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‘‘(ii) In the case of a new qualified hy-
brid motor vehicle which is a heavy duty
hybrid motor vehicle and which provides the
following percentage of the maximum avail-
able power:
‘‘(I) If such vehicle has a gross ve-
hicle weight rating of not more than
14,000 pounds:
‘‘If percentage of the maximum
available power is:
The credit amount is:
At least 20 percent but less than 30 percent ...............................
$1,000
At least 30 percent but less than 40 percent ...............................
$1,750
At least 40 percent but less than 50 percent ...............................
$2,000
At least 50 percent but less than 60 percent ...............................
$2,250
At least 60 percent .........................................................................
$2,500.
‘‘(II) If such vehicle has a gross
vehicle weight rating of more than
14,000 but not more than 26,000
pounds:
‘‘If percentage of the maximum
available power is:
The credit amount is:
At least 20 percent but less than 30 percent ...............................
$4,000
At least 30 percent but less than 40 percent ...............................
$4,500
At least 40 percent but less than 50 percent ...............................
$5,000
At least 50 percent but less than 60 percent ...............................
$5,500
At least 60 percent .........................................................................
$6,000.
‘‘(III) If such vehicle has a gross
vehicle weight rating of more than
26,000 pounds:
‘‘If percentage of the maximum
available power is:
The credit amount is:
At least 20 percent but less than 30 percent ...............................
$6,000
At least 30 percent but less than 40 percent ...............................
$7,000
At least 40 percent but less than 50 percent ...............................
$8,000
At least 50 percent but less than 60 percent ...............................
$9,000
At least 60 percent .........................................................................
$10,000.
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‘‘(B) INCREASE FOR FUEL EFFICIENCY.—
‘‘(i) AMOUNT.—The amount deter-
mined under subparagraph (A)(i) with re-
spect to a new qualified hybrid motor vehi-
cle which is a passenger automobile or light
truck shall be increased by—
‘‘(I) $500, if such vehicle achieves
at least 125 percent but less than 150
percent of the 2000 model year city
fuel economy,
‘‘(II) 
$1,000, 
if 
such 
vehicle
achieves at least 150 percent but less
than 175 percent of the 2000 model
year city fuel economy,
‘‘(III) $1,500, if such vehicle
achieves at least 175 percent but less
than 200 percent of the 2000 model
year city fuel economy,
‘‘(IV) $2,000, if such vehicle
achieves at least 200 percent but less
than 225 percent of the 2000 model
year city fuel economy,
‘‘(V) 
$2,500, 
if 
such 
vehicle
achieves at least 225 percent but less
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than 250 percent of the 2000 model
year city fuel economy, and
‘‘(VI) $3,000, if such vehicle
achieves at least 250 percent of the
2000 model year city fuel economy.
‘‘(ii) 2000 MODEL
YEAR
CITY
FUEL
ECONOMY.—For purposes of clause (i), the
2000 model year city fuel economy with re-
spect to a vehicle shall be determined using
the tables provided in subsection (b)(2)(B)
with respect to such vehicle.
‘‘(C) INCREASE
FOR
ACCELERATED
EMIS-
SIONS PERFORMANCE.—The amount determined
under subparagraph (A)(ii) with respect to an
applicable heavy duty hybrid motor vehicle shall
be increased by the increased credit amount de-
termined in accordance with the following tables:
‘‘(i) In the case of a vehicle which has
a gross vehicle weight rating of not more
than 14,000 pounds:
‘‘If the model year is:
The increased credit amount is:
2002 ................................................................................................
$3,500
2003 ................................................................................................
$3,000
2004 ................................................................................................
$2,500
2005 ................................................................................................
$2,000
2006 ................................................................................................
$1,500.
‘‘(ii) In the case of a vehicle which has
a gross vehicle weight rating of more than
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14,000 pounds but not more than 26,000
pounds:
‘‘If the model year is:
The increased credit amount is:
2002 ................................................................................................
$9,000
2003 ................................................................................................
$7,750
2004 ................................................................................................
$6,500
2005 ................................................................................................
$5,250
2006 ................................................................................................
$4,000.
‘‘(iii) In the case of a vehicle which has
a gross vehicle weight rating of more than
26,000 pounds:
‘‘If the model year is:
The increased credit amount is:
2002 ................................................................................................
$14,000
2003 ................................................................................................
$12,000
2004 ................................................................................................
$10,000
2005 ................................................................................................
$8,000
2006 ................................................................................................
$6,000.
‘‘(D) DEFINITIONS.—
‘‘(i) APPLICABLE HEAVY DUTY HYBRID
MOTOR VEHICLE.—For purposes of subpara-
graph (C), the term ‘applicable heavy duty
hybrid motor vehicle’ means a heavy duty
hybrid motor vehicle which is powered by
an internal combustion or heat engine
which is certified as meeting the emission
standards set in the regulations prescribed
by the Administrator of the Environmental
Protection Agency for 2007 and later model
year diesel heavy duty engines, or for 2008
and later model year ottocycle heavy duty
engines, as applicable.
