187 
engine which is certified as meeting the 
emission standards set in the regulations 
prescribed by the Administrator of the En-
vironmental Protection Agency for 2007 
and later model year diesel heavy duty en-
gines, or for 2008 and later model year 
ottocycle heavy duty engines, as applicable. 
‘‘(ii) MAXIMUM AVAILABLE POWER.— 
‘‘(I) PASSENGER
AUTOMOBILE, 
MEDIUM DUTY PASSENGER VEHICLE, 
OR LIGHT TRUCK.—For purposes of 
subparagraph (A)(i), the term ‘max-
imum available power’ means the 
maximum power available from the re-
chargeable energy storage system, 
during a standard 10 second pulse 
power or equivalent test, divided by 
such maximum power and the SAE 
net power of the heat engine. 
‘‘(II) 
HEAVY
DUTY
HYBRID 
MOTOR
VEHICLE.—For purposes of 
subparagraph (A)(ii), the term ‘max-
imum available power’ means the 
maximum power available from the re-
chargeable energy storage system,
188 
during a standard 10 second pulse 
power or equivalent test, divided by 
the vehicle’s total traction power. The 
term ‘total traction power’ means the 
sum of the peak power from the re-
chargeable energy storage system and 
the heat engine peak power of the ve-
hicle, except that if such storage sys-
tem is the sole means by which the ve-
hicle can be driven, the total traction 
power is the peak power of such stor-
age system. 
‘‘(3) NEW
QUALIFIED
HYBRID
MOTOR
VEHI-
CLE.—For purposes of this subsection, the term 
‘new qualified hybrid motor vehicle’ means a motor 
vehicle— 
‘‘(A) which draws propulsion energy from 
onboard sources of stored energy which are 
both— 
‘‘(i) an internal combustion or heat 
engine using combustible fuel, and 
‘‘(ii) a rechargeable energy storage 
system, 
‘‘(B) which, in the case of a passenger 
automobile, medium duty passenger vehicle, or
189 
light truck, has received a certificate that such 
vehicle meets or exceeds the Bin 5 Tier II emis-
sion level established in regulations prescribed 
by the Administrator of the Environmental Pro-
tection Agency under section 202(i) of the 
Clean Air Act for that make and model year ve-
hicle, 
‘‘(C) which, in the case of a heavy duty hy-
brid motor vehicle, the internal combustion or 
heat engine of which has received a certificate 
of conformity under the Clean Air Act as meet-
ing the emission standards set in the regula-
tions prescribed by the Administrator of the 
Environmental Protection Agency for 2004 
through 2007 model year diesel heavy duty en-
gines or ottocycle heavy duty engines, as appli-
cable, 
‘‘(D) the original use of which commences 
with the taxpayer, 
‘‘(E) which is acquired for use or lease by 
the taxpayer and not for resale, and 
‘‘(F) which is made by a manufacturer. 
‘‘(4) HEAVY DUTY HYBRID MOTOR VEHICLE.— 
For purposes of this subsection, the term ‘heavy 
duty hybrid motor vehicle’ means a new qualified hy-
190 
brid motor vehicle which has a gross vehicle weight 
rating of more than 8,500 pounds. Such term does 
not include a medium duty passenger vehicle. 
‘‘(d) APPLICATION WITH OTHER CREDITS.—The 
credit allowed under subsection (a) for any taxable year 
shall not exceed the excess (if any) of— 
‘‘(1) the regular tax for the taxable year re-
duced by the sum of the credits allowable under sub-
part A and sections 27, 29, and 30, over 
‘‘(2) the tentative minimum tax for the taxable 
year. 
‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.— 
For purposes of this section— 
‘‘(1) 
CONSUMABLE
FUEL.—The 
term 
‘consumable fuel’ means any solid, liquid, or gaseous 
matter which releases energy when consumed by an 
auxiliary power unit. 
‘‘(2) MOTOR VEHICLE.—The term ‘motor vehi-
cle’ has the meaning given such term by section 
30(c)(2). 
‘‘(3) CITY FUEL ECONOMY.—The city fuel econ-
omy with respect to any vehicle shall be measured in 
a manner which is substantially similar to the man-
ner city fuel economy is measured in accordance 
with procedures under part 600 of subchapter Q of
191 
chapter I of title 40, Code of Federal Regulations, 
as in effect on the date of the enactment of this sec-
tion. 
‘‘(4) OTHER TERMS.—The terms ‘automobile’, 
‘passenger automobile’, ‘medium duty passenger ve-
hicle’, ‘light truck’, and ‘manufacturer’ have the 
meanings given such terms in regulations prescribed 
by the Administrator of the Environmental Protec-
tion Agency for purposes of the administration of 
title II of the Clean Air Act (42 U.S.C. 7521 et 
seq.). 
‘‘(5) REDUCTION IN BASIS.—For purposes of 
this subtitle, the basis of any property for which a 
credit is allowable under subsection (a) shall be re-
duced by the amount of such credit so allowed (de-
termined without regard to subsection (e)). 
