Energy Opportunity Zones Act of 2020

To amend the Internal Revenue Code of 1986 to provide for energy opportunity zones. 1. Short title This Act may be cited as the Energy Opportunity Zones Act of 2020 2. Opportunity zones (a) In general Chapter 1 Y Energy Opportunity Zones Sec. 1400Y–1. Energy opportunity zones. 1400Y–1. Energy opportunity zones (a) Production tax credit In the case of a qualified energy opportunity zone facility, section 45 shall be administered as if— (1) subsection (b)(5) did not apply, (2) 2050 2021 (3) 2050 2021 (b) Investment tax credit In the case of qualified energy opportunity zone property, section 48 shall be administered as if— (1) 2050 2022 (2) 2050 2021 (3) paragraphs (5)(E), (6), and (7) of subsection (a) did not apply, (4) paragraphs (1)(D) and (2)(D) of subsection (c) did not apply, (5) 2050 2022 (6) subsection (c)(4)(C) did not apply. (c) Definitions For purposes of this section— (1) Qualified energy opportunity zone facility The term qualified energy opportunity zone facility (2) Qualified energy opportunity zone property The term qualified energy opportunity zone property (A) such property is located within an energy opportunity zone, (B) the construction of such property was subject to a project labor agreement, and (C) all laborers and mechanics employed by any contractor or subcontractor in the construction of such property were paid wages at rates not less than those prevailing on similar construction in the locality as determined by the Secretary of Labor under subchapter IV of chapter 31 (3) Energy opportunity zone defined The term energy opportunity zone (A) any area which is within 120 miles of— (i) a nuclear power plant, or a facility which utilizes coal to generate electricity, which (after the date which is 10 years before the date of the enactment of this section) ceases operation, or (ii) a nuclear power plant which is scheduled to cease operation not later than 6 years after the date of the enactment of this section, and (B) any other area that can reasonably demonstrate how changes in the nuclear or coal economy have resulted (or are anticipated to result) in job losses in such area. (4) Project labor agreement The term project labor agreement 26 U.S.C. 158(f) . (b) Clerical amendment The table of subchapters for chapter 1 of such Code is amended by inserting before the item relating to subchapter Z the following new item: Subchapter Y—Energy Opportunity Zones . (c) Effective date (1) In general Except as provided in paragraph (2), the amendments made by this section shall apply to property placed in service after the date of the enactment of this Act. (2) Application of progress expenditure rules So much of the amendments made by this section as relate to section 48 section 48(m) 3. Energy credit for qualified offshore wind facilities and energy storage (a) In general Section 48 (1) in subsection (a)— (A) in paragraph (2)(A)(i)— (i) in subclause (II), by striking paragraph (3)(A)(i) clause (i) or (ix) of paragraph (3)(A) (ii) by striking and (iii) by adding at the end the following new subclause: (V) qualified offshore wind property, and , and (B) in paragraph (3)(A)— (i) in clause (vi), by striking or (ii) by adding at the end the following new clause: (viii) qualified offshore wind property, but only with respect to property the construction of which begins before January 1, 2050, or (ix) any equipment if— (I) such equipment receives, stores, and delivers energy using batteries, compressed air, pumped hydropower, hydrogen storage (including hydrolysis), thermal energy storage, regenerative fuel cells, flywheels, capacitors, superconducting magnets, or other technologies identified by the Secretary in consultation with the Secretary of Energy, (II) such equipment has a capacity of not less than 5 megawatt hours, (III) such equipment is located in an energy opportunity zone (as defined in section 1400Y–1), (IV) the construction of such equipment was subject to a project labor agreement (as defined in section 1400Y–1), and (V) all laborers and mechanics employed by any contractor or subcontractor in the construction of such equipment were paid wages at rates not less than those prevailing on similar construction in the locality as determined by the Secretary of Labor under subchapter IV of chapter 31 , and (2) in subsection (c), by adding at the end the following new paragraph: (5) Qualified offshore wind property (A) In general The term qualified offshore wind property (i) such facility uses wind to produce electricity, (ii) such facility is located not farther than 50 miles from the boundary of an energy opportunity zone (as defined in section 1400Y–1), (iii) the construction of such facility was subject to a project labor agreement (as defined in section 1400Y–1), and (iv) all laborers and mechanics employed by any contractor or subcontractor in the construction of such facility were paid wages at rates not less than those prevailing on similar construction in the locality as determined by the Secretary of Labor under subchapter IV of chapter 31 (B) Offshore facility The term offshore facility . (b) Effective date The amendments made by this section shall apply to periods after the date of the enactment of this Act under rules similar to the rules of section 48(m) 4. Improvements to credit for nonbusiness energy property (a) Extension of credit (1) In general Section 25C(g)(2) December 31, 2020 December 31, 2050 (2) Effective date The amendments made by this subsection shall apply to property placed in service after December 31, 2020. (b) Other improvements (1) In general Section 25C (A) in subsection (a)(1), by striking 10 percent 15 percent (B) in subsection (b)— (i) in paragraph (1)— (I) by striking $500 $1,200 (II) by striking December 31, 2005 December 31, 2019 (ii) by striking paragraphs (2) and (3) and inserting the following: (2) Limitation on insulation material or system In the case of amounts paid or incurred for components described in subsection (c)(3)(A) by any taxpayer for any taxable year, the credit allowed under this section with respect to such amounts for such year shall not exceed the excess (if any) of $600 over the aggregate credits allowed under this section with respect to such amounts for all prior taxable years ending after December 31, 2019. (3) Limitation on windows (A) In general (i) Energy Star Most efficient In the case of amounts paid or incurred by any taxpayer for any taxable year for components described in subsection (c)(3)(B) which meet the most efficient certification under applicable Energy Star program requirements, the credit allowed under this section with respect to such amounts for such year shall not exceed the excess (if any) of $600 over the aggregate credits allowed under this section with respect to such amounts for all prior taxable years ending after December 31, 2019. (ii) Energy Star In the case of amounts paid or incurred by any taxpayer for any taxable year for components described in subsection (c)(3)(B) which do not meet the most efficient certification under applicable Energy Star program requirements, the credit allowed under this section with respect to such amounts for such year shall not exceed the excess (if any) of $200 over the aggregate credits allowed under this section with respect to such amounts for all prior taxable years ending after December 31, 2019. (B) Election (i) In general For purposes of any amounts paid or incurred by any taxpayer for components described in subsection (c)(3)(B), the credit allowed under this section shall only be allowed for components described in clause (i) of subparagraph (A) or clause (ii) of such subparagraph, but not both, as elected by the taxpayer during the first taxable year in which such credit is being claimed by the taxpayer. (ii) Irrevocability The Secretary shall, through such rules, regulations, and procedures as are determined appropriate, establish procedures for making an election under this subparagraph, which shall require that— (I) any election made by the taxpayer shall be irrevocable, and (II) such election shall remain in effect for all subsequent taxable years. (4) Limitation on doors In the case of amounts paid or incurred for components described in subsection (c)(3)(C) by any taxpayer for any taxable year, the credit allowed under this section with respect to such amounts for such year shall not exceed— (A) the excess (if any) of $500 over the aggregate credits allowed under this section with respect to such amounts for all prior taxable years ending after December 31, 2019, or (B) $250 for each exterior door. (5) Limitation on residential energy property expenditures The amount of the credit allowed under this section by reason of subsection (a)(2) shall not exceed— (A) in the case of any energy-efficient building property— (i) for any item of property described in subparagraph (A), (B), or (C) of subsection (d)(3), $600, and (ii) for any item of property described in subparagraph (D) or (E) of such subsection, $400, and (B) in the case of any qualified natural gas, propane, or oil furnace or hot water boiler (as defined in subsection (d)(4)), an amount equal to— (i) $600 for a hot water boiler, and (ii) in the case of a furnace, an amount equal to the sum of— (I) $300, plus (II) if the taxpayer is converting from a non-condensing furnace to a condensing furnace, $300. , (C) in subsection (c)— (i) in paragraph (2)— (I) by striking subparagraphs (A) and (B) and inserting the following: (A) applicable Energy Star program requirements, in the case of an exterior window, a skylight, or an exterior door, and , (II) by redesignating subparagraph (C) as subparagraph (B), and (III) in subparagraph (B), as so redesignated, by striking 2009 International Act of 2009 2015 IECC (as defined in section 45L(b)(5)) (ii) in paragraph (3)— (I) in subparagraph (B), by adding and (II) in subparagraph (C), by striking , and (III) by striking subparagraph (D), and (iii) by adding at the end the following new paragraph: (5) Labor costs The term qualified energy efficiency improvements , (D) in subsection (d)— (i) in paragraph (2)(A)— (I) in clause (i), by adding or (II) in clause (ii), by striking , or (III) by striking clause (iii), (ii) in paragraph (3)— (I) by striking subparagraph (A) and inserting the following: (A) an electric heat pump water heater which, in the standard Department of Energy test procedure, yields a uniform energy factor of at least 3.0, , (II) in subparagraph (B), by striking January 1, 2009 the date of enactment of the Home Energy Savings Act (III) in subparagraph (C), by striking January 1, 2009 the date of enactment of the Home Energy Savings Act (IV) by striking subparagraph (D) and inserting the following: (D) a natural gas, propane, or oil water heater which, in the standard Department of Energy test procedure, yields— (i) in the case of a storage tank water heater— (I) in the case of a medium-draw water heater, a uniform energy factor of not less than 0.78, and (II) in the case of a high-draw water heater, a uniform energy factor of not less than 0.80, and (ii) in the case of a tankless water heater— (I) in the case of a medium-draw water heater, a uniform energy factor of not less than 0.87, and (II) in the case of a high-draw water heater, a uniform energy factor of not less than 0.90, and , and (V) in subparagraph (E), by striking of at least 75 percent (as determined pursuant to the applicable list published by the Environmental Protection Agency for certified wood stoves, hydronic heaters, or forced-air furnaces) of at least— (i) in the case of any stove placed in service before January 1, 2021, 73 percent, and (ii) in the case of any stove placed in service after December 31, 2020, 75 percent. , (iii) in paragraph (4), by striking not less than 95 not less than— (A) in the case of a furnace, 97 percent, and (B) in the case of a hot water boiler, 95 percent. , (iv) by striking paragraph (5), and (v) by redesignating paragraph (6) as paragraph (5), and (E) in subsection (e), by adding the following new paragraphs at the end: (4) Installation standards The terms energy efficient building envelope component qualified energy property (5) Replacement of terminated standards In the case of any standard, requirement, or criteria applicable to any energy efficient building envelope component or qualified energy property which is terminated after the date of enactment of the Home Energy Savings Act . (2) Effective date The amendments made by this subsection shall apply to property placed in service after December 31, 2019. (c) Periodic report to Congress regarding improved standards Not later than 5 years after the date of the enactment of this Act (and each 5 years thereafter until the termination of the credit determined under section 25C (1) an evaluation of each standard used under such section in determining the eligibility of property for credit under such section including whether relevant higher industry standards have been developed, and (2) recommendations (if any) for higher standards which would supplement or replace such current standards and an analysis of how such higher standards would be expected to improve the effectiveness of such credit. 5. Improvements to new energy efficient home credit (a) Extension of credit (1) In general Section 45L(g) December 31, 2020 December 31, 2050 (2) Effective date The amendments made by this subsection shall apply to qualified new energy efficient homes acquired after December 31, 2020. (b) Updating new energy efficient home credit (1) In general Section 45L (A) in subsection (a)(2)— (i) in subparagraph (A), by striking $2,000 $2,500 (ii) in subparagraph (B), by inserting or (4) paragraph (3) (B) in subsection (b)— (i) in paragraph (2)(B), by striking this section the New Home Energy Efficiency Act (ii) by adding at the end the following: (5) 2018 IECC (A) In general The term 2018 IECC New Home Energy Efficiency Act (B) Special rule For purposes of subsection (c)(1)(B)(i)(I), in determining whether a dwelling unit has been constructed in accordance with the standards of chapter 4 of the 2018 IECC by achieving a level of energy efficiency which meets Section R406.4 (N1106.4) of such Code, such determination shall be made without accounting for on-site energy generation. ; and (C) by striking subsection (c) and inserting the following: (c) Energy saving requirements A dwelling unit meets the energy saving requirements of this subsection if such unit— (1) (A) is certified— (i) to have a level of annual heating and cooling energy consumption which is at least 60 percent below the annual level of heating and cooling energy consumption of a comparable dwelling unit— (I) which is constructed in accordance with the standards of chapter 4 of the 2006 International Energy Conservation Code, as such Code (including supplements) is in effect on January 1, 2006, and (II) for which the heating and cooling equipment efficiencies correspond to the minimum allowed under the regulations established by the Department of Energy pursuant to the National Appliance Energy Conservation Act of 1987 and in effect at the time of completion of construction, and (ii) to have building envelope component improvements account for at least 1/5 (B) is certified— (i) to have a level of annual energy consumption which is at least 15 percent below the annual level of energy consumption of a comparable dwelling unit— (I) which is constructed in accordance with the standards of chapter 4 of the 2018 IECC, and (II) which meets the requirements described in subparagraph (A)(i)(II), and (ii) to have building envelope component improvements account for at least 1/5 (2) is a manufactured home which— (A) conforms to Federal Manufactured Home Construction and Safety Standards (part 3280 of title 24, Code of Federal Regulations), and (B) meets the requirements described in subparagraph (A) or (B) of paragraph (1), (3) meets the requirements established by the Administrator of the Environmental Protection Agency under the Energy Star Labeled Homes program, or (4) is a manufactured home which— (A) conforms to the standards described in paragraph (2)(A), and (B) meets the requirements described in paragraph (3). . (2) Effective date The amendments made by this subsection shall apply to qualified new energy efficient homes acquired after December 31, 2020. (c) Periodic report to Congress regarding improved standards Not later than 5 years after the date of the enactment of this Act (and each 5 years thereafter until the termination of the credit determined under section 45L (1) an evaluation of each standard used under such section in determining the eligibility of property for credit under such section including whether relevant higher industry standards have been developed, and (2) recommendations (if any) for higher standards which would supplement or replace such current standards and an analysis of how such higher standards would be expected to improve the effectiveness of such credit. 6. Extension energy efficient commercial buildings deduction (a) In general Section 179D(h) December 31, 2020 December 31, 2050 (b) Effective date The amendment made by this section shall apply to property placed in service after December 31, 2020.

Summary: Energy Opportunity Zones Act of 2020 This bill designates energy opportunity zones for areas that are within 120 miles of a nuclear or coal power plant used to generate electricity that has ceased operations or is scheduled to cease operations within 6 years, or areas that can demonstrate how changes in the nuclear or coal economy have resulted or may result in job losses. The bill modifies or extends the new energy efficient home tax credit, the nonbusiness energy property tax credit, the investment tax credit, and the tax credit for production of electricity, and establishes a new tax credit for offshore wind and energy storage. The bill also extends through 2050 the tax deduction for energy efficient commercial buildings.