II 

109TH CONGRESS 

1ST SESSION S. 727

To provide tax incentives to promote the conservation and production of 

natural gas. 

IN THE SENATE OF THE UNITED STATES 

APRIL 6, 2005

Mr. ALEXANDER (for himself and Mr. JOHNSON) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL

To provide tax incentives to promote the conservation and 

production of natural gas.

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Tax Incentives for the 

5 Natural Gas Price Reduction Act of 2005’’. 

6 SEC. 2. ENCOURAGING COGENERATION DEVELOPMENT. 

7 (a) COMBINED HEAT AND POWER SYSTEM.—Section 

8 48(a) of the Internal Revenue Code of 1986 is amended—

9 (1) in paragraph (3)(A)—
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1 (A) in clause (i), by striking ‘‘or’’ at the 

2 end; 

3 (B) in clause (ii) by striking the comma at 

4 the end and inserting ‘‘, or’’; and 

5 (C) by inserting after clause (ii) the fol6 lowing: 

7 ‘‘(iii) combined heat and power system 

8 property,’’; 

9 (2) by redesignating paragraph (4) as para10 graph (5); and 

11 (3) by inserting after paragraph (3) the fol12 lowing new paragraph: 

13 ‘‘(4) COMBINED HEAT AND POWER SYSTEM

14 PROPERTY.—For purposes of this subsection—

15 ‘‘(A) COMBINED HEAT AND POWER SYS16 TEM PROPERTY.—

17 ‘‘(i) IN GENERAL.—The term ‘com18 bined heat and power system property’ 

19 means property comprising a system—

20 ‘‘(I) which uses the same energy 

21 source for the simultaneous or sequen22 tial generation of electrical power, me23 chanical shaft power, or both, in com24 bination with the generation of steam 

25 or other forms of useful thermal en-
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1 ergy (including heating and cooling 

2 applications), 

3 ‘‘(II) which has an electrical ca4 pacity of no more than 50,000 kilo5 watts or a mechanical energy capacity 

6 of more than 67,051 horsepower or an 

7 equivalent combination of electrical 

8 and mechanical energy capacities, 

9 ‘‘(III) which produces at least 20 

10 percent of its total useful energy in 

11 the form of thermal energy, and at 

12 least 15 percent of its total useful en13 ergy in the form of electrical or me14 chanical power (or combination there15 of), 

16 ‘‘(IV) the energy efficiency per17 centage of which exceeds 60 percent, 

18 and 

19 ‘‘(V) which is placed in service 

20 after December 31, 2005, and before 

21 January 1, 2010. 

22 ‘‘(ii) EXCLUSION.—The term ‘com23 bined heat and power system property’ 

24 does not include property used to transport 
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1 the energy source to the facility or to dis2 tribute energy produced by the facility. 

3 ‘‘(B) SPECIAL RULES.—

4 ‘‘(i) NONAPPLICATION OF CERTAIN

5 RULES.—For purposes of determining if 

6 the term ‘combined heat and power system 

7 property’ includes technologies which gen8 erate electricity or mechanical power using 

9 back-pressure steam turbines in place of 

10 existing pressure-reducing valves or which 

11 make use of waste heat from industrial 

12 processes such as by using organic rankin, 

13 stirling, or kalina heat engine systems, 

14 subparagraph (A)(i) shall be applied with15 out regard to subclauses (III) and (IV). 

16 ‘‘(ii) ENERGY EFFICIENCY PERCENT17 AGE.—For purposes of subparagraph 

18 (A)(i)(IV), the energy efficiency percentage 

19 of a system is the fraction—

20 ‘‘(I) the numerator of which is 

21 the total useful electrical, thermal, 

22 and mechanical power produced by 

23 the system at normal operating rates, 

24 and expected to be consumed in its 

25 normal application, and 
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1 ‘‘(II) the denominator of which is 

2 the higher heating value of the pri3 mary fuel source for the system. 

4 ‘‘(iii) DETERMINATIONS MADE ON

5 BTU BASIS.—The energy efficiency per6 centage and the percentages under sub7 paragraph (A)(i)(III) shall be determined 

8 on a Btu basis. 

9 ‘‘(iv) EXCEPTION.—The matter in 

10 paragraph (3) which follows subparagraph 

11 (D) shall not apply to combined heat and 

12 power system property. 

13 ‘‘(C) SYSTEMS USING BAGASSE OR OTHER

14 BIOMASS.—If a system is designed to use ba15 gasse or other biomass (including wood chips, 

16 wood waste, and bark) for at least 90 percent 

17 of the energy source—

18 ‘‘(i) subparagraph (A)(i)(IV) shall not 

19 apply, and 

20 ‘‘(ii) the amount of credit determined 

21 under subsection (a) with respect to such 

22 system shall not exceed the amount which 

23 bears the same ratio to such amount of 

24 credit (determined without regard to this 

25 subparagraph) as the energy efficiency per-
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1 centage of such system bears to 60 per2 cent.’’. 

3 (b) CONFORMING AMENDMENTS.—Section 

4 29(b)(3)(A)(i)(III) of such Code is amended by striking 

5 ‘‘section 48(a)(4)(C)’’ and inserting ‘‘section 

6 48(a)(5)(C)’’. 

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

8 this section shall apply to periods after December 31, 

9 2005, in taxable years ending after such date, under rules 

10 similar to the rules of section 48(m) of the Internal Rev11 enue Code of 1986 (as in effect on the day before the date 

12 of the enactment of the Revenue Reconciliation Act of 

13 1990). 

14 SEC. 3. SOLAR ENERGY INCENTIVES. 

15 (a) BUSINESS CONSUMER CREDIT.—

16 (1) ENERGY PERCENTAGE.—Section 48(a)(2) 

17 of the Internal Revenue Code of 1986 (relating to 

18 energy percentage) is amended by striking subpara19 graph (A) and inserting the following: 

20 ‘‘(A) IN GENERAL.—The energy percent21 age is—

22 ‘‘(i) for geothermal property, 10 per23 cent, and 

24 ‘‘(ii) for solar equipment—
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1 ‘‘(I) 30 percent during taxable 

2 years ending after December 31, 

3 2005, and before January 1, 2011, 

4 and 

5 ‘‘(II) 10 percent during taxable 

6 years ending after December 31, 

7 2010. 

8 (2) ENERGY PROPERTY.—Section 48(a)(3)(A) 

9 of such Code (defining energy property) is amended 

10 by striking clause (i) and inserting the following: 

11 ‘‘(i) equipment which uses solar en12 ergy to generate electricity for use in a 

13 structure, to heat or cool (or provide hot 

14 water for use in) a structure, to illuminate 

15 the inside of a structure using fiber-optic 

16 distributed sunlight or to provide solar 

17 process heat, excepting property used to 

18 generate energy for the purposes of heat19 ing a swimming pool,’’. 

20 (b) RESIDENTIAL CONSUMER CREDIT.—Subpart A 

21 of part IV of subchapter A of chapter 1 of the Internal 

22 Revenue Code of 1986 is amended by inserting after sec23 tion 25B the following: 
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1 ‘‘SEC. 25C. RENEWABLE ENERGY EQUIPMENT CREDITS. 

2 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in3 dividual, there shall be allowed as a credit against the tax 

4 imposed by this chapter for the taxable year, in the case 

5 of qualified photovoltaic property expenditures or qualified 

6 solar heating property expenditures made by the taxpayer 

7 during such year, an amount equal to 30 percent of so 

8 much of such expenditures as do not exceed $7,500. 

9 ‘‘(b) DEFINITIONS.—For purposes of this section: 

10 ‘‘(1) PROPERTY EXPENDITURE.—

11 ‘‘(A) IN GENERAL.—The term ‘property 

12 expenditure’ means any expenditure for a prop13 erty. 

14 ‘‘(B) INCLUSIONS.—

15 ‘‘(i) LABOR COSTS.—The term ‘prop16 erty expenditure’ includes the cost of any 

17 labor that is properly allocable to the on18 site preparation, assembly, or original in19 stallation of the property described in 

20 paragraph (2) or (3), including the cost of 

21 piping or wiring to interconnect such prop22 erty to the dwelling unit. 

23 ‘‘(ii) SOLAR PANELS.—No expenditure 

24 relating to a solar panel or other property 

25 installed as a roof (or portion thereof) 

26 shall fail to be treated as a property ex-
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1 penditure solely because it constitutes a 

2 structural component of the structure on 

3 which it is installed. 

4 ‘‘(2) QUALIFIED PHOTOVOLTAIC PROPERTY EX5 PENDITURE.—The term ‘qualified photovoltaic prop6 erty expenditure’ means any property expenditure 

7 for property which uses solar energy to generate 

8 electricity for use in a dwelling unit through the 

9 photovoltaic effect. 

10 ‘‘(3) QUALIFIED SOLAR HEATING PROPERTY

11 EXPENDITURE.—

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

13 solar heating property expenditure’ means any 

14 property expenditure for property which uses 

15 solar energy to heat or cool (or provide hot 

16 water for use in) a dwelling unit. 

17 ‘‘(B) EXCLUSION.—The term ‘qualified 

18 solar heating property expenditure’ does not in19 clude an expenditure for property which uses 

20 solar energy to heat or cool a swimming pool. 

21 ‘‘(c) SPECIAL RULES.—

22 ‘‘(1) JOINT OCCUPANCY.—In the case of any 

23 dwelling unit which is jointly occupied and used dur24 ing any calendar year as a residence by 2 or more 

25 individuals the following shall apply separately with 
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1 respect to qualified solar heating property expendi2 tures and qualified photovoltaic property expendi3 tures: 

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

5 under subsection (a) by reason of expenditures 

6 made during such calendar year by any of such 

7 individuals with respect to such dwelling unit 

8 shall be determined by treating all of such indi9 viduals as 1 taxpayer whose taxable year is 

10 such calendar year. 

