893 
‘‘SEC. 45I. CREDIT FOR PRODUCTION OF LOW SULFUR DIE-
SEL FUEL. 
‘‘(a) IN GENERAL.—For purposes of section 38, the 
amount of the low sulfur diesel fuel production credit de-
termined under this section with respect to any facility 
of a small business refiner is an amount equal to 5 cents 
for each gallon of low sulfur diesel fuel produced during 
the taxable year by such small business refiner at such 
facility. 
‘‘(b) MAXIMUM CREDIT.— 
‘‘(1) IN GENERAL.—The aggregate credit deter-
mined under subsection (a) for any taxable year with 
respect to any facility shall not exceed— 
‘‘(A) 25 percent of the qualified capital 
costs incurred by the small business refiner 
with respect to such facility, reduced by 
‘‘(B) the aggregate credits determined 
under this section for all prior taxable years 
with respect to such facility. 
‘‘(2) REDUCED PERCENTAGE.—In the case of a 
small business refiner with average daily domestic 
refinery runs for the 1-year period ending on De-
cember 31, 2002, in excess of 155,000 barrels, the 
number of percentage points described in paragraph 
(1) shall be reduced (not below zero) by the product 
of such number (before the application of this para-
894 
graph) and the ratio of such excess to 50,000 bar-
rels. 
‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur-
poses of this section— 
‘‘(1) SMALL
BUSINESS
REFINER.—The term 
‘small business refiner’ means, with respect to any 
taxable year, a refiner of crude oil— 
‘‘(A) with respect to which not more than 
1,500 individuals are engaged in the refinery 
operations of the business on any day during 
such taxable year, and 
‘‘(B) the average daily domestic refinery 
run or average retained production of which for 
all facilities of the taxpayer for the 1-year pe-
riod ending on December 31, 2002, did not ex-
ceed 205,000 barrels. 
‘‘(2) QUALIFIED
CAPITAL
COSTS.—The term 
‘qualified capital costs’ means, with respect to any 
facility, those costs paid or incurred during the ap-
plicable period for compliance with the applicable 
EPA regulations with respect to such facility, includ-
ing expenditures for the construction of new process 
operation units or the dismantling and reconstruc-
tion of existing process units to be used in the pro-
duction of low sulfur diesel fuel, associated adjacent
895 
or offsite equipment (including tankage, catalyst, 
and power supply), engineering, construction period 
interest, and sitework. 
‘‘(3) APPLICABLE
EPA
REGULATIONS.—The 
term ‘applicable EPA regulations’ means the High-
way Diesel Fuel Sulfur Control Requirements of the 
Environmental Protection Agency. 
‘‘(4) APPLICABLE PERIOD.—The term ‘applica-
ble period’ means, with respect to any facility, the 
period beginning on January 1, 2003, and ending on 
the earlier of the date which is 1 year after the date 
on which the taxpayer must comply with the applica-
ble EPA regulations with respect to such facility or 
December 31, 2009. 
‘‘(5) LOW SULFUR DIESEL FUEL.—The term 
‘low sulfur diesel fuel’ means diesel fuel with a sul-
fur content of 15 parts per million or less. 
‘‘(d) REDUCTION IN BASIS.—For purposes of this 
subtitle, if a credit is determined under this section for 
any expenditure with respect to any property, the increase 
in basis of such property which would (but for this sub-
section) result from such expenditure shall be reduced by 
the amount of the credit so determined. 
‘‘(e) SPECIAL RULE FOR DETERMINATION OF REFIN-
ERY
RUNS.—For purposes this section and section
896 
179C(b), in the calculation of average daily domestic refin-
ery run or retained production, only refineries which on 
April 1, 2003, were refineries of the refiner or a related 
person (within the meaning of section 613A(d)(3)), shall 
be taken into account. 
‘‘(f) CERTIFICATION.— 
‘‘(1) REQUIRED.—No credit shall be allowed 
unless, not later than the date which is 30 months 
after the first day of the first taxable year in which 
the low sulfur diesel fuel production credit is allowed 
with respect to a facility, the small business refiner 
obtains certification from the Secretary, after con-
sultation with the Administrator of the Environ-
mental Protection Agency, that the taxpayer’s quali-
fied capital costs with respect to such facility will re-
sult in compliance with the applicable EPA regula-
tions. 
‘‘(2) CONTENTS OF APPLICATION.—An applica-
tion for certification shall include relevant informa-
tion regarding unit capacities and operating charac-
teristics sufficient for the Secretary, after consulta-
tion with the Administrator of the Environmental 
Protection Agency, to determine that such qualified 
capital costs are necessary for compliance with the 
applicable EPA regulations.
