IB 

Union Calendar No. 25

109TH CONGRESS 

1ST SESSION H. R. 1541

[Report No. 109–45] 

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 

APRIL 18, 2005

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on April 12, 2005] 

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,
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1 SECTION 1. SHORT TITLE; ETC. 

2 (a) SHORT TITLE.—This Act may be cited as the ‘‘En3 hanced Energy Infrastructure and Technology Tax Act of 

4 2005’’. 

5 (b) AMENDMENT OF 1986 CODE.—Except as otherwise 

6 expressly provided, whenever in this Act an amendment or 

7 repeal is expressed in terms of an amendment to, or repeal 

8 of, a section or other provision, the reference shall be consid9 ered to be made to a section or other provision of the Inter10 nal Revenue Code of 1986. 

11 (c) TABLE OF CONTENTS.—The table of contents for 

12 this Act is as follows:

Sec. 1. Short title; etc. 

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.
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1 TITLE I—ENERGY INFRASTRUC2 TURE TAX INCENTIVES 

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

4 YEAR PROPERTY. 

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

6 168(e)(3) (relating to classification of certain property) is 

7 amended by striking ‘‘and’’ at the end of clause (iii), by 

8 redesignating clause (iv) as clause (v), and by inserting 

9 after clause (iii) the following new clause: 

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

11 and’’. 

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

13 of section 168 is amended by inserting after paragraph (16) 

14 the following new paragraph: 

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

16 term ‘natural gas gathering line’ means—

17 ‘‘(A) the pipe, equipment, and appur18 tenances determined to be a gathering line by the 

19 Federal Energy Regulatory Commission, and 

20 ‘‘(B) the pipe, equipment, and appur21 tenances used to deliver natural gas from the 

22 wellhead or a commonpoint to the point at which 

23 such gas first reaches—

24 ‘‘(i) a gas processing plant, 
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1 ‘‘(ii) an interconnection with a trans2 mission pipeline for which a certificate as 

3 an interstate transmission pipeline has been 

4 issued by the Federal Energy Regulatory 

5 Commission, 

6 ‘‘(iii) an interconnection with an 

7 intrastate transmission pipeline, or 

8 ‘‘(iv) a direct interconnection with a 

9 local distribution company, a gas storage 

10 facility, or an industrial consumer.’’. 

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

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

13 relating to subparagraph (C)(iii) the following:

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

14 (d) ALTERNATIVE MINIMUM TAX EXCEPTION.—Sub15 paragraph (B) of section 56(a)(1) is amended by inserting 

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

17 168(e)(3)(C)(iv)’’. 

18 (e) EFFECTIVE DATE.—The amendments made by this 

19 section shall apply to property placed in service after April 

20 11, 2005. 

21 SEC. 102. NATURAL GAS DISTRIBUTION LINES TREATED AS 

22 15-YEAR PROPERTY. 

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

24 168(e)(3) (relating to classification of certain property) is 

25 amended by striking ‘‘and’’ at the end of clause (v), by 
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1 striking the period at the end of clause (vi) and inserting 

2 ‘‘, and’’, and by adding at the end the following new clause: 

3 ‘‘(vii) any natural gas distribution 

4 line.’’. 

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

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

7 relating to subparagraph (E)(vi) the following:

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

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

9 section shall apply to property placed in service after April 

10 11, 2005. 

11 SEC. 103. ELECTRIC TRANSMISSION PROPERTY TREATED 

12 AS 15-YEAR PROPERTY. 

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

14 168(e)(3) (relating to classification of certain property), as 

15 amended by section 102 of this Act, is amended by striking 

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

17 the end of clause (vii) and inserting ‘‘, and’’, and by adding 

18 at the end the following new clause: 

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

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

21 transmission at 69 or more kilovolts of elec22 tricity for sale and the original use of which 

23 commences with the taxpayer after April 

24 11, 2005.’’. 
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1 (b) ALTERNATIVE SYSTEM.—The table contained in 

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

3 relating to subparagraph (E)(vii) the following:

‘‘(E) (viii) ......................................................................................................... 30’’.

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

5 section shall apply to property placed in service after April 

6 11, 2005. 

7 SEC. 104. EXPANSION OF AMORTIZATION FOR CERTAIN AT8 MOSPHERIC POLLUTION CONTROL FACILI9 TIES IN CONNECTION WITH PLANTS FIRST 

10 PLACED IN SERVICE AFTER 1975. 

11 (a) ELIGIBILITY OF POST-1975 POLLUTION CONTROL

12 FACILITIES.—Subsection (d) of section 169 (relating to 

13 definitions) is amended by adding at the end the following: 

14 ‘‘(5) SPECIAL RULE RELATING TO CERTAIN AT15 MOSPHERIC POLLUTION CONTROL FACILITIES.—In the 

16 case of any atmospheric pollution control facility 

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

18 used in connection with an electric generation plant 

19 or other property which is primarily coal fired, para20 graph (1) shall be applied without regard to the 

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

22 (b) TREATMENT AS NEW IDENTIFIABLE TREATMENT

23 FACILITY.—Subparagraph (B) of section 169(d)(4) is 

24 amended to read as follows: 
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1 ‘‘(B) CERTAIN FACILITIES PLACED IN OPER2 ATION AFTER APRIL 11, 2005.—In the case of any 

3 facility described in paragraph (1) solely by rea4 son of paragraph (5), subparagraph (A) shall be 

5 applied by substituting ‘April 11, 2005’ for ‘De6 cember 31, 1968’ each place it appears therein.’’. 

7 (c) TECHNICAL AMENDMENT.—Section 169(d)(3) is 

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

9 inserting ‘‘Health and Human Services’’. 

10 (d) EFFECTIVE DATE.—The amendments made by this 

11 section shall apply to facilities placed in service after April 

12 11, 2005. 

13 SEC. 105. MODIFICATION OF CREDIT FOR PRODUCING FUEL 

14 FROM A NONCONVENTIONAL SOURCE. 

15 (a) TREATMENT AS BUSINESS CREDIT.—

16 (1) CREDIT MOVED TO SUBPART RELATING TO

17 BUSINESS RELATED CREDITS.—The Internal Revenue 

18 Code of 1986 is amended by redesignating section 29 

19 as section 45J and by moving section 45J (as so re20 designated) from subpart B of part IV of subchapter 

21 A of chapter 1 to the end of subpart D of part IV of 

22 subchapter A of chapter 1. 

23 (2) CREDIT TREATED AS BUSINESS CREDIT.—

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

25 end of paragraph (18), by striking the period at the 
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1 end of paragraph (19) and inserting ‘‘, plus’’, and by 

2 adding at the end the following: 

3 ‘‘(20) the nonconventional source production 

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

5 (3) CONFORMING AMENDMENTS.—

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

7 striking ‘‘sections 27 and 29’’ and inserting ‘‘sec8 tion 27’’. 

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

10 613A(c)(6)(C) are each amended by striking 

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

12 45J(d)(2)(C)’’. 

