1. Short title
This Act may be cited as the “Agriculture Environmental Stewardship Act of 2019”.
Agriculture Environmental Stewardship Act of 2019
A BILL
To amend the Internal Revenue Code of 1986 to make qualified biogas property and qualified manure resource recovery property eligible for the energy credit and to permit renewable energy bonds to finance qualified biogas property, and for other purposes.
2. Findings
Congress finds the following:
Incentives and encouragement for the conservation and appropriate handling of nutrients contained in organic matter are necessary.
Biogas systems will save Federal, State, and local taxpayers money by converting waste into useful products, such as fuel, fertilizer, thermal heat, feedstock for hydrogen fuel cells, and renewable chemicals.
Manure resource recovery systems will save Federal, State, and local taxpayers money by recovering the nutrients contained in organic matter from their source, rather than recovering the nutrients after they have entered landfills or waterways.
3. Energy credit for qualified biogas property and qualified manure resource recovery property
In General— Section 48(a)(3)(A) of the Internal Revenue Code of 1986 is amended by striking “or” at the end of clause (vi) and by adding at the end the following new clauses:
“(viii) qualified biogas property, or
“(ix) qualified manure resource recovery property,”
30-Percent Credit— Section 48(a)(2)(A)(i) of such Code is amended by striking “and” at the end of subclause (III), by striking “and” at the end of subclause (IV), and by adding at the end the following new subclauses:
“(V) qualified biogas property, and
“(VI) qualified manure resource recovery property, and”
Definitions— Section 48(c) of such Code is amended by adding at the end the following new paragraphs:
“(5) Qualified biogas property
“(A) In general—The term qualified biogas property means property comprising a system which—
“(i) uses anaerobic digesters, or other biological, chemical, thermal, or mechanical processes (alone or in combination), to convert biomass (as defined in section 45K(c)(3)) into a gas which consists of not less than 52 percent methane, and
“(ii) captures such gas for use as a fuel.
“(B) Inclusion of certain cleaning and conditioning equipment—Such term shall include any property which cleans and conditions the gas referred to in subparagraph (A) for use as a fuel.
“(C) Termination—No credit shall be determined under this section with respect to any qualified biogas property for any period after December 31, 2021.
“(6) Qualified manure resource recovery property
“(A) In general—The term qualified manure resource recovery property means property comprising a system which uses physical, biological, chemical, thermal, or mechanical processes to recover the nutrients nitrogen and phosphorus from a non-treated digestate or animal manure by reducing or separating at least 50 percent of the concentration of such nutrients, excluding any reductions during the incineration, storage, composting, or field application of the non-treated digestate or animal manure.
“(B) Inclusion of certain processing equipment—Such term shall include—
“(i) any property which is used to recover the nutrients referred to in subparagraph (A), such as—
“(I) biological reactors,
“(II) crystallizers,
“(III) reverse osmosis membranes and other water purifiers,
“(IV) evaporators,
“(V) distillers,
“(VI) decanter centrifuges, and
“(VII) equipment that facilitates the process of dissolved air flotation, ammonia stripping, gasification, or ozonation, and
“(ii) any thermal drier which treats the nutrients recovered by the processes referred to in subparagraph (A).
“(C) Termination—No credit shall be determined under this section with respect to any qualified manure resource recovery property for any period after December 31, 2021.”
Denial of Double Benefit for Qualified Biogas Property— Section 45(e) of such Code is amended by adding at the end the following new paragraph:
“(12) Coordination with energy credit for qualified biogas property—The term qualified facility shall not include any facility which produces electricity from gas produced by qualified biogas property (as defined in section 48(c)(5)) if a credit is determined under section 48 with respect to such property for the taxable year or any prior taxable year.”
Effective Date— The amendments made by this section shall apply to periods after December 31, 2018, in taxable years ending after such date, under rules similar to the rules of section 48(m) of such Code (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).
