To amend the Internal Revenue Code of 1986 to provide for clean renewable water supply bonds.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Clean Renewable Water Supply Act of 
2009''.

SEC. 2. CLEAN RENEWABLE WATER SUPPLY BONDS.

    (a) In General.--Subpart I 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. 54G. CLEAN RENEWABLE WATER SUPPLY BONDS.

    ``(a) Clean Renewable Water Supply Bonds.--For purposes of this 
subpart, the term `clean renewable water supply bond' means any bond 
issued as part of an issue if--
            ``(1) 100 percent of the available project proceeds of such 
        issue are to be used for capital expenditures incurred by 
        qualified borrowers for 1 or more qualified projects,
            ``(2) the bond is issued by a qualified issuer,
            ``(3) the issuer designates such bond for purposes of this 
        section, and
            ``(4) the bond is issued--
                    ``(A) pursuant to an allocation by the Secretary to 
                such issuer of a portion of the national clean 
                renewable water supply bond limitation under subsection 
                (b), and
                    ``(B) not later than 6 months after the date that 
                such qualified issuer receives an allocation under 
                subsection (b).
``Any allocation under subsection (b) not used within the 6-month 
period described in paragraph (4)(B) shall be applied to increase the 
national clean renewable water supply bond limitation for the next 
succeeding application period under subsection (b)(2)(B).
    ``(b) National Limitation on Amount of Bonds Designated.--
            ``(1) In general.--There is a national clean renewable 
        water supply bond limitation for each calendar year. Such 
        limitation is--
                    ``(A) $100,000,000 for 2010,
                    ``(B) $150,000,000 for 2011,
                    ``(C) $200,000,000 for 2012,
                    ``(D) $250,000,000 for 2013,
                    ``(E) $500,000,000 for 2014,
                    ``(F) $750,000,000 for 2015,
                    ``(G) $1,000,000,000 for 2016,
                    ``(H) $1,500,000,000 for 2017,
                    ``(I) $1,750,000,000 for 2018, and
                    ``(J) $0 for 2019 and thereafter.
            ``(2) Allocation of limitation.--
                    ``(A) In general.--The limitation under paragraph 
                (1) shall be allocated by the Secretary among qualified 
                projects as provided in this paragraph.
                    ``(B) Method of allocation.--For each calendar year 
                for which there is a national clean renewable water 
                supply bond limitation greater than zero, the Secretary 
                shall publish a notice soliciting applications by 
                qualified issuers for allocations of such limitation to 
                qualified projects. Such notice shall specify a 3-month 
                application period in the calendar year during which 
                the Secretary will accept such applications. Within 30 
                days after the end of such application period, and 
                subject to the requirements of subparagraph (C), the 
                Secretary shall allocate such limitation to qualified 
                projects on a first-come, first-served basis, based on 
                the order in which such applications are received from 
                qualified issuers.
                    ``(C) Allocation requirements.--
                            ``(i) Certifications regarding regulatory 
                        approvals.--No portion of the national clean 
                        renewable water supply bond limitation shall be 
                        allocated to a qualified project unless the 
                        qualified issuer has certified in its 
                        application for such allocation that as of the 
                        date of such application the qualified issuer 
                        or qualified borrower has received all Federal 
                        and State regulatory approvals necessary to 
                        construct the qualified project.
                            ``(ii) Restriction on allocations to large 
                        projects or to individual projects.--
                                    ``(I) In general.--The Secretary 
                                shall not allocate--
                                            ``(aa) more than 60 percent 
                                        of the national clean renewable 
                                        water supply bond limitation 
                                        for a calendar year to 1 or 
                                        more large projects,
                                            ``(bb) more than 18 percent 
                                        of the amount of the national 
                                        clean renewable water supply 
                                        bond limitation for a calendar 
                                        year to any single project that 
                                        is a large project,
                                            ``(cc) more than 12 percent 
                                        of the national clean renewable 
                                        water supply bond limitation 
                                        for a calendar year to any 
