I 
109TH CONGRESS 
1ST SESSION H. R. 2794
To amend the Internal Revenue Code of 1986 to allow a credit to holders 
of qualified bonds issued to finance certain energy projects, and for 
other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 8, 2005
Mr. LEWIS of Kentucky (for himself, Mr. POMEROY, Mr. RAMSTAD, Mr. 
BEAUPREZ, and Mr. WELLER) introduced the following bill; which was 
referred to the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to allow a 
credit to holders of qualified bonds issued to finance 
certain energy projects, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Clean Energy Bonds Act of 2005’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
SEC. 2. CREDIT TO HOLDERS OF CLEAN ENERGY BONDS. 
(a) IN GENERAL.—Part IV of subchapter A of chap-
ter 1 (relating to credits against tax) is amended by add-
ing at the end the following new subpart: 
‘‘Subpart H—Nonrefundable Credit to Holders of 
Clean Energy Bonds
‘‘Sec. 54. Credit to holders of clean energy bonds.
‘‘SEC. 54. CREDIT TO HOLDERS OF CLEAN ENERGY BONDS. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax-
payer who holds a clean energy bond on a credit allowance 
date of such bond, which occurs during the taxable year, 
there shall be allowed as a credit against the tax imposed 
by this chapter for such taxable year an amount equal to 
the sum of the credits determined under subsection (b) 
with respect to credit allowance dates during such year 
on which the taxpayer holds such bond. 
‘‘(b) AMOUNT OF CREDIT.—
‘‘(1) IN GENERAL.—The amount of the credit 
determined under this subsection with respect to any 
credit allowance date for a clean energy bond is 25 
percent of the annual credit determined with respect 
to such bond.
‘‘(2) ANNUAL CREDIT.—The annual credit de-
termined with respect to any clean energy bond is 
the product of—
‘‘(A) the credit rate determined by the Sec-
retary under paragraph (3) for the day on 
which such bond was sold, multiplied by 
‘‘(B) the outstanding face amount of the 
bond. 
‘‘(3) DETERMINATION.—For purposes of para-
graph (2), with respect to any clean energy bond, 
the Secretary shall determine daily or caused to be 
determined daily a credit rate which shall apply to 
the first day on which there is a binding, written 
contract for the sale or exchange of the bond. The 
credit rate for any day is the credit rate which the 
Secretary or the Secretary’s designee estimates will 
permit the issuance of clean energy bonds with a 
specified maturity or redemption date without dis-
count and without interest cost to the qualified 
issuer. 
‘‘(4) CREDIT ALLOWANCE DATE.—For purposes 
of this section, the term ‘credit allowance date’ 
means—
‘‘(A) March 15, 
‘‘(B) June 15,
‘‘(C) September 15, and 
‘‘(D) December 15. 
Such term also includes the last day on which the 
bond is outstanding. 
‘‘(5) SPECIAL RULE FOR ISSUANCE AND RE-
DEMPTION.—In the case of a bond which is issued 
during the 3-month period ending on a credit allow-
ance date, the amount of the credit determined 
under this subsection with respect to such credit al-
lowance date shall be a ratable portion of the credit 
otherwise determined based on the portion of the 3-
month period during which the bond is outstanding. 
A similar rule shall apply when the bond is redeemed 
or matures. 
‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The credit allowed under 
subsection (a) for any 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 part (other than subpart C thereof, 
relating to refundable credits).
‘‘(2) CARRYOVER OF UNUSED CREDIT.—If the 
credit allowable under subsection (a) exceeds the 
limitation imposed by paragraph (1) for such taxable 
year, such excess shall be carried to the succeeding 
taxable year and added to the credit allowable under 
subsection (a) for such taxable year. 
‘‘(d) CLEAN ENERGY BOND.—For purposes of this 
section—
‘‘(1) IN
GENERAL.—The term ‘clean energy 
bond’ means any bond issued as part of an issue 
if—
‘‘(A) the bond is issued by a qualified 
issuer, 
‘‘(B) 95 percent or more of the proceeds 
from the sale of such issue are to be used for 
capital expenditures incurred by qualified bor-
rowers for 1 or more qualified projects, 
‘‘(C) the qualified issuer designates such 
bond for purposes of this section and the bond 
is in registered form, and 
‘‘(D) the issue meets the requirements of 
subsections (e) and (g). 
‘‘(2) 
QUALIFIED
PROJECT; 
SPECIAL
USE 
RULES.—
‘‘(A) IN
GENERAL.—The term ‘qualified 
project’ means any qualified facility (as deter-
mined under section 45(d) without regard to 
any placed in service date) owned by a qualified 
borrower. 
‘‘(B) REFINANCING RULES.—For purposes 
of paragraph (1)(B), a qualified project may be 
refinanced with proceeds of a clean energy bond 
only if the indebtedness being refinanced (in-
cluding any obligation directly or indirectly refi-
nanced by such indebtedness) was originally in-
curred by a qualified borrower after the date of 
the enactment of this section. 
‘‘(C) REIMBURSEMENT.—For purposes of 
paragraph (1)(B), a clean energy bond may be 
issued to reimburse a qualified borrower for 
amounts paid after the date of the enactment 
of this section with respect to a qualified 
project, but only if prior to the payment of such 
expenditure, the qualified borrower declared its 
intent to reimburse such expenditure with the 
proceeds of a clean energy bond. 
‘‘(D) TREATMENT OF CHANGES IN USE.—
For purposes of paragraph (1)(B), the proceeds 
of an issue shall not be treated as used for a
qualified project to the extent that a qualified 
borrower takes any action within its control 
which causes such proceeds not to be used for 
a qualified project. The Secretary shall pre-
scribe regulations specifying remedial actions 
that may be taken (including conditions to tak-
ing such remedial actions) to prevent an action 
described in the preceding sentence from caus-
ing a bond to fail to be a clean energy bond. 
‘‘(e) MATURITY LIMITATIONS.—
‘‘(1) DURATION OF TERM.—A bond shall not be 
treated as a clean energy bond if such bond is issued 
as part of an issue and—
‘‘(A) the average maturity of bonds issued 
as a part of such issue, exceeds 
‘‘(B) 120 percent of the average reasonable 
expected economic life of the facilities being fi-
nanced with the proceeds from the sale of such 
issue. 
‘‘(2) DETERMINATION OF AVERAGES.—For pur-
poses of paragraph (1), the determination of aver-
ages of an issue and economic life of any facility 
shall be determined in accordance with section 
147(b).
‘‘(3) RATABLE PRINCIPAL AMORTIZATION RE-
QUIRED.—A bond shall not be treated as a clean en-
ergy bond unless it is part of an issue which pro-
vides for an equal amount of principal to be paid by 
the qualified issuer during each calendar year that 
the issue is outstanding. 
‘‘(f) CREDIT INCLUDED IN GROSS INCOME.—Gross 
income includes the amount of the credit allowed to the 
taxpayer under this section (determined without regard to 
subsection (c)) and the amount so included shall be treat-
ed as interest income. 
‘‘(g) SPECIAL
RULES
RELATING
TO
EXPENDI-
TURES.—
‘‘(1) IN GENERAL.—An issue shall be treated as 
meeting the requirements of this subsection if—
‘‘(A) at least 95 percent of the proceeds 
from the sale of the issue are to be spent for 
1 or more qualified projects within the 5-year 
period beginning on the date of issuance of the 
clean energy bond, 
‘‘(B) a binding commitment with a third 
party to spend at least 10 percent of the pro-
ceeds from the sale of the issue will be incurred 
within the 6-month period beginning on the 
date of issuance of the clean energy bond or, in
the case of a clean energy bond, the proceeds 
of which are to be loaned to 2 or more qualified 
borrowers, such binding commitment will be in-
curred within the 6-month period beginning on 
the date of the loan of such proceeds to a quali-
fied borrower, and 
‘‘(C) such projects will be completed with 
due diligence and the proceeds from the sale of 
the issue will be spent with due diligence. 
‘‘(2) EXTENSION
OF
PERIOD.—Upon submis-
sion of a request prior to the expiration of the period 
described in paragraph (1)(A), the Secretary may 
extend such period if the qualified issuer establishes 
that the failure to satisfy the 5-year requirement is 
due to reasonable cause and the related projects will 
continue to proceed with due diligence. 
‘‘(3) FAILURE TO SPEND REQUIRED AMOUNT 
OF BOND PROCEEDS WITHIN 5 YEARS.—To the ex-
tent that less than 95 percent of the proceeds of 
such issue are expended within such 5-year period 
(and no extension has been obtained under para-
graph (2)), the qualified issuer shall redeem all of 
the nonqualified bonds on the earliest call date sub-
sequent to the expiration of the 5-year period. If 
such earliest call date is more than 90 days subse-
quent to the expiration of the 5-year period, the 
qualified issuer shall establish a yield-restricted de-
feasance escrow within such 90 days to retire such 
nonqualified bonds on the earlier of the date which 
is 10 years after the issue date or the first call date. 
For purposes of this paragraph, the term ‘non-
qualified bonds’ means the portion of the out-
standing bonds in an amount that, if the remaining 
bonds were issued on the fifth anniversary of the 
date of the issuance of the issue, at least 95 percent 
of the proceeds of the remaining bonds would be 
used to provide qualified projects. 
‘‘(h) SPECIAL RULES RELATING TO ARBITRAGE.—
‘‘(1) IN GENERAL.—A bond which is part of an 
issue shall not be treated as a clean energy bond un-
less, with respect to the issue of which the bond is 
a part, the qualified issuer satisfies the arbitrage re-
bate requirements of section 148 with respect to 
gross proceeds of the issue (other than any amounts 
applied in accordance with subsection (g)). For pur-
poses of such requirements, yield over the term of an 
issue shall be determined under the principles of sec-
tion 148 based on the qualified issuer’s payments of 
principal, interest (if any), and fees for qualified 
guarantees on such issue.
