‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED SOLAR WATER HEATING PROP-
ERTY
EXPENDITURE.—The term ‘qualified solar 
water heating property expenditure’ means an ex-
penditure for property which uses solar energy to 
heat water for use in a dwelling unit. 
‘‘(2) QUALIFIED PHOTOVOLTAIC PROPERTY EX-
PENDITURE.—The term ‘qualified photovoltaic prop-
erty expenditure’ means an expenditure for property 
which uses solar energy to generate electricity for 
use in a dwelling unit and which is not described in 
paragraph (1). 
‘‘(3) QUALIFIED
FUEL
CELL
PROPERTY
EX-
PENDITURE.—The term ‘qualified fuel cell property 
expenditure’ means an expenditure for any qualified 
fuel cell property (as defined in section 48(b)(1)). 
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) 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 prop-
erty described in paragraph (1) or (2) of subsection 
(c) solely because it constitutes a structural compo-
nent of the structure on which it is installed.
‘‘(2) SWIMMING POOLS, ETC., USED AS STOR-
AGE MEDIUM.—Expenditures which are properly al-
locable 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 account for purposes of this section. 
‘‘(3) DOLLAR AMOUNTS IN CASE OF JOINT OC-
CUPANCY.—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 fol-
lowing rules shall apply: 
‘‘(A) The amount of the credit allowable 
under subsection (a) by reason of expenditures 
made during such calendar year by any of such 
individuals with respect to such dwelling unit 
shall be determined by treating all of such indi-
viduals as 1 taxpayer whose taxable year is 
such calendar year. 
‘‘(B) There shall be allowable, with respect 
to such expenditures to each of such individ-
uals, a credit under subsection (a) for the tax-
able year in which such calendar year ends in 
an amount which bears the same ratio to the 
amount determined under subparagraph (A) as 
the amount of such expenditures made by such
individual during such calendar year bears to 
the aggregate of such expenditures made by all 
of such individuals during such calendar year. 
‘‘(C) Subparagraphs (A) and (B) shall be 
applied separately with respect to expenditures 
described in paragraphs (1), (2), and (3) of 
subsection (c). 
‘‘(4) 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 
defined in such section), such individual shall be 
treated as having made the individual’s tenant-stock-
holder’s proportionate share (as defined in section 
216(b)(3)) of any expenditures of such corporation. 
‘‘(5) 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. 
‘‘(B) CONDOMINIUM
MANAGEMENT
ASSO-
CIATION.—For purposes of this paragraph, the
term ‘condominium management association’ 
means an organization which meets the require-
ments of paragraph (1) of section 528(c) (other 
than subparagraph (E) thereof) with respect to 
a condominium project substantially all of the 
units of which are used as residences. 
‘‘(6) ALLOCATION IN CERTAIN CASES.—If less 
than 80 percent of the use of an item is for nonbusi-
ness purposes, only that portion of the expenditures 
for such item which is properly allocable to use for 
nonbusiness purposes shall be taken into account. 
‘‘(7) 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 treated as made when the original use of the 
constructed or reconstructed structure by the 
taxpayer begins.
‘‘(C) AMOUNT.—The amount of any ex-
penditure shall be the cost thereof. 
‘‘(8) 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 
into account expenditures which are made from sub-
sidized energy financing (as defined in section 
48(a)(4)(C)). 
‘‘(e) BASIS ADJUSTMENTS.—For purposes of this 
subtitle, if a credit is allowed under this section for any 
expenditure with respect to any property, the increase in 
the basis of such property which would (but for this sub-
section) result from such expenditure shall be reduced by 
the amount of the credit so allowed. 
‘‘(f) TERMINATION.—The credit allowed under this 
section shall not apply to taxable years beginning after 
December 31, 2007.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Section 1016(a) is amended by striking 
‘‘and’’ at the end of paragraph (30), by striking the 
period at the end of paragraph (31) and inserting ‘‘, 
and’’, and by adding at the end the following new 
paragraph:
‘‘(32) to the extent provided in section 25C(e), 
in the case of amounts with respect to which a credit 
has been allowed under section 25C.’’. 
