§ 45K. Credit for producing fuel from a nonconventional source
(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—
(b)
Limitations and adjustments
(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—
(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.
(3)
Credit reduced for grants, tax-exempt bonds, and subsidized energy financing
(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—
(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
(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—
(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
(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—
(c)
Definition of qualified fuels
For purposes of this section—
(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).
(B)
Special rules for gas from tight formations
The term “gas produced from a tight formation” shall only include gas from a tight formation—
(d)
Other definitions and special rules
For purposes of this section—
(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—
(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.
(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.
(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.
(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.
(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.
(f)
Extension for certain facilities
(1)
In general
In the case of a facility for producing qualified fuels described in subparagraph (B)(ii) or (C) of subsection (c)(1)—
(g)
Extension for facilities producing coke or coke gas
Notwithstanding subsection (e)—
(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—
(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”.