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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2189 Introduced in Senate (IS)]

113th CONGRESS
  2d Session
                                S. 2189

 To amend the Internal Revenue Code of 1986 to improve and extend the 
 deduction for new and existing energy-efficient commercial buildings, 
                        and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             April 1, 2014

Mr. Cardin (for himself, Mrs. Feinstein, and Mr. Schatz) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL

 
 To amend the Internal Revenue Code of 1986 to improve and extend the 
 deduction for new and existing energy-efficient commercial buildings, 
                        and for other purposes.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Energy Efficiency 
Tax Incentives Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.
               TITLE I--COMMERCIAL BUILDING MODERNIZATION

Sec. 101. Extension and modification of deduction for energy-efficient 
                            commercial buildings.
Sec. 102. Deduction for retrofits of existing commercial and 
                            multifamily buildings.
                   TITLE II--HOME ENERGY IMPROVEMENTS

Sec. 201. Performance based home energy improvements.
           TITLE III--INDUSTRIAL ENERGY AND WATER EFFICIENCY

Sec. 301. Modifications in credit for combined heat and power system 
                            property.
Sec. 302. Investment tax credit for biomass heating property.
Sec. 303. Investment tax credit for waste heat to power property.
Sec. 304. Motor energy efficiency improvement tax credit.
Sec. 305. Credit for replacement of CFC refrigerant chiller.
Sec. 306. Qualifying efficient industrial process water use project 
                            credit.

               TITLE I--COMMERCIAL BUILDING MODERNIZATION

SEC. 101. EXTENSION AND MODIFICATION OF DEDUCTION FOR ENERGY-EFFICIENT 
              COMMERCIAL BUILDINGS.

    (a) Extension.--
            (1) Through 2016.--Section 179D(h) is amended by striking 
        ``December 31, 2013'' and inserting ``December 31, 2016''.
            (2) Inclusion of multifamily buildings.--
                    (A) In general.--Subparagraph (B) of section 
                179D(c)(1) is amended by striking ``building'' and 
                inserting ``commercial building or multifamily 
                building''.
                    (B) Definitions.--Subsection (c) of section 179D is 
                amended by adding at the end the following new 
                paragraphs:
            ``(3) Commercial building.--The term `commercial building' 
        means a building with a primary use or purpose other than as 
        residential housing.
            ``(4) Multifamily building.--The term `multifamily 
        building' means a structure of 5 or more dwelling units with a 
        primary use as residential housing, and includes such buildings 
        owned and operated as a condominium, cooperative, or other 
        common interest community.''.
    (b) Increase in Maximum Amount of Deduction.--
            (1) In general.--Subparagraph (A) of section 179D(b)(1) is 
        amended by striking ``$1.80'' and inserting ``$3.00''.
            (2) Partial allowance.--Paragraph (1) of section 179D(d) is 
        amended to read as follows:
            ``(1) Partial allowance.--
                    ``(A) In general.--Except as provided in subsection 
                (f), if--
                            ``(i) the requirement of subsection 
                        (c)(1)(D) is not met, but
                            ``(ii) there is a certification in 
                        accordance with paragraph (6) that--
                                    ``(I) any system referred to in 
                                subsection (c)(1)(C) satisfies the 
                                energy-savings targets established by 
                                the Secretary under subparagraph (B) 
                                with respect to such system, or
                                    ``(II) the systems referred to in 
                                subsection (c)(1)(C)(ii) and subsection 
                                (c)(1)(C)(iii) together satisfy the 
                                energy-savings targets established by 
                                the Secretary under subparagraph (B) 
                                with respect to such systems,
                then the requirement of subsection (c)(1)(D) shall be 
                treated as met with respect to such system or systems, 
                and the deduction under subsection (a) shall be allowed 
                with respect to energy-efficient commercial building 
                property installed as part of such system and as part 
                of a plan to meet such targets, except that subsection 
                (b) shall be applied to such property described in 
                clause (ii)(I) by substituting `$1.00' for `$3.00' and 
                to such property described in clause (ii)(II) by 
                substituting `$2.20' for `$3.00'.
                    ``(B) Regulations.--
                            ``(i) In general.--The Secretary, after 
                        consultation with the Secretary of Energy, 
                        shall promulgate regulations establishing a 
                        target for each system described in subsection 
                        (c)(1)(C) which, if such targets were met for 
                        all such systems, the property would meet the 
                        requirements of subsection (c)(1)(D).
                            ``(ii) Safe harbor for combined systems.--
                        The Secretary, after consultation with the 
                        Secretary of Energy, and not later than 6 
                        months after the date of the enactment of the 
                        Energy Efficiency Tax Incentives Act, shall 
                        promulgate regulations regarding combined 
                        envelope and mechanical system performance that 
                        detail appropriate components, efficiency 
                        levels, or other relevant information for the 
                        systems referred to in subsection (c)(1)(C)(ii) 
                        and subsection (c)(1)(C)(iii) together to be 
                        deemed to have achieved two-thirds of the 
                        requirements of subsection (c)(1)(D).''.
    (c) Denial of Double Benefit Rules.--
            (1) In general.--Section 179D is amended by redesignating 
        subsection (h) as subsection (i) and by inserting after 
        subsection (g) the following new subsection:
    ``(h) Tax Incentives Not Available.--Energy-efficient measures for 
which a deduction is allowed under this section shall not be eligible 
for a deduction under section 179F.''.
            (2) Low-income housing exception to basis reduction.--
        Subsection (e) of section 179D is amended by inserting ``(other 
        than property placed in service in a qualified low-income 
        building (within the meaning of section 42))'' after ``building 
        property''.
    (d) Allocation of Deduction.--Paragraph (4) of section 179D(d) is 
amended to read as follows:
            ``(4) Allocation of deduction.--
                    ``(A) In general.--Not later than 180 days after 
                the date of the enactment of this subsection, the 
                Secretary, in consultation with the Secretary of 
                Energy, shall promulgate a regulation to allow the 
                owner of a commercial or multifamily building, 
                including a government, tribal, or non-profit owner, to 
                allocate any deduction allowed under this section, or a 
                portion thereof, to the person primarily responsible 
                for designing the property in lieu of the owner or to a 
                commercial tenant that leases or otherwise occupies 
                space in such building pursuant to a written agreement. 
                Such person shall be treated as the taxpayer for 
                purposes of this section.
                    ``(B) Form of allocation.--An allocation made under 
                this paragraph shall be in writing and in a form that 
                meets the form of allocation requirements in Notice 
                2008-40 of the Internal Revenue Service.
                    ``(C) Provision of allocation.--Not later than 30 
                days after receipt of a written request from a person 
                eligible to receive an allocation under this paragraph, 
                the owner of a building that makes an allocation under 
                this paragraph shall provide the form of allocation (as 
                described in subparagraph (B)) to such person.
                    ``(D) Allocation from public owner of building.--In 
                the case of a commercial building or multifamily 
                building that is owned by a Federal, State, or local 
                government or a subdivision thereof, Notice 2006-52 of 
                the Internal Revenue Service, as amplified by Notice 
                2008-40, shall apply to any allocation.''.
    (e) Treatment of Basis in Context of Allocation.--Subsection (e) of 
section 179D, as amended by subsection (c)(2), is amended by inserting 
``or so allocated'' after ``so allowed''.
    (f) Earnings and Profits Conformity for Real Estate Investment 
Trusts.--Subparagraph (B) of section 312(k)(3) is amended--
            (1) by striking ``.--For purposes of'' and inserting ``.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), for purposes of'', and
            (2) by adding at the end the following new clause:
                            ``(ii) Earnings and profits conformity for 
                        real estate investment trusts.--
                                    ``(I) In general.--For purposes of 
                                computing the earnings and profits of a 
                                real estate investment trust (other 
                                than a captive real estate investment 
                                trust), the entire amount deductible 
                                under section 179D shall be allowed as 
                                deductions in the taxable years for 
                                which such amounts are claimed under 
                                such section.
                                    ``(II) Captive real estate 
                                investment trust.--The term `captive 
                                real estate investment trust' means a 
                                real estate investment trust the shares 
                                or beneficial interests of which are 
                                not regularly traded on an established 
                                securities market and more than 50 
                                percent of the voting power or value of 
                                the beneficial interests or shares of 
                                which are owned or controlled, directly 
                                or indirectly, or constructively, by a 
                                single entity that is treated as an 
                                association taxable as a corporation 
                                under this title and is not exempt from 
                                taxation pursuant to the provisions of 
                                section 501(a).
                                    ``(III) Rules of application.--For 
                                purposes of this clause, the 
                                constructive ownership rules of section 
                                318(a), as modified by section 
                                856(d)(5), shall apply in determining 
                                the ownership of stock, assets, or net 
                                profits of any person, and the 
                                following entities are not considered 
                                an association taxable as a 
                                corporation:
                                            ``(aa) Any real estate 
                                        investment trust other than a 
                                        captive real estate investment 
                                        trust.
                                            ``(bb) Any qualified real 
                                        estate investment trust 
                                        subsidiary under section 856, 
                                        other than a qualified REIT 
                                        subsidiary of a captive real 
                                        estate investment trust.
                                            ``(cc) Any Listed 
                                        Australian Property Trust 
                                        (meaning an Australian unit 
                                        trust registered as a `Managed 
                                        Investment Scheme' under the 
                                        Australian Corporations Act in 
                                        which the principal class of 
                                        units is listed on a recognized 
                                        stock exchange in Australia and 
                                        is regularly traded on an 
                                        established securities market), 
                                        or an entity organized as a 
                                        trust, provided that a Listed 
                                        Australian Property Trust owns 
                                        or controls, directly or 
                                        indirectly, 75 percent or more 
                                        of the voting power or value of 
                                        the beneficial interests or 
                                        shares of such trust.
                                            ``(dd) Any corporation, 
                                        trust, association, or 
                                        partnership organized outside 
                                        the laws of the United States 
                                        and which satisfies the 
                                        criteria described in subclause 
                                        (IV).
                                    ``(IV) Criteria.--The criteria 
                                described in this subclause are as 
                                follows:
                                            ``(aa) At least 75 percent 
                                        of the entity's total asset 
                                        value at the close of its 
                                        taxable year is represented by 
                                        real estate assets (as defined 
                                        in section 856(c)(5)(B)), cash 
                                        and cash equivalents, and 
                                        United States Government 
                                        securities.
                                            ``(bb) The entity is not 
                                        subject to tax on amounts 
                                        distributed to its beneficial 
                                        owners, or is exempt from 
                                        entity-level taxation.
                                            ``(cc) The entity 
                                        distributes at least 85 percent 
                                        of its taxable income (as 
                                        computed in the jurisdiction in 
                                        which it is organized) to the 
                                        holders of its shares or 
                                        certificates of beneficial 
                                        interest on an annual basis.
                                            ``(dd) Not more than 10 
                                        percent of the voting power or 
                                        value in such entity is held 
                                        directly or indirectly or 
                                        constructively by a single 
                                        entity or individual, or the 
                                        shares or beneficial interests 
                                        of such entity are regularly 
                                        traded on an established 
                                        securities market.
                                            ``(ee) The entity is 
                                        organized in a country which 
                                        has a tax treaty with the 
                                        United States.''.
    (g) Rules for Lighting Systems.--Subsection (f) of section 179D is 
amended to read as follows:
    ``(f) Rules for Lighting Systems.--
            ``(1) In general.--With respect to property that is part of 
        a lighting system, the deduction allowed under subsection (a) 
        shall be equal to--
                    ``(A) for a lighting system that includes 
                installation of a lighting control described in 
                paragraph (2)(A), the applicable amount determined 
                under paragraph (3)(A),
                    ``(B) for a lighting system that includes 
                installation of a lighting control described in 
                paragraph (2)(B), the applicable amount determined 
                under paragraph (3)(B), or
                    ``(C) for a lighting system that does not include 
                installation of any lighting controls described in 
                subparagraph (A) or (B) of paragraph (2), the 
                applicable amount determined under paragraph (3)(C).
            ``(2) Energy saving controls.--
                    ``(A) Lighting controls in certain spaces.--For 
                purposes of paragraph (1)(A), the lighting controls 
                described in this subparagraph are the following:
                            ``(i) Occupancy sensors (as described in 
                        paragraph (4)(I)) in spaces not greater than 
                        800 square feet.
                            ``(ii) Bi-level controls (as described in 
                        paragraph (4)(A)).
                            ``(iii) Continuous or step dimming controls 
                        (as described in subparagraphs (B) and (K) of 
                        paragraph (4)).
                            ``(iv) Daylight dimming where sufficient 
                        daylight is available (as described in 
                        paragraph (4)(C)).
                            ``(v) A multi-scene controller (as 
                        described in paragraph (4)(H)).
                            ``(vi) Time scheduling controls (as 
                        described in paragraph (4)(L)), provided that 
                        such controls are not required by Standard 
                        90.1-2010.
                            ``(vii) Such other lighting controls as the 
                        Secretary, in consultation with the Secretary 
                        of Energy, determines appropriate.
                    ``(B) Other control types.--For purposes of 
                paragraph (1)(B), the lighting controls described in 
                this subparagraph are the following:
                            ``(i) Occupancy sensors (as described in 
                        paragraph (4)(I)) in spaces greater than 800 
                        square feet.
                            ``(ii) Demand responsive controls (as 
                        described in paragraph (4)(D)).
                            ``(iii) Lumen maintenance controls (as 
                        described in paragraph (4)(F)) where solid 
                        state lighting is used.
                            ``(iv) Such other lighting controls as the 
                        Secretary, in consultation with the Secretary 
                        of Energy, determines appropriate.
            ``(3) Applicable amount.--
                    ``(A) Lighting controls in certain spaces.--For 
                purposes of paragraph (1)(A), the applicable amount 
                shall be determined in accordance with the following 
                table:

``If the percentage of reduction in The amount of the deduction per 
        lighting power density is           square foot is:
        not less than:
        15 percent.........................................      $0.30 
        20 percent.........................................      $0.44 
        25 percent.........................................      $0.58 
        30 percent.........................................      $0.72 
        35 percent.........................................      $0.86 
        40 percent.........................................      $1.00.
                    ``(B) Lighting controls in larger spaces and where 
                solid lighting is used.--For purposes of paragraph 
                (1)(B), the applicable amount shall be determined in 
                accordance with the following table:

``If the percentage of reduction in The amount of the deduction per 
        lighting power density is           square foot is:
        not less than:
        20 percent.........................................      $0.30 
        25 percent.........................................      $0.44 
        30 percent.........................................      $0.58 
        35 percent.........................................      $0.72 
        40 percent.........................................      $0.86 
        45 percent.........................................      $1.00.
                    ``(C) No qualified lighting controls.--For purposes 
                of paragraph (1)(C), the applicable amount shall be 
                determined in accordance with the following table:

``If the percentage of reduction in The amount of the deduction per 
        lighting power density is           square foot is:
        not less than:
        25 percent.........................................      $0.30 
        30 percent.........................................      $0.44 
        35 percent.........................................      $0.58 
        40 percent.........................................      $0.72 
        45 percent.........................................      $0.86 
        50 percent.........................................      $1.00.
            ``(4) Definitions.--For purposes of this subsection:
                    ``(A) Bi-level control.--
                            ``(i) In general.--Subject to clause (ii), 
                        the term `bi-level control' means a lighting 
                        control strategy that provides for 2 different 
                        levels of lighting.
                            ``(ii) Full-off setting.--For purposes of 
                        clause (i), a bi-level control shall also 
                        provide for a full-off setting.
                    ``(B) Continuous dimming.--The term `continuous 
                dimming' means a lighting control strategy that adjusts 
                the light output of a lighting system between minimum 
                and maximum light output in a manner that is not 
                perceptible.
                    ``(C) Daylight dimming; sufficient daylight.--
                            ``(i) Daylight dimming.--The term `daylight 
                        dimming' means any device that--
                                    ``(I) adjusts electric lighting 
                                power in response to the amount of 
                                daylight that is present in an area, 
                                and
                                    ``(II) provides for separate 
                                control of the lamps for general 
                                lighting in the daylight area by not 
                                less than 1 multi-level photocontrol, 
                                including continuous dimming devices, 
                                that satisfies the following 
                                requirements:
                                            ``(aa) The light sensor for 
                                        the multi-level photocontrol is 
                                        remote from where calibration 
                                        adjustments are made.
                                            ``(bb) The calibration 
                                        adjustments are readily 
                                        accessible.
                                            ``(cc) The multi-level 
                                        photocontrol reduces electric 
                                        lighting power in response to 
                                        the amount of daylight with--

                                                    ``(AA) not less 
                                                than 1 control step 
                                                that is between 50 
                                                percent and 70 percent 
                                                of design lighting 
                                                power, and

                                                    ``(BB) not less 
                                                than 1 control step 
                                                that is not less than 
                                                35 percent of design 
                                                lighting power.

                            ``(ii) Sufficient daylight.--
                                    ``(I) In general.--The term 
                                `sufficient daylight' means--
                                            ``(aa) in the case of 
                                        toplighted areas, when the 
                                        total daylight area under 
                                        skylights plus the total 
                                        daylight area under rooftop 
                                        monitors in an enclosed space 
                                        is greater than 900 square feet 
                                        (as defined in Standard 90.1-
                                        2010), and
                                            ``(bb) in the case of 
                                        sidelighted areas, when the 
                                        combined primary sidelight area 
                                        in an enclosed space is not 
                                        less than 250 square feet (as 
                                        defined in Standard 90.1-2010).
                                    ``(II) Exceptions.--Sufficient 
                                daylight shall be deemed to not be 
                                available if--
                                            ``(aa) in the case of areas 
                                        described in subclause 
                                        (I)(aa)--

                                                    ``(AA) for 
                                                daylighted areas under 
                                                skylights, it is 
                                                documented that 
                                                existing adjacent 
                                                structures or natural 
                                                objects block direct 
                                                beam sunlight for more 
                                                than 1500 daytime hours 
                                                (after 8 a.m. and 
                                                before 4 p.m., local 
                                                time) per year,

                                                    ``(BB) for 
                                                daylighted areas, the 
                                                skylight effective 
                                                aperture is less than 
                                                0.006, or

                                                    ``(CC) for 
                                                buildings in climate 
                                                zone 8, as defined 
                                                under Standard 90.1-
                                                2010, the daylight 
                                                areas total less than 
                                                1500 square feet in an 
                                                enclosed space, and

                                            ``(bb) in the case of 
                                        primary sidelighted areas 
                                        described in subclause 
                                        (I)(bb)--

                                                    ``(AA) the top of 
                                                the existing adjacent 
                                                structures are at least 
                                                twice as high above the 
                                                windows as the distance 
                                                from the window, or

                                                    ``(BB) the 
                                                sidelighting effective 
                                                aperture is less than 
                                                0.1.