(2) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 25B the fol-
lowing new item:
‘‘Sec. 25C. Residential energy efficient property.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenditures made after the 
date of the enactment of this Act. 
SEC. 202. CREDIT FOR BUSINESS INSTALLATION OF QUALI-
FIED FUEL CELLS. 
(a) IN GENERAL.—Section 48(a)(3)(A) (defining en-
ergy property) is amended by striking ‘‘or’’ at the end of 
clause (i), by adding ‘‘or’’ at the end of clause (ii), and 
by inserting after clause (ii) the following new clause: 
‘‘(iii) qualified fuel cell property,’’. 
(b) ENERGY PERCENTAGE.—Subparagraph (A) of 
section 48(a)(2) (relating to energy percentage) is amend-
ed to read as follows: 
‘‘(A) IN GENERAL.—The energy percent-
age is—
‘‘(i) in the case of qualified fuel cell 
property, 15 percent, and
‘‘(ii) in the case of any other energy 
property, 10 percent.’’. 
(c) QUALIFIED FUEL CELL PROPERTY.—Section 48 
(relating to energy credit) is amended—
(1) by redesignating subsection (b) as para-
graph (5) of subsection (a), 
(2) by striking ‘‘subsection (a)’’ in paragraph 
(5) of subsection (a), as redesignated by paragraph 
(1), and inserting ‘‘this subsection’’, and 
(3) by adding at the end the following new sub-
section: 
‘‘(b) QUALIFIED FUEL CELL PROPERTY.—For pur-
poses of subsection (a)(3)(A)(iii)—
‘‘(1) IN
GENERAL.—The term ‘qualified fuel 
cell property’ means a fuel cell power plant which 
generates at least 0.5 kilowatt of electricity using an 
electrochemical process. 
‘‘(2) LIMITATION.—The energy credit with re-
spect to any qualified fuel cell property shall not ex-
ceed an amount equal to $500 for each 0.5 kilowatt 
of capacity of such property. 
‘‘(3) FUEL
CELL
POWER
PLANT.—The term 
‘fuel cell power plant’ means an integrated system, 
comprised of a fuel cell stack assembly and associ-
ated balance of plant components, which converts a 
fuel into electricity using electrochemical means. 
‘‘(4) TERMINATION.—The term ‘qualified fuel 
cell property’ shall not include any property placed 
in service after December 31, 2007.’’. 
(d) CONFORMING AMENDMENT.—Section 48(a)(1) is 
amended by inserting ‘‘except as provided in subsection 
(b)(2),’’ before ‘‘the energy’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
April 11, 2005, under rules similar to the rules of section 
48(m) of the Internal Revenue Code of 1986 (as in effect 
on the day before the date of the enactment of the Rev-
enue Reconciliation Act of 1990). 
SEC. 203. REDUCED MOTOR FUEL EXCISE TAX ON CERTAIN 
MIXTURES OF DIESEL FUEL. 
(a) IN GENERAL.—Paragraph (2) of section 4081(a) 
is amended by adding at the end the following: 
‘‘(D) DIESEL-WATER FUEL EMULSION.—In 
the case of diesel-water fuel emulsion at least 
16.9 percent of which is water and with respect 
to which the emulsion additive is registered by 
a United States manufacturer with the Envi-
ronmental Protection Agency pursuant to sec-
tion 211 of the Clean Air Act (as in effect on
March 31, 2003), subparagraph (A)(iii) shall be 
applied by substituting ‘19.7 cents’ for ‘24.3 
cents’.’’. 
(b) SPECIAL RULES
FOR DIESEL-WATER FUEL 
EMULSIONS.—
(1) REFUNDS FOR TAX-PAID PURCHASES.—Sec-
tion 6427 is amended by redesignating subsections 
(m) through (p) as subsections (n) through (q), re-
spectively, and by inserting after subsection (l) the 
following new subsection: 
‘‘(m) DIESEL FUEL USED
TO PRODUCE EMUL-
SION.—
‘‘(1) IN GENERAL.—Except as provided in sub-
section (k), if any diesel fuel on which tax was im-
posed by section 4081 at the regular tax rate is used 
by any person in producing an emulsion described in 
section 4081(a)(2)(D) which is sold or used in such 
person’s trade or business, the Secretary shall pay 
(without interest) to such person an amount equal to 
the excess of the regular tax rate over the incentive 
tax rate with respect to such fuel. 
