To amend the Internal Revenue Code of 1986 to provide for home energy conservation bonds.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Home Energy Conservation Act of 
2010''.

SEC. 2. HOME ENERGY CONSERVATION BONDS.

    (a) In General.--Subpart I 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. 54G. HOME ENERGY CONSERVATION BONDS.

    ``(a) Home Energy Conservation Bond.--For purposes of this 
subchapter, the term `home energy conservation bond' means any bond 
issued as part of an issue if--
            ``(1) 100 percent of the available project proceeds of such 
        issue are to be used to make qualified residential energy 
        efficiency assistance grants and loans,
            ``(2) not less than 20 percent of the available project 
        proceeds of such issue are to be used to make qualified low-
        income residential energy efficiency assistance grants and 
        loans,
            ``(3) not less than 10 percent of the available project 
        proceeds of such issue are to be used to make qualified very 
        low-income residential energy efficiency assistance grants,
            ``(4) repayments of principal and applicable interest on 
        financing provided by the issue are used not later than the 
        close of the 3-month period beginning on the date the 
        prepayment (or complete repayment) is received to redeem bonds 
        which are part of the issue or to make qualified residential 
        energy efficiency assistance grants and loans,
            ``(5) the bond is issued by a State or local government, 
        and
            ``(6) the issuer designates such bond for purposes of this 
        section.
    ``(b) Limitation on Amount of Bonds Designated.--The maximum 
aggregate face amount of bonds which may be designated under subsection 
(a) by any issuer shall not exceed the limitation amount allocated 
under subsection (d) to such issuer.
    ``(c) National Limitation on Amount of Bonds Designated.--There is 
a national home energy conservation bond limitation of $2,400,000,000.
    ``(d) Allocations.--
            ``(1) In general.--The limitation under subsection (c) 
        shall be allocated by the Secretary among the States in 
        proportion to the population of the States.
            ``(2) Allocations to largest local governments.--
                    ``(A) In general.--In the case of any State in 
                which there is a large local government, each such 
                local government shall be allocated a portion of such 
                State's allocation which bears the same ratio to the 
                State's allocation (determined without regard to this 
                subparagraph) as the population of such large local 
                government bears to the population of such State.
                    ``(B) Allocation of unused limitation to state.--
                The amount allocated under this subsection to a large 
                local government may be reallocated by such local 
                government to the State in which such local government 
                is located.
                    ``(C) Large local government.--For purposes of this 
                section, the term `large local government' means any 
                municipality or county if such municipality or county 
                has a population of 500,000 or more.
    ``(e) Qualified Residential Energy Efficiency Assistance Grants and 
Loans.--For purposes of this section--
            ``(1) In general.--Qualified residential energy efficiency 
        assistance grants and loans are any grant or low-interest loan, 
        as the case may be, to acquire (including reasonable 
        installation and testing costs) any of the following:
                    ``(A) Any property which meets (at a minimum) the 
                requirements of the Energy Star program and which is to 
                be installed in a dwelling unit.
                    ``(B) Any property not described in subparagraph 
                (A) which meets (at a minimum) the requirements of the 
                Water Sense program and which is to be installed in a 
                dwelling unit.
                    ``(C) Any improvements to a dwelling unit which are 
                made pursuant to a plan which--
                            ``(i) is developed by a Residential Energy 
                        Services Network (RESNET), Building Performance 
                        Institute (BPI), or equivalent, energy 
                        efficiency expert, and
                            ``(ii) is certified by such energy 
                        efficiency expert (based on testing done before 
                        and after such improvements) as resulting in at 
                        least a 20 percent reduction in total household 
                        energy consumption related to heating, cooling, 
                        lighting, and appliances.
                For purposes of this subparagraph, improvements to a 
                dwelling unit for basic health and safety may be taken 
                into account to the extent that such improvements do 
                not exceed 10 percent of the value of the grant or loan 
                and are required under State or local law as a 
                condition of making the other improvement described in 
                this subparagraph.
            ``(2) Dollar limitations.--
                    ``(A) Dwelling unit improvements.--
                            ``(i) In general.--Such term shall not 
                        include any grant or loan for improvements 
                        described in paragraph (1)(C) with respect to 
