Title: Energy Sector Innovation Credit Act of 2019
Policy area: Taxation

Summary:
Energy Sector Innovation Credit Act of 2019
This bill allows new tax credits for investment in emerging energy technology and for the production of electricity from such technology.
The bill also allows an energy tax credit for energy storage technologies, including equipment which receives, stores, and delivers energy using batteries, compressed air, pumped hydropower, hydrogen storage (including hydrolysis), thermal energy storage, regenerative fuel cells, flywheels, capacitors, superconducting magnets, or other technologies.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5523 Introduced in House (IH)]

<DOC>






116th CONGRESS
  1st Session
                                H. R. 5523

 To amend the Internal Revenue Code of 1986 to provide investment and 
production tax credits for emerging energy technologies, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           December 19, 2019

    Mr. Reed (for himself, Mr. Panetta, Mr. LaHood, Mr. Suozzi, Mr. 
 Gottheimer, and Mr. Schweikert) introduced the following bill; which 
            was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide investment and 
production tax credits for emerging energy technologies, 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 ``Energy Sector Innovation Credit Act 
of 2019''.

SEC. 2. PURPOSES.

    The energy sector innovation credit is a technology-neutral 
approach that would leverage new private investment in nascent clean 
technologies, help cutting-edge technologies break into the market, and 
then naturally phasedown as each technology proves commercial 
viability. It could bring about the new technologies needed to quickly 
and cheaply reduce global emissions. The innovation ESIC incentivizes 
is key to a strong energy supply plus will help address the climate and 
environmental challenge of this generation. The United States must lead 
on clean energy technology development.

SEC. 3. INVESTMENT CREDIT FOR EMERGING ENERGY TECHNOLOGY.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 48C the following new section:

``SEC. 48D. EMERGING ENERGY TECHNOLOGY CREDIT.

