I

106TH CONGRESS

2D SESSION H. R. 5345

To amend the Internal Revenue Code of 1986 to provide incentives to

introduce new technologies to reduce energy consumption in buildings.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 29, 2000

Mr. CUNNINGHAM (for himself, Mr. MARKEY, Mr. BILBRAY, Mr. LEWIS of

California, Mr. FARR of California, and Mr. HUNTER) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

incentives to introduce new technologies to reduce energy

consumption in buildings.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Energy Efficient

5 Buildings Incentives Act’’.
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1 SEC. 2. INCENTIVE FOR CERTAIN ENERGY EFFICIENT

2 PROPERTY USED IN BUSINESS.

3 (a) IN GENERAL.—Part VI of subchapter B of chap4 ter 1 of the Internal Revenue Code of 1986 is amended

5 by adding at the end the following new section:

6 ‘‘SEC. 199. ENERGY PROPERTY DEDUCTION.

7 ‘‘(a) IN GENERAL.—There shall be allowed as a de8 duction for the taxable year an amount equal to the sum

9 of—

10 ‘‘(1) the amount determined under subsection

11 (b) for each energy property of the taxpayer placed

12 in service during such taxable year, and

13 ‘‘(2) the energy efficient commercial building

14 amount determined under subsection (f).

15 ‘‘(b) AMOUNT FOR ENERGY PROPERTY.—

16 ‘‘(1) IN GENERAL.—The amount determined

17 under this subsection for the taxable year for each

18 item of energy property shall equal the amount spec19 ified for such property in the following table:

Description of property: Allowable amount is:

Elected solar hot water property ..................................... $1.00 per each

kwh/year of savings.

Photovoltaic property ....................................................... $4.50 per peak

watt.

Natural gas heat pump described in subsection

(d)(2)(C).

$3,000.

Tier 2 energy-efficient building property (other than a

natural gas heat pump).

$1,500.

Tier 1 energy-efficient building property ......................... $750.
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1 ‘‘(2) ELECTED SOLAR HOT WATER PROP2 ERTY.—In the case of elected solar hot water prop3 erty, the taxpayer may elect to substitute ‘$21 per

4 annual Therm of natural gas savings’ for ‘$1.00 per

5 each kwh/year of savings’ in the table contained in

6 paragraph (1).

7 ‘‘(c) ENERGY PROPERTY DEFINED.—

8 ‘‘(1) IN GENERAL.—For purposes of this part,

9 the term ‘energy property’ means any property—

10 ‘‘(A) which is—

11 ‘‘(i) solar energy property,

12 ‘‘(ii) Tier 2 energy-efficient building

13 property, or

14 ‘‘(iii) Tier 1 energy-efficient building

15 property,

16 ‘‘(B)(i) the construction, reconstruction, or

17 erection of which is completed by the taxpayer,

18 or

19 ‘‘(ii) which is acquired by the taxpayer if

20 the original use of such property commences

21 with the taxpayer,

22 ‘‘(C) with respect to which depreciation (or

23 amortization in lieu of depreciation) is allow24 able, and
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1 ‘‘(D) which meets the performance and

2 quality standards, and the certification require3 ments (if any), which—

4 ‘‘(i) have been prescribed by the Sec5 retary by regulations (after consultation

6 with the Secretary of Energy or the Ad7 ministrator of the Environmental Protec8 tion Agency, as appropriate), and

9 ‘‘(ii) are in effect at the time of the

10 acquisition of the property.

11 ‘‘(2) SOLAR ENERGY PROPERTY.—In the case

12 of—

13 ‘‘(A) elected solar hot water property, the

14 regulations under paragraph (1)(D) shall be

15 based on the OG–300 Standard for the Annual

16 Performance of OG–300 Certified Systems of

17 the Solar Rating and Certification Corporation,

18 and

19 ‘‘(B) photovoltaics, such regulations shall

20 be based on the ASTM Standard E 1036 and

21 E 1036M–96 Standard Test Method for Elec22 tric Performance of Nonconcentrator Terres23 trial Photovoltaic Modules and Arrays Using

24 Reference Cells,
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1 to the extent the Secretary determines such stand2 ards carry out the purposes of this section.

3 ‘‘(3) EXCEPTION.—Such term shall not include

4 any property which is public utility property (as de5 fined in section 46(f)(5) as in effect on the day be6 fore the date of the enactment of the Revenue Rec7 onciliation Act of 1990).

8 ‘‘(d) DEFINITIONS RELATING TO TYPES OF ENERGY

9 PROPERTY.—For purposes of this section—

10 ‘‘(1) SOLAR ENERGY PROPERTY.—

11 ‘‘(A) IN GENERAL.—The term ‘solar en12 ergy property’ means equipment which uses

13 solar energy—

14 ‘‘(i) to generate electricity, or

15 ‘‘(ii) to provide hot water for use in a

16 structure.

