Sustainable Skies Act

I 117TH CONGRESS 1ST SESSION H. R. 3440 To amend the Internal Revenue Code of 1986 to provide a tax credit for sustainable aviation fuel, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MAY 20, 2021 Mr. SCHNEIDER (for himself, Mr. KILDEE, and Ms. BROWNLEY) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to provide a tax credit for sustainable aviation fuel, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Sustainable Skies 4 Act’’. 5 SEC. 2. SUSTAINABLE AVIATION FUEL CREDIT. 6 (a) IN GENERAL.—Subpart D of part IV of sub- 7 chapter A of chapter 1 of the Internal Revenue Code of 8 1986 is amended by inserting after section 40A the fol- 9 lowing new section: 10 VerDate Sep 11 2014 05:30 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3440.IH H3440 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3440 IH ‘‘SEC. 40B. SUSTAINABLE AVIATION FUEL CREDIT. 1 ‘‘(a) IN GENERAL.— 2 ‘‘(1) CREDIT AMOUNT.—For purposes of sec- 3 tion 38, the sustainable aviation fuel credit for the 4 taxable year is, with respect to each gallon of sus- 5 tainable aviation fuel which is used by the taxpayer 6 in the production of a qualified mixture— 7 ‘‘(A) a base credit amount of $1.50, plus 8 ‘‘(B) the applicable supplementary credit 9 amount. 10 ‘‘(2) APPLICABLE SUPPLEMENTARY CREDIT 11 AMOUNT.— 12 ‘‘(A) IN GENERAL.—For purposes of para- 13 graph (1), the applicable supplementary credit 14 amount is $0.01 for every percentage point 15 above 50 percent for which the sustainable avia- 16 tion fuel is certified under subsection (f) to re- 17 duce emissions in comparison with petroleum- 18 based jet fuel as described in subsections 19 (d)(2)(A) or (d)(2)(B). 20 ‘‘(B) MAXIMUM SUPPLEMENTARY CREDIT 21 AMOUNT.—For purposes of subparagraph (A), 22 the maximum applicable supplementary credit 23 amount allowable is $0.50. 24 ‘‘(3) 40A EXCEPTION.—If the biodiesel fuels 25 credit under section 40A is not in effect for a tax- 26 VerDate Sep 11 2014 05:30 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3440.IH H3440 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3440 IH able year, paragraph (1)(A) shall by applied by sub- 1 stituting ‘$1.15’ for ‘$1.50’. 2 ‘‘(b) QUALIFIED MIXTURE.—For purposes of this 3 section, the term ‘qualified mixture’ means a mixture of 4 sustainable aviation fuel and kerosene, which— 5 ‘‘(1) is sold by the taxpayer producing such 6 mixture for use in an aircraft that has fuel uplift in 7 the United States, or 8 ‘‘(2) is used— 9 ‘‘(A) by the taxpayer producing such mix- 10 ture, and 11 ‘‘(B) in an aircraft that has fuel uplift in 12 the United States. 13 ‘‘(c) SALE OR USE MUST BE IN TRADE OR BUSI- 14 NESS, ETC.—Sustainable aviation fuel used in the produc- 15 tion of a qualified mixture shall be taken into account— 16 ‘‘(1) only if the sale or use described in sub- 17 section (b) is in a trade or business of the taxpayer, 18 and 19 ‘‘(2) for the taxable year in which such sale or 20 use occurs. 21 ‘‘(d) SUSTAINABLE AVIATION FUEL.—For purposes 22 of this section, the term ‘sustainable aviation fuel’ means 23 liquid fuel— 24 ‘‘(1) that— 25 VerDate Sep 11 2014 05:30 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3440.IH H3440 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3440 IH ‘‘(A) consists of synthesized hydrocarbons, 1 ‘‘(B) meets the requirements of— 2 ‘‘(i) ASTM International Standard 3 D7566, or 4 ‘‘(ii) the Fischer Tropsch provisions of 5 ASTM International Standard D1655, 6 Annex A1, and 7 ‘‘(C) is derived from biomass (as such term 8 is defined in section 45K(c)(3)), waste streams, 9 renewable energy sources, or gaseous carbon ox- 10 ides, 11 ‘‘(D) is not derived from palm fatty acid 12 distillates, and 13 ‘‘(2) that achieves at least a 50 percent lifecycle 14 greenhouse gas emissions reduction in comparison 15 with petroleum-based jet fuel, as determined by a 16 test that shows— 17 ‘‘(A) the fuel production pathway achieves 18 at least a 50 percent reduction of the aggregate 19 attributional core lifecycle emissions and the 20 positive induced land use change values under 21 the lifecycle methodology for sustainable avia- 22 tion fuels adopted by the International Civil 23 Aviation Organization with the agreement of 24 the United States, or 25 VerDate Sep 11 2014 05:30 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3440.IH H3440 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 3440 IH ‘‘(B) the fuel production pathway achieves 1 at least a 50 percent reduction of the aggregate 2 attributional core lifecycle greenhouse gas emis- 3 sions values and the positive induced land use 4 change values under another methodology that 5 the Secretary, in consultation with the Adminis- 6 trator of the Environmental Protection Agency, 7 determines is— 8 ‘‘(i) reflective of the latest scientific 9 understanding of lifecycle greenhouse gas 10 emissions, and 11 ‘‘(ii) as stringent as the requirement 12 under subparagraph (A). 