paragraph (4) of section 691(c) is amended 
by inserting ‘‘1203,’’ after ‘‘1202,’’. 
(6) Paragraph (2) of section 871(a) is amended 
by inserting ‘‘or 1203,’’ after ‘‘1202,’’. 
(7) The table of sections for part I of subchapter 
P of chapter 1 is amended by adding at the end the 
following new item: 
‘‘Sec. 1203. Deduction for qualified timber gain.’’. 
(i) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after the date 
of the enactment of this Act. 
SEC. 1552. EXCISE TAX NOT APPLICABLE TO SECTION 1203 
DEDUCTION OF REAL ESTATE INVESTMENT 
TRUSTS. 
(a) IN GENERAL.— 
(1) ORDINARY
INCOME.—Subparagraph (B) of 
section 4981(e)(1) is amended to read as follows:
947 
‘‘(B) by not taking into account— 
‘‘(i) any gain or loss from the sale or 
exchange of capital assets (determined with-
out regard to any reduction that would be 
applied 
for 
purposes 
of 
section 
857(b)(3)(G)(i)), and 
‘‘(ii) any deduction allowable under 
section 1203, and’’. 
(2) 
CAPITAL
GAIN
NET
INCOME.—Section 
4981(e)(2) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(D) 
QUALIFIED
TIMBER
GAIN.—The 
amount determined under subparagraph (A) 
shall be determined without regard to any reduc-
tion that would be applied for purposes of sec-
tion 857(b)(3)(G)(i) but shall be reduced for any 
deduction allowable under section 1203 for such 
calendar year.’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after the date 
of the enactment of this Act. 
SEC. 1553. TIMBER REIT MODERNIZATION. 
(a) IN GENERAL.—Section 856(c)(5) is amended by 
adding after subparagraph (G) the following new subpara-
graph:
948 
‘‘(H) TREATMENT OF TIMBER GAINS.— 
‘‘(i) IN GENERAL.—Gain from the sale 
of real property described in paragraph 
(2)(D) and (3)(C) shall include gain which 
is— 
‘‘(I) recognized by an election 
under section 631(a) from timber 
owned by the real estate investment 
trust, the cutting of which is provided 
by a taxable REIT subsidiary of the 
real estate investment trust; 
‘‘(II) recognized under section 
631(b); or 
‘‘(III) income which would con-
stitute gain under subclause (I) or (II) 
but for the failure to meet the 1-year 
holding period requirement. 
‘‘(ii) SPECIAL RULES.— 
‘‘(I) For purposes of this subtitle, 
cut timber, the gain of which is recog-
nized by a real estate investment trust 
pursuant to an election under section 
631(a) described in clause (i)(I) or so 
much of clause (i)(III) as relates to 
clause (i)(I), shall be deemed to be sold
949 
to the taxable REIT subsidiary of the 
real estate investment trust on the first 
day of the taxable year. 
‘‘(II) For purposes of this subtitle, 
income described in this subparagraph 
shall not be treated as gain from the 
sale of property described in section 
1221(a)(1). 
‘‘(iii) TERMINATION.—This subpara-
graph shall not apply to dispositions after 
the termination date.’’. 
(b) TERMINATION DATE.—Subsection (c) of section 
856 is amended by adding at the end the following new 
paragraph: 
‘‘(8) TERMINATION DATE.—For purposes of this 
subsection, the term ‘termination date’ means the last 
day of the first taxable year beginning after the date 
of the enactment of this paragraph.’’. 
(c) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to dispositions in taxable years be-
ginning after the date of the enactment of this Act. 
SEC. 1554. MINERAL ROYALTY INCOME QUALIFYING IN-
COME FOR TIMBER REITS. 
(a) IN GENERAL.—Section 856(c)(2) is amended by 
striking ‘‘and’’ at the end of subparagraph (G), by inserting
950 
‘‘and’’ at the end of subparagraph (H), and by adding after 
subparagraph (H) the following new subparagraph: 
‘‘(I) mineral royalty income earned in the 
first taxable year beginning after the date of the 
enactment of this subparagraph from real prop-
erty owned by a timber real estate investment 
trust held, or once held, in connection with the 
trade or business of producing timber by such 
real estate investment trust;’’. 
(b) TIMBER REAL ESTATE INVESTMENT TRUST.—Sec-
tion 856(c)(5), as amended by this Act, is amended by add-
ing after subparagraph (H) the following new subpara-
graph: 
‘‘(I) TIMBER
REAL
ESTATE
INVESTMENT 
TRUST.—The term ‘timber real estate investment 
trust’ means a real estate investment trust in 
which more than 50 percent in value of its total 
assets consists of real property held in connection 
with the trade or business of producing timber.’’. 
(c) EFFECTIVE DATE.—The amendments by this sec-
tion shall apply to taxable years beginning after the date 
of the enactment of this Act.
951 
SEC. 1555. MODIFICATION OF TAXABLE REIT SUBSIDIARY 
ASSET TEST FOR TIMBER REITS. 
(a) IN GENERAL.—Section 856(c)(4)(B)(ii) is amend-
ed by inserting ‘‘(in the case of a quarter which closes on 
or before the termination date, 25 percent in the case of 
a timber real estate investment trust)’’ after ‘‘not more than 
20 percent of the value of its total assets is represented by 
securities of one or more taxable REIT subsidiaries’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after the date 
of the enactment of this Act. 
SEC. 1556. SAFE HARBOR FOR TIMBER PROPERTY. 
(a) IN GENERAL.—Section 857(b)(6) (relating to in-
come from prohibited transactions) is amended by adding 
at the end the following new subparagraph: 
‘‘(G) SPECIAL RULES FOR SALES TO QUALI-
FIED ORGANIZATIONS.— 
‘‘(i) IN GENERAL.—In the case of sale 
of a real estate asset (as defined in section 
856(c)(5)(B)) to a qualified organization 
(as defined in section 170(h)(3)) exclusively 
for conservation purposes (within the mean-
ing of section 170(h)(1)(C)), subparagraph 
(D) shall be applied— 
‘‘(I) by substituting ‘2 years’ for 
‘4 years’ in clause (i), and
952 
‘‘(II) by substituting ‘2-year pe-
riod’ for ‘4-year period’ in clauses (ii) 
and (iii). 
‘‘(ii) TERMINATION.—This subpara-
graph shall not apply to sales after the ter-
mination date.’’. 
(b) 
PROHIBITED
TRANSACTIONS.—Section 
857(b)(6)(D)(v) is amended by inserting ‘‘or, in the case 
of a sale on or before the termination date, a taxable REIT 
subsidiary’’ after ‘‘independent contractor (as defined in 
section 856(d)(3)) from whom the trust itself does not derive 
or receive any income’’. 
(c) SALES THAT ARE NOT PROHIBITED TRANS-
ACTIONS.—Section 857(b)(6), as amended by subsection (a), 
is amended by adding at the end the following new subpara-
graph: 
‘‘(H) SALES OF PROPERTY THAT ARE NOT A 
PROHIBITED TRANSACTION.—In the case of a sale 
on or before the termination date, the sale of 
property which is not a prohibited transaction 
through application of subparagraph (D) shall 
be considered property held for investment or for 
use in a trade or business and not property de-
scribed in section 1221(a)(1) for all purposes of 
this subtitle.’’.
953 
(d) TERMINATION
DATE.—Section 857(b)(6), as 
amended by subsections (a) and (c), is amended by adding 
at the end the following new subparagraph: 
‘‘(I) TERMINATION DATE.—For purposes of 
this paragraph, the term ‘termination date’ 
means the last day of the first taxable year be-
ginning after the date of the enactment of this 
subparagraph.’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to dispositions in taxable years begin-
ning after the date of the enactment of this Act. 
PART II—EXXON VALDEZ 
SEC. 1557. INCOME AVERAGING FOR AMOUNTS RECEIVED 
IN CONNECTION WITH THE EXXON VALDEZ 
LITIGATION. 
(a) INCOME AVERAGING OF AMOUNTS RECEIVED FROM 
THE EXXON VALDEZ LITIGATION.—For purposes of section 
1301 of the Internal Revenue Code of 1986— 
(1) any qualified taxpayer who receives any 
qualified settlement income in any taxable year shall 
be treated as engaged in a fishing business (deter-
mined without regard to the commercial nature of the 
business), and
954 
(2) such qualified settlement income shall be 
treated as income attributable to such a fishing busi-
ness for such taxable year. 
(b) CONTRIBUTIONS OF AMOUNTS RECEIVED TO RE-
TIREMENT ACCOUNTS.— 
(1) IN GENERAL.—Any qualified taxpayer who 
receives qualified settlement income during the tax-
able year may, at any time before the end of the tax-
able year in which such income was received, make 
one or more contributions to an eligible retirement 
plan of which such qualified taxpayer is a beneficiary 
in an aggregate amount not to exceed the lesser of— 
(A) $100,000 (reduced by the amount of 
qualified settlement income contributed to an eli-
gible retirement plan in prior taxable years pur-
suant to this subsection), or 
(B) the amount of qualified settlement in-
come received by the individual during the tax-
able year. 
(2) 
TIME
WHEN
CONTRIBUTIONS
DEEMED 
MADE.—For purposes of paragraph (1), a qualified 
taxpayer shall be deemed to have made a contribution 
to an eligible retirement plan on the last day of the 
taxable year in which such income is received if the 
contribution is made on account of such taxable year
955 
and is made not later than the time prescribed by law 
for filing the return for such taxable year (not includ-
ing extensions thereof). 
(3) TREATMENT OF CONTRIBUTIONS TO ELIGIBLE 
RETIREMENT PLANS.—For purposes of the Internal 
Revenue Code of 1986, if a contribution is made pur-
suant to paragraph (1) with respect to qualified set-
tlement income, then— 
(A) except as provided in paragraph (4)— 
(i) to the extent of such contribution, 
the qualified settlement income shall not be 
included in taxable income, and 
(ii) for purposes of section 72 of such 
Code, such contribution shall not be consid-
ered to be investment in the contract, 
(B) the qualified taxpayer shall, to the ex-
tent of the amount of the contribution, be treat-
ed— 
(i) as having received the qualified set-
tlement income— 
(I) in the case of a contribution to 
an individual retirement plan (as de-
fined under section 7701(a)(37) of such 
Code), in a distribution described in 
section 408(d)(3) of such Code, and
956 
(II) in the case of any other eligi-
ble retirement plan, in an eligible roll-
over distribution (as defined under sec-
tion 402(f)(2) of such Code), and 
(ii) as having transferred the amount 
to the eligible retirement plan in a direct 
trustee to trustee transfer within 60 days of 
the distribution, 
(C) section 408(d)(3)(B) of the Internal 
Revenue Code of 1986 shall not apply with re-
spect to amounts treated as a rollover under this 
paragraph, and 
(D) section 408A(c)(3)(B) of the Internal 
Revenue Code of 1986 shall not apply with re-
spect to amounts contributed to a Roth IRA (as 
defined under section 408A(b) of such Code) or 
a designated Roth contribution to an applicable 
retirement plan (within the meaning of section 
402A of such Code) under this paragraph. 
