I 
111TH CONGRESS 
1ST SESSION H. R. 3746 
To amend the Internal Revenue Code of 1986 to provide tax incentives 
for making homes more water-efficient, for building new water-efficient 
homes, for public water conservation, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 7, 2009 
Ms. BERKLEY (for herself and Ms. TITUS) introduced the following bill; which 
was referred to the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
tax incentives for making homes more water-efficient, 
for building new water-efficient homes, for public water 
conservation, 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. 
This Act may be cited as the ‘‘Water Efficiency and 
Conservation Investment Act of 2009’’. 
SEC. 2. RESIDENTIAL WATER EFFICIENCY CREDIT. 
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code is 
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amended by inserting after section 30D the following new 
section: 
‘‘SEC. 30E. RESIDENTIAL WATER EFFICIENCY CREDIT. 
‘‘(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 50 percent of the qualified water efficiency prop-
erty expenditures paid or incurred during such taxable 
year. 
‘‘(b) LIMITATION.—The credit allowed under this sec-
tion with respect to any taxpayer for any taxable year shall 
not exceed $750. 
‘‘(c) QUALIFIED WATER EFFICIENCY PROPERTY EX-
PENDITURES.—For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified water 
efficiency property expenditures’ means expenditures 
for qualified water efficiency property which is— 
‘‘(A) installed on or in connection with a 
dwelling unit located in the United States that 
is owned by the taxpayer (without regard to 
whether any other person occupies such dwell-
ing unit as a residence), and 
‘‘(B) originally placed in service by the tax-
payer. 
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Such term includes expenditures for labor costs 
properly allocable to the onsite preparation, assem-
bly, or original installation of such property. 
‘‘(2) QUALIFIED
WATER
EFFICIENCY
PROP-
ERTY.—The term ‘qualified water efficiency prop-
erty’ means— 
‘‘(A) property which meets the national ef-
ficiency standards and specifications for resi-
dential water-using fixtures, appliances, and de-
vices under the WaterSense program of the En-
vironmental Protection Agency that are in ef-
fect on the date of purchase of such property, 
but only if such property improves water effi-
ciency by no less than 20 percent over standard 
models of similar water-using fixtures and ap-
pliances as determined by the Administrator of 
such Agency, and 
‘‘(B) water efficient landscaping which is 
installed by a landscape irrigation professional 
certified by such WaterSense program and 
which reduces water use by no less than 50 per-
cent, as certified by such professional. 
‘‘(3) STATE WATER EFFICIENCY STANDARDS.— 
In the case of a State that has mandatory water ef-
ficiency standards for any property that are more 
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stringent than the standards and specifications de-
scribed in paragraph (2), property installed on or in 
connection with a dwelling unit that is located in 
such State must meet such water efficiency stand-
ards of such State in order to be treated as qualified 
water efficiency property for purposes of this sec-
tion. 
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion— 
‘‘(1) JOINT OWNERSHIP OF WATER EFFICIENCY 
ITEMS.— 
‘‘(A) IN GENERAL.—An expenditure shall 
not fail to be treated as a qualified water effi-
ciency property expenditure merely because 
such expenditure was made with respect to 2 or 
more dwelling units. 
‘‘(B) ALLOCATION OF EXPENDITURES.—In 
the case of an expenditure made with respect to 
2 or more dwelling units, for purposes of deter-
mining the credit allowable under this section, 
such expenditure shall be allocated among such 
dwelling units in proportion to the amount of 
the expenditure made for each dwelling unit. 
‘‘(2) REFUNDS DISREGARDED IN THE ADMINIS-
TRATION OF FEDERAL PROGRAMS AND FEDERALLY 
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ASSISTED PROGRAMS.—Any credit or refund allowed 
or made to any individual by reason of this section 
shall not be taken into account as income and shall 
not be taken into account as resources, for purposes 
of determining the eligibility of such individual or 
any other individual for benefits or assistance, or the 
amount or extent of benefits or assistance, under 
any Federal program or under any State or local 
program financed in whole or in part with Federal 
funds. 
‘‘(3) BASIS
ADJUSTMENTS.—For purposes of 
this subtitle, if a credit is allowed under subsection 
(a) for any expenditure with respect to any property, 
the increase in the basis of such property which 
would (but for this subsection) result from such ex-
penditure shall be reduced by the amount of the 
credit so allowed. 
‘‘(4) DENIAL OF DOUBLE BENEFIT.— 
‘‘(A) IN GENERAL.—No deduction or credit 
under any other provision of this chapter shall 
be allowed with respect to the amount of any 
qualified water efficiency property expenditure 
taken into account under this section. 
‘‘(B) REBATE PROGRAMS.—The amount of 
any qualified water efficiency property expendi-
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ture for which an individual is reimbursed 
under any Federal government program shall 
not be taken into account for purposes of deter-
mining the credit under subsection (a) with re-
spect such individual. 
‘‘(e) APPLICATION WITH OTHER CREDITS.— 
‘‘(1) BUSINESS CREDIT.— 
‘‘(A) BUSINESS CREDIT TREATED AS PART 
OF GENERAL BUSINESS CREDIT.—So much of 
the credit which would be allowed under sub-
section (a) for any taxable year (determined 
without regard to this subsection) that is attrib-
utable to property of a character subject to an 
allowance for depreciation shall be treated as a 
credit listed in section 38(b) for such taxable 
year (and not allowed under subsection (a)). 
‘‘(B) DISALLOWANCE OF DEPRECIATION.— 
In the case of an expenditure for property de-
scribed in subparagraph (A) with respect to 
which a credit is allowed under section 38(b) by 
reason of such subparagraph, the depreciation 
allowance for such property in all taxable years 
shall be zero and no deduction shall be available 
under section 167 with respect to such prop-
erty. 
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(1) Section 24(b)(3)(B) of the Internal Revenue 
Code of 1986 is amended by striking ‘‘and 30D’’ 
and inserting ‘‘, 30D, and 30E’’. 
(2) Section 25(e)(1)(C)(ii) of such Code is 
amended by inserting ‘‘30E,’’ after ‘‘30D,’’. 
(3) Section 25B(g)(2) of such Code is amended 
by striking ‘‘and 30D’’ and inserting ‘‘30D, and 
30E’’. 
(4) Section 904(i) of such Code is amended by 
striking ‘‘and 30D’’ and inserting ‘‘30D, and 30E’’. 
(5) Section 1016(a) of such Code is amended 
by striking ‘‘and’’ at the end of paragraph (36), by 
striking the period at the end of paragraph (37) and 
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(38) to the extent provided in section 
30E(d)(3).’’. 
(6) Section 1400C(d)(2) of such Code is 
amended by striking ‘‘and 30D’’ and inserting 
‘‘30D, and 30E’’. 
(c) CREDIT TO BE PART OF BUSINESS CREDIT.— 
Section 38(b) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘plus’’ at the end of paragraph (34), 
by striking the period at the end of paragraph (35) and 
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inserting ‘‘, plus’’, and by adding at the end the following 
new paragraph: 
‘‘(36) the portion of the residential water effi-
ciency credit to which section 30E(e)(1) applies.’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by in-
serting after the item relating to section 30D the following 
new item: 
‘‘Sec. 30E. Residential water efficiency credit.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
December 31, 2009. 
SEC. 3. NEW WATER EFFICIENT HOME CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
section: 
‘‘SEC. 45R. NEW WATER EFFICIENT HOME CREDIT. 
‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec-
tion 38, in the case of an eligible contractor, the new water 
efficient home credit for the taxable year is an amount 
equal to $1,500 for each qualified new water efficient 
home which is— 
‘‘(1) constructed by such eligible contractor, 
and 
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‘‘(2) acquired by a person from such eligible 
contractor during the taxable year. 
‘‘(b) DEFINITIONS.—For purposes of this section— 
‘‘(1) ELIGIBLE CONTRACTOR.—The term ‘eligi-
ble contractor’ means a person who is certified as a 
builder partner under the WaterSense program of 
the Environmental Protection Agency and who is— 
‘‘(A) the person who constructed the quali-
fied new water efficient home, or 
‘‘(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
WATER
EFFICIENT 
HOME.—The term ‘qualified new water 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 is certified by the Environ-
mental Protection Agency as complying with 
the Final Water-Efficient Single-Family New 
Home Specification issued by such Agency. 
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‘‘(3) CONSTRUCTION.—The term ‘construction’ 
includes substantial reconstruction and rehabilita-
tion. 
‘‘(4) ACQUIRE.—The term ‘acquire’ includes 
purchase. 
‘‘(c) CERTIFICATION.— 
‘‘(1) METHOD OF CERTIFICATION.—A certifi-
cation described in subsection (b)(2)(C) shall be 
made in accordance with guidance prescribed by the 
Secretary, after consultation with the Administrator 
of the Environmental Protection Agency. Such guid-
ance shall specify procedures and methods for calcu-
lating water and cost savings. 
‘‘(2) FORM.—Any certification described in sub-
section (b)(2)(C) shall be made in writing in a man-
ner which specifies in readily verifiable fashion the 
water efficient components (including toilets, fau-
cets, other plumbing fixtures and appliances, hot 
water delivery, landscape design, and irrigation sys-
tems) installed and their respective rated water effi-
ciency performance. 
‘‘(d) 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 sub-
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section) result from such expenditure shall be reduced by 
the amount of the credit so determined. 
‘‘(e) COORDINATION WITH OTHER CREDITS.—Ex-
penditures taken into account under section 45L, 47, or 
48(a) shall not be taken into account under this section. 
‘‘(f) REBATE PROGRAMS.—The amount of the credit 
allowed under subsection (a) to an eligible contractor with 
respect to any qualified new water efficient home shall be 
reduced, but not below zero, by the amount of any reim-
bursement which such contractor receives under any Fed-
eral government program for the construction of such 
home or for expenditures relating to such construction. 
‘‘(g) TERMINATION.—This section shall not apply to 
any qualified new water efficient home acquired after De-
cember 31, 2014.’’. 
(b) CREDIT TO BE PART OF GENERAL BUSINESS 
CREDIT.—Section 38(b) of the Internal Revenue Code of 
1986, as amended by this Act, is amended by striking 
‘‘plus’’ at the end of paragraph (35), by striking the period 
at the end of paragraph (36) and inserting ‘‘, plus’’, and 
by adding at the end the following new paragraph: 
‘‘(37) the new water efficient home credit deter-
mined under section 45R.’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
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of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following new item: 
‘‘Sec. 45R. New water efficient home credit.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to homes acquired after December 
31, 2009. 
SEC. 4. WATER CONSERVATION BONDS. 
(a) IN GENERAL.—Section 54D of the Internal Rev-
enue Code of 1986 is amended— 
(1) by striking ‘‘energy conservation bond’’ each 
place it appears in subsections (a), (b), and (d), and 
inserting ‘‘energy and water conservation bond’’, 
(2) by inserting ‘‘AND WATER’’ after ‘‘QUALI-
FIED ENERGY’’ in the heading, 
(3) by striking ‘‘State or local government’’ in 
subsection (a)(2) and inserting ‘‘State, local govern-
ment, or water district’’, 
(4) by striking ‘‘$3,200,000,000’’ in subsection 
(d) and inserting ‘‘$4,000,000,000, of which not less 
than 20 percent shall be used for qualified conserva-
tion purposes described in subsection (f)(1)(F)’’, and 
(5) by adding at the end of subsection (f)(1) 
the following new subparagraph: 
‘‘(F) Expenditures incurred for purposes 
of— 
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‘‘(i) reducing water consumption by a 
public building or facility by not less than 
30 percent, 
‘‘(ii) advanced water metering infra-
structure, including the purchase, installa-
tion, and commissioning of advanced water 
meters and related software and infra-
structure, 
‘‘(iii) investigation, design, or con-
struction of a qualified groundwater reme-
diation, desalination, or recycled water fa-
cility or system, 
‘‘(iv) increasing energy efficiency or 
the generation and use of renewable energy 
in the management, conveyance, or treat-
ment of water, wastewater, or stormwater, 
‘‘(v) reducing water loss in a water 
distribution system, including training 
water system personnel, annual testing and 
calibration of meters, detecting and repair-
ing leaks, and purchase and installation of 
related equipment, or 
‘‘(vi) establishing or improving a sys-
tem for volumetric billing to enable utilities 
to base retail residential customer bills in 
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whole or in part on the volume of metered 
water deliveries.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 5. ARBITRAGE RULES NOT TO APPLY TO PREPAY-
MENTS FOR ELECTRICITY. 
(a) IN GENERAL.—Subsection (b) of section 148 of 
the Internal Revenue Code of 1986 is amended by adding 
at the end the following new paragraph: 
‘‘(5) SAFE HARBOR FOR PREPAID ELECTRICITY 
SUPPLY CONTRACTS.— 
‘‘(A) IN GENERAL.—The term ‘investment- 
type property’ does not include a prepayment 
under a qualified electricity supply contract. 
‘‘(B) QUALIFIED
ELECTRICITY
SUPPLY 
CONTRACT.— 
‘‘(i) IN
GENERAL.—For purposes of 
this paragraph, the term ‘qualified elec-
tricity supply contract’ means— 
‘‘(I) any contract entered into by 
a water or sewer utility to acquire 
electricity for the use of such utility in 
providing water or sewer services to 
its customers, if such contract pro-
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vides that the provider of such elec-
tricity under the contract will use not 
less than 75 percent of the prepay-
ment described in subparagraph (A) 
to acquire, construct, or improve a 
qualified renewable energy facility, 
and 
‘‘(II) any contract to acquire 
electricity which is not described in 
subclause (I) which the Secretary de-
termines does not constitute property 
of the type intended to be described in 
paragraph (2)(D). 
‘‘(ii) WATER
OR
SEWER
UTILITY.— 
The term ‘water or sewer utility’ means a 
utility which is a governmental unit or is 
owned by a governmental unit and which 
provides— 
‘‘(I) water for residential, com-
mercial, irrigation, or industrial use, 
or 
‘‘(II) sewer services for residen-
tial, commercial, or industrial use, 
to retail or wholesale customers in the 
service territory of such utility. 
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‘‘(iii) QUALIFIED
RENEWABLE
EN-
ERGY FACILITY.—The term ‘qualified re-
newable energy facility’ means a qualified 
facility within the meaning of section 45(d) 
(without regard to paragraphs (8) and 
(10) thereof, to the placed in service date 
of such facility, and to the person who 
owns such facility) which is located in the 
United States. 
‘‘(iv) USE OF WATER OR SEWER UTIL-
ITY.—For purposes of clause (i)(I), a con-
tract shall be treated as providing elec-
tricity for the use of a water or sewer util-
ity if the sum of— 
‘‘(I) the total number of kilowatt 
hours of electricity purchased under 
such contract and any other contracts 
for the purchase of electricity by such 
utility in effect on the date of the exe-
cution of such contract, plus 
‘‘(II) the amount of electricity ex-
pected to be generated by any gener-
ating facilities owned and used by 
such utility, 
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does not exceed by more than 10 percent 
the total kilowatt hours of electricity ex-
pected to be used by such utility during 
the term of such contract for the purpose 
of providing water or sewer services to its 
customers or for resale to other water or 
sewer utilities for their use (and not for re-
sale to any entity that is not a water or 
sewer utility). 
‘‘(C) OTHER RULES.—Rules similar to the 
rules of subparagraphs (D)(ii), (G), and (I) of 
paragraph (4) shall apply for purposes of this 
paragraph.’’. 
(b) PRIVATE LOAN FINANCING TEST NOT TO APPLY 
TO PREPAYMENTS FOR ELECTRICITY.—Paragraph (2) of 
section 141(c) of the Internal Revenue Code of 1986 is 
amended— 
(1) by striking ‘‘or’’ at the end of subparagraph 
(B), 
(2) by striking the period at the end of sub-
paragraph (C) and inserting ‘‘, or’’, and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(D) is a qualified electricity supply con-
tract (as defined in section 148(b)(5)).’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after the date 
of the enactment of this Act. 
Æ 
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