170
paragraph (1) for any taxable year shall not ex-
ceed $10,000,000 for a taxpayer. 
‘‘(B) 
TREATMENT
OF
CONTROLLED 
GROUP.—For purposes of clause (i)—
‘‘(i) all component members of a con-
trolled group shall be treated as one tax-
payer, and 
‘‘(ii) the Secretary shall apportion the 
dollar limitation in such clause among the 
component members of such controlled 
group in such manner as he shall by regu-
lation prescribe. 
‘‘(C) TREATMENT OF PARTNERSHIPS AND 
S CORPORATIONS.—In the case of a partner-
ship, the dollar limitation in clause (i) shall 
apply with respect to the partnership and with 
respect to each partner. A similar rule shall 
apply in the case of an S corporation and its 
shareholders. 
‘‘(D) CONTROLLED GROUP DEFINED.—For 
purposes of clause (ii), the term ‘controlled 
group’ has the meaning given such term by sec-
tion 1563(a), except that ‘more than 50 per-
cent’ shall be substituted for ‘at least 80 per-
171
cent’ 
each 
place 
it 
appears 
in 
section 
1563(a)(1). 
‘‘(c) CERTAIN
PROGRESS
EXPENDITURE
RULES 
MADE APPLICABLE.—Rules similar to the rules of sub-
sections (c)(4) and (d) of section 46 (as in effect on the 
day before the date of the enactment of the Revenue Rec-
onciliation Act of 1990) shall apply for purposes of this 
subsection. 
‘‘(d) DEFINITIONS.—For purposes of this sub-
section—
‘‘(1) QUALIFIED RECYCLING PROPERTY.—The 
term ‘qualified recycling property’ means equipment 
used exclusively to collect, distribute, or sort used 
ferrous or nonferrous metals. The term does not in-
clude equipment used to collect, distribute, or sort 
precious metals such as gold, silver, or platinum un-
less such use is coincidental to the collection, dis-
tribution, or sorting of other used ferrous or non-
ferrous metals. 
‘‘(2) QUALIFIED
REMANUFACTURING
PROP-
ERTY.—The term ‘qualified remanufacturing prop-
erty’ means equipment used primarily by the tax-
payer in the business of rebuilding or remanufac-
turing a used product or part, but only if—
172
‘‘(A) the rebuilt or remanufactured prod-
uct or part includes 50 percent or less virgin 
material, and 
‘‘(B) the equipment is not used primarily 
in a process occurring after the product or part 
is rebuilt or remanufactured. 
‘‘(3) COORDINATION
WITH
REHABILITATION 
AND ENERGY CREDITS.—For purposes of this sec-
tion—
‘‘(A) the basis of any qualified reclamation 
property shall be reduced by that portion of the 
basis of any property which is attributable to 
qualified rehabilitation expenditures (as defined 
in section 47(c)(2)) or to the energy percentage 
of energy property (as determined under section 
48A), and 
‘‘(B) expenditures taken into account 
under either section 47 or 48A shall not be 
taken into account under this section.’’. 
(c) SPECIAL BASIS ADJUSTMENT RULE.—Paragraph 
(3) of section 50(c) (relating to basis adjustment to invest-
ment credit property) is amended by inserting ‘‘or rec-
lamation credit’’ after ‘‘energy credit’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for subpart E of part IV of subchapter A of chapter 1
173
is amended by inserting before the item relating to section 
48A the following:
‘‘Sec. 48. Reclamation credit.’’.
(e) 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. 327. CREDIT FOR DISTRIBUTED ENERGY GENERATION 
AND 
DEMAND 
MANAGEMENT 
PROPERTY 
USED IN RESIDENCES. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal 
credits) is amended by inserting after section 25B the fol-
lowing: 
‘‘SEC. 25C. RESIDENTIAL DISTRIBUTED ENERGY GENERA-
TION AND DEMAND MANAGEMENT PROP-
ERTY. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this chapter for the taxable year an amount 
equal to the sum of—
‘‘(1) 50 percent of the qualified photovoltaic 
property expenditures, 
‘‘(2) 15 percent of the qualified solar water 
heating property expenditures, 
‘‘(3) 25 percent of the qualified wind energy 
property expenditures, and
174
‘‘(4) 20 percent for the qualified fuel cell prop-
erty expenditures, 
‘‘(5) 20 percent for qualified energy-efficient 
building property expenditures (10 percent for ex-
penditures described in subsection (c)(5)(B)), made 
by the taxpayer during the taxable year. 
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—
‘‘(A) PHOTOVOLTAIC PROPERTY.—
‘‘(i) IN GENERAL.—The credit allowed 
under subsection (a)(1) shall not exceed 
the applicable rate multiplied by the num-
ber of watts of generating capacity of the 
property which does not exceed 10 kilo-
watts. 
‘‘(ii) APPLICABLE
RATE.—For pur-
poses of this subparagraph, the applicable 
rate is the rate determined under the fol-
lowing table:
‘‘In the case of taxable years beginning in calendar year: 
The applica-
ble rate is: 
2006 ................................................................................................