11 ‘‘(B) There shall be allowable with respect 

12 to such expenditures to each of such individ13 uals, a credit under subsection (a) for the tax14 able year in which such calendar year ends in 

15 an amount which bears the same ratio to the 

16 amount determined under subparagraph (A) as 

17 the amount of such expenditures made by such 

18 individual during such calendar year bears to 

19 the aggregate of such expenditures made by all 

20 of such individuals during such calendar year. 

21 ‘‘(2) TENANT-STOCKHOLDER IN COOPERATIVE

22 HOUSING CORPORATION.—In the case of an indi23 vidual who is a tenant-stockholder (as defined in sec24 tion 216) in a cooperative housing corporation (as 

25 defined in that section), the individual shall be treat-
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1 ed as having made such individual’s tenant-stock2 holder’s proportionate share (as defined in section 

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

4 ‘‘(3) CONDOMINIUMS.—

5 ‘‘(A) IN GENERAL.—In the case of an indi6 vidual who is a member of a condominium man7 agement association with respect to a condo8 minium which such individual owns, such indi9 vidual shall be treated as having made such in10 dividual’s proportionate share of any expendi11 tures of such association. 

12 ‘‘(B) MANAGEMENT ASSOCIATION.—For 

13 purposes of this paragraph, the term ‘condo14 minium management association’ means an or15 ganization which meets the requirements of 

16 paragraph (1) of section 528(c) (other than 

17 subparagraph (E) thereof) with respect to a 

18 condominium project substantially all of the 

19 units of which are used as residences. 

20 ‘‘(4) AMOUNT OF EXPENDITURE.—

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

22 subparagraph (B), an expenditure with respect 

23 to an item shall be treated as made when the 

24 original installation of the item is completed. 
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1 ‘‘(B) EXPENDITURES IN CONNECTION

2 WITH BUILDING CONSTRUCTION.—In the case 

3 of an expenditure in connection with the con4 struction or reconstruction of a structure, such 

5 expenditure shall be treated as made when the 

6 original use of the constructed or reconstructed 

7 structure by the taxpayer begins. 

8 ‘‘(C) AMOUNT.—

9 ‘‘(i) IN GENERAL.—The amount of 

10 any expenditure shall be the cost of the ex11 penditure. 

12 ‘‘(ii) SUBSIDIZED ENERGY FINANC13 ING.—For purposes of determining the 

14 amount of expenditures, there shall not be 

15 taken into account expenditures which are 

16 made from subsidized energy financing (as 

17 defined in section 48(a)(5)(A)). 

18 ‘‘(d) BASIS ADJUSTMENTS.—For purposes of this 

19 subtitle, if a credit is allowed under this section for any 

20 expenditure with respect to any property, the increase in 

21 the basis of such property which would (but for this sub22 section) result from such expenditure shall be reduced by 

23 the amount of the credit so allowed. 

24 ‘‘(e) LIMITATIONS.—No credit shall be allowed under 

25 this section for an item of property unless—
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1 ‘‘(1) in the case of solar heating property, the 

2 property meets all applicable health and safety 

3 standards and requirements imposed by any State or 

4 local permitting authority, and 

5 ‘‘(2) in the case of a photovoltaic property, the 

6 property meets all appropriate fire and electric code 

7 requirements. 

8 ‘‘(f) TERMINATION.—This section shall not apply to 

9 expenditures made after December 31, 2010.’’. 

10 (c) PRODUCTION TAX CREDIT FOR UTILITY-SCALE

11 SOLAR.—Paragraph (4) of section 45(d) of the Internal 

12 Revenue Code of 1986 (relating to qualified facilities) is 

13 amended to read as follows: 

14 ‘‘(4) GEOTHERMAL OR SOLAR ENERGY FACIL15 ITY.—In the case of a facility using geothermal or 

16 solar energy to produce electricity, the term ‘quali17 fied facility’ means any facility owned by the tax18 payer which is originally placed in service after De19 cember 31, 2005, and before December 31, 2010.’’. 

20 (d) CONFORMING AMENDMENTS.—

21 (1) Subsection (a) of section 1016 of the Inter22 nal Revenue Code of 1986 is amended—

23 (A) by striking ‘‘and’’ at the end of para24 graph (30); 
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1 (B) by striking the period at the end of 

2 paragraph (31) and inserting ‘‘, and’’; and 

3 (C) by adding at the end the following new 

4 paragraph: 

5 ‘‘(32) to the extent provided in section 25C(d), 

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

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

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

9 IV of subchapter A of chapter 1 of such Code is 

10 amended by inserting after the item relating to sec11 tion 25C the following new item:

‘‘Sec. 25C. Renewable energy equipment credits.’’.

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

13 this section shall apply to property placed in service after 

14 December 31, 2005, in taxable years ending after such 

15 date. 

16 SEC. 4. ENERGY EFFICIENCY TAX PROVISIONS. 

17 (a) CREDIT FOR RESIDENTIAL ENERGY EFFICIENT

18 PROPERTY.—

19 (1) IN GENERAL.—Subpart A of part IV of sub20 chapter A of chapter 1 of the Internal Revenue Code 

21 of 1986 (relating to nonrefundable personal credits) 

22 is amended by inserting after section 25B the fol23 lowing: 
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1 ‘‘SEC. 25C. RESIDENTIAL ENERGY EFFICIENT PROPERTY. 

2 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in3 dividual, there shall be allowed as a credit against the tax 

4 imposed by this chapter for the taxable year an amount 

5 equal to 20 percent of the qualified fuel cell property ex6 penditures made by the taxpayer during such year. 

7 ‘‘(b) LIMITATIONS.—

8 ‘‘(1) MAXIMUM CREDIT.—

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

10 under subsection (a) shall not exceed $500 for 

11 each 0.5 kilowatt of capacity of property de12 scribed in subsection (c). 

13 ‘‘(B) PRIOR EXPENDITURES BY TAXPAYER

14 ON SAME RESIDENCE TAKEN INTO ACCOUNT.—

15 In determining the amount of the credit allowed 

16 to a taxpayer with respect to any dwelling unit 

17 under this section, the dollar amount under 

18 subparagraph (A)(i) with respect to each type 

19 of property described in such subparagraph 

20 shall be reduced by the credit allowed to the 

21 taxpayer under this section with respect to such 

22 property for all preceding taxable years with re23 spect to such dwelling unit. 

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

25 be allowed under this section for an item of property 

26 unless—
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1 ‘‘(A) the original use of such property com2 mences with the taxpayer, 

3 ‘‘(B) such property reasonably can be ex4 pected to remain in use for at least 5 years, 

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

6 connection with a dwelling unit located in the 

7 United States and used as a residence by the 

8 taxpayer, and 

9 ‘‘(D) such property meets—

10 ‘‘(i) the performance and quality 

11 standards (if any) which have been pre12 scribed by the Secretary by regulations 

13 (after consultation with the Secretary of 

14 Energy), and 

15 ‘‘(ii) appropriate fire and electric code 

16 requirements. 

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

18 ‘‘(1) QUALIFIED FUEL CELL PROPERTY EX19 PENDITURE.—The term ‘qualified fuel cell property 

20 expenditure’ means an expenditure for any qualified 

21 fuel cell property (as defined in section 48(c)(1)). 

22 ‘‘(d) SPECIAL RULES.—For purposes of this sec23 tion—

24 ‘‘(1) DOLLAR AMOUNTS IN CASE OF JOINT OC25 CUPANCY.—In the case of any dwelling unit which is 
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1 jointly occupied and used during any calendar year 

2 as a residence by 2 or more individuals, the fol3 lowing rules shall apply: 

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

5 under subsection (a) by reason of expenditures 

6 made during such calendar year by any of such 

7 individuals with respect to such dwelling unit 

8 shall be determined by treating all of such indi9 viduals as 1 taxpayer whose taxable year is 

10 such calendar year. 

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

12 to such expenditures to each of such individ13 uals, a credit under subsection (a) for the tax14 able year in which such calendar year ends in 

15 an amount which bears the same ratio to the 

16 amount determined under subparagraph (A) as 

17 the amount of such expenditures made by such 

18 individual during such calendar year bears to 

19 the aggregate of such expenditures made by all 

20 of such individuals during such calendar year. 

21 ‘‘(2) TENANT-STOCKHOLDER IN COOPERATIVE

22 HOUSING CORPORATION.—In the case of an indi23 vidual who is a tenant-stockholder (as defined in sec24 tion 216) in a cooperative housing corporation (as 

25 defined in such section), such individual shall be 
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1 treated as having made the individual’s tenant-stock2 holder’s proportionate share (as defined in section 

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

4 ‘‘(3) CONDOMINIUMS.—

5 ‘‘(A) IN GENERAL.—In the case of an indi6 vidual who is a member of a condominium man7 agement association with respect to a condo8 minium which the individual owns, such indi9 vidual shall be treated as having made the indi10 vidual’s proportionate share of any expenditures 

11 of such association. 

12 ‘‘(B) CONDOMINIUM MANAGEMENT ASSO13 CIATION.—For purposes of this paragraph, the 

14 term ‘condominium management association’ 

15 means an organization which meets the require16 ments of paragraph (1) of section 528(c) (other 

17 than subparagraph (E) thereof) with respect to 

18 a condominium project substantially all of the 

19 units of which are used as residences. 

20 ‘‘(4) ALLOCATION IN CERTAIN CASES.—Except 

21 in the case of qualified wind energy property expend22 itures, if less than 80 percent of the use of an item 

23 is for nonbusiness purposes, only that portion of the 

24 expenditures for such item which is properly allo-
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1 cable to use for nonbusiness purposes shall be taken 

2 into account.

3 ‘‘(5) WHEN EXPENDITURE MADE; AMOUNT OF

4 EXPENDITURE.—

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

6 subparagraph (B), an expenditure with respect 

7 to an item shall be treated as made when the 

8 original installation of the item is completed. 

9 ‘‘(B) EXPENDITURES PART OF BUILDING

10 CONSTRUCTION.—In the case of an expenditure 

11 in connection with the construction or recon12 struction of a structure, such expenditure shall 

13 be treated as made when the original use of the 

14 constructed or reconstructed structure by the 

15 taxpayer begins. 

16 ‘‘(C) AMOUNT.—The amount of any ex17 penditure shall be the cost thereof. 

18 ‘‘(6) PROPERTY FINANCED BY SUBSIDIZED EN19 ERGY FINANCING.—For purposes of determining the 

20 amount of expenditures made by any individual with 

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

22 into account expenditures which are made from sub23 sidized energy financing (as defined in section 

24 48(a)(5)(C)). 
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1 ‘‘(e) BASIS ADJUSTMENTS.—For purposes of this 

2 subtitle, if a credit is allowed under this section for any 

3 expenditure with respect to any property, the increase in 

4 the basis of such property which would (but for this sub5 section) result from such expenditure shall be reduced by 

6 the amount of the credit so allowed. 

7 ‘‘(f) TERMINATION.—The credit allowed under this 

8 section shall not apply to taxable years beginning after 

9 December 31, 2006 (December 31, 2008, with respect to 

10 qualified photovoltaic property expenditures).’’. 

11 (2) CONFORMING AMENDMENTS.—

12 (A) Section 1016(a) of the Internal Rev13 enue Code of 1986 is amended—

14 (i) by striking ‘‘and’’ at the end of 

15 paragraph (30); 

16 (ii) by striking the period at the end 

17 of paragraph (31) and inserting ‘‘, and’’; 

18 and 

19 (iii) by adding at the end the fol20 lowing: 

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

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

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

24 (B) The table of sections for subpart A of 

25 part IV of subchapter A of chapter 1 of such 
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1 Code is amended by inserting after the item re2 lating to section 25B the following:

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

3 (3) EFFECTIVE DATE.—The amendments made 

4 by this section shall apply to taxable years ending 

5 after December 31, 2005. 

6 (b) EXTENSION OF CREDIT FOR ELECTRICITY PRO7 DUCED FROM CERTAIN RENEWABLE RESOURCES.—

8 (1) EXTENSION.—Section 45(d) of the Internal 

9 Revenue Code of 1986 (relating to qualified facili10 ties) is amended by striking ‘‘2006’’ each place it 

11 appears and inserting ‘‘2007’’. 

12 (2) COORDINATION WITH OTHER CREDITS.—

13 Paragraph (9) of section 45(e) of the Internal Rev14 enue Code of 1986 (relating to definitions and spe15 cial rules) is amended to read as follows: 

16 ‘‘(9) COORDINATION WITH OTHER CREDITS.—

17 The term ‘qualified facility’ shall not include—

18 ‘‘(A) any property with respect to which a 

19 credit is allowed under section 25C, and 

20 ‘‘(B) any facility the production from 

21 which is allowed as a credit under section 29, 

22 for the taxable year or any prior taxable year.’’. 

23 (3) EFFECTIVE DATE.—The amendments made 

24 by this section shall apply to electricity produced 
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1 and sold after the date of the enactment of this Act, 

2 in taxable years ending after that date. 

3 (4) GAO STUDY AND REPORT.—

4 (A) IN GENERAL.—The Comptroller Gen5 eral of the United States shall conduct a study 

6 on the market viability of producing electricity 

7 from resources with respect to which credit is 

8 allowed under section 45 of the Internal Rev9 enue Code of 1986. 

10 (B) OPEN-LOOP BIOMASS AND MUNICIPAL

11 SOLID WASTE.—In the case of open-loop bio12 mass and municipal solid waste resources, the 

13 study under paragraph (1) shall take into ac14 count savings associated with not having to dis15 pose of those resources. 

16 (C) ENVIRONMENTAL IMPACT.—In con17 ducting the study under paragraph (1), the 

18 Comptroller General of the United States shall 

19 estimate the dollar value of the environmental 

20 impact of producing electricity from open-loop 

21 biomass and municipal solid waste relative to 

22 producing electricity from fossil fuels using the 

23 latest generation of technology. 

24 (D) REPORT.—Not later than June 30, 

25 2006, the Comptroller General of the United 
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1 States shall submit to the Committee on Ways 

2 and Means of the House of Representatives and 

3 the Committee on Finance of the Senate a re4 port describing the results of the study under 

5 paragraph (1). 

6 (c) CREDIT FOR BUSINESS INSTALLATION OF QUALI7 FIED FUEL CELLS.—

8 (1) IN GENERAL.—Section 48 of the Internal 

9 Revenue Code of 1986 (relating to energy credit) is 

10 amended—

11 (A) in subsection (a)—

12 (i) in paragraph (1), by inserting ‘‘ex13 cept as provided in subsection (c)(2),’’ be14 fore ‘‘the energy’’; 

15 (ii) in paragraph (2), by striking sub16 paragraph (A) and inserting the following: 

17 ‘‘(A) IN GENERAL.—The energy percent18 age is—

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

20 property, 20 percent, and 

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

22 property, 10 percent.’’; and 

23 (iii) in paragraph (3)(A)—

24 (I) in clause (i), by striking ‘‘or’’ 

25 at the end; 
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1 (II) in clause (ii), by adding ‘‘or’’ 

2 after the comma at the end; and 

3 (III) by inserting at the end the 

4 following: 

5 ‘‘(iii) qualified fuel cell property,’’; 

6 and 

7 (B) by adding at the end the following: 

8 ‘‘(c) QUALIFIED FUEL CELL PROPERTY.—For pur9 poses of subsection (a)(3)(A)(iii)—

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

11 cell property’ means a fuel cell power plant which 

12 generates at least 0.5 kilowatt of electricity using an 

13 electrochemical process. 

14 ‘‘(2) LIMITATION.—The energy credit with re15 spect to any qualified fuel cell property shall not ex16 ceed an amount equal to $500 for each 0.5 kilowatt 

17 of capacity of such property. 

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

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

20 comprised of a fuel cell stack assembly and associ21 ated balance of plant components, which converts a 

22 fuel into electricity using electrochemical means. 

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

24 cell property’ shall not include any property placed 

25 in service after December 31, 2006.’’. 
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1 (2) EFFECTIVE DATE.—The amendments made 

2 by this section shall apply to periods after December 

3 31, 2005, under rules similar to the rules of section 

4 48(m) of the Internal Revenue Code of 1986 (as in 

5 effect on the day before the date of the enactment 

6 of the Revenue Reconciliation Act of 1990). 

7 (d) CREDIT FOR ENERGY EFFICIENCY IMPROVE8 MENTS TO EXISTING HOMES.—

9 (1) IN GENERAL.—Subpart A of part IV of sub10 chapter A of chapter 1 of the Internal Revenue Code 

11 of 1986 (relating to nonrefundable personal credits) 

12 (as amended by this Act) is amended by inserting 

13 after section 25C the following: 

14 ‘‘SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXIST15 ING HOMES. 

16 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in17 dividual, there shall be allowed as a credit against the tax 

18 imposed by this chapter for the taxable year an amount 

19 equal to 20 percent of the amount paid or incurred by 

20 the taxpayer for qualified energy efficiency improvements 

21 installed during such taxable year. 

22 ‘‘(b) LIMITATIONS.—

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

24 this section with respect to a dwelling unit shall not 

25 exceed $2,000. 
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1 ‘‘(2) PRIOR CREDIT AMOUNTS FOR TAXPAYER

2 ON SAME DWELLING TAKEN INTO ACCOUNT.—If a 

3 credit was allowed to the taxpayer under subsection 

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

5 taxable years, the amount of the credit otherwise al6 lowable for the taxable year with respect to that 

7 dwelling unit shall be reduced by the sum of the 

8 credits allowed under subsection (a) to the taxpayer 

9 with respect to the dwelling unit for all prior taxable 

10 years. 

11 ‘‘(c) QUALIFIED ENERGY EFFICIENCY IMPROVE12 MENTS.—For purposes of this section, the term ‘qualified 

13 energy efficiency improvements’ means any energy effi14 cient building envelope component which meets the pre15 scriptive criteria for such component established by the 

16 2000 International Energy Conservation Code, as such 

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

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

19 roof with appropriate pigmented coatings which meet the 

20 Energy Star program requirements), if—

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

22 dwelling unit—

23 ‘‘(A) located in the United States, 
27

•S 727 IS 

1 ‘‘(B) owned and used by the taxpayer as 

2 the taxpayer’s principal residence (within the 

3 meaning of section 121), and 

4 ‘‘(C) which has not been treated as a 

5 qualified new energy efficient home for pur6 poses of any credit allowed under section 45J, 

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

9 ‘‘(3) such component reasonably can be ex10 pected to remain in use for at least 5 years. 

11 If the aggregate cost of such components with respect to 

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

13 be treated as qualified energy efficiency improvements 

14 only if such components are also certified in accordance 

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

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

17 subsection (c) shall be—

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

19 specifications or applicable ratings (including prod20 uct labeling requirements) for the measurement of 

21 energy efficiency (based upon energy use or building 

22 envelope component performance) for the energy ef23 ficient building envelope component, 

24 ‘‘(2) provided by a local building regulatory au25 thority, a utility, a manufactured home production 
28

•S 727 IS 

1 inspection primary inspection agency (IPIA), or an 

2 accredited home energy rating system provider who 

3 is accredited by or otherwise authorized to use ap4 proved energy performance measurement methods by 

5 the Residential Energy Services Network 

6 (RESNET), and 

7 ‘‘(3) made in writing in a manner which speci8 fies in readily verifiable fashion the energy efficient 

9 building envelope components installed and their re10 spective energy efficiency levels. 

11 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur12 poses of this section—

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

14 term ‘building envelope component’ means—

15 ‘‘(A) any insulation material or system 

16 which is specifically and primarily designed to 

17 reduce the heat loss or gain of a dwelling unit 

18 when installed in or on such dwelling unit, 

19 ‘‘(B) exterior windows (including sky20 lights), 

21 ‘‘(C) exterior doors, and 

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

23 unit, but only if such roof has appropriate pig24 mented coatings which are specifically and pri-
29

•S 727 IS 

1 marily designed to reduce the heat gain of such 

2 dwelling unit. 

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

4 term ‘dwelling unit’ includes a manufactured home 

5 which conforms to Federal Manufactured Home 

6 Construction and Safety Standards (section 3280 of 

7 title 24, Code of Federal Regulations). 

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

9 the rules under paragraphs (3), (4), and (5) of sec10 tion 25C(d) shall apply. 

11 ‘‘(f) BASIS ADJUSTMENT.—For purposes of this sub12 title, if a credit is allowed under this section for any ex13 penditure with respect to any property, the increase in the 

14 basis of such property which would (but for this sub15 section) result from such expenditure shall be reduced by 

16 the amount of the credit so allowed. 

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

18 apply to qualified energy efficiency improvements installed 

19 after December 31, 2005, and before January 1, 2007.’’. 

20 (2) CONFORMING AMENDMENTS.—

21 (A) Subsection (a) of section 1016 of the 

22 Internal Revenue Code of 1986 (as amended by 

23 this Act) is amended—

24 (i) in paragraph (31), by striking 

25 ‘‘and’’ at the end; 
30

•S 727 IS 

1 (ii) in paragraph (32), by striking the 

2 period at the end and inserting ‘‘, and’’; 

3 and 

4 (iii) by adding at the end the fol5 lowing: 

6 ‘‘(33) to the extent provided in section 25D(f), 

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

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

9 (B) The table of sections for subpart A of 

10 part IV of subchapter A of chapter 1 of such 

11 Code (as amended by this Act) is amended by 

12 inserting after the item relating to section 25C 

13 the following:

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

14 (3) EFFECTIVE DATE.—The amendments made 

15 by this section shall apply to taxable years ending 

16 after December 31, 2005. 

17 (e) CREDIT FOR CONSTRUCTION OF NEW ENERGY

18 EFFICIENT HOMES.—

19 (1) IN GENERAL.—Subpart D of part IV of 

20 subchapter A of chapter 1 of the Internal Revenue 

21 Code of 1986 (relating to business related credits) is 

22 amended by adding at the end the following: 

23 ‘‘SEC. 45J. NEW ENERGY EFFICIENT HOME CREDIT. 

24 ‘‘(a) IN GENERAL.—For purposes of section 38, in 

25 the case of an eligible contractor with respect to a quali-
31

•S 727 IS 

1 fied new energy efficient home, the credit determined 

2 under this section for the taxable year with respect to such 

3 home is an amount equal to the aggregate adjusted bases 

4 of all energy efficient property installed in such home dur5 ing construction of such home. 

6 ‘‘(b) LIMITATIONS.—

7 ‘‘(1) MAXIMUM CREDIT.—

8 ‘‘(A) IN GENERAL.—The credit allowed by 

9 this section with respect to a dwelling unit shall 

10 not exceed—

11 ‘‘(i) in the case of a dwelling unit de12 scribed in clause (i) or (iii) of subsection 

13 (c)(3)(D), $1,000, and 

14 ‘‘(ii) in the case of a dwelling unit de15 scribed in subsection (c)(3)(D)(ii), $2,000.

16 ‘‘(B) PRIOR CREDIT AMOUNTS ON SAME

17 DWELLING UNIT TAKEN INTO ACCOUNT.—If a 

18 credit was allowed under subsection (a) with re19 spect to a dwelling unit in 1 or more prior tax20 able years, the amount of the credit otherwise 

21 allowable for the taxable year with respect to 

22 such dwelling unit shall be reduced by the sum 

23 of the credits allowed under subsection (a) with 

24 respect to the dwelling unit for all prior taxable 

25 years. 
32

•S 727 IS 

1 ‘‘(2) COORDINATION WITH CERTAIN CREDITS.—

2 For purposes of this section—

3 ‘‘(A) the basis of any property referred to 

4 in subsection (a) shall be reduced by that por5 tion of the basis of any property which is attrib6 utable to qualified rehabilitation expenditures 

7 (as defined in section 47(c)(2)) or to the energy 

8 percentage of energy property (as determined 

9 under section 48(a)), and 

10 ‘‘(B) expenditures taken into account 

11 under section 47 or 48(a) shall not be taken 

12 into account under this section. 

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

14 ‘‘(1) ELIGIBLE CONTRACTOR.—The term ‘eligi15 ble contractor’ means—

16 ‘‘(A) the person who constructed the quali17 fied new energy efficient home, or 

18 ‘‘(B) in the case of a qualified new energy 

19 efficient home which is a manufactured home, 

20 the manufactured home producer of such home. 

21 If more than 1 person is described in subparagraph 

22 (A) or (B) with respect to any qualified new energy 

23 efficient home, such term means the person des24 ignated as such by the owner of such home. 
33

•S 727 IS 

1 ‘‘(2) ENERGY EFFICIENT PROPERTY.—The 

2 term ‘energy efficient property’ means any energy 

3 efficient building envelope component, and any en4 ergy efficient heating or cooling equipment or sys5 tem, which can, individually or in combination with 

6 other components, result in a dwelling unit meeting 

7 the requirements of this section. 

8 ‘‘(3) QUALIFIED NEW ENERGY EFFICIENT

9 HOME.—The term ‘qualified new energy efficient 

10 home’ means a dwelling unit—

11 ‘‘(A) located in the United States, 

12 ‘‘(B) the construction of which is substan13 tially completed after December 31, 2005, 

14 ‘‘(C) the original use of which, after such 

15 construction, is reasonably expected to be as a 

16 residence by the person who acquires such 

17 dwelling unit from the eligible contractor, 

18 ‘‘(D) which is—

19 ‘‘(i) certified to have a level of annual 

20 heating and cooling energy consumption 

21 which is at least 30 percent below the an22 nual level of heating and cooling energy 

23 consumption of a comparable dwelling unit 

24 constructed in accordance with the stand25 ards of chapter 4 of the 2000 International 
34

•S 727 IS 

1 Energy Conservation Code, as such Code 

2 (including supplements) is in effect on the 

3 date of the enactment of this section, and 

4 to have building envelope component improvements account for at least 1 5 ⁄3 of such 

6 30 percent, 

7 ‘‘(ii) certified to have a level of annual 

8 heating and cooling energy consumption 

9 which is at least 50 percent below such an10 nual level and to have building envelope 

11 component improvements account for at 

least 1 12 ⁄5 of such 50 percent, or 

13 ‘‘(iii) a manufactured home which—

14 ‘‘(I) conforms to Federal Manu15 factured Home Construction and 

16 Safety Standards (section 3280 of 

17 title 24, Code of Federal Regulations), 

18 and 

19 ‘‘(II) meets the applicable stand20 ards required by the Administrator of 

21 the Environmental Protection Agency 

22 under the Energy Star Labeled 

23 Homes program. 
35

•S 727 IS 

1 ‘‘(4) CONSTRUCTION.—The term ‘construction’ 

2 includes substantial reconstruction and rehabilita3 tion. 

4 ‘‘(5) ACQUIRE.—The term ‘acquire’ includes 

5 purchase and, in the case of reconstruction and re6 habilitation, such term includes a binding written 

7 contract for such reconstruction or rehabilitation. 

8 ‘‘(6) BUILDING ENVELOPE COMPONENT.—The 

9 term ‘building envelope component’ means—

10 ‘‘(A) any insulation material or system 

11 which is specifically and primarily designed to 

12 reduce the heat loss or gain of a dwelling unit 

13 when installed in or on such dwelling unit, 

14 ‘‘(B) exterior windows (including sky15 lights), 

16 ‘‘(C) exterior doors, and 

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

18 unit, but only if such roof has appropriate pig19 mented coatings which—

20 ‘‘(i) are specifically and primarily de21 signed to reduce the heat gain of such 

22 dwelling unit, and 

23 ‘‘(ii) meet the Energy Star program 

24 requirements. 

25 ‘‘(d) CERTIFICATION.—
36

•S 727 IS 

1 ‘‘(1) METHOD OF CERTIFICATION.—A certifi2 cation described in subsection (c)(3)(D) shall be de3 termined in accordance with guidance prescribed by 

4 the Secretary. Such guidance shall specify proce5 dures and methods for calculating energy and cost 

6 savings. 

7 ‘‘(2) FORM.—A certification described in sub8 section (c)(3)(D) shall be made in writing—

9 ‘‘(A) in a manner which specifies in readily 

10 verifiable fashion the energy efficient building 

11 envelope components and energy efficient heat12 ing or cooling equipment installed and their re13 spective rated energy efficiency performance, 

14 and 

15 ‘‘(B) in the case of a qualified new energy 

16 efficient home which is a manufactured home, 

17 accompanied by such documentation as required 

18 by the Administrator of the Environmental Pro19 tection Agency under the Energy Star Labeled 

20 Homes program. 

21 ‘‘(e) BASIS ADJUSTMENT.—For purposes of this sub22 title, if a credit is determined under this section for any 

23 expenditure with respect to any property, the increase in 

24 the basis of such property which would (but for this sub-
37

•S 727 IS 

1 section) result from such expenditure shall be reduced by 

2 the amount of the credit so determined. 

3 ‘‘(f) APPLICATION OF SECTION.—Subsection (a) shall 

4 apply to qualified new energy efficient homes acquired 

5 during the period beginning on January 1, 2006, and end6 ing on December 31, 2008.’’. 

7 (2) CREDIT MADE PART OF GENERAL BUSINESS

8 CREDIT.—Section 38(b) of the Internal Revenue 

9 Code of 1986 (relating to current year business 

10 credit) is amended—

11 (A) in paragraph (18), by striking ‘‘plus’’ 

12 at the end; 

13 (B) in paragraph (19), by striking the pe14 riod at the end and inserting ‘‘, plus’’; and 

15 (C) by adding at the end the following: 

16 ‘‘(20) the new energy efficient home credit de17 termined under section 45J(a).’’. 

18 (3) BASIS ADJUSTMENT.—Section 1016(a) of 

19 the Internal Revenue Code of 1986 (as amended by 

20 this Act) is amended—

21 (A) in paragraph (32), by striking ‘‘and’’ 

22 at the end; 

23 (B) in paragraph (33), by striking the pe24 riod at the end and inserting ‘‘, and’’; and 

25 (C) by adding at the end the following: 
38

•S 727 IS 

1 ‘‘(34) to the extent provided in section 45J(e), 

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

3 has been allowed under section 45J.’’. 

4 (4) DEDUCTION FOR CERTAIN UNUSED BUSI5 NESS CREDITS.—Section 196(c) of the Internal Rev6 enue Code of 1986 (defining qualified business cred7 its) is amended—

8 (A) in paragraph (11), by striking ‘‘and’’ 

9 at the end; 

10 (B) in paragraph (12), by striking the pe11 riod at the end and inserting ‘‘, and’’; and 

12 (C) by adding after paragraph (12) the fol13 lowing: 

14 ‘‘(13) the new energy efficient home credit de15 termined under section 45J(a).’’. 

16 (5) CLERICAL AMENDMENT.—The table of sec17 tions for subpart D of part IV of subchapter A of 

18 chapter 1 of the Internal Revenue Code of 1986 is 

19 amended by adding at the end the following:

‘‘Sec. 45J. New energy efficient home credit.’’.

20 (6) EFFECTIVE DATE.—The amendments made 

21 by this section shall apply to taxable years ending 

22 after December 31, 2005. 

23 (f) CREDIT FOR ENERGY EFFICIENT APPLIANCES.—

24 (1) IN GENERAL.—Subpart D of part IV of 

25 subchapter A of chapter 1 of the Internal Revenue 
39

•S 727 IS 

1 Code of 1986 (relating to business-related credits) 

2 (as amended by this Act) is amended by adding at 

3 the end the following: 

4 ‘‘SEC. 45K. ENERGY EFFICIENT APPLIANCE CREDIT. 

5 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec6 tion 38, the energy efficient appliance credit determined 

7 under this section for the taxable year is an amount equal 

8 to the sum of—

9 ‘‘(1) the tier I appliance amount, and 

10 ‘‘(2) the tier II appliance amount,

11 with respect to qualified energy efficient appliances pro12 duced by the taxpayer during the calendar year ending 

13 with or within the taxable year. 

14 ‘‘(b) APPLIANCE AMOUNTS.—For purposes of sub15 section (a)—

16 ‘‘(1) TIER I APPLIANCE AMOUNT.—The tier I 

17 appliance amount is equal to—

18 ‘‘(A) $100, multiplied by 

19 ‘‘(B) an amount (rounded to the nearest 

20 whole number) equal to the applicable percent21 age of the eligible production. 

22 ‘‘(2) TIER II APPLIANCE AMOUNT.—The tier II 

23 appliance amount is equal to $150, multiplied by an 

24 amount equal to the eligible production reduced by 

25 the amount determined under paragraph (1)(B). 
40

•S 727 IS 

1 ‘‘(3) APPLICABLE PERCENTAGE.—The applica2 ble percentage is the percentage determined by di3 viding the tier I appliances produced by the taxpayer 

4 during the calendar year by the sum of the tier I 

5 and tier II appliances so produced. 

6 ‘‘(4) ELIGIBLE PRODUCTION.—The eligible pro7 duction of qualified energy efficient appliances by 

8 the taxpayer for any calendar year is the excess of—

9 ‘‘(A) the number of such appliances which 

10 are produced by the taxpayer during such cal11 endar year, over 

12 ‘‘(B) 110 percent of the average annual 

13 number of such appliances which were produced 

14 by the taxpayer (or any predecessor) during the 

15 preceding 3-calendar year period. 

16 ‘‘(c) QUALIFIED ENERGY EFFICIENT APPLIANCE.—

17 For purposes of this section—

18 ‘‘(1) IN GENERAL.—The term ‘qualified energy 

19 efficient appliance’ means any tier I appliance or tier 

20 II appliance which is produced in the United States. 

21 ‘‘(2) TIER I APPLIANCE.—The term ‘tier I ap22 pliance’ means— 

23 ‘‘(A) a clothes washer which is produced 

24 with at least a 1.50 MEF, and 
41

•S 727 IS 

1 ‘‘(B) a refrigerator which consumes at 

2 least 15 percent (20 percent in the case of a re3 frigerator produced after 2006) less kilowatt 

4 hours per year than the energy conservation 

5 standards for refrigerators promulgated by the 

6 Department of Energy and effective on July 1, 

7 2001. 

8 ‘‘(3) TIER II APPLIANCE.—The term ‘tier II ap9 pliance’ means a refrigerator produced before 2007 

10 which consumes at least 20 percent less kilowatt 

11 hours per year than the energy conservation stand12 ards described in paragraph (2)(B). 

13 ‘‘(4) CLOTHES WASHER.—The term ‘clothes 

14 washer’ means a residential clothes washer, includ15 ing a residential style coin operated washer. 

16 ‘‘(5) REFRIGERATOR.—The term ‘refrigerator’ 

17 means an automatic defrost refrigerator-freezer 

18 which has an internal volume of at least 16.5 cubic 

19 feet. 

20 ‘‘(6) MEF.—The term ‘MEF’ means Modified 

21 Energy Factor (as determined by the Secretary of 

22 Energy). 

23 ‘‘(7) PRODUCED.—The term ‘produced’ in24 cludes manufactured. 

25 ‘‘(d) LIMITATION ON MAXIMUM CREDIT.—
42

•S 727 IS 

1 ‘‘(1) IN GENERAL.—The amount of credit al2 lowed under subsection (a) with respect to a tax3 payer for any taxable year shall not exceed 

4 $60,000,000, reduced by the amount of the credit 

5 allowed under subsection (a) to the taxpayer (or any 

6 predecessor) for any prior taxable year. 

7 ‘‘(2) LIMITATION BASED ON GROSS RE8 CEIPTS.—The credit allowed under subsection (a) 

9 with respect to a taxpayer for the taxable year shall 

10 not exceed an amount equal to 2 percent of the aver11 age annual gross receipts of the taxpayer for the 3 

12 taxable years preceding the taxable year for which 

13 the credit is determined. 

14 ‘‘(3) GROSS RECEIPTS.—For purposes of this 

15 subsection, the rules of paragraphs (2) and (3) of 

16 section 448(c) shall apply. 

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

19 ‘‘(1) IN GENERAL.—Rules similar to the rules 

20 of subsections (c), (d), and (e) of section 52 shall 

21 apply. 

22 ‘‘(2) CONTROLLED GROUPS.—

23 ‘‘(A) IN GENERAL.—All persons treated as 

24 a single employer under subsection (a) or (b) of 
43

•S 727 IS 

1 section 52 or subsection (m) or (o) of section 

2 414 shall be treated as a single manufacturer. 

3 ‘‘(B) INCLUSION OF FOREIGN CORPORA4 TIONS.—For purposes of subparagraph (A), in 

5 applying subsections (a) and (b) of section 52 

6 to this section, section 1563 shall be applied 

7 without regard to subsection (b)(2)(C) thereof. 

8 ‘‘(f) VERIFICATION.—The taxpayer shall submit such 

9 information or certification as the Secretary, after con10 sultation with the Secretary of Energy, determines nec11 essary to claim the credit amount under subsection (a). 

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

13 with respect to appliances produced after December 31, 

14 2007.’’. 

15 (2) CREDIT MADE PART OF GENERAL BUSINESS

16 CREDIT.—Section 38(b) of the Internal Revenue 

17 Code of 1986 (relating to current year business 

18 credit) (as amended by this Act) is amended—

19 (A) in paragraph (19), by striking ‘‘plus’’ 

20 at the end; 

21 (B) in paragraph (20), by striking the pe22 riod at the end and inserting ‘‘, plus’’; and 

23 (C) by adding at the end the following: 

24 ‘‘(21) the energy efficient appliance credit de25 termined under section 45K(a).’’. 
44

•S 727 IS 

1 (3) CLERICAL AMENDMENT.—The table of sec2 tions for subpart D of part IV of subchapter A of 

3 chapter 1 of the Internal Revenue Code of 1986 (as 

4 amended by this Act) is amended by adding at the 

5 end the following:

‘‘Sec. 45K. Energy efficient appliance credit.’’.

6 (4) EFFECTIVE DATE.—The amendments made 

7 by this section shall apply to appliances produced 

8 after December 31, 2005, in taxable years ending 

9 after such date. 

