tion of the expenditure period (determined 
without regard to any extension under this 
clause), the Secretary may extend such pe-
riod if the issuer establishes that the fail-
ure to expend the proceeds within the 
original expenditure period is due to rea-
sonable cause and the expenditures for 
qualified purposes will continue to proceed 
with due diligence. 
‘‘(C) QUALIFIED PURPOSE.—For purposes 
of this paragraph, the term ‘qualified purpose’ 
means a purpose specified in section 54B(a)(1). 
‘‘(D) REIMBURSEMENT.—For purposes of 
this subtitle, available project proceeds of an 
issue shall be treated as spent for a qualified 
purpose if such proceeds are used to reimburse 
the issuer for amounts paid for a qualified pur-
pose after the date that the Secretary makes an 
allocation of bond limitation with respect to 
such issue, but only if— 
‘‘(i) prior to the payment of the origi-
nal expenditure, the issuer declared its in-
tent to reimburse such expenditure with 
the proceeds of a qualified tax credit bond, 
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‘‘(ii) not later than 60 days after pay-
ment of the original expenditure, the issuer 
adopts an official intent to reimburse the 
original expenditure with such proceeds, 
and 
‘‘(iii) the reimbursement is made not 
later than 18 months after the date the 
original expenditure is paid. 
‘‘(3) REPORTING.—An issue shall be treated as 
meeting the requirements of this paragraph if the 
issuer of qualified tax credit bonds submits reports 
similar to the reports required under section 149(e). 
‘‘(4) SPECIAL
RULES
RELATING
TO
ARBI-
TRAGE.— 
‘‘(A) IN
GENERAL.—An issue shall be 
treated as meeting the requirements of this 
paragraph if the issuer satisfies the require-
ments of section 148 with respect to the pro-
ceeds of the issue. 
‘‘(B) SPECIAL
RULE
FOR
INVESTMENTS 
DURING EXPENDITURE PERIOD.—An issue shall 
not be treated as failing to meet the require-
ments of subparagraph (A) by reason of any in-
vestment of available project proceeds during 
the expenditure period. 
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‘‘(C) 
SPECIAL
RULE
FOR
RESERVE 
FUNDS.—An issue shall not be treated as fail-
ing to meet the requirements of subparagraph 
(A) by reason of any fund which is expected to 
be used to repay such issue if— 
‘‘(i) such fund is funded at a rate not 
more rapid than equal annual installments, 
‘‘(ii) such fund is funded in a manner 
that such fund will not exceed the amount 
necessary to repay the issue if invested at 
the maximum rate permitted under clause 
(iii), and 
‘‘(iii) the yield on such fund is not 
greater than the discount rate determined 
under paragraph (5)(B) with respect to the 
issue. 
‘‘(5) MATURITY LIMITATION.— 
‘‘(A) IN GENERAL.—An issue shall not be 
treated as meeting the requirements of this 
paragraph if the maturity of any bond which is 
part of such issue exceeds the maximum term 
determined by the Secretary under subpara-
graph (B). 
‘‘(B) MAXIMUM TERM.—During each cal-
endar month, the Secretary shall determine the 
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maximum term permitted under this paragraph 
for bonds issued during the following calendar 
month. Such maximum term shall be the term 
which the Secretary estimates will result in the 
present value of the obligation to repay the 
principal on the bond being equal to 50 percent 
of the face amount of such bond. Such present 
value shall be determined using as a discount 
rate the average annual interest rate of tax-ex-
empt obligations having a term of 10 years or 
more which are issued during the month. If the 
term as so determined is not a multiple of a 
whole year, such term shall be rounded to the 
next highest whole year. 
‘‘(e) OTHER DEFINITIONS.—For purposes of this 
subchapter— 
‘‘(1) CREDIT
ALLOWANCE
DATE.—The term 
‘credit allowance date’ means— 
‘‘(A) March 15, 
‘‘(B) June 15, 
‘‘(C) September 15, and 
‘‘(D) December 15. 
Such term includes the last day on which the bond 
is outstanding. 
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‘‘(2) BOND.—The term ‘bond’ includes any ob-
ligation. 