                                        single project that is not a 
                                        large project, or
                                            ``(dd) more than 
                                        $95,000,000 for all calendar 
                                        years for any single project.
                                    ``(II) Definition of large 
                                project.--For purposes of subclause 
                                (I), the term `large project' means a 
                                qualified project that is designed to 
                                deliver more than 10,000,000 gallons of 
                                water per day.
                                    ``(III) Exception to restriction.--
                                Subclause (I) shall not apply to the 
                                extent its application would cause any 
                                portion of the national clean renewable 
                                water supply bond limitation for the 
                                calendar year to remain unallocated, 
                                based on applications for allocations 
                                of such limitation received by the 
                                Secretary during the application period 
                                referred to in subparagraph (B).
            ``(3) Carryover of unused limitation.--If the clean 
        renewable water supply bond limitation for any calendar year 
        exceeds the aggregate amount allocated under paragraph (2) for 
        such year, such limitation for the succeeding calendar year 
        shall be increased by the amount of such excess.
    ``(c) Maturity Limitation.--
            ``(1) In general.--A bond shall not be treated as a clean 
        renewable water supply bond if the maturity of such bond 
        exceeds 20 years.
            ``(2) Coordination with section 54a.--The maturity 
        limitation in section 54A(d)(5) shall not apply to any clean 
        renewable water supply bond.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Governmental body.--The term `governmental body' 
        means any State or Indian tribal government, or any political 
        subdivision thereof.
            ``(2) Local water company.--The term `local water company' 
        means any entity responsible for providing water service to the 
        general public (including electric utility, industrial, 
        agricultural, commercial, or residential users) pursuant to 
        State or tribal law.
            ``(3) Qualified borrower.--The term `qualified borrower' 
        means a governmental body or a local water company.
            ``(4) Qualified desalination facility.--The term `qualified 
        desalination facility' means any facility that is used to 
        produce new water supplies by desalinating seawater, 
        groundwater, or surface water if the facility's source water 
        includes chlorides or total dissolved solids that, either 
        continuously or seasonally, exceed maximum permitted levels for 
        primary or secondary drinking water under Federal or State law 
        (as in effect on the date of issuance of the issue).
            ``(5) Qualified groundwater remediation facility.--The term 
        `qualified groundwater remediation facility' means any facility 
        that is used to reclaim contaminated or naturally impaired 
        groundwater for direct delivery for potable use if the 
        facility's source water includes constituents that exceed 
        maximum contaminant levels regulated under the Safe Drinking 
        Water Act (as in effect on the date of the enactment of this 
        section).
            ``(6) Qualified issuer.--The term `qualified issuer' 
        means--
                    ``(A) a governmental body, or
                    ``(B) in the case of a State or political 
                subdivision thereof (as defined for purposes of section 
                103), any entity qualified to issue tax-exempt bonds 
                under section 103 on behalf of such State or political 
                subdivision.
            ``(7) Qualified project.--
                    ``(A) In general.--The term `qualified project' 
                means any facility owned by a qualified borrower which 
                is a--
                            ``(i) qualified desalination facility,
                            ``(ii) qualified recycled water facility,
                            ``(iii) qualified groundwater remediation 
                        facility, or
                            ``(iv) facility that is functionally 
                        related or subordinate to a facility described 
                        in clause (i), (ii), or (iii).
                    ``(B) Environmental impact.--A project shall not be 
                treated as a qualified project under subparagraph (A) 
                unless such project is designed to comply with 
                regulations issued under subsection (e) relating to the 
                minimization of the environmental impact of the 
                project.
            ``(8) Qualified recycled water facility.--
                    ``(A) In general.--The term `qualified recycled 
                water facility' means any wastewater treatment 
                facility, distribution facility, or distribution system 
                which--
                            ``(i) exceeds the requirements for the 
                        treatment and disposal of wastewater under the 
                        Clean Water Act and any other Federal or State 
                        water pollution control standards for the 
                        discharge and disposal of wastewater to surface 
                        water, land, or groundwater (as such 
                        requirements and standards are in effect on the 
                        date of issuance of the issue), and
                            ``(ii) except as provided in subparagraph 
                        (B), is used to reclaim wastewater produced by 
                        the general public (including electric utility, 
                        industrial, agricultural, commercial, or 
                        residential users) to the extent such reclaimed 
                        wastewater is used for a beneficial use that 
                        the issuer reasonably expects as of the date of 
                        issuance of the issue otherwise would have been 
                        satisfied with potable water supplies.
                    ``(B) Impermissible uses.--Reclaimed wastewater is 
                not used for a use described in subparagraph (A)(ii) to 
                the extent such reclaimed wastewater is--
                            ``(i) discharged into a waterway or used to 
                        meet waterway discharge permit requirements and 
                        not used to supplement potable water supplies,
                            ``(ii) used to restore habitat,
                            ``(iii) used to provide once-through 
                        cooling for an electric generation facility, or
                            ``(iv) intentionally introduced into the 
                        groundwater and not used to supplement potable 
                        water supplies.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as are necessary to carry out the purposes of this section, including 
regulations promulgated in consultation with the Administrator of the 
Environmental Protection Agency to ensure the environmental impact of 
qualified facilities is minimized.''.
    (b) Study on Allocation Method.--
            (1) In general.--The Secretary of the Treasury shall 
        conduct a study on the method of allocation for the national 
        limitation provided under section 54G(b)(2) of the Internal 
        Revenue Code of 1986 (as added by subsection (a)) in order to 
        determine whether a different allocation method would better 
        result in the development of projects to provide new supplies 
        of water in a more efficient manner. In assessing the 
        advisability of a different allocation method, the study shall 
        take into account--
                    (A) the administrative burdens on the Federal 
                government and issuers, and
                    (B) the environmental impact of such projects, and
                    (C) the cost effectiveness of the projects funded.
        The study shall include an examination of at least three rounds 
        of allocations.
            (2) Consultation and public comment.--Such study shall be 
        conducted in consultation with the Secretary of the Interior 
        and the Administrator of the Environmental Protection Agency 
        and shall allow for public comment.
            (3) Submission to congress.--The study, and any recommended 
        changes to the allocation method, shall be submitted to the 
        Committee on Ways and Means of the House of Representatives and 
        the Committee on Finance of the Senate before July 1, 2014.
    (c) Conforming Amendments.--
            (1) Paragraph (1) of section 54A(d) of the Internal Revenue 
        Code of 1986 is amended by striking ``or'' at the end of 
        subparagraph (D), by inserting ``or'' at the end of 
        subparagraph (E), and by inserting after subparagraph (E) the 
        following new subparagraph:
                    ``(F) a clean renewable water supply bond,''.
            (2) Subparagraph (C) of section 54A(d)(2) of such Code is 
        amended by striking ``and'' at the end of clause (iv), by 
        striking the period at the end of clause (v) and inserting ``, 
        and'', and by adding at the end the following new clause:
                            ``(vi) in the case of a clean renewable 
                        water supply bond, a purpose specified in 
                        section 54G(a)(1).''.
            (3) The table of sections for subpart I of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

``Sec. 54G. Clean renewable water supply bonds.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to obligations issued after December 31, 2009.

Summary: Clean Renewable Water Supply Act of 2009 - Amends the Internal Revenue Code to provide for the issuance, until 2019, of tax-exempt clean renewable water supply bonds to finance certain water recycling, desalination, and groundwater remediation projects that comply with requirements for minimization of environmental impact.

Establishes a national clean renewable water supply bond limitation for each of calendar years 2010-2018. Sets forth provsions governing the allocation of such limitation among qualified projects. Directs the Secretary of the Treasury to conduct a study of the method of allocation to determine whether a different method would result in the development of projects to provide new supplies of water in a more efficient manner.