I 

108TH CONGRESS 

2D SESSION H. R. 5302 

To promote the purchase of renewable energy systems, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 8, 2004 

Mr. BASS (for himself, Mr. UPTON, and Mr. BRADLEY of New Hampshire) 

introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and 

Means, for a period to be subsequently determined by the Speaker, in 

each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To promote the purchase of renewable energy systems, and 

for other purposes. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Renewable Energy Se5 curity Act of 2004’’. 

6 SEC. 2. WEATHERIZATION ASSISTANCE. 

7 Section 415(c) of the Energy Conservation and Pro8 duction Act (42 U.S.C. 6865(c)) is amended— 
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1 (1) in paragraph (1), by striking ‘‘in paragraph 

2 (3)’’ and inserting ‘‘in paragraphs (3) and (4)’’; 

3 (2) in paragraph (3), by striking ‘‘$2,500 per 

4 dwelling unit average provided in paragraph (1)’’ 

5 and inserting ‘‘dwelling unit averages provided in 

6 paragraphs (1) and (4)’’; and 

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

8 paragraphs: 

9 ‘‘(4) The expenditure of financial assistance provided 

10 under this part for labor, weatherization materials, and 

11 related matters for a renewable energy system shall not 

12 exceed an average of $3,000 per dwelling unit. 

13 ‘‘(5)(A) The Secretary, in consultation with the Sec14 retary of Housing and Urban Development and other ap15 propriate Federal officers, shall by regulations— 

16 ‘‘(i) establish the criteria which are to be used 

17 in prescribing performance and quality standards 

18 under paragraph (6)(A)(ii) or in specifying any form 

19 of renewable energy under paragraph (6)(A)(i)(I); 

20 and 

21 ‘‘(ii) establish a procedure under which a manu22 facturer of an item may request the Secretary to 

23 certify that the item will be treated, for purposes of 

24 this paragraph, as a renewable energy system. 
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1 ‘‘(B) The Secretary shall make a final determination 

2 with respect to any request filed under subparagraph 

3 (A)(ii) within 1 year after the filing of the request, to4 gether with any information required to be filed with such 

5 request under subparagraph (A)(ii). 

6 ‘‘(C) Each month the Secretary shall publish a report 

7 of any request under subparagraph (A)(ii) which has been 

8 denied during the preceding month and the reasons for 

9 the denial. 

10 ‘‘(D) The Secretary shall not specify any form of re11 newable energy under paragraph (6)(A)(i)(I) unless the 

12 Secretary determines that— 

13 ‘‘(i) there will be a reduction in oil or natural 

14 gas consumption as a result of such specification; 

15 ‘‘(ii) such specification will not result in an in16 creased use of any item which is known to be, or 

17 reasonably suspected to be, environmentally haz18 ardous or a threat to public health or safety; and 

19 ‘‘(iii) available Federal subsidies do not make 

20 such specification unnecessary or inappropriate (in 

21 the light of the most advantageous allocation of eco22 nomic resources). 

23 ‘‘(6) In this subsection— 

24 ‘‘(A) the term ‘renewable energy system’ means 

25 a system which— 
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1 ‘‘(i) when installed in connection with a 

2 dwelling, transmits or uses— 

3 ‘‘(I) solar energy, energy derived from 

4 the geothermal deposits, energy derived 

5 from biomass, or any other form of renew6 able energy which the Secretary specifies 

7 by regulations, for the purpose of heating 

8 or cooling such dwelling or providing hot 

9 water or electricity for use within such 

10 dwelling; or 

11 ‘‘(II) wind energy for nonbusiness res12 idential purposes; 

13 ‘‘(ii) meets the performance and quality 

14 standards (if any) which have been prescribed 

15 by the Secretary by regulations; 

16 ‘‘(iii) in the case of a combustion rated 

17 system, has a thermal efficiency rating of at 

18 least 75 percent; and 

19 ‘‘(iv) in the case of a solar system, has a 

20 thermal efficiency rating of at least 15 percent; 

21 and 

22 ‘‘(B) the term ‘biomass’ means any organic 

23 matter that is available on a renewable or recurring 

24 basis, including agricultural crops and trees, wood 

25 and wood wastes and residues, plants (including 
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1 aquatic plants), grasses, residues, fibers, and animal 

2 wastes, municipal wastes, and other waste mate3 rials.’’. 

