Energy Efficiency Tax Incentives Act

Bill: 113-s-2189
Sponsor: full_name: Sen. Cardin, Benjamin L. [D-MD]
Introduced: 2014-04-01
Policy area: Taxation
Subjects: Administrative law and regulatory procedures

Alternative and renewable resources

Building construction

Business investment and capital

Congressional oversight

Department of the Treasury

Electric power generation and transmission

Energy efficiency and conservation

Income tax credits

Income tax deductions

Industrial facilities

Lighting, heating, cooling

Residential rehabilitation and home repair

Tax-exempt organizations

Water use and supply
Latest action: action_date: 2014-05-07
text: Committee on Banking, Housing, and Urban Affairs Subcommittee on Economic Policy. Hearings held. With printed Hearing: S.Hrg. 113-466.

Summaries:
action_date: 2014-04-01
action_desc: Introduced in Senate
text: <p>Energy Efficiency Tax Incentives Act - Amends the Internal Revenue Code to: (1) extend through 2016, and increase the maximum rate of, the tax deduction for energy-efficient commercial building expenditures; (2) allow a new tax deduction for the cost of retrofitting existing commercial and multifamily buildings; (3)&nbsp;allow a new tax credit, through 2016, for home energy efficiency improvements that increase energy efficiency by at least 20%; (4) extend&nbsp;through 2018&nbsp;the tax credit for combined heat and power system property expenditures and increase the capacity limitations and credit percentages for systems with a higher efficiency rating; (5) allow an energy tax credit&nbsp;for investment in biomass heating property and for waste heat to power property (i.e., a system which generates electricity through the recovery of a qualified waste heat resource and is placed in service before January 1, 2019); (6) allow a new business-related tax credit for efficient advanced motor systems with adjustable speed capability; (7)&nbsp;allow a new business-related tax credit for&nbsp;replacement of large water-cooled&nbsp;refrigerant chillers that use environmentally harmful refrigerants; and (8) allow a new tax credit for expenditures to increase water use efficiency&nbsp;in the manufacturing sector. </p>

tv_txt: II 113th CONGRESS 2d Session S. 2189 IN THE SENATE OF THE UNITED STATES April 1, 2014 Mr. Cardin (for himself, Mrs. Feinstein , and Mr. Schatz ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to improve and extend the deduction for new and existing energy-efficient commercial buildings, and for other purposes.