(4) SPECIAL RULE FOR ROTH IRAS AND ROTH 
401(k)S.—For purposes of the Internal Revenue Code 
of 1986, if a contribution is made pursuant to para-
graph (1) with respect to qualified settlement income 
to a Roth IRA (as defined under section 408A(b) of 
such Code) or as a designated Roth contribution to an
957 
applicable retirement plan (within the meaning of 
section 402A of such Code), then— 
(A) the qualified settlement income shall be 
includible in taxable income, and 
(B) for purposes of section 72 of such Code, 
such contribution shall be considered to be in-
vestment in the contract. 
(5) ELIGIBLE RETIREMENT PLAN.—For purpose 
of this subsection, the term ‘‘eligible retirement plan’’ 
has the meaning given such term under section 
402(c)(8)(B) of the Internal Revenue Code of 1986. 
(c) TREATMENT OF QUALIFIED SETTLEMENT INCOME 
UNDER EMPLOYMENT TAXES.— 
(1) SECA.—For purposes of chapter 2 of the In-
ternal Revenue Code of 1986 and section 211 of the 
Social Security Act, no portion of qualified settlement 
income received by a qualified taxpayer shall be treat-
ed as self-employment income. 
(2) FICA.—For purposes of chapter 21 of the In-
ternal Revenue Code of 1986 and section 209 of the 
Social Security Act, no portion of qualified settlement 
income received by a qualified taxpayer shall be treat-
ed as wages. 
(d) QUALIFIED TAXPAYER.—For purposes of this sec-
tion, the term ‘‘qualified taxpayer’’ means—
958 
(1) any individual who is a plaintiff in the civil 
action In re Exxon Valdez, No. 89–095–CV (HRH) 
(Consolidated) (D. Alaska); or 
(2) any individual who is a beneficiary of the es-
tate of such a plaintiff who— 
(A) acquired the right to receive qualified 
settlement income from that plaintiff; and 
(B) was the spouse or an immediate relative 
of that plaintiff. 
(e) QUALIFIED SETTLEMENT INCOME.—For purposes 
of this section, the term ‘‘qualified settlement income’’ 
means any interest and punitive damage awards which 
are— 
(1) otherwise includible in taxable income, and 
(2) received (whether as lump sums or periodic 
payments) in connection with the civil action In re 
Exxon Valdez, No. 89–095–CV (HRH) (Consolidated) 
(D. Alaska) (whether pre- or post-judgment and 
whether related to a settlement or judgment).
959 
Subtitle E—Revenue Provisions 
SEC. 1561. LIMITATION OF DEDUCTION FOR INCOME AT-
TRIBUTABLE TO DOMESTIC PRODUCTION OF 
OIL, GAS, OR A PRIMARY PRODUCTS THERE-
OF. 
(a) DENIAL OF DEDUCTION FOR MAJOR INTEGRATED 
OIL COMPANIES FOR INCOME ATTRIBUTABLE TO DOMESTIC 
PRODUCTION
OF
OIL, GAS, OR
PRIMARY
PRODUCTS 
THEREOF.— 
(1) IN GENERAL.—Subparagraph (B) of section 
199(c)(4) (relating to exceptions) is amended by strik-
ing ‘‘or’’ at the end of clause (ii), by striking the pe-
riod at the end of clause (iii) and inserting ‘‘, or’’, 
and by inserting after clause (iii) the following new 
clause: 
‘‘(iv) in the case of any major inte-
grated oil company (as defined in section 
167(h)(5)(B)), the production, refining, 
processing, transportation, or distribution 
of oil, gas, or any primary product thereof 
during any taxable year described in sec-
tion 167(h)(5)(B).’’. 
(2) PRIMARY PRODUCT.—Section 199(c)(4)(B) is 
amended by adding at the end the following flush sen-
tence:
960 
‘‘For purposes of clause (iv), the term ‘primary 
product’ has the same meaning as when used in 
section 927(a)(2)(C), as in effect before its re-
peal.’’. 
(b) LIMITATION ON OIL RELATED QUALIFIED PRO-
DUCTION ACTIVITIES INCOME
FOR TAXPAYERS OTHER 
THAN MAJOR INTEGRATED OIL COMPANIES.— 
(1) IN GENERAL.—Section 199(d) is amended by 
redesignating paragraph (9) as paragraph (10) and 
by inserting after paragraph (8) the following new 
paragraph: 
‘‘(9) SPECIAL RULE FOR TAXPAYERS WITH OIL 
RELATED
QUALIFIED
PRODUCTION
ACTIVITIES
IN-
COME.— 
‘‘(A) IN
GENERAL.—If a taxpayer (other 
than a major integrated oil company (as defined 
in section 167(h)(5)(B))) has oil related qualified 
production activities income for any taxable 
year beginning after 2009, the amount of the de-
duction under subsection (a) shall be reduced by 
3 percent of the least of— 
‘‘(i) the oil related qualified production 
activities income of the taxpayer for the 
taxable year,
961 
‘‘(ii) the qualified production activities 
income of the taxpayer for the taxable year, 
or 
‘‘(iii) taxable income (determined with-
out regard to this section). 
‘‘(B) OIL RELATED QUALIFIED PRODUCTION 
ACTIVITIES
INCOME.—The term ‘oil related 
qualified production activities income’ means for 
any taxable year the qualified production activi-
ties income which is attributable to the produc-
tion, refining, processing, transportation, or dis-
tribution of oil, gas, or any primary product 
thereof during such taxable year.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
199(d)(2) (relating to application to individuals) is 
amended by striking ‘‘subsection (a)(1)(B)’’ and in-
serting ‘‘subsections (a)(1)(B) and (d)(9)(A)(iii)’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2007.
962 
SEC. 1562. ELIMINATION OF THE DIFFERENT TREATMENT 
OF FOREIGN OIL AND GAS EXTRACTION IN-
COME AND FOREIGN OIL RELATED INCOME 
FOR PURPOSES OF THE FOREIGN TAX CRED-
IT. 
(a) IN GENERAL.—Subsections (a) and (b) of section 
907 (relating to special rules in case of foreign oil and gas 
income) are amended to read as follows: 
‘‘(a) REDUCTION IN AMOUNT ALLOWED AS FOREIGN 
TAX UNDER SECTION 901.—In applying section 901, the 
amount of any foreign oil and gas taxes paid or accrued 
(or deemed to have been paid) during the taxable year 
which would (but for this subsection) be taken into account 
for purposes of section 901 shall be reduced by the amount 
(if any) by which the amount of such taxes exceeds the prod-
uct of— 
‘‘(1) the amount of the combined foreign oil and 
gas income for the taxable year, 
‘‘(2) multiplied by— 
‘‘(A) in the case of a corporation, the per-
centage which is equal to the highest rate of tax 
specified under section 11(b), or 
‘‘(B) in the case of an individual, a fraction 
the numerator of which is the tax against which 
the credit under section 901(a) is taken and the
963 
denominator of which is the taxpayer’s entire 
taxable income. 
‘‘(b) COMBINED FOREIGN OIL AND GAS INCOME; FOR-
EIGN OIL AND GAS TAXES.—For purposes of this section— 
‘‘(1) COMBINED
FOREIGN
OIL
AND
GAS
IN-
COME.—The term ‘combined foreign oil and gas in-
come’ means, with respect to any taxable year, the 
sum of— 
‘‘(A) foreign oil and gas extraction income, 
and 
‘‘(B) foreign oil related income. 
‘‘(2) FOREIGN OIL AND GAS TAXES.—The term 
‘foreign oil and gas taxes’ means, with respect to any 
taxable year, the sum of— 
‘‘(A) oil and gas extraction taxes, and 
‘‘(B) any income, war profits, and excess 
profits taxes paid or accrued (or deemed to have 
been paid or accrued under section 902 or 960) 
during the taxable year with respect to foreign 
oil related income (determined without regard to 
subsection (c)(4)) or loss which would be taken 
into account for purposes of section 901 without 
regard to this section.’’. 
(b) RECAPTURE OF FOREIGN OIL AND GAS LOSSES.— 
Paragraph (4) of section 907(c) (relating to recapture of
964 
foreign oil and gas extraction losses by recharacterizing 
later extraction income) is amended to read as follows: 
‘‘(4) RECAPTURE
OF
FOREIGN
OIL
AND
GAS 
LOSSES
BY
RECHARACTERIZING
LATER
COMBINED 
FOREIGN OIL AND GAS INCOME.— 
‘‘(A) IN GENERAL.—The combined foreign 
oil and gas income of a taxpayer for a taxable 
year (determined without regard to this para-
graph) shall be reduced— 
‘‘(i) first by the amount determined 
under subparagraph (B), and 
‘‘(ii) then by the amount determined 
under subparagraph (C). 
The aggregate amount of such reductions shall be 
treated as income (from sources without the 
United States) which is not combined foreign oil 
and gas income. 
‘‘(B) REDUCTION
FOR
PRE-2008
FOREIGN 
OIL EXTRACTION LOSSES.—The reduction under 
this paragraph shall be equal to the lesser of— 
‘‘(i) the foreign oil and gas extraction 
income of the taxpayer for the taxable year 
(determined without regard to this para-
graph), or 
‘‘(ii) the excess of—
965 
‘‘(I) the aggregate amount of for-
eign oil extraction losses for preceding 
taxable years beginning after December 
31, 1982, and before January 1, 2008, 
over 
‘‘(II) so much of such aggregate 
amount as was recharacterized under 
this paragraph (as in effect before and 
after the date of the enactment of the 
Clean Renewable Energy and Con-
servation Tax Act of 2007) for pre-
ceding taxable years beginning after 
December 31, 1982. 