13 (C) Section 45(e)(9) is amended—

14 (i) by striking ‘‘section 29’’ and insert15 ing ‘‘section 45J’’, and 

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

17 as in effect on the day before the date of en18 actment of the Enhanced Energy Infrastruc19 ture and Technology Tax Act of 2005, for 

20 any prior taxable year)’’ before the period 

21 at the end thereof. 

22 (D) Section 45I is amended—

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

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

25 45J(d)(5))’’, and 
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1 (ii) in subsection (d)(3) by striking 

2 ‘‘section 29’’ both places it appears and in3 serting ‘‘section 45J’’. 

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

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

6 shall be allowed as a credit against the tax im7 posed by this chapter for the taxable year’’ and 

8 inserting ‘‘For purposes of section 38, if the tax9 payer elects to have this section apply, the non10 conventional source production credit determined 

11 under this section for the taxable year is’’. 

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

13 amended by striking paragraph (6). 

14 (G) Section 53(d)(1)(B)(iii) is amended by 

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

16 through ‘‘or not allowed’’. 

17 (H) Section 55(c)(3) is amended by striking 

18 ‘‘29(b)(6),’’. 

19 (I) Subsection (a) of section 772 is amended 

20 by inserting ‘‘and’’ at the end of paragraph (9), 

21 by striking paragraph (10), and by redesig22 nating paragraph (11) as paragraph (10). 

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

24 amended by striking ‘‘the foreign tax credit, and 
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1 the credit allowable under section 29’’ and in2 serting ‘‘and the foreign tax credit’’. 

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

4 part IV of subchapter A of chapter 1 is amended 

5 by striking the item relating to section 29. 

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

7 part IV of subchapter A of chapter 1 is amended 

8 by inserting after the item relating to section 45I 

9 the following new item:

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

10 (b) AMENDMENTS CONFORMING TO THE REPEAL OF

11 THE NATURAL GAS POLICY ACT OF 1978.—

12 (1) IN GENERAL.—Section 29(c)(2)(A) (before re13 designation under subsection (a)) is amended—

14 (A) by inserting ‘‘(as in effect before the re15 peal of such section)’’ after ‘‘1978’’, and 

16 (B) by striking subsection (e) and redesig17 nating subsections (f) and (g) as subsections (e) 

18 and (f), respectively. 

19 (2) CONFORMING AMENDMENTS.—Section 

20 29(g)(1)(before redesignation under subsection (a) and 

21 paragraph (1) of this subsection) is amended—

22 (A) in subparagraph (A) by striking ‘‘sub23 section (f)(1)(B)’’ and inserting ‘‘subsection 

24 (e)(1)(B)’’, and 
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1 (B) in subparagraph (B) by striking ‘‘sub2 section (f)’’ and inserting ‘‘subsection (e)’’. 

3 (c) EFFECTIVE DATES.—

4 (1) IN GENERAL.—Except as provided in para5 graph (2), the amendments made by this section shall 

6 apply to credits determined under the Internal Rev7 enue Code of 1986 for taxable years ending after De8 cember 31, 2005. 

9 (2) SUBSECTION (b).—The amendments made by 

10 subsection (b) shall take effect on the date of the en11 actment of this Act. 

12 SEC. 106. MODIFICATIONS TO SPECIAL RULES FOR NU13 CLEAR DECOMMISSIONING COSTS. 

14 (a) REPEAL OF LIMITATION ON DEPOSITS INTO FUND

15 BASED ON COST OF SERVICE; CONTRIBUTIONS AFTER

16 FUNDING PERIOD.—Subsection (b) of section 468A (relat17 ing to special rules for nuclear decommissioning costs) is 

18 amended to read as follows: 

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

20 amount which a taxpayer may pay into the Fund for any 

21 taxable year shall not exceed the ruling amount applicable 

22 to such taxable year.’’. 

23 (b) TREATMENT OF CERTAIN DECOMMISSIONING

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

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

3 (g) and (h), respectively, and by inserting after sub4 section (e) the following new subsection: 

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

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

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

8 section applies with respect to a nuclear power plant 

9 may transfer into such Fund not more than an 

10 amount equal to the present value of the portion of 

11 the total nuclear decommissioning costs with respect 

12 to such nuclear power plant previously excluded for 

13 such nuclear power plant under subsection (d)(2)(A) 

14 as in effect immediately before the date of the enact15 ment of the Enhanced Energy Infrastructure and 

16 Technology Tax Act of 2005. 

17 ‘‘(2) DEDUCTION FOR AMOUNTS TRANS18 FERRED.—

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

20 subparagraph (C), the deduction allowed by sub21 section (a) for any transfer permitted by this 

22 subsection shall be allowed ratably over the re23 maining estimated useful life (within the mean24 ing of subsection (d)(2)(A)) of the nuclear power 
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1 plant beginning with the taxable year during 

2 which the transfer is made. 

3 ‘‘(B) DENIAL OF DEDUCTION FOR PRE4 VIOUSLY DEDUCTED AMOUNTS.—No deduction 

5 shall be allowed for any transfer under this sub6 section of an amount for which a deduction was 

7 previously allowed to the taxpayer (or a prede8 cessor) or a corresponding amount was not in9 cluded in gross income of the taxpayer (or a 

10 predecessor). For purposes of the preceding sen11 tence, a ratable portion of each transfer shall be 

12 treated as being from previously deducted or ex13 cluded amounts to the extent thereof. 

14 ‘‘(C) TRANSFERS OF QUALIFIED FUNDS.—

15 If—

16 ‘‘(i) any transfer permitted by this 

17 subsection is made to any Fund to which 

18 this section applies, and 

19 ‘‘(ii) such Fund is transferred there20 after, 

21 any deduction under this subsection for taxable 

22 years ending after the date that such Fund is 

23 transferred shall be allowed to the transferor for 

24 the taxable year which includes such date. 

25 ‘‘(D) SPECIAL RULES.—
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1 ‘‘(i) GAIN OR LOSS NOT RECOGNIZED

2 ON TRANSFERS TO FUND.—No gain or loss 

3 shall be recognized on any transfer de4 scribed in paragraph (1). 

5 ‘‘(ii) TRANSFERS OF APPRECIATED

6 PROPERTY TO FUND.—If appreciated prop7 erty is transferred in a transfer described in 

8 paragraph (1), the amount of the deduction 

9 shall not exceed the adjusted basis of such 

10 property. 

11 ‘‘(3) NEW RULING AMOUNT REQUIRED.—Para12 graph (1) shall not apply to any transfer unless the 

13 taxpayer requests from the Secretary a new schedule 

14 of ruling amounts in connection with such transfer. 

15 ‘‘(4) NO BASIS IN QUALIFIED FUNDS.—Notwith16 standing any other provision of law, the taxpayer’s 

17 basis in any Fund to which this section applies shall 

18 not be increased by reason of any transfer permitted 

19 by this subsection.’’. 

20 (2) NEW RULING AMOUNT TO TAKE INTO AC21 COUNT TOTAL COSTS.—Subparagraph (A) of section 

22 468A(d)(2) (defining ruling amount) is amended to 

23 read as follows: 

24 ‘‘(A) fund the total nuclear decommis25 sioning costs with respect to such power plant 
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1 over the estimated useful life of such power plant, 

2 and’’. 

