[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1423 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 1423

To amend the Internal Revenue Code of 1986 to expand the energy credit 
 to include investment in property which produces energy from certain 
  renewable sources and expenditures for cool roofing, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 25, 2003

 Mr. Engel (for himself and Mr. Terry) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addition 
      to the Committee on Energy and Commerce, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to expand the energy credit 
 to include investment in property which produces energy from certain 
  renewable sources and expenditures for cool roofing, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Preserving Our World's Energy and 
Resources Act of 2003''.

SEC. 2. ENERGY CREDIT FOR INVESTMENTS IN CERTAIN RENEWABLE RESOURCE 
              PROPERTY AND COOL ROOF PROPERTY.

    (a) Energy Property Used in Business.--
            (1) In general.--Subparagraph (A) of section 48(a)(3) of 
        the Internal Revenue Code of 1986 (defining energy property) is 
        amended by striking ``or'' at the end of clause (i) and by 
        inserting after clause (ii) the following new clauses:
                            ``(iii) equipment which uses wind to 
                        generate electricity, or
                            ``(iv) cool roof property,''.
            (2) Energy percentage.--Paragraph (2) of section 48(a) of 
        such Code (relating to energy percentage) is amended--
                    (A) in subparagraph (A) by striking ``The'' and 
                inserting ``Except as provided in subparagraph (B), 
                the'', and
                    (B) by redesignating subparagraph (B) as 
                subparagraph (C) and by inserting after subparagraph 
                (A) the following new subparagraph:
                    ``(B) Exception.--The energy percentage for the 
                following properties is--
                            ``(i) 25 percent for equipment which uses 
                        solar energy to generate electricity,
                            ``(ii) 25 percent for equipment which uses 
                        wind to generate electricity,
                            ``(iii) 25 percent for equipment which uses 
                        energy derived from geothermal deposits and 
                        which is described in paragraph (3)(A)(ii), and
                            ``(iv) 30 percent for cool roof 
                        property.''.
            (3) Cool roof property defined.--Subsection (a) of section 
        48 of such Code (relating to energy credit) is amended by 
        redesignating paragraphs (4) and (5) as paragraphs (5) and (6), 
        respectively, and by inserting after paragraph (3) the 
        following new paragraph:
            ``(4) Cool roof property.--For purposes of this subsection, 
        the term `cool roof property' means property which is used as a 
        roof or roof coating and which has a solar reflectance index 
        (as determined by the Lawrence Berkeley National Laboratory) of 
        65 percent or greater.''.
            (4) Credit allowable against regular and minimum tax.--
                    (A) In general.--Section 38(c) of such Code 
                (relating to limitation based on amount of tax) is 
                amended by redesignating paragraph (3) as paragraph (4) 
                and inserting after paragraph (2) the following:
            ``(3) Special rules for energy credit relating to equipment 
        which uses wind to generate electricity and cool roof 
        property.--
                    ``(A) In general.--In the case of the portion of 
                the energy credit relating to equipment which uses wind 
                to generate electricity and cool roof property--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to such portion 
                        of the credit, and
                            ``(ii) in applying paragraph (1) to such 
                        portion of the credit--
                                    ``(I) subparagraphs (A) and (B) 
                                thereof shall not apply, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than such portion).
                    ``(B) Portion of energy credit relating to 
                equipment which uses wind to generate electricity and 
                cool roof property.--For purposes of this subsection, 
                the portion of energy credit relating to equipment 
                which uses wind to generate electricity and cool roof 
                property means the credit allowable under subsection 
                (a) by reason of clauses (iii) and (iv) of section 
                48(a)(3)(A).''.
                    (B) Conforming amendment.--Subclause (II) of 
                section 38(c)(2)(A)(ii) of such Code is amended by 
                inserting ``or the portion of energy credit relating to 
                equipment which uses wind to generate electricity and 
                cool roof property'' after ``employment credit''.
    (b) Renewable Resource and Cool Roof Property.--
            (1) In general.--Subpart A of part IV of subchapter A of 
        chapter 1 of such Code (relating to nonrefundable personal 
        credits) is amended by inserting after section 25B the 
        following new section:

``SEC. 25C. CERTAIN RENEWABLE RESOURCE AND COOL ROOF PROPERTY.

