S.1508 - Clean Energy Production Tax Incentives Act of 2007

A bill to amend the Internal Revenue Code of 1986 to extend and expand various tax incentives for production of renewable energy and clean energy sources, and for other purposes.

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S 1508 ISComments Close Comments Permalink

110th CONGRESS 1st Session S. 1508

To amend the Internal Revenue Code of 1986 to extend and expand various tax incentives for production of renewable energy and clean energy sources, and for other purposes.Comments Close Comments Permalink

IN THE SENATE OF THE UNITED STATES

May 24, 2007

Mr. DORGAN introduced the following bill; which was read twice and referred to the Committee on FinanceComments Close Comments Permalink

A BILL

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

SECTION 1. SHORT TITLE; ETC.

(a) Short Title- This Act may be cited as the `Clean Energy Production Tax Incentives Act of 2007'.Comments Close Comments Permalink

(b) Amendment of 1986 Code- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.Comments Close Comments Permalink

Sec. 1. Short title; etc.Comments Close Comments Permalink

TITLE I--CLEAN ENERGY PRODUCTION TAX INCENTIVES

Sec. 101. Extension of and increase in renewable electricity production credit.Comments Close Comments Permalink

Sec. 102. Modifications to credit for clean renewable energy bonds.Comments Close Comments Permalink

Sec. 103. Extension of qualifying advanced clean coal project credit.Comments Close Comments Permalink

Sec. 104. Clean coal energy bonds.Comments Close Comments Permalink

Sec. 105. Credit for capture and storage or use of carbon dioxide.Comments Close Comments Permalink

Sec. 106. Carbon dioxide capture bonds.Comments Close Comments Permalink

Sec. 107. Incentives for investment in electric transmission property.Comments Close Comments Permalink

Sec. 108. Electric transmission property bonds.Comments Close Comments Permalink

Sec. 109. Extension and modification of investment credit for qualified fuel cell property, qualified microturbine property, and solar property.Comments Close Comments Permalink

TITLE II--REVENUE PROVISIONS

Sec. 201. Tax treatment of controlled foreign corporations established in tax havens.Comments Close Comments Permalink

Sec. 202. Taxation of income of controlled foreign corporations attributable to imported property.Comments Close Comments Permalink

Sec. 203. Modification of effective date of leasing provisions of the American Jobs Creation Act of 2004.Comments Close Comments Permalink

Sec. 204. Clarification of economic substance doctrine.Comments Close Comments Permalink

Sec. 205. Penalty for understatements attributable to transactions lacking economic substance, etc.Comments Close Comments Permalink

Sec. 206. Denial of deduction for interest on underpayments attributable to noneconomic substance transactions.Comments Close Comments Permalink

TITLE I--CLEAN ENERGY PRODUCTION TAX INCENTIVES

SEC. 101. EXTENSION OF AND INCREASE IN RENEWABLE ELECTRICITY PRODUCTION CREDIT.

(a) Extension- Paragraphs (1), (2), (3), (4), (5), (6), (7), and (9) of section 45(d) (relating to qualified facilities) is amended by striking `January 1, 2009' each place it appears and inserting `January 1, 2019'.Comments Close Comments Permalink

(b) Increase in Credit Rate-Comments Close Comments Permalink

(1) IN GENERAL- Paragraph (1) of section 45(a) is amended by striking `1.5 cents' and inserting `2.1 cents'.Comments Close Comments Permalink

(2) MODIFICATION OF INFLATION ADJUSTMENT-Comments Close Comments Permalink

(A) IN GENERAL- Section 45(e)(2)(B) (defining inflation adjustment factor) is amended by inserting `(calendar year 2006 in the case of the 2.1 cent amount in subsection (a))' after `1992'.Comments Close Comments Permalink

(B) CONFORMING AMENDMENT- Paragraph (2) of section 45(b) is amended by striking `1.5 cent' and inserting `2.1 cent'.Comments Close Comments Permalink

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to electricity produced and sold after the date of the enactment of this Act.Comments Close Comments Permalink

SEC. 102. MODIFICATIONS TO CREDIT FOR CLEAN RENEWABLE ENERGY BONDS.

(a) Increase in Amount of Bonds Designated; 10 Year Extension-Comments Close Comments Permalink

(1) IN GENERAL- Subsection (f) of section 54 is amended to read as follows:Comments Close Comments Permalink

`(f) Limitation on Amount of Bonds Designated-Comments Close Comments Permalink

`(1) NATIONAL LIMITATION- There is a national clean renewable energy bond limitation for each calendar year. Such limitation is $1,000,000,000 for 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, and 2017, and zero thereafter.Comments Close Comments Permalink

`(2) ALLOCATION BY SECRETARY- The national clean renewable energy bond limitation for a calendar year shall be allocated by the Secretary among qualified projects in such manner as the Secretary determines appropriate, except that the Secretary may not allocate more than $625,000,000 of such limitation for each calendar year to finance qualified projects of qualified borrowers which are governmental bodies.'.Comments Close Comments Permalink

(2) CONFORMING AMENDMENT- Section 54 is amended by striking subsection (m).Comments Close Comments Permalink

(b) Additional Period for Reimbursement of Costs Paid by Borrower- Section 54(d)(2)(C) is amended by striking clause (iii) and inserting the following new clause:Comments Close Comments Permalink

`(iii) the reimbursement is made not later than 18 months after the date the original expenditure is paid or, if later, the date that the project is placed in service or abandoned.Comments Close Comments Permalink

In no event may the reimbursement under clause (iii) be made more than 3 years after the date the original expenditure is paid.'.Comments Close Comments Permalink

(1) IN GENERAL- Paragraph (5) of section 54(l) is amended to read as follows:Comments Close Comments Permalink

`(5) RATABLE PRINCIPAL AMORTIZATION REQUIRED- A bond shall not be treated as a clean renewable energy bond unless it is part of an issue which provides for an equal amount of principal to be paid by the qualified issuer during each 12-month period that the issue is outstanding (other than the first 12-month period).'.Comments Close Comments Permalink

(2) CONFORMING AMENDMENT- The third sentence of section 54(e)(2) is amended by striking `subsection (l)(6)' and inserting `Subsection (l)(5)'.Comments Close Comments Permalink

(d) Maximum Term of Issue- The second sentence of section 54(e)(2) is amended by inserting `the greater of 15 years or' after `Such maximum term shall be'.Comments Close Comments Permalink

(e) Effective Date-Comments Close Comments Permalink

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to obligations issued after December 31, 2006.Comments Close Comments Permalink

(2) ANNUAL BOND LIMITATION- The amendments made by subsection (a) shall apply to obligations issued after December 31, 2007.Comments Close Comments Permalink

SEC. 103. EXTENSION OF QUALIFYING ADVANCED CLEAN COAL PROJECT CREDIT.

(a) In General- Paragraph (3) of section 48A(d)(3) (relating to aggregate credits) is amended to read as follows:Comments Close Comments Permalink

`(3) AGGREGATE CREDIT LIMITATIONS-Comments Close Comments Permalink

`(A) INITIAL ALLOCATIONS-Comments Close Comments Permalink

`(i) IN GENERAL- The aggregate credits allowed under subsection (a) for projects certified by the Secretary under paragraph (2) with respect to which an application has been accepted under paragraph (2)(C) before January 1, 2008, may not exceed $1,300,000,000.Comments Close Comments Permalink

`(ii) PARTICULAR PROJECTS- Of the dollar amount in clause (i), the Secretary is authorized to certify--Comments Close Comments Permalink

`(I) $800,000,000 for integrated gasification combined cycle projects, andComments Close Comments Permalink

`(II) $500,000,000 for projects which use other advanced coal-based generation technologies.Comments Close Comments Permalink

`(iii) PRIORITIES- The Secretary shall give high priority to projects that incorporate capture and long-term storage of carbon dioxide, including carbon dioxide enhanced oil recovery.Comments Close Comments Permalink

`(iv) CARRYOVER-Comments Close Comments Permalink

`(I) IN GENERAL- If the dollar amount under clause (i) exceeds the amount allocated to all projects for which an application has been accepted before January 1, 2008, the dollar amount under subparagraph (B)(i) for calendar year 2007 shall be increased by the amount of such excess.Comments Close Comments Permalink

`(II) ALLOCATION- Any amount redistributed under clause (i) shall be allocated to the same category under subparagraph (B)(ii) as the category of the original project to which it was allocated.Comments Close Comments Permalink

`(B) ANNUAL ALLOCATION-Comments Close Comments Permalink

`(i) IN GENERAL- In the case of projects with respect to which an application has been accepted under paragraph (2)(C) in any calendar year after 2007 and before 2018, the aggregate credits allowed under subsection (a) for all projects accepted in such calendar year may not exceed $750,000,000.Comments Close Comments Permalink

`(ii) PARTICULAR PROJECTS- Of the dollar amount in clause (i) with respect to any calendar year, the Secretary is authorized to certify--Comments Close Comments Permalink

`(I) $550,000,000 for integrated gasification combined cycle projects, andComments Close Comments Permalink

`(II) $200,000,000 for projects which use other advanced coal-based generation technologies.Comments Close Comments Permalink

`(iii) PRIORITIES- The Secretary shall give high priority to projects that incorporate capture and long-term storage of carbon dioxide, including for carbon dioxide enhanced oil recovery, permanent geological storage, or other purposes.Comments Close Comments Permalink

`(iv) CARRYOVERS- If for any calendar year the dollar amount under subclause (I) or (II) of clause (ii) exceeds the amount allocated to all projects for which an application has been accepted during such calendar year, such dollar amount for the following calendar year shall be increased by the amount of such excess.Comments Close Comments Permalink

`(C) REDISTRIBUTIONS-Comments Close Comments Permalink

`(i) IN GENERAL- If any dollar amount allocated to a project under this paragraph has been revoked pursuant to paragraph (2)(D), then the dollar amount under subparagraph (B)(i) for the next available calendar year shall be increased by the amount of the dollar amount so revoked.Comments Close Comments Permalink

`(ii) ALLOCATION- Any amount redistributed under clause (i) shall be allocated to the same category under subparagraph (B)(ii) as the category of the original project to which it was allocated.'.Comments Close Comments Permalink

(b) Conforming Amendments-Comments Close Comments Permalink

(1) APPLICATION DEADLINE- The second sentence of section 48A(d)(3)(A) is amended to read as follows: `No application may be submitted for certification under this paragraph after December 31, 2017.'Comments Close Comments Permalink

(2) REVIEW AND REDISTRIBUTION- Subsection (d) of section 48A is amended by striking paragraph (4).Comments Close Comments Permalink

(c) Effective Date- The amendments made by this section shall take effect on the date of the enactment of this Act.Comments Close Comments Permalink

SEC. 104. CLEAN COAL ENERGY BONDS.