‘‘(2) EXCEPTION.—Amounts on deposit in a 
bona fide debt service fund with regard to any clean 
energy bond are not subject to the arbitrage rebate 
requirements of section 148. 
‘‘(i) COOPERATIVE ELECTRIC COMPANY; QUALIFIED 
ENERGY TAX CREDIT BOND LENDER; GOVERNMENTAL 
BODY; QUALIFIED BORROWER.—For purposes of this sec-
tion—
‘‘(1) COOPERATIVE ELECTRIC COMPANY.—The 
term ‘cooperative electric company’ means a mutual 
or cooperative electric company described in section 
501(c)(12) or section 1381(a)(2)(C), or a not-for-
profit electric utility which has received a loan or 
loan guarantee under the Rural Electrification Act. 
‘‘(2) CLEAN
ENERGY
BOND
LENDER.—The 
term ‘clean energy bond lender’ means a lender 
which is a cooperative which is owned by, or has out-
standing loans to, 100 or more cooperative electric 
companies and is in existence on February 1, 2002, 
and shall include any affiliated entity which is con-
trolled by such lender. 
‘‘(3) GOVERNMENTAL BODY.—The term ‘gov-
ernmental body’ means any State, territory, posses-
sion of the United States, the District of Columbia,
Indian tribal government, and any political subdivi-
sion thereof. 
‘‘(4) QUALIFIED ISSUER.—The term ‘qualified 
issuer’ means—
‘‘(A) a clean energy bond lender, 
‘‘(B) a cooperative electric company, 
‘‘(C) a governmental body, or 
‘‘(D) the Tennessee Valley Authority. 
‘‘(5) QUALIFIED BORROWER.—The term ‘quali-
fied borrower’ means—
‘‘(A) a cooperative electric company, 
‘‘(B) a governmental body, or 
‘‘(C) the Tennessee Valley Authority. 
‘‘(j) SPECIAL RULES RELATING TO POOL BONDS.—
No portion of a pooled financing bond may be allocable 
to loan unless the borrower has entered into a written loan 
commitment for such portion prior to the issue date of 
such issue. 
‘‘(k) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) BOND.—The term ‘bond’ includes any ob-
ligation. 
‘‘(2) POOLED
FINANCING
BOND.—The term 
‘pooled financing bond’ shall have the meaning given 
such term by section 149(f)(4)(A).
‘‘(3) PARTNERSHIP; 
S
CORPORATION; 
AND 
OTHER
PASS-THRU
ENTITIES.—Under regulations 
prescribed by the Secretary, in the case of a partner-
ship, trust, S corporation, or other pass-thru entity, 
rules similar to the rules of section 41(g) shall apply 
with respect to the credit allowable under subsection 
(a). 
‘‘(4) BONDS
HELD
BY
REGULATED
INVEST-
MENT COMPANIES.—If any clean energy bond is held 
by a regulated investment company, the credit deter-
mined under subsection (a) shall be allowed to 
shareholders of such company under procedures pre-
scribed by the Secretary. 
‘‘(5) TREATMENT FOR ESTIMATED TAX PUR-
POSES.—Solely for purposes of sections 6654 and 
6655, the credit allowed by this section to a tax-
payer by reason of holding a clean energy bond on 
a credit allowance date shall be treated as if it were 
a payment of estimated tax made by the taxpayer on 
such date. 
‘‘(6) REPORTING.—Issuers of clean energy 
bonds shall submit reports similar to the reports re-
quired under section 149(e).
‘‘(l) TERMINATION.—This section shall not apply 
with respect to any bond issued after December 31, 
2008.’’. 
(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: 
‘‘(8) REPORTING OF CREDIT ON CLEAN ENERGY 
BONDS.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (a), the term ‘interest’ includes amounts 
includible in gross income under section 54(f) 
and such amounts shall be treated as paid on 
the credit allowance date (as defined in section 
54(b)(4)). 
‘‘(B) 
REPORTING
TO
CORPORATIONS, 
ETC.—Except as otherwise provided in regula-
tions, in the case of any interest described in 
subparagraph (A), subsection (b)(4) shall be 
applied without regard to subparagraphs (A), 
(H), (I), (J), (K), and (L)(i) of such subsection. 
‘‘(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) CLERICAL AMENDMENTS.—
(1) The table of subparts for part IV of sub-
chapter A of chapter 1 is amended by adding at the 
end the following new item:
‘‘SUBPART H. NONREFUNDABLE CREDIT TO HOLDERS OF CLEAN ENERGY 
BONDS’’.
(2) Section 6401(b)(1) is amended by striking 
‘‘and G’’ and inserting ‘‘G, and H’’. 
(d) ISSUANCE OF REGULATIONS.—The Secretary of 
Treasury shall issue regulations required under section 54 
of the Internal Revenue Code of 1986 (as added by this 
section) not later than 120 days after the date of the en-
actment of this Act. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after the date of 
the enactment of this Act.
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