taxable year an amount equal to 50 percent of the amount 
paid or incurred by the taxpayer during the taxable year 
for the installation of qualified clean-fuel vehicle refueling 
property. 
‘‘(b) LIMITATION.—
‘‘(1) IN GENERAL.—The credit allowed under 
subsection (a)—
‘‘(A) with respect to any retail clean-fuel 
vehicle refueling property, shall not exceed 
$30,000, and 
‘‘(B) with respect to any residential clean-
fuel vehicle refueling property, shall not exceed 
$1,000. 
‘‘(2) PHASEOUT.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), in the case of any qualified 
clean-fuel vehicle refueling property placed in 
service after December 31, 2007, the limit oth-
erwise applicable under paragraph (1) shall be 
reduced by—
‘‘(i) 25 percent in the case of any ve-
hicle placed in service in calendar year 
2008, and
100
‘‘(ii) 50 percent in the case of any ve-
hicle placed in service in calendar year 
2009. 
‘‘(B) HYDROGEN PROPERTY.—In the case 
of any qualified clean-fuel vehicle refueling 
property relating to hydrogen placed in service 
after December 31, 2011, the limit otherwise 
applicable under paragraph (1) shall be reduced 
by—
‘‘(i) 25 percent in the case of any ve-
hicle placed in service in calendar year 
2012, and 
‘‘(ii) 50 percent in the case of any ve-
hicle placed in service in calendar year 
2013. 
‘‘(c) YEAR CREDIT ALLOWED.—The credit allowed 
under subsection (a) shall be allowed in the taxable year 
in which the qualified clean-fuel vehicle refueling property 
is placed in service by the taxpayer. 
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED
CLEAN-FUEL
VEHICLE
RE-
FUELING PROPERTY.—The term ‘qualified clean-fuel 
vehicle refueling property’ has the same meaning 
given such term by section 179A(d).
101
‘‘(2) RESIDENTIAL CLEAN-FUEL VEHICLE RE-
FUELING PROPERTY.—The term ‘residential clean-
fuel vehicle refueling property’ means qualified 
clean-fuel vehicle refueling property which is in-
stalled on property which is used as the principal 
residence (within the meaning of section 121) of the 
taxpayer. 
‘‘(3) RETAIL CLEAN-FUEL VEHICLE REFUELING 
PROPERTY.—The term ‘retail clean-fuel vehicle re-
fueling property’ means qualified clean-fuel vehicle 
refueling property which is installed on property 
(other than property described in paragraph (2)) 
used in a trade or business of the taxpayer. 
‘‘(e) APPLICATION WITH OTHER CREDITS.—The 
credit allowed under subsection (a) for any taxable year 
shall not exceed the excess (if any) of—
‘‘(1) the regular tax for the taxable year re-
duced by the sum of the credits allowable under sub-
part A and sections 27, 29, 30, and 30B, over 
‘‘(2) the tentative minimum tax for the taxable 
year. 
‘‘(f) BASIS REDUCTION.—For purposes of this title, 
the basis of any property shall be reduced by the portion 
of the cost of such property taken into account under sub-
section (a).
102
‘‘(g) NO DOUBLE BENEFIT.—No deduction shall be 
allowed under section 179A with respect to any property 
with respect to which a credit is allowed under subsection 
(a). 
‘‘(h) REFUELING PROPERTY INSTALLED FOR TAX-
EXEMPT ENTITIES.—In the case of qualified clean-fuel ve-
hicle refueling property installed on property owned or 
used by an entity exempt from tax under this chapter, the 
person which installs such refueling property for the entity 
shall be treated as the taxpayer with respect to the refuel-
ing property for purposes of this section (and such refuel-
ing property shall be treated as retail clean-fuel vehicle 
refueling property) and the credit shall be allowed to such 
person, but only if the person clearly discloses to the entity 
in any installation contract the specific amount of the 
credit allowable under this section. 
‘‘(i) CARRYFORWARD ALLOWED.—
‘‘(1) IN GENERAL.—If the credit amount allow-
able under subsection (a) for a taxable year exceeds 
the amount of the limitation under subsection (e) for 
such taxable year (referred to as the ‘unused credit 
year’ in this subsection), such excess shall be allowed 
as a credit carryforward for each of the 20 taxable 
years following the unused credit year.
103
‘‘(2) RULES.—Rules similar to the rules of sec-
tion 39 shall apply with respect to the credit 
carryforward under paragraph (1). 
‘‘(j) SPECIAL RULES.—Rules similar to the rules of 
paragraphs (4) and (5) of section 179A(e) shall apply. 
‘‘(k) REGULATIONS.—The Secretary shall prescribe 
such regulations as necessary to carry out the provisions 
of this section. 
‘‘(l) TERMINATION.—This section shall not apply to 
any property placed in service—
‘‘(1) in the case of property relating to hydro-
gen, after December 31, 2013, and 
‘‘(2) in the case of any other property, after 
December 31, 2009.’’. 
(b) INCENTIVE FOR PRODUCTION OF HYDROGEN AT 
QUALIFIED CLEAN-FUEL VEHICLE REFUELING PROP-
ERTY.—Section 179A(d) (defining qualified clean-fuel ve-
hicle refueling property) is amended by adding at the end 
the following new flush sentence: 
‘‘In the case of clean-burning fuel which is hydrogen pro-
duced from another clean-burning fuel, paragraph (3)(A) 
shall be applied by substituting ‘‘production, storage, or 
dispensing’’ for ‘‘storage or dispensing’’ both places it ap-
pears.’’.
104
(c) 
CONFORMING
AMENDMENTS.—(1) 
Section 
1016(a), 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: 
‘‘(33) to the extent provided in section 
30C(f).’’. 
(2) Section 55(c)(3) is amended by inserting 
‘‘30C(e),’’ after ‘‘30B(e)’’. 
(3) The table of sections for subpart B of part IV 
of subchapter A of chapter 1, as amended by this Act, 
is amended by inserting after the item relating to section 
30B the following new item:
‘‘Sec. 30C. Clean-fuel vehicle refueling property credit.’’.
(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. 321. INCENTIVE FOR CERTAIN ENERGY EFFICIENT 
PROPERTY USED IN BUSINESS. 
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 is amended by adding at the end the following new 
section:
105
‘‘SEC. 200. ENERGY PROPERTY DEDUCTION. 
‘‘(a) IN GENERAL.—There shall be allowed as a de-
duction for the taxable year an amount equal to the sum 
of—
‘‘(1) the amount determined under subsection 
(b) for each energy property of the taxpayer placed 
in service during such taxable year, and 
‘‘(2) the energy efficient residential rental 
building property deduction determined under sub-
section (e). 
‘‘(b) AMOUNT FOR ENERGY PROPERTY.—
‘‘(1) IN
GENERAL.—The amount determined 
under this subsection for the taxable year for each 
item of energy property shall equal the amount spec-
ified for such property in the following table:
Description of property: 
Allowable amount is: 
Elected solar hot water property .....................................
$1.00 per each 
kwh/year of sav-
ings. 
Photovoltaic property .......................................................
$4.50 per peak 
watt. 
Advanced main air circulating fan or a Tier 1 natural 
gas, propane, or oil water heater.
$150. 
Tier 2 energy-efficient building property .........................
$900.
Tier 1 energy-efficient building property (other than an 
advanced main air circulating fan or a natural gas, 
propane, or oil water heater).
$450.’’
‘‘(2) ELECTED
SOLAR
HOT
WATER
PROP-
ERTY.—In the case of elected solar hot water prop-
erty, the taxpayer may elect to substitute ‘$21 per 
annual Therm of natural gas savings’ for ‘$1.00 per
106
each kwh/year of savings’ in the table contained in 
paragraph (1). 
‘‘(c) ENERGY PROPERTY DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this part, 
the term ‘energy property’ means any property—
‘‘(A) which is—
‘‘(i) solar energy property, 
‘‘(ii) Tier 2 energy-efficient building 
property, or 
‘‘(iii) Tier 1 energy-efficient building 
property, 
‘‘(B)(i) the construction, reconstruction, or 
erection of which is completed by the taxpayer, 
or 
‘‘(ii) which is acquired by the taxpayer if 
the original use of such property commences 
with the taxpayer, 
‘‘(C) 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
107
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) may be based on certified 
data of the Air Conditioning and Re-
frigeration Institute, 
‘‘(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 
Expansion 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-
108
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).
109
‘‘(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.
110
‘‘(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 13, 
‘‘(C) a geothermal heat pump which—
111
‘‘(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 13, 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
112
at least 8.5, a cooling seasonal energy efficiency 
ratio (SEER) of at least 14, and an energy effi-
ciency ratio (EER) of at least 12, 
‘‘(B) a central air conditioner which has a 
cooling seasonal energy efficiency ratio (SEER) 
of at least 14 and an energy efficiency ratio 
(EER) of at least 12, 
‘‘(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 RESIDENTIAL RENTAL 
BUILDING PROPERTY DEDUCTION.—
113
‘‘(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—
‘‘(i) $6,000 in the case of a percent-
age reduction of 50 percent as determined 
under paragraph (2)(B), and 
‘‘(ii) $12,000 times the percentage re-
duction in the case of a percentage reduc-
tion of less than 50 percent as determined 
under paragraph (2)(B). 
‘‘(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.
114
‘‘(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
115
respect to heating and cooling of the build-
ing by a percentage certified according to 
clause (ii). 
‘‘(ii) PROCEDURES.—
‘‘(I) IN GENERAL.—For purposes 
of clause (i), energy usage and costs 
shall be demonstrated by perform-
ance-based compliance. 
‘‘(II) PERFORMANCE-BASED COM-
PLIANCE.—Performance-based compli-
ance shall be demonstrated by calcu-
lating the percent energy cost savings 
for heating and cooling, as applicable, 
with respect to a dwelling unit when 
compared to the original condition of 
the dwelling unit. 
‘‘(III) COMPUTER
SOFTWARE.—
Computer software shall be used in 
support of performance-based compli-
ance under subclause (II) 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
116
for software and verification protocols 
shall be based on the 2005 California 
Residential 
Alternative 
Calculation 
Method Approval Manual. 
‘‘(IV) 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. 
‘‘(V) APPROVAL
OF
SOFTWARE 
SUBMISSIONS.—The Secretary shall
117
approve software submissions which 
comply with the requirements of sub-
clause (III). 
‘‘(VI) PROCEDURES FOR INSPEC-
TION AND TESTING OF HOMES.—The 
Secretary shall ensure that procedures 
for the inspection and testing for com-
pliance comply with the calculation re-
quirements 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.—
118
‘‘(I) IN
GENERAL.—The Sec-
retary, after consultation with the 
Secretary of Energy, shall establish 
requirements for certification and 
compliance procedures after exam-
ining the requirements for energy con-
sultants and home energy ratings pro-
viders specified by the Mortgage In-
dustry National Home Energy Rating 
Standards. 
‘‘(II) INDIVIDUALS
QUALIFIED 
TO
DETERMINE
COMPLIANCE.—The 
determination of compliance may be 
provided by a local building regulatory 
authority, a utility, a manufactured 
home production inspection primary 
inspection agency (IPIA), or an ac-
credited home energy rating system 
provider. All providers shall be accred-
ited, or otherwise authorized to use 
approved energy performance meas-
urement methods, by the Residential 
Energy Services Network (RESNET). 
‘‘(C) ALLOCATION
OF
DEDUCTION
FOR 
PUBLIC PROPERTY.—In the case of energy effi-
119
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. 
‘‘(f) 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. 
‘‘(g) 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.
120
‘‘(h) TERMINATION.—This section shall not apply 
with respect to—
‘‘(1) any energy property placed in service after 
December 31, 2010 (December 31, 2006, in the case 
of Tier 1 energy-efficient building property), and 
‘‘(2) 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) 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) is 
amended—
(A) in clause (vi)(I)—
121
(i) by striking ‘‘section 48(a)(3)’’ and 
inserting ‘‘section 200(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 
200(c)(3)’’. 
(3) Section 1016(a) is amended by striking 
‘‘and’’ at the end of paragraph (32), by striking the 
period at the end of paragraph (33) and inserting ‘‘, 
and’’, and by inserting the following new paragraph: 
‘‘(34) for amounts allowed as a deduction under 
section 200(a).’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for part VI of subchapter B of chapter 1 is amended by 
adding at the end the following new item:
‘‘Sec. 200. 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, 2005.