132 
‘‘(1) QUALIFIED ENERGY EFFICIENT BUILDING 
PROPERTY EXPENDITURE.—The term ‘qualified en-
ergy efficient building property expenditure’ means 
an expenditure for any Tier 2 or Tier 1 energy effi-
cient building property. 
‘‘(2) TIER
ENERGY
EFFICIENT
BUILDING 
PROPERTY.—The term ‘Tier 2 energy efficient build-
ing property’ means— 
‘‘(A) an electric heat pump water heater 
which yields an energy factor of at least 1.7 in 
the standard Department of Energy test proce-
dure, 
‘‘(B) a natural gas, oil, propane furnace, 
or hot water boiler which achieves at least 95 
percent 
annual 
fuel 
utilization 
efficiency 
(AFUE) and which has an advanced main air 
circulating fan, 
‘‘(C) a natural gas, oil, or propane water 
heater (including a tankless water heater) 
which has an energy factor of at least 0.80 in 
the standard Department of Energy test proce-
dure, 
‘‘(D) a combination space and water heat-
ing system which has a combined energy factor 
of at least 0.80 and a combined annual fuel uti-
133 
lization efficiency (AFUE) of at least 78 per-
cent in the standard Department of Energy test 
procedure, 
‘‘(E) a geothermal heat pump which has 
water heating capability by a desuperheater or 
full-condensing option and which has an energy 
efficiency ratio (EER) of at least 18 for 
ground-loop systems, at least 21 for ground- 
water systems, and at least 17 for direct 
GeoExchange systems; and 
‘‘(F) a central air conditioner or central 
heat pump which meets— 
‘‘(i) the highest efficiency tier estab-
lished by the Consortium for Energy Effi-
ciency as in effect on Jan. 1, 2006; and 
‘‘(ii) for units installed after Decem-
ber 31, 2006, the Energy Star installation 
specifications that take effect in 2007, as 
set by the Environmental Protection Agen-
cy. 
‘‘(3) TIER
ENERGY
EFFICIENT
BUILDING 
PROPERTY.—The term ‘Tier 1 energy efficient build-
ing property’ means— 
‘‘(A) a natural gas, oil, propane furnace, or 
hot water boiler which achieves at least 92 per-
134 
cent annual fuel utilization efficiency (AFUE) 
and which has an advanced main air circulating 
fan, 
‘‘(B) a natural gas, oil, or propane water 
heater (including a tankless water heater) 
which has an energy factor of at least 0.65 but 
less than 0.80 in the standard Department of 
Energy test procedure, 
‘‘(C) an advanced main air circulating fan 
which has an annual electricity use of no more 
than 2 percent of the total annual energy use 
(as determined in the standard Department of 
Energy test procedures) and which is used in a 
new natural gas, propane, or oil-fired furnace, 
‘‘(D) a combination space and water heat-
ing system which has a combined energy factor 
of at least 0.65 but less than 0.80 and a com-
bined annual fuel utilization efficiency (AFUE) 
of at least 78 percent in the standard Depart-
ment of Energy test procedure, 
‘‘(E) a central air conditioner or central 
heat pump which meets the Energy Star speci-
fications set by the Environmental Protection 
Agency as follows—
135 
‘‘(i) equipment specifications that take 
effect in 2006 (including for units installed 
before the specifications take effect); and 
‘‘(ii) for units installed after Decem-
ber 31, 2006, installation specifications 
that take effect in 2007. 
‘‘(4) LABOR
COSTS.—Expenditures for labor 
costs properly allocable to the onsite preparation, as-
sembly, or original installation of the property and 
for piping or wiring to interconnect such property to 
the dwelling unit shall be taken into account for pur-
poses of this section. 
‘‘(e) 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 
as a 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 
(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
136 
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-
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 the individual owns, such indi-
137 
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. 
‘‘(4) ALLOCATION IN CERTAIN CASES.—Except 
in the case of qualified wind energy property expend-
itures, if less than 80 percent of the use of an item 
is for nonbusiness purposes, only that portion of the 
expenditures for such item which is properly allo-
cable to use for nonbusiness purposes shall be taken 
into account. 
‘‘(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.
138 
‘‘(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. 
‘‘(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 
into 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 
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. 
‘‘(g) TERMINATION.—The credit allowed under this 
section shall not apply to expenditures after December 31, 
2008.’’.
139 
(b) CONFORMING AMENDMENTS.— 
(1) Section 1016(a), as amended by this Act, is 
amended by striking ‘‘and’’ at the end of paragraph 
(34), by striking the period at the end of paragraph 
(35) and inserting ‘‘, and’’, and by adding at the 
end the following new paragraph: 
‘‘(36) to the extent provided in section 25E(f), 
in the case of amounts with respect to which a credit 
has been allowed under section 25E.’’. 
(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 25D the 
following new item: 
‘‘25E. Residential energy efficient property.’’. 
(c) 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, 
2005, in taxable years ending after such date. 
(2) SUBSECTION (b).—The amendments made 
by subsection (b) shall apply to taxable years begin-
ning after December 31, 2005. 
SEC. 505. CREDIT FOR ENERGY EFFICIENT APPLIANCES. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business-related cred-
140 
its) is amended by adding at the end the following new 
section: 
‘‘SEC. 45K. 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 to the sum of the credit amounts determined 
under paragraph (2) for each type of qualified en-
ergy efficient appliance produced by the taxpayer 
during the calendar year ending with or within the 
taxable year. 
‘‘(2) CREDIT
AMOUNTS.—The credit amount 
determined for any type of qualified energy efficient 
appliance 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—
141 
‘‘(i) is manufactured in calendar year 
2006 or 2007, and 
‘‘(ii) meets the requirements of the 
Energy Star program which are in effect 
for dishwashers in 2007. 
