To amend the Internal Revenue Code of 1986 to provide a credit against the income tax for expenses incurred in restoring and protecting coastal lands.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Coastal Restoration Tax Credit Act 
of 2005''.

SEC. 2. CREDIT FOR EXPENSES INCURRED IN RESTORING AND PROTECTING 
              COASTAL LANDS.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 30B. CREDIT FOR EXPENSES INCURRED IN RESTORING AND PROTECTING 
              COASTAL LANDS.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the qualified expenditures of the taxpayer for the taxable 
year.
    ``(b) Limitations.--
            ``(1) Maximum credit.--The credit allowed under subsection 
        (a) for a taxable year shall not exceed $2,000,000.
            ``(2) Limitation based on amount of tax.--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 imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under 
                subpart A and sections 27 and 30A for the taxable year.
    ``(c) Qualified Expenditures.--For purposes of this section--
            ``(1) In general.--The term `qualified expenditures' means 
        amounts paid or incurred by the taxpayer for an approved 
        project.
            ``(2) Approved project.--The term `approved project' means 
        any project approved by the Natural Resources Conservation 
        Service to restore or protect coastal lands located in the 
        United States.
    ``(d) Carryovers Allowed.--
            ``(1) In general.--If the credit amount allowable under 
        subsection (a) for a taxable year exceeds the amount of the 
        limitation under subsection (c) for such taxable year (referred 
        to as the `unused credit year' in this paragraph), such excess 
        shall be allowed as a credit carryforward for each of the 
        taxable years following the unused credit year or as a credit 
        carryback for each of the taxable years preceeding the unused 
        credit year.
            ``(2) Rules.--For purposes of paragraph (1), rules similar 
        to the rules of section 39 shall apply, except that--
                    ``(A) subsection (a)(1) shall be applied--
                            ``(i) by substituting `3 taxable years' for 
                        `1 taxable years' in subparagraph (A) thereof, 
                        and
                            ``(ii) by substituting `5 taxable years' 
                        for `20 taxable years' in subparagraph (B) 
                        thereof, and
                    ``(B) subsection (a)(2) shall be applied--
                            ``(i) by substituting `8 taxable years' for 
                        `21 taxable years' in subparagraph (A) thereof, 
                        and
                            ``(ii) by substituting `7 taxable years' 
                        for `20 taxable years' in subparagraph (B).
    ``(e) Special Rules.--
            ``(1) Basis reduction.--The basis of any property for which 
        a credit is allowable under subsection (a) shall be reduced by 
        the amount of such credit (determined without regard to 
        subsection (b)(2)).
            ``(2) No double benefit.--The amount of any deduction or 
        credit allowable under this chapter (other than the credit 
        allowable under subsection (a)), shall be reduced by the amount 
        of credit allowed under subsection (a) (determined without 
        regard to subsection (b)(2)) for the taxable year.
            ``(3) Reduction for assistance.--The amount taken into 
        account under subsection (a) with respect to any project shall 
        be reduced by the amount of any Federal, State, or local grant 
        or other assistance received by the taxpayer during such 
        taxable year or any prior taxable year which was used to make 
        qualified expenditures and which was not included in the gross 
        income of such taxpayer.''.
    (b) Basis Adjustment.--Section 1016(a) of such Code is amended by 
striking ``and'' at the end of paragraph (30), by striking the period 
at the end of paragraph (31) and inserting ``, and'', and by adding at 
the end the following new paragraph:
            ``(32) to the extent provided in section 30B(e)(1).''.
    (c) Clerical Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 30A the following new 
item:

``Sec. 30B. Credit for expenses incurred in restoring and protecting 
                            coastal lands.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

Summary: Coastal Restoration Tax Credit Act of 2005 - Amends the Internal Revenue Code to allow a tax credit for expenditures related to any project approved by the Natural Resources Conservation Service to restore or protect coastal lands in the United States.