4 SEC. 3. DISTRICT HEATING AND COOLING PROGRAMS. 

5 Section 172 of the Energy Policy Act of 1992 (42 

6 U.S.C. 13451 note) is amended— 

7 (1) in subsection (a)— 

8 (A) by striking ‘‘and’’ at the end of para9 graph (3); 

10 (B) by striking the period at the end of 

11 paragraph (4) and inserting ‘‘; and’’; and 

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

13 paragraph: 

14 ‘‘(5) evaluate the use of renewable energy sys15 tems (as such term is defined in section 415(c) of 

16 the Energy Conservation and Production Act (42 

17 U.S.C. 6865(c))) in residential buildings.’’; and 

18 (2) in subsection (b), by striking ‘‘this Act’’ and 

19 inserting ‘‘the Renewable Energy Security Act of 

20 2004’’. 

21 SEC. 4. DEFINITION OF BIOMASS. 

22 Section 203(2) of the Biomass Energy and Alcohol 

23 Fuels Act of 1980 (42 U.S.C. 8802(2)) is amended to read 

24 as follows: 
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1 ‘‘(2) The term ‘biomass’ means any organic 

2 matter that is available on a renewable or recurring 

3 basis, including agricultural crops and trees, wood 

4 and wood wastes and residues, plants (including 

5 aquatic plants), grasses, residues, fibers, and animal 

6 wastes, municipal wastes, and other waste mate7 rials.’’. 

8 SEC. 5. CREDIT FOR RESIDENTIAL RENEWABLE ENERGY 

9 SYSTEMS. 

10 (a) IN GENERAL.—Subpart A of part IV of sub11 chapter A of chapter 1 of the Internal Revenue Code of 

12 1986 (relating to nonrefundable personal credits) is 

13 amended by inserting after the item relating to section 

14 25B the following new section: 

15 ‘‘SEC. 25C. RESIDENTIAL RENEWABLE ENERGY SYSTEM. 

16 ‘‘(a) GENERAL RULE.—In the case of an individual, 

17 there shall be allowed as a credit against the tax imposed 

18 by this subtitle for the taxable year an amount equal to 

19 20 percent of the qualified renewable energy system ex20 penditures made by the taxpayer during the taxable year. 

21 ‘‘(b) LIMITATIONS.—For purposes of subsection 

22 (a)— 

23 ‘‘(1) MAXIMUM CREDIT.—The amount of the 

24 credit allowed under subsection (a) for a taxable 

25 year shall not exceed $3,000. 
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1 ‘‘(2) PRIOR EXPENDITURES BY TAXPAYER ON

2 SAME RESIDENCE TAKEN INTO ACCOUNT.—If for 

3 any prior year a credit was allowed to the taxpayer 

4 under this section with respect to any dwelling unit 

5 by reason of qualified renewable energy system ex6 penditures, paragraph (1) shall be applied for the 

7 taxable year with respect to such dwelling unit by 

8 reducing the dollar amount contained therein by the 

9 prior year expenditures taken into account under 

10 such paragraph. 

11 ‘‘(3) MINIMUM DOLLAR AMOUNT.—No credit 

12 shall be allowed under this section with respect to 

13 any return for any taxable year if the amount which 

14 would (but for this paragraph) be allowed with re15 spect to such return is less than $10. 

16 ‘‘(4) LIMITATION BASED ON AMOUNT OF

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

18 any taxable year shall not exceed the excess of— 

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

20 (as defined in section 26(b)) plus the tax im21 posed by section 55, over 

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

23 under this subpart (other than this section and 

24 section 23) and section 27 for the taxable year. 
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1 ‘‘(5) CARRYOVER OF UNUSED CREDIT.—If the 

2 credit allowable under subsection (a) for any taxable 

3 year exceeds the limitation imposed by paragraph 

4 (4) for such taxable year, such excess shall be car5 ried to the succeeding taxable year and added to the 

6 credit allowable under subsection (a) for such tax7 able year. No credit may be carried forward under 

8 this subsection to any taxable year following the 

9 fifth taxable year after the taxable year in which the 

10 credit arose. For purposes of the preceding sentence, 

11 credits shall be treated as used on a first-in first-out 

12 basis. 

13 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur14 poses of this section— 

15 ‘‘(1) QUALIFIED RENEWABLE ENERGY SYSTEM

16 EXPENDITURE.— 

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

18 renewable energy system expenditure’ means an 

19 expenditure made by the taxpayer for renewable 

20 energy system property installed in connection 

21 with a dwelling unit— 

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

23 States, and 

24 ‘‘(ii) which is used by the taxpayer as 

25 his principal residence. 
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1 ‘‘(B) CERTAIN LABOR AND OTHER COSTS

2 INCLUDED.—The term ‘qualified renewable en3 ergy system expenditure’ includes— 

4 ‘‘(i) expenditures for labor costs prop5 erly allocable to the onsite preparation, as6 sembly, or original installation of renew7 able energy system property, and 

8 ‘‘(ii) expenditures for an onsite well 

9 drilled for any geothermal deposit (as de10 fined in section 613(e)(3)), but only if the 

11 taxpayer has not elected under section 

12 263(c) to deduct any portion of such ex13 penditures. 

14 ‘‘(C) SWIMMING POOL, ETC., USED AS

15 STORAGE MEDIUM.—The term ‘qualified renew16 able energy system expenditure’ does not in17 clude any expenditure properly allocable to a 

18 swimming pool used as an energy storage me19 dium or to any other energy storage medium 

20 which has a primary function other than the 

21 function of such storage. 

22 ‘‘(D) CERTAIN SOLAR PANELS.—No solar 

23 panel installed as a roof (or portion thereof) 

24 shall fail to be treated as renewable energy sys25 tem property solely because it constitutes a 
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1 structural component of the dwelling on which 

2 it is installed. 

3 ‘‘(2) RENEWABLE ENERGY SYSTEM PROP4 ERTY.—The term ‘renewable energy system prop5 erty’ means property— 

6 ‘‘(A) which constitutes a renewable energy 

7 system, as defined by section 415(c)(6) of the 

8 Energy Conservation and Production Act (42 

9 U.S.C. 6865(c)(6)), 

10 ‘‘(B) the original use of which begins with 

11 the taxpayer, and 

12 ‘‘(C) which can reasonably be expected to 

13 remain in operation for at least 5 years. 

14 ‘‘(3) EFFECTIVE DATE.— 

15 ‘‘(A) IN GENERAL.—In the case of any en16 ergy system specified under paragraph (2)(A), 

17 the credit allowed by subsection (a) shall apply 

18 with respect to expenditures which are made on 

19 or after the date on which final notice of such 

20 specification is published in the Federal Reg21 ister. 

22 ‘‘(B) EXPENDITURES TAKEN INTO AC23 COUNT IN FOLLOWING TAXABLE YEARS.—The 

24 Secretary may prescribe by regulations that ex25 penditures made on or after the date referred 
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1 to in clause (i) and before the close of the tax2 able year in which such date occurs shall be 

3 taken into account in the following taxable year. 

4 ‘‘(4) WHEN EXPENDITURES MADE; AMOUNT OF

5 EXPENDITURES.— 

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

7 subparagraph (B), an expenditure with respect 

8 to an item shall be treated as made when origi9 nal installation of the item is completed. 

10 ‘‘(B) CONSTRUCTION OR RECONSTRUCTION

11 OF DWELLING.—In the case of qualified renew12 able energy system expenditures in connection 

13 with the construction or reconstruction of a 

14 dwelling, such expenditures shall be treated as 

15 made when the original use of the constructed 

16 or reconstructed dwelling by the taxpayer be17 gins. 

18 ‘‘(C) AMOUNT.—The amount of any ex19 penditure shall be the cost thereof. 

20 ‘‘(D) ALLOCATION IN CERTAIN CASES.—If 

21 less than 80 percent of the use of an item is for 

22 nonbusiness residential purposes, only that por23 tion of the expenditures for such item which is 

24 properly allocable to use for nonbusiness resi25 dential purposes shall be taken into account. 
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1 For purposes of this subparagraph, use for a 

2 swimming pool shall be treated as use which is 

3 not for residential purposes. 

4 ‘‘(5) PRINCIPAL RESIDENCE.—The determina5 tion of whether or not a dwelling unit is a taxpayer’s 

6 principal residence shall be made under principles 

7 similar to those applicable to section 121, except 

8 that— 

9 ‘‘(A) no ownership requirement shall be 

10 imposed, and 

11 ‘‘(B) the period for which a dwelling is 

12 treated as the principal residence of the tax13 payer shall include the 30-day period ending on 

14 the first day on which it would (but for this 

15 subparagraph) be treated as his principal resi16 dence. 