(a) In General- Subpart H of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section:Comments Close Comments Permalink

`SEC. 54A. CREDIT TO HOLDERS OF CLEAN COAL ENERGY BONDS.

`(a) Allowance of Credit- If a taxpayer holds a clean coal energy bond on 1 or more credit allowance dates of the bond occurring 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 the sum of the credits determined under subsection (b) with respect to such dates.Comments Close Comments Permalink

`(b) Amount of Credit-Comments Close Comments Permalink

`(1) IN GENERAL- The amount of the credit determined under this subsection with respect to any credit allowance date for a clean coal energy bond is 25 percent of the annual credit determined with respect to such bond.Comments Close Comments Permalink

`(2) ANNUAL CREDIT- The annual credit determined with respect to any clean coal energy bond is the product of--Comments Close Comments Permalink

`(A) the credit rate determined by the Secretary under paragraph (3) for the day on which such bond was sold, multiplied byComments Close Comments Permalink

`(B) the outstanding face amount of the bond.Comments Close Comments Permalink

`(3) DETERMINATION- For purposes of paragraph (2), with respect to any clean coal energy bond, the Secretary shall determine daily or cause to be determined daily a credit rate which shall apply to the first day on which there is a binding, written contract for the sale or exchange of the bond. The credit rate for any day is the credit rate which the Secretary or the Secretary's designee estimates will permit the issuance of clean coal energy bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer.Comments Close Comments Permalink

`(4) CREDIT ALLOWANCE DATE- For purposes of this section, the term `credit allowance date' means--Comments Close Comments Permalink

`(A) March 15,Comments Close Comments Permalink

`(B) June 15,Comments Close Comments Permalink

`(C) September 15, andComments Close Comments Permalink

`(D) December 15.Comments Close Comments Permalink

`Such term also includes the last day on which the bond is outstanding.Comments Close Comments Permalink

`(5) 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.Comments Close Comments Permalink

`(c) Limitation Based on Amount of Tax- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--Comments Close Comments Permalink

`(1) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, overComments Close Comments Permalink

`(2) the sum of the credits allowable under this part (other than subpart C, this subpart and section 1400N(l)).Comments Close Comments Permalink

`(d) Clean Coal Energy Bond- For purposes of this section--Comments Close Comments Permalink

`(1) IN GENERAL- The term `clean coal energy bond' means any bond issued as part of an issue if--Comments Close Comments Permalink

`(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 clean coal energy bond limitation under subsection (f)(2),Comments Close Comments Permalink

`(B) 95 percent or more of the proceeds from the sale of such issue are to be used for capital expenditures incurred by qualified borrowers for 1 or more qualified projects,Comments Close Comments Permalink

`(C) the qualified issuer designates such bond for purposes of this section and the bond is in registered form, andComments Close Comments Permalink

`(D) the issue meets the requirements of subsection (h).Comments Close Comments Permalink

`(2) QUALIFIED PROJECT; SPECIAL USE RULES-Comments Close Comments Permalink

`(A) IN GENERAL- The term `qualified project' means a qualifying advanced coal project (as defined in section 48A(c)(1)) placed in service by a qualified borrower.Comments Close Comments Permalink

`(B) REFINANCING RULES- For purposes of paragraph (1)(B), a qualified project may be refinanced with proceeds of a clean coal energy bond only if the indebtedness being refinanced (including any obligation directly or indirectly refinanced by such indebtedness) was originally incurred by a qualified borrower after the date of the enactment of this section.Comments Close Comments Permalink

`(C) REIMBURSEMENT- For purposes of paragraph (1)(B), a clean coal energy bond may be issued to reimburse a qualified borrower for amounts paid after the date of the enactment of this section with respect to a qualified project, but only if--Comments Close Comments Permalink

`(i) prior to the payment of the original expenditure, the qualified borrower declared its intent to reimburse such expenditure with the proceeds of a clean coal energy bond,Comments Close Comments Permalink

`(ii) not later than 60 days after payment of the original expenditure, the qualified issuer adopts an official intent to reimburse the original expenditure with such proceeds, andComments Close Comments Permalink

In no event may the reimbursement under clause (iii) be made more than 3 years after the date the original expenditure is paid.Comments Close Comments Permalink

`(D) TREATMENT OF CHANGES IN USE- For purposes of paragraph (1)(B), the proceeds of an issue shall not be treated as used for a qualified project to the extent that a qualified borrower takes any action within its control which causes such proceeds not to be used for a qualified project. The Secretary shall prescribe regulations specifying remedial actions that may be taken (including conditions to taking such remedial actions) to prevent an action described in the preceding sentence from causing a bond to fail to be a clean coal energy bond.Comments Close Comments Permalink

`(e) Maturity Limitations-Comments Close Comments Permalink

`(1) DURATION OF TERM- A bond shall not be treated as a clean coal energy bond if the maturity of such bond exceeds the maximum term determined by the Secretary under paragraph (2) with respect to such bond.Comments Close Comments Permalink

`(2) MAXIMUM TERM- During each calendar month, the Secretary shall determine the maximum term permitted under this paragraph for bonds issued during the following calendar month. Such maximum term shall be the greater of 15 years or the term which the Secretary estimates will result in the present value of the obligation to repay the principal on the bond being equal to 50 percent of the face amount of such bond. Such present value shall be determined without regard to the requirements of subsection (l)(5) and using as a discount rate the average annual interest rate of tax of tax-exempt obligations having a term of 10 years or more which are issued during the month. If the term as so determined is not a multiple of a whole year, such term shall be rounded to the next highest whole year.Comments Close Comments Permalink

`(f) Limitation on Amount of Bonds Designated-Comments Close Comments Permalink

`(1) NATIONAL LIMITATION- There is a national clean coal energy bond limitation of $5,000,000,000.Comments Close Comments Permalink

`(2) ALLOCATION BY SECRETARY- The Secretary shall allocate the amount described in paragraph (1) among qualified projects in such manner as the Secretary determines appropriate, except that the Secretary may not allocate more than $3,125,000,000 of the national clean coal energy bond limitation to finance qualified projects of qualified borrowers which are public power entities.Comments Close Comments Permalink

`(g) Credit Included in Gross Income- Gross income includes the amount of the credit allowed to the taxpayer under this section (determined without regard to subsection (c)) and the amount so included shall be treated as interest income.Comments Close Comments Permalink

`(h) Special Rules Relating to Expenditures-Comments Close Comments Permalink

`(1) IN GENERAL- An issue shall be treated as meeting the requirements of this subsection if, as of the date of issuance, the qualified issuer reasonably expects--Comments Close Comments Permalink

`(A) at least 95 percent of the proceeds from the sale of the issue are to be spent for 1 or more qualified projects within the 5-year period beginning on the date of issuance of the clean energy bond,Comments Close Comments Permalink

`(B) a binding commitment with a third party to spend at least 10 percent of the proceeds from the sale of the issue will be incurred within the 6-month period beginning on the date of issuance of the clean energy bond or, in the case of a clean energy bond the proceeds of which are to be loaned to 2 or more qualified borrowers, such binding commitment will be incurred within the 6-month period beginning on the date of the loan of such proceeds to a qualified borrower, andComments Close Comments Permalink

`(C) such projects will be completed with due diligence and the proceeds from the sale of the issue will be spent with due diligence.Comments Close Comments Permalink

`(2) EXTENSION OF PERIOD- Upon submission of a request prior to the expiration of the period described in paragraph (1)(A), the Secretary may extend such period if the qualified issuer establishes that the failure to satisfy the 5-year requirement is due to reasonable cause and the related projects will continue to proceed with due diligence.Comments Close Comments Permalink

`(3) FAILURE TO SPEND REQUIRED AMOUNT OF BOND PROCEEDS WITHIN 5 YEARS- To the extent that less than 95 percent of the proceeds of such issue are expended by the close of the 5-year period beginning on the date of issuance (or if an extension has been obtained under paragraph (2), by the close of the extended period), the qualified issuer shall redeem all of the nonqualified bonds within 90 days after the end of such period. For purposes of this paragraph, the amount of the nonqualified bonds required to be redeemed shall be determined in the same manner as under section 142.Comments Close Comments Permalink

`(i) Special Rules Relating to Arbitrage- A bond which is part of an issue shall not be treated as a clean coal energy bond unless, with respect to the issue of which the bond is a part, the qualified issuer satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue.Comments Close Comments Permalink

`(j) Cooperative Electric Company; Clean Coal Energy Bond Lender; Public Power Entity; Qualified Borrower- For purposes of this section--Comments Close Comments Permalink

`(1) 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), or a not-for-profit electric utility which has received a loan or loan guarantee under the Rural Electrification Act.Comments Close Comments Permalink

`(2) CLEAN COAL ENERGY BOND LENDER- The term `clean coal 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.Comments Close Comments Permalink

`(3) 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 the enactment of this paragraph).Comments Close Comments Permalink

`(4) QUALIFIED ISSUER- The term `qualified issuer' means--Comments Close Comments Permalink

`(A) a clean coal energy bond lender,Comments Close Comments Permalink

`(B) a cooperative electric company, orComments Close Comments Permalink

`(C) a public power entity.Comments Close Comments Permalink

`(5) QUALIFIED BORROWER- The term `qualified borrower' means--Comments Close Comments Permalink

`(A) a mutual or cooperative electric company described in section 501(c)(12) or 1381(a)(2)(C), orComments Close Comments Permalink

`(B) a public power entity.Comments Close Comments Permalink

`(k) Special Rules Relating to Pool Bonds- No portion of a pooled financing bond may be allocable to any loan unless the borrower has entered into a written loan commitment for such portion prior to the issue date of such issue.Comments Close Comments Permalink

`(l) Other Definitions and Special Rules- For purposes of this section--Comments Close Comments Permalink

`(1) BOND- The term `bond' includes any obligation.Comments Close Comments Permalink

`(2) POOLED FINANCING BOND- The term `pooled financing bond' shall have the meaning given such term by section 149(f)(4)(A).Comments Close Comments Permalink

`(3) PARTNERSHIP; S CORPORATION; AND OTHER PASS-THRU ENTITIES-Comments Close Comments Permalink

`(A) IN GENERAL- Under regulations prescribed by the Secretary, in the case of a partnership, trust, S corporation, or other pass-thru entity, rules similar to the rules of section 41(g) shall apply with respect to the credit allowable under subsection (a).Comments Close Comments Permalink

`(B) NO BASIS ADJUSTMENT- Rules similar to the rules under section 1397E(l) shall apply.Comments Close Comments Permalink

`(4) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any clean coal energy bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.Comments Close Comments Permalink

