Energy efficient property credit

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 45L the following:

45M.

Energy efficient heat pump credit

(a)

Establishment of credit

(1)

In general

For purposes of section 38, the energy efficient heat pump credit determined under this section for any taxable year is an amount equal to the sum of the credit amounts determined under paragraph (2) for each type of qualified energy efficient heat pump produced by the taxpayer during the calendar year ending with or within the taxable year. (2)

Credit amounts

The credit amount determined for any type of qualified energy efficient heat pump is—(A)the applicable amount determined under subsection (b) with respect to such type, multiplied by(B)the eligible production for such type, as determined under subsection (c).(b)

Applicable amount

For purposes of subsection (a) and subject to subsections (f) and (h)(4), the applicable amount shall be determined as follows:(1)

Heat pump water heaters

(A)

Consumer heat pump water heaters

In the case of a consumer heat pump water heater which meets the requirements of the Energy Star Water Heater program which are in effect at the time that such water heater is produced by the taxpayer, the applicable amount shall be—(i)in the case of a water heater with a volume of less than 55 gallons, $600, or(ii)in the case of a water heater with a volume of not less than 55 gallons, $800.(B)

Commercial heat pump water heaters

In the case of a commercial heat pump water heater which meets the requirements of the Energy Star Commercial Water Heater program which are in effect at the time that such water heater is produced by the taxpayer, the applicable amount shall be the amount equal to the product of—(i)the heating capacity of such water heater, expressed in Btus per hour, multiplied by(ii)2.4 cents.(2)

Heat pumps

(A)

Consumer unitary heat pumps

(i)

In general

In the case of a consumer unitary heat pump, the applicable amount shall be—(I)in the case of a heat pump which satisfies the applicable requirement under clause (ii)—(aa)in the case of a heat pump which is a ducted system with a heating capacity of not less than 22,000 Btus per hour and which satisfies the Energy Star Energy-Efficient Criteria for Certified Residential Cold Climate Heat Pumps or the Energy Star Energy-Efficient Criteria for Geothermal Heat Pumps which are in effect at the time that such heat pump is produced by the taxpayer, $1,000, (bb)in the case of an electric heat pump which is not described in item (aa) and is produced during any calendar year beginning after December 31, 2023, by a taxpayer which has not produced any consumer central air conditioner units during such calendar year, $600, or(cc)in the case of a heat pump which is not described in item (aa) or (bb), $400, and(II)subject to clause (iii), in the case of a heat pump which does not satisfy the applicable requirement under clause (ii) and is produced during any calendar year beginning after December 31, 2023, by a taxpayer which has not produced any consumer central air conditioner units during such calendar year, $600.(ii)

Additional Requirement

The requirement described in this clause is the Energy Star Central Air Conditioner and Air Source Heat Pump Specification which is in effect at the time that the heat pump is produced by the taxpayer.(iii)

Limitation

For purposes of clause (i)(II), if the total number of heat pumps described in such clause which are produced by the taxpayer during any calendar year beginning after December 31, 2023, exceeds the number of heat pumps described in clause (i)(I)(bb) which are produced by the taxpayer during such calendar year, clause (i)(II) shall not apply with respect to the amount of such excess.(B)

Commercial heat pumps

(i)

In general

In the case of a commercial heat pump which satisfies the applicable requirements under clause (ii), the applicable amount shall be the amount equal to the product of—(I)the heating capacity of such heat pump, expressed in Btus per hour, multiplied by(II)2.4 cents.(ii)

Requirements

The requirement described in this clause is—(I)in the case of an air-source unitary heat pump which has a cooling capacity of not greater than 240,000 Btus per hour, such heat pump satisfies—(aa)the requirements of the Energy Star Light Commercial HVAC program which are in effect at the time that such heat pump is produced by the taxpayer, or(bb)the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect at the time that such heat pump is produced by the taxpayer, or(II)in the case of any heat pump which is not described in subclause (I), such heat pump exceeds the minimum efficiency standards under Reference Standard 90.1 by not less than 10 percent, as determined under testing conditions specified in Reference Standard 90.1.(iii)

Heating capacity

For purposes of clause (i)(I), in the case of an air-source heat pump, the heating capacity of such heat pump shall be determined using an ambient temperature of 17 degrees Fahrenheit.(C)

Industrial heat pump

In the case of an industrial heat pump, the applicable amount shall be the amount equal to the product of—(i)the heating capacity of such heat pump, expressed in Btus per hour, multiplied by(ii)(I)in the case of a heat pump with a heating capacity of not greater than 2,400,000 Btus per hour, 3.6 cents, or(II)in the case of a heat pump with a heating capacity greater than 2,400,000 Btus per hour and a coefficient of performance of not less than 2.0, 1.8 cents. (c)

Eligible production

Subject to subsection (h)(4), the eligible production in a calendar year with respect to each type of qualified energy efficient heat pump is the excess of—(1)the number of heat pumps of such type which are produced by the taxpayer in the United States during such calendar year, over(2)the average number of heat pumps of such type which were produced by the taxpayer (or any predecessor) in the United States during the preceding 3-calendar year period.(d)

Types of qualified energy efficient heat pumps

For purposes of this section, the types of qualified energy efficient heat pumps are—(1)consumer heat pump water heaters described in subparagraph (A) of subsection (b)(1),(2)commercial heat pump water heaters described in subparagraph (B) of such subsection,(3)consumer unitary heat pumps described in subparagraph (A)(i) of subsection (b)(2),(4)commercial heat pumps described in subparagraph (B)(i) of such subsection, and(5)industrial heat pumps described in subparagraph (C) of such subsection.(e)

Limitations

(1)

Aggregate credit amount allowed

The aggregate amount of credit allowed under subsection (a) with respect to a taxpayer for any taxable year shall not exceed an amount equal to the sum of—(A)with respect to any consumer unitary heat pumps described in subsection (b)(2)(A)(i)(I)(bb), $300,000,000 reduced by the amount of the credit allowed under subsection (a) to the taxpayer (or any predecessor) with respect to such heat pumps for all prior taxable years beginning after December 31, 2023, plus(B)with respect to any qualified energy efficient heat pumps (including any consumer unitary heat pumps described in subsection (b)(2)(A)(i)(I)(bb) which are not included under subparagraph (A)), $400,000,000 reduced by the amount of the credit allowed under subsection (a) to the taxpayer (or any predecessor) with respect to such heat pumps for all prior taxable years beginning after December 31, 2021.(2)

Limitation based on gross receipts

The credit allowed under subsection (a) with respect to a taxpayer for the taxable year shall not exceed an amount equal to 4 percent of the average annual gross receipts of the taxpayer for the 3 taxable years preceding the taxable year in which the credit is determined.(3)

Gross receipts

For purposes of this subsection, the rules of paragraphs (2) and (3) of section 448(c) shall apply.(f)

Adjustment of energy efficiency criteria and test procedures

(1)

Adjustment of energy efficiency criteria for industrial heat pumps

Not later than December 31, 2023, and every 2 years thereafter, the Secretary, in consultation with the Secretary of Energy, shall—(A)review the requirement with respect to coefficient of performance for industrial heat pumps under subsection (b)(2)(C)(ii)(II), and(B)as necessary, prescribe regulations or other guidance which revise any such requirement to ensure that—(i)the credit allowed under subsection (a) only applies to industrial heat pumps which are the most efficient industrial heat pumps that are commercially available, and(ii)not less than 3 manufacturers produce such heat pumps across a range of product heating capacities.(2)

Test methods and procedures

(A)

Industrial heat pumps

Not later than the date which is 12 months after the date of enactment of this Act, the Secretary of Energy shall prescribe regulations or other guidance which establish test methods and procedures to determine the coefficient of performance for industrial heat pumps.(B)

ANSI and ISO test methods and procedures

For purposes of developing the test methods and procedures described in subparagraph (A), the Secretary of Energy shall expand upon any relevant test methods and procedures established by the American National Standards Institute and the International Organization for Standardization which are in effect as of the date of enactment of the Heating Efficiency and Affordability through Tax Relief Act.(g)

Definitions

In this section—(1)

Btus

The term Btus means British thermal units.(2)

Coefficient of performance

(A)

In general

The term coefficient of performance means the ratio of heat output to energy input.(B)

Default

Until such time as the Secretary of Energy issues regulations or guidance under subsection (f)(2), in the case of any industrial heat pump, any determination with respect to coefficient of performance for purposes of this section shall be determined using any test methods or procedures employed by the taxpayer which produced such heat pump, provided that such taxpayer makes any test conditions and assumptions with respect to such methods or procedures publicly available.(3)

Commercial heat pump

The term commercial heat pump means a heat pump which—(A)is designed to provide space heating and cooling, and(B)is not described in subparagraph (B) of paragraph (6). (4)

Commercial heat pump water heater

The term commercial heat pump water heater means a water heater which uses a heat pump to heat water and is not described in subparagraph (A) or (B) of paragraph (5).(5)

Consumer heat pump water heater

The term consumer heat pump water heater means a water heater which uses a heat pump to heat water and has a maximum current rating of 24 amperes at a voltage not greater than 250 volts.(6)

Consumer unitary heat pump

The term consumer unitary heat pump means a heat pump which—(A)is designed to provide space heating and cooling, and (B)has a cooling capacity of not greater than 65,000 Btus per hour.(7)

Industrial heat pump

The term industrial heat pump means a heat pump which—(A)upgrades industrial waste heat to a higher temperature, and(B)such heat is produced and supplied to an industrial facility in a manner which is more energy efficient than conventional heating methods, such as a steam or electric resistance boiler.(8)

Qualified energy efficient heat pump

The term qualified energy efficient heat pump means—(A)any consumer heat pump water heater described in subparagraph (A) of subsection (b)(1),(B)any commercial heat pump water heater described in subparagraph (B) of such subsection, (C)any consumer unitary heat pump described in subparagraph (A) of subsection (b)(2),(D)any commercial heat pump described in subparagraph (B) of such subsection, and(E)any industrial heat pump described in subparagraph (C) of such subsection.(9)

Produced

The term produced includes manufactured or assembled.(10)

Reference Standard 90.1

The term Reference Standard 90.1 means, with respect to any heat pump, the most recent Standard 90.1 published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers which is in effect at the time that such heat pump is produced by the taxpayer.(h)

Special rules

For purposes of this section—(1)

In general

Rules similar to the rules of subsections (c), (d), and (e) of section 52 shall apply.(2)

Controlled group

(A)

In general

All persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as a single producer.(B)

Inclusion of foreign corporations

For purposes of subparagraph (A), in applying subsections (a) and (b) of section 52 to this section, section 1563 shall be applied without regard to subsection (b)(2)(C) thereof.(3)

Verification

No amount shall be allowed as a credit under subsection (a) with respect to which the taxpayer has not submitted such information or certification as the Secretary, in consultation with the Secretary of Energy, determines necessary.(4)

10 percent increase in applicable amount for heat pumps produced in union facilities

In the case of any qualified energy efficient heat pump which is produced in a facility operating under a collective bargaining agreement negotiated by an employee organization (as defined in section 412(c)(4)), determined in a manner consistent with section 7701(a)(46), for purposes of determining the credit amount under subsection (a)(2) with respect to such heat pump, the applicable amount determined under subsection (b) with respect to such heat pump shall be increased by an amount equal to 10 percent of the applicable amount otherwise in effect under such subsection. (i)

Election for direct payment

(1)

In general

In the case of a taxpayer making an election (at such time and in such manner as the Secretary may provide) under this subsection with respect to any credit determined under subsection (a) with respect to such taxpayer, such taxpayer shall be treated as making a payment against the tax imposed by subtitle A (for the taxable year with respect to which such credit was determined) equal to the amount of such credit.(2)

Special rules

For purposes of this subsection—(A)

Application to partnerships and S corporations

(i)

In general

In the case of any credit determined under subsection (a) with respect to any property produced by a partnership or S corporation, if such partnership or S corporation makes an election under paragraph (1) (in such manner as the Secretary may provide) with respect to such credit—(I)the Secretary shall make a payment to such partnership or S corporation equal to the amount of such credit,(II)paragraph (4) shall be applied with respect to such credit before determining any partner’s distributive share, or shareholder’s pro rata share, of such credit,(III)any amount with respect to which the election in paragraph (1) is made shall be treated as tax exempt income for purposes of sections 705 and 1366, and(IV)a partner’s distributive share of such tax exempt income shall be based on such partner’s distributive share of such credit for each taxable year.(ii)

Coordination with application at partner or shareholder level

In the case of any partnership or S corporation, paragraph (1) shall be applied at the partner or shareholder level after application of clause (i)(II).(B)

Elections

Any election under paragraph (1) shall be made not later than the due date (including extensions of time) for the return of tax for the taxable year for which the election is made. Any such election, once made, shall be irrevocable. Any election under paragraph (1) shall apply with respect to any credit for the taxable year for which the election is made.(C)

Timing

The payment described in paragraph (1) shall be treated as made on the later of the due date (determined without regard to extensions) of the return of tax for the taxable year or the date on which such return is filed.(D)

Treatment of payments to partnerships and S corporations

For purposes of section 1324 of title 31, United States Code, the payments under subparagraph (A)(i)(I) shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.(E)

Additional information

As a condition of, and prior to, a payment under this subsection, the Secretary may require such information or registration as the Secretary deems necessary or appropriate for purposes of preventing duplication, fraud, improper payments, or excessive payments under this subsection.(F)

Excessive payment

(i)

In general

In the case of a payment made to a taxpayer under this paragraph or any amount treated as a payment which is made by the taxpayer under paragraph (1) which the Secretary determines constitutes an excessive payment, the tax imposed on such taxpayer by chapter 1 for the taxable year in which such determination is made shall be increased by an amount equal to the sum of—(I)the amount of such excessive payment, plus(II)an amount equal to 20 percent of such excessive payment. (ii)

Reasonable cause

Clause (i)(II) shall not apply if the taxpayer demonstrates to the satisfaction of the Secretary that the excessive payment resulted from reasonable cause.(iii)

Excessive payment defined

For purposes of this subparagraph, the term excessive payment means, with respect to an election is made under this subsection for any taxable year, an amount equal to the excess of—(I)the amount of the payment made to the taxpayer under this paragraph or any amount treated as a payment which is made by the taxpayer under paragraph (1) for such taxable year, over(II)the amount of the credit which, without application of this paragraph, would be otherwise allowable (determined without regard to section 38(c)) under subsection (a) for such taxable year.(3)

Denial of double benefit

In the case of a taxpayer making an election under this subsection with respect to the credit allowed under subsection (a), such credit shall be reduced to zero and shall, for any other purposes under this title, be deemed to have been allowed to the taxpayer for such taxable year.(4)

Mirror code possessions

In the case of any possession of the United States with a mirror code tax system (as defined in section 24(k)), this subsection shall not be treated as part of the income tax laws of the United States for purposes of determining the income tax law of such possession unless such possession elects to have this subsection be so treated. (5)

Regulations

The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this subsection, including—(A)regulations or other guidance providing rules for determining a partner’s distributive share of the tax exempt income described in paragraph (2)(A)(i)(III), and(B)guidance to ensure that the amount of the payment or deemed payment made under this subsection is commensurate with the amount of the credit that would be otherwise allowable (determined without regard to section 38(c)). (j)

Termination

This section shall not apply with respect to any property produced after December 31, 2031.

(b)

Conforming amendments

(1)Section 38(b) of the Internal Revenue Code of 1986 is amended—(A)by redesignating paragraphs (26) through (33) as paragraphs (27) through (34), respectively, and(B)by inserting after paragraph (25) the following:

(26)the energy efficient heat pump credit determined under section 45M,

(2)The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 45L the following item:

Sec. 45M. Energy efficient heat pump credit.

(c)

Effective date

The amendments made by this section shall apply to property produced after the date of enactment of this Act.