‘‘(6) NO
DOUBLE
BENEFIT.—The amount of 
any deduction or other credit allowable under this 
chapter— 
‘‘(A) for any incremental cost taken into 
account in computing the amount of the credit 
determined under subsection (d) shall be re-
duced by the amount of such credit attributable 
to such cost, and
192 
‘‘(B) with respect to a vehicle described 
under subsection (b) or (c), shall be reduced by 
the amount of credit allowed under subsection 
(a) for such vehicle for the taxable year. 
‘‘(7) PROPERTY USED BY TAX-EXEMPT ENTI-
TIES.—In the case of a credit amount which is al-
lowable with respect to a motor vehicle which is ac-
quired by an entity exempt from tax under this 
chapter, the person which sells or leases such vehicle 
to the entity shall be treated as the taxpayer with 
respect to the vehicle for purposes of this section 
and the credit shall be allowed to such person, but 
only if the person clearly discloses to the entity at 
the time of any sale or lease the specific amount of 
any credit otherwise allowable to the entity under 
this section. 
‘‘(8) RECAPTURE.—The Secretary shall, by reg-
ulations, provide for recapturing the benefit of any 
credit allowable under subsection (a) with respect to 
any property which ceases to be property eligible for 
such credit (including recapture in the case of a 
lease period of less than the economic life of a vehi-
cle). 
‘‘(9) 
PROPERTY
USED
OUTSIDE
UNITED 
STATES, ETC., NOT QUALIFIED.—No credit shall be
193 
allowed under subsection (a) with respect to any 
property referred to in section 50(b) or with respect 
to the portion of the cost of any property taken into 
account under section 179. 
‘‘(10) ELECTION TO NOT TAKE CREDIT.—No 
credit shall be allowed under subsection (a) for any 
vehicle if the taxpayer elects to not have this section 
apply to such vehicle. 
‘‘(11) CARRYBACK
AND
CARRYFORWARD
AL-
LOWED.— 
‘‘(A) IN GENERAL.—If the credit amount 
allowable under subsection (a) for a taxable 
year exceeds the amount of the limitation under 
subsection (e) for such taxable year (in this 
paragraph referred to as the ‘unused credit 
year’), such excess shall be allowed as a credit 
carryback for each of the 3 taxable years begin-
ning after the date of the enactment of this sec-
tion, which precede the unused credit year and 
a credit carryforward for each of the 20 taxable 
years which succeed the unused credit year. 
‘‘(B) RULES.—Rules similar to the rules of 
section 39 shall apply with respect to the credit 
carryback and credit carryforward under sub-
paragraph (A).
194 
‘‘(12) INTERACTION
WITH
AIR
QUALITY
AND 
MOTOR VEHICLE SAFETY STANDARDS.—Unless oth-
erwise provided in this section, a motor vehicle shall 
not be considered eligible for a credit under this sec-
tion unless such vehicle is in compliance with— 
‘‘(A) the applicable provisions of the Clean 
Air Act for the applicable make and model year 
of the vehicle (or applicable air quality provi-
sions of State law in the case of a State which 
has adopted such provision under a waiver 
under section 209(b) of the Clean Air Act), and 
‘‘(B) the motor vehicle safety provisions of 
sections 30101 through 30169 of title 49, 
United States Code. 
‘‘(f) REGULATIONS.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the Secretary shall promulgate such regu-
lations as necessary to carry out the provisions of 
this section. 
‘‘(2) COORDINATION IN PRESCRIPTION OF CER-
TAIN REGULATIONS.—The Secretary of the Treas-
ury, in coordination with the Secretary of Transpor-
tation and the Administrator of the Environmental 
Protection Agency, shall prescribe such regulations 
as necessary to determine whether a motor vehicle
195 
meets the requirements to be eligible for a credit 
under this section. 
‘‘(g) TERMINATION.—This section shall not apply to 
any property purchased after— 
‘‘(1) in the case of a new qualified fuel cell 
motor vehicle (as described in subsection (b)), De-
cember 31, 2014, and 
‘‘(2) in the case of any other property, Decem-
ber 31, 2010.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 1016(a) is amended by striking 
‘‘and’’ at the end of paragraph (37), by striking the 
period at the end of paragraph (38) and inserting ‘‘, 
and’’, and by adding at the end the following new 
paragraph: 
‘‘(39) to the extent provided in section 
30B(e)(5).’’. 
(2) Section 55(c)(2) is amended by inserting 
‘‘30B(d),’’ after ‘‘30(b)(3)’’. 
(3) Section 6501(m) is amended by inserting 
‘‘30B(e)(10),’’ after ‘‘30(d)(4),’’. 
(4) The table of sections for subpart B of part 
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 30A the fol-
lowing new item: 
‘‘30B. Alternative motor vehicle credit.’’.
196 
(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. 
Subtitle C—Industry Incentives 
SEC. 521. ENERGY CREDIT FOR COMBINED HEAT AND 
POWER SYSTEM PROPERTY. 
(a) IN GENERAL.—Section 48(a)(3)(A) (defining en-
ergy property), as amended by this Act, is amended to 
read as follows: 
‘‘(A) which is— 
‘‘(i) equipment used to produce, dis-
tribute, or use energy derived from a geo-
thermal deposit (within the meaning of 
section 613(e)(2)), but only, in the case of 
electricity generated by geothermal power, 
up to (but not including) the electrical 
transmission stage, or 
‘‘(ii) combined heat and power system 
property,’’. 
(b) COMBINED HEAT AND POWER SYSTEM PROP-
ERTY.—Section 48 (relating to energy credit) is amended 
by redesignating subsection (b) as paragraph (5) of sub-
section (a), by moving such paragraph (5) two ems to the
197 
right, and by adding at the end the following new sub-
section: 
‘‘(b) COMBINED HEAT AND POWER SYSTEM PROP-
ERTY.—For purposes of subsection (a)(3)(A)(ii)— 
‘‘(1) COMBINED
HEAT
AND
POWER
SYSTEM 
PROPERTY.—The term ‘combined heat and power 
system property’ means property comprising a sys-
tem— 
‘‘(A) which uses the same energy source 
for the simultaneous or sequential generation of 
electrical power, mechanical shaft power, or 
both, in combination with the generation of 
steam or other forms of useful thermal energy 
(including heating and cooling applications), 
‘‘(B) which has an electrical capacity of 
not more than 15 megawatts or a mechanical 
energy capacity of not more than 2,000 horse-
power or an equivalent combination of electrical 
and mechanical energy capacities, 
‘‘(C) which produces— 
‘‘(i) at least 20 percent of its total 
useful energy in the form of thermal en-
ergy which is not used to produce electrical 
or mechanical power (or combination 
thereof), and
198 
‘‘(ii) at least 20 percent of its total 
useful energy in the form of electrical or 
mechanical power (or combination thereof), 
‘‘(D) the energy efficiency percentage of 
which exceeds 60 percent, and 
‘‘(E) which is placed in service before Jan-
uary 1, 2009. 
‘‘(2) SPECIAL RULES.— 
‘‘(A) 
ENERGY
EFFICIENCY
PERCENT-
AGE.—For purposes of this subsection, the en-
ergy efficiency percentage of a system is the 
fraction— 
‘‘(i) the numerator of which is the 
total useful electrical, thermal, and me-
chanical power produced by the system at 
normal operating rates, and expected to be 
consumed in its normal application, and 
‘‘(ii) the denominator of which is the 
lower heating value of the fuel sources for 
the system. 
‘‘(B) DETERMINATIONS
MADE
ON
BTU 
BASIS.—The energy efficiency percentage and 
the percentages under paragraph (1)(C) shall 
be determined on a Btu basis.
199 
‘‘(C) INPUT AND OUTPUT PROPERTY NOT 
INCLUDED.—The term ‘combined heat and 
power system property’ does not include prop-
erty used to transport the energy source to the 
facility or to distribute energy produced by the 
facility. 
‘‘(D) PUBLIC UTILITY PROPERTY.— 
‘‘(i) ACCOUNTING RULE FOR PUBLIC 
UTILITY PROPERTY.—If the combined heat 
and power system property is public utility 
property (as defined in section 168(i)(10)), 
the taxpayer may only claim the credit 
under subsection (a) if, with respect to 
such property, the taxpayer uses a normal-
ization method of accounting. 
‘‘(ii) CERTAIN
EXCEPTION
NOT
TO 
APPLY.—The matter in subsection (a)(3) 
which follows subparagraph (D) thereof 
shall not apply to combined heat and 
power system property. 
‘‘(E) 
NONAPPLICATION
OF
CERTAIN 
RULES.—For purposes of determining if the 
term ‘combined heat and power system prop-
erty’ includes technologies which generate elec-
tricity or mechanical power using back-pressure
200 
steam turbines in place of existing pressure-re-
ducing valves or which make use of waste heat 
from industrial processes such as by using or-
ganic rankine, stirling, or kalina heat engine 
systems, paragraph (1) shall be applied without 
regard to subparagraphs (A), (C), and (D) 
thereof.’’ 
‘‘(3) SYSTEMS USING BAGASSE.—If a system is 
designed to use bagasse for at least 90 percent of 
the energy source— 
‘‘(A) paragraph (1)(D) shall not apply, but 
‘‘(B) the amount of credit determined 
under subsection (a) with respect to such sys-
tem shall not exceed the amount which bears 
the same ratio to such amount of credit (deter-
mined without regard to this paragraph) as the 
energy efficiency percentage of such system 
bears to 60 percent.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this subsection shall apply to periods after December 31, 
2005, in taxable years ending after such date, under rules 
similar to the rules of section 48(m) of the Internal Rev-
enue Code of 1986 (as in effect on the day before the date
201 
of the enactment of the Revenue Reconciliation Act of 
1990). 
Æ