‘‘(3) STATE.—The term ‘State’ includes the 
District of Columbia and any possession of the 
United States. 
‘‘(4) AVAILABLE
PROJECT
PROCEEDS.—The 
term ‘available project proceeds’ means— 
‘‘(A) the excess of— 
‘‘(i) the proceeds from the sale of an 
issue, over 
‘‘(ii) the issuance costs financed by 
the issue (to the extent that such costs do 
not exceed 2 percent of such proceeds), 
and 
‘‘(B) the proceeds from any investment of 
the excess described in subparagraph (A). 
‘‘(f) CREDIT TREATED AS INTEREST.—For purposes 
of this subtitle, the credit determined under subsection (a) 
shall be treated as interest which is includible in gross in-
come. 
‘‘(g) S CORPORATIONS AND PARTNERSHIPS.—In the 
case of a tax credit bond held by an S corporation or part-
nership, the allocation of the credit allowed by this section 
to the shareholders of such corporation or partners of such 
partnership shall be treated as a distribution. 
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‘‘(h) BONDS HELD
BY REGULATED INVESTMENT 
COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.— 
If any qualified tax credit bond is held by a regulated in-
vestment company or a real estate investment trust, the 
credit determined under subsection (a) shall be allowed to 
shareholders of such company or beneficiaries of such 
trust (and any gross income included under subsection (f) 
with respect to such credit shall be treated as distributed 
to such shareholders or beneficiaries) under procedures 
prescribed by the Secretary. 
‘‘(i) CREDITS MAY BE STRIPPED.—Under regula-
tions prescribed by the Secretary— 
‘‘(1) IN GENERAL.—There may be a separation 
(including at issuance) of the ownership of a quali-
fied tax credit bond and the entitlement to the credit 
under this section with respect to such bond. In case 
of any such separation, the credit under this section 
shall be allowed to the person who on the credit al-
lowance date holds the instrument evidencing the en-
titlement 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 
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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 
energy bond’ means any bond issued as part of an issue 
if— 
‘‘(1) 100 percent of the available project pro-
ceeds of such issue are to be used for capital expend-
itures incurred by public power providers or coopera-
tive electric companies for one or more qualified re-
newable energy facilities, 
‘‘(2) the bond is issued by a qualified issuer, 
and 
‘‘(3) the issuer designates such bond for pur-
poses of this section. 
‘‘(b) REDUCED CREDIT AMOUNT.—The annual credit 
determined under section 54A(b) with respect to any new 
clean renewable energy bond shall be 70 percent of the 
amount so determined without regard to this subsection. 
‘‘(c) 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 
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the limitation amount allocated under this sub-
section 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 60 percent thereof 
may be allocated to qualified projects of public 
power providers, and 
‘‘(B) not more than 40 percent thereof 
may be allocated to qualified projects of cooper-
ative 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 
amount allocated to each such project bears the 
same ratio to the cost of such project as the 
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limitation under subparagraph (2)(A) bears to 
the cost of all such projects. 
‘‘(B) ALLOCATION
AMONG
COOPERATIVE 
ELECTRIC
COMPANIES.—The Secretary shall 
make allocations of the amount of the national 
new clean renewable energy bond limitation de-
scribed in paragraph (2)(B) among qualified 
projects of cooperative electric companies in 
such manner as the Secretary determines ap-
propriate. 
‘‘(d) 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 or a cooperative 
electric company. 
‘‘(2) PUBLIC
POWER
PROVIDER.—The term 
‘public power provider’ means a State utility with a 
service obligation, as such terms are defined in sec-
tion 217 of the Federal Power Act (as in effect on 
the date of the enactment of this paragraph). 
‘‘(3) COOPERATIVE ELECTRIC COMPANY.—The 
term ‘cooperative electric company’ means a mutual 
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or cooperative electric company described in section 
501(c)(12) or section 1381(a)(2)(C). 
‘‘(4) 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 
cooperative electric companies and is in existence on 
February 1, 2002, and shall include any affiliated 
entity which is controlled by such lender. 