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

4 (relating to taxation of Fund) is amended—

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

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

7 percent’’, 

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

9 (3) by redesignating subparagraphs (C) and (D) 

10 as subparagraphs (B) and (C), respectively. 

11 (d) EFFECTIVE DATE.—The amendments made by this 

12 section shall apply to taxable years beginning after Decem13 ber 31, 2005. 

14 SEC. 107. ARBITRAGE RULES NOT TO APPLY TO PREPAY15 MENTS FOR NATURAL GAS. 

16 (a) IN GENERAL.—Subsection (b) of section 148 (relat17 ing to higher yielding investments) is amended by adding 

18 at the end the following new paragraph: 

19 ‘‘(4) SAFE HARBOR FOR PREPAID NATURAL

20 GAS.—

21 ‘‘(A) IN GENERAL.—The term ‘investment22 type property’ does not include a prepayment 

23 under a qualified natural gas supply contract. 

24 ‘‘(B) QUALIFIED NATURAL GAS SUPPLY

25 CONTRACT.—For purposes of this paragraph, the 
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1 term ‘qualified natural gas supply contract’ 

2 means any contract to acquire natural gas for 

3 resale by a utility owned by a governmental unit 

4 if the amount of gas permitted to be acquired 

5 under the contract by the utility during any 

6 year does not exceed the sum of—

7 ‘‘(i) the annual average amount during 

8 the testing period of natural gas purchased 

9 (other than for resale) by customers of such 

10 utility who are located within the service 

11 area of such utility, and 

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

13 used to transport the prepaid natural gas to 

14 the utility during such year. 

15 ‘‘(C) NATURAL GAS USED TO GENERATE

16 ELECTRICITY.—Natural gas used to generate 

17 electricity shall be taken into account in deter18 mining the average under subparagraph 

19 (B)(i)—

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

21 by a utility owned by a governmental unit, 

22 and 

23 ‘‘(ii) only to the extent that the elec24 tricity is sold (other than for resale) to cus-
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1 tomers of such utility who are located with2 in the service area of such utility. 

3 ‘‘(D) ADJUSTMENTS FOR CHANGES IN CUS4 TOMER BASE.—

5 ‘‘(i) NEW BUSINESS CUSTOMERS.—If—

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

7 period and before the date of issuance 

8 of the issue, the utility owned by a gov9 ernmental unit enters into a contract 

10 to supply natural gas (other than for 

11 resale) for a business use at a property 

12 within the service area of such utility, 

13 and 

14 ‘‘(II) the utility did not supply 

15 natural gas to such property during 

16 the testing period or the ratable 

17 amount of natural gas to be supplied 

18 under the contract is significantly 

19 greater than the ratable amount of gas 

20 supplied to such property during the 

21 testing period, 

22 then a contract shall not fail to be treated 

23 as a qualified natural gas supply contract 

24 by reason of supplying the additional nat-
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1 ural gas under the contract referred to in 

2 subclause (I). 

3 ‘‘(ii) LOST CUSTOMERS.—The average 

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

5 the annual amount of natural gas reason6 ably expected to be purchased (other than 

7 for resale) by persons who are located with8 in the service area of such utility and who, 

9 as of the date of issuance of the issue, are 

10 customers of such utility. 

11 ‘‘(E) RULING REQUESTS.—The Secretary 

12 may increase the average under subparagraph 

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

14 governmental unit establishes to the satisfaction 

15 of the Secretary that, based on objective evidence 

16 of growth in natural gas consumption or popu17 lation, such average would otherwise be insuffi18 cient for such period. 

19 ‘‘(F) ADJUSTMENT FOR NATURAL GAS OTH20 ERWISE ON HAND.—

21 ‘‘(i) IN GENERAL.—The amount other22 wise permitted to be acquired under the 

23 contract for any period shall be reduced 

24 by—
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1 ‘‘(I) the applicable share of nat2 ural gas held by the utility on the date 

3 of issuance of the issue, and 

4 ‘‘(II) the natural gas (not taken 

5 into account under subclause (I)) 

6 which the utility has a right to acquire 

7 during such period (determined as of 

8 the date of issuance of the issue). 

9 ‘‘(ii) APPLICABLE SHARE.—For pur10 poses of the clause (i), the term ‘applicable 

11 share’ means, with respect to any period, 

12 the natural gas allocable to such period if 

13 the gas were allocated ratably over the pe14 riod to which the prepayment relates. 

15 ‘‘(G) INTENTIONAL ACTS.—Subparagraph 

16 (A) shall cease to apply to any issue if the util17 ity owned by the governmental unit engages in 

18 any intentional act to render the volume of nat19 ural gas acquired by such prepayment to be in 

20 excess of the sum of—

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

22 (other than for resale) by customers of such 

23 utility who are located within the service 

24 area of such utility, and 
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1 ‘‘(ii) the amount of natural gas used to 

2 transport such natural gas to the utility. 

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

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

5 with respect to an issue, the most recent 5 cal6 endar years ending before the date of issuance of 

7 the issue. 

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

9 paragraph, the service area of a utility owned by 

10 a governmental unit shall be comprised of—

11 ‘‘(i) any area throughout which such 

12 utility provided at all times during the test13 ing period—

14 ‘‘(I) in the case of a natural gas 

15 utility, natural gas transmission or 

16 distribution services, and 

17 ‘‘(II) in the case of an electric 

18 utility, electricity distribution services, 

19 ‘‘(ii) any area within a county contig20 uous to the area described in clause (i) in 

21 which retail customers of such utility are lo22 cated if such area is not also served by an23 other utility providing natural gas or elec24 tricity services, as the case may be, and 
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1 ‘‘(iii) any area recognized as the serv2 ice area of such utility under State or Fed3 eral law.’’. 

4 (b) PRIVATE LOAN FINANCING TEST NOT TO APPLY TO

5 PREPAYMENTS FOR NATURAL GAS.—Paragraph (2) of sec6 tion 141(c) (providing exceptions to the private loan financ7 ing test) is amended by striking ‘‘or’’ at the end of subpara8 graph (A), by striking the period at the end of subpara9 graph (B) and inserting ‘‘, or’’, and by adding at the end 

10 the following new subparagraph: 

11 ‘‘(C) is a qualified natural gas supply con12 tract (as defined in section 148(b)(4)).’’. 

13 (c) EXCEPTION FOR QUALIFIED ELECTRIC AND NAT14 URAL GAS SUPPLY CONTRACTS.—Section 141(d) is amend15 ed by adding at the end the following new paragraph: 

16 ‘‘(7) EXCEPTION FOR QUALIFIED ELECTRIC AND

17 NATURAL GAS SUPPLY CONTRACTS.—The term ‘non18 governmental output property’ shall not include any 

19 contract for the prepayment of electricity or natural 

20 gas which is not investment property under section 

21 148(b)(2).’’. 