‘‘(C) REDUCTION
FOR
POST-2007
FOREIGN 
OIL AND GAS LOSSES.—The reduction under this 
paragraph shall be equal to the lesser of— 
‘‘(i) the combined foreign oil and gas 
income of the taxpayer for the taxable year 
(determined without regard to this para-
graph), reduced by an amount equal to the 
reduction under subparagraph (A) for the 
taxable year, or 
‘‘(ii) the excess of— 
‘‘(I) the aggregate amount of for-
eign oil and gas losses for preceding
966 
taxable years beginning after December 
31, 2007, over 
‘‘(II) so much of such aggregate 
amount as was recharacterized under 
this paragraph for preceding taxable 
years beginning after December 31, 
2007. 
‘‘(D) FOREIGN
OIL
AND
GAS
LOSS
DE-
FINED.— 
‘‘(i) IN
GENERAL.—For purposes of 
this paragraph, the term ‘foreign oil and 
gas loss’ means the amount by which— 
‘‘(I) the gross income for the tax-
able year from sources without the 
United States and its possessions 
(whether or not the taxpayer chooses 
the benefits of this subpart for such 
taxable year) taken into account in de-
termining the combined foreign oil and 
gas income for such year, is exceeded 
by 
‘‘(II) the sum of the deductions 
properly 
apportioned 
or 
allocated 
thereto.
967 
‘‘(ii) NET OPERATING LOSS DEDUCTION 
NOT TAKEN INTO ACCOUNT.—For purposes 
of clause (i), the net operating loss deduc-
tion allowable for the taxable year under 
section 172(a) shall not be taken into ac-
count. 
‘‘(iii) EXPROPRIATION AND CASUALTY 
LOSSES
NOT
TAKEN
INTO
ACCOUNT.—For 
purposes of clause (i), there shall not be 
taken into account— 
‘‘(I) any foreign expropriation 
loss (as defined in section 172(h) (as in 
effect on the day before the date of the 
enactment of the Revenue Reconcili-
ation Act of 1990)) for the taxable 
year, or 
‘‘(II) any loss for the taxable year 
which arises from fire, storm, ship-
wreck, or other casualty, or from theft, 
to the extent such loss is not compensated 
for by insurance or otherwise. 
‘‘(iv) 
FOREIGN
OIL
EXTRACTION 
LOSS.—For 
purposes 
of 
subparagraph 
(B)(ii)(I), foreign oil extraction losses shall 
be determined under this paragraph as in
969 
paragraph (A) for the year to which such 
taxes are carried by substituting ‘foreign oil 
and gas extraction income’ for ‘foreign oil 
and gas income’ in subsection (a). 
‘‘(B) 2008 CREDITS.—In the case of any 
unused credit year beginning in 2008, the 
amendments made to this subsection by the 
Clean Renewable Energy and Conservation Tax 
Act of 2007 shall be treated as being in effect for 
any preceding year beginning before January 1, 
2008, solely for purposes of determining how 
much of the unused foreign oil and gas taxes for 
such unused credit year may be deemed paid or 
accrued in such preceding year.’’. 
(d) CONFORMING AMENDMENT.—Section 6501(i) is 
amended by striking ‘‘oil and gas extraction taxes’’ and in-
serting ‘‘foreign oil and gas taxes’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2007. 
SEC. 1563. SEVEN-YEAR AMORTIZATION OF GEOLOGICAL 
AND GEOPHYSICAL EXPENDITURES FOR CER-
TAIN MAJOR INTEGRATED OIL COMPANIES. 
(a) IN
GENERAL.—Subparagraph (A) of section 
167(h)(5) (relating to special rule for major integrated oil
970 
companies) is amended by striking ‘‘5-year’’ and inserting 
‘‘7-year’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to amounts paid or incurred after the 
date of the enactment of this Act. 
SEC. 1564. BROKER REPORTING OF CUSTOMER’S BASIS IN 
SECURITIES TRANSACTIONS. 
(a) IN GENERAL.— 
(1) BROKER REPORTING FOR SECURITIES TRANS-
ACTIONS.—Section 6045 (relating to returns of bro-
kers) is amended by adding at the end the following 
new subsection: 
‘‘(g) ADDITIONAL INFORMATION REQUIRED IN THE 
CASE OF SECURITIES TRANSACTIONS.— 
‘‘(1) IN GENERAL.—If a broker is otherwise re-
quired to make a return under subsection (a) with re-
spect to the gross proceeds of the sale of a covered se-
curity, the broker shall include in such return the in-
formation described in paragraph (2). 
‘‘(2) ADDITIONAL INFORMATION REQUIRED.— 
‘‘(A) IN
GENERAL.—The information re-
quired under paragraph (1) to be shown on a re-
turn with respect to a covered security of a cus-
tomer shall include the customer’s adjusted basis 
in such security and whether any gain or loss
971 
with respect to such security is long-term or 
short-term (within the meaning of section 1222). 
‘‘(B) 
DETERMINATION
OF
ADJUSTED 
BASIS.—For purposes of subparagraph (A)— 
‘‘(i) IN GENERAL.—The customer’s ad-
justed basis shall be determined— 
‘‘(I) in the case of any stock (other 
than any stock in an open-end fund), 
in accordance with the first-in first-out 
method unless the customer notifies the 
broker by means of making an ade-
quate identification of the stock sold or 
transferred, 
‘‘(II) in the case of any stock in 
an open-end fund acquired before Jan-
uary 1, 2011, in accordance with any 
acceptable method under section 1012 
with respect to the account in which 
such interest is held, 
‘‘(III) in the case of any stock in 
an open-end fund acquired after De-
cember 31, 2010, in accordance with 
the broker’s default method unless the 
customer notifies the broker that he 
elects another acceptable method under
972 
section 1012 with respect to the ac-
count in which such interest is held, 
and 
‘‘(IV) in any other case, under the 
method for making such determination 
under section 1012. 