    ``(a) In General.--For purposes of section 46, the emerging energy 
technology credit for any taxable year is an amount equal to 30 percent 
of the basis of any qualified emerging energy property placed in 
service by the taxpayer during such taxable year.
    ``(b) Certain Qualified Progress Expenditure Rules Made 
Applicable.--Rules similar to the rules of subsections (c)(4) and (d) 
of section 46 (as in effect on the day before the enactment of the 
Revenue Reconciliation Act of 1990) shall apply for purposes of this 
section.
    ``(c) Qualified Emerging Energy Property.--For purposes of this 
section--
            ``(1) In general.--The term `qualified emerging energy 
        property' means property which is constructed, reconstructed, 
        erected, or acquired by the taxpayer, and the original use of 
        which commences with the taxpayer, which is--
                    ``(A) a qualified production facility (as defined 
                in section 45T(d), determined without regard to 
                paragraph (2) thereof) which is a tier 1 facility (as 
                defined in section 45T(e)(1)), or
                    ``(B) property which is placed in service at and 
                used in connection with an existing electric generating 
                facility which is a point source of air pollutants and 
                which, with respect to such facility--
                            ``(i) contains equipment which can separate 
                        and sequester--
                                    ``(I) not less than 60 percent of 
                                such facility's maximum hourly carbon 
                                oxide emission rate, and
                                    ``(II) not less than 100,000 metric 
                                tons of qualified carbon oxide (as 
                                defined in section 45Q(c)) annually, 
                                and
                            ``(ii) places such carbon oxide in secure 
                        geological storage (as determined under section 
                        45Q(f)(2)).
            ``(2) Denial of double benefit.--Such term shall not 
        include--
                    ``(A) any property which,
                    ``(B) property any portion of which, or
                    ``(C) property placed in service at and used in 
                connection with a facility which,
        has been treated as a qualified facility for purposes of 
        section 45(d), as an advanced nuclear power facility for 
        purposes of section 45J, as a qualified facility for purposes 
        of section 45Q, as a qualified production facility for purposes 
        of section 45T, as energy property for purposes of section 48, 
        or as a qualified investment for purposes of section 48A, 48B, 
        or 48C, for any taxable year.
            ``(3) Point source.--For purposes of paragraph (1)(B), the 
        term `point source' means a megawatt-scale, stationary and non-
        mobile, identifiable source of emissions that releases 
        pollutants into the atmosphere.
    ``(d) First of Its Kind Technology.--
            ``(1) In general.--In the case of any qualified emerging 
        energy property which is the first of its kind, subsection (a) 
        shall be applied by substituting `40' for `30'.
            ``(2) First of its kind.--Property shall be treated as the 
        first of its kind if such property is 1 of the first 3 original 
        demonstrations in the United States of a megawatt-scale 
        electric power generation facility which generates revenue from 
        sales of electric power to an unrelated person (within the 
        meaning of section 45(e)(4)).
            ``(3) Determination.--
                    ``(A) In general.--The Secretary, in consultation 
                with the Secretary of Energy, shall develop a process 
                to determine whether qualified emerging energy property 
                is first of its kind. Such process shall include a 
                certification, at the request of the taxpayer before 
                the commencement of construction, that the property 
                will be treated as first of its kind.
                    ``(B) Effective period of certification.--Except as 
                provided by the Secretary, a certification granted 
                under subparagraph (A) with respect to any property 
                shall be in effect for the period, not to exceed 5 
                years, beginning on the date of the certification and 
                ending on the date construction commences with respect 
                to the property. If construction does not commence 
                within the 5-year period beginning on the date of the 
                certification, the property shall not be treated as 
                first of its kind unless the certification is renewed.
    ``(e) Transfer of Credit by Certain Public Entities.--
            ``(1) In general.--If, with respect to a credit under 
        subsection (a) for any taxable year--
                    ``(A) a qualified public entity would be the 
                taxpayer (but for this paragraph), and
                    ``(B) such entity elects the application of this 
                paragraph for such taxable year with respect to all (or 
                any portion specified in such election) of such credit, 
                the eligible project partner specified in such 
                election, and not the qualified public entity, shall be 
                treated as the taxpayer for purposes of this title with 
                respect to such credit (or such portion thereof).
            ``(2) Definitions.--For purposes of this subsection--
                    ``(A) Qualified public entity.--The term `qualified 
                public entity' means--
                            ``(i) a Federal, State, or local government 
                        entity, or any political subdivision, agency, 
                        or instrumentality thereof,
                            ``(ii) a mutual or cooperative electric 
                        company described in section 501(c)(12) or 
                        1381(a)(2), or
                            ``(iii) a not-for-profit electric utility 
                        which had or has received a loan or loan 
                        guarantee under the Rural Electrification Act 
                        of 1936.
                    ``(B) Eligible project partner.--The term `eligible 
                project partner' means any person who--
                            ``(i) is responsible for, or participates 
                        in, the design or construction of the qualified 
                        emerging energy property to which the credit 
                        under subsection (a) relates,
                            ``(ii) is a financial institution providing 
                        financing for the construction or operation of 
                        such property (other than financing provided in 
                        connection with becoming eligible for the 
                        credit under this section by reason of this 
                        subsection), or
                            ``(iii) has an ownership interest in such 
                        property.
            ``(3) Special rules.--
                    ``(A) Application to partnerships.--In the case of 
                a credit under subsection (a) which is determined at 
                the partnership level--
                            ``(i) for purposes of paragraph (1)(A), a 
                        qualified public entity shall be treated as the 
                        taxpayer with respect to such entity's 
                        distributive share of such credit, and
                            ``(ii) the term `eligible project partner' 
                        shall include any partner of the partnership.
                    ``(B) Taxable year in which credit taken into 
                account.--In the case of any credit (or portion 
                thereof) with respect to which an election is made 
                under paragraph (1), such credit shall be taken into 
                account in the first taxable year of the eligible 
                project partner ending with, or after, the qualified 
                public entity's taxable year with respect to which the 
                credit was determined.
                    ``(C) Treatment of transfer under private use 
                rules.--For purposes of section 141(b)(1), any benefit 
                derived by an eligible project partner in connection 
                with an election under this subsection shall not be 
                taken into account as a private business use.
    ``(f) Certain Rules Not Applicable.--Paragraphs (3) and (4) of 
section 50(d) shall not apply for purposes of this section.''.
    (b) Special Rule for Proceeds of Transfers for Mutual or 
Cooperative Electric Companies.--Section 501(c)(12)(I) of such Code is 
amended by inserting ``or 48D(e)'' after ``section 45J(e)(1)''.
    (c) Conforming Amendments.--
            (1) Section 46 of such Code is amended by striking ``and'' 
        at the end of paragraph (5), by striking the period at the end 
        of paragraph (6) and inserting ``, and'', and by adding at the 
        end the following new paragraph:
            ``(7) the emerging energy technology credit.''.
            (2) Section 49(a)(1)(C) 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) the basis of any qualified emerging 
                        energy property (as defined in section 
                        48D(c)(1)).''.
            (3) The table of sections for subpart E of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 48C the following new item:

``Sec. 48D. Emerging energy technology credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
the date of the 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. PRODUCTION CREDIT FOR EMERGING ENERGY TECHNOLOGY.

