I 

108TH CONGRESS 

1ST SESSION H. R. 694

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

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

equipment. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 11, 2003

Mr. MCDERMOTT (for himself, Ms. NORTON, Mr. BROWN of Ohio, Mr. 

GEORGE MILLER of California, Ms. CARSON of Indiana, Mr. FROST, Mr. 

OWENS, Ms. JACKSON-LEE of Texas, Mr. SANDERS, Mr. INSLEE, Mr. 

MATSUI, and Mr. LANTOS) introduced the following bill; which was referred to the Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to provide 

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

installing residential solar energy equipment.

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Residential Solar En5 ergy Act of 2003’’. 
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1 SEC. 2. CREDIT TO HOLDERS OF RESIDENTIAL SOLAR EN2 ERGY BONDS. 

3 (a) IN GENERAL.—Subpart B of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of 

5 1986 is amended by adding at the end the following new 

6 section: 

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

8 ENERGY BONDS. 

9 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax10 payer who holds a Residential Solar Energy Bond on a 

11 credit allowance date of such bond which occurs during 

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

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

14 amount equal to the sum of the credits determined under 

15 subsection (b) with respect to credit allowance dates dur16 ing such year on which the taxpayer holds such bond. 

17 ‘‘(b) AMOUNT OF CREDIT.—

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

19 determined under this subsection with respect to any 

20 credit allowance date for a Residential Solar Energy 

21 Bond is 25 percent of the annual credit determined 

22 with respect to such bond. 

23 ‘‘(2) ANNUAL CREDIT.—The annual credit de24 termined with respect to any Residential Solar En25 ergy Bond is the product of—
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1 ‘‘(A) the applicable credit rate, multiplied 

2 by 

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

4 bond. 

5 ‘‘(3) APPLICABLE CREDIT RATE.—For purposes 

6 of paragraph (1), the applicable credit rate with re7 spect to an issue is the rate equal to an average 

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

9 issuance of the issue) on outstanding long-term cor10 porate debt obligations (determined under regula11 tions prescribed by the Secretary). 

12 ‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE13 DEMPTION.—In the case of a bond which is issued 

14 during the 3-month period ending on a credit allow15 ance date, the amount of the credit determined 

16 under this subsection with respect to such credit al17 lowance date shall be a ratable portion of the credit 

18 otherwise determined based on the portion of the 3-

19 month period during which the bond is outstanding. 

20 A similar rule shall apply when the bond is re21 deemed. 

22 ‘‘(c) RESIDENTIAL SOLAR ENERGY BOND.—For pur23 poses of this section—
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1 ‘‘(1) IN GENERAL.—The term ‘Residential 

2 Solar Energy Bond’ means any bond issued as part 

3 of an issue if—

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

5 such issue are to be used to make qualified 

6 solar energy loans, 

7 ‘‘(B) the bond is issued by a qualified util8 ity, 

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

10 purposes of this section, and 

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

12 of such issue does not exceed 15 years. 

13 ‘‘(2) QUALIFIED SOLAR ENERGY LOAN.—

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

15 solar energy loan’ means any loan without in16 terest to the owner of any qualified residential 

17 property for the purchase and installation of 

18 photovoltaic cells on such property but only if—

19 ‘‘(i) the excess of the electricity pro20 duced by such cells over the electricity con21 sumed at the residential property is trans22 mitted from such property for use by oth23 ers,
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1 ‘‘(ii) the net electricity produced or 

2 consumed at the residential property is me3 tered, 

4 ‘‘(iii) the owner receives a credit 

5 against future electricity consumption for 

6 the excess described in clause (i), 

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

8 is payable in equal installments over 15 

9 years (or, if shorter, the period specified by 

10 the utility), and 

11 ‘‘(v) the loan is made under a pro12 gram of the utility that—

13 ‘‘(I) specifies an approved list of 

14 photovoltaic cell equipment and in15 stallers, and 

16 ‘‘(II) contains other safeguards 

17 to ensure that the loan is used for its 

18 intended purpose. 

