I 
108TH CONGRESS 
1ST SESSION H. R. 1271
To amend the Internal Revenue Code of 1986 to provide incentives to 
introduce new technologies to reduce energy consumption in buildings. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 13, 2003
Mr. CUNNINGHAM (for himself, Mr. MARKEY, Mr. CRANE, and Mr. MATSUI) 
introduced the following bill; which was referred to the Committee on 
Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
incentives to introduce new technologies to reduce energy 
consumption in buildings.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Efficient Energy 
through Certified Technologies (EFFECT) Act of 2003’’.
‘‘(C) with respect to which depreciation (or 
amortization in lieu of depreciation) is allow-
able, and 
‘‘(D) which meets the performance and 
quality standards, and the certification require-
ments (if any), which—
‘‘(i) have been prescribed by the Sec-
retary by regulations (after consultation 
with the Secretary of Energy or the Ad-
ministrator of the Environmental Protec-
tion Agency, as appropriate), 
‘‘(ii) in the case of the energy effi-
ciency ratio (EER) for central air condi-
tioners and electric heat pumps—
‘‘(I) require measurements to be 
based on published data which is test-
ed by manufacturers at 95 degrees 
Fahrenheit, and 
‘‘(II) do not require ratings to be 
based on certified data of the Air 
Conditioning and Refrigeration Insti-
tute, 
‘‘(iii) in the case of geothermal heat 
pumps—
‘‘(I) shall be based on testing 
under the conditions of ARI/ISO 
Standard 13256–1 for Water Source 
Heat Pumps or ARI 870 for Direct 
GeoExchange Heat Pumps (DX), as 
appropriate, and 
‘‘(II) shall include evidence that 
water heating services have been pro-
vided through a desuperheater or inte-
grated water heating system con-
nected to the storage water heater 
tank, and 
‘‘(iv) are in effect at the time of the 
acquisition of the property. 
‘‘(2) SOLAR ENERGY PROPERTY.—In the case 
of—
‘‘(A) elected solar hot water property, the 
regulations under paragraph (1)(D) shall be 
based on the OG–300 Standard for the Annual 
Performance of OG–300 Certified Systems of 
the Solar Rating and Certification Corporation, 
and 
‘‘(B) photovoltaics, such regulations shall 
be based on the ASTM Standard E 1036 and 
E 1036M–96 Standard Test Method for Elec-
tric Performance of Nonconcentrator Terres-
trial Photovoltaic Modules and Arrays Using 
Reference Cells, 
to the extent the Secretary determines such stand-
ards carry out the purposes of this section.
‘‘(3) EXCEPTION.—Such term shall not include 
any property which is public utility property (as de-
fined in section 46(f)(5) as in effect on the day be-
fore the date of the enactment of the Revenue Rec-
onciliation Act of 1990). 
‘‘(d) DEFINITIONS RELATING TO TYPES OF ENERGY 
PROPERTY.—For purposes of this section—
‘‘(1) SOLAR ENERGY PROPERTY.—
‘‘(A) IN GENERAL.—The term ‘solar en-
ergy property’ means equipment which uses 
solar energy—
‘‘(i) to generate electricity, or 
‘‘(ii) to provide hot water for use in a 
structure. 
‘‘(B) ELECTED SOLAR HOT WATER PROP-
ERTY.—
‘‘(i) IN GENERAL.—The term ‘elected 
solar hot water property’ means property 
which is solar energy property by reason of 
subparagraph (A)(ii) and for which an
election under this subparagraph is in ef-
fect. 
‘‘(ii) ELECTION.—For purposes of 
clause (i), a taxpayer may elect to treat 
property described in clause (i) as elected 
solar hot water property. 
‘‘(C) 
PHOTOVOLTAIC
PROPERTY.—The 
term ‘photovoltaic property’ means solar energy 
property which uses a solar photovoltaic process 
to generate electricity. 
‘‘(D) SWIMMING
POOLS, ETC., USED
AS 
STORAGE
MEDIUM.—The term ‘solar energy 
property’ shall not include a swimming pool, 
hot tub, or any other energy storage medium 
which has a function other than the function of 
such storage. 
‘‘(E) SOLAR PANELS.—No solar panel or 
other property installed as a roof (or portion 
thereof) shall fail to be treated as solar energy 
property solely because it constitutes a struc-
tural component of the structure on which it is 
installed. 
‘‘(2) TIER
ENERGY-EFFICIENT
BUILDING 
PROPERTY.—The term ‘Tier 2 energy-efficient build-
ing property’ means—
‘‘(A) an electric heat pump water heater 
which yields an energy factor of at least 2.0 in 
the standard Department of Energy test proce-
dure, 
‘‘(B) an electric heat pump which has a 
heating seasonal performance factor (HSPF) of 
at least 9, a seasonal energy efficiency ratio 
(SEER) of at least 15, and an energy efficiency 
ratio (EER) of at least 12.5, 
‘‘(C) a geothermal heat pump which—
‘‘(i) in the case of a closed loop prod-
uct, has an energy efficiency ratio (EER) 
of at least 14.1 and a heating coefficient of 
performance (COP) of at least 3.3, 
‘‘(ii) in the case of an open loop prod-
uct, has an energy efficiency ratio (EER) 
of at least 16.2 and a heating coefficient of 
performance (COP) of at least 3.6, and 
‘‘(iii) in the case of a direct expansion 
(DX) product, has an energy efficiency 
ratio (EER) of at least 15 and a heating 
coefficient of performance (COP) of at 
least 3.5, 
‘‘(D) a central air conditioner which has a 
seasonal energy efficiency ratio (SEER) of at
least 15 and an energy efficiency ratio (EER) 
of at least 12.5, and 
‘‘(E) a natural gas, propane, or oil water 
heater which has an energy factor of at least 
0.80. 
‘‘(3) TIER
ENERGY-EFFICIENT
BUILDING 
PROPERTY.—The term ‘Tier 1 energy-efficient build-
ing property’ means—
‘‘(A) an electric heat pump which has a 
heating system performance factor (HSPF) of 
at least 7.5, a cooling seasonal energy efficiency 
ratio (SEER) of at least 13.5, and an energy 
efficiency ratio (EER) of at least 11.5, 
‘‘(B) a central air conditioner which has a 
cooling seasonal energy efficiency ratio (SEER) 
of at least 13.5 and an energy efficiency ratio 
(EER) of at least 11.5, 
‘‘(C) a natural gas, propane, or oil water 
heater which has an energy factor of at least 
0.65, and 
‘‘(D) an oil, natural gas, or propane fur-
nace or hot water boiler which achieves at least 
95 percent annual fuel utilization efficiency 
(AFUE).
