SECTION 1. MODIFICATIONS TO CARBON DIOXIDE SEQUESTRATION CREDIT.

    (a) Allocation and Certification of Credit.--
            (1) In general.--Subsection (e) of section 45Q of the 
        Internal Revenue Code of 1986 is amended to read as follows:
    ``(e) Limitation.--
            ``(1) Allocation limitation.--No credit shall be allowed 
        under subsection (a) with respect to qualified carbon dioxide 
        captured by carbon capture equipment at a qualified facility 
        for the amount of qualified carbon dioxide captured by such 
        carbon capture equipment in excess of--
                    ``(A) the portion of the national limitation 
                allocated with respect to such carbon capture equipment 
                under subsection (f), over
                    ``(B) the amount of qualified carbon dioxide 
                captured by such carbon capture equipment during 
                periods after July 31, 2013.
            ``(2) National limitation.--For purposes of paragraph 
        (1)(A), the national limitation is the excess of--
                    ``(A) 75,000,000 metric tons of qualified carbon 
                dioxide, over
                    ``(B) the number of metric tons of qualified carbon 
                dioxide captured before August 1, 2013, for which a 
                credit under subsection (a) was allowed.''.
            (2) Allocation and certification.--Section 45Q of such Code 
        is amended by adding at the end the following new subsection:
    ``(f) Allocation for and Certification of Carbon Capture 
Projects.--
            ``(1) Establishment of procedures.--Not later than July 1, 
        2013, the Secretary shall establish, by regulation, processes 
        and procedures--
                    ``(A) for allocating the national limitation under 
                subsection (e)(2) to projects for placing carbon 
                capture equipment in service at qualified facilities, 
                and
                    ``(B) for certifying projects for which an 
                allocation has been made under subparagraph (A).
            ``(2) Allocations.--
                    ``(A) Application.--Each applicant for an 
                allocation under this subsection shall submit an 
                application to the Secretary under such terms and 
                conditions as are established by the Secretary in 
                regulations.
                    ``(B) Priority.--The Secretary shall rank 
                applications received under subparagraph (A) in the 
                following order:
                            ``(i) Applicants with applications received 
                        by the Secretary on an earlier date shall be 
                        given higher priority than applicants with 
                        applications received on a later date. For 
                        purposes of this clause, any application 
                        received before the date that is 30 days after 
                        the procedures and processes described in 
                        paragraph (1) are established shall be 
                        considered to have been received on such date.
                            ``(ii) In the case of applications received 
                        on the same date, those applicants concurrently 
                        applying for certification shall be given 
                        higher priority.
                            ``(iii) In the case of applications 
                        received on the same date and concurrently 
                        applying for certification, those projects with 
                        the earlier date by which construction 
                        commenced shall be given higher priority.
                    ``(C) Allocation to applicants.--Subject to 
                subparagraph (D), the Secretary shall allocate tonnage 
                to each applicant--
                            ``(i) based on the amount requested on the 
                        application, and
                            ``(ii) in order of the rank of the 
                        application under subparagraph (B),
                until the amount of tonnage available under this 
                section is exhausted. Projects for which no or a 
                partial allocation is made shall retain their ranking 
                and shall be eligible to receive an allocation of 
                tonnage previously allocated that is forfeited or 
                recaptured.
                    ``(D) Limitation.--The Secretary may not allocate 
                to any project more than the lesser of--
                            ``(i) the number of metric tons of 
                        qualified carbon dioxide projected to be 
                        captured at the qualified facility under the 
                        project during the 10-year period beginning on 
                        the date on which such project is placed in 
                        service,
                            ``(ii) the number of metric tons of 
                        qualified carbon dioxide projected to be 
                        captured at the qualified facility under the 
                        project--
                                    ``(I) which are subject to a 
                                written, binding contract for disposal 
                                in secure geological storage (whether 
                                or not used as a tertiary injectant), 
                                or
                                    ``(II) for which there is a plan 
                                for such disposal by the applicant, or
                            ``(iii) 15,000,000 metric tons of qualified 
                        carbon dioxide.
                    ``(E) Reduction for prior credits.--The amount of 
                any allocation under subparagraph (C) to any project 
                shall be reduced by the number of metric tons of carbon 
                dioxide captured by the carbon capture equipment with 
                respect to such project before August 1, 2013, for 
                which a credit was allowed under subsection (a).
            ``(3) Certification.--
                    ``(A) In general.--No credit shall be allowed under 
                subsection (a) with respect to any project for using 
                carbon capture equipment to capture qualified carbon 
                dioxide at a qualified facility before the date on 
                which such project is certified under this paragraph.
                    ``(B) Application for certification.--Each project 
                which is allocated a portion of the national limitation 
                shall submit an application for certification to the 
                Secretary containing such information as the Secretary 
                may require. Such application shall be submitted--
                            ``(i) not later than--
                                    ``(I) 6 months after the date on 
                                which such project receives an 
                                allocation, and
                                    ``(II) 30 days after the later of 
                                the date on which the regulations, 
                                processes, and procedures are 
                                established under paragraph (1) or the 
                                construction start date, and
                            ``(ii) not earlier than the construction 
                        start date.
                For purposes of this subparagraph, the term 
                `construction start date' means the earlier of the 
                first date on which physical work on the project of a 
                significant nature is undertaken or the date by which 5 
                percent or more of the total cost of the project has 
                been spent.
                    ``(C) Revocation of certification.--
                            ``(i) Materially inaccurate 
                        representations.--The Secretary may revoke a 
                        certification under this paragraph if the 
                        Secretary determines that an applicant has made 
                        a materially inaccurate representation with 
                        respect to the project.
