‘‘(B) PROGRESS EXPENDITURE PROPERTY
DEFINED.—For purposes of this paragraph, the
term ‘progress expenditure property’ means any
property being constructed by or for the tax-
payer and which—
‘‘(i) cannot reasonably be expected to
be completed in less than 18 months, and
‘‘(ii) it is reasonable to believe will
qualify as a carbonaceous fuels conversion
facility which is being constructed by or for
the taxpayer when it is placed in service.
‘‘(C) 
QUALIFIED
PROGRESS
EXPENDI-
TURES
DEFINED.—For 
purposes 
of 
this
paragraph—
‘‘(i) 
SELF-CONSTRUCTED
PROP-
ERTY.—In the case of any self-constructed
property, the term ‘qualified progress ex-
penditures’ means the amount which, for
purposes of this subpart, is properly
chargeable (during such taxable year) to
capital account with respect to such prop-
erty.
‘‘(ii) NON-SELF-CONSTRUCTED PROP-
ERTY.—In the case of non-self-constructed
property, the term ‘qualified progress ex-
penditures’ means the amount paid during
the taxable year to another person for the
construction of such property.
‘‘(D) OTHER DEFINITIONS.—For purposes
of this subsection—
‘‘(i) 
SELF-CONSTRUCTED
PROP-
ERTY.—The term ‘self-constructed prop-
erty’ means property for which it is rea-
sonable to believe that more than half of
the construction expenditures will be made
directly by the taxpayer.
‘‘(ii) NON-SELF-CONSTRUCTED PROP-
ERTY.—The 
term 
‘non-self-constructed
property’ means property which is not self-
constructed property.
‘‘(iii) 
CONSTRUCTION, 
ETC.—The
term ‘construction’ includes reconstruction
and erection, and the term ‘constructed’
includes reconstructed and erected.
‘‘(iv) ONLY CONSTRUCTION OF CAR-
BONACEOUS FUELS CONVERSION FACILITY
TO BE TAKEN INTO ACCOUNT.—Construc-
tion shall be taken into account only if, for
purposes of this subpart, expenditures
therefor are properly chargeable to capital
account with respect to the property.
‘‘(E) ELECTION.—An election under this
paragraph may be made at such time and in
such manner as the Secretary may by regula-
tions prescribe. Such an election shall apply to
the taxable year for which made and to all sub-
sequent taxable years. Such an election, once
made, may not be revoked except with the con-
sent of the Secretary.
‘‘(5) COORDINATION WITH OTHER CREDITS.—
This subsection shall not apply to any property with
respect to which the energy credit or the rehabilita-
tion credit is allowed unless the taxpayer elects to
waive the application of such credits to such prop-
erty.’’
(c) RECAPTURE.—Subsection (a) of section 50 of
such Code is amended by adding at the end the following
new paragraph:
‘‘(6) SPECIAL
RULES
RELATING
TO
CARBO-
NACEOUS FUELS CONVERSION FACILITY.—For pur-
poses of applying this subsection in the case of any
credit allowable by reason of section 48(c), the fol-
lowing shall apply:
‘‘(A) GENERAL
RULE.—In lieu of the
amount of the increase in tax under paragraph
(1), the increase in tax shall be an amount
equal to the investment tax credit allowed under
section 38 for all prior taxable years with re-
spect to a carbonaceous fuels conversion facility
(as defined by section 48(c)) multiplied by a
fraction whose numerator is the number of
years remaining to fully depreciate under this
title the carbonaceous fuels conversion facility
disposed of, and whose denominator is the total
number of years over which such facility would
otherwise have been subject to depreciation. For
purposes of the preceding sentence, the year of
disposition of the carbonaceous fuels conversion
facility property shall be treated as a year of re-
maining depreciation.
‘‘(B) PROPERTY CEASES TO QUALIFY FOR
PROGRESS
EXPENDITURES.—Rules similar to
the rules of paragraph (2) shall apply in the
case of qualified progress expenditures for a
carbonaceous fuels conversion facility under sec-
tion 48(c), except that the amount of the in-
crease in tax under subparagraph (A) of this
paragraph shall be substituted in lieu of the
amount described in such paragraph (2).
‘‘(C) This paragraph shall be applied sepa-
rately with respect to the credit allowed under
section 38 regarding a carbonaceous fuels con-
version facility.’’
(d) TECHNICAL AMENDMENTS.—
(1) Subparagraph (C) of section 49(a)(1) of
such Code is amended by striking ‘‘and’’ at the end
of clause (ii), by striking the period at the end of
clause (iii) and inserting ‘‘, and’’, and by adding at
the end thereof the following new clause:
‘‘(iv) the portion of the basis of any
carbonaceous fuels conversion facility at-
tributable to any qualified investment (as
defined by section 48(c)(3)).’’
(2) Paragraph (4) of section 50(a) of such Code
is amended by striking ‘‘and (2)’’ and inserting ‘‘,
(2), and (6)’’.
(3)(A) The section heading for section 48 of
such Code is amended to read as follows:
‘‘SEC. 48. OTHER CREDITS.’’
(B) The table of sections for subpart E of part
IV of subchapter A of chapter 1 of such Code is
amended by striking the item relating to section 48
and inserting the following:
‘‘Sec. 48. Other credits.’’
(e) SALE
OR ASSIGNMENT
OF UNUSED CREDIT
AMOUNT.—Section 50 of such Code is amended by adding
at the end the following new subsection:
‘‘(e) SALE
OR ASSIGNMENT
OF UNUSED CARBO-
NACEOUS FUELS FACILITY CREDIT AMOUNT.—
‘‘(1) GENERAL RULE.—Any unused portion of a
carbonaceous fuels facility credit may be sold or as-
signed in accordance with regulations prescribed by
the Secretary.
‘‘(2) TREATMENT OF SELLER.—
‘‘(A) LIABILITY.—The sale or assignment
of any portion of a credit under paragraph (1)
shall not relieve the seller or assignor of any
penalty or interest charged under this title with
respect to such portion.
‘‘(B) BASIS.—The basis of a carbonaceous
fuels facility shall not be adjusted by reason of
the sale or assignment of a credit under para-
graph (1).
‘‘(3) TREATMENT OF ACQUIRER.—
‘‘(A) CREDIT
CLAIMED.—The credit (or
portion thereof) acquired under paragraph (1)
may be claimed only by the person acquiring
such credit in the taxable year of such person
enactment of this Act under rules similar to the rules of
section 48(m) of the Internal Revenue Code of 1986 (as
in effect on the day before the date of the enactment of
the Revenue Reconciliation Act of 1990).
SEC. 4. EXEMPTION FROM MANUFACTURERS EXCISE TAX
ON FUELS.
(a) GASOLINE.—Subsection (a) of section 4083 of the
Internal Revenue Code of 1986 is amended by adding at
the end the following new paragraph:
‘‘(4) QUALIFIED CARBONACEOUS FUEL.—
‘‘(A) EXEMPTION.—For taxable years be-
ginning after 90 days after the date of the en-
actment of this paragraph and ending before
December 31, 2012, the terms ‘taxable fuel’,
‘gasoline’, and ‘diesel fuel’ do not include quali-
fied carbonaceous fuel or that portion of a
blend that is qualified carbonaceous fuel.
‘‘(B) QUALIFIED
CARBONACEOUS
FUEL
DEFINED.—For purposes of subparagraph (A),
the term ‘qualified carbonaceous fuel’ means
qualified fuel produced by a carbonaceous fuels
conversion facility.
‘‘(C) OTHER DEFINITIONS.—For purposes
of subparagraph (B), the terms ‘qualified fuel’
and ‘carbonaceous fuels conversion facility’ have
the meaning given such terms by section
48(c)(2).’’
(b) AVIATION FUEL.—Subsection (a) of section 4093
of such Code is amended by adding at the end the follow-
ing new sentence: ‘‘Such term does not include qualified
carbonaceous fuel (as defined by section 4083(a)(4)).’’
(c) RETAIL USES.—Section 4041 of such Code is
amended by adding at the end the following new sub-
section:
‘‘(n) CERTAIN CARBONACEOUS FUEL.—
‘‘(1) EXEMPTION.—For taxable years beginning
after 90 days after the date of the enactment of this
subsection and ending before December 31, 2012, no
tax shall be imposed under this section on qualified
carbonaceous fuel or that portion of a blend that is
qualified carbonaceous fuel.
‘‘(2) QUALIFIED
CARBONACEOUS
FUEL
DE-
FINED.—For purposes of paragraph (1), the term
‘qualified carbonaceous fuel’ has the meaning given
such term by section 4083(a)(4).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to fuels produced after the date
of the enactment of this Act.
Æ