Agriculture Environmental Stewardship Act of 2021
Bill: H.R.3939 | Sponsor: Rep. Kind, Ron (D-WI)
Policy area: Taxation

Summary:
Agriculture Environmental Stewardship Act of 2021
This bill allows energy tax credits through 2023 for investments in (1) qualified biogas property, or (2) qualified manure resource recovery property. The bill also permits new clean renewable energy bonds to be used for such properties.
Qualified biogas property comprises a system that (1) uses anaerobic digesters or other specified processes to convert biomass into a gas which is at least 52% methane, and (2) captures the gas for use as a fuel. The term includes property that cleans and conditions the gas for use as a fuel.
Qualified manure resource recovery property comprises a system that uses specified processes to recover the nutrients nitrogen and phosphorus from a non-treated digestate or animal manure by reducing or separating at least 50% of the nutrients, excluding any reductions during the incineration, storage, composting, or field application of the non-treated digestate or animal manure. The term also includes certain processing equipment.
The Department of the Treasury must enter into an agreement with the National Renewable Energy Laboratory for a study of biogas and report to Congress on the study.

To amend the Internal Revenue Code of 1986 to make qualified biogas 
 property and qualified manure resource recovery property eligible for 
   the energy credit and to permit renewable energy bonds to finance 
           qualified biogas property, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Agriculture Environmental 
Stewardship Act of 2021''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Incentives and encouragement for the conservation and 
        appropriate handling of nutrients contained in organic matter 
        are necessary.
            (2) Biogas systems will save Federal, State, and local 
        taxpayers money by converting waste into useful products, such 
        as fuel, fertilizer, thermal heat, feedstock for hydrogen fuel 
        cells, and renewable chemicals.
            (3) Manure resource recovery systems will save Federal, 
        State, and local taxpayers money by recovering the nutrients 
        contained in organic matter from their source, rather than 
        recovering the nutrients after they have entered landfills or 
        waterways.

SEC. 3. ENERGY CREDIT FOR QUALIFIED BIOGAS PROPERTY AND QUALIFIED 
              MANURE RESOURCE RECOVERY PROPERTY.

    (a) In General.--Section 48(a)(3)(A) of the Internal Revenue Code 
of 1986 is amended by striking ``or'' at the end of clause (vii) and by 
adding at the end the following new clauses:
                            ``(ix) qualified biogas property, or
                            ``(x) qualified manure resource recovery 
                        property,''.
    (b) 30-Percent Credit.--Section 48(a)(2)(A)(i) of such Code is 
amended by striking ``and'' at the end of subclause (IV), by striking 
``and'' at the end of subclause (V), and by adding at the end the 
following new subclauses:
                                    ``(VI) qualified biogas property, 
                                and
                                    ``(VII) qualified manure resource 
                                recovery property, and''.
    (c) Definitions.--Section 48(c) of such Code is amended by adding 
at the end the following new paragraphs:
            ``(6) Qualified biogas property.--
                    ``(A) In general.--The term `qualified biogas 
                property' means property comprising a system which--
                            ``(i) uses anaerobic digesters, or other 
                        biological, chemical, thermal, or mechanical 
                        processes (alone or in combination), to convert 
                        biomass (as defined in section 45K(c)(3)) into 
                        a gas which consists of not less than 52 
                        percent methane, and
                            ``(ii) captures such gas for use as a fuel.
                    ``(B) Inclusion of certain cleaning and 
                conditioning equipment.--Such term shall include any 
                property which cleans and conditions the gas referred 
                to in subparagraph (A) for use as a fuel.
                    ``(C) Termination.--No credit shall be determined 
                under this section with respect to any qualified biogas 
                property for any period after December 31, 2023.
            ``(7) Qualified manure resource recovery property.--
                    ``(A) In general.--The term `qualified manure 
                resource recovery property' means property comprising a 
                system which uses physical, biological, chemical, 
                thermal, or mechanical processes to recover the 
                nutrients nitrogen and phosphorus from a non-treated 
                digestate or animal manure by reducing or separating at 
                least 50 percent of the concentration of such 
                nutrients, excluding any reductions during the 
                incineration, storage, composting, or field application 
                of the non-treated digestate or animal manure.
                    ``(B) Inclusion of certain processing equipment.--
                Such term shall include--
                            ``(i) any property which is used to recover 
                        the nutrients referred to in subparagraph (A), 
                        such as--
                                    ``(I) biological reactors,
                                    ``(II) crystallizers,
                                    ``(III) water filtration membrane 
                                systems and other water purifiers,
                                    ``(IV) evaporators,
                                    ``(V) distillers,
                                    ``(VI) decanter centrifuges, and
                                    ``(VII) equipment that facilitates 
                                the process of removing and dewatering 
                                suspended and dissolved solids, ammonia 
                                stripping, gasification, or ozonation, 
                                and
                            ``(ii) any thermal drier which treats the 
                        nutrients recovered by the processes referred 
                        to in subparagraph (A).
                    ``(C) Termination.--No credit shall be determined 
                under this section with respect to any qualified manure 
                resource recovery property for any period after 
                December 31, 2023.''.
    (d) Denial of Double Benefit for Qualified Biogas Property.--
Section 45(e) of such Code is amended by adding at the end the 
following new paragraph:
            ``(12) Coordination with energy credit for qualified biogas 
        property.--The term `qualified facility' shall not include any 
        facility which produces electricity from gas produced by 
        qualified biogas property (as defined in section 48(c)(6)) if a 
        credit is determined under section 48 with respect to such 
        property for the taxable year or any prior taxable year.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to periods after December 31, 2020, in taxable years ending after 
such date, under rules similar to the rules of section 48(m) of such 
Code (as in effect on the day before the date of the enactment of the 
Revenue Reconciliation Act of 1990).

SEC. 4. RENEWABLE ENERGY BONDS RELATING TO BIOGAS PROPERTY AND MANURE 
              RESOURCE RECOVERY PROPERTY.

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

     ``Subpart H--Nonrefundable Credit to Holders of Certain Bonds

``Sec. 54. Credit to holders of qualified renewable energy bonds.

``SEC. 54. CREDIT TO HOLDERS OF QUALIFIED RENEWABLE ENERGY BONDS.

    ``(a) Allowance of Credit.--If a taxpayer holds a qualified 
renewable energy bond on one or more credit allowance dates of the bond 
during any taxable year, there shall be allowed as a credit against the 
tax imposed by this chapter for the taxable year an amount equal to 70 
percent of the sum of the credits determined under subsection (b) with 
respect to such dates.
    ``(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 qualified renewable energy bond is 25 percent of the 
        annual credit determined with respect to such bond.
            ``(2) Annual credit.--The annual credit determined with 
        respect to any qualified renewable energy bond is the product 
        of--
                    ``(A) the applicable credit rate, multiplied by
                    ``(B) the outstanding face amount of the bond.
            ``(3) Applicable credit rate.--For purposes of paragraph 
        (2), the applicable credit rate is the rate which the Secretary 
        estimates will permit the issuance of qualified renewable 
        energy bonds with a specified maturity or redemption date 
        without discount and without interest cost to the qualified 
        issuer. The applicable credit rate with respect to any 
        qualified renewable energy bond shall be determined as of the 
        first day on which there is a binding, written contract for the 
        sale or exchange of the bond.
            ``(4) Special rule for issuance and redemption.--In the 
        case of a bond which is issued during the 3-month period ending 
        on a credit allowance date, the amount of the credit determined 
        under this subsection with respect to such credit allowance 
        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 imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under this 
                part (other than subpart C and this subpart).
            ``(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 
        (determined before the application of paragraph (1) for such 
        succeeding taxable year).
    ``(d) Qualified Renewable Energy Bonds.--For purposes of this 
subpart--
            ``(1) In general.--The term `qualified renewable energy 
        bonds' means any bond issued as part of an issue if--
                    ``(A) the bond is issued by a qualified issuer 
                pursuant to an allocation by the Secretary to such 
                issuer of a portion of the national renewable energy 
                bond limitation under paragraph (2),
                    ``(B) 100 percent of the available project proceeds 
                of such issue are to be used for capital expenditures 
                incurred by a governmental body, public power provider, 
                or cooperative electric company for property owned by 
                the public power provider, a governmental body, or a 
                cooperative electric company, as the case may be, that 
                is--
                            ``(i) qualified biogas property (as defined 
                        in section 48(c)(6)), or
                            ``(ii) a qualified manure resource recovery 
                        property (as defined in section 48(c)(7)),
                    ``(C) the qualified issuer designates such bond for 
                purposes of this section, and
                    ``(D) the issue meets the requirements of this 
                section.
            ``(2) Limitation on amount of bonds designated.--
                    ``(A) In general.--The maximum aggregate face 
                amount of bonds which may be designated under paragraph 
                (1)(C) by any issuer shall not exceed the limitation 
                amount allocated under this paragraph to such issuer.
                    ``(B) National limitation on amount of bonds 
                designated.--There is a national renewable energy bond 
                limitation of $800,000,000 which shall be allocated by 
                the Secretary as provided in subparagraph (C), except 
                that--
                            ``(i) not more than 33\1/3\ percent thereof 
                        may be allocated to projects of public power 
                        providers,
                            ``(ii) not more than 33\1/3\ percent 
                        thereof may be allocated to projects of 
                        governmental bodies, and
                            ``(iii) not more than 33\1/3\ percent 
                        thereof may be allocated to projects of 
                        cooperative electric companies.
                    ``(C) Method of allocation.--
                            ``(i) Allocation among public power 
                        providers..--After the Secretary determines the 
