I 

109TH CONGRESS 

1ST SESSION H. R. 1541

To amend the Internal Revenue Code of 1986 to enhance energy infrastructure properties in the United States and to encourage the use of certain 

energy technologies, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 12, 2005

Mr. THOMAS 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 enhance 

energy infrastructure properties in the United States 

and to encourage the use of certain energy technologies, 

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. REFERENCE; TABLE OF CONTENTS. 

4 (a) AMENDMENT OF 1986 CODE.—Except as other5 wise expressly provided, whenever in this Act an amend6 ment or repeal is expressed in terms of an amendment 

7 to, or repeal of, a section or other provision, the reference 
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

3 (b) TABLE OF CONTENTS.—The table of contents for 

4 this Act is as follows:

Sec. 1. Reference; table of contents. 

TITLE I—ENERGY INFRASTRUCTURE TAX INCENTIVES 

Sec. 101. Natural gas gathering lines treated as 7-year property. 

Sec. 102. Natural gas distribution lines treated as 15-year property. 

Sec. 103. Electric transmission property treated as 15-year property. 

Sec. 104. Expansion of amortization for certain atmospheric pollution control 

facilities in connection with plants first placed in service after 

1975. 

Sec. 105. Modification of credit for producing fuel from a nonconventional 

source. 

Sec. 106. Modifications to special rules for nuclear decommissioning costs. 

Sec. 107. Arbitrage rules not to apply to prepayments for natural gas. 

Sec. 108. Determination of small refiner exception to oil depletion deduction. 

TITLE II—MISCELLANEOUS ENERGY TAX INCENTIVES 

Sec. 201. Credit for residential energy efficient property. 

Sec. 202. Credit for business installation of qualified fuel cells. 

Sec. 203. Reduced motor fuel excise tax on certain mixtures of diesel fuel. 

Sec. 204. Amortization of delay rental payments. 

Sec. 205. Amortization of geological and geophysical expenditures. 

Sec. 206. Advanced lean burn technology motor vehicle credit. 

Sec. 207. Credit for energy efficiency improvements to existing homes. 

TITLE III—ALTERNATIVE MINIMUM TAX RELIEF 

Sec. 301. New nonrefundable personal credits allowed against regular and minimum taxes. 

Sec. 302. Certain business energy credits allowed against regular and minimum 

taxes.

5 TITLE I—ENERGY INFRASTRUC6 TURE TAX INCENTIVES 

7 SEC. 101. NATURAL GAS GATHERING LINES TREATED AS 7-

8 YEAR PROPERTY. 

9 (a) IN GENERAL.—Subparagraph (C) of section 

10 168(e)(3) (relating to classification of certain property) is 

11 amended by striking ‘‘and’’ at the end of clause (iii), by 
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1 redesignating clause (iv) as clause (v), and by inserting 

2 after clause (iii) the following new clause: 

3 ‘‘(iv) any natural gas gathering line, 

4 and’’. 

5 (b) NATURAL GAS GATHERING LINE.—Subsection (i) 

6 of section 168 is amended by inserting after paragraph 

7 (16) the following new paragraph: 

8 ‘‘(17) NATURAL GAS GATHERING LINE.—The 

9 term ‘natural gas gathering line’ means—

10 ‘‘(A) the pipe, equipment, and appur11 tenances determined to be a gathering line by 

12 the Federal Energy Regulatory Commission, 

13 and 

14 ‘‘(B) the pipe, equipment, and appur15 tenances used to deliver natural gas from the 

16 wellhead or a commonpoint to the point at 

17 which such gas first reaches—

18 ‘‘(i) a gas processing plant, 

19 ‘‘(ii) an interconnection with a trans20 mission pipeline for which a certificate as 

21 an interstate transmission pipeline has 

22 been issued by the Federal Energy Regu23 latory Commission, 

24 ‘‘(iii) an interconnection with an 

25 intrastate transmission pipeline, or 
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1 ‘‘(iv) a direct interconnection with a 

2 local distribution company, a gas storage 

3 facility, or an industrial consumer.’’. 

4 (c) ALTERNATIVE SYSTEM.—The table contained in 

5 section 168(g)(3)(B) is amended by inserting after the 

6 item relating to subparagraph (C)(iii) the following:

‘‘(C) (iv) .................................................................................................... 14’’.

7 (d) ALTERNATIVE MINIMUM TAX EXCEPTION.—Sub8 paragraph (B) of section 56(a)(1) is amended by inserting 

9 before the period the following: ‘‘, or in section 

10 168(e)(3)(C)(iv)’’. 

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

12 this section shall apply to property placed in service after 

13 April 11, 2005. 

14 SEC. 102. NATURAL GAS DISTRIBUTION LINES TREATED AS 

15 15-YEAR PROPERTY. 

16 (a) IN GENERAL.—Subparagraph (E) of section 

17 168(e)(3) (relating to classification of certain property) is 

18 amended by striking ‘‘and’’ at the end of clause (v), by 

19 striking the period at the end of clause (vi) and inserting 

20 ‘‘, and’’, and by adding at the end the following new 

21 clause: 

22 ‘‘(vii) any natural gas distribution 

23 line.’’. 
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1 (b) ALTERNATIVE SYSTEM.—The table contained in 

2 section 168(g)(3)(B) is amended by inserting after the 

3 item relating to subparagraph (E)(vi) the following:

‘‘(E) (vii) ................................................................................................... 35’’.

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

5 this section shall apply to property placed in service after 

6 April 11, 2005. 

7 SEC. 103. ELECTRIC TRANSMISSION PROPERTY TREATED 

8 AS 15-YEAR PROPERTY. 

9 (a) IN GENERAL.—Subparagraph (E) of section 

10 168(e)(3) (relating to classification of certain property), 

11 as amended by section 102 of this Act, is amended by 

12 striking ‘‘and’’ at the end of clause (vi), by striking the 

13 period at the end of clause (vii) and inserting ‘‘, and’’, 

14 and by adding at the end the following new clause: 

15 ‘‘(viii) any section 1245 property (as 

16 defined in section 1245(a)(3)) used in the 

17 transmission at 69 or more kilovolts of 

18 electricity for sale and the original use of 

19 which commences with the taxpayer after 

20 April 11, 2005.’’. 

21 (b) ALTERNATIVE SYSTEM.—The table contained in 

22 section 168(g)(3)(B) is amended by inserting after the 

23 item relating to subparagraph (E)(vii) the following:

‘‘(E) (viii) .................................................................................................. 30’’.
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to property placed in service after 

3 April 11, 2005. 

4 SEC. 104. EXPANSION OF AMORTIZATION FOR CERTAIN AT5 MOSPHERIC POLLUTION CONTROL FACILI6 TIES IN CONNECTION WITH PLANTS FIRST 

7 PLACED IN SERVICE AFTER 1975. 

8 (a) ELIGIBILITY OF POST-1975 POLLUTION CON9 TROL FACILITIES.—Subsection (d) of section 169 (relat10 ing to definitions) is amended by adding at the end the 

11 following: 

12 ‘‘(5) SPECIAL RULE RELATING TO CERTAIN AT13 MOSPHERIC POLLUTION CONTROL FACILITIES.—In 

14 the case of any atmospheric pollution control facility 

15 which is placed in service after April 11, 2005, and 

16 used in connection with an electric generation plant 

17 or other property which is primarily coal fired, para18 graph (1) shall be applied without regard to the 

19 phrase ‘in operation before January 1, 1976’.’’. 

20 (b) TECHNICAL AMENDMENT.—Section 169(d)(3) is 

21 amended by striking ‘‘Health, Education, and Welfare’’ 

22 and inserting ‘‘Health and Human Services’’. 

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

24 this section shall apply to facilities placed in service after 

25 April 11, 2005. 
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1 SEC. 105. MODIFICATION OF CREDIT FOR PRODUCING 

2 FUEL FROM A NONCONVENTIONAL SOURCE. 

3 (a) TREATMENT AS BUSINESS CREDIT.—

4 (1) CREDIT MOVED TO SUBPART RELATING TO

5 BUSINESS RELATED CREDITS.—The Internal Rev6 enue Code of 1986 is amended by redesignating sec7 tion 29 as section 45J and by moving section 45J 

8 (as so redesignated) from subpart B of part IV of 

9 subchapter A of chapter 1 to the end of subpart D 

10 of part IV of subchapter A of chapter 1. 