$3.00
2007 ................................................................................................
$2.75
2008 ................................................................................................
$2.50
2009 and thereafter ........................................................................
$2.25
‘‘(iii) GENERATING
CAPACITY.—For 
purposes of this subparagraph, generating
175
capacity shall be measured as the rated 
peak power output of a system’s compo-
nent modules as established by the Amer-
ican Society for Testing and Materials. 
Any photovoltaic property which is elec-
trically contiguous or serves the same cus-
tomer load shall be treated as one system 
for purposes of this section. 
‘‘(B) SOLAR WATER HEATING.—The credit 
allowed under subsection (a)(2) shall not exceed 
$2,000 for each system of solar energy prop-
erty. 
‘‘(C) WIND.—The credit allowed under 
subsection (a)(3) shall not exceed $5,000 for 
each system of wind energy property. 
‘‘(D) ENERGY-EFFICIENT BUILDING PROP-
ERTY.—The credit allowed under subsection 
(a)(5) shall not exceed $500 for each item of 
energy-efficient building property. 
‘‘(2) TYPE OF PROPERTY.—No expenditure may 
be taken into account under this section unless such 
expenditure is made by the taxpayer for property in-
stalled on or in connection with a dwelling unit 
which is located in the United States and which is 
used as a residence.
176
‘‘(3) 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 nonprofit Solar Rating 
Certification Corporation or a comparable enti-
ty endorsed by the government of the State in 
which such property is installed, and 
‘‘(B) in the case of a photovoltaic, wind en-
ergy, or fuel cell property, such property meets 
appropriate fire and electric code requirements. 
‘‘(c) DEFINITIONS AND SPECIAL RULES RELATING 
TO EXPENDITURES.—For purposes of this section—
‘‘(1) 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. 
‘‘(2) 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 with respect to
177
which a majority of the energy is derived from the 
sun. 
‘‘(3) 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 a dwelling unit. 
‘‘(4) QUALIFIED
FUEL
CELL
PROPERTY
EX-
PENDITURE.—The term ‘qualified fuel cell property 
expenditure’ means an expenditure for property 
which uses an electrochemical fuel cell system to 
generate electricity for use in a dwelling unit. 
‘‘(5) QUALIFIED ENERGY-EFFICIENT BUILDING 
PROPERTY EXPENDITURE.—
‘‘(A) IN
GENERAL.—The term ‘qualified 
energy-efficient building property expenditure’ 
means an expenditure for energy efficient build-
ing property defined in clauses (ii), (iii), (iv), 
(v), (vi), and (vii) of section 48A(d)(3)(A). 
‘‘(B) 10 PERCENT CREDIT FOR CERTAIN 
PROPERTY.—For purposes of subsection (a)(5), 
the expenditures described in this subparagraph 
are expenditures for energy efficient building 
property defined in clauses (iii)(II) and (iv)(II) 
of section 48A(d)(3)(A).
178
‘‘(6) 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) solely because 
it constitutes a structural component of the struc-
ture on which it is installed. 
‘‘(7) LABOR
COSTS.—Expenditures for labor 
costs properly allocable to the onsite preparation, as-
sembly, or original installation of the property de-
scribed in paragraph (1), (2), (3), (4), or (5) and for 
piping or wiring to interconnect such property to the 
dwelling unit shall be taken into account for pur-
poses of this section. 
‘‘(8) ENERGY
STORAGE
MEDIUM.—Expendi-
tures 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 account for purposes 
of this section. 
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) 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
179
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 cal-
endar year by any of such individuals with re-
spect to such dwelling unit shall be determined 
by treating 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 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. 
‘‘(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 
defined in such section), such individual shall be 
treated as having made his tenant-stockholder’s pro-
180
portionate share (as defined in section 216(b)(3)) of 
any expenditures 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 such individual owns, such indi-
vidual shall be treated as having made his pro-
portionate share of any expenditures of such as-
sociation. 
‘‘(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. 
‘‘(4) JOINT OWNERSHIP OF ITEMS OF SOLAR OR 
WIND ENERGY PROPERTY.—
‘‘(A) IN GENERAL.—Any expenditure oth-
erwise qualifying as an expenditure described in 
paragraph (1), (2), or (3) of subsection (c) shall 
not be treated as failing to so qualify merely be-
181
cause such expenditure was made with respect 
to 2 or more dwelling units. 
‘‘(B) LIMITS
APPLIED
SEPARATELY.—In 
the case of any expenditure described in sub-
paragraph (A), the amount of the credit allow-
able under subsection (a) shall (subject to para-
graph (1)) be computed separately with respect 
to the amount of the expenditure made for each 
dwelling unit. 
‘‘(5) ALLOCATION IN CERTAIN CASES.—If less 
than 80 percent of the use of an item is for nonbusi-
ness residential purposes, only that portion of the 
expenditures for such item which is properly allo-
cable to use for nonbusiness residential purposes 
shall be taken into account. For purposes of this 
paragraph, use for a swimming pool shall be treated 
as use which is not for residential purposes. 
‘‘(6) 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