†
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HR 6 EAS
‘‘SEC. 200. ENERGY PROPERTY DEDUCTION.
‘‘(a) IN GENERAL.—There shall be allowed as a deduc-
tion for the taxable year an amount equal to the greater
of—
‘‘(1) the amount determined under subsection (b)
for each energy property of the taxpayer placed in
service during such taxable year, or
‘‘(2) the energy efficient residential rental build-
ing property deduction determined under subsection
(e).
‘‘(b) AMOUNT FOR ENERGY PROPERTY.—The amount
determined under this subsection for the taxable year shall
be—
‘‘(1) $150 for any advanced main air circulating
fan,
‘‘(2) $450 for any qualified natural gas, pro-
pane, or oil furnace or hot water boiler, and
‘‘(2) $900 for any energy efficient building prop-
erty.
‘‘(c) ENERGY PROPERTY DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this part,
the term ‘energy property’ means any property—
‘‘(A) which is—
‘‘(i) energy-efficient building property,
‘‘(ii) a qualified natural gas, propane,
or oil furnace or hot water boiler, or
†
1033
HR 6 EAS
‘‘(iii) an advanced main air circu-
lating fan,
‘‘(B)(i) the construction, reconstruction, or
erection of which is completed by the taxpayer,
or
‘‘(ii) which is acquired by the taxpayer if
the original use of such property commences with
the taxpayer,
‘‘(C) with respect to which depreciation (or
amortization in lieu of depreciation) is allow-
able, and
‘‘(D) which meets the performance and
quality standards, and the certification require-
ments (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) for central air conditioners
and electric heat pumps—
‘‘(I) require measurements to be
based on published data which is tested
†
1034
HR 6 EAS
by manufacturers at 95 degrees Fahr-
enheit, and
‘‘(II) may be based on the cer-
tified data of the Air Conditioning and
Refrigeration Institute that are pre-
pared in partnership with the Consor-
tium for Energy Efficiency,
‘‘(iii) in the case of geothermal heat
pumps—
‘‘(I) shall be based on testing
under the conditions of ARI/ISO
Standard 13256–1 for Water Source
Heat Pumps or ARI 870 for Direct
Expansion GeoExchange Heat Pumps
(DX), as appropriate, and
‘‘(II) shall include evidence that
water heating services have been pro-
vided through a desuperheater or inte-
grated water heating system connected
to the storage water heater tank, and
‘‘(iv) are in effect at the time of the ac-
quisition of the property, or at the time of
the completion of the construction, recon-
struction, or erection of the property, as the
case may be.
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1035
HR 6 EAS
‘‘(2) EXCEPTION.—Such term shall not include
any property which is public utility property (as de-
fined in section 46(f)(5) as in effect on the day before
the date of the enactment of the Revenue Reconcili-
ation Act of 1990).
‘‘(d) DEFINITIONS RELATING TO TYPES OF ENERGY
PROPERTY.—For purposes of this section—
‘‘(1) ENERGY-EFFICIENT BUILDING PROPERTY.—
The term ‘energy-efficient building property’ means—
‘‘(A) an electric heat pump water heater
which yields an energy factor of at least 2.0 in
the standard Department of Energy test proce-
dure,
‘‘(B) an electric heat pump which has a
heating seasonal performance factor (HSPF) of
at least 9, a seasonal energy efficiency ratio
(SEER) of at least 15, and an energy efficiency
ratio (EER) of at least 13,
‘‘(C) a geothermal heat pump which—
‘‘(i) in the case of a closed loop prod-
uct, has an energy efficiency ratio (EER) of
at least 14.1 and a heating coefficient of
performance (COP) of at least 3.3,
‘‘(ii) in the case of an open loop prod-
uct, has an energy efficiency ratio (EER) of
†
1036
HR 6 EAS
at least 16.2 and a heating coefficient of
performance (COP) of at least 3.6, and
‘‘(iii) in the case of a direct expansion
(DX) product, has an energy efficiency ratio
(EER) of at least 15 and a heating coeffi-
cient of performance (COP) of at least 3.5,
‘‘(D) a central air conditioner which has a
seasonal energy efficiency ratio (SEER) of at
least 15 and an energy efficiency ratio (EER) of
at least 13, and
‘‘(E) a natural gas, propane, or oil water
heater which has an energy factor of at least
0.80.