11 (2) CREDIT TREATED AS BUSINESS CREDIT.—

12 Section 38(b) is amended by striking ‘‘plus’’ at the 

13 end of paragraph (18), by striking the period at the 

14 end of paragraph (19) and inserting ‘‘, plus’’, and 

15 by adding at the end the following: 

16 ‘‘(20) the nonconventional source production 

17 credit determined under section 45J(a).’’. 

18 (3) CONFORMING AMENDMENTS.—

19 (A) Section 30(b)(3)(A) is amended by 

20 striking ‘‘sections 27 and 29’’ and inserting 

21 ‘‘section 27’’. 

22 (B) Sections 43(b)(2), 45I(b)(2)(C)(i), and 

23 613A(c)(6)(C) are each amended by striking 

24 ‘‘section 29(d)(2)(C)’’ and inserting ‘‘section 

25 45J(d)(2)(C)’’. 

26 (C) Section 45(e)(9) is amended—
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1 (i) by striking ‘‘section 29’’ and in2 serting ‘‘section 45J’’, and 

3 (ii) by inserting ‘‘(or under section 29, 

4 as in effect on the day before the date of 

5 enactment of this parenthetical, for any 

6 prior taxable year)’’ before the period at 

7 the end thereof. 

8 (D) Section 45I is amended—

9 (i) in subsection (c)(2)(A) by striking 

10 ‘‘section 29(d)(5))’’ and inserting ‘‘section 

11 45J(d)(5))’’, and 

12 (ii) in subsection (d)(3) by striking 

13 ‘‘section 29’’ both places it appears and in14 serting ‘‘section 45J’’. 

15 (E) Section 45J(a), as redesignated by 

16 paragraph (1), is amended by striking ‘‘There 

17 shall be allowed as a credit against the tax im18 posed by this chapter for the taxable year’’ and 

19 inserting ‘‘For purposes of section 38, if the 

20 taxpayer elects to have this section apply, the 

21 nonconventional source production credit deter22 mined under this section for the taxable year 

23 is’’. 

24 (F) Section 45J(b), as so redesignated, is 

25 amended by striking paragraph (6). 
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1 (G) Section 53(d)(1)(B)(iii) is amended by 

2 striking ‘‘under section 29’’ and all that follows 

3 through ‘‘or not allowed’’. 

4 (H) Section 55(c)(3) is amended by strik5 ing ‘‘29(b)(6),’’. 

6 (I) Subsection (a) of section 772 is amend7 ed by inserting ‘‘and’’ at the end of paragraph 

8 (9), by striking paragraph (10), and by redesig9 nating paragraph (11) as paragraph (10). 

10 (J) Paragraph (5) of section 772(d) is 

11 amended by striking ‘‘the foreign tax credit, 

12 and the credit allowable under section 29’’ and 

13 inserting ‘‘and the foreign tax credit’’. 

14 (K) The table of sections for subpart B of 

15 part IV of subchapter A of chapter 1 is amend16 ed by striking the item relating to section 29. 

17 (L) The table of sections for subpart D of 

18 part IV of subchapter A of chapter 1 is amend19 ed by inserting after the item relating to section 

20 45I the following new item:

‘‘Sec. 45J. Credit for producing fuel from a nonconventional source.’’.

21 (b) AMENDMENTS CONFORMING TO THE REPEAL OF

22 THE NATURAL GAS POLICY ACT OF 1978.—

23 (1) IN GENERAL.—Section 29(c)(2)(A) (before 

24 redesignation under subsection (a)) is amended—
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1 (A) by inserting ‘‘(as in effect before the 

2 repeal of such section)’’ after ‘‘1978’’, and 

3 (B) by striking subsection (e) and redesig4 nating subsections (f) and (g) as subsections (e) 

5 and (f), respectively. 

6 (2) CONFORMING AMENDMENTS.—Section 

7 29(g)(1)(before redesignation under subsection (a) 

8 and paragraph (1) of this subsection) is amended—

9 (A) in subparagraph (A) by striking ‘‘sub10 section (f)(1)(B)’’ and inserting ‘‘subsection 

11 (e)(1)(B)’’, and 

12 (B) in subparagraph (B) by striking ‘‘sub13 section (f)’’ and inserting ‘‘subsection (e)’’. 

14 (c) EFFECTIVE DATES.—

15 (1) IN GENERAL.—Except as provided in para16 graph (2), the amendments made by this section 

17 shall apply to credits determined under the Internal 

18 Revenue Code of 1986 for taxable years ending after 

19 December 31, 2005. 

20 (2) SUBSECTION (b).—The amendments made 

21 by subsection (b) shall take effect on the date of the 

22 enactment of this Act. 
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1 SEC. 106. MODIFICATIONS TO SPECIAL RULES FOR NU2 CLEAR DECOMMISSIONING COSTS. 

3 (a) REPEAL OF LIMITATION ON DEPOSITS INTO

4 FUND BASED ON COST OF SERVICE; CONTRIBUTIONS

5 AFTER FUNDING PERIOD.—Subsection (b) of section 

6 468A (relating to special rules for nuclear decommis7 sioning costs) is amended to read as follows: 

8 ‘‘(b) LIMITATION ON AMOUNTS PAID INTO FUND.—

9 The amount which a taxpayer may pay into the Fund for 

10 any taxable year shall not exceed the ruling amount appli11 cable to such taxable year.’’. 

12 (b) TREATMENT OF CERTAIN DECOMMISSIONING

13 COSTS.—

14 (1) IN GENERAL.—Section 468A is amended by 

15 redesignating subsections (f) and (g) as subsections 

16 (g) and (h), respectively, and by inserting after sub17 section (e) the following new subsection: 

18 ‘‘(f) TRANSFERS INTO QUALIFIED FUNDS.—

19 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

20 (b), any taxpayer maintaining a Fund to which this 

21 section applies with respect to a nuclear power plant 

22 may transfer into such Fund not more than an 

23 amount equal to the present value of the portion of 

24 the total nuclear decommissioning costs with respect 

25 to such nuclear power plant previously excluded for 

26 such nuclear power plant under subsection (d)(2)(A) 
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1 as in effect immediately before the date of the enact2 ment of this subsection. 

3 ‘‘(2) DEDUCTION FOR AMOUNTS TRANS4 FERRED.—

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

6 subparagraph (C), the deduction allowed by 

7 subsection (a) for any transfer permitted by 

8 this subsection shall be allowed ratably over the 

9 remaining estimated useful life (within the 

10 meaning of subsection (d)(2)(A)) of the nuclear 

11 power plant beginning with the taxable year 

12 during which the transfer is made. 

13 ‘‘(B) DENIAL OF DEDUCTION FOR PRE14 VIOUSLY DEDUCTED AMOUNTS.—No deduction 

15 shall be allowed for any transfer under this sub16 section of an amount for which a deduction was 

17 previously allowed to the taxpayer (or a prede18 cessor) or a corresponding amount was not in19 cluded in gross income of the taxpayer (or a 

20 predecessor). For purposes of the preceding 

21 sentence, a ratable portion of each transfer 

22 shall be treated as being from previously de23 ducted or excluded amounts to the extent there24 of. 
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1 ‘‘(C) TRANSFERS OF QUALIFIED FUNDS.—

2 If—

3 ‘‘(i) any transfer permitted by this 

4 subsection is made to any Fund to which 

5 this section applies, and 

6 ‘‘(ii) such Fund is transferred there7 after, 

8 any deduction under this subsection for taxable 

9 years ending after the date that such Fund is 

10 transferred shall be allowed to the transferor 

11 for the taxable year which includes such date. 

12 ‘‘(D) SPECIAL RULES.—

13 ‘‘(i) GAIN OR LOSS NOT RECOGNIZED

14 ON TRANSFERS TO FUND.—No gain or loss 

15 shall be recognized on any transfer de16 scribed in paragraph (1). 

17 ‘‘(ii) TRANSFERS OF APPRECIATED

18 PROPERTY TO FUND.—If appreciated prop19 erty is transferred in a transfer described 

20 in paragraph (1), the amount of the deduc21 tion shall not exceed the adjusted basis of 

22 such property. 

23 ‘‘(3) NEW RULING AMOUNT REQUIRED.—Para24 graph (1) shall not apply to any transfer unless the 
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1 taxpayer requests from the Secretary a new schedule 

2 of ruling amounts in connection with such transfer. 

