I
105TH CONGRESS
2D SESSION
H. R. 4538
To amend the Internal Revenue Code of 1986 to provide incentives to reduce
energy consumption.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 10, 1998
Mr. MATSUI (for himself, Mrs. KENNELLY of Connecticut, Ms. MCCARTHY of
Missouri, Mrs. THURMAN, Mr. PALLONE, Mr. VENTO, Mr. NEAL of Mas-
sachusetts, Ms. DELAURO, Mr. BERMAN, Mrs. LOWEY, Ms. FURSE, Mr.
LEWIS of Georgia, Mr. WAXMAN, Mr. HINCHEY, Mr. GUTIERREZ, Mr.
BECERRA, and Mr. FARR of California) 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
incentives to reduce energy consumption.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Energy Efficient Tech-
nology Tax Act’’.
‘‘(A) 15 percent for elected solar hot water
property for the period beginning on January 1,
1999, and ending on December 31, 2003, and
‘‘(B) 15 percent for photovoltaic property
for the period beginning on January 1, 1999,
and ending on December 31, 2005.
‘‘(4) PERIOD FOR WHICH CREDIT IS ALLOWED
FOR CERTAIN ENERGY PROPERTIES.—
‘‘(A) IN GENERAL.—In the case of energy
property described in subparagraph (B), the
credit under subsection (a) shall be allowed only
for the period—
‘‘(i) beginning on January 1, 1999
(January 1, 2000, in the case of a fuel cell
described in subsection (e)(3)(A)), and
‘‘(ii) ending on December 31, 2003
(December 31, 2004, in the case of such
fuel cell).
‘‘(B) ENERGY PROPERTY SPECIFIED.—The
energy property specified in this subparagraph
is energy-efficient building property, combined
heat and power system property, qualified cir-
cuit breaker property, and hydrofluorocarbon
and perfluorocompound recycling property.
‘‘(5) COORDINATION WITH REHABILITATION.—
The energy percentage shall not apply to that por-
tion of the basis of any property which is attrib-
utable to qualified rehabilitation expenditures.
‘‘(6) TRANSITIONAL RULES.—Rules similar to
the rules of section 48(m) (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.
‘‘(c) MAXIMUM CREDIT FOR CERTAIN PROPERTY.—
In the case of property referred to in any of the following
subparagraphs, the amount of the current year business
credit for the taxable year shall not exceed—
‘‘(1) $1,000 in the case of each item of elected
solar hot water property,
‘‘(2) $2,000 in the case of each item of photo-
voltaic property,
‘‘(3) $500 in the case of each item of energy-
efficient building property not referred to in para-
graph (4) or (5),
‘‘(4) $500 for each kilowatt of capacity in the
case of a fuel cell described in subsection (e)(3)(A),
and
‘‘(5) $1,000 in the case of a natural gas heat
pump described in subsection (e)(3)(D).
Paragraphs (1) and (2) shall apply only to property for
which the energy percentage is greater than 10 percent.
‘‘(d) ENERGY PROPERTY DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this sub-
part, the term ‘energy property’ means any prop-
erty—
‘‘(A) which is—
‘‘(i) solar energy property,
‘‘(ii) geothermal energy property,
‘‘(iii) energy-efficient building prop-
erty,
‘‘(iv) combined heat and power system
property,
‘‘(v) qualified circuit breaker property,
or
‘‘(vi) 
hydrofluorocarbon 
and
perfluorocompound recycling property,
‘‘(B)(i) the construction, reconstruction, or
erection of which is completed by the taxpayer,
or
‘‘(ii) which is acquired by the taxpayer if
the original use of such property commences
with the taxpayer,
‘‘(C) with respect to which depreciation (or
amortization in lieu of depreciation) is allow-
able, and
‘‘(D) which meets—
‘‘(i) the performance and quality
standards (if any), and the certification re-
quirements (if any), which have been pre-
scribed by the Secretary by regulations
(after consultation with the Secretary of
Energy or the EPA Administrator, as ap-
propriate), and
‘‘(ii) are in effect at the time of the
acquisition of the property.
‘‘(2) EXCEPTION.—Such term shall not include
any property which is public utility property (as de-
fined in section 46(f)(5) as in effect on the day be-
fore the date of the enactment of the Revenue Rec-
onciliation Act of 1990). The preceding sentence
shall not apply to qualified circuit breaker property
and combined heat and power system property.
‘‘(e) DEFINITIONS RELATING TO TYPES OF ENERGY
PROPERTY.—For purposes of this section—
‘‘(1) SOLAR ENERGY PROPERTY.—
‘‘(A) IN GENERAL.—The term ‘solar en-
ergy property’ means equipment which uses
solar energy—
‘‘(i) to generate electricity,
‘‘(ii) to heat or cool (or provide hot
water for use in) a structure, or
‘‘(iii) to provide solar process heat.
‘‘(B) ELECTED
SOLAR
WATER
HEATING
PROPERTY.—The term ‘elected solar water
heating property’ means property which is solar
energy property by reason of subparagraph
(A)(ii) and for which an election under this sub-
paragraph is in effect.
‘‘(C) 
PHOTOVOLTAIC
PROPERTY.—The
term ‘photovoltaic property’ means solar energy
property which uses a solar photovoltaic process
to generate electricity.
‘‘(D) SWIMMING
POOLS, ETC., USED
AS
STORAGE
MEDIUM.—The term ‘solar energy
property’ shall not include a swimming pool,
hot tub, or any other energy storage medium
which has a function other than the function of
such storage.
‘‘(E) SOLAR PANELS.—No solar panel or
other property installed as a roof (or portion
thereof) shall fail to be treated as solar energy
property solely because it constitutes a struc-
tural component of the structure on which it is
installed.
‘‘(F) DOUBLE BENEFIT.—Credit shall not
be allowed under subsection (a)(1) for a taxable
year for an item of property described in a sub-
paragraph of this paragraph if, for such taxable
year, such item is described in another subpara-
graph of this paragraph for which credit is al-
lowed under subsection (a)(1).
‘‘(2) GEOTHERMAL
ENERGY
PROPERTY.—The
term ‘geothermal energy property’ means equipment
used to produce, distribute, or use energy derived
from a geothermal deposit (within the meaning of
section 613(e)(2)), but only, in the case of electricity
generated by geothermal power, up to (but not in-
cluding) the electrical transmission stage.
‘‘(3) 
ENERGY-EFFICIENT
BUILDING
PROP-
ERTY.—The term ‘energy-efficient building property’
means—
‘‘(A) a fuel cell that—
‘‘(i) generates electricity and heat
using an electrochemical process,
‘‘(ii) has an electricity-only generation
efficiency greater than 35 percent, and
‘‘(iii) has a minimum generating ca-
pacity of 50 kilowatts,
‘‘(B) an electric heat pump hot water heat-
er that yields an energy factor of 1.7 or greater,
‘‘(C) an electric heat pump that has a
heating system performance factor (HSPF) of
9 or greater and a cooling seasonal energy effi-
ciency ratio (SEER) of 15 or greater,
‘‘(D) a natural gas heat pump that has a
coefficient of performance of not less than 1.25
for heating and not less than 0.70 for cooling,
‘‘(E) a central air conditioner that has a
cooling seasonal energy efficiency ratio (SEER)
of 15 or greater, and
‘‘(F) an advanced natural gas water heater
that has an energy factor of at least 0.80.
‘‘(4) COMBINED
HEAT
AND
POWER
SYSTEM
PROPERTY.—
‘‘(A) IN GENERAL.—The term ‘combined
heat and power system property’ means prop-
erty comprising a system—
‘‘(i) which uses the same energy
source for the simultaneous or sequential
generation of electrical power, mechanical
shaft power, or both, in combination with
the generation of steam or other forms of
useful thermal energy (including heating
and cooling applications),
‘‘(ii) which has an electrical capacity
of more than 50 kilowatts or a mechanical
energy capacity of more than 67 horse-
power or an equivalent combination of elec-
trical and mechanical energy capacities,
‘‘(iii) which produces—
‘‘(I) at least 20 percent of its
total useful energy in the form of
thermal energy, and
‘‘(II) at least 20 percent of its
total useful energy in the form of elec-
trical or mechanical power (or a com-
bination thereof), and
‘‘(iv) the energy efficiency percentage
of which exceeds 60 percent (70 percent in
the case of a system with an electrical ca-
pacity in excess of 50 megawatts or a me-
chanical energy capacity in excess of
67,000 horsepower).
‘‘(B) SPECIAL RULES.—
‘‘(i) ENERGY
EFFICIENCY
PERCENT-
AGE.—For 
purposes 
of 
subparagraph
(A)(iv), the energy efficiency percentage of
a system is the fraction—
‘‘(I) the numerator of which is
the total useful electrical, thermal,
and mechanical power produced by
the system at normal operating rates,
and
‘‘(II) the denominator of which is
the lower heating value of the primary
fuel source for the system.
‘‘(ii) DETERMINATIONS MADE ON BTU
BASIS.—The energy efficiency percentage
and the percentages under subparagraph
(A)(iii) shall be determined on a Btu basis.
‘‘(iii) INPUT AND OUTPUT PROPERTY
NOT INCLUDED.—The term ‘combined heat
and power system property’ does not in-
clude property used to transport the en-
ergy source to the facility or to distribute
energy produced by the facility.
‘‘(iv) ACCOUNTING RULE FOR PUBLIC
UTILITY
PROPERTY.—In the case that
combined heat and power system property
is public utility property (as defined in sec-
tion 46(f)(5) as in effect on the day before
the date of the enactment of the Revenue
Reconciliation Act of 1990), the taxpayer
may only claim the credit under subsection
(a)(1) if, with respect to such property, the
taxpayer uses a normalization method of
accounting.
‘‘(v) DEPRECIATION.—No credit shall
be allowed for any combined heat and
power system property unless the taxpayer
elects to treat such property for purposes
of section 168 as having a class life of 22
years.
‘‘(5) QUALIFIED
CIRCUIT
BREAKER
PROP-
ERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
circuit breaker property’ means circuit breaker
equipment which replaces a dual pressure cir-
cuit breaker that—
‘‘(i) 
contains 
sulfur 
hexafluoride
(SF6),
‘‘(ii) has a capacity of not less than
115 kilovolts, and
‘‘(iii) was placed into service before
January 1, 1986.
‘‘(B) REQUIREMENT
TO
DESTROY
OLD
EQUIPMENT.—A credit shall not be allowed
under subsection (a)(1) for qualified circuit
breaker property unless the taxpayer—
‘‘(i) promptly destroys the replaced
property, and
‘‘(ii) certifies such destruction in the
manner prescribed in regulations by the
Secretary (in consultation with the EPA
Administrator).
‘‘(6) QUALIFIED
HYDROFLUOROCARBON
AND
PERFLUOROCOMPOUND RECYCLING PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
hydrofluorocarbon and perfluorocompound recy-
cling property’ means equipment—
‘‘(i) which is used to recover and recy-
cle gas containing any hydrofluorocarbon
or specified perfluorocompound used in the
manufacturing of semiconductors, and
‘‘(ii) which recovers and recycles not
less 
than 
percent 
of 
the
hydrofluorocarbons 
and 
specified
perfluorocompounds within such gas.