Amended 1984, 2005
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1322(a)(1), renumbered section 29 of this title as this section.
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1322(b)(1)(B), redesignated subsec. (h) as (g).
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1321(a), added subsec. (h).
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 471(c), renumbered section 44D of this title as this section.
(a) Allowance of credit For purposes of section 38, the nonconventional source production credit determined under this section for the taxable year is an amount equal to—
Amended 2005
- 2005 Pub. L. 109-135 Pub. L. 109–135, § 402(g), struck out “if the taxpayer elects to have this section apply,” after “For purposes of section 38,” in introductory provisions.
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1322(a)(3)(E), substituted “For purposes of section 38, if the taxpayer elects to have this section apply, the nonconventional source production credit determined under this section for the taxable year is” for “There shall be allowed as a credit against the tax imposed by this chapter for the taxable year” in introductory provisions.
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(1) $3, multiplied by
(2) the barrel-of-oil equivalent of qualified fuels—
(A) sold by the taxpayer to an unrelated person during the taxable year, and
(B) the production of which is attributable to the taxpayer.
(b) Limitations and adjustments
Amended 1990, 1996, 2005
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1322(a)(3)(F), struck out heading and text of par. (6). Text read as follows: “The credit allowed by subsection (a) for any taxable year shall not exceed the excess (if any) of—
“(A) the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and section 27, over
“(B) the tentative minimum tax for the taxable year.”
- 1996 Pub. L. 104-188 Pub. L. 104–188, § 1205(d)(3), substituted “section 27” for “sections 27 and 28”.
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11501(c)(1), added par. (5) and redesignated former par. (5) as (6).
(1) Phaseout of credit The amount of the credit allowable under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to this paragraph) as—
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(A) the amount by which the reference price for the calendar year in which the sale occurs exceeds $23.50, bears to
Amended 1984
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 722(d)(1), substituted “in which the sale occurs” for “in which the taxable year begins”.
(B) $6.
(2) Credit and phaseout adjustment based on inflation The $3 amount in subsection (a) and the $23.50 and $6 amounts in paragraph (1) shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale occurs. In the case of gas from a tight formation, the $3 amount in subsection (a) shall not be adjusted.
Amended 1984
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 722(d)(2), substituted “in which the sale occurs” for “in which a taxable year begins”.
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(3) Credit reduced for grants, tax-exempt bonds, and subsidized energy financing
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(A) In general The amount of the credit allowable under subsection (a) with respect to any project for any taxable year (determined after the application of paragraphs (1) and (2)) shall be reduced by the amount which is the product of the amount so determined for such year and a fraction—
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(i) the numerator of which is the sum, for the taxable year and all prior taxable years, of—
(I) grants provided by the United States, a State, or a political subdivision of a State for use in connection with the project,
(II) proceeds of any issue of State or local government obligations used to provide financing for the project the interest on which is exempt from tax under section 103, and
(III) the aggregate amount of subsidized energy financing (within the meaning of section 48(a)(4)(C)) provided in connection with the project, and
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11813(b)(1)(A), substituted “section 48(a)(4)(C)” for “section 48(l)(11)(C)”.
(ii) the denominator of which is the aggregate amount of additions to the capital account for the project for the taxable year and all prior taxable years.
(B) Amounts determined at close of year The amounts under subparagraph (A) for any taxable year shall be determined as of the close of the taxable year.
(4) Credit reduced for energy credit The amount allowable as a credit under subsection (a) with respect to any project for any taxable year (determined after the application of paragraphs (1), (2), and (3)) shall be reduced by the excess of—
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11813(b)(1)(B), substituted “section 49(b) or 50(a)” for “section 47” in two places.
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(A) the aggregate amount allowed under section 38 for the taxable year or any prior taxable year by reason of the energy percentage with respect to property used in the project, over
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(B) the aggregate amount recaptured with respect to the amount described in subparagraph (A)—
(i) under section 49(b) or 50(a) for the taxable year or any prior taxable year, or
(ii) under this paragraph for any prior taxable year.