‘‘(5) QUALIFIED ISSUER.—The term ‘qualified 
issuer’ means a public power provider, a cooperative 
electric company, a clean renewable energy bond 
lender, or a not-for-profit electric utility which has 
received a loan or loan guarantee under the Rural 
Electrification Act.’’. 
(b) REPORTING.—Subsection (d) of section 6049 (re-
lating to returns regarding payments of interest) is 
amended by adding at the end the following new para-
graph: 
‘‘(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 
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the credit allowance date (as defined in section 
54A(e)(1)). 
‘‘(B) 
REPORTING
TO
CORPORATIONS, 
ETC.—Except as otherwise provided in regula-
tions, in the case of any interest described in 
subparagraph (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 
necessary or appropriate to carry out the pur-
poses of this paragraph, including regulations 
which require more frequent or more detailed 
reporting.’’. 
(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’’. 
(2) Section 1397E(c)(2) is amended by striking 
‘‘subpart H’’ and inserting ‘‘subparts H and I’’. 
(3) Section 6401(b)(1) is amended by striking 
‘‘and H’’ and inserting ‘‘H, and I’’. 
(4) The heading of subpart H of part IV of 
subchapter A of chapter 1 is amended by striking 
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‘‘Certain Bonds’’ and inserting ‘‘Clean Re-
newable Energy Bonds’’. 
(5) The table of subparts for part IV of sub-
chapter A of chapter 1 is amended by striking the 
item relating to subpart H and inserting the fol-
lowing new items: 
‘‘SUBPART H. NONREFUNDABLE CREDIT TO HOLDERS OF CLEAN RENEWABLE 
ENERGY BONDS. 
‘‘SUBPART I. QUALIFIED TAX CREDIT BONDS.’’. 
(d) EFFECTIVE DATES.—The amendments made by 
this section shall apply to obligations issued after the date 
of the enactment of this Act. 
SEC. 105. EXTENSION AND MODIFICATION OF SPECIAL 
RULE TO IMPLEMENT FERC AND STATE 
ELECTRIC RESTRUCTURING POLICY. 
(a) EXTENSION FOR QUALIFIED ELECTRIC UTILI-
TIES.— 
(1) IN
GENERAL.—Paragraph (3) of section 
451(i) (relating to special rule for sales or disposi-
tions to implement Federal Energy Regulatory Com-
mission or State electric restructuring policy) is 
amended by striking ‘‘before January 1, 2008,’’ and 
inserting ‘‘before January 1, 2010, by a qualified 
electric utility,’’. 
(2) QUALIFIED ELECTRIC UTILITY.—Subsection 
(i) of section 451 is amended by redesignating para-
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graphs (6) through (10) as paragraphs (7) through 
(11), respectively, and by inserting after paragraph 
(5) the following new paragraph: 
‘‘(6) QUALIFIED ELECTRIC UTILITY.—For pur-
poses of this subsection, the term ‘qualified electric 
utility’ means— 
‘‘(A) an electric utility (as defined in sec-
tion 3(22) of the Federal Power Act (16 U.S.C. 
796(22)), and 
‘‘(B) any person in the same holding com-
pany system (as defined in section 1262(9) of 
the Public Utility Holding Company Act of 
2005 (42 U.S.C. 16451(9)) as an electric utility 
referred to subparagraph (A).’’. 
(b) EXTENSION
OF PERIOD
FOR TRANSFER
OF 
OPERATIONAL
CONTROL
AUTHORIZED
BY
FERC.— 
Clause (ii) of section 451(i)(4)(B) is amended by striking 
‘‘December 31, 2007’’ and inserting ‘‘the date which is 
4 years after the close of the taxable year in which the 
transaction occurs’’. 
(c) PROPERTY LOCATED OUTSIDE
THE UNITED 
STATES NOT TREATED
AS EXEMPT UTILITY PROP-
ERTY.—Paragraph (5) of section 451(i) is amended by 
adding at the end the following new subparagraph: 
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‘‘(C) EXCEPTION FOR PROPERTY LOCATED 
OUTSIDE THE UNITED STATES.—The term ‘ex-
empt utility property’ shall not include any 
property which is located outside the United 
States.’’. 
