I
107TH CONGRESS
1ST SESSION
H. R. 2392
To amend the Internal Revenue Code of 1986 to provide, expand, or extend
tax incentives for renewable and alternative electric energy, alternative
fuels and alternative fuel vehicles, energy efficiency and conservation,
and demand management and distributive energy generation.
IN THE HOUSE OF REPRESENTATIVES
JUNE 28, 2001
Mr. INSLEE (for himself, Mr. SHAYS, Mr. UDALL of Colorado, Mr. WAMP, Mr.
BAIRD, Mr. ALLEN, Mr. OLVER, Mr. SMITH of Washington, and Mr.
HOLT) introduced the following bill; which was referred to the Committee
on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide,
expand, or extend tax incentives for renewable and alter-
native electric energy, alternative fuels and alternative
fuel vehicles, energy efficiency and conservation, and de-
mand management and distributive energy generation.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Clean Energy Incentives Act’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; references; table of contents.
TITLE I—RENEWABLE AND ALTERNATIVE ELECTRIC ENERGY
Sec. 101. Five-year extension of qualified facilities for renewable resource cred-
it.
Sec. 102. Expansion of renewable resource credit to include additional alter-
native resources.
Sec. 103. Tradable renewable resource credit for public utilities and other tax
exempt organizations.
TITLE II—ALTERNATIVE FUELS AND ENERGY EFFICIENT
VEHICLES
Sec. 201. Credit for alternative motor vehicles and modification of credit for
qualified electric vehicles.
Sec. 202. Credit for retail sale of alternative fuels as motor vehicle fuel.
Sec. 203. Extension of deduction for certain refueling property.
Sec. 204. Credit for installation of alternative fueling stations.
Sec. 205. Credit for property to convert waste to fuel.
TITLE III—ENERGY EFFICIENCY AND CONSERVATION
Sec. 301. Energy-efficient commercial building property deduction.
Sec. 302. Credit for construction of new highly energy-efficient homes.
Sec. 303. Credit for energy efficient appliances.
Sec. 304. Credit for adjustable speed drives.
Sec. 305. Credit for energy efficient recycling or remanufacturing equipment.
TITLE IV—DEMAND MANAGEMENT AND DISTRIBUTED ENERGY
GENERATION
Sec. 401. Credit for distributed energy generation and demand management
property used in business.
Sec. 402. Credit for distributed energy generation and demand management
property used in residences.
Sec. 403. Credit for energy management systems using residential real time
metering systems.
Sec. 404. Credit for flywheel property.
TITLE I—RENEWABLE AND AL-
TERNATIVE 
ELECTRIC 
EN-
ERGY
SEC. 101. FIVE-YEAR EXTENSION OF QUALIFIED FACILITIES
FOR RENEWABLE RESOURCE CREDIT.
(a) WIND AND POULTRY WASTE FACILITIES.—Sub-
paragraphs (A) and (C) of section 45(c)(3) (relating to
definitions) are each amended by striking ‘‘2002’’ and in-
serting ‘‘2007’’.
(b) CLOSED-LOOP BIOMASS FACILITIES.—Subpara-
graph (B) of section 45(c)(3) is amended to read as fol-
lows:
‘‘(B) CLOSED-LOOP BIOMASS FACILITY.—
In the case of a facility using closed-loop bio-
mass to produce electricity, the term ‘qualified
facility’ means any facility owned by the tax-
payer which is originally placed in service—
‘‘(i) after December 31, 1992, and be-
fore January 1, 2007, or
‘‘(ii) before January 1, 1993, and
modified to use closed-loop biomass to co-
fire with coal after December 31, 1992,
and before January 1, 2007.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to electricity and other energy pro-
duced in taxable years beginning after the date of the en-
actment of this Act.
SEC. 102. EXPANSION OF RENEWABLE RESOURCE CREDIT
TO INCLUDE ADDITIONAL ALTERNATIVE RE-
SOURCES.
(a) IN GENERAL.—Section 45(c)(1) (relating to
qualified energy resources) is amended by striking ‘‘and’’
at the end of subparagraph (B), by striking the period
at the end of subparagraph (C) and inserting ‘‘, and’’, and
by adding at the end the following:
‘‘(D) alternative resources.’’.
(b) DEFINITION
OF ALTERNATIVE RESOURCES.—
Section 45(c) (relating to definitions) is amended by add-
ing at the end the following:
‘‘(5) ALTERNATIVE RESOURCES.—
‘‘(A) IN GENERAL.—The term ‘alternative
resources’ means—
‘‘(i) solar,
‘‘(ii) biomass (other than closed loop
biomass),
‘‘(iii) incremental hydropower,
‘‘(iv) incremental geothermal, and
‘‘(v) geothermal energy.
‘‘(B) 
BIOMASS.—The 
term 
‘biomass’
means any nonhazardous, cellulosic waste mate-
rial, which is segregated from other waste mate-
rials, and which is derived from—
‘‘(i) any of the following forest-related
resources: mill residues, precommercial
thinnings, slash, and brush, but not includ-
ing old-growth timber or black liquor,
‘‘(ii) agriculture sources, including or-
chard tree crops, vineyard, grain, legumes,
sugar, and other crop by-products or resi-
dues,
‘‘(iii) waste pallets, crates, dunnage,
manufacturing 
and 
construction 
wood
wastes (other than pressure-treated, chemi-
cally treated, or lead-painted wood wastes),
and landscape or right-of-way tree trim-
mings, but not including—
‘‘(I) unsegregated municipal solid
waste (garbage), or
‘‘(II) postconsumer wastepaper
which can be recycled affordably,
‘‘(iv) landfill gas, or
‘‘(v) animal waste (other than poultry
waste).
‘‘(C) INCREMENTAL
HYDROPOWER.—The
term ‘incremental hydropower’ means additional
generating capacity achieved from increased ef-
ficiency at a non-Federal hydroelectric facility
in existence on January 1, 2001, and licensed
by the Federal Energy Regulatory Commission.
‘‘(D) INCREMENTAL
GEOTHERMAL.—The
term ‘incremental geothermal’ means additional
generating capacity achieved from—
‘‘(i) increased efficiency, or
‘‘(ii) additions of new capacity,
at a geothermal power plant originally placed in
service before the date of the enactment of this
paragraph.
‘‘(E) LANDFILL GAS.—The term ‘landfill
gas’ means gas generated from the decomposi-
tion of any household solid waste, commercial
solid waste, and industrial solid waste disposed
of in a municipal solid waste landfill unit (as
such terms are defined in regulations promul-
gated under subtitle D of the Solid Waste Dis-
posal Act (42 U.S.C. 6941 et seq.)).’’.
(c) QUALIFIED FACILITY.—
(1) IN
GENERAL.—Section 45(c)(3) (defining
qualified facility) is amended by adding at the end
the following:
‘‘(D) ALTERNATIVE
RESOURCES
FACIL-
ITY.—In the case of a facility using alternative
resources to produce electricity, the term ‘quali-
fied facility’ means—
‘‘(i) any facility owned by the tax-
payer which is originally placed in service
after December 31, 2001, and before Jan-
uary 1, 2007,
‘‘(ii) in the case of incremental hydro-
power and incremental geothermal, any fa-
cility originally placed in service before De-
cember 31, 2001, and modified with incre-
mental hydropower or incremental geo-
thermal after that date and before January
1, 2007, and
‘‘(iii) in the case of biomass (other
than closed-loop biomass), any facility
owned by the taxpayer which is originally
placed in service before January 1, 2007,
or any facility modified to use biomass to
co-fire with coal after December 31, 2001,
and before January 1, 2007.’’.
(2) SPECIAL RULE.—Section 45(d) (relating to
definitions and special rules) is amended by adding
at the end the following new paragraph:
‘‘(8) SPECIAL RULE RELATING TO BIOMASS FA-
CILITIES.—In the case of a qualified facility de-
scribed in subsection (c)(3)(D)(iii)—
‘‘(A) subsection (b)(3) shall not apply to
any such facility originally placed in service be-
fore January 1, 1997, and
‘‘(B) if such facility is leased and the oper-
ator thereof is the lessee, such lessee (and not
the owner) shall be treated for purposes of this
section as owning such facility.’’.
(d) GOVERNMENT-OWNED FACILITY.—The text and
heading of section 45(d)(6) (relating to credit eligibility
in the case of government-owned facilities using poultry
waste) is amended by inserting ‘‘or alternative resources’’
after ‘‘poultry waste’’ each place it appears.
(e) QUALIFIED
FACILITIES
WITH
CO-PRODUC-
TION.—Section 45(b) (relating to limitations and adjust-
ments) is amended by adding at the end the following:
‘‘(4) INCREASED CREDIT FOR CO-PRODUCTION
FACILITIES.—
‘‘(A) IN GENERAL.—In the case of a quali-
fied facility described in subsection (c)(3)(D)
which has a co-production facility or a qualified
facility described in subparagraph (A), (B), or
(C) of subsection (c)(3) which adds a co-pro-
duction facility after the date of the enactment
of this paragraph, the amount in effect under
subsection (a)(1) for an eligible taxable year of
the taxpayer shall (after adjustment under
paragraphs (1), (2), and (3)) be increased by
.25 cents.
‘‘(B) 
CO-PRODUCTION
FACILITY.—For
purposes of subparagraph (A), the term ‘co-pro-
duction facility’ means a facility which—
‘‘(i) enables a qualified facility to
produce heat, mechanical power, or min-
erals from qualified energy resources in ad-
dition to electricity, and
‘‘(ii) produces such energy on a con-
tinuous basis.
‘‘(C) ELIGIBLE TAXABLE YEAR.—For pur-
poses of subparagraph (A), the term ‘eligible
taxable year’ means any taxable year in which
the amount of gross receipts attributable to the
co-production facility of a qualified facility are
at least 10 percent of the amount of gross re-
ceipts attributable to electricity produced by
such facility.’’.
(f) QUALIFIED FACILITIES LOCATED WITHIN QUALI-
FIED INDIAN LANDS.—Section 45(b) (relating to limita-
tions and adjustments), as amended by subsection (e), is
amended by adding at the end the following:
‘‘(5) INCREASED CREDIT FOR QUALIFIED FA-
CILITY
LOCATED
WITHIN
QUALIFIED
INDIAN
LAND.—In the case of a qualified facility described
in subsection (c)(3)(D) which—
‘‘(A) is located within—
‘‘(i) qualified Indian lands (as defined
in section 7871(c)(3)), or
‘‘(ii) lands which are held in trust by
a Native Corporation (as defined in section
3(m) of the Alaska Native Claims Settle-
ment Act (43 U.S.C. 1602(m))) for Alaska
Natives, and
‘‘(B) is operated with the explicit written
approval of the Indian tribal government or Na-
tive Corporation (as so defined) having jurisdic-
tion over such lands,
the amount in effect under subsection (a)(1) for a
taxable year shall (after adjustment under para-
graphs (1), (2), (3), and (4)) be increased by .25
cents.’’.