                            ``(iii) Daylight, sidelighting, and other 
                        related terms.--The terms `daylight area', 
                        `daylight area under skylights', `daylight area 
                        under rooftop monitors', `daylighted area', 
                        `enclosed space', `primary sidelighted areas', 
                        `sidelighting effective aperture', and 
                        `skylight effective aperture' have the same 
                        meaning given such terms under Standard 90.1-
                        2010.
                    ``(D) Demand responsive control.--
                            ``(i) In general.--The term `demand 
                        responsive control' means a control device that 
                        receives and automatically responds to a demand 
                        response signal and--
                                    ``(I) in the case of space-
                                conditioning systems, conducts a 
                                centralized demand shed for non-
                                critical zones during a demand response 
                                period and that has the capability to, 
                                on a signal from a centralized contract 
                                or software point within an Energy 
                                Management Control System--
                                            ``(aa) remotely increase 
                                        the operating cooling 
                                        temperature set points in such 
                                        zones by not less than 4 
                                        degrees,
                                            ``(bb) remotely decrease 
                                        the operating heating 
                                        temperature set points in such 
                                        zones by not less than 4 
                                        degrees,
                                            ``(cc) remotely reset 
                                        temperatures in such zones to 
                                        originating operating levels, 
                                        and
                                            ``(dd) provide an 
                                        adjustable rate of change for 
                                        any temperature adjustment and 
                                        reset, and
                                    ``(II) in the case of lighting 
                                power, has the capability to reduce 
                                lighting power by not less than 30 
                                percent during a demand response 
                                period.
                            ``(ii) Demand response period.--The term 
                        `demand response period' means a period in 
                        which short-term adjustments in electricity 
                        usage are made by end-use customers from normal 
                        electricity consumption patterns, including 
                        adjustments in response to--
                                    ``(I) the price of electricity, and
                                    ``(II) participation in programs or 
                                services that are designed to modify 
                                electricity usage in response to 
                                wholesale market prices for electricity 
                                or when reliability of the electrical 
                                system is in jeopardy.
                            ``(iii) Demand response signal.--The term 
                        `demand response signal' means a signal sent to 
                        an end-use customer by a local utility, 
                        independent system operator, or designated 
                        curtailment service provider or aggregator 
                        that--
                                    ``(I) indicates an adjustment in 
                                the price of electricity, or
                                    ``(II) is a request to modify 
                                electricity consumption.
                    ``(E) Lamp.--The term `lamp' means an artificial 
                light source that produces optical radiation (including 
                ultraviolet and infrared radiation).
                    ``(F) Lumen maintenance control.--The term `lumen 
                maintenance control' means a lighting control strategy 
                that maintains constant light output by adjusting lamp 
                power to compensate for age and cleanliness of 
                luminaires.
                    ``(G) Luminaire.--The term `luminaire' means a 
                complete lighting unit for the production, control, and 
                distribution of light that consists of--
                            ``(i) not less than 1 lamp, and
                            ``(ii) any of the following items:
                                    ``(I) Optical control devices 
                                designed to distribute light.
                                    ``(II) Sockets or mountings for the 
                                positioning, protection, and operation 
                                of the lamps.
                                    ``(III) Mechanical components for 
                                support or attachment.
                                    ``(IV) Electrical and electronic 
                                components for operation and control of 
                                the lamps.
                    ``(H) Multi-scene control.--The term `multi-scene 
                control' means a lighting control device or system that 
                allows for--
                            ``(i) not less than 2 predetermined 
                        lighting settings,
                            ``(ii) a setting that turns off all 
                        luminaires in an area, and
                            ``(iii) a recall of the settings described 
                        in clauses (i) and (ii) for any luminaires or 
                        groups of luminaires to adjust to multiple 
                        activities within the area.
                    ``(I) Occupancy sensor.--The term `occupancy 
                sensor' means a control device that--
                            ``(i) detects the presence or absence of 
                        individuals within an area and regulates 
                        lighting, equipment, or appliances according to 
                        a required sequence of operation,
                            ``(ii) shuts off lighting when an area is 
                        unoccupied,
                            ``(iii) except in areas designated as 
                        emergency egress and using less than 0.2 watts 
                        per square foot of floor area, provides for 
                        manual shut-off of all luminaires regardless of 
                        the status of the sensor and allows for--
                                    ``(I) independent control in each 
                                area enclosed by ceiling-height 
                                partitions,
                                    ``(II) controls that are readily 
                                accessible, and
                                    ``(III) operation by a manual 
                                switch that is located in the same area 
                                as the lighting that is subject to the 
                                control device.
                    ``(J) Standard 90.1-2010.--The term `Standard 90.1-
                2010' means Standard 90.1-2010 of the American Society 
                of Heating, Refrigerating, and Air Conditioning 
                Engineers and the Illuminating Engineering Society of 
                North America.
                    ``(K) Step dimming.--The term `step dimming' means 
                a lighting control strategy that adjusts the light 
                output of a lighting system by 1 or more predetermined 
                amounts of greater than 1 percent of full output in a 
                manner that may be perceptible.
                    ``(L) Time scheduling control.--The term `time 
                scheduling control' means a control strategy that 
                automatically controls lighting, equipment, or systems 
                based on a particular time of day or other daily event 
                (including sunrise and sunset).''.
    (h) Updated Standards.--
            (1) Initial update.--
                    (A) In general.--Section 179D(c) is amended by 
                striking ``90.1-2001'' each place it appears and 
                inserting ``90.1-2004''.
                    (B) Conforming amendment.--Paragraph (2) of section 
                179D(c) is amended by striking ``(as in effect on April 
                2, 2003)''.
            (2) Second update.--
                    (A) In general.--Section 179D is amended by 
                striking ``90.1-2004'' each place it appears in 
                subsections (c) and (f) and inserting ``90.1-2007''.
                    (B) Effective date.--The amendments made by 
                subparagraph (A) shall apply to property placed in 
                service after December 31, 2014.
    (i) Treatment of Lighting Systems.--Section 179D(c)(1) is amended 
by striking ``interior'' each place it appears.
    (j) Reporting Program.--Section 179D, as amended by subsection 
(c)(1), is amended by redesignating subsection (i) as subsection (j) 
and by inserting after subsection (h) the following new subsection:
    ``(i) Reporting Program.--For purposes of the report required under 
section 179F(l), the Secretary, in consultation with the Secretary of 
Energy, shall--
            ``(1) develop a program to collect a statistically valid 
        sample of energy consumption data from taxpayers that received 
        full deductions under this section, regardless of whether such 
        taxpayers allocated all or a portion of such deduction, and
            ``(2) include such data in the report, with such redactions 
        as deemed necessary to protect the personally identifiable 
        information of such taxpayers.''.
    (k) Special Rule for Partnerships and S Corporations.--Section 
179D, as amended by subsection (j), is amended by redesignating 
subsection (j) as subsection (k) and by inserting after subsection (i) 
the following new subsection:
    ``(j) Special Rule for Partnerships and S Corporations.--In the 
case of a partnership or S corporation, this section shall be applied 
at the partner or shareholder level, subject to such reporting 
requirements as are determined appropriate by the Secretary.''.
    (l) Effective Date.--Except as otherwise provided, the amendments 
made by this section shall apply to property placed in service in 
taxable years beginning after the date of the enactment of this Act.

SEC. 102. DEDUCTION FOR RETROFITS OF EXISTING COMMERCIAL AND 
              MULTIFAMILY BUILDINGS.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
179E the following new section:

``SEC. 179F. DEDUCTION FOR RETROFITS OF EXISTING COMMERCIAL AND 
              MULTIFAMILY BUILDINGS.