‘‘(2) QUALIFIED NATURAL GAS, PROPANE, OR OIL
FURNACE OR HOT WATER BOILER.—The term ‘quali-
fied natural gas, propane, or oil furnace or hot water
boiler’ means a natural gas, propane, or oil furnace
or hot water boiler which achieves an annual fuel uti-
lization efficiency rate of not less than 95.
‘‘(3) ADVANCED MAIN AIR CIRCULATING FAN.—
The term ‘advanced main air circulating fan’ means
a fan used in a natural gas, propane, or oil furnace
originally placed in service by the taxpayer during
the taxable year and which has an annual electricity
use of no more than 2 percent of the total annual en-
†
1037
HR 6 EAS
ergy use of the furnace (as determined in the stand-
ard Department of Energy test procedures).
‘‘(e) ENERGY
EFFICIENT
RESIDENTIAL
RENTAL
BUILDING PROPERTY DEDUCTION.—
‘‘(1) DEDUCTION
ALLOWED.—For purposes of
subsection (a)—
‘‘(A) IN
GENERAL.—The energy efficient
residential rental building property deduction
determined under this subsection is an amount
equal to energy efficient residential rental build-
ing property expenditures made by a taxpayer
for the taxable year.
‘‘(B) MAXIMUM AMOUNT OF DEDUCTION.—
The amount of energy efficient residential rental
building property expenditures taken into ac-
count under subparagraph (A) with respect to
each dwelling unit shall not exceed—
‘‘(i) $6,000 in the case of a percentage
reduction of 50 percent or more as deter-
mined under paragraph (2)(B)(ii), and
‘‘(ii) $12,000 times the percentage re-
duction in the case of a percentage reduc-
tion which is less than 50 percent as deter-
mined under paragraph (2)(B)(ii).
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HR 6 EAS
‘‘(C) YEAR DEDUCTION ALLOWED.—The de-
duction under subparagraph (A) shall be allowed
in the taxable year in which the construction, re-
construction, erection, or rehabilitation of the
property is completed.
‘‘(2) ENERGY EFFICIENT RESIDENTIAL RENTAL
BUILDING PROPERTY EXPENDITURES.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The term ‘energy effi-
cient residential rental building property ex-
penditures’ means an amount paid or incurred
for energy efficient residential rental building
property—
‘‘(i) in connection with construction,
reconstruction, erection, or rehabilitation of
residential rental property (as defined in
section 168(e)(2)(A)) other than property
for which a deduction is allowable under
section 179D,
‘‘(ii) for which depreciation is allow-
able under section 167,
‘‘(iii) which is located in the United
States, and
†
1039
HR 6 EAS
‘‘(iv) the construction, reconstruction,
erection, or rehabilitation of which is com-
pleted by the taxpayer.
Such term includes expenditures for labor costs
properly allocable to the onsite preparation, as-
sembly, or original installation of the property.
‘‘(B) 
ENERGY
EFFICIENT
RESIDENTIAL
RENTAL BUILDING PROPERTY.—
‘‘(i) IN GENERAL.—The term ‘energy
efficient residential rental building prop-
erty’ means any property which, individ-
ually or in combination with other prop-
erty, reduces total annual energy and power
costs with respect to heating and cooling of
the building by 20 percent or more when
compared to—
‘‘(I) in the case of an existing
building, the original condition of the
building, and
‘‘(II) in the case of a new build-
ing, the standards for residential build-
ings of the same type which are built
in compliance with the applicable
building construction codes.
‘‘(ii) PROCEDURES.—
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1040
HR 6 EAS
‘‘(I) IN GENERAL.—For purposes
of clause (i), energy usage and costs
shall be demonstrated by performance-
based compliance in accordance with
the requirements of clause (iv).
