I
106TH CONGRESS
2D SESSION
H. R. 5345
To amend the Internal Revenue Code of 1986 to provide incentives to
introduce new technologies to reduce energy consumption in buildings.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 29, 2000
Mr. CUNNINGHAM (for himself, Mr. MARKEY, Mr. BILBRAY, Mr. LEWIS of
California, Mr. FARR of California, and Mr. HUNTER) introduced the fol-
lowing 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 introduce new technologies to reduce energy
consumption in buildings.
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
Buildings Incentives Act’’.
SEC. 2. INCENTIVE FOR CERTAIN ENERGY EFFICIENT
PROPERTY USED IN BUSINESS.
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended
by adding at the end the following new section:
‘‘SEC. 199. ENERGY PROPERTY DEDUCTION.
‘‘(a) IN GENERAL.—There shall be allowed as a de-
duction for the taxable year an amount equal to the sum
of—
‘‘(1) the amount determined under subsection
(b) for each energy property of the taxpayer placed
in service during such taxable year, and
‘‘(2) the energy efficient commercial building
amount determined under subsection (f).
‘‘(b) AMOUNT FOR ENERGY PROPERTY.—
‘‘(1) IN
GENERAL.—The amount determined
under this subsection for the taxable year for each
item of energy property shall equal the amount spec-
ified for such property in the following table:
Description of property:
Allowable amount is:
Elected solar hot water property .....................................
$1.00 per each
kwh/year of sav-
ings.
Photovoltaic property .......................................................
$4.50 per peak
watt.
Natural gas heat pump described in subsection
(d)(2)(C).
$3,000.
Tier 2 energy-efficient building property (other than a
natural gas heat pump).
$1,500.
Tier 1 energy-efficient building property .........................
$750.
‘‘(2) ELECTED
SOLAR
HOT
WATER
PROP-
ERTY.—In the case of elected solar hot water prop-
erty, the taxpayer may elect to substitute ‘$21 per
annual Therm of natural gas savings’ for ‘$1.00 per
each kwh/year of savings’ in the table contained in
paragraph (1).
‘‘(c) ENERGY PROPERTY DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this part,
the term ‘energy property’ means any property—
‘‘(A) which is—
‘‘(i) solar energy property,
‘‘(ii) Tier 2 energy-efficient building
property, or
‘‘(iii) Tier 1 energy-efficient building
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 the performance and
quality standards, and the certification require-
ments (if any), which—
‘‘(i) have been prescribed by the Sec-
retary by regulations (after consultation
with the Secretary of Energy or the Ad-
ministrator of the Environmental Protec-
tion Agency, as appropriate), and
‘‘(ii) are in effect at the time of the
acquisition of the property.
‘‘(2) SOLAR ENERGY PROPERTY.—In the case
of—
‘‘(A) elected solar hot water property, the
regulations under paragraph (1)(D) shall be
based on the OG–300 Standard for the Annual
Performance of OG–300 Certified Systems of
the Solar Rating and Certification Corporation,
and
‘‘(B) photovoltaics, such regulations shall
be based on the ASTM Standard E 1036 and
E 1036M–96 Standard Test Method for Elec-
tric Performance of Nonconcentrator Terres-
trial Photovoltaic Modules and Arrays Using
Reference Cells,
to the extent the Secretary determines such stand-
ards carry out the purposes of this section.
‘‘(3) 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).
‘‘(d) 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, or
‘‘(ii) to provide hot water for use in a
structure.
‘‘(B) ELECTED SOLAR HOT WATER PROP-
ERTY.—
‘‘(i) IN GENERAL.—The term ‘elected
solar hot water property’ means property
which is solar energy property by reason of
subparagraph (A)(ii) and for which an
election under this subparagraph is in ef-
fect.
‘‘(ii) ELECTION.—For purposes of
clause (i), a taxpayer may elect to treat
property described in clause (i) as elected
solar hot water property.
‘‘(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.
