I
107TH CONGRESS
1ST SESSION
H. R. 2108
To amend the Internal Revenue Code of 1986 to provide tax incentives
to encourage the production and use of efficient energy sources, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 7, 2001
Mr. MATSUI (for himself, Mr. BECERRA, Mr. POMEROY, Mr. CONDIT, Mr.
SAWYER, Mr. THOMPSON of California, Mrs. CAPPS, Ms. LOFGREN, Mr.
BENTSEN, Mr. CROWLEY, Mr. KANJORSKI, and Ms. JACKSON-LEE of
Texas) 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
tax incentives to encourage the production and use of
efficient energy sources, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Energy Security and Tax Incentive Policy Act of 2001’’.
(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 for
this Act is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I—ENERGY-EFFICIENT PROPERTY USED IN BUSINESS
Sec. 101. Credit for energy-efficient property used in business.
Sec. 102. Energy Efficient Commercial Building Property Deduction.
Sec. 103. Credit for energy-efficient appliances.
TITLE II—RESIDENTIAL ENERGY SYSTEMS
Sec. 201. Business credit for construction of new energy-efficient home.
Sec. 202. Credit for energy efficiency improvements to existing homes.
Sec. 203. Credit for residential solar, wind, and fuel cell energy property.
TITLE III—ELECTRICITY FACILITIES AND PRODUCTION
Sec. 301. Incentive for Distributed Generation.
Sec. 302. Modifications to credit for electricity produced from renewable and
waste resources.
Sec. 303. Treatment of facilities using bagasse to produce energy as solid waste
disposal facilities eligible for tax-exempt financing.
Sec. 304. Depreciation of property used in the transmission of electricity.
TITLE IV—INCENTIVES FOR EARLY COMMERCIAL APPLICATIONS
OF ADVANCED CLEAN COAL TECHNOLOGIES
Sec. 401. Credit for investment in qualifying advanced clean coal technology.
Sec. 402. Credit for production from qualifying advanced clean coal technology.
Sec. 403. Risk pool for qualifying advanced clean coal technology.
TITLE V—HEATING FUELS AND STORAGE
Sec. 501. Full expensing of propane storage facilities.
Sec. 502. Arbitrage rules not to apply to prepayments for natural gas and other
commodities.
Sec. 503. Private loan financing test not to apply to prepayments for natural
gas and other commodities.
TITLE VI—OIL AND GAS PRODUCTION AND PETROLEUM
PRODUCTS
Sec. 601. Credit for production of re-refined lubricating oil.
Sec. 602. Oil and gas from marginal wells.
Sec. 603. Deduction for delay rental payments.
Sec. 604. Election to expense geological and geophysical expenditures.
Sec. 605. Gas pipelines treated as 7-year property.
Sec. 606. Crude oil and natural gas development credit.
Sec. 607. Credit for capture of coalmine methane gas.
Sec. 608. Allocation of alcohol fuels credit to patrons of a cooperative.
Sec. 609. Extension of credit for producing fuel from a nonconventional source.
TITLE I—ENERGY-EFFICIENT
PROPERTY USED IN BUSINESS
SEC. 101. CREDIT FOR CERTAIN ENERGY-EFFICIENT PROP-
ERTY 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,
‘‘(C) in the case of energy property de-
scribed in subsection (c)(1)(A)(v), 15 percent,
‘‘(D) in the case of energy property de-
scribed in subsection (c)(1)(A)(ii) relating to a
high risk geothermal well, 20 percent, and
‘‘(E) in the case of energy property de-
scribed in subsection (c)(1)(A)(vii), 30 percent.
‘‘(2) 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.
‘‘(c) ENERGY PROPERTY DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this sub-
part, the term ‘energy property’ means any
property—
‘‘(A) which is—
‘‘(i) solar energy property,
‘‘(ii) geothermal energy property,
‘‘(iii) energy-efficient building prop-
erty other than property described in
clauses (iii)(I) and (v)(I) of subsection
(d)(3)(A),
‘‘(iv) combined heat and power system
property,
‘‘(v) low core loss distribution trans-
former property,
‘‘(vi) 
qualified 
anaerobic 
digester
property, or
‘‘(vii) qualified wind energy systems
equipment 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) which can reasonably be expected to
remain in operation for at least 5 years,
‘‘(D) with respect to which depreciation (or
amortization in lieu of depreciation) is allow-
able, and
‘‘(E) which meets the performance and
quality standards (if any) which—
‘‘(i) have been prescribed by the Sec-
retary by regulations (after consultation
with the Secretary of Energy), and
‘‘(ii) are in effect at the time of the
acquisition of the property.
‘‘(2) EXCEPTIONS.—
‘‘(A) PUBLIC
UTILITY
PROPERTY.—Such
term shall not include any property which is
public utility property (as defined in section
46(f)(5) as in effect on the day before the date
of the enactment of the Revenue Reconciliation
Act of 1990), except for property described in
paragraph (1)(A)(iv).
‘‘(B) CERTAIN
WIND
EQUIPMENT.—Such
term shall not include equipment described in
paragraph (1)(A)(vii) which is taken into ac-
count for purposes of section 45 for the taxable
year.
‘‘(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 to generate electricity, to heat or
cool (or provide hot water for use in) a struc-
ture, or to provide solar process heat.
‘‘(B) SWIMMING
POOLS, ETC. USED
AS
STORAGE
MEDIUM.—The term ‘solar energy
property’ shall not include property with respect
to which expenditures are properly allocable to
a swimming pool, hot tub, or any other energy
storage medium which has a function other
than the function of such storage.
‘‘(C) 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) GEOTHERMAL ENERGY PROPERTY.—
‘‘(A) IN GENERAL.—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 elec-
tricity generated by geothermal power, up to
(but not including) the electrical transmission
stage.
‘‘(B) HIGH
RISK
GEOTHERMAL
WELL.—
The term ‘high risk geothermal well’ means a
geothermal deposit (within the meaning of sec-
tion 613(e)(2)) which requires high risk drilling
techniques. Such deposit may not be located in
a State or national park or in an area in which
the relevant State park authority or the Na-
tional Park Service determines the development
of such a deposit will negatively impact on a
State or national park.
‘‘(3) 
ENERGY-EFFICIENT
BUILDING
PROP-
ERTY.—
‘‘(A) IN GENERAL.—The term ‘energy-effi-
cient building property’ means—
‘‘(i) a fuel cell which—
‘‘(I) generates electricity using
an electrochemical process,
‘‘(II) has an electricity-only gen-
eration efficiency greater than 30 per-
cent, and
‘‘(III) has a minimum generating
capacity of 2 kilowatts,
‘‘(ii) an electric heat pump hot water
heater which yields an energy factor of 1.7
or greater under test procedures prescribed
by the Secretary of Energy,
‘‘(iii)(I) an electric heat pump which
has a heating system performance factor
(HSPF) of at least 8.5 but less than 9 and
a cooling seasonal energy efficiency ratio
(SEER) of at least 13.5 but less than 15,
‘‘(II) an electric heat pump which has
a heating system performance factor
(HSPF) of 9 or greater and a cooling sea-
sonal energy efficiency ratio (SEER) of 15
or greater,
‘‘(iv) a natural gas heat pump which
has a coefficient of performance of not less
than 1.25 for heating and not less than
0.70 for cooling,
‘‘(v)(I) a central air conditioner which
has a cooling seasonal energy efficiency
ratio (SEER) of at least 13.5 but less than
15,
‘‘(II) a central air conditioner which
has a cooling seasonal energy efficiency
ratio (SEER) of 15 or greater,
‘‘(vi) an advanced natural gas water
heater which—
‘‘(I) increases steady state effi-
ciency and reduces standby and vent
losses, and
‘‘(II) has an energy factor of at
least 0.65,
‘‘(vii) an advanced natural gas fur-
nace which achieves a 90 percent AFUE
and rated for seasonal electricity use of
less than 300 kWh per year, and
‘‘(viii) natural gas cooling equipment
which meets all applicable standards of the
American Society of Heating, Refrig-
erating, and Air Conditioning Engineers
and which—
‘‘(I) has a coefficient of perform-
ance of not less than .60, or
‘‘(II) uses desiccant technology
and has an efficiency rating of not
less than 50 percent.
‘‘(B) LIMITATIONS.—The credit under sub-
section (a) for the taxable year may not
exceed—
‘‘(i) $500 in the case of property de-
scribed in subparagraph (A) other than
clauses (i), (iv), and (viii) thereof,
‘‘(ii) $500 for each kilowatt of capac-
ity in the case of any fuel cell described in
subparagraph (A)(i),
‘‘(iii) $1,000 in the case of any nat-
ural gas heat pump described in subpara-
graph (A)(iv), and
‘‘(iv) $150 for each ton of capacity in
the case of any natural gas cooling equip-
ment described in subparagraph (A)(viii).
‘‘(4) COMBINED
HEAT
AND
POWER
SYSTEM
PROPERTY.—
‘‘(A) IN GENERAL.—The term ‘combined
heat and power system property’ means
property—
‘‘(i) comprising a system for the same
energy source for the simultaneous or se-
quential generation of electrical power, me-
chanical shaft power, or both, in combina-
tion with steam, heat, or other forms of
useful energy,
‘‘(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—
‘‘(I) 60 percent in the case of a
system with an electrical capacity of
less than 1 megawatt,
‘‘(II) 65 percent in the case of a
system with an electrical capacity of
not less than 1 megawatt and not in
excess of 50 megawatts, and
‘‘(III) 70 percent in the case of a
system with an electrical capacity in
excess of 50 megawatts.
‘‘(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.—If the combined heat
and power system property is public utility
property (as defined in section 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.
‘‘(5) LOW
CORE
LOSS
DISTRIBUTION
TRANS-
FORMER PROPERTY.—The term ‘low core loss dis-
tribution transformer property’ means a distribution
transformer which has energy savings from a highly
efficient core of at least 20 percent more than the
average for power ratings reported by studies re-
quired under section 124 of the Energy Policy Act
of 1992.
‘‘(6) QUALIFIED ANAEROBIC DIGESTER PROP-
ERTY.—The term ‘qualified anaerobic digester prop-
erty’ means an anaerobic digester for manure or
crop waste which achieves at least 65 percent effi-
ciency measured in terms of the fraction of energy
input converted to electricity and useful thermal en-
ergy.
‘‘(7) 
QUALIFIED
WIND
ENERGY
SYSTEMS
EQUIPMENT PROPERTY.—The term ‘qualified wind
energy systems equipment property’ means wind en-
ergy systems equipment with a turbine size of not
more than 75 kilowatts rated capacity.
‘‘(e) 
SPECIAL
RULES.—For 
purposes 
of 
this
section—
‘‘(1) SPECIAL RULE FOR PROPERTY FINANCED
BY SUBSIDIZED ENERGY FINANCING OR INDUSTRIAL
DEVELOPMENT BONDS.—
‘‘(A) REDUCTION OF BASIS.—For purposes
of applying the energy percentage to any prop-
erty, if such property is financed in whole or in
part by—
‘‘(i) subsidized energy financing, or
‘‘(ii) the proceeds of a private activity
bond (within the meaning of section 141)
the interest on which is exempt from tax
under section 103, the amount taken into
account as the basis of such property shall
not exceed the amount which (but for this
subparagraph) would be so taken into ac-
count multiplied by the fraction deter-
mined under subparagraph (B).
‘‘(B) DETERMINATION OF FRACTION.—For
purposes of subparagraph (A), the fraction de-
termined under this subparagraph is 1 reduced
by a fraction—
‘‘(i) the numerator of which is that
portion of the basis of the property which
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.—
‘‘(1) IN
GENERAL.—Except as provided by
paragraph (2), this section shall apply to property
placed in service after December 31, 2001, and be-
fore January 1, 2009.
‘‘(2) EXCEPTIONS.—
‘‘(A) SOLAR
ENERGY
AND
GEOTHERMAL
ENERGY PROPERTY.—Paragraph (1) shall not
apply to solar energy property or geothermal
energy property.
‘‘(B) CERTAIN
ELECTRIC
HEAT
PUMPS
AND CENTRAL AIR CONDITIONERS.—In the case
of property which is described in subsection
(d)(3)(A)(iii)(I) or (d)(3)(A)(v)(I), this section
shall apply to property placed in service after
December 31, 2001, and before January 1,
2006.’’.
(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
the portion of the amortizable basis of any qualified timber
property which was acquired during such taxable year and
which is taken into account under section 194 (after the
application of section 194(b)(1)).
‘‘(b) DEFINITIONS.—For purposes of this subpart,
the terms ‘amortizable basis’ and ‘qualified timber prop-
erty’ have the respective meanings given to such terms by
section 194.’’.
(2) Section 39(d) is amended by adding at the
end the following:
‘‘(10) NO CARRYBACK OF ENERGY CREDIT BE-
FORE EFFECTIVE DATE.—No portion of the unused
business credit for any taxable year which is attrib-
utable to the energy credit determined under section
48A may be carried back to a taxable year ending
before January 1, 2002.’’.
(3) Section 280C is amended by adding at the
end the following:
‘‘(d) CREDIT FOR ENERGY PROPERTY EXPENSES.—
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed for that portion of the expenses for energy
property (as defined in section 48A(c)) otherwise al-
lowable as a deduction for the taxable year which is
equal to the amount of the credit determined for
such taxable year under section 48A(a).
‘‘(2) SIMILAR
RULE
WHERE
TAXPAYER
CAP-
ITALIZES RATHER THAN DEDUCTS EXPENSES.—If—
‘‘(A) the amount of the credit allowable for
the taxable year under section 48A (determined
without regard to section 38(c)), exceeds
‘‘(B) the amount allowable as a deduction
for the taxable year for expenses for energy
property (determined without regard to para-
graph (1)), the amount chargeable to capital
account for the taxable year for such expenses
shall be reduced by the amount of such excess.
‘‘(3) CONTROLLED GROUPS.—Paragraph (3) of
subsection (b) shall apply for purposes of this sub-
section.’’.
(4) Section 29(b)(3)(A)(i)(III) is amended by
striking ‘section 48(a)(4)(C)’ and inserting ‘section
48A(e)(1)(C)’.
(5) Section 50(a)(2)(E) is amended by striking
‘section 48(a)(5)’ and inserting ‘section 48A(e)(2)’.
(6) Section 168(e)(3)(B) is amended—
(A) by striking clause (vi)(I) and inserting
the following:
‘‘(I) is described in paragraph (1) or
(2) of section 48A(d) (or would be so de-
scribed if ‘solar and wind’ were substituted
for ‘solar’ in paragraph (1)(B)),’’, and
(B) in the last sentence by striking ‘‘sec-
tion 
48(a)(3)’’ 
and 
inserting 
‘‘section
48A(c)(2)(A)’’.
(c) CLERICAL AMENDMENT.—The table of sections
for subpart E of part IV of subchapter A of chapter 1
is amended by striking the item relating to section 48 and
inserting the following:
‘‘Sec. 48. Reforestation credit.
‘‘Sec. 48A. Energy credit.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 2001, 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. 102. 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.
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
45F(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) 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, 2006,
and
‘‘(2) the construction of which is not completed
on or before December 31, 2008.’’.
(b) CONFORMING AMENDMENTS.—Section 1016(a) 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:
‘‘(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 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. 103. 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) is amended by adding at the end the following:
‘‘SEC. 45E. 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 kWh per year
than the energy conservation standards
promulgated by the Department of Energy
for such refrigerator for 2001, or
‘‘(ii) 15 percent less kWh per year
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—
‘‘(1) with respect to energy-efficient refrig-
erators described in subsection (d)(3)(B)(i) produced
in calendar years beginning after 2005, and
‘‘(2) with respect to all other qualified energy-
efficient appliances produced in calendar years be-
ginning after 2007.’’.
(b) LIMITATION ON CARRYBACK.—Section 39(d) (re-
lating to transition rules), as amended by section
101(b)(2), is amended by adding at the end the following:
‘‘(11) NO CARRYBACK OF ENERGY-EFFICIENT
APPLIANCE CREDIT BEFORE 2002.—No portion of
the unused business credit for any taxable year
which is attributable to the energy-efficient appli-
ance credit determined under section 45E may be
carried to a taxable year beginning before January
1, 2002.’’.
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C
(relating to certain expenses for which credits are allow-
able), as amended by section 102(b)(3), is amended by
adding at the end the following:
‘‘(e) CREDIT FOR ENERGY-EFFICIENT APPLIANCE
EXPENSES.—No deduction shall be allowed for that por-
tion of the expenses for qualified energy-efficient appli-
ances (as defined in section 45E(d)) 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(a).’’.
(d) CONFORMING AMENDMENT.—Section 38(b) (re-
lating to general business credit) is amended by striking
‘‘plus’’ at the end of paragraph (12), by striking the period
at the end of paragraph (13) and inserting ‘‘, plus’’, and
by adding at the end the following:
‘‘(14) the energy-efficient appliance credit de-
termined under section 45E(a).’’.
(e) 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. Energy-efficient appliance credit.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
TITLE II—RESIDENTIAL ENERGY
SYSTEMS
SEC. 201. CREDIT FOR CONSTRUCTION OF NEW ENERGY-EF-
FICIENT HOME.
(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 103(a), is amended by insert-
ing after section 45E the following:
‘‘SEC. 45F. NEW 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 aggregate adjusted bases of all energy-efficient
property installed in a qualified new energy-efficient home
during construction of such home.
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—
‘‘(A) IN GENERAL.—The credit allowed by
this section with respect to a dwelling shall not
exceed—
‘‘(i) in the case of a dwelling described
in subsection (c)(3)(D)(i), $1,500, and
‘‘(ii) in the case of a dwelling de-
scribed in subsection (c)(3)(D)(ii), $2,500.
‘‘(B) PRIOR CREDIT AMOUNTS ON SAME
DWELLING TAKEN INTO ACCOUNT.—If a credit
was allowed under subsection (a) with respect
to a dwelling in 1 or more prior taxable years,
the amount of the credit otherwise allowable for
the taxable year with respect to that dwelling
shall not exceed the amount under clause (i) or
(ii) (as the case may be), reduced by the sum
of the credits allowed under subsection (a) with
respect to the dwelling for all prior taxable
years.
‘‘(2) COORDINATION
WITH
REHABILITATION
AND
ENERGY
CREDITS.—For purposes of this
section—
‘‘(A) the basis of any property referred to
in subsection (a) shall be reduced by that por-
tion of the basis of any property which is attrib-
utable to qualified rehabilitation expenditures
(as defined in section 47(c)(2)) or to the energy
percentage of energy property (as determined
under section 48A(a)), and
‘‘(B) expenditures taken into account
under either section 47 or 48A(a) shall not be
taken into account under this section.
‘‘(c) 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) 
ENERGY-EFFICIENT
PROPERTY.—The
term ‘energy-efficient property’ means any energy-
efficient building envelope component, and any en-
ergy-efficient heating or cooling equipment which
can, individually or in combination with other com-
ponents, meet the requirements of this section.
‘‘(3) 
QUALIFIED
NEW
ENERGY-EFFICIENT
HOME.—The term ‘qualified new energy-efficient
home’ means a dwelling—
‘‘(A) located in the United States,
‘‘(B) the construction of which is substan-
tially completed after December 31, 2000,
‘‘(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 to have a projected
level of annual heating and cooling energy con-
sumption, measured in terms of average annual
energy cost to the homeowner which is at
least—
‘‘(i) 30 percent less than the annual
level of heating and cooling energy con-
sumption of a reference dwelling con-
structed in accordance with the standards
of chapter 4 of the 2000 International En-
ergy Conservation Code, or
‘‘(ii) 50 percent less than such annual
level of heating and cooling energy con-
sumption.
‘‘(4) CONSTRUCTION.—The term ‘construction’
includes reconstruction and rehabilitation.
‘‘(5) 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.
‘‘(6) BUILDING ENVELOPE COMPONENT.—The
term ‘building envelope component’ means—
‘‘(A) insulation material or system which is
specifically and primarily designed to reduce the
heat loss or gain of a dwelling when installed in
or on such dwelling, and
‘‘(B) exterior windows (including skylights)
and doors.
‘‘(7) 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) CERTIFICATION.—
‘‘(1) METHOD.—A certification described in
subsection (c)(3)(D) shall be determined on the
basis of 1 of the following methods:
‘‘(A) A component-based method, using the
applicable technical energy efficiency specifica-
tions or ratings (including product labeling re-
quirements) for the energy-efficient building en-
velope component or energy-efficient heating or
cooling equipment. The Secretary shall, in con-
sultation with the Administrator of the Envi-
ronmental Protection Agency, develop prescrip-
tive component-based packages that are equiva-
lent in energy performance to properties that
qualify under subparagraph (B).
‘‘(B) An energy performance-based method
that calculates projected energy usage and cost
reductions in the dwelling in relation to a ref-
erence dwelling—
‘‘(i) heated by the same energy source
and heating system type, and
‘‘(ii) constructed in accordance with
the standards of chapter 4 of the 2000
International Energy Conservation Code.
Computer software shall be used in support of an
energy performance-based method certification under
subparagraph (B). Such software shall meet proce-
dures and methods for calculating energy and cost
savings in regulations 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 Calcula-
tion Method Approval Manual.
‘‘(2) PROVIDER.—Such certification shall be
provided by—
‘‘(A) in the case of a method described in
paragraph (1)(A), a local building regulatory
authority, a utility, a manufactured home pro-
duction inspection primary inspection agency
clude 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.
‘‘(C) RATINGS LABEL AFFIXED IN DWELL-
ING.—A permanent label documenting the rat-
ings in subparagraph (B) 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.
‘‘(4) REGULATIONS.—
‘‘(A) IN GENERAL.—In prescribing regula-
tions under this subsection for energy perform-
ance-based certification methods, the Secretary,
after examining the requirements for energy
consultants and home energy ratings providers
specified by the Mortgage Industry National
Accreditation Procedures for Home Energy
Rating Systems, shall prescribe procedures for
calculating annual energy usage and cost reduc-
tions for heating and cooling and for the report-
ing of the results. Such regulations shall—
‘‘(i) provide that any calculation pro-
cedures be fuel neutral such that the same
energy efficiency measures allow a home to
qualify for the credit under this section re-
gardless of whether the dwelling uses a gas
or oil furnace or boiler or an electric heat
pump, and
‘‘(ii) require that any computer soft-
ware allow for the printing of the Federal
tax forms necessary for the credit under
this section and for the printing of forms
for disclosure to the homebuyer.
‘‘(B) PROVIDERS.—For purposes of para-
graph (2)(B), the Secretary shall establish re-
quirements for the designation of individuals
based on the requirements for energy consult-
ants and home energy raters specified by the
Mortgage Industry National Accreditation Pro-
cedures for Home Energy Rating Systems.
‘‘(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.—Subsection (b) of section 38 (relating to current
year business credit), as amended by section 103(d), is
amended by striking ‘‘plus’’ at the end of paragraph (13),
by striking the period at the end of paragraph (14) and
inserting ‘‘, plus’’, and by adding at the end the following:
‘‘(15) the new energy-efficient home credit de-
termined under section 45F.’’.
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C
(relating to certain expenses for which credits are allow-
able), as amended by section 103(c), is amended by adding
at the end the following:
‘‘(f) NEW ENERGY-EFFICIENT HOME EXPENSES.—
No deduction shall be allowed for that portion of expenses
for a new 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 45F.’’.
(d) CREDIT ALLOWED AGAINST REGULAR AND MIN-
IMUM TAX.—
(1) IN GENERAL.—Subsection (c) of section 38
(relating to limitation based on amount of tax) is
amended by redesignating paragraph (3) as para-
graph (4) and by inserting after paragraph (2) the
following new paragraph:
‘‘(3) 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
ENERGY
EFFICIENT
HOME
CREDIT.—For purposes of this subsection, the
term ‘new energy efficient home credit’ means
the credit allowable under subsection (a) by rea-
son of section 45F.’’.
(2) CONFORMING AMENDMENT.—Subclause (II)
of section 38(c)(2)(A)(ii) is amended by inserting
‘‘or the new energy efficient home credit’’ after ‘‘em-
ployment credit’’.
(e) LIMITATION ON CARRYBACK.—Subsection (d) of
section 39, as amended by section 103(b), is amended by
adding at the end the following:
‘‘(12) NO CARRYBACK OF NEW ENERGY-EFFI-
CIENT HOME CREDIT BEFORE EFFECTIVE DATE.—
No portion of the unused business credit for any
taxable year which is attributable to the credit deter-
mined under section 45F 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 energy-efficient home credit deter-
mined under section 45F.’’.
(g) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1,
as amended by section 103(d), is amended by inserting
after the item relating to section 45E the following:
‘‘Sec. 45F. New energy-efficient home credit.’’.
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 2000.
SEC. 202. CREDIT FOR ENERGY EFFICIENCY IMPROVE-
MENTS TO EXISTING HOMES.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal
credits) is amended by inserting after section 25A the fol-
lowing new section:
‘‘SEC. 25B. ENERGY EFFICIENCY IMPROVEMENTS TO EXIST-
ING HOMES.
‘‘(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 20 percent of the amount paid or incurred by
the taxpayer for qualified energy efficiency improvements
installed during such taxable year.
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—The credit allowed by
this section with respect to a dwelling shall not ex-
ceed $2,000.
‘‘(2) PRIOR CREDIT AMOUNTS FOR TAXPAYER
ON SAME DWELLING TAKEN INTO ACCOUNT.—If a
credit was allowed to the taxpayer under subsection
(a) with respect to a dwelling in 1 or more prior tax-
able years, the amount of the credit otherwise allow-
able for the taxable year with respect to that dwell-
ing shall not exceed the amount of $2,000 reduced
by the sum of the credits allowed under subsection
(a) to the taxpayer with respect to the dwelling for
all prior taxable years.
‘‘(c) CARRYFORWARD OF UNUSED CREDIT.—If the
credit allowable under subsection (a) exceeds the limita-
tion imposed by section 26(a) for such taxable year re-
duced by the sum of the credits allowable under subpart
A of part IV of subchapter A (other than this section),
such excess shall be carried to the succeeding taxable year
and added to the credit allowable under subsection (a) for
such taxable year.
‘‘(d) QUALIFIED ENERGY EFFICIENCY IMPROVE-
MENTS.—For purposes of this section, the term ‘qualified
energy efficiency improvements’ means any energy effi-
cient building envelope component which is certified to
meet or exceed the prescriptive criteria for such compo-
nent in the 2000 International Energy Conservation Code,
or any combination of energy efficiency measures which
achieves at least a 30 percent reduction in heating and
cooling energy usage for the dwelling (as measured in
terms of energy cost to the taxpayer), if—
tured home production inspection primary inspection
agency (IPIA), or a home energy rating organiza-
tion, consistent with the requirements of section
45F(d)(2), and
‘‘(4) made in writing on forms which specify in
readily inspectable fashion the energy-efficient com-
ponents and other measures and their respective ef-
ficiency ratings, and which shall include a perma-
nent label affixed to the electrical distribution panel
as described in section 45F(d)(3)(C).
‘‘(f) DEFINITIONS AND SPECIAL RULES.—
‘‘(1) DOLLAR AMOUNTS IN CASE OF JOINT OC-
CUPANCY.—In the case of any dwelling unit which is
jointly occupied and used during any calendar year
as a residence by 2 or more individuals the following
shall apply:
‘‘(A) The amount of the credit allowable
under subsection (a) by reason of expenditures
for the qualified energy efficiency improvements
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 paid his tenant-stockholder’s pro-
portionate share (as defined in section 216(b)(3)) of
the cost of qualified energy efficiency improvements
made by such corporation.
‘‘(3) CONDOMINIUMS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is a member of a condominium man-
agement association with respect to a condo-
minium which he owns, such individual shall be
treated as having paid his proportionate share
of the cost of qualified energy efficiency im-
provements made by such association.
‘‘(B) CONDOMINIUM
MANAGEMENT
ASSO-
CIATION.—For purposes of this paragraph, the
term ‘condominium management association’
means an organization which meets the require-
ments of paragraph (1) of section 528(c) (other
than subparagraph (E) thereof) with respect to
a condominium project substantially all of the
units of which are used as residences.
‘‘(4) BUILDING ENVELOPE COMPONENT.—The
term ‘building envelope component’ means—
‘‘(A) insulation material or system which is
specifically and primarily designed to reduce the
heat loss or gain or a dwelling when installed
in or on such dwelling, and
‘‘(B) exterior windows (including skylights)
and doors.
‘‘(5) MANUFACTURED HOMES INCLUDED.—For
purposes of this section, the term ‘dwelling’ includes
a manufactured home which conforms to Federal
Manufactured Home Construction and Safety Stand-
ards (24 C.F.R. 3280).
‘‘(g) 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.
‘‘(h) TERMINATION.—Subsection (a) shall apply to
qualified energy efficiency improvements installed during
the period beginning on the date of the enactment of this
section and ending on December 31, 2005.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (c) of section 23 is amended by
inserting ‘‘, section 25B, and section 1400C’’ after
‘‘other than this section’’.
(2) Subparagraph (C) of section 25(e)(1) is
amended by striking ‘‘section 23’’ and inserting
‘‘sections 23, 25B, and 1400C’’.
(3) Subsection (d) of section 1400C is amended
by inserting ‘‘and section 25B’’ after ‘‘other than
this section’’.
(4) Subsection (a) of section 1016, as amended
by section 102(b), is amended by striking ‘‘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 25B(f),
in the case of amounts with respect to which a credit
has been allowed under section 25B.’’.
(5) The table of sections for subpart A of part
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 25A the fol-
lowing new item:
‘‘Sec. 25B. Energy efficiency improvements to existing homes.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending on or after
the date of the enactment of this Act.
SEC. 203. CREDIT FOR RESIDENTIAL SOLAR, WIND, AND
FUEL CELL ENERGY PROPERTY.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal
credits), as amended by section 201(a), is amended by in-
serting after section 25B the following:
‘‘SEC. 25C. RESIDENTIAL SOLAR, WIND, AND FUEL CELL EN-
ERGY 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) 15 percent of the qualified photovoltaic
property expenditures,
‘‘(2) 15 percent of the qualified solar water
heating property expenditures,
‘‘(3) 30 percent of the qualified wind energy
property expenditures, and
‘‘(4) 20 percent for the qualified fuel cell prop-
erty expenditures,
made by the taxpayer during the taxable year.
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM
CREDIT.—The credit allowed
under subsection (a)(2) shall not exceed $2,000 for
each system of solar energy property.
‘‘(2) TYPE OF PROPERTY.—No expenditure may
be taken into account under this section unless such
expenditure is made by the taxpayer for property in-
stalled on or in connection with a dwelling unit
which is located in the United States and which is
used as a residence.
‘‘(3) SAFETY CERTIFICATIONS.—No credit shall
be allowed under this section for an item of property
unless—
‘‘(A) in the case of solar water heating
property, such property is certified for perform-
ance and safety by the non-profit Solar Rating
Certification Corporation or a comparable enti-
ty endorsed by the government of the State in
which such property is installed, and
‘‘(B) in the case of a photovoltaic, wind en-
ergy, or fuel cell property, such property meets
appropriate fire and electric code requirements.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED SOLAR WATER HEATING PROP-
ERTY
EXPENDITURE.—The term ‘qualified solar
water heating property expenditure’ means an ex-
penditure for property which uses solar energy to
heat water for use in a dwelling unit with respect to
which a majority of the energy is derived from the
sun.
‘‘(2) QUALIFIED PHOTOVOLTAIC PROPERTY EX-
PENDITURE.—The term ‘qualified photovoltaic prop-
erty expenditure’ means an expenditure for property
which uses solar energy to generate electricity for
use in a dwelling unit.
‘‘(3) SOLAR PANELS.—No expenditure relating
to a solar panel or other property installed as a roof
(or portion thereof) shall fail to be treated as prop-
erty described in paragraph (1) or (2) solely because
it constitutes a structural component of the struc-
ture on which it is installed.
‘‘(4) QUALIFIED WIND ENERGY PROPERTY EX-
PENDITURE.—The term ‘qualified wind energy prop-
erty expenditure’ means an expenditure for property
which uses wind energy to generate electricity for
use in a dwelling unit.
‘‘(5) QUALIFIED
FUEL
CELL
PROPERTY
EX-
PENDITURE.—The term ‘qualified fuel cell property
expenditure’ means an expenditure for property
which uses an electrochemical fuel cell system to
generate electricity for use in a dwelling unit.
‘‘(6) LABOR
COSTS.—Expenditures for labor
costs properly allocable to the onsite preparation, as-
sembly, or original installation of the property de-
scribed in paragraph (1), (2), (4), or (5) and for
piping or wiring to interconnect such property to the
dwelling unit shall be taken into account for pur-
poses of this section.
‘‘(7) ENERGY
STORAGE
MEDIUM.—Expendi-
tures which are properly allocable to a swimming
pool, hot tub, or any other energy storage medium
which has a function other than the function of such
storage shall not be taken into account for purposes
of this section.
‘‘(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 is
jointly occupied and used during any calendar year
as a residence by 2 or more individuals the following
shall apply:
‘‘(A) The amount of the credit allowable
under subsection (a) by reason of expenditures
(as the case may be) made during such cal-
endar year by any of such individuals with re-
spect to such dwelling unit shall be determined
by treating all of such individuals as 1 taxpayer
whose taxable year is such calendar year.
‘‘(B) There shall be allowable with respect
to such expenditures to each of such individ-
uals, a credit under subsection (a) for the tax-
able year in which such calendar year ends in
an amount which bears the same ratio to the
amount determined under subparagraph (A) as
the amount of such expenditures made by such
individual during such calendar year bears to
the aggregate of such expenditures made by all
of such individuals during such calendar year.
‘‘(2) TENANT-STOCKHOLDER IN COOPERATIVE
HOUSING CORPORATION.—In the case of an indi-
vidual who is a tenant-stockholder (as defined in sec-
tion 216) in a cooperative housing corporation (as
defined in such section), such individual shall be
treated as having made his tenant-stockholder’s pro-
portionate share (as defined in section 216(b)(3)) of
any expenditures of such corporation.
‘‘(3) CONDOMINIUMS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is a member of a condominium man-
agement association with respect to a condo-
minium which such individual owns, such indi-
vidual shall be treated as having made his pro-
portionate share of any expenditures of such as-
sociation.
‘‘(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 ITEMS OF SOLAR OR
WIND ENERGY PROPERTY.—
‘‘(A) IN GENERAL.—Any expenditure oth-
erwise qualifying as an expenditure described in
paragraph (1), (2), or (4) of subsection (c) shall
not be treated as failing to so qualify merely
because such expenditure was made with re-
spect 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 residential purposes, only that portion of the
expenditures for such item which is properly allo-
cable to use for nonbusiness residential 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 residential purposes.
‘‘(6) WHEN EXPENDITURE MADE; AMOUNT OF
EXPENDITURE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), an expenditure with respect
to an item shall be treated as made when the
original installation of the item is completed.
‘‘(B) EXPENDITURES PART OF BUILDING
CONSTRUCTION.—In the case of an expenditure
in connection with the construction or recon-
struction of a structure, such expenditure shall
be treated as made when the original use of the
constructed or reconstructed structure by the
taxpayer begins.
‘‘(C) AMOUNT.—The amount of any ex-
penditure shall be the cost thereof.
‘‘(7) REDUCTION OF CREDIT FOR GRANTS, TAX-
EXEMPT BONDS, AND SUBSIDIZED ENERGY FINANC-
ING.—The rules of section 29(b)(3) shall apply for
purposes of this section.
‘‘(e) BASIS ADJUSTMENTS.—For purposes of this
subtitle, if a credit is allowed under this section for any
expenditure with respect to any property, the increase in
the basis of such property which would (but for this sub-
section) result from such expenditure shall be reduced by
the amount of the credit so allowed.
‘‘(f) TERMINATION.—The credit allowed under this
section shall not apply to taxable years beginning after
December 31, 2011.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 1016, as amended
by section 201(b)(4), 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 adding at the end the following:
‘‘(30) 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, as amended by sec-
tion 201(b)(2), is amended by inserting after the
item relating to section 25B the following:
‘‘Sec. 25C. Residential solar, wind, and fuel cell energy prop-
erty.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenditures made after the
date of the enactment of this Act, in taxable years ending
after such date.
TITLE III—ELECTRICITY
FACILITIES AND PRODUCTION
SEC. 301. INCENTIVE FOR DISTRIBUTED GENERATION.
(a) DEPRECIATION OF DISTRIBUTED POWER PROP-
ERTY.—
(1) IN GENERAL.—Subparagraph (C) of section
168(e)(3) (relating to 7-year property) is amended
by redesignating clause (ii) as clause (iii) and by in-
serting after clause (i) the following:
‘‘(ii) any distributed power property,
and’’.
(2) 10-YEAR CLASS LIFE.—The table contained
in section 168(g)(3)(B) is amended by inserting
after the item relating to subparagraph (C)(i) the
following:
‘‘(C)(ii) .......................................................................................................
10’’.
(b) 
DISTRIBUTED
POWER
PROPERTY.—Section
168(i) is amended by adding at the end the following:
‘‘(15) DISTRIBUTED
POWER
PROPERTY.—The
term ‘distributed power property’ means property—
‘‘(A) which is used in the generation of
electricity for primary use—
‘‘(i) in nonresidential real or residen-
tial rental property used in the taxpayer’s
trade or business, or
‘‘(ii) in the taxpayer’s industrial man-
ufacturing process or plant activity, with a
rated total capacity in excess of 500 kilo-
watts,
‘‘(B) which also may produce usable ther-
mal energy or mechanical power for use in a
heating or cooling application, as long as at
least 40 percent of the total useful energy pro-
duced consists of—
‘‘(i) with respect to assets described in
subparagraph 
(A)(i), 
electrical 
power
(whether sold or used by the taxpayer), or
‘‘(ii) with respect to assets described
in subparagraph (A)(ii), electrical power
(whether sold or used by the taxpayer) and
thermal or mechanical energy used in the
taxpayer’s industrial manufacturing proc-
ess or plant activity,
‘‘(C) which is not used to transport pri-
mary fuel to the generating facility or to dis-
tribute energy within or outside of the facility,
and
‘‘(D) where it is reasonably expected that
not more than 50 percent of the produced elec-
tricity will be sold to, or used by, unrelated per-
sons.
For purposes of subparagraph (B), energy output is
determined on the basis of expected annual output
levels, measured in British thermal units (Btu),
using standard conversion factors established by the
Secretary.’’.
(c) 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. 302. MODIFICATIONS TO CREDIT FOR ELECTRICITY
PRODUCED FROM RENEWABLE AND WASTE
PRODUCTS.
(a) INCREASE IN CREDIT RATE.—
(1) IN GENERAL.—Section 45(a)(1) is amended
by striking ‘‘1.5 cents’’ and inserting ‘‘1.8 cents’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 45(b)(2) is amended by strik-
ing ‘‘1.5 cent’’ and inserting ‘‘1.8 cent’’.
(B) Section 45(d)(2)(B) is amended by in-
serting ‘‘(calendar year 2001 in the case of the
1.8 cent amount in subsection (a))’’ after
‘‘1992’’.
(b) EXPANSION OF QUALIFIED RESOURCES.—
(1) 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 in-
serting ‘‘, and’’, and by adding at the end the fol-
lowing:
‘‘(D) alternative resources.’’.
(2) 
DEFINITION
OF
ALTERNATIVE
RE-
SOURCES.—Section 45(c) (relating to definitions) is
amended—
(A) by redesignating paragraph (3) as
paragraph (5),
(B) by redesignating paragraph (4) as
paragraph (3), and
(C) by inserting after paragraph (3), as re-
designated by subparagraph (B), the following:
‘‘(4) ALTERNATIVE RESOURCES.—
‘‘(A) IN GENERAL.—The term ‘alternative
resources’ means—
‘‘(i) solar,
‘‘(ii) biomass (other than closed loop
biomass),
‘‘(iii) municipal solid waste,
‘‘(iv) incremental hydropower,
‘‘(v) geothermal,
‘‘(vi) landfill gas, and
‘‘(vii) steel cogeneration.
‘‘(B) 
BIOMASS.—The 
term 
‘biomass’
means any solid, nonhazardous, cellulosic waste
material or any organic carbohydrate matter,
which is segregated from other waste materials,
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,
‘‘(ii) waste pallets, crates, dunnage,
untreated wood waste from construction or
manufacturing activities, and landscape or
right-of-way tree trimmings, but not in-
cluding unsegregated municipal solid waste
or post-consumer wastepaper, or
‘‘(iii) any of the following agriculture
sources: orchard tree crops, vineyard,
grain, legumes, sugar, and other crop by-
products or residues, including any pack-
aging and other materials which are
nontoxic and biodegradable and are associ-
ated with the processing, feeding, selling,
transporting, and disposal of such agricul-
tural materials.
‘‘(C) MUNICIPAL SOLID WASTE.—The term
‘municipal solid waste’ has the same meaning
given the term ‘solid waste’ under section 2(27)
of the Solid Waste Utilization Act (42 U.S.C.
6903).
‘‘(D) INCREMENTAL
HYDROPOWER.—The
term ‘incremental hydropower’ means additional
generating capacity achieved from—
‘‘(i) increased efficiency, or
‘‘(ii) additions of new capacity,
at a licensed non-Federal hydroelectric project
originally placed in service before the date of
the enactment of this paragraph.
‘‘(E) 
GEOTHERMAL.—The 
term 
‘geo-
thermal’ means 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.
‘‘(F) 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.).
‘‘(G) STEEL
COGENERATION.—The term
‘steel cogeneration’ means the production of
electricity and steam (or other form of thermal
energy) from any or all waste sources defined
in paragraphs (2) and (3) and subparagraphs
(B) and (C) of this paragraph within an oper-
ating facility which produces or integrates the
production of coke, direct reduced iron ore,
iron, or steel provided that the cogeneration
meets any regulatory energy-efficiency stand-
ards established by the Secretary, and only to
the extent that such energy is produced from—
‘‘(i) gases or heat generated from the
production of metallurgical coke,
‘‘(ii) gases or heat generated from the
production of direct reduced iron ore or
iron, 
from 
blast 
furnace 
or 
direct
ironmaking processes, or
‘‘(iii) gases or heat generated from
the manufacture of steel.’’.
(3) QUALIFIED
FACILITY.—Section 45(c)(5)
(defining qualified facility), as redesignated by para-
graph 2(A), is amended by adding at the end the
following:
‘‘(D) ALTERNATIVE
RESOURCES
FACIL-
ITY.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clauses (ii), (iii), and (iv), in the
case of a facility using alternative re-
sources to produce electricity, the term
‘qualified facility’ means any facility of the
taxpayer which is originally placed in serv-
ice after the date of the enactment of this
subparagraph.
‘‘(ii) BIOMASS FACILITY.—In the case
of a facility using biomass described in
paragraph (4)(A)(ii) to produce electricity,
the term ‘qualified facility’ means any fa-
cility of the taxpayer.
‘‘(iii) 
GEOTHERMAL
FACILITY.—In
the case of a facility using geothermal to
produce electricity, the term ‘qualified fa-
cility’ means any facility of the taxpayer
which is originally placed in service after
December 31, 1992.
‘‘(iv) STEEL
COGENERATION
FACILI-
TIES.—In the case of a facility using steel
cogeneration to produce electricity, the
term ‘qualified facility’ means any facility
permitted to operate under the environ-
mental requirements of the Clean Air Act
Amendments of 1990 which is owned by
the taxpayer and originally placed in serv-
ice after the date of the enactment of this
subparagraph. Such a facility may be
treated as originally placed in service when
such facility was last upgraded to increase
efficiency or generation capability after
such date.
‘‘(v) SPECIAL RULES.—In the case of
a qualified facility described in this sub-
paragraph, the 10-year period referred to
in subsection (a) shall be treated as begin-
ning no earlier than the date of the enact-
ment of this subparagraph.’’.
(4) GOVERNMENT-OWNED
FACILITY.—Section
45(d)(6) (relating to credit eligibility in the case of
government-owned facilities using poultry waste) is
amended—
(A) by inserting ‘‘or alternative resources’’
after ‘‘poultry waste’’, and
(B) by inserting ‘‘OR
ALTERNATIVE
RE-
SOURCES’’ after ‘‘POULTRY
WASTE’’ in the
heading thereof.
(5) QUALIFIED FACILITIES WITH CO-PRODUC-
TION.—Section 45(b) (relating to limitations and ad-
justments) is amended by adding at the end the fol-
lowing:
‘‘(4) INCREASED CREDIT FOR CO-PRODUCTION
FACILITIES.—
‘‘(A) IN GENERAL.—In the case of a quali-
fied facility described in subsection (c)(3)(D)(i)
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
a taxpayer shall (after adjustment under para-
graph (2) and before adjustment under para-
graphs (1) 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, chemicals,
liquid fuels, or minerals from qualified en-
ergy resources in addition 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.’’.
(6) QUALIFIED
FACILITIES
LOCATED
WITHIN
QUALIFIED INDIAN LANDS.—Section 45(b) (relating
to limitations and adjustments), as amended by
paragraph (5), 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 (2) and (4) and before adjustment under
paragraphs (1) and (3)) be increased by .25 cents.’’.
(7) ELECTRICITY
PRODUCED
FROM
CERTAIN
RESOURCES
CO-FIRED
IN
COAL
PLANTS.—Section
45(d) (relating to definitions and special rules) is
amended by adding at the end the following:
‘‘(8) SPECIAL
RULE
FOR
ELECTRICITY
PRO-
DUCED
FROM
CERTAIN
RESOURCES
CO-FIRED
IN
COAL PLANTS.—In the case of electricity produced
from biomass (including closed loop biomass), mu-
nicipal solid waste, or animal waste, co-fired in a fa-
cility which produces electricity from coal—
‘‘(A) subsection (a)(1) shall be applied by
substituting ‘1 cent’ for ‘1.8 cents’,
‘‘(B) such facility shall be considered a
qualified facility for purposes of this section,
and
‘‘(C) the 10-year period referred to in sub-
section (a) shall be treated as beginning no ear-
lier than the date of the enactment of this para-
graph.’’.
(8) CONFORMING AMENDMENTS.—
(A) The heading for section 45 is amended
by inserting ‘‘AND
WASTE
ENERGY’’ after
‘‘RENEWABLE’’.
(B) The item relating to section 45 in the
table of sections subpart D of part IV of sub-
chapter A of chapter 1 is amended by inserting
‘‘and waste energy’’ after ‘‘renewable’’.
(c) ADDITIONAL MODIFICATIONS
OF RENEWABLE
AND WASTE ENERGY RESOURCE CREDIT.—
(1) CREDITS FOR CERTAIN TAX EXEMPT ORGA-
NIZATIONS
AND
GOVERNMENTAL
UNITS.—Section
45(d) (relating to definitions and special rules), as
amended by subsection (b)(7), is amended by adding
at the end the following:
‘‘(9) 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 C 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), or
‘‘(iii) an entity the income of which is
excludable from gross income under section
115.
‘‘(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) or 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) COORDINATION
WITH
OTHER
CREDITS.—
Section 45(d), as amended by paragraph (1), is
amended by adding at the end the following:
‘‘(10) 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 the application of such credit
to such facility.’’.
(3) EXPANSION TO INCLUDE ANIMAL WASTE.—
Section 45 (relating to electricity produced from cer-
tain renewable resources), as amended by para-
graphs (2) and (4) of subsection (b), is amended—
(A) by striking ‘‘poultry’’ each place it ap-
pears in subsection (c)(1)(C) and subsection
(d)(6) and inserting ‘‘animal’’,
(B) by striking ‘‘POULTRY’’ in the heading
of paragraph (6) of subsection (d) and inserting
‘‘ANIMAL’’,
(C) by striking paragraph (3) of subsection
(c) and inserting the following:
‘‘(3) ANIMAL WASTE.—The term ‘animal waste’
means poultry manure and litter and other animal
wastes, including—
‘‘(A) wood shavings, straw, rice hulls, and
other bedding material for the disposition of
manure, and
‘‘(B) byproducts, packaging, and other ma-
terials which are nontoxic and biodegradable
and are associated with the processing, feeding,
selling, transporting, and disposal of such ani-
mal wastes.’’, and
(D) by striking subparagraph (C) of sub-
section (c)(5) and inserting the following:
‘‘(C) ANIMAL WASTE FACILITY.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), in the case of a facility
using animal waste (other than poultry) to
produce electricity, the term ‘qualified fa-
cility’ means any facility of the taxpayer
which is originally placed in service after
the date of the enactment of this clause.
‘‘(ii) POULTRY WASTE.—In the case
of a facility using animal waste relating to
poultry to produce electricity, the term
‘qualified facility’ means any facility of the
taxpayer which is originally placed in serv-
ice after December 31, 1999.’’.
(4) TREATMENT OF QUALIFIED FACILITIES NOT
IN COMPLIANCE WITH POLLUTION LAWS.—Section
45(c)(5) (relating to qualified facilities), as amended
by paragraphs (2) and (3) of subsection (b), 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.’’.
(5) PERMANENT EXTENSION OF QUALIFIED FA-
CILITY DATES.—Section 45(c)(5) (relating to quali-
fied facility), as redesignated by subsection (b)(2), is
amended by striking ‘‘, and before January 1, 2002’’
in subparagraphs (A) and (B).
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to electricity and other energy pro-
duced after the date of the enactment of this Act.
SEC. 303. TREATMENT OF FACILITIES USING BAGASSE TO
PRODUCE ENERGY AS SOLID WASTE DIS-
POSAL FACILITIES ELIGIBLE FOR TAX-EX-
EMPT FINANCING.
(a) IN GENERAL.—Section 142 (relating to exempt
facility bond) is amended by adding at the end the fol-
lowing:
‘‘(k) SOLID WASTE DISPOSAL FACILITIES.—For pur-
poses of subsection (a)(6), the term ‘solid waste disposal
facilities’ includes property located in Hawaii and used for
the collection, storage, treatment, utilization, processing,
or final disposal of bagasse in the manufacture of eth-
anol.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to bonds issued after the date of
the enactment of this Act.
SEC. 304. DEPRECIATION OF PROPERTY USED IN THE
TRANSMISSION OF ELECTRICITY.
(a) DEPRECIATION
OF PROPERTY USED
IN
THE
TRANSMISSION OF ELECTRICITY.—
(1) IN GENERAL.—Subparagraph (C) of section
168(e)(3) (relating to 7-year property), as amended
by section 301(a)(1), is amended by striking ‘‘and’’
at the end of clause (ii), by redesignating clause (iii)
as clause (iv), and by inserting after clause (ii) the
following:
‘‘(iii) any property used in the trans-
mission of electricity, and’’.
(2) 10-YEAR CLASS LIFE.—The table contained
in section 168(g)(3)(B), as amended by section
301(a)(2), is amended by inserting after the item re-
lating to subparagraph (C)(ii) the following:
‘‘(C)(iii) ......................................................................................................
10’’.
(b) DEFINITION OF PROPERTY USED IN THE TRANS-
MISSION OF ELECTRICITY.—Section 168(i), as amended
by section 301(b), is amended by adding at the end the
following:
‘‘(16) PROPERTY USED IN THE TRANSMISSION
OF ELECTRICITY.—The term ‘property used in the
transmission of electricity’ means property used in
the transmission of electricity for sale.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
the date of the enactment of this Act.
TITLE 
IV—INCENTIVES 
FOR
EARLY COMMERCIAL APPLI-
CATIONS 
OF 
ADVANCED
CLEAN COAL TECHNOLOGIES
SEC. 401. CREDIT FOR INVESTMENT IN QUALIFYING AD-
VANCED CLEAN COAL TECHNOLOGY.
(a) ALLOWANCE OF QUALIFYING ADVANCED CLEAN
COAL TECHNOLOGY FACILITY CREDIT.—Section 46 (re-
lating to amount of 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:
‘‘(4) the qualifying advanced clean coal tech-
nology facility credit.’’.
(b) AMOUNT
OF QUALIFYING ADVANCED CLEAN
COAL TECHNOLOGY FACILITY CREDIT.—Subpart E of
part IV of subchapter A of chapter 1 (relating to rules
for computing investment credit), as amended by section
101(a), is amended by inserting after section 48A the fol-
lowing:
‘‘SEC. 48B. QUALIFYING ADVANCED CLEAN COAL TECH-
NOLOGY FACILITY CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 46, the
qualifying advanced clean coal technology facility credit
for any taxable year is an amount equal to 10 percent
of the qualified investment in a qualifying advanced clean
coal technology facility for such taxable year.
‘‘(b) QUALIFYING ADVANCED CLEAN COAL TECH-
NOLOGY FACILITY.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the term ‘qualifying advanced clean coal tech-
nology facility’ means a facility of the taxpayer
which—
‘‘(A)(i)(I) replaces a conventional tech-
nology facility of the taxpayer and the original
use of which commences with the taxpayer, or
‘‘(II) is a retrofitted or repowered conven-
tional technology facility, the retrofitting or
repowering of which is completed by the tax-
payer (but only with respect to that portion of
the basis which is properly attributable to such
retrofitting or repowering), or
‘‘(ii) is acquired through purchase (as de-
fined by section 179(d)(2)),
‘‘(B) is depreciable under section 167,
‘‘(C) has a useful life of not less than 4
years,
‘‘(D) is located in the United States, and
‘‘(E) uses qualifying advanced clean coal
technology.
‘‘(2) SPECIAL RULE FOR SALE-LEASEBACKS.—
For purposes of subparagraph (A) of paragraph (1),
in the case of a facility which—
‘‘(A) is originally placed in service by a
person, and
‘‘(B) is sold and leased back by such per-
son, or is leased to such person, within 3
months after the date such facility was origi-
nally placed in service, for a period of not less
than 12 years,
such facility shall be treated as originally placed in
service not earlier than the date on which such prop-
erty is used under the leaseback (or lease) referred
to in subparagraph (B). The preceding sentence
shall not apply to any property if the lessee and les-
sor of such property make an election under this
sentence. Such an election, once made, may be re-
voked only with the consent of the Secretary.
‘‘(3) QUALIFYING
ADVANCED
CLEAN
COAL
TECHNOLOGY.—For purposes of paragraph (1)—
‘‘(A) IN GENERAL.—The term ‘qualifying
advanced clean coal technology’ means, with re-
spect to clean coal technology—
‘‘(i) multiple applications, with a com-
bined capacity of not more than 2,000
megawatts, of advanced pulverized coal or
atmospheric 
fluidized 
bed 
combustion
technology—
‘‘(I) installed as a new, retrofit,
or repowering application,
‘‘(II) operated between 2001 and
2011, and
‘‘(III) with a design net heat rate
of not more than 9,500 Btu per kilo-
watt hour when the design coal has a
heat content of more than 8,000 Btu
per pound, or a design net heat rate
of not more than 9,900 Btu per kilo-
watt hour when the design coal has a
heat content of 8,000 Btu per pound
or less,
‘‘(ii) multiple applications, with a
combined capacity of not more than 1,000
megawatts, of pressurized fluidized bed
combustion technology—
‘‘(I) installed as a new, retrofit,
or repowering application,
‘‘(II) operated between 2001 and
2015, and
‘‘(III) with a design net heat rate
of not more than 8,400 Btu per kilo-
watt hour when the design coal has a
heat content of more than 8,000 Btu
per pound, or a design net heat rate
of not more than 9,900 Btu per kilo-
watt hour when the design coal has a
heat content of 8,000 Btu per pound
or less,
‘‘(iii) multiple applications, with a
combined capacity of not more than 5,000
megawatts, of integrated gasification com-
bined cycle technology, with or without fuel
or chemical co-production—
‘‘(I) installed as a new, retrofit,
or repowering application,
‘‘(II) operated between 2001 and
2015,
‘‘(III) with a design net heat rate
of not more than 8,550 Btu per kilo-
watt hour when the design coal has a
heat content of more than 8,000 Btu
per pound, or a design net heat rate
of not more than 9,900 Btu per kilo-
watt hour when the design coal has a
heat content of 8,000 Btu per pound
or less, and
‘‘(IV) with a net thermal effi-
ciency on any fuel or chemical co-pro-
duction of not less than 39 percent
(higher heating value), and
‘‘(iv) multiple applications, with a
combined capacity of not more than 2,000
megawatts of technology for the production
of electricity—
‘‘(I) installed as a new, retrofit,
or repowering application,
‘‘(II) operated between 2001 and
2015, and
‘‘(III) with a carbon emission
rate which is not more than 85 per-
cent of conventional technology.
‘‘(B) EXCEPTIONS.—Such term shall not
include clean coal technology projects receiving
or scheduled to receive funding under the Clean
Coal Technology Program of the Department of
Energy.
‘‘(C) CLEAN
COAL
TECHNOLOGY.—The
term ‘clean coal technology’ means advanced
technology which uses coal to produce 75 per-
cent or more of its thermal output as electricity
including advanced pulverized coal or atmos-
pheric fluidized bed combustion, pressurized flu-
idized bed combustion, integrated gasification
combined cycle with or without fuel or chemical
co-production, and any other technology for the
production of electricity which exceeds the per-
formance of conventional technology.
‘‘(D) CONVENTIONAL TECHNOLOGY.—The
term ‘conventional technology’ means—
‘‘(i) coal-fired combustion technology
with a design net heat rate of not less than
9,500 Btu per kilowatt hour (HHV) and a
carbon equivalents emission rate of not
more than 0.54 pounds of carbon per kilo-
watt hour when the design coal has a heat
content of more than 8,000 Btu per
pound,
‘‘(ii) coal-fired combustion technology
with a design net heat rate of not less than
10,500 Btu per kilowatt hour (HHV) and
a carbon equivalents emission rate of not
more than 0.60 pounds of carbon per kilo-
watt hour when the design coal has a heat
content of 8,000 Btu per pound or less, or
‘‘(iii) natural gas-fired combustion
technology with a design net heat rate of
not less than 7,500 Btu per kilowatt hour
(HHV) and a carbon equivalents emission
rate of not more than 0.24 pounds of car-
bon per kilowatt hour.
‘‘(E) DESIGN NET HEAT RATE.—The de-
sign net heat rate shall be based on the design
annual heat input to and the design annual net
electrical output from the qualifying advanced
clean coal technology (determined without re-
gard to such technology’s co-generation of
steam).
‘‘(F) SELECTION CRITERIA.—Selection cri-
teria for clean coal technology facilities—
‘‘(i) shall be established by the Sec-
retary of Energy as part of a competitive
solicitation,
‘‘(ii) shall include primary criteria of
minimum design net heat rate, maximum
design thermal efficiency, and lowest cost
to the government, and
‘‘(iii) shall include supplemental cri-
teria as determined appropriate by the
Secretary of Energy.
‘‘(4) 
NONCOMPLIANCE
WITH
POLLUTION
LAWS.—For purposes of this subsection, a facility
which is not in compliance with the applicable State
and Federal pollution prevention, control, and per-
mit requirements for any period of time shall not be
considered to be a qualifying advanced clean coal
technology facility during such period.
‘‘(c) QUALIFIED INVESTMENT.—For purposes of sub-
section (a), the term ‘qualified investment’ means, with
respect to any taxable year, the basis of a qualifying ad-
vanced clean coal technology facility placed in service by
the taxpayer during such taxable year.
‘‘(d) QUALIFIED PROGRESS EXPENDITURES.—
‘‘(1) INCREASE IN QUALIFIED INVESTMENT.—
In the case of a taxpayer who has made an election
under paragraph (5), the amount of the qualified in-
vestment of such taxpayer for the taxable year (de-
termined under subsection (c) without regard to this
section) shall be increased by an amount equal to
the aggregate of each qualified progress expenditure
for the taxable year with respect to progress expend-
iture property.
‘‘(2) PROGRESS EXPENDITURE PROPERTY DE-
FINED.—For purposes of this subsection, the term
‘progress expenditure property’ means any property
being constructed by or for the taxpayer and which
it is reasonable to believe will qualify as a qualifying
advanced clean coal technology facility which is
being constructed by or for the taxpayer when it is
placed in service.
‘‘(3) QUALIFIED PROGRESS EXPENDITURES DE-
FINED.—For purposes of this subsection—
‘‘(A) SELF-CONSTRUCTED PROPERTY.—In
the case of any self-constructed property, the
term ‘qualified progress expenditures’ means
the amount which, for purposes of this subpart,
is properly chargeable (during such taxable
year) to capital account with respect to such
property.
‘‘(B) 
NONSELF-CONSTRUCTED
PROP-
ERTY.—In the case of nonself-constructed prop-
erty, the term ‘qualified progress expenditures’
means the amount paid during the taxable year
to another person for the construction of such
property.
‘‘(4) OTHER
DEFINITIONS.—For purposes of
this subsection—
‘‘(A) SELF-CONSTRUCTED
PROPERTY.—
The term ‘self-constructed property’ means
property for which it is reasonable to believe
that more than half of the construction expendi-
tures will be made directly by the taxpayer.
‘‘(B) 
NONSELF-CONSTRUCTED
PROP-
ERTY.—The term ‘nonself-constructed property’
means property which is not self-constructed
property.
‘‘(C) CONSTRUCTION, 
ETC.—The term
‘construction’ includes reconstruction and erec-
tion, and the term ‘constructed’ includes recon-
structed and erected.
‘‘(D) ONLY
CONSTRUCTION
OF
QUALI-
FYING
ADVANCED
CLEAN
COAL
TECHNOLOGY
FACILITY TO BE TAKEN INTO ACCOUNT.—Con-
struction shall be taken into account only if, for
purposes of this subpart, expenditures therefor
are properly chargeable to capital account with
respect to the property.
‘‘(5) ELECTION.—An election under this sub-
section may be made at such time and in such man-
ner as the Secretary may by regulations prescribe.
Such an election shall apply to the taxable year for
which made and to all subsequent taxable years.
Such an election, once made, may not be revoked ex-
cept with the consent of the Secretary.
‘‘(e) CREDITS FOR CERTAIN TAX EXEMPT ORGANI-
ZATIONS AND GOVERNMENTAL UNITS.—
‘‘(1) ALLOWANCE
OF
CREDIT.—Any credit
which would be allowable under subsection (a) with
respect to a qualifying advanced clean coal tech-
nology facility of an entity if such entity were not
exempt from tax under this chapter shall be treated
as a credit allowable under subpart C to such entity
if such entity is—
‘‘(A) an organization described in section
501(c)(12)(C) and exempt from tax under sec-
tion 501(a),
‘‘(B) an organization described in section
1381(a)(2)(C),
‘‘(C) an entity the income of which is ex-
cludable from gross income under section 115,
or
‘‘(D) the Tennessee Valley Authority.
‘‘(2) USE OF CREDIT.—
‘‘(A) TRANSFER
OF
CREDIT.—An entity
described in subparagraph (A), (B), or (C) of
paragraph (1) may assign, trade, sell, or other-
wise transfer any credit allowable to such entity
under paragraph (1) to any taxpayer.
‘‘(B) USE OF CREDIT AS AN OFFSET.—
Notwithstanding any other provision of law, in
the case of an entity described in subparagraph
(A) or (B) of paragraph (1), any credit allow-
able to such entity under paragraph (1) may be
applied by such entity, without penalty, as a
prepayment of any loan, debt, or other obliga-
tion the entity has incurred under subchapter I
of chapter 31 of title 7 of the Rural Electrifica-
tion Act of 1936 (7 U.S.C. 901 et seq.).
‘‘(C) USE BY TVA.—
‘‘(i) IN
GENERAL.—Notwithstanding
any other provision of law, in the case of
an entity described in paragraph (1)(D),
any credit allowable under paragraph (1)
to such entity may be applied as a credit
against the payments required to be made
in any fiscal year under section 15d(e) of
the Tennessee Valley Authority Act of
1933 (16 U.S.C. 831n–4(e)) as an annual
return on the appropriations investment
and an annual repayment sum.
‘‘(ii) TREATMENT OF CREDITS.—The
aggregate amount of credits described in
paragraph (1) shall be treated in the same
manner and to the same extent as if such
credits were a payment in cash and shall
be applied first against the annual return
on the appropriations investment.
‘‘(iii) CREDIT CARRYOVER.—With re-
spect to any fiscal year, if the aggregate
amount of credits described in paragraph
(1) exceeds the aggregate amount of pay-
ment obligations described in clause (i),
the excess amount shall remain available
for application as credits against the
amounts of such payment obligations in
succeeding fiscal years in the same manner
as described in this subparagraph.
‘‘(3) CREDIT NOT INCOME.—Neither a transfer
under subparagraph (A) or a use under subpara-
graph (B) of paragraph (2) of any credit allowable
under paragraph (1) shall result in income for pur-
poses of section 501(c)(12).
‘‘(4) TRANSFER PROCEEDS TREATED AS ARIS-
ING
FROM
ESSENTIAL
GOVERNMENT
FUNCTION.—
Any proceeds derived by an entity described in para-
graph (1)(C) from the transfer of any credit under
paragraph (2)(A) shall be treated as arising from an
essential government function.
‘‘(f) COORDINATION WITH OTHER CREDITS.—This
section shall not apply to any property with respect to
which the rehabilitation credit under section 47 or the en-
ergy credit under section 48A is allowed unless the tax-
payer elects to waive the application of such credit to such
property.
‘‘(g) TERMINATION.—This section shall not apply
with respect to any qualified investment made more than
10 years after the effective date of this section.’’.
(c) RECAPTURE.—Section 50(a) (relating to other
special rules) is amended by adding at the end the fol-
lowing:
‘‘(6) SPECIAL RULES RELATING TO QUALIFYING
ADVANCED CLEAN COAL TECHNOLOGY FACILITY.—
For purposes of applying this subsection in the case
of any credit allowable by reason of section 48B, the
following shall apply:
‘‘(A) GENERAL
RULE.—In lieu of the
amount of the increase in tax under paragraph
(1), the increase in tax shall be an amount
equal to the investment tax credit allowed under
section 38 for all prior taxable years with re-
spect to a qualifying advanced clean coal tech-
nology facility (as defined by section 48B(b)(1))
multiplied by a fraction whose numerator is the
number of years remaining to fully depreciate
under this title the qualifying advanced clean
coal technology facility disposed of, and whose
denominator is the total number of years over
which such facility would otherwise have been
subject to depreciation. For purposes of the
preceding sentence, the year of disposition of
the qualifying advanced clean coal technology
facility property shall be treated as a year of re-
maining depreciation.
‘‘(B) PROPERTY CEASES TO QUALIFY FOR
PROGRESS
EXPENDITURES.—Rules similar to
the rules of paragraph (2) shall apply in the
case of qualified progress expenditures for a
qualifying advanced clean coal technology facil-
ity under section 48B, except that the amount
of the increase in tax under subparagraph (A)
of this paragraph shall be substituted in lieu of
the amount described in such paragraph (2).
‘‘(C) APPLICATION OF PARAGRAPH.—This
paragraph shall be applied separately with re-
spect to the credit allowed under section 38 re-
garding a qualifying advanced clean coal tech-
nology facility.’’.
(d) TRANSITIONAL RULE.—Section 39(d) of the In-
ternal Revenue Code of 1986 (relating to transitional
rules), as amended by section 201(e), is amended by add-
ing at the end the following:
‘‘(13) NO CARRYBACK OF SECTION 48B CREDIT
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is
attributable to the qualifying advanced clean coal
technology facility credit determined under section
48B may be carried back to a taxable year ending
before January 1, 2002.’’.
(e) TECHNICAL AMENDMENTS.—
(1) Section 49(a)(1)(C) is amended by striking
‘‘and’’ at the end of clause (ii), by striking the pe-
riod at the end of clause (iii) and inserting ‘‘, and’’,
and by adding at the end the following:
‘‘(iv) the portion of the basis of any
qualifying advanced clean coal technology
facility attributable to any qualified invest-
ment (as defined by section 48B(c)).’’.
(2) Section 50(a)(4) is amended by striking
‘‘and (2)’’ and inserting ‘‘(2), and (6)’’.
(3) Section 50(c) is amended by adding at the
end the following:
‘‘(6) NONAPPLICATION.—Paragraphs (1) and
(2) shall not apply to any advanced clean coal tech-
nology facility credit under section 48B.’’.
(4) The table of sections for subpart E of part
IV of subchapter A of chapter 1, as amended by sec-
tion 101(c), is amended by inserting after the item
relating to section 48A the following:
‘‘Sec. 48B. Qualifying advanced clean coal technology facility credit.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to periods after December 31,
2001, under rules similar to the rules of section 48(m)
of the Internal Revenue Code of 1986 (as in effect on the
day before the date of the enactment of the Revenue Rec-
onciliation Act of 1990).
SEC. 402. CREDIT FOR PRODUCTION FROM QUALIFYING
ADVANCED CLEAN COAL TECHNOLOGY.
(a) CREDIT FOR PRODUCTION FROM QUALIFYING
ADVANCED CLEAN COAL TECHNOLOGY.—Subpart D of
part IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 (relating to business related credits),
as amended by section 201(a), is amended by adding at
the end the following:
‘‘SEC. 45G. CREDIT FOR PRODUCTION FROM QUALIFYING
ADVANCED CLEAN COAL TECHNOLOGY.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the qualifying advanced clean coal technology production
credit of any taxpayer for any taxable year is equal to—
‘‘(1) the applicable amount of advanced clean
coal technology production credit, multiplied by
‘‘(2) the sum of—
‘‘(A) the kilowatt hours of electricity, plus
‘‘(B) each 3,413 Btu of fuels or chemicals,
100
produced by the taxpayer during such taxable year
at a qualifying advanced clean coal technology facil-
ity during the 10-year period beginning on the date
the facility was originally placed in service.
‘‘(b) APPLICABLE AMOUNT.—For purposes of this
section, the applicable amount of advanced clean coal tech-
nology production credit with respect to production from
a qualifying advanced clean coal technology facility shall
be determined as follows:
‘‘(1) Where the design coal has a heat content
of more than 8,000 Btu per pound:
‘‘(A) In the case of a facility originally
placed in service before 2008, if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 8,400 ............................................................
$.0050
$.0030
More than 8,400 but not more than 8,550 ..........................
$.0010
$.0010
More than 8,550 but not more than 8,750 ..........................
$.0005
$.0005.
‘‘(B) In the case of a facility originally
placed in service after 2007 and before 2012,
if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 7,770 ............................................................
$.0090
$.0075
More than 7,770 but not more than 8,125 ..........................
$.0070
$.0050
More than 8,125 but not more than 8,350 ..........................
$.0060
$.0040.
101
‘‘(C) In the case of a facility originally
placed in service after 2011 and before 2015,
if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 7,380 ............................................................
$.0120
$.0090
More than 7,380 but not more than 7,720 ..........................
$.0095
$.0070.
‘‘(2) Where the design coal has a heat content
of not more than 8,000 Btu per pound:
‘‘(A) In the case of a facility originally
placed in service before 2008, if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 8,500 ............................................................
$.0050
$.0030
More than 8,500 but not more than 8,650 ..........................
$.0010
$.0010
More than 8,650 but not more than 8,750 ..........................
$.0005
$.0005.
‘‘(B) In the case of a facility originally
placed in service after 2007 and before 2012,
if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 8,000 ............................................................
$.0090
$.0075
More than 8,000 but not more than 8,250 ..........................
$.0070
$.0050
More than 8,250 but not more than 8,400 ..........................
$.0060
$.0040.
‘‘(C) In the case of a facility originally
placed in service after 2011 and before 2015,
if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 7,800 ............................................................
$.0120
$.0090
108
TITLE VI—OIL AND GAS
PRODUCTION
SEC. 601.
CREDIT FOR PRODUCTION OF RE-REFINED LU-
BRICATING OIL.
(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 402(a), is amended by adding
at the end the following:
‘‘SEC. 45H. CREDIT FOR PRODUCING RE-REFINED LUBRI-
CATING OIL.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the re-refined lubricating oil production credit of any tax-
payer for any taxable year is equal to $4.05 per barrel
of qualified re-refined lubricating oil production which is
attributable to the taxpayer (within the meaning of section
29(d)(3)).
‘‘(b) QUALIFIED RE-REFINED LUBRICATING OIL
PRODUCTION.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified re-re-
fined lubricating oil production’ means a base oil
manufactured from at least 95 percent used oil and
not more than 2 percent of previously unused oil by
a re-refining process at a qualified facility which ef-
fectively removes physical and chemical impurities
and spent and unspent additives to the extent that