I

107TH CONGRESS

1ST SESSION H. R. 1969

To amend the Internal Revenue Code of 1986 to provide an interest-free

source of capital to cover the costs of installing residential solar energy

equipment.

IN THE HOUSE OF REPRESENTATIVES

MAY 23, 2001

Mr. MCDERMOTT introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

an interest-free source of capital to cover the costs of

installing residential solar energy equipment.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Residential Solar En5 ergy Act of 2001’’.

6 SEC. 2. CREDIT TO HOLDERS OF RESIDENTIAL SOLAR EN7 ERGY BONDS.

8 (a) IN GENERAL.—Subpart B of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of
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1 1986 is amended by adding at the end the following new

2 section:

3 ‘‘SEC. 30B. CREDIT TO HOLDERS OF RESIDENTIAL SOLAR

4 ENERGY BONDS.

5 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax6 payer who holds a Residential Solar Energy Bond on a

7 credit allowance date of such bond which occurs during

8 the taxable year, there shall be allowed as a credit against

9 the tax imposed by this chapter for such taxable year an

10 amount equal to the sum of the credits determined under

11 subsection (b) with respect to credit allowance dates dur12 ing such year on which the taxpayer holds such bond.

13 ‘‘(b) AMOUNT OF CREDIT.—

14 ‘‘(1) IN GENERAL.—The amount of the credit

15 determined under this subsection with respect to any

16 credit allowance date for a Residential Solar Energy

17 Bond is 25 percent of the annual credit determined

18 with respect to such bond.

19 ‘‘(2) ANNUAL CREDIT.—The annual credit de20 termined with respect to any Residential Solar En21 ergy Bond is the product of—

22 ‘‘(A) the applicable credit rate, multiplied

23 by

24 ‘‘(B) the outstanding face amount of the

25 bond.
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1 ‘‘(3) APPLICABLE CREDIT RATE.—For purposes

2 of paragraph (1), the applicable credit rate with re3 spect to an issue is the rate equal to an average

4 market yield (as of the day before the date of

5 issuance of the issue) on outstanding long-term cor6 porate debt obligations (determined under regula7 tions prescribed by the Secretary).

8 ‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE9 DEMPTION.—In the case of a bond which is issued

10 during the 3-month period ending on a credit allow11 ance date, the amount of the credit determined

12 under this subsection with respect to such credit al13 lowance date shall be a ratable portion of the credit

14 otherwise determined based on the portion of the 3-

15 month period during which the bond is outstanding.

16 A similar rule shall apply when the bond is re17 deemed.

18 ‘‘(c) RESIDENTIAL SOLAR ENERGY BOND.—For pur19 poses of this section—

20 ‘‘(1) IN GENERAL.—The term ‘Residential

21 Solar Energy Bond’ means any bond issued as part

22 of an issue if—

23 ‘‘(A) 95 percent or more of the proceeds of

24 such issue are to be used to make qualified

25 solar energy loans,
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1 ‘‘(B) the bond is issued by a qualified util2 ity,

3 ‘‘(C) the issuer designates such bond for

4 purposes of this section, and

5 ‘‘(D) the term of each bond which is part

6 of such issue does not exceed 15 years.

7 ‘‘(2) QUALIFIED SOLAR ENERGY LOAN.—

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

9 solar energy loan’ means any loan without in10 terest to the owner of any qualified residential

11 property for the purchase and installation of

12 photovoltaic cells on such property but only if—

13 ‘‘(i) the excess of the electricity pro14 duced by such cells over the electricity con15 sumed at the residential property is trans16 mitted from such property for use by oth17 ers,

18 ‘‘(ii) the net electricity produced or

19 consumed at the residential property is me20 tered,

21 ‘‘(iii) the owner receives a credit

22 against future electricity consumption for

23 the excess described in clause (i),

24 ‘‘(iv) the principal amount of the loan

25 is payable in equal installments over 15
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1 years (or, if shorter, the period specified by

2 the utility), and

3 ‘‘(v) the loan is made under a pro4 gram of the utility that—

5 ‘‘(I) specifies an approved list of

6 photovoltaic cell equipment and in7 stallers, and

8 ‘‘(II) contains other safeguards

9 to ensure that the loan is used for its

10 intended purpose.

11 ‘‘(B) QUALIFIED UTILITY.—The term

12 ‘qualified utility’ means any entity (including a

13 governmental unit) engaged in the sale of elec14 trical energy at retail in the United States

15 ‘‘(C) QUALIFIED RESIDENTIAL PROP16 ERTY.—The term ‘qualified residential prop17 erty’ means any single-family or multi-family

18 residence.