17 ‘‘(B) ELECTED SOLAR HOT WATER PROP18 ERTY.—

19 ‘‘(i) IN GENERAL.—The term ‘elected

20 solar hot water property’ means property

21 which is solar energy property by reason of

22 subparagraph (A)(ii) and for which an

23 election under this subparagraph is in ef24 fect.
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1 ‘‘(ii) ELECTION.—For purposes of

2 clause (i), a taxpayer may elect to treat

3 property described in clause (i) as elected

4 solar hot water property.

5 ‘‘(C) PHOTOVOLTAIC PROPERTY.—The

6 term ‘photovoltaic property’ means solar energy

7 property which uses a solar photovoltaic process

8 to generate electricity.

9 ‘‘(D) SWIMMING POOLS, ETC., USED AS

10 STORAGE MEDIUM.—The term ‘solar energy

11 property’ shall not include a swimming pool,

12 hot tub, or any other energy storage medium

13 which has a function other than the function of

14 such storage.

15 ‘‘(E) SOLAR PANELS.—No solar panel or

16 other property installed as a roof (or portion

17 thereof) shall fail to be treated as solar energy

18 property solely because it constitutes a struc19 tural component of the structure on which it is

20 installed.

21 ‘‘(2) TIER 2 ENERGY-EFFICIENT BUILDING

22 PROPERTY.—The term ‘Tier 2 energy-efficient build23 ing property’ means—

24 ‘‘(A) an electric heat pump hot water heat25 er that yields an energy factor of 1.7 or greater,
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1 ‘‘(B) an electric heat pump that has a

2 heating system performance factor (HSPF) of

3 9 or greater and a cooling seasonal energy effi4 ciency ratio (SEER) of 15 or greater and a

5 peak energy efficiency ratio (EER) of 12.5 or

6 greater,

7 ‘‘(C) a natural gas heat pump that has a

8 coefficient of performance of not less than 1.25

9 for heating and not less than 0.70 for cooling,

10 ‘‘(D) a central air conditioner that has a

11 cooling seasonal energy efficiency ratio (SEER)

12 of 15 or greater and a peak EER of 12.5 or

13 greater, and

14 ‘‘(E) an advanced natural gas water heater

15 that has an energy factor of at least 0.80.

16 ‘‘(3) TIER 1 ENERGY-EFFICIENT BUILDING

17 PROPERTY.—The term ‘Tier 1 energy-efficient build18 ing property’ means—

19 ‘‘(A) an electric heat pump that has a

20 heating system performance factor (HSPF) of

21 7.5 or greater and a cooling seasonal energy ef22 ficiency ratio (SEER) of 13.5 or greater and a

23 peak energy efficiency ratio (EER) of 11.5 or

24 greater,
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1 ‘‘(B) a central air conditioner that has a

2 cooling seasonal energy efficiency ratio (SEER)

3 of 13.5 or greater and a peak EER of 11.5 or

4 greater, and

5 ‘‘(C) an advanced natural gas water heater

6 that has an energy factor of at least 0.65.

7 ‘‘(e) SPECIAL RULES.—For purposes of this

8 section—

9 ‘‘(1) BASIS REDUCTION.—For purposes of this

10 subtitle, if a deduction is allowed under this section

11 with respect to any energy property, the basis of

12 such property shall be reduced by the amount of the

13 deduction so allowed.

14 ‘‘(2) DOUBLE BENEFIT.—Property which

15 would, but for this paragraph, be eligible for deduc16 tion under more than one provision of this section

17 shall be eligible only under one such provision, the

18 provision specified by the taxpayer.

19 ‘‘(f) ENERGY EFFICIENT COMMERCIAL BUILDING

20 PROPERTY DEDUCTION.—

21 ‘‘(1) DEDUCTION ALLOWED.—For purposes of

22 subsection (a)—

23 ‘‘(A) IN GENERAL.—The energy efficient

24 commercial building property deduction deter25 mined under this subsection is an amount equal
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1 to energy efficient commercial building property

2 expenditures made by a taxpayer for the tax3 able year.

4 ‘‘(B) MAXIMUM AMOUNT OF DEDUC5 TION.—The amount of energy efficient commer6 cial building property expenditures taken into

7 account under subparagraph (A) shall not ex8 ceed an amount equal to the product of—

9 ‘‘(i) $2.25, and

10 ‘‘(ii) the square footage of the build11 ing with respect to which the expenditures

12 are made.

13 ‘‘(C) YEAR DEDUCTION ALLOWED.—The

14 deduction under subparagraph (A) shall be al15 lowed in the taxable year in which the construc16 tion of the building is completed.