The amount recaptured under section 49(b) or 50(a) with respect to any property shall be appropriately reduced to take into account any reduction in the credit allowed by this section by reason of the preceding sentence.
(5) Credit reduced for enhanced oil recovery credit The amount allowable as a credit under subsection (a) with respect to any project for any taxable year (determined after application of paragraphs (1), (2), (3), and (4)) shall be reduced by the excess (if any) of—
Amended 1984, 1986, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11501(c)(1), added par. (5) and redesignated former par. (5) as (6).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 701(c)(3), amended par. (5) generally. Prior to amendment, par. (5) read as follows: “The credit allowed by subsection (a) for a taxable year shall not exceed the taxpayer’s tax liability for the taxable year (as defined in section 26(b)), reduced by the sum of the credits allowable under subpart A and sections 27 and 28.”
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 612(e)(1), substituted “section 26(b)” for “section 25(b)”.
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 474(h), amended par. (5) generally, substituting “shall not exceed the taxpayer’s tax liability for the taxable year (as defined in section 25(b)), reduced by the sum of the credits allowable under subpart A and sections 27 and 28” for “shall not exceed the tax imposed by this chapter for such taxable year, reduced by the sum of the credits allowable under a section of this subpart having a lower number or letter designation than this section, other than the credits allowable by sections 31, 39, and 43. For purposes of the preceding sentence, the term ‘tax imposed by this chapter’ shall not include any tax treated as not imposed by this chapter under the last sentence of section 53(a)”.
(A) the aggregate amount allowed under section 38 for the taxable year and any prior taxable year by reason of any enhanced oil recovery credit determined under section 43 with respect to such project, over
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(B) the aggregate amount recaptured with respect to the amount described in subparagraph (A) under this paragraph for any prior taxable year.
(c) Definition of qualified fuels For purposes of this section—
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(b)(1), struck out par. (4) “Qualifying processed wood fuel” which read as follows:
- 1990 “(A) In general.—The term ‘qualifying processed wood fuel’ means any processed solid wood fuel (other than charcoal, fireplace products, or a product used for ornamental or recreational purposes) which has a Btu content per unit of volume or weight, determined without regard to any nonwood elements, which is at least 40 percent greater per unit of volume or weight than the Btu content of the wood from which it is produced (determined immediately before the processing).
- 1990 “(B) Election.—A taxpayer shall elect, at such time and in such manner as the Secretary by regulations may prescribe, as to whether Btu content per unit shall be determined for purposes of this paragraph on a volume or weight basis. Any such election—
“(i) shall apply to all production from a facility; and
“(ii) shall be effective for the taxable year with respect to which it is made and for all subsequent taxable years and, once made, may be revoked only with the consent of the Secretary.”
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(b)(1), struck out par. (5) “Agricultural byproduct steam” which read as follows: “Steam produced from solid agricultural byproducts which is used by the taxpayer in his trade or business shall be treated as having been sold by the taxpayer to an unrelated person on the date on which it is used.”
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(1) In general The term “qualified fuels” means—
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(a), inserted “and” at end of subpar. (B), substituted a period for a comma at end of subpar. (C), and struck out subpar. (D) which related to qualifying processed wood fuels, and subpar. (E) which related to steam produced from solid agricultural byproducts (not including timber byproducts).
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(A) oil produced from shale and tar sands,
(B) gas produced from—
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(a), inserted “and” at end of subpar. (B), substituted a period for a comma at end of subpar. (C), and struck out subpar. (D) which related to qualifying processed wood fuels, and subpar. (E) which related to steam produced from solid agricultural byproducts (not including timber byproducts).
(i) geopressured brine, Devonian shale, coal seams, or a tight formation, or
(C) liquid, gaseous, or solid synthetic fuels produced from coal (including lignite), including such fuels when used as feedstocks.
