II 

112TH CONGRESS 

2D SESSION S. 3591 

To amend the Internal Revenue Code of 1986 to improve and extend the 

deduction for new and existing energy-efficient commercial buildings, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 20, 2012 

Ms. SNOWE (for herself, Mr. BINGAMAN, Mrs. FEINSTEIN, and Mr. CARDIN) 

introduced the following bill; which was read twice and referred to the 

Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to improve 

and extend the deduction for new and existing energyefficient commercial buildings, and for other purposes. 

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; AMENDMENT OF 1986 CODE; 

4 TABLE OF CONTENTS. 

5 (a) SHORT TITLE.—This Act may be cited as the 

6 ‘‘Commercial Building Modernization Act’’. 

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend9 ment or repeal is expressed in terms of an amendment 


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1 to, or repeal of, a section or other provision, the reference 

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986. 

4 SEC. 2. EXTENSION AND MODIFICATION OF DEDUCTION 

5 FOR ENERGY-EFFICIENT COMMERCIAL 

6 BUILDINGS. 

7 (a) EXTENSION.— 

8 (1) THROUGH 2016.—Subsection (h) of section 

9 179D is amended by striking ‘‘December 31, 2013’’ 

10 and inserting ‘‘December 31, 2016’’. 

11 (2) INCLUSION OF MULTIFAMILY BUILDINGS.— 

12 (A) IN GENERAL.—Subparagraph (B) of 

13 section 179D(c)(1) is amended by striking 

14 ‘‘building’’ and inserting ‘‘commercial building 

15 or multifamily building’’. 

16 (B) DEFINITIONS.—Subsection (c) of sec17 tion 179D is amended by adding at the end the 

18 following new paragraphs: 

19 ‘‘(3) COMMERCIAL BUILDING.—The term ‘com20 mercial building’ means a building with a primary 

21 use or purpose other than as residential housing. 

22 ‘‘(4) MULTIFAMILY BUILDING.—The term ‘mul23 tifamily building’ means a structure of 5 or more 

24 dwelling units with a primary use as residential 

25 housing, and includes such buildings owned and opVerDate Mar 15 2010 06:56 Sep 26, 2012 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3591.IS S3591

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1 erated as a condominium, cooperative, or other com2 mon interest community.’’. 

3 (3) INCLUSION OF PROPERTY LOCATED IN POS4 SESSIONS OR TERRITORIES.—Clause (i) of section 

5 179D(c)(1)(B) is amended by inserting ‘‘or any pos6 session or territory thereof’’ after ‘‘United States’’. 

7 (b) INCREASE IN MAXIMUM AMOUNT OF DEDUC8 TION.— 

9 (1) IN GENERAL.—Subparagraph (A) of section 

10 179D(b)(1) is amended by striking ‘‘$1.80’’ and in11 serting ‘‘$3.00’’. 

12 (2) PARTIAL ALLOWANCE.—Paragraph (1) of 

13 section 179D(d) is amended to read as follows: 

14 ‘‘(1) PARTIAL ALLOWANCE.— 

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

16 subsection (f), if— 

17 ‘‘(i) the requirement of subsection 

18 (c)(1)(D) is not met, but 

19 ‘‘(ii) there is a certification in accord20 ance with paragraph (6) that— 

21 ‘‘(I) any system referred to in 

22 subsection (c)(1)(C) satisfies the en23 ergy-savings targets established by the 

24 Secretary under subparagraph (B) 

25 with respect to such system, or 


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1 ‘‘(II) the systems referred to in 

2 subsection (c)(1)(C)(ii) and subsection 

3 (c)(1)(C)(iii) together satisfy the en4 ergy-savings targets established by the 

5 Secretary under subparagraph (B) 

6 with respect to such systems, 

7 then the requirement of subsection (c)(1)(D) 

8 shall be treated as met with respect to such sys9 tem or systems, and the deduction under sub10 section (a) shall be allowed with respect to en11 ergy-efficient commercial building property in12 stalled as part of such system and as part of 

13 a plan to meet such targets, except that sub14 section (b) shall be applied to such property de15 scribed in clause (ii)(I) by substituting ‘$1.00’ 

16 for ‘$3.00’ and to such property described in 

17 clause (ii)(II) by substituting ‘$2.20’ for 

18 ‘$3.00’. 

19 ‘‘(B) REGULATIONS.— 

20 ‘‘(i) IN GENERAL.—The Secretary, 

21 after consultation with the Secretary of 

22 Energy, shall promulgate regulations es23 tablishing a target for each system de24 scribed in subsection (c)(1)(C) which, if 

25 such targets were met for all such systems, 


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1 the property would meet the requirements 

2 of subsection (c)(1)(D). 

3 ‘‘(ii) SAFE HARBOR FOR COMBINED

4 SYSTEMS.—The Secretary, after consulta5 tion with the Secretary of Energy, and not 

6 later than 6 months after the date of the 

7 enactment of the Commercial Building 

8 Modernization Act, shall promulgate regu9 lations regarding combined envelope and 

10 mechanical system performance that detail 

11 appropriate components, efficiency levels, 

12 or other relevant information for the sys13 tems referred to in subsection (c)(1)(C)(iii) 

14 and subsection (c)(1)(C)(iv) together to be 

15 deemed to have achieved two-thirds of the 

16 requirements of subsection (c)(1)(D).’’. 

17 (c) DENIAL OF DOUBLE BENEFIT RULES.— 

18 (1) IN GENERAL.—Section 179D is amended by 

19 redesignating subsections (g) and (h) as subsections 

20 (h) and (i), respectively, and by inserting after sub21 section (f) the following new subsection: 

22 ‘‘(g) TAX INCENTIVES NOT AVAILABLE.—Energy-ef23 ficient measures for which a deduction is allowed under 

24 this section shall not be eligible for a deduction under sec25 tion 179F.’’. 


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1 (2) LOW-INCOME HOUSING EXCEPTION TO

2 BASIS REDUCTION.—Subsection (e) of section 179D 

3 is amended by inserting ‘‘(other than property 

4 placed in service in a qualified low-income building 

5 (within the meaning of section 42))’’ after ‘‘building 

6 property’’. 

7 (d) ALLOCATION OF DEDUCTION.—Section 179D, as 

8 amended by subsection (c)(1), is amended by redesig9 nating subsection (i) as subsection (j) and by inserting 

10 after subsection (h) the following new subsection: 

11 ‘‘(i) ALLOCATION OF DEDUCTION.—Not later than 

12 180 days after the date of the enactment of this sub13 section, the Secretary, in consultation with the Secretary 

14 of Energy, shall promulgate a regulation to allow the 

15 owner of a commercial building, including a non-profit, to 

16 allocate any deduction allowed under this section, or a por17 tion thereof, to the person primarily responsible for fund18 ing, financing, designing, leasing, operating, or placing in 

19 service energy-efficient measures. Such person shall be 

20 treated as the taxpayer for purposes of this section and 

21 shall include a building tenant, financier, architect, profes22 sional engineer, licensed contractor, energy services com23 pany, or other building professional. In the case of a com24 mercial building that is owned by a Federal, State, or local 

25 government or a subdivision thereof, Internal Revenue NoVerDate Mar 15 2010 06:56 Sep 26, 2012 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S3591.IS S3591

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1 tice 2006–52, as amplified by Notice 2008–40, shall apply 

2 to any allocation.’’. 

