To provide a tax credit for qualified energy storage air conditioner property.

Summary: Amends the Internal Revenue Code to allow: (1) a residential energy efficient tax credit for 30% of the cost of qualified energy storage air conditioner property installed in a principal residence; and (2) an energy tax credit for 30% of qualified energy storage air conditioner property installed before January 1, 2015.

 Defines "qualified energy storage air conditioner property" as a cooling system that: (1) consists of thermal or ice storage components that create, store, and supply cooling energy to reduce peak electricity demand; (2) can deliver a minimum of 29,000 Btu and a maximum of 240,000 Btu of cooling capacity; (3) is designed to deliver such cooling capacity for a minimum continuous period of three hours; (4) is designed to reduce peak kilowatt demand by 90% for the cooling load served; and (5) is designed not to exceed the 24-hour energy consumption of conventional cooling equipment by more than 10%.

SECTION 1. CREDIT FOR QUALIFIED ENERGY STORAGE AIR CONDITIONER PROPERTY 
              INSTALLED IN A PRINCIPAL RESIDENCE.

    (a) In General.--Subsection (a) of section 25D of the Internal 
Revenue Code of 1986 is amended by striking ``and'' at the end of 
paragraph (2), by striking the period at the end of paragraph (3) and 
inserting ``, and'', and by adding at the end the following new 
paragraph:
            ``(4) 30 percent of the qualified energy storage air 
        conditioner property expenditures made by the taxpayer during 
        such year.''.
    (b) Qualified Energy Storage Air Conditioner Property 
Expenditure.--Section 25D(d) of such Code is amended by adding at the 
end the following new paragraph:
            ``(4) Qualified energy storage air conditioner property 
        expenditure.--The term `qualified energy storage air 
        conditioner property expenditure' means an expenditure for 
        qualified energy storage air conditioner property (as defined 
        in section 48(d)) installed on or in connection with a dwelling 
        unit located in the United States and used as a principal 
        residence (within the meaning of section 121) by the 
        taxpayer.''.
    (c) Modification of Maximum Credit.--
            (1) In general.--Paragraph (1) of section 25D(b) of such 
        Code is amended by striking ``and'' at the end of subparagraph 
        (B), by striking the period at the end of subparagraph (C) and 
        inserting ``, and'', and by adding at the end the following new 
        subparagraph:
                    ``(D) $500 with respect to each half kilowatt of 
                peak demand reduction (as defined in section 48(d)) of 
                qualified energy storage air conditioner property (as 
                defined in section 48(d)) for which qualified energy 
                storage air conditioner expenditures are made.''.
            (2) Conforming amendments.--Subparagraph (A) of section 
        25D(e)(4) of such Code is amended by striking ``and'' at the 
        end of clause (ii), by striking the period at the end of clause 
        (iii) and inserting ``, and'', and by adding at the end the 
        following new clause:
                            ``(iv) $1,667 in the case of each half 
                        kilowatt of peak demand reduction (as defined 
                        in section 48(d)) of qualified energy storage 
                        air conditioner property (as defined in section 
                        48(d)) for which qualified energy storage air 
                        conditioner expenditures are made.''.
    (d) Extension of Credit.--Subsection (f) of section 25D of such 
Code is amended by inserting ``(December 31, 2014, in the case of 
qualified energy storage air conditioner property (ad defined in 
section 48(d))'' before the period at the end.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 2. BUSINESS CREDIT FOR QUALIFIED ENERGY STORAGE AIR CONDITIONER 
              PROPERTY.

    (a) In General.--Subparagraph (A) of section 48(a)(3) of the 
Internal Revenue Code of 1986 is amended by deleting ``or'' at the end 
of clause (iii), by inserting ``or'' at the end of clause (iv), and by 
inserting clause (iv) the following new clause:
                            ``(v) qualified energy storage air 
                        conditioner property but only with respect to 
                        periods ending before January 1, 2015,''.
    (b) 30 Percent Credit.--Clause (i) of section 48(a)(2)(A) of such 
Code is amended by striking ``and'' at the end of subclause (II) and by 
inserting after subclause (III) the following new subclause:
                                    ``(IV) qualified energy storage air 
                                conditioner property, and''.
    (c) Qualified Energy Storage Air Conditioner Property.--Section 48 
of such Code is amended by adding at the end the following new 
subsection:
    ``(d) Qualified Energy Storage Air Conditioner Property.--For the 
purposes of this section--
            ``(1) In general.--The term `qualified energy storage air 
        conditioner property' means a cooling system which--
                    ``(A) consists of thermal storage or ice storage 
                components which create, store, and supply cooling 
                energy to reduce peak electricity demand by displacing 
                the daytime peak electrical demand of conventional 
                mechanical cooling equipment,
                    ``(B) has a nameplate operational capability to 
                deliver a minimum of 29,000 Btu and a maximum of 
                240,000 Btu of cooling capacity,
                    ``(C) is designed to deliver such cooling capacity 
                for a minimum continuous period of 3 hours, available 
                daily from May 1 through September 30, coincident with 
                daytime peak load periods,
                    ``(D) is designed so as to reduce peak kilowatt 
                demand by 90 percent for the cooling load served, and
                    ``(E) is designed so as not to exceed the 24 hour 
                energy consumption of conventional cooling equipment by 
                more than 10 percent.
            ``(2) Inclusion of related equipment.--Such term shall 
        include any secondary components which integrate the cooling 
        system described in paragraph (1) with the conventional cooling 
        system, including equipment and controls for measuring and 
        reporting operation and performance, but shall not include any 
        portion of the conventional cooling system.
            ``(3) Limitation.--
                    ``(A) In general.--In the case of qualified energy 
                storage air conditioner property placed in service 
                during the taxable year, the credit otherwise 
                determined under this section for such year with 
                respect to such property shall not exceed an amount 
                equal to $500 for each 0.5 kilowatt of peak demand 
                reduction of such property.
                    ``(B) Peak demand reduction.--For purposes of this 
                subsection, the term `peak demand reduction' means the 
                removal of electrical demand (kW) on the utility grid 
                system during the daily time period of high electrical 
                demand. The peak demand reduction shall be determined 
                based on Energy Efficiency Ratio (EER) standards for 
                residential and commercial air conditioning equipment, 
                established under the Energy Policy and Conservation 
                Act of 1975.''.
    (d) Effective Date.--The amendments made by this Act shall apply to 
taxable years beginning after December 31, 2008.