13 ‘‘(e) TIME LIMIT FOR ADOPTION OF NEW SUSTAIN- 14 ABLE AVIATION FUEL EMISSIONS REDUCTION TEST.— 15 For purposes of subparagraph (B) of subsection (d)(2), 16 the Secretary, in consultation with the Administrator of 17 the Environmental Protection Agency, shall, within 24 18 months after the date of the enactment of this section, 19 adopt at least one methodology for testing lifecycle green- 20 house gas emissions that meets the requirements of such 21 subparagraph. 22 ‘‘(f) CERTIFICATION REQUIREMENTS.— 23 ‘‘(1) IN GENERAL.—No credit shall be allowed 24 under subsection (a) unless the taxpayer meets cer- 25 VerDate Sep 11 2014 05:30 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3440.IH H3440 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 3440 IH tification requirements demonstrating the sustain- 1 able aviation fuel conforms with one of the lifecycle 2 greenhouse gas emissions reduction tests under sub- 3 section (d)(2). 4 ‘‘(2) CERTIFICATION REQUIREMENT FOR TEST 5 IN (D)(2)(A).—For purposes of paragraph (1), with 6 respect to certifications based on the test under sub- 7 paragraph (A) of subsection (d)(2), the taxpayer 8 shall obtain from the fuel producer a certification 9 from a sustainability certification scheme approved 10 by the International Civil Aviation Organization 11 demonstrating that the fuel conforms with the Car- 12 bon Offsetting and Reduction Scheme for Inter- 13 national Aviation’s sustainability criteria and the 14 traceability and information transmission require- 15 ments approved by the International Civil Aviation 16 Organization with the agreement of the United 17 States. 18 ‘‘(3) CERTIFICATION REQUIREMENTS FOR TEST 19 IN (D)(2)(B).—For purposes of paragraph (1), with 20 respect to certifications based on the test under sub- 21 paragraph (B) of subsection (d)(2)— 22 ‘‘(A) the taxpayer shall obtain from the 23 fuel producer a certification that the fuel has 24 been determined by the Environmental Protec- 25 VerDate Sep 11 2014 05:30 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3440.IH H3440 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 3440 IH tion Agency to qualify under the requirements 1 of such subparagraph, and 2 ‘‘(B) the taxpayer shall obtain from the 3 fuel producer an additional certification that 4 the fuel conforms with the sustainability criteria 5 and the traceability and information trans- 6 mission requirements that the Secretary, in 7 consultation with the Administrator of the En- 8 vironmental Protection Agency, determines are 9 equivalent with those necessary to claim emis- 10 sions reductions from sustainable aviation fuel 11 use under the Carbon Offsetting and Reduction 12 Scheme for International Aviation adopted by 13 the International Civil Aviation Organization 14 with the agreement of the United States. 15 ‘‘(g) TERMINATION.—This section shall not apply to 16 any sale or use after December 31, 2031.’’. 17 (b) CREDIT MADE PART OF GENERAL BUSINESS 18 CREDIT.— Section 38(b) (relating to current year busi- 19 ness credit) is amended by striking ‘‘plus’’ at the end of 20 paragraph (32), by striking the period at the end of para- 21 graph (33) and inserting ‘‘, plus’’, and by inserting after 22 paragraph (33) the following new paragraph: 23 ‘‘(34) the sustainable aviation fuel credit deter- 24 mined under section 40B.’’. 25 VerDate Sep 11 2014 05:30 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3440.IH H3440 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 3440 IH (c) CONFORMING AMENDMENT.—Section 40A(f) of 1 such Code is amended by striking paragraph (4). 2 (d) EFFECTIVE DATE.—The amendments made by 3 this section shall apply to taxable years ending after the 4 date of the enactment of this Act. 5 Æ VerDate Sep 11 2014 05:30 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\H3440.IH H3440 kjohnson on DSK79L0C42PROD with BILLS