3 ‘‘(4) NO BASIS IN QUALIFIED FUNDS.—Not4 withstanding any other provision of law, the tax5 payer’s basis in any Fund to which this section ap6 plies shall not be increased by reason of any transfer 

7 permitted by this subsection.’’. 

8 (2) NEW RULING AMOUNT TO TAKE INTO AC9 COUNT TOTAL COSTS.—Subparagraph (A) of section 

10 468A(d)(2) (defining ruling amount) is amended to 

11 read as follows: 

12 ‘‘(A) fund the total nuclear decommis13 sioning costs with respect to such power plant 

14 over the estimated useful life of such power 

15 plant, and’’. 

16 (c) TECHNICAL AMENDMENTS.—Section 468A(e)(2) 

17 (relating to taxation of Fund) is amended—

18 (1) by striking ‘‘rate set forth in subparagraph 

19 (B)’’ in subparagraph (A) and inserting ‘‘rate of 20 

20 percent’’, 

21 (2) by striking subparagraph (B), and 

22 (3) by redesignating subparagraphs (C) and 

23 (D) as subparagraphs (B) and (C), respectively. 
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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2005. 

4 SEC. 107. ARBITRAGE RULES NOT TO APPLY TO PREPAY5 MENTS FOR NATURAL GAS. 

6 (a) IN GENERAL.—Subsection (b) of section 148 (re7 lating to higher yielding investments) is amended by add8 ing at the end the following new paragraph: 

9 ‘‘(4) SAFE HARBOR FOR PREPAID NATURAL

10 GAS.—

11 ‘‘(A) IN GENERAL.—The term ‘investment12 type property’ does not include a prepayment 

13 under a qualified natural gas supply contract. 

14 ‘‘(B) QUALIFIED NATURAL GAS SUPPLY

15 CONTRACT.—For purposes of this paragraph, 

16 the term ‘qualified natural gas supply contract’ 

17 means any contract to acquire natural gas for 

18 resale by a utility owned by a governmental 

19 unit if the amount of gas permitted to be ac20 quired under the contract by the utility during 

21 any year does not exceed the sum of—

22 ‘‘(i) the annual average amount dur23 ing the testing period of natural gas pur24 chased (other than for resale) by cus-
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1 tomers of such utility who are located 

2 within the service area of such utility, and 

3 ‘‘(ii) the amount of natural gas to be 

4 used to transport the prepaid natural gas 

5 to the utility during such year. 

6 ‘‘(C) NATURAL GAS USED TO GENERATE

7 ELECTRICITY.—Natural gas used to generate 

8 electricity shall be taken into account in deter9 mining the average under subparagraph 

10 (B)(i)—

11 ‘‘(i) only if the electricity is generated 

12 by a utility owned by a governmental unit, 

13 and 

14 ‘‘(ii) only to the extent that the elec15 tricity is sold (other than for resale) to 

16 customers of such utility who are located 

17 within the service area of such utility. 

18 ‘‘(D) ADJUSTMENTS FOR CHANGES IN

19 CUSTOMER BASE.—

20 ‘‘(i) NEW BUSINESS CUSTOMERS.—

21 If—

22 ‘‘(I) after the close of the testing 

23 period and before the date of issuance 

24 of the issue, the utility owned by a 

25 governmental unit enters into a con-
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1 tract to supply natural gas (other 

2 than for resale) for a business use at 

3 a property within the service area of 

4 such utility, and 

5 ‘‘(II) the utility did not supply 

6 natural gas to such property during 

7 the testing period or the ratable 

8 amount of natural gas to be supplied 

9 under the contract is significantly 

10 greater than the ratable amount of 

11 gas supplied to such property during 

12 the testing period, 

13 then a contract shall not fail to be treated 

14 as a qualified natural gas supply contract 

15 by reason of supplying the additional nat16 ural gas under the contract referred to in 

17 subclause (I). 

18 ‘‘(ii) LOST CUSTOMERS.—The average 

19 under subparagraph (B)(i) shall not exceed 

20 the annual amount of natural gas reason21 ably expected to be purchased (other than 

22 for resale) by persons who are located 

23 within the service area of such utility and 

24 who, as of the date of issuance of the 

25 issue, are customers of such utility. 
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1 ‘‘(E) RULING REQUESTS.—The Secretary 

2 may increase the average under subparagraph 

3 (B)(i) for any period if the utility owned by the 

4 governmental unit establishes to the satisfaction 

5 of the Secretary that, based on objective evi6 dence of growth in natural gas consumption or 

7 population, such average would otherwise be in8 sufficient for such period. 

9 ‘‘(F) ADJUSTMENT FOR NATURAL GAS

10 OTHERWISE ON HAND.—

11 ‘‘(i) IN GENERAL.—The amount oth12 erwise permitted to be acquired under the 

13 contract for any period shall be reduced 

14 by—

15 ‘‘(I) the applicable share of nat16 ural gas held by the utility on the 

17 date of issuance of the issue, and 

18 ‘‘(II) the natural gas (not taken 

19 into account under subclause (I)) 

20 which the utility has a right to ac21 quire during such period (determined 

22 as of the date of issuance of the 

23 issue). 

24 ‘‘(ii) APPLICABLE SHARE.—For pur25 poses of the clause (i), the term ‘applicable 
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1 share’ means, with respect to any period, 

2 the natural gas allocable to such period if 

3 the gas were allocated ratably over the pe4 riod to which the prepayment relates. 

5 ‘‘(G) INTENTIONAL ACTS.—Subparagraph 

6 (A) shall cease to apply to any issue if the util7 ity owned by the governmental unit engages in 

8 any intentional act to render the volume of nat9 ural gas acquired by such prepayment to be in 

10 excess of the sum of—

11 ‘‘(i) the amount of natural gas needed 

12 (other than for resale) by customers of 

13 such utility who are located within the 

14 service area of such utility, and 

15 ‘‘(ii) the amount of natural gas used 

16 to transport such natural gas to the utility. 

17 ‘‘(H) TESTING PERIOD.—For purposes of 

18 this paragraph, the term ‘testing period’ means, 

19 with respect to an issue, the most recent 5 cal20 endar years ending before the date of issuance 

21 of the issue. 

22 ‘‘(I) SERVICE AREA.—For purposes of this 

23 paragraph, the service area of a utility owned 

24 by a governmental unit shall be comprised of—
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1 ‘‘(i) any area throughout which such 

2 utility provided at all times during the 

3 testing period—

4 ‘‘(I) in the case of a natural gas 

5 utility, natural gas transmission or 

6 distribution services, and 

7 ‘‘(II) in the case of an electric 

8 utility, electricity distribution services, 

9 ‘‘(ii) any area within a county contig10 uous to the area described in clause (i) in 

11 which retail customers of such utility are 

12 located if such area is not also served by 

13 another utility providing natural gas or 

14 electricity services, as the case may be, and 

15 ‘‘(iii) any area recognized as the serv16 ice area of such utility under State or Fed17 eral law.’’. 

18 (b) PRIVATE LOAN FINANCING TEST NOT TO APPLY

19 TO PREPAYMENTS FOR NATURAL GAS.—Paragraph (2) of 

20 section 141(c) (providing exceptions to the private loan fi21 nancing test) is amended by striking ‘‘or’’ at the end of 

22 subparagraph (A), by striking the period at the end of 

23 subparagraph (B) and inserting ‘‘, or’’, and by adding at 

24 the end the following new subparagraph: 
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1 ‘‘(C) is a qualified natural gas supply con2 tract (as defined in section 148(b)(4)).’’. 

3 (c) EXCEPTION FOR QUALIFIED ELECTRIC AND NAT4 URAL GAS SUPPLY CONTRACTS.—Section 141(d) is 

5 amended by adding at the end the following new para6 graph: 

7 ‘‘(7) EXCEPTION FOR QUALIFIED ELECTRIC

8 AND NATURAL GAS SUPPLY CONTRACTS.—The term 

9 ‘nongovernmental output property’ shall not include 

10 any contract for the prepayment of electricity or nat11 ural gas which is not investment property under sec12 tion 148(b)(2).’’. 

13 (d) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to obligations issued after the date 

15 of the enactment of this Act. 