4. Renewable energy bonds relating to biogas property and manure resource recovery property
In General— Part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following:
“H Nonrefundable credit to holders of certain bonds
“54. Credit to holders of qualified renewable energy bonds
“(a) Allowance of Credit—If a taxpayer holds a qualified renewable energy bond on one or more credit allowance dates of the bond 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 70 percent of the sum of the credits determined under subsection (b) with respect to such dates.
“(b) Amount of Credit
“(1) In general—The amount of the credit determined under this subsection with respect to any credit allowance date for a qualified renewable energy bond is 25 percent of the annual credit determined with respect to such bond.
“(2) Annual credit—The annual credit determined with respect to any qualified renewable energy bond is the product of—
“(A) the applicable credit rate, multiplied by
“(B) the outstanding face amount of the bond.
“(3) Applicable credit rate—For purposes of paragraph (2), the applicable credit rate is the rate which the Secretary estimates will permit the issuance of qualified renewable energy bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer. The applicable credit rate with respect to any qualified renewable energy bond shall be determined as of the first day on which there is a binding, written contract for the sale or exchange of the bond.
“(4) 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.
“(c) Limitation based on amount of tax
“(1) In general—The credit allowed under subsection (a) for any taxable year shall not exceed the excess of—
“(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over
“(B) the sum of the credits allowable under this part (other than subpart C and this subpart).
“(2) Carryover of unused credit—If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year (determined before the application of paragraph (1) for such succeeding taxable year).
“(d) Qualified renewable energy bonds—For purposes of this subpart—
“(1) In general—The term qualified renewable energy bonds means any bond issued as part of an issue if—
“(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 renewable energy bond limitation under paragraph (2),
“(B) 100 percent of the available project proceeds of such issue are to be used for capital expenditures incurred by a governmental body, public power provider, or cooperative electric company for property owned by the public power provider, a governmental body, or a cooperative electric company, as the case may be, that is—
“(i) qualified biogas property (as defined in section 48(c)(5)), or
“(ii) a qualified manure resource recovery property (as defined in section 48(c)(6)),
“(C) the qualified issuer designates such bond for purposes of this section, and
“(D) the issue meets the requirements of this section.
“(2) Limitation on amount of bonds designated
“(A) In general—The maximum aggregate face amount of bonds which may be designated under paragraph (1)(C) by any issuer shall not exceed the limitation amount allocated under this paragraph to such issuer.
“(B) National limitation on amount of bonds designated—There is a national renewable energy bond limitation of $800,000,000 which shall be allocated by the Secretary as provided in subparagraph (C), except that—
“(i) not more than 331/3 percent thereof may be allocated to projects of public power providers,
“(ii) not more than 331/3 percent thereof may be allocated to projects of governmental bodies, and
“(iii) not more than 331/3 percent thereof may be allocated to projects of cooperative electric companies.
“(C) Method of allocation
“(i) Allocation among public power providers—After the Secretary determines the projects of public power providers which are appropriate for receiving an allocation of the national renewable energy bond limitation, the Secretary shall, to the maximum extent practicable, make allocations among such projects in such manner that the amount allocated to each such project bears the same ratio to the cost of such project as the limitation under subparagraph (B)(i) bears to the cost of all such projects.
“(ii) Allocation among governmental bodies and cooperative electric companies—The Secretary shall make allocations of the amount of the national renewable energy bond limitation described in subparagraphs (B)(ii) and (B)(iii) among projects of governmental bodies and cooperative electric companies, respectively, in such manner as the Secretary determines appropriate.
“(e) Definitions—For purposes of this section—
“(1) Qualified issuer—The term qualified issuer means a public power provider, a cooperative electric company, a governmental body, a renewable energy bond lender, or a not-for-profit electric utility which has received a loan or loan guarantee under the Rural Electrification Act.
“(2) Public power provider—The term public power provider 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).
“(3) Governmental body—The term governmental body means any State or Indian tribal government, or any political subdivision thereof.
“(4) 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).
“(5) Renewable energy bond lender—The term renewable 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.