897 
‘‘(3) REVIEW
PERIOD.—Any application shall 
be reviewed and notice of certification, if applicable, 
shall be made within 60 days of receipt of such ap-
plication. In the event the Secretary does not notify 
the taxpayer of the results of such certification with-
in such period, the taxpayer may presume the cer-
tification to be issued until so notified. 
‘‘(4) STATUTE OF LIMITATIONS.—With respect 
to the credit allowed under this section— 
‘‘(A) the statutory period for the assess-
ment of any deficiency attributable to such 
credit shall not expire before the end of the 3- 
year period ending on the date that the review 
period described in paragraph (3) ends with re-
spect to the taxpayer, and 
‘‘(B) such deficiency may be assessed be-
fore the expiration of such 3-year period not-
withstanding the provisions of any other law or 
rule of law which would otherwise prevent such 
assessment. 
‘‘(g) COOPERATIVE ORGANIZATIONS.— 
‘‘(1) APPORTIONMENT OF CREDIT.— 
‘‘(A) IN GENERAL.—In the case of a coop-
erative 
organization 
described 
in 
section 
1381(a), any portion of the credit determined
898 
under subsection (a) for the taxable year may, 
at the election of the organization, be appor-
tioned among patrons eligible to share in pa-
tronage dividends on the basis of the quantity 
or value of business done with or for such pa-
trons for the taxable year. 
‘‘(B) FORM AND EFFECT OF ELECTION.— 
An election under subparagraph (A) for any 
taxable year shall be made on a timely filed re-
turn for such year. Such election, once made, 
shall be irrevocable for such taxable year. 
‘‘(2) TREATMENT OF ORGANIZATIONS AND PA-
TRONS.— 
‘‘(A) ORGANIZATIONS.—The amount of the 
credit not apportioned to patrons pursuant to 
paragraph (1) shall be included in the amount 
determined under subsection (a) for the taxable 
year of the organization. 
‘‘(B) PATRONS.—The amount of the credit 
apportioned to patrons pursuant to paragraph 
(1) shall be included in the amount determined 
under subsection (a) for the first taxable year 
of each patron ending on or after the last day 
of the payment period (as defined in section 
1382(d)) for the taxable year of the organiza-
899 
tion or, if earlier, for the taxable year of each 
patron ending on or after the date on which the 
patron receives notice from the cooperative of 
the apportionment. 
‘‘(3) SPECIAL RULE.—If the amount of a credit 
which has been apportioned to any patron under this 
subsection is decreased for any reason— 
‘‘(A) such amount shall not increase the 
tax imposed on such patron, and 
‘‘(B) the tax imposed by this chapter on 
such organization shall be increased by such 
amount. 
The increase under subparagraph (B) shall not be 
treated as tax imposed by this chapter for purposes 
of determining the amount of any credit under this 
chapter or for purposes of section 55.’’. 
(b) CREDIT MADE PART OF GENERAL BUSINESS 
CREDIT.—Subsection (b) of section 38 (relating to general 
business credit), as amended by this Act, is amended by 
striking ‘‘plus’’ at the end of paragraph (17), by striking 
the period at the end of paragraph (18) and inserting ‘‘, 
plus’’, and by adding at the end the following new para-
graph:
900 
‘‘(19) in the case of a small business refiner, 
the low sulfur diesel fuel production credit deter-
mined under section 45I(a).’’. 
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C 
(relating to certain expenses for which credits are allow-
able) is amended by adding at the end the following new 
subsection: 
‘‘(d) LOW SULFUR DIESEL FUEL PRODUCTION 
CREDIT.—No deduction shall be allowed for that portion 
of the expenses otherwise allowable as a deduction for the 
taxable year which is equal to the amount of the credit 
determined for the taxable year under section 45I(a).’’. 
(d) BASIS ADJUSTMENT.—Section 1016(a) (relating 
to adjustments to basis), as amended by this Act, is 
amended by striking ‘‘and’’ at the end of paragraph (33), 
by striking the period at the end of paragraph (34) and 
inserting ‘‘, and’’, and by adding at the end the following 
new paragraph: 
‘‘(35) in the case of a facility with respect to 
which a credit was allowed under section 45I, to the 
extent provided in section 45I(d).’’. 
(e) DEDUCTION FOR CERTAIN UNUSED BUSINESS 
CREDITS.—Section 196(c) (defining qualified business 
credits), as amended by this Act, is amended by striking 
‘‘and’’ at the end of paragraph (12), by striking the period
901 
at the end of paragraph (13) and inserting ‘‘, and’’, and 
by adding after paragraph (13) the following new para-
graph: 
‘‘(14) the low sulfur diesel fuel production cred-
it determined under section 45I(a).’’. 