(d) EFFECTIVE DATES.— 
(1) EXTENSION.—The amendment made by 
subsection (a) shall apply to transactions after De-
cember 31, 2007. 
(2) TRANSFERS OF OPERATIONAL CONTROL.— 
The amendment made by subsection (b) shall take 
effect as if included in section 909 of the American 
Jobs Creation Act of 2004. 
(3) EXCEPTION FOR PROPERTY LOCATED OUT-
SIDE THE UNITED STATES.—The amendment made 
by subsection (c) shall apply to transactions after 
the date of the enactment of this Act. 
SEC. 106. REPEAL OF DOLLAR LIMITATION AND ALLOW-
ANCE AGAINST ALTERNATIVE MINIMUM TAX 
FOR RESIDENTIAL SOLAR AND FUEL CELL 
PROPERTY CREDIT. 
(a) REPEAL OF MAXIMUM DOLLAR LIMITATION.— 
(1) IN
GENERAL.—Subsection (b) of section 
25D (relating to limitations) is amended to read as 
follows: 
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‘‘(b) CERTIFICATION OF SOLAR WATER HEATING 
PROPERTY.—No credit shall be allowed under this section 
for an item of property described in subsection (d)(1) un-
less such property is certified for performance by the non- 
profit Solar Rating Certification Corporation or a com-
parable entity endorsed by the government of the State 
in which such property is installed.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Subsection (e) of section 25D is 
amended by striking paragraph (4) and by re-
designating paragraphs (5) through (9) as 
paragraphs (4) through (8), respectively. 
(B) Paragraph (1) of section 25C(e) is 
amended by striking ‘‘(8), and (9)’’ and insert-
ing ‘‘and (8) (and paragraph (4) as in effect be-
fore its repeal by the Renewable Energy and 
Energy Conservation Tax Act of 2007)’’. 
(b) CREDIT ALLOWED AGAINST ALTERNATIVE MIN-
IMUM TAX.— 
(1) IN
GENERAL.—Subsection (c) of section 
25D is amended to read as follows: 
‘‘(c) LIMITATION BASED
ON AMOUNT
OF TAX; 
CARRYFORWARD OF UNUSED CREDIT.— 
‘‘(1) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—In the case of a taxable year to which section 
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26(a)(2) does not apply, the credit allowed under 
subsection (a) for the taxable year shall not exceed 
the excess of— 
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section) and 
section 27 for the taxable year. 
‘‘(2) CARRYFORWARD OF UNUSED CREDIT.— 
‘‘(A) RULE
FOR
YEARS
IN
WHICH
ALL 
PERSONAL
CREDITS
ALLOWED
AGAINST
REG-
ULAR
AND
ALTERNATIVE
MINIMUM
TAX.—In 
the case of a taxable year to which section 
26(a)(2) applies, if the credit allowable under 
subsection (a) exceeds the limitation imposed by 
section 26(a)(2) for such taxable year reduced 
by the sum of the credits allowable under this 
subpart (other than this section), such excess 
shall be carried to the succeeding taxable year 
and added to the credit allowable under sub-
section (a) for such succeeding taxable year. 
‘‘(B) RULE
FOR
OTHER
YEARS.—In the 
case of a taxable year to which section 26(a)(2) 
does not apply, if the credit allowable under 
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subsection (a) exceeds the limitation imposed by 
paragraph (1) for such taxable year, such ex-
cess shall be carried to the succeeding taxable 
year and added to the credit allowable under 
subsection (a) for such succeeding taxable 
year.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 23(b)(4)(B) is amended by in-
serting ‘‘and section 25D’’ after ‘‘this section’’. 
(B) Section 24(b)(3)(B) is amended by 
striking ‘‘and 25B’’ and inserting ‘‘, 25B, and 
25D’’. 
(C) Section 25B(g)(2) is amended by strik-
ing ‘‘section 23’’ and inserting ‘‘sections 23 and 
25D’’. 
(D) Section 26(a)(1) is amended by strik-
ing ‘‘and 25B’’ and inserting ‘‘25B, and 25D’’. 
(c) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to expenditures made after 
the date of the enactment of this Act. 
