To amend the Internal Revenue Code of 1986 to modify the rules relating to clean energy renewable bonds.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Clean Renewable Energy for Public 
Power Act of 2007''.

SEC. 2. MODIFICATIONS RELATING TO CLEAN RENEWABLE ENERGY BONDS.

    (a) Clean Renewable Energy Bond.--Paragraph (1) of section 54(d) of 
the Internal Revenue Code of 1986 (defining clean renewable energy 
bond) is amended--
            (1) in subparagraph (A) by striking ``pursuant'' and all 
        that follows through ``subsection (f)(2)'',
            (2) in subparagraph (B) by striking ``95 percent or more of 
        the proceeds'' and inserting ``90 percent or more of the net 
        proceeds'', and
            (3) in subparagraph (D) by striking ``subsection (h)'' and 
        inserting ``subsection (g)''.
    (b) Qualified Project.--Subparagraph (A) of section 54(d)(2) of 
such Code (defining qualified project) is amended to read as follows:
                    ``(A) In general.--The term `qualified project' 
                means any qualified facility (as determined under 
                section 45(d) without regard to paragraphs (8) and (10) 
                thereof and to any placed in service requirement) owned 
                by a qualified borrower and also without regard to the 
                following--
                            ``(i) in the case of a qualified facility 
                        described in section 45(d)(9) (regarding 
                        incremental hydropower production), any 
                        determination of incremental hydropower 
                        production and related calculations shall be 
                        determined by the qualified borrower based on a 
                        methodology that meets Federal Energy 
                        Regulatory Commission standards; and
                            ``(ii) in the case of a qualified facility 
                        described in section 45(d)(9) (regarding non-
                        hydropower production), the facility need not 
                        be licensed by the Federal Energy Regulation 
                        Commission if the facility, when constructed, 
                        will meet Federal Energy Regulatory Commission 
                        licensing requirements and other applicable 
                        environmental, licensing, and regulatory 
                        requirements.''.
    (c) Reimbursement.--Subparagraph (C) of section 54(d)(2) of such 
Code (relating to reimbursement) is amended to read as follows:
                    ``(C) Reimbursement.--For purposes of paragraph 
                (1)(B), proceeds of a clean renewable energy bond may 
                be issued to reimburse a qualified borrower for amounts 
                paid after the date of the enactment of this section in 
                the same manner as proceeds of State and local 
                government obligations the interest upon which is 
                exempt from tax under section 103.''.
    (d) Change in Use.--Subparagraph (D) of section 54(d)(2) of such 
Code (relating to treatment of changes in use) is amended by striking 
``or qualified issuer''.
    (e) Maximum Term.--Paragraph (2) of section 54(e) of such Code 
(relating to maximum term) is amended by striking ``without regard to 
the requirements of subsection (1)(6) and''.
    (f) Repeal of Limitation on Amount of Bonds Designated.--Section 54 
of such Code is amended by striking subsection (f) (relating to repeal 
of limitation on amount of bonds designated).
    (g) Special Rules Relating to Expenditures.--Subsection (h) of 
section 54 of such Code (relating to special rules relating to 
expenditures) is amended--
            (1) in paragraph (1)(A) by striking ``95 percent of the 
        proceeds'' and inserting ``90 percent of the net proceeds'',
            (2) in paragraph (1)(B)--
                    (A) by striking ``10 percent of the proceeds'' and 
                inserting ``5 percent of the net proceeds'', and
                    (B) by striking ``the 6-month period beginning on'' 
                both places it appears and inserting ``1 year of'', and
            (3) in paragraph (1)(C) by inserting ``net'' before 
        ``proceeds'',
            (4) in paragraph (3) by striking ``95 percent of the 
        proceeds'' and inserting ``90 percent of the net proceeds''.
    (h) Repeal of Special Rules Relating to Arbitrage.--Section 54 of 
such Code is amended by striking subsection (i) (relating to repeal of 
special rules relating to arbitrage).
    (i) Public Power Entity.--Subsection (j) of section 54 of such Code 
(defining Cooperative electric company; qualified energy tax credit 