                        projects of public power providers which are 
                        appropriate for receiving an allocation of the 
                        national renewable energy bond limitation, the 
                        Secretary shall, to the maximum extent 
                        practicable, make allocations among such 
                        projects in such manner that the amount 
                        allocated to each such project bears the same 
                        ratio to the cost of such project as the 
                        limitation under subparagraph (B)(i) bears to 
                        the cost of all such projects.
                            ``(ii) Allocation among governmental bodies 
                        and cooperative electric companies.--The 
                        Secretary shall make allocations of the amount 
                        of the national renewable energy bond 
                        limitation described in subparagraphs (B)(ii) 
                        and (B)(iii) among projects of governmental 
                        bodies and cooperative electric companies, 
                        respectively, in such manner as the Secretary 
                        determines appropriate.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Qualified issuer.--The term `qualified issuer' means 
        a public power provider, a cooperative electric company, a 
        governmental body, a renewable energy bond lender, or a not-
        for-profit electric utility which has received a loan or loan 
        guarantee under the Rural Electrification Act.
            ``(2) Public power provider.--The term `public power 
        provider' 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 the enactment of this paragraph).
            ``(3) Governmental body.--The term `governmental body' 
        means any State or Indian tribal government, or any political 
        subdivision thereof.
            ``(4) 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).
            ``(5) Renewable energy bond lender.--The term `renewable 
        energy bond lender' means a lender which is a cooperative which 
        is owned by, or has outstanding loans to, 100 or more 
        cooperative electric companies and is in existence on February 
        1, 2002, and shall include any affiliated entity which is 
        controlled by such lender.
    ``(f) Other Definitions.--For purposes of this subchapter--
            ``(1) Credit allowance date.--The term `credit allowance 
        date' means--
                    ``(A) March 15,
                    ``(B) June 15,
                    ``(C) September 15, and
                    ``(D) December 15.
        Such term includes the last day on which the bond is 
        outstanding.
            ``(2) Bond.--The term `bond' includes any obligation.
            ``(3) State.--The term `State' includes the District of 
        Columbia and any possession of the United States.
            ``(4) Available project proceeds.--The term `available 
        project proceeds' means--
                    ``(A) the excess of--
                            ``(i) the proceeds from the sale of an 
                        issue, over
                            ``(ii) the issuance costs financed by the 
                        issue (to the extent that such costs do not 
                        exceed 2 percent of such proceeds), and
                    ``(B) the proceeds from any investment of the 
                excess described in subparagraph (A).
    ``(g) Credit Treated as Interest.--For purposes of this subtitle, 
the credit determined under subsection (a) shall be treated as interest 
which is includible in gross income.
    ``(h) S Corporations and Partnerships.--In the case of a renewable 
energy bond held by an S corporation or partnership, the allocation of 
the credit allowed by this section to the shareholders of such 
corporation or partners of such partnership shall be treated as a 
distribution.
    ``(i) Bonds Held by Real Estate Investment Trusts.--If any 
qualified renewable energy bond is held by a real estate investment 
trust, the credit determined under subsection (a) shall be allowed to 
beneficiaries of such trust (and any gross income included under 
subsection (f) with respect to such credit shall be distributed to such 
beneficiaries) under procedures prescribed by the Secretary.
    ``(j) Credits May Be Stripped.--Under regulations prescribed by the 
Secretary--
            ``(1) In general.--There may be a separation (including at 
        issuance) of the ownership of a qualified 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.
            ``(2) Certain rules to apply.--In the case of a separation 
        described in paragraph (1), the rules of section 1286 shall 
        apply to the qualified renewable energy bond as if it were a 
        stripped bond and to the credit under this section as if it 
        were a stripped coupon.''.
    (b) Payments to Issuers.--Subchapter B of chapter 65 of such Code 
is amended by adding at the end the following:

``SEC. 6431. CREDIT FOR QUALIFIED RENEWABLE ENERGY BONDS ALLOWED TO 
              ISSUER.

    ``(a) In General.--The issuer of a qualified renewable energy bond 
(as defined in section 54(d)) shall be allowed a credit with respect to 
each interest payment under such bond which shall be payable by the 
Secretary as provided in subsection (b).
    ``(b) Payment of Credit.--The Secretary shall pay 
(contemporaneously with each interest payment date under such bond) to 
the issuer of such bond (or to any person who makes such interest 
payments on behalf of the issuer) 35 percent of the interest payable 
under such bond on such date.
    ``(c) Application of Arbitrage Rules.--For purposes of section 148, 
the yield on such bonds shall be reduced by the credit allowed under 
this section.
    ``(d) Interest Payment Date.--For purposes of this subsection, the 
term `interest payment date' means each date on which interest is 
payable by the issuer under the terms of the bond.''.
    (c) Conforming Amendments.--
            (1) The table of subparts for part IV of subchapter A of 
        chapter 1 of such Code is amended by adding at the end the 
        following new item:

    ``subpart h. nonrefundable credit to holders of certain bonds''.

            (2) The table of sections for subchapter B of chapter 65 of 
        such Code is amended by adding at the end the following new 
        item:

``Sec. 6431. Credit for qualified renewable energy bonds allowed to 
                            issuer.''.
            (3) Section 6211(b)(4)(A) of such Code is amended by 
        inserting ``6431,'' after ``6428B,''.
            (4) Section 6401(b)(1) of such Code is amended by striking 
        ``and G'' and inserting ``G, and H''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.

SEC. 5. STUDY OF BIOGAS AND NUTRIENT REUSE.

    (a) In General.--The Secretary of the Treasury shall enter into an 
agreement with the National Renewable Energy Laboratory to undertake a 
study of biogas that addresses the following:
            (1) The quality of biogas, including a comparison of biogas 
        to natural gas and the identification of any components of 
        biogas which make biogas unsuitable for injection into existing 
        natural gas pipelines.
            (2) Methods for obtaining the highest energy content in 
        biogas, including the use of co-digestion and identifying the 
        optimal feed mixture.
            (3) Recommendations for the expansion of biogas production, 
        including an analysis of the extent to which increasing the 
        methane content of biogas would result in the greater use of 
        biogas and an analysis of how the expanded use of biogas could 
        help meet the growing energy needs of the United States.
            (4) Methods for productive use of nutrients recovered from 
        qualified manure resource recovery property that benefits the 
        agricultural economy.
    (b) Report.--Not later than 2 years after the date of the enactment 
of this Act, the Secretary shall submit to Congress a report on the 
study conducted under subsection (a).
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