19 ‘‘(B) QUALIFIED UTILITY.—The term 

20 ‘qualified utility’ means any entity (including a 

21 governmental unit) engaged in the sale of elec22 trical energy at retail in the United States 

23 ‘‘(C) QUALIFIED RESIDENTIAL PROP24 ERTY.—The term ‘qualified residential prop-
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1 erty’ means any single-family or multi-family 

2 residence. 

3 ‘‘(d) LIMITATION ON AMOUNT OF BONDS DES4 IGNATED.—

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

6 face amount of bonds which may be designated 

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

8 not exceed the limitation amount allocated to such 

9 utility under paragraph (3). 

10 ‘‘(2) NATIONAL LIMITATION ON AMOUNT OF

11 BONDS DESIGNATED.—There is a national Residen12 tial Solar Energy Bond limitation of 

13 $24,000,000,000. 

14 ‘‘(3) ALLOCATION OF LIMITATION AMONG UTIL15 ITIES.—

16 ‘‘(A) IN GENERAL.—The national Residen17 tial Solar Energy Bond limitation shall be allo18 cated by the Secretary of Energy during 2004, 

19 2005, 2006, and 2007 to qualified utilities. In 

20 making such allocations, such Secretary shall 

21 give priorities to qualified utilities which provide 

22 subsidies (other than through the use of such 

23 Bonds) for the purchase and installation by res24 idential customers of photovoltaic cells on their 

25 residences. 
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1 ‘‘(B) UNUSED ALLOCATIONS.—Any alloca2 tion made to a qualified utility which is not 

3 used within 6 months after the date of the allo4 cation may be reallocated by the Secretary of 

5 Energy. 

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

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

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

9 the excess of—

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

11 (as defined in section 26(b)) plus the tax im12 posed by section 55, over 

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

14 under part IV of subchapter A (other than sub15 part C thereof, relating to refundable credits). 

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

17 credit allowable under subsection (a) exceeds the 

18 limitation imposed by paragraph (1) for such taxable 

19 year, such excess shall be carried to the succeeding 

20 taxable year and added to the credit allowable under 

21 subsection (a) for such taxable year. 

22 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec23 tion— 

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

25 ‘credit allowance date’ means—
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1 ‘‘(A) March 15, 

2 ‘‘(B) June 15, 

3 ‘‘(C) September 15, and 

4 ‘‘(D) December 15. 

5 Such term includes the last day on which the bond 

6 is outstanding. 

7 ‘‘(2) BOND.—The term ‘bond’ includes any ob8 ligation. 

9 ‘‘(g) CREDIT INCLUDED IN GROSS INCOME.—Gross 

10 income includes the amount of the credit allowed to the 

11 taxpayer under this section (determined without regard to 

12 subsection (e)) and the amount so included shall be treat13 ed as interest income. 

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

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

16 as failing to meet the requirements of subsection 

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

18 of the issue of which such bond is a part are in19 vested for a reasonable temporary period until such 

20 proceeds are used in making qualified solar energy 

21 loans. 

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

23 on proceeds during the temporary period shall be 

24 treated as proceeds of the issue for purposes of ap-
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1 plying subsection (c)(1) and paragraph (1) of this 

2 subsection. 

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

4 Principal repayments received during any calendar 

5 quarter shall not be treated as failing to meet the 

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

7 of the following calendar quarter, the amount of 

8 such repayments is used to make qualified solar en9 ergy loans, to redeem residential solar energy bonds, 

10 or to acquire zero interest State and local govern11 ment series bonds. The term of a loan made from 

12 such repayments may extend beyond the last day 

13 that any bond issued as part of the issue financing 

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

15 requirement that a loan be without interest shall not 

16 apply to the period after such last day. 

17 ‘‘(i) OTHER SPECIAL RULES.—

18 ‘‘(1) BONDS HELD BY REGULATED INVEST19 MENT COMPANIES.—If any Residential Solar Energy 

20 Bond is held by a regulated investment company, 

21 the credit determined under subsection (a) shall be 

22 allowed to shareholders of such company under pro23 cedures prescribed by the Secretary. 

24 ‘‘(2) CREDITS MAY BE STRIPPED.—Under regu25 lations prescribed by the Secretary—
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1 ‘‘(A) IN GENERAL.—There may be a sepa2 ration (including at issuance) of the ownership 

3 of a Residential Solar Energy Bond and the en4 titlement to the credit under this section with 

5 respect to such bond. In case of any such sepa6 ration, the credit under this section shall be al7 lowed to the person who on the credit allowance 

8 date holds the instrument evidencing the enti9 tlement to the credit and not to the holder of 

10 the bond. 

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

12 case of a separation described in subparagraph 

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

14 Residential Solar Energy Bond as if it were a 

15 stripped bond and to the credit under this sec16 tion as if it were a stripped coupon. 

17 ‘‘(3) TREATMENT FOR ESTIMATED TAX PUR18 POSES.—Solely for purposes of sections 6654 and 

19 6655, the credit allowed by this section to a tax20 payer by reason of holding a Residential Solar En21 ergy Bond on a credit allowance date shall be treat22 ed as if it were a payment of estimated tax made by 

23 the taxpayer on such date. 

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

25 in any law or rule of law shall be construed to limit 
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1 the transferability of the credit allowed by this sec2 tion through sale and repurchase agreements. 

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

4 Energy Bonds shall submit reports similar to the re5 ports required under section 149(e). 

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

7 CESSATION OF QUALIFIED USE.—

8 ‘‘(1) IN GENERAL.—If any bond which when 

9 issued purported to be a Residential Solar Energy 

10 Bond ceases to meet the requirements of subsection 

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

12 time required by the Secretary) an amount equal to 

13 the aggregate of the credits allowable under this sec14 tion (determined without regard to subsection (e)) 

15 for taxable years ending during the calendar year in 

16 which such cessation occurs and the 2 preceding cal17 endar years. 

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

19 timely pay the amount required by paragraph (1) 

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

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

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

23 the holder in which such cessation occurs) by the ag24 gregate decrease in the credits allowed under this 

25 section to such holder for taxable years beginning in 
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1 such 3 calendar years which would have resulted 

2 solely from denying any credit under this section 

3 with respect to such issue for such taxable years. 

4 ‘‘(3) SPECIAL RULES.—

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

6 the taxable year shall be increased under para7 graph (2) only with respect to credits allowed 

8 by reason of this section which were used to re9 duce tax liability. In the case of credits not so 

10 used to reduce tax liability, the carryforwards 

11 and carrybacks under section 39 shall be appro12 priately adjusted. 

13 ‘‘(B) NO CREDITS AGAINST TAX.—Any in14 crease in tax under paragraph (2) shall not be 

15 treated as a tax imposed by this chapter for 

16 purposes of determining—

17 ‘‘(i) the amount of any credit allow18 able under this part, or 

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

20 by section 55.’’

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

22 such Code (relating to returns regarding payments of in23 terest) is amended by adding at the end the following new 

24 paragraph: 
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1 ‘‘(8) REPORTING OF CREDIT ON RESIDENTIAL

2 SOLAR ENERGY BONDS.—

3 ‘‘(A) IN GENERAL.—For purposes of sub4 section (a), the term ‘interest’ includes amounts 

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

6 and such amounts shall be treated as paid on 

7 the credit allowance date (as defined in section 

8 30B(f)(1)). 

9 ‘‘(B) REPORTING TO CORPORATIONS, 

10 ETC.—Except as otherwise provided in regula11 tions, in the case of any interest described in 

12 subparagraph (A) of this paragraph, subsection 

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

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

15 and (L)(i). 

16 ‘‘(C) REGULATORY AUTHORITY.—The Sec17 retary may prescribe such regulations as are 

18 necessary or appropriate to carry out the pur19 poses of this paragraph, including regulations 

20 which require more frequent or more detailed 

21 reporting.’’

22 (c) CONFORMING AMENDMENT.—The table of sec23 tions for subpart B of part IV of subchapter A of chapter 

24 1 of such Code is amended by adding at the end the fol25 lowing new item:

‘‘Sec. 30B. Credit to holders of Residential Solar Energy Bonds.’’
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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to obligations issued after Decem3 ber 31, 2003. 

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

5 January 1, 2004, guidelines specifying the criteria to be 

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

7 the Internal Revenue Code of 1986 (as added by this Act) 

8 shall be developed and published by the Secretary of En9 ergy in the Federal Register.

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