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‘‘(ii) HEAVY DUTY HYBRID MOTOR VE-
HICLE.—For purposes of this paragraph,
the term ‘heavy duty hybrid motor vehicle’
means a new qualified hybrid motor vehicle
which has a gross vehicle weight rating of
more than 10,000 pounds and draws pro-
pulsion energy from both of the following
onboard sources of stored energy:
‘‘(I) An internal combustion or
heat engine using consumable fuel
which, for 2002 and later model vehi-
cles, has received a certificate of con-
formity under the Clean Air Act and
meets or exceeds a level of not greater
than 3.0 grams per brake horsepower–
hour of oxides of nitrogen and 0.01 per
brake horsepower–hour of particulate
matter.
‘‘(II) A rechargeable energy stor-
age system.
‘‘(iii) MAXIMUM AVAILABLE POWER.—
‘‘(I) PASSENGER AUTOMOBILE OR
LIGHT TRUCK.—For purposes of sub-
paragraph (A)(i), the term ‘maximum
available power’ means the maximum
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power available from the rechargeable
energy storage system, during a stand-
ard 10 second pulse power or equiva-
lent test, divided by such maximum
power and the SAE net power of the
heat engine.
‘‘(II) HEAVY DUTY HYBRID MOTOR
VEHICLE.—For purposes of subpara-
graph (A)(ii), the term ‘maximum
available power’ means the maximum
power available from the rechargeable
energy storage system, during a stand-
ard 10 second pulse power or equiva-
lent test, divided by the vehicle’s total
traction power. The term ‘total trac-
tion power’ means the sum of the peak
power from the rechargeable energy
storage system and the heat engine
peak power of the vehicle, except that if
such storage system is the sole means
by which the vehicle can be driven, the
total traction power is the peak power
of such storage system.
‘‘(3) NEW
QUALIFIED
HYBRID
MOTOR
VEHI-
CLE.—For purposes of this subsection, the term ‘new
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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 en-
gine using combustible fuel, and
‘‘(ii) a rechargeable energy storage sys-
tem,
‘‘(B) which, in the case of a passenger auto-
mobile or light truck—
‘‘(i) for 2002 and later model vehicles,
has received a certificate of conformity
under the Clean Air Act and meets or ex-
ceeds the equivalent qualifying California
low emission vehicle standard under section
243(e)(2) of the Clean Air Act for that make
and model year, and
‘‘(ii) for 2004 and later model vehicles,
has received a certificate that such vehicle
meets or exceeds the Bin 5 Tier II emission
level established in regulations prescribed by
the Administrator of the Environmental
Protection Agency under section 202(i) of
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the Clean Air Act for that make and model
year vehicle,
‘‘(C) the original use of which commences
with the taxpayer,
‘‘(D) which is acquired for use or lease by
the taxpayer and not for resale, and
‘‘(E) which is made by a manufacturer.
‘‘(d) NEW QUALIFIED ALTERNATIVE FUEL MOTOR VE-
HICLE CREDIT.—
‘‘(1) ALLOWANCE OF CREDIT.—Except as pro-
vided in paragraph (5), the credit determined under
this subsection is an amount equal to the applicable
percentage of the incremental cost of any new quali-
fied alternative fuel motor vehicle placed in service by
the taxpayer during the taxable year.
‘‘(2) APPLICABLE
PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage with re-
spect to any new qualified alternative fuel motor vehi-
cle is—
‘‘(A) 40 percent, plus
‘‘(B) 30 percent, if such vehicle—
‘‘(i) has received a certificate of con-
formity under the Clean Air Act and meets
or exceeds the most stringent standard
available for certification under the Clean
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Air Act for that make and model year vehi-
cle (other than a zero emission standard), or
‘‘(ii) has received an order certifying
the vehicle as meeting the same require-
ments as vehicles which may be sold or
leased in California and meets or exceeds
the most stringent standard available for
certification under the State laws of Cali-
fornia (enacted in accordance with a waiver
granted under section 209(b) of the Clean
Air Act) for that make and model year vehi-
cle (other than a zero emission standard).
‘‘(3) INCREMENTAL COST.—For purposes of this
subsection, the incremental cost of any new qualified
alternative fuel motor vehicle is equal to the amount
of the excess of the manufacturer’s suggested retail
price for such vehicle over such price for a gasoline
or diesel fuel motor vehicle of the same model, to the
extent such amount does not exceed—
‘‘(A) $5,000, if such vehicle has a gross ve-
hicle weight rating of not more than 8,500
pounds,
‘‘(B) $10,000, if such vehicle has a gross ve-
hicle weight rating of more than 8,500 pounds
but not more than 14,000 pounds,
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‘‘(C) $25,000, if such vehicle has a gross ve-
hicle weight rating of more than 14,000 pounds
but not more than 26,000 pounds, and
‘‘(D) $40,000, if such vehicle has a gross ve-
hicle weight rating of more than 26,000 pounds.