                            ``(ii) Failure to timely place equipment in 
                        service.--A certification under this paragraph 
                        shall be revoked in any case in which carbon 
                        capture equipment with respect to the project 
                        is not placed in service--
                                    ``(I) before the date which is 5 
                                years after the date on which the 
                                allocation was issued, in the case of a 
                                new industrial facility, or
                                    ``(II) before the date which is 3 
                                years after the date on which the 
                                allocation was issued, in the case of a 
                                modification of an existing industrial 
                                facility.
                    ``(D) Reallocation.--In any case--
                            ``(i) in which a certification is revoked 
                        under subparagraph (C), or
                            ``(ii) in which a taxpayer to whom an 
                        allocation is made under paragraph (2) fails to 
                        obtain certification for a project under this 
                        paragraph,
                the amount of national limitation which was allocated 
                to such project under paragraph (2) shall be 
                reallocated under such rules as established by the 
                Secretary under regulations.
            ``(4) Public disclosure.--
                    ``(A) In general.--The Secretary shall, within 30 
                days of making any allocation, certification, 
                revocation, or change in the ranking of projects, 
                publicly disclose the amount of such allocation, a 
                description of the project for which such allocation, 
                certification, or revocation was made, and the change 
                in the ranking of projects, as the case may be.
                    ``(B) Annual report.--The Secretary shall issue an 
                annual report summarizing credits allocated and 
                available for allocation.''.
            (3) Conforming amendments.--
                    (A) Paragraph (2) of section 45Q(c) of such Code is 
                amended by inserting ``which is part of a project which 
                is certified under subsection (f)(3)'' after ``carbon 
                capture equipment''.
                    (B) Paragraph (3) of section 45Q(c) of such Code is 
                amended by striking ``which'' and inserting ``at which 
                such carbon capture equipment''.
    (b) 10-Year Credit Limitation.--Section 45Q(a) of the Internal 
Revenue Code of 1986 is amended--
            (1) in paragraph (1)(A), by inserting ``during the 10-year 
        period beginning on the later of the date on which the carbon 
        capture equipment described in subsection (c)(1) is placed in 
        service or the date on which the project with respect to such 
        carbon capture equipment was certified under subsection 
        (f)(3)'' after ``qualified facility'', and
            (2) in paragraph (2)(A), by inserting ``during the 10-year 
        period beginning on the later of the date on which the carbon 
        capture equipment described in subsection (c)(1) is placed in 
        service or the date on which the project with respect to such 
        carbon capture equipment was certified under subsection 
        (f)(3)'' after ``qualified facility''.
    (c) Definition of Carbon Capture Equipment.--Section 45Q(d) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new paragraph:
            ``(8) Carbon capture equipment.--The term `carbon capture 
        equipment' means equipment to capture and pressurize qualified 
        carbon dioxide.''.
    (d) Credit Allowed to Taxpayer Performing Carbon Capture.--
            (1) In general.--Paragraph (5) of section 45Q(d) of the 
        Internal Revenue Code of 1986 is amended to read as follows:
            ``(5) Person to whom credit is allowable.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B) or in regulations prescribed by the 
                Secretary, any credit under this section shall be 
                allowed to the taxpayer who--
                            ``(i) captures the qualified carbon 
                        dioxide, and
                            ``(ii) through contract or otherwise, 
                        disposes of the qualified carbon dioxide in a 
                        manner meeting the requirements of paragraph 
                        (1)(B) or (2)(C) of subsection (a), as the case 
                        may be.
                    ``(B) Election to allow credit to person disposing 
                carbon dioxide.--If the person described in 
                subparagraph (A) makes an election under this 
                subparagraph in such manner as the Secretary may 
                prescribe by regulations, the credit under this 
                section--
                            ``(i) shall be allowable to the person that 
                        disposes of qualified carbon dioxide in a 
                        manner meeting the requirements of paragraph 
                        (1)(B) or (2)(C) of subsection (a), as the case 
                        may be, and
                            ``(ii) shall not be allowable to the person 
                        described in subparagraph (A).''.
            (2) Conforming amendments.--
                    (A) Section 45Q(a) of such Code is amended by 
                striking ``by the taxpayer'' each place it appears in 
                paragraph (1)(B), (2)(B), and (2)(C).
                    (B) Section 45Q(c) of such Code, as amended by 
                subsection (a), is amended by striking paragraph (1) 
                and redesignating paragraphs (2) and (3) as paragraphs 
                (1) and (2), respectively.
    (e) Rules Relating to Credit Recapture.--Paragraph (6) of section 
45Q(d) of the Internal Revenue Code of 1986 is amended by adding at the 
end the following new sentence: ``Notwithstanding section 7805(b), any 
regulation issued pursuant to this paragraph shall apply only with 
respect to qualified carbon dioxide captured or disposed of after the 
date on which such regulation is filed with the Federal Register.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to carbon dioxide captured after July 31, 2013.
Amends the Internal Revenue Code, with respect to the tax credit for carbon dioxide sequestration, to: (1) establish a national limitation for such credit based upon metric tons of qualified carbon dioxide (defined as carbon dioxide captured from an industrial source that would otherwise be released into the atmosphere as industrial emission of greenhouse gas and that is measured at the source of capture and verified at the point of disposal or injection); (2) direct the Secretary of the Treasury to establish processes and procedures for allocating the national limitation and for certifying projects for which an allocation has been made; (3) impose a 10-year limitation period for such credit; (4) identify the primary taxpayer eligible to claim such credit as the taxpayer who captures the qualified carbon dioxide and disposes, through contract or otherwise, of the qualified carbon dioxide in a specified manner; and (5) provide for the transferability of such credit.
A bill to amend the Internal Revenue Code of 1986 to modify the credit for carbon dioxide sequestration.