S. 2306 - Maintaining and Enhancing Hydroelectricity and River Restoration Act of 2021

"(A) which is —

"(i) dam safety property,

"(ii) environmental improvement property, or

"(iii) grid resilience property,

"(B)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

"(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer, and

"(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable.

"(2) DAM SAFETY PROPERTY. — The term 'dam safety property' means property the purpose of which is to maintain or improve dam safety on a qualified dam to ensure acceptable performance under all loading conditions (static, hydrologic, seismic) in accordance with applicable regulatory criteria and risk guidelines, including —

"(A) the maintenance or upgrade of spillways or other appurtuant structures,

"(B) dam stability, including erosion repair and enhanced seepage controls, and

"(C) upgrades or replacements of floodgates or natural infrastructure restoration or protection to improve flood risk reduction.

"(3) ENVIRONMENTAL IMPROVEMENT PROPERTY. — The term 'environmental improvement property' means property the purpose of which is to —

"(A) add or improve safe and effective fish passage, including new or upgraded turbine technology, fish ladders, fishways, and all other associated technology, equipment, or other fish passage technology to a qualified dam,

"(B) maintain or improve the quality of the water retained or released by a qualified dam,

"(C) promote downstream sediment transport processes and habitat maintenance with respect to a qualified dam, or

"(D) provide for or improve recreational access to the vicinity of a qualified dam, including roads, trails, boat ingress and egress, flows to improve recreation, and infrastructure that improves river recreation opportunity.

"(4) GRID RESILIENCE PROPERTY. —

"(A) IN GENERAL. — The term 'grid resilience property' means property —

"(i) the purpose of which is to provide the ability of a hydroelectric facility at a qualified dam to contribute to electricity grid resilience and efficiency by —

"(I) adapting more quickly to changing grid conditions,

"(II) providing ancillary services (including black start capabilities, voltage support, and spinning reserves),

"(III) integrating other variable sources of electricity generation, or

"(IV) managing accumulated reservoir sediments, or

"(ii) which is a qualified dam described in paragraph (5)(B).

"(B) MITIGATION AND ENVIRONMENTAL REVIEW REQUIREMENTS. — Such term shall not include any property described in subparagraph (A)(i) unless any physical or operational changes instituted in connection with the activities described in such subparagraph have been authorized under applicable Federal, State, and tribal permitting or licensing processes which include appropriate mitigation conditions arising from consultation and environmental review under such processes.

"(5) QUALIFIED DAM. — The term 'qualified dam' means any of the following:

"(A) A hydroelectric dam which is licensed by the Federal Energy Regulatory Commission or legally operating without such a license and was placed in service before the date of the enactment of this section.

"(B) A hydroelectric dam which —

"(i) was licensed by the Federal Energy Regulatory Commission before December 31, 2020,

"(ii) is under active license from the Federal Energy Regulatory Commission on the date of enactment of this section,

"(iii) meets the requirements of subclauses (I) and (III) of sections 242(b)(1)(B)(ii) of the Energy Policy Act of 2005 (42 U.S.C. 15881),

"(iv) is placed in service on or after the date of the enactment of this section, and

"(v) does not contribute to atmospheric pollution.

"(C) Any dam which —

"(i) was placed in service before the date of the enactment of this section,

"(ii) is operated on such date of enactment for any beneficial public use except hydropower generation, and

"(iii) is authorized after such date of the enactment for hydropower development by the Federal Energy Regulatory Commission, the Bureau of Reclamation, or a State, as appropriate.

"(D) Any dam which was placed in service before the date of the enactment of this section and which is a qualified nonpowered dam (as defined in section 34(e)(3) of the Federal Power Act (16 U.S.C. § 823e(e)(3)).

"(e) ELECTIVE PAYMENT. —

"(1) IN GENERAL. — In the case of a taxpayer making an election (at such time and in such manner as the Secretary may provide) under this subsection with respect to any portion of the credit which would (without regard to this subsection) be determined under this section with respect to such taxpayer, such taxpayer shall be treated as making a payment against the tax imposed by subtitle A for the taxable year equal to 100 percent of such amount.

"(2) TIMING. — The payment described in subsection (a) shall be treated as made on the later of the due date of the return of tax for such taxable year or the date on which such return is filed.

"(3) DENIAL OF DOUBLE BENEFIT. — Solely for purposes of section 38, in the case of a taxpayer making an election under this subsection, the credit determined under this section shall be reduced by the amount of the portion of such credit with respect to which the taxpayer makes such election.

"(4) APPLICATION TO CERTAIN TAX-EXEMPT PERSONS. — In the case of a taxpayer making an election under this subsection, the credit subject to such an election shall be determined notwithstanding —

"(A) section 50(b)(3), and

"(B) section 50(b)(4), with respect to an entity described in section 50(b)(4)(A)(i).

"(f) SPECIAL RULE FOR PROPERTY FINANCED BY SUBSIDIZED ENERGY FINANCING OR TAX-EXEMPT BONDS. — For purposes of this section, rules similar to the rules of section 48(a)(4) (determined without regard to subparagraph (D) thereof) shall apply.".

(b) CONFORMING AMENDMENTS. —

(1) Section 46 of the Internal Revenue Code of 1986 is amended by striking "and" at the end of paragraph (5), by striking the period at the end of paragraph (6) and inserting ", and", and by adding at the end the following new paragraph:

"(7) the credit for maintaining and enhancing hydroelectric dams.".

(2) Section 49(a)(1)(C) of such Code is amended by striking "and" at the end of clause (iv), by striking the period at the end of clause (v) and inserting ", and", and by adding at the end the following new clause:

"(vi) the basis of any qualified property taken into account under section 48D(d).".

(3) Section 50(a)(2)(E) of such Code is amended by striking "or 48C(b)(2)" and inserting "48C(b)(2), or 48D(c)".

(4) The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 48C the following new item:

"Sec. 48D. Credit for maintaining and enhancing hydroelectric dams.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

SEC. 3. CREDIT FOR OBSOLETE RIVER OBSTRUCTION REMOVAL EXPENDITURES.

(a) IN GENERAL. — Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding after section 45T the following new section:

"SEC. 45U. CREDIT FOR OBSOLETE RIVER OBSTRUCTION REMOVAL EXPENDITURES.

"(a) IN GENERAL. — For purposes of section 38, the credit for obsolete river obstruction removal expenditures for any taxable year is 30 percent of the qualified obsolete river obstruction removal expenditures incurred during such taxable year.

"(b) QUALIFIED OBSOLETE RIVER OBSTRUCTION REMOVAL EXPENDITURES. — For purposes of this section —

"(1) IN GENERAL. — The term 'qualified obsolete river obstruction removal expenditures' means any expenditure to demolish and remove, in whole or in part, any dam described in paragraph (2) and its associated infrastructure, including all associated remediation and ecosystem restoration costs, so long as —

"(A) the work is performed with the consent of the dam owner, if available, and

"(B) none of the expenses incurred are used to demolish or remove a Federally-owned hydroelectric dam.

"(2) DAM DESCRIBED. — A dam is described in this paragraph if such dam is —

"(A) a qualified nonpowered dam (as defined in section 34(e)(3) of the Federal Power Act (16 U.S.C. § 823e(e)(3)), or

"(B) a hydroelectric dam which is not owned by the Federal government.

"(c) APPLICATION TO TAX-EXEMPT ENTITIES. —

"(1) IN GENERAL. — In the case of qualified obsolete river obstruction removal expenditures incurred by an eligible entity, the Secretary shall promulgate regulations to allow the allocation of the credit under this section to the person primarily responsible for designing the property in lieu of the owner of such property, with such person to be treated as the taxpayer for purposes of this section.

"(2) ELIGIBLE ENTITY. — For purposes of this subsection, the term 'eligible entity' means —

"(A) a Federal, State, or local government or a political subdivision thereof,

"(B) an Indian tribe (as defined in section 45A(c)(6)), or

"(C) an organization described in section 501(c) and exempt from tax under section 501(a).

"(d) ELECTIVE PAYMENT. —

"(1) IN GENERAL. — In the case of a taxpayer making an election (at such time and in such manner as the Secretary may provide) under this subsection with respect to any portion of the credit which would (without regard to this subsection) be determined under this section with respect to such taxpayer, such taxpayer shall be treated as making a payment against the tax imposed by subtitle A for the taxable year equal to 100 percent of such amount.

"(2) TIMING. — The payment described in subsection (a) shall be treated as made on the later of the due date of the return of tax for such taxable year or the date on which such return is filed.

"(3) DENIAL OF DOUBLE BENEFIT. — Solely for purposes of section 38, in the case of a taxpayer making an election under this subsection, the credit determined under this section shall be reduced by the amount of the portion of such credit with respect to which the taxpayer makes such election.".

(b) CONFORMING AMENDMENTS. —

(1) Section 38(b) of the Internal Revenue Code of 1986 is amended by striking "plus" at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting ", plus", and by adding at the end the following new paragraph:

"(34) the credit for obsolete river obstruction removal expenditures under section 45U(a).".

(2) Section 280C of such Code is amended by adding at the end the following new subsection:

"(i) CREDIT FOR OBSOLETE RIVER OBSTRUCTION REMOVAL EXPENDITURES. — No deduction shall be allowed for that portion of the expenses otherwise allowable as a deduction taken into account in determining the credit under section 45U for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45U(a).".

(3) The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 45T the following new item:

"Sec. 45U. Credit for obsolete river obstruction removal expenditures.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to any obsolete river obstruction removal expenditures (as defined in section 45U of the Internal Revenue Code of 1986, as added by this section) incurred after the date of the enactment of this Act.