‘‘(2) DEFINITIONS.—For purposes of paragraph 
(1)—
‘‘(A) REGULAR TAX RATE.—The term ‘reg-
ular tax rate’ means the aggregate rate of tax
imposed by section 4081 determined without re-
gard to section 4081(a)(2)(D). 
‘‘(B) INCENTIVE
TAX
RATE.—The term 
‘incentive tax rate’ means the aggregate rate of 
tax imposed by section 4081 determined with 
regard to section 4081(a)(2)(D).’’. 
(2) LATER
SEPARATION
OF
FUEL.—Section 
4081 (relating to imposition of tax) is amended by 
inserting after subsection (b) the following new sub-
section: 
‘‘(c) LATER SEPARATION OF FUEL FROM DIESEL-
WATER FUEL EMULSION.—If any person separates the 
taxable fuel from a diesel-water fuel emulsion on which 
tax was imposed under subsection (a) at a rate determined 
under subsection (a)(2)(D) (or with respect to which a 
credit or payment was allowed or made by reason of sec-
tion 6427), such person shall be treated as the refiner of 
such taxable fuel. The amount of tax imposed on any re-
moval of such fuel by such person shall be reduced by the 
amount of tax imposed (and not credited or refunded) on 
any prior removal or entry of such fuel.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on January 1, 2006.
SEC. 204. AMORTIZATION OF DELAY RENTAL PAYMENTS. 
(a) IN GENERAL.—Section 167 (relating to deprecia-
tion) is amended by redesignating subsection (h) as sub-
section (i) and by inserting after subsection (g) the fol-
lowing new subsection: 
‘‘(h) AMORTIZATION OF DELAY RENTAL PAYMENTS 
FOR DOMESTIC OIL AND GAS WELLS.—
‘‘(1) IN GENERAL.—Any delay rental payment 
paid or incurred in connection with the development 
of oil or gas wells within the United States (as de-
fined in section 638) shall be allowed as a deduction 
ratably over the 24-month period beginning on the 
date that such payment was paid or incurred. 
‘‘(2) HALF-YEAR CONVENTION.—For purposes 
of paragraph (1), any payment paid or incurred dur-
ing the taxable year shall be treated as paid or in-
curred on the mid-point of such taxable year. 
‘‘(3) EXCLUSIVE METHOD.—Except as provided 
in this subsection, no depreciation or amortization 
deduction shall be allowed with respect to such pay-
ments. 
‘‘(4) TREATMENT
UPON
ABANDONMENT.—If 
any property to which a delay rental payment relates 
is retired or abandoned during the 24-month period 
described in paragraph (1), no deduction shall be al-
lowed on account of such retirement or abandon-
ment and the amortization deduction under this sub-
section shall continue with respect to such payment. 
‘‘(5) DELAY RENTAL PAYMENTS.—For purposes 
of this subsection, the term ‘delay rental payment’ 
means an amount paid for the privilege of deferring 
development of an oil or gas well under an oil or gas 
lease.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred in tax-
able years beginning after the date of the enactment of 
this Act. 
SEC. 205. AMORTIZATION OF GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES. 
(a) IN GENERAL.—Section 167 (relating to deprecia-
tion), as amended by section 204 of this Act, is amended 
by redesignating subsection (i) as subsection (j) and by 
inserting after subsection (h) the following new subsection: 
‘‘(i) AMORTIZATION
OF GEOLOGICAL
AND GEO-
PHYSICAL EXPENDITURES.—
‘‘(1) IN
GENERAL.—Any geological and geo-
physical expenses paid or incurred in connection 
with the exploration for, or development of, oil or 
gas within the United States (as defined in section 
638) shall be allowed as a deduction ratably over the