I
107TH CONGRESS
1ST SESSION
H. R. 2478
To establish a balanced energy program for the United States that unlocks
the potential of renewable energy and energy efficiency, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 11, 2001
Ms. WOOLSEY (for herself, Mr. FILNER, Mr. SANDERS, Ms. MCKINNEY, Mr.
HOEFFEL, Mr THOMPSON of Mississippi, Mr. PAYNE, Mr. BAIRD, Mr.
BACA, Mr. BALDACCI, Ms. RIVERS, Mr. BLUMENAUER, Mr. LANTOS,
Mrs. MINK of Hawaii, Mr. WU, Mr. HONDA, and Mr. UDALL of Colo-
rado) introduced the following bill; which was referred to the Committee
on Ways and Means, and in addition to the Committees on Science, and
Energy and Commerce, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned
A BILL
To establish a balanced energy program for the United
States that unlocks the potential of renewable energy
and energy efficiency, 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; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Comprehensive Renewable Energy and Energy Efficiency
Act of 2001’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. National research and development policy.
Sec. 4. Definitions.
TITLE I—RESEARCH, DEVELOPMENT, AND DEMONSTRATION
Sec. 101. Enhanced renewable energy research, development, and demonstra-
tion.
Sec. 102. Enhanced energy efficiency research, development, and demonstra-
tion.
Sec. 103. Biomass energy and related chemical research, development, and
demonstration.
Sec. 104. Assessment of renewable energy resources.
Sec. 105. Enhanced aeronautical system energy efficiency research, develop-
ment, and demonstration.
Sec. 106. Progress report.
Sec. 107. National Building Performance Initiative.
TITLE II—COMMERCIAL APPLICATIONS
Sec. 201. Study of financing for prototype technologies.
Sec. 202. Regulatory reviews for new technologies and processes.
Sec. 203. Commercialization assistance.
Sec. 204. Education and outreach.
Sec. 205. Proton exchange membrane demonstration programs.
TITLE III—REGULATORY PROVISIONS
Sec. 301. Public Benefits Trust Fund.
Sec. 302. Net metering.
Sec. 303. Renewable energy portfolio standards.
Sec. 304. High performance schools.
Sec. 305. High performance schools research.
Sec. 306. Vehicle fuel economy standards.
Sec. 307. Energy Star program.
Sec. 308. Fuel Efficient Tire program.
Sec. 309. Environmental disclosure to consumers.
TITLE IV—FEDERAL GOVERNMENT PROGRAMS
Sec. 401. Energy savings measures in Capitol.
Sec. 402. Energy savings performance contracts.
Sec. 403. Federal purchase requirement.
Sec. 404. Federal buildings energy efficiency.
Sec. 405. Retention of savings.
Sec. 406. Guaranteed energy savings.
Sec. 407. President’s Management Council.
Sec. 408. Federal use of Energy Star standards.
TITLE V—TAX PROVISIONS
Sec. 500. Amendment of 1986 Code.
Subtitle A—Energy-Efficient Property Used in Business
Sec. 501. Credit for certain energy-efficient property used in business.
Sec. 502. Energy-efficient commercial building property deduction.
Sec. 503. Business tax credit for the manufacture of energy efficient appli-
ances.
Subtitle B—Residential Energy Systems
Sec. 511. Credit for construction of new energy-efficient home.
Sec. 512. Credit for energy efficiency improvements to existing homes.
Sec. 513. Credit for residential solar, wind, and fuel cell energy property.
Sec. 514. Credit for purchase of energy star products.
Subtitle C—Electricity Facilities and Production
Sec. 521. Incentive for distributed generation.
Sec. 522. Modifications to credit for electricity produced from renewable and
waste products.
Sec. 523. Treatment of facilities using bagasse to produce energy as solid waste
disposal facilities eligible for tax-exempt financing.
Sec. 524. Depreciation of property used in the transmission of electricity.
Sec. 525. Credit for investment in additional plant capacity for existing renew-
able resources facilities producing electricity.
Subtitle D—Hybrid Electric Vehicles
Sec. 531. Alternative motor vehicle credit.
Sec. 532. Modification of credit for qualified electric vehicles.
Sec. 533. Credit for retail sale of alternative fuels as motor vehicle fuel.
Sec. 534. Extension of deduction for certain refueling property.
Sec. 535. Credit for installation of alternative fueling stations.
SEC. 2. FINDINGS.
The Congress finds that—
(1) there is a need for a robust renewable en-
ergy and energy efficiency research and development
program that provides a basis for the development,
demonstration, and deployment of new energy tech-
nologies in partnership with industry;
(2) Federal budget authority for renewable en-
ergy and energy efficiency research and development
has declined significantly since 1980; and
(3) the President’s budget request for fiscal
year 2002 makes even greater reductions in these
programs, imperiling promising technologies that
have the potential to reduce energy consumption and
increase energy efficiency.
SEC. 3. NATIONAL RESEARCH AND DEVELOPMENT POLICY.
It shall be the policy of the United States that its
research, development, demonstration, and commercial ap-
plications programs be designed to enable 20 percent of
the energy generated in the United States from stationary
sources to be generated from nonhydropower renewable
energy sources by the year 2020.
SEC. 4. DEFINITIONS.
For purposes of this Act, except as otherwise
provided—
(1) the term ‘‘biomass’’ means any organic
matter that is available on a renewable or recurring
basis, including agricultural crops and trees, wood
and wood wastes and residues, plants (including
aquatic plants), grasses, residues, fibers, animal
wastes, and municipal wastes; and
(2) the term ‘‘renewable energy source’’
means—
(A) wind;
(B) biomass;
(C) a geothermal source;
(D) a solar source;
(E) a photovoltaic source; or
(F) additional hydroelectric generation ca-
pacity achieved from increased efficiency at an
existing hydroelectric dam.
TITLE I—RESEARCH, DEVELOP-
MENT, AND DEMONSTRATION
SEC. 101. ENHANCED RENEWABLE ENERGY RESEARCH, DE-
VELOPMENT, AND DEMONSTRATION.
(a) GOALS.—In order to achieve the goal stated in
section 3, the United States shall have a balanced energy
research, development, and demonstration program to en-
hance renewable energy with the following goals:
(1) For wind power, the program should reduce
the cost of wind electricity by 50 percent by 2006,
compared to the cost as of the date of the enactment
of this Act, so that wind power can be widely com-
petitive with fossil-fuel-based electricity in a restruc-
tured electric industry, with concentration within the
program on a variety of advanced wind turbine con-
cepts and manufacturing technologies.
(2) For photovoltaics, the programs should pur-
sue research, development, and demonstration that
would lead to photovoltaic systems prices of $3,000
per kilowatt by January 1, 2003, and $1,500 per
kilowatt by January 1, 2006. Program activities
should include assisting industry in developing man-
ufacturing technologies, giving greater attention to
balance of system issues, and expanding funda-
mental research on relevant advanced materials.
(3) For solar thermal electric systems the pro-
gram should strengthen ongoing research, develop-
ment, and demonstration combining high-efficiency
and high-temperature receivers with advanced ther-
mal storage and power cycles, with the goal of mak-
ing solar-only power (including baseload solar power)
widely competitive with fossil fuel power by 2015.
(4) For geothermal energy, the program should
continue work on hydrothermal systems, and reac-
tivate research, development, and demonstration on
advanced concepts, giving top priority to high-grade
hot dry-rock geothermal energy.
(5) For hydrogen-based energy systems, the
program should support research, development, and
demonstration on hydrogen-using and hydrogen-pro-
ducing technologies. The program should also co-
ordinate hydrogen-using technology development
with proton exchange membrane fuel cell vehicle de-
velopment activities under the enhanced energy effi-
ciency program described in section 102.
(6) For hydropower, the program should pro-
vide a new generation of turbine technologies that
will increase generating capacity and will be less
damaging to fish and aquatic ecosystems.
(7) For electric energy and storage, the pro-
gram should develop high capacity superconducting
transmission lines and generators, and develop dis-
tributed generating systems to accommodate mul-
tiple types of energy sources under a common inter-
connect standard.
(b) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Secretary of En-
ergy for carrying out activities to achieve the goals de-
scribed in subsection (a)—
(1) $420,000,000 for fiscal year 2002;
(2) $470,000,000 for fiscal year 2003;
(3) $525,000,000 for fiscal year 2004;
(4) $585,000,000 for fiscal year 2005; and
(5) $655,000,000 for fiscal year 2006.
SEC. 102. ENHANCED ENERGY EFFICIENCY RESEARCH, DE-
VELOPMENT, AND DEMONSTRATION.
(a) GOALS.—In order to achieve the goal stated in
section 3, the United States shall have a balanced energy
research, development, and demonstration program to en-
hance energy efficiency with the following goals:
(1) For energy efficiency in housing, the pro-
gram should develop technologies, housing compo-
nents, designs, and production methods that will, by
2010—
(A) reduce the time needed to move tech-
nologies to market by 50 percent, compared to
the time needed as of the date of the enactment
of this Act;
(B) reduce the monthly cost of new hous-
ing by 20 percent, compared to the cost as of
the date of the enactment of this Act;
(C) cut the environmental impact and en-
ergy use of new housing by 50 percent, com-
pared to the impact and use as of the date of
the enactment of this Act;
(D) ensure that at least 15,000,000 homes
existing as of the date of the enactment of this
Act reduce their energy use by 30 percent, com-
pared to the use as of the date of the enact-
ment of this Act; and
(E) improve durability and reduce mainte-
nance costs by 50 percent compared to the du-
rability and costs as of the date of the enact-
ment of this Act.
(2) For industrial energy efficiency, the pro-
gram should, in cooperation with the affected
industries—
(A) develop a microturbine (40 to 300 kilo-
watt) that is more than 40 percent efficient by
2006, compared to the efficiency as of the date
of the enactment of this Act;
(B) develop a microturbine that is more
than 50 percent efficient by 2010, compared to
the efficiency as of the date of the enactment
of this Act;
(C) develop advanced materials for com-
bustion systems that reduce emissions of nitro-
gen oxides by 30 to 50 percent while increasing
efficiency 5 to 10 percent by 2007, compared to
such emissions as of the date of the enactment
of this Act; and
(D) improve the energy intensity of the
major energy-consuming industries by at least
25 percent by 2010, compared to the energy in-
tensity as of the date of the enactment of this
Act.
(3) For transportation energy efficiency, the
program should, in cooperation with affected
industries—
(A) develop a production prototype pas-
senger automobile that has fuel economy equiv-
alent to 80 miles per gallon of gasoline by
2004;
(B) develop class 7 and 8 heavy duty
trucks and buses with ultra low emissions and
the ability to use an alternative fuel that has an
average fuel economy equivalent to—
(i) 10 miles per gallon of gasoline by
2007; and
(ii) 13 miles per gallon of gasoline by
2010;
(C) develop a production prototype of a
passenger automobile with zero equivalent emis-
sions that has an average fuel economy of 100
miles per gallon of gasoline by 2010; and
(D) improve, by 2010, the average fuel
economy of trucks—
(i) in classes 1 and 2 by 300 percent;
and
(ii) in classes 3 through 6 by 200 per-
cent,
compared to the fuel economy as of the date of
the enactment of this Act.
(b) DEFINITIONS.—For purposes of this section—
(1) the term ‘‘alternative fuel’’ has the meaning
given that term in section 301(2) of the Energy Pol-
icy Act of 1992; and
(2) the term ‘‘major energy-consuming indus-
tries’’ means—
(A) the forest product industry;
(B) the steel industry;
(C) the aluminum industry;
(D) the metal casting industry;
(E) the chemical industry;
(F) the petroleum refining industry; and
(G) the glass-making industry.
(c) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Secretary of En-
ergy for carrying out activities to achieve the goals de-
scribed in subsection (a), including State and local grants
and the Federal Energy Management Program—
(1) $900,000,000 for fiscal year 2002;
(2) $950,000,000 for fiscal year 2003;
(3) $1,025,000,000 for fiscal year 2004;
(4) $1,110,000,000 for fiscal year 2005; and
(5) $1,200,000,000 for fiscal year 2006.