‘‘(II) 
COMPUTER
SOFTWARE.—
Computer software shall be used in
support of performance-based compli-
ance under subclause (I) and such soft-
ware shall meet all of the procedures
and methods for calculating energy
savings reductions which are promul-
gated by the Secretary of Energy. Such
regulations on the specifications for
software and verification protocols
shall be based on the 2005 California
Residential 
Alternative 
Calculation
Method Approval Manual.
‘‘(III) 
CALCULATION
REQUIRE-
MENTS.—In calculating tradeoffs and
energy performance, the regulations
prescribed under this clause shall pre-
scribe for the taxable year the costs per
unit of energy and power, such as kilo-
watt hour, kilowatt, gallon of fuel oil,
†
1041
HR 6 EAS
and cubic foot or Btu of natural gas,
which may be dependent on time of
usage. If a State has developed annual
energy usage and cost calculation pro-
cedures based on time of usage costs for
use in the performance standards of the
State’s building energy code prior to
the effective date of this section, the
State may use those annual energy
usage and cost calculation procedures
in lieu of those adopted by the Sec-
retary.
‘‘(IV) APPROVAL
OF
SOFTWARE
SUBMISSIONS.—The 
Secretary 
shall
approve software submissions which
comply with the requirements of sub-
clause (II).
‘‘(V) PROCEDURES
FOR
INSPEC-
TION
AND
TESTING
OF
HOMES.—The
Secretary shall ensure that procedures
for the inspection and testing for com-
pliance comply with the calculation re-
quirements under subclause (III) of
this clause and clause (iv).
†
1042
HR 6 EAS
‘‘(iii) DETERMINATIONS
OF
COMPLI-
ANCE.—A determination of compliance with
respect to energy efficient residential rental
building property made for the purposes of
this subparagraph shall be filed with the
Secretary not later than 1 year after the
date of such determination and shall in-
clude the TIN of the certifier, the address of
the building in compliance, and the identity
of the person for whom such determination
was performed. Determinations of compli-
ance filed with the Secretary shall be avail-
able for inspection by the Secretary of En-
ergy.
‘‘(iv) COMPLIANCE.—
‘‘(I) IN GENERAL.—The Secretary,
after consultation with the Secretary of
Energy, shall establish requirements
for certification and compliance proce-
dures after examining the requirements
for energy consultants and home en-
ergy ratings providers specified by the
Mortgage Industry National Home En-
ergy Rating Standards.
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1043
HR 6 EAS
‘‘(II) INDIVIDUALS QUALIFIED TO
DETERMINE
COMPLIANCE.—The deter-
mination of compliance may be pro-
vided by a local building regulatory
authority, a utility, a manufactured
home production inspection primary
inspection agency (IPIA), a home in-
spector certified by the Secretary of
Energy as trained to perform an en-
ergy inspection for purposes of this sec-
tion, or an accredited home energy rat-
ing system provider. All providers shall
be accredited, or otherwise authorized
to use approved energy performance
measurement methods, by the Residen-
tial 
Energy 
Services 
Network
(RESNET).
‘‘(C) ALLOCATION OF DEDUCTION FOR PUB-
LIC PROPERTY.—In the case of energy efficient
residential rental building property which is
property owned by a Federal, State, or local gov-
ernment or a political subdivision thereof, the
Secretary shall promulgate a regulation to allow
the allocation of the deduction to the person pri-
marily responsible for designing the improve-
†
1044
HR 6 EAS
ments to the property in lieu of the owner of
such property. Such person shall be treated as
the taxpayer for purposes of this subsection.
‘‘(f) BASIS REDUCTION.—For purposes of this subtitle,
if a deduction is allowed under this section with respect
to any property, the basis of such property shall be reduced
by the amount of the deduction so allowed.
‘‘(g) REGULATIONS.—The Secretary shall promulgate
such regulations as necessary to take into account new tech-
nologies regarding energy efficiency and renewable energy
for purposes of determining energy efficiency and savings
under this section.
