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‘‘(C) YEAR DEDUCTION ALLOWED.—The de-
duction under subparagraph (A) shall be allowed 
in the taxable year in which the construction, re-
construction, erection, or rehabilitation of the 
property is completed. 
‘‘(2) ENERGY EFFICIENT RESIDENTIAL RENTAL 
BUILDING PROPERTY EXPENDITURES.—For purposes 
of this subsection— 
‘‘(A) IN GENERAL.—The term ‘energy effi-
cient residential rental building property ex-
penditures’ means an amount paid or incurred 
for energy efficient residential rental building 
property— 
‘‘(i) in connection with construction, 
reconstruction, erection, or rehabilitation of 
residential rental property (as defined in 
section 168(e)(2)(A)) other than property 
for which a deduction is allowable under 
section 179D, 
‘‘(ii) for which depreciation is allow-
able under section 167, 
‘‘(iii) which is located in the United 
States, and
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‘‘(iv) the construction, reconstruction, 
erection, or rehabilitation of which is com-
pleted by the taxpayer. 
Such term includes expenditures for labor costs 
properly allocable to the onsite preparation, as-
sembly, or original installation of the property. 
‘‘(B) 
ENERGY
EFFICIENT
RESIDENTIAL 
RENTAL BUILDING PROPERTY.— 
‘‘(i) IN GENERAL.—The term ‘energy 
efficient residential rental building prop-
erty’ means any property which, individ-
ually or in combination with other prop-
erty, reduces total annual energy and power 
costs with respect to heating and cooling of 
the building by 20 percent or more when 
compared to— 
‘‘(I) in the case of an existing 
building, the original condition of the 
building, and 
‘‘(II) in the case of a new build-
ing, the standards for residential build-
ings of the same type which are built 
in compliance with the applicable 
building construction codes. 
‘‘(ii) PROCEDURES.—
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‘‘(I) IN GENERAL.—For purposes 
of clause (i), energy usage and costs 
shall be demonstrated by performance- 
based compliance in accordance with 
the requirements of clause (iv). 
‘‘(II) 
COMPUTER
SOFTWARE.— 
Computer software shall be used in 
support of performance-based compli-
ance under subclause (I) and such soft-
ware shall meet all of the procedures 
and methods for calculating energy 
savings reductions which are promul-
gated by the Secretary of Energy. Such 
regulations on the specifications for 
software and verification protocols 
shall be based on the 2005 California 
Residential 
Alternative 
Calculation 
Method Approval Manual. 
‘‘(III) 
CALCULATION
REQUIRE-
MENTS.—In calculating tradeoffs and 
energy performance, the regulations 
prescribed under this clause shall pre-
scribe for the taxable year the costs per 
unit of energy and power, such as kilo-
watt hour, kilowatt, gallon of fuel oil,
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and cubic foot or Btu of natural gas, 
which may be dependent on time of 
usage. If a State has developed annual 
energy usage and cost calculation pro-
cedures based on time of usage costs for 
use in the performance standards of the 
State’s building energy code prior to 
the effective date of this section, the 
State may use those annual energy 
usage and cost calculation procedures 
in lieu of those adopted by the Sec-
retary. 
‘‘(IV) APPROVAL
OF
SOFTWARE 
SUBMISSIONS.—The 
Secretary 
shall 
approve software submissions which 
comply with the requirements of sub-
clause (II). 
‘‘(V) PROCEDURES
FOR
INSPEC-
TION
AND
TESTING
OF
HOMES.—The 
Secretary shall ensure that procedures 
for the inspection and testing for com-
pliance comply with the calculation re-
quirements under subclause (III) of 
this clause and clause (iv).
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‘‘(iii) DETERMINATIONS
OF
COMPLI-
ANCE.—A determination of compliance with 
respect to energy efficient residential rental 
building property made for the purposes of 
this subparagraph shall be filed with the 
Secretary not later than 1 year after the 
date of such determination and shall in-
clude the TIN of the certifier, the address of 
the building in compliance, and the identity 
of the person for whom such determination 
was performed. Determinations of compli-
ance filed with the Secretary shall be avail-
able for inspection by the Secretary of En-
ergy. 
‘‘(iv) COMPLIANCE.— 
‘‘(I) IN GENERAL.—The Secretary, 
after consultation with the Secretary of 
Energy, shall establish requirements 
for certification and compliance proce-
dures after examining the requirements 
for energy consultants and home en-
ergy ratings providers specified by the 
Mortgage Industry National Home En-
ergy Rating Standards.
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‘‘(II) INDIVIDUALS QUALIFIED TO 
DETERMINE
COMPLIANCE.—The deter-
mination of compliance may be pro-
vided by a local building regulatory 
authority, a utility, a manufactured 
home production inspection primary 
inspection agency (IPIA), a home in-
spector certified by the Secretary of 
Energy as trained to perform an en-
ergy inspection for purposes of this sec-
tion, or an accredited home energy rat-
ing system provider. All providers shall 
be accredited, or otherwise authorized 
to use approved energy performance 
measurement methods, by the Residen-
tial 
Energy 
Services 
Network 
(RESNET). 
‘‘(C) ALLOCATION OF DEDUCTION FOR PUB-
LIC PROPERTY.—In the case of energy efficient 
residential rental building property which is 
property owned by a Federal, State, or local gov-
ernment or a political subdivision thereof, the 
Secretary shall promulgate a regulation to allow 
the allocation of the deduction to the person pri-
marily responsible for designing the improve-
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ments to the property in lieu of the owner of 
such property. Such person shall be treated as 
the taxpayer for purposes of this subsection. 
‘‘(f) BASIS REDUCTION.—For purposes of this subtitle, 
if a deduction is allowed under this section with respect 
to any property, the basis of such property shall be reduced 
by the amount of the deduction so allowed. 
‘‘(g) REGULATIONS.—The Secretary shall promulgate 
such regulations as necessary to take into account new tech-
nologies regarding energy efficiency and renewable energy 
for purposes of determining energy efficiency and savings 
under this section. 
‘‘(h) TERMINATION.—This section shall not apply with 
respect to any property placed in service after December 
31, 2008.’’. 
(b) CONFORMING AMENDMENT.—Section 1016(a), as 
amended by this Act, is amended by striking ‘‘and’’ at the 
end of paragraph (32), by striking the period at the end 
of paragraph (33) and inserting ‘‘, and’’, and by inserting 
the following new paragraph: 
‘‘(34) for amounts allowed as a deduction under 
section 200(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 new item: 
‘‘Sec. 200. Energy property deduction.’’.
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(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to property placed in service after the 
date of the enactment of this Act. 
SEC. 1524. CREDIT FOR CERTAIN NONBUSINESS ENERGY 
PROPERTY. 
(a) IN GENERAL.—Subpart A of part IV of subchapter 
A of chapter 1 (relating to nonrefundable personal credits) 
is amended by inserting after section 25B the following new 
section: 
‘‘SEC. 25C. NONBUSINESS ENERGY PROPERTY. 
‘‘(a) ALLOWANCE OF CREDIT.— 
‘‘(1) IN GENERAL.—In the case of an individual, 
there shall be allowed as a credit against the tax im-
posed by this chapter for the taxable year an amount 
equal to the greater of— 
‘‘(A) the amount of residential energy prop-
erty expenditures made by the taxpayer during 
such taxable year, or 
‘‘(B) the amount specified in paragraph (2) 
for any building owned by the taxpayer which is 
certified as a highly energy-efficient principal 
residence during such taxable year. 
‘‘(2) CREDIT AMOUNT.—For purposes of para-
graph (1)(B), the credit amount with respect to a 
highly energy-efficient principal residence is—
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‘‘(A) $2,000 in the case of a percentage re-
duction of 50 percent or more as determined 
under subsection (c)(4)(C), and 
‘‘(B) $4,000 times the percentage reduction 
in the case of a percentage reduction which is 20 
percent or more but less than 50 percent as de-
termined under subsection (c)(4)(C). 
‘‘(b) LIMITATION.—The amount of the credit allowed 
under this section by reason of subsection (a)(1)(A) shall 
not exceed— 
‘‘(1) $50 for any advanced main air circulating 
fan, 
‘‘(2) $150 for any qualified natural gas, pro-
pane, or oil furnace or hot water boiler, and 
‘‘(3) $300 for any item of energy efficient prop-
erty. 
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) RESIDENTIAL ENERGY PROPERTY EXPENDI-
TURES.—The term ‘residential energy property ex-
penditures’ means expenditures made by the taxpayer 
for qualified energy property installed on or in con-
nection with a dwelling unit which— 
‘‘(A) is located in the United States, and 
‘‘(B) is used as a principal residence.
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Such term includes expenditures for labor costs prop-
erly allocable to the onsite preparation, assembly, or 
original installation of the property. 
‘‘(2) QUALIFIED ENERGY PROPERTY.— 
‘‘(A) IN GENERAL.—The term ‘qualified en-
ergy property’ means— 
‘‘(i) energy-efficient building property, 
‘‘(ii) a qualified natural gas, propane, 
or oil furnace or hot water boiler, or 
‘‘(iii) an advanced main air circu-
lating fan. 
‘‘(B) REQUIRED STANDARDS.—Property de-
scribed under subparagraph (A) shall meet the 
performance and quality standards and certifi-
cation standards of section 200(c)(1)(D). 
‘‘(3) ENERGY-EFFICIENT
BUILDING
PROPERTY; 
QUALIFIED NATURAL GAS, PROPANE, OR OIL FURNACE 
OR HOT WATER BOILER; ADVANCED MAIN AIR CIRCU-
LATING
FAN.—The terms ‘energy-efficient building 
property’, ‘qualified natural gas, propane, or oil fur-
nace or hot water boiler’, and ‘advanced main air cir-
culating fan’ have the meanings given such terms in 
section 200. 
‘‘(4) 
HIGHLY
ENERGY-EFFICIENT
PRINCIPAL 
RESIDENCE.—
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‘‘(A) IN GENERAL.—A building is a highly 
energy-efficient principal residence if— 
‘‘(i) such building is located in the 
United States, 
‘‘(ii) the building is used as a prin-
cipal residence, 
‘‘(iii) in the case of a new building, the 
building is not acquired from an eligible 
contractor (within the meaning of section 
45K(b)(1)), and 
‘‘(iv) the building is certified in ac-
cordance with subparagraph (D) as meeting 
the requirements of subparagraph (C). 
‘‘(B) PRINCIPAL RESIDENCE.— 
‘‘(i) IN
GENERAL.—The term ‘prin-
cipal residence’ has the same meaning as 
when used in section 121, except that— 
‘‘(I) no ownership requirement 
shall be imposed, and 
‘‘(II) the period for which a build-
ing is treated as used as a principal 
residence shall also include the 60-day 
period ending on the 1st day on which 
it would (but for this subparagraph)
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first be treated as used as a principal 
residence. 
‘‘(ii) MANUFACTURED HOUSING.—The 
term ‘residence’ shall include a dwelling 
unit which is a manufactured home con-
forming to Federal Manufactured Home 
Construction and Safety Standards (24 
C.F.R. 3280). 
‘‘(C) REQUIREMENTS.—The requirements of 
this subparagraph are met if the projected heat-
ing and cooling energy usage of the building, 
measured in terms of average annual energy cost 
to taxpayer, is reduced by 20 percent or more in 
comparison to— 
‘‘(i) in the case of an existing building, 
the original condition of the building, and 
‘‘(ii) in the case of a new building, a 
comparable building— 
‘‘(I) which is constructed in ac-
cordance with the standards of chapter 
4 of the 2003 International Energy 
Conservation Code, as such Code (in-
cluding supplements) is in effect on the 
date of the enactment of this section, 
and
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‘‘(II) for which the heating and 
cooling 
equipment 
efficiencies 
cor-
respond to the minimum allowed under 
the regulations established by the De-
partment of Energy pursuant to the 
National Appliance Energy Conserva-
tion Act of 1987 and in effect at the 
time of construction. 
‘‘(D) CERTIFICATION PROCEDURES.— 
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (A)(iv), energy usage shall be 
demonstrated by performance-based compli-
ance in accordance with the requirements of 
subsection (d)(2). 
‘‘(ii) 
COMPUTER
SOFTWARE.—Com-
puter software shall be used in support of 
performance-based compliance under clause 
(i) and such software shall meet all of the 
procedures and methods for calculating en-
ergy savings reductions which are promul-
gated by the Secretary of Energy. Such reg-
ulations on the specifications for software 
and verification protocols shall be based on 
the 2005 California Residential Alternative 
Calculation Method Approval Manual.
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‘‘(iii) CALCULATION REQUIREMENTS.— 
In calculating tradeoffs and energy per-
formance, the regulations shall prescribe the 
costs per unit of energy and power, such as 
kilowatt hour, kilowatt, gallon of fuel oil, 
and cubic foot or Btu of natural gas, which 
may be dependent on time of usage. If a 
State has developed annual energy usage 
and cost calculation procedures based on 
time of usage costs for use in the perform-
ance standards of the State’s building en-
ergy code before the effective date of this sec-
tion, the State may use those annual energy 
usage and cost calculation procedures in 
lieu of those adopted by the Secretary. 
‘‘(iv) APPROVAL
OF
SOFTWARE
SUB-
MISSIONS.—The Secretary shall approve 
software submissions which comply with the 
calculation requirements of clause (ii). 
‘‘(v) PROCEDURES
FOR
INSPECTION 
AND
TESTING
OF
DWELLING
UNITS.—The 
Secretary shall ensure that procedures for 
the inspection and testing for compliance 
comply with the calculation requirements 
under clause (iii) and subsection (d)(2).
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‘‘(d) SPECIAL RULES.—For purposes of this section— 
‘‘(1) DETERMINATIONS OF COMPLIANCE.—A de-
termination of compliance made for the purposes of 
this section shall be filed with the Secretary within 1 
year of the date of such determination and shall in-
clude the TIN of the certifier, the address of the build-
ing in compliance, and the identity of the person for 
whom such determination was performed. Determina-
tions of compliance filed with the Secretary shall be 
available for inspection by the Secretary of Energy. 
‘‘(2) COMPLIANCE.— 
‘‘(A) IN
GENERAL.—The Secretary, after 
consultation with the Secretary of Energy, shall 
establish 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 Home Energy Rating Stand-
ards. 
‘‘(B) INDIVIDUALS
QUALIFIED
TO
DETER-
MINE COMPLIANCE.—The determination of com-
pliance may be provided by a local building reg-
ulatory authority, a utility, a manufactured 
home production inspection primary inspection 
agency (IPIA), or an accredited home energy
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rating system provider. All providers shall be ac-
credited, or otherwise authorized to use approved 
energy performance measurement methods, by 
the 
Residential 
Energy 
Services 
Network 
(RESNET). 
‘‘(3) DOLLAR AMOUNTS IN CASE OF JOINT OCCU-
PANCY.—In the case of any dwelling unit which is 
jointly occupied and used during any calendar year 
as a principal 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 individuals, a 
credit under subsection (a) for the taxable year 
in which such calendar year ends in an amount 
which bears the same ratio to the amount deter-
mined under subparagraph (A) as the amount of 
such expenditures made by such individual dur-
ing such calendar year bears to the aggregate of
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such expenditures made by all of such individ-
uals during such calendar year. 
‘‘(4) 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 de-
fined in such section), such individual shall be treated 
as having made his tenant-stockholder’s proportionate 
share (as defined in section 216(b)(3)) of any expend-
itures of such corporation and such credit shall be al-
located pro rata to such individual. 
‘‘(5) 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 ASSOCIA-
TION.—For purposes of this paragraph, the term 
‘condominium management association’ means 
an organization which meets the requirements of 
paragraph (1) of section 528(c) (other than sub-
paragraph (E) thereof) with respect to a condo-
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minium project substantially all of the units of 
which are used as principal residences. 
‘‘(6) JOINT OWNERSHIP OF ENERGY ITEMS.— 
‘‘(A) IN GENERAL.—Any expenditure other-
wise qualifying as an expenditure under this sec-
tion 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 subpara-
graph (A), the amount of the credit allowable 
under subsection (a) shall (subject to paragraph 
(1)) be computed separately with respect to the 
amount of the expenditure made for each dwell-
ing unit. 
‘‘(7) 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. 
‘‘(8) YEAR CREDIT ALLOWED.—The credit under 
subsection (a)(2) shall be allowed in the taxable year 
in which the percentage reduction with respect to the 
principal residence is certified.
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‘‘(9) 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 structure 
by the taxpayer begins. 
‘‘(10) PROPERTY FINANCED BY SUBSIDIZED EN-
ERGY FINANCING.— 
‘‘(A) REDUCTION OF EXPENDITURES.— 
‘‘(i) IN GENERAL.—Except as provided 
in subparagraph (C), for purposes of deter-
mining the amount of expenditures made by 
any individual with respect to any dwelling 
unit, there shall not be taken into account 
expenditures which are made from sub-
sidized energy financing. 
‘‘(ii) SUBSIDIZED
ENERGY
FINANC-
ING.—For purposes of clause (i), the term 
‘subsidized energy financing’ has the same
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meaning 
given 
such 
term 
in 
section 
48(a)(4)(C). 
‘‘(B) DOLLAR LIMITS REDUCED.—The dol-
lar amounts in subsection (b)(3) with respect to 
each property purchased for such dwelling unit 
for any taxable year of such taxpayer shall be re-
duced 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 taxpayer dur-
ing 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 income of such tax-
payer. 
‘‘(C) EXCEPTION FOR STATE PROGRAMS.— 
Subparagraphs (A) and (B) shall not apply to 
expenditures made with respect to property for 
which the taxpayer has received a loan, State tax
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credit, or grant under any State energy pro-
gram. 
‘‘(11) COORDINATION WITH SECTION 25D.—In 
any case in which a credit under section 25D has 
been allowed with respect to property in connection 
with a building for which a credit is allowable under 
this section by reason of subsection (a)(1)(B)— 
‘‘(A) for purposes of subsection (c)(4)(C), 
the average annual energy cost with respect to 
heating and cooling of— 
‘‘(i) 
for 
purposes 
of 
subsection 
(c)(4)(C)(i), the original condition of the 
building, and 
‘‘(ii) 
for 
purposes 
of 
subsection 
(c)(4)(C)(ii), the comparable building, 
shall be determined assuming such building con-
tains the property for which such credit has been 
allowed, and 
‘‘(B) any cost of such property taken into 
account under such section shall not be taken 
into account under this section. 
‘‘(e) BASIS ADJUSTMENTS.—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 subsection)
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result from such expenditure shall be reduced by the amount 
of the credit so allowed. 
‘‘(f) REGULATIONS.—The Secretary shall promulgate 
such regulations as necessary to take into account new tech-
nologies regarding energy efficiency and renewable energy 
for purposes of determining energy efficiency and savings 
under this section. 
‘‘(g) TERMINATION.—This section shall not apply with 
respect to any property placed in service after December 
31, 2008.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Subsection (a) of section 1016, as amended 
by this Act, is amended by striking ‘‘and’’ at the end 
of paragraph (33), by striking the period at the end 
of paragraph (34) and inserting ‘‘, and’’, and by add-
ing at the end the following new paragraph: 
‘‘(35) to the extent provided in section 25C(e), in 
the case of amounts with respect to which a credit has 
been allowed under section 25C.’’. 
(2) The table of sections for subpart A of part IV 
of subchapter A of chapter 1 is amended by inserting 
after the item relating to section 25B the following 
new item: 
‘‘Sec. 25C. Nonbusiness energy property.’’.
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(c) EFFECTIVE DATES.—The amendments made by 
this section shall apply to property placed in service after 
December 31, 2005. 
SEC. 1525. ENERGY CREDIT FOR COMBINED HEAT AND 
POWER SYSTEM PROPERTY. 
(a) IN GENERAL.—Section 48(a)(3)(A) (defining en-
ergy property) is by striking ‘‘or’’ at the end of clause (i), 
by inserting ‘‘or’’ at the end of clause (ii), and by adding 
at the end the following new clause: 
‘‘(iii) combined heat and power system 
property,’’. 
(b) COMBINED HEAT
AND POWER SYSTEM PROP-
ERTY.—Section 48 (relating to energy credit; reforestation 
credit) is amended by adding at the end the following new 
subsection: 
‘‘(c) COMBINED HEAT AND POWER SYSTEM PROP-
ERTY.—For purposes of subsection (a)(3)(A)(iii)— 
‘‘(1) COMBINED HEAT AND POWER SYSTEM PROP-
ERTY.—The term ‘combined heat and power system 
property’ means property comprising a system— 
‘‘(A) which uses the same energy source for 
the simultaneous or sequential generation of elec-
trical power, mechanical shaft power, or both, in 
combination with the generation of steam or
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other forms of useful thermal energy (including 
heating and cooling applications), 
‘‘(B) which has an electrical capacity of not 
more than 15 megawatts or a mechanical energy 
capacity of not more than 2,000 horsepower or 
an equivalent combination of electrical and me-
chanical energy capacities, 
‘‘(C) which produces— 
‘‘(i) at least 20 percent of its total use-
ful energy in the form of thermal energy 
which is not used to produce electrical or 
mechanical power (or combination thereof), 
and 
‘‘(ii) at least 20 percent of its total 
useful energy in the form of electrical or me-
chanical power (or combination thereof), 
‘‘(D) the energy efficiency percentage of 
which exceeds 60 percent, and 
‘‘(E) which is placed in service before Janu-
ary 1, 2008. 
‘‘(2) SPECIAL RULES.— 
‘‘(A) ENERGY EFFICIENCY PERCENTAGE.— 
For purposes of this subsection, the energy effi-
ciency percentage of a system is the fraction—
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‘‘(i) the numerator of which is the total 
useful electrical, thermal, and mechanical 
power produced by the system at normal 
operating rates, and expected to be con-
sumed in its normal application, and 
‘‘(ii) the denominator of which is the 
lower heating value of the fuel sources for 
the system. 
‘‘(B) DETERMINATIONS
MADE
ON
BTU 
BASIS.—The energy efficiency percentage and the 
percentages under paragraph (1)(C) shall be de-
termined on a Btu basis. 
‘‘(C) INPUT AND OUTPUT PROPERTY NOT IN-
CLUDED.—The term ‘combined heat and power 
system property’ does not include property used 
to transport the energy source to the facility or 
to distribute energy produced by the facility. 
‘‘(D) CERTAIN EXCEPTION NOT TO APPLY.— 
The first sentence of the matter in subsection 
(a)(3) which follows subparagraph (D) thereof 
shall not apply to combined heat and power sys-
tem property. 
‘‘(3) SYSTEMS USING BAGASSE.—If a system is 
designed to use bagasse for at least 90 percent of the 
energy source—
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‘‘(A) paragraph (1)(D) shall not apply, but 
‘‘(B) the amount of credit determined under 
subsection (a) with respect to such system shall 
not exceed the amount which bears the same 
ratio to such amount of credit (determined with-
out regard to this paragraph) as the energy effi-
ciency percentage of such system bears to 60 per-
cent.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to periods after the date of the enactment 
of this Act, in taxable years ending after such date, under 
rules similar to the rules of section 48(m) of the Internal 
Revenue Code of 1986 (as in effect on the day before the 
date of the enactment of the Revenue Reconciliation Act of 
1990). 
SEC. 1526. CREDIT FOR ENERGY EFFICIENT APPLIANCES. 
(a) IN GENERAL.—Subpart D of part IV of subchapter 
A of chapter 1 (relating to business-related credits), as 
amended by this Act, is amended by adding at the end the 
following new section: 
‘‘SEC. 45L. ENERGY EFFICIENT APPLIANCE CREDIT. 
‘‘(a) GENERAL RULE.— 
‘‘(1) IN GENERAL.—For purposes of section 38, 
the energy efficient appliance credit determined under 
this section for any taxable year is an amount equal
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to the sum of the credit amounts determined under 
paragraph (2) for each type of qualified energy effi-
cient appliance produced by the taxpayer during the 
calendar year ending with or within the taxable year. 
‘‘(2) CREDIT AMOUNTS.—The credit amount de-
termined for any type of qualified energy efficient ap-
pliance is— 
‘‘(A) the applicable amount determined 
under subsection (b) with respect to such type, 
multiplied by 
‘‘(B) the eligible production for such type. 
‘‘(b) APPLICABLE AMOUNT.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a)— 
‘‘(A) 
DISHWASHERS.—The 
applicable 
amount is the energy savings amount in the case 
of a dishwasher which— 
‘‘(i) is manufactured in calendar year 
2006 or 2007, and 
‘‘(ii) meets the requirements of the En-
ergy Star program which are in effect for 
dishwashers in 2007. 
‘‘(B) CLOTHES WASHERS.—The applicable 
amount is—
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‘‘(i) $50, in the case of a clothes washer 
which— 
‘‘(I) is manufactured in calendar 
year 2005, and 
‘‘(II) has an MEF of at least 1.42, 
‘‘(ii) $100, in the case of a clothes 
washer which— 
‘‘(I) is manufactured in calendar 
year 2005, 2006, or 2007, and 
‘‘(II) meets the requirements of the 
Energy Star program which are in ef-
fect for clothes washers in 2007, and 
‘‘(iii) the energy and water savings 
amount, in the case of a clothes washer 
which— 
‘‘(I) is manufactured in calendar 
year 2008, 2009, or 2010, and 
‘‘(II) meets the requirements of the 
Energy Star program which are in ef-
fect for clothes washers in 2010. 
‘‘(C) REFRIGERATORS.— 
‘‘(i) 15 PERCENT SAVINGS.—The appli-
cable amount is $75 in the case of a refrig-
erator which—
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‘‘(I) is manufactured in calendar 
year 2005 or 2006, and 
‘‘(II) consumes at least 15 percent 
but not more than 20 percent less kilo-
watt hours per year than the 2001 en-
ergy conservation standard. 
‘‘(ii) 20 PERCENT
SAVINGS.—In the 
case of a refrigerator which consumes at 
least 20 percent but not more than 25 per-
cent less kilowatt hours per year than the 
2001 energy conservation standards, the ap-
plicable amount is— 
‘‘(I) $125 for a refrigerator which 
is manufactured in calendar year 
2005, 2006, or 2007, and 
‘‘(II) $100 for a refrigerator 
which is manufactured in calendar 
year 2008. 
‘‘(iii) 25 PERCENT
SAVINGS.—In the 
case of a refrigerator which consumes at 
least 25 percent less kilowatt hours per year 
than the 2001 energy conservation stand-
ards, the applicable amount is—
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‘‘(I) $175 for a refrigerator which 
is manufactured in calendar year 
2005, 2006, or 2007, and 
‘‘(II) $150 for a refrigerator 
which is manufactured in calendar 
year 2008, 2009, or 2010. 
‘‘(2) ENERGY SAVINGS AMOUNT.—For purposes 
of paragraph (1)(A)— 
‘‘(A) IN
GENERAL.—The energy savings 
amount is the lesser of— 
‘‘(i) the product of— 
‘‘(I) $3, and 
‘‘(II) 100 multiplied by the energy 
savings percentage, or 
‘‘(ii) $100. 
‘‘(B) ENERGY SAVINGS PERCENTAGE.—For 
purposes of subparagraph (A), the energy savings 
percentage is the ratio of— 
‘‘(i) the EF required by the Energy 
Star program for dishwashers in 2007 
minus the EF required by the Energy Star 
program for dishwashers in 2005, to 
‘‘(ii) the EF required by the Energy 
Star program for dishwashers in 2007.
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‘‘(3) ENERGY AND WATER SAVINGS AMOUNT.— 
For purposes of paragraph (1)(B)(iii)— 
‘‘(A) IN GENERAL.—The energy and water 
savings amount is the lesser of— 
‘‘(i) the product of— 
‘‘(I) $10, and 
‘‘(II) 100 multiplied by the energy 
and water savings percentage, or 
‘‘(ii) $200. 
‘‘(B) ENERGY
AND
WATER
SAVINGS
PER-
CENTAGE.—For purposes of subparagraph (A), 
the energy and water savings percentage is the 
average of the MEF savings percentage and the 
WF savings percentage. 
‘‘(C) MEF 
SAVINGS
PERCENTAGE.—For 
purposes of this paragraph, the MEF savings 
percentage is the ratio of— 
‘‘(i) the MEF required by the Energy 
Star program for clothes washers in 2010 
minus the MEF required by the Energy 
Star program for clothes washers in 2007, 
to 
‘‘(ii) the MEF required by the Energy 
Star program for clothes washers in 2010.