SEC. 103. BIOMASS ENERGY AND RELATED CHEMICAL RE-
SEARCH, DEVELOPMENT, AND DEMONSTRA-
TION.
(a) GOALS.—In order to achieve the goal stated in
section 3, the United States shall have a balanced energy
research, development, and demonstration program to en-
hance biomass energy and related chemical research, de-
velopment, and demonstration with the following goals:
(1) The program should enable the United
States to triple bioenergy use by 2010.
(2) For biomass-based power systems, the pro-
gram should enable commercialization, within five
years after the date of the enactment of this Act, of
integrated power-generating technologies that em-
ploy gas turbines and fuel cells integrated with bio-
mass gasifiers.
(3) For biofuels, the program should accelerate
research, development, and demonstration on ad-
vanced enzymatic hydrolysis technology for making
ethanol from cellulosic feedstock, with the goal that
between 2010 and 2015 ethanol produced from en-
ergy crops would be fully competitive in terms of
price with gasoline as a neat fuel, in either internal
combustion engines or fuel cell vehicles.
(b) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Secretary of En-
ergy for carrying out research, development, and dem-
onstration activities on biomass-related technologies, in-
cluding transportation, power, and related chemical pro-
duction technologies, under the Biomass Research and De-
velopment Act of 2000—
(1) for biomass transportation—
(A) $54,000,000 for fiscal year 2002;
(B) $65,000,000 for fiscal year 2003;
(C) $78,000,000 for fiscal year 2004;
(D) $94,000,000 for fiscal year 2005; and
(E) $113,000,000 for fiscal year 2006;
(2) for biomass power—
(A) $48,000,000 for fiscal year 2002;
(B) $58,000,000 for fiscal year 2003;
(C) $70,000,000 for fiscal year 2004;
(D) $84,000,000 for fiscal year 2005; and
(E) $101,000,000 for fiscal year 2006; and
(3) 
for 
biomass 
energy-related 
industrial
applications—
(A) $53,000,000 for fiscal year 2002;
(B) $58,000,000 for fiscal year 2003;
(C) $63,000,000 for fiscal year 2004;
(D) $68,000,000 for fiscal year 2005; and
(E) $73,000,000 for fiscal year 2006.
SEC. 104. ASSESSMENT OF RENEWABLE ENERGY RE-
SOURCES.
(a) IN GENERAL.—Not later than one year after the
date of the enactment of this Act, the Secretary of Energy
shall submit to the Congress an assessment of all renew-
able energy resources available for commercial applica-
tions within the United States.
(b) RESOURCE ASSESSMENT.—Such assessment shall
include a detailed inventory describing the available
amount and characteristics of renewable energy sources,
and an estimate of the research, development, demonstra-
tion, and commercial applications efforts necessary to de-
velop each resource. The assessment shall also include
such other information as the Secretary of Energy believes
would be useful in achieving wider commercial applications
of emerging and state-of-the-art renewable energy genera-
tion facilities or devices.
(c) AVAILABILITY.—The technology development in-
formation and cost estimates in the assessment shall be
updated annually and made available to the public, along
with the data used to create the assessment.
(d) AUTHORIZATION OF APPROPRIATIONS.—For the
purposes of carrying out this section, there are authorized
to be appropriated to the Secretary of Energy
$10,000,000 for fiscal year 2002, and such sums as may
be necessary for the fiscal years 2003 through 2020.
SEC. 105. ENHANCED AERONAUTICAL SYSTEM ENERGY EF-
FICIENCY RESEARCH, DEVELOPMENT, AND
DEMONSTRATION.
(a) GOALS.—For aeronautical system energy effi-
ciency, the National Aeronautics and Space Administra-
tion shall seek to—
(1) develop technologies that will enable a 50
percent increase in aircraft engine energy efficiencies
by 2010 as compared to the most energy efficient
engine in the United States commercial aircraft fleet
as of the date of the enactment of this Act; and
(2) develop air transportation management
operational concepts and procedures that will enable
a 25 percent increase in the energy efficiency of the
overall air transport system on a per flight basis by
2010 as compared to the efficiency as of the date of
the enactment of this Act.
(b) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Administrator of
the National Aeronautics and Space Administration for
carrying out activities to achieve the goals described in
subsection (a)—
(1) $50,000,000 for fiscal year 2002;
(2) $55,000,000 for fiscal year 2003;
(3) $60,000,000 for fiscal year 2004;
(4) $65,000,000 for fiscal year 2005; and
(5) $70,000,000 for fiscal year 2006.
SEC. 106. PROGRESS REPORT.
The Secretary of Energy shall transmit to the Com-
mittee on Science of the House of Representatives and the
Committee on Energy and Natural Resources of the Sen-
ate an annual report assessing the progress made pursu-
ant to this title in achieving the goal set forth in section
3. The first such report shall be transmitted along with
the first annual budget request from the President occur-
ring at least 6 months after the date of the enactment
of this Act.
SEC. 107. NATIONAL BUILDING PERFORMANCE INITIATIVE.
(a) INTERAGENCY GROUP.—Not later than 90 days
after the date of the enactment of this Act, the Director
of the Office of Science and Technology Policy shall estab-
lish an Interagency Group responsible for the development
and implementation of a National Building Performance
Initiative. The Director of the Office of Science and Tech-
nology Policy or the Director’s designee shall serve as
Chairperson of the Interagency Group. The membership
of the Interagency Group shall include representatives the
National Institute of Standards and Technology, the De-
partment of Energy, the National Science Foundation, the
Environmental Protection Agency, and other agencies with
jurisdiction over energy conservation research and devel-
opment, buildings, construction, or related issues. The
Interagency Group shall work to ensure regular agency co-
ordination and information sharing. The National Insti-
tute of Standards and Technology shall provide necessary
administrative support for the Interagency Group.
(b) OBJECTIVE.—The objective of the Interagency
Group shall be to detail the appropriate government role
in reducing the costs, including energy and health and
safety related costs, of using, owning, and operating com-
mercial, institutional, residential, and industrial buildings
by 30 percent by 2020.
(c) PLAN.—Not later than 270 days after the date
of the enactment of this Act, the Interagency Group shall
transmit to the Congress a multiyear implementation plan
for achieving the objective stated in subsection (b). The
plan shall address—
(1) the appropriate Federal Government role in
achieving the objective, including the elements de-
scribed in subsection (d);
(2) research, development, and demonstration
of new or improved technologies, including the ele-
ments described in subsection (e);
(3) better understanding of impediments and
disincentives to adoption of best practices;
(4) dissemination of information on cost-effec-
tive and affordable construction and building oper-
ation technologies and techniques to industry, State
and local governments, homeowners, and the general
public, including the elements described in sub-
section (f); and
(5) incentives for the creation of partnerships
between the public and private sectors.
The plan shall defer to the private sector and State and
local government for implementation in all appropriate in-
stances.
(d) FEDERAL ROLE.—The plan required under sub-
section (c) shall include—
(1) a statement of research, development, and
demonstration goals and priorities;
(2) the establishment, consistent with this Act,
of goals, priorities, and target dates for implementa-
tion of the plan;
(3) assignment of responsibilities with respect
to each element of the plan, avoiding duplication
whenever possible and assigning responsibilities to
Federal agencies with existing expertise;
(4) a description of resources, including staff-
ing, needed to carry out the plan; and
(5) a description of plans for cooperation and
coordination in all phases described in the plan with
interested governmental entities in the States.
(e) RESEARCH, DEVELOPMENT, AND DEMONSTRA-
TION ELEMENTS.—The research, development, and dem-
onstration elements of the plan shall include—
(1) peer-reviewed research and development on
and demonstration of systems and materials for new
construction and retrofit, including composite mate-
rials; building envelope components, including win-
dows, doors, and roofs; structural design; and design
and construction techniques, through physical test-
ing and through computer simulation when appro-
priate, taking into consideration cost-effectiveness,
affordability, and regional climate differences and
susceptibility to natural hazards;
(2) development of mechanisms for collecting
information on building systems and materials per-
formance and other pertinent information from
sources such as the construction industry, insurance
companies, and building officials; and
(3) development of updatable, cost-effective,
and affordable systems, both for new construction
and for retrofitting, and for inventorying informa-
tion on components and materials and their inter-
action.
(f) TECHNOLOGY TRANSFER.—The technology trans-
fer elements of the plan shall include—
(1) the collection, classification, presentation,
and dissemination in a usable form to Federal,
State, and local officials, community leaders, the de-
sign and construction industry, contractors, home
owners, and the general public, of research results
and other pertinent information;
(2) in coordination with the private sector, aca-
demia, and the States, curriculum development and
related measures to facilitate the education or train-
ing of employees of the design and construction in-
dustry, the insurance industry, and State and local
governments, and other persons as appropriate; and
(3) efforts to increase public awareness and in-
formation.
(g) ADDITIONAL
FUNCTIONS.—The Interagency
Group established under subsection (a) shall—
(1) refine, in conjunction with appropriate rep-
resentatives of State and local units of government
and private sector organizations, the objective stated
in subsection (b) as necessary; and
(2) develop measurements related to the objec-
tive, including emphasis on cost-effectiveness and af-
fordability.
(h) NATIONAL BUILDING PERFORMANCE ADVISORY
COMMITTEE.—A National Building Performance Advisory
Committee shall be established to advise on creation of
the plan, review progress made under the plan, advise on
any improvements that should be made to the plan, and
report to the Congress on actions that have been taken
to advance the Nation’s capability to meet the objective
described in subsection (b). The Advisory Committee shall
be composed of 21 members to be appointed by the Presi-
dent, one of whom shall be designated by the President
as chair. The members shall include representatives of a
broad cross-section of interests such as the research, tech-
nology transfer, architectural, engineering, and financial
communities; materials and systems suppliers; State,
county, and local governments; the residential, multi-
family, and commercial sectors of the construction indus-
try; and the insurance industry. The Advisory Committee
shall coordinate with existing advisory committees of the
Federal Government and of the National Academies of
Sciences and Engineering. As appropriate, the work and
reports of the Advisory Committee may be done in con-
junction with or replace the work of other advisory com-
mittees. The Advisory Committee shall not be subject to
section 14 of the Federal Advisory Committee Act.
(i) REPORT.—The Interagency Group shall, within
90 days after the end of each fiscal year, transmit a report
to the Congress describing progress achieved during the
preceding fiscal year by government at all levels and by
the private sector, toward achieving the objective described
in subsection (b) and implementing the plan developed
under subsection (c), and including any amendments to
the plan. Each such report shall include any recommenda-
tions for legislative and other action the Interagency
Group considers necessary and appropriate.
TITLE II—COMMERCIAL
APPLICATIONS
SEC. 201. STUDY OF FINANCING FOR PROTOTYPE TECH-
NOLOGIES.
(a) INDEPENDENT ASSESSMENT.—The Secretary of
Energy shall commission an independent assessment of in-
novative financing techniques to facilitate construction of
new renewable energy and energy efficiency facilities that
might not otherwise be built in a competitive market.
(b) CONDUCT OF THE ASSESSMENT.—The Secretary
of Energy shall retain an independent contractor with
proven expertise in financing large capital projects or in
financial services consulting to conduct the assessment
under this section.
(c) CONTENT OF THE ASSESSMENT.—The assess-
ment shall include a comprehensive examination of all
available techniques to safeguard private investors against
risks (including both market-based and government-im-
posed risks) that are beyond the control of the investors.
Such techniques may include Federal loan guarantees,
Federal price guarantees, special tax considerations, and
direct Federal investment.
(d) REPORT.—The Secretary of Energy shall submit
the results of the independent assessment to the Congress
not later than 9 months after the date of enactment of
this section.
SEC. 202. REGULATORY REVIEWS FOR NEW TECHNOLOGIES
AND PROCESSES.
(a) REGULATORY REVIEWS.—Not later than one year
after the date of the enactment of this Act, and every five
years thereafter, the Director of the Office of Science and
Technology Policy shall oversee a review of each Federal
agency’s regulations and policies to identify—
(1) existing regulations and policies that act as
barriers to the development and commercialization of
emerging renewable energy and energy efficiency
technologies and processes (including fuel cells, com-
bined heat and power, distributed generation, and
small-scale renewable energy); and
(2) actions the agency is taking or could take
to—
(A) remove barriers to market entry for
emerging renewable energy and energy effi-
ciency technologies;
(B) increase energy efficiency; or
(C) encourage the use of new processes to
meet energy and environmental goals.
(b) REPORTS
TO CONGRESS.—Not later than 18
months after the date of the enactment of this Act, and
every five years thereafter, the Director of the Office of
Science and Technology Policy shall report to the Con-
gress on the results of the agency reviews conducted under
subsection (a).
(c) CONTENTS OF THE REPORTS.—The reports re-
quired under subsection (b) shall—
(1) identify all regulatory and policy barriers to
the development and commercialization of emerging
renewable energy and energy efficiency technologies
and processes;
(2) actions taken, or proposed to be taken, that
are identified under subsection (a)(2); and
(3) recommendations for changes in laws or
regulations that may be needed to—
(A) expedite the siting and development of
energy production and distribution facilities;
and
(B) encourage the adoption of energy effi-
ciency and process improvements.
SEC. 203. COMMERCIALIZATION ASSISTANCE.
(a) AUTHORITY.—The Secretary of Energy shall pro-
vide, through a competitive review process, assistance to
private sector entities for the commercial application of
renewable energy and energy efficiency technologies.
(b) APPLICATIONS.—The Secretary of Energy shall
establish requirements for applications for assistance
under this section. Such applications shall contain a com-
mercial application plan, including a description of the fi-
nancial, business, and technical support (including sup-
port from universities and national laboratories) the appli-
cant anticipates in its commercial application effort.
(c) SELECTION.—The Secretary of Energy shall se-
lect applicants to receive assistance under this section on
the basis of which applications are the most likely to result
in commercial application of renewable energy and energy
efficiency technologies. The Secretary shall ensure that at
least 50 percent of the funds provided under this section
are provided to small businesses or startup companies.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Secretary of En-
ergy for carrying out this section $200,000,000 for each
of the fiscal years 2002 through 2006, and such sums as
may be necessary for each of the fiscal years 2007 through
2020.
SEC. 204. EDUCATION AND OUTREACH.
(a) PROGRAM.—The Secretary of Energy shall estab-
lish a program education and outreach, including innova-
tive education and outreach techniques, on renewable en-
ergy and energy efficiency technologies to manufacturers,
consumers, engineers, architects, builders, energy service
companies, universities, facility planners and managers,
State and local governments, and other appropriate enti-
ties.
(b) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Secretary of En-
ergy for carrying out this section $100,000,000 for each
of the fiscal years 2002 through 2006, and such sums as
may be necessary for each of the fiscal years 2007 through
2020.
SEC. 205. PROTON EXCHANGE MEMBRANE DEMONSTRA-
TION PROGRAMS.
(a) IN GENERAL.—
(1) ESTABLISHMENT.—The Secretary of En-
ergy, in consultation with the Secretary of Transpor-
tation, the Secretary of Defense, and the Secretary
of Housing and Urban Development, shall establish
a program for the demonstration of fuel cell tech-
nologies, including fuel cell proton exchange mem-
brane technology, for commercial, residential, and
transportation applications, including buses. Such
program shall specifically focus on promoting the ap-
plication of and improved manufacturing production
and processes for fuel cell technologies.
(2) AUTHORIZATION OF APPROPRIATIONS.—For
the purpose of carrying out this subsection, there
are authorized to be appropriated $140,000,000 for
the period encompassing fiscal years 2002 through
2006.
(b) BUS DEMONSTRATION PROGRAM.—
(1) ESTABLISHMENT.—The Secretary of En-
ergy, in consultation with the Secretary of Transpor-
tation, shall establish a comprehensive fuel cell bus
demonstration program to address hydrogen produc-
tion, storage, and use in transit bus applications.
Such program shall cover all aspects of the introduc-
tion of this new technology, and shall include the fol-
lowing components:
(A) Development, installation, and oper-
ation of a hydrogen delivery system located on-
site at transit bus terminals.
(B) Development, installation, and oper-
ation of on-site storage associated with the hy-
drogen delivery systems as well as storage tank
systems incorporated into the bus itself.
(C) Demonstration of use of hydrogen as a
practical, safe, renewable energy source in a
highly efficient, zero-emission power system for
buses.
(D) Development of fuel cell power systems
that are confirmed and verified as being com-
patible with transit bus application require-
ments.
(E) Durability testing of the fuel cell bus
at a national testing facility.
(F) Identification and implementation of
necessary codes and standards for the safe use
of hydrogen as a fuel suitable for bus applica-
tion, including the fuel cell power system and
related operational facilities.
(G) Identification and implementation of
maintenance and overhaul requirements for fuel
cell transit buses.
(H) Completion of fleet vehicle evaluation
program by bus operators along normal transit
routes, providing equipment manufacturers and
transit operators with the necessary analyses to
enable operation of fuel cell buses under a
range of operating environments.
(2) DOMESTIC ASSEMBLY.—All fuel cell systems
and fuel cell stacks in power plants acquired, or
from which power is acquired, under paragraph (1)
shall be assembled in the United States.
(3) AUTHORIZATION OF APPROPRIATIONS.—For
the purpose of carrying out this subsection, there
are authorized to be appropriated $150,000,000 for
the period encompassing fiscal years 2002 through
2006.
TITLE III—REGULATORY
PROVISIONS
SEC. 301. PUBLIC BENEFITS TRUST FUND.
(a) BOARD.—
(1) ESTABLISHMENT.—The Secretary shall es-
tablish a National Electric System Public Benefits
Board to carry out the functions and responsibilities
described in this section.
(2) MEMBERSHIP.—The Board shall be com-
posed of—
(A) 1 representative of the Federal Energy
Regulatory Commission appointed by the Fed-
eral Energy Regulatory Commission;
(B) 2 representatives of the Secretary of
Energy appointed by the Secretary of Energy;
(C) 2 persons nominated by the National
Association of Regulatory Utility Commis-
sioners and appointed by the Secretary;
(D) 1 person nominated by the National
Association of State Utility Consumer Advo-
cates and appointed by the Secretary;
(E) 1 person nominated by the National
Association of State Energy Officials and ap-
pointed by the Secretary;
(F) 1 person nominated by the National
Energy Assistance Directors Association and
appointed by the Secretary; and
(G) 1 representative of the Environmental
Protection Agency appointed by the Adminis-
trator.
(3) CHAIRPERSON.—The Secretary shall select
a member of the Board to serve as Chairperson of
the Board.
(b) ESTABLISHMENT OF FUND.—
(1) IN GENERAL.—The Board shall establish an
account or accounts at one or more financial institu-
tions, which account or accounts shall be known as
the National Electric System Public Benefits Fund
(in this section referred to as the ‘‘Fund’’), con-
sisting of amounts deposited in the fund under sub-
section (d).
(2) STATUS
OF
FUND.—Amounts collected
under subsection (d) and deposited in the Fund—
(A) shall not constitute funds of the
United States;
(B) shall be held in trust by the Board
solely for the purposes stated in subsection (c);
and
(C) shall not be available to meet any obli-
gations of the United States.
(c) USE OF FUND.—
(1) FUNDING
OF
PUBLIC
BENEFITS
PRO-
GRAMS.—Amounts in the Fund shall be used by the
Board to provide matching funds to States and In-
dian tribes for the support of State or tribal public
benefits programs relating to—
(A) renewable energy sources;
(B) universal electric service;
(C) affordable electric service;
(D) energy conservation and efficiency;
(E) research and development in areas de-
scribed in subparagraphs (A) through (D); or
(F) disconnections during periods of ex-
treme cold or heat.
(2) DISTRIBUTION.—
(A) IN
GENERAL.—Except for amounts
needed to pay costs of the Board in carrying
out its duties under this section, the Board
shall distribute all amounts in the Fund to
States or Indian tribes to fund public benefits
programs under paragraph (1).
(B) FUND SHARE.—
(i) IN GENERAL.—Except as otherwise
provided in this subparagraph, the Fund
share of a public benefits program funded
under paragraph (1) shall not exceed 50
percent.
(ii) PROPORTIONATE
REDUCTION.—
To the extent that the amount of matching
funds requested by States and Indian
tribes exceeds the maximum projected rev-
enues of the Fund, the matching funds dis-
tributed to the States and Indian tribes
shall be reduced proportionately.
(iii) ADDITIONAL FUNDING.—A State
or Indian tribe may apply funds to public
benefits programs in addition to the
amount of funds applied for the purpose of
matching the Fund share.
(3) APPLICATION.—Not later than August 1 of
each year beginning in 2002, a State or Indian tribe
seeking matching funds for the following fiscal year
shall file with the Board, in such form as the Board
may require, an application—
(A) certifying that the funds will be used
for an eligible public benefits program; and
(B) stating the amount of State or Indian
tribe funds earmarked for the program.
(d) PUBLIC BENEFITS CHARGE.—
(1) AMOUNT OF CHARGE.—As a condition of
interconnection with facilities of any transmitting
utility, the owner of an electric generating facility
whose nameplate capacity exceeds five megawatts
shall pay the transmitting utility a public benefits
charge equal to one mill per kilowatt-hour on electric
energy generated by such electric generating facility.
(2) AFFILIATES.—The owner of an electric gen-
erating facility subject to the charge under para-
graph (1) shall pay the charge even if the generation
facility and the transmitting facility are under com-
mon ownership or are otherwise affiliated.
(3) IMPORTED
ELECTRICITY.—Each importer
of electric energy, as a condition of interconnection
with facilities of any transmitting utility in the
United States, shall pay the charge required under
paragraph (1) for imported electric energy.
(4) PAYMENT OF THE CHARGE.—The transmit-
ting utility shall pay the amounts collected under
this subsection to the Board at the close of each
month, and the Board shall deposit the amounts into
the Fund.
(e) REPORT.—One year before the date of expiration
of this section, the Secretary of Energy shall report to
Congress whether a public benefits fund should continue
to exist.
(f) EXPIRATION.—This section expires after Decem-
ber 31, 2020.
SEC. 302. NET METERING.
Title VI of the Public Utility Regulatory Policies Act
of 1978 is amended by adding at the end the following:
‘‘SEC. 605. NET METERING FOR RENEWABLE ENERGY AND
FUEL CELLS.
‘‘(a) DEFINITIONS.—For purposes of this section:
‘‘(1) The term ‘eligible on-site generating facil-
ity’ means—
‘‘(A) a facility on the site of a residential
electric consumer with a maximum generating
capacity of 100 kilowatts or less that is fueled
by solar or wind energy; or
‘‘(B) a facility on the site of a commercial
electric consumer with a maximum generating
capacity of 250 kilowatts or less that is fueled
solely by a renewable energy resource.
‘‘(2) The term ‘renewable energy resource’
means solar energy, wind energy, biomass, geo-
thermal energy, or fuel cells.
‘‘(3) The term ‘net metering service’ means
service to an electric consumer under which elec-
tricity generated by that consumer from an eligible
on-site generating facility and delivered to the dis-
tribution system through the same meter through
which purchased electricity is received may be used
to offset electricity provided by the retail electric
supplier to the electric consumer during the applica-
ble billing period so that an electric consumer is
billed only for the net electricity consumed during
the billing period.
‘‘(b) REQUIREMENT TO PROVIDE NET METERING
SERVICE.—Each retail electric supplier shall make avail-
able upon request net metering service to any retail elec-
tric consumer that the supplier currently serves or solicits
for service.
‘‘(c) RATES AND CHARGES.—
‘‘(1) IDENTICAL
CHARGES.—A retail electric
supplier—
‘‘(A) shall charge the owner or operator of
an on-site generating facility rates and charges
that are identical to those that would be
charged other retail electric customers of the
electric company in the same rate class; and
‘‘(B) shall not charge the owner or oper-
ator of an on-site generating facility any addi-
tional standby, capacity, interconnection, or
other rate or charge.
‘‘(2) MEASUREMENT.—A retail electric supplier
that supplies electricity to the owner or operator of
an on-site generating facility shall measure the
quantity of electricity produced by the on-site facility
and the quantity of electricity consumed by the
owner or operator of an on-site generating facility
during a billing period in accordance with normal
metering practices.
‘‘(3) ELECTRICITY SUPPLIED EXCEEDING ELEC-
TRICITY GENERATED.—If the quantity of electricity
supplied by a retail electric supplier during a billing
period exceeds the quantity of electricity generated
by an on-site generating facility and fed back to the
electric distribution system during the billing period,
the supplier may bill the owner or operator for the
net quantity of electricity supplied by the retail elec-
tric supplier, in accordance with normal metering
practices.
‘‘(4) ELECTRICITY
GENERATED
EXCEEDING
ELECTRICITY
SUPPLIED.—If the quantity of elec-
tricity generated by an on-site generating facility
during a billing period exceeds the quantity of elec-
tricity supplied by the retail electric supplier during
the billing period—
‘‘(A) the retail electric supplier may bill
the owner or operator of the on-site generating
facility for the appropriate charges for the bill-
ing period in accordance with paragraph (2);
and
‘‘(B) the owner or operator of the on-site
generating facility shall be credited for the ex-
cess kilowatt-hours generated during the billing
period, with the kilowatt-hour credit appearing
on the bill for the following billing period.
‘‘(d) SAFETY AND PERFORMANCE STANDARDS.—
‘‘(1) REQUIREMENT.—An eligible on-site gener-
ating facility and net metering system used by a re-
tail electric consumer shall meet all applicable safe-
ty, performance, reliability, and interconnection
standards established by the National Electrical
Code, the Institute of Electrical and Electronics En-
gineers, and Underwriters Laboratories.
‘‘(2) ADDITIONAL CONTROL AND TESTING RE-
QUIREMENTS.—The Commission, after consultation
with State regulatory authorities and nonregulated
local distribution systems and after notice and op-
portunity for comment, may adopt, by rule, addi-
tional control and testing requirements for on-site
generating facilities and net metering systems that
the Commission determines are necessary to protect
public safety and system reliability.’’.
SEC. 303. RENEWABLE ENERGY PORTFOLIO STANDARDS.
(a) DEFINITION OF COVERED GENERATION FACIL-
ITY.—In this section, the term ‘‘covered generation facil-
ity’’ means a nonhydroelectric facility that generates elec-
tric energy for sale.
(b) REQUIRED RENEWABLE ENERGY.—Of the total
amount of electricity sold by covered generation facilities
during a calendar year, the amount generated by renew-
able energy sources shall be not less than—
(1) 3.0 percent in 2002;
(2) 3.5 percent in 2003;
(3) 4.0 percent in 2004;
(4) 5.0 percent in 2005;
(5) 6.0 percent in 2006;
(6) 7.0 percent in 2007;
(7) 8.0 percent in 2008;
(8) 9.0 percent in 2009;
(9) 10.0 percent in 2010;
(10) 11.0 percent in 2011;
(11) 12.0 percent in 2012;
(12) 13.0 percent in 2013;
(13) 14.0 percent in 2014;
(14) 15.0 percent in 2015;
(15) 16.0 percent in 2016;
(16) 17.0 percent in 2017;
(17) 18.0 percent in 2018;
(18) 19.0 percent in 2019; and
(19) 20.0 percent in 2020 and each year there-
after.
(c) RENEWABLE ENERGY CREDITS.—
(1) IDENTIFICATION
OF
ENERGY
SOURCES.—
The Federal Energy Regulatory Commission shall
establish standards and procedures under which a
covered generation facility shall certify to a pur-
chaser of electricity—
(A) the amount of the electricity that is
generated by a renewable energy source; and
(B) the amount of the electricity that is
generated by a source other than a renewable
energy source.
(2) ISSUANCE OF RENEWABLE ENERGY CRED-
ITS.—Not later than April 1 of each year, beginning
in 2003, the Federal Energy Regulatory Commission
shall issue to a covered generation facility 1 renew-
able energy credit for each megawatt-hour of elec-
tricity sold by the covered generation facility in the
preceding calendar year that was generated by a re-
newable energy source.
(3) SUBMISSION
OF
RENEWABLE
ENERGY
CREDITS.—Not later than July 1 of each year, a
covered generation facility shall submit credits to the
Federal Energy Regulatory Commission in an
amount equal to the total number of megawatt-hours
of electricity sold by the covered generation facility
in the preceding year multiplied by the applicable re-
newable energy source requirement under subsection
(a).
(4) USE OF RENEWABLE ENERGY CREDITS.—
(A) TIME FOR USE.—A renewable energy
credit shall be used for the calendar year for
which the renewable energy credit is issued.
(B) PERMITTED USES.—Until July 1 of
the year in which a renewable energy credit was
issued, a covered generation facility may—
(i) use the renewable energy credit to
make a submission to the Federal Energy
Regulatory Commission under paragraph
(3); or
(ii) on notice to the Federal Energy
Regulatory Commission, sell or otherwise
transfer a renewable energy credit to an-
other covered generation facility.
(d) RECORDKEEPING.—The Federal Energy Regu-
latory Commission shall maintain records of all renewable
energy credits issued and all credits sold or transferred.
(e) PENALTIES.—
(1) IN GENERAL.—The Federal Energy Regu-
latory Commission may bring an action in United
States district court to impose a civil penalty on any
person that fails to comply with subsection (c)(3).
(2) AMOUNT OF PENALTY.—A person that fails
to comply with a requirement to submit renewable
energy credits under subsection (c)(3) shall be sub-
ject to a civil penalty of not more than 3 times the
estimated national average market value (as deter-
mined by the Federal Energy Regulatory Commis-
sion) for the calendar year concerned of the quantity
of renewable energy credits that person is required
to submit for the applicable fiscal year.
SEC. 304. HIGH PERFORMANCE SCHOOLS.
(a) PROGRAM ESTABLISHMENT AND ADMINISTRA-
TION.—
(1) ESTABLISHMENT.—There is established in
the Department of Energy the High Performance
Schools Program (in this section referred to as the
‘‘Program’’).
(2) IN
GENERAL.—The Secretary of Energy
may, through the Program, make grants—
(A) to assist school districts in the produc-
tion, through construction or renovation, of
high performance elementary and secondary
school buildings that are healthful, productive,
energy efficient, and environmentally sound;
(B) to State energy offices to administer
the program of assistance to school districts
pursuant to this section; and
(C) to State energy offices to promote par-
ticipation by school districts in the Program.
(3) GRANTS TO ASSIST SCHOOL DISTRICTS.—
Grants under paragraph (2)(A) for new school build-
ings shall be used to achieve energy efficiency per-
formance that reduces energy use at least 30 percent
below that of a school constructed in compliance
with standards prescribed in Chapter 8 of the 2000
International Energy Conservation Code, or a simi-
lar State code intended to achieve substantially
equivalent results. Grants under paragraph (2)(A)
for existing school buildings shall be used to achieve
energy efficiency performance that reduces energy
use below the school’s baseline consumption, assum-
ing a 3-year, weather-normalized average for calcu-
lating such baseline. Grants under paragraph (2)(A)
shall be made to school districts that have—
(A) demonstrated a need for such grants
in order to respond appropriately to increasing
elementary and secondary school enrollments or
to make major investments in renovation of
school facilities; and
(B) made a commitment to use the grant
funds to develop high performance school build-
ings in accordance with a plan developed and
approved pursuant to paragraph (5)(A).
(4) OTHER GRANTS.—
(A) 
GRANTS
FOR
ADMINISTRATION.—
Grants under paragraph (2)(B) shall be used to
evaluate compliance by school districts with the
requirements of this section, and in addition
may be used for—
(i) distributing information and mate-
rials to clearly define and promote the de-
velopment of high performance school
buildings for both new and existing facili-
ties;
(ii) organizing and conducting pro-
grams for school board members, school
district personnel, architects, engineers,
and others to advance the concepts of high
performance school buildings;
(iii) obtaining technical services and
assistance in planning and designing high
performance school buildings; and
(iv) collecting and monitoring data
and information pertaining to the high per-
formance school building projects.
(B) GRANTS
TO
PROMOTE
PARTICIPA-
TION.—Grants under paragraph (2)(C) may be
used for promotional and marketing activities,
including facilitating private and public financ-
ing, promoting the use of energy service compa-
nies, working with school administrations, stu-
dents, and communities, and coordinating pub-
lic benefit programs.
(5) IMPLEMENTATION.—
(A) PLANS.—A grant under paragraph
(2)(A) shall be provided only to a school district
that, in consultation with its State office of en-
ergy and education, has developed a plan that
the State energy office determines to be feasible
and appropriate in order to achieve the pur-
poses for which such grants are made.
(B) SUPPLEMENTING
GRANT
FUNDS.—
State energy offices shall encourage qualifying
school districts to supplement their grant funds
with funds from other sources in the implemen-
tation of their plans.
(b) ALLOCATION OF FUNDS.—
(1) IN GENERAL.—Except as provided in para-
graph (3), funds appropriated to carry out this sec-
tion shall be provided to State energy offices.
(2) PURPOSES.—Except as provided in para-
graph (3), funds appropriated to carry out this sec-
tion shall be allocated as follows:
(A) Seventy percent shall be used to make
grants under subsection (a)(2)(A).
(B) Fifteen percent shall be used to make
grants under subsection (a)(2)(B).
(C) Fifteen percent shall be used to make
grants under subsection (a)(2)(C).
(3) OTHER FUNDS.—The Secretary of Energy
may retain not to exceed $300,000 per year from
amounts appropriated under subsection (c) to assist
State energy offices in coordinating and imple-
menting the Program. Such funds may be used to
develop reference materials to further define the
principles and criteria to achieve high performance
school buildings.
(c) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Secretary of En-
ergy to carry out this section $200,000,000 for each of
the fiscal years 2002 through 2006, and such sums as may
be necessary for each of the fiscal years 2007 through
2020.
(d) REPORT TO CONGRESS.—The Secretary of En-
ergy shall conduct a biennial review of State actions imple-
menting this section, and the Secretary shall report to
Congress on the results of such reviews. In conducting
such reviews, the Secretary shall assess the effectiveness
of the calculation procedures used by the States in estab-
lishing eligibility of schools for funding under this section,
and may assess other aspects of the State program to de-
termine whether they have been effectively implemented.
(e) DEFINITIONS.—For purposes of this section:
(1) ELEMENTARY AND SECONDARY SCHOOL.—
The terms ‘‘elementary school’’ and ‘‘secondary
school’’ shall have the same meaning given such
terms in paragraphs (14) and (26) of section 14101
of the Elementary and Secondary Education Act of
1965 (20 U.S.C. 8801(14), (26)).
(2) HIGH PERFORMANCE SCHOOL BUILDING.—
The term ‘‘high performance school building’’ means
a school building which, in its design, construction,
operation, and maintenance, maximizes use of re-
newable energy and energy efficiency practices, is
cost-effective on a life cycle basis, uses affordable,
environmentally preferable, durable materials, en-
hances indoor environmental quality, protects and
conserves water, and optimizes site potential.
(3) RENEWABLE ENERGY.—The term ‘‘renew-
able energy’’ means energy produced by solar, wind,
geothermal, photovoltaic, fuel cell, or biomass power.
SEC. 305. HIGH PERFORMANCE SCHOOLS RESEARCH.
(a) PROGRAM AUTHORIZED.—The Director of the
National Science Foundation (in this section referred to
as the ‘‘Director’’) shall establish a competitive, merit-
based research program to investigate how the character-
istics of the physical environment of elementary and sec-
ondary schools affect student educational achievement.
(b) PROGRAM REQUIREMENTS.—
(1) 
RESEARCH
PROJECTS.—Awards 
made
under subsection (a) shall be for research projects
that focus on the quantification of the effects on stu-
dent educational achievement of lighting, noise, tem-
perature and ventilation, general upkeep, and other
characteristics of the physical environment of school
classrooms. The research projects shall be designed
to separate the effects of the key variables that in-
fluence student educational achievement in order to
isolate the effects of the environmental variables.
(2) ASSESSMENTS.—For awards made under
subsection (a), the Director shall ensure that each
research project specifies appropriate procedures to
make assessments of student educational achieve-
ment. Such assessments shall be carried out over a
multiyear period.
(3) DISSEMINATION OF FINDINGS.—The Direc-
tor may sponsor and support workshops, con-
ferences, and dedicated web sites to disseminate in-
formation to school administrators about the find-
ings of research projects carried out under sub-
section (a).
(c) GUIDELINES, PROCEDURES, AND CRITERIA.—
The Director shall establish and publish application and
selection guidelines, procedures, and criteria for the pro-
gram established under subsection (a).
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the National Science
Foundation to carry out this section $2,000,000 for each
of the fiscal years 2002, 2003, and 2004.
SEC. 306. VEHICLE FUEL ECONOMY STANDARDS.
(a) INCREASED AVERAGE FUEL ECONOMY STAND-
ARD FOR LIGHT TRUCKS.—
(1) DEFINITION
OF
LIGHT
TRUCK.—Section
32901(a) of title 49, United States Code, is amend-
ed by adding at the end the following new para-
graph:
‘‘(17) ‘light truck’ has the meaning given that
term in regulations prescribed by the Secretary of
Transportation in the administration of this chap-
ter.’’.
(2) REQUIREMENT
FOR
INCREASED
STAND-
ARD.—Section 32902(a) of title 49, United States
Code, is amended—
(A) by inserting ‘‘(1)’’ after ‘‘AUTO-
MOBILES.—’’;
(B) by inserting before the period at the
end of the third sentence the following: ‘‘, sub-
ject to paragraph (2)’’; and
(C) by adding at the end the following new
paragraph:
‘‘(2) The average fuel economy standard for light
trucks manufactured by a manufacturer may not be less
than 27.5 miles per gallon, except that the average fuel
economy standard for—
‘‘(A) light trucks manufactured by a manufac-
turer in a model year after model year 2002 and be-
fore model year 2005 may not be less than 22.5
miles per gallon; and
‘‘(B) light trucks manufactured by a manufac-
turer in a model year after model year 2004 and be-
fore model year 2007 may not be less than 25 miles
per gallon.’’.
(3) APPLICABILITY.—Paragraph (2) of section
32902(a) of such title does not apply with respect to
light trucks manufactured before model year 2003.
(b) FUEL ECONOMY STANDARDS FOR AUTOMOBILES
UP TO 10,000 POUNDS GROSS VEHICLE WEIGHT.—
(1) VEHICLES
DEFINED
AS
AUTOMOBILES.—
Section 32901(a)(3) of title 49, United States Code,
is amended by striking ‘‘and rated at—’’ and all
that follows through the end and inserting ‘‘and is
rated at not more than 10,000 pounds gross vehicle
weight.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on January 1,
2007.
(c) FUEL ECONOMY OF THE FEDERAL FLEET OF
VEHICLES.—
(1) BASELINE AVERAGE FUEL ECONOMY.—The
head of each executive agency shall determine, for
each class of vehicles that are in the agency’s fleet
of vehicles in fiscal year 2001, the average fuel econ-
omy for all of the vehicles in that class that are in
the agency’s fleet of vehicles for that fiscal year. For
the purposes of this subsection, the average fuel
economy so determined for the agency’s vehicles in
a class of vehicles shall be the baseline average fuel
economy for the agency’s fleet of vehicles in that
class.
(2) INCREASE OF AVERAGE FUEL ECONOMY.—
The head of an executive agency shall manage the
procurement of vehicles in each class of vehicles for
that agency in such a manner that—
(A) not later than September 30, 2003,
the average fuel economy of the new vehicles in
the agency’s fleet of vehicles in each class of ve-
hicles is not less than 3 miles per gallon higher
than the baseline average fuel economy deter-
mined for that class; and
(B) not later than September 30, 2005,
the average fuel economy of the new vehicles in
the agency’s fleet of vehicles in each class of ve-
hicles is not less than 6 miles per gallon higher
than the baseline average fuel economy deter-
mined for that class.
(3) CALCULATION
OF
AVERAGE
FUEL
ECON-
OMY.—Average fuel economy shall be calculated for
the purposes of this subsection in accordance with
guidance which the Secretary of Transportation
shall prescribe for the implementation of this sub-
section.
(4) DEFINITIONS.—In this subsection:
(A) The term ‘‘class of vehicles’’ means a
class of vehicles for which an average fuel econ-
omy standard is in effect under chapter 329 of
title 49, United States Code.
(B) The term ‘‘executive agency’’ has the
meaning given the term in section 4(1) of the
Office of Federal Procurement Policy Act (41
U.S.C. 403(1)).
(C) The term ‘‘new vehicle’’, with respect
to the fleet of vehicles of an executive agency,
means a vehicle procured by or for the agency
after September 30, 2002.
SEC. 307. ENERGY STAR PROGRAM.
(a) ESTABLISHMENT.—There shall be established, as
a jointly administered program of the Environmental Pro-
tection Agency and the Department of Energy, an Energy
Star program to identify, establish standards for, and pro-
mote cost-effective, energy-efficient products and buildings
for government, industrial, commercial, and individual en-
ergy users. Such program shall be conducted so that En-
ergy Star labels for each product and building system, de-
sign, or product represents a standard of high quality and
solid scientific basis.
(b) MEMORANDUM OF UNDERSTANDING.—Not later
than 3 months after the date of the enactment of this Act,
the Administrator of the Environmental Protection Agen-
cy and the Secretary of Energy shall enter into and trans-
mit to the Congress a memorandum of understanding de-
lineating the respective responsibilities of the Environ-
mental Protection Agency and the Department of Energy
for the Energy Star program.
(c) CONSOLIDATION REPORT.—Not later than 6
months after the date of the enactment of this Act, the
Administrator of the Environmental Protection Agency
and the Secretary of Energy shall jointly transmit to the
Congress a report on the consolidation of standards for
energy-efficient products and building systems, designs,
and products for government, industrial, commercial, and
individual energy users. Such report shall include an as-
sessment of—
(1) standards established by private sector
standards organizations and by Federal agencies;
and
(2) how the Energy Star program should co-
ordinate its efforts with such organizations and
agencies to establish a uniform standard for each
type of product or building system, design, or prod-
uct that is designated with an Energy Star label.
(d) ANNUAL REPORT.—The Administrator of the En-
vironmental Protection Agency and the Secretary of En-
ergy shall jointly transmit to the Congress an annual re-
port containing—
(1) a description of the activities of the Envi-
ronmental Protection Agency and the Department of
Energy through the Energy Star program; and
(2) goals for the future of the Energy Star pro-
gram.
(e) AUTHORIZATION OF APPROPRIATIONS.—For pur-
poses of carrying out the Energy Star program, there are
authorized to be appropriated—
(1) to the Administrator of the Environmental
Protection Agency $75,000,000 for fiscal year 2002
and $100,000,000 for fiscal year 2003; and
(2) to the Secretary of Energy $3,000,000 for
fiscal year 2002 and $5,000,000 for fiscal year
2003.
SEC. 308. FUEL EFFICIENT TIRE PROGRAM.
Section 30123 of title 49, United States Code, is
amended—
(1) in subsection (b)—
(A) by inserting ‘‘(1)’’ before the first sen-
tence; and
(B) by adding at the end the following:
‘‘(2) The uniform quality system shall include stand-
ards for rating tires for the following:
‘‘(A) Treadwear.
‘‘(B) Traction.
‘‘(C) Temperature resistance.
‘‘(D) Rolling resistance and fuel economy.’’;
and
(2) by adding at the end the following:
‘‘(d) NATIONAL
TIRE
FUEL
EFFICIENCY
PRO-
GRAM.—(1) The Secretary shall, after consulting with the
Administrator of the Environmental Protection Agency,
industry representatives, and other appropriate organiza-
tions, develop a national tire fuel efficiency program that
will develop fuel efficiency ratings and label requirements
for tires.
‘‘(2) The program shall include—
‘‘(A) specifications for testing procedures and
labels that will enable tire buyers to make more in-
formed purchasing decisions about the fuel efficiency
of tires;
‘‘(B) dissemination of information through la-
bels, catalogs, trade publications, or other mecha-
nisms, that will allow tire buyers to assess the en-
ergy consumption and potential costs savings of al-
ternative tire products;
‘‘(C) by no later than September 30, 2002, de-
velopment by the Secretary of recommendations for
minimum fuel efficiency standards for tires; and
‘‘(D) by no later than January 1, 2003, pre-
scription by the Secretary of minimum fuel efficiency
standards for tires.
‘‘(3) Recommendations and standards under para-
graph (2) (C) and (D), respectively, shall—
‘‘(A) be designed to ensure that the fuel effi-
ciency of replacement tires is equal to or better than
the fuel efficiency of tires sold as original equipment
on new vehicles;
‘‘(B) consider all safety implications; and
‘‘(C) ensure the standards do not adversely im-
pact tire safety.’’.
SEC. 309. ENVIRONMENTAL DISCLOSURE TO CONSUMERS.
(a) RETAIL SALES.—The Federal Trade Commission
shall issue rules requiring each retail electric supplier to
include with each monthly billing to retail electric con-
sumers a statement of the known energy sources used to
generate the electricity the supplier distributes, on an an-
nual basis, stated in numbers of kilowatt-hours, both in
percentages and in the form of a pie chart, of biomass
power, coal-fired power, hydropower, natural gas-fired
power, nuclear power, oil-fired power, wind power, geo-
thermal power, solar thermal power, photovoltaic power,
combined heat and power, and other sources of power, re-
spectively.
(b) WHOLESALE SALES.—The Federal Trade Com-
mission shall issue rules requiring any electric supplier
that sells or makes an offer to sell electric energy at whole-
sale to provide the purchaser or offeree such known infor-
mation about the energy source used to generate the elec-
tricity, on an annual basis, as the Commission may deter-
mine.
(c) CERTIFICATION PROGRAM.—The Secretary of
Energy, in consultation with the Federal Trade Commis-
sion, shall develop a certification program for each retail
electric supplier that sells electric energy, at least 50 per-
cent of which, averaged over a year, is generated from re-
newable energy sources. For purposes of this subsection,
the term ‘‘renewable energy source’’ means biomass, wind
power, geothermal power, solar thermal power, or photo-
voltaic power.
TITLE IV—FEDERAL
GOVERNMENT PROGRAMS
SEC. 401. ENERGY SAVINGS MEASURES IN CAPITOL.
(a) REQUIREMENTS.—The Architect of the Capitol—
(1) shall develop and implement a cost-effective
energy conservation strategy for all facilities cur-
rently administered by Congress to achieve a net re-
duction of 25 percent in energy consumption on the
congressional campus compared to fiscal year 1991
consumption levels on a Btu-per-gross-square-foot
basis not later than 4 years after the date of the en-
actment of this Act;
(2) shall submit to Congress not later than 10
months after the date of the enactment of this Act
a comprehensive energy conservation and manage-
ment plan which includes life cycle cost methods to
determine the cost-effectiveness of proposed energy
efficiency projects;
(3) shall present to Congress annually a report
on congressional energy management and conserva-
tion programs which details energy expenditures and
cost estimates for each facility, energy management
and conservation projects, and future priorities to
ensure compliance with the requirements of this sec-
tion;
(4) shall perform energy surveys of all congres-
sional buildings and update such surveys as needed;
(5) shall use such surveys to determine the cost
and payback period of energy and water conserva-
tion measures likely to achieve the energy consump-
tion levels contained in the strategy developed under
paragraph (1);
(6) shall install energy and water conservation
measures that will achieve such levels through life
cycle cost methods and procedures included in the
plan submitted under paragraph (2);
(7) may contract with nongovernmental entities
and employ private sector capital to finance energy
conservation projects and achieve energy consump-
tion targets;
(8) may develop innovative contracting methods
that will attract private sector funding for the instal-
lation of energy-efficient and renewable energy tech-
nology to meet the requirements of this section;
(9) may participate in the Department of Ener-
gy’s Financing Renewable Energy and Efficiency
(FREE Savings) contracts program for Federal
Government facilities;
(10) within 100 days after the date of the en-
actment of this Act, shall submit to Congress the re-
sults of a study of the installation of sub-metering
in buildings on the congressional campus;
(11) shall produce information packages and
‘‘how-to’’ guides for each Member and employing au-
thority of Congress that detail simple, cost-effective
methods to save energy and taxpayer dollars;
(12) shall work with the Department of Ener-
gy’s Federal Energy Management Program and ap-
propriate manufacturers, local utilities, trade asso-
ciations, and national laboratories to identify and
demonstrate innovative new renewable energy or en-
ergy efficiency technologies in the Visitor’s Center,
as allowed by the Visitor’s Center design param-
eters; and
(13) shall include in the Visitor’s Center an ex-
hibit on the energy efficiency measures employed in
the congressional campus.
(b) REPEAL.—Section 310 of the Legislative Branch
Appropriations Act, 1999 (40 U.S.C. 166i) is repealed.
SEC. 402. ENERGY SAVINGS PERFORMANCE CONTRACTS.
(a) COST SAVINGS FROM REPLACEMENT FACILI-
TIES.—Section 801(a) of the National Energy Conserva-
tion Policy Act (42 U.S.C. 8287(a)) is amended by adding
at the end the following:
‘‘(3)(A) In the case of an energy savings con-
tract or energy savings performance contract pro-
viding for energy savings through the construction
and operation of one or more buildings or facilities
to replace one or more existing buildings or facilities,
benefits ancillary to the purpose of such contract
under paragraph (1) may include savings resulting
from reduced costs of operation and maintenance at
such replacement buildings or facilities when com-
pared with costs of operation and maintenance at
the buildings or facilities being replaced.
‘‘(B) Notwithstanding paragraph (2)(B), aggre-
gate annual payments by an agency under an energy
savings contract or energy savings performance con-
tract referred to in subparagraph (A) may take into
account (through the procedures developed pursuant
to this section) savings resulting from reduced costs
of operation and maintenance as described in sub-
paragraph (A).’’.
(b) REPEAL OF SUNSET.—Section 801(c) of the Na-
tional Energy Conservation Policy Act (42 U.S.C.
8287(c)) is repealed.
(c) ENERGY SAVINGS PERFORMANCE CONTRACT
DEFINITIONS.—
(1) ENERGY SAVINGS.—Section 804(2) of the
National Energy Conservation Policy Act (42 U.S.C.
8287c(2)) is amended to read as follows:
‘‘(2) The term ‘energy savings’ means a reduc-
tion in the cost of energy or water, from a base cost
established through a methodology set forth in the
contract, used in either—
‘‘(A) an existing federally owned building
or buildings or other federally owned facilities
as a result of—
‘‘(i) the lease or purchase of operating
equipment, improvements, altered oper-
ation and maintenance, or technical serv-
ices;
‘‘(ii) the increased efficient use of ex-
isting energy sources by cogeneration or
heat recovery, excluding any cogeneration
process for other than a federally owned
building or buildings or other federally
owned facilities; or
‘‘(iii) the increased efficient use of ex-
isting water sources; or
‘‘(B) a replacement facility under section
801(a)(3).’’.
(2) 
ENERGY
SAVINGS
CONTRACT.—Section
804(3) of the National Energy Conservation Policy
Act (42 U.S.C. 8287c(3)) is amended to read as fol-
lows:
‘‘(3) The terms ‘energy savings contract’ and
‘energy savings performance contract’ mean a con-
tract which provides for—
‘‘(A) the performance of services for the
design, acquisition, installation, testing, oper-
ation, and, where appropriate, maintenance and
repair, of an identified energy or water con-
servation measure or series of measures at one
or more locations; or
‘‘(B) energy savings through the construc-
tion and operation of one or more buildings or
facilities to replace one or more existing build-
ings or facilities.’’.
(3) ENERGY OR WATER CONSERVATION MEAS-
URE.—Section 804(4) of the National Energy Con-
servation Policy Act (42 U.S.C. 8287c(4)) is amend-
ed to read as follows:
‘‘(4) The term ‘energy or water conservation
measure’ means—
‘‘(A) an energy conservation measure, as
defined in section 551(4) (42 U.S.C. 8259(4));
or
‘‘(B) a water conservation measure that
improves water efficiency, is life cycle cost effec-
tive, and involves water conservation, water re-
cycling or reuse, improvements in operation or
maintenance efficiencies, retrofit activities or
other related activities, not at a Federal hydro-
electric facility.’’.
(4) 
CONFORMING
AMENDMENT.—Section
801(a)(2)(C) of the National Energy Conservation
Policy Act (42 U.S.C. 8287(a)(2)(C)) is amended by
inserting ‘‘or water’’ after ‘‘finance energy’’.
SEC. 403. FEDERAL PURCHASE REQUIREMENT.
The President shall ensure that, of the total amount
of electric power the Federal Government purchases dur-
ing any fiscal year—
(1) not less than 3 percent in fiscal years 2002
through 2004;
(2) not less than 5 percent in fiscal years 2005
through 2009;
(3) not less than 7.5 percent in fiscal years
2010 through 2019; and
(4) not less than 20 percent in fiscal year 2020
and each fiscal year thereafter,
shall be electric power generated by a renewable energy
source.
SEC. 404. FEDERAL BUILDINGS ENERGY EFFICIENCY.
(a) MINIMUM REQUIREMENT.—Any federally owned
or leased building for which a contract for construction
or major retrofit is entered into after the date of the en-
actment of this Act shall be required to achieve energy
efficient design standards that exceed by at least 30 per-
cent the standards contained in Standard 90.1–1999 of
the American Society of Heating, Refrigerating, and Air-
Conditioning Engineers.
(b) ALTERNATIVE STANDARDS.—The Secretary may
establish a requirement for stricter standards than those
required by subsection (a) where local climate conditions
or other circumstances so warrant.
SEC. 405. RETENTION OF SAVINGS.
A Federal agency that is authorized by law to retain
a portion of savings resulting from efficient energy and
water management shall permit the retention of the sav-
ings at the facility or site where the savings occur to pro-
vide greater incentive for facility and site managers to un-
dertake energy and water management initiatives, invest
in renewable energy systems, and purchase electricity from
renewable energy sources.
SEC. 406. GUARANTEED ENERGY SAVINGS.
Section 546(a) of the National Energy Conservation
Policy Act (42 U.S.C. 8256(a)) is amended by adding at
the end the following new paragraph:
‘‘(3) A contract entered into under this subsection
shall provide for a guarantee of energy savings to the
agency, shall establish payment schedules reflecting such
guarantee, taking into account any capital costs under the
contract, and shall provide for monitoring and verification
of the energy savings.’’.
SEC. 407. PRESIDENT’S MANAGEMENT COUNCIL.
The President’s Management Council shall periodi-
cally assess the progress of Federal agencies in improving
energy management.
SEC. 408. FEDERAL USE OF ENERGY STAR STANDARDS.
(a) REQUIREMENT.—Each Federal agency, in acquir-
ing energy-using products, or in acquiring building sys-
tems, designs, or products, shall acquire Energy Star
products, systems, or designs. If Energy Star products,
systems, or designs are not available, the Federal agency
shall acquire products, systems, or designs designated as
among the top 25 percent of such type of product, system,
or design under the Federal Energy Management Pro-
gram, or other appropriate standards-setting organiza-
tions.
(b) AVAILABILITY.—The General Services Adminis-
tration and the Defense Logistics Agency shall ensure that
Energy Star products, systems, and designs are made
known and readily available to Federal agencies for acqui-
sition.
TITLE V—TAX PROVISIONS
SEC. 500. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in
this title an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
Subtitle A—Energy-Efficient
Property Used in Business
SEC. 501. 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
paragraph, 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,
‘‘(E) in the case of energy property de-
scribed in subsection (c)(1)(A)(vii), 30 percent,
and
‘‘(F)(i) in the case of a small employer
with respect to the energy property described in
subsection (c)(1)(A)(viii), 30 percent, and
‘‘(ii) in the case of energy property de-
scribed in subsection (c)(1)(A)(viii) other than
with respect to a small employer, 0 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,
‘‘(vii) qualified wind energy systems
equipment property, or
‘‘(viii) qualified energy star 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) $1,000 for each kilowatt of ca-
pacity 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.
‘‘(8) QUALIFIED ENERGY STAR PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
energy star product’ means a product which—
‘‘(i) meets the guidelines, specifica-
tions, and performance levels of the En-
ergy Star program jointly managed by the
Environmental Protection Agency and the
Department of Energy, and
‘‘(ii) displays the Energy Star label.
‘‘(B) SMALL EMPLOYER.—The term ‘small
employer’ means, with respect to any calendar
year, any employer if such employer employed
an average of 100 or fewer employees on busi-
ness days during either of the 2 preceding cal-
endar years. For purposes of the preceding sen-
tence, a preceding calendar year may be taken
into account only if the employer was in exist-
ence throughout such year.
‘‘(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.
‘‘(g) TERMINATION.—This section shall not apply to
property placed in service after December 31, 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:
‘‘(11) 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. 502. ENERGY-EFFICIENT COMMERCIAL BUILDING
PROPERTY DEDUCTION.
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 (relating to itemized deductions for individuals and
corporations) is amended by adding at the end the fol-
lowing:
‘‘SEC. 199. ENERGY-EFFICIENT COMMERCIAL BUILDING
PROPERTY.
‘‘(a) IN GENERAL.—There shall be allowed as a de-
duction for the taxable year an amount equal to the en-
ergy-efficient commercial building property expenditures
made by a taxpayer for the taxable year.
‘‘(b) MAXIMUM
AMOUNT
OF
DEDUCTION.—The
amount of energy-efficient commercial building property
expenditures taken into account under subsection (a) shall
not exceed an amount equal to the product of—
‘‘(1) $2.25, and
‘‘(2) the square footage of the building with re-
spect to which the expenditures are made.
‘‘(c) YEAR DEDUCTION ALLOWED.—The deduction
under subsection (a) shall be allowed in the taxable year
in which the construction of the building is completed.
‘‘(d) ENERGY-EFFICIENT COMMERCIAL BUILDING
PROPERTY
EXPENDITURES.—For 
purposes 
of 
this
section—
‘‘(1) IN GENERAL.—The term ‘energy-efficient
commercial building property expenditures’ means
an amount paid or incurred for energy-efficient com-
mercial building property installed on or in connec-
tion with new construction or reconstruction of
property—
‘‘(A) for which depreciation is allowable
under section 167,
‘‘(B) which is located in the United States,
and
‘‘(C) the construction or erection of which
is completed by the taxpayer.
Such property includes all residential rental prop-
erty, including low-rise multifamily structures and
single family housing property which is not within
the scope of Standard 90.1–1999 (described in para-
graph (3)).
‘‘(2) LABOR COSTS INCLUDED.—Such term in-
cludes expenditures for labor costs properly allocable
to the onsite preparation, assembly, or original in-
stallation of the property.
‘‘(3) ENERGY
EXPENDITURES
EXCLUDED.—
Such term does not include any expenditures taken
into account in determining any credit allowed under
section 48A.
‘‘(e) ENERGY-EFFICIENT COMMERCIAL BUILDING
PROPERTY.—For purposes of subsection (d)—
‘‘(1) IN GENERAL.—The term ‘energy-efficient
commercial building property’ means any property
which reduces total annual energy and power costs
with respect to the lighting, heating, cooling, ventila-
tion, and hot water supply systems of the building
by 50 percent or more in comparison to a reference
building which meets the requirements of Standard
90.1–1999 of the American Society of Heating, Re-
frigerating, and Air Conditioning Engineers and the
Illuminating Engineering Society of North America
using methods of calculation under subparagraph
(B) and certified by qualified professionals as pro-
vided under paragraph (6).
‘‘(2) METHODS
OF
CALCULATION.—The Sec-
retary, in consultation with the Secretary of Energy,
shall promulgate regulations which describe in detail
methods for calculating and verifying energy and
power consumption and cost, taking into consider-
ation the provisions of the 1998 California Nonresi-
dential ACM Manual. These procedures shall meet
the following requirements:
‘‘(A) In calculating tradeoffs and energy
performance, the regulations shall prescribe the
costs per unit of energy and power, such as kil-
owatt hour, kilowatt, gallon of fuel oil, and
cubic foot or Btu of natural gas, which may be
dependent on time of usage.
‘‘(B) The calculational methodology shall
require that compliance be demonstrated for a
whole building. If some systems of the building,
such as lighting, are designed later than other
systems of the building, the method shall pro-
vide that either—
‘‘(i) the expenses taken into account
under paragraph (1) shall not occur until
the date designs for all energy-using sys-
tems of the building are completed, or
‘‘(ii) the expenses taken into account
under paragraph (1) shall be a fraction of
such expenses based on the performance of
less than all energy-using systems in ac-
cordance with subparagraph (C), and the
energy performance of all systems and
components not yet designed shall be as-
sumed to comply minimally with the re-
quirements of such Standard 90.1–1999.
‘‘(C) The expenditures in connection with
the design of subsystems in the building, such
as the envelope, the heating, ventilation, air
conditioning and water heating system, and the
lighting system shall be allocated to the appro-
priate building subsystem based on system-spe-
cific energy cost savings targets in regulations
promulgated by the Secretary of Energy which
are equivalent, using the calculation method-
ology, to the whole building requirement of 50
percent savings.
‘‘(D) The calculational methods under this
paragraph need not comply fully with section
11 of such Standard 90.1–1999.
‘‘(E) The calculational methods shall be
fuel neutral, such that the same energy effi-
ciency features shall qualify a building for the
deduction under this section regardless of
whether the heating source is a gas or oil fur-
nace or an electric heat pump.
‘‘(F) The calculational methods shall pro-
vide appropriate calculated energy savings for
design methods and technologies not otherwise
credited in either such Standard 90.1–1999 or
in the 1998 California Nonresidential ACM
Manual, including the following:
‘‘(i) Natural ventilation.
‘‘(ii) Evaporative cooling.
‘‘(iii) Automatic lighting controls such
as occupancy sensors, photocells, and time-
clocks.
‘‘(iv) Daylighting.
‘‘(v) Designs utilizing semi-condi-
tioned spaces which maintain adequate
comfort conditions without air conditioning
or without heating.
‘‘(vi) Improved fan system efficiency,
including reductions in static pressure.
‘‘(vii) Advanced unloading mecha-
nisms for mechanical cooling, such as mul-
tiple or variable speed compressors.
‘‘(viii) The calculational methods may
take into account the extent of commis-
sioning in the building, and allow the tax-
payer to take into account measured per-
formance which exceeds typical perform-
ance.
‘‘(3) COMPUTER SOFTWARE.—
‘‘(A) IN GENERAL.—Any calculation under
this subsection shall be prepared by qualified
computer software.
‘‘(B) QUALIFIED COMPUTER SOFTWARE.—
For purposes of this paragraph, the term
‘qualified computer software’ means software—
‘‘(i) for which the software designer
has certified that the software meets all
procedures and detailed methods for calcu-
lating energy and power consumption and
costs as required by the Secretary,
‘‘(ii) which provides such forms as re-
quired to be filed by the Secretary in con-
nection with energy efficiency of property
and the deduction allowed under this sec-
tion, and
‘‘(iii) which provides a notice form
which summarizes the energy efficiency
features of the building and its projected
annual energy costs.
‘‘(4) ALLOCATION OF DEDUCTION FOR PUBLIC
PROPERTY.—In the case of energy-efficient commer-
cial building property installed on or in public prop-
erty, the Secretary shall promulgate a regulation to
allow the allocation of the deduction to the person
primarily responsible for designing the property in
lieu of the public entity which is the owner of such
property. Such person shall be treated as the tax-
payer for purposes of this section.
‘‘(5) NOTICE TO OWNER.—The qualified indi-
vidual shall provide an explanation to the owner of
the building regarding the energy efficiency features
of the building and its projected annual energy costs
as 
provided 
in 
the 
notice 
under 
paragraph
(3)(B)(iii).
‘‘(6) CERTIFICATION.—
‘‘(A) IN GENERAL.—Except as provided in
this paragraph, the Secretary, in consultation
with the Secretary of Energy, shall establish re-
quirements for certification and compliance pro-
cedures similar to the procedures under section
45G(d).
‘‘(B) QUALIFIED
INDIVIDUALS.—Individ-
uals qualified to determine compliance shall be
only those individuals who are recognized by an
organization certified by the Secretary for such
purposes.
‘‘(C) PROFICIENCY OF QUALIFIED INDIVID-
UALS.—The Secretary shall consult with non-
profit organizations and State agencies with ex-
pertise in energy efficiency calculations and in-
spections to develop proficiency tests and train-
ing programs to qualify individuals to determine
compliance.
‘‘(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 (27),
by striking the period at the end of paragraph (28) and
inserting ‘‘, and’’, and by inserting the following:
‘‘(29) 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. 503. BUSINESS TAX CREDIT FOR THE MANUFACTURE
OF 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 new
section:
‘‘SEC. 45G. 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), an energy
efficient 
refrigerator 
described 
in 
subsection
(d)(3)(B)(i), or an energy efficient air conditioner
described in subsection (d)(4)(A), an amount equal
to—
‘‘(A) $50, multiplied by
‘‘(B) the number of such washers, refrig-
erators, and air conditioners 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), an energy
efficient 
refrigerator 
described 
in 
subsection
(d)(3)(B)(ii), or an energy efficient air conditioner
described in subsection (d)(4)(B), an amount equal
to—
‘‘(A) $100, multiplied by
‘‘(B) the number of such washers, refrig-
erators, or air conditioners produced by the tax-
payer 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,
‘‘(B) an energy efficient refrigerator, or
‘‘(C) an energy efficient air conditioner.
‘‘(2) ENERGY EFFICIENT CLOTHES WASHER.—
The term ‘energy efficient clothes washer’ means a
residential clothes washer, including a residential
style coin operated washer, which is manufactured
with—
‘‘(A) a 1.26 Modified Energy Factor (re-
ferred to in this paragraph as ‘MEF’) (as de-
termined by the Secretary of Energy), or
‘‘(B) a 1.42 MEF (as determined by the
Secretary of Energy) (1.5 MEF for calendar
years beginning after 2004).
‘‘(3) ENERGY EFFICIENT REFRIGERATOR.—The
term ‘energy efficient refrigerator’ means an auto-
matic defrost refrigerator-freezer which—
‘‘(A) has an internal volume of at least
16.5 cubic feet, and
‘‘(B) consumes—
‘‘(i) 10 percent less kw/hr/yr than the
energy conservation standards promulgated
by the Department of Energy for such re-
frigerator for 2001, or
‘‘(ii) 15 percent less kw/hr/yr than
such energy conservation standards.
‘‘(4) ENERGY EFFICIENT AIR CONDITIONER.—
The term ‘energy efficient air conditioner’ means—
‘‘(A) a central air conditioner which has a
cooling seasonal energy efficiency ratio (SEER)
of at least 13.5 but less than 15, or
‘‘(B) a central air conditioner which has a
cooling seasonal energy efficiency ratio (SEER)
of 15 or greater.
‘‘(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-
100
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) is amended by adding at the
end the following new paragraph:
‘‘(12) NO CARRYBACK OF ENERGY EFFICIENT
APPLIANCE CREDIT BEFORE EFFECTIVE DATE.—No
portion of the unused business credit for any taxable
year which is attributable to the energy efficient ap-
pliance credit determined under section 45G may be
carried to a taxable year ending before the date of
the enactment of section 45G.’’.
(c) CONFORMING AMENDMENT.—Section 38(b) (re-
lating to general business credit) is amended by striking
‘‘plus’’ at the end of paragraph (14), by striking the period
at the end of paragraph (15) and inserting ‘‘, plus’’, and
by adding at the end the following new paragraph:
101
‘‘(16) the energy efficient appliance credit de-
termined under section 45G(a).’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
45F the following new item:
‘‘Sec. 45G. Energy efficient appliance credit.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
Subtitle B—Residential Energy
Systems
SEC. 511. 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) is amended by inserting after section 45G the fol-
lowing:
‘‘SEC. 45H. 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.—
102
‘‘(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), $2,000, and
‘‘(ii) in the case of a dwelling de-
scribed in subsection (c)(3)(D)(ii), $3,000.
‘‘(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.
‘‘(C) ADJUSTMENT FOR INFLATION.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 2002, each dollar amount contained
in subparagraph (A) shall be increased by
an amount equal to—
103
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3)
for the calendar year in which the tax-
able year begins by substituting ‘cal-
endar year 2001’ for ‘calendar year
1992’ in subparagraph (B) thereof.
‘‘(B) ROUNDING.—If any increase deter-
mined under paragraph (1) is not a multiple of
$100, such increase shall be rounded to the
next lower multiple of $100.
‘‘(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.
104
‘‘(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
105
‘‘(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
106
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
107
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
(IPIA), or a home energy rating organization,
or
108
‘‘(B) in the case of a method described in
paragraph (1)(B), an individual recognized by
an organization designated by the Secretary for
such purposes.
‘‘(3) FORM.—
‘‘(A) IN
GENERAL.—Such certification
shall be made in writing in a manner that
specifies in readily verifiable fashion the energy-
efficient building envelope components and en-
ergy-efficient heating or cooling equipment in-
stalled and their respective rated energy effi-
ciency performance, and in the case of a meth-
od described in paragraph (1)(B), accompanied
by written analysis documenting the proper ap-
plication of a permissible energy performance
calculation method to the specific circumstances
of such dwelling.
‘‘(B) FORM PROVIDED TO BUYER.—A form
documenting the energy-efficient building enve-
lope components and energy-efficient heating or
cooling equipment installed and their rated en-
ergy efficiency performance shall be provided to
the buyer of the dwelling. The form shall in-
clude labeled R-value for insulation products,
NFRC-labeled U-factor and Solar Heat Gain
109
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
110
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.’’.
(b) CREDIT MADE PART OF GENERAL BUSINESS
CREDIT.—Subsection (b) of section 38 (relating to current
111
year business credit) is amended by striking ‘‘plus’’ at the
end of paragraph (15), by striking the period at the end
of paragraph (16) and inserting ‘‘, plus’’, and by adding
at the end the following:
‘‘(17) the new energy-efficient home credit de-
termined under section 45H.’’.
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C
(relating to certain expenses for which credits are allow-
able) is amended by adding at the end the following:
(e) 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 45H.’’.
(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.—
112
‘‘(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 45H.
‘‘(e) TERMINATION.—This section shall not apply to
taxable years beginning after December 31, 2006.’’.
(2) CONFORMING AMENDMENT.—Subclause (II)
of section 38(c)(2)(A)(ii) is amended by inserting
113
‘‘or the new energy efficient home credit’’ after ‘‘em-
ployment credit’’.
(e) LIMITATION ON CARRYBACK.—Subsection (d) of
section 39 is amended by adding at the end the following:
‘‘(13) 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 45H 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 (8), by striking
the period at the end of paragraph (9) and inserting ‘‘,
and’’, and by adding after paragraph (10) the following:
‘‘(11) the new energy-efficient home credit de-
termined under section 45H.’’.
(g) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
45G the following:
‘‘Sec. 45H. 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.
114
SEC. 512. 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 25B the fol-
lowing new section:
‘‘SEC. 25C. 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
115
(a) to the taxpayer with respect to the dwelling for
all prior taxable years.
‘‘(3) ADJUSTMENT FOR INFLATION.—
‘‘(A) IN
GENERAL.—In the case of any
taxable year beginning in a calendar year after
2001, the $2,000 amount contained in para-
graphs (1) and (2) shall each be increased by
an amount equal to—
‘‘(i) $2000, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins by substituting ‘calendar year 2000’
for ‘calendar year 1992’ in subparagraph
(B) thereof.
‘‘(B) ROUNDING.—If any increase deter-
mined under subparagraph (A) is not a multiple
of $100, such increase shall be rounded to the
next lowest multiple of $100.’’.
‘‘(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 this sub-
part (other than this section), such excess shall be carried
116
to the succeeding taxable year and added to the credit al-
lowable 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—
‘‘(1) such component or combinations of meas-
ures is installed in or on a dwelling—
‘‘(A) located in the United States, and
‘‘(B) owned and used by the taxpayer as
the taxpayer’s principal residence (within the
meaning of section 121),
‘‘(2) the original use of such component or com-
bination of measures commences with the taxpayer,
and
‘‘(3) such component or combination of meas-
ures reasonably can be expected to remain in use for
at least 5 years.
117
‘‘(e) CERTIFICATION.—The certification described in
subsection (d) shall be—
‘(1) in the case of any component described in
subsection (d), determined on the basis of applicable
energy efficiency ratings (including product labeling
requirements) for affected building envelope compo-
nents,
‘‘(2) in the case of combinations of measures
described in subsection (d), determined by the per-
formance-based 
methods 
described 
in 
section
45G(d),
‘‘(3) provided by a third party, such as a local
building regulatory authority, a utility, a manufac-
tured home production inspection primary inspection
agency (IPIA), or a home energy rating organiza-
tion, consistent with the requirements of section
45G(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 45G(d)(3)(C).
‘‘(f) DEFINITIONS AND SPECIAL RULES.—
118
‘‘(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-
119
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—
120
‘‘(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.—This section shall not apply to
taxable years beginning after December 31, 2006.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (c) of section 23 is amended by
striking ‘‘and 1400C’’ and inserting ‘‘, 25C, and
1400C’’.
(2) Subparagraph (C) of section 25(e)(1) is
amended by inserting ‘‘25C,’’ after ‘‘24,’’.
121
(3) Section 904(h) is amended by inserting ‘‘,
25C’’ after ‘‘24’’.
(4) Subsection (d) of section 1400C is amended
by striking ‘‘section 24’’ and inserting ‘‘sections 24
and 25C’’.
(5) Subsection (a) of section 1016 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 fol-
lowing:
‘‘(30) to the extent provided in section 25C(f),
in the case of amounts with respect to which a credit
has been allowed under section 25C.’’.
(6) 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. 25C. 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. 513. 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
122
credits) is amended by inserting after section 25C the fol-
lowing:
‘‘SEC. 25D. RESIDENTIAL WIND, AND FUEL CELL ENERGY
PROPERTY.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by this chapter for the taxable year an amount
equal to the sum of—
‘‘(1) 30 percent of the qualified photovoltaic
property expenditures,
‘‘(2) 30 percent of the qualified wind energy
property expenditures, and
‘‘(3) 30 percent for the qualified fuel cell prop-
erty expenditures,
made by the taxpayer during the taxable year.
‘‘(b) LIMITATIONS.—
‘‘(1) 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.
‘‘(2) SAFETY CERTIFICATIONS.—No credit shall
be allowed under this section for an item of photo-
voltaic, wind energy, or fuel cell property unless such
123
property meets appropriate fire and electric code re-
quirements.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) 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.
‘‘(2) 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.
‘‘(3) 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.
‘‘(4) 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.
124
‘‘(5) 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), or (4) and for piping
or wiring to interconnect such property to the dwell-
ing unit shall be taken into account for purposes of
this section.
‘‘(6) 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
125
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-
126
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 be-
cause such expenditure was made with respect
to 2 or more dwelling units.
‘‘(B) LIMITS
APPLIED
SEPARATELY.—In
the case of any expenditure described in sub-
paragraph (A), the amount of the credit allow-
able under subsection (a) shall (subject to para-
graph (1)) be computed separately with respect
127
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.
128
‘‘(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, 2006.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 1016 is amended
by striking ‘‘and’’ at the end of paragraph (29), by
striking the period at the end of paragraph (30) and
inserting ‘‘; and’’, and by adding at the end the fol-
lowing:
‘‘(31) to the extent provided in section 25D(e),
in the case of amounts with respect to which a credit
has been allowed under section 25D.’’.
(2) The table of sections for subpart A of part
IV of subchapter A of chapter 1 is amended by in-
129
serting after the item relating to section 25B the fol-
lowing:
‘‘Sec. 25D. 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.
SEC. 514. CREDIT FOR PURCHASE OF ENERGY STAR PROD-
UCTS.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by inserting after sec-
tion 25D the following new section:
‘‘SEC. 25E. CREDIT FOR PURCHASE OF ENERGY STAR PROD-
UCTS.
‘‘(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 30 percent of the amount paid by the taxpayer
for the purchase of any Energy Star product during the
taxable year.
‘‘(b) LIMITATION.—The amount allowable as a credit
under subsection (a) for a taxable year shall not exceed
$1,000.
130
‘‘(c) ENERGY STAR PRODUCT.—For purposes of this
section, the term ‘Energy Star product’ means a product
which—
‘‘(1) meets the guidelines, specifications, and
performance levels of the Energy Star program
jointly managed by the Environmental Protection
Agency and the Department of Energy, and
‘‘(2) displays the Energy Star label.
‘‘(d) REFUNDABLE CREDIT
FOR CERTAIN TAX-
PAYERS.—If the adjusted gross income of the taxpayer for
the taxable year is $75,000 or less ($150,000 or less in
the case of a joint return), the credit allowable under sub-
section (a) shall be treated as a credit allowed under sub-
part C.
‘‘(e) TERMINATION.—This section shall not apply to
taxable years beginning after December 31, 2006.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
25D the following new item:
‘‘Sec. 25E. Credit for purchase of Energy Star products.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
131
Subtitle C—Electricity Facilities
and Production
SEC. 521. 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
132
‘‘(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-
133
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. 522. 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.—
134
(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) geothermal, and
‘‘(v) landfill gas.
135
‘‘(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, 
landscape 
or
right-of-way tree trimmings, unsegregated
municipal solid waste, and 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.
136
‘‘(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) 
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.
‘‘(E) LANDFILL GAS.—The term ‘landfill
gas’ means gas generated from the decomposi-
tion of any household solid waste, commercial
solid waste, and industrial solid waste disposed
of in a municipal solid waste landfill unit (as
such terms are defined in regulations promul-
gated under subtitle D of the Solid Waste Dis-
posal Act (42 U.S.C. 6941 et seq.).’’.
(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.—
137
‘‘(i) IN
GENERAL.—Except as pro-
vided in clauses (ii) and (iii), in the case
of a facility using alternative resources 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 subpara-
graph.
‘‘(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) 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.’’.
138
(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-
139
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) is amended by add-
ing at the end the following:
140
‘‘(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:
141
‘‘(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.—
142
(1) CREDITS FOR CERTAIN TAX EXEMPT ORGA-
NIZATIONS
AND
GOVERNMENTAL
UNITS.—Section
45(d) (relating to definitions and special rules) 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
143
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)
144
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) is amended by adding at the end the
following:
‘‘(10) COORDINATION WITH OTHER CREDITS.—
This section shall not apply to any qualified facility
145
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), 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,
146
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) 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-
147
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. 523. 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.’’.
148
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to bonds issued after the date of
the enactment of this Act.
SEC. 524. 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) is amended
by striking ‘‘and’’ at the end of clause (ii), by redes-
ignating 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) is amended by inserting
after the item relating to subparagraph (C)(ii) the
following:
‘‘(C)(iii) ......................................................................................................
10’’.
(b) DEFINITION OF PROPERTY USED IN THE TRANS-
MISSION OF ELECTRICITY.—Section 168(i) 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.’’.
149
(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. 525. CREDIT FOR INVESTMENT IN ADDITIONAL PLANT
CAPACITY FOR EXISTING RENEWABLE RE-
SOURCES 
FACILITIES 
PRODUCING 
ELEC-
TRICITY.
(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
48A the following:
‘‘SEC. 48B. INCREASED OUTPUT OF EXISTING RENEWABLE
RESOURCES FACILITIES PRODUCING ELEC-
TRICITY.
‘‘(a) IN GENERAL.—For purposes of section 46, the
renewable resources facilities increased output credit for
any taxable year is the 20 percent of the basis of qualified
property placed in service during such taxable year.
‘‘(b) QUALIFIED PROPERTY.—For purposes of sub-
section (a), the term ‘qualified property’ means property
originally placed in service after the date of the enactment
of this section as part of a qualified facility if—
‘‘(1) such property is used to generate addi-
tional capacity from increased efficiency or additions
of new capacity, and
150
‘‘(2) after such property is placed in service, the
nameplate capacity rating of such facility for elec-
tricity production is not less than 110 percent of the
nameplate capacity rating of such facility as of the
date of the enactment of this section.
‘‘(c) QUALIFIED FACILITY.—For purposes of this
section, the term ‘qualified facility’ means a facility de-
scribed in section 45(c)(5).
‘‘(d) APPLICABLE RULES.—For purposes of this sec-
tion, rules similar to the rules of section 48A(e) shall
apply.
‘‘(e) TERMINATION.—No credit shall be allowed
under this section for property placed in service after De-
cember 31, 2004.’’.
(b) CREDIT MADE PART OF INVESTMENT CREDIT.—
Section 46 is amended by striking ‘‘and’’ at the end of
paragraph (2), by striking the period at the end of para-
graph (3) and inserting ‘‘, and’’, and by inserting after
paragraph (3) the following new paragraph:
‘‘(4) the renewable resources facilities increased
output credit.’’.
(c) NO CARRYBACK BEFORE EFFECTIVE DATE.—
Section 39(d) is amended by adding at the end the fol-
lowing:
151
‘‘(12) NO
CARRYBACK
OF
RENEWABLE
RE-
SOURCES
FACILITIES
INCREASED
OUTPUT
CREDIT
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is
attributable to the renewable resources facilities in-
creased output credit determined under section 48B
may be carried back to a taxable year ending before
January 1, 2002.’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart E of part IV of subchapter A of chapter 1
is amended by adding at the end the following new item:
‘‘Sec. 48. Increased output of existing renewable resources facilities producing
electricity.—’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 2001.
Subtitle D—Hybrid Electric
Vehicles
SEC. 531. ALTERNATIVE MOTOR VEHICLE CREDIT.
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 (relating to foreign tax credit, etc.)
is amended by adding at the end the following:
‘‘SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to the sum of—
152
‘‘(1) the new qualified fuel cell motor vehicle
credit determined under subsection (b),
‘‘(2) the new qualified hybrid motor vehicle
credit determined under subsection (c), and
‘‘(3) the new qualified alternative fuel motor ve-
hicle credit determined under subsection (d).
‘‘(b) NEW QUALIFIED FUEL CELL MOTOR VEHICLE
CREDIT.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the new qualified fuel cell motor vehicle credit
determined under this subsection with respect to a
new qualified fuel cell motor vehicle placed in service
by the taxpayer during the taxable year is—
‘‘(A) $4,000, if such vehicle has a gross ve-
hicle weight rating of not more than 8,500
pounds,
‘‘(B) $10,000, if such vehicle has a gross
vehicle weight rating of more than 8,500
pounds but not more than 14,000 pounds,
‘‘(C) $20,000, if such vehicle has a gross
vehicle weight rating of more than 14,000
pounds but not more than 26,000 pounds, and
‘‘(D) $40,000, if such vehicle has a gross
vehicle weight rating of more than 26,000
pounds.
182
the Secretary) of such fuel having a Btu content of
114,000.
‘‘(3) QUALIFIED MOTOR VEHICLE.—The term
‘qualified motor vehicle’ means any motor vehicle (as
defined in section 30(c)(2)) which meets any appli-
cable Federal or State emissions standards with re-
spect to each fuel by which such vehicle is designed
to be propelled.
‘‘(4) SOLD AT RETAIL.—
‘‘(A) IN GENERAL.—The term ‘sold at re-
tail’ means the sale, for a purpose other than
resale, after manufacture, production, or impor-
tation.
‘‘(B) USE TREATED AS SALE.—If any per-
son uses alternative fuel (including any use
after importation) as a fuel to propel any quali-
fied alternative fuel motor vehicle (as defined in
section 30B(d)(4)) before such fuel is sold at
retail, then such use shall be treated in the
same manner as if such fuel were sold at retail
as a fuel to propel such a vehicle by such per-
son.
‘‘(c) NO DOUBLE BENEFIT.—The amount of any de-
duction or credit allowable under this chapter for any fuel
taken into account in computing the amount of the credit