(g) ELECTRICITY PRODUCED FROM BIOMASS CO-
FIRED IN COAL PLANTS.—Paragraph (1) of section 45(a)
is amended by inserting ‘‘(1.0 cents in the case of elec-
tricity produced from biomass, other than closed-loop bio-
mass, co-fired in a facility which produced electricity from
coal)’’ after ‘‘1.5 cents’’.
(h) COORDINATION WITH OTHER CREDITS.—Section
45(d) (relating to definitions and special rules), as amend-
ed by subsection (c), is amended by adding at the end the
following:
‘‘(9) COORDINATION WITH OTHER CREDITS.—
This section shall not apply to any qualified facility
with respect to which a credit under any other sec-
tion is allowed for the taxable year unless the tax-
payer elects to waive application of such credit to
such facility.’’.
(i) TREATMENT OF QUALIFIED FACILITIES NOT IN
COMPLIANCE WITH POLLUTION LAWS.—Section 45(c)(3)
(relating to qualified facilities), as amended by subsection
(c), is amended by adding at the end the following:
‘‘(E) NONCOMPLIANCE
WITH
POLLUTION
LAWS.—For purposes of this paragraph, a facil-
ity which is not in compliance with the applica-
ble State and Federal pollution prevention, con-
trol, and permit requirements for any period of
time shall not be considered to be a qualified
facility during such period.’’.
(j) EFFECTIVE DATE.—The amendments made by
this section shall apply to electricity and other energy pro-
duced in taxable years beginning after the date of the en-
actment of this Act.
SEC. 103. TRADABLE RENEWABLE RESOURCE CREDIT FOR
PUBLIC UTILITIES AND OTHER TAX EXEMPT
ORGANIZATIONS.
(a) CREDITS FOR CERTAIN TAX EXEMPT ORGANIZA-
TIONS AND GOVERNMENTAL UNITS.—
(1) IN GENERAL.—Section 45(d) (relating to
definitions and special rules), as amended by section
102, is amended by adding at the end the following:
‘‘(10) CREDITS FOR CERTAIN TAX EXEMPT OR-
GANIZATIONS AND GOVERNMENTAL UNITS.—
‘‘(A) ALLOWANCE OF CREDIT.—Any credit
which would be allowable under subsection (a)
with respect to a qualified facility of an entity
if such entity were not exempt from tax under
this chapter shall be treated as a credit allow-
able under subpart D to such entity if such en-
tity is—
‘‘(i) an organization described in sec-
tion 501(c)(12)(C) and exempt from tax
under section 501(a),
‘‘(ii) an organization described in sec-
tion 1381(a)(2)(C),
‘‘(iii) an entity the income of which is
excludable from gross income under section
115, or
‘‘(iv) a State, the District of Colum-
bia, any territory or possession of the
United States, or any political subdivision
thereof.
‘‘(B) USE OF CREDIT.—
‘‘(i) TRANSFER OF CREDIT.—An enti-
ty described in subparagraph (A) may as-
sign, trade, sell, or otherwise transfer any
credit allowable to such entity under sub-
paragraph (A) to any taxpayer.
‘‘(ii) USE
OF
CREDIT
AS
AN
OFF-
SET.—Notwithstanding any other provision
of law, in the case of an entity described
in clause (i) or (ii) of subparagraph (A),
any credit allowable to such entity under
subparagraph (A) may be applied by such
entity, without penalty, as a prepayment of
any loan, debt, or other obligation the enti-
ty has incurred under subchapter I of
chapter 31 of title 7 of the Rural Elec-
trification Act of 1936 (7 U.S.C. 901 et
seq.).
‘‘(C) CREDIT
NOT
INCOME.—Neither a
transfer under clause (i) nor a use under clause
(ii) of subparagraph (B) of any credit allowable
under subparagraph (A) shall result in income
for purposes of section 501(c)(12).
‘‘(D) TRANSFER PROCEEDS TREATED AS
ARISING FROM ESSENTIAL GOVERNMENT FUNC-
TION.—Any proceeds derived by an entity de-
scribed in subparagraph (A)(iii) from the trans-
fer of any credit under subparagraph (B)(i)
shall be treated as arising from an essential
government function.
‘‘(E) CREDITS NOT REDUCED BY TAX-EX-
EMPT BONDS OR CERTAIN OTHER SUBSIDIES.—
Subsection (b)(3) shall not apply to reduce any
credit allowable under subparagraph (A) with
respect to—
‘‘(i) proceeds described in subpara-
graph (A)(ii) of such subsection, or
‘‘(ii) any loan, debt, or other obliga-
tion incurred under subchapter I of chap-
ter 31 of title 7 of the Rural Electrification
Act of 1936 (7 U.S.C. 901 et seq.),
used to provide financing for any qualified facil-
ity.
‘‘(F) TREATMENT
OF
UNRELATED
PER-
SONS.—For purposes of this paragraph, sales
among and between entities described in sub-
paragraph (A) shall be treated as sales between
unrelated parties.’’.
(2) INCLUSION
OF
INDIAN
TRIBAL
GOVERN-
MENTS.—Section 7871(a)(7) is amended by striking
‘‘and’’ at the end of subparagraph (A), by striking
the period at the end of subparagraph (B), and by
adding at the end the following:
‘‘(C) section 45 (relating to credit for elec-
tricity produced from certain renewable re-
sources).’’.
(b) CREDIT ALLOWABLE AGAINST REGULAR
AND
MINIMUM TAX.—
(1) IN
GENERAL.—Section 38(c) (relating to
limitation based on amount of tax) is amended by
redesignating paragraph (3) as paragraph (4) and
inserting after paragraph (2) the following:
‘‘(3) SPECIAL RULES FOR RENEWABLE ELEC-
TRICITY PRODUCTION CREDIT.—
‘‘(A) IN GENERAL.—In the case of the re-
newable electricity production credit—
‘‘(i) this section and section 39 shall
be applied separately with respect to the
credit, and
‘‘(ii) in applying paragraph (1) to the
credit—
‘‘(I) subparagraphs (A) and (B)
thereof shall not apply, and
‘‘(II) the limitation under para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the
taxable year (other than the renewable
electricity production credit).
‘‘(B) RENEWABLE ELECTRICITY PRODUC-
TION CREDIT.—For purposes of this subsection,
the term ‘renewable electricity production cred-
it’ means the credit allowable under subsection
(a) by reason of section 45(a).’’.
(2) CONFORMING AMENDMENT.—Subclause (II)
of section 38(c)(2)(A)(ii) is amended by inserting
‘‘or the renewable electricity production credit’’ after
‘‘employment credit’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to electricity and other energy pro-
duced in taxable years beginning after the date of the en-
actment of this Act.
TITLE II—ALTERNATIVE FUELS
AND ENERGY EFFICIENT VE-
HICLES
SEC. 201. CREDIT FOR ALTERNATIVE MOTOR VEHICLES
AND MODIFICATION OF CREDIT FOR QUALI-
FIED ELECTRIC VEHICLES.
(a) CREDIT FOR ALTERNATIVE MOTOR VEHICLES.—
(1) IN GENERAL.—Subpart B of part IV of
subchapter A of chapter 1 (relating to foreign tax
credit, etc.) is amended by adding at the end the fol-
lowing:
‘‘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),
‘‘(2) the new qualified hybrid motor vehicle
credit determined under subsection (c), and
‘‘(3) the new qualified alternative fuel motor ve-
hicle credit determined under subsection (d).
‘‘(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) $4,000, if such vehicle has a gross ve-
hicle 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
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 2000 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 2000 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 2000 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 2000 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 2000 model year city fuel econ-
omy,
‘‘(vi) $3,500, if such vehicle achieves
at least 275 percent but less than 300 per-
cent of the 2000 model year city fuel econ-
omy, and
‘‘(vii) $4,000, if such vehicle achieves
at least 300 percent of the 2000 model
year city fuel economy.
‘‘(B) 2000 MODEL YEAR CITY FUEL ECON-
OMY.—For purposes of subparagraph (A), the
2000 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 
weight
class is:
The 2000 model year city fuel
economy is:
1,500 or 1,750 lbs ....................................................................
43.7 mpg
2,000 lbs ..................................................................................
38.3 mpg
2,250 lbs ..................................................................................
34.1 mpg
2,500 lbs ..................................................................................
30.7 mpg
2,750 lbs ..................................................................................
27.9 mpg
3,000 lbs ..................................................................................
25.6 mpg
3,500 lbs ..................................................................................
22.0 mpg
4,000 lbs ..................................................................................
19.3 mpg
4,500 lbs ..................................................................................
17.2 mpg
5,000 lbs ..................................................................................
15.5 mpg
5,500 lbs ..................................................................................
14.1 mpg
6,000 lbs ..................................................................................
12.9 mpg
6,500 lbs ..................................................................................
11.9 mpg
7,000 or 8,500 lbs ....................................................................
11.1 mpg.
‘‘(ii) In the case of a light truck:
‘‘If 
vehicle 
inertia 
weight
class is:
The 2000 model year city fuel
economy is:
1,500 or 1,750 lbs ....................................................................
37.6 mpg
2,000 lbs ..................................................................................
33.7 mpg
2,250 lbs ..................................................................................
30.6 mpg
2,500 lbs ..................................................................................
28.0 mpg
2,750 lbs ..................................................................................
25.9 mpg
3,000 lbs ..................................................................................
24.1 mpg
3,500 lbs ..................................................................................
21.3 mpg
4,000 lbs ..................................................................................
19.0 mpg
4,500 lbs ..................................................................................
17.3 mpg
5,000 lbs ..................................................................................
15.8 mpg
5,500 lbs ..................................................................................
14.6 mpg
6,000 lbs ..................................................................................
13.6 mpg
6,500 lbs ..................................................................................
12.8 mpg
7,000 or 8,500 lbs ....................................................................
12.0 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—
‘‘(i) one or more cells which convert
chemical energy directly into electricity by
combining oxygen with hydrogen fuel
which is stored on board the vehicle in any
form and may or may not require reforma-
tion prior to use, or
‘‘(ii) one or more cells described in
clause (i) used in conjunction with a re-
chargeable energy storage system.
‘‘(B) which, in the case of a passenger
automobile or light truck—
‘‘(i) for 2002 and later model vehicles,
has received a certificate of conformity
under the Clean Air Act and meets or ex-
ceeds the equivalent qualifying California
low emission vehicle standard under sec-
tion 243(e)(2) of the Clean Air Act for
that make and model year, and
‘‘(ii) for 2004 and later model vehi-
cles, has received a certificate that such ve-
hicle meets or exceeds the Bin 5 Tier II
emission level established in regulations
prescribed by the Administrator of the En-
vironmental Protection Agency under sec-
tion 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 or light truck and which pro-
vides the following percentage of the max-
imum 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 ..........................
$1,500
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.
