[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1709 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1709

  To amend the Internal Revenue Code of 1986 to provide incentives to 
 introduce new technologies to reduce energy consumption in buildings.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 15, 2001

Mr. Smith of New Hampshire (for himself and Mrs. Feinstein) 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 provide incentives to 
 introduce new technologies to reduce energy consumption in buildings.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. INCENTIVE FOR CERTAIN ENERGY EFFICIENT PROPERTY USED IN 
              BUSINESS.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new section:

``SEC. 199. ENERGY PROPERTY DEDUCTION.

    ``(a) In General.--There shall be allowed as a deduction for the 
taxable year an amount equal to the energy efficient residential rental 
building property expenditures made by a taxpayer for the taxable year.
    ``(b) Limitations.--
            ``(1) Maximum amount of deduction.--The amount of energy 
        efficient residential rental building property expenditures 
        taken into account under subsection (a) with respect to each 
        dwelling unit shall not exceed the amount specified in the 
        following table:

                                                              Deduction
``In the case of:                                               amount:
    30 percent property...........................              $1,500 
    50 percent property...........................              $4,000.
            ``(2) Year deduction allowed.--The deduction under 
        subsection (a) shall be allowed in the taxable year in which 
        the construction, reconstruction, or repair of the property is 
        completed.
    ``(c) Energy Efficient Residential Rental Building Property 
Expenditures.--For purposes of this section--
            ``(1) In general.--The term `energy efficient residential 
        rental building property expenditures' means an amount paid or 
        incurred in connection with construction, reconstruction, or 
        repair of energy efficient residential rental building 
        property--
                    ``(A) for which depreciation is allowable under 
                section 167,
                    ``(B) which is located in the United States, and
                    ``(C) the construction, reconstruction, or repair 
                of which is completed by the taxpayer.
        Such term includes expenditures for labor costs properly 
        allocable to the onsite preparation, assembly, or original 
        installation of the property.
            ``(2) Energy efficient residential rental building 
        property.--
                    ``(A) In general.--The term `energy efficient 
                residential rental building property' means any 
                property which reduces total annual energy and power 
                costs with respect to heating and cooling of the 
                building by 50 percent or more in the case of 50 
                percent property or 30 percent or more in the case of 
                30 percent property in comparison to the projected 
                energy cost of such property without such expenditures. 
                Such comparison shall be made using the procedures 
                under subparagraph (B).
                    ``(B) Procedures.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), energy usage and costs shall 
                        be demonstrated either by a component-based 
                        approach or a performance-based approach.
                            ``(ii) Component approach.--Component 
                        approach compliance shall be demonstrated if 
                        all of the components of the dwelling unit 
                        comply with the requirements of prescriptive 
                        packages established by the Secretary of 
                        Energy, in consultation with the Administrator 
                        of the Environmental Protection Agency, such 
                        that the majority of the buildings which use 
                        such approach achieve energy cost reductions 
                        equivalent to the results of using the 
                        performance-based approach under clause (iii).
                            ``(iii) Performance-based approach.--
                        Performance-based compliance shall be 
                        demonstrated if the 30 percent or 50 percent 
                        energy cost savings for heating and cooling, as 
                        applicable, are met with respect to a dwelling 
                        unit when compared to the original condition of 
                        the dwelling unit.
                            ``(iv) Computer software.--Computer 
                        software shall be used in support of 
                        performance-based compliance under clause (iii) 
                        and such software shall meet all of the 
                        procedures and methods for calculating energy 
                        savings reductions that are promulgated by the 
                        Secretary of Energy. Such regulations on the 
                        specifications for software and verification 
                        protocols shall be based on the 2001 California 