‘‘(B) CLOTHES WASHERS.—The applicable 
amount is— 
‘‘(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 
effect for clothes washers in 2007, 
and 
‘‘(iii) the energy and water savings 
amount, in the case of a clothes washer 
which—
142 
‘‘(I) is manufactured in calendar 
year 2008, 2009, or 2010, and 
‘‘(II) meets the requirements of 
the Energy Star program which are in 
effect for clothes washers in 2010. 
‘‘(C) REFRIGERATORS.— 
‘‘(i) 15 PERCENT SAVINGS.—The ap-
plicable amount is $75 in the case of a re-
frigerator which— 
‘‘(I) is manufactured in calendar 
year 2005 or 2006, and 
‘‘(II) consumes at least 15 per-
cent but not more than 20 percent 
less kilowatt hours per year than the 
2001 energy 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 
applicable amount is— 
‘‘(I) $125 for a refrigerator 
which is manufactured in calendar 
year 2005, 2006, or 2007, and
143 
‘‘(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 
standards, the applicable amount is— 
‘‘(I) $175 for a refrigerator 
which is manufactured in calendar 
year 2005, 2006, or 2007, and 
‘‘(II) $150 for a refrigerator 
which is manufactured in calendar 
year 2008, 2009, or 2010. 
‘‘(2) ENERGY SAVINGS AMOUNT.—For purposes 
of paragraph (1)(A)— 
‘‘(A) IN
GENERAL.—The energy savings 
amount is the lesser of— 
‘‘(i) the product of— 
‘‘(I) $3, and 
‘‘(II) 100 multiplied by the en-
ergy savings percentage, or 
‘‘(ii) $100.
144 
‘‘(B) ENERGY
SAVINGS
PERCENTAGE.— 
For purposes of subparagraph (A), the energy 
savings percentage is the ratio of— 
‘‘(i) the EF required by the Energy 
Star program for dishwashers in 2007 
minus the EF required by the Energy Star 
program for dishwashers in 2005, to 
‘‘(ii) the EF required by the Energy 
Star program for dishwashers in 2007. 
‘‘(3) ENERGY AND WATER SAVINGS AMOUNT.— 
For purposes of paragraph (1)(B)(iii)— 
‘‘(A) IN GENERAL.—The energy and water 
savings amount is the lesser of— 
‘‘(i) the product of— 
‘‘(I) $10, and 
‘‘(II) 100 multiplied by the en-
ergy and water savings percentage, or 
‘‘(ii) $200. 
‘‘(B) ENERGY AND WATER SAVINGS PER-
CENTAGE.—For purposes of subparagraph (A), 
the energy and water savings percentage is the 
average of the MEF savings percentage and the 
WF savings percentage.
145 
‘‘(C) MEF SAVINGS
PERCENTAGE.—For 
purposes of this paragraph, the MEF savings 
percentage is the ratio of— 
‘‘(i) the MEF required by the Energy 
Star program for clothes washers in 2010 
minus the MEF required by the Energy 
Star program for clothes washers in 2007, 
to 
‘‘(ii) the MEF required by the Energy 
Star program for clothes washers in 2010. 
‘‘(D) WF 
SAVINGS
PERCENTAGE.—For 
purposes of this paragraph, the WF savings 
percentage is the ratio of— 
‘‘(i) the WF required by the Energy 
Star program for clothes washers in 2007 
minus the WF required by the Energy 
Star program for clothes washers in 2010, 
to 
‘‘(ii) the WF required by the Energy 
Star program for clothes washers in 2007. 
‘‘(c) ELIGIBLE PRODUCTION.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), the eligible production in a cal-
endar year with respect to each type of energy effi-
cient appliance is the excess of—
146 
‘‘(A) the number of appliances of such type 
which are produced by the taxpayer in the 
United States during such calendar year, over 
‘‘(B) the average number of appliances of 
such type which were produced by the taxpayer 
(or any predecessor) in the United States dur-
ing the preceding 3-calendar year period. 
‘‘(2) SPECIAL
RULE
FOR
REFRIGERATORS.— 
The eligible production in a calendar year with re-
spect to each type of refrigerator described in sub-
section (b)(1)(C) is the excess of— 
‘‘(A) the number of appliances of such type 
which are produced by the taxpayer in the 
United States during such calendar year, over 
‘‘(B) 110 percent of the average number of 
appliances of such type which were produced by 
the taxpayer (or any predecessor) in the United 
States during the preceding 3-calendar year pe-
riod. 
‘‘(3) SPECIAL RULE FOR 2005 PRODUCTION.— 
For purposes of determining eligible production for 
calendar year 2005— 
‘‘(A) only production after the date of en-
actment of this section shall be taken into ac-
count under paragraphs (1)(A) and (2)(A), and
147 
‘‘(B) the amount taken into account under 
paragraphs (1)(B) and (2)(B) shall be an 
amount which bears the same ratio to the 
amount which would (but for this paragraph) 
be taken into account under such paragraph 
as— 
‘‘(i) the number of days in calendar 
year 2005 after the date of enactment of 
this section, bears to 
‘‘(ii) 365. 
‘‘(d) TYPES OF ENERGY EFFICIENT APPLIANCE.— 
For purposes of this section, the types of energy efficient 
appliances are— 
‘‘(1) 
dishwashers 
described 
in 
subsection 
(b)(1)(A), 
‘‘(2) clothes washers described in subsection 
(b)(1)(B)(i), 
‘‘(3) clothes washers described in subsection 
(b)(1)(B)(ii), 
‘‘(4) clothes washers described in subsection 
(b)(1)(B)(iii), 
‘‘(5) 
refrigerators 
described 
in 
subsection 
(b)(1)(C)(i), 
‘‘(6) 
refrigerators 
described 
in 
subsection 
(b)(1)(C)(ii)(I),
148 
‘‘(7) 
refrigerators 
described 
in 
subsection 
(b)(1)(C)(ii)(II), 
‘‘(8) 
refrigerators 
described 
in 
subsection 
(b)(1)(C)(iii)(I), and 
‘‘(9) 
refrigerators 
described 
in 
subsection 
(b)(1)(C)(iii)(II). 
