[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1541 Reported in House (RH)]






                                                  Union Calendar No. 25
109th CONGRESS
  1st Session
                                H. R. 1541

                          [Report No. 109-45]

     To amend the Internal Revenue Code of 1986 to enhance energy 
infrastructure properties in the United States and to encourage the use 
        of certain energy technologies, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 12, 2005

  Mr. Thomas introduced the following bill; which was referred to the 
                      Committee on Ways and Means

                             April 18, 2005

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
 [For text of introduced bill, see copy of bill as introduced on April 
                               12, 2005]

_______________________________________________________________________

                                 A BILL


 
     To amend the Internal Revenue Code of 1986 to enhance energy 
infrastructure properties in the United States and to encourage the use 
        of certain energy technologies, 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; ETC.

    (a) Short Title.--This Act may be cited as the ``Enhanced Energy 
Infrastructure and Technology Tax Act of 2005''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.

             TITLE I--ENERGY INFRASTRUCTURE TAX INCENTIVES

Sec. 101. Natural gas gathering lines treated as 7-year property.
Sec. 102. Natural gas distribution lines treated as 15-year property.
Sec. 103. Electric transmission property treated as 15-year property.
Sec. 104. Expansion of amortization for certain atmospheric pollution 
                            control facilities in connection with 
                            plants first placed in service after 1975.
Sec. 105. Modification of credit for producing fuel from a 
                            nonconventional source.
Sec. 106. Modifications to special rules for nuclear decommissioning 
                            costs.
Sec. 107. Arbitrage rules not to apply to prepayments for natural gas.
Sec. 108. Determination of small refiner exception to oil depletion 
                            deduction.

             TITLE II--MISCELLANEOUS ENERGY TAX INCENTIVES

Sec. 201. Credit for residential energy efficient property.
Sec. 202. Credit for business installation of qualified fuel cells.
Sec. 203. Reduced motor fuel excise tax on certain mixtures of diesel 
                            fuel.
Sec. 204. Amortization of delay rental payments.
Sec. 205. Amortization of geological and geophysical expenditures.
Sec. 206. Advanced lean burn technology motor vehicle credit.
Sec. 207. Credit for energy efficiency improvements to existing homes.

               TITLE III--ALTERNATIVE MINIMUM TAX RELIEF

Sec. 301. New nonrefundable personal credits allowed against regular 
                            and minimum taxes.
Sec. 302. Certain business energy credits allowed against regular and 
                            minimum taxes.

             TITLE I--ENERGY INFRASTRUCTURE TAX INCENTIVES

SEC. 101. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR PROPERTY.

    (a) In General.--Subparagraph (C) of section 168(e)(3) (relating to 
classification of certain property) is amended by striking ``and'' at 
the end of clause (iii), by redesignating clause (iv) as clause (v), 
and by inserting after clause (iii) the following new clause:
                            ``(iv) any natural gas gathering line, 
                        and''.
    (b) Natural Gas Gathering Line.--Subsection (i) of section 168 is 
amended by inserting after paragraph (16) the following new paragraph:
            ``(17) Natural gas gathering line.--The term `natural gas 
        gathering line' means--
                    ``(A) the pipe, equipment, and appurtenances 
                determined to be a gathering line by the Federal Energy 
                Regulatory Commission, and
                    ``(B) the pipe, equipment, and appurtenances used 
                to deliver natural gas from the wellhead or a 
                commonpoint to the point at which such gas first 
                reaches--
                            ``(i) a gas processing plant,
                            ``(ii) an interconnection with a 
                        transmission pipeline for which a certificate 
                        as an interstate transmission pipeline has been 
                        issued by the Federal Energy Regulatory 
                        Commission,
                            ``(iii) an interconnection with an 
                        intrastate transmission pipeline, or
                            ``(iv) a direct interconnection with a 
                        local distribution company, a gas storage 
                        facility, or an industrial consumer.''.
    (c) Alternative System.--The table contained in section 
168(g)(3)(B) is amended by inserting after the item relating to 
subparagraph (C)(iii) the following:

``(C) (iv)..................................................      14''.
    (d) Alternative Minimum Tax Exception.--Subparagraph (B) of section 
56(a)(1) is amended by inserting before the period the following: ``, 
or in section 168(e)(3)(C)(iv)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service after April 11, 2005.

SEC. 102. NATURAL GAS DISTRIBUTION LINES TREATED AS 15-YEAR PROPERTY.

    (a) In General.--Subparagraph (E) of section 168(e)(3) (relating to 
classification of certain property) is amended by striking ``and'' at 
the end of clause (v), by striking the period at the end of clause (vi) 
and inserting ``, and'', and by adding at the end the following new 
clause:
                            ``(vii) any natural gas distribution 
                        line.''.
    (b) Alternative System.--The table contained in section 
168(g)(3)(B) is amended by inserting after the item relating to 
subparagraph (E)(vi) the following:

``(E) (vii).................................................      35''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after April 11, 2005.

SEC. 103. ELECTRIC TRANSMISSION PROPERTY TREATED AS 15-YEAR PROPERTY.

    (a) In General.--Subparagraph (E) of section 168(e)(3) (relating to 
classification of certain property), as amended by section 102 of this 
Act, is amended by striking ``and'' at the end of clause (vi), by 
striking the period at the end of clause (vii) and inserting ``, and'', 
and by adding at the end the following new clause:
                            ``(viii) any section 1245 property (as 
                        defined in section 1245(a)(3)) used in the 
                        transmission at 69 or more kilovolts of 
                        electricity for sale and the original use of 
                        which commences with the taxpayer after April 
                        11, 2005.''.
    (b) Alternative System.--The table contained in section 
168(g)(3)(B) is amended by inserting after the item relating to 
subparagraph (E)(vii) the following:

``(E) (viii)................................................      30''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after April 11, 2005.

SEC. 104. EXPANSION OF AMORTIZATION FOR CERTAIN ATMOSPHERIC POLLUTION 
              CONTROL FACILITIES IN CONNECTION WITH PLANTS FIRST PLACED 
              IN SERVICE AFTER 1975.