‘‘(h) TERMINATION.—This section shall not apply with
respect to any property placed in service after December
31, 2008.’’.
(b) CONFORMING AMENDMENT.—Section 1016(a), as
amended by this Act, is amended by striking ‘‘and’’ at the
end of paragraph (32), by striking the period at the end
of paragraph (33) and inserting ‘‘, and’’, and by inserting
the following new paragraph:
‘‘(34) for amounts allowed as a deduction under
section 200(a).’’.
(c) CLERICAL AMENDMENT.—The table of sections for
part VI of subchapter B of chapter 1 is amended by adding
at the end the following new item:
‘‘Sec. 200. Energy property deduction.’’.
†
1045
HR 6 EAS
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to property placed in service after the
date of the enactment of this Act.
SEC. 1524. CREDIT FOR CERTAIN NONBUSINESS ENERGY
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. NONBUSINESS ENERGY PROPERTY.
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—In the case of an individual,
there shall be allowed as a credit against the tax im-
posed by this chapter for the taxable year an amount
equal to the greater of—
‘‘(A) the amount of residential energy prop-
erty expenditures made by the taxpayer during
such taxable year, or
‘‘(B) the amount specified in paragraph (2)
for any building owned by the taxpayer which is
certified as a highly energy-efficient principal
residence during such taxable year.
‘‘(2) CREDIT AMOUNT.—For purposes of para-
graph (1)(B), the credit amount with respect to a
highly energy-efficient principal residence is—
†
1046
HR 6 EAS
‘‘(A) $2,000 in the case of a percentage re-
duction of 50 percent or more as determined
under subsection (c)(4)(C), and
‘‘(B) $4,000 times the percentage reduction
in the case of a percentage reduction which is 20
percent or more but less than 50 percent as de-
termined under subsection (c)(4)(C).
‘‘(b) LIMITATION.—The amount of the credit allowed
under this section by reason of subsection (a)(1)(A) shall
not exceed—
‘‘(1) $50 for any advanced main air circulating
fan,
‘‘(2) $150 for any qualified natural gas, pro-
pane, or oil furnace or hot water boiler, and
‘‘(3) $300 for any item of energy efficient prop-
erty.
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) RESIDENTIAL ENERGY PROPERTY EXPENDI-
TURES.—The term ‘residential energy property ex-
penditures’ means expenditures made by the taxpayer
for qualified energy property installed on or in con-
nection with a dwelling unit which—
‘‘(A) is located in the United States, and
‘‘(B) is used as a principal residence.
†
1047
HR 6 EAS
Such term includes expenditures for labor costs prop-
erly allocable to the onsite preparation, assembly, or
original installation of the property.
‘‘(2) QUALIFIED ENERGY PROPERTY.—
‘‘(A) IN GENERAL.—The term ‘qualified en-
ergy property’ means—
‘‘(i) energy-efficient building property,
‘‘(ii) a qualified natural gas, propane,
or oil furnace or hot water boiler, or
‘‘(iii) an advanced main air circu-
lating fan.
‘‘(B) REQUIRED STANDARDS.—Property de-
scribed under subparagraph (A) shall meet the
performance and quality standards and certifi-
cation standards of section 200(c)(1)(D).
‘‘(3) ENERGY-EFFICIENT
BUILDING
PROPERTY;
QUALIFIED NATURAL GAS, PROPANE, OR OIL FURNACE
OR HOT WATER BOILER; ADVANCED MAIN AIR CIRCU-
LATING
FAN.—The terms ‘energy-efficient building
property’, ‘qualified natural gas, propane, or oil fur-
nace or hot water boiler’, and ‘advanced main air cir-
culating fan’ have the meanings given such terms in
section 200.
‘‘(4) 
HIGHLY
ENERGY-EFFICIENT
PRINCIPAL
RESIDENCE.—
†
1048
HR 6 EAS
‘‘(A) IN GENERAL.—A building is a highly
energy-efficient principal residence if—
‘‘(i) such building is located in the
United States,
‘‘(ii) the building is used as a prin-
cipal residence,
‘‘(iii) in the case of a new building, the
building is not acquired from an eligible
contractor (within the meaning of section
45K(b)(1)), and
‘‘(iv) the building is certified in ac-
cordance with subparagraph (D) as meeting
the requirements of subparagraph (C).