10 (g) ENERGY EFFICIENT COMMERCIAL BUILDINGS

11 DEDUCTION.—

12 (1) IN GENERAL.—Part VI of subchapter B of 

13 chapter 1 of the Internal Revenue Code of 1986 (re14 lating to itemized deductions for individuals and cor15 porations) is amended by inserting after section 

16 179B the following: 

17 ‘‘SEC. 179C. ENERGY EFFICIENT COMMERCIAL BUILDINGS 

18 DEDUCTION. 

19 ‘‘(a) IN GENERAL.—There shall be allowed as a de20 duction an amount equal to the cost of energy efficient 

21 commercial building property placed in service during the 

22 taxable year. 

23 ‘‘(b) MAXIMUM AMOUNT OF DEDUCTION.—The de24 duction under subsection (a) with respect to any building 
45

•S 727 IS 

1 for the taxable year and all prior taxable years shall not 

2 exceed an amount equal to the product of—

3 ‘‘(1) $1.50, and 

4 ‘‘(2) the square footage of the building. 

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

6 ‘‘(1) ENERGY EFFICIENT COMMERCIAL BUILD7 ING PROPERTY.—The term ‘energy efficient commer8 cial building property’ means property—

9 ‘‘(A) which is installed on or in a build10 ing—

11 ‘‘(i) which is located in the United 

12 States, and 

13 ‘‘(ii) which is the type of structure to 

14 which the Standard 90.1–2001 is applica15 ble, 

16 ‘‘(B) which is installed as part of—

17 ‘‘(i) the lighting systems, 

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

19 and hot water systems, or 

20 ‘‘(iii) the building envelope, and 

21 ‘‘(C) which is certified in accordance with 

22 subsection (d)(4) as being installed as part of 

23 a plan designed to reduce the total annual en24 ergy and power costs with respect to the light25 ing systems, heating, cooling, ventilation, and 
46

•S 727 IS 

1 hot water systems of the building by 50 percent 

2 or more in comparison to a reference building 

3 which meets the minimum requirements of 

4 Standard 90.1–2001 using methods of calcula5 tion under subsection (d)(2). 

6 ‘‘(2) STANDARD 90.1–2001.—The term ‘Stand7 ard 90.1–2001’ means Standard 90.1–2001 of the 

8 American Society of Heating, Refrigerating, and Air 

9 Conditioning Engineers and the Illuminating Engi10 neering Society of North America (as in effect on 

11 April 2, 2003). 

12 ‘‘(d) SPECIAL RULES.—

13 ‘‘(1) PARTIAL ALLOWANCE.—

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

15 subsection (f), in the case of a building placed 

16 in service on or before the date of the enact17 ment of this section, if—

18 ‘‘(i) the requirement of subsection 

19 (c)(1)(C) is not met, but 

20 ‘‘(ii) there is a certification in accord21 ance with subsection (d)(4) that any sys22 tem referred to in subsection (c)(1)(B) sat23 isfies the energy-savings targets estab24 lished by the Secretary under subpara25 graph (B) with respect to such system, 
47

•S 727 IS 

1 then the requirement of subsection (c)(1)(C) 

2 shall be treated as met with respect to such sys3 tem, and the deduction under subsection (a) 

4 shall be allowed with respect to energy efficient 

5 commercial building property installed as part 

6 of such system and as part of a plan to meet 

7 such targets, except that subsection (b) shall be 

8 applied to such property by substituting ‘$.50’ 

9 for ‘$1.50’. 

10 ‘‘(B) REGULATIONS.—The Secretary, after 

11 consultation with the Secretary of Energy, shall 

12 establish a target for each system described in 

13 subsection (c)(1)(B) which, if such targets were 

14 met for all such systems, the building would 

15 meet the requirements of subsection (c)(1)(C). 

16 ‘‘(2) METHODS OF CALCULATION.—The Sec17 retary, after consultation with the Secretary of En18 ergy, shall promulgate regulations which describe in 

19 detail methods for calculating and verifying energy 

20 and power cost for purposes of this section. 

21 ‘‘(3) NOTICE TO OWNER.—Each certification 

22 required under this section shall include an expla23 nation to the building owner regarding the energy 

24 efficiency features of the building and its projected 

25 annual energy costs. 
48

•S 727 IS 

1 ‘‘(4) CERTIFICATION.—

2 ‘‘(A) IN GENERAL.—The Secretary shall 

3 prescribe the manner and method for the mak4 ing of certifications under this section. 

5 ‘‘(B) PROCEDURES.—The Secretary shall 

6 include as part of the certification process pro7 cedures for inspection and testing by qualified 

8 individuals described in subparagraph (C) to 

9 ensure compliance of buildings with energy-sav10 ings plans and targets. Such procedures shall 

11 be—

12 ‘‘(i) comparable, given the difference 

13 between commercial and residential build14 ings, to the requirements in the Mortgage 

15 Industry National Accreditation Proce16 dures for Home Energy Rating Systems, 

17 and 

18 ‘‘(ii) fuel neutral such that the same 

19 energy efficiency measures allow a building 

20 to be eligible for the deduction under this 

21 section regardless of whether such building 

22 uses a gas or oil furnace or boiler, an elec23 tric heat pump, or other fuel source. 

24 ‘‘(C) QUALIFIED INDIVIDUALS.—Individ25 uals qualified to determine compliance shall be 
49

•S 727 IS 

1 only those individuals who are recognized by an 

2 organization certified by the Secretary for such 

3 purposes. 

4 ‘‘(e) BASIS REDUCTION.—For purposes of this sub5 title, if a deduction is allowed under this section with re6 spect to any energy efficient commercial building property, 

7 the basis of such property shall be reduced by the amount 

8 of the deduction so allowed. 

9 ‘‘(f) INTERIM RULES FOR LIGHTING SYSTEMS.—

10 Until such time as the Secretary issues final regulations 

11 under subsection (d)(1)(B) with respect to property which 

12 is part of a lighting system— 

13 ‘‘(1) IN GENERAL.—The lighting system target 

14 under subsection (d)(1)(A)(ii) shall be a reduction in 

15 lighting power density of 25 percent (50 percent in 

16 the case of a warehouse) of the minimum require17 ments in Table 9.3.1.1 or Table 9.3.1.2 (not includ18 ing additional interior lighting power allowances) of 

19 Standard 90.1–2001. 

20 ‘‘(2) REDUCTION IN DEDUCTION IF REDUCTION

21 LESS THAN 40 PERCENT.—

22 ‘‘(A) IN GENERAL.—If, with respect to the 

23 lighting system of any building other than a 

24 warehouse, the reduction in lighting power den25 sity of the lighting system is not at least 40 
50

•S 727 IS 

1 percent, only the applicable percentage of the 

2 amount of deduction otherwise allowable under 

3 this section with respect to such property shall 

4 be allowed. 

5 ‘‘(B) APPLICABLE PERCENTAGE.—For 

6 purposes of subparagraph (A), the applicable 

7 percentage is the number of percentage points 

8 (not greater than 100) equal to the sum of—

9 ‘‘(i) 50, and 

10 ‘‘(ii) the amount which bears the same 

11 ratio to 50 as the excess of the reduction 

12 of lighting power density of the lighting 

13 system over 25 percentage points bears to 

14 15. 

15 ‘‘(C) EXCEPTIONS.—This subsection shall 

16 not apply to any system—

17 ‘‘(i) the controls and circuiting of 

18 which do not comply fully with the manda19 tory and prescriptive requirements of 

20 Standard 90.1–2001 and which do not in21 clude provision for bilevel switching in all 

22 occupancies except hotel and motel guest 

23 rooms, store rooms, restrooms, and public 

24 lobbies, or 
51

•S 727 IS 

1 ‘‘(ii) which does not meet the min2 imum requirements for calculated lighting 

3 levels as set forth in the Illuminating Engi4 neering Society of North America Lighting 

5 Handbook, Performance and Application, 

6 Ninth Edition, 2000. 

7 ‘‘(g) REGULATIONS.—The Secretary shall promul8 gate such regulations as necessary—

9 ‘‘(1) to take into account new technologies re10 garding energy efficiency and renewable energy for 

11 purposes of determining energy efficiency and sav12 ings under this section, and 

13 ‘‘(2) to provide for a recapture of the deduction 

14 allowed under this section if the plan described in 

15 subsection (c)(1)(C) or (d)(1)(A) is not fully imple16 mented. 

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

18 with respect to property placed in service after December 

19 31, 2007.’’. 

20 (2) CONFORMING AMENDMENTS.—

21 (A) Section 1016(a) of the Internal Rev22 enue Code of 1986 (as amended by this Act) is 

23 amended—

24 (i) in paragraph (33), by striking 

25 ‘‘and’’ at the end; 
52

•S 727 IS 

1 (ii) in paragraph (34), by striking the 

2 period at the end and inserting ‘‘, and’’; 

3 and 

4 (iii) by adding at the end the fol5 lowing: 

6 ‘‘(35) to the extent provided in section 

7 179B(e).’’. 

8 (B) Paragraphs (2)(C) and (3)(C) of sec9 tion 1245(a) of such Code are amended by in10 serting ‘‘179C,’’ after ‘‘179B,’’ each place it ap11 pears. 

12 (C) Section 1250(b)(3) of such Code is 

13 amended by inserting before the period at the 

14 end of the first sentence ‘‘or by section 179C’’. 