‘‘(4) QUALIFIED ALTERNATIVE FUEL MOTOR VE-
HICLE DEFINED.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘qualified al-
ternative fuel motor vehicle’ means any motor
vehicle—
‘‘(i) which is only capable of operating
on an alternative fuel,
‘‘(ii) the original use of which com-
mences with the taxpayer,
‘‘(iii) which is acquired by the tax-
payer for use or lease, but not for resale,
and
‘‘(iv) which is made by a manufac-
turer.
‘‘(B) ALTERNATIVE FUEL.—The term ‘alter-
native fuel’ means compressed natural gas, lique-
fied natural gas, liquefied petroleum gas, hydro-
gen, and any liquid at least 85 percent of the
volume of which consists of methanol.
‘‘(5) CREDIT FOR MIXED-FUEL VEHICLES.—
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‘‘(A) IN GENERAL.—In the case of a mixed-
fuel vehicle placed in service by the taxpayer
during the taxable year, the credit determined
under this subsection is an amount equal to—
‘‘(i) in the case of a 75/25 mixed-fuel
vehicle, 70 percent of the credit which would
have been allowed under this subsection if
such vehicle was a qualified alternative fuel
motor vehicle, and
‘‘(ii) in the case of a 90/10 mixed-fuel
vehicle, 90 percent of the credit which would
have been allowed under this subsection if
such vehicle was a qualified alternative fuel
motor vehicle.
‘‘(B) MIXED-FUEL VEHICLE.—For purposes
of this subsection, the term ‘mixed-fuel vehicle’
means any motor vehicle described in subpara-
graph (C) or (D) of paragraph (3), which—
‘‘(i) is certified by the manufacturer as
being able to perform efficiently in normal
operation on a combination of an alter-
native fuel and a petroleum-based fuel,
‘‘(ii) either—
‘‘(I) has received a certificate of
conformity under the Clean Air Act, or
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‘‘(II) has received an order certi-
fying the vehicle as meeting the same
requirements as vehicles which may be
sold or leased in California and meets
or exceeds the low emission vehicle
standard under section 88.105-94 of
title 40, Code of Federal Regulations,
for that make and model year vehicle,
‘‘(iii) the original use of which com-
mences with the taxpayer,
‘‘(iv) which is acquired by the tax-
payer for use or lease, but not for resale,
and
‘‘(v) which is made by a manufacturer.
‘‘(C) 75/25 
MIXED-FUEL
VEHICLE.—For
purposes of this subsection, the term ‘75/25
mixed-fuel vehicle’ means a mixed-fuel vehicle
which operates using at least 75 percent alter-
native fuel and not more than 25 percent petro-
leum-based fuel.
‘‘(D) 90/10 
MIXED-FUEL
VEHICLE.—For
purposes of this subsection, the term ‘90/10
mixed-fuel vehicle’ means a mixed-fuel vehicle
which operates using at least 90 percent alter-
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native fuel and not more than 10 percent petro-
leum-based fuel.
‘‘(e) 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 reduced
by the sum of the credits allowable under subpart A
and sections 27, 29, and 30, over
‘‘(2) the tentative minimum tax for the taxable
year.
‘‘(f) 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 vehicle’
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 chapter
I of title 40, Code of Federal Regulations, as in effect
on the date of the enactment of this section.
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‘‘(4) OTHER
TERMS.—The terms ‘automobile’,
‘passenger automobile’, ‘light truck’, and ‘manufac-
turer’ have the meanings given such terms in regula-
tions prescribed by the Administrator of the Environ-
mental Protection Agency for purposes of the admin-
istration 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 reduced by
the amount of such credit so allowed (determined
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 ac-
count in computing the amount of the credit de-
termined under subsection (d) shall be reduced
by the amount of such credit attributable to such
cost, and
‘‘(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.
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‘‘(7) PROPERTY
USED
BY
TAX-EXEMPT
ENTI-
TIES.—In the case of a credit amount which is allow-
able with respect to a motor vehicle which is acquired
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 ve-
hicle 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 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 (including recapture in the case of a lease
period of less than the economic life of a vehicle).
‘‘(9) 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) or with respect to the por-
tion 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
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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 al-
lowable under subsection (a) for a taxable year
exceeds the amount of the limitation under sub-
section (e) for such taxable year (in this para-
graph referred to as the ‘unused credit year’),
such excess shall be allowed as a credit carryback
for each of the 3 taxable years beginning after
September 30, 2002, 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).
‘‘(12) INTERACTION
WITH
AIR
QUALITY
AND
MOTOR VEHICLE SAFETY STANDARDS.—Unless other-
wise 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—
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‘‘(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.
‘‘(g) REGULATIONS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the Secretary shall promulgate such regula-
tions as necessary to carry out the provisions of this
section.
‘‘(2) COORDINATION IN PRESCRIPTION OF CER-
TAIN REGULATIONS.—The Secretary of the Treasury,
in coordination with the Secretary of Transportation
and the Administrator of the Environmental Protec-
tion Agency, shall prescribe such regulations as nec-
essary to determine whether a motor vehicle meets the
requirements to be eligible for a credit under this sec-
tion.