‘‘(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 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 2000 model
year city fuel economy,
‘‘(II) $1,000, if such vehicle
achieves at least 150 percent but less
than 175 percent of the 2000 model
year city fuel economy,
‘‘(III) $1,500, if such vehicle
achieves at least 175 percent but less
than 200 percent of the 2000 model
year city fuel economy,
‘‘(IV) $2,000, if such vehicle
achieves at least 200 percent but less
than 225 percent of the 2000 model
year city fuel economy,
‘‘(V) $2,500, if such vehicle
achieves at least 225 percent but less
than 250 percent of the 2000 model
year city fuel economy, and
‘‘(VI) $3,000, if such vehicle
achieves at least 250 percent of the
2000 model year city fuel economy.
‘‘(ii) 2000 MODEL YEAR CITY FUEL
ECONOMY.—For purposes of clause (i), the
2000 model year city fuel economy with re-
spect to a vehicle shall be determined using
the tables 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 increase credit
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 increase credit amount is:
2002 .........................................................................................
$3,500
2003 .........................................................................................
$3,000
2004 .........................................................................................
$2,500
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 increase credit amount is:
2002 .........................................................................................
$9,000
2003 .........................................................................................
$7,750
2004 .........................................................................................
$6,500
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 increase credit amount is:
2002 .........................................................................................
$14,000
2003 .........................................................................................
$12,000
2004 .........................................................................................
$10,000
2005 .........................................................................................
$8,000
2006 .........................................................................................
$6,000.
‘‘(D) DEFINITIONS.—
‘‘(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
engine which is certified as meeting the
emission standards set in the regulations
prescribed by the Administrator of the En-
vironmental Protection Agency for 2007
and later model year diesel heavy duty en-
gines or 2008 and later model year
ottocycle heavy duty engines, as applicable.
‘‘(ii) HEAVY DUTY HYBRID MOTOR VE-
HICLE.—For purposes of this paragraph,
the term ‘heavy duty hybrid motor vehicle’
means a new qualified hybrid motor vehicle
which has a gross vehicle weight rating of
more than 10,000 pounds and draws pro-
pulsion energy from both of the following
onboard sources of stored energy:
‘‘(I) An internal combustion or
heat engine using consumable fuel
which, for 2002 and later model vehi-
cles, has received a certificate of con-
formity under the Clean Air Act and
meets or exceeds a level of not greater
than 3.0 grams per brake horse-
power–hour of oxides of nitrogen and
0.01 per brake horsepower–hour of
particulate matter.
‘‘(II) A rechargeable energy stor-
age system.
‘‘(iii) MAXIMUM AVAILABLE POWER.—
‘‘(I) PASSENGER
AUTOMOBILE
OR LIGHT TRUCK.—For purposes of
subparagraph (A)(i), the term ‘max-
imum available power’ means the
maximum power available from the
battery or other electrical storage de-
vice, during a standard 10 second
pulse power test, divided by the sum
of the battery or other electrical stor-
age device and the SAE net power of
the heat engine.
‘‘(II) 
HEAVY
DUTY
HYBRID
MOTOR
VEHICLE.—For purposes of
subparagraph (A)(ii), the term ‘max-
imum available power’ means the
maximum power available from the
battery or other electrical storage de-
vice, during a standard 10 second
pulse power test, divided by the vehi-
cle’s total traction power. The term
‘total traction power’ means the sum
of the electric motor peak power and
the heat engine peak power of the ve-
hicle, except that if the electric motor
is the sole means by which the vehicle
can be driven, the total traction power
is the peak electric motor power.
‘‘(3) NEW
QUALIFIED
HYBRID
MOTOR
VEHI-
CLE.—For purposes of this subsection, the term
‘new qualified hybrid motor vehicle’ means a motor
vehicle—
‘‘(A) which draws propulsion energy from
onboard sources of stored energy which are
both—
‘‘(i) an internal combustion or heat
engine using combustible fuel, and
‘‘(ii) a rechargeable energy storage
system,
‘‘(B) which, in the case of a passenger
automobile or light truck—
‘‘(i) for 2002 and later model vehicles,
has received a certificate of conformity
under the Clean Air Act and meets or ex-
ceeds the equivalent qualifying California
low emission vehicle standard under sec-
tion 243(e)(2) of the Clean Air Act for
that make and model year, and
‘‘(ii) for 2004 and later model vehi-
cles, has received a certificate that such ve-
hicle meets or exceeds the Bin 5 Tier II
emission level established in regulations
prescribed by the Administrator of the En-
vironmental Protection Agency under sec-
tion 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.
‘‘(d) NEW QUALIFIED ALTERNATIVE FUEL MOTOR
VEHICLE CREDIT.—
‘‘(1) ALLOWANCE OF CREDIT.—Except as pro-
vided in paragraph (5), the credit determined under
this subsection is an amount equal to the applicable
percentage of the incremental cost of any new quali-
fied alternative fuel motor vehicle placed in service
by the taxpayer during the taxable year.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage with re-
spect to any new qualified alternative fuel motor ve-
hicle is—
‘‘(A) 50 percent, plus
‘‘(B) 30 percent, if such vehicle—
‘‘(i) has received a certificate of con-
formity under the Clean Air Act and meets
or exceeds the most stringent standard
available for certification under the Clean
Air Act for that make and model year vehi-
cle (other than a zero emission standard),
or
‘‘(ii) has received an order from an
applicable State certifying the vehicle for
sale or lease in California and meets or ex-
ceeds the most stringent standard available
for certification under the State laws of
California (enacted in accordance with a
waiver granted under section 209(b) of the
Clean Air Act) for that make and model
year vehicle (other than a zero emission
standard).
‘‘(3) INCREMENTAL
COST.—For purposes of
this subsection, the incremental cost of any new
qualified alternative fuel motor vehicle is equal to
the amount of the excess of the manufacturer’s sug-
gested retail price for such vehicle over such price
for a gasoline or diesel fuel motor vehicle of the
same model, to the extent such amount does not
exceed—
‘‘(A) $5,000, if such vehicle has a gross ve-
hicle 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) $25,000, 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.
‘‘(4) QUALIFIED
ALTERNATIVE
FUEL
MOTOR
VEHICLE
DEFINED.—For 
purposes 
of 
this
subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
alternative fuel motor vehicle’ means any motor
vehicle—
‘‘(i) which is only capable of operating
on an alternative fuel,
‘‘(ii) the original use of which com-
mences with the taxpayer,
‘‘(iii) which is acquired by the tax-
payer for use or lease, but not for resale,
and
‘‘(iv) which is made by a manufac-
turer.
‘‘(B) ALTERNATIVE FUEL.—The term ‘al-
ternative fuel’ means compressed natural gas,
liquefied natural gas, liquefied petroleum gas,
hydrogen, and any liquid at least 85 percent of
the volume of which consists of methanol.
‘‘(5) CREDIT FOR MIXED-FUEL VEHICLES.—
‘‘(A) IN
GENERAL.—In the case of a
mixed-fuel vehicle placed in service by the tax-
payer during the taxable year, the credit deter-
mined under this subsection is an amount equal
to—
‘‘(i) in the case of a 75/25 mixed-fuel
vehicle, 70 percent of the credit which
would have been allowed under this sub-
section if such vehicle was a qualified alter-
native fuel motor vehicle, and
‘‘(ii) in the case of a 95/5 mixed-fuel
vehicle, 95 percent of the credit which
would have been allowed under this sub-
section if such vehicle was a qualified alter-
native fuel motor vehicle.
‘‘(B) MIXED-FUEL
VEHICLE.—For pur-
poses of this subsection, the term ‘mixed-fuel
vehicle’ means any motor vehicle described in
subparagraph (C) or (D) of paragraph (3),
which—
‘‘(i) is certified by the manufacturer
as being able to perform efficiently in nor-
mal operation on a combination of an al-
ternative fuel and a petroleum-based fuel,
‘‘(ii) either—
‘‘(I) has received a certificate of
conformity under the Clean Air Act,
or
‘‘(II) has received an order from
an applicable State certifying the vehi-
cle for sale or lease in California and
meets or exceeds the low emission ve-
hicle standard under section 88.105-
94 of title 40, Code of Federal Regu-
lations, for that make and model year
vehicle,
‘‘(iii) the original use of which com-
mences with the taxpayer,
‘‘(iv) which is acquired by the tax-
payer for use or lease, but not for resale,
and
‘‘(v) which is made by a manufac-
turer.
‘‘(C) 75/25 MIXED-FUEL
VEHICLE.—For
purposes of this subsection, the term ‘75/25
mixed-fuel vehicle’ means a mixed-fuel vehicle
which operates using at least 75 percent alter-
native fuel and not more than 25 percent petro-
leum-based fuel.
‘‘(D) 95/5 MIXED-FUEL
VEHICLE.—For
purposes of this subsection, the term ‘95/5
mixed-fuel vehicle’ means a mixed-fuel vehicle
which operates using at least 95 percent alter-
native fuel and not more than 5 percent petro-
leum-based fuel.
‘‘(e) APPLICATION WITH OTHER CREDITS.—The
credit allowed under subsection (a) for any taxable year
shall not exceed the excess (if any) of—
‘‘(1) the regular tax for the taxable year re-
duced by the sum of the credits allowable under sub-
part A and sections 27, 29, and 30, over
‘‘(2) the tentative minimum tax for the taxable
year.
‘‘(f) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) 
CONSUMABLE
FUEL.—The 
term
‘consumable fuel’ means any solid, liquid, or gaseous
matter which releases energy when consumed by an
auxiliary power unit.
‘‘(2) MOTOR VEHICLE.—The term ‘motor vehi-
cle’ has the meaning given such term by section
30(c)(2).
‘‘(3) 2000 MODEL
YEAR
CITY
FUEL
ECON-
OMY.—The 2000 model year city fuel economy with
respect to any vehicle shall be measured under rules
similar to the rules under section 4064(c).
‘‘(4) OTHER TERMS.—The terms ‘automobile’,
‘passenger automobile’, ‘light truck’, and ‘manufac-
turer’ have the meanings given such terms in regula-
tions prescribed by the Administrator of the Envi-
ronmental Protection Agency for purposes of the ad-
ministration of title II of the Clean Air Act (42
U.S.C. 7521 et seq.).
‘‘(5) REDUCTION IN BASIS.—For purposes of
this subtitle, the basis of any property for which a
credit is allowable under subsection (a) shall be re-
duced by the amount of such credit so allowed (de-
termined without regard to subsection (e)).
‘‘(6) NO
DOUBLE
BENEFIT.—The amount of
any deduction or credit allowable under this
chapter—
‘‘(A) for any incremental cost taken into
account in computing the amount of the credit
determined under subsection (d) shall be re-
duced by the amount of such credit attributable
to such cost, and
‘‘(B) with respect to a vehicle described
under subsection (b) or (c), shall be reduced by
the amount of credit allowed under subsection
(a) for such vehicle for the taxable year.
‘‘(7) PROPERTY USED BY TAX-EXEMPT ENTI-
TIES.—In the case of a credit amount which is al-
lowable with respect to a motor vehicle which is ac-
quired by an entity exempt from tax under this
chapter, the person which sells or leases such vehicle
to the entity shall be treated as the taxpayer with
respect to the vehicle for purposes of this section
and the credit shall be allowed to such person, but
only if the person clearly discloses to the entity in
any sale or lease document the specific amount of
any credit otherwise allowable to the entity under
this section and reduces the sale or lease price of
such vehicle by an equivalent amount of such credit.
‘‘(8) RECAPTURE.—The Secretary shall, by reg-
ulations, provide for recapturing the benefit of any
credit allowable under subsection (a) with respect to
any property which ceases to be property eligible for
such credit (including recapture in the case of a
lease period of less than the economic life of a vehi-
cle).
‘‘(9) 
PROPERTY
USED
OUTSIDE
UNITED
STATES, ETC., NOT QUALIFIED.—No credit shall be
allowed under subsection (a) with respect to any
property referred to in section 50(b) or with respect
to the portion of the cost of any property taken into
account under section 179.
‘‘(10) ELECTION TO NOT TAKE CREDIT.—No
credit shall be allowed under subsection (a) for any
vehicle if the taxpayer elects to not have this section
apply to such vehicle.
‘‘(11) CARRYFORWARD ALLOWED.—
‘‘(A) IN GENERAL.—If the credit amount
allowable under subsection (a) for a taxable
year exceeds the amount of the limitation under
subsection (e) for such taxable year (referred to
as the ‘unused credit year’ in this paragraph),
such excess shall be allowed as a credit
carryforward for each of the 20 taxable years
following the unused credit year.
‘‘(B) RULES.—Rules similar to the rules of
section 39 shall apply with respect to the credit
carryforward under subparagraph (A).
‘‘(12) INTERACTION
WITH
AIR
QUALITY
AND
MOTOR VEHICLE SAFETY STANDARDS.—Unless oth-
erwise provided in this section, a motor vehicle shall
not be considered eligible for a credit under this sec-
tion unless such vehicle is in compliance with—
‘‘(A) the applicable provisions of the Clean
Air Act for the applicable make and model year
of the vehicle (or applicable air quality provi-
sions of State law in the case of a State which
has adopted such provision under a waiver
under section 209(b) of the Clean Air Act), and
‘‘(B) the motor vehicle safety provisions of
sections 30101 through 30169 of title 49,
United States Code.
‘‘(g) REGULATIONS.—
‘‘(1) IN GENERAL.—The Secretary shall pro-
mulgate such regulations as necessary to carry out
the provisions of this section.
‘‘(2) 
ADMINISTRATOR
OF
ENVIRONMENTAL
PROTECTION
AGENCY.—The Administrator of the
Environmental Protection Agency, in coordination
with the Secretary of Transportation and the Sec-
retary of the Treasury, shall prescribe such regula-
tions as necessary to determine whether a motor ve-
hicle meets the requirements to be eligible for a
credit under this section.
‘‘(h) TERMINATION.—This section shall not apply to
any property placed in service after December 31, 2007.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 1016(a) is amended by strik-
ing ‘‘and’’ at the end of paragraph (27), by
striking the period at the end of paragraph (28)
and inserting ‘‘, and’’, and by adding at the end
the following:
‘‘(29) to the extent provided in section
30B(f)(4).’’.
(B) Section 53(d)(1)(B)(iii) is amended by
inserting ‘‘, or not allowed under section 30B
solely by reason of the application of section
30B(e)(2)’’ before the period.
(C) Section 55(c)(2) is amended by insert-
ing ‘‘30B(e),’’ after ‘‘30(b)(3)’’.
(D) Section 6501(m) is amended by insert-
ing ‘‘30B(f)(9),’’ after ‘‘30(d)(4),’’.
(E) The table of sections for subpart B of
part IV of subchapter A of chapter 1 is amend-
ed by inserting after the item relating to section
30A the following:
‘‘Sec. 30B. Alternative motor vehicle credit.’’.
(b) MODIFICATION
OF
CREDIT
FOR
QUALIFIED
ELECTRIC VEHICLES.—
(1) AMOUNT OF CREDIT.—
(A) IN GENERAL.—Section 30(a) (relating
to allowance of credit) is amended by striking
‘‘10 percent of’’.
(B) LIMITATION
OF
CREDIT
ACCORDING
TO TYPE OF VEHICLE.—Section 30(b) (relating
to limitations) is amended—
(i) by striking paragraphs (1) and (2)
and inserting the following:
‘‘(1) LIMITATION ACCORDING TO TYPE OF VE-
HICLE.—The amount of the credit allowed under
subsection (a) for any vehicle shall not exceed the
greatest of the following amounts applicable to such
vehicle:
‘‘(A) In the case of a vehicle which con-
forms to the Motor Vehicle Safety Standard
500 prescribed by the Secretary of Transpor-
tation, the lesser of—
‘‘(i) 10 percent of the manufacturer’s
suggested retail price of the vehicle, or
‘‘(ii) $4,000.
‘‘(B) In the case of a vehicle with a gross
vehicle weight rating not exceeding 8,500
pounds—
‘‘(i) $4,000, or
‘‘(ii) $6,000, if such vehicle is—
‘‘(I) capable of a driving range of
at least 100 miles on a single charge
of the vehicle’s rechargeable batteries
and measured pursuant to the urban
dynamometer schedules under appen-
dix I to part 86 of title 40, Code of
Federal Regulations, or
‘‘(II) capable of a payload capac-
ity of at least 1000 pounds.
‘‘(C) In the case of a vehicle with a gross
vehicle weight rating exceeding 8,500 but not
exceeding 14,000 pounds, $10,000.
‘‘(D) In the case of a vehicle with a gross
vehicle weight rating exceeding 14,000 but not
exceeding 26,000 pounds, $20,000.
‘‘(E) In the case of a vehicle with a gross
vehicle weight rating exceeding 26,000 pounds,
$40,000.’’, and
(ii) by redesignating paragraph (3) as
paragraph (2).
(C) CONFORMING AMENDMENTS.—
(i) Section 53(d)(1)(B)(iii) is amend-
ed by striking ‘‘section 30(b)(3)(B)’’ and
inserting ‘‘section 30(b)(2)(B)’’.
(ii) Section 55(c)(2) is amended by
striking 
‘‘30(b)(3)’’ 
and 
inserting
‘‘30(b)(2)’’.
(2) QUALIFIED BATTERY ELECTRIC VEHICLE.—
(A) IN
GENERAL.—Section 30(c)(1)(A)
(defining qualified electric vehicle) is amended
to read as follows:
‘‘(A) which is—
‘‘(i) operated solely by use of a bat-
tery or battery pack, or
‘‘(ii) powered primarily through the
use of an electric battery or battery pack
using a flywheel or capacitor which stores
energy produced by an electric motor
through regenerative braking to assist in
vehicle operation,’’.
(B) 
LEASED
VEHICLES.—Section
30(c)(1)(C) is amended by inserting ‘‘or lease’’
after ‘‘use’’.
(C) CONFORMING AMENDMENTS.—
(i) Subsections (a), (b)(2), and (c) of
section 30 are each amended by inserting
‘‘battery’’ after ‘‘qualified’’ each place it
appears.
(ii) The heading of subsection (c) of
section 30 is amended by inserting ‘‘BAT-
TERY’’ after ‘‘QUALIFIED’’.
(iii) The heading of section 30 is
amended by inserting ‘‘BATTERY’’ after
‘‘QUALIFIED’’.
(iv) The item relating to section 30 in
the table of sections for subpart B of part
IV of subchapter A of chapter 1 is amend-
ed by inserting ‘‘battery’’ after ‘‘qualified’’.
(v) Section 179A(c)(3) is amended by
inserting ‘‘battery’’ before ‘‘electric’’.
(vi) The heading of paragraph (3) of
section 179A(c) is amended by inserting
‘‘BATTERY’’ before ‘‘ELECTRIC’’.
(3) 
ADDITIONAL
SPECIAL
RULES.—Section
30(d) (relating to special rules) is amended by add-
ing at the end the following:
‘‘(5) NO
DOUBLE
BENEFIT.—The amount of
any deduction or credit allowable under this chapter
for any cost taken into account in computing the
amount of the credit determined under subsection
(a) shall be reduced by the amount of such credit at-
tributable to such cost.
‘‘(6) PROPERTY USED BY TAX-EXEMPT ENTI-
TIES.—In the case of a credit amount which is al-
lowable with respect to a vehicle which is acquired
by an entity exempt from tax under this chapter, the
person which sells or leases such vehicle to the entity
shall be treated as the taxpayer with respect to the
vehicle for purposes of this section and the credit
shall be allowed to such person, but only if the per-
son clearly discloses to the entity in any sale or lease
contract the specific amount of any credit otherwise
allowable to the entity under this section and re-
duces the sale or lease price of such vehicle by an
equivalent amount of such credit.’’.
(4) EXTENSION.—Section 30(e) (relating to ter-
mination) is amended by striking ‘‘2004’’ and insert-
ing ‘‘2007’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 2001, in taxable years ending after such
date.
SEC. 202. CREDIT FOR RETAIL SALE OF ALTERNATIVE
FUELS AS MOTOR VEHICLE FUEL.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its) is amended by inserting after section 40 the following:
‘‘SEC. 40A. CREDIT FOR RETAIL SALE OF ALTERNATIVE
FUELS AS MOTOR VEHICLE FUEL.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the alternative fuel retail sales credit for any taxable year
is 25 cents for each gasoline gallon equivalent of alter-
native fuel sold at retail by the taxpayer during such year
as a fuel to propel any qualified motor vehicle, but only
if the taxpayer reduces the retail sales price of such fuel
by an equivalent amount of such credit.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) ALTERNATIVE
FUEL.—The term ‘alter-
native fuel’ means compressed natural gas, liquefied
natural gas, liquefied petroleum gas, hydrogen, and
any liquid at least 85 percent of the volume of which
consists of methanol.
‘‘(2) GASOLINE
GALLON
EQUIVALENT.—The
term ‘gasoline gallon equivalent’ means, with respect
to any alternative fuel, the amount (determined by
the Secretary) of such fuel having a Btu content of
114,000.
‘‘(3) QUALIFIED MOTOR VEHICLE.—The term
‘qualified motor vehicle’ means any motor vehicle (as
defined in section 30(c)(2)) which meets any appli-
cable Federal or State emissions standards with re-
spect to each fuel by which such vehicle is designed
to be propelled.
‘‘(4) SOLD AT RETAIL.—
‘‘(A) IN GENERAL.—The term ‘sold at re-
tail’ means the sale, for a purpose other than
resale, after manufacture, production, or impor-
tation.
‘‘(B) USE TREATED AS SALE.—If any per-
son uses alternative fuel (including any use
after importation) as a fuel to propel any quali-
fied alternative fuel motor vehicle (as defined in
section 30B(d)(4)) before such fuel is sold at
retail, then such use shall be treated in the
same manner as if such fuel were sold at retail
as a fuel to propel such a vehicle by such per-
son.
‘‘(c) NO DOUBLE BENEFIT.—The amount of any de-
duction or credit allowable under this chapter for any fuel
taken into account in computing the amount of the credit
determined under subsection (a) shall be reduced by the
amount of such credit attributable to such fuel.
‘‘(d) PASS-THRU IN THE CASE OF ESTATES AND
TRUSTS.—Under regulations prescribed by the Secretary,
rules similar to the rules of subsection (d) of section 52
shall apply.
‘‘(e) TERMINATION.—This section shall not apply to
any fuel sold at retail after December 31, 2007.’’.
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b) (relating to current year business credit) is
amended by striking ‘‘plus’’ at the end of paragraph (14),
by striking the period at the end of paragraph (15) and
inserting ‘‘, plus’’, and by adding at the end the following:
‘‘(16) the alternative fuel retail sales credit de-
termined under section 40A(a).’’.
(c) TRANSITIONAL RULE.—Section 39(d) (relating to
transitional rules) is amended by adding at the end the
following:
‘‘(11) NO CARRYBACK OF SECTION 40A CREDIT
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is
attributable to the alternative fuel retail sales credit
determined under section 40A(a) may be carried
back to a taxable year ending before January 1,
2002.’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
40 the following:
‘‘Sec. 40A. Credit for retail sale of alternative fuels as motor vehicle fuel.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to fuel sold at retail after Decem-
ber 31, 2001, in taxable years ending after such date.
SEC. 203. EXTENSION OF DEDUCTION FOR CERTAIN RE-
FUELING PROPERTY.
(a) IN GENERAL.—Section 179A(f) (relating to ter-
mination) is amended by striking ‘‘2004’’ and inserting
‘‘2007’’.
(b) CONFORMING AMENDMENT.—Section 179A(c)
(relating to qualified clean-fuel vehicle property defined)
is amended by striking paragraph (3).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 2001, in taxable years ending after such
date.
SEC. 204. CREDIT FOR INSTALLATION OF ALTERNATIVE
FUELING STATIONS.
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 (relating to foreign tax credit, etc.),
as amended by section 201, is amended by adding at the
end the following:
‘‘SEC. 30C. CLEAN-FUEL VEHICLE REFUELING PROPERTY
CREDIT.
‘‘(a) CREDIT ALLOWED.—There shall be allowed as
a credit against the tax imposed by this chapter for the
taxable year an amount equal to—
‘‘(1) 50 percent, in the case of retail clean-fuel
vehicle refueling property, and
‘‘(2) 50 percent, in the case of residential clean-
fuel vehicle refueling property,
of the amount paid or incurred by the taxpayer during
the taxable year for the installation of clean-fuel vehicle
refueling property.
‘‘(b) LIMITATION.—The credit allowed under—
‘‘(1) subsection (a)(1) with respect to clean-fuel
vehicle refueling property, shall not exceed $30,000,
and
‘‘(2) subsection (a)(2) with respect to clean-fuel
vehicle refueling property, shall not exceed $1,000.
‘‘(c) YEAR CREDIT ALLOWED.—The credit allowed
under subsection (a) shall be allowed in the taxable year
in which the clean-fuel vehicle refueling property is placed
in service by the taxpayer.
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) CLEAN-FUEL VEHICLE REFUELING PROP-
ERTY.—The term ‘clean-fuel vehicle refueling prop-
erty’ has the same meaning given the term ‘qualified
clean-fuel vehicle refueling property’ under section
179A.
‘‘(2) RESIDENTIAL CLEAN-FUEL VEHICLE RE-
FUELING PROPERTY.—The term ‘residential clean-
fuel vehicle refueling property’ means clean-fuel ve-
hicle refueling property which is installed on prop-
erty which is used as the principal residence (within
the meaning of section 121) of the taxpayer.
‘‘(3) RETAIL CLEAN-FUEL VEHICLE REFUELING
PROPERTY.—The term ‘retail clean-fuel vehicle re-
fueling property’ means clean-fuel vehicle refueling
property—
‘‘(A) which is installed on property used in
a trade or business of the taxpayer, and
‘‘(B) if such refueling property—
‘‘(i) is—
‘‘(I) available to the public dur-
ing normal business hours, and
‘‘(II) capable of serving at least 3
motor vehicles at the same time, or
‘‘(ii) regularly serves at least 1 fleet of
10 or more motor vehicles.
‘‘(e) APPLICATION WITH OTHER CREDITS.—The
credit allowed under subsection (a) for any taxable year
shall not exceed the excess (if any) of—
‘‘(1) the regular tax for the taxable year re-
duced by the sum of the credits allowable under sub-
part A and sections 27, 29, 30, and 30B, over
‘‘(2) the tentative minimum tax for the taxable
year.
‘‘(f) BASIS REDUCTION.—For purposes of this title,
the basis of any property shall be reduced by the portion
of the cost of such property taken into account under sub-
section (a).
‘‘(g) NO DOUBLE BENEFIT.—No deduction shall be
allowed under section 179A with respect to any property
with respect to which a credit is allowed under subsection
(a).
‘‘(h) REFUELING PROPERTY INSTALLED FOR TAX-
EXEMPT ENTITIES.—In the case of clean-fuel vehicle re-
fueling property installed on property owned or used by
an entity exempt from tax under this chapter, the person
which installs such refueling property for the entity shall
be treated as the taxpayer with respect to the refueling
property for purposes of this section (and such refueling
property shall be treated as retail clean-fuel vehicle refuel-
ing property) and the credit shall be allowed to such per-
son, but only if the person clearly discloses to the entity
in any installation contract the specific amount of the
credit allowable under this section and modifies the price
of such contract to take into account the amount of such
credit.
‘‘(i) CARRYFORWARD ALLOWED.—
‘‘(1) IN GENERAL.—If the credit amount allow-
able under subsection (a) for a taxable year exceeds
the amount of the limitation under subsection (b)
for such taxable year (referred to as the ‘unused
credit year’ in this subsection), such excess shall be
allowed as a credit carryforward for each of the 20
taxable years following the unused credit year.
‘‘(2) RULES.—Rules similar to the rules of sec-
tion 39 shall apply with respect to the credit
carryforward under paragraph (1).
‘‘(j) SPECIAL RULES.—Rules similar to the rules of
paragraphs (4) and (5) of section 179A(e) shall apply.
‘‘(k) REGULATIONS.—The Secretary shall prescribe
such regulations as necessary to carry out the provisions
of this section.
‘‘(l) TERMINATION.—This section shall not apply to
any property placed in service after December 31, 2007.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1016(a), as amended by section
201, is amended by striking ‘‘and’’ at the end of
paragraph (28), by striking the period at the end of
paragraph (29) and inserting ‘‘, and’’, and by add-
ing at the end the following:
‘‘(30) to the extent provided in section
30C(f).’’.
(2) Section 53(d)(1)(B)(iii), as amended by sec-
tion 201, is amended by inserting ‘‘, or not allowed
under section 30C solely by reason of the application
of section 30C(e)(2)’’ before the period.
(3) Section 55(c)(2), as amended by section
201, is amended by inserting ‘‘30C(e),’’ after
‘‘30B(e)’’.
(4) The table of sections for subpart B of part
IV of subchapter A of chapter 1, as amended by sec-
tion 201, is amended by inserting after the item re-
lating to section 30B the following:
‘‘Sec. 30C. Clean-fuel vehicle refueling property credit.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 2001, in taxable years ending after such
date.
SEC. 205. CREDIT FOR PROPERTY TO CONVERT WASTE TO
FUEL.
(a) IN GENERAL.—Subparagraph (A) of section
48A(c)(1) (defining energy property), as added by section
401, is amended by striking ‘‘or’’ at the end of clause (vi),
by adding ‘‘or’’ at the end of clause (vii), and by inserting
after clause (vii) the following new clause:
‘‘(viii) waste conversion property,’’.
(b) WASTE CONVERSION PROPERTY.—Subsection (d)
of section 48A, as so added, is amended by adding at the
end the following new paragraph:
‘‘(8) WASTE
CONVERSION
PROPERTY.—The
term ‘waste conversion property’ means equipment
used to produce a usable liquid or gaseous synthetic
fuel derived from a waste feedstock (including plas-
tic waste and biomass (as defined in section
29(c)).’’.
(c) ENERGY PERCENTAGE IS 15 PERCENT.—Sub-
section (b) of section 48A, as so added, is amended in
paragraph (1)(C) by striking ‘‘subsection (c)(1)(A)(v)’’
and inserting ‘‘clauses (v) and (viii) of subsection
(c)(1)(A)’’.
TITLE III—ENERGY EFFICIENCY
AND CONSERVATION
SEC. 301. ENERGY-EFFICIENT COMMERCIAL BUILDING
PROPERTY DEDUCTION.
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 (relating to itemized deductions for individuals and
corporations) is amended by adding at the end the fol-
lowing:
‘‘SEC. 199. ENERGY-EFFICIENT COMMERCIAL BUILDING
PROPERTY.
‘‘(a) IN GENERAL.—There shall be allowed as a de-
duction for the taxable year an amount equal to the en-
ergy-efficient commercial building property expenditures
made by a taxpayer for the taxable year.
‘‘(b) MAXIMUM
AMOUNT
OF
DEDUCTION.—The
amount of energy-efficient commercial building property
expenditures taken into account under subsection (a) shall
not exceed an amount equal to the product of—
‘‘(1) $2.25, and
‘‘(2) the square footage of the building with re-
spect to which the expenditures are made.
‘‘(c) YEAR DEDUCTION ALLOWED.—The deduction
under subsection (a) shall be allowed in the taxable year
in which the construction of the building is completed.
‘‘(d) ENERGY-EFFICIENT COMMERCIAL BUILDING
PROPERTY
EXPENDITURES.—For 
purposes 
of 
this
section—
‘‘(1) IN GENERAL.—The term ‘energy-efficient
commercial building property expenditures’ means
an amount paid or incurred for energy-efficient com-
mercial building property installed on or in connec-
tion with new construction or reconstruction of
property—
‘‘(A) for which depreciation is allowable
under section 167,
‘‘(B) which is located in the United States,
and
‘‘(C) the construction or erection of which
is completed by the taxpayer.
Such property includes all residential rental prop-
erty, including low-rise multifamily structures and
single family housing property which is not within
the scope of Standard 90.1–1999 (described in para-
graph (3)).
‘‘(2) LABOR COSTS INCLUDED.—Such term in-
cludes expenditures for labor costs properly allocable
to the onsite preparation, assembly, or original in-
stallation of the property.
‘‘(3) ENERGY
EXPENDITURES
EXCLUDED.—
Such term does not include any expenditures taken
into account in determining any credit allowed under
section 48A.
‘‘(e) ENERGY-EFFICIENT COMMERCIAL BUILDING
PROPERTY.—For purposes of subsection (d)—
‘‘(1) IN GENERAL.—The term ‘energy-efficient
commercial building property’ means any property
which reduces total annual energy and power costs
with respect to the lighting, heating, cooling, ventila-
tion, and hot water supply systems of the building
by 50 percent or more in comparison to a reference
building which meets the requirements of Standard
90.1–1999 of the American Society of Heating, Re-
frigerating, and Air Conditioning Engineers and the
Illuminating Engineering Society of North America
using methods of calculation under subparagraph
(B) and certified by qualified professionals as pro-
vided under paragraph (6).
‘‘(2) METHODS
OF
CALCULATION.—The Sec-
retary, in consultation with the Secretary of Energy,
shall promulgate regulations which describe in detail
methods for calculating and verifying energy and
power consumption and cost, taking into consider-
ation the provisions of the 1998 California Nonresi-
dential ACM Manual. These procedures shall meet
the following requirements:
‘‘(A) In calculating tradeoffs and energy
performance, the regulations shall prescribe the
costs per unit of energy and power, such as kil-
owatt hour, kilowatt, gallon of fuel oil, and
cubic foot or Btu of natural gas, which may be
dependent on time of usage.
‘‘(B) The calculational methodology shall
require that compliance be demonstrated for a
whole building. If some systems of the building,
such as lighting, are designed later than other
systems of the building, the method shall pro-
vide that either—
‘‘(i) the expenses taken into account
under paragraph (1) shall not occur until
the date designs for all energy-using sys-
tems of the building are completed, or
‘‘(ii) the expenses taken into account
under paragraph (1) shall be a fraction of
such expenses based on the performance of
less than all energy-using systems in ac-
cordance with subparagraph (C), and the
energy performance of all systems and
components not yet designed shall be as-
sumed to comply minimally with the re-
quirements of such Standard 90.1–1999.
‘‘(C) The expenditures in connection with
the design of subsystems in the building, such
as the envelope, the heating, ventilation, air
conditioning and water heating system, and the
lighting system shall be allocated to the appro-
priate building subsystem based on system-spe-
cific energy cost savings targets in regulations
promulgated by the Secretary of Energy which
are equivalent, using the calculation method-
ology, to the whole building requirement of 50
percent savings.
‘‘(D) The calculational methods under this
paragraph need not comply fully with section
11 of such Standard 90.1–1999.
‘‘(E) The calculational methods shall be
fuel neutral, such that the same energy effi-
ciency features shall qualify a building for the
deduction under this section regardless of
whether the heating source is a gas or oil fur-
nace or an electric heat pump.
‘‘(F) The calculational methods shall pro-
vide appropriate calculated energy savings for
design methods and technologies not otherwise
credited in either such Standard 90.1–1999 or
in the 1998 California Nonresidential ACM
Manual, including the following:
‘‘(i) Natural ventilation.
‘‘(ii) Evaporative cooling.
‘‘(iii) Automatic lighting controls such
as occupancy sensors, photocells, and time-
clocks.
‘‘(iv) Daylighting.
‘‘(v) Designs utilizing semi-condi-
tioned spaces which maintain adequate
comfort conditions without air conditioning
or without heating.
‘‘(vi) Improved fan system efficiency,
including reductions in static pressure.
‘‘(vii) Advanced unloading mecha-
nisms for mechanical cooling, such as mul-
tiple or variable speed compressors.
‘‘(viii) The calculational methods may
take into account the extent of commis-
sioning in the building, and allow the tax-
payer to take into account measured per-
formance which exceeds typical perform-
ance.
‘‘(3) COMPUTER SOFTWARE.—
‘‘(A) IN GENERAL.—Any calculation under
this subsection shall be prepared by qualified
computer software.
‘‘(B) QUALIFIED COMPUTER SOFTWARE.—
For purposes of this paragraph, the term
‘qualified computer software’ means software—
‘‘(i) for which the software designer
has certified that the software meets all
procedures and detailed methods for calcu-
lating energy and power consumption and
costs as required by the Secretary,
‘‘(ii) which provides such forms as re-
quired to be filed by the Secretary in con-
nection with energy efficiency of property
and the deduction allowed under this sec-
tion, and
‘‘(iii) which provides a notice form
which summarizes the energy efficiency
features of the building and its projected
annual energy costs.
‘‘(4) ALLOCATION OF DEDUCTION FOR PUBLIC
PROPERTY.—In the case of energy-efficient commer-
cial building property installed on or in public prop-
erty, the Secretary shall promulgate a regulation to
allow the allocation of the deduction to the person
primarily responsible for designing the property in
lieu of the public entity which is the owner of such
property. Such person shall be treated as the tax-
payer for purposes of this section.
‘‘(5) NOTICE TO OWNER.—The qualified indi-
vidual shall provide an explanation to the owner of
the building regarding the energy efficiency features
of the building and its projected annual energy costs
as 
provided 
in 
the 
notice 
under 
paragraph
(3)(B)(iii).
‘‘(6) CERTIFICATION.—
‘‘(A) IN GENERAL.—Except as provided in
this paragraph, the Secretary, in consultation
with the Secretary of Energy, shall establish re-
quirements for certification and compliance pro-
cedures similar to the procedures under section
45E(d).
‘‘(B) QUALIFIED
INDIVIDUALS.—Individuals
qualified to determine compliance shall be only
those individuals who are recognized by an or-
ganization certified by the Secretary for such
purposes.
‘‘(C) PROFICIENCY OF QUALIFIED INDIVID-
UALS.—The Secretary shall consult with non-
profit organizations and State agencies with ex-
pertise in energy efficiency calculations and in-
spections to develop proficiency tests and train-
ing programs to qualify individuals to determine
compliance.
‘‘(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 any energy-efficient commercial building
property expenditures in connection with property—
‘‘(1) the plans for which are not certified under
subsection (e)(6) on or before December 31, 2007,
and
‘‘(2) the construction of which is not completed
on or before December 31, 2009.’’.
(b) CONFORMING AMENDMENTS.—Section 1016(a),
as amended by section 203(b), is amended by striking
‘‘and’’ at the end of paragraph (29), by striking the period
at the end of paragraph (30) and inserting ‘‘, and’’, and
by inserting the following:
‘‘(31) for amounts allowed as a deduction under
section 199(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:
‘‘Sec. 199. Energy-efficient commercial building property.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 302. CREDIT FOR CONSTRUCTION OF NEW HIGHLY EN-
ERGY-EFFICIENT HOMES.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its) is amended by inserting after section 45D the fol-
lowing:
‘‘SEC. 45E. NEW HIGHLY ENERGY-EFFICIENT HOME CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 38, in
the case of an eligible contractor, the credit determined
under this section for the taxable year is an amount equal
to the credit amount specified in the following table for
a new, highly energy-efficient principal residence:
‘‘New, 
highly 
energy-efficient
principal residence:
Credit amount:
30 percent property ........................................................................... $1,250
50 percent property ........................................................................... $2,500.
‘‘(b) HIGHLY ENERGY-EFFICIENT PRINCIPAL RESI-
DENCE.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘highly energy-ef-
ficient principal residence’ means a dwelling—
‘‘(A) located in the United States,
‘‘(B) the construction of which is substan-
tially completed after December 31, 2001,
‘‘(C) the original use of which is as a prin-
cipal residence (within the meaning of section
121) which commences with the person who ac-
quires such dwelling from the eligible con-
tractor, and
‘‘(D) which is certified before such use
commences as being 50 percent property or 30
percent property.
‘‘(2) 50 OR 30 PERCENT PROPERTY.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), property is 50 percent property or
30 percent property if the projected heating and
cooling energy usage of such property, meas-
ured in terms of average annual energy cost to
taxpayer, is reduced by 50 percent, or 30 per-
cent, respectively, in comparison to the energy
usage of the standard design reference house as
determined using the procedures under sub-
paragraph (D).
‘‘(B) 
STANDARD
DESIGN
REFERENCE
HOUSE.—For purposes of this subsection, the
term ‘standard design reference house’ means a
dwelling which conforms with the standards of
chapter 4 of the 2000 International Energy
Conservation Code of the International Code
Council and the minimum equipment efficiency
standards promulgated by the Department of
Energy under the National Appliance Energy
Conservation Act.
‘‘(C) 
ENERGY
EFFICIENT
REFERENCE
HOUSE.—For purposes of this paragraph, the
term ‘energy efficient reference house’ means a
design of a dwelling which uses the same heat-
ing fuel type as the proposed design and which
uses minimum standards equipment, as re-
quired by the Department of Energy under the
National Appliance Energy Conservation Act
and which achieves, on average over fuel type
and house geometry, the required 30 percent or
50 percent reductions in annual energy cost as
calculated using the procedures under subpara-
graph (D).
‘‘(D) PROCEDURES.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), energy usage shall be
demonstrated either by a component-based
approach or a performance-based ap-
proach.
‘‘(ii) COMPONENT
APPROACH.—Com-
pliance by the component approach is
achieved when all of the components of the
house comply with the requirements of pre-
scriptive packages established by the Sec-
retary of Energy, in consultation with the
Administrator of the Environmental Pro-
tection Agency, such that they are equiva-
lent, for the strong majority of houses
which can use this method, to the results
of using the performance-based approach
of clause (iii) to achieve the required re-
duction in energy usage.
‘‘(iii) 
PERFORMANCE-BASED
AP-
PROACH.—Performance-based 
compliance
shall be demonstrated in terms of equiva-
lent or less energy usage when compared
to the energy efficient reference house of
the same heating fuel type as the dwelling
concerned or through an alternate method
prescribed by the Secretary which yields
equivalent results.
‘‘(iv) COMPUTER
SOFTWARE.—Com-
puter software shall be used in support of
performance-based 
compliance 
under
clause (iii) and such software shall meet all
of the procedures and methods for calcu-
lating energy savings reductions that are
promulgated by the Secretary of Energy.
Such regulations on the specifications for
software and verification protocols shall be
based on the 1998 California Residential
Alternative Calculation Method Approval
Manual.
‘‘(v) FUEL PARITY.—In the case of
both the component and the performance-
based approaches, and any software used
in support of either such approach, the
Secretary shall assure fuel parity by re-
quiring both the energy efficient reference
house and the prescriptive package under
clause (ii) to employ the same envelope en-
ergy efficiency measures for a house heat-
ed by a gas furnace as for a house heated
by an electric air source heat pump or by
an oil furnace or boiler; and, for equipment
efficiency, to employ electric, oil, or gas
equipment efficiency of corresponding effi-
ciency improvement. Such determination of
corresponding efficiency improvement shall
be made on a linear scale between the min-
imum standard equipment efficiency and
the best available marketplace technology
efficiency as determined by the Secretary
after considering the information provided
by the Air Conditioning and Refrigeration
Institute (ARI) and the Gas Appliance
Manufacturers Association (GAMA) guides
for the respective electric, oil, and natural
gas equipment of such type (such as heat-
ing and cooling).
‘‘(vi) APPROVAL OF SOFTWARE SUB-
MISSIONS.—The Secretary shall approve
software submissions that comply with the
calculation requirements of clause (iv).
‘‘(vii) PROCEDURES FOR INSPECTION
AND TESTING OF HOMES.—The Secretary
shall ensure that procedures for the inspec-
tion and testing for compliance comply
with the calculation requirements under
clause (iv).
‘‘(3) DETERMINATIONS
OF
COMPLIANCE.—A
determination of compliance made for the purposes
of this subsection shall be filed with the Secretary
within 1 year after the date of such determination
and shall include the TIN of the certifier, the ad-
dress of the building in compliance, and the identity
of the person for whom such determination was per-
formed. Determinations of compliance filed with the
Secretary shall be available for inspection by the
Secretary of Energy.
‘‘(4) COMPLIANCE.—
‘‘(A) IN GENERAL.—The Secretary, in con-
sultation with the Secretary of Energy shall es-
tablish 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 Accreditation Procedures for
Home Energy Rating Systems.
‘‘(B) INDIVIDUALS QUALIFIED TO DETER-
MINE
COMPLIANCE.—Individuals qualified to
determine compliance shall be only those indi-
viduals who are recognized by an organization
certified by the Secretary for such purposes.
The Secretary may qualify a Home Energy
Rating Systems Organization, a local building
code agency, a State or local energy office, a
utility, or other organizations which meet the
requirements prescribed under this section.
‘‘(5) FORM PROVIDED TO BUYER.—
‘‘(A) IN GENERAL.—A form documenting
the energy-efficiency of the dwelling, including
the rated energy efficiency performance of
equipment installed in the dwelling, shall be
provided to the buyer of the dwelling. The form
shall include labeled R-value for insulation
products, NFRC-labeled U-factor and Solar
Heat Gain Coefficient for windows, skylights,
and doors, labeled AFUE ratings for furnaces
and boilers, labeled HSPF ratings for electric
heat pumps, and labeled SEER ratings for air
conditioners.
‘‘(B) RATINGS LABEL AFFIXED IN DWELL-
ING.—A permanent label documenting the rat-
ings in subparagraph (A) shall be affixed to the
front of the electrical distribution panel of the
dwelling, or shall be otherwise permanently dis-
played in a readily inspectable location in the
dwelling.
‘‘(c) ADDITIONAL DEFINITIONS.—For purposes of
this section—
‘‘(1) ELIGIBLE CONTRACTOR.—The term ‘eligi-
ble contractor’ means the person who constructed
the new energy-efficient home, or in the case of a
manufactured home which conforms to Federal
Manufactured Home Construction and Safety Stand-
ards (24 C.F.R. 3280), the manufactured home pro-
ducer of such home.
‘‘(2) CONSTRUCTION.—The term ‘construction’
includes reconstruction and rehabilitation.
‘‘(3) ACQUIRE.—The term ‘acquire’ includes
purchase and, in the case of reconstruction and re-
habilitation, such term includes a binding written
contract for such reconstruction or rehabilitation.
‘‘(4) MANUFACTURED HOME INCLUDED.—The
term ‘dwelling’ includes a manufactured home con-
forming to Federal Manufactured Home Construc-
tion and Safety Standards (24 C.F.R. 3280).
‘‘(d) COORDINATION WITH OTHER CREDITS.—Prop-
erty which would, but for this paragraph, be eligible for
credit under more than one provision of this section shall
be eligible only under one such provision, the provision
specified by the taxpayer.
‘‘(e) BASIS ADJUSTMENT.—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 sub-
section) result from such expenditure shall be reduced by
the amount of the credit so allowed.
‘‘(f) TERMINATION.—Subsection (a) shall apply to
dwellings purchased during the period beginning on Janu-
ary 1, 2001, and ending on December 31, 2005.’’.
(b) CREDIT MADE PART OF GENERAL BUSINESS
CREDIT.—Section 38(b) (relating to current year business
credit), as amended by section 202, is amended by striking
‘‘plus’’ at the end of paragraph (15), by striking the period
at the end of paragraph (16) and inserting ‘‘, plus’’, and
by adding at the end the following:
‘‘(17) the new highly energy-efficient home
credit determined under section 45E.’’.
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C
(relating to certain expenses for which credits are allow-
able) is amended by adding at the end the following:
‘‘(d) NEW ENERGY-EFFICIENT HOME EXPENSES.—
No deduction shall be allowed for that portion of expenses
for a new highly energy-efficient home otherwise allowable
as a deduction for the taxable year which is equal to the
amount of the credit determined for such taxable year
under section 45E.’’.
(d) CREDIT ALLOWED AGAINST REGULAR AND MIN-
IMUM TAX.—
(1) IN
GENERAL.—Section 38(c) (relating to
limitation based on amount of tax), as amended by
section 102, is amended by redesignating paragraph
(4) as paragraph (5) and by inserting after para-
graph (3) the following new paragraph:
‘‘(4) SPECIAL RULES FOR NEW ENERGY EFFI-
CIENT HOME CREDIT.—
‘‘(A) IN GENERAL.—In the case of the new
energy efficient home credit—
‘‘(i) this section and section 39 shall
be applied separately with respect to the
credit, and
‘‘(ii) in applying paragraph (1) to the
credit—
‘‘(I) subparagraphs (A) and (B)
thereof shall not apply, and
‘‘(II) the limitation under para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the
taxable year (other than the new en-
ergy efficient home credit).
‘‘(B) NEW
HIGHLY
ENERGY
EFFICIENT
HOME
CREDIT.—For purposes of this sub-
section, the term ‘new highly energy efficient
home credit’ means the credit allowable under
subsection (a) by reason of section 45E.’’.
(2) CONFORMING AMENDMENT.—Subclause (II)
of section 38(c)(2)(A)(ii) is amended by inserting
‘‘or the new highly energy efficient home credit’’
after ‘‘employment credit’’.
(e) LIMITATION ON CARRYBACK.—Section 39(d) (re-
lating to transition rules), as amended by section 202, is
amended by adding at the end the following:
‘‘(12) NO
CARRYBACK
OF
NEW
HIGHLY
EN-
ERGY-EFFICIENT HOME CREDIT BEFORE EFFECTIVE
DATE.—No portion of the unused business credit for
any taxable year which is attributable to the credit
determined under section 45E may be carried back
to any taxable year ending before January 1,
2001.’’.
(f) DEDUCTION FOR CERTAIN UNUSED BUSINESS
CREDITS.—Subsection (c) of section 196 is amended by
striking ‘‘and’’ at the end of paragraph (7), by striking
the period at the end of paragraph (8) and inserting ‘‘,
and’’, and by adding after paragraph (8) the following:
‘‘(9) the new highly energy-efficient home credit
determined under section 45E.’’.
(g) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
45D the following:
‘‘Sec. 45E. New highly energy-efficient home credit.’’.
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 2001.
SEC. 303. 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-
its), as amended by section 302, is amended by adding
at the end the following new section:
‘‘SEC. 45F. ENERGY EFFICIENT APPLIANCE CREDIT.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the energy efficient appliance credit determined under this
section for the taxable year is an amount equal to the ap-
plicable amount determined under subsection (b) with re-
spect to qualified energy efficient appliances produced by
the taxpayer during the calendar year ending with or with-
in the taxable year.
‘‘(b) APPLICABLE AMOUNT.—For purposes of sub-
section (a), the applicable amount determined under this
subsection with respect to a taxpayer is the sum of—
‘‘(1) in the case of an energy efficient clothes
washer described in subsection (d)(2)(A) or an en-
ergy efficient refrigerator described in subsection
(d)(3)(B)(i), an amount equal to—
‘‘(A) $50, multiplied by
‘‘(B) the number of such washers and re-
frigerators produced by the taxpayer during
such calendar year, and
‘‘(2) in the case of an energy efficient clothes
washer described in subsection (d)(2)(B) or an en-
ergy efficient refrigerator described in subsection
(d)(3)(B)(ii), an amount equal to—
‘‘(A) $100, multiplied by
‘‘(B) the number of such washers and re-
frigerators produced by the taxpayer during
such calendar year.
‘‘(c) LIMITATION ON MAXIMUM CREDIT.—
‘‘(1) IN GENERAL.—The maximum amount of
credit allowed under subsection (a) with respect to
a taxpayer for all taxable years shall be—
‘‘(A) $30,000,000 with respect to the cred-
it determined under subsection (b)(1), and
‘‘(B) $30,000,000 with respect to the cred-
it determined under subsection (b)(2).
‘‘(2) 
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.
‘‘(3) GROSS RECEIPTS.—For purposes of this
subsection, the rules of paragraphs (2) and (3) of
section 448(c) shall apply.
‘‘(d) QUALIFIED ENERGY EFFICIENT APPLIANCE.—
For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified energy
efficient appliance’ means—
‘‘(A) an energy efficient clothes washer, or
‘‘(B) an energy efficient refrigerator.
‘‘(2) ENERGY EFFICIENT CLOTHES WASHER.—
The term ‘energy efficient clothes washer’ means a
residential clothes washer, including a residential
style coin operated washer, which is manufactured
with—
‘‘(A) a 1.26 Modified Energy Factor (re-
ferred to in this paragraph as ‘MEF’) (as de-
termined by the Secretary of Energy), or
‘‘(B) a 1.42 MEF (as determined by the
Secretary of Energy) (1.5 MEF for calendar
years beginning after 2004).
‘‘(3) ENERGY EFFICIENT REFRIGERATOR.—The
term ‘energy efficient refrigerator’ means an auto-
matic defrost refrigerator-freezer which—
‘‘(A) has an internal volume of at least
16.5 cubic feet, and
‘‘(B) consumes—
‘‘(i) 10 percent less kw/hr/yr than the
energy conservation standards promulgated
by the Department of Energy for such re-
frigerator for 2001, or
‘‘(ii) 15 percent less kw/hr/yr than
such energy conservation standards.
‘‘(e) SPECIAL RULES.—
‘‘(1) IN GENERAL.—Rules similar to the rules
of subsections (c), (d), and (e) of section 52 shall
apply for purposes of this section.
‘‘(2) AGGREGATION RULES.—All persons treat-
ed as a single employer under subsection (a) or (b)
of section 52 or subsection (m) or (o) of section 414
shall be treated as one person for purposes of sub-
section (a).
‘‘(f) VERIFICATION.—The taxpayer shall submit such
information or certification as the Secretary, in consulta-
tion with the Secretary of Energy, determines necessary
to claim the credit amount under subsection (a).
‘‘(g) TERMINATION.—This section shall not apply to
qualified energy efficient appliances produced in calendar
years beginning after 2006.’’.
(b) LIMITATION ON CARRYBACK.—Section 39(d) (re-
lating to transition rules), as amended by section 302, is
amended by adding at the end the following new para-
graph:
‘‘(13) NO CARRYBACK OF ENERGY EFFICIENT
APPLIANCE CREDIT BEFORE EFFECTIVE DATE.—No
portion of the unused business credit for any taxable
year which is attributable to the energy efficient ap-
pliance credit determined under section 45F may be
carried to a taxable year ending before the date of
the enactment of section 45F.’’.
(c) CONFORMING AMENDMENT.—Section 38(b) (re-
lating to general business credit), as amended by section
302, is amended by striking ‘‘plus’’ at the end of para-
graph (16), by striking the period at the end of paragraph
(17) and inserting ‘‘, plus’’, and by adding at the end the
following new paragraph:
‘‘(18) the energy efficient appliance credit de-
termined under section 45F(a).’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1,
as amended by section 302, is amended by inserting after
the item relating to section 45E the following new item:
‘‘Sec. 45F. Energy efficient appliance credit.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 304. CREDIT FOR ADJUSTABLE SPEED DRIVES.
(a) IN GENERAL.—Subparagraph (A) of section
48A(c)(1) (defining energy property), as added by section
401 and amended by section 206, is amended by striking
‘‘or’’ at the end of clause (vii), by adding ‘‘or’’ at the end
of clause (viii), and by inserting after clause (viii) the fol-
lowing new clause:
‘‘(ix) adjustable speed drive prop-
erty,’’.
(b) ADJUSTABLE SPEED DRIVE PROPERTY.—Sub-
section (d) of section 48A, as so added, is amended by
adding at the end the following new paragraph:
‘‘(9) ADJUSTABLE SPEED DRIVE PROPERTY.—
‘‘(A) IN GENERAL.—The term ‘adjustable
speed drive property’ means equipment installed
as part of an electric motor driven system of 10
horsepower or greater—
‘‘(i) that is used to adjust the speed
of the electric motor drive output to the re-
quirements of a fluctuating load, and
‘‘(ii) that achieves an energy savings
of at least 20 percent during a complete
cycle of operation.
‘‘(B) LIMITATION.—In the case of adjust-
able speed drive property placed in service dur-
ing the taxable year, the credit under sub-
section (a) for such year may not exceed
$10,000 for each item of such property.
‘‘(C) COORDINATION
WITH
DEDUCTION
FOR
ENERGY-EFFICIENT
COMMERCIAL
BUILD-
ING PROPERTY.—The energy percentage shall
apply to the basis of adjustable speed drive
property 
after 
adjustment 
under 
section
1016(a)(31).’’.
SEC. 305. CREDIT FOR ENERGY EFFICIENT RECYCLING OR
REMANUFACTURING EQUIPMENT.
(a) IN GENERAL.—Section 46 (relating to amount of
investment credit) is amended by striking ‘‘and’’ at the
end of paragraph (2), by striking the period at the end
of paragraph (3) and inserting ‘‘, and’’, and by adding
at the end the following new paragraph:
‘‘(4) the reclamation credit.’’
(b) RECLAMATION CREDIT.—Section 48 (relating to
energy credit and reforestation credit), as amended by sec-
tion 401, is amended by adding at the end the following
new subsection:
‘‘(c) RECLAMATION CREDIT.—
‘‘(1) IN GENERAL.—For purposes of section 46,
the reclamation credit for any taxable year is 20
percent of the basis of each qualified reclamation
property placed in service during the taxable year.
‘‘(2) QUALIFIED RECLAMATION PROPERTY.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘qualified reclamation prop-
erty’ means property—
‘‘(i) which is qualified recycling prop-
erty or qualified remanufacturing property,
‘‘(ii) which is tangible property (not
including a building and its structural
components),
‘‘(iii) with respect to which deprecia-
tion (or amortization in lieu of deprecia-
tion) is allowable,
‘‘(iv) which has a useful life of at least
5 years, and
‘‘(v) which is—
‘‘(I) acquired by purchase (as de-
fined in section 179(d)(2)) by the tax-
payer if the original use of such prop-
erty commences with the taxpayer, or
‘‘(II) constructed by or for the
taxpayer.
‘‘(B) DOLLAR LIMITATION.—
‘‘(i) IN GENERAL.—The basis of quali-
fied reclamation property taken into ac-
count under paragraph (1) for any taxable
year shall not exceed $10,000,000 for a
taxpayer.
‘‘(ii) TREATMENT
OF
CONTROLLED
GROUP.—For purposes of clause (i)—
‘‘(I) all component members of a
controlled group shall be treated as
one taxpayer, and
‘‘(II) the Secretary shall appor-
tion the dollar limitation in such
clause among the component members
of such controlled group in such man-
ner as he shall by regulation pre-
scribe.
‘‘(iii) TREATMENT OF PARTNERSHIPS
AND S CORPORATIONS.—In the case of a
partnership, the dollar limitation in clause
(i) shall apply with respect to the partner-
ship and with respect to each partner. A
similar rule shall apply in the case of an
S corporation and its shareholders.
‘‘(iv) 
CONTROLLED
GROUP
DE-
FINED.—For purposes of clause (ii), the
term ‘controlled group’ has the meaning
given such term by section 1563(a), except
that ‘more than 50 percent’ shall be sub-
stituted for ‘at least 80 percent’ each place
it appears in section 1563(a)(1).
‘‘(3) CERTAIN PROGRESS EXPENDITURE RULES
MADE APPLICABLE.—Rules similar to the rules of
subsections (c)(4) and (d) of section 46 (as in effect
on the day before the date of the enactment of the
Revenue Reconciliation Act of 1990) shall apply for
purposes of this subsection.
‘‘(4) DEFINITIONS.—For purposes of this
subsection—
‘‘(A) 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 include equipment used to collect,
distribute, or sort precious metals such as gold,
silver, or platinum unless such use is coinci-
dental to the collection, distribution, or sorting
of other used ferrous or nonferrous metals.
‘‘(B) 
QUALIFIED
REMANUFACTURING
PROPERTY.—The term ‘qualified remanufac-
turing property’ means equipment used pri-
marily by the taxpayer in the business of re-
building or remanufacturing a used product or
part, but only if—
‘‘(i) the rebuilt or remanufactured
product or part includes 50 percent or less
virgin material, and
‘‘(ii) the equipment is not used pri-
marily in a process occurring after the
product or part is rebuilt or remanufac-
tured.
‘‘(5) COORDINATION
WITH
REHABILITATION
AND
ENERGY
CREDITS.—For purposes of this
section—
‘‘(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 striking ‘‘energy
credit or reforestation credit’’ and inserting ‘‘energy cred-
it, reforestation credit, or reclamation credit’’.
(d) CLERICAL AMENDMENTS.—
(1) The section heading for section 48, as
amended by section 401, is amended to read as fol-
lows:
‘‘SEC. 48. REFORESTATION CREDIT; RECLAMATION CRED-
IT.’’
(2) The item relating to section 48 in the table
of sections for subpart E of part IV of subchapter
A of chapter 1 is amended to read as follows:
‘‘Sec. 48. Reforestation credit; reclamation credit.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 2001.
TITLE 
IV—DEMAND 
MANAGE-
MENT AND DISTRIBUTED EN-
ERGY GENERATION
SEC. 401. CREDIT FOR DISTRIBUTED ENERGY GENERATION
AND 
DEMAND 
MANAGEMENT 
PROPERTY
USED IN BUSINESS.
(a) IN GENERAL.—Subpart E of part IV of sub-
chapter A of chapter 1 (relating to rules for computing
investment credit) is amended by inserting after section
48 the following:
‘‘SEC. 48A. ENERGY CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 46, the
energy credit for any taxable year is the energy percentage
of the basis of each energy property placed in service dur-
ing such taxable year.
‘‘(b) ENERGY PERCENTAGE.—
‘‘(1) IN GENERAL.—The energy percentage is—
‘‘(A) except as otherwise provided in this
subparagraph, 10 percent,
‘‘(B) in the case of energy property de-
scribed in clauses (i), (iii), and (vi) of sub-
section (c)(1)(A), 20 percent,
101
is allocable to such financing or proceeds,
and
‘‘(ii) the denominator of which is the
basis of the property.
‘‘(C) SUBSIDIZED
ENERGY
FINANCING.—
For purposes of subparagraph (A), the term
‘subsidized energy financing’ means financing
provided under a Federal, State, or local pro-
gram a principal purpose of which is to provide
subsidized financing for projects designed to
conserve or produce energy.
‘‘(2) CERTAIN PROGRESS EXPENDITURE RULES
MADE APPLICABLE.—Rules similar to the rules of
subsections (c)(4) and (d) of section 46 (as in effect
on the day before the date of the enactment of the
Revenue Reconciliation Act of 1990) shall apply for
purposes of this section.
‘‘(f) APPLICATION OF SECTION.—This section shall
apply to property placed in service after December 31,
2001, and before January 1, 2007.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 48 is amended to read as follows:
‘‘SEC. 48. REFORESTATION CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 46, the
reforestation credit for any taxable year is 20 percent of
114
SEC. 403. CREDIT FOR ENERGY MANAGEMENT SYSTEMS
USING RESIDENTIAL REAL TIME METERING
SYSTEMS.
(a) CREDIT FOR ENERGY MANAGEMENT SYSTEMS.—
(1) IN GENERAL.—Subpart B of part IV of
subchapter A of chapter 1 (relating to foreign tax
credits, etc.), as amended by section 204, is amend-
ed by inserting after section 30C the following new
section:
‘‘SEC. 30D. CREDIT FOR ENERGY MANAGEMENT SYSTEMS.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year—
‘‘(1) an amount equal to $20 for each qualified
energy management device originally placed in serv-
ice during the taxable year, and
‘‘(2) for each qualified retrofitted meter origi-
nally placed in service during the taxable year, an
amount equal to the lesser of—
‘‘(A) $20, or
‘‘(B) the adjusted basis of such meter.
‘‘(b) DEFINITIONS.—
‘‘(1) QUALIFIED
ENERGY
MANAGEMENT
DE-
VICE.—For purposes of this section, the term ‘quali-
fied energy management device’ means any meter or
metering device acquired and used by an electric en-
115
ergy or natural gas supplier or service provider to
enable consumers or others to manage their pur-
chase, sale, or use of electricity or natural gas in re-
sponse to energy price and usage signals.
‘‘(2) QUALIFIED
RETROFITTED
METER.—For
purposes of this section, the term ‘qualified retro-
fitted meter’ means an electric energy or natural gas
meter or metering device that has been modified by
the addition of equipment designed to enable users
to manage the purchase, sale, or use of electricity
and natural gas in response to energy price and
usage signals.
‘‘(3) PLACED
IN
SERVICE.—For purposes of
this section, the term ‘placed in service’ means inter-
connected with other devices in a manner that per-
mits reading of energy price and usage signals on at
least a daily basis.
‘‘(4) COST OF METERS INCLUDES COST OF IN-
STALLATION.—The cost of any qualified energy
management device or qualified retrofitted meter re-
ferred to in paragraph (1) or (2) shall include the
cost of the original installation of such property.
‘‘(c) SPECIAL RULES.—
‘‘(1) BASIS
REDUCTION.—The basis of any
property for which a credit is allowed under sub-