(2) ALLOWANCE AGAINST ALTERNATIVE MIN-
IMUM TAX.— 
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(A) IN GENERAL.—The amendments made 
by subsection (b) shall apply to taxable years 
beginning after the date of the enactment of 
this Act. 
(B) APPLICATION OF EGTRRA SUNSET.— 
The amendments made by subsection (b)(2) 
shall be subject to title IX of the Economic 
Growth and Tax Relief Reconciliation Act of 
2001 in the same manner as the provisions of 
such Act to which such amendments relate. 
TITLE II—CONSERVATION 
Subtitle A—Transportation 
SEC. 201. CREDIT FOR PLUG-IN HYBRID VEHICLES. 
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 (relating to other credits) is 
amended by adding at the end the following new section: 
‘‘SEC. 30D. PLUG-IN HYBRID VEHICLES. 
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed 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 re-
spect to each qualified plug-in hybrid vehicle placed in 
service by the taxpayer during the taxable year. 
‘‘(b) PER VEHICLE DOLLAR LIMITATION.— 
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‘‘(1) IN
GENERAL.—The amount determined 
under this subsection with respect to any qualified 
plug-in hybrid vehicle is the sum of the amounts de-
termined under paragraphs (2) and (3) with respect 
to such vehicle. 
‘‘(2) BASE AMOUNT.—The amount determined 
under this paragraph is $4,000. 
‘‘(3) BATTERY CAPACITY.—In the case of 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 ex-
cess 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 char-
acter subject to an allowance for depreciation shall 
be treated as a credit listed in section 38(b) for such 
taxable year (and not allowed under subsection (a)). 
‘‘(2) PERSONAL CREDIT.— 
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‘‘(A) IN GENERAL.—For purposes of this 
title, the credit allowed under subsection (a) for 
any taxable year (determined after application 
of paragraph (1)) shall be treated as a credit 
allowable under subpart A for such taxable 
year. 
‘‘(B) LIMITATION BASED ON AMOUNT OF 
TAX.—In the case of a taxable year to which 
section 26(a)(2) does not apply, the credit al-
lowed under subsection (a) for any taxable year 
(determined after application of paragraph (1)) 
shall not exceed the excess of— 
‘‘(i) the sum of the regular tax liabil-
ity (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) QUALIFIED PLUG-IN HYBRID VEHICLE.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified plug-in 
hybrid vehicle’ means a motor vehicle (as defined in 
section 30(c)(2))— 
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‘‘(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, 
‘‘(D) which has a gross vehicle weight rat-
ing of less than 14,000 pounds, 
‘‘(E) which has received a certificate of 
conformity under the Clean Air Act and meets 
or exceeds the Bin 5 Tier II emission standard 
established 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, 
‘‘(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, and 
‘‘(G) which either— 
‘‘(i) is also propelled to a significant 
extent by other than an electric motor, or 
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‘‘(ii) has a significant onboard source 
of electricity which also recharges the bat-
tery referred to in subparagraph (F). 
‘‘(2) EXCEPTION.—The term ‘qualified plug-in 
hybrid vehicle’ shall not include any vehicle which is 
not a passenger automobile or light truck if such ve-
hicle has a gross vehicle weight rating of less than 
8,500 pounds. 
‘‘(3) OTHER
TERMS.—The terms ‘passenger 
automobile’, ‘light truck’, and ‘manufacturer’ have 
the meanings given such terms in regulations pre-
scribed by the Administrator of the Environmental 
Protection Agency for purposes of the administra-
tion 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 QUALIFIED PLUG- 
IN HYBRID VEHICLES ELIGIBLE FOR CREDIT.— 
‘‘(1) IN GENERAL.—In the case of a qualified 
plug-in hybrid vehicle sold during the phaseout pe-
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riod, only the applicable percentage of the credit oth-
erwise allowable under subsection (a) shall be al-
lowed. 
‘‘(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 qualified plug-in hybrid vehicles 
manufactured by the manufacturer of the vehicle re-
ferred to in paragraph (1) sold for use in the United 
States after the date of the enactment of this sec-
tion, is at least 60,000. 