17 ‘‘(2) ENERGY EFFICIENT COMMERCIAL BUILD18 ING PROPERTY EXPENDITURES.—For purposes of

19 this subsection, the term ‘energy efficient commer20 cial building property expenditures’ means an

21 amount paid or incurred for energy efficient com22 mercial building property installed on or in connec23 tion with new construction or reconstruction of

24 property—
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1 ‘‘(A) for which depreciation is allowable

2 under section 167,

3 ‘‘(B) which is located in the United States,

4 and

5 ‘‘(C) the construction or erection of which

6 is completed by the taxpayer.

7 Such property includes all residential rental prop8 erty, including low-rise multifamily structures and

9 single family housing property which is not within

10 the scope of Standard 90.1–1999 (described in para11 graph (3)). Such term includes expenditures for

12 labor costs properly allocable to the onsite prepara13 tion, assembly, or original installation of the prop14 erty.

15 ‘‘(3) ENERGY EFFICIENT COMMERCIAL BUILD16 ING PROPERTY.—For purposes of paragraph (2)—

17 ‘‘(A) IN GENERAL.—The term ‘energy effi18 cient commercial building property’ means any

19 property which reduces total annual energy and

20 power costs with respect to the lighting, heat21 ing, cooling, ventilation, and hot water supply

22 systems of the building by 50 percent or more

23 in comparison to a reference building which

24 meets the requirements of Standard 90.1–1999

25 of the American Society of Heating, Refrig-
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1 erating, and Air Conditioning Engineers and

2 the Illuminating Engineering Society of North

3 America using methods of calculation under

4 subparagraph (B) and certified by qualified

5 professionals as provided under paragraph (6).

6 ‘‘(B) METHODS OF CALCULATION.—The

7 Secretary, in consultation with the Secretary of

8 Energy, shall promulgate regulations which de9 scribe in detail methods for calculating and

10 verifying energy and power consumption and

11 cost, taking into consideration the provisions of

12 the 1998 California Nonresidential ACM Man13 ual. These procedures shall meet the following

14 requirements:

15 ‘‘(i) In calculating tradeoffs and en16 ergy performance, the regulations shall

17 prescribe the costs per unit of energy and

18 power, such as kilowatt hour, kilowatt, gal19 lon of fuel oil, and cubic foot or Btu of

20 natural gas, which may be dependent on

21 time of usage.

22 ‘‘(ii) The calculational methodology

23 shall require that compliance be dem24 onstrated for a whole building. If some sys25 tems of the building, such as lighting, are
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1 designed later than other systems of the

2 building, the method shall provide that

3 either—

4 ‘‘(I) the expenses taken into ac5 count under paragraph (1) shall not

6 occur until the date designs for all en7 ergy-using systems of the building are

8 completed,

9 ‘‘(II) the energy performance of

10 all systems and components not yet

11 designed shall be assumed to comply

12 minimally with the requirements of

13 such Standard 90.1–1999, or

14 ‘‘(III) the expenses taken into ac15 count under paragraph (1) shall be a

16 fraction of such expenses based on the

17 performance of less than all energy18 using systems in accordance with

19 clause (iii).

20 ‘‘(iii) The expenditures in connection

21 with the design of subsystems in the build22 ing, such as the envelope, the heating, ven23 tilation, air conditioning and water heating

24 system, and the lighting system shall be al25 located to the appropriate building sub-
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1 system based on system-specific energy

2 cost savings targets in regulations promul3 gated by the Secretary of Energy which

4 are equivalent, using the calculation meth5 odology, to the whole building requirement

6 of 50 percent savings.

7 ‘‘(iv) The calculational methods under

8 this subparagraph need not comply fully

9 with section 11 of such Standard 90.1–

10 1999.

11 ‘‘(v) The calculational methods shall

12 be fuel neutral, such that the same energy

13 efficiency features shall qualify a building

14 for the deduction under this subsection re15 gardless of whether the heating source is a

16 gas or oil furnace or an electric heat pump.

17 ‘‘(vi) The calculational methods shall

18 provide appropriate calculated energy sav19 ings for design methods and technologies

20 not otherwise credited in either such

21 Standard 90.1–1999 or in the 1998 Cali22 fornia Nonresidential ACM Manual, in23 cluding the following:

24 ‘‘(I) Natural ventilation.

25 ‘‘(II) Evaporative cooling.
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1 ‘‘(III) Automatic lighting controls

2 such as occupancy sensors, photocells,

3 and timeclocks.

4 ‘‘(IV) Daylighting.

5 ‘‘(V) Designs utilizing semi-con6 ditioned spaces that maintain ade7 quate comfort conditions without air

8 conditioning or without heating.

9 ‘‘(VI) Improved fan system effi10 ciency, including reductions in static

11 pressure.

12 ‘‘(VII) Advanced unloading

13 mechanisms for mechanical cooling,

14 such as multiple or variable speed

15 compressors.