‘‘(e) LIMITATIONS.— 
‘‘(1) AGGREGATE CREDIT AMOUNT ALLOWED.— 
The aggregate amount of credit allowed under sub-
section (a) with respect to a taxpayer for any tax-
able year shall not exceed $75,000,000 reduced by 
the amount of the credit allowed under subsection 
(a) to the taxpayer (or any predecessor) for all prior 
taxable years. 
‘‘(2) AMOUNT ALLOWED FOR CERTAIN APPLI-
ANCES.— 
‘‘(A) IN GENERAL.—In the case of appli-
ances described in subparagraph (C), the aggre-
gate amount of the credit allowed under sub-
section (a) with respect to a taxpayer for any 
taxable year shall not exceed $20,000,000 re-
duced by the amount of the credit allowed 
under subsection (a) to the taxpayer (or any 
predecessor) for all prior taxable years with re-
spect to such appliances.
149 
‘‘(B) ELECTION TO INCREASE ALLOWABLE 
CREDIT.—In the case of any taxpayer who 
makes an election under this subparagraph— 
‘‘(i) subparagraph (A) shall be applied 
by 
substituting 
‘$25,000,000’ 
for 
‘$20,000,000’, and 
‘‘(ii) the aggregate amount of the 
credit allowed under subsection (a) with re-
spect to such taxpayer for any taxable year 
for appliances described in subparagraph 
(C) and the additional appliances described 
in subparagraph (D) shall not exceed 
$50,000,000 reduced by the amount of the 
credit allowed under subsection (a) to the 
taxpayer (or any predecessor) for all prior 
taxable years with respect to such appli-
ances. 
‘‘(C) APPLIANCES DESCRIBED.—The appli-
ances described in this subparagraph are— 
‘‘(i) clothes washers described in sub-
section (b)(1)(B)(i), and 
‘‘(ii) refrigerators described in sub-
section (b)(1)(C)(i).
150 
‘‘(D) ADDITIONAL APPLIANCES.—The ad-
ditional appliances described in this subpara-
graph are— 
‘‘(i) refrigerators described in sub-
section (b)(1)(C)(ii)(I), and 
‘‘(ii) refrigerators described in sub-
section (b)(1)(C)(ii)(II). 
‘‘(3) 
LIMITATION
BASED
ON
GROSS
RE-
CEIPTS.—The credit allowed under subsection (a) 
with respect to a taxpayer for the taxable year shall 
not exceed an amount equal to 2 percent of the aver-
age annual gross receipts of the taxpayer for the 3 
taxable years preceding the taxable year in which 
the credit is determined. 
‘‘(4) GROSS RECEIPTS.—For purposes of this 
subsection, the rules of paragraphs (2) and (3) of 
section 448(c) shall apply. 
‘‘(f) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED
ENERGY
EFFICIENT
APPLI-
ANCE.—The term ‘qualified energy efficient appli-
ance’ means— 
‘‘(A) any dishwasher described in sub-
section (b)(1)(A), 
‘‘(B) any clothes washer described in sub-
section (b)(1)(B), and
151 
‘‘(C) any refrigerator described in sub-
section (b)(1)(C). 
‘‘(2) DISHWASHER.—The term ‘dishwasher’ 
means a residential dishwasher subject to the energy 
conservation standards established by the Depart-
ment of Energy. 
‘‘(3) CLOTHES
WASHER.—The term ‘clothes 
washer’ means a residential model clothes washer, 
including a residential style coin operated washer. 
‘‘(4) REFRIGERATOR.—The term ‘refrigerator’ 
means a residential model automatic defrost refrig-
erator-freezer which has an internal volume of at 
least 16.5 cubic feet. 
‘‘(5) MEF.—The term ‘MEF’ means the modi-
fied energy factor established by the Department of 
Energy for compliance with the Federal energy con-
servation standards. 
‘‘(6) EF.—The term ‘EF’ means the energy 
factor established by the Department of Energy for 
compliance with the Federal energy conservation 
standards. 
‘‘(7) WF.—The term ‘WF’ means Water Fac-
tor (as determined by the Secretary of Energy). 
‘‘(8) PRODUCED.—The term ‘produced’ in-
cludes manufactured.
152 
‘‘(9) 2001 
ENERGY
CONSERVATION
STAND-
ARD.—The term ‘2001 energy conservation stand-
ard’ means the energy conservation standards pro-
mulgated by the Department of Energy and effective 
July 1, 2001. 
‘‘(g) SPECIAL RULES.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—Rules similar to the rules 
of subsections (c), (d), and (e) of section 52 shall 
apply. 
‘‘(2) CONTROLLED GROUP.— 
‘‘(A) IN GENERAL.—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 a single producer. 
‘‘(B) INCLUSION
OF
FOREIGN
CORPORA-
TIONS.—For purposes of subparagraph (A), in 
applying subsections (a) and (b) of section 52 
to this section, section 1563 shall be applied 
without regard to subsection (b)(2)(C) thereof. 
‘‘(3) VERIFICATION.—No amount shall be al-
lowed as a credit under subsection (a) with respect 
to which the taxpayer has not submitted such infor-
mation or certification as the Secretary, in consulta-
153 
tion with the Secretary of Energy, determines nec-
essary.’’. 
(b) CONFORMING AMENDMENT.—Section 38(b) (re-
lating to general business credit) is amended by striking 
‘‘plus’’ at the end of paragraph (19), by striking the period 
at the end of paragraph (20) and inserting ‘‘, plus’’, and 
by adding at the end the following new paragraph: 
‘‘(21) the energy efficient appliance credit de-
termined under section 45K(a).’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
is amended by adding at the end the following new item: 
‘‘45K. Energy efficient appliance credit.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to appliances produced after the 
date of the enactment of this Act, in taxable years ending 
after such date. 