    ``(a) Allowance of Credit.--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 paid or incurred by 
the taxpayer for qualified renewable resource property and qualified 
cool roof property installed during such taxable year.
    ``(b) Limitation.--
            ``(1) Limitation based on amount of tax.--The credit 
        allowed under subsection (a) for any taxable year shall not 
        exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under this 
                subpart (other than this section) and section 27 for 
                the taxable year.
            ``(2) Carryforward of unused credit.--If the credit 
        allowable under subsection (a) exceeds the limitation imposed 
        by paragraph (1) for such taxable year, such excess shall be 
        carried to the succeeding taxable year and added to the credit 
        allowable under subsection (a) for such taxable year.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified renewable resource property.--The term 
        `qualified renewable resource property' means--
                    ``(A) equipment which uses solar energy to generate 
                electricity,
                    ``(B) equipment which uses wind to generate 
                electricity, and
                    ``(C) equipment which uses energy derived from 
                geothermal deposits to generate electricity and which 
                is described in section 48(a)(3)(A)(ii).
            ``(2) Cool roof property.--The term `cool roof property' 
        means property which is used as a roof or roof coating and 
        which has a solar reflectance index (as determined by the 
        Lawrence Berkeley National Laboratory) of 65 percent or 
        greater.
            ``(3) Labor costs.--Expenditures for labor costs properly 
        allocable to the onsite preparation, assembly, or original 
        installation of the property described in paragraph (1) or (2) 
        and for wiring to interconnect such property to the dwelling 
        unit shall be taken into account for purposes of this section.
            ``(4) Energy storage medium.--Expenditures which are 
        properly allocable to a swimming pool, hot tub, or any other 
        energy storage medium which has a function other than the 
        function of such storage shall not be taken into account for 
        purposes of this section.
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Property must be installed on principal residence.--
        Property shall not be treated as described in subsection (c) 
        unless--
                    ``(A) such property is installed in or on a 
                dwelling--
                            ``(i) located in the United States, and
                            ``(ii) owned and used by the taxpayer as 
                        the taxpayer's principal residence (within the 
                        meaning of section 121),
                    ``(B) the original use of such property commences 
                with the taxpayer, and
                    ``(C) such property reasonably can be expected to 
                remain in use for at least 5 years.
            ``(2) Dollar amounts in case of joint occupancy.--In the 
        case of any dwelling unit which is jointly occupied and used 
        during any calendar year as a residence by 2 or more 
        individuals the following shall apply:
                    ``(A) The amount of the credit allowable under 
                subsection (a) by reason of expenditures for qualified 
                renewable resource property and qualified cool roof 
                property 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.
            ``(3) 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 paid his tenant-
        stockholder's proportionate share (as defined in section 
        216(b)(3)) of the cost of qualified renewable resource property 
        and qualified cool roof property made by such corporation.
            ``(4) 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 paid his 
                proportionate share of the cost of qualified renewable 
                resource property and qualified cool roof property made 
                by such association.
                    ``(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.
            ``(5) Manufactured homes included.--For purposes of this 
        section, the term `dwelling' includes a manufactured home which 
        conforms to Federal Manufactured Home Construction and Safety 
        Standards (24 C.F.R. 3280).
            ``(6) Joint ownership of items of solar or wind energy 
        property.--
                    ``(A) In general.--Any expenditure otherwise 
                qualifying as an expenditure described in paragraph (1) 
                or (2) of subsection (c) 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.
            ``(7) Allocation in certain cases.--If less than 80 percent 
        of the use of an item is for nonbusiness residential purposes, 
        only that portion of the expenditures for such item which is 
        properly allocable to use for nonbusiness residential purposes 
        shall be taken into account. For purposes of this paragraph, 
        use for a swimming pool shall be treated as use which is not 
        for residential purposes.
            ``(8) When expenditure made; amount of expenditure.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), an expenditure with respect to an 
                item shall be treated as made when the original 
                installation of the item is completed.
                    ``(B) Expenditures part of building construction.--
                In the case of an expenditure in connection with the 
construction or reconstruction of a structure, such expenditure shall 
be treated as made when the original use of the constructed or 
reconstructed structure by the taxpayer begins.
                    ``(C) Amount.--The amount of any expenditure shall 
                be the cost thereof.
            ``(9) Reduction of credit for grants, tax-exempt bonds, and 
        subsidized energy financing.--The rules of section 29(b)(3) 
        shall apply for purposes of this section.
    ``(e) Basis Adjustment.--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.''.
    (c) Conforming Amendments.--
            (1) Subsection (c) of section 23 of such Code is amended by 
        striking ``sections 24'' and inserting ``sections 24, 25C,''.
            (2) Subparagraph (C) of section 25(e)(1) of such Code is 
        amended by inserting ``25C'' after ``25B,''.
            (3) Paragraph (1) of section 26(a) of such Code is amended 
        by striking ``and 25B'' and inserting ``25B, and 25C''.
            (4) Section 904(h) of such Code is amended by striking 
        ``and 25B'' and inserting ``25B, and 25C''.
            (5) Subsection (d) of section 1400C of such Code is amended 
        by striking ``and 25B'' and inserting ``25B, and 25C''.
            (6) Subsection (a) of section 1016 of such Code 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:
            ``(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.''.
            (7) 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. Certain renewable resource 
                                        and cool roof property.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending on or after the date of the enactment of 
this Act.

SEC. 3. NET METERING.

    Part II of the Federal Power Act is amended by adding the following 
new section at the end thereof:

``SEC. 215. NET METERING.

    ``(a) Definitions.--As used in this section:
            ``(1) The term `customer-generator' means the owner or 
        operator of an electric generation unit qualified for net 
        metering under this section.
            ``(2) The term `net metering' means measuring the 
        difference between the electricity supplied to a customer-
        generator and the electricity generated by a customer-generator 
        that is delivered to a local distribution section system at the 
        same point of interconnection during an applicable billing 
        period.
            ``(3) The terms `electric generation unit qualified for net 
        metering' and `qualified generation unit' mean an electric 
        energy generation unit that meets the requirements of paragraph 
        (5) and each of the following requirements:
                    ``(A) The unit is a fuel cell or uses as its energy 
                source either solar, wind, or biomass.
                    ``(B) The unit has a generating capacity of not 
                more than 100 kilowatts.
                    ``(C) The unit is located on premises that are 
                owned, operated, leased, or otherwise controlled by the 
                customer-generator.
                    ``(D) The unit operates in parallel with the retail 
                electric supplier.
                    ``(E) The unit is intended primarily to offset part 
                or all of the customer-generator's requirements for 
                electric energy.
            ``(4) The term `retail electric supplier' means any person 
        that sells electric energy to the ultimate consumer thereof.
            ``(5) The term `local distribution system' means any system 
        for the distribution section of electric energy to the ultimate 
        consumer thereof, whether or not the owner or operator of such 
        system is also a retail electric supplier.
    ``(b) Adoption.--Not later than one year after the enactment of 
this section, each retail electric supplier shall comply with each of 
the following requirements and notify all of its retail customers of 
such requirements not less frequently than quarterly:
            ``(1) The supplier shall offer to arrange (either directly 
        or through a local distribution company or other third party) 
        to make available, on a first-come-first-served basis, to each 
        of its retail customers that has installed an energy generation 
        unit that is intended for net metering and that notifies the 
        supplier of its generating capacity an electric energy meter 
        that is capable of net metering if the customer-generator's 
        existing electrical meter cannot perform that function.
            ``(2) Rates and charges and contract terms and conditions 
        for the sale of electric energy to customer-generators shall be 
        the same as the rates and charges and contract terms and 
        conditions that would be applicable if the customer-generator 
        did not own or operate a qualified generation unit and use a 
        net metering system.
Any retail electric supplier or local distribution company may, at its 
own expense, install one or more additional electric energy meters to 
monitor the flow of electricity in either direction or to reflect the 
time of generation or both. Whenever a customer-generator with a net 
metering system uses any energy generation system entitled to credits 
under a Federal minimum renewable energy generation requirement, the 
total amount of energy generated by that system shall be treated as 
generated by the retail electric supplier for purposes of such 
requirement.
    ``(c) Net Energy Measurement and Billing.--Each retail electric 
supplier subject to subsection (b) shall calculate the net energy 
measurement for a customer using a net metering system in the following 
manner:
            ``(1) The retail electric supplier shall measure the net 
        electricity produced or consumed during the billing period 
        using the metering referred to in paragraph (1) or (2) of 
        subsection (b).
            ``(2) If the electricity supplied by the retail electric 
        supplier exceeds the electricity generated by the customer-
        generator during the billing period, the customer-generator 
        shall be billed for the net electricity supplied by the retail 
        electric supplier in accordance with normal metering practices.
            ``(3) If electricity generated by the customer-generator 
        exceeds the electricity supplied by the retail electric 
        supplier, the customer-generator--
                    ``(A) shall be billed for the appropriate customer 
                charges for that billing period;
                    ``(B) shall be credited for the excess electric 
                energy generated during the billing period, with this 
                credit appearing on the bill for the following billing 
                period (except for a billing period that ends in the 
                next calendar year); and
                    ``(C) shall not be charged for transmission losses.
        If the customer-generator is using a meter that reflects the 
        time of generation (a `real time meter'), the credit shall be 
        based on the retail rates for sale by the retail electric 
        supplier at the time of such generation. At the beginning of 
        each calendar year, any remaining unused kilowatt-hour credit 
        accumulated by a customer-generator during the previous year 
        may be sold by the customer-generator to any electric supplier 
        that agrees to purchase such credit. In the absence of any such 
        purchase, the credit shall be assigned (at no cost) to the 
        retail electric supplier that supplied electric energy to such 
        customer-generator at the end of the previous year.
    ``(d) Percent Limitations.--
            ``(1) Two percent limitation.--A local distribution company 
        retail electric supplier shall not be required to provide local 
        distribution service with respect to additional customer-
        generators after the date during any calendar year on which the 
        total generating capacity of all customer-generators with 
        qualified generation facilities and net metering systems served 
        by that local distribution company is equal to or in excess of 
        2 percent of the capacity necessary to meet the company's 
        average forecasted aggregate customer peak demand for that 
        calendar year.
            ``(2) One percent limitation.--A local distribution company 
        retail electric supplier shall not be required to provide local 
distribution service with respect to additional customer-generators 
using a single type of qualified energy generation system after the 
date during any calendar year on which the total generating capacity of 
all customer-generators with qualified generation facilities of that 
type and net metering systems served by that local distribution company 
is equal to or in excess of 1 percent of the capacity necessary to meet 
the company's average forecasted aggregate customer peak demand for 
that calendar year.
            ``(3) Records and notice.--Each retail electric supplier 
        shall maintain, and make available to the public, records of 
        the total generating capacity of customer-generators of such 
        system that are using net metering, the type of generating 
        systems and energy source used by the electric generating 
        systems used by such customer-generators. Each such retail 
        electric supplier shall notify the Commission when the total 
        generating capacity of such customer-generators is equal to or 
        in excess of 2 percent of the capacity necessary to meet the 
        supplier's aggregate customer peak demand during the previous 
        calendar year and when the total generating capacity of such 
        customer-generators using a single type of qualified generation 
        is equal to or in excess of 1 percent of such capacity.
    ``(e) Safety and Performance Standards.--(1) A qualified generation 
unit and net metering system used by a customer-generator shall meet 
all applicable safety and performance and reliability standards 
established by the national electrical code, the Institute of 
Electrical and Electronics Engineers, Underwriters Laboratories, or the 
American National Standards Institute.
    ``(2) The Commission, after consultation with State regulatory 
authorities and nonregulated local distribution systems and after 
notice and opportunity for comment, may adopt by regulation additional 
control and testing requirements for customer-generators that the 
Commission determines are necessary to protect public safety and system 
reliability.
    ``(3) The Commission shall, after consultation with State 
regulatory authorities and nonregulated local distribution systems and 
after notice and opportunity for comment, prohibit by regulation the 
imposition of additional charges by electric suppliers and local 
distribution systems for equipment or services for safety or 
performance that are additional to those necessary to meet the 
standards referred to in subparagraphs (A) and (B).
    ``(f) State Authority.--Nothing in this section shall preclude a 
State from establishing or imposing additional incentives or 
requirements to encourage qualified generation and net metering 
additional to that required under this section.''.
    ``(g) Interconnection Standards.--(1) Within one year after the 
enactment of this section the Commission shall publish model standards 
for the physical connection between local distribution systems and 
qualified generation units and electric generation units that would be 
qualified generation units but for the fact that the unit has a 
generating capacity of more than 100 kilowatts (but not more than 250 
kilowatts). Such model standards shall be designed to encourage the use 
of qualified generation units and to insure the safety and reliability 
of such units and the local distribution systems interconnected with 
such units. Within 2 years after the enactment of this section, each 
State shall adopt such model standards, with or without modification, 
and submit such standards to the Commission for approval. The 
Commission shall approve a modification of the model standards only if 
the Commission determines that such modification is consistent with the 
purpose of such standards and is required by reason of local 
conditions. If standards have not been approved under this paragraph by 
the Commission for any State within 2 years after the enactment of this 
section, the Commission shall, by rule or order, enforce the 
Commission's model standards in such State until such time as State 
standards are approved by the Commission.
    ``(2) The standards under this section shall establish such 
measures for the safety and reliability of the affected equipment and 
local distribution systems as may be appropriate. Such standards shall 
be consistent with all applicable safety and performance standards 
established by the national electrical code, the Institute of 
Electrical and Electronics Engineers, Underwriters Laboratories, or the 
American National Standards Institute and with such additional safety 
and reliability standards as the Commission shall, by rule, prescribe. 
Such standards shall ensure that generation units will automatically 
isolate themselves from the electrical system in the event of an 
electrical power outage. Such standards shall permit the owner or 
operator of the local distribution system to interrupt or reduce 
deliveries of available energy from the generation unit to the system 
when necessary in order to construct, install, maintain, repair, 
replace, remove, investigate, or inspect any of its equipment or part 
of its system; or if it determines that curtailment, interruption, or 
reduction is necessary because of emergencies, forced outages, force 
majeure, or compliance with prudent electrical practices.
    ``(3) The model standards under this subsection prohibit the 
imposition of additional charges by local distribution systems for 
equipment or services for interconnection that are additional to those 
necessary to meet such standards.
    ``(h) Interconnection.--At the election of the owner or operator of 
the generation unit concerned, connections meeting the standards 
applicable under subsection (g) may be made--
            ``(1) by such owner or operator at such owner's or 
        operator's expense, or
            ``(2) by the owner or operator of the local distribution 
        system upon the request of the owner or operator of the 
        generating unit and pursuant to an offer by the owner or 
        operator of the generating unit to reimburse the local 
        distribution system in an amount equal to the minimum cost of 
        such connection, consistent with the procurement procedures of 
        the State in which the unit is located, except that the work on 
        all such connections shall be performed by qualified electrical 
        personnel certified by a responsible body or licensed by a 
        State or local government authority.
    ``(i) Consumer Friendly Contracts.--The Commission shall promulgate 
regulations insuring that simplified contracts will be used for the 
interconnection of electric energy by electric energy transmission or 
distribution systems and generating facilities that have a power 
production capacity not greater than 250 kilowatts.''
                                 <all>