16 SEC. 108. DETERMINATION OF SMALL REFINER EXCEPTION 

17 TO OIL DEPLETION DEDUCTION. 

18 (a) IN GENERAL.—Paragraph (4) of section 613A(d) 

19 (relating to limitations on application of subsection (c)) 

20 is amended to read as follows: 

21 ‘‘(4) CERTAIN REFINERS EXCLUDED.—If the 

22 taxpayer or 1 or more related persons engages in the 

23 refining of crude oil, subsection (c) shall not apply 

24 to the taxpayer for a taxable year if the average 

25 daily refinery runs of the taxpayer and such persons 
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1 for the taxable year exceed 75,000 barrels. For pur2 poses of this paragraph, the average daily refinery 

3 runs for any taxable year shall be determined by di4 viding the aggregate refinery runs for the taxable 

5 year by the number of days in the taxable year.’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 this section shall apply to taxable years ending after the 

8 date of the enactment of this Act. 

9 TITLE II—MISCELLANEOUS 

10 ENERGY TAX INCENTIVES 

11 SEC. 201. CREDIT FOR RESIDENTIAL ENERGY EFFICIENT 

12 PROPERTY. 

13 (a) IN GENERAL.—Subpart A of part IV of sub14 chapter A of chapter 1 (relating to nonrefundable personal 

15 credits) is amended by inserting after section 25B the fol16 lowing new section: 

17 ‘‘SEC. 25C. RESIDENTIAL ENERGY EFFICIENT PROPERTY. 

18 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in19 dividual, there shall be allowed as a credit against the tax 

20 imposed by this chapter for the taxable year an amount 

21 equal to the sum of—

22 ‘‘(1) 15 percent of the qualified solar water 

23 heating property expenditures made by the taxpayer 

24 during such year, 
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1 ‘‘(2) 15 percent of the qualified photovoltaic 

2 property expenditures made by the taxpayer during 

3 such year, and 

4 ‘‘(3) 15 percent of the qualified fuel cell prop5 erty expenditures made by the taxpayer during such 

6 year. 

7 ‘‘(b) LIMITATIONS.—

8 ‘‘(1) MAXIMUM CREDIT.—

9 ‘‘(A) IN GENERAL.—The credit allowed 

10 under subsection (a) shall not exceed—

11 ‘‘(i) $2,000 for solar water heating 

12 property described in subsection (c)(1), 

13 ‘‘(ii) $2,000 for photovoltaic property 

14 described in subsection (c)(2), and 

15 ‘‘(iii) $500 for each 0.5 kilowatt of ca16 pacity of property described in subsection 

17 (c)(3). 

18 ‘‘(B) PRIOR EXPENDITURES BY TAXPAYER

19 ON SAME RESIDENCE TAKEN INTO ACCOUNT.—

20 In determining the amount of the credit allowed 

21 to a taxpayer with respect to any dwelling unit 

22 under this section, the dollar amounts under 

23 clauses (i) and (ii) of subparagraph (A) with re24 spect to each type of property described in such 

25 clauses shall be reduced by the credit allowed to 
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1 the taxpayer under this section with respect to 

2 such type of property for all preceding taxable 

3 years with respect to such dwelling unit. 

4 ‘‘(2) PROPERTY STANDARDS.—No credit shall 

5 be allowed under this section for an item of property 

6 unless—

7 ‘‘(A) the original use of such property com8 mences with the taxpayer, 

9 ‘‘(B) such property can be reasonably ex10 pected to remain in use for at least 5 years, 

11 ‘‘(C) such property is installed on or in 

12 connection with a dwelling unit located in the 

13 United States and used as a residence by the 

14 taxpayer, 

15 ‘‘(D) in the case of solar water heating 

16 property, such property is certified for perform17 ance by the non-profit Solar Rating and Certifi18 cation Corporation or a comparable entity en19 dorsed by the government of the State in which 

20 such property is installed, and 

21 ‘‘(E) in the case of fuel cell property, such 

22 property meets the performance and quality 

23 standards (if any) which have been prescribed 

24 by the Secretary by regulations (after consulta25 tion with the Secretary of Energy). 
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1 ‘‘(c) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) QUALIFIED SOLAR WATER HEATING PROP3 ERTY EXPENDITURE.—The term ‘qualified solar 

4 water heating property expenditure’ means an ex5 penditure for property which uses solar energy to 

6 heat water for use in a dwelling unit. 

7 ‘‘(2) QUALIFIED PHOTOVOLTAIC PROPERTY EX8 PENDITURE.—The term ‘qualified photovoltaic prop9 erty expenditure’ means an expenditure for property 

10 which uses solar energy to generate electricity for 

11 use in a dwelling unit and which is not described in 

12 paragraph (1). 

13 ‘‘(3) QUALIFIED FUEL CELL PROPERTY EX14 PENDITURE.—The term ‘qualified fuel cell property 

15 expenditure’ means an expenditure for any qualified 

16 fuel cell property (as defined in section 48(b)(1)). 

17 ‘‘(d) SPECIAL RULES.—For purposes of this sec18 tion—

19 ‘‘(1) SOLAR PANELS.—No expenditure relating 

20 to a solar panel or other property installed as a roof 

21 (or portion thereof) shall fail to be treated as prop22 erty described in paragraph (1) or (2) of subsection 

23 (c) solely because it constitutes a structural compo24 nent of the structure on which it is installed. 
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1 ‘‘(2) SWIMMING POOLS, ETC., USED AS STOR2 AGE MEDIUM.—Expenditures which are properly al3 locable to a swimming pool, hot tub, or any other 

4 energy storage medium which has a function other 

5 than the function of such storage shall not be taken 

6 into account for purposes of this section. 

7 ‘‘(3) DOLLAR AMOUNTS IN CASE OF JOINT OC8 CUPANCY.—In the case of any dwelling unit which is 

9 jointly occupied and used during any calendar year 

10 as a residence by 2 or more individuals, the fol11 lowing rules shall apply: 

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

13 under subsection (a) by reason of expenditures 

14 made during such calendar year by any of such 

15 individuals with respect to such dwelling unit 

16 shall be determined by treating all of such indi17 viduals as 1 taxpayer whose taxable year is 

18 such calendar year. 

19 ‘‘(B) There shall be allowable, with respect 

20 to such expenditures to each of such individ21 uals, a credit under subsection (a) for the tax22 able year in which such calendar year ends in 

23 an amount which bears the same ratio to the 

24 amount determined under subparagraph (A) as 

25 the amount of such expenditures made by such 
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1 individual during such calendar year bears to 

2 the aggregate of such expenditures made by all 

3 of such individuals during such calendar year. 

4 ‘‘(C) Subparagraphs (A) and (B) shall be 

5 applied separately with respect to expenditures 

6 described in paragraphs (1), (2), and (3) of 

7 subsection (c). 

8 ‘‘(4) TENANT-STOCKHOLDER IN COOPERATIVE

9 HOUSING CORPORATION.—In the case of an indi10 vidual who is a tenant-stockholder (as defined in sec11 tion 216) in a cooperative housing corporation (as 

12 defined in such section), such individual shall be 

13 treated as having made the individual’s tenant-stock14 holder’s proportionate share (as defined in section 

15 216(b)(3)) of any expenditures of such corporation. 

16 ‘‘(5) CONDOMINIUMS.—

17 ‘‘(A) IN GENERAL.—In the case of an indi18 vidual who is a member of a condominium man19 agement association with respect to a condo20 minium which the individual owns, such indi21 vidual shall be treated as having made the indi22 vidual’s proportionate share of any expenditures 

23 of such association. 

24 ‘‘(B) CONDOMINIUM MANAGEMENT ASSO25 CIATION.—For purposes of this paragraph, the 
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1 term ‘condominium management association’ 

2 means an organization which meets the require3 ments of paragraph (1) of section 528(c) (other 

4 than subparagraph (E) thereof) with respect to 

5 a condominium project substantially all of the 

6 units of which are used as residences. 

7 ‘‘(6) ALLOCATION IN CERTAIN CASES.—If less 

8 than 80 percent of the use of an item is for nonbusi9 ness purposes, only that portion of the expenditures 

10 for such item which is properly allocable to use for 

11 nonbusiness purposes shall be taken into account. 

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

13 EXPENDITURE.—

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

15 subparagraph (B), an expenditure with respect 

16 to an item shall be treated as made when the 

17 original installation of the item is completed. 