3 (e) EARNINGS AND PROFITS CONFORMITY FOR REAL

4 ESTATE INVESTMENT TRUSTS.—Subparagraph (B) of 

5 section 312(k)(3) is amended— 

6 (1) by striking ‘‘.—For purposes of’’ and in7 serting ‘‘.— 

8 ‘‘(i) IN GENERAL.—Except as pro9 vided in clause (ii), for purposes of’’, and 

10 (2) by adding at the end the following new 

11 clause: 

12 ‘‘(ii) EARNINGS AND PROFITS CON13 FORMITY FOR REAL ESTATE INVESTMENT

14 TRUSTS.— 

15 ‘‘(I) IN GENERAL.—For purposes 

16 of computing the earnings and profits 

17 of a real estate investment trust 

18 (other than a captive real estate in19 vestment trust), the entire amount de20 ductible under section 179D shall be 

21 allowed as deductions in the taxable 

22 years for which such amounts are 

23 claimed under such section. 

24 ‘‘(II) CAPTIVE REAL ESTATE IN25 VESTMENT TRUST.—The term ‘captive 


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1 real estate investment trust’ means a 

2 real estate investment trust the shares 

3 or beneficial interests of which are not 

4 regularly traded on an established se5 curities market and more than 50 per6 cent of the voting power or value of 

7 the beneficial interests or shares of 

8 which are owned or controlled, directly 

9 or indirectly, or constructively, by a 

10 single entity that is treated as an as11 sociation taxable as a corporation 

12 under this title and is not exempt 

13 from taxation pursuant to the provi14 sions of section 501(a). 

15 ‘‘(III) RULES OF APPLICATION.— 

16 For purposes of this clause, the con17 structive ownership rules of section 

18 318(a), as modified by section 

19 856(d)(5), shall apply in determining 

20 the ownership of stock, assets, or net 

21 profits of any person, and the fol22 lowing entities are not considered an 

23 association taxable as a corporation: 


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1 ‘‘(aa) Any real estate invest2 ment trust other than a captive 

3 real estate investment trust. 

4 ‘‘(bb) Any qualified real es5 tate investment trust subsidiary 

6 under section 856, other than a 

7 qualified REIT subsidiary of a 

8 captive real estate investment 

9 trust. 

10 ‘‘(cc) Any Listed Australian 

11 Property Trust (meaning an Aus12 tralian unit trust registered as a 

13 ‘Managed Investment Scheme’ 

14 under the Australian Corpora15 tions Act in which the principal 

16 class of units is listed on a recog17 nized stock exchange in Australia 

18 and is regularly traded on an es19 tablished securities market), or 

20 an entity organized as a trust, 

21 provided that a Listed Australian 

22 Property Trust owns or controls, 

23 directly or indirectly, 75 percent 

24 or more of the voting power or 


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1 value of the beneficial interests 

2 or shares of such trust. 

3 ‘‘(dd) Any corporation, 

4 trust, association, or partnership 

5 organized outside the laws of the 

6 United States and which satisfies 

7 the criteria described in sub8 clause (IV). 

9 ‘‘(IV) CRITERIA.—The criteria 

10 described in this subclause are as fol11 lows: 

12 ‘‘(aa) At least 75 percent of 

13 the entity’s total asset value at 

14 the close of its taxable year is 

15 represented by real estate assets 

16 (as defined in section 

17 856(c)(5)(B)), cash and cash 

18 equivalents, and United States 

19 Government securities. 

20 ‘‘(bb) The entity is not sub21 ject to tax on amounts distrib22 uted to its beneficial owners, or 

23 is exempt from entity-level tax24 ation. 


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1 ‘‘(cc) The entity distributes 

2 at least 85 percent of its taxable 

3 income (as computed in the juris4 diction in which it is organized) 

5 to the holders of its shares or 

6 certificates of beneficial interest 

7 on an annual basis. 

8 ‘‘(dd) Not more than 10 

9 percent of the voting power or 

10 value in such entity is held di11 rectly or indirectly or construc12 tively by a single entity or indi13 vidual, or the shares or beneficial 

14 interests of such entity are regu15 larly traded on an established se16 curities market. 

17 ‘‘(ee) The entity is organized 

18 in a country which has a tax 

19 treaty with the United States.’’. 

20 (f) UPDATED STANDARDS.— 

21 (1) INITIAL UPDATE.— 

22 (A) IN GENERAL.—Section 179D is 

23 amended by striking ‘‘90.1-2001’’ each place it 

24 appears in subsections (c) and (f) and inserting 

25 ‘‘90.1-2004’’. 