‘‘(h) TERMINATION.—This section shall not apply to
any property purchased after—
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‘‘(1) in the case of a new qualified fuel cell motor
vehicle (as described in subsection (b)), December 31,
2011, and
‘‘(2) in the case of any other property, December
31, 2006.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1016(a) is amended by striking
‘‘and’’ at the end of paragraph (27), by striking the
period at the end of paragraph (28) and inserting ‘‘,
and’’, and by adding at the end the following new
paragraph:
‘‘(29) 
to 
the 
extent 
provided 
in 
section
30B(f)(5).’’.
(2) Section 55(c)(2) is amended by inserting
‘‘30B(e),’’ after ‘‘30(b)(3)’’.
(3) Section 6501(m) is amended by inserting
‘‘30B(f)(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 inserting
after the item relating to section 30A the following
new item:
‘‘Sec. 30B. Alternative motor vehicle credit.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to property placed in service after Sep-
tember 30, 2002, in taxable years ending after such date.
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SEC. 2002. MODIFICATION OF CREDIT FOR QUALIFIED
ELECTRIC VEHICLES.
(a) AMOUNT OF CREDIT.—
(1) IN GENERAL.—Section 30(a) (relating to al-
lowance of credit) is amended by striking ‘‘10 percent
of’’.
(2) LIMITATION OF CREDIT ACCORDING TO TYPE
OF VEHICLE.—Section 30(b) (relating to limitations)
is amended—
(A) by striking paragraphs (1) and (2) and
inserting the following new paragraph:
‘‘(1) LIMITATION ACCORDING TO TYPE OF VEHI-
CLE.—The amount of the credit allowed under sub-
section (a) for any vehicle shall not exceed the greatest
of the following amounts applicable to such vehicle:
‘‘(A) In the case of a vehicle which conforms
to the Motor Vehicle Safety Standard 500 pre-
scribed by the Secretary of Transportation, as in
effect on the date of the enactment of the Energy
Tax Incentives Act of 2002, the lesser of—
‘‘(i) 10 percent of the manufacturer’s
suggested retail price of the vehicle, or
‘‘(ii) $1,500.
‘‘(B) In the case of a vehicle not described
in subparagraph (A) with a gross vehicle weight
rating not exceeding 8,500 pounds—
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‘‘(i) $3,500, or
‘‘(ii) $6,000, if such vehicle is—
‘‘(I) capable of a driving range of
at least 100 miles on a single charge of
the vehicle’s rechargeable batteries as
measured pursuant to the urban dyna-
mometer schedules under appendix I to
part 86 of title 40, Code of Federal
Regulations, or
‘‘(II) capable of a payload capac-
ity of at least 1,000 pounds.
‘‘(C) In the case of a vehicle with a gross
vehicle weight rating exceeding 8,500 but not ex-
ceeding 14,000 pounds, $10,000.
‘‘(D) In the case of a vehicle with a gross
vehicle weight rating exceeding 14,000 but not
exceeding 26,000 pounds, $20,000.
‘‘(E) In the case of a vehicle with a gross
vehicle weight rating exceeding 26,000 pounds,
$40,000.’’, and
(B) by redesignating paragraph (3) as
paragraph (2).
(3) CONFORMING AMENDMENTS.—
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(A) Section 53(d)(1)(B)(iii) is amended by
striking ‘‘section 30(b)(3)(B)’’ and inserting
‘‘section 30(b)(2)(B)’’.
(3) Section 55(c)(2), as amended by this Act, is
amended by striking ‘‘30(b)(3)’’ and inserting
‘‘30(b)(2)’’.
(b) QUALIFIED BATTERY ELECTRIC VEHICLE.—
(1) IN GENERAL.—Section 30(c)(1)(A) (defining
qualified electric vehicle) is amended to read as fol-
lows:
‘‘(A) which is—
‘‘(i) operated solely by use of a battery
or battery pack, or
‘‘(ii) powered primarily through the
use of an electric battery or battery pack
using a flywheel or capacitor which stores
energy produced by an electric motor
through regenerative braking to assist in ve-
hicle operation,’’.
(2) LEASED VEHICLES.—Section 30(c)(1)(C) is
amended by inserting ‘‘or lease’’ after ‘‘use’’.
(3) CONFORMING AMENDMENTS.—
(A) Subsections (a), (b)(2), and (c) of sec-
tion 30 are each amended by inserting ‘‘battery’’
after ‘‘qualified’’ each place it appears.
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(B) The heading of subsection (c) of section
30 is amended by inserting ‘‘BATTERY’’ after
‘‘QUALIFIED’’.
(C) The heading of section 30 is amended
by inserting ‘‘BATTERY’’ after ‘‘QUALIFIED’’.
(D) The item relating to section 30 in the
table of sections for subpart B of part IV of sub-
chapter A of chapter 1 is amended by inserting
‘‘battery’’ after ‘‘qualified’’.
