Energy Sector Innovation Credit Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 5523 To amend the Internal Revenue Code of 1986 to provide investment and production tax credits for emerging energy technologies, and for other purposes. IN THE HOUSE OF REPRESENTATIVES DECEMBER 19, 2019 Mr. REED (for himself, Mr. PANETTA, Mr. LAHOOD, Mr. SUOZZI, Mr. GOTTHEIMER, and Mr. SCHWEIKERT) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to provide investment and production tax credits for emerging en- ergy technologies, 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 ‘‘Energy Sector Innova- 4 tion Credit Act of 2019’’. 5 SEC. 2. PURPOSES. 6 The energy sector innovation credit is a technology- 7 neutral approach that would leverage new private invest- 8 ment in nascent clean technologies, help cutting-edge tech- 9 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 5523 IH nologies break into the market, and then naturally 1 phasedown as each technology proves commercial viability. 2 It could bring about the new technologies needed to quick- 3 ly and cheaply reduce global emissions. The innovation 4 ESIC incentivizes is key to a strong energy supply plus 5 will help address the climate and environmental challenge 6 of this generation. The United States must lead on clean 7 energy technology development. 8 SEC. 3. INVESTMENT CREDIT FOR EMERGING ENERGY 9 TECHNOLOGY. 10 (a) IN GENERAL.—Subpart E of part IV of sub- 11 chapter A of chapter 1 of the Internal Revenue Code of 12 1986 is amended by inserting after section 48C the fol- 13 lowing new section: 14 ‘‘SEC. 48D. EMERGING ENERGY TECHNOLOGY CREDIT. 15 ‘‘(a) IN GENERAL.—For purposes of section 46, the 16 emerging energy technology credit for any taxable year is 17 an amount equal to 30 percent of the basis of any qualified 18 emerging energy property placed in service by the taxpayer 19 during such taxable year. 20 ‘‘(b) CERTAIN QUALIFIED PROGRESS EXPENDITURE 21 RULES MADE APPLICABLE.—Rules similar to the rules of 22 subsections (c)(4) and (d) of section 46 (as in effect on 23 the day before the enactment of the Revenue Reconcili- 24 ation Act of 1990) shall apply for purposes of this section. 25 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 5523 IH ‘‘(c) QUALIFIED EMERGING ENERGY PROPERTY.— 1 For purposes of this section— 2 ‘‘(1) IN GENERAL.—The term ‘qualified emerg- 3 ing energy property’ means property which is con- 4 structed, reconstructed, erected, or acquired by the 5 taxpayer, and the original use of which commences 6 with the taxpayer, which is— 7 ‘‘(A) a qualified production facility (as de- 8 fined in section 45T(d), determined without re- 9 gard to paragraph (2) thereof) which is a tier 10 1 facility (as defined in section 45T(e)(1)), or 11 ‘‘(B) property which is placed in service at 12 and used in connection with an existing electric 13 generating facility which is a point source of air 14 pollutants and which, with respect to such facil- 15 ity— 16 ‘‘(i) contains equipment which can 17 separate and sequester— 18 ‘‘(I) not less than 60 percent of 19 such facility’s maximum hourly car- 20 bon oxide emission rate, and 21 ‘‘(II) not less than 100,000 met- 22 ric tons of qualified carbon oxide (as 23 defined in section 45Q(c)) annually, 24 and 25 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 5523 IH ‘‘(ii) places such carbon oxide in se- 1 cure geological storage (as determined 2 under section 45Q(f)(2)). 3 ‘‘(2) DENIAL OF DOUBLE BENEFIT.—Such 4 term shall not include— 5 ‘‘(A) any property which, 6 ‘‘(B) property any portion of which, or 7 ‘‘(C) property placed in service at and used 8 in connection with a facility which, 9 has been treated as a qualified facility for purposes 10 of section 45(d), as an advanced nuclear power facil- 11 ity for purposes of section 45J, as a qualified facility 12 for purposes of section 45Q, as a qualified produc- 13 tion facility for purposes of section 45T, as energy 14 property for purposes of section 48, or as a qualified 15 investment for purposes of section 48A, 48B, or 16 48C, for any taxable year. 17 ‘‘(3) POINT SOURCE.—For purposes of para- 18 graph (1)(B), the term ‘point source’ means a mega- 19 watt-scale, stationary and non-mobile, identifiable 20 source of emissions that releases pollutants into the 21 atmosphere. 22 ‘‘(d) FIRST OF ITS KIND TECHNOLOGY.— 23 ‘‘(1) IN GENERAL.—In the case of any qualified 24 emerging energy property which is the first of its 25 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 5523 IH kind, subsection (a) shall be applied by substituting 1 ‘40’ for ‘30’. 