22 (d) EFFECTIVE DATE.—The amendments made by this 

23 section shall apply to obligations issued after the date of 

24 the enactment of this Act. 
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1 SEC. 108. DETERMINATION OF SMALL REFINER EXCEPTION 

2 TO OIL DEPLETION DEDUCTION. 

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

4 (relating to limitations on application of subsection (c)) is 

5 amended to read as follows: 

6 ‘‘(4) CERTAIN REFINERS EXCLUDED.—If the tax7 payer or 1 or more related persons engages in the re8 fining of crude oil, subsection (c) shall not apply to 

9 the taxpayer for a taxable year if the average daily 

10 refinery runs of the taxpayer and such persons for the 

11 taxable year exceed 75,000 barrels. For purposes of 

12 this paragraph, the average daily refinery runs for 

13 any taxable year shall be determined by dividing the 

14 aggregate refinery runs for the taxable year by the 

15 number of days in the taxable year.’’. 

16 (b) EFFECTIVE DATE.—The amendment made by this 

17 section shall apply to taxable years ending after the date 

18 of the enactment of this Act. 

19 TITLE II—MISCELLANEOUS 

20 ENERGY TAX INCENTIVES 

21 SEC. 201. CREDIT FOR RESIDENTIAL ENERGY EFFICIENT 

22 PROPERTY. 

23 (a) IN GENERAL.—Subpart A of part IV of subchapter 

24 A of chapter 1 (relating to nonrefundable personal credits) 

25 is amended by inserting after section 25B the following new 

26 section: 
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1 ‘‘SEC. 25C. RESIDENTIAL ENERGY EFFICIENT PROPERTY. 

2 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an indi3 vidual, there shall be allowed as a credit against the tax 

4 imposed by this chapter for the taxable year an amount 

5 equal to the sum of—

6 ‘‘(1) 15 percent of the qualified solar water heat7 ing property expenditures made by the taxpayer dur8 ing such year, 

9 ‘‘(2) 15 percent of the qualified photovoltaic 

10 property expenditures made by the taxpayer during 

11 such year, and 

12 ‘‘(3) 15 percent of the qualified fuel cell property 

13 expenditures made by the taxpayer during such year. 

14 ‘‘(b) LIMITATIONS.—

15 ‘‘(1) MAXIMUM CREDIT.—

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

17 under subsection (a) shall not exceed—

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

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

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

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

22 ‘‘(iii) $500 for each 0.5 kilowatt of ca23 pacity of property described in subsection 

24 (c)(3). 

25 ‘‘(B) PRIOR EXPENDITURES BY TAXPAYER

26 ON SAME RESIDENCE TAKEN INTO ACCOUNT.—In 
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1 determining the amount of the credit allowed to 

2 a taxpayer with respect to any dwelling unit 

3 under this section, the dollar amounts under 

4 clauses (i) and (ii) of subparagraph (A) with re5 spect to each type of property described in such 

6 clauses shall be reduced by the credit allowed to 

7 the taxpayer under this section with respect to 

8 such type of property for all preceding taxable 

9 years with respect to such dwelling unit. 

10 ‘‘(2) PROPERTY STANDARDS.—No credit shall be 

11 allowed under this section for an item of property un12 less—

13 ‘‘(A) the original use of such property com14 mences with the taxpayer, 

15 ‘‘(B) such property can be reasonably ex16 pected to remain in use for at least 5 years, 

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

18 connection with a dwelling unit located in the 

19 United States and used as a residence by the 

20 taxpayer, 

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

22 property, such property is certified for perform23 ance by the non-profit Solar Rating and Certifi24 cation Corporation or a comparable entity en-
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1 dorsed by the government of the State in which 

2 such property is installed, and 

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

4 property meets the performance and quality 

5 standards (if any) which have been prescribed by 

6 the Secretary by regulations (after consultation 

7 with the Secretary of Energy). 

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

9 ‘‘(1) QUALIFIED SOLAR WATER HEATING PROP10 ERTY EXPENDITURE.—The term ‘qualified solar water 

11 heating property expenditure’ means an expenditure 

12 for property which uses solar energy to heat water for 

13 use in a dwelling unit. 

14 ‘‘(2) QUALIFIED PHOTOVOLTAIC PROPERTY EX15 PENDITURE.—The term ‘qualified photovoltaic prop16 erty expenditure’ means an expenditure for property 

17 which uses solar energy to generate electricity for use 

18 in a dwelling unit and which is not described in 

19 paragraph (1). 

20 ‘‘(3) QUALIFIED FUEL CELL PROPERTY EXPENDI21 TURE.—The term ‘qualified fuel cell property expend22 iture’ means an expenditure for any qualified fuel cell 

23 property (as defined in section 48(b)(1)). 

24 ‘‘(d) SPECIAL RULES.—For purposes of this section—
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1 ‘‘(1) SOLAR PANELS.—No expenditure relating to 

2 a solar panel or other property installed as a roof (or 

3 portion thereof) shall fail to be treated as property de4 scribed in paragraph (1) or (2) of subsection (c) solely 

5 because it constitutes a structural component of the 

6 structure on which it is installed. 

7 ‘‘(2) SWIMMING POOLS, ETC., USED AS STORAGE

8 MEDIUM.—Expenditures which are properly allocable 

9 to a swimming pool, hot tub, or any other energy 

10 storage medium which has a function other than the 

11 function of such storage shall not be taken into ac12 count for purposes of this section. 

13 ‘‘(3) DOLLAR AMOUNTS IN CASE OF JOINT OCCU14 PANCY.—In the case of any dwelling unit which is 

15 jointly occupied and used during any calendar year 

16 as a residence by 2 or more individuals, the following 

17 rules shall apply: 

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

19 under subsection (a) by reason of expenditures 

20 made during such calendar year by any of such 

21 individuals with respect to such dwelling unit 

22 shall be determined by treating all of such indi23 viduals as 1 taxpayer whose taxable year is such 

24 calendar year. 
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1 ‘‘(B) There shall be allowable, with respect 

2 to such expenditures to each of such individuals, 

3 a credit under subsection (a) for the taxable year 

4 in which such calendar year ends in an amount 

5 which bears the same ratio to the amount deter6 mined under subparagraph (A) as the amount of 

7 such expenditures made by such individual dur8 ing such calendar year bears to the aggregate of 

9 such expenditures made by all of such individ10 uals during such calendar year. 

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

12 applied separately with respect to expenditures 

13 described in paragraphs (1), (2), and (3) of sub14 section (c). 

15 ‘‘(4) TENANT-STOCKHOLDER IN COOPERATIVE

16 HOUSING CORPORATION.—In the case of an indi17 vidual who is a tenant-stockholder (as defined in sec18 tion 216) in a cooperative housing corporation (as de19 fined in such section), such individual shall be treated 

20 as having made the individual’s tenant-stockholder’s 

21 proportionate share (as defined in section 216(b)(3)) 

22 of any expenditures of such corporation. 

23 ‘‘(5) CONDOMINIUMS.—

24 ‘‘(A) IN GENERAL.—In the case of an indi25 vidual who is a member of a condominium man-
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1 agement association with respect to a condo2 minium which the individual owns, such indi3 vidual shall be treated as having made the indi4 vidual’s proportionate share of any expenditures 

5 of such association. 