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(a), inserted “and” at end of subpar. (B), substituted a period for a comma at end of subpar. (C), and struck out subpar. (D) which related to qualifying processed wood fuels, and subpar. (E) which related to steam produced from solid agricultural byproducts (not including timber byproducts).
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(2) Gas from geopressured brine, etc.
(A) In general Except as provided in subparagraph (B), the determination of whether any gas is produced from geopressured brine, Devonian shale, coal seams, or a tight formation shall be made in accordance with section 503 of the Natural Gas Policy Act of 1978 (as in effect before the repeal of such section).
Amended 2005
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1322(b)(1)(A), inserted “(as in effect before the repeal of such section)” after “1978”.
(B) Special rules for gas from tight formations The term “gas produced from a tight formation” shall only include gas from a tight formation—
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11501(b)(1), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “The term ‘gas produced from a tight formation’ shall only include—
“(i) gas the price of which is regulated by the United States, and
“(ii) gas for which the maximum lawful price applicable under the Natural Gas Policy Act of 1978 is at least 150 percent of the then applicable price under section 103 of such Act.”
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(i) which, as of April 20, 1977, was committed or dedicated to interstate commerce (as defined in section 2(18) of the Natural Gas Policy Act of 1978, as in effect on the date of the enactment of this clause), or
(ii) which is produced from a well drilled after such date of enactment.
(3) Biomass The term “biomass” means any organic material other than—
(A) oil and natural gas (or any product thereof), and
(B) coal (including lignite) or any product thereof.
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11813(b)(1)(C), amended par. (3) generally. Prior to amendment, par. (3) read as follows: “The term ‘biomass’ means any organic material which is an alternate substance (as defined in section 48(l)(3)(B)) other than coal (including lignite) or any product of such coal.”
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(d) Other definitions and special rules For purposes of this section—
Amended 1982, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(b)(3), redesignated pars. (7) to (9) as (6) to (8), respectively.
- 1982 Pub. L. 97-354 Pub. L. 97–354 substituted “Pass-thru in the case of estates and trusts” for “Pass-through in the case of subchapter S corporations, etc.” in par. heading, and substituted provisions relating to the applicability of rules similar to rules of subsec. (d) of section 52 for provisions relating to the applicability of rules similar to rules of subsecs. (d) and (e) of section 52.
(1) Only production within the United States taken into account Sales shall be taken into account under this section only with respect to qualified fuels the production of which is within—
(A) the United States (within the meaning of section 638(1)), or
(B) a possession of the United States (within the meaning of section 638(2)).
(2) Computation of inflation adjustment factor and reference price
(A) In general The Secretary shall, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor and the reference price for the preceding calendar year in accordance with this paragraph.
(B) Inflation adjustment factor The term “inflation adjustment factor” means, with respect to a calendar year, a fraction the numerator of which is the GNP implicit price deflator for the calendar year and the denominator of which is the GNP implicit price deflator for calendar year 1979. The term “GNP implicit price deflator” means the first revision of the implicit price deflator for the gross national product as computed and published by the Department of Commerce.
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(3) Production attributable to the taxpayer In the case of a property or facility in which more than 1 person has an interest, except to the extent provided in regulations prescribed by the Secretary, production from the property or facility (as the case may be) shall be allocated among such persons in proportion to their respective interests in the gross sales from such property or facility.
(4) Gas from geopressured brine, Devonian shale, coal seams, or a tight formation The amount of the credit allowable under subsection (a) shall be determined without regard to any production attributable to a property from which gas from Devonian shale, coal seams, geopressured brine, or a tight formation was produced in marketable quantities before January 1, 1980.
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(b)(2), amended par. (4) generally, striking out “Special rules applicable to” before “Gas” in heading, redesignating former subpar. (A) as par. (4), striking out subpar. (B) which related to the reference price and application of phaseout for Devonian shale, and making minor changes in phraseology.
(5) Barrel-of-oil equivalent The term “barrel-of-oil equivalent” with respect to any fuel means that amount of such fuel which has a Btu content of 5.8 million; except that in the case of qualified fuels described in subparagraph (C) of subsection (c)(1), the Btu content shall be determined without regard to any material from a source not described in such subparagraph.
