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‘‘(2) AGGREGATION RULES.—All persons treated
as a single employer under subsection (a) or (b) of
section 52 or subsection (m) or (o) of section 414 shall
be treated as 1 person for purposes of subsection (a).
‘‘(f) VERIFICATION.—The taxpayer shall submit such
information or certification as the Secretary, in consulta-
tion with the Secretary of Energy, determines necessary to
claim the credit amount under subsection (a).
‘‘(g) TERMINATION.—This section shall not apply—
‘‘(1) with respect to refrigerators described in
subsection (b)(1)(A)(ii) produced after December 31,
2004, and
‘‘(2) with respect to all other qualified energy ef-
ficient appliances produced after December 31,
2006.’’.
(b) LIMITATION ON CARRYBACK.—Section 39(d) (relat-
ing to transition rules), as amended by this Act, is amended
by adding at the end the following new paragraph:
‘‘(14) NO CARRYBACK OF ENERGY EFFICIENT AP-
PLIANCE CREDIT BEFORE EFFECTIVE DATE.—No por-
tion of the unused business credit for any taxable year
which is attributable to the energy efficient appliance
credit determined under section 45H may be carried
to a taxable year ending before January 1, 2003.’’.
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(c) CONFORMING AMENDMENT.—Section 38(b) (relat-
ing to general business credit), as amended by this Act, is
amended by striking ‘‘plus’’ at the end of paragraph (17),
by striking the period at the end of paragraph (18) and
inserting ‘‘, plus’’, and by adding at the end the following
new paragraph:
‘‘(19) the energy efficient appliance credit deter-
mined under section 45H(a).’’.
(d) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1, as
amended by this Act, is amended by adding at the end the
following new item:
‘‘Sec. 45H. Energy efficient appliance credit.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to appliances produced after December
31, 2002, in taxable years ending after such date.
SEC. 2103. CREDIT FOR RESIDENTIAL ENERGY EFFICIENT
PROPERTY.
(a) IN GENERAL.—Subpart A of part IV of subchapter
A of chapter 1 (relating to nonrefundable personal credits)
is amended by inserting after section 25B the following new
section:
‘‘SEC. 25C. RESIDENTIAL ENERGY EFFICIENT PROPERTY.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an indi-
vidual, there shall be allowed as a credit against the tax
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imposed by this chapter for the taxable year an amount
equal to the sum of—
‘‘(1) 15 percent of the qualified photovoltaic
property expenditures made by the taxpayer during
such year,
‘‘(2) 15 percent of the qualified solar water heat-
ing property expenditures made by the taxpayer dur-
ing such year,
‘‘(3) 30 percent of the qualified fuel cell property
expenditures made by the taxpayer during such year,
‘‘(4) 30 percent of the qualified wind energy
property expenditures made by the taxpayer during
such year, and
‘‘(5) the sum of the qualified Tier 2 energy effi-
cient building property expenditures made by the tax-
payer during such year.
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM
CREDIT.—The credit allowed
under subsection (a) shall not exceed—
‘‘(A) $2,000 for property described in sub-
section (d)(1),
‘‘(B) $2,000 for property described in sub-
section (d)(2),
‘‘(C) $1,000 for each kilowatt of capacity of
property described in subsection (d)(4),
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‘‘(D) $2,000 for property described in sub-
section (d)(5), and
‘‘(E) for property described in subsection
(d)(6)—
‘‘(i) $75 for each electric heat pump
water heater,
‘‘(ii) $250 for each electric heat pump,
‘‘(iii) $250 for each advanced natural
gas furnace,
‘‘(iv) $250 for each central air condi-
tioner,
‘‘(v) $75 for each natural gas water
heater, and
‘‘(vi) $250 for each geothermal heat
pump.