2 ‘‘(2) FIRST OF ITS KIND.—Property shall be 3 treated as the first of its kind if such property is 1 4 of the first 3 original demonstrations in the United 5 States of a megawatt-scale electric power generation 6 facility which generates revenue from sales of elec- 7 tric power to an unrelated person (within the mean- 8 ing of section 45(e)(4)). 9 ‘‘(3) DETERMINATION.— 10 ‘‘(A) IN GENERAL.—The Secretary, in con- 11 sultation with the Secretary of Energy, shall de- 12 velop a process to determine whether qualified 13 emerging energy property is first of its kind. 14 Such process shall include a certification, at the 15 request of the taxpayer before the commence- 16 ment of construction, that the property will be 17 treated as first of its kind. 18 ‘‘(B) EFFECTIVE PERIOD OF CERTIFI- 19 CATION.—Except as provided by the Secretary, 20 a certification granted under subparagraph (A) 21 with respect to any property shall be in effect 22 for the period, not to exceed 5 years, beginning 23 on the date of the certification and ending on 24 the date construction commences with respect 25 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 5523 IH to the property. If construction does not com- 1 mence within the 5-year period beginning on 2 the date of the certification, the property shall 3 not be treated as first of its kind unless the cer- 4 tification is renewed. 5 ‘‘(e) TRANSFER OF CREDIT BY CERTAIN PUBLIC EN- 6 TITIES.— 7 ‘‘(1) IN GENERAL.—If, with respect to a credit 8 under subsection (a) for any taxable year— 9 ‘‘(A) a qualified public entity would be the 10 taxpayer (but for this paragraph), and 11 ‘‘(B) such entity elects the application of 12 this paragraph for such taxable year with re- 13 spect to all (or any portion specified in such 14 election) of such credit, the eligible project part- 15 ner specified in such election, and not the quali- 16 fied public entity, shall be treated as the tax- 17 payer for purposes of this title with respect to 18 such credit (or such portion thereof). 19 ‘‘(2) DEFINITIONS.—For purposes of this sub- 20 section— 21 ‘‘(A) QUALIFIED PUBLIC ENTITY.—The 22 term ‘qualified public entity’ means— 23 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 5523 IH ‘‘(i) a Federal, State, or local govern- 1 ment entity, or any political subdivision, 2 agency, or instrumentality thereof, 3 ‘‘(ii) a mutual or cooperative electric 4 company described in section 501(c)(12) or 5 1381(a)(2), or 6 ‘‘(iii) a not-for-profit electric utility 7 which had or has received a loan or loan 8 guarantee under the Rural Electrification 9 Act of 1936. 10 ‘‘(B) ELIGIBLE PROJECT PARTNER.—The 11 term ‘eligible project partner’ means any person 12 who— 13 ‘‘(i) is responsible for, or participates 14 in, the design or construction of the quali- 15 fied emerging energy property to which the 16 credit under subsection (a) relates, 17 ‘‘(ii) is a financial institution pro- 18 viding financing for the construction or op- 19 eration of such property (other than fi- 20 nancing provided in connection with be- 21 coming eligible for the credit under this 22 section by reason of this subsection), or 23 ‘‘(iii) has an ownership interest in 24 such property. 25 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 5523 IH ‘‘(3) SPECIAL RULES.— 1 ‘‘(A) APPLICATION TO PARTNERSHIPS.—In 2 the case of a credit under subsection (a) which 3 is determined at the partnership level— 4 ‘‘(i) for purposes of paragraph (1)(A), 5 a qualified public entity shall be treated as 6 the taxpayer with respect to such entity’s 7 distributive share of such credit, and 8 ‘‘(ii) the term ‘eligible project partner’ 9 shall include any partner of the partner- 10 ship. 11 ‘‘(B) TAXABLE YEAR IN WHICH CREDIT 12 TAKEN INTO ACCOUNT.—In the case of any 13 credit (or portion thereof) with respect to which 14 an election is made under paragraph (1), such 15 credit shall be taken into account in the first 16 taxable year of the eligible project partner end- 17 ing with, or after, the qualified public entity’s 18 taxable year with respect to which the credit 19 was determined. 20 ‘‘(C) TREATMENT OF TRANSFER UNDER 21 PRIVATE USE RULES.—For purposes of section 22 141(b)(1), any benefit derived by an eligible 23 project partner in connection with an election 24 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 5523 IH under this subsection shall not be taken into ac- 1 count as a private business use. 2 ‘‘(f) CERTAIN RULES NOT APPLICABLE.