    (a) In General.--Subpart D 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. 45T. ELECTRICITY PRODUCED FROM EMERGING ENERGY TECHNOLOGY.

    ``(a) General Rule.--For purposes of section 38, the emerging 
energy technology production credit determined under this section for 
any taxable year beginning in the credit period with respect to a 
qualified production facility of the taxpayer is an amount equal to the 
applicable percentage of the lesser of--
            ``(1) the annual gross receipts of the taxpayer from the 
        sale of electricity generated at the qualified production 
        facility to an unrelated person (within the meaning of section 
        45(e)(4)) during such taxable year, or
            ``(2) the product of--
                    ``(A) the national average wholesale price of a 
                kilowatt hour of electricity in the preceding taxable 
                year, as determined by the Secretary in consultation 
                with the Administrator of the Energy Information 
                Administration, and
                    ``(B) the number of kilowatt hours of electricity 
                produced at the qualified production facility and sold 
                to an unrelated person (within the meaning of section 
                45(e)(4)) during the taxable year.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is--
            ``(1) in the case of a tier 1 facility, 60 percent,
            ``(2) in the case of a tier 2 facility, 45 percent,
            ``(3) in the case of a tier 3 facility, 30 percent, and
            ``(4) in the case of any other facility, zero percent.
    ``(c) Credit Period.--For purposes of this section, the credit 
period with respect to any qualified production facility is the 10-year 
period beginning with the date the facility was originally placed in 
service.
    ``(d) Qualified Production Facility.--For purposes of this 
section--
            ``(1) In general.--The term `qualified production facility' 
        means any electric generating facility which is certified by 
        the Secretary, which is located in the United States or a 
        possession of the United States (as such terms are used in 
        section 638), and which utilizes--
                    ``(A) any power conversion fuel-based technology 
                which captures and sequesters at least 60 percent of 
                the produced carbon oxide,
                    ``(B) any reactor design licensed by the Nuclear 
                Regulatory Commission which produces electricity 
                through nuclear fission or a fusion chain reaction and 
                which--
                            ``(i) reduces the high-level radioactive 
                        waste or spent nuclear fuel per unit of energy 
                        yield,
                            ``(ii) improves fuel utilization by not 
                        less than 20 percent,
                            ``(iii) decreases core damage frequency or 
                        large early release frequency by at least a 
                        factor of 10, or
                            ``(iv) increases thermal efficiency by not 
                        less than 20 percent, as compared to existing 
                        nuclear commercial technologies,
                    ``(C) any new technology or new improvement to 
                technology which generates electricity from renewable 
                energy, as defined in section 203(b)(2) of the Energy 
                Policy Act of 2005, and which generates at least a 20-
                percent increase in the conversion efficiency or a 20-
                percent increase in the capacity factor of the facility 
                as compared with the commercial technology of the same 
                type as such technology which is considered to be the 
                best of its type in commercial use,
                    ``(D) technology which the Secretary, in 
                consultation with the Secretary of Energy, determines 
                would increase the technical resource potential for 
                renewable energy development in the United States by at 
                least 500 terawatt hours per year, or
                    ``(E) technology which the Secretary, in 
                consultation with the Secretary of Energy, determines 
                could produce electricity with an emissions rate less 
                than 150g Co2-e per kWh with a 75-percent capacity 
                factor.
            ``(2) Denial of double benefit.--Such term shall not 
        include any facility which has been treated as a qualified 
        facility for purposes of section 45(d), as an advanced nuclear 
        power facility for purposes of section 45J, as a qualified 
        facility for purposes of section 45Q, as energy property for 
        purposes of section 48, as a qualified investment for purposes 
        of section 48A, 48B, or 48C, or as qualified emerging energy 
        property for purposes of section 48D, for any taxable year.
            ``(3) Co2-e.--The term `Co2-e' means the quantity of a 
        greenhouse gas that has a global warming potential equivalent 
        to 1 metric ton of carbon dioxide, as determined under table A-
        1 of subpart A of part 98 of title 40, Code of Federal 
        Regulations, as in effect on the date of enactment of this 
        section.
            ``(4) Conversion efficiency.--The term `conversion 
        efficiency' means the fraction--
                    ``(A) the numerator of which is the total useful 
                electrical or thermal power produced by an electric 
                generating facility at normal operating rates, and 
                expected to be consumed in its normal application, and
                    ``(B) the denominator of which is the incident 
                energy, whether mechanical, radiation, or thermal 
                energy, which is measurable at the input of the 