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(b)(3), (4), redesignated par. (6) as (5), substituted “subparagraph (C)” for “subparagraph (C), (D), or (E)”, and struck out former par. (5) which read as follows: “In the case of a facility for the production of—
“(A) qualifying processed wood fuel,
or
“(B) steam from solid agricultural byproducts,
paragraph (1) of subsection (b) shall not apply with respect to the amount of the credit allowable under subsection (a) for fuels sold during the 3-year period beginning on the date the facility is placed in service.”
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(6) Barrel defined The term “barrel” means 42 United States gallons.
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(b)(3), (4), redesignated par. (6) as (5), substituted “subparagraph (C)” for “subparagraph (C), (D), or (E)”, and struck out former par. (5) which read as follows: “In the case of a facility for the production of—
“(A) qualifying processed wood fuel,
or
“(B) steam from solid agricultural byproducts,
paragraph (1) of subsection (b) shall not apply with respect to the amount of the credit allowable under subsection (a) for fuels sold during the 3-year period beginning on the date the facility is placed in service.”
(7) Related persons Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). In the case of a corporation which is a member of an affiliated group of corporations filing a consolidated return, such corporation shall be treated as selling qualified fuels to an unrelated person if such fuels are sold to such a person by another member of such group.
Amended 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(b)(3), redesignated pars. (7) to (9) as (6) to (8), respectively.
(8) Pass-thru in the case of estates and trusts Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
Amended 1986, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(b)(3), redesignated pars. (7) to (9) as (6) to (8), respectively.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1879(c)(1), inserted provision directing that a corporation which is a member of an affiliated group of corporations filing a consolidated return shall be treated as selling qualified fuels to an unrelated person if such fuels are sold to such person by another member of such group.
(e) Application of section This section shall apply with respect to qualified fuels—
(2) which are sold before January 1, 2003.
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Amended 1981, 2005
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1322(b)(1)(B), redesignated subsecs. (f) and (g) as (e) and (f), respectively, and struck out former subsec. (e), which related to application of section with the Natural Gas Policy Act of 1978.
- 1981 Pub. L. 97-34 Pub. L. 97–34 substituted provisions respecting application with the Natural Gas Policy Act of 1978 for prior provision reading “If the taxpayer makes an election under section 107(d) of the Natural Gas Policy Act of 1978 to have subsections (a) and (b) of section 107 of that Act, and subtitle B of title I of that Act, apply with respect to gas described in subsection (c)(1)(B)(i) produced from any well on a property, then the credit allowable by subsection (a) shall not be allowed with respect to any gas produced on that property.”
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(f) Extension for certain facilities
Amended 1990, 2005
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1322(b)(1)(B), redesignated subsecs. (f) and (g) as (e) and (f), respectively, and struck out former subsec. (e), which related to application of section with the Natural Gas Policy Act of 1978.
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11816(b)(5), amended subsec. (f) generally, redesignating former par. (1) as subsec. (f), making minor changes in phraseology, substituting par. (2) for former par. (1)(B) which read as follows: “which are sold after December 31, 1979, and before January 1, 2003.”, and striking out former par. (2) which related to special rules applicable to qualified processed wood and solid agricultural byproduct steam.
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(1) In general In the case of a facility for producing qualified fuels described in subparagraph (B)(ii) or (C) of subsection (c)(1)—
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(A) for purposes of subsection (e)(1)(B), such facility shall be treated as being placed in service before January 1, 1993, if such facility is placed in service before July 1, 1998, pursuant to a binding written contract in effect before January 1, 1997, and
Amended 1988, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11501(a)(1), substituted “1993” for “1991”.
- 1988 Pub. L. 100-647 Pub. L. 100–647 substituted “1991” for “1990”.
