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‘‘(b) MAXIMUM AMOUNT OF DEDUCTION.—The deduc-
tion under subsection (a) with respect to any building for
any taxable year shall not exceed the excess (if any) of—
‘‘(1) the product of—
‘‘(A) $2.25, and
‘‘(B) the square footage of the building, over
‘‘(2) the aggregate amount of the deductions
under subsection (a) with respect to the building for
all prior taxable years.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) ENERGY EFFICIENT COMMERCIAL BUILDING
PROPERTY.—The term ‘energy efficient commercial
building property’ means property—
‘‘(A) with respect to which depreciation (or
amortization in lieu of depreciation) is allow-
able,
‘‘(B) which is installed on or in any build-
ing which is—
‘‘(i) located in the United States, and
‘‘(ii) within the scope of Standard
90.1–2001,
‘‘(C) which is installed as part of—
‘‘(i) the interior lighting systems,
‘‘(ii) the heating, cooling, ventilation,
and hot water systems, or
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‘‘(iii) the building envelope, and
‘‘(D) which is certified in accordance with
subsection (d)(6) as being installed as part of a
plan designed to reduce the total annual energy
and power costs with respect to the interior
lighting systems, heating, cooling, ventilation,
and hot water systems of the building by 50 per-
cent or more in comparison to a reference build-
ing which meets the minimum requirements of
Standard 90.1–2001 using methods of calcula-
tion under subsection (d)(2).
‘‘(2) STANDARD 90.1–2001.—The term ‘Standard
90.1–2001’ means Standard 90.1–2001 of the Amer-
ican Society of Heating, Refrigerating, and Air Con-
ditioning Engineers and the Illuminating Engineer-
ing Society of North America (as in effect on April
2, 2003).
‘‘(d) SPECIAL RULES.—
‘‘(1) PARTIAL ALLOWANCE.—
‘‘(A) IN GENERAL.—Except as provided in
subsection (f), if—
‘‘(i) the requirement of subsection
(c)(1)(D) is not met, but
‘‘(ii) there is a certification in accord-
ance with paragraph (6) that any system
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referred to in subsection (c)(1)(C) satisfies
the energy-savings targets established by the
Secretary under subparagraph (B) with re-
spect to such system,
then the requirement of subsection (c)(1)(D) shall
be treated as met with respect to such system,
and the deduction under subsection (a) shall be
allowed with respect to energy efficient commer-
cial building property installed as part of such
system and as part of a plan to meet such tar-
gets, except that subsection (b) shall be applied
to such property by substituting ‘$.75’ for
‘$2.25’.
‘‘(B) REGULATIONS.—The Secretary, after
consultation with the Secretary of Energy, shall
establish a target for each system described in
subsection (c)(1)(C) which, if such targets were
met for all such systems, the building would meet
the requirements of subsection (c)(1)(D).
‘‘(2) METHODS
OF
CALCULATION.—The Sec-
retary, after consultation with the Secretary of En-
ergy, shall promulgate regulations which describe in
detail methods for calculating and verifying energy
and power consumption and cost, based on the provi-
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sions of the 2005 California Nonresidential Alter-
native Calculation Method Approval Manual.
‘‘(3) COMPUTER SOFTWARE.—
‘‘(A) IN GENERAL.—Any calculation under
paragraph (2) shall be prepared by qualified
computer software.
‘‘(B) QUALIFIED COMPUTER SOFTWARE.—
For purposes of this paragraph, the term ‘quali-
fied computer software’ means software—
‘‘(i) for which the software designer has
certified that the software meets all proce-
dures and detailed methods for calculating
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 documents the energy efficiency fea-
tures of the building and its projected an-
nual energy costs.
‘‘(4) ALLOCATION
OF
DEDUCTION
FOR
PUBLIC
PROPERTY.—In the case of energy efficient commer-
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cial building property installed on or in property
owned by a Federal, State, or local government or a
political subdivision thereof, the Secretary shall pro-
mulgate a regulation to allow the allocation of the de-
duction to the person primarily responsible for de-
signing the property in lieu of the owner of such
property. Such person shall be treated as the taxpayer
for purposes of this section.
‘‘(5) NOTICE TO OWNER.—Each certification re-
quired under this section shall include an explanation
to the building owner regarding the energy efficiency
features of the building and its projected annual en-
ergy costs as provided in the notice under paragraph
(3)(B)(iii).
‘‘(6) CERTIFICATION.—
‘‘(A) IN
GENERAL.—The Secretary shall
prescribe the manner and method for the making
of certifications under this section.
‘‘(B) PROCEDURES.—The Secretary shall
include as part of the certification process proce-
dures for inspection and testing by qualified in-
dividuals described in subparagraph (C) to en-
sure compliance of buildings with energy-savings
plans and targets. Such procedures shall be com-
parable, given the difference between commercial
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and residential buildings, to the requirements in
the Mortgage Industry National Accreditation
Procedures for Home Energy Rating Systems.
‘‘(C) QUALIFIED INDIVIDUALS.—Individuals
qualified to determine compliance shall be only
those individuals who are recognized by an orga-
nization certified by the Secretary for such pur-
poses.
‘‘(e) BASIS REDUCTION.—For purposes of this subtitle,
if a deduction is allowed under this section with respect
to any energy efficient commercial building property, the
basis of such property shall be reduced by the amount of
the deduction so allowed.
‘‘(f) INTERIM RULES FOR LIGHTING SYSTEMS.—Until
such time as the Secretary issues final regulations under
subsection (d)(1)(B) with respect to property which is part
of a lighting system—
‘‘(1) IN GENERAL.—The lighting system target
under subsection (d)(1)(A)(ii) shall be a reduction in
lighting power density of 25 percent (50 percent in
the case of a warehouse) of the minimum require-
ments in Table 9.3.1.1 or Table 9.3.1.2 (not including
additional interior lighting power allowances) of
Standard 90.1–2001.
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‘‘(2) REDUCTION IN DEDUCTION IF REDUCTION
LESS THAN 40 PERCENT.—
‘‘(A) IN GENERAL.—If, with respect to the
lighting system of any building other than a
warehouse, the reduction in lighting power den-
sity of the lighting system is not at least 40 per-
cent, only the applicable percentage of the
amount of deduction otherwise allowable under
this section with respect to such property shall be
allowed.
‘‘(B) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A), the applicable per-
centage is the number of percentage points (not
greater than 100) equal to the sum of—
‘‘(i) 50, and
‘‘(ii) the amount which bears the same
ratio to 50 as the excess of the reduction of
lighting power density of the lighting sys-
tem over 25 percentage points bears to 15.
‘‘(C) EXCEPTIONS.—This subsection shall
not apply to any system—
‘‘(i) the controls and circuiting of
which do not comply fully with the manda-
tory 
and 
prescriptive 
requirements 
of
Standard 90.1–2001 and which do not in-
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clude provision for bilevel switching in all
occupancies except hotel and motel guest
rooms, store rooms, restrooms, and public
lobbies, or
‘‘(ii) which does not meet the min-
imum requirements for calculated lighting
levels as set forth in the Illuminating Engi-
neering Society of North America Lighting
Handbook, Performance and Application,
Ninth Edition, 2000.
‘‘(g) COORDINATION WITH OTHER TAX BENEFITS.—
In any case in which a deduction under section 200 or a
credit under section 25C has been allowed with respect to
property in connection with a building for which a deduc-
tion is allowable under subsection (a)—
‘‘(1) the annual energy and power costs of the
reference building referred to in subsection (c)(1)(D)
shall be determined assuming such reference building
contains the property for which such deduction or
credit has been allowed, and
‘‘(2) any cost of such property taken into ac-
count under such sections shall not be taken into ac-
count under this section.
‘‘(h) REGULATIONS.—The Secretary shall promulgate
such regulations as necessary—
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‘‘(1) to take into account new technologies re-
garding energy efficiency and renewable energy for
purposes of determining energy efficiency and savings
under this section, and
‘‘(2) to provide for a recapture of the deduction
allowed under this section if the plan described in
subsection (c)(1)(D) or (d)(1)(A) is not fully imple-
mented.
‘‘(i) TERMINATION.—This section shall not apply with
respect to property placed in service after December 31,
2009.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1016(a) is amended by striking
‘‘and’’ at the end of paragraph (30), by striking the
period at the end of paragraph (31) and inserting ‘‘,
and’’, and by adding at the end the following new
paragraph:
‘‘(32) to the extent provided in section 179D(e).’’.
(2) Section 1245(a), as amended by this Act, is
amended by inserting ‘‘179D,’’ after ‘‘179C,’’ both
places it appears in paragraphs (2)(C) and (3)(C).
(3) Section 1250(b)(3) is amended by inserting
before the period at the end of the first sentence ‘‘or
by section 179D’’.
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(4) Section 263(a)(1), as amended by this Act, is
amended by striking ‘‘or’’ at the end of subparagraph
(I), by striking the period at the end of subparagraph
(J) and inserting ‘‘, or’’, and by inserting after sub-
paragraph (J) the following new subparagraph:
‘‘(K) expenditures for which a deduction is
allowed under section 179D.’’.
(5) Section 312(k)(3)(B), as amended by this
Act, is amended by striking ‘‘179, 179A, 179B, or
179C’’ each place it appears in the heading and text
and inserting ‘‘179, 179A, 179B, 179C, or 179D’’.
(c) CLERICAL AMENDMENT.—The table of sections for
part VI of subchapter B of chapter 1, as amended by this
Act, is amended by inserting after section 179C the fol-
lowing new item:
‘‘Sec. 179D. Energy efficient commercial buildings deduction.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to property placed in service after the
date of the enactment of this Act in taxable years ending
after such date.
SEC. 1522. CREDIT FOR CONSTRUCTION OF NEW ENERGY
EFFICIENT HOMES.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits), as
amended by this Act, is amended by adding at the end the
following new section:
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‘‘SEC. 45K. NEW ENERGY EFFICIENT HOME CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—For purposes of section 38,
in the case of an eligible contractor, the new energy
efficient home credit for the taxable year is the appli-
cable amount for each qualified new energy efficient
home which is—
‘‘(A) constructed by the eligible contractor,
and
‘‘(B) acquired by a person from such eligi-
ble contractor for use as a residence during the
taxable year.
‘‘(2) APPLICABLE
AMOUNT.—For purposes of
paragraph (1), the applicable amount is an amount
equal to—
‘‘(i) in the case of a dwelling unit de-
scribed in paragraph (1) or (3) of sub-
section (c), $1,000, and
‘‘(ii) in the case of a dwelling unit de-
scribed in paragraph (2) or (4) of sub-
section (c), $2,000.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) ELIGIBLE CONTRACTOR.—The term ‘eligible
contractor’ means—
‘‘(A) the person who constructed the quali-
fied new energy efficient home, or
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‘‘(B) in the case of a qualified new energy
efficient home which is a manufactured home,
the manufactured home producer of such home.
‘‘(2) 
QUALIFIED
NEW
ENERGY
EFFICIENT
HOME.—The term ‘qualified new energy efficient
home’ means a dwelling unit—
‘‘(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) which meets the energy saving require-
ments of subsection (c).
‘‘(3) CONSTRUCTION.—The term ‘construction’
includes substantial reconstruction and rehabilitation.
‘‘(4) ACQUIRE.—The term ‘acquire’ includes pur-
chase.
‘‘(c) ENERGY SAVING REQUIREMENTS.—A dwelling
unit meets the energy saving requirements of this subsection
if such unit is—
‘‘(1) certified—
‘‘(A) to have a level of annual heating and
cooling energy consumption which is at least 30
percent below the annual level of heating and
cooling energy consumption of a comparable
dwelling unit—
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‘‘(i) which is constructed in accordance
with the standards of chapter 4 of the 2003
International Energy Conservation Code, as
such Code (including supplements) is in ef-
fect on the date of the enactment of this sec-
tion, and
‘‘(ii) for which the heating and cooling
equipment efficiencies correspond to the
minimum allowed under the regulations es-
tablished by the Department of Energy pur-
suant to the National Appliance Energy
Conservation Act of 1987 and in effect at
the time of construction, and
‘‘(B) to have building envelope component
improvements account for at least 1⁄3 of such 30
percent,
‘‘(2) certified—
‘‘(A) to have a level of annual heating and
cooling energy consumption which is at least 50
percent below such annual level, and
‘‘(B) to have building envelope component
improvements account for at least 1⁄5 of such 50
percent,
‘‘(3) a manufactured home which conforms to
Federal Manufactured Home Construction and Safety
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Standards (section 3280 of title 24, Code of Federal
Regulations) and which—
‘‘(A) meets the requirements of clause (i), or
‘‘(B) meets the requirements established by
the Administrator of the Environmental Protec-
tion Agency under the Energy Star Labeled
Homes program, or
‘‘(4) a manufactured home which conforms to
Federal Manufactured Home Construction and Safety
Standards (section 3280 of title 24, Code of Federal
Regulations) and which meets the requirements of
clause (ii).
‘‘(d) CERTIFICATION.—
‘‘(1) METHOD
OF
CERTIFICATION.—A certifi-
cation described in paragraphs (1) and (2) of sub-
section (c) shall be made in accordance with guidance
prescribed by the Secretary, after consultation with
the Secretary of Energy. Such guidance shall specify
procedures and methods for calculating energy and
cost savings.
‘‘(2) FORM.—Any certification described in sub-
section (c) shall be made in writing in a manner
which specifies in readily verifiable fashion the energy
efficient building envelope components and energy ef-
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ficient heating or cooling equipment installed and
their respective rated energy efficiency performance.
‘‘(e) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is allowed under this section in connection
with any expenditure for any property, the increase in the
basis of such property which would (but for this subsection)
result from such expenditure shall be reduced by the amount
of the credit so determined.
‘‘(f) COORDINATION WITH OTHER CREDITS AND DE-
DUCTIONS.—
‘‘(1) SPECIAL RULE WITH RESPECT TO BUILD-
INGS
WITH
ENERGY
EFFICIENT
PROPERTY.—In the
case of property which is described in section 200
which is installed in connection with a dwelling unit,
the level of annual heating and cooling energy con-
sumption of the comparable dwelling unit referred to
in paragraphs (1) and (2) of subsection (c) shall be
determined assuming such comparable dwelling unit
contains the property for which such deduction or
credit has been allowed.
‘‘(2) COORDINATION
WITH
INVESTMENT
CRED-
IT.—For purposes of this section, expenditures taken
into account under section 47 or 48(a) shall not be
taken into account under this section.
‘‘(g) APPLICATION OF SECTION.—
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‘‘(1) 50 PERCENT HOMES.—In the case of any
dwelling unit described in paragraph (2) or (4) of
subsection (c), subsection (a) shall apply to qualified
new energy efficient homes acquired during the period
beginning on the date of the enactment of this section
and ending on December 31, 2009.
‘‘(2) 30 PERCENT HOMES.—In the case of any
dwelling unit described in paragraph (1) or (3) of
subsection (c), subsection (a) shall apply to qualified
new energy efficient homes acquired during the period
beginning on the date of the enactment of this section
and ending on December 31, 2007.’’.
(b) CREDIT MADE PART
OF GENERAL BUSINESS
CREDIT.—Section 38(b) (relating to current year business
credit), as amended by this Act, is amended by striking
‘‘plus’’ at the end of paragraph (19), by striking the period
at the end of paragraph (20) and inserting ‘‘, plus’’, and
by adding at the end the following new paragraph:
‘‘(21) the new energy efficient home credit deter-
mined under section 45K(a).’’.
(c) BASIS ADJUSTMENT.—Subsection (a) of section
1016, as amended by this Act, is amended by striking
‘‘and’’ at the end of paragraph (31), by striking the period
at the end of paragraph (32) and inserting ‘‘, and’’, and
by adding at the end the following new paragraph:
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‘‘(33) to the extent provided in section 45K(e), in
the case of amounts with respect to which a credit has
been allowed under section 45K.’’.
(d) DEDUCTION
FOR CERTAIN UNUSED BUSINESS
CREDITS.—Section 196(c) (defining qualified business cred-
its) is amended by striking ‘‘and’’ at the end of paragraph
(11), by striking the period at the end of paragraph (12)
and inserting ‘‘, and’’, and by adding after paragraph (12)
the following new paragraph:
‘‘(13) the new energy efficient home credit deter-
mined under section 45K(a).’’.
(e) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1, as
amended by this Act, is amended by adding at the end the
following new item:
‘‘Sec. 45K. New energy efficient home credit.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years ending after the date
of the enactment of this Act.
SEC. 1523. DEDUCTION FOR BUSINESS ENERGY PROPERTY.
(a) IN GENERAL.—Part VI of subchapter B of chapter
1 is amended by adding at the end the following new sec-
tion: