SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Energy Efficient Affordable Home Act 
of 1998''.

SEC. 2. CREDIT FOR PURCHASE OF NEW ENERGY EFFICIENT HOME AND OF ENERGY 
              EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25A the 
following new section:

``SEC. 25B. PURCHASE OF NEW ENERGY EFFICIENT HOME AND OF ENERGY 
              EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to--
            ``(1) the purchase price of each new energy efficient 
        dwelling purchased by the taxpayer during the taxable year, and
            ``(2) 20 percent of the cost paid or incurred by the 
        taxpayer for qualified energy efficiency improvements installed 
        during such taxable year.
    ``(b) Limitations.--
            ``(1) Maximum credit.--The credit allowed by this section 
        with respect to a dwelling shall not exceed $2,000.
            ``(2) Prior credit amounts for taxpayer on same dwelling 
        taken into account.--If a credit was allowed to the taxpayer 
        under subsection (a) with respect to a dwelling in 1 or more 
        prior taxable years, the amount of the credit otherwise 
        allowable for the taxable year with respect to that dwelling 
        shall not exceed the amount of $2,000 reduced by the sum of the 
        credits allowed under subsection (a) to the taxpayer with 
        respect to the dwelling for all prior taxable years.
    ``(c) Carryforward of Unused Credit.--If the credit allowable under 
subsection (a) exceeds the limitation imposed by section 26(a) for such 
taxable year reduced by the sum of the credits allowable under subpart 
A of part IV of subchapter A (other than this section), such excess 
shall be carried to the succeeding taxable year and added to the credit 
allowable under subsection (a) for such taxable year.
    ``(d) Definitions.--For purposes of this section--
            ``(1) New energy efficient dwelling.--The term `new energy 
        efficient dwelling' means a dwelling--
                    ``(A) located in the United States,
                    ``(B) owned and used by the taxpayer as the 
                taxpayer's principal residence (within the meaning of 
                section 121),
                    ``(C) the construction of which is substantially 
                completed after December 31, 1998,
                    ``(D) the original use of which commences with the 
                taxpayer, and
                    ``(E) which is certified to exceed by 30 percent or 
                more the applicable standards for energy efficiency 
                based upon energy use or building component performance 
                established for comparable dwellings under the 
                applicable Model Energy Code (promulgated by the 
                Council of American Building Officials) or to exceed 
                such alternative standards for energy efficiency as the 
                Secretary may prescribe in consultation with the 
                Secretary of Energy.
            ``(2) Purchase price.--The term `purchase price' means the 
        adjusted basis of the dwelling on the date of its acquisition 
        by the taxpayer.
            ``(3) Qualified energy efficiency improvements.--The term 
        `qualified energy efficiency improvements' means any energy 
        efficient building envelope component, and any high energy 
        efficiency heating or cooling appliance, if--
                    ``(A) such component or appliance is installed in 
                or on a dwelling--
                            ``(i) located in the United States, and
                            ``(ii) owned and used by the taxpayer as 
                        the taxpayer's principal residence (within the 
                        meaning of section 121),
                    ``(B) the original use of such component or 
                appliance commences with the taxpayer, and
                    ``(C) such component or appliance reasonably can be 
                expected to remain in use for at least 5 years.
            ``(4) Energy efficient building envelope component.--The 
        term `energy efficient building envelope component' means--
                    ``(A) insulation material which is specifically and 
                primarily designed to reduce, when installed in or on a 
                dwelling, the heat loss or gain of such dwelling,
                    ``(B) exterior windows that are certified to equal 
                or exceed the applicable standards for energy 
                efficiency (as determined by the National Fenestration 
                Rating Council or similar body), and
                    ``(C) such other components of the building 
                envelope as the Secretary may prescribe in consultation 
                with the Secretary of Energy.
            ``(5) High energy efficiency heating or cooling 
        appliance.--The term `high energy efficiency heating or cooling 
        appliance' means mechanical heating or cooling equipment 
        (including a hot water heater) which is certified by the 
        manufacturer as having an energy efficiency rating that equals 
        or exceeds 150 percent of the applicable minimum energy 
        efficiency standard established under the National Appliance 
        Energy Conservation Act of 1987 (Public Law 100-12).
    ``(e) Certification.--
            ``(1) New dwelling certifications.--A certification 
        described in subsection (d)(1)(E) with respect to a dwelling 
        shall be made by the person who constructed the dwelling or by 
        a local building regulatory authority.
            ``(2) Windows.--A certification described in subsection 
        (d)(4)(B) with respect to a window shall be made by the person 
        who sold or installed the window.
            ``(3) Form of certifications.--Certifications referred to 
        in this subsection shall be in such form as the Secretary shall 
        prescribe, and, except in the case of a certification by a 
        representative of a local building regulatory authority, shall 
        include the taxpayer identification number of the person making 
        the certification.
    ``(f) Special Rules.--
            ``(1) Tenant-stockholder in cooperative housing 
        corporation.--In the case of an individual who is a tenant-
        stockholder (as defined in section 216) in a cooperative 
        housing corporation (as defined in such section), such 
        individual shall be treated as having paid his tenant-
        stockholder's proportionate share (as defined in section 
        216(b)(3)) of the cost of qualified energy efficiency 
        improvements made by such corporation.
            ``(2) Condominiums.--
                    ``(A) In general.--In the case of an individual who 
                is a member of a condominium management association 
                with respect to a condominium which he owns, such 
                individual shall be treated as having paid his 
                proportionate share of the cost of qualified energy 
                efficiency improvements made by such association.
                    ``(B) Condominium management association.--For 
                purposes of this paragraph, the term `condominium 
                management association' means an organization which 
                meets the requirements of paragraph (1) of section 
                528(c) (other than subparagraph (E) thereof) with 
                respect to a condominium project substantially all of 
                the units of which are used as residences.
    ``(g) Basis Adjustment.--For purposes of this subtitle, if a credit 
is allowed under this section for any expenditure with respect to any 
property, the increase in the basis of such property which would (but 
for this subsection) result from such expenditure shall be reduced by 
the amount of the credit so allowed.
    ``(h) Effective Date.--Subsection (a)(1) shall apply to dwellings 
purchased during the period beginning on January 1, 1999, and ending on 
December 31, 2003, and subsection (a)(2) shall apply to qualified 
energy efficiency improvements installed during such period.''.
    (b) Conforming Amendments.--
            (1) Subsection (c) of section 23 of such Code is amended by 
        inserting ``, section 25B, and section 1400C'' after ``other 
        than this section''.
            (2) Subparagraph (C) of section 25(e)(1) of such Code is 
        amended by striking ``section 23'' and inserting ``sections 23, 
        25B, and 1400C''.
            (3) Subsection (d) of section 1400C of such Code is amended 
        by inserting ``and section 25B'' after ``other than this 
        section''.
            (4) Subsection (a) of section 1016 of such Code is amended 
        by striking ``and'' at the end of paragraph (26), by striking 
        the period at the end of paragraph (27) and inserting ``; 
        and'', and by adding at the end the following new paragraph:
            ``(28) to the extent provided in section 25B(g), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25B.''.
            (5) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 25A the following new item:

                              ``Sec. 25B. Purchase of new energy 
                                        efficient home and of energy 
                                        efficiency improvements to 
                                        existing homes.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1998.
Energy Efficient Affordable Home Act of 1998 - Amends the Internal Revenue Code to provide individuals a limited tax credit for the purchase of:  (1)  a new energy efficient affordable home; or (2) energy efficiency improvements to an existing home.
Energy Efficient Affordable Home Act of 1998