17 ‘‘(6) PROPERTY FINANCED BY SUBSIDIZED EN18 ERGY FINANCING.— 

19 ‘‘(A) REDUCTION OF QUALIFIED EXPENDI20 TURES.—For purposes of determining the 

21 amount of qualified renewable energy system 

22 expenditures made by any individual with re23 spect to any dwelling unit, there shall not be 

24 taken into account expenditures which are made 

25 from subsidized energy financing. 
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1 ‘‘(B) DOLLAR LIMITS REDUCED.—Para2 graph (1) of subsection (b) shall be applied with 

3 respect to such dwelling unit for any taxable 

4 year of such taxpayer by reducing each dollar 

5 amount contained in such paragraph (reduced 

6 as provided in subsection (b)(3)) by an amount 

7 equal to the sum of— 

8 ‘‘(i) the amount of the expenditures 

9 which were made by the taxpayer during 

10 such taxable year or any prior taxable year 

11 with respect to such dwelling unit and 

12 which were not taken into account by rea13 son of subparagraph (A), and 

14 ‘‘(ii) the amount of any Federal, 

15 State, or local grant received by the tax16 payer during such taxable year or any 

17 prior taxable year which was used to make 

18 qualified renewable energy system expendi19 tures with respect to the dwelling unit and 

20 which was not included in the gross income 

21 of such taxpayer. 

22 ‘‘(C) SUBSIDIZED ENERGY FINANCING.— 

23 For purposes of subparagraph (A), the term 

24 ‘subsidized energy financing’ means financing 

25 provided under a Federal, State, or local pro-
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1 gram a principal purpose of which is to provide 

2 subsidized financing for projects designed to 

3 conserve or produce energy. 

4 ‘‘(d) SPECIAL RULES.—For purposes of this sec5 tion— 

6 ‘‘(1) DOLLAR AMOUNTS IN CASE OF JOINT OC7 CUPANCY.—In the case of any dwelling unit which is 

8 jointly occupied and used during any calendar year 

9 as a principal residence by 2 or more individuals— 

10 ‘‘(A) the amount of the credit allowable 

11 under subsection (a) by reason of qualified re12 newable energy system expenditures (as the 

13 case may be) made during such calendar year 

14 by any of such individuals with respect to such 

15 dwelling unit shall be determined by treating all 

16 of such individuals as one taxpayer whose tax17 able year is such calendar year, and 

18 ‘‘(B) there shall be allowable with respect 

19 to such expenditures to each of such individ20 uals, a credit under subsection (a) for the tax21 able year in which such calendar year ends in 

22 an amount which bears the same ratio to the 

23 amount determined under subparagraph (A) as 

24 the amount of such expenditures made by such 

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

2 of such individuals during such calendar year. 

3 ‘‘(2) TENANT-STOCKHOLDER IN COOPERATIVE

4 HOUSING CORPORATION.—In the case of an indi5 vidual who is a tenant-stockholder (as defined in sec6 tion 216) in a cooperative housing corporation (as 

7 defined in such section), such individual shall be 

8 treated as having made his tenant-stockholder’s pro9 portionate share (as defined in section 216(b)(3)) of 

10 any expenditures of such corporation. 

11 ‘‘(3) CONDOMINIUMS.— 

12 ‘‘(A) IN GENERAL.—In the case of an indi13 vidual who is a member of a condominium man14 agement association with respect to a condo15 minium which he owns, such individual shall be 

16 treated as having made his proportionate share 

17 of any expenditures of such association. 

18 ‘‘(B) CONDOMINIUM MANAGEMENT ASSO19 CIATION.—For purposes of this paragraph, the 

20 term ‘condominium management association’ 

21 means an organization which meets the require22 ments of paragraph (1) of section 528(c) (other 

23 than subparagraph (E) thereof) with respect to 

24 a condominium project substantially all of the 

25 units of which are used as residences. 
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1 ‘‘(4) JOINT OWNERSHIP OF ENERGY ITEMS.— 

2 ‘‘(A) IN GENERAL.—Any expenditure oth3 erwise qualifying as a qualified renewable en4 ergy system expenditure shall not be treated as 

5 failing to so qualify merely because such ex6 penditure was made with respect to 2 or more 

7 dwelling units. 

8 ‘‘(B) LIMITS APPLIED SEPARATELY.—In 

9 the case of any expenditure described in sub10 paragraph (A), the amount of the credit allow11 able under subsection (a) shall (subject to para12 graph (1)) be computed separately with respect 

13 to the amount of the expenditure made by each 

14 individual. 

15 ‘‘(e) BASIS ADJUSTMENTS.—For purposes of this 

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

17 expenditure with respect to any property, the increase in 

18 the basis of such property which would (but for this sub19 section) result from such expenditure shall be reduced by 

20 the amount of the credit so allowed. 

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

22 expenditures made after December 31, 2009.’’. 

23 (b) CLERICAL AMENDMENT.—The table of sections 

24 for subpart A of part IV of subchapter A of chapter 1 
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1 of such Code is amended by inserting after the item relat2 ing to section 25B the following new item: 

‘‘Sec. 25C. Residential renewable energy system.’’. 

3 (c) BASIS ADJUSTMENT.—Section 1016(a) of such 

4 Code is amended by striking ‘‘and’’ at the end of para5 graph (27), by striking the period at the end of paragraph 

6 (28) and inserting ‘‘, and’’, and by adding at the end the 

7 following new paragraph: 

8 ‘‘(29) to the extent provided in section 

9 25C(e).’’. 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2004. 

13 SEC. 6. CREDIT FOR RENEWABLE ENERGY SYSTEMS 

14 PLACED IN SERVICE BY SMALL BUSINESSES. 

15 (a) IN GENERAL.—Subpart D of part IV of sub16 chapter A of chapter 1 of the Internal Revenue Code of 

17 1986 (relating to business related credits) is amended by 

18 adding at the end the following new section: 

19 ‘‘SEC. 45G. RENEWABLE ENERGY SYSTEMS CREDIT. 

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

21 the case of an eligible small business, the amount of the 

22 renewable energy systems credit determined under this 

23 section for any taxable year shall be an amount equal to 

24 20 percent of the qualified renewable energy system ex25 penditures for the taxable year. 
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1 ‘‘(b) LIMITATION.—The amount of the credit allowed 

2 under subsection (a) for a taxable year shall not exceed 

3 $10,000. 

4 ‘‘(c) ELIGIBLE SMALL BUSINESS.—For purposes of 

5 this section, the term ‘eligible small business’ has the 

6 meaning given such term by section 44(b). 

7 ‘‘(d) QUALIFIED RENEWABLE ENERGY SYSTEM EX8 PENDITURES.—The term ‘qualified renewable energy sys9 tem expenditures’ has the meaning given such term by sec10 tion 25C(c)(1), except that ‘commercial property’ shall be 

11 substituted for ‘dwelling unit’ each place it appears and 

12 subparagraph (A)(ii) thereof shall not apply. 

13 ‘‘(e) APPLICABLE RULES.—For purposes of this sec14 tion, rules similar to the rules of paragraphs (2), (6), and 

15 (7) of section 44(d) shall apply.’’. 

16 (b) CREDIT MADE PART OF GENERAL BUSINESS

17 CREDIT.—Section 38(b) of such Code (relating to current 

18 year business credit) is amended by striking ‘‘plus’’ at the 

19 end of paragraph (14), by striking the period at the end 

20 of paragraph (15) and inserting ‘‘, plus’’, and by adding 

21 at the end the following new paragraph: 

22 ‘‘(16) the renewable energy systems credit de23 termined under section 45G(a).’’. 
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1 (c) LIMITATION ON CARRYBACK.—Section 39(d) of 

2 such Code (relating to transitional rules) is amended by 

3 adding at the end the following new paragraph: 

4 ‘‘(11) NO CARRYBACK OF RENEWABLE ENERGY

5 SYSTEMS CREDIT BEFORE EFFECTIVE DATE.—No 

6 portion of the unused business credit for any taxable 

7 year which is attributable to the credit determined 

8 under section 45G may be carried back to any tax9 able year ending on or before the date of the enact10 ment of section 45G.’’. 

11 (d) CLERICAL AMENDMENT.—The table of sections 

12 for subpart D of part IV of subchapter A of chapter 1 

13 of such Code is amended by adding at the end the fol14 lowing new item: 

‘‘Sec. 45G. Renewable energy systems credit.’’. 

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

16 this section shall apply to taxable years ending after the 

17 date of the enactment of this Act. 

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