18 ‘‘(B) EXPENDITURES PART OF BUILDING

19 CONSTRUCTION.—In the case of an expenditure 

20 in connection with the construction or recon21 struction of a structure, such expenditure shall 

22 be treated as made when the original use of the 

23 constructed or reconstructed structure by the 

24 taxpayer begins. 
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1 ‘‘(C) AMOUNT.—The amount of any ex2 penditure shall be the cost thereof. 

3 ‘‘(8) PROPERTY FINANCED BY SUBSIDIZED EN4 ERGY FINANCING.—For purposes of determining the 

5 amount of expenditures made by any individual with 

6 respect to any dwelling unit, there shall not be taken 

7 into account expenditures which are made from sub8 sidized energy financing (as defined in section 

9 48(a)(4)(C)). 

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.—The credit allowed under this 

17 section shall not apply to taxable years beginning after 

18 December 31, 2007.’’. 

19 (b) CONFORMING AMENDMENTS.—

20 (1) Section 1016(a) is amended by striking 

21 ‘‘and’’ at the end of paragraph (30), by striking the 

22 period at the end of paragraph (31) and inserting ‘‘, 

23 and’’, and by adding at the end the following new 

24 paragraph: 
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1 ‘‘(32) to the extent provided in section 25C(e), 

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

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

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

5 IV of subchapter A of chapter 1 is amended by in6 serting after the item relating to section 25B the fol7 lowing new item:

‘‘Sec. 25C. Residential energy efficient property.’’.

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

9 this section shall apply to expenditures made after the 

10 date of the enactment of this Act. 

11 SEC. 202. CREDIT FOR BUSINESS INSTALLATION OF QUALI12 FIED FUEL CELLS. 

13 (a) IN GENERAL.—Section 48(a)(3)(A) (defining en14 ergy property) is amended by striking ‘‘or’’ at the end of 

15 clause (i), by adding ‘‘or’’ at the end of clause (ii), and 

16 by inserting after clause (ii) the following new clause: 

17 ‘‘(iii) qualified fuel cell property,’’. 

18 (b) ENERGY PERCENTAGE.—Subparagraph (A) of 

19 section 48(a)(2) (relating to energy percentage) is amend20 ed to read as follows: 

21 ‘‘(A) IN GENERAL.—The energy percent22 age is—

23 ‘‘(i) in the case of qualified fuel cell 

24 property, 15 percent, and 
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1 ‘‘(ii) in the case of any other energy 

2 property, 10 percent.’’. 

3 (c) QUALIFIED FUEL CELL PROPERTY.—Section 48 

4 (relating to energy credit) is amended—

5 (1) by redesignating subsection (b) as para6 graph (5) of subsection (a), 

7 (2) by striking ‘‘subsection (a)’’ in paragraph 

8 (5) of subsection (a), as redesignated by paragraph 

9 (1), and inserting ‘‘this subsection’’, and 

10 (3) by adding at the end the following new sub11 section: 

12 ‘‘(b) QUALIFIED FUEL CELL PROPERTY.—For pur13 poses of subsection (a)(3)(A)(iii)—

14 ‘‘(1) IN GENERAL.—The term ‘qualified fuel 

15 cell property’ means a fuel cell power plant which 

16 generates at least 0.5 kilowatt of electricity using an 

17 electrochemical process. 

18 ‘‘(2) LIMITATION.—The energy credit with re19 spect to any qualified fuel cell property shall not ex20 ceed an amount equal to $500 for each 0.5 kilowatt 

21 of capacity of such property. 

22 ‘‘(3) FUEL CELL POWER PLANT.—The term 

23 ‘fuel cell power plant’ means an integrated system, 

24 comprised of a fuel cell stack assembly and associ-
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1 ated balance of plant components, which converts a 

2 fuel into electricity using electrochemical means. 

3 ‘‘(4) TERMINATION.—The term ‘qualified fuel 

4 cell property’ shall not include any property placed 

5 in service after December 31, 2007.’’. 

6 (d) CONFORMING AMENDMENT.—Section 48(a)(1) is 

7 amended by inserting ‘‘except as provided in subsection 

8 (b)(2),’’ before ‘‘the energy’’. 

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

10 this section shall apply to property placed in service after 

11 April 11, 2005, under rules similar to the rules of section 

12 48(m) of the Internal Revenue Code of 1986 (as in effect 

13 on the day before the date of the enactment of the Rev14 enue Reconciliation Act of 1990). 

15 SEC. 203. REDUCED MOTOR FUEL EXCISE TAX ON CERTAIN 

16 MIXTURES OF DIESEL FUEL. 

17 (a) IN GENERAL.—Paragraph (2) of section 4081(a) 

18 is amended by adding at the end the following: 

19 ‘‘(D) DIESEL-WATER FUEL EMULSION.—In 

20 the case of diesel-water fuel emulsion at least 

21 16.9 percent of which is water and with respect 

22 to which the emulsion additive is registered by 

23 a United States manufacturer with the Envi24 ronmental Protection Agency pursuant to sec25 tion 211 of the Clean Air Act (as in effect on 
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1 March 31, 2003), subparagraph (A)(iii) shall be 

2 applied by substituting ‘19.7 cents’ for ‘24.3 

3 cents’.’’. 

4 (b) SPECIAL RULES FOR DIESEL-WATER FUEL

5 EMULSIONS.—

6 (1) REFUNDS FOR TAX-PAID PURCHASES.—Sec7 tion 6427 is amended by redesignating subsections 

8 (m) through (p) as subsections (n) through (q), re9 spectively, and by inserting after subsection (l) the 

10 following new subsection: 

11 ‘‘(m) DIESEL FUEL USED TO PRODUCE EMUL12 SION.—

13 ‘‘(1) IN GENERAL.—Except as provided in sub14 section (k), if any diesel fuel on which tax was im15 posed by section 4081 at the regular tax rate is used 

16 by any person in producing an emulsion described in 

17 section 4081(a)(2)(D) which is sold or used in such 

18 person’s trade or business, the Secretary shall pay 

19 (without interest) to such person an amount equal to 

20 the excess of the regular tax rate over the incentive 

21 tax rate with respect to such fuel. 

22 ‘‘(2) DEFINITIONS.—For purposes of paragraph 

23 (1)—

24 ‘‘(A) REGULAR TAX RATE.—The term ‘reg25 ular tax rate’ means the aggregate rate of tax 
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1 imposed by section 4081 determined without re2 gard to section 4081(a)(2)(D). 

3 ‘‘(B) INCENTIVE TAX RATE.—The term 

4 ‘incentive tax rate’ means the aggregate rate of 

5 tax imposed by section 4081 determined with 

6 regard to section 4081(a)(2)(D).’’. 

7 (2) LATER SEPARATION OF FUEL.—Section 

8 4081 (relating to imposition of tax) is amended by 

9 inserting after subsection (b) the following new sub10 section: 

11 ‘‘(c) LATER SEPARATION OF FUEL FROM DIESEL12 WATER FUEL EMULSION.—If any person separates the 

13 taxable fuel from a diesel-water fuel emulsion on which 

14 tax was imposed under subsection (a) at a rate determined 

15 under subsection (a)(2)(D) (or with respect to which a 

16 credit or payment was allowed or made by reason of sec17 tion 6427), such person shall be treated as the refiner of 

18 such taxable fuel. The amount of tax imposed on any re19 moval of such fuel by such person shall be reduced by the 

20 amount of tax imposed (and not credited or refunded) on 

21 any prior removal or entry of such fuel.’’. 

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

23 this section shall take effect on January 1, 2006. 
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1 SEC. 204. AMORTIZATION OF DELAY RENTAL PAYMENTS. 

2 (a) IN GENERAL.—Section 167 (relating to deprecia3 tion) is amended by redesignating subsection (h) as sub4 section (i) and by inserting after subsection (g) the fol5 lowing new subsection: 

6 ‘‘(h) AMORTIZATION OF DELAY RENTAL PAYMENTS

7 FOR DOMESTIC OIL AND GAS WELLS.—

8 ‘‘(1) IN GENERAL.—Any delay rental payment 

9 paid or incurred in connection with the development 

10 of oil or gas wells within the United States (as de11 fined in section 638) shall be allowed as a deduction 

12 ratably over the 24-month period beginning on the 

13 date that such payment was paid or incurred. 

14 ‘‘(2) HALF-YEAR CONVENTION.—For purposes 

15 of paragraph (1), any payment paid or incurred dur16 ing the taxable year shall be treated as paid or in17 curred on the mid-point of such taxable year. 