‘‘(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 cal-
endar 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 pur-
poses of this subsection. 
‘‘(f) SPECIAL RULES.— 
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‘‘(1) BASIS
REDUCTION.—The basis of any 
property for which a credit is allowable under sub-
section (a) shall be reduced by the amount of such 
credit (determined without regard to subsection (c)). 
‘‘(2) 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. 
‘‘(3) 
PROPERTY
USED
OUTSIDE
UNITED 
STATES, ETC., NOT QUALIFIED.—No credit shall be 
allowed under subsection (a) with respect to any 
property referred to in section 50(b)(1) or with re-
spect to the 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 VEHI-
CLE SAFETY STANDARDS.—Rules similar to the rules 
of paragraphs (6) and (10) of section 30B(h) shall 
apply for purposes of this section.’’. 
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(b) PLUG-IN VEHICLES NOT TREATED
AS NEW 
QUALIFIED HYBRID VEHICLES.—Section 30B(d)(3) is 
amended by adding at the end the following new subpara-
graph: 
‘‘(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) is amended by striking ‘‘and’’ at 
the end of paragraph (30), by striking the period at the 
end of paragraph (31) and inserting ‘‘, plus’’, and by add-
ing at the end the following new paragraph: 
‘‘(32) the portion of the plug-in hybrid 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 insert-
ing ‘‘25D, and 30D’’. 
(B) Section 25(e)(1)(C)(ii) is amended by in-
serting ‘‘30D,’’ after ‘‘25D,’’. 
(C) Section 25B(g)(2), as amended by this Act, 
is amended by striking ‘‘and 25D’’ and inserting ‘‘, 
25D, and 30D’’. 
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(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 (37), by striking the 
period at the end of paragraph (38) 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 add-
ing at the end the following new item: 
‘‘Sec. 30D. Plug-in hybrid 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 
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credit allowable under subpart A for such taxable 
year.’’. 
(2) CONFORMING AMENDMENT.—Subparagraph 
(A) of section 30C(d)(2) is amended by striking 
‘‘sections 27, 30, and 30B’’ and inserting ‘‘sections 
27 and 30’’. 
(f) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2007. 
(2) TREATMENT OF ALTERNATIVE MOTOR VE-
HICLE CREDIT AS PERSONAL CREDIT.—The amend-
ments made by subsection (e) shall apply to taxable 
years beginning after December 31, 2006. 
(g) APPLICATION
OF
EGTRRA SUNSET.—The 
amendments made by subsection (d)(1) shall be subject 
to title IX of the Economic Growth and Tax Relief Rec-
onciliation Act of 2001 in the same manner as the provi-
sions of such Act to which such amendments relate. 
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SEC. 202. EXTENSION AND MODIFICATION OF ALTER-
NATIVE FUEL VEHICLE REFUELING PROP-
ERTY CREDIT. 
(a) INCREASE IN CREDIT AMOUNT.—Section 30C 
(relating to alternative fuel vehicle refueling property cred-
it) is amended— 
(1) by striking ‘‘30 percent’’ in subsection (a) 
and inserting ‘‘50 percent’’, and 
(2) by striking ‘‘$30,000’’ in subsection (b)(1) 
and inserting ‘‘$50,000’’. 
(b) EXTENSION OF CREDIT.—Paragraph (2) of sec-
tion 30C(g) (relating to termination) is amended by strik-
ing ‘‘December 31, 2009’’ and inserting ‘‘December 31, 
2010’’. 
(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. 203. 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— 
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(1) 
by 
striking 
‘‘using 
a 
thermal 
depolymerization process’’, and 
(2) by striking ‘‘or D396’’ in subparagraph (B). 
(c) 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
PRO-
DUCED FROM BIOMASS.—The amendments made by 
subsection (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. 204. CREDIT FOR PRODUCTION OF CELLULOSIC ALCO-
HOL. 
(a) IN GENERAL.—Subsection (b) of section 40 is 
amended by adding at the end the following new para-
graph: 
‘‘(5) CELLULOSIC
ALCOHOL
FUEL
PRODUCER 
CREDIT.— 
‘‘(A) IN GENERAL.—The cellulosic alcohol 
fuel producer credit of any cellulosic alcohol fuel 
producer for any taxable year is 50 cents for 
each gallon of qualified cellulosic fuel produc-
tion of such producer. 