‘‘(4) ADVANCED MAIN AIR CIRCULATING FAN.—
The term ‘advanced main air circulating fan’ means 
a fan used in a natural gas, propane, or oil furnace 
originally placed in service by the taxpayer during 
the taxable year, including a fan which uses a 
brushless permanent magnet motor or another type 
of motor which achieves similar or higher efficiency 
at full and half speed, as determined by the Sec-
retary. 
‘‘(e) ENERGY EFFICIENT COMMERCIAL BUILDING 
PROPERTY DEDUCTION.—
‘‘(1) DEDUCTION ALLOWED.—For purposes of 
subsection (a)—
‘‘(A) IN GENERAL.—The energy efficient 
commercial building property deduction deter-
mined under this subsection is an amount equal 
to energy efficient commercial building property 
expenditures made by a taxpayer for the tax-
able year. 
‘‘(B) MAXIMUM
AMOUNT
OF
DEDUC-
TION.—Except as otherwise provided in this 
subsection, the amount of energy efficient com-
mercial building property expenditures taken 
into account under subparagraph (A) shall not 
exceed an amount equal to the product of—
‘‘(i) $2.25, and
‘‘(ii) the square footage of the build-
ing with respect to which the expenditures 
are made. 
‘‘(C) YEAR
DEDUCTION
ALLOWED.—The 
deduction under subparagraph (A) shall be al-
lowed in the taxable year in which the construc-
tion, reconstruction, or erection of the building 
is completed. 
‘‘(2) ENERGY EFFICIENT COMMERCIAL BUILD-
ING
PROPERTY
EXPENDITURES.—For purposes of 
this subsection, the term ‘energy efficient commer-
cial building property expenditures’ means an 
amount paid or incurred for energy efficient com-
mercial building property installed on or in connec-
tion with new construction, reconstruction, or erec-
tion of property—
‘‘(A) for which depreciation is allowable 
under section 167, 
‘‘(B) which is located in the United States, 
and 
‘‘(C) the construction, reconstruction, 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 ASHRAE Standard 90.1–2001 (de-
scribed in paragraph (3)). Such term includes ex-
penditures for labor costs properly allocable to the 
onsite preparation, assembly, or original installation 
of the property. 
‘‘(3) ENERGY EFFICIENT COMMERCIAL BUILD-
ING PROPERTY.—For purposes of paragraph (2)—
‘‘(A) IN GENERAL.—The term ‘energy effi-
cient commercial building property’ means any 
building property which reduces total annual 
energy and power costs with respect to the 
lighting, heating, cooling, ventilation, and hot 
water supply systems of the building by at least 
50 percent in comparison to a reference build-
ing which meets the requirements of ASHRAE 
Standard 90.1–2001 of the American Society of 
Heating, Refrigerating, and Air Conditioning 
Engineers and the Illuminating Engineering So-
ciety of North America using methods of cal-
culation under subparagraph (B) and certified 
by qualified professionals as provided under 
paragraph (6).
‘‘(B) METHODS
OF
CALCULATION.—The 
Secretary, in consultation with the Secretary of
Energy, shall promulgate regulations which de-
scribe in detail methods for calculating and 
verifying energy and power consumption and 
cost, based on the provisions of the 2001 Cali-
fornia Nonresidential Alternative Calculation 
Method Approval Manual or, in the case of resi-
dential property, the 2001 California Residen-
tial Alternative Calculation Method Approval 
Manual. These regulations shall meet the fol-
lowing requirements: 
‘‘(i) In calculating tradeoffs and en-
ergy performance, the regulations shall 
prescribe the costs per unit of energy and 
power, such as kilowatt hour, kilowatt, gal-
lon of fuel oil, and cubic foot or Btu of 
natural gas, which may be dependent on 
time of usage. If a State has developed an-
nual energy usage and cost reduction pro-
cedures based on time of usage costs for 
use in the performance standards of the 
State’s building energy code before the ef-
fective date of this section, the State may 
use those annual energy usage and cost re-
duction procedures in lieu of those adopted 
by the Secretary.
‘‘(ii) The calculational methodology 
shall require that compliance be dem-
onstrated for a whole building. If some sys-
tems of the building, such as lighting, are 
designed later than other systems of the 
building, the method shall provide that 1 
of the following shall apply: 
‘‘(I) The expenditures taken into 
account under paragraph (1) shall not 
occur until the date designs for all en-
ergy-using systems of the building are 
completed. 
‘‘(II) The energy performance of 
all systems and components not yet 
designed shall be assumed to comply 
minimally with the requirements of 
such ASHRAE Standard 90.1–2001. 
‘‘(III) The expenditures taken 
into account under paragraph (1) 
shall be a fraction of such expendi-
tures based on the energy cost savings 
performance of less than all energy-
using systems in accordance with 
clause (iii) and shall be limited to
$0.75 per square foot for each of the 
energy-using systems. 
‘‘(iii) The expenditures in connection 
with the design of subsystems in the build-
ing, such as the envelope, the heating, ven-
tilation, air conditioning and water heating 
system, and the lighting system, and the 
limitation under paragraph (2), shall be al-
located to the appropriate building sub-
system based on a demonstration of com-
pliance with system-specific energy cost 
savings targets established in regulations 
promulgated by the Secretary of Energy 
which are equivalent, using the calculation 
methodology, to the whole building require-
ment of 50 percent savings. 
‘‘(iv) The calculational methods under 
this subparagraph need not comply fully 
with section 11 of such ASHRAE Stand-
ard 90.1–2001. 
‘‘(v) The calculational methods shall 
be fuel neutral, such that the same energy 
efficiency features shall qualify a building 
for the deduction under this subsection re-
gardless of whether the heating source is a 
gas or oil furnace or an electric heat pump. 
‘‘(vi) The calculational methods shall 
provide appropriate calculated energy sav-
ings for design methods and technologies 
not otherwise credited in either such 
ASHRAE Standard 90.1–2001 or in the 
2001 California Nonresidential Alternative 
Calculation Method Approval Manual, in-
cluding the following: 
‘‘(I) Natural ventilation. 
‘‘(II) Evaporative cooling. 
‘‘(III) Automatic lighting controls 
such as occupancy sensors, photocells, 
and timeclocks. 
‘‘(IV) Daylighting. 
‘‘(V) Designs utilizing semi-con-
ditioned spaces which maintain ade-
quate comfort conditions without air 
conditioning or without heating. 
‘‘(VI) Improved fan system effi-
ciency, including reductions in static 
pressure. 
‘‘(VII) 
Advanced 
unloading 
mechanisms for mechanical cooling,
such as multiple or variable speed 
compressors. 
‘‘(VIII) The calculational meth-
ods may take into account the extent 
of commissioning in the building, and 
allow the taxpayer to take into ac-
count measured performance which 
exceeds typical performance. 
‘‘(IX) On-site generation of elec-
tricity, including combined heat and 
power systems, fuel cells, and renew-
able energy generation such as solar 
energy. 
‘‘(C) COMPUTER SOFTWARE.—
‘‘(i) IN
GENERAL.—Any calculation 
under this paragraph shall be prepared by 
qualified computer software. 
‘‘(ii) QUALIFIED
COMPUTER
SOFT-
WARE.—For purposes of this subpara-
graph, the term ‘qualified computer soft-
ware’ means software—
‘‘(I) for which the software de-
signer has certified that the software 
meets all procedures and detailed 
methods for calculating energy and
power consumption and costs as re-
quired by the Secretary, 
‘‘(II) which provides such forms 
as required to be filed by the Sec-
retary in connection with energy effi-
ciency of property and the deduction 
allowed under this subsection, and 
‘‘(III) which provides a notice 
form which documents the energy effi-
ciency features of the building and its 
projected annual energy costs. 
‘‘(4) ALLOCATION OF DEDUCTION FOR PUBLIC 
PROPERTY.—In the case of energy efficient commer-
cial building property installed on or in public prop-
erty, the Secretary shall promulgate a regulation to 
allow the allocation of the deduction to the person 
primarily responsible for designing the property in 
lieu of the public entity which is the owner of such 
property. Such person shall be treated as the tax-
payer for purposes of this subsection.
‘‘(5) NOTICE TO OWNER.—The qualified indi-
vidual shall provide an explanation to the owner of 
the building regarding the energy efficiency features 
of the building and its projected annual energy costs
as 
provided 
in 
the 
notice 
under 
paragraph 
(3)(C)(ii)(III). 
‘‘(6) CERTIFICATION.—
‘‘(A) IN GENERAL.—Except as provided in 
this paragraph, the Secretary shall prescribe 
procedures for the inspection and testing for 
compliance of buildings which are comparable, 
given the difference between commercial and 
residential buildings, to the requirements in the 
Mortgage Industry National Accreditation Pro-
cedures for Home Energy Rating Systems. 
‘‘(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. The Secretary may qualify a Home 
Ratings Systems Organization, a local building 
code agency, a State or local energy office, a 
utility, or any other organization which meets 
the requirements prescribed under this section. 
‘‘(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) ENERGY
EFFICIENT
RESIDENTIAL
RENTAL 
BUILDING PROPERTY DEDUCTION.—
‘‘(1) DEDUCTION ALLOWED.—For purposes of 
subsection (a)—
‘‘(A) IN GENERAL.—The energy efficient 
residential rental building property deduction 
determined under this subsection is an amount 
equal to energy efficient residential rental build-
ing property expenditures made by a taxpayer 
for the taxable year. 
‘‘(B) MAXIMUM
AMOUNT
OF
DEDUC-
TION.—The amount of energy efficient residen-
tial rental building property expenditures taken 
into account under subparagraph (A) with re-
spect to each dwelling unit shall not exceed the 
amount specified in the following table:
Deduction 
‘‘In the case of: 
amount: 
30-percent property .................................................................
$600
50-percent property .................................................................
$1,500.
‘‘(C) YEAR
DEDUCTION
ALLOWED.—The 
deduction under subparagraph (A) shall be al-
lowed in the taxable year in which the construc-
tion, reconstruction, erection, or rehabilitation 
of the property is completed.
‘‘(2) ENERGY EFFICIENT RESIDENTIAL RENTAL 
BUILDING
PROPERTY
EXPENDITURES.—For pur-
poses of this subsection—
‘‘(A) IN GENERAL.—The term ‘energy effi-
cient residential rental building property ex-
penditures’ means an amount paid or incurred 
in connection with construction, reconstruction, 
erection, or rehabilitation of energy efficient 
residential rental building property—
‘‘(i) for which depreciation is allow-
able under section 167, 
‘‘(ii) which is located in the United 
States, and 
‘‘(iii) the construction, reconstruction, 
erection, or rehabilitation of which is com-
pleted by the taxpayer. 
Such term includes expenditures for labor costs 
properly allocable to the onsite preparation, as-
sembly, or original installation of the property. 
‘‘(B) ENERGY
EFFICIENT
RESIDENTIAL 
RENTAL BUILDING PROPERTY.—
‘‘(i) IN GENERAL.—The term ‘energy 
efficient residential rental building prop-
erty’ means any property which reduces 
total annual energy and power costs with
respect to heating and cooling of the build-
ing by at least 50 percent in the case of 
50-percent property or at least 30 percent 
in the case of 30-percent property in com-
parison to the projected energy cost of 
such property without such expenditures. 
Such comparison shall be made using the 
procedures under clause (ii). 
‘‘(ii) PROCEDURES.—
‘‘(I) IN GENERAL.—For purposes 
of clause (i), energy usage and costs 
shall be demonstrated either by com-
ponent-based compliance or perform-
ance-based compliance. 
‘‘(II) COMPONENT-BASED
COM-
PLIANCE.—Component-based compli-
ance shall be demonstrated if all of 
the components of the dwelling unit 
comply with the requirements of pre-
scriptive packages established by the 
Secretary of Energy, in consultation 
with the Administrator of the Envi-
ronmental Protection Agency, such 
that the buildings which use such ap-
proach achieve energy cost reductions
equivalent to the results of using per-
formance-based compliance under sub-
clause (III).
‘‘(III) 
PERFORMANCE-BASED 
COMPLIANCE.—Performance-based 
compliance shall be demonstrated if 
the 30 percent or 50 percent energy 
cost savings for heating and cooling, 
as applicable, are met with respect to 
a dwelling unit when compared to the 
original condition of the dwelling unit. 
‘‘(IV) COMPUTER
SOFTWARE.—
Computer software shall be used in 
support of performance-based compli-
ance under subclause (III) and such 
software shall meet all of the proce-
dures and methods for calculating en-
ergy savings reductions which are pro-
mulgated by the Secretary of Energy. 
Such regulations on the specifications 
for software and verification protocols 
shall be based on the 2001 California 
Residential 
Alternative 
Calculation 
Method Approval Manual.
‘‘(V) 
CALCULATION
REQUIRE-
MENTS.—In calculating tradeoffs and 
energy performance, the regulations 
prescribed under this clause shall pre-
scribe for the taxable year the costs 
per unit of energy and power, such as 
kilowatt hour, kilowatt, gallon of fuel 
oil, and cubic foot or Btu of natural 
gas, which may be dependent on time 
of usage. Where a State has developed 
annual energy usage and cost reduc-
tion procedures based on time of 
usage costs for use in the performance 
standards of the State’s building en-
ergy code prior to the effective date of 
this section, the State may use those 
annual energy usage and cost reduc-
tion procedures in lieu of those adopt-
ed by the Secretary. 
‘‘(VI) APPROVAL OF SOFTWARE 
SUBMISSIONS.—The Secretary shall 
approve software submissions which 
comply with the requirements of sub-
clause (IV).
‘‘(VII) PROCEDURES
FOR
IN-
SPECTION AND TESTING OF HOMES.—
The Secretary shall ensure that proce-
dures for the inspection and testing 
for compliance comply with the cal-
culation requirements under subclause 
(IV) of this clause and clause (iv). 
‘‘(iii) DETERMINATIONS
OF
COMPLI-
ANCE.—A determination of compliance 
with respect to energy efficient residential 
rental building property made for the pur-
poses of this subparagraph shall be filed 
with the Secretary not later than 1 year 
after the date of such determination and 
shall include the TIN of the certifier, the 
address of the building in compliance, and 
the identity of the person for whom such 
determination was performed. Determina-
tions of compliance filed with the Secretary 
shall be available for inspection by the Sec-
retary of Energy. 
‘‘(iv) COMPLIANCE.—
‘‘(I) IN
GENERAL.—The Sec-
retary, in consultation with the Sec-
retary of Energy, shall establish re-
quirements for certification and com-
pliance procedures after examining 
the requirements for energy consult-
ants and home energy ratings pro-
viders specified by the Mortgage In-
dustry National Home Energy Rating 
Standards. 
‘‘(II) INDIVIDUALS
QUALIFIED 
TO
DETERMINE
COMPLIANCE.—Indi-
viduals qualified to determine compli-
ance shall be only those individuals 
who are recognized by an organization 
certified by the Secretary for such 
purposes. The Secretary may qualify a 
home energy rating systems organiza-
tion, a local building code agency, a 
State or local energy office, a utility, 
or any other organization which meets 
the requirements prescribed under 
this subsection. 
‘‘(C) ALLOCATION
OF
DEDUCTION
FOR 
PUBLIC PROPERTY.—In the case of energy effi-
cient residential rental building property which 
is public property, the Secretary shall promul-
gate a regulation to allow the allocation of the
deduction to the person primarily responsible 
for designing the improvements to the property 
in lieu of the public entity which is the owner 
of such property. Such person shall be treated 
as the taxpayer for purposes of this subsection. 
‘‘(g) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) BASIS REDUCTION.—For purposes of this 
subtitle, if a deduction is allowed under this section 
with respect to any property, the basis of such prop-
erty shall be reduced by the amount of the deduction 
so allowed. 
‘‘(2) 
DOUBLE
BENEFIT.—Property 
which 
would, but for this paragraph, be eligible for deduc-
tion under more than one provision of this section 
shall be eligible only under one such provision, the 
provision specified by the taxpayer. 
‘‘(h) REGULATIONS.—The Secretary shall promul-
gate such regulations as necessary to take into account 
new technologies regarding energy efficiency and renew-
able energy for purposes of determining energy efficiency 
and savings under this section. 
‘‘(i) TERMINATION.—This section shall not apply 
with respect to—
‘‘(1) any energy property placed in service after 
December 31, 2008 (December 31, 2005, in the case 
of Tier I energy-efficient building property), 
‘‘(2) any energy efficient commercial building 
property expenditures in connection with property—
‘‘(A) the plans for which are not certified 
under subsection (e)(6) on or before December 
31, 2008, and 
‘‘(B) the construction, reconstruction, or 
erection of which is not completed on or before 
December 31, 2010, and 
‘‘(3) any energy efficient residential rental 
building property expenditures in connection with 
property—
‘‘(A) placed in service after December 31, 
2008, or 
‘‘(B) the construction, reconstruction, erec-
tion, or rehabilitation of which is not completed 
on or before December 31, 2008.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Section 48(a)(3)(A) of the Internal Revenue 
Code of 1986 is amended to read as follows: 
‘‘(A) which is equipment used to produce, 
distribute, or use energy derived from a geo-
thermal deposit (within the meaning of section
613(e)(2)), but only, in the case of electricity 
generated by geothermal power, up to (but not 
including) the electrical transmission stage,’’. 
(2) Subparagraph (B) of section 168(e)(3) of 
such Code is amended—
(A) in clause (vi)(I)—
(i) by striking ‘‘section 48(a)(3)’’ and 
inserting ‘‘section 199(d)(1)’’, and 
(ii) by striking ‘‘clause (i)’’ and in-
serting ‘‘such subparagraph (A)’’, and 
(B) in the last sentence, by striking ‘‘sec-
tion 
48(a)(3)’’ 
and 
inserting 
‘‘section 
199(c)(3)’’. 
(3) Section 1016(a) of such Code is amended 
by striking ‘‘and’’ at the end of paragraph (27), by 
striking the period at the end of paragraph (28) and 
inserting ‘‘, and’’, and by inserting the following new 
paragraph: 
‘‘(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 of the Internal 
Revenue Code of 1986 is amended by adding at the end 
the following new item:
‘‘Sec. 199. Energy property deduction.’’.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Department of 
Energy out of amounts not already appropriated such 
sums as necessary to carry out this section. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2002. 
SEC. 3. CREDIT FOR CONSTRUCTION OF NEW ENERGY EF-
FICIENT HOME. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to business related credits) is amended by 
adding at the end the following new section: 
‘‘SEC. 45G. 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 qualifying new home during con-
struction of such home. 
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—
‘‘(A) IN GENERAL.—The credit allowed by 
this section with respect to a qualifying new 
home shall not exceed—
‘‘(i) in the case of a 30-percent home, 
$600, and 
‘‘(ii) in the case of a 50-percent home, 
$2,000. 
‘‘(B) 30- OR 50-PERCENT HOME.—For pur-
poses of subparagraph (A)—
‘‘(i) 30-PERCENT
HOME.—The term 
‘30-percent home’ means a qualifying new 
home which is certified to have a projected 
level of annual heating and cooling energy 
consumption, measured in terms of aver-
age annual energy cost to the homeowner, 
which is at least 30 percent less than the 
annual level of heating and cooling energy 
consumption of the standard design ref-
erence home. 
‘‘(ii) 50-PERCENT
HOME.—The term 
‘50-percent home’ means a qualifying new 
home which is certified to have a projected 
level of annual heating and cooling energy 
consumption, measured in terms of aver-
age annual energy cost to the homeowner, 
which is at least 50 percent less than the 
annual level of heating and cooling energy
consumption of the standard design ref-
erence home. 
‘‘(C) PRIOR
CREDIT
AMOUNTS
ON
SAME 
HOME TAKEN INTO ACCOUNT.—If a credit was 
allowed under subsection (a) with respect to a 
qualifying new home in 1 or more prior taxable 
years, the amount of the credit otherwise allow-
able for the taxable year with respect to such 
home shall not exceed the amount under clause 
(i) or (ii) of subparagraph (A) (as the case may 
be), reduced by the sum of the credits allowed 
under subsection (a) with respect to the home 
for all prior taxable years. 
‘‘(2) COORDINATION
WITH
REHABILITATION 
AND ENERGY CREDITS.—For purposes of this sec-
tion—
‘‘(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 the rehabilitation credit (as deter-
mined under section 47(a)) or to the energy 
percentage of energy property (as determined 
under section 48(a)), and
‘‘(B) expenditures taken into account 
under either section 47 or 48(a) shall not be 
taken into account under this section. 
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) ELIGIBLE CONTRACTOR.—The term ‘eligi-
ble contractor’ means the person who constructed 
the qualifying new home, or in the case of a manu-
factured home which conforms to Federal Manufac-
tured Home Construction and Safety Standards (24 
C.F.R. 3280), the manufactured home producer of 
such home. 
‘‘(2) ENERGY EFFICIENT PROPERTY.—
‘‘(A) IN GENERAL.—The term ‘energy effi-
cient property’ means any energy efficient 
building envelope component, and any energy 
efficient heating or cooling equipment, and any 
other materials and systems which are specifi-
cally designed to reduce heat loss or gain or the 
heating or cooling energy use of a dwelling, 
which can, individually or in combination with 
other components, meet the requirements of 
this section. 
‘‘(B) BUILDING ENVELOPE COMPONENT.—
The 
term 
‘building 
envelope 
component’ 
means—
‘‘(i) any insulation material or system 
which is specifically and primarily designed 
to reduce the heat loss or gain of a quali-
fying new home when installed in or on 
such home, and 
‘‘(ii) exterior windows (including sky-
lights) and doors. 
‘‘(3) QUALIFYING
NEW
HOME.—The term 
‘qualifying new home’ means a dwelling—
‘‘(A) located in the United States, 
‘‘(B) the construction of which is substan-
tially completed after the date of the enactment 
of this section, and 
‘‘(C) the first use of which after construc-
tion is as a principal residence (within the 
meaning of section 121, determined without re-
gard to ownership). 
‘‘(4) STANDARD DESIGN REFERENCE HOME.—
The term ‘standard design reference home’ means a 
dwelling which conforms with the standards of chap-
ter 4 of the 2000 International Energy Conservation 
Code of the International Code Council and the min-
imum equipment efficiency standards promulgated 
by the Department of Energy under the National 
Appliance Energy Conservation Act.
‘‘(5) ENERGY EFFICIENT REFERENCE HOME.—
The term ‘energy efficient reference home’ means a 
design of a dwelling which uses the same heating 
fuel type as the proposed design, as required by the 
Department of Energy under the National Appliance 
Energy Conservation Act and which achieves, on av-
erage over fuel type and home geometry, the re-
quired 30 percent or 50 percent reductions in annual 
energy cost as calculated using the procedures under 
subsection (d)(1)(C)(i). 
‘‘(6) CONSTRUCTION.—The term ‘construction’ 
includes reconstruction, erection, and rehabilitation. 
‘‘(7) MANUFACTURED HOME INCLUDED.—The 
term ‘qualifying new home’ includes a manufactured 
home conforming to Federal Manufactured Home 
Construction and Safety Standards (24 C.F.R. 
3280). 
‘‘(d) CERTIFICATION.—
‘‘(1) METHOD OF CERTIFICATION.—
‘‘(A) IN
GENERAL.—A certification de-
scribed in subsection (b)(1)(B) shall be deter-
mined either by a component-based method or 
a performance-based method. 
‘‘(B) 
COMPONENT-BASED
METHOD.—A 
component-based method is a method in which
compliance is achieved when all of the compo-
nents of the home comply with the require-
ments of prescriptive packages using the appli-
cable technical energy efficiency specifications 
or ratings (including product labeling require-
ments) for the energy efficient building envelope 
component or energy efficient heating or cooling 
equipment. The Secretary shall, in consultation 
with the Administrator of the Environmental 
Protection Agency, develop prescriptive compo-
nent-based packages which are equivalent in en-
ergy performance (when modeled with 50 per-
cent of the windows of such packages facing 
west, 25 percent facing east, 12.5 percent fac-
ing south, and 12.5 percent facing north) to 
properties which qualify under subparagraph 
(C). 
‘‘(C) PERFORMANCE-BASED METHOD.—
‘‘(i) IN
GENERAL.—A performance-
based method is a method which calculates 
projected energy usage and cost reductions 
in the qualifying new home in relation to 
an energy efficient reference home—
‘‘(I) heated by the same fuel 
type, and
‘‘(II) constructed in accordance 
with the requirements for the applica-
ble 30 percent or 50 percent energy 
efficient reference home. 
‘‘(ii) COMPUTER SOFTWARE.—
‘‘(I) 
IN
GENERAL.—Computer 
software shall be used in support of a 
performance-based 
method 
certifi-
cation under clause (i). Such software 
shall meet procedures and methods 
for calculating energy and cost sav-
ings in regulations promulgated by 
the Secretary of Energy. Such regula-
tions on the specifications for software 
and verification protocols shall be 
based on the 2001 California Residen-
tial Alternative Calculation Method 
Approval Manual. 
‘‘(II) APPROVAL
OF
SOFTWARE 
SUBMISSIONS.—The Secretary shall 
approve software submissions which 
comply with the calculation require-
ments of subclause (I). 
‘‘(iii) PROCEDURES FOR INSPECTION 
AND TESTING OF HOMES.—The Secretary
shall ensure that procedures for the inspec-
tion and testing for compliance comply 
with the calculation requirements under 
this section. 
‘‘(2) PROVIDER.—A certification described in 
subsection (b)(1)(B) shall be provided by an indi-
vidual recognized by an organization designated by 
the Secretary for such purposes. 
‘‘(3) FORM.—
‘‘(A) IN
GENERAL.—A certification de-
scribed in subsection (b)(1)(B) shall be made in 
writing in a manner that specifies in readily 
verifiable fashion the energy efficient building 
envelope components and energy efficient heat-
ing or cooling equipment installed and their re-
spective rated energy efficiency performance, 
and in the case of a performance-based method, 
accompanied by a written analysis documenting 
the proper application of a permissible energy 
performance calculation method to the specific 
circumstances of the qualifying new home. 
‘‘(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 qualifying new home. The form 
shall include labeled R-value for insulation 
products, NFRC-labeled U-factor and Solar 
Heat Gain Coefficient for windows, skylights, 
and doors, labeled AFUE ratings for furnaces 
and boilers, labeled HSPF ratings for electric 
heat pumps, and labeled SEER ratings for air 
conditioners. 
‘‘(C) RATINGS LABEL AFFIXED IN DWELL-
ING.—A permanent label documenting the rat-
ings in subparagraph (B) shall be affixed to the 
front of the electrical distribution panel of the 
qualifying new home, or shall be otherwise per-
manently displayed in a readily inspectable loca-
tion in such home. 
‘‘(4) REGULATIONS.—
‘‘(A) IN GENERAL.—In prescribing regula-
tions under this subsection for performance-
based certification methods, the Secretary, after 
examining the requirements of the 2001 Cali-
fornia Residential Alternative Calculation Meth-
od Approval Manual, shall prescribe procedures 
for calculating annual energy usage and cost re-
ductions for heating and cooling and for the re-
porting of the results. Such regulations shall—
‘‘(i) provide for fuel parity in the case 
of both the component-based and the per-
formance-based approaches, and any soft-
ware used in support of either such ap-
proach, 
‘‘(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, and 
‘‘(iii) establish the costs per unit of 
energy and power, such as kilowatt hour, 
kilowatt, gallon of fuel oil, and cubic foot 
or Btu of natural gas, dependent on time 
of usage. 
‘‘(B) FUEL PARITY.—For purposes of sub-
paragraph (A)(i), the Secretary shall assure 
fuel parity by requiring both the energy effi-
cient reference home and the prescriptive pack-
age under paragraph (1) to employ the same 
envelope energy efficiency measures for a home 
heated by a gas furnace as for a home heated 
by an electric air source heat pump or by an oil
furnace or boiler; and, for equipment efficiency, 
to employ electric, oil, or gas equipment effi-
ciency of corresponding efficiency improvement. 
Such determination of corresponding efficiency 
improvement shall be made on a linear scale be-
tween the minimum standard equipment effi-
ciency and the best available marketplace tech-
nology efficiency as determined by the Sec-
retary based upon the information provided by 
the Air Conditioning and Refrigeration Insti-
tute (ARI) and the Gas Appliance Manufactur-
ers Association (GAMA) guides for the respec-
tive electric, oil, and natural gas equipment of 
such type (such as heating and cooling). For 
homes heated electrically, the baseline of the 
linear scale shall be the latest NAECA min-
imum efficiency required for air-source heat 
pumps. For homes heated by direct combustion 
fossil fuels, the baseline of the linear scale shall 
be the latest NAECA minimum efficiency for 
furnaces. 
‘‘(C) TIME OF USAGE.—For purposes of 
subparagraph (A)(iii), time of usage costs shall 
be determined based on regional or State utility 
and fuel costs. Where a State has developed an-
nual energy usage and cost reduction proce-
dures based on time of usage costs for use in 
the performance standards of the State’s build-
ing energy code prior to the effective date of 
this section, the State may use those annual en-
ergy usage and cost reduction procedures in 
lieu of those adopted by the Secretary. 
‘‘(D) PROVIDERS.—For purposes of para-
graph (2), the Secretary shall establish require-
ments for the designation of individuals based 
on the requirements for energy consultants and 
home energy raters specified by the Mortgage 
Industry National Home Energy Rating Stand-
ards. The Secretary shall qualify an inde-
pendent home energy rating system organiza-
tion, a local building code agency, a State or 
local energy office, a utility, a manufactured 
home production inspection agency (IPIA), or 
any other organization which meets the require-
ments prescribed under this section. 
‘‘(E) 
DETERMINATIONS
OF
COMPLI-
ANCE.—A determination of compliance with re-
spect to energy efficient property made for the 
purposes of this subsection shall be filed with 
the Secretary not later than 1 year after the
date of such determination and shall include the 
TIN of the certifier, the address of the building 
in compliance, and the identity of the person 
for whom such determination was performed. 
Determinations of compliance filed with the 
Secretary shall be available for inspection by 
the Secretary of Energy. 
‘‘(e) TERMINATION.—Subsection (a) shall apply to 
qualifying new homes purchased during the period begin-
ning on the date of the enactment of this section and end-
ing on December 31, 2005, for 30-percent homes and De-
cember 31, 2008, for 50-percent homes.’’. 
(b) CREDIT MADE PART OF GENERAL BUSINESS 
CREDIT.—Section 38(b) of the Internal Revenue Code of 
1986 (relating to current year business credit) is amended 
by striking ‘‘plus’’ at the end of paragraph (14), by strik-
ing the period at the end of paragraph (15) and inserting 
‘‘, plus’’, and by adding at the end the following new para-
graph: 
‘‘(16) the new energy efficient home credit de-
termined under section 45G(a).’’. 
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C of 
the Internal Revenue Code of 1986 (relating to certain 
expenses for which credits are allowable) is amended by 
adding at the end the following new subsection:
‘‘(d) NEW ENERGY EFFICIENT HOME EXPENSES.—
No deduction shall be allowed for that portion of expenses 
for a qualifying new home otherwise allowable as a deduc-
tion for the taxable year which is equal to the amount 
of the credit determined for such taxable year under sec-
tion 45G(a).’’. 
(d) LIMITATION ON CARRYBACK.—Section 39(d) of 
the Internal Revenue Code of 1986 (relating to transi-
tional rules) is amended by adding at the end the following 
new paragraph: 
‘‘(11) 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 45G may be carried back to any 
taxable year ending on or before the date of the en-
actment of section 45G.’’. 
(e) DEDUCTION FOR CERTAIN UNUSED BUSINESS 
CREDITS.—Section 196(c) of the Internal Revenue Code 
of 1986 (defining qualified business credit) is amended by 
striking ‘‘and’’ at the end of paragraph (9), by striking 
the period at the end of paragraph (10) and inserting ‘‘, 
and’’, and by adding at the end the following new para-
graph:
‘‘(11) the new energy efficient home credit de-
termined under section 45G(a).’’. 
(f) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following new item:
‘‘Sec. 45G. New energy efficient home credit.’’.
(g) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
SEC. 4. CREDIT FOR CERTAIN NONBUSINESS ENERGY 
PROPERTY. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to nonrefundable personal credits) is 
amended by inserting after section 25B the following new 
section: 
‘‘SEC. 25C. NONBUSINESS ENERGY PROPERTY. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this chapter for the taxable year an amount 
equal to the sum of—
‘‘(1) the amount determined under subsection 
(b) for each qualified energy property of the tax-
payer placed in service during such taxable year, and
‘‘(2) so much of the credit amount specified in 
the following table which does not exceed the ex-
penditures made by the taxpayer in connection with 
the construction, reconstruction, erection, or reha-
bilitation of a dwelling unit of the taxpayer which re-
sults in the unit being a highly energy-efficient prin-
cipal residence:
‘‘Highly energy-efficient principal 
residence: 
Credit amount: 
30-percent property ............................................................................
$200
50-percent property ............................................................................
$500.
For purposes of paragraph (2), the expenditures may in-
clude labor costs properly allocable to the onsite prepara-
tion, assembly, or original installation of such property. 
‘‘(b) AMOUNT
FOR
QUALIFIED
ENERGY
PROP-
ERTY.—
‘‘(1) RESIDENTIAL
ENERGY
PROPERTY
EX-
PENDITURES.—Except as provided in paragraph (2), 
the amount determined under this subsection for the 
taxable year for each item of qualified energy prop-
erty shall equal the amount of residential energy 
property expenditures made by the taxpayer with re-
spect to such property during such taxable year. 
‘‘(2) SOLAR
HOT
WATER
PROPERTY; PHOTO-
VOLTAIC PROPERTY.—
‘‘(A) IN GENERAL.—In the case of solar 
hot water property and photovoltaic property,
the amount determined under this subsection 
for the taxable year shall equal the amount 
specified for such property in the following 
table: 
Description of property: 
Allowable amount is: 
Elected solar hot water property .....................................
35¢ per each 
kwh/year of sav-
ings. 
Photovoltaic property .......................................................
$1.50 per peak 
watt. 
‘‘(B) ELECTED SOLAR HOT WATER PROP-
ERTY.—In the case of elected solar hot water 
property (as defined in section 199(d)(1)(B)), 
the taxpayer may elect to substitute ‘$7 per an-
nual Therm of natural gas savings’ for ‘35¢ per 
each kwh/year of savings’ in the table contained 
in subparagraph (A). 
‘‘(3) MAXIMUM AMOUNT.—In the case of prop-
erty described in the following table, the amount of 
expenditures taken into account under paragraph 
(1) and the amount determined under paragraph (2) 
for the taxable year for each item of qualified energy 
property with respect to a dwelling unit shall not ex-
ceed the amount specified for such property in such 
table:
‘‘Description of property item: 
Maximum allowable 
credit amount is: 
Tier 2 energy-efficient building property .........................
$300. 
Advanced main air circulating fan ..................................
$50.
‘‘Description of property item: 
Maximum allowable 
credit amount is: 
Tier 1 energy-efficient building property (other than an 
advanced main air circulating fan).
$150. 
Solar hot water property .................................................
$1,000. 
Photovoltaic property .......................................................
$6,000. 
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) RESIDENTIAL
ENERGY
PROPERTY
EX-
PENDITURES.—The term ‘residential energy prop-
erty expenditures’ means expenditures made by the 
taxpayer for qualified energy property installed on or 
in connection with a dwelling unit which—
‘‘(A) is located in the United States, and 
‘‘(B) is used as a principal residence.
Such term includes expenditures for labor costs 
properly allocable to the onsite preparation, assem-
bly, or original installation of the property. 
‘‘(2) QUALIFIED ENERGY PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified 
energy property’ means—
‘‘(i) energy-efficient building property, 
‘‘(ii) solar hot water property, and 
‘‘(iii) photovoltaic property. 
‘‘(B) SWIMMING
POOL, ETC., USED
AS 
STORAGE MEDIUM; SOLAR PANELS.—For pur-
poses of this paragraph, the provisions of sub-
paragraphs (D) and (E) section 199(d)(1) shall 
apply. 
‘‘(C) REQUIRED
STANDARDS.—Property 
described under subparagraph (A) shall meet 
the performance and quality standards and cer-
tification standards of paragraphs (1)(D) and 
(2) of section 199(c). 
‘‘(3) 
ENERGY-EFFICIENT
BUILDING
PROP-
ERTY.—The term ‘energy-efficient building property’ 
has the same meaning given the terms ‘Tier 2 en-
ergy-efficient property’, ‘Tier 1 energy-efficient 
property’, and ‘advanced main air circulating fan’ in 
paragraphs (2), (3), and (4) of section 199(d), re-
spectively. 
‘‘(4) SOLAR HOT WATER PROPERTY.—The term 
‘solar hot water property’ means property which, 
when installed in connection with a structure, uses 
solar energy for the purpose of providing hot water 
for use within such structure and the performance 
of which is determined in accordance with section 
199(c)(2)(A).
‘‘(5) PHOTOVOLTAIC
PROPERTY.—The term 
‘photovoltaic property’ has the same meaning given 
such term in section 199(d)(1)(C).
‘‘(6) HIGHLY
ENERGY-EFFICIENT
PRINCIPAL 
RESIDENCE.—
‘‘(A) IN GENERAL.—Property is a highly 
energy-efficient principal residence if—
‘‘(i) such property is located in the 
United States, 
‘‘(ii) the property is used as a prin-
cipal residence, and 
‘‘(iii) such property is certified as 
being 50-percent property or 30-percent 
property. 
‘‘(B) PRINCIPAL RESIDENCE.—
‘‘(i) IN
GENERAL.—The term ‘prin-
cipal residence’ has the same meaning as 
when used in section 121, except that—
‘‘(I) no ownership requirement 
shall be imposed, and 
‘‘(II) the period for which a 
building is treated as used as a prin-
cipal residence shall also include the 
60-day period ending on the 1st day 
on which it would (but for this sub-
paragraph) first be treated as used as 
a principal residence.
‘‘(ii) MANUFACTURED HOUSING.—The 
term ‘residence’ shall include a dwelling 
unit which is a manufactured home con-
forming to Federal Manufactured Home 
Construction and Safety Standards (24 
C.F.R. 3280). 
‘‘(C) 50- OR 30-PERCENT PROPERTY.—
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (A), property is 50-percent 
property or 30-percent property if the pro-
jected heating and cooling energy usage of 
such property, measured in terms of aver-
age annual energy cost to taxpayer, is re-
duced by 50 percent, or 30 percent, respec-
tively, in comparison to the energy cost of 
such property if expenditures made by the 
taxpayer with respect to energy efficient 
improvements to such property were not 
made. Such comparison shall be deter-
mined using the procedures under clause 
(ii). 
‘‘(ii) PROCEDURES.—
‘‘(I) IN GENERAL.—For purposes 
of clause (i), energy usage shall be 
demonstrated either by component-
based compliance or performance-
based compliance. 
‘‘(II) COMPONENT-BASED
COM-
PLIANCE.—Component-based compli-
ance shall be demonstrated if all of 
the components of the dwelling unit 
comply with the requirements of pre-
scriptive packages established by the 
Secretary of Energy, in consultation 
with the Administrator of the Envi-
ronmental Protection Agency, such 
that the buildings which use this 
method achieve energy cost reductions 
equivalent to the results using the 
performance-based compliance method 
under subclause (III).
‘‘(III) 
PERFORMANCE-BASED 
COMPLIANCE.—Performance-based 
compliance shall be demonstrated if 
the 30 percent or the 50 percent en-
ergy cost savings for heating and cool-
ing, as applicable, are met with re-
spect to a dwelling unit when com-
pared to the original condition of the 
dwelling unit.
‘‘(IV) COMPUTER
SOFTWARE.—
Computer software shall be used in 
support of performance-based compli-
ance under subclause (III) and such 
software shall meet all of the proce-
dures and methods for calculating en-
ergy savings reductions which are pro-
mulgated by the Secretary of Energy. 
Such regulations on the specifications 
for software and verification protocols 
shall be based on the 2001 California 
Residential 
Alternative 
Calculation 
Method Approval Manual. 
‘‘(V) 
CALCULATION
REQUIRE-
MENTS.—In calculating tradeoffs and 
energy performance, the regulations 
shall prescribe the costs per unit of 
energy and power, such as kilowatt 
hour, kilowatt, gallon of fuel oil, and 
cubic foot or Btu of natural gas, 
which may be dependent on time of 
usage. If a State has developed an-
nual energy usage and cost reduction 
procedures based on time of usage 
costs for use in the performance
standards of the State’s building en-
ergy code before the effective date of 
this section, the State may use those 
annual energy usage and cost reduc-
tion procedures in lieu of those adopt-
ed by the Secretary. 
‘‘(VI) APPROVAL OF SOFTWARE 
SUBMISSIONS.—The Secretary shall 
approve software submissions which 
comply with the calculation require-
ments of subclause (IV). 
‘‘(VII) PROCEDURES
FOR
IN-
SPECTION AND TESTING OF DWELL-
ING UNITS.—The Secretary shall en-
sure that procedures for the inspec-
tion and testing for compliance com-
ply with the calculation requirements 
under subclause (IV) and subsection 
(d)(2). 
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) DETERMINATIONS
OF
COMPLIANCE.—A 
determination of compliance made for the purposes 
of this section shall be filed with the Secretary with-
in 1 year of the date of such determination and shall
include the TIN of the certifier, the address of the 
building in compliance, and the identity of the per-
son for whom such determination was performed. 
Determinations of compliance filed with the Sec-
retary shall be available for inspection by the Sec-
retary of Energy. 
‘‘(2) COMPLIANCE.—
‘‘(A) IN GENERAL.—The Secretary, in con-
sultation with the Secretary of Energy shall es-
tablish requirements for certification and com-
pliance procedures after examining the require-
ments for energy consultants and home energy 
ratings providers specified by the Mortgage In-
dustry National Home Energy Rating Stand-
ards. 
‘‘(B) INDIVIDUALS QUALIFIED TO DETER-
MINE
COMPLIANCE.—Individuals qualified to 
determine compliance shall be only those indi-
viduals who are recognized by an organization 
certified by the Secretary for such purposes. 
The Secretary may qualify a home energy rat-
ing systems organization, a local building code 
agency, a State or local energy office, a utility, 
or any other organization which meets the re-
quirements prescribed under this section.
‘‘(3) DOLLAR AMOUNTS IN CASE OF JOINT OC-
CUPANCY.—In the case of any dwelling unit which if 
jointly occupied and used during any calendar year 
as a principal residence by 2 or more individuals the 
following rules shall apply: 
‘‘(A) The amount of the credit allowable 
under subsection (a) by reason of expenditures 
made during such calendar year by any of such 
individuals with respect to such dwelling unit 
shall be determined by treating all of such indi-
viduals as 1 taxpayer whose taxable year is 
such calendar year. 
‘‘(B) There shall be allowable with respect 
to such expenditures to each of such 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. 
‘‘(4) TENANT-STOCKHOLDER IN COOPERATIVE 
HOUSING CORPORATION.—In the case of an indi-
vidual who is a tenant-stockholder (as defined in sec-
tion 216) in a cooperative housing corporation (as 
defined in such section), such individual shall be 
treated as having made his tenant-stockholder’s pro-
portionate share (as defined in section 216(b)(3)) of 
any expenditures of such corporation and such credit 
shall be allocated pro rata to such individual. 
‘‘(5) CONDOMINIUMS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is a member of a condominium man-
agement association with respect to a condo-
minium which he owns, such individual shall be 
treated as having made his proportionate share 
of any expenditures of such association and any 
credit shall be allocated appropriately. 
‘‘(B) CONDOMINIUM
MANAGEMENT
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 principal residences. 
‘‘(6) JOINT OWNERSHIP OF ENERGY ITEMS.—
‘‘(A) IN GENERAL.—Any expenditure oth-
erwise qualifying as an expenditure under this
section shall not be treated as failing to so 
qualify merely because such expenditure was 
made with respect to 2 or more dwelling units. 
‘‘(B) LIMITS
APPLIED
SEPARATELY.—In 
the case of any expenditure described in sub-
paragraph (A), the amount of the credit allow-
able under subsection (a) shall (subject to para-
graph (1)) be computed separately with respect 
to the amount of the expenditure made for each 
dwelling unit. 
‘‘(7) ALLOCATION IN CERTAIN CASES.—If less 
than 80 percent of the use of an item is for nonbusi-
ness purposes, only that portion of the expenditures 
for such item which is properly allocable to use for 
nonbusiness purposes shall be taken into account. 
‘‘(8) COORDINATION WITH OTHER CREDITS.—
Property which would, but for this paragraph, be eli-
gible for credit under more than one provision of 
this section shall be eligible only under one such pro-
vision, the provision specified by the taxpayer. 
‘‘(9) YEAR
CREDIT
ALLOWED.—The credit 
under subsection (a)(2) shall be allowed in the tax-
able year in which the principal residence is certified 
as 50-percent property or 30-percent property.