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1 (B) CONFORMING AMENDMENT.—Para2 graph (2) of section 179D(c) is amended by 

3 striking ‘‘(as in effect on April 2, 2003)’’. 

4 (2) SECOND UPDATE.— 

5 (A) IN GENERAL.—Section 179D is 

6 amended by striking ‘‘90.1-2004’’ each place it 

7 appears in subsections (c) and (f) and inserting 

8 ‘‘90.1-2007’’. 

9 (B) EFFECTIVE DATE.—The amendments 

10 made by subparagraph (A) shall apply to prop11 erty placed in service after December 31, 2014. 

12 (g) TREATMENT OF LIGHTING SYSTEMS.—Section 

13 179D is amended by striking ‘‘interior’’ each place it ap14 pears in subsections (c)(1) and (f)(1). 

15 (h) VOLUNTARY REPORTING PROGRAM.—Section 

16 179D, as amended by subsection (d), is amended by redes17 ignating subsection (j) as subsection (k) and by inserting 

18 after subsection (i) the following new subsection: 

19 ‘‘(i) VOLUNTARY REPORTING PROGRAM.—For pur20 poses of the report required under section 179F(k), the 

21 Secretary, in consultation with the Secretary of Energy, 

22 shall develop a voluntary program to provide energy con23 sumption data from recipients and current tenants of 

24 buildings that received full deductions under this sec25 tion.’’. 


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1 (i) EFFECTIVE DATE.—Except as otherwise pro2 vided, the amendments made by this section shall apply 

3 to property placed in service in taxable years beginning 

4 after the date of the enactment of this Act. 

5 SEC. 3. DEDUCTION FOR RETROFITS OF EXISTING COM6 MERCIAL AND MULTIFAMILY BUILDINGS. 

7 (a) IN GENERAL.—Part VI of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 is amended 

9 by inserting after section 179E the following new section: 

10 ‘‘SEC. 179F. DEDUCTION FOR RETROFITS OF EXISTING 

11 COMMERCIAL AND MULTIFAMILY BUILDINGS. 

12 ‘‘(a) ALLOWANCE OF DEDUCTION.—With respect to 

13 each certified retrofit plan, there shall be allowed as a de14 duction an amount equal to the lesser of— 

15 ‘‘(1) the sum of— 

16 ‘‘(A) the design deduction, and 

17 ‘‘(B) the realized deduction, or 

18 ‘‘(2) 50 percent of the total cost to develop and 

19 implement such certified retrofit plan. 

20 ‘‘(b) DEDUCTION AMOUNTS.—For purposes of this 

21 section— 

22 ‘‘(1) DESIGN DEDUCTION.—A design deduction 

23 shall be— 


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1 ‘‘(A) based on projected source energy sav2 ings as calculated in accordance with subsection 

3 (c)(3)(B), 

4 ‘‘(B) correlated to the percent of source 

5 energy savings set forth in the general scale in 

6 paragraph (3)(A) that a certified retrofit plan 

7 is projected to achieve when energy-efficient 

8 measures are placed in service, and 

9 ‘‘(C) equal to 60 percent of the amount al10 lowed under the general scale. 

11 ‘‘(2) REALIZED DEDUCTION.— 

12 ‘‘(A) IN GENERAL.—A realized deduction 

13 shall be— 

14 ‘‘(i) based on realized source energy 

15 savings as calculated in accordance with 

16 subsection (c)(3)(C), 

17 ‘‘(ii) correlated to the percent of 

18 source energy savings set forth in the gen19 eral scale in paragraph (3)(A) as realized 

20 by a certified retrofit plan, and 

21 ‘‘(iii) equal to 40 percent of the 

22 amount allowed under the general scale. 

23 ‘‘(B) ADJUSTMENT OF SOURCE ENERGY

24 SAVINGS.—The percent of source energy sav25 ings for purposes of any realized deduction may 


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1 vary from such savings projected when energy2 efficient measures were placed in service for 

3 purposes of a design deduction under paragraph 

4 (1). 

5 ‘‘(3) GENERAL SCALE.— 

6 ‘‘(A) IN GENERAL.—The scale for deduc7 tions allowed under this section shall be— 

8 ‘‘(i) $1.00 per square foot of retrofit 

9 floor area for 20 to 24 percent source en10 ergy savings, 

11 ‘‘(ii) $1.50 per square foot of retrofit 

12 floor area for 25 to 29 percent source en13 ergy savings, 

14 ‘‘(iii) $2.00 per square foot of retrofit 

15 floor area for 30 to 34 percent source en16 ergy savings, 

17 ‘‘(iv) $2.50 per square foot of retrofit 

18 floor area for 35 to 39 percent source en19 ergy savings, 

20 ‘‘(v) $3.00 per square foot of retrofit 

21 floor area for 40 to 44 percent source en22 ergy savings, 

23 ‘‘(vi) $3.50 per square foot of retrofit 

24 floor area for 45 to 49 percent source en25 ergy savings, and 


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1 ‘‘(vii) $4.00 per square foot of retrofit 

2 floor area for 50 percent or more source 

3 energy savings. 

4 ‘‘(B) HISTORIC BUILDINGS.—With respect 

5 to energy-efficient measures placed in service as 

6 part of a certified retrofit plan in a commercial 

7 building or multifamily building on or eligible 

8 for the National Register of Historic Places, the 

9 respective dollar amounts set forth in the gen10 eral scale under subparagraph (A) shall each be 

11 increased by 20 percent, for the purposes of cal12 culating any applicable design deduction and re13 alized deduction. 

14 ‘‘(c) CALCULATION OF ENERGY SAVINGS.— 

15 ‘‘(1) IN GENERAL.—For purposes of the design 

16 deduction and the realized deduction, source energy 

17 savings shall be calculated with reference to a base18 line of the annual source energy consumption of the 

19 commercial or multifamily building before energy-ef20 ficient measures were placed in service. 

21 ‘‘(2) BASELINE BENCHMARK.—The baseline 

22 under paragraph (1) shall be determined using a 

23 building energy performance benchmarking tool des24 ignated by the Administrator of the Environmental 

25 Protection Agency, and based upon 1 year of source 


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1 energy consumption data prior to the date upon 

2 which the energy-efficient measures are placed in 

3 service. 

4 ‘‘(3) DESIGN AND REALIZED SOURCE ENERGY

5 SAVINGS.— 

6 ‘‘(A) IN GENERAL.—In certifying a retrofit 

7 plan as a certified retrofit plan, a professional 

8 engineer shall calculate source energy savings 

9 by utilizing the baseline benchmark defined in 

10 paragraph (2) and determining percent im11 provements from such baseline. 

12 ‘‘(B) DESIGN DEDUCTION.—For purposes 

13 of claiming a design deduction, the regulations 

14 issued under subsection (f)(1) shall prescribe 

15 the standards and process for a professional en16 gineer to calculate and certify source energy 

17 savings projected from the design of a certified 

18 retrofit plan as of the date energy-efficient 

19 measures are placed in service. 

20 ‘‘(C) REALIZED DEDUCTION.—For pur21 poses of claiming a realized deduction, a profes22 sional engineer shall calculate and certify source 

23 energy savings realized by a certified retrofit 

24 plan 2 years after a design deduction is allowed 

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1 ergy-efficient measures are placed in service, 

2 and adjusting for climate, building occupancy 

3 hours, density, or other factors deemed appro4 priate in the benchmarking tool designated 

5 under paragraph (2). 

6 ‘‘(d) CERTIFIED RETROFIT PLAN AND OTHER DEFI7 NITIONS.—For purposes of this section— 

8 ‘‘(1) CERTIFIED RETROFIT PLAN.—The term 

9 ‘certified retrofit plan’ means a plan that— 

10 ‘‘(A) is designed to reduce the annual 

11 source energy costs of a commercial building, or 

12 a multifamily building, through the installation 

13 of energy-efficient measures, 

14 ‘‘(B) is certified under penalty of perjury 

15 by a registered professional engineer, who is not 

16 a direct employee of the owner of the commer17 cial building or multifamily building that is the 

18 subject of the plan, and is licensed in the State 

19 in which such building is located, 

20 ‘‘(C) describes the square footage of ret21 rofit floor area covered by such a plan, 

22 ‘‘(D) specifies that it is designed to achieve 

23 a final source energy usage intensity after en24 ergy-efficient measures are placed in service in 

25 a commercial building or a multifamily building 


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1 that does not exceed on a square foot basis the 

2 average level of energy usage intensity of other 

3 similar buildings, 

4 ‘‘(E) requires that after the energy-effi5 cient measures are placed in service, the com6 mercial building or multifamily building meets 

7 the applicable State and local new building code 

8 requirements for the area in which such build9 ing is located, 

10 ‘‘(F) satisfies the regulations prescribed 

11 under subsection (f), and 

12 ‘‘(G) is submitted to the Secretary of En13 ergy after energy-efficient measures are placed 

14 in service, for the purpose of informing the re15 port to Congress required by subsection (l). 

16 The standard under subparagraph (D) shall be 

17 300,000 British thermal units or less per square 

18 foot unless the Secretary, in consultation with the 

19 Administrator of the Environmental Protection 

20 Agency, develops distinct minimum standards for a 

21 particular category or subcategory of building based 

22 on the best available information used by the EN23 ERGY STAR program. 

24 ‘‘(2) COMMERCIAL BUILDING.— 


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1 ‘‘(A) IN GENERAL.—The term ‘commercial 

2 building’ means a building located in the United 

3 States or any possession or territory thereof— 

4 ‘‘(i) that is in existence and occupied 

5 on the date of the enactment of this sec6 tion, 

7 ‘‘(ii) for which a certificate of occu8 pancy has been issued at least 10 years be9 fore energy efficiency measures are placed 

10 in service, and 

11 ‘‘(iii) with a primary use or purpose 

12 other than as residential housing. 

13 ‘‘(B) SHOPPING CENTERS.—In the case of 

14 a retail shopping center, the term ‘commercial 

15 building’ shall include an area within such 

16 building that is— 

17 ‘‘(i) 50,000 square feet or larger that 

18 is covered by a separate utility grade meter 

19 to record energy consumption in such area, 

20 and 

21 ‘‘(ii) under the day-to-day manage22 ment and operation of— 

23 ‘‘(I) the owner of such building 

24 as common space areas, or 


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1 ‘‘(II) a retail tenant, lessee, or 

2 other occupant. 

3 ‘‘(3) ENERGY-EFFICIENT MEASURES.—The 

4 term ‘energy-efficient measures’ means a measure, 

5 or combination of measures, placed in service 

6 through a certified retrofit plan— 

7 ‘‘(A) on or in a commercial building or 

8 multifamily building, 

9 ‘‘(B) as part of— 

10 ‘‘(i) the lighting systems, 

11 ‘‘(ii) the heating, cooling, ventilation, 

12 or hot water systems, 

13 ‘‘(iii) the building envelope, which 

14 may include an energy-efficient cool roof, 

15 ‘‘(iv) a continuous commissioning con16 tract, or 

17 ‘‘(v) building operations or monitoring 

18 systems, and 

19 ‘‘(C) including equipment, materials, and 

20 systems within subparagraph (B) with respect 

21 to which depreciation (or amortization in lieu of 

22 depreciation) is allowed. 

23 ‘‘(4) ENERGY SAVINGS.—The term ‘energy sav24 ings’ means source energy usage intensity reduced 


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1 on a per square foot basis through design and imple2 mentation of a certified retrofit plan. 

3 ‘‘(5) MULTIFAMILY BUILDING.—The term ‘mul4 tifamily building’— 

5 ‘‘(A) means— 

6 ‘‘(i) a structure of 5 or more dwelling 

7 units located in the United States or any 

8 possession or territory thereof— 

9 ‘‘(I) that is in existence and oc10 cupied on the date of the enactment 

11 of this section, 

12 ‘‘(II) for which a certificate of 

13 occupancy has been issued at least 10 

14 years before energy efficiency meas15 ures are placed in service, and 

16 ‘‘(III) with a primary use as resi17 dential housing, and 

18 ‘‘(B) includes such buildings owned and 

19 operated as a condominium, cooperative, or 

20 other common interest community. 

21 ‘‘(6) SOURCE ENERGY.—The term ‘source en22 ergy’ means the total amount of raw fuel that is re23 quired to operate a commercial building or multi24 family building, and accounts for losses that are inVerDate Mar 15 2010 06:56 Sep 26, 2012 Jkt 019200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\S3591.IS S3591

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1 curred in the generation, storage, transport, and de2 livery of fuel to such a building. 

3 ‘‘(e) TIMING OF CLAIMING DEDUCTIONS.—Deduc4 tions allowed under this section may be claimed as follows: 

5 ‘‘(1) DESIGN DEDUCTION.—In the case of a de6 sign deduction, in the taxable year that energy effi7 ciency measures are placed in service. 

8 ‘‘(2) REALIZED DEDUCTION.—In the case of a 

9 realized deduction, in the second taxable year fol10 lowing the taxable year described in paragraph (1). 

11 ‘‘(f) REGULATIONS.— 

12 ‘‘(1) IN GENERAL.—Not later than 180 days 

13 after the date of the enactment of this section, and 

14 after opportunity for public notice and comment, the 

15 Secretary, in consultation with the Secretary of En16 ergy and the Administrator of the Environmental 

17 Protection Agency, shall prescribe regulations— 

18 ‘‘(A) for the manner and method for a reg19 istered professional engineer to certify retrofit 

20 plans, model projected energy savings, and cal21 culate realized energy savings, and 

22 ‘‘(B) to provide, as appropriate, for a re23 capture of the deductions allowed under this 

24 section if a retrofit plan is not fully imple25 mented, or a retrofit plan and energy savings 


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1 are not certified or verified in accordance with 

2 regulations prescribed under this subsection. 

3 ‘‘(2) RELIANCE ON ESTABLISHED PROTOCOLS, 

4 ETC.—To the maximum extent practicable and avail5 able, such regulations shall rely upon established 

6 protocols and documents used in the ENERGY 

7 STAR program, and industry best practices and ex8 isting guidelines, such as the Building Energy Mod9 eling Guidelines of the Commercial Energy Services 

10 Network (COMNET). 

11 ‘‘(3) ALLOWANCE OF DEDUCTIONS PENDING

12 ISSUANCE OF REGULATIONS.—Pending issuance of 

13 the regulations under paragraph (1), the owner of a 

14 commercial building or a multifamily building shall 

15 be allowed to claim or allocate a deduction allowed 

16 under this section. 

17 ‘‘(g) NOTICE TO OWNER.—Each certification of a 

18 retrofit plan and calculation of energy savings required 

19 under this section shall include an explanation to the 

20 owner of a commercial building or a multifamily building 

21 regarding the energy-efficient measures placed in service 

22 and their projected and realized annual energy costs. 

23 ‘‘(h) ALLOCATION OF DEDUCTION.—Not later than 

24 180 days after the date of the enactment of this section, 

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1 ergy, shall promulgate a regulation to allow the owner of 

2 a commercial building or a multifamily building, including 

3 a non-profit, to allocate any deduction allowed under this 

4 section, or a portion thereof, to the person primarily re5 sponsible for funding, financing, designing, leasing, oper6 ating, or placing in service energy-efficient measures. Such 

7 person shall be treated as the taxpayer for purposes of 

8 this section and shall include a building tenant, financier, 

9 architect, professional engineer, licensed contractor, en10 ergy services company, or other building professional. In 

11 the case of a commercial building or a multifamily building 

12 that is owned by a Federal, State, or local government 

13 or a subdivision thereof, Internal Revenue Notice 2006– 

14 52, as amplified by Notice 2008–40, shall apply to any 

15 allocation. 

16 ‘‘(i) BASIS REDUCTION.—For purposes of this sub17 title, if a deduction is allowed under this section with re18 spect to any energy-efficient measures placed in service 

19 under a certified retrofit plan other than in a qualified 

20 low-income building (within the meaning of section 42), 

21 the basis of such measures shall be reduced by the amount 

22 of the deduction so allowed. 

23 ‘‘(j) TAX INCENTIVES NOT AVAILABLE.— 

24 ‘‘(1) ENERGY EFFICIENT COMMERCIAL BUILD25 INGS DEDUCTION.—Energy-efficient measures for 


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1 which a deduction is allowed under this section shall 

2 not be eligible for a deduction under section 179D. 

3 ‘‘(2) NEW ENERGY EFFICIENT HOME CREDIT.— 

4 No deduction shall be allowed under this section 

5 with respect to any building or dwelling unit with re6 spect to which a credit under section 45L was al7 lowed. 

8 ‘‘(k) REPORT TO CONGRESS.—Biennially, beginning 

9 with the first year after the enactment of this section, the 

10 Secretary of Energy shall submit a report to Congress ex11 plaining the energy saved, the energy-efficient measures 

12 implemented, the realization of energy savings projected, 

13 and the amounts and types of deductions allowed, deter14 mining the number of jobs created as a result of the de15 duction allowed under this section, and how the use of any 

16 deduction allowed under this section may be improved, 

17 based on the information provided to the Secretary of En18 ergy as part of a certified retrofit plan. The Secretary and 

19 the Secretary of Energy shall share such information on 

20 deductions allowed under this section and related reports 

21 submitted, as requested by each agency to fulfill its obliga22 tions under this section, with such redactions as deemed 

23 necessary to protect the personally identifiable financial 

24 information of a taxpayer. In addition, the report will in25 clude recommendations on providing energy-efficient tax 


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•S 3591 IS

1 incentives for subsections of buildings that operate with 

2 specific utility grade metering. In addition, the Secretary 

3 of Energy shall, to the maximum extent practicable, incor4 porate conclusions of this report into current Department 

5 of Energy’s building performance and energy efficiency 

6 programs and include statutory recommendations to Con7 gress that would reduce energy consumption in new and 

8 existing commercial buildings located in the United States. 

9 Finally, the Secretary of Energy shall, working with stake10 holder groups, provide in such report aggregated data that 

11 is publicly available. 

12 ‘‘(l) TERMINATION.—This section shall not apply 

13 with respect to property placed in service after December 

14 31, 2016.’’. 

15 (b) EFFECT ON DEPRECIATION ON EARNINGS AND

16 PROFITS.—Subparagraph (B) of section 312(k)(3), as 

17 amended by this Act, is amended— 

18 (1) by striking ‘‘or 179E’’ both places it ap19 pears in clause (i) and inserting ‘‘179E, or 179F’’, 

20 (2) by striking ‘‘OR 179E’’ in the heading and 

21 inserting ‘‘179E, OR 179F’’, and 

22 (3) by inserting ‘‘or 179F’’ after ‘‘section 

23 179D’’ in clause (ii). 


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1 (c) CONFORMING AMENDMENT.—The table of sec2 tions for such part is amended by inserting after the item 

3 relating to section 179E the following new item: 

‘‘Sec. 179F. Deduction for retrofits of existing commercial and multifamily 

buildings.’’. 

4 (d) EFFECTIVE DATE.—Except as otherwise pro5 vided, the amendments made by this section shall apply 

6 to property placed in service in taxable years beginning 

7 after the date of the enactment of this Act. 

Æ 


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