SEC. 710. EXPANSION OF CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE RESOURCES.

(a) EXPANSION OF QUALIFIED ENERGY RESOURCES- Subsection (c) of section 45 (relating to electricity produced from certain renewable resources) is amended to read as follows:

`(c) QUALIFIED ENERGY RESOURCES AND REFINED COAL- For purposes of this section:

`(1) IN GENERAL- The term `qualified energy resources' means--

`(A) wind,

`(B) closed-loop biomass,

`(C) open-loop biomass,

`(D) geothermal energy,

`(E) solar energy,

`(F) small irrigation power, and

`(G) municipal solid waste.

`(2) CLOSED-LOOP BIOMASS- The term `closed-loop biomass' means any organic material from a plant which is planted exclusively for purposes of being used at a qualified facility to produce electricity.

`(3) OPEN-LOOP BIOMASS-

`(A) IN GENERAL- The term `open-loop biomass' means--

`(i) any agricultural livestock waste nutrients, or

`(ii) any solid, nonhazardous, cellulosic waste material which is segregated from other waste materials and which is derived from--

`(I) any of the following forest-related resources: mill and harvesting residues, precommercial thinnings, slash, and brush,

`(II) solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes (other than pressure-treated, chemically-treated, or painted wood wastes), and landscape or right-of-way tree trimmings, but not including municipal solid waste, gas derived from the biodegradation of solid waste, or paper which is commonly recycled, or

`(III) agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.

Such term shall not include closed-loop biomass or biomass burned in conjunction with fossil fuel (cofiring) beyond such fossil fuel required for startup and flame stabilization.

`(B) AGRICULTURAL LIVESTOCK WASTE NUTRIENTS-

`(i) IN GENERAL- The term `agricultural livestock waste nutrients' means agricultural livestock manure and litter, including wood shavings, straw, rice hulls, and other bedding material for the disposition of manure.

`(ii) AGRICULTURAL LIVESTOCK- The term `agricultural livestock' includes bovine, swine, poultry, and sheep.

`(4) GEOTHERMAL ENERGY- The term `geothermal energy' means energy derived from a geothermal deposit (within the meaning of section 613(e)(2)).

`(5) SMALL IRRIGATION POWER- The term `small irrigation power' means power--

`(A) generated without any dam or impoundment of water through an irrigation system canal or ditch, and

`(B) the nameplate capacity rating of which is not less than 150 kilowatts but is less than 5 megawatts.

`(6) MUNICIPAL SOLID WASTE- The term `municipal solid waste' has the meaning given the term `solid waste' under section 2(27) of the Solid Waste Disposal Act (42 U.S.C. 6903).

`(7) REFINED COAL-

`(A) IN GENERAL- The term `refined coal' means a fuel which--

`(i) is a liquid, gaseous, or solid synthetic fuel produced from coal (including lignite) or high carbon fly ash, including such fuel used as a feedstock,

`(ii) is sold by the taxpayer with the reasonable expectation that it will be used for purpose of producing steam,

`(iii) is certified by the taxpayer as resulting (when used in the production of steam) in a qualified emission reduction, and

`(iv) is produced in such a manner as to result in an increase of at least 50 percent in the market value of the refined coal (excluding any increase caused by materials combined or added during the production process), as compared to the value of the feedstock coal.

`(B) QUALIFIED EMISSION REDUCTION- The term `qualified emission reduction' means a reduction of at least 20 percent of the emissions of nitrogen oxide and either sulfur dioxide or mercury released when burning the refined coal (excluding any dilution caused by materials combined or added during the production process), as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of January 1, 2003.'.

(b) EXPANSION OF QUALIFIED FACILITIES-

(1) IN GENERAL- Section 45 is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection:

`(d) QUALIFIED FACILITIES- For purposes of this section:

`(1) WIND FACILITY- In the case of a facility using wind to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service after December 31, 1993, and before January 1, 2006.

`(2) CLOSED-LOOP BIOMASS FACILITY-

`(A) IN GENERAL- In the case of a facility using closed-loop biomass to produce electricity, the term `qualified facility' means any facility--

`(i) owned by the taxpayer which is originally placed in service after December 31, 1992, and before January 1, 2006, or

`(ii) owned by the taxpayer which before January 1, 2006, is originally placed in service and modified to use closed-loop biomass to co-fire with coal, with other biomass, or with both, but only if the modification is approved under the Biomass Power for Rural Development Programs or is part of a pilot project of the Commodity Credit Corporation as described in 65 Fed. Reg. 63052.

`(B) SPECIAL RULES- In the case of a qualified facility described in subparagraph (A)(ii)--

`(i) the 10-year period referred to in subsection (a) shall be treated as beginning no earlier than the date of the enactment of this clause,

`(ii) the amount of the credit determined under subsection (a) with respect to the facility shall be an amount equal to the amount determined without regard to this clause multiplied by the ratio of the thermal content of the closed-loop biomass used in such facility to the thermal content of all fuels used in such facility, and

`(iii) if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) shall be the lessee or the operator of such facility.

`(3) OPEN-LOOP BIOMASS FACILITIES-

`(A) IN GENERAL- In the case of a facility using open-loop biomass to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which--

`(i) in the case of a facility using agricultural livestock waste nutrients--

`(I) is originally placed in service after the date of the enactment of this subclause and before January 1, 2006, and

`(II) the nameplate capacity rating of which is not less than 150 kilowatts, and

`(ii) in the case of any other facility, is originally placed in service before January 1, 2006.

`(B) CREDIT ELIGIBILITY- In the case of any facility described in subparagraph (A), if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) shall be the lessee or the operator of such facility.

`(4) GEOTHERMAL OR SOLAR ENERGY FACILITY- In the case of a facility using geothermal or solar energy to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2006. Such term shall not include any property described in section 48(a)(3) the basis of which is taken into account by the taxpayer for purposes of determining the energy credit under section 48.

`(5) SMALL IRRIGATION POWER FACILITY- In the case of a facility using small irrigation power to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2006.

`(6) LANDFILL GAS FACILITIES- In the case of a facility producing electricity from gas derived from the biodegradation of municipal solid waste, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2006.

`(7) TRASH COMBUSTION FACILITIES- In the case of a facility which burns municipal solid waste to produce electricity, the term `qualified facility' means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before January 1, 2006.

`(8) REFINED COAL PRODUCTION FACILITY- The term `refined coal production facility' means a facility which is placed in service after the date of the enactment of this paragraph and before January 1, 2009.'.

(2) RULES FOR REFINED COAL PRODUCTION FACILITIES- Subsection (e) of section 45, as so redesignated, is amended by adding at the end the following new paragraph:

`(8) REFINED COAL PRODUCTION FACILITIES-

`(A) DETERMINATION OF CREDIT AMOUNT- In the case of a producer of refined coal, the credit determined under this section (without regard to this paragraph) for any taxable year shall be increased by an amount equal to $4.375 per ton of qualified refined coal--

`(i) produced by the taxpayer at a refined coal production facility during the 10-year period beginning on the date the facility was originally placed in service, and

`(ii) sold by the taxpayer--

`(I) to an unrelated person, and

`(II) during such 10-year period and such taxable year.

`(B) PHASEOUT OF CREDIT- The amount of the increase determined under subparagraph (A) shall be reduced by an amount which bears the same ratio to the amount of the increase (determined without regard to this subparagraph) as--

`(i) the amount by which the reference price of fuel used as a feedstock (within the meaning of subsection (c)(7)(A)) for the calendar year in which the sale occurs exceeds an amount equal to 1.7 multiplied by the reference price for such fuel in 2002, bears to

`(ii) $8.75.

`(C) APPLICATION OF RULES- Rules similar to the rules of the subsection (b)(3) and paragraphs (1) through (5) and (9) of this subsection shall apply for purposes of determining the amount of any increase under this paragraph.'.

(3) CONFORMING AMENDMENTS-

(A) Section 45(e), as so redesignated, is amended by striking `subsection (c)(3)(A)' in paragraph (7)(A)(i) and inserting `subsection (d)(1)'.

(B) The heading of section 45 and the item relating to such section in the table of sections for subpart D of part IV of subchapter A of chapter 1 are each amended by inserting before the period at the end `, etc'.

(C) Paragraph (2) of section 45(b) is amended by striking `The 1.5 cent amount' and all that follows through `paragraph (1)' and inserting `The 1.5 cent amount in subsection (a), the 8 cent amount in paragraph (1), the $4.375 amount in subsection (e)(8)(A), and in subsection (e)(8)(B)(i) the reference price of fuel used as a feedstock (within the meaning of subsection (c)(7)(A)) in 2002'.

(c) SPECIAL CREDIT RATE AND PERIOD FOR ELECTRICITY PRODUCED AND SOLD AFTER ENACTMENT DATE- Section 45(b) is amended by adding at the end the following new paragraph:

`(4) CREDIT RATE AND PERIOD FOR ELECTRICITY PRODUCED AND SOLD FROM CERTAIN FACILITIES-

`(A) CREDIT RATE- In the case of electricity produced and sold in any calendar year after 2003 at any qualified facility described in paragraph (3), (5), (6), or (7) of subsection (d), the amount in effect under subsection (a)(1) for such calendar year (determined before the application of the last sentence of paragraph (2) of this subsection) shall be reduced by one-half.

`(B) CREDIT PERIOD-

`(i) IN GENERAL- Except as provided in clause (ii), in the case of any facility described in paragraph (3), (4), (5), (6), or (7) of subsection (d), the 5-year period beginning on the date the facility was originally placed in service shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).

`(ii) CERTAIN OPEN-LOOP BIOMASS FACILITIES- In the case of any facility described in subsection (d)(3)(A)(ii) placed in service before the date of the enactment of this paragraph, the 5-year period beginning on the date of the enactment of this Act shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).'.

(d) COORDINATION WITH OTHER CREDITS- Section 45(e), as redesignated and amended by this section, is amended by inserting after paragraph (8) the following new paragraph:

`(9) COORDINATION WITH CREDIT FOR PRODUCING FUEL FROM A NONCONVENTIONAL SOURCE- The term `qualified facility' shall not include any facility the production from which is allowed as a credit under section 29 for the taxable year or any prior taxable year.'.

(e) COORDINATION WITH SECTION 48- Section 48(a)(3) (defining energy property) is amended by adding at the end the following new sentence: `Such term shall not include any property which is part of a facility the production from which is allowed as a credit under section 45 for the taxable year or any prior taxable year.'.

(f) ELIMINATION OF CERTAIN CREDIT REDUCTIONS- Section 45(b)(3) (relating to credit reduced for grants, tax-exempt bonds, subsidized energy financing, and other credits) is amended--

(1) by inserting `the lesser of 1/2 or' before `a fraction' in the matter preceding subparagraph (A), and

(2) by adding at the end the following new sentence: `This paragraph shall not apply with respect to any facility described in subsection (d)(2)(A)(ii).'.

(g) EFFECTIVE DATES-

(1) IN GENERAL- Except as otherwise provided in this subsection, the amendments made by this section shall apply to electricity produced and sold after the date of the enactment of this Act, in taxable years ending after such date.

(2) CERTAIN BIOMASS FACILITIES- With respect to any facility described in section 45(d)(3)(A)(ii) of the Internal Revenue Code of 1986, as added by subsection (b)(1), which is placed in service before the date of the enactment of this Act, the amendments made by this section shall apply to electricity produced and sold after December 31, 2004, in taxable years ending after such date.

(3) CREDIT RATE AND PERIOD FOR NEW FACILITIES- The amendments made by subsection (c) shall apply to electricity produced and sold after December 31, 2004, in taxable years ending after such date.

(4) NONAPPLICATION OF AMENDMENTS TO PREEFFECTIVE DATE POULTRY WASTE FACILITIES- The amendments made by this section shall not apply with respect to any poultry waste facility (within the meaning of section 45(c)(3)(C), as in effect on the day before the date of the enactment of this Act) placed in service before January 1, 2004.

(5) REFINED COAL PRODUCTION FACILITIES- Section 45(e)(8) of the Internal Revenue Code of 1986, as added by this section, shall apply to refined coal produced and sold after the date of the enactment of this Act.

SEC. 711. CERTAIN BUSINESS RELATED CREDITS ALLOWED AGAINST REGULAR AND MINIMUM TAX.

(a) IN GENERAL- Subsection (c) of section 38 (relating to limitation based on amount of tax) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph:

`(4) SPECIAL RULES FOR SPECIFIED CREDITS-

`(A) IN GENERAL- In the case of specified credits--

`(i) this section and section 39 shall be applied separately with respect to such credits, and

`(ii) in applying paragraph (1) to such credits--

`(I) the tentative minimum tax shall be treated as being zero, and

`(II) the limitation under paragraph (1) (as modified by subclause (I)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the specified credits).

`(B) SPECIFIED CREDITS- For purposes of this subsection, the term `specified credits' includes--

`(i) for taxable years beginning after December 31, 2004, the credit determined under section 40,

`(ii) the credit determined under section 45 to the extent that such credit is attributable to electricity or refined coal produced--

`(I) at a facility which is originally placed in service after the date of the enactment of this paragraph, and

`(II) during the 4-year period beginning on the date that such facility was originally placed in service'.

(b) CONFORMING AMENDMENTS- Paragraph (2)(A)(ii)(II) and (3)(A)(ii)(II) of section 38(c) are each amended by inserting `or the specified credits' after `employee credit'.

(c) EFFECTIVE DATE- Except as otherwise provided, the amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.