6 ‘‘(B) CONDOMINIUM MANAGEMENT ASSOCIA7 TION.—For purposes of this paragraph, the term 

8 ‘condominium management association’ means 

9 an organization which meets the requirements of 

10 paragraph (1) of section 528(c) (other than sub11 paragraph (E) thereof) with respect to a condo12 minium project substantially all of the units of 

13 which are used as residences. 

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

15 than 80 percent of the use of an item is for nonbusi16 ness purposes, only that portion of the expenditures 

17 for such item which is properly allocable to use for 

18 nonbusiness purposes shall be taken into account. 

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

20 EXPENDITURE.—

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

22 subparagraph (B), an expenditure with respect 

23 to an item shall be treated as made when the 

24 original installation of the item is completed. 
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1 ‘‘(B) EXPENDITURES PART OF BUILDING

2 CONSTRUCTION.—In the case of an expenditure 

3 in connection with the construction or recon4 struction of a structure, such expenditure shall be 

5 treated as made when the original use of the con6 structed or reconstructed structure by the tax7 payer begins. 

8 ‘‘(C) AMOUNT.—The amount of any expend9 iture shall be the cost thereof. 

10 ‘‘(8) PROPERTY FINANCED BY SUBSIDIZED EN11 ERGY FINANCING.—For purposes of determining the 

12 amount of expenditures made by any individual with 

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

14 into account expenditures which are made from sub15 sidized energy financing (as defined in section 

16 48(a)(4)(C)). 

17 ‘‘(e) BASIS ADJUSTMENTS.—For purposes of this sub18 title, if a credit is allowed under this section for any ex19 penditure with respect to any property, the increase in the 

20 basis of such property which would (but for this subsection) 

21 result from such expenditure shall be reduced by the amount 

22 of the credit so allowed. 

23 ‘‘(f) TERMINATION.—The credit allowed under this sec24 tion shall not apply to taxable years beginning after Decem25 ber 31, 2007.’’. 
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1 (b) CONFORMING AMENDMENTS.—

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

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

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

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

6 paragraph: 

7 ‘‘(32) to the extent provided in section 25C(e), in 

8 the case of amounts with respect to which a credit has 

9 been allowed under section 25C.’’. 

10 (2) The table of sections for subpart A of part IV 

11 of subchapter A of chapter 1 is amended by inserting 

12 after the item relating to section 25B the following 

13 new item:

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

14 (c) EFFECTIVE DATE.—The amendments made by this 

15 section shall apply to expenditures made after the date of 

16 the enactment of this Act. 

17 SEC. 202. CREDIT FOR BUSINESS INSTALLATION OF QUALI18 FIED FUEL CELLS. 

19 (a) IN GENERAL.—Section 48(a)(3)(A) (defining en20 ergy property) is amended by striking ‘‘or’’ at the end of 

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

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

23 ‘‘(iii) qualified fuel cell property,’’. 
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1 (b) ENERGY PERCENTAGE.—Subparagraph (A) of sec2 tion 48(a)(2) (relating to energy percentage) is amended to 

3 read as follows: 

4 ‘‘(A) IN GENERAL.—The energy percentage 

5 is—

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

7 property, 15 percent, and 

8 ‘‘(ii) in the case of any other energy 

9 property, 10 percent.’’. 

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

11 (relating to energy credit) is amended—

12 (1) by redesignating subsection (b) as paragraph 

13 (5) of subsection (a), 

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

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

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

17 (3) by adding at the end the following new sub18 section: 

19 ‘‘(b) QUALIFIED FUEL CELL PROPERTY.—For pur20 poses of subsection (a)(3)(A)(iii)—

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

22 property’ means a fuel cell power plant which—

23 ‘‘(A) generates at least 0.5 kilowatt of elec24 tricity using an electrochemical process, and 
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1 ‘‘(B) has an electricity-only generation effi2 ciency greater than 30 percent. 

3 ‘‘(2) LIMITATION.—The energy credit with re4 spect to any qualified fuel cell property shall not ex5 ceed an amount equal to $500 for each 0.5 kilowatt 

6 of capacity of such property. 

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

8 cell power plant’ means an integrated system, com9 prised of a fuel cell stack assembly and associated bal10 ance of plant components, which converts a fuel into 

11 electricity using electrochemical means. 

12 ‘‘(4) TERMINATION.—The term ‘qualified fuel cell 

13 property’ shall not include any property placed in 

14 service after December 31, 2007.’’. 

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

16 amended by inserting ‘‘except as provided in subsection 

17 (b)(2),’’ before ‘‘the energy’’ the first place it appears. 

18 (e) EFFECTIVE DATE.—The amendments made by this 

19 section shall apply to property placed in service after April 

20 11, 2005, under rules similar to the rules of section 48(m) 

21 of the Internal Revenue Code of 1986 (as in effect on the 

22 day before the date of the enactment of the Revenue Rec23 onciliation Act of 1990). 
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1 SEC. 203. REDUCED MOTOR FUEL EXCISE TAX ON CERTAIN 

2 MIXTURES OF DIESEL FUEL. 

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

4 is amended by adding at the end the following: 

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

6 the case of diesel-water fuel emulsion at least 

7 16.9 percent of which is water and with respect 

8 to which the emulsion additive is registered by a 

9 United States manufacturer with the Environ10 mental Protection Agency pursuant to section 

11 211 of the Clean Air Act (as in effect on March 

12 31, 2003), subparagraph (A)(iii) shall be applied 

13 by substituting ‘19.7 cents’ for ‘24.3 cents’.’’. 

14 (b) SPECIAL RULES FOR DIESEL-WATER FUEL EMUL15 SIONS.—

16 (1) REFUNDS FOR TAX-PAID PURCHASES.—Sec17 tion 6427 is amended by redesignating subsections 

18 (m) through (p) as subsections (n) through (q), respec19 tively, and by inserting after subsection (l) the fol20 lowing new subsection: 

21 ‘‘(m) DIESEL FUEL USED TO PRODUCE EMULSION.—

22 ‘‘(1) IN GENERAL.—Except as provided in sub23 section (k), if any diesel fuel on which tax was im24 posed by section 4081 at the regular tax rate is used 

25 by any person in producing an emulsion described in 

26 section 4081(a)(2)(D) which is sold or used in such 
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1 person’s trade or business, the Secretary shall pay 

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

3 the excess of the regular tax rate over the incentive 

4 tax rate with respect to such fuel. 

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

6 (1)—

7 ‘‘(A) REGULAR TAX RATE.—The term ‘reg8 ular tax rate’ means the aggregate rate of tax 

9 imposed by section 4081 determined without re10 gard to section 4081(a)(2)(D). 

11 ‘‘(B) INCENTIVE TAX RATE.—The term ‘in12 centive tax rate’ means the aggregate rate of tax 

13 imposed by section 4081 determined with regard 

14 to section 4081(a)(2)(D).’’. 