(E) Section 179A(c)(3) is amended by in-
serting ‘‘battery’’ before ‘‘electric’’.
(F) The heading of paragraph (3) of section
179A(c) is amended by inserting ‘‘BATTERY’’ be-
fore ‘‘ELECTRIC’’.
(c) ADDITIONAL SPECIAL RULES.—Section 30(d) (re-
lating to special rules) is amended by adding at the end
the following new paragraphs:
‘‘(5) NO DOUBLE BENEFIT.—The amount of any
deduction or other credit allowable under this chapter
for any cost taken into account in computing the
amount of the credit determined under subsection (a)
shall be reduced by the amount of such credit attrib-
utable to such cost.
‘‘(6) PROPERTY
USED
BY
TAX-EXEMPT
ENTI-
TIES.—In the case of a credit amount which is allow-
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able with respect to a vehicle which is acquired 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 spe-
cific amount of any credit otherwise allowable to the
entity under this section.
‘‘(7) 
CARRYBACK
AND
CARRYFORWARD
AL-
LOWED.—
‘‘(A) IN GENERAL.—If the credit amount al-
lowable under subsection (a) for a taxable year
exceeds the amount of the limitation under sub-
section (b)(2) for such taxable year (in this para-
graph referred to as the ‘unused credit year’),
such excess shall be allowed as a credit carryback
for each of the 3 taxable years beginning after
September 30, 2002, 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
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carryback and credit carryforward under sub-
paragraph (A).’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to property placed in service after Sep-
tember 30, 2002, in taxable years ending after such date.
SEC. 2003. CREDIT FOR INSTALLATION OF ALTERNATIVE
FUELING STATIONS.
(a) IN GENERAL.—Subpart B of part IV of subchapter
A of chapter 1 (relating to foreign tax credit, etc.), as
amended by this Act, is amended by adding at the end the
following new section:
‘‘SEC. 30C. CLEAN-FUEL VEHICLE REFUELING PROPERTY
CREDIT.
‘‘(a) CREDIT ALLOWED.—There shall be allowed as a
credit against the tax imposed by this chapter for the tax-
able year an amount equal to 50 percent of the amount
paid or incurred by the taxpayer during the taxable year
for the installation of qualified clean-fuel vehicle refueling
property.
‘‘(b) LIMITATION.—The credit allowed under sub-
section (a)—
‘‘(1) with respect to any retail clean-fuel vehicle
refueling property, shall not exceed $30,000, and
‘‘(2) with respect to any residential clean-fuel ve-
hicle refueling property, shall not exceed $1,000.
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‘‘(c) YEAR CREDIT ALLOWED.—The credit allowed
under subsection (a) shall be allowed in the taxable year
in which the qualified clean-fuel vehicle refueling property
is placed in service by the taxpayer.
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED CLEAN-FUEL VEHICLE REFUEL-
ING PROPERTY.—The term ‘qualified clean-fuel vehicle
refueling property’ has the same meaning given such
term by section 179A(d).
‘‘(2) RESIDENTIAL
CLEAN-FUEL
VEHICLE
RE-
FUELING PROPERTY.—The term ‘residential clean-fuel
vehicle refueling property’ means qualified clean-fuel
vehicle refueling property which is installed on prop-
erty which is used as the principal residence (within
the meaning of section 121) of the taxpayer.
‘‘(3) RETAIL CLEAN-FUEL VEHICLE REFUELING
PROPERTY.—The term ‘retail clean-fuel vehicle refuel-
ing property’ means qualified clean-fuel vehicle refuel-
ing property which is installed on property (other
than property described in paragraph (2)) used in a
trade or business of the taxpayer.
‘‘(e) APPLICATION WITH OTHER CREDITS.—The credit
allowed under subsection (a) for any taxable year shall not
exceed the excess (if any) of—
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‘‘(1) the regular tax for the taxable year reduced
by the sum of the credits allowable under subpart A
and sections 27, 29, 30, and 30B, over
‘‘(2) the tentative minimum tax for the taxable
year.
‘‘(f) BASIS REDUCTION.—For purposes of this title, the
basis of any property shall be reduced by the portion of
the cost of such property taken into account under sub-
section (a).
‘‘(g) NO DOUBLE BENEFIT.—No deduction shall be al-
lowed under section 179A with respect to any property with
respect to which a credit is allowed under subsection (a).
‘‘(h) REFUELING PROPERTY INSTALLED FOR TAX-EX-
EMPT ENTITIES.—In the case of qualified clean-fuel vehicle
refueling property installed on property owned or used by
an entity exempt from tax under this chapter, the person
which installs such refueling property for the entity shall
be treated as the taxpayer with respect to the refueling prop-
erty for purposes of this section (and such refueling prop-
erty shall be treated as retail clean-fuel vehicle refueling
property) and the credit shall be allowed to such person,
but only if the person clearly discloses to the entity in any
installation contract the specific amount of the credit allow-
able under this section.
