Short title

This Act may be cited as the

Renewable Energy Security Act of 2004

Weatherization Assistance

Section 415(c) of the Energy Conservation and Production Act (42 U.S.C. 6865(c)) is amended— (1)in paragraph (1), by striking in paragraph (3) and inserting in paragraphs (3) and (4); (2)in paragraph (3), by striking $2,500 per dwelling unit average provided in paragraph (1) and inserting dwelling unit averages provided in paragraphs (1) and (4); and (3) by adding at the end the following new paragraphs:

(4)The expenditure of financial assistance provided under this part for labor, weatherization materials, and related matters for a renewable energy system shall not exceed an average of $3,000 per dwelling unit. (5) (A)The Secretary, in consultation with the Secretary of Housing and Urban Development and other appropriate Federal officers, shall by regulations— (i)establish the criteria which are to be used in prescribing performance and quality standards under paragraph (6)(A)(ii) or in specifying any form of renewable energy under paragraph (6)(A)(i)(I); and (ii)establish a procedure under which a manufacturer of an item may request the Secretary to certify that the item will be treated, for purposes of this paragraph, as a renewable energy system. (B)The Secretary shall make a final determination with respect to any request filed under subparagraph (A)(ii) within 1 year after the filing of the request, together with any information required to be filed with such request under subparagraph (A)(ii). (C)Each month the Secretary shall publish a report of any request under subparagraph (A)(ii) which has been denied during the preceding month and the reasons for the denial. (D)The Secretary shall not specify any form of renewable energy under paragraph (6)(A)(i)(I) unless the Secretary determines that— (i)there will be a reduction in oil or natural gas consumption as a result of such specification; (ii)such specification will not result in an increased use of any item which is known to be, or reasonably suspected to be, environmentally hazardous or a threat to public health or safety; and (iii)available Federal subsidies do not make such specification unnecessary or inappropriate (in the light of the most advantageous allocation of economic resources). (6)In this subsection— (A)the term renewable energy system means a system which— (i)when installed in connection with a dwelling, transmits or uses— (I)solar energy, energy derived from the geothermal deposits, energy derived from biomass, or any other form of renewable energy which the Secretary specifies by regulations, for the purpose of heating or cooling such dwelling or providing hot water or electricity for use within such dwelling; or (II)wind energy for nonbusiness residential purposes; (ii)meets the performance and quality standards (if any) which have been prescribed by the Secretary by regulations; (iii)in the case of a combustion rated system, has a thermal efficiency rating of at least 75 percent; and (iv)in the case of a solar system, has a thermal efficiency rating of at least 15 percent; and (B)the term biomass means any organic matter that is available on a renewable or recurring basis, including agricultural crops and trees, wood and wood wastes and residues, plants (including aquatic plants), grasses, residues, fibers, and animal wastes, municipal wastes, and other waste materials.

District heating and cooling programs

Section 172 of the Energy Policy Act of 1992 (42 U.S.C. 13451 note) is amended— (1)in subsection (a)— (A)by striking and at the end of paragraph (3); (B)by striking the period at the end of paragraph (4) and inserting ; and; and (C)by adding at the end the following new paragraph:

(5) evaluate the use of renewable energy systems (as such term is defined in section 415(c) of the Energy Conservation and Production Act (42 U.S.C. 6865(c))) in residential buildings.

; and

(2)in subsection (b), by striking this Act and inserting the Renewable Energy Security Act of 2004.

Definition of biomass

Section 203(2) of the Biomass Energy and Alcohol Fuels Act of 1980 (42 U.S.C. 8802(2)) is amended to read as follows:

(2) The term biomass means any organic matter that is available on a renewable or recurring basis, including agricultural crops and trees, wood and wood wastes and residues, plants (including aquatic plants), grasses, residues, fibers, and animal wastes, municipal wastes, and other waste materials.

Credit for residential renewable energy systems

(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 the item relating to section 25B the following new section:

25C.

Residential renewable energy system

(a)

General rule

In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to 20 percent of the qualified renewable energy system expenditures made by the taxpayer during the taxable year. (b)

Limitations

For purposes of subsection (a)— (1)

Maximum credit

The amount of the credit allowed under subsection (a) for a taxable year shall not exceed $3,000. (2)

Prior expenditures by taxpayer on same residence taken into account

If for any prior year a credit was allowed to the taxpayer under this section with respect to any dwelling unit by reason of qualified renewable energy system expenditures, paragraph (1) shall be applied for the taxable year with respect to such dwelling unit by reducing the dollar amount contained therein by the prior year expenditures taken into account under such paragraph. (3)

Minimum dollar amount

No credit shall be allowed under this section with respect to any return for any taxable year if the amount which would (but for this paragraph) be allowed with respect to such return is less than $10. (4)

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 23) and section 27 for the taxable year. (5)

Carryover of unused credit

If the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by paragraph (4) 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. No credit may be carried forward under this subsection to any taxable year following the fifth taxable year after the taxable year in which the credit arose. For purposes of the preceding sentence, credits shall be treated as used on a first-in first-out basis. (c)

Definitions and special rules

For purposes of this section— (1)

Qualified renewable energy system expenditure

(A)

In general

The term qualified renewable energy system expenditure means an expenditure made by the taxpayer for renewable energy system property installed in connection with a dwelling unit— (i)which is located in the United States, and (ii)which is used by the taxpayer as his principal residence. (B)

Certain labor and other costs included

The term qualified renewable energy system expenditure includes— (i)expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of renewable energy system property, and (ii)expenditures for an onsite well drilled for any geothermal deposit (as defined in section 613(e)(3)), but only if the taxpayer has not elected under section 263(c) to deduct any portion of such expenditures. (C)

Swimming pool, etc., used as storage medium

The term qualified renewable energy system expenditure does not include any expenditure properly allocable to a swimming pool used as an energy storage medium or to any other energy storage medium which has a primary function other than the function of such storage. (D)

Certain solar panels

No solar panel installed as a roof (or portion thereof) shall fail to be treated as renewable energy system property solely because it constitutes a structural component of the dwelling on which it is installed. (2)

Renewable energy system property

The term renewable energy system property means property— (A)which constitutes a renewable energy system, as defined by section 415(c)(6) of the Energy Conservation and Production Act (42 U.S.C. 6865(c)(6)), (B)the original use of which begins with the taxpayer, and (C)which can reasonably be expected to remain in operation for at least 5 years. (3)

Effective date

(A)

In general

In the case of any energy system specified under paragraph (2)(A), the credit allowed by subsection (a) shall apply with respect to expenditures which are made on or after the date on which final notice of such specification is published in the Federal Register. (B)

Expenditures taken into account in following taxable years

The Secretary may prescribe by regulations that expenditures made on or after the date referred to in clause (i) and before the close of the taxable year in which such date occurs shall be taken into account in the following taxable year. (4)

When expenditures made; amount of expenditures

(A)

In general

Except as provided in subparagraph (B), an expenditure with respect to an item shall be treated as made when original installation of the item is completed. (B)

Construction or reconstruction of dwelling

In the case of qualified renewable energy system expenditures in connection with the construction or reconstruction of a dwelling, such expenditures shall be treated as made when the original use of the constructed or reconstructed dwelling by the taxpayer begins. (C)

Amount

The amount of any expenditure shall be the cost thereof. (D)

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 subparagraph, use for a swimming pool shall be treated as use which is not for residential purposes. (5)

Principal residence

The determination of whether or not a dwelling unit is a taxpayer’s principal residence shall be made under principles similar to those applicable to section 121, except that— (A)no ownership requirement shall be imposed, and (B)the period for which a dwelling is treated as the principal residence of the taxpayer shall include the 30-day period ending on the first day on which it would (but for this subparagraph) be treated as his principal residence. (6)

Property financed by subsidized energy financing

(A)

Reduction of qualified expenditures

For purposes of determining the amount of qualified renewable energy system 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. (B)

Dollar limits reduced

Paragraph (1) of subsection (b) shall be applied with respect to such dwelling unit for any taxable year of such taxpayer by reducing each dollar amount contained in such paragraph (reduced as provided in subsection (b)(3)) by an amount equal to the sum of— (i)the amount of the expenditures which were made by the taxpayer during such taxable year or any prior taxable year with respect to such dwelling unit and which were not taken into account by reason of subparagraph (A), and (ii)the amount of any Federal, State, or local grant received by the taxpayer during such taxable year or any prior taxable year which was used to make qualified renewable energy system expenditures with respect to the dwelling unit and which was not included in the gross income of such taxpayer. (C)

Subsidized energy financing

For purposes of subparagraph (A), the term subsidized energy financing means financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy. (d)

Special rules

For purposes of this section— (1)

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 principal residence by 2 or more individuals— (A)the amount of the credit allowable under subsection (a) by reason of qualified renewable energy system expenditures (as the case may be) 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 one taxpayer whose taxable year is such calendar year, and (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. (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. (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 qualified renewable energy system 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 by each individual. (e)

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. (f)

Termination

This section shall not apply to expenditures made after December 31, 2009.

(b)

Clerical amendment

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. Residential renewable energy system

(c)

Basis adjustment

Section 1016(a) 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 new paragraph:

(29)to the extent provided in section 25C(e).

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

Credit for renewable energy systems placed in service by small businesses

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

45G.

Renewable energy systems credit

(a)

In general

For purposes of section 38, in the case of an eligible small business, the amount of the renewable energy systems credit determined under this section for any taxable year shall be an amount equal to 20 percent of the qualified renewable energy system expenditures for the taxable year. (b)

Limitation

The amount of the credit allowed under subsection (a) for a taxable year shall not exceed $10,000. (c)

Eligible small business

For purposes of this section, the term eligible small business has the meaning given such term by section 44(b). (d)

Qualified renewable energy system expenditures

The term qualified renewable energy system expenditures has the meaning given such term by section 25C(c)(1), except that commercial property shall be substituted for dwelling unit each place it appears and subparagraph (A)(ii) thereof shall not apply. (e)

Applicable rules

For purposes of this section, rules similar to the rules of paragraphs (2), (6), and (7) of section 44(d) shall apply.

(b)

Credit made part of general business credit

Section 38(b) of such Code (relating to current year business credit) is amended by striking plus at the end of paragraph (14), by striking the period at the end of paragraph (15) and inserting , plus, and by adding at the end the following new paragraph:

(16)the renewable energy systems credit determined under section 45G(a).

(c)

Limitation on carryback

Section 39(d) of such Code (relating to transitional rules) is amended by adding at the end the following new paragraph:

(11)

No carryback of renewable energy systems credit before effective date

No portion of the unused business credit for any taxable year which is attributable to the credit determined under section 45G may be carried back to any taxable year ending on or before the date of the enactment of section 45G.

(d)

Clerical amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 45G. Renewable energy systems credit

(e)

Effective date

The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.