SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Residential Solar Energy Act of 
2001''.

SEC. 2. CREDIT TO HOLDERS OF RESIDENTIAL SOLAR ENERGY BONDS.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 30B. CREDIT TO HOLDERS OF RESIDENTIAL SOLAR ENERGY BONDS.

    ``(a) Allowance of Credit.--In the case of a taxpayer who holds a 
Residential Solar Energy Bond on a credit allowance date of such bond 
which occurs during the taxable year, there shall be allowed as a 
credit against the tax imposed by this chapter for such taxable year an 
amount equal to the sum of the credits determined under subsection (b) 
with respect to credit allowance dates during such year on which the 
taxpayer holds such bond.
    ``(b) Amount of Credit.--
            ``(1) In general.--The amount of the credit determined 
        under this subsection with respect to any credit allowance date 
        for a Residential Solar Energy Bond is 25 percent of the annual 
        credit determined with respect to such bond.
            ``(2) Annual credit.--The annual credit determined with 
        respect to any Residential Solar Energy Bond is the product 
        of--
                    ``(A) the applicable credit rate, multiplied by
                    ``(B) the outstanding face amount of the bond.
            ``(3) Applicable credit rate.--For purposes of paragraph 
        (1), the applicable credit rate with respect to an issue is the 
        rate equal to an average market yield (as of the day before the 
        date of issuance of the issue) on outstanding long-term 
        corporate debt obligations (determined under regulations 
        prescribed by the Secretary).
            ``(4) Special rule for issuance and redemption.--In the 
        case of a bond which is issued during the 3-month period ending 
        on a credit allowance date, the amount of the credit determined 
        under this subsection with respect to such credit allowance 
        date shall be a ratable portion of the credit otherwise 
        determined based on the portion of the 3-month period during 
        which the bond is outstanding. A similar rule shall apply when 
        the bond is redeemed.
    ``(c) Residential Solar Energy Bond.--For purposes of this 
section--
            ``(1) In general.--The term `Residential Solar Energy Bond' 
        means any bond issued as part of an issue if--
                    ``(A) 95 percent or more of the proceeds of such 
                issue are to be used to make qualified solar energy 
                loans,
                    ``(B) the bond is issued by a qualified utility,
                    ``(C) the issuer designates such bond for purposes 
                of this section, and
                    ``(D) the term of each bond which is part of such 
                issue does not exceed 15 years.
            ``(2) Qualified solar energy loan.--
                    ``(A) In general.--The term `qualified solar energy 
                loan' means any loan without interest to the owner of 
                any qualified residential property for the purchase and 
                installation of photovoltaic cells on such property but 
                only if--
                            ``(i) the excess of the electricity 
                        produced by such cells over the electricity 
                        consumed at the residential property is 
                        transmitted from such property for use by 
                        others,
                            ``(ii) the net electricity produced or 
                        consumed at the residential property is 
                        metered,
                            ``(iii) the owner receives a credit against 
                        future electricity consumption for the excess 
                        described in clause (i),
                            ``(iv) the principal amount of the loan is 
                        payable in equal installments over 15 years 
                        (or, if shorter, the period specified by the 
                        utility), and
                            ``(v) the loan is made under a program of 
                        the utility that--
                                    ``(I) specifies an approved list of 
                                photovoltaic cell equipment and 
                                installers, and
                                    ``(II) contains other safeguards to 
                                ensure that the loan is used for its 
                                intended purpose.
                    ``(B) Qualified utility.--The term `qualified 
                utility' means any entity (including a governmental 
                unit) engaged in the sale of electrical energy at 
                retail in the United States
                    ``(C) Qualified residential property.--The term 
                `qualified residential property' means any single-
                family or multi-family residence.
    ``(d) Limitation on Amount of Bonds Designated.--
            ``(1) In general.--The maximum aggregate face amount of 
        bonds which may be designated under subsection (c)(1) by any 
        qualified utility shall not exceed the limitation amount 
        allocated to such utility under paragraph (3).
            ``(2) National limitation on amount of bonds designated.--
        There is a national Residential Solar Energy Bond limitation of 
        $24,000,000,000.
            ``(3) Allocation of limitation among utilities.--
                    ``(A) In general.--The national Residential Solar 
                Energy Bond limitation shall be allocated by the 
                Secretary of Energy during 2002, 2003, 2004, and 2005 
                to qualified utilities. In making such allocations, 
                such Secretary shall give priorities to qualified 
                utilities which provide subsidies (other than through 
                the use of such Bonds) for the purchase and 
                installation by residential customers of photovoltaic 
                cells on their residences.
                    ``(B) Unused allocations.--Any allocation made to a 
                qualified utility which is not used within 6 months 
                after the date of the allocation may be reallocated by 
                the Secretary of Energy.
    ``(e) Limitation Based on Amount of Tax.--
            ``(1) In general.--The credit allowed under subsection (a) 
        for any taxable year shall not exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under part 
                IV of subchapter A (other than subpart C thereof, 
                relating to refundable credits).
            ``(2) Carryover of unused credit.--If the credit allowable 
        under subsection (a) exceeds the limitation imposed by 
        paragraph (1) for such taxable year, such excess shall be 
        carried to the succeeding taxable year and added to the credit 
        allowable under subsection (a) for such taxable year.
    ``(f) Other Definitions.--For purposes of this section--
            ``(1) Credit allowance date.--The term `credit allowance 
        date' means--
                    ``(A) March 15,
                    ``(B) June 15,
                    ``(C) September 15, and
                    ``(D) December 15.
        Such term includes the last day on which the bond is 
        outstanding.
            ``(2) Bond.--The term `bond' includes any obligation.
    ``(g) Credit Included in Gross Income.--Gross income includes the 
amount of the credit allowed to the taxpayer under this section 
(determined without regard to subsection (e)) and the amount so 
included shall be treated as interest income.
    ``(h) Special Rules Relating to Arbitrage.--
            ``(1) In general.--A bond shall not be treated as failing 
        to meet the requirements of subsection (c)(1) solely by reason 
        of the fact that the proceeds of the issue of which such bond 
        is a part are invested for a reasonable temporary period until 
        such proceeds are used in making qualified solar energy loans.
            ``(2) Earnings on proceeds.--Any earnings on proceeds 
        during the temporary period shall be treated as proceeds of the 
        issue for purposes of applying subsection (c)(1) and paragraph 
        (1) of this subsection.
            ``(3) Treatment of loan repayments.--Principal repayments 
        received during any calendar quarter shall not be treated as 
        failing to meet the requirements of subsection (c)(1) if, 
        before the end of the following calendar quarter, the amount of 
        such repayments is used to make qualified solar energy loans, 
        to redeem residential solar energy bonds, or to acquire zero 
        interest State and local government series bonds. The term of a 
        loan made from such repayments may extend beyond the last day 
        that any bond issued as part of the issue financing the loan 
        being repaid is outstanding; and, if so, the requirement that a 
        loan be without interest shall not apply to the period after 
        such last day.
    ``(i) Other Special Rules.--
            ``(1) Bonds held by regulated investment companies.--If any 
        Residential Solar Energy Bond is held by a regulated investment 
        company, the credit determined under subsection (a) shall be 
        allowed to shareholders of such company under procedures 
        prescribed by the Secretary.
            ``(2) Credits may be stripped.--Under regulations 
        prescribed by the Secretary--
                    ``(A) In general.--There may be a separation 
                (including at issuance) of the ownership of a 
                Residential Solar Energy Bond and the entitlement to 
                the credit under this section with respect to such 
                bond. In case of any such separation, the credit under 
                this section shall be allowed to the person who on the 
                credit allowance date holds the instrument evidencing 
                the entitlement to the credit and not to the holder of 
                the bond.
                    ``(B) Certain rules to apply.--In the case of a 
                separation described in subparagraph (A), the rules of 
                section 1286 shall apply to the Residential Solar 
                Energy Bond as if it were a stripped bond and to the 
                credit under this section as if it were a stripped 
                coupon.
            ``(3) Treatment for estimated tax purposes.--Solely for 
        purposes of sections 6654 and 6655, the credit allowed by this 
        section to a taxpayer by reason of holding a Residential Solar 
        Energy Bond on a credit allowance date shall be treated as if 
        it were a payment of estimated tax made by the taxpayer on such 
        date.
            ``(4) Credit may be transferred.--Nothing in any law or 
        rule of law shall be construed to limit the transferability of 
        the credit allowed by this section through sale and repurchase 
        agreements.
            ``(5) Reporting.--Issuers of Residential Solar Energy Bonds 
        shall submit reports similar to the reports required under 
        section 149(e).
    ``(j) Recapture of Portion of Credit Where Cessation of Qualified 
Use.--
            ``(1) In general.--If any bond which when issued purported 
        to be a Residential Solar Energy Bond ceases to meet the 
        requirements of subsection (c), the issuer shall pay to the 
        United States (at the time required by the Secretary) an amount 
        equal to the aggregate of the credits allowable under this 
        section (determined without regard to subsection (e)) for 
        taxable years ending during the calendar year in which such 
        cessation occurs and the 2 preceding calendar years.
            ``(2) Failure to pay.--If the issuer fails to timely pay 
        the amount required by paragraph (1) with respect to any issue, 
        the tax imposed by this chapter on each holder of any bond 
        which is part of such issue shall be increased (for the taxable 
        year of the holder in which such cessation occurs) by the 
        aggregate decrease in the credits allowed under this section to 
        such holder for taxable years beginning in such 3 calendar 
        years which would have resulted solely from denying any credit 
        under this section with respect to such issue for such taxable 
        years.
            ``(3) Special rules.--
                    ``(A) Tax benefit rule.--The tax for the taxable 
                year shall be increased under paragraph (2) only with 
                respect to credits allowed by reason of this section 
                which were used to reduce tax liability. In the case of 
                credits not so used to reduce tax liability, the 
                carryforwards and carrybacks under section 39 shall be 
                appropriately adjusted.
                    ``(B) No credits against tax.--Any increase in tax 
                under paragraph (2) shall not be treated as a tax 
                imposed by this chapter for purposes of determining--
                            ``(i) the amount of any credit allowable 
                        under this part, or
                            ``(ii) the amount of the tax imposed by 
                        section 55.''
    (b) Reporting.--Subsection (d) of section 6049 of such Code 
(relating to returns regarding payments of interest) is amended by 
adding at the end the following new paragraph:
            ``(8) Reporting of credit on residential solar energy 
        bonds.--
                    ``(A) In general.--For purposes of subsection (a), 
                the term `interest' includes amounts includible in 
                gross income under section 30B(g) and such amounts 
                shall be treated as paid on the credit allowance date 
                (as defined in section 30B(f)(1)).
                    ``(B) Reporting to corporations, etc.--Except as 
                otherwise provided in regulations, in the case of any 
                interest described in subparagraph (A) of this 
                paragraph, subsection (b)(4) of this section shall be 
                applied without regard to subparagraphs (A), (H), (I), 
                (J), (K), and (L)(i).
                    ``(C) Regulatory authority.--The Secretary may 
                prescribe such regulations as are necessary or 
                appropriate to carry out the purposes of this 
                paragraph, including regulations which require more 
                frequent or more detailed reporting.''
    (c) Conforming Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

                              ``Sec. 30B. Credit to holders of 
                                        Residential Solar Energy 
                                        Bonds.''
    (d) Effective Date.--The amendments made by this section shall 
apply to obligations issued after December 31, 2001.
    (e) Guidelines for Applications.--Not later than January 1, 2002, 
guidelines specifying the criteria to be used in approving applications 
under section 30B(d)(3) of the Internal Revenue Code of 1986 (as added 
by this Act) shall be developed and published by the Secretary of 
Energy in the Federal Register.
Residential Solar Energy Act of 2001 - Amends the Internal Revenue Code to allow a credit, as specified, to holders of residential solar energy bonds. Defines such bonds.
To amend the Internal Revenue Code of 1986 to provide an interest-free source of capital to cover the costs of installing residential solar energy equipment.