    ``(a) Allowance of Deduction.--
            ``(1) In general.--With respect to each certified retrofit 
        plan, there shall be allowed as a deduction an amount equal to 
        the lesser of--
                    ``(A) the sum of--
                            ``(i) the design deduction, and
                            ``(ii) the realized deduction, or
                    ``(B) the total cost to develop and implement such 
                certified retrofit plan.
            ``(2) Exception.--For purposes of the amount described in 
        paragraph (1)(B), if such amount is taken as a design 
        deduction, no realized deduction shall be allowed.
    ``(b) Deduction Amounts.--For purposes of this section--
            ``(1) Design deduction.--A design deduction shall be--
                    ``(A) based on projected source energy savings as 
                calculated in accordance with subsection (c)(3)(B),
                    ``(B) correlated to the percent of source energy 
                savings set forth in the general scale in paragraph 
                (3)(A) that a certified retrofit plan is projected to 
                achieve when energy-efficient measures are placed in 
                service, and
                    ``(C) equal to 60 percent of the amount allowed 
                under the general scale.
            ``(2) Realized deduction.--
                    ``(A) In general.--A realized deduction shall be--
                            ``(i) based on realized source energy 
                        savings as calculated in accordance with 
                        subsection (c)(3)(C),
                            ``(ii) correlated to the percent of source 
                        energy savings set forth in the general scale 
                        in paragraph (3)(A) as realized by a certified 
                        retrofit plan, and
                            ``(iii) equal to 40 percent of the amount 
                        allowed under the general scale.
                    ``(B) Adjustment of source energy savings.--The 
                percent of source energy savings for purposes of any 
                realized deduction may vary from such savings projected 
                when energy-efficient measures were placed in service 
                for purposes of a design deduction under paragraph (1).
                    ``(C) No recapture of design deduction.--
                Notwithstanding the regulations prescribed under 
                subsection (f), no recapture of a design deduction 
                shall be required where the owner of the commercial or 
                multifamily building--
                            ``(i) claims or allocates a design 
                        deduction when energy-efficient measures are 
                        placed into service pursuant to the terms and 
                        conditions of a certified retrofit plan, and
                            ``(ii) is not eligible for or does not 
                        subsequently claim or allocate a realized 
                        deduction.
            ``(3) General scale.--
                    ``(A) In general.--The scale for deductions allowed 
                under this section shall be--
                            ``(i) $1.00 per square foot of retrofit 
                        floor area for 20 to 24 percent source energy 
                        savings,
                            ``(ii) $1.50 per square foot of retrofit 
                        floor area for 25 to 29 percent source energy 
                        savings,
                            ``(iii) $2.00 per square foot of retrofit 
                        floor area for 30 to 34 percent source energy 
                        savings,
                            ``(iv) $2.50 per square foot of retrofit 
                        floor area for 35 to 39 percent source energy 
                        savings,
                            ``(v) $3.00 per square foot of retrofit 
                        floor area for 40 to 44 percent source energy 
                        savings,
                            ``(vi) $3.50 per square foot of retrofit 
                        floor area for 45 to 49 percent source energy 
                        savings, and
                            ``(vii) $4.00 per square foot of retrofit 
                        floor area for 50 percent or more source energy 
                        savings.
                    ``(B) Historic buildings.--
                            ``(i) In general.--With respect to energy-
                        efficient measures placed in service as part of 
                        a certified retrofit plan in a commercial 
                        building or multifamily building on or eligible 
                        for the National Register of Historic Places, 
                        the respective dollar amounts set forth in the 
                        general scale under subparagraph (A) shall--
                                    ``(I) each be increased by 20 
                                percent, for the purposes of 
                                calculating any applicable design 
                                deduction and realized deduction, and
                                    ``(II) not exceed the total cost to 
                                develop and implement such certified 
                                retrofit plan.
                            ``(ii) Exception.--If the amount described 
                        in clause (i)(II) is taken as a design 
                        deduction, then no realized deduction shall be 
                        allowed.
    ``(c) Calculation of Energy Savings.--
            ``(1) In general.--For purposes of the design deduction and 
        the realized deduction, source energy savings shall be 
        calculated with reference to a baseline of the annual source 
        energy consumption of the commercial or multifamily building 
        before energy-efficient measures were placed in service.
            ``(2) Baseline benchmark.--The baseline under paragraph (1) 
        shall be determined using a building energy performance 
        benchmarking tool designated by the Administrator of the 
        Environmental Protection Agency, and based upon 1 year of 
        source energy consumption data prior to the date upon which the 
        energy-efficient measures are placed in service.
            ``(3) Design and realized source energy savings.--
                    ``(A) In general.--In certifying a retrofit plan as 
                a certified retrofit plan, a licensed engineer or 
                architect shall calculate source energy savings by 
                utilizing the baseline benchmark defined in paragraph 
                (2) and determining percent improvements from such 
                baseline.
                    ``(B) Design deduction.--For purposes of claiming a 
                design deduction, the regulations issued under 
                subsection (f)(1) shall prescribe the standards and 
                process for a licensed engineer or architect to 
                calculate and certify source energy savings projected 
                from the design of a certified retrofit plan as of the 
                date energy-efficient measures are placed in service.
                    ``(C) Realized deduction.--For purposes of claiming 
                a realized deduction, a licensed engineer or architect 
                shall calculate and certify source energy savings 
                realized by a certified retrofit plan 2 years after a 
                design deduction is allowed by utilizing energy 
                consumption data after energy-efficient measures are 
                placed in service, and adjusting for climate, building 
                occupancy hours, density, or other factors deemed 
                appropriate in the benchmarking tool designated under 
                paragraph (2).
    ``(d) Certified Retrofit Plan and Other Definitions.--For purposes 
of this section--
            ``(1) Certified retrofit plan.--The term `certified 
        retrofit plan' means a plan that--
                    ``(A) is designed to reduce the annual source 
                energy costs of a commercial building, or a multifamily 
                building, through the installation of energy-efficient 
                measures,
                    ``(B) is certified under penalty of perjury by a 
                licensed engineer or architect, who is not a direct 
                employee of the owner of the commercial building or 
                multifamily building that is the subject of the plan, 
                and is licensed in the State in which such building is 
                located,
                    ``(C) describes the square footage of retrofit 
                floor area covered by such a plan,
                    ``(D) specifies that it is designed to achieve a 
                final source energy usage intensity after energy-
                efficient measures are placed in service in a 
                commercial building or a multifamily building that does 
                not exceed on a square foot basis the average level of 
                energy usage intensity of other similar buildings, as 
                described in paragraph (2),
                    ``(E) requires that after the energy-efficient 
                measures are placed in service, the commercial building 
                or multifamily building meets the applicable State and 
                local building code requirements for the area in which 
                such building is located,
                    ``(F) satisfies the regulations prescribed under 
                subsection (f), and
                    ``(G) is submitted to the Secretary of Energy after 
                energy-efficient measures are placed in service, for 
                the purpose of informing the report to Congress 
                required by subsection (l).
            ``(2) Average level of energy usage intensity.--
                    ``(A) In general.--The maximum average level of 
                energy usage intensity under paragraph (1)(D) shall not 
                exceed 300,000 British thermal units per square foot.
                    ``(B) Regulations.--
                            ``(i) In general.--The Secretary, in 
                        consultation with the Administrator of the 
                        Environmental Protection Agency, shall develop 
                        distinct standards for categories and 
                        subcategories of buildings with respect to 
                        maximum average level of energy usage intensity 
                        based on the best available information used by 
                        the ENERGY STAR program.
                            ``(ii) Review.--The standards developed 
                        pursuant to clause (i) shall be reviewed and 
                        updated by the Secretary, in consultation with 
                        the Administrator of the Environmental 
                        Protection Agency, not later than every 3 
                        years.
            ``(3) Commercial building.--
                    ``(A) In general.--The term `commercial building' 
                means a building located in the United States--
                            ``(i) that is in existence and occupied on 
                        the date of the enactment of this section,
                            ``(ii) for which a certificate of occupancy 
                        has been issued at least 10 years before energy 
                        efficiency measures are placed in service, and
                            ``(iii) with a primary use or purpose other 
                        than as residential housing.
                    ``(B) Shopping centers.--In the case of a retail 
                shopping center, the term `commercial building' shall 
                include an area within such building that is--
                            ``(i) 50,000 square feet or larger that is 