`(5) RATABLE PRINCIPAL AMORTIZATION REQUIRED- A bond shall not be treated as a clean coal energy bond unless it is part of an issue which provides for one-half of the principal amount of the issue to be paid in equal amounts in each 12-month period the issue in outstanding (excluding the first 2 12-month periods the issue is outstanding) prior to the year in which the issue matures.Comments Close Comments Permalink

`(6) REPORTING- Issuers of clean coal energy bonds shall submit reports similar to the reports required under section 149(e).Comments Close Comments Permalink

`(m) Termination- This section shall not apply with respect to any bond issued after December 31, 2017.'.Comments Close Comments Permalink

(b) Reporting- Subsection (d) of section 6049 (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph:Comments Close Comments Permalink

`(9) REPORTING OF CREDIT ON CLEAN COAL ENERGY BONDS-Comments Close Comments Permalink

`(A) IN GENERAL- For purposes of subsection (a), the term `interest' includes amounts includible in gross income under section 54A(g) and such amounts shall be treated as paid on the credit allowance date (as defined in section 54A(b)(4)).Comments Close Comments Permalink

`(B) REPORTING TO CORPORATIONS, ETC- Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A), subsection (b)(4) shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i) of such subsection.Comments Close Comments Permalink

`(C) REGULATORY AUTHORITY- The Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.'.Comments Close Comments Permalink

(c) Clerical Amendment- The table of sections for subpart H of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:Comments Close Comments Permalink

`Sec. 54A. Credit to holders of clean coal energy bonds.'.Comments Close Comments Permalink

(d) Issuance of Regulations- The Secretary of the Treasury shall issues regulations required under section 54A of the Internal Revenue Code of 1986 (as added by this section) not later than 120 days after the date of the enactment of this Act.Comments Close Comments Permalink

(e) Effective Date- The amendments made by this section shall apply to bonds issued after December 31, 2007.Comments Close Comments Permalink

SEC. 105. CREDIT FOR CAPTURE AND STORAGE OR USE OF CARBON DIOXIDE.

(a) Tax Credit for Carbon Dioxide Captured From Industrial Sources and Used in Enhanced Oil and Natural Gas Recovery, and for Other Purposes-Comments Close Comments Permalink

(1) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 (relating to business credits) is amended by adding at the end the following new section:Comments Close Comments Permalink

`SEC. 45O. CREDIT FOR CAPTURE AND STORAGE OR USE OF CARBON DIOXIDE.

`(a) General Rule- For purposes of section 38, the captured carbon dioxide tertiary injectant credit for any taxable year is an amount equal to the product of--Comments Close Comments Permalink

`(1) the credit amount, andComments Close Comments Permalink

`(2) the qualified captured carbon dioxide which is attributable to the taxpayer.Comments Close Comments Permalink

`(b) Credit Amount- For purposes of this section--Comments Close Comments Permalink

`(1) IN GENERAL- The credit amount is $0.75 per 1,500 standard cubic feet of qualified captured carbon dioxide.Comments Close Comments Permalink

`(2) INFLATION ADJUSTMENT- In the case of any taxable year beginning in a calendar year after 2007, there shall be substituted for the $0.75 amount under paragraph (1) an amount equal to the product of--Comments Close Comments Permalink

`(A) $0.75, multiplied byComments Close Comments Permalink

`(B) the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting `2006' for `1990'.Comments Close Comments Permalink

`(3) CREDIT AMOUNT FOR CAPTURE AND STORAGE- In the case of carbon dioxide which is qualified captured carbon dioxide by reason of subsection (c)(1)(D)(i), paragraphs (1) and (2) shall be applied by substituting `$1.00' for `$0.75' each place it appears.Comments Close Comments Permalink

`(c) Qualified Captured Carbon Dioxide- For purposes of this section--Comments Close Comments Permalink

`(1) IN GENERAL- The term `qualified captured carbon dioxide' means carbon dioxide captured within the United States (within the meaning of section 638(1)) or a possession of the United States (within the meaning of section 638(2)) from an anthropogenic source that--Comments Close Comments Permalink

`(A) would otherwise be released into the atmosphere as industrial emission of greenhouse gas,Comments Close Comments Permalink

`(B) is measurable at the source of capture,Comments Close Comments Permalink

`(C) is compressed, treated, and (if necessary) transported via pipeline, andComments Close Comments Permalink

`(D) is--Comments Close Comments Permalink

`(i) permanently sequestered in saline or other underground formations, orComments Close Comments Permalink

`(ii) sold or used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and permanently sequestered in geological formations as a result of such project.Comments Close Comments Permalink

`(2) RECYCLED CARBON DIOXIDE- The term `qualified captured carbon dioxide' includes the initial deposit of captured carbon dioxide used as a tertiary injectant. Such term does not include carbon dioxide that is re-captured, recycled, and re-injected as part of the enhanced oil or natural gas recovery project.Comments Close Comments Permalink

`(3) ANTHROPOGENIC SOURCE- An anthropogenic source of carbon dioxide is an industrial source, including any coal or natural gas fired electrical generating power station, and facilities related to such source.Comments Close Comments Permalink

`(4) QUALIFIED ENHANCED OIL OR NATURAL GAS RECOVERY PROJECT- The term `qualified enhanced oil or natural gas recovery project' has the meaning given the term `qualified enhanced oil recovery project' by section 43(c)(2), by substituting `crude oil or natural gas' for `crude oil' in subparagraph (A)(i) thereof.Comments Close Comments Permalink

`(5) TERTIARY INJECTANT- The term `tertiary injectant' has the same meaning as when used in section 193(b)(1).'.Comments Close Comments Permalink

(2) CREDIT TREATED AS PART OF GENERAL BUSINESS CREDIT- Section 38(b) (relating to general business credit) is amended by striking `plus' at the end of paragraph (30), by striking the period at the end of paragraph (31) and inserting `, plus', and by adding at the end of following new paragraph:Comments Close Comments Permalink

`(32) the captured carbon dioxide tertiary injectant credit determined under section 45O(a).'.Comments Close Comments Permalink

(3) CLERICAL AMENDMENT- The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:Comments Close Comments Permalink

`Sec. 45O. Credit for capture and storage or use of carbon dioxide.'.Comments Close Comments Permalink

(4) EFFECTIVE DATE- The amendments made by this subsection shall apply to taxable years beginning after the date of the enactment of this Act.Comments Close Comments Permalink

(b) Class Life of Carbon Dioxide Distribution Pipelines-Comments Close Comments Permalink

(1) IN GENERAL- Subparagraph (D) of section 168(e)(3) (relating to 10-year property) is amended by striking `and' at the end of clause (i), by striking the period at the end of clause (ii) and inserting `, and', and by adding at the end the following new clause:Comments Close Comments Permalink

`(iii) any pipeline used primarily for the distribution of carbon dioxide for use as a tertiary injectant (within the meaning of section 193(b)(1)) for a qualified enhanced oil or natural gas recovery project (as defined in section 45O(c)(4)) and the original use of which commences with the taxpayer after the date of the enactment of Clean Energy Production Tax Incentives Act of 2007.'.Comments Close Comments Permalink

(2) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.Comments Close Comments Permalink

SEC. 106. CARBON DIOXIDE CAPTURE BONDS.

(a) In General- Subpart H of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding at the end the following new section:Comments Close Comments Permalink

`SEC. 54B. CREDIT TO HOLDERS OF CARBON DIOXIDE CAPTURE BONDS.

`(a) Allowance of Credit- If a taxpayer holds a carbon dioxide capture bond on 1 or more credit allowance dates of the bond occurring 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 the sum of the credits determined under subsection (b) with respect to such dates.Comments Close Comments Permalink

`(b) Amount of Credit-Comments Close Comments Permalink

`(1) IN GENERAL- The amount of the credit determined under this subsection with respect to any credit allowance date for a carbon dioxide capture bond is 25 percent of the annual credit determined with respect to such bond.Comments Close Comments Permalink

`(2) ANNUAL CREDIT- The annual credit determined with respect to any carbon dioxide capture bond is the product of--Comments Close Comments Permalink

`(A) the credit rate determined by the Secretary under paragraph (3) for the day on which such bond was sold, multiplied byComments Close Comments Permalink

`(B) the outstanding face amount of the bond.Comments Close Comments Permalink

`(3) DETERMINATION- For purposes of paragraph (2), with respect to any carbon dioxide capture bond, the Secretary shall determine daily or cause to be determined daily a credit rate which shall apply to the first day on which there is a binding, written contract for the sale or exchange of the bond. The credit rate for any day is the credit rate which the Secretary or the Secretary's designee estimates will permit the issuance of carbon dioxide capture bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer.Comments Close Comments Permalink

`(4) CREDIT ALLOWANCE DATE- For purposes of this section, the term `credit allowance date' means--Comments Close Comments Permalink

`(A) March 15,Comments Close Comments Permalink

`(B) June 15,Comments Close Comments Permalink

`(C) September 15, andComments Close Comments Permalink

`(D) December 15.Comments Close Comments Permalink

`Such term also includes the last day on which the bond is outstanding.Comments Close Comments Permalink

`(c) Limitation Based on Amount of Tax- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--Comments Close Comments Permalink

`(1) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, overComments Close Comments Permalink

`(2) the sum of the credits allowable under this part (other than subpart C, this subpart and section 1400N(l)).Comments Close Comments Permalink

`(d) Carbon Dioxide Capture Bond- For purposes of this section--Comments Close Comments Permalink

`(1) IN GENERAL- The term `carbon dioxide capture bond' means any bond issued as part of an issue if--Comments Close Comments Permalink

`(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 carbon dioxide capture bond limitation under subsection (f)(2),Comments Close Comments Permalink

`(C) the qualified issuer designates such bond for purposes of this section and the bond is in registered form, andComments Close Comments Permalink

`(D) the issue meets the requirements of subsection (h).Comments Close Comments Permalink

`(2) QUALIFIED PROJECT; SPECIAL USE RULES-Comments Close Comments Permalink

`(A) QUALIFIED PROJECT- The term `qualified project' means a project placed in service by a qualified borrower for the processing of qualified captured carbon dioxide (as defined in section 45O(c)(1)).Comments Close Comments Permalink

`(B) REFINANCING RULES- For purposes of paragraph (1)(B), a qualified project may be refinanced with proceeds of a carbon dioxide capture bond only if the indebtedness being refinanced (including any obligation directly or indirectly refinanced by such indebtedness) was originally incurred by a qualified borrower after the date of the enactment of this section.Comments Close Comments Permalink

`(C) REIMBURSEMENT- For purposes of paragraph (1)(B), a carbon dioxide capture bond may be issued to reimburse a qualified borrower for amounts paid after the date of the enactment of this section with respect to a qualified project, but only if--Comments Close Comments Permalink