                        any dwelling unit to the extent that such grant 
                        or loan (when added to all other grants or 
                        loans for such improvements) exceeds $5,000.
                            ``(ii) Increased limitation for certain 
                        principal residences.--In the case of a 
                        dwelling unit which is used as a principal 
                        residence (within the meaning of section 121) 
                        by the recipient of the grant or loan referred 
                        to in clause (i)--
                                    ``(I) clause (i) shall be applied 
                                by substituting `$12,000' for `$5,000' 
                                if such grant or loan would satisfy the 
                                requirements of paragraph (1)(C) if 
                                such paragraph were applied by 
                                substituting `40 percent' for `20 
                                percent', and
                                    ``(II) in any case to which 
                                subclause (I) does not apply, clause 
                                (i) shall be applied by substituting 
                                `$8,000' for `$5,000' if such grant or 
                                loan would satisfy the requirements of 
                                paragraph (1)(C) if such paragraph were 
                                applied by substituting `30 percent' 
                                for `20 percent'.
                            ``(iii) Increased limitation for cash 
                        positive loans.--In the case of a dwelling unit 
                        which is used as a principal residence (within 
                        the meaning of section 121) by the recipient of 
                        a loan with respect to which the reduced energy 
                        costs which result from the improvements 
                        described in paragraph (1)(C) exceed the 
                        payments required under the terms of the loan--
                                    ``(I) clause (i) shall be applied 
                                by substituting `$12,000' for `$5,000', 
                                and
                                    ``(II) clause (ii) shall not apply.
                    ``(B) Reduction in water consumption.--Such term 
                shall not include any grant or loan for property 
                described in paragraph (1)(B) with respect to any 
                dwelling unit to the extent that such grant or loan 
                (when added to all other grants or loans for such 
                property) exceeds $500.
            ``(3) Low-interest loan.--The term `low interest loan' 
        means any loan which charges interest at a rate which does not 
        exceed the applicable Federal rate in effect under section 
        1288(b)(1) determined as of the issuance of the loan.
            ``(4) Exclusion of certain property.--The following 
        property shall not be taken into account for purposes of 
        paragraph (1):
                    ``(A) Any equipment used in connection with a 
                swimming pool, hot tub, or similar property.
                    ``(B) Any television.
                    ``(C) Any device for converting digital signal to 
                analog.
                    ``(D) Any DVD player.
                    ``(E) Any video cassette recorder (VCR).
                    ``(F) Any audio equipment.
                    ``(G) Any cordless phone.
                    ``(H) Any other item of property where there is 
                substantial recreational use.
    ``(f) Qualified Low-Income Residential Efficiency Assistance Grants 
and Loans.--
            ``(1) In general.--Qualified low-income residential energy 
        efficiency assistance grants and loans are any qualified 
        residential energy efficiency assistance grant or loan, as the 
        case may be, with respect to a dwelling unit which is occupied 
        (at the time of the grant or loan) by individuals whose income 
        is 100 percent or less of area median gross income. Rules 
        similar to the rules of section 142(d)(2)(B) shall apply for 
        purposes of this paragraph.
            ``(2) Restriction to grants and very low interest loans.--
        Such term shall not include any loan unless the rate of 
        interest on such loan does not exceed the excess of--
                    ``(A) the applicable Federal rate in effect under 
                section 1288(b)(1) determined as of the issuance of the 
                loan, over
                    ``(B) 100 basis points.
    ``(g) Qualified Very Low-Income Residential Efficiency Assistance 
Grants.--For purposes of this section, qualified very low-income 
residential energy efficiency assistance grants are any qualified low-
income residential energy efficiency assistance grant with respect to a 
dwelling unit which is occupied (at the time of the grant) by 
individuals whose income is 50 percent or less of area median gross 
income. Rules similar to the rules of section 142(d)(2)(B) shall apply 
for purposes of this paragraph.
    ``(h) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Applicable interest.--The term `applicable interest' 
        means, with respect to any loan, so much of any interest on 
        such loan which exceeds 1 percentage point.
            ``(2) Special rule relating to arbitrage.--An issue shall 
        not be treated as failing to meet the requirements of section 