15 (D) Section 263(a)(1) of such Code is 

16 amended—

17 (i) in subparagraph (H), by striking 

18 ‘‘or’’ at the end; 

19 (ii) in subparagraph (I), by striking 

20 the period at the end and inserting ‘‘, or’’; 

21 and 

22 (iii) by inserting after subparagraph 

23 (I) the following: 

24 ‘‘(J) expenditures for which a deduction is 

25 allowed under section 179C.’’. 
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•S 727 IS 

1 (E) Section 312(k)(3)(B) of such Code (in2 cluding the heading of that section) is amended 

3 by striking ‘‘179A, or 179B’’ each place it ap4 pears and inserting ‘‘, 179A, 179B, or 179C’’. 

5 (3) CLERICAL AMENDMENT.—The table of sec6 tions for part VI of subchapter B of chapter 1 of the 

7 Internal Revenue Code of 1986 is amended by in8 serting after section 179B the following:

‘‘Sec. 179C. Energy efficient commercial buildings deduction.’’.

9 (4) EFFECTIVE DATE.—The amendments made 

10 by this section shall apply to property placed in serv11 ice after the date of the enactment of this Act in 

12 taxable years ending after such date. 

13 (h) THREE-YEAR APPLICABLE RECOVERY PERIOD

14 FOR DEPRECIATION OF QUALIFIED ENERGY MANAGE15 MENT DEVICES.—

16 (1) IN GENERAL.—Section 168 of the Internal 

17 Revenue Code of 1986 (relating to accelerated cost 

18 recovery system) is amended—

19 (A) in subsection (e)(3)(A)—

20 (i) in clause (ii), by striking ‘‘and’’ at 

21 the end; 

22 (ii) in clause (iii), by striking the pe23 riod at the end and inserting ‘‘, and’’; and 

24 (iii) by adding at the end the fol25 lowing: 
54

•S 727 IS 

1 ‘‘(iv) any qualified energy manage2 ment device.’’; 

3 (B) in subsection (i), by inserting at the 

4 end the following: 

5 ‘‘(17) QUALIFIED ENERGY MANAGEMENT DE6 VICE.—

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

8 energy management device’ means any energy 

9 management device which is placed in service 

10 before January 1, 2008, by a taxpayer who is 

11 a supplier of electric energy or a provider of 

12 electric energy services. 

13 ‘‘(B) ENERGY MANAGEMENT DEVICE.—

14 For purposes of subparagraph (A), the term 

15 ‘energy management device’ means any meter 

16 or metering device which is used by the tax17 payer—

18 ‘‘(i) to measure and record electricity 

19 usage data on a time-differentiated basis 

20 in at least 4 separate time segments per 

21 day, and 

22 ‘‘(ii) to provide such data on at least 

23 a monthly basis to both consumers and the 

24 taxpayer.’’; and 
55

•S 727 IS 

1 (C) in the table under subsection 

2 (g)(3)(B), by inserting after the item relating to 

3 subparagraph (A)(iii) the following:

‘‘(A)(iv) ...................................................................................................... 20’’.

4 (2) EFFECTIVE DATE.—The amendments made 

5 by this section shall apply to property placed in serv6 ice after the date of the enactment of this Act, in 

7 taxable years ending after such date. 

8 SEC. 5. CREDIT FOR INVESTMENT IN QUALIFYING GASIFI9 CATION COMBINED CYCLE TECHNOLOGIES. 

10 (a) ALLOWANCE OF QUALIFYING GASIFICATION

11 COMBINED CYCLE TECHNOLOGY FACILITY CREDIT.—

12 Section 46 (relating to the amount of credit) is amended 

13 by striking ‘‘and’’ at the end of paragraph (1), by striking 

14 the period at the end of paragraph (2) and inserting ‘‘, 

15 and’’, and by adding at the end the following new para16 graph: 

17 ‘‘(3) the qualifying gasification combined cycle 

18 technology facility credit.’’. 

19 (b) AMOUNT OF QUALIFYING GASIFICATION COM20 BINED CYCLE TECHNOLOGY FACILITY CREDIT.—Subpart 

21 E of part IV of subchapter A of chapter 1 (relating to 

22 rules for computing investment credit) is amended by in23 serting after section 48 the following new section: 
56

•S 727 IS 

1 ‘‘SEC. 48A. QUALIFYING GASIFICATION COMBINED CYCLE 

2 TECHNOLOGY FACILITY CREDIT. 

3 ‘‘(a) IN GENERAL.—For purposes of section 46, the 

4 qualifying gasification combined cycle technology facility 

5 credit for any taxable year is an amount equal to 15 per6 cent of the qualified investment in a qualifying gasification 

7 combined cycle technology facility for such taxable year, 

8 except that the credit shall be 20 percent if the facility 

9 is a poly-generation facility. 

10 ‘‘(b) QUALIFYING GASIFICATION COMBINED CYCLE

11 TECHNOLOGY FACILITY.—For purposes of subsection (a), 

12 the term ‘qualifying gasification combined cycle technology 

13 facility’ means an integrated gasification combined cycle 

14 technology facility of the taxpayer—

15 ‘‘(1) in the case of a facility first placed in serv16 ice after September 30, 2005 and before September 

17 30, 2013, the original use of which commences with 

18 the taxpayer, or 

19 ‘‘(2) in the case of the retrofitting or 

20 repowering of a facility first placed in service before 

21 October 1, 2005, the retrofitting or repowering of 

22 which is completed by the taxpayer after September 

23 30, 2005 and before September 30, 2013. 

24 ‘‘(c) QUALIFIED INVESTMENT.—For purposes of sub25 section (a), the term ‘qualified investment’ means, with 

26 respect to any taxable year, the basis of a qualifying gasifi-
57

•S 727 IS 

1 cation combined cycle technology facility, including all 

2 equipment and other tangible personal property incor3 porated into and used in a gasification combined cycle 

4 technology facility or poly-generating facility, as appro5 priate, all transmission equipment employed specifically to 

6 serve and located at the site of a gasification combined 

7 cycle technology facility or poly-generating facility, as ap8 propriate, and all components added to capture, separate 

9 on a long term basis, isolate, or remove greenhouse gases 

10 that result from the generation of electricity from a gasifi11 cation combined cycle technology facility or poly-gener12 ating facility, placed in service by the taxpayer during 

13 such taxable year (in the case of a facility described in 

14 subsection (b)(2), only that portion of the basis of such 

15 facility which is properly attributable to the retrofitting 

16 or repowering of such facility.) 

17 ‘‘(d) QUALIFIED PROGRESS EXPENDITURES.—

18 ‘‘(1) INCREASE IN QUALIFIED INVESTMENT.—

19 In the case of a taxpayer who has made an election 

20 under paragraph (5), the amount of the qualified in21 vestment of such taxpayer for the taxable year (de22 termined under subsection (g) without regard to this 

23 subsection) shall be increased by an amount equal to 

24 the aggregate of each qualified progress expenditure 
58

•S 727 IS 

1 for the taxable year with respect to progress expend2 iture property. 

3 ‘‘(2) PROGRESS EXPENDITURE PROPERTY DE4 FINED.—For purposes of this subsection, the term 

5 ‘progress expenditure property’ means any property 

6 being constructed by or for the taxpayer and which 

7 it is reasonable to believe will qualify as a qualifying 

8 gasification combined cycle technology facility which 

9 is being constructed by or for the taxpayer when it 

10 is placed in service. 

11 ‘‘(3) QUALIFIED PROGRESS EXPENDITURES DE12 FINED.—For purposes of this subsection—

13 ‘‘(A) SELF-CONSTRUCTED PROPERTY.—In 

14 the case of any self-constructed property, the 

15 term ‘qualified progress expenditures’ means 

16 the amount which, for purposes of this subpart, 

17 is properly chargeable (during such taxable 

18 year) to capital account with respect to such 

19 property. 

20 ‘‘(B) NONSELF-CONSTRUCTED PROP21 ERTY.—In the case of nonself-constructed prop22 erty, the term ‘qualified progress expenditures’ 

23 means the amount paid during the taxable year 

24 to another person for the construction of such 

25 property. 
59

•S 727 IS 

1 ‘‘(4) OTHER DEFINITIONS.—For purposes of 

2 this subsection—

3 ‘‘(A) SELF-CONSTRUCTED PROPERTY.—

4 The term ‘self-constructed property’ means 

5 property for which it is reasonable to believe 

6 that more than half of the construction expendi7 tures will be made directly by the taxpayer. 

8 ‘‘(B) NONSELF-CONSTRUCTED PROP9 ERTY.—The term ‘nonself-constructed property’ 

10 means property which is not self-constructed 

11 property. 

12 ‘‘(C) CONSTRUCTION, ETC.—The term 

13 ‘construction’ includes reconstruction and erec14 tion, and the term ‘constructed’ includes recon15 structed and erected. 

16 ‘‘(D) ONLY CONSTRUCTION OF GASIFI17 CATION COMBINED CYCLE TECHNOLOGY FACIL18 ITY TO BE TAKEN INTO ACCOUNT.—Construc19 tion shall be taken into account only if, for pur20 poses of this subpart, expenditures therefore 

21 are properly chargeable to capital account with 

22 respect to the property. 

23 ‘‘(5) ELECTION.—An election under this sub24 section may be made at such time and in such man25 ner as the Secretary may by regulations prescribe. 
60

•S 727 IS 

1 Such an election shall apply to the taxable year for 

2 which made and to all subsequent taxable years. 

3 Such an election, once made, may not be revoked ex4 cept with the consent of the Secretary. 

5 ‘‘(e) COORDINATION WITH OTHER CREDITS.—This 

6 section shall not apply to any property with respect to 

7 which the rehabilitation credit under section 47 or the en8 ergy credit under section 48 is allowed unless the taxpayer 

9 elects to waive the application of such credit to such prop10 erty. 