15 (2) LATER SEPARATION OF FUEL.—Section 4081 

16 (relating to imposition of tax) is amended by insert17 ing after subsection (b) the following new subsection: 

18 ‘‘(c) LATER SEPARATION OF FUEL FROM DIESEL19 WATER FUEL EMULSION.—If any person separates the tax20 able fuel from a diesel-water fuel emulsion on which tax 

21 was imposed under subsection (a) at a rate determined 

22 under subsection (a)(2)(D) (or with respect to which a cred23 it or payment was allowed or made by reason of section 

24 6427), such person shall be treated as the refiner of such 

25 taxable fuel. The amount of tax imposed on any removal 
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1 of such fuel by such person shall be reduced by the amount 

2 of tax imposed (and not credited or refunded) on any prior 

3 removal or entry of such fuel.’’. 

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

5 section shall take effect on January 1, 2006. 

6 SEC. 204. AMORTIZATION OF DELAY RENTAL PAYMENTS. 

7 (a) IN GENERAL.—Section 167 (relating to deprecia8 tion) is amended by redesignating subsection (h) as sub9 section (i) and by inserting after subsection (g) the fol10 lowing new subsection: 

11 ‘‘(h) AMORTIZATION OF DELAY RENTAL PAYMENTS

12 FOR DOMESTIC OIL AND GAS WELLS.—

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

14 paid or incurred in connection with the development 

15 of oil or gas wells within the United States (as de16 fined in section 638) shall be allowed as a deduction 

17 ratably over the 24-month period beginning on the 

18 date that such payment was paid or incurred. 

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

20 paragraph (1), any payment paid or incurred during 

21 the taxable year shall be treated as paid or incurred 

22 on the mid-point of such taxable year. 

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

24 in this subsection, no depreciation or amortization 
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1 deduction shall be allowed with respect to such pay2 ments. 

3 ‘‘(4) TREATMENT UPON ABANDONMENT.—If any 

4 property to which a delay rental payment relates is 

5 retired or abandoned during the 24-month period de6 scribed in paragraph (1), no deduction shall be al7 lowed on account of such retirement or abandonment 

8 and the amortization deduction under this subsection 

9 shall continue with respect to such payment. 

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

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

12 means an amount paid for the privilege of deferring 

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

14 lease.’’. 

15 (b) EFFECTIVE DATE.—The amendments made by this 

16 section shall apply to amounts paid or incurred in taxable 

17 years beginning after the date of the enactment of this Act. 

18 SEC. 205. AMORTIZATION OF GEOLOGICAL AND GEO19 PHYSICAL EXPENDITURES. 

20 (a) IN GENERAL.—Section 167 (relating to deprecia21 tion), as amended by section 204 of this Act, is amended 

22 by redesignating subsection (i) as subsection (j) and by in23 serting after subsection (h) the following new subsection: 

24 ‘‘(i) AMORTIZATION OF GEOLOGICAL AND GEO25 PHYSICAL EXPENDITURES.—
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1 ‘‘(1) IN GENERAL.—Any geological and geo2 physical expenses paid or incurred in connection with 

3 the exploration for, or development of, oil or gas with4 in the United States (as defined in section 638) shall 

5 be allowed as a deduction ratably over the 24-month 

6 period beginning on the date that such expense was 

7 paid or incurred. 

8 ‘‘(2) SPECIAL RULES.—For purposes of this sub9 section, rules similar to the rules of paragraphs (2), 

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

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

12 amended by inserting ‘‘167(h), 167(i),’’ after ‘‘under sec13 tion’’. 

14 (c) EFFECTIVE DATE.—The amendments made by this 

15 section shall apply to amounts paid or incurred in taxable 

16 years beginning after the date of the enactment of this Act. 

17 SEC. 206. ADVANCED LEAN BURN TECHNOLOGY MOTOR VE18 HICLE CREDIT. 

19 (a) IN GENERAL.—Subpart B of part IV of subchapter 

20 A of chapter 1 (relating to other credits) is amended by 

21 adding at the end the following: 

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

23 VEHICLE CREDIT. 

24 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be allowed 

25 as a credit against the tax imposed by this chapter for the 
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1 taxable year an amount equal to the sum of the credit 

2 amounts determined under subsection (b) with respect to 

3 each qualified advanced lean burn technology motor vehicle 

4 placed in service by the taxpayer during the taxable year. 

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

6 (a)—

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

8 with respect to any vehicle shall be—

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

10 vehicle is at least 125 percent but less than 150 

11 percent of the 2000 model year city fuel economy 

12 for a vehicle in the same inertia weight class, 

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

14 vehicle is at least 150 percent but less than 175 

15 percent of the 2000 model year city fuel economy 

16 for a vehicle in the same inertia weight class, 

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

18 vehicle is at least 175 percent but less than 200 

19 percent of the 2000 model year city fuel economy 

20 for a vehicle in the same inertia weight class, 

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

22 vehicle is at least 200 percent but less than 225 

23 percent of the 2000 model year city fuel economy 

24 for a vehicle in the same inertia weight class, 
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1 ‘‘(E) $2,500, if the city fuel economy of such 

2 vehicle is at least 225 percent but less than 250 

3 percent of the 2000 model year city fuel economy 

4 for a vehicle in the same inertia weight class, 

5 and 

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

7 vehicle is at least 250 percent of the 2000 model 

8 year city fuel economy for a vehicle in the same 

9 inertia weight class. 

10 ‘‘(2) CONSERVATION.—The credit amount deter11 mined under paragraph (1) with respect to any vehi12 cle shall be increased by—

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

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

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

16 and 

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

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

19 fuel. 

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

21 credit allowed under subsection (a) for the taxable year shall 

22 not exceed the excess of—

23 ‘‘(1) the sum of the regular tax liability (as de24 fined in section 26(b)) plus the tax imposed by section 

25 55, over 
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1 ‘‘(2) the sum of the credits allowable under sub2 part A and sections 27 and 30A for the taxable year. 

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

4 ‘‘(1) QUALIFIED ADVANCED LEAN BURN TECH5 NOLOGY MOTOR VEHICLE.—The term ‘qualified ad6 vanced lean burn technology motor vehicle’ means a 

7 motor vehicle—

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

9 with the taxpayer, 

10 ‘‘(B) powered by an internal combustion en11 gine that—

12 ‘‘(i) is designed to operate primarily 

13 using more air than is necessary for com14 plete combustion of the fuel, and 

15 ‘‘(ii) incorporates direct injection, 

16 ‘‘(C) that only uses diesel fuel (as defined in 

17 section 4083(a)(3)), 

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

19 least 125 percent of the 2000 model year city fuel 

20 economy for a vehicle in the same inertia weight 

21 class, and 

22 ‘‘(E) that has received a certificate that 

23 such vehicle meets or exceeds the Bin 8 Tier II 

24 emission level established in regulations pre25 scribed by the Administrator of the Environ-
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1 mental Protection Agency under section 202(i) of 

2 the Clean Air Act. 

