I
107TH CONGRESS
1ST SESSION
H. R. 2502
To amend the Internal Revenue Code of 1986 to assist small business refiners
in complying with Environmental Protection Agency sulfur regulations.
IN THE HOUSE OF REPRESENTATIVES
JULY 16, 2001
Mr. HORN (for himself, Mr. WATKINS of Oklahoma, Mr. PETERSON of Penn-
sylvania, Mr. WATTS of Oklahoma, Mr. DOOLITTLE, Mr. DOOLEY of Cali-
fornia, Mr. INSLEE, Mr. DICKS, Mr. MCINNIS, and Mr. ENGLISH) intro-
duced the following bill; which was referred to the Committee on Ways
and Means
A BILL
To amend the Internal Revenue Code of 1986 to assist
small business refiners in complying with Environmental
Protection Agency sulfur regulations.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. EXPENSING OF CAPITAL COSTS INCURRED IN
COMPLYING WITH ENVIRONMENTAL PROTEC-
TION AGENCY SULFUR REGULATIONS.
(a) IN GENERAL.—Section 179(b) of the Internal
Revenue Code of 1986 (relating to election to expense cer-
(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. 2. ENVIRONMENTAL TAX CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business-related credits) is amended by
adding at the end the following new section:
‘‘SEC. 45G. ENVIRONMENTAL TAX CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 38, the
amount of the environmental tax credit determined under
this section with respect to any small business refiner for
any taxable year is an amount equal to 5 cents for every
gallon of 15 parts per million or less sulfur diesel produced
at a facility by such small business refiner.
‘‘(b) MAXIMUM CREDIT.—For any small business re-
finer, the aggregate amount allowable as a credit under
subsection (a) for any taxable year with respect to any
facility shall not exceed 25 percent of the qualified capital
costs incurred by such small business refiner with respect
to such facility not taken into account in determining the
credit under subsection (a) for any preceding taxable year.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) SMALL
BUSINESS
REFINER.—The term
‘small business refiner’ means, with respect to any
taxable year, a refiner which, within the refining op-
erations of the business, employs not more than
1,500 employees on business days during such tax-
able year and has less than 155,000 barrels per day
total capacity.
‘‘(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 15 parts per million or less sulfur diesel
fuel, associated adjacent or offsite equipment (in-
cluding tankage, catalyst, and power supply), engi-
neering, 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 with the date of the enactment of
this section and ending with the date which is one
year after the date on which the taxpayer must com-
ply with the applicable EPA regulations with respect
to such facility.
‘‘(d) REDUCTION IN BASIS.—For purposes of this
subtitle, if a credit is determined under this section with
respect to any property by reason of qualified capital
costs, the basis of such property shall be reduced by the
amount of the credit so determined.
‘‘(e) CERTIFICATION.—
‘‘(1) REQUIRED.—Not later than the date
which is 30 months after the first day of the first
taxable year in which the environmental tax credit is
allowed with respect to a facility, the small business
refiner must obtain certification from the Secretary,
in consultation with the Administrator of the Envi-
ronmental Protection Agency, that the taxpayer’s
qualified capital costs with respect to such facility
will result in compliance with the applicable EPA
regulations.
‘‘(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, in consultation
with the Administrator of the Environmental Protec-
tion Agency, to determine that such qualified capital
costs are necessary for compliance with the applica-
ble EPA regulations.
‘‘(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.
‘‘(4) RECAPTURE.—Notwithstanding subsection
(f), failure to obtain certification under paragraph
(1) constitutes a recapture event under subsection
(f) with an applicable percentage of 100 percent.
‘‘(f) RECAPTURE OF ENVIRONMENTAL TAX CRED-
IT.—
‘‘(1) IN GENERAL.—Except as provided in sub-
section (e), if, as of the close of any taxable year,
there is a recapture event with respect to any facility
of the small business refiner, then the tax of such
refiner under this chapter for such taxable year shall
be increased by an amount equal to the product of—
‘‘(A) the applicable recapture percentage,
and
‘‘(B) the aggregate decrease in the credits
allowed under section 38 for all prior taxable
years which would have resulted if the qualified
capital costs of the taxpayer described in sub-
section (c)(2) with respect to such facility had
been zero.
‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the applicable recapture percentage
shall be determined from the following table:
The applicable
recapture
‘‘If the recapture event occurs in:
percentage is:
Year 1 ........................................................................
100
Year 2 ........................................................................
Year 3 ........................................................................
Year 4 ........................................................................
Year 5 ........................................................................
Years 6 and thereafter ..............................................
0.
‘‘(B) YEARS.—For purposes of subpara-
graph (A), year 1 shall begin on the first day
of the taxable year in which the qualified cap-
ital costs with respect to a facility described in
subsection (c)(2) are paid or incurred by the
taxpayer.
‘‘(3) RECAPTURE EVENT DEFINED.—For pur-
poses of this subsection, the term ‘recapture event’
means—
‘‘(A) FAILURE
TO
COMPLY.—The failure
by the small business refiner to meet the appli-
cable EPA regulations within the applicable pe-
riod with respect to the facility.
‘‘(B) CESSATION
OF
OPERATION.—The
cessation of the operation of the facility as a fa-
cility which produces 15 parts per million or
less sulfur diesel after the applicable period.
‘‘(C) CHANGE IN OWNERSHIP.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), the disposition of a
small business refiner’s interest in the fa-
cility with respect to which the credit de-
scribed in subsection (a) was allowable.
‘‘(ii) AGREEMENT TO ASSUME RECAP-
TURE
LIABILITY.—Clause (i) shall not
apply if the person acquiring such interest
in the facility agrees in writing to assume
the recapture liability of the person dis-
posing of such interest in effect imme-
diately before such disposition. In the
event of such an assumption, the person
acquiring the interest in the facility shall
be treated as the taxpayer for purposes of
assessing any recapture liability (computed
as if there had been no change in owner-
ship).
‘‘(4) SPECIAL RULES.—
‘‘(A) TAX
BENEFIT
RULE.—The tax for
the taxable year shall be increased under para-
graph (1) only with respect to credits allowed