‘‘(2) TIER
ENERGY-EFFICIENT
BUILDING
PROPERTY.—The term ‘Tier 2 energy-efficient build-
ing property’ means—
‘‘(A) an electric heat pump hot water heat-
er that yields an energy factor of 1.7 or greater,
‘‘(B) 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 and a
peak energy efficiency ratio (EER) of 12.5 or
greater,
‘‘(C) 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,
‘‘(D) a central air conditioner that has a
cooling seasonal energy efficiency ratio (SEER)
of 15 or greater and a peak EER of 12.5 or
greater, and
‘‘(E) an advanced natural gas water heater
that has an energy factor of at least 0.80.
‘‘(3) TIER
ENERGY-EFFICIENT
BUILDING
PROPERTY.—The term ‘Tier 1 energy-efficient build-
ing property’ means—
‘‘(A) an electric heat pump that has a
heating system performance factor (HSPF) of
7.5 or greater and a cooling seasonal energy ef-
ficiency ratio (SEER) of 13.5 or greater and a
peak energy efficiency ratio (EER) of 11.5 or
greater,
‘‘(B) a central air conditioner that has a
cooling seasonal energy efficiency ratio (SEER)
of 13.5 or greater and a peak EER of 11.5 or
greater, and
‘‘(C) an advanced natural gas water heater
that has an energy factor of at least 0.65.
‘‘(e) 
SPECIAL
RULES.—For 
purposes 
of 
this
section—
‘‘(1) BASIS REDUCTION.—For purposes of this
subtitle, if a deduction is allowed under this section
with respect to any energy property, the basis of
such property shall be reduced by the amount of the
deduction so allowed.
‘‘(2) 
DOUBLE
BENEFIT.—Property 
which
would, but for this paragraph, be eligible for deduc-
tion under more than one provision of this section
shall be eligible only under one such provision, the
provision specified by the taxpayer.
‘‘(f) ENERGY EFFICIENT COMMERCIAL BUILDING
PROPERTY DEDUCTION.—
‘‘(1) DEDUCTION ALLOWED.—For purposes of
subsection (a)—
‘‘(A) IN GENERAL.—The energy efficient
commercial building property deduction deter-
mined under this subsection is an amount equal
to energy efficient commercial building property
expenditures made by a taxpayer for the tax-
able year.
‘‘(B) MAXIMUM
AMOUNT
OF
DEDUC-
TION.—The amount of energy efficient commer-
cial building property expenditures taken into
account under subparagraph (A) shall not ex-
ceed an amount equal to the product of—
‘‘(i) $2.25, and
‘‘(ii) the square footage of the build-
ing with respect to which the expenditures
are made.
‘‘(C) YEAR
DEDUCTION
ALLOWED.—The
deduction under subparagraph (A) shall be al-
lowed in the taxable year in which the construc-
tion of the building is completed.
‘‘(2) ENERGY EFFICIENT COMMERCIAL BUILD-
ING
PROPERTY
EXPENDITURES.—For purposes of
this subsection, the term ‘energy efficient commer-
cial 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)). Such term includes expenditures for
labor costs properly allocable to the onsite prepara-
tion, assembly, or original installation of the prop-
erty.
‘‘(3) ENERGY EFFICIENT COMMERCIAL BUILD-
ING PROPERTY.—For purposes of paragraph (2)—
‘‘(A) IN GENERAL.—The term ‘energy effi-
cient commercial building property’ means any
property which reduces total annual energy and
power costs with respect to the lighting, heat-
ing, cooling, ventilation, 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, Refrig-
erating, 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 provided under paragraph (6).
‘‘(B) METHODS
OF
CALCULATION.—The
Secretary, in consultation with the Secretary of
Energy, shall promulgate regulations which de-
scribe in detail methods for calculating and
verifying energy and power consumption and
cost, taking into consideration the provisions of
the 1998 California Nonresidential ACM Man-
ual. These procedures shall meet the following
requirements:
‘‘(i) In calculating tradeoffs and en-
ergy performance, the regulations shall
prescribe the costs per unit of energy and
power, such as kilowatt hour, kilowatt, gal-
lon of fuel oil, and cubic foot or Btu of
natural gas, which may be dependent on
time of usage.