11 ‘‘(f) CARRYFORWARD OF UNUSED CREDIT.—A tax12 payer may elect to use all or a portion of the credit cal13 culated under subsection (a) in one or more succeeding 

14 taxable years. 

15 ‘‘(g) DEFINITIONS.—

16 ‘‘(1) For purposes of this section, the term 

17 ‘gasification combined cycle technology facility’ 

18 means any combination of equipment, including all 

19 related power generation equipment, (A) used at a 

20 single location to convert coal or residuals into syn21 thesis gas that is then used as a fuel to generate 

22 electricity; (B) that is carbon capture ready; (C) to 

23 which depreciation (or amortization in lieu of depre24 ciation) is allowable; and (D) that can meet a nitro-
61

•S 727 IS 

1 gen oxides emissions rate of 0.06 lb/mmBtu and a 

2 sulfur dioxide emissions rate of 0.08 lb/mmBtu. 

3 ‘‘(2) For purposes of this section, the term 

4 ‘poly-generating facility’ means a gasification com5 bined cycle technology facility that also produces 

6 commercially useful fuel and/or chemical products 

7 and where no more than 50 percent or less than 20 

8 percent of the energy content (BTUs/hr) of the gas9 ification process is used to produce such other fuels 

10 or chemicals. 

11 ‘‘(3) For purposes of this section, the term ‘car12 bon capture ready’ means a gasification combined 

13 cycle technology facility that can have components 

14 added that can capture, separate on a long term 

15 basis, isolate, or remove greenhouse gases that result 

16 from the generation of electricity.’’. 

17 (c) RECAPTURE AND BASIS ADJUSTMENT.—

18 (1) Section 50(a) of the Internal Revenue Code 

19 of 1986 (relating to other special rules) is amended 

20 by adding at the end the following new paragraph: 

21 ‘‘(6) SPECIAL RULES RELATING TO QUALIFYING

22 GASIFICATION COMBINED CYCLE TECHNOLOGY FA23 CILITY.—For purposes of applying this subsection in 

24 the case of any credit allowable by reason of section 

25 48A, the following shall apply: 
62

•S 727 IS 

1 ‘‘(A) GENERAL RULE.—In lieu of the 

2 amount of the increase in tax under paragraph 

3 (1), the increase in tax shall be an amount 

4 equal to the investment tax credit allowed under 

5 section 38 for all prior taxable years with re6 spect to a qualifying gasification combined cycle 

7 technology facility (as defined by section 

8 48A(g)(1)) multiplied by a fraction whose nu9 merator is the number of years remaining to 

10 fully depreciate under this title the qualifying 

11 gasification combined cycle technology facility 

12 disposed of, and whose denominator is the total 

13 number of years over which such facility would 

14 otherwise have been subject to depreciation. For 

15 purposes of the preceding sentence, the year of 

16 disposition of the qualifying gasification com17 bined cycle technology facility shall be treated 

18 as a year of remaining depreciation. 

19 ‘‘(B) PROPERTY CEASES TO QUALIFY FOR

20 PROGRESS EXPENDITURES.—Rules similar to 

21 the rules of paragraph (2) shall apply in the 

22 case of qualified progress expenditures for a 

23 qualifying gasification combined cycle tech24 nology facility under section 48A, except that 

25 the amount of the increase in tax under sub-
63

•S 727 IS 

1 paragraph (A) of this paragraph shall be sub2 stituted for the amount described in such para3 graph (2). 

4 ‘‘(C) APPLICATION OF PARAGRAPH.—This 

5 paragraph shall be applied separately with re6 spect to the credit allowed under section 38 re7 garding a qualifying gasification combined cycle 

8 technology facility.’’. 

9 (2) BASIS ADJUSTMENT.—Section 50(c)(3) of 

10 the Internal Revenue Code of 1986 is amended by 

11 adding ‘‘or any gasification combined cycle tech12 nology credit’’ after ‘‘any energy credit’’. 

13 SEC. 6. TREATMENT OF PERSONS NOT ABLE TO USE EN14 TIRE CREDIT. 

15 (a) IN GENERAL.—Section 48A of the Internal Rev16 enue Code of 1986, as added by this Act, is amended by 

17 adding at the end the following new subsection: 

18 ‘‘(h) TREATMENT OF PERSONS NOT ABLE TO USE

19 ENTIRE CREDIT.—

20 ‘‘(1) ALLOWANCE OF CREDITS.—

21 ‘‘(A) IN GENERAL.—Any credit allowable 

22 under this section with respect to a facility 

23 owned by a person described in subparagraph 

24 (B) may be transferred or used as provided in 

25 this subsection, and the determination as to 
64

•S 727 IS 

1 whether the credit is allowable shall be made 

2 without regard to the tax-exempt status of the 

3 person. 

4 ‘‘(B) PERSONS DESCRIBED.—A person is 

5 described in this subparagraph if the person 

6 is—

7 ‘‘(i) an organization described in sec8 tion 501(c)(12)(C) and exempt from tax 

9 under section 501(a), 

10 ‘‘(ii) an organization described in sec11 tion 1381(a)(2)(C), 

12 ‘‘(iii) a public utility (as defined in 

13 section 136(c)(2)(B)), 

14 ‘‘(iv) any State or political subdivision 

15 thereof, the District of Columbia, or any 

16 agency or instrumentality of any of the 

17 foregoing, 

18 ‘‘(v) any Indian tribal government 

19 (within the meaning of section 7871) or 

20 any agency or instrumentality thereof, or 

21 ‘‘(vi) the Tennessee Valley Authority. 

22 ‘‘(2) TRANSFER OF CREDIT.—

23 ‘‘(A) IN GENERAL.—A person described in 

24 clause (i), (ii), (iii), (iv), or (v) of paragraph 

25 (1)(B) may transfer any credit to which para-
65

•S 727 IS 

1 graph (1)(A) applies through an assignment to 

2 any other person not described in paragraph 

3 (1)(B). Such transfer may be revoked only with 

4 the consent of the Secretary. 

5 ‘‘(B) REGULATIONS.—The Secretary shall 

6 prescribe such regulations as necessary to in7 sure that any credit described in subparagraph 

8 (A) is claimed once and not reassigned by such 

9 other person. 

10 ‘‘(C) TRANSFER PROCEEDS TREATED AS

11 ARISING FROM ESSENTIAL GOVERNMENT FUNC12 TION.—Any proceeds derived by a person de13 scribed in clause (iii), (iv), or (v) of paragraph 

14 (1)(B) from the transfer of any credit under 

15 subparagraph (A) shall be treated as arising 

16 from the exercise of an essential government 

17 function. 

18 ‘‘(3) USE OF CREDIT AS AN OFFSET.—Notwith19 standing any other provision of law, in the case of 

20 a person described in clause (i), (ii), or (v) of para21 graph (1)(B), any credit to which paragraph (1)(A) 

22 applies may be applied by such person, to the extent 

23 provided by the Secretary of Agriculture, as a pre24 payment of any loan, debt, or other obligation the 

25 entity has incurred under subchapter I of chapter 31 
66

•S 727 IS 

1 of title 7 of the Rural Electrification Act of 1936 (7 

2 U.S.C. 901 et seq.), as in effect on the date of the 

3 enactment of this section. 

4 ‘‘(4) USE BY TVA.—

5 ‘‘(A) IN GENERAL.—Notwithstanding any 

6 other provision of law, in the case of a person 

7 described in paragraph (1)(B)(vi), any credit to 

8 which paragraph (1)(A) applies may be applied 

9 as a credit against the payments required to be 

10 made in any fiscal year under section 15d(e) of 

11 the Tennessee Valley Authority Act of 1933 (16 

12 U.S.C. 831n–4(e)) as an annual return on the 

13 appropriations investment and an annual repay14 ment sum. 

15 ‘‘(B) TREATMENT OF CREDITS.—The ag16 gregate amount of credits described in para17 graph (1)(A) with respect to such person shall 

18 be treated in the same manner and to the same 

19 extent as if such credits were a payment in cash 

20 and shall be applied first against the annual re21 turn on the appropriations investment. 

22 ‘‘(C) CREDIT CARRYOVER.—With respect 

23 to any fiscal year, if the aggregate amount of 

24 credits described in paragraph (1)(A) with re25 spect to such person exceeds the aggregate 
67

•S 727 IS 

1 amount of payment obligations described in 

2 subparagraph (A), the excess amount shall re3 main available for application as credits against 

4 the amounts of such payment obligations in 

5 succeeding fiscal years in the same manner as 

6 described in this paragraph. 

7 ‘‘(5) CREDIT NOT INCOME.—Any transfer 

8 under paragraph (2) or use under paragraph (3) of 

9 any credit to which paragraph (1)(A) applies shall 

10 not be treated as income for purposes of section 

11 501(c)(12). 

12 ‘‘(6) TREATMENT OF UNRELATED PERSONS.—

13 For purposes of this subsection, sales among and be14 tween persons described in clauses (i), (ii), (iii), and 

15 (v) of paragraph (1)(A) shall be treated as sales be16 tween unrelated parties.’’. 

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

18 this section shall apply to production after the date of the 

19 enactment of this Act, in taxable years ending after such 

20 date. 

21 SEC. 7. ELIGIBILITY FOR TAX CREDITS. 

22 (a) IN GENERAL.—The Secretary of the Treasury, in 

23 consultation with the Secretary of Energy, may certify 

24 that an eligible entity, as defined in section 113 of the 

25 Natural Gas Price Reduction Act of 2005, qualifies for—
68

•S 727 IS 

1 (1) an investment tax credit; or 

2 (2) a production tax credit. 

3 (b) REQUIREMENT.—A taxpayer shall not be entitled 

4 to a tax credit described in subsection (a) without certifi5 cation by the Secretary of the Treasury.

Æ