1. Short title; amendment of 1986 Code; table of contents (a) Short title This Act may be cited as the Energy Efficiency Tax Incentives Act . (b) Amendment of 1986 Code Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. (c) Table of contents The table of contents of this Act is as follows: Sec. 1. Short title; amendment of 1986 Code; table of contents. TITLE I—Commercial Building Modernization Sec. 101. Extension and modification of deduction for energy-efficient commercial buildings. Sec. 102. Deduction for retrofits of existing commercial and multifamily buildings. TITLE II—Home energy improvements Sec. 201. Performance based home energy improvements. TITLE III—Industrial Energy and Water Efficiency Sec. 301. Modifications in credit for combined heat and power system property. Sec. 302. Investment tax credit for biomass heating property. Sec. 303. Investment tax credit for waste heat to power property. Sec. 304. Motor energy efficiency improvement tax credit. Sec. 305. Credit for replacement of CFC refrigerant chiller. Sec. 306. Qualifying efficient industrial process water use project credit. I Commercial Building Modernization 101. Extension and modification of deduction for energy-efficient commercial buildings (a) Extension (1) Through 2016 Section 179D(h) is amended by striking December 31, 2013 and inserting December 31, 2016 . (2) Inclusion of multifamily buildings (A) In general Subparagraph (B) of section 179D(c)(1) is amended by striking building and inserting commercial building or multifamily building . (B) Definitions Subsection (c) of section 179D is amended by adding at the end the following new paragraphs: (3) Commercial building The term commercial building means a building with a primary use or purpose other than as residential housing. (4) Multifamily building The term multifamily building means a structure of 5 or more dwelling units with a primary use as residential housing, and includes such buildings owned and operated as a condominium, cooperative, or other common interest community. . (b) Increase in maximum amount of deduction (1) In general Subparagraph (A) of section 179D(b)(1) is amended by striking $1.80 and inserting $3.00 . (2) Partial allowance Paragraph (1) of section 179D(d) is amended to read as follows: (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 accordance with paragraph (6) that— (I) any system referred to in subsection (c)(1)(C) satisfies the energy-savings targets established by the Secretary under subparagraph (B) with respect to such system, or (II) the systems referred to in subsection (c)(1)(C)(ii) and subsection (c)(1)(C)(iii) together satisfy the energy-savings targets established by the Secretary under subparagraph (B) with respect to such systems, then the requirement of subsection (c)(1)(D) shall be treated as met with respect to such system or systems, and the deduction under subsection (a) shall be allowed with respect to energy-efficient commercial building property installed as part of such system and as part of a plan to meet such targets, except that subsection (b) shall be applied to such property described in clause (ii)(I) by substituting $1.00 for $3.00 and to such property described in clause (ii)(II) by substituting $2.20 for $3.00 . (B) Regulations (i) In general The Secretary, after consultation with the Secretary of Energy, shall promulgate regulations establishing a target for each system described in subsection (c)(1)(C) which, if such targets were met for all such systems, the property would meet the requirements of subsection (c)(1)(D). (ii) Safe harbor for combined systems The Secretary, after consultation with the Secretary of Energy, and not later than 6 months after the date of the enactment of the Energy Efficiency Tax Incentives Act , shall promulgate regulations regarding combined envelope and mechanical system performance that detail appropriate components, efficiency levels, or other relevant information for the systems referred to in subsection (c)(1)(C)(ii) and subsection (c)(1)(C)(iii) together to be deemed to have achieved two-thirds of the requirements of subsection (c)(1)(D). . (c) Denial of double benefit rules (1) In general Section 179D is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection: (h) Tax incentives not available Energy-efficient measures for which a deduction is allowed under this section shall not be eligible for a deduction under section 179F. . (2) Low-income housing exception to basis reduction Subsection (e) of section 179D is amended by inserting (other than property placed in service in a qualified low-income building (within the meaning of section 42)) after building property . (d) Allocation of deduction Paragraph (4) of section 179D(d) is amended to read as follows: (4) Allocation of deduction (A) In general Not later than 180 days after the date of the enactment of this subsection, the Secretary, in consultation with the Secretary of Energy, shall promulgate a regulation to allow the owner of a commercial or multifamily building, including a government, tribal, or non-profit owner, to allocate any deduction allowed under this section, or a portion thereof, to the person primarily responsible for designing the property in lieu of the owner or to a commercial tenant that leases or otherwise occupies space in such building pursuant to a written agreement. Such person shall be treated as the taxpayer for purposes of this section. (B) Form of allocation An allocation made under this paragraph shall be in writing and in a form that meets the form of allocation requirements in Notice 2008–40 of the Internal Revenue Service. (C) Provision of allocation Not later than 30 days after receipt of a written request from a person eligible to receive an allocation under this paragraph, the owner of a building that makes an allocation under this paragraph shall provide the form of allocation (as described in subparagraph (B)) to such person. (D) Allocation from public owner of building In the case of a commercial building or multifamily building that is owned by a Federal, State, or local government or a subdivision thereof, Notice 2006–52 of the Internal Revenue Service, as amplified by Notice 2008–40, shall apply to any allocation. . (e) Treatment of basis in context of allocation Subsection (e) of section 179D, as amended by subsection (c)(2), is amended by inserting or so allocated after so allowed . (f) Earnings and profits conformity for real estate investment trusts Subparagraph (B) of section 312(k)(3) is amended— (1) by striking .—For purposes of and inserting “.— (i) In general Except as provided in clause (ii), for purposes of , and (2) by adding at the end the following new clause: (ii) Earnings and profits conformity for real estate investment trusts (I) In general For purposes of computing the earnings and profits of a real estate investment trust (other than a captive real estate investment trust), the entire amount deductible under section 179D shall be allowed as deductions in the taxable years for which such amounts are claimed under such section. (II) Captive real estate investment trust The term captive real estate investment trust means a real estate investment trust the shares or beneficial interests of which are not regularly traded on an established securities market and more than 50 percent of the voting power or value of the beneficial interests or shares of which are owned or controlled, directly or indirectly, or constructively, by a single entity that is treated as an association taxable as a corporation under this title and is not exempt from taxation pursuant to the provisions of section 501(a). (III) Rules of application For purposes of this clause, the constructive ownership rules of section 318(a), as modified by section 856(d)(5), shall apply in determining the ownership of stock, assets, or net profits of any person, and the following entities are not considered an association taxable as a corporation: (aa) Any real estate investment trust other than a captive real estate investment trust. (bb) Any qualified real estate investment trust subsidiary under section 856, other than a qualified REIT subsidiary of a captive real estate investment trust. (cc) Any Listed Australian Property Trust (meaning an Australian unit trust registered as a Managed Investment Scheme under the Australian Corporations Act in which the principal class of units is listed on a recognized stock exchange in Australia and is regularly traded on an established securities market), or an entity organized as a trust, provided that a Listed Australian Property Trust owns or controls, directly or indirectly, 75 percent or more of the voting power or value of the beneficial interests or shares of such trust. (dd) Any corporation, trust, association, or partnership organized outside the laws of the United States and which satisfies the criteria described in subclause (IV). (IV) Criteria The criteria described in this subclause are as follows: (aa) At least 75 percent of the entity's total asset value at the close of its taxable year is represented by real estate assets (as defined in section 856(c)(5)(B)), cash and cash equivalents, and United States Government securities. (bb) The entity is not subject to tax on amounts distributed to its beneficial owners, or is exempt from entity-level taxation. (cc) The entity distributes at least 85 percent of its taxable income (as computed in the jurisdiction in which it is organized) to the holders of its shares or certificates of beneficial interest on an annual basis. (dd) Not more than 10 percent of the voting power or value in such entity is held directly or indirectly or constructively by a single entity or individual, or the shares or beneficial interests of such entity are regularly traded on an established securities market. (ee) The entity is organized in a country which has a tax treaty with the United States. . (g) Rules for lighting systems Subsection (f) of section 179D is amended to read as follows: (f) Rules for lighting systems (1) In general With respect to property that is part of a lighting system, the deduction allowed under subsection (a) shall be equal to— (A) for a lighting system that includes installation of a lighting control described in paragraph (2)(A), the applicable amount determined under paragraph (3)(A), (B) for a lighting system that includes installation of a lighting control described in paragraph (2)(B), the applicable amount determined under paragraph (3)(B), or (C) for a lighting system that does not include installation of any lighting controls described in subparagraph (A) or (B) of paragraph (2), the applicable amount determined under paragraph (3)(C). (2) Energy saving controls (A) Lighting controls in certain spaces For purposes of paragraph (1)(A), the lighting controls described in this subparagraph are the following: (i) Occupancy sensors (as described in paragraph (4)(I)) in spaces not greater than 800 square feet. (ii) Bi-level controls (as described in paragraph (4)(A)). (iii) Continuous or step dimming controls (as described in subparagraphs (B) and (K) of paragraph (4)). (iv) Daylight dimming where sufficient daylight is available (as described in paragraph (4)(C)). (v) A multi-scene controller (as described in paragraph (4)(H)). (vi) Time scheduling controls (as described in paragraph (4)(L)), provided that such controls are not required by Standard 90.1-2010. (vii) Such other lighting controls as the Secretary, in consultation with the Secretary of Energy, determines appropriate. (B) Other control types For purposes of paragraph (1)(B), the lighting controls described in this subparagraph are the following: (i) Occupancy sensors (as described in paragraph (4)(I)) in spaces greater than 800 square feet. (ii) Demand responsive controls (as described in paragraph (4)(D)). (iii) Lumen maintenance controls (as described in paragraph (4)(F)) where solid state lighting is used. (iv) Such other lighting controls as the Secretary, in consultation with the Secretary of Energy, determines appropriate. (3) Applicable amount (A) Lighting controls in certain spaces For purposes of paragraph (1)(A), the applicable amount shall be determined in accordance with the following table: If the percentage of reduction in lighting power density is not less than: The amount of the deduction per square foot is: 15 percent $0.30 20 percent $0.44 25 percent $0.58 30 percent $0.72 35 percent $0.86 40 percent $1.00. (B) Lighting controls in larger spaces and where solid lighting is used For purposes of paragraph (1)(B), the applicable amount shall be determined in accordance with the following table: If the percentage of reduction in lighting power density is not less than: The amount of the deduction per square foot is: 20 percent $0.30 25 percent $0.44 30 percent $0.58 35 percent $0.72 40 percent $0.86 45 percent $1.00. (C) No qualified lighting controls For purposes of paragraph (1)(C), the applicable amount shall be determined in accordance with the following table: If the percentage of reduction in lighting power density is not less than: The amount of the deduction per square foot is: 25 percent $0.30 30 percent $0.44 35 percent $0.58 40 percent $0.72 45 percent $0.86 50 percent $1.00. (4) Definitions For purposes of this subsection: (A) Bi-level control (i) In general Subject to clause (ii), the term bi-level control means a lighting control strategy that provides for 2 different levels of lighting. (ii) Full-off setting For purposes of clause (i), a bi-level control shall also provide for a full-off setting. (B) Continuous dimming The term continuous dimming means a lighting control strategy that adjusts the light output of a lighting system between minimum and maximum light output in a manner that is not perceptible. (C) Daylight dimming; sufficient daylight (i) Daylight dimming The term daylight dimming means any device that— (I) adjusts electric lighting power in response to the amount of daylight that is present in an area, and (II) provides for separate control of the lamps for general lighting in the daylight area by not less than 1 multi-level photocontrol, including continuous dimming devices, that satisfies the following requirements: (aa) The light sensor for the multi-level photocontrol is remote from where calibration adjustments are made. (bb) The calibration adjustments are readily accessible. (cc) The multi-level photocontrol reduces electric lighting power in response to the amount of daylight with— (AA) not less than 1 control step that is between 50 percent and 70 percent of design lighting power, and (BB) not less than 1 control step that is not less than 35 percent of design lighting power. (ii) Sufficient daylight (I) In general The term sufficient daylight means— (aa) in the case of toplighted areas, when the total daylight area under skylights plus the total daylight area under rooftop monitors in an enclosed space is greater than 900 square feet (as defined in Standard 90.1-2010), and (bb) in the case of sidelighted areas, when the combined primary sidelight area in an enclosed space is not less than 250 square feet (as defined in Standard 90.1-2010). (II) Exceptions Sufficient daylight shall be deemed to not be available if— (aa) in the case of areas described in subclause (I)(aa)— (AA) for daylighted areas under skylights, it is documented that existing adjacent structures or natural objects block direct beam sunlight for more than 1500 daytime hours (after 8 a.m. and before 4 p.m., local time) per year, (BB) for daylighted areas, the skylight effective aperture is less than 0.006, or (CC) for buildings in climate zone 8, as defined under Standard 90.1-2010, the daylight areas total less than 1500 square feet in an enclosed space, and (bb) in the case of primary sidelighted areas described in subclause (I)(bb)— (AA) the top of the existing adjacent structures are at least twice as high above the windows as the distance from the window, or (BB) the sidelighting effective aperture is less than 0.1. (iii) Daylight, sidelighting, and other related terms The terms daylight area , daylight area under skylights , daylight area under rooftop monitors , daylighted area , enclosed space , primary sidelighted areas , sidelighting effective aperture , and skylight effective aperture have the same meaning given such terms under Standard 90.1-2010. (D) Demand Responsive Control (i) In general The term demand responsive control means a control device that receives and automatically responds to a demand response signal and— (I) in the case of space-conditioning systems, conducts a centralized demand shed for non-critical zones during a demand response period and that has the capability to, on a signal from a centralized contract or software point within an Energy Management Control System— (aa) remotely increase the operating cooling temperature set points in such zones by not less than 4 degrees, (bb) remotely decrease the operating heating temperature set points in such zones by not less than 4 degrees, (cc) remotely reset temperatures in such zones to originating operating levels, and (dd) provide an adjustable rate of change for any temperature adjustment and reset, and (II) in the case of lighting power, has the capability to reduce lighting power by not less than 30 percent during a demand response period. (ii) Demand response period The term demand response period means a period in which short-term adjustments in electricity usage are made by end-use customers from normal electricity consumption patterns, including adjustments in response to— (I) the price of electricity, and (II) participation in programs or services that are designed to modify electricity usage in response to wholesale market prices for electricity or when reliability of the electrical system is in jeopardy. (iii) Demand response signal The term demand response signal means a signal sent to an end-use customer by a local utility, independent system operator, or designated curtailment service provider or aggregator that— (I) indicates an adjustment in the price of electricity, or (II) is a request to modify electricity consumption. (E) Lamp The term lamp means an artificial light source that produces optical radiation (including ultraviolet and infrared radiation). (F) Lumen maintenance control The term lumen maintenance control means a lighting control strategy that maintains constant light output by adjusting lamp power to compensate for age and cleanliness of luminaires. (G) Luminaire The term luminaire means a complete lighting unit for the production, control, and distribution of light that consists of— (i) not less than 1 lamp, and (ii) any of the following items: (I) Optical control devices designed to distribute light. (II) Sockets or mountings for the positioning, protection, and operation of the lamps. (III) Mechanical components for support or attachment. (IV) Electrical and electronic components for operation and control of the lamps. (H) Multi-scene control The term multi-scene control means a lighting control device or system that allows for— (i) not less than 2 predetermined lighting settings, (ii) a setting that turns off all luminaires in an area, and (iii) a recall of the settings described in clauses (i) and (ii) for any luminaires or groups of luminaires to adjust to multiple activities within the area. (I) Occupancy sensor The term occupancy sensor means a control device that— (i) detects the presence or absence of individuals within an area and regulates lighting, equipment, or appliances according to a required sequence of operation, (ii) shuts off lighting when an area is unoccupied, (iii) except in areas designated as emergency egress and using less than 0.2 watts per square foot of floor area, provides for manual shut-off of all luminaires regardless of the status of the sensor and allows for— (I) independent control in each area enclosed by ceiling-height partitions, (II) controls that are readily accessible, and (III) operation by a manual switch that is located in the same area as the lighting that is subject to the control device. (J) Standard 90.1-2010 The term Standard 90.1-2010 means Standard 90.1-2010 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America. (K) Step dimming The term step dimming means a lighting control strategy that adjusts the light output of a lighting system by 1 or more predetermined amounts of greater than 1 percent of full output in a manner that may be perceptible. (L) Time scheduling control The term time scheduling control means a control strategy that automatically controls lighting, equipment, or systems based on a particular time of day or other daily event (including sunrise and sunset). . (h) Updated standards (1) Initial update (A) In general Section 179D(c) is amended by striking 90.1-2001 each place it appears and inserting 90.1-2004 . (B) Conforming amendment Paragraph (2) of section 179D(c) is amended by striking (as in effect on April 2, 2003) . (2) Second update (A) In general Section 179D is amended by striking 90.1-2004 each place it appears in subsections (c) and (f) and inserting 90.1-2007 . (B) Effective date The amendments made by subparagraph (A) shall apply to property placed in service after December 31, 2014. (i) Treatment of lighting systems Section 179D(c)(1) is amended by striking interior each place it appears. (j) Reporting program Section 179D, as amended by subsection (c)(1), is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection: (i) Reporting program For purposes of the report required under section 179F(l), the Secretary, in consultation with the Secretary of Energy, shall— (1) develop a program to collect a statistically valid sample of energy consumption data from taxpayers that received full deductions under this section, regardless of whether such taxpayers allocated all or a portion of such deduction, and (2) include such data in the report, with such redactions as deemed necessary to protect the personally identifiable information of such taxpayers. . (k) Special rule for partnerships and S corporations Section 179D, as amended by subsection (j), is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection: (j) Special rule for partnerships and S corporations In the case of a partnership or S corporation, this section shall be applied at the partner or shareholder level, subject to such reporting requirements as are determined appropriate by the Secretary. . (l) Effective date Except as otherwise provided, the amendments made by this section shall apply to property placed in service in taxable years beginning after the date of the enactment of this Act. 102. Deduction for retrofits of existing commercial and multifamily buildings (a) In general Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 179E the following new section: 179F. Deduction for retrofits of existing commercial and multifamily buildings (a) Allowance of deduction (1) In general With respect to each certified retrofit plan, there shall be allowed as a deduction an amount equal to the lesser of— (A) the sum of— (i) the design deduction, and (ii) the realized deduction, or (B) the total cost to develop and implement such certified retrofit plan. (2) Exception For purposes of the amount described in paragraph (1)(B), if such amount is taken as a design deduction, no realized deduction shall be allowed. (b) Deduction amounts For purposes of this section— (1) Design deduction A design deduction shall be— (A) based on projected source energy savings as calculated in accordance with subsection (c)(3)(B), (B) correlated to the percent of source energy savings set forth in the general scale in paragraph (3)(A) that a certified retrofit plan is projected to achieve when energy-efficient measures are placed in service, and (C) equal to 60 percent of the amount allowed under the general scale. (2) Realized deduction (A) In general A realized deduction shall be— (i) based on realized source energy savings as calculated in accordance with subsection (c)(3)(C), (ii) correlated to the percent of source energy savings set forth in the general scale in paragraph (3)(A) as realized by a certified retrofit plan, and (iii) equal to 40 percent of the amount allowed under the general scale. (B) Adjustment of source energy savings The percent of source energy savings for purposes of any realized deduction may vary from such savings projected when energy-efficient measures were placed in service for purposes of a design deduction under paragraph (1). (C) No recapture of design deduction Notwithstanding the regulations prescribed under subsection (f), no recapture of a design deduction shall be required where the owner of the commercial or multifamily building— (i) claims or allocates a design deduction when energy-efficient measures are placed into service pursuant to the terms and conditions of a certified retrofit plan, and (ii) is not eligible for or does not subsequently claim or allocate a realized deduction. (3) General scale (A) In general The scale for deductions allowed under this section shall be— (i) $1.00 per square foot of retrofit floor area for 20 to 24 percent source energy savings, (ii) $1.50 per square foot of retrofit floor area for 25 to 29 percent source energy savings, (iii) $2.00 per square foot of retrofit floor area for 30 to 34 percent source energy savings, (iv) $2.50 per square foot of retrofit floor area for 35 to 39 percent source energy savings, (v) $3.00 per square foot of retrofit floor area for 40 to 44 percent source energy savings, (vi) $3.50 per square foot of retrofit floor area for 45 to 49 percent source energy savings, and (vii) $4.00 per square foot of retrofit floor area for 50 percent or more source energy savings. (B) Historic buildings (i) In general With respect to energy-efficient measures placed in service as part of a certified retrofit plan in a commercial building or multifamily building on or eligible for the National Register of Historic Places, the respective dollar amounts set forth in the general scale under subparagraph (A) shall— (I) each be increased by 20 percent, for the purposes of calculating any applicable design deduction and realized deduction, and (II) not exceed the total cost to develop and implement such certified retrofit plan. (ii) Exception If the amount described in clause (i)(II) is taken as a design deduction, then no realized deduction shall be allowed. (c) Calculation of energy savings (1) In general For purposes of the design deduction and the realized deduction, source energy savings shall be calculated with reference to a baseline of the annual source energy consumption of the commercial or multifamily building before energy-efficient measures were placed in service. (2) Baseline benchmark The baseline under paragraph (1) shall be determined using a building energy performance benchmarking tool designated by the Administrator of the Environmental Protection Agency, and based upon 1 year of source energy consumption data prior to the date upon which the energy-efficient measures are placed in service. (3) Design and realized source energy savings (A) In general In certifying a retrofit plan as a certified retrofit plan, a licensed engineer or architect shall calculate source energy savings by utilizing the baseline benchmark defined in paragraph (2) and determining percent improvements from such baseline. (B) Design deduction For purposes of claiming a design deduction, the regulations issued under subsection (f)(1) shall prescribe the standards and process for a licensed engineer or architect to calculate and certify source energy savings projected from the design of a certified retrofit plan as of the date energy-efficient measures are placed in service. (C) Realized deduction For purposes of claiming a realized deduction, a licensed engineer or architect shall calculate and certify source energy savings realized by a certified retrofit plan 2 years after a design deduction is allowed by utilizing energy consumption data after energy-efficient measures are placed in service, and adjusting for climate, building occupancy hours, density, or other factors deemed appropriate in the benchmarking tool designated under paragraph (2). (d) Certified retrofit plan and other definitions For purposes of this section— (1) Certified retrofit plan The term certified retrofit plan means a plan that— (A) is designed to reduce the annual source energy costs of a commercial building, or a multifamily building, through the installation of energy-efficient measures, (B) is certified under penalty of perjury by a licensed engineer or architect, who is not a direct employee of the owner of the commercial building or multifamily building that is the subject of the plan, and is licensed in the State in which such building is located, (C) describes the square footage of retrofit floor area covered by such a plan, (D) specifies that it is designed to achieve a final source energy usage intensity after energy-efficient measures are placed in service in a commercial building or a multifamily building that does not exceed on a square foot basis the average level of energy usage intensity of other similar buildings, as described in paragraph (2), (E) requires that after the energy-efficient measures are placed in service, the commercial building or multifamily building meets the applicable State and local building code requirements for the area in which such building is located, (F) satisfies the regulations prescribed under subsection (f), and (G) is submitted to the Secretary of Energy after energy-efficient measures are placed in service, for the purpose of informing the report to Congress required by subsection (l). (2) Average level of energy usage intensity (A) In general The maximum average level of energy usage intensity under paragraph (1)(D) shall not exceed 300,000 British thermal units per square foot. (B) Regulations (i) In general The Secretary, in consultation with the Administrator of the Environmental Protection Agency, shall develop distinct standards for categories and subcategories of buildings with respect to maximum average level of energy usage intensity based on the best available information used by the ENERGY STAR program. (ii) Review The standards developed pursuant to clause (i) shall be reviewed and updated by the Secretary, in consultation with the Administrator of the Environmental Protection Agency, not later than every 3 years. (3) Commercial building (A) In general The term commercial building means a building located in the United States— (i) that is in existence and occupied on the date of the enactment of this section, (ii) for which a certificate of occupancy has been issued at least 10 years before energy efficiency measures are placed in service, and (iii) with a primary use or purpose other than as residential housing. (B) Shopping centers In the case of a retail shopping center, the term commercial building shall include an area within such building that is— (i) 50,000 square feet or larger that is covered by a separate utility grade meter to record energy consumption in such area, and (ii) under the day-to-day management and operation of— (I) the owner of such building as common space areas, or (II) a retail tenant, lessee, or other occupant. (4) Energy-efficient measures The term energy-efficient measures means a measure, or combination of measures, placed in service through a certified retrofit plan— (A) on or in a commercial building or multifamily building, (B) as part of— (i) the lighting systems, (ii) the heating, cooling, ventilation, refrigeration, or hot water systems, (iii) building transportation systems, such as elevators and escalators, (iv) the building envelope, which may include an energy-efficient cool roof, (v) a continuous commissioning contract under the supervision of a licensed engineer or architect, or (vi) building operations or monitoring systems, including utility-grade meters and submeters, and (C) including equipment, materials, and systems within subparagraph (B) with respect to which depreciation (or amortization in lieu of depreciation) is allowed. (5) Energy savings The term energy savings means source energy usage intensity reduced on a per square foot basis through design and implementation of a certified retrofit plan. (6) Multifamily building The term multifamily building — (A) means— (i) a structure of 5 or more dwelling units located in the United States— (I) that is in existence and occupied on the date of the enactment of this section, (II) for which a certificate of occupancy has been issued at least 10 years before energy efficiency measures are placed in service, and (III) with a primary use as residential housing, and (B) includes such buildings owned and operated as a condominium, cooperative, or other common interest community. (7) Source energy The term source energy means the total amount of raw fuel that is required to operate a commercial building or multifamily building, and accounts for losses that are incurred in the generation, storage, transport, and delivery of fuel to such a building. (e) Timing of claiming deductions Deductions allowed under this section may be claimed as follows: (1) Design deduction In the case of a design deduction, in the taxable year that energy efficiency measures are placed in service. (2) Realized deduction In the case of a realized deduction, in the second taxable year following the taxable year described in paragraph (1). (f) Regulations (1) In general Not later than 180 days after the date of the enactment of this section, and after notice and opportunity for public comment, the Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, shall prescribe regulations— (A) for the manner and method for a licensed engineer or architect to certify retrofit plans, model projected energy savings, and calculate realized energy savings, and (B) notwithstanding subsection (b)(2)(C), to provide, as appropriate, for a recapture of the deductions allowed under this section if a retrofit plan is not fully implemented, or a retrofit plan and energy savings are not certified or verified in accordance with regulations prescribed under this subsection. (2) Reliance on established protocols, etc To the maximum extent practicable and available, such regulations shall rely upon established protocols and documents used in the ENERGY STAR program, and industry best practices and existing guidelines, such as the Building Energy Modeling Guidelines of the Commercial Energy Services Network (COMNET). (3) Allowance of deductions pending issuance of regulations Pending issuance of the regulations under paragraph (1), the owner of a commercial building or a multifamily building shall be allowed to claim or allocate a deduction allowed under this section. (g) Notice to owner Each certification of a retrofit plan and calculation of energy savings required under this section shall include an explanation to the owner of a commercial building or a multifamily building regarding the energy-efficient measures placed in service and their projected and realized annual energy costs. (h) Allocation of deduction (1) In general Not later than 180 days after the date of the enactment of this section, the Secretary, in consultation with the Secretary of Energy, shall promulgate a regulation to allow the owner of a commercial building or a multifamily building, including a government, tribal, or non-profit owner, to allocate any deduction allowed under this section, or a portion thereof, to the person primarily responsible for funding, financing, designing, leasing, operating, or placing in service energy-efficient measures. Such person shall be treated as the taxpayer for purposes of this section and shall include a building tenant, financier, architect, professional engineer, licensed contractor, energy services company, or other building professional. (2) Form of allocation An allocation made under this paragraph shall be in writing and in a form that meets the form of allocation requirements in Notice 2008–40 of the Internal Revenue Service. (3) Provision of allocation Not later than 30 days after receipt of a written request from a person eligible to receive an allocation under this paragraph, the owner of a building that makes an allocation under this paragraph shall provide the form of allocation (as described in paragraph (2)) to such person. (4) Allocation from public owner of building In the case of a commercial building or a multifamily building that is owned by a Federal, State, or local government or a subdivision thereof, Notice 2006–52 of the Internal Revenue Service, as amplified by Notice 2008–40, shall apply to any allocation. (i) Basis reduction For purposes of this subtitle, if a deduction is allowed under this section with respect to any energy-efficient measures placed in service under a certified retrofit plan other than in a qualified low-income building (within the meaning of section 42), the basis of such measures shall be reduced by the amount of the deduction so allowed or so allocated. (j) Special Rule for Partnerships and S Corporations In the case of a partnership or S corporation, this section shall be applied at the partner or shareholder level, subject to such reporting requirements as are determined appropriate by the Secretary. (k) Tax incentives not available (1) Energy efficient commercial buildings deduction Energy-efficient measures for which a deduction is allowed under this section shall not be eligible for a deduction under section 179D. (2) New energy efficient home credit No deduction shall be allowed under this section with respect to any building or dwelling unit with respect to which a credit under section 45L was allowed. (l) Report to Congress (1) In general Biennially, beginning with the first year after the enactment of this section, the Secretary, in conjunction with the Secretary of Energy, shall submit a report to Congress that— (A) explains the energy saved, the energy-efficient measures implemented, the realization of energy savings projected, and records the amounts and types of deductions allowed under this section, (B) explains the energy saved, the energy efficient measures implemented, and records the amount of deductions allowed under section 179D, based on the data collected pursuant to subsection (i) of such section, (C) determines the number of jobs created as a result of the deduction allowed under this section, (D) determines how the use of any deduction allowed under this section may be improved, based on the information provided to the Secretary of Energy, (E) provides aggregated data with respect to the information described in subparagraphs (A) through (D), and (F) provides statutory recommendations to Congress that would reduce energy consumption in new and existing commercial buildings located in the United States, including recommendations on providing energy-efficient tax incentives for subsections of buildings that operate with specific utility-grade metering. (2) Protection of taxpayer information The Secretary and the Secretary of Energy shall share information on deductions allowed under this section and related reports submitted, as requested by each agency to fulfill its obligations under this section, with such redactions as deemed necessary to protect the personally identifiable financial information of a taxpayer. (3) Incorporation into Department of Energy programs The Secretary of Energy shall, to the maximum extent practicable, incorporate conclusions of the report under this subsection into current Department of Energy building performance and energy efficiency data collection and other reporting programs. (m) Termination This section shall not apply to any property placed in service after December 31, 2016. . (b) Effect on depreciation on earnings and profits Subparagraph (B) of section 312(k)(3), as amended by this title, is amended— (1) by striking or 179E both places it appears in clause (i) and inserting 179E, or 179F , (2) by striking or 179E in the heading and inserting 179E, or 179F , and (3) by inserting or 179F after section 179D in clause (ii)(I). (c) Conforming amendment The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 179E the following new item: Sec. 179F. Deduction for retrofits of existing commercial and multifamily buildings. . (d) Effective date Except as otherwise provided, the amendments made by this section shall apply to property placed in service in taxable years beginning after the date of the enactment of this Act. II Home energy improvements 201. Performance based home energy improvements (a) In general Subpart A of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section: 25E. Performance based energy improvements (a) In general In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year for a qualified whole home energy efficiency retrofit an amount determined under subsection (b). (b) Amount determined (1) In general Subject to paragraph (4), the amount determined under this subsection is equal to— (A) the base amount under paragraph (2), increased by (B) the amount determined under paragraph (3). (2) Base amount For purposes of paragraph (1)(A), the base amount is $2,000, but only if the energy use for the residence is reduced by at least 20 percent below the baseline energy use for such residence as calculated according to paragraph (5). (3) Increase amount For purposes of paragraph (1)(B), the amount determined under this paragraph is $500 for each additional 5 percentage point reduction in energy use. (4) Limitation In no event shall the amount determined under this subsection exceed the lesser of— (A) $5,000 with respect to any residence, or (B) 30 percent of the qualified home energy efficiency expenditures paid or incurred by the taxpayer under subsection (c) with respect to such residence. (5) Determination of energy use reduction For purposes of this subsection— (A) In general The reduction in energy use for any residence shall be determined by modeling the annual predicted percentage reduction in total energy costs for heating, cooling, hot water, and permanent lighting. It shall be modeled using computer modeling software approved under subsection (d)(2) and a baseline energy use calculated according to subsection (d)(1)(C). (B) Energy costs For purposes of subparagraph (A), the energy cost per unit of fuel for each fuel type shall be determined by dividing the total actual energy bill for the residence for that fuel type for the most recent available 12-month period by the total energy units of that fuel type used over the same period. (c) Qualified home energy efficiency expenditures For purposes of this section, the term qualified home energy efficiency expenditures — (1) means any amount paid or incurred by the taxpayer during the taxable year for a qualified whole home energy efficiency retrofit, including the cost of diagnostic procedures, labor, and modeling, (2) includes only measures that have an average estimated life of 5 years or more as determined by the Secretary, after consultation with the Secretary of Energy, and (3) does not include any amount which is paid or incurred in connection with any expansion of the building envelope of the residence. (d) Qualified whole home energy efficiency retrofit For purposes of this section— (1) In general The term qualified whole home energy efficiency retrofit means the implementation of measures placed in service during the taxable year intended to reduce the energy use of the principal residence of the taxpayer which is located in the United States. A qualified whole home energy efficiency retrofit shall— (A) subject to paragraph (4), be designed, implemented, and installed by a contractor which is— (i) accredited by the Building Performance Institute (hereafter in this section referred to as BPI ) or a preexisting BPI accreditation-based State certification program with enhancements to achieve State energy policy, (ii) a Residential Energy Services Network (hereafter in this section referred to as RESNET ) accredited Energy Smart Home Performance Team, or (iii) accredited by an equivalent certification program approved by the Secretary, after consultation with the Secretary of Energy, for this purpose, (B) install a set of measures modeled to achieve a reduction in energy use of at least 20 percent below the baseline energy use established in subparagraph (C), using computer modeling software approved under paragraph (2), (C) establish the baseline energy use by calibrating the model using sections 3 and 4 and Annex D of BPI Standard BPI–2400–S–2011: Standardized Qualification of Whole House Energy Savings Estimates, or an equivalent standard approved by the Secretary, after consultation with Secretary of Energy, for this purpose, (D) document the measures implemented in the residence through photographs taken before and after the retrofit, including photographs of its visible energy systems and envelope as relevant, and (E) implement a test-out procedure, following guidelines of the applicable certification program specified under clause (i) or (ii) of subparagraph (A), or equivalent guidelines approved by the Secretary, after consultation with the Secretary of Energy, for this purpose, to ensure— (i) the safe operation of all systems post retrofit, and (ii) that all improvements are included in, and have been installed according to, standards of the applicable certification program specified under clause (i) or (ii) of subparagraph (A), or equivalent standards approved by the Secretary, after consultation with the Secretary of Energy, for this purpose. For purposes of subparagraph (A)(iii), an organization or State may submit an equivalent certification program for approval by the Secretary, in consultation with the Secretary of Energy. The Secretary shall approve or deny such submission not later than 180 days after receipt, and, if the Secretary fails to respond in that time period, the submitted equivalent certification program shall be considered approved. (2) Approved modeling software For purposes of paragraph (1)(B), the contractor (or, if applicable, the person described in paragraph (4)) shall use modeling software certified by RESNET as following the software verification test suites in section 4.2.1 of RESNET Publication No. 06–001 or certified by an alternative organization as following an equivalent standard, as approved by the Secretary, after consultation with the Secretary of Energy, for this purpose. (3) Documentation The Secretary, after consultation with the Secretary of Energy, shall prescribe regulations directing what specific documentation is required to be retained or submitted by the taxpayer in order to claim the credit under this section, which shall include, in addition to the photographs under paragraph (1)(D), a form approved by the Secretary that is completed and signed by the qualified whole home energy efficiency retrofit contractor under penalties of perjury. Such form shall include— (A) a statement that the contractor (or, if applicable, the person described in paragraph (4)) followed the specified procedures for establishing baseline energy use and estimating reduction in energy use, (B) the name of the software used for calculating the baseline energy use and reduction in energy use, the percentage reduction in projected energy savings achieved, and a statement that such software was certified for this program by the Secretary, after consultation with the Secretary of Energy, (C) a statement that the contractor (or, if applicable, the person described in paragraph (4)) will retain the details of the calculations and underlying energy bills for 5 years and will make such details available for inspection by the Secretary or the Secretary of Energy, if so requested, (D) a list of measures installed and a statement that all measures included in the reduction in energy use estimate are included in, and installed according to, standards of the applicable certification program specified under clause (i) or (ii) of subparagraph (A), or equivalent standards approved by the Secretary, after consultation with the Secretary of Energy, (E) a statement that the contractor (or, if applicable, the person described in paragraph (4)) meets the requirements of paragraph (1)(A), and (F) documentation of the total cost of the project in order to comply with the limitation under subsection (b)(4)(B). (4) Certified home energy rater For purposes of paragraph (1)(A), a contractor shall be deemed to have satisfied the accreditation requirement under such paragraph if the contractor enters into a contract with a person that satisfies such accreditation requirement for purposes of modeling the energy use reduction described in paragraph (1)(B). (e) Additional rules For purposes of this section— (1) No double benefit (A) In general With respect to any residence, no credit shall be allowed under this section for any taxable year in which the taxpayer claims a credit under section 25C. (B) Renewable energy systems and appliances In the case of a renewable energy system or appliance that qualifies for another credit under this chapter, the resulting reduction in energy use shall not be taken into account in determining the percentage energy use reductions under subsection (b). (C) No double benefit for certain expenditures The term qualified home energy efficiency expenditures shall not include any expenditure for which a deduction or credit is claimed by the taxpayer under this chapter for the taxable year or with respect to which the taxpayer receives any Federal energy efficiency rebate. (2) Principal residence The term principal residence has the same meaning as when used in section 121. (3) Special rules Rules similar to the rules under paragraphs (4), (5), (6), (7), and (8) of section 25D(e) and section 25C(e)(2) shall apply, as determined by the Secretary, after consultation with the Secretary of Energy. (4) Basis adjustments For purposes of this subtitle, if a credit is allowed under this section with respect to any expenditure with respect to any property, the increase in the basis of such property which would (but for this paragraph) result from such expenditure shall be reduced by the amount of the credit so allowed. (5) Election not to claim credit No credit shall be determined under subsection (a) for the taxable year if the taxpayer elects not to have subsection (a) apply to such taxable year. (6) Multiple year retrofits If the taxpayer has claimed a credit under this section in a previous taxable year, the baseline energy use for the calculation of reduced energy use must be established after the previous retrofit has been placed in service. (f) Termination This section shall not apply with respect to any costs paid or incurred after December 31, 2016. (g) Secretary review The Secretary, after consultation with the Secretary of Energy, shall establish a review process for the retrofits performed, including an estimate of the usage of the credit and a statistically valid analysis of the average actual energy use reductions, utilizing utility bill data collected on a voluntary basis, and report to Congress not later than June 30, 2014, any findings and recommendations for— (1) improvements to the effectiveness of the credit under this section, and (2) expansion of the credit under this section to rental units. . (b) Conforming amendments (1) Section 1016(a) is amended— (A) by striking and at the end of paragraph (36), (B) by striking the period at the end of paragraph (37) and inserting , and , and (C) by adding at the end the following new paragraph: (38) to the extent provided in section 25E(e)(4), in the case of amounts with respect to which a credit has been allowed under section 25E. . (2) Section 6501(m) is amended by inserting 25E(e)(5), after section . (3) The table of sections for subpart A of part IV of subchapter A chapter 1 is amended by inserting after the item relating to section 25D the following new item: Sec. 25E. Performance based energy improvements. . (c) Effective date The amendments made by this section shall apply to amounts paid or incurred for a qualified whole home energy efficiency retrofit placed in service after December 31, 2013. III Industrial Energy and Water Efficiency 301. Modifications in credit for combined heat and power system property (a) Modification of certain capacity limitations Section 48(c)(3)(B) is amended— (1) by striking 15 megawatts in clause (ii) and inserting 25 megawatts , (2) by striking 20,000 horsepower in clause (ii) and inserting 34,000 horsepower , and (3) by striking clause (iii). (b) Increase in credit percentage for systems with greater efficiency Subparagraph (A) of section 48(a)(2) is amended— (1) by striking and at the end of subclause (III) of clause (i), (2) by adding at the end of clause (i) the following new subclause: (V) combined heat and power system property the energy efficiency percentage of which (as defined in subsection (c)(3)(C)(i)) is equal to or greater than 85 percent, , (3) by redesignating clause (ii) as clause (iii), (4) by striking clause (i) in clause (iii), as so redesignated, and inserting clause (i) or (ii) , and (5) by inserting after clause (i) the following new clause: (ii) 20 percent in the case of combined heat and power system property the energy percentage of which (as defined in subsection (c)(3)(C)(i)) is equal to or greater than 75 percent and less than 85 percent, and . (c) Extension Clause (iv) of section 48(c)(3)(A) is amended by striking January 1, 2017 and inserting January 1, 2019 . (d) Effective date The amendments made by this section shall apply to periods after the date of the enactment of this Act, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990). 302. Investment tax credit for biomass heating property (a) In general Subparagraph (A) of section 48(a)(3) is amended by striking or at the end of clause (vi), by inserting or at the end of clause (vii), and by inserting after clause (vii) the following new clause: (viii) open-loop biomass (within the meaning of section 45(c)(3)) heating property, including boilers or furnaces which operate at output efficiencies of not less than 65 percent (measured by the higher heating value of the fuel) and which provide thermal energy in the form of heat, hot water, or steam for space heating, air conditioning, domestic hot water, or industrial process heat, but only with respect to periods ending before January 1, 2016, . (b) 30-Percent and 15-Percent credits (1) In general Subparagraph (A) of section 48(a)(2), as amended by this title, is amended— (A) by redesignating clause (iii) as clause (iv), (B) by striking and at the end of clause (ii), (C) by striking clause (i) or (ii) in clause (iv), as so redesignated, and inserting clause (i), (ii), or (iii) , and (D) by inserting after clause (ii) the following new clause: (iii) 15 percent in the case of energy property described in paragraph (3)(A)(viii) to which clause (i)(VI) does not apply, and . (2) Increased credit for greater efficiency Clause (i) of section 48(a)(2)(A), as amended by this title, is amended by striking and at the end of subclause (IV), by striking the comma at the end of subclause (V) and inserting , and , and by inserting after subclause (V) the following new subclause: (VI) energy property described in paragraph (3)(A)(viii) which operates at an output efficiency of not less than 80 percent (measured by the higher heating value of the fuel), . (c) Effective date The amendments made by this section shall apply to periods after the date of the enactment of this Act, in taxable years ending after such date, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990). 303. Investment tax credit for waste heat to power property (a) In general Subparagraph (A) of section 48(a)(3), as amended by this title, is amended by striking or at the end of clause (vii), by striking the comma at the end of clause (viii) and inserting , or , and by inserting after clause (viii) the following new clause: (ix) waste heat to power property, . (b) 30-Percent credit Clause (i) of section 48(a)(2)(A), as amended by this title, is amended by striking and at the end of subclause (V), by striking the comma at the end of subclause (VI) and inserting , and , and by inserting after subclause (VI) the following new subclause: (VII) waste heat to power property, . (c) Waste heat To power property Subsection (c) of section 48 is amended by adding at the end the following new paragraph: (5) Waste heat to power property (A) In general The term waste heat to power property means property— (i) comprising a system which generates electricity through the recovery of a qualified waste heat resource, and (ii) which is placed in service before January 1, 2019. (B) Qualified waste heat resource The term qualified waste heat resource means— (i) exhaust heat or flared gas from an industrial process, (ii) waste gas or industrial tail gas that would otherwise be flared, incinerated, or vented, (iii) a pressure drop in any gas for an industrial or commercial process, or (iv) such other forms of waste heat resources as the Secretary may determine. (C) Exception The term qualified waste heat resource does not include any heat resource from a process whose primary purpose is the generation of electricity utilizing a fossil fuel or the production of oil, natural gas, or other fossil fuels. . (d) Effective date The amendments made by this section shall apply to periods after the date of the enactment of this Act, in taxable years ending after such date, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990). 304. Motor energy efficiency improvement tax credit (a) In general Subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section: 45S. Motor energy efficiency improvement tax credit (a) In general For purposes of section 38, the motor energy efficiency improvement tax credit determined under this section for the taxable year is an amount equal to $120 multiplied by the motor horsepower of an appliance, machine, or equipment— (1) manufactured in such taxable year by a manufacturer which incorporates an advanced motor and drive system into a newly designed appliance, machine, or equipment or into a redesigned appliance, machine, or equipment which did not previously make use of the advanced motor and drive system, or (2) placed back into service in such taxable year by an end user which upgrades an existing appliance, machine, or equipment with an advanced motor and drive system. For any advanced motor and drive system with a total horsepower of less than 10, such motor energy efficiency improvement tax credit is an amount which bears the same ratio to $120 as such total horsepower bears to 1 horsepower. (b) Advanced motor and drive system For purposes of this section, the term advanced motor and drive system means a motor and any required associated electronic control which— (1) offers variable or multiple speed operation, and (2) uses permanent magnet technology, electronically commutated motor technology, switched reluctance motor technology, synchronous reluctance, or such other motor and drive systems technologies as determined by the Secretary of Energy. (c) Aggregate per taxpayer limitation (1) In general The amount of the credit determined under this section for any taxpayer for any taxable year shall not exceed the excess (if any) of $2,000,000 over the aggregate credits allowed under this section with respect to such taxpayer for all prior taxable years. (2) Aggregation rules For purposes of this section, all persons treated as a single employer under subsections (a) and (b) of section 52 shall be treated as 1 taxpayer. (d) Special rules (1) Basis reduction For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed. (2) No double benefit No other credit shall be allowable under this chapter for property with respect to which a credit is allowed under this section. (3) Property used outside United States not qualified No credit shall be allowable under subsection (a) with respect to any property referred to in section 50(b)(1). (e) Application This section shall not apply to property manufactured or placed back into service before the date which is 6 months after the date of the enactment of this section or after December 31, 2016. . (b) Conforming amendments (1) Section 38(b) 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 motor energy efficiency improvement tax credit determined under section 45S. . (2) Section 1016(a) 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 following new paragraph: (38) to the extent provided in section 45S(d)(1). . (3) The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item: Sec. 45S. Motor energy efficiency improvement tax credit. . (c) Effective date The amendments made by this section shall apply to property manufactured or placed back into service after the date which is 6 months after the date of the enactment of this Act. 305. Credit for replacement of CFC refrigerant chiller (a) In general Subpart D of part IV of subchapter A of chapter 1, as amended by this title, is amended by adding at the end the following new section: 45T. CFC chiller replacement credit (a) In general For purposes of section 38, the CFC chiller replacement credit determined under this section for the taxable year is an amount equal to— (1) $150 multiplied by the tonnage rating of a CFC chiller replaced with a new efficient chiller that is placed in service by the taxpayer during the taxable year, plus (2) if all chilled water distribution pumps connected to the new efficient chiller include variable frequency drives, $100 multiplied by any tonnage downsizing. (b) CFC chiller For purposes of this section, the term CFC chiller includes property which— (1) was installed after 1980 and before 1993, (2) utilizes chlorofluorocarbon refrigerant, and (3) until replaced by a new efficient chiller, has remained in operation and utilized for cooling a commercial building. (c) New efficient chiller For purposes of this section, the term new efficient chiller includes a water-cooled chiller which is certified to meet efficiency standards effective on January 1, 2015, as defined in table 6.8 in Standard 90.1-2013 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers. (d) Tonnage downsizing For purposes of this section, the term tonnage downsizing means the amount by which the tonnage rating of the CFC chiller exceeds the tonnage rating of the new efficient chiller. (e) Energy audit As a condition of receiving a tax credit under this section, an energy audit shall be performed on the building prior to installation of the new efficient chiller, identifying cost-effective energy-saving measures, particularly measures that could contribute to chiller downsizing. The audit shall satisfy criteria that shall be issued by the Secretary of Energy. (f) Property used by tax-Exempt entity In the case of a CFC chiller replaced by a new efficient chiller the use of which is described in paragraph (3) or (4) of section 50(b), the person who sold such new efficient chiller to the entity shall be treated as the taxpayer that placed in service the new efficient chiller that replaced the CFC chiller, but only if such person clearly discloses to such entity in a document the amount of any credit allowable under subsection (a) and the person certifies to the Secretary that the person reduced the price the entity paid for such new efficient chiller by the entire amount of such credit. (g) Termination This section shall not apply to replacements made after December 31, 2017. . (b) Conforming amendments (1) Section 38(b), as amended by this title, is amended by striking plus at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , plus , and by adding at the end the following new paragraph: (38) the CFC chiller replacement credit determined under section 45T. . (2) The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by this title, is amended by adding at the end the following new item: Sec. 45T. CFC chiller replacement credit. . (c) Effective date The amendments made by this section shall apply to replacements made after the date of the enactment of this Act. 306. Qualifying efficient industrial process water use project credit (a) In general Section 46 is amended by inserting a comma at the end of paragraph (4), by striking and at the end of paragraph (5), by striking the period at the end of paragraph (6) and inserting , and , and by adding at the end the following new paragraph: (7) the qualifying efficient industrial process water use project credit. . (b) Amount of credit Subpart E of part IV of subchapter A of chapter 1 is amended by inserting after section 48D the following new section: 48E. Qualifying efficient industrial process water use project credit (a) In general (1) Allowance of credit For purposes of section 46, the qualifying efficient industrial process water use project credit for any taxable year is an amount equal to the applicable percentage of the qualified investment for such taxable year with respect to any qualifying efficient industrial process water use project of the taxpayer. (2) Applicable percentage For purposes of subsection (a)— (A) In general The applicable percentage is— (i) 10 percent in the case of a qualifying efficient industrial process water use project which achieves a 25 percent or greater (but less than 50 percent) reduction in water use for industrial purposes, (ii) 20 percent in the case of a qualifying efficient industrial process water use project which achieves a 50 percent or greater (but less than 75 percent) reduction in water use for industrial purposes, and (iii) 30 percent in the case of a qualifying efficient industrial process water use project which achieves a 75 percent or greater reduction in water use for industrial purposes. (B) Water use For purposes of subparagraph (A)— (i) Measurement of reduction in water use (I) In general The taxpayer shall elect one of the methods specified in clause (ii) for measuring the reduction in water use achieved by a qualifying efficient industrial process water use project. (II) Irrevocable election An election under subclause (I), once made with respect to a qualifying efficient industrial process water use project, shall apply to the taxable year for which made and all subsequent taxable years, and may not be revoked. (III) Projected savings The credit under subsection (a) may be claimed on the basis of a reduction in water use which is projected, by a registered professional engineer who is not a related person (within the meaning of section 144(a)(3)(A)) to the taxpayer or the installer of eligible property, to be achieved by a qualifying efficient industrial process water use project. Such projection, if used as a basis for determining the credit under subsection (a), shall be included with the return of tax. (ii) Methods specified The methods specified in this clause are— (I) a measurement of the percentage reduction in water use per unit of product manufactured by the taxpayer, and (II) a measurement of the percentage reduction in water use per pound of product manufactured by the taxpayer. (b) Qualified investment (1) In general For purposes of subsection (a), the qualified investment for any taxable year is the basis of eligible property placed in service by the taxpayer during such taxable year which is part of a qualifying efficient industrial process water use project. (2) Exceptions Such term shall not include any portion of the basis related to— (A) permitting, (B) land acquisition, or (C) infrastructure not directly associated with the implementation of the technology or process improvements of the qualifying efficient industrial process water use project. (3) Certain qualified progress expenditures rules made applicable Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section. (4) Special rule for subsidized energy financing Rules similar to the rules of section 48(a)(4) (without regard to subparagraph (D) thereof) shall apply for purposes of this section. (5) Limitation The amount which is treated for all taxable years with respect to any qualifying efficient industrial process water use project with respect to any site shall not exceed $10,000,000. (c) Definitions For purposes of this section— (1) Qualifying efficient industrial process water use project (A) In general The term qualifying efficient industrial process water use project means, with respect to any site, a project which retrofits or expands an existing facility to implement technology or process improvements which are designed to reduce water use for systems that use any form of water in the production of goods in the manufacturing sector (as defined in North American Industrial Classification System codes 31, 32, and 33), including any system that uses water for heating, cooling, or energy production for the production of goods in the trade or business of manufacturing (other than extraction of fossil fuels). Such term shall not include a project which alters an existing facility to change the type of goods produced by such facility. (B) Systems For purposes of subparagraph (A), the term system does not include any system which does not encompass 1 or more complete processes. (2) Eligible property The term eligible property means any property— (A) which is part of a qualifying efficient industrial process water use project and which is necessary for the reduction in water use described in paragraph (1), (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, and (C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable. (3) Water use (A) In general The term water use means all water taken for use at the site directly from ground and surface water sources together with any water supplied to the site by a regulated water system. (B) Regulated water system The term regulated water system means a system that supplies water that has been treated to potable standards. (d) Termination This section shall not apply to periods after December 31, 2017, under rules similar to the rules of section 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990). . (c) Conforming amendments (1) Section 49(a)(1)(C) is amended by striking and at the end of clause (v), by striking the period at the end of clause (vi) and inserting , and , and by adding at the end the following new clause: (vii) the basis of any property which is part of a qualifying efficient industrial use water project under section 48E. . (2) The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 48D the following new item: Sec. 48E. Qualifying efficient industrial process water use project credit. . (d) Effective date The amendments made by this section shall apply to periods after the date of the enactment of this Act, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).