‘‘(ii) The calculational methodology
shall require that compliance be dem-
onstrated for a whole building. If some sys-
tems of the building, such as lighting, are
designed later than other systems of the
building, the method shall provide that
either—
‘‘(I) the expenses taken into ac-
count under paragraph (1) shall not
occur until the date designs for all en-
ergy-using systems of the building are
completed,
‘‘(II) the energy performance of
all systems and components not yet
designed shall be assumed to comply
minimally with the requirements of
such Standard 90.1–1999, or
‘‘(III) the expenses taken into ac-
count under paragraph (1) shall be a
fraction of such expenses based on the
performance of less than all energy-
using systems in accordance with
clause (iii).
‘‘(iii) The expenditures in connection
with the design of subsystems in the build-
ing, such as the envelope, the heating, ven-
tilation, air conditioning and water heating
system, and the lighting system shall be al-
located to the appropriate building sub-
system based on system-specific energy
cost savings targets in regulations promul-
gated by the Secretary of Energy which
are equivalent, using the calculation meth-
odology, to the whole building requirement
of 50 percent savings.
‘‘(iv) The calculational methods under
this subparagraph need not comply fully
with section 11 of such Standard 90.1–
1999.
‘‘(v) The calculational methods shall
be fuel neutral, such that the same energy
efficiency features shall qualify a building
for the deduction under this subsection re-
gardless of whether the heating source is a
gas or oil furnace or an electric heat pump.
‘‘(vi) The calculational methods shall
provide appropriate calculated energy sav-
ings for design methods and technologies
not otherwise credited in either such
Standard 90.1–1999 or in the 1998 Cali-
fornia Nonresidential ACM Manual, in-
cluding the following:
‘‘(I) Natural ventilation.
‘‘(II) Evaporative cooling.
‘‘(III) Automatic lighting controls
such as occupancy sensors, photocells,
and timeclocks.
‘‘(IV) Daylighting.
‘‘(V) Designs utilizing semi-con-
ditioned spaces that maintain ade-
quate comfort conditions without air
conditioning or without heating.
‘‘(VI) Improved fan system effi-
ciency, including reductions in static
pressure.
‘‘(VII) 
Advanced 
unloading
mechanisms for mechanical cooling,
such as multiple or variable speed
compressors.
‘‘(VIII) The calculational meth-
ods may take into account the extent
of commissioning in the building, and
allow the taxpayer to take into ac-
count measured performance that ex-
ceeds typical performance.
‘‘(C) COMPUTER SOFTWARE.—
‘‘(i) IN
GENERAL.—Any calculation
under this paragraph shall be prepared by
qualified computer software.
‘‘(ii) QUALIFIED
COMPUTER
SOFT-
WARE.—For purposes of this subpara-
graph, the term ‘qualified computer soft-
ware’ means software—
‘‘(I) for which the software de-
signer has certified that the software
meets all procedures and detailed
methods for calculating energy and
power consumption and costs as re-
quired by the Secretary,
‘‘(II) which provides such forms
as required to be filed by the Sec-
retary in connection with energy effi-
ciency of property and the deduction
allowed under this subsection, and
‘‘(III) which provides a notice
form which summarizes the energy ef-
ficiency 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 subsection.
‘‘(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)(C)(ii)(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
25B(c)(7).
‘‘(B) QUALIFIED
INDIVIDUALS.—Individ-
uals qualified to determine compliance shall be
only those individuals who are recognized by an
organization 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.
‘‘(g) TERMINATION.—This section shall not apply
with respect to—
‘‘(1) any energy property placed in service after
December 31, 2006, and
‘‘(2) any energy efficient commercial building
property expenditures in connection with property—
‘‘(A) the plans for which are not certified
under subsection (f)(6) on or before December
31, 2006, and
‘‘(B) the construction of which is not com-
pleted on or before December 31, 2008.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 48(a)(3)(A) of such Code is amend-
ed to read as follows:
‘‘(A) which is equipment used to produce,
distribute, or use energy derived from a geo-
thermal deposit (within the meaning of section
613(e)(2)), but only, in the case of electricity
generated by geothermal power, up to (but not
including) the electrical transmission stage,’’.
(2) Subparagraph (B) of section 168(e)(3) of
such Code is amended—
(A) in clause (vi)(I)—
(i) by striking ‘‘section 48(a)(3)’’ and
inserting ‘‘section 199(d)(1)’’, and
(ii) by striking ‘‘clause (i)’’ and in-
serting ‘‘such subparagraph (A)’’, and
(B) in the last sentence, by striking ‘‘sec-
tion 
48(a)(3)’’ 
and 
inserting 
‘‘section
199(c)(3)’’.
(3) Section 1016(a) of such Code is amended
by striking ‘‘and’’ at the end of paragraph (26), by
striking the period at the end of paragraph (27) and
inserting ‘‘, and’’, and by inserting the following new
paragraph:
‘‘(28) 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 of such Code
is amended by adding at the end the following new item:
‘‘Sec. 199. Energy property deduction.’’.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Department of
Energy out of amounts not already appropriated such
sums as necessary to carry out this section.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 3. CREDIT FOR CERTAIN NONBUSINESS ENERGY
PROPERTY.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to nonrefundable personal credits) is
amended by inserting after section 25A the following new
section:
‘‘SEC. 25B. NONBUSINESS ENERGY PROPERTY.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by this chapter for the taxable year an amount
equal to the sum of—
‘‘(1) the amount determined under subsection
(b) for each qualified energy property of the tax-
payer placed in service during such taxable year, and
‘‘(2) the credit amount specified in the fol-
lowing table for a new, highly energy-efficient prin-
cipal residence:
‘‘New, 
highly 
energy-efficient
principal residence:
Credit amount:
30 percent property ...........................................................................
$750
50 percent property ........................................................................... $2,000.
‘‘(b) AMOUNT
FOR
QUALIFIED
ENERGY
PROP-
ERTY.—
‘‘(1) RESIDENTIAL
ENERGY
PROPERTY
EX-
PENDITURES.—Except as provided in paragraph (2),
the amount determined under this subsection for the
taxable year for each item of qualified energy prop-
erty shall equal the amount of residential energy
property expenditures made by the taxpayer with re-
spect to such property during such taxable year.
‘‘(2) SOLAR
HOT
WATER
PROPERTY; PHOTO-
VOLTAIC PROPERTY.—
‘‘(A) IN GENERAL.—In the case of solar
hot water property and photovoltaic property,
the amount determined under this subsection
for the taxable year shall equal the amount
specified for such property in the following
table:
Description of property:
Allowable amount is:
Elected solar hot water property .....................................
35¢ per each
kwh/year of sav-
ings.
Photovoltaic property .......................................................
$1.50 per peak
watt.
‘‘(B) ELECTED SOLAR HOT WATER PROP-
ERTY.—In the case of elected solar hot water
property, the taxpayer may elect to substitute
‘$7 per annual Therm of natural gas savings’
for ‘35¢ per each kwh/year of savings’ in the
table contained in subparagraph (A).
‘‘(3) MAXIMUM AMOUNT.—In the case of prop-
erty described in the following table, the amount of
expenditures taken into account under paragraph
(1) and the amount determined under paragraph (2)
for the taxable year for each item of qualified energy
property with respect to a dwelling unit shall not
exceed the amount specified for such property in
such table:
‘‘Description of property item:
Maximum allowable
credit amount is:
Tier 2 energy-efficient building property (other than a
natural gas heat pump).
$500.
Natural 
gas 
heat 
pump 
described 
in 
section
199(d)(2)(C).
$1,000.
Tier 1 energy-efficient building property .........................
$ 250.
Solar hot water property .................................................
$1,000.
Photovoltaic property .......................................................
$6,000.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) RESIDENTIAL
ENERGY
PROPERTY
EX-
PENDITURES.—The term ‘residential energy prop-
erty expenditures’ means expenditures made by the
taxpayer for qualified energy property installed on or
in connection with a dwelling unit which—
‘‘(A) is located in the United States, and
‘‘(B) is used by the taxpayer as a resi-
dence.
Such term includes expenditures for labor costs
properly allocable to the onsite preparation, assem-
bly, or original installation of the property.
‘‘(2) QUALIFIED ENERGY PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
energy property’ means—
‘‘(i) energy-efficient building property,
‘‘(ii) solar hot water property, and
‘‘(iii) photovoltaic property.
‘‘(B) SWIMMING
POOL, ETC., USED
AS
STORAGE MEDIUM; SOLAR PANELS.—For pur-
poses of this paragraph, the provisions of sub-
paragraphs (D) and (E) section 199(d)(1) shall
apply.
‘‘(C) REQUIRED
STANDARDS.—Property
described under subparagraph (A) shall meet
the performance and quality standards and cer-
tification standards of paragraphs (1)(D) and
(2) of section 199(c).
‘‘(3) 
ENERGY-EFFICIENT
BUILDING
PROP-
ERTY.—The term ‘energy-efficient building property’
has the same meaning given the terms ‘Tier 2 en-
ergy-efficient property’ and ‘Tier 1 energy-efficient
property’ in paragraphs (2) and (3) of section
199(d), respectively.
‘‘(4) SOLAR HOT WATER PROPERTY.—The term
‘solar hot water property’ means property which,
when installed in connection with a structure, uses
solar energy for the purpose of providing hot water
for use within such structure.
‘‘(5) PHOTOVOLTAIC
PROPERTY.—The term
‘photovoltaic property’ has the same meaning given
such term in section 199(d)(1)(C).
‘‘(6) RESIDENCE.—For purposes of paragraph
(1)(B), the term ‘residence’ has the same meaning
as when the term ‘principal residence’ is used in sec-
tion 121, except no ownership requirement shall be
imposed.
‘‘(7) HIGHLY
ENERGY-EFFICIENT
PRINCIPAL
RESIDENCE.—
‘‘(A) IN GENERAL.—Property is a highly
energy-efficient principal residence if—
‘‘(i) such property is located in the
United States,
‘‘(ii) the use of such property com-
mences with the taxpayer and is, at the
time of such use, the principal residence of
the taxpayer, and
‘‘(iii) such property is certified before
such use commences as being 50 percent
property or 30 percent property.
‘‘(B) 50 OR 30 PERCENT PROPERTY.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), property is 50 percent
property or 30 percent property if the pro-
equipment, as required 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 clause (iv).
‘‘(iv) PROCEDURES.—
‘‘(I) IN GENERAL.—For purposes
of clause (i), energy usage shall be
demonstrated either by a component-
based approach or a performance-
based approach.
‘‘(II) COMPONENT APPROACH.—
Compliance by the component ap-
proach is achieved when all of the
components of the house comply with
the requirements of prescriptive pack-
ages established by the Secretary of
Energy, in consultation with the Ad-
ministrator of the Environmental Pro-
tection Agency, such that they are
equivalent, for the strong majority of
houses which can use this method, to
the results of using the performance-
based approach of subclause (III) to
achieve the required reduction in en-
ergy usage.
‘‘(III) PERFORMANCE-BASED AP-
PROACH.—Performance-based compli-
ance shall be demonstrated in terms
of equivalent or less energy usage
when compared to the energy efficient
reference house of the same heating
fuel type as the taxpayer’s house or
through an alternate method pre-
scribed by the Secretary which yields
equivalent results.
‘‘(IV) COMPUTER
SOFTWARE.—
Computer software shall be used in
support of performance-based compli-
ance under subclause (III) and such
software shall meet all of the proce-
dures and methods for calculating en-
ergy savings reductions that are pro-
mulgated 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 per-
formance-based approaches, and any
software used in support of such ap-
proach, the Secretary shall assure fuel
parity by requiring both the energy ef-
ficient reference house and the pre-
scriptive package under subclause (II)
to employ the same envelope energy
efficiency measures for a house heated
by a gas furnace as for a house heat-
ed by an electric air source heat pump
or by an oil furnace or boiler; and, for
equipment efficiency, to employ elec-
tric, oil, or gas equipment efficiency of
corresponding efficiency 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 in-
formation provided by the Air Condi-
tioning and Refrigeration Institute
(ARI) and the Gas Appliance Manu-
facturers Association (GAMA) guides
for the respective electric, oil, and
natural gas equipment of such type
(such as heating and cooling).
‘‘(VI) APPROVAL OF SOFTWARE
SUBMISSIONS.—The Secretary shall
approve software submissions that
comply with the calculation require-
ments of subclause (IV).
‘‘(VII) PROCEDURES
FOR
IN-
SPECTION AND TESTING OF HOMES.—
The Secretary shall ensure that proce-
dures for the inspection and testing
for compliance comply with the cal-
culation requirements under subclause
(IV).
‘‘(C) DETERMINATIONS OF COMPLIANCE.—
A determination of compliance made for the
purposes of this paragraph shall be filed with
the Secretary within 1 year of the date of such
determination and shall include the TIN of the
certifier, the address of the building in compli-
ance, and the identity of the person for whom
such determination was performed. Determina-
tions of compliance filed with the Secretary
shall be available for inspection by the Sec-
retary of Energy.
‘‘(D) COMPLIANCE.—
‘‘(i) IN GENERAL.—The Secretary, in
consultation with the Secretary of Energy
shall establish requirements for certifi-
cation and compliance procedures after ex-
amining the requirements for energy con-
sultants and home energy ratings providers
specified by the Mortgage Industry Na-
tional Accreditation Procedures for Home
Energy Rating Systems.
‘‘(ii) INDIVIDUALS QUALIFIED TO DE-
TERMINE COMPLIANCE.—Individuals quali-
fied to determine compliance shall be only
those individuals who are recognized by an
organization certified by the Secretary for
such purposes. The Secretary may qualify
a Home Energy Rating Systems Organiza-
tion, a local building code agency, a State
or local energy office, a utility, or other or-
ganizations which meet the requirements
prescribed under this section.
‘‘(E) PRINCIPAL
RESIDENCE.—For pur-
poses of this paragraph, the term ‘principal res-
idence’ has the same meaning as when used in
section 121, except that the period for which a
building is treated as the principal residence of
the taxpayer shall also include the 60-day pe-
riod ending on the 1st day on which it would
(but for this subparagraph) first be treated as
a principal residence.
‘‘(d) SPECIAL
RULES.—For purposes of this
section—
‘‘(1) DOLLAR AMOUNTS IN CASE OF JOINT OC-
CUPANCY.—In the case of any dwelling unit which if
jointly occupied and used during any calendar year
as a residence by 2 or more individuals the following
rules shall apply:
‘‘(A) The amount of the credit allowable
under subsection (a) by reason of expenditures
made during such calendar year by any of such
individuals with respect to such dwelling unit
shall be determined by treating all of such indi-
viduals as 1 taxpayer whose taxable year is
such calendar year.
‘‘(B) There shall be allowable with respect
to such expenditures to each of such individ-
uals, a credit under subsection (a) for the tax-
able year in which such calendar year ends in
an amount which bears the same ratio to the
amount determined under subparagraph (A) as
the amount of such expenditures made by such
individual during such calendar year bears to
the aggregate of such expenditures made by all
of such individuals during such calendar year.
‘‘(2) TENANT-STOCKHOLDER IN COOPERATIVE
HOUSING CORPORATION.—In the case of an indi-
vidual who is a tenant-stockholder (as defined in sec-
tion 216) in a cooperative housing corporation (as
defined in such section), such individual shall be
treated as having made his tenant-stockholder’s pro-
portionate share (as defined in section 216(b)(3)) of
any expenditures of such corporation and such credit
shall be allocated pro rata to such individual.
‘‘(3) CONDOMINIUMS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is a member of a condominium man-
agement association with respect to a condo-
minium which he owns, such individual shall be
treated as having made his proportionate share
of any expenditures of such association and any
credit shall be allocated appropriately.
‘‘(B) CONDOMINIUM
MANAGEMENT
ASSO-
CIATION.—For purposes of this paragraph, the
term ‘condominium management association’
means an organization which meets the require-
ments of paragraph (1) of section 528(c) (other
than subparagraph (E) thereof) with respect to
a condominium project substantially all of the
units of which are used as residences.
‘‘(4) JOINT OWNERSHIP OF ENERGY ITEMS.—
‘‘(A) IN GENERAL.—Any expenditure oth-
erwise qualifying as a residential energy prop-
erty expenditure shall not be treated as failing
to so qualify merely because such expenditure
was made with respect to 2 or more dwelling
units.
‘‘(B) LIMITS
APPLIED
SEPARATELY.—In
the case of any expenditure described in sub-
paragraph (A), the amount of the credit allow-
able under subsection (a) shall (subject to para-
graph (1)) be computed separately with respect
to the amount of the expenditure made for each
dwelling unit.
‘‘(5) ALLOCATION IN CERTAIN CASES.—If less
than 80 percent of the use of an item is for nonbusi-
ness purposes, only that portion of the expenditures
for such item which is properly allocable to use for
nonbusiness purposes shall be taken into account.
For purposes of this paragraph, use for a swimming
pool shall be treated as use which is not for nonbusi-
ness purposes.
‘‘(6) COORDINATION WITH OTHER CREDITS.—
Property which would, but for this paragraph, be eli-
gible for credit under more than one provision of
this section shall be eligible only under one such pro-
vision, the provision specified by the taxpayer.
‘‘(7) WHEN EXPENDITURE MADE; AMOUNT OF
EXPENDITURE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), an expenditure with respect
to an item shall be treated as made when the
original installation of the item is completed.
‘‘(B) EXPENDITURES PART OF BUILDING
CONSTRUCTION.—In the case of an expenditure
in connection with the construction of a struc-
ture, such expenditure shall be treated as made
when the original use of the constructed struc-
ture by the taxpayer begins.
‘‘(8) PROPERTY FINANCED BY SUBSIDIZED EN-
ERGY FINANCING.—
‘‘(A) REDUCTION OF EXPENDITURES.—
‘‘(i) IN
GENERAL.—For purposes of
determining the amount of residential en-
ergy property expenditures made by any
individual with respect to any dwelling
unit, there shall not be taken in to account
expenditures which are made from sub-
sidized energy financing.
‘‘(ii) SUBSIDIZED
ENERGY
FINANC-
ING.—For purposes of clause (i), the term
‘subsidized energy financing’ has the same
meaning given such term in section
48(a)(4)(C).
‘‘(B) DOLLAR LIMITS REDUCED.—The dol-
lar amounts in the table contained in subsection
(b)(1) with respect to each property purchased
for such dwelling unit for any taxable year of
such taxpayer shall be reduced proportionately
by an amount equal to the sum of—
‘‘(i) the amount of the expenditures
made by the taxpayer during such taxable
year with respect to such dwelling unit and
not taken into account by reason of sub-
paragraph (A), and
‘‘(ii) the amount of any Federal,
State, or local grant received by the tax-
payer during such taxable year which is
used to make residential energy property
expenditures with respect to the dwelling
unit and is not included in the gross in-
come of such taxpayer.
‘‘(e) BASIS ADJUSTMENTS.—For purposes of this
subtitle, if a credit is allowed under this section for any
expenditure with respect to any property, the increase in
the basis of such property which would (but for this sub-
section) result from such expenditure shall be reduced by
the amount of the credit so allowed.
‘‘(f) TERMINATION.—This section shall not apply
with respect to any taxable years beginning after Decem-
ber 31, 2006.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 1016 of such Code
as amended by section 2(b)(3), is amended by strik-
ing ‘‘and’’ at the end of paragraph (27), by striking
the period at the end of paragraph (28) and insert-
ing ‘‘, and’’, and by adding at the end the following
new paragraph:
‘‘(29) to the extent provided in section 25B(e),
in the case of amounts with respect to which a credit
has been allowed under section 25B.’’.
(2) The table of sections for subpart A of part
IV of subchapter A of chapter 1 of such Code is
amended by inserting after the item relating to sec-
tion 25A the following new item:
‘‘Sec. 25B. Nonbusiness energy property.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenditures made after Decem-
ber 31, 2000.
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