                        covered by a separate utility grade meter to 
                        record energy consumption in such area, and
                            ``(ii) under the day-to-day management and 
                        operation of--
                                    ``(I) the owner of such building as 
                                common space areas, or
                                    ``(II) a retail tenant, lessee, or 
                                other occupant.
            ``(4) Energy-efficient measures.--The term `energy-
        efficient measures' means a measure, or combination of 
        measures, placed in service through a certified retrofit plan--
                    ``(A) on or in a commercial building or multifamily 
                building,
                    ``(B) as part of--
                            ``(i) the lighting systems,
                            ``(ii) the heating, cooling, ventilation, 
                        refrigeration, or hot water systems,
                            ``(iii) building transportation systems, 
                        such as elevators and escalators,
                            ``(iv) the building envelope, which may 
                        include an energy-efficient cool roof,
                            ``(v) a continuous commissioning contract 
                        under the supervision of a licensed engineer or 
                        architect, or
                            ``(vi) building operations or monitoring 
                        systems, including utility-grade meters and 
                        submeters, and
                    ``(C) including equipment, materials, and systems 
                within subparagraph (B) with respect to which 
                depreciation (or amortization in lieu of depreciation) 
                is allowed.
            ``(5) Energy savings.--The term `energy savings' means 
        source energy usage intensity reduced on a per square foot 
        basis through design and implementation of a certified retrofit 
        plan.
            ``(6) Multifamily building.--The term `multifamily 
        building'--
                    ``(A) means--
                            ``(i) a structure of 5 or more dwelling 
                        units located in the United States--
                                    ``(I) that is in existence and 
                                occupied on the date of the enactment 
                                of this section,
                                    ``(II) for which a certificate of 
                                occupancy has been issued at least 10 
                                years before energy efficiency measures 
                                are placed in service, and
                                    ``(III) with a primary use as 
                                residential housing, and
                    ``(B) includes such buildings owned and operated as 
                a condominium, cooperative, or other common interest 
                community.
            ``(7) Source energy.--The term `source energy' means the 
        total amount of raw fuel that is required to operate a 
        commercial building or multifamily building, and accounts for 
        losses that are incurred in the generation, storage, transport, 
        and delivery of fuel to such a building.
    ``(e) Timing of Claiming Deductions.--Deductions allowed under this 
section may be claimed as follows:
            ``(1) Design deduction.--In the case of a design deduction, 
        in the taxable year that energy efficiency measures are placed 
        in service.
            ``(2) Realized deduction.--In the case of a realized 
        deduction, in the second taxable year following the taxable 
        year described in paragraph (1).
    ``(f) Regulations.--
            ``(1) In general.--Not later than 180 days after the date 
        of the enactment of this section, and after notice and 
        opportunity for public comment, the Secretary, in consultation 
        with the Secretary of Energy and the Administrator of the 
        Environmental Protection Agency, shall prescribe regulations--
                    ``(A) for the manner and method for a licensed 
                engineer or architect to certify retrofit plans, model 
                projected energy savings, and calculate realized energy 
                savings, and
                    ``(B) notwithstanding subsection (b)(2)(C), to 
                provide, as appropriate, for a recapture of the 
                deductions allowed under this section if a retrofit 
                plan is not fully implemented, or a retrofit plan and 
                energy savings are not certified or verified in 
                accordance with regulations prescribed under this 
                subsection.
            ``(2) Reliance on established protocols, etc.--To the 
        maximum extent practicable and available, such regulations 
        shall rely upon established protocols and documents used in the 
        ENERGY STAR program, and industry best practices and existing 
        guidelines, such as the Building Energy Modeling Guidelines of 
        the Commercial Energy Services Network (COMNET).
            ``(3) Allowance of deductions pending issuance of 
        regulations.--Pending issuance of the regulations under 
        paragraph (1), the owner of a commercial building or a 
        multifamily building shall be allowed to claim or allocate a 
        deduction allowed under this section.
    ``(g) Notice to Owner.--Each certification of a retrofit plan and 
calculation of energy savings required under this section shall include 
an explanation to the owner of a commercial building or a multifamily 
building regarding the energy-efficient measures placed in service and 
their projected and realized annual energy costs.
    ``(h) Allocation of Deduction.--
            ``(1) In general.--Not later than 180 days after the date 
        of the enactment of this section, the Secretary, in 
        consultation with the Secretary of Energy, shall promulgate a 
        regulation to allow the owner of a commercial building or a 
        multifamily building, including a government, tribal, or non-
        profit owner, to allocate any deduction allowed under this 
        section, or a portion thereof, to the person primarily 
        responsible for funding, financing, designing, leasing, 
        operating, or placing in service energy-efficient measures. 
        Such person shall be treated as the taxpayer for purposes of 
        this section and shall include a building tenant, financier, 
        architect, professional engineer, licensed contractor, energy 
        services company, or other building professional.
            ``(2) Form of allocation.--An allocation made under this 
        paragraph shall be in writing and in a form that meets the form 
        of allocation requirements in Notice 2008-40 of the Internal 
        Revenue Service.
            ``(3) Provision of allocation.--Not later than 30 days 
        after receipt of a written request from a person eligible to 
        receive an allocation under this paragraph, the owner of a 
        building that makes an allocation under this paragraph shall 
        provide the form of allocation (as described in paragraph (2)) 
        to such person.
            ``(4) Allocation from public owner of building.--In the 
        case of a commercial building or a multifamily building that is 
        owned by a Federal, State, or local government or a subdivision 
        thereof, Notice 2006-52 of the Internal Revenue Service, as 
        amplified by Notice 2008-40, shall apply to any allocation.
    ``(i) Basis Reduction.--For purposes of this subtitle, if a 
deduction is allowed under this section with respect to any energy-
efficient measures placed in service under a certified retrofit plan 
other than in a qualified low-income building (within the meaning of 
section 42), the basis of such measures shall be reduced by the amount 
of the deduction so allowed or so allocated.
    ``(j) Special Rule for Partnerships and S Corporations.--In the 
case of a partnership or S corporation, this section shall be applied 
at the partner or shareholder level, subject to such reporting 
requirements as are determined appropriate by the Secretary.
    ``(k) Tax Incentives Not Available.--
            ``(1) Energy efficient commercial buildings deduction.--
        Energy-efficient measures for which a deduction is allowed 
        under this section shall not be eligible for a deduction under 
        section 179D.
            ``(2) New energy efficient home credit.--No deduction shall 
        be allowed under this section with respect to any building or 
        dwelling unit with respect to which a credit under section 45L 
        was allowed.
    ``(l) Report to Congress.--
            ``(1) In general.--Biennially, beginning with the first 
        year after the enactment of this section, the Secretary, in 
        conjunction with the Secretary of Energy, shall submit a report 
        to Congress that--
                    ``(A) explains the energy saved, the energy-
                efficient measures implemented, the realization of 
                energy savings projected, and records the amounts and 
                types of deductions allowed under this section,
                    ``(B) explains the energy saved, the energy 
                efficient measures implemented, and records the amount 
                of deductions allowed under section 179D, based on the 
                data collected pursuant to subsection (i) of such 
                section,
                    ``(C) determines the number of jobs created as a 
                result of the deduction allowed under this section,
                    ``(D) determines how the use of any deduction 
                allowed under this section may be improved, based on 
                the information provided to the Secretary of Energy,
                    ``(E) provides aggregated data with respect to the 
                information described in subparagraphs (A) through (D), 
                and
                    ``(F) provides statutory recommendations to 
                Congress that would reduce energy consumption in new 
                and existing commercial buildings located in the United 
                States, including recommendations on providing energy-
                efficient tax incentives for subsections of buildings 
                that operate with specific utility-grade metering.
            ``(2) Protection of taxpayer information.--The Secretary 
        and the Secretary of Energy shall share information on 
        deductions allowed under this section and related reports 
        submitted, as requested by each agency to fulfill its 
        obligations under this section, with such redactions as deemed 
        necessary to protect the personally identifiable financial 
        information of a taxpayer.
            ``(3) Incorporation into department of energy programs.--
        The Secretary of Energy shall, to the maximum extent 
        practicable, incorporate conclusions of the report under this 
        subsection into current Department of Energy building 
        performance and energy efficiency data collection and other 
        reporting programs.
    ``(m) Termination.--This section shall not apply to any property 
placed in service after December 31, 2016.''.
    (b) Effect on Depreciation on Earnings and Profits.--Subparagraph 
(B) of section 312(k)(3), as amended by this title, is amended--
            (1) by striking ``or 179E'' both places it appears in 
        clause (i) and inserting ``179E, or 179F'',
            (2) by striking ``or 179e'' in the heading and inserting 
        ``179e, or 179f'', and
            (3) by inserting ``or 179F'' after ``section 179D'' in 
        clause (ii)(I).
    (c) Conforming Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by inserting after the item 
relating to section 179E the following new item:

``Sec. 179F. Deduction for retrofits of existing commercial and 
                            multifamily buildings.''.
    (d) Effective Date.--Except as otherwise provided, the amendments 
made by this section shall apply to property placed in service in 
taxable years beginning after the date of the enactment of this Act.

                   TITLE II--HOME ENERGY IMPROVEMENTS

SEC. 201. PERFORMANCE BASED HOME ENERGY IMPROVEMENTS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
is amended by adding at the end the following new section:

``SEC. 25E. PERFORMANCE BASED ENERGY IMPROVEMENTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this chapter for the 
taxable year for a qualified whole home energy efficiency retrofit an 
amount determined under subsection (b).
    ``(b) Amount Determined.--
            ``(1) In general.--Subject to paragraph (4), the amount 
        determined under this subsection is equal to--
                    ``(A) the base amount under paragraph (2), 
                increased by
                    ``(B) the amount determined under paragraph (3).
            ``(2) Base amount.--For purposes of paragraph (1)(A), the 
        base amount is $2,000, but only if the energy use for the 
        residence is reduced by at least 20 percent below the baseline 
        energy use for such residence as calculated according to 
        paragraph (5).
            ``(3) Increase amount.--For purposes of paragraph (1)(B), 
        the amount determined under this paragraph is $500 for each 
        additional 5 percentage point reduction in energy use.
            ``(4) Limitation.--In no event shall the amount determined 
        under this subsection exceed the lesser of--
                    ``(A) $5,000 with respect to any residence, or
                    ``(B) 30 percent of the qualified home energy 
                efficiency expenditures paid or incurred by the 
                taxpayer under subsection (c) with respect to such 
                residence.
            ``(5) Determination of energy use reduction.--For purposes 
        of this subsection--
                    ``(A) In general.--The reduction in energy use for 
                any residence shall be determined by modeling the 
                annual predicted percentage reduction in total energy 
                costs for heating, cooling, hot water, and permanent 
                lighting. It shall be modeled using computer modeling 
                software approved under subsection (d)(2) and a 
                baseline energy use calculated according to subsection 
                (d)(1)(C).
                    ``(B) Energy costs.--For purposes of subparagraph 
                (A), the energy cost per unit of fuel for each fuel 
                type shall be determined by dividing the total actual 
                energy bill for the residence for that fuel type for 
                the most recent available 12-month period by the total 
                energy units of that fuel type used over the same 
                period.
    ``(c) Qualified Home Energy Efficiency Expenditures.--For purposes 
of this section, the term `qualified home energy efficiency 
expenditures'--
            ``(1) means any amount paid or incurred by the taxpayer 
        during the taxable year for a qualified whole home energy 
        efficiency retrofit, including the cost of diagnostic 
        procedures, labor, and modeling,
            ``(2) includes only measures that have an average estimated 
        life of 5 years or more as determined by the Secretary, after 
        consultation with the Secretary of Energy, and
            ``(3) does not include any amount which is paid or incurred 
        in connection with any expansion of the building envelope of 
        the residence.
    ``(d) Qualified Whole Home Energy Efficiency Retrofit.--For 
purposes of this section--
            ``(1) In general.--The term `qualified whole home energy 
        efficiency retrofit' means the implementation of measures 
        placed in service during the taxable year intended to reduce 
        the energy use of the principal residence of the taxpayer which 
        is located in the United States. A qualified whole home energy 
        efficiency retrofit shall--
                    ``(A) subject to paragraph (4), be designed, 
                implemented, and installed by a contractor which is--
                            ``(i) accredited by the Building 
                        Performance Institute (hereafter in this 
                        section referred to as `BPI') or a preexisting 
                        BPI accreditation-based State certification 
                        program with enhancements to achieve State 
                        energy policy,
                            ``(ii) a Residential Energy Services 
                        Network (hereafter in this section referred to 
                        as `RESNET') accredited Energy Smart Home 
                        Performance Team, or
                            ``(iii) accredited by an equivalent 
                        certification program approved by the 
                        Secretary, after consultation with the 
                        Secretary of Energy, for this purpose,
                    ``(B) install a set of measures modeled to achieve 
                a reduction in energy use of at least 20 percent below 
                the baseline energy use established in subparagraph 
                (C), using computer modeling software approved under 
                paragraph (2),
                    ``(C) establish the baseline energy use by 
                calibrating the model using sections 3 and 4 and Annex 
                D of BPI Standard BPI-2400-S-2011: Standardized 
                Qualification of Whole House Energy Savings Estimates, 
                or an equivalent standard approved by the Secretary, 
                after consultation with Secretary of Energy, for this 
                purpose,
                    ``(D) document the measures implemented in the 
                residence through photographs taken before and after 
                the retrofit, including photographs of its visible 
                energy systems and envelope as relevant, and
                    ``(E) implement a test-out procedure, following 
                guidelines of the applicable certification program 
                specified under clause (i) or (ii) of subparagraph (A), 
                or equivalent guidelines approved by the Secretary, 
                after consultation with the Secretary of Energy, for 
                this purpose, to ensure--
                            ``(i) the safe operation of all systems 
                        post retrofit, and
                            ``(ii) that all improvements are included 
                        in, and have been installed according to, 
                        standards of the applicable certification 
                        program specified under clause (i) or (ii) of 
                        subparagraph (A), or equivalent standards 
                        approved by the Secretary, after consultation 
                        with the Secretary of Energy, for this purpose.
                For purposes of subparagraph (A)(iii), an organization 
                or State may submit an equivalent certification program 
                for approval by the Secretary, in consultation with the 
                Secretary of Energy. The Secretary shall approve or 
                deny such submission not later than 180 days after 
                receipt, and, if the Secretary fails to respond in that 
                time period, the submitted equivalent certification 
                program shall be considered approved.
            ``(2) Approved modeling software.--For purposes of 
        paragraph (1)(B), the contractor (or, if applicable, the person 
        described in paragraph (4)) shall use modeling software 
        certified by RESNET as following the software verification test 
        suites in section 4.2.1 of RESNET Publication No. 06-001 or 
        certified by an alternative organization as following an 
        equivalent standard, as approved by the Secretary, after 
        consultation with the Secretary of Energy, for this purpose.
            ``(3) Documentation.--The Secretary, after consultation 
        with the Secretary of Energy, shall prescribe regulations 
        directing what specific documentation is required to be 
        retained or submitted by the taxpayer in order to claim the 
        credit under this section, which shall include, in addition to 
        the photographs under paragraph (1)(D), a form approved by the 
        Secretary that is completed and signed by the qualified whole 
        home energy efficiency retrofit contractor under penalties of 
        perjury. Such form shall include--
                    ``(A) a statement that the contractor (or, if 
                applicable, the person described in paragraph (4)) 
                followed the specified procedures for establishing 
                baseline energy use and estimating reduction in energy 
                use,
                    ``(B) the name of the software used for calculating 
                the baseline energy use and reduction in energy use, 
                the percentage reduction in projected energy savings 
                achieved, and a statement that such software was 
                certified for this program by the Secretary, after 
                consultation with the Secretary of Energy,
                    ``(C) a statement that the contractor (or, if 
                applicable, the person described in paragraph (4)) will 
                retain the details of the calculations and underlying 
                energy bills for 5 years and will make such details 
                available for inspection by the Secretary or the 
                Secretary of Energy, if so requested,
                    ``(D) a list of measures installed and a statement 
                that all measures included in the reduction in energy 
                use estimate are included in, and installed according 
                to, standards of the applicable certification program 
                specified under clause (i) or (ii) of subparagraph (A), 
                or equivalent standards approved by the Secretary, 
                after consultation with the Secretary of Energy,
                    ``(E) a statement that the contractor (or, if 
                applicable, the person described in paragraph (4)) 
                meets the requirements of paragraph (1)(A), and
                    ``(F) documentation of the total cost of the 
                project in order to comply with the limitation under 
                subsection (b)(4)(B).
            ``(4) Certified home energy rater.--For purposes of 
        paragraph (1)(A), a contractor shall be deemed to have 
        satisfied the accreditation requirement under such paragraph if 
        the contractor enters into a contract with a person that 
        satisfies such accreditation requirement for purposes of 
        modeling the energy use reduction described in paragraph 
        (1)(B).
    ``(e) Additional Rules.--For purposes of this section--
            ``(1) No double benefit.--
                    ``(A) In general.--With respect to any residence, 
                no credit shall be allowed under this section for any 
                taxable year in which the taxpayer claims a credit 
                under section 25C.
                    ``(B) Renewable energy systems and appliances.--In 
                the case of a renewable energy system or appliance that 
                qualifies for another credit under this chapter, the 
                resulting reduction in energy use shall not be taken 
                into account in determining the percentage energy use 
                reductions under subsection (b).
                    ``(C) No double benefit for certain expenditures.--
                The term `qualified home energy efficiency 
                expenditures' shall not include any expenditure for 
                which a deduction or credit is claimed by the taxpayer 
                under this chapter for the taxable year or with respect 
                to which the taxpayer receives any Federal energy 
                efficiency rebate.
            ``(2) Principal residence.--The term `principal residence' 
        has the same meaning as when used in section 121.
            ``(3) Special rules.--Rules similar to the rules under 
        paragraphs (4), (5), (6), (7), and (8) of section 25D(e) and 
        section 25C(e)(2) shall apply, as determined by the Secretary, 
        after consultation with the Secretary of Energy.
            ``(4) Basis adjustments.--For purposes of this subtitle, if 
        a credit is allowed under this section with respect to any 
        expenditure with respect to any property, the increase in the 
        basis of such property which would (but for this paragraph) 
        result from such expenditure shall be reduced by the amount of 
        the credit so allowed.
            ``(5) Election not to claim credit.--No credit shall be 
        determined under subsection (a) for the taxable year if the 
        taxpayer elects not to have subsection (a) apply to such 
        taxable year.
            ``(6) Multiple year retrofits.--If the taxpayer has claimed 
        a credit under this section in a previous taxable year, the 
        baseline energy use for the calculation of reduced energy use 
        must be established after the previous retrofit has been placed 
        in service.
    ``(f) Termination.--This section shall not apply with respect to 
any costs paid or incurred after December 31, 2016.
    ``(g) Secretary Review.--The Secretary, after consultation with the 
Secretary of Energy, shall establish a review process for the retrofits 
performed, including an estimate of the usage of the credit and a 
statistically valid analysis of the average actual energy use 
reductions, utilizing utility bill data collected on a voluntary basis, 
and report to Congress not later than June 30, 2014, any findings and 
recommendations for--
            ``(1) improvements to the effectiveness of the credit under 
        this section, and
            ``(2) expansion of the credit under this section to rental 
        units.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (36),
                    (B) by striking the period at the end of paragraph 
                (37) and inserting ``, and'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(38) to the extent provided in section 25E(e)(4), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25E.''.
            (2) Section 6501(m) is amended by inserting ``25E(e)(5),'' 
        after ``section''.
            (3) The table of sections for subpart A of part IV of 
        subchapter A chapter 1 is amended by inserting after the item 
        relating to section 25D the following new item:

``Sec. 25E. Performance based energy improvements.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred for a qualified whole home energy 
efficiency retrofit placed in service after December 31, 2013.

           TITLE III--INDUSTRIAL ENERGY AND WATER EFFICIENCY

SEC. 301. MODIFICATIONS IN CREDIT FOR COMBINED HEAT AND POWER SYSTEM 
              PROPERTY.

    (a) Modification of Certain Capacity Limitations.--Section 
48(c)(3)(B) is amended--
            (1) by striking ``15 megawatts'' in clause (ii) and 
        inserting ``25 megawatts'',
            (2) by striking ``20,000 horsepower'' in clause (ii) and 
        inserting ``34,000 horsepower'', and
            (3) by striking clause (iii).
    (b) Increase in Credit Percentage for Systems With Greater 
Efficiency.--Subparagraph (A) of section 48(a)(2) is amended--
            (1) by striking ``and'' at the end of subclause (III) of 
        clause (i),
            (2) by adding at the end of clause (i) the following new 
        subclause:
                                    ``(V) combined heat and power 
                                system property the energy efficiency 
                                percentage of which (as defined in 
                                subsection (c)(3)(C)(i)) is equal to or 
                                greater than 85 percent,'',
            (3) by redesignating clause (ii) as clause (iii),
            (4) by striking ``clause (i)'' in clause (iii), as so 
        redesignated, and inserting ``clause (i) or (ii)'', and
            (5) by inserting after clause (i) the following new clause:
                            ``(ii) 20 percent in the case of combined 
                        heat and power system property the energy 
                        percentage of which (as defined in subsection 
                        (c)(3)(C)(i)) is equal to or greater than 75 
                        percent and less than 85 percent, and''.
    (c) Extension.--Clause (iv) of section 48(c)(3)(A) is amended by 
striking ``January 1, 2017'' and inserting ``January 1, 2019''.
    (d) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this Act, under 
rules similar to the rules of section 48(m) of the Internal Revenue 
Code of 1986 (as in effect on the day before the date of the enactment 
of the Revenue Reconciliation Act of 1990).

SEC. 302. INVESTMENT TAX CREDIT FOR BIOMASS HEATING PROPERTY.

    (a) In General.--Subparagraph (A) of section 48(a)(3) is amended by 
striking ``or'' at the end of clause (vi), by inserting ``or'' at the 
end of clause (vii), and by inserting after clause (vii) the following 
new clause:
                            ``(viii) open-loop biomass (within the 
                        meaning of section 45(c)(3)) heating property, 
                        including boilers or furnaces which operate at 
                        output efficiencies of not less than 65 percent 
                        (measured by the higher heating value of the 
                        fuel) and which provide thermal energy in the 
                        form of heat, hot water, or steam for space 
                        heating, air conditioning, domestic hot water, 
                        or industrial process heat, but only with 
                        respect to periods ending before January 1, 
                        2016,''.
    (b) 30-Percent and 15-Percent Credits.--
            (1) In general.--Subparagraph (A) of section 48(a)(2), as 
        amended by this title, is amended--
                    (A) by redesignating clause (iii) as clause (iv),
                    (B) by striking ``and'' at the end of clause (ii),
                    (C) by striking ``clause (i) or (ii)'' in clause 
                (iv), as so redesignated, and inserting ``clause (i), 
                (ii), or (iii)'', and
                    (D) by inserting after clause (ii) the following 
                new clause:
                            ``(iii) 15 percent in the case of energy 
                        property described in paragraph (3)(A)(viii) to 
                        which clause (i)(VI) does not apply, and''.
            (2) Increased credit for greater efficiency.--Clause (i) of 
        section 48(a)(2)(A), as amended by this title, is amended by 
        striking ``and'' at the end of subclause (IV), by striking the 
        comma at the end of subclause (V) and inserting ``, and'', and 
        by inserting after subclause (V) the following new subclause:
                                    ``(VI) energy property described in 
                                paragraph (3)(A)(viii) which operates 
                                at an output efficiency of not less 
                                than 80 percent (measured by the higher 
                                heating value of the fuel),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this Act, in 
taxable years ending after such date, under rules similar to the rules 
of section 48(m) of the Internal Revenue Code of 1986 (as in effect on 
the day before the date of the enactment of the Revenue Reconciliation 
Act of 1990).

SEC. 303. INVESTMENT TAX CREDIT FOR WASTE HEAT TO POWER PROPERTY.

    (a) In General.--Subparagraph (A) of section 48(a)(3), as amended 
by this title, is amended by striking ``or'' at the end of clause 
(vii), by striking the comma at the end of clause (viii) and inserting 
``, or'', and by inserting after clause (viii) the following new 
clause:
                            ``(ix) waste heat to power property,''.
    (b) 30-Percent Credit.--Clause (i) of section 48(a)(2)(A), as 
amended by this title, is amended by striking ``and'' at the end of 
subclause (V), by striking the comma at the end of subclause (VI) and 
inserting ``, and'', and by inserting after subclause (VI) the 
following new subclause:
                                    ``(VII) waste heat to power 
                                property,''.
    (c) Waste Heat To Power Property.--Subsection (c) of section 48 is 
amended by adding at the end the following new paragraph:
            ``(5) Waste heat to power property.--
                    ``(A) In general.--The term `waste heat to power 
                property' means property--
                            ``(i) comprising a system which generates 
                        electricity through the recovery of a qualified 
                        waste heat resource, and
                            ``(ii) which is placed in service before 
                        January 1, 2019.
                    ``(B) Qualified waste heat resource.--The term 
                `qualified waste heat resource' means--
                            ``(i) exhaust heat or flared gas from an 
                        industrial process,
                            ``(ii) waste gas or industrial tail gas 
                        that would otherwise be flared, incinerated, or 
                        vented,
                            ``(iii) a pressure drop in any gas for an 
                        industrial or commercial process, or
                            ``(iv) such other forms of waste heat 
                        resources as the Secretary may determine.
                    ``(C) Exception.--The term `qualified waste heat 
                resource' does not include any heat resource from a 
                process whose primary purpose is the generation of 
                electricity utilizing a fossil fuel or the production 
                of oil, natural gas, or other fossil fuels.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this Act, in 
taxable years ending after such date, under rules similar to the rules 
of section 48(m) of the Internal Revenue Code of 1986 (as in effect on 
the day before the date of the enactment of the Revenue Reconciliation 
Act of 1990).

SEC. 304. MOTOR ENERGY EFFICIENCY IMPROVEMENT TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by adding at the end the following new section:

``SEC. 45S. MOTOR ENERGY EFFICIENCY IMPROVEMENT TAX CREDIT.

    ``(a) In General.--For purposes of section 38, the motor energy 
efficiency improvement tax credit determined under this section for the 
taxable year is an amount equal to $120 multiplied by the motor 
horsepower of an appliance, machine, or equipment--
            ``(1) manufactured in such taxable year by a manufacturer 
        which incorporates an advanced motor and drive system into a 
        newly designed appliance, machine, or equipment or into a 
        redesigned appliance, machine, or equipment which did not 
        previously make use of the advanced motor and drive system, or
            ``(2) placed back into service in such taxable year by an 
        end user which upgrades an existing appliance, machine, or 
        equipment with an advanced motor and drive system.
For any advanced motor and drive system with a total horsepower of less 
than 10, such motor energy efficiency improvement tax credit is an 
amount which bears the same ratio to $120 as such total horsepower 
bears to 1 horsepower.
    ``(b) Advanced Motor and Drive System.--For purposes of this 
section, the term `advanced motor and drive system' means a motor and 
any required associated electronic control which--
            ``(1) offers variable or multiple speed operation, and
            ``(2) uses permanent magnet technology, electronically 
        commutated motor technology, switched reluctance motor 
        technology, synchronous reluctance, or such other motor and 
        drive systems technologies as determined by the Secretary of 
        Energy.
    ``(c) Aggregate Per Taxpayer Limitation.--
            ``(1) In general.--The amount of the credit determined 
        under this section for any taxpayer for any taxable year shall 
        not exceed the excess (if any) of $2,000,000 over the aggregate 
        credits allowed under this section with respect to such 
        taxpayer for all prior taxable years.
            ``(2) Aggregation rules.--For purposes of this section, all 
        persons treated as a single employer under subsections (a) and 
        (b) of section 52 shall be treated as 1 taxpayer.
    ``(d) Special Rules.--
            ``(1) Basis reduction.--For purposes of this subtitle, the 
        basis of any property for which a credit is allowable under 
        subsection (a) shall be reduced by the amount of such credit so 
        allowed.
            ``(2) No double benefit.--No other credit shall be 
        allowable under this chapter for property with respect to which 
        a credit is allowed under this section.
            ``(3) Property used outside united states not qualified.--
        No credit shall be allowable under subsection (a) with respect 
        to any property referred to in section 50(b)(1).
    ``(e) Application.--This section shall not apply to property 
manufactured or placed back into service before the date which is 6 
months after the date of the enactment of this section or after 
December 31, 2016.''.
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking ``plus'' at the 
        end of paragraph (35), by striking the period at the end of 
        paragraph (36) and inserting ``, plus'', and by adding at the 
        end the following new paragraph:
            ``(37) the motor energy efficiency improvement tax credit 
        determined under section 45S.''.
            (2) Section 1016(a) is amended by striking ``and'' at the 
        end of paragraph (36), by striking the period at the end of 
        paragraph (37) and inserting ``, and'', and by adding at the 
        end the following new paragraph:
            ``(38) to the extent provided in section 45S(d)(1).''.
            (3) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 is amended by adding at the end the 
        following new item:

``Sec. 45S. Motor energy efficiency improvement tax credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property manufactured or placed back into service after the 
date which is 6 months after the date of the enactment of this Act.

SEC. 305. CREDIT FOR REPLACEMENT OF CFC REFRIGERANT CHILLER.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1, 
as amended by this title, is amended by adding at the end the following 
new section:

``SEC. 45T. CFC CHILLER REPLACEMENT CREDIT.