        54A(d)(4)(A) by reason of any investment of available project 
        proceeds in qualified residential energy efficiency assistance 
        loans.
            ``(3) Exclusion of administrative expenses.--The amount 
        treated as used to make any grant or loan described in this 
        section shall not exceed the amount of such grant or loan.
            ``(4) Population.--The population of any State or local 
        government shall be determined as provided in section 146(j) 
        for the calendar year which includes the date of the enactment 
        of this section.
            ``(5) Reporting.--
                    ``(A) Reports by issuers.--Issuers of home energy 
                conservation bonds shall, not later than 6 months after 
                the expenditure period (as defined in section 54A) and 
                annually thereafter until the last such bond is 
                redeemed, submit reports to the Secretary regarding 
                such bonds, including information regarding--
                            ``(i) the number and monetary value of 
                        loans and grants provided and the purposes for 
                        which provided,
                            ``(ii) the number of dwelling units the 
                        energy efficiency of which improved as result 
                        of such loans and grants,
                            ``(iii) the types of property described in 
                        subparagraphs (A) and (B) of subsection (e)(1) 
                        installed as a result of such loans and grants 
                        and the projected energy savings with respect 
                        to such property, and
                            ``(iv) the projected energy savings as a 
                        result of such loans and grants for 
                        improvements described in subsection (e)(1)(C).
                    ``(B) Report to congress.--Not later than 12 months 
                after receipt of the first report under subparagraph 
                (A) and annually thereafter until the last such report 
                is required to be submitted, the Secretary, in 
                consultation with the Secretary of Energy and the 
                Administrator of the Environmental Protection Agency, 
                shall submit a report to Congress regarding the bond 
                program under this section, including information 
                regarding--
                            ``(i) the aggregate of each category of 
                        information described in subparagraph (A) 
                        (including any independent assessment of 
                        projected energy savings), and
                            ``(ii) an estimate of the amount of 
                        greenhouse gas emissions reduced as a result of 
                        such bond program.''.
    (b) Treatment as a Specified Tax Credit Bond for Purposes of Direct 
Payment Provisions.--Subparagraph (A) of section 6431(f)(3) of such 
Code is amended by striking ``or'' at the end of clause (iii), by 
striking ``and'' at the end of clause (iv) and inserting ``or'', and by 
adding at the end the following new clause:
                            ``(v) a home energy conservation bond (as 
                        defined in section 54G), and''.
    (c) Conforming Amendments.--
            (1) Paragraph (1) of section 54A(d) of such Code is amended 
        by striking ``or'' at the end of subparagraph (D), by inserting 
        ``or'' at the end of subparagraph (E), and by inserting after 
        subparagraph (E) the following new subparagraph:
                    ``(F) a home energy conservation bond,''.
            (2) Subparagraph (C) of section 54A(d)(2) 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) in the case of a home energy 
                        conservation bond, a purpose specified in 
                        section 54G(a)(1).''.
            (3) The table of sections for subpart I of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

``Sec. 54G. Home energy conservation bonds.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to obligations issued after the date of the enactment of this 
Act.

Summary: Home Energy Conservation Act of 2010 - Amends the Internal Revenue Code to allow the issuance of tax-exempt home energy conservation bonds to finance qualified residential energy efficiency assistance grants and loans and extend such grants and loans to low and very-low income taxpayers. Imposes a national home energy conservation bond limitation amount of $2.4 billion and allocates such amount to states in proportion to state population. Defines qualified residential energy efficiency assistance grants and loans as any grant or loan to acquire: (1) any property which meets the requirements of the Energy Star program or the Water Sense program and which is to be installed in a dwelling unit. And (2) any improvement to a dwelling unit made under a plan which is developed by a Residential Energy Services Network, Building Performance Institute, or equivalent energy efficiency expert and is certified by such expert as resulting in at least a 20 reduction in total household energy consumption related to heating, cooling, lighting, and appliances. Imposes dollar limitations on such grants and loans and excludes certain types of property from such grant and loan program, including equipment used in connection with a swimming pool or hot tub, any television, any device for converting a digital signal to analog, any DVD player, video cassette recorder, audio equipment, cordless phone, or other property where there is a substantial recreational use.