16 ‘‘(VIII) The calculational meth17 ods may take into account the extent

18 of commissioning in the building, and

19 allow the taxpayer to take into ac20 count measured performance that ex21 ceeds typical performance.

22 ‘‘(C) COMPUTER SOFTWARE.—

23 ‘‘(i) IN GENERAL.—Any calculation

24 under this paragraph shall be prepared by

25 qualified computer software.
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1 ‘‘(ii) QUALIFIED COMPUTER SOFT2 WARE.—For purposes of this subpara3 graph, the term ‘qualified computer soft4 ware’ means software—

5 ‘‘(I) for which the software de6 signer has certified that the software

7 meets all procedures and detailed

8 methods for calculating energy and

9 power consumption and costs as re10 quired by the Secretary,

11 ‘‘(II) which provides such forms

12 as required to be filed by the Sec13 retary in connection with energy effi14 ciency of property and the deduction

15 allowed under this subsection, and

16 ‘‘(III) which provides a notice

17 form which summarizes the energy ef18 ficiency features of the building and

19 its projected annual energy costs.

20 ‘‘(4) ALLOCATION OF DEDUCTION FOR PUBLIC

21 PROPERTY.—In the case of energy efficient commer22 cial building property installed on or in public prop23 erty, the Secretary shall promulgate a regulation to

24 allow the allocation of the deduction to the person

25 primarily responsible for designing the property in
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1 lieu of the public entity which is the owner of such

2 property. Such person shall be treated as the tax

3 payer for purposes of this subsection.

4 ‘‘(5) NOTICE TO OWNER.—The qualified indi5 vidual shall provide an explanation to the owner of

6 the building regarding the energy efficiency features

7 of the building and its projected annual energy costs

8 as provided in the notice under paragraph

9 (3)(C)(ii)(III).

10 ‘‘(6) CERTIFICATION.—

11 ‘‘(A) IN GENERAL.—Except as provided in

12 this paragraph, the Secretary, in consultation

13 with the Secretary of Energy, shall establish re14 quirements for certification and compliance pro15 cedures similar to the procedures under section

16 25B(c)(7).

17 ‘‘(B) QUALIFIED INDIVIDUALS.—Individ18 uals qualified to determine compliance shall be

19 only those individuals who are recognized by an

20 organization certified by the Secretary for such

21 purposes.

22 ‘‘(C) PROFICIENCY OF QUALIFIED INDIVID23 UALS.—The Secretary shall consult with non24 profit organizations and State agencies with ex25 pertise in energy efficiency calculations and in-
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1 spections to develop proficiency tests and train2 ing programs to qualify individuals to determine

3 compliance.

4 ‘‘(g) TERMINATION.—This section shall not apply

5 with respect to—

6 ‘‘(1) any energy property placed in service after

7 December 31, 2006, and

8 ‘‘(2) any energy efficient commercial building

9 property expenditures in connection with property—

10 ‘‘(A) the plans for which are not certified

11 under subsection (f)(6) on or before December

12 31, 2006, and

13 ‘‘(B) the construction of which is not com14 pleted on or before December 31, 2008.’’.

15 (b) CONFORMING AMENDMENTS.—

16 (1) Section 48(a)(3)(A) of such Code is amend17 ed to read as follows:

18 ‘‘(A) which is equipment used to produce,

19 distribute, or use energy derived from a geo20 thermal deposit (within the meaning of section

21 613(e)(2)), but only, in the case of electricity

22 generated by geothermal power, up to (but not

23 including) the electrical transmission stage,’’.

24 (2) Subparagraph (B) of section 168(e)(3) of

25 such Code is amended—
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1 (A) in clause (vi)(I)—

2 (i) by striking ‘‘section 48(a)(3)’’ and

3 inserting ‘‘section 199(d)(1)’’, and

4 (ii) by striking ‘‘clause (i)’’ and in5 serting ‘‘such subparagraph (A)’’, and

6 (B) in the last sentence, by striking ‘‘sec7 tion 48(a)(3)’’ and inserting ‘‘section

8 199(c)(3)’’.

9 (3) Section 1016(a) of such Code is amended

10 by striking ‘‘and’’ at the end of paragraph (26), by

11 striking the period at the end of paragraph (27) and

12 inserting ‘‘, and’’, and by inserting the following new

13 paragraph:

14 ‘‘(28) for amounts allowed as a deduction under

15 section 199(a).’’.

16 (c) CLERICAL AMENDMENT.—The table of sections

17 for part VI of subchapter B of chapter 1 of such Code

18 is amended by adding at the end the following new item:

‘‘Sec. 199. Energy property deduction.’’.

19 (d) AUTHORIZATION OF APPROPRIATIONS.—There

20 are authorized to be appropriated to the Department of

21 Energy out of amounts not already appropriated such

22 sums as necessary to carry out this section.