‘‘(i) CARRYFORWARD ALLOWED.—
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‘‘(1) IN GENERAL.—If the credit amount allow-
able under subsection (a) for a taxable year exceeds
the amount of the limitation under subsection (e) for
such taxable year (referred to as the ‘unused credit
year’ in this subsection), such excess shall be allowed
as a credit carryforward for each of the 20 taxable
years following the unused credit year.
‘‘(2) RULES.—Rules similar to the rules of sec-
tion 39 shall apply with respect to the credit
carryforward under paragraph (1).
‘‘(j) SPECIAL RULES.—Rules similar to the rules of
paragraphs (4) and (5) of section 179A(e) shall apply.
‘‘(k) REGULATIONS.—The Secretary shall prescribe
such regulations as necessary to carry out the provisions
of this section.
‘‘(l) TERMINATION.—This section shall not apply to
any property placed in service—
‘‘(1) in the case of property relating to hydrogen,
after December 31, 2011, and
‘‘(2) in the case of any other property, after De-
cember 31, 2006.’’.
(b) INCENTIVE FOR PRODUCTION OF HYDROGEN AT
QUALIFIED
CLEAN-FUEL
VEHICLE
REFUELING
PROP-
ERTY.—Section 179A(d) (defining qualified clean-fuel vehi-
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cle refueling property) is amended by adding at the end
the following new flush sentence:
‘‘In the case of clean-burning fuel which is hydrogen pro-
duced from another clean-burning fuel, paragraph (3)(A)
shall be applied by substituting ‘production, storage, or dis-
pensing’ for ‘storage or dispensing’ both places it appears.’’.
(c) CONFORMING AMENDMENTS.—(1) Section 1016(a),
as amended by this Act, is amended by striking ‘‘and’’ at
the end of paragraph (28), by striking the period at the
end of paragraph (29) and inserting ‘‘, and’’, and by add-
ing at the end the following new paragraph:
‘‘(30) to the extent provided in section 30C(f).’’.
(2) Section 55(c)(2), as amended by this Act, is
amended by inserting ‘‘30C(e),’’ after ‘‘30B(e)’’.
(3) The table of sections for subpart B of part IV of
subchapter A of chapter 1, as amended by this Act, is
amended by inserting after the item relating to section 30B
the following new item:
‘‘Sec. 30C. Clean-fuel vehicle refueling property credit.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to property placed in service after Sep-
tember 30, 2002, in taxable years ending after such date.
SEC. 2004. CREDIT FOR RETAIL SALE OF ALTERNATIVE
FUELS AS MOTOR VEHICLE FUEL.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits) is
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amended by inserting after section 40 the following new sec-
tion:
‘‘SEC. 40A. CREDIT FOR RETAIL SALE OF ALTERNATIVE
FUELS AS MOTOR VEHICLE FUEL.
‘‘(a) GENERAL RULE.—For purposes of section 38, the
alternative fuel retail sales credit for any taxable year is
the applicable amount for each gasoline gallon equivalent
of alternative fuel sold at retail by the taxpayer during such
year as a fuel to propel any qualified motor vehicle.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) APPLICABLE AMOUNT.—The term ‘applica-
ble amount’ means the amount determined in accord-
ance with the following table:
‘‘In the case of any taxable year
ending in—
The applicable amount is—
2002 and 2003 ...............................................................................
30 cents
2004 ................................................................................................
40 cents
2005 and 2006 ...............................................................................
50 cents.
‘‘(2) ALTERNATIVE FUEL.—The term ‘alternative
fuel’ means compressed natural gas, liquefied natural
gas, liquefied petroleum gas, hydrogen, and any liq-
uid at least 85 percent of the volume of which consists
of methanol or ethanol.
‘‘(3) GASOLINE GALLON EQUIVALENT.—The term
‘gasoline gallon equivalent’ means, with respect to
any alternative fuel, the amount (determined by the
Secretary) of such fuel having a Btu content of
114,000.
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‘‘(4) QUALIFIED
MOTOR
VEHICLE.—The term
‘qualified motor vehicle’ means any motor vehicle (as
defined in section 30(c)(2)) which meets any applica-
ble Federal or State emissions standards with respect
to each fuel by which such vehicle is designed to be
propelled.
‘‘(5) SOLD AT RETAIL.—
‘‘(A) IN GENERAL.—The term ‘sold at retail’
means the sale, for a purpose other than resale,
after manufacture, production, or importation.
‘‘(B) USE TREATED AS SALE.—If any per-
son uses alternative fuel (including any use after
importation) as a fuel to propel any qualified
alternative fuel motor vehicle (as defined in sec-
tion 30B(d)(4)) before such fuel is sold at retail,
then such use shall be treated in the same man-
ner as if such fuel were sold at retail as a fuel
to propel such a vehicle by such person.
‘‘(c) NO DOUBLE BENEFIT.—The amount of any de-
duction or other credit allowable under this chapter for any
fuel taken into account in computing the amount of the
credit determined under subsection (a) shall be reduced by
the amount of such credit attributable to such fuel.