‘‘(ii) EXCEPTION FOR WASH SALES.— 
Except as otherwise provided by the Sec-
retary, the customer’s adjusted basis shall be 
determined without regard to section 1091 
(relating to loss from wash sales of stock or 
securities) unless the transactions occur in 
the same account with respect to identical 
securities. 
‘‘(3) COVERED SECURITY.—For purposes of this 
subsection— 
‘‘(A) IN GENERAL.—The term ‘covered secu-
rity’ means any specified security acquired on or 
after the applicable date if such security— 
‘‘(i) was acquired through a trans-
action in the account in which such security 
is held, or 
‘‘(ii) was transferred to such account 
from an account in which such security was 
a covered security, but only if the broker re-
973 
ceived a statement under section 6045A 
with respect to the transfer. 
‘‘(B) 
SPECIFIED
SECURITY.—The 
term 
‘specified security’ means— 
‘‘(i) any share of stock in a corpora-
tion, 
‘‘(ii) any note, bond, debenture, or 
other evidence of indebtedness, 
‘‘(iii) any commodity, or contract or 
derivative with respect to such commodity, 
if the Secretary determines that adjusted 
basis reporting is appropriate for purposes 
of this subsection, and 
‘‘(iv) any other financial instrument 
with respect to which the Secretary deter-
mines that adjusted basis reporting is ap-
propriate for purposes of this subsection. 
‘‘(C) APPLICABLE DATE.—The term ‘appli-
cable date’ means— 
‘‘(i) January 1, 2009, in the case of 
any specified security which is stock in a 
corporation, and 
‘‘(ii) January 1, 2011, or such later 
date determined by the Secretary in the case 
of any other specified security.
974 
‘‘(4) OPEN-END FUND.—For purposes of this sub-
section, the term ‘open-end fund’ means a regulated 
investment company (as defined in section 851) 
which is offering for sale or has outstanding any re-
deemable security of which it is the issuer and the 
shares of which are not traded on an established secu-
rities exchange. 
‘‘(5) TREATMENT OF S CORPORATIONS.—In the 
case of the sale of a covered security acquired by an 
S corporation (other than a financial institution) 
after December 31, 2010, such S corporation shall be 
treated in the same manner as a partnership for pur-
poses of this section. 
‘‘(6) SPECIAL RULES FOR SHORT SALES.— 
‘‘(A) IN
GENERAL.—Notwithstanding sub-
section (a), in the case of a short sale under sec-
tion 1233, reporting under this section shall be 
made for the year in which such sale is closed. 
‘‘(B) 
EXCEPTION
FOR
CONSTRUCTIVE 
SALES.—Subparagraph (A) shall not apply to 
any short sale which results in a constructive 
sale under section 1259 with respect to property 
held in the account in which the short sale is en-
tered into.’’.
975 
(2) BROKER INFORMATION REQUIRED WITH RE-
SPECT TO OPTIONS.—Section 6045, as amended by 
subsection (a), is amended by adding at the end the 
following new subsection: 
‘‘(h) APPLICATION TO OPTIONS ON SECURITIES.— 
‘‘(1) EXERCISE
OF
OPTION.—For purposes of 
this section, in the case of any exercise of an option 
on a covered security where the option was granted 
or acquired in the same account as the covered secu-
rity, the amount received or paid with respect to such 
exercise shall be treated as an adjustment to gross 
proceeds or as an adjustment to basis, as the case 
may be. 
‘‘(2) LAPSE
OR
CLOSING
TRANSACTION.—For 
purposes of this section, in the case of the lapse (or 
closing 
transaction 
(as 
defined 
in 
section 
1234(b)(2)(A))) of an option on a specified security 
where the taxpayer is the grantor of the option, this 
section shall apply as if the premium received for 
such option were gross proceeds received on the date 
of the lapse or closing transaction, and the cost (if 
any) of the closing transaction shall be taken into ac-
count as adjusted basis. In the case of an option on 
a specified security where the taxpayer is the grantee 
of such option, this section shall apply as if the grant-
976 
ee received gross proceeds of zero on the date of the 
lapse. 
‘‘(3) PROSPECTIVE
APPLICATION.—Paragraphs 
(1) and (2) shall not apply to any option which is 
granted or acquired before January 1, 2011. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section, the terms ‘covered security’ and ‘specified se-
curity’ shall have the meanings given such terms in 
subsection (g)(3).’’. 
(3) EXTENSION
OF
PERIOD
FOR
STATEMENTS 
SENT TO CUSTOMERS.— 
(A) IN GENERAL.—Subsection (b) of section 
6045 is amended by striking ‘‘January 31’’ and 
inserting ‘‘February 15 (January 31 in the case 
of returns for calendar years before 2010)’’. 
(B) STATEMENTS RELATED TO SUBSTITUTE 
PAYMENTS.—Subsection (d) of section 6045 is 
amended— 
(i) by striking ‘‘at such time and’’, and 
(ii) by inserting after ‘‘other item.’’ the 
following new sentence: ‘‘In the case of a 
payment made during any calendar year 
after 2009, the written statement required 
under the preceding sentence shall be fur-
nished on or before February 15 of the year
977 
following the calendar year in which the 
payment was made.’’. 