SEC. 506. INCENTIVE FOR CERTAIN ENERGY EFFICIENT 
PROPERTY USED IN BUSINESS. 
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 is amended by adding at the end the following new 
section: 
‘‘SEC. 200. ENERGY PROPERTY DEDUCTION. 
‘‘(a) IN GENERAL.—There shall be allowed as a de-
duction for the taxable year an amount equal to the sum 
of—
154 
‘‘(1) the amount determined under subsection 
(b) for each energy property of the taxpayer placed 
in service during such taxable year, and 
‘‘(2) the energy efficient residential rental 
building property deduction determined under sub-
section (d). 
‘‘(b) AMOUNT FOR ENERGY PROPERTY.— 
‘‘(1) IN
GENERAL.—The amount determined 
under this subsection for the taxable year for each 
item of energy property is— 
‘‘(A) $900 for each Tier 2 electric heat 
pump water heater, 
‘‘(B) $900 for each Tier 2 natural gas, oil 
or propane furnace or hot water boiler installed 
in 2006 ($750 for equipment installed in 2007, 
$600 for equipment installed in 2008), 
‘‘(C) $600 for each Tier 1 natural gas, oil, 
or propane furnace, or hot water boiler installed 
in 2006 ($450 for equipment installed in 2007, 
$300 for equipment installed in 2008), 
‘‘(D) $900 for each Tier 2 natural gas, oil, 
or propane water heater, 
‘‘(E) $150 for each Tier 1 natural gas, oil, 
or propane water heater,
155 
‘‘(F) $150 for a Tier 1advanced main air 
circulating fan which is installed in a furnace 
with an Annual Fuel Utilization Efficiency of 
less than 92 percent, 
‘‘(G) $900 for each Tier 2 combination 
space and water heating system, 
‘‘(H) $150 for each Tier 1combination 
space and water heating system, 
‘‘(I) $750 for each Tier 2 geothermal heat 
pump, 
‘‘(J) $900 for each Tier 2 central air con-
ditioner or central heat pump ($600 for equip-
ment installed in 2008), and 
‘‘(K) $600 for each Tier 1central air con-
ditioner or central heat pump ($300 for equip-
ment installed in 2008). 
‘‘(2) SAFETY CERTIFICATIONS.—A rule similar 
to the rule of section 25E(b)(2) shall apply for pur-
poses of this section. 
‘‘(c) ENERGY PROPERTY DEFINED.—For purposes of 
this part, the term ‘energy property’ means any prop-
erty— 
‘‘(1) which is energy efficient building property 
(as defined in section 25E(d),
156 
‘‘(2)(A) the construction, reconstruction, or 
erection of which is completed by the taxpayer, or 
‘‘(B) which is acquired by the taxpayer if the 
original use of such property commences with the 
taxpayer, and 
‘‘(3) with respect to which depreciation (or am-
ortization in lieu of depreciation) is allowable. 
‘‘(d) 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
DEDUC-
TION.—The amount of energy efficient residen-
tial rental building property expenditures taken 
into account under subparagraph (A) with re-
spect to each dwelling unit shall not exceed— 
‘‘(i) $6,000 in the case of a percent-
age reduction of 50 percent as determined 
under paragraph (2)(B), and
157 
‘‘(ii) $12,000 times the percentage re-
duction in the case of a percentage reduc-
tion of less than 50 percent as determined 
under paragraph (2)(B). 
‘‘(C) YEAR
DEDUCTION
ALLOWED.—The 
deduction under subparagraph (A) shall be al-
lowed in the taxable year in which the construc-
tion, reconstruction, erection, or rehabilitation 
of the property is completed. 
‘‘(2) ENERGY EFFICIENT RESIDENTIAL RENTAL 
BUILDING
PROPERTY
EXPENDITURES.—For pur-
poses of this subsection— 
‘‘(A) IN GENERAL.—The term ‘energy effi-
cient residential rental building property ex-
penditures’ means an amount paid or incurred 
in connection with construction, reconstruction, 
erection, or rehabilitation of energy efficient 
residential rental building property— 
‘‘(i) for which depreciation is allow-
able under section 167, 
‘‘(ii) which is located in the United 
States, and 
‘‘(iii) the construction, reconstruction, 
erection, or rehabilitation of which is com-
pleted by the taxpayer.
158 
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 reduces 
total annual energy and power costs with 
respect to heating and cooling of the build-
ing by a percentage certified according to 
clause (ii). 
‘‘(ii) PROCEDURES.— 
‘‘(I) IN GENERAL.—For purposes 
of clause (i), energy usage and costs 
shall be demonstrated by perform-
ance-based compliance. 
‘‘(II) PERFORMANCE-BASED COM-
PLIANCE.—Performance-based compli-
ance shall be demonstrated by calcu-
lating the percent energy cost savings 
for heating and cooling, as applicable, 
with respect to a dwelling unit when 
compared to the original condition of 
the dwelling unit.
159 
‘‘(III) COMPUTER
SOFTWARE.— 
Computer software shall be used in 
support of performance-based compli-
ance under subclause (II) and such 
software shall meet all of the proce-
dures and methods for calculating en-
ergy savings reductions which are pro-
mulgated 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. 
‘‘(IV) 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 
kilowatt hour, kilowatt, gallon of fuel 
oil, and cubic foot or Btu of natural 
gas, which may be dependent on time 
of usage. Where a State has developed 
annual energy usage and cost reduc-
tion procedures based on time of
160 
usage costs for use in the performance 
standards of the State’s building en-
ergy code prior to the effective date of 
this section, the State may use those 
annual energy usage and cost reduc-
tion procedures in lieu of those adopt-
ed by the Secretary. 
‘‘(V) APPROVAL
OF
SOFTWARE 
SUBMISSIONS.—The Secretary shall 
approve software submissions which 
comply with the requirements of sub-
clause (III). 
‘‘(VI) 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 (IV) of 
this clause and clause (iv). 