“(f) Other Definitions—For purposes of this subchapter—
“(1) Credit allowance date—The term credit allowance date means—
“(A) March 15,
“(B) June 15,
“(C) September 15, and
“(D) December 15.
“(2) Bond—The term bond includes any obligation.
“(3) State—The term State includes the District of Columbia and any possession of the United States.
“(4) Available project proceeds—The term available project proceeds means—
“(A) the excess of—
“(i) the proceeds from the sale of an issue, over
“(ii) the issuance costs financed by the issue (to the extent that such costs do not exceed 2 percent of such proceeds), and
“(B) the proceeds from any investment of the excess described in subparagraph (A).
“(g) Credit Treated as Interest—For purposes of this subtitle, the credit determined under subsection (a) shall be treated as interest which is includible in gross income.
“(h) S Corporations and Partnerships—In the case of a renewable energy bond held by an S corporation or partnership, the allocation of the credit allowed by this section to the shareholders of such corporation or partners of such partnership shall be treated as a distribution.
“(i) Bonds Held by Real Estate Investment Trusts—If any qualified renewable energy bond is held by a real estate investment trust, the credit determined under subsection (a) shall be allowed to beneficiaries of such trust (and any gross income included under subsection (f) with respect to such credit shall be distributed to such beneficiaries) under procedures prescribed by the Secretary.
“(j) Credits May be Stripped—Under regulations prescribed by the Secretary—
“(1) In general—There may be a separation (including at issuance) of the ownership of a qualified renewable energy bond and the entitlement to the credit under this section with respect to such bond. In case of any such separation, the credit under this section shall be allowed to the person who on the credit allowance date holds the instrument evidencing the entitlement to the credit and not to the holder of the bond.
“(2) Certain rules to apply—In the case of a separation described in paragraph (1), the rules of section 1286 shall apply to the qualified renewable energy bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon.”
Payments to issuers— Subchapter B of chapter 65 of such Code is amended by adding at the end the following:
“6431. Credit for qualified renewable energy bonds allowed to issuer
“(a) In general—The issuer of a qualified renewable energy bond (as defined in section 54(d)) shall be allowed a credit with respect to each interest payment under such bond which shall be payable by the Secretary as provided in subsection (b).
“(b) Payment of credit—The Secretary shall pay (contemporaneously with each interest payment date under such bond) to the issuer of such bond (or to any person who makes such interest payments on behalf of the issuer) 35 percent of the interest payable under such bond on such date.
“(c) Application of arbitrage rules—For purposes of section 148, the yield on such bonds shall be reduced by the credit allowed under this section.
“(d) Interest payment date—For purposes of this subsection, the term interest payment date means each date on which interest is payable by the issuer under the terms of the bond.”
Conforming amendments—
The table of subparts for part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:
The table of sections for subchapter B of chapter 65 of such Code is amended by adding at the end the following new item:
Section 6211(b)(4)(A) of such Code is amended by striking ‘‘and 36B, 168(k)(4)’’ and inserting “36B, 168(k)(4), and 6431”.
Section 6401(b)(1) of such Code is amended by striking ‘‘and G’’ and inserting ‘‘G, and H’’.
Effective Date— The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.
5. Study of biogas and nutrient reuse
In General— The Secretary of the Treasury shall enter into an agreement with the National Renewable Energy Laboratory to undertake a study of biogas that addresses the following:
The quality of biogas, including a comparison of biogas to natural gas and the identification of any components of biogas which make biogas unsuitable for injection into existing natural gas pipelines.
Methods for obtaining the highest energy content in biogas, including the use of co-digestion and identifying the optimal feed mixture.
Recommendations for the expansion of biogas production, including an analysis of the extent to which increasing the methane content of biogas would result in the greater use of biogas and an analysis of how the expanded use of biogas could help meet the growing energy needs of the United States.
Methods for productive use of nutrients recovered from qualified manure resource recovery property that benefits the agricultural economy.
Report— Not later than 2 years after the date of the enactment of this Act, the Secretary shall submit to Congress a report on the study conducted under subsection (a).