3 ‘‘(2) LIFETIME FUEL SAVINGS.—The term ‘life4 time fuel savings’ means, with respect to a qualified 

5 advanced lean burn technology motor vehicle, an 

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

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

8 year city fuel economy for the vehicle inertia 

9 weight class, over 

10 ‘‘(B) 120,000 divided by the city fuel econ11 omy for such vehicle. 

12 ‘‘(3) 2000 MODEL YEAR CITY FUEL ECONOMY.—

13 The 2000 model year city fuel economy with respect 

14 to a vehicle shall be determined in accordance with 

15 the following tables: 

16 ‘‘(A) In the case of a passenger automobile:

‘‘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 

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.

17 ‘‘(B) In the case of a light truck:
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‘‘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.

1 ‘‘(4) MOTOR VEHICLE.—The term ‘motor vehicle’ 

2 has the meaning given such term by section 30(c)(2). 

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

4 with respect to any vehicle shall be measured in ac5 cordance with testing and calculation procedures es6 tablished by the Administrator of the Environmental 

7 Protection Agency by regulations in effect on April 

8 11, 2005. 

9 ‘‘(6) OTHER TERMS.—The terms ‘passenger auto10 mobile’, ‘light truck’, and ‘manufacturer’ shall have 

11 the meanings given such terms in regulations pre12 scribed by the Administrator of the Environmental 

13 Protection Agency for purposes of the administration 

14 of title II of the Clean Air Act (42 U.S.C. 7521 et 

15 seq.). 

16 ‘‘(e) CARRYFORWARD ALLOWED.—

17 ‘‘(1) IN GENERAL.—If the credit amount allow18 able under subsection (a) for a taxable year exceeds 
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1 the amount of the limitation under subsection (c) for 

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

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

4 as a credit carryforward for each of the 20 taxable 

5 years following the unused credit year. 

6 ‘‘(2) RULES.—Rules similar to the rules of sec7 tion 39 shall apply with respect to the credit 

8 carryforward under paragraph (1). 

9 ‘‘(f) SPECIAL RULES.—For purposes of this section—

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

11 property for which a credit is allowable under sub12 section (a) shall be reduced by the amount of such 

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

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

15 deduction or credit allowable under this chapter 

16 (other than the credit allowable under subsection (a)), 

17 with respect to any vehicle shall be reduced by the 

18 amount of credit allowed under subsection (a) (deter19 mined without regard to subsection (c)) for such vehi20 cle for the taxable year. 

21 ‘‘(3) PROPERTY USED BY TAX-EXEMPT ENTITY.—

22 In the case of a vehicle whose use is described in 

23 paragraph (3) or (4) of section 50(b) and which is 

24 not subject to a lease, the person who sold such vehicle 

25 to the person or entity using such vehicle shall be 
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1 treated as the taxpayer that placed such vehicle in 

2 service, but only if such person clearly discloses to 

3 such person or entity in a document the amount of 

4 any credit allowable under subsection (a) with respect 

5 to such vehicle (determined without regard to sub6 section (c)). 

7 ‘‘(4) PROPERTY USED OUTSIDE UNITED STATES, 

8 ETC., NOT QUALIFIED.—No credit shall be allowable 

9 under subsection (a) with respect to any property re10 ferred to in section 50(b)(1) or with respect to the 

11 portion of the cost of any property taken into account 

12 under section 179. 

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

14 shall be allowed under subsection (a) for any vehicle 

15 if the taxpayer elects not to have this section apply 

16 to such vehicle. 

17 ‘‘(6) INTERACTION WITH AIR QUALITY AND

18 MOTOR VEHICLE SAFETY STANDARDS.—Unless other19 wise provided in this section, a motor vehicle shall 

20 not be considered eligible for a credit under this sec21 tion unless such vehicle is in compliance with—

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

23 Air Act for the applicable make and model year 

24 of the vehicle (or applicable air quality provi25 sions of State law in the case of a State which 
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1 has adopted such provision under a waiver 

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

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

4 sections 30101 through 30169 of title 49, United 

5 States Code. 

6 ‘‘(g) REGULATIONS.—

7 ‘‘(1) IN GENERAL.—The Secretary shall promul8 gate such regulations as necessary to carry out this 

9 section, including regulations to prevent the avoid10 ance of the purposes of this section through disposal 

11 of any motor vehicle or leasing of any motor vehicle 

12 for a lease period of less than the economic life of such 

13 vehicle. 

14 ‘‘(2) DETERMINATION OF MOTOR VEHICLE ELIGI15 BILITY.—The Secretary, in coordination with the Sec16 retary of Transportation and the Administrator of the 

17 Environmental Protection Agency, shall prescribe 

18 such regulations as necessary to determine whether a 

19 motor vehicle meets the requirements to be eligible for 

20 a credit under this section. 

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

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

23 (b) CONFORMING AMENDMENTS.—

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

25 of this Act, is amended by striking ‘‘and’’ at the end 
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1 of paragraph (31), by striking the period at the end 

2 of paragraph (32) and inserting ‘‘, and’’, and by add3 ing at the end the following: 

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

5 30B(f)(1).’’. 

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

7 ‘‘30B(f)(6),’’ after ‘‘30(d)(4),’’. 

8 (3) The table of sections for subpart B of part IV 

9 of subchapter A of chapter 1 is amended by inserting 

10 after the item relating to section 30A the following:

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

11 (c) EFFECTIVE DATE.—The amendments made by this 

12 section shall apply to property placed in service after the 

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

14 after such date. 

15 SEC. 207. CREDIT FOR ENERGY EFFICIENCY IMPROVE16 MENTS TO EXISTING HOMES. 

17 (a) IN GENERAL.—Subpart A of part IV of subchapter 

18 A of chapter 1 (relating to nonrefundable personal credits), 

19 as amended by section 201, is amended by inserting after 

20 section 25C the following new section: 

21 ‘‘SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXIST22 ING HOMES. 

23 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an indi24 vidual, there shall be allowed as a credit against the tax 

25 imposed by this chapter for the taxable year an amount 
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1 equal to 20 percent of the amount paid or incurred by the 

2 taxpayer for qualified energy efficiency improvements in3 stalled during such taxable year. 

4 ‘‘(b) LIMITATIONS.—

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

6 this section with respect to a dwelling unit shall not 

7 exceed $2,000. 

8 ‘‘(2) PRIOR CREDIT AMOUNTS FOR TAXPAYER ON

9 SAME DWELLING TAKEN INTO ACCOUNT.—If a credit 

10 was allowed to the taxpayer under subsection (a) with 

11 respect to a dwelling unit in 1 or more prior taxable 

12 years, the amount of the credit otherwise allowable for 

13 the taxable year with respect to that dwelling unit 

14 shall be reduced by the sum of the credits allowed 

15 under subsection (a) to the taxpayer with respect to 

16 the dwelling unit for all prior taxable years. 