                electric generating facility.
            ``(5) Energy efficiency.--The efficiency of an electric 
        generating facility is the fraction--
                    ``(A) the numerator of which is the total useful 
                electrical, thermal, and mechanical power which is 
                produced by the facility at normal operating rates and 
                expected to be consumed in its normal operation, and
                    ``(B) the denominator of which is the lower heating 
                value of the energy sources for the facility.
            ``(6) Performance baseline.--Not less frequently than every 
        10 years, the Secretary, in consultation with the Secretary of 
        Energy, shall establish baseline levels with respect to the 
        types of electric generating facilities and the measures of 
        performance described in paragraph (1) which a facility must 
        exceed in order to meet the requirements of such paragraph.
            ``(7) Commercial technology.--The term `commercial 
        technology' means a design that has been installed in and is 
        being used in 3 or more projects in the United States 
        marketplace in the same general application as in the electric 
        generating facility, and has been in such use in at least 1 of 
        such projects for a period of at least 5 years.
            ``(8) Core damage frequency.--The term `core damage 
        frequency' means the likelihood that, given the way a reactor 
        is designed and operated, an accident could cause the fuel in 
        the reactor to be damaged.
            ``(9) Large early release frequency.--The term `large early 
        release frequency' means the likelihood of a release into the 
        environment of a sufficiently large quantity of fission 
        products in an early enough time frame to have the potential 
        for a prompt fatality.
            ``(10) Gross recoverable resource potential.--The term 
        `gross recoverable resource potential' means the subset of 
        total resource potential for any given renewable energy 
        resource within the boundaries of the United States economic 
        exclusion zone that can be considered theoretically recoverable 
        without allowing for common technological constraints that 
        exist as of the most recent date on which the Secretary has 
        established baseline levels described in paragraph (6).
            ``(11) Technical resource potential.--The term `technical 
        resource potential' means the subset of gross recoverable 
        resource potential for any given renewable energy resource that 
        can be considered recoverable under available technological 
        performance conditions as of the date of the enactment of this 
        section while considering land-use and environmental siting 
        constraints.
    ``(e) Facility Tiers.--
            ``(1) Tier 1 facility.--The term `tier 1 facility' means an 
        electric generating facility using a type of technology which 
        accounts for less than 1 percent of annual domestic electricity 
        production in the preceding taxable year, as determined by the 
        Secretary on the basis of data reported by the Energy 
        Information Administration.
            ``(2) Tier 2 facility.--The term `tier 2 facility' means an 
        electric generating facility using a type of technology which 
        accounts for at least 1 percent but less than 2 percent of 
        annual domestic electricity production in the preceding taxable 
        year, as determined by the Secretary on the basis of data 
        reported by the Energy Information Administration.
            ``(3) Tier 3 facility.--The term `tier 3 facility' means an 
        electric generating facility using a type of technology which 
        accounts for at least 2 percent but less than 3 percent of 
        annual domestic electricity production in the preceding taxable 
        year, as determined by the Secretary on the basis of data 
        reported by the Energy Information Administration.
    ``(f) Transfer of Credit by Certain Public Entities.--Rules similar 
to the rules of subsection (e) of section 48D shall apply for purposes 
of this section.
    ``(g) Regulations.--
            ``(1) In general.--Not later than 1 year after the date of 
        the enactment of this section, the Secretary shall prescribe 
        such regulations as may be necessary or appropriate to carry 
        out the purposes of this section. Such regulations shall 
        include a process for making eligibility certifications 
        described in subsection (d)(1)(E).
            ``(2) Certification.--The regulations developed under 
        paragraph (1) shall include a certification process under which 
        the Secretary, in consultation with the Secretary of Energy, 
        determines the eligibility of facilities for purposes of 
        subsection (d)(1).''.
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) of the Internal Revenue Code of 1986 is amended by striking 
``plus'' at the end of paragraph (31), by striking the period at the 
end of paragraph (32) and inserting ``, plus'', and by adding at the 
end the following new paragraph:
            ``(33) the emerging energy technology production credit 
        determined under section 45T(a).''.
    (c) Special Rule for Proceeds of Transfers for Mutual or 
Cooperative Electric Companies.--Section 501(c)(12)(I) of such Code, as 
amended by the preceding provisions of this Act, is amended by striking 
``or 48D(e)'' and inserting ``, 45T(f), or 48D(e)''.
    (d) Clerical Amendment.--The table of sections for subpart D 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 item:

``Sec. 45T. Electricity produced from emerging energy technology.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to electricity produced and sold in taxable years beginning after 
the date of the enactment of this Act, at facilities placed in service 
after such date of enactment.