‘‘(iii) DETERMINATIONS
OF
COMPLI-
ANCE.—A determination of compliance 
with respect to energy efficient residential 
rental building property made for the pur-
poses of this subparagraph shall be filed 
with the Secretary not later than 1 year
161 
after the date of such determination and 
shall include the TIN of the certifier, the 
address of the building 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 Sec-
retary of Energy. 
‘‘(iv) COMPLIANCE.— 
‘‘(I) IN
GENERAL.—The Sec-
retary, after consultation with the 
Secretary of Energy, shall establish 
requirements for certification and 
compliance procedures after exam-
ining the requirements for energy con-
sultants and home energy ratings pro-
viders specified by the Mortgage In-
dustry National Home Energy Rating 
Standards. 
‘‘(II) INDIVIDUALS
QUALIFIED 
TO
DETERMINE
COMPLIANCE.—The 
determination of compliance may be 
provided by a local building regulatory 
authority, a utility, a manufactured 
home production inspection primary
162 
inspection agency (IPIA), a home in-
spector, or an accredited home energy 
rating system provider. All providers 
shall be accredited, or otherwise au-
thorized to use approved energy per-
formance measurement methods, by 
the Residential Energy Services Net-
work (RESNET). 
‘‘(C) ALLOCATION
OF
DEDUCTION
FOR 
PUBLIC PROPERTY.—In the case of energy effi-
cient residential rental building property which 
is public property, the Secretary shall promul-
gate a regulation to allow the allocation of the 
deduction to the person primarily responsible 
for designing the improvements to the property 
in lieu of the public entity which is the owner 
of such property. Such person shall be treated 
as the taxpayer for purposes of this subsection. 
‘‘(e) SPECIAL RULES.—For purposes of this sec-
tion— 
‘‘(1) BASIS REDUCTION.—For purposes of this 
subtitle, if a deduction is allowed under this section 
with respect to any property, the basis of such prop-
erty shall be reduced by the amount of the deduction 
so allowed.
163 
‘‘(2) 
DOUBLE
BENEFIT.—Property 
which 
would, but for this paragraph, be eligible for deduc-
tion under more than one provision of this section 
shall be eligible only under one such provision, the 
provision specified by the taxpayer. 
‘‘(f) REGULATIONS.—The Secretary shall promulgate 
such regulations as necessary to take into account new 
technologies regarding energy efficiency and renewable en-
ergy for purposes of determining energy efficiency and 
savings under this section. 
‘‘(g) TERMINATION.—This section shall not apply 
with respect to— 
‘‘(1) any energy property placed in service after 
December 31, 2008, and 
‘‘(2) any energy efficient residential rental 
building property expenditures in connection with 
property— 
‘‘(A) placed in service after December 31, 
2009, or 
‘‘(B) the construction, reconstruction, erec-
tion, or rehabilitation of which is not completed 
on or before December 31, 2009.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 48(a)(3)(A) is amended to read as 
follows:
164 
‘‘(A) which is equipment used to produce, 
distribute, or use energy derived from a geo-
thermal deposit (within the meaning of section 
613(e)(2)), but only, in the case of electricity 
generated by geothermal power, up to (but not 
including) the electrical transmission stage,’’. 
(2) Subparagraph (B) of section 168(e)(3) is 
amended— 
(A) in clause (vi)(I)— 
(i) by striking ‘‘section 48(a)(3)’’ and 
inserting ‘‘section 200(d)(1)’’, and 
(ii) by striking ‘‘clause (i)’’ and in-
serting ‘‘such subparagraph (A)’’, and 
(B) in the last sentence, by striking ‘‘sec-
tion 
48(a)(3)’’ 
and 
inserting 
‘‘section 
200(c)(3)’’. 
(3) Section 1016(a), as amended by this Act, is 
amended by striking ‘‘and’’ at the end of paragraph 
(35), by striking the period at the end of paragraph 
(36) and inserting ‘‘, and’’, and by inserting the fol-
lowing new paragraph: 
‘‘(37) for amounts allowed as a deduction under 
section 200(a).’’.
165 
(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: 
‘‘200. Energy property deduction.’’. 
(d) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Department of 
Energy out of amounts not already appropriated such 
sums as necessary to carry out this section. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 507. CREDIT FOR BUSINESS INSTALLATION OF QUALI-
FIED FUEL CELLS. 
(a) IN GENERAL.—Section 48(a)(3)(A) of the Inter-
nal Revenue Code of 1986 (defining energy property), as 
amended by section 301, 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) QUALIFIED FUEL CELL PROPERTY.—Section 48 
of such Code (relating to energy credit) is amended by 
adding at the end the following new subsection: 
‘‘(c) QUALIFIED FUEL CELL PROPERTY.—For pur-
poses of subsection (a)(3)(A)(iii)—
166 
‘‘(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, 2009.’’. 
(c) ENERGY PERCENTAGE.—Subparagraph (A) of 
section 48(a)(2) of such Code (relating to energy percent-
age) is amended to read as follows: 
‘‘(A) IN GENERAL.—The energy percent-
age is— 
‘‘(i) in the case of qualified fuel cell 
property, 30 percent, and 
‘‘(ii) in the case of any other energy 
property, 10 percent.’’.
167 
(d) CONFORMING AMENDMENT.—Section 48(a)(1) of 
such Code is amended by inserting ‘‘except as provided 
in subsection (c)(2),’’ before ‘‘the energy’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to periods after December 31, 
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 Revenue Rec-
onciliation Act of 1990). 
SEC. 508. CREDIT FOR NONBUSINESS INSTALLATION OF 
QUALIFIED FUEL CELLS [NEW ADDITION NOT 
UPDATED]. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to nonrefundable personal credits) is 
amended by inserting after section 25B the following new 
section: 
‘‘SEC. 25F. NONBUSINESS INSTALLATION OF QUALIFIED 
FUEL CELLS. 