23 (e) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to taxable years beginning after

25 December 31, 2000.
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1 SEC. 3. CREDIT FOR CERTAIN NONBUSINESS ENERGY

2 PROPERTY.

3 (a) IN GENERAL.—Subpart A of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of

5 1986 (relating to nonrefundable personal credits) is

6 amended by inserting after section 25A the following new

7 section:

8 ‘‘SEC. 25B. NONBUSINESS ENERGY PROPERTY.

9 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in10 dividual, there shall be allowed as a credit against the tax

11 imposed by this chapter for the taxable year an amount

12 equal to the sum of—

13 ‘‘(1) the amount determined under subsection

14 (b) for each qualified energy property of the tax15 payer placed in service during such taxable year, and

16 ‘‘(2) the credit amount specified in the fol17 lowing table for a new, highly energy-efficient prin18 cipal residence:

‘‘New, highly energy-efficient

principal residence:

Credit amount:

30 percent property ........................................................................... $750

50 percent property ........................................................................... $2,000.

19 ‘‘(b) AMOUNT FOR QUALIFIED ENERGY PROP20 ERTY.—

21 ‘‘(1) RESIDENTIAL ENERGY PROPERTY EX22 PENDITURES.—Except as provided in paragraph (2),

23 the amount determined under this subsection for the
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1 taxable year for each item of qualified energy prop2 erty shall equal the amount of residential energy

3 property expenditures made by the taxpayer with re4 spect to such property during such taxable year.

5 ‘‘(2) SOLAR HOT WATER PROPERTY; PHOTO6 VOLTAIC PROPERTY.—

7 ‘‘(A) IN GENERAL.—In the case of solar

8 hot water property and photovoltaic property,

9 the amount determined under this subsection

10 for the taxable year shall equal the amount

11 specified for such property in the following

12 table:

Description of property: Allowable amount is:

Elected solar hot water property ..................................... 35¢ per each

kwh/year of savings.

Photovoltaic property ....................................................... $1.50 per peak

watt.

13 ‘‘(B) ELECTED SOLAR HOT WATER PROP14 ERTY.—In the case of elected solar hot water

15 property, the taxpayer may elect to substitute

16 ‘$7 per annual Therm of natural gas savings’

17 for ‘35¢ per each kwh/year of savings’ in the

18 table contained in subparagraph (A).

19 ‘‘(3) MAXIMUM AMOUNT.—In the case of prop20 erty described in the following table, the amount of

21 expenditures taken into account under paragraph
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1 (1) and the amount determined under paragraph (2)

2 for the taxable year for each item of qualified energy

3 property with respect to a dwelling unit shall not

4 exceed the amount specified for such property in

5 such table:

‘‘Description of property item: Maximum allowable

credit amount is:

Tier 2 energy-efficient building property (other than a

natural gas heat pump).

$500.

Natural gas heat pump described in section

199(d)(2)(C).

$1,000.

Tier 1 energy-efficient building property ......................... $ 250.

Solar hot water property ................................................. $1,000.

Photovoltaic property ....................................................... $6,000.

6 ‘‘(c) DEFINITIONS.—For purposes of this section—

7 ‘‘(1) RESIDENTIAL ENERGY PROPERTY EX8 PENDITURES.—The term ‘residential energy prop9 erty expenditures’ means expenditures made by the

10 taxpayer for qualified energy property installed on or

11 in connection with a dwelling unit which—

12 ‘‘(A) is located in the United States, and

13 ‘‘(B) is used by the taxpayer as a resi14 dence.

15 Such term includes expenditures for labor costs

16 properly allocable to the onsite preparation, assem17 bly, or original installation of the property.

18 ‘‘(2) QUALIFIED ENERGY PROPERTY.—

19 ‘‘(A) IN GENERAL.—The term ‘qualified

20 energy property’ means—
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1 ‘‘(i) energy-efficient building property,

2 ‘‘(ii) solar hot water property, and

3 ‘‘(iii) photovoltaic property.

4 ‘‘(B) SWIMMING POOL, ETC., USED AS

5 STORAGE MEDIUM; SOLAR PANELS.—For pur6 poses of this paragraph, the provisions of sub7 paragraphs (D) and (E) section 199(d)(1) shall

8 apply.

9 ‘‘(C) REQUIRED STANDARDS.—Property

10 described under subparagraph (A) shall meet

11 the performance and quality standards and cer12 tification standards of paragraphs (1)(D) and

13 (2) of section 199(c).

14 ‘‘(3) ENERGY-EFFICIENT BUILDING PROP15 ERTY.—The term ‘energy-efficient building property’

16 has the same meaning given the terms ‘Tier 2 en17 ergy-efficient property’ and ‘Tier 1 energy-efficient

18 property’ in paragraphs (2) and (3) of section

19 199(d), respectively.

20 ‘‘(4) SOLAR HOT WATER PROPERTY.—The term

21 ‘solar hot water property’ means property which,

22 when installed in connection with a structure, uses

23 solar energy for the purpose of providing hot water

24 for use within such structure.
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1 ‘‘(5) PHOTOVOLTAIC PROPERTY.—The term

2 ‘photovoltaic property’ has the same meaning given

3 such term in section 199(d)(1)(C).

4 ‘‘(6) RESIDENCE.—For purposes of paragraph

5 (1)(B), the term ‘residence’ has the same meaning

6 as when the term ‘principal residence’ is used in sec7 tion 121, except no ownership requirement shall be

8 imposed.

9 ‘‘(7) HIGHLY ENERGY-EFFICIENT PRINCIPAL

10 RESIDENCE.—

11 ‘‘(A) IN GENERAL.—Property is a highly

12 energy-efficient principal residence if—

13 ‘‘(i) such property is located in the

14 United States,

15 ‘‘(ii) the use of such property com16 mences with the taxpayer and is, at the

17 time of such use, the principal residence of

18 the taxpayer, and

19 ‘‘(iii) such property is certified before

20 such use commences as being 50 percent

21 property or 30 percent property.

22 ‘‘(B) 50 OR 30 PERCENT PROPERTY.—

23 ‘‘(i) IN GENERAL.—For purposes of

24 subparagraph (A), property is 50 percent

25 property or 30 percent property if the pro-
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1 jected heating and cooling energy usage of

2 such property, measured in terms of aver3 age annual energy cost to taxpayer, is re4 duced by 50 percent, or 30 percent, respec5 tively, in comparison to the energy usage

6 of the standard design reference house as

7 determined using the procedures under

8 clause (iv).

9 ‘‘(ii) STANDARD DESIGN REFERENCE

10 HOUSE.—For purposes of this paragraph,

11 the term ‘standard design reference house’

12 means a dwelling which conforms with the

13 standards of chapter 4 of the 2000 Inter14 national Energy Conservation Code of the

15 International Code Council and the min16 imum equipment efficiency standards pro17 mulgated by the Department of Energy

18 under the National Appliance Energy Con19 servation Act.

20 ‘‘(iii) ENERGY EFFICIENT REFERENCE

21 HOUSE.—For purposes of this paragraph,

22 the term ‘energy efficient reference house’

23 means a design of a dwelling which uses

24 the same heating fuel type as the proposed

25 design and which uses minimum standards
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1 equipment, as required by the Department

2 of Energy under the National Appliance

3 Energy Conservation Act and which

4 achieves, on average over fuel type and

5 house geometry, the required 30 percent or

6 50 percent reductions in annual energy

7 cost as calculated using the procedures

8 under clause (iv).

9 ‘‘(iv) PROCEDURES.—

10 ‘‘(I) IN GENERAL.—For purposes

11 of clause (i), energy usage shall be

12 demonstrated either by a component13 based approach or a performance14 based approach.

15 ‘‘(II) COMPONENT APPROACH.—

16 Compliance by the component ap17 proach is achieved when all of the

18 components of the house comply with

19 the requirements of prescriptive pack20 ages established by the Secretary of

21 Energy, in consultation with the Ad22 ministrator of the Environmental Pro23 tection Agency, such that they are

24 equivalent, for the strong majority of

25 houses which can use this method, to
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1 the results of using the performance2 based approach of subclause (III) to

3 achieve the required reduction in en4 ergy usage.

5 ‘‘(III) PERFORMANCE-BASED AP6 PROACH.—Performance-based compli7 ance shall be demonstrated in terms

8 of equivalent or less energy usage

9 when compared to the energy efficient

10 reference house of the same heating

11 fuel type as the taxpayer’s house or

12 through an alternate method pre13 scribed by the Secretary which yields

14 equivalent results.

15 ‘‘(IV) COMPUTER SOFTWARE.—

16 Computer software shall be used in

17 support of performance-based compli18 ance under subclause (III) and such

19 software shall meet all of the proce20 dures and methods for calculating en21 ergy savings reductions that are pro22 mulgated by the Secretary of Energy.

23 Such regulations on the specifications

24 for software and verification protocols

25 shall be based on the 1998 California
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1 Residential Alternative Calculation

2 Method Approval Manual.

3 ‘‘(V) FUEL PARITY.—In the case

4 of both the component and the per5 formance-based approaches, and any

6 software used in support of such ap7 proach, the Secretary shall assure fuel

8 parity by requiring both the energy ef9 ficient reference house and the pre10 scriptive package under subclause (II)

11 to employ the same envelope energy

12 efficiency measures for a house heated

13 by a gas furnace as for a house heat14 ed by an electric air source heat pump

15 or by an oil furnace or boiler; and, for

16 equipment efficiency, to employ elec17 tric, oil, or gas equipment efficiency of

18 corresponding efficiency improvement.

19 Such determination of corresponding

20 efficiency improvement shall be made

21 on a linear scale between the min22 imum standard equipment efficiency

23 and the best available marketplace

24 technology efficiency as determined by

25 the Secretary after considering the in-
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1 formation provided by the Air Condi2 tioning and Refrigeration Institute

3 (ARI) and the Gas Appliance Manu4 facturers Association (GAMA) guides

5 for the respective electric, oil, and

6 natural gas equipment of such type

7 (such as heating and cooling).

8 ‘‘(VI) APPROVAL OF SOFTWARE

9 SUBMISSIONS.—The Secretary shall

10 approve software submissions that

11 comply with the calculation require12 ments of subclause (IV).

13 ‘‘(VII) PROCEDURES FOR IN14 SPECTION AND TESTING OF HOMES.—

15 The Secretary shall ensure that proce16 dures for the inspection and testing

17 for compliance comply with the cal18 culation requirements under subclause

19 (IV).

20 ‘‘(C) DETERMINATIONS OF COMPLIANCE.—

21 A determination of compliance made for the

22 purposes of this paragraph shall be filed with

23 the Secretary within 1 year of the date of such

24 determination and shall include the TIN of the

25 certifier, the address of the building in compli-
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1 ance, and the identity of the person for whom

2 such determination was performed. Determina3 tions of compliance filed with the Secretary

4 shall be available for inspection by the Sec5 retary of Energy.

6 ‘‘(D) COMPLIANCE.—

7 ‘‘(i) IN GENERAL.—The Secretary, in

8 consultation with the Secretary of Energy

9 shall establish requirements for certifi10 cation and compliance procedures after ex11 amining the requirements for energy con12 sultants and home energy ratings providers

13 specified by the Mortgage Industry Na14 tional Accreditation Procedures for Home

15 Energy Rating Systems.

16 ‘‘(ii) INDIVIDUALS QUALIFIED TO DE17 TERMINE COMPLIANCE.—Individuals quali18 fied to determine compliance shall be only

19 those individuals who are recognized by an

20 organization certified by the Secretary for

21 such purposes. The Secretary may qualify

22 a Home Energy Rating Systems Organiza23 tion, a local building code agency, a State

24 or local energy office, a utility, or other or-
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1 ganizations which meet the requirements

2 prescribed under this section.

3 ‘‘(E) PRINCIPAL RESIDENCE.—For pur4 poses of this paragraph, the term ‘principal res5 idence’ has the same meaning as when used in

6 section 121, except that the period for which a

7 building is treated as the principal residence of

8 the taxpayer shall also include the 60-day pe9 riod ending on the 1st day on which it would

10 (but for this subparagraph) first be treated as

11 a principal residence.

12 ‘‘(d) SPECIAL RULES.—For purposes of this

13 section—

14 ‘‘(1) DOLLAR AMOUNTS IN CASE OF JOINT OC15 CUPANCY.—In the case of any dwelling unit which if

16 jointly occupied and used during any calendar year

17 as a residence by 2 or more individuals the following

18 rules shall apply:

19 ‘‘(A) The amount of the credit allowable

20 under subsection (a) by reason of expenditures

21 made during such calendar year by any of such

22 individuals with respect to such dwelling unit

23 shall be determined by treating all of such indi24 viduals as 1 taxpayer whose taxable year is

25 such calendar year.
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1 ‘‘(B) There shall be allowable with respect

2 to such expenditures to each of such individ3 uals, a credit under subsection (a) for the tax4 able year in which such calendar year ends in

5 an amount which bears the same ratio to the

6 amount determined under subparagraph (A) as

7 the amount of such expenditures made by such

8 individual during such calendar year bears to

9 the aggregate of such expenditures made by all

10 of such individuals during such calendar year.

11 ‘‘(2) TENANT-STOCKHOLDER IN COOPERATIVE

12 HOUSING CORPORATION.—In the case of an indi13 vidual who is a tenant-stockholder (as defined in sec14 tion 216) in a cooperative housing corporation (as

15 defined in such section), such individual shall be

16 treated as having made his tenant-stockholder’s pro17 portionate share (as defined in section 216(b)(3)) of

18 any expenditures of such corporation and such credit

19 shall be allocated pro rata to such individual.

20 ‘‘(3) CONDOMINIUMS.—

21 ‘‘(A) IN GENERAL.—In the case of an indi22 vidual who is a member of a condominium man23 agement association with respect to a condo24 minium which he owns, such individual shall be

25 treated as having made his proportionate share
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1 of any expenditures of such association and any

2 credit shall be allocated appropriately.

3 ‘‘(B) CONDOMINIUM MANAGEMENT ASSO4 CIATION.—For purposes of this paragraph, the

5 term ‘condominium management association’

6 means an organization which meets the require7 ments of paragraph (1) of section 528(c) (other

8 than subparagraph (E) thereof) with respect to

9 a condominium project substantially all of the

10 units of which are used as residences.

11 ‘‘(4) JOINT OWNERSHIP OF ENERGY ITEMS.—

12 ‘‘(A) IN GENERAL.—Any expenditure oth13 erwise qualifying as a residential energy prop14 erty expenditure shall not be treated as failing

15 to so qualify merely because such expenditure

16 was made with respect to 2 or more dwelling

17 units.

18 ‘‘(B) LIMITS APPLIED SEPARATELY.—In

19 the case of any expenditure described in sub20 paragraph (A), the amount of the credit allow21 able under subsection (a) shall (subject to para22 graph (1)) be computed separately with respect

23 to the amount of the expenditure made for each

24 dwelling unit.
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1 ‘‘(5) ALLOCATION IN CERTAIN CASES.—If less

2 than 80 percent of the use of an item is for nonbusi3 ness purposes, only that portion of the expenditures

4 for such item which is properly allocable to use for

5 nonbusiness purposes shall be taken into account.

6 For purposes of this paragraph, use for a swimming

7 pool shall be treated as use which is not for nonbusi8 ness purposes.

9 ‘‘(6) COORDINATION WITH OTHER CREDITS.—

10 Property which would, but for this paragraph, be eli11 gible for credit under more than one provision of

12 this section shall be eligible only under one such pro13 vision, the provision specified by the taxpayer.

14 ‘‘(7) WHEN EXPENDITURE MADE; AMOUNT OF

15 EXPENDITURE.—

16 ‘‘(A) IN GENERAL.—Except as provided in

17 subparagraph (B), an expenditure with respect

18 to an item shall be treated as made when the

19 original installation of the item is completed.

20 ‘‘(B) EXPENDITURES PART OF BUILDING

21 CONSTRUCTION.—In the case of an expenditure

22 in connection with the construction of a struc23 ture, such expenditure shall be treated as made

24 when the original use of the constructed struc25 ture by the taxpayer begins.
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1 ‘‘(8) PROPERTY FINANCED BY SUBSIDIZED EN2 ERGY FINANCING.—

3 ‘‘(A) REDUCTION OF EXPENDITURES.—

4 ‘‘(i) IN GENERAL.—For purposes of

5 determining the amount of residential en6 ergy property expenditures made by any

7 individual with respect to any dwelling

8 unit, there shall not be taken in to account

9 expenditures which are made from sub10 sidized energy financing.

11 ‘‘(ii) SUBSIDIZED ENERGY FINANC12 ING.—For purposes of clause (i), the term

13 ‘subsidized energy financing’ has the same

14 meaning given such term in section

15 48(a)(4)(C).

16 ‘‘(B) DOLLAR LIMITS REDUCED.—The dol17 lar amounts in the table contained in subsection

18 (b)(1) with respect to each property purchased

19 for such dwelling unit for any taxable year of

20 such taxpayer shall be reduced proportionately

21 by an amount equal to the sum of—

22 ‘‘(i) the amount of the expenditures

23 made by the taxpayer during such taxable

24 year with respect to such dwelling unit and
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1 not taken into account by reason of sub2 paragraph (A), and

3 ‘‘(ii) the amount of any Federal,

4 State, or local grant received by the tax5 payer during such taxable year which is

6 used to make residential energy property

7 expenditures with respect to the dwelling

8 unit and is not included in the gross in9 come of such taxpayer.

10 ‘‘(e) BASIS ADJUSTMENTS.—For purposes of this

11 subtitle, if a credit is allowed under this section for any

12 expenditure with respect to any property, the increase in

13 the basis of such property which would (but for this sub14 section) result from such expenditure shall be reduced by

15 the amount of the credit so allowed.

16 ‘‘(f) TERMINATION.—This section shall not apply

17 with respect to any taxable years beginning after Decem18 ber 31, 2006.’’.

19 (b) CONFORMING AMENDMENTS.—

20 (1) Subsection (a) of section 1016 of such Code

21 as amended by section 2(b)(3), is amended by strik22 ing ‘‘and’’ at the end of paragraph (27), by striking

23 the period at the end of paragraph (28) and insert24 ing ‘‘, and’’, and by adding at the end the following

25 new paragraph:
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1 ‘‘(29) to the extent provided in section 25B(e),

2 in the case of amounts with respect to which a credit

3 has been allowed under section 25B.’’.

4 (2) The table of sections for subpart A of part

5 IV of subchapter A of chapter 1 of such Code is

6 amended by inserting after the item relating to sec7 tion 25A the following new item:

‘‘Sec. 25B. Nonbusiness energy property.’’.

8 (c) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to expenditures made after Decem10 ber 31, 2000.

Æ