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‘‘(B) QUALIFIED CELLULOSIC FUEL PRO-
DUCTION.—For purposes of this paragraph, the 
term ‘qualified cellulosic fuel production’ means 
any cellulosic alcohol which is produced by a 
cellulosic alcohol fuel producer, and which dur-
ing the taxable year— 
‘‘(i) is sold by such producer to an-
other person— 
‘‘(I) for use by such other person 
in the production of a qualified mix-
ture in such other person’s trade or 
business (other than casual off-farm 
production), 
‘‘(II) for use by such other per-
son as a fuel in a trade or business, 
or 
‘‘(III) who sells such alcohol at 
retail to another person and places 
such alcohol in the fuel tank of such 
other person, or 
‘‘(ii) is used or sold by such producer 
for any purpose described in clause (i). 
‘‘(C) CELLULOSIC
ALCOHOL.—For pur-
poses of this paragraph, the term ‘cellulosic al-
cohol’ means any alcohol which— 
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‘‘(i) is produced in the United States 
for use as a fuel in the United States, and 
‘‘(ii) 
is 
derived 
from 
any 
lignocellulosic or hemicellulosic matter that 
is available on a renewable or recurring 
basis. 
For purposes of this subparagraph, the term 
‘United States’ includes any possession of the 
United States. 
‘‘(D) CELLULOSIC
ALCOHOL
FUEL
PRO-
DUCER.—For purposes of this paragraph, the 
term ‘cellulosic alcohol fuel producer’ means 
any person who produces cellulosic alcohol in a 
trade or business and is registered with the 
Secretary as a cellulosic alcohol fuel producer. 
‘‘(E) 
ADDITIONAL
DISTILLATION
EX-
CLUDED.—The qualified cellulosic fuel produc-
tion of any producer for any taxable year shall 
not include any alcohol which is purchased by 
the producer and with respect to which such 
producer increases the proof of the alcohol by 
additional distillation.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Subsection (a) of section 40 is amended by 
striking ‘‘plus’’ at the end of paragraph (1), by 
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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 fol-
lowing new paragraph: 
‘‘(4) in the case of a cellulosic alcohol fuel pro-
ducer, the cellulosic alcohol fuel producer credit.’’. 
(2) Clause (ii) of section 40(d)(3)(C) is amend-
ed by striking ‘‘subsection (b)(4)(B)’’ and inserting 
‘‘paragraph (4)(B) or (5)(B) of subsection (b)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to alcohol produced after December 
31, 2007. 
SEC. 205. 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: 
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‘‘(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 add-
ing at the end the following: 
‘‘(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 stor-
age, 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 
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multiplied by the number of qualified bicy-
cle commuting months during such year. 
‘‘(iii) 
QUALIFIED
BICYCLE
COM-
MUTING MONTH.—The term ‘qualified bi-
cycle commuting month’ means, with re-
spect to any 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 reimburse-
ment)’’ after ‘‘qualified transportation fringe’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2007. 
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SEC. 206. MODIFICATION OF LIMITATION ON AUTOMOBILE 
DEPRECIATION. 
(a) IN GENERAL.—Paragraph (5) of section 280F(d) 
of the Internal Revenue Code of 1986 (defining passenger 
automobile) is amended to read as follows: 
‘‘(5) PASSENGER AUTOMOBILE.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the term ‘passenger auto-
mobile’ means any 4-wheeled vehicle— 
‘‘(i) which is primarily designed or 
which can be used to carry passengers over 
public streets, roads, or highways (except 
any vehicle operated exclusively on a rail or 
rails), and 
‘‘(ii) which is rated at not more than 
14,000 pounds gross vehicle weight. 
‘‘(B) EXCEPTIONS.—The term ‘passenger 
automobile’ shall not include— 
‘‘(i) any exempt-design vehicle, and 
‘‘(ii) any exempt-use vehicle. 