‘‘(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 30 percent of the qualified fuel cell 
property expenditures made by the taxpayer during such 
year.
168 
‘‘(b) LIMITATIONS.— 
‘‘(1) MAXIMUM
CREDIT.—The credit allowed 
under subsection (a) shall not exceed $500 for each 
0.5 kilowatt of capacity of qualified fuel cell prop-
erty. 
‘‘(2) PROPERTY STANDARDS.—No credit shall 
be allowed under this section for an item of property 
unless— 
‘‘(A) the original use of such property com-
mences with the taxpayer, 
‘‘(B) such property reasonably can be ex-
pected to remain in use for at least 5 years, 
‘‘(C) such property is installed on or in 
connection with a dwelling unit located in the 
United States and used as a residence by the 
taxpayer, 
‘‘(D) such property meets the performance 
and quality standards (if any) which have been 
prescribed by the Secretary by regulations 
(after consultation with the Secretary of En-
ergy), and 
‘‘(E) such property meets appropriate fire 
and electric code requirements. 
‘‘(c) QUALIFIED FUEL CELL PROPERTY EXPENDI-
TURE.—For purposes of this section, the term ‘qualified
169 
fuel cell property expenditure’ means an expenditure for 
any qualified fuel cell property (as defined in section 
48(c)(1)). 
‘‘(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 
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
170 
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 the individual’s tenant-stock-
holder’s proportionate 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 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
171 
a condominium project substantially all of the 
units of which are used as residences. 
‘‘(4) 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. 
‘‘(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 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. 
‘‘(6) PROPERTY FINANCED BY SUBSIDIZED EN-
ERGY FINANCING.—For purposes of determining the 
amount of expenditures made by any individual with
172 
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, 2009.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 1016(a) of such Code is amended 
by striking ‘‘and’’ at the end of paragraph (36), by 
striking the period at the end of paragraph (37) and 
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(38) to the extent provided in section 25F(e), 
in the case of amounts with respect to which a credit 
has been allowed under section 25F.’’. 
(2) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 of such Code is
173 
amended by adding at the end the following new 
item: 
‘‘Sec. 25F. Nonbusiness installation of qualified fuel cells.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after De-
cember 31, 2005. 
SEC. 509. NEW NONREFUNDABLE PERSONAL CREDITS AL-
LOWED AGAINST REGULAR AND MINIMUM 
TAXES. 
(a) IN GENERAL.— 
(1) SECTION 25c.—Section 25C(c), as added by 
this Act, is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(12) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under subsection (a) for 
the taxable year shall not exceed the excess of— 
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section) and 
section 27 for the taxable year.’’. 
(2) SECTION 25d.—Section 25D(f), as added by 
this Act, is amended by adding at the end the fol-
lowing new paragraph:
174 
‘‘(6) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under subsection (a) for 
the taxable year shall not exceed the excess of— 
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section) and 
section 27 for the taxable year.’’. 
(3) SECTION 25e.—Section 25E(e), as added by 
this Act, is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(7) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under subsection (a) for 
the taxable year shall not exceed the excess of— 
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section) and 
section 27 for the taxable year.’’. 
(4) SECTION 25f.—Section 25F(b), as added by 
this Act, is amended by adding at the end the fol-
lowing new paragraph:
175 
‘‘(3) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under subsection (a) for 
the taxable year shall not exceed the excess of— 
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section) and 
section 27 for the taxable year.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 23(b)(4)(B) is amended by inserting 
‘‘and sections 25C, 25D, 25E, and 25F’’ after ‘‘this 
section’’. 
(2) Section 24(b)(3)(B) is amended by striking 
‘‘and 25B’’ and inserting ‘‘, 25B, 25C, 25D, 25E, 
and 25F’’. 
(3) Section 25(e)(1)(C) is amended by inserting 
‘‘25C, 25D, 25E, and 25F’’ after ‘‘25B,’’. 
(4) Section 25B(g)(2) is amended by striking 
‘‘section 23’’ and inserting ‘‘sections 23, 25C, 25D, 
25E, and 25F’’. 
(5) Section 26(a)(1) is amended by striking 
‘‘and 25B’’ and inserting ‘‘25B, 25C, 25D, 25E, 
and 25F’’.
176 
(6) Section 904(i) is amended by striking ‘‘and 
25B’’ and inserting ‘‘25B, 25C, 25D, 25E, and 
25F’’. 
(7) Section 1400C(d) is amended by striking 
‘‘and 25B’’ and inserting ‘‘25B, 25C, 25D, 25E, 
and 25F’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 510. CERTAIN BUSINESS ENERGY CREDITS ALLOWED 
AGAINST REGULAR AND MINIMUM TAXES. 
(a) IN GENERAL.—Subparagraph (B) of section 
38(c)(4) (relating to specified credits) is amended by re-
designating clause (ii) as clause (iv) and by striking clause 
(i) and inserting the following new clauses: 
‘‘(i) the credits determined under sec-
tions 40, 45H, 45I, 45J, and 45K, 
‘‘(ii) so much of the credit determined 
under section 46 as is attributable to sec-
tion 48(a)(3)(A)(iii), 
‘‘(iii) for taxable years beginning after 
December 31, 2005, and before January 1, 
2008, the credit determined under section 
43, and’’. 
(b) EFFECTIVE DATES.—
177 
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendment made by subsection (a) 
shall apply to credits determined under the Internal 
Revenue Code of 1986 for taxable years beginning 
after December 31, 2005. 
(2) FUEL
CELLS.—Clause (ii) of section 
38(c)(4)(B) of the Internal Revenue Code of 1986, 
as amended by subsection (a) of this section, shall 
apply to credits determined under the Internal Rev-
enue Code of 1986 for taxable years ending after 
April 11, 2005. 
Subtitle B—Transportation 
Incentives 
SEC. 511. ALTERNATIVE MOTOR VEHICLE CREDIT. 