`(i) prior to the payment of the original expenditure, the qualified borrower declared its intent to reimburse such expenditure with the proceeds of a carbon dioxide capture bond,Comments Close Comments Permalink

In no event may the reimbursement under clause (iii) be made more than 3 years after the date the original expenditure is paid.Comments Close Comments Permalink

`(D) TREATMENT OF CHANGES IN USE- For purposes of paragraph (1)(B), the proceeds of an issue shall not be treated as used for a qualified project to the extent that a qualified borrower takes any action within its control which causes such proceeds not to be used for a qualified project. The Secretary shall prescribe regulations specifying remedial actions that may be taken (including conditions to taking such remedial actions) to prevent an action described in the preceding sentence from causing a bond to fail to be a carbon dioxide capture bond.Comments Close Comments Permalink

`(e) Maturity Limitations-Comments Close Comments Permalink

`(1) DURATION OF TERM- A bond shall not be treated as a carbon dioxide capture bond if the maturity of such bond exceeds the maximum term determined by the Secretary under paragraph (2) with respect to such bond.Comments Close Comments Permalink

`(f) Limitation on Amount of Bonds Designated-Comments Close Comments Permalink

`(1) NATIONAL LIMITATION- There is a national carbon dioxide capture bond limitation of $5,000,000,000.Comments Close Comments Permalink

`(2) ALLOCATION BY SECRETARY- The Secretary, in consultation with the Secretary of Energy, shall allocate the amount described in paragraph (1) among qualified projects in such manner as the Secretary determines appropriate, except that the Secretary may not allocate more than $3,125,000,000 of the national carbon dioxide capture bond limitation to finance qualified projects of qualified borrowers which are public power entities.Comments Close Comments Permalink

`(h) Special Rules Relating to Expenditures-Comments Close Comments Permalink

`(1) IN GENERAL- An issue shall be treated as meeting the requirements of this subsection if, as of the date of issuance, the qualified issuer reasonably expects--Comments Close Comments Permalink

`(C) such projects will be completed with due diligence and the proceeds from the sale of the issue will be spent with due diligence.Comments Close Comments Permalink

`(i) Special Rules Relating to Arbitrage- A bond which is part of an issue shall not be treated as a carbon dioxide capture bond unless, with respect to the issue of which the bond is a part, the qualified issuer satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue.Comments Close Comments Permalink

`(j) Cooperative Electric Company; Carbon Dioxide Capture Bond Lender; Governmental Body; Qualified Borrower- For purposes of this section--Comments Close Comments Permalink

`(2) CARBON DIOXIDE CAPTURE BOND LENDER- The term `carbon dioxide capture 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.Comments Close Comments Permalink

`(3) GOVERNMENTAL BODY- For purposes of this section, the term `governmental body' means any State, territory, possession of the United States, the District of Columbia, Indian tribal government, and any political subdivision thereof.Comments Close Comments Permalink

`(4) QUALIFIED ISSUER- The term `qualified issuer' means--Comments Close Comments Permalink

`(A) a carbon dioxide capture bond lender,Comments Close Comments Permalink

`(B) a cooperative electric company, orComments Close Comments Permalink

`(C) a governmental body.Comments Close Comments Permalink

`(5) QUALIFIED BORROWER- The term `qualified borrower' means--Comments Close Comments Permalink

`(A) a mutual or cooperative electric company described in section 501(c)(12) or 1381(a)(2)(C), orComments Close Comments Permalink

`(B) a governmental body.Comments Close Comments Permalink

`(l) Other Definitions and Special Rules- For purposes of this section--Comments Close Comments Permalink

`(1) BOND- The term `bond' includes any obligation.Comments Close Comments Permalink

`(2) POOLED FINANCING BOND- The term `pooled financing bond' shall have the meaning given such term by section 149(f)(4)(A).Comments Close Comments Permalink

`(3) PARTNERSHIP; S CORPORATION; AND OTHER PASS-THRU ENTITIES-Comments Close Comments Permalink

`(B) NO BASIS ADJUSTMENT- Rules similar to the rules under section 1397E(l) shall apply.Comments Close Comments Permalink

`(4) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any carbon dioxide capture bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.Comments Close Comments Permalink

`(5) RATABLE PRINCIPAL AMORTIZATION REQUIRED- A bond shall not be treated as a carbon dioxide capture bond unless it is part of an issue which provides for an equal amount of principal to be paid by the qualified issuer during each calendar year that the issue is outstanding.Comments Close Comments Permalink

`(6) REPORTING- Issuers of carbon dioxide capture bonds shall submit reports similar to the reports required under section 149(e).Comments Close Comments Permalink

`(m) Termination- This section shall not apply with respect to any bond issued after December 31, 2017.'.Comments Close Comments Permalink

(b) Reporting- Subsection (d) of section 6049 (relating to returns regarding payments of interest), as amended by this Act, is amended by adding at the end the following new paragraph:Comments Close Comments Permalink

`(10) REPORTING OF CREDIT ON CARBON DIOXIDE CAPTURE BONDS-Comments Close Comments Permalink

`(A) IN GENERAL- For purposes of subsection (a), the term `interest' includes amounts includible in gross income under section 54B(g) and such amounts shall be treated as paid on the credit allowance date (as defined in section 54B(b)(4)).Comments Close Comments Permalink

(c) Clerical Amendment- The table of sections for subpart H of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding at the end the following new item:Comments Close Comments Permalink

`Sec. 54B. Credit to holders of carbon dioxide capture bonds.'.Comments Close Comments Permalink

(d) Issuance of Regulations- The Secretary of the Treasury shall issues regulations required under section 54B of the Internal Revenue Code of 1986 (as added by this section) not later than 120 days after the date of the enactment of this Act.Comments Close Comments Permalink

(e) Effective Date- The amendments made by this section shall apply to bonds issued after December 31, 2007.Comments Close Comments Permalink

SEC. 107. INCENTIVES FOR INVESTMENT IN ELECTRIC TRANSMISSION PROPERTY.

(a) Electric Transmission Property Investment Tax Credit-Comments Close Comments Permalink

(1) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits), as amended by this Act, is amended by adding at the end the following new section:Comments Close Comments Permalink

`SEC. 45P. ELECTRIC TRANSMISSION PROPERTY INVESTMENT CREDIT.

`(a) In General- For purposes of section 38, the amount of the electric transmission property investment credit determined under this section for any taxable year in the credit period shall be an amount equal to the applicable percentage of the basis of each qualified electric transmission property.Comments Close Comments Permalink

`(b) Applicable Percentage- For purposes of this section--Comments Close Comments Permalink

`(1) IN GENERAL- The term `applicable percentage' means the appropriate percentage prescribed by the Secretary for the first month of the credit period with respect to qualified electric transmission property.Comments Close Comments Permalink

`(2) METHOD OF PRESCRIBING PERCENTAGES- The percentages prescribed by the Secretary for any month shall be percentages which will yield over a 10-year period amounts of credit under subsection (a) which have a present value equal to 80 percent of the basis of the qualified electric transmission property.Comments Close Comments Permalink

`(3) METHOD OF DISCOUNTING- The present value under paragraph (2) shall be determined--Comments Close Comments Permalink

`(A) as of the last day of the 1st year of the 10-year period referred to in paragraph (2),Comments Close Comments Permalink

`(B) by using a discount rate equal to 72 percent of the average of the annual Federal mid-term rate and the annual Federal long-term rate applicable under section 1274(d)(1) to the month applicable under subparagraph (A) or (B) of paragraph (1) and compounded annually, andComments Close Comments Permalink

`(C) by assuming that the credit allowable under this section for any year is received on the last day of such year.Comments Close Comments Permalink

`(c) Qualified Electric Transmission Property; Qualified Interstate Electric Transmission Investment Project; Compliance Period- For purposes of this section--Comments Close Comments Permalink

`(1) QUALIFIED ELECTRIC TRANSMISSION PROPERTY- The term `qualified electric transmission property' means any section 1245 property (as defined in section 1245(a)(3)) used in the transmission at 230 or more kilovolts of electricity for sale which is part of a qualified interstate electric transmission investment project at all times during the period--Comments Close Comments Permalink

`(A) beginning on the 1st day in the compliance period on which such property is part of such an investment project, andComments Close Comments Permalink

`(B) ending on the last day of the compliance period with respect to such property.Comments Close Comments Permalink

`(2) QUALIFIED INTERSTATE ELECTRIC TRANSMISSION INVESTMENT PROJECT- The term `qualified interstate electric transmission investment project' means any investment project which consists of the construction of property used in the interstate transmission electricity and which is certified by the Secretary under subsection (e).Comments Close Comments Permalink

`(3) COMPLIANCE PERIOD- The term `compliance period' means, with respect to any building, the period of 10 taxable years beginning with the 1st taxable year of the credit period with respect thereto.Comments Close Comments Permalink

`(d) Definition and Special Rules Relating to Credit Period-Comments Close Comments Permalink

`(1) CREDIT PERIOD DEFINED- For purposes of this section, the term `credit period' means, with respect to any property, the period of 10 taxable years beginning with the taxable year in which the property is first placed in service.Comments Close Comments Permalink

`(2) SPECIAL RULE FOR 1ST YEAR OF CREDIT PERIOD-Comments Close Comments Permalink

`(A) IN GENERAL- The credit allowable under subsection (a) with respect to any property for the 1st taxable year of the credit period shall be determined by multiplying such credit by the fraction--Comments Close Comments Permalink

`(i) the numerator of which is the number of full months of such year during which such property was in service, andComments Close Comments Permalink

`(ii) the denominator of which is 12.Comments Close Comments Permalink

`(B) DISALLOWED 1ST YEAR CREDIT ALLOWED IN 11TH YEAR- Any reduction by reason of subparagraph (A) in the credit allowable (without regard to subparagraph (A)) for the 1st taxable year of the credit period shall be allowable under subsection (a) for the 1st taxable year following the credit period.Comments Close Comments Permalink

`(e) Certification of Qualified Interstate Electric Transmission Investment Projects-Comments Close Comments Permalink

`(1) IN GENERAL- Not later than 180 days after the date of the enactment of this Act, the Secretary, in consultation with the Secretary of Energy, shall establish a program identifying criteria for the certification of qualified interstate electric transmission investment projects.Comments Close Comments Permalink

`(2) CERTIFICATION-Comments Close Comments Permalink

`(A) APPLICATION PERIOD- Each applicant for certification under this paragraph shall submit an application meeting the requirements of subparagraph (B).Comments Close Comments Permalink