‘‘(C) 
EXEMPT-DESIGN
VEHICLE.—The 
term ‘exempt-design vehicle’ means— 
‘‘(i) any vehicle which, by reason of its 
nature or design, is not likely to be used 
more than a de minimis amount for per-
sonal purposes, and 
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‘‘(ii) any vehicle— 
‘‘(I) which is designed to have a 
seating capacity of more than 9 per-
sons behind the driver’s seat, 
‘‘(II) which is equipped with a 
cargo area of at least 5 feet in interior 
length which is an open area or is de-
signed for use as an open area but is 
enclosed by a cap and is not readily 
accessible directly from the passenger 
compartment, or 
‘‘(III) has an integral enclosure, 
fully enclosing the driver compartment 
and load carrying device, does not 
have seating rearward of the driver’s 
seat, and has no body section pro-
truding more than 30 inches ahead of 
the leading edge of the windshield. 
‘‘(D) EXEMPT-USE
VEHICLE.—The term 
‘exempt-use vehicle’ means— 
‘‘(i) any ambulance, hearse, or com-
bination ambulance-hearse used by the tax-
payer directly in a trade or business, 
‘‘(ii) any vehicle used by the taxpayer 
directly in the trade or business of trans-
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porting persons or property for compensa-
tion or hire, and 
‘‘(iii) any truck or van if substantially 
all of the use of such vehicle by the tax-
payer is directly in— 
‘‘(I) a farming business (within 
the meaning of section 263A(e)(4)), 
‘‘(II) the transportation of a sub-
stantial amount of equipment, sup-
plies, or inventory, or 
‘‘(III) the moving or delivery of 
property which requires substantial 
cargo capacity. 
‘‘(E) RECAPTURE.—In the case of any ve-
hicle which is not a passenger automobile by 
reason of being an exempt-use vehicle, if such 
vehicle ceases to be an exempt-use vehicle in 
any taxable year after the taxable year in which 
such vehicle is placed in service, a rule similar 
to the rule of subsection (b) shall apply.’’. 
(b) CONFORMING AMENDMENT.—Section 179(b) of 
such Code (relating to limitations) is amended by striking 
paragraph (6). 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
December 31, 2007. 
SEC. 207. 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 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 Lib-
erty 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 section 3403 an amount equal to so much of the 
portion of the qualifying project expenditure amount allo-
cated under subsection (b)(3) to such governmental unit 
for the calendar year as is allocated by such governmental 
unit to such period 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 calendar year, the sum of— 
‘‘(A) the total expenditures paid or in-
curred during such calendar year by all New 
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York Liberty Zone governmental units and the 
Port Authority 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 
each New York Liberty Zone governmental unit 
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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 
period 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 
period shall not exceed the sum of— 
‘‘(i) $169,000,000, 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 cred-
it period, the amount under subparagraph (B) 
exceeds the aggregate amount allocated under 
subparagraph (A) for all calendar years in the 
credit 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 
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Liberty Zone governmental units for any cal-
endar 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 expenditure amount under paragraph (3) for 
a calendar year may allocate such portion to payroll 
periods beginning in such calendar year as such gov-
ernmental 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 for any calendar year exceeds the aggregate 
taxes imposed by section 3402 for which such gov-
ernmental unit is liable under section 3403 for peri-
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ods beginning in such year, such excess shall be car-
ried to the succeeding calendar year and added to 
the allocation of such governmental unit for such 
succeeding calendar year. 
‘‘(2) REALLOCATION.—If a New York Liberty 
Zone governmental unit does not use an amount al-
located 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 man-
ner 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
GOVERN-
MENTAL UNIT.—The term ‘New York Liberty Zone 
governmental unit’ means— 
‘‘(A) the State of New York, 
‘‘(B) the City of New York, New York, and 
‘‘(C) any agency or instrumentality of such 
State or City. 
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‘‘(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 
Federal program. 
‘‘(4) TREATMENT
OF
CREDIT
AMOUNTS
FOR 
PURPOSES 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 de-
ducts 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 
‘‘(B) the amount allocated to each New 
York Liberty Zone governmental unit under 
subsection (b)(3) for the calendar year, and 
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