    (a) Eligibility of Post-1975 Pollution Control Facilities.--
Subsection (d) of section 169 (relating to definitions) is amended by 
adding at the end the following:
            ``(5) Special rule relating to certain atmospheric 
        pollution control facilities.--In the case of any atmospheric 
        pollution control facility which is placed in service after 
        April 11, 2005, and used in connection with an electric 
        generation plant or other property which is primarily coal 
        fired, paragraph (1) shall be applied without regard to the 
        phrase `in operation before January 1, 1976'.''.
    (b) Treatment as New Identifiable Treatment Facility.--Subparagraph 
(B) of section 169(d)(4) is amended to read as follows:
                    ``(B) Certain facilities placed in operation after 
                april 11, 2005.--In the case of any facility described 
                in paragraph (1) solely by reason of paragraph (5), 
                subparagraph (A) shall be applied by substituting 
                `April 11, 2005' for `December 31, 1968' each place it 
                appears therein.''.
    (c) Technical Amendment.--Section 169(d)(3) is amended by striking 
``Health, Education, and Welfare'' and inserting ``Health and Human 
Services''.
    (d) Effective Date.--The amendments made by this section shall 
apply to facilities placed in service after April 11, 2005.

SEC. 105. MODIFICATION OF CREDIT FOR PRODUCING FUEL FROM A 
              NONCONVENTIONAL SOURCE.

    (a) Treatment as Business Credit.--
            (1) Credit moved to subpart relating to business related 
        credits.--The Internal Revenue Code of 1986 is amended by 
        redesignating section 29 as section 45J and by moving section 
        45J (as so redesignated) from subpart B of part IV of 
        subchapter A of chapter 1 to the end of subpart D of part IV of 
        subchapter A of chapter 1.
            (2) Credit treated as business credit.--Section 38(b) is 
        amended by striking ``plus'' at the end of paragraph (18), by 
        striking the period at the end of paragraph (19) and inserting 
        ``, plus'', and by adding at the end the following:
            ``(20) the nonconventional source production credit 
        determined under section 45J(a).''.
            (3) Conforming amendments.--
                    (A) Section 30(b)(3)(A) is amended by striking 
                ``sections 27 and 29'' and inserting ``section 27''.
                    (B) Sections 43(b)(2), 45I(b)(2)(C)(i), and 
                613A(c)(6)(C) are each amended by striking ``section 
                29(d)(2)(C)'' and inserting ``section 45J(d)(2)(C)''.
                    (C) Section 45(e)(9) is amended--
                            (i) by striking ``section 29'' and 
                        inserting ``section 45J'', and
                            (ii) by inserting ``(or under section 29, 
                        as in effect on the day before the date of 
                        enactment of the Enhanced Energy Infrastructure 
                        and Technology Tax Act of 2005, for any prior 
                        taxable year)'' before the period at the end 
                        thereof.
                    (D) Section 45I is amended--
                            (i) in subsection (c)(2)(A) by striking 
                        ``section 29(d)(5))'' and inserting ``section 
                        45J(d)(5))'', and
                            (ii) in subsection (d)(3) by striking 
                        ``section 29'' both places it appears and 
                        inserting ``section 45J''.
                    (E) Section 45J(a), as redesignated by paragraph 
                (1), is amended by striking ``There shall be allowed as 
                a credit against the tax imposed by this chapter for 
                the taxable year'' and inserting ``For purposes of 
                section 38, if the taxpayer elects to have this section 
                apply, the nonconventional source production credit 
                determined under this section for the taxable year 
                is''.
                    (F) Section 45J(b), as so redesignated, is amended 
                by striking paragraph (6).
                    (G) Section 53(d)(1)(B)(iii) is amended by striking 
                ``under section 29'' and all that follows through ``or 
                not allowed''.
                    (H) Section 55(c)(3) is amended by striking 
                ``29(b)(6),''.
                    (I) Subsection (a) of section 772 is amended by 
                inserting ``and'' at the end of paragraph (9), by 
                striking paragraph (10), and by redesignating paragraph 
                (11) as paragraph (10).
                    (J) Paragraph (5) of section 772(d) is amended by 
                striking ``the foreign tax credit, and the credit 
                allowable under section 29'' and inserting ``and the 
                foreign tax credit''.
                    (K) The table of sections for subpart B of part IV 
                of subchapter A of chapter 1 is amended by striking the 
                item relating to section 29.
                    (L) The table of sections for subpart D of part IV 
                of subchapter A of chapter 1 is amended by inserting 
                after the item relating to section 45I the following 
                new item:

``Sec. 45J. Credit for producing fuel from a nonconventional source.''.
    (b) Amendments Conforming to the Repeal of the Natural Gas Policy 
Act of 1978.--
            (1) In general.--Section 29(c)(2)(A) (before redesignation 
        under subsection (a)) is amended--
                    (A) by inserting ``(as in effect before the repeal 
                of such section)'' after ``1978'', and
                    (B) by striking subsection (e) and redesignating 
                subsections (f) and (g) as subsections (e) and (f), 
                respectively.
            (2) Conforming amendments.--Section 29(g)(1)(before 
        redesignation under subsection (a) and paragraph (1) of this 
        subsection) is amended--
                    (A) in subparagraph (A) by striking ``subsection 
                (f)(1)(B)'' and inserting ``subsection (e)(1)(B)'', and
                    (B) in subparagraph (B) by striking ``subsection 
                (f)'' and inserting ``subsection (e)''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to credits 
        determined under the Internal Revenue Code of 1986 for taxable 
        years ending after December 31, 2005.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall take effect on the date of the enactment of this Act.

SEC. 106. MODIFICATIONS TO SPECIAL RULES FOR NUCLEAR DECOMMISSIONING 
              COSTS.