17 ‘‘(c) QUALIFIED ENERGY EFFICIENCY IMPROVE18 MENTS.—For purposes of this section, the term ‘qualified 

19 energy efficiency improvements’ means any energy efficient 

20 building envelope component which meets the prescriptive 

21 criteria for such component established by the 2000 Inter22 national Energy Conservation Code, as such Code (includ23 ing supplements) is in effect on the date of the enactment 

24 of the Enhanced Energy Infrastructure and Technology Tax 

25 Act of 2005 (or, in the case of a metal roof with appropriate 
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1 pigmented coatings which meet the Energy Star program 

2 requirements), if—

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

4 dwelling unit located in the United States and owned 

5 and used by the taxpayer as the taxpayer’s principal 

6 residence (within the meaning of section 121), 

7 ‘‘(2) the original use of such component com8 mences with the taxpayer, and 

9 ‘‘(3) such component reasonably can be expected 

10 to remain in use for at least 5 years. 

11 If the aggregate cost of such components with respect to any 

12 dwelling unit exceeds $1,000, such components shall be 

13 treated as qualified energy efficiency improvements only if 

14 such components are also certified in accordance with sub15 section (d) as meeting such prescriptive criteria. 

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

17 subsection (c) shall be—

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

19 specifications or applicable ratings (including prod20 uct labeling requirements) for the measurement of en21 ergy efficiency (based upon energy use or building en22 velope component performance) for the energy efficient 

23 building envelope component, 

24 ‘‘(2) provided by a local building regulatory au25 thority, a utility, a manufactured home production 
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1 inspection primary inspection agency (IPIA), or an 

2 accredited home energy rating system provider who is 

3 accredited by or otherwise authorized to use approved 

4 energy performance measurement methods by the Res5 idential Energy Services Network (RESNET), and 

6 ‘‘(3) made in writing in a manner which speci7 fies in readily verifiable fashion the energy efficient 

8 building envelope components installed and their re9 spective energy efficiency levels. 

10 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur11 poses of this section—

12 ‘‘(1) BUILDING ENVELOPE COMPONENT.—The 

13 term ‘building envelope component’ means—

14 ‘‘(A) any insulation material or system 

15 which is specifically and primarily designed to 

16 reduce the heat loss or gain of a dwelling unit 

17 when installed in or on such dwelling unit, 

18 ‘‘(B) exterior windows (including skylights), 

19 ‘‘(C) exterior doors, and 

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

21 unit, but only if such roof has appropriate pig22 mented coatings which are specifically and pri23 marily designed to reduce the heat gain of such 

24 dwelling unit. 
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1 ‘‘(2) MANUFACTURED HOMES INCLUDED.—The 

2 term ‘dwelling unit’ includes a manufactured home 

3 which conforms to Federal Manufactured Home Con4 struction and Safety Standards (section 3280 of title 

5 24, Code of Federal Regulations). 

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

7 the rules under paragraphs (3), (4), and (5) of section 

8 25C(d) shall apply. 

9 ‘‘(f) BASIS ADJUSTMENT.—For purposes of this sub10 title, if a credit is allowed under this section for any ex11 penditure with respect to any property, the increase in the 

12 basis of such property which would (but for this subsection) 

13 result from such expenditure shall be reduced by the amount 

14 of the credit so allowed. 

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

16 apply to qualified energy efficiency improvements installed 

17 after the date of the enactment of the Enhanced Energy In18 frastructure and Technology Tax Act of 2005, and before 

19 January 1, 2008.’’. 

20 (b) CONFORMING AMENDMENTS.—

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

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

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

24 period at the end of paragraph (33) and inserting ‘‘, 
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1 and’’, and by adding at the end the following new 

2 paragraph: 

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

4 the case of amounts with respect to which a credit has 

5 been allowed under section 25D.’’. 

6 (2) The table of sections for subpart A of part IV 

7 of subchapter A of chapter 1, as amended by section 

8 201, is amended by inserting after the item relating 

9 to section 25C the following new item:

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

10 (c) EFFECTIVE DATE.—The amendments made by this 

11 section shall apply to improvements installed after the date 

12 of the enactment of this Act in taxable years ending after 

13 such date. 

14 TITLE III—ALTERNATIVE 

15 MINIMUM TAX RELIEF 

16 SEC. 301. NEW NONREFUNDABLE PERSONAL CREDITS AL17 LOWED AGAINST REGULAR AND MINIMUM 

18 TAXES. 

19 (a) IN GENERAL.—

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

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

22 end the following new paragraph: 

23 ‘‘(3) LIMITATION BASED ON AMOUNT OF TAX.—

24 The credit allowed under subsection (a) for the tax25 able year shall not exceed the excess of—
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1 ‘‘(A) the sum of the regular tax liability (as 

2 defined in section 26(b)) plus the tax imposed by 

3 section 55, over 

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

5 this subpart (other than this section) and section 

6 27 for the taxable year.’’. 

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

8 section 207 of this Act, is amended by adding at the 

9 end the following new paragraph: 

10 ‘‘(3) LIMITATION BASED ON AMOUNT OF TAX.—

11 The credit allowed under subsection (a) for the tax12 able year shall not exceed the excess of—

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

14 defined in section 26(b)) plus the tax imposed by 

15 section 55, over 

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

17 this subpart (other than this section) and section 

18 27 for the taxable year.’’. 

19 (b) CONFORMING AMENDMENTS.—

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

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

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

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

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

25 ‘‘25C, and 25D’’ after ‘‘25B,’’. 
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1 (4) Section 25B(g)(2) is amended by striking 

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

3 25D’’. 

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

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

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

7 25B’’ and inserting ‘‘25B, 25C, and 25D’’. 

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

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

10 (c) EFFECTIVE DATE.—The amendments made by this 

11 section shall apply to taxable years beginning after Decem12 ber 31, 2005. 

13 SEC. 302. CERTAIN BUSINESS ENERGY CREDITS ALLOWED 

14 AGAINST REGULAR AND MINIMUM TAXES. 

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

16 38(c)(4) (relating to specified credits) is amended by redes17 ignating clause (ii) as clause (iv) and by striking clause 

18 (i) and inserting the following new clauses: 

19 ‘‘(i) the credits determined under sec20 tions 40, 45H, and 45I, 

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

22 under section 46 as is attributable to section 

23 48(a)(3)(A)(iii), 

24 ‘‘(iii) for taxable years beginning after 

25 December 31, 2005, and before January 1, 
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1 2008, the credit determined under section 

2 43, and’’. 

3 (b) EFFECTIVE DATES.—

4 (1) IN GENERAL.—Except as provided by para5 graph (2), the amendment made by subsection (a) 

6 shall apply to credits determined under the Internal 

7 Revenue Code of 1986 for taxable years beginning 

8 after December 31, 2005. 

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

10 38(c)(4)(B) of the Internal Revenue Code of 1986, as 

11 amended by subsection (a) of this section, shall apply 

12 to credits determined under the Internal Revenue 

13 Code of 1986 for taxable years ending after April 11, 

14 2005. 

Union Calendar No. 25

109TH CONGRESS 

1ST SESSION H. R. 1541

[Report No. 109–45] 

A BILL

To amend the Internal Revenue Code of 1986 to 

tain energy technologies, and for other purposes. United States and to encourage the use of cerenhance energy infrastructure properties in the 

APRIL 18, 2005

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union,