(f) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1, 
as amended by this Act, is amended by adding at the end 
the following new item: 
‘‘Sec. 45I. Credit for production of low sulfur diesel fuel.’’. 
(g) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenses paid or incurred after 
December 31, 2002, in taxable years ending after such 
date. 
SEC. 1326. DETERMINATION OF SMALL REFINER EXCEP-
TION TO OIL DEPLETION DEDUCTION. 
(a) IN GENERAL.—Paragraph (4) of section 613A(d) 
(relating to limitations on application of subsection (c)) 
is amended to read as follows: 
‘‘(4) CERTAIN
REFINERS
EXCLUDED.—If the 
taxpayer or 1 or more related persons engages in the 
refining of crude oil, subsection (c) shall not apply 
to the taxpayer for a taxable year if the average 
daily refinery runs of the taxpayer and such persons 
for the taxable year exceed 67,500 barrels. For pur-
poses of this paragraph, the average daily refinery
902 
runs for any taxable year shall be determined by di-
viding the aggregate refinery runs for the taxable 
year by the number of days in the taxable year.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
SEC. 1327. SALES OR DISPOSITIONS TO IMPLEMENT FED-
ERAL ENERGY REGULATORY COMMISSION 
OR STATE ELECTRIC RESTRUCTURING POL-
ICY. 
(a) IN GENERAL.—Section 451 (relating to general 
rule for taxable year of inclusion) is amended by adding 
at the end the following new subsection: 
‘‘(i) SPECIAL RULE FOR SALES OR DISPOSITIONS TO 
IMPLEMENT FEDERAL ENERGY REGULATORY COMMIS-
SION OR STATE ELECTRIC RESTRUCTURING POLICY.— 
‘‘(1) IN GENERAL.—In the case of any quali-
fying electric transmission transaction for which the 
taxpayer elects the application of this section, quali-
fied gain from such transaction shall be recog-
nized— 
‘‘(A) in the taxable year which includes the 
date of such transaction to the extent the 
amount realized from such transaction ex-
ceeds—
903 
‘‘(i) the cost of exempt utility property 
which is purchased by the taxpayer during 
the 4-year period beginning on such date, 
reduced (but not below zero) by 
‘‘(ii) any portion of such cost pre-
viously taken into account under this sub-
section, and 
‘‘(B) ratably over the 8-taxable year period 
beginning with the taxable year which includes 
the date of such transaction, in the case of any 
such gain not recognized under subparagraph 
(A). 
‘‘(2) QUALIFIED GAIN.—For purposes of this 
subsection, the term ‘qualified gain’ means, with re-
spect to any qualifying electric transmission trans-
action in any taxable year— 
‘‘(A) any ordinary income derived from 
such transaction which would be required to be 
recognized under section 1245 or 1250 for such 
taxable year (determined without regard to this 
subsection), and 
‘‘(B) any income derived from such trans-
action in excess of the amount described in sub-
paragraph (A) which is required to be included
904 
in gross income for such taxable year (deter-
mined without regard to this subsection). 
‘‘(3) QUALIFYING
ELECTRIC
TRANSMISSION 
TRANSACTION.—For purposes of this subsection, the 
term ‘qualifying electric transmission transaction’ 
means any sale or other disposition before January 
1, 2007, of— 
‘‘(A) property used in the trade or business 
of providing electric transmission services, or 
‘‘(B) any stock or partnership interest in a 
corporation or partnership, as the case may be, 
whose principal trade or business consists of 
providing electric transmission services, 
but only if such sale or disposition is to an inde-
pendent transmission company. 
‘‘(4) 
INDEPENDENT
TRANSMISSION
COM-
PANY.—For purposes of this subsection, the term 
‘independent transmission company’ means— 
‘‘(A) an independent transmission provider 
approved by the Federal Energy Regulatory 
Commission, 
‘‘(B) a person— 
‘‘(i) who the Federal Energy Regu-
latory Commission determines in its au-
thorization of the transaction under section
905 
203 of the Federal Power Act (16 U.S.C. 
824b) or by declaratory order is not a 
market participant within the meaning of 
such Commission’s rules applicable to inde-
pendent transmission providers, and 
‘‘(ii) whose transmission facilities to 
which the election under this subsection 
applies are under the operational control of 
a Federal Energy Regulatory Commission- 
approved independent transmission pro-
vider before the close of the period speci-
fied in such authorization, but not later 
than the close of the period applicable 
under subsection (a)(2)(B) as extended 
under paragraph (2), or 
‘‘(C) in the case of facilities subject to the 
jurisdiction of the Public Utility Commission of 
Texas— 
‘‘(i) a person which is approved by 
that Commission as consistent with Texas 
State law regarding an independent trans-
mission provider, or 
‘‘(ii) a political subdivision or affiliate 
thereof whose transmission facilities are
906 
under the operational control of a person 
described in clause (i). 