‘‘(B) PRINCIPAL RESIDENCE.—
‘‘(i) IN
GENERAL.—The term ‘prin-
cipal residence’ has the same meaning as
when used in section 121, except that—
‘‘(I) no ownership requirement
shall be imposed, and
‘‘(II) the period for which a build-
ing is treated as used as a principal
residence shall also include the 60-day
period ending on the 1st day on which
it would (but for this subparagraph)
†
1049
HR 6 EAS
first be treated as used as a principal
residence.
‘‘(ii) MANUFACTURED HOUSING.—The
term ‘residence’ shall include a dwelling
unit which is a manufactured home con-
forming to Federal Manufactured Home
Construction and Safety Standards (24
C.F.R. 3280).
‘‘(C) REQUIREMENTS.—The requirements of
this subparagraph are met if the projected heat-
ing and cooling energy usage of the building,
measured in terms of average annual energy cost
to taxpayer, is reduced by 20 percent or more in
comparison to—
‘‘(i) in the case of an existing building,
the original condition of the building, and
‘‘(ii) in the case of a new building, a
comparable building—
‘‘(I) which is constructed in ac-
cordance with the standards of chapter
4 of the 2003 International Energy
Conservation Code, as such Code (in-
cluding supplements) is in effect on the
date of the enactment of this section,
and
†
1050
HR 6 EAS
‘‘(II) for which the heating and
cooling 
equipment 
efficiencies 
cor-
respond to the minimum allowed under
the regulations established by the De-
partment of Energy pursuant to the
National Appliance Energy Conserva-
tion Act of 1987 and in effect at the
time of construction.
‘‘(D) CERTIFICATION PROCEDURES.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A)(iv), energy usage shall be
demonstrated by performance-based compli-
ance in accordance with the requirements of
subsection (d)(2).
‘‘(ii) 
COMPUTER
SOFTWARE.—Com-
puter software shall be used in support of
performance-based compliance under clause
(i) and such software shall meet all of the
procedures and methods for calculating en-
ergy savings reductions which are promul-
gated by the Secretary of Energy. Such reg-
ulations on the specifications for software
and verification protocols shall be based on
the 2005 California Residential Alternative
Calculation Method Approval Manual.
†
1051
HR 6 EAS
‘‘(iii) CALCULATION REQUIREMENTS.—
In calculating tradeoffs and energy per-
formance, the regulations shall prescribe the
costs per unit of energy and power, such as
kilowatt hour, kilowatt, gallon of fuel oil,
and cubic foot or Btu of natural gas, which
may be dependent on time of usage. If a
State has developed annual energy usage
and cost calculation procedures based on
time of usage costs for use in the perform-
ance standards of the State’s building en-
ergy code before the effective date of this sec-
tion, the State may use those annual energy
usage and cost calculation procedures in
lieu of those adopted by the Secretary.
‘‘(iv) APPROVAL
OF
SOFTWARE
SUB-
MISSIONS.—The Secretary shall approve
software submissions which comply with the
calculation requirements of clause (ii).
‘‘(v) PROCEDURES
FOR
INSPECTION
AND
TESTING
OF
DWELLING
UNITS.—The
Secretary shall ensure that procedures for
the inspection and testing for compliance
comply with the calculation requirements
under clause (iii) and subsection (d)(2).
†
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HR 6 EAS
‘‘(d) SPECIAL RULES.—For purposes of this section—
‘‘(1) DETERMINATIONS OF COMPLIANCE.—A de-
termination of compliance made for the purposes of
this section shall be filed with the Secretary within 1
year of the date of such determination and shall in-
clude the TIN of the certifier, the address of the build-
ing in compliance, and the identity of the person for
whom such determination was performed. Determina-
tions of compliance filed with the Secretary shall be
available for inspection by the Secretary of Energy.
‘‘(2) COMPLIANCE.—
‘‘(A) IN
GENERAL.—The Secretary, after
consultation with the Secretary of Energy, shall
establish requirements for certification and com-
pliance procedures after examining the require-
ments for energy consultants and home energy
ratings providers specified by the Mortgage In-
dustry National Home Energy Rating Stand-
ards.
‘‘(B) INDIVIDUALS
QUALIFIED
TO
DETER-
MINE COMPLIANCE.—The determination of com-
pliance may be provided by a local building reg-
ulatory authority, a utility, a manufactured
home production inspection primary inspection
agency (IPIA), or an accredited home energy
†
1053
HR 6 EAS
rating system provider. All providers shall be ac-
credited, or otherwise authorized to use approved
energy performance measurement methods, by
the 
Residential 
Energy 
Services 
Network
(RESNET).
‘‘(3) 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 principal residence by 2 or more individuals, the
following 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 individuals, 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
†
1054
HR 6 EAS
such expenditures made by all of such individ-
uals during such calendar year.
‘‘(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 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 and such credit shall be al-
located pro rata to such individual.
‘‘(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 he owns, such individual shall be
treated as having made his proportionate share
of any expenditures of such association and any
credit shall be allocated appropriately.
‘‘(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-
†
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HR 6 EAS
minium project substantially all of the units of
which are used as principal residences.
‘‘(6) JOINT OWNERSHIP OF ENERGY ITEMS.—
‘‘(A) IN GENERAL.—Any expenditure other-
wise qualifying as an expenditure under this sec-
tion shall not be treated as failing to so qualify
merely because such expenditure was made with
respect to 2 or more dwelling units.
‘‘(B) LIMITS APPLIED SEPARATELY.—In the
case of any expenditure described in subpara-
graph (A), the amount of the credit allowable
under subsection (a) shall (subject to paragraph
(1)) be computed separately with respect to the
amount of the expenditure made for each dwell-
ing unit.
‘‘(7) 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.
‘‘(8) YEAR CREDIT ALLOWED.—The credit under
subsection (a)(2) shall be allowed in the taxable year
in which the percentage reduction with respect to the
principal residence is certified.
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1056
HR 6 EAS
‘‘(9) 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 of a struc-
ture, such expenditure shall be treated as made
when the original use of the constructed structure
by the taxpayer begins.
‘‘(10) PROPERTY FINANCED BY SUBSIDIZED EN-
ERGY FINANCING.—
‘‘(A) REDUCTION OF EXPENDITURES.—
‘‘(i) IN GENERAL.—Except as provided
in subparagraph (C), for purposes of deter-
mining 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.
‘‘(ii) SUBSIDIZED
ENERGY
FINANC-
ING.—For purposes of clause (i), the term
‘subsidized energy financing’ has the same
†
1057
HR 6 EAS
meaning 
given 
such 
term 
in 
section
48(a)(4)(C).
‘‘(B) DOLLAR LIMITS REDUCED.—The dol-
lar amounts in subsection (b)(3) with respect to
each property purchased for such dwelling unit
for any taxable year of such taxpayer shall be re-
duced proportionately by an amount equal to the
sum of—
‘‘(i) the amount of the expenditures
made by the taxpayer during such taxable
year with respect to such dwelling unit and
not taken into account by reason of sub-
paragraph (A), and
‘‘(ii) the amount of any Federal, State,
or local grant received by the taxpayer dur-
ing such taxable year which is used to make
residential energy property expenditures
with respect to the dwelling unit and is not
included in the gross income of such tax-
payer.
‘‘(C) EXCEPTION FOR STATE PROGRAMS.—
Subparagraphs (A) and (B) shall not apply to
expenditures made with respect to property for
which the taxpayer has received a loan, State tax
†
1058
HR 6 EAS
credit, or grant under any State energy pro-
gram.
‘‘(11) COORDINATION WITH SECTION 25D.—In
any case in which a credit under section 25D has
been allowed with respect to property in connection
with a building for which a credit is allowable under
this section by reason of subsection (a)(1)(B)—
‘‘(A) for purposes of subsection (c)(4)(C),
the average annual energy cost with respect to
heating and cooling of—
‘‘(i) 
for 
purposes 
of 
subsection
(c)(4)(C)(i), the original condition of the
building, and
‘‘(ii) 
for 
purposes 
of 
subsection
(c)(4)(C)(ii), the comparable building,
shall be determined assuming such building con-
tains the property for which such credit has been
allowed, and
‘‘(B) any cost of such property taken into
account under such section shall not be taken
into account under this section.
‘‘(e) 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)
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result from such expenditure shall be reduced by the amount
of the credit so allowed.
‘‘(f) REGULATIONS.—The Secretary shall promulgate
such regulations as necessary to take into account new tech-
nologies regarding energy efficiency and renewable energy
for purposes of determining energy efficiency and savings
under this section.
‘‘(g) TERMINATION.—This section shall not apply with
respect to any property placed in service after December
31, 2008.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 1016, as amended
by this Act, is amended by striking ‘‘and’’ at the end
of paragraph (33), by striking the period at the end
of paragraph (34) and inserting ‘‘, and’’, and by add-
ing at the end the following new paragraph:
‘‘(35) 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 inserting
after the item relating to section 25B the following
new item:
‘‘Sec. 25C. Nonbusiness energy property.’’.
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(c) EFFECTIVE DATES.—The amendments made by
this section shall apply to property placed in service after
December 31, 2005.
SEC. 1525. ENERGY CREDIT FOR COMBINED HEAT AND
POWER SYSTEM PROPERTY.
(a) IN GENERAL.—Section 48(a)(3)(A) (defining en-
ergy property) is by striking ‘‘or’’ at the end of clause (i),
by inserting ‘‘or’’ at the end of clause (ii), and by adding
at the end the following new clause:
‘‘(iii) combined heat and power system
property,’’.
(b) COMBINED HEAT
AND POWER SYSTEM PROP-
ERTY.—Section 48 (relating to energy credit; reforestation
credit) is amended by adding at the end the following new
subsection:
‘‘(c) COMBINED HEAT AND POWER SYSTEM PROP-
ERTY.—For purposes of subsection (a)(3)(A)(iii)—
‘‘(1) COMBINED HEAT AND POWER SYSTEM PROP-
ERTY.—The term ‘combined heat and power system
property’ means property comprising a system—
‘‘(A) which uses the same energy source for
the simultaneous or sequential generation of elec-
trical power, mechanical shaft power, or both, in
combination with the generation of steam or
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other forms of useful thermal energy (including
heating and cooling applications),
‘‘(B) which has an electrical capacity of not
more than 15 megawatts or a mechanical energy
capacity of not more than 2,000 horsepower or
an equivalent combination of electrical and me-
chanical energy capacities,
‘‘(C) which produces—
‘‘(i) at least 20 percent of its total use-
ful energy in the form of thermal energy
which is not used to produce electrical or
mechanical power (or combination thereof),
and
‘‘(ii) at least 20 percent of its total
useful energy in the form of electrical or me-
chanical power (or combination thereof),
‘‘(D) the energy efficiency percentage of
which exceeds 60 percent, and
‘‘(E) which is placed in service before Janu-
ary 1, 2008.
‘‘(2) SPECIAL RULES.—
‘‘(A) ENERGY EFFICIENCY PERCENTAGE.—
For purposes of this subsection, the energy effi-
ciency percentage of a system is the fraction—
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‘‘(i) the numerator of which is the total
useful electrical, thermal, and mechanical
power produced by the system at normal
operating rates, and expected to be con-
sumed in its normal application, and
‘‘(ii) the denominator of which is the
lower heating value of the fuel sources for
the system.
‘‘(B) DETERMINATIONS
MADE
ON
BTU
BASIS.—The energy efficiency percentage and the
percentages under paragraph (1)(C) shall be de-
termined on a Btu basis.
‘‘(C) INPUT AND OUTPUT PROPERTY NOT IN-
CLUDED.—The term ‘combined heat and power
system property’ does not include property used
to transport the energy source to the facility or
to distribute energy produced by the facility.
‘‘(D) CERTAIN EXCEPTION NOT TO APPLY.—
The first sentence of the matter in subsection
(a)(3) which follows subparagraph (D) thereof
shall not apply to combined heat and power sys-
tem property.
‘‘(3) SYSTEMS USING BAGASSE.—If a system is
designed to use bagasse for at least 90 percent of the
energy source—
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‘‘(A) paragraph (1)(D) shall not apply, but
‘‘(B) the amount of credit determined under
subsection (a) with respect to such system shall
not exceed the amount which bears the same
ratio to such amount of credit (determined with-
out regard to this paragraph) as the energy effi-
ciency percentage of such system bears to 60 per-
cent.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to periods after the date of the enactment
of this Act, in taxable years ending after such date, 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 Revenue Reconciliation Act of
1990).
SEC. 1526. CREDIT FOR ENERGY EFFICIENT APPLIANCES.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business-related credits), as
amended by this Act, is amended by adding at the end the
following new section:
‘‘SEC. 45L. ENERGY EFFICIENT APPLIANCE CREDIT.
‘‘(a) GENERAL RULE.—
‘‘(1) IN GENERAL.—For purposes of section 38,
the energy efficient appliance credit determined under
this section for any taxable year is an amount equal
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to the sum of the credit amounts determined under
paragraph (2) for each type of qualified energy effi-
cient appliance produced by the taxpayer during the
calendar year ending with or within the taxable year.
‘‘(2) CREDIT AMOUNTS.—The credit amount de-
termined for any type of qualified energy efficient ap-
pliance is—
‘‘(A) the applicable amount determined
under subsection (b) with respect to such type,
multiplied by
‘‘(B) the eligible production for such type.
‘‘(b) APPLICABLE AMOUNT.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a)—
‘‘(A) 
DISHWASHERS.—The 
applicable
amount is the energy savings amount in the case
of a dishwasher which—
‘‘(i) is manufactured in calendar year
2006 or 2007, and
‘‘(ii) meets the requirements of the En-
ergy Star program which are in effect for
dishwashers in 2007.
‘‘(B) CLOTHES WASHERS.—The applicable
amount is—
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‘‘(i) $50, in the case of a clothes washer
which—
‘‘(I) is manufactured in calendar
year 2005, and
‘‘(II) has an MEF of at least 1.42,
‘‘(ii) $100, in the case of a clothes
washer which—
‘‘(I) is manufactured in calendar
year 2005, 2006, or 2007, and
‘‘(II) meets the requirements of the
Energy Star program which are in ef-
fect for clothes washers in 2007, and
‘‘(iii) the energy and water savings
amount, in the case of a clothes washer
which—
‘‘(I) is manufactured in calendar
year 2008, 2009, or 2010, and
‘‘(II) meets the requirements of the
Energy Star program which are in ef-
fect for clothes washers in 2010.
‘‘(C) REFRIGERATORS.—
‘‘(i) 15 PERCENT SAVINGS.—The appli-
cable amount is $75 in the case of a refrig-
erator which—
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‘‘(I) is manufactured in calendar
year 2005 or 2006, and
‘‘(II) consumes at least 15 percent
but not more than 20 percent less kilo-
watt hours per year than the 2001 en-
ergy conservation standard.
‘‘(ii) 20 PERCENT
SAVINGS.—In the
case of a refrigerator which consumes at
least 20 percent but not more than 25 per-
cent less kilowatt hours per year than the
2001 energy conservation standards, the ap-
plicable amount is—
‘‘(I) $125 for a refrigerator which
is manufactured in calendar year
2005, 2006, or 2007, and
‘‘(II) $100 for a refrigerator
which is manufactured in calendar
year 2008.
‘‘(iii) 25 PERCENT
SAVINGS.—In the
case of a refrigerator which consumes at
least 25 percent less kilowatt hours per year
than the 2001 energy conservation stand-
ards, the applicable amount is—