`(B) REQUIREMENTS FOR APPLICATIONS FOR CERTIFICATION- An application under subparagraph (A) shall contain such information as the Secretary may require in order to make a determination to accept or reject an application for certification. Any information contained in the application shall be protected as provided in section 552(b)(4) of title 5, United States Code.Comments Close Comments Permalink

`(C) TIME TO ACT UPON APPLICATIONS FOR CERTIFICATION- The Secretary shall issue a determination as to whether an applicant has met the requirements established under paragraph (1) within 60 days following the date of submittal of the application for certification.Comments Close Comments Permalink

`(D) PERIOD OF ISSUANCE- An applicant which receives a certification shall have 5 years from the date of issuance of the certification in order to place the project in service and if such project is not placed in service by that time period then the certification shall no longer be valid.Comments Close Comments Permalink

`(3) AGGREGATE CREDITS- The aggregate credits allowed under subsection (a) for projects certified by the Secretary under paragraph (2) may not exceed $2,500,000,000.Comments Close Comments Permalink

`(f) Credits for Electric Cooperatives and State and Local Governments-Comments Close Comments Permalink

`(1) ALLOWANCE OF CREDIT- Any credit which would be allowable under subsection (a) with respect to an organization described in paragraph (4) shall be treated as a credit allowable under subpart C to such organization.Comments Close Comments Permalink

`(2) USE OF CREDIT- An organization described in paragraph (4) may assign, trade, sell, or otherwise transfer any credit allowable to such organization under subsection (a) to any taxpayer.Comments Close Comments Permalink

`(3) CREDIT NOT INCOME- A transfer under paragraph (2) of any credit allowable under subsection (a) shall not result in income for purposes of section 511.Comments Close Comments Permalink

`(4) ORGANIZATION DESCRIBED- An organization is described in this paragraph if such organization is--Comments Close Comments Permalink

`(A) a State or local government, orComments Close Comments Permalink

`(B) a mutual or cooperative electric company which is described in section 501(c)(12) and exempt from tax under section 501(a).Comments Close Comments Permalink

`(g) Certifications and Other Reports to Secretary-Comments Close Comments Permalink

`(1) CERTIFICATION WITH RESPECT TO 1ST YEAR OF CREDIT PERIOD- Following the close of the 1st taxable year in the credit period with respect to any qualified electric transmission property, the taxpayer shall certify to the Secretary (at such time and in such form and in such manner as the Secretary prescribes)--Comments Close Comments Permalink

`(A) the taxable year, and calendar year, in which such property was first placed in service,Comments Close Comments Permalink

`(B) the basis of such property as of the beginning of the credit period, andComments Close Comments Permalink

`(C) such other information as the Secretary may require.Comments Close Comments Permalink

In the case of a failure to make the certification required by the preceding sentence on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, no credit shall be allowable by reason of subsection (a) with respect to such property for any taxable year ending before such certification is made.Comments Close Comments Permalink

`(2) ANNUAL REPORTS TO THE SECRETARY- The Secretary may require taxpayers to submit an information return (at such time and in such form and manner as the Secretary prescribes) for each taxable year setting forth--Comments Close Comments Permalink

`(A) the basis for the taxable year of each qualified electric transmission property of the taxpayer, andComments Close Comments Permalink

`(B) such other information as the Secretary may require.Comments Close Comments Permalink

`(h) Regulations- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations for recapturing the credit allowed under this section where appropriate.'.Comments Close Comments Permalink

(2) CREDIT TREATED AS PART OF GENERAL BUSINESS CREDIT- Section 38(b), as amended by this Act, 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:Comments Close Comments Permalink

`(33) the electric transmission property investment credit determined under section 45P(a).'.Comments Close Comments Permalink

(3) CLERICAL AMENDMENT- The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code, as amended by this Act, is amended by adding at the end the following new item:Comments Close Comments Permalink

`Sec. 45P. Electric transmission property investment credit.'.Comments Close Comments Permalink

(b) Electric Transmission Property Treated as 10-Year Property-Comments Close Comments Permalink

(1) IN GENERAL- Subparagraph (D) of section 168(e)(3) (relating to 10-year property), as amended by this Act, is amended by striking `and' at the end of clause (ii), by striking the period at the end of clause (iii) and inserting `, and', and by adding at the end the following new clause:Comments Close Comments Permalink

`(iv) any section 1245 property (as defined in section 1245(a)(3)) used in the transmission at 230 or more kilovolts of electricity for sale and the original use of which commences with the taxpayer after the date of the enactment of this clause.'.Comments Close Comments Permalink

(2) CONFORMING AMENDMENT- Subparagraph (E) of section 168(e)(3) is amended by inserting `and before the date of the enactment of the Clean Energy Production Tax Incentives Act of 2007'.Comments Close Comments Permalink

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to property placed in service after the date of the enactment of this Act.Comments Close Comments Permalink

SEC. 108. ELECTRIC TRANSMISSION PROPERTY BONDS.

(a) In General- Subpart H of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding at the end the following new section:Comments Close Comments Permalink

`SEC. 54C. CREDIT TO HOLDERS OF ELECTRIC TRANSMISSION PROPERTY BONDS.

`(a) Allowance of Credit- If a taxpayer holds an electric transmission property bond on 1 or more credit allowance dates of the bond occurring 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 the sum of the credits determined under subsection (b) with respect to such dates.Comments Close Comments Permalink

`(b) Amount of Credit-Comments Close Comments Permalink

`(1) IN GENERAL- The amount of the credit determined under this subsection with respect to any credit allowance date for an electric transmission property bond is 25 percent of the annual credit determined with respect to such bond.Comments Close Comments Permalink

`(2) ANNUAL CREDIT- The annual credit determined with respect to any electric transmission property bond is the product of--Comments Close Comments Permalink

`(A) the credit rate determined by the Secretary under paragraph (3) for the day on which such bond was sold, multiplied byComments Close Comments Permalink

`(B) the outstanding face amount of the bond.Comments Close Comments Permalink

`(3) DETERMINATION- For purposes of paragraph (2), with respect to any electric transmission property bond, the Secretary shall determine daily or cause to be determined daily a credit rate which shall apply to the first day on which there is a binding, written contract for the sale or exchange of the bond. The credit rate for any day is the credit rate which the Secretary or the Secretary's designee estimates will permit the issuance of electric transmission property bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer.Comments Close Comments Permalink

`(4) CREDIT ALLOWANCE DATE- For purposes of this section, the term `credit allowance date' means--Comments Close Comments Permalink

`(A) March 15,Comments Close Comments Permalink

`(B) June 15,Comments Close Comments Permalink

`(C) September 15, andComments Close Comments Permalink

`(D) December 15.Comments Close Comments Permalink

`Such term also includes the last day on which the bond is outstanding.Comments Close Comments Permalink

`(c) Limitation Based on Amount of Tax- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--Comments Close Comments Permalink

`(1) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, overComments Close Comments Permalink

`(2) the sum of the credits allowable under this part (other than subpart C, this subpart and section 1400N(l)).Comments Close Comments Permalink

`(d) Electric Transmission Property Bond- For purposes of this section--Comments Close Comments Permalink

`(1) IN GENERAL- The term `electric transmission property bond' means any bond issued as part of an issue if--Comments Close Comments Permalink

`(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 electric transmission property bond limitation under subsection (f)(2),Comments Close Comments Permalink

`(C) the qualified issuer designates such bond for purposes of this section and the bond is in registered form, andComments Close Comments Permalink

`(D) the issue meets the requirements of subsection (h).Comments Close Comments Permalink

`(2) QUALIFIED PROJECT; SPECIAL USE RULES-Comments Close Comments Permalink

`(A) IN GENERAL- The term `qualified project' means a project for the installation of any section 1245 property (as defined in section 1245(a)(3)) used in the transmission at 230 or more kilovolts of electricity for sale and placed in service by a qualified borrower.Comments Close Comments Permalink

`(B) REFINANCING RULES- For purposes of paragraph (1)(B), a qualified project may be refinanced with proceeds of an electric transmission property bond only if the indebtedness being refinanced (including any obligation directly or indirectly refinanced by such indebtedness) was originally incurred by a qualified borrower after the date of the enactment of this section.Comments Close Comments Permalink

`(C) REIMBURSEMENT- For purposes of paragraph (1)(B), an electric transmission property bond may be issued to reimburse a qualified borrower for amounts paid after the date of the enactment of this section with respect to a qualified project, but only if--Comments Close Comments Permalink

`(i) prior to the payment of the original expenditure, the qualified borrower declared its intent to reimburse such expenditure with the proceeds of an electric transmission property bond,Comments Close Comments Permalink

In no event may the reimbursement under clause (iii) be made more than 3 years after the date the original expenditure is paid.Comments Close Comments Permalink

`(D) TREATMENT OF CHANGES IN USE- For purposes of paragraph (1)(B), the proceeds of an issue shall not be treated as used for a qualified project to the extent that a qualified borrower takes any action within its control which causes such proceeds not to be used for a qualified project. The Secretary shall prescribe regulations specifying remedial actions that may be taken (including conditions to taking such remedial actions) to prevent an action described in the preceding sentence from causing a bond to fail to be an electric transmission property bond.Comments Close Comments Permalink

`(e) Maturity Limitations-Comments Close Comments Permalink

`(1) DURATION OF TERM- A bond shall not be treated as an electric transmission property bond if the maturity of such bond exceeds the maximum term determined by the Secretary under paragraph (2) with respect to such bond.Comments Close Comments Permalink

`(2) MAXIMUM TERM- During each calendar month, the Secretary shall determine the maximum term permitted under this paragraph for bonds issued during the following calendar month. Such maximum term shall be the greater of 15 years or the term which the Secretary estimates will result in the present value of the obligation to repay the principal on the bond being equal to 50 percent of the face amount of such bond. Such present value shall be determined without regard to the requirements of subsection (l)(6) and using as a discount rate the average annual interest rate of tax of tax-exempt obligations having a term of 10 years or more which are issued during the month. If the term as so determined is not a multiple of a whole year, such term shall be rounded to the next highest whole year.Comments Close Comments Permalink

`(f) Limitation on Amount of Bonds Designated-Comments Close Comments Permalink

`(1) NATIONAL LIMITATION- There is a national electric transmission property bond limitation of $2,500,000,000.Comments Close Comments Permalink

`(2) ALLOCATION BY SECRETARY- The Secretary, in consultation with the Secretary of Energy, shall allocate the amount described in paragraph (1) among qualified projects in such manner as the Secretary determines appropriate, except that the Secretary may not allocate more than $1,560,000,000 of the national electric transmission property bond limitation to finance qualified projects of qualified borrowers which are public power entities.Comments Close Comments Permalink

`(h) Special Rules Relating to Expenditures-Comments Close Comments Permalink

`(1) IN GENERAL- An issue shall be treated as meeting the requirements of this subsection if, as of the date of issuance, the qualified issuer reasonably expects--Comments Close Comments Permalink

`(C) such projects will be completed with due diligence and the proceeds from the sale of the issue will be spent with due diligence.Comments Close Comments Permalink

`(i) Special Rules Relating to Arbitrage- A bond which is part of an issue shall not be treated as an electric transmission property bond unless, with respect to the issue of which the bond is a part, the qualified issuer satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue.Comments Close Comments Permalink

`(j) Cooperative Electric Company; Electric Transmission Property Bond Lender; Public Power Entity; Qualified Borrower- For purposes of this section--Comments Close Comments Permalink

`(2) ELECTRIC TRANSMISSION PROPERTY BOND LENDER- The term `electric transmission property 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.Comments Close Comments Permalink

`(4) QUALIFIED ISSUER- The term `qualified issuer' means--Comments Close Comments Permalink

`(A) an electric transmission property bond lender,Comments Close Comments Permalink

`(B) a cooperative electric company, orComments Close Comments Permalink

`(C) a public power entity.Comments Close Comments Permalink

`(5) QUALIFIED BORROWER- The term `qualified borrower' means--Comments Close Comments Permalink

`(A) a mutual or cooperative electric company described in section 501(c)(12) or 1381(a)(2)(C), orComments Close Comments Permalink

`(B) a public power entity.Comments Close Comments Permalink

`(l) Other Definitions and Special Rules- For purposes of this section--Comments Close Comments Permalink

`(1) BOND- The term `bond' includes any obligation.Comments Close Comments Permalink

`(2) POOLED FINANCING BOND- The term `pooled financing bond' shall have the meaning given such term by section 149(f)(4)(A).Comments Close Comments Permalink

`(3) PARTNERSHIP; S CORPORATION; AND OTHER PASS-THRU ENTITIES-Comments Close Comments Permalink

`(B) NO BASIS ADJUSTMENT- Rules similar to the rules under section 1397E(l) shall apply.Comments Close Comments Permalink

`(4) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any electric transmission property bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.Comments Close Comments Permalink

`(5) RATABLE PRINCIPAL AMORTIZATION REQUIRED- A bond shall not be treated as an electric transmission property bond unless it is part of an issue which provides for an equal amount of principal to be paid by the qualified issuer during each calendar year that the issue is outstanding.Comments Close Comments Permalink

`(6) REPORTING- Issuers of electric transmission property bonds shall submit reports similar to the reports required under section 149(e).Comments Close Comments Permalink

`(m) Termination- This section shall not apply with respect to any bond issued after December 31, 2017.'.Comments Close Comments Permalink

`(11) REPORTING OF CREDIT ON ELECTRIC TRANSMISSION PROPERTY BONDS-Comments Close Comments Permalink

`(A) IN GENERAL- For purposes of subsection (a), the term `interest' includes amounts includible in gross income under section 54C(g) and such amounts shall be treated as paid on the credit allowance date (as defined in section 54C(b)(4)).Comments Close Comments Permalink

`Sec. 54C. Credit to holders of electric transmission property bonds.'.Comments Close Comments Permalink

(d) Issuance of Regulations- The Secretary of the Treasury shall issues regulations required under section 54C of the Internal Revenue Code of 1986 (as added by this section) not later than 120 days after the date of the enactment of this Act.Comments Close Comments Permalink

(e) Effective Date- The amendments made by this section shall apply to bonds issued after December 31, 2007.Comments Close Comments Permalink

SEC. 109. EXTENSION AND MODIFICATION OF INVESTMENT CREDIT FOR QUALIFIED FUEL CELL PROPERTY, QUALIFIED MICROTURBINE PROPERTY, AND SOLAR PROPERTY.

(a) Extension-Comments Close Comments Permalink

(1) QUALIFIED FUEL CELL PROPERTY- Subparagraph (E) of section 48(c)(1) is amended by striking `December 31, 2008' and inserting `December 31, 2018'.Comments Close Comments Permalink

(2) QUALIFIED MICROTURBINE PROPERTY- Subparagraph (E) of section 48(c)(2) is amended by striking `December 31, 2008' and inserting `December 31, 2018'.Comments Close Comments Permalink

(3) SOLAR PROPERTY- Subclause (II) of section 48(a)(2)(i) is amended by striking `January 1, 2009' and inserting `January 1, 2019'.Comments Close Comments Permalink

(b) Solar Investment Credit Allowed for Public Utility Property-Comments Close Comments Permalink

(1) IN GENERAL- The second sentence of section 48(a)(3) of the Internal Revenue Code of 1986 is amended by inserting `(other than property described in subparagraph (A)(i))' before `shall not'.Comments Close Comments Permalink

(2) EFFECTIVE DATE- The amendment made by this subsection shall apply to periods after the date of the enactment of this Act, in taxable years ending after such date, 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).Comments Close Comments Permalink

TITLE II--REVENUE PROVISIONS

SEC. 201. TAX TREATMENT OF CONTROLLED FOREIGN CORPORATIONS ESTABLISHED IN TAX HAVENS.

(a) In General- Subchapter C of chapter 80 (relating to provisions affecting more than one subtitle) is amended by adding at the end the following new section:Comments Close Comments Permalink

`SEC. 7875. CONTROLLED FOREIGN CORPORATIONS IN TAX HAVENS TREATED AS DOMESTIC CORPORATIONS.

`(a) General Rule- If a controlled foreign corporation is a tax-haven CFC, then, notwithstanding section 7701(a)(4), such corporation shall be treated for purposes of this title as a domestic corporation.Comments Close Comments Permalink

`(b) Tax-Haven CFC- For purposes of this section--Comments Close Comments Permalink

`(1) IN GENERAL- The term `tax-haven CFC' means, with respect to any taxable year, a foreign corporation which--Comments Close Comments Permalink

`(A) was created or organized under the laws of a tax-haven country, andComments Close Comments Permalink

`(B) is a controlled foreign corporation (determined without regard to this section) for an uninterrupted period of 30 days or more during the taxable year.Comments Close Comments Permalink

`(2) EXCEPTION- The term `tax-haven CFC' does not include a foreign corporation for any taxable year if substantially all of its income for the taxable year is derived from the active conduct of trades or businesses within the country under the laws of which the corporation was created or organized.Comments Close Comments Permalink

`(c) Tax-Haven Country- For purposes of this section--Comments Close Comments Permalink

`(1) IN GENERAL- The term `tax-haven country' means any of the following:Comments Close Comments Permalink

---------------------------------------------------------------CommentsClose CommentsPermalink

---------------------------------------------------------------CommentsClose CommentsPermalink

              `Andorra               Guernsey           Panama CommentsClose CommentsPermalink

              Anguilla            Isle of Man            Samoa CommentsClose CommentsPermalink

   Antigua and Barbuda                 Jersey       San Marino CommentsClose CommentsPermalink

                 Aruba                Liberia    Federation of CommentsClose CommentsPermalink

   Commonwealth of the        Principality of    Saint Christ- CommentsClose CommentsPermalink

               Bahamas          Liechtenstein           opher  CommentsClose CommentsPermalink

               Bahrain        Republic of the        and Nevis CommentsClose CommentsPermalink

              Barbados               Maldives      Saint Lucia CommentsClose CommentsPermalink

                Belize                  Malta    Saint Vincent CommentsClose CommentsPermalink

               Bermuda        Republic of the          and the CommentsClose CommentsPermalink

British Virgin Islands       Marshall Islands       Grenadines CommentsClose CommentsPermalink

        Cayman Islands              Mauritius  Republic of the CommentsClose CommentsPermalink

          Cook Islands Principality of Monaco       Seychelles CommentsClose CommentsPermalink

                Cyprus             Montserrat            Tonga CommentsClose CommentsPermalink

   Commonwealth of the      Republic of Nauru Turks and Caicos CommentsClose CommentsPermalink

              Dominica            Netherlands      Republic of CommentsClose CommentsPermalink

             Gibraltar               Antilles          Vanuatu CommentsClose CommentsPermalink

               Grenada                   Niue                  CommentsClose CommentsPermalink

---------------------------------------------------------------CommentsClose CommentsPermalink

`(2) SECRETARIAL AUTHORITY- The Secretary may remove or add a foreign jurisdiction from the list of tax-haven countries under paragraph (1) if the Secretary determines such removal or addition is consistent with the purposes of this section.'.Comments Close Comments Permalink

(b) Conforming Amendment- The table of sections for subchapter C of chapter 80 is amended by adding at the end the following new item:Comments Close Comments Permalink

`Sec. 7875. Controlled foreign corporations in tax havens treated as domestic corporations.'.Comments Close Comments Permalink

(c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2008.Comments Close Comments Permalink

SEC. 202. TAXATION OF INCOME OF CONTROLLED FOREIGN CORPORATIONS ATTRIBUTABLE TO IMPORTED PROPERTY.

(a) General Rule- Subsection (a) of section 954 (defining foreign base company income) is amended by striking `and' at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting `, and', and by adding at the end the following new paragraph:Comments Close Comments Permalink

`(6) imported property income for the taxable year (determined under subsection (j) and reduced as provided in subsection (b)(5)).'.Comments Close Comments Permalink

(b) Definition of Imported Property Income- Section 954 is amended by adding at the end the following new subsection:Comments Close Comments Permalink

`(j) Imported Property Income-Comments Close Comments Permalink

`(1) IN GENERAL- For purposes of subsection (a)(6), the term `imported property income' means income (whether in the form of profits, commissions, fees, or otherwise) derived in connection with--Comments Close Comments Permalink

`(A) manufacturing, producing, growing, or extracting imported property;Comments Close Comments Permalink

`(B) the sale, exchange, or other disposition of imported property; orComments Close Comments Permalink

`(C) the lease, rental, or licensing of imported property.Comments Close Comments Permalink

Such term shall not include any foreign oil and gas extraction income (within the meaning of section 907(c)) or any foreign oil related income (within the meaning of section 907(c)).Comments Close Comments Permalink

`(2) IMPORTED PROPERTY- For purposes of this subsection--Comments Close Comments Permalink

`(A) IN GENERAL- Except as otherwise provided in this paragraph, the term `imported property' means property which is imported into the United States by the controlled foreign corporation or a related person.Comments Close Comments Permalink

`(B) IMPORTED PROPERTY INCLUDES CERTAIN PROPERTY IMPORTED BY UNRELATED PERSONS- The term `imported property' includes any property imported into the United States by an unrelated person if, when such property was sold to the unrelated person by the controlled foreign corporation (or a related person), it was reasonable to expect that--Comments Close Comments Permalink

`(i) such property would be imported into the United States; orComments Close Comments Permalink

`(ii) such property would be used as a component in other property which would be imported into the United States.Comments Close Comments Permalink

`(C) EXCEPTION FOR PROPERTY SUBSEQUENTLY EXPORTED- The term `imported property' does not include any property which is imported into the United States and which--Comments Close Comments Permalink

`(i) before substantial use in the United States, is sold, leased, or rented by the controlled foreign corporation or a related person for direct use, consumption, or disposition outside the United States; orComments Close Comments Permalink

`(ii) is used by the controlled foreign corporation or a related person as a component in other property which is so sold, leased, or rented.Comments Close Comments Permalink

`(D) EXCEPTION FOR CERTAIN AGRICULTURAL COMMODITIES- The term `imported property' does not include any agricultural commodity which is not grown in the United States in commercially marketable quantities.Comments Close Comments Permalink

`(3) DEFINITIONS AND SPECIAL RULES-Comments Close Comments Permalink

`(A) IMPORT- For purposes of this subsection, the term `import' means entering, or withdrawal from warehouse, for consumption or use. Such term includes any grant of the right to use intangible property (as defined in section 936(h)(3)(B)) in the United States.Comments Close Comments Permalink

`(B) UNITED STATES- For purposes of this subsection, the term `United States' includes the Commonwealth of Puerto Rico, the Virgin Islands of the United States, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.Comments Close Comments Permalink

`(C) UNRELATED PERSON- For purposes of this subsection, the term `unrelated person' means any person who is not a related person with respect to the controlled foreign corporation.Comments Close Comments Permalink

`(D) COORDINATION WITH FOREIGN BASE COMPANY SALES INCOME- For purposes of this section, the term `foreign base company sales income' shall not include any imported property income.'.Comments Close Comments Permalink

(c) Separate Application of Limitations on Foreign Tax Credit for Imported Property Income-Comments Close Comments Permalink

(1) IN GENERAL- Paragraph (1) of section 904(d) (relating to separate application of section with respect to certain categories of income) is amended by striking `and' at the end of subparagraph (A), by redesignating subparagraph (B) as subparagraph (C), and by inserting after subparagraph (A) the following new subparagraph:Comments Close Comments Permalink

`(B) imported property income, and'.Comments Close Comments Permalink

(2) IMPORTED PROPERTY INCOME DEFINED- Paragraph (2) of section 904(d) is amended by redesignating subparagraphs (I) and (J) as subparagraphs (J) and (K), respectively, and by inserting after subparagraph (H) the following new subparagraph:Comments Close Comments Permalink

`(I) IMPORTED PROPERTY INCOME- The term `imported property income' means any income received or accrued by any person which is of a kind which would be imported property income (as defined in section 954(j)).'.Comments Close Comments Permalink

(3) CONFORMING AMENDMENT- Clause (ii) of section 904(d)(2)(A) is amended by inserting `or imported property income' after `passive category income'.Comments Close Comments Permalink

(d) Technical Amendments-Comments Close Comments Permalink

(1) Clause (iii) of section 952(c)(1)(B) (relating to certain prior year deficits may be taken into account) is amended--Comments Close Comments Permalink

(A) by redesignating subclauses (II), (III), (IV), and (V) as subclauses (III), (IV), (V), and (VI), andComments Close Comments Permalink

(B) by inserting after subclause (I) the following new subclause:Comments Close Comments Permalink

`(II) imported property income,'.Comments Close Comments Permalink

(2) Paragraph (5) of section 954(b) (relating to deductions to be taken into account) is amended by striking `and the foreign base company oil related income' and inserting `the foreign base company oil related income, and the imported property income'.Comments Close Comments Permalink

(e) Effective Date- The amendments made by this section shall apply to taxable years of foreign corporations beginning after the date of the enactment of this Act, and to taxable years of United States shareholders within which or with which such taxable years of such foreign corporations end.Comments Close Comments Permalink

SEC. 203. MODIFICATION OF EFFECTIVE DATE OF LEASING PROVISIONS OF THE AMERICAN JOBS CREATION ACT OF 2004.

(a) Leases to Foreign Entities- Section 849(b) of the American Jobs Creation Act of 2004 is amended by adding at the end the following new paragraph:Comments Close Comments Permalink

`(5) LEASES TO FOREIGN ENTITIES- In the case of tax-exempt use property leased to a tax-exempt entity which is a foreign person or entity, the amendments made by this part shall apply to taxable years beginning after December 31, 2006, with respect to leases entered into on or before March 12, 2004.'.Comments Close Comments Permalink

(b) Effective Date- The amendment made by this section shall take effect as if included in the enactment of the American Jobs Creation Act of 2004.Comments Close Comments Permalink

SEC. 204. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

(a) In General- Section 7701 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:Comments Close Comments Permalink

`(o) Clarification of Economic Substance Doctrine; etc-Comments Close Comments Permalink

`(1) GENERAL RULES-Comments Close Comments Permalink

`(A) IN GENERAL- In any case in which a court determines that the economic substance doctrine is relevant for purposes of this title to a transaction (or series of transactions), such transaction (or series of transactions) shall have economic substance only if the requirements of this paragraph are met.Comments Close Comments Permalink

`(B) DEFINITION OF ECONOMIC SUBSTANCE- For purposes of subparagraph (A)--Comments Close Comments Permalink

`(i) IN GENERAL- A transaction has economic substance only if--Comments Close Comments Permalink

`(I) the transaction changes in a meaningful way (apart from Federal tax effects) the taxpayer's economic position, andComments Close Comments Permalink

`(II) the taxpayer has a substantial nontax purpose for entering into such transaction and the transaction is a reasonable means of accomplishing such purpose.Comments Close Comments Permalink

In applying subclause (II), a purpose of achieving a financial accounting benefit shall not be taken into account in determining whether a transaction has a substantial nontax purpose if the origin of such financial accounting benefit is a reduction of income tax.Comments Close Comments Permalink

`(ii) SPECIAL RULE WHERE TAXPAYER RELIES ON PROFIT POTENTIAL- A transaction shall not be treated as having economic substance by reason of having a potential for profit unless--Comments Close Comments Permalink

`(I) the present value of the reasonably expected pre-tax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected, andComments Close Comments Permalink

`(II) the reasonably expected pre-tax profit from the transaction exceeds a risk-free rate of return.Comments Close Comments Permalink

`(C) TREATMENT OF FEES AND FOREIGN TAXES- Fees and other transaction expenses and foreign taxes shall be taken into account as expenses in determining pre-tax profit under subparagraph (B)(ii).Comments Close Comments Permalink

`(2) SPECIAL RULES FOR TRANSACTIONS WITH TAX-INDIFFERENT PARTIES-Comments Close Comments Permalink

`(A) SPECIAL RULES FOR FINANCING TRANSACTIONS- The form of a transaction which is in substance the borrowing of money or the acquisition of financial capital directly or indirectly from a tax-indifferent party shall not be respected if the present value of the deductions to be claimed with respect to the transaction is substantially in excess of the present value of the anticipated economic returns of the person lending the money or providing the financial capital. A public offering shall be treated as a borrowing, or an acquisition of financial capital, from a tax-indifferent party if it is reasonably expected that at least 50 percent of the offering will be placed with tax-indifferent parties.Comments Close Comments Permalink

`(B) ARTIFICIAL INCOME SHIFTING AND BASIS ADJUSTMENTS- The form of a transaction with a tax-indifferent party shall not be respected if--Comments Close Comments Permalink

`(i) it results in an allocation of income or gain to the tax-indifferent party in excess of such party's economic income or gain, orComments Close Comments Permalink

`(ii) it results in a basis adjustment or shifting of basis on account of overstating the income or gain of the tax-indifferent party.Comments Close Comments Permalink

`(3) DEFINITIONS AND SPECIAL RULES- For purposes of this subsection--Comments Close Comments Permalink

`(A) ECONOMIC SUBSTANCE DOCTRINE- The term `economic substance doctrine' means the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose.Comments Close Comments Permalink

`(B) TAX-INDIFFERENT PARTY- The term `tax-indifferent party' means any person or entity not subject to tax imposed by subtitle A. A person shall be treated as a tax-indifferent party with respect to a transaction if the items taken into account with respect to the transaction have no substantial impact on such person's liability under subtitle A.Comments Close Comments Permalink

`(C) EXCEPTION FOR PERSONAL TRANSACTIONS OF INDIVIDUALS- In the case of an individual, this subsection shall apply only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.Comments Close Comments Permalink

`(D) TREATMENT OF LESSORS- In applying paragraph (1)(B)(ii) to the lessor of tangible property subject to a lease--Comments Close Comments Permalink

`(i) the expected net tax benefits with respect to the leased property shall not include the benefits of--Comments Close Comments Permalink

`(I) depreciation,Comments Close Comments Permalink

`(II) any tax credit, orComments Close Comments Permalink

`(III) any other deduction as provided in guidance by the Secretary, andComments Close Comments Permalink

`(ii) subclause (II) of paragraph (1)(B)(ii) shall be disregarded in determining whether any of such benefits are allowable.Comments Close Comments Permalink

`(4) OTHER COMMON LAW DOCTRINES NOT AFFECTED- Except as specifically provided in this subsection, the provisions of this subsection shall not be construed as altering or supplanting any other rule of law, and the requirements of this subsection shall be construed as being in addition to any such other rule of law.Comments Close Comments Permalink

`(5) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection. Such regulations may include exemptions from the application of this subsection.'.Comments Close Comments Permalink

(b) Effective Date- The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.Comments Close Comments Permalink

SEC. 205. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

(a) In General- Subchapter A of chapter 68 is amended by inserting after section 6662A the following new section:Comments Close Comments Permalink

`SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

`(a) Imposition of Penalty- If a taxpayer has an noneconomic substance transaction understatement for any taxable year, there shall be added to the tax an amount equal to 40 percent of the amount of such understatement.Comments Close Comments Permalink

`(b) Reduction of Penalty for Disclosed Transactions- Subsection (a) shall be applied by substituting `20 percent' for `40 percent' with respect to the portion of any noneconomic substance transaction understatement with respect to which the relevant facts affecting the tax treatment of the item are adequately disclosed in the return or a statement attached to the return.Comments Close Comments Permalink

`(c) Noneconomic Substance Transaction Understatement- For purposes of this section--Comments Close Comments Permalink

`(1) IN GENERAL- The term `noneconomic substance transaction understatement' means any amount which would be an understatement under section 6662A(b)(1) if section 6662A were applied by taking into account items attributable to noneconomic substance transactions rather than items to which section 6662A would apply without regard to this paragraph.Comments Close Comments Permalink