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 (relating to foreign tax credit, etc.) 
is amended by adding at the end the following new section: 
‘‘SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT. 
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the sum of— 
‘‘(1) the new qualified fuel cell motor vehicle 
credit determined under subsection (b), and 
‘‘(2) the new qualified hybrid motor vehicle 
credit determined under subsection (c).
178 
‘‘(b) NEW QUALIFIED FUEL CELL MOTOR VEHICLE 
CREDIT.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), the new qualified fuel cell motor vehicle credit 
determined under this subsection with respect to a 
new qualified fuel cell motor vehicle placed in service 
by the taxpayer during the taxable year is— 
‘‘(A) $8,000 ($4,000 in the case of vehicles 
placed in service after December 31, 2009), if 
such vehicle has a gross vehicle weight rating of 
not more than 8,500 pounds, 
‘‘(B) $10,000, if such vehicle has a gross 
vehicle weight rating of more than 8,500 
pounds but not more than 14,000 pounds, 
‘‘(C) $20,000, if such vehicle has a gross 
vehicle weight rating of more than 14,000 
pounds but not more than 26,000 pounds, and 
‘‘(D) $40,000, if such vehicle has a gross 
vehicle weight rating of more than 26,000 
pounds. 
‘‘(2) INCREASE FOR FUEL EFFICIENCY.— 
‘‘(A) IN
GENERAL.—The amount deter-
mined under paragraph (1)(A) with respect to 
a new qualified fuel cell motor vehicle which is
179 
a passenger automobile or light truck shall be 
increased by— 
‘‘(i) $1,000, if such vehicle achieves at 
least 150 percent but less than 175 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(ii) $1,500, if such vehicle achieves 
at least 175 percent but less than 200 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(iii) $2,000, if such vehicle achieves 
at least 200 percent but less than 225 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(iv) $2,500, if such vehicle achieves 
at least 225 percent but less than 250 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(v) $3,000, if such vehicle achieves 
at least 250 percent but less than 275 per-
cent of the 2002 model year city fuel econ-
omy, 
‘‘(vi) $3,500, if such vehicle achieves 
at least 275 percent but less than 300 per-
180 
cent of the 2002 model year city fuel econ-
omy, and 
‘‘(vii) $4,000, if such vehicle achieves 
at least 300 percent of the 2002 model 
year city fuel economy. 
‘‘(B) 2002 MODEL YEAR CITY FUEL ECON-
OMY.—For purposes of subparagraph (A), the 
2002 model year city fuel economy with respect 
to a vehicle shall be determined in accordance 
with the following tables: 
‘‘(i) In the case of a passenger auto-
mobile: 
‘‘If vehicle inertia 
The 2002 model year city 
weight class is: 
fuel economy is: 
1,500 or 1,750 lbs ....................................................................
45.2 mpg
2,000 lbs ..................................................................................
39.6 mpg
2,250 lbs ..................................................................................
35.2 mpg
2,500 lbs ..................................................................................
31.7 mpg
2,750 lbs ..................................................................................
28.8 mpg
3,000 lbs ..................................................................................
26.4 mpg
3,500 lbs ..................................................................................
22.6 mpg
4,000 lbs ..................................................................................
19.8 mpg
4,500 lbs ..................................................................................
17.6 mpg
5,000 lbs ..................................................................................
15.9 mpg
5,500 lbs ..................................................................................
14.4 mpg
6,000 lbs ..................................................................................
13.2 mpg
6,500 lbs ..................................................................................
12.2 mpg
7,000 to 8,500 lbs ....................................................................
11.3 mpg. 
‘‘(ii) In the case of a light truck: 
‘‘If vehicle inertia 
The 2002 model year city 
weight class is: 
fuel economy is: 
1,500 or 1,750 lbs ....................................................................
39.4 mpg
2,000 lbs ..................................................................................
35.2 mpg
2,250 lbs ..................................................................................
31.8 mpg
2,500 lbs ..................................................................................
29.0 mpg
2,750 lbs ..................................................................................
26.8 mpg
3,000 lbs ..................................................................................
24.9 mpg
3,500 lbs ..................................................................................
21.8 mpg
4,000 lbs ..................................................................................
19.4 mpg
181 
‘‘If vehicle inertia 
The 2002 model year city 
weight class is: 
fuel economy is: 
4,500 lbs ..................................................................................
17.6 mpg
5,000 lbs ..................................................................................
16.1 mpg
5,500 lbs ..................................................................................
14.8 mpg
6,000 lbs ..................................................................................
13.7 mpg
6,500 lbs ..................................................................................
12.8 mpg
7,000 to 8,500 lbs ....................................................................
12.1 mpg. 
‘‘(C) VEHICLE INERTIA WEIGHT CLASS.— 
For purposes of subparagraph (B), the term 
‘vehicle inertia weight class’ has the same 
meaning as when defined in regulations pre-
scribed by the Administrator of the Environ-
mental Protection Agency for purposes of the 
administration of title II of the Clean Air Act 
(42 U.S.C. 7521 et seq.). 
‘‘(3) NEW QUALIFIED FUEL CELL MOTOR VEHI-
CLE.—For purposes of this subsection, the term 
‘new qualified fuel cell motor vehicle’ means a motor 
vehicle— 
‘‘(A) which is propelled by power derived 
from one or more cells which convert chemical 
energy directly into electricity by combining ox-
ygen with hydrogen fuel which is stored on 
board the vehicle in any form and may or may 
not require reformation prior to use, 
‘‘(B) which, in the case of a passenger 
automobile or light truck, has received a certifi-
cate that such vehicle meets or exceeds the Bin
182 
5 Tier II emission level established in regula-
tions prescribed by the Administrator of the 
Environmental Protection Agency under section 
202(i) of the Clean Air Act for that make and 
model year vehicle, 
‘‘(C) the original use of which commences 
with the taxpayer, 
‘‘(D) which is acquired for use or lease by 
the taxpayer and not for resale, and 
‘‘(E) which is made by a manufacturer. 
‘‘(c) NEW QUALIFIED HYBRID MOTOR VEHICLE 
CREDIT.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), the new qualified hybrid motor vehicle credit de-
termined under this subsection with respect to a new 
qualified hybrid motor vehicle placed in service by 
the taxpayer during the taxable year is the credit 
amount determined under paragraph (2). 
‘‘(2) CREDIT AMOUNT.— 
‘‘(A) IN GENERAL.—The credit amount de-
termined under this paragraph shall be deter-
mined in accordance with the following tables: 
‘‘(i) In the case of a new qualified hy-
brid motor vehicle which is a passenger 
automobile, medium duty passenger vehi-
183 
cle, or light truck and which provides the 
following percentage of the maximum 
available power: 
‘‘If percentage of the maximum 
available power is: 
The credit amount is: 
At least 5 percent but less than 10 percent ............................
$250
At least 10 percent but less than 20 percent ..........................
$500
At least 20 percent but less than 30 percent ..........................
$750
At least 30 percent ..................................................................
$1,000. 
‘‘(ii) In the case of a new qualified hy-
brid motor vehicle which is a heavy duty 
hybrid motor vehicle and which provides 
the following percentage of the maximum 
available power: 
‘‘(I) If such vehicle has a gross 
vehicle weight rating of not more than 
14,000 pounds: 
‘‘If percentage of the maximum 
available power is: 
The credit amount is: 
At least 20 percent but less than 30 percent ..........................
$1,000
At least 30 percent but less than 40 percent ..........................
$1,750
At least 40 percent but less than 50 percent ..........................
$2,000
At least 50 percent but less than 60 percent ..........................
$2,250
At least 60 percent ..................................................................
$2,500. 
‘‘(II) If such vehicle has a gross 
vehicle weight rating of more than 
14,000 but not more than 26,000 
pounds: 
‘‘If percentage of the maximum 
available power is: 
The credit amount is: 
At least 20 percent but less than 30 percent ..........................
$4,000
At least 30 percent but less than 40 percent ..........................
$4,500
At least 40 percent but less than 50 percent ..........................
$5,000
At least 50 percent but less than 60 percent ..........................
$5,500
At least 60 percent ..................................................................
$6,000.
184 
‘‘(III) If such vehicle has a gross 
vehicle weight rating of more than 
26,000 pounds: 
‘‘If percentage of the maximum 
available power is: 
The credit amount is: 
At least 20 percent but less than 30 percent ..........................
$6,000
At least 30 percent but less than 40 percent ..........................
$7,000
At least 40 percent but less than 50 percent ..........................
$8,000
At least 50 percent but less than 60 percent ..........................
$9,000
At least 60 percent ..................................................................
$10,000. 
‘‘(B) INCREASE FOR FUEL EFFICIENCY.— 
‘‘(i) AMOUNT.—The amount deter-
mined under subparagraph (A)(i) with re-
spect to a new qualified hybrid motor vehi-
cle which is a passenger automobile or 
light truck shall be increased by— 
‘‘(I) 
$500, 
if 
such 
vehicle 
achieves at least 125 percent but less 
than 150 percent of the 2002 model 
year city fuel economy, 
‘‘(II) $1,000, if such vehicle 
achieves at least 150 percent but less 
than 175 percent of the 2002 model 
year city fuel economy, 
‘‘(III) $1,500, if such vehicle 
achieves at least 175 percent but less 
than 200 percent of the 2002 model 
year city fuel economy,
185 
‘‘(IV) $2,000, if such vehicle 
achieves at least 200 percent but less 
than 225 percent of the 2002 model 
year city fuel economy, 
‘‘(V) $2,500, if such vehicle 
achieves at least 225 percent but less 
than 250 percent of the 2002 model 
year city fuel economy, and 
‘‘(VI) $3,000, if such vehicle 
achieves at least 250 percent of the 
2002 model year city fuel economy. 
‘‘(ii) 2002 MODEL YEAR CITY FUEL 
ECONOMY.—For purposes of clause (i), the 
2002 model year city fuel economy with re-
spect to a vehicle shall be determined on a 
gasoline gallon equivalent basis as deter-
mined by the Administrator of the Envi-
ronmental Protection Agency using the ta-
bles provided in subsection (b)(2)(B) with 
respect to such vehicle. 
‘‘(C) INCREASE FOR ACCELERATED EMIS-
SIONS
PERFORMANCE.—The amount deter-
mined under subparagraph (A)(ii) with respect 
to an applicable heavy duty hybrid motor vehi-
cle shall be increased by the increased credit
186 
amount determined in accordance with the fol-
lowing tables: 
‘‘(i) In the case of a vehicle which has 
a gross vehicle weight rating of not more 
than 14,000 pounds: 
‘‘If the model year is: 
The increased credit amount is: 
2005 .........................................................................................
$2,000
2006 .........................................................................................
$1,500. 
‘‘(ii) In the case of a vehicle which 
has a gross vehicle weight rating of more 
than 14,000 pounds but not more than 
26,000 pounds: 
‘‘If the model year is: 
The increased credit amount is: 
2005 .........................................................................................
$5,250
2006 .........................................................................................
$4,000. 
‘‘(iii) In the case of a vehicle which 
has a gross vehicle weight rating of more 
than 26,000 pounds: 
‘‘If the model year is: 
The increased credit amount is: 
2005 .........................................................................................
$8,000
2006 .........................................................................................
$6,000. 
‘‘(D) DEFINITIONS RELATING TO CREDIT 
AMOUNT.— 
‘‘(i) APPLICABLE
HEAVY
DUTY
HY-
BRID MOTOR VEHICLE.—For purposes of 
subparagraph (C), the term ‘applicable 
heavy duty hybrid motor vehicle’ means a 
heavy duty hybrid motor vehicle which is 
powered by an internal combustion or heat