(B) if such facility is originally placed in service after December 31, 1992, paragraph (2) of subsection (e) shall be applied with respect to such facility by substituting “January 1, 2008” for “January 1, 2003”.
Amended 1983, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11501(a)(2), substituted “2003” for “2001”.
- 1983 Pub. L. 97-448 Pub. L. 97–448 substituted “December 31, 1979” for “December 3, 1979”.
(2) Special rule Paragraph (1) shall not apply to any facility which produces coke or coke gas unless the original use of the facility commences with the taxpayer.
Amended 1983
- 1983 Pub. L. 97-448 Pub. L. 97–448 substituted “December 31, 1979” for “December 3, 1979”.
(g) Extension for facilities producing coke or coke gas Notwithstanding subsection (e)—
Amended 1992, 2005
- 2005 Pub. L. 109-135 Pub. L. 109–135, § 412(l)(1), substituted “subsection (e)” for “subsection (f)” in introductory provisions.
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1322(b)(1)(B), redesignated subsec. (h) as (g).
- 1992 Pub. L. 102-486 Pub. L. 102–486 added subsec. (g).
(1) In general In the case of a facility for producing coke or coke gas (other than from petroleum based products) which was placed in service before January 1, 1993, or after June 30, 1998, and before January 1, 2010, this section shall apply with respect to coke and coke gas produced in such facility and sold during the period—
Amended 2006
- 2006 Pub. L. 109-432 Pub. L. 109–432, § 211(b), inserted “(other than from petroleum based products)” after “producing coke or coke gas” in introductory provisions.
(A) beginning on the later of January 1, 2006, or the date that such facility is placed in service, and
Amended 1996, 2005
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1322(b)(2)(A), substituted “subsection (e)(1)(B)” for “subsection (f)(1)(B)”.
- 1996 Pub. L. 104-188 Pub. L. 104–188, § 1207(a), substituted “July 1, 1998” for “January 1, 1997” and “January 1, 1997” for “January 1, 1996”.
(B) ending on the date which is 4 years after the date such period began.
Amended 2005
- 2005 Pub. L. 109-58 Pub. L. 109–58, § 1322(b)(2)(B), substituted “subsection (e)” for “subsection (f)”.
(2) Special rules In determining the amount of credit allowable under this section solely by reason of this subsection—
(A) Daily limit The amount of qualified fuels sold during any taxable year which may be taken into account by reason of this subsection with respect to any facility shall not exceed an average barrel-of-oil equivalent of 4,000 barrels per day. Days before the date the facility is placed in service shall not be taken into account in determining such average.
(B) Extension period to commence with unadjusted credit amount For purposes of applying subsection (b)(2) to the $3 amount in subsection (a), in the case of fuels sold after 2005, subsection (d)(2)(B) shall be applied by substituting “2004” for “1979”.
(C) Denial of double benefit This subsection shall not apply to any facility producing qualified fuels for which a credit was allowed under this section for the taxable year or any preceding taxable year by reason of subsection (f).
Amended 2005
- 2005 Pub. L. 109-135 Pub. L. 109–135, § 412(l)(2), substituted “subsection (f)” for “subsection (g)”.
(D) Nonapplication of phaseout Subsection (b)(1) shall not apply.
Amended 2006
- 2006 Pub. L. 109-432 Pub. L. 109–432, § 211(a), added subpar. (D).
(E) Coordination with section 45 No credit shall be allowed with respect to any coke or coke gas which is produced using steel industry fuel (as defined in section 45(c)(7)) as feedstock if a credit is allowed to any taxpayer under section 45 with respect to the production of such steel industry fuel.
Amended 2008, 2014
- 2014 Pub. L. 113-295 Pub. L. 113–295 amended subpar. (E) generally. Prior to amendment, text read as follows: “No credit shall be allowed with respect to any qualified fuel which is steel industry fuel (as defined in section 45(c)(7)) if a credit is allowed to the taxpayer for such fuel under section 45.”
- 2008 Pub. L. 110-343 Pub. L. 110–343 added subpar. (E).