(C) OTHER
STATEMENTS.—Subsection (b) 
of section 6045 is amended by adding at the end 
the following: ‘‘In the case of a consolidated re-
porting statement (as defined in regulations) 
with respect to any account which includes the 
statement required by this subsection, any state-
ment which would otherwise be required to be 
furnished on or before January 31 of a calendar 
year 
after 
2010 
under 
section 
6042(c), 
6049(c)(2)(A), or 6050N(b) with respect to any 
item in such account shall instead be required to 
be furnished on or before February 15 of such 
calendar year if furnished as part of such con-
solidated reporting statement.’’. 
(b) DETERMINATION OF BASIS OF CERTAIN SECURI-
TIES ON ACCOUNT BY ACCOUNT METHOD.—Section 1012 
(relating to basis of property–cost) is amended— 
(1) by striking ‘‘The basis of property’’ and in-
serting the following: 
‘‘(a) IN GENERAL.—The basis of property’’, 
(2) by striking ‘‘The cost of real property’’ and 
inserting the following:
978 
‘‘(b) SPECIAL RULE FOR APPORTIONED REAL ESTATE 
TAXES.—The cost of real property’’, and 
(3) by adding at the end the following new sub-
section: 
‘‘(c) DETERMINATIONS BY ACCOUNT.— 
‘‘(1) IN GENERAL.—In the case of the sale, ex-
change, or other disposition of a specified security on 
or after the applicable date, the conventions pre-
scribed by regulations under this section shall be ap-
plied on an account by account basis. 
‘‘(2) APPLICATION TO OPEN-END FUNDS.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), any stock in an open-end 
fund acquired before January 1, 2009, shall be 
treated as a separate account from any such 
stock acquired on or after such date. 
‘‘(B) ELECTION
BY
OPEN-END
FUND
FOR 
TREATMENT AS SINGLE ACCOUNT.—If an open- 
end fund elects (at such time and in such form 
and manner as the Secretary may prescribe) to 
have this subparagraph apply with respect to 
one or more of its stockholders— 
‘‘(i) subparagraph (A) shall not apply 
with respect to any stock in such fund held 
by such stockholders, and
979 
‘‘(ii) all stock in such fund which is 
held by such stockholders shall be treated as 
covered 
securities 
described 
in 
section 
6045(g)(3) without regard to the date of the 
acquisition of such stock. 
A rule similar to the rule of the preceding sen-
tence shall apply with respect to a broker holding 
stock in an open-end fund as a nominee. 
‘‘(3) DEFINITIONS.—For purposes of this section, 
the terms ‘specified security’, ‘applicable date’, and 
‘open-end fund’ shall have the meaning given such 
terms in section 6045(g).’’. 
(c) INFORMATION
BY TRANSFERORS TO AID BRO-
KERS.— 
(1) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 is amended by inserting after 
section 6045 the following new section: 
‘‘SEC. 6045A. INFORMATION REQUIRED IN CONNECTION 
WITH TRANSFERS OF COVERED SECURITIES 
TO BROKERS. 
‘‘(a) FURNISHING OF INFORMATION.—Every applica-
ble person which transfers to a broker (as defined in section 
6045(c)(1)) a security which is a covered security (as de-
fined in section 6045(g)(3)) in the hands of such applicable 
person shall furnish to such broker a written statement in
980 
such manner and setting forth such information as the Sec-
retary may by regulations prescribe for purposes of ena-
bling such broker to meet the requirements of section 
6045(g). 
‘‘(b) APPLICABLE PERSON.—For purposes of sub-
section (a), the term ‘applicable person’ means— 
‘‘(1) 
any 
broker 
(as 
defined 
in 
section 
6045(c)(1)), and 
‘‘(2) any other person as provided by the Sec-
retary in regulations. 
‘‘(c) TIME FOR FURNISHING STATEMENT.—Any state-
ment required by subsection (a) shall be furnished not later 
than the earlier of— 
‘‘(1) 45 days after the date of the transfer de-
scribed in subsection (a), or 
‘‘(2) January 15 of the year following the cal-
endar year during which such transfer occurred.’’. 
(2) ASSESSABLE PENALTIES.—Paragraph (2) of 
section 6724(d) (defining payee statement) is amend-
ed by redesignating subparagraphs (I) through (CC) 
as subparagraphs (J) through (DD), respectively, and 
by inserting after subparagraph (H) the following 
new subparagraph:
981 
‘‘(I) section 6045A (relating to information 
required in connection with transfers of covered 
securities to brokers).’’. 
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of 
chapter 61 is amended by inserting after the item re-
lating to section 6045 the following new item: 
‘‘Sec. 6045A. Information required in connection with transfers of covered securi-
ties to brokers.’’. 
(d) ADDITIONAL ISSUER INFORMATION TO AID BRO-
KERS.— 
(1) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 of the Internal Revenue Code 
of 1986, as amended by subsection (b), is amended by 
inserting after section 6045A the following new sec-
tion: 
‘‘SEC. 6045B. RETURNS RELATING TO ACTIONS AFFECTING 
BASIS OF SPECIFIED SECURITIES. 