18 ‘‘(3) EXCLUSIVE METHOD.—Except as provided 

19 in this subsection, no depreciation or amortization 

20 deduction shall be allowed with respect to such pay21 ments. 

22 ‘‘(4) TREATMENT UPON ABANDONMENT.—If 

23 any property to which a delay rental payment relates 

24 is retired or abandoned during the 24-month period 

25 described in paragraph (1), no deduction shall be al26 lowed on account of such retirement or abandon-
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1 ment and the amortization deduction under this sub2 section shall continue with respect to such payment. 

3 ‘‘(5) DELAY RENTAL PAYMENTS.—For purposes 

4 of this subsection, the term ‘delay rental payment’ 

5 means an amount paid for the privilege of deferring 

6 development of an oil or gas well under an oil or gas 

7 lease.’’. 

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

9 this section shall apply to amounts paid or incurred in tax10 able years beginning after the date of the enactment of 

11 this Act. 

12 SEC. 205. AMORTIZATION OF GEOLOGICAL AND GEO13 PHYSICAL EXPENDITURES. 

14 (a) IN GENERAL.—Section 167 (relating to deprecia15 tion), as amended by section 204 of this Act, is amended 

16 by redesignating subsection (i) as subsection (j) and by 

17 inserting after subsection (h) the following new subsection: 

18 ‘‘(i) AMORTIZATION OF GEOLOGICAL AND GEO19 PHYSICAL EXPENDITURES.—

20 ‘‘(1) IN GENERAL.—Any geological and geo21 physical expenses paid or incurred in connection 

22 with the exploration for, or development of, oil or 

23 gas within the United States (as defined in section 

24 638) shall be allowed as a deduction ratably over the 
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1 24-month period beginning on the date that such ex2 pense was paid or incurred. 

3 ‘‘(2) SPECIAL RULES.—For purposes of this 

4 subsection, rules similar to the rules of paragraphs 

5 (2), (3), and (4) of subsection (h) shall apply.’’. 

6 (b) CONFORMING AMENDMENT.—Section 263A(c)(3) 

7 is amended by inserting ‘‘167(h), 167(i),’’ after ‘‘under 

8 section’’. 

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

10 this section shall apply to amounts paid or incurred in tax11 able years beginning after the date of the enactment of 

12 this Act. 

13 SEC. 206. ADVANCED LEAN BURN TECHNOLOGY MOTOR VE14 HICLE CREDIT. 

15 (a) IN GENERAL.—Subpart B of part IV of sub16 chapter A of chapter 1 (relating to other credits) is 

17 amended by adding at the end the following: 

18 ‘‘SEC. 30B. ADVANCED LEAN BURN TECHNOLOGY MOTOR 

19 VEHICLE CREDIT. 

20 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al21 lowed as a credit against the tax imposed by this chapter 

22 for the taxable year an amount equal to the sum of the 

23 credit amounts determined under subsection (b) with re24 spect to each qualified advanced lean burn technology 
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1 motor vehicle placed in service by the taxpayer during the 

2 taxable year. 

3 ‘‘(b) CREDIT AMOUNT.—For purposes of subsection 

4 (a)—

5 ‘‘(1) FUEL EFFICIENCY.—The credit amount 

6 with respect to any vehicle shall be—

7 ‘‘(A) $500, if the city fuel economy of such 

8 vehicle is at least 125 percent but less than 150 

9 percent of the 2000 model year city fuel econ10 omy for a vehicle in the same inertia weight 

11 class, 

12 ‘‘(B) $1,000, if the city fuel economy of 

13 such vehicle is at least 150 percent but less 

14 than 175 percent of the 2000 model year city 

15 fuel economy for a vehicle in the same inertia 

16 weight class, 

17 ‘‘(C) $1,500, if the city fuel economy of 

18 such vehicle is at least 175 percent but less 

19 than 200 percent of the 2000 model year city 

20 fuel economy for a vehicle in the same inertia 

21 weight class, 

22 ‘‘(D) $2,000, if the city fuel economy of 

23 such vehicle is at least 200 percent but less 

24 than 225 percent of the 2000 model year city 
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1 fuel economy for a vehicle in the same inertia 

2 weight class, 

3 ‘‘(E) $2,500, if the city fuel economy of 

4 such vehicle is at least 225 percent but less 

5 than 250 percent of the 2000 model year city 

6 fuel economy for a vehicle in the same inertia 

7 weight class, and 

8 ‘‘(F) $3,000, if the city fuel economy of 

9 such vehicle is at least 250 percent of the 2000 

10 model year city fuel economy for a vehicle in 

11 the same inertia weight class. 

12 ‘‘(2) CONSERVATION.—The credit amount de13 termined under paragraph (1) with respect to any 

14 vehicle shall be increased by—

15 ‘‘(A) $250, if the lifetime fuel savings of 

16 such vehicle is at least 1,500 gallons of motor 

17 fuel but less than 2,500 gallons of motor fuel, 

18 and 

19 ‘‘(B) $500, if the lifetime fuel savings of 

20 such vehicle is at least 2,500 gallons of motor 

21 fuel. 

22 ‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—The 

23 credit allowed under subsection (a) for the taxable year 

24 shall not exceed the excess of—
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1 ‘‘(1) the sum of the regular tax liability (as de2 fined in section 26(b)) plus the tax imposed by sec3 tion 55, over 

4 ‘‘(2) the sum of the credits allowable under sub5 part A and sections 27 and 30A for the taxable 

6 year. 

7 ‘‘(d) DEFINITIONS.—For purposes of this section—

8 ‘‘(1) QUALIFIED ADVANCED LEAN BURN TECH9 NOLOGY MOTOR VEHICLE.—The term ‘qualified ad10 vanced lean burn technology motor vehicle’ means a 

11 motor vehicle—

12 ‘‘(A) the original use of which commences 

13 with the taxpayer, 

14 ‘‘(B) powered by an internal combustion 

15 engine that—

16 ‘‘(i) is designed to operate primarily 

17 using more air than is necessary for com18 plete combustion of the fuel, and 

19 ‘‘(ii) incorporates direct injection, 

20 ‘‘(C) that only uses diesel fuel (as defined 

21 in section 4083(a)(3)), 

22 ‘‘(D) the city fuel economy of which is at 

23 least 125 percent of the 2000 model year city 

24 fuel economy for a vehicle in the same inertia 

25 weight class, and 
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1 ‘‘(E) that has received a certificate that 

2 such vehicle meets or exceeds the Bin 8 Tier II 

3 emission level established in regulations pre4 scribed by the Administrator of the Environ5 mental Protection Agency under section 202(i) 

6 of the Clean Air Act. 

7 ‘‘(2) LIFETIME FUEL SAVINGS.—The term ‘life8 time fuel savings’ means, with respect to a qualified 

9 advanced lean burn technology motor vehicle, an 

10 amount equal to the excess (if any) of—

11 ‘‘(A) 120,000 divided by the 2000 model 

12 year city fuel economy for the vehicle inertia 

13 weight class, over 

14 ‘‘(B) 120,000 divided by the city fuel econ15 omy for such vehicle. 

16 ‘‘(3) 2000 MODEL YEAR CITY FUEL ECON17 OMY.—The 2000 model year city fuel economy with 

18 respect to a vehicle shall be determined in accord19 ance with the following tables: 

20 ‘‘(A) In the case of a passenger auto21 mobile:

‘‘If vehicle inertia weight 

class is: 

The 2000 model year city fuel 

economy is: 

1,500 or 1,750 lbs .................................................................... 43.7 mpg

2,000 lbs .................................................................................. 38.3 mpg

2,250 lbs .................................................................................. 34.1 mpg

2,500 lbs .................................................................................. 30.7 mpg

2,750 lbs .................................................................................. 27.9 mpg

3,000 lbs .................................................................................. 25.6 mpg

3,500 lbs .................................................................................. 22.0 mpg
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‘‘If vehicle inertia weight 

class is: 

The 2000 model year city fuel 

economy is: 

4,000 lbs .................................................................................. 19.3 mpg

4,500 lbs .................................................................................. 17.2 mpg

5,000 lbs .................................................................................. 15.5 mpg

5,500 lbs .................................................................................. 14.1 mpg

6,000 lbs .................................................................................. 12.9 mpg

6,500 lbs .................................................................................. 11.9 mpg

7,000 or 8,500 lbs .................................................................... 11.1 mpg.