‘‘(d) PASS-THRU
IN
THE CASE
OF ESTATES
AND
TRUSTS.—Under regulations prescribed by the Secretary,
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rules similar to the rules of subsection (d) of section 52 shall
apply.
‘‘(e) TERMINATION.—This section shall not apply to
any fuel sold at retail after December 31, 2006.’’.
(b) CREDIT TREATED AS BUSINESS CREDIT.—Section
38(b) (relating to current year business credit) is amended
by striking ‘‘plus’’ at the end of paragraph (14), by striking
the period at the end of paragraph (15) and inserting ‘‘,
plus’’, and by adding at the end the following new para-
graph:
‘‘(16) the alternative fuel retail sales credit deter-
mined under section 40A(a).’’.
(c) TRANSITIONAL RULE.—Section 39(d) (relating to
transitional rules) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(11) NO CARRYBACK OF SECTION 40A CREDIT
BEFORE EFFECTIVE DATE.—No portion of the unused
business credit for any taxable year which is attrib-
utable to the alternative fuel retail sales credit deter-
mined under section 40A(a) may be carried back to
a taxable year ending before January 1, 2002.’’.
(d) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1 is amend-
ed by inserting after the item relating to section 40 the fol-
lowing new item:
‘‘Sec. 40A. Credit for retail sale of alternative fuels as motor vehicle fuel.’’.
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(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to fuel sold at retail after September
30, 2002, in taxable years ending after such date.
SEC. 2005. SMALL ETHANOL PRODUCER CREDIT.
(a) ALLOCATION OF ALCOHOL FUELS CREDIT TO PA-
TRONS OF A COOPERATIVE.—Section 40(g) (relating to al-
cohol used as fuel) is amended by adding at the end the
following new paragraph:
‘‘(6) ALLOCATION
OF
SMALL
ETHANOL
PRO-
DUCER CREDIT TO PATRONS OF COOPERATIVE.—
‘‘(A) ELECTION TO ALLOCATE.—
‘‘(i) IN GENERAL.—In the case of a co-
operative organization described in section
1381(a), any portion of the credit deter-
mined under subsection (a)(3) for the tax-
able year may, at the election of the organi-
zation, be apportioned pro rata among pa-
trons of the organization on the basis of the
quantity or value of business done with or
for such patrons for the taxable year.
‘‘(ii) FORM
AND
EFFECT
OF
ELEC-
TION.—An election under clause (i) for any
taxable year shall be made on a timely filed
return for such year. Such election, once
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made, shall be irrevocable for such taxable
year.
‘‘(B) TREATMENT OF ORGANIZATIONS AND
PATRONS.—The amount of the credit apportioned
to patrons under subparagraph (A)—
‘‘(i) shall not be included in the
amount determined under subsection (a)
with respect to the organization for the tax-
able year,
‘‘(ii) shall be included in the amount
determined under subsection (a) for the tax-
able year of each patron for which the pa-
tronage dividends for the taxable year de-
scribed in subparagraph (A) are included in
gross income, and
‘‘(iii) shall be included in gross income
of such patrons for the taxable year in the
manner and to the extent provided in sec-
tion 87.
‘‘(C) SPECIAL
RULES
FOR
DECREASE
IN
CREDITS FOR TAXABLE YEAR.—If the amount of
the credit of a cooperative organization deter-
mined under subsection (a)(3) for a taxable year
is less than the amount of such credit shown on
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the return of the cooperative organization for
such year, an amount equal to the excess of—
‘‘(i) such reduction, over
‘‘(ii) the amount not apportioned to
such patrons under subparagraph (A) for
the taxable year,
shall be treated as an increase in tax imposed by
this chapter on the organization. Such increase
shall not be treated as tax imposed by this chap-
ter for purposes of determining the amount of
any credit under this chapter or for purposes of
section 55.’’.
(b) IMPROVEMENTS TO SMALL ETHANOL PRODUCER
CREDIT.—
(1) DEFINITION
OF
SMALL
ETHANOL
PRO-
DUCER.—Section 40(g) (relating to definitions and
special rules for eligible small ethanol producer cred-
it) is amended by striking ‘‘30,000,000’’ each place it
appears and inserting ‘‘60,000,000’’.
(2) SMALL ETHANOL PRODUCER CREDIT NOT A
PASSIVE
ACTIVITY
CREDIT.—Clause (i) of section
469(d)(2)(A) is amended by striking ‘‘subpart D’’ and
inserting ‘‘subpart D, other than section 40(a)(3),’’.
(3) ALLOWING
CREDIT
AGAINST
ENTIRE
REG-
ULAR TAX AND MINIMUM TAX.—
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(A) IN GENERAL.—Subsection (c) of section
38 (relating to limitation based on amount of
tax), as amended by section 301(b) of the Job
Creation and Worker Assistance Act of 2002, is
amended by redesignating paragraph (4) as
paragraph (5) and by inserting after paragraph
(3) the following new paragraph:
‘‘(4) SPECIAL RULES FOR SMALL ETHANOL PRO-
DUCER CREDIT.—
‘‘(A) IN GENERAL.—In the case of the small
ethanol producer credit—
‘‘(i) this section and section 39 shall be
applied separately with respect to the cred-
it, and
‘‘(ii) in applying paragraph (1) to the
credit—
‘‘(I) the amounts in subpara-
graphs (A) and (B) thereof shall be
treated as being zero, and
‘‘(II) the limitation under para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the tax-
able year (other than the small ethanol
producer credit).