—Para- 3 graphs (3) and (4) of section 50(d) shall not apply for 4 purposes of this section.’’. 5 (b) SPECIAL RULE FOR PROCEEDS OF TRANSFERS 6 FOR MUTUAL OR COOPERATIVE ELECTRIC COMPANIES.— 7 Section 501(c)(12)(I) of such Code is amended by insert- 8 ing ‘‘or 48D(e)’’ after ‘‘section 45J(e)(1)’’. 9 (c) CONFORMING AMENDMENTS.— 10 (1) Section 46 of such Code is amended by 11 striking ‘‘and’’ at the end of paragraph (5), by strik- 12 ing the period at the end of paragraph (6) and in- 13 serting ‘‘, and’’, and by adding at the end the fol- 14 lowing new paragraph: 15 ‘‘(7) the emerging energy technology credit.’’. 16 (2) Section 49(a)(1)(C) of such Code is amend- 17 ed by striking ‘‘and’’ at the end of clause (iv), by 18 striking the period at the end of clause (v) and in- 19 serting ‘‘, and’’, and by adding at the end the fol- 20 lowing new clause: 21 ‘‘(vi) the basis of any qualified emerg- 22 ing energy property (as defined in section 23 48D(c)(1)).’’. 24 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 5523 IH (3) The table of sections for subpart E of part 1 IV of subchapter A of chapter 1 of such Code is 2 amended by inserting after the item relating to sec- 3 tion 48C the following new item: 4 ‘‘Sec. 48D. Emerging energy technology credit.’’. (d) EFFECTIVE DATE.—The amendments made by 5 this section shall apply to property placed in service in 6 taxable years beginning after the date of the enactment 7 of this Act, under rules similar to the rules of section 8 48(m) of the Internal Revenue Code of 1986 (as in effect 9 on the day before the date of the enactment of the Rev- 10 enue Reconciliation Act of 1990). 11 SEC. 4. PRODUCTION CREDIT FOR EMERGING ENERGY 12 TECHNOLOGY. 13 (a) IN GENERAL.—Subpart D of part IV of sub- 14 chapter A of chapter 1 of the Internal Revenue Code of 15 1986 is amended by adding at the end the following new 16 section: 17 ‘‘SEC. 45T. ELECTRICITY PRODUCED FROM EMERGING EN- 18 ERGY TECHNOLOGY. 19 ‘‘(a) GENERAL RULE.—For purposes of section 38, 20 the emerging energy technology production credit deter- 21 mined under this section for any taxable year beginning 22 in the credit period with respect to a qualified production 23 facility of the taxpayer is an amount equal to the applica- 24 ble percentage of the lesser of— 25 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 5523 IH ‘‘(1) the annual gross receipts of the taxpayer 1 from the sale of electricity generated at the qualified 2 production facility to an unrelated person (within 3 the meaning of section 45(e)(4)) during such taxable 4 year, or 5 ‘‘(2) the product of— 6 ‘‘(A) the national average wholesale price 7 of a kilowatt hour of electricity in the preceding 8 taxable year, as determined by the Secretary in 9 consultation with the Administrator of the En- 10 ergy Information Administration, and 11 ‘‘(B) the number of kilowatt hours of elec- 12 tricity produced at the qualified production fa- 13 cility and sold to an unrelated person (within 14 the meaning of section 45(e)(4)) during the tax- 15 able year. 16 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 17 subsection (a), the applicable percentage is— 18 ‘‘(1) in the case of a tier 1 facility, 60 percent, 19 ‘‘(2) in the case of a tier 2 facility, 45 percent, 20 ‘‘(3) in the case of a tier 3 facility, 30 percent, 21 and 22 ‘‘(4) in the case of any other facility, zero per- 23 cent. 24 VerDate Sep 11 2014 16:16 Dec 29, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 5523 IH ‘‘(c) CREDIT PERIOD.—For purposes of this section, 1 the credit period with respect to any qualified production 2 facility is the 10-year period beginning with the date the 3 facility was originally placed in service. 4 ‘‘(d) QUALIFIED PRODUCTION FACILITY.—For pur- 5 poses of this section— 6 ‘‘(1) IN GENERAL.—The term ‘qualified produc- 7 tion facility’ means any electric generating facility 8 which is certified by the Secretary, which is located 9 in the United States or a possession of the United 10 States (as such terms are used in section 638), and 11 which utilizes— 12 ‘‘(A) any power conversion fuel-based tech- 13 nology which captures and sequesters at least 14 60 percent of the produced carbon oxide, 15 ‘‘(B) any reactor design licensed by the 16 Nuclear Regulatory Commission which produces 17 electricity through nuclear fission or a fusion 18 chain reaction and which— 19 ‘‘(i) reduces the high-level radio [Text truncated for display. 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