‘‘(a) IN GENERAL.—According to the forms or regula-
tions prescribed by the Secretary, any issuer of a specified 
security shall make a return setting forth— 
‘‘(1) a description of any organizational action 
which affects the basis of such specified security of 
such issuer, 
‘‘(2) the quantitative effect on the basis of such 
specified security resulting from such action, and
982 
‘‘(3) such other information as the Secretary 
may prescribe. 
‘‘(b) TIME FOR FILING RETURN.—Any return required 
by subsection (a) shall be filed not later than the earlier 
of— 
‘‘(1) 45 days after the date of the action de-
scribed in subsection (a), or 
‘‘(2) January 15 of the year following the cal-
endar year during which such action occurred. 
‘‘(c) STATEMENTS TO BE FURNISHED TO HOLDERS OF 
SPECIFIED SECURITIES OR THEIR NOMINEES.—According 
to the forms or regulations prescribed by the Secretary, 
every person required to make a return under subsection 
(a) with respect to a specified security shall furnish to the 
nominee with respect to the specified security (or certificate 
holder if there is no nominee) a written statement show-
ing— 
‘‘(1) the name, address, and phone number of the 
information contact of the person required to make 
such return, 
‘‘(2) the information required to be shown on 
such return with respect to such security, and 
‘‘(3) such other information as the Secretary 
may prescribe.
983 
The written statement required under the preceding sen-
tence shall be furnished to the holder on or before January 
15 of the year following the calendar year during which 
the action described in subsection (a) occurred. 
‘‘(d) SPECIFIED SECURITY.—For purposes of this sec-
tion, the term ‘specified security’ has the meaning given 
such term by section 6045(g)(3)(B). No return shall be re-
quired under this section with respect to actions described 
in subsection (a) with respect to a specified security which 
occur before the applicable date (as defined in section 
6045(g)(3)(C)) with respect to such security. 
‘‘(e) PUBLIC REPORTING IN LIEU OF RETURN.—The 
Secretary may waive the requirements under subsections 
(a) and (c) with respect to a specified security, if the person 
required to make the return under subsection (a) makes 
publicly available, in such form and manner as the Sec-
retary determines necessary to carry out the purposes of this 
section— 
‘‘(1) the name, address, phone number, and 
email address of the information contact of such per-
son, and 
‘‘(2) the information described in paragraphs 
(1), (2), and (3) of subsection (a).’’. 
(2) ASSESSABLE PENALTIES.—
984 
(A) Subparagraph (B) of section 6724(d)(1) 
of such Code (defining information return) is 
amended by redesignating clauses (iv) through 
(xix) as clauses (v) through (xx), respectively, 
and by inserting after clause (iii) the following 
new clause: 
‘‘(iv) section 6045B(a) (relating to re-
turns relating to actions affecting basis of 
specified securities),’’. 
(B) Paragraph (2) of section 6724(d) of 
such Code (defining payee statement), as amend-
ed by subsection (c)(2), is amended by redesig-
nating subparagraphs (J) through (DD) as sub-
paragraphs (K) through (EE), respectively, and 
by inserting after subparagraph (I) the following 
new subparagraph: 
‘‘(J) subsections (c) and (e) of section 
6045B (relating to returns relating to actions af-
fecting basis of specified securities).’’. 
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of 
chapter 61 of such Code, as amended by subsection 
(b)(3), is amended by inserting after the item relating 
to section 6045A the following new item: 
‘‘Sec. 6045B. Returns relating to actions affecting basis of specified securities.’’.
1015 
‘‘(B) FACTORS.—The Secretary concerned 
shall determine best value based on such factors 
as— 
‘‘(i) the technical demands and com-
plexity of the work to be done; 
‘‘(ii)(I) the ecological objectives of the 
project; and 
‘‘(II) the sensitivity of the resources 
being treated; 
‘‘(iii) the past experience by the con-
tractor with the type of work being done, 
using the type of equipment proposed for 
the project, and meeting or exceeding de-
sired ecological conditions; and 
‘‘(iv) the commitment of the contractor 
to hiring highly qualified workers and local 
residents. 
‘‘(3) 
MERCHANTABLE
TIMBER
CONTRACTING 
PILOT PROGRAM.— 
‘‘(A) ESTABLISHMENT.—The Secretary con-
cerned shall establish a pilot program to imple-
ment a certain percentage of approved projects 
involving the sale of merchantable timber using 
separate contracts for—
1026 
‘‘(B) The total cost of the project, including 
the level of agency overhead to be assessed 
against the project. 
‘‘(C) For a multiyear project, the estimated 
cost of the project for each of the fiscal years in 
which it will be carried out. 
‘‘(D) The remedies for failure of the Sec-
retary concerned to comply with the terms of the 
agreement consistent with current Federal law. 
‘‘(2) LIMITED
USE
OF
FEDERAL
FUNDS.—The 
Secretary concerned may decide, at the sole discretion 
of the Secretary concerned, to cover the costs of a por-
tion of an approved project using Federal funds ap-
propriated or otherwise available to the Secretary for 
the same purposes as the project. 
‘‘(b) TRANSFER OF PROJECT FUNDS.— 
‘‘(1) INITIAL TRANSFER REQUIRED.—As soon as 
practicable after the agreement is reached under sub-
section (a) with regard to a project to be funded in 
whole or in part using project funds, or other funds 
described in section 203(a)(2), the Secretary con-
cerned shall transfer to the applicable unit of Na-
tional Forest System land or Bureau of Land Man-
agement District an amount of project funds equal 
to—