                        Residential Alternative Calculation Method 
                        Approval Manual.
                            ``(v) Calculation requirements.--In 
                        calculating tradeoffs and energy performance, 
                        the regulations prescribed under this 
                        subparagraph shall prescribe for the taxable 
                        year the costs per unit of energy and power, 
                        such as kilowatt hour, kilowatt, gallon of fuel 
                        oil, and cubic foot or Btu of natural gas, 
                        which may be dependent on time of usage. Such 
                        costs shall be based on average current and 
                        future costs to the consumer.
                            ``(vi) Approval of software submissions.--
                        The Secretary shall approve software 
                        submissions that comply with the requirements 
                        of clause (iv).
                            ``(vii) Procedures for inspection and 
                        testing of homes.--The Secretary shall ensure 
that procedures for the inspection and testing for compliance comply 
with the calculation requirements under clause (iv).
                    ``(C) Determinations of compliance.--A 
                determination of compliance with respect to energy 
                efficient residential rental building property made for 
                the purposes of this paragraph shall be filed with the 
                Secretary not later than 1 year after the date of such 
                determination and shall include the TIN of the 
                certifier, the address of the building in compliance, 
                and the identity of the person for whom such 
                determination was performed. Determinations of 
                compliance filed with the Secretary shall be available 
                for inspection by the Secretary of Energy.
                    ``(D) Compliance.--
                            ``(i) In general.--The Secretary, in 
                        consultation with the Secretary of Energy shall 
                        establish requirements for certification and 
                        compliance procedures after examining the 
                        requirements for energy consultants and home 
                        energy ratings providers specified by the 
                        Mortgage Industry National Accreditation 
                        Procedures for Home Energy Rating Systems.
                            ``(ii) Individuals qualified to determine 
                        compliance.--Individuals qualified to determine 
                        compliance shall be only those individuals who 
                        are recognized by an organization certified by 
                        the Secretary for such purposes. The Secretary 
                        may qualify a Home Energy Rating Systems 
                        Organization, a local building code agency, a 
                        State or local energy office, a utility, or 
                        other organizations which meet the requirements 
                        prescribed under this section.
            ``(4) Allocation of deduction for public property.--In the 
        case of energy efficient residential rental building property 
        which is public property, the Secretary shall promulgate a 
        regulation to allow the allocation of the deduction to the 
        person primarily responsible for designing the improvements to 
        the property in lieu of the public entity which is the owner of 
        such property. Such person shall be treated as the taxpayer for 
        purposes of this subsection.
    ``(d) Basis Reduction.--For purposes of this subtitle, if a 
deduction is allowed under this section with respect to any property, 
the basis of such property shall be reduced by the amount of the 
deduction so allowed.
    ``(e) Regulations.--The Secretary shall promulgate such regulations 
as necessary to take into account new technologies regarding energy 
efficiency and renewable energy for purposes of determining energy 
efficiency and savings under this section.
    ``(f) Termination.--This section shall not apply with respect to 
any property placed in service, or construction, reconstruction, 
repair, or erection completed, after December 31, 2007.''.
    (b) Conforming Amendment.--Section 1016(a) of the Internal Revenue 
Code of 1986 is amended by striking ``and'' at the end of paragraph 
(26), by striking the period at the end of paragraph (27) and inserting 
``, and'', and by inserting the following new paragraph:
            ``(28) for amounts allowed as a deduction under section 
        199(a).''.
    (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new item:

                              ``Sec. 199. Energy property deduction.''.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated to the Department of Energy out of amounts not already 
appropriated such sums as necessary to carry out this section.
    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service, or construction, reconstruction, 
repair, or erection completed, in taxable years beginning after 
December 31, 2001.

SEC. 2. CREDIT FOR CERTAIN NONBUSINESS ENERGY PROPERTY.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25B the 
following new section:

``SEC. 25C. HIGHLY ENERGY-EFFICIENT NONBUSINESS ENERGY PROPERTY.

    ``(a) Allowance of Credit.--
            ``(1) 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 an amount equal to the amount of 
        residential energy property expenditures made by the taxpayer 
        for the taxable year.
            ``(2) Limitation.--The credit allowed under paragraph (1) 
        with respect to a residence of a taxpayer shall not exceed the 
        amount specified in the following table:

``Highly energy-efficient property:                      Credit amount:
        30 percent property....................................   $500 
        50 percent property.................................... $1,250.
            ``(3) Year credit allowed.--The credit under paragraph (1) 
        shall be allowed for the taxable year in which the principal 
        residence of the taxpayer is certified as 50 percent property 
        or 30 percent property.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Residential energy property expenditures.--The term 
        `residential energy property expenditures' means expenditures 
        made by the taxpayer in connection with the construction, 
        reconstruction, or repair of a dwelling unit of the taxpayer 
        which results in the unit being a highly energy-efficient 
        principal residence. Such term includes expenditures for labor 
        costs properly allocable to the onsite preparation, assembly, 
        or original installation of the property.
            ``(2) Highly energy-efficient principal residence.--
                    ``(A) In general.--Property is a highly energy-
                efficient principal residence if--
                            ``(i) such property is located in the 
                        United States,
                            ``(ii) the property is the principal 
                        residence of the taxpayer, and
                            ``(iii) such property is certified as being 
                        50 percent property or 30 percent property.
                    ``(B) 50 or 30 percent property.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), property is 50 
percent property or 30 percent property if the projected heating and 
cooling energy cost of such property, measured in terms of average 
annual energy cost to taxpayer, is reduced by 50 percent, or 30 
percent, respectively, in comparison to the energy cost of such 
property if expenditures made by the taxpayer with respect to energy 
efficient improvements to such property were not made. Such comparison 
shall be determined using the procedures under clause (ii).
                            ``(ii) Procedures.--
                                    ``(I) In general.--For purposes of 
                                clause (i), energy usage shall be 
                                demonstrated either by a component-
                                based approach or a performance-based 
                                approach.
                                    ``(II) Component approach.--
                                Component approach compliance shall be 
                                demonstrated if all of the components 
                                of the property comply with the 
                                requirements of prescriptive packages 
                                established by the Secretary of Energy, 
                                in consultation with the Administrator 
                                of the Environmental Protection Agency, 
                                such that the majority of the buildings 
                                which use such approach achieve energy 
                                cost reductions equivalent to the 
                                results of using the performance-based 
                                approach under subclause (III).
                                    ``(III) Performance-based 
                                approach.--Performance-based compliance 
                                shall be demonstrated if the 30 percent 
                                or 50 percent energy cost savings for 
                                heating and cooling, as applicable, are 
                                met with respect to a dwelling unit 
                                when compared to the original condition 
                                of the property.
                                    ``(IV) Computer software.--Computer 
                                software shall be used in support of 
                                performance-based compliance under 
                                subclause (III) and such software shall 
                                meet all of the procedures and methods 
                                for calculating energy savings 
                                reductions that are promulgated by the 
                                Secretary of Energy. Such regulations 
                                on the specifications for software and 
                                verification protocols shall be based 
                                on the 2001 California Residential 
                                Alternative Calculation Method Approval 
                                Manual.
            ``(3) Principal residence.--For purposes of this section--
                    ``(A) In general.--The term `principal residence' 
                has the same meaning as when used in section 121, 
                except that--
                            ``(i) no ownership requirement shall be 
                        imposed, and
                            ``(ii) the period for which a building is 
                        treated as the principal residence of the 
                        taxpayer shall also include the 60-day period 
                        ending on the 1st day on which it would (but 
                        for this subparagraph) first be treated as a 
                        principal residence.
                    ``(B) Manufactured housing.--The term `residence' 
                shall include a dwelling unit which is manufactured 
                housing.
    ``(c) Special Rules.--For purposes of this section--
            ``(1) Dollar amounts in case of joint occupancy.--In the 
        case of any dwelling unit which if jointly occupied and used 
        during any calendar year as a residence by 2 or more 
        individuals the following rules shall apply:
                    ``(A) The amount of the credit allowable under 
                subsection (a) by reason of expenditures made during 
                such calendar year by any of such individuals with 
                respect to such dwelling unit shall be determined by 
                treating all of such individuals as 1 taxpayer whose 
                taxable year is such calendar year.
                    ``(B) There shall be allowable with respect to such 
                expenditures to each of such individuals, a credit 
                under subsection (a) for the taxable year in which such 
                calendar year ends in an amount which bears the same 
                ratio to the amount determined under subparagraph (A) 
                as the amount of such expenditures made by such 
individual during such calendar year bears to the aggregate of such 
expenditures made by all of such individuals during such calendar year.
            ``(2) Tenant-stockholder in cooperative housing 
        corporation.--In the case of an individual who is a tenant-
        stockholder (as defined in section 216) in a cooperative 
        housing corporation (as defined in such section), such 
        individual shall be treated as having made his tenant-
        stockholder's proportionate share (as defined in section 
        216(b)(3)) of any expenditures of such corporation and such 
        credit shall be allocated pro rata to such individual.
            ``(3) Condominiums.--
                    ``(A) In general.--In the case of an individual who 
                is a member of a condominium management association 
                with respect to a condominium which he owns, such 
                individual shall be treated as having made his 
                proportionate share of any expenditures of such 
                association and any credit shall be allocated 
                appropriately.
                    ``(B) Condominium management association.--For 
                purposes of this paragraph, the term `condominium 
                management association' means an organization which 
                meets the requirements of paragraph (1) of section 
                528(c) (other than subparagraph (E) thereof) with 
                respect to a condominium project substantially all of 
                the units of which are used as residences.
            ``(4) Joint ownership of energy items.--
                    ``(A) In general.--Any expenditure otherwise 
                qualifying as a residential energy property expenditure 
                shall not be treated as failing to so qualify merely 
                because such expenditure was made with respect to 2 or 
                more dwelling units.
                    ``(B) Limits applied separately.--In the case of 
                any expenditure described in subparagraph (A), the 
                amount of the credit allowable under subsection (a) 
                shall (subject to paragraph (1)) be computed separately 
                with respect to the amount of the expenditure made for 
                each dwelling unit.
            ``(5) Allocation in certain cases.--If less than 80 percent 
        of the use of an item is for nonbusiness purposes, only that 
        portion of the expenditures for such item which is properly 
        allocable to use for nonbusiness purposes shall be taken into 
        account.
            ``(6) Property financed by subsidized energy financing.--
                    ``(A) Reduction of expenditures.--
                            ``(i) In general.--Except as provided in 
                        subparagraph (B), for purposes of determining 
                        the amount of residential energy property 
                        expenditures made by any individual with 
                        respect to any dwelling unit, there shall not 
                        be taken into account expenditures which are 
                        made from subsidized energy financing.
                            ``(ii) Subsidized energy financing.--For 
                        purposes of clause (i), the term `subsidized 
                        energy financing' has the same meaning given 
                        such term in section 48(a)(4)(C).
                    ``(B) Exception for state programs.--Subparagraph 
                (A) shall not apply to expenditures made with respect 
                to property for which the taxpayer has received a loan, 
                State tax credit, or grant under any State energy 
                program.
    ``(d) Basis Adjustments.--For purposes of this subtitle, if a 
credit is allowed under this section for any expenditure with respect 
to any property, the increase in the basis of such property which would 
(but for this subsection) result from such expenditure shall be reduced 
by the amount of the credit so allowed.
    ``(e) Regulations.--The Secretary shall promulgate such regulations 
as necessary to take into account new technologies regarding energy 
efficiency and renewable energy for purposes of determining energy 
efficiency and savings under this section.
    ``(f) Termination.--This section shall not apply with respect to 
any taxable years beginning after December 31, 2007.''.
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 1016 of the Internal Revenue 
        Code of 1986 as amended by section 1(b), is amended by striking 
        ``and'' at the end of paragraph (27), by striking the period at 
        the end of paragraph (28) and inserting ``, and'', and by 
        adding at the end the following new paragraph:
            ``(29) to the extent provided in section 25C(e), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25C.''.
            (2) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 25B the following new item:

                              ``Sec. 25C. Nonbusiness energy 
                                        property.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenditures made after December 31, 2001.
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