    ``(a) In General.--For purposes of section 38, the CFC chiller 
replacement credit determined under this section for the taxable year 
is an amount equal to--
            ``(1) $150 multiplied by the tonnage rating of a CFC 
        chiller replaced with a new efficient chiller that is placed in 
        service by the taxpayer during the taxable year, plus
            ``(2) if all chilled water distribution pumps connected to 
        the new efficient chiller include variable frequency drives, 
        $100 multiplied by any tonnage downsizing.
    ``(b) CFC Chiller.--For purposes of this section, the term `CFC 
chiller' includes property which--
            ``(1) was installed after 1980 and before 1993,
            ``(2) utilizes chlorofluorocarbon refrigerant, and
            ``(3) until replaced by a new efficient chiller, has 
        remained in operation and utilized for cooling a commercial 
        building.
    ``(c) New Efficient Chiller.--For purposes of this section, the 
term `new efficient chiller' includes a water-cooled chiller which is 
certified to meet efficiency standards effective on January 1, 2015, as 
defined in table 6.8 in Standard 90.1-2013 of the American Society of 
Heating, Refrigerating, and Air Conditioning Engineers.
    ``(d) Tonnage Downsizing.--For purposes of this section, the term 
`tonnage downsizing' means the amount by which the tonnage rating of 
the CFC chiller exceeds the tonnage rating of the new efficient 
chiller.
    ``(e) Energy Audit.--As a condition of receiving a tax credit under 
this section, an energy audit shall be performed on the building prior 
to installation of the new efficient chiller, identifying cost-
effective energy-saving measures, particularly measures that could 
contribute to chiller downsizing. The audit shall satisfy criteria that 
shall be issued by the Secretary of Energy.
    ``(f) Property Used by Tax-Exempt Entity.--In the case of a CFC 
chiller replaced by a new efficient chiller the use of which is 
described in paragraph (3) or (4) of section 50(b), the person who sold 
such new efficient chiller to the entity shall be treated as the 
taxpayer that placed in service the new efficient chiller that replaced 
the CFC chiller, but only if such person clearly discloses to such 
entity in a document the amount of any credit allowable under 
subsection (a) and the person certifies to the Secretary that the 
person reduced the price the entity paid for such new efficient chiller 
by the entire amount of such credit.
    ``(g) Termination.--This section shall not apply to replacements 
made after December 31, 2017.''.
    (b) Conforming Amendments.--
            (1) Section 38(b), as amended by this title, is amended by 
        striking ``plus'' at the end of paragraph (36), by striking the 
        period at the end of paragraph (37) and inserting ``, plus'', 
        and by adding at the end the following new paragraph:
            ``(38) the CFC chiller replacement credit determined under 
        section 45T.''.
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1, as amended by this title, is amended 
        by adding at the end the following new item:

``Sec. 45T. CFC chiller replacement credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to replacements made after the date of the enactment of this Act.

SEC. 306. QUALIFYING EFFICIENT INDUSTRIAL PROCESS WATER USE PROJECT 
              CREDIT.

    (a) In General.--Section 46 is amended by inserting a comma at the 
end of paragraph (4), by striking ``and'' at the end of paragraph (5), 
by striking the period at the end of paragraph (6) and inserting ``, 
and'', and by adding at the end the following new paragraph:
            ``(7) the qualifying efficient industrial process water use 
        project credit.''.
    (b) Amount of Credit.--Subpart E of part IV of subchapter A of 
chapter 1 is amended by inserting after section 48D the following new 
section:

``SEC. 48E. QUALIFYING EFFICIENT INDUSTRIAL PROCESS WATER USE PROJECT 
              CREDIT.

    ``(a) In General.--
            ``(1) Allowance of credit.--For purposes of section 46, the 
        qualifying efficient industrial process water use project 
        credit for any taxable year is an amount equal to the 
        applicable percentage of the qualified investment for such 
        taxable year with respect to any qualifying efficient 
        industrial process water use project of the taxpayer.
            ``(2) Applicable percentage.--For purposes of subsection 
        (a)--
                    ``(A) In general.--The applicable percentage is--
                            ``(i) 10 percent in the case of a 
                        qualifying efficient industrial process water 
                        use project which achieves a 25 percent or 
                        greater (but less than 50 percent) reduction in 
                        water use for industrial purposes,
                            ``(ii) 20 percent in the case of a 
                        qualifying efficient industrial process water 
                        use project which achieves a 50 percent or 
                        greater (but less than 75 percent) reduction in 
                        water use for industrial purposes, and
                            ``(iii) 30 percent in the case of a 
                        qualifying efficient industrial process water 
                        use project which achieves a 75 percent or 
                        greater reduction in water use for industrial 
                        purposes.
                    ``(B) Water use.--For purposes of subparagraph 
                (A)--
                            ``(i) Measurement of reduction in water 
                        use.--
                                    ``(I) In general.--The taxpayer 
                                shall elect one of the methods 
                                specified in clause (ii) for measuring 
                                the reduction in water use achieved by 
                                a qualifying efficient industrial 
                                process water use project.
                                    ``(II) Irrevocable election.--An 
                                election under subclause (I), once made 
                                with respect to a qualifying efficient 
                                industrial process water use project, 
                                shall apply to the taxable year for 
                                which made and all subsequent taxable 
                                years, and may not be revoked.
                                    ``(III) Projected savings.--The 
                                credit under subsection (a) may be 
                                claimed on the basis of a reduction in 
                                water use which is projected, by a 
                                registered professional engineer who is 
                                not a related person (within the 
                                meaning of section 144(a)(3)(A)) to the 
                                taxpayer or the installer of eligible 
                                property, to be achieved by a 
                                qualifying efficient industrial process 
                                water use project. Such projection, if 
                                used as a basis for determining the 
                                credit under subsection (a), shall be 
                                included with the return of tax.
                            ``(ii) Methods specified.--The methods 
                        specified in this clause are--
                                    ``(I) a measurement of the 
                                percentage reduction in water use per 
                                unit of product manufactured by the 
                                taxpayer, and
                                    ``(II) a measurement of the 
                                percentage reduction in water use per 
                                pound of product manufactured by the 
                                taxpayer.
    ``(b) Qualified Investment.--
            ``(1) In general.--For purposes of subsection (a), the 
        qualified investment for any taxable year is the basis of 
        eligible property placed in service by the taxpayer during such 
        taxable year which is part of a qualifying efficient industrial 
        process water use project.
            ``(2) Exceptions.--Such term shall not include any portion 
        of the basis related to--
                    ``(A) permitting,
                    ``(B) land acquisition, or
                    ``(C) infrastructure not directly associated with 
                the implementation of the technology or process 
                improvements of the qualifying efficient industrial 
                process water use project.
            ``(3) Certain qualified progress expenditures rules made 
        applicable.--Rules similar to the rules of subsections (c)(4) 
        and (d) of section 46 (as in effect on the day before the 
        enactment of the Revenue Reconciliation Act of 1990) shall 
        apply for purposes of this section.
            ``(4) Special rule for subsidized energy financing.--Rules 
        similar to the rules of section 48(a)(4) (without regard to 
        subparagraph (D) thereof) shall apply for purposes of this 
        section.
            ``(5) Limitation.--The amount which is treated for all 
        taxable years with respect to any qualifying efficient 
        industrial process water use project with respect to any site 
        shall not exceed $10,000,000.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualifying efficient industrial process water use 
        project.--
                    ``(A) In general.--The term `qualifying efficient 
                industrial process water use project' means, with 
                respect to any site, a project which retrofits or 
                expands an existing facility to implement technology or 
                process improvements which are designed to reduce water 
                use for systems that use any form of water in the 
                production of goods in the manufacturing sector (as 
                defined in North American Industrial Classification 
                System codes 31, 32, and 33), including any system that 
                uses water for heating, cooling, or energy production 
                for the production of goods in the trade or business of 
                manufacturing (other than extraction of fossil fuels). 
                Such term shall not include a project which alters an 
                existing facility to change the type of goods produced 
                by such facility.
                    ``(B) Systems.--For purposes of subparagraph (A), 
                the term `system' does not include any system which 
                does not encompass 1 or more complete processes.
            ``(2) Eligible property.--The term `eligible property' 
        means any property--
                    ``(A) which is part of a qualifying efficient 
                industrial process water use project and which is 
                necessary for the reduction in water use described in 
                paragraph (1),
                    ``(B)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, or
                    ``(ii) which is acquired by the taxpayer if the 
                original use of such property commences with the 
                taxpayer, and
                    ``(C) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable.
            ``(3) Water use.--
                    ``(A) In general.--The term `water use' means all 
                water taken for use at the site directly from ground 
                and surface water sources together with any water 
                supplied to the site by a regulated water system.
                    ``(B) Regulated water system.--The term `regulated 
                water system' means a system that supplies water that 
                has been treated to potable standards.
    ``(d) Termination.--This section shall not apply to periods after 
December 31, 2017, under rules similar to the rules of section 48(m) 
(as in effect on the day before the date of the enactment of the 
Revenue Reconciliation Act of 1990).''.
    (c) Conforming Amendments.--
            (1) Section 49(a)(1)(C) is amended by striking ``and'' at 
        the end of clause (v), by striking the period at the end of 
        clause (vi) and inserting ``, and'', and by adding at the end 
        the following new clause:
                            ``(vii) the basis of any property which is 
                        part of a qualifying efficient industrial use 
                        water project under section 48E.''.
            (2) The table of sections for subpart E of part IV of 
        subchapter A of chapter 1 is amended by inserting after the 
        item relating to section 48D the following new item:

``Sec. 48E. Qualifying efficient industrial process water use project 
                            credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this Act, under 
rules similar to the rules of section 48(m) of the Internal Revenue 
Code of 1986 (as in effect on the day before the date of the enactment 
of the Revenue Reconciliation Act of 1990).
                                 <all>
```