bond lender; governmental body; qualified borrower) is amended--
            (1) by redesignating paragraphs (4) and (5) as paragraph 
        (5) and (6) and by inserting after paragraph (3) the following 
        new paragraph:
            ``(4) Public power entity.--The term `public power entity' 
        means a State utility with a service obligation, as such terms 
        are defined in section 217 of the Federal Power Act (as in 
        effect on the date of enactment of this paragraph).'',
            (2) in paragraph (5), as so redesignated, by striking 
        ``or'' at the end of subparagraph (B), by striking the period 
        at the end of subparagraph (C) and inserting ``, or'', and by 
        adding at the end the following:
                    ``(D) a public power entity.'', and
            (3) in paragraph (6), as so redesignated, by striking 
        ``or'' at the end of subparagraph (A), by striking the period 
        at the end of subparagraph (B) and inserting ``, or'', and by 
        adding at the end the following:
                    ``(C) a public power entity.''.
    (j) Repeal of Ratable Principal Amortization Requirement.--
Subsection (l) of section 54 of such Code (relating to other 
definitions and special rules) is amended by striking paragraph (5) and 
redesignating paragraph (6) as paragraph (5).
    (k) Net Proceeds.--Subsection (i) of section 54 of such Code 
(relating to other definitions and special rules), as amended by 
subsection (j), is amended by redesignating paragraphs (2), (3), (4), 
and (5) as paragraphs (4), (5), (6), and (7), respectively, and by 
inserting after paragraph (1) the following new paragraphs:
            ``(2) Net proceeds.--The term `net proceeds' means, with 
        respect to an issue, the proceeds of such issue reduced by 
        amounts in a reasonably required reserve or replacement fund.
            ``(3) Limitation on amount in reserve or replacement fund 
        which may be financed by issue.--A bond issued as part of an 
        issue shall not be treated as a clean renewable energy bond if 
        the amount of the proceeds from the sale of such issue which is 
        part of any reserve or replacement fund exceeds 10 percent of 
        the proceeds of the issue (or such higher amount which the 
        issuer establishes is necessary to the satisfaction of the 
        Secretary).''.
    (l) Other Special Rules.--Subsection (i) of section 54 of such Code 
((relating to other definitions and special rules), as amended by 
subsections (j) and (k)) is amended by adding at the end the following 
new paragraphs:
            ``(8) Credits may be separated.--There may be a separation 
        (including at issuance) of the ownership of a clean renewable 
        energy 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 allowance date holds the 
        instrument evidencing the entitlement to the credit and not to 
        the holder of the bond.
            ``(9) Treatment for estimated tax purposes.--Solely for the 
        purposes of sections 6654 and 6655, the credit allowed by this 
        section to a taxpayer by reason of holding a qualified energy 
        tax credit bond on a credit allowance date (or the credit in 
        the case of a separation as provided in paragraph (8)) shall be 
        treated as if it were a payment of estimated tax made by the 
        taxpayer on such date.
            ``(10) Carryback and carryforward of unused credits.--If 
        the sum of the credit exceeds the limitation imposed by 
        subsection (c) for any taxable year, any credits may be applied 
        in a manner similar to the rules set forth in section 39.''.
    (m) Termination.--Subsection (m) of section 54 of such Code 
(relating to termination) is amended by striking ``2008'' and inserting 
``2013''.
    (n) Clerical Redesignations.--Section 54 of such Code, as amended 
by the preceding provisions of this section, is amended by 
redesignating subsections (g), (h), (j), (k), (l), and (m) as 
subsections (f), (g), (h), (i), (j), and (k), respectively.
    (o) Effective Date.--The amendments made by this section shall 
apply to obligations issued after the date of the enactment of this 
Act.

Summary: Clean Renewable Energy for Public Power Act of 2007 - Amends Internal Revenue Code provisions allowing a tax credit for holders of clean renewable energy bonds (CREBs) to: (1) eliminate allocation limitations on such bonds; (2) reduce from 95 to 90% the amount of CREB proceeds required for capital expenditures; (3) redefine "qualified project" and "public power entity" for CREB purposes; (4) repeal the national limitation on CREBs and arbitrage rules applicable to such bonds; and (5) extend through 2013 the authority for issuing CREBs.