‘‘(5) EXEMPT
UTILITY
PROPERTY.—For pur-
poses of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘exempt 
utility property’ means property used in the 
trade or business of— 
‘‘(i) generating, transmitting, distrib-
uting, or selling electricity, or 
‘‘(ii) producing, transmitting, distrib-
uting, or selling natural gas. 
‘‘(B) NONRECOGNITION OF GAIN BY REA-
SON OF ACQUISITION OF STOCK.—Acquisition of 
control of a corporation shall be taken into ac-
count under this subsection with respect to a 
qualifying electric transmission transaction only 
if the principal trade or business of such cor-
poration is a trade or business referred to in 
subparagraph (A). 
‘‘(6) 
SPECIAL
RULE
FOR
CONSOLIDATED 
GROUPS.—In the case of a corporation which is a 
member of an affiliated group filing a consolidated 
return, any exempt utility property purchased by an-
other member of such group shall be treated as pur-
907 
chased by such corporation for purposes of applying 
paragraph (1)(A). 
‘‘(7) 
TIME
FOR
ASSESSMENT
OF
DEFI-
CIENCIES.—If the taxpayer has made the election 
under paragraph (1) and any gain is recognized by 
such taxpayer as provided in paragraph (1)(B), 
then— 
‘‘(A) the statutory period for the assess-
ment of any deficiency, for any taxable year in 
which any part of the gain on the transaction 
is realized, attributable to such gain shall not 
expire prior to the expiration of 3 years from 
the date the Secretary is notified by the tax-
payer (in such manner as the Secretary may by 
regulations prescribe) of the purchase of exempt 
utility property or of an intention not to pur-
chase such property, and 
‘‘(B) such deficiency may be assessed be-
fore the expiration of such 3-year period not-
withstanding any law or rule of law which 
would otherwise prevent such assessment. 
‘‘(8) PURCHASE.—For purposes of this sub-
section, the taxpayer shall be considered to have 
purchased any property if the unadjusted basis of
908 
such property is its cost within the meaning of sec-
tion 1012. 
‘‘(9) ELECTION.—An election under paragraph 
(1) shall be made at such time and in such manner 
as the Secretary may require and, once made, shall 
be irrevocable. 
‘‘(10) 
NONAPPLICATION
OF
INSTALLMENT 
SALES TREATMENT.—Section 453 shall not apply to 
any qualifying electric transmission transaction with 
respect to which an election to apply this subsection 
is made.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transactions occurring after the 
date of the enactment of this Act, in taxable years ending 
after such date. 
SEC. 1328. MODIFICATIONS TO SPECIAL RULES FOR NU-
CLEAR DECOMMISSIONING COSTS. 
(a) REPEAL
OF LIMITATION
ON DEPOSITS INTO 
FUND BASED ON COST OF SERVICE; CONTRIBUTIONS 
AFTER FUNDING PERIOD.—Subsection (b) of section 
468A (relating to special rules for nuclear decommis-
sioning costs) is amended to read as follows: 
‘‘(b) LIMITATION ON AMOUNTS PAID INTO FUND.— 
‘‘(1) IN GENERAL.—The amount which a tax-
payer may pay into the Fund for any taxable year
972 
‘‘(B) PROPERTY CEASES TO QUALIFY FOR 
PROGRESS
EXPENDITURES.—Rules similar to 
the rules of this paragraph shall apply in cases 
where qualified progress expenditures were 
taken into account under the rules referred to 
in section 48A(g)(1). 
‘‘(C) INCREASED RECAPTURE IN CERTAIN 
CASES.—The fraction in subparagraph (A)(ii) 
shall be 1 in any case in which the property 
ceases to be a basic or advanced clean coal 
technology unit by reason of paragraph (3), (4), 
or (5) of section 48A(g). 
‘‘(D) COORDINATION WITH OTHER RECAP-
TURE
RULES.—Paragraphs (1) and (2) shall 
not apply to qualified clean coal property. 
‘‘(E) DEFINITIONS.—Terms used in this 
section which are also used in section 48A shall 
have the meanings given to such terms in sec-
tion 48A.’’. 
(2) Paragraph (4) of section 50(a), as redesig-
nated by paragraph (1), is amended by striking ‘‘or 
(2)’’ and inserting ‘‘, (2), or (3)’’. 
(3) Paragraph (5) of section 50(a), as so redes-
ignated, is amended by striking ‘‘and (2)’’ and in-
serting ‘‘, (2), and (3)’’.