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‘‘(B) SMALL
ETHANOL
PRODUCER
CRED-
IT.—For purposes of this subsection, the term
‘small ethanol producer credit’ means the credit
allowable under subsection (a) by reason of sec-
tion 40(a)(3).’’.
(B) CONFORMING AMENDMENTS.—Subclause
(II) of section 38(c)(2)(A)(ii), as amended by
section 301(b)(2) of the Job Creation and Worker
Assistance Act of 2002, and subclause (II) of sec-
tion 
38(c)(3)(A)(ii), 
as 
added 
by 
section
301(b)(1) of such Act, are each amended by in-
serting ‘‘or the small ethanol producer credit’’
after ‘‘employee credit’’.
(4) SMALL
ETHANOL
PRODUCER
CREDIT
NOT
ADDED BACK TO INCOME UNDER SECTION 87.—Sec-
tion 87 (relating to income inclusion of alcohol fuel
credit) is amended to read as follows:
‘‘SEC. 87. ALCOHOL FUEL CREDIT.
‘‘Gross income includes an amount equal to the sum
of—
‘‘(1) the amount of the alcohol mixture credit de-
termined with respect to the taxpayer for the taxable
year under section 40(a)(1), and
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‘‘(4) CERTAIN RULES TO APPLY.—Rules similar
to the rules of paragraphs (6) and (7) of subsection
(c) shall apply for purposes of this subsection.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 4041 is amended by adding at
the end the following new subsection:
‘‘(n) BIODIESEL V MIXTURES.—Under regulations
prescribed by the Secretary, in the case of the sale or use
of a qualified biodiesel mixture (as defined in section
40B(b)(2)) with biodiesel V, the rates under paragraphs (1)
and (2) of subsection (a) shall be the otherwise applicable
rates, reduced by any applicable biodiesel mixture rate (as
defined in section 40B(b)(1)(B)).’’.
(B) Section 6427 is amended by redesig-
nating subsection (p) as subsection (q) and by
inserting after subsection (o) the following new
subsection:
‘‘(p) BIODIESEL V MIXTURES.—Except as provided in
subsection (k), if any diesel fuel on which tax was imposed
by section 4081 at a rate not determined under section
4081(f) is used by any person in producing a qualified bio-
diesel mixture (as defined in section 40B(b)(2)) with bio-
diesel V which is sold or used in such person’s trade or busi-
ness, the Secretary shall pay (without interest) to such per-
son an amount equal to the per gallon applicable biodiesel
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SEC. 2303. EXPENSING OF CAPITAL COSTS INCURRED IN
COMPLYING WITH ENVIRONMENTAL PROTEC-
TION AGENCY SULFUR REGULATIONS.
(a) IN GENERAL.—Part VI of subchapter B of chapter
1 (relating to itemized deductions for individuals and cor-
porations), as amended by this Act, is amended by inserting
after section 179C the following new section:
‘‘SEC. 179D. DEDUCTION FOR CAPITAL COSTS INCURRED IN
COMPLYING WITH ENVIRONMENTAL PROTEC-
TION AGENCY SULFUR REGULATIONS.
‘‘(a) TREATMENT AS EXPENSE.—
‘‘(1) IN GENERAL.—A small business refiner may
elect to treat any qualified capital costs as an expense
which is not chargeable to capital account. Any quali-
fied cost which is so treated shall be allowed as a de-
duction for the taxable year in which the cost is paid
or incurred.
‘‘(2) LIMITATION.—
‘‘(A) IN
GENERAL.—The aggregate costs
which may be taken into account under this sub-
section for any taxable year may not exceed the
applicable percentage of the qualified capital
costs paid or incurred for the taxable year.
‘‘(B) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A)—
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‘‘(vi) For purposes of this subparagraph, the
recovery period is the 7-year period beginning
with the start-up year.
‘‘(vii) For purposes of this subparagraph,
the start-up year is the calendar year which in-
cludes the date of the enactment of this subpara-
graph or, if later, at the election of the mutual
or cooperative electric company—
‘‘(I) the first year that such electric
company offers nondiscriminatory open ac-
cess, or
‘‘(II) the first year in which at least 10
percent of such electric company’s sales are
not to members of such electric company.
‘‘(viii) A company shall not fail to be treat-
ed as a mutual or cooperative company for pur-
poses of this paragraph or as a corporation oper-
ating on a cooperative basis for purposes of sec-
tion 1381(a)(2)(C) by reason of the treatment
under clause (i).
‘‘(ix) In the case of a mutual or cooperative
electric company, income from any open access
transaction received, or accrued, indirectly from
a member shall be treated as an amount collected