SEC. 5. ENERGY CREDIT FOR ENERGY STORAGE TECHNOLOGIES.

    (a) In General.--Section 48(a)(2)(A)(i) of the Internal Revenue 
Code of 1986 is amended by striking ``and'' at the end of subclause 
(III) and by inserting after subclause (IV) the following new 
subclause:
                                    ``(V) energy property described in 
                                paragraph (3)(A)(viii), and''.
    (b) Energy Storage Technologies.--Section 48(a)(3)(A) of such Code 
is amended by striking ``or'' at the end of clause (vi), by adding 
``or'' at the end of clause (vii), and by adding at the end the 
following new clause:
                            ``(viii) equipment which receives, stores, 
                        and delivers energy using batteries, compressed 
                        air, pumped hydropower, hydrogen storage 
                        (including hydrolysis), thermal energy storage, 
                        regenerative fuel cells, flywheels, capacitors, 
                        superconducting magnets, or other technologies 
                        identified by the Secretary, in consultation 
                        with the Secretary of Energy,''.
    (c) National Limitation Relating to Energy Storage Property.--
Section 48(a)(5) of such Code is amended by adding at the end the 
following new subparagraph:
                    ``(F) National limitation relating to energy 
                storage property.--
                            ``(i) In general.--The amount of credit 
                        which (but for this subsection) would be 
                        allowed with respect to all equipment described 
                        in subsection (a)(3)(A)(viii) for any taxable 
                        year shall not exceed the national megawatt 
                        capacity limitation for energy storage property 
                        allocated to the project of which such 
                        equipment is a part.
                            ``(ii) Amount of national credit 
                        limitation.--
                                    ``(I) In general.--The aggregate 
                                amount of national megawatt capacity 
                                limitation allocated to projects under 
                                clause (i) shall not exceed 20,000 
                                megawatts.
                                    ``(II) Limitation on lithium ion 
                                electric storage batteries.--The 
                                Secretary shall ensure that not more 
                                than 15,000 megawatts of the national 
                                megawatt capacity limitation are 
                                allocated to projects for lithium ion 
                                electric storage batteries, in an 
                                effort to facilitate the deployment of 
                                a diverse suite of technological 
                                designs.
                            ``(iii) Allocation.--
                                    ``(I) Establishment of program.--
                                Not later than 180 days after the date 
                                of enactment of this subparagraph, the 
                                Secretary, in consultation with the 
                                Secretary of Energy, shall develop a 
                                process to allocate national megawatt 
                                capacity limitation under this 
                                subparagraph.
                                    ``(II) Applications.--Each 
                                applicant for allocations under this 
                                subparagraph shall submit an 
                                application to the Secretary. The 
                                Secretary shall issue a determination 
                                as whether an applicant has been 
                                allocated national megawatt capacity 
                                limitation not later than 60 days after 
                                the date of the submission of a 
                                completed application under this 
                                subclause.
                                    ``(III) Time limit on beginning and 
                                completing construction.--An allocation 
                                of national megawatt capacity 
                                limitation under this clause shall be 
                                void unless the taxpayer begins 
                                construction of the project not later 
                                than the date which is 1 year after the 
                                date on which such allocation is made 
                                and completes construction of such 
                                project not later than the date which 5 
                                years after the date on which such 
                                construction begins.
                                    ``(IV) Reallocation of unused 
                                limitation.--The Secretary shall 
                                reallocate national megawatt capacity 
                                limitation (and such reallocation shall 
                                not be taken into account in applying 
                                the limitation of clause (ii)(I)) to 
                                the extent that any allocation is void 
                                under subclause (III) or to the extent 
                                that the credit attributable to such 
                                allocation is recaptured under section 
                                50(a).''.
    (d) Transfer of Energy Storage Property Credit by Certain Public 
Entities.--Section 48 of such Code is amended by adding at the end the 
following new subsection:
    ``(e) Transfer of Energy Storage Property Credit by Certain Public 
Entities.--In the case of any property described in subsection 
(a)(3)(A)(viii), rules similar to the rules of subsection (e) of 
section 48D shall apply for purposes of this section.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
the date of the 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).
                                 <all>