19 ‘‘(d) LIMITATION ON AMOUNT OF BONDS DES20 IGNATED.—

21 ‘‘(1) IN GENERAL.—The maximum aggregate

22 face amount of bonds which may be designated

23 under subsection (c)(1) by any qualified utility shall

24 not exceed the limitation amount allocated to such

25 utility under paragraph (3).
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1 ‘‘(2) NATIONAL LIMITATION ON AMOUNT OF

2 BONDS DESIGNATED.—There is a national Residen3 tial Solar Energy Bond limitation of

4 $24,000,000,000.

5 ‘‘(3) ALLOCATION OF LIMITATION AMONG UTIL6 ITIES.—

7 ‘‘(A) IN GENERAL.—The national Residen8 tial Solar Energy Bond limitation shall be allo9 cated by the Secretary of Energy during 2002,

10 2003, 2004, and 2005 to qualified utilities. In

11 making such allocations, such Secretary shall

12 give priorities to qualified utilities which provide

13 subsidies (other than through the use of such

14 Bonds) for the purchase and installation by res15 idential customers of photovoltaic cells on their

16 residences.

17 ‘‘(B) UNUSED ALLOCATIONS.—Any alloca18 tion made to a qualified utility which is not

19 used within 6 months after the date of the allo20 cation may be reallocated by the Secretary of

21 Energy.

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

23 ‘‘(1) IN GENERAL.—The credit allowed under

24 subsection (a) for any taxable year shall not exceed

25 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 part IV of subchapter A (other than sub6 part C thereof, relating to refundable credits).

7 ‘‘(2) CARRYOVER OF UNUSED CREDIT.—If the

8 credit allowable under subsection (a) exceeds the

9 limitation imposed by paragraph (1) for such taxable

10 year, such excess shall be carried to the succeeding

11 taxable year and added to the credit allowable under

12 subsection (a) for such taxable year.

13 ‘‘(f) OTHER DEFINITIONS.—For purposes of this

14 section—

15 ‘‘(1) CREDIT ALLOWANCE DATE.—The term

16 ‘credit allowance date’ means—

17 ‘‘(A) March 15,

18 ‘‘(B) June 15,

19 ‘‘(C) September 15, and

20 ‘‘(D) December 15.

21 Such term includes the last day on which the bond

22 is outstanding.

23 ‘‘(2) BOND.—The term ‘bond’ includes any ob24 ligation.
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1 ‘‘(g) CREDIT INCLUDED IN GROSS INCOME.—Gross

2 income includes the amount of the credit allowed to the

3 taxpayer under this section (determined without regard to

4 subsection (e)) and the amount so included shall be treat5 ed as interest income.

6 ‘‘(h) SPECIAL RULES RELATING TO ARBITRAGE.—

7 ‘‘(1) IN GENERAL.—A bond shall not be treated

8 as failing to meet the requirements of subsection

9 (c)(1) solely by reason of the fact that the proceeds

10 of the issue of which such bond is a part are in11 vested for a reasonable temporary period until such

12 proceeds are used in making qualified solar energy

13 loans.

14 ‘‘(2) EARNINGS ON PROCEEDS.—Any earnings

15 on proceeds during the temporary period shall be

16 treated as proceeds of the issue for purposes of ap17 plying subsection (c)(1) and paragraph (1) of this

18 subsection.

19 ‘‘(3) TREATMENT OF LOAN REPAYMENTS.—

20 Principal repayments received during any calendar

21 quarter shall not be treated as failing to meet the

22 requirements of subsection (c)(1) if, before the end

23 of the following calendar quarter, the amount of

24 such repayments is used to make qualified solar en25 ergy loans, to redeem residential solar energy bonds,
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1 or to acquire zero interest State and local govern2 ment series bonds. The term of a loan made from

3 such repayments may extend beyond the last day

4 that any bond issued as part of the issue financing

5 the loan being repaid is outstanding; and, if so, the

6 requirement that a loan be without interest shall not

7 apply to the period after such last day.

8 ‘‘(i) OTHER SPECIAL RULES.—

9 ‘‘(1) BONDS HELD BY REGULATED INVEST10 MENT COMPANIES.—If any Residential Solar Energy

11 Bond is held by a regulated investment company,

12 the credit determined under subsection (a) shall be

13 allowed to shareholders of such company under pro14 cedures prescribed by the Secretary.

15 ‘‘(2) CREDITS MAY BE STRIPPED.—Under regu16 lations prescribed by the Secretary—

17 ‘‘(A) IN GENERAL.—There may be a sepa18 ration (including at issuance) of the ownership

19 of a Residential Solar Energy Bond and the en20 titlement to the credit under this section with

21 respect to such bond. In case of any such sepa22 ration, the credit under this section shall be al23 lowed to the person who on the credit allowance

24 date holds the instrument evidencing the enti-
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1 tlement to the credit and not to the holder of

2 the bond.

3 ‘‘(B) CERTAIN RULES TO APPLY.—In the

4 case of a separation described in subparagraph

5 (A), the rules of section 1286 shall apply to the

6 Residential Solar Energy Bond as if it were a

7 stripped bond and to the credit under this sec8 tion as if it were a stripped coupon.

9 ‘‘(3) TREATMENT FOR ESTIMATED TAX PUR10 POSES.—Solely for purposes of sections 6654 and

11 6655, the credit allowed by this section to a tax12 payer by reason of holding a Residential Solar En13 ergy Bond on a credit allowance date shall be treat14 ed as if it were a payment of estimated tax made by

15 the taxpayer on such date.

16 ‘‘(4) CREDIT MAY BE TRANSFERRED.—Nothing

17 in any law or rule of law shall be construed to limit

18 the transferability of the credit allowed by this sec19 tion through sale and repurchase agreements.

20 ‘‘(5) REPORTING.—Issuers of Residential Solar

21 Energy Bonds shall submit reports similar to the re22 ports required under section 149(e).

23 ‘‘(j) RECAPTURE OF PORTION OF CREDIT WHERE

24 CESSATION OF QUALIFIED USE.—
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1 ‘‘(1) IN GENERAL.—If any bond which when

2 issued purported to be a Residential Solar Energy

3 Bond ceases to meet the requirements of subsection

4 (c), the issuer shall pay to the United States (at the

5 time required by the Secretary) an amount equal to

6 the aggregate of the credits allowable under this sec7 tion (determined without regard to subsection (e))

8 for taxable years ending during the calendar year in

9 which such cessation occurs and the 2 preceding cal10 endar years.

11 ‘‘(2) FAILURE TO PAY.—If the issuer fails to

12 timely pay the amount required by paragraph (1)

13 with respect to any issue, the tax imposed by this

14 chapter on each holder of any bond which is part of

15 such issue shall be increased (for the taxable year of

16 the holder in which such cessation occurs) by the ag17 gregate decrease in the credits allowed under this

18 section to such holder for taxable years beginning in

19 such 3 calendar years which would have resulted

20 solely from denying any credit under this section

21 with respect to such issue for such taxable years.

22 ‘‘(3) SPECIAL RULES.—

23 ‘‘(A) TAX BENEFIT RULE.—The tax for

24 the taxable year shall be increased under para25 graph (2) only with respect to credits allowed
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1 by reason of this section which were used to re2 duce tax liability. In the case of credits not so

3 used to reduce tax liability, the carryforwards

4 and carrybacks under section 39 shall be appro5 priately adjusted.

6 ‘‘(B) NO CREDITS AGAINST TAX.—Any in7 crease in tax under paragraph (2) shall not be

8 treated as a tax imposed by this chapter for

9 purposes of determining—

10 ‘‘(i) the amount of any credit allow11 able under this part, or

12 ‘‘(ii) the amount of the tax imposed

13 by section 55.’’

14 (b) REPORTING.—Subsection (d) of section 6049 of

15 such Code (relating to returns regarding payments of in16 terest) is amended by adding at the end the following new

17 paragraph:

18 ‘‘(8) REPORTING OF CREDIT ON RESIDENTIAL

19 SOLAR ENERGY BONDS.—

20 ‘‘(A) IN GENERAL.—For purposes of sub21 section (a), the term ‘interest’ includes amounts

22 includible in gross income under section 30B(g)

23 and such amounts shall be treated as paid on

24 the credit allowance date (as defined in section

25 30B(f)(1)).
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1 ‘‘(B) REPORTING TO CORPORATIONS,

2 ETC.—Except as otherwise provided in regula3 tions, in the case of any interest described in

4 subparagraph (A) of this paragraph, subsection

5 (b)(4) of this section shall be applied without

6 regard to subparagraphs (A), (H), (I), (J), (K),

7 and (L)(i).

8 ‘‘(C) REGULATORY AUTHORITY.—The Sec9 retary may prescribe such regulations as are

10 necessary or appropriate to carry out the pur11 poses of this paragraph, including regulations

12 which require more frequent or more detailed

13 reporting.’’

14 (c) CONFORMING AMENDMENT.—The table of sec15 tions for subpart B of part IV of subchapter A of chapter

16 1 of such Code is amended by adding at the end the fol17 lowing new item:

‘‘Sec. 30B. Credit to holders of Residential Solar Energy Bonds.’’

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

19 this section shall apply to obligations issued after Decem20 ber 31, 2001.

21 (e) GUIDELINES FOR APPLICATIONS.—Not later than

22 January 1, 2002, guidelines specifying the criteria to be

23 used in approving applications under section 30B(d)(3) of

24 the Internal Revenue Code of 1986 (as added by this Act)
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1 shall be developed and published by the Secretary of En2 ergy in the Federal Register.

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