    (a) Repeal of Limitation on Deposits Into Fund Based on Cost of 
Service; Contributions After Funding Period.--Subsection (b) of section 
468A (relating to special rules for nuclear decommissioning costs) is 
amended to read as follows:
    ``(b) Limitation on Amounts Paid Into Fund.--The amount which a 
taxpayer may pay into the Fund for any taxable year shall not exceed 
the ruling amount applicable to such taxable year.''.
    (b) Treatment of Certain Decommissioning Costs.--
            (1) In general.--Section 468A is amended by redesignating 
        subsections (f) and (g) as subsections (g) and (h), 
        respectively, and by inserting after subsection (e) the 
        following new subsection:
    ``(f) Transfers Into Qualified Funds.--
            ``(1) In general.--Notwithstanding subsection (b), any 
        taxpayer maintaining a Fund to which this section applies with 
        respect to a nuclear power plant may transfer into such Fund 
        not more than an amount equal to the present value of the 
        portion of the total nuclear decommissioning costs with respect 
        to such nuclear power plant previously excluded for such 
        nuclear power plant under subsection (d)(2)(A) as in effect 
        immediately before the date of the enactment of the Enhanced 
        Energy Infrastructure and Technology Tax Act of 2005.
            ``(2) Deduction for amounts transferred.--
                    ``(A) In general.--Except as provided in 
                subparagraph (C), the deduction allowed by subsection 
                (a) for any transfer permitted by this subsection shall 
                be allowed ratably over the remaining estimated useful 
                life (within the meaning of subsection (d)(2)(A)) of 
                the nuclear power plant beginning with the taxable year 
                during which the transfer is made.
                    ``(B) Denial of deduction for previously deducted 
                amounts.--No deduction shall be allowed for any 
                transfer under this subsection of an amount for which a 
                deduction was previously allowed to the taxpayer (or a 
                predecessor) or a corresponding amount was not included 
                in gross income of the taxpayer (or a predecessor). For 
                purposes of the preceding sentence, a ratable portion 
                of each transfer shall be treated as being from 
                previously deducted or excluded amounts to the extent 
                thereof.
                    ``(C) Transfers of qualified funds.--If--
                            ``(i) any transfer permitted by this 
                        subsection is made to any Fund to which this 
                        section applies, and
                            ``(ii) such Fund is transferred thereafter,
                any deduction under this subsection for taxable years 
                ending after the date that such Fund is transferred 
                shall be allowed to the transferor for the taxable year 
                which includes such date.
                    ``(D) Special rules.--
                            ``(i) Gain or loss not recognized on 
                        transfers to fund.--No gain or loss shall be 
                        recognized on any transfer described in 
                        paragraph (1).
                            ``(ii) Transfers of appreciated property to 
                        fund.--If appreciated property is transferred 
                        in a transfer described in paragraph (1), the 
                        amount of the deduction shall not exceed the 
                        adjusted basis of such property.
            ``(3) New ruling amount required.--Paragraph (1) shall not 
        apply to any transfer unless the taxpayer requests from the 
        Secretary a new schedule of ruling amounts in connection with 
        such transfer.
            ``(4) No basis in qualified funds.--Notwithstanding any 
        other provision of law, the taxpayer's basis in any Fund to 
        which this section applies shall not be increased by reason of 
        any transfer permitted by this subsection.''.
            (2) New ruling amount to take into account total costs.--
        Subparagraph (A) of section 468A(d)(2) (defining ruling amount) 
        is amended to read as follows:
                    ``(A) fund the total nuclear decommissioning costs 
                with respect to such power plant over the estimated 
                useful life of such power plant, and''.
    (c) Technical Amendments.--Section 468A(e)(2) (relating to taxation 
of Fund) is amended--
            (1) by striking ``rate set forth in subparagraph (B)'' in 
        subparagraph (A) and inserting ``rate of 20 percent'',
            (2) by striking subparagraph (B), and
            (3) by redesignating subparagraphs (C) and (D) as 
        subparagraphs (B) and (C), respectively.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 107. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR NATURAL GAS.

    (a) In General.--Subsection (b) of section 148 (relating to higher 
yielding investments) is amended by adding at the end the following new 
paragraph:
            ``(4) Safe harbor for prepaid natural gas.--
                    ``(A) In general.--The term `investment-type 
                property' does not include a prepayment under a 
                qualified natural gas supply contract.
                    ``(B) Qualified natural gas supply contract.--For 
                purposes of this paragraph, the term `qualified natural 
                gas supply contract' means any contract to acquire 
                natural gas for resale by a utility owned by a 
                governmental unit if the amount of gas permitted to be 
                acquired under the contract by the utility during any 
                year does not exceed the sum of--
                            ``(i) the annual average amount during the 
                        testing period of natural gas purchased (other 
                        than for resale) by customers of such utility 
                        who are located within the service area of such 
                        utility, and
                            ``(ii) the amount of natural gas to be used 
                        to transport the prepaid natural gas to the 
                        utility during such year.
                    ``(C) Natural gas used to generate electricity.--
                Natural gas used to generate electricity shall be taken 
                into account in determining the average under 
                subparagraph (B)(i)--
                            ``(i) only if the electricity is generated 
                        by a utility owned by a governmental unit, and
                            ``(ii) only to the extent that the 
                        electricity is sold (other than for resale) to 
                        customers of such utility who are located 
                        within the service area of such utility.
                    ``(D) Adjustments for changes in customer base.--
                            ``(i) New business customers.--If--
                                    ``(I) after the close of the 
                                testing period and before the date of 
                                issuance of the issue, the utility 
                                owned by a governmental unit enters 
                                into a contract to supply natural gas 
                                (other than for resale) for a business 
                                use at a property within the service 
                                area of such utility, and
                                    ``(II) the utility did not supply 
                                natural gas to such property during the 
                                testing period or the ratable amount of 
                                natural gas to be supplied under the 
                                contract is significantly greater than 
                                the ratable amount of gas supplied to 
                                such property during the testing 
                                period,
                        then a contract shall not fail to be treated as 
                        a qualified natural gas supply contract by 
                        reason of supplying the additional natural gas 
                        under the contract referred to in subclause 
                        (I).
                            ``(ii) Lost customers.--The average under 
                        subparagraph (B)(i) shall not exceed the annual 
                        amount of natural gas reasonably expected to be 
                        purchased (other than for resale) by persons 
                        who are located within the service area of such 
                        utility and who, as of the date of issuance of 
                        the issue, are customers of such utility.
                    ``(E) Ruling requests.--The Secretary may increase 
                the average under subparagraph (B)(i) for any period if 
                the utility owned by the governmental unit establishes 
                to the satisfaction of the Secretary that, based on 
                objective evidence of growth in natural gas consumption 
                or population, such average would otherwise be 
                insufficient for such period.
                    ``(F) Adjustment for natural gas otherwise on 
                hand.--
                            ``(i) In general.--The amount otherwise 
                        permitted to be acquired under the contract for 
                        any period shall be reduced by--
                                    ``(I) the applicable share of 
                                natural gas held by the utility on the 
                                date of issuance of the issue, and
                                    ``(II) the natural gas (not taken 
                                into account under subclause (I)) which 
                                the utility has a right to acquire 
                                during such period (determined as of 
                                the date of issuance of the issue).
                            ``(ii) Applicable share.--For purposes of 
                        the clause (i), the term `applicable share' 
                        means, with respect to any period, the natural 
                        gas allocable to such period if the gas were 
                        allocated ratably over the period to which the 
                        prepayment relates.
                    ``(G) Intentional acts.--Subparagraph (A) shall 
                cease to apply to any issue if the utility owned by the 
                governmental unit engages in any intentional act to 
                render the volume of natural gas acquired by such 
                prepayment to be in excess of the sum of--
                            ``(i) the amount of natural gas needed 
                        (other than for resale) by customers of such 
                        utility who are located within the service area 
                        of such utility, and
                            ``(ii) the amount of natural gas used to 
                        transport such natural gas to the utility.
                    ``(H) Testing period.--For purposes of this 
                paragraph, the term `testing period' means, with 
                respect to an issue, the most recent 5 calendar years 
                ending before the date of issuance of the issue.
                    ``(I) Service area.--For purposes of this 
                paragraph, the service area of a utility owned by a 
                governmental unit shall be comprised of--
                            ``(i) any area throughout which such 
                        utility provided at all times during the 
                        testing period--
                                    ``(I) in the case of a natural gas 
                                utility, natural gas transmission or 
                                distribution services, and
                                    ``(II) in the case of an electric 
                                utility, electricity distribution 
                                services,
                            ``(ii) any area within a county contiguous 
                        to the area described in clause (i) in which 
                        retail customers of such utility are located if 
                        such area is not also served by another utility 
                        providing natural gas or electricity services, 
                        as the case may be, and
                            ``(iii) any area recognized as the service 
                        area of such utility under State or Federal 
                        law.''.
    (b) Private Loan Financing Test not to Apply to Prepayments for 
Natural Gas.--Paragraph (2) of section 141(c) (providing exceptions to 
the private loan financing test) is amended by striking ``or'' at the 
end of subparagraph (A), by striking the period at the end of 
subparagraph (B) and inserting ``, or'', and by adding at the end the 
following new subparagraph:
                    ``(C) is a qualified natural gas supply contract 
                (as defined in section 148(b)(4)).''.
    (c) Exception for Qualified Electric and Natural Gas Supply 
Contracts.--Section 141(d) is amended by adding at the end the 
following new paragraph:
            ``(7) Exception for qualified electric and natural gas 
        supply contracts.--The term `nongovernmental output property' 
        shall not include any contract for the prepayment of 
        electricity or natural gas which is not investment property 
        under section 148(b)(2).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to obligations issued after the date of the enactment of this 
Act.

SEC. 108. DETERMINATION OF SMALL REFINER EXCEPTION TO OIL DEPLETION 
              DEDUCTION.

    (a) In General.--Paragraph (4) of section 613A(d) (relating to 
limitations on application of subsection (c)) is amended to read as 
follows:
            ``(4) Certain refiners excluded.--If the taxpayer or 1 or 
        more related persons engages in the refining of crude oil, 
        subsection (c) shall not apply to the taxpayer for a taxable 
        year if the average daily refinery runs of the taxpayer and 
        such persons for the taxable year exceed 75,000 barrels. For 
        purposes of this paragraph, the average daily refinery runs for 
        any taxable year shall be determined by dividing the aggregate 
        refinery runs for the taxable year by the number of days in the 
        taxable year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after the date of the enactment of this Act.

             TITLE II--MISCELLANEOUS ENERGY TAX INCENTIVES

SEC. 201. CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.

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

``SEC. 25C. RESIDENTIAL ENERGY EFFICIENT 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 sum of--
            ``(1) 15 percent of the qualified solar water heating 
        property expenditures made by the taxpayer during such year,
            ``(2) 15 percent of the qualified photovoltaic property 
        expenditures made by the taxpayer during such year, and
            ``(3) 15 percent of the qualified fuel cell property 
        expenditures made by the taxpayer during such year.
    ``(b) Limitations.--
            ``(1) Maximum credit.--
                    ``(A) In general.--The credit allowed under 
                subsection (a) shall not exceed--
                            ``(i) $2,000 for solar water heating 
                        property described in subsection (c)(1),
                            ``(ii) $2,000 for photovoltaic property 
                        described in subsection (c)(2), and
                            ``(iii) $500 for each 0.5 kilowatt of 
                        capacity of property described in subsection 
                        (c)(3).
                    ``(B) Prior expenditures by taxpayer on same 
                residence taken into account.--In determining the 
                amount of the credit allowed to a taxpayer with respect 
                to any dwelling unit under this section, the dollar 
                amounts under clauses (i) and (ii) of subparagraph (A) 
                with respect to each type of property described in such 
                clauses shall be reduced by the credit allowed to the 
                taxpayer under this section with respect to such type 
                of property for all preceding taxable years with 
                respect to such dwelling unit.
            ``(2) Property standards.--No credit shall be allowed under 
        this section for an item of property unless--
                    ``(A) the original use of such property commences 
                with the taxpayer,
                    ``(B) such property can be reasonably expected to 
                remain in use for at least 5 years,
                    ``(C) such property is installed on or in 
                connection with a dwelling unit located in the United 
                States and used as a residence by the taxpayer,
                    ``(D) in the case of solar water heating property, 
                such property is certified for performance by the non-
                profit Solar Rating and Certification Corporation or a 
                comparable entity endorsed by the government of the 
                State in which such property is installed, and
                    ``(E) in the case of fuel cell property, such 
                property meets the performance and quality standards 
                (if any) which have been prescribed by the Secretary by 
                regulations (after consultation with the Secretary of 
                Energy).
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified solar water heating property expenditure.--
        The term `qualified solar water heating property expenditure' 
        means an expenditure for property which uses solar energy to 
        heat water for use in a dwelling unit.
            ``(2) Qualified photovoltaic property expenditure.--The 
        term `qualified photovoltaic property expenditure' means an 
        expenditure for property which uses solar energy to generate 
        electricity for use in a dwelling unit and which is not 
        described in paragraph (1).
            ``(3) Qualified fuel cell property expenditure.--The term 
        `qualified fuel cell property expenditure' means an expenditure 
        for any qualified fuel cell property (as defined in section 
        48(b)(1)).
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Solar panels.--No expenditure relating to a solar 
        panel or other property installed as a roof (or portion 
        thereof) shall fail to be treated as property described in 
        paragraph (1) or (2) of subsection (c) solely because it 
        constitutes a structural component of the structure on which it 
        is installed.
            ``(2) Swimming pools, etc., used as 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.
            ``(3) 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 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.
                    ``(C) Subparagraphs (A) and (B) shall be applied 
                separately with respect to expenditures described in 
                paragraphs (1), (2), and (3) of subsection (c).
            ``(4) 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 the individual's 
        tenant-stockholder's proportionate share (as defined in section 
        216(b)(3)) of any expenditures of such corporation.
            ``(5) 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 the individual 
                owns, such individual shall be treated as having made 
                the individual's 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.
            ``(6) 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.
            ``(7) 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.
            ``(8) Property financed by subsidized energy financing.--
        For purposes of determining the amount of 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 (as defined in section 
        48(a)(4)(C)).
    ``(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.--The credit allowed under this section shall not 
apply to taxable years beginning after December 31, 2007.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) is amended by striking ``and'' at the 
        end of paragraph (30), by striking the period at the end of 
        paragraph (31) and inserting ``, and'', and by adding at the 
        end the following new paragraph:
            ``(32) 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 is amended by inserting after the 
        item relating to section 25B the following new item:

``Sec. 25C. Residential energy efficient property.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenditures made after the date of the enactment of this Act.

SEC. 202. CREDIT FOR BUSINESS INSTALLATION OF QUALIFIED FUEL CELLS.

    (a) In General.--Section 48(a)(3)(A) (defining energy property) is 
amended by striking ``or'' at the end of clause (i), by adding ``or'' 
at the end of clause (ii), and by inserting after clause (ii) the 
following new clause:
                            ``(iii) qualified fuel cell property,''.
    (b) Energy Percentage.--Subparagraph (A) of section 48(a)(2) 
(relating to energy percentage) is amended to read as follows:
                    ``(A) In general.--The energy percentage is--
                            ``(i) in the case of qualified fuel cell 
                        property, 15 percent, and
                            ``(ii) in the case of any other energy 
                        property, 10 percent.''.
    (c) Qualified Fuel Cell Property.--Section 48 (relating to energy 
credit) is amended--
            (1) by redesignating subsection (b) as paragraph (5) of 
        subsection (a),
            (2) by striking ``subsection (a)'' in paragraph (5) of 
        subsection (a), as redesignated by paragraph (1), and inserting 
        ``this subsection'', and
            (3) by adding at the end the following new subsection:
    ``(b) Qualified Fuel Cell Property.--For purposes of subsection 
(a)(3)(A)(iii)--
            ``(1) In general.--The term `qualified fuel cell property' 
        means a fuel cell power plant which--
                    ``(A) generates at least 0.5 kilowatt of 
                electricity using an electrochemical process, and
                    ``(B) has an electricity-only generation efficiency 
                greater than 30 percent.
            ``(2) Limitation.--The energy credit with respect to any 
        qualified fuel cell property shall not exceed an amount equal 
        to $500 for each 0.5 kilowatt of capacity of such property.
            ``(3) Fuel cell power plant.--The term `fuel cell power 
        plant' means an integrated system, comprised of a fuel cell 
        stack assembly and associated balance of plant components, 
        which converts a fuel into electricity using electrochemical 
        means.
            ``(4) Termination.--The term `qualified fuel cell property' 
        shall not include any property placed in service after December 
        31, 2007.''.
    (d) Conforming Amendment.--Section 48(a)(1) is amended by inserting 
``except as provided in subsection (b)(2),'' before ``the energy'' the 
first place it appears.
    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service after April 11, 2005, under rules 
similar to the rules of section 48(m) of the Internal Revenue Code of 
1986 (as in effect on the day before the date of the enactment of the 
Revenue Reconciliation Act of 1990).

SEC. 203. REDUCED MOTOR FUEL EXCISE TAX ON CERTAIN MIXTURES OF DIESEL 
              FUEL.

    (a) In General.--Paragraph (2) of section 4081(a) is amended by 
adding at the end the following:
                    ``(D) Diesel-water fuel emulsion.--In the case of 
                diesel-water fuel emulsion at least 16.9 percent of 
                which is water and with respect to which the emulsion 
                additive is registered by a United States manufacturer 
                with the Environmental Protection Agency pursuant to 
                section 211 of the Clean Air Act (as in effect on March 
                31, 2003), subparagraph (A)(iii) shall be applied by 
                substituting `19.7 cents' for `24.3 cents'.''.
    (b) Special Rules for Diesel-Water Fuel Emulsions.--
            (1) Refunds for tax-paid purchases.--Section 6427 is 
        amended by redesignating subsections (m) through (p) as 
        subsections (n) through (q), respectively, and by inserting 
        after subsection (l) the following new subsection:
    ``(m) Diesel Fuel Used to Produce Emulsion.--
            ``(1) In general.--Except as provided in subsection (k), if 
        any diesel fuel on which tax was imposed by section 4081 at the 
        regular tax rate is used by any person in producing an emulsion 
        described in section 4081(a)(2)(D) which is sold or used in 
        such person's trade or business, the Secretary shall pay 
        (without interest) to such person an amount equal to the excess 
        of the regular tax rate over the incentive tax rate with 
        respect to such fuel.
            ``(2) Definitions.--For purposes of paragraph (1)--
                    ``(A) Regular tax rate.--The term `regular tax 
                rate' means the aggregate rate of tax imposed by 
                section 4081 determined without regard to section 
                4081(a)(2)(D).
                    ``(B) Incentive tax rate.--The term `incentive tax 
                rate' means the aggregate rate of tax imposed by 
                section 4081 determined with regard to section 
                4081(a)(2)(D).''.
            (2) Later separation of fuel.--Section 4081 (relating to 
        imposition of tax) is amended by inserting after subsection (b) 
        the following new subsection:
    ``(c) Later Separation of Fuel From Diesel-Water Fuel Emulsion.--If 
any person separates the taxable fuel from a diesel-water fuel emulsion 
on which tax was imposed under subsection (a) at a rate determined 
under subsection (a)(2)(D) (or with respect to which a credit or 
payment was allowed or made by reason of section 6427), such person 
shall be treated as the refiner of such taxable fuel. The amount of tax 
imposed on any removal of such fuel by such person shall be reduced by 
the amount of tax imposed (and not credited or refunded) on any prior 
removal or entry of such fuel.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2006.

SEC. 204. AMORTIZATION OF DELAY RENTAL PAYMENTS.

    (a) In General.--Section 167 (relating to depreciation) is amended 
by redesignating subsection (h) as subsection (i) and by inserting 
after subsection (g) the following new subsection:
    ``(h) Amortization of Delay Rental Payments for Domestic Oil and 
Gas Wells.--
            ``(1) In general.--Any delay rental payment paid or 
        incurred in connection with the development of oil or gas wells 
        within the United States (as defined in section 638) shall be 
        allowed as a deduction ratably over the 24-month period 
        beginning on the date that such payment was paid or incurred.
            ``(2) Half-year convention.--For purposes of paragraph (1), 
        any payment paid or incurred during the taxable year shall be 
        treated as paid or incurred on the mid-point of such taxable 
        year.
            ``(3) Exclusive method.--Except as provided in this 
        subsection, no depreciation or amortization deduction shall be 
        allowed with respect to such payments.
            ``(4) Treatment upon abandonment.--If any property to which 
        a delay rental payment relates is retired or abandoned during 
        the 24-month period described in paragraph (1), no deduction 
        shall be allowed on account of such retirement or abandonment 
        and the amortization deduction under this subsection shall 
        continue with respect to such payment.
            ``(5) Delay rental payments.--For purposes of this 
        subsection, the term `delay rental payment' means an amount 
        paid for the privilege of deferring development of an oil or 
        gas well under an oil or gas lease.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after the 
date of the enactment of this Act.

SEC. 205. AMORTIZATION OF GEOLOGICAL AND GEOPHYSICAL EXPENDITURES.

    (a) In General.--Section 167 (relating to depreciation), as amended 
by section 204 of this Act, is amended by redesignating subsection (i) 
as subsection (j) and by inserting after subsection (h) the following 
new subsection:
    ``(i) Amortization of Geological and Geophysical Expenditures.--
            ``(1) In general.--Any geological and geophysical expenses 
        paid or incurred in connection with the exploration for, or 
        development of, oil or gas within the United States (as defined 
        in section 638) shall be allowed as a deduction ratably over 
        the 24-month period beginning on the date that such expense was 
        paid or incurred.
            ``(2) Special rules.--For purposes of this subsection, 
        rules similar to the rules of paragraphs (2), (3), and (4) of 
        subsection (h) shall apply.''.
    (b) Conforming Amendment.--Section 263A(c)(3) is amended by 
inserting ``167(h), 167(i),'' after ``under section''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after the 
date of the enactment of this Act.

SEC. 206. ADVANCED LEAN BURN TECHNOLOGY MOTOR VEHICLE CREDIT.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
(relating to other credits) is amended by adding at the end the 
following:

``SEC. 30B. ADVANCED LEAN BURN TECHNOLOGY MOTOR VEHICLE CREDIT.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the sum of the credit amounts determined under subsection (b) 
with respect to each qualified advanced lean burn technology motor 
vehicle placed in service by the taxpayer during the taxable year.
    ``(b) Credit Amount.--For purposes of subsection (a)--
            ``(1) Fuel efficiency.--The credit amount with respect to 
        any vehicle shall be--
                    ``(A) $500, if the city fuel economy of such 
                vehicle is at least 125 percent but less than 150 
                percent of the 2000 model year city fuel economy for a 
                vehicle in the same inertia weight class,
                    ``(B) $1,000, if the city fuel economy of such 
                vehicle is at least 150 percent but less than 175 
                percent of the 2000 model year city fuel economy for a 
                vehicle in the same inertia weight class,
                    ``(C) $1,500, if the city fuel economy of such 
                vehicle is at least 175 percent but less than 200 
                percent of the 2000 model year city fuel economy for a 
                vehicle in the same inertia weight class,
                    ``(D) $2,000, if the city fuel economy of such 
                vehicle is at least 200 percent but less than 225 
                percent of the 2000 model year city fuel economy for a 
                vehicle in the same inertia weight class,
                    ``(E) $2,500, if the city fuel economy of such 
                vehicle is at least 225 percent but less than 250 
                percent of the 2000 model year city fuel economy for a 
                vehicle in the same inertia weight class, and
                    ``(F) $3,000, if the city fuel economy of such 
                vehicle is at least 250 percent of the 2000 model year 
                city fuel economy for a vehicle in the same inertia 
                weight class.
            ``(2) Conservation.--The credit amount determined under 
        paragraph (1) with respect to any vehicle shall be increased 
        by--
                    ``(A) $250, if the lifetime fuel savings of such 
                vehicle is at least 1,500 gallons of motor fuel but 
                less than 2,500 gallons of motor fuel, and
                    ``(B) $500, if the lifetime fuel savings of such 
                vehicle is at least 2,500 gallons of motor fuel.
    ``(c) Limitation Based on Amount of Tax.--The credit allowed under 
subsection (a) for the taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under subpart A and 
        sections 27 and 30A for the taxable year.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified advanced lean burn technology motor 
        vehicle.--The term `qualified advanced lean burn technology 
        motor vehicle' means a motor vehicle--
                    ``(A) the original use of which commences with the 
                taxpayer,
                    ``(B) powered by an internal combustion engine 
                that--
                            ``(i) is designed to operate primarily 
                        using more air than is necessary for complete 
                        combustion of the fuel, and
                            ``(ii) incorporates direct injection,
                    ``(C) that only uses diesel fuel (as defined in 
                section 4083(a)(3)),
                    ``(D) the city fuel economy of which is at least 
                125 percent of the 2000 model year city fuel economy 
                for a vehicle in the same inertia weight class, and
                    ``(E) that has received a certificate that such 
                vehicle meets or exceeds the Bin 8 Tier II emission 
                level established in regulations prescribed by the 
                Administrator of the Environmental Protection Agency 
                under section 202(i) of the Clean Air Act.
            ``(2) Lifetime fuel savings.--The term `lifetime fuel 
        savings' means, with respect to a qualified advanced lean burn 
        technology motor vehicle, an amount equal to the excess (if 
        any) of--
                    ``(A) 120,000 divided by the 2000 model year city 
                fuel economy for the vehicle inertia weight class, over
                    ``(B) 120,000 divided by the city fuel economy for 
                such vehicle.
            ``(3) 2000 model year city fuel economy.--The 2000 model 
        year city fuel economy with respect to a vehicle shall be 
        determined in accordance with the following tables:
                    ``(A) In the case of a passenger automobile:

``If vehicle inertia weight class   The 2000 model year city fuel 
        is:                                 economy is:
    1,500 or 1,750 lbs............................             43.7 mpg
    2,000 lbs.....................................             38.3 mpg
    2,250 lbs.....................................             34.1 mpg
    2,500 lbs.....................................             30.7 mpg
    2,750 lbs.....................................             27.9 mpg
    3,000 lbs.....................................             25.6 mpg
    3,500 lbs.....................................             22.0 mpg
    4,000 lbs.....................................             19.3 mpg
    4,500 lbs.....................................             17.2 mpg
    5,000 lbs.....................................             15.5 mpg
    5,500 lbs.....................................             14.1 mpg
    6,000 lbs.....................................             12.9 mpg
    6,500 lbs.....................................             11.9 mpg
    7,000 or 8,500 lbs............................            11.1 mpg.
                    ``(B) In the case of a light truck:

``If vehicle inertia weight class   The 2000 model year city fuel 
        is:                                 economy is:
    1,500 or 1,750 lbs............................             37.6 mpg
    2,000 lbs.....................................             33.7 mpg
    2,250 lbs.....................................             30.6 mpg
    2,500 lbs.....................................             28.0 mpg
    2,750 lbs.....................................             25.9 mpg
    3,000 lbs.....................................             24.1 mpg
    3,500 lbs.....................................             21.3 mpg
    4,000 lbs.....................................             19.0 mpg
    4,500 lbs.....................................             17.3 mpg
    5,000 lbs.....................................             15.8 mpg
    5,500 lbs.....................................             14.6 mpg
    6,000 lbs.....................................             13.6 mpg
    6,500 lbs.....................................             12.8 mpg
    7,000 or 8,500 lbs............................            12.0 mpg.
            ``(4) Motor vehicle.--The term `motor vehicle' has the 
        meaning given such term by section 30(c)(2).
            ``(5) City fuel economy.--City fuel economy with respect to 
        any vehicle shall be measured in accordance with testing and 
        calculation procedures established by the Administrator of the 
        Environmental Protection Agency by regulations in effect on 
        April 11, 2005.
            ``(6) Other terms.--The terms `passenger automobile', 
        `light truck', and `manufacturer' shall have the meanings given 
        such terms in regulations prescribed by the Administrator of 
        the Environmental Protection Agency for purposes of the 
        administration of title II of the Clean Air Act (42 U.S.C. 7521 
        et seq.).
    ``(e) Carryforward Allowed.--
            ``(1) In general.--If the credit amount allowable under 
        subsection (a) for a taxable year exceeds the amount of the 
        limitation under subsection (c) for such taxable year (referred 
        to as the `unused credit year' in this paragraph), such excess 
        shall be allowed as a credit carryforward for each of the 20 
        taxable years following the unused credit year.
            ``(2) Rules.--Rules similar to the rules of section 39 
        shall apply with respect to the credit carryforward under 
        paragraph (1).
    ``(f) Special Rules.--For purposes of this section--
            ``(1) Reduction in basis.--The basis of any property for 
        which a credit is allowable under subsection (a) shall be 
        reduced by the amount of such credit (determined without regard 
        to subsection (c)).
            ``(2) No double benefit.--The amount of any deduction or 
        credit allowable under this chapter (other than the credit 
        allowable under subsection (a)), with respect to any vehicle 
        shall be reduced by the amount of credit allowed under 
        subsection (a) (determined without regard to subsection (c)) 
        for such vehicle for the taxable year.
            ``(3) Property used by tax-exempt entity.--In the case of a 
        vehicle whose use is described in paragraph (3) or (4) of 
        section 50(b) and which is not subject to a lease, the person 
        who sold such vehicle to the person or entity using such 
        vehicle shall be treated as the taxpayer that placed such 
        vehicle in service, but only if such person clearly discloses 
        to such person or entity in a document the amount of any credit 
        allowable under subsection (a) with respect to such vehicle 
        (determined without regard to subsection (c)).
            ``(4) Property used outside united states, etc., not 
        qualified.--No credit shall be allowable under subsection (a) 
        with respect to any property referred to in section 50(b)(1) or 
        with respect to the portion of the cost of any property taken 
        into account under section 179.
            ``(5) Election not to take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the taxpayer 
        elects not to have this section apply to such vehicle.
            ``(6) Interaction with air quality and motor vehicle safety 
        standards.--Unless otherwise provided in this section, a motor 
        vehicle shall not be considered eligible for a credit under 
        this section unless such vehicle is in compliance with--
                    ``(A) the applicable provisions of the Clean Air 
                Act for the applicable make and model year of the 
                vehicle (or applicable air quality provisions of State 
                law in the case of a State which has adopted such 
                provision under a waiver under section 209(b) of the 
                Clean Air Act), and
                    ``(B) the motor vehicle safety provisions of 
                sections 30101 through 30169 of title 49, United States 
                Code.
    ``(g) Regulations.--
            ``(1) In general.--The Secretary shall promulgate such 
        regulations as necessary to carry out this section, including 
        regulations to prevent the avoidance of the purposes of this 
        section through disposal of any motor vehicle or leasing of any 
        motor vehicle for a lease period of less than the economic life 
        of such vehicle.
            ``(2) Determination of motor vehicle eligibility.--The 
        Secretary, in coordination with the Secretary of Transportation 
        and the Administrator of the Environmental Protection Agency, 
        shall prescribe such regulations as necessary to determine 
        whether a motor vehicle meets the requirements to be eligible 
        for a credit under this section.
    ``(h) Termination.--This section shall not apply to any property 
placed in service after December 31, 2007.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a), as amended by section 201 of this Act, 
        is amended by striking ``and'' at the end of paragraph (31), by 
        striking the period at the end of paragraph (32) and inserting 
        ``, and'', and by adding at the end the following:
            ``(33) to the extent provided in section 30B(f)(1).''.
            (2) Section 6501(m) is amended by inserting ``30B(f)(6),'' 
        after ``30(d)(4),''.
            (3) The table of sections for subpart B of part IV of 
        subchapter A of chapter 1 is amended by inserting after the 
        item relating to section 30A the following:

``Sec. 30B. Advanced lean burn technology motor vehicle credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act in taxable years ending after such date.

SEC. 207. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits), as amended by section 
201, is amended by inserting after section 25C the following new 
section:

``SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

    ``(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 20 percent of the amount paid 
or incurred by the taxpayer for qualified energy efficiency 
improvements installed during such taxable year.
    ``(b) Limitations.--
            ``(1) Maximum credit.--The credit allowed by this section 
        with respect to a dwelling unit shall not exceed $2,000.
            ``(2) Prior credit amounts for taxpayer on same dwelling 
        taken into account.--If a credit was allowed to the taxpayer 
        under subsection (a) with respect to a dwelling unit in 1 or 
        more prior taxable years, the amount of the credit otherwise 
        allowable for the taxable year with respect to that dwelling 
        unit shall be reduced by the sum of the credits allowed under 
        subsection (a) to the taxpayer with respect to the dwelling 
        unit for all prior taxable years.
    ``(c) Qualified Energy Efficiency Improvements.--For purposes of 
this section, the term `qualified energy efficiency improvements' means 
any energy efficient building envelope component which meets the 
prescriptive criteria for such component established by the 2000 
International Energy Conservation Code, as such Code (including 
supplements) is in effect on the date of the enactment of the Enhanced 
Energy Infrastructure and Technology Tax Act of 2005 (or, in the case 
of a metal roof with appropriate pigmented coatings which meet the 
Energy Star program requirements), if--
            ``(1) such component is installed in or on a dwelling unit 
        located in the United States and owned and used by the taxpayer 
        as the taxpayer's principal residence (within the meaning of 
        section 121),
            ``(2) the original use of such component commences with the 
        taxpayer, and
            ``(3) such component reasonably can be expected to remain 
        in use for at least 5 years.
If the aggregate cost of such components with respect to any dwelling 
unit exceeds $1,000, such components shall be treated as qualified 
energy efficiency improvements only if such components are also 
certified in accordance with subsection (d) as meeting such 
prescriptive criteria.
    ``(d) Certification.--The certification described in subsection (c) 
shall be--
            ``(1) determined on the basis of the technical 
        specifications or applicable ratings (including product 
        labeling requirements) for the measurement of energy efficiency 
        (based upon energy use or building envelope component 
        performance) for the energy efficient building envelope 
        component,
            ``(2) provided by a local building regulatory authority, a 
        utility, a manufactured home production inspection primary 
        inspection agency (IPIA), or an accredited home energy rating 
        system provider who is accredited by or otherwise authorized to 
        use approved energy performance measurement methods by the 
        Residential Energy Services Network (RESNET), and
            ``(3) made in writing in a manner which specifies in 
        readily verifiable fashion the energy efficient building 
        envelope components installed and their respective energy 
        efficiency levels.
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Building envelope component.--The term `building 
        envelope component' means--
                    ``(A) any insulation material or system which is 
                specifically and primarily designed to reduce the heat 
                loss or gain of a dwelling unit when installed in or on 
                such dwelling unit,
                    ``(B) exterior windows (including skylights),
                    ``(C) exterior doors, and
                    ``(D) any metal roof installed on a dwelling unit, 
                but only if such roof has appropriate pigmented 
                coatings which are specifically and primarily designed 
                to reduce the heat gain of such dwelling unit.
            ``(2) Manufactured homes included.--The term `dwelling 
        unit' includes a manufactured home which conforms to Federal 
        Manufactured Home Construction and Safety Standards (section 
        3280 of title 24, Code of Federal Regulations).
            ``(3) Application of rules.--Rules similar to the rules 
        under paragraphs (3), (4), and (5) of section 25C(d) shall 
        apply.
    ``(f) 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.
    ``(g) Application of Section.--This section shall apply to 
qualified energy efficiency improvements installed after the date of 
the enactment of the Enhanced Energy Infrastructure and Technology Tax 
Act of 2005, and before January 1, 2008.''.
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 1016, as amended by section 
        206 of this Act, is amended by striking ``and'' at the end of 
        paragraph (32), by striking the period at the end of paragraph 
        (33) and inserting ``, and'', and by adding at the end the 
        following new paragraph:
            ``(34) to the extent provided in section 25D(f), in the 
        case of amounts with respect to which a credit has been allowed 
        under section 25D.''.
            (2) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1, as amended by section 201, is 
        amended by inserting after the item relating to section 25C the 
        following new item:

``Sec. 25D. Energy efficiency improvements to existing homes.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to improvements installed after the date of the enactment of this 
Act in taxable years ending after such date.

               TITLE III--ALTERNATIVE MINIMUM TAX RELIEF

SEC. 301. NEW NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST REGULAR 
              AND MINIMUM TAXES.

    (a) In General.--
            (1) Section 25c.--Section 25C(b), as added by section 201 
        of this Act, is amended by adding at the end the following new 
        paragraph:
            ``(3) Limitation based on amount of tax.--The credit 
        allowed under subsection (a) for the 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) Section 25d.--Section 25D(b), as added by section 207 
        of this Act, is amended by adding at the end the following new 
        paragraph:
            ``(3) Limitation based on amount of tax.--The credit 
        allowed under subsection (a) for the 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.''.
    (b) Conforming Amendments.--
            (1) Section 23(b)(4)(B) is amended by inserting ``and 
        sections 25C and 25D'' after ``this section''.
            (2) Section 24(b)(3)(B) is amended by striking ``and 25B'' 
        and inserting ``, 25B, 25C, and 25D''.
            (3) Section 25(e)(1)(C) is amended by inserting ``25C, and 
        25D'' after ``25B,''.
            (4) Section 25B(g)(2) is amended by striking ``section 23'' 
        and inserting ``sections 23, 25C, and 25D''.
            (5) Section 26(a)(1) is amended by striking ``and 25B'' and 
        inserting ``25B, 25C, and 25D''.
            (6) Section 904(h) is amended by striking ``and 25B'' and 
        inserting ``25B, 25C, and 25D''.
            (7) Section 1400C(d) is amended by striking ``and 25B'' and 
        inserting ``25B, 25C, and 25D''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 302. CERTAIN BUSINESS ENERGY CREDITS ALLOWED AGAINST REGULAR AND 
              MINIMUM TAXES.

    (a) In General.--Subparagraph (B) of section 38(c)(4) (relating to 
specified credits) is amended by redesignating clause (ii) as clause 
(iv) and by striking clause (i) and inserting the following new 
clauses:
                            ``(i) the credits determined under sections 
                        40, 45H, and 45I,
                            ``(ii) so much of the credit determined 
                        under section 46 as is attributable to section 
                        48(a)(3)(A)(iii),
                            ``(iii) for taxable years beginning after 
                        December 31, 2005, and before January 1, 2008, 
                        the credit determined under section 43, and''.
    (b) Effective Dates.--
            (1) In general.--Except as provided by paragraph (2), the 
        amendment made by subsection (a) shall apply to credits 
        determined under the Internal Revenue Code of 1986 for taxable 
        years beginning after December 31, 2005.
            (2) Fuel cells.--Clause (ii) of section 38(c)(4)(B) of the 
        Internal Revenue Code of 1986, as amended by subsection (a) of 
        this section, shall apply to credits determined under the 
        Internal Revenue Code of 1986 for taxable years ending after 
        April 11, 2005.




                                                  Union Calendar No. 25

109th CONGRESS

  1st Session

                               H. R. 1541

                          [Report No. 109-45]

_______________________________________________________________________

                                 A BILL

     To amend the Internal Revenue Code of 1986 to enhance energy 
infrastructure properties in the United States and to encourage the use 
        of certain energy technologies, and for other purposes.

_______________________________________________________________________

                             April 18, 2005

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed