To amend the Internal Revenue Code of 1986 to provide a shorter recovery period for the depreciation of certain systems installed in nonresidential real property or residential rental property.

SECTION 1. RECOVERY PERIOD FOR DEPRECIATION OF CERTAIN SYSTEMS 
              INSTALLED IN NONRESIDENTIAL AND RESIDENTIAL RENTAL 
              BUILDINGS.

    (a) 20-Year Recovery Period for Highly Efficient HVAC&R 
Equipment.--Subparagraph (F) of section 168(e)(3) of the Internal 
Revenue Code of 1986 (relating to 20-year property) is amended to read 
as follows:
                    ``(F) 20-year property.--The term `20-year 
                property' means--
                            ``(i) initial clearing and grading land 
                        improvements with respect to any electric 
                        utility transmission and distribution plant, 
                        and
                            ``(ii) any property--
                                    ``(I) which is part of a heating, 
                                ventilation, air conditioning, or 
                                commercial refrigeration system,
                                    ``(II) which exceeds by at least 10 
                                percent the applicable minimum 
                                performance standard for such system or 
                                component under the National Appliance 
                                Energy Conservation Act of 1987 or the 
                                Energy Policy Act of 1992 (as such Acts 
                                are in effect on the date that such 
                                property is placed in service and 
                                taking into account any changes to the 
                                American Society of Heating, 
                                Refrigerating and Air-conditioning 
                                Engineers Standard 90.1 which have been 
                                adopted by the Department of Energy as 
                                of such date),
                                    ``(III) which is installed on or in 
                                a building which is nonresidential real 
                                property or residential rental 
                                property,
                                    ``(IV) the original use of which 
                                commences with the taxpayer (the owner 
                                or lessor in the case of residential 
                                rental property), and
                                    ``(V) which is placed in service 
                                before January 1, 2013.''
    (b) 25-Year Recovery Period.--Section 168(e)(3) of such Code is 
further amended by inserting after subparagraph (F) the following new 
subparagraph:
                    ``(G) 25-year property.--The term `25-year 
                property' means any property--
                            ``(i) which is part of a heating, 
                        ventilation, air conditioning, or commercial 
                        refrigeration system,
                            ``(ii) which is not described in 
                        subparagraph (F),
                            ``(iii) which is installed on or in a 
                        building which is nonresidential real property 
                        or residential rental property,
                            ``(iv) the original use of which commences 
                        with the taxpayer (the owner or lessor in the 
                        case of residential rental property), and
                            ``(v) which is placed in service before 
                        January 1, 2013.''.
    (c) Conforming Amendments.--
            (1) The table contained in section 168(c) of such Code is 
        amended by inserting after the item relating to 20-year 
        property the following new item:

        ``25-year property................................. 25 years''.
            (2) The table contained in section 467(e)(3)(A) of such 
        Code is amended by inserting after the item relating to 
        residential rental property and nonresidential real property 
        the following new item:

        ``25-year property................................. 25 years''.
    (d) Requirement To Use Straight Line Method.--Paragraph (3) of 
section 168(b) of such Code (relating to property to which straight 
line method applies) is amended by redesignating subparagraphs (F), 
(G), (H), and (I) as subparagraphs (G), (H), (I), and (J), 
respectively, and by inserting after subparagraph (E) the following new 
subparagraph:
            ``(F) Property described in subsection (e)(3)(F)(ii) and 
        subsection (e)(3)(G).''.
    (e) Alternative System.--The table contained in section 
168(g)(3)(B) of such Code is amended by striking the items relating to 
subparagraph (F) and inserting the following new items:

        ``(F)(i)...............................................     20 
         (F)(ii)...............................................     20 
         (G)...................................................   25''.
    (f) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2008.

Summary: Amends the Internal Revenue Code to provide for accelerated depreciation of certain energy-efficient heating, ventilation, air conditioning, or commercial refrigeration property installed in nonresidential real property or residential rental property and placed in service before January 1, 2013.