To amend the Internal Revenue Code of 1986 to allow a credit against income tax for certain energy efficient property placed in service or installed in an existing principal residence or property used by businesses.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Energy Efficiency Investment Act of 
2001''.

SEC. 2. CREDIT FOR CERTAIN ENERGY EFFICIENT PROPERTY IN RESIDENCES AND 
              BUSINESSES.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 30A the following new section:

``SEC. 30B. CERTAIN ENERGY EFFICIENT PROPERTY IN RESIDENCES AND 
              BUSINESSES.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to 25 percent of the amount paid or incurred by the taxpayer for 
qualified energy property placed in service or installed by the 
taxpayer during such taxable year.
    ``(b) Qualified Energy Property.--For purposes of this section, the 
term `qualified energy property' means any property--
            ``(1) which is--
                    ``(A) an energy efficient building envelope 
                component which is Energy Star qualified, and
                    ``(B) any energy efficient heating or cooling 
                equipment (including boilers) which is Energy Star 
                qualified,
            ``(2) which, in the case of an individual, is installed in 
        or on an existing residence--
                    ``(A) located in the United States, and
                    ``(B) owned and used by the taxpayer as the 
                taxpayer's principal residence at the time the property 
                is placed in service or installed,
            ``(3) the original use of which commences with the 
        taxpayer, and
            ``(4) which has a useful life of at least 5 years.
    ``(c) Other Definitions.--For purposes of this section--
            ``(1) Building envelope component.--The term `building 
        envelope component' shall have the same meaning as set forth in 
        section 434.201 of title 10 of the Code of Federal Regulations.
            ``(2) Principal residence.--The term `principal residence' 
        shall have the same meaning as when used in section 121.
            ``(3) Energy star qualified.--The term `Energy Star 
        qualified' means property which--
                    ``(A) meets the guidelines, specifications, and 
                performance levels of the Energy Star program jointly 
                managed by the Environmental Protection Agency and the 
                Department of Energy, including guidelines, 
                specifications, and performance levels for the climate 
                region in which a residence is located, and
                    ``(B) displays the Energy Star label at the time 
                the property is placed in service or installed.
    ``(d) 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 this 
                part (other than under this section and subpart C 
                thereof, relating to refundable credits) and section 
                1397E.
            ``(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.
    ``(e) Special Rules.--For purposes of this section:
            ``(1) Tenant-stockholder in cooperative housing 
        corporation.--In the case of an individual who is a tenant-
        stockholder (as defined in section 216(b)(2)) in a cooperative 
        housing corporation (as defined in section 216(b)(1)), such 
        individual shall be treated as having paid his tenant-
        stockholder's proportionate share (as defined in section 
        216(b)(3)) of any expenditures paid or incurred for qualified 
        energy property by such corporation, and such credit shall be 
        allocated appropriately to such individual.
            ``(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 expenditures paid or incurred 
                for qualified energy property by such association, and 
                such credit shall be allocated appropriately to such 
                individual.
                    ``(B) Condominium management association.--For 
                purposes of this paragraph, the term `condominium 
                management association' means an organization which 
                meets the requirements of section 528(c)(2) with 
                respect to a condominium project of which substantially 
                all of the units are used by individuals as residences.
            ``(3) Expenditures for labor included.--For purposes of 
        this section, the amount paid or incurred by the taxpayer for 
        qualified energy property shall also include expenditures for 
        labor costs properly allocable to the onsite preparation, 
        assembly, and installation of such property.
            ``(4) Allocation to nonbusiness use in certain cases.--In 
        the case of an individual, if less than 80 percent of the use 
        of qualified energy property placed in service or installed is 
        for nonbusiness purposes, only that portion of the expenditure 
        paid or incurred for such property which is properly allocable 
        to use for nonbusiness purposes shall be eligible for the 
        credit provided by this section.
    ``(f) Basis Adjustment.--For purposes of this subtitle, if a credit 
is allowed under this section for any expenditure with respect to a 
residence or other property, the basis of such residence or other 
property shall be reduced by the amount of the credit so allowed.
    ``(g) Applicability.--Subsection (a) shall apply to qualified 
energy property placed in service or installed on or after January 1, 
2001.''.
    (b) Conforming Amendment.--Subsection (a) of section 1016 of such 
Code (relating to general rule for adjustments to basis) 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) in the case of a residence or other property with 
        respect to which a credit was allowed under section 30B, to the 
        extent provided in section 30B(f).''.
    (c) Clerical Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 30A the following new 
item:

                              ``Sec. 30B. Certain energy efficient 
                                        property in residences and 
                                        businesses.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2001.

Summary: Energy Efficiency Investment Act of 2001 - Amends the Internal Revenue Code to allow a limited credit for qualified energy property placed in service or installed in a US-sited principal residence.