`(2) NONECONOMIC SUBSTANCE TRANSACTION- The term `noneconomic substance transaction' means any transaction if--Comments Close Comments Permalink

`(A) there is a lack of economic substance (within the meaning of section 7701(o)(1)) for the transaction giving rise to the claimed benefit or the transaction was not respected under section 7701(o)(2), orComments Close Comments Permalink

`(B) the transaction fails to meet the requirements of any similar rule of law.Comments Close Comments Permalink

`(d) Rules Applicable to Compromise of Penalty-Comments Close Comments Permalink

`(1) IN GENERAL- If the 1st letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals has been sent with respect to a penalty to which this section applies, only the Commissioner of Internal Revenue may compromise all or any portion of such penalty.Comments Close Comments Permalink

`(2) APPLICABLE RULES- The rules of paragraphs (2) and (3) of section 6707A(d) shall apply for purposes of paragraph (1).Comments Close Comments Permalink

`(e) Coordination With Other Penalties- Except as otherwise provided in this part, the penalty imposed by this section shall be in addition to any other penalty imposed by this title.Comments Close Comments Permalink

`(f) Cross References-Comments Close Comments Permalink

`(1) For coordination of penalty with understatements under section 6662 and other special rules, see section 6662A(e).Comments Close Comments Permalink

`(2) For reporting of penalty imposed under this section to the Securities and Exchange Commission, see section 6707A(e).'.Comments Close Comments Permalink

(b) Coordination With Other Understatements and Penalties-Comments Close Comments Permalink

(1) The second sentence of section 6662(d)(2)(A) is amended by inserting `and without regard to items with respect to which a penalty is imposed by section 6662B' before the period at the end.Comments Close Comments Permalink

(2) Subsection (e) of section 6662A is amended--Comments Close Comments Permalink

(A) in paragraph (1), by inserting `and noneconomic substance transaction understatements' after `reportable transaction understatements' both places it appears,Comments Close Comments Permalink

(B) in paragraph (2)(A), by inserting `and a noneconomic substance transaction understatement' after `reportable transaction understatement',Comments Close Comments Permalink

(D) in paragraph (2)(C)(i), by inserting `or section 6662B' before the period at the end,Comments Close Comments Permalink

(E) in paragraph (2)(C)(ii), by inserting `and section 6662B' after `This section',Comments Close Comments Permalink

(F) in paragraph (3), by inserting `or noneconomic substance transaction understatement' after `reportable transaction understatement', andComments Close Comments Permalink

(G) by adding at the end the following new paragraph:Comments Close Comments Permalink

`(4) NONECONOMIC SUBSTANCE TRANSACTION UNDERSTATEMENT- For purposes of this subsection, the term `noneconomic substance transaction understatement' has the meaning given such term by section 6662B(c).'.Comments Close Comments Permalink

(3) Subsection (e) of section 6707A is amended--Comments Close Comments Permalink

(A) by striking `or' at the end of subparagraph (B), andComments Close Comments Permalink

(B) by striking subparagraph (C) and inserting the following new subparagraphs:Comments Close Comments Permalink

`(C) is required to pay a penalty under section 6662B with respect to any noneconomic substance transaction, orComments Close Comments Permalink

`(D) is required to pay a penalty under section 6662(h) with respect to any transaction and would (but for section 6662A(e)(2)(C)) have been subject to penalty under section 6662A at a rate prescribed under section 6662A(c) or under section 6662B,'.Comments Close Comments Permalink

(c) Clerical Amendment- The table of sections for part II of subchapter A of chapter 68 is amended by inserting after the item relating to section 6662A the following new item:Comments Close Comments Permalink

`Sec. 6662B. Penalty for understatements attributable to transactions lacking economic substance, etc.'.Comments Close Comments Permalink

(d) Effective Date- The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.Comments Close Comments Permalink

SEC. 206. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS ATTRIBUTABLE TO NONECONOMIC SUBSTANCE TRANSACTIONS.

(a) In General- Section 163(m) (relating to interest on unpaid taxes attributable to nondisclosed reportable transactions) is amended--Comments Close Comments Permalink

(1) by striking `attributable' and all that follows and inserting the following: `attributable to--Comments Close Comments Permalink

`(1) the portion of any reportable transaction understatement (as defined in section 6662A(b)) with respect to which the requirement of section 6664(d)(2)(A) is not met, orComments Close Comments Permalink

`(2) any noneconomic substance transaction understatement (as defined in section 6662B(c)).', andComments Close Comments Permalink

(2) by inserting `And Noneconomic Substance Transactions' in the heading thereof after `Transactions'.Comments Close Comments Permalink

(b) Effective Date- The amendments made by this section shall apply to transactions after the date of the enactment of this Act in taxable years ending after such date.Comments Close Comments Permalink

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U.S. Congress - Text of S.1508 as Introduced in Senate Clean Energy Production Tax Incentives Act of 2007

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S.1508 - Clean Energy Production Tax Incentives Act of 2007

May 24, 2007

SECTION 1. SHORT TITLE; ETC.

TITLE I--CLEAN ENERGY PRODUCTION TAX INCENTIVES

TITLE II--REVENUE PROVISIONS

TITLE I--CLEAN ENERGY PRODUCTION TAX INCENTIVES

SEC. 101. EXTENSION OF AND INCREASE IN RENEWABLE ELECTRICITY PRODUCTION CREDIT.

SEC. 102. MODIFICATIONS TO CREDIT FOR CLEAN RENEWABLE ENERGY BONDS.

SEC. 103. EXTENSION OF QUALIFYING ADVANCED CLEAN COAL PROJECT CREDIT.

SEC. 104. CLEAN COAL ENERGY BONDS.

`SEC. 54A. CREDIT TO HOLDERS OF CLEAN COAL ENERGY BONDS.

SEC. 105. CREDIT FOR CAPTURE AND STORAGE OR USE OF CARBON DIOXIDE.

`SEC. 45O. CREDIT FOR CAPTURE AND STORAGE OR USE OF CARBON DIOXIDE.

SEC. 106. CARBON DIOXIDE CAPTURE BONDS.

`SEC. 54B. CREDIT TO HOLDERS OF CARBON DIOXIDE CAPTURE BONDS.

SEC. 107. INCENTIVES FOR INVESTMENT IN ELECTRIC TRANSMISSION PROPERTY.

`SEC. 45P. ELECTRIC TRANSMISSION PROPERTY INVESTMENT CREDIT.

SEC. 108. ELECTRIC TRANSMISSION PROPERTY BONDS.

`SEC. 54C. CREDIT TO HOLDERS OF ELECTRIC TRANSMISSION PROPERTY BONDS.

SEC. 109. EXTENSION AND MODIFICATION OF INVESTMENT CREDIT FOR QUALIFIED FUEL CELL PROPERTY, QUALIFIED MICROTURBINE PROPERTY, AND SOLAR PROPERTY.

TITLE II--REVENUE PROVISIONS

SEC. 201. TAX TREATMENT OF CONTROLLED FOREIGN CORPORATIONS ESTABLISHED IN TAX HAVENS.

`SEC. 7875. CONTROLLED FOREIGN CORPORATIONS IN TAX HAVENS TREATED AS DOMESTIC CORPORATIONS.

SEC. 202. TAXATION OF INCOME OF CONTROLLED FOREIGN CORPORATIONS ATTRIBUTABLE TO IMPORTED PROPERTY.

SEC. 203. MODIFICATION OF EFFECTIVE DATE OF LEASING PROVISIONS OF THE AMERICAN JOBS CREATION ACT OF 2004.

SEC. 204. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

SEC. 205. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

`SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

SEC. 206. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS ATTRIBUTABLE TO NONECONOMIC SUBSTANCE TRANSACTIONS.

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U.S. Congress - Text of S.1508 as Introduced in Senate Clean Energy Production Tax Incentives Act of 2007

Advanced Search Options

S.1508 - Clean Energy Production Tax Incentives Act of 2007

May 24, 2007

SECTION 1. SHORT TITLE; ETC.

TITLE I--CLEAN ENERGY PRODUCTION TAX INCENTIVES

TITLE II--REVENUE PROVISIONS

TITLE I--CLEAN ENERGY PRODUCTION TAX INCENTIVES

SEC. 101. EXTENSION OF AND INCREASE IN RENEWABLE ELECTRICITY PRODUCTION CREDIT.

SEC. 102. MODIFICATIONS TO CREDIT FOR CLEAN RENEWABLE ENERGY BONDS.

SEC. 103. EXTENSION OF QUALIFYING ADVANCED CLEAN COAL PROJECT CREDIT.

SEC. 104. CLEAN COAL ENERGY BONDS.

`SEC. 54A. CREDIT TO HOLDERS OF CLEAN COAL ENERGY BONDS.

SEC. 105. CREDIT FOR CAPTURE AND STORAGE OR USE OF CARBON DIOXIDE.

`SEC. 45O. CREDIT FOR CAPTURE AND STORAGE OR USE OF CARBON DIOXIDE.

SEC. 106. CARBON DIOXIDE CAPTURE BONDS.

`SEC. 54B. CREDIT TO HOLDERS OF CARBON DIOXIDE CAPTURE BONDS.

SEC. 107. INCENTIVES FOR INVESTMENT IN ELECTRIC TRANSMISSION PROPERTY.

`SEC. 45P. ELECTRIC TRANSMISSION PROPERTY INVESTMENT CREDIT.

SEC. 108. ELECTRIC TRANSMISSION PROPERTY BONDS.

`SEC. 54C. CREDIT TO HOLDERS OF ELECTRIC TRANSMISSION PROPERTY BONDS.

SEC. 109. EXTENSION AND MODIFICATION OF INVESTMENT CREDIT FOR QUALIFIED FUEL CELL PROPERTY, QUALIFIED MICROTURBINE PROPERTY, AND SOLAR PROPERTY.

TITLE II--REVENUE PROVISIONS

SEC. 201. TAX TREATMENT OF CONTROLLED FOREIGN CORPORATIONS ESTABLISHED IN TAX HAVENS.

`SEC. 7875. CONTROLLED FOREIGN CORPORATIONS IN TAX HAVENS TREATED AS DOMESTIC CORPORATIONS.

SEC. 202. TAXATION OF INCOME OF CONTROLLED FOREIGN CORPORATIONS ATTRIBUTABLE TO IMPORTED PROPERTY.

SEC. 203. MODIFICATION OF EFFECTIVE DATE OF LEASING PROVISIONS OF THE AMERICAN JOBS CREATION ACT OF 2004.

SEC. 204. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

SEC. 205. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

`SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

SEC. 206. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS ATTRIBUTABLE TO NONECONOMIC SUBSTANCE TRANSACTIONS.

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