1 ‘‘(B) In the case of a light truck:

‘‘If vehicle inertia weight 

class is: 

The 2000 model year city fuel 

economy is: 

1,500 or 1,750 lbs .................................................................... 37.6 mpg

2,000 lbs .................................................................................. 33.7 mpg

2,250 lbs .................................................................................. 30.6 mpg

2,500 lbs .................................................................................. 28.0 mpg

2,750 lbs .................................................................................. 25.9 mpg

3,000 lbs .................................................................................. 24.1 mpg

3,500 lbs .................................................................................. 21.3 mpg

4,000 lbs .................................................................................. 19.0 mpg

4,500 lbs .................................................................................. 17.3 mpg

5,000 lbs .................................................................................. 15.8 mpg

5,500 lbs .................................................................................. 14.6 mpg

6,000 lbs .................................................................................. 13.6 mpg

6,500 lbs .................................................................................. 12.8 mpg

7,000 or 8,500 lbs .................................................................... 12.0 mpg.

2 ‘‘(4) MOTOR VEHICLE.—The term ‘motor vehi3 cle’ has the meaning given such term by section 

4 30(c)(2). 

5 ‘‘(5) CITY FUEL ECONOMY.—City fuel economy 

6 with respect to any vehicle shall be measured in ac7 cordance with testing and calculation procedures es8 tablished by the Administrator of the Environmental 

9 Protection Agency by regulations in effect on April 

10 11, 2005. 

11 ‘‘(6) OTHER TERMS.—The terms ‘passenger 

12 automobile’, ‘light truck’, and ‘manufacturer’ shall 

13 have the meanings given such terms in regulations 
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1 prescribed by the Administrator of the Environ2 mental Protection Agency for purposes of the admin3 istration of title II of the Clean Air Act (42 U.S.C. 

4 7521 et seq.). 

5 ‘‘(e) CARRYFORWARD ALLOWED.—

6 ‘‘(1) IN GENERAL.—If the credit amount allow7 able under subsection (a) for a taxable year exceeds 

8 the amount of the limitation under subsection (c) for 

9 such taxable year (referred to as the ‘unused credit 

10 year’ in this paragraph), such excess shall be allowed 

11 as a credit carryforward for each of the 20 taxable 

12 years following the unused credit year. 

13 ‘‘(2) RULES.—Rules similar to the rules of sec14 tion 39 shall apply with respect to the credit 

15 carryforward under paragraph (1). 

16 ‘‘(f) SPECIAL RULES.—For purposes of this sec17 tion—

18 ‘‘(1) REDUCTION IN BASIS.—The basis of any 

19 property for which a credit is allowable under sub20 section (a) shall be reduced by the amount of such 

21 credit (determined without regard to subsection (c)). 

22 ‘‘(2) NO DOUBLE BENEFIT.—The amount of 

23 any deduction or credit allowable under this chapter 

24 (other than the credit allowable under subsection 

25 (a)), with respect to any vehicle shall be reduced by 
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1 the amount of credit allowed under subsection (a) 

2 (determined without regard to subsection (c)) for 

3 such vehicle for the taxable year. 

4 ‘‘(3) PROPERTY USED BY TAX-EXEMPT ENTI5 TY.—In the case of a vehicle whose use is described 

6 in paragraph (3) or (4) of section 50(b) and which 

7 is not subject to a lease, the person who sold such 

8 vehicle to the person or entity using such vehicle 

9 shall be treated as the taxpayer that placed such ve10 hicle in service, but only if such person clearly dis11 closes to such person or entity in a document the 

12 amount of any credit allowable under subsection (a) 

13 with respect to such vehicle (determined without re14 gard to subsection (c)). 

15 ‘‘(4) PROPERTY USED OUTSIDE UNITED

16 STATES, ETC., NOT QUALIFIED.—No credit shall be 

17 allowable under subsection (a) with respect to any 

18 property referred to in section 50(b)(1) or with re19 spect to the portion of the cost of any property 

20 taken into account under section 179. 

21 ‘‘(5) ELECTION NOT TO TAKE CREDIT.—No 

22 credit shall be allowed under subsection (a) for any 

23 vehicle if the taxpayer elects not to have this section 

24 apply to such vehicle. 
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1 ‘‘(6) INTERACTION WITH AIR QUALITY AND

2 MOTOR VEHICLE SAFETY STANDARDS.—Unless oth3 erwise provided in this section, a motor vehicle shall 

4 not be considered eligible for a credit under this sec5 tion unless such vehicle is in compliance with—

6 ‘‘(A) the applicable provisions of the Clean 

7 Air Act for the applicable make and model year 

8 of the vehicle (or applicable air quality provi9 sions of State law in the case of a State which 

10 has adopted such provision under a waiver 

11 under section 209(b) of the Clean Air Act), and 

12 ‘‘(B) the motor vehicle safety provisions of 

13 sections 30101 through 30169 of title 49, 

14 United States Code. 

15 ‘‘(g) REGULATIONS.—

16 ‘‘(1) IN GENERAL.—The Secretary shall pro17 mulgate such regulations as necessary to carry out 

18 this section, including regulations to prevent the 

19 avoidance of the purposes of this section through 

20 disposal of any motor vehicle or leasing of any motor 

21 vehicle for a lease period of less than the economic 

22 life of such vehicle. 

23 ‘‘(2) DETERMINATION OF MOTOR VEHICLE ELI24 GIBILITY.—The Secretary, in coordination with the 

25 Secretary of Transportation and the Administrator 
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1 of the Environmental Protection Agency, shall pre2 scribe such regulations as necessary to determine 

3 whether a motor vehicle meets the requirements to 

4 be eligible for a credit under this section. 

5 ‘‘(h) TERMINATION.—This section shall not apply to 

6 any property placed in service after December 31, 2007.’’. 

7 (b) CONFORMING AMENDMENTS.—

8 (1) Section 1016(a), as amended by section 201 

9 of this Act, is amended by striking ‘‘and’’ at the end 

10 of paragraph (31), by striking the period at the end 

11 of paragraph (32) and inserting ‘‘, and’’, and by 

12 adding at the end the following: 

13 ‘‘(33) to the extent provided in section 

14 30B(f)(1).’’. 

15 (2) Section 6501(m) is amended by inserting 

16 ‘‘30B(f)(6),’’ after ‘‘30(d)(4),’’. 

17 (3) The table of sections for subpart B of part 

18 IV of subchapter A of chapter 1 is amended by in19 serting after the item relating to section 30A the fol20 lowing:

‘‘Sec. 30B. Advanced lean burn technology motor vehicle credit.’’.

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

22 this section shall apply to property placed in service after 

23 the date of the enactment of this Act in taxable years end24 ing after such date. 
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1 SEC. 207. CREDIT FOR ENERGY EFFICIENCY IMPROVE2 MENTS TO EXISTING HOMES. 

3 (a) IN GENERAL.—Subpart A of part IV of sub4 chapter A of chapter 1 (relating to nonrefundable personal 

5 credits), as amended by section 201, is amended by insert6 ing after section 25C the following new section: 

7 ‘‘SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXIST8 ING HOMES. 

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 20 percent of the amount paid or incurred by 

13 the taxpayer for qualified energy efficiency improvements 

14 installed during such taxable year. 

15 ‘‘(b) LIMITATIONS.—

16 ‘‘(1) MAXIMUM CREDIT.—The credit allowed by 

17 this section with respect to a dwelling unit shall not 

18 exceed $2,000. 

19 ‘‘(2) PRIOR CREDIT AMOUNTS FOR TAXPAYER

20 ON SAME DWELLING TAKEN INTO ACCOUNT.—If a 

21 credit was allowed to the taxpayer under subsection 

22 (a) with respect to a dwelling unit in 1 or more prior 

23 taxable years, the amount of the credit otherwise al24 lowable for the taxable year with respect to that 

25 dwelling unit shall be reduced by the sum of the 

26 credits allowed under subsection (a) to the taxpayer 
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1 with respect to the dwelling unit for all prior taxable 

2 years. 

3 ‘‘(c) QUALIFIED ENERGY EFFICIENCY IMPROVE4 MENTS.—For purposes of this section, the term ‘qualified 

5 energy efficiency improvements’ means any energy effi6 cient building envelope component which meets the pre7 scriptive criteria for such component established by the 

8 2000 International Energy Conservation Code, as such 

9 Code (including supplements) is in effect on the date of 

10 the enactment of this section (or, in the case of a metal 

11 roof with appropriate pigmented coatings which meet the 

12 Energy Star program requirements), if—

13 ‘‘(1) such component is installed in or on a 

14 dwelling unit located in the United States and 

15 owned and used by the taxpayer as the taxpayer’s 

16 principal residence (within the meaning of section 

17 121), 

18 ‘‘(2) the original use of such component com19 mences with the taxpayer, and 

20 ‘‘(3) such component reasonably can be ex21 pected to remain in use for at least 5 years. 

22 If the aggregate cost of such components with respect to 

23 any dwelling unit exceeds $1,000, such components shall 

24 be treated as qualified energy efficiency improvements 
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1 only if such components are also certified in accordance 

2 with subsection (d) as meeting such prescriptive criteria. 

3 ‘‘(d) CERTIFICATION.—The certification described in 

4 subsection (c) shall be—

5 ‘‘(1) determined on the basis of the technical 

6 specifications or applicable ratings (including prod7 uct labeling requirements) for the measurement of 

8 energy efficiency (based upon energy use or building 

9 envelope component performance) for the energy ef10 ficient building envelope component, 

11 ‘‘(2) provided by a local building regulatory au12 thority, a utility, a manufactured home production 

13 inspection primary inspection agency (IPIA), or an 

14 accredited home energy rating system provider who 

15 is accredited by or otherwise authorized to use ap16 proved energy performance measurement methods by 

17 the Residential Energy Services Network 

18 (RESNET), and 

19 ‘‘(3) made in writing in a manner which speci20 fies in readily verifiable fashion the energy efficient 

21 building envelope components installed and their re22 spective energy efficiency levels. 

23 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur24 poses of this section—
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1 ‘‘(1) BUILDING ENVELOPE COMPONENT.—The 

2 term ‘building envelope component’ means—

3 ‘‘(A) any insulation material or system 

4 which is specifically and primarily designed to 

5 reduce the heat loss or gain of a dwelling unit 

6 when installed in or on such dwelling unit, 

7 ‘‘(B) exterior windows (including sky8 lights), 

9 ‘‘(C) exterior doors, and 

10 ‘‘(D) any metal roof installed on a dwelling 

11 unit, but only if such roof has appropriate pig12 mented coatings which are specifically and pri13 marily designed to reduce the heat gain of such 

14 dwelling unit. 

15 ‘‘(2) MANUFACTURED HOMES INCLUDED.—The 

16 term ‘dwelling unit’ includes a manufactured home 

17 which conforms to Federal Manufactured Home 

18 Construction and Safety Standards (section 3280 of 

19 title 24, Code of Federal Regulations). 

20 ‘‘(3) APPLICATION OF RULES.—Rules similar to 

21 the rules under paragraphs (3), (4), and (5) of sec22 tion 25C(d) shall apply. 

23 ‘‘(f) BASIS ADJUSTMENT.—For purposes of this sub24 title, if a credit is allowed under this section for any ex25 penditure with respect to any property, the increase in the 
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1 basis of such property which would (but for this sub2 section) result from such expenditure shall be reduced by 

3 the amount of the credit so allowed. 

4 ‘‘(g) APPLICATION OF SECTION.—This section shall 

5 apply to qualified energy efficiency improvements installed 

6 after the date of the enactment of this section, and before 

7 January 1, 2008.’’. 

8 (b) CONFORMING AMENDMENTS.—

9 (1) Subsection (a) of section 1016, as amended 

10 by section 206 of this Act, is amended by striking 

11 ‘‘and’’ at the end of paragraph (32), by striking the 

12 period at the end of paragraph (33) and inserting ‘‘, 

13 and’’, and by adding at the end the following new 

14 paragraph: 

15 ‘‘(34) to the extent provided in section 25D(f), 

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

17 has been allowed under section 25D.’’. 

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

19 IV of subchapter A of chapter 1, as amended by sec20 tion 201, is amended by inserting after the item re21 lating to section 25C the following new item:

‘‘Sec. 25D. Energy efficiency improvements to existing homes.’’.

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

23 this section shall apply to improvements installed after the 

24 date of the enactment of this Act in taxable years ending 

25 after such date. 
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1 TITLE III—ALTERNATIVE 

2 MINIMUM TAX RELIEF 

3 SEC. 301. NEW NONREFUNDABLE PERSONAL CREDITS AL4 LOWED AGAINST REGULAR AND MINIMUM 

5 TAXES. 

6 (a) IN GENERAL.—

7 (1) SECTION 25C.—Section 25C(b), as added by 

8 section 201 of this Act, is amended by adding at the 

9 end the following new paragraph: 

10 ‘‘(3) LIMITATION BASED ON AMOUNT OF

11 TAX.—The credit allowed under subsection (a) for 

12 the taxable year shall not exceed the excess of—

13 ‘‘(A) the sum of the regular tax liability 

14 (as defined in section 26(b)) plus the tax im15 posed by section 55, over 

16 ‘‘(B) the sum of the credits allowable 

17 under this subpart (other than this section) and 

18 section 27 for the taxable year.’’. 

19 (2) SECTION 25D.—Section 25D(b), as added 

20 by section 207 of this Act, is amended by adding at 

21 the end the following new paragraph: 

22 ‘‘(3) LIMITATION BASED ON AMOUNT OF

23 TAX.—The credit allowed under subsection (a) for 

24 the taxable year shall not exceed the excess of—
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1 ‘‘(A) the sum of the regular tax liability 

2 (as defined in section 26(b)) plus the tax im3 posed by section 55, over 

4 ‘‘(B) the sum of the credits allowable 

5 under this subpart (other than this section) and 

6 section 27 for the taxable year.’’. 

7 (b) CONFORMING AMENDMENTS.—

8 (1) Section 23(b)(4)(B) is amended by inserting 

9 ‘‘and sections 25C and 25D’’ after ‘‘this section’’. 

10 (2) Section 24(b)(3)(B) is amended by striking 

11 ‘‘and 25B’’ and inserting ‘‘, 25B, 25C, and 25D’’. 

12 (3) Section 25(e)(1)(C) is amended by inserting 

13 ‘‘25C, and 25D’’ after ‘‘25B,’’. 

14 (4) Section 25B(g)(2) is amended by striking 

15 ‘‘section 23’’ and inserting ‘‘sections 23, 25C, and 

16 25D’’. 

17 (5) Section 26(a)(1) is amended by striking 

18 ‘‘and 25B’’ and inserting ‘‘25B, 25C, and 25D’’. 

19 (6) Section 904(h) is amended by striking ‘‘and 

20 25B’’ and inserting ‘‘25B, 25C, and 25D’’. 

21 (7) Section 1400C(d) is amended by striking 

22 ‘‘and 25B’’ and inserting ‘‘25B, 25C, and 25D’’. 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2005. 
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1 SEC. 302. CERTAIN BUSINESS ENERGY CREDITS ALLOWED 

2 AGAINST REGULAR AND MINIMUM TAXES. 

3 (a) IN GENERAL.—Subparagraph (B) of section 

4 38(c)(4) (relating to specified credits) is amended by re5 designating clause (ii) as clause (iv) and by striking clause 

6 (i) and inserting the following new clauses: 

7 ‘‘(i) the credits determined under sec8 tions 40, 45H, and 45I, 

9 ‘‘(ii) so much of the credit determined 

10 under section 46 as is attributable to sec11 tion 48(a)(3)(A)(iii), 

12 ‘‘(iii) for taxable years beginning after 

13 December 31, 2005, and before January 1, 

14 2008, the credit determined under section 

15 43, and’’. 

16 (b) EFFECTIVE DATES.—

17 (1) IN GENERAL.—Except as provided by para18 graph (2), the amendment made by subsection (a) 

19 shall apply to credits determined under the Internal 

20 Revenue Code of 1986 for taxable years beginning 

21 after December 31, 2005. 

22 (2) FUEL CELLS.—Clause (ii) of section 

23 38(c)(4)(B) of the Internal Revenue Code of 1986, 

24 as amended by subsection (a) of this section, shall 

25 apply to credits determined under the Internal Rev-
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1 enue Code of 1986 for taxable years ending after 

2 April 11, 2005.

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