‘‘(2) SAFETY CERTIFICATIONS.—No credit shall
be allowed under this section for an item of property
unless—
‘‘(A) in the case of solar water heating
property, such property is certified for perform-
ance and safety by the non-profit Solar Rating
Certification Corporation or a comparable entity
endorsed by the government of the State in which
such property is installed,
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‘‘(B) in the case of a photovoltaic property,
a fuel cell property, or a wind energy property,
such property meets appropriate fire and electric
code requirements, and
‘‘(C) in the case of property described in
subsection (d)(6), such property meets the per-
formance and quality standards, and the certifi-
cation requirements (if any), which—
‘‘(i) have been prescribed by the Sec-
retary by regulations (after consultation
with the Secretary of Energy or the Admin-
istrator of the Environmental Protection
Agency, as appropriate),
‘‘(ii) in the case of the energy efficiency
ratio (EER)—
‘‘(I) require measurements to be
based on published data which is tested
by manufacturers at 95 degrees Fahr-
enheit, and
‘‘(II) do not require ratings to be
based on certified data of the Air Con-
ditioning and Refrigeration Institute,
and
‘‘(iii) are in effect at the time of the
acquisition of the property.
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‘‘(c) CARRYFORWARD
OF UNUSED CREDIT.—If the
credit allowable under subsection (a) exceeds the limitation
imposed by section 26(a) for such taxable year reduced by
the sum of the credits allowable under this subpart (other
than this section and section 25D), such excess shall be car-
ried to the succeeding taxable year and added to the credit
allowable under subsection (a) for such succeeding taxable
year.
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED SOLAR WATER HEATING PROP-
ERTY EXPENDITURE.—The term ‘qualified solar water
heating property expenditure’ means an expenditure
for property to heat water for use in a dwelling unit
located in the United States and used as a residence
by the taxpayer if at least half of the energy used by
such property for such purpose is derived from the
sun.
‘‘(2) QUALIFIED PHOTOVOLTAIC PROPERTY EX-
PENDITURE.—The term ‘qualified photovoltaic prop-
erty expenditure’ means an expenditure for property
that uses solar energy to generate electricity for use
in such a dwelling unit.
‘‘(3) SOLAR PANELS.—No expenditure relating to
a solar panel or other property installed as a roof (or
portion thereof) shall fail to be treated as property de-
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scribed in paragraph (1) or (2) solely because it con-
stitutes a structural component of the structure on
which it is installed.
‘‘(4) QUALIFIED FUEL CELL PROPERTY EXPENDI-
TURE.—The term ‘qualified fuel cell property expend-
iture’ means an expenditure for qualified fuel cell
property (as defined in section 48(a)(4)) installed on
or in connection with such a dwelling unit.
‘‘(5) QUALIFIED WIND ENERGY PROPERTY EX-
PENDITURE.—The term ‘qualified wind energy prop-
erty expenditure’ means an expenditure for property
which uses wind energy to generate electricity for use
in such a dwelling unit.
‘‘(6) QUALIFIED
TIER
ENERGY
EFFICIENT
BUILDING PROPERTY EXPENDITURE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
Tier 2 energy efficient building property expend-
iture’ means an expenditure for any Tier 2 en-
ergy efficient building property.
‘‘(B) TIER 2 ENERGY EFFICIENT BUILDING
PROPERTY.—The term ‘Tier 2 energy efficient
building property’ means—
‘‘(i) an electric heat pump water heater
which yields an energy factor of at least 1.7
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in the standard Department of Energy test
procedure,
‘‘(ii) an electric heat pump which has
a heating seasonal performance factor
(HSPF) of at least 9, a seasonal energy effi-
ciency ratio (SEER) of at least 15, and an
energy efficiency ratio (EER) of at least
12.5,
‘‘(iii) an advanced natural gas furnace
which achieves at least 95 percent annual
fuel utilization efficiency (AFUE),
‘‘(iv) a central air conditioner which
has a seasonal energy efficiency ratio
(SEER) of at least 15 and an energy effi-
ciency ratio (EER) of at least 12.5,
‘‘(v) a natural gas water heater which
has an energy factor of at least 0.80 in the
standard Department of Energy test proce-
dure, and
‘‘(vi) a geothermal heat pump which
has an energy efficiency ratio (EER) of at
least 21.
‘‘(7) LABOR
COSTS.—Expenditures for labor
costs properly allocable to the onsite preparation, as-
sembly, or original installation of the property de-
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scribed in paragraph (1), (2), (4), (5), or (6) and for
piping or wiring to interconnect such property to the
dwelling unit shall be taken into account for purposes
of this section.
‘‘(8) SWIMMING POOLS, ETC., USED AS STORAGE
MEDIUM.—Expenditures which are properly allocable
to a swimming pool, hot tub, or any other energy
storage medium which has a function other than the
function of such storage shall not be taken into ac-
count for purposes of this section.
‘‘(e) SPECIAL RULES.—For purposes of this section—
‘‘(1) DOLLAR AMOUNTS IN CASE OF JOINT OCCU-
PANCY.—In the case of any dwelling unit which is
jointly occupied and used during any calendar year
as a residence by 2 or more individuals the following
shall apply:
‘‘(A) The amount of the credit allowable,
under subsection (a) by reason of expenditures
(as the case may be) made during such calendar
year by any of such individuals with respect to
such dwelling unit shall be determined by treat-
ing all of such individuals as 1 taxpayer whose
taxable year is such calendar year.
‘‘(B) There shall be allowable, with respect
to such expenditures to each of such individuals,
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a credit under subsection (a) for the taxable year
in which such calendar year ends in an amount
which bears the same ratio to the amount deter-
mined under subparagraph (A) as the amount of
such expenditures made by such individual dur-
ing such calendar year bears to the aggregate of
such expenditures made by all of such individ-
uals during such calendar year.
‘‘(2) TENANT-STOCKHOLDER
IN
COOPERATIVE
HOUSING
CORPORATION.—In the case of an indi-
vidual who is a tenant-stockholder (as defined in sec-
tion 216) in a cooperative housing corporation (as de-
fined in such section), such individual shall be treated
as having made his tenant-stockholder’s proportionate
share (as defined in section 216(b)(3)) of any expend-
itures of such corporation.
‘‘(3) CONDOMINIUMS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is a member of a condominium man-
agement association with respect to a condo-
minium which the individual owns, such indi-
vidual shall be treated as having made the indi-
vidual’s proportionate share of any expenditures
of such association.
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‘‘(B) CONDOMINIUM MANAGEMENT ASSOCIA-
TION.—For purposes of this paragraph, the term
‘condominium management association’ means
an organization which meets the requirements of
paragraph (1) of section 528(c) (other than sub-
paragraph (E) thereof) with respect to a condo-
minium project substantially all of the units of
which are used as residences.
‘‘(4) ALLOCATION IN CERTAIN CASES.—Except in
the case of qualified wind energy property expendi-
tures, if less than 80 percent of the use of an item is
for nonbusiness purposes, only that portion of the ex-
penditures for such item which is properly allocable
to use for nonbusiness purposes shall be taken into ac-
count.
‘‘(5) WHEN
EXPENDITURE
MADE; AMOUNT
OF
EXPENDITURE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), an expenditure with respect
to an item shall be treated as made when the
original installation of the item is completed.
‘‘(B) EXPENDITURES
PART
OF
BUILDING
CONSTRUCTION.—In the case of an expenditure
in connection with the construction or recon-
struction of a structure, such expenditure shall be
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treated as made when the original use of the con-
structed or reconstructed structure by the tax-
payer begins.
‘‘(C) AMOUNT.—The amount of any expend-
iture shall be the cost thereof.
‘‘(6) PROPERTY FINANCED BY SUBSIDIZED EN-
ERGY FINANCING.—For purposes of determining the
amount of expenditures made by any individual with
respect to any dwelling unit, there shall not be taken
in to account expenditures which are made from sub-
sidized energy financing (as defined in section
48(a)(5)(C)).
‘‘(f) BASIS ADJUSTMENTS.—For purposes of this sub-
title, if a credit is allowed under this section for any ex-
penditure with respect to any property, the increase in the
basis of such property which would (but for this subsection)
result from such expenditure shall be reduced by the amount
of the credit so allowed.
‘‘(g) TERMINATION.—The credit allowed under this
section shall not apply to expenditures after December 31,
2007.’’.
(b) CREDIT ALLOWED AGAINST REGULAR TAX AND
ALTERNATIVE MINIMUM TAX.—
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(1) IN GENERAL.—Section 25C(b), as added by
subsection (a), is amended by adding at the end the
following new paragraph:
‘‘(3) LIMITATION BASED ON AMOUNT OF TAX.—
The credit allowed under subsection (a) for the tax-
able year shall not exceed the excess of—
‘‘(A) the sum of the regular tax liability (as
defined in section 26(b)) plus the tax imposed by
section 55, over
‘‘(B) the sum of the credits allowable under
this subpart (other than this section and section
25D) and section 27 for the taxable year.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 25C(c), as added by subsection
(a), is amended by striking ‘‘section 26(a) for
such taxable year reduced by the sum of the cred-
its allowable under this subpart (other than this
section and section 25D)’’ and inserting ‘‘sub-
section (b)(3)’’.
(B) Section 23(b)(4)(B) is amended by in-
serting ‘‘and section 25C’’ after ‘‘this section’’.
(C) Section 24(b)(3)(B) is amended by
striking ‘‘23 and 25B’’ and inserting ‘‘23, 25B,
and 25C’’.
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(D) Section 25(e)(1)(C) is amended by in-
serting ‘‘25C,’’ after ‘‘25B,’’.
(E) Section 25B(g)(2) is amended by strik-
ing ‘‘section 23’’ and inserting ‘‘sections 23 and
25C’’.
(F) Section 26(a)(1) is amended by striking
‘‘and 25B’’ and inserting ‘‘25B, and 25C’’.
(G) Section 904(h) is amended by striking
‘‘and 25B’’ and inserting ‘‘25B, and 25C’’.
(H) Section 1400C(d) is amended by strik-
ing ‘‘and 25B’’ and inserting ‘‘25B, and 25C’’.
(c) ADDITIONAL CONFORMING AMENDMENTS.—
(1) Section 23(c), as in effect for taxable years
beginning before January 1, 2004, is amended by
striking ‘‘section 1400C’’ and inserting ‘‘sections 25C
and 1400C’’.
(2) Section 25(e)(1)(C), as in effect for taxable
years beginning before January 1, 2004, is amended
by inserting ‘‘, 25Cs,’’ after ‘‘sections 23’’.
(3) Subsection (a) of section 1016, as amended
by this Act, is amended by striking ‘‘and’’ at the end
of paragraph (29), by striking the period at the end
of paragraph (30) and inserting ‘‘, and’’, and by add-
ing at the end the following new paragraph:
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‘‘(31) to the extent provided in section 25C(f), in
the case of amounts with respect to which a credit has
been allowed under section 25C.’’.
(4) Section 1400C(d), as in effect for taxable
years beginning before January 1, 2004, is amended
by inserting ‘‘and section 25C’’ after ‘‘this section’’.
(5) The table of sections for subpart A of part IV
of subchapter A of chapter 1 is amended by inserting
after the item relating to section 25B the following
new item:
‘‘Sec. 25C. Residential energy efficient property.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendments made by this section shall
apply to expenditures after December 31, 2002, in
taxable years ending after such date.
(2) SUBSECTION (b).—The amendments made by
subsection (b) shall apply to taxable years beginning
after December 31, 2003.
SEC. 2104. CREDIT FOR BUSINESS INSTALLATION OF QUALI-
FIED FUEL CELLS AND STATIONARY MICRO-
TURBINE POWER PLANTS.
(a) IN
GENERAL.—Subparagraph (A) of section
48(a)(3) (defining energy property) is amended by striking
‘‘or’’ at the end of clause (i), by adding ‘‘or’’ at the end
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‘‘(4) NOTICE
TO
OWNER.—The qualified indi-
vidual shall provide an explanation to the owner of
the building regarding the energy efficiency features
of the building and its projected annual energy costs
as 
provided 
in 
the 
notice 
under 
paragraph
(2)(C)(ii)(III).
‘‘(5) CERTIFICATION.—
‘‘(A) IN GENERAL.—Except as provided in
this paragraph, the Secretary shall prescribe pro-
cedures for the inspection and testing for compli-
ance of buildings that are comparable, given the
difference between commercial and residential
buildings, to the requirements in the Mortgage
Industry National Accreditation Procedures for
Home Energy Rating Systems.
‘‘(B) QUALIFIED
INDIVIDUALS.—Individ-
uals qualified to determine compliance shall be
only those individuals who are recognized by an
organization certified by the Secretary for such
purposes. The Secretary may qualify a Home
Ratings Systems Organization, a